This article was published in the
Miami Herald,
St. Paul Pioneer Press, Long Beach Press-Telegram, The Record (Hackensack,
NJ), Watertown (NY) Daily Times, Detroit Free Press and
Mobile (AL) Register and other
Knight Ridder
newspapers in November 2004.
Social Security and Women
By Diana Zuckerman
Whatever our government does during the next four years, nothing
is more important to women and families than Social Security.
Most Americans are focused on homeland security, but the economic
security of our Social Security program is equally essential.
A few years ago, it looked as if the FDR-era program would be
retired before it reached 65 — dumped for a new, privatized
model. In 2000, presidential candidate George W. Bush promised
to take up this challenge, but no real efforts were made during
his first term.
That may change soon.
If Bush follows through with his plan to privatize Social Security,
women will be more affected than men. Here’s why.
—Most Social Security checks are sent to women, because
women live longer than men.
—Women depend more on Social Security than men do, because
women are less likely to have their own private pensions when
they retire. When women have private pensions, their pension checks
are, on average, half as large as men’s are.
—Our Social Security system is currently relatively generous
to low earners, and especially women. A privatized system would
be more generous to high earners, most of whom are men.
In recent years, Congress has been unwilling to reach consensus
on changes to the Social Security system. Unfortunately, we have
been hurt by the failure to change the system eight years ago,
or four years ago — while the economy was robust and baby
boomers were fully employed. For example, small increases in Social
Security taxes during a flourishing economy would have added a
great deal of money to the Social Security Trust Fund. The budget
surplus of a few years ago — now replaced by a harrowing
deficit — could have been used for transition costs for
a privatized system.
As a result of the delay in addressing Social Security’s
long-term problems, we will need to make greater increases in
Social Security taxes or greater cuts in benefits, than would
otherwise have been necessary.
Although the details are murky, President Bush’s goal is
to increase Social Security benefits for everyone by providing
small private accounts. The plan would keep the current system
in place but create a small private plan to supplement it. The
assumption is that Social Security benefits invested in stocks
and bonds would earn high dividends that would make up for cuts
in benefits.
Unfortunately, any privatized plan would still have transition
costs that would add up to trillions of dollars, and the only
way to pay is by cutting benefits. This could be a triple whammy
for women: (1) investing in the private sector tends primarily
to benefit the highest earners, who tend to be men; (2) transition
costs would necessitate budget cuts that would put holes in the
Social Security safety net, which is desperately needed by individuals
without pension plans, most of whom are women; and (3) personal
accounts don’t provide guaranteed benefits for as long as
you live, which is important to those who live the longest, most
of whom are women.
There are alternatives to private accounts that would be better
for everyone, and especially women. One attractive proposal is
to invest Social Security funds in stocks and bonds, which would
increase the rate of return. Instead of privatized accounts that
individuals would invest as they choose (sometimes disastrously),
a part of the Social Security Trust Fund could be invested, thus
reducing the investment risk for individuals.
In addition to risk, private accounts can be expensive. The administrative
cost of a personal account — at least $50 each year —
may be a small price to pay for investing tens of thousands of
dollars in retirement funds. But most women and men earn less
than $30,000/year, and if their privatized account is 2 percent
per year (as generally proposed), only $600 or less would be added
to the private account each year. For these low earners, the dividends
from such a small account (let’s be generous and estimate
10 percent — which is $60 a year) would be drastically offset
by the $50 or more cost of administering that personal account.
For that reason, personal accounts benefit very few women.
Private accounts will not last indefinitely. Social Security
benefits currently last a lifetime. Privatized Social Security,
like other private pensions, would run out of money if someone
lives “too long,” or would pay smaller monthly checks
to women with the same earnings as men, since it is assumed that
women live longer. Neither is as good for women as the current
benefits, which last a lifetime and increase with inflation.
The program needs reform, but not by harming women. Social Security
is more than a retirement program — it is a social insurance
program that keeps millions of Americans out of poverty. The Social
Security system is not bankrupt, but it does need to be carefully
strengthened before the baby boomers retire. We should maintain
guaranteed benefits that provide a safety net for our most vulnerable
citizens — our lowest earners and those living alone. Most
of these are women.
Diana Zuckerman is president of the National Research Center for Women & Families in Washington, DC.
