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CNBC
a day ago
- Business
- CNBC
As Denmark raises its retirement age to 70, experts weigh in on whether the U.S. may follow its lead
Denmark has moved to increase its retirement age to 70 — making it the highest retirement age in Europe. Yet it may be difficult for the U.S. to follow its lead. The new change in Denmark will apply to public pension retirements starting in 2040. Since 2006, the country has been adjusting its retirement age to reflect changes in life expectancy. The U.S. does not technically have an official retirement age. At age 65, individuals become eligible for Medicare coverage. At age 66 to 67, depending on date of birth, an individual becomes eligible for full Social Security benefits based on their earnings record. More from Personal Finance:House Republican tax bill favors the richSome lawmakers want to defer capital gains taxes for mutual fundsWhat the House GOP budget bill means for your money However, those individuals who wait until age 70 to claim Social Security retirement benefits stand to get the biggest payout — an increase of 8% for each year beyond full retirement age. (The full retirement age is when beneficiaries are eligible for 100% of the benefits they've earned based on their work records.) Yet few people wait until age 70 to claim benefits. While more than 90% of individuals would benefit from delaying Social Security until that age, only about 10% actually do, according to a 2023 paper from the National Bureau of Economic Research. While age 70 is not the official U.S. retirement age, it is the threshold based on economists' definition — the age at which you can't accrue any more benefits, according to Teresa Ghilarducci, a labor economist and professor at The New School for Social Research. "In the United States, it's been 70 for decades, and we had the highest retirement age than any other country for years," Ghilarducci said. Yet there are efforts to officially bump up the U.S. retirement age higher. In 1983, Congress passed legislation to gradually raise the full retirement age for Social Security from 65 to 67. That change is still getting phased in today, with people born in 1960 and later subject to the higher 67 retirement age. In December, an amendment to raise the full retirement age to 70 was introduced by Sen. Rand Paul, R-Ky., during last-minute efforts to advance legislation that increased Social Security benefits for certain public pensioners. The bill, the Social Security Fairness Act, was voted into law. However, the proposal to raise the retirement age was struck down. Paul called for raising the retirement age by three months per year until it reached age 70, to reflect current life expectancies. The change would have created nearly $400 billion in savings for the program, while the Social Security Fairness Act added $200 billion in costs to the program over 10 years. Other Republican proposals have likewise called for raising the retirement age. The Social Security Administration faces looming depletion dates for the trust funds it relies on to help pay benefits. To help resolve that issue, lawmakers may consider raising taxes, cutting benefits or a combination of both. Raising the retirement age is effectively a benefit cut. Like the changes enacted in 1983, raising the retirement age could be on the menu. Denmark's move to raise the retirement age to 70 is not a surprise, experts say. In 2023, research published by the Danish Center for Social Science Research found increasing good health and educational resources for 60- to 70-year-olds, along with higher demand for older workers, could point to retirement age increases in the future. In 2025, Denmark residents can retire with public pensions when they are 67. That will gradually increase to age 70 as of 2040. "That means simply that younger people today will have to work longer before they can go on retirement," said Jesper Rangvid, professor of finance at the Copenhagen Business School and co-director of its Pension Research Centre. That retirement age affects everybody entitled to basic public pension income, according to Rangvid. However, those with private pension savings may retire earlier. "There's nothing that prevents you from retiring earlier if you have the funds and the means to do so," Rangvid said. Denmark does offer options for early retirement, including an early pension. However, raising the retirement age conveys a message, Rangvid said. "It sends a signal that this is what the positions would like, that you should work longer," Rangvid said. Retirement experts say raising the U.S. retirement age may not present the same solution for the population that it does in Denmark. Denmark has a much more "equal society" when it comes to income, wealth, education and life expectancy compared to the United States, said Alicia Munnell, senior advisor at the Center for Retirement Research at Boston College. In the U.S., government data shows a stark difference between the life expectancy for those at the bottom and top income quartiles, Munnell said. "When you have such a big, big difference, any across-the-board increase in the retirement age would be foolish," Munnell said. "It'd be immensely harmful to those at the bottom who already receive benefits for a shorter period of time." A policy to raise the retirement age may also be problematic for another reason — it would take time to phase the change in, according to Andrew Biggs, senior fellow at the American Enterprise Institute. For example, Congress may enact a higher retirement age that starts to go into effect in 10 years, and then it would take 30 years for people with the higher retirement age to go through the system. While moving the age from say 67 to 69 would produce savings for the program in the long run, "they're going to need the money right now," Biggs said. The welfare reform that began in Denmark in 2006 — whereby the retirement age increased with life expectancy — has been "extremely important" for the country's economy, according to Rangvid. "We have basically no public debt at all," Rangvid said. In contrast, the U.S. faces high national debt that requires the country to spend more on interest payments than on the military. Budget legislation that is currently under consideration in Congress could add an estimated $3.3 trillion to the debt including interest, according to the Committee for a Responsible Federal Budget. That package would not touch Social Security or its retirement age. However, other proposals have suggested that change, a benefit cut that would be a "pretty powerful lever" toward helping to resolve the program's funding issues, according to Munnell. One proposal scored by the Social Security Administration's actuaries found raising the full retirement age to 70 would eliminate 26% of the program's 75-year shortfall.
