The effect of three factors on social security old-age and survivors insurance (OASI) benefits: earnings, mortality, and the consumer price index

Hung-tai Lin

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Earnings are found to be higher for Whites relative to Nonwhites, for males relative to females. OASDI, with its formula based on earnings history, tends to compound the benefit differences, although the structure does provide proportionately larger returns for those at lower earnings levels. But the disparity between the Social Security benefits of Whites and Blacks, and between males and females, remains large. In addition, mortality rates were found to be higher for Nonwhites relative to Whites, for males relative to females, and for the less educated relative to the more educated. Some of researchers pointed out that differential mortality rates may have a significant influence on the distributional character of the Social Security program. Therefore, the redistribution effect of the progressive benefit formula, intended to provide a higher rate of return on the contributions of workers with low earnings than for those with high earnings, may not be as strong as expected.;In addition, if the basis for the CPI is empirical, we must consider whether an escalator intended for a specific demographic group, such as Social Security beneficiaries, should reflect the expenditure patterns of that group. Furthermore, the index number biases themselves could have differing impacts across different demographic groups. Therefore, it is important to discover how measured annual inflation rates and cumulative cost of living differed among specific demographic groups.

Date: 1997-01-01
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