I agree with Johathan Rauch who thinks
America Needs to Radically Rethink What It Means to Be Old
“With millions of people living vigorously into their 80s and beyond, the very idea of “retirement”—the expectation that people will leave the workforce at an arbitrary age—makes no sense. In fact, out the window goes the whole three-stage structure of American life, with education crammed into the first couple of decades, work heaped in the middle, and leisure stuck at the end.”
Nicely said! But changing this will require:
“Jobs [] to be made more friendly to older workers (through measures as elaborate as shifting physical tasks to robots and as simple as providing different footwear and chairs); employers need to exploit age diversity (which improves team productivity by blending older workers’ experience and skill with younger workers’ creativity and drive); education and training need to be available and encouraged throughout life.”
It may also require restructuring pay schedules so that firms do not fine older workers more expensive, after taking account of the value of experience. More flexible remuneration and making the age at which to begin receiving Social Security benefits also more flexible would largely eliminate “retirement” as an arbitrary age determined event.
The same is true on the other end. Education, particularly productivity-enhancing education should continue throughout working life. This may become even more the case as slower population growth/decline and AI impact more workplaces [1].
And while an arbitrary “retirement” age was one unfortunate legacy of the creation of Social Security, the other was also unfortunate: financing the system with a tax on wages, and capped wages at that! The choice in 1938 was understandable as the VAT had not been invented, but less understandable was using the same wage tax mechanism for Medicare in 1965.
A VAT is superior to a wage tax for various reasons. A VAT
1) Does not discourage employment.
2) Is less vulnerable to demographic shifts in labor force participation
3) Is probably easier to adjust so as to keep revenues and benefits actuarily in line
4) Taxes consumption, not income (some of which could otherwise be saved)
Desirable changes in Social Security will of course have budget implications. The most important of these is preventing Social Security and Medicare from creating actuarially unsound net withdrawals from the respective trust funds. They need not, however, affect the level of taxes and benefits. In this context the fact that Social Security and Medicare beneficiaries have on average higher incomes that the average wage taxpayer (less true if benefits were financed with a VAT) is sometimes advanced as an argument for reducing taxes and benefits. Taking account that Socia Security benefits are taxable (they could be fully taxable, not just 85% as at present) the difference in average income is irrelevant. On the other hand, a system in which fewer older people would withdraw from labor force completely, could provoke a re-think about tax and benefit profiles. More at mid-life and less later or the reverse; who’s to say?
A broader perspective on social insurance. https://thomaslhutcheson.substack.com/p/socia-insurance-20
[Standard bleg: Although my style is know-it-all-ism, I do understand I might be mistaken or at least over state a point. I would, therefore, welcome comments on these views.]
Image: Taken from the Atlantic article.
[1] Katherine Webber on lifelong job skills enhancement: https://substack.com/home/post/p-151626729
Shall we agree to disagree, the issue with Social Security is simple. Right now once your income reaches $176,000, you no longer pay Social Security tax. It has been at that level for 30+ years. Increase the cap from $176,000 to $400, 000 and the Social Security insolvency goes away.
Why shouldn't workers get a break in the last portion of their life, after being a wage slave for over 4 decades?