For more than two centuries, the United States of America has embraced an ethos that has encouraged successive generations to build on the progress of their forebears. Over time, this ideal has served as inspiration for individuals, families, and society as a whole, and has fueled greater levels of economic security for American workers. However, the U.S. is now at a critical crossroads. A weak U.S. economy—exacerbated by skyrocketing health care costs, imprudent government spending and taxing decisions, corporate malfeasance, and the effects of an extended recession—has spurred policymakers to scrutinize budgets at every level of government. Even though Social Security cannot by law contribute to the nation’s debt, the program has been continuously misidentified as a cause of the nation’s budget challenges and has therefore become a target for those who want to reduce government spending. As a part of New Deal reforms in the wake of the Great Depression of the 1930s, Social Security has become a cornerstone of American progress. In exchange for modest payroll contributions, U.S. workers have been able to gain insurance that provides economic benefits for themselves and their families in the event of retirement, disability or early death; events that in previous generations would have led to impoverishment for workers and their families. As an economic stabilizer, Social Security also stimulates the overall economy through monthly payments to beneficiaries who, in turn, spend their Social Security wealth at local retail outlets throughout the country. These benefit checks are distributed regardless of the country’s economic condition and are especially helpful in maintaining demand during economic downturns.

Throughout its 76-year history, Social Security has maintained a successful track record of performance—never missing a payment and reducing poverty among vulnerable groups. Unlike other parts of the U.S. budget, the Social Security trust funds currently have a surplus and are able to fully pay benefits until the year 2036.1 Extending the solvency of the program beyond that point will require modest programmatic changes. Because decisions made today about the program’s future will profoundly affect the next generation’s ability to survive and thrive, it is the collective responsibility of national leaders to ensure that any changes are made with the best interests of the next generation as a top priority. This can only be done by understanding who these children are and what socioeconomic circumstances they are likely to face as they come of age and mature in the middle to latter part of the 21st century.

America’s Changing Complexion

Three inextricably intertwined phenomena—globalization, economic instability, and changing racial and ethnic demographics—provide substantial insight into how mid-century Americans will likely view and use Social Security. Figures from the U.S. Census Bureau paint a vivid picture. Demographic trends point to a steady growth in the number of people of color (Latino, African American, Asian and Pacific Islander, Native American) while simultaneously projecting a decline in the white population. In June of 2011, the Census Bureau reported that the majority of babies born in the U.S. are now children of color and that a majority of youth under the age of 18 would be from non-white racial and ethnic groups by the end of this decade.2 If current trends continue, the overall U.S. population is expected to become “majority-minority” by the year 2042.3

Despite the growth of racial and ethnic populations of color, the socioeconomic outlook for this rising majority is not rosy. The vast majority of children of color are born into lower-income, low-wealth households.4 This historical phenomenon has its roots in discriminatory labor market practices and social policies.5 However, the current socioeconomic circumstances of families of color have also been shaped by increased economic insecurity and stagnating wages for working class Americans of all backgrounds6 and the loss of U.S. jobs due to globalization and the Great Recession. The Great Recession has led to disproportionate rates of unemployment, foreclosures, and poverty in communities of color, which has had (and will continue to have) generational consequences for the children of the recession generation.7

Indeed, a recent report by the Pew Research Center found that the wealth gap between whites and communities of color has reached its widest level in the quarter century since this statistic has been measured.8 From 2005 to 2009, wealth fell by 66% among Latino households and 53% among black households, and 54% among Asian households, compared with only 16% among white households.9 In 2009, the typical African American and Latino household had a mere $5 and $6 of net worth, respectively, for every $100 of assets held by the typical non-Hispanic white household. Racial wealth disparities have direct implications for retirement security; an estimated nine out of 10 senior households of color do not have enough economic security to sustain themselves throughout their projected lives.10

Unless effective interventions are implemented, uneven education investments and misguided education policies will also assure that a majority of children coming of age in mid-century will lack the skills and knowledge necessary to strengthen their socioeconomic outlook. This very real possibility, combined with the global competition for jobs, eroding retirement security due to diminished savings and the inadequacies of 401K-style defined benefit plans,11 and inadequate access to “white collar” jobs with disability, secure retirement, and life insurance benefits, means that today’s children, like their parents, will rely heavily on Social Security. What is the nation’s responsibility to the next generation of children in light of these projections?

