OPINION: We need to talk about the pandemic's effect on Social Security. We need to ensure that people retiring in the mid-2030s and later do not see a 20% to 25% cut in benefits.
The 2020 Social Security Trustees Report, which came out a few weeks ago, showed an increase in the program’s 75-year deficit from 2.78% to 3.21% of taxable payroll. The depletion date for the trust fund remained at 2035.
Since this report was prepared before the onset of the COVID-19 pandemic and shutdown of the economy, the press is eager to know how the pandemic would affect the outlook. In an effort to be thorough, I offered three avenues through which the shutdown of the economy could affect the program.Program finances. Let me start with the biggest question.
The 2020 Trustees Report projects an increase in the Average Wage Index, but I argued that, in the wake of COVID-19, wages in 2020 may well decline rather than increase, as it did in 2009.It never occurred to me that average wages could increase in 2020. But, indeed, that is what happened in April. In fact, average weekly earnings of private sector workers in April 2020 were 7.2% higher than in April 2019 and 5.0% higher than in March 2020.
The good news is that starting benefits for those nearing retirement would not be adversely affected. The bad news is that our already unequal distribution of earnings and income will only be worse after this mess ends.
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