Too Many And Too Few: What are Reasonable Opportunities for Flexible Work?
Posted Wednesday, April 1st, 2015| Comments Off
Do Purpose and Passion Add Up to Impact?
Some suggest that reasons for Europe’s slow economic recovery have much to do workers receiving too many protections with a disregard for costs and unforeseen consequences (evidenced in rising debts and high youth unemployment). In contrast, the U.S. economy is appears to be thriving (as evidenced by stock market surges). Differences between the United States and Europe have much to do with the way work is organized. Observing fissures in the wake of the Great Recession, and the opportunities presented by an economic recovery, opens the prospect for both Americans and Europeans to rethink the reasonableness of existing arrangements, including those that relate to work flexibility.
When it comes to access to flexible work (such are family leave and reduced schedules), what is reasonable? On an objective level, if flexible work arrangements cripple the capacity of organizations or a national economy to operate effectively, they are hard to justify. However, if family-level or community-level benefits result, costs incurred by organizations or taxpayers might be warranted. On a comparative level, what is reasonable can be framed in reference to normative standards, meaning the terms under which similar economies operate.
First consider the objective criterion. While there has been an economic recovery in the US, it has primarily benefited top income groups. It has simultaneously left many behind, as evidenced by flat employment growth rates and wage stagnation. One should not equate the lopsided US recovery as indicating an economy that is working effectively or to its maximum capacity. Given that the economy is generating more wealth, on an objective level it should be able to venture greater support for more generous flexible work options, such as paid family leave and paid sick leave. But as it stands, in the US limits are imposed on who can contribute to the economy, how, and on what terms. These limits hamper the economy.
Now consider the comparative criterion. Every country in the European Union offers rights to flexible work options and job securities that American workers do not have. As a consequence, employers stomach more constraints and citizens pay higher taxes. But in return, employees have options such as the “right to request” in the United Kingdom, in which they receive fair hearings for adjustments to their work arrangements. In the United States, not only can employers ignore employee requests for flexibility, they can also expand and contract work hours at will. Part-time work in Europe is not penalized as severely as it is in the United States, where a shift to fewer work hours can have prohibitively high costs (such as exclusion from employer-sponsored health care programs). Paid family leave policies that exist in virtually all advanced economies enable parents to take from half a year (Iceland for example) to a full year (or more as in Sweden), as compared to 12 weeks of unpaid leave that is available to select workers in the United States. And as one last example, consider that all European Union member nations provide employees with a right to a month or more of paid vacation time, as compared to no statutory right to any paid vacation time in the United States.
Under current conditions, American workers navigate careers in contexts of insecurity and inflexibility, where-as Europeans have difficulty initiating careers, but with far greater protections. None of the economies are working as might be hoped. On the basis of both objective and comparative standards, if other countries have gone too far in supporting options for flexible work, the United States has certainly not gone far enough.
Stephen Sweet is the author of Changing Contours of Work (2013, Sage) and The Work-Family Interface (2014, Sage)
Posted Wednesday, March 11th, 2015| Comments (2)
Does Age Discrimination in Employment Exist?
Time after time, in survey after survey, my own cohort of Baby Boomers, as well as people into their 70s and beyond, express a powerful impulse towards finding and serving a purpose beyond themselves. The organization I work for, Encore.org, is built upon our belief that a largely untapped human resource for effecting social change flows from that sense of purpose.
But what’s the connection between wanting to make a difference and actually making one? My own thinking got a jolt last fall when I read Jonathan Rauch’s fascinating cover story in The Atlantic, “The Real Roots of Midlife Crisis,” a savvy romp through a slew of research on happiness in later life.
Rauch begins by reviewing research into the well-known U-curve of lifetime happiness: Happiness bottoms out around age 50 and starts climbing after that. After discovering that this phenomenon cuts across geographies, cultures and other primate species, Rauch digs into its possible biological, psychological and evolutionary roots. Rauch first cites Stanford psychologist (and Encore.org board member), Laura Carstensen, on where people find satisfaction in later life: “As people age and time horizons grow shorter, people invest in what is most important, typically meaningful relationships, and derive increasingly greater satisfaction from these investments.
Rauch next recaps the work of Dilip Jeste and other researchers who are using functional-MRI brain scans to understand if older adults’ brains are wired for wisdom. Among the traits found to correlate with older age: greater compassion, less competitiveness, reduced regret for things one cannot change, greater social reasoning, improved long-term decision making and greater comfort with uncertainty and ambiguity.
