Older workers aren’t retiring. Should they be forced to?

0:00This message comes from Arctic Wolf. Arctic Wolf combines AI-led security operations with human expertise, helping teams detect, investigate, and respond at machine speed without building it themselves. More at ArcticWolf.com slash NPR. This is Planet Money from NPR. When I talked to Ryan Hendrickson, he was sitting on a porch in Southern California on his lunch break. The wind chimes are such a nice touch. I feel like I'm relaxing. I hope that doesn't mess up the audio. Yeah, right. Ryan is 37, the first in his family to go to college, and he's gotten to work on some cool, cool stuff in his career so far.

0:45Working on a few different missions. When we send, like, a rover or a spacecraft to another place. So wait, like, NASA? Yes, yeah. Yeah. NASA, the dream. And he was crushing it. Ten years into his time there, he'd been promoted three times. And an opportunity came up for me to move into, like, a supervisor type of position. and they ended up going with someone else for the role. Which, okay, fine, that happens. But Ryan was bummed and he asked the higher-ups what he could do differently next time. The response I got was, no, you're doing a great job. Just keep doing what you're doing and it will work out.

1:32And I was just sort of like, that's what I've been doing and that didn't work. Ryan was feeling a little stuck, like he was doing everything right, everything he should do, but he just couldn't move up anymore. And he couldn't stop thinking about who got the job instead of him. The person that ended up getting the role had been at NASA for somewhere around like 40, 45 years. And they actually had this same position like 20 or 30 years ago. The supervisor position that they were applying for, they had already had? Yeah, they had already had it. Yeah. Frustrations kind of boiled up a little bit.

2:16You know, getting to a point where the role I was going for was filled by someone who was well into retirement age, but also had that exact same role like 20 years prior to that, you know, definitely felt unfair. Yeah, we're talking about age here, just to name the 800-pound rover in the room. So you said that the person who got the job over you had been at NASA 45-ish years. Yeah. So they're like 66, 67? Yeah, I guess this person also did have their PhD as well. Oh, so they're like maybe 75? Yeah. Uh-huh. If you're being like your most petty self, like what were you feeling? Yeah, it was definitely really frustrating.

3:06But technically, I don't have my PhD right. So on that front, definitely they were more qualified for sure. We did reach out to NASA. They said they generally do not comment on personnel matters. But yeah, this person was obviously more qualified, more years on the job, had management experience, a PhD, was maybe even better than Ryan at doing the job, okay? And there are probably also a bunch of other good reasons why this person wanted their old job back again, right? But Ryan says he couldn't help but feel like this worker took an opportunity from him. Like, they already had the chance to do this job when they were younger, and Ryan felt like it was his time now, his turn.

3:50He was feeling like this implicit agreement between employee and employer that if you work hard, you can move up in pay and position wasn't happening for him anymore. And Ryan went where any late 30s millennial would go to commiserate. Read it. For some reason, I went onto the millennial subreddit and made a post. Basically said, has anyone else been noticing senior colleagues at work refusing to retire and making it much harder to move up the ladder? Ooh. And there are several similar posts out there, like this one. Boomers won't retire, and it's screwing the rest of us. There I said it. Attention-grabbing.

4:33Yeah. That's BJ Swamy, an engineer in tech, who wrote that colorful Reddit post. What kind of reaction did you get? Oh, Reddit just lost its mind. Like, I got, oh my goodness, all varied reactions. The perspective of the younger colleagues was they work hard, they're ambitious, they want to go places, but then they're stuck. And then there's others that are saying, I would retire now, but I can't afford to retire. And I'm in my 70s. BJ had written that his boss was 71 and kept saying he'd retire next year. I know he said he had some health reasons and the family had to pay off medical bills. and I felt his pain, but it was also frustrating from my end because like I'm stuck in this position because I can't go to the next level because I'm, you know, there's already people there that are not retiring and it's just hard.

