Category: Demographics

Meet the Grinch Stealing the Future of Gen Y And Z

Mary Pat Campbell

Link: https://www.ineteconomics.org/perspectives/blog/meet-the-grinch-stealing-the-future-of-gen-y-and-z

Excerpt:

There’s one threat that gets far less attention, which has been impacting American workers since the 1970s: wages that just don’t keep up, despite increased productivity. Social Security was designed for wages that rise with inflation – but that’s not happening. In an interview with the Institute for New Economic Thinking, Eric Laursen, author of The People’s Pension: The Struggle to Defend Social Security Since Reagan, breaks down how the program works, why wage stagnation represents a mounting threat, and what can be done to strengthen and update the program for the 21stcentury.

Lynn Parramore: Social Security has been America’s most successful retirement program for the last 87 years. Yet the public is constantly hearing that the program is going to “run out of money.” Is that actually true? Can Social Security actually go bankrupt?

Eric Laursen: No, and the word bankrupt is just about a complete misnomer when it comes to Social Security. The program is funded by contributions that participants and their employers make through their paychecks. It’s also backed by a Trust Fund which is accumulated over time.

That Trust Fund is dwindling now, and it’s expected to run out of money in the early 2030s. But Social Security can’t actually go bankrupt. If the situation arises where there is not enough money either in the Trust Fund or coming through from contributions to fund current benefits, then those benefits can’t be paid, perhaps as much as 25%. In that case, Congress would be faced with a choice to either cut benefits or increase contributions.

There’s a lot of pressure from people who want to cut Social Security to do it now rather than waiting for that point in the future, because at that point, Congress would be under a lot of pressure to make good on what people have been promised.

….

LP: What would you do to make sure that Social Security is protected and remains strong? Does it need to be modernized in some ways to keep it effective?

EL: There are a number of things that can be done. One is to raise the cap. More of income beyond the $147,000 threshold needs to be taxed for payroll tax purposes. Another thing that can be done is passing the Social Security Expansion Act that Sanders, Elizabeth Warren, and others have backed. There is a special minimum benefit for Social Security recipients that’s aimed at keeping people who have really low incomes during their lifetimes above the poverty level, and that needs to be improved. That’s not asking a lot. It should be done.

You can also change the rules for wealthy people. One of the differences between now and 40 years ago is that people in the really high income brackets get much more of their income from investments, stock options, and other business holdings than they do from salaries and wages. We need to figure out a formula for applying the payroll tax to at least some of that investment income – like capital gains and so forth. Definitely, the CPI-E needs to be instituted. There should be an expansion of benefits across the board for Social Security benefits. We need the CPI-E at a base level that’s more reasonable. Another thing I think is important: one of the changes that happened in ’83 that was really bad was that Social Security survivor benefits were ended for children of deceased or disabled workers above the age of 18. It used to be that you could get those until 22 and they would help you to go to college. That was abolished. It would be a very good thing if that could be reinstated so that more people have some level of security to pursue higher education.

Author(s): Lynn Parramore

Publication Date: 20 Dec 2022

Publication Site: Institute for New Economic Thinking

Lawmakers Discuss How Financial Institutions Should Address Ties to Slavery

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2022/12/12/lawmakers-discuss-how-financial-institutions-should-address-ties-to-slavery/

Excerpt:

Rep. Al Green, D-Texas, wants to develop legislation that could affect how insurers and other financial institutions address their historical involvement in slavery.

Green and other lawmakers talked about ideas for legislation related to slavery during a  recent hearing of the House Financial Services oversight subcommittee on the role of financial institutions in the horrors of slavery.

….

Berkshire Hathaway, for example, descends partly from The Valley Falls Company, a textile manufacturer owned by members of an abolitionist family, Rockman said.

But members of the abolitionist family “rarely paused to ask where their cotton came from,” Rockman said. “Virtually every cotton fiber they spun and wove would have been slave-grown and slave-picked.”

William Darity Jr., a public policy professor at Duke University, talked about the role of insurers in slavery. He noted that Aetna, AIG, Baltimore Life, Loews Corp., New York Life and Southern Mutual Insurance Company all descend from companies that protected slaveowners against the deaths of slaves.

