Graying of America (Issue)

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GRAYING OF AMERICA (ISSUE)

At the beginning of the twentieth century retirement was practically unheard of. Pension plans were a rarity and Social Security did not yet exist. People typically "died working." It was only after President Franklin D. Roosevelt's New Deal, especially the Social Security Administration, that the concept of retirement became rooted in the American psyche. Beginning in the 1950s, as a result of governmentencouraged corporate pension plans and the Social Security Administration, older workers were rapidly leaving the work force. In fact, they were leaving so rapidly that they threatened to bankrupt the Social Security System. The key statistic here is the ratio of workers paying FICA taxes to retirees. A high ratio leaves the system solvent; a low ratio bankrupts it. At the close of the century the ratio of workers to retirees was decreasing at an alarming rate. In 2010 the ratio was projected to hover around four to one. By 2020 the estimated ratio would decline to three to one. By 2030 the ratio would be nearly two to one; moreover, the trend was not expected to reverse itself for decades to come.

In addition, the retirement system drains the economy of skilled workers. Some economists believed that in order to foster the growth of the labor supply and increase the level of experienced workers the Congress needs to amend the Social Security laws and eliminate income restrictions on recipients. Older workers, they argue, need an incentive to work. But in the late 1990s most post-retirement workers had to sacrifice a significant portion of their Social Security income once they started getting a paycheck again. If the retiree was under age 65 with earnings in excess of $7,680, one dollar in benefits was deducted for each two dollars earned above $7,680. From age 65 to 70, one dollar in benefits was deducted for each three dollars earned above $10,560. Above age 70 the Social Security benefits were not affected.

Other economists disagreed with Social Security reform. They argue that the older worker needs to be able to retire after a life of work. For them the only problem with the retirement system is that the Social Security program is so popular that it is running out of money and needs to be refunded. The advocates of refunding tend to believe that there should be a tax on the working population to cover the retirees' Social Security and Medicare.

Proponents of an elderly work force pointed to studies suggesting that aging baby boomers were not looking to spend their twilight years working in high school level jobs at minimum wage, nor were they as concerned with advancement as their younger counterparts. These studies suggest that older workers want to "enjoy" themselves on the job more: they wanted stability, a good rapport with coworkers, and also a liberal amount of discretionary time. In other words, older workers enjoy both the social aspects of working and the challenge of work, in addition to the pay.

Economists believed that this was a motivational characteristic that blended well with the growing popularity in the late twentieth century of mentoring, flex-time, and part-time positions. They argued that many older workers tended to be more focused and conscientious and that they exhibited greater feelings of company loyalty and maintained better job morale. These proponents of fostering an elderly work force discounted various charges: that older workers were less creative, that they were less likely to keep up with new developments in their fields, and that they were more difficult to supervise. These workers seemed to enjoy a working environment consisting of both younger and older workers.

But will there be enough older workers to fill any expansion in the work slots set aside for older workers? A potential problem for the U.S. labor force during the first few decades of the twenty-first century is that the baby-boomer generation, beginning to retire in substantial numbers around the year 2020, would be followed by a much smaller generation of workers who, because of their relatively small number, might not have the skills to pull the economy forward. Some predicted a significant shortage of qualified workers, old or young, as early as 2000.

This touches on the general problem of training. The shift from heavy industry and agriculture to an information and services society will probably increase the need for a more highly skilled, technically adept and "agile" work force, able to fill multiple functions on the job. But the U.S. educational system had not caught up with growing needs. If the schools did not provide new workers with technical skills to fill the wave of future job markets, how can we expect older workers to step in and fill that need? But some economists thought that older workers might help to staunch the hemorrhaging of skills that will take place when experienced workers leave work for early retirement.

See also: Human Capital, Social Security Act