How Can Changes to Social Security Improve Benefits for Black and Hispanic Beneficiaries?

Abstract

This paper compares Social Security outcomes for non-Hispanic Black, Hispanic, and non-Hispanic white beneficiaries and assesses the capacity of various benefit enhancements to narrow racial and ethnic disparities in Social Security benefits.  Using the Dynamic Simulation of Income Model 4 (DYNASIM4), we project, under current law and each benefit enhancement, lifetime Social Security benefits, the share of beneficiaries receiving limited annual benefits, and the share with limited annual income.  To capture the fully phased-in impact of each option, we project annual outcomes in 2080 and lifetime outcomes for adults born between 2001 and 2010.

The paper found that:

• Racial and ethnic differences in annual and lifetime Social Security benefits are substantial.  We project that average lifetime benefits received by adults born between 2001 and 2010 are 19 percent less for Black beneficiaries than white beneficiaries and 14 percent less for Hispanic beneficiaries than white beneficiaries.  Black and Hispanic beneficiaries ages 62 and older in 2080 are projected to be about 10 percentage points more likely to receive limited incomes in 2080 than white beneficiaries.
• Various benefit enhancements, including creating caregiver credits, making the benefit formula more progressive, and adding a new minimum benefit to Social Security, would disproportionately help Black and Hispanic beneficiaries.
• However, these benefit enhancements would only modestly narrow racial and ethnic disparities in Social Security benefits.  Adding a new minimum benefit tied to years of covered employment would have a particularly modest effect, because relatively few beneficiaries receiving limited benefits complete long careers.

The policy implications of the findings are:

• The effectiveness of benefit enhancements depends crucially on how those adjustments are structured.  Policy details, including eligibility for the enhanced benefit and the presence of any benefit caps, shape how much low-income beneficiaries would receive and how well targeted the adjustments are.
• Achieving equity in Social Security benefits for Black and Hispanic adults would likely require substantial progress toward equality in labor market outcomes.