Thursday, October 26, 2017

Why You Don’t Want to Raise the Retirement Age for Social Security

Every year or so a new proposal comes out to address Social Security funding issues by raising the eligibility age for the program to acknowledge the increases in life expectancy that have occurred since the program was initiated.  One of the more recent came from James M. Stone in his book Five Easy Theses.  He provided this comment on the subject.

“….a more complete repair is available if Congress would add to the enabling legislation a provision that it might have included from the start if the rapid increases in life expectancy had been foreseen.  It is hard to believe that an ever-lengthening period of benefit collection was either desired or expected by Social Security’s drafters, and it is harder still to justify that feature now.  Scientists tell me that we should see life expectancy continue to rise over time, then eventually flatten out as expected life spans approach one hundred.”

This is the conventional wisdom with regard to longevity.  Although there are some who think that life may one day be extended indefinitely, little is said about the possibility that life expectancy could peak and then turn downward.  Nevertheless, some evidence is accumulating that seems to indicate that something like that might be beginning to happen.  In addition, it is dangerous for people to perform analyses on diverse populations using average numbers.  Longevity turns out to depend on a number of factors such as wealth, culture (lifestyle), gender, and geography.

This source provides the following longevity data for the US population.

The first thing to realize is that the biggest leverage on average numbers arises from the mortality rates of children.  Much of the dramatic rise in longevity over past decades came from advances that lowered child mortality rather than advances that allowed adults to live longer.  What is of interest for programs such as Social Security is the longevity of people when they reach age 65.  This longevity is usually expressed as a life expectancy number rather than as years left to live.  Given that preamble, average life expectancy at birth for the US population increased by 10.3 years between 1950 and 2009.  However, the number was only 5.3 years for those aged 65. 

One might still consider 5.3 years a large increase that must be dealt with.  Now consider life expectancy as a function of income.  Katelin P. Isaacs and Sharmila Choudhury have produced The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age which included the following chart. 

This looks at two populations, one born in 1920 and the other in 1940.  They would respectively be aged 97 and 77 today.  Data are presented for both males and females.  The fact that there is a life expectancy variation based on income is obvious.  This has been known for some time, but what might be less obvious is that the difference between the wealthy and the poor is increasing dramatically over time.  For the 1920 cohort the difference between the lowest and highest incomes was 5.0 years.  For the 1960 cohort, after a mere 20 years, the difference has increased to 12.0 years.  The comparable numbers for females are 3.7 years and 10.1 years.  Something rather significant has occurred to produce those results in a 20-year time period.

Also consider that the Social Security program was designed to be most protective of the lower income people.  They receive more in retirement income than deserved on a purely actuarial basis while the higher income people receive less.  Consequently, the lowest income people are the most affected by any attempt to increase the retirement age.  In fact the longevity of the poorest people has hardly changed at all over that 20 year period.  For lowest income males the increase was a mere 1.7 years, and for females there was no increase at all. 

Can one still justify the claim that increasing average life expectancies are driving a need to increase the retirement eligibility age?  And if your conclusion is yes, what value would you use.  Remember that you are still using averages by income, what about variations by region?  Yes there is a huge variation in longevity depending on the location within the US.  This source provides longevity, in terms of years to death, by county at age 50 for both men and women.

Note that longevity can vary by as much as 10 years depending on where one lives.  There are locations where the life expectancy at birth is barely equal to the current Social Security retirement age.  Is it fair to those citizens to increase that age?

There are perhaps more troubling developments that must also be considered.  Can we really expect the population to continue to have increasing longevity?  Data are beginning to accumulate that cast doubt on that cherished expectation.  In 2012, Sabrina Tavernise published a New York Times article titled Life Spans Shrink for Least-Educated Whites in the U.S.  By “least educated” was meant those without a high school diploma.  This decrease in longevity only occurred in whites.  It was absent for Hispanics and blacks.  Therein resides a clue.

In 2015, Anne Case and Angus Deaton produced Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century.  They demonstrate that the  mortality rate has been rising for non-Hispanic whites in the US, an effect that is not seen for Hispanics.  Nor is such an effect seen in any of the other advanced countries.  The authors also conclude that education is a critical factor in the level of mortality.  All the rise in mortality comes from the cohort with a high school degree or less.  Those with some college education but no degree have slightly decreased mortality.  For those with a college degree or post-graduate education the mortality rate has continued to drop.  Note that the data presented by Tavernise was based on those without a high school diploma, a much smaller group.

Much of the increase in mortality comes from bad lifestyle choices.  Increases in drug use (poisoning) and alcohol abuse are indicated as major contributors, along with a greater number of suicides.

There is clearly something terrible occurring in some classes of our society that is unique to our nation.  It would behoove us to figure out what it is and fix it.

There is yet another aspect of aging to consider in addressing the appropriate retirement age.  The fact that we are, on average, living longer is usually associated with the assumption that we are living longer because we are healthier.  That is not necessarily true.  Consider the results obtained by Eileen M. Crimmins and Hiram Beltran-Sanchez: Mortality and Morbidity Trends: Is There Compression of Morbidity?  They are asking whether or not people are living longer in a healthy condition. Their paper appeared in 2011.  Two of the tables summarizing their data are reproduced below.  There is much of interest here.


This chart looks at various measures of functional mobility at all ages from surveys taken in 1998 and 2006.  In all age groups the 2006 cohort reports decreased mobility relative to the earlier group.  It seems we are becoming feeble at an earlier age.


This chart tallies the outcomes expected given the health status reported by the 1998 and the 2006 groups.  Included for consideration are the functional mobility findings and the occurrence of cardiovascular disease, cancer, or diabetes as a life threatening factor.  The general conclusion is that by 2006 the number of years one could expect to live without one of those diseases was declining, and the number of years one could expect to live with a major disease was increasing.

Another way of expressing these results is that as we approach retirement age we are more likely to be feeble and unhealthy than were the people in the same situation eight years earlier.  In what universe does that suggest we should by increasing the retirement age?

Our society seems to have some serious problems.  Perhaps it is time to start worrying about them.  Things are getting worse not better.  We need to ask why.  

At least a few people are beginning to take notice.  A few days ago an article appeared on the Bloomberg website: Americans Are Retiring Later, Dying Sooner, and Sicker In-Between.  This was motivated by a slight tick upward in the overall mortality rate.

The interested reader might find the following articles to be of informative:

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