The Great Equalizer? Social Security and the Persistence of Educational Gaps in Late Life Income

• In Event: 067 - Section on Aging and the Life Course Refereed Roundtable Session
  In Refereed Roundtable 100min: Table 12. Life Course Perspectives on Inequalities

Abstract

Income trajectories in late life are generally considered as more or less “equalized” due to Social Security, pensions, and annuities that individuals receive. In reality, entitlements for older adults are far from equal in the face of disappearing traditional pensions, which could result in income inequality that ever-grows with age after Social Security retirement. However, no existing studies to date have presented evidence. Drawing from Social Security Administrative data linked to the Health and Retirement Study, my study attempts to fill the gap by examining income replacement ratios measured biannually among Social Security beneficiaries over a span of 20 years. Methods: Latent Growth Modeling was used to empirically frame my research questions as follows: 1) to what extent are the trajectory patterns of income replacement ratio (IRR) differentiated by socio-economic status (SES)? ; 2) Does earning power decline differently by SES even after pensions and annuities are taken into account? Results: Education is positively associated with the fixed IRR due to pensions and annuities (30-40% for college graduates, 10% for high school graduates). The progressivity of Social Security is not nearly enough to close this gap. Beyond pensions and annuities, education also inversely influences how fast earning power declines. Discussion: Income equality in later life is a myth. Further cuts of Social Security could result in increased hardships that persists for the rest of life, particularly among the socio-economically disadvantaged. Regardless of education, individuals cease to have earning by age 80. Increase in retirement age is not advisable.

Author

• Katsuya Oi, The Pennsylvania State University