Life Expectancy Up... For the Rich

The debate surrounding cuts to popular social programs often neglects disparity between poor and more wealthy seniors

An increase in overall life expectancy is one of the justifications many offer when they try to defend making benefit cuts to key social programs like Medicare and Social Security.

Due to the fact that these programs are aimed at creating safety nets and secure retirements for aging members of the society, the gains in life expectancy are used to argue that the age limits for receiving access to such programs be increased.

The problem? Life expectancy is calculated as an average among the population, but what all the deeper research and math show is that not all members of society are achieving these gains equally. Specifically, it is the rich and well-to-do who are living longer, while those who work in more physically demanding jobs or live a life in perpetual poverty--those who need these programs the most--are also the ones most likely to die younger.

Instead of making cuts to Medicare and Social Security, experts argue: "We need higher benefits across the board."

But as politicians from both major parties in Washington talk about how they can convince US citizens that cutting popular social programs like Medicare and Social Security is a good idea, reporting in the Washington Post on Monday reminds readers that such moves would dramatically undercut those most in need.

As the Post reports, "the nation's life expectancy has marched steadily upward, reaching 78.5 years in 2009." But, citing a large and growing field of research, "those gains are going mostly to those at the upper end of the income ladder."

"People who are shorter-lived tend to make less, which means that if you raise the retirement age, low-income populations would be subsidizing the lives of higher-income people," Maya Rockeymoore, president and chief executive of Global Policy Solutions, told the Post. "Whenever I hear a policymaker say people are living longer as a justification for raising the retirement age, I immediately think they don't understand the research or, worse, they are willfully ignoring what the data say."

And Monique Morrissey, an economist at the Economic Policy Institute, says: "Life expectancy has increased mainly among the privileged class. For many people, raising the retirement age would amount to a significant benefit cut."

As the Post reports:

Not only is life expectancy diverging by income level, but now some demographic groups -- particularly low-income white women -- are losing ground.

A study published last week in the journal Health Affairs said that in almost half of the nation's counties, women younger than 75 are dying at rates higher than before. The counties where women's life expectancy is declining typically are in the rural South and West, the report said.

Putnam County shares many of those characteristics. Forests, picturesque lakes and the beautiful St. Johns River, the longest in Florida, dot the area. But amid that rural splendor there are few good jobs and, officials said, little access to medical care.

Even people who have health insurance often struggle to make it to doctor appointments, complicating efforts to manage chronic diseases.

And, as EPI's Morrissey wrote in an policy paper last month, "Americans need Social Security more than ever, and they're willing to pay for it." Instead of making cuts to Medicare and Social Security, she argues, "We need higher benefits across the board."

And economist Dean Baker, co-director of the Center for Economic and Policy Research, explains not only why Social Security is more important than ever, but says that cutting benefits to the program--including implementing a so-called 'chained CPI' adjustment--in no way helps the overall deficit picture of the budget.

Baker writes:

While some people have tried to foster a myth of the elderly as a high living population, the facts don't fit this story. The median income of people over age 65 is less than $20,000 a year. Nearly 70 percent of the elderly rely on Social Security benefits for more than half of their income and nearly 40 percent rely on Social Security for more than 90 percent of their income. These benefits average less than $15,000 a year.

The reason that seniors are so dependent on Social Security is that the other pillars of the retirement stool, employer pensions and individual savings, have largely collapsed. Defined benefit pensions are rapidly disappearing. Defined contribution plans, like 401(k)s have also proved grossly inadequate. Only around half of the work force even has a defined contribution plan available to them at their workplace. In a period of stagnant wages and limited employer contributions, workers have generally been unable to accumulate much wealth in these plans. According to the Retirement Research Center at Boston College, the median value of 401(K) and other defined contribution plans for those near retirement who have a plan is $120,000, enough to get an annuity paying $575 per month.

For most workers the vast majority of their wealth was in their homes. The collapse of the housing bubble destroyed much of this equity. Counting all forms of wealth, including equity in a home, the median household approaching retirement had just $170,000 in wealth in 2011.

The proposed cut in the annual cost of living adjustment will be a substantial hit to a population that for the most part is ill-prepared to see a cut in its income.


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