Yahoo
21-05-2025
- Business
- Yahoo
We can't price control our way to cheaper, more available drugs
The White House just announced a sweeping plan that could ultimately cap U.S. drug prices at lower levels seen in other developed countries. Administration officials have good intentions. They're trying to shake up the plainly unacceptable status quo, in which American "citizens pay massively higher prices than other nations pay for the same exact pill, from the same factory, effectively subsidizing socialism abroad," as President Trump put it. But good intentions aren't enough to prevent dire unintended consequences. This proposal could largely eliminate the incentives for biotech companies to invest in new medicines, ultimately resulting in millions of premature deaths and lost jobs. Thankfully, there are several alternative strategies that could meaningfully save Americans at the pharmacy without destroying our biotech sector. Foreign price fixing is a real problem. Most other wealthy countries artificially cap the cost of medicines. Those countries know they'll get away with it, because as economist Craig Garthwaite explains in a recent paper in the Journal of Economic Perspectives, many foreign countries are "too small to be central to the drug development investment decisions of innovative firms." In other words, drug companies book the majority of their profits in America. So companies rationally calculate that it's better to earn some marginal revenue in smaller countries — even if those countries demand arbitrarily low prices — than to unsuccessfully demand free-market prices, face rejection from those countries' socialized healthcare systems, and earn no additional revenue at all. Hicks: Why tariffs lead to recession, even after Trump caved to China It's entirely unfair that Americans are forced to disproportionately shoulder the majority of the world's research and development burden. But adopting other countries' artificially low prices won't fix the problem. It'd just make it impossible for biotech companies to recover their immense R&D costs — and thus destroy the incentives to develop new treatments altogether. This isn't just a theoretical concern. Europe used to dominate the global biotech industry for most of the 20th century, accounting for more than half of all new drugs developed — but America surged ahead by the late 1990s after European policymakers kneecapped their domestic innovators with price controls. And while America historically resisted the temptation to impose price controls on medicines — at least until the Inflation Reduction Act — we have imposed them on medical devices before, with disastrous results. A new National Bureau of Economic Research paper examined what happened when Medicare slashed reimbursements for certain medical devices by more than 60%. Innovation fell off a cliff. Patent filings dropped 75%. New product launches fell 25%. The executive order would replicate that mistake on a far larger scale. If it takes effect, companies will simply stop investing in most new drug research. It's simple economics — kill the potential return, and you kill the risk-taking too. That'd come at a massive human cost. New drugs have been responsible for more than a third of the decline in cardiovascular deaths since 1990. They've turned certain cancers from imminent death sentences into manageable, even curable, conditions. Now we're seeing promising treatments for obesity, ALS, and rare genetic disorders. Imagine telling families that future breakthroughs won't be coming — because we chose to import foreign price controls. There are smarter ways to lower prices without compromising innovation. First, we must eliminate the waste in our health care system. More than half of every dollar spent on brand-name drugs doesn't go to the companies that make them — it's absorbed by a complicated supply chain that rakes in hundreds of billions from hidden rebates and markups, with no requirements to pass savings onto patients. Opinion: Indiana prides itself on work. What happens when AI takes our jobs? Policymakers should demand transparency, ban abusive practices, and ensure that negotiated discounts reach the patients who actually buy the medicine. Second, we should tackle the foreign pricing problem through trade negotiations. Other wealthy nations should have to pay market rates for medicines if they want access to American markets. The White House is right to be angry about foreign price fixing. But we need to fight it without destroying one of America's most successful industries in the process. Dr. Larry Bucshon, a cardiothoracic surgeon, served as a Republican U.S. representative for Indiana's 8th congressional district from 2011 to 2025. This article originally appeared on Indianapolis Star: Trump's drug price plan would hurt biotech firms, consumers | Opinion
