Social Security Favors the Rich

Sound incredible? Social Security was designed to ensure that workers would not go penniless in old age; it was also designed to be an equalizer between rich and poor, giving more generous retirement benefits to low-income people given the taxes they pay during their working years. What has changed the reality can be explained in a study by Barry Bosworth, Gary Burtless and Kan Zhang, economists at The Brookings Institute, which found that the rich live longer. They explain that life expectancy for the bottom 10 percent of male wage earners turning 66 this year has risen 0.7 of a year compared with what was expected for low-income counterparts 30 years ago. In the same period, life span rose 8.1 years for the top 10 percent of male wage earners. That corresponds to life spans of 87 years for the wealthy, and 78 years for the lower income tier group, according to the latest research by Stanford economist Raj Chetty and seven of his colleagues (published this month in the Journal of the American Medical Association). It is evident that the life span gap between rich and poor is widening; the average American man in the top one percent lives nine years longer than a person in the lowest income level. The people who die unusually young subsidize those who live unusually long lives; therefore, a person who lives years longer is getting a far better deal than people who die right after they first draw benefits. Due to different life expectancies, some groups receive more value from every dollar of payroll taxes they and their employers pay into the system. This idea of differing life spans between rich and poor is not new. The problem was identified in a 1977 paper by the Brookings Institution economist Henry J. Aaron. Additionally, research published in 2000 found that, with certain assumptions, the Social Security retirement system as a whole is regressive, or more favorable to the affluent than to the poor. The battle for answers over Social Security benefits is continuing with questions and concerns on the life span differential, health status of people near retirement age, potentially raising the maximum annual income level for benefits, and core issues about government and social justice. (From Economic View by Neil Irwin),

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