(iPoster) Analysis of Social Security Reform Preferences: A Study of US Public Opinion

• In Event: Poster Session: Public Policy & Urban and Local Politics
  In Poster Session: Poster Session: Public Policy

Abstract

In this paper, we explore and seek to fill gaps in the present literature on demographic (e.g., age, gender, marital status, education, employment status) influences on Americans’ preferences on Social Security reform. By doing so, we contribute to ongoing public pension sustainability and reform debates by providing empirical insights into public preferences.

While Social Security is America’s only universal social program, it faces significant financial challenges. According to the 2024 Social Security Administration Trustees Report, by 2023, 21 percent of scheduled benefit payments may become unpayable due to depleted fund reserves. America’s aging population, which increases the number of eligible recipients while decreasing the workers per beneficiary ratio, fuels this looming crisis; this ratio has fallen from 4.0 workers per beneficiary in 1964 to just 2.7 today.

Three broad options, or “levers,” exist for pension reform: (1) decreasing benefits (that is, the amount Social Security recipients receive each month), (2) increasing the statutory retirement age (that is, the age at which one is eligible for Social Security benefits), and (3) increasing contributions (that is, taxes). Decreasing benefits would allow the same amount of contributions (funded by taxes) to fund monthly Social Security benefits (albeit at a lower level) for Americans starting at the same age at which they currently receive them. Increasing the retirement age would allow the same amount of contributions (funded by taxes) to fund the same level of monthly Social Security benefits but starting at an earlier age than they currently do. Increasing contributions (in the form of taxes) would allow Americans to receive the same level of monthly Social Security benefits starting at the age that these benefits currently start by paying more in payroll taxes (which fund Social Security) throughout their lives.

Previous reform attempts by Presidents Bill Clinton and George W. Bush failed due to widespread disagreement about which “levers” to “pull” and to what extent to “pull” them. To maintain Social Security’s financial viability, a combination of all three reform options may be necessary. All three “levers,” however, require some group to pay more, either directly or indirectly. By increasing contributions (taxes), Americans would directly pay more to the Social Security system throughout their lifetimes. In the case of decreasing benefits, Social Security recipients would indirectly pay more in that receiving less money each month in Social Security benefits would require them to spend more of their own money in retirement and/or not consume as much in retirement. Increasing the retirement age would also indirectly make Americans pay more, as they would have to work past the previous statutory retirement age, spend more of their own money in their retirement, and/or spend less per year if they choose to retire before the new statutory retirement age.

We examine US public opinion on which of the three “levers” to “pull” using a robust and representative public opinion survey of over 1,000 US adults. The purpose of the survey was to examine the current context for Social Security reform from the citizen’s perspective, enabling us to better understand individuals’ preferences for each of the reform channels. The issue of public pension reform is particularly important in the United States since due to the current lack of action; understanding public opinion on Social Security reform will shed light on which reform options might be the most politically feasible and/or result in the fewest negative electoral consequences. In the survey, respondents were asked their preferences on working longer, paying higher taxes, or receiving a lower amount in monthly Social Security benefits. Demographic statistics (e.g., age, gender, marital status, education, employment status) were also among the questions asked to determine how they affected individual preferences.

We look specifically at three main angles of this data on pension reform preferences in the United States: (1) gender and marital status, (2) race, and, drawing on these factors and others in the data, (3) financial literacy. We do so through four multivariate regression models, developed using advanced econometric tools, which examine basic demographics, economic status, family structure, and sociocultural factors, respectively, with each model including the variables from all previous models.

By delving into issues of financial literacy, we think beyond commonly studied categories of age, race, and gender to better understand the underlying reasons behind lower levels of financial literacy among certain age groups (e.g., millennials), racial and ethnic groups (e.g., Hispanics), and women in the US—and how these disparities could and should influence how American policymakers address Social Security reform in the crucial years to come.

Authors

• Ari Edward Bersch, Bowdoin College

• Vianney Gomezgil Yaspik, Bowdoin College