National Council of La Raza

NATIONAL COUNCIL OF LA RAZA

VIEWS ON THE IMPACT OF THE SOCIAL SECURITY DEBATE ON HISPANIC AMERICANS
Submitted to the White House Conference on Social Security
December 2, 1998
The National Council of La Raza (NCLR), the nation's largest national Latino civil rights organization, applauds the Clinton Administration's efforts to facilitate a bipartisan dialogue on this issue. We also believe that much more information is needed in order for the public to make informed choices about the direction and shape that Social Security reform efforts should take.
Notwithstanding this, NCLR believes that the potential Social Security problem and proposed reform plans could have an adverse effect on the Latino community. This is largely because Hispanics are a growing proportion of present and future contributors and beneficiaries of the Social Security system. For example by 2010, 2020, and 2030, Latinos are projected to account for 13.2%, 15.2%, and 17.2%, respectively, of all U.S. workers. Moreover, between 1997 and 2030, the number of Hispanic elderly is expected to triple; in 2030, Hispanics over age 65 are projected to comprise 11.2% of the U.S. elderly population. Furthermore, in 1996, 1.1 million Hispanic elderly received Social Security, which for many was their primary source of income, and averaged $6,747 in total yearly benefits.
NCLR is currently in the process of examining the potential implications and impacts of the various Social Security reform proposals on the Hispanic community. As the policy process continues, we believe that it must take the following considerations into account:
Given that the Social Security system will become more dependent on Latino workers for revenue, it is imperative that their educational and employment outcomes be improved. Hispanics comprise an increasing share of the U.S. population and labor force. Currently, the majority of Latinos have only a high school education and are concentrated in low-wage occupations. However, if Hispanic educational attainment were increased, employment prospects would be enhanced, and earnings levels would rise. This "chain reaction" would result in greater payroll tax revenue, less pressure to provide for retirees, and consequently less need to change the current Social Security system drastically.[i]
Since the Social Security system will begin paying benefits to more Latino retirees, any reform proposals must be progressive, to ensure a decent retirement for the most needy. The growth of the Hispanic population over the next few decades will be concentrated in part among those 65 years and over. Given that the current Hispanic elderly population relies heavily on the Social Security system for income, it is likely that a significant share of tomorrow's retired Latino workers will do the same. Therefore, any reform of the system must factor in the growing Hispanic elderly population, and its potential for reliance on Social Security for retirement security.
In addition to Social Security, other methods to help Latinos build a financially secure retirement should be studied and advanced. Latino households held under one-third (30.2%) the assets (including home equity; financial assets, such as stocks or bonds; and real assets, such as cars) of White households in 1995.[ii] It is also likely that Latinos do not save and invest due to their overall low level of "financial literacy." According to the 1998 Employee Benefits Research Institute Survey, a large segment of Latino respondents did not have access to and/or use financial planning information. Furthermore, Latinos have extremely low pension plan coverage because they are concentrated in low-wage jobs that do not offer retirement savings plans. Of the 12.3 million Hispanics in the U.S. labor force in 1995, one-third (32%) had employee pension plans, compared to one-half (51%) of Whites and two-fifths (44%) of other minorities.[iii] Therefore, increasing Latino access to positions which pay better and provide pension plan coverage, as well as to financial planning information could simultaneously diminish the strain on the Social Security system and enhance Latino retirement security.
Further research is needed to assess fully and accurately the effects of various Social Security reform options on the Hispanic community. Various features of the Social Security system interact in complex ways; as a result, sophisticated economic models generally are required to produce precise projections of the impact of alternative proposals on specific income groups. For Latinos, even these analyses are often inadequate, because they do not fully account for the community's demographic and employment characteristics. Given the scope and magnitude of the potential impacts on Latinos as a result of changes in the Social Security system, any major reform debate should be informed by the most complete, accurate, and inclusive data available.
Latino workers and retirees will respectively be greater contributors to, and beneficiaries of, the Social Security system when financial constraints are projected to affect it in the next 15 to 30 years. Accordingly, a joint federal and community-based effort must seek to develop this critical population base financially, by helping to move more Latinos into higher-paying occupations with retirement savings plans, and to heighten their "financial literacy," both of which begin by improving Latino educational outcomes. Any consideration of reform of the Social Security system must take into account the impact of the current Social Security structure, in addition to proposed reforms, on the Latino community, not only for the benefit of Latino retirees by reducing poverty and enhancing retirement security, but also for the nation, by helping to avert a potential crisis.

i Sorensen, Stephen, and Dominic J. Brewer, Stephen J. Carroll, and Eugene Bryton, RAND, 1995; and Perez, Sonia M., Latino Education: Status and Prospects. Washington, D.C.: NCLR, July 1998.
ii Racial and Ethnic Differences in Wealth in the Health and Retirement Study, RAND, 1995. . . .
iii "Hispanic Americans and Pensions," U.S. Department of Labor, October 1997.