Harbingers of a Troubled Future

April 1, 2001

If America’s 76 million baby boomers want a fright, they need look no further than two reports issued in February by the nonpartisan Social Security Advisory Board. The panel monitors trends at the Social Security Administration, the nation’s biggest-spending agency.

The reports show an agency about to crumble. The problem at hand isn’t the Social Security trust fund, however. The trust fund is growing every day. It may well be headed for disaster sometime in the 2030s as the baby boomers finally suck out the last of the budget surplus, but the Social Security Administration will come apart much sooner if something isn’t done soon about its human capital crisis. SSA is aging much faster than the people it serves.

The tracks of the coming crisis are easy to see. On the one hand, the SSA has never been under greater pressure to perform. According to the agency’s own projections, the number of beneficiaries grew 10 million over the past decade to nearly 52 million, and will grow another 10 million by 2010. By 2005, according to the Advisory Board, the agency’s toll-free number will receive 76 million calls a year, two-thirds of which will require a live response.

On the other hand, much of SSA’s workforce is retiring. Like the rest of the federal government, the agency expects roughly half its workforce to retire over the next decade, with the vast majority of the exits among the very claims representatives who process benefits for new retirees. Adding in another 10,000 exits due to ordinary attrition in high-stress positions, the agency will need to replace three out of every five employees just to stay at its current strength.

Balancing these two trends would be hard enough under the best of circumstances, but SSA’s recent downsizing made it even more difficult. Between 1985 and 2000, SSA cut more than 15,000 jobs, even as it made every effort to meet the lofty service standards. To its credit, SSA mostly succeeded and even set up one of the nation’s premier toll-free telephone lines along the way.

Unfortunately, SSA cannot maintain the facade of service much longer. Consider the warning signs highlighted by the Social Security Advisory Board:

Despite SSA’s excellent toll-free telephone services, one-third of callers got a busy signal or hung up in exasperation after long waits. Social Security field offices are becoming more crowded with each passing day, and waiting times appear to be rising. The quality of claims decisions appears to be declining as workloads rise, thereby putting greater pressure on an already overburdened appeals process.

All of these problems are compounded by the hollowing-out produced by the Clinton administration’s downsizing. Prohibited from growing under President Clinton’s employment caps, SSA did what any caring agency would do: It stopped filling vacancies at the bottom and reclassified its supervisors into non-supervisory positions. As a result, the hierarchy slowly began to change shape from a classic bureaucratic pyramid with more employees at the bottom to an increasingly familiar federal pentagon with more managers, non-supervisors and overseers at the middle and fewer front-line staff at the bottom.

If SSA is to turn itself from an emerging horror story into a fairy tale, it must act quickly on three fronts. First, it must fundamentally change its shape to put the lion’s share of its staffing resources at the bottom, not at the middle. Instead of filling each new middle- or senior-level vacancy, the new agency head should split these jobs into two or more front-line positions. The Bush administration could speed the effort by allowing SSA to manage based on payroll, not head count.

Second, SSA must learn how to compete for talent in the current labor market. One of the byproducts of the decade-long drought in hiring is that SSA, and many other federal agencies for that matter, have forgotten how to recruit. SSA won’t get its fair share of talent merely offering higher entry-level pay. It must make its case for talent based on its critically important mission in honoring the nation’s pact with its people.

Third, and perhaps most importantly, SSA must join with other federal agencies in helping Congress and the Bush administration understand the desperate need for civil service reform. Like the federal government as a whole, the Social Security Administration is cursed with a civil service system that was last reformed in 1978 based on ideas that were in good currency in the 1950s and that were built on research conducted in the 1930s by scholars who were trained in the 1910s and 1920s. It is a civil service system best suited to a workforce that rides to work in Model Ts, not on HTML.

Luckily, the agency has 76 million baby boomers on its side. To paraphrase the old commercial, Congress can fix SSA’s human capital crisis now or pay the price at the voting booth later. High percentages of older Americans vote, and they love to take revenge against any politician who threatens their Social Security, whether the threat comes from financial crises or just plain bad service.