5:28And for Vijay, it feels like the writing is already on the wall for him. You know, we're told to save for retirement constantly, you know, put money in the 401k, max your Roth IRA, compound interest. Okay, cool. I would love to, but I can't get promoted. So I can't make more money and I barely save anything. And it's almost like, I know I'm going to probably be the same person in my seventies doing the same thing. And then some guy or girl, my age is going to be like, I should be in that position, but I'm stuck here because of you. You're going to be the 70 year old that some younger workers complaining about.

6:08Oh yeah. I feel like I'm, that's the irony of life. Because you want to work until you're 70 or because you think you're going to have to? Probably have to, in all fairness. All right. Despite Vijay's provocative headline, his post is actually pretty thoughtful. And it captures this feeling that many early and mid-career workers are having. When older workers cannot afford to retire, that's one thing. When they can and just don't want to, that's trickier. It's just a cycle and it sucks and I don't know what the solution is, honestly. We heard about a potential solution. Hello and welcome to Planet Money.

6:53I'm Sarah Gonzalez. There are 11 million people over age 65 in the U.S. workforce and age in the workplace is a complicated thing to talk about. In fact, sometimes it's illegal to bring up. But the trend toward later and later retirement is one of the most important labor market developments of the 21st century. So we're going to talk about it. Today on the show, a debate over how long people should work, who wins when we delay retirement, who doesn't. And we consider an old idea to force people to retire. Plus, the case for why older workers want to, and maybe even should, work even longer.

7:58Vanguard.com slash investor choice to learn more. Vanguard investors own shares of their index funds and those funds own shares of the companies they invest in. Vanguard Marketing Corporation Distributor. This message comes from Schwab. With the new Schwab Teen Investor Account, teens can gain hands-on investing experience. It's co-owned by you and your teen, so you can monitor the account while your teen learns how to invest and manage money. Learn more at schwab.com. All right. You want to meet the person with the potential solution for our retirement problem if you think that it is a problem?

8:34Here he is. I'm Sam. I teach college and I teach law and I'm excited to chat. I teach college is the chillest way I've heard someone say that they're a professor at Yale. Well, I always like professors who said they're teachers. Samuel Moyne, Sam, teaches history and law and has just written a book called Gerontocracy in America. It's about how, according to him, some older Americans are, quote, hoarding power and wealth and housing and jobs. Now, we're just going to talk about the jobs part because Sam has a pretty provocative take that older workers are staying in their jobs way longer than they, um, should.

9:20Oh, absolutely. I think it's very widespread across a lot of domains. People are under the thumb of old people, old men, most commonly. And why is that a problem? Yeah. So one of the most glaring is injustice or unfairness towards other people, especially younger people. We're going to get to his arguments in a bit. But first, it used to be that people didn't retire at all, right? For most of human history, you worked until you died on the farm or became physically unable to work. There was no such thing as retirement. Then, in the 1880s, the head of Germany, this guy named Otto von Bismarck, looking to score some points, said, what if we let people stop working when they get older and the government takes care of you?

10:13People were like, sounds great. And slowly, the idea picked up in the United States as well. In the 1930s, the U.S. got Social Security. Then in the 60s, Medicare. And people started retiring. Also, traditional pensions were more common, where employers would guarantee workers a specific amount of money every month for the rest of their life after retirement. And these old school pensions actually incentivized workers to retire at a specific age. And for all of these reasons, the trend for four decades was earlier and earlier retirement. But then in the 90s, the trend reversed. The average age of retirement started going back up.

11:00People were working longer. And there were a few reasons for this. For one, people were living longer, so they could work longer. Also, jobs got a lot less physically strenuous, so it was easier to work longer. And traditional pensions started going away, so people couldn't afford not to work longer. The share of employed people 65 and older has close to doubled since the mid-1980s. Now, about 19 % of the workforce is over age 65. and Sam Moyn says there have been some collateral effects like upward mobility for younger workers. When older people are hoarding their positions and refusing to retire, they're inhibiting other people from getting what they have acquired.

11:46This staying on is unfair to younger people who often have to choose different careers or wait around for a cent in their career. Younger people can't move up in pay, can't move up in position. Or can't get the job at all. And then can't afford to buy a home and the whole. Houses and other benefits. As the proportion of workers over age 55 has gone up, so has the pay gap between older and younger workers. Between 1979 and 2018, the pay gap between those over age 55 and under age 35 has increased by 61%. percent. Sam points out the U.S. is the first society in history where you're more likely to be poor if you're young than if you're old.

