Developments in aging, 1967 : a report of the special committee on aging United States Senate pursuant to S. Res. 20, February 17, 1967 resolution authorizing a study of the problems of the aged and aging together with minority views.

  • United States Senate Special Committee on Aging
Date:
1968
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Licence: Public Domain Mark

Credit: Developments in aging, 1967 : a report of the special committee on aging United States Senate pursuant to S. Res. 20, February 17, 1967 resolution authorizing a study of the problems of the aged and aging together with minority views. Source: Wellcome Collection.

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    FIVE, even if public policy did in fact keep retirement benefits apace with the cost of living, there would be a gradual worsening of retirement benefits relative to earnings, since earnings grow in accord- ance with the overall growth of the economy whereas benefits do not reflect such gains from growth. SIX, the central question comes to be: To what extent (and through what mechanisms) are older people to share in the growth in real national product? A question of equity: Whose growth is 1t?—Failure to provide more gvenerous public pensions for retirees in the United States reflects, as Dr. Kreps expressed it: A failure to recognize the lengthening retirement period as a new life stage, and in part a belief that each family is in charge of its own financial destiny. Hence, private savings are expected to achieve whatever income smoothing beyond certain minimum pensions are desired. Saving for retirement while in the work force is extremely difficult, as Dr. Kreps showed in models submitted to the committee. She said: Moreover, there is in the present scheme of income allo- cation, which offers rewards primarily on the basis of produc- tivity, the implicit assumption that the gains from economic cerowth are due altogether to the efforts of persons who are currently at work. Such an assumption is unwarranted. In- creases in the productivity of the employed may have very little to do with their own actions and initiative; they result, rather, from capital accumulation and advances in technology. The growth component of increases in income is aed fortuitous from the standpoint of the individual worker. Further, Dr. Kreps challenges the common belief that the social security system is like a bank in that retired persons withdraw from the system the same funds they put into it while they were in the work force. She advances the idea that each generation of retirees draws from the funds put into the system by the current work force: Public pensions, which in the United States are financed by payroll taxes on the incomes of persons still at work, transfer income claims against the Nation’s total output from workers to retirees. It is important to note that the transfer is from workers in 1968 to retirees in 1968, and not from a man who works in 1968 to the same man when he retires in 1988. The retiree of 1988 will have an income claim against the 1988 output, financed by a tax on the worker of that year. Transfers of income claims thus reallo- cate the annual output between workers and nonworkers (including the young as well as the old). Dr. Kreps also asked: If the incomes of retired persons are to be maintained at levels closer to those of economically active persons, whose earn- ings are always rising, how should the additional transfer be financed? There are few alternatives: (1) individual
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