There has been lots of buzz the past few weeks about Paul Ryan’s plan to abolish Medicare to help Republicans lower their deficit. Why they focus on demolishing Medicare rather than on reducing military spending, I’ll never understand, but that is just me.

Here is all you really need to know about the Republican Medicare strategy: Seniors will pay a lot more for medical care under the Ryan Plan.

If you want to really understand why this is so, I recommend you turn to the always informative James Kwak at the Baseline Scenario blog. He wrote several excellent posts last week discussing the issues surrounding Medicare and how they could be addressed.

Now For The Important Part

If you are over 55, you may have already decided that this debate doesn’t concern you. Don’t make that mistake.

The Ryan plan has been designed so that the over 55 population will pay as little attention as possible. This is a transparent, cynical attempt to take the citizens who know the most about this issue out of the debate.

Think about it. Which segment of the population knows the most about Medicare? (Okay, besides health care providers.) The answer is the Seniors who are already covered by it. Most Seniors are satisfied with Medicare. So what does the Ryan plan do? It takes them out of the debate. No one who currently receives Medicare will be affected by the Ryan Plan. Hear that sound? It’s the sound of everyone over 65 losing interest. Mission Accomplished.

Okay, next question. What segment of the population is most concerned about their health care costs? Could it be people in their 50s who have been watching their health insurance premiums and co-pays and deductibles rise and rise and rise just as they themselves are starting to need more healthcare? Ah, well they don’t have to worry. The Ryan plan will not affect anyone over 55 either. Hear that sound? It’s a heavy sigh of relief from about 35 million citizens.

So who is left to worry about the Ryan Plan? Let’s see, could it be the young, healthy 20 or 30-somethings who feel great and don’t think they will ever get sick? Or maybe the 40-somethings who are being told (falsely) that Medicare is bankrupt and won’t be around for them anyway?

Divide and conquer

It is all a craven political ploy, typical of modern day Republican politicians. Take the people who know and care about the issue out of the debate. Then lie to anyone else who is paying attention until you convince enough of them something bad is going to happen no matter what. Then say, “Hey, we will give you a voucher when you turn 65 to help you with medical costs. It’s better than nothing.”

Voilà! The only decent, working aspect of the US healthcare financing system is destroyed.

Don’t let it happen.

Pay attention. Read and learn. Share your knowledge. Help protect what works about the US healthcare financing system and demand that politicians fix what doesn’t.

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Trapped in the House?

The current economic downturn has been hard on people thinking about starting over.

Job losses have hit people over 40 particularly hard. Some of us have had to tap into savings because of extended unemployment. All of us have seen our retirement portfolios shrink to the point we can barely see them without our reading glasses. And let’s not even talk about the value of our homes.

Actually, I’d like to reconsider that. Maybe we should talk about the value of our homes.

For many of us, our homes represent our single most important investment. Year after year, we’ve sent in our monthly mortgage payments and paid those crazy property tax bills, comfortable in the knowledge that we were building equity and a nice little nest egg.

Whoops.

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Health Insurers Mislead on Profit Margins

Over the next few weeks, the endless debate on health care reform may actually move on to “The Next Hill” status. For people in their 40s, 50s, and early 60s, this is a critical issue. So for the next week, I’m going to talk about some aspects of the debate that have had me screaming at my television set. To start off, I want to talk about the health insurance industry.

President Obama has launched some fairly aggressive attacks on the health insurance industry recently. And why not? Health insurers are an easy target. They reported record profits for 2009 ($12.2 billion for the top 5 companies) but are still forcing unconscionably high rate increases on people who must buy their own health insurance. [click to continue…]

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1975 to 2050: And Now The Consequences Pile Up

This post is the last part of a five part series that tries to put our notions of retirement in an historical perspective. Part One may be found here. Links to the other parts are at the bottom of the page.

Suddenly Everyone Wants (And Expects) to Retire

By 1975, retirement had been completely internalized by the American public. In less than two generations, retirement had transmogrified from a business tool used to get rid of unwanted workers into every citizen’s Just Reward.

The exit of older American’s from the workforce represents one of the most dramatic changes in the America economy in the 20th century. In 1900, 65% of American males over 65 still worked. By 2000, that percentage had dropped to 17%. Corporate America had achieved its hundred-year-old goal: get those inefficient, decrepit, whining older workers out of the way.

