RPF-0013

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00:00:28.800 | Radical Personal Finance, Episode 13

00:00:35.600 | [Music]

00:00:51.800 | Welcome to the Radical Personal Finance podcast for today, July 3, 2014.

00:00:57.200 | I'm your host, Joshua Sheets.

00:00:59.100 | On today's show, a continuation, a history of retirement.

00:01:04.000 | Is retirement actually about the retiree?

00:01:07.900 | Or is the idea of retirement actually intended to benefit somebody else?

00:01:12.700 | Stay with us.

00:01:14.200 | [Music]

00:01:27.800 | So thanks for being here with us today for our episode number 13.

00:01:31.900 | I'm excited about today's show.

00:01:33.900 | Of course, I'm excited about every day's show, otherwise I wouldn't be doing this, right?

00:01:36.600 | What's the point of doing it if you're not excited about what you're doing?

00:01:40.100 | However, in today's show, we're going to talk about some things

00:01:42.500 | that I have never actually heard discussed in financial media.

00:01:46.400 | And today's show is going to be a little bit different.

00:01:49.600 | Plan to be more of, I'll call it a working show.

00:01:53.500 | So the idea behind today's show is not to give a presentation with a specific agenda

00:02:01.100 | or to give a presentation with a specific conclusion,

00:02:05.300 | but rather to have a working show and to give some information.

00:02:08.600 | And we're going to talk a little bit about the history of retirement.

00:02:11.500 | Why are we doing this?

00:02:13.300 | Well, let's start with the problem.

00:02:15.700 | Let me read a very short article here,

00:02:17.700 | and this sums up what you will see often in the news these days.

00:02:22.900 | This article, entitled "The Greatest Retirement Crisis in American History" by Ted Seidel,

00:02:28.000 | and this is written in Forbes, March 20, 2013.

00:02:32.900 | "We are on the precipice of the greatest retirement crisis in the history of the world.

00:02:37.800 | In the decades to come, we will witness millions of elderly Americans,

00:02:41.000 | the baby boomers and others, slipping into poverty.

00:02:44.400 | Too frail to work, too poor to retire will become the new normal for many elderly Americans.

00:02:50.400 | That dire prediction, which I wrote two years ago, is already coming true.

00:02:54.400 | Our national demographics, coupled with indisputably glaring insufficient retirement savings

00:02:59.800 | and human physiology, suggest that a catastrophic outcome

00:03:03.600 | for at least a significant percentage of our elderly population is inevitable.

00:03:08.400 | With the average 401(k) balance for 65-year-olds estimated at $25,000 by independent experts

00:03:14.400 | - $100,000 if you believe the retirement planning industry -

00:03:17.400 | the decades many elders will spend in forced or elected retirement will be grim.

00:03:23.400 | Corporate America and the financial wizards behind the past three decades of so-called retirement innovations,

00:03:28.400 | most notably titans of the pension benefits consulting and mutual fund 401(k) industries,

00:03:34.000 | are downplaying just how bad things are already and how much worse they are going to get.

00:03:39.400 | Americans today are aware that corporate pensions have been virtually eliminated

00:03:43.400 | and that the few remaining private as well as the nation's public pensions are in jeopardy.

00:03:48.000 | Even if you are among the lucky few that have a pension,

00:03:50.400 | you cannot rest assured that it will be there for all the years you'll need it.

00:03:54.000 | Whether you know it or not, someone is busy trying to figure out how to screw you out of your pension.

00:03:59.400 | Americans also know the great 401(k) experiment of the past 30 years has been a disaster.

00:04:04.400 | It is now apparent that 401(k)s will not provide the retirement security promised to workers.

00:04:09.200 | As a former mutual fund legal counsel, when I recall some of the outrageous sales materials

00:04:14.000 | the industry came up with to peddle funds to workers, particularly in the 1980s,

00:04:18.200 | it's almost laughable if the results weren't so tragic.

00:04:22.200 | There was the "dial your own return" cardboard wheel of fortune

00:04:26.200 | that showed investors which mutual funds they should select for any given level of return.

00:04:30.800 | Looking for 12%? Load up on our "government plus" or option income funds.

00:04:36.200 | It was that easy to get that level of income needed in retirement, investors were told.

00:04:40.800 | The signs of the coming retirement crisis are all around you.

00:04:43.600 | Who's bagging your groceries? A young high school kid or an older retiree

00:04:48.200 | who had to go back to work to supplement his income or qualify for health insurance?

00:04:52.800 | The impending crisis will come in what I call "waves" as opposed to a tsunami hitting all at once.

00:04:58.800 | With each successive wave, more elderly will be drowned.

00:05:02.600 | The older you are, the harder it is to recover from a setback.

00:05:06.400 | Wave 1. Retirees come back to work.

00:05:09.600 | Workers who retired post-2000 realized they cannot possibly live on their meager retirement savings,

00:05:15.200 | virtually no interest and limited health benefits, and conclude they must go back to work full-time.

00:05:20.800 | For example, one of my clients, a sheriff's office, has already seen retirees coming back to work

00:05:25.400 | largely for health insurance coverage.

00:05:27.600 | While these retirees do have pensions, the cost of health insurance, when not subsidized by an employer,

00:05:33.600 | is far greater than they had anticipated.

00:05:36.000 | For those who are physically and mentally capable of going back to work

00:05:39.400 | and are welcomed by their former employers or other employers, this is a plausible survival strategy.

00:05:45.800 | Wave 2. Workers delay full retirement.

00:05:49.600 | Many current workers realize they have not saved enough to retire

00:05:53.400 | and postpone retirement for a certain number of years.

00:05:56.400 | They still believe, however, that someday they will be able to retire and live off their savings.

00:06:01.600 | This strategy makes sense for workers who can hang on to their jobs at the same or better pay

00:06:06.400 | and are healthy enough to keep working.

00:06:08.200 | On the other hand, older workers who are forced by employers to agree to demotions, pay cuts,

00:06:12.800 | or part-time status to stay on may feel demoralized.

00:06:16.400 | Wave 3. Full retirement is unachievable.

00:06:19.600 | Many current workers and retirees at some point realize that they can never fully retire,

00:06:24.400 | i.e. stop working altogether, and commit to working part-time for as many of their golden years as possible.

00:06:30.200 | The problem is, of course, that each year more elderly people become too frail to work

00:06:35.000 | and fewer employers are interested in hiring them, even on a part-time basis.

00:06:39.200 | Remember those ads that said, "It's hell to be 40 and out of work"?

00:06:43.200 | Try looking for work at 70 or 80.

00:06:45.800 | Wave 4. Drowning.

00:06:48.000 | At some point, lack of savings, lack of employment possibilities, and failing health

00:06:52.400 | will catch up with the overwhelming majority of the nation's elders.

00:06:55.600 | Let me emphasize that we're talking about the overwhelming majority,

00:06:59.200 | not a small percentage who arguably made bad decisions throughout their working lives.

00:07:03.800 | Given the certainty that a retirement crisis is headed toward our shores,

00:07:07.400 | you'd think that our elected officials would be hard at work preparing a response.

00:07:11.400 | Of course, that's not happening.

00:07:13.400 | To the contrary, conservatives are trying to pare back so-called entitlements that will mushroom in the near future,

00:07:18.800 | and liberals have failed to acknowledge the crisis or propose any solutions.

00:07:23.000 | Eventually, the pain will be so widespread that the crisis will be impossible to ignore.

00:07:28.200 | For many, the challenge is to hang in there until help arrives.

00:07:32.600 | It's a good outline of the problem.

00:07:38.400 | I chose it because it's a little bit sensational, but I don't think the author overstates the facts.

00:07:43.000 | We do have major problems with retirement, as I started to discuss yesterday.

00:07:49.000 | The problem is affecting and will affect every single American.

00:07:53.800 | Hopefully, my goal through the process of this show is to help guide people out of the problem and into solutions.

00:08:01.400 | But it's first important to acknowledge the situation that exists.

00:08:05.600 | Demographically speaking, there are a huge number of baby boomers headed toward retirement.

00:08:10.400 | Financially speaking, those baby boomers do not have enough money to live on based upon assets,

00:08:17.600 | which is basically what every single TV commercial for every financial services company would lead you to believe.

00:08:24.600 | You see the picture of the wealthy couple strolling down the beach.

00:08:31.200 | Does that happen? Yes.

00:08:33.200 | I have a few clients that are in that situation, but they are rare and unique.

00:08:36.800 | This is not normal.

00:08:39.000 | So we need new strategies that work in every situation.

00:08:41.800 | It's important to acknowledge the pressure that's coming.

00:08:46.400 | Social Security, Medicare are woefully underfunded.

00:08:51.400 | Medicare substantially more than Social Security.

00:08:53.800 | We'll talk about that in detail at some point in the future.

00:08:56.000 | But this chicken will come home to roost in the future.

00:08:59.000 | This is going to create significant adjustments, and there are going to be significant adjustments in the systems that exist currently.

00:09:06.800 | This is not abnormal.

00:09:13.000 | Social Security has been adjusted many times.

00:09:15.200 | We'll discuss that in a future show and kind of talk through how it's been adjusted.

00:09:18.200 | It will be adjusted again.

00:09:19.600 | And it's going to take some major changes to make things work.

00:09:25.600 | How it's all going to work, I don't know.

00:09:27.200 | But we'll watch it as the years go by.

00:09:29.800 | Many people are of the opinion that the retiring baby boomers, as they spend down assets, that that will affect capital markets.

00:09:35.800 | We'll discuss that in detail at some point in the future.

00:09:38.800 | It's certainly going to affect taxes.

00:09:40.200 | Taxes certainly have to be adjusted, especially Social Security taxes.

00:09:44.800 | The number of wage payers per retiree decreases and continues to decrease over time.

00:09:51.400 | So I've struggled, me personally, thinking through all these aspects of the problem.

00:09:56.200 | And I've looked, trying to understand answers.

00:09:59.400 | It's hard to find good answers.

00:10:01.600 | In the current society, it's very easy to read articles.

00:10:05.800 | I'll read a lot of articles in the show, as you can see from the past few days.

00:10:09.200 | But articles, generally, what, four minutes to read it?

00:10:12.000 | It's hard to get an answer.

00:10:13.600 | So I've tried to figure out some of the history.

00:10:15.600 | Now, all the history, generally, as I was growing up, I was under the assumption that retirement was something that everybody was going to do.

00:10:23.400 | Retirement was something that everybody should be planning for.

00:10:25.800 | And that this is going to be a reality for everybody.

00:10:30.000 | And if you would just be smart enough to save $100 a month, you'd be a millionaire and everything would be good.

00:10:34.600 | But I've learned that my viewpoints, I guess, were a little bit naive.

00:10:39.600 | And so I've gone looking for books on history.

00:10:42.000 | And I found two.

00:10:43.200 | And today, we're going to be talking extensively from a book entitled "A History of Retirement."

00:10:49.000 | And the author of this book is a man named William Grabener.

00:10:53.200 | And I read this book, would recommend it to you.

00:10:56.400 | You can find it on Amazon.

00:10:57.800 | It's out of print.

00:11:00.000 | So you'll have to look for it on the used market.

00:11:03.400 | It's substantially priced, if you look at it on Amazon.

00:11:12.800 | And William Grabener is a college professor who -- the subtitle of the book is called "The Meaning and Function of an American Institution from 1885 to 1978."

00:11:22.000 | And when I found this book, I really soaked it up because it helped me to understand some of the history.

00:11:28.200 | Now, as with any book on history, you have to figure out, is the book that I'm reading, is it history?

00:11:34.200 | Is it a revision of history?

00:11:36.200 | From what angle is the history?

00:11:38.200 | I'm going to basically ignore most of that controversy.

00:11:40.800 | Although I would point out -- I found an interesting review of this book.

00:11:45.200 | I would point out that it may not -- that you have the author's point of view.