12:34And yet, Sam says, most of the social safety net is for older Americans, right? Not like lower paid, mid-career people struggling to afford child care and buy a house. Okay, now we have to get to the solution. What is your solution? Well, the main one I talk about is mandatory retirement. Mandatory retirement. Meaning you think we should force people to retire when they hit a certain age? Correct. Sam is very careful to say that, of course, there are a lot of older workers who would love to retire but can't afford to, right? There are millions of Americans over age 65 that live near or below the poverty line.

13:14But he is not talking about those workers, you know, people in blue collar, low paying, backbreaking jobs. We should actually like be thinking creatively about how we can do better by them in their retirement too. But they're not the ones who are hoarding employment opportunity. Sam is talking about those who can afford to retire, but don't, particularly those in powerful positions like, you know, politics and those in the highest level, highest paying white collar jobs. So engineers, lawyers, judges, CEOs, journalists, professors. Sam says academia is actually worst of all as a place where older people, quote, stay on to the detriment of the rest.

14:01Now, is it legal to force millions of workers out of their job because of their age? Nope, sure isn't. Not in most sectors of the U.S., but it used to be. Not too long ago, even. It used to be standard to have mandatory retirement. In the 1970s, about half of all jobs in the U.S. came with a non-negotiable expiration date. A date when workers would be forced to leave when they hit a certain age, usually age 65. One of the ideas behind mandatory retirement ages was to help, like, freshen up the workforce, bring younger workers in with their newer skills. So people like Albert Einstein, Milton Friedman, Nobel Prize winning economist, had to retire.

14:49They had to leave their universities because they reached their age of mandatory retirement. This was standard. So people would be like at their job for a decade or two decades or four decades. And then they'd be like, oh, it's your birthday. You're gone? Absolutely. Like on their birthday? On their birthday. And... Really? And you knew when you got in. And you knew from the start you retired at 65. Yeah. People knew when they took the job what their last day was going to be. And everyone could plan around that. Even when Congress passed the Age Discrimination in Employment Act in 1967, employers were still allowed to force people to retire at age 65.

15:34But after lobbying from the AARP and pushback from seniors who were like, hey, we're living longer now. Why are we getting kicked out of work when we still have so much life to live? The law was revised. They said you couldn't kick anyone out until they hit age 70. Then the law was revised again in 1986 when it became largely illegal to force anyone to retire because of age. Though Congress did make a temporary exemption for universities because universities, academics, they were strongly warning against the consequences of eliminating mandatory retirement, saying it would be bad for business, bad for innovation, bad for research.

16:10Like this former Chicago school provost who went on to be Stanford University president. Oh, Gerhard Casper. Yeah, he went hard. What did he say? I've never met him, but he was one of my heroes. He said that innovation in education comes from young faculty members. Faculty tend to teach what they understand, and they understand best what they learn when they were young. Everything he warned about has come true. I mean, you think that there's less, okay, you think there's like the less quality research being done by the older world? Oh, yeah, you're shaking your head like, of course there. Oh, God, absolutely.

16:45Yeah, no, it's. Okay, Milton Friedman. famous economist, won the Nobel Prize in economics the year that he was forced to mandatorily retire from his university. Yeah, but that's for time served. It's not for future promise. Nobel Prizes are for something you did, and no one's expecting you to do it again. Harsh. Now, Sam has been accused of ageism since his book came out, but Sam says it's not ageism because what he's proposing would apply to everyone who eventually becomes old. So younger workers would also be subject to forced retirement at some point, right? There were, of course, unintended consequences from making mandatory retirement ages illegal.

17:29Ironically, it created new ways to discriminate against older workers. Because, like, sure, it protects current employees from being forced out, But employers might choose not to hire older workers at all because they worry they'll be difficult to let go later. And kind of surprisingly, mandatory retirement is still allowed in some industries in the United States. For commercial pilots, air traffic controllers, federal firefighters, often state judges, in these professions, you do not have the right to stay on until you decide to leave. Air traffic controllers have a mandatory retirement age of 56.