Corporations no longer had to force older workers into retirement. Older employees marched happily into the sunset on their own. By the mid-1980s, mandatory retirement rules fell by the wayside, technically illegal for almost all occupations. Business leaders grumbled, but only a little. They really did not need the rules any longer. [click to continue…]

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This post is the fourth in a five part series that tries to put our notions of retirement in an historical perspective. Part One may be found here. Links to the other parts are at the bottom of the page.

1940 to 1975: The Postwar Era and the Selling of the Myth of Retirement

The 35 years from 1940 to 1975 finally saw retirement turn into the cherished institution it is today. After World War II, technology continued to transform the workplace. More than ever, the future seemed to belong to the young. The old needed to step aside. Social pressures to make room for the younger generation were pervasive and irresistible. Older Americans needed learn how to stop worrying and love retirement. Eventually, we all did.

World War II Changes the Game

During the Great Depression, millions of workers, young and old lost their jobs. But as Government policymakers struggled to put the country on the road to recovery, they focused exclusively on getting younger people back to work.

Someone had to be left out of the long, slow economic recovery. America could not keep all its citizens employed, and older people took the fall. Once a person turned 65, his work life was pretty much over. By 1940, 56.5% of men over 65 were no longer in the workforce.

But World War II put everyone back to work: young, old, men, women. Anyone who could work did work. The war put America at full employment again.

It also permanently altered our economy. To fight inflationary pressures, the Government instituted wartime wage freezes. Employers, desperate to attract and keep suddenly scarce workers, turned to fringe benefits not subject to the wage freezes. Instead of bigger paychecks, employees received paid health insurance and pension benefits.

The war lasted just long enough to get the fringe benefits ball rolling. In 1940, only about 12% of workers in the private sector had pensions. By 1945 that percentage had jumped to almost 17%. Fringe benefits were almost as good as money!

After the War, Older Workers Were Asked To Step Aside Again

As the war ended in 1945, millions of young men returned from Europe and Asia. They all needed jobs, of course. The women and older people who had worked on the home front during the war were expected to step aside for the returning veterans. It was the patriotic thing to do.

Corporate America reasserted its preference for younger workers. Mandatory retirement became an important mechanism for efficiency and cost control once again. And labor leaders, eager to impress younger workers, bargained for even more fringe benefits. In the end, Labor traded away the job rights of older workers for the supposed security of increasingly common pensions.

Fears of another depression also worked against older workers. Policymakers in government knew the peacetime US economy could not provide jobs for everyone. Taking older workers out of the workforce left more room for younger ones. New legislation encouraged private pensions with tax breaks that significantly reduced costs for employers. Earning restrictions on social security benefits also helped keep people over 65 out of the workforce.

Disgruntled Retirees Still Resisted

Barred from their old jobs by mandatory retirement at 65 and shunned by many employers even at 50, older workers struggled with their now truncated lives.

A very high percentage of retired workers remained dissatisfied with the notion of retirement. Many older people still believed that work was central to life. An alarming number even refused to apply for social security benefits. Surveys taken during the early 1950s found that up to 60% of workers nearing retirement age wanted to continue working. Public resistance to mandatory retirement was strong and seemed to be growing.

But mandatory retirement rules gave Corporate America, Labor, and the Federal Government something each wanted. All they needed to do was find some way to make the workers they were pushing off the cliff feel happy about it.

Selling the Myth

Faced with growing dissent, business, labor, and government interests joined forces to create a new definition of retirement.

Work was for the young, they proclaimed to older citizens. After years of hearing “Idle hands are the devil’s workshop,” older workers were now bombarded with a new message expounding on the joys of leisure. Retirement was not a tool for pushing aside older workers. It was a well-earned reward for years of dedicated service!

The term “Senior Citizen” gained currency, conveying the notion of a mature, responsible, disciplined person who knew his place in society (or perhaps more correctly, outside of it).

Insurance companies, seeing a huge market for life insurance policies that would help people prepare for retirement, were at the forefront of efforts to paint an idyllic picture of the joys of retirement. Organizations and magazines sprang up like weeds to encourage the blissful illusion.

It’s the Natural Order of Things…

Sociologists even pitched in to “help” by spinning new theories of aging that included the concept of disengagement, a hitherto unknown process whereby older people naturally withdrew from society as they prepared for decay and death. (I’m paraphrasing here.)

