Economic Snapshot | Retirement

Many already lack a steady job before the Social Security retirement age

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Snapshot for June 15, 2005.

Many already lack a steady job before the Social Security retirement age

In the Social Security debate, some policy makers have suggested raising the retirement age as a way to address the projected long-term gap in Social Security’s finances.  Those who favor a later retirement age seem to assume that people work right up until they become eligible for early retirement at age 62 or until the “normal retirement age” under Social Security, and then immediately retire. The “normal retirement age” is already in the process of increasing from 65 to 67.  The assumption is that raising the retirement age further would induce Americans to continue working and to postpone claiming their benefits until they hit the new, later retirement age.  If people behaved this way, it would raise revenue and reduce benefits. 

However, as the figure below shows, large percentages of both men and women lose employment before they reach Social Security eligibility.  Increasing either the early retirement age or the normal retirement age would put more Americans at risk of poverty and would do nothing to make employment opportunities more available to older Americans.

Share of the population working, age 25-80, by gender, 2004

As workers age, they have greater difficulty in securing and retaining employment.  They are more likely to drop out of the labor force and more likely to be unemployed.  Men’s employment rate reaches a peak level of 89% at age 39, and then drops 29 percentage points by age 61.  Between 61 and 65 years of age, male employment rates drops another 25 percentage points.  At age 65, 36% of men are still working.  Employment declines for men are greater between age 39 and age 61 than between age 61 and age 65.  This suggests that many workers would not be able to find employment for additional years before they hit a higher Social Security retirement age.

Women follow the same pattern.  The peak employment rate for women is 76% at age 46.  By age 61, their employment rate falls to 42%.  Loosely, this means that 34% of women who had worked at some point in their lives were not working in the year before they became eligible for Social Security retirement benefits.  As both men and women age, their increasing lack of employment could be involuntary (e.g., their inability to find a suitable job) or voluntary withdrawal from the labor force (e.g., sufficient wealth for reduced labor force attachment or early retirement).

Americans over 45 are disproportionately more likely than their younger counterparts to be among the long-term unemployed (those unemployed for 27 weeks or more). Americans older than 45 make up about 14% of the labor force but 37% of the long-term unemployed.1 Older workers—even those as young as their late 40s and early 50s—are disproportionately more likely to fall into the ranks of the long-term unemployed.

One possible explanation for lower employment rates for older Americans is age discrimination in hiring practices. Compared to other charges of discrimination collected by the U.S. Equal Employment Opportunity Commission, age discrimination tends to display the strongest counter-cyclical trend.2  That is, charges of age discrimination fall during good economic times and rise during recessions; more so than discrimination based on race or sex.  Companies trying to cut costs in bad economic times will benefit more from laying off older workers, who get paid more than younger, lower paid entry-level workers.  About 23% of all discrimination charges in 2004 had an age component, compared to 18% of all charges in 1999.

Because going without work is not an option financially, some seniors are turning to disability claims to fill the financial gap. Rising disability rates may suggest that older Americans who cannot secure employment will be more likely to file for disability.  For those motivated to raise the retirement age for budget purposes, the problem here is that one portion of the Social Security trust fund will simply replace another.  And, if we loosen disability eligibility rules to cover these older unemployed workers, it will have ripple effects for younger Americans seeking disability benefits, potentially increasing Social Security costs rather than reducing them.

Raising the normal retirement age but not the early retirement age would effectively cause a decline in Social Security benefits for everyone.  That might seem reasonable for well-paid professionals who often retire after age 65, but that’s not the typical Social Security retiree. A higher retirement age would be a cruel blow to those who have been displaced by a rapidly changing economy and have obsolete skills, or who have struggled with low paying, physically demanding work and can no longer find suitable jobs well before they reach 62.


1. Andrew Stettner and Sylvia Allegretto. The Rising Stakes of Job Loss: Stubborn long-term joblessness amid falling unemployment rates. May 26, 2005.  EPI and NELP Briefing Paper #162.

2. U.S. Equal Employment Opportunity Commission, Charge Statistics, FY 1992-FY 2004.  Web site accessed 6/13/05.

Today’s Snapshot was written by EPI economist Elise Gould.

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