Monday, March 24, 2008

Life expectancy gap between rich and poor widens

The New York Times reports that while average life expectancies are increasing, they are rising at different rates for Americans of different incomes. The gap in life expectancies between rich and poor is growing. The Times story highlights a number of potential causes, ranging from different risk factors, different levels of medical treatment, and differences in long-range planning for individual health. All likely play a role.

A factor the Times article does not mention is that causation between income and health runs both ways. While those with lower incomes can’t afford as good health care, it’s also the case that those with poorer health tend to earn less, simply because they cannot work as much. If poor health has a stronger negative effect on income today than in the past, this could help explain the trend.

Differential mortality by income has been an issue for Social Security policy for many years. Milton Friedman argued decades ago that Social Security’s formal progressivity was reduced due to the different life spans of the rich and poor. (This is true, though the program remains progressive overall.)

More recently, Peter Orszag and Peter Diamond argued that the Social Security benefit formula should be adjusted to account for rising differential mortality by income. Their reform plan indexed all Social Security benefits to account for rising average life expectancies, but also increased the progressivity of the benefit formula to account that longevity was rising faster for the rich than for the poor.

1 comment:

Anonymous said...


that's life expectancy at birth. my guess is that life expectancy at 65 for least disadvantaged means that they can expect to get in benefits at least as much as they paid in, even if they were at the cap every year of their working lives... adjusted for inflation and general rise in wages.

as for the progressivity/regressivity... i get a little tired of liberals and conservatives arguing about this.
the program is progressive. calling the tax "regressive" is just a liberal way to ask for social security to be turned into welfare. on the other hand, the consevatives pretend that it already is welfare.

the current balance of taxes and benefits is very close to what it should be for Social Security to be "fair" whether you end up a "winner" by being poor enough to get a higher "return" or a "loser" by being rich enough to have to regard your lost opportunity costs as "insurance."

but of course this is just being rational. and the last rational train left the station twenty years ago.