00:11:51.000 | Here's one interesting review.

00:11:53.200 | This is a review that was written by a man named James Patterson, who was from the Department of History at Brown University.

00:11:58.600 | And his review of this book -- "This vigorously revisionist treatment of ideas and policies concerning retirement manages to illuminate much about American economic and political life in the 20th century.

00:12:10.000 | Grabener's interpretation, though not his tone, resembles that of Francis Fox Pivot and Richard Cloward,

00:12:15.600 | who emphasized the importance of corporate needs in the evolution of 20th century social programs.

00:12:20.800 | Indeed, Grabener seeks a legitimate radical critique of social welfare policies.

00:12:26.000 | With the development of corporate capitalism, he says, business leaders "become less concerned with immediate profit and more interested in long-term stability."

00:12:34.800 | The review continues.

00:12:37.800 | When I read things like that, I always bristle a little bit.

00:12:41.000 | I'm not a fan of revisionist history.

00:12:43.200 | But I find it -- reading books like this to be a much more solid place, because then you have footnotes and can continue to seek it out.

00:12:51.200 | I'm still young in my journey of looking through this.

00:12:54.200 | I'm very interested in finding good answers.

00:12:57.600 | Another book that -- I haven't read it yet, but there's another book entitled "The Evolution of Retirement in American Economic History from 1880 to 1990."

00:13:06.200 | This is published by the National Bureau of Economic Research.

00:13:09.200 | The author is a lady named Costa, Doris or Dora Costa.

00:13:14.200 | Doris, Dora, something like that.

00:13:18.200 | This one is also available, used on Amazon.

00:13:21.200 | The price is pretty high.

00:13:22.200 | If you pull up the National Bureau of Economic Research, you can actually find it for free as a PDF, a downloadable PDF on their website.

00:13:30.200 | I will read this one and review it in the future as well.

00:13:34.200 | But these answers are tough to find.

00:13:37.200 | "Yesterday I tried just to illustrate in my own way kind of the absurdity of the idea that everyone just wants to retire and play golf in Florida.

00:13:45.200 | Are there a lot of people who want to do that?

00:13:47.200 | Absolutely.

00:13:48.200 | But I've tried to figure out where did this idea of inactivity come from?

00:13:51.200 | If Bill Gates and Warren Buffett and Tim Ferriss and Jacob Lundfisker -- and if none of these people retire, quote/unquote, kick back at 65 and play golf every day,

00:14:03.200 | then where did this idea that this is what we should be working toward come from?

00:14:08.200 | Why did the idea of retiring at 65 become such a universally accepted goal?"

00:14:15.200 | So this book -- I'm going to read some excerpts from it today, and that's going to be the bulk of today's show to provide you with those excerpts.

00:14:22.200 | This book, I think, helps me to give a little bit of an idea.

00:14:25.200 | And what I'm learning is that it's far more complicated than is usual with most things in history.

00:14:31.200 | It's far more complicated than it would seem right at the front end.

00:14:35.200 | It's hard for me to figure out when I look at things like this.

00:14:39.200 | It's hard for me to figure out whether the results are intentional or unintentional.

00:14:44.200 | Sometimes you look at the circumstances of a situation that we have today and you say, "Was this a conspiracy?

00:14:51.200 | Was this a group of people planning out what would happen?

00:14:55.200 | Or did this happen organically and it just simply wound up with these expected results?"

00:15:01.200 | And generally, I can't usually figure out the answer to that.

00:15:06.200 | I can't usually actually figure out what the real answer is to that.

00:15:10.200 | However, this show is going to be my effort at kind of giving a little bit of the history.

00:15:17.200 | And I'm trying to give you a sufficient summary of the book to encourage you to read it,

00:15:21.200 | but I'm going to read enough of the passages here from the first two chapters and from the last chapter to give you a good overview.

00:15:28.200 | If you're interested in the meat and potatoes, go back and read through the actual history of each of the major retirement programs that's listed here.

00:15:37.200 | So we begin with Chapter 1, and I particularly like the author's introduction here.

00:15:44.200 | And this section to give interest is entitled "Americans Confront Retirement, the Osler Valedictory."

00:15:52.200 | And this is a famous speech that was mentioned in several of those articles that I read yesterday.

00:15:56.200 | So we will begin here.

00:16:00.200 | "William Osler was reluctant to leave Johns Hopkins, even to return to British soils as Regius Professor of Medicine at Oxford.

00:16:08.200 | His 16 years in Baltimore as physician-in-chief of the university's new hospital had been triumphant ones,

00:16:14.200 | full of rewards commensurate with his growing stature as teacher, medical scholar, administrator, and man of letters.

00:16:21.200 | On February 22, 1905, Osler delivered a valedictory address, which he titled "The Fixed Period," after a novel by Anthony Trollope.

00:16:30.200 | Grateful for his contributions to the medical school, and aware of Osler's reputation as a public speaker, the audience was large and receptive.

00:16:38.200 | A serious and ingenious man, Osler took this opportunity to instruct, drawing a series of analogies between his own physical state and the human body on the one hand,

00:16:48.200 | and the health of the teaching and medical professions on the other.

00:16:51.200 | Although Osler's career was to last another 14 years, the address had a "retrospective" quality,

00:16:58.200 | as Osler, extrapolating from his own history, discussed the universals of hard work, flagging energies, and the need for increased leisure.

00:17:06.200 | But his departure was more than the product of his own physical demands.

00:17:10.200 | "It may be asked, in the first place," he continued, "whether metabolism is sufficiently active in the professoriate body.

00:17:18.200 | Is there change enough? Would not the loss of a professor bring stimulating benefits to a university?

00:17:24.200 | It is strange of how slight value is the unit in the great system. A mobile professoriate," he argued, "was essential.

00:17:32.200 | Change is the very marrow of a professor's existence. A new set of students every year, a new set of assistants,

00:17:39.200 | a new set of associates every few years, to replace those called off to other fields.

00:17:44.200 | In any active department, there is no constancy, no stability in the human surroundings."

00:17:50.200 | Had Osler chosen to diffuse the valedictory at this point, he would have emerged relatively unscathed,

00:17:56.200 | having aroused, one would imagine, no small measure of anxiety on the part of the older members of the faculty,

00:18:03.200 | but avoiding public vilification. This was not Osler's way.

00:18:08.200 | Instead, the lecture, for that indeed was what it had become, moved from the general to the concrete,

00:18:14.200 | and from problem to solution, as Osler delivered the lines that were to have a considerable impact on his reputation,

00:18:22.200 | and were to be associated with the eminent physician long after his death.

00:18:27.200 | I am going to be very bold and touch upon another question of some delicacy, but of infinite importance in university life,

00:18:34.200 | one that has not been settled in this country. I refer to a fixed period for the teacher,

00:18:40.200 | either of time of service or of age. It is a very serious matter in our young universities

00:18:46.200 | to have all of the professors growing old at the same time. In some places, only an epidemic,

00:18:52.200 | a time limit, or an age limit can save the situation. I have two fixed ideas well known to my friends,

00:18:59.200 | harmless obsessions with which I sometimes bore them, but which have a direct bearing on this important problem.

00:19:06.200 | The first is the comparative uselessness of men above forty years of age.

00:19:13.200 | This may seem shocking, and yet, read aright, the world's history bears out the statement.

00:19:19.200 | Take the sum of human achievement in action, in science, in art, in literature.

00:19:24.200 | Subtract the work of the men above forty, and while we should miss great treasures,

00:19:29.200 | even priceless treasures, we would practically be where we are today.

00:19:33.200 | It is difficult to name a great and far-reaching conquest of the mind which has not been given to the world

00:19:39.200 | by a man on whose back the sun was still shining. The effective, moving, vitalizing work of the world

00:19:45.200 | is done between the ages of twenty-five and forty. These fifteen golden years of plenty,

00:19:51.200 | the anabolic or constructive period in which there is always a balance in the mental bank and the credit is still good.

00:19:58.200 | In the science and art of medicine, young or comparatively young men have made every advance of the first rank.

00:20:04.200 | My second fixed idea is the uselessness of men above sixty years of age,

00:20:10.200 | and the incalculable benefit it would be in commercial, political, and in professional life

00:20:16.200 | if, as a matter of course, men stopped work at this age. In that charming novel, The Fixed Period,

00:20:23.200 | Anthony Trollope discusses the practical advantages in modern life of a return to this ancient usage,

00:20:30.200 | and the plot hinges upon the admirable scheme of a college into which, at sixty, men retired

00:20:36.200 | for a year of contemplation before a peaceful departure by chloroform.

00:20:41.200 | That incalculable benefits might follow, such a scheme is apparent to anyone who, like myself,

00:20:51.200 | is nearing the limit and who has made a careful study of the calamities which may befall men

00:20:57.200 | during the seventh and eighth decades. Still more, when he contemplates the many evils which they perpetuate

00:21:05.200 | unconsciously and with impunity, one could, in short, tolerate the participation of the middle-aged,

00:21:12.200 | who were only uncreative. The aged, however, were positively dangerous. They must be retired.

00:21:20.200 | Graebener goes on and uses this as a hook to pull us in, and I'm going to be skipping around

00:21:29.200 | reading just a couple of paragraphs here and there that I think will contribute.

00:21:34.200 | Osler's suggestion of retiring those over sixty provoked considerable comment, most of it negative.

00:21:40.200 | Before retirement could be carried out on a mass basis, said the Brooklyn Eagle,

00:21:45.200 | a major redistribution of wealth would be necessary. Otherwise, no one could afford it.

00:21:51.200 | At Harper's Weekly, editor George Harvey thought Osler's notions of the productivity of those

00:21:56.200 | between twenty-five and forty scandalous, but found some logic in retirement.

00:22:02.200 | "The end of life," said Harvey, "could be a pleasure time in which adequate preparation

00:22:07.200 | would be followed by a variety of frivolous and irresponsible, but ultimately satisfying activities.

00:22:14.200 | Resistance to such a concept," Harvey contended, "was deeply ingrained in the national character."

00:22:20.200 | "We are like Rolo. Our play is work, and it continues to be work in the case of most of us,

00:22:26.200 | just as long as our work is marketable."

00:22:31.200 | In 1905, the idea of pulling back was at odds with both the level of opportunity in the society

00:22:36.200 | and prevailing notions of work. The Saturday Review counseled resistance.

00:22:41.200 | "Men shrink from voluntarily committing themselves to an act which simulates the forced inactivity of death."

00:22:49.200 | Thirty-five years later, with work increasingly scarce, especially for the old and middle-aged,

00:22:55.200 | and pensions, public and private, more readily available, this conception of retirement

00:23:00.200 | would fuse with Social Security and become a dominant ideology.

00:23:05.200 | A society so intensely concerned with progress must also be vigilant against sources of decay.

00:23:11.200 | At this time, the perceived menaces to progress were, first, trusts and monopolies,

00:23:16.200 | which threatened to destroy opportunity and competition, the critical ingredients of capitalism,

00:23:21.200 | and, second, the new immigration, which would, many feared, corrupt the racial fiber

00:23:26.200 | and invitiate national strength and purpose.

00:23:30.200 | Osler brought to the surface a third source of cultural anxiety,

00:23:34.200 | the specter of an aging population mired in its own demography.

00:23:39.200 | Socialists would focus on this idea some 40 years later, and in the process,

00:23:44.200 | create the profession of social gerontology.

00:23:49.200 | Continuing on through a section of retirement and the evolution of American capitalism,

00:23:53.200 | we move to Chapter 2, which is entitled "Retirement and the Origins of Age Discrimination."

00:23:59.200 | I'm going to read here a section on the problem of technology,

00:24:03.200 | and then also talk through how it was implemented and discussed in society.

00:24:11.200 | The Problem of Technology

00:24:14.200 | Lee Welling Squire's Old Age Dependency in the United States, published in 1912, was an angry book.

