Tuesday, March 17, 2009

Survey: Half of Workers Would Opt Out of Social Security if They Could

Posted at NewMajority.com…


Anonymous said...

1) The article (http://www.sunlife-usa.com/unretirementindex/results.cfm) doesn't give the wording of the question, which makes me wonder if it was biased.

2) Even 47 percent of low income (<$25,000) respondents and 34 percent of older respondents (60+) say they would opt out. For a large majority of them, that would be a bad decision, which makes me wonder about how meaningful the responses are.

Andrew G. Biggs said...

In a comment at New Majority, I agreed that the question wording is very important; I may email them and see if I can find out how they phrased things. That said, the fact that they told folks that by opting out they would give up their benefits implies the question was reasonably worded. Will see what I can find out there.

I also agree that for older and low income people opting out would be a bad idea. However, while that makes me wonder how correct/informed their answers were, that doesn't mean they weren't meaningful. What does it say when even people who benefit from Social Security have so little faith in it, particularly when the main purpose of the program is to make people feel secure. This goes to non-financial issues regarding confidence in government handling of the program, which I think is legitimate.

Bruce Webb said...

Well some people really do believe "Things go better with Coke". Because Coke paid good money to market that message.

The results of the survey tell me something I have known for a long time, the efforts outlined in Butler and Germanis (Cato J. 1983) worked brilliantly. The plan as outlined had three parts which I would summarize as follows:
1. Reassure those in or approaching retirement
2. Convince younger workers that Social Security just won't be there for them
3. Present them with a plausible alternative based on the argument 'something is better than nothing'

This plan was perhaps one of the best marketing campaigns in history with the results seen in the survey. Those who have been exposed to the message promulgated by what is now known as the "Cato Project for Social Security Choice" aided and abetted by various enterprises sponsored by Pete G. Peterson such as Concord and the movie I.O.U.S.A combined with an active outreach to younger workers via such things as the Fiscal Responsibility Wakeup Tour over the 25 years (since the publication of Butler and Germanis) have largely succumbed to the message strategy. Naturally people will want to opt out if they don't believe they will get anything out or can get better returns on their own.

So congratulations are due to all concerned. But all that polling really shows is the success of the marketing campaign. In my experience extraordinarily few of the doubters really have any conception of the actual numbers in play. Mainly because they never seem to be part of the message being delivered. Except of course when they see numbers aggregated over the Infinite Future Horizon for both Social Security and Medicare.

"What does it say when even people who benefit from Social Security have so little faith in it?"

Well it suggests to me that Cato got its money worth in some of its past hires.

DB said...

What Bruce said. It would be interesting to see not only the questions, but how the "I'd opt out" answers correlate with the "I don't believe Social Security will be there for me" answers. If that belief is an ill informed one, then the "I"d opt out" preference is similarly ill informed.

WilliamLarsen said...

In 1989 and 1990 I asked 125 people if they would rather pay SS and get benefits or forgo SS benefits and pay no SS taxes. I got three distinct groups of responses. Those age 45 and over over whelming opted for SS. Those under 30 opted out at about 50% and those 30 to 45 were about 25% opting out.

I then gave them a paper I had written called the Social Security lottery. After reading it, the responses changed dramatically. Nearly 90% under age 45 opted out of of SS while 505 over 45 opted out.

What I found and I think most would agree is that there is a great deal of misinformation about SS. Politicians love to spread myths and lies.

The survey is intersting in that with no other information known about SS except individuals own personal perception, is that the rate of opting out has grown so high. It is only a matter of time before SS is gone. What is SS actually worth to a worker in terms of percent of payroll? By my calculations the 75% payable benefit stated in the SSA's 2009 wage and benefit statement under current law (No COLA's after 2037) is worth 3.1% of payroll. With SS-OASI at 10.6% it does not take much of a calculation to show SS-OASI is a lousy deal.

Let's face it, if we allow people to opt out, it means that those who have the most to gain would opt out first. This means those who are young would most likely opt out first. This means for each cohort that opts out the date that full benefits with COLA ends moves forward. Pretty soon you have everyone opting out and only the trust fund to fund benefits which can last less than four years.