arnings. A new approach to reduce the defined-benefit pension now provided by Social Security would be ôto introduce a new defined-contribution benefit that would be financed out of contributions into an individual retirement account (IRA)ö (Bosworth, 1999, 2).
There is no reliable basis for predicting the future trend of economy-wide average earnings, one that will affect the actual earnings profiles of workers who are currently young and middle-aged. It seems more valuable to estimate the relationship between workersÆ relative earnings and their age. Relative is defined as the ratio of a workerÆs earnings in a given year and the economy-wide average covered wage estimated by the Social Security Administration. The pattern of career earnings differs across population groups, differing between men and women, and workers with different levels of education. It is predicted that by 2016, the outflow of Social Security benefits will exceed the inflow of Social Security contributions. What this implies is that the taxes in excess of benefit payments that working people have paid to prefund the system since 1983 are worthless. Social Security is facing a long-term financial shortfall that needs to be fixed. The PresidentÆs commission believes that 2016 is the ôcrisis date for Social Security...benefit payments in that year will exceed payroll revenueö (Aaron, 2001, 2).
Anxious to be known for reform, Bush took a gamble in promising to reform what many consider the ôsacred cowö of socialism, Social Security. However, if Bush can achieve privatization of Social Security he will be aiding the poor in America to a significant degree. Michael Tanner (1996) argues that ôCritics of Social Security privatization often warn that such proposals hold serious dangers for the poor and elderly. However, a closer examination of the evidence indicates that the poor would be among those who would gain most from the privatization of ...