00:24:20.200 | In it, Squire challenged the right of the individual employer to "engage men in an occupation

00:24:26.200 | that exhausts the individual's industrial life in 10, 20, or 40 years,

00:24:32.200 | and then leave the remnant floating on society at large as a derelict at sea."

00:24:38.200 | Squire implied that it was justifiable for an industry to wear out its workers.

00:24:42.200 | Having done so, it must simply make provision for them, presumably through some form of retirement.

00:24:48.200 | But work was inherently consuming, damaging, and destructive,

00:24:52.200 | and that technology was the central agent in the work experience of middle-aged and older employees.

00:24:58.200 | By the late 1920s, technology was one of the most common explanations

00:25:02.200 | of the employment problems of older workers.

00:25:05.200 | Herbert Hoover's Committee on Recent Economic Changes found the essence of the problem

00:25:09.200 | in a new job mix that placed a premium on youthful vigor.

00:25:13.200 | "Labor-saving machinery," commented the Commercial and Financial Chronicle,

00:25:17.200 | "had displaced men and reduced opportunity.

00:25:20.200 | Even in the midst of the Great Depression, when one would expect such an analysis of unemployment

00:25:25.200 | to have been overthrown by the sheer numbers of those without jobs and the collapse of the world economy,

00:25:30.200 | the technological argument remained influential,

00:25:33.200 | prompting a 1936 investigation of unemployment and technology by the House of Representatives.

00:25:39.200 | By 1960, the centrality of technology had emerged as an article of faith among social gerontologists."

00:25:46.200 | The only legitimate early study of the problem, by English economist William Beveridge in 1909,

00:25:52.200 | took a diametrically opposed point of view.

00:25:55.200 | Machinery, Beveridge said, did not cause unemployment,

00:25:58.200 | for if machinery had been making labor superfluous,

00:26:01.200 | the price of labor would have fallen with the advance of technology.

00:26:05.200 | In fact, the opposite had happened.

00:26:07.200 | Although Beveridge reduced unemployment to "specific imperfections of adjustment,"

00:26:13.200 | including regular changes in industry, fluctuations in industrial activity,

00:26:17.200 | and the need for reserves of labor to meet incidental fluctuations in trade,

00:26:21.200 | he was well aware that older workers were not absorbed as easily as younger workers.

00:26:26.200 | Since technology was not involved, the problem must reside in some characteristic of the older worker,

00:26:32.200 | which served to inhibit his employment.

00:26:34.200 | Older workers, Beveridge reasoned, lacked a quality essential in a rapidly changing society—adaptability.

00:26:42.200 | Beveridge had, in effect, reversed the technological argument,

00:26:45.200 | moving from an inflexible technology to the inflexible worker.

00:26:50.200 | The printing industry offers some opportunity to test the technological theory in a historical context.

00:26:57.200 | I'm going to skip through a section here talking about the adjustments in the printing industry

00:27:02.200 | with the introduction of a new machine called the Linotype,

00:27:06.200 | and continue on to the commentary on the impact of that machine on the printers themselves.

00:27:16.200 | The Inland Printer, voice of the employers, was torn between what it saw as the absurdity of superannuation

00:27:23.200 | in an industry in which brains, skill, and experience played such a major role in strength and endurance,

00:27:29.200 | such a minor one, and the inevitability and rationality of the whole process.

00:27:33.200 | The latter viewpoint was dominant.

00:27:35.200 | Acknowledging that labor had been intensified by the introduction of the new machines,

00:27:41.200 | and that intensification was in some measure responsible for the problems of the older worker,

00:27:46.200 | owners located the source of this intensification in two factors.

00:27:50.200 | First, technology, which they labeled at once as benign and a mark of the "advance of civilization."

00:27:59.200 | Second, the reduction in working hours, for which, of course, the workers were responsible.

00:28:05.200 | Technology produced superannuated workers because "the daily task is more exacting."

00:28:13.200 | Shop owners had also developed a more tractable labor force.

00:28:16.200 | The "old-time prints" were irrepressible drinkers who might at any moment quit work

00:28:21.200 | and leave the shop for the companionship of the saloon.

00:28:24.200 | The sober, well-educated, and quick-witted young men who replaced them had lost the drinking habit.

00:28:32.200 | The victims of this reorganization shared with the owners a sense of the inevitability of what was happening to them,

00:28:38.200 | but their resignation emerged from an analysis of capitalist modes of production rather than technology itself.

00:28:45.200 | They understood that not the machine, but the demands placed on its operator by the shop owner, were behind the grind.

00:28:52.200 | The old boy has to undergo today in order to hold his job.

00:28:56.200 | Although printers agreed that good eyesight and supple fingers were requisites of linotype operation,

00:29:01.200 | they would not accept the master's argument that the mere operation of typesetting machines

00:29:06.200 | damaged the nervous systems and general health of the worker.

00:29:09.200 | "It was," wrote one typesetter, "the unnatural pace that kills."

00:29:14.200 | Employees did, however, acknowledge the claim of their employers that the capital requirements imposed on the industry

00:29:19.200 | by typesetting machinery entailed certain operating requirements.

00:29:23.200 | A $3,500 piece of machinery, the Mergenthaler, had to be operated efficiently, extensively, and intensively to be economical.

00:29:36.200 | Continuing on, imperatives of the workday.

00:29:39.200 | Technological imperatives and labor force modifications are part of an answer to the conundrum of age discrimination.

00:29:46.200 | But why the speed-up?

00:29:48.200 | Why, in the last years of the 19th century and the first decades of the 20th,

00:29:52.200 | were American employers so interested in squeezing the most from their labor?

00:29:56.200 | Behind the speed-up was a set of interrelationships that revolved around the shorter working day.

00:30:01.200 | Historians who have studied the politics of the working day have centered their inquiries on the Haymarket Riot of 1886

00:30:08.200 | and questions of social order.

00:30:10.200 | For most employers and workers, however, the shorter working day was important, largely for its economic implications.

00:30:17.200 | The modern phase of the agitation for a shorter working day began in 1886,

00:30:22.200 | when the 10-hour day and the six-day week were the common experience of American labor.

00:30:27.200 | A national strike in that year failed, but agitation continued, pushed by national unions.

00:30:33.200 | In the printing industry, working day politics had their beginnings in 1887,

00:30:37.200 | and within four years, the International Typographical Union, ITU,

00:30:41.200 | had secured agreements covering limited numbers of the nation's newspaper workers.

00:30:45.200 | At the 1898 Syracuse Conference, representatives of management and labor

00:30:50.200 | agreed to extend the nine-and-a-half-hour day to most of the industry as of November 21, 1898,

00:30:56.200 | and the nine-hour day a year later.

00:31:01.200 | Through a strike initiated in 1905, the ITU and its companion unions reduced the working day to eight hours

00:31:07.200 | in some areas of the industry.

00:31:09.200 | Aggregate data for other industries indicates that the printing experience was typical.

00:31:14.200 | Nationally, the decline in the working day was gradual from 1892 through about 1915.

00:31:20.200 | For 11 selected industries, a major decline of 0.6% occurred in 1892-93,

00:31:26.200 | and another of 0.9% in 1901-02.

00:31:30.200 | In presenting its case for the shorter working day, labor offered a number of rationales.

00:31:35.200 | Shorter hours would mean more time for recreation, leisure, and education,

00:31:39.200 | as well as less toil before the machine.

00:31:42.200 | For the most part, however, these considerations were peripheral.

00:31:46.200 | The shorter working day was a work-sharing program that the printers, capital and labor,

00:31:51.200 | believed would help solve the threatening problem of technologically-induced unemployment.

00:31:56.200 | This analysis was shared at least by cigar makers, painters, engineers, blacksmiths,

00:32:00.200 | machinists, iron molders, and silk weavers.

00:32:03.200 | Work-sharing was a goal of the major unions of typesetters and printing pressmen in 1898.

00:32:09.200 | In Dayton and New York City, for example, machinery installation had left a surplus of printers,

00:32:14.200 | and union officials expected the shorter work day to at least contribute to their re-employment.

00:32:26.200 | Labor organizations were seeking to aid their unemployed, presumably an older group,

00:32:31.200 | through the mechanism of the shorter working day.

00:32:35.200 | There is also some evidence that particular groups of workers sought to share directly

00:32:39.200 | and personally in the productivity of labor-saving machinery.

00:32:42.200 | This was especially likely to occur in occupations, such as newspaper typesetting,

00:32:46.200 | where work was naturally concentrated in one period of the day.

00:32:50.200 | In this situation, compositors argued, a longer working day would only mean additional hours of idleness.

00:32:56.200 | No matter how benign the intent of labor organizations,

00:33:00.200 | the major impact of the shorter working day was to intensify the pressures on older workers.

00:33:07.200 | Skipping through to a section entitled "Economic Rationale."

00:33:11.200 | During the late 19th century, economists labored to develop a theoretical framework

00:33:15.200 | that would tie the seemingly harmful industrial realities of the shorter working day

00:33:19.200 | and higher wages to the desirable goal of increased productivity.

00:33:23.200 | Where capitalism had experienced these phenomena at an early date, as in England and Germany,

00:33:28.200 | the economic rationale was most developed.

00:33:31.200 | Gerhard von Schulz-Gabernitz used the classic case of the English cotton textile industry

00:33:37.200 | as evidence that high wages and falling work hours could be reconciled with productivity

00:33:42.200 | through the mechanism of age discrimination.

00:33:45.200 | In an 1871 work on factory legislation,

00:33:48.200 | Ernest von Plainer, for the first time, raised the issue of the age of the workforce.

00:33:53.200 | Following the introduction of shorter hours, he wrote, "The operatives, especially the younger ones,

00:33:58.200 | no longer exhausted by excessive bodily effort, produced the same amount

00:34:08.200 | and frequently even turned out more in the shorter time,

00:34:11.200 | having, owing to the almost universal system of payment by the piece, a special interest in doing so."

00:34:17.200 | Skipping down, more than any other single work published in the late 19th century,

00:34:22.200 | Brentano's "Hours and Wages" provided the capitalist class with a powerful rationale

00:34:27.200 | for eliminating older workers who were inefficient and tradition-bound

00:34:31.200 | and for hiring younger workers with more muscle, more energy, and fewer ties to the past.

00:34:36.200 | Several American economists contributed to this flowering ideology.

00:34:41.200 | Three years into the severe depression of the 1870s,

00:34:44.200 | Francis Walker suggested relieving the pressure on labor markets through legislation,

00:34:49.200 | prohibiting labor for all classes beyond the term which physiological science accepts

00:34:53.200 | as consistent with soundness and vigor.

00:34:56.200 | An interest in productivity rather than unemployment informed

00:35:00.200 | Jacob Schoenhoff's "Economy of High Wages" published in 1892.

00:35:04.200 | A laissez-faire economist and low-tariff democrat,

00:35:07.200 | Schoenhoff traveled the world for the Department of State,

00:35:10.200 | comparing wage rates and productivity and concluding that productivity increases

00:35:14.200 | depended upon rising living standards.

00:35:17.200 | As an example of the relationship between low wages and low productivity,

00:35:20.200 | Schoenhoff pointed to the English nail industry where old and young,

00:35:25.200 | husbands and wives and daughters all work at nail-making

00:35:28.200 | from four or five in the morning until late at night.

00:35:31.200 | An economy that offered labor to inefficient workers was not functioning properly.

00:35:37.200 | It remained only for the theory to be incorporated into the mainstream of American economics.

00:35:42.200 | That task fell to Alfred Marshall, dean of turn-of-the-century economists

00:35:47.200 | and author of a number of popular textbooks.

00:35:50.200 | In "Principles of Economics," Marshall, with Auslerian detachment,

00:35:54.200 | tied elemental physical characteristics to profit.

00:35:58.200 | Health and strength were the basis of industrial efficiency.

