Thursday, September 03, 2009

Unintended Consequences: 401ks Mean Fewer Jobs for Young People

Interesting, this is something I hadn't really thought about: when people rely more on private retirement savings, they retire later, leaving fewer openings for younger workers to fill.

A Reluctance to Retire Means Fewer Openings

In other parts of the developed world, people are retiring as planned, because of relatively flush state and corporate pensions that await them. But here in the United States, financial security in old age rests increasingly on private savings, which have taken a beating in the last year. Prospective retirees are clinging to their jobs despite some cherished life plans.

As a result, companies are not only reluctant to create new jobs, but have fewer job openings to fill from attrition. For the 14 million Americans looking for work — a number expected to rise in Friday’s jobs report for August — this lack of turnover has made a tough job market even tougher.

All those baby boomers refusing to retire isn't going to help our unemployment situation...

18 comments:

Anonymous said...

People delaying retirement has been a huge problem in Japan. Especially that some company are really nice to their employee, and intend to hire them for life. They simply won't let go of their jobs until they die. There are young people who are more efficient, smarter and more creative, but they can't get the jobs. I have met college graduates in Tokyo who sweeps floor in Disneyland. As he said, "You gotta start somewhere." Others with more pride became NEET. There is a huge number of young people between 25-35 who are still depending on their parents.

I really hope that this wouldn't cause the same problem here.

Adrienne said...

A Modest Proposal: Take all the whinny senior citizens up on their reluctance for government sponsored healthcare and end Medicare. Direct money towards social security. Bam! More people retire, young people get jobs, and fewer bitchy old people (the current generation has pretty much spent their whole life on some form of government handout).

Chad @ Sentient Money said...

@Adrienne
The bane of our policitcal system is the emotional response. Eliminating Medicare and putting more towards social security would probably make old people stay at their jobs even longer, as they would then be forced to pay for their healthcare. Their healthcare would be more expensive as many insurance companies would say no or charge outrageous fees to cover them. Plus, most insurers don't get the same price breaks the government demands.

Adrienne said...

Chad: the "humourous" intent was that old people would die off.

Context: http://art-bin.com/art/omodest.html

Anonymous said...

"refusing to retiring?" How about being unable to afford to retire? With 60% reduction in your 401K it's not really a matter of choice is it?

Anonymous said...

Another issue, as I see it, is how the increased age that you need for full social secruity and to get medicare benefits also extends the amount of time people are working--and with a finite number of jobs this means that prepared younger people are more challanged to get into the labor force.

I know we hear lots of stories about age-ism on the upper end in the workforce-- but I belive this is an issue that is being overlooked and in some ways being highlighted as a result of the bad economy. (and, i wouldn't be surprised if this only gets worse for a while...)

mOOm said...

This kind of assumes that there are a fixed amount of jobs to go around which isn't the case...

Anonymous said...

it's sad to see a post and some replies that parrot stereotypes and generalities about "old people." Instead of attacking an entire generation (you'll be there one day), how about trying to understand the predicament of many people forced to work (it's not always a voluntary thing) becus they lost so much in the stock market? There's plenty of age-based discrimination out there, so i would guess that any loss of jobs by young people due to older folks holding on to theirs is balanced out by a huge preference by employers for more youthful employees. How about a little understanding, folks?

Gord said...

Finally, some respect for the aging boomers. Thank you Anon (last).

A couple of years ago, Canada (or at least some of the provinces) decided that mandatory retirement at 65 was discriminatory, so it was eliminated except in cases of safety.

At the time, I didn't think about it too much but now in our little group at work there is one fellow nearing 66 and others are indicating they may do the same. Why? Mostly poor planning, I suspect, some is divorce related, others may just failed to develop a social network outside of work.

Its tough for the other employees that are waiting for our positions to open up. Do Americans have age discrimination (65) laws?

mOOm said...

Gord: Yes you can't force retirement due to age in the US or in Australia.

Of course, in if there is sudden increase in the time people are staying in the work force that will cause a job shortage in the short-run, but in the long-run it shouldn't be much of a problem. The thought experiment is: How would the economy do if everyone retired at 30? Not well is the answer everyone would come up with I think...

donkee said...

Sad thing is - they might lower the 401k contribution limit for 2010. Not a whole lot, but still...

I posted about it here:
http://donkeehouse.com/?p=767

Anonymous said...

THis is actually a good thing - later retirement means fewer years in which the younger workers will have to support the baby boomers. I'm not suggesting the boomers are parasites, just pointing out that they have rich retirement benefits that have to be supported by a limited number of younger workers. Maybe social security won't go bankrupt after all!

Suzanne Muusers said...

I don't see this as a reluctance to retire. It's more like we have to keep working because our previous projections didn't include the 08/09 meltdown. I haven't looked at my 401k statements because I don't want reality to depress me. I just keep my eyes focused on my goals and keep moving.
Suzanne

Anonymous said...

I don't know about refusing to retire entirely but, the longer an older person wrks, the larger the retirement benefits they're entilted to. If there's anything left (ha,ha)

Michelle said...

Really interesting idea. Something I doubt many have even considered.

Crystal said...

I never considered anyone deciding to work until death because they wanted to...that seems strange to me. I just assumed people work until they can afford to retire. That's my plan and my gift to the younger generations...lol!

JoesMoney said...

While some view this as a downfall, I view it as an opporitunity. At my employer, many are avoiding retirement as well. However, this enables me to put in some time and learn the ropes so once they do retire and more opporitunities present themselves, I will be prepared.

Your Own Retirement said...

The funny thing is that I don't see too many young people even thinking about retirement or 401Ks. I think for the younger generations new finance products are going to have to be introduced.