And here is where the trail leads us: The purposeful desire to achieve social impact (throughout the life course) and the accretion of wisdom and the experience of greater happiness with the passage of time are accepted truths. Of course, for many people, social impact is channeled through their immediate social circle, for instance, as grandparents. This raises a crucial question: Do these wisdom traits, when joined with a passion for leaving the world a better place, translate into a unique path to social impact?
My answer: Yes. In my work over the last decade I’ve regularly witnessed the truth of this proposition. I’ve been privileged to read the stories of, and often meet, nearly 500 women and men recognized by The Purpose Prize, our program recognizing social innovators over the age of 60. Their deep empathy, lack of ego and willingness to risk failure for causes they deeply believe in is the existential ‘glue’ that unifies Purpose Prize winners and fellows, no matter where they live or what they do. It’s easy to see how those characteristics might translate into impact.
I’ve observed similar arcs for the more than 500 individuals that Encore.org has placed in Encore Fellowships in nonprofit organizations since 2009. These fellowships are meant to bridge the transition from a private sector career to work that’s focused on social purpose and impact. The evidence to date is anecdotal but enthusiastic: Numerous testimonials from nonprofit leaders acclaim the efficacy of these one-year encore fellowships in creating transformational change.
This year, we hope to balance the anecdotes with analysis. Three studies are under way here that will shine a light on the purpose-impact connection. With Mihaly Csikszentmihalyi, the psychologist best known for the theory of flow, Claremont Graduate University professor Jeanne Nakamura is leading a team at the Quality of Life Research Center that is looking at the characteristics and pathways of social innovators who have been Purpose Prize winners and fellows. And in two related projects, one in partnership with organizations in our network that help people find encore roles and the other with Boston College, Encore.org is studying two broad questions: What types of impact are created by individuals serving in paid and pro-bono/volunteer encore roles? Second, is there a correlation between impact and personal characteristics most often associated with maturity, that were apparent in the individuals carrying out these encore roles?
Stay tuned for the results. And if you know of any research or have thoughts on the through-line between life experience, purpose and social impact, I’d love to hear from you.
Posted Tuesday, February 10th, 2015| Comments (2)
New SHRM Survey Finds That Many Organizations Are Unprepared for the Impact of Demographic Changes in the Workforce
If you ask many older workers if age discrimination exists, you will get a resounding yes. Surveys show that at least some older workers think they’re being discriminated against . However, self-reports are not the best measure of discrimination. While some instances of discrimination are obvious, others are more subtle, and sometimes there’s a non-discriminatory reason behind perceived differential treatment.
If successful lawsuits are any indication, there’s at least some age discrimination. In 2013, the EEOC reported 21,396 charges of discrimination under ADEA. Of that number, 7,232 were resolved by the EEOC, 7 suits were filed, and 16 suits were resolved in court. However, the number of charges filed in 2013 represents only 0.025 % of labor force participants over the age of 40 and 0.043% of labor force participants over the age of 50. Of course, this number could also be underestimating the problem if people don’t realize they are being discriminated against or they want to avoid a costly lawsuit.
It is more difficult to study age discrimination than it is to study gender discrimination or race discrimination. With race and gender, we can set up experimental situations in which job applicants are identical except for their race or gender, but we cannot do that with age because as you get older, you should also have more experience. We may prefer a younger worker with just one year of work experience to an older worker with the same experience not because of age, but because that lack of experience with the older worker might suggest something about the older worker being unwilling or unable to keep a job. Similarly, older workers who have been in the labor market really do have more experience and employers may genuinely be worried about “over-qualification” instead of just using that term as code for “being older.”
We know that older people take longer to get new jobs while unemployed and are less likely to get new jobs than younger people. This difference by age is true even in cases where we might think the reasons for previous job separation have nothing to do with the quality of the worker, such as mass layoffs. But maybe older job seekers are just picky and expect higher salaries, or are less willing to move, or maybe they’re more likely to be in dying occupations or dying industries.
