How Big a Boost Do Working Seniors Give the Economy?

Americans who work past traditional retirement age are extending their productive lives. They're also paying taxes longer, which may have big implications for the country's finances. As part of his Making Sen$e series, economics correspondent Paul Solman reports.

Read the Full Transcript


    Now the last in our occasional series on America's aging work force.

    NewsHour economics correspondent Paul Solman has reported on a factory where the average age is 74, on the graying of academia, on senior entrepreneurship, and on age discrimination.

    Tonight, he considers how working longer could help the economy.

    It's all part of Paul's ongoing reporting "Making Sen$e of Financial News."

    ROSA FINNEGAN, 101 Years Old: Well, you're doing something useful. You're not just sitting, vegetating.


    At age 101 Rosa Finnegan is still punching in part-time at small manufacturer Vita Needle.


    I'm in.


    By working into old age, Finnegan and those like her are extending their useful lives and their retirement income. But might they also be a boon to the economy?

    How much are you paid?


    I don't think I'm allowed to say, am I?


    You're 100 years old. You can say whatever you want.

    The reason I asked: This year, the gap between U.S. government spending and tax revenues is expected to be over $640 billion dollars. Threatening to widen the gap, 32 million Americans reaching retirement age in the next 20 years slated to draw Social Security and Medicare while paying zero taxes on income.

    So, are you slowing down?


    Yes, definitely.

    As long as I don't come to a screeching halt, I will be lucky.


    But what if Americans worked as long as Rosa Finnegan, whom we interviewed in December? Finnegan was coy about her pay, but whatever she's making, she's paying taxes, federal and state income, Medicare and Social Security, which Vita Needle matches.

  • STEVE BOEHNE, Infinity Surfboards:

    I made my first surfboard in 1960, when I was about 12 years old.


    Another older worker we interviewed recently, 66-year-old Steve Boehne, runs Infinity Boards, pays himself about $60,000 dollars a year. His yearly tax tab, more than $18,000 dollars.

    And then there was Mike Grottola, 69, who became a business consultant after trying in vain to get a tech executive job, like the one from which he was laid off at 65.


    That big six-figure salary, that was so great, da-da-da. But, at 65, you're not going to make any headway doing that. And it was a mistake. Let me go on a path that will be way more productive.


    With his new business up and running, last year, Grottola paid close to $15,000 dollars in total taxes on income.

    Finally, 71-year-old George Mason Writing professor Don Gallehr.

  • DON GALLEHR, George Mason University:

    I think this is my 47th year that I'm here.


    Don Gallehr paid about $35,000 dollars in taxes, including his university's Social Security contribution. He has no plans to retire.


    Last semester, I had five students come up to me and say it was the best class they ever had, so, apparently, I'm still good for my students.


    Overall, 18 percent of Americans 65 and older are now working and paying taxes, at least $120 billion dollars a year, we figure, on average, a figure that doesn't include state income taxes.

    Moreover, every extra percentage point of the work force not retiring would mean at least another few billion dollars in revenues toward closing America's annual budget gap.

    JULIE ZISSIMOPOULOS, University of Southern California: It's good for the economy.


    University of Southern California economist Julie Zissimopoulos thinks older people working longer is an unambiguous good. Why?


    For the simple reason that it grows the labor force. How are we going to keep Social Security solvent? How are we going to keep Medicare beneficiaries receiving the benefits that they have received in the past? In order to fund these, we need workers. We need people paying taxes.


    It's a problem economists have worried about for decades. As the population has aged, the number of workers supporting retirees has dropped, a trend we reported on back in 1990.

    When Social Security began paying benefits, there were 159 American workers being taxed for every retiree. By the late 1940s, we reported 23 years ago, 42 workers for every Social Security recipient, by 1970, only four workers. And looking at the numbers these days, for 2011, for example, there were just 2.9 workers for every beneficiary.

    Social Security now pays out more in benefits than it receives in tax revenue. But according to Eugene Steuerle of the Urban Institute, if, instead of retiring, more and more people 65 and older continue to work, the picture could change dramatically. Rather than just drawing from benefit programs, they'd be contributing to them.

  • EUGENE STEUERLE, Urban Institute:

    It's not just Social Security taxes and Medicare taxes, the types of taxes we might think of as necessary to support programs for the elderly, but among the biggest gains for the government as a whole are with respect to income taxes. Higher income taxes mean that it's easier to support government programs without increasing tax rates.


    Steuerle found that the Social Security taxes generated if the average American were to retire five years later than normal would make up better than half of the program's shortfall come 2045. If you were to factor in income tax revenue, the shortfall would be completely erased.

    Boston College's Alicia Munnell says there's an even more direct economic benefit to working longer.

  • ALICIA MUNNELL, Boston College:

    It makes the pie bigger. You have more people out there working with their capital to produce more stuff. So you get a bigger GDP and everyone is better off.


    Not every economist agrees, of course, Boston University's Larry Kotlikoff, who thinks the pluses of working longer are way overblown.

  • LARRY KOTLIKOFF, Boston University:

    Only a very small share of people over 65 are going to continue to work under the best of circumstances, so it really can't matter much to the macroeconomy or to our fiscal problems. It's just not a big enough effect.


    So you don't think that this is going to make that much of a difference?


    Even if we had another 20 percent of people in their 60s continue to work through their 70s or 75, it just wouldn't add up to much. It's just not enough people earning enough money, paying enough taxes to matter much.


    What a surprise. Economists disagree. But it's certainly true that many who want to stay in the work force simply can't, due to poor health, a strenuous job, the need to care for a sick family member. So we just don't know how many will.

    But, says Gene Steuerle, the portion of older people continuing to work has been growing for years.


    The Social Security Administration has consistently underestimated the extent to which older workers will work longer and constantly pushing up that projection. And, as larger and larger shares of the population hit these older ages, someone has to produce the goods and services.


    And, says Munnell, that would be a good thing for the older workers, considering that 55-to-64-year-olds have an average of only $120,000 dollars saved for retirement.


    One hundred and twenty thousand dollars may sound like a lot, but when you think about taking that out over a 20-30 year retirement, you're talking about only a few hundred dollars per month.


    So you mean if you have saved as much as $120,000 dollars in your late 50s, you're still facing relative poverty?


    People are not going to have very much money if they retire at 64. So my view is the single most important thing they can do is to work as long as they possibly can.


    Marc freedman, the founder of, says there are major benefits to working longer for the workers themselves and for the broader economy.

  • MARC FREEDMAN, Founder,

    It's an extraordinary opportunity for individuals to have another chance to do something important, but really for a society which is discovering a continent of human resources, that's really only comparable to the emergence of women into new roles 30, 40 years ago.

    Now we wouldn't be able to contemplate being competitive globally without that talent pool. And I think 20, 30 years from now, we will feel the same way about all these people in their 60s and 70s who are continuing to do important work.


    A nice thought for the nearly eight million of us who are still working past traditional retirement age.


    Our reporting on longer work lives continues online on a brand new site we're calling "New Adventures for Older Workers."

    Again, Paul Solman explains.


    Our working longer website is designed to be an adventure in itself. You can see how you compare to your peers, whether you're planning to retire or work forever. See if you have saved enough for retirement, whether you're 22 or 72.

    We have got new data, new analysis, and not-so-new people, some of whom NewsHour viewers have met, like 101-year-old manufacturing worker Rosa Finnegan, or Mannequin Madness entrepreneur Judicial Townsend, 55. And you will meet others, like Mike Kemp, whose health may force him to quit before he'd planned to — at times, scary, at others, inspiring, often interactive, more often, surprising. It's all on our website.