“Scrapping the cap” is a popular and effective way to address Social Security’s funding gap. Nearly three-fourths of Social Security’s projected long-term shortfall would be eliminated if the cap were scrapped without increasing benefits.

But wouldn’t such a move be opposed by high earners? The answer isn’t as obvious as you might think, because most workers with earnings above the cap stand to lose more from benefit cuts than from higher taxes. If nothing is done to shore up Social Security’s finances, EPI estimates that 70% of workers aged 32–66 who earned more than the taxable maximum in 2024 would lose more in benefit cuts than they would pay in higher taxes if the cap were scrapped.

The remaining 30% of these high earners, would, however, be better off losing 22.4% of their benefits beginning in 2034 than paying Social Security taxes on earnings above the cap. Unfortunately, this group includes politically influential multi-millionaires and billionaires.

Figure A

Figure A shows the break-even line below which workers are better off paying taxes on earnings above the cap than experiencing benefit cuts sufficient to eliminate the projected shortfall. For example, if the cap were eliminated, a worker who was 35 years old and earned below $236,000 in 2024 would pay taxes on earnings above the cap through age 66, but the value of these additional taxes would be lower than the value of forgone benefits if these were reduced by 22.4% (the amount necessary to restore the system to long-term balance).

Ultimately, most high earners stand to lose more from potential Social Security benefit cuts than from paying taxes on earnings above the cap. Scrapping the cap remains the most fair and practical path to safeguarding Social Security for future generations.

Leland Dudek
Acting Commissioner
Social Security Administration
6401 Security Boulevard

Tasha Harley
Acting Reports Clearance Officer
Social Security Administration

Submitted via http://www.regulations.gov

Re: Agency Information Collection Activities: New Emergency Request No. SSA-2025-0014

Dear Acting Commissioner Dudek:

I write to submit this comment on behalf of the Economic Policy Institute. The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank working for the last 30 years to counter rising inequality. We intentionally center low- and middle-income working families in economic policy discussions at the federal, state, and local level.

Thank you for the opportunity to comment on this proposal.

The new identity-proofing policy implemented by the Social Security Administration imposes a significant burden on claimants who have difficulty accessing or navigating the internet.

Last month, bypassing the normal review process under the pretext of an emergency, the Social Security Administration (SSA) implemented a new policy to increase the level of identity proofing needed for beneficiaries to make payment method changes by phone, including changing bank accounts used for the direct deposits. Specifically, SSA began requiring beneficiaries requesting these changes to open mySocialSecurity accounts online in order to generate new Security Authentication PINs (SAPs).

Internet-savvy beneficiaries already have the option of using SSA’s online portal. This change will therefore primarily affect beneficiaries for whom the new requirement is at best an inconvenience and at worst a major obstacle to accessing benefits in a timely manner. Many beneficiaries lacking internet access or digital proficiency will be forced to make in-person visits to SSA field offices to process what until now had been straightforward phone transactions.

Many beneficiaries will be forced to travel to distant and understaffed field offices.

Many elderly and disabled beneficiaries have mobility issues that can make visiting field offices a major challenge, especially given current long wait times simply to schedule an appointment. The Center on Budget and Policy Priorities has documented that millions of beneficiaries live 45 miles or farther from the nearest field office, 1 and field offices have been overwhelmed by worried claimants after staffing cuts and other harmful actions taken by this administration 2 caused long delays and service interruptions.3 Requiring millions more beneficiaries to schedule in-person visits only exacerbates an already dire situation.

SSA asserts the need to implement the new policy on an emergency basis without providing evidence of large-scale fraud.

The April 25, 2025 “Emergency Justification Letter” from SSA Deputy Commissioner Dustin S. Brown to Jeffrey Clark, Acting Administrator of the Office of Information and Regulatory Affairs at the Office of Management and Budget, does not provide any evidence of an emergency that would justify the immediate implementation of the new regulation.

The letter does not establish that fraud is a significant or growing problem, simply stating that “about 42% of all direct deposit fraud is phone-based.” However, if more than 42% of direct deposit changes are processed by phone, this statistic would suggest that phone transactions are relatively safe. In fact, the available evidence from SSA suggests that direct deposit fraud is extremely rare, on the order of $100 million a year, a tiny fraction of the roughly $1.6 trillion 4 SSA pays out annually in benefits 5. 

SSA has protocols for establishing a caller’s identity over the phone. Prior to recent actions taken by this administration, the agency also had an excellent track record of protecting personally identifiable information (PII), including bank account information required for the direct deposit of benefits.

The potential for fraud is undoubtedly greater since the administration gave improperly vetted members of the Department of Government Efficiency (DOGE) unrestricted access to PII.6 There is now a legitimate concern that DOGE actions could cause PII to be leaked 7 or used for purposes not intended by Congress, such as identifying immigrants 8. However, the way to address this very real risk is to restore longstanding protocols for restricting internal access to PII in Social Security databases, not forcing millions of elderly and disabled beneficiaries to travel long distances to overwhelmed field offices in order to process simple transactions.

We urge you to withdraw this policy and avoid putting additional economic and administrative burdens on seniors, people with disabilities, and other claimants.

Sincerely,
Monique Morrissey
Senior Economist
Economic Policy Institute

1. Kathleen Romig, Abruptly Eliminating Social Security Phone Services Threatens Access to Benefits, Center on Budget and Policy Priorities, April 8, 2025.

2. Consortium of Constituents with Disabilities, letter to Senate Finance Committee, March 20, 2025

3. Lisa Rein and Hannah Natanson, “Long waits, waves of calls, website crashes: Social Security is breaking down,” Washington Post, March 25, 2025

4. Social Security Administration (SSA). 2025. “Social Security Fact Sheet.”

5. Emily Peck, “DOGE Social Security plan targets small fraud at possible high cost,” Axios, March 20, 2025.

6. Lisa Rein, “Former Social Security official describes hostile takeover by Musk team,” Washington Post, March 10, 2025.

7. Celine McNicholas and Ben Zipperer, Trump is enabling Musk and DOGE to flout conflicts of interest, Economic Policy Institute, May 7, 2025.

8. Hannah Natanson, Joseph Menn, Lisa Rein and Rachel Siegel, “DOGE aims to pool federal data, putting personal information at risk,” Washington Post, May 7, 2025

• DOGE announced plans to cut Social Security staff by 7,000 workers—12% of the workforce. The Trump administration also plans to shutter or shrink dozens of Social Security Administration offices around the country.

• Administrative costs are less than 1% of Social Security spending. Since almost all Social Security spending goes towards benefits, which are set by statute, gutting the agency won’t save money for participants.

• The only way that slashing the number of workers will save large sums money is by making it hard for people to access benefits they’ve earned. Such backdoor benefit cuts, and making a popular government program look bad, are the real goals behind DOGE attacks on Social Security.

What does the Social Security Administration (SSA) do?

Social Security staff perform critically important functions. In addition to managing Social Security’s retirement program, officially known as Old Age and Survivors Insurance, career civil servants at SSA manage Social Security Disability Insurance and Supplemental Security Income that provide benefits to people with disabilities and low-income seniors. SSA personnel also enroll people in Medicare on behalf of the Centers for Medicare and Medicaid Services and assist other agencies in administering a diverse array of programs, ranging from the Department of Agriculture’s food assistance program (SNAP) to Homeland Security’s E-Verify program. Social Security itself lifts more Americans out of poverty than any other government program, and the means-tested benefits SSA administers or assists with provide critical—if meager—assistance to millions of individuals and families living below or near the poverty line.

Social Security personnel protect a trove of personally identifiable information. Sensitive information stored in SSA databases includes not only Social Security numbers, but also detailed earnings, tax, banking, and medical records. Until DOGE entered SSA headquarters, this information was carefully protected, with limited access granted to specially trained employees only for specific purposes.

What is DOGE and what is it doing to federal agencies?

On his first day in office, President Trump signed an executive order establishing DOGE. DOGE is the reorganized and renamed version of an existing unit within the White House Office of Management and Budget (OMB) tasked with “modernizing Federal technology and software to maximize governmental efficiency and productivity.” Officially, it’s headed by a veteran of the U.S. Digital Service, the predecessor to DOGE. Unofficially, it’s run by billionaire Elon Musk, a special advisor to President Trump—a reality acknowledged by the judge who issued a temporary restraining order against DOGE actions at SSA.

Trump has given Musk free rein, allowing DOGE to implement drastic cutbacks at multiple agencies. Among other actions, DOGE has gutted the Department of Education and effectively dismantled the U.S. Agency for International Development (USAID), the U.S. Institute of Peace (USIP), and the Consumer Financial Protection Bureau (CFPB). These and other efforts have been met with court challenges.

Though DOGE is an arm of the White House budget office, it has infiltrated independent off-budget agencies. Many agencies targeted by DOGE, including USAID, USIP, and CFPB, are independent agencies intentionally set up to be insulated from White House control. In addition, two independent agencies targeted by DOGE, SSA and the United States Postal Service (USPS), are off-budget programs with dedicated funding. Though OMB has no jurisdiction over these agencies, the heads of SSA and USPS were forced out after resisting DOGE incursions.

DOGE has demanded access to highly sensitive data. At many agencies, including SSA, the Office of Personnel Management, and the Departments of Treasury, Education, and Labor, DOGE programmers have accessed personally identifiable information such as Social Security numbers. In the case of SSA and many others, judges have ruled in favor of plaintiffs who would be harmed by data breaches. Nevertheless, DOGE continues to demand access to sensitive data at multiple agencies, including most recently gaining the ability to read and even possibly alter payroll data for hundreds of thousands of federal workers at the Department of the Interior.

What is DOGE doing at SSA?

A team of DOGE programmers installed themselves behind closed doors at SSA headquarters. The DOGE team at SSA, one of the largest, embarked on what a former chief of staff described as a “hostile takeover,” with an armed guard posted outside their office. When the inexperienced and improperly vetted DOGE team demanded unrestricted access to Social Security databases, the acting commissioner resigned in protest and was replaced by Leland Dudek, a mid-level manager who boasted on social media about circumventing SSA management to help DOGE. At least one DOGE associate accessed this data remotely from the Office of Personnel Management, the site of the most serious data breach in U.S. government history. A judge later issued a temporary restraining order limiting access to SSA data by DOGE associates.

SSA, under a new DOGE-friendly Acting Commissioner Leland Dudek, announced plans to reduce staffing by 7,000 employees through incentives and layoffs. This 12% reduction is a target—many more SSA employees could leave or be forced out. Cutbacks have affected all agency personnel, including critical and difficult-to-replace programmers and cybersecurity experts. Morale was already low at the agency before DOGE staff started bullying employees, threatening layoffs, and offering buyouts. Meanwhile, the DOGE-friendly acting commissioner has instituted hiring and overtime freezes and even threatened to shut down operations.

SSA was already stretched to the breaking point after years of underfunding. Even before the DOGE cuts, staffing at the agency was at a 50-year low. Meanwhile, more people are receiving Social Security benefits than ever before thanks to the aging Baby Boomer generation. Despite years of flat funding that failed to keep up with an escalating workload, House Republicans were gunning for cuts to Social Security’s administrative budget even before DOGE’s slash-and-burn efforts.

Social Security is at a breaking point. Former Commissioner Martin O’Malley has noted that not only has DOGE set the stage for a total collapse of the system, but this brain drain is being paid for by Social Security participants. Wait times for phone and in-person appointments have already skyrocketed, with half of callers hanging up before they have a chance to speak with anyone. The large number of people attempting to use the online portal crashed the system four times last month.

