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Whatever political position you hold on the TARP of George W. Bush or the bailout of General Motors carried out under Barack Obama, the fact is, a great deal of money, not wealth, was pushed into the economy. ‘Inflation‘ is the result of putting in more money into an economy than the economy is worth: as dollars are pumped in that to do not reflect the perceived value of the market, each person will demand more of those cheap, common, dollars for his or her goods and services.
No one is hurt more by inflation than those on a fixed income that does not respond with the economy; Namely, the retired. When a retiree’s Social Security Check check arrives in the mail, the note on the check might be for $100 (to keep my brain clear with simple round numbers), but the groceries that used to cost $100 might cost $110 with 10% inflation. Those in the labor force can work an extra hour or two to make up the difference. Those who are retired (or unemployed), are stuck $10 short a month. How will they cover the shortfall?
By working. Senior Housing News ran a story earlier this week showing that we can already see a slight rise in the retired taking part-time jobs. The story argues that still more will (try to) re-enter the jobs market over the next couple of decades. The thrust of the article, not surprisingly, was toward housing costs.
As energy and materials and labor costs rise, so will housing and retirement-services costs rise. Even though Social Security is meant to take inflation into account (the ‘COLA‘ or ‘Cost Of Living Adjustment’), it usually does far down the slop of inflation. Housing and food are fundamental to survival, not just a comfortable life, so even seniors will be pressed to find ways to make ends meet.
Assuming a 10% growth in property taxes, home maintenance, heating and air conditioning, food, gas and other household expenses every five years, assets will be depleted faster or retirees will need to find a way to supplement their incomes, most likely through part-time work. Notice how the list does not address healthcare expenses?
The story only alludes to the economic pressure at the other end of the economic life cycle: that seniors (whose numbers will expand exponentially in the next couple of decades) compete with young people trying to enter the work force via temporary and part-time jobs. What is bleaker still, is that we will have a glut of laborers beyond the needs of the market: an ‘inflation’ in labor, which will make each person’s contribution to the market less valuable, thus lower paid. Why pay a senior $8 an hour when a kid from the local college will do it for $7? Unless that senior will take $6.50?
Keep in mind that the reason the senior in age is competing with the senior in college in the first place is precisely because the senior in age needs more dollars per hour, not fewer. Or more hours per job. Not a great prospect for a retirement.
The US economy is nothing if not creative, flexible, and complicated. We are not heading in a straight line to granddad and grandson trading hours at the fast-food chain down the block. But the numbers are not working in favor of most seniors (in years or in college).
