Cuts to Social Security would hurt mostly young and low wage workers.
In March French cops fired tear gas and fought with protesters in the streets of Paris and across the country as hundreds of thousands of French workers and students marched against President Emmanuel Macrons’s plan to raise the pension age.
Train and air travel was disrupted. Teachers were among many professions to walk off the job, days after the government pushed through legislation to raise the retirement age by two years to 64.
I’m thinking about the events in France right now as similar changes are being considered for the U.S. Social Security system.
I’m retired ten years and collect an already reduced Social Security check and a teacher pension.
My Social Security pension is reduced because in middle age I chose to change careers and become a teacher. As a result of a federal law - the WEP/GPO - public employees in 15 states who are members of public pension systems and who also paid into Social Security have their Social Security slashed by nearly two thirds.
Through all my adult working years I have heard that Social Security will run out of money.
That is over fifty years of hearing doom and gloom.
As if one of the world’s wealthiest nations can’t afford to fund a universal retirement benefit.
A report, released on March 31, forecasts that the Social Security retirement trust fund reserves will be depleted in 2033.
Some in Congress, mostly Republicans, are arguing for a Macron solution. They argue for Social Security cuts including raising the retirement age.
Mark Miller, who writes extensively about retirement issues, explains how cuts and raising the retirement age will hurt young workers and low wage earners the most.
The claiming trends argue against an increase in the retirement age, and the reason is simple: A higher retirement age functions as a benefit cut, because it raises the bar on how long people wait to receive their full benefit. Every 12-month increase in the FRA roughly equates to a 6.5% cut in benefits.
And we’ve been down this road before. Under the Social Security reform legislation enacted in 1983, the FRA has been rising gradually over the past three decades, from 65 to 67. For everyone born in 1960 or later, the FRA is 67.
That means today’s younger workers will receive less from Social Security than older workers or current retirees, even though they are making the same Federal Insurance Contributions Act payments that today’s retired and near-retired workers have made.
And other trends look to be threatening for the retirement security of today’s younger workers, according to research by the Urban Institute. The causes include lower earnings growth; the erosion of defined-benefit pensions; and the global financial crisis, which wiped out trillions of dollars of household wealth and caused long bouts of unemployment. That crisis hit younger workers especially hard, and the effects are long-lasting.
The Urban report projects that 38% of early millennials will have inadequate income to meet their basic living needs at age 70, compared with 39% of late Gen Xers (born between 1973 and 1979), and 28% of late baby boomers (born from 1955 to 1964). The picture looks worse still for early millennials of color: 53% of Hispanic adults and 42% of Black adults will struggle to meet expenses.