The Retirement Age
France shines new light on an old problem.
NPR (“Macron’s unpopular plan to raise France’s retirement age is enacted into law“):
French President Emmanuel Macron’s unpopular plan to raise France’s retirement age from 62 to 64 was enacted into law Saturday, the day after the country’s constitutional body approved the change.
Macron’s signature and publication in the Official Journal of the French Republic allowed the law to enter into force. The authorized changes will start being implemented in September, French government spokesperson Olivier Veran said.
On Friday, the Constitutional Council rejected some parts of the government’s pension legislation but approved the higher minimum retirement age, which was central to Macron’s plan and the focus of opponents’ protests.
The nine-member council’s decision capped months of tumultuous debates in parliament and fervor in the streets. Spontaneous demonstrations took place in Paris and across the country after the ruling.
France’s main labor unions, which organized 12 nationwide protests since January in hopes of defeating the plan, have vowed to continue fighting until it is withdrawn. They called for another mass protest on May 1, which is International Workers’ Day.
The government argued that requiring people to work two years more before qualifying for a pension was needed to keep the pension system afloat as the population ages; opponents proposed raising taxes on the wealthy or employers instead, and said the change threatened a hard-won social safety net.
I’ve watched all this out of the corner of my eye, mostly dismissing this as “France being France.” After all, the standard American retirement age was 65 since the founding of Social Security and was raised to 67 for those of us born after 1960 while I was still in high school. So, raising it to 64 seems rather quaint.
A piece linked in the sidebar of the above report, Manuela López Restrepo‘s March explainer “What France’s revolt over raising the retirement age says about the attitude to work,” includes these tidbits:
- The fierce opposition to the idea is in part thanks to France’s work culture; one that places a heavy emphasis on quality of life, work-life balance, and a comfortable retirement. Reporter Lisa Bryant told Morning Edition: “The French are fiercely protective of their universal health care and generous pensions. And it’s a choice society has made: Work hard, pay high taxes, but also retire at a relatively young age with a high standard of living.”
- France’s current retirement age of 62 is low compared to other European countries. Macron has long talked about raising it because of the country’s demographic changes: There are more and more older people and comparatively fewer workers to fund the government pension.
- Loriol told NPR how the French attitude towards work had also changed over time: “Work is very important for French people, but since about 20 or 30 years ago, a lot of jobs have become precarious. [Before], people were hired in an enterprise and if the job was good, they climbed the ladder, and they could obtain a higher position in the company. Now, it’s more and more difficult because people are not hiring [employees] for life. It’s something that has changed in France particularly, because that was tradition before. So [now], people say, ‘I can’t think my work is my only goal in my life.'”
All of this leads The Atlantic‘s Annie Lowrie to argue, relating to the United States, that “The Problem With the Retirement Age Is That It’s Too High.”
As France is wracked by furious protests over President Emmanuel Macron’s plan for pension cuts, a bipartisan group of legislators on Capitol Hill is discussing how to make Social Security available to a smaller group of workers. People are living longer, the argument goes, and benefit programs are running out of money. Shifting the retirement age higher is a reasonable, desirable, and necessary fix.
Except it is not reasonable. It is not desirable. And it is not necessary. Indeed, the opposite is true: Politicians should let Americans retire with security and dignity by making retirement benefits more generous and by promising to lower the retirement age.
Her solution to the solvency problem is familiar:
Right now the payroll tax that raises money for the program applies to only the first $160,200 of a person’s wage income; if you make $300,000 a year, $139,800 of that money remains untouched by the relevant tax. This is unfair: There’s no good reason that millionaires should pay a lower tax rate than their assistants do to help finance the country’s retirement benefits. (And there’s no reason to make the tax liability max out even if benefits do; we want progressive taxes and progressive spending.) It is also silly, given the importance of Social Security in ending elderly poverty and letting people retire with confidence. Lifting the payroll-tax cap would secure the program’s financing for decades, depending on wage and longevity trends.
Politically speaking, Social Security has all been predicated on maintaining the illusion that it was a self-funded pension plan rather than social welfare. This would shatter that illusion. If we’re going to cap benefits but not the portion of wage earnings subject to the payroll tax, we should just do away with the illusion altogether and fund retirement through the general Treasury rather than a “trust fund.”
Regardless, Lowrey’s argument isn’t really about solvency but about justice.
Those longevity trends do not really show all Americans enjoying a long and healthy life. In 1980, 50-year-olds in the top income quintile could expect to live four or five years longer than 50-year-olds in the bottom income quintile. In 2010, the rich were living 13 or 14 years longer than the poor. And now average life expectancy is dropping because of the coronavirus pandemic, the opioid epidemic, and the prevalence of gun violence.