Experiments using hypothetical resumes can separate out differential treatment by employers from different preferences by potential employees. Laboratory experiments with simulated resumes suggest that older job applicants are less preferred, although the type of job matters in these experiments. For example, Elissa Perry has several papers with coauthors demonstrating that young applicants are preferred for “young-type” jobs. Similarly, while Phillip Young and coauthors found that younger PE teachers were preferred to older PE teachers, they found no difference in treatment by age for teachers in subjects that did not require physical activity. Recent work by Barbara Fritzche and Justin Marcus notes that older “job changers” are especially disadvantaged. There may be other interesting differences; some new work I am doing suggests that age discrimination in hiring in an entry-level position may have different patterns for blacks compared to whites.
In addition to laboratory experiments, researchers have done field experiments called “audit studies” that send simulated resumes to real employers and measure their response rates by age. A study in the 1990s by Marc Bendick Jr. sent applications to Fortune 500 companies and found that 32 year olds were preferred to 57 year olds. This study controlled for experience by giving previous experience as a teacher or in the armed forces, which may be introducing different biases other than age. In a more recent labor market experiment, I sent resumes to entry-level job openings in Boston and St. Petersburg, and found that younger women applicants are 40% more likely to be called back for an interview than older women applicants. This experiment, however, is only really externally valid for women applying to entry-level jobs and doesn’t say much about other labor markets or other job seekers. Current work by David Neumark is looking at isolating the effect of experience on differential treatment by age for a wider range of jobs and positions.
Bottom Line: Yes, age discrimination exists in hiring, but we don’t know its full extent. We only have small pieces of the picture and there’s a lot more work that needs to be done to see the full picture.
Posted Wednesday, January 14th, 2015| Comments (3)
Change Is Coming to the Workforce: Will You Run Towards It, or Will You Run Away?
Given the recent discussions about skills shortages and recruiting difficulties in the popular business media and among many business leaders, you might be surprised to know that over half of businesses and organizations are either not aware of a demographic shift towards an aging workforce or are not actively taking steps to prepare for the impact of these changes. This finding comes from a recent SHRM Research survey of HR professionals, which also found that currently few HR professionals believe the potential loss of talent due to retirement of workers is considered crisis or even problem in their industry.
The survey is part of a three-year initiative undertaken by The Society for Human Resource Management (SHRM) and the SHRM Foundation, and supported by a grant from the Alfred P. Sloan Foundation. The goals of this project are to highlight the value of older workers and identify the best practices for employing an aging workforce. So far, the survey has uncovered an apparent lack of concern about losing a key source of organizational talent.
SHRM’s analysis of the steps that organizations are currently taking to prepare for the future can be seen in the chart below. About one-third of respondents (36%) said their organization was preparing for the projected increase in the proportion of older workers in the labor force by “beginning to examine internal policies and management practices to address this change”. One-fifth (19%) of respondents indicated their organization was just becoming aware of this potential change in the ratio of older workers, and another 10% are unaware of potential change. In contrast, about 13% have proposed or implemented policies or management practices, and one-fifth (20%) indicated their organization has examined their workforce and determined that no changes in their policies and practices are necessary,
What could explain the disconnect between changing workforce demographics and HR activities? It may be that there is a lack of clarity about when and how these changes will take effect within a given industry and organizations. Only about half of HR professionals said their organization tracks the percentage of employees eligible to retire in the next 1-2 years and even fewer forecast workforce demographics beyond that time frame. Around 20% or fewer organizations have done workforce assessments around the loss of workers aged 55+, identifying future workforce needs and potential skills gaps in the six years and beyond timeframe.
Overall, the findings suggest that many organizations may not be fully aware of the various ways these demographic shifts will influence their organizations. Additional SHRM research in the series looks at how those organizations that are responding to these demographic shifts are adjusting their recruiting and retention strategies to specifically target older workers and about the skills and experience HR professionals most value in older workers.
For more information about the SHRM/SHRM Foundation Older Workers initiative go to www.shrm.org/surveys and www.shrmfoundation.org.
How Organizations Are Preparing for the Projected Increase in the Proportion of Older Workers in the Labor Force 1
1 “According to the Bureau of Labor Statistics, workers 55 years of age and over are projected to make up approximately 26% of the labor force by the year 2022, compared to 21% in 2012 and 14% in 2002. As the proportion of older workers increases, the potential impact resulting from the loss of their knowledge and experience may become more substantial. Which of the following best describes your organization’s preparation for this change?”
