“The Family” in Social Security: Entrenched Norms and Prospects for Transformation

Part III: Options for Addressing Social Security’s Inadequate Coverage for Certain Family Types

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Part III: Options for Addressing Social Security’s Inadequate Coverage for Certain Family Types

The foregoing sections of this paper have demonstrated that while Social Security’s initial design may have suited many families in the 1930s, the program has responded slowly to changing demographics and social trends. This section will explain how the program’s hesitant liberalization has made the program less effective and supportive for today’s families. Specifically, the program shortchanges families that are not the normative heterosexual marriage preferred under the current Social Security system. As in many large, bureaucratic enterprises, inertia within the Social Security program has resulted in a system that is unresponsive to change and reflects longstanding biases against nontraditional families. Given the preference for two-parent, single breadwinner families, families that deviate from this ideal are disadvantaged. These include dual-earner families, families that experience divorce, as well as cohabitants and their children. After exploring the inequities that these groups face under today’s Social Security system this section will propose policy approaches for reform.

  1. Dual-Earner Couples and Divorced Families

Johnny and Gina are married with three kids. Both of them work – Gina works at a diner earning $30,000 per year and Johnny used to work on the docks, but when his union went on strike he became a truck driver, and now earns $30,000 per year. Their children spend their days at school or in daycare. Gina and Johnny pay $620 a month in Social Security taxes. Ruth and Peter live next door to Gina and Johnny. Peter is an adjunct professor at the local university and earns $60,000 per year. Ruth volunteers, cares for their two young children, and plans to be a homemaker, at least until their children leave home to attend college. Ruth and Peter also pay $620 a month in Social Security taxes on Peter’s income. At retirement, Johnny and Gina will receive less retirement income ($2027 per month) than Ruth and Peter ($2220 per month) despite the fact that they earned the same amount as their next-door neighbors and paid an equivalent amount of Social Security taxes. In the event that either Peter or Johnny dies in old age, this inequity would also carry over to the women’s widow’s benefits. Ruth would receive Peter’s full benefit, but Gina would go on receiving only her individual entitlement since it would be equivalent to what Johnny’s was. While Ruth would experience a 33% deduction in her standard of living when she was widowed, Gina would lose half of her income when Johnny died. Likewise, if either husband were to die young, Ruth and her children would receive larger survivors’ benefits than Gina and her kids. The only potential area in which Gina and Johnny would experience an advantage over Peter and Ruth is if the couples were to get divorced or if either wife was to become disabled or pre-decease her husband. With her own earning record, Gina would likely be better equipped to care for herself and her children than Ruth in the case of divorce. By virtue of her participation in the workforce, Gina, but not Ruth, would also be able to provide Social Security benefits for her children and spouse if she died or became disabled.150
The situation described above outlines a longstanding bias in the Social Security system in favor of single-earner couples. Although couples like Johnny and Gina, who are both in the workforce, are on the rise, Social Security retains a preference for couples like Peter and Ruth. So called, “working families,” with two employed spouses actually constitute the majority (53.7%) of American families.151 Merely 18.7 percent of all American families are “traditional,” in which only the husband is employed.152 In 1997, 70.7 percent of married American mothers with children under the age of 18 were in the labor force.153 The prevalence of working families is not a wholly new phenomenon. For instance, it was thirty years ago, in 1975, when a majority of American mothers with school-age children first held jobs outside of the home.154 Although familial norms have certainly changed since Social Security’s inception, the program still operates in favor of an increasingly uncommon traditional family form. The ways in which Social Security family benefits prefer single-earner couples are pervasive and varied.

Under the Social Security retirement benefits plan, the spouse of an insured worker can claim benefits on their own individual account (built from their employment) or on their spouse’s account.155 Although any spouse is eligible for a spousal benefit156, working spouses receive their own benefit or a spousal benefit based on 50% their spouse’s earnings, whichever is greater.157 Spouses who do not work or who contribute less than 20% to the household income are “dually entitled” to receive benefits as a spouse or an individual. However, such spouses will always receive a larger benefit by taking the spousal benefit over their own benefit.158 People like Gina, who earned the same amount as their spouse, will receive no spousal benefit at all.159 This rule “enables a one-earner couple to receive greater Social Security benefits than a two-earner couple who has the same total earnings and who pays the same amount of payroll taxes.”160 This system rewards married couples with very little in terms of Social Security benefits for a second worker’s taxable earnings.161

