IB Number 40

AARP PUBLIC POLICY INSTITUTESOCIAL SECURITY REFORM: RETHINKING RETIREMENT-AGE POLICY—

A LOOK AT RAISING SOCIAL SECURITY’S RETIREMENT AGE

Introduction

Many plans to restore long-term solvencyto the Social Security system would increasethe age of eligibility for full Social Securitybenefits. Some call for raising the age forreduced benefits as well. Whether a higherretirement age would have the desired effectdepends in part on the willingness and abilityof workers to remain at work longer, as well ason the willingness of employers to retain them.Large numbers of workers say they want orexpect to work longer; employers face laborshortages. For many workers today, improvedhealth and working conditions suggest that alonger worklife might not pose unduehardships. Workers, however, express verylittle interest in being required to wait longer toreceive full Social Security benefits.

Moreover, while baby boomers, inparticular, will be reaching retirement age farbetter educated than past generations ofretirees, skills obsolescence will plague manyof them. In addition, many older workers,particularly those with low incomes, willexperience health problems or face employmentbarriers that make prolonging worklifedifficult. This issue brief discusses theimplications for workers and employers ofraising the age of eligibility for full SocialSecurity retired worker benefits, referred tosimply as “raising the normal retirement age.”It focuses on a number of work-related issuesthat should be addressed before that age isfurther increased. Because the underlying issueof concern in this brief is the long-rangesolvency of the Old Age, Survivors, andDisability Insurance Trust Funds, proposals toraise the age of eligibility for Medicare are notexamined. However, it is recognized thatincreasing Medicare’s eligibility age wouldlikely have a very substantial effect onretirement decisions.

20th Century Retirement Trends andExpectations1

Retirement came of age in America in thedecades following World War II. SocialSecurity coverage was expanded and benefitsimproved; cost-of-living adjustments ensuredthat retired worker benefits would better keeppace with inflation. Growing numbers ofAmericans had jobs that entitled them toprivate pension benefits, often at relativelyyoung ages (e.g., 55). More and more familieshad two earners, enhancing their capacity tosave for retirement.

For much of the post-war era, the laborforce participation rates of the midlife andolder population drifted downward, mainlybecause of the continuing labor forcewithdrawal of men (Figure 1). Though jobloss, mandatory retirement, and ill healthpropelled many of these men into retirementbefore they planned to retire, ever largernumbers of workers began to take advantage ofthe opportunity to leave the labor forcevoluntarily in comfort and dignity. Indeed, asreflected both in labor force participation ratesas well as the average age at which SocialSecurity retirement benefits are awarded (Table1), early retirement was obviously attractive togrowing numbers of Americans.2

1 The author wishes to thank Laurel Beedon,Barbara Bovbjerg, Bruce Douglas, John Gist,Clare Hushbeck, Evelyn Morton, and JosephQuinn for their thoughtful reviews of and helpfulcomments on earlier drafts of this issue brief.Responsibility for any remaining errors or otherproblems rests with the author. Nor are the viewsexpressed necessarily those of the reviewers.2 The table in the Annual Statistical Supplementfrom which Table 1’s figures were obtained mayeven understate the proportion of workers optingfor early benefits, as it includes persons whosebenefits were converted from disabled worker

benefits to rconversionswomen werage 62 in 191997: Table

Figure 1Labor Force Participation Rates of Men and Women Aged 65

and Older, 1950-1998

0

10

20

30

40

50

60

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1998

Par

tici

pati

on r

ate

MenWomen

.Source: U.S. Bureau of Labor Statistics, Handbook of Labor Statistics, 1985, Table 5; U.S.Bureau of Labor Statistics, Employment and Earnings, 1991, Table 3 and 1999, Table 3.

Workers continue to look forward toretirement, eyeing early retirement—often veryearly retirement—as the ideal. One-third of therespondents to the 1997 Retirement ConfidenceSurvey reported they would like to retire at orbefore age 55 (Yakoboski and Dickemper1997). Baby boomers participating in a recentRoper Starch survey for AARP maintainedthey would like to stop working for payaltogether at an average age of 59.7 (AARP1998b). Yet workers increasingly seem to feelthat such early and total retirement will not betheir reality.3 In numerous surveys, a majorityof workers have been saying that they expect towork in retirement. Reasons vary, butfinancial considerations are key for manyworkers. Others like what they are doing andwant to remain active. For the boomers who“retire” but continue to work, the nature ofretirement may turn out to be fundamentallydifferent from what it has been for their parentsand grandparents.

In addition, there are signs that at leastsome people may already be working longer

Table 1Percent of Social Security Retired Worker

Benefits Awarded at Age 62, 1960-1996

Men Women1960* -- 27.11965 14.7 30.91970 18.4 34.71975 25.8 41.61980 30.1 45.91985 45.5 57.91990 47.2 55.91991 46.8 56.11992 48.2 56.71993 48.8 56.01994 49.0 57.61995 49.3 55.41996 49.9 57.4

*Reduced benefits were made available to womenin 1956 and to men in 1961.Sources: Social Security Administration, AnnualStatistical Supplement, 1997 to the Social SecurityBulletin, Washington, DC: Social SecurityAdministration, 1997, Table 6B.5.

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etired worker benefits. Excluding the, 57.2 percent of men and 64 percent ofe awarded retired worker benefits at96 (Social Security Administration 6.B1).

than were comparable-age workers even adecade ago. After declining fairly steadily

3 These boomers, for example, expect to retire atan average age of 63.9 years (AARP 1998b).

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since the late 1940s, the labor forceparticipation rate for persons aged 65 and olderbegan to level off around 1985 and has beeninching upward since then. In 1998, 11.9percent of persons aged 65 and above were inthe labor force, up from 10.8 percent in 1985(see Figure 1).4 These numbers translate intoover 900,000 more older men and women inthe labor force in 1998 than in 1985 (U.S.Bureau of Labor Statistics 1986 and 1999).

The Bureau of Labor Statistics (BLS)projects modest increases in the labor forceparticipation rate of persons aged 65 and olderthrough the first few years of the next century(Fullerton 1997). However, some laboranalysts suggest that prolonged employmentwill characterize a substantially higherpercentage of Americans, since many say theywant to work, and others will find they lack thefinancial resources they need to maintain theiraccustomed standard of living in retirement. Inaddition, slower growth of the labor force mayput pressure on employers to promoteopportunities for older workers.

Various polls conducted over the yearsindicate that large numbers of workers wouldbe happy with some form of employment inlater life, perhaps retiring from one firm andmoving to another or continuing to work for thesame employer after beginning to receivepension or Social Security benefits. Twentyyears ago, just over half of preretirees weretelling Louis Harris and Associates (1979) thatthey would like to work, preferably part-timeor in less demanding jobs, after retirement. Bythe late 1990s, over 70 percent of all workersand 80 percent of the baby boomers werereporting that they expected to work inretirement (AARP 1998a; Yakoboski andDickemper 1997).

4 Fuchs (1998) finds little change in expectedyears of work for persons aged 65 and older overabout the same period. However, he does reportan increase in expected years not at work, at leastamong men.

What fails to emerge from these polls isjust what respondents expect, want, and/orwould be willing to work at in retirement.Despite the high proportion of workersexpressing interest in continued employment,only a minority remain in the labor force oncethey begin to collect pension or Social Securitybenefits.5 One reason may be the types of jobsavailable to older workers, many of whomexpress a preference for part-time work. Part-time employment in the United Statesfrequently consists of work that is low-wage,low-benefit, and low-status, as well as tediousand/or demanding and, hence, not likely toappeal to people who do not need to work.Some evidence that the “quality” of jobsinfluences the work decisions of older men andwomen can be found in a study conductednearly a decade ago as part of a major initiativeto expand employment opportunities for olderAmericans.

