This is a transcipt of a keynote orignally presented at the Association of Social Economic's 2020 ASSA Reception.


(Photo by: Martha Susana Jaimes)


The Gray New Deal: General Theory of Employment, Retirement, and Money

Teresa Ghilarducci

Keynote for the Association Social Economics’ ASSA Reception

January 2 6:30 pm

San Diego ASSA


Over the last thirty years, we have witnessed a doomsday for pensions. The vast majority of the ten thousand baby boomers turning 65 every day do not have enough income to maintain their standard of living. For the first time in modern history, the American elderly will be relatively worse off than their parents and grandparents. If nothing happens, almost half of middle-class workers over 50 will be poor or near-poor retirees by 2030. Many will turn to work—any kind of work. The failing do-it-yourself American pension system is causing the coming humanitarian and political crises and a deep disturbance in labor markets.  

There are two policy tracks addressing the coming old-age income crises. One track fights age discrimination, promotes job retraining, extolls the benefits of paid work and does not prioritize securing retirement income.

The other track is a Gray New Deal. A Gray New Deal recognizes that civilized democratic societies provide adequate pensions, allowing people to retire in dignity.

A Gray New Deal competes with what I call the “working longer consensus.” Doubtless members of the Association of Social Economics remember the 1980s global economic policy framework, the Washington Consensus, which promoted pro-market, pro-austerity policies. The Washington Consensus was so named because it came from Washington, D.C.-based institutions such as the International Monetary Fund (IMF), World Bank, and the U.S. Treasury and was supported by academics.

Of course, the Association for Social Economics was founded on the recognition that economic behavior is the result of complex social interactions with ethical consequences. We have seen complex problems shaped by economic forces and institutions treated solely with individualistic solutions. The Washington Consensus was a good example of that – it was a set of technocratic, market-based policies to fix sluggish economies caused by too much government.

The “working longer consensus” comes from American consulting firms, the World Bank, the European-based OECD, the press and academic work.  Like the Washington consensus, the “working longer consensus” promotes a set of technocratic, market-based policies to, again, fix sluggish economies this time caused by aging populations.  The “working longer consensus” aims to cut pensions and lengthen working lives.

The promise is that older workers will be healthier by working more. The promise of the “working longer consensus” is that economies will be richer when older people work more. Children will be better off when governments spend more on them and less on the elderly. Making older people work longer is the ultimate “free lunch” policy solution – all winners, no losers. But there is no free lunch. Making older people work longer creates a number of specific losers.

Today, we see more and more advocacy on behalf of the “Working longer consensus.” The Economist [1] lionized a new OECD report, “Working Better with Age,” concluding that the “employment of older workers is vital if prosperity is to be maintained.”

All we need is “silver surfers,” the Economist wrote. Elders need to modernize and learn to “surf” computer technology. Calls for retraining the elderly are often paired with shaming messages, such as  “if you don’t have enough money to retir,e it is your fault,” or, “fighting for  pensions means you will you hurt future generations.” Urban Institute Economist Gene Steurele’s 2014 book, Dead Men Ruling, describes a “gerontocracy” that persistently chooses  pensions over children.

In 2019, the World Economic Forum and the consulting firm Mercer recommended that most nations cut benefits by raising the retirement age, even in Japan and the United States. Japanese and American workers already work longer than others in the OECD and have the highest rates of elderly poverty -- 19 percent in Japan and 21 percent in the U.S.

However, there is pushback. In September 2019, a Bank of Japan (BOJ) official argued that  Japan’s economy is suffering because the country’s dearth of pensions caused too-high savings rates and too many elderly workers are toiling in low productivity, part-time jobs. What the Japanese economy needs, says the Bank of Japan, are higher pensions and better jobs for the elderly. The BOJ is hinting at the core of a Gray New Deal.[2]

There is more pushback. Pension tensions cause political instability. Consider France.  Yesterday, the leader of the General Federation of Labor dismissed a bid for compromise on Macron’s plan to consolidate French pension plans by calling for, well, “strikes everywhere.” Take Italy. The Five Star and National Front movements owed much of their popularity to their resistance of the previous Italian government’s increase in the retirement age in 2011.