00:36:01.200 | "In estimating muscular strength, or indeed any other kind of strength,

00:36:05.200 | for industrial purposes, we must take into account the number of hours in the day,

00:36:09.200 | the number of days in the year, and the number of years in a lifetime

00:36:12.200 | during which it can be asserted."

00:36:14.200 | Discussing Marshall's physical emphasis in an article written in 1906,

00:36:18.200 | well-known statistician Frederick Hoffman concluded that for the nation

00:36:21.200 | to maximize its productive potential, given the present capacities of its population,

00:36:26.200 | work should normally begin at age 15 and cease at 65.

00:36:30.200 | Economic theory was linked to the workplace in an alliance detrimental

00:36:34.200 | to older workers and mandating retirement.

00:36:37.200 | Support from science and medicine.

00:36:40.200 | Science came to the support of capitalist economics

00:36:43.200 | in late 19th century studies of work and fatigue.

00:36:46.200 | Prevailing theories originated in the work of George Beard,

00:36:49.200 | a physician who, in the 1870s, popularized the idea of neurasthenia,

00:36:55.200 | a catch-all illness with an endless list of symptoms, including anxiety and fatigue.

00:37:00.200 | The disease was hereditary and cumulative.

00:37:03.200 | "No two persons," writes historian Charles Rosenberg,

00:37:07.200 | "would be born with the same amount of nervous force.

00:37:10.200 | No two persons would be subjected to the same external pressures.

00:37:13.200 | Only those individuals whose endowment of nervous force

00:37:16.200 | was inadequate to the demands of daily life succumbed to neurasthenia."

00:37:21.200 | The closer one's contact with the new technology of the 19th century,

00:37:25.200 | the steam engine, the linotype, the sewing machine, even the telegraph,

00:37:28.200 | the faster one's supply of nervous force would be consumed,

00:37:32.200 | and therefore, to be replenished.

00:37:34.200 | Work became associated with nervous strain, tension, anxiety, stress, and nerves.

00:37:43.200 | Workers were burned out, used up, exhausted, and prematurely aged.

00:37:48.200 | During debates over retirement legislation,

00:37:50.200 | each occupation, from railroading to teaching to mail delivery,

00:37:54.200 | would claim to be the most tension-producing and energy-consuming.

00:37:58.200 | In a 2012 study of old-age dependency,

00:38:00.200 | Squeer opened a chapter on transportation

00:38:03.200 | with a description that might well have been written by Beard.

00:38:06.200 | "There is no part of the great national labor machine

00:38:09.200 | that wears out men more rapidly or subjects them to greater hazard

00:38:14.200 | than that which we call transportation.

00:38:17.200 | Especially is this true of those engaged in the operation of trains

00:38:21.200 | and vessels on time schedules,

00:38:23.200 | which require by day and night the strictest attention to duty and rules.

00:38:28.200 | Every moment is fraught with danger.

00:38:30.200 | Brain, nerve, and muscle are all subject to the severest and most unexpected strain.

00:38:35.200 | The locomotive engines are of the most intricate device

00:38:39.200 | and require the keenest intelligence, quickest action,

00:38:42.200 | and oftentimes the most prolonged tension of mind and body."

00:38:49.200 | During their campaign for pensions,

00:38:51.200 | the public school teachers argued a similar case.

00:38:54.200 | "The severe mental strain and high nervous tension

00:38:57.200 | under which faithful teachers work

00:38:59.200 | tend to make them apprehensive of the future.

00:39:02.200 | Small and insufficient salaries preclude those frequent and necessary relaxations

00:39:07.200 | which preserve health and elasticity of mind and body.

00:39:11.200 | Work itself rarely kills, but worry often does."

00:39:18.200 | Even bureaucracies not involved in the competitive economy

00:39:21.200 | shared this concept of work.

00:39:23.200 | Writing to Pierre S. DuPont in an attempt to recruit youthful members

00:39:26.200 | for his National Civic Federation,

00:39:28.200 | John Hayes Hammond explained his inquiry

00:39:30.200 | with reference to the "high tension and complexities

00:39:33.200 | of our 20th century civilization."

00:39:36.200 | The import of such statements is independent of their scientific validity.

00:39:40.200 | In their various forms, these work-related ideas

00:39:43.200 | encouraged employers in their proclivity to select younger workers

00:39:46.200 | whose contact with the technological sources of nervous tension

00:39:49.200 | had heretofore been limited.

00:39:51.200 | They led logically to the notion of a "work life"

00:39:54.200 | which naturally ended well before death, perhaps even in middle age,

00:39:58.200 | and they defined the older worker

00:40:00.200 | as one who had used up a considerable portion of his allotted nervous force.

00:40:06.200 | I'm going to read one additional section here

00:40:09.200 | that continues in this theme,

00:40:11.200 | and then we're going to skip through to some conclusions.

00:40:14.200 | This is from the section entitled

00:40:16.200 | "Link to the Workplace, Scientific Management."

00:40:18.200 | For anybody who's studied business,

00:40:20.200 | you'll know that the scientific management movement

00:40:24.200 | was an extremely important movement in modern corporate life.

00:40:29.200 | I'm just going to read two quick paragraphs here.

00:40:32.200 | The idea of scientific management, if you're not familiar,

00:40:35.200 | is essentially, in my words,

00:40:37.200 | the idea of measuring each and everything that would be done.

00:40:40.200 | It started with time and motion studies for workers

00:40:43.200 | and basically trying to apply the scientific method

00:40:47.200 | to the management of people.

00:40:49.200 | Really great in some areas, and then had, as anything,

00:40:52.200 | unintended consequences in many other things.

00:40:55.200 | "Scientific management demanded more of its workers

00:40:58.200 | than a heightened level of intensity.

00:41:00.200 | It also required a certain kind of flexibility.

00:41:03.200 | If not exactly scientists, these managers and those to follow

00:41:06.200 | were experimenters, with the factory as their laboratory.

00:41:10.200 | Labor must be willing to cooperate,

00:41:12.200 | first in the process of experimentation,

00:41:14.200 | then in a reconstruction of its work habits.

00:41:17.200 | In the early 19th century,

00:41:19.200 | capitalists staffed their factories with children,

00:41:22.200 | in part because, as Englishman Andrew Ure wrote,

00:41:26.200 | "It is found nearly impossible

00:41:29.200 | to convert persons past the age of puberty,

00:41:32.200 | whether drawn from rural or from handicraft occupations,

00:41:36.200 | into useful factory hands.

00:41:38.200 | After struggling for a while to conquer their listless

00:41:41.200 | or restive habits,

00:41:43.200 | they either renounce the employment spontaneously

00:41:46.200 | or are dismissed by the overlookers

00:41:48.200 | on account of inattention."

00:41:51.200 | A similar obstacle confronted the aggressive management movement

00:41:54.200 | and, to a lesser extent,

00:41:56.200 | most late 19th and 20th century capitalists.

00:41:59.200 | They used the same solution as their predecessors,

00:42:02.200 | recruit a young, flexible labor force,

00:42:06.200 | willing to play the guinea pig,

00:42:08.200 | unfettered by craft traditions

00:42:10.200 | and dysfunctional work routines.

00:42:13.200 | William Osler would have applauded the virtual unanimity

00:42:16.200 | with which older workers were labeled "unadaptable."

00:42:19.200 | An industrial psychiatrist

00:42:21.200 | for the Metropolitan Life Insurance Company

00:42:23.200 | wrote of five kinds of employee crises.

00:42:26.200 | The fifth was the crisis of the older employee.

00:42:29.200 | "He is a touchy individual,

00:42:31.200 | and criticism of his actions

00:42:33.200 | is always hampered by the very human warmth and respect

00:42:36.200 | his long record generates.

00:42:38.200 | Yet it is true that to grow old gracefully

00:42:41.200 | is a very difficult art.

00:42:43.200 | Time does indeed march on.

00:42:45.200 | Old ways give place to new,

00:42:47.200 | and the old employees cling to their time-worn ways,

00:42:50.200 | suspicious of the young men and their newfangled methods."

00:42:54.200 | Paul Cherrington,

00:42:56.200 | professor of marketing at the Harvard Graduate School of Business Administration,

00:42:59.200 | argued that American business

00:43:01.200 | was being strangled by a surfeit of old men and young men's jobs.

00:43:05.200 | "The approach of middle age," Cherrington said,

00:43:08.200 | "could be observed in the appearance of such qualities

00:43:11.200 | as lack of adaptability,

00:43:13.200 | devotion to routine,

00:43:15.200 | reluctance to adventure,

00:43:17.200 | chronic impatience, and rigidity."

00:43:19.200 | Now I'm going to read one summary

00:43:21.200 | from the end of this chapter two,

00:43:23.200 | and then we're going to go to the end of the book

00:43:25.200 | and talk about solutions and observations.

00:43:28.200 | Summary.

00:43:30.200 | "The battle for reform, as it was first joined in the late 1920s,

00:43:34.200 | was not so much a real contest,

00:43:37.200 | with the outcome in doubt, as a ritual struggle,

00:43:39.200 | with both sides aware of the identity of the ultimate victor.

00:43:56.200 | It could be no other way.

00:43:58.200 | The solutions that might have made a difference

00:44:00.200 | and made the conflict real--

00:44:02.200 | massive job creation,

00:44:03.200 | a willingness to continue production with older forms of technology,

00:44:06.200 | a reduction in the operating speed of the technology--

00:44:09.200 | were not considered viable options.

00:44:12.200 | As William Osler had so clearly seen,

00:44:14.200 | a society that is dedicated to progress

00:44:16.200 | and allows its economic institutions to define its terms

00:44:20.200 | must learn to sacrifice the older generation for the younger.

00:44:25.200 | Retirement and age discrimination

00:44:27.200 | emerged as important phenomena at the same time,

00:44:30.200 | and not coincidentally.

00:44:32.200 | Retirement was one of several means available

00:44:34.200 | to a business culture committed to restructuring

00:44:36.200 | the age components of the workforce.

00:44:38.200 | Workers might be fired outright, of course,

00:44:41.200 | but, as later chapters indicate,

00:44:43.200 | such a policy was difficult for most public and private employers

00:44:46.200 | to carry out.

00:44:47.200 | Retirement was impersonal and egalitarian in its application.

00:44:51.200 | It allowed the powerful turn-of-the-century impulse

00:44:53.200 | toward efficiency to coexist with a system

00:44:56.200 | of labor-management relations

00:44:58.200 | that was still permeated with personal and human relationships.

00:45:02.200 | After 1915, a minority of employers found older workers attractive.

00:45:07.200 | Overall, however, discrimination did not diminish.

00:45:10.200 | Most employers continued to favor younger workers,

00:45:13.200 | and after 1925, retirement came to be seen

00:45:16.200 | as a realistic antidote to unemployment

00:45:19.200 | in depressed industries and in the economy at large.

00:45:24.200 | There are, between here and the end of the book,

00:45:26.200 | a number of important chapters,

00:45:29.200 | and clearly I can't create an audiobook out of this.

00:45:32.200 | A, you're probably not ready for that,

00:45:34.200 | and B, it would be illegal.

00:45:35.200 | But it talks about efficiency, security, community,

00:45:40.200 | retirement in the federal civil service.

00:45:43.200 | It goes on, there's chapters on retirement and education.

00:45:47.200 | It goes on with retirement and the reconstruction of community,

00:45:52.200 | railroad workers and the New Deal,

00:45:55.200 | Social Security and the older worker,

00:45:57.200 | the triumph of retirement, the post-war years,

00:46:00.200 | the reconsideration of retirement in the 1970s,

00:46:03.200 | and then we come to the final chapter,

00:46:05.200 | the meaning and function of retirement.

