Social Security is celebrating its 84th birthday on August 14. The program has shown its staying power and importance for middle-class economic security over the decades. Its benefits are particularly important for workers, who face economic insecurity during their careers. And the chance of that happening has gone up in the past four decades. At the same time, the growth in economic uncertainty fueled by increasing income inequality, less income mobility and greater income volatility has hurt Social Security’s finances. Rising income uncertainty is the spoil sport at Social Security’s birthday party.

Social Security’s benefits play a crucial role in stabilizing family incomes. Working families can rely on its universal basic benefits when they retire, when a worker becomes disabled or when a worker passes away. In 2018, 63 million people received Social Security benefits, including 47 million retirees and their family members, 10 million disabled workers and their families and six million dependents of deceased workers. Beneficiaries received modest payments with average benefits of $1,523 for newly retired beneficiaries in 2017 and $1,386 for those who became disabled then.

These benefits disproportionately help those workers who struggled during their career. Workers who received below-average wages while they worked will receive relatively larger benefits compared to their earnings than higher-lifetime earners. Workers can have below-average earnings because their wages are low and don’t grow much and because their jobs and wages are unstable, interrupted by frequent spells of involuntary part-time work and unemployment.

All of these factors – income inequality, income stagnation and income volatility — have gone up over time. Average incomes for the bottom half of the income distribution were flat from 1980 to 2014 and even fell by 25% for households in the bottom fifth. At the same time, incomes grew by 120% for those in the top 10%. Increasingly, low-income families are stuck at the bottom rungs as income mobility has fallen. For example, 90% of children born in 1940 eventually earned more than their parents did, but only 50% of children born in 1980 did. And that’s not all. Lower-income families also had to contend with increasingly unstable incomes, often as a result of working irregular schedules in growing industries such as retail and restaurants.

The combination of these income trends have made it harder for many lower-income and middle-income families to save on their own. They need to and can rely on Social Security benefits as an important backstop for their families’ financial future.

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