Economist Aaron Terrazas warns inflation could drive economic inequality.
Baby boomers are helping to prop up the economy, as they're in their core retirement spending years.
There's an income premium for job switchers — and for retirees.
The Social Security Administration recently released the cost-of-living adjustment for next year. About 72 million recipients will experience a 3.6% increase in their benefits in January, higher than the September three-month moving average year-over-year median wage growth for job stayers at 3.4%.
Independent economist Aaron Terrazas said cost-of-living increases for Social Security beneficiaries were higher than job-stayers' increases in three of the past six years, the most recent being the 8.7% 2023 increase announced in 2022 amid the post-pandemic inflation spike.
"Retiree income is adjusted with the cost of living, whereas people who are working are mostly compensated according to the cost of labor," Terrazas said. "For most of the past decades, we've been in a low inflation labor shortage world, so that's worked out in workers' favor, but it feels like that's shifting underneath the surface."
The headline consumer price index increased 3.7% from a year ago in September, moving away from the Fed's 2% inflation target but down from the high rates back in 2022. The Social Security Administration bases the annual cost-of-living adjustment on the average of a related inflation rate during the third quarter of each year.
"Indexing incomes to the cost of living rather than cost of labor is a big part of what fueled inflation, the wage-price spiral in the 1970s," Terrazas said. "We moved away from that practice for most of the workforce, but not for retirees. With the growing share of Americans in their retiring years, more and more consumers are, whether we want it or not, having their incomes indexed to inflation rather than the cost of labor."
This, Terrazas thinks, could continue to drive the K-shaped economy of the haves and the have-nots, as he said older consumers are driving an outsize share of spending, although that could change as boomers start to age out of the peak retirement spending years.
"Baby boomers are in their core retirement spending years," he said. "When we think about consumer trends and what's holding up the economy, that is something we can't forget — that once people reach their 80s, we should expect that spending to start to contract as people become homebound."
Meanwhile, the three-month moving average for job switchers was higher than for job stayers and higher than the announced COLA, so job-hopping could be better than job-staying if you prioritize earning more. The problem is that it may be hard to find a new opportunity, depending on where you're looking. White-collar fields have been experiencing job loss, and employment levels in the leisure and hospitality sector have been pretty volatile.
The US has spent the last couple of years in a low-hire, low-fire period: Layoffs are low, so if you have a job, you're likely doing OK, but job openings and hiring have also been anemic, making an ominous situation for job seekers.
While that means employees may be more secure if they have a job, it also means employers don't have to do a lot to convince people to stay. Some workers have turned to "loud working" to try to make sure their accomplishments are being heard internally at their company or externally via LinkedIn or other platforms, whether that be because of fear of job cuts, to make the case for a raise, or some other reason.
"It's tough, I think, for job seekers to see headlines when we get the jobs report that unemployment is low, we're continuing to create jobs, but it's something very different from what they're feeling," Terrazas said. "And so I think it is important for them to understand that message that they're not alone. Many people, especially in white-collar work, are struggling to find new jobs or struggling to stay afloat in their workplaces."
I'm Gen Z and have always valued rest, leisure, and finding balance in my life.
My 86-year-old grandfather has worked as a doctor for 60 years and refuses to retire.
His dedication has changed how I think about ambition, purpose, and growing older.
As a Gen Z, I have struggled with my work ethic. I have learned to optimize leisure, travel, and rest, and to get into a flow state. However, my grandfather's work ethic has made me rethink my approach.
At 86, my grandfather refuses to retire. For the past 60 years, he has woken up at the same time every morning, showered, dressed immaculately, had breakfast, and left for his work as a general physician in his private clinic.
Barring sickness and rare travel, he has never taken a day off, never deviated from schedule, and has an enviable work ethic that I have not seen in anyone. My grandmother, who was 70, died last year, and he was back to work in a week.
He is the eldest son
Born in 1940 in the small town of Gonda in North India, he was the eldest of six younger siblings. In 1966, at the age of 26, he began his medical practice after completing his MBBS.
From the beginning, he has been focused on his career and his responsibilities as the eldest son of a South Asian family. He worked in big hospitals, then opened a private practice a few years later, and he also established a Rotary Club Chapter in his city, leading it many times in the decades that followed.
The author's grandparents in the 80s.
Courtesy of the author
There has always been a deep sense of empathy in him, which has made him a very considerate doctor for those who are economically marginalized. Because he charged less, took his time to understand each patient's issue, and prescribed medicines with great care, he gained popularity in his city very soon.
After six decades, the patients who were once young men and women bring their grandchildren from different cities to be treated by him. Only two years ago, he scaled back his work, working only till lunch. So now many patients come home in an emergency. "I don't like turning them away. Helping them makes me feel elated," he told me in one of our weekly phone calls.
He doesn't want to retire
From his work, he built a home for his parents and siblings, and another for his wife and children. He paid for the education of most of his siblings and put down a significant sum when it was time for them to get married. In short, he has been responsible for every role and relationship in his life.
He has three kids, two daughters and a son. They feel as if he should take it easy. "Why don't you retire?" My mother asked him a few years ago, and he shook his head vigorously, as if the thought itself was impossible.
"There were friends who were much healthier than me. They retired early, and I have seen many of them pass away," was his response to my mom. He also feels that being in a perpetual state of rest will dull his senses. Barring a partial hearing loss in one ear and a decrease in activity level due to age, he is fit and completely Independent.
He makes time to enjoy life
He can decide if he ever wants to retire because he has built his own practice, which is a privilege. However, he hasn't denied himself the pleasures of life either. He took time off to go on vacations and spent dedicated time with his kids, parents, and wife.
From him, I am learning that having a work ethic also means having a deep respect for your own life. It is not just dedication to his work; his ethic showcases his will to live as long as he can, independently. I want to live a purposeful and robust life, helping and guiding others and being of use till it's time to go. I want to eat clean, work out every day, put in the work to nurture my ambition, spend time with my loved ones, and focus on my goals. His work ethic has also shown me how he values his time. He nourishes it, nurtures it, and uses it to build a better life for himself. An honorable relationship with time and hard work has led him here.
He wants to be a functional part of society, and it has given me a fresh perspective on how I want to live my life. It is an odd thought, but I aspire to have a work ethic just like his and not retire.
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