Today’s Social Security lie: It’s bad for black workers
One of the hoariest misrepresentations in the anti-Social Security arsenal reappeared over the weekend, in the hands of Cato Institute tax analyst Daniel J. Mitchell. The claim is that Social Security hurts black workers.
Mitchell’s piece was published by Townhall.com under the headline “Government-Run Social Security Is Bad News for Blacks and Other Minorities.” Since the evidence is strong that Social Security has helped keep millions of black families -- among millions of other Americans -- out of poverty, it’s worthwhile to examine where Mitchell goes wrong. It’s also proper to point out that Mitchell doesn’t actually offer any remedies for what he sees as this systematic flaw -- beyond the old hobbyhorse of privatizing Social Security, which is certain to impoverish even more low-income families while providing a healthy new income stream for Wall Street.
Mitchell’s raw material is a recent study from the Urban Institute suggesting that on a multi-generational basis -- that is, taking into account how families with certain characteristics have done over many decades -- blacks and Hispanics have gotten less from Social Security than whites.
The paper interprets this as meaning that the program redistributes wealth from blacks and Hispanics to whites. That’s the ball Mitchell runs with. But things aren’t that simple.
The institute’s paper does say that minorities don’t do as well as whites from Social Security, but it attributes that to fundamental demographic and economic differences that have more to do with society than with the program. Black workers are more likely to be short-lived and less likely to marry than whites, which reduces the value of retirement benefits paid out over time, as are Social Security’s, and to spouses and ex-spouses. Hispanic immigrants have fewer years of earnings covered by the program, on average -- some lack the minimum 10 years of earnings required to collect benefits.
What the Urban Institute also says -- but Cato’s Mitchell skates over -- is that blacks benefit more than other racial groups from Social Security’s disability and dependent components. The disability difference alone “significantly narrows the gap between black workers and white workers,” the paper says. So too do survivor benefits, since since black males have shorter lifespans on average than white males.
The fact is that Social Security benefits are highly progressive; the overall formula is advantageous to low-income recipients by awarding them in retirement a higher percentage of their lifetime earnings. Since black workers on average earn less than whites, they’re winners in that respect.
The notion that Social Security “hurts” black families is so old it was conclusively debunked in 1973 by Henry Aaron of the Brookings Institution. Aaron and his colleagues found that the average rate of return on payroll taxes was higher overall for blacks than whites because of the formers’ generally lower earnings. But they also found that it’s lower for blacks than whites at the same income level, because black workers have lower life expectancies.
Longevity and other factors that affect black workers “offset, but do not eliminate, the progressivity of the social security benefit formula,” Aaron found. “Social Security has provided relatively larger lifetime wealth increments to cohorts with low earnings.”
The oddest thing about Mitchell’s argument -- indeed, the argument of all those who would try to suggest that Social Security is a bad deal for blacks and other low-income workers -- is that it misses the glaringly obvious point.
To the extent black and Hispanic workers get less from Social Security than they deserve, it’s because they’re trapped at the disadvantaged end of the income and employment spectrum. That’s a social and economic issue, not a Social Security issue. Black workers would do better from the program (and not only from the program) if they earned better pay and had access to better jobs -- and if they had better health, leading to longer, more productive lives.
If Cato has a program to achieve any of those goals, I haven’t seen it. Cato is against extending unemployment insurance, which helps to keep people looking for work. It’s against increasing the minimum wage. It’s against the Affordable Care Act, even though black and Hispanic Americans are overrepresented among the uninsured and thus lack equal access to healthcare. It’s in favor of raising the retirement age, which wouldn’t do much for workers who already lose out from the current retirement age.
Mitchell’s big nostrum is privatizing Social Security, but the costs of that change would hammer low-income black families mercilessly. A low-wage worker with a shorter life span would be left helplessly in the dust by the economics of a privatized plan, which delivers its greatest benefits to higher-wage and longer-lived workers.
Put it all together, and the conclusion is inescapable: Cato analysts like Daniel Mitchell just don’t like Social Security. To their credit, they don’t hide that fact. To their shame, however, they’re not above using misleading claims about the program to divide and conquer. And trying to turn the debate into one about race is pretty close to the lowest note you can sound.
