Workers in France recently held massive demonstrations over a proposed and now instituted change to raise the retirement age from age 62 to 64. In the U.S. there are also new proposals to raise the retirement age as high as age 70 since, according to the most recent Social Security Trustees Report, the Trust Funds will only be able to pay 80 percent of all scheduled benefits after 2034. However, raising the retirement age is short-sighted and will further harm the economic security of seniors.
We are just seeing the full impact of the Social Security Amendments of 1983 which raised the retirement age incrementally from 65-67 over the past few decades. Workers who turned 62 in 2022 or after (born in 1960 or later) receive a full retirement benefit at age 67. The 1983 amendments also lowered the percentage of Social Security benefits a person receives when retiring early. Prior to the 1983 amendments, an individual received 80 percent of full benefits when retiring at age 62. As of 2022, an individual retiring at age 62 receives only 70 percent of full benefits.
The 1983 raise in the retirement age is now hurting the economic security of older workers, especially people of color and individuals who work in the service sector including manufacturing, warehouses and frontline health care workers. Persistent racial disparities in health care access and quality — and in access to food, affordable housing, high-quality schools, and economic opportunity — mean that people of color are more likely to have a chronic health care condition or disability or die before reaching full retirement age. Workers in the service sector work in arduous jobs for 40 years or more, their bodies beaten by the types of work they perform (such as home care workers who lift and bathe adults who cannot do that for themselves). Most of these workers retire early, many at age 62, with a significant reduction in their Social Security benefits.
People of color and workers in the service sector have lower life expectancies and lower lifetime earnings. Many of these workers live paycheck to paycheck, without access to employer-provided retirement savings accounts or pensions, relying upon Social Security for the majority of their retirement income. Research shows that between 21-25 percent of seniors rely on Social Security for 90 percent of their retirement income and 50 percent of seniors rely on Social Security for 50 percent or more of their retirement income. Social Security benefits are especially important for women, who generally have less years in the workforce, meaning lower benefits and longer life expectancy.
For all these reasons we should look for other ways to improve Social Security’s finances for the baby boomers and beyond.
During the debate on the 1983 amendments, Maggie Kuhn, founder and national convener of the Gray Panthers, testified in opposition to the entire package, including the raise in the retirement age. Rather than raise the retirement age, she proposed to eliminate the wage base for Social Security. In 2023, the wage base, which is indexed to average wages, is $160,200; meaning that no Social Security contributions (i.e., Federal Insurance Contributions Act payments or “FICA”) are assessed on any earnings over that amount.
To give some historical context, according to a 2018 report by the Congressional Research Service (CRS): “When the program began in 1937, taxable earnings represented 92% of covered earnings. Since the 1980s, the share of covered earnings that is subject to Social Security contributions has fallen from 90% of all earnings in 1982 to 83% in 2016.” The reason for this is that between 1979-2017 the top 10 percent of earners’ real wages grew cumulatively by 34.3 percent while the bottom 10 percent of earners saw a growth of only 1.2 percent and those in the 50th percentile (middle-wage earners) grew by only 6.1 percent.
According to the report, “salaries for top earners increased faster than the taxable maximum,” or wage base, because the annual wage base increase is based upon average wage growth. “This increasing gap between top earner salaries and the taxable maximum has led to more earnings that are not covered by payroll taxes (because these earnings are above the taxable maximum)….” In fact, a recent report by the Economic Policy Institute highlights that income inequality has cost Social Security billions of dollars of revenue every year.
As far back as 1985, legislation has been introduced to eliminate the wage base from Social Security. According to the CRS report, if all earnings were subject to Social Security contributions, Social Security could pay full benefits for the next 60 years. Currently in Congress legislation has been introduced, which will phase in an elimination of the wage base for Social Security payroll taxes. Passage of this bill would resolve the long-term financing issues of Social Security and protect the retirement security of generations of Americans without further raising the retirement age.
It is time for workers to let their representatives and senators know that rather than cut Social Security benefits across-the-board for everyone through a raise in the retirement age, all earnings should be covered by Social Security to protect the economic security of all workers.
Lowell Arye has more than 40 years of bipartisan work at the national and state policy levels, including federal and state government, academia, philanthropy and the non-profit sector. He had oversight of the Social Security program in Congress (1982-1988) and in the Executive branch (1988-1992). He recently served as Deputy Commissioner for the New Jersey Department of Human Services (2012-2016).