DOGE also announced plans to shutter or shrink Social Security Administration offices. This is part of a broader plan to terminate leases on thousands of federal offices around the country with the goal of reducing federal office space by half even as federal workers are being recalled back from remote work. These efforts have raised concerns that offices sold at fire-sale prices could be leased back later at a higher cost to taxpayers. SSA offices slated for closing include the Maryland headquarters, regional offices, and dozens of field offices that handle in-person appointments needed to process complex transactions.

DOGE actions increase costs even as service suffers. As former Commissioner O’Malley noted, SSA is now paying people not to work. DOGE has also reassigned high-level staff to fill staffing shortages in entry-level positions, such as answering calls to the 1-800 number. And since the Trump Administration announced office closings and lease terminations while it was recalling remote workers, SSA will likely end up leasing office space at a higher cost—perhaps from Trump insiders who bought the offices at fire-sale prices. The fact that DOGE has cut Internal Revenue Service staff tasked with rooting out tax evasion by large corporations and wealthy individuals makes clear that deficit reduction and preventing fraud are not its real goals.

Who is most affected by SSA cutbacks?

Wait times were too long even before DOGE, especially for accessing disability benefits. Disability determination is a complex process requiring copious documentation. As of February 2025, the process averaged 236 days for decisions issued in the initial stage and 277 days for cases that were appealed. Over a million people are waiting on an appeal, with tens of thousands dying while awaiting a decision. Delays will only get worse with staffing cuts.

Disabled claimants are particularly affected by field office closings. Social Security office closures exacerbate mobility and other barriers to accessing disability benefits. According to research published by the National Bureau of Economic Research, office closures lead to a 13% drop in the number of people receiving disability benefits in the affected area.

What is the rationale for the DOGE takeover of SSA?

Musk and others in the Trump Administration claim impossible cost savings. Musk and others in the Trump Administration have boasted that they’ll find ways to reduce spending by $500 billion or more from Social Security and other social insurance programs—a third of spending on these programs—without, somehow, cutting benefits.

Trump and Musk float outrageous fraud claims. Trump and Musk claim that Musk’s DOGE team found millions of people who were receiving benefits tied to the Social Security numbers of people born over a century ago. The truth is that inexperienced DOGE programmers misinterpreted missing-date codes on old records and assumed, without bothering to check, that millions of people were receiving benefits in the name of dead beneficiaries. When this embarrassing error was pointed out, Trump and Musk doubled down on their claims rather than admit they were wrong.

Fraud isn’t a serious problem at Social Security. Credible independent sources estimate improper payments to be less than 1% of SSA benefit payments, much of it due to errors and reporting delays, not fraud. The only widespread misuse of Social Security numbers—by undocumented workers—is helpful to Social Security’s finances because these workers contribute to the system with little chance of ever receiving benefits based on their contributions.

Should we be worried about Social Security?

Yes and no. DOGE attacks on the Social Security Administration have been extremely destructive, and some of the damage will be very difficult to reverse. However, Social Security has never missed a payment in its 89-year history, and it would be political suicide for the Trump Administration and Republican Party to allow this to happen under their watch. However, the Trump Administration, with DOGE’s help, is making it hard for people to claim benefits in the first place, harming participants and unfairly tarnishing Social Security’s reputation.

Social Security faces a long-term shortfall that would be easy to fix if Republican lawmakers listened to voters. Republican and Democratic voters alike support addressing the shortfall through revenue increases, not benefit cuts. Options for raising revenue include eliminating the cap on taxable earnings, so billionaires like Musk no longer contribute the same amount to Social Security as doctors and lawyers. Claims that Social Security is in crisis—and attempts to manufacture a crisis—serve to distract from this popular option.

The alleged rationale for putting an unelected billionaire and his team in charge of SSA and other government functions is rooting out waste. But Social Security’s administrative costs are tiny—less than 1% of spending—and improper payments are similarly inconsequential. Meanwhile, a top priority of the Trump Administration is extending tax cuts that overwhelmingly flow to wealthy people like Musk.

If it ain’t broke, DOGE will break it. As former Commissioner Martin O’Malley warned, “When they can break it, they can say, ‘Aha! We told you! This program never worked, and we were just ripping the band aid off.’” Massachusetts Senator Elizabeth Warren told Frank Bisignano, the self-described “DOGE person” who Trump has nominated to run the agency, that the only way to significantly reduce Social Security spending without Congress instituting unpopular benefit cuts is to make it very hard for people to access them. If this makes people frustrated with the agency, that’s a plus for an administration that wants you to believe that government is broken. 

The Honorable Bernie Sanders, Chair

The Honorable Bill Cassidy, Ranking Member

Senate Committee on Health, Education, Labor, and Pensions

428 Dirksen Senate Office Building

Washington, DC 20510

Re: Hearing of the Senate Health, Education, Labor, and Pensions Committee to consider “Taking a Serious Look at the Retirement Crisis in America: What can we do to expand defined benefit pension plans for workers?”

Dear Chairman Sanders, Ranking Member Cassidy, and members of the committee:

On behalf of Economic Policy Institute (EPI), I am pleased to submit this statement for the record for the February 28, 2024, Senate HELP Committee hearing on the retirement income crisis. EPI is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI believes every working person deserves a good job with fair pay, affordable health care, and retirement security. We welcome this opportunity to comment on the causes of the retirement crisis and ways to alleviate it.

The 401(k) revolution has failed working families

Steady contributions, affordability, and lifetime income are the building blocks of an effective retirement system. Social Security and traditional defined benefit pensions check all three boxes, 401(k)-style defined contribution plans check none. 

The roots of the retirement crisis can be traced to the early 1980s, when employers began shifting from secure pensions to defined contribution plans around the same time that Congress enacted cuts to Social Security to avert an imminent shortfall.

The shift from defined benefit pensions to defined contribution plans is an experiment that failed. 401(k)s were initially intended as a perk for bankers, not a substitute for pensions.1 However, 401(k)s took off quickly and now outnumber defined benefit pensions among private-sector workers by a factor of nearly eight to one (Figure A).

Figure A

401(k)s do a poor job of building savings

401(k)s made it easy for employers to offer a retirement plan since much of the cost and all of the risk fall on workers. Despite making it easier on employers, the shift from traditional pensions to 401(k)s did not increase the share of workers participating in a retirement plan, which has long hovered around 50%.2 It did, however, widen the gap between retirement haves and have-nots.3

Though defined contribution plans have outnumbered defined benefit pensions in the private sector for three decades, they have done a poor job of growing retirement savings. There are fewer assets in defined contribution plans ($10.0 trillion) than in defined benefit plans ($15.4 trillion). This does not take into account the $13.0 trillion in Individual Retirement Accounts (IRAs), perhaps half of which were rolled over from 401(k) accounts.4 However, a rough equivalence between assets held in defined benefit pensions and retirement account plans is unimpressive given the much larger number of workers participating in defined contribution plans.

Retirement account balances are highly unequal

Most households have nothing or next to nothing saved in retirement accounts. Even among households nearing or starting retirement (ages 60–64), 44% have nothing saved in these accounts, and the median household has only $10,400. The top 10%, meanwhile, have over $1 million saved in retirement accounts (Figure B).5

Figure B

Racial and ethnic disparities are stark.6 Most Black (65%) and Hispanic (70%) households have nothing saved in retirement accounts.7 Even focusing on households approaching or entering retirement (ages 60–64), 65% of Black and 82% of Hispanic households lack retirement account savings. As shown in Figure C, mean account balances also show large and persistent disparities by race and ethnicity.

Figure C

Many workers get no help from their employer or the government

There are many reasons why most households have little or nothing saved in retirement accounts, including savings diminished by high fees and pre-retirement withdrawals. But the most important factor is that nearly half of workers (47%) do not participate in a plan, in most cases because their employer does not provide one or because they are not eligible.8

Participation rates vary considerably by industry, occupation, and other factors.9 Union membership is an important factor, especially among blue-collar workers, since 94% of private-sector union members have access to a retirement plan and 84% participate.10 Retirement plan participation is higher among construction (50%), manufacturing (69%), and trade, transportation, and utilities (51%) workers, where unionization rates are relatively high, than among leisure and hospitality workers (16%), where unionization rates are low.11 Unions influence retirement plan access not only among unionized employers but also among competing employers.

Though some workers opt not to participate in an employer plan, this is not necessarily a short-sighted decision, as is often assumed. Many low-income and part-time workers are not eligible for an employer contribution and do not gain a tax advantage by participating because they do not owe income tax. These workers nonetheless face a 10% penalty if they need to access their own funds before age 59-1/2 unless they qualify for a special exemption.

Thus, it is not surprising that many low-income and part-time workers, including many retail workers, do not participate in a retirement plan. Only 9% of Dollar General workers, for example, have positive 401(k) balances even though the company considers all its employees “active participants” who are eligible to contribute their own money to the plan. Though the company offers a seemingly generous dollar-for-dollar matching contribution up to 5% of pay, workers are only eligible for the match after a year of service and 1,000 hours, and most retail workers—including, presumably, Dollar General employees—work part-time and do not last a full year.12 Though employers are required to extend eligibility to part-time workers who work at least 500 hours per year for three years (reduced to two years starting in 2025, thanks to the SECURE 2.0 Act of 2022), companies like Dollar General can continue to exclude workers by limiting their hours.

In any case, it would be difficult for most Dollar General workers to contribute to their 401(k) plan since the company has the dubious distinction of employing the highest share of workers (92%) earning under $15 per hour out of the large service-sector employers analyzed in one study.13 Dollar General’s reliance on a low-paid, part-time, and high-turnover workforce kept its 401(k) contributions to a measly $200 per worker in 2022.14

Federal subsidies for retirement accounts are costly and mostly go to high-income households

The U.S. Treasury Department estimates that contributions to tax-favored retirement accounts cost taxpayers $138.5 billion in 2021.15 However, we do not actually know how much these subsidies cost because the federal government does not track untaxed investment earnings and other factors that would be needed to calculate tax losses, and different agencies use different estimation methods.16

In contrast, we closely monitor Social Security’s finances, including long-term projections. The annual release of the Social Security Trustees report elicits concern about projected shortfalls, which the Social Security actuaries last year estimated at 1.3% of GDP over 75 years.17 Meanwhile, Andrew Biggs of the American Enterprise Institute and Alicia Munnell of Boston College’s Center for Retirement Research estimate that the combined cost of tax expenditures related to retirement similarly amounted to 1.3% of GDP annually, yet these subsidies receive far less scrutiny than Social Security’s projected shortfall.18 In addition to receiving less attention, some forgone revenues from tax-favored accounts would improve Social Security’s finances because some contributions to employer retirement plans are not subject to the payroll taxes that fund Social Security and Medicare.

