On May 17, the House Ways and Means Subcommittee on Social Security held the first in a series of hearings on proposals to protect and strengthen Social Security. In this hearing, witnesses were asked to focus their comments on the importance of Social Security to women, minorities, and individuals with disabilities.
In a press release announcing the hearing, Chair Jim McCrery (R-LA) stated, “Over the decades, Social Security has provided a vital safety net for women, children, individuals with disabilities, and those with low earnings. As the Subcommittee begins its examination of ways to protect and strengthen Social Security, I am pleased to focus first on the history of Social Security’s essential safety net, and its importance to those who are most vulnerable.”
Pointing out that four in ten elderly women rely on Social Security for over 90 percent of their income, Ranking Member Sander Levin (D-MI) said that efforts to reform Social Security should ensure that the middle class maintains its current standard of living and that people are kept out of poverty. He also expressed his concern that efforts to “privatize” Social Security would have an adverse impact on the nation’s most vulnerable populations.
Social Security Commissioner Jo Anne Barnhart provided a brief history of Social Security, explaining that the program began as an “old-age insurance system” and was later amended “to shift its focus from protection of the individual worker to protection of the family…Over one-third of today’s Social Security beneficiaries are not retirees. The program has since developed into one that provides a large measure of economic well-being for millions of Americans.” Noting that the program “is gender and race neutral,” she stated, “We treat individuals with identical earnings histories the same in terms of benefits. However, due to demographic trends, certain groups like women benefit from various features of the Social Security program. These features include a progressive benefit formula, automatic cost-of-living adjustments and guaranteed benefits for dependents and survivors. Women who on average live longer, make less money and spend more time out of the workforce raising children than men find these elements of the program’s benefit structure particularly helpful.”
During the question and answer session, Rep. Stephanie Tubbs Jones (D-OH), who is the only woman on the subcommittee, stated: “ I want to talk about women since we are so well-represented on this committee.” After much laughter, she pointed out that Social Security was created when the norm was a woman working in the home and receiving a spousal benefit based on her husband’s earnings. Ms. Barnhart agreed that the current system is disadvantageous to working women, adding that a non-working woman could receive a higher spousal benefit than a woman working in a low-wage job would receive based on her own earnings.
Director of Education, Workforce, and Income Security at the Government Accountability Office (GAO) Barbara Bovbjerg detailed the results of a recent GAO study examining the importance of Social Security for vulnerable populations, including women. She noted that the program “was designed around a working father, a stay-at-home mother, and children,” adding, “Society has moved away from this model. There are many more single parent and two-earner households than in the past. Women’s labor force participation rates are now at 59 percent a substantial increase from their participation rates when the program was introduced. At the same time, women have different work patterns from men. Women are more likely to work part-time and work intermittently as they may take time out of the labor force to raise children or care for elderly parents.” Ms. Bovbjerg explained that as their participation in the labor force increases, more women would be entitled to Social Security based on their own earnings, adding, “Spouses can be entitled to a benefit based on their own earnings record that is equal or less than the benefit they are entitled to on their spouses’ earning records. The household benefit in such cases is no greater than if such spouses had never worked at all. Similarly, when a woman becomes widowed, her total household income can potentially be cut much more deeply if she was receiving a retirement benefit based on her own earnings while her spouse was alive, compared to a widow whose benefit was based only on her spouse’s earnings…In considering alternatives to the one-earner model on which the program was created, however, a two-earner model is not necessarily the answer. In a country as heterogeneous as America, probably no one model is optimal. The increase in women in the workforce and two-earner couples raises questions about the equity for working women of the current design of the spousal benefit.”
Carrie Lukas, director of policy for the Independent Women’s Forum, demonstrated how the current Social Security system has a “disparate affect” on women. She reiterated many of the statements made about working women, but also noted that the program has “very serious drawbacks” for stay-at-home moms and single women: “Consider the situation of a stay-at-home mom who ends up divorced. This woman agreed to forego earning her own income to raise children while her husband worked. But if she gets divorced after having been married for less than 10 years, that woman has no right to any portion of the retirement benefits that her husband accrued while they were married. This means that many divorced women are forced to start from square one when saving for retirement.” Ms. Lukas also addressed the plight of a 60-year-old single mom who worked all her life, stating, “In addition to struggling to provide for her family’s needs, she has been paying taxes to Social Security. If she dies at age 60 and her children are over age eighteen, according to Social Security’s rules, her family will receive a paltry $225 death benefit. Her years of work and thousands of dollars in taxes paid will have been for nothing.”
Ms. Lukas argued that the administration’s proposal to divert money from Social Security to individual accounts “would put women on more equal footing. Those women who choose to work would be putting more away for retirement. Those who choose to stay at home would still be earning interest on the money they previously invested, and a woman would know that if and when she chooses to return to the workforce, she won’t just be throwing her payroll taxes away.” She added, “Personal accounts would be an individual’s private property. Therefore, in the event of divorce, the personal account could be divided equally between the husband and wife during settlement, just like all other assets. Personal accounts also would be inheritable. That single mother who has been paying payroll taxes all her life would know that if she dies before reaching retirement, her adult children will receive the benefit of her lifetime of labor. They could use that money to go to college or to start a business. Personal accounts would also give women the opportunity to earn a higher rate of return on their income, which is particularly important since women are less likely than men to have jobs that provide retirement savings options, such as corporate pensions or 401(k)s.” Ms. Lukas concluded by stating, “In our society, a woman has the right to choose where to live, whom to marry, whether or not to have children, and how to protect herself and her family from very real threats that exist in our country today. Women also should be able to decide for ourselves whether we want to keep putting all our money into Social Security, or keep a portion of it in an account that we own and can watch grow.”
Testifying on behalf of the National Women’s Law Center, Co-President Nancy Duff Campbell said that “for four out of ten nonmarried women 65 and older, including widows, Social Security is virtually all they have to live on, providing 90 percent or more of their income; nearly six out of ten single African American and Latina women 65 and older get 90 percent or more of their income from Social Security. Without Social Security, more than half (53 percent) of all women 65 and older (and 42 percent of men 65 and older) would be poor.”
Expressing her opposition to the Bush administration’s proposal, Ms. Campbell explained that the plan “has sometimes been referred to as ‘progressive price indexing’ because workers making less than $20,000 a year today are exempt from benefit cuts (at least as retired workers) and higher earners face progressively higher cuts. But this label is misleading because the plan cuts benefits for 70% of retired workers, whose partially price-indexed benefits would no longer keep pace with wage growth and increases in the overall standard of living…beneficiaries with incomes under $20,000 especially widows and surviving children would in fact have their benefits cut because their benefits are based on the record of a worker who earned over $20,000 a year.” She also noted that “with a private account, the timing and size of contributions, as well as overall investment returns, affect the size of the accumulation. If [a woman] took several years out of the labor force early in her working life to raise children, she will likely have a smaller account, because of the loss of compounding [interest] on contributions in the early years. In contrast, Social Security helps counteract the lifetime earnings gap between men and women…because it has a progressive benefit formula that provides lower earners with a higher percentage of their pre-retirement income, counts only the 35 highest years of earnings toward the average used to determine benefits, and makes the timing of earnings irrelevant.” Finally, Ms. Campbell stated that private accounts “are likely to provide little if any assistance” to women receiving spousal benefits: “The account of a worker who dies at a young age would be small. It would provide little additional support for a woman raising young children, even if she had access to the funds in the account when disaster struck and she might not. The Administration has said that accounts could be left to anyone, so a young widow might not inherit. Even if she did inherit, the Administration has said that accounts must be saved until retirement, so a young widow might not have access to the funds until she retired.”