00:46:08.200 | I would encourage reading those intervening chapters

00:46:10.200 | if you're interested in the book,

00:46:12.200 | but I'm going to read now the summary, the final chapter,

00:46:14.200 | the meaning and function of retirement,

00:46:16.200 | and then we'll discuss some of the impact and commentary

00:46:18.200 | and comments as far as what I see as some ideas

00:46:21.200 | for how to integrate this history.

00:46:25.200 | Chapter 10, the meaning and function of retirement.

00:46:29.200 | Retirement has had no single function in American history.

00:46:33.200 | From its beginnings in the private and public bureaucracies

00:46:36.200 | of the late 19th century, formal retirement has been a product

00:46:39.200 | of its appeal to institutions and social groups

00:46:42.200 | with disparate goals and viewpoints.

00:46:44.200 | Until 1930, economy, efficiency, modernization

00:46:48.200 | and depersonalization were the most important uses of retirement.

00:46:52.200 | Since then, personal security and social welfare

00:46:56.200 | have so dominated our conception of the function

00:46:58.200 | of private and governmental retirement systems

00:47:01.200 | that we have forgotten retirement's origins

00:47:03.200 | in the economic and social milieu of the turn of the century.

00:47:07.200 | Having adopted this generic definition of social security,

00:47:11.200 | the ideology of the welfare state,

00:47:13.200 | we have become incapable of understanding

00:47:15.200 | the history of retirement and its place in our culture.

00:47:18.200 | Retirement goals cut across the boundaries

00:47:21.200 | that presumably divided labor from management,

00:47:23.200 | the public from the private sector.

00:47:26.200 | Specific needs might vary, but leaders in education,

00:47:29.200 | government, business, and the trade unions

00:47:31.200 | found common ground in the pension

00:47:33.200 | as an institution of control.

00:47:35.200 | Henry Pritchett's intent to use the Carnegie Foundation

00:47:40.200 | for the Advancement of Teaching

00:47:41.200 | as a mechanism for restructuring and shaping higher education

00:47:44.200 | had its parallels not only in the public schools,

00:47:47.200 | where retirement was supposed to help maintain

00:47:50.200 | the teaching profession as a source of social stability,

00:47:52.200 | but in the trade unions and corporations,

00:47:55.200 | where pensions were expected to bind workers

00:47:57.200 | to one or the other of these institutions,

00:48:01.200 | and in the federal bureaucracy,

00:48:02.200 | where the potential for dominance inherent in the pension

00:48:05.200 | was of concern to labor leaders.

00:48:08.200 | Because the pension could be used effectively

00:48:10.200 | to control dissidents,

00:48:11.200 | many workers came to favor contributory systems.

00:48:14.200 | While the Social Security Act of 1935

00:48:17.200 | has been criticized for its contributory feature,

00:48:19.200 | the semi-contractual nature of the contribution

00:48:22.200 | has appealed to some employees for the freedom it implies.

00:48:25.200 | Moreover, the location of the system

00:48:27.200 | within the national government,

00:48:28.200 | rather than within the private sector,

00:48:30.200 | promised relief from the sporadic attempts of business,

00:48:33.200 | most common in railroading,

00:48:35.200 | to use pension systems to manipulate employees.

00:48:38.200 | Retirement was also expected to induce progress

00:48:41.200 | and prevent social retrogression.

00:48:44.200 | This viewpoint was shared by Pritchett,

00:48:46.200 | William Osler,

00:48:47.200 | and a generation of high-level government officials,

00:48:50.200 | of whom the pension bureau's Gaylord Seltzgeber

00:48:54.200 | was a prototype,

00:48:55.200 | who were among the first to confront

00:48:57.200 | the potential of the debilitating effects

00:48:59.200 | of burgeoning bureaucracy.

00:49:01.200 | Pensions also fulfilled a variety of microeconomic ends.

00:49:05.200 | Depending on the nature of the bureaucracy

00:49:07.200 | and its particular needs,

00:49:08.200 | retirement has made it impossible for institutions

00:49:11.200 | to replace inefficient older workers with younger ones

00:49:14.200 | and expensive salaried personnel with cheaper ones.

00:49:17.200 | The public schools and the railroads did so in the 1930s.

00:49:21.200 | It has allowed institutions to defer wage increases

00:49:24.200 | and, in times of inflation,

00:49:26.200 | to lower salaries through deferral.

00:49:28.200 | Turnover reduction was a major goal of pension systems

00:49:31.200 | between 1910 and 1930,

00:49:33.200 | while recruitment of superior personnel

00:49:35.200 | was of lesser importance.

00:49:36.200 | Pensions have also met the need,

00:49:38.200 | common in all bureaucracies,

00:49:40.200 | but of special significance in declining industries

00:49:42.200 | and in periods of high unemployment,

00:49:44.200 | to maintain and provide promotional opportunity,

00:49:47.200 | the illusion, if not the reality,

00:49:50.200 | of personal progress and achievement.

00:49:52.200 | Where retirement systems did not exist,

00:49:54.200 | as in the sales profession in the 1920s,

00:49:57.200 | age discrimination served many of the same functions.

00:50:00.200 | The post-1940 growth in pension plans

00:50:03.200 | was a product of changes in collective bargaining

00:50:05.200 | after 1949 and of the tax advantages available

00:50:09.200 | under World War II regulations and legislation.

00:50:12.200 | Unions found that pensions satisfied their members

00:50:14.200 | in difficult times and opened up jobs

00:50:17.200 | in crowded industries and during recessions.

00:50:19.200 | Business still expected retirement systems

00:50:21.200 | to improve efficiency by making employees more secure

00:50:25.200 | and by facilitating dismissal.

00:50:27.200 | But as industrial relations became more sophisticated

00:50:30.200 | after 1930,

00:50:32.200 | corporations turned to other mechanisms of efficiency,

00:50:35.200 | control, and adjustment,

00:50:37.200 | and ceased to demand so many internal benefits

00:50:40.200 | from the pension.

00:50:41.200 | Retirement also emerged from, and was a reaction to,

00:50:44.200 | the changing tone of employer-employee relationships.

00:50:48.200 | It was, first, an attack on the systems of permanence

00:50:51.200 | that employees had attempted to build

00:50:53.200 | into bureaucratic structures.

00:50:55.200 | These systems included tenure in teaching,

00:50:57.200 | seniority on the railroads,

00:50:59.200 | and the elimination of the spoils system in the civil service.

00:51:02.200 | As workers sought to establish a property right to the job,

00:51:05.200 | managers, often joined by workers,

00:51:07.200 | turned to retirement as one of several mechanisms

00:51:10.200 | for diminishing the impact of that right.

00:51:12.200 | When the property right was allowed to exist

00:51:14.200 | for a decade or more

00:51:16.200 | and to become a part of employee expectations,

00:51:18.200 | a challenge to it could produce the high level

00:51:21.200 | of emotionally charged conflict experienced in Chicago

00:51:24.200 | over the relationship between tenure and retirement.

00:51:27.200 | And in Washington, D.C., over general job security.

00:51:30.200 | In some sense, these contests pitted

00:51:33.200 | one impersonal bureaucratic mechanism against another.

00:51:36.200 | Second, retirement was a reaction

00:51:39.200 | against the continued influence

00:51:41.200 | of personal modes of behavior in institutions,

00:51:43.200 | in which personal relationships were increasingly seen

00:51:47.200 | as dysfunctional relics of the past.

00:51:50.200 | To a certain extent,

00:51:51.200 | the application of personal qualities to business affairs

00:51:54.200 | is inherently dysfunctional by capitalist definitions.

00:51:57.200 | Employment practices should reflect economic rationality,

00:52:01.200 | rather than priorities established by family and friendship.

00:52:05.200 | Yet in 1890, in spite of mechanization

00:52:08.200 | and the rise of national competition,

00:52:10.200 | employment practices had not been fully rationalized.

00:52:14.200 | The economic and technological forces

00:52:16.200 | that made age discrimination a significant phenomenon

00:52:19.200 | in the late 19th century

00:52:21.200 | had not resulted in the complete elimination

00:52:23.200 | of protective attitudes toward older workers.

00:52:27.200 | Corporations might seldom hire older workers,

00:52:30.200 | but they also seldom fired them.

00:52:32.200 | Some notion of personal or social responsibility remained.

00:52:36.200 | One can see it manifested at DuPont,

00:52:39.200 | within the aging railroad workforce,

00:52:41.200 | and in the civil service and teaching bureaucracies,

00:52:44.200 | where the inability to discharge aged employees

00:52:47.200 | coexisted uneasily with the new codes of efficiency.

00:52:51.200 | Public and private bureaucracies

00:52:53.200 | had become old-age institutions,

00:52:56.200 | providing the money, status, and physical activity

00:52:59.200 | that would be dispensed a half-century later

00:53:01.200 | through social security programs,

00:53:03.200 | nursing homes, and old-age clubs and centers.

00:53:06.200 | Whether we choose to regard those workers

00:53:08.200 | who lived under the system as employed or retired,

00:53:11.200 | informally pensioned, as contemporaries said,

00:53:14.200 | depends only on how one uses the words.

00:53:17.200 | It is more important to understand

00:53:19.200 | that work-centered retirement was a natural phenomenon

00:53:22.200 | in cities as well as rural areas

00:53:25.200 | and in large and complex bureaucracies

00:53:27.200 | as well as small firms.

00:53:30.200 | Many of the dislocating effects of mid-century retirement

00:53:33.200 | are not so much caused by retirement itself

00:53:36.200 | as by the destruction of an earlier version of retirement

00:53:40.200 | more suited to human needs for structure, sociability, and place.

00:53:45.200 | The agent of this destruction was formal retirement itself.

00:53:49.200 | One of its tangible manifestations was the old-age home.

00:53:53.200 | Because it often separated the old from their families

00:53:56.200 | and geographical communities,

00:53:58.200 | the old-age home was an especially disruptive institution.

00:54:01.200 | Workers rejected it,

00:54:03.200 | even when it offered retirement with fellow craftsmen.

00:54:06.200 | Depersonalization was neither easily nor completely accomplished.

00:54:11.200 | At least within the public sphere,

00:54:13.200 | the existence of a formal pension system

00:54:15.200 | did not guarantee a purely rational approach to employee relations.

00:54:19.200 | Pensions under the Civil Service Retirement Act of 1920

00:54:22.200 | were not sufficient to overcome knowledge

00:54:25.200 | that employment officers continued to have

00:54:27.200 | of the personal details of employees' lives.

00:54:29.200 | Bureau chiefs preferred to give extensions

00:54:32.200 | rather than discharge a clerk

00:54:34.200 | whose pension would not cover mortgage payments

00:54:36.200 | or decently provide for his family.

00:54:38.200 | Chicago school administrators eventually supported mandatory retirement

00:54:42.200 | when a voluntary system failed to induce retirement among teachers over 70.

00:54:46.200 | But even then, several school board members felt uncomfortable

00:54:50.200 | with the notion of subjecting faithful employees to an arbitrary system.

00:54:54.200 | Private sector data is more difficult to obtain,

00:54:57.200 | but if DuPont's experience is typical,

00:54:59.200 | a formal corporate pension plan was no guarantee of impersonality.

00:55:04.200 | The relatively late development of mandatory retirement

00:55:06.200 | in the post-World War II period,

00:55:08.200 | following a half-century of experience with voluntary arrangements,

00:55:11.200 | suggests that mandatory systems were installed

00:55:15.200 | when voluntary ones failed to induce retirement at desired ages.

00:55:20.200 | Third, retirement has historically been sanctioned

00:55:23.200 | as a form of unemployment relief.

00:55:26.200 | Older workers have been retired to create places for younger ones.

00:55:30.200 | This has been done most blatantly and most publicly in railroading,

00:55:35.200 | an industry of declining employment since 1920.

00:55:38.200 | But the same solution has been applied to other occupations,

00:55:41.200 | like typesetting, which were experiencing technological unemployment

00:55:45.200 | or technologically induced superannuation,

00:55:48.200 | a specific variety of the same phenomenon.

