Can we raise wages to fully fund Social Security?
Social Security is societal insurance, not an individual retirement plan. Its purpose is to protect society by ensuring a basic level of income security, particularly for the elderly, disabled, and survivors of deceased workers. It is a safety net to prevent poverty and economic distress in vulnerable populations. This fosters societal stability. Unlike a private retirement plan, Social Security pools contributions from the workforce to provide collective support, shielding America from the dire effects of widespread poverty that harm the economy as a whole. However, stagnant wages undermine this system. They limit revenue growth and increase dependency on government programs. Addressing stagnant wages is vital to ensuring the sustainability of Social Security and fostering financial independence.
Now that the election is over, the conversation about fixing Social Security has gained momentum. On the December 8th NBC News Meet the Press, President-elect Trump said he didn’t plan to cut Social Security.
At the same time, Social Security is underfunded, and the program’s failure to provide full benefits is imminent.
We can’t bury our heads in the sand and pretend the problem will resolve itself. According to the Social Security Administration Annual Trust Fund report, “in 2023, the (Old-Age and Survivors Insurance) Trust Fund’s cost of $1,237.3 billion exceeded income by $70.4 billion.” At the same time, the “(Disability Insurance) Trust Fund’s income of $183.8 billion exceeded cost by $29.0 billion.” For those of us trying to do public math, the total shortfall was $41 billion. Let’s remember that figure for later.
The timeframe of 2034 to 2037 coincides with the time when all the Boomers reach retirement age. The size of the Boomer generation significantly exceeded the Gen X generation, and Social Security funding can’t keep up. Because Social Security revenue is lower than needed during this timeframe, the first Americans who could lose part of their Social Security benefits are the Boomers. Social Security benefits wouldn’t have to be eliminated; they could be reduced to distribute the available funds accordingly. The Social Security Administration estimates it could pay about 79% of benefits to retirees in 2034.
In principle, there are three approaches to addressing the deficiency, each with its trade-offs. First, we can increase revenue. Second, we can cut benefits. Third, we can increase the size of the working population.
You can rename these approaches any way you’d like. As an example, instead of saying we need to increase revenue, you can say we should raise or eliminate the Social Security tax cap. For 2024, the tax cap is $168,600. Employees and employers each contribute 6.2% of wages toward Social Security up to this income cap, totaling 12.4%. Any earnings beyond $168,600 are exempt. Advocates for this approach claim if higher earners pay Social Security taxes on earnings above $168,600, it could boost the funds available for the program. Critics say raising or eliminating the tax cap illegitimately increases taxes on a population that won’t see a proportional increase in their benefits. This creates tension between the goals of funding Social Security and maintaining a balance in tax equity.
As another example, instead of saying we need to cut benefits, you can say we should increase the retirement age. This approach means individuals would need to work longer before becoming eligible for benefits. By raising the age threshold, the proposal would reduce the total amount paid to beneficiaries over their lifetimes, as they would have fewer years to draw benefits. Advocates of this idea argue that it reflects increased life expectancy, aligning the system with modern demographics. Critics highlight that the life expectancy for the bottom half of earners has not risen since 1983, and they are the individuals who need Social Security the most.
Of course, fully funding Social Security is a systemic problem with no silver bullet solution. We need to compromise on both ends of the spectrum. But we should still consider new ideas.
I propose we consider something other than the proposals we commonly hear. Instead of focusing on cuts or caps, we should address the root cause of the issue: stagnant wages.
Higher wages directly increase Social Security revenue through larger payroll tax contributions.
Higher wages reduce the need for Social Security and other social programs. They make individual workers more financially resilient if we do have to cut benefits. Further, fewer taxpayer dollars are funneled through the bureaucracy, which means less waste.
Higher wages empower individuals to achieve greater financial independence. This fosters long-term economic stability for workers.
First, let’s look at how we can increase revenue by raising wages.
Higher Wages Increase Social Security Revenue
Raising wages directly increases Social Security revenue by increasing payroll tax contributions. Employers match worker wages dollar for dollar. These funds are the primary source of Social Security revenue.
Social Security taxes represent a percentage of earnings. When workers earn more, they contribute more to the program.
Let’s consider the non-starter idea of raising the minimum wage across the board. An Economic Policy Institute fact sheet from 2021, titled “Why the U.S. needs a $15 minimum wage,” identified raising the minimum wage would “lift pay for 32 million workers—21% of the U.S. workforce.” We can address why this idea is a non-starter in a minute, but let’s consider the financial impact on Social Security.
If 21% of the workforce earned higher wages, an immediate effect would be a significant boost to Social Security payroll tax contributions. The Institute estimated that a $15 minimum wage would generate $107 billion in higher wages.
12.4% of worker wages goes to Social Security, 6.2% from worker wages, and 6.2% from employer contributions. 12.4% of $107 billion is $13.26 billion.
Social Security’s shortfall was $41 billion this year. Raising worker wages to $15 an hour would reduce the shortfall to $28 billion.
However, raising the minimum wage is a non-starter because businesses can’t raise wages without increasing revenue. Taking broad action, such as raising the minimum wage to a federal standard for all areas, threatens business vigor and viability nationally, making this approach politically untenable.
For example, a $15 federal minimum wage might be too low in high-cost-of-living areas, viable in some areas, and overwhelm small businesses in lower-cost rural areas. Businesses must generate sufficient revenue to support higher wages, and a one-size-fits-all mandate doesn’t account for regional differences. Even if it’s a potential solution, it’s not achievable if we can’t gain consensus.
Instead of mandating raising the minimum wage, we need to increase small business revenue and incentivize businesses to pay higher wages. We could reduce the tax burden for small businesses that prove they pay wages above social program levels. This approach would help businesses generate the revenue to pay higher wages, reduce the national need for poverty programs, and increase funding to shore up Social Security.
