I will try to respond to a few of the many good comments on my discussion last week of retirement. One person asked if I believe I am capable of doing work of the same quality that I had done in the past. My answer is no--age brings valuable experience, but at some point one loses some capacity for originality.
Some of you believe that early retirement is necessary to provide full employment. Yet labor markets can employ the vast majority of people who want to work if conditions of employment are flexible. Japan has low unemployment rates with high levels of employment among the elderly (see my posting this week) because it allows flexible earnings of older workers. Other nations could employ many more of their older workers if they allowed compensation to be market determined.
What is the so-called "natural" rate of unemployment is somewhat controversial. A couple of decades ago, it was believed to have risen in the United States to 6 per cent or more. But experience of the past 20 years suggests that the United States can achieve full employment with 5 per cent, or perhaps even lower, unemployment.
I agree that flexibility is necessary in dealing with older (and other) workers since the deterioration in their health and other measures of productivity varies greatly. That is why I believe conditions of employment of older workers should not be determined by legislation--which tends toward rigid rules--but by market forces.
I am no fan of age discrimination legislation, such as the ADEA in the United States. After all, older workers are among the best paid of all workers and have among the lowest rate of unemployment. African Americans by contrast have relatively low pay and high unemployment rates. So the argument for anti-discrimination legislation in their case has essentially no applicability to older workers.
As one of the commentators responded, pensions generally now vest when an employee is discharges, so there is no saving in pension costs by firing older workers. Health costs may be another matter, but that is a further reason to separate medical insurance, and its tax benefits, from employment.
I have always believed that economists have to consider nonmaterial aspects of life like character, love, and the like. Economics can deal in a useful way with these traits.
Some of you claim that capitalism and capitalists are the source of inequality and hard-hearted treatment of older workers. I do not believe that is correct. Inequalities, for example, under Mao and Stalin were enormous, including those in the economic sphere. And employee-owned companies, such as United or Avis, have usually fared very badly because of incompetent management.