This is not to suggest that all subsidies for retirement should be scrapped. However, those that disproportionately benefit upper-income households and do little to increase saving should be repurposed. The Tax Policy Center estimates that 60% of tax expenditures for retirement saving accounts go to the highest income quintile (20%).19 Since these households tend to save anyway, the subsidies do little to incentivize saving but rather induce households to steer savings to tax-favored accounts.20

Tellingly, most households approaching retirement would have accumulated more in retirement accounts if tax subsidies that were supposed to encourage saving had instead been divided equally among households and invested in Treasury bonds with no employer or employee contributions—a damning assessment of the efficacy of these supposed saving incentives.21

We need to fix 401(k)s before expanding them

There are things we can do to make 401(k)s better, but these have received less support than policies to make them bigger. The financial services industry has embraced automatic enrollment, expanding contribution limits, and pushing back the age that participants are required to start withdrawing funds. In contrast, efforts by the Obama administration and others to improve incentives for low-income savers received little industry support and took years to pass because small accounts are not lucrative. Overdue changes to the low-income Saver’s Credit passed in SECURE 2.0 will not take effect until 2027, whereas provisions benefiting higher-income households, such as raising the age for required distributions, take effect sooner.22 Another indicator of who these accounts really serve: exposés of billionaires shielding millions and even billions in tax-favored retirement accounts have not led to better rules and enforcement around contribution limits or capping account balances, though the Obama and Biden administrations proposed limits on accumulations.23

Meanwhile, efforts to ensure that retirement savers are not steered to high-cost investments by salespeople posing as financial advisors have met with fierce industry opposition.24 Though there has been a welcome trend toward lower-cost passive investment strategies, retirement savers are still being steered to inappropriate high-cost investments through gaps in rules intended to protect savers, since these rules do not apply to rollovers or complex insurance products that even financial professionals have difficulty pricing.25

This is exactly backwards. Before we funnel more money to 401(k)s, we need to ensure that they are an affordable savings vehicle for ordinary workers, not a tax dodge for the wealthy. Even then, our priority should be expanding Social Security and access to secure pensions rather than relying more on 401(k)s.

Social Security is key, but benefits are modest

Social Security replaces only 39% of pre-retirement earnings for a medium earner retiring at 65 though the replacement rate is higher for low earners and lower for high earners. Before benefit cuts were implemented in 1983, including a gradual increase in the normal retirement age, the replacement rate for a medium earner who retired at 65 was 50%.26

Social Security benefits are lower than benefits from similar plans in most peer countries. The average replacement rate for mandatory pensions in the Organisation for Economic Co-operation and Development is 51% for a medium earner—similar to the Social Security replacement rate prior to the 1983 cuts.27

Though modest, the value of Social Security benefits exceeds the value of savings in defined contribution plans for all but the wealthiest Americans. For higher income households, the value of defined benefit pensions exceeds both the value of Social Security and that of defined contribution plan savings (Figure D).

Figure D

Defined benefit pensions provide financial security for most union members and public-sector workers

Traditional defined benefit pensions are more efficient than 401(k)-style defined contribution plans. Pensions pool risk among workers who retire at different times and have different lifespans. In contrast, defined contribution plans are riskier because individual savers do not benefit from intergenerational risk-sharing or longevity risk pooling. Professionally managed pension funds also earn higher risk-adjusted returns and have lower administrative costs than individual accounts. Due to a lack of risk pooling and lower net investment returns, EPI and others have estimated that contributions to 401(k) plans need to be almost twice as large as contributions to defined benefit pensions to provide similar retirement security.28

In the private sector, most rank-and-file workers who participate in defined benefit pensions are union members. Whereas 58% of union members in the private sector have a defined benefit pension, only 7% of their nonunion counterparts do.29 Defined benefit pensions are the norm in the public sector, where secure pensions partly compensate for lower salaries. Three-quarters (75%) of all state and local government workers—including 82% of full-time workers and 82% of union members—participate in a defined benefit pension.30

Public pensions are especially critical for women and Black workers, who gravitate toward public-sector jobs with secure benefits despite a public-sector pay gap.31 Black (27%) and non-Hispanic white (27%) working households have similar rates of defined benefit pension coverage, as do unmarried or unpartnered working women (15%) and working men (13%).32

While some union members, including many auto workers, participate in single-employer pension plans, others participate in multiemployer plans jointly sponsored by employers and unions. These Taft-Hartley plans are common in sectors where workers often have longer-lasting relationships with unions than with individual employers, such as the trucking and construction industries. Multiple-employer plans such as TIAA are also common among mobile professionals, such as university professors and clergy.

Multiemployer Taft-Hartley plans can survive the demise of individual employers but run into trouble when an entire industry, or union membership in an industry, shrinks rapidly. With a low ratio of active participants to retirees, it becomes difficult for mature plans to adjust contributions to offset volatile investment returns even if the plans were adequately funded to begin with.33 Congress included assistance for troubled multiemployer plans in the American Rescue Plan of 2021, effectively stabilizing them for decades to come. However, additional steps will eventually be needed to ensure that these plans can weather the next storm and serve future generations.

The challenge of defined benefit pensions is that while they eliminate individual longevity and investment risks through risk pooling, sponsors still bear some cohort longevity and market risks because future lifespans and long-term investment returns cannot be perfectly predicted. Pension plans deal with this challenge by gradually adjusting contribution rates to offset nontransitory changes in life expectancy or investment returns—a strategy that works well for public-sector employers and multiemployer plans with a stable or growing number of active participants. Though quasi-mandatory participation can be enforced through collective bargaining agreements, extending pension-like benefits to a broader group of workers might require mandates or greater risk sharing with participants in so-called “hybrid” plans that combine elements of defined benefit and defined contribution plans.

It is time for an overhaul of our retirement system that builds on what works

Social Security is the most important source of retirement income for most workers but needs to be strengthened and significantly expanded along the lines proposed by Chairman Sanders and other cosponsors of the Social Security Expansion Act.34 We also need to expand Supplemental Security Insurance and other social insurance programs to ensure that seniors and people with disabilities are lifted above poverty and families are not devastated by medical and caregiving expenses.

Defined benefit pensions are critical to the retirement security of public-sector and unionized workers. We need to protect existing plans while exploring ways to extend secure pension benefits to more workers. Hybrid plans in some states, provinces, and countries that equitably share risk between employers and workers could serve as models for expanding multiple-employer plans in the United States.35

Three decades after 401(k)s became the most common retirement plan in the private sector, most workers approaching retirement have little or nothing in these accounts. We should stop pretending that the problem is workers and not a poorly designed system that has failed them.

We should begin by implementing the Department of Labor’s Retirement Security Rule without delay. We should also tighten and enforce 401(k) contribution rules, set a $5 million or lower limit on account balances, tax inherited balances immediately, and use the savings from these reforms to help low-income savers.

We should take steps to prevent employers from discriminating against part-time workers, including workers who would prefer to work full-time but are limited to part-time work by employers seeking to save on benefit costs. A provision in the Part-Time Worker Bill of Rights that extended retirement benefits to part-time workers who were employed for two years was included in SECURE 2.0, but more could be done to expand access to other part-time workers.

Ultimately, employers who want to avoid providing retirement benefits will find ways to do so in a voluntary system. Some state and local governments have therefore taken the step of requiring employers to at least facilitate worker contributions to state-sponsored IRAs via automatic enrollment and payroll deduction. While Auto IRAs do not allow for employer contributions, these efforts could prompt federal action, possibly including requirements for employer contributions or a government match.36 The idea of an employer mandate has gained currency in recent decades though it should not be viewed as a substitute for Social Security expansion.

Sincerely,

Monique Morrissey, Ph.D.

Senior Economist

Economic Policy Institute

Notes

1. Sarah Max, “The Inventor of the 401(k) Thinks It Has Gone Awry, Barron’s, November 16, 2018; Taylor Tepper, “Ted Benna, Father of the 401(k), on the State of Retirement Savings Today, Forbes, December 22, 2021.

2. Siavash Radpour, Michael Papadopoulos, and Teresa Ghilarducci, Trends in Employer-Sponsored Retirement Plan Access and Participation Rates: Reconciling Different Data Sources, Schwartz Center for Economic Policy Analysis Research Note #2021-01, January 2021; Andrew G. Biggs and Alicia H. Munnell, The Case for Using Subsidies for Retirement Plans to Fix Social Security, Center for Retirement Research at Boston College Issue in Brief 24-2, January 16, 2024.

3. John Sabelhaus and Alice Henriques Volz, “Are Disappearing Employer Pensions Contributing to Rising Wealth Inequality?” FEDS Notes, February 1, 2019; Nadia Karamcheva and Victoria Perez-Zetune, “Defined Benefit and Defined Contribution Plans and the Distribution of Family Wealth,” Congressional Budget Office Working Paper Series, February 2023.

4. Federal Reserve Board of Governors, Financial Accounts of the United States, Third Quarter 2023, Table L.117, 2023 Q2; Sarah Holden and Daniel Schrass, The Role of IRAs in US Households’ Saving for Retirement, Investment Company Institute, January 2022, Figure 10.

5. Though households with defined benefit pensions do not have to rely as much or at all on retirement account savings, excluding these households makes account savings look worse, not better.

6. Monique Morrissey, “Gaps in Retirement Savings Based on Race, Ethnicity and Gender,” Statement before the U.S. Department of Labor Advisory Council on Employee Welfare and Pension Benefit Plans, June 25, 2021.

7. Author’s analysis of Federal Reserve Survey of Consumer Finances microdata, 2022.

8. U.S. Bureau of Labor Statistics (BLS), Employee Benefits in the United States, March 2023 (Excel tables).

9. Monique Morrissey, Siavash Radpour, and Barbara Schuster, The Older Workers and Retirement Chartbook, Chapter 2, Economic Policy Institute and Schwartz Center for Economic Policy Analysis, November 16, 2022.

10. U.S. Bureau of Labor Statistics (BLS), Employee Benefits, 2023.

11. U.S. Bureau of Labor Statistics (BLS), Employee Benefits, 2023; U.S. Bureau of Labor Statistics, Union Member—2023 (News Release), January 23, 2024.

12. U.S. Bureau of Labor Statistics (BLS), “Retail Trade: NAICS 44-45,” Industries at a Glance (web page), February 21, 2024. Annual separations in the retail trade industry in 2023, derived by summing monthly rates, was 55% in 2023 based on BLS Job Openings and Labor Turnover Survey (JOLTS) data accessed on the BLS JOLTS website February 27, 2024.

13. Annette Gailliot, Kristen Harknett, Daniel Schneider, and Ben Zipperer, “The Company Wage Tracker: Estimates of Wages at 66 Large Service Sector Employers,” The Shift Project and the Economic Policy Institute Research Brief, April 2022.

14. Author’s estimate based on Dollar General 401(k) Form 5500 for 2022, accessed through https://www.efast.dol.gov/5500Search/ on February 27, 2024; and Dollar General Form 10-K annual report for 2022, accessed through https://www.sec.gov/edgar/searchedgar/companysearch on February 27, 2024.

15. U.S. Department of the Treasury, Tax Expenditures, FY 2024, Table 4, March 2023, accessed through https://home.treasury.gov/policy-issues/tax-policy/tax-expenditures on February 27, 2024.

16. Benjamin H. Harris, Eugene Steuerle, and Caleb Quakenbush, Evaluating Tax Expenditures: Introducing Oversight into Spending Through the Tax Code, Tax Policy Center, July 10, 2018.

17. 2023 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

18. Andrew G. Biggs and Alicia H. Munnell, The Case for Using Subsidies for Retirement Plans to Fix Social Security, 2024.

19. Tax Policy Center, “T22-0264 – Tax Benefit of Retirement Savings Incentives (Present Value Approach), Baseline: Current Law, Distribution of Federal Tax Change by ECI Percentile, 2022,” December 29, 2022, accessed via taxpolicycenter.org on February 27, 2024.

20. Research summarized in Andrew G. Biggs and Alicia H. Munnell, The Case for Using Subsidies for Retirement Plans to Fix Social Security, 2024.

21. Author’s analysis of U.S. Treasury Department, “Present Value of Tax Expenditures” tables, 2001-2022; Federal Reserve Board of Governors Survey of Consumer Finances microdata, 2001-2022; and Federal Reserve Board of Governors, “Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis,” (accessed through FRED Economic Data, Federal Reserve Bank of St. Louis on February 27, 2024).

