Old-Age, Survivors, And Disability Insurance Research Articles

Fixing Social Security: Major Reform or Minor Repairs?

Without congressional action, the Social Security reserve fund will be exhausted by 2035. When that occurs, benefit payments must be cut by one-fifth. To avoid that outcome, Congress must agree on a reform plan that boosts revenues, cuts pensions, or does both. The choice of a reform strategy should depend on voters’ support for the goals of the Old-Age, Survivors, and Disability Insurance (OASDI) program and evidence about the program’s effectiveness in achieving those goals. This article explains the aims of the Old-Age and Survivors Insurance (OASI) program, briefly describes how the program attempts to achieve those aims, and considers evidence on whether the goals have been achieved and at what cost. It then considers alternative reforms that address OASI’s main problem, namely, the long-term shortfall in program revenues compared with pension commitments. It concludes by identifying the reforms that seem best suited to achieving OASI’s core aims while conforming to voter preferences.

The Social Security Program and Its Funding Problems

2018 was a pivotal year for the Social Security program. It was the first year since the 1983 amendments that the Old Age, Survivors and Disability Insurance (OASDI) trust funds spent more than they took in. This will continue until they are depleted in 2034. This article examines the operation of the OASDI program with particular attention to its funding. It concludes by questioning the myth that, until 2018, the OASDI trust funds held large amounts of surpluses. There has never been any real money there. It was spent by the Treasury Department as fast as it came in. The OASDI program has always been a pay-as-you-go system. That should be recognized by anyone involved in crafting a solution to the problem.

Impact of the Financial Crisis on Long-Term Growth

This study examines the potential impact of the 2008-2009 financial crisis on economic growth. Expectations of future growth are critical to evaluating of the sustainability of overall budget trends and the financial condition of the Old-Age Survivors and Disability Insurance (OASDI) and Medicare trust funds. The paper includes an assessment of the experience of other industrial economies with similar situations in earlier decades. The Nordic countries achieved a relatively complete recovery within a period of 5-10 years, but the slump in economic growth in Japan has continued for over a quarter century. The analysis of the current experience in the United States focuses on recent changes in the supply of labor and capital and changes in the growth of total factor productivity (TFP). The large decline in the labor force participation rate is largely the result of demographic changes and not the recession. Similarly, the growth of TFP has slowed in recent years, but most studies perceive it as predating the onset of the recession.The paper finds that:-- Even though they may not be directly due to the financial crisis, expectations have been cut back in a wide range of analyses of future growth prospects.-- The recent decline in labor force participation is dominated by demographic changes that will continue in future decades. Only a small portion appears to be related to cyclical factors.-- The growth in TFP has also slowed, but the change predates the financial crisis and is also likely to continue in future years. The policy implications of the findings are:-- The economic assumptions that underlie current projections of government expenditure programs are likely to be overly optimistic, particularly because the changed expectations are not cyclical or temporary in nature.

Interest Rates and Economic Growth: Are They Related?

Each year the Board of Trustees of the Old-Age, Survivors and Disability Insurance (OASDI) Trust Funds projects the future financial status of the programs extending as far as 75-years into the future. These projections incorporate anticipated trends in both demographic and economic determinants of future costs. Particularly with regard to the economic determinants, the Trustees rely on past trends to project the future, and the projections of individual elements are largely independent of one another. This paper explores the long-term determinants of interest rates, and, in particular, the relationship between variations in interest rates and the rate of economic growth. Is there a positive correlation, as suggested by standard growth theory, or is the role of economic growth overshadowed by a larger array of domestic and foreign influences.Data from a number of large economies are used to demonstrate the influence of foreign interest rates in an increasingly globalized world capital market. A method is developed to adjust both long and short-term interest rates for expected inflation. The paper suggests that capital markets are highly integrated at the global level and that it makes little sense to model, analyze, or forecast interest rates within a closed-economy framework. Furthermore, there is only a weak relationship between real interest rates and economic growth. Given the complexity of global economic developments, it is unlikely that the OASDI projections can be improved by more formal efforts to model future interest rate changes.

Social Security Reform and the Full-Funding Concept

Social Security, more accurately the Old-Age, Survivors, and Disability Insurance (OASDI) program, is woefully underfunded as measured by the long-term actuarial balance. Its reserves, on deposit with the U.S. Treasury Department, will be depleted in 2033, notwithstanding the fact that there is no money there. The surpluses that created them following the 1983 Amendments ended in 2010. The so-called reserves have long since been spent on other government programs and obligations. Yet the fiction endures. This article examines the origins of the full-funding standard and then analyses the real funding problems of OASDI and how they are measured. If the OASDI is seen as the pay-as-you-go system that it is, its problems would be more easily managed.

