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Scoring a Fiscal and Social Win-Win

Encore careers are a good investment, writes David Bank


It's safe to say the debt commission's proposal to raise Social Security's retirement age to 69 has more to do with trimming finances than it does with a compelling vision of longer working lives.

But there is a bountiful fiscal and social harvest to be reaped by accelerating the growing trend toward working longer -- by choice, not fiat. It's not a stretch to say encore careers could help drive the kind of economic prosperity and job creation needed to make the debt more manageable.

The potential windfall from longer working lives wasn't factored into the calculations presented to the fiscal commission, but it should be. An initiative to enable people to work longer could eliminate cuts to Social Security that penalize those who cannot work and do nothing for those who can.

Encore careers are a good investment. Americans working an average of just three years longer than they do now - raising the median age from just over 62 years now to just over 65 years - would give the economy an $800 billion a year boost, according to a model developed for Andrew Biggs of the American Enterprise Institute. That would generate $1.2 trillion in tax revenues between 2015 and 2024, Biggs says. (Note: Biggs favors raising Social Security's early-eligibility age, but says similar returns are possible with any combination of sticks and carrots that boost the median retirement age.)

Economists agree that higher labor force participation drives higher economic growth. A model developed by the McKinsey Global Institute projected a GDP windfall of nearly $13 trillion over the next three decades by raising the median retirement age in 2015 to 64.1 years. McKinsey's team, led by Diana Farrell, now deputy director of the White House's National Economic Council, said the labor market innovation and flexibility needed to enable boomers to work longer could fuel even stronger productivity growth and job creation.

Baby boomers are anticipating such changes. MetLife's most recent annual human resources survey found that 59 percent of employees say they plan to work past 65, up from 53 percent a year ago. The increase in expectations was even more dramatic among workers now in their 50s.

The draft debt-reduction plan does pay lip service to the transformation under way, promoting "smart retirement decisions" with education "to encourage greater personal savings, delayed retirement and phased retirement" and greater flexibility in how Social Security benefits are claimed.

But the draft assigns no debt-reduction credit, or "score," to the trend toward longer working lives, making it easy to ignore as a serious policy direction.

Rhetorically, the alternative debt-reduction plan by former White House budget director Alice Rivlin and former Sen. Pete Domenici is even stronger on the need to encourage longer working lives, calling it "one of the most important components" of the whole proposal.

"With workers spending more years in the labor force, production will rise and more retirees will have adequate savings and standards of living," write Rivlin and Domenici. They add, "Policies influencing behavior are preferable to those that force people to delay retirement."

But that report likewise fails to give credit where credit is due and recognize the economic windfall represented by the working-longer trend.

Simple reforms and modest investments could make encore careers more accessible. Expanded retraining program, financial aid and "encore fellowships" could help older workers transition to new fields and less strenuous jobs. Making Medicare the first-payer for health coverage for workers over 65 could eliminate employers' main concern about hiring older workers. Modernized pension rules could encourage phased retirement and flexible work arrangements. Disincentives to work in Social Security could be replaced with streamlined income-planning features that help people better manage the next stage of their lives.

But it will take an intergenerational job-creation initiative to overcome the stark reality that economic stagnation and age bias mean there are too few encore career opportunities for older adults. Unemployment among older workers is at historic highs, and the average length of unemployment for older workers is far higher than the national average.

A third budget plan, from the Economic Policy Institute, Demos and the Century Foundation, calls for ambitious public investment to meet key national challenges, create jobs -- and generate tax revenues. The report musters research demonstrating high rates of return on investments in early childhood education and childcare; roads, bridges and water systems; public transit and rural broadband connectivity; and basic science and R&D.

The talent and experience of people seeking encore careers could help ensure the success of public investments in these and other critical areas -- and strengthen efforts to create jobs for younger workers as well.

As policymakers tackle the national debt, they should invest in a national asset: the talent of older adults seeking to put their experience to work in their encore careers.