Social Security: What's it to women?

Social Security

What's It to Women?

by Sarah Ritchie

If you believe Madison Avenue, the typical Social Security recipient is a healthy, married person, probably living in Florida and playing endless games of golf. The media and various interest groups have done a fine job convincing many younger Americans that Social Security beneficiaries are the quintessential "greedy geezers." In reality, the average Social Security recipient is likely to be elderly woman, living alone, and struggling to make ends meet. The truth is that women remain financially vulnerable in old age. Consider these facts:

An elderly woman is twice as likely to be poor, compared to her male counterpart.
By age 85, one woman in five is poor.
Without Social Security more than half of women elders would be poor.

Let's stop and look at the Social Security program as a whole for a minute. Social Security, arguably the most successful social welfare policy in U.S. history, is a by-product of the nation's Great Depression. Although Social Security is most often associated with its retirement benefits, the program provides vital social insurance for other life events such as the death or disability of a family income earner. Currently about six million disabled workers and their dependents, and more than seven million survivors of deceased workers receive Social Security benefits.

In other words, Social Security is truly a family-friendly public policy, protecting individuals from impoverishment in old age or financial ruin caused by unexpected life events. It springs from Judeo-Christian values of social justice and compassion. Mainline Protestant denominations have long supported the program, and about a month ago, organizations representing faith-based institutions, including the Women's Division of the United Methodist Church and the General Board of Church and Society for the Methodist Church, signed an ecumenical statement of principles supporting minor adjustments in the current Social Security system.

Why Is Social Security So Vital to Women?

The current Social Security program is critical to women because of their life patterns and the realities of the economy. Since women typically assume family caregiving roles -- raising children as well as assisting with aging parents -- they are more likely to take time out of the work force or to work part-time. This fact has important implications for salary increases, job promotions and vesting in employer-sponsored pension programs. Moreover, on average a female worker will earn a lower wage than her male counterpart.

All of these factors mean that women are less likely to accrue savings or receive private pensions, making Social Security the most vital source of retirement income. Social Security weaves women's special needs into the construction of the program, according Alicia Munnell of Boston College, an expert on the system. Ms. Munnell reported:

Social Security uses a "progressive" benefit formula. This means lower-wage workers, often women, will receive higher proportion of their pre-retirement income during their retirement.
Social Security values the homemaking and child-rearing roles. For a woman who spends her career working at home, Social Security allows her to receive a benefit equal to half of her husband's benefit.
Even though a woman may survive her husband by many years, she will receive 100 percent of her husband's benefit after his death, and younger widows will receive additional financial support for dependent children. These benefits are annually adjusted for cost of living increases so inflation won't eat away at the value of the benefit.

Why are Policy makers Debating Social Security Reform?

The current Social Security debates are about finding ways to maintain this popular, reliable program, not eliminate it. Unlike other government programs, Social Security is required by law to be in "long-term balance," defined as 75 years. This means resources (tax collections, mainly) and obligations (benefits) must balance each other through 2074. Using conservative economic and demographic assumptions, there will be an imbalance between the resources and obligations of the system. Using conservative economic and demographic assumptions, the system would only be able to meet about 75 percent of its obligations over the long term, unless there are changes in the current program.

The 75-year time frame is particularly important because it will include the retirement of the 76 million members of the Baby Boom generation, who will be replaced by a generation that is much smaller.

To bring the system back into long-term solvency, various Policy makers, interest groups, and even a nonpartisan blue-ribbon government commission have proposed a vast array of changes in the program. Proposed reforms have included raising the retirement age; changing the automatic cost of living adjustment and other benefit calculations; raising FICA (Federal Insurance Contribution Act)payroll taxes; and lifting limitations on taxable income.

Proposed Plans

During 1998, the President called for a national year of discussion about various reform options aimed at shoring up Social Security financing for the 21st century. A number of organizations and individuals have suggested the traditional U.S. Social Security system be scrapped in favor of a radically altered system of private retirement accounts.

Privatization advocates have suggested that individualized retirement accounts are superior to the current Social Security system because they would allow for the potential for a greater "rate of return." However, many believe that the actual costs of a private system and the potential risks for the aged -- especially for women -- are simply too great to justify higher benefits for a few.

President Clinton recently announced his plan for reforming Social Security. That proposal calls for using about 60 percent of the projected budget surplus to extend the solvency of the Social Security program. In addition, a portion of those new funds would be shifted into the stock market where they could earn a higher rate of return than in the bond market, where funds are now invested.

The president also proposed so-called Universal Savings Accounts (USA) as a new savings vehicles for low- and moderate-income Americans. The federal government would support the USA accounts matching a portion of each dollar that a worker contributes, with larger matches going to low-income individuals.

Women must carefully monitor this debate and participate in the process. They have much at stake.

Sarah Ritchie is program officer The Century Foundation, formerly the Twentieth Century Fund, a research foundation that undertakes timely and critical analyses of major economic, political and social institutions and issues.