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Private savings accounts don't attract less educated
Scripps Howard News Service


March 13, 2006

Recent research by behavioral psychologists might shed some light on why President Bush had difficulty in selling his concept of private retirement accounts as a central feature of reforming Social Security.

As you might recall, the president promoted the plan through the idea of moving to an "ownership society" and providing the opportunity of choice regarding our retirement funds.

However, according to a team of psychologists from Swarthmore and Stanford, who discussed the results of their work recently in the New York Times, Americans do not uniformly welcome more choices into their lives.

Specifically, whereas higher income, better educated individuals welcome the empowerment of more choice, working class Americans, who represent the majority of our workforce, often do not. "For them, being free is less about making choices that reflect their uniqueness and mastery and more about being left alone, with their personality, integrity and well-being intact."

When college students were asked to pick adjectives that capture what "choice" means to them, those from homes with college educated parents were more likely to select the words "freedom," "action" and "control," whereas those from homes whose parents had only a high school education more often selected "fear," "doubt" and "difficulty."

Other tests that these psychologists report appear to confirm that those with more education put greater value on items that they were able to choose, whereas those with less education tend to value articles they receive the same, whether or not they chose them.

Polling on Social Security private accounts appears consistent with the general research of these psychologists on the issue of freedom and choice. According to polling done by the Pew Research Center about a year ago, 46 percent of those polled favored introduction of private Social Security retirement accounts and 38 percent were opposed to the idea.

Looking into the reasoning of those who favor private accounts, most said they favor them because "Individuals will have more control." This is twice the number who responded that they favor them because the accounts will earn more money.

Of those opposed to private accounts, most of the opposition came from those who expressed fear that the accounts would be potentially too risky.

Further examination showed breakdown that is consistent with education and income.

Fifty percent of those with a college education favor private accounts whereas only 35 percent of those with less than a high school degree do. More than half of those earning more than $50,000 per year favor private accounts whereas only 38 percent of those earning less than $20,000 a year do.

The specific polling on Social Security private accounts appears consistent with the more general work reported by the behavioral psychologists regarding the propensity to embrace more choice. Those who are better educated view it positively and as an opportunity and those more poorly educated view it negatively and as a threat.

Blacks, who are on average less wealthy and less educated than whites, are far less supportive of private accounts than whites - 36 percent of blacks favor them compared to 46 percent of whites.

However, on the issue of school choice, blacks and whites are equally supportive of vouchers. Polling done by the Joint Center on Political and Economic Studies shows 48 percent of blacks and 48 percent of whites favor vouchers.

What conclusion might be drawn here? Why would polling regarding choice on private accounts appear consistent with more general research correlating level of education and preference for independence of choice but school choice not correlate?

I think that the inner city public schools are so bad that there leaves little question to blacks that they would be better off if they had the option of choosing where to send their child to school.

My guess is that the team of psychologists from Swarthmore and Stanford provides us with an accurate picture when they report that lower income, less educated individuals embrace freedom to choose less enthusiastically than higher income, more educated individuals. However, the correlation breaks down when a status quo blocking choice is so clearly unattractive that even those naturally disinclined to loosen the reins of control want choice introduced.

Regarding Social Security private accounts, it's been my view that the current system based on payroll taxes and government determined benefits hurts low income folks more than high income folks. For them the payroll tax confiscates the only funds they have available to save and invest.

But if my conclusions above are correct, we probably won't see private Social Security accounts until low income people in general conclude the status quo is not an acceptable option.


Star Parker is author of "Uncle Sam's Plantation: How Big Government Enslaves America's Poor and What We Can Do about It" and president of CURE, Coalition on Urban Renewal and Education,
Distributed to subscribers for publication by Scripps Howard News Service.

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