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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.”