Commentary: Making Social Security More Women Friendly

In recent weeks, Vice-President Al Gore and Texas Governor George W. Bush have been circling warily around the issue of Social Security, which is fast becoming a flash point in the Presidential campaign. Gore wants to use projected federal budget surpluses to shore up the Social Security trust fund, while Bush has begun to advocate partial privatization to help restore the system's long-term solvency. The candidates' big challenge is to gain the trust of baby boomers, who have the most to lose when the fund is projected to run short in 37 years.

But Social Security may turn into a gender gap issue as well. That's because women have the most at stake in any reform plan: As a group, they are more dependent on Social Security in their old age and make up nearly two-thirds of Social Security recipients (chart, page 104).

SKEWED SYSTEM. The campaign provides an opening to address the long-ignored subject of how Social Security is skewed against women (table, page 104). Because most breadwinners were male when the system was set up in 1935, the rules penalize anyone who doesn't work a standard 35-year career. Overall, 13% of elderly women live in poverty--officially defined as $7,990 a year for a single elderly person--vs. 7% for elderly men.

A coalition called the Women & Social Security Project is preparing to push the subject with mass mailings and forums across the country over the next several months. If their campaign catches on, Gore could come out ahead. Already, the Vice-President has proposed giving working women extra credits toward Social Security for years spent raising children. Such costly suggestions put Bush on the defensive, since he's juggling calls for more dough to address the potential insolvency while handing out big tax cuts. Women's groups are also arguing that Bush's privatization plan would be riskier for women, whose higher poverty rates put them at greater peril if a stock market slump cuts into now-guaranteed retirement income. "There's a concern that the system could get reformed in a way that hurts women," says Heidi Hartmann, director of the Institute for Women's Policy Research.

Certainly, the way Social Security stands now isn't fair to women. The biggest problem: The formula used to calculate benefits is based on a 35-year career. Trouble is, the average woman works 27 years, while the average man puts in 39, according to the Social Security Administration (SSA). Each year out of the workforce spent caring for kids or an ailing parent counts as zero in calculating benefits.

Women's lower pay is another factor. Even when a woman works full time, she earns just 74% of what a full-time male worker earns. Women are also less likely to stay in a job long enough to get a pension. And many lower-paying jobs have no such plan. "A woman is more dependent on Social Security for a larger portion of her retirement income," says Deborah Briceland-Betts, executive director of the Older Women's League.

Divorced women, too, often lose out. Although the average marriage lasts 7 years, a woman must be married for 10 years to the same man to receive a spousal benefit, which is 50% of her ex-husband's benefit. Otherwise, a divorcee's benefit is based on her own earnings, which are often less. Even divorced women who stay married more than 10 years face difficulties, because they only qualify for 50% of their ex's benefit. That's a big reason why 22% of divorced women over 65 are poor--higher than for widows and never-married older women.

The flood of boomer women into the labor force in recent decades doesn't offset this. True, many middle-aged women today have careers that will let them retire comfortably. But the overall poverty rate for older women will remain stuck at 12% for 20 more years, says the SSA. Blame the rise in divorce and single motherhood. Nearly 19% of women over 62 in 2020 will be divorced or separated, about triple the share of older women in 1991, the SSA projects. Their poverty rates, though declining slightly, will still be more than 20%. Meanwhile, more low-earning single mothers will increase the poverty rates of never-married women to 35%, compared with 23% in 1991. Single mothers "raised their kids but spent a lot of time on welfare rather than building up Social Security credits," says Timothy M. Smeeding, head of Syracuse University's Center for Policy Research.

Experts have plenty of ideas about how to make Social Security more women-friendly. Hartmann has proposed increasing the divorced woman's spousal benefit from 50% to 75% and ensuring that widows are not penalized by their husbands' decisions to retire early, as happens now. Smeeding recommends setting a benefit guarantee at the poverty line and raising widows' benefits. With the shortfall threat, though, few policymakers have been willing to consider benefit hikes.

That may change as the Presidential campaign heats up. Gore, for one, isn't shy about big-ticket fixes. His proposal would give working mothers credit for up to 5 years spent raising children--estimated to increase Social Security benefits by about $600 a year. For widows, Gore proposes that they receive a benefit of 75% of the combined couple's benefit, rather than the current two-thirds or one-half, adding an average $1,000 to widow benefits a year. The price tag: up to 5% of the $2.2 trillion Social Security surplus over the next decade.

Bush is going out on a shakier limb, proposing that workers invest about 2 percentage points of their 12% payroll taxes in stocks and bonds through personal retirement accounts. While Bush has not said how this would affect women, the libertarian Cato Institute, which advocates privatization, has done several studies. It argues that a single woman earning just $12,000 a year would retire with a benefit of $936 a month if she invested 7% in a portfolio that earned a 6.2% return. That would compare with $638 a month in regular Social Security benefits. "Even women working part-time and in and out of the workforce do better with individual retirement accounts," says Darcy Olsen, a Social Security expert at Cato.

Opponents dispute some of Cato's assumptions: A 6.2% return may be too optimistic considering today's overvalued stock market and projected slower economic growth. And though Bush's plan reportedly guarantees benefits for anyone whose private plan tanks, skeptics argue that he can't fulfill that promise and cut taxes at the same time. That's a big risk for women, who depend on the program more than men. Current protections "are guaranteed by law, and women should be reluctant to give them up for an untried system," says Alicia H. Munnell, a former member of President Clinton's Council of Economic Advisers who teaches at Boston College.

The retirement system will come under increased scrutiny as the campaign gains momentum. That's a good thing. At the very least, it will shine a spotlight on older women living in unnecessary poverty.

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