Work Longer; Reduce Poverty

Keeping older people in the workforce for longer could help fight the U.S.’s high rates of old-age poverty and reduce inequality, according to a new report.

More than 20% of Americans over 65 have an income that puts them below the poverty line, defined as half of median disposable household income, according to the report from the Organization for Economic Cooperation and Development.

And future retirees will have even higher risks of poverty as inequality rises, the report said.

While the U.S. has a higher share of older people in the workforce compared to most major economies, how people fare in their later years depends crucially on educational attainment.

The gap between workers with high and low skills is “huge” and it’s “potentially getting worse as the digital transition progresses,” said Stefano Scarpetta, the OECD’s employment, labor and social affairs director.

The Paris-based think tank, which provides advice on the best policies to follow to its 35 member governments, called on the U.S. to support longer careers for all socioeconomic groups as a way of reducing old-age poverty without putting additional strain on pension systems as the population ages rapidly.

One way of doing so is by offering flexible or “phased” retirement. Under such a system, older workers receive a full or partial pension benefit while continuing in paid work, often with reduced hours. Far fewer Americans work part-time in retirement than people in countries such as Germany and the U.K.

The full retirement age in the U.S. has risen in recent years, to 67 years old for people born in 1960 and later. The earliest age Americans can start receiving Social Security retirement benefits is 62.

Studies from other countries suggest the impact of postponing retirement on growth and unemployment could be considerable.

2011 report from the U.K. found that extending working lives by one year would increase real gross domestic product by about 1% six years after its implementation, and boost the rate of employment by 1.6% after four years.

A number of developed economies are raising their retirement ages to keep up with changing demographics. In a report late last year, the OECD put the average retirement age at 64 in 2016, which it expects will rise to 65.7 by 2060.

Debra Whitman, chief public policy officer at the AARP, said fighting age discrimination and changing mindsets about older workers’ relevance in the workplace also play a role in helping people to work longer.