The extraordinary expansion in the level of Social Security benefits paid during the last decade has been supported primarily by the Social Security taxes paid by and on behalf of married women who work.
Today, about 55 percent of married women, over 25 million, are in the labor force. Like men, they pay Social Security taxes on an individual basis. But benefits are "awarded," to use the government's terminology, on a family basis. Thus, both married women who work and the much smaller group of men and women who never marry receive smaller benefits related to taxes than the married "head of household" with a dependent spouse.
Another inequity of the present rules is that the married couple, where both husband and wife work, receives on the average smaller benefits related to taxes paid than if the family income had been the same but the wife had never worked. The benefits of two-worker retired famillies average about 17 percent less than those of a one-worker family with the same income covered by Social Security.
The level and precise differential depend on the percentage share earned by each spouse. The benefits of the survivor of a two-worker family average about 25 percent less. Yet the taxes paid by the families being compared are the same. Further, in families where earned income is above the maximum base to which the rate is applied ($32,400 in 1982) two-worker families pay a greater tax.
It is estimated that the rule of entitlement to only one benefit, either a spouse's or an earner's, whichever is the greater, has saved the Social Security system about 3.5 percent of long-run payroll. This is a considerable sum when one realizes that the latest estimate of the long-run deficit is 1.81 percent of the payroll. (Obviously, no responsible economist advocates that working married women should receive both benefits in full.)
Five million more women than men joined the labor force from 1970 to 1981, 3 million more women than men from 1960 to 1970. Most of these women are married. Today, 65 percent of all women are in the labor force, and over 90 percent work a substantial part of their lifetime.
It is argued today by Robert Myers, actuary and current executive director of the 1982 National Commission on Social Security Reform, that there is no sex discrimination under the Social Security program "per se," but rather a distinction between one-worker and two-worker families.
But in fact such labels often do hide sex discrimination. President Reagan promised during the 1980 campaign and after taking office to try do do something about "the discrimination against working wives in Social Security."
The National Commission on Social Security Reform, which reports this December, focuses correctly on the program's financing problems of the 1980s. But it should also address the system's needed long-run structural reform, and therefore should be making some proposals to at least reduce the size of the inqequity against working wives.
The spouse's benefit for non-working wives is a "windfall" because there is no reduction in the worker's benefit as there is in almost all private pension plans when the worker elects to receive a spouse's benefit. Today a surviving spouse, and there are in many cases more than one surviving spouse per earner, may receive at age 60 a benefit based on the deceased husband's hearings; furthermore, that benefit does not end with remarriage.
It is difficult to justify (as is being widely proposed) later retirement ages for workers than the current ones -- 62 for reduced and 65 for full benefits -- when survivors receive benefits at age 60.
To a degree, the system is "saved" because widows may receive only one benefit. Already, however, it is clear that the benefits of divorced women are on the average higher than those of all other women except those who have never married.
When I dissented from the 1974-75 report of the quadrennial advisory council on Social Security, I proposed a three-part program that still appears to be politically too costly. The proposal was to phase out over 30- and 50-year periods respectively the retired and surving spouses' benefits and simultaneously award two or three years of credits to a mother for each child born. The latter would make the mothers of large families who choose not to work after marriage eligible for Social Security benefits.
Today, over 90 percent of women work for several years during some period of their lives. Only 10 years of work and taxes are needed for eligibility for a "worker's" or primary benefit.
Although it may be politically too costly to phase out the non-working spouse's benefit, it may be, dollar-wise, too costly to retain the 100 percent widow's and widower's benefits. Two factors explain why spouses' benefits are absorbing a growing percentage of total benefits. The first is the rapidly increasing life expectancy of women as compared with men. The second is the incredible U.S. divorce rate, the highest in the world. The latter can be linked to the reduction from 20 to only 10 years in the marriage requirement for the non-earner benefits. In several cases, three survivor's benefits at or near 100 percent are being paid on one primary Social Security earnings account.
Because of the high divorce and remarriage rates, it is becoming an increasing administrative problem to pay Social Security benefits on a family rather than an individual baisis. If the latter is not politically viable, neither is the absence of redress for working wives.