Author(s): Allison Bell

Publication Date: 12 Dec 2022

Publication Site: Think Advisor

Defining Discrimination in Insurance

Mary Pat Campbell

Link: https://www.casact.org/sites/default/files/2022-03/Research-Paper_Defining_Discrimination_In_Insurance.pdf

Graphic:

Excerpt:

Unfair Discrimination without Disproportionate Impact. As previously defined, unfair discrimination occurs when rating variables that have no relationship to expected loss are used. A hypothetical example could be if an insurer decided to use rating factors that charged those with red cars higher rates, even if the data did not show this. In this case, there would be no disproportionate impact, assuming protected classes do not own a large majority of red cars.
Disparate Treatment. Disparate treatment and unfair discrimination are not directly related if we use the Fair Trade Act definition of unfair discrimination. However, in states where rating on protected class is defined to be unfair discrimination, disparate treatment would be a subset of unfair discrimination. In such cases, an insurer would explicitly use protected class to charge higher rates, with the intention of prejudicing against that class.
Intentional Proxy Discrimination. If proxy discrimination is defined to require intent, it would be a subset of disparate treatment, whereby an insurer would deliberately substitute a facially neutral variable for protected class for the purpose of discrimination. Redlining is an example of this type of discrimination, given the use of location characteristics as proxies for race and social class.
Disproportionate Impact. Disproportionate impact focuses on effect on protected class, even if there is a relationship to expected loss. An example of this is the one mentioned in the AAA study, whereby a rating plan that uses age could disproportionately impact a minority group if those in that minority group tend to have higher risk ages. This disproportionate impact is not necessarily the same as proxy discrimination, since it is likely that even after controlling for minority status, age would have a relationship to
expected costs.

Unintentional Proxy Discrimination. If proxy discrimination is defined to be unintentional, the focus is more on disproportionate outcomes and the variables used to substitute for protected class. Several variables are being investigated by regulators to potentially be proxy discrimination and include criminal history for auto insurance rating. In order to prove proxy discrimination, an analysis would have to be performed to understand the extent to which criminal history proxies for minority status, and whether its predictive power would decrease when controlling for protected class. It is important to note once
again that terms like “unintentional proxy discrimination” may be subsumed by “disparate impact,” but they are included in this paper to show how various stakeholders use the term differently.
Disparate Impact. Disparate impact is unintentional discrimination, where there is disproportionate impact, but also other legal requirements, such as the existence of alternatives. To date, no disparate impact lawsuits against insurance companies have been won. An example of potential disparate impact (although it was not litigated as a lawsuit) is from health care. Optum used an algorithm to identify and allocate additional care to patients with complex healthcare needs. The algorithm was designed to create a risk score for each patient during the enrollment period. Patients above the 97th percentile were automatically enrolled in the program and thus allocated additional care. Upon an independent peer review of the model, researchers found that the model was in fact allocating artificially lower scores to Black patients, even though the model did not use race. The reason behind this was the model’s use of prior healthcare costs as an input. Black patients typically spend less than white patients on health care, which artificially allocated better health to Black patients.18
Unfair Discrimination and Disproportionate Impact. In this case, an insurer would use a variable that both has no relationship to expected loss, but also has an outsized effect on protected classes. An example of this could be the same red car case above, but where protected classes also owned almost all the red cars. In this case, higher rates would create a disproportionate effect on protected classes, while also having no relationship to expected loss.

Author(s): Kudakwashe F. Chibanda, FCAS

Publication Date: 2022

Publication Site: Casualty Actuarial Society

South Korea spent $200 billion, but it can’t pay people enough to have a baby

Mary Pat Campbell

Link: https://www.cnn.com/2022/12/03/asia/south-korea-worlds-lowest-fertility-rate-intl-hnk-dst/index.html

Excerpt:

South Korea recently broke its own record for the world’s lowest fertility rate. Figures released in November showed the average number of children a South Korean woman will have in her lifetime is down to just 0.79.

That is far below the 2.1 needed to maintain a stable population and low even compared to other developed countries where the rate is falling, such as the United States (1.6) and Japan – which at 1.3 reported its own lowest rate on record.

