Pandemic Mortality Differentials and the Racial and Ethnic Wealth Gap

Mortality rates among Black Americans are substantially higher than rates among White Americans. Factors linked to structural racism contribute to this outcome, including differences in health care access and quality, poverty, education, neighborhood, and lifestyle. While the racial mortality gap has narrowed over time, there was a sharp widening of the differential during the COVID-19 pandemic.

Disparities in mortality play a key role in accounting for racial and ethnic disparities in Social Security wealth and defined benefit pension wealth. Wealth values reflect the stream of benefits that an individual can expect to receive over their lifetime, discounting each future year of benefits by the probability that the individual survives to that age. Differences in coverage status and earnings history also contribute to the retirement wealth gap.

In Mortality Differentials, the Racial and Ethnic Retirement Wealth Gap, and the Great Pandemic (NBER Working Paper 31200), researcher Edward Wolff estimates average pension and Social Security wealth by race and ethnicity during the past two decades as well as the effect of increased mortality during the pandemic on retirement wealth.

The author uses data from the Survey of Consumer Finances to estimate the Social Security and pension benefits that households can expect to receive in retirement. Retirement wealth calculations incorporate mortality rates that vary by race, ethnicity, and gender. 

The Black-White gap in life expectancy narrowed between 2006 and 2019 but remains substantial. White men were expected to live 6.2 years longer than Black men in 2006 and 4.8 years longer in 2019; among women, the gap was 4.2 years in 2006 and 3.1 years in 2019. By contrast, life expectancy is higher among Hispanics than among Whites and the size of the gap is growing. The gap for men was 1.8 years in 2006 and 2.7 years in 2019, while for women it was 2.3 years in 2006 and 3.1 years in 2019. 

The COVID-19 pandemic had a profound effect on life expectancy, particularly among racial and ethnic minorities. The Black-White gap in life expectancy jumped from 4.8 to 7 years for men and from 3.1 to 4.7 years for women. The mortality advantage of Hispanics over Whites was eliminated for men, falling from a 2.7-year advantage for Hispanics to a 0.2-year advantage for Whites, and reduced for women from 3.1 years to 1.2 years. These period life expectancy calculations reflect the expected length of life if 2020 mortality rates were experienced at all ages. 

The average level of Social Security wealth for Black households in 1989 was 44 percent of the average level for non-Hispanic White households. By 2019, this ratio had climbed to 60 percent, reflecting the narrowing racial mortality gap. Applying 2020 mortality rates would reduce the ratio to 56 percent, reversing one-quarter of the gains of the past three decades. 

For Hispanics, average Social Security wealth in 2019 was 76 percent of the level for non-Hispanic Whites, indicating that lower coverage rates and earnings among Hispanics offset their mortality advantage. Applying 2020 mortality rates reduces this ratio to 69 percent, a larger drop than occurred in the Black-White ratio. 

Turning to wealth from defined benefit and defined contribution pension plans, the Black-White ratio fell by around 10 percentage points from 1989 to 2019, then dropped by a further 1.4 points when applying 2020 mortality rates. The Hispanic-White ratio in pension wealth dropped by 0.8 points using 2020 mortality. The pandemic-related changes in pension wealth are smaller than the changes in Social Security wealth because a large share of pension wealth comes from defined contribution pension plans, whose value does not depend on mortality rates.

In concluding, the author notes, “though the racial and ethnic gap in Social Security wealth has closed over the years, it was still quite large in 2019.” Pandemic-related increases in mortality have widened the gap, though future research will be needed to determine the long-term effects of the pandemic on mortality rates and retirement wealth.

The research reported herein was performed pursuant to grant RDR18000003 from the US Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium. The opinions and conclusions expressed are solely those of the author(s) and do not represent the opinions or policy of SSA, any agency of the federal government, or NBER. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof. This project was also supported by grant number T32HS026128 from the Agency for Healthcare Research and Quality. The content is solely the responsibility of the authors and does not necessarily represent the official views of the Agency for Healthcare Research and Quality. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.