Should Retirees Emigrate?

A blog about business and economics.
Dec. 28 2012 8:44 AM

Should Retirees Emigrate?

I heard Washington, DC's planning director remark the other day that certain sections of the city amount to a "naturally occurring retirement community" and that she wants the city to be a good place for people to age in place. I wish her good luck on that, but it seems extraordinarily unlikely to me. The great virtue of DC in particular, the DC metro area more broadly, and the Acela Corridor even more broadly is that wages are high here. The great failing of the region is that houses are extraordinarily expensive. Expensive housing is a reasonable price to pay for access to a high-wage labor market if you're an ambitious career-minded person with in-demand skills, but it's a terrible idea if you're retired.

Relatedly, Tyler Cowen says that "many old people would fare somewhat better if our economy were somewhat more like that of Mexico, namely with cheaper land and cheaper servants." This is precisely why so many old people move to Arizona which combines these Mexico-like characteristics (up to and including lots of people born in Mexico) with minor league baseball.


But it's natural to wonder if in the future there won't be more business models and life plans built around actually relocating to a foreign country. For the host country, an American retiree is in effect a way to turn US workers' payroll taxes into remittances. For the retiree, the benefit is an increase in the purchasing power of Social Security benefits. The particularly winning strategy would be to find a country that not only has cheap land and labor, but also has an underlying rate of price inflation that's below America's. A problem here is that one of elderly Americans' largest implicit financial assets is their right to Medicare benefits, a right that can't be exercised abroad. But as Dean Baker has long argued trying to move to some form of free trade in Medicare is a potential game-changer. Right now international commerce in physical goods is already extraordinarily free, but that's not the case for health care services. And America is absymal at the production of cost-effective health care services compared to a wide range of other countries. Attempting purely domestic reforms to the system is wise, but in most markets there's no good substitute for direct competition to more efficient foreign providers. That's doubly true because trade in Medicare could unlock the kind of broader moves toward retirement-as-emigration that might benefit the elderly.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



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