22. American Society of Pension Professionals and Actuaries (ASPPA), Key SECURE 2.0 Act Provisions and Effective Dates, January 11, 2023.

23. Fred Hiatt, “Obama’s Modest Proposal to Cap Retirement Entitlements,” Washington Post, May 5, 2013; Justin Elliott, Patricia Callahan, and James Bandler, “Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank,” ProPublica, June 24, 2021; Ted Godbout, “Biden Budget Resurrects ‘Build Back Better’ Retirement Plan Revenue Raisers,” ASPPA, March 10, 2023.

24. Tobias Salinger, “DOL Hearing Promises Passionate Support and Resistance from Industry—Here’s a Sample,” Financial Planning, December 11, 2023.

25. Monique Morrissey and Heidi Shierholz, “EPI comments on DOL’s Retirement Security Rule—Definition of an Investment Advice Fiduciary,” statement submitted to the U.S. Department of Labor Employee Benefits Security Administration on January 2, 2024.

26. Kyle Burkhalter and Chris Chaplain, “Replacement Rates for Hypothetical Retired Workers,” Social Security Administration Actuarial Note 2023.9, March 2023.

27. Organisation for Economic Co-operation and Development, Pensions at a Glance 2023, Table 4.1.

28. Monique Morrissey, Toward a Universal, Secure, and Adequate Retirement System. Retirement USA Conference Report, October 21, 2009; Dan Doonan and William B. Fornia, A Better Bang for the Buck 3.0, National Institute on Retirement Security, January 2022.

29. U.S. Bureau of Labor Statistics (BLS), Employee Benefits, 2023.

30. U.S. Bureau of Labor Statistics (BLS), Employee Benefits, 2023.

31. Nari Rhee, Closing the Gap: The Role of Public Pensions in Reducing Retirement Inequality, National Institute on Retirement Security, September 2023.

32. Married or partnered households have more than double the rate of pension coverage (31%) as single people (14%), in part because there may be two people employed. The source is the author’s analysis of Federal Reserve Survey of Consumer Finances microdata, 2022.

33. Jason Russell, The Role of Plan Demographics in the American Rescue Plan Act, Keynote at the National Institute on Retirement Security 2023 Annual Retirement Policy Conference, February 28, 2023 (presentation slides).

34. Stephen Goss, Letter to The Honorable Bernie Sanders and the Honorable Peter DeFazio (analysis of the Social Security Expansion Act), Social Security Administration Office of the Chief Actuary, June 9, 2022.

35. Dan Doonan and Elizabeth Wiley, The Hybrid Handbook: Not All Hybrids Are Created Equal, National Institute on Retirement Security, May 2021; J. Mark Iwry, David C. John, Christopher Pulliam, and William G. Gale, Collective Defined Contribution Plans, Economic Studies at Brookings, September 2021; Charles E.F. Millard, David Pitt-Watson, and Angela M. Antonelli, Securing a Reliable Income in Retirement: An Examination of the Benefits and Challenges of Pooled Funding and Risk-Sharing in Collective Defined Contribution (CDC) Plans, Georgetown University Center for Retirement Initiatives, Policy Report 21-03, April 2021; Monique Morrissey, Risk Sharing in a Voluntary Retirement Plan, Economic Policy Institute Technical Paper, August 2022.

36. See, for example, Teresa Ghilarducci, Guaranteed Retirement Accounts: Toward Retirement Income Security, Economic Policy Institute Briefing Paper #204, March 3, 2008; Gary Koenig, Jason J. Fichtner, and William G. Gale. Supplemental Transition Accounts for Retirement. AARP, January 2018; Chris Coons and Amy Klobuchar. “Most Americans Can’t Save for Retirement. We Want to Fix That.” CNN Business, April 25, 2019; John Hickenlooper and Thom Tillis, “Retirement Savings for Americans Act: Bipartisan, Bicameral Retirement Savings for Americans Act Would Make Saving for Retirement Reliable, Real, and Attainable for American Workers,” October 18, 2023.

This is the first of two reports on older workers’ responses to the American Working Conditions Survey (RAND Corporation 2015, 2018). This report focuses on six categories of working conditions that are considered onerous or dangerous for workers, and that may be even more so for older workers:

• Physical demands, such as moving heavy loads or people (Figure A)
• Environmental hazards or burdens, such as exposure to chemicals or infectious materials (Figure B)
• Difficult schedules, such as shift work or last-minute scheduling (Figure C)
• High pressure, such as working to tight deadlines or at very high speeds (Figure D)
• Low control over work decisions, such as the order of tasks or timing of breaks (Figure E)
• Adverse social interactions, such as threats or violence (Figure F)

The analysis in this report suggests that roughly half of older workers ages 50–70 experience each of these categories of difficult working conditions, with the exception of adverse social interactions (which affect less than 15% of older workers). The average older worker experiences 2.6 of these categories.

Quantifying the large share of older workers with difficult jobs serves as a reality check for policymakers and researchers who view later retirement as an easy way for workers to close retirement income gaps.

A second EPI report will focus on how well, or how poorly, employers are meeting the needs of older workers in terms of job satisfaction, hours, pay and benefits, future job prospects, and preparing for retirement. The second report is intended to help inform discussions around older worker recruitment and retention at a time when workers age 50 and older make up a third of the workforce, the highest share on record, yet were disproportionately likely to exit during the pandemic.1

Both reports are companions to the Older Workers and Retirement Chartbook, a joint project of the Economic Policy Institute and the Schwartz Center for Economic Policy Analysis (Morrissey, Radpour, and Schuster 2022). Among other things, the chartbook documents that 31.6% of workers ages 55­–64 and 24.1% of workers age 65 and older have physically demanding jobs.2 The current report builds on these findings using a different survey (the American Working Conditions Survey) and a broader array of working conditions.

Background and related research

It has been extensively documented that the life expectancy of lower-paid, blue-collar, or non-college-educated workers is shorter than that of higher-paid, white-collar, or college-educated workers, and that these gaps have widened in recent decades.3 Some of these gaps reflect physical demands and workplace hazards that many lower-paid workers are exposed to. Workplace stressors such as poor work-life balance and a lack of autonomy are also more widespread among lower-paid workers and are linked to poor health, disability, and premature death. However, lack of access to medical care, behavioral risks such as smoking, and other factors correlated with low socioeconomic status also negatively affect health, making it challenging to isolate the effects of difficult working conditions.4

This report builds on earlier research documenting working conditions experienced by older workers, including reports from the Center for Economic and Policy Research (CEPR) that link older workers’ occupations with physically demanding and onerous working conditions documented in the Occupational Information Network (O*NET) (Rho 2010; Bucknor and Baker 2016). CEPR’s 2016 study, focusing on a somewhat older age group than this report, found that 34.5% of workers age 58 and older had physically demanding jobs; 22.1% of these older workers had jobs with difficult working conditions; and 43.8% had jobs that met one or both of these criteria in 2014. Though the metrics in the current report are not directly comparable with those in the CEPR reports, they corroborate the CEPR findings that many older workers have onerous or hazardous jobs.

Some workers do leave physically demanding jobs as they get older, either transitioning to less physical jobs or leaving the workforce entirely, often due to poor health. Thus, for example, between 2003 and 2018, there was a small decline in the number of construction laborers among the 1954–1968 birth cohort despite rapid growth in that occupation. As a result, workers ages 50–64 in 2018 made up 20.6% of that occupation, less than their 26.9% share of the workforce.5

This is not true of all physically demanding occupations, however. Between 2003 and 2018, the number of personal and home care aides more than doubled among the 1954–1968 birth cohort. While this also reflects a rapid growth in that occupation, prime-age workers ages 35–49 were slightly underrepresented in this occupation in 2003, while older workers ages 50–64 were slightly overrepresented in 2018, making up 30.8% of the occupation and 26.9% of the overall workforce.

A related occupation—nursing, psychiatric, and home health aides—was also slightly overrepresented among workers ages 50–64 in 2018 (28.2% vs. 26.9%).6 These aides—overwhelmingly women, workers of color, and immigrants—perform essential work for extremely low pay that does not compensate for the risks they face (Dorman and Boden 2021; Robertson, Sawo, and Cooper 2022). Home health aides, for example, are at high risk of overexertion and falling injuries because their job often involves moving patients without assistance or proper equipment (AIHA 2021).

How do older workers’ jobs compare with prime-age workers’ jobs?

With many more years of experience, we might expect older workers to have better jobs than prime-age workers—and they do, on average. However, the differences are smaller than might be expected, and many older workers remain in difficult jobs.

As is discussed in more detail later in this report, older workers ages 50–70 are less likely than prime-age workers ages 35–49 to have demanding schedules, work under high pressure, or experience adverse social interactions. Older workers are also less likely than prime-age workers to have physically demanding jobs or be exposed to uncomfortable or hazardous environments; however, these differences are often small and statistically insignificant. Older workers are about as likely as prime-age workers to have little control over work decisions, which can contribute to stress and poor health.

Of the six categories of difficult working conditions discussed in this report, older workers experience on average 2.6 of them, while prime-age workers experience 3.1.

Any advantages enjoyed by older workers stem from the fact that some workers move to better jobs as they gain skills and experience, while workers in poor health or with bad jobs are more likely to exit the workforce. In addition, some older workers consider themselves semi-retired but transition to easier, often part-time, “bridge” jobs. Though older workers may be less likely than prime-age workers to have physically taxing or hazardous jobs, difficult working conditions combined with declining health put older workers at greater risk for serious injuries.

How do older U.S. workers fare compared with older European workers?

Throughout this report, we share data on working conditions faced by older European workers as a point of comparison.

By some measures, older European workers appear to have less physically demanding jobs and less demanding schedules than their U.S. counterparts. They are about as likely as older U.S. workers to be exposed to potentially hazardous environmental conditions, have high-pressure jobs, or experience adverse social interactions. They appear more likely than older U.S. workers to say they have little control over their work.

These comparisons should be approached with caution, though, because the European survey was fielded three years before the U.S. survey, covers a somewhat wider age range, and does not include all the questions from the U.S. survey selected for this report. (See the technical note.)

Half of older workers have physically demanding jobs

As shown in Figure A, half (50.3%) of older workers engage in at least one physical activity that can lead to injury. These include carrying or moving heavy loads, lifting or moving people, or working in tiring or painful positions at least a quarter of the time. Prime-age workers are more likely to engage in these activities (55.5%), but the difference between the two age groups is fairly small.

Figure A

More older workers might be considered to have physically demanding jobs if we included those who stand all or almost all the time at work, but this question was not included in the 2018 American Working Conditions Survey. In 2015, 29.3% of older workers had jobs that entailed standing all or almost all the time. Including these workers, 56.2% of older workers had physically demanding jobs in 2015, whereas the share of older workers in physically demanding jobs was 50.3% in 2015 if standing is not included.7

Older European workers are less likely than older U.S. workers to have jobs that involve carrying heavy loads (29% vs. 36.1%) or lifting or moving people (9% vs. 15.6%). However, older European workers are more likely than older U.S. workers to say they work in tiring or painful positions (43% vs. 36.9%).8

Moving heavy loads or people and working in tiring or painful positions takes a toll on workers’ musculoskeletal systems over time, especially if actions are done repeatedly and in awkward positions. Musculoskeletal disorders are the largest category of Social Security Disability Insurance awards among adults (SSA 2022, Chart 6). Workers in physically demanding occupations also face greater accident risk (Abdalla et al. 2017).