18:07So young. Commercial pilots have a mandatory retirement age of 65. And that age cap was based on a years-long safety study. When Congress tried to raise the age of retirement for pilots to 67 a few years ago, the pilots union said, we don't want that unless you can prove that raising the age is safe. and sam's really just saying maybe there are other professions out there that should also consider age caps okay so i i'm i just i have to ask you how old how old are you i'm 54 you're 54 54 and a half okay all right 55 you're 54 54 54 and a half 54 sorry sorry at six months uh so So you're out at 65?

18:54You're retiring? I've said 70. I mean, I like 69 and a half. Oh, 70. Look at you. You're already. No, but look, we have people who are in their 80s here. Look, I want a general rule we all agree about. And if it's 65, I'm down. I would retire earlier than that if I might. I mean, I'm not committing to it, but I'm definitely committing to retire before a lot of my older colleagues have chosen to do so. Well, you know, 80 is the new 70 and 70 is the new 60. Oh, is it? Oh, I wasn't aware. Okay, good to know Olivia. We called up economist Olivia S. Mitchell for a counterpoint. Olivia started out as a labor economist, now focuses more on things like pensions and retirement at the University of Pennsylvania's Wharton School.

19:40And as an economist, Olivia fundamentally rejects the assertion that older workers are taking jobs away from younger workers. This is known as the lump of labor fallacy, which we've covered on Planet Money before. The lump of labor fallacy is the mistaken belief that there is a fixed amount of work to be done in an economy, like one big lump of jobs that we all fight over and have to share. So the lump of labor fallacy is the notion that there's only a certain number of jobs in the labor market. And if the older people don't retire, there won't be any opportunities for the young or for women or for, you know, ethnic minorities.

20:24And the reality is that more people working create more jobs and create more demand for labor. I mean, I think a good example is like when women entered the labor force. Right. It's not like we took all the men's jobs and now there weren't enough jobs for men. Like, we will make as many jobs as we need is sort of the idea. Right. And I would say that when women did go into the paid labor market, that created jobs for other people to help them, you know, help take care of their houses, help take care of their children. Babysitters. Right. The idea that an older person refusing to retire is preventing a younger person from finding a job is just wrong.

21:05Olivia says. But that's not necessarily the only thing that Sam is saying. I see that for, like, there's not a finite number of jobs. And the more people working creates new jobs and new opportunities. That all makes sense. But I think some people's arguments, like this book author, Samuel Moyne, he's not really saying there aren't enough jobs for younger workers. He's saying there's not enough well-paying jobs. And that it's because the older workers have the highest salaries. How old is he? Not above 60. Yeah. Why do you say that? I was just curious. Yeah. So anyways, yeah, people always bring up the lump of labor fallacy to Sam, and generally he agrees that more people working creates more jobs is good for the economy.

21:54In general, it's great to have more jobs, and the fact that someone holds a job doesn't forbid the creation of a new job, but sometimes it does. So there is not a finite number of jobs in the economy, but maybe there are in some sectors, like tenured professors, for example.

22:19After the break, we put some real parameters on how mandatory retirement could work and for who. Also, a hot take from Olivia. Well, I think people retire far too early. Thank you.

23:01Vanguard investors own shares of their index funds, and those funds own shares of the companies they invest in. Vanguard Marketing Corporation Distributor. This message comes from Great Wolf Lodge, where there is adventure for the whole family. You and your pack can splash away in the indoor water park, where it's always 84 degrees and filled with fun, from water slides to pools, a lazy river, and more. Plus, adventurous attractions, delicious dining, spacious suites, and daily entertainment all under one roof. With 22 lodges across the country, you're always just a short drive away. So bring your pack together at a lodge near you.

