2012 February 12 Sunday
UK PM David Cameron: Work Into Your Seventies

On some topics the British political debate is ahead of the American political debate. For example, the British government's planned immigration policy changes are far ahead of US immigration policy. On old age entitlements the British government is also much more realistic and practical than what passes for mainstream US debate on old age entitlements. British Prime Minister David Cameron sees the necessity to raise retirement age in line with increasing life expectancy.

Mr Cameron said he supported plans to increase the retirement age in line with life expectancy which could see workers remaining in employment until well into their seventies.

Slow economic growth and rising health care costs are putting Western governments under water for funding of their old age entitlement programs. We can't have just 2 people working for every retiree.

People need to hear decades before their 60s that they'll need to work longer. They need to know to make career choices and develop skills that will allow them to have viable careers into their early 70s. To compensate for aging brains people need to develop more skills and to develop marketable skills that will be less affected by body and brain aging.

There are additional benefits from longer time spent working. Senior No. 10 aide David Halpern says if old folks worked longer they would not be so lonely.

He told delegates at the Stockholm summit that more than half of those older than 75 in Britain described themselves as lonely “all or most of the time”.

“Work matters, particularly for older people, not just for money, but absolutely for social contact,” he said.

This is very true. Unfortunately, the old folks who are lonely are so isolated that these lonely people are pretty invisible to those who have lots of friends, work associates, and contacts with social networks. Unless you happen to know old lonely people you aren't going to appreciate the scale of the problem. Even if you know old lonely people (and I do) you might live too far away from them to make much difference in their lives. Wish I had a general solution to offer. I've certainly seen benefits from the need for work.

The trend for worker to retiree ratios is not sustainable.

In 1940, there were 42 workers per retiree. In 1950, the ratio was 16-to-1. In 2010, there were 2.8 workers per retiree, and within 40 years, it’s projected that there will be just two workers per retiree¹. At the present rate, as the population ages and life expectancies continue to rise, the system will not be able to sustain itself into the future without major reform.

See this table of retirement age versus worker/retiree ratio. If the retirement age was raised to 72 by 2030 then the worker/retiree ratio would be 4. Note that since it is politically much harder to raise Medicare retirement eligibility (since old folks will find it much harder to get jobs with medical benefits as compare to younger workers) we need a much higher retirement age with a high worker/retiree ratio to bring in more tax revenue to find medical care for the old. By taking the load off of Social Security with higher retirement age we also keep much more money flowing in from workers paying income taxes and Medicare taxes even beyond the point where they become eligible for Medicare.

Share |      By Randall Parker at 2012 February 12 11:21 AM  Economics Retirement


Comments
Black Death said at February 12, 2012 3:49 PM:

When Social Security first paid benefits in 1940, the life expectancy for males in the US was 62 and, for females, 65. Benefits started at 65 - there was no early retirement. Since the majority of beneficiaries at the time were male, this meant that most never got anything, and only half the working women got anything. Now the life expectancy for US males is 76, and 81 for women. So, as a matter of economic necessity, people are going to have to work longer. But what's wromg with that? As long as you're healthy, working, even part time, is good for you.

Joseph Moroco said at February 13, 2012 4:09 AM:

Don't matter much in Limeyville as so many are on the dole from a young age.

S. Thompson said at February 13, 2012 11:52 AM:

No, forcing older people to retire at later ages is not an ideal solution. In Europe, very high percentages of young people under 30 can't get a job. How is it fair to ask an old person to continue working, when young people struggle to get an unpaid internship? Realistically, how productive can someone be after age 65? Most scientists and inventors made their great feats before the age of 40. In their 70s they may still appear to be productive, but actually this is just due to the quality of student attracted to their lab. One would swear there are so many jobs available that we need old people to stay on in the workforce. If anything, the pool of jobs available is being whittled down due to automation. Forcing old people to retire later, for example, would mean an increasingly unproductive civil service and a growing army of unemployed young people. Where is the logic in that?

Cameron is also wrong on immigration policy. Why is the 3rd world the 3rd world? This is mainly due to genetic factors. Those with the highest IQ move to the west rather than stay at home and have a large family that will in turn, over many generations, propagate the genes that lead to 1st world civilization. That is how the West got there. Up to 1800 there was selection for genes predisposing to civilized traits. If the best 10% (in terms of cognitive capacity and executive function) in every generation had moved elsewhere, Europe would probably not be considered 1st world today.

