There’s been a lot of talk lately about possibly raising the federal minimum wage. It currently sits at $7.25 – where it has been for the past 12 years. Some lawmakers want to see it jump to $15 per hour to provide workers with what they call “a living wage”. A few states are already making moves for that to happen. In November, Florida voters approved the increase, which will take place over the next five years.
Proponents of a higher minimum wage say it would put more money in workers’ pockets and pull millions of American workers out of poverty. On the other hand, opponents argue it could lead to job losses and increased automation instead as business owners are forced to make workforce changes if they can’t pass along the added expense to customers.
With the future uncertain for workers, it is also unclear how this could affect the future of Social Security if the federal minimum wage is increased to $15 per hour.
Higher Minimum Wage, Bigger Benefits?
Social Security benefits are calculated based on wages earned during a person’s 35 highest income-earning years. So, if you’re still working, by raising the minimum wage you stand to receive bigger benefits once you retire.
CNBC looked into this and found that if a person earned minimum wage for their entire life and were to start collecting Social Security benefits this year, they would receive about $1000 per month in benefits. However, if they were to have earned $15 per hour throughout their working lifetime, then they would receive over $1400 per month in Social Security benefits.
An expert from the Bipartisan Policy Center told CNBC that not only would a higher minimum wage could result in an increase in future Social Security benefits for some, but it may also improve all seniors’ retirement security. Is this possible? If so, how?
Could Social Security Benefit?
The Social Security trust fund is shrinking. Estimates are that it could be depleted by 2035 (possibly sooner due to Covid-19). That doesn’t mean there won’t be money available to pay benefits, but the benefit amounts will probably need to be reduced – perhaps to about 80% of what was promised.
However, raising the minimum wage could mean more money is being paid into the Social Security system through taxes. Currently, employees contribute 6.2% of their salary to Social Security, with their employer matching that. CNBC points to a report that found raising the minimum wage to $15 per hour would benefit about 32 million workers – and bring in an extra $107 billion to Social Security. That could potentially help fix Social Security’s funding shortfall.
On the flip side, a Congressional Budget Office report on the impact of a $15 minimum wage found that raising the minimum wage would cost 1.4 million jobs. That means 1.4 million fewer people paying into Social Security. And that would hardly make a dent in bolstering its reserves.
No matter what route we take, something needs to be done now to get seniors more of the retirement money they earned, shore up the Social Security trust fund, and guarantee its long-term solvency. The Social Security Expansion Act will do just that. The Seniors Trust has made it our mission to see Congress enact this critically important piece of legislation.
Section 9 of the Social Security Expansion Act calls for the establishment of a Social Security Trust Fund. It proposes combining the Disability Insurance Trust Fund with the Old Age and Survivors Trust fund to establish one cohesive Trust Fund to help senior citizens. A solid trust fund will guarantee today’s seniors – and tomorrow’s – will get all that they deserve.
If passed, the Social Security Expansion Act will improve the long-term solvency of Social Security by ensuring the program can pay every benefit owed to every eligible American for the next 50+ years. There’s overwhelming support for this legislation, just take a look at the nationwide surveys we have conducted. You can show your support for America’s retirees by signing The Senior Trust’s petition to Congress.