In a time of economic hardship, Social Security is a lifeline that keeps hundreds of thousands of women from falling into poverty. In 2010, an astonishing 46 percent of elderly unmarried women and 58 percent of elderly unmarried women of color relied on Social Security for 90 percent of more of their total income. Policy experts have long known that Social Security is vitally important to everyone in the U.S. — but it is especially critical to the financial security of women.
That’s partly because women outlive men by an average of 2.4 years. Another reason, frequently overlooked, is that women also have significantly less savings to begin with, thanks to working a lifetime at unequal pay in jobs that often lack benefits such as health care, pensions or even 401(k) plans. Women on average are paid just 77 cents to the dollar paid to men. For women of color the disparity is even worse: African American women are paid 69 cents, and Latinas 59 cents, to the dollar paid to white males. At 59 cents to the dollar, who can put money away for retirement?
On average, only 28 percent of women age 65-74 receive pension income, whereas 42 percent of their male counterparts do. Even for women who do have pensions, theirs are usually smaller than their male colleagues’ because of the gender wage gap — compounded by a race-based wage gap for women of color — that follows women throughout their careers. Over a working career, the cumulative effect of the gender wage gap can total several hundred thousands of dollars for the average worker. For women in highly-skilled professions — where the wage gap is also found — the loss of income can be more than a million dollars.
Social Security has dramatically cut poverty among older women in recent decades: without it more than half of would be in poverty. Still, 12 percent of older women live in poverty; 15 percent of widows are at the poverty level. But for women of color, the statistics are even worse: in 2010, 26.1 percent of African American women and 21.4 percent of Latinas aged 75 and older were living in poverty, despite the fact that they were receiving Social Security.
Even if they are not living at the poverty level, many older women get by on very tight household budgets and often by the time they reach their 80s, they’ve exhausted their savings. Social Security is all the income they have. If their husbands have passed away by then, their income has shrunk as a result. Social Security retirement benefits are quite modest: women’s average yearly benefit was $12,155 in 2009 (compared to men’s $15,620). It’s hard to imagine what it would be like to live on little more than $1,000 income per month — especially if you have substantial out-of-pocket medical expenses as many elderly women do.
Despite that, some lawmakers want to cut those benefits. They would do this by using a stingier formula to calculate the cost-of-living adjustment measure, or COLA, the Chained CPI, which would reduce the individual benefit over time by as much as $672 a year for a woman at age 80. Doesn’t seem like all that much, but that amount could be worth 23 weeks of food. At age 95, the Chained CPI would reduce the monthly amount by about $100! These Scrooge-like conservatives also want to increase the retirement age to 67, a benefit cut that would have an especially harsh impact on those who work in physically demanding jobs or have a serious health condition.
Women must fight back against these draconian proposals, not only for our mothers and grandmothers but for ourselves as we will sooner or later be retiring. Towards that end the National Organization for Women Foundation, with the Institute for Women’s Policy Research and the National Committee to Preserve Social Security and Medicare are proposing a series of updates and improvements to Social Security in their new report, “Breaking the Social Security Glass Ceiling: A Proposal to Modernize Women’s Benefits.” We believe it is essential to bring Social Security into the 21st century when so many more women are juggling childcare, elder care and work outside the home. This is especially vital now that retirement savings and investments, along with housing values, have sustained serious losses thanks to the financial meltdown and slow-to-recover economy. Additionally, employment among older workers has declined and many older women and men are not adequately prepared for 20 more years in retirement.
Among the improvements that we suggest:
• An increase in the basic benefit for all current and future beneficiaries of five percent or approximately $55 per month;
• Critically important for women, provide Social Security credits for caregivers that would be calculated as imputed earnings for up to five family service years for a worker who provides care to children under the age of six or to elderly or disabled family members;
• Enhancing the Special Minimum Benefit for those who have spent most of their working lives in low-wage employment;
• Use the same rules for disabled widows and surviving divorced spouses as other disabled individuals in determining their eligibility for benefits;
• Achieve benefit equality for working widows, who shouldn’t be penalized simply because their spouses decided to retire early;
• Strengthen the Cost of Living Adjustment (COLA) which currently uses the Consumer Price Index (CPI) by switching to one that has been developed to address retirees’ living costs. This new CPI-E more accurately reflects the yearly increase in older people’s living expenses, especially their health care expenses.;
• Provide equal benefits for same-sex married couples and partners and extend to the children of these relationships the same benefits as children of heterosexual couples;
• Improve benefits for workers’ disabled adult children; and
• Restore the student benefit up to age 22 (currently reduced to age 18 or 19 if attending school) if that child is a full-time student in college or vocational school.
How to pay for these benefit improvements? Some politicians are claiming that we can’t afford to pay even current benefits, but that is not the case. Simple changes that we suggest in this report will not only cover the costs of these improved benefits but also reach the gold standard of 75-year solvency of the system. Here they are:
Scrap the Cap – Most importantly, we could eliminate the cap on wages subject to the payroll tax, currently set at $110,100, so that millionaires pay their fair share.
Adjust Payroll Tax Rate – We could also increase the Social Security contribution rate very gradually, by 1/40th of one percent over twenty years, significantly strengthening Social Security’s financial condition far into the future.
Treat All Salary Reduction Plans like 401(k)s – Right now, workers pay Social Security and Medicare taxes on their contributions to retirement accounts, but do not pay taxes on their contributions to flexible spending accounts, such as health care, transit and dependent care plans. Adopting this change produces revenue equal to about 0.48 percent of taxable payroll.
A number of other solutions to paying for benefit improvements and financing Social Security of the very long run have been advanced by others. It is clear that we have the ability to secure a livable retirement for both women and men in this country. We can also assure that persons with disabilities and dependent children of deceased or disabled workers are taken care of under Social Security.
Don’t let politicians who say that cutting the federal deficit is the most important thing tell you we can’t afford to strengthen and update Social Security. Women and their families need a modern, responsive — and guaranteed — social insurance program.