Senator MCNAMARA. Do I conclude that you do not think we should raise the $1,200? Mr. ODELL. That is right, because it will cost more money to do so and if we are going to spend more at this time, I'd rather see it spent to provide hospital and medical benefits. Mr. SARGENT. May I make one more point. I have illustrated three types of family situations here. I think there are seven altogether. When I worked on this thing I talked with someone who used to be down at Social Security and he said, "Don't do anything to upset the administrative machine." If we try to set a policy of for every $2 that a man earns he loses $1 of social security, you would have seven different tables to apply to get the 2 for 1 arrangement. I have stuck with the idea that by tapering this thing off at $4,200, one table would apply to everybody a varying amount of incentive, but the minimum amount of social security administrative work. Senator MCNAMARA. At this point I wonder if we could have Professor Cohen talk a little bit about it. He seemed to have established himself pretty well as a statistical expert. Professor Cohen, do you want to talk about this? STATEMENT OF WILBUR COHEN, PROFESSOR OF SOCIAL WELFARE, UNIVERSITY OF MICHIGAN, AND FORMER TECHNICAL ADVISER AND DIRECTOR OF RESEARCH FOR THE SOCIAL SECURITY ADMINISTRATION Professor CоHEN. First, estimates have been made by the actuaries. on practically every one of these proposals discussed today. It is not a very difficult task to do so and, although there is a margin of error because of what people might do, within this small margin of error the costs for any of these proposals can be determined easily. For instance, on the proposal that you suggested, or not suggested but asked the witness, of increasing the $1,200 to $1,800, the actuaries have estimated that that would cost three-tenths of a percent of payroll in the indefinite future, or roughly $957 million per year, which would have to be financed out of the additional payroll tax. I have here and we can put in the record 20 different proposals that have been made to change the retirement test, some of them along the lines that Mr. Sargent has indicated although not identical with the ones he had, and they range all the way from a very insignificant amount, depending on how little you want to do, to what I mentioned yesterday, if you abolished the entire retirement test it would cost 1 percent of payroll, or roughly $3 billion per year. So that between these 2 extremes I have here 20 different proposals which have been made and I could put them in the record. Senator MCNAMARA. We would be happy to have them made part of the record at this point. L TO (A table showing the proposals referred to follows:) TABLE 5.-Level-premium cost estimates on intermediate-cost basis for various proposed changes in old age, survivors, and disability insurance system Proposal Level-premium cost (in percent of payroll) Equivalent level annual cost (in millions of dollars) Ou he hei rai ola Retirement test: (1) $1,200 and $100 units. (8) $1,800 and $80 units (19) Abolish for child's benefits. Professor COHEN. I have not studied Mr. Sargent's charts closely. I do have one that is $200 and then two $100 units per month. That comes to three-tenths percent of a payroll and costs $957 million per year. I think the essential problem is that the costs are rather easily determinable. When I say $957 million I think the actuaries would say between $900 million and $1 billion, but I think the real problem is the question of economic and social policy that is involved. These things are all easily administrable and I certainly thing the costs could be financed but it is a question of exactly what you would want to accomplish and what kind of people it would benefit. Senator MCNAMARA. Thank you. Mr. SARGENT. Professor Cohen, you have no basis for estimating how many people would try to go back to work if we had an incentive worked into this thing? Professor COHEN. Well, it would be very minor because when you are talking about a gigantic system as we have now and you are talking about 15 million aged people of whom only 3 million people in a year work of which maybe 1 million are in-and-outers, you would have to have a tremendous impact in the incentive change, and I think the same point that you made about Senator Clark's proposal applies to yours, namely, that the incentive factor is small. That is why I say it is not the cost that is involved, it is the social policy that you want. If you think the having of an incentive is important, you can combine your incentive and Senator Clark's incentive. You can have the two incentives. I think it would affect only a small number of people at the present time. But maybe 20 years from now it might affect a substantially larger number of people. Mr. SARGENT. If it is socially right, it is the thing to do. Professor COHEN. Yes, and I don't think the cost factor plus or minus should be particularly important. Senator MCNAMARA. I would like to ask Professor Cohen a question that I just asked some of the others. Professor Cohen, what do you think of raising the allowable amount that an employee could earn above $1,200? Professor COHEN. I would not be in favor of raising it. I would combine the basic principle in Mr. Sargent's proposal with Senator Clark's proposal. I would raise the units which are now $80, and in some cases $100, to at least $127. The reason for that would be that an individual should not lose more in benefits in a month than he can make in earnings. That would be a minimum and that goes in Mr. Sargent's direction. Secondly, I would add onto it Senator Clark's proposal, which would give a deferred annuity in effect to people who did continue to work, because, of the 3 million people today who are working I would say a million and a half of them are going to continue to work no matter what you do about pension plans. These are the people who are in semiprofessional, independent business occupations. They are rather high income people. They work because they want to work, because they own a business or they are a real estate broker or a doctor or lawyer. So these people who will never draw benefits I would say when they do retire, give them something a little additional, not necessarily an incentive to work but as an equity element for their having contributed so long. Senator MCNAMARA. Thank you, Professor Cohen. I interrupted Mr. Williams when he was trying to say something. Mr. WILLIAMS. I think the question is not so much whether you raise the $1,200 figure. I would agree with Mr. Odell that it would be enormously useful if we could develop a method of changing the age at which a person could receive benefits in terms of the national unemployment situation so we might be able to offer retirement at an earlier age when there is unemployment in the country and at a later age when we have a tighter labor market. Senator MCNAMARA. A year after the change, if a fellow was laid off at 60, would he go back to work? Mr. WILLIAMS. This is the kind of