Social Security Privatization and African Americans

Abstract

Social Security (SS) was formulated on a pay-as-you-go basis. Thus, current workers’ contributions fund retired workers’ benefits. As baby boomers begin to retire, the contribution-to-benefit ratio would decline significantly. In response, some advocates of reform have been proposing privatization of the SS system. Specifically, for African Americans whose retirement incomes are highly dependent on SS incomes, the question of how to fix the system is of paramount concern. To this end, this study investigates the potential implications of SS privatization with respect to African Americans and the majority population. Using data from various sources, particularly the U.S. Bureau of Census Current Population Survey and the Survey of Consumer Finances, this study concludes via a descriptive case study approach that the benefits of the current SS program outweigh the costs. In contrast, the costs of SS privatization far exceed the benefits in the case of African Americans compared with the majority population