How do social security expenditures vary by state? The surprising impact of unemployment

Abstract

AbstractWe examine state-level variation in the flow of benefits under the largest Social Security programme – the Old-Age (OA) programme. OA pensions remain a robust and growing component of the American social safety net. Although OA pensions are entirely administered by the federal government, state-level demographic features can imply different aggregate levels of programme expenditures across states. We describe high levels of variation in the resources flowing into states from the OA programme and we find relationships between state features that might seem only remotely related to income support for the elderly: current unemployment rates, previous income levels, poverty rates and minority populations. We find a particularly strong link between current unemployment rates, OA coverage and OA average benefits. The number of recipients and the level of average OA payments increase when unemployment increases. This is a poorly understood but important feature of the OA programme.