But the “working longer consensus” advocates also push back. Just last year, Italian economist Edoardo Campanella wrote in Project Syndicate that the underfunded Italian pension system was overly generous and the only solution was older Italians working more. Meanwhile, the Italian economy can’t fully employ prime-aged adults, much less any more elders seeking work. No wonder there is political dissonance.

Here are the facts. Populations are aging. The median age of OECD residents has risen from 40 to 45 since 2008 due to low fertility rates, better health care, and improvements in baseline sanitation. But while these factors contribute to an aging population, they don’t lead to an iron-clad conclusion that older people should work more. In fact, economic progress in democratic countries means the opposite. Leisure is a normal good. In the United States after World War II, almost every demographic group lived longer and children and older men worked less. Workers and unions struggled to get the weekend. But universal public education for children under 16 became standard, as did paid vacations and now – finally- paid family leave. But retirement, the ultimate paid time off, is now contested. 

FDR and Congress established Social Security in 1935. Back then, most working men died in their boots. They never retired. Instead, they lived alone as they aged or in township poor houses reserved for the mentally insane and poor. The elderly did not generally live in the bosoms of extended families. Then, as now, poor elderly likely had adult children with their own financial problems who don’t have extra bedrooms. In 1934, one year before Social Security was passed, the pressure was on. Twenty-eight states had some sort of plan to cover the aged. The states moved before the federal government.

Social Security now provides over 50 percent of income for over 50 percent of aged households and almost all income for over 13 percent.

I hope you walk away tonight forever banning the wrong-headed image that the United States has a three-legged stool to support the aged, where the elderly receive income in equal parts from Social Security, employer–based pensions, and personal assets. The reality is far different. The Urban Institute predicts middle-class Gen Xers, those ages 45-55 today, will get over a third of their income from Social Security and about 22  percent each from working, employer pensions and assets (mainly from imputed rent of owning houses) when they are age 67.

Earnings are fast becoming the new pensions. And working is the new retirement.

The liberal interpretation of the welfare state is that it substitutes for kin – the welfare state redistributes resources between families to help the unemployed older parents, children, disabled persons, etc. A political economy interpretation of the welfare state is that it regulates the size of the labor force whose time is commodified. It is the political economy interpretation I am invoking today. When a person can legitimately lay claim to income without working, that is at the heart of the “working longer consensus.”

The “working longer consensus” rests on three false assumptions about longevity, public finance, and economic growth.

The truth is:

1. Increasing longevity and pension wealth are not equally distributed, and time in retirement is becoming more unequal.

2. Nations with good pensions do not spend less on the young. Nations with good pensions spend more on children, especially on education.

3. Far from benefiting both firms and workers equally, adding more elders to the labor market disproportionately benefits employers.

Let’s turn to the first myth, the false claim that increasing longevity leads to increased workability. The truth is there is a growing inequality in longevity, pension wealth and retirement time.

I trace some seeds of the “working longer consensus” to Malcolm Lovell, President Ronald Reagan’s deputy labor secretary, who warned Congress in 1982 that eroding workplace pensions and cuts in Social Security would mean the elderly would have to work longer into their lives. He advocated for aggressive anti-age discrimination laws and the elimination of mandatory retirement. The U.S. Congress passed the “Freedom to Work Act” in 2000 that penalized retirement before age 70. The United States still stands apart from the EU and OECD by banning mandatory retirement and making the age to collect full benefits at such an advanced age - age 70.  Congress gave generous terms for delaying claiming Social Security – a guaranteed 6.75 percent per year for every year past age 62.

How many people here plan to delay collecting Social Security until age 70? Hold up your hand.