With the notable exception of COVID, I’m not sure these trends have much to do with the elderly. If you die from a gunshot wound or drug overdose in your 30s, lowering the retirement age isn’t going to do you much good.
The stronger point is a variation of the one I’ve been making for a very long time:
The number of healthy years that lower-income Americans can expect to enjoy by the time they hit middle age is also lower than you might think. What some researchers call health span—meaning the length of time a person spends living without major illness or disability—is heavily predicated on a person’s socioeconomic status. The rich get to retire and have fun; the poor have to work until their body starts to give out.
The people arguing that Americans should work until they are 70 are typically people with cushy, remunerative white-collar jobs—the types of jobs that are fun and intellectually engaging for octogenarians. Most people do not have those jobs, especially not older workers without a college degree. That’s why the average lower-income American quits working and applies for Social Security as soon as they are eligible, trading a lower monthly benefit for the ability to stop changing car tires or working a cash register for $11 an hour at age 62.
It really makes no sense for society to subsidize people like me—healthy folks with relatively cushy jobs—for decades of idleness. I’m 57 now and fully expect to continue working until I maximize my Social Security benefits at 70. But 70 is damn old if you change tires–much less dig coal or install roofs—for a living.
I’m less sold on this one:
That is perhaps the strongest argument for lowering the retirement age rather than raising it: Earlier retirement is what the American people obviously want, given how they behave. Poll after poll after poll shows that both Democrats and Republicans strongly support leaving benefits alone. And survey after survey shows that older Americans seek retirement as soon as is practical, with one-third of people taking benefits at 62 and more than half accepting reduced benefits for the chance to quit working before the current “full” retirement age of 66.
The fact that people want to stop working doesn’t mean society should subsidize their doing so. Hell, I’m fortunate to be one of those people, as the comedian Chris Rock puts it, have a career rather than a job. While there are parts of it I could do without, I by and large enjoy going to work, getting genuine satisfaction out of it. But, if I could maintain the same lifestyle without being on someone else’s schedule, I’d retire tomorrow. Still, it would be absurd for the American taxpayer to subsidize that move.
Lowrey concludes with something of a whimper:
There is no good reason for the government to force such people to continue toiling away at their job toward the end of their life. We live in the wealthiest society the world has ever known. We have dozens of policy options available to increase employment among prime-age workers, help all Americans live a healthier life, and lift productivity and GDP. It would be straightforward to fully finance Social Security with some simple tax changes, ones that would have the benefit of making the tax code fairer and more progressive. And it would be straightforward to give workers what they want by letting them accept full retirement benefits at age 62 or 65 rather than at 67.
We’re really talking about incremental change, then.
Honestly, I have no idea what the solution is. A just system would differentiate between those who have jobs and careers and those whose work is physically demanding and those who isn’t. It would probably also factor in differential life expectancy somehow.
There is very much a lottery aspect of all this: While most of us will be lucky to make it to 80, we could all die today. And some will live well past 80. Knowing when to punch out is, therefore, a crapshoot. The difference in my Social Security benefits in retiring at 62, 67, or 70 is substantial: roughly 50% more at 67 than at 62 and almost twice as much at 70 as 62. But, of course, if I kick the bucket at 66, as my father did, I’ll have paid in all my working years for nothing.
One argument that I haven’t heard enunciated for keeping or lowering the retirement age is that businesses frequently don’t want older workers. They’re more expensive and depending on the job, less productive.
@James, like you, I planned to work till 70 in order to maximize my SS benefits, that was until a good friend who had just retired at 68, was diagnosed with cancer and was dead 2 months later. That changed my attitude. I did work about 7 months beyond my 67th b-day, but in truth the difference in benefit amount wasn’t worth the risk that I wouldn’t see retirement if I had waited.
Retirement age for the OECD countries:
As is frequently the case, Americans tend to imagine they are the global standard when in fact a significantly worse off outlier
@Sleeping Dog: Completely reasonable. The difference for me is only ~$900/month and requires foregoing 36 months at the lower rate. It would take quite a while to make it worthwhile in terms of that tradeoff. Of course, I’d also be making a whole lot more by working my job than retiring during that period.
@Stormy Dragon: It looks like we’re right in line with all of the major OECD countries. France is the only comparably rich country with a significantly lower age—and they’re now coming in line with us. (That said, your larger point is right: our social safety net overall is comparatively weak.)
