Why teenagers don't want to raise the retirement age
Saturday, October 23, 2010 at 08:32AM The French parliament is about to raise the national retirement age by two years, and high school students are at the barricades. Link. Why? Truly, I don't know why teenagers do anything, but it's easy to see how this change will adversely affect them in the short term: During the transition period, there will be fewer jobs open to young people because there will be more sexagenarians hanging on to job slots that would otherwise trickle down to new labor market entrants.
Older workers have the power of incumbency: As long as their jobs aren't actually eliminated, they can generally keep working as long as health and motivation permit. So, when there is a labor surplus (job shortage), the burden falls most heavily on the young who have not yet established themselves in the work force. This pops out of US age-and-education-dissected unemployment data for the Great Recession: The greatest increase in the unemployment rate has been among college graduates under 25. Link.
Some in the US want to eliminate Social Security entirely on the ground that it is wrong to tax the young and middle-aged to pay pension benefits to the old. (They don't say whether it is also wrong to tax the middle-aged and old to pay for the even more valuable benefit of free public educations.) Those who simply want to put US Social Security on an actuarily sounder long-term financial footing propose raising the retirement age but do not discuss the adverse impacts of that on youth unemployment (or other human effects).
Perhaps some readers will object that I'm assuming the Lump of Labor Fallacy (aka the Lump of Jobs Fallacy), but I'm not. The "fallacy" originated in proposals to reduce unemployment rates by reducing the work week from 40 hours to 35 hours and spreading the work among 12.5% more employees. Economists pointed out that, for a variety of reasons believed to be present in real labor markets, that wouldn't happen--or at least would not happen to the extent claimed. The criticism is, I think, correct, but some misuse that fallacy to try to prove the opposite--that nothing will happen to the unemployment rate, which is also a fallacy: The Lump of Labor Fallacy Fallacy? I don't assume that the number of jobs in the US will not expand if general economic conditions improve, but it would be equally false to say that because the number of people in the work force increases, an equivalent number of jobs will magically appear for them. In fact, the number of US jobs as a percentage of working age US population has actually been shrinking--not just during the Great Recession but ever since 2000 and is lower now than in 1991. Link. Whatever the number of jobs existing at any time, the competition for them will be more intense if sexagenarians stay in the work force longer, and the cohort most disadvantaged by that increased competition will be the youngest.
If we're going to increase the retirement age, what's the plan to increase the number of jobs?
Skeptic
Another question to ponder: If we were to create as many new jobs as would be necessary to allow later retirement without diminishing the prospects of the young, wouldn't Social Security actuaries probably calculate that we don't need to raise the retirement age after all?
Skeptic
More reporting on how unemployment hits the young hardest is in this LAT piece and, echoing other reports, it says cohorts that get off to a slow start tend to lag behind throughout their careers.
As the nation struggles with the aftermath of the Great Recession, few groups have suffered greater setbacks or face greater long-term damage than young Americans — damage that could shadow their entire working lives.
Unemployment for 20- to 24-year-olds hit a record high of more than 17% earlier this year. Even for young adults with college degrees, the jobless rate has averaged 9.3% this year, double the figure for older graduates, according to the Labor Department.
Adding to the impact, surveys by the Pew Research Center indicate, a greater share of workers in their 20s lost hours or were cut down to part-time status than any other age group. And their incomes have fallen more sharply, even as they are far more likely than others to say they are working harder than ever.
Skeptic
More LAT reporting from Paris finds French youth indeed worried about the impact of the retirement age increase on their already-bleak job opportunities.
They may be showing solidarity with their older compatriots, but for many of the teens, the motivation resonates closer to home. With unemployment estimated at 23% for 15-to-24-year-olds, fresh graduates can feel as though they're on the outside of the job market looking in, and they don't think the government is doing enough to help them.
"They aren't only in the streets because they are worried about their future retirement," said Jean-Baptiste Prevost, head of the largest student union, UNEF, as he led a protest march through Paris. "It's not the future in 40 years; it's the future in two years that they're worried about."
Skeptic
Another way raising the retirement age fails to work as intended is that there will be more applications for disability retirement, which comes out of the same fund. That is the prediction of the Government Accountability Office as reported by Mark Thoma.
Skeptic
Skeptic
Floyd Norris reports in NYT that the percentage of Americans 55+ holding jobs has increased 7.6% since the start of the Great Recession. Meanwhile, the employment rate among those 45-54 declined 4.6%, among those 25-44 the decline was 7.5%, and 16-24 year-olds dropped 13.2%. Three years is much too short a period for these changes to have been substantially influenced by demographic changes. People who had jobs are keeping them, and those trying to break into the work force are being shut out.
Reader Comments (1)
Yay! Someone who finally gets it about the difference between the lump-of-labor fallacy and the lump-of-labor fallacy fallacy.