The Blog of the Frances Perkins Center

Lower the retirement age and help workers young and old

In Biography, Economics on May 26, 2010 at 9:23 am

Linda Stinson, the historian at the Department of Labor, sent me a wonderful news clip this morning of Frances Perkins testifying in Congress on a bill that would have adjusted the work week from 40 hours to 30 hours. (Frances Perkins appears about a minute into the clip.)

Click the photo to go to the video.

Watching Secretary of Labor Perkins talking about jobs in the 1930s got me thinking about our current situation. For some reason, there is a huge push in Washington to worry about deficits, but no one seems to be worrying about jobs, even though the unemployment rate stands at 9.9 percent and is projected to remain quite high for months and years to come.

Some deficit-obsessed “experts” are trying to convince us that raising the Social Security retirement age from 67 to 70 will cut the deficit. This is false economics on many fronts.

First of all, Social Security doesn’t contribute to the deficit. So changing Social Security will not change the deficit. As Rep. Andrew Weiner states in Politico today:

They ignore that Social Security is fiscally responsible. By law, it cannot spend money that it doesn’t have. And the Social Security Trust Fund now has a $2.5 trillion surplus that can help pay out benefits for years to come.

Without any change, Social Security could cover three-quarters of benefits until 2083 — when people born today will be 73.

The federal government borrowed that money, the $2.5 trillion, and issued Treasury bonds to Social Security. This is a good thing — it raises needed cash for the government and provides interest to Social Security, because of course bonds pay interest to the holder.

However, it’s tempting to some in government to consider not making good on those bonds. As Treasury Secretary Geithner, famously quoting bank robber Willie Sutton, stated in a Congressional hearing, “That’s where the money is.” But whose money is it? It’s  yours and mine, safely invested. I can only imagine there would be hell to pay if the government reneges.

Second of all, for someone who spends his or her work week sitting in an ergonomic desk chair in an air conditioned office, 70 years of age may not seem too old to retire. But ask a construction worker, a waitress, a nurse, or any worker who puts in day after day of hard physical labor, and 70 seems old indeed.

Third, requiring older workers to stay on the job an extra three years will clog the job market with older workers, at least some of whom would prefer to retire. Meanwhile, young people will find it harder to get started on their careers due to lack of job opportunities.

Instead of talking about deficits, we should be thinking of ways to increase jobs. A 30-hour work week, as Frances Perkins discusses in this film clip? Perhaps. What is sure is that we need to consider all sorts of “nudges” toward employment. Creative thinking that looks at the problem from another perspective. We should turn conventional wisdom upside down.

For example, instead of raising the retirement age, let’s think about lowering it. How about making the full retirement age 62? To pay for the change, raise or even lift the salary cap, now set at $106,800. And get those millions of unemployed Americans back to work and paying their taxes into the Social Security system.

Wouldn’t that help workers of all ages?

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