The Imperative for Stronger Social Security Benefits

Given the economic outlook for tomorrow’s workers, efforts to reform Social Security should not only focus on the program’s solvency, they must also consider how to increase the adequacy of benefits for vulnerable recipients. For 76 years, Social Security has helped provide economic security for American workers and their families. For families of color, Social Security has not only helped to keep them out of poverty, it also has helped them maintain a standard of living that would not otherwise be possible when they or family members are faced with death, disability, or retirement. As people of color transition to become the majority of the U.S. workforce and eventually the majority of the older adult population, it is important to consider how these populations use Social Security and how the program can be modernized to meet the needs of an increasingly diverse and economically insecure 21st century workforce.

In recognition of Social Security’s continued relevance for a new generation of diverse Americans, the Insight Center for Community Economic Development and Global Policy Solutions convened the Commission to Modernize Social Security. Comprised of experts from or representing African American, Asian American and Pacific Islander, Latino, and Native American communities, the Commission was given the task of identifying proposals to extend Social Security’s long-term solvency while also modernizing the program to ensure the program continues to achieve its goal of increasing economic security for all. Building upon what currently works in the program, the group developed a reform plan that would make Social Security fully solvent for more than 75 years while also strengthening benefits for vulnerable groups such as the disabled, students, and the very old. With an interest in maintaining intergenerational equity, the Commission achieved its goal without introducing benefit cuts—like raising the retirement age, reducing cost of living adjustments, or price-indexing benefits—that are harmful to middle- and low-income Americans of all racial and ethnic backgrounds. This report represents the outcome of the Commission’s deliberations. It analyzes how communities of color interact with the Social Security program and outlines the rationale and approaches for making Social Security stronger for future generations.


The Social Security Act was passed in 1935 to solve a pressing problem: how to alleviate poverty among those who contributed a lifetime of labor to the U.S. economy but who, through no fault of their own, could no longer work. The program’s early years focused on providing assistance to the elderly and their spouses. Later, eligibility was extended to dependents of deceased workers and to people who could no longer work due to long-term disability. Since its beginnings, Social Security has proven to be one of the most enduring and effective means of protecting vulnerable people from poverty while giving them dignity and a measure of economic security.12 It is an especially important asset for workers and families of color who are more vulnerable to economic instability and who are the least likely to have wealth as a direct result of past racial discrimination in American life and policies.13 It is important to recognize that Social Security also serves to prevent the middle class from falling behind.14 Today, Social Security’s insurance benefits are a valuable asset for vulnerable workers and families and would be unaffordable for many if purchased in the private market. For example, the value of the life insurance provided to survivors through Social Security is over $433,000, and the value of disability protection for a young disabled worker with a spouse and two children is more than $414,000.15 The program’s progressive structure also replaces a larger percentage of lower earning workers’ pre-retirement or pre-disability income, and its steady, inflation-adjusted benefits allow families to maintain the purchasing power of their Social Security income over time. Despite some who question the value that people of color receive from Social Security, a 2003 study conducted by the U.S. General Accounting Office (now the Government Accountability Office) found that Hispanics and African Americans receive a higher rate of return—receiving more in benefits than what is paid out in payroll taxes—than whites due to their heavier reliance on the full range of benefits offered by Social Security.16 This finding is reflected in polling data that underscore the program’s popularity among people of color. According to a 2010 National Academy of Social Insurance poll, 92 percent of African Americans, 90 percent of Latinos, and 86 percent of whites agree that Social Security’s societal benefits are worth the cost.17 The continued popularity of Social Security among people in all racial and ethnic groups is a testament to its effectiveness in providing economic support to workers and families facing lost income due to death, disability, or retirement of a primary wage earner.

