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09.22.2022 0

America’s Labor Shortage – The Baby Boomer Solution

By Rick Manning

Social Security has long been called the third rail of politics, so any mention of reforming the program in the halls of Congress often sends elected members scurrying for cover.

However, right now our nation has a labor crisis.  A crisis that is at least partially caused by the retirement of the Baby Boomer generation combined with a birth rate over the past twenty years that has fallen below the population replacement level.

The Social Security system has been set up over the past forty years to encourage people to retire and get out of the workforce.  That made sense when we had significantly more people wanting work than jobs available for them to fill.  Today, we have the opposite situation, so our retirement system encourages the exact wrong response to meet our workforce needs in the 2020s.

To start, Congress should eliminate all taxes on Social Security benefits.  Taxing these benefits has the effect of discouraging people from full-time work as the more you make, the more taxes you pay on your benefit due to the progressive income tax system.  Social Security benefits are the result of decades of compulsory payments directly removed from each of our paychecks, and until 1983 was not taxed.

Now, it is time to end the Social Security benefits tax.  The net result would be to encourage those who wish to continue with their careers.  And in 2022, we need willing workers of all ages to meet the needs facing our economy.  Congress should want to encourage Baby Boomers and Generation X to continue working if they wish, and ending taxes on Social Security benefits will end one of the current disincentives to do so.

The next obvious change is to allow people to collect Social Security at the age of 62 without restrictions on the amount of money that can be made outside of the benefit.  Currently, if you opt to collect Social Security prior to the age of 66 and three months, you are capped on how much you can make before the benefit needs to be repaid.  With the current labor shortage, denying people access to a diminished benefit due to this income cap is just plain short-sighted. 

Blue collar workers who often-times find their minds willing to keep working even as their bodies struggle to keep up as they get older, should be able to collect the benefit they are owed while shifting gears to another position which may pay less, but raises their standard of living out of the poverty level. 

For these seniors, the current system effectively consigns them to poverty rather than allowing them to use the Social Security benefit payment as a supplement to their income from a different career.

A third workforce challenge created by the structure of the Social Security/Disability Insurance Fund is the income cap placed upon those who collect Disability Insurance including the health care benefit.  Currently, a person on disability can only make a monthly income limit of $1,350 for non-blind and $2,260 for blind people. If you can earn more than these amounts, then the SSA deems you capable of engaging in “substantial gainful activity,” which prevents you from qualifying for benefits.

The denial of the health benefit is effectively a death sentence for many people with disabilities who cannot replace it due to the high cost of their treatments.  

Currently, the Bureau of Labor Statistics reports that only 37.6 percent of persons with disabilities aged 16 – 64 are in the workforce as opposed to 77.5 percent of those without disabilities.  While not every person with a disability wants a job, the current SSDI system consigns people dependent upon the health insurance it provides to institutional poverty. This is morally wrong, easily corrected and counter to our national need to empower every American to seek employment.  And the answer is simple.  Disconnect the health benefit from the economic benefit, while allowing the economic benefit to be reduced based upon income replacement akin to the current Earned Income Tax Credit system which ensures that making a higher wage does not cost a person money through the loss of benefits.  This Milton Friedman recommended system to wean people off of government dependency would also allow people with disabilities to make more and more money while not risking the only benefit that matters for their survival. 

What’s more with technological gains for people with mobility, sight and hearing disabilities, the current system is irrationally punitive and regardless of national employment needs should be reformed.

Incentivizing work by simply reforming the Social Security benefits system to end the deliberate obstacles to continuing in the workforce makes sense for America in 2023.  Republicans and Democrats alike should be able to find common ground on this common sense issue as our nation’s economy flounders at least partially due to the demographics of an aging population.

While this is a temporary solution, it will buy some time while our country grapples with how to create a rational immigration policy and what, if anything, can be done to encourage a birth rate that exceeds population replacement levels.

Rick Manning is the President of Americans for Limited Government. 

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