Beyond increasing Social Security revenue, raising wages has a compounding effect on the broader economic system. When workers earn more, their reliance on government assistance programs like the Earned Income Tax Credit (EITC) and Supplemental Nutrition Assistance Program (SNAP) decreases. This reduces the financial strain on taxpayers and minimizes the inefficiency of funneling the American people’s money through the bureaucracy. Let’s look at how higher wages decrease the need for social programs and drive efficient use of public resources.
Higher Wages: Financial Resilience and Reduced Government Waste
Let’s establish a fundamental truth: the government owns no assets. It has no money of its own. Every dollar spent by elected representatives or government workers is an asset of the American people. When government officials spend money, they allocate resources that belong to the citizens they serve.
Social programs, then, pass money from one individual to another through layers of bureaucracy that waste at least 30 to 40 percent of those resources. We should inherently oppose a system where half of American families rely on this inefficiency to survive. Even though we can’t love our country and not our countrymen, this system reflects a failure to achieve financial resilience across society.
Workers who earn livable wages achieve financial resilience and don’t need government assistance programs such as the Earned Income Tax Credit (EITC) or Supplemental Nutrition Assistance Program (SNAP). One immediate benefit is that more financially resilient workers can better absorb cuts if they are necessary. Financial resilience means workers have the capacity to adapt to unexpected costs.
Further, raising wages reduces reliance on social programs, which means less of the American people’s money is funneled through the bureaucracy. Less taxpayer money eaten by the government means less waste and more efficient use of public funds.
For example, EITC is designed to supplement the incomes of low-wage workers, effectively subsidizing employers who pay below livable wages. By increasing wages, fewer workers qualify for EITC, reducing government payouts while businesses pay true labor value.
The money not spent on social programs could then be redirected to fiscally responsible efforts, such as balancing the budget, paying off the national debt, and strengthening social security.
Let’s consider the drastic impact this proposal could have on national finances. In 2023, on just these two programs, the nation spent $57 billion supplementing worker wages through EITC and $112 billion supplementing low wages through SNAP. $169 billion combined.
If higher wages led to only a 20% reduction in reliance on these programs, $34 billion of American taxpayer funds would be available to help balance the budget. This figure exceeds the necessary funds to eliminate the Social Security shortage for the year, albeit in a different money bucket. If we could reduce social program expenditures by half, we could save $85 billion annually.
Opponents of this approach argue that workers need to justify their higher wages with more productivity. This is a valid point. Some jobs and employees generate higher revenue for their employers and inherently command higher wages.
But we should consider—even if it’s true that some jobs pay low wages, does that mean it’s the taxpayer’s responsibility to pick up the tab? There’s no valid argument to justify any employer offloading labor costs onto the taxpayer. Use any example you would like—dishwasher, janitor, burger maker. Even if a business thinks it’s a low-wage job, under no circumstance should it be a taxpayer-funded one. If a business doesn’t think a janitor is an important job, they should go a month without one and see if they change their mind. When businesses pay wages below social program thresholds, those jobs become taxpayer-funded.
Beyond saving taxpayer dollars, higher wages allow Americans to escape the cycle of government dependence and build financial resilience. When individuals can rely on their earnings to meet basic needs and save for the future, they gain stability and resilience in their personal lives and can contribute to the broader economy.
Higher Wages Foster Financial Independence
Higher wages enable workers to build greater financial security and resilience. Workers can save more for emergencies, invest in their future, and rely less on safety nets.
How would we reduce the reliance on programs like Social Security without paying workers livable wages that enable them to put food on their tables, heat their houses, and save for the future?
When they don’t make livable wages, workers go to the lower-cost grocery store to put food on their tables. Except there isn’t one. They go to the same grocery store as everyone else and use SNAP benefits.
To find a house to heat, workers might move their family into a cheaper apartment. Except those don’t exist, either. Those are government housing units.
If workers can’t put food on their tables and heat their houses without government assistance, how would we reduce their dependence on Social Security and other safety nets?
If we don’t address the root cause—low wages—programs like Social Security will remain essential as a retirement benefit and a lifeline for daily survival. Reducing reliance on Social Security means ensuring workers can build financial security through livable wages, personal savings, and access to private retirement options.
We need to set conditions enabling workers to be independent from government programs to meet basic needs. Workers must be able to afford food, housing, and utilities without inefficient taxpayer-funded government assistance. Livable wages create the foundation for financial independence. With higher wages, workers can save more for emergencies and strengthen their retirement options on their own.
Some doubt higher worker wages would achieve these goals, but Universal Basic Income pilot studies prove them wrong. Americans aren’t irresponsible with money, lazy, or stupid. They use extra money to gain skills and get better jobs, move into safer neighborhoods, buy shoes and coats for their kids, and heat their houses. They go back to school and get degrees and certifications. They work MORE with the extra funds, not less, and the work they do is more meaningful.
Americans with enough money live stable, productive lives and can save money for their futures. They are less dependent on Social Security and all other social programs.
In Sum
We need to shore up Social Security funding. We have few choices: increase revenue, cut benefits, or expand the working population.
I propose we consider something other than the proposals we commonly hear. Instead of focusing on cuts or caps, we should address the root cause of the issue: stagnant wages.
Higher wages directly increase Social Security revenue.
Higher wages reduce the need for Social Security and other social programs. They make individual workers more financially resilient if we do have to cut benefits. Further, fewer taxpayer dollars are funneled through the bureaucracy, which means less waste.
Higher wages empower individuals to achieve greater financial independence. This fosters long-term economic stability for workers.
Fixing Social Security is achievable, and higher wages directly address the root cause of the issue.
May God bless the United States of America.
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