People of Color Use Social Security Differently than Whites

It is widely assumed that everyone uses Social Security similarly. However, it is a fact that people of color rely on Social Security differently than whites, elevating the importance of certain program features.18 While the vast majority of whites (74%) depend on Social Security for its retirement benefits, almost half (45%) of all African-American beneficiaries and a majority (58%) of persons of “other” (the Social Security Administration uses the term “other” to describe racial and ethnic groups that are not white or black) racial and ethnic groups rely on Social Security for its survivor and disability benefits.19 For people of color, their heavier reliance on survivor and disability benefits reflects socioeconomic factors, such as lower educational attainment and higher rates of poverty, disability, morbidity, and—for African Americans and Native Americans—mortality.20 These usage patterns also reflect the effects of occupational segregation, with people of color more likely to work in physically challenging jobs that are more likely to lead to temporary or permanent disability.21 Such jobs can also lead to early death, which may be the reason for the greater utilization of Social Security by children of color as survivors of deceased workers or dependents of disabled workers. For example, nearly 21 percent of all children who receive Social Security disability benefits are African American, although they are only 15 percent of all children in the U.S.22 There are other important differences among racial and ethnic groups. Life expectancy is a case in point. Asians and Latinos who are 65 today have longer life expectancies than whites, African Americans and Native Americans. For example, a 65 year-old Latino or Asian man is expected to live to 85 compared to 82 for all men; a Latina woman is expected to live to 89 and an Asian woman to 88 compared to 85 for all women.23 Given longer life spans for Asians and Latinos, the annual cost of living adjustment (COLA) is an especially important Social Security feature that maintains the purchasing power of Social Security dollars for those who are very long lived.24 On the other hand, African Americans and Native Americans have lower life expectancies than whites, Asians, and Latinos. Social Security’s early retirement feature, which allows workers to retire at age 62, is especially important to them.

Another important difference is that family structures in communities of color often differ. For example, Asians of all ages are the most likely to be married and living with spouses (60% for Asians vs. 49% of the total population).25 On the other hand, more African American women are never married or divorced and thus are least well served by the family provisions in Social Security. One important similarity among people of color is that they all tend to depend on extended family networks and are more likely to share income beyond their nuclear family, which both cushions elders and disabled people, but decreases savings and investments for those providing financial help.

Older Adults of Color are More Reliant on Social Security than Whites

Although Social Security accounts for the bulk of retirement wealth for 70 percent of Americans, people of color rely more on its benefits because they are least likely to have significant sources of wealth outside of Social Security upon retirement.26 In addition to well-documented racial and ethnic disparities in income, the racial wealth gap—rooted in historical discrimination—reflects disparities in receipt of private pensions, investments, savings, and homeownership.27 Wealth data from the Federal Reserve Board provides additional insight into these disparities. In 2007, the average family of color had only 16 cents of wealth for every dollar held by the average white family. The gap was largest between African American and white families, $17,100 versus $170,400.28 A more recent study by the Pew Research Center confirms that the wealth gap has widened as a result of the Great Recession.29 While those in the pre-retirement ages of 50- 64 have the most wealth given that they are at the peak of their working years and have yet to begin drawing down on accumulated assets for post-retirement income, large racial gaps remain with single white men and women owning twice as much as single non-white men and women.30 Since those are the ages in which people often lose parents, it is likely that racial differences in inheritance play a major role in the racial wealth gap.31 For example, while 1 in 4 white Americans will receive an inheritance, only 1 in 20 African Americans will; and they will receive only 8 cents to the white inheritor’s dollar.32 Mostly due to continued occupational segregation by race and gender, people of color also are less likely than whites to have pensions.33 For example, 78.2 percent of managerial positions are held by non-Hispanic whites, while they are 63.7 percent of the population. In comparison, 8.4 percent of African Americans, 6.1 percent of Asians, and 7.3 percent of Latinos hold these types of positions.34 In contrast, service sector occupations are the least likely of provide pensions. Accordingly, African Americans (16.3%) and Latinos (40.8%) hold a disproportionate number of the maid and housekeeping cleaner positions within the service sector compared to 5 percent of Asians and 37.9 percent of whites.35 Women (56.9%) are also more likely to hold service sectors jobs and are dramatically overrepresented in areas such as healthcare support (88.9%) personal care and service (78.3%), and maids and housekeeping cleaner (89%) occupations.36

