Study: Youth Gain More From Entitlements

Campus Research Finds Today's Youth to Profit More From Government Programs Than in Past

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UC Berkeley researchers recently found that in comparison with members of past generations, young people today will profit more from government entitlement programs.

According to the study, which was published in the March issue of the journal Population and Development Review, when taxes paid for public education are factored into the costs associated with maintaining inter-generational entitlement programs, the net income received by young people will exceed that given to older generations.

The study contradicts the popular belief that previous generations have not paid the same amount for programs such as Social Security and Medicare, as younger generations will have to.

"We found that the earliest generations suffered lifetime losses because they paid taxes to pay for the beginning of public education, but they themselves did not receive public education," said Ronald Lee, a campus professor of demography and economics who co-authored the study, in an e-mail. "Conversely, when Social Security and Medicare were started up, the earliest generations received the benefits but paid very little in taxes first, so they got a big gain."

Because older generations were less likely to receive an education which they paid taxes for, they took a net loss of 1 to 2 percent from their lifetime earnings. Today's children are expected to receive 5.1 percent of their lifetime earnings in net benefits from Social Security, Medicare and education, according to the study.

Lee said the fact that most older generations actually paid more in taxes than they received in benefits is surprising. These older generations paid for the education of the large Baby Boomer generation and for the rapid increase in educational attainment in the 1950s.

"Without judging what is or is not legitimate, our results simply show that the cohorts born between 1928 and 1942 have been more or less repaid through Social Security and Medicare for the costs they incurred for the development of public education," the study states.

According to the study, economists traditionally view education as an investment. But in the current study, researchers viewed education as a benefit for subsequent generations over those who currently pay for it.

But the study argues that since parents have no claim on their children's income, they do not directly benefit from "investing" in their children. Therefore, education is really a transfer of an asset-the ability to find a job and earn an income-to the next generation.

"Taxpayers young and old should appreciate the value of education as a great gift to the young," Lee said in the e-mail. "The young should value this gift and not resent the taxes paid for the programs for the elderly."

Tags: UC BERKELEY DEPARTMENT OF DEMOGRAPHY DEPARTMENT OF ECONOMICS, UC BERKELEY


Contact Claire Perlman at [email protected]



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