The Accuracy of the Social Security Wage and Other Economic Projections

The Social Security Administration’s (SSA) Board of Trustees regularly gauges the actuarial status of its retirement, disability, and medical programs in an annual report. Some forensic economists use the projections provided in these reports when calculating the present value of earnings growth and costs in economic damages analyses in wrongful death, personal injury, and employment termination cases. They may be incorporated into net discount rate assumptions or used to calculate nominal growth. Thus, the extent to which the SSA’s wage growth projections are accurate has implications for projections made by forensic economists who use the Trustees’ Report. In this paper, we examine the accuracy of the SSA’s wage growth projections and compare them with projections made using other methodologies. Our results show that the Trustees’ intermediate projections have overestimated actual wage growth—as have some of the other methodologies. When the Social Security wage inflation forecasts are applied to economic loss measures in personal injury litigation, they lead to overestimates. However, the Trustees’ interest rate projections have also been overestimated during the period we examine. The result is that net discount rates based on SSA wage growth and interest rate projections are not consistently over- or under-estimated.