And it spells trouble for a country with an aging population that faces a looming shortage of workers to support its pension system.

Author(s): Paula Hancocks

Publication Date: 3 Dec 2022

Publication Site: CNN

All of US: a dot density map of the United States

Mary Pat Campbell

Link: https://all-of-us.benschmidt.org/

Graphic:

Excerpt:

One point per person in the US for the 2010 and 2020 censuses, fully zoomable and interactive using WebGL and [Deepscatter](https://github.com/CreatingData/deepscatter). Since this uses WebGL individual point rendering and quadtiled data, it can be far more responsive than raster-based maps you may have seen in 2010. Plus, if you zoom all the way in in some views it has little person glyphs!

Author(s): Ben Schmidt

Publication Date: accessed 2 Dec 2022

Publication Site: Ben Schmidt’s personal site

Movember 2022: Men and Drug Overdoses (and Giving Tuesday!)

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/movember-2022-men-and-drug-overdoses

Graphic:

Excerpt:

Remember the graph I made showing the suicide trend for men crossing over from prostate cancer?

Let me layer on unintentional drug overdoses:

Yeah, it’s as bad as it looks.

While death rates due to suicide increased by about 30% over the 20-year period, death rates due to unintentional drug overdoses increased by over 500%.

None of this is really a surprise. I’ve written about the drug OD problem many times before, which had a horrible trend before the pandemic and got much, much worse during the pandemic.

Much of the increase came in 2020 and 2021 — over 30% in 2020, and 17% in 2021. These are huge increases on rates that were already bad.

Author(s): Mary Pat Campbell

Publication Date: 29 Nov 2022

Publication Site: STUMP at substack

Covid’s Drag on the Workforce Proves Persistent. ‘It Sets Us Back.’

Mary Pat Campbell

Link: https://www.wsj.com/articles/covid-workforce-absenteeism-productivity-economy-labor-11667831493

Graphic:

Excerpt:

Two-and-a-half years after Covid-19 emerged, reported infections are way down, pandemic restrictions are practically gone and life in many respects is approaching normal. The labor force, however, is not.

Researchers say the virus is having a persistent effect, keeping millions out of work and reducing the productivity and hours of millions more, disrupting business operations and raising costs.

In the average month this year, nearly 630,000 more workers missed at least a week of work because of illness than in the years before the pandemic, according to Labor Department data. That is a reduction in workers equal to about 0.4 percent of the labor force, a significant amount in a tight labor market. That share is up about 0.1 percentage point from the same period last year, the data show.

….

Another half a million workers have dropped out of the labor force due to lingering effects from previous Covid infections, according to research by economists Gopi Shah Goda of Stanford University and Evan J. Soltas at the Massachusetts Institute of Technology. In a Census Bureau survey in October, 1.1 million people said they hadn’t worked the week before because they were concerned about contracting or spreading the virus.

The resulting labor shortages are contributing to upward pressure on wages and inflation, one reason the Fed delivered its fourth consecutive 0.75 percentage point interest rate increase last Wednesday. On Friday, the Labor Department reported brisk job growth in October, but health-related absences remained elevated and the labor force contracted slightly.

Author(s): Gwynn Guilford and Lauren Weber

Publication Date: 7 Nov 2022

Publication Site: WSJ

Social Security Politics

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/social-security-politics#details

Graphic:

Excerpt:

2022 OASDI Trustees Report, plus spreadsheets, etc. https://www.ssa.gov/OACT/TR/2022/

I am graphing the net change in the OASI (that’s the old age benefit part) Trust Fund, year-over-year.

I think you can easily see all those glorious years the Boomer payroll taxes were being stuffed into the Trust Fund… but really flowing right out into current spending for other goodies.

And you can see when that reversed and is now negative, and will continue to be negative until the Trust Fund is exhausted, in the early 2030s.

