NEW STUDY SHOWS GAP IN NET WORTH FOR THE ELDERLY

Privatizing Social Security May Increase Racial Gap In Net Worth

WASHINGTON—The findings of a new study reveal enormous differences in net worth between elderly white people and elderly black people. The differences can be attributed in part to education, number of years worked and investment habits.

The study, in the June issue of Social Work Research, a journal by the National Association of Social Workers (NASW), found that lifetime earnings, education, and occupation play a significant role in determining the net worth of white men, however, those same variables have little or no bearing on the net worth of black men. The opposite is true for women. Lifetime earnings is the major predictor of black women’s net worth while education, occupation and number of years worked predict the net worth of white women.

Martha Ozawa, PhD, of the George Warren Brown School of Social Work, Washington University, St. Louis and Huan-yui Tseng, PhD of Shih-Chien University in Taipei, Taiwan, who co-authored the study, included data from the New Beneficiary Data System (NBDS) and looked at money market accounts, certificates of deposit, checking accounts, bonds, stocks, and mutual funds, for example, as well as race, gender, marital status, number of children, education, occupation and number of years worked to determine net worth.

The sample merged the data from the 1982 New Beneficiary Survey (NBS) and the 1991 New Beneficiary Follow-up (NBF). The NBS had a sample of 18,136 individuals who had become new beneficiaries of Old-age, Survivors and Disability Insurance (OASDI) or Medicare or both and the NBF interviewed 12,128 surviving NBS respondents and 1,834 surviving spouses of NBS respondents who had died.

Dr. Ozawa says the results show a distinct separation between race and gender when determining net worth in old age. According to Dr. Ozawa, the proposed idea of privatizing social security should have no more than 2 percent of payroll deductions for private investing and guarantee poverty line income of the public portion. Investment training for the lower working class would help educate those that have little to no investment experience, hopefully decreasing the net worth gap.

The differences in net worth between white and black men are significant. Even when all variables remain constant, same education and similar occupation, black people fell almost 90 percent lower than white people. Part of this difference can be explained by the fact that black people tend to have more liquid investments such as checking and savings accounts as opposed to stocks and bonds which produce a greater rate of return and less inheritance or financial help from parents.

Although education and job classification were significant in both black and white women, the study found that lifetime earnings had no effect on the net worth of white women but was a significant predictor in the net worth of black women.

These findings are important predictors of what part social security benefits constitute in retirement benefits.

For black people, these benefits are the majority of their retirement income. The question is, if social security is privatized, will this have an adverse effect on minority net worth in retirement?

Article: "Differences in net worth between elderly black people and elderly white people," Martha N. Ozawa, Washington University, St. Louis and Huan-yui Tseng, Shih-Chien University, Taipei, Taiwan, Social Work Research, Vol 24, No 2.

Full text of the article is available from NASW Public Affairs at (202) 336-8228.

Martha N. Ozawa is available for interviews and can be reached at 314-935-6615 or e-mail at awazo@gwbmail.wustl.edu.