Raising the Medicare age could hurt young workers

January 23, 2013: 10:15 AM ET
labor force share chart
NEW YORK (CNNMoney)

Raising the Medicare eligibility age won't just affect older workers ... it could ripple all the way down the career ladder.

If senior citizens can't sign up for Medicare until age 67, many will likely stay on the job longer so they can keep their health insurance. That means it could be tougher for mid-career workers to move up, which in turn could make it harder for younger workers to secure entry-level positions, economists say.

"The only way to free up jobs at the bottom for young people is for older workers to retire," said Sung Won Sohn, an economics professor at California State University Channel Islands. "No one wants to retire without health care."

Options for cutting Medicare costs are back on the table as the Obama administration and lawmakers seek ways to reduce the deficit. President Obama has said he'd be willing to make modest changes to Medicare as part of the debt ceiling negotiations, while House Republicans are looking to overhaul the troubled entitlement programs.

Raising the eligibility age to 67 has been kicked around for years. Advocates say that the program should reflect the increased lifespan that Americans now enjoy, as well as the fact that there are fewer workers to support retirees.

Related: Obama's economy: A snapshot

There's already evidence that raising the entitlement age affects workers' decisions to retire. A recent report from the Congressional Budget Office estimated that about half of the increase in the share of people age 62 or older who participated in the labor force during the 2000s can be attributed to the increase in the full retirement age of Social Security, which rose by one year to 66.

CBO expects a similar jump when the full retirement age for Social Security goes up to 67 in coming years. The share of men and women age 65 to 69 in the labor force should rise by 4 percentage points between 2012 and 2022, the report said.

Keeping senior citizens in the workforce could prove problematic for those down the career chain, particularly during weak labor conditions such as we've had in recent years.

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During the Great Recession, older workers hung onto their jobs, exacerbating the tough market for younger ones, said Sarah Watt, economic analyst with Wells Fargo Securities.

The share of Americans age 65 and over in the labor market rose to 18.5% in 2012, up from 16.0% in 2007. At the same time, the share of those age 25 to 54 fell to 81.4%, from 83.0%.

A similar scenario played out in the higher education arena after 1994 when universities were barred from instituting a mandatory retirement age of 70, said Carl Van Horn, director of Heldrich Center for Workforce Development at Rutgers University. More older professors are staying on the job, making it harder for younger PhDs to get tenure track positions or mid-career faculty to advance.

"There just weren't as many openings," he said.

Have you had trouble finding work or moving up as a result of older workers staying on the job longer? Email tami.luhby@turner.com and you could be featured in an upcoming story.
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