For Women, Troubling Trends in Social Security

A new report from the Institute for Women's Policy Research warns that proposed reforms in the Social Security system could be devastating for widows and many other elderly women who are more likely to be dependent on Social Security than men.

Women who are currently on Social Security, and who were much less likely to have worked than women in the baby boom generation, are not the only ones threatened, according to "The Impact of Social Security Reform on Women," written by economist Heidi Hartmann and her colleagues. Women of the generation in which working was the norm also are at greater risk of poverty than are men, because their incomes average 75 percent of men's and because many women of childbearing age take time off or work part time. Both factors lower their Social Security benefits.

"Single and divorced and long-term widowed women are the most vulnerable to poverty because of their lesser engagement in paid work over their lifetime," Hartmann says. "Their own pensions are either nonexistent or very small. If they were once married, they are frequently dependent on what their husbands' earnings were, on his pension and Social Security. These pensions are reduced when the husband and chief breadwinner dies. This leaves women who are alone very vulnerable."

The study is based on data from the Social Security Administration's New Beneficiary Survey, which conducted interviews with a sample of men and women who began receiving benefits in the early 1980s. The surviving members of the original sample and surviving spouses were reinterviewed in 1991 to find out how their circumstances had changed. Ten percent of the unmarried women were poor when they were first interviewed shortly after retirement. Nine years later, that percentage had risen to 15. Among the older women who became poor, two-thirds stayed poor. Declining income from assets also contributed to their poverty.

For women with modest retirement income, continuing to work was one of the few ways of avoiding poverty, but for women with health problems, that was not always an option. The study found that the current Social Security system had important protections for women, including yearly cost-of-living increases and a benefit formula that is relatively generous to low-income workers.

It warned that several features of proposed reforms could undermine women by cutting dependent spouse benefits, raising the basis for calculating benefits from 35 years of highest earnings to 38, and raising the age at which a person could begin receiving benefits from the current 65 to much older. Already, the age is being raised from 65 to 67 by 2027, and some proposals would require people to be 70 before they could receive Social Security checks.

The study calculated that 30 percent of women and 60 percent of men retiring in 2021 will have accumulated 38 years of work experience. Women would find their benefits lowered because they would include up to three years of zero or part-time income for the time the women took off to care for young children.

Another proposal that could hurt women in particular is one that would limit cost-of-living benefit increases to 1 percentage point less than the Consumer Price Index, which could have a devastating cumulative effect on women who live to be very old.

Both men and women also may lose years out of the work force when they have to reeducate or retrain themselves, an increasingly common pattern, Hartmann says. "It may be that men and women's lives become more similar, with men taking on more family care, but that both would have to leave the labor force while retraining. With computers and being able to work from home, we might envision a more fluid mesh or screen between work and nonwork, in which men and women would move in and out of work more readily. You'd want to see the private pensions be more portable. Now it still requires five years to vest in a pension. We might want to reduce this, as well as have a Social Security system that doesn't penalize time off from work."

Social Security reform is going in the opposite direction of societal trends, she points out. "As society gets more wealthy, people want more leisure, and they are retiring earlier, not later. . . . Our public policy seems almost punitive: You can't get any benefit until you are 70." A factor that may be driving that is the perception that people are retiring from their main jobs earlier and beginning a second career to supplement their pensions. That kind of work usually pays less, although it provides more freedom.

"The biggest reason women became poor is that they stopped working. To look at it and say we can delay benefits because so many are working, that's the privileged few who are healthy enough. Many policymakers are thinking of themselves," and they do not realize that when women can no longer work and are dependent on meager benefits, they are plunged into poverty. "Policymakers see retired people working now. But there is a big difference between doing it to get extra money and doing it to survive."

Hartmann says she has been surprised by how many articles and reports on Social Security reform fail to mention the great difference in its impact on men and women.

Women are far more dependent on Social Security as a main source of income than men are -- which means that attempts to reform Social Security absolutely must be examined through a lens that tells us in detail what the impact would be on women. This is a program designed to provide social insurance against poverty, and that mission must remain firmly in our sights.