Hispanics and the Social Security Debate

I. Overview

Latinos have distinct demographic and economic characteristics that give them a unique stake in the debate over the future of Social Security. First, they are younger on average than the remainder of the U.S. population, which means that, as a group, their future as Social Security contributors and beneficiaries will be different from the future of non-Hispanics. Second, Hispanic workers tend to hold lower-paying jobs than the average U.S. worker and are less likely to have an employment-based pension. At all ages of adulthood Hispanics have lower average incomes and have accumulated less wealth than their white counterparts, and Hispanics currently over the age of 65 rely very heavily on Social Security retirement benefits as a source of income. For all these reasons, the nature, extent and timing of any changes to Social Security would have specific and distinct consequences for the Hispanic population.¹

In addition to examining these demographic and economic characteristics, this report presents the findings of a new national public opinion survey which found that about half of all Latinos favor a plan of the sort proposed by President George W. Bush, a plan that would allow wage earners to put some of their Social Security taxes in investment accounts. Conducted from February 15 to March 2, 2005, among a nationally representative sample of 1,001 Hispanic adults, the Pew Hispanic Center survey found that 49 percent think the proposal is a good idea while 38 percent say it is a bad idea. The survey also found that Latinos strongly favor measures that would limit benefits for the wealthy or increase Social Security taxes on them and oppose measures that would reduce benefits or eligibility for most retirees.

The major findings presented in this report include:

• Because of their relative youth, Latinos would be disproportionately affected by any changes to Social Security that leave benefits untouched for today’s older workers and current retirees but impose a new structure on younger people. More than 25 percent of the white population was born before 1950, but only 10 percent of Hispanics. Since President Bush’s proposed changes are “back-loaded,” affecting younger persons but leaving the system unchanged for those age 55 or older, a greater share of Hispanics than whites would find themselves directly affected.
• The transition to a retirement system that includes personal investment accounts as proposed by President Bush might be more challenging for Hispanic workers than for the working population at large. Not only are their earnings lower than average, young Hispanics have much less experience owning and managing long-term financial assets. For example, among household heads ages 35 to 44, 66 percent of whites own stocks, bonds or other long-term financial assets, compared with less than 28 percent of Hispanics.
• Among persons age 65 or over, Hispanics are less likely than others to receive Social Security benefits, and the average amount of Social Security benefits they do receive is lower as well.
• Hispanics age 65 or over are more dependent on Social Security than whites in the same age bracket because they have few other sources of retirement income.
• Current indicators suggest that Social Security is likely to continue to be a key source of income for older Hispanics in the future. Hispanic workers are the least likely of the principal racial and ethnic groups to participate in an employment-based retirement plan or own any long-term financial assets.
• The role that Hispanics play as contributors to Social Security will increase substantially in the next several decades. While the white labor force is projected to fall from 100 million in 2005 to about 94 million in 2050, the Hispanic labor force is projected to more than double, increasing from 19 million in 2005 to about 46 million in 2050. While fewer white workers will be contributing, many more Hispanics will be paying Social Security taxes by the middle of the century.
• In a national opinion survey by the Pew Hispanic Center, 49 percent of Hispanics said they thought a plan for individual investment accounts of the sort proposed by President Bush was a good idea while 38 percent said it was a bad idea and 12 percent said they did not know.
• Hispanics are almost evenly divided in their views of the condition of the Social Security system, with 47 percent saying it was in crisis or had major problems and 43 percent saying it had minor problems or no problems at all.

This report is broken into four sections. First, it reviews the current and future demographic characteristics of the Latino and white population in the United States, and shows how differences in these characteristics mean that Latinos and whites would be affected in different ways by the changes in Social Security proposed by President Bush. Next, the report analyzes how older Hispanics are faring under the current Social Security system. It then shows how wealth accumulation and levels of participation in pension plans by Hispanics are likely to shape their dependence on Social Security in the future.² Finally, the report presents the findings of a national survey of Latino attitudes toward proposed changes in the Social Security system.