Implications of the COVID-19 Pandemic 

for the US Social Security Program

Steve Goss, Chief Actuary

Karen Glenn, Deputy Chief Actuary

Social Security Administration

NBER Summer Institute / Economics of Social Security Workshop

July 22, 2020
COVID-19: 

Some Background

2
Characteristics of COVID-19

• Highly communicable

• Transmissible prior to symptoms

• Some never show symptoms

• Immunity after infection appears to be limited

• Less than 12 months; implications for “herd immunity”

• Potential for repeated reinfection 

• Death rate overall 0.4% to 1%: concentrated at high ages

• Compromise for survivors?

• Vaccine or therapy? How effective?

COVID-19: Some Background 3
Potential Path Going Forward

1918: worst case scenario? Will we do much better in 2020?

• Will we avert a substantial 

second wave in the fall? If so, 

we my be able to return to 

“normal” next year

• If not...

COVID-19: Some Background 4

Source: The Spanish Flu and the Stock Market: The Pandemic of 1919

by Bryan Taylor | Feb 27, 2020 | Economics, Historical, Insights

Figure 1. Death Rates of the Spanish Flu, June 1918 to May 1919
Assessing Where We Are Currently

Based on analysis of lag, estimates of complete 

deaths in a week have been accurate...

Estimated Complete Total U.S. Deaths 

Begin to Rise in June 

COVID-19: Some Background 5

• Infections are variable: undercounted by factor of 5-10, as seen by ratio to deaths

• Deaths may be miscoded—so look at total deaths? 

• Also, many deaths are reported with a lag of several weeks; completeness analysis suggests deaths started rising 

in June
Effects on Social Security: 

Economic

In the near term, effects will be largely due to reduced payroll tax, 

which in turn is due to reduced employment and GDP

6
Direct GDP Effects

• What were the 

Trustees and other 

forecasters projecting 

before COVID (solid 

lines)?

• What about now 

(dashed lines)?

• Forecasts vary widely 

and are being updated 

frequently

Effects on Social Security: Economic 7

16,000

17,000

18,000

19,000

20,000

21,000

22,000

23,000

Real GDP Levels ($ Billions)

CBO Jul20

IHSbase Jul20

2020TR

FY21Bud

CBO Aug19

Moodys Jul20

IHSopt Jul20

IHSpes Jul20

Moodys Nov19

IHSbase Nov19
Direct GDP Effects

• Ratios of recent 

projections to preCOVID projections

• Will GDP levels return 

pre-recession levels? 

Or will we see a 

permanent loss to 

future potential GDP, 

as has happened in 

other recessions?

Effects on Social Security: Economic 8

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

Ratio to Pre-COVID Projected Level of Real GDP

CBO May 2020 / CBO August 2019 IHSmarkit May 2020 / IHSmarkit Nov 2019 (Base forecasts)

Moody's May 2020 / Moody's Nov 2019 IHSmarkit June 2020 / IHSmarkit Nov 2019 (Base forecasts)

Moody's June 2020 / Moody's Nov 2019
Labor Force and Employment

• Again, solid lines are 

pre-COVID, and dashed 

lines are recent 

projections

• How severe and 

prolonged will declines 

in LFPR be?

• Employment has a direct 

effect on Social Security 

payroll tax revenue

Effects on Social Security: Economic 9

58

59

60

61

62

63

64

65

Labor Force Participation Rates (Percent)

IHSbase Jun20

2020TR

FY21Bud

CBO Aug19

Moodys Jun20

Moodys Nov19

IHSbase Nov19

CBO Jul20
Earnings and Payroll Tax Revenue

• Projections of wage and 

salary disbursements 

(WSD)

• Recent forecasts all 

reach pre-recession 

trends within the next 

few quarters

• Forecasters see lower 

nominal aggregate 

earnings:

• Lower employment?

• Lower CPI?

• Lower real wage?

Effects on Social Security: Economic 10

8,000

9,000

10,000

11,000

12,000

13,000

Nominal WSD ($ Billions)

IHSbase Jul20

2020TR

FY21Bud

CBO Aug19

Moodys Jul20

Moodys Nov19

IHSbase Nov19

CBO Jul20
Earnings and Payroll Tax Revenue

• Social Security payroll tax revenue will certainly be lower than we projected 

for 2020—but by how much?

• In April we offered examples including 15% lower earnings and payroll tax for 2020, 

but now 10% lower seems more likely—assuming no substantial second wave

• Good news: employer payroll tax deferral in COVID legislation does not 

affect revenue to the trust funds

• What will effects be beyond 2020?