Adding Employer Contributions to Health Insurance to Social Security's Earnings and Tax Base

The inclusion of employer-sponsored health insurance (ESI) in taxable income would increase income and payroll tax receipts, but would also increase Old Age, Survivors, and Disability Insurance (OASDI) benefits by adding ESI to the OASDI earnings base. This study uses the Urban Institute’s DYNASIM model to estimate the effects of including ESI premiums in taxable earnings on the level and distribution by age and income groups of income tax burdens, payroll tax burdens, and OASDI benefits. We find that the increased present value of OASDI benefits from including ESI in the wage base in 2014 offsets about 22 percent of increased income and payroll taxes, 57 percent of increased payroll taxes, and 72 percent of increased OASDI taxes. The overall distributions of taxes and benefits by income group follow the same pattern, with both taxes and benefits increasing as a share of income between the bottom and middle quintiles and then declining as a share of income for higher income taxpayers. But households in the bottom income quintiles receive a net benefit from including ESI in the tax base because their increase in OASDI benefits exceeds their increase in income and payroll taxes. Over a lifetime perspective, all earnings groups experience net tax increases, but workers in the middle of the earnings distribution experience the largest net tax increases as a share of lifetime earnings. Higher benefits offset a larger share of tax increases for lower than for higher income groups.

Changes in Firm Pension Policy: Trends Away from Traditional Defined Benefit Plans

In light of the recent concerns regarding the solvency of Social Security’s Old-Age, Survivors and Disability Insurance (OASDI), private pensions may play an increasingly important role in retirement welfare of US retirees. However, the private pension landscape has evolved in ways that may result in lower private pension wealth for retirees. One recent such phenomenon involves the conversion of traditional defined benefit pension plans to cash balance plans, which results in lower pension benefits for many workers. In this study, I investigated how characteristics of the firm’s workforce influenced whether the firm converted their traditional pension plan to a cash balance plan and how these characteristics related to the firm’s pension plan policy more generally. Using the Longitudinal Employer-Household Data and pension plan data from the Department of Labor/Internal Revenue Service and the Pension Benefit Guaranty Corporation, I found little evidence of workforce age distribution effects on the likelihood of DB plan conversion to a cash balance plan in the 1990s. More generally, I consistently found positive associations between firms with older and more female workforces and defined contribution plans during the same time.

Changes in Firm Pension Policy: Trends Away from Traditional Defined Benefit Plans

In light of the recent concerns regarding the solvency of Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI), private pensions may play an increasingly important role in the retirement welfare of U.S. retirees. However, the private pension landscape is also evolving in ways that may result in lower private pension wealth for retirees. One recent such phenomenon involves the conversion of traditional defined benefit (DB) pension plans to cash balance plans, resulting in lower pension benefits for workers. In this study, I investigated how characteristics of the firm’s workforce influence whether the firm converted its traditional pension plan to a cash balance plan and how these characteristics related to the firm’s pension plan policy more generally. Using the Longitudinal Employer-Household Data and pension plan data from the Department of Labor/Internal Revenue Service and the Pension Benefit Guaranty Corporation, I found little evidence of workforce age distribution effects on the likelihood of DB plan conversion to a cash balance plan in the 1990s. More generally, I consistently found positive associations between firms with older and female workforces and having defined contribution plans during the same time.

Changes in Firm Pension Policy: Trends Away from Traditional Defined Benefit Plans

In light of the recent concerns regarding the solvency of Social Security’s Old-Age, Survivors and Disability Insurance (OASDI), private pensions may play an increasingly important role in retirement welfare of US retirees. However, the private pension landscape has evolved in ways that may result in lower private pension wealth for retirees. One recent such phenomenon involves the conversion of traditional defined benefit pension plans to cash balance plans, which resulted in lower pension benefits for many workers. In this study, I investigate how characteristics of the firm’s workforce influenced whether the firm converted their traditional pension plan to a cash balance plan and how these characteristics related to the firm’s pension plan policy more generally. Using the Longitudinal Employer-Household Data and pension plan data from the Department of Labor/Internal Revenue Service and the Pension Benefit Guaranty Corporation, I found little evidence of workforce age distribution effects on the likelihood of DB plan conversion to a cash balance plan in the 1990s. More generally, I consistently find positive associations between firms with older and more female workforces and defined contribution plans during the same time.