In 1989, the Commonwealth Fundcommissioned a survey of nonworking 50-to-64-year-olds that concluded that more than 1.9million people in this group were ready andable to go to work; this was substantially morethan the estimate by the Bureau of LaborStatistics (Commonwealth Fund 1990).6 Whilethese 1.9 million men and women may trulyhave constituted a reservoir of labor, theynonetheless represented only one-fourth of allnonworkers between the ages of 50 and 64. Inother words, three-fourths of the nonworkers—who were still quite young—could not, or didnot wish to, be in the labor force.

5 This is not to suggest that all workers movedirectly from full-time work to full-timeretirement. Many workers obtain what is oftenreferred to as transitional or bridge employment,which may be full-time or less than full-time work,before exiting the labor force permanently (see,e.g., Mutchler et al. 1997; Quinn and Kozy 1996;Quinn 1999).6 The Commonwealth Fund respondents werequeried about interest in jobs that would beavailable at “a suitable location, salary, andhours.” Presumably, fewer would have beeninterested in work under less favorable conditions.

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Moreover, the would-be workersthemselves were not necessarily ready for justany type of work. A large majority (87percent) said that they would be willing andable to do a job that involved using theirspecial skills, however defined. Just over halfindicated that they would be willing and able totake a “sales job in a store, serving customers,”which, given the projected growth in retail salesjobs (Silvestri 1993 and 1997),7 points to apotentially good match between labor supplyand demand. However, enthusiasm for manyof the other jobs included in the study wasmuted. Working in a fast food restaurant orwaiting on tables, for instance, had littleappeal, but those jobs are among theoccupations whose numbers are projected toincrease greatly.

While wide variation in interest in differentemployment possibilities is to be expected, the“perfect” job may be hard to come by. Inparticular, workers who are not employed inthe types of occupations (e.g., professional ortechnical) that most readily lend themselves tosatisfying part-time work or phased retirementmay find post-retirement work options notmuch more attractive 10 years from now thanthey are today. Just what might those boomerswho say they want to work be willing to do?More and better information about vagueexpressions of interest in post-retirementemployment is needed.

Benefit Eligibility Age on the Rise

Workers can, of course, leave the laborforce at whatever age they choose, 8 although

7 Recent projections by BLS show retail sales asone of the occupations experiencing the largest jobgrowth (Silvestri 1993 and 1997).8 Despite the fact that mandatory retirement hasbeen eliminated in most occupations, workers maynot always end up retiring when they want to. Forexample, a recent poll by Americans DiscussSocial Security found that just over half of thoseunder the age of 65 expect to retire before age 65,while 69 percent of current retirees had retiredbefore that age (Lukensmeyer 1998).

under current law, they cannot collect SocialSecurity retired worker benefits until age 62.If they opt to begin collecting at 62, theirbenefits are only 80 percent of what they wouldbe at the age of full eligibility, currently 65.This latter age is often referred to as the“normal retirement age,” or NRA.9

For workers who turn 62 in 2000, the ageof eligibility for full Social Security benefitswill rise gradually from 65 to 66, where it willremain through 2016. The NRA will thenbegin again to rise gradually until it reachesage 67. Early benefits will still be available atage 62, but they will amount to only 70 percentof the full benefit, rather than the 80 percent oftoday.

Additional changes to the NRA have beenincluded in several plans to restore long-termsolvency to the Social Security system.Proponents of raising the age argue that notonly are people living much longer today thanthey were when the age of eligibility for fullbenefits was set at 65 (Table 2), they arehealthier or, at the very least, the incidence ofdisability in old age is lower (Manton, Corder,and Stallard 1993; Manton and Stallard 1996).

The Social Security Administration’sOffice of the Chief Actuary reports that ifSocial Security’s NRA had kept pace withlongevity increases since the program began, itwould be 71 by 2000 (Social SecurityAdvisory Board 1999: 3). Today, workerswho leave the labor force at age 62 can expectto spend nearly one-fourth of their lives inretirement. Add to that 12 (or more) years ofschooling at the beginning, and expectednonwork life may exceed expected work life fora sizable proportion of the population—toomuch, some say, especially in light of projectedincreases in life expectancy.

9 The age at which workers actually retire is muchlower than the age of eligibility for full benefits.

says Social Security Commissioner KennethApfel (1998: 4), “a pivotal difference betweenlonger life expectancy and longer healthy lifeexpectancy,” a critical distinction whenconsidering raising the NRA and perhapsindexing it to increases in longevity. Just howmuch of that longer life expectancy is a healthylife expectancy is a matter of debate.11

Opponents of raising the NRA, at least atthis time, argue that there is too muchuncertainty about the likely impact of thecurrently scheduled increase, to say nothing ofany additional increase, to justify furtherchanges. Research by Fields and Mitchell(1983), conducted about the time Congressvoted to raise the NRA from 65 to 67, suggeststhat the impact of this higher retirement age onbehavior will be modest. Fields and Mitchellactually estimated raising the NRA to 68,rather than the legislated 67, and determinedthat without a corresponding reduction in earlyretirement, an increase of that magnitude wouldraise average retirement age by less than twomonths.

Gustman and Steinmeier (1985) examinedthe potential impact of several changes in the1983 amendments to the Social Security Act,

Table 2Life Expectancy at Birth and at Age 65 by

Gender, 1929/31-1998 and Projected2000-2070

At Birth At Age 65Male Female Male Female

1929/31 57.7 60.9 11.7 12.81940 61.4 65.7 11.9 13.41950 65.6 71.1 12.8 15.11960 66.7 73.2 12.9 15.91970 67.2 74.9 13.1 17.11980 69.9 77.5 14.0 18.41990 71.8 78.9 15.0 19.01998 73.4 79.4 15.7 19.22000 73.8 79.6 15.8 19.22010 75.2 80.4 16.3 19.52020 76.0 81.0 16.7 19.82030 76.8 81.7 17.1 20.22040 77.4 82.3 17.5 20.72050 78.1 82.8 17.9 21.12060 78.7 83.4 18.3 21.52070 79.3 83.9 18.7 21.9

Sources: National Center for Health Statistics, 1997,Table 6-4; Board of Trustees, Federal Old-Age andSurvivors Insurance and Disability Insurance TrustFunds, 1999, Table II.D2.

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Under the Social Security Adminis-tration’s intermediate assumptions,10 lifeexpectancy at age 65 is projected to rise byabout three years for both men and womenover the next 80 years (Social SecurityAdministration 1999). In the eyes of many,workers should “pay” for some of theseimprovements in life expectancy by workinglonger, especially if health is improving aswell.

On the other hand, not everyone isconvinced that living longer means being ableto work longer. Most would agree that there is,

10 These are the economic and demographicassumptions that reflect the Social SecurityTrustees’ best estimates about future developmentsaffecting Social Security (Social Security andMedicare Boards of Trustees 1997: 3).

including the retirement-age increase, andconcluded that the delayed retirement credit12

would actually have a greater impact on thework behavior of older workers than theretirement-age increase. However, thesescholarly exercises are both based onreasonable assumptions, not on observedbehavior. There is yet no comparableexperience or history to guide Congress inassessing how workers and the economy mightrespond to and be affected by a higherretirement age.

