Stanford economist John Shoven argues for increasing the Social Security retirement age, based on a novel redefinition of the term “age”: for Shoven, age should be measured in terms of years from death rather than years from birth. The Social Security retirement age should rise in years-from-birth terms, Shoven says, given that years from death are increasing as mortality declines. Shoven says:
Just consider the consequences of altering the age when entitlement benefits kick in or retirement becomes mandatory to these new inflation-adjusted measurements. It doesn't mean shortening retirements, just stabilizing them. In 20th-century
Mark Thoma disagrees. First, he says:
there is no guarantee that the ability to work and lead a productive life expands at the same rate as life expectancy (e.g., if most of the extension in life expectancy in the future comes from expensive interventions toward the end of life rather than improvements in health during, say, the late 60s, that make working easier then there would be no reason to extend the retirement age). It would be better to define retirement in terms of the minimum of these two concepts, the time at which the typical person can no longer be expected to work full-time on a typical job that may have physical demands, and the life expectancy adjusted retirement age discussed above.
For instance, John Turner examines health status by age and ethnicity among individuals aged 50 to 64. In all categories, the percentage of individuals reporting fair or poor health status has declined significantly since 1982.
The percentage of individuals with physically demanding jobs has also declined: from 1950 to 1992, the percentage of individuals reporting jobs requiring frequent lifting of heavy objects has fallen by from 20 to 8 percent. Turner concludes that “it appears clear that if demand for older workers were sufficient, it would be feasible to raise the Early Eligibility Age for Social Security to 63.5 in order to promote longer worklives.”
Thoma’s second objection to Shoven’s argument is “that Social Security is not the entitlement problem we should worry about, that title belongs to Medicare where costs are expected to increase rapidly in the future.”
This argument is flawed, for two reasons. First, simply because one problem is larger than another does not mean that we address only the largest one. Social Security is the largest program of the federal government and its costs are projected to rise by over 20% relative to its tax base in the next 10 years, with further increases in following decades. Given that reform is essentially a problem of smoothing cost burdens over different cohorts, it’s not clear how delaying action makes for a better outcome.
Second, Social Security is a more mature policy issue than health care. We know fairly precisely what the cost drivers are for Social Security, while for health care the components of excess cost growth are less clear cut. Moreover, for Social Security we know the range of options fairly well, making a potential compromise easier to envision. On the health care side it’s not well understood even the degree to which we should want to restrain cost growth, much less the most efficient ways to do so.