Implications of Raising Social Security’s

Normal Retirement Age

Nicole WooCenter for Economic and Policy Research

August 5, 2010

•20th century saw gains of over 20 years in average life expectancy – at birth

•Mostly due to increased survival during childhood = exaggerated increases in retirement length

•Also gains during working years = longer working lives

•Life expectancy at age 65 for men increased less than 5 years; for women, less than 3 years

Longer life expectancies don’t translate directly into longer retirements

Expected Years of Life

•A 20-year-old man born in 1899 could expect to work 39 years

• If born in 1949, his work life increased to 42 years

•Those born in 1999 will average 45 years of work before retirement age (under current law)

Younger generations will work considerably longer than workers past

Expected Working Life, Age 20 to Retirement

Raising the Normal Retirement Age (NRA) Would More Greatly Impact Younger Workers

Raising the NRA to 70 in 2036 =

•4% reduction in benefits for workers aged 50-54 in 2007•10% reduction for workers aged 40-44 in 2007

Percentage Change in Benefits due to Raising the NRA to Age 70, by Age Cohort

Raising the NRA Would More Greatly Impact Lower-Income Workers

Raising the NRA to 70 in 2036 =

•3% reduction in retirement income for workers aged 50-54 in the bottom income quintile•Almost 8% reduction for lowest-income workers aged 40-44

Percentage Change in Annual Income due to Raising the NRA, 40-44 Age Cohort, by Income Quintile

45% of Older Workers Have Jobs with Physical Demands or

Difficult Working Conditions

•6.5 million workers over age 58 (over 1/3) have physically demanding jobs (PD)

•5 million older workers (over ¼) have jobs with difficult physical working conditions (DWC)

•Over 8.5 million older workers (about 45%) have jobs with PD or DWC (“difficult jobs”)

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Workers in Physically Demanding J obs or DifficultWorking Conditions

Workers in Physically Demanding J obs

Older Workers in Physically Demanding Jobs or Difficult Working Conditions in 2009

•Over ½ (54%) of older Latino workers have physically demanding jobs•Latino men have the largest share (62%) of older workers in physically demanding jobs•Over ½ of African American (53%) and Asian Pacific American (51%) older workers have difficult jobs

Minority Older Workers Are More Likely to Have Physically Demanding Jobs

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Share of Older Workers in Physically Demanding Jobs, by Race/Ethnicity

•Over ¾ (77%) of older workers with less than a high school diploma have difficult jobs•Less than ¼ (22%) of older workers with advanced degrees have difficult jobs

Less-Educated Older Workers Are More Likely to Have Physically Demanding Jobs

Share of Older Workers in Physically Demanding Jobs, by Education

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•Over ½ (56%) of older workers in the bottom wage quintile have physically demanding jobs•Less than 1/5 (17%) in the top quintile have physically demanding jobs

Lower-Income Older Workers Are More Likely to Have Physically Demanding Jobs

Share of Older Workers in Physically Demanding Jobs, by Wage Quintile

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Raising the NRA Would Have Relatively Minor Impacts on the National Debt

Comparison of Reduction in Publicly Held Debt in 2020 by Various Policies

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Resources at www.cepr.net

•Patterns in Physically Demanding Labor Among Older Workers, August 2010, Hye Jin Rho

•The Impact of Social Security Cuts on Retiree Income, July 2010, Dean Baker and David Rosnick

•Social Security and the Age of Retirement, June 2010, David Rosnick

•2020 Debt Simulator: http://www.cepr.net/calculators/calc_deficit.html

Nicole Woo • CEPRwoo@cepr.net • 202-293-5380 x108