The Federal Government Should Offer Early Retirement to Baby Boomers
by Spencer Holly, AngryCalifornian
Our current high unemployment rates are not due to lack of jobs, but, rather, to the fact that our employed workforce is too large, thanks, in part, to the Baby Boomer generation that is not ready to retire.
There are two basic ways to reduce unemployment. One, the conventional solution, is to increase the number of jobs available by somehow creating more jobs, and two, to somehow reduce the total number of currently employed workers in viable jobs; jobs that will need replacement workers. Either one, or a combination, will reduce the unemployment rate.
Creating jobs is good, but it takes too long; it takes many years, and there is no guarantee that there will ever be enough jobs.
Reducing the number of currently employed workers is never considered because, on its surface, it doesnt make sense because reducing the number of employed workers should mean that there is an increase in unemployed workers and the unemployment rate. But that is only true if the no longer employed worker needs to collect unemployment benefits, and seeks new employment.
If the not-employed workers did not collect benefits, and did not need to seek new employment, the effect would be to create new job openings. It is a mathematical fact that when employed workers drop out of the workforce, the unemployment rate must decrease
So, we need to reduce the employed workforce in order to reduce unemployment.
Obviously, we cannot reduce the workforce by decree, or by force. We want individuals to voluntarily leave their jobs, and drop out of the workforce. A simple, and effective way to induce workers to voluntarily vacate their jobs, and not collect unemployment payments, and not need to seek new employment, would be to offer early retirement to certain, older, individuals who are already near retirement, but are still holding on to their jobs until they reach age 65.
Under current Social Security rules, an individual may now retire at age 62, however, their benefits, and the monthly amount they receive is much less than if they wait until they reach the age of 65. We could induce older workers to retire early by offering them full Social Security benefits at age 62, instead of age 65, and effectively reduce the unemployment rate.
We would probably create more than one position per retiring individual, because older/experienced workers often possess knowledge and skills that make them efficient workers who are able to do the work of more than one inexperienced individual. It could easily take two or more new employees to handle the duties of a single retiring employee.
Employers would like this because it would reduce their payroll costs; they would be shedding the higher paid individuals in favor of lower paid individuals, and could quite possibly hire more than one new employee per retiring employee. And they could also see a reduction in their health insurance costs, and their workers compensation costs, because the younger workforce is healthier.
Instead of collecting unemployment payments, the now employed individuals would be paying income tax, and SSI & Medicare, etc.
And lets face it. The people who spend the most money in our culture are the young people with families to feed, and cloth, and house, etc, etc. The older crowd is through with that; quite possibly, their houses are paid for, and their kids our out of college, etc. They are spending their discretionary money on medications, and recreation, and vacations.
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Of course, there is an extra expense involved in paying the extra retirement monies, but that may be more than offset by the savings in not having to pay unemployment benefits, and the additional tax revenues paid by the hired workers, and the greater ripple effect their monies would have on the overall economy. (Employed people spend money and support the employment of other individuals).
From a quick search of the internet I found that during the first three years of the Baby Boomer generation, 1946, 1947, and 1948, there were an average of 3.66 million births EACH YEAR, in the U.S, for a total of about 11 million births.
Since the first baby boomers turned 62 in 2008, if all of those individuals were allowed to retire early, right now, we would create 3.66 million job openings, immediately, and then another 3.66 million jobs for EACH of the next two years.
(These are obviously high estimates, because, many of those born in those years surely have died already, and there may be some who won’t want to retire early).
According to current stats, there have been 3.6 million jobs lost in nonfarm occupations, since Dec of 2007.
(That number is certainly much higher, at this time).By changing the current retirement rules, we would almost immediately nullify all the jobs lost so far, and create up to an additional 3.66 million jobs for each subsequent year.
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I don’t really know the true cost of allowing individuals to retire early, but let’s say, for the sake of argument, that it costs an average of an additional $ 20,000 per year per individual, which is probably conservative. Remember, this additional amount is only a burden for three years per individual retiree, if they choose to retire at age 62. After that, at age 65, the additional amount would no longer be additional, but would be the normal amounts dues at age 65.
At $ 20,000 per individual, if 3.66 million additional people retire early each year, the total additional annual cost is 73.2 billion dollars.
From that 73.2 billion dollars, we need to deduct the savings in unemployment payments, because formerly unemployed people would now be employed.
We would lose the tax formerly received from the retiring individuals, but that would be offset by the employees who are now employed, and paying taxes. Plus we would gain much more revenue from the ripple effect of having more, and younger, people employed.
That 73.2 billion is a huge amount of money, but, we’ve reduced unemployment by 3.66 million people, and if those formerly unemployed, now employed, individuals pay ONLY $ 3,000.00 per year in Federal income taxes, SSI, etc, the total is 11 BILLION dollars PER YEAR, off the top.
We have already wasted 100s of billions of dollars on programs, such as the 700+ billion dollar TARP, that have not created a single job, so why not spend a fraction of that amount on a program that will actually work, and will actually create job openings, and reduce unemployment ?
If the early retirement program were in effect for just a few years, say 2008, 2009,2010, 2011, and assuming the program actually begins in 2009:
If we had this program in effect for the next three years, beginning in 2009, the maximum cost would be about 658.6 billion dollars:
Turned………………Cost……..Cost…….Cost…….Cost
Age 62………………2008…….2009…….2010…….2011
———-………………——-……..——-…….——–……——
2008…………………000………73.2……..73.2……..73.2
2009…………………000………73.2……..73.2……..73.2
2010…………………000……….000……..73.2……..73.2
2011…………………000……….000………000……..73.2
……………………….——………——……..——…….——–
Total…………………………….146.2…….219.6……292.8…..=……658.6 billion dollars
In reality, each year would be much less that 73.2 billion because the individuals would not be eligible to retire until they have attained the age of 62, which, for the population, would be distributed over the whole year.
In terms of jobs created, we could create almost 33 million job openings:
Turned………..Jobs……….Jobs………..Jobs………..Jobs
Age 62……….2008……….2009………..2010………..2011
———-……….——-……….——–……….——-………..——-
2008………….0000……….3.66…………3.66…………3.66
2009………….0000……….3.66…………3.66…………3.66
2010………….0000……….0000………..3.66…………3.66
2011………….0000……….0000………..0000………..3.66
………………..——-……….——-………..——-………..——-
Total………………………….7.32……….10.98………..14.64….=….32.92 million jobs
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In a couple years, we could actually have a labor shortage, and wages would be forced up, and, hence, tax revenues would also increase.
Even if my figures are off by 50%, we’ve still created 3.66 million jobs immediately, and 12.8 million
more job openings in subsequent years.
Another plus, is that the retired individuals are not going to live forever, and their numbers will decrease steadily with each year, decreasing the over all cost.
On it’s surface, this kind sounds like a crack-pot idea, but……. maybe it wouldn’t hurt to do some serious number crunching on this one…
And that is just my opinion.
Spencer Holly, AngryCalifornian
AC20090515007
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