11 The answer is obviously just as or perhaps morecritical to an assessment of the impact of anyincrease in the age of eligibility for Medicare.12 The delayed retirement credit (DRC) increasesthe retired worker benefit of workers who delayretirement between the ages of 65 and 70.

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Proposals to Raise Retirement Age

The fact that there are many unansweredquestions about the soon-to-be implementedincrease in the normal retirement age has failedto serve as a deterrent to calls for furtherincreases. Recent reform proposalsincorporating changes in the NRA vary fromsimply eliminating the hiatus in the currentlylegislated increase from age 66 to age 67 toraising the age of eligibility for full SocialSecurity benefits to 69 or 70 and indexing it tochanges in life expectancy.

Two of the reform plans developed by the1994-96 Social Security Advisory Councilwould accelerate the legislated increase in fullretirement age by removing the 11-year hiatusand then indexing the higher retirement age toincreases in life expectancy (Advisory Councilon Social Security 1997). Doing this wouldensure that longevity improvements translateinto longer worklives, at least in the case ofworkers who cannot afford to retire early. TheCommittee for Economic Development (1997)has recommended that the NRA be raised to 70by 2030 and then indexed to increases in lifeexpectancy, while the National Commission onRetirement Policy (1999) would raise the NRAto 70 by 2029. A modification of this proposal(H.R. 1793) would raise the NRA more slowly,causing it to reach 67 in 2011 and thereafterincreasing one month every two years.13

Although most members of the 1994-96Advisory Council approved a speedier increasein the NRA, followed by indexing, somemembers demurred, insisting that “it is risky toassume that just because people are livinglonger, they can work longer and will want orhave the opportunity to do so” (Ball et al.1997: 92). These members had “grave doubts”about the advisability of the current increase,especially in view of its disproportionateimpact on workers who are least likely to be

13 Increases in the early retirement age have alsobeen proposed by the Commission and areincluded in the modified bill.

able to work longer. These opponents of ahigher NRA feel that any further increase isunwise until there has been an opportunity toassess the impact of the increase now on thebooks, contending that in the years since thelaw gradually raising NRA to 67 was enacted“the employability of older workers hasdecidedly not increased” (Ball et al. 1997: 93).

An aspect of raising the normal retirementage that its supporters find appealing is that theproposed increases would be phased ingradually, giving workers ample time toprepare for the change.14 In the case of theincrease legislated in 1983, it would be nearlytwo decades before the phase-in would beginand another 27 years before the full impactwould be in effect. Workers who wanted toretire early would have many years to adjusttheir plans, assuming they knew about thechange. Because of the long phase-in undermost retirement-age increase proposals, thepublic might find this change, especially ifdelayed far into the future,15 less objectionablethan others with a more immediate impact(e.g., a tax increase or benefit cut). However,as will be seen below, phasing in an increase isno guarantee of its popularity.

The Public Response to Raising theRetirement Age

Americans are aware that Social Securityfaces financing problems, and most, accordingto Americans Discuss Social Security

14 Eliminating the hiatus as of 2006, however,might disrupt the plans of some people fairly closeto retirement age.15 Of course, what is “far into the future” is amatter of opinion. At present, three decades hencemight seem far into the future to proponents ofraising the retirement age to 70 by 2030. On theother hand, three decades ago may seem likeyesterday.

P

ADSS),16 “think big changes are required inorder to avert” them (Lukensmeyer 1998: 4).Raising the retirement age, however, is notamong the favored solutions. Polls show thatthe public is clear and consistent in itsdisavowal of increasing the NRA, even whenthe rise would not be implemented for anotherquarter century.

To be sure, few of the possible reformoptions generate widespread enthusiasm, butraising the retirement age ranks close to thebottom. As recently as August 1998,Americans were displaying what was describedas “a sheer stone wall of . . . opposition” toraising the retirement age, according to a pollreleased by ADSS (Cutter 1998): 74 percent ofthe public objected to raising it to age 70; age,income, and party affiliation did not appear tobe factors in the responses. In comparison,“only” 61 percent objected to cutting the cost-of-living adjustment for benefits and 54 percentobjected to a payroll tax increase, according tothe poll.

The ADSS poll was not the first tohighlight deep dissatisfaction with raising theretirement age. Upon review of 11 nationalsurveys conducted in 1997 and 1998 (Blendonet al. 1998), analysts writing for the BrookingsInstitution concluded that generally only aboutone in three supports raising the retirement age,even if phased in gradually. Accelerating thescheduled increase finds favor with fewer thanfour in ten, an outcome that probably shouldnot be surprising, given that many of therespondents might be affected by such achange.

Over the past 20 years, proposed NRAincreases have consistently proven unpopularwith the public (see Table 3). Baggette,Schapiro, and Jacobs (1995), for example,found that surveys conducted from the late1970s through the mid-1990s tend to confirm

16 ADSS was a nonpartisan project funded by ThePew Charitable Trusts to foster public discussionabout the future of Social Security.

Table 3The Public’s View of Raising Retirement Age:

Results of Selected Polls, 1977-1998

Raise age to*

Poll** PercentOpposed

70 ADSS, Aug. 1998 74

69 PSRA/Newsweek , Jan. 1997 64

70 EBRI, July/Aug. 1996 68

70 NTU, March/April1992

78

70 NTU, Nov./Dec.1990***

74

68 CBS/NYT, Jan. 1983 57

67 or 68 Time/YSW, Dec. 1982 54

68 Harris, Nov. 1982 58

68 Roper, July 1982 70

68 CBS/NYT, July 1981 42

68 MAP, June 1981 59

67 or 68 MAP, June 1979 74

68 Gallup, Oct. 1977 64

*The wording of the questions, as well as the proposedincrease, varied across surveys, which may have influencedresponses. The figures in this table are only meant to beillustrative of the persistent opposition to raising theretirement age. The weakening of opposition in the early1980s may have been in response to the immediacy of thefinancial crisis confronting Social Security at that time.**Acronyms: ADSS—Americans Discuss Social Security;PSRA—Princeton Survey Research Associates; NTU—National Taxpayers Union Foundation; MAP—MonitoringAttitudes of the Public (American Council on LifeInsurance); YSW—Yankelovich, Skelly, and White.Sources: Americans Discuss Social Security 1998; Baggett,Shapiro, and Jacobs 1995; Employee Benefit ResearchInstitute et al., 1996; Farkas and Johnson 1997; MathewGreenwald and Associates 1992; Sherman 1989.

age 7

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opposition to raising the retirement age allalong.

According to Sherman (1989), raising theretirement age was not a popular option even inthe early 1980s when Social Security faced afinancing crisis. There did appear to be someweakening of opposition “at the depth of thecrisis” (Sherman 1989: 10), when theimmediacy of the problem confronting SocialSecurity undoubtedly made people realize thatsomething—perhaps even raising theretirement age—had to be done.

Given the professed objection to a higherNRA, then, just who is promoting it? MarilynMoon sees a higher NRA as a “favoriteproposal of workaholics and not a favoriteproposal of anyone else” (Moon cited inWildavsky 1998: 1563). Former PrincipalDeputy Commissioner of Social SecurityLawrence Thompson (1996: 2) likewise notesthat “if any consensus can be found amongopinion leaders, it is that the retirement ageought to be increased. Yet few employers seemto want to keep their long-tenured employeesaround even longer and few individuals seem tobe interested in delaying pension receipt.”

