Longevity Policy: Facing Up to Longevity Issues Affecting Social Security, Pensions, and Older Workers

170 Pages·2011·3.05 MB·English

by  John A. Turner

Longevity Policy
http://avaxhome.ws/blogs/ChrisRedfield
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Longevity Policy
Facing Up to Longevity Issues
Affecting Social Security,
Pensions, and Older Workers
John A. Turner
2011
W.E. Upjohn Institute for Employment Research
Kalamazoo, Michigan
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Library of Congress Cataloging-in-Publication Data
Turner, John A. (John Andrew), 1949 July 9–
Longevity policy : facing up to longevity issues affecting social security, pensions,
and older workers / John A. Turner.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-88099-377-7 (pbk. : alk. paper)
ISBN-10: 0-88099-377-4 (pbk. : alk. paper)
ISBN-13: 978-0-88099-378-4 (hbk. : alk. paper)
ISBN-10: 0-88099-378-2 (hbk: alk. paper)
1. Social security—United States. 2. Pensions—Government policy—United States.
3. Older people—Employment—Government policy—United States. I. Title.
HD7125.T849 2011
368.4'300973—dc23
2011022673
© 2011
W.E. Upjohn Institute for Employment Research
300 S. Westnedge Avenue
Kalamazoo, Michigan 49007-4686
The facts presented in this study and the observations and viewpoints expressed are
the sole responsibility of the author. They do not necessarily represent positions of
the W.E. Upjohn Institute for Employment Research.
Cover design by Alcorn Publication Design.
Index prepared by Diane Worden.
Printed in the United States of America.
Printed on recycled paper.
Contents
Acknowledgments ix
1 The Policy Challenges of Increasing Longevity: Paying the Costs 1
of Living Longer
Life-Expectancy Increases 2
This Book 5
Five Policy Recommendations 8
Conclusions 12
Part 1: Labor Market Policy toward Older Workers
2 Can Older Workers Extend Their Work Lives? Changes in 15
Health and Job Requirements
Why Work Longer? 15
Health Indicators Affecting the Ability to Work at Older Ages 17
Factors Affecting Health at Older Ages 23
Ability to Work at Older Ages 26
The Decline in Physically Demanding Jobs 28
Phased Retirement and Its Relevance to Raising the Retirement Age 32
Vulnerable Workers 34
Public Policy Issues 37
Conclusions 37
Part 2: Social Security Policy
3 Automatic Adjustment Mechanisms to Maintain Social 41
Security’s Solvency
The Problem 42
Automatic Adjustment Mechanisms 43
International Experience with Automatic Adjustment Mechanisms 48
Comparing the Options: The Pros and Cons 62
Distributional Consequences 64
Indexing Options for U.S. Social Security 65
Conclusions 67
Policy Recommendations 68
v
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4 Raising the Early Retirement Age 71
Views on Raising the Early Retirement Age 73
Comparable Early Retirement Ages with Increases in 75
Life Expectancy
Fairness 76
An Alternative to Benefi t Cuts 77
International Experience 79
Flexible Normal Retirement Age 83
Raising the Maximum Age for Actuarial Adjustment of Benefi ts 84
Policy Recommendations 84
5 Longevity Insurance Benefi ts 87
An Increasing Risk of Poverty with Advancing Age 88
Longevity Insurance 90
Longevity Insurance in the Private Sector and Internationally 99
Conclusions 100
Policy Recommendations 101
Part 3: Pension Policy
6 Defi ned Contribution Plans: Encouraging Annuitization 105
Policies Encouraging Workers to Annuitize 106
The Use of Information to Affect Behavior: Education, Framing, 113
and Advice
Policy Recommendations 115
7 Defi ned Benefi t Plans: Flexibility to Deal with Increasing 117
Life Expectancy
Effect of Life-Expectancy Increases on Defi ned Benefi t Plan Costs 117
Employer Pension Responses to Increased Worker Longevity 119
International Survey 121
A Life Expectancy–Indexed DB Plan 122
Life-Expectancy Indexing of Fixed Ages in Pension Law 124
Lump Sum Benefi ts in Defi ned Benefi t Plans 125
Policy Recommendations 125
Part 4: Conclusion
8 Policy Recommendations 129
Policy Recommendations 129
Conclusions 133
vi
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References 135
The Author 149
Index 151
About the Institute 159
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Tables
1.1 Overview of Major Policy Recommendations 9
2.1 Life Expectancy at Age 65, 1950–2005 (by number of years) 19
2.2 Self-Reported Health Status Rated as Fair or Poor, Aged 50–64, 21
by Gender, Race, and Ethnicity, 1982–2005, Selected Years (%)
2.3 Percentage of Population with Educational Attainment of Four 24
Years of High School or More, Aged 55–64, by Race and
Ethnicity, 1960–2004, Selected Years (%)
2.4 Percentage of Population Smoking Cigarettes, Aged 55–64, 25
by Race, 1965–2004, Selected Years (%)
2.5 Obesity Rates for Males, by Race and Ethnicity, 2000–2008 (%) 26
2.6 Physical Requirements of Jobs, by Gender, 1982–2002, Selected 30
Years (%)
3.1 Projected Percentage Change in Old-Age and Survivors Insurance 44
(OASI)–Covered Workers and Benefi ciaries, Selected Periods,
1970–2030
3.2 Sweden: Changes in Contributions and Benefi ts 53
3.3 Sweden: Life-Expectancy Indexing of Benefi ts 53
3.4 Germany: Changes in Contributions and Benefi ts 58
3.5 Japan: Changes in Contributions and Benefi ts 60
3.6 Canada: Changes in Contributions and Benefi ts 61
3.7 United States: Changes in Contributions and Benefi ts 66
4.1 Comparable Early Retirement Ages with an Increase in Life 76
Expectancy at Age 65, by Race and Sex, 1950–2006 (years)
5.1 Relationship between Number of Years of Covered Work and 94
Benefi t Level for the Longevity Insurance Benefi t
5.2 Social Security Benefi t Recipients with Low Annual Benefi ts, 2004 97
7.1 Bearing of Longevity Risk by Employers, Employees, and 123
Insurance Companies
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Acknowledgments
I have greatly benefi ted from collaboration with distinguished coauthors,
whose work with me I have cited and to whom I express gratitude: Clive
Bailey, Daniel Beller, Yung-Ping Chen, Teresa Ghilarducci, Colin Gillion, Roy
Guenther, Mark Iwry, Denis Latulippe, Courtney Monk, Dana Muir, Christian
Toft, Satyendra Verma, Hazel Witte, and Natalia Zhivan. I have received valu-
able comments from Kevin Hollenbeck, Benjamin Jones, and three anony-
mous reviewers. I wish to thank my wife, Kathy, and daughter, Sarah, for sup-
porting my absences to write, attend conferences, and work abroad. I thank my
parents, Henry and Mary, for ultimately making everything possible.
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