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

Women and Social Security: Fairness and Well-Being under Current Law and Proposed Reforms. Melissa M. Favreault The Urban Institute May 16, 2008. Social Security has greatly reduced aged poverty. Source: U.S. Census Bureau (2006).

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

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  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 men’s compared to 77.3% nationwide • Nationwide, black women also relatively high fractions: 88.2% of men’s Source: U.S. Census Bureau (ACS 2006 data)

  13. 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/statcomps/income_pop55/2004/ • Social Security Administration. 2007. “OASDI Beneficiaries by State and ZIP Code, 2006 http://www.socialsecurity.gov/policy/docs/statcomps/oasdi_zip/2006 • U.S. Census Bureau. 2006. “Historical Poverty Tables.”http://www.census.gov/hhes/www/poverty/histpov/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

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