Charles Edison

"Economics, politics, and personalities are often inseparable." - Charles Edison

Wednesday, February 23, 2011

Retirement Expectancies May Hurt Unemployment

This article says that most people plan to retire when they're 70 or older instead of 65. Some even speak of waiting until they're 80 to enjoy their golden years. People simply can't afford to stop working any earlier than that, especially since most don't expect to get anything from Social Security. But those people staying in the work force longer could have a negative effect on unemployment. It would reduce frictional unemployment (voluntary unemployment), and that may seem like a good thing on the surface. But frictional employment is natural and will always be present to some degree, so it's not a big deal if we have it. The problem is that if people wait longer to retire, they make it harder for others to get jobs. In recessions and troughs, the younger and more inexperienced are going to be layed off first unless they're needed. If the more experienced potential retirees hold on to their jobs, the younger people (who may have to provide for a family) won't be needed and will have a harder time finding work. That will increase the cyclical unemployment, which is the type of unemployment we want to minimize the most. But if Social Security is going to run out soon, the older people don't have much of a choice.

10 comments:

Smith said...

How does the rising retirement age affect Social Security right now? How does this influence societies’ confidence in the system?

Alison said...

It decreases society's confidence in the system because if people are waiting longer to retire, they're confident that they will live longer. That means they're going to take up more Social Security. Also, if they're retiring later that means that ther retirees themselves don't have confidence that Social Security will pay for their retirement.

kern said...

Do your arguments also hold true if we raise the age where you can receive retirement? Would that hurt the overall job market? Would we just be transferring the social security payments to unemployment benefits and by solving one problem create another?

joseph said...

You say that if the elderly were to keep there jobs longer, that the younger generation wouldnt be able to aquire some jobs that would be opened up. However if some of those elderly are still working they might be producing new ideas along with creating new jobs that the world may never have seen before. They mightuse there knowledge and experience to help the world excel. Also as technology progress people might have to start worrying about machines taking over there jobs and not the elderly. This is especially probably more of a problem then the elderly a we have xperts trying to come up with a solution to the social security problem.

Payne said...

I can fully understand why people would choose to work longer. Besides the money aspect, choosing not to retire gives the elderly something to do. But it does make it more difficult for individuals entering the work force to get jobs. Also, since many don't plan on receiving social security, the only option they have is to continue to work.

Easton said...

If this is becoming a problem now, how long will our generation have to work? With some saying they will work into their 80's, will we have to work when we are so old our medical conditions are a problem every day we go to work? The social security problem is one problem we should be trying to fix now.

Tyler said...

I think Kern may have a point that the money saved by not having to pay social security may instead be spent on unemployment. It would be better if the person say retires at age 65, but then lives off what he has saved and then doesn't collect social security until he is 67. If people still retired, but collected ss later it would help the younger people just entering the job market to find jobs.

Lindsay said...

You have a good point about it being more difficult for the younger people to keep jobs because the older people are more experienced. My argument to that though is the job itself. While you have a good point, many jobs require the employee to be younger, or to have a certain image. I work at PacSun, and a huge requirement of being hired is to have the right image to represent the store, which is how most retailers are. What I'm trying to say is, many places might not be able to hire older people because their customers are younger so they are trying to hit a different age group.

Cara Sheffer said...

This is interesting because of the issue with social security right now. Our generation has a lot to handle and as Lindsay pointed out, it is much more difficult for younger people with less experience to get a job versus older people with more experience. On the flip side of this, do we really want the retirement age to stay the same and run out of social security funds? There are pros and cons to both sides and could be looked at many different ways.

Alix H said...

This is a very interesting article from an economics perspective. You have made a very good point about this making it more difficult for younger people entering the workforce to find jobs because the people who would be retiring and creating space in a company are going to continue working. Another important point, though, is that as these people are growing older, their productivity will be reduced. This will also have a negative impact on the economy. I think that each individual person must consider their retirement by thinking at the margin. At this point, the benefits of working one more year and earning one more year’s salary outweighs the benefits of retirement. What also applies in this situation is the tragedy of the commons. Although the potential retirees may be aware of how their presence in the work force may affect the economy, they do not have that large of an incentive to retire, especially because at this point they can no longer afford to retire.