Will Social Security Reforms Harm Women?
By Diana Zuckerman, Ph.D.
Social Security needs to be changed to assure adequate benefits when the baby boomers retire, but what should those changes look like?
In recent months, President Clinton and some members of Congress have started to ask a crucial question that may determine whether the changes produce evolution or revolution: How will proposed changes affect women?
Sixty percent of Social Security beneficiaries are women. Social Security benefits treat women and men the same way, but many provisions tend to benefit women more than men, or vice versa.
For example, married individuals have a choice of whether to receive benefits based on their own lifetime earnings or half their retired spouses' benefits. However, choosing half the spouse’s benefit helps more women than men, since men usually earn more.
Although their Social Security benefits tend to be lower, women depend on Social Security more than men because women are much less likely to receive employer-provided pensions.
Even when women receive private pensions, they average only half the dollars received by men.
Such facts make clear the vulnerability of women retirees. Yet surprisingly, the impact of Social Security reform on women has received little attention until very recently. Unfortunately, many of the proposals that are being seriously considered would put the lowest earners at greatest risk, and many of those lowest earners are women.
Impact of Proposals
Proposals to privatize Social Security—especially to set up personal accounts for each individual--have attracted increasing support.
Although the proposals vary, the basic plan is that most of the money that is currently set aside from each individual's paycheck for Social Security would instead go into an account for that individual, and the funds would be invested in stocks, bonds, or other private investments. Paying for a safety net for society's most vulnerable, and the enormous costs of moving from the current "pay as you go" system to private accounts, would result either in higher taxes or cuts in some Social Security benefits. These proposed changes have very different impacts on women and men.
Raising the retirement age would affect more women than men, since women live longer. In addition, many women retire when their husbands stop working, in order to spend time with or take care of them. Under current law, the retirement age will gradually increase from 65, stopping at 67 for those born in 1960 or later. Several proposals would raise the retirement age to 67 even sooner, and would continue to increase it to age 70. Reduced benefits for early retirement would also be delayed.
Calculating benefits on 38 years of employment rather than 35 years would decrease benefits for everyone, but women who spent any time as "stay at home mothers" would be harmed more than others.
The Social Security Administration estimates that only 30 percent of women who are retired in 2021 will have worked 38 years, compared to 60 percent of men. And more of those women's years will be based on part-time salaries, because even today fewer than half of women between 25-44 years old are employed full-time.
Lifetime benefits tend to help women more than men since women live an average of seven years longer than men. Private accounts might run out of money while some long-lived individuals are still alive. For people who buy individual private annuities in the insurance market, women are likely to receive smaller payments because of their greater life expectancy. Moreover, the payments would not be indexed for inflation, which is more of a problem for those who live the longest.
Many other proposals would reduce guaranteed benefits that provide a safety net for our lowest earners. The lowest earners tend to be women, who would be hurt more if the safety net is reduced. Such reductions could be a significant problem for divorced women--particularly those who have spent a number of years as homemakers. The number of divorced retirees is skyrocketing because divorce is much more common than it used to be.
One proposal that would have little impact on women is to raise the "cap" so that high earners pay Social Security taxes on more of their earnings. Currently, workers and their employers pay Social Security taxes on the first $68,400 of an annual salary. Because few women earn more than that, substantially raising the cap would have little impact on them. This option lessens the need for benefit cuts, but the proposal is controversial because it would be considered a tax increase. So, the one reform that would be least harmful to women will face stiff opposition.
In addition to reducing benefits for retirees, many proposals to reform Social Security would reduce benefits for persons with disabilities. Disabled workers and disabled children and adults who never worked are currently eligible for benefits; relatives who care for the disabled are usually women.
Social Security is more than a retirement program--it is a social insurance program that keeps millions of Americans out of poverty. Simple solutions that sound too good to be true, probably are: changing Social Security will be complicated, and we need to make sure that our nation's most vulnerable citizens are well served by any changes that Congress enacts.
Diana Zuckerman, Ph.D. is one of the authors of the Institute for Women’s Policy Research’s recent report, The Impact of Social Security Reform on Women. She is also Executive Director of the National Center for Policy Research for Women and Families.
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