Is Social Security At A Tipping Point?

We’ve spent the last decades inching toward a world with too few workers and too many retirees depending on their labor, like a train crash in slow motion. Have we finally reached the tipping point?

Consider today’s convergence of economic events: a labor shortage, dramatically increased inflation, large government budget deficits, and falling stock and bond prices. This may be attributed to the pandemic and its aftermath, including excessive government stimulus, supply chain concerns, terrified and exhausted workers departing in droves, and the Federal Reserve’s decision a year ago to combat inflation.

But perhaps, the pandemic was merely the catastrophe that threw our demographic challenges into stark view, including the retirement of the baby boomers, our dependency on imported commodities, and federal government expenditure increasingly oriented toward Social Security and Medicare. 

In 2000, there were 4.8 Americans between the ages of 20 and 64 for every person aged 65 and older. According to United Nations data, this figure is currently 3.4 and will be 2.7 in 10 years. This is not simply a U.S. issue. In Western Europe and Japan, the worker-retiree imbalance is much more pronounced.

At the same time, the pandemic and its aftermath underscore how we’ll tackle these issues: by forcing individuals in their 60s to remain in the labor market for longer or to return to work full or part-time and pressuring companies to make the workplace more attractive to older employees.

In what ways do elderly Americans face pressure? This year, their portfolios are falling while their living expenses are rising. Doubtless, many retirees are feeling pinched, and many older employees don’t like how their finances look, and at least some have determined that a little longer time in labor wouldn’t be a terrible idea.

By the end of the decade, more elderly Americans are expected to remain in the labor force, according to the Bureau of Labor Statistics (BLS). The BLS forecasts that labor force participation for persons aged 60 to 64 will increase from 57.1% in 2020 to 62.5% in 2030. Over the same time, it also anticipates a jump from 33% to 39.6% in labor force participation among those aged 65 to 69 and from 18.9% to 23.4% among those aged 70 to 74.

Another indication that people are concerned about funding their increasingly prolonged retirement: More retirees are deferring Social Security benefits to obtain a greater stream of inflation-adjusted lifetime income, which is perhaps the best hedge against the possibility of an unexpectedly long life. In 2021, 16.3% of males collecting benefits would be at least 67 years old, compared to 10.3% in 2016. The numbers for women were 16.2% in 2021 and 11.2% in 2016. (These numbers exclude recipients of Social Security disability payments who were automatically changed to retirement benefits when they reached the full retirement age for Social Security.)

However, not just employees are facing pressure. Likewise, companies are battling to fill vacant positions. According to the BLS, the percentage of job openings, including those that stay unfilled, was 6.3% in October, close to a 20-year high. In November, the unemployment rate was 3.7%, close to a 50-year low. In the next years, it is anticipated that forward-thinking corporations will take measures to help older people feel more welcome, such as developing less physically demanding tasks and providing greater flexibility to work part-time and from home.

Need something to do: How older individuals and businesses are embracing retirement employment.

If there is a shift toward retirement at a later age, there are several potential benefits for both individuals and the economy. In addition to higher earned cash, individuals may also experience a stronger feeling of purpose. Even in retirement, we must find a way to motivate ourselves to get up each day; a few days of work each week may be the incentive.

Consider the advantages to the economy as well. It’s not only that we’ll retain people with decades of experience for longer. We will also begin to correct the imbalance between employees and retirees who are essentially dependent on their labor in U.S. society. This, more than anything else, will go a long way toward addressing many of the financial worries expressed today.

Concerned about the diminishing Social Security trust fund, the trade imbalance, inflation, the soaring federal budget deficit, and slow economic expansion? In reality, these many issues—often attributed to inadequate tax collections, excessive government expenditure, and an overreliance on foreign goods—are caused by too few employees and many retirees.

In other words, if people can be persuaded to remain in the labor field for longer, many of the financial issues we bemoan may be resolved. In a 2003 essay, Robert Arnott and Anne Casscells reinforced this idea. In an exciting new work, Larry Siegel and Stephen Sexauer presented a similar point.

There will undoubtedly be some hand-wringing in the media as experts lament that 68-year-olds are required to work a few days per week as people are financially driven to remain in the labor sector for longer. 

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