Partial Privatization of Social Security: Assessing Its Effect on Women, Minorities, and Lower-Income Workers

Abstract

This article explains why partial privatization of Social Security is likely to have an adverse impact on three specific subpopulations: women, minorities, and lower-income workers. It begins by explaining how partial privatization differs fundamentally from the current system. It then explains why shifting investment risk to workers, the fundamental indispensable difference between the current system and a partially privatized system, would likely have an adverse impact on the three subpopulations. It then explains how distribution of benefits to the three subpopulations would be impacted by partial privatization's interaction with the four factors that are most relevant in determining how the current system redistributes income. Those four factors are (1) the method by which benefits are paid out; (2) the progressive benefit formula; (3) disability benefits; and (4) auxiliary benefits.