ECONOMICS OF AGING: TOWARD A FULL SHARE IN

ABUNDANCE

TUESDAY, APRIL 29, 1969

U.S. SENATE,

SPECIAL COMMITTEE ON AGING,

Washington, D.C.

The committee met at 10 a.m., pursuant to call, in room G308 (auditorium), New Senate Office Building, Senator Harrison A. Williams, Jr. (chairman) presiding.

Present: Senators Williams, Moss, Hartke, Miller, and Saxbe.

Committee staff members present: William E. Oriol, staff director; John Guy Miller, minority staff director; Dorothy McCamman, consultant on economics of aging; Patricia Ślinkard, chief clerk.

OPENING STATEMENT BY SENATOR HARRISON A. WILLIAMS, CHAIRMAN

Senator WILLIAMS. The committee will come to order. We will begin the hearings on Economics of Aging: Toward a Full Share in Abundance.

That title was chosen to make several vital points. One is that the committee is not dealing solely with one or two issues, such as adequacy of social security benefits, or the likely levels of private pension payments a decade hence.

We are keenly concerned, of course, about such matters.

But a more fundamental purpose is to establish an overview of the many economic pressures that affect aged and aging Americans.

The committee will focus its attention on the personal economics of individuals who-in the final decades of their lifetimes-discover that fixed incomes and lifetime savings are either totally inadequate or barely enough for marginal life.

We will also try to look ahead to the likely economic situation that today's workers those who now think of retirement as far in the future-will face if present trends continue.

Give some thought for a moment, if you will, to that last statement. The point is that problems related to retirement income should not be regarded as solely the concern of those now retired.

Today's middle-aged head of household-struggling to pay off his mortgage, provide a good education for his youngsters, perhaps contributing to the support of a parent, keeping up with the Joneses in our expensive or modest suburbs-probably gives little thought to his own security in later years.

And yet, if he were to study today's retirement income problems, he would find little comfort from hard facts facing millions of Americans in retirement today.

Fortunately, those facts are emerging. But they have not yet caused the alarm bell to ring throughout the Nation.

This committee will sound the alarm as well as it can, and we will of necessity face the hard facts I mentioned before.

What kind of facts? Thanks to the task force which prepared a working paper in advance of this hearing, the Committee on Aging can offer the most hard-hitting statements yet made on the economics of aging. To summarize some of the major points made in the task force report:

Many older Americans who are poor did not become poor until they became old. And approximately 3 out of 10 people 65 and olderin contrast to 1-in-9 younger people are living in poverty.

There is an income gap between older and younger people; this has long been recognized. But, a less well-known fact is that this gap is widening. Generally speaking, elderly couples and singles have less than half the income of those still in the work force.

There is every reason to believe that the economic position of persons now old will deteriorate markedly in the years ahead; there is no good reason for thinking that low income in old age is a transitional problem that, given present trends, will solve itself.

Americans in middle-age or even younger should be concerned about projections and other studies which indicate that social security, private pensions, and other forms of retirement income are not improving fast enough to reverse or significantly counter present economic trends.

The task force report-which bears the same name as our hearingsis a disturbing document which will receive careful attention throughout hearings by the full committee and at specialized hearings on such individual subjects as:

1. Income maintenance of widows-a particularly disadvantaged group.

2. Health needs and rising medical costs.

3. Problems associated with homeownership and taxation.

4. Employment opportunities in later years.

5. Early retirement trends and their meaning.

On that last point, I would like to note that more than half the men who retired within recent years have claimed reduced social security benefits before the traditional age of 65.

HEAVY PENALTY FOR EARLY RETIREMENT

That fact alone would be worthy of careful scrutiny. Social Security studies show that most men pay a heavy economic penalty when they retire before age 65. It appears that those most in need of an adequate social security income often must settle for less earlier in life simply because they have no alternative.

Our formal testimony will begin in a few moments, but before it does I would like to put into the record at this point several excerpts from letters written after I first announced these hearings a month ago. The authors of these letters are, for the most part, elderly Americans who tell more eloquently than anyone else what it means to live in old age on fixed incomes in a land of abundance.

I'll read from a few before concluding.

From Pitman, N.J., comes this commentary from a man who had to retire because of a health problem a few years ago:

There is only my wife and I, and the Social Security pension for both of us amounts to only $1,920 a year, and from this amount we have to pay real estate taxes-water and gas and electricity-and for fuel oil. After these items have been taken care of we eat from the meager amount remaining. We cannot afford three full meals each day so manage on one good meal. The prices of meat are outrageous and to have a roast or steak once a week is beyond our reach.

