Yes, raising the retirement age would be bad for the poor. No, that doesn’t mean it’s unfair.

My colleague Michael Fletcher reported this week on research showing that “even as the nation’s life expectancy has marched steadily upward, reaching 78.5 years in 2009, a growing body of research shows that those gains are going mostly to those at the upper end of the income ladder.”

He goes on to quote Maya Rockeymoore, president and chief executive of Global Policy Solutions, a public policy consultancy, who says, “people who are shorter-lived tend to make less, which means that if you raise the retirement age, low-income populations would be subsidizing the lives of higher-income people.”

What's the right retirement age? (Tracy A. Woodward--The Washington Post)
What's the right retirement age? (Tracy A. Woodward -- The Washington Post)

Social Security and Medicare are social insurance programs designed to provide everyone with a social safety net when they get old by assuring them adequate medical care and a minimum income to keep them out of poverty. It shouldn’t be any surprise, then, that these programs ultimately represent a transfer between those who die early to those who die late, in much the same way fire insurance represents a transfer from those who don’t have fires to those who do have them. That would be true, by the way, whether the retirement age is left where it is now or allowed to rise.

Still, the most you could say about the distributional impact is that a slow increase in the retirement age would have a modestly regressive impact on two programs that are structured to be highly progressive in terms of the money paid in to them and the benefits that are paid out.

Moreover, given that most serious proposals for raising the retirement age also include other reforms such as raising the cap on income subject to the payroll tax, slowing the growth in Social Security benefits for well-to-do seniors and requiring them to contribute more to their Medicare insurance, these programs are likely to get more progressive rather than less as a result of entitlement reform.

The moral argument against a higher retirement age rests on the assumption that poor people die young because they are poor.  While it is true that life expectancy correlates with income, it is important to remember that correlation is not the same as causation.

One reason poorer people die younger is that they have less access to quality health care. We can all agree this is unfair and morally unacceptable. But after a huge debate, the nation recently adopted a highly-progressive health reform package whose underlying purpose is to insure that nobody will be denied necessary medical care because they can’t afford it, including the years just before retirement. Against that backdrop, a higher retirement age that takes effect over a period of decades seems a lot less unfair.

Another reason for the correlation between income and life expectancy is that lower-income people lead less healthy lives – they are more likely to smoke, drink and take drugs, their diets are less healthy, they get less exercise and they don’t take advantage of the health care that is available to them. This raises a different sort of moral question that conservatives are quick to raise and liberals prefer to ignore:

Why should the rest of the country be prevented from making a needed, common sense reform to its retirement program because some people refuse to take personal responsibility for their own health?  Where is the fairness in that?

Rising income inequality is a big problem, no doubt about it, but it seems to have encouraged some people to view every public policy issue primarily through a distributional or class prism. A carbon tax, a soda tax, higher energy and fuel-efficiency standards, tougher enforcement of criminal and immigration laws, tax breaks for alternative energy and college-savings and long-term investment, public investment in airports and high-speed rail, residential zoning restrictions, revenue-neutral corporate tax reform — all of these have, or would have, the unintended effect of disproportionately helping those with more money or hurting those with less. Does that mean we should reject them out of hand?

Just about every policy you can think of has a disproportionate impact on certain classes, races, genders, regions, industries or age cohorts, but that doesn’t mean we shouldn’t adopt them. Sometimes what is “fairest” is doing what’s best for the whole country.

For further reading:

There’s nothing ‘courageous’ about raising the Social Security retirement age

Why rich guys want to raise the retirement age

A better way to raise the age for retirement benefits

Steven Pearlstein is a business and economics columnist who writes about local, national and international topics.
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My colleague Michael Fletcher reported this week on research showing that “even as the nation’s life expectancy has marched steadily upward, reaching 78.5 years in 2009, a growing body of research shows that those gains are going mostly to those at the upper end of the income ladder.”

He goes on to quote Maya Rockeymoore, president and chief executive of Global Policy Solutions, a public policy consultancy, who says, “people who are shorter-lived tend to make less, which means that if you raise the retirement age, low-income populations would be subsidizing the lives of higher-income people.”

What's the right retirement age? (Tracy A. Woodward--The Washington Post)
What's the right retirement age? (Tracy A. Woodward -- The Washington Post)

Social Security and Medicare are social insurance programs designed to provide everyone with a social safety net when they get old by assuring them adequate medical care and a minimum income to keep them out of poverty. It shouldn’t be any surprise, then, that these programs ultimately represent a transfer between those who die early to those who die late, in much the same way fire insurance represents a transfer from those who don’t have fires to those who do have them. That would be true, by the way, whether the retirement age is left where it is now or allowed to rise.

Still, the most you could say about the distributional impact is that a slow increase in the retirement age would have a modestly regressive impact on two programs that are structured to be highly progressive in terms of the money paid in to them and the benefits that are paid out.

Moreover, given that most serious proposals for raising the retirement age also include other reforms such as raising the cap on income subject to the payroll tax, slowing the growth in Social Security benefits for well-to-do seniors and requiring them to contribute more to their Medicare insurance, these programs are likely to get more progressive rather than less as a result of entitlement reform.

The moral argument against a higher retirement age rests on the assumption that poor people die young because they are poor.  While it is true that life expectancy correlates with income, it is important to remember that correlation is not the same as causation.

One reason poorer people die younger is that they have less access to quality health care. We can all agree this is unfair and morally unacceptable. But after a huge debate, the nation recently adopted a highly-progressive health reform package whose underlying purpose is to insure that nobody will be denied necessary medical care because they can’t afford it, including the years just before retirement. Against that backdrop, a higher retirement age that takes effect over a period of decades seems a lot less unfair.

Another reason for the correlation between income and life expectancy is that lower-income people lead less healthy lives – they are more likely to smoke, drink and take drugs, their diets are less healthy, they get less exercise and they don’t take advantage of the health care that is available to them. This raises a different sort of moral question that conservatives are quick to raise and liberals prefer to ignore:

Why should the rest of the country be prevented from making a needed, common sense reform to its retirement program because some people refuse to take personal responsibility for their own health?  Where is the fairness in that?

Rising income inequality is a big problem, no doubt about it, but it seems to have encouraged some people to view every public policy issue primarily through a distributional or class prism. A carbon tax, a soda tax, higher energy and fuel-efficiency standards, tougher enforcement of criminal and immigration laws, tax breaks for alternative energy and college-savings and long-term investment, public investment in airports and high-speed rail, residential zoning restrictions, revenue-neutral corporate tax reform — all of these have, or would have, the unintended effect of disproportionately helping those with more money or hurting those with less. Does that mean we should reject them out of hand?

Just about every policy you can think of has a disproportionate impact on certain classes, races, genders, regions, industries or age cohorts, but that doesn’t mean we shouldn’t adopt them. Sometimes what is “fairest” is doing what’s best for the whole country.

For further reading:

There’s nothing ‘courageous’ about raising the Social Security retirement age

Why rich guys want to raise the retirement age

A better way to raise the age for retirement benefits

Steven Pearlstein is a business and economics columnist who writes about local, national and international topics.
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