Morgan Stanley recently released a report painting a far rosier portrait of Social Security’s future than generally accepted.
The Social Security Trustees’ annual calculations have steadfastly presented 2034 as the Trust Fund’s depletion year. Each year, the Trustees remind Congress legislative intervention is mandatory to adding solvency time to Social Security.
But according to Morgan Stanley, a “youth boom” approaches with the entrance of Generation Z into adulthood and the workforce. This boom, they say, will dramatically alter Social Security’s financial prognosis.
Post-Millennials, or those generally held to be born in or after 1997, comprise about 20% of the population. Its oldest members have been contributing to the labor force for several years.
As the majority of these Americans mature and enter employment, they’ll join Milliennials, now the largest generation in the workforce, in making payroll contributions and putting fresh revenue into the Social Security system.
Morgan Stanley predicts this workforce increase alone will be enough to sustain Social Security’s reserves by an additional 28 years.
But former National Economic Council Deputy Director Charles Blauhous cautions against this theory in an article published last Tuesday at E21. In his own estimation, the Morgan Stanley report fails to accurately account for a variety of factors that could as easily increase demands on Social Security’s reserves as they would improve Social Security’s finances.
In reality, he claims, Congressional Budget Office and Social Security Trustee data only supports an increase of three years on the depletion deadline if wage growth increases 50% faster.
Blauhous’ complete analysis suggests that while we’d all love to take an optimistic view of Social Security’s future, it is dangerous to assume we can rely on passive demographic fluctuations to repair the Trust Fund.
The Trustees have repeatedly warned elected officials to pursue legislative solutions for any significant impact to be made, but as of yet, Congress is still seemingly ignoring the issue.