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**MARCH 24, 2021**

Kuttner on TAP

Another Reason for a $15 Minimum Wage-Social Security

****

Social Security faces a double-barreled challenge. Benefits are grossly
inadequate, and yet the system faces a shortfall in its trust funds
projected to hit sometime in the 2040s, depending on your assumptions of
economic growth and wage growth.

Social Security is funded by payroll taxes on worker earnings. The
entire shortfall is the result of wages failing to keep pace with
productivity growth since about 1973.

According to data and a graph made famous by the Economic Policy
Institute , median wages and
growth in the economy's productivity rose in lockstep from 1948 to
1979, and have widely diverged ever since. Since 1979, productivity has
grown by 69.6 percent but hourly pay only by 11.6 percent.

With a $15 minimum wage, EPI projects

annual wage gains of $107 billion. That in turn would increase payroll
tax receipts by $13 billion a year, or over $200 billion between now and
2040. That's not enough to plug the entire Social Security shortfall,
but it's not chump change either.

The indirect impact of a minimum-wage hike would spill over into faster
GDP growth, tighter labor markets, and higher wages elsewhere. That
would also be good for Social Security tax receipts.

We do need to find other revenue sources to combine Social Security
solvency with adequacy of benefits, which are far too low. But a $15
minimum wage would be a great place to start.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

Robert Kuttner's latest book is
The Stakes: 2020 and the Survival of American Democracy
.

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