Raising Social Security's Retirement Age is a Disaster for the Poor
Posted On: Apr 22, 2015
Would you want to be doing this work at 70? (Spencer Platt/Getty Images)
There are few policies as popular with politicians, but unpopular with voters, as raising Social Security's retirement age. It's a perennial feature of bipartisan budget negotiations — the Simpson-Bowles report proposed it, for instance — and both Jeb Bush and Chris Christie have endorsed it. If establishment Washington has a platform, raising the Social Security retirement age is squarely at its core.
To its advocates, raising the Social Security age seems like common sense: it helps balance the program's books, and since Americans are living longer anyway, it's more like a technical adjustment to the program than an actual cut. The idea that anyone might disagree is borderline unthinkable.
"If you can't raise the retirement age to 68 by the year 2050 without the AARP losing their marbles," said former Senator Alan Simpson, co-chair of the Simpson-Bowles commission, then the country just "won't make it."
Americans disagree. A 2012 Pew poll found that 56 percent of Americans opposed even gradually raising the Social Security retirement age — more than opposed cutting military spending, or increasing taxes, or reducing Medicare benefits for richer seniors. In 2014, the National Academy of Social Insurance performed an even more detailed survey and found that 75 percent of Americans opposed raising the retirement age to 70. Hell, even self-identified Tea Partiers would prefer to raise taxes than raise the Social Security retirement age.
It's not just polls where Americans demonstrate their opposition to a higher retirement age. It's in their retirement, too. Right now, the full retirement age for Social Security is 66 — though it's rising by a few months each year until it reaches 67. But Social Security actually lets people retire as early as 62 if they accept a smaller check as the cost. Many Americans take that deal. According to the Social Security Administration, the most common age for Americans to take benefits is 62, and people with less education are particularly likely to begin taking benefits early. Many Americans, in fact, are retiring even before they begin taking benefits — according to Gallup, the average age of retirement is 62.
Given the polling, when politicians propose raising the retirement age, they portray themselves as committing an act of great political bravery. "You’re going to have to raise the retirement age for Social Security," Christie said in a speech at the American Enterprise Institute. "Oh, I just said it and I’m still standing here! I did not vaporize into the carpeting."
But there's another way to look at the eagerness of political elites to raise the retirement age: as an expression of the vast chasm of class privilege that separates political Washington from the rest of the country.
The rich live longer than the poor
One argument for raising the Social Security retirement age is that Americans simply live far longer today than they did when Social Security was established. The first sentence of the Heritage Foundation's brief on this subject reads, "Americans are living longer, which means they are spending a higher proportion of their lives in retirement, receiving Social Security payments." Given that, the Heritage Foundation argues, raising the retirement age is simply "common sense."
Americans are living longer. But the comforting averages obscure a grim inequality in lifespan. Richer Americans are living much longer than poorer Americans. According to the Social Security Administration, retirees who made above-average incomes in their working years live six years longer than they did in the 1970s. Retirees in the bottom half of the income distribution live only 1.3 years longer.
So let's say you increase the Social Security retirement age by two years. Yes, you would be increasing the retirement age by less than lifespans have increased for richer retirees. But you would also be increasing it by more than lifespans have increased for poorer retirees.
A related point is that while it's true that Americans, on average, live much longer than they did when Social Security first passed, it's also true that real GDP per capita has increased by well over 500 percent since Social Security passed. America, in other words, is a much, much richer country, and one thing it can buy with those riches is more leisure in the final years (or decades!) of life.
A cut that targets people who hate their jobs
When Alan Simpson was crisscrossing the country arguing that Americans should raise the Social Security retirement age, he was 78 years old. But he was still working. He was still serving on commissions, still giving speeches, still doing television interviews. And he was doing all that because he's passionate about it. You can tell when you interview him. He loves the fight. He loves serving the public. He loves trying to find the answers. He loves what he does. That's why he works so damn hard at it more than 15 years after most Americans have retired.
But a lot of people loathe their jobs. Their work is physical, tiring. Standing on your feet nine hours a day is a lot harder at 65 than it is at 35. Driving a truck cross-country is much more dangerous at 67 than it is at 27. And even those who aren't doing heavy lifting can simply hate their work. The world is full of bad bosses, mind-numbing forms, daily drudgery. That's why many Americans retire at age 62. They don't want to work anymore. They don't like working.
As the old saying goes, there are people who live to work and there are people who work to live. Political elites tend to live to work. They love what they do and they'll do it until they die, or as close as they can possibly get. There are currently 23 senators in their 70s and 80s — and a whole bunch of them want to run for reelection. If that's your world, then raising the retirement age makes perfect sense: after all, isn't everyone already working into their 70s?
Raising the retirement age is painless if you live to work, and grueling if you work to live. It's a cut, in other words, that targets people with miserable jobs. And people with miserable jobs tend to be poorer. But the people proposing the cut love their jobs, and will never notice if they start taking Social Security a few years later. Raising the retirement age seems like an obvious policy change because, for them, it is an obvious policy change — they were never going to retire before 75 anyway.
Behind this discussion is a deeper reality: political Washington is a very white-collar world. As political scientist Nick Carnes wrote, "People who work in manual labor and service-industry jobs have made up more than half of the country since at least the start of the 20th century — but they've never made up more than 2 percent of Congress."
This isn't to deny that there are benefits — both to the economy and to seniors — for people to work past age 62. But there are better ways to encourage working later into life — ways that don't punish people counting the days until retirement. The Heritage Foundation's brief on the retirement age, for instance, includes the smart idea to lift payroll taxes on seniors who choose to keep working past the retirement age — that would make working more valuable to them, and it would make hiring seniors a better deal for employers, which is a real boon in an economy rife with age discrimination.
What Social Security reforms look like across the class chasm
Social Security is facing budget problems. On its current trajectory, the program won't be able to pay out the benefits promised to future generations of retirees. But there are many ways to close Social Security's shortfall — and a lot of them are a whole lot easier on the poor and overworked than raising the retirement age.
The National Academy for Social Insurance asked people to choose from a variety of options for funding Social Security, and the results, from a class perspective, were interesting. Just as political elites have fastened onto a Social Security reform that barely touches them, NASI's respondents gravitated toward a reform that few of them would have to pay: eliminating the cap on the payroll tax that funds Social Security.
In 2015, all income above $118,500 will be exempt from Social Security taxes. Most Americans make less than $118,500. But politicians, pundits, and think tankers, for the most part, make much more. Lifting the cap so all earnings were taxable to fund Social Security would actually do a lot more for Social Security's solvency than raising the retirement age: in 2010, the Congressional Budget Office estimated that eliminating the cap would raise about twice as much money for Social Security as raising the retirement age to 70.
But it would be a huge tax hike on high earners — "the increase in taxes for high earners would be 12 percent, 15 percent, and 18 percent for people born in the 1960s, 1980s, and 2000s, respectively," reports the CBO. Perhaps this is one reason political elites seem a whole lot less enthusiastic about it.
Raising taxes isn't the only way to close Social Security's shortfall, of course. It's not even the only way to do it that's progressive. There are all kinds of ways to cut benefits. But politicians who want to cut Social Security's spending should find a policy that doesn't target people who work the worst jobs and die the earliest.