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So, basically, at 62, your
choice is I can get one more
year of benefits or I
get higher benefits
for one fewer years.
And that's a choice that's
a roughly fair deal.
OK.
Questions about that?
Am I making sense of that?
In Europe, it's not
a fair deal.
In Europe the way it works is
they say, you can get one more
year of benefits.
But if you decide to work this
year, we're not given you any
more in the future.
So let me describe how it works
in the Netherlands.
At age 55, the Netherlands says,
if you decide to retire
this year, we will replace 90%
of your wages in social
security payments to make sure
your income doesn't suffer
when you retire.
If you don't retire and work,
you're going to give up
sitting at home earning
90% of your wage.
That is the opportunity
cost of working.
It's that you have forgone the
ability to sit at home and get
90% of your wage.
So what is your net
wage if you work?
10% of what you would
have earned.
So if you're earning $20 an
hour, then your choice is you
can sit at home for $18 or
work for $20 an hour.
So your net wage for working
is $2 an hour.
The return to work, the
opportunity cost of leisure is
only $2 an hour.
You're only forgoing $2 an
hour by sitting at home.
But wait, there's more.
If you sit at home, you don't
have to pay the payroll taxes
of financing the system
that are almost 50%.
If you work, you have to
pay the payroll taxes.
Which means that if you
work, you lose money.
Because if you work, you forgo
getting to sit at home at 90%
of your wage, and you