4. How much income smoothing through the lifespan do we wish to achieve? What temporal reallocation of man's lifetime income is desirable? Any reallocation achieved is at that point in time, of course, a shift of income claims from workers to nonworkers. But an increase in the incomes of the present elderly implies that the future elderly will enjoy a similar improvement in their living levels. 5. What are the mechanisms through which we can achieve the desired shifts and the timing of income? Should we look toward larger fringe benefits, such as increases in private pensions, at the expense of some direct wage payments? By what magnitude should social security benefits be raised? Once these benefits are improved, what provisions should be made for keeping retirement incomes in some way keyed to the growth of real incomes of workers? Finally, 6. Are there types of goods and services which can best be provided for the elderly through the public sector? What would be the additional costs of achieving the goals we set? Within the budget constraints we must face, what priorities can be established that will enable us to move systematically toward the long-range goals of improved living levels for the aging population? In posing these questions, the task force was able to provide only this briefest summary. We expect much more detail to be added by the knowledge and expertise of the witnesses that will appear during the hearings. However, we do note that the Nation's reluctance to allocate a larger portion of its largesse to the later stage of life sharpens the income break between work and retirement. In our deliberations, I hope we will keep in mind the earlier admonition that no age group has a future. Just as those of you who are young, will become middle-aged, so those of us who are middle-aged will become old. The composition of the aged will therefore shift in time to include those of us in this room. But the condition of the aged will not shift, not unless we reshape social policy. Thank you. The CHAIRMAN. Thank you very much, Dr. Kreps. Would you members of the task force proceed in whatever order you want? STATEMENT OF HAROLD L. SHEPPARD, STAFF SOCIAL SCIENTIST, W. E. UPJOHN INSTITUTE FOR EMPLOYMENT RESEARCH Dr. SHEPPARD. I am listed next, Senator, so I will quickly get on with, I hope, a brief statement. I want to talk a little bit about my own role in this task force, primarily as a person concerned with work, work experience and its impact on problems of older workers and work in aging as it in turn affects the future of people as they become old. The first thing I want to say is a general statement concerning-it might sound rather Pollyannaish-but an expression of my faith in our country to meet this problem but only through kinds of communications that we are trying to participate in. I still remember very vividly going to the U.S. exhibit in Brussels in 1958, and going through all the magnificent exhibits of our technological process and walking out of that building and seeing a little sign saying "Toward Our Unfinished Business." There was a little exhibit that most people didn't notice and it had to do with our problems in America. We were frank enough to admit the problems we were coping with. There was a small exhibit in a small building next to the regular one dealing with the problems of minority groups and of the aged in America. Unfortunately, they are still our unfinished business. My concern is that there are still many policies and practices in our society that contribute toward making people poor. Much of the war against poverty has been based on the assumption that all the poor were born poor. I think it is very important for the Senate and the House and the public at large, to recognize that some people who are poor, move out of poverty, but important for our purposes some nonpoor people become poor. The big question is, how do we as a society make people poor? We don't get into it in detail in our report but we do point out, for example, that early retirement practices can, despite all our original intentions, contribute to the creation of a new poverty class. I think it is very interesting that as the data presented to us on the task force by such people as Mr. Brotman, from HEW, that 70 percent of all the men retiring under social security, now retire before the age of 65 and they are the people least prepared to cope with retirement in terms of the other economic resources they bring into that retirement age and they then live long. LABOR FORCE DROPOUT Another thing that happens in our work experience, somewhere in the 40's and 50's we get what I call a labor force dropout increase. The labor force participation rates of people as they get older, starting in their 40's, go down and this has an impact on our ultimate retirement and poverty status of older people. It is interesting that the percentage of male heads of families who work year-round full-time, go down as aging goes up, and, secondly, that we still have many people who work year-round full-time and are still poor and that percentage of people who work year-round full-time and are still poor, goes up as you go up the age ladder, starting about the age of 40 or 45. The Census Bureau has just released a report on that. Another thing is the shutdown phenomenon. Now, shutdowns, plant closures, plant movings, are all part of even a booming economy. We have done very little to cope with the impact of that type of economic event insofar as affecting the poverty status of our workers concerned. Someone gave me a leaflet that just came out recently about Sperry-Rand in Long Island, closing down with about 900 workers, the average age being about 58. Now, the big question is, what happens to a man 58 years old? It is just like in the Packard shutdown, the Studebaker shutdown. What happens is: they have to go into the labor market and try and get new jobs. I know we have a law against discrimination on the basis of age on the books. I would hope we look into how well we enforce that law as a tool in the war against poverty. As part of that, I would just like to conclude by indicating, there is still no reaching of this goal of a full share in abundance, when you measure the degree of participa tion of older workers in even our manpower programs. About 25 percent of our long-term unemployed men in this country are 45 and over and only about 9 or 10 percent of the participants in our manpower development training program are in that age group. This is a contribution toward creating more poverty in older age. POVERTY AND OLDER WOMEN I will try and conclude at this point except for one final thing. In this war against poverty, with all the programs we have had so far, a major group still stands out as not being reduced in size when it comes to poverty, and the report brings that out, especially among older women. We have not reduced this; in fact, I think there has been an increase in the number of poor widows. They are the widows of the kinds of men I have been talking about in my brief presentatation here, Senator. The CHAIRMAN. Thank you very much, Dr. Sheppard. Professor Schulz, do you want to continue on for the task force? STATEMENT OF JAMES H. SCHULZ, ASSOCIATE PROFESSOR OF ECONOMICS, UNIVERSITY OF NEW HAMPSHIRE Dr. SCHULZ. A well-known syndicated columnist, in reacting to the task force working paper recently wrote, "The forthcoming hearings should concentrate on what are