The RAND Corporation's Dr. Nicole Maestas discusses retirement and the American economy.
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GUEST: Nicole Maestas
AIR DATE: 09/08/2012
I’m Richard Heffner, your host on The Open Mind. And this is another of an occasional series of broadcast conversations … prepared in cooperation with the Alfred P. Sloan Foundation … on the subject of Americans working longer and our nation perhaps doing better as a result.
Joining me again today in pursuing this theme of such profound social and personal significance to so many of us is the RAND Corporation’s Dr. Nicole Maestas, whose work focuses on the economics of retirement, health and disability … specifically on how longer work lives could ameliorate the economic effects of population aging.
Now, two years ago, in addressing the Committee on Finance of the United States Senate on “Encouraging Work at Older Ages”, my guest said, “The economic challenges posed by an aging society are significant. As the Baby Boomers age and retire, the ratio of non-workers to workers in the population is rising, causing society’s consumption needs to outpace growth in our productive capacity, and ultimately straining Social Security and Medicare and slowing economic growth.”
We started our conversation from that point last time. Let’s do it again today and I would ask you, Dr. Maestas, whether other nations, developing nations are facing the same kind of problems and the same kind of opportunities that we discussed last time.
MAESTAS: The same kinds of problems are seen in other developed countries, so Europe, for example … faces … in, in fact, in many ways if you contrast the position of the US with the position of many of the European countries, the US actually looks pretty good.
Why? Well, already we have much higher rates of employment among older workers in the US than are currently seen in many European countries. And looking at the populations changes that are coming down the pike, it’s actually worse in Europe than it is in the US.
In other words one statistic is the, you know, the fraction of population … older, older than age 65 that … the growth in that population between say now and ten, twenty, thirty years from now.
More growth in the population … in the older population in European countries than we will see here in the US.
So, in other words the problem is, is more severe in many European countries and yet they’re even worst positioned to be able to deal with it. Only because nobody works past retirement in many European countries.
HEFFNER: That’s interesting so you’re talking about a psychological divide there.
MAESTAS: Yeah. There … I think there is a psychological divide, but it’s also very interesting … before we were, we were talking about the institution’s public policies are the polices in institutions set up to match these demographic changes and these changes in the way people want to retire. And the answer for the US was, of course, “Well, yes and no”. And we’ve actually … you know, we’ve made some progress and I expect we’ll make more progress on this front.
Well, you look at Europe and the answer really is “No”. Now, it’s not like no one is seeing this as a problem, but the institutional, the institutional setting in many countries really is … it’s very strongly toward work until retirement and then leave the labor force.
There is not a lot part-time work. There’s not a lot of un-retirement. People are beginning to get interested in and I’m starting to get calls from … I had a call recently from the European Commission they want to talk about un-retirement.
But changes have to be made in many of the institutional, the social programs that people use to transition out of the labor force.
For example, in many countries it’s very easy to retire via the disability insurance program. Or via an unemployment insurance program. Not just the traditional retirement program.
And we think of many of these programs in this countries as really kind of … we call them “alternative routes to retirement”, not … you know … in other words they’re being used as, as a way to exit the labor force permanently. More so than they’re being used for their stated purpose.
And this is playing out … you know, this is, this is the European situation. It’s quite, quite contrasting compared to the US situation.
HEFFNER: How do you, how do you explain this? National attitudes.
MAESTAS: Yeah. I, I, you know, I don’t know. National attitudes, sure, sure. You know, you know social policies around, around leave from employment are more generous. Maternity leave … year long maternity leave benefits in some countries comes to mind.
But, you know, population aging is really a game-changer. And, you know, it impacts the fiscal position of countries in very profound ways.
I mean it cuts to the heart of economic growth. You know, the quote that you opened the program with really, you know, illustrates the problem. It’s when, when the consumption needs of a society are growing much, much faster than the society’s ability to produce the goods and services to feed the society … right … you … economic growth slows, necessarily.
HEFFNER: You say this society’s ability … I think what you had been saying, though …
HEFFNER: … society’s … population’s willingness … we’re willing to work, from what you said, you talk about un-retirement …
MAESTAS: Yeah. Yeah.
HEFFNER: … you say it doesn’t happen that often elsewhere …
HEFFNER: … again, what do you think it means?
MAESTAS: Well, I mean un-retirement is … here’s what I think is … here’s, here’s the thing … I think, you know, there has been un-retirement. It has been around for a long time, there have always been people who have retired and returned to work.
