Saturday, June 16, 2012

Reality Seven: Becoming an Older American Involves Getting Old.

Social Security Reform: Peter Pan grew up anyway

Somehow we have let governments all over the world divide our lives into discrete segments that are convenient for governments to administer.  Never mind if they have nothing to do with the real world.  Nowhere is this more apparent than with retirement.  To governments, life seems divided into: work, work, work, then don’t work, don’t work, don’t work.   Allow minor adjustments for education if done early on, and of course weekends, holidays, and vacations in order to accommodate the insanity of the ridged segmentation.  Even allow early Social Security enrollment for individuals where the phony segmenting does a "crash and burn."  If you really screw up, try to bridge the gap with unemployment insurance and lax administration of other social safety net programs.  Of course amply provide resources to make the segmentation work for government employees. 
The truth is aging is a continuous process.  It happens one day at a time.  From the perspective of twenty-first century life expectancies, someone who is 64 years and 364 days old is the same age as someone 65 years old. In fact, the life expectancy of the 64 plus individual isn’t that different from that of a 69 year old.

There is an inconvenient truth about a realistic view of aging.  It devastates a lot of fictions that have grown up around the work, work, work, don’t work nonsense.  That is the notion that in 1935 Social Security was set up so that people could retire.  The truth is poverty among older Americans was the problem.  The combination of a stock market crash, an agriculture depression, and bank failures had wiped out most peoples’ savings.  It was disgraceful that people who had worked and saved all their life were left destitute. 
Many older Americans would have continued to work if they could find employment.  Stories of “retirees” coming back to work to support the war effort illustrate the point.  If there was a job older Americans could do, we as a nation welcomed their contribution.  It is no accident that it is an “old age and disability” program.  In 1935 old age and disability meant reduced productivity; a reduction that, in 1935, precluded the person from completing in the labor market. 

To illustrate how much the fictions confuse people, consider this quote from the Browning article.  When talking about 55 to 64 year olds it states: “At an age when they should be generating peak incomes and savings, many unemployed and underemployed Americans are applying for early Social Security benefits and spending what's left in their retirement accounts.”  Note the ridiculous assumption that productivity, the basis for wages, increases throughout the pre-65 magic age.  Then at 65 it disappears.   The productivity of post-65 workers is ignored.
Now it may seem like these postings are picking on Browning.  That’s not the case.  Browning addresses the issue so much better and thoroughly than most reports.  It covers more aspects of the issue and thus better illustrates the realities even when focusing on other issues.  Thus, this posting draws heavily on it even when highlighting issues the article ignores.

The article screams for the realization that productivity grows with age and experience for some period of time, then it declines.  There is no magic age where this happens.  Both the increased productivity and the decline happen one day at a time.  But, at some point, the reality is productivity drops with age. One isn’t as strong.  Ones skills become old, perhaps obsolete.  Ones interest in acquiring new skills or knowledge may shift from job related to a personal passion.  Ones command of “modern technology” requires larger investments as more and more of ones accumulated technical skills age.  Ones increased skills become more and more tailored to a specific employer and thus increasing vulnerable to changes at a specific employer or in a specific industry.  This happens at different rates for different occupation and even for different people in the same occupation, but it happens.
All of these factors contribute to a massive misunderstanding of the realities Social Security must address.  For example, from the Browning article addressing 55 to 64 year olds, “That doesn't count the lost wages of people who have taken salary cuts to get new jobs.”  The pay cuts reflect the abandonment or obsolescing of skills tailored to a specific employer. Consider this quote from a discussion of one individual’s situation: “The older he gets, the more trouble he has finding jobs in computer mainframes, his specialty, amid changing technologies.”   One wonders how Browning, sitting there writing on his or her PC, missed the point.

Interpretations can get totally turned around by ignoring reality.  Consider this quote cited in part in another context: “Older people hang on to jobs or, out of desperation, take lower-level jobs for which they are over-qualified. Either way, they displace younger workers.”  Older workers “hang on to their jobs” because they’re productive in those specific jobs at that employer.  If so, younger workers couldn’t possibly be displaced unless they too have acquired the employer-specific skills and knowledge that allow the older worker to keep the job.  That will happen eventually as the relative importance of old skills and newer skills shifts.  But displacement? What nonsense. 
As to older workers taking jobs “for which they are over-qualified,” one is always best qualified for one’s last job. After all, one has done it.  In that sense we are all over qualified for any new job.  Every new job requires the acquisition of new skills and knowledge.  Who gets a job depends on who has less to learn and looks most interested in acquiring the new skills and knowledge required. 

To me, nothing makes the point more clearly than this quote: “Older people have more trouble finding new jobs. Among unemployed workers older than 55, more than half have been looking for more than two years, compared with 31% of younger workers, according to the Heldrich Center. Among older workers who found a new job, 72% took a pay cut, often a big one, the Rutgers data show.”  The obvious explanation is skills have become specialized.  Thus, it takes longer to find an employer where they are relevant.  Since the general productivity drop is accompanied by a move that makes many employer-specific skills irrelevant, the wage income implications can be dramatic. The chances of finding a job where the value of the new skills is larger than that of the obsolete or abandoned skills decrease with age.
It’s only in government that the idea of a new program to address these realities would seem more reasonable than fixing the existing programs for older workers. Why not reforming Social Security to address the reality that at some point productivity declines with age?   We don’t need a new program.  Fix Social Security.

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