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Racial and Ethnic Disparities in Knowledge about Social Security Programs

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Abstract

Imperfect knowledge of public programs influences use and can lead to suboptimal decisions. We quantify significant disparities in Social Security program knowledge across race and ethnic groups. Differences in knowledge are not explained by differences in income, wealth, employment history, or educational achievement. We find evidence that there are racial/ethnic differences between perceived and actual knowledge of Social Security programs as well as differences in financial literacy, an important component of retirement planning. To identify mechanisms for alleviating these disparities, we investigate how knowledge relates to information sources about Social Security across race and ethnic groups. We find that Black and Hispanic respondents, on average, have fewer information sources. This gap corresponds to a difference in the ability to collect information from friends and family. Additional sources of information predict knowledge scores, even after accounting for confounders. The impact of racial and ethnic disparities in Social Security knowledge on post-claiming outcomes remains unclear. We present some suggestive evidence from retirement beneficiaries of a relationship between knowledge differences and subjective perceptions about the benefit claiming decision. Understanding causal mechanisms connecting racial and ethnic disparities in knowledge and outcomes likely requires an experimental design.

Key Findings

  • There are significant racial/ethnic disparities in knowledge about Social Security programs: Black and Hispanic respondents typically score 8% to 14% lower on knowledge tests of Social Security program eligibility and benefits compared to white respondents.
  • Differences in Social Security knowledge across racial and ethnic groups are not explained by group differences in income, wealth, employment history, or educational levels.
  • Black and Hispanic respondents are more likely than white respondents to express confidence that they understand Social Security, which might indicate it is more common that people in these groups “do not know that they don’t know” about how Social Security works. This result might stem from differences in information sources or experiences with SSA programs.
  • Sources of information about Social Security vary by race and ethnic groups: Black respondents are 25% more likely than white respondents to have no source of information on Social Security and Hispanic respondents are 15% more likely than white respondents to have no source of information.
  • More sources of information about Social Security are associated with higher scores in knowledge tests: Approximately two additional sources of information are comparable to most racial/ethnic differences.
  • Satisfaction with past claiming decisions is lower among nonwhite respondents and among those with lower Social Security knowledge.
  • Whether disparities in knowledge translate into differences in actual decisions remains unclear due to data limitations: Understanding the causal mechanism requires an experiment.

Other points of possible interest:

  • There exist similar or worse racial/ethnic discrepancies in financial literacy: Less Social Security knowledge may reflect broader informational challenges related to personal finance and retirement.
  • Black and Hispanic respondents are significantly less likely than white respondents to report friends and family as a source of information.
  • Black and Hispanic respondents report 22% and 21% fewer sources of information, respectively.
  • Black and Hispanic respondents report seeking information about Social Security from Social Security 11% and 15% less than white respondents.

Citation

Knapp, David, and Francisco Perez-Arce. 2022. “Racial and Ethnic Disparities in Knowledge about Social Security Programs.” Ann Arbor, MI. University of Michigan Retirement and Disability Research Center (MRDRC) Working Paper; MRDRC WP 2022-449. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp449.pdf

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Project

Paper ID

WP 2022-449

Publication Type

Working Paper

Publication Year

2022