Worldly Philosopher: The Death of Keynes’ Predictions
This week's Worldly Philosopher, Ismael Cid, discusses how the decline in employer-sponsored retirement plans has forced a growing number of Americans to postpone retirement.
In his 1930 essay, "Economics Possibilities for Our Grandchildren," economist John Maynard Keynes predicted a future of increased living standards and 15-hour workweeks. He envisioned a rise in living standards - equivalent to what we have experienced over the last 85 years – that would allow us to devote our energies to non-economic purposes. In his words, "the lilies of the field who toil not, neither do they spin."
A future of longer and healthier lives proved right. Unfortunately, however, reality does not bear out Keynes' vision of security and leisure. In fact, it is the opposite. Increased life expectancies and the challenges of a graying population have encouraged some economists to champion a retirement policy described as "work until you drop."
SCEPA Director and retirement expert Teresa Ghilarducci recently described the growing problem of retirement insecurity behind this new reality. Rather than a savings problem, SCEPA research documents the underlying structural problem: employer sponsorship of retirement plans for prime-aged (25-64) workers declined from 61% to 53% from 2002 to 2012.
Absent the creation of new savings vehicles, a growing number of Americans will not have enough savings to retire in old age. Their only remaining option to avoid downward mobility in old age, or slipping from middle-class to poor or near-poor, is work. This explains why since 2000, the proportion of working Americans 65 years of age and older has increased by more than 41% -- a growth similar to that experienced by those 70-74 years of age (see graph).
The share of older Americans looking for work has also increased. Since 2002, Americans between the ages of 65 and 74 experienced the largest increase in labor force participation relative to all other age groups. The next oldest group, those 75 to 79, showed the fastest growth rate per year in labor force participation from 2002-2012.
Economists who read increased life expectancy as a call for working longer use these numbers to support increasing the retirement age. However, the question remains: are these workers returning to the job market doing so for love or cold hard cash? Evidence may be found by looking at our continued wage stagnation and the jobs and industries seniors end up in. Rather than extending middle-class careers, some seniors go to great (physical) pains to work in low-wage, labor-intensive jobs in warehousing, hospitality, and food services. Harper's Magazine's "The End of Retirement" provided a glimpse into this grim reality last summer with a close-up look at Workampers, the new name for seniors who live in RVs to follow seasonal warehouse jobs with Amazon.
Unfortunately, the dream of leisure after a lifetime of work looks like it will continue to elude older Americans. Both the Bureau of Labor Statistics and the Social Security Administration project that more seniors will stay in or return to the labor force in the years ahead. When Americans already spend less time in retirement than seniors in other developed countries, we should strive to ensure Keynes' vision of allowing people the choice between work and leisure – especially in old age.