Social Security’s Solvency & Unemployment Bonuses: The Link - AMAC

All Republican governors have already cut off residents of their states from the so-called “Biden bonus” that pays people an extra $300 per week not to work through early September.  The scheme passed in the last stimulus bill of March 2021 with Democrat votes only.  Experts continue to note these bonuses are holding down job gains and growth, causing shortages, and contributing to inflation.  Employers have resorted to bonuses of their own, higher wages, and signing offers to lure folks off the couch.  Results appear to be mixed.

But what is the impact of the “Biden bonus” on Social Security’s solvency?  Pretty significant.  Why?  People who collect unemployment benefits, as opposed to wages or salaries, do not pay the FICA tax (6.2% to Social Security and 1.45% to Medicare), and neither do their employers.  The longer millions collect unemployment rather than work, the more the Social Security Trust Fund suffers.  As it now stands, the Fund is due to run dry after all surpluses currently being used to keep benefits whole are exhausted in about a decade.  Benefits will then be cut for all by 23% automatically.  Experts think the reckoning date may be sooner due to the pandemic.  The 2021 report by Social Security’s Board of Trustees will give us a better idea, and the report is eagerly awaited this summer (it was released in April in 2020).

But there is more bad news.  People are actually doing damage to their own futures, likely without realizing it, as time out of the workforce permanently affects their future monthly Social Security payments.  That’s because Social Security uses one’s highest 35 years of earnings (adjusted for inflation) in calculating one’s monthly benefit.  Throw a zero into that mix, because one sat out a year or more collecting unemployment, and the benefit calculation will be significantly lower.  As noted, that income is not credited as work.

Democrats in Congress have little appetite to rescind the bonuses, though that body will still have to fix the long term issues by reforming the Social Security program.  The fixes are becoming more difficult and painful each year it drags its feet on reform.  Essentially, to shore up the program’s finances, there are three choices—cut benefits, raise taxes, or increase the retirement age.  Of course, a mix of any of those three can be applied as well, as in perhaps trimming benefits for the highest income earners, an idea that might garner bipartisan support.

But reform can never happen in the current toxic environment where any candidate or elected official who speaks the truth is hit with or accused of “cutting Social Security” or “throwing Grandma off the cliff.”  For years we’ve heard these ridiculous lines in commercials and in campaign literature.

The public needs to understand Social Security’s financial problems in order not to fall victim to members of Congress looking only to their next election with lines like, “I pledge to increase everyone’s Social Security benefits.”  It’s a popular moniker and thus why so many members propose benefit hike bills.  But it’s disingenuous.  The tough, courageous, and righteous stance is to advocate for reforming the program so that it will remain sound and stable and continue to exist as we know it for future generations.

AMAC’s Social Security Guarantee is designed to preserve and modernize the program without raising taxes on workers.  One component is Social Security PLUS, a voluntary companion benefit (not privatization of the main program) that would allow all workers to have more money in retirement.  See the full plan here.


Jeff Szymanski works in political communications at AMAC, a senior benefits organization with 2.4 million members.  This piece is part of an on-going attempt to inform Americans of the reality of Social Security’s precarious financial situation and to promote AMAC’s plan to preserve and modernize the program for successive generations.

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