Fight Unemployment Now or Face Social and Fiscal Consequences Later
The searing experiences of unemployed people in their 50s should set off everyone's alarm bells. Because everyone will, somehow, pay.
Motoko Rich of the NYT breathes some life into the unemployment statistics with a great piece on how jobless fiftysomethings may very well "age out of the labor force before their luck changes." They might be able, but they also may have somewhat outdated skills on the technological front, and have not had to really pound the pavement for a job for some years. That means they need a thriving labor market to find new work, and that we do not have:
Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group -- 7.3 percent -- is at a record, more than double what it was at the beginning of the latest recession.It does not take much imagination to figure out what happens to a person who is, say, 57 years old and has been unemployed for awhile now. There is the occasional odd job. Maybe temp work. Perhaps a daring attempt at becoming an entrepreneur. Then, when all else fails, Social Security. Of course, when you retire out of desperation to get benefits (let's not go into whether those benefits might be cut), you've got less to supplement government payments, and lower payments because you contributed less to the system.
Forced early retirement imposes an intense financial strain, particularly for those at lower incomes. The recession and its aftermath have already pushed down some older workers. In figures released last week by the Census Bureau, the poverty rate among those 55 to 64 increased to 9.4 percent in 2009, from 8.6 percent in 2007.(Right now we're in a kind of suspended animation. Retiree incomes have gotten a boost from stimulus payments and near-deflation, which preserves purchasing power.)
So, fast-forward ten years. We decided not to really kickstart the economy, and suffered a long stagnation. Those new retirees don't have much cash at all, and helped depress equity markets by dumping what savings they had. Forget any kind of contribution to consumer demand -- they ain't got the cash. Now they rely on Social Security. Advocates of changes to the program now see a much larger base of people whose main or sole income source is Social Security. Their dreams of private accounts, or lower benefits are unrealizable. The tax burden on the working population may even increase. And then there's the social cost: acute poverty among the elderly. Don't think it can't happen here.
This is what failing to stimulate growth now gets you. More of what you don't like in the future.
Related:
- Want Social Security Reform? Then Don't Overplay The (Relatively Modest) Problem
- Why Ben Bernanke Has Underestimated The Danger of Deflation
- Not Content With Sitting On Its Hands, The Fed Now Baffles and Misleads Us On Deflation
- Hey, Ben Bernanke! Either Tell Us How We're Going to Grow, or Do Something - Now
- The Fed: Absent a Double-Dip Or Deflation, We'll Hang The Economy Out To Dry
- Criticism of Fed On Quantitative Easing Are Wrong: We Need More
- Fed To Maintain Its Balance Sheet - But Not Because The Economy Is Slipping
- Fighting With Itself, The Fed Does Damage to Its Credibility As Economy Suffers
- Bernanke Gives Us the Evidence For Further Action, But No Clear Endorsement Of It
- Draw Ben Bernanke Out on the D-Word: Is Deflation Near