I read an article today projecting that Social Security will run out of money in only a few short years. Of course, I’ve been reading the same dire predictions since I was in grade school and after hearing the same scary story for 50 or 60 years, it begins to lose its dramatic impact.
What will we do? What will we do?
Maybe we could start by analyzing how Social Security works. Much of it is simple. Working people have money deducted from their paychecks while they’re earning a wage or a salary. Overall, Social Security tax is 12.4%. For those who work for a company, it is split so that the employee pays 6.2 percent and the employer pays 6.2 percent. This money goes into a fund to be used to pay retirees in the future.
Since Social Security tax is based on a percentage, people who earn more money pay more into the fund. Some, like doctors and plumbers make more money because of their education or skill set, so it’s in our national self-interest to encourage people to earn more. Public education, especially community and traditional colleges is one way to position workers to earn more.
Currently, there are a few bugs in the system. Minimum hourly wage today is $7.25 in most cases, so a minimum wage earner contributes $1,869.92 per year into the Social Security fund. In 1945, just after the Second World War, there were 41.9 workers paying into Social Security for every retiree receiving Social Security benefits. Today, it is less than 3 workers paying into Social Security for every retiree receiving benefits. Since there is no isolated, protected portion of the federal budget for social security, most of the cash has been replaced by IOUs from Congress. The system only works if there’s more money going into the fund than coming out of the fund.
A few years ago, one attempt to fix this a tiny bit was to raise the traditional retirement age from 65 to 67 in stages. It wasn’t nearly enough.
Since Social Security taxes are based on earnings, if the minimum hourly wage were raised to $10.00 per hour, each worker would contribute $2,579.20 per year, an increase of $709.28. There is a lot of opposition to raising the minimum wage for a variety of reasons of varying validity. However, as a follow on to the COVID-19 pandemic, many people are rethinking their employment choices. When COVID removes 660,000 people through death and debilitates a significant number of others, the remaining workers have more options available to them. This has been true for thousands of years after every plague or pandemic.
If fewer people return to minimum wage jobs because there are fewer (living) people available, does this help Social Security? Obviously not.
What is needed is to draw additional people into the workforce, especially people who are willing to accept lower level jobs. The question is, how to find them. The most logical approach, of course, is to screen those who want to move into America or other developed countries, pick the best, let them in, put them to work, and if they earn it, make them citizens.
It may not be the preferred political plan, but unless someone comes up with a better way to pay more into Social Security than is paid out, it may require, at the least, serious consideration.