Much the same situation is described by a man from Alhambra, Calif. I am 76 years old. I retired 10 years ago with my home paid for, and no debts. After ten years my property taxes have doubled. Every service and general living costs have skyrocketed and medical and doctor and hospital costs are as near to robbery as a cost can get: $600 for removing a cataract from one eye; almost $400 for the hospital (my wife had the operation). We fixed income people are in trouble.

And, from a 76-year-old woman who lives in Swarthmore, Pa.:

I am one of those elderly people, living alone, who has become poor since becoming old. Unable to work any longer, I am trying to get along on my Social Security of $55 per month income, besides drawing a few dollars from a fastdwindling nest-egg in the bank and an occasional fee from private French teaching and some baby-sitting, to meet the ever increasing cost of living. I am, however, aware of the fact that some elderly people are worse off than I, and for those, drawing less than $80 or $100 a month, the name of Social Security has become a paradox indeed.

WORRIED AND ANGRY

The message is similar in all the other letters I have received within recent weeks. Older Americans are worried and many of them are angry about economic problems over which they have very little control.

They have left the labor force, either voluntarily or involuntarily. They have seen their limited resources dwindle.

They want the same Nation that established a social security system 34 years ago to be equally inventive during more affluent times in finding new ways to deal with the retirement income crisis.

I will close this statement by pointing out that the committee had invited Secretary Finch of the Department of Health, Education, and Welfare to be with us today to deal with a subject which-I am sure HEW regards as both timely and important. The Secretary, however, could not be with us. I am happy that Commissioner Ball of the Social Security Administration is here to discuss some aspects of the issues before us. I expect a later appearance by the Secretary.*

We will begin this morning's proceedings with brief statements from the four task force members who-with consultant Dorothy McCamman-prepared the working paper on economics of aging. It is a pleasure to introduce Dr. Juanita M. Kreps, professor of economics, Duke University; Dr. James H. Schulz, associate professor of economics, University of New Hampshire; Mrs. Agnes W. Brewster, consultant on medical economics; and Dr. Harold L. Sheppard, staff social scientist, W. E. Upjohn Institute for Employment Research.

*For exchange of letters between the chairman and Secretary Finch, see app. II, p. 229.

After we hear from the task force participants, one aspect of the economics of aging will be dealt with from the executive branch by the Administrator of the Social Security program, Commissioner Ball. Before we come to Mr. Ball, I would like to have the statements from our task force participants who also will, I trust and hope, be with us through this hearing.

Dr. Kreps, would you begin?

SUMMARY BY TASK FORCE MEMBERS

STATEMENT OF JUANITA M. KREPS, PROFESSOR OF ECONOMICS, DUKE UNIVERSITY

Dr. KREPS. I am honored to introduce this discussion of the economics of aging and in doing so I should like to cite the following statement:

One of the things we know for certain about any aging group is that it has no future. The young become middle-aged and the middle-age become old, and the old die. Consequently, the support which the middle-aged give to the young can be regarded as the first part of the deferred exchange which will be consummated when those who are now young become middle-aged and support those who are now middle-aged who will then be old. Similarly, the support which the middle-aged give to the old can be regarded as the consummation of a bargain entered into a generation ago.

The transfer of income which is now made between generations primarily through governmental agencies rather than within family units has come to be accepted as a concomitant of the lengthened life span which prevails in all advanced countries.

The questions before us have to do with the major issue: how well are we meeting these income transfer needs of the elderly?

The task force which prepared the working paper to serve as a basis for the committee's deliberations was concerned with this major issue and within it, with these questions:

TASK FORCE: MAJOR QUESTIONS

1. What are the income levels of the present aged? How do these incomes compare with those of younger families and individuals? What are the assets of the elderly? How much do these assets add to the real incomes of older people?

2. What is likely to be the economic status of the future aged? On the basis of the best projections we can make, how will aged families and individuals fare a decade from now? Will the position of the future aged be improved significantly relative to the middle aged and the young of the future, or will the aged continue to be relatively deprived?

3. What are the reasons for the low-income status of the aged? Are older people suffering low incomes because of low-lifetime earnings or were they simply unwilling to save during their working lives? Are they in financial difficulties because of inflation of the price level? Because of forced retirement? Or does the explanation lie primarily in the continued growth in real incomes of the working population, which constantly raises those incomes above the levels fixed for retirees?