In The American, from the American Enterprise Institute, Andrew Biggs writes of efforts to make Social Security more progressive, that is, reducing the relative benefit to upper-income earners.
But those proposing these tax and benefit changes never ask how progressive the Social Security program should be in the first place. While this is a difficult question to answer with precision, we can glean useful information by comparing Social Security’s progressivity to those of national pension systems around the world. The chart below, based on data from the Organization for Economic Cooperation and Development’s (OECD) invaluable “Pensions at a Glance” compendium, illustrates.
Each line represents the benefits paid by a national pension system to individuals by earnings levels. In general, the lines slope upward at less than a 45-degree angle; this signifies that programs are progressive, as benefits do not grow commensurately with earnings. The “flatter” a country’s line the more progressive its benefit structure, as it denotes that benefits rise more slowly as the individual’s earnings increase.
Now consider where the United States—the bold line—compares with other countries. While there are several countries with more progressive benefit structures than the United States—interestingly, most are of Anglo origin, including the United Kingdom, New Zealand, Ireland, and Canada—the majority of national pension plans are less progressive than the U.S. Social Security program.
