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Retirement and Public Policy.

Reviewer: Vickie L. Bajtelsmit, Assistant Professor of Finance and Real Estate, Colorado State University.

In the introductory chapter of Retirement and Public Policy, the editor poses the question: Should national policy be aimed at keeping older workers in the labor force? The collection of papers in this book, originally solicited for a conference of the National Academy of Social Insurance, represents a concerted effort by researchers from a variety of disciplines and ideologies to provide an informed answer to that question.

With the trend to early retirement that began after World War II and accelerated in the 1960s and 1970s, many policymakers are concerned with the declines in work effort and earnings of workers age 55 and older. The papers are effectively organized to address historical retirement trends, potential economic effects, worker preferences, medical evidence on the health status and ability of older workers, as well as relevant policy issues.

Although there have been many possible explanations offered for the trend toward earlier retirement, a point that is repeatedly made in this book is that the overwhelming reason may be simply that people want to. In combination with the increasing availability of public and private pensions as well as rising wage profiles, today's elderly do not have to stay in the workforce as long as earlier cohorts of workers to achieve similar levels of well-being. The introductory papers provide the reader with an overview of historical retirement trends and reasons that have been offered for these trends.

The second set of papers examines the impact of early retirement on the U.S. economy and concludes that although there may be some reductions in tax revenues and national saving, on balance, current patterns of retirement are not cause for concern. The one economic issue that may have deserved more attention in this section is the combined impact of early retirement and the aging baby boomers on the viability of the Social Security system. Although the potential necessity of raising tax rates in the future was briefly discussed, it was dismissed as being of limited concern.

It is argued by another set of authors that the trend toward voluntary early retirement is not imposing costs on society since the retirees are supporting themselves through accumulated savings and pensions. In addition, survey and econometric data are used to show that although many unemployed elderly could work at available jobs and thereby enhance domestic productivity, most find that incentive built into the system make continued employment undesirable.

Given the trend toward longer lives, another set of papers analyzes whether the long-lived elderly are not better able to extend their working years, a common argument in favor of raising ages of pension eligibility. This question is apparently one of some controversy and it is by no means clear that improved health has accompanied improved life expectancy. Instead it appears that mortality gains have, for many elderly, merely extended their periods of disability.

The book concludes with a series of papers exploring several policy options that could affect retirement. Specifically addressed are: government policies designed to encourage the hiring and retention of older workers; modification of supplementary public and government pension plans to remove early retirement incentives; and increasing the age of eligibility for Social Security benefits. The earlier papers' conclusions--that people are retiring voluntarily, most do not want to return to work, and their retirement is not adversely affecting the economy--tend to imply that making major policy changes in the near future would not be advisable (although not all the authors would be in agreement with that statement).

While providing a great deal of food for thought, this book does not lead the reader to any conclusions with certainty, which is not surprising given the variety of viewpoints presented. Nevertheless, the book is well worth reading by interested academics and other public and private pension policy analysts. It is not highly technical but includes complete sets of references for those who would like to explore the subject further.
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Author:Bajtelsmit, Vickie L.
Publication:Journal of Risk and Insurance
Article Type:Book Review
Date:Dec 1, 1992
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