Social Security and Trends in Wealth Inequality

74 Pages Posted: 14 Apr 2020 Last revised: 30 Aug 2021

See all articles by Sylvain Catherine

Sylvain Catherine

University of Pennsylvania - Finance Department

Max Miller

University of Pennsylvania, The Wharton School, Finance Department

Natasha Sarin

University of Pennsylvania Carey Law School

Date Written: February 29, 2020

Abstract

Recent influential work finds large increases in inequality in the U.S. based on measures of wealth concentration that notably exclude the value of social insurance programs. This paper revisits this conclusion by incorporating Social Security retirement benefits into measures of wealth inequality. We find that top wealth shares have not increased in the last three decades when Social Security is properly accounted for. This finding is robust to assumptions about how taxes and benefits may change in response to system financing concerns. When discounted at the risk-free rate, real Social Security wealth increased substantially from $4.9 trillion in 1989 to $52.6 trillion in 2019. When we adjust the discount rate for long-run macroeconomic risk, this increase remains sizable, growing from over $4.0 trillion in 1989 to $41.2 trillion in 2019. Consequently, by 2019, Social Security wealth represents 59% of the wealth of the bottom 90% of the wealth distribution.

Keywords: Social Security, Inequality, Top Wealth Shares

JEL Classification: D31, E21, G51, H55, N32

Suggested Citation

Catherine, Sylvain and Miller, Max and Sarin, Natasha, Social Security and Trends in Wealth Inequality (February 29, 2020). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper , Available at SSRN: https://ssrn.com/abstract=3546668 or http://dx.doi.org/10.2139/ssrn.3546668

Sylvain Catherine

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Max Miller

University of Pennsylvania, The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Natasha Sarin (Contact Author)

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

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