Briefing Paper No. 61

Disparate Impact: Social Security and African Americans

Executive Summary

Perhaps no group has as much at stake in the debate over Social Security reform as do African Americans. Elderly African Americans are much more likely than their white counterparts to be dependent on Social Security benefits for most or all of their retirement income, yet the current system often works to their disadvantage.

Despite a progressive benefit structure, Social Security benefits are inadequate to provide for the retirement needs of the elderly poor, leaving nearly 30 percent of African-American seniors in poverty. Moreover, because African Americans generally have shorter life expectancies than do whites, they receive less total Social Security payments over the course of their lifetimes.

Social Security also contributes to the growing wealth gap between blacks and whites. Because Social Security taxes squeeze out other forms of saving and investment, especially for low-income workers, many African Americans are unable to accumulate real wealth. And, since Social Security benefits are not inheritable, that wealth inequity is compounded from generation to generation.

Traditional Social Security reforms such as raising the retirement age, cutting benefits, or increasing taxes would only make the problem worse. On the other hand, African Americans would be among those with the most to gain from the privatization of Social Security—transforming the program into a system of individually owned, privately invested accounts.

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Michael Tanner is director of the Cato Institute Project on Social Security Privatization and coauthor of A New Deal for Social Security (1998).