When discounted at the risk-free rate, real Social Security wealth increased from $5.6 tn in 1989 to $42.0 tn in 2016; adjusting for systematic risk, it grew from $4.6 tn in 1989 to $34.0 tn in 2016

Catherine, Sylvain and Miller, Max and Sarin, Natasha, Social Security and Trends in Inequality (February 29, 2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546668

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. Wealth inequality has not increased in the last three decades when Social Security is accounted for. When discounted at the risk-free rate, real Social Security wealth increased substantially from $5.6 trillion in 1989 to just over $42.0 trillion in 2016. When we adjust for systematic risk coming from the covariance of Social Security returns with the market portfolio, this increase remains sizable, growing from over $4.6 trillion in 1989 to $34.0 trillion in 2016. Consequently, by 2016, Social Security wealth represented 58% of the wealth of the bottom 90% of the wealth distribution. Redistribution through programs like Social Security increases the progressivity of the economy, and it is important that our estimates of wealth concentration reflect this.

Keywords: Social Security, Inequality, Top Wealth Shares
JEL Classification: D31, E21, G51, H55, N32