Posted Wednesday, November 12th, 2014| Comment (1)
An Anti-Retirement Advocate
Maybe because it’s my personal cause célèbre — not to mention my full-time job, as executive VP at Encore.org, a national nonprofit that aims to channel the skills of people in and beyond midlife for the greater good — but I’m always asking people what they’ll do next, if they plan to retire. Even when their plans include some time off, many people want to stay engaged with the wider world and make a constructive difference — and also recognize the need for continued income, even if it’s not their current full-time salary.
But too often, the conversation hits a dead end right there. As much as we like the idea of a ‘second act,’ few of us have given much thought to what our own second act might actually be. Retirement can look more like falling off a cliff than stepping onto a launch pad.
It’s unfortunate that companies large and small don’t offer much help to their employees in planning life beyond retirement. Often, assistance is bare-bones: a brief financial seminar or potential tuition reimbursement. But few corporations offer a structured program to help retirement-eligible employees negotiate the transition.
That’s the conclusion of new research by The Conference Board and Encore.org, which surveyed 91 employers to find out how they helped employees with these transitions. The answer: Not much.
Only 25% of employers do anything at all. Of those, only one in five — or 5% — have anything resembling a structured transition program.
We asked why companies don’t do more to help their employees move into their next chapter. The overwhelming reason: The transition to post-company life simply wasn’t a strategic priority.
Well, maybe not yet. But, as the report indicates, it should be — especially for companies that employ older workers. With Baby Boomers moving into what’s been considered the traditional retirement years, companies will soon confront very real challenges in managing their talent — both the employees they seek to retain and those who are ready to move on.
One of the most prominent benefits to companies like Intel, HP, IBM and a company called YourEncore (created for a consortium that includes P&G, Boeing and Eli Lilly), which have transition-planning programs, is a better toolset to develop and manage talent. These tools yield employees who are more engaged as they approach retirement, with a clearer sense of what can follow. In their second acts, they serve as ambassadors for their companies in the community, and they inspire loyalty among employees whose future second acts might be decades away.
Encore.org presented this research at our Encore2014 conference. The conversation included human-resources leaders from the corporate and nonprofit sectors, who agreed that transition-support programs were valuable resources. Last month, I joined Julie Wirt, Intel’s global retirement design manager, in a Conference Board webcast, where you can learn how Intel views the program and what it took to set it up.
One of the Encore 2014 panelists, Lisa Taylor, founder of Challenge Factory, shared a useful analogy. Growing up in a town laced with railroad crossings, Lisa learned that when a car is stalled on the tracks and a train is approaching, you should, perhaps counter-intuitively, run towards the train. That way, you’re less likely to be hit by flying debris.
With the “oncoming train” of changing workplace demographics barreling down the track, companies that run towards the train, anticipating the needs of employees who are looking for their next chapter, will avert the “flying debris” — and come out ahead, by retaining valuable talent for whom incentives make a powerful difference.
As Amber Wiseley, Intel’s Retirement Design Strategist for the Americas, noted at the conference, companies need any tool they can get their hands on to manage talent and make sure their workforce remains as motivated and productive as possible in a time when every dollar spent comes under scrutiny.
Posted Wednesday, August 20th, 2014| Comments (3)
Moving from Ideas to Action: Growing Interest in Encore Careers
At 89 years old, retirement is one of the few things that has not made it onto Robert E. Levinson’s vita.
Levinson almost single-handedly seems to be trying to start an anti-retirement movement. He feels so strongly that he once wrote a book titled, “The Anti-Retirement Book.”
“I just feel very strongly that one should never retire, or if they’re forced to retire they should try to find something productive to do,” he said.
Though not wealthy, Levinson is one of the lucky Americans. The long-time businessman and fund-raiser for a Florida college is college educated and said he is comfortable financially. But when he looks around his luxury senior community in Delray Beach, he sees pain and regret. Many residents seem idle. For example, a retired physician sits in the lobby waiting for people to drop by and consult him on their ailments.
“If you made a survey of all these guys who are retired, you would find that probably 75 percent would say to you , ‘I retired too soon,’ ” Levinson says.
On Tuesday, Squared Away profiled two older Americans who, after retiring, were pulled back into the work world by their desire to re-engage. But Levinson has simply blown past the traditional retirement age range chosen by most Americans—the 60s—and just keeps working.
He doesn’t really need the money he earns in a late-life career built on his varied interests. He’s just always been driven to work hard, and that did not change simply because he got older.
