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 Guest Commentary
May 17, 2005
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Women Should Be Especially Wary of Any Privatization of Social Security
The Honorable Carolyn Maloney
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On April 19 of this year, we observed Equal Pay Day, a day that indicates just how far into each year a woman must work to earn as much as a man earned in the previous year. Because women on average earn less than men, they must work longer for the same pay. ...
Social Security reduces this inequity for women in retirement in a way that private accounts will not.
It is no surprise that women are particularly wary of President Bush's proposed private accounts for Social Security. Women are more likely than men to depend on Social Security for their financial well-being, not only in retirement but throughout their lives, through survivorships and disability benefits.
The vast majority of Social Security recipients are women, representing almost 60 percent of all beneficiaries age 65 and over. And an even higher percentage of women that are seniors and are in older age groups are on Social Security. Unfortunately, women still make less money than men, about 76 cents on the dollar, and usually work fewer years than men. Social Security provides proportionately higher benefits for lower earners; so the progressive benefit structure counteracts the pay and pension gaps that women experience during their working years. ...
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Women typically earn about 24 percent less than men. Since their lifetime earnings are lower than men's, they receive smaller Social Security benefits than men, but the gap is narrower. The typical woman's Social Security benefit is only 17 percent lower than the typical man's, narrowing the gap by almost one third. In contrast, private accounts would preserve the wage gap. The typical woman would accumulate 24 percent less in her private account than the typical man.
By taking time out of the workforce to raise children or care for ailing parents or spouses, women typically lose more than a decade of earnings. ...
A man born today with average earnings throughout his career who diverted 4 percent of his earnings into a private account would accumulate about $204,000. A woman who earned 24 percent less each year would only accumulate about $155,000. If she took 10 years out of the workforce, her private account accumulation would drop to about $112,000, just over half what the typical man would accumulate. If she only took 5 years out of the workforce, her private account accumulation would drop to about $132,000, 35 percent less than what the typical man would accumulate.
Women are also more likely to work part-time, less likely to be covered by an employer-sponsored pension plan, and more likely to work in low-paying fields. As a result, they have lower lifetime earnings, making Social Security a larger portion of their retirement income.
Because women earn less, they would have less to invest in private accounts than men and more to lose from the substantial benefit cuts under the kind of privatization plan the President supports. The President's preferred plan requires cutting guaranteed benefits by more than 25 percent, even for middle class workers, and even for those who choose not to invest in private accounts. Meanwhile, those that do choose a private account also would be hit with a privatization tax of 70 percent or more of the value of their account, which would be deducted from their Social Security benefits upon retirement. Because Social Security helps level the playing field for women, cutting their benefits would make it even harder for women to achieve financial security in retirement.
Without Social Security, more than half of white and Hispanic senior women and almost two-thirds of African American senior women would live in poverty. Also, because women live longer, whatever they are able to save in private accounts would have to be stretched to cover more years in their senior years. Unlike private savings, you cannot outlive Social Security, and the benefits are not eroded over time by inflation.
The President is having a hard time convincing the American people, especially women, that private accounts would be better for American families than Social Security, and rightly so. It has touched so many of our lives. Social Security is an insurance program, not an investment plan, and private accounts would destroy much of the insurance value of the program.
The President's private accounts pose a serious threat to the future economic security of all Americans. Private accounts would cut Social Security's funding, weaken the program, and make its financial problems worse, not better. Federal Reserve Chairman Alan Greenspan told Congress that private accounts would do absolutely nothing to improve Social Security's solvency. The government would have to borrow nearly $5 trillion over 20 years to fund private accounts. That would increase interest rates, harm our economy, and lead to large tax increases.
Democrats want to work with President Bush to strengthen Social Security for the long term, but we need to get it right. Clearly, women are disadvantaged when facing retirement. They are paid less and work fewer years than men, on average. Any reform that is enacted must keep the safety net intact. Our mothers, our daughters, and our granddaughters are counting on us.
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Carolyn Maloney, a Democrat, represents the 14th Congressional District of New York in the U.S. House of Representatives. The above commentary has been adapted from a speech Rep. Maloney delivered on the floor of the House, May 16, 2005. To contact her, Click Here.
The above column has been distributed by PoliticsOL.com.
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