More than half of older workers are exposed to negative environmental conditions

As shown in Figure B, over half of older workers (54.2%) are exposed to at least one unpleasant, unhealthy, or potentially hazardous condition in their physical work environment at least a quarter of the time, about the same share as prime-age workers (55.0%). Older workers are less likely than prime-age workers to breathe secondhand tobacco smoke, handle chemicals, breathe vapors, be exposed to loud noise, or be exposed to vibrations. They are more likely to be exposed to low temperatures. Differences in exposure to infectious materials, smoke and fumes, or high temperatures are not statistically significant.

Figure B

By most measures, older European and U.S. workers are about equally likely to be exposed to potentially harmful physical environments: 13% of older European workers handle infectious materials (compared with 15.6% of older U.S. workers); 7% breathe secondhand tobacco smoke (vs. 6.7%); 17% handle chemical products (vs. 16.9%); 10% breathe vapors (vs. 10.9%); 15% breathe fumes, powder, or dust (vs. 13.9%); 26% are exposed to loud noise (vs. 27.4%); and 19% handle vibrating tools or machinery (vs. 16.4%). None of these differences are statistically significant. Older European workers are, however, less likely to be exposed to low temperatures (22% compared with 32.3%) or high temperatures (23% vs. 35.8%).9

Unfortunately, the American Working Conditions Survey does not ask about working conditions that increase the risk of many types of accidents, such as falls. Workplace hazards interact with health factors such as worsening vision, hearing, reflexes, and balance to increase the risk of accidents that put many older workers in grave danger. Older workers also suffer more serious consequences than younger workers from incidents such as falls and are overrepresented in some dangerous occupations, such as farming (CPWR et al. 2009; National Research Council and Institute of Medicine 2004; Smith and Pegula 2020).

Even if older workers face less hazardous working conditions than other workers, these hazards can have more serious repercussions for older workers. For example, while older workers may be less likely than other workers to be killed falling from heights, presumably because they are less likely to work in construction trades and other occupations in which the risk of these injuries is elevated, they are more likely to be killed from falls on the same level (Rogers and Wiatrowski 2005).

Because older workers tend to suffer more serious injuries than younger workers from similar incidents, workers 65 and older are more than twice as likely as workers as a whole to suffer fatal workplace injuries: 8.4 deaths per 100,000 full-time-equivalent (FTE) workers versus an average of 3.6 deaths per 100,000 FTE workers overall in 2021 (BLS 2022). Workers ages 55–64 have the next-highest fatality rate (4.6 deaths per 100,000 FTE workers).

Based on a measure that tracks occupational injuries and illnesses resulting in days away from work, nonfatal occupational injury and illness rates declined across age groups between 2011 and 2019 before spiking in 2020 due to the pandemic. However, the decline was steeper for younger workers than for older workers, who in earlier years typically had fewer—albeit more serious—nonfatal injuries and illnesses (BLS 2023a; Rogers and Wiatrowski 2005; CDC 2011). In 2019, injury and illness rates for workers ages 45–54, 55–64, and 65 and older were 98.3, 109.1, and 98.3 injuries or illnesses per 10,000 full-time-equivalent workers, respectively, compared with an overall average rate of 94.8 (BLS 2023a). These injuries and illnesses also resulted in more time off work: The median number of days lost from a nonfatal work injury or illness was 12, 14, and 15 days for workers ages 45–54, 55–64, and 65 and older, respectively, compared with an overall median of 9 days (BLS 2023b).

The Bureau of Labor Statistics does not track fatal occupational illnesses. However, the available evidence suggests that health vulnerabilities and occupational exposure appear to have made the COVID-19 pandemic especially deadly for some older workers. While some occupations with high COVID-19 mortality rates—such as food preparation and serving occupations—employ relatively young workers, other occupations have high mortality rates due to a combination of age and exposure risk factors. These doubly dangerous occupations are: building and grounds cleaning and maintenance; community and social services; installation, maintenance, and repair; and production occupations (a broad category that includes most manufacturing and food processing occupations).10

Another indication that older workers have been especially vulnerable during the pandemic is that total nonfatal illness and injury rates increased nearly as fast between 2019 and 2020 for workers ages 45–54 (31.9%) and ages 55–64 (30.6%) as the overall average (34.2%) (BLS 2023a). Since much or all of the increased incidence was probably due to the pandemic, these estimates can serve as a rough indicator of the likelihood of COVID-19 exposure. Since overall COVID-19 mortality rates for older age groups are up to 25 times11 that of the 18–29 age group that serves as a reference, these older workers likely died at greater rates from COVID-19 exposure on the job (CDC 2023). Though nonfatal illness and injury rates increased more slowly between 2019 and 2020 for workers 65 and older (9.7%) than for other workers (BLS 2023a), likely due to a jump in retirements among older workers in occupations characterized by high physical proximity to others (Davis 2021), the COVID-19 mortality rate for people age 65 and older is at least 65 times that of people ages 18–29 (CDC 2023).

Half of older workers have difficult schedules

As shown in Figure C, half of older workers (53.7%) and two-thirds of prime-age workers (66.1%) report at least one indicator of a difficult or precarious work schedule. Fewer older workers than prime-age workers say that poor work-life balance causes their work to interfere with family or social commitments; that their employer engages in last-minute (day-before or same-day) scheduling; that they usually work 48 or more hours per week at their main job; that they worked at night at least once in the past month; or that they work shifts.12

Figure C

Older European workers appear to have less demanding schedules than their U.S. counterparts, with 16% reporting night work (compared with 24.5% of older U.S. workers) and 16% reporting shift work (vs. 26.5%).13 Older European workers are also less likely to have worked at least one 10+ hour day in the past month (31% vs. 52.5%) (indicator not shown in Figure C).

Studies have found links between long hours, shift work, poor work-life balance, and poor health (Goh, Pfeffer, and Zenios 2015). Irregular schedules common in the service sector are associated with psychological distress, poor sleep, work-family conflict, and economic insecurity among older workers (Abrams, Harknett, and Schneider 2022). For workers paid by the hour, irregular schedules not only affect work-life balance but also make incomes unpredictable and contribute to stress, poor sleep, and other negative health outcomes (Harknett and Schneider 2020). Last-minute scheduling exacerbates the uncertainty of irregular hours and makes it difficult for workers to take on other work.

Night shift work is also harmful to workers’ health. It is linked to risk factors for heart disease, diabetes, stroke, and other serious health problems (Cheng et al. 2021), compounding health risks that increase with age. Though the American Working Conditions Survey does not differentiate between overnight shifts and earlier shifts or evening work, 7.9% of older workers and 10.8% of prime-age workers report both working nights and working shifts (not shown in Figure C).

Nearly half of older workers have high-pressure jobs

As shown in Figure D, nearly half of older workers (46.1%) have at least one indicator of a high-pressure job, though this share is less than the share of prime-age workers who report the same (63.6%). Fewer older workers than prime-age workers say they deal with frequent negative disruptions, that they usually do not have enough time to finish their work, that they work to tight deadlines all or almost all the time, or that they work at very high speeds all or almost all the time.

Figure D

Older European workers are about as likely as older U.S. workers to report frequent negative disruptions (15% vs. 17.8%); to work to tight deadlines all or almost all the time (24% vs. 27.0%); or to work at very high speeds all or almost all the time (19% vs. 19.1%). None of these differences are statistically significant. Older European workers are more likely than older U.S. workers to say that they usually do not have enough time to finish their work (26% vs. 19.7%).

High-pressure jobs are “risk multipliers,” to quote a report on the high injury and illness rates experienced by Amazon warehouse workers (Berkowitz and Athena Coalition 2020; Greene and Alcantara 2021). Amazon warehouse workers trying to meet demanding quotas were among the older workers whose on-the-job injuries are vividly described in the book Nomadland (Bruder 2017). Amazon delivery drivers also suffer high injury rates linked to high-pressure delivery quotas (SOC 2022). Meat processing, which employs many older workers, is another industry in which speed has been linked to high injury rates (Gremillion and Berkowitz 2019; Human Rights Watch 2019; GAO 2016).

Nearly half of older workers have limited control over their work

As shown in Figure E, nearly half of older workers (45.9%) report at least one indicator of low job control, a share not significantly different from that of prime-age workers (47.9%). Older workers are somewhat less likely to say they lack control over break times or work speed and somewhat more likely to say they lack control over work methods. For other indicators, differences between the two age groups are not statistically significant.

Figure E

Older European workers appear to have less autonomy than older U.S. workers: 28% say they rarely or never choose break times, compared with 17.6% of older U.S. workers; 24% (vs. 18.0%) say they rarely or never influence decisions important to their work; 25% (vs. 19.0%) say they have no choice in work speed; 27% (vs. 25.2%) say they have no choice in work methods; and 29% (vs. 23.0%) say they have no choice in the order of tasks.

In a discussion about how long it is reasonable to expect workers to continue working at older ages, autonomy may seem less important than, say, risk of injury. However, a positive association between job control and health has been documented since the influential “Whitehall” studies of British civil servants in the 1970s.14 Though it is not surprising that higher-status workers (who tend to have more control over their work) are also healthier than lower-status workers (who tend to have less control), there is some evidence that the relationship between job control and health is causal and not simply a function of socioeconomic status. However, the relationship may vary by type of worker (blue-collar or white-collar) and other factors, such as whether a low-control job is also highly demanding.

Many older workers experience adverse social interactions at work

Older workers are less likely than prime-age workers to be on the receiving end of abusive and violent behavior (14.1% vs. 24.4%), though many still endure bullying, humiliation, threats, and verbal abuse on the job. As shown in Figure F, older workers are less likely than prime-age workers to say that they endured sexual harassment or bullying in the past 12 months or that they endured threats, unwanted sexual attention, or verbal abuse in the past month. Differences between the two age groups in exposure to physical violence in the past 12 months or humiliating behavior in the past month are not statistically significant.

Figure F

European workers age 50 and older and U.S. workers ages 50–70 are about equally likely to be subject to any of these adverse social interactions (13% vs. 14.1%).

When we look at data on injuries intentionally inflicted on workers that are serious enough to result in days away from work, we see that workplace violence has been a growing problem in recent years. These injuries increased from 2.8 per 10,000 full-time-equivalent workers in 2011 to 3.6 per 10,000 FTE workers in 2019. The rate of intentional injuries dipped to 3.3 per 10,000 FTE workers in 2020, likely due to increased remote work during the COVID-19 pandemic. Rates for older workers also trended up during the 2011–2019 period, though older workers are generally less likely to be the targets of violence. In the last pre-pandemic year (2019), intentional injury rates for workers ages 45–54, 55–64, and 65+ were 3.2, 3.1, and 2.0 per 10,000 FTE workers, respectively, as compared with an overall average of 3.6 per 10,000 FTE workers (BLS 2023c).

The Bureau of Labor Statistics has only been tracking intentional injuries since 2011. Another measure of nonfatal workplace violence, based on a survey of crime victims and not limited to incidents resulting in missed work, suggests that workplace violence was more prevalent in the mid-1990s than it is today but shows a recent increase (Harrell et al. 2022, Figure 4.1). Workplace homicides were also higher in the mid-1990s and, unlike nonfatal attacks, have been relatively flat in recent years. Homicides accounted for 8–10% of fatal occupational injuries in 2011–2019 (BLS 2023c; Harrell et al. 2022, Figure 1.2).

Among broad occupation groups, medical, mental health, law enforcement, and security occupations suffer the highest rates of violent injury (Harrell et al. 2022, Table 5.2). Specific occupations that are often targeted and employ an older workforce include doctors, nurses, mental health practitioners and social workers, special education teachers, bus drivers, and taxi drivers.15

News reports suggest that the pandemic and social divisions may have intensified abuse aimed at workers, especially in medical settings. However, there is limited survey data on abuses that stop short of physical violence, and data for the pandemic years is just now starting to become available.

Discussion

In comparing reporting of working conditions between prime-age and older workers, it can be useful to keep in mind that these reflect differences between generations as well as changes workers experience over the course of their working lives. Generational and age differences, as well as cultural and societal differences between workers in the United States and in Europe, may also influence how these different groups experience similar working conditions. In other words, what one worker might find burdensome another might see as normal.

For example, in Albania, few workers report being exposed to adverse social behaviors such as verbal abuse, bullying, threats, or sexual harassment, according to the European Working Conditions Survey. In contrast, such negative social interactions appear common in the Netherlands, a far wealthier country (Parent-Thirion et al. 2017, Figure 51). Other surveys corroborate the finding that workers in high-income countries are more likely to say that they experience violence or harassment (ILO 2022). It is possible that Dutch coworkers or clients are more abusive than their Albanian counterparts. It is also possible that Albanian workers have fewer social interactions at work, that Albanian workers experiencing abuse are more reluctant to answer honestly or to complete the survey, or that some behavior that Albanian workers consider simply annoying Dutch workers consider abusive. More than one explanation could be true.

Differences in reporting can also reflect individual tastes. For example, some workers may enjoy the physical or mental challenges of a particular occupation, while others may find such work onerous.

In addition, some measures used in this report may not always be reliable indicators of difficult jobs even without subjective responses. For example, a grocery store cashier may have regular union-negotiated breaks and friendly coworkers who can cover in case of emergency. A delivery driver, on the other hand, may have difficulty taking rest breaks because of intense time pressure, but can decide for herself the timing of quick bathroom breaks based on access to facilities. In these scenarios, the grocery cashier has better working conditions when it comes to breaks and probably feels more in control at work than the harried delivery driver, but only the grocery cashier would be considered to have “low control” based on her inability to choose the timing of breaks. In other words, some measures of “low control” may reflect rules put in place to protect workers and ensure fairness, which might partly explain why older European workers, who are more likely to be represented by a union or similar body than older U.S. workers, are more likely to say they lack input on work-related decisions.16

Just as the timing of breaks may be an imperfect measure of job control, the connection between job control and well-being is also complicated. Nevertheless, low control and other aspects of work that can be gleaned from the American Working Conditions Survey can provide us with a more complete picture of the challenges facing older workers than focusing narrowly on physical demands and health-related work limitations. Some types of difficult working conditions may be imperfectly measured or poorly understood but are more harmful to workers than more easily quantifiable or better-known risks. It is likely, for example, that shift work and stress associated with police work have more of an impact on police officers’ life expectancy than the dangers normally associated with this occupation (Violanti et al. 2013; Ma et al. 2014).

Conclusion

By some measures, older workers are somewhat less exposed to physical risks and stressors than prime-age workers, consistent with the idea that some workers with difficult jobs, such as construction laborers, either transition to easier jobs or leave the workforce as they age. However, differences between prime-age and older workers are generally small, and roughly half of older workers endure physical demands, environmental hazards or burdens, difficult schedules, high pressure, or low control over their work. One in 7 older workers experience physical or verbal abuse on the job. The average older worker experiences 2.6 categories of difficult working conditions.

Workers who exit the workforce early often do so before they are ready to retire. The Older Workers and Retirement Chartbook documents that most workers who retire before age 65 do so involuntarily, with retirement preceded by poor health or disability; by a layoff, business closure, or ownership change; or by changes in working conditions or compensation.17

Though older workers’ exposure to risk might be slightly lower than that of prime-age workers, the repercussions are often much more serious. This is certainly true of accidental injuries and illnesses such as COVID-19, which are much more likely to be fatal for older workers. However, it is likely also true of many stressors that affect health, such as working nights.

While some occupations are clearly more dangerous than others as measured by injury rates, the wear and tear associated with physical labor, the cumulative impact of exposure to toxic substances, and the effects of other difficult working conditions are not always well documented but may contribute more to disability and premature death than accidents, though it can be challenging to differentiate between the effects of working conditions and socioeconomic status.18

The takeaway is that it is misguided and unrealistic to expect older workers with onerous or hazardous jobs to keep working into advanced old age. A better way to close the retirement income gap is to support workers’ ability to be fully employed during their prime working years and ensure that all jobs come with benefits that lead to a secure retirement. Ways to support workers include pursuing full-employment macroeconomic policies, providing more support for workers with caregiving responsibilities, and expanding Social Security. All workers would also be helped by stronger health and safety protections.

Acknowledgments

The author would like to thank RRF Foundation for Aging for its generous support of this project, Jori Kandra for timely and helpful research assistance, and Krista Faries for excellent editing.

Notes

1. EPI analysis of Current Population Survey microdata (Flood et al. 2022).

2. Based on data from the Health and Retirement Study, with non-college, Black, and Hispanic workers at even greater risk (Morrissey, Radpour, and Schuster 2022, Figures 1C and 1D).

3. See, for example, Waldron 2007; Rutledge 2018; Society of Actuaries 2019; Deeg, De Tavernier, and de Breij 2021.

4. For discussion of these factors, see Landsbergis, Grzywacz, and LaMontagne 2014; Clougherty, Souza, and Cullen 2010; Goh, Pfeffer, and Zenios 2015; Lovejoy et al. 2021; Pebley et al. 2021.

5. Author’s analysis of Current Population Survey microdata (Flood et al. 2022).

6. Author’s analysis of Current Population Survey microdata (Flood et al. 2022).

7. Author’s analysis of RAND Corporation 2015 microdata.

8. Author’s analysis of RAND Corporation 2018 and Eurofound n.d.; European statistics not shown in Figure A.

9. Author’s analysis of RAND Corporation 2018 and Eurofound n.d.; European statistics not shown in Figure B.

10. Author’s analysis of Billock, Steege, and Miñino 2022, Figure 1, and Current Population Survey data (Flood et al. 2022).

11. CDC data report that the COVID mortality rate for 50- to 64-year-olds is 25 times the mortality rate for 18- to 29-year-olds; for 40- to 49-year-olds, it is 10 times the rate.

12. Though the survey did not define shift work, it is usually understood to mean round-the-clock work divided into two or three shifts, such that some work is done outside of daytime hours.

13. Author’s analysis of RAND Corporation 2018 and Eurofound n.d.; European statistics not shown in Figure C.

14. Studies looking at the relationship between job control and health include Bosma et al. 1997; Clougherty, Souza, and Cullen 2010; Goh, Pfeffer, and Zenios 2015; Orton et al. 2019.

15. Author’s analysis of Current Population Survey microdata (Flood et al. 2022) and Harrell et al. 2022, Table 5.1.

16. Author’s analysis of RAND Corporation 2018 and Eurofound n.d.

17. See Morrissey, Radpour, and Schuster, Figures 1F, 1G, 1H, and 1I.

18. Studies analyzing causes of disability and premature mortality include Hummer and Hernandez 2013; Sabbath et al. 2013; Sewdas et al. 2019; de Wind et al. 2020; Roy et al. 2020; Schram et al. 2021; Boot et al. 2022.

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If the X-date comes and nothing is done except the federal government fails to fulfill its spending obligations, economic calamity will ensue: People who depend on programs like Social Security and food stamps will suffer, and the spillover effects on the larger economy would certainly cause a recession—and a truly horrible one if the stalemate lasted for any significant amount of time.

The factor forcing this terrible outcome would not be any implacable economic reality, it would simply be Congressional Republicans weaponizing the absurd political institution that is a statutory debt limit that can only be adjusted through acts of Congress. With a responsible Congress, the debt limit would be a silly inconvenience to policymaking. But twice in the past 12 years, Republican-led efforts in Congress have brought the nation to a near-crisis—and the current near-crisis could still graduate into a real crisis in coming weeks.

In 2011 (the last instance of protracted debt limit brinkmanship), the GOP demands for large spending cuts did mammoth damage to the living standards of U.S. families by sabotaging the economic recovery from the Great Recession and financial crisis of 2008–09. This time around, the GOP demands are not just for recovery-damaging spending cuts, but also for a complete do-over on already passed legislation; Speaker McCarthy’s recently released list of demands includes rolling back student debt relief as well as the Inflation Reduction Act’s (IRA) climate provisions and enhanced enforcement against the nation’s rich tax cheats.

The cuts to IRA climate provisions would be literally catastrophic—the act’s climate provisions are the only thing keeping the U.S. economy on a path of needed emissions reductions to contain the worst damages of climate change. Further, hundreds of billions of dollars of planned private investment have already begun based on the incentives provided in the IRA. Stripping these climate provisions away would snap the economy back to a path toward climate catastrophe and be a huge waste of society’s resources.

All of this clearly calls for abolishing the debt limit to keep irresponsible Congressional majorities from holding the nation’s economy hostage to its policy preferences in the future. But what makes today’s debt limit showdown so bad is how normalized it has become—often with the encouragement of too many in D.C. policymaking circles who should know better. Many institutions and people who had argued forcefully in the past that the debt limit should not be wielded to force policy concessions—from business lobbies to former Treasury Secretaries to bipartisan think tanks—have instead this time blessed the absurdly shallow “deal” put forward by Speaker McCarthy. If this drive to normalize debt limit brinkmanship does not spark an economic meltdown this time, we all know where it leads next time.

This makes it imperative that the Biden administration does whatever it takes to keep the debt limit from binding our nation’s continued prosperity (yes, the nod to Mario Draghi is intentional). Their negotiations with Speaker McCarthy cannot include spending cuts or special legislative processes that make it easier to enact cuts going forward (no supercommittees).

Some defenders of the debt limit claim that it is good because it forces Congress to “reflect” on the nation’s fiscal trajectory. Former Trump administration budget director Mick Mulvaney made this claim about how the debt limit should be treated: “…the debt ceiling is really that buzzer that goes off when your battery is busted in your smoke alarm. It always goes off at an inconvenient time, it is always a pain to change it, but you always do it.”

This analogy is predictably terrible as a description of the real world. A faulty battery in a smoke detector can’t burn your house down. The debt limit could. But if Mulvaney really thinks that’s how the debt limit should operate, then a deal could be constructed consistent with this interpretation: each debt limit breach should lead to an entire day of legislative debate in Congress over the nation’s fiscal trajectory. And that’s it.

If the Speaker doesn’t agree to that deal, then the administration should use the range of accounting and legal workarounds available to them to keep the debt limit from binding. These are all suboptimal relative to debt ceiling abolition in the short run, but in the long run they will end up implicitly codified (unless the Supreme Court wants to take responsibility for forcing an unnecessary economic crisis) and will take the prospect of a debt limit crisis off the table of future presidents and Congresses. This would be a huge gift to the future.

At Christmas time last year, an 82-year-old Walmart cashier was finally able to retire after a viral TikTok video and GoFundMe campaign netted him over $100,000. A kind customer posted the TikTok video, saying, “I was astounded seeing this little older man still grinding working 8- to 9-hour shifts.”

Do these stories illustrate America’s retirement divide or are they oddities?

The evidence compiled in our recently released Older Workers and Retirement Chartbook suggests the former, though the story is complex and multilayered.

Once workers reach older ages, especially Black and brown workers, those who are not financially able to retire must accept low wages and poor working conditions because they know they have little chance of finding a better job, or any job at all, if they lose employment.

Because of this, for most of these workers, working longer does not prevent poverty in retirement, though it may postpone it for some time. Many are left with no choice other than claiming Social Security benefits early, leading to reduced Social Security benefits and increasing downward mobility and poverty in retirement. They have no way out.

The chartbook—produced by The New School’s Schwartz Center for Economic Policy Analysis and the Economic Policy Institute which documents an array of disparities in more than 30 charts—shines many spotlights on this grim reality. It provides evidence that millions are unable to retire due to financial stress while others are pushed into involuntary premature “retirement” even if they don’t have enough money to make ends meet.

Nearly half of older Americans are financially unready for retirement—many on the precipice of poverty. Most workers have little, if anything, in their retirement accounts; the median retirement account balance for Americans approaching retirement age is only $10,000. If nothing changes, older Americans may increasingly need to hope for random acts of kindness and GoFundMe pensions.

The two-way connection between bad jobs and retirement financial precarity

Over the past two decades, older workers have become an increasingly significant share of the labor force. In the economic recovery after the Great Recession of 2008–2009, four in 10 Americans ages 55 or older were in the labor force—the highest participation rate in half a century. As of 2020, these older workers made up 23.6% of the total U.S. workforce, the highest portion on record.

Why are so many older Americans unable to retire and so many working into old age to survive? For many, the answer isn’t “because they want to.” Even before the COVID-19 pandemic, more than 50% of low-income older households ages 55–64 were financially fragile—up dramatically from the 35% at risk in 1992. This measure of precarity, the chartbook explains, is based on their debt burdens, housing costs, and the savings they had available to access in an emergency.

Financial fragility is not random. When broken down by race and ethnicity, we see significant differences in precarity: 57.0% of older Black households and 50.7% of older Hispanic households were financially fragile, compared with 33.4% of older white households. “The connection between work and retirement insecurity is a two-way street. Bad jobs lead to bad retirements, but retirement insecurity also forces older workers to accept bad jobs,” the chartbook explains.

Factors like race and ethnicity, gender, education, sexual identity, and disability affect Americans’ socioeconomic status throughout their working life and these disparities tend to be magnified along the life cycle.

And making matters worse, older workers perform more physically taxing work than might be expected, and older Black and Hispanic workers are much more likely than white workers to have physically demanding jobs. 

Figure 2D

How job and labor market disparities hinder retirement access

Lack of access to retirement plans is one of the major causes of insufficient retirement assets among older workers and retirees. How many older Americans approaching retirement have a decent retirement plan? Far fewer than you might think.

Only 57% of older workers (ages 55–64) and 53% of prime-age workers (ages 25–54) participate in an employer-based retirement plan, and this share plunges to 25% for workers ages 65 and older. Lack of access is the biggest factor depressing worker participation in retirement plans.

Societal inequities appear in who has access to plans and who doesn’t. For example, one chart below (2F) shows that high-earning older workers are three times as likely as low-earning older workers to have access to a retirement plan. Likewise, older workers without a bachelor’s degree or more education are “much less likely than their college-educated peers to have access to and participate in a retirement plan,” another chart below (2C) shows. While seven in 10 workers ages 55–64 with a bachelor’s degree have a retirement plan, less than half (48.6%) of their counterparts without a bachelor’s degree have this opportunity. In short, the very workers who need greater retirement security after a lifetime of lower earnings are the people left out in the cold in old age.

Figure 2F

Figure 2C

Compared with other wealthy countries, the United States relies more on employers to voluntarily provide benefits to supplement Social Security, a patchwork retirement system that became even more frayed when private-sector employers began switching from traditional pensions to 401(k) plans in the 1980s—thus shifting most of the cost and all of the risk of these benefits onto workers. This happened around the same time that gradual cuts to Social Security benefits were enacted, a process that is still underway. Despite these cuts, Social Security remains by far the most important source of income for people ages 65 and older, with four in 10 seniors—one-fourth of whom are still working—relying on Social Security payments for at least half their income.

Many workers were not just losing access to secure retirement benefits, they were also losing access to good jobs. The erosion of labor standards and policies that hindered workers’ ability to collectively bargain for better wages and working conditions have left many older workers stuck in bad jobs with no path to retirement.

Policymakers must address this broken system in which half of older Americans are financially precarious. Expanding Social Security and supplementing it with a universal retirement plan must become a top policy priority, as must improving labor standards and workers’ rights. The economic and human costs of not repairing this fracturing world of older workers and retirement are immense and unacceptable. The Older Workers and Retirement Chartbook documents these urgent disparities posing immense challenges that policymakers must confront now.

On May 17 at 2:00 p.m. Eastern, EPI will host a virtual event that will shine a light on this problem and outline policy recommendations to alleviate the plight of older workers. Register here. 

However, rising income inequality is skewing this tax structure even further to the benefit of top earners and diminishing funding for the crucial retirement program so many Americans rely on.

Social Security’s payroll tax—of which employees pay 6.2% and employers 6.2% each—has a cap that rises with growth in the national average wage index compiled by the Social Security Administration (SSA). In 2023, for example, the cap is set at $160,200. But since wage growth for top earners continues to outpace average wage growth, a growing share of total earnings is spilling over the cap and escaping taxation, eroding Social Security revenues.

Significant reforms to Social Security made in 1983 set the cap at a level so that 90% of all earnings would be subject to taxes. Over time, rising inequality meant that this share shrank as more earnings for higher-wage workers spilled over the cap. In 2020 and 2021, the share of earnings subject to Social Security taxes hit the lowest levels since before the 1983 reform. In fact, by 2021, the share of earnings subject to Social Security taxes was at the lowest level in nearly 50 years (since 1972).

This fact is important for at least two reasons:

• First, Social Security is likely to be under threat in coming years as part of a general return to debates over long-run fiscal sustainability in the United States.

• Second, a recent debate on earnings inequality trends has rightly highlighted a pronounced compression of wages among the bottom 90% of workers. But the Social Security data we highlight in this brief show that growth at the very top of the earnings distribution—the top 1% and above—continues to exceed growth of the bottom 99% of the workforce. This means there has been very little (or no) compression between earnings for the bottom 90% and those at the very top of the earnings distribution.

Earnings growth at the top in recent years

According to our latest research using SSA data, annual earnings rose fastest for the top 1% of earners (up 9.4%) and top 0.1% (up 18.5%), while those in the bottom 90% saw their real earnings fall 0.2% between 2020 and 2021. As wage growth over the cap continues to outpace average wage growth, a higher share earnings fall above the Social Security tax cap. This costs the Social Security system significant amounts of revenue relative to a scenario where wage growth was more equal and there was no growth in the share of overall earnings above the cap.

Figure A shows the share of aggregate earnings subject to the Social Security tax between 1950 and 2021. The share of earnings subject to Social Security taxes hit a record high of 90% in 1982 and 1983. This was an intentional choice made as part of a significant reform to Social Security meant to shore up its long-run actuarial balance. Because wage inequality was not visibly rising when these reforms were made, it is safe to assume that the reform was meant to set the earnings cap at 90% into the future. But this target has been undercut since by steadily rising wage inequality: In 2021, only 81.4% of all wage earnings were subject to Social Security taxes.

Figure A

Figure B tracks the share of earnings above the Social Security tax cap alongside the share of earnings accruing to the top 1% of wage earners. The share of earnings above the cap increases as the top 1% share of earnings rises.

Figure B

The costs of letting the cap wither as wage inequality increases are enormous. What might look like small changes in the share of earnings covered by Social Security taxes (a percentage point or two) have large implications for the program’s revenues. Each one percentage point drop in the share of total earnings subject to Social Security taxes (moving from 82.4% to the current 81.4%, for example) reduces revenue by an additional $12.6 billion.

From 2019 to 2021, the share of earnings subject to the Social Security tax fell by 2.1 percentage points. On an earnings base of $10.2 trillion in 2021, this translates into roughly $26 billion in lost revenue to Social Security.

Figure C shows the annual revenue loss to Social Security stemming from earnings spilling over the cap since 1983, expressed as a share of total taxes collected through the Social Security payroll tax. By 2021, the leakage from revenues caused by growing inequality reached almost 11% of total taxes paid. This is equivalent in fiscal impact to an unlegislated 11% cut in the Social Security tax rate (or equivalent to a 1.1 percentage point cut from the 12.4% Social Security tax) by the end of this period. The implied cumulative loss since 1983 is enormous: The ongoing leakage out of Social Security’s revenue has led to a Social Security Trust Fund holding 50% fewer reserves in 2022 ($1.4 trillion fewer) than it would have if inequality had not increased (even before accounting for the larger interest income that a higher level of reserves would have been generating over this entire period).

Figure C

Why this matters II: Telling a richer story of inequality trends

Recent research by Autor, Dube, and McGrew finds a pronounced degree of wage compression among the bottom 90% of workers in the pandemic labor market. That is, pay at the bottom has risen more rapidly than at the middle or the top. Our prior research also found similar patterns of low-wage workers experiencing disproportionate wage gains in the past two years—gains that even beat out high inflation for roughly the bottom third of workers.

Both of those findings rely on the Current Population Survey (CPS) to examine changes in hourly wages. However, the CPS makes it difficult—if not impossible—to examine what’s going on above the 90^th percentile of the wage distribution. But the SSA data used in this piece allow us to look within the top 10%, specifically within the top 5% and even 1% of earnings. The SSA data measure annual earnings (hourly earnings cannot currently be calculated from the SSA public data). The SSA data also include some wage and salary income not captured by the CPS—stock options and bonus pay, most importantly. This SSA data tell us that while there has indeed been pronounced compression of hourly wages among the bottom 90% (and there’s even some speculative evidence of annual earnings compression within the bottom 90%), annual earnings for the top 5% and above continue to rise substantially faster than average growth. Annual earnings compression does not seem to be happening much between the top 5% and everybody else.

Another way to illustrate the role of rising wage inequality on the declining share of earnings subject to the Social Security tax is to look at the cumulative change in the earnings cap against the growth in average earnings of the top 5%. Because roughly 6% of workers have annual earnings that exceed the Social Security taxable maximum, growth in the top 5% relative to the earnings cap should be a good proxy for just how fast inequality is eroding Social Security revenue. Figure D below shows the growth rate of earnings for the top 5% and growth in the average earnings cap since 1979. The rise in inequality (i.e., faster growth among the top 5% relative to the average) is constant and has not slowed down in recent years.

Figure D

Policy lessons

In the long run, stopping the growth of earnings inequality should be a key goal of policymakers. Given that this growth has been largely policy-driven, its reversal could also be secured by better policies (i.e., stronger labor standards, effective labor law reform that allows workers to more easily form unions, and macroeconomic policy that targets low unemployment rates over longer periods of time).

However, even with the growth of inequality as given, Social Security’s finances can be protected from erosion by simply changing how the earnings cap is set.

At a minimum, ensuring the cap is set at a level that restores 90% of earnings to being subject to Social Security taxes should be done. However, further reforms that remove the cap entirely, or even allow a greater range of income (investment income, for example) to be subject to Social Security taxation should be considered. What should not be allowed to continue is the status quo where rising earnings inequality steadily throttles revenue available to the Social Security system.