After college and a stint in the U.S. Navy in the mid-1940s, he and his brother ran an Ohio manufacturing company they eventually sold to American Standard. While continuing to work as a group vice president for the corporation, he bought one hotel in Pompano Beach—later, he built two more in southern Florida. He lost the hotels due to financing difficulties, he said. For the past 25 years, he’s been working as a development officer at Lynn University in Boca Raton. He’ll leave that job next spring.
That won’t slow him down. He plans to work more with his son at a consulting company he founded back in 1969, in addition to writing books, which have included “Full Circle, A Love Story,” about his relationship with Zelda Luxenberg, and the forthcoming “Management Savvy.”
Words of wisdom from a man who will turn 90 in March: Retirement “ain’t what it’s cracked up to be.”
Posted Wednesday, August 6th, 2014| Comments (10)
How Social Security Reforms Could Affect Employers
There is growing evidence to show that people are warm to the idea of encore careers—post-midlife work or pro bono service to meet community needs. Yet despite that interest, people aren’t easily moving from thinking to doing. What will it take to move more people from ideas into action? That’s the urgent question that surfaced in Encore.org’s 2014 national survey, which asked people 50 to 70 years old about their post-midlife plans, aspirations and concerns.
Interest in encore careers rose by 17% from 2011 to 2014, according to national surveys conducted by Encore.org and Penn Schoen Berland. These gains are coupled with demonstrably less concern about encore income and threats to personal flexibility, both identified as major obstacles in 2011—and relatively minor concerns three years later.
Nevertheless, the view that post-midlife is a time to use one’s personal skills and experience to help others is still held by twice as many people (55%) as are ready to take action to make an encore the defining feature of their own next stage (28%). Society needs the contributions of that other half. What will it take to better convert this belief into action?
Lowering perceived barriers to encore careers is one important step and it looks like there’s been some progress on this front in the last three years.
For example, fewer people with a high level of encore interest say that the economy would make it hard to move into encore work. That could make sense. After all, the job market has been strengthening, albeit slowly. As the economy continues to gain strength, we might hope that the options for people to move into work that speaks to their need for purpose and social impact will also improve.
Further evidence: In 2011, 30% of those interested in an encore career had significant concerns that a next act focused on social impact wouldn’t provide the income they needed. This concern was among the top barriers just three years ago. In 2014, it dropped to one of the least significant obstacles.
In 2011, fear that moving into an encore career would mean a loss of flexibility in taking care of other important needs, like family care-giving, was quite high. Three years later the percentage of those most interested in an encore career and who were quite concerned about this dropped by two-thirds. It’s possible that this relates to the diminishing concerns around income since people may believe that they can now afford to have jobs that allow them the flexibility they need. It’s also possible that there is a growing perception of greater workplace flexibility, perhaps especially in the nonprofit sector.
Fear of age discrimination remains a significant concern, although it dropped too. The continuing concern wasn’t a surprise. At Encore.org, we sometimes feel inundated with horror stories of older people shunned in their job searches. They are no doubt true and the stats about people over 50 who have been out of work the longest remain depressingly high.
The lesson here is that we need to combat age discrimination more vigorously by raising awareness of the value experienced workers bring. More broadly, we need to make the case that people in encore careers need to be part of the human talent mix in any organization tackling big challenges where experience is an asset.
What about the obstacles that socio-economic concerns pose for those interested in encore careers?
I was pleasantly surprised to see that perceived barriers dropped across all income levels.
Still, there is greater concern among the lowest earners than among those in higher income brackets. And some issues pose greater challenges to those with lower educational levels. Those with only some college expressed more concern than those who had completed college about their own confidence in trying something new, the need to learn new technologies, their health, age discrimination and the state of the economy.
Clearly, investing in those who haven’t yet completed college needs to be a priority for the encore movement. The growth of programs addressing the 50+ population in community colleges is a positive sign, but there is much more that can be done in this arena. There’s a role for four-year colleges and universities here, too, as they bring encore-type programs to their continuing education offerings. Completing college is often a step in social mobility that can happen at any age.
Perhaps the biggest lesson is that work allowing people to use their talents and decades of experience to improve their communities cannot be limited to any single socio-economic stratum. The desire to make a difference spans the gamut from those with low income and few assets to those with more resources.
