Old Reliable

by Russ Roberts on January 28, 2005

in Social Security

Newsflash: Paul Krugman thinks George Bush is a liar.  In today’s New York Times, in a column called "Little Black Lies," Krugman accuses Bush of both deceit and playing the race card.  Evidently, Bush suggested earlier this week that African-Americans get a bad deal from social security because they don’t live as long as whites.  Krugman calls this a lie, arguing:

First, Mr. Bush’s remarks on African-Americans perpetuate a crude
misunderstanding about what life expectancy means. It’s true that the
current life expectancy for black males at birth is only 68.8 years -
but that doesn’t mean that a black man who has worked all his life can
expect to die after collecting only a few years’ worth of Social
Security benefits. Blacks’ low life expectancy is largely due to high
death rates in childhood and young adulthood. African-American men who
make it to age 65 can expect to live, and collect benefits, for an
additional 14.6 years – not that far short of the 16.6-year figure for
white men.

Second, the formula determining Social Security
benefits is progressive: it provides more benefits, as a percentage of
earnings, to low-income workers than to high-income workers. Since
African-Americans are paid much less, on average, than whites, this
works to their advantage.

Finally, Social Security isn’t just a
retirement program; it’s also a disability insurance program. And
blacks are much more likely than whites to receive disability benefits.

Put it all together, and the deal African-Americans get from
Social Security turns out, according to various calculations, to be
either about the same as that for whites or somewhat better.

(I love that last sentence.   According to various calculations.  But he only gets so many words, so let’s give him the benefit of the doubt.)

Now I don’t really think it’s all that important whether social security is a good deal for African-Americans or any other arbitrary subset of the population.  Or whether African-Americans get a better or worse deal than whites.  In fact, one of the drawbacks of publicly funded retirement is just this kind of ugly argument—who’s profiting at whose expense?  And social security is not a racist program—it does treat race neutrally

But social security does hurt the poor when they’re young.  It forces the poor to contribute to a program they will only benefit from if they live long enough to enjoy the benefits.  And it benefits the elderly poor if they survive to receive benefits because the benefit formula pays lower wage workers more per dollar earned than higher wage workers.

Any differential impact of social security on African-Americans is due to factors that are merely correlated with being African-American—earnings patterns, marital status, life expectancy and so on.

Having said all that, is Krugman right?  Is Bush wrong?  Krugman is probably roughly right that African-Americans do fare about the same as whites.  Here‘s a Rand study that concludes:

As expected from unequal mortality rates, whites fare better than blacks
across the board.  On a per-capita basis, blacks transfer between $2,000 and
$21,000 to whites, depending on earning levels and marital status.

But that study didn’t include the effects of disability, so if that were included, it probably would be close to a wash.  Then again, Bush isn’t planning on changing the disability component.

Be Sociable, Share!

Comments

comments

3 comments    Share Share    Print    Email

Previous post:

Next post: