Yahoo Assigns Arithmetic Challenged Team to Cover Social Security

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Thursday, 09 August 2012 20:15

There have been numerous stories about how workers don't have the necessary skills for the available jobs. There is little evidence of this in the data. Wages are not rising rapidly in any major occupational grouping. If employers could not find workers with the necessary skills then they should be raising wages to pull away the limited group of qualified workers from competitors, unless of course the employers were too incompetent to understand that higher wages are necessary to attract workers.

Anyhow, Yahoo clearly has trouble attracting staff with the necessary skills in arithmetic and logic, since it ran a piece on Social Security which contained major errors in one or both. The piece recounts the story of Mary Ann Sorrentino, a woman who spent a career in relatively low-paying jobs, but nonetheless managed to save and invest successfully and thereby accumulate a substantial amount to support her retirement.

It then tells readers:

"Now nearly 70, Sorrentino says her mother's admonitions saved her -- especially considering that Social Security, that very American of safety nets, hasn't quite panned out the way many had hoped. She dubs them the "reality-challenged," referring to those who have long paid into the Social Security kitty with a blind belief they'll see their investments, and perhaps more, kindly returned to them by the federal government.

That dream has soured, says an Associated Press study this week. The average American who retires now will receive less Social Security money than what he contributed over a working life. There are variables (retirement age and income level are two big ones), but for many, it's clear: Social Security, she ain't what she used to be."

Just about every assertion in this piece is wrong. In fact, the statements are sufficiently inaccurate to be libelous. If Yahoo had mischaracterized a private corporation like Goldman Sachs or Morgan Stanley the same way, it is likely that it would be facing a serious lawsuit.

In fact, the study cited by Associated Press (Associated Press did not do a study) did not indicate that Social Security is paying out less than planned. The last cut in benefits was put into law 29 years. This means that if workers had looked at benefits they had been promised at any date since those cuts, they would be seeing exactly the benefits that they expected. The only "reality-challenged" folks in this story are those at Yahoo who apparently did not know this fact.

Also, the study showed that most workers would in fact get more than the standard return on the money they put into Social Security. It is only the top quarter or so of wage earners who could expect to get somewhat less than a normal return on the money they invested in Social Security. (Yahoo's concern for these relatively well off workers is ironic, since the Bowles-Simpson plan, which is enthusiastically supported by most of the Washington establishment, calls for further cuts to these workers' benefits.)

The Yahoo piece also badly misleads readers about the financial condition of Social Security. It told readers of a small business owner who doesn't expect to retire until 2039:

"and that Social Security, according to the Congressional Budget Office, could be bone-dry by 2040."

Actually the Congressional Budget Office does not say that Social Security could be bone-dry by 2040. Its projections show that it will only have enough revenue at that point to pay about 80 percent of scheduled benefits. However, the payable benefit projected for 2040 would still be larger than the average benefit that retirees receive today.

That would be the case if Congress never took any steps to address the projected shortfall. The additional funding needed to pay the full scheduled benefit would be roughly equal to half of the cost of the war in Iraq at its peak. It is likely that a voting population that has a substantially higher share of retirees than we do at present would insist that Congress find the funding to maintain full scheduled benefits.

Yahoo has been having serious management and financial problems in recent years. If this article is typical of its reporting it is a virtual certainty that the company will be out of business long before Social Security faces any real financial problems.