The Social Security Administration pumped $84,000,000 in benefits into the USVI economy during 1998, according to newly-released figures in Washington.
This represented a $6 million increase over the prior year.
The some 12,500 Social Security checks arriving in the islands each month are the best possible kind of money from the mainland — they are in no danger from a hurricane, the whims of the travel industry (or Congress), or territorial government financial crises.
Further the money goes directly to the recipients, with no opportunities for delays, scandals or governmental waste. (The overhead costs of the Social Security Administration (SSA) are minimal, which is as it should be for a seasoned government agency blessed with major economies of scale.)
Finally, the benefits keep up with inflation, and as a result, the total dollar volume for the USVI grows year after year.
About 8,800 of these monthly checks go to retired workers and their spouses, and to a few of their children; another 2,200 go to widows, widowers and surviving children of insured workers, and the rest, about 1,500, go to disabled workers, and to their spouses and children. Benefit levels vary; they are higher for those with higher earnings, but the formulae are tilted a bit, I think appropriately, to give a break to those with lower incomes.
The volume of benefits, and their steady rise — that's the cheerful side of the coin.
On the other side we find that the Virgin Islands checks are smaller, on average, than those in the rest of the U.S. (but not in the rest of the U.S. islands), and proportionately, there are fewer checks coming to the USVI than there are to American jurisdictions generally.
The average recipient of a Social Security check, nationally, in 1998 found a check worth $707 in his or her mailbox on (usually) the third of the month. The average recipient in the USVI got $562.
In the same year about 16.4% of the American population generally (including for the last few months, this writer) found the little brown envelope in the mail while only 10.6% of the Virgin Islands population had that experience. (More precisely, most of these checks are deposited directly in the recipients' bank accounts, a highly useful part of the SSA program.)
Are there good reasons why the USVI gets less than its apparent share of the checks, and smaller ones at that? And can the local government do something about it?
The answers are "yes" to the first question and "yes but slowly" to the second.
The checks are smaller primarily because the USVI's economy is not as sturdy as that of the nation as a whole, and the checks are less numerous primarily because the average age of the USVI population is lower than that of the rest of the nation. But there are other factors at work that the local government can influence, at least at the margins.
A stealthy reducer of the number of checks and their size is the underground economy, and observers suggest that this is probably more of a problem in the islands than on the Mainland; the efficient troops of the Internal Revenue Service, seldom seen in the USVI, are active on the Mainland to make sure that employers and employees both pay their social security taxes, which go by the acronym of FICA.
Workers who take cash, and avoid the FICA (and break the law), may think they are getting the better part of the deal, but only for the moment because social security benefits, in the later part of one's life, reflect the amount of contributions recorded over the entire working life of the would-be benefits recipient. I was surprised to discover recently, when I filed, that the SSA calculates retirement benefits on the best 35 earning years of one's life; if you don't work in each of those 35 years, that reduces your pension; if you skipped FICA payments on some work done even 35 years back, your pension is reduced. (I did not suffer from losing a year's earnings decades ago, when I was a Fulbright Scholar in New Zealand, only because I delayed filing till I was 70.) You can get a social security pension, at the right age, with only ten years of covered employment, but it is a small pension.
So what could the island government do to keep those Social Security payments increasing year after year? Here are two strategies:
1) fight the underground labor market now so that full benefits are available to island residents in the future, and
2) encourage more people with existing or potential social security benefits to collect them in the islands.
The first strategy is simply supportive of existing federal law, and can not be criticized except by lawbreakers, but it brings benefits slowly; the second is totally non-controversial, it can bring instant results, but the task — encouraging people to retire to a place where do not now live, is difficult. (In Florida, however, fully 21% of the population receives a social security check, as opposed to about 10-11% in the USVI; many of the recipients are not Floridians by birth, but are, instead, Floridians by migration.)
What can the USVI government do about the underground labor market? The most direct tactic would be simply to insist that all USVI government contractors pay their FICA taxes, audit those contractors regularly on this point, and then loudly terminate contracts with those found in non-compliance. Given the number of workers on the territorial payroll, there apparently is a large enough staff to conduct the audits.
The USVI government could also use its influence with the schools, the university and the Food Stamp program to carry a strong message to students and Food Stamp recipients — do not EVEN THINK about taking a cash job in the underground economy.
What can the USVI do to increase the number of Social Security recipients in the islands? Three elements suggest themselves:
A). To the best of my knowledge there is no ongoing USVI program designed to lure back, in their retirement years, people who were born in the islands, and then migrated to the Mainland for their working years. It would be better for the islands, and probably better for the individuals, if their social security checks were mailed to an address in the USVI rather than to a Brooklyn (for example) address.
How do you encourage the widely scattered members of the Virgin Islands diaspora to think about retiring to the USVI? It is a specialized public relations challenge, but there are many channels, in addition to the most obvious one — encouraging USVI residents to write to their own relatives on the subject, sending along government-prepared material on the subject. University and high school alumni lists (and associations) could be used, and so could the envelopes sent out every two years carrying absentee ballots. These mailings, by definition, are going to people who: 1) care about the USVI or they would not be voting, and 2) who are not currently in the USVI. Any mailings sent along with the absentee ballots would have to be scrupulously non-partisan in nature and presumably should not be signed by an elected official.
B). Another, and quite different public relations campaign, this to be conducted with the close cooperation of the private sector, could be aimed at older people who did not grow up in the USVI, who could be encouraged to retire here (just like all those folks from the Middle West now living in Florida.) Anything that could be said to this audience about an improved health care system for senior citizens would, of course, be very useful. Causing them to live in the islands would, in most cases, bring more in financial assets than just their social security checks.
C). A third approach, suggested in an earlier column, would be to encourage immediate retirement of USVI government workers with pending (but unused) social security benefits; this would provide the double benefit of bringing in additional money from the Mainland while reducing the government's payroll. An able-bodied person can retire as early as 62 under the curre
nt law.
In short, the flow of Social Security checks to the Virgin Islands is strong, and growing slowly. The local government, if it desires, can increase that rate of growth — all without seeking anything as difficult as an act of Congress.
Editor's note: David North, a former assistant to the U.S. Secretary of Labor, is chairman of the Board of Tax Appeals in Arlington County, Virginia.
