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NATIONAL
JOBS FOR ALL COALITION
UNCOMMON
SENSE 25 August
2001
SOCIAL SECURITY
AND MINORITIES
by Helen Lachs Ginsburg, Professor
of Economics Emerita, Brooklyn College of the City University
of New York, and NJFAC Executive Com., and Gertrude Schaffner
Goldberg, Prof. of Social Policy, Adelphi Univ. Sch. of Social
Work, and Chair, NJFAC
Regardless of race or ethnicity, a job at a living wage is the
mainstay of a decent standard of living for most working age Americans
and their families. However, Social Security, the nation’s
largest family protection program, is a much needed complement.
America’s most popular and successful social program, Social
Security provides a steady, reliable income for 45 million elderly
and disabled workers of all races and income levels, as well as
for many of their dependents and those of deceased workers [See
Uncommon Sense 24, "Social Security Isn’t Just
for Seniors"]
Background
Before Social Security was enacted, organized business and Republicans
bitterly opposed it. For example, Congressman John Taber (R-NY)
said, "Never before in the history of the world has any measure
been brought in here so insidiously designed as to prevent business
recovery, enslave workers and to prevent any possibility of employers
providing work for the people." But due to fear of reprisals
at the polls, most Republican opposition collapsed.
Since Social Security's enactment in 1935, conservatives have
continued to criticize it. But its popularity saved it from frontal
attacks. More typical have been attempts to weaken support among
Social Security’s varied constituencies, including youth
and minorities. Other attacks try to generate support for changes
that will actually weaken the system but claim to strengthen it.
A prime example is the drive toward privatization.
One criticism of Social Security is that it is unfair to African-Americans
and other minorities, which implies that it is not an important
program for them. Nothing could be further from the truth.
Social Security: Essential for Minorities
Social Security is essential for minorities: minorities rely
on it for more of their retirement income than whites; Social
Security reduces minority poverty; the progressive formula used
to calculate Social Security payments is beneficial for minorities
(and other low earners); Social Security Survivors' and Disability
Insurance is especially important to them. And, with the minority
population of the United States increasing at a faster rate than
the white population, a growing proportion of people will rely
heavily on Social Security in the future.
Minorities Rely on Social Security for More of Their Retirement
Income
Social Security benefits are important to most retirees, all
the more so since pension coverage has declined for all workers.
But Social Security payments are especially important to minorities,
who are more likely than others to have little or no other retirement
income.
Among private sector workers 21 to 61 years old, about one in
three African-Americans and one in four Hispanics had pension
coverage in 1993 (latest reliable date), compared to nearly half
(45 percent) of whites. This gap follows them into retirement.
Proportionately fewer elderly minorities than whites receive any
pension income. Minorities, whose average earnings are
considerably less than those of whites, also have far less wealth.
Thus, they are less likely than others to have income from savings,
stocks and bonds, and other income-generating assets. As a consequence,
Social Security is a much more important source of their retirement
income. In 1996, almost half of minorities collecting Social Security
relied on it for more than half of their income compared to one
in three whites. And one in three African-American and Hispanic
beneficiaries but only one in six whites relied on Social Security
for all of their income.
Social Security Reduces Minority Poverty
Blacks, on average, earn less and suffer from more unemployment
during their working years than do whites. Social Security payments
are related to a worker’s covered earnings and years of employment
and are likely to be negatively affected by fewer years of employment.
African-Americans, as pointed out, also have less income from
pensions and assets. Thus, poverty is more widespread among older
African-Americans. In the late 1990s, nearly one in four African-Americans
65 and older was poor (using the official poverty standard) compared
to less than one in ten of their white counterparts. Without it,
around 60 percent of elderly African-Americans and Hispanics would
have been poor, compared to slightly less than half of the white
elderly.
Progressive Social Security Formula Benefits Minorities
Social Security payments are based on a progressive formula
that considers a worker’s prior earnings. That is, low-wage
workers receive a higher proportion of their past earnings than
do average or high-wage workers, although the latter receive larger
Social Security checks. Since minorities have lower average earnings,
they benefit from the progressive formula even as they end up
with smaller average monthly payments than whites. The discrepancy
is due to inequality in the labor market, but Social Security
partially offsets it. However, the payroll tax that finances Social
Security is regressive. Because Social Security taxes are not
paid on wage and salary income above $80,400 and minorities tend
to earn less than whites, they are more likely than whites to
pay Social Security taxes on all of their wage and salary earnings.