But we’re now seeing more and more and more of it. And, you know, at the same time, people are living longer and they’re living healthier. The desire on the part of older workers, I believe is there. Many older workers …
HEFFNER: And you …
MAESTAS: … would like to keep working.
HEFFNER: … and you’ve already said this isn’t a matter, essentially, of financial pressure.
MAESTAS: It’s … a … you know … now the great recession has, has, has, you know, come upon us and has increased financial pressure on, you know, many households, so I don’t mean to minimize the, the impact of the great recession, but, but these are forces that were at play long before the great recession. And, you know, people, people like being productive, they like engaging in activities that they see value in. They like being valued. Work … the workplace is a place of, you know, social connections … people derive their sense of identity often from their work.
You know, I believe that there is … and, and we see this in nationally representative data … you see this particularly in the US. You see that people intend to work after retirement. They tend to delay their retirement. They tend to … they want to partially retire.
So, I see … on the one hand these very stark demographic pressures that raise the specter of declining economic or slowing economic growth … in the long run … yet the solution is right there as well … with a population of older workers that actually would like to keep working.
HEFFNER: You’re, you’re, you’re saying you don’t have to coerce us …
HEFFNER: … into doing the right thing.
MAESTAS: That’s right. Yeah. That’s exactly right.
HEFFNER: A plus.
MAESTAS: It’s a plus. Yeah, and so certainly, you know, my sense is that in the European setting, some of those same forces are at play, and in fact, if … you know, we spoke earlier about the great turnaround in the long-running decline in employment at older ages.
Well, that same remarkable turnaround in the mid-nineties also played out in European countries as well. So the same forces that are increasing the desire and willingness of older individuals to work past traditional retirement ages are present there as well.
HEFFNER: But you’re saying not as profoundly. You … I, I thought you were saying …
MAESTAS: Well, in that case I would argue that the institutional constraints are much more rigid.
HEFFNER: Ah, I …
HEFFNER: I see what you’re saying.
MAESTAS: … so you can see it playing out in, in the data, but, but the institutions are really, you know, much more … we’ve made a lot more progress in this country around adjusting the institutions to accommodate these trends.
So one, one example of that would be, you know, the increases in the full retirement age that have been steadily phasing in. Well, those were announced back in the 1980s.
Many European countries are now … only now … or in recent years adjusting their full retirement ages. So some of these institutional changes are being … the need for them is being recognized, but they are … they’re being implemented with a pretty significant lag over when we’ve started some of this here.
HEFFNER: The AARP, is it aware of your, of our findings because in a sense it seems so much to be protesting the notion of extending the retirement age … as a representative of America’s workers … older workers, presumably.
MAESTAS: Well, you know … I, I don’t know about that. You know I will say that when I want some inspiration around what employers are devising in the way of creative strategies to keep older workers engaged and employed … hmmm, you know I turn, I turn to AARP’s website, for, you know, the, the annual awards they give in recognition of employers attempts to, to do this kind of thing.
HEFFNER: Is it then … we will push for employers devising plans and strategies to help us get back … help us un-retire? But at the same time fight to the last man or woman, aged or otherwise, against extending the Social Security age?
MAESTAS: Right. (Sigh)
HEFFNER: It’s a contradiction, isn’t it?
MAESTAS: Well, yeah, I mean it’s, it’s … you know I’m not really … I’m not really, you know, in a position to comment on, on their position.
But we … I’m fairly confident that … well for one, the full retirement age is increasing already. It hasn’t’ even fully phased in yet. So full retirement age today is 66 … but, it will eventually be at 67.
HEFFNER: But we’re talking about …
MAESTAS: I would be willing ….
MAESTAS: … to bet that we will see further increases in both the full retirement age and also in the early retirement age, which is still at 62, as you know.
HEFFNER: With penalties.
MAESTAS: Well, you, you take a penalty for claiming early with …
MAESTAS: … respect to the full benefit that you would get. That’s right.
HEFFNER: Right. Have your researches ever touched upon or has RAND’s researches ever touched upon a most desirable age for full retirement? Desirable in terms of the economy?
MAESTAS: Oh, I see. Well, that’s interesting, it’s interesting … it’s an interesting question, an interesting thought. You know, I guess you’d have to … we’d have to think some about … you know, on what dimension would we consider it desirable?