Indianapolis Star
21-05-2025
- Business
- Indianapolis Star
We can't price control our way to cheaper, more available drugs
The White House just announced a sweeping plan that could ultimately cap U.S. drug prices at lower levels seen in other developed countries. Administration officials have good intentions. They're trying to shake up the plainly unacceptable status quo, in which American "citizens pay massively higher prices than other nations pay for the same exact pill, from the same factory, effectively subsidizing socialism abroad," as President Trump put it. But good intentions aren't enough to prevent dire unintended consequences. This proposal could largely eliminate the incentives for biotech companies to invest in new medicines, ultimately resulting in millions of premature deaths and lost jobs. Thankfully, there are several alternative strategies that could meaningfully save Americans at the pharmacy without destroying our biotech sector. Foreign price fixing is a real problem. Most other wealthy countries artificially cap the cost of medicines. Those countries know they'll get away with it, because as economist Craig Garthwaite explains in a recent paper in the Journal of Economic Perspectives, many foreign countries are "too small to be central to the drug development investment decisions of innovative firms." In other words, drug companies book the majority of their profits in America. So companies rationally calculate that it's better to earn some marginal revenue in smaller countries — even if those countries demand arbitrarily low prices — than to unsuccessfully demand free-market prices, face rejection from those countries' socialized healthcare systems, and earn no additional revenue at all. Hicks: Why tariffs lead to recession, even after Trump caved to China It's entirely unfair that Americans are forced to disproportionately shoulder the majority of the world's research and development burden. But adopting other countries' artificially low prices won't fix the problem. It'd just make it impossible for biotech companies to recover their immense R&D costs — and thus destroy the incentives to develop new treatments altogether. This isn't just a theoretical concern. Europe used to dominate the global biotech industry for most of the 20th century, accounting for more than half of all new drugs developed — but America surged ahead by the late 1990s after European policymakers kneecapped their domestic innovators with price controls. And while America historically resisted the temptation to impose price controls on medicines — at least until the Inflation Reduction Act — we have imposed them on medical devices before, with disastrous results. A new National Bureau of Economic Research paper examined what happened when Medicare slashed reimbursements for certain medical devices by more than 60%. Innovation fell off a cliff. Patent filings dropped 75%. New product launches fell 25%. The executive order would replicate that mistake on a far larger scale. If it takes effect, companies will simply stop investing in most new drug research. It's simple economics — kill the potential return, and you kill the risk-taking too. That'd come at a massive human cost. New drugs have been responsible for more than a third of the decline in cardiovascular deaths since 1990. They've turned certain cancers from imminent death sentences into manageable, even curable, conditions. Now we're seeing promising treatments for obesity, ALS, and rare genetic disorders. Imagine telling families that future breakthroughs won't be coming — because we chose to import foreign price controls. There are smarter ways to lower prices without compromising innovation. First, we must eliminate the waste in our health care system. More than half of every dollar spent on brand-name drugs doesn't go to the companies that make them — it's absorbed by a complicated supply chain that rakes in hundreds of billions from hidden rebates and markups, with no requirements to pass savings onto patients. Opinion: Indiana prides itself on work. What happens when AI takes our jobs? Policymakers should demand transparency, ban abusive practices, and ensure that negotiated discounts reach the patients who actually buy the medicine. Second, we should tackle the foreign pricing problem through trade negotiations. Other wealthy nations should have to pay market rates for medicines if they want access to American markets. The White House is right to be angry about foreign price fixing. But we need to fight it without destroying one of America's most successful industries in the process.
