IV. Entitlements and Generational Equity
Table of Contents/Entitlement Report/Introduction/Foreward/I/II/III/IV/V/VI
Income is Census "money income" (which includes public cash benefits), plus capital gains. Source: Measuring the Effect of Benefits and Taxes on Income and Poverty: 1992, Current Population Reports, Series P-60, no. 186-RD (Census; September 1993); and unpublished Census data on numbers of persons by household type (supplied by the Bureau of the Census).
Chart 4-2. Because of the preferential tax treatment the elderly enjoy,...
FICA taxes include both the employer and employee share. (Economists generally agree that employees ultimately pay for the employer's share of FICA taxes through foregone compensation.) Source: 1993 Green Book (Committee on Ways and Means, U.S. House of Representatives; July 1993), Appendix K: Table 2.
Chart 4-3. ...they do relatively better after taxes.
See chart 4-1 for source. Income is cash income as defined in chart 4-1, minus federal income taxes, federal payroll taxes, and state income taxes.
Chart 4-4. Counting in-kind benefits, the relative economic standing of the elderly is better still.
See chart 4-1 for source. Income is after-tax cash income as defined in chart 4-3, plus (a) employer-paid health benefits, (b) noncash public benefits (Medicare, Medicaid, and food and housing benefits), and (c) imputed income from homeownership. The value of Medicare and Medicaid benefits is calculated according to a "fungible value" approach, which, for lower-income households, counts only a portion of the benefits' full market value as income. The income value of owner-occupied housing is calculated as an imputed return on home equity (assumed to be 6.41 percent in 1992), less property taxes.
Chart 4-5. Distance above the poverty line: the elderly as a group rank about average...
Income is after-tax cash income, excluding capital gains, plus food and housing benefits--a more restrictive definition than the "total-income" measure in chart 4-4. Also, income is measured per household rather than per capita. Household types differ somewhat from those in charts 4-1, 4-3, and 4-4. Source: 1991 Green Book (Committee on Ways and Means, U.S. House of Representatives; May 1991), Appendix I: Table 37.
Chart 4-6. ...at both the lowest and highest income levels.
See chart 4-5 for source and definitions.
Chart 4-7. Social Security: a story of surging numbers of beneficiaries as well as rising average benefit levels -- ...
"Average covered earnings" are the average wages, salaries, and self-employment income of workers covered by Social Security. In 1992, the average Social Security (OASI) benefit for retired workers was 35.9 percent of covered earnings. For retired workers with nonworking spouses, it was 61.1 percent. These figures are down slightly from their 1982 peaks, but remain far higher than levels before 1972--when benefits were liberalized and mistakenly "double-indexed." Numbers of beneficiaries refer to retired workers only. Source: Annual Statistical Supplement to the Social Security Bulletin: 1993 (SSA; 1993), Tables 4.B1, 5.A4, 5.C2, and 5.H1.
Chart 4-8. ...in stark contrast to the very different story of "welfare" benefits for young women and children...
"Average covered earnings" are earnings as defined in chart 4-7. Average AFDC benefits are benefits per member of beneficiary families. The average AFDC benefit level peaked as a share of average earnings in 1977 (at 10.6 percent). Since then (and despite the recent increase in the number of beneficiaries), the average AFDC benefit level has declined steadily--to an all-time low of 7.8 percent of average earnings in 1991. Source: Annual Statistical Supplement to the Social Security Bulletin: 1993 (SSA; 1993), Tables 4.B1 and 9.G1.
Chart 4-9. ...or pay scales for young workers.
Source: Before 1979, BLS data tabulated in A Children's Defense Budget: FY 1988 (Children's Defense Fund; 1987); since 1979, Handbook of Labor Statistics (BLS; 1989) and Employment and Earnings (BLS), various January issues.
Chart 4-10. Among traditional male breadwinners, recent income trends by age group reveal a stunning divergence between old and young.
Note that for all ages under sixty-five, 1973 marks the postwar peak in real median income. Income is Census "money income." Constant dollars are calculated with the CPI-U-X1. For 1987 to 1992, the income of men aged 20-24 is estimated on the trend for men aged 15-24.
Source: Money Income of Households, Families, and Persons in the United States: 1992, Current Population Reports, Series P-60, no. 184 (Census; September 1993).
