Distributional Effects of Price Indexing Social Security Benefits

by Mark A. Sarney
Policy Brief No. 2010-03 (released November 2010)
Table equivalent for Chart 1. An additional bend point would split the 32 percent segment in the benefit formula (using 2010 bend points to illustrate, in dollars)
Option 90% segment 32% segment Upper 32% segment 15% segment
Current Law 761 3,825   3,363
Shield 30% 761 1,094 2,731 3,363
Shield 40% 761 1,710 2,115 3,363
Shield 50% 761 2,352 1,473 3,363
Shield 60% 761 3,014 811 3,363
 
Table equivalent for Chart 2. Median individual benefit reductions increase over time, except for Shield 60% (relative to scheduled benefits)
Year Shield 0% Shield 30% Shield 40% Shield 50% Shield 60% Payable benefits
2025 0 0 0 0 0 0
2026 -0.2 0 0 0 0 0
2027 -1.1 0 0 0 0 0
2028 -2.1 0 0 0 0 0
2029 -3.0 0 0 0 0 0
2030 -4.0 -0.1 0 0 0 0
2031 -4.0 -0.5 0 0 0 0
2032 -5.0 -0.8 0 0 0 0
2033 -6.0 -1.1 0 0 0 0
2034 -7.0 -1.5 -0.1 0 0 0
2035 -7.5 -1.9 -0.5 0 0 0
2036 -8.0 -2.2 -0.7 0 0 0
2037 -9.0 -2.5 -0.9 0 0 -16.9
2038 -9.9 -2.9 -1.3 0 0 -23.8
2039 -10.9 -3.4 -1.6 0 0 -23.6
2040 -11.8 -3.8 -1.9 0 0 -23.3
2041 -12.8 -4.2 -2.3 -0.1 0 -23.1
2042 -13.7 -4.6 -2.6 -0.4 0 -22.8
2043 -14.6 -5.1 -3.0 -0.6 0 -22.6
2044 -15.5 -5.6 -3.3 -0.8 0 -22.3
2045 -16.4 -6.0 -3.7 -1.1 0 -22.1
2046 -17.3 -6.5 -4.1 -1.4 0 -22.0
2047 -18.2 -7.0 -4.5 -1.7 0 -21.8
2048 -19.0 -7.6 -5.0 -2.0 0 -21.7
2049 -19.9 -8.2 -5.4 -2.3 0 -21.6
2050 -20.7 -8.7 -5.8 -2.5 0 -21.4
2051 -21.6 -9.2 -6.3 -2.9 0 -21.4
2052 -22.4 -9.7 -6.7 -3.1 0 -21.3
2053 -23.2 -10.4 -7.2 -3.5 0 -21.3
2054 -24.0 -10.9 -7.7 -3.7 0 -21.4
2055 -24.8 -11.4 -8.1 -4.0 0 -21.4
2056 -25.6 -11.9 -8.5 -4.3 0 -21.5
2057 -26.4 -12.4 -8.9 -4.6 0 -21.6
2058 -27.2 -13.0 -9.4 -4.9 0 -21.7
2059 -28.0 -13.5 -9.8 -5.2 0 -21.8
2060 -28.7 -14.1 -10.3 -5.5 0 -21.9
2061 -29.5 -14.6 -10.7 -5.8 0 -22.0
2062 -30.2 -15.0 -11.1 -6.1 0 -22.1
2063 -30.9 -15.6 -11.5 -6.4 0 -22.2
2064 -31.4 -16.0 -12.0 -6.7 0 -22.4
2065 -31.9 -16.5 -12.4 -6.9 0 -22.5
2066 -32.4 -16.9 -12.8 -7.2 0 -22.7
2067 -33.1 -17.4 -13.1 -7.3 0 -22.8
2068 -33.8 -17.8 -13.6 -7.7 0 -23.0
2069 -34.5 -18.3 -14.0 -7.9 0 -23.2
2070 -35.2 -18.7 -14.3 -8.1 0 -23.3
2071 -35.9 -19.1 -14.6 -8.3 0 -23.5
2072 -36.6 -19.5 -14.9 -8.4 0 -23.7
2073 -37.3 -19.9 -15.2 -8.6 0 -23.9
2074 -37.9 -20.4 -15.6 -8.8 0 -24.1
2075 -38.6 -20.8 -16.0 -9.0 0 -24.3
2076 -39.2 -21.2 -16.3 -9.1 0 -24.5
2077 -39.9 -21.7 -16.5 -9.2 0 -24.7
2078 -40.5 -22.0 -16.8 -9.3 0 -25.0
2079 -41.2 -22.3 -17.0 -9.3 0 -25.2
2080 -41.8 -22.8 -17.3 -9.4 0 -25.4
 
