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  • Writer's pictureOren Levin-Waldman

COVID-19 and the Need to Lower the Retirement Age

With coronavirus cases around the country rising and some states slowing the pace of reopening their economies, there are those calling for additional stimulus payments, as well as extending the CARES Act protections. Perhaps a different approach needs to be taken. With a vaccine long off in the future, it is becoming abundantly clear that we will need to learn to live with the virus. The costs of lockdowns are astronomical. The political left that insists that the Federal government spend more, also believes that more money can be printed up.

Let’s begin with the premise that the economy should be reopened. Let’s also assume that most people who are infected will recover, or at least that is what the current science says. It is ultimately the most vulnerable that need to be protected, and steps should be taken to do that. Then, how do we do that in the labor market?

We can further assume that many workers over 60 may simply be afraid to go back to work and in a free market that should be their choice. Unfortunately, it is also the case that we can expect to see quite a bit of age discrimination in the future, whereby employers may be hesitant to hire workers over a certain age out of fear that they could get sick and that the resultant absenteeism will only undermine productivity.

Nothing here should be misconstrued to justify age discrimination; rather it is a reality that we can expect. Thereforre, it might make better sense to lower the age for the receipt of full Social Security and Medicare to 60. One who is 59 and a half can already tap into his/her retirement savings without penalty, but can’t even get partial benefits from Social Security until the age of 62. Because workers can’t get full benefits until 67, they may feel compelled to work in an environment where they are at greater risk.

Of course, those who can continue to work remotely will see no need to retire. But those who don’t have that luxury, should have the option and still be entitled to full benefits. Ideally, we might use this crisis as an opportunity to establish a universal basic income (UBI) that would be set at a level that would replace Social Security, Unemployment Insurance, and other social supports. Although the idea has come up again in recent months, that is incredibly expensive, and policy in the U.S. is made incrementally.

The problem with relying on the government to pass new bills is that everybody is held hostage to a robust political process that can barely achieve consensus. Moreover, there is a difference between an economy that slows down because a pandemic results in fewer people going out and buying things and workers afraid to work on the one hand and an economy that has been shutdown by government edict on the other. The latter is very much akin to a government taking whereby it should be obligated to compensate everybody under the Fifth Amendment’s Taking Clause.

Critics of this modest proposal will first argue that Social Security has been going bankrupt and that one way to save it is to among other things raise the retirement age. It isn’t clear that this is true. The Social Security Trust Fund has long been a fiction, and most retirement savings have been paid out of the general treasury. If we are going to pay for additional stimulus money and other assistance out of the general treasury, then we can pay for additional Social Security beginning at age 60 out of the general treasury too.

The second argument they will make is that with people living longer, retirement age should be raised; not lowered. This may be true, but we are talking about an emergency step during an extraordinary set of circumstances. The reality is that allowing workers to retire earlier doesn’t change the fact that they are still entitled because they paid into the system.

What we are trying to achieve here is get the economy moving, with workers returning to work and with those opting not to having an income and the ability to continue purchasing goods and services. At the end of the day, it is all about liquidity. It is probably a good bet that this proposal would enjoy broader support than a proposal for a UBI, even if its time has come. As an incremental measure this would seem to be a logical step.

What clearly is harmful is this idea that we can shutdown the economy, reopen, and then shutdown again if we need to. Aside from the economic harm that has been done, including the exacerbation of inequalities across different populations, we have the various social pathologies that have arisen due to the lockdowns. Cases of domestic abuse are up, as are depression and suicides. Additionally, people have died because they have been afraid to get needed medical care for other ailments. This is in addition to medical screening that has not been done because during periods of emergency they have been classified as elective procedures. We know that schools being closed are not good for children, which comes from the American Academy of Pediatrics.

It should never have been a question of whether the economy reopens as opposed to how it reopens. The same is true for the schools. One way to reopen at this point is to do it with masks and social distancing in place, along with the choice left to the more vulnerable to determine if they want to work. The only way for that choice to be meaningful is if the more vulnerable can opt to retire at 60 with full benefits.

At the same time, the consequences of this economic havoc raise larger questions of how work in the future will be reshaped and what the social safety net will look like. If nothing else, this crisis has dramatized the need for health insurance to be severed from employment. In the short term, the retirement age needs to be lowered and in the long term a system of UBI needs to adopted.

Short of a UBI, then perhaps a system of individual development accounts (IDAs), whereby government creates accounts for individuals at birth and makes contributions until age 18. Then when individuals enter the labor market, both workers and their employers would make contributions. The IDA replaces all social supports and insurance, and workers are free to draw on it as needed, including retirement. Of course, this all requires serious planning, but we can begin with lowering the retirement age.

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