Writing as a professional economist, my response to the recent article entitled ‘A Reluctance to Retire Means Fewer Openings’, by Catherine Marshall and Matthew Saltmarsh, (published September 2nd 20091), is to welcome it, as a sound contribution to debate, not just in relation to the modern understanding and study of Economics overall, but for its tackling the important, if not crucial, number of issues surrounding retirement that will potentially effect everybody’s future in the world today.
The primary aim of this written response then, tackles these points. Principally those economic problems that the article highlights as arising from the effects of delayed retirement common to the experience of the United States – problems, which the article’s twin author’s correctly point out – somewhat unique to the United States economy, in contrast to other Western economies.
Taking this as its fundamental point of agreement, this response first, provides an economic analysis of these problems specific to the United States, with an eye to further discussing issues concerning future policy implications and consequences, who gains and who loses from these, and finally the impact this will have on market efficiency.
As mentioned, the Marshall and Saltmarsh article, highlights how the United States stands differently to many other countries in the world, in that, its policy regarding retirement, is very much one which relies on retiring individuals making and managing their own financial provisions for their retirement years.
This contrast then, with many other advanced Western democracies, where there remains in place what the article’s authors describe as adequate financial resources, allowing for traditional practices of providing in-built corporate retirement packages to continue unabated.
This, in the case of the latter, has meant retirement remains an attractive option. Whereas in the United States, many singles as well as couples, have lost a great deal in recent years, due to personal savings taking a pounding in the financial markets.
Conscientious savers eager (like many others), to take advantage of their retirement years to live out their ‘cherished dreams’, have contrastingly, been forced not merely to shelve these plans, but to carry on working into their retirement, and even then, as the article highlights, fail to regain all but a little of what they have lost.
This has effect also is not confined to a small or limited number of retirees, it encompasses right across the broad financial spectrum.
Naturally, policy implications, about how to best deal with repercussions figure high up on the United States agenda, especially, as even in Europe, where the degree of severity regarding this issue is not deemed as yet at crisis point.
Indeed, as an example, the article cites the case of the United Kingdom, where policy measures already are underway to increase the normal age (65) of retirement to 68 by 2004.
However, as the article rightly suggests, following the European approach, is not really an option. Future policy planning in the United States, has to take note of the still strong feeling among its current and upcoming retirees, regarding making individual provision for their retirement years.
This quite significant cultural difference, despite the balance of returns markedly in favor of European’s retiring, simply cannot be ignored. Indeed, measures put forward by the recently elected Obama administration, remain limited to for example, opt-out clauses in deference to this.
With a system overhaul not in the pipeline then, especially given the current recessionary climate, it is difficult to identify a clear set of winners emerging in the near future.
Clearly, there is already a long list of losers among today’s retiring population, and further to this, as also rightly pointed out in the article discussed here, is that with fewer people retiring, the number of openings and opportunities available for those just starting out on their careers diminishes too.
While the former, is deeply unfortunate, the implications of the latter suggest that if these problems are not addressed with a greater emphasis placed on changing what today passes for the status quo, the danger is, future generations of workers will blanch from seeing these existing methods as routes to helping provide future financial security for themselves.
Catherine Rampell and Matthew Saltmarsh, ‘A Reluctance to Retire Means Fewer Openings’, 2nd September, 2009.
1 Catherine Rampell and Matthew Saltmarsh, ‘A Reluctance to Retire Means Fewer Openings’, September 2nd, 2009.