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Big Payoff in Latino Education

March 29, 1998

In arguing for privatization of the Social Security system in a recent report, the Heritage Foundation was returning to a familiar issue. But the Washington-based think tank gave the issue a new and provocative twist in declaring that the future of the retirement system upon which most Americans rely lies with Latinos.

The fact is that Latinos on average are younger than the rest of the U.S. population and thus they bear a disproportionate share of the tax burden that supports retirees through the Social Security trust fund. The foundation's report says this inequity in funding Social Security will grow even greater in the next two decades.

Privatizing Social Security, the Heritage report argues, would allow Latinos to divert some of their payroll taxes into personal investment accounts that could be retained for their own use at retirement. That would not only be fairer to Latino workers but smarter overall, the report says.

Initial reaction among Latino political activists has been mixed. Some question whether Latino workers would benefit from a privatized Social Security system, given the lower wages they earn and their lower discretionary income. Inexperience in investing is another problem.

But Latinos do agree that a debate on their role in the future of Social Security is long overdue. A decade ago, that point was made in an important but little-noted book called "The Burden of Support," written by David-Hayes Bautista, Werner O. Schink and Jorge Chapa. It argued in 1988 that there were two social trends that would shape the future of Social Security: the aging of a well-educated generation of baby boomers who will retire in the early part of the 21st century and the growth of a younger, less-educated Latino population that will be a majority of the American labor force.

To encourage a brighter future for both groups, the authors urged investing in the younger Latino population. By giving these future wage earners and taxpayers quality educations and investing in adult training programs, their earning ability could be brought up to par with other U.S. workers.

As they stand today, Latino contributions to the Social Security system are much smaller proportionally than will be required to support the retirement of the baby boomers. Latino wages are lower than the earnings of whites, blacks and Asians.

Even as the country experiences economic growth, some incomes decline. By providing inadequate education--which disproportionately affects growing numbers of Latinos--the United States may also be denying its retirees the chance for a secure financial future.

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