It was a patently ludicrous theory, but it served the needs of business and government, so it flourished for a time.

Of course, if some older people could not adjust to the unpleasant consequences of not working, society was more than happy to turn on them. Those who were unable to accept their new roles or who had not prepared sufficiently were dismissed as maladjusted, immature, or feckless.

Take It Easy, You’ve Earned It

The indoctrination program worked. By the late 1960s, the mythology of retirement had been completely assimilated into the American consciousness. Retirement became a full fledged industry.

Slowly but surely people stopped conceiving of work as a desirable or realistic alternative to retirement. Older people even learned to love the idea. Of course, they really had no other choice.

Protecting the Bounty

55.2% of private sector employees have pensions by 1975

Soon, nearly everyone saw retirement as the culmination of the American Dream. By 1975, over 55% of private sector employees had private pension plans available to them. The transformation was so complete Government focus shifted from encouraging retirement to protecting employee pension rights.

In 1974, the Federal Government passed the Employee Retirement Income Security Act (ERISA). The act protected the interests of employees in benefit plans, set disclosure rules and standards for pension plans wishing to qualify for favorable tax treatment, and created the Pension Benefit Guaranty Corporation to ensure that employees received their pensions if their plans went bankrupt.

Americans had so assimilated the notion of retirement as an entitlement that the Government was even able to turn its attention to the long neglected needs of middle aged workers too young to retire but often deemed too old for the workplace. The Age Discrimination in Employment Act of 1967, (ADEA) prohibited employment discrimination against persons 40 years of age or older. It was a toothless bill, but it marked the beginning of a trend that would continue in the future.

Because there was trouble ahead. A giant bubble called the Baby Boom was slowly inching its way through the American economy. As Baby Boomers began to reach the end of their productive lives, the game would have to change again.

Next: Part 5 1940 — 1975 to 2050: The Consequences Pile Up

Note: My primary sources for this series of articles are:

W. Graebner. A History Of Retirement: The Meaning And Function Of An American Institution, 1885 to 1978, New Haven, Connecticut, USA:Yale University Press 1980. 293 pp. ISBN 0-300-03300-1

D. Costa. The Evolution of Retirement: An American Economic History, 1880-1990. Chicago, Illinois USA: University of Chicago Press, 1998. 234 pp. ISBN 978-0-226-11608-2.

The Graebner book is a great read and I highly recommend it to anyone wishing to learn more about this subject. It is 30 years old, but it is still the definitive historical account of Retirement in America. It is currently out of print, but used copies are readily available.

The Costa book is also excellent. It is an economic history and takes a more quantitative approach.

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This post is the third in a five part series that tries to put our notions of retirement in an historical perspective. Part One may be found here. Links to the other parts are at the bottom of the page.

1930 to 1940: The Great Depression Turns Retirement Into A Civic Duty

By Jack Markow, 1935-1939, Franklin D. Roosevelt Library, NARA

Before 1930, the forced retirement of older workers was driven primarily by industrialists seeking greater efficiency in their factories and warehouses. After the stock market crash of 1929 and the beginning of the Great Depression, the federal government came to see retirement of older workers as its best tool for economic stimulus and social stability.

Economic Collapse Changes The World

The Great Depression caused severe disruptions in the social fabric of the United States. The 1930s were a period of widespread political and social disenchantment. Few of us today grasp the scope of this disillusionment. The large numbers of unemployed young people fed fears of chaos and revolution. The future of the country seemed at risk. Solutions demanded sacrifice. Getting angry, disillusioned young people back to work took precedence over nearly everything.

To create jobs for the young, older people were encouraged, even compelled to get out of the way.

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This unbearably long article, broken into five parts, tries to put our notions of retirement in an historical perspective. Part One of the series may be found here. Links to the other parts are at the bottom of the page.

1885 to 1929: Corporate America Demands Efficiency

The industrial revolution began in England in the late 1700s, but its migration to North America was a slow, incremental process. It was not until the 1850s and 1860s that industrialization finally began to gather steam in the United States.

As it did, leaders in business and government discovered they needed a mechanism to stimulate economic growth and facilitate the replacement of older, less efficient workers by younger, cheaper ones. Mandatory retirement for older workers became the preferred mechanism.

The Industrial Revolution entered a second phase in the 1850s with the discovery of new techniques for the mass-production of low cost, high quality steel. The demand for steel products was insatiable. Factories, and the rail networks to connect them, sprang up across the U. S. In 1840 the total length of steam powered railway tracks in the United States stood at 3,326 miles. By 1860, it had risen almost tenfold to 30,600 miles.

