Social Security is a Women’s Issue

Posted: Nov 01, 2006 4:56 PM

When politicians and commentators talk about “women’s issues,” they’re typically referring to issues like pay equity, abortion, education and healthcare. It’s assumed that women—who still tend to take on the bulk of responsibility for raising families—are more focused on those area that most directly impact a family’s safety and well being.

Polling data tells a different story. In the 2004 election, when deciding whom to vote for, women’s top priorities were the situation in Iraq, the war on Terror, and the economy—the exact same issues that were men’s greatest concerns. This suggests that all issues are women’s issues, and women, like men, are just trying to do what’s best for the country.

Regardless of whether one believes women are truly more concerned about close-to-home issues or that women, like men, are simply concerned citizens, Social Security should be a top priority in this election.

Social Security is a program that affects all of us. When people think about Social Security, they first think of the elderly Social Security recipients receiving monthly checks. But Social Security also affects today’s workers: Social Security is the largest tax that most Americans face, claiming nearly one of every eight dollars each workers earns.

Social Security even affects children: Social Security is accumulating a massive debt; the systems total unfunded liability is an unfathomably $13 trillion dollars. Today’s children will face an incredible burden, with payroll tax rates climbing 50 percent during the next forty years, to meet Social Security’s obligation.

Women should be particularly concerned. Women live longer than men and are more dependent on Social Security’s income during retirement. They also tend to move in and out of the workforce, which means they have less of an opportunity to participate in other investment vehicles.

This means that women have the most to lose if Social Security is allowed to continue its race toward financial ruin. In just ten years, Social Security will begin running a deficit: the government will collect less in Social Security payroll taxes than it needs to payout in benefits. That means that the government will have to find revenue in addition to payroll taxes to pay all of Social Security promised benefits. When that day comes, Congress will have an unpleasant choice: raise taxes, slash spending on other government programs, or cut benefits on current retirees.

Social Security’s looming financial crisis isn’t the only reason why women should care about Social Security reform. More fundamentally, Social Security isn’t a good investment or a well-constructed retirement program for the 21st century. Young workers paying into Social Security today can expect an abysmal return on their investment of just one or two percent—and that’s assuming that Social Security is able to pay all of its promised benefits. Because women often take years out of the workforce to care for family members, many who return to work will pay thousands of dollars in Social Security taxes without accruing any additional benefits.

Social Security’s problem is structural. Social Security isn’t a savings vehicle and doesn’t take advantage of the powerful forces of investment and interest that fuel other popular retirement plans like the 401Ks that many Americans now depend on in retirement.

Social Security’s system of financing is often called “pay-as-you-go,” but “tax-and-spend” is a more accurate description of how it works. Workers pay taxes today and that money is immediately spent on benefits for current retirees. The problem is that with people living longer and having fewer children soon there won’t be enough workers to support benefits.

The problem gets worse with every day that passes. Policymakers must act quickly to put Social Security on more secure financial footing. This requires that savings becomes an integral part of the Social Security system. Young workers should have the option to use a portion of the money that they currently pay in taxes to fund an account (much like a 401k) which would be their private property and would be available to help pay a portion of their benefits when they reach retirement.

Social Security’s long-term problems are easy to ignore when compared to issues that confront us regularly, like the situation in Iraq or problems in the healthcare system. But women should be warned: Social Security’s problems also require immediate attention. Each day that passes we miss the opportunity to accrue real savings and let Social Security take a step further toward insolvency.