Women live longer than men and generally rely on Social Security for more of their retirement income so reductions in Social Security benefits hit them harder and affect them for a longer period of time.
Last week, Federal Reserve Chairman Ben Bernanke joined the chorus of yeas for an economic stimulus plan to get “money to low- and moderate-income people.”
One very simple way to put thousands of dollars into the pockets of hundreds of thousands of deserving women isn’t part of that discussion.
The economy needs a shot in the arm and a fix for a massive injustice dramatically impacting women in our Social Security system. As the administration works on its economic plan, we suggest taking a look at plans already introduced in Congress to eliminate two Social Security inequities.
The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) unfairly reduce or eliminate Social Security benefits for many retired public employees. These public servants are blocked from rightfully receiving their benefits due to these two arcane, but powerful provisions.
For example, under the GPO, if a retired government employee outlives a spouse, the Social Security Administration calculates what two-thirds of the surviving retiree’s pension is, and then subtracts it from the benefit to which he or she would normally be entitled. Obviously, this results in a vastly lower Social Security check or – for the vast majority of women– no Social Security benefit at all.
The victims of GPO are largely women who retired as government workers and whose husbands worked in the private sector. In 2002, 75 percent of the people receiving the fully or partially offset benefits were women, with 66 percent of the women receiving absolutely nothing. Annually, about 300,000 women are affected by benefit reductions close to $444 a month or $5,300 a year – the difference between retirement well-being and poverty.
Like GPO, the Windfall Elimination Provision affects only those who worked for the government. There is one additional proviso – the worker had less than 30 years of substantial earnings covered by Social Security. (Remember it only takes 10 years of substantial earnings to qualify for Social Security.)
Without getting into the math, suffice it to say that for affected workers, WEP significantly lowers Social Security’s income replacement rate for retirement benefits. This lower replacement rate ultimately reduces the Social Security benefit. This means workers who qualify for both Social Security and for a government pension get lower benefits than someone with the exact same Social Security earnings history and pension benefits in the private sector. Because women spend less time in the work force and earn lower wages, WEP has particular ramifications for their retirement well-being.
Women live longer than men and generally rely on Social Security for more of their retirement income so reductions in Social Security benefits hit them harder and affect them for a longer period of time. In fact, women age 65 are projected to live at least four years longer than men and on average they receive half of their annual income from Social Security compared to 33 percent for men.
The pundits argue that Social Security benefits must be cut, and it is true that the program faces a financial squeeze in the future that should be addressed in the present. But all of this talk – about reducing Social Security benefits – glosses over the fact that GPO and WEP have been reducing benefits for some time for elderly women who can least afford it. The inequity of the current situation – and the disproportionate effect on women – is clear.
The cost of eliminating WEP and GPO is small in comparison to the long-term financial deficit the program faces. In fact, among the various bills to either modify or eliminate WEP and GPO, the cost is less than 0.1 percent – not 10 percent, but one-tenth of a percent of payroll taxes collected and a fraction of the $150 billion starting point for the stimulus plan.
Perpetuating these policies is a drain on the economy. The current stimulus debate presents an opportunity to rectify this injustice and get money into the purses of women who will spend it on the food, clothes and medicine they need. This fix does more than any one time check for a few hundred dollars. It gives hundreds of dollars to thousands of women every month for the rest of their lives.
And yes, Mr. Bernanke, these women are low- and moderate- income.
Teresa Heinz Kerry is chairman of the Heinz Family Philanthropies. Jeffrey Lewis is the president and can be reached at firstname.lastname@example.org