Policy Briefing continued
Juliet Schor documented this trend in her
1992 bestseller, The Overworked American: The Unexpected Decline of Leisure.
Subsequent Bureau of Labor Statistics
research found increases in the percentage of workers logging 49 or more hours
per week for every occupational category
studied for both men and women.
Vacation time offers a particularly
stark contrast across borders. As a report
from the Center for Economic and Policy
Research documents, the U.S. is the only
member nation of the Organisation for
Economic Co-operation and Development
(OECD) that doesn’t require any paid vacation time. Aside from Canada and Japan,
which require a minimum of two weeks,
the other 18 OECD countries all require a
minimum of between four and six weeks.
The U.S. also trails in paid holidays.
In a holistic context, consider the balance between work and leisure over the
employees, perhaps eligible for some
form of additional compensation or
compensatory time for work beyond
certain maximums.
While we have to consider the potential
reduction in gross domestic product (GDP)
and standard of living from working fewer
hours (offsetting the potential increase in
GDP from retiring later), several potential
benefits could ensue. On a macroeconomic
level, reduced annual work hours could increase the demand for older workers and
provide better employment opportunities
for them. It’s also important to remember
that our standard of living is not necessarily best measured based on GDP alone; a
more complete measure would factor in
the value of free time.
One of the criticisms of raising the
retirement age is that recent longevity
gains have varied significantly by socioeconomic status, that a longevity gap has
increasing the retirement age is both
a retirement policy and a labor policy.
The actuarial intersects with the non-actuarial.
course of a lifetime. Age at retirement
and hours worked per year while working are two elements of this unified balance. If we alter one, we might consider
whether we want to change the other.
“Retirement” equals “not working.” This duality means that decisions
about retirement policy are sometimes,
ipso facto, decisions about labor policy
as well. Increasing the retirement age
is both a retirement policy and a labor
policy. The actuarial intersects with the
non-actuarial.
The proposal here is that, if we do
increase the Social Security retirement
age and ask people to work later in life,
we combine it with other labor policies that moderate what we might call
the “intensity” of work requirements
during all of one’s working years, both
earlier and later. While detailed proposals are beyond the scope of this article,
possibilities include establishing a significant vacation mandate and creating
additional new tiers of non-exempt
emerged (the New York Times reported
last year on new studies from the Congressional Budget Office and from Harvard that identify this gap). Reducing the
intensity of work would provide some
offsetting benefit to the segment of the
population that hasn’t, on average, enjoyed longevity gains and yet would be
asked to retire later.
In terms of utility, Rand Corp. researchers suggest that shorter hours may well
have a net positive effect on life satisfaction. Consider that at the margin, a given
percentage decrease in work time can produce a significantly greater increase in leisure time. A person working the equivalent
of six days a week who can reduce that to
five trades a 16 percent reduction in work
time for a doubling of time off.
Finally, there’s the political calculus.
Reforming Social Security through an increase in the Social Security retirement
age is anathema to some, but these same
groups would very likely trumpet labor
market reform. Conversely, increased la-
bor market mandates would be anathema
to others. Meanwhile, the estimated actuarial imbalance of Social Security continues. Is there a seed here for a grand political
compromise?
Such a compromise would take some
doing. Although we’ve shown that retirement policy and labor policy are sometimes two sides of the same coin, jurisdiction over them straddles at least two
committees in the House and two in the
Senate. Nonetheless, in this time of economic crises, in which we as a nation are
re-evaluating some of our basic economic
premises—and with Social Security having been the third rail of American politics for the past generation—perhaps a
holistic approach to retirement and labor
policy is the way to move forward.
FRANK TODISCO is the Academy’s
senior pension fellow. the opinions
expressed here are his own and not
necessarily those of the American
Academy of Actuaries.
References
The 2009 Annual Report of the Board of Trustees
of the Federal Old-Age and Survivors Insurance
and Federal Disability Insurance Trust Funds.
Ghilarducci, Teresa, “The Changing Role of
Employer Pensions: Tax Expenditures, Costs,
and Implications for Middle-Class Elderly,”
Working Paper No. 469, The Levy Economics
Institute of Bard College, August 2006.
Kapteyn, Arie, Smith, James P., and Van Soest,
Arthur, “Comparing Life Satisfaction,”
Working Paper, Rand Labor and Population,
October 2008.
Kleiber, Eric, “Strengthening Social Security
for Workers in Physically Demanding Occupations,” Working Papers, National Academy of
Social Insurance, Jan. 30, 2009.
Luo, Michael, “Longer Unemployment
for Those 45 and Older,” New York Times,
April 13, 2009.
Ray, Rebecca, and Schmitt, John, “No-Vacation
Nation,” Center for Economic and Policy
Research, May 2007.
Rones, Philip L., Ilg, Randy E., and Gardner,
Jennifer M., “Trends in Hours of Work Since the
Mid-1970s,” Monthly Labor Review, April 1997.
Sack, Kevin, “The Short End of a Longer Life,”
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Schor, Juliet B., The Overworked American: The
Unexpected Decline of Leisure, Basic Books, 1992.
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and Protect Those Who Cannot?” AARP Public
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