While it is unclear what George Bush will propose specifically in his social security tax system overhaul, he is expected to propose allowing workers to divert a couple of percentage points of the 6.2 percent payroll tax on wages into personal investment accounts. One catch is that opening such accounts will likely require those in the new program to accept smaller regular Social Security benefits in exchange.
Young adults may find the cost-benefits attractive with their openness to stock investments. However, the baby boomers will likely balk at the idea because they are close to retirement. However, the relationship between age and acceptance of the Bush overhaul tells a limited story about the plan’s impact of America’s diverse society.
The most important factor, as I see it, is the predictable increased class gap within the United States that will accompany any social security privatization plan. Since race, ethnicity and class are intertwined, it is not surprising that the poor, disabled, Latinos, African Americans will likely suffer the most with privatization. Consider the following data from the U.S. government’s General Accounting Office 2003 study.
The calculation of Social Security benefits is designed to replace a larger proportion of the earnings of lower earners than it does for higher earners. This simply means that those in lower wage brackets will lose the benefits gained by their money being pooled with higher income earners. African Americans and the disabled tend to earn the lowest wages on the average.
Those with physical and mental challenges tend to start drawing Social Security earlier and simultaneously see their tax liability reduced. They generally receive greater benefits in relation to the taxes they pay. This will not be possible under a system in which their personal earnings serve as the base for offsetting any need to draw early. Not surprising, African Americans, Latinos and poor white Americans tend to have higher incidents of disability and lower lifetime earnings. Therefore, they tend to rely on the social security system more to manage life challenges.
Mortality rates determine the expected number of years a person will contribute taxes and receive benefits and, therefore, the amount of total benefits received. A person without a disability who dies before retirement, is expected to benefit less from the taxes placed into the present retirement system compared to an individual who lives to receive retirement benefits. An individual who dies before retirement will no longer make contributions to the Social Security program. However, they may have dependents who would benefit from the survivor portion of the program. African Americans are more likely to die before receiving a retirement benefit than their Latino or white counterparts. Put differently, African Americans who are not disabled are likely to contribute to the social security without experiencing the benefit compared to other groups.
My point is that social security is more than an effort to offer Americans a retirement cushion. It is clearly a way to collectively contribute to a fund that enables Americans to live and work productively as possible while they can. People inevitably meet misfortune from workplace hazards or other life stressors, and the social security system serves as a mechanism for assuring that they are not likely to completely fall through the cracks.
An inclusive and compassionate society cannot ignore the consequences of social security reform on the lives of those who have been historically disenfranchised. A modern business organization realizes that creating a productive workspace requires attending to worker needs from their perspective.
Hopefully, we will not treat the social security system reform discussions in a colorblind way.