I was never going to let the government, or my employer, tell me when to retire. The last ten years I was working we lived on about 25% of my salary, and saved the rest.
I walked away from a very, very good salary and retired at age 53 because we had “enough” – which is a concept completely foreign to most Americans. Yes, in the intervening years I could have saved up a couple million more dollars that would be where the rest of my money is now – sitting in an account gaining value, but my life would be spent stressing over meetings and deadlines and which employees were performing well and which employees needed to be cut.
Instead, I think about what I want to think about, and I do what I want to do, and I live where I want to live.
We are so busy making money we forget, until it’s too late, that it’s supposed to buy us freedom.
Some risk of being gamed but I would set eligibility based upon income with the goal being that people should have roughly equal numbers of years receiving benefits.
Or…maybe just remove the cap on earnings subject to ss tax. I know the high earners will bleat and moan, but the cap is crazy low compared to some professional wages, amounting to a huge de facto tax cut for them.
Ha…who am I kidding…making our, “betters” pay into the system. I crack myself up sometimes.
@Thomm: Covered in the OP.
@Thomm: Puerile class resentment is rarely a very good demarche for policy setting. However there is not any very good financial or economic logic in respect to your social security system for a cap on the portion of wage subject to retirement levy and should indeed be lifted, completely aside from any retirement age policy.
Given modern developed countries health care and lifespans, the raising of retirement age for full state benefit is completely sensible particularly as labour trends to less physical and manual, including in industry and old industrial labour becomes less, there’s no particular reason for non-physical labour workers generally to stop productive work. Equity issues for labour that remains manual are best addressed by allowance for certain work categories to have special age categorisation (as is the case in several of the EU cases). While imperfect, it would address the main body of need without typically heavy bureacratic burden: of course a category of informal undocumented is not covered but in most systems drawing on years of contribution they are in essence excluded
The French comment re change in labour market rather is telling as to the social blindness of the actual priveledge of what in USA would get the ‘boomer label’ as the jobs-for-life model evoked was reformed as it had generated a two tier job market, and mass structural unemployment amongst youth, such that the post-war generations have had armoured jobs with extensive benefit but the immigration descended youth in particular, but youth in general had little jobs access, eventually even the Socialists realised they had a problem – although as usual for France priviledge gets dressed up in hyprocritically deceptive social justice slogans. It still remains, I can assure, very difficult to lay off under French code and so as I do when hiring under that code, one does one’s best to avoid “CDI” until one has a very good idea of the employee.
“It looks like we’re right in line with all of the major OECD countries.”
No, we are currently near the top of the OECD, and about the middle of where all countries plan to be by 2050. Proposals to raise the retirement age to 70 would put us 2 years higher than any of the other countries’ future plans.
When the compromise to extend the life of Social Security in the 1980’s was made, the payroll tax level was set so that it covered 90% of income. Since then, as income gains mostly went to those with the highest incomes, this percentage has fallen considerably.
@Lounsbury: You agree with me, but don’t like the way I framed it… interesting. There has been class warfare going on in the US for damn near 40 years now, but since it is your class that has been waging it, and winning, it is rarely called that.
By the way. I don’t resent the upper-middle class and above, they are my customers and who I earn a living from. What I resent is our culture looking at them like they have a divine right to not having to contribute to our society at the same relative level as someone making my lunch.
I don’t know if I want to “Retire”. My grandfather was a firefighter and ended up having to retire after injury and a botched surgery. I watched him have all the time in the world and nothing to do with it. He had enough money from the settlement, his pension and for a while a cagey gambling habit. But he was bored constantly.
I really don’t want that. I honestly don’t know what the answer is, but the view of retirement I got from him was miserable.
@Thomm: I agree with the goal, I find the class resentment puerile, besides the point and rather worse not useful for understanding how to effect an actual change, and thus self-paralysing for self-defeat.
As not explanatory of either the reason for the cap nor the actual barrier to changing said however much you may resent such people. The cap I understood from when I lived in USA was a relic and artefact of the original mechanism by which SocSec was created, a policy archaicism. And barrier to change not being “your betters” as such but the behavioural economic observation that humans are much more sensitive to perceived loss than perceived gain (something that makes perfect evolutionary sense but of course is irrational in modern economies). Given the mass of highly engaged professionals – even if Ecolo BoBos as one says in French – you need to conceived of path to change.
Illustratively a path to change that could overcome the resistance: under next budget law (or whichever mechanism for such) institute a mechanism to raise the cap at a multiple of the CPI (or another inflation mechanism, but CPI seems appropriate for a salary mechanism), say 2x CPI (if then CPI is 5%, the cap increases by 10% of the prior year). One ratchets up until eventually the normal mass of voting bourgeouisie salary is within scope, and then the voting base for opposition is attritioned away. Imperfect but plausible path.
