The Center for Global Policy Solutions released a report that finds President Obama’s proposal to base the Cost of Living Adjustment (COLA) for Social Security, veteran’s benefits and other retirement programs on the chained consumer price index (chained CPI) will widen income and wealth inequality seen among African Americans.
The Chained CPI: Increasing Economic Inequality for African Americans finds that COLA decreases resulting from the chained CPI will disproportionately harm African Americans, who have dramatically fewer sources of wealth to draw upon compared to whites and are, therefore, more heavily reliant on federally-issued benefits.
Changing the COLA for Social Security benefits from the traditional CPI to the chained CPI would lead to a larger across-the-board cut in Social Security benefits. Almost half of African-American seniors rely on Social Security for more than 90 percent of income in retirement due to lower levels of educational attainment, employment, earnings, and ownership of family assets such as homes, investments, savings accounts, businesses and other opportunities to build assets over time that ensure financial security in post-working years.
“As a result of racial wealth disparities, African Americans will be negatively affected by implementation of the chained CPI regardless of the non-means tested federal program from which they receive their benefits,” said Dr. Maya Rockeymoore, president and CEO of the Center for Global Policy Solutions. “With precious few other assets to help meet expenses, African Americans will experience deeper economic pain as a result of the chained CPI.”
The median wealth of white households is twenty times that of African American households. This racial wealth gap means that African Americans are less likely than whites to possess other resources to offset reductions to their COLAs. Older individuals and those who receive benefits for a long time are especially vulnerable.
“Rather than achieving deficit reduction on the backs of middle and working class households using the chained CPI, the President and Congress should identify reforms—like lifting Social Security’s cap on taxable wages—that strengthen the program’s solvency while providing a basis for ensuring that benefits work for those who need them most,” said Dr. Rockeymoore.
The Center for Global Policy Solutions is social change nonprofit organization in Washington, DC dedicated to making policy work for people and their environments.
Click here to download the full report.