Given the disparities in access to pensions and to income from personal savings and ownership, it is no wonder that Social Security payments are more essential to beneficiaries of color than to white beneficiaries. Social Security is the primary source of retirement income for older minorities, with more than 25 percent of African Americans and Latinos depending on it for more than 90 percent of their family income. It is the ONLY source of income for two out of every five Latino and African American retiree beneficiary households.37 Consider the data for people of color by marital status: In 2009, among African Americans receiving Social Security, 29 percent of elderly married couples and 56 percent of unmarried elderly persons relied on Social Security for 90 percent or more of their income.38 In 2009, among Hispanics receiving Social Security, 36 percent of elderly married couples and 62 percent of elderly unmarried persons relied on Social Security for 90 percent or more of their income.39

In 2009, among Asian Americans and Pacific Islanders receiving Social Security, 27 percent of elderly married couples and 48 percent of elderly unmarried persons relied on Social Security for 90 percent or more of their income.40 In 2009, among American Indians receiving Social Security, 45 percent of elderly unmarried persons relied on Social Security for 90 percent or more of their income.41 The following graph illustrates how communities of color rely more heavily on Social Security for the majority of their income.

Social Security is Important to Women of Color

As a majority of adult Social Security beneficiaries (52%), women are also heavily reliant on Social Security.42 More than half (60%) of adult women receive Social Security as retired workers while the other half is split between women who rely on Social Security as widows of deceased workers and the caretakers of their dependent children, as disabled workers, as disabled dependents, and as the spouses of retired and disabled workers.43 In general, women live longer than men, have a history of lower earnings during the course of their working years, take more time out of the workforce to care for family, and have higher rates of poverty. These factors increase their reliance on Social Security. Women of color face unique circumstances that make them more vulnerable to extreme poverty and more reliant on Social Security as they age. Disproportionately lower earners—even more so than white women and men of all races and ethnicities—women of color are more likely to have worked in low-wage and part-time positions while in the labor force.44 This continuing trend makes women of color even more reliant on Social Security’s progressive benefit formula. The marital status of women of color and the earnings of the men they marry, if they marry, also contribute to their economic insecurity. While marriage often provides a step up the economic ladder for white women, women of color have no such marital advantage because they tend to marry men of color who also have lower earnings relative to whites.45 One in three (31%) AfricanAmerican married couples and nearly four in ten (39%) Hispanic married couples rely on Social Security for 90 percent or more of their income in retirement, compared to only one in five (20%) white married couples.46 Divorced women and women who have never married have the highest rates of poverty.47 AfricanAmerican women are especially disadvantaged because they are the least likely to ever be married.48 Unmarried women living alone aged 65 and older are three times as likely to be living in poverty as married women aged 65 and older (16.6 % compared with 4.8 /5).49 Without Social Security, more than two-thirds of unmarried elderly women would fall into poverty.50

In contrast, Asians of all ages are the most likely to be married and living with their spouses (60% for Asians vs. 49.1% of the total population).51 Eightyfour percent of Asian men over 65 live with their spouses but only 45 percent of Asian women over 65 are still living with their spouses.52 This disparity reveals a gender differential in life expectancy among Asian older adults. Since more Asians are legally married and because husbands tend to die first a greater percentage of Asian women are eligible for Social Security survivor benefits, which helps Asian elderly women escape poverty.53

Social Security is Important to Men of Color

Despite their vulnerability, the needs of men of color are not usually highlighted in discussions about Social Security reform. One notable exception was when President Bush justified his effort to partially privatize Social Security by arguing that African American men get a raw deal from the program due to their shorter life expectancy.54 Indeed, it is true that African American and Native American men have shorter life expectancies when compared to white, Asian, and Latino men. For example, in 2009 the at-birth life expectancy for black men was 70.9 years of age compared to 76.2 years of age for white men.55 However, this should not be a justification for dismantling Social