Effects on Social Security: Economic 11
Effects on Social Security: 

Demographic

Demographic factors will influence responses in the near term, but 

Social Security financial status will be affected only in the long term

12
Mortality: Baseline Death Rates

• We consider mortality 

experience at all ages, 

but ages 65 and older 

are critical

• In general, reductions in 

death rates at younger 

ages (<40) hurt program 

finances, while 

reductions at older ages 

help the program

• Reductions in death 

rates since 2009 

continue to fall short of 

expectations

Effects on Social Security: Demographic 13

4,000

4,200

4,400

4,600

4,800

5,000

5,200

5,400

5,600

5,800

6,000

1990 1995 2000 2005 2010 2015 2020

Age-Sex-Adjusted Death Rates (per 100,000)

Ages 65 and Older

2018TR 2019TR 2020TR Actual
Mortality: COVID Effects

• How much of an effect will COVID deaths have?

• Will deaths continue to be concentrated at older ages?

• Will there be persistent and even cumulative effects on mortality in the 

longer term?

• Direct virus-related immediate deaths

• Increased deaths of despair/violence—suicide, homicide?

• Decreased life expectancy from compromise for COVID survivors; how much?

• Data available to date and medical implications are as yet unclear

Effects on Social Security: Demographic 14
Mortality: Total Deaths Have Consistently Dropped 

After the 11th Week of the Year, But Not in 2020 

Deaths have risen sharply for both COVID and non-COVID 

Effects on Social Security: Demographic 15
Mortality: Increased Deaths in 2020 by Cause

• The figure shows the difference 

in estimated complete deaths 

versus the prior year

• Starting in March, suggests that 

most increase over 2019 is not 

from COVID?

• Lag analysis independent for 

total and total excluding 

pneumonia/influenza/COVID

• Are COVID deaths being 

properly identified?

• Might there be an increasing 

portion of COVID being 

attributed to other causes? 

Effects on Social Security: Demographic 16
Fertility

• Fertility rates are a critical 

assumption for the program

• They directly affect the age 

distribution of the population, 

and in turn the ratio of 

workers to beneficiaries

• Fertility rates have been very 

low lately, but we have been 

assuming they will rebound 

over the next decade or so— birth expectations still above 

2.0 children per woman

• Recessions tend to depress 

fertility on a period basis— but is this mainly a tempo 

(timing) or quantum 

(number) effect?

Effects on Social Security: Demographic 17

1.0

1.5

2.0

2.5

3.0

3.5

4.0

19151920192519301935194019451950195519601965197019751980198519901995200020052010201520202025203020352040

Total Fertility Rate

Calendar Year

Alternative I

Alternative II

Alternative III

Historical 

Historical and Projected Total Fertility Rates
Immigration

• Effects of COVID on immigration are extremely speculative at this point

• Lawful immigration

• Perhaps some timing effects due to delayed processing

• In general, these folks have been waiting to immigrate and may not be deterred

• Unauthorized immigration 

• Note the program receives payroll tax revenue from many of these workers

• Border closings will likely have effects—in both directions

• Will the recession deter unauthorized immigration, as recessions have in the past?

• Will varying impacts of COVID around the world affect migration patterns?

Effects on Social Security: Demographic 18
Effects on Social Security: 

Program-Specific

19
Average Wage Index (AWI)

• The national average wage index (AWI) for 2020 will likely decline and lower 

Social Security benefits for those who become “newly eligible” in 2022

• For retired worker benefits, those who reach age 62 in 2022 (born in 1960)

• For disabled worker benefits, those who are newly entitled for benefits in 2022

• Survivors and auxiliary beneficiaries too

• The AWI is determined based on the ratio of total wages paid in the year to 

the total number of at-any-time workers in the year

• Therefore, it is very likely the AWI will decline significantly for 2020, due to 

the timing and abrupt drop of employment in this recession

Effects on Social Security: Program-Specific 20
Average Wage Index (AWI): “Notch”

• The first main effect of a drop in AWI can be referred to as the “notch”:

• Assume the following illustrative scenario:

• Total wages for 2020 will be about 10% below the level projected in the 2020 

Trustees Report (TR)

• The number of workers with any earnings received in 2020 will be about 1% lower 

than projected in the 2020 TR

• Under this scenario, more than 4 million retired worker and disabled 

worker beneficiaries who become newly eligible for benefits in 2022 would 

receive a benefit that is 9.1% lower than expected, for life, as would all 

survivor and auxiliary beneficiaries paid on their account

• And the benefit would be 5.9% lower than the initial benefit for similar new 

beneficiaries in 2021

Effects on Social Security: Program-Specific 21
Average Wage Index (AWI): “Boost”

• The second effect of a drop in AWI can be referred to as the “boost”:

• Again, assume the illustrative scenario, that the AWI will increase 9.1% less 

than expected in the 2020 TR

• Under this illustrative scenario, all workers with earnings in 2020 who first 

become eligible for benefits after 2022 will experience a 10% increase in 

the indexed value of their 2020 earnings used for their benefit computation 

(1/0.909 = 1.1)

• Because the increase is for only one year of earnings (one of up to 35 years 

used in the AIME for benefit calculation), the increase in benefit level for 

these workers will be generally less than 0.3% (averaging perhaps 0.15%)

