Alicia H. Munnell and Steven A. Sass, Working Longer: The Solution to the Retirement Income Challenge — January 21, 2013

Alicia H. Munnell and Steven A. Sass, Working Longer: The Solution to the Retirement Income Challenge

Here’s a quick bit about a book I despised. Munnell and Sass’s thesis is that since people are living longer, they logically have just 3 options: live on less per year of retirement, save more for every year they’re employed, or retire later. No problems up to here.

Living on less would be dangerous, say Munnell and Sass, and people aren’t saving enough (no arguments here, either); ergo, the only option (flashing DANGER lights) is working longer. So their first sin is one of omission: a better book would have looked at how to, e.g., shift more of society’s resources into providing a better retirement for everyone.

Their next sin is in acknowledging that life expectancies have risen the least for the poorest and least educated among us, and for African-Americans, without then proposing any solution that would actually solve their problem and while sticking to their retire-later guns. If you’re the sort of person whose basic moral alignment says to help the neediest first, this book will anger you. Indeed, I often thought that it should be retitled, [book: Throwing It Against The Wall: The Solution To This Book].

The solutions that they do come to are small-ball ones, like beefing up little job-retraining programs that they admit don’t really work. And they leave the reader with no confidence that employers will actually want to employ older workers. (Even larger solutions, like committing on G.I. Bill scale to college education, aren’t obviously going to solve the problem: give everyone a college degree, and you’ll still find that some people are better educated than others. It’s not clear that a college degree for everyone will solve a macroeconomic problem like retirement security.)

Munnell and Sass rule most of the interesting parts of the problem out of scope, for reasons that elude me. The basic problem, it seems to me, is that employers have no incentive to do what society acknowledges needs to be done, namely provide for the well-being of those who’ve spent their lives toiling. Employers aren’t charities, naturally, so this isn’t necessarily a knock on them. It is, however, a knock on a society that has structured much of worker security (401(k)s, before them pensions, and health insurance for current workers) around employers whose incentives push in exactly the opposite direction. We know that companies won’t do what we need them to do; other societies have taken the next logical step here and looked to government to provide what companies will not. Yet Munnell and Sass rule this out of bounds early on: literally their only question is how to get workers to work longer.

Workers don’t *want* to work longer. They end up retiring at 62, even though they say they want to work to 65. Here Munnell and Sass have a point: changes in the provision of Social Security benefits have caused people to lower their retirement age from 66 to 62; policy changes could just as easily return the retirement age to where it would have “naturally” landed on its own.

That said, real per-capita GDP has more than tripled since 1950, back when the U.S. economy was the envy of the world; if Americans were prosperous then, we must be really prosperous now. When people earn more money, they naturally decide to convert some of that money into increased leisure. And if they had greater income security (through Social Security, say), they’d likely convert more of that income into leisure. Munnell and Sass ask, essentially, how to convince people who are wealthier than ever to work longer. It’s bizarre tunnel vision.

I *anti*-recommend this book wholeheartedly.