Of course, under most proposals, workerswould not have to delay collecting SocialSecurity until the higher NRA; they wouldsimply get less per year than if they waited.While they might not find this to their liking, inthe end, the public, too, may decide that raisingthe normal retirement age is the leastobjectionable of several solvency options.Many workers would still be able to retireearly due to savings, investments, and pensionincome; others could try to save more if theywanted the additional years in retirement.

Employer Concerns About Raising theRetirement Age

Little is actually known about howemployers view further increases in the NRA.The U.S. General Accounting Office (1998)posits that employers’ negative perceptions of

older worker costs and productivity mightaffect their willingness to retain or hire them.Numerous surveys of human resourceexecutives and employers over the yearsreveal extremely favorable opinions of olderworkers when it comes to attributes such asloyalty, dependability, and experience. Thesesame employer representatives, however, tendto be far less positive about older workerflexibility, adaptability, and technologicalcompetence—attributes that seem to weighmore heavily than those such as loyalty in thehiring and retention decision (see AARP1995; Barth, McNaught, and Rizzi 1993).

In testimony before the Senate SpecialCommittee on Aging, a senior vice presidentwith the National Association ofManufacturers (NAM) argued against a higheruniform retirement age, contending that raisingthe NRA would have a number ofconsequences detrimental to workers andemployers, among which would be asubstantial rise in the costs of health care(Huard 1998).17 The cost of long-termdisability plans would also rise if, as somepropose, the early retirement age (ERA)increased along with the NRA and disabilitybenefits had to be paid for a longer period oftime. The increase in the cost of benefitswould, Huard argues, discourage employers“from offering the range and value of benefitscurrently available” (Huard 1998: 11). Byraising costs for employers, a higherretirement age might reinforce employers’interest in getting rid of their older employees.

Some employer costs are higher for olderworkers (see, e.g., Clark 1994). If these costsare offset by higher productivity, lessturnover, or lower recruitment expenditures,they may not feature prominently inemployers’ decisions about older workers.Data that would adequately refute concernsabout any higher costs, however, do notappear to be available. Thus, the issue of costscontinues to serve as a formidable

17 Huard noted that NAM itself had not, as ofthen, taken a position on raising the NRA.

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employment barrier for older workers; somelabor experts argue that these costs must bereduced if the number of older workers hiredand retained is to increase by much.

Burkhauser and Quinn (1997) point outthat one way of reducing employer costs wouldbe to make Medicare, rather than any employerhealth plan, once again the primary source ofhealth care coverage for older workers. Otherssuggest that relaxing some of the requirementsof the Age Discrimination in Employment Act(ADEA) to allow employers greater flexibilityin setting wage and/or compensation levels forolder workers would also enhance employmentopportunities for older workers (see, e.g.,Rebick 1993). Such flexibility seems to becommon in Japan, where the labor forceparticipation rate of the older populationexceeds that of the United States. However,those same workers lack the very importantprotections afforded older workers in theUnited States under the Age Discrimination inEmployment Act.

In recent testimony on Capitol Hill, GaryBurtless (1998) of the Brookings Institutionexpressed relatively little concern about raisingthe retirement age, observing that employershad managed to accommodate large numbers ofstudents and mothers with the creation ofmillions of part-time jobs. His “guess is that acomparable accommodation [would] be madefor the special needs of older workers” (p. 10).Indeed, a recent newspaper article notes thatSears Roebuck was offering two-hour shifts inan effort to attract workers in the labor-strapped retail industry (Presslar 1998);retirees might find such arrangements much totheir liking.

Whether such short shifts and other“accommodations” work will depend in part onthe jobs for which accommodations are made.Another question is whether workers wouldagree to the lower salaries or wages that areoften the price of part-time work (Burtless1998: 10).

Financial Impact of Raising the RetirementAge on Social Security Finances

It seems likely that a higher normalretirement age will feature prominently on theagenda of any Social Security plan seriouslydebated by Congress. Public oppositionnotwithstanding, further NRA increases mightprove irresistible in view of their sizable impacton the solvency of the Social Security trustfunds. Merely removing the hiatus in thescheduled increase from 66 to 67 wouldeliminate 5 percent of the long-range deficit(Goss and Wade 1998); going on to index it tolongevity until age 68 is reached wouldeliminate 18 percent.

According to Social Security actuaries,gradually but steadily (i.e., without the hiatus)raising the NRA by two months per year untilit reaches 68 would reduce the long rangedeficit by .49 percent of taxable payroll, orover one-fifth of the shortfall. The 68retirement age would affect workers turningage 62 in 2017 and later.

The same impact could be achieved by ahigher retirement age that was phased in muchmore gradually. In modeling the impact ofvarious Social Security reform options forAARP’s Public Policy Institute,PriceWaterhouseCoopers estimates thateliminating the scheduled hiatus and thenincreasing the NRA from 67 to 70 by just onemonth every two years until 2083 would alsoshrink the long-range deficit by about .50percent of payroll, or one-fifth the projecteddeficit.

A 15-year phase-in of a rise in the NRA to69, coupled with an increase in the earlyretirement age, would add another 13 years tothe period of projected solvency (estimates ofSocial Security actuaries cited in U.S. GeneralAccounting Office 1998: 3). According to theAmerican Academy of Actuaries (1997),rapidly moving the NRA to 73 would take careof nearly the entire shortfall. Since a widerange of increases and phase-in periods ispossible—some far less painful than

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others—considerable variation in the impact onsolvency of raising the NRA is obviouslypossible, but it could be huge.

Advantages of raising the retirement agemight accrue beyond any impact on trust fundsolvency. The GAO, for example, contendsthat a higher NRA “could increase the nation’seconomic output” (U.S. General AccountingOffice 1998: 1), if experienced workersremained longer in the labor force.

Work Abilities and Opportunities in Midlifeand Beyond

A higher retirement age assumes that mostmen and women are physically and mentallyable to work longer, that employers will wantthem, and that the available jobs will enticeworkers who could afford to retire to remain onthe job. Health status and performance, alongwith job availability, thus become criticalissues. What proportion of people would notbe able to continue working to the higherretirement age because of health or job-relatedproblems or caregiving responsibilities? Whattype of safety net would be available for thosefor whom a longer work life is not feasible?

Health Status

While health problems and physicallimitations have always featured in theretirement decision, people once worked muchlater in life in jobs that were typically far morephysically arduous than jobs are today. As lateas 1968, over half of new Social Securitybeneficiaries were reporting health problems asthe main reason for leaving their last job(Sherman 1985). Only 14 years later, that wasthe case for less than 30 percent, despite thefact that labor force participation rates amongolder people continued to fall.

Burkhauser, Couch, and Phillips (1996:789) maintain that the major decreases in thelabor force participation of 62- to-70-year-oldmen in recent decades have been moreconsistent with economic factors than with

worsening health. Spikes in the rate ofretirement around age 62 and 65, the earliestand full retirement ages under Social Security,would seem to support this contention,although not everyone is in accord. Dwyer andMitchell (1998) argue, for example, that“health problems influence expected retirementage more strongly than do economic variables.”

From Wave 1 and the early release ofWave 2 of the Health and Retirement Survey(HRS), Burkhauser, Couch, and Phillips(1996: 790) conclude that the “great majorityof men” who opt for Social Security retirementbenefits at age 62—far from ailing—“enjoygood health.” The percentage of men withwork limitations—16—was the same for thosetaking early retirement and those who did notand increased by about the same amount forboth groups between the first and second wavesof the HRS. In other words, the presence ofwork-limiting conditions, at least as defined byBurkhauser, Couch, and Phillips, did notappear to be a factor that distinguished earlySocial Security recipients from those whocontinued working.

