Introduction:
Legislators have recently expressed support for raising the normal retirement age (NRA) to as high as 70. Under current law, the normal retirement age — the age at which full retirement benefits are payable — is already scheduled to increase from 66 to 67 in two-month increments from 2017 to 2022. The current law was enacted in 1983 as a part of the Greenspan Commission’s efforts to improve Social Security’s solvency. A proposal for a further retirement age increase is one possible recommendation from President Obama’s Fiscal Commission, which is expected to issue a report in December.
Proponents of the retirement age increase often suggest that Americans now have higher life expectancies and are in better health than those of previous generations. The growth in average life expectancy, however, is mostly due to declines in child and teen mortality, and hence leads the workers to have longer working lives.1 Furthermore, the longevity growth is disproportionately distributed across different socioeconomic groups.2
Raising the retirement age has important implications on more vulnerable populations, such as low-wage earners, less educated workers, and those in poor health or in physically strenuous jobs. Studies have found that such groups of workers are more likely to claim benefits at the early entitlement age (EEA) of 62.3 Other studies have found that lower-income retirees would be hit the hardest by the benefit reductions from raising the normal retirement age.4 Many workers would have to work longer to offset the impact of these benefit cuts — this would be particularly difficult for workers in physically strenuous jobs. For older workers, finding a new, less physically demanding job before retirement is becoming increasingly difficult, as they are more likely to face age discrimination and shortcomings in job training than in the past.5
This paper focuses on retirement and near-retirement age workers in physically demanding jobs or in jobs with difficult working conditions based on the evidence that employment in these jobs is strongly associated with early labor-market exit.6 Despite changing employment patterns in the twenty-first century,7 the findings of this paper show that in 2009, a significant share (45.3 percent) of older workers was still in physically demanding jobs or in jobs that had difficult working conditions. Overall, physically demanding jobs and jobs that had difficult working conditions were more likely to be held by men, Latinos, the least educated (less than a high school diploma), immigrants, and the lowest wage earners.
2 For further discussion on life expectancy, see Congressional Budget Office (April 2008), Morrissey and Garr (2009), and Rosnick (2010).
3 See Li, Hurd, and Loughran (2008) and Kingson and Brown (2009) for detailed analyses on the correlation between early retirement age and socioeconomic factors, such as education, health status, type of jobs held, income, and economic well-being.
4 Mermin and Steuerle (2006) find that while raising the retirement age may reduce benefits for high-income group at a larger rate than low-income group, it would push nearly 1.5 million people into poverty by 2050. For details on the impact of raising the retirement age for different income groups, see Baker and Rosnick (2010).
5 According to the Equal Employment Opportunity Commission, there has been a sharp increase (17 percent) in the
age discrimination cases filed since the beginning of the recession. See www.eeoc.gov/eeoc/statistics/enforcement/adea.cfm; See also Frazis, Gittleman, Joyce (2000).
6 Holden (1988) suggests that workers in physically demanding jobs are more likely to either discontinue working past benefit-receipt or change jobs a few years prior to retirement. Filer and Petri (1988) find that workers are more likely to retire early if they are employed in difficult jobs that require intense physical demand or stress. See also Li, Hurd, and Loughran (2008).
7 Johnson, Mermin, and Resseger (2007) analyze and compare historical changes in work trends. They note that despite the long-term decline in the share of workers in physically demanding jobs, there has been a growth in stressful and cognitively challenging jobs.
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Hye Jin Rho is a Research Assistant at the Center for Economic and Policy Research in Washington, DC. This article was first published by CEPR in August 2010 under a Creative Commons license. See, also, James K. Galbraith, “There Is No Economic Justification for Deficit Reduction.”
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