Generational Inequity
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An important factor fueling the demand for Social Security reform is a sense
of generation inequity. Generation Xers believe job opportunities are not
as good, that they are hit with higher taxes, and that they will receive
little, if anything, from Social Security when they retire.
In the February issue of the Monthly Labor Review, the Bureau of Labor Statistics
presents considerable data showing that Generation X workers are indeed
worse off. For example,
- A worker aged 18 to 24 had an average yearly income of $17,629 in 1972-73
(in today's dollars).
- However, the real income for workers in that same age group fell to
$16,396 in the 1984-85 period and to $15,527 today.
- In short, today's Generation X workers are paid about 12 percent less
than Baby Boomers were at the same age.
Generation X workers are also right about paying higher taxes and receiving
fewer government benefits. According to generational accounts, say economists
Laurence Kotlikoff and Willi Leibfritz, a 25-year old worker can expect
to pay $175,000 more in taxes over his lifetime than he can expect to receive
in Social Security benefits (seefigure).
By contrast, a 55-year old worker will only pay $4,000 more and those older
will get back substantially more than they will ever pay.
Sooner or later, action must be taken to give younger workers a better deal,
even if it means cutting benefits for the politically powerful elderly.
Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis),
April 27, 1998.
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