The Second Industrial Revolution

Urbanization in America, % of Population in Urban areas (1850 to 1930)

By 1885, the industrial transformation of America was well underway. The small mills, tanneries, and mule-drawn canal barges of the pre-industrial era gave way to ever larger industrial age factories and steam belching railroads. Large, impersonal corporations became the dominate form of business organization. The national character took an increasingly urban air.

Industrialization, of course, required machinery, and the machines required huge capital investments. Before long, the cost of machinery approached and then exceeded the costs of factory labor. Developing ways to maximize the efficient use of all this new equipment became the theme of the day.

The machinery of early industrial revolution was complex, but we are not talking robotics here. The machines still needed people to run them. Unfortunately, factory owners found that they often had to slow down the machines to match the capabilities of their workers.

By 1910, a new business theory of “scientific management” developed and spread, giving rise to professional “efficiency experts”. These efficiency experts, building on a worldview of social Darwinism—survival of the fittest—spread the notion that the most efficient society would ultimately be the most powerful society. Labor productivity became one of their buzzwords.

Employment Changes During the Second Industrial Revolution

Older workers who were no longer fast enough or strong enough to keep up with the machines slowed down production. The efficiency experts and their industrialist employers realized they needed to get older workers out of the way so that they could replace them with a younger, faster workforce. A steady flow of immigrants from America’s farms and Europe meant these younger workers were readily available. But the older workers refused to give up their jobs.

Mandatory Retirement Spreads

Businesses, government, and society in general were obsessed with the cold, hard efficiency. Since older workers were seen as inherently less efficient than younger ones, they had to be removed. This became a business axiom, and to some extent a social axiom as well.

Attitudes toward older people in general became increasingly negative. By the early 1900s, many factory owners were restricting the hiring of older workers and enforcing rigid mandatory retirement policies to get rid of those they had.

Many business leaders were at least a little uncomfortable with the idea of putting loyal older workers into the streets to starve. Some offered older workers pensions or helped build company homes for the aged and infirm.

Other employers reluctant to throw older workers into the street, moved them to less critical functions within the corporate bureaucracy. Often, these bureaucracies became holding institutions—informal retirement mechanisms—for older workers. But this was also glaringly inefficient, and left the efficiency experts fidgeting.

By 1920, mandatory retirement with some small company pension slowly evolved as the preferred method for moving older workers aside. This allowed employers to eliminate their older workers but feel secure in the knowledge that the retired would at least have enough money to survive.

Most Workers Resisted The Notion of Retirement

Of course, this plan met with resistance from older workers. Most mandatory retirement laws during this period focused on factory workers. Factory work in the early industrial age was brutally hard. But not having work was harder. In the impersonal industrialized cities, support resources for older people were often fractured. Family family members were often widely dispersed. Social services were almost non-existent. Retirement meant a significantly lower standard of living.

Men Over 65 in Retirement (1870-1930)

But confronted with increasingly common mandatory retirement rules many workers found themselves forced out of their jobs. By 1920 43% of white males over 60 were no longer in the workforce. Many older workers discovered that receiving a meager and insufficient pension was better than being pushed aside with no pension at all.

An uneasy equilibrium developed. Throughout urban America, older workers grudgingly stepped aside before they were pushed out. Few were happy with the situation. They fought retirement rules when they could, but they usually lost.

Then came the Great Depression to change everything.

Next: Part 3: 1930-1940 — The Great Depression Turns Retirement Into A Civic Duty.

Note: My primary sources for this series of articles are:

W. Graebner. A History Of Retirement: The Meaning And Function Of An American Institution, 1885 to 1978, New Haven, Connecticut, USA:Yale University Press 1980. 293 pp. ISBN 0-300-03300-1

D. Costa. The Evolution of Retirement: An American Economic History, 1880-1990. Chicago, Illinois USA: University of Chicago Press, 1998. 234 pp. ISBN 978-0-226-11608-2.

The Graebner book is a great read and I highly recommend it to anyone wishing to learn more about this subject. It is 30 years old, but it is still the definitive historical account of Retirement in America. It is currently out of print, but used copies are readily available.

The Costa book is also excellent. It is an economic history and takes a more quantitative approach.

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