The Earned Income Tax Credit was designed to take the sting
out of the regressive payroll tax for families with children,
but that is not sufficient. Social Security financing could be
made more progressive in a variety of ways that deserve wider
public debate. For example, taxing all of a person’s earned
income, as is the case for Medicare, is one way; another would
be to make the payroll tax more progressive by introducing graduated
rates—that is, lower rates for low-wage than for middle-
and high-wage workers. Alternatively, part of Social Security
could be financed from general revenues, which come from taxes
on all types of income, including interest, dividends, and capital
gains, not just on wage and salary income. Indeed, the architects
of Social Security in the 1930s thought that general revenues
would eventually be needed to finance part of Social Security
benefits. In any case, the current limitations of the payroll
tax, which Congress could remedy, should not be used as a criticism
of Social Security itself.
Social Security Survivors’ and Disability Insurance
Essential
In the United States, African-Americans do not live as long
as whites. Better education, health care, working conditions,
and other progress have decreased this well-known difference in
life expectancy in the past half century. But, for reasons including
higher infant mortality, persistent poverty, discrimination, more
dangerous jobs, and less access to medical care, a significant
0gap remains.
Those who claim that Social Security does not benefit African-Americans
often point to this lower life expectancy. A smaller proportion
reach retirement age, and those who do will, on average, not collect
benefits as long as whites. But poorer health during working years
and more premature deaths mean that disability and survivors'
benefits are more important to them. And progressive benefits
more than offset the difference in longevity, so that the claim
of some conservatives that minority men earn a negative return
on their Social Security taxes is wrong. [The Actuary,
Sept. 1998]
A larger percentage of disadvantaged minority groups depend
on disability benefits than do whites because low-income workers
have much higher rates of disability. Thus, about half of African-American
and other minority beneficiaries receive retirement benefits (which
include worker, spouse, and children’s benefits), compared
to nearly three out of four white beneficiaries. Minority beneficiaries,
however, are much more likely to get disability and survivors’
benefits than whites. One out of four African-Americans but only
out of eight white Social Security beneficiaries collect them.
One out of four benefits awarded to surviving children goes to
African-Americans even though they make up only 15 percent of
the population of children under 18 years old.
Toward the Future…
The gaps in life expectancy, disability rates, wages, and unemployment
should be reduced and then eliminated as quickly as possible through
appropriate government policies such as: universal health care,
decent housing for all, safer workplaces, anti-discrimination
and affirmative action; more funding for education of disadvantaged
groups; and jobs for all at living wages. These policies would
help, as would rolling back the Social Security retirement age,
which is gradually rising to 67 by 2022.
Privatizing and weakening Social Security’s basic protection
in other ways will not help but will worsen the situation by jeopardizing
the income that is so necessary for minorities. For example, according
to a recent study by National Urban League, the private account
of a typical black man who dies in his 30's would cover only 2%
of survivors' benefits under current law. As Urban League's Maya
Rockeymoor, Senior Resident Scholar, put it:
… Social Security is more than a retirement
program—it is an insurance program that takes care of vulnerable
families at all stages of life. Funding private retirement accounts
by diverting money away from the current system would increase
retirement insecurity and undermine the viability of the survivor
and disability components of the social Security system—the
very programs upon which African-Americans and their children
heavily rely.
With minorities becoming a larger proportion of the U.S. population,
more of the population will rely on Social Security in the future.
Thus, the system needs strengthening to help low-wage workers,
who are disproportionately minorities. And policies such as full
employment at decent wages are fundamental to improvements in
Social Security benefits. Such a policy would raise the earnings
of low-wage workers and increase their future Social Security
benefits at the same time that it would add more money to the
Social Security Trust Funds. Nonetheless, it is important to raise
the special minimum benefits paid to lifetime, low-wage workers
and to strengthen Social Security in other ways that are especially
important to minority workers and their families.
Note: The data are from Alexa A. Hendley and
Natasha Bilimoria, "Minorities and Social Security: An Analysis
of Racial and Ethnic Differences in the Current Program,"
Social Security Bulletin 62, 2 (1999): 59-64.
Editor: June Zaccone, Economics (Emer.), Hofstra
University
©National Jobs for All Coalition 2001
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