…a woman (in the bottom 10th of earners) who turned 50 in 1970….had a life expectancy of about 80.4. A woman born in the same year but with income in the top tenth…84.1. The gap in life expectancy was about 3½ years….(I)n 1990, we found no improvement at all in the life expectancy of low earners…(but) in the top tenth…life expectancy rose 6.4 years, from 84.1 to 90.5. In those two decades, the gap in life expectancy between women in the bottom tenth and the top tenth of earners increased from a little over 3½ years to more than 10 years….(F)or men, the gap … increased from 5 years to 12 years over the same two decades.
Rising longevity inequality has important implications for reforming Social Security…A common proposal to eliminate the funding shortfall is to increase the full retirement age, currently 66. Increasing the age for full benefits by one year has the effect of lowering workers’ monthly checks by 6% to 7.5%, depending on the age when a worker first claims a pension.
For affluent workers, any benefit cut will be partially offset by gains in life expectancy. Additional years of life after age 65 increase the number years these workers collect pensions. Workers at the bottom of the wage distribution, however, are not living much longer, so the percentage cut in their lifetime pensions will be about the same as the percentage reduction in their monthly benefit check.
Our results and other researchers’ findings suggest that low-income workers have not shared in the improvements in life expectancy that have contributed to Social Security’s funding problem. It therefore seems unfair to preserve Social Security by cutting future benefits across the board. Any reform in the program to keep it affordable should make special provision to protect the benefits of low-wage workers.