Social security is indexed to wages. But real wages are the same as 1973. Productivity doubled since 1973. So social security went up, but only with inflation. People are not getting a real social security payment that is higher in real terms because men’s median wages are the same as 1973. Women’s median wages are what men’s were in 1960.
Men and women’s median wages graphed in link below from 1960.
People on social security have lost out because social security was tied to the wages during their work life which didn’t go up in real terms because of immigration.
Medicare contributions are also tied to wages. If wages went up with productivity, then Medicare could cover everything including nutrition supplements to fight aging and cancer.
Immigrants, legal and illegal, have low earnings. They threaten the solvency of Social Security and Medicare. We can cover prescription drugs, supplements against aging and all care if we stop immigration and send the illegals home. Productivity doubled from 1973 but real wages didn’t increase. That is why Social Security and Medicare don’t provide the full package they could for retirement.
No recommendation implied. Supplements like Resveratrol can be expensive.
Social security could be double if wages had gone up with productivity since 1973 as they did before immigration increases, during immigration restriction it was 1 for 1, then wages for men now would be over twice as much. For women, they would be 2.5 times as much since their wage convergence to men was slowed by immigration and eventually tapered off. The same applies to blacks and Hispanics whose convergence in median wages to all men has been slowed by immigration.
Medicare contributions are tied to wages. If wages had doubled along with productivity, Medicare would be afloat with cash. Medicare would have twice as much money to spend as it has now. That would mean all care covered including all drugs, prescription and OTC, and nutrition supplements like Resveratrol to fight aging and cancer.
==June 10 2008 Reply to comment below
There is an excellent comment below which is informative and I appreciate the input. Productivity, inflation, deflator indices, and formulas for social security or medicare are complicated. We also have the constraint that the sum equals the whole.
Series Id: PRS84006093
Duration: index, 1992 = 100
Measure: Output Per Hour
Select business, output per hour, and index. Then click on Add to Your Selection.
Then click on Get Data. You can get formatting options later. I selected only annual data and csv data. I copied that into a text file and then recopied it into this.
Other productivity choices and sources
1948 to 2002
This is almost a doubling of this measure of output per labor. There are many at BLS.
It is true that to reconcile with the National Income Product Accounts (NIPA) we have to be careful. Hours worked times output per hour have to add up to the gross domestic product of labor if we can call it that. This has to be less than GDP.
Andrew G. Biggs is an expert on Social Security, so I appreciate his comments, and I am just trying to learn. My understanding is that Social security is tied to wages in a complicated fashion. Above the ceiling for social security wages, wages are not taxed for social security. The benefit itself though is linked to an individual’s wages in a complicated algorithm. The benefits themselves, i.e. how those points are themselves set itself has some relationship to these variables. Thus, it appears to me as a hypothesis, that the average and median both have information relevant to social security. I don’t claim to the same expertise or understanding as Mr. Biggs, so I may be wrong and I still have to study this some more.
Part of the resolution in reconciling the output per hour data, median and average wage data and labor’s share of GDP is that women’s wages did rise relative to men’s from 1973 to 2007. See the graph on page 16 of p60-233.pdf at Census.gov. Note that women’s wage convergence to men’s slowed down after the 1986 amnesty and 1990 Immigration Act increases and the additional increases in immigration and guest worker in the years after. Women’s labor force participation rate also increased from 1973 to 2007. This too slowed down after the 1986 amnesty and 1990 onwards increases in legal immigration. The 1986 amnesty also contributed chain migration as part of the damper on wages in addition to university and business H-1B and all the other categories including illegal.
Presidential speaking fees have gone up much faster. In 1998, Bush Sr. got 100,000 dollars from Goldman Sachs to fly to Moscow for a speech. Bill Clinton now gets 300,000 per speech even without flying so far.