Summary: Although Social Security's benefit and contribution provisions are neutral with respect to race, ethnicity, and gender, GAO found that because of socioeconomic characteristics, minorities have benefited from the Social Security program. Because minorities are more likely than whites to have lower lifetime earnings, they are advantaged by Social Security's progressive benefit formula that provides larger relative benefits for lower-paid workers. Moreover, blacks in particular are more likely to receive other important Social Security benefits, such as disability, that protect against lost earnings. Some reforms that would reduce benefits to restore solvency could have a disproportionate effect on low-wage earners, including blacks and Hispanics, depending on how they are structured. Restructuring Social Security to include individual accounts would also likely have varying effects on different racial and ethnic groups. However, GAO found that education and family income are better predictors of individuals' investment behavior than race. Persons with less education and lower incomes tend to invest more conservatively than those with more education and higher income. Because blacks and Hispanics are more likely to have less education and lower incomes, they would likely earn smaller returns on their accounts, although they would bear less risk. These results suggest that if individual accounts were adopted as part of comprehensive Social Security reform, investor information and education would be needed to help low-income individuals with their investment decisions.
