Robert Benmosche, the ailing CEO of AIG (NYSE: AIG), has suggested the retirement age in the United States could rise well above 65. If he is right, the impact on unemployment among young Americans would be severe. A generation of people, who should become major consumers in the next decade, will be crippled — another danger to the American economy.
Benmosche told Bloomberg, “Retirement ages will have to move to 70, 80 years old.” His rationale makes sense. He sees weakness in the global economy for years to come. U.S. seniors who often already have too little money for retirement will face conditions that would further erode their nest eggs. Among these are drops in interest rates on their fixed income holdings, caused to a great extent by the “flight to safety” that has driven Treasury rates down.
Benmosche argues that Americans can retire later than those a generation ago because they live longer. But the problems that undermine their economic status mean they are unlikely to live better. That is, to some extent, because they will not be retired at all.
The effects of later retirement ages would change the dynamics of unemployment in the U.S. The Census reports that unemployment for people over 65 is 6.2%. The figures will go even lower if the number of old people who need jobs rises. On the other hand, the jobless situation among people under 24 is awful. Among those between 16 and 17, the figure is 28.3%; among those between 18 to 19, it is 22.4%. Move higher to those aged 20 to 24, and the rate is still more than 50% above the national average. Unemployment rates moves sharply lower once people reach 34, but a long-term economic downturn in the U.S. means the people who are now 20 and will be 30 in a decade may find that older workers have taken up a number of the jobs they might have had.
Older workers have several advantages over younger ones. The first is experience, and in many cases education. Another is that older people are less likely to move from where they live. Employers favor stability. Older people provide that.
The U.S. economy could pick up and jobs might become plentiful for all age groups. But agencies from the Federal Reserve to the Office of Management and Budget do not expect a sharp improvement in the next few years. The generation of people who are in their early 20s today may see little increase in employment opportunities. And a group of people whose consumption would boost GDP may hardly be consumers at all.
Douglas A. McIntyre