See how Social Security retirement benefits stack up globally – The Washington Post

So far, neither Biden nor former President Donald Trump have made strengthening Social Security a central part of their presidential campaigns, but some U.S. policy experts are looking abroad for lessons.

Many countries face similar pressures to the United States: Ageing populations leaving fewer workers to support retirees. But many countries spend more on their public pension systems than the United States and offer more generous benefits and lower retirement ages.

Economic, political and demographic differences complicate international comparisons, but Courtney Coyle, an economist at Wellesley College who has spent years studying public pension systems around the world, notes that while many countries have implemented policy changes in recent years, Social Security systems have changed little since the last major overhaul in 1983.

One reason, Mr. Coyle said, is that the 1983 reforms created long-term savings that allowed the U.S. to spend less over the long term. “One big difference is that benefit levels are more generous than in many other countries,” he said.

Below are five charts showing how Social Security compares to retirement systems around the world.

In the broadest sense, Social Security is funded in the same way as pension systems around the world: workers, employers, or both pay a portion of their salary into a government fund as taxes during their employment. Then, when workers retire, they are entitled to regular checks. So one way to increase public pension benefits and reduce spending is to raise the age at which people start receiving them.

The legal retirement age in the United States is 66 or 67, depending on your year of birth, higher than in all but nine countries. Globally, the median is 61. In some countries, workers can choose to retire at a younger age (62 in the United States), which would mean a smaller pension, or they can wait a few years and get a bigger check.

Several countries have raised or have plans to raise their retirement ages in recent years. Still, workers in these countries typically retire younger than their Americans. Such reforms are often political minefields. In France, for example, people took to the streets in fierce protest when President Emmanuel Macron proposed raising the retirement age from 62 to 64.

Meanwhile, both Trump and Biden campaigned on pledges to not cut Social Security benefits, including raising the retirement age.

When workers retire and start receiving benefits, their standard of living can change dramatically. Because Social Security only supplements about 40 percent of the average American’s salary, people who rely primarily on it often see a sharp drop in their monthly income.

In many other countries, benefits are more generous and approach a level that almost completely covers a worker’s salary. In contrast, Americans rely on private pensions, In tax-advantaged savings accounts like 401(k)s, your employer matches every contribution you make during your working life, but not all workers have much savings, and fewer and fewer workers have union or company pensions. This is an argument against across-the-board benefit cuts to ensure Social Security remains solvent.

Social Security, like pension systems in many other countries, is one of the most expensive items in the U.S. federal budget. The United States spends 7.5 percent of its gross domestic product on Social Security, roughly the same as the OECD average but much less than some developed countries such as France, Greece, and Italy.

A higher birth rate would significantly strengthen Social Security and increase the worker-to-retiree ratio. But in the United States, as around the world, birth rates have been trending downward for years. Nancy Altman, president of Social Security Works, an advocacy group, argues that the most effective way to address this labor shortage would be through increased immigration, rather than through increased birth rates. ““It’s not nice to allow immigration,” she said. “It’s selfish. It’s good for our economy.”

Social Security is funded by taxes paid by workers and their employers over their lifetimes. American workers pay 6.2% of their wages and employers pay another 6.2%, for a total of 12.4%. 113 countries have a combined contribution rate higher than the U.S.’s 12.4%. The global average is 16.3 percent.

There is wide variation in who pays and how much they pay. Romanian For example, workers contribute 25% of their wages, while employers usually pay nothing. Worker Australia, Lebanon, Russia and Ukraine Employees don’t contribute anything and the employer covers the costs.

In the United States, some Democrats have cautiously supported the idea of ​​raising taxes, but conservatives argue such comparisons are misleading. Social Security is based on progressive distribution, with low-wage workers receiving more in benefits relative to their salaries and higher-wage workers receiving less. Andrew Biggs, a researcher at the American Enterprise Institute who worked on Social Security reform in the George W. Bush administration, said tax hikes are unusual in countries with similar redistribution practices.

“As tax rates go up, benefits tend to become less progressive,” Biggs said. “If we make them less progressive, we can maintain these high tax rates because people feel they are only paying taxes for themselves and not for others.”

meanwhile Final Calculation Now, more than a decade later, the OECD Comparing benefit redistribution across countries. On a scale from 0 (not redistributing at all) to 100 (most progressive), the OECD rated the U.S. system at 42, slightly above the OECD average of 39. This is because Finland (4) or Sweden (Minus 13 means the system is regressive, taking from the poor and giving to the rich.) In these Scandinavian countries, tax rates are high, but the relationship between lifetime income and retirement savings is much closer, Biggs noted.

On the other hand, countries that redistribute profits more tend to have lower tax rates. Canada It has a progressivity score of 92 (one of the highest in the world) and a tax rate of 10 percent.

Recent debate over Social Security funding has focused on the threshold at which American workers stop paying a 6.2 percent tax on their wages, currently $168,600. The upper limit of annual income is not subject to Social Security tax, so highly paid workers have a large portion of their income exempt from it. (Because benefits are also capped, Social Security also covers a smaller portion of income for high-income earners.)

Many Democrats argue that raising or eliminating the cap would provide enough funding to support Social Security for decades to come, and Mr. Biden has included a revision to the cap in his budget proposals for his presidency and in his 2024 campaign plan. The idea is similar in other countries, including Costa Rica, Denmark, Estonia, Finland, Iceland and Portugal, which do not cap wages subject to severance taxes.

Some countries with caps allow more of your income to be exempt from tax than others. In Canada, the cap exempts just 79% of the average worker’s salary, meaning even ordinary workers don’t pay tax on some of their income. In contrast, in countries like Mexico and Colombia, the cap doesn’t kick in until you earn many times the national average, meaning higher earners pay tax on a larger portion of their income.

The US cap of $168,600 is roughly 2.3 times the average worker’s annual wage, putting the US close to the global average.