Opinion Editorial | |
| Monday, August 10, 1998 | |
Should we Punish Productive Seniors?Pete du PontFormer Governor of Delaware, is Policy Chairman of the National Center for Policy Analysis |
An elderly gentleman from Wisconsin called the other day voicing a complaint.
While he's doing all right in retirement, his mother recently entered a
nursing home. Since nursing homes can cost about $40,000 a year for those
who pay out of pocket, he decided to go to work to help pay for some of
the costs. That's when he learned that the government would only let him make $14,500
this year before it stepped in and hit him with a penalty known as the Social
Security earnings limit. He was justifiably outraged. Here he was simply trying to help his mother
pay for her own nursing home care rather than turn to the government for
help, yet that same government was going to penalize him for being a good
son and responsible citizen. Why was such a policy ever adopted, he wanted to know? Good question.
Better yet, why do we still have it? When Congress created the Social Security system in 1935, the country
was in the midst of the Great Depression. In an effort to address the huge
unemployment problem, Congress included in the legislation an earnings limit
meant to encourage seniors who were beginning to draw Social Security to
leave the workforce so that more jobs would be available for younger, unemployed
workers. If seniors made more than the federally allowed amount, their
Social Security benefits would be taken away. That earnings limit is still in effect today. Currently, Social Security
recipients age 65 through 69 lose $1 in Social Security benefits for every
$3 they earn in excess of $14,500, and those age 62 through 64 lose $1 for
every $2 they earn in excess of $9,120. This work disincentive has had a predictable impact: the vast majority
of seniors decline to work. Of those who do work, a majority only work
part time. In 1930, 54 percent of males continued working after reaching age 65,
while only seven percent of senior women continued working, according to
the Bureau of Labor Statistics (BLS). By 1997, only 18 percent of senior
males continued to work, though nine percent of senior women remained in
the workforce. Of course, part of the reason for the decline in the male participation
rate is that seniors today have more assets, more generous retirement benefits
and better health insurance through Medicare than they did when Social Security
was created, and so do not have to work to make ends meet. But another demographic change is occurring: people are living longer
and healthier lives, and many of them want to be productive in their retirement
years, even though they may seek less demanding or part-time jobs. At a time when the country has a labor shortage and Congress is considering
expanding immigration limits so that more foreign workers can come to the
country to fill empty jobs, doesn't it make sense to open up opportunities
for the most experienced segment of the U.S. workforce? Especially since
many of these seniors would be willing to take the rapidly growing but lower-paying,
service sector jobs just to have something to do. Fortunately, Rep. Sam Johnson (R-Texas) has introduced legislation to
do something about this foolishness. And Speaker of the House Newt Gingrich
(R-Ga.) has made removing the earnings limit one of his key tax cut ideas.
Rep. Johnson's bill (H.R. 3912) would eliminate the earnings limit so
that seniors would not be penalized for working. As a result, more seniors
would voluntarily remain in the workforce. That means more people paying
taxes. It also means fewer Social Security errors. For example, the earnings
limit's complexity is responsible for more than half of the program's overpayments.
Eliminating the penalty would reduce administrative problems and costs. But the key benefit is giving our seniors the opportunity to work and
be productive, both now and in the future. A recent survey by the American
Association of Retired Persons (AARP) found that 80 percent of baby boomers
expect to work after age 65. The country needs their experience and their
input. Penalizing seniors for working is the surest way to ensure we get
neither. Even if it was a reasonable argument in 1935 to encourage seniors to
leave the workforce, it makes no sense today when unemployment is reaching
record lows in some areas of the country. Employers need workers and many
seniors would like to work more. Removing the earnings limit penalty would
help solve both problems. # # # # # The National Center for Policy Analysis is a public policy
research institute founded in 1983 and internationally known for its studies
on public policy issues. The NCPA is headquartered in Dallas, Texas, with
an office in Washington, D.C. For more information: Jil Hicks, Dallas, TX 972/386-6272 Home | Support Us | All Issues | Social Security Debate Central | Contact Us |