With some of the most significant concerns that have held people back from pursing their encores appear to be lessening, we need to do everything we can to make sure that the opportunities are there for those who want them. It’s a human resource our society cannot afford to waste. Please comment. We welcome your thoughts.
Posted Wednesday, July 23rd, 2014| Comment (1)
Encore Entrepreneurs to the Rescue
Social Security payroll taxes are a major expense for employers and employees alike. Each party now must pay 7.65 percent on the first $117,000 of covered wage earnings, with that amount split between Social Security (6.2 percent) and Medicare (1.45 percent, with the proceeds going to the Medicare trust fund that pays for hospital expenses under Part A of the program).
These taxes are nearly universal in private workplaces and, increasingly, in government jobs as well. It’s easy to see them as an immutable cost of business, which over time becomes a forgotten fixed cost. The same is true for employees, especially younger ones.
But in an aging nation, the importance of retirement in general and Social Security in particular will only grow. And if employers looked at the program with fresh eyes, they might be able to fashion better benefit programs and strengthen relationships with their employees in the process. Here’s a quick primer on Social Security and a look at the impact of changing payroll taxes.
Social Security reform has been just around the corner for years. The last major reforms in the program were enacted in 1983 by the Greenspan commission, headed by economist Alan Greenspan, who would later chair the Federal Reserve Board for nearly 20 years. Creating an authoritative commission was necessary because even 30 years ago, Congress could not muster the consensus to make changes in the program. Today, of course, Congress has trouble mustering a consensus that today is even today.
But cracks in the program’s finances have been evident for a long time. Changes billed as ensuring solvency for 75 years, it turns out, will endure for fewer than 50. The program did build up big surpluses but they are now being spent down, with benefits exceeding revenues at an accelerating pace.
The overall fund for OASDI (Old Age Security and Disability Insurance) is split into separate OAS and DI funds. The latter is in especially bad shape and will run out of money in about two years.
Congress could authorize that more money be siphoned into the DI fund from the much larger OAS fund. This has happened once before, and allowed Congress to defer broader reforms. Doing so again is possible but the time for fixing broader issues without causing major problems with people’s retirement plans has run out.
Common wisdom, while perhaps an oxymoron inside the Washington beltway, holds that people aged about 55 and older should be spared from any major negative changes in Social Security. They are close enough to retirement that they do not have enough time in their careers to adjust to any Social Security cuts.
With OASDI projected to be unable to pay all its scheduled benefits in only 15-16 years, the need for a 10-year lead time means that the program’s cushion will get much, much smaller before reforms begin to reduce annual deficits.
The menu of possible reforms includes extending the retirement age, reducing annual cost of living adjustments, means-testing benefits for high earners and other benefits tweaks. But there is no way to come close to balancing Social Security without changing payroll taxes.
While it’s called a payroll tax, Social Security taxes are not regarded the same way as income or sales taxes. Generally, people feel like their payroll taxes are a fair price to pay for their future Social Security benefits. Last year, the National Academy of Social Insurance found that people were willing to pay more in payroll taxes to preserve the program.
“Eighty-two percent of those surveyed agreed that it is critical to preserve Social Security for future generations even if it means increasing Social Security taxes paid by working Americans,” says Elisa A. Walker, a NASI policy analyst. “Responses were remarkably constant across political parties, age, income, and race/ethnicity. For example, those who agreed it is critical to preserve Social Security for future generations even if it means increasing Social Security taxes for working Americans include 74 percent of Republicans, 88 percent of Democrats, and 83 percent of independents.”
There are two major ways to boost payroll taxes: 1) raise the wage ceiling on which taxes are owed, and, 2) raise the percentage rate of the payroll tax. The impact of both were laid out in a recent report from the Congressional Budget Office.
Historically, 90 percent of wages were captured by payroll taxes. In recent years, wages have stagnated for the middle class but continued rising for higher earners. Today, as a result, only about 83 percent of wage income falls at or beneath the ceiling, which is $117,000 this year and rises each year by the rate of consumer price inflation.
Raising the ceiling back to 90 percent would be a logical first step toward boosting program revenues. If this were done (and it would need to be phased in over years), the wage ceiling would more than double, the CBO said. If the change were made all at once, the ceiling in 2015 would be $241,600. People earning between the current and new ceilings would get a boost in their eventual Social Security benefits in exchange for their higher taxes. But it would be a very modest boost. Social Security has a very progressive benefit formula that credits a high percentage of lower-earners’ wages but a very small percentage of high-end wages.