Steuerle (1998) likewise points to rathergood health, on the whole, among what mightbe called the “early-retirement age” populationin the Current Population Survey (CPS).Respondents between the ages of 60 and 64who reported a work-limiting disability or whocontended that they were in poor or only fairhealth were in the minority. Moreover, thesehealth-related complaints showed little increaseamong those aged 65 to 69. Crimmins,Reynolds, and Saito (1999) found a significantimprovement in ability to work, as reported bymen and women in their 60s, from 1982through 1993, an improvement due to increasededucation, which has a bearing on occupationalchoice, health status, and lifestyle.

Burkhauser, Couch, and Phillips arecareful not to minimize the importance ofhealth problems for some early retirees, namelythose who are apparently not healthy

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enough to continue working and who lackalternative sources of pension income. For thissmall group (who were less than 10 percent ofmale early Social Security takers studied byBurkhauser, Couch, and Phillips), a higherretirement age would most likely result inconsiderable hardship.

Still, the researchers claim that theirfindings “call into question popularconceptions of early Social Securitybeneficiaries as having a markedly higherprevalence of health problems relative to thosewho delay acceptance past age 62”(Burkhauser, Couch, and Phillips 1996: 791).According to this view, raising the earlyretirement age should not be a problem, asmost workers could either continue to work orhave access to other sources of income tosupport them if they are unable to work.

Research by Gendell and Siegel (1996),however, might give pause, showing as it doesthat rather high proportions of men and womenstop working more than a year beforecollecting Social Security retirement benefits.18 To be sure, such early exit is hardlytroublesome in the case of workers withadequate income from other sources, such as aspouse’s earnings or pension benefits. Non-workers who delay applying for Social Securitybeyond age 62 may for the most part fall intothis category. However, those who have beenout of work for a year or more and then begincollecting Social Security at the earliestpossible age are most likely another story.19

18 Of those no longer working in the NewBeneficiary Survey, 25 percent of the men andnearly 50 percent of the women had stoppedworking more than a year before receiving theirfirst Social Security Retirement Benefit (Gendelland Siegel 1996: S138).19 In the New Beneficiary Survey, almost one-third of the men who received benefits at age 62had been out of the labor force for at least a year(Author’s calculations of Table A in Sherman[1985]; see also Gendell and Siegel [1996]).

Gendell and Siegel also report that theinterval between leaving the labor force andreceipt of benefits was “fairly long” for blacks(one to two years), considerably longer than forwhites. These racial differences can, accordingto the evidence cited by Gendell and Siegel, beattributed to health differences. Crimmins,Reynolds, and Saito (1999) note that AfricanAmerican men in the National Health InterviewSurvey were about 40 percent more likely thannon-Hispanic white men with the sameeducation to report inability to work.

While the health problems referred to byGendell and Siegel might not preclude anywork, they are apparently sufficiently severe todistinguish the labor force behavior of thosewho experience them from workers withsimilar characteristics who are in good health(Sammartino 1987: 41). Workers who haveleft the labor force before reaching earlyretirement age may be at particular risk ofeconomic distress if that age is increased.

Nevertheless, research undertaken forAARP leads to the conclusion that a highproportion of the population does seem to bephysically capable of working beyond both theearly and full retirement ages. Analyzing datain the HRS and the Survey of Income andProgram Participation (SIPP), Uccello (1998)has determined that “the vast majority ofworkers [8 in 10]20, even those aged 65 andolder, are in good health” and have nofunctional conditions that would limit work.Nonetheless, she acknowledges that somepeople—often members of minority groups—would not find it easy to prolong theirworklives.

Like many researchers before her, Uccellofinds that ill health does bedevil a portion ofolder workers, prompting some to retire

20 According to Uccello (1998), 83 percent ofworkers aged 62 to 64 and 80 percent of workersaged 65 or older in the 1990 panel of the Survey ofIncome and Program Participation reported goodto excellent health.

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before they might prefer. As would beexpected, retirees tend to be in worse healththan their working counterparts, but Uccello’sresearch indicates that the majority of retireesare also healthy. Still, a not inconsequentialnumber of nonworkers experience work-limiting conditions.21 Those conditions mightnot qualify those who experience them forSocial Security Disability Insurance (SSDI)benefits but could be severe enough to makeprolonged labor force attachment difficult orimpossible.

Other research produces comparableresults. Over one-fourth of the population aged60 to 64 and aged 65 to 69 in the CurrentPopulation Survey (CPS) rated their health asonly fair or poor (Steuerle 1998). Similarfindings were reported by GAO, whoseassessment “shows that approximately 22 to 31percent of men aged 62 to 67 report that theyhave a disability that limits their work”(Bovbjerg 1998: 3). In sum, “unhealthy”people in the age group that would be mostaffected by changes in retirement might be inthe minority, but they are a sizable minoritynonetheless.

Crimmins, Reynolds, and Saito (1999:S39) also “suggest caution. . .in projectingcurrent trends into the future,” given that theydid not find improvement in work abilityamong persons in their 50s, which they foundamong those in their 60s. This was despite thefact that the educational level of this age groupincreased as well.

In addition, it is not just poor health thatcauses workers to leave the labor forceprematurely. Other problems, such as job loss,play a part. The earlier the retirement, Uccelloobserves, the less likely a worker leaves thelabor force voluntarily. She found, forinstance, that only one in four workers leavinga job between ages 55 and 61 retired 21 For example, nearly 40 percent of 55-64-year-old retirees in the 1990 SIPP reported that theyhad a condition the limited work at a job (Uccello1998).

voluntarily, compared to over one-half of thosedoing so at or after age 62. Many of theseinvoluntary retirees, not all of whom have leftthe labor force for health reasons, would likelysuffer if the age of eligibility for benefit werepushed back or if early retirement benefits werefurther reduced. (See Table 4 for the reasonsHealth and Retirement Study respondents leftthe labor force.)

Table 4Reason for Leaving the Labor Force by

Age at Departure and Gender, Health andRetirement Study (in percents)

Reason for Departure Age atDeparture

55-61 62-63

Both SexesVoluntary retirement 26.8 57.1Involuntary Business closed, laid

off13.8 8.5

Poor health, disabled 22.2 11.3Other 37.3 23.1

MenVoluntary retirement 32.5 69.0Involuntary Business closed, laid

off14.8 4.2

Poor health, disabled 25.7 9.0Other 27.0 17.8

WomenVoluntary retirement 22.4 44.2Involuntary Business closed, laid

off12.9 13.1

Poor health, disabled 19.5 13.9Other 45.2 28.8

Source: From Tables 9a and 9b in Cori E.Uccello, Factors Influencing Retirement: TheirImplications for Raising Retirement Age,Washington, DC: AARP 1998 (tabulations ofWave 2 of the Health and Retirement Study).

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The Meaning of Good Health

Before concluding that the health status oftoday’s older Americans, at least those in their60s, justifies raising the retirement age, a morethorough understanding is needed of therelationship between self-reported health andwork ability. Does the fact that workers (orretirees) say that they are in good health or freeof work limitations mean that they are capableof continuing in the jobs they have (or hadprior to retirement) and that their on-the-jobperformance would be up to par?

