Growing gap in lifespan by income, growing gap in government benefits

Larger consideration of life expectancy and lifetime earning may close the gap and offer better control on the cost of social programs.
By Stephen Feller   |   Sept. 17, 2015 at 4:04 PM

WASHINGTON, Sept. 17 (UPI) -- As the gap in life expectancy between high and low income earners in the United States has widened, higher earners have tended to receive a larger proportion of government benefits, according to a congressionally mandated report from the National Academies of Sciences, Engineering, and Medicine.

Some ideas to close or slow the spread of the gap were shown in simulations to have positive effects on it and the costs of the programs, which include Social Security and Medicare, according to the committee that wrote the report. Simulations for future benefits distributed by the programs show the gap will continue to widen, and the programs will continue to get more expensive, if nothing is done.

"Life expectancy has risen significantly in the U.S. over the past century, and it has long been the case that people who are better-educated and earn higher incomes live longer, on average, than those with less education and lower incomes," said Peter Orszag, co-chair of the committee that carried out the study and wrote the report, and vice chairman of Citigroup, in a press release. "What has changed is that the life expectancy gap across different income groups has become so much bigger."

In the last 50 years, average life expectancy in the United States has increased from 67 to 76 for men and from 73 to 81 for women. Better education and higher incomes, the committee said, result in a longer life expectancy than those with lower levels of education and lower incomes. The causes for this include life conditions, behavioral factors such as nutrition and exercise, stress and access to healthcare.

The simulation found that for men born in 1930, lifetime benefits across all income groups are the same after age 50. This is because, despite high earners born that year living longer because of basic life factors and receiving more in Social Security, people with lower incomes receive more in Medicaid, disability insurance, and Supplemental Security Income -- effectively balancing the scales.

For men born in 1960, however, high earners are expected to receive about $128,000 more in benefits over their lifespans than those with low incomes.

Among women, the lowest earners have historically received more than high earners. Low-income women born in 1930 would receive about $129,000 more in benefits over their lifetimes than high-income women. This gap, however, has flipped substantially as low-income women born in 1960 would receive about $28,000 less than high earners during their lifetimes.

The committee didn't make suggestions to fix the gap, but they analyzed suggestions that have been made to address it, as well as the overall growth in cost of government social welfare programs.

The most significant actions, if done together, would be to raise the normal retirement age for Social Security from 67 to 70 and raising the earliest eligibility age from 62 to 64.

Reducing the cost-of-living adjustment for Social Security and other benefits would affect the gap in benefits paid out, the committee wrote.

Additionally, they wrote, lowering initial benefits for the top 50 percent of earners also would generate significant savings for the system and narrow the gap between high and low income earners by 30 percent for men and 40 percent for women.

"The increasing gap in longevity by socioeconomic status is important in itself, but it also means that high earners will increasingly collect some government benefits over more years than will lower earners," said committee co-chair Ronald Lee, professor of demography and economics at the University of California, Berkeley. "Policymakers considering changes to put entitlement programs on firmer financial footing should take into account how such policy changes interact with these differential trends in life expectancy."

The full report is published by the National Academies Press.

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