Rutledge 2018 — How Is the Mortality Gap Affecting Social Security Progressivity

Summary

This Center for Retirement Research (CRR) Issue Brief synthesizes the Retirement Research Consortium (RRC) literature on the widening socioeconomic status (SES) mortality gap and traces its consequences for Social Security's distributional progressivity. The benefit formula is designed to replace a higher share of pre-retirement earnings for lower earners, but because lower earners also live shorter lives — and the life expectancy (LE) gap has grown substantially — they collect progressive benefits for fewer years. Bosworth and Burke (2014) estimate that differential mortality offsets approximately half of overall Social Security's progressivity. The National Academies of Sciences (NAS)/Auerbach et al. (2017) cohort comparison shows that between the 1930 and 1960 birth cohorts, top-quintile men's lifetime Social Security (SS) benefits rose from $229k to $295k (2009$) while the bottom quintile's benefits fell in absolute terms.

Key Claims

• Life expectancy at age 65 increased +6 years for men and +4 years for women over the last half-century, but gains have been concentrated at the top of the SES distribution
• Waldron (2007): men with above-median lifetime earnings born in 1912 had a LE advantage of 0.7 years over below-median earners at age 65; by the 1941 cohort, that gap grew to 5.3 years
• Bound et al. (2015): education-based LE gaps (ages 25–85) widened for all race-sex groups 1990–2010, even after controlling for rising educational attainment
• The widening LE gap is mostly driven by improved outcomes among higher-SES individuals, particularly via smoking reduction; cancer, cardiovascular, and lung disease explain ~half the differential; the other half is unexplained by behavioral differences
• Chetty et al. (2016): lower-SES people live longer in areas with better behavioral norms (lower smoking, obesity), more college graduates, higher local government spending, and higher home values — suggesting behavioral environment as a mediating pathway
• At the individual level, Social Security retirement is modestly progressive on net; at the household level it appears regressive because spousal benefits disproportionately benefit higher-income couples (Gustman and Steinmeier 2001)
• Adding Disability Insurance (DI) to Old-Age and Survivors Insurance (OASI) in progressivity analyses improves the picture for lower-SES households, making the combined system progressive even at the household level (Steuerle et al. 2004a; Gustman and Steinmeier 2001)
• Bosworth and Burke (2014): differential mortality offsets approximately half of overall SS system progressivity; the offset is greater for men (larger LE-by-SES disparity at older ages)
• Congressional Budget Office (CBO) (Meyerson and Sabelhaus 2006): the benefit-to-tax ratio for the 1960s birth cohort is downward-sloping (progressive) but considerably flatter than it would be under equal remaining LE at age 65
• NAS/Auerbach et al. (2017): comparing 1930 and 1960 birth cohorts — top-quintile men's lifetime SS benefits rose $229k → $295k (2009$); bottom-quintile men's lifetime benefits fell; second-lowest quintile barely increased

Concepts Introduced or Extended

• Social Security Progressivity — the central topic; how the progressive benefit formula interacts with differential mortality to produce lifetime redistribution
• Income-Mortality Gradient — the widening SES LE gap that erodes SS progressivity; DI as a counter-force
• Education-Mortality Gradient — education-based LE widening (Bound et al. 2015) as evidence for growing mortality gap

Entities Mentioned

• Matthew S. Rutledge
• Hilary Waldron
• Raj Chetty
• John Bound

Quotes

"The increasing mortality gap means that higher-SES individuals are receiving their Social Security benefits for a longer period of time than their lower-SES counterparts."

"Their analysis of lifetime benefits...shows that differential mortality offsets about half of the overall system's progressivity."

My Take

This is a short synthesis brief (4 content pages), not original empirical work — it assembles findings from Waldron 2007, Bosworth/Burke 2014, Chetty 2016, Auerbach et al. 2017, and others. The core finding (differential mortality offsets ~half of SS progressivity) rests on Bosworth and Burke (2014), which is a CRR working paper that includes Social Security Disability Insurance (SSDI) in its analysis. The brief's main value is connecting the income-mortality gradient literature to Social Security distribution policy in a policy-accessible format. The cohort comparison from Auerbach et al. (2017) is the most striking number: bottom-quintile men's lifetime SS benefits fell in absolute real terms from 1930 to 1960 birth cohorts — a stark illustration of how LE divergence defeats the progressive formula over time.