Yahoo
20-05-2025
- Business
- Yahoo
STEPHEN MOORE: Why Moody's credibility should be questioned after downgrade of US federal bonds
I'm as worried about runaway government spending and debt as anyone. But I've got to wonder if there possibly could be a more incompetent and biased credit rater than Moody's -- the agency that just downgraded federal bonds from AAA rating. For context, this is the agency that gave the highest credit ratings to the subprime mortgage-backed securities right of until the eve of the greatest financial crisis since the Great Depression, wiping out trillions of dollars of investor wealth. The National Bureau of Economic Research issued this useful reminder of Moody's complicity in the meltdown: "The credit crisis of 2008-9 was in many ways a credit rating crisis. Structured finance products, such as mortgage-backed securities, accounted for over $11 trillion dollars of outstanding U.S. debt... More than half of the securities rated by Moody's carried the highest possible credit rating that is typically reserved for securities deemed to be nearly riskless. In 2007 and 2008, the creditworthiness of structured finance securities deteriorated dramatically: 36,346 Moody's rated tranches were downgraded, and nearly one third of the downgraded tranches bore the AAA rating." Ironically, this came after Moody's agreed, in 2017, to pay a $864 million penalty for contributing to the crisis due to its flawed ratings. When exactly? Moody's Downgrades Us Credit Rating Over Rising Debt Read On The Fox Business App After the subprime mortgage debacle. So I hav to ask, how could Moody's stand in judgment of anyone's credit worthiness? This would be like hiring Pee Wee Herman as your investment adviser. The problem isn't just Moody's less-than-stellar track record. Moody's is overtly politically biased. The biggest hole ever ripped into the budget was the $5 trillion President Joe Biden spending spree. With Bidenflation deflating the value of existing government bonds. But strangely, no credit downgrade was issued while Biden was in the White House. Now that Donald Trump is president and the sky is apparently falling. The chief economist of Moody's regularly trashes supply-side tax cuts, but believes government spending is a stimulus to the economy. What Moody's and other credit-rating agencies still can't understand is that tax cuts like Ronald Reagan's in 1981 and Trump's 2017 bill grow the economy and over time lower the debt burden as a share of the nation's wealth. More people working and less people on welfare is a great way to lower debt spending. If we can get the growth rate up to 3% -- which President Trump is aiming for -- the debt burden starts to shrink. Remember, the full faith and credit of the U.S. government stands behind Treasury bonds. That's pretty close to an ironclad guarantee of repayment. Yes, we have a spending problem in Washington for sure, but we aren't Zimbabwe. The timing of this downgrade is particularly suspicious. Is it coincidence that it comes just as Congress is voting on the Trump tax cut? Click Here To Read More On Fox Business In just the past two months, President Trump has secured at least $1 trillion of new investment capital commitments to come to these shores. Why would this gold rush of investment flood into a nation at risk of default? Maybe investors know what Moody's doesn't. Trumponomics is good for the U.S. economy -- and for those who invest in America. Stephen Moore is a co-founder of Unleash Prosperity and a former Trump senior economic advisor. Original article source: STEPHEN MOORE: Why Moody's credibility should be questioned after downgrade of US federal bonds Sign in to access your portfolio
Yahoo
19-05-2025
- Business
- Yahoo
Study looking at AI chatbots in 7,000 workplaces finds ‘no significant impact on earnings or recorded hours in any occupation'
AI chatbots have been rolled out across hundreds of white-collar workplaces, but on average, their effect on hours and pay has been negligible, according to a National Bureau of Economic Research working paper linking AI use to corporate records in Denmark. On average, employees saved 3% of their time, while just 3%-7% of their productivity gains came back to them in the form of higher pay. Since OpenAI rolled out ChatGPT just over two years ago, AI chatbots have become the fastest-adopted technologies in history, rivaling the PC three decades ago. Their popularity has created and destroyed entire job descriptions and sent company valuations into the stratosphere—then back down to earth. And yet, one of the first studies to look at AI use in conjunction with employment data finds the technology's effect on time and money to be negligible. 