Growth of life expectancy gap between low- and high-income Americans
“In a 2015 report, the National Academy of Sciences compared the 1930 and 1960 birth cohorts and found that life expectancy for the bottom quintile of men at age 50 decreased slightly to 26.1 years over the 30-year period. Meanwhile, life expectancy rose for men age 50 in higher-income quintiles. As shown in Figure 1, the life expectancy gap between the bottom (quintile 1) and top fifth of the income distribution widened from 5.1 to 12.7 years.
“In 2016, a Brookings study found, for men born in 1940, those in the lowest income decile at age 50 could expect to live to be about 76 years old compared with 88 years for the highest income decile. Another research team, led by Raj Chetty, found that disparity in longevity continued to increase over 2001–2014; the average gap between the bottom and top 1 percent was 14.6 years for men and 10.1 years for women.”
“Less affluent Americans — those who depend most on Social Security — have seen little rise in life expectancy, and in some cases actual declines,” Krugman observes. “So anyone invoking rising life expectancy as a reason to delay Social Security benefits is, in effect, saying that aging janitors must keep working — or be cast into extreme poverty — because bankers are living longer.”
Good to see Paul Krugman weighing in on how raising the retirement age again would hurt low-wage workers. Krugman’s comments in the NYT came a few weeks after the newspaper published this article promoting a higher Social Security retirement age by an economist from a DC think tank and a business school professor:
For the Good of the Country, Older Americans Should Work More and Take Less – Eugene Steuerle & Glenn Kramon
To their credit, the authors addressed a couple of the criticisms we raised with a version of this piece published on LinkedIn. They specify what time frame they are using to show life expectancy rose. They mention in passing that a higher age for Social Security eligibility would impact certain types of low wage workers negatively. But their suggested policy changes to adjust for major lifetime benefit losses by low-wage and middle-wage workers due to a higher benefit age are weak antidotes, would not help most low-wage workers, could be hard to administer, and would be less likely to be considered by Congress than raising the age. Their recommended compensatory changes are: Making it easier to qualify for Social Security disability benefits and raising the minimum old age benefit amount (both good ideas in their own right). They also fail to mention that US life expectancy, though higher than many years ago, has been dropping for several years now. Most important, if the retirement age were raised, they omit that lifetime Social Security benefits would drop a lot more for lower wage workers because their life expectancy is much lower than for others. In addition, raising the retirement age would only fill about one fifth of Social Security’s long term financing gap. Congress still would have to raise taxes or cut benefits – hopefully in a more equitable way.
Finally, the authors bundle Medicare and Social Security on the chopping block when the cost of the two programs is rising for different reasons and controlling costs has very different distributional impacts. While Social Security costs are rising mainly due to demographic changes, Medicare costs have been rising inexorably for decades due to failure by the government and other health care purchasers to bargain effectively to keep prices in sync with the general cost of living and restrain profit taking by providers and middlemen funneling funds through the system. Vigorously reducing Medicare costs would reduce Part B premiums, leaving retirees more money to spend from their Social Security checks, while also helping to balance the national budget.
CCSE on this issue earlier this year:
“A proposal by Sens. Angus King (I-ME) and Bill Cassidy (R-LA) to raise the Social Security retirement age to 70 would be a massive benefit cut, particularly affecting low-wage workers. If Congress enacts it, millions more Social Security taxpayers would not live long enough to collect a cent in retirement benefits.
“Most recently floated by presidential hopeful Nikki Haley, an increase in the age at which workers collect full benefits is often included in proposals to bring Social Security into financial balance along with other types of benefit cuts and tax increases.
“Few people realize that low-wage workers are already receiving a cut in lifetime Social Security benefits due to an increase in the retirement age to age 67 gradually being implemented under legislation enacted four decades ago. The age for collecting full benefits is going up two years for all income groups, but lifetime retirement income for those at the bottom is affected the most.
“Why? Because low-wage workers, on average, live shorter lives. They already collect fewer Social Security checks than those who are better off. Though a higher retirement age may not affect differences in monthly payment rates, it would have a relatively greater negative impact on lifetime income for people with a history of low earnings. It would also affect the relative value of their benefits compared to taxes they paid.”