A recent Associated Press story notes “‘more Americans work to later age.” Yet over the past couple of decades, the average age at which people apply for Social Security, now about 63, has been dropping at least slightly. So what is happening? Are people retiring earlier or later?
The lack of a precise definition of “retirement” confuses things. I’m an example of why. For three years now, I’ve been getting a monthly $212 pension from my Federal Reserve employment. However, I also write more than 100 newspaper columns a year, about two-thirds of a full-time job, and I teach a full load of classes at a local college. Am I retired?
If not, when will I be? When I start my Army Reserve pension in 2010, or get Social Security in 2016? What if I still teach evening courses in my 70s?
The Bureau of Labor Statistics that tabulates the number of employed people and the unemployment rate every month has official criteria for being “employed,” “unemployed” or “in or out of the labor force.”
Basically, if you work even a few hours a week for pay or in your own business, you are “employed.” If you don’t have paid work, but take specified steps to get a job, you are “unemployed.” If you don’t work for pay and are not seeking a job, you are “out of the labor force.”
If you are over a certain age, say 60 or 65, and out of the labor force, most people would consider you retired. But there is no official definition. Thus, many people who consider themselves retired, who get a private pension or Social Security and who are considered retired by others, still are deemed employed and in the labor force by the BLS because of part-time employment.
Who cares? Is this just a technical detail for economists and statisticians to argue about? No, it matters because the question of who is and isn’t retired matters in what will happen to the economy as the 80 million members of the baby boom retire over the next two decades.
It is a challenge seen coming for a long time. It is 25 years since President Reagan established the Greenspan Commission to revamp Social Security to meet precisely this situation.
But regardless of past or future Social Security changes, in the real economy, the number of workers for each retiree, already dropping, will drop even more.
To maintain current standards of living, each worker will have to produce more goods and services than now. Increased immigration will ease the burden somewhat. So will people working later into life. People live longer now than in the past and most have better health. Yet the average age at which people begin to take Social Security, now about 63, continues to inch downward. This alarms pessimists who think we should be moving in the other direction.
I’m not terribly worried. Wage levels will rise as labor becomes relatively scarcer. People respond to such incentives. I expect to be doing some paid work in my 70s, even if largely for the fun of it, and I expect many other boomers will do the same.
© 2008 Edward Lotterman
Chanarambie Consulting, Inc.