While some lawmakers are zeroing in on unions in their efforts to reduce government spending, many economists are recommending another target to relieve budget pressures: the retirement age. They advocate raising it to keep workers on the job longer, which would increase tax revenues and lower expenditures for government pensions and Social Security benefits.

But other economists disagree. They say if older workers stay on the job longer, it reduces opportunities for young workers with new job skills.

NPRs senior business editor Marilyn Geewax joins us to parse out the conflicting views.

Good to see you, Marilyn.

MARILYN GEEWAX: Hi, Lynn. Good to be here.

NEARY: So why do some economists say that lawmakers should raise the retirement age?

GEEWAX: Its just simple demographics. The U.S. population is aging, and that means there are going to be fewer active workers paying taxes, and more retirees collecting benefits. You know, the early eligibility age for Social Security benefits is 62 right now. And the conservative American Enterprise Institute did a study that showed that if you just raised that to 65, the system would be in a lot better financial shape. And in fact, the whole U.S. economy would get a boost from having people work and pay taxes longer.

In an age when there are fewer and fewer jobs that require a whole lot of physical strength, it makes sense to move the retirement age up - at least, according to this argument.

NEARY: Sounds like a pretty compelling argument. Why not do it?

GEEWAX: Because if you're going to retire later, then you have to have a job in the first place. And the thing is, many older workers just don't. Since this recession began, the unemployment rate among people over 55 has been at the highest levels we've seen in 60 years.

Heres what happened: When companies started laying off workers in those massive waves of layoffs in 2008, 2009, a lot of baby boomers lost their jobs, and they just haven't been able to find their way back into the workforce. So a lot of them decided to file for those early Social Security benefits that they could get at 62. And in 2007, before the recession hit, 38 percent of 62-year-olds asked for those benefits. In 2009, the figure was up to 42 percent.

They started taking those benefits because they just didnt have a choice. Jobs werent available to them.

So some economists say that raising the retirement age would not keep people working and paying taxes longer. It would just increase the level of poverty among people in their mid 60s, people who could neither find jobs nor would be able to collect their early Social Security benefits.

NEARY: Well, that would be really difficult for a lot of people. But it would help relieve budget pressures by reducing benefit payouts, right?

GEEWAX: Well, thats actually another point of disagreement. When you balance a budget, you need tax revenues on one side to equal the spending outlays on the other side. So some economists say that if you're raising the retirement age, yes, you would reduce government outlays. But in the long run, you might make it harder to balance that budget by depressing tax revenues.

NEARY: How would it hurt tax revenues?

GEEWAX: Well, to boost tax revenues, what you really want are corporations paying lots of taxes on their really big profits. You want workers to have big incomes. And to do that, you need very productive, technologically advanced, innovative companies. And you look at the huge incomes and the profits that a company like Google has generated over the past decade or so - thats what you want if you want to boost tax revenues.

To create those kinds of super-fast-growing companies, you probably dont actually need a need large numbers of workers who were in school 40 or 50 years ago. In fact, a lot of corporations try to become more profitable by offering their older, higher-paid workers incentives to retire early. They want to lower their payroll expenses while creating opportunities for young workers - who also have high rates of unemployment, but they have fresher job skills.

My point is that in this issue of balancing budgets, it's really very tricky. Right now, most lawmakers are focused on holding down government costs. But a lot of economists say they should also be worrying about how to boost tax revenues over the long haul by having companies with lean, innovative staffs.

NEARY: NPR senior business editor Marilyn Geewax. Thanks very much, Marilyn.

GEEWAX: You're welcome, Lynn.

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