Is it possible that expectations, and thusdefinitions of good health, change with age,such that “good health” means somethingdifferent to a 65- or 70-year-old than it does toa 50-year-old, with differing consequenceswhen it comes to working? Does the fact thatso many older people describe themselves as infine health mean they could perform acceptablyin the jobs they have, had, or might be neededfor? Or might good to excellent health and/orthe lack of work-limiting conditions reflectdiffering levels of strength, stamina, mentalacuity, and the like, with different work-relatedconsequences at different ages?22

Furthermore, might it be the case that olderworkers who describe themselves as healthyand without work-limiting conditions are, infact, healthier and abler than their non-workingcounterparts who also say they are healthy andfree of work-limiting conditions? In brief, eventhough the majority of persons in their 60s andearly 70s maintain they are in good health, therelationship between self-assessed health statusand the ability to remain productively at work,especially into the late 60s and early 70s and inthe myriad occupations in which older workersmay find themselves, warrants further research.

22 Or, might the health evaluations reflect theability to perform well in some jobs and notothers?

Worker Characteristics

Workers approaching retirement age makeup a heterogeneous group whose variedcharacteristics and life experiences might affecthealth status and ability to prolong work.Differences include the nature of the workpeople engage in, when workers first enter thelabor force (e.g., at age 18 or after professionalschool), the skills people have or are able toacquire to remain competitive, and theirexperiences with unemployment. Is itreasonable, for example, to expect the sameextension of worklife from men and womenwho start to work right after high school asfrom those who spend years in graduateschool? Some would argue that prolongededucation was work enough, but theemployment experiences of the highly educatedare likely to be far more conducive to later lifework than those of people with only a highschool diploma.23

Proposals to raise the retirement age areviewed as “exceptionally biased against blue-collar folks,” in the words of Joseph White ofthe Century Foundation (Wildavsky 1998:1563), in part for health reasons. According tothe GAO, blue-collar workers would morelikely experience greater difficulties inprolonging their worklives than white-collarworkers (U.S. General Accounting Office1998). White-collar workers, the GAO found,“were not at greater risk for having any of thehealth problems [GAO] examined” (p. 7).Even after controlling for such variables asage, race, and alcohol consumption, blue-collarworkers were far more likely to suffer from avariety of health problems that might haveimplications for work performance. Theseincluded arthritis, chronic lung disease, andemotional disorders.

23 EBRI’s 1996 Retirement Confidence Surveyfound that respondents without any collegeeducation were among the most opposed to raisingthe NRA, quite possibly because the prospect ofremaining another five years in the types of jobsthey hold is not enticing (Employee BenefitResearch Institute 1996).

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The GAO report concludes that “when allblue-collar occupations are grouped together,blue-collar workers are 80 percent more likelythan white-collar workers to experience painthat affects their ability to perform their jobs”(U.S. General Accounting Office 1998: 9).While some of these workers might befinancially prepared to retire when their healthgives out, it is doubtful that all such workerswould be so fortunate. Yet staying on the jobmight prove impossible as well, especially ifperformance suffers. For some workers,alternative work arrangements, such as shiftingto less demanding work or workplacemodifications, might be available and mightmake continued employment possible.Outdated skills and age biases, however, arelikely to limit the attraction of these workers toboth current and new employers.

Age and Performance

A substantial body of research indicatesthat age is a poor predictor of job performance(see Sterns and McDaniel 1994 for a review ofthis literature), but the paucity of post-retirement age workers (i.e., 65-plus) in studiesof performance once again suggests caution ingeneralizing to all people of a certain age. Inother words, what applies to older workers whoremain in the labor force may not apply tothose who left, despite reports of comparablehealth status. Similarly, it may be prematureto assess the overall work performance—especially in a range of occupations andindustries—of large numbers of people whomight have to work up to their seventh decadefrom the small numbers of older workers theretoday.

Of course, many older men and women doremain at work. As of 1998, nearly 650,000 ofthem were aged 75 or older (U.S. Bureau ofLabor Statistics 1999). Some continue intotheir 80s and 90s. In a labor force as large asthat of the U.S, older people can be found invirtually every industry and occupation, thoughconcentrated in certain ones more than others.There are also too few in many occupations todraw definitive conclusions about the general

effectiveness of older workers in thoseoccupations. Nevertheless, assertions that thejobs of today are more suitable for olderworkers than the jobs of the past may be true,but promoting productivity in those jobs toadvanced ages remains a matter for furtherresearch.

Proponents of raising the retirement agemust assume that sufficient jobs capitalizing onthe skills and abilities of workers will beavailable. Steuerle (1998) reports that theproportion of workers in physically demandingjobs, defined as “requiring frequent liftingand/or carrying of objects weighing over 25pounds” had fallen from 20.3 percent in 1950to 7.5 percent in 1996. But while theproportion of workers employed in physicallydemanding jobs might continue to fall, thosejobs will not disappear.

Furthermore, other measures of “physicallydemanding” (e.g., standing for long periods oftime) might be worth examining in addition tofrequent lifting or carrying of heavy objects.Jobs can be physically demanding without thelifting of heavy weights. Perhaps the“workaholics” referred to above by Mooncould remain longer at their desks with onlyminimal adjustment in work schedule or tasks,but they are not necessarily in the jobs wherelabor shortages are likely to develop.

To be sure, many of the occupations whosenumbers are projected to increase the most overthe next few years (e.g., retail sales people,cashiers, fast food workers, systems analysts)seem amenable to flexible work schedules andless than full-time work. Some of theseoccupations are neither blue-collar work norphysically demanding, according to somedefinitions. But they are not all desk jobseither. White-collar workers in the servicesector can also find themselves in demandingoccupations that require exertion and physicalstamina (e.g., nursing) and that may notimmediately come to mind when the term“white collar” or “service sector” is mentioned.Mental stress in some of those

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jobs may be even greater and perhaps moredebilitating.

Job performance encompasses more thanjust the ability to complete a task or fulfill jobrequirements. Performance can also bereflected in absenteeism rates, and while“voluntary” work absences tend to be lower forolder workers, absences due to illness andinjury rise with age (U.S. Bureau of LaborStatistics 1996a). BLS reports that the medianlength of absence for persons 55 and older isdouble that of workers under the age of 35.

More seriously, fatal job accidents also risesharply with age. 24 Furthermore, the injuriesof older workers, says BLS, result in lengthywork absences, not only because their injuriestend to be more disabling but because the samecondition requires more recuperation time(U.S. Bureau of Labor Statistics 1996a).Differences such as these entail real costs foremployers that must be taken into accountwhen issues of older worker employability areexamined. BLS warns that "the costimplications of severe injuries to older workersare especially troublesome for the future,"given their increased numbers (U.S. Bureau ofLabor Statistics 1996a: 2).

Health problems requiring medical careand medications rise with age, as do co-morbidities that may affect work performance(see Douglas and Douglas 1998). Visits tophysicians, hospital stays, and duration ofhospital stays are higher for older persons. Tothe extent that this occurs among persons outof the labor force, the work-relatedimplications are obviously nonexistent. To theextent that they occur among persons whoremain longer in the labor force, the costimplications may be more serious.

However, if the retirement age is increasedand workers cannot afford to leave the labor 24 In 1994, there were 14 fatal occupationalinjuries per 100,000 employed persons aged 65and older vs. 5 per 100,000 for the total workforce(U.S. Bureau of Labor Statistics 1994).

force when they no longer feel up to the job,these age-related differences and conditionstake on potentially new meaning. At the veryleast, they call for more research to assistemployers in identifying and implementingprocedures and policies for the safest and mosteffective utilization of workers with limitationsand the fairest way of evaluating performance.Work performance may be only marginallyaffected by age-related changes or not at all;some tasks may be affected but not others;certain conditions or medications might havesignificant and adverse implications for workperformance and for the safety and well beingof older workers and their colleagues. Somemight call for testing and intervention, such asjob transfer or task modification at youngerages; others might have particular implicationsfor employer health costs and other types ofinsurance.

