Making Social Security’s retirement age work for workers

A new report from the Social Security trustees warns that the program is in deep trouble. The retirement and social insurance program is already spending more on benefits than it raises in dedicated revenue, due in large part to a decline in birth rates and a decreasing ratio of workers to retirees. By 2034, beneficiaries face the prospect of a sudden 21 percent benefit cut when trust fund savings from the program’s prior surpluses are exhausted.

It’s a real problem, but a solvable one. Despite a lot of posturing and politics, Congress can shore up Social Security’s finances by reducing benefits, raising the retirement age for when workers can collect benefits, raising the Social Security payroll tax rate, or raising the income level at which workers stop paying said taxes — $128,400 this year based on a formula in law. Making such changes would generate sufficient revenue to keep Social Security on firm footing.

{mosads}Some of these ideas are more popular than others. Raising the payroll tax income limits would help preserve the progressivity of Social Security, but that idea, in practice a tax increase, is politically challenging and insufficient to solve the program’s shortfall by itself. 

Raising the normal retirement age, which varies between 65 and 67 depending on when someone was born, seems like a no-brainer if you work in front of a computer or in another role that is not physically demanding. People are living longer so what’s another year or two in the office or at the kind of job that allows you to write and think about Social Security policy. Or if you’re a member of Congress. 

But imagine for a moment that you are a waitress on your feet all day. Or that you move things around in a warehouse or at a construction site. Or if your job requires you to be bent over or crawling on your hands and knees a lot. If your job is physically demanding, then suddenly the idea of working a few more years is less appealing — if it’s even possible.

We’re not talking about a negligible number of workers. More than one in three workers over 58 is working in a physically demanding job. Millions more work in difficult working conditions – outside or in cramped spaces or with unusual machinery. Even with enhanced benefits, working longer doesn’t sound like a great deal to them.

But there are a number of potential ways to modernize Social Security that respect the challenges facing these workers. Rather than blanket retirement ages, Congress could create occupational categories differentiating between physically demanding jobs and other jobs. Yes, this sort of parsing about what roles count as physical will be high stakes and politically charged – and a great time to be a lobbyist, speaking of non-physically demanding jobs. But such an approach, for instance coding Social Security quarters to different types of work, would allow for raising the retirement age in a more equitable way in today’s economy. It also takes into account that for those with physically demanding jobs that wear a body down, early retirement with lower Social Security benefits is sometimes not a choice at all.

The National Commission on Fiscal Responsibility and Reform, better known as Simpson-Bowles, included a version of this idea in their 2010 recommendations with ahardship exemption to increased retirement ages. The commission also wanted the Social Security Administration to look at ways to help workers in physically demanding jobs if the early eligibility age – when someone can first collect Social Security with a permanently reduced monthly benefit – was raised from its current level (age 62). The idea has been debated episodically, such as when the retirement age was raised in 1983 and a study about physically demanding jobs was mandated by Congress.

Another option is raising the retirement age but reducing the penalties associated with earlier retirement for low-income workers. The Bipartisan Policy Center proposed a version of this idea in the form of a “Basic Minimum Benefit,” which was included as part of a broader package of reforms recommended by their Commission on Retirement Security and Personal Savings. This income-based approach is an intriguing one, but it’s worth remembering that not all low-income jobs are physical and not all physically demanding jobs are low-income.

Finally, lawmakers could strengthen Social Security’s Disability Insurance component, which provides benefits to individuals who can no longer work due to their medical situation. DI’s eligibility standards already take into account some hardships unique to older workers, so enrolling in benefits becomes progressively easier for individuals over the age of 50. Nevertheless, DI could still be broadened and improved to better accommodate those workers in physically demanding jobs while raising the age for full Social Security retirement benefits.

All these ideas are aimed at the same goal. And ideas like this should be a no-brainer for the Trump Administration – ostensibly friendly to working Americans and tougher on the country’s elites. But underneath the bravado at rallies and on Twitter, President Trump governs far more like a plutocrat than a populist and there’s little reason to believe Trump is any more serious about retirement policy than other domestic policy issue. So far the President struggles to effectively run the Social Security Administration.

Democrats, meanwhile, still take their retirement policy cues mostly from interest groups that benefit from the status quo. But the nation’s retirement security problems will still be here after the Trump show is over. As pressure grows on the federal purse, the field is open for leaders who want to champion creative solutions for strengthening retirement security rather than only criticize Republican efforts to undermine successful programs like Social Security.

Andy Rotherham is a senior fellow at the nonprofit Progressive Policy Institute and co-founder and partner at Bellwether Education.