And I would argue that what often is most desirable certainly from an economic efficiency point of view is to have as few constraints as possible on the … on the ability of somebody to retire when it’s personally optimal for them. So in other words, the more choice there is …
MAESTAS: … and the fewer institutional public policy employer constraints around when people choose to exit the labor force and how they choose to come back into the labor force … if they wish to … ahmm, you know, the fewer constraints there are upon that behavior, the better off we all are.
And I really do think the story is a story of a great diversity of paths. People transit … they traverse, you know, the labor force … their career building years in very different ways and they leave the labor force in very, very different ways as well.
And, you know, any notion of kind of a one size fits all retirement transition, which kind of was much more the way it was in the past … you know, we’re, we’re basically seeing that, that breaking down in favor of much more, many more, you know, varied, varied transitions out of the labor force.
HEFFNER: You know, that makes me think, I suppose as an old fuddy-duddy college professor, but it, it, it makes me think of the connection with educational philosophies and the conflict among them.
For instance, increasingly we seem to be moving away from the older liberal arts education which basically on the college level saying … “we’ll prepare you for anything …”
HEFFNER: … in the future. And we’re talking now about living a lot longer …
HEFFNER: … and …
HEFFNER: … this wonderful phrase of “un-retirement” moving on to other things, which that seems to be to a great extent …
HEFFNER: … and I would think it would impact upon our thinking about educational philosophy.
MAESTAS: Yeah. I, I think … it, it … you’re right, it has to. It has to impact that. You do, you do see evidence of, of … I mean it’s hard to say … it’s all new. This is, I mean to a certain degree … right … there … some of this has been going on, you know, for a very long time.
But more and more there is an emphasis on creating, you know, opportunities for education re-training, re-tooling outside of the traditional liberal arts education.
And, in fact, you know, as we … as our economy becomes more dynamic people, people don’t stay in the same job forever now. They change jobs, they change industries, you know, I, I … the education system has to, and I, I, I know of particular instances when, when it … where it is actually delivering opportunities for continuing education for re-training, re-tooling, and the like.
But it does become more and more important that those opportunities be available.
Because part of what you can do when you un-retire is you now have some retirement income, you don’t have to work, you can actually go back to school.
You can obtain training in that thing that you always wanted to do. Or some new thing that you think sounds exciting, right.
HEFFNER: Now, let me ask you a question. Are you talking about a specific and it’s a question that’s sort of bothered me in this program and the one we did previously … are you talking about a certain cadre …
HEFFNER: … of Americans? Are you talking about a certain level of being well off?
MAESTAS: MmmHmmm. MmmHmmm.
HEFFNER: Having Social Security and perhaps private money, pension.
HEFFNER: Or are we talking about a further dichotomizing society?
MAESTAS: Yeah. I … well … I mean it’s hard to say where we will, where we will wind up … but what we have seen so far is that … yes … un-retirement rates are higher among the more educated.
That was, in some ways, a surprise to me. Because when I set out to look at this … I thought … just as, you know, everybody else who read the newspapers thought … that un-retirement was a symptom of economic distress.
MAESTAS: But, by and large that’s not the case …
HEFFNER: Is it higher education and higher bucks … wealthier …
HEFFNER: … persons?
HEFFNER: … those two things usually go together …
MAESTAS: … and health usually goes with that, as well.
HEFFNER: Good health?
MAESTAS: Good health. Right. Yeah, it was a very strong correlation between higher education, higher income and better health.
You know, I mean, health really is the kind of … the big question here. Will our health keep up with us? Right? We’re living longer on average … we’re living healthier … we should be able to work longer. But not everybody will.
HEFFNER: So, we’re back to those who have … will gain more because they do take care of their health better.
HEFFNER: … They are better educated, they do have more dollars in the banks …
MAESTAS: Yeah, yeah.
HEFFNER: … ah, doesn’t that scare you sometimes … at what you see in the long, long future?
MAESTAS: Well, it’s not … it’s not as if … I guess I’d make one distinction here. So, it’s not as if somebody who is less educated and has lower income and less retirement wealth would be somehow precluded from un-retiring, per se.
HEFFNER: He won’t have as much opportunity,
MAESTAS: Well, we are not talking about … I mean we are really not talking (NOISE) about the high level jobs.
MAESTAS: Right? We’re talking often about service industry jobs, retail, trade. You know, support types of positions, so you know, maybe … there’s certainly some possibility that they, you know, they might not be as competitive in the labor market for those positions as somebody who, you know, brings more … a higher level of skill from their past career.
