Fact #612: Under current census projections, the number of working-age Americans (ages 18 to 64) to each resident 65 years and up will fall from 4.8 in the year 2000 to 2.7 in 2050. Maintaining even a modestly positive actuarial ratio of 4 to 1 would require dramatically increasing U.S. population growth to 607 million by 2050, compared to the 392 million now projected. With the fertility of most native-born Americans well under replacement level, achieving such rapid growth in so short a time would require massive increases in already high levels of direct immigration boosted by the higher birth rate of the foreign born. (Source: Social Security: A Tale of Two Problems, Washington Policy Center)
Fact #613: Americans are living longer and having fewer children, and this alters the ratio between the number of workers and retirees. In 1937, 42 workers paid 2% in payroll tax to support every retiree. In 1950, 16 workers paid 3% in tax for each retiree. Today around 3.3 workers pay 12.4% in payroll tax for each retiree. By 2025 there will be two workers per retiree and by 2050 1.3 workers per retiree. (Source: Social Security: A Tale of Two Problems, Washington Policy Center)
Fact #614: Social Security has become a poor deal for workers. When the program started in 1935, the rate of return on a 40-year worker’s investment was about 8%. Today someone that age can expect a dismal 1%. Our children’s rate of return will be negative if the program remains the same. (Source: Social Security: A Tale of Two Problems, Washington Policy Center)
Fact #615:When the Social Security program was initiated in 1937, the average life expectancy in the U.S. was less than 65 years. Eligibility for benefi ts was set at age 65 in the expectation that fewer than half of the workers would collect Social Security (because they wouldn’t live long enough). Furthermore, when the program started, there were a lot of workers paying into the program and few receiving benefits. (Source: Social Security: A Tale of Two Problems, Washington Policy Center)
Fact #616; In 1945, the ratio of workers-to-retirees was over 40 to 1; in 1950, over 16 to 1; and in 1960, the ratio was 5 to 1. Today, the worker-to retiree ratio is a little over 3 to 1. As the worker-to-retiree ratio fell, the Social Security Administration found it necessary to raise the tax rate from 2% in 1937-1949 (1% employee + 1% employer) to 6% by 1960 to 12.4% in 1990. The 12.4% rate remains today. Furthermore, the SSA found it necessary to raise the level of wages on which the tax is paid from $3,000 in 1937 ($38,400 in 2004 inflation-adjusted dollars) to $87,900 in 2004. (Source: Social Security by the Numbers, www.muhlenkamp.com
For more about worker shortages and workforce trends, visit Perfect Labor Storm.