Sunday, December 30, 2012

One or two Lumps?

As the defeated Tea Party legions begin their long trek west from Moscow, out come the traditional-minded Republican senators and their cocktail friends—haven't Susan Collins and Max Baucus, for instance, been in the headlines an awful lot lately?—to see what damage they can do in the intervening chaos. Yesterday's report was of Senators Corker and Alexander (formerly known as Lamar! with the exclamation point included, anybody remember that?) to demand that the retirement age be raised, or they'll blow up the debt ceiling, trapping us all inside the building.

Now old Lindsey-Woolsey* Graham is on board with the same extortion plan.

Sorry, I don't negotiate with terrorists.

*I have long felt that "Huckleberry", with its cornpone crackle, makes a lousy nickname for this starchy, perpetually indignant fussbudget.
First edition of Tasha Tudor's book (New York: Oxford University Press, 1946).
Why is it, do you suppose, that they're so fixated on that particular item? I mean, I can really understand the thing about cutting Medicare and Medicaid benefits: it may be a bad solution, but it is to a problem that actually exists. But surely Corker and Alexander have heard by now that Social Security does not contribute to the deficit, will not be in trouble for a good many years, and will be easy to fix when it happens.

Are they just envious of retired friends and neighbors Facebooking their endless vacations, while they themselves must spend literally days every month in tedious Washington haranguing tongue-tied committee witnesses? Is it a moral issue—is our social substance being consumed by shiftless 69-year-old bucks blowing their checks on T-bone steaks, Cadillacs, and smartphones? A-and listening to that filthy bebop music?

Or are they merely representing the old Markets hungry, boss. Must feed markets, plenty fresh cash, or P-E rate go down rent-seeking institutions in their eternal quest for the money nobody else seems to be using at the moment? Because the bond market gets to play with your Social Security as long as you're not collecting it?

Be that as it may, what I was thinking about was something completely different: whether there's a relationship between delayed retirement and unemployment, such that making all us dotards keep slaving away until we're 70 will have the effect of making it harder than ever for others to find jobs—youngsters, and middle-aged layoff victims.

Because, as it happens, there's a good deal of delayed retirement going on already:
In 2009, 31 percent of eligible people signed up for Social Security, up from 27 percent in 2007. But the take-up rate has since declined to 28.3 percent in 2010 and 26.9 percent in 2011. The Urban Institute found that a smaller proportion of eligible people signed up for Social Security in 2011 than in any other year since 1976.
The rise in retirements from 2007 to 2009 was a response to the housing-and-finance crisis which put so many out of reach of ever getting a job again; the later decline reflects the changes in Social Security that have already taken place, the general crappiness of the new-style pension plans (just ask Richard Armey!), and a higher educational attainment that puts more of us in jobs that we are physically able to do until we have to be carted away into the R&R we can't afford.
Uncredited image from the apparently now defunct blog Upper Italy, in a post that reminds us that linsey-woolsey, a "garment mingled of linen and woolen", is shatnez, an abomination unto the Lord (Leviticus 19:19).
Well, Dr. Google informs me that the received wisdom among economists is that I am guilty of the Lump of Labor fallacy in expecting delayed retirements to interfere with employment growth. Or rather, that early retirements don't increase employment, as they used to believe in Europe in the 1980s and still do in France. The fact that they still believe it in France is a sign that it's a little more complicated than that.

The Lump of Labor fallacy is when** you believe that any community has a fixed amount of work that has to be done, so that for example if you hire immigrants you are taking work away from the natives. It was first used to mock the English Luddites who believed that the spinning jenny would eliminate their jobs, which of course it didn't.*** Obviously the amount of work in a given community constantly changes, the work itself being one of the factors (the more suits you make the more dry cleaners you require). When you add immigrants, you add economic activity, so the number of jobs may increase. Thus, anybody who really believes in the Lump of Labor is an idiot.

I'm no economist, but I must warn you, I have studied logic, and this putdown is a transparent, elementary straw man. You don't need to believe in the Lump of Labor to worry about the retirement system affecting the jobs market; all you need is to walk into your local Barnes & Noble and look at the grumpy 70-year-old manning a cash register, doing a job that is a godsend for a student or aspiring actor sharing an apartment and groceries with five other people, but is of very little use to this guy.

There is no fixed number of jobs in a community, but there are historical moments when there is a shortage of jobs, and they happen when there is a deficit of demand, and that comes when nobody has enough money. Like, uh, now. And if you force people to remain at an advanced age in jobs they don't want (don't look at me, I love my job), it's not going to help. Lumps of Labor have nothing to do with it.

**See the very remarkable Ecological Headstand for a splendid tirade against Professor Krugman, who seems to be somewhat on the right on this topic, a complete history of the Lump of Labor trope, and much more.

***Although, didn't England virtually have to mummify South Asia and later Africa in English cotton in order to keep the industry going?

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