Just Chillin said at February 13, 2012 4:23 PM:

What???
Nobody's talking about Iran yet? We all know that most humans are going to have to work into their seventies. Let's move on people!

solaris said at February 13, 2012 5:25 PM:

>"Those with the highest IQ move to the west rather than stay at home and have a large family that will in turn, over many generations, propagate the genes that lead to 1st world civilization. That is how the West got there. Up to 1800 there was selection for genes predisposing to civilized traits."


So you are saying that up until 1800 Europe was sucking in the brightest people from around the world, and that is how it "got there"? That is flat out false.

solaris said at February 13, 2012 5:30 PM:

>"Realistically, how productive can someone be after age 65? Most scientists and inventors made their great feats before the age of 40."


Realistically, the percentage of the population who are scientists and inventors is miniscule. The average age of a population tells us nothing about how many scientists and inventors we can expect to find in it.

S. Thompson said at February 14, 2012 1:11 AM:

>'So you are saying that up until 1800 Europe was sucking in the brightest people from around the world, and that is how it "got there"? That is flat out false.'

No, this is what is currently happening in 3rd world countries. They move to the west and so remove their high IQ genes from the mating pool. This exacerbates the problems in the 3rd world. If, from 1300-1800AD, the same had happened in Europe (i.e moving to another hypothetical location), the average would not have increased to what it is today. Alot of Europe's best and brightest did actually move to the US but mass migration only really began after 1700.

>'Realistically, the percentage of the population who are scientists and inventors is miniscule. The average age of a population tells us nothing about how many scientists and inventors we can expect to find in it.'

Yes, but younger people are still more productive. Even if their IQ is a few points lower they still have a big advantage relative to the elderly. I fail to see how it makes sense to employ some older person instead of a young man who is more likely to turn to crime, if unemployed. I cannot understand why it is now expected that old people should work beyond 65 in a less productive manner while many young people struggle to get that first job.

Check it Out said at February 14, 2012 1:37 PM:

How boring it is to read from people who seem to have a rather low IQ talk (and "know") so much about what people with high IQs do and think. As if all high IQers did, thought and proceeded the same. People who continue to confuse intelligence with reasoning with ability to make money or adapt to a particular system.

Smells like narcissism around here.

Randall Parker said at February 15, 2012 9:06 PM:

solaris,

To understand what selective pressures the Malthusian Trap caused in Europe (or at least England - probably most of Europe) read Gregory Clark's A Farewell To Alms.

bbartlog said at February 18, 2012 4:46 PM:

@S Thompson: it sounds to me like you have succumbed to the 'Lump of Jobs Fallacy'. If in fact there were only so many jobs to be done, then indeed I would think that having the older hang on to them rather than making way for the younger would be problematic. But in reality, having more labor available (via retiring at an older age or w/e) *should*, all other things being equal, expand the production possibilities of society.
Now, all other things aren't always equal, and if the elderly tend to compete for the same jobs as the young in such a way that the youngsters lose out on valuable work experience (human capital improvements), we can still make some arguments for a negative effect. But it isn't as simple as a competition for a fixed pool of jobs.

S. Thompson said at February 20, 2012 1:21 AM:

@bbartlog: I can appreciate that the pool of jobs available isn't static. New jobs will certainly be created in the future. However, I now believe that the current pace of automation is such that more jobs are disappearing than are coming onstream, and this pace will obviously accelerate in the future. The 'Lump of Jobs' fallacy was certainly true in the past as new labour-saving products (that, at first glance, seemed to destroy jobs) required employees for manufacturing, selling and servicing the devices. The manufacturing process would now be considerably more automated than it has been in the past. The selling of such items is probably largely done online (how many bookstore have Amazon indirectly closed down). Thus, the pool of jobs is certainly dynamic, but unless civilization regresses, automation will continue to erode it.

William Larsen said at February 23, 2012 10:52 AM:

One must be very careful about life span statistics. Are they identified as "birth" or a particular age? If ten babies are born this year and one dies prior to age one and the remaining live to 100, the life expectancy at birth is age 90, but at age one it becomes 100.

Prior to 1910 infant mortality rates were close to 20%. This is why period life tables show life expectancy jumping after 1 and increasing there after. The fact is a baby born last year will can expect to live about 18 days longer than a baby born this year at age 67. When looking at the reason behind why SS-OASI it is not increased life expectancy. Today at age 67 you can expect to live 20 more years. 18 days more out of 7300 days is less than 0.2466%. In today;s dollars this is would be setting aside less than $10 today to pay the 18 days additional SS-OASI payment when the person reaches 87.

Take a look at what the problems are behind SS and how long politicians have known about them.

http://www.justsayno.50megs.com/ss.html


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