According to the Organisation for Economic Cooperation and Development’s influential Pensions at a Glance, the United States has a gross retirement income replacement rate for average-income workers of 70.3 percent (see table 5.3). On the face of it, a 70.3 percent replacement rate is impressive. It matches the 70 percent
Workers’ compensation experts have expressed concern in recent years about the impact of decades of state cost-cutting measures and resulting uneven and increasingly inadequate benefits for injured workers. Indeed, a ProPublica investigation reveals the steep decline in compensation for disabling injuries, including cutting off benefits long before many workers have recovered and refusing coverage for necessary aspects of care: “Over the past decade, state after state has been dismantling America’s workers’ comp system with disastrous consequences for many of the hundreds of thousands of people who suffer serious injuries at work each year.”
Many Americans had reason to be concerned about their retirement prospects long before 2020. For decades, the racial wealth gap between Whites and African-Americans has increased, while the gap between Whites and Latinos has not diminished. Workers of color and low-income workers have long had less stable jobs, which provided fewer supports and exposed them to higher risks.
Now, communities that were already the most vulnerable to being insecure in retirement have been hit hardest by COVID-19. This is especially concerning for women of color, who tend to have low-wage, front-line jobs.
The political air is charged these days with claims that various policy ideas, like Medicare-For-All and the Green New Deal, are “socialistic.” Such charges have been made in American history since the late 19th century, often in response to bold new policy concepts put forward to address gaps in income and health care security. This leads us to revisit a fundamental question – what differentiates Socialism from Social Insurance?
Social Insurance as Collective Action
In the words of Robert M. Ball, Founding Chair of our Academy: “Social insurance derives its unique strength from the principle that the best form of self-protection is mutual aid on a universal scale; when everyone contributes, everyone can be protected.” Academy Member and historian Edward D. Berkowitz also quotes Bob Ball:
With most Americans focused on taxes this month, it’s a good time to take a look at the relationship between federal income taxes and social insurance contributions.
Overview of Federal Taxes and Distributional Effects
The latest report by the Joint Committee on Taxation, Overview of the Federal Tax System As In Effect for 2019, provides a comprehensive starting point. This report breaks out the current federal tax system into four elements:
Among the many headlines in coverage of the government shutdown: “The government shutdown spotlights a bigger issue: 78% of U.S. workers live paycheck to paycheck.”
For the roughly 800,000 furloughed federal workers, the partial shutdown began on December 22, 2018. These federal workers missed their first biweekly paycheck on January 11, 2019. If the shutdown continues, they will miss a second paycheck on January 25 and possibly future paychecks until the shutdown ends. Until January 16, when legislation was enacted guaranteeing that federal workers would receive back-pay upon the government’s reopening, these workers also faced over three weeks of uncertainty as to whether they would ever be paid for the shutdown period.
For all of us who are dedicated to the Academy’s mission – “increasing public understanding of how social insurance contributes to economic security” – 2019 has the makings of a challenging year.
One of the top challenges facing us as we begin a new year is to develop and refine a common language that connects with the public at large. When distraction, detraction, and discord seem so prevalent in the nation’s political discourse, we need new ways to refocus the conversation on unifying issues that matter most to many. When it comes to providing greater economic security and reducing inequality in our nation, we need to reframe how we discuss social insurance, so that its enduring value as shared protection will be communicated more effectively.
If we were to measure the American people’s current understanding of social insurance, what might we find?
Ramsey L. Alwin is the Director of Thought Leadership for Financial Resilience in the Office of Policy, Research, and International Affairs at AARP. Alwin’s work focuses on longevity trends and economic security issues, especially as they relate to older adults.
Kathryn Edwards is an Associate Economist at the RAND Corporation. She is a member of the . After working as a research assistant at the Economic Policy Institute from 2008-2011, Ms. Edwards attended the University of Wisconsin-Madison where she received her Ph.D. in Economics. Along the way, Edwards was a graduate fellow of the Institute for Research on Poverty and a summer fellow at the Federal Reserve Bank of Chicago.
As the Academy gears up for our 31st annual policy conference, Regenerating Social Insurance for Millennials and the Millennium, I am thinking back to what we have learned from our last few conferences.
Our 2016 conference premiered the Academy’s focus on inequality. Keynote speaker Marc Pearson, Deputy Director of Employment, Labor and Social Affairs at the Organisation for Economic Co-operation and Development (OECD), reminded us that: