Many men in this town work all their lives in low-income jobs and die before they are old enough to collect Social Security. Many workers in Washington -- a dishwasher in a restaurant, say, or a houseman in a hotel -- earn, perhaps, $10,000 a year. At that level of income, a worker pays Social Security taxes at a rate of 6.7 percent, or $670 annually. Many workers in these low-paying jobs do not have fringe benefits such as health coverage or sick leave. If they are ill, their pay is docked. Ineligible for government health plans, they must pay for health care, and often are not able to afford the care they need.
One Democratic proposal the President's Advisory Commission on Social Security made last week would make the situation worse for those workers. The commission wants to move up to 1984 some or all of the Social Security tax increases already scheduled for 1985, 1986 and 1990. The 6.7 percent tax rate is scheduled to rise to 7.65 percent. A worker now earning $10,000 might be earning $12,000 with an adjustment for inflation by 1984, but would then pay taxes totaling $918. Unless that is offset, it will be burdensome for the working poor.
Social Security currently supports three tiers of retirees: the upper tier made up of high wage earners for whom Social Security represents a small portion of retirement income; the middle tier consisting of average, middle-income workers who are not entirely dependent but rely on it for a "sizeable minority" of their income in retirement; and the third group, into which most low-income elderly fall, for which Social Security represents the major, and often only, source of income after retirement.
Since we are going through Social Security reform, what better time to put in some cushions so that the low-income person, already hard hit and struggling, doesn't fare worse?
The conventional wisdom is that the less that is deducted for Social Security, the less that will be available upon retirement. But the fact is, many low-income people don't reach retirement age because they did not have enough for food, housing and health care in their middle years. For example, among early black male retirees, 54 to 61 years old, 48 percent have some kind of physical disability. Black male life expectancy is 64 years--six fewer years than that for white males.
"It would seem very unfair for people to put money into the system and not be able to live long enough to collect it," says Robert Hill, senior research associate for the Bureau of Social Science Research. "That to me is part of the inequity."
One additional measure that might be invoked on behalf of the low-income wage earner would be to keep the tax rate at 6.7 percent for these workers and raise it to the higher rate for higher-income workers.
We know that the system needs to be saved and that grave financial difficulties produced the proposed reforms in the first place, but people at the bottom of the pecking order shouldn't have to bear the burden. The time is ripe to do something now since the compromise, drafted by several key Democrats, has never officially been discussed by the commission as a whole.
Certainly they would have to consider the additional cost strains on the system, but I argue that it is false economy to so overtax a low-income worker that he cannot care for himself and his family. If workers have more money to better care for themselves and their families and be more productive over a longer period of time, they would give more to the system and be happier as well. So many of the low-income elderly have to retire early due to health disability that the likelihood of their becoming dependent on the government due to health factors is high. That is a drain on society in Medicaid or Supplemental Security Income payments.
Making the payroll tax more progressive, on the other hand, puts the burden of increased taxes on those who are most able to pay and covered with a range of benefits.
Robert Hill estimates that we may be talking about 3 to 5 million Americans in this low-income elderly group. They need help. And while the commission's compromise was a definite sign of progress on this thorny problem of Social Security, some special provisions to help those at the bottom might help save their dignity -- and save the rest of us money as well.