Each year, Social Security reduces how much it pays millions of retired teachers and other government employees, their spouses, and their survivors. This has sparked outrage among some public servants and has resulted in bipartisan efforts to repeal the annual cuts.

Despite their seeming unfairness, the benefit reductions prevent Social Security from overpaying well-off government retirees. Eliminating these reductions would worsen inequities, disproportionately benefit higher-income people, and exacerbate Social Security’s financial shortfalls. Plus, there are more targeted ways of increasing benefits for low-income beneficiaries.

Social Security excludes some government employees who collect pensions

Social Security’s progressive benefit formula can generate inequities when workers split their careers between jobs that are covered by Social Security and jobs that aren’t. Social Security now covers nearly all private-sector jobs and most public-sector jobs. However, about 6 million public school teachers (including teachers in large states such as California, Illinois, and Texas), police officers, firefighters, and other state and local government employees don’t earn future Social Security benefits (PDF). Additionally, most federal government employees hired before 1984 don’t receive future benefits.

Instead, these jobs offer traditional pensions to retired workers, a fringe benefit that’s largely disappeared in the private sector. These state and local pensions generally compute annual benefits as a fraction of salary earned—around 2 percent—near the end of a worker’s career for each year of completed service. In California, teachers who retire after 30 years of service receive an annual pension equal to 60 percent of their salary averaged over their final three consecutive years of service.

The basic benefit formula can overpay people who have worked both covered and uncovered jobs

Inequities in Social Security benefits can arise when employees work jobs both covered and not covered by Social Security at some point during their career, allowing them to earn future Social Security benefits. Social Security’s progressive benefit formula can generate overly generous benefits for workers who spent little time in covered employment.

To understand why, consider Social Security’s benefit formula. Social Security bases benefits on average monthly covered earnings, computed over a worker’s top 35 earning years and adjusted for economy-wide wage growth over a worker’s career. The formula is progressive, replacing a higher share of the first dollars of earnings and a lower share of the last dollars. For people who turn 62 in 2024, their monthly Social Security benefit is calculated as 90 percent of average indexed monthly earnings up to $1,174, plus 32 percent of earnings between $1,174 and $7,078, plus 15 percent of earnings that exceed $7,078.

Although higher earners receive a larger benefit in dollar terms, retirees with only limited lifetime earnings receive a higher benefit relative to their lifetime earnings than retirees with more lifetime earnings.

The basic benefit formula doesn’t distinguish between workers whose lifetime covered earnings are limited because they received low wages throughout their career and those whose lifetime covered earnings are limited because they split their career between covered and uncovered government jobs.

Similar inequities can arise from the benefits that Social Security offers to the spouses, widows, and widowers of retired workers. Instead of collecting benefits based on their own earnings, people can collect a benefit equal to 50 percent of their spouse’s benefit if that would result in a higher payment. Widows and widowers can opt for a benefit equal to 100 percent of their deceased spouse’s benefit instead of a benefit based on their own earnings.

Under the basic formula, retirees who spent a career in uncovered government employment could qualify for spouse and survivor benefits from Social Security, even while receiving a significant state or local government pension.

Reducing Social Security for pensioners who worked uncovered jobs promotes equity

To rectify these inequities, Social Security reduces benefits paid to retired workers, spouses, widows, and widowers with government pensions from uncovered employment. In 2023, the Windfall Elimination Provision (WEP) reduced payments to about 2.1 million retired pensioners (PDF). In the same year, the Government Pension Offset (GPO) reduced payments to roughly 750,000 spouses, widows, and widowers (PDF).

However, bills to repeal the WEP and GPO have been introduced in Congress with bipartisan support, and President Biden proposed eliminating the cuts during his 2020 presidential campaign.

Our simulations show that repealing the WEP and GPO would favor higher-income people. Restoring full Social Security benefits to all government retirees who spent most of their career in uncovered employment would increase average annual 2025 Social Security benefits by $1,900 for people in the top fifth of the income distribution, compared with only $400 for people in the bottom fifth. About 60 percent of the additional Social Security benefits generated by repealing the WEP and GPO would go to beneficiaries in the top 40 percent of the income distribution.