Barry’s Pickings Online: Intimations of Mortality

Michael Barry questions whether there is a lack of commitment to Social Security as a social insurance system, but rather a desire to use the opportunity presented by the Social Security “crisis” to cook up more schemes for re-distributing income from “rich people.”
By PS

PS_Barry_JCiardielloArt by J CiardielloThe easiest way to solve the Social Security “crisis” is to raise the retirement age. I put “crisis” in quotes, because I’m not totally persuaded Social Security is in that much trouble. But, according to the 2016 Social Security Administration (SSA) Annual Report, “[t]he Trustees project that the combined [retirement and disability] trust funds will be depleted in 2034.” 

As President Obama said in 2012 in his first debate with former Governor Mitt Romney: “Social Security is structurally sound. It’s going to have to be tweaked the way it was by Ronald Reagan and Speaker – Democratic Speaker Tip O’Neill. But it is – the basic structure is sound.” What President Reagan and Speaker O’Neill (in 1983) did was … raise the retirement age.

In 2010, the bipartisan Simpson-Bowles Commission leaders recommended:

[I]ndexing the retirement age to gains in longevity. The effect of this is roughly equivalent to adjusting the retirement ages by one month every two years after the NRA reaches age 67 under current law. At this pace, the NRA would reach 68 in about 2050, and 69 in about 2075; the Early Eligibility Age (EEA) would increase to 63 and 64 in step.

Just to be clear: This proposal is to raise the age from 67 to 69 by 2075—almost 60 years from now.

Workers broken down by physical labor 

Many, however, strenuously oppose any increase in the Social Security retirement age. This split is explicitly partisan. Notwithstanding the recommendation of the President Obama’s bipartisan budget commission leaders and of President Obama himself (in that quote I just gave above), Democrats emphatically oppose a Social Security retirement age increase. Their 2016 party platform states, “We will fight every effort to cut, privatize, or weaken Social Security, including attempts to raise the retirement age, diminish benefits by cutting cost-of-living adjustments, or reducing earned benefits.” Republicans are more oblique, but the implication is clear. Their platform states, “Of the many reforms being proposed, all options should be considered to preserve Social Security.”

When you float the idea of an SS retirement age increase by Democrats, the pushback looks like this (quoting Hillary Clinton from a February 2016 speech):  

Right now if you look at who draws Social Security for the longest time, people who have worked hard for many years, people who are often really broken down by the physical labor or the repetitive labor that they’ve done. Their lifespan is much lower than the lifespan of people like you and me who had a different sort of life, made our monies different ways, didn’t have to work that hard. So right now the average death age for a lot of Americans and Latinos and African-Americans is lower than the average death age of whites. And that’s lower still than the age of people who are affluent and well educated. So raising the retirement age would very well eliminate a lot of hardworking people from getting much Social Security at all. I will not do that. I want people to have the best possible older years. So that is ruled out to me. [Emphasis added.]

And this argument has a certain appeal: there does seem to be something fundamentally unfair about raising the Social Security retirement age for individuals with shorter life spans. Let’s consider it a little more fully.

NEXT: “Data”

Just how many American workers are “really broken down by the physical labor or the repetitive labor that they've done?” The (“left leaning” and “progressive”) think tank the Center for Economic and Policy Research has produced some data on this issue: “Out of 18.8 million workers ages 58 and older, nearly 35% (that is, about 6.5 million) were in physically demanding jobs in 2009, abou% of which required high physical demand.” Just to be clear about that last bit, as I read this it means that 1.75% of workers 58 and older were in jobs “which required high physical demand.”

Like any piece of gross data, this number is pretty unsatisfying—you’d really like to know what kind of jobs we’re talking about here. But let’s start with a minimal claim: the problem that Ms. Clinton identifies—workers being “really broken down by physical labor”—may conceivably exist for, at most, 35% of the workforce age 58 and older.

I’d just like to observe in passing that if that many workers are being broken down by physical labor in 2075, then we and our children will have totally screwed up the 21st century.

Your stories vs. my stories 

But, why exactly does physical labor equal being broken down? I could spin an entirely different story here. As we keep being told, “sitting is the new smoking.” Why isn’t a sedentary work environment more likely to kill you than, say, physical labor, at least physical labor that doesn’t require a “high physical demand?” Indeed, there are studies showing that “among blue-collar workers, we see that workers who retire earlier have higher mortality rates”—from which I infer that physical work, into old age, is generally good for your health. As is, I believe, mental work.

