How America's Retirement Crisis Is Crushing the Hopes of a Generation of Young People
Continued from previous page
Consider two pictures that are worth a thousand words; they show the share of the younger and older populations in the workforce, beginning about a decade after the transition to worker-owned retirement accounts began in earnest. As you can see, regardless of the ups and downs of the business cycle, the trend has been more workers aged 55 and over in the workforce and fewer working people under the age of 25 (The decline in labor force participation for 20- to 24-year-olds also correlates with an increasing share of young people getting a bachelor's degree, so this isn't a trend that can be attributed to a single cause.)
This shows the participation rate for workers over 55 (note that this can't be explained by more women entering the workforce; that shift was already largely baked into the cake by the time these data begin):
And this shows the participation rate for those aged 20 to 24:
Today, the unemployment rate stands at 7.5 percent, but almost 23 percent of 18- and 19 year-olds and more than 13 percent of 20- to 24-year-olds who want to work can't land a job. (The unemployment rate for those aged 55 and up is 5.5 percent.)
Again, this is the context that's largely missing from our endless debates about fiscal policy. It points to a rather obvious conclusion: we should be increasing Social Security benefits, decreasing the out-of-pocket healthcare costs seniors have to shoulder, and lowering the minimum age for retirement. In short, we should be focusing on policies that make it possible for older workers who have put in their time to kick back and let some younger workers find jobs. It wouldn't be a magic bullet for young people; it wouldn't deflate the student debt bubble or address our crushing level of income inequality, but it would be a darn good start.
Last month, the New America Foundation's Michael Lind, Joshua Freedman and Steven Hill offered a proposal that would go a long way toward achieving that goal. They envisioned an expanded Social Security program supplemented by a flat benefit that isn't tied to earnings or funded through payroll taxes, and argued that shifting a greater share of the costs of retirement onto Social Security would make tax-subsidized employer plans less crucial to Americans' retirement security. University of Texas economist James Galbraith has similarly argued for lowering the age of eligibility for Social Security and Medicare, at least until the employment picture improves.
But aren't these programs already costing too much? And aren't we already taxed to death, as the Tea Partiers claim? No: that's ideologically informed mythology. Prior to the Wall Street crash, we had the fourth lowest tax burden in the Organization for Economic Cooperation and Development (OECD). And while the average “replacement rate” for public pensions – the share of a workers' income covered by retirement benefits – is 57 percent, we cover just 39 percent, on average, in the United States ( XLS). Americans have some of the stingiest retirement benefits in the developed world.
As for the politics, it almost goes without saying that at a time when it requires 60 votes in the Senate to name a post office after a war hero -- and when the House has essentially given up on legislating in the public interest – policies that help real people suffering real pain in this economy are nonstarters.
But one can be certain it won't remain that way. Because we're just at the beginning of this crisis, and with each cohort of Americans reaching retirement age, fewer will have pensions and more will have experienced the great middle-class squeeze than the cohort before it. So it will get worse before it gets better, but eventually our elites will have no choice but to finally recognize the severity of the crisis their neoliberal clap-trap has created.