00:55:51.200 | The shorter workday and the shorter work life

00:55:53.200 | shared this unemployment relief function.

00:55:57.200 | Particular elements of the federal bureaucracy--

00:55:59.200 | Navy, Yard, and Post Office employees in the 1920s, for example--

00:56:03.200 | advocated additional inducements to retirement

00:56:06.200 | and disarmament and technology, respectively, threatened job security.

00:56:11.200 | With the additional stimulus of the Depression,

00:56:13.200 | retirement as work sharing became a popular solution

00:56:16.200 | to national unemployment.

00:56:18.200 | It was put into practice with administrative changes

00:56:21.200 | in the application of civil service retirement

00:56:24.200 | through the Railroad Retirement Act

00:56:26.200 | and in a necessarily limited form,

00:56:28.200 | given the resources available to the national government,

00:56:31.200 | in the Social Security Act of 1935.

00:56:35.200 | Retirement as a method of alleviating unemployment

00:56:39.200 | has been carried out with the support of the aged.

00:56:42.200 | One of the most impressive aspects of the Townsend movement

00:56:45.200 | is the self-sacrifice of the old in the interest of jobs for the young.

00:56:50.200 | But this should not obscure the discrimination implicit in the mechanism

00:56:55.200 | or the felt need for such discrimination as a device for social order.

00:56:59.200 | When jobs were scarce in the 1930s,

00:57:02.200 | the Roosevelts, Eleanor and Franklin,

00:57:05.200 | ministered, relatively at least, to the needs of youth.

00:57:08.200 | It was the young who threatened disorder and violence

00:57:11.200 | and whose political sympathies seemed most crucial.

00:57:14.200 | Sharing this perspective, the aged welcomed their own retirement

00:57:18.200 | and missed an opportunity to insist on the right to work, regardless of age.

00:57:23.200 | With the exception of the military pension,

00:57:25.200 | 19th century retirement was carried out by cities and states,

00:57:29.200 | trade unions and corporations.

00:57:31.200 | Following a dramatic and frightening expansion

00:57:33.200 | in the bureaucracy of the nation-state in the Progressive period,

00:57:36.200 | the national government again asserted its preferences for youth and efficiency

00:57:41.200 | by creating a retirement system for its own civil service employees.

00:57:45.200 | During the Depression, the magic of retirement was applied

00:57:48.200 | to the sick industry of railroading, using the mechanism of federal law.

00:57:52.200 | And in 1935, when Congress passed the Social Security Act,

00:57:55.200 | the national government affirmed the importance of retirement

00:57:58.200 | for much of the American population.

00:58:01.200 | Private pensions came under the direct supervision of the national government

00:58:05.200 | in legislation passed in 1947, 1958 and 1974.

00:58:10.200 | The Retirement Act of 1978 represents an attempt to roll back

00:58:14.200 | what was now seen as a very expensive, complex

00:58:18.200 | and inefficient instrument of public policy.

00:58:21.200 | The emergence of the national government as the foremost arbiter of retirement

00:58:25.200 | parallels the largest history of government intervention in the economy.

00:58:29.200 | It also reflects the tendency since 1920 to conceive of the economy

00:58:33.200 | in national terms and to view retirement as an important ingredient

00:58:37.200 | in the broader macroeconomic picture.

00:58:40.200 | Retirement could become an instrument of national economic policy in the 1930s

00:58:44.200 | only if millions of workers could be reached by federal law.

00:58:48.200 | Pension plans could prove a useful source of capital for business

00:58:52.200 | only if their use could be nationally restricted under Taft-Hartley and ERISA.

00:58:58.200 | Retirement could be utilized in the struggle to arrest the long-term decline

00:59:02.200 | in the American economy only if the rollback took place nationally.

00:59:06.200 | Older workers have generally welcomed the pension plan,

00:59:09.200 | if not mandatory retirement or the idea of retirement itself.

00:59:13.200 | The active core of the Townsend movement was composed of persons over 60,

00:59:18.200 | working and retired.

00:59:20.200 | The Railway Employees National Pension Association,

00:59:23.200 | the equivalent of the Townsend organization on an industry level,

00:59:26.200 | was also buoyed by the enthusiasm of older workers.

00:59:30.200 | Teachers and civil service pensions went unopposed by any large segment

00:59:34.200 | of employees in either occupation.

00:59:36.200 | Organizations of the retired, from the National Association of Retired Federal Employees

00:59:41.200 | to the more broadly based organizations of the 1950s,

00:59:44.200 | such as the American Association of Retired Persons,

00:59:46.200 | have adopted a restricted attitude toward retirement.

00:59:49.200 | Just as most American unions have concentrated on wages

00:59:52.200 | and generally avoided workplace issues,

00:59:55.200 | so have the retirement associations emphasized benefits

00:59:58.200 | and accepted the necessity of retirement, the absence of work.

01:00:02.200 | Retirement proved only mildly divisive as an issue among teachers,

01:00:06.200 | more so among railroad workers.

01:00:08.200 | As a group, the young were seldom as committed to retirement,

01:00:11.200 | especially to voluntary programs that reduced job creation potential,

01:00:15.200 | as were older workers.

01:00:17.200 | Employed workers tended to be wage-minded rather than retirement-minded,

01:00:23.200 | unless they were close enough to the end of their work lives

01:00:26.200 | to appreciate the prospect of a pension.

01:00:28.200 | If the railroad experience in the 1930s is typical,

01:00:31.200 | a substantial majority of older workers supported retirement

01:00:34.200 | amid the objections of a vocal minority who wished to continue working.

01:00:39.200 | Data from the 1950s indicates that once the extreme insecurity

01:00:43.200 | of the Depression decade disappeared,

01:00:45.200 | the desire to remain at work became more widespread.

01:00:49.200 | This revival of interest in work helped make the selling of retirement

01:00:52.200 | a necessity for corporations and labor unions.

01:00:56.200 | In almost every industry and in every period after 1890,

01:01:00.200 | the middle-aged found retirement systems frustrating and ineffective.

01:01:04.200 | Too old to find work, too young to retire,

01:01:07.200 | the middle-aged worker of 55, 50, or even 45,

01:01:11.200 | was a constant embarrassment to the American economic and political system.

01:01:15.200 | By 1900, a 60-year-old typesetter was considered superannuated,

01:01:19.200 | too old to operate the new technology.

01:01:22.200 | Yet he was also too old to retrain and too young for the union to retire.

01:01:28.200 | Thousands of railroad workers experienced the same anomalous circumstances.

01:01:32.200 | The Social Security Act of 1935 offered no old-age benefits

01:01:36.200 | to the worker under 65,

01:01:38.200 | no matter how long he or she had been unemployed.

01:01:41.200 | Congress ignored the determined efforts of Francis Townsend

01:01:44.200 | and Ernest Lundin to serve this middle-aged constituency.

01:01:48.200 | In the 1950s, the middle-aged were reduced to writing bitter letters

01:01:52.200 | to Dwight Eisenhower and his cabinet officials,

01:01:54.200 | who refused to recognize the obvious.

01:01:57.200 | Retirement, permanent unemployment insurance,

01:02:00.200 | rather than unemployment insurance,

01:02:02.200 | was the only appropriate device for dealing with the social problems

01:02:05.200 | of the long-term unemployed middle-aged worker.

01:02:08.200 | Although retirement was essentially a political device

01:02:11.200 | imposed by one group upon another,

01:02:14.200 | its imposition was seldom challenged.

01:02:17.200 | Why have American workers welcomed or acquiesced in retirement?

01:02:22.200 | Anxiety about social disorder, which the old associated with youth,

01:02:26.200 | provides part of an explanation

01:02:28.200 | and one of particular relevance for the critical decade of the 1930s.

01:02:31.200 | On another level, it is possible to see the aged,

01:02:35.200 | indeed the majority of the population,

01:02:37.200 | as victims of a 20th-century redefinition of retirement.

01:02:41.200 | To some extent, this redefinition was a product of a natural inclination

01:02:45.200 | to accept the pension as a bounty, gift, or necessary financial reward.

01:02:51.200 | Even in 1900, during the early struggles over teachers

01:02:54.200 | and civil service pensions,

01:02:56.200 | the alternative to the pension was no pension.

01:02:59.200 | The alternative to leaving work with this protection

01:03:02.200 | was not remaining at work, but rather leaving work unprotected.

01:03:05.200 | Retirement on pension also appeared reasonable

01:03:08.200 | to the machinists, printers, trainmen, and other workers

01:03:11.200 | for whom the alternative was the social isolation

01:03:14.200 | of institutionalization in an old-age home.

01:03:17.200 | Because employees needed the basic forms of security

01:03:20.200 | the pension could provide,

01:03:22.200 | and because this security component could not be isolated

01:03:25.200 | from the pension's efficiency and control aspects,

01:03:28.200 | retirement was never completely divorced from a notion of security,

01:03:32.200 | however defensive.

01:03:34.200 | The view of retirement as a separate period of time

01:03:36.200 | in which one reaps the rewards of past service

01:03:39.200 | has always been a part of the conceptualization of the institution,

01:03:43.200 | but its salience, among other definitions of retirement,

01:03:47.200 | began in the 1920s with the arguments of leisure theorists

01:03:51.200 | that technological unemployment could be,

01:03:54.200 | and indeed had to be, converted into leisure.

01:03:58.200 | Retirement was the inevitable result of the need

01:04:01.200 | to shorten the work life to spread available work.

01:04:05.200 | Although forced withdrawal from the workplace

01:04:08.200 | might have been interpreted negatively,

01:04:10.200 | leisure theorists chose to emphasize technology's potential

01:04:14.200 | for freeing Americans for new forms of leisure.

01:04:17.200 | At the same time, business made retirement and security

01:04:21.200 | difficult to separate.

01:04:23.200 | Under the influence of Elton Mayo

01:04:25.200 | and other practitioners of industrial psychology,

01:04:27.200 | employee performance and security became closely linked,

01:04:31.200 | and the corporate world thus had a strong incentive

01:04:34.200 | to define retirement as a state of security.

01:04:38.200 | The massive insecurity of the Great Depression

01:04:40.200 | further obscured the historical origins of retirement.

01:04:43.200 | The development of old age security

01:04:45.200 | during a time of insecurity and dependency

01:04:47.200 | has made it difficult to see that some of the roots of social security

01:04:50.200 | were in retirement,

01:04:52.200 | rather than retirement having its origins in social security.

01:04:56.200 | A complex program serving a number of social and economic functions,

01:05:00.200 | social security took on a singleness of purpose

01:05:02.200 | and a simplicity that its authors never intended,

01:05:05.200 | and that has never been descriptive of reality.

01:05:08.200 | Even the Railroad Retirement Act,

01:05:10.200 | so clearly drawn as a retirement measure

01:05:12.200 | to achieve efficiency, economy, and unemployment relief,

01:05:16.200 | was not impervious to the ideology of security.

01:05:20.200 | In striking down the original legislation,

01:05:23.200 | the Supreme Court refused to accept

01:05:25.200 | the acknowledged purposes of the legislation

01:05:27.200 | as appropriate or operative,

01:05:30.200 | thus forcing retirement advocates

01:05:32.200 | into legal defenses based on security.

01:05:35.200 | Acceptance and enjoyment of the new leisure

01:05:38.200 | and of retirement itself required a definition of old age

01:05:42.200 | that minimized the need for the high levels of activity

01:05:45.200 | provided by the workplace.

01:05:47.200 | Disengagement theory served that purpose.

01:05:50.200 | Disengagement became an important way

01:05:52.200 | of conceptualizing aging and retirement

01:05:55.200 | in the decades after the 1950s.