the rights of the elderly American whose productivity during his working years contributed to today's prosperity." Mr. Chairman, I would like to submit that to frame the income maintenance problem of the aged in that way hides an equally important and perhaps more fundamental question. The task force has stated: Every American-whether poor or rich, black or white, uneducated or college-trained-faces a common aging problem: How can he provide and plan for a retirement period of indeterminate length and uncertain needs? How can he allocate earnings during his working lifetime so that he not only meets current obligations, but has something left over for his own old age? This is the central issue. It should not be so much a question of giving older Americans rights, or giving older Americans what is their due, or fulfilling an obligation arising from the fact that older Americans were born before us. Rather, the provision of adequate economic resources in old age requires intelligent planning to insure a more even distribution of each family's income over its lifetime. This, however, is not an easy task. Given the uncertainties and complexities of retirement planning and the vicissitudes of the economy, it is becoming increasingly apparent that our society as a whole must come to grips with two questions: TWO KEY QUESTIONS 1. What standard of living do we, the young and nonretired, want when we get old? and 2. Having decided that, what should be the respective roles of the individual, private industry, and Government in planning and providing for that standard of living in old age? We are all well aware of the economic circumstances of older people today. The sad facts speak for themselves, and I know many people will address themselves to this problem during the hearings. However, the main point that I would like to make this morning is that if we, the nonaged, want to insure against our own poverty as we grow old and, further, if we want a living standard in retirement that is not drastically lower than our way of life during the working years, we must either make major changes in our savings behavior or we must vastly improve the institutions in our country which provide income for the later years of our lives. The general nature of the problem is shown by chart I of the task force paper.* Pensions are now, and promise to be in the future, the predominant source of retirement income. Chart I shows my projections of the relationship between pension income in retirement and the average earnings of workers 5 years prior to retirement. The chart shows that present pension trends developing in the United States will provide most aged Americans in 1980 with yearly pensions which are less than half of their prior earnings. The implication is clear: Without supplemental resources, this next generation of aged Americans will suffer sharp drops in living standards similar to those being experienced by the current older population. We must all decide now whether such drops in income will be acceptable to us 10, 20, 30 years hence when we retire. Adequately anticipating retirement needs will become even more urgent as more and more American families begin to evaluate the sufficiency of their retirement income in relation to their standard of living immediately prior to retirement, rather than measuring it in relation to some arbitrary poverty income level. Given the needs of today's aged Americans and prospects for rising retirement expectations in the future, some people might suggest that we really will never be able to develop adequate programs for the aged because there are so many other competing social needs. THE MAJOR ECONOMIC ISSUE The major economic issue is not, however, whether in the face of other needs such as general poverty, urban blight, and education—we can have new programs for the aged. Rather, the issue is better posed as to whether we want a higher standard of living in our younger years at the expense of a lower standard during retirement. This issue is extremely difficult to deal with because we are faced with essentially a question of how to provide a satisfactory level of income to individuals after work stops in a society which has traditionally oriented its income provision almost solely to the performance of work. The options are simple; the implementation is not. To better provide for old age, people must either save more during their working years or they must develop institutions which will provide each succeeding aged generation with the required amount of income transfer from the working population to the retired or semiretired. These options *See p. 176. mean either higher taxes, higher private pension or insurance contributions, or higher personal savings in the working years. Fortunately, the economic wealth of this Nation and the wealth of a large proportion of the people in it is bountiful and continues to grow. Economist Leon Keyserling, in testimony before this committee* about a year ago, projected that in the next 10 years economic growth alone would provide an average of $200 billion worth of additional goods and services each year in the United States. Such economic growth makes the choice easier, permitting us to make provision for more income in old age without seriously affecting our current living standards. Whether it is possible for a conscientious individual to effectively and efficiently handle this task of retirement planning alone is, in my opinion, open to serious doubt. The task force calls instead for major reliance on the social security system. But, as we have indicated, having accepted this proposition, there still remains a whole host of issues to be decided and problems to be solved. They fall into three broad categories: 1. The encouragement and facilitation of individual retirement income planning. 2. The equity and safety of various institutional saving arrangements for old age. 3. The level and distribution of social security benefits and alternative ways of financing them. I hope this hearing will be the beginning of more extensive and continuing discussion by the committee of these important issues. While we should certainly continue to deal with the serious problems of the current aged population, we should also be concerned about what the future holds for succeeding generations of old people. The solution to income adequacy in old age depends upon individual and collective action while we are still young. Thank you. The CHAIRMAN. Thank you very much, Professor Schulz. STATEMENT OF AGNES W. BREWSTER, CONSULTANT ON MEDICAL ECONOMICS Mrs. BREWSTER. Senator Williams, and distinguished audience, I am delighted to be here because I, too, am approaching retirement and aware of the problems. The costs of medical care and their impact on personal income has been a major concern of mine since serving with the Committee on the Costs of Medical Care prior to World War II. In 1968, I retired from the U.S. Public Health Service to do consulting work in medical economics; part of the time I serve as faculty to the Leonard Davis Institute of Health Economics at the University of Pennsylvania. It is a pleasure to be here this morning. During my 28 years in Government, one assignment was the developmental aspects of Medicare. Even before the national health survey documented the relationship between ill health and old age "Long-Range Program and Research Needs in Aging and Related Fields," Dec. 5–6, 1967, pp. 64-92. |