• Measures no coherent economic value. The measure of debt it targets is not inflation-adjusted, would perversely make the debt situation look worse if there was a reform to Social Security that closed that program’s long-run actuarial imbalance, and ignores trillions of dollars in assets held by the federal government.
• Has no relationship to any economic stressor facing the country. Over the past 25 years, as the nominal federal debt rose from $5 trillion to $22.7 trillion, debt service payments (required interest payments on debt) shrank almost in half, from 3.0% of GDP to 1.8%.
• Can cause real damage if it’s not lifted in the next couple of weeks. It would only take a couple of months of missing federal payments due to the debt ceiling to mechanically send the economy into recession—and that’s without assessing damage it would cause from financial market fallouts.
• Has been used time and time again to enforce misguided austerity policies. The 2011 Budget Control Act (BCA) grew directly out of a GOP Congress threatening to not raise the debt ceiling absent spending cuts. The BCA provided an anti-stimulus about twice as large as the stimulus provided by the American Recovery and Reinvestment Act (ARRA—commonly known as “The Recovery Act”) and is largely responsible for the sluggish recovery from the Great Recession.

Given all of this, the debt ceiling should be abolished or neutralized in absolutely any way politically possible. It serves no good economic purpose and plenty of malign ones. Below we expand on these points.

Overview of the debt ceiling

The U.S. Treasury draws on banking accounts at the Federal Reserve to fund federal governmental activities—remitting paychecks to federal government employees, sending Social Security checks, reimbursing doctors for treating Medicare-covered patients, paying defense contractors and interest to bondholders, and so on. These accounts are fed on an ongoing basis by both tax revenues and the proceeds from selling bonds (debt). But, because the United States has a statutorily imposed limit of how much outstanding debt is allowed, once this limit is reached on issuing new debt, Treasury can no longer sell bonds and deposit these proceeds, and hence accounts at the Federal Reserve will dwindle as they are now only fed by ongoing taxes, which are insufficient to cover all spending. This limit is being rapidly reached, and by mid-October (current guesstimate) the Treasury accounts will be too small to finance that day’s governmental activities.

The debt ceiling measures no coherent economic indicator

The statutory debt ceiling is a completely arbitrary value—there has never been any economic justification for any of its historical values and it is raised (or suspended periodically) purely based on congressional whim. It is not indexed for inflation, even as federal government payments (like Social Security checks) are so indexed.

Further, it measures gross debt, which includes debt the federal government owes itself. The biggest difference between the debt held by public and gross debt is the Social Security Trust Fund (SSTF). To help pre-fund the now-arrived retirement of the Baby Boomer generation, for years the Social Security system taxed current workers more than what was needed to pay current beneficiaries. The surplus was credited to the SSTF. As dedicated Social Security revenues fall a bit short of benefits in coming decades, the system (as designed) will draw down the SSTF.

But this means that in those years that saw the SSTF rise, this actually inflated measures of gross debt. And it means, for example, that proposals to narrow the long-run actuarial shortfall of the Social Security system would actually see us hit the federal debt limit sooner. How can that make sense?

Finally, the gross debt also excludes the roughly $2 trillion in financial assets (mostly student loans) held by the federal government. Any measure that aims to measure the balance sheet health of an entity probably shouldn’t ignore trillions of dollars in assets.

The debt ceiling has no relationship to genuine economic stressors

Higher interest payments that put stress on the federal government’s ability to pay and raise the cost of capital for private businesses is the entire economic reason to keep an eye on public debt. But interest rates have collapsed as debt has risen. In 1996, gross federal debt stood at $5.2 trillion. By 2019, it was at $22.7 trillion. Yet in 1996, debt service payments—the interest costs needed to be paid on outstanding debt—were 3.0% of GDP, but by 2019 they were just 1.8%. The reason why interest rates have collapsed while debt has grown is simply that both variables have been driven by pronounced economic weakness over most of the post-2000 period. But the larger point is that the level of gross federal debt has no reliable relationship to any economic stressor faced by governments or households, so hinging something as high stakes as a hard limit on the federal governments’ legal ability to borrow on this measure makes no sense.

The debt ceiling will cause a recession if it’s allowed to bind spending in coming months

Currently, the Congressional Budget Office (CBO) forecasts a budget deficit of just under 12% of GDP for 2021. The Bureau of Economic Analysis (BEA) indicates much of this was front-loaded—federal government borrowing averaged 16% of GDP for the first six months of the year. For the rest of the year, assume borrowing averaged about 8% of GDP. This is the gap between tax revenues and spending, so if no more borrowing is allowed due to the debt ceiling, it is de facto a measure of how much spending would have to be cut. A spending cut of 8% of GDP is a mammoth shock, and to have it slam into the economy in an instant would be spectacularly damaging.

For comparison, the much-touted private-sector “deleveraging” (an abrupt swing from borrowing to saving) that led to the Great Recession in 2008–2009 was about a 9% contraction in spending as a share of GDP—but that was spread over more than two years. This means that the mechanical shutdown of spending caused by hitting the debt ceiling would be sharper and larger than the one that led to the Great Recession. Worse, as the negative fiscal shock ripples through the private economy, the austerity becomes self-reinforcing. Say that in the first month, the 8% of GDP cutback in federal spending has a multiplier of 1.5, so economic activity in that month is slowed by 12% of that month’s GDP in total. (While it’s true that multiplier effects may well not happen right away, illustratively this is the dynamic we’re facing.)

With GDP and incomes 12% lower, tax collections will fall by roughly 4% of GDP. So the next month, not only will the original cutback in spending be needed, but the new and lower tax collections will ratchet down spending even more—and pretty quickly! Normally the federal budget acts as an automatic stabilizer when recessions hit—taxes fall and spending rises and debt increases, all of which spurs economic activity. But a recession caused by an arbitrary legal rule that spending cannot exceed (falling) taxes means that the budget would actually act as an automatic destabilizer.

If the spending cutbacks occur for a month, say, and then federal transfers make up for the lost month, then lots of the damage could be undone pretty quickly. But not all of it. The multiplier effects—the consumption foregone because, say, the workers at diners serving the retirees who didn’t go out to eat for a month because their Social Security checks didn’t come—will not be made up by subsequent government payments.

Finally, all of this is just a description of the strictly “mechanical” effects of hitting the debt ceiling. The ripple effects stemming from distress in financial markets that would be sparked by missing interest payments on Treasury bonds and bills could be extreme as well. But these mechanical effects are useful to keep in mind when some misleadingly claim that the Treasury can “prioritize” payments to bondholders and hence the U.S. can avoid technical “default.” Besides being likely impossible for both logistical and legal reasons, prioritizing interest payments to bondholders just means defaulting even more heavily on Social Security beneficiaries, doctors’ reimbursements for seeing Medicare and Medicaid patients, federal contractors’ bills, and all other federal payments. And “prioritizing” some payments over others doesn’t change the grim mechanical arithmetic run through above.

The debt ceiling is an austerity trump card

People often invoke the damage done by the 2011 showdown over the debt ceiling. They point to stock market losses, increases in “economic uncertainty” indices, and estimates of how much higher interest rates went in the showdown’s aftermath. But they tend to miss what was by far the greatest damage done by the 2011 debt ceiling episode: the passage of the Budget Control Act (BCA), a piece of legislation that is relatively unknown to the lay public, but that delivered an anti-stimulus to the U.S. economy about two times as powerful as the stimulus provided by the Obama administration’s Recovery Act in 2009.

The BCA’s caps on federal spending explain a large part of why this spending in the aftermath of the Great Recession was the slowest in history following any recession (or at least since the Great Depression). This federal spending austerity fully explains why the recovery from the Great Recession was so agonizingly slow. If this spending had instead followed the normal post-recession path, then a return to pre-recession unemployment rates would’ve happened 5–6 years before it finally did in 2017.

The BCA was the GOP demand for raising the debt limit in 2011, and the Obama administration acquiesced to it. The leverage provided by the debt limit led directly to the worst recovery following a recession since World War II. If the debt ceiling manages to fatally wound prospects for the budget reconciliation bill wending its way through Congress now, we’ll see history repeat itself, with fiscal policy turning sharply contractionary in mid-2022 as the boost from the American Rescue Plan (passed earlier this year) begins quickly running out. This leverage the debt ceiling provides to those looking to enforce austerity is its greatest—and often most-overlooked—danger.

The debt ceiling needs to be abolished—either formally or effectively

Given all of this, it is obvious that the U.S. should join the vast majority of rich countries around the world who don’t have a debt ceiling. It would be most straightforward if Congress would abolish it straightaway. Alternatively, if a large enough group of members of Congress demand that the reconciliation bill raise the debt ceiling to some laughably large number ($100 trillion? $500 trillion?), this would effectively abolish it (for arcane procedural reasons I don’t understand, under the rules of budget reconciliation the only change that can be made to the debt ceiling is to raise it).

If Congress won’t act sensibly, the Biden administration should act unilaterally. There is plenty of support for citing the fact that Congress has given the executive branch conflicting instructions and, hence, the administration is free to choose which path it follows. Congress’s taxing and spending instructions require the administration to issue debt to cover the shortfall, yet the debt ceiling would bar debt issuance. One of these congressional “decisions” must be ignored, so the administration should decide. A more fun solution—one that highlights the stupidity of the debt ceiling—is minting the trillion-dollar platinum coin. I’m a fan, mostly because of the educational value of it, and because it treats the debt ceiling as a problem with the contempt it deserves.

However it is done, it is imperative to not just squeak through this latest crisis. Either Congress or the Biden administration needs to do future policymakers a huge favor and render the debt ceiling moot forevermore. It has already done enough damage.

The poverty rate reduction highlights how much poverty the nation and its policymakers tolerate is a choice. It should not have taken a pandemic to make us realize this.

Last year, Economic Impact Payments (stimulus checks) and unemployment insurance (UI) benefits played larger than usual roles in reducing poverty. The Census Supplemental Poverty Measure (SPM) data show that the first two Economic Impact Payments and UI benefits reduced poverty by 11.7 and 5.5 million people, respectively (see Figure A).

Figure A

Social Security remained the largest anti-poverty program in 2020. Primarily reducing poverty among families with older individuals, Social Security reduced poverty by 26.5 million people. Without Supplemental Nutrition assistance and school lunch benefits, 3.2 million more people would be in poverty, many of them children.

Historically the UI system has played a limited role in poverty reduction, with uneven state-based implementation, restrictive eligibility requirements, and relatively stingy benefits blunting its effectiveness as a poverty-reducer. But as job loss accelerated last year, Congress temporarily strengthened the UI system in March 2020 and expanded eligibility to previously excluded workers—like independent contractors and those with low incomes—and provided an additional $600 weekly unemployment benefit for three months.

As a result of the increased federal funding and extensions, 10 times as many people were kept out of poverty by UI in 2020 than was the case in 2019.

The Economic Impact Payments (EIP) reduced poverty by an even larger amount than UI. This is largely a function of the fact that the EIP program simply spent more money—about 44% more over the relevant period, according to Bureau of Economic Analysis data. Had Congress not let the $600 UI payments lapse in late July 2020, the UI program would have generated even larger reductions in poverty than it did.

While Congress eventually extended pandemic UI programs in January 2021, these programs have been terminated entirely, first in June 2021 by about two dozen states, and then at the beginning of this month by the rest of the nation.

Existing evidence shows that these programs substantially increased incomes and consumer spending, with little negative cost to employment opportunities. Today’s Census data underscore that the pandemic UI programs were essential to cushioning the blow of the pandemic in 2020, and that social assistance programs, when well-funded, can dramatically reduce hardship. Congress should reinstate the extensions and reform UI systems immediately, as the spread of COVID-19 continues to sharply limit growth and job opportunities for millions of workers.