The Relationship Between the Supplemental Security Income and the Old-Age, Survivors, and Disability Insurance Programs During the 1990s

The purpose of this paper is to discuss the relationships between the Supplemental Security Income (SSI) program and the Old-Age, Survivors, and Disability Insurance (OASDI) programs during the 1990s. The focus is on the persons concurrently receiving benefits from both programs, but analyzed from the alternative perspectives of the SSI and OASDI programs separately. Longitudinal sample data drawn from Social Security Administration administrative records are used to perform the analysis. Fourteen tables and eight figures present the data stratified in various ways by gender, age, and program involvement. An analysis of observed trends is presented, along with some suggestions for needed future research.

Money's worth in social security benefits: Black-white differences

In the wake of public debate about reforming social security, Democratic Party leaders, union leaders, and black leaders defend the current social security program because it is designed to provide disproportionately large monthly benefits to low-wage earners relative to their lifetime average monthly earnings. Despite the progressive benefit formula used by the program, an important question remains: Do black workers receive disproportionately larger benefits during their lifetimes in relation to their lifetime contributions, as well as disproportionately larger monthly benefits? This article presents findings from a study that shows that when the lifetime perspective is taken, black workers receive less money's worth in social security benefits than white workers. Implications for policies are discussed. Key words: benefits; black workers; contributions social security; white workers The United States is facing a dual agenda regarding social security. On the one hand, maintaining the program's financial solvency beyond year 2037 requires some form of structural reform as the Board of Trustees (2000) of the Old-Age, Survivors, and Disability Insurance (OASDI) Trust Funds warned. On the other hand, policymakers who are concerned about black and other minority group workers need to assess how the current system is working for them. If the system is working well for them, it should be maintained with minimal alterations. If it is not, it needs to be reformed more radically. Such a critical assessment of money's worth in social security benefits is needed because it is generally believed that the current program serves people of color well. In particular, liberal politicians and leaders of black communities tend to defend the current system on the basis of the benefit formula, which is slanted in favor of low-wage earners. Because black workers' earnings tend to be lower than those of white workers, this view is correct--but only partially. The missing variable is the shorter average life expectancy of black workers than white workers. If black workers receive social security benefits for fewer years than white workers, the apparent progressiveness in the benefit formula may be offset to a considerable degree. Indeed, an assessment of the social security benefits that black people are expected to receive during their lifetimes and of the relationship between their lifetime contributions and lifetime benefits is an important prerequisite to making an informed judgment about whether the social security system should be reformed and, if so, in what way. This article addresses the central question: Do black workers, who tend to earn lower wages than white workers, receive disproportionately larger benefits than white workers on the basis of lifetime benefits, as well as on the basis of monthly benefits? This question is critical because the life expectancy of black workers is shorter than that of white workers. Thus, the aim of our study, the findings of which are presented in this article, was to evaluate the degree of money's worth that black and white workers receive for their lifetime contributions. In particular, the study investigated the mean ratio of the present value of lifetime benefits to the present value of lifetime contributions of black and white workers. It also compared the mean ratio of monthly benefits to the average indexed monthly earnings of black and white workers. METHOD OF CALCULATING SOCIAL SECURITY BENEFITS All social security benefits are based on the primary insurance amount (PIA), which is derived in two steps. First, the worker's average indexed monthly earnings (AIME) are calculated by indexing the taxable earnings for each year from 1951 onward to the average wage level in the second year before age 62, disability, or death; summing indexed earnings (and unindexed earnings in the years after age 60); and dividing the sum by the number of months elapsed after 1950 (or age 21, if later) through age 61 (or the year before the year of disability or death). …

2½ Proposals to Save Social Security*

This is a review article of three books that deal with the problems facing the U.S. Social Security system. One deals with the OASDI (Old‐Age, Survivors and Disability Insurance) financial shortfall and proposes an alternative plan with both a tier one benefit and a tier two provision based on personal saving accounts. A second considers the social insurance system more comprehensively, arguing for a grand reform that would include new programs, particularly in the areas of child care and housing. A third largely confines itself to arguing against those who wish to change the OASDI plan because of the financial projections, although it also argues for a more comprehensive health care insurance system. The review concludes that key differences expressed in the books, particularly between the first and third, rest on different value judgments regarding intergenerational equity and the role of government.

