Seniors and the Deficit: Why working longer isn't part of the solution
Mark Miller

Are older workers really faring better in this recession-wracked job market?

Just seven percent of workers over 55 were jobless in October, compared with a nine percent national average, the Bureau of Labor Statistics (BLS) reported earlier this month. That's a sizable gap, and it's been roughly that size throughout the recession.

The health of the employment market for older workers is a critical factor in the future economic security of seniors, since job loss in later life can wreck even the best-laid retirement plan. But it's also a key issue as Washington deficit cutters argue for yet another round of increases in the Social Security retirement age by pointing toward rising longevity and the need to work longer.

But the lower jobless rates doesn't really reflect a healthier job market for older workers. Sara E. Rix, an expert on workforce and employment issues at the AARP Public Policy Institute who studies the labor market for older workers, explains that the gap reflects several statistical quirks that mask underlying problems facing older workers.

Employers tend to hang on longer to more experienced workers, she says. The lower jobless rate also reflects a greater tendency of older workers to become discouraged about finding new jobs, and drop out of the labor force entirely. The Bureau of Labor Statistics doesn't count workers who have stopped looking for jobs in its unemployment calculations, and that brings down the overall jobless rate for workers over age 55.

The discouragement isn't difficult to understand. Once older workers do lose their jobs, it takes much longer to find new ones -- if they're able to find jobs at all. The BLS report for October stated that it took 52.9 weeks for workers over age 55 to find new jobs, compared with 37.3 weeks for younger workers.

Age discrimination certainly plays a role in the longer job hunts, Rix says. But another factor is reduced mobility. The housing crash has made it difficult for many people to sell their homes in order to move for a new job. And, she notes that "older workers may be ready and willing to move for a new job, but they're not always able to do it due to a spouse with a well-established career," she says.

Rix thinks some older workers struggle to acclimate to job hunting when they've out of the market for a long time. "At least initially after a job loss, there's evidence that workers who do get offers tend to hold out for something better. As the jobless period gets longer, they're willing to accept less than at the beginning."

Ironically enough, Washington deficit cutters often attempt to justify a higher Social Security retirement age by pointing toward rising longevity and the need to work longer.

There are several problems with that argument. First, most of the longevity gains are going to affluent Americans with access to better health care and diets, and occupations that are less demanding physically. What's more, only about one-fifth of Social Security's long-range imbalance is due to rising longevity; more than half is due to weak wage growth and rising income inequality, which reduce the payroll tax receipts that fund the program.

Proponents of Social Security cuts often point to the high number of Americans who file for early benefits --at age 62 -- as evidence that we're retiring earlier. But an analysis of labor force trends by the Economic Policy Institute (EPI) notes that Social Security filing trends don't correlate with labor force participation, since many older workers continue to work after filing.

Although benefits are withheld for early filers who earn more than a certain amount, those payments are added back after the Normal Retirement Age (NRA) is reached -- the age when you qualify for full benefits. For 2011, that amount is $14,160; in 2012, the ceiling will be $14,640. If your earnings exceed the limit, $1 will be deducted from your benefit payments for every $2 you earn over that amount. And seniors can work as much as they like after reaching the NRA without penalty.

The share of workers age 55-64 is at its highest point since the Bureau of Labor Statistics started measuring labor force participation in 1948. And Social Security's retirement age already is rising under earlier reforms -- from 65 to 67 by 2022. (The current NRA is 66.) That is an across-the-board benefit cut no matter when you retire, since higher NRAs raise the bar on full benefits.

The net effect of all this?

We're already are working longer, and receiving lower Social Security benefits. "One of the most effective lines of attack on Social Security has been that people are living longer, we can't afford it and the boomers are coming," says Monique Morrissey, an economist at EPI. "The point needs to be made that we're already working longer."