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Minimum Benefits in Social Security

Although a number of proposals made since 1998 for altering Social Security have included provisions for minimum benefits, relatively little effort has been made to develop the rationale for a minimum benefit or to examine alternative ways it might be designed. As a consequence, the design of a minimum benefit – or, for that matter, the design of many redistributive aspects of Social Security – has seldom been based on any theoretical or empirical notion of exactly what goals are sought and what types of formulaic adjustments would best achieve them.

This study attempts to fill that gap by...

  • examining the redistributive purpose of Social Security and how it relates to other purposes of the program
  • offering minimum benefit designs of varying generosity based on years of covered work and the current poverty threshold (both wage-indexed and price-indexed)
  • examining empirically just how well different types of minimum benefits achieve various goals, such as reduction in poverty

Minimum benefits, the study finds, could help reduce poverty among the aged substantially, even within the context of a system with benefits reduced in order to improve the program's long-term fiscal deficit. In sum, the most effective changes are likely to integrate a combination of parameters that include both means for improving program adequacy and means for enhancing horizontal equity. (76 pages)

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