While problems associated with a sizableincrease in the number and proportion of olderworkers are not necessarily insurmountable,they may pose a challenge to workers and theiremployers and should be better understood—especially as far as work performance andemployer costs are concerned—before the ageof eligibility for full Social Security benefits israised further.

Job Loss at Upper Ages

At present, older workers face formidablebarriers in their search for work. Officialunemployment rates for older workers aretypically lower than those for younger workers,but that is partly because older workers wholose their jobs are more likely than theiryounger counterparts to drop out of the laborforce and are therefore excluded from the ranksof the unemployed. If they remain in the laborforce, the job search can be long anddiscouraging, despite years of experience andsolid work performance.

Between 1995 and 1997, nearly one millionworkers 55 or older were displaced from thejobs they held as a result of a plant

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closing, insufficient work, or abolition of shiftor position (U.S. Bureau of Labor Statistics1998). By February 1998, only 56 percentwere reemployed. (This is in contrast to 80percent of displaced workers between the agesof 25 and 54.) Significantly, the number ofolder displaced workers was no lower duringthis period than it was for 1993-95, althoughthe number of younger displaced workers fellsharply (U.S. Bureau of Labor Statistics 1996aand 1996b). Clearly, older workers remainvulnerable to job loss, in spite of the improvedoverall employment picture. Not only does ittake older unemployed workers much longer tobecome reemployed, they are less likely thanyounger jobseekers to be successful, and if theydo find work, are more likely to experiencesubstantial earnings losses.

If historian Theodore Roszak (1998) iscorrect, one of America’s greatest assets is itsmaturing workforce. “Never before,” Roszakavers, “has a senior generation possessedenough technical skill, professional training,and intellectual astuteness to consider stayingon the job well beyond the legal retirement age.Nor have people over the age of sixty-five everlooked so much like a viable and sizableworkforce, a workforce that may be betterequipped to compete for jobs than the youngergeneration” (p. 11).

Roszak and others might argue that olderworker employment opportunities are ripe forchange, especially given an economy that isprojected to increase by 18.6 million jobsbetween 1996 and 2006 (Silvestri 1997).Certainly, the greater employment of olderworkers referred to in the introduction to thisissue brief would seem to reflect somewillingness on the part of employers to turn toolder workers,25 but recent job displacementfigures for older workers should temper someof the optimism. Employers do hire olderworkers and retirees (see Hirshorn and Hoyer

25 A study by the National Council on Aging(1998) reports employers saying they would like tohire older workers, but they cannot find them.

1992), although not necessarily in largenumbers or for the most desirable of jobs.They may eventually come around to Roszak’spoint of view, but for the most part, employersfor whatever reason have yet to do so.

Moreover, despite the impressive numberof newly created jobs in the United States,downsizing, restructuring, and reengineeringcontinue to characterize the economy. BoeingCo., for example, recently reported that itwould cut some 48,000 jobs over the next twoyears (Smart 1998), and Boeing is not alone inits reduction. At times, jobs may be eliminatedwhile substantial hiring is going on in otherparts of the same company. The departingworkers—often eased on their way with anearly retirement incentive but not yet ready toretire—seldom appear to be candidates for thenewly created positions.26

For many workers, therefore, the option ofsimply pushing back the date of retirementmight not be a realistic one. Their jobs may nolonger exist, necessitating an often prolongedsearch for work if they are to postponeretirement. Possessing up-to-date skills andabilities, especially so-called “technologicalcompetence,” will prove critical to the successof these job searches. As noted earlier,employers harbor reservations about the olderworkers’ comfort with new technology andability to learn it, such reservations conspireagainst those workers in their search foremployment. Future cohorts of older workersare expected to be more technologically adept,but those cohorts may always be at adisadvantage compared to more recentlyschooled younger workers unless theirtraining/retraining and exposure to changingtechnology are continuous.

26 Some companies do bring back retirees on atemporary basis or for short-term projects.

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A Look to the Future

Employers and a Higher NRA

Rising costs associated with an agingworkforce could encourage employers to scaleback benefits, require higher benefitcopayments, or increase wages lessfrequently.27 Or employers might make greateruse of part-time or contingent workers, whotypically receive few or no employer-providedbenefits.

It also is not clear how, if at all, employersmight modify their private pension plans inresponse to a higher retirement age for SocialSecurity benefits. Private pension plans thatare integrated with Social Security, and thusallow employers to take into account theircontributions to Social Security in establishingpension benefits, could see an increase in costsresulting from the decline in Social Securitybenefits, unless the NRA of those plans wereraised as well (American Academy ofActuaries 1997).28 The impact would dependon the type of integration and on the plan typeitself.

In an effort to encourage continued earlyretirement, employers with defined benefitpension plans might maintain the plan’s earlyretirement age and offer enhanced early-retirement benefits to carry retirees through tothe higher Social Security age.

Workers who have accrued what theybelieve to be adequate retirement benefits,whether in a defined benefit or definedcontribution plan, might continue to retireearly. For some, private pension benefits mightnot be enough to compensate for the cut inSocial Security benefits that early retirementwould entail. To the extent their healthpermitted, these workers would 27 Under the Age Discrimination in EmploymentAct, any such adjustments would be applied toworkers of all ages.28 See Lichtenstein (1998) for a discussion ofSocial Security and pension plan integration.

presumably delay retirement, unless employersenticed them to leave with pension sweeteners.

Employers’ responses will depend on thetype of plan provided, the size and skill level ofthe older workforce, the size and quality of theavailable labor pool, and the costs of andreturns to any adjustments, such as enhancedearly retirement incentive offers. Employerresponse is also likely to depend on what theeventual NRA is; they might be more willing toaccommodate an NRA of 68 than, for example,one of 70 or higher.

Indexing retirement age to longevity mayprove particularly problematic. Even if greaterlongevity has been associated with improvedhealth up to now, the same relationship mightnot prevail in the future.

Employers might face planning problemswhen workers’ retirement is unpredictable(Douglas and Douglas 1998). Performancematters that were relatively easy to handle oroverlook when most workers could be countedon to retire at early ages could assume greaterimport if the proportion of older workers wereto rise substantially.

Fatal accident rates and recovery rates, inparticular, would demand further scrutiny if thenumbers of older workers were to rise sharplyin the face of a retirement-age increase. Onemight quibble about the significance of longerrecovery rates, but dying on the job cannot bedismissed so lightly. The severity of accidentsmight be alleviated by interventions that benefitworkers of all ages, but especially those mostvulnerable at upper ages. Programs andpolicies to promote health and wellness, as wellas safety, might increase, as might shifts to lessrisky jobs. This latter response, however,could raise concerns about when and underwhat condition such shifts could be made in anondiscriminatory fashion.

On the whole, it does seem thatconsiderably more men and women are

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capable of continuing to work productively fora longer period than they do today, perhapseven much longer. However, as suggested inthe section, “The Meaning of Good Health,”just because workers say they are in goodhealth is no guarantee that they canautomatically continue at the same speed in thesame work into their late 60s or early 70s. Itmight be wise to examine the extent to whichworkplace modifications, including work hourreductions and job change, would facilitate alonger worklife, and to ask whether, and underwhat circumstances, the benefits of thesearrangements outweigh any costs.