Chart 4-11. Despite the growing share of working mothers who add a second income to the household,...
Excludes never-married mothers. Figures refer to mothers in the civilian labor force--i.e., to mothers either currently employed or seeking work.
Source: BLS Special Labor Force Reports (various issues), as tabulated in Youth Indicators: 1991 (Department of Education; 1991); and Statistical Abstract of the United States: 1993 (Census; 1993), Table 633.
Chart 4-12. ...the divergence in income trends between old and young is still dramatic for entire households.
Note that for all households headed by persons under age forty-five, 1973 marks the postwar peak in real median income. Income is Census "money income." Constant dollars are calculated with the CPI-U-X1. For 1951 to 1956, household income by age group is estimated on the trend in family income by age group.
Source: Money Income of Households, Families, and Persons in the United States: 1992, Current Population Reports, Series P-60, no. 184 (Census; September 1993).
Chart 4-13. America's post-1973 productivity slowdown has hit the young hard--while largely sparing the elderly...
See chart 4-12 for source and definitions.
Chart 4-14. ...at every income level.
Income is Census "money income." Changes in income are measured as changes in multiples of the poverty threshold.
Source: 1991 Green Book (Committee on Ways and Means, U.S. House of Representatives; May 1991), Appendix I: Table 38.
Chart 4-15. Looking to the future, the incomes of today's young adults may not match their parents' at the same age.
Projections for 1960 birth year are averages of optimistic and pessimistic scenarios.
Source: Tabulations of Census data and projection scenarios in Restoring Prosperity: Budget Choices for Economic Growth (Committee for Economic Development; 1992).
Chart 4-16. Beyond income, age confers advantages in financial assets, where the elderly do better than any younger age group,...
Household averages include both asset and non-asset holders. Financial net worth includes passbook savings accounts,money market accounts, CDs, interest-earning and regular checking accounts, stocks, mutual fund shares, interest-earning securities including U.S. Savings Bonds, IRA and Keogh accounts, mortgages and receivables held as assets, and unit trusts.
Source: Household Wealth and Asset Ownership: 1991, Current Population Reports, Series P-70, no. 34 (Census; January 1994).
Chart 4-17. ...as well as in total net worth, where they do better than any age group under fifty-five.
See chart 4-16 for source and definitions.
Chart 4-18. The elderly also enjoy much higher rates of homeownership -- which are declining for the young but still rising for seniors. Source: The State of the Nation's Housing: 1993 (Joint Center for Housing Studies of Harvard University; 1993).
Chart 4-19. The same is true of health insurance, where lack of coverage declines dramatically with age,...
"Not covered" means without health insurance at some time during the year. The near universal coverage of the elderly is due to their categorical eligibility for non-means-tested Medicare benefits. In addition, a large share of the elderly are insured a second (or third) time. In 1992, 67.7 percent of the elderly had private coverage; 9.4 percent had means-tested public coverage under Medicaid.
Source: Poverty in the United States: 1992, Current Population Reports, Series P-60, no. 185 (Census; September 1993).
Chart 4-20. ...making access to medical care almost entirely a problem of the young...
See chart 4-19 for source and definitions.
Chart 4-21. ...and helping to explain why America is the healthiest place to grow old but the riskiest to be born.
Other G-7 countries are Canada, France, Italy, Germany, Japan, and the United Kingdom. Mortality rates are measured per 1,000 population. Life expectancies are averages for men and women. All averaged indicators for other G-7 countries include all six countries, except life expectancy at age 85, where Italy is unavailable. Data are for years 1987 to 1990, again except for life expectancy at age 85, where the latest data are for 1983.
Source: For infant mortality, life expectancy at birth, and life expectancy at age 85, George Schieber et al., "Health Spending, Delivery, and Outcomes in OECD Countries," Health Affairs (Summer 1993); for life expectancy at age 60, Health Care Systems in Transition: The Search for Efficiency (OECD; 1990); for the mortality rate of children under age five, UNICEF data published in SOS America! A Children's Defense Budget (Children's Defense Fund; 1990); and for life expectancy at age 85, Health Statistics on Older Persons: United States, 1986 (National Center for Health Statistics; 1987).
