Older Workers Essential For Economy

Wasting the talents and experience of older Americans has cost our economy, but not nearly so much as it will in the next couple of decades if we don’t change some old, bad rules for seniors.

That is the word from a top expert on the U.S. work force, Alan Reynolds, director of economic research at the prestigious Hudson Institute.

In a week that started with a 554-point drop in the stock market, long-term economic worries weren’t getting much attention. But at least one long-term worry deserves attention, because the ill effects could last not just a day or a week but many years of a slowed, stagnating economy. Reynolds hammered that point in a report to the Senate special committee on aging. Let’s hope the senators read and heed.

His report is titled, “Restoring Work Incentives for Older Americans.” What the Hudson people see is scary: “The U.S. economy is about to suffer from chronic shortages of willing workers, and that might limit economic growth for as much as two decades.”

Politicians are congratulating themselves over the low unemployment rate now, but Hudson’s expert warns that “in the foreseeable future, the U.S. economy is far more likely to be troubled by a chronic scarcity of willing and able workers than by job shortages.”

The problem is that there aren’t enough workers who can do the high-skill, professional and technical work that must be done in a high-tech economy.

Members of the younger generation aren’t going to fill this need. There aren’t enough of them, let alone enough who can do the jobs. Growth in the labor force in the 1980s was 1.7 percent per year. From now through 2010, the number of young Americans entering the work force will grow only 0.9 percent. And the sorry state of public education is failing to prepare many of them to be productive workers.

We need the able, as well as the willing.

Nor is immigration going to provide the answer; we need not just bodies, but skilled workers.

The people with the talents and experience that are required already are here. And they have been here for a long time. They are the older workers. They are the folks who have been dumped by many employers. They are the folks whose departure from the work force has been encouraged by government policy since the 1930s. Now, employers desperate to find good help are beginning to pay for that.

Good help, hard to find now, is going to be much more so, as Reynolds says, if present policies continue.

At a time when relatively few young grads are entering the market, “a high and rising percentage of middle-aged and older men are neither working nor seeking work,” according to the Hudson expert.

It’s no wonder these older men aren’t working. A government policy was designed to get precisely this result back in the 1930s when the unemployment rate was 25 percent. A major goal of the Social Security program then was to encourage older workers to drop clear out of the labor market and lateral the vacant jobs off to younger heads of families with kids to raise.

This outdated tool, used to keep older folks completely retired, is what Reynolds calls “the infamous earnings penalty in the federal income tax.” Many seniors have much nastier terms for it.

It was eased last year by the Republican Congress, but it still makes no sense: “The longer you work, the more taxes you pay and the fewer benefits you receive.” With high-skill veteran workers, it actually does exactly what we do not want: It creates a huge income penalty on old pros who try to stay in the work force.

Namely, it taxes the bejabbers out of them. And it takes the biggest bite out of a two-paycheck couple of skilled, veteran workers - just the sort most needed by the new economy of the next century.

As this report points out, seniors who make more than the limit - $12,500 a year - lose a Social Security buck for every three if they are 65 to 69. Those who begin benefits at 62 face a limit of $8,280, and the penalty is harder: a dollar lost for every two over the limit. That is on top of all other taxes all workers pay.

Also add the back-door means testing: the new 85 percent benefit tax on higher-income pensioners. The Hudson report points out that extra taxes plus lost benefits for that highly skilled couple are “confiscating almost the entire net income of the second earner.” No wonder such workers hang it up.

This probably is the dumbest rule in the feds’ rule book. And it isn’t boomer bashing to warn that the stupid penalty is damaging not just seniors but the whole economy.

Age 40-plus makes you an older worker, and that is what most boomers are now.

Most of those “qualified” senior workers who will need new incentives to keep contributing in upcoming decades will be the baby boomers. We all had better think about that.