Even if older workers are healthy enoughto keep on working and even if their jobs arenot eliminated due to downsizing orrestructuring, other employment issues arise.If older, long-tenured workers are more costlyor are perceived as more costly, if higher costsare not offset by superior performance, if olderworkers lack or are perceived as lacking theskills employers need or say they need in theglobal economy, and if alternative workers areavailable, employers could take steps thatwould make staying on very difficult for manyworkers.

As mentioned, a higher retirement agecould accelerate the use of contingent workers.Not only are such workers typically cheaperthan permanent employees, but they can bemore easily terminated if they do not work out.

For retirees with pensions, healthinsurance, and adequate Social Security,contingent employment may be a desirabletransition from full-time work to full-timeretirement. For older workers in need of adependable paycheck and benefits, thecontingent workforce is a precarious place.Maintaining up-to-date skills might beespecially difficult for contingent workerswithout access to employer-provided training.Greater reliance on contingent workers couldmake more older workers vulnerable to thevagaries of a changing market and to agediscrimination in the search for work. Finally,

large numbers of contingent workers moving inand out of the labor force would not necessarilyhave the desirable impact on Social Securitythat other forms of employment would have.

Virtually everyone, it seems safe to say,would favor increasing opportunities, asopposed to requirements, for prolongingworklife, with benefits that accrue to bothemployers and employees. Over the years,older worker advocates have called for manychanges that they argue would promote longerand more productive attachment to the laborforce. These include flexible work schedules,which have become quite common, work athome and telecommuting, job sharing, andbetter part-time jobs. Phased retirement hasbeen highly touted by some as a way ofprolonging labor force attachment and easingsome of the burden on public pensions (Delsenand Reday-Mulvey 1996), but formal phasedretirement programs are rare in the UnitedStates.

Workers and a Higher NRA

There are also questions about howworkers would actually respond to a higherretirement age. If public opinion polls such asthose referenced elsewhere in this issue briefare any guide, legislators would be wise tosteer clear of this approach to solving SocialSecurity’s long-term financial problems, butfew proposals to shore up the Social Securitysystem generate much enthusiasm among thepublic. Despite expressed opposition even to along-delayed rise in retirement age, the publicmay be less responsive to a change that wouldnot affect them for many years into the future,if at all. At it stands, relatively few Americans(one in five) are even aware of the 1983increase that will soon begin phasing in(Americans Discuss Social Security 1998).

On the one hand, future retirees might beequally oblivious to another increase in theNRA. On the other hand, ignorance of the1983 amendments will fade once the increase

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goes into effect. Members of the public mightlook askance at a further increase if it were tooccur just as they were becoming cognizant ofthe last one.

Baby boomers may insist that they wantand expect to work longer, but will they reallydo that? And how much longer might they betalking about? What boomers want is options,not requirements—they want to decide if theywill work longer and just what they might do inretirement. Unfortunately, what they want todo may not be what employers ask of them. Intheory, of course, if the right options areunavailable as the NRA rises, workers couldstill retire early if they had the means to do soor were willing to make do on smaller SocialSecurity benefits.

In practice, however, the financial penaltiesassociated with early retirement under a higherNRA might be too great for many workers. Itis likely that workers with good pensions whocan afford to retire when they choose are thevery ones with the jobs most conducive todelayed retirement and the skills to negotiatearrangements with their employers that wouldkeep them at work longer. Workers with fewerfinancial resources and marketable skills couldbe the ones who need to stay on longer butwhose options for doing that are most limited.

Finally, there are workers who reallycannot be expected to work much longer thanthey do now because they lack the requisiteskills or health. For some of them, retrainingfor another line of work could be the answer;others might be able to find something. It isnot clear how many workers would actuallyfall into the “absolutely unable to work or finda job” categories, but their numbers willdoubtless increase as the population ages.How those workers would be protected, and atwhat cost, has received too little attention.

Demand from less healthy workers unableto continue in the labor force might heightencalls for liberalized access to Social SecurityDisability Insurance (SSDI), with attendant

increases in costs to that program. Workercompensation costs could rise if older workersconsistently prove to be at greater risk ofworkplace injuries. Demands onunemployment insurance for older workers whocannot find work are other costs that mightoffset some savings to Social Security resultingfrom a higher retirement age.

Workers, Spouses, and a Higher ERA

This issue brief has focused primarily onraising the age of eligibility for full SocialSecurity benefits. A key issue in the debatewill be what happens to the early retirementage. Some proposals to increase the NRAwould leave the early retirement age at 62, withappropriate actuarial reductions; others wouldgradually increase the ERA along with theNRA.

Raising the NRA can be viewed as anacross-the-board benefit cut. An unknownpercentage of workers will be, for the reasonsdiscussed in this paper, unable or unwilling toextend working life. If reduced benefitscontinue to be available at age 62, many ofthese workers will apply for them at or close tothe earliest age possible. Not only will theretirees themselves have to manage on thosereduced benefits, but their spouses andsurvivors stand to be affected as well.

Social Security spousal and retirementbenefits are based on the worker’s benefit, so alower retired worker benefit means lowerspousal benefits and, ultimately, lower survivorbenefits. For the women who will collectsurvivor benefits in retirement—a category thatincludes a shrinking proportion of women withtoo few credits to qualify for Social Security ontheir own and a large proportion of womenwhose survivor benefits will continue to behigher than their own retired worker benefits—further reduction in what they will receive aswidows is cause for concern. Aged widows areone of the most economically vulnerablegroups today.

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Conclusion

It is one thing to talk about theinducements that might keep people workinglonger. It is quite another to know just whatwould accomplish that. Earlier in this century,workers may have typically remained at workmuch later in life in jobs that were considerablymore taxing than they are today. But standardsabout what is “good” or “bad,” “hard” or“easy,” change with time. Moreover, throughtheir behavior, workers over the past halfcentury have expressed a strong interest inearly retirement. More older persons may be inthe labor force today than a decade ago, but thelabor force participation rate itself has risen byless than one percentage point for thepopulation aged 55 and older and by less than1.5 percentage point for the 65-pluspopulation.

Employers who need workers will do whatthey must to get them, using nontraditionalmethods to find them, seeking nontraditionalworkers (e.g., retired workers), and offeringnontraditional work arrangements (e.g., two hourshifts in the case of one major retailer). After all,they are in business to stay in business. If it is intheir best interest to do so, employers willentice older workers to remain in or return tothe workforce and may even invest more intraining their older workers. Phased retirementprograms, more attractive part-timeemployment options, greater opportunities tochange jobs or careers in midlife, among otheroptions, might encourage sizable numbers ofworkers to delay full retirement, thusincreasing labor force participation rates wellabove those seen today. Innovative employerswith worker-friendly employment policiesshould have the pick of the labor supply.

Still, while everyone is undoubtedly infavor of increasing work opportunities thatappeal to older workers and that cause them tochoose to work longer, a higher normalretirement age is not an “opportunity.” It isone thing for writers of issue briefs to ponderthe pleasurable prospects of remaining in the

labor force a few more years. It may be quiteanother thing in the case of the millions ofworkers in far less desirable, but important,jobs. Before the normal retirement age isfurther raised, more substantive assessments ofits potential impact seem called for.

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Written by Sara E. Rix, Economics Team,AARP Public Policy Institute, ResearchGroup, November 1999.

1999, AARPReprinting with permission only.AARP, 601 E Street, NW, Washington, DC20049research.aarp.org