Source: Social Security Administration.
Social Security helps tens of millions of American retirees make ends meet after the end of their careers. On its face, the program appears to be gender-neutral, with benefits determined solely by the amount of wages earned, making no provision for the differing life expectancies of men and women. Yet some Social Security advocates believe that some of the program's provisions fail to address other financial differences between women and men, arguing that lawmakers should make further changes to Social Security to remedy unfairness in the system.
Last week, Janet Barr, former chair of the Social Security Committee at the American Academy of Actuaries, testified before the Senate Finance Committee at its hearing on whether Social Security is working properly for women. Barr's testimony identified several ways in which women get the short end of the Social Security stick, along with some possible changes that could make the system more fair.
3 reasons why Social Security isn't always fair to women
Many analysts look at the gender-neutral provisions of Social Security as evidence that the program is fair to women. But Barr notes that unfair aspects of broader U.S. society work their way into Social Security through those provisions.
First, women are more likely than men to have gaps in employment or never to enter the workforce at all. Spousal and survivors provisions offer benefits to married women whose spouses work more than they do, but spousal benefits are typically just half what the working spouse receives. Because Social Security considers 35 full years of earnings when calculating benefits, even short breaks can be enough to reduce benefits.
Source: SSA.
Second, women's average earnings are lower than men's. Barr reports that in 2011, the average Social Security wage for women was just 74% of the average wage for men -- that's a difference of more than $10,000.
Third, women tend to live longer than men, and because married women on average have older spouses, they're more likely to survive their spouses and need to live independently during a portion of their retirement. In addition to often becoming widows, women are also more likely to be single or divorced during their retired years than men are.
How Social Security solves some -- but not all -- of its problems
Admittedly, Social Security already works to the benefit of women in several ways. Because lower-income recipients get a higher percentage of their average lifetime earnings in benefits than higher-income recipients do, Social Security ameliorates some of the unfairness of unequal wages. Similarly, the availability of benefits based on a spouse's or ex-spouse's work history dramatically increases benefits for many women, and the fact that benefits last for an entire lifetime leads longer-living women to get more in benefits than shorter-living men.
Source: SSA.
Yet even these provisions don't always have the intended effect. For instance, because of the interplay between regular and spousal benefits, one-earner families can often get more in Social Security than two-earner families that make the same total amount of money, both during their joint lifetimes and after the death of one of the spouses.
To resolve the remaining problems, Barr recommends several changes to the system:
- Shortening the work-history measuring period from 35 years to 30 years would reduce the impact of taking time off over the course of a career.
- Adding a guarantee of minimum benefits for long-working, low-income workers would disproportionately assist women to help bridge the gap.
- Reducing spousal benefits while increasing survivors' benefits would make the system fairer for two-earner couples, albeit at the expense of hurting nonworking women in one-earner couples.
- Establishing a familywide Social Security benefit and sharing it equally between spouses would eliminate any disparity in earnings.
In the end, policymakers have to decide whether to make changes to Social Security in response to society's current unfairness or to work harder at solving those inequalities elsewhere. Regardless of which course policymakers choose, women and men are likely to continue to face very different challenges in planning for their retirement years long into the future.
