Social Security and Minorities: Earnings, Disability Incidence, and Mortality Are Key Factors That Influence Taxes Paid and Benefits Received Page: 2 of 76
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- GAO
SAccountability Integrity Reliability
Highlights
Highlights of GAO-03-387, a report to the
Ranking Minority Member, Subcommittee
on Social Security, Committee on Ways
and Means, House of Representatives
Why GAO Did This Study
Although Social Security's benefit
and contribution provisions are
neutral with respect to race,
ethnicity, and gender, concerns
about the experiences of minority
groups under Social Security focus
on whether they benefit less than
whites, particularly because of the
shorter life expectancy of blacks.
These concerns are related to the
concept of equity, or how benefits
compare with taxes. To gain a
thorough understanding of the
experiences of minority
populations under Social Security,
GAO was asked to examine
(1) what socioeconomic and
demographic factors influence
Social Security taxes paid and
benefits received and (2) how
different equity measures compare
across racial groups.
Because of the current system's
projected actuarial deficit, to
conduct this study, GAO made its
calculations using three policy
scenarios, each of which achieves
75-year solvency: a payroll tax
increase and a progressive and
proportional benefit cut. Further,
GAO used three measures of
equity: lifetime benefit-to-tax
ratios, net lifetime benefits, and
real internal rates of return. GAO
also examined four birth cohorts:
1931-40, 1941-45, 1946-55, and
1956-64.SOCIAL SECURITY AND MINORITIES
Earnings, Disability Incidence, and
Mortality Are Key Factors That Influence
Taxes Paid and Benefits ReceivedWhat GAO Found
Lifetime earnings, the incidence of disability, and mortality are three key
factors that influence the taxes individuals pay into the Social Security
system and the benefits they receive. Lifetime earnings factor directly into
the Social Security benefit formula, which is designed to replace a larger
proportion of pre-retirement-covered earnings for low-income earners than
for higher-income earners. Additionally, the probability of being on the
Disability Insurance rolls affects the expected value of benefits. People who
are disabled start receiving benefits earlier. The third factor, mortality,
affects the benefits received relative to taxes paid because it determines the
number of years a person will pay taxes and receive benefits.
Differences by race in the relationship between taxes paid and benefits
received under Social Security are due mainly to differences in lifetime
earnings, the incidence of disability, and mortality among the groups. In the
aggregate, blacks and Hispanics have higher disability rates and lower
lifetime earnings, and thus as a group tend to receive greater benefits
relative to taxes than whites. However, whites with low lifetime earnings or
high disability rates also receive greater benefits relative to taxes than their
higher-income or nondisabled counterparts. Higher benefits relative to taxes
paid are associated with lower lifetime earnings and higher disability
incidence.www.gao.gov/cgi-bin/getrpt?GAO-03-387.
To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Barbara D.
Bovbjerg at (202) 512-7215 or
bovbjergb @ gao.gov.United States General Accounting Office
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United States. General Accounting Office. Social Security and Minorities: Earnings, Disability Incidence, and Mortality Are Key Factors That Influence Taxes Paid and Benefits Received, report, April 23, 2003; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc295331/m1/2/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.