College of LAS « Illinois

Research

Overlooked Resource

More elderly poor could benefit from neglected welfare program, researchers say.

Elizabeth Powers

While the national debate concerning Social Security reform continues to simmer, there is another federal program aimed at keeping the elderly out of poverty that has been virtually ignored by pundits and politicians, according to two economics professors.

Economists Elizabeth Powers and Todd Elder, now at Michigan State University, have investigated the effectiveness of the Supplemental Security Income (SSI) program, a federal assistance program established in 1974 that targets low-income individuals not expected to work—the aged (65 and over) and disabled. While the program has been a resounding success for the disabled, Powers' and Elder's research reveals that the effectiveness of SSI in keeping elderly households out of poverty has eroded since the program began.

"The story of the program has been a long deteriorating slide," says Powers, who holds a joint appointment in the LAS Department of Economics and the Institute of Government and Public Affairs. "Now it seems much less effective at reducing poverty amongst the elderly. It used to be the ratio of SSI participants to the elderly poor was about 80 percent. Now it's about 60 percent. The decline in the SSI aged program is more rapid than the decline in aged poverty."

There were approximately 1.2 million individuals receiving SSI due to age in January 2005. At its 1974 peak, the program had 2.3 million participants.

The pair found that the main reason the program has faltered is the government's failure to update it. SSI is a typical welfare program, meaning that individuals must apply and must pass a series of litmus tests to see if they qualify, including asset and income tests. The tests, called income disregards, have not been indexed, meaning that they have not been adjusted for inflation. And because Social Security income is indexed, many people who might be eligible are being priced out through the SSI formula.

"Our estimate is that if the limits had been indexed for inflation, you would have almost a third higher participation rate," Powers says. "So it would be a much more substantial program for the aged today."

One change to Social Security that will occur regardless of politics is the upcoming update to the normal retirement age, which gradually will increase from 65 to 67. The eligibility age for SSI will remain at 65. Powers says this alteration likely will lead to an increase in the program's participation rates, one that is likely unintentional by its designers. This is because people who retire younger than 67 will receive a smaller retirement benefit than those who wait. Those Americans eligible for SSI will still receive the maximum benefit allowed, up to a prescribed ceiling.

Although SSI has links to Social Security, the two programs are not meaningfully integrated. Experts estimate that there are perhaps twice as many elderly who are eligible for the program, but have not enrolled.

"Half of those people who aren't using it, conservatively, are in touch with the Social Security Administration," Powers says. "They're getting a Social Security check. They could just be automatically enrolled in the program and [the government doesn't do that]. In this country there's a real dichotomy between welfare programs and Social Security, which is a sacred, unstigmatized program."

By Laura Weisskopf Bleill
Fall/Winter 2006-07