Can somebody plz explain this lil piece of the SS jibberjabber to me?

[ChairOne]

I've been following the issue fairly closely, but apparently skipped class on the day they explained exactly what "wage-indexing" versus "inflation-indexing" are.

I *think* it has something to do with the manner in which future SS benefit increases (or decreases?) are calculated - say, according to the wage growth at that time, or inflation growth at that time. But even if I'm right about that, that's about where my understanding of the issue ends.

I'd appreciate a specific, detailed explanation of the two concepts, along with a cataloging of their comparative advantages and disadvantages. A link to such would be just fine as well.

Thanks!

[Warpy]

1. Inflation indexing means as the cost of living goes up, so do benefits.

Wage inexing would follow the median wage, which as we all know, is depressed and likely to become even more so. Wage indexing will mean that benefits will lag far behind the cost of living, devastating people who are already hanging onto the edge.

Wage indexing also refers to the fact that the more you make in your lifetime, the higher your benefits will be. However, if they ram wage indexing through and eliminate COLA benefits, you will find yourself living on kibble at some point.

[ChairOne]

2. Ok.....

So when you say:

"Wage indexing will mean that benefits will lag far behind the cost of living",

That's because the cost of living increases (or has been) increasing faster than wages themselves?

So all in all, inflation indexing is the way to go, since it measures the benefit against what it will be spent on - thus seeking tot match benefit to need?