Wealthy Americans are living longer than ever. According to data published in the Journal of the American Medical Association, life expectancy of 40 year olds in the top 1 percent of income increased by three years from 2001 to 2014. Life expectancy for the poorest 1 percent was unchanged.
At all levels, life expectancy rises in lockstep with income. The poorest men have a life expectancy of 72 years; the wealthiest 87 years. The poorest women have a life expectancy of 78 years; the wealthiest 89 years.
Interestingly, for those above the 50th percentile of income, geographical location does not seem to matter. Within this group, for example, it makes no difference if one lives in the New York area or the Detroit area. Below, the 50th percentile, it makes a big difference with those in the New York area living five to seven years longer.
One hypothesis is that wealthier people have access to better medical care. As logical as this seems, it is inconsistent with data showing little correlation between the life expectancy of the poor and either Medicare spending or the availability of health insurance.
Another hypothesis is that the wealthy have better health habits — they smoke less, get more exercise and are less likely to be overweight.
It may also be that good health in and of itself makes it more likely that one will be employed and for a longer period of time. Good health could lead to greater wealth rather than the other way around.
Among these findings, geographic differences in particular bear further analysis. What is Newark, New Jersey doing right that Indianapolis is not? Implementation of best practices is in order.
These differences in life expectancy have policy implications beyond healthcare. Everything else being equal, for example, Social Security benefits appear to be strongly progressive. Those with lower lifetime incomes receive greater benefits relative to their contributions than those with higher incomes.
But everything is not equal. Those with higher incomes are likely to collect Social Security for many more years than those with lower incomes. A poor person who lives to age 78 will receive approximately $115,000 less than he or she would by living to 87.
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This phenomenon should inform the debate over the future of Social Security. Currently, Social Security pays out more in annual benefits than it is collects in taxes. This deficit will grow as more baby boomers retire.
There are only four ways to preserve Social Security as we know it — raise Social Security taxes, cut benefits, borrow money or fund Social Security out of the general federal budget.
Among these alternatives, cutting benefits by raising the retirement age would make the system less progressive and more unfavorable to the poor. Raising the Social Security tax rate would also penalize those with lower incomes.
The alternatives that increase progressivity are increasing the amount of income subject to Social Security taxes or reducing benefit payments to those who are better off.
Contact Jeffrey R. Scharf at jeffreyrscharf@gmail.com. To view previous Everybody’s Business columns, visit santacruzsentinel.com/topic/Jeffrey Scharf.