Proponents of raising the minimum wage argue that this increase would help put Social Security on a more financially stable footing because it would mean that even low-income workers would pay more into the system.
The Alliance for Retired Americans points to a 2011 study by the nonpartisan Economic Policy Institute, or EPI, that says, "A rising profit share, slow wage growth, earnings inequality and rising health care costs have contributed to an erosion in taxable earnings (subject to Social Security) from 42 percent of gross domestic product in 1983 to 37 percent today."
Given that data, one way to bring more money into the Social Security system is to raise the minimum wage and permanently index it to inflation, according to the alliance. It points to more calculations by the EPI that conclude that this change would cause 28 million workers to earn $35 billion more by 2016 -- and pay Social Security taxes on that income.
Social Security Works, another nonprofit, nonpartisan group, would also tie an increase in Social Security benefits to an increase in the minimum wage so recipients would get at least enough to be above the poverty level in retirement. Ben Veghte, research director for Social Security Works, says, "Today, a lifetime minimum-wage worker with a 40-year work history receives a Social Security benefit of only $686 per month if he or she retires at 62, as most workers -- often for health reasons -- do, or $916 per month if he or she waits to retire until age 66; in both cases, this retirement income is below the poverty level."
If only it were this simple. It's worth noting that a single person who receives Social Security at this level is also eligible for a variety of other government benefits, including Medicaid, in addition to Medicare at age 65, which together eliminate many health care costs. They also are likely to get housing assistance and to be eligible for the supplemental nutrition program, or SNAP, plus some auxiliary benefits such as weatherization help and transportation assistance. And if they are veterans, which many boomer men are, they also qualify for VA health benefits. Raising the income of people who receive this kind of aid above the federal poverty level would eliminate their eligibility for many of these benefits.
Not that I'm suggesting that this kind of assistance makes life easy for impoverished older Americans, but unless any increase in benefits is done carefully, taking everything into account, some low-wage earners might be in worse shape after any increase than they would be otherwise.
Check out these pros and cons of raising the minimum wage.