But, you know, but … that is there. That is certainly there. That, that … that … it’s not like … I think it would be … we’d be overstating the case to say that, that the un-retirement route is closed off for them.
Now … but the real concern really is, is health. You know, will their health support a longer, a longer work life? I mean health concerns all of us. It’s not … again, you know … we don’t want to draw to … I don’t want to draw a too, too … you know, polarized a picture here …
MAESTAS: … because, you know, plenty of higher, you know, of, of well educated people suffer severe health problems. It seems to be just the nature, nature of aging. But, but … yeah …
HEFFNER: I’ve heard about that.
MAESTAS: Yeah. Recently, too.
HEFFNER: The … you talk about service field …
HEFFNER: … is that the one that grows the most? In terms of the un-retirement.
MAESTAS: Yeah. So, it’s, it’s very … quite interesting … you see a very distinct movement of people out of say … the manufacturing industry … or out of professional special … professional managerial occupations …
HEFFNER: Too much stress?
MAESTAS: Into … yeah, yeah, yeah … into service industries and professional … more professional support … administrative positions. Yeah. So I do think, I mean the service industry is, you know, one place where we do tend to find a lot of these sorts of jobs.
HEFFNER: When Jessie …
MAESTAS: It won’t be the only place though.
HEFFNER: When Jessie Gruman was here … she … I think you possibly saw us taping the program … she was talking about nurses, as you have talked about nurses and she was talking about all of us needing someone to lead us through and sit with us when we’re in the hospital.
Are you finding that in the health area and in the teaching area, in the do-good fields …
HEFFNER: … that un-retiring people are moving in those directions?
MAESTAS: Well, you know, I can’t speak specifically to that exact case from, from the data.
MAESTAS: However, you know, it is the, you know, an obvious great position or class of positions for people who want to re-enter the labor force. It’s an area where there’s tremendous need; there’s a shortage of … you know, we talked about the shortage … the nursing shortages … so there’s a shortage of labor.
But, you know, this … you know, there’s an increasing, increasing awareness, I guess, of the … and, you know, Jessie spoke to this, of how complex our medical care system is.
You know many people do need help navigating the system. And, I mean this is a great, a great example of, of, you know, of an opportunity that could … that older workers could kind of fulfill.
HEFFNER: Ironically, if I understand the situation correctly, that was one of the reasons that … there are many of us who thought that there would not be movement back into the workforce because we were going to have to stay home and take care our elderly parents and our younger children.
MAESTAS: Yeah, right, yeah. That’s … I mean … that is … that’s a big concern. So, you know, we, we … yeah, we can … we’ve … you know we’ve talked about how the desire seems to be there, employers seem to be coming along and creating opportunities. All of it is lining up, just as one would hope.
Yet, you know … health … will our health hold up? That’s an open question. And care giving responsibilities are another open question.
HEFFNER: Not being paid for giving the care, but caring for our families.
MAESTAS: Caring for our families. That’s right. That’s right.
HEFFNER: That’s such an interesting conflict there.
MAESTAS: Yeah, yeah.
HEFFNER: We need the bucks to go into our economy …
HEFFNER: … by paying for these services.
HEFFNER: And yet people aren’t availing themselves of, of those opportunities because they have to take care of their own.
MAESTAS: Because that’s right. Right. That’s exactly right.
HEFFNER: And yet you seem wonderfully optimistic about the long-range tendencies.
MAESTAS: Yeah. Yeah. I am optimistic. I am and … yes. And you know, I mean … it’s, it’s … the way I see it is, is the forces that are at play here are really strong. Like these are not just little wavering trends that might, you know, turn around and take us back the other direction.
And sure there are challenges along the way and you know, the way in which we, you know, adapt to those challenges, you know, if we adapt well, you know, we’ll see even more employment at older ages.
If we don’t adapt so well, then it won’t be quite as rosy as we’re hoping. But, you know, my view is that this is where we’re, where we’re headed …
HEFFNER: That’s …
MAESTAS: … it’s just a matter of degree.
HEFFNER: I’ll take that view. It’s a very positive one and Nicole Maestas, thank you again for joining me on The Open Mind.
MAESTAS: Thank you. And thanks, too, to you in the audience. I hope you join us again next time. Meanwhile, as an old friend used to say, “Good night and good luck.”
And do visit the Open Mind Website at thirteen.org/openmind to reprise this program online right now or to draw upon our Archive of 1,500 or so other Open Mind and related programs. That’s thirteen.org/openmind.