There’s no easy way to tally up the costs of the COVID-19 pandemic. Between March 2020 and January 2023, more than 1.7 million Americans died in excess of expectations, cutting lives short and reshaping the national economic landscape. A new National Bureau of Economic Research working paper authored by Gies College of Business associate professor of finance Julian Reif examines one ripple effect from the pandemic: how excess mortality affects the solvency of Social Security.

In “The Effect of U.S. COVID-19 Excess Mortality on Social Security Outlays,” Reif and his coauthors used dynamic simulation models to estimate COVID-19’s long-term impact on the Old-Age, Survivors, and Disability Insurance (OASDI) program, the core program that provides monthly benefits to qualified retired and disabled workers and their dependents.

Their findings were counterintuitive – premature deaths during the pandemic reduced future Social Security obligations by $205 billion on net (after accounting for lost payroll taxes and benefits).

“Some of my previous research had shown that COVID-19 resulted in a large number of years of lost life,” said Reif. “I also knew that one of the big drivers of Social Security spending is that we are all living much longer than we used to. Those two facts led to this paper.”

Measuring Unexpected Effects

Reif and three colleagues from the University of Southern California – Hanke Heun-Johnson, Darius Lakdawalla, and Bryan Tysinger – combined CDC excess death records with two powerful modeling tools widely used to estimate lifetime costs and benefits: the Future Adult Model (FAM) and the Future Elderly Model (FEM). That process allowed them to simulate the pandemic’s financial impact on Social Security. The effect on OASDI outlays was complex. Each premature death reduced future retirement payments, but those reductions were offset by two factors:

• Lost payroll taxes: Fewer workers contributing meant $58 billion less in future additions to the fund.
• Survivors’ benefits: The program will pay an estimated $32 billion in future benefits to surviving spouses and children.

Those figures, Reif notes, come with a human cost that overshadows the numbers. For surviving families, the redistribution is significant.

“When an individual with Social Security benefits dies, some of the benefits they would have received are often redirected to their spouses and children,” he explained. “We estimate that the excess mortality caused by the pandemic will result in $25 billion in future payments to those individuals.”

One of the study’s more counterintuitive findings is that pandemic deaths ultimately reduced Social Security liabilities. Those offsets, however, don’t necessarily translate into a net fiscal benefit for the federal government.

The gain of $205 billion from future obligations is small when compared with the $5 trillion in federal stimulus spending during the pandemic. Direct payments, expanded unemployment insurance, and business relief programs were all costly interventions intended to stabilize an American economy at its most turbulent point since the 2008 financial crisis.

“To be clear, the pandemic increased government spending overall,” Reif said. “The three stimulus packages passed by the federal government cost over $5 trillion. The purpose of our paper was to point out that there are some offsetting costs. However, the offsets we found number ‘only’ in the hundreds of billions of dollars, so overall the pandemic certainly strained government finances.”

The working paper also revealed racial and ethnic disparities in the pandemic’s impact on life expectancy and Social Security payouts. Among Americans aged 65 and older, Black and Hispanic populations lost roughly twice as many years of life per person compared with similarly aged White populations. Despite higher mortality, surviving members of Black and Hispanic families often receive lower total survivors’ benefits compared to White families, reflecting systemic differences in earnings and benefits formulas.

“Those aged 25 to 64 years lost about three times as many years of life [as those over 65],” Reif said.

Implications for Social Security

For policymakers, these findings complicate the conversation around Social Security’s long-term solvency. The OASDI trust fund, which pays benefits to more than 66 million Americans, has been predicted to become depleted as early as the mid-2030s. The pandemic relieved some pressure on the fund, but only marginally.

While this study quantifies the fiscal impact of the pandemic, it reveals by contrast the limitations of financial framing. Savings in future benefits come at the cost of shortened lives, disrupted families, and lasting inequities. Reif and his coauthors estimate that 262,000 children lost a parent in 34 months of the pandemic, many from disproportionately affected households. For those families, survivors’ benefits may soften the blow, but they can’t replace what’s lost.

The pandemic’s economic legacy continues to unfold, but Reif’s research underscores an uncomfortable reality: mortality shocks don’t just shape public health, they alter the balance sheets of institutions designed to protect us for years to come. By quantifying the pandemic’s effect on Social Security, the study offers policymakers better tools for forecasting while leaving no doubt: any apparent “gains” in federal finances come at an immense human cost.

More Gies Research:

• Read about the long-term costs of Hurricane Katrina – 20 years later
• Learn more about the impact of wildfire smoke – even when fires are hundreds of miles away
• Check out more research from Julian Reif on Illinois Experts
• Explore how Gies research from Julian Reif and Tatyana Deryugina is shaping the national conversation about air pollution