Revising Social Security Benefit Formula Which Favors Short-Term Workers Could Save Billions

Short-term workers have contributed a relatively small amount of social security tax because they have had little work in covered employment. However, they receive a higher return on their contribution than the average wage earner because of the benefit formula used to attain the program's social adequacy objectives. This advantage is created by spreading the worker's covered earnings over a lifetime and applying the resulting artificially low average wage to a benefit formula that is favorable for low wage earners. Stopping the short-term worker advantage could save as much as $15 billion over the next decade and end windfall social security benefits to retired Government workers who also receive a pension from their noncovered employment.