New priorities are needed when we say ‘save’ Social Security | David W. Rasmussen
Saving Social Security is a misnomer. The institution is secure, the threat is a 20% cut in benefits about 2035. “Saving” it usually means increasing taxes to maintain the current level of benefits for all recipients.
Sources of income to households 65 and older indicate that as many as one-third of these households are financially insecure: they rely heavily on Social Security, have almost no earnings, and very little retirement income.
Just sustaining the current system, however, will result in more economic hardship among future retirees with low life-time earnings in the fast growing service sector, modest if any savings, and no participation in a retirement plan. These households do not have home equity to supplement their income: about 25% of older households are not homeowners.
Working longer, saving more, and home ownership to prepare for retirement are reserved for households that enjoyed higher earnings throughout their working lives. Benefits must rise for workers with low lifetime earnings to prevent rising poverty and financial distress among Social Security recipients.
Congressional initiatives to improve life in retirement have not focused on workers with a lifetime in low wage jobs. A Senate bipartisan proposal, the Enhancing American Retirement Now Act (EARN Act) aims to help people save more to support upward mobility and old age security. This laudable goal, however, does not help long-term low earners whose immediate needs preclude saving.
Substantial reform of Social Security is the goal of progressives who have joined together in the Expand Social Security Caucus which is co-chaired by Senators Ellen Warren and Bernie Sanders.
The Social Security Expansion Act is right on target with a proposal to increase minimum benefits for workers with a career of low-wage jobs. The Act also proposes to Increase benefits by $2,400 a year for all beneficiaries, increasing program costs by helping many beneficiaries who are not financially insecure. Increasing social security benefits across the board may reduce the incentive of future retirees to save, thereby undermining the intentions of the EARN Act.
A healthy Social Security program requires a productive work force that can support current beneficiaries and save enough to comfortably retire. Increasing employment in low-wage service jobs undermines the system. So does under-investment in the education in youth born in poor households, particularly those of single parents that have fewer parenting resources to provide for their children. How to invest in these children is a contentious issue.
Increasing benefits to retiring workers with a long history of low paid labor could have widespread support: these individuals spent a lifetime playing by the rules and deserve to end life with dignity.
David W. Rasmussen served as dean of the College of Social Sciences and Public Policy from 2003 to 2016 and is Professor Emeritus of Economics, Florida State University.
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This article originally appeared on Tallahassee Democrat: New priorities are needed when we say ‘save’ Social Security | Opinion