Indeed, privileged older workers delay and reap Social Security’s generous rate of return. Delaying is a good investment decision! But there is no evidence that the delayed retirement credit helps anyone be better prepared for retirement, and it encourages people to work longer.

Our team’s new research by Tony Webb and Mike Papadopolous finds that older workers collect Social Security WHILE they are working. No scholar has thought to investigate that. Most established scholars assume older workers delay claiming.

We find evidence they likely do so to supplement their low pay. Most workers never get the delayed retirement credit. The delayed retirement credit goes to those who are well-off in retirement or those who are working who can wait until 70 to collect their benefit. Half of retirees retired BEFORE they wanted to, reflecting that many seniors can’t work even if they wanted a job.

Worse is the growing inequality in something even more precious - time in retirement. It is worse because of the combination of unequal longevity gains and unequal wealth.

In 1950, life expectancy at age 65 for for black and white men was equal - about 12.8 years. Now, there is a two-year difference.[3] In the last 20 years, all longevity gains for Americans have gone to those in the upper half of the income distribution. Almost all of the gains in retirement wealth have gone to the top 20 percent.

Older women[4] at the bottom end of educational attainment can expect almost 16 years of retirement time, but more than a third of that time will be spent with significant impairment.[5] Women with the highest levels of education can expect 19 years of life expectancy after age 65. These women will likely experience a fifth of those years with some impairment. Older men have a less pronounced class pattern. At age 65, men of lower socioeconomic status have about 12.6 years of retirement time with 27 percent of those years spent in impaired health. Like highly-educated women, high socioeconomic status men can expect almost two more years of life with a little less time (20 percent) experiencing impairment.

Making American workers work more is especially harsh given that American men and women work more hours per day, more days per year and more years per lifetime than any men and women in any other country in the G7. On average, American and Japanese retirement time is 20 years.  People in France get 28 years, 25 years in Italy, and 23 years in Canada.

Now, let’s turn to second myth, the myth of the greedy geezer. 

There is no evidence that “the old eat the young.” My research found that in 63 nations over 40 years, nations with high levels of education spending generosity – GDP spent per child on education -- also spend more GDP per old-person on pensions.

As nations become richer, the ability to retire becomes accepted by society. At the same time, economic prosperity causes aging populations. It might look like pension generosity is increasing because the old are getting politically stronger, but pension generosity is increasing because a nation is getting richer.

My research, controlling for aging populations, finds a 10 percent increase in education spending accompanies a 7.3 percent increase in pension generosity. Among the G-7 countries, Canada has the highest spending per child on education and has one of the highest rates of spending per elderly. The U.S. is the lowest in both.[6] But the positive correlation between education and pension spending still holds up in the U.S.

American children receive a substantial amount of Social Security income. In 2017, over 8 percent of American children lived in families that received Social Security income. Social Security income lifted one million children out of poverty, which is about a third of how many children [7] received payments from the program aimed at poor children, Temporary Aid for Needy Families. In 2018, the Social Security Survivors and Disability benefits paid $21 billion to children compared to the Earned Income Tax Credit that paid out $58 billion. Though old-age programs are not means tested, disability and early death are more common among lower income groups and so Social Security disproportionately helps low-income children.[8]

Axel Boersch-Supan examined 16 countries and also concluded social expenditures for programs targeting the elderly does not reduce the share of total social expenditures for programs targeting youth. Economists Bommier, Lee, Miller and Zuber’s 2004 study of U.S. education, Social Security, and Medicare concluded people continually get higher returns on their taxes than cohorts before them. There are detractors. Rochester’s Robert Novy-Marx and Trump-CEA member Josh Rauh argue that the underfunding of state and local government pensions will increase debt burdens for future taxpayers. But in the late 1990s, New Jersey underfunded state pensions to increase education spending. Those future taxpayers had more human capital. In 2019, Economist Charles Steindal found that pension debt had no association with state economic growth.