detail I think could be worked out easily. Senator MCNAMARA. It has problems. Mr. WILLIAMS. Yes, but they can be worked out. Professor GINZBERG. I heard Mr. Odell say that the workers who are in the social security system view with some alarm the fooling around with the raising of the age for retirement. I wonder whether that is because they have another question in the back of their heads. I am guessing at this. I wonder if they fear that if you start to raise the age what is going to prevent you from saying one of these days that they do not get any retirement benefits until they are 68 or 70? Do you think this is a problem? What is initially an incentive system may become a penalty system and from their point of view it may be better to leave well enough alone. Mr. ODELL. I am not sure I have probed deeply enough into the motivation to comment specifically on your question. I think there is a large element of suspicion involved in the attitude toward the retirement age and the retirement tests and what not on the part of those who were conditioned in the early educational campaign which accompanied the original passage of the Social Security Act and which accompanied the drive for negotiated pensions, a feeling that this is an earned right which came with blood, sweat, and tears and a lot of brick pounding and that it is something that we do not want to lose by a process of machination and manipulation. It is really very difficult to appraise the motivations but I would say that the great majority of our retirees and our people approaching retirement look upon this as an earned right which they don't want to lose, and the sooner they can get it the better. So if we are going to make these changes, we have a large-scale educational job to do with the people who are supposed to be the ultimate beneficiaries. Senator MCNAMARA. Citing individual cases is a hazardous thing and I do not want it to be interpreted as the rule but I know an individual who will become 65 on June 20 this year. He has been working in the copper mines in northern Michigan all of his life, and he is just waiting for that day when he can throw that dinner bucket down in the pit. He is very able-physically able, mentally able. There is much of this. I run into it all the time. I just happen to know this individual. Mr. Williams, you first, and then others also, have mentioned that there are jobs in which older people can be trained. I think generally you are referring to people over 45-in the category from 45, perhaps, to 55. Do you have in mind any specific jobs. Is there a market for this retained person to the degree that it has been presented in the record today? This is what I am trying to establish. Mr. WILLIAMS. Well, as I suggested in my remarks, there is virtually no limit to what you can train a person to do at 45. It would depend on the individual. We have now over a thousand women in training, many of them over 45, to be practical nurses. There is a great shortage of practical nurses in Pennsylvania. You can almost assure a person getting a job once he or she has completed this course. We can do the same thing for power sewing machine operators. The only limitation is in training for jobs for which a long period of training is required. These people cannot support themselves for a year or 2 years to become skilled tool and die makers so we like to train them to be operatives or repairmen. Senator MCNAMARA. Practical nursing would be a year, perhaps, for the average person? Mr. WILLIAMS. Yes, but they begin earning some money after 3 months. One other aspect is the upgrading of skills which the older worker already has. We walked into Uniontown, Pa., where 25 percent of the labor market is unemployed, and on the blackboard of the employment office we saw a notice. "Needed, automotive mechanics with automatic transmission experience." There are a lot of automotive me chanics in Uniontown but they do not know how to deal with automatic transmissions and training them to deal in this new skill should be a relatively easy matter. Professor GINZBERG. I think there is a connection between this committee and the other Committee on Education that I would like to comment on. In earlier days one thought about a man getting prepared for a job once in his life and that was it. I think the important point to stress is that the more money we put into basic education in the initial period of life, the more flexibility the person is going to have later on. He is going to need that flexibility because of the rate of technological change. Furthermore, the better the quality of initial education, the more likely he is to find some meaningful things to do in his leisure time, which is one of the points that Mr. Kuplan raised. So I think one can look at initial investments in basic education from the view not of returns to youngsters in getting them started in life but also as a contribution to people throughout the totality of their life, including when they are old. One of the things that we found in Virginia a couple of years ago was that they had trouble placing older women who came back to work because of the extreme limitations in their basic education. It is hard to train somebody to be a practical nurse if she cannot read and write properly. I think the more investment you make in people initially to give them a better type of education, the better off you will be. Senator MCNAMARA. I think another important point is this bitterness over the competition between older and younger people with the younger person demanding that the oldster retire and give the younger person a chance to raise his family. I do not think there is very much the Federal Government can do at this level. I imagine there is a great deal the unions can do and have done on it. In my experience of attending some of the meetings of retired workers that Mr. Odell made reference to, it seemed to me that the people actually retiring are so sure that everybody that got to be 65 should retire this seemed to be their philosophy and would not express this bitterness. Do we have this bitterness or not? The record indicates that we have. What is your reaction, Mr. Odell? Mr. ODELL. I think in the rank and file in our unions, and I am sure this is true in the Steelworkers and other unions, in a period of recession and vast technological displacement and automation of plants and workers where there is competition for the jobs that are left, that there is considerable resentment among the younger rank and file against the idea of an older man staying on indefinitely, even to the mandatory age in most of our contracts, which is 68. I have had a number of requests to come in to areas like Waterbury, Conn., where you have a very old work force in the brass plants, for example, to talk to the people and a mandatory retirement age of 70, incidentally-to talk to the older men about why they should retire. I have gracefully skipped that kind of assignment but I have advocated instead that they introduce it into negotiations there. The |