Of course, there are all sorts of obvious stories you can tell to “prove” that hard physical labor shortens life expectancy. I’m pretty sure working 40 years in a coal mine will. And I’m guessing that working construction for the same period could too. But, what about, say, plumbing? Or driving a truck?

Plus, like every other economic “fact,” shorter blue collar life expectancy is fantastically over-determined. Consider these findings about the prevalence of smoking from the Centers for Disease Control:

Substantial differences in smoking prevalence were observed across industry and occupation groups. … [B]y occupation group, prevalence [of smoking] ranged from 8.7% in education, training, and library to 31.4% in construction and extraction. [Emphasis added.]

Or consider that the construction and extraction industries have a 13% alcohol abuse rate, 5 percentage points higher than the 8% U.S. average.

Moreover, it’s a commonplace that to a meaningful extent all these cofactors—highly physically demanding labor, tobacco and alcohol abuse—are gender specific. They’re male issues. As everyone (even Democrats) knows, women live longer—at 65, two to three years longer—than men. 

And, while Ms. Clinton features the issue of lower minority life expectancy, in fact there currently is a trend for “a marked increase in the all-cause mortality of middle-aged white non-Hispanic men and women.”

So, are we not to raise the retirement age because some people smoke and drink too much? Or, alternatively, should we have a different retirement age for different occupations, different races, and different sexes? If not—if we’re going to decide not to make these sorts of distinctions (some of which certainly make me uncomfortable)—if we’re going to just use one retirement age, then why must that age be pegged to the life experience of one group—more or less, blue collar workers? Which group has some, uh, non-work related health issues.

NEXT: The one thing we do know—we’re all living longer

Notwithstanding all this gloom, the Society of Actuaries recently published new 2014 mortality tables—updating their year 2000 tables—showing a meaningful increase in life expectancy across the board, including among blue collar workers. Based on the SOA’s numbers, from 2000 to 2014, the life expectancy of a blue collar male at age 65 increased by more than one year (from 16.3 to 17.5).

The last time the Social Security retirement age was increased was 1983—33 years ago. In 1980 the life expectancy (at 65) of a male non-smoker—just to be clear, this is an average male, not a blue collar male, and a non-smoker—was around 14.6 years—three years less than the current life expectancy of a blue collar male.

If that doesn't sound like much, then you’re not thinking about this the right way. In 2014, a 65-year-old blue collar male could expect to get his Social Security benefit for 20% longer than he would have in 1980.

What principle underlies these stories? 

All of which is to say that “broken down by physical labor” is a nice talking point, but there’s no principle underlying it. Nobody’s suggesting that women should get a smaller benefit, or should work longer, because they’re not broken down by physical labor, smoke and drink less, and, for some reason, live longer.

No—in fact, Ms. Clinton is proposing to “[e]xpand Social Security for those who need it most and who are treated unfairly by the current system—including women who are widows and those who took significant time out of the paid workforce to take care of their children, aging parents, or ailing family members.” [Emphasis added.] She’ll pay for this by “asking the highest-income Americans to pay more, including options to tax some of their income above the current Social Security cap and taxing some of their income not currently taken into account by the Social Security system.” Just to be clear: the “Social Security cap” is $118,500 for 2016. So if you make more than that, Ms. Clinton is thinking about increasing the amount you pay into this system, with no increase in benefits.

I still to this day have no idea who I’m going to vote for this November. But I’m really tired of this sort of talk. Social Security is and always has been a progressive system. Hello: it’s not a regressive payroll tax. It’s a social insurance system with a net bias in favor of lower paid individuals. Higher paid individuals pay more tax for a benefit that replaces less of their Social Security-taxable income. I would have no problem covering “those who took significant time out of the paid workforce to take care of their children, aging parents, or ailing family members”—if they (or conceivably their aging parents) paid their Social Security tax.

But what I hear behind most of this rhetoric—and especially behind the refusal to consider an Social Security retirement age increase—is a lack of commitment to Social Security as a social insurance system—as (to re-quote President Obama) a system whose “basic structure is sound.” And instead, a desire to use the opportunity presented by the Social Security “crisis” to cook up more schemes for re-distributing income from “rich people”—which is probably going to wind up being people who earn more than $118,500 a year. As Chicago Mayor Rahm Emanuel once (notoriously) said, “You never let a serious crisis go to waste.”

I sincerely hope I’m wrong.

 

Michael Barry is president of the Plan Advisory Services Group, a consulting group that helps financial services­ corporations with the regulatory issues facing their plan sponsor clients. He has 40 years’ experience in the benefits field, in law and consulting firms, and blogs regularly http://moneyvstime.com/ about retirement plan and policy issues.  

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Asset International or its affiliates.

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