November 9, 2021
Social Security Stabilizes Local Economies
Social Security’s great achievement for retirees is a guarantee that they’ll get a check every month, without fail. Less appreciated is the stability the program brings to local economies and businesses.
Retirees use their Social Security benefits to patronize establishments that sell goods and services locally such as restaurants, car repair shops, banks, and hospitals. That steady supply of spending in good times and bad helps to stabilize economies, according to research conducted by the Center for Retirement Research and funded by the U.S. Social Security Administration.
Between 2000 and 2018, working-age adults’ employment levels and earnings were less affected by the ups and downs in the state unemployment rate in counties where Social Security provides a higher percentage of residents’ total income.
During the Great Recession, for example, when unemployment rates surged across the country, earnings and employment did not decline as much in counties that were more reliant on the federal retirement benefits.
The researchers’ analysis of U.S. Census data produced similar results when they tested Social Security’s stabilizing effects on specific industries that sell locally. Businesses in several industries – retail and entertainment, healthcare, education, financial services, and other services – had more stable employment and earnings when county residents got a higher percentage of their total income from the program. Manufacturers, which tend to sell their products nationally or internationally, were excluded from the industry analysis.
Social Security’s regularity and reliability set it apart from the countercyclical federal programs that were designed to ease the pain of recessions, such as unemployment benefits or food assistance distributed through the Supplemental Nutrition Assistance Program.
Social Security, the researchers concluded, serves as a valuable “stabilizer for the local economy, above and beyond its direct value to beneficiaries.”
To read this study, authored by Laura Quinby, Robert Siliciano and Gal Wettstein, see “Does Social Security Serve as an Economic Stabilizer?”
The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium. The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College. Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.
I can attest to spending locally: a plumbing repair, lunches at a nice restaurant, wine from the locally owned wine shop, and season subscription to Summerville Orchestra.