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Retirement and Public Policy

Retirement and Public Policy

January 25, 1990 January 26, 1990
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This Conference was designed to explore the rationale behind the widespread call for the continued employment of older Americans. Many concerned observers, including politicians, gerontologists, and editorial writers, have come to deplore the trend toward early retirement. The trend, which began after World War II and accelerated in the 1960s and 1970s, has led to a dramatic decline in work effort and earnings among persons age 55 and older. Opponents of earlier retirement point out that keeping people in the work force longer will raise the nations' output and reduce the costs of Social Security. They also think deferred retirement will improve the well-being of older Americans. In contrast, the groups most directly affected by retirement patterns - employers, labor unions, and especially older workers themselves - show little interest in reversing recent retirement trends.

The concern about the trend toward earlier retirement has taken on increased urgency in the face of the projected slow growth in the labor force in the 1990s and a sharp increase in the elderly population when the baby boom retires after the turn of the century. Advocates of delayed retirement worry about the costs of suporting a large retired population after 2010 and view the 1990s as an opportunity to head off unbearable financial burdens.

The traditional view of economists, on the other hand, is that, in a perfectly functioning economy, early retirement simply reflectsthe preferences of older people for more leisure and less consumption. If people save on their own over their work years and live off that savings in retirement, their decision to retire early should in no way adversely affect others. If leisure, which is valued by individuals, were also valued as national output, it would be clear that the nation has acheived the best allocation of resources possible. The economists' arguments get somewhat more complicated with the introduction of a social insurance system and market imperfections, but few economists view the trend toward early retirement with alarm.

In attempt to clarify the issues and narrow the gulf in views, the National Academy of Social Insurace solicited a series of papers by people in a variety of diciplines on various aspects of the retirement controversy. The conference opens with an analysis of the historical patterns of retirement. The second session addresses the economic arguments head on. Specifically, it looks at the implications of introducing a social insurance program into the traditional economic analysis, and also considers the possibility that distortions or lack of information could lead individuals to make unwise choices about thir own retirement. The third session investigates whether prople retire voluntarily or are driven out of the labor force, and the extent to which older people currently out of the labor force want to reenter. The fourth session summarizes the medical evidence on the trends in the health and ability to work of older workers. The conference concludes with an exploration of specific policy options that could affect retirement.

Chair:

Alicia H. Munnell
Federal Reserve Bank of Boston

A book of published proceedings, Retirement and Public Policy, edited by Alicia H. Munnell, is available.