This increase would, by itself, close 30 percent of the program’s projected financial shortfall during the 75-year window from 2014 to 2089 (program solvency projections are based on a 75-year time span). Some people would like to load even more of the financial burden on wealthier earners.
Eliminating the ceiling and making all wages subject to the payroll tax would close 45 percent of the projected shortfall, the CBO estimated. And if higher Social Security benefits for high earners were limited more than under current law, it would be possible to eliminate nearly two-thirds of the system’s financial problems solely on the backs of the wealthy. For many reasons, I oppose this.
Increasing the OASDI part of the payroll tax to 7.2 percent from 6.2 percent (for both employee and employer shares) would close 60 percent of Social Security’s 75-year financial shortfall, the CBO projected. So if this were done and the annual tax ceiling were increased to capture 90 percent of wage earnings, 90 percent of the shortfall would be addressed.
Of course, solving Social Security’s problems is much easier on paper than in reality. Conservatives tend to oppose any tax increases and often seem especially against higher taxes for the wealthy. Liberals recently have rallied to the notion that Social Security reform must include higher revenues that would fund more benefits for lower-income earners.
Posted Wednesday, July 9th, 2014| Comments (5)
Social Security at 62 but Fairly Healthy
Solopreneurship and the End of “Retirement”
I think we can all agree: the later years of life—those decades formerly known as “retirement”—are changing rapidly… and radically. The Baby Boom gifted 21st-century America with a graying population: there are 78 million Baby Boomers, the first of whom turned 65 in 2011. Today, we’re turning 65 at a rate of about 10,000 a day, and 65+-year-olds make up about 13% of the U.S. Population.
Meanwhile, traditional pensions are dwindling and Social Security is in trouble. The recession and painfully slow recovery mean that retirement savings are in short supply, while many near-retirees have also lost home equity or a job. And because the population is growing older so quickly, programs for the elderly are expected to consume an ever-larger percentage of federal dollars (the projected statistics for 2015 put federal spending for the elderly at nearly half the federal budget).
Pretty bleak, huh?
But then there’s the upside! Americans are living longer, healthier lives than ever before. My friend Bill Zinke of the Center for Productive Longevity calls it the “longevity bonus”: “The gift of the 20th century to the 21st,” he says, “was 30 extra years of life!” Quality of life is important to us, and we’re learning more and more about how to get healthy, stay healthy, and make our later years better than ever.
So where does that leave us? A huge chunk of the population is approaching (or surpassing) “retirement age,” but retirement—in the traditional sense—seems out of reach … and the economic situation means that we really can’t afford to have people just sitting around. But even though all people want is JOBS, a staggering 78.5% of businesses never hire employees. These businesses are one-person ventures. Meanwhile, however, even if there were jobs, getting one would be another thing entirely: rampant ageism in the workforce has left a disproportionately high percentage of workers aged 50 and older unemployed for the long-term, draining their savings and forced to rely on government services.
Oh, and don’t forget! We have three extra decades of health to enjoy our retirement … or lack thereof.
It seems like a frustrating bundle of insolvable puzzles and Catch 22s, doesn’t it?
The good new is that it doesn’t have to be. Introducing one of the most interesting trends in the business world: encore entrepreneurship.
- Someone who is 50+ and excited about their “next act”
- Part of the fastest-growing segment of the American workforce
The U.S. Small Business Administration has a whole campaign directed specifically at encores, and for good reason: among working Baby Boomers, more than five million run their own businesses or are otherwise self-employed.
Encore entrepreneurship solves a number of problems in one fell swoop: staying productive is a great way to stay healthy, and running a business (especially if it centers around something you love doing) is a great way to stay productive for those of us who can’t afford to spend our entire “next act” volunteering or pursuing a hobby. Furthermore, encore entrepreneurs can keep working without having to get all worked up about the JOBS issue … and that “keep working” bit is just what our economy needs right now (not to mention our wallets!)
In short, the encore trend is paving the way for an increasingly vibrant economy full of healthy people (and saving the government money on social services and elder care costs!)
Welcome to the Age of the Solopreneur.
