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Institute for Policy Studies

To Save Social Security, Raise the Minimum Wage

Social Security is the bedrock entitlement program that directly supports over 56 million Americans. That’s over 18 percent of the population.

If you’re receiving Social Security, you know that Social Security benefits are modest. The average Social Security benefit is just $14,800 per year.

In other words, Social Security beneficiaries make just about as much as a full-time minimum wage worker.

With retirement savings low and private pensions hard to come by, that’s not much after a lifetime of work.

Social Security is the main source of income for the majority of American retirees, so it’s important that Social Security

The 2012 Social Security Trustees Report predicts that the Social Security retirement trust fund will run dry in 2035.

If Social Security retirement funds are used to make up shortfalls in the Social Security disability programs, that date moves up to 2033.

That’s hardly tomorrow, but it’s close enough to be worth worrying about.

By 2033 the accumulated trust funds will be used up, but the Social Security program will still have money coming in every year from Social Security taxes.

The Trustees estimate that these ongoing receipts will be enough to pay beneficiaries at 73 percent of full benefits in perpetuity.

So even if we do nothing, Social Security won’t disappear in 2033. It will continue, just at reduced benefit levels.

The tap won’t run dry. It’ll just run a little weak.

Put that way, the challenge of saving Social Security doesn’t look quite so daunting. Yes, we have to do something. But we have to do something that will top up benefit levels twenty years from now, not something to stave a complete collapse tomorrow.

One thing we could do is simply make up the projected 27 percent shortfall in Social Security benefits through general government spending.

At today’s prices, that would cost about $200 billion per year, or about 6 percent of the federal budget. That’s a lot, but not an unmanageable sum of money for the federal government. It could be done.

Another thing we would do is just raise the minimum wage.

Social Security is mainly funded by a flat tax on all wages up to $110,100 per year (going up to $113,700 in 2013). The more people earn, the more tax they pay (up to that level).

There are no deductions and no exemptions. Every additional dollar earned by poor and middle-income people translates directly into higher Social Security tax receipts.

Thus a doubling of the minimum wage from $7.25 to $14.50 an hour would result in a doubling of the Social Security taxes paid by minimum wage earners.

We have at least twenty years to rebuild the Social Security trust fund. If we raise minimum wages now, we can start rebuilding the fund now. Congress should put the minimum wage up a dollar a year every year for the next ten years, starting in 2013.

As with all retirement saving, the earlier you start the easier it is to meet your goals. Social Security taxes paid into the trust funds in 2013 will immediately start earning compound interest. By 2023 the Social Security crisis will be solved.

By 2033 we’ll probably be able to raise benefits a little, too.

  • JPSnoopington

    Social Security “trust funds” earning compound interest? What a fantasy world!

  • Guest

    What many fail to realize is, while raising minimum wage like that on paper and in theory sounds like a quick fix; it really isn’t. It’s still all about big business then. As it is, next year when the Obamacare goes into effect, it will hurt a lot of small businesses. Plus, I know a lot of doctors not thrilled that they will be making less money when they have a million dollar education that they need to pay on until they are 80. But also, raising minimum wage in an a economy where small businesses are already struggling, will collapse them. The money has got to come from somewhere. I am listening to his speech right now just shaking my head amazed at how many people don’t see it. Thus, this is taking the responsibility away from the people we already paid the money to for this benefit. They spend it on useless items, then we have to pay for it all over again. Where is this money going to come from that will pay for this double payment to fix the issue.

  • Parthasarathy Shakkottai

    SS is a federal program and should be funded with created dollars as all other federal programs. It was originally set up as an insurance program when USA could not create money. Now it can. Actually all such programs in the national interest like University education, National labs, Medical research,NIH, CDC,and roads and bridges should be funded straight with created money (called deficit) at zero cost. Even poor India does that.(Except SS which it does not have)

  • Malisteen

    If a business can’t afford to pay its employees enough to afford food and rent, then that business doesn’t deserve to be in business to begin with.

    • T C KARDOS

      Comment :: If a business can’t afford to pay its employees enough to afford food
      and rent, then that business doesn’t deserve to be in business to begin
      Rebuttal :: So you would suggest it is that business fault to compete with wages paid to there employees at lets say 13$ an hour & still compete with the company’s in Pakistan / Nigeria (Importing their product to USA to compete etc at .15 cents to every USA dollar per hour paid to their employees) & some how compete with (Fairness) In a Unfair ” FREE OPEN TRADE AGREEMENT USA COUNTRY ” that has disabled our own USA company’s … So That’s the fault of the USA CO ? CORRECT ? U R Correct any USA co still stupid enough to employee USA Employees should just fold up shop / Change their Name / Move to Mexico / & set up shell Company’s through Las Vegas ~ to think an american co would stay here & try and employee Americans at American Wages & Manufacture / sell (socks) (Mud flaps) (sunglasses) in USA Today (DUMB ASSES) Today to say ” MADE IN AMERICA ” really Means (TOO FUCKING STUPID TO BE IN BUSINESS) Let all American workers be left with ONLY Jobs from Pizza Hut & McDonald’s (FIGHT DUMB AMERICANS FOR THOSE JOBS) While we continue to give all American Labor Jobs to Overseas in (Tim buck 2) JUST NOT YOU ! P.S. Now Let’s add insult to Injury FORCE A MIN WAGE DOWN THESE (Few That Have survived American company’s) a new Higher Min Wage & Keep them Competing with .15 cent’s an Hour Company’s from IRAQ (Yes They Should Just fold up shop) Wouldn’t YOU !! I Agree Raise the Min Wage but (TURN OFF) THE Open ended free UNFAIR TO USA COMPANY’S Trade Agreements we have had in place since the 70’s & Let’s Give a New AMERICAN MEANING TO ” Made In America ” We’ve Been Trading Away USA JOBS to support CHINA / JAPAN / MEXICO / PAKISTAN / INDIA ~ AT A DISABLING COST TO THE USA ? Don’t Fault your American Co for even being able to TRY & offer you a job at wages that may keep them in FAIR competition … !! FAULT YOUR GOVERNMENT !! T.C.KARDOS

      • Rocketboy1313

        You can’t outsource waiters or the service industry and those are the jobs that make minimum wage in the US.

        Most manufacturing in America is mechanized and the aspects that require human hands are done by professionals that draw union wages above the minimum wage.

  • Krist

    I think they should stop the 200k per month the congressmen can give to people, that usually goes to pay for their kids cars and etc, plus since they are all in the payroll of corporations do they really need 150k a year for life, they could also pay for their own security not have it provided for free, that would save millions per year,

  • david

    to me it seems that the government is trying to kill off the elderly especially the disabled and the ones on alot of meds

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