@Beth:it is indeed what I observed with some of my North American cousins, retirement meant after year 2 boredom, and increasingly unhealthy sedentary life. Impressionistically from occasional NA visits, had they not taken the early retirement but rather gone to part-time work or similar, they likely would have lived another ten years.
Of course there is a certain irony in hand-wringing over age discrimination and labour given the age discriminatory comments about Biden and others that crop up.
What I want is the time to devote labor to whatever projects interest me whether or not the finance bros think there’s enough money in it. I always want to no longer be in a place where I’m forced to endure abusive employers and toxic work environments because they can use the threat of homelessness and starvation to extort me into accepting it.
I’m 57 in two weeks and can’t imagine working until 70. I’m eligible for federal retirement at 60, but will stay to at least 62 to get the 10% bump (federal retirement goes from 1% per year of service to 1.1% if one stays to 62). Beyond that, I’ll decide then. Maybe I’ll just stay to 65 and start drawing Social Security then.
One thing I read a while back, if you start drawing Social Security later the monthly payment is higher, but the total benefit you receive during the time you draw it is about the same. You just get more every month if you draw it for fewer years.
@Beth: I find that I’m enjoying my retirement just fine. Then again, I still do a little substitute teaching to get myself out of the house and I score high on introversion on personality tests (two different ones put me at the top of the heap), so I may not be the example you’re looking for as a role model. I hope your kids (and their kids) will be a source of contact with humanity for you when you reach that time. My friends with kids and grandkids tell me those contacts are really important anyway.
@Mikey: Taking early and waiting till later both base off of having to live into your mid to late 80s from what I remember studying about it. After 85 or 86, the story goes, you will start to “lose” money relative to what “maximized” would have looked like if you retire early, and if you don’t live that long, you don’t “make back” what you didn’t collect between 67 (?) and 72. Or so the story goes.
Sounds a lot like the guys I knew who played the Trifecta at the racetrack when I was young.
Raising the cap on taxed earnings, which would mean fundamentally changing the nature of the Social Security program, would not even make us solvent for *existing* benefits, let alone lowering the retirement age.
That’s totally understandable. For me, barring something wild, I don’t expect I’ll ever be not self-employed. I like the area of law I’m in, people are generally happy about interacting with real estate attorneys, and the weird stuff that pops up tends to be fun. I can see myself happily putting through a couple of deals a year just for something to do.
If I was a trades person or worked some other manual labor that would be untenable.
@Just nutha ignint cracker:
Lol, I’m a fairly extreme extrovert. The only reason I’m hiding in my car typing this instead of at a kids birthday party is that I’m hung over from last nights rave. Where I made a bunch of new friends. A retirement where my kids or grandkids wheel me around to raves and festivals does sound nice. Maybe that way I could afford Coachella.
@Hal_10000: While I’m sure that there a levels of “raising the cap” that would be ineffective, removing the cap altogether creates a different dynamic. And since I’m not one of the “eat the rich” progressives, I’d be fine with removing it only on the wage earner side and letting the owners of the capital skate by with what they’re paying now.
But I agree that lowering the retirement age is probably not worth considering. We could accomplish what’s needed for the working class by liberalizing the qualifications for disability-based early retirement. Maybe a worker should be able to retire at half-crippled up, for example. And maybe without having to spend out all of his savings first. I realize that not requiring that a disabled worker be condemned to permanent poverty is a radical idea, but it may be an idea whose time has come.
I get the impression that several of the posters above are confusing what Europe has — a publicly-funded pension system — with what America has, which is a subsidized safety net. Social Security in the US pays enough to keep you from starving or (probably) losing your home. That’s what it was designed to do. It is not, and has never been, a replacement for an actual public retirement plan, like first-world nations have. That would be (cover the children’s eyes) socialism…
@Beth: Retirement has come with an element of boredom, which requires me to be diligent in keeping busy. They key, however, is not to be *too* busy.
In my working years I was so busy that I was nicely distracted from the personal work I needed to do in order to improve relationships and understand myself better. I suppose it didn’t matter because if I had kept working I’m sure I would have been alone and without any relationships to repair – so moot point.
As it is, I feel like the last 4 years or so have been a fantastic journey of self-discovery. I’m starting to remember who I am, something I always knew as a less-distracted teenager.
One must not navel-gaze too much though. There are weeds in the garden and the front eaves need paint.