Number: RL32900
Title: Indexing Social Security Benefits: The Effects of Price and Wage Indexes
Authors: Patrick Purcell, Laura Haltzel, and Neela Ranade, Domestic Social Policy Division 
Abstract: One way to preserve benefits for low-wage workers would be to progressively price-index initial benefits. Initial benefits of low-wage workers would continue to be fully wage-indexed, the benefits of average-wage workers would be based on a mix of wage-indexing and price-indexing, and the benefits of high-wage workers would be fully price-indexed. President Bush has suggested that Congress consider progressive price-indexing of Social Security benefits. The Social Security Administration (SSA) has analyzed a method of progressive price-indexing that would continue to wage-index Social Security benefits for workers with careeraverage earnings in the lowest 30% of the earnings distribution. SSA has estimated that this proposal would eliminate about three-fourths of the program's 75-year unfunded liability. One consequence of this method of progressive price-indexing would be that, eventually, all workers with earnings in the top 70% of the earnings distribution would receive the same benefit.
Pages: 30
Date: May 12, 2005