Lose – Lose Scenario for Women and Social Security

I have avoided this topic like the plague because my expertise, such as it is, is in foreign policy and political strategy. I know next to nothing about Social Security except that I pay into it and someday I’ll draw from it. I’ve heard the pundits pontificate that SS will be bankrupt in 40 some odd years and have listened with only half an ear. When I hear “Iran”, my ears perk up, when I hear “Social Security” my attention turns elsewhere. I’ve listened to President Bush’s proposal to issue private investment accounts to folks under 55 and it seems to make sense to me.

However, I am a male and my concerns are very different than that of my good friend who happens to be a woman. She sent me an e-mail that read, “Why don't you put something on your blog about how none of the SS reform being talked about is going to change one of the main things wrong with SS: it is unfair to women.” Frankly I never thought about it and so off I went to do some of my patented “fast Google research”. Here are the fruits of my labor.

First off, on the question of whether or not Social Security as it stands today is in fact unfair to women, the answer according to the National Center For Policy Analysis is, “Yes and No. Social Security is very generous to the married woman who never works. She is entitled to half her husband's benefit (the spouse's benefit) even if she never paid a dollar of taxes. Social Security is much less generous to the married working woman. The reason: if she works, she can collect either the Social Security benefit or a benefit in her own right, but not both. Many women discover that after paying Social Security taxes for many years, their best option is to accept the spouse's benefit. So they get nothing in return for all the taxes they paid. There are also other problems. A divorced person married for 10 years or more is entitled to full spousal and survivor benefits, while one married less than 10 years is entitled to none. So being short a single day of marriage (9 years, 364 days) can cost a spouse tens of thousands of dollars in lifetime Social Security benefits.” (Credit mysocialsecurity.org)

In America, Women represent a large portion of the national workforce. According to the AFL-CIO, “Since the 1970’s the number of women in the paid labor force has increased by 112 percent. The percentage of children with mothers in the paid workforce has increased 28 percent. Combined work hours for dual-earner couples with children rose 10 hours a week. The gender wage gap decreased by 15 cents to 77 cents for every dollar a man earns. The number of women workers has increased steadily, particularly in the second half of the past century, and continues to grow. Since 1950, the number of women in the paid labor force has increased by more than 250 percent. In comparison, the labor force participation rate of men continues to decline. In 1950 only one-third of the U.S. labor force was female; by the year 2003 that proportion was approaching one-half (46 percent). By 2010, women are projected to account for 48 percent of the total labor force. The number of working women has grown from 5.3 million in 1900 to 18.4 million in 1950 and to nearly 65 million in 2003 and is projected to increase to 75.5 million by 2010. By 2010, more than 62 percent of women will be in the paid work force. In comparison, the labor force participation rate for men has steadily declined from nearly 80 percent in 1970 to less than 76 percent in 2003.” (Credit aflcio.org).

As stated above, so long as women stand by their men, as the song goes, for at least 10 years or more, they are entitled to their spouse’s benefits. Here’s the rub; according to the Equality in Marriage Institute, “(the) total number of divorced adults grew from 4.3 million in 1970 to 20 million today…Younger couples marrying for the first time face roughly a 40-50% chance of divorcing in their lifetime, under current trends…The median length for a first time marriage ending in divorce is eight years…” (Credit equalityinmarriage.org)

So, under our current safety net system combined with today’s cost of living and raising a family, women are encouraged to marry, will most likely make less than their husband, divorce within 8 years and then be cut from receiving retirement benefits. Unfair indeed.

President Bush has proposed privatized personal investment accounts. From what I’ve been able to pick up, it involves the Federal government giving a portion of the current workforce’s retirement money back to them for the purposes of limited and federally regulated investments. There’s more to it than that and to date there’s no solid plan in the congress but that is what the President has been campaigning about this week.

While this plan that the President is campaigning about may seem to make a modicum of sense, the Institute for Women’s Policy Research published a paper in March of 2000 stating that, “There are several reasons why individual accounts would be particularly negative for women. First, because women earn less than men, they benefit from the current system that provides proportionately higher benefits for low earners. This feature would be lost in a privatized system. Because women would tend to have smaller accounts, it is likely that the yield of their accounts would be below average, as they (appropriately) avoid risky investments. For these same reasons, women would find a larger share of their accounts going toward administration. Second, because women tend to live longer than men, they would have to pay more for annuities (guaranteed monthly income) in a privatized system, or face the possibility of outliving their assets. Finally, women are more likely to be hurt by losses in disability and life insurance coverage because they are much more likely to be responsible for children as well as themselves after disability or death.”

The IWRP rejects the claim by the Cato Institute that, “All serious proposals for privatization include a safety net feature that would ensure that everyone’s retirement income is at least at or above the poverty line.”

They counter that, “Not all of the Cato Institutes privatization proposals include such a minimum. Furthermore, it is unlikely that Congress would pass such a dramatic improvement in benefits. Currently Social Security’s special minimum is approximately 85 percent of the poverty line. For workers who have less than 30 years of coverage the benefit gradually decreases and phases out at 10 years. SSI’s maximum benefit for a single individual is even less (about 75 percent of the poverty line) and is subject to means and asset tests.

A minimum benefit at or above the poverty line is, of course, desirable. However, the Cato Institute has provided no estimate of the cost of such a minimum.”

At present, and granted I’m not the expert here; I cannot stand by a policy that seems to so grossly misrepresent women across the board. Women lose in our current system and will stand to lose even more if private accounts pass without the minimum safety benefit. The fact that whatever plan is passed will be optional for the worker doesn’t account for much if the regular American woman isn’t aware of the apparent pitfalls of privatization accounts. One can only hope that as this debate unfolds, the Congress will reconcile the gaping holes in whatever plan they agree to before more damage is hurled upon women in the American workforce.