Removal of Social Security limits helps working seniors, job market

OUTLOOK

March 26, 2000|By Amanda J. Crawford

Last week, Congress passed legislation that stops the reduction of Social Security benefits for people who continue to work through their late 60s. The bill, which President Clinton has said he will sign, would be made retroactive to Dec. 31, 1999, effectively boosting the income of 800,000 workers 65 through 69 by thousands of dollars before Election Day in November.

Under current law, elderly workers 65 through 69 lose $1 in Social Security benefits for every $3 in wages they make above $17,000. Supporters argued that the earnings limit was outdated, the product of the Depression when the goal was to make room for younger workers. Now, with a tight labor market, the aging of the baby boomers, and the demise of traditional pension plans, there seems little reason to penalize people for working past 65.

Will this change bring more older people into the job market? Is it likely that labor-short employers will try to tap this resource? Could this contribute to a trend of people working longer?

Judith Hellerstein

Associate professor of economics, University of Maryland

When your taxes are increased by 33 percent as a result of Social Security, you are much less likely to work. If you do work, you are much more likely to work fewer hours. This change will encourage older people to stay in the labor force, work more hours and earn higher income.

I think whether employers will hire older people depends on the type of employer. Older workers have skills that are different from the skills of younger workers. Many are not computer literate, so they would not be appropriate new hires in firms that utilize that new technology. However, firms that don't require those kinds of skills, like a fast-food restaurant, for example, may be very interested in filling their vacancies with older workers who may have a better work ethic than younger workers. Another issue is a worker who has been with a firm for a long time often develops firm-specific human capital, skills that are important in that particular job and are valuable to that firm. The firm doesn't want to lose that by having that person retire and having to train a new employee.

Ellen Galinsky

President, Families and Work Institute, New York

I think not having a penalty for working more will certainly bring more older people into the workforce. People in their 60s now can expect to live 20 or 30 or more years and I think that the labor shortage, the war for talent, will encourage employers to look at this very experienced workforce. Employers will have to accommodate these people in some sense. Older people will have the ability to set some terms that they might not have felt free to do when they were younger. They may want to travel, live in a warmer climate, work part-time, things like that.

I think that the trend of people working longer is already in place. What Social Security did was respond to something that has happened more than it will precipitate what happens.

Lawrence J. White

Professor of economics, Stern School of Business, New York University

There is evidence that seniors work for a while and stop working because they are concerned when they hit their max income. Beyond that, they are facing a very steep marginal tax rate and that's a disincentive to work. So the change will keep them in the workforce and, given our current tight labor markets, that is surely a good thing. I think it will have more of an effect on someone who is facing the choice of whether or not to retire.

An older work force is a very valuable resource. These are skilled men and women who in labor-short times like these can help forestall the labor shortage and the specter of wage inflation that so worries Alan Greenspan.

Craig Copeland

Associate director, Social Security Reform Evaluation Project, Employee Benefit Research Institute, Washington

If people are already out of the labor force, it may be difficult to jump back in. But for the people who haven't retired yet, now there is the incentive to continue working. As we've seen in the last couple years, the trend toward early retirement has started to bottom out. Now that there is not going to be a loss of benefits by continuing to earn full income, the average age of retirement could accelerate upward.

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