23:40Learn more at greatwolf.com. This message comes from Schwab. With the new Schwab Teen Investor Account, teens can gain hands-on investing experience. It's co-owned by you and your teen, so you can monitor the account while your teen learns how to invest and manage money. Learn more at Schwab.com. Um, do you mind sharing with us how old you are? I'm 73. That's economist Olivia S. Mitchell again. And how do you feel about work? I love my work. I wake up every day, say, oh, there's new things I can explore. I'm so excited. Really? Yeah, I'm not planning to retire. I mean, at some point. Well, maybe another 10 years.

24:26We'll give it, everything's on a 10-year plan. We'll see. Olivia will maybe consider retiring around age 83, but like hard, maybe. I have a lot of research left in me. I have a lot of books I want to write. I told Sam Moyne about Olivia. She's like, I do not plan on retiring. I think that's, let's check the citation counts of those over 70 and see what happens. What work actually changes fields? Hard to think of a lot produced by those over 70. With all due respect. The hits keep coming from Sam. And listen, this is where Sam's argument does start to get more uncomfortable, okay? Because he is saying that when it comes to research, younger academics tend to be more innovative.

25:15He does admit that in some professions, the older you get, sure, the better you get at your job because it's more about repetition. So like think a pianist or maybe, I don't know, an interpreter. But like in science, for example, according to a peer-reviewed study in the Journal of Science, researchers from the University of Chicago did find that, quote, scientific innovation narrows as scientists age. They wrote younger scientists are, quote, more likely to instigate disruption in their fields, replacing established ideas with new ones, while older scientists tend to iterate on their earlier work.

25:53Now, of course, this is not true for all jobs, but some. And there is this economic theory that kind of backs some of this stuff up, too, and the case for mandatory retirement. Okay, so there is this economist, his name was Edward Lazier, and he used to say that mandatory retirement enabled this implicit contract between the worker and the employer. And it basically says, when you are a younger worker, you get paid less than your productivity. But we reward you by when you're an older worker, you get paid more than your productivity. Yeah, okay. Right. And he's like, but that only works. And we all were okay with that because there was an end date to when you're an older worker, because otherwise if you stay past, you know, 70, 75, 80, you're just getting this high salary.

26:43And it's more than what we should have compensated you from this chunk when you were underpaid. Okay. Brilliant. Brilliant. Totally agree with his point. With the rise of gerontocracy, what we have is like a rupture of the implicit contract by those who are hanging on. Now, it's not that older workers necessarily become less productive. It's that their salaries are just higher than their productivity. And this economist, Edward Lazier, said mandatory retirement corrected for that. So I know Eddie Lazier quite well. The implicit contract, it worked for a time, but that model broke down. Olivia says the assumption that older workers are generally overpaid relative to productivity is much less convincing today than when Lazier wrote his paper and that it is probably a less complete description of compensation practices in today's labor market because people bounce around now.

27:41They don't stay at one job forever to reach that stage when they become overpaid and early career workers are less likely to tolerate being underpaid because of that. Also, it's just a different time now. Olivia says there were a bunch of things that actually enabled mandatory retirement ages to work for the employer and for the employee, like traditional pensions, which are so rare now. If we look at the system now, Olivia says there is every reason to work longer. As long as possible, actually. She says delaying retirement is not just good for you as a person. It's good for the economy. For the economy, delayed retirement boosts labor force participation, it raises tax revenues, it eases labor shortages, and it generates more economic growth.

28:31Olivia travels all over the world advising governments about their pension and Social Security systems. And she says people are retiring far too early to cover their own needs. Under the U.S. Social Security rules, you can stop working as early as age 62. But I wouldn't advise that because if you delay claiming until you're 70, your benefits go up by 75%. Yeah, the system rewards you if you retire later. So my advice is work more, save more, and expect less. That's my mantra. Expect less from the government to support you? Yes, because Social Security is running into insolvency within about six years.

29:15By the way, Medicare is also running short of money. So when you think about the amount of money you need to retire on these days, it's getting more expensive to retire at all. And this gets to the heart of Olivia's point. As a society, Olivia says, we can't actually afford to let people retire earlier. So if Sam's whole point is, you know, justice for younger workers, Olivia says early retirement would not give them that. So if more people retired younger than those who are young would end up paying much higher taxes to take care of us, right, when we could be very productive and we could be generating output for the economy.