Solopreneurs are entrepreneurs who work alone. They might be writers, coaches, consultants, or artists. They might be massage therapists or CPAs. They are outsourcing the help they need, treating their time as the precious commodity it is, and using their passion and talents to make a living (and a good one—successful solo businesses can make $100,000 or more a year). Whether they call themselves “freelancers,” “home-based businesses,” or “self-employed,” they are predicted to make up 50% of the labor force by the year 2020.
And yet everyone—from the highest-ranked politicians in the federal government to local Small Business Development Centers—is obsessed with the same old questions: Why aren’t there any jobs? How can we get more of them?
You see, I believe we’re measuring the wrong thing: we’re wasting our time talking about JOBS. What we need to be measuring is work. Given the huge percentage of solo ventures out there, we need to figure out how to teach solos to be successful, and stop agonizing about the lack of good old 9-5 JOB-jobs. My decades of working with small businesses have made me realize that traditional business wisdom, which focuses on the “pyramid model” of hiring employees, is simply not applicable to solo ventures. Solos need to BE the business and DO the work they love—not hire other people to do it for them. I’ve developed some tools to help solos on their path to financial success, and I’m convinced it’s possible for everyone.
But what brings this all full circle is that I’m convinced that it’s especially possible for Boomers and seniors. As we’ve already discussed, we’re seeing more and more encore entrepreneurs, and solopreneurship is the easiest way for encores to be in business because of its flexibility. So if the idea of starting a business makes you want to run the other way, hang on a second! The internet and all of the e-tools we have available have made solo businesses scalable; geography no longer matters. You can sell your product or service anywhere, anytime.
In addition, many encores already have the basic requirement, the very first principle for successful solopreneurship: they have a lifetime of learning in one particular area, meaning that they have a focused passion for a deep and narrow niche. Bill Zinke of the Center for Productive Longevity calls it “Double ESP”: Boomers and seniors have Experience, Expertise, Seasoned judgment, and Productivity. Doesn’t that sound like a recipe for a successful business?
Now, I don’t want to paint too rosy a picture: solopreneurship has it’s own unique set of challenges. But that, after all, is why I wrote my book, Better, Smarter, Richer: 7 Business Principles for Encore, Creative, and Solo Entrepreneurs … and started my own solo-encore venture! I would love to hear your entrepreneurial stories and help make your next act better, smarter, and richer—drop me a line or visit me on the web!
Posted Tuesday, June 24th, 2014| Comment (1)
Are people who claim their Social Security retirement benefits when they’re 62 too sick or impaired to work?
Fast forward three years, to when these early claimers turn 65. They’re about as healthy as those who decided to wait until age 65 to start receiving their Social Security retirement benefits, according to preliminary findings from a study using Medicare spending data as a proxy for health. The early claimers are also far healthier than people who left the labor force early to go on federal disability.
Some 8,500 older Americans were in the study’s sample, and they fell into four different groups: those who claimed a reduced Social Security pension soon after turning 62; those who claimed a larger pension at 65; those who were awarded a Social Security disability benefit before turning 62; and those who applied for disability but were denied and then claimed their retirement benefit after age 62.
The researchers, from the University of Michigan and Johns Hopkins University, examined Medicare claims from 1991 through 2008 for the four groups during the year following their 65th birthdays. They found no evidence of persistent health problems that would have kept the 62-year-olds from continuing to work for a few more years.
Controlling for race, sex, education and other factors that have a bearing on health, the $287 annual difference in Medicare claims between people who started receiving retirement benefits at 62 and at 65 was not significant. Similarly, the healthcare spending of people who received disability benefits and those who were rejected was virtually the same.
But there was a large gap between the group who claimed a retirement benefit at 62 and the group on disability: Medicare claims for disability recipients were $4,400 more annually than the claims for early pensioners.
It’s important to note that this analysis doesn’t capture any differences in healthcare spending that may’ve occurred prior to age 65. That’s the age of Medicare eligibility for everyone in the sample except those who qualified for Medicare sometime prior to turning 62, because they were receiving Social Security disability benefits.
When the researchers repeated the analysis using Medicare claims at age 70, however, the story was the same: poor health seems to play a fairly small role in the decision about when to claim Social Security retirement benefits.
Full disclosure: The research cited in this post was funded by a grant from the U.S. Social Security Administration (SSA) through the Retirement Research Consortium. The opinions and conclusions expressed are solely those of the blog’s author and do not represent the opinions or policy of SSA or any agency of the federal government.