There is little evidence for a gerontocracy, or a Greedy Geezer effect. Education and pension spending go together because of what political scientists John Williamson and Frank Pampel call the social democratic effect. I quote them, “pensions are the outcome of a struggle between organizations and political parties representing the interests of capital and those representing the interests of labor.” Political coalitions to boost workers’ pensions are political coalitions that boost public education.  The evidence points to solidarity among generations of working class people, not strong-armed generational politics.

Now let’s turn to the third and last myth. The false claim that a larger number of older people working will add to GDP and benefit workers and firms. The truth is that employers, not labor, disproportionately benefit from tens of millions of older people needing paid work.

The sheer size of the boomer cohort coupled with their insecure pensions means over half of the 11.4 million jobs expected to be added to the U.S. economy by 2026 will be filled by workers over 55. Our project at The New School examines the impact on bargaining power. We predict power will continue to shift to employers when millions of older adults lacking basic retirement income are forced to stay or enter the labor market. Bad pensions means weaker worker bargaining power because old-age financial insecurity causes older workers’ reservation wages to drop. As a result, predictably, older workers’ wages and job quality have eroded.

Since 1991, older men’s wages started to fall relative to younger workers’ wages and have lagged behind ever since. At all education levels, older workers experienced almost no real wage growth since 2007 while weekly earnings for prime-age workers (ages 35 to 54) grew 4.7 percent. In prior business cycles, older workers’ earnings grew at similar or higher rates than prime-age workers’ earnings. Over the longer term, 1990 to 2019, for full-time men with bachelor’s degrees, the real median weekly earnings for older men decreased by almost 3 percent, while wages increased almost 9 percent for prime-age male workers with bachelor’s degrees.

And the jobs older workers have are arguably worse, not better. Older workers jobs are increasingly likely to require stooping and bending. Think warehouse and care work.  Next time you get an Amazon package from a fulfillment center, thank a granny. Writer Jessica Bruder found Amazon recruits “workampers” – elders living in trailers –to work in rural warehouses. And because of the computer, a larger number of older people have jobs demanding keen eyesight and intense concentration. Older black men are more likely to have to do physical labor than in the 1990s.

Older workers are increasingly employed in low-wage traditional jobs and in alternative work arrangements. In the next ten years, the occupations with the most job growth will be the 1.3 million personal and home health care aides. Three-fourths of these new jobs will go to women over age 55. This means older women will be taking care of even older women. Just 7 percent of personal and home health care aides are union members, and 24 percent earn less than $15 per hour.

Without secure pensions, older people are forced to accept wages, hours, and working conditions based on employer’s terms. An increase in the supply of labor invariably redistributes income away from wages and toward profits. The “working longer consensus” helps tame pressures for higher pay and improved working conditions and incentives to increase worker productivity. This is similar to what the Bank of Japan predicted.

Other sources of the “working longer consensus” come from Harvard economists Johnathon Gruber and David Wise. In 1999, they found a negative 75 percent correlation between the labor force participation of those over age 65 and the age in which people can collect their full Social Security benefits. This paper is the go-to footnote for calls to cut pensions.

But what drives what? Do nations with high unemployment expand pension benefits or do generous pension benefits drive people to retire? Gruber and Wise emphasize the supply side. They proffer that older workers decrease their work effort when they get pensions earlier. On the other hand, nations with chronically high rates of unemployment may adopt early pension ages. I find weak support for the supply side argument. If Gruber and Wise are right, pension generosity should be correlated with more time in retirement. There is virtually no relationship.  Among 42 OECD nations, the correlation between pension generosity – the amount of money spent per old person - and the average time a person spends in retirement was 12 percent in 2005 and 16 percent in 2015.

In closing (two words said by John Kenneth Galbraith that brought relief and gratitude to an audience), the “working longer consensus” should be replaced by a Gray New Deal. 

I predict we will have our chance to replace the “working longer Consensus” in the next recession and election. The policy window – when ideas, politics, and a pressing problem all come together – may be open for a Gray New Deal!

