WORKING TO FIX OUR FISCAL WOES
May 19, 2006
Projections about how much Americans will work are now at the heart of worries about emerging crises in United States public finances -- whether government deficits or imbalances in Social Security's bankbook, says Eugene Steuerle, a senior fellow at the Urban Institute and co-director of the Urban-Brookings Tax Policy Center.
What makes our work habit suddenly so important?
- A postwar boom in the United States labor force is just now ending; if Americans keep retiring at the same ages they do today, the share of adults who are working will fall markedly, and the effect on the economy will be roughly equivalent to increasing the unemployment rate by 3/10 of 1 percent every year for the next 20 years starting in 2008.
- If workers keep working a little longer, their lifetime income obviously would increase; research by Barbara Butrica, Karen Smith, and Eugene Steuerle on the effects of working longer show that annual household retirement income, including Social Security, would typically increase by about 6 to 10 percent for each additional year of work.
- Working longer helps the nation, too. Additional time on the job increases national income, while boosting the revenues needed to float government programs, including those serving the elderly.
Obviously just working longer won't solve the nation's fiscal mess or the tangle of old age issues. But extra years of work would allow most Americans to live better in retirement and the government to provide higher levels of both Social Security and non-elderly program benefits at any given tax rate, says Steuerle.
Source: C. Eugene Steuerle, "Working To Fix Our Fiscal Woes," Washington Post, April 14, 2006.
For text (subscription required):
Browse more articles on Economic Issues