On Saturday, August 14, Social Security celebrates its 69th birthday. Social Security provides a valuable package of retirement, disability, and survivors' insurance to workers and their families. According to data published by the Social Security Administration, it is the major source of income for approximately two-thirds of the nation's elderly, and helps to lift about 12 million people out of poverty each year. It is especially important to Latinos, who fare better under Social Security than most other groups of Americans. This is in large part because the socioeconomic status of the Hispanic community today mirrors that of the nation in the1930s, when conscientious lawmakers began laying the foundation of our social insurance system.
For Latinos, the progressive benefit formula, guaranteed basic benefit, and cost of living adjustments built into the Social Security system are especially critical. The progressive formula used to calculate Social Security benefits ensures that low-wage workers receive a greater percentage of the resources they contributed to the system than high-wage workers. Social Security replaces about 57 percent of lifetime average wages for low-wage workers, 42 percent for moderate-wage workers, and 36 percent for high-wage workers, provided that they retire at the normal retirement age. This favors Latino workers, who earn less than other groups of Americans during their working years. Data from the Census show that, in 2002, 53 percent of all Hispanic workers earned less than $25,000, but only 25 percent of non-Hispanic Whites earned so little.
Another important feature of the Social Security system is its provision of a guaranteed benefit for workers and their spouses, which continues until death, with a cost-of-living adjustment (COLA) each year to index for inflation. Social Security beneficiaries cannot outlive the income, and their purchasing power does not erode over time. As Latinos have a longer life expectancy than other groups, this is particularly important to them. In 2004, Hispanic men age 65 can expect to live another 19.5 years, 3.0 years longer than non-Hispanic White men and 4.4 years longer than non-Hispanic Black men. Data from the Census show that Hispanic women's life expectancy at age 65 is 22.8 years, 2.9 years longer than non-Hispanic White women and 4.2 years longer than non-Hispanic Black women.
Hispanics also have a higher work disability rate than other Americans. While disability data from the Census show that the overall work disability rate was 11.9 percent in 2000, the work disability rate for Latinos was 16.7 percent. Thus, Hispanics are more likely to be in need of the disability benefits that the Social Security system provides.
Finally, Latinos are less likely than other groups to receive additional sources of retirement income. For example, unpublished data from the Bureau of Labor Statistics' Annual Demographic Survey 2002 show that Hispanics were much less likely to have pension coverage; in 2001, only 26.3 percent of Hispanic workers participated in an employer-provided pension plan, compared to 43.2 percent of all U.S. workers. They also received much less income from assets than non-Hispanic Whites. According to data published by the Social Security Administration, in 2001, only 26 percent of elderly Hispanics had income from assets, compared with 62 percent of Whites.
Because Latinos have lower earnings, higher rates of unemployment, longer life expectancies, and higher rates of employment disability, and are less likely to have retirement income from other sources, they are more dependent on Social Security than other groups. In the aggregate, nearly half (47 percent) of the income for elderly Hispanics came from Social Security in 2000, compared with 38 percent for Whites and 44 percent for Blacks, data from the Social Security Administration show. For those elderly Latinos who do receive benefits, three-quarters (74 percent) of their income came from Social Security in 2000. Social Security was the sole source of income for 29 percent of elderly Hispanic couples and 45 percent of unmarried older Latinos. This was true of only 10 percent of elderly White couples and 24 percent of older White singles in 2000. Furthermore, without Social Security, the poverty rate of elderly Hispanics who are eligible for Social Security would have more than tripled, from 16 percent to 55 percent.
All these figures aside, a social system that helps workers support retirees and their dependents reflects the values that Latinos share with all Americans. Helping to care for parents and relatives here and abroad is paramount to Hispanic workers, no matter how little they earn. In view of this, the debate over reforming the Social Security system is of critical importance to the nation's Latinos, and not just for financial reasons. Lawmakers and reformers would be wise to reflect on the inspiration that has guided the development and expansion of this system over time, and the U.S. Latino worker perhaps best personifies that spirit today.
Eric Rodriguez and Kim Tucker are staff members at the policy analysis center in the office of research, advocacy, and legislation at the National Council of La Raza.