Table equivalent for Chart 3. The number of additional aged beneficiaries in poverty would increase under Shield 0%, but would be virtually unchanged under progressive price indexing options, compared with scheduled benefits (in thousands)
Option 2030 2050 2070
Payable benefits   1,297.45 1,189.16
Shield 0% 257.81 1,127.51 1,955.15
Shield 30% 9.35 13.12 0.84
Shield 40% 9.35 7.12  
Shield 50% 8.35 5.12  
Shield 60% 5.70 1.12  
 
Table equivalent for Chart 4. A smaller percentage of beneficiaries would be shielded than expected under progressive price indexing options, 2070 (in percent)
Option Expected Projected
Shield 30% 30 17
Shield 40% 40 28
Shield 50% 50 40
Shield 60% 60 51
 
Table equivalent for Chart 5. Projected shielding of lowest quintile earners would fall below expectations
Option Percent
Expected shielding 100
Shield 30% 77
Shield 40% 88
Shield 50% 94
Shield 60% 96
 
Table equivalent for Chart 7. Median household benefit reductions compared with scheduled benefits, by income quintile, 2070 (in percent)
Option Lowest Second lowest Middle Second highest Highest
Payable benefits -23.3 -23.3 -23.3 -23.3 -23.3
Shield 0% -34.5 -35.3 -35.9 -35.3 -35.1
Shield 30% -4.1 -15.9 -21.3 -23.4 -28.1
Shield 40% 0 -10.5 -17.5 -20.5 -26.4
Shield 50% 0 -3.7 -13.1 -17.3 -24.5
Shield 60% 0 0 -6.5 -12.1 -20.5
 
Table equivalent for Chart 8. Lifetime progressivity increases under price indexing options
Birth cohort Shield 0% Shield 30% Shield 40% Shield 50% Shield 60% Scheduled benfits Payable benefits
1926–1930 0.254 0.254 0.254 0.254 0.254 0.254 0.254
1931–1935 0.194 0.194 0.194 0.194 0.194 0.194 0.194
1936–1940 0.166 0.166 0.166 0.166 0.166 0.166 0.166
1941–1945 0.168 0.168 0.168 0.168 0.168 0.168 0.168
1946–1950 0.160 0.160 0.160 0.160 0.160 0.160 0.162
1951–1955 0.142 0.143 0.143 0.143 0.143 0.142 0.146
1956–1960 0.148 0.152 0.152 0.152 0.151 0.144 0.150
1961–1965 0.155 0.163 0.164 0.164 0.162 0.148 0.157
1966–1970 0.152 0.165 0.166 0.166 0.163 0.143 0.155
1971–1975 0.168 0.187 0.188 0.187 0.185 0.154 0.168
1976–1980 0.160 0.184 0.186 0.186 0.183 0.144 0.156
1981–1985 0.163 0.193 0.196 0.195 0.192 0.145 0.155
1986–1990 0.166 0.202 0.205 0.205 0.200 0.148 0.155
1991–1995 0.173 0.216 0.219 0.218 0.211 0.153 0.160
1996–2000 0.173 0.224 0.227 0.225 0.211 0.153 0.158
2001–2005 0.175 0.233 0.237 0.235 0.214 0.155 0.161
2006–2010 0.174 0.240 0.243 0.236 0.213 0.155 0.160
2011–2015 0.174 0.247 0.251 0.237 0.213 0.155 0.160
2016–2020 0.180 0.259 0.262 0.242 0.218 0.161 0.167