Social Security was designed to redistribute income from those with higher lifetime earnings to those with lower lifetime earnings. The reason is obvious: the system was created to ensure an adequate retirement income for the elderly. Less obvious is how Social Security's many provisions interact to achieve redistribution. This Straight Talk summarizes the most comprehensive study of those interactions to date, concluding that less-educated, lower-income, and nonwhite groups benefit little or not at all from redistribution in the old age and survivors insurance (OASI) part of Social Security. However, there is substantial redistribution to women, who historically have had lower lifetime earnings than men.

This brief, building on the discussion of progressivity in Straight Talk 37, shows how including Disability Insurance (DI) restores very modest levels of progressivity to the Social Security system as a whole. That is, some lower lifetime earnings groups that fall victim to regressive trends under the Old-Age Survivors' Insurance program find their situation considerably improved or reversed when DI is added to the mix, in the form of higher internal rates of return on the benefits they receive over a lifetime. Generally, we find that black men, those earning in the bottom quintile, and those dropping out of high school have a greater chance of receiving DI than other groups.

In reviewing reform proposals, lawmakers typically assess the adequacy of retirement benefits by looking just at annual benefits in the Social Security program alone. However, it is the lifetime package of retirement benefits--including Medicare--that gives the most comprehensive picture of what government is being asked to provide for the elderly. Moreover, it is only by considering benefits as a whole that reformers can consider trade-offs among cash versus medical benefits, more years of retirement versus higher annual benefits, and benefits for the very old versus the younger old. This brief estimates the value of lifetime retirement benefits and taxes promised under current law.

Social Security was designed in the late 1930s, a time when a married male worker and a stay-at-home wife were considered the norm. Is it too late to bring Social Security in sync with contemporary family life? Not at all. Besides reaching financial balance and increasing saving, reform should have two main goals: providing minimum levels of income above poverty and removing obvious inequities.

Social Security reform - regardless of the success of the 16-member commission appointed in May by President George W. Bush - is inevitable. Although the reform debates usually raise the specter of scaled-back benefits growth, systemic change could also improve basic Social Security benefits for the poor and near poor. While we think enhancing the prospects of the poor makes economic sense, we also see a political case for making antipoverty protection a reform goal.