Redistribution Under the Current Social Security System

Arguably the most successful program of the modern welfare state, Social Security has been enormously successful in lifting the elderly out of poverty. Thirty years ago, almost 30% of the elderly were in poverty, a poverty rate that was more than twice as high as the rate for the population as a whole. Today, in contrast, only about 12% of the elderly are subject to poverty, a rate that is about the same as the rest of the adult population. This Article describes how the current system redistributes income. The Article does not attempt to develop a mathematical model to generate an aggregate number. Such an undertaking would go well beyond the scope of a law review article. Instead, the Article identifies and discusses the principal factors that are most relevant in determining how the current system redistributes income within generations. Since one of the fundamental purposes behind Social Security is to provide for progressive redistribution to lift the elderly out of poverty, and women, minorities, and lower-income workers are at a heightened risk of poverty in old age, the Article focuses on how the current system affects these groups. The Article begins by describing the role Social Security has played in lifting the elderly, and particularly members of the at-risk groups, out of poverty. It then analyzes how four elements of the current system: (1) the method by which benefits are paid out; (2) the progressive benefit formula; (3) disability benefits; and (4) auxiliary benefits affect these groups. The Article assumes that the reader has a basic understanding of how the current system operates. For those who would like more details, the Appendix provides an overview of the funding and benefit structure of the current system