Social Security Is Our Best Hope To Protect Worker Security–Let’s Expand It, Not Cut It.
On this Labor Day, let’s talk about how Social Security protects workers’ old age security and how we can keep Social Security robust and delivering for all of us.
Social Security turned 87 this year, and despite persistent challenges and threats, the program is holding strong because of its efficiency, political support, flexibility, and its positive effect on economic stability.
Dating back to the Great Depression, the program remains one of America’s enduring protections against elderly poverty and deprivation. But it is hardly enough for millions of retired workers and their dependents to survive on, and it is under attack.
Finances need serious shoring up. As of now, Social Security won’t be able to pay full benefits by 2035, at which point beneficiaries will face projected benefit cuts of 25%. There are chronic political threats: some politicians and advocates want to privatize the program and cut benefits. Nancy Altman — expert member of the Social Security Advisory Council — warns us about backroom conversations among Republicans to trim Social Security if they have political power. Ironically, in spite of its success, Social Security is unstable.
But if we act now to raise revenues — and there are many sound ideas to do that — we can prevent these harmful cuts to the elderly.
What’s good about Social Security?
- Social Security is the single best anti-poverty program we have in America, lifting more than 18 million people over age 65—and over a million children—out of poverty each year.
- Nearly two-thirds of beneficiaries aged 65 or older receive at least half of their total income from Social Security. For one-third of elderly beneficiaries, Social Security provides 90% or more of their income.
- Social Security is indexed to inflation, a blessing in times like these. Although seniors have many financial challenges, those living on Social Security are at least better protected against price hikes. During financial crises, the system keeps delivering income to people in need. While others lose their jobs and value in their 401(k)s, Social Security keeps the checks coming. This helps everyone — not just beneficiaries but also their neighbors as communities with Social Security recipients are kept economically stable.
- Social Security reduces retirement wealth inequality and helps offset the unequal distribution of retirement wealth generated by a broken employer-based retirement system. (Though benefits keep many retirees out of poverty, American workers still face a retirement income crisis.)
- Social Security benefits are progressive, providing economic protection to people with fewer resources. People with higher earnings get larger benefits, but Social Security represents a greater proportion of a worker’s previous earnings for those at lower earnings levels. A low-wage earner’s benefits will replace about half their prior earnings, while the high wage earner’s benefits only replace about 30 percent of their prior earnings. A very low earner will get almost 80% of their pre-retirement earnings in Social Security. While this does not prevent systemic poverty and inequality, the program provides vital economic stability for many who would otherwise lack it.
What’s not great about the current program?
- Benefits remain low, many elderly Americans are still poor and the rate is shamefully rising!
- Social Security is not an adequate substitute for pensions, and is not designed to provide full retirement or economic security.
- The program is perpetually under attack by lawmakers and ideologues who seek to cut and privatize Social Security.
How do we fix what’s wrong?
Rather than cut or privatize, we must increase benefits to make the program more of a true economic stabilizer for all.
- We could enact a rather mild proposal to help workers boost their own Social Security benefits by making catch-up contributions — essentially allowing workers to buy extra benefits. Starting at age 50, workers would contribute an additional 3.1% of salary. Come retirement time, the typical worker would receive additional benefits of $226 a month.
- To strengthen Social Security’s financial footing, we could do a myriad of other things to raise revenues:
- Schedule an increase in the payroll tax (known as FICA) for Social Security in the future.
- Tax higher earners more by raising the Social Security earnings cap.
- Tax capital income.
Two things we definitely should not do
- Raising the retirement age would do more harm and scarcely any good. Not everyone is living healthier and longer. Longevity gains barely rose in the past couple of decades for the bottom half of the income distribution, while the greatest gains in life expectancy have been enjoyed by the highest-income groups. There are also wide gaps in who gets retirement time and who doesn’t. Raising the retirement age will maintain and potentially exacerbate these inequalities, and leaves all workers with two bad choices: working longer or living on reduced monthly benefits. This especially penalizes Black and low-wage workers because they are unlikely to live long enough to recoup payments foregone as a result of delayed claiming.
- Cutting Social Security will only expand and worsen elder poverty in America, forcing many to work longer. As I’ve noted, working longer doesn’t work for everyone, and many elderly Americans are barely getting by on their current benefits and savings.
Social Security provides insurance against the risk of outliving one’s wealth — valuable to low and high earners alike. While we collect the benefits in our older years, Social Security is fundamentally a pro-worker program that helps create more stable and productive workplaces. It also provides an essential bulwark against elder poverty, promoting greater equity and longevity. As America’s elderly population grows and millions of older Americans are either poor or precarious, now is the time to expand rather than contract this life-saving, essential program of social insurance.
Christopher D. Cook and Eva Conway contributed substantially to this article. At the New School’s Schwartz Center for Economic Policy Analysis, we work together to explain the politics and economics of Social Security.
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