01:05:57.200 | Golden age clubs, developed in Cleveland in 1940

01:06:01.200 | and widespread by 1950,

01:06:03.200 | provided a different kind of adjustment mechanism,

01:06:06.200 | one which combined disengagement with activity theory.

01:06:10.200 | The clubs were premised on disengagement theory

01:06:13.200 | in the sense that traditional work was not considered essential

01:06:16.200 | to a healthy existence.

01:06:18.200 | They relied on activity theory, however,

01:06:20.200 | to the extent that their sponsors believed

01:06:22.200 | that complete disengagement

01:06:24.200 | was socially and individually destructive.

01:06:27.200 | Whether complete or partial, however,

01:06:30.200 | disengagement theory justified withdrawal from work

01:06:33.200 | and contributed materially to the creation

01:06:35.200 | of the mythology of retirement.

01:06:37.200 | Another link in the selling of retirement

01:06:39.200 | was forged in the late 1940s

01:06:41.200 | when insurance companies joined industry and labor

01:06:43.200 | in making retirement into a commodity.

01:06:46.200 | By 1960, therefore,

01:06:48.200 | the meaning of retirement had been transformed.

01:06:50.200 | It was now a form of leisure,

01:06:52.200 | a way of spending time following the conclusion of one's work life.

01:06:56.200 | It was a stage of existence,

01:06:58.200 | inevitable but to be welcomed and even celebrated.

01:07:02.200 | Once largely a device for maximizing productivity

01:07:05.200 | in a bureaucratizing society,

01:07:07.200 | retirement had become a state of being,

01:07:09.200 | apparently benign, classless, and apolitical.

01:07:13.200 | The almost universal adulation

01:07:15.200 | that has accompanied the reconsideration of retirement in the 1970s

01:07:18.200 | has further undermined our ability to understand it

01:07:21.200 | as an ingredient in the national political economy.

01:07:24.200 | Because the retirement legislation of 1978

01:07:27.200 | was popular with liberal politicians,

01:07:29.200 | with labor unions,

01:07:31.200 | and with virtually every organization

01:07:33.200 | representing the old and retired,

01:07:35.200 | we have all too easily interpreted the law

01:07:37.200 | as a just, if belated, victory

01:07:40.200 | for those who want to work

01:07:42.200 | over those who would prevent them from doing so

01:07:44.200 | on the artificial basis of age.

01:07:47.200 | This view of the legislation is both incomplete and flawed.

01:07:51.200 | It is incomplete in that it fails to take into account

01:07:54.200 | the costs that attend the elimination of mandatory retirement.

01:07:57.200 | Employees who remain at work

01:07:59.200 | occupy jobs that would be filled by others.

01:08:02.200 | In effect, the burden of unemployment has shifted

01:08:05.200 | from the retired to some other segment of the workforce.

01:08:08.200 | If the labor market impact of the law

01:08:10.200 | is not expected to be very large,

01:08:12.200 | some 200,000-ish jobs,

01:08:14.200 | neither will the retirement impact be substantial.

01:08:17.200 | To the extent that the legislation works,

01:08:19.200 | it has no negative effects.

01:08:21.200 | To the extent that it fails to keep potential retirees on the job,

01:08:24.200 | it has no such impact.

01:08:26.200 | But then, neither is it a law worth celebrating

01:08:29.200 | as the elderly's Magna Carta.

01:08:32.200 | The liberal view of the reconsideration of retirement is flawed

01:08:35.200 | because it confuses result and purpose.

01:08:38.200 | Although the new retirement law might well result

01:08:40.200 | in older workers enjoying a longer work life,

01:08:42.200 | this was not its sole purpose,

01:08:44.200 | nor even its most important one.

01:08:46.200 | The act became a possibility

01:08:48.200 | only in the context of challenges to American economic hegemony,

01:08:52.200 | and only when influential elements within American capitalism

01:08:57.200 | had concluded that retirement, as then constituted,

01:09:00.200 | was unduly costly as well as inefficient in allocating labor.

01:09:04.200 | Once these conditions and perceptions existed,

01:09:07.200 | liberal reformers could have their way.

01:09:09.200 | Given the American experience with retirement over the last century,

01:09:14.200 | one could hardly have expected anything else.

01:09:17.200 | Interesting, huh?

01:09:22.200 | I've got to look up that word--hegemony.

01:09:26.200 | Leadership or dominance,

01:09:28.200 | especially by one country or social group over others.

01:09:30.200 | Okay, so I wasn't familiar with that word.

01:09:33.200 | Kind of adjusts your perspective, doesn't it?

01:09:36.200 | It changes things.

01:09:42.200 | As with almost anything,

01:09:46.200 | your preconceived ideas about something

01:09:49.200 | will affect how you perceive the reality of the situation.

01:09:53.200 | The example that I heard--

01:09:55.200 | I don't know where it's from or I would cite it--

01:09:58.200 | has to do with how you perceive people.

01:10:01.200 | For example, if I'm introducing you to my friend John,

01:10:04.200 | and I tell you John is just a wonderful human being.

01:10:08.200 | He's salt of the earth.

01:10:10.200 | He's just the most kind, gentle, gracious,

01:10:13.200 | just wonderful, genuine, caring, loving person

01:10:16.200 | you're ever going to meet.

01:10:18.200 | And you meet John, and when you meet him,

01:10:20.200 | he's a little bit snappy and a little bit short

01:10:22.200 | and a little bit rude to you.

01:10:24.200 | You automatically discount that and say,

01:10:26.200 | "Man, John must be having a bad day.

01:10:28.200 | "He must have just gotten some bad news

01:10:30.200 | "or something must be happening to him."

01:10:32.200 | But on the other side, if I tell you,

01:10:34.200 | "I'm going to introduce you to my friend John,

01:10:36.200 | "but listen, you've got to be careful.

01:10:38.200 | "He's not a real bad guy, but he's a little slimy.

01:10:41.200 | "You've just got to be careful, because sometimes--

01:10:44.200 | "Be careful."

01:10:46.200 | If that's all I tell you, and you meet John,

01:10:48.200 | and John is warm and genuine

01:10:50.200 | and just gracious and kind to you,

01:10:53.200 | immediately your defenses go up.

01:10:55.200 | And you immediately say, "Whoa, whoa, whoa, whoa, whoa.

01:10:57.200 | "Hang on a second, hang on a second.

01:10:59.200 | "What is John after here?"

01:11:01.200 | So I think the same thing with just about any topic.

01:11:05.200 | If you go into--

01:11:08.200 | Well, let's just stick with retirement.

01:11:10.200 | If we go into retirement and say,

01:11:12.200 | "Retirement is my right.

01:11:14.200 | "Retirement is my reward."

01:11:16.200 | You know, being able to retire and be at leisure

01:11:19.200 | for 30 years and to play and to fish and golf

01:11:21.200 | and do these things every single day,

01:11:23.200 | if this is my right and my reward,

01:11:26.200 | then it substantially impacts our experience of retirement.

01:11:30.200 | If, on the other hand, we see retirement,

01:11:32.200 | as is kind of sketched out in this book,

01:11:35.200 | as in some ways a punishment,

01:11:37.200 | or in some ways a...

01:11:41.200 | a punishment, I guess would be the best way,

01:11:43.200 | or as a political tool would be another accurate way of saying it,

01:11:47.200 | then we say, "Wait a second, what's going on?"

01:11:50.200 | And so to follow along with the content from yesterday,

01:11:54.200 | you don't see--

01:11:56.200 | And the people that can most afford to retire--

01:11:59.200 | And yes, I cherry-picked some examples yesterday,

01:12:01.200 | but I see this everywhere.

01:12:03.200 | And the people who can most afford to retire,

01:12:05.200 | you don't see them retiring.

01:12:07.200 | You see them just continuing on into a different phase.

01:12:09.200 | So in the show yesterday, Bill Gates has this video

01:12:12.200 | about how he's going to retire and he's going to play golf

01:12:14.200 | and he's going to record music and do all these things.

01:12:17.200 | But in reality, what is he doing?

01:12:19.200 | He's still working hard, but he's working at different things.

01:12:22.200 | You see Warren Buffett doing work that he finds interesting.

01:12:25.200 | You see this with former presidents.

01:12:27.200 | You see this with former presidents.

01:12:29.200 | Are they just unengaged?

01:12:31.200 | Is Bill Clinton just sitting around playing golf every day?

01:12:33.200 | No. He's playing golf, but golf is integrated into his life.

01:12:37.200 | And so these conceptions of retirement that we have,

01:12:40.200 | kind of fed by our culture and fed by advertising,

01:12:44.200 | are completely flawed.

01:12:46.200 | My thought is that the first way to really--

01:12:49.200 | one of the first steps that I see

01:12:51.200 | is to really adjust our conception.

01:12:53.200 | I've only been a financial planner for six years,

01:12:55.200 | but in that time I've watched some people

01:12:57.200 | make the transition to retirement,

01:12:59.200 | and I've read a lot about advisors who have worked

01:13:01.200 | with more clients than I have personally

01:13:03.200 | about that transition to retirement.

01:13:05.200 | At the moment, I'm personally convinced of this.

01:13:08.200 | If you are retiring only from something,

01:13:12.200 | you've got a problem.

01:13:14.200 | If you are retiring to something,

01:13:16.200 | it's likely that it'll go successfully.

01:13:18.200 | So anecdotally, consider this.

01:13:20.200 | How many people do you know, or have at least heard of,

01:13:24.200 | who they retired from their job to come home,

01:13:26.200 | and after a year they were back at work again

01:13:28.200 | because they couldn't handle sitting at home?

01:13:30.200 | They couldn't handle just sitting watching TV

01:13:32.200 | and playing golf all day.

01:13:34.200 | You play golf every day, and over time it starts to feel like work.

01:13:37.200 | It really does.

01:13:39.200 | I learned that lesson myself when I was in high school.

01:13:42.200 | I taught wakeboarding and water skiing for a summer camp.

01:13:47.200 | I had never been an expert wakeboarder or water skier,

01:13:50.200 | but I could teach the basics,

01:13:52.200 | and I learned to teach the basics to kids

01:13:54.200 | as part of a summer camp.

01:13:56.200 | My job consisted of wearing board shorts

01:13:58.200 | and driving a boat on the lake all day,

01:14:00.200 | teaching wakeboarding and water skiing.

01:14:02.200 | By the end of the summer, I was so sick and tired

01:14:04.200 | of being in a boat.

01:14:06.200 | One person's dream--I want to buy a ski boat

01:14:08.200 | and go wakeboarding every day--

01:14:10.200 | was mine.

01:14:12.200 | I cannot stand to be in this boat again today.

01:14:14.200 | I am bored out of my skin.

01:14:16.200 | How we interpret things

01:14:18.200 | is very much driven by our viewpoint of it.

01:14:20.200 | But if you just hate the job that you have

01:14:23.200 | and can't wait to quit--

01:14:25.200 | or excuse me--if you were doing a job that's okay,

01:14:28.200 | and you just quit and do nothing--

01:14:30.200 | we all know anecdotally the guy who retires at 65

01:14:33.200 | and can't wait to do it and then dies of cancer at 66,

01:14:36.200 | or the guy who gets so sick--

01:14:38.200 | my grandfather--my experience with my grandfather--

01:14:40.200 | he was the one who was a professor.

01:14:42.200 | In his mid-80s, he was a young man.

01:14:44.200 | You would have thought he was 70 if you met him.

01:14:47.200 | But after about three years of being retired,

01:14:49.200 | he just sat down, and he was an old man.

01:14:51.200 | And it was so sad to see.

01:14:53.200 | And I wish that--you know, we tried to organize

01:14:56.200 | some tutoring and things for him,

01:14:58.200 | but I wish he had never quit working,

01:15:00.200 | because then he could have, you know,

01:15:02.200 | the later years of his life--

01:15:04.200 | the later years of his life,

01:15:07.200 | he would have been much more engaged

01:15:09.200 | and just, I think, much happier.

