Monday, October 25, 2010

Q & A

A question from a commenter, TexExile:

Finally, a question for you, Art: on what basis do you conclude that the provisions made for people who start to work early, interrupted careers, etc etc, are insufficient?

A fair question. My primary concern is with people who lose their jobs toward the end of their career. As older workers, their likelihood of being hired is reduced. The reform steepens the rate of benefit decrease for failing to work the requisite number of quarters. Thus a worker willing to work but unable to find a job to round out his 41.5 years of service will pay a price that extends over the entirety of his post-employment life-span. This seems unfair. And one might draw an analogy here with the perverse incentives you note in your comment in regard to medical disabilities. Employers are not forced to internalize the true social cost of their decisions resulting in the dismissal of older workers. For example, the decision to consolidate production or to outsource to a low-wage country is influenced by the age structure of the work force. Older workers are more expensive than younger ones. But the plant closing, justified by this economic logic, shifts the entire burden onto the older worker, and the penalty inflicted bears no relation to either her ability or her willingness to work. If one can cite perverse externalities in favor of the reform, one can also cite them in opposition. I think this is one provision of the bill that falls short and needs to be redressed.

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