Author(s): Mary Pat Campbell

Publication Date: 7 Nov 2022

Publication Site: STUMP at substack

2021 Risks and Process of Retirement Survey

Mary Pat Campbell

Link: https://www.soa.org/resources/research-reports/2021/retirement-risk-survey/

Full report: https://www.soa.org/48fd8a/globalassets/assets/files/resources/research-report/2021/risks-retirement-findings.pdf

Graphic:

Excerpt:

CHAPTER HIGHLIGHTS:
• Despite the COVID-19 pandemic, level of concern about various risks remains historically low this year for both pre-retirees and retirees. Compared to 2019, level of concern dropped on some issues for retirees. As a result of this drop, retiree concerns are lower than those of pre-retirees by a larger gap than ever before.
• The one exception to this trend was concern about fraud. In 2021, both retirees and pre-retirees were
more concerned about fraud, and it is the highest concern among retirees, particularly Black/African
American retirees. As in prior studies, those with lower income tend to show much higher levels of
concern.
• The biggest concerns for pre-retirees are their savings and investments not keeping up with inflation, not being able to afford long-term care, not being able to afford health care costs, not being able to maintain a reasonable standard of living throughout retirement, and potentially depleting all their savings.
• While half of pre-retirees plan to retire gradually rather than all at once, retiree respondents indicate this
seldom actually happens. Higher-income pre-retirees are more likely to plan to go straight from full time
employment to retirement.
• The COVID-19 pandemic has not affected plans that pre-retirees have for work, living arrangements, and
lifestyle in retirement, although over a quarter report changing their lifestyle.
• Despite the financial challenges that retirement poses, most do not have financial advisors, especially preretirees, lower-income respondents, and Black/African American respondents.

Author(s): Greenwald Research

Publication Date: February 2022

Publication Site: Society of Actuaries

Social Security Needs Saving Again

Mary Pat Campbell

Link: https://www.wsj.com/articles/social-security-needs-saving-again-retirement-planning-wages-earnings-benefits-eligible-savings-11654631767?mod=opinion_lead_pos5

Excerpt:

— Raise the full retirement age further. Starting in 2028, it would go up by one month every half-year until it reaches 68 1/2 in nine years. That means that in 101 years (1935-2036) the full retirement age would have risen 3 1/2 years — far less than the increase in average life span over the same period.

— Raise the early eligibility age. Since the 1960s, all workers have had the option of retiring at 62 with benefits reduced by around 25%. Most retirees now claim Social Security at 62, and the rising full retirement age strengthens the incentive to do so. Once it’s at 67, holding out for higher payments will mean giving up five years’ worth of benefits — a three-year gap will have widened to five.

If my first reform were enacted, the gap would grow further, to an irresistible 6 1/2 years. So Congress should return to the three-year gap by raising the early eligibility age to 65 1/2 as soon as possible.

— Change the way benefits are calculated for new recipients. At a 1983 White House Rose Garden ceremony, I sat next to a Senate member of the Social Security Reform Commission. I told him, “You can fix Social Security by not indexing the bend points for five years.” His response: “What the hell are bend points?”

Bend points determine how much your initial Social Security check will be. First they take the 35 years of your highest income. Thirty-five years ago, you were a junior employee and the dollar didn’t go as far. So each year’s wages are adjusted for inflation to compute an average monthly wage in today’s dollars.

Using the present rules, assume you’re retiring in 2022 and your average inflation-adjusted monthly wage is $6,572. Your first check would be $2,628.96 — 90% of the first $1,024 (or $921.60), plus 32% from $1,024 to $6,172 (or 1,647.36), plus 15% in excess of $6,172 (or $60).

The bend points are $1,024 and $6,172. They were $230 and $1,388 in 1982, when I wrote my constituent newsletter. The growth in benefits could be constrained by indexing the bend points every other year rather than annually for six to 10 years. In addition, the initial benefit should be based on 38 years of wages rather than 35, since Americans not only live longer but work longer, and the inflation-adjusted average wage should be discounted by 5%.

— Slow the growth of benefits for new and existing beneficiaries alike by changing the basis on which they’re indexed for inflation. All indexing of Social Security now uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Economists agree that the Chained CPI is the most accurate inflation index available. Between 2000 and 2020, the Chained CPI was around 0.3 percentage point lower each year than the CPI-W. The government uses Chained CPI to index income-tax brackets and the higher CPI-W to calculate government outlays, including Social Security cost-of-living adjustments — which leads both taxes and spending to rise more quickly.

