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Will they get their ham and eggs?

The Retirement of Baby Boomers

Focusing on the final section, “Ham and Eggs in the Twenty-first Century,” this paper [] emphasizes the impending question of the consequences related to the retirement of the baby-boomers. As there is a growing gap in population numbers between the elderly and the young, there is uncertainty surrounding social security and retirement benefits. How will the United States government finance social security pensions for the high nuumber retirees associated with the baby-boomers? Will the younger generations be forced to retire in their late sixties in order to finance the burden, or does the US need to restructure the entire social security system? [The “normal” retirement age is now 66, and will continue to rise under current legislation…the prof]
This paper claims that “there are three possibilities for national income enhancement: more technological progress, more capital, or more labor.” While “it would be nice if there were a simple solution to the baby boom retirement,” the mounting concern surrounding this issue is evident throughout US news, especially in today’s presidential race. A conflict arises for candidates who are forced to emphasize the need for social security reform while attempting to maintain the trust among the large elderly constituency. How can the candidates propose a social security reform that will address the baby-boomer question as well as the issue of national debt, whilst winning the vote of the elderly?

One Comment

  1. Ah, would more capital and/or technological progress — both of which would improve labor productivity — really “solve” the problem? If people have higher incomes, is it reasonable to think that retirees won’t share in those gains, perhaps from using an inflation index linked to actual increases in costs they face? (In addition, if gains show up as capital income — the case this past decade — it won’t lead to greater FICA tax revenues, as it is a tax only on labor income.)
    Second, where would additional labor come from? Now as an economist my presumption is that we would gain from an increase in immigration (a jump in fertility wouldn’t be noticed in labor markets for 20+ years, and in the interim would increase the dependency ratio). But what sort of numbers would be needed to keep the ratio of workers to retirees constant? (Remember that immigrants have spouses and children, while having on average lower productivity than comparably educated residents — so you don’t get a one-for-one boost.)
    Challenge: Pull up numbers of retirees — not new retirees, but the total corrected for mortality. How many immigrants would be needed, net of the correction I suggest, to keep the ratio of workers to retirees constant? This is a simple back-of-the-envelope calculation but I think will prove pretty helpful in framing the discussion.

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