Women and Social Security: Fairness and WellBeing under Current Law and Proposed Reforms

1
Women and Social Security Fairness and
Well-Being under Current Law and Proposed Reforms

• Melissa M. Favreault
• The Urban Institute
• May 16, 2008

2
Social Security has greatly reduced aged poverty
Source U.S. Census Bureau (2006)
3
Social Security Is Especially Important for
Low-Income People
Percent of Income by Source for Aged Units by
Income Quintile, 2004
24
Social Security
24
67
67
78
Social Security
Employer pensions
78
Assets
assets
Earnings
other
Source Social Security Administration (2006)
4
Social Security OASDI

• Old-Age
• Survivors
• Disability
• Insurance

5
Social Security OASDI

• Retired workers 63.1
• Disabled workers 13.9
• Survivors 9.5
• Spouses 5.4
• Children 8.2

Source Social Security Administration (2007)
6
DC OASDI beneficiaries look quite similar to U.S.
average
US
DC
Slightly more kids
Children
Fewer spouses
Spouses
Fewer survivors
Survivors
Retired workers
Disabled workers
More retired and disabled workers
Source Social Security Administration (2007)
7
Differences within DC are Great
DC overall
East River Zip codes
Children
More kids
Spouses
Fewer spouses
Fewer retirees
Survivors
Retired workers
Disabled workers
More disabled workers
Source Social Security Administration (2007)
8
DC retirees have lower monthly retirement benefits
Average monthly worker benefit, 2006
Source Social Security Administration (2007),
December averages
9
How different is DC?

• Looks like a lot of other US cities
• Greater income inequality
• Relatively high poverty
• Younger age distribution
• Very different family formation patterns
• One special feature that makes DC different than
  most cities
• Lots of older government workers / retirees who
  are not primarily covered by Social Security (may
  have reduced benefits)

10
Aspects of Current Law Important to Women in DC

• Social Security relies on very traditional
  definition of a family
• Spouse is entitled to higher of half a worker
  benefit or own benefit
• Legal marriage, not children
• Survivor benefit 100 worker benefit
• Divorced people qualify with a minimum of 10
  years of marriage

11
Social changes

• About half marriages end in divorce
• More than half of those that end do so before the
  10 year point (median of 7)
• Households without a married couple will soon be
  the majority
• Single-earners are a minority for couples
• Over a quarter of wives out-earn husbands
• Males withdrawing from labor force
• A third of children born outside of marriage
• 56 in DC in 2005
• (Source http//www.cdc.gov/nchs/data/nvsr/nvsr56
  /nvsr56_06.pdf)

12
Concerns with Current Law

• Equity Couples with even earnings often receive
  far lower benefits than couples with dissimilar
  earnings paying the same payroll taxes
• Amount to over 100,000 over a lifetime
• Couples with similar earnings have steeper income
  drops at widowhood
• In DC, median earnings for women are about 98 of
  mens compared to 77.3 nationwide
• Nationwide, black women also relatively high
  fractions 88.2 of mens
• Source U.S. Census Bureau (ACS 2006 data)

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Concerns with Current Law

• Efficiency Poor work incentives
• Marriage / divorce penalties/bonuses
• Adequacy
• Spousal/survivor transfers depend on worker
  earnings, not need or childcare
• Substantial levels of aged poverty, especially
  among unmarried women
• 12 poor, 20 near poor (vs. 7 and 12 for men)
• Unmarried women especially vulnerable (17 poor
  vs. 4 among married)

14
Incremental changes of equal costs can improve
OASDI adequacy, equity

• Caregiver credits
• Herd (2006) Iams and Sandell (1994) Favreault
  and Steuerle (2007)
• Minimum benefits
• Herd (2005) Favreault, Mermin and Steuerle
  (2006) Favreault, Sammartino and Steuerle
  (2002) Favreault and Steuerle (2007)
• Spouse-survivor tradeoffs
• Burkhauser and Smeeding (1994) Hurd and Wise
  (1997) Sandell and Iams (1997) Favreault,
  Sammartino and Steuerle (2002)

15
Poverty Can Decline With Cost-Neutral Changes
Change in 2049 poverty (1,000s)
Source Authors calculations from DYNASIM
(Favreault and Steuerle 2007)
16
Conclusions

• Well-constructed changes to Social Security
  (minimums, caregiver) can do as well (better) on
  poverty and equity
• Need to pay careful attention to design details

17
Policy Implications

• To learn more, check out
• www.retirementpolicy.org

18
Selected Chart Sources

• Social Security Administration. 2006. Income of
  the Population 55 or Older, 2004.
• http//www.socialsecurity.gov/policy/docs/statcom
  ps/income_pop55/2004/
• Social Security Administration. 2007. OASDI
  Beneficiaries by State and ZIP Code, 2006
• http//www.socialsecurity.gov/policy/docs/statcom
  ps/oasdi_zip/2006
• U.S. Census Bureau. 2006. Historical Poverty
  Tables. http//www.census.gov/hhes/www/poverty/hi
  stpov/hstpov3.html
• U.S. Census Bureau (Webster and Bishaw). 2007.
  Income, Earnings, and Poverty Data from the 2006
  American Community Survey.
• http//www.census.gov/prod/2007pubs/acs-08.pdf