'AI chatbots have had no significant impact on earnings or recorded hours in any occupation,' economists Anders Humlum and Emilie Vestergaard wrote in a National Bureau of Economic Research working paper released this week. Humlum, an assistant professor of economics at the University of Chicago's Booth School of Business, and Emilie Vestergaard, an economics PhD student at the University of Copenhagen, looked at 25,000 workers across 7,000 workspaces, focusing on occupations believed to be susceptible to disruption by AI: accountants, customer support specialists, financial advisors, HR professionals, IT support specialists, journalists, legal professionals, marketing professionals, office clerks, software developers, and teachers. They pulled records from Denmark, a country whose rates of AI adoption as well as hiring and firing practices are similar to those in the U.S. but where record-keeping is far more detailed, allowing the study to anonymously match survey responses to records of actual hours and pay. On average, users of AI at work had a time savings of 3%, the researchers found. Some saved more time, but didn't see better pay, with just 3%-7% of productivity gains being passed on to paychecks. In other words, while they found no mass displacement of human workers, neither did they see transformed productivity or hefty raises for AI-wielding superworkers. 'While adoption has been rapid, with firms now heavily invested in unlocking the technological potential, the economic impacts remain small,' the authors write. Productivity, interrupted The findings might be a surprise against the backdrop of aggressive corporate adoption of AI: from Duolingo replacing its contract workers with AI to Shopify decreeing it will only hire humans as a second choice to AI. Meanwhile, investors have been bidding up shares of companies involved in AI. But the NBER paper doesn't mean that earlier findings of AI's productivity boost have been wrong, said Humlum—just incomplete. Most of the earlier research has focused 'exactly on the occupations where the time savings are largest,' Humlum told Fortune. 'Software, writing code, writing marketing tasks, writing job posts for HR professionals—these are the tasks the AI can speed up. But in a broader occupational survey, where AI can still be helpful, we see much smaller savings,' he said. Other factors that explain AI's overall ho-hum impact include employer buy-in and employees' own time management. 'I might save time drafting an email using a large language model, so I save some time there, but the important question is, what do I use that time savings for?' he said. 'Is the marginal task I'm shifting my work toward a productive task?' Workers in the study allocated more than 80% of their saved time to other work tasks (less than 10% said they took more breaks or leisure time), including new tasks created by the use of AI, such as editing AI-generated copy, or, in Humlum's own case, adjusting exams to make sure that students aren't using AI to cheat. There's also the fact that real workplaces are much messier than structured experiments. 'In the real world, many workers are using these tools without even the endorsement of the boss. Some don't even know if they're allowed to use it; some are allowed but not really encouraged to use it,' Humlum said. 'In a workplace where it's not explicitly encouraged, there's limited space to go to your boss and say, 'I'd like to take on more work because AI has made me more productive,'' let alone negotiate for higher pay based on higher productivity. And of course, employees might not want to advertise how much more productive AI has made them, especially considering the well-trod adage that the reward for efficient workers is more work. Some of the findings around hours and pay in workplaces where AI isn't used 'suggest that workers are not exactly knocking on the boss's door asking for more work,' Humlum said. Great expectations, mid results The NBER paper comes on the heels of other indications suggesting that AI's potential, while tremendous, has been vastly overstated in the media and the market. Payment processor Klarna, which made waves last year when it revealed it stopped hiring humans in favor of a super-productive AI, recently tempered its rhetoric. An IBM survey of 2,000 CEOs revealed that just 25% of AI projects deliver on their promised return on investment. The main driver of adoption, it seems, is corporate FOMO, with nearly two-thirds of CEOs agreeing that 'the risk of falling behind drives them to invest in some technologies before they have a clear understanding of the value they bring to the organization,' according to the study. Nobel laureate Daron Acemoglu, who has extensively researched automation and labor, estimates AI's productivity boost at approximately 1.1% to 1.6% of GDP in the next decade—a sizable boost for an advanced economy like the U.S., but far from the doubling of GDP some technologists have predicted. The danger with AI is that 'the hype will likely go on for a while and do much more damage in the process than experts are anticipating,' he wrote for Fortune last year. In fact, 'getting productivity gains from any technology requires organizational adjustment, a range of complementary investments, and improvements in worker skills, via training and on-the-job learning,' he said. That's a finding backed up by Humlum and Vestegaard, whose paper showed greater productivity gains when employers encouraged AI use and trained workers in it. It could also be just a matter of time. After all, the Industrial Revolution went on for a century, transforming how people lived and worked long after the invention of the steam engine. 'It took a couple decades to see that we can have an assembly line powered by electricity instead of having everything run centrally via a steam engine,' Humlum said. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