— Withhold some Social Security COLAs from higher-income retirees. Those who report income of more than $60,000 (a threshold that itself would rise with inflation) from sources other than Social Security could be denied the COLA every other year for up to six years.

— Give the COLA not annually but every 14 or 15 months using the 12 months of lowest inflation.

— Tax Social Security income for higher-bracket taxpayers, and give them the option to forgo all or part of their monthly payment. The forgone amount could be deducted as a charitable contribution. In high-income-tax states, forgoing Social Security payments would incur little or no cost. Skeptics may be surprised by how many Americans will forgo a part of their monthly checks to assure the system’s solvency for their grandchildren. The election to forgo would be reversible annually.

— Raise the payroll tax by 0.1% of wages every other year — half from withholding, half for the employer’s contribution — for 20 years, a total tax increase of 1%.

Author(s): Rudy Boschwitz

Publication Date: 7 June 2022

Publication Site: WSJ

Public’s Cash Stash Will Cushion a Downturn? Maybe Not

Mary Pat Campbell

Link: https://www.ai-cio.com/news/publics-cash-stash-will-cushion-a-downturn-maybe-not/

Excerpt:

One calming thought amid today’s economic turmoil has been that any recession would be softened by the large trove of savings that the U.S. public has accrued since the pandemic began. But that cushion may be a lot less protective than many believe, according to a study by Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Pandemic savings have “been run down further than previously thought,” Shepherdson noted. “Consumers’ financial cushion against tighter financial conditions is smaller” than before, he wrote.

Thanks to Washington stimulus and curbed spending in the early days of COVID-19, savings had run up to $2.6 trillion. New government data, however, show that this ready cash has shrunk, no doubt due to high consumer outlays that kicked in since. Almost a third of the trove has been spent.

Indeed, consumers have gone back to their previous ways of preferring spending to saving, and then some. This past decade, before the pandemic, the personal savings rate was around 6% of their disposable income. That shot up to almost 25% in early 2020 and stayed high until the middle of 2021. Lately, it is a mere 3.5%.

Author(s): Larry Light

Publication Date: 10 Oct 2022

Publication Site: ai-CIO

What Social Security Should Really Be Paying to Survive in This Economy

Mary Pat Campbell

Link: https://www.nakedcapitalism.com/2022/10/what-social-security-should-really-be-paying-to-survive-in-this-economy.html

Excerpt:

Inflation continues to rise in the United States. Although gas prices have recently fallen since their record high over the summer, the cost of groceries rose by 11.4 percent over the last year, and there is no expectation that they will fall back to reasonable levels. Prices overall have risen by 8.2 percent, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index report covering September 2022 as compared to the same month last year. While most working Americans are not getting hefty wage raises to compensate for inflation, seniors will see their Social Security benefits—which are pegged to inflation—rise next year. Starting in January 2023, beneficiaries will see an 8.7 percent cost-of-living adjustment (COLA) bump in their Social Security checks.

Conservatives are scoffing at this automated increase, as if it were a special treat that the Biden administration has cooked up to bribe older voters. Fox News reported that there was a “social media backlash” against White House Chief of Staff Ron Klain’s tweet lauding the upcoming increased COLA benefits for seniors. The outlet elevated comments by the conservative America First Policy Institute’s Marc Lotter, who retorted to Klain, “Nice try Ron. Raising benefits next year does not help seniors with the higher prices they are paying today or the higher prices they’ve been paying since you took office.”

But Social Security benefits have risen automatically with inflation since 1975 by design, precisely so that the livelihoods of seniors are not beholden to partisanship. This is an imminently sensible way to ensure that retired Americans, who spent their working lives paying Social Security taxes, can have a basic income.

If conservatives are complaining that an 8.7 percent bump is not enough to counter inflation, one might expect them to demand an even greater increase to Social Security benefits.

Author(s): Sonali Kolhatkar

Publication Date: 15 Oct 2022

Publication Site: naked capitalism