Including Homemakers in Social Security

For some time, many people have felt that homemaking and/or childcare duties should be classified as “work,” and as such, these people should be included in social security systems. This paper analyzes the current provision for homemakers in the Canada and Québec Pension Plans (C/QPP), along with three other methods aimed at improving C/QPP benefits for homemakers. It concludes that splitting incomes between married couples on a voluntary basis has several desirable characteristics. However, due to a reduction in income taxes payable, the Canadian government(s) would likely reject this approach. To analyze further alternatives, the paper also reviews a study presented by the U.S. Subcommittee on Social Security that looked at various earnings sharing schemes within the Old Age, Survivors and Disability Insurance (OASDI) scheme. Due to the complexity of OASDI, it would not be possible to modify benefits for homemakers without affecting other groups (such as divorced persons and widow(er)s). As such, the subcommittee had several standards for analyzing any potential modifications to OASDI. However, none of the plans presented ccomplished all of the goals set out by the subcommittee. In addition, there would be vast administrative difficulties associated with implementing any of the earnings sharing schemes. Even if these problems could be overcome, the two national security systems are very different, so proposed solutions under the U.S. system might not be appropriate to the Canadian system.

Social Security

The evidence is growing that a positive correlation exists between income levels and longevity. In short, high-income earners live longer. That also means that high-income earners get larger retirement-income security benefits from social security. This correlation raises the following questions: • If social security contributions are a level percentage of earnings and high-income earners live longer and receive larger social security benefits, then is social security regressive? • If higher income actually causes enhanced longevity, then would providing more social security benefits enhance population life expectancy? This paper analyzes both the Old-Age, Survivors, and Disability Insurance (OASDI) system of the U.S. and the Canada/Quebec Pension Plans (C/QPP) in Canada to determine whether these systems are “a good deal” and whether they are regressive or progressive as defined above.

Disparity in Present Value Net Social Security Wealth

(1994). Disparity in Present Value Net Social Security Wealth. The Black Scholar: Vol. 24, Blacks & Social Policy, pp. 19-29.

What benefits will self-employed doctors receive under social security?

After many years of debate, a bill has been passed extending compulsory coverage under old-age, survivors, and disability insurance (OASDI), as well as a new program of hospital insurance (HI), to self-employed physicians. It is not the purpose of this report to argue the merits of such compulsory coverage. Rather, it is to point out the effects of coverage and the protection that is provided, and particularly to illustrate the benefits that accrue to the older doctors brought under the program. These advantages derive from liberalizations contained in the 1960 and 1961 amendments to the Social Security Act, as well as in the current amendments. This presentation is concerned only with male self-employed physicians and does not encompass the effect of any coverage secured through work as an employee. It is also assumed that annual earnings are at least equal to the maximum taxable earnings, $6,600 beginning in 1966 ($4,800

What Benefits Will Self-Employed Doctors Receive Under Social Security?

After many years of debate, a bill has been passed extending compulsory coverage under old-age, survivors, and disability insurance (OASDI), as well as a new program of hospital insurance (HI), to self-employed physicians. It is not the purpose of this report to argue the merits of such compulsory coverage. Rather, it is to point out the effects of coverage and the protection that is provided, and particularly to illustrate the benefits that accrue to the older doctors brought under the program. These advantages derive from liberalizations contained in the 1960 and 1961 amendments to the Social Security Act, as well as in the current amendments. This presentation is concerned only with male self-employed physicians and does not encompass the effect of any coverage secured through work as an employee. It is also assumed that annual earnings are at least equal to the maximum taxable earnings, $6,600 beginning in 1966 ($4,800

Some observations on financial assets of the aged and For and-type legislation.

The famous British economist, Alfred Marshall, wrote many years ago: Experience in controversies... brings out the impossibility of learning anything from facts till they are examined and interpreted by reason; and teaches that the most reckless and treacherous of all theorists is he who professes to let facts and figures speak for themselves.... 1 The wisdom of this observation is forcefully brought home by an examination of the literature surrounding the report of the Department of Health, Education, and Welfare to the Committee on Ways and Means concerning hospitalization payments for beneficiaries of old age, survivors, and disability insurance (OASDI) and by the hearings conducted in July, 1959, by that committee on H. R. 4700 introduced by Rep. Aime J. Forand (D.) of Rhode Island. A striking feature of both the report and the testimony favoring the bill is the bias resulting from an almost complete lack of consideration of