by Mitch Kokai
Senior Political Analyst, John Locke Foundation
For the boomers, staying on the job seems more a matter of necessity. As MacroMavens’ Stephanie Pomboy relates, the labor-force participation rate for those 65 and older is back near 20%, about where it stood in 1962, before the Beatles’ big breakthrough, and nearly twice its nadir in the mid-1980s. Part of that may be the aging of the big baby-boomer generation; many of its members have joined the 65-plus cohort.
But the fact that so many haven’t opted for retirement isn’t a surprise, given that “millennials are blogging in their parents’ basement,” she observes. Then there’s the matter of not having any nest egg to retire on. One study, from the National Institute on Retirement Security, found that 40 million working-age households, some 45% of the total, have accumulated exactly zero in retirement savings. That was brought home by an anecdote Steph related of a 72-year-old taxi driver she rode with who planned to deal with having just $857 in the bank by moving to Vietnam, where he could live comfortably on $400 a month.
Perusing her chart of the 65-plus labor-force participation rate shows the line turned up in earnest in the 1990s, about the time that fat interest yields on certificates of deposit began to shrink. And in recent years, the Federal Reserve decided to “save” the economy by pushing rates near zero. “With a savings-poor and aging population, what could possibly go wrong?” Steph asks. The result: Folks have stepped up their savings to make up for their lack of interest earnings—exactly the opposite of the boost to spending Fed officials and academics had predicted.
Public-sector employees would seem to be immune to this retirement uncertainty. One of the big payoffs for them comes in the form of generous, assured pensions, the kind that only a dwindling minority in the private sector still enjoy. But now that payoff may not be so certain. …
… The problem of making ends meet and providing for retirement are backdrops to the current, unbelievably contentious election campaign, although these issues are being obliterated by scandals that escalate by the day. And though the burden of pension shortfalls falls mainly on states and localities, Pomboy envisions them one day becoming Washington’s problem.
“Policy makers cannot—and will not—abide the recession that a state and local pension-funding crisis would guarantee,” she boldly predicts. “Should the present pension walk turn into a run, the federal government would swoop in to backstop public pensions—with the increased expenditure monetized by the Fed. It’s only right, after all, that the Fed should clean up the mess it created.”