At death, as at retirement, surviving spouses in single-earner families fare better than widows or widowers in “working families.” When one spouse dies, the surviving spouse at retirement age is entitled to receive the greater of (1) their own individual benefit or (2) the full amount of their deceased spouse’s Social Security benefit.162 Because of this rule, a surviving spouse of a one-earner couple will always receive a larger survivor’s benefit than a surviving spouse in a dual-earner couple even if they earned the exact same amount.163 This redistributive effect means that dual-earners are taxed above and beyond single-earner families and it is the single-earner families who reap the greater survivors’ and retirement benefits. In other words, when it comes to Social Security benefits, for dual-earner couples, you don’t always pay for what you get.

Despite this account of unfairness, dual-earner families do experience some advantages over traditional families. Sadly, these boons come only with unfortunate events like divorce, death, or disability. First, the effect of divorce can be especially grave for spouses who do not work. Divorced spouses (primarily women) who “stayed at home” may face greater barriers than working wives to earning sufficient income to support themselves and build an individual Social Security account. Additionally, since entitlement as a divorced spouse is contingent on a 10 year marriage, a large number of divorced spouses will not recover any dependents’ or survivors’ benefits at all. This 10 year minimum is especially problematic in light of the fact that “median duration of marriages ending in divorce [was] 7.2 years” in 1997.164 With that fact in mind, working spouses are probably better off than non-working spouses since they can always count their working years to their eventual Social Security benefit. Likewise, a working spouse is constantly building earnings credits that can benefit his or her family in the event of death or disability.

Lest we conclude this discussion of inequality between single and dual earner families too soon, it is important to recognize how the variables of gender and race further complicate the picture. First, since men tend to earn more than women, men are more likely to be primary earners. Women thereby constitute the vast majority of recipients of spousal benefits.165 With time, if the gendered wage disparity diminishes, this trend may wane but in 1996, 99% of retired individuals receiving spousal benefits were women.166 Secondly, the fact that men are usually the primary earners in a “working family,” by virtue of earnings disparities that favor men over women, also means that women’s wages are usually discounted or do very little to increase a woman’s individual retirement benefits.167 Although cases like Goldfarb insured bare gender equity so that women received the same right to building survivors’ insurance coverage for their dependents as men, judicial intervention did not change the underlying and unequal framework of gender and labor. Finally, the fact that women are usually more adversely affected by divorce than men also contributes to inequity under the system.

Inequalities between working and traditional families are also exacerbated along racial lines. Across all income levels, black couples are more likely to be dual-earners than white couples. Married black couples are also more likely to contribute roughly equal amounts to the household income than white couples.168 Since roughly equal wage-earning households receive (according to their input) the least amount in survivors’ benefits, black families tend to receive proportionally less from their Social Security contributions than white families.169 In addition to the different experience within marriage between black and white couples, blacks are less likely to be married in the first place than whites.170 Without the formal sanction of marriage, a partner is not eligible for dependents’ or survivors’ benefits. Although with proof of paternity a child of an unmarried couple may qualify for child’s benefits in the event of disability, death, or retirement, a long-term partner categorically cannot qualify for benefits without a connection through marriage. Therefore, lower rates of marriage in the black community probably also contribute to less Social Security coverage.

On the other hand, Social Security does include certain features that benefit people of color. For instance, Social Security benefits comprise more of the income for elderly people of color than for elderly White recipients.171 Also, Social Security’s “progressive” benefit formula gives lower-wage workers a larger percentage of their pre-retirement earnings than workers with higher incomes. This formula benefits people of color, especially women of color, since they tend to earn less than the majority of the country.172 This is not a result of extra generosity, but a reflection of relative poverty. Additionally, the existence of disability and survivors’ benefits may especially assist families of low-wage workers who are employed in physically arduous jobs.173 Since African-American men have shorter life expectancies than the rest of the male population, survivors’ benefits are more crucial for their spouses, who are primarily African-American women.174 Although all of these facts describe why Social Security may be especially important to people of color, the facts are not a panacea. Since Social Security benefits are often not large enough to raise a recipient out of poverty and because low-wage workers are less likely to have independent retirement savings or access to private pensions, the system still leaves plenty of insured individuals in poverty.175

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