Harvard Nonsense

Fortunately I don’t subscribe to useless banter.  In this case, that useless banter is the Harvard Business Review.  Since I don’t subscribe, I’m only able to read the abstract of the articles.  Even from the abstract I can show what a useless piece of junk this article is.  This was originally posted on April 27th, and discusses how retiring is now getting easier to do.  Here are some key points:

1) 85% of men between the ages of 75 and 79 were retired in 2000, up from 22% in 1850.

2) Over the past century, real wages have increased 1.5% annually.

3) The price of leisure goods has fallen 1% annually during the same time frame.

There are so many problems with these 3 points it’s hard to know where to start.  Let’s start with the time frame.  150 years?  Really?  Why don’t we go back to the cavemen while we’re at it.  Or at least the Roman Empire.  We could see what their retirement plans looked like.  Be that as it may, in 1850 the life expectancy was about 40 years old per research done at Colgate University.  And men typically have a lower life expectancy than women.  So how did 22% of men retire if most of them didn’t even live past the age of 40?  If death and retirement are considered equal, then maybe this is a valid argument.

As for real wages increasing 1.5%, this is yet another significant joke.  I’m hard-pressed to agree that nominal wages have increased that much, inflation aside. According to the Bureau of Labor Statistics, in the year 2000 the CPI stood at 172.2.  This is cumulative from a base rate of inflation in 1982-1984 where the index = 100.  In 1913 (the earliest data I could find), the index was at 9.9.  Using standard division to find the multiplier, it becomes evident that a standard “basket of goods” was 17.4 times more expensive in 2000 than in 1913.  This amounts to a 20% annual raise in order to keep pace with inflation.  So real wages grew 1.5% on top of this?  I don’t know anyone, ever, in the history of this Country (other than maybe Congress) who has received a 20% annual raise.  This also does not factor in those annoying things like oil and food, since our Government doesn’t like to include those items in its calculations.  But we’ll get to that later.

On to the leisure goods argument.  While it’s certainly possible that these prices have fallen slightly (due to technological advances, lower labor costs via outsourcing, improved materials and supply chain logistics, etc.), it’s irrelevant.  Examples of leisure goods in the article are “sports equipment” and “entertainment tickets”.  There are only so many treadmills, ellipticals, and tennis rackets a person can buy.  And they typically last a very long time.  I have a tennis racket that’s over 10 years old, and I think I used it once.  It’s in perfect condition.  Once these are purchased, future purchases are so infrequent that there’s not even enough to find data points with which to measure.  As far as entertainment tickets, the prices may also be declining overall, but they’re also irrelevant.  First of all, there is a huge difference geographically.  I happen to live near a city with an excellent professional baseball team.  You can’t even GET tickets, and if you can, they’ll be from a scalper with a minimum markup of 150%.  And most people who retire don’t necessarily want to go down to the local theater.  They want to go to Europe, Australia, and take cruises around the Cape of Good Hope.  The cost of transportation and food has been bordering on hyper inflation.  I don’t know of any cruise ships or planes that don’t use petroleum-based fuel, and I don’t know too many people who partake in entertainment that don’t eat.  It’s also quite possible the people that are going to said entertainment events will be either driving a car, or taking a bus or a train.  If they live in a major city and can walk, great, but then we have to factor in the increased taxes for living in said city.  But that’s a whole other discussion.

The data  also only goes up to 2000.  If we factored in the recent 4-year great recession, even these optimistic figures would begin to get muddled.  In conclusion, unless people are happy trading in their 5-week Australian excursion for a tennis racket, this assumption and argument that people are able to retire more easily is pretty irrelevant.

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One Comment on “Harvard Nonsense”

  1. TiredOfBeingAnOreo Says:

    I wish that the Harvard Business Review article was accurate, because then that would mean that more and more people would be retiring, and not just retiring, but would also be living on easy street, doing only leisure activities. The reality is that the only people able to retire any longer is those who have pensions – Social Security alone is not enough to cover costs today. And sure, men ages 75-79 are retired, but let’s remember, they are part of the generation, prior to baby boomers, that received pensions. It is more likely that what will happen is that adults of retirement age will move in with their kids, who are just starting to have kids themselves, and look to their children to provide for them. All of this at the same time that these same children are trying to raise the retired adults grandchildren. And leisure activities – who has time for those in today’s world? When I read the abstract, it was so off-base it was almost comical. And this is from one of the most respected providers of higher education in this country – no wonder we are failing, and that children cannot handle the real world when they first experience it.

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