Effects on Social Security: Program-Specific 22
Average Wage Index (AWI): Legislation

• Two bills have been introduced to address these effects

• S. 4180, the “Protecting Benefits for Retirees Act,” was introduced on July 2 by 

Senators Tim Kaine and Bill Cassidy

• Does not let the AWI decrease from one year to the next, beginning with 2020

• Addresses both the “notch” and the “boost”

• H.R. 7499, the “Social Security COVID Correction and Equity Act,” was 

introduced on July 9 by Representative John Larson

• Also does not let the AWI decrease from one year to the next, but only to address the 

“notch”; the “boost” remains in place

• Also includes several provisions to raise benefits for calendar year 2020 only, similar to those 

in his comprehensive Social Security solvency bill (the Social Security 2100 Act)

• We provided Rep. Larson an analysis of the effects (https://www.ssa.gov/oact/solvency)

Effects on Social Security: Program-Specific 23
OASI Beneficiaries

• There has been speculation in the press and elsewhere that the COVIDinduced recession will cause workers to apply for retirement benefits earlier 

than they would have otherwise

• We are not seeing this in the data—yet

• Speculation is that folks are relying on extended unemployment benefits for 

now, but might start applying earlier if the recession persists

• Increases in survivor benefits will likely be limited

• Earlier benefit start for those with age-reduced benefits actually tends to 

lower longer-term cost

Effects on Social Security: Program-Specific 24
DI Beneficiaries

• Similarly, we aren’t yet 

seeing evidence of 

increased DI applications

• Recessions have a delayed 

impact on applications 

(“receipts”)

• Applications for disabled 

worker benefits increased 

rapidly in the last 

recession from 1.5 million 

in 2007 and 2008 to 

1.8 million in 2009 and 

1.9 million in 2010

• Also note what has 

happened since then!

Effects on Social Security: Program-Specific 25

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

(millions)

Social Security Disabled Worker Receipts at Disability Determination 

Services by Calendar Year: Historical and Intermediate Assumptions 

for 2012 through 2020 Trustees Reports

2012TR

2017TR

2016TR

2015TR

2014TR

2013TR

2018TR

2019TR 2020TR
OASDI Beneficiaries

• There will clearly be competing effects on the size of the beneficiary 

population in the near term

• Decrease in beneficiaries due to increased deaths

• Increase in beneficiaries due to additional applications—assuming recession 

persists, and recovery is not as abrupt as the recession

• For example, if there are an additional 200K to 300K DI applications with 

about one-half allowed—will that be on the order of the number of 

additional OASDI beneficiary deaths in 2020?

• Could there be even more beneficiary deaths in 2021?

Effects on Social Security: Program-Specific 26
Bottom Line: Trust Fund Baseline: Pre-COVID

• Where do we stand? 

This figure shows results 

from the 2020 TR—with 

no COVID effects 

reflected

• Reserve depletion 

projected in 2035

• 79% of benefits payable 

at that time, declining 

slowly over time to 73%

Effects on Social Security: Program-Specific 27

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar Year

OASDI Non-Interest Income, Cost and Expenditures 

as Percentages of Taxable Payroll

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected
Bottom Line: Trust Fund Effects from Last Recession

Effects on Social Security: Program-Specific 28

• During the 2007-09 

recession, reductions in 

annual trust fund income 

(compared to the 2008 TR 

projection) grew gradually, 

exceeding 10% for 2010 

and 15% thereafter

• However, annual program 

cost (almost entirely 

benefit payments) 

exceeded the projection by 

only about 5% for 2009 

and 2010, with little 

difference thereafter

• Increased benefit cost 

occurred with a delay, due 

to extended UI payments
Bottom Line: Effects on Trust Funds Under COVID

• In April we speculated 15% reduction in earnings and payroll tax for one or 

two years, and then full recovery: Trust Fund reserve depletion advanced 

from early 2035 to mid or early 2034

• Now, consider an illustrative scenario: assume total earnings in 2020 are 

reduced to 10% below the 2020 TR intermediate projection, with full 

recovery to expected earnings in 2021 and thereafter

• This could happen if there is no substantial second wave in the fall, with resulting 

closure of the economy

• Then payroll tax revenue would be reduced by about $100 billion in 2020

• The trust fund reserve depletion date for the combined OASI and DI Trust Funds 

would likely move from early in 2035 to mid-2034

Effects on Social Security: Program-Specific 29
Bottom Line: Effects on Trust Funds Under COVID

• If, instead, closure due to the pandemic extends through 2021, or if there is 

a permanent reduction in the level of economic activity, then negative 

effects on the actuarial status could be substantially larger

• Trust Fund reserve depletion could be earlier than 2034, and the percent of 

scheduled benefits payable after depletion could be reduced 

• The degree of longer-term persistent effects on the level of economic 

activity and on demographic factors is as yet unknowable

Effects on Social Security: Program-Specific 30
Questions?

31