Note what happened in the last recession. The value of older workers’ retirement accounts fell. Some, instead of exiting the labor force with secure pensions, stayed on and cut spending. The recession was made worse by financialized pensions. We destabilized our automatic stabilizers. And retirement income security soared to the top of polls that asked American families about their deepest fears.

Republicans have been careful not to discuss retirement security, with the exception of a slip by Senate leader Mitch McConnell early in the Trump administration on a Sunday TV talk show  about wanting to cut entitlement spending after cutting taxes. Right now, the executive branch is cutting Social Security field office spending and getting tough on disability insurance awards. Worse, the 2017 Republican tax cuts reduced fiscal capacity to expand Social Security. But worse of all is the dead silence from the administration and the Senate majority. By not moving to bring more revenue to Social Security, only three fourths of benefits will be paid around 2034. And because the system is progressive, the cuts will increase U.S. elderly poverty rates, when we are already a leader in the number of poor elederly among rich nations. Inaction in getting new revenue into Social Security is deadly action. But in politics, regression is possible. Policies to hurt workers are politically possible.

The good news is that unlike the2016 election, when neither Clinton nor Sanders, Trump, or Cruz had any plans for retirement,[9] most all the 2020 Democratic candidates have a retirement income security plan and ALL are talking about power and unions.

The plan I know best is Buttigieg's, which expands Social Security as well as fixes our voluntary, employer system. The plan is similar to the plan I devised with EPI in 2008 and recently relaunched, called the Guaranteed Retirement Account (GRA). Guaranteed Retirement Plans are portable retirement accounts, and the money is taken out only at retirement.

Buttigieg and the GRA make employers pay 3 percent into a portable workplace plan (The GRA plan is a 1.5% shared cost between employers and employees, which is functionally the same.) The self-employed also are required to have a GRA, similar to the way they are required to contribute to Social Security.  The Gray New Deal expands Social Security and layers on top of it an advanced, funded retirement system like workers have in public employment, unionized workplaces and large firms.

Elizabeth Warren‘s plan expands Social Security. It raises all benefits $200 per month. And Bernie Sanders also expands Social Security. Joe Biden expands the employer-based pension system through a voluntary method.

Another sign the policy window for a Gray New Deal is opening is that over 34 states, like the time before Social Security passed, have employer mandates for employers to offer -- but sadly not to pay for -- a retirement plan.

A personal finance end-of-the-year article posed 12 reasons one should work past age 65. Every reason was an assertion with no proof and some falsehoods. One was that leisure might be boring. The article was every inch the “working longer consensus.” There is no evidence that having adequate income and control over pace and content of your time is detrimental. On the contrary, control over your time and adequate finances promote well-being. There is also no evidence that working longer improves financial preparedness for retirement. Jobs are low paid and people collect their Social Security while working.

The only evidence that is unassailable about working longer is that it recommodifies older people’s time, makes workers worse off, shrinks retirement time, and makes retirement time more unequal. Now may be time for a Gray New Deal.

Retirement time is the new contested struggle for paid time-off. A Gray New Deal that mandates pensions, expands Social Security, and finances long-term care will increase worker bargaining power, strengthen labor markets, and make workers better off.



1. Economist blog Bartleby September 7 – 13th 2019 (page 54)

2. (Murkami, 2019).

3. (81 percent of white men make it to 65 compared to 70 percent of black men.) 

4. in the lowest third in SES

5. (with one or more ADLs)

6. Because two-way correlations do not establish causal relations, we isolated the effect of pension generosity on education generosity by controlling for the wealth and age profiles of the nations.

7. Romig 2019

8. National Academies of Sciences, 2019

9. 68% of American workers in 2016, surveyed by the Financial Services Roundtable, said the candidates haven’t talked enough about ensuring Americans have a secure retirement (according to Forbes) and Charles Schwab survey found 77% of respondents considered the ability to save enough for retirement to be a “major public policy issue.”