01:15:12.200 | So this is something that I think affects all of us.

01:15:16.200 | And I feel that there is a dramatic opportunity here

01:15:19.200 | with the prospect of financial planning,

01:15:21.200 | where instead of everything focused on,

01:15:23.200 | "Why do I keep doing this work that I don't like doing anymore

01:15:26.200 | "so that I can--so that I can, you know, quit someday?"

01:15:30.200 | Why don't we just skip that all

01:15:32.200 | and focus on doing work that we enjoy doing

01:15:34.200 | that we don't want to quit from?

01:15:36.200 | You know, I think of--in these excerpts

01:15:38.200 | that I read from this book,

01:15:41.200 | I think of the idea of a craftsperson.

01:15:44.200 | And you had this change of somebody who was a craftsperson

01:15:47.200 | going on and becoming a factory worker.

01:15:50.200 | Is the life of a craftsperson actually that bad?

01:15:54.200 | What do you see people do in retirement?

01:15:56.200 | I have a neighbor across the street,

01:15:58.200 | an older man who's retired,

01:16:00.200 | and he has a wood-turning machine,

01:16:02.200 | and he's out in his garage every day

01:16:04.200 | making bowls and wooden utensils and things

01:16:06.200 | that he just really enjoys.

01:16:08.200 | Don't you see this a lot with retired people,

01:16:11.200 | is that they reinstitute some hobby?

01:16:13.200 | And I find it so interesting that in a world

01:16:16.200 | where we're disconnected from the results of our work,

01:16:18.200 | we're disconnected from being able to see a project through

01:16:21.200 | from beginning to end,

01:16:23.200 | that what we naturally gravitate to in retirement

01:16:26.200 | is producing that type of work again.

01:16:28.200 | So why don't we turn the whole conversation on its head?

01:16:31.200 | And instead of spending all of our time

01:16:33.200 | talking about retirement,

01:16:35.200 | why don't we spend a good amount of time

01:16:38.200 | talking about designing the ultimate life

01:16:40.200 | and the ideal life that we wish to live,

01:16:43.200 | and not letting the financial planning get in the way of that,

01:16:46.200 | not letting the idea that I have to work this mind-numbing job

01:16:50.200 | for another 30 years just so I can retire.

01:16:53.200 | Why don't we just quit and do something

01:16:55.200 | that we would be engaged with?

01:16:57.200 | Now, I do believe--and this is me personally--

01:17:00.200 | I do believe there's a huge value in saving money.

01:17:03.200 | And I do believe there's a huge value in financial independence.

01:17:06.200 | I am not currently financially independent.

01:17:08.200 | I can't sit around and just do whatever I want to do

01:17:11.200 | and not make money.

01:17:13.200 | I need to keep working and creating income.

01:17:16.200 | I think you probably only really know

01:17:18.200 | if you really want to keep doing what you're doing

01:17:21.200 | if you were financially independent.

01:17:23.200 | And sometimes I wonder--

01:17:25.200 | again, it's always tough to describe reasons--

01:17:28.200 | but I wonder if people would stay at their jobs so much

01:17:31.200 | if they were financially independent.

01:17:33.200 | And my anecdotal experience and what we experience--

01:17:37.200 | if you read surveys that show that 70% of Americans

01:17:40.200 | are unhappy with work, the answer is no.

01:17:44.200 | So just to point out a couple of details of this,

01:17:47.200 | when I design--

01:17:49.200 | when I consult with a business owner

01:17:52.200 | and I'm designing a benefits plan with them as a consultant,

01:17:56.200 | then one of the primary things that we're looking to do

01:18:00.200 | is try to figure--we're asking the client,

01:18:02.200 | "What do they want?

01:18:04.200 | "What are you trying to accomplish with your benefits plan?"

01:18:07.200 | And generally, the most common thing that an employer

01:18:10.200 | is looking to accomplish with their benefits plan

01:18:13.200 | is the idea of increasing employee stickiness.

01:18:16.200 | How do we keep the good employees?

01:18:18.200 | Because it's very expensive and very difficult

01:18:21.200 | to go out and find another good employee

01:18:23.200 | if you already have one.

01:18:25.200 | And the way that you do that is you can create

01:18:28.200 | what we call in the business "golden handcuffs."

01:18:31.200 | There's kind of two aspects to benefits planning.

01:18:33.200 | You can create golden handcuffs,

01:18:35.200 | or you can create the golden handshake.

01:18:37.200 | And so the golden handcuffs is the idea of,

01:18:39.200 | "How can I keep the people that I want

01:18:41.200 | "working with my business?"

01:18:43.200 | You know how you do that? Pensions.

01:18:45.200 | Pensions that have a deferred vesting schedule

01:18:47.200 | that give people an incentive to stay and work

01:18:50.200 | that goes beyond current situations.

01:18:54.200 | And this can be a win-win.

01:18:55.200 | It can be a win for the employer and a win for the employee.

01:18:57.200 | There's substantial tax benefits.

01:18:59.200 | The employee feels more engaged.

01:19:00.200 | The employee has incentives to stay with that job.

01:19:03.200 | And the employer is able to retain those employees

01:19:05.200 | for a longer period of time.

01:19:07.200 | It doesn't have to go and search for new employees.

01:19:11.200 | But it's not necessarily a bad thing.

01:19:16.200 | But if you understand that my employer

01:19:18.200 | is trying to get some hooks into me,

01:19:20.200 | that I'm getting some golden handcuffs,

01:19:22.200 | it puts things into the proper scenario.

01:19:24.200 | It doesn't mean you're not willing to go through with it.

01:19:26.200 | It just puts things in the proper perspective.

01:19:28.200 | On the other hand, consider the golden handshake.

01:19:30.200 | So the golden handshake is,

01:19:31.200 | "How do you usher the employees out of your business

01:19:33.200 | "that you no longer want?"

01:19:34.200 | You see this in the news a lot of times.

01:19:36.200 | You see this with companies,

01:19:38.200 | or I think it was like the Postal Service

01:19:39.200 | a couple years ago was doing this,

01:19:41.200 | was offering early retirement.

01:19:43.200 | So we have here this whole paragraph

01:19:45.200 | that says that retirement was sanctioned

01:19:48.200 | as a form of unemployment relief.

01:19:50.200 | And so you offer retirement

01:19:51.200 | to reduce the size of the workforce.

01:19:54.200 | And we offer retirement to reduce the size of the workforce

01:19:58.200 | to lower the unemployment percentages

01:20:00.200 | of people looking for work or people able to work.

01:20:02.200 | And we cut out all the retirees now.

01:20:04.200 | Well, that accomplishes a political objective,

01:20:07.200 | but we have to sell that.

01:20:08.200 | So you have to sell it with the concept of golden handcuffs.

01:20:10.200 | So when you're offered an early retirement,

01:20:12.200 | there has to be some financial incentive

01:20:13.200 | for somebody to accept it.

01:20:15.200 | But it changes your mind if you realize,

01:20:17.200 | "Wait a second, they're trying to get me out."

01:20:20.200 | Now, you may again choose it.

01:20:21.200 | You may choose to take that and go and build something else,

01:20:24.200 | but they're trying to get you out.

01:20:26.200 | Now, there's lots of other considerations to this,

01:20:29.200 | and I don't want to be overly simplistic.

01:20:32.200 | But I did want to walk through that history,

01:20:34.200 | because with that history,

01:20:35.200 | I think we can start to understand a little bit.

01:20:37.200 | And we can start to understand that these political debates,

01:20:40.200 | the political, you know, the use of Social Security

01:20:44.200 | as a tool, as a political tool, is not new.

01:20:49.200 | From day one, it was intended as a political tool.

01:20:52.200 | There's an interesting aspect in this book.

01:20:55.200 | I don't know if I can find it quickly enough here to read it.

01:20:58.200 | I didn't mark it.

01:20:59.200 | But when Social Security went--

01:21:01.200 | some information that I hadn't known

01:21:03.200 | is that FDR instituted and Social Security was instituted

01:21:08.200 | partly in reaction to another competing proposal

01:21:13.200 | that was a non-contributory system

01:21:15.200 | that was proposed by another politician.

01:21:17.200 | Again, I don't remember these names.

01:21:19.200 | But that the other idea was a non-contributory system.

01:21:23.200 | It's that Social Security was issued as a contributory system

01:21:26.200 | where Social Security taxes would be contributed by the worker

01:21:29.200 | and then by the employee to fund the system--

01:21:31.200 | the employer to fund the system.

01:21:33.200 | So I hope this has been interesting today,

01:21:35.200 | and I hope that you've enjoyed this contact.

01:21:39.200 | If anybody knows William Grabener--

01:21:40.200 | I'm trying to find him and get a hold of him.

01:21:42.200 | I'd really love to interview him,

01:21:43.200 | because this book was written in 1980, and that's 30 years ago.

01:21:46.200 | And so the context of this being written

01:21:50.200 | right after the passage of ERISA,

01:21:52.200 | the Employee Retirement Income Security Act,

01:21:54.200 | which I think, if my memory is correct, was '78.

01:21:56.200 | It was late '70s anyway.

01:21:58.200 | So this book was being written,

01:21:59.200 | and clearly that's what he's talking about at the end.

01:22:02.200 | He's talking about the impact of ERISA legislation.

01:22:04.200 | And today, ask any person who is any practitioner

01:22:07.200 | active in the world of benefits planning,

01:22:14.200 | and ERISA governs much of what we do.

01:22:16.200 | And ERISA has a huge impact,

01:22:18.200 | and you're constantly figuring out

01:22:19.200 | how to maintain compliance with ERISA.

01:22:21.200 | And I'm not going to talk about what's good, what's bad, whatever.

01:22:24.200 | It's been around for my entire working lifetime,

01:22:26.200 | and it just is, so you have to deal with it.

01:22:28.200 | But it's very interesting to have a little bit of historical context.

01:22:32.200 | If anybody knows William Grabener, let me know.

01:22:35.200 | I would love to have him on the show.

01:22:37.200 | At some point in time, I will be able to read this other retirement book,

01:22:44.200 | "The Evolution of Retirement" by Dora Costa.

01:22:47.200 | I'm interested in reading that.

01:22:48.200 | And I'm also interested, if any of you are aware of any other resources,

01:22:53.200 | any other scholarly books on this subject

01:22:56.200 | that you think would be interesting, let me know that,

01:22:58.200 | because I'd be interested in reading about them.

01:23:00.200 | I highly commend this book to you.

01:23:01.200 | I highly commend it.

01:23:02.200 | If you're interested in the scholarly research,

01:23:04.200 | I clearly didn't talk about the footnotes,

01:23:06.200 | but it's one thing to read an article that doesn't have a single footnote in it,

01:23:09.200 | and it's another thing to see the bibliography and the footnotes

01:23:12.200 | of an academic book like this.

01:23:16.200 | So I would love to have some more people read it and discuss it.

01:23:20.200 | Let me know your comments on today's show.

01:23:22.200 | Come by the blog.

01:23:23.200 | Today's show is episode 13, so the URL is radicalpersonalfinance.com/13.

01:23:29.200 | Email me, joshua@radicalpersonalfinance.com.

01:23:32.200 | If I don't speak with you before tomorrow, have a happy 4th of July,

01:23:35.200 | and focus, with tomorrow being Independence Day,

01:23:38.200 | what this show is going to be about is basically

01:23:40.200 | how to create your own financial independence.

01:23:43.200 | And hopefully you'll like the start of the shows this week.

01:23:46.200 | I'd love to hear feedback, and I will keep creating great content for you.

01:23:52.200 | But the neat thing about you as an early listener of the show,

01:23:55.200 | you have an opportunity to have a great influence over the direction of the show.

01:24:01.200 | So bring on your comments and questions.

01:24:03.200 | Come by the blog, and have a happy 4th of July.

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