Minorities and Social Security: an analysis of racial and ethnic differences in the current program.

Executive Summary In recent articles, some commentators have criticized the Social Security system as being unfair to minorities. This criticism has generated discussions about how minority groups fare under the current Social Security system and how they might be affected as the system undergoes changes in the future. To understand the policy implications of any changes for these groups, it is important to understand the current system. This paper addresses how minorities fare under the current system and sets the stage for a later discussion on how various changes to the Social Security system may affect them. The Social Security program is race-neutral. That is, people in identical economic and family situations are treated identically. Rarely, however, are individuals in identical situations; minority 2 groups, on average, have different earnings and life expectancies than whites, which affect the benefits that minorities receive under the Social Security system. They also have less retirement income from other sources, on average, than whites. This paper shows that: · Social Security plays a larger role in retirement income for minorities than for whites because minorities have fewer other resources such as pensions and assets. · Several aspects of the Social Security system work to the advantage of minority groups. For example, minorities who tend to have lower earnings (blacks and Hispanics) benefit from the progressive benefit formula, and those with shorter life expectancies (blacks) benefit from the disability and survivors benefits. · Minorities will become a greater percentage of the U.S. population. Minorities are expected to increase from 25 percent of the population in 1990 to 47 percent in 2050, with most of that growth due to an increase in the Hispanic, Asian, and black populations. Social Security is the nation’s largest family protection program. Because Social Security spreads risk among almost the entire population and provides nearly universal coverage, relatively few older individuals are forced into situations where they are wholly dependent on family members for retirement income support. The importance of Social Security for minorities in retirement can be demonstrated in a couple of ways. First, minorities rely on This report addresses how individuals from various racial and ethnic groups fare under the current Social Security system. It examines the relative importance of Social Security for these individuals and how several aspects of the system affect them. and Alicia Cackley for their assistance and comments on this paper and earlier drafts.