Rips in the Fabric of the Social Security “Safety Net”

Much of the concern about unemployment today focuses on the alarming number of younger workers who can’t find jobs and not upon the plight of older workers who have the “safety net” of Social Security.

Of course, this is not a contest. It is a tragedy that younger workers are unemployed but it also should be of concern that older Americans are suffering. It is trueEconomic Policy Institute that Social Security keeps older Americans from homelessness and starvation but studies show that 9.5 percent of Americans over the age of 65 (including 11 percent of women) live in poverty and almost half of older Americans are “economically vulnerable.”  The so-called safety net is torn and insecure.

When Social Security was adopted in the 1930s it was not designed to be the sole source of support for older Americans in retirement. It was intended to supplement pensions and savings. The demise of  traditional defined benefit pensions began more than 30 years ago and millions of older workers lost homes and savings during the worst recession in 100 years. (2007-2009).  Many retiring workers today have nominal resources to fall back on aside from Social Security.

It should be (but sadly does not seem to be) of concern to policy-makers that older workers suffer disproportionately from age discrimination in employment and chronic long-term unemployment., which condemns them to poverty or near poverty in retirement.

One reason that older workers are more vulnerable to age discrimination is that the Age Discrimination in Employment Act of 1967 is far weaker than Title Vii of the Civil Rights Act of 1964, the federal law prohibiting discrimination on the basis of race, sex and religion. Also, the U.S. Supreme Court has issued rulings in recent years that have further weakened the ADEA.  As a result, older workers can be pushed out of the workplace by employers seeking to cut costs and, once unemployed, older workers cannot find jobs due to  epidemic and unaddressed age discrimination in hiring. Millions of older workers are forced to spend down their savings, work in low-paid jobs, and, finally, to retire as soon as they are eligible.

To make matters worse, the Social Security formula operates to benefit the rich and penalize the poor. Workers can start collecting benefits  at age 62 but their monthly benefits increase by about 6 percent per year if they wait until they’re 67. (Sixty-seven is the retirement age for anyone born in or after 1960).  If a worker can wait until age 70 to start collecting benefits, his or her monthly benefit will be about 75 percent higher than if the worker had started collecting benefits at age 62.  Older workers who are forced to retire because of age discrimination end up on the losing side of the Social Security benefit formula.

It’s hard to say how many older workers have been forced out of the workplace in recent years and the degree to which age discrimination is  responsible. A 2013 AARP survey found that  two-thirds of workers ages 45–74 said they had seen or experienced age discrimination on the job. Of those, 92 percent say it is very or somewhat common. Women were more likely than men to say that they have seen or experienced workplace age bias (72 percent vs. 57 percent). Meanwhile, there is no doubt that age discrimination in hiring is blatant, epidemic and unaddressed.

More research is needed on the impact of age discrimination in employment on retirement but the U.S. government ignores the problem. 

Many unemployed older workers have given up the hope of even finding decent work.

This week, the Economic Policy Institute estimated that millions of workers have disappeared from government rolls because they are discouraged or have given up the hope of finding a job. According to the EPI, the real unemployment rate would be 7.2 percent (and not  the official rate of 5.1 percent) if it counted workers who are not counted due to weak employment opportunities  Other estimates put the unemployment rate number  much higher at more than 10 percent.

A survey earlier this year showed that half of older workers who experienced unemployment in the last five years are not working: 38% reported they were unemployed and 12% had dropped out of the labor force.

Economists say the  United States is experiencing one of the lowest labor participation rates since the 1970s – only about 62.6 percent – of the labor force is working. The nation’s labor participation rate is defined as the share of the working-age population that is either working or looking for work. The share of the population 16 years and over in the workforce was 66 percent in December 2007 when the economy fell into recession, It is estimated that  the U.S. had the same labor participation rate today as in late 2007, the nation’s workforce would be roughly 8 million larger than the July 2015 figure of about 157 million.

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