Income, Life Expectancy and Social Security

We are well aware of the fact that economic status has a direct correlation to life expectancy. The rich are expected to live longer than the poor. Recently, though, the gap between rich and poor people’s  life expectancy has been widening. Especially for women, economic status is having a more significant influence over life expectancy each year. Interestingly, life expectancy for poor women has actually been decreasing by generation, indicating that it is not only growing at a slower rate than that of the rich, but that it is actually decreasing. An article from the Wall Street Journal, “The Richer You Are the Older You’ll Get”, outlines the results found from surveys conducted by the University of Michigan, and points to the complex implications this has on social security.

The data used comes from the University of Michigan’s Health and Retirement Study, a survey that tracks the health and work-life of 26,000 Americans as they age and retire. According to the data, men of all incomes are living longer. But the data shows that the life expectancy of the wealthy is growing much faster than that of the poor. Looking at the graph below,  for a man born in 1940 with income in the top 10% for his age group, if he lives to age 55 he can expect to live an additional 34.9 years. This is six years longer than a man also in the 10%, but who was born in 1920. Men who were in the poorest 10%, can expect to live another 24 years, only a year and a half longer than his 1920s counterpart. That’s a huge difference. when we are talking about life expectancy.

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However, the story is different for women. While the wealthiest women from the 1940’s are living longer, the poorest 40% have a declining life expectancy from one generation to the next. ““At the bottom of the distribution, life is not improving rapidly for women anymore,” said Mr. Bosworth. “Smoking stands out as a possibility. It’s much more common among women at lower income levels.”” This is an interesting observation, which has some logic to it (smoking kills), but it’s hard to believe that this is the sole cause. I would also add that drugs play a big role here.

Looking at the following graph, we can see how life expectancy for the poorest women is declining, while that of men is still increasing (though not as significantly at that of rich men).

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Though I can’t immediately think of any explanation for this, it is worth thinking about. Perhaps the increase in cancers affecting women has something to do with it, but it is hard to tell.

Lastly, the article points towards the implications this has on social security. If people at the bottom are not experiencing increases in life expectancy (the graphs show predictions based on actuarial data), this means they are getting less social security benefits since they will receive it for less years. This might indicate that the retirement age should be lower. But then there is the case for those not in the lower class: for example, a wealthy man born in 1920 who retired at age 65, could expect to draw social security for 19 years. His son, born in 1940 and retired at age 67, could expect to draw benefits for 24 years. He retired at a later age, but he’s living longer. But this is obviously not true for men and women at the bottom. They would draw social security for less years, if the retirement age rises, and their longevity does not. Clearly, this poses a dilemma for setting appropriate policies as life expectancy rises (for all except women in the bottom 40%).

One thought on “Income, Life Expectancy and Social Security

  1. ajsanna

    Great post! Two years ago, I took a class on Government Revenues with Jim Hines, where he made the point that the best thing that could happen to social securities is if smoking rates started rising again… a comment that got a laugh from the class but was actually true. If people start living a lot longer, we will have to come up with some solutions to address the deficiency in funding.

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