Chart 4-22. By the official measure, America's elderly are now just three-fifths as likely to be poor as children.
The official measure of poverty counts cash income (before taxes) only. For 1960 to 1965, elderly poverty rates are interpolations.
Source: Poverty in the United States: 1992, Current Population Reports, Series P-60, no. 185 (Census; September 1993).
Chart 4-23. Counting in-kind income, the poverty rate of the elderly is lower than that of any age group.
"Total-income" poverty is measured on an after-tax basis, and adds to cash income: (a) employer-paid health benefits; (b) noncash public benefits; and (c) imputed income from homeownership. For the valuation of health benefits (Medicare and Medicaid) and income from homeownership, see chart 4-4.
Source: Measuring the Effect of Benefits and Taxes on Income and Poverty: 1992, Current Population Reports, Series P-60, no. 186-RD (Census; September 1993).
Chart 4-24. By this measure, we can count over seven poor Americans under twenty-five for every one poor American sixty-five and over. See chart 4-23 for source and definitions.
Chart 4-25. The great entitlement tilt: the largest share of federal benefits flows to the age group with the smallest number of poor,...
See charts 3-1 and 4-23 for sources and definitions. Benefit total excludes benefits that could not be allocated by age group. 1990 poverty data is from Measuring the Effect of Benefits and Taxes: 1979-1991, Current Population Reports, Series P-60, no. 182-RD (Census; August 1992).
Chart 4-26. ...bypassing the young and leaving a larger share of children in poverty than any other major industrial nation tolerates.
The poverty threshold is here defined as 40 percent of the median household income in each country. Income is cash income, after federal income and payroll taxes, plus certain forms of near-cash income, such as Food Stamps. Data are from the Luxembourg Income Study. For Germany and France, poverty rates are for 1984; for the United States and United Kingdom, 1986; and for Canada, 1987. Source: 1993 Green Book (Committee on Ways and Means, U.S. House of Representatives; July 1993), Appendix J: Table 75.
Chart 4-27. For today's retirees, Social Security "pays back" everything they paid in--and a great deal more.
Social Security contributions are OASI FICA taxes; Medicare contributions are primarily HI FICA taxes and SMI premiums. FICA taxes include both employee and employer shares; benefit paybacks include interest on contributions. All amounts are in constant 1993 dollars discounted to present value at age 65 with a 2 percent real interest rate. Taxes and benefits do not adjust for the chance of death before age 65 (Medicare figures presented in source are re-estimated on this basis). Calculations are for workers with average wage histories. Single worker figures are averages for male and female workers.
Source: Eugene Steuerle, Retooling Social Security for the 21st Century (Urban Institute; 1994), Appendix: Tables A.3 and A.10.
Chart 4-28. But the dollar windfall is already declining... "Net" lifetime Social Security benefits are lifetime OASI benefits less lifetime OASI FICA taxes. FICA taxes include both employee and employer shares. All amounts are in constant 1993 dollars discounted to present value at age 65 with a 2 percent real interest rate. Net benefits are adjusted for chance of death in all years after age 21. All amounts are averages for single male and female average-earning workers. Source: Steuerle, Retooling Social Security for the 21st Century, Appendix: Table A.6.
Chart 4-29. ...and in the decades to come Social Security will be a mediocre "deal."
Rates of return are real lifetime rates of return on OASI FICA taxes. FICA taxes include both employee and employer shares. Calculations are averages for single male and female average-earning workers, and are adjusted for chance of death in all years after age 21.
Source: Steuerle, Retooling Social Security for the 21st Century, Appendix: Table A.9.
Chart 4-30. This deal, moreover, assumes away a huge financing gap that must be closed if tomorrow's promised benefits are to be paid at all.
The financing gap measured here is the annual difference between current-law income (excluding trust fund interest) and current-law benefits. Projections are for SSA's and HCFA's Scenario II, and refer to the payroll-financed Social Security system only--i.e., to Old Age and Survivors Insurance and Disability Insurance (OASDI) and to Medicare Hospital Insurance (HI). Constant dollars are calculated with the SSA-projected CPI. For an explanation of the SSA and HCFA projection scenarios, see chart 5-1.
Source: 1993 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (April 1993), Tables III.B.1 and III.B.4.
