Women Answer the President on Social Security

February 8, 2005

The National Organization for Women (NOW) warns that the plan to privatize Social Security will undermine women's financial security.

Women are more vulnerable to the reduction in benefits that will accompany privatization because we have smaller benefits to begin with, and because women are less likely than men to have a pension or other means to supplement those reduced benefits. Playing the stock market always creates winners and losers, and women will end up on the losing end when Social Security falls prey to the boom and inevitable bust of the stock market.

The existing system is progressive, in the sense that lower lifetime earners have modestly higher proportional benefits relative to their earnings. This increased benefit is critical for women because of our lower average earnings and time out of the workforce for caregiving. Those pushing for privatization want us to take money out of that progressive system and deposit it into a so-called personal account, which is just the opposite—it is a regressive system. Since earnings from private accounts would be dispensed through annuities, women would pay a higher price or receive lower benefits than a man with the same size private account because we live longer.

Here's the bottom line: If you're a woman, you're being asked to take your money out of a system that offers guaranteed retirement, disability and survivor benefits, and move it into a privatized system that will discriminate against you in the amount it pays out because you are female. Women weren't born Democrat, Republican or yesterday.

So much of the discussion to date has focused on retirement, but Social Security is also a disability and life insurance program. Privatization puts at risk disabled women, widows, single and divorced women and the children of a working parent who dies or becomes disabled.

Instead of scrapping the current system, NOW suggests we fix it and fund it. Some improvements towards that end have been made, but more adjustments to this basically sound program must be undertaken. The following suggestions would address the needs of certain groups of women who live out their final years almost entirely dependent upon their modest monthly Social Security check:

• Reduce the Child Care Penalty in one of two ways: provide up to ten years of Family Service Credits, with a maximum of $5,000 per year, for a single parent or the lower earner of a couple staying home to care for children under age six, or alternatively drop out some of the zero-income years;

• Increase the Widow's Benefit to 75 percent of the couple's joint benefit, capped at the maximum earner's benefit;

• Raise benefits for Disabled Widows and Divorced Disabled Spouses to 100 percent of the retired worker's benefits;

• Increase the Divorced Women's Spousal Benefit to 75 percent and increase eligibility for divorce benefits after seven years of marriage, as long as there is a total of 10 years in combined marriage and work history;

• Revise the current Special Minimum to lower earnings required to 50 percent of minimum-wage earnings for full-time, year round work.

To cover the costs of improved benefits and assure long-term financing for generations, we suggest two simple changes: (1) beginning around the year 2020 when Social Security begins to draw down on the surplus, a modest increase in the payroll FICA rate-for both employees and employers, and (2) an increase in the taxable wage base at the same time. We challenge the assertion that an increased payroll contribution—especially since it would be only a slight increase—would depress economic growth. Ideally, the payroll rate should be made progressive since the heaviest burden falls on women, persons of color and other lifetime low-income workers, while those at the top feel the impact far less.

With these few changes, we can make our guaranteed insurance and retirement program the envy of the world and assure that all women who have given so much to society live out their later years in economic security.

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