[Congressional Record Volume 144, Number 101 (Friday, July 24, 1998)]
[Senate]
[Pages S8985-S8987]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                SOCIAL SECURITY AND THE GENDER/RACE GAP

  Mr. GRAMS. Mr. President, in my continuing series of statements on 
the troubled Social Security program, I have discussed the history of 
Social Security, the program's looming crisis, and the old-age 
insurance reform efforts undertaken by other nations.
  Today, I want to discuss an aspect of Social Security that often gets 
distorted in the reform debates going on throughout this great nation.
  It is the issue of how the current Social Security system puts women 
and minorities at a greater financial risk and disadvantage than other 
retirees face today.
  We must address the questions of how these Americans will fare under 
any reform of the current system, so we can empower them with the 
ability to have a more secure retirement future than that which Social 
Security promises today.
  First, it is essential to understand why these Americans were put at 
a disadvantage in a system supposedly established to help them. To do 
that, we must go back to the beginnings of the Social Security program.
  When Social Security was first enacted in the 1930s, the 
discriminative elements were inherently built into the system. 
Professor Edward Berkowitz of George Washington University has done 
excellent research on this subject.
  According to his studies, policy makers taking part in the first 
Social Security advisory council freely indulged in racial and sexual 
stereotypes. They made a widow's benefit equal to only three-quarters 
of the value of a single man's benefit.
  Their rationale for the decision was, according to one member, that a 
``widow could look out for herself better than the man could.''
  Douglas Brown, the chairman of the advisory council, even suggested 
that a single woman could adjust to a lower budget ``on account of the 
fact that she is used to doing her own housework whereas the single man 
has to go to a restaurant.''
  Another example of Social Security's inherently discriminative nature 
is that domestic workers were not covered by Social Security when the 
program was set up.
  One early policy maker explained that it was difficult to collect 
contributions from the ``colored woman . . . who goes from house to 
house for a day's work here and a day's work there.''
  Clearly, things were different then.
  At that time, most women stayed home, and only 6 people out of 10 
reached age 65.
  Despite the fact that the Social Security program provided an 
opportunity to redistribute income from wealthier individuals to low-
income retirees--an effort to help provide assistance to those less 
fortunate--the inequality of women and minorities was never adequately 
addressed.
  In fact, the disparity has grown under the current Social Security 
system.
  The profile of today's retiree is quite different than it was in the 
1930s and continues to change.
  More women today are working outside the home, less than half of 
America's working women receive pensions today, life expectancy is 
increasing, while minority populations continue to grow in number.
  But our Social Security system has failed to make the needed 
adjustments. As a result, financial gender and racial gaps are growing 
larger for those retired or nearing retirement. Women and minorities 
are suffering under the current Social Security system.
  For women and minorities, average income continues to remain low. 
This means there is less money available to personally save for one's 
own retirement.
  Furthermore, payroll taxes have increased 36 times over the last 27 
years, forcing families to squeeze more out of less take-home pay.
  According to the Heritage Foundation, today's payroll taxes consume 
as much of the family budget as do costs for housing, and nearly three 
times more than annual health care.
  So it is not surprising that growing numbers of women and minorities 
are becoming increasingly dependent upon their Social Security checks. 
If we are going to successfully raise their quality of life once they 
reach retirement age, we must begin to look outside the proverbial box 
today.
  Mr. President, I would like to begin by focusing on women, since they 
are disproportionately dependent upon Social Security. There are a 
number of factors that create this reliance.
  While we can rally around the idea that our Social Security system is 
supposedly ``gender neutral,'' issues such as income levels, years out 
of the workforce, and marital status all impact a woman's retirement 
security.
  At the forefront of the issue is the fact that women tend to outlive 
men, just as they have been doing for the past 500 years. With today's 
retirees beginning to collect benefits at age 65, it is not unlikely 
for a woman to spend nearly one-fourth of her life on Social Security.
  And because women statistically receive lower benefits than men, 
typically have fewer saving, and are less likely to have a pension, it 
means they are forced to live longer on less.
  We are finding that a retirement security system that was termed a 
success in the past threatens future female retirees the most.
  Over the past few decades, women have made great progress in the 
workplace.
  Today, there are more women working at higher-paying jobs. But 
according to the General Accounting Office, the labor force 
participation rate for women aged 25 to 34 remains at 75 percent, and 
only four-fifths that of men.
  Further complicating the issue is that when women do work, 25 percent 
work part-time. There are a variety of reasons for this, including the 
fact that women are more likely to take time off for family reasons.
  However, it leads to fewer opportunities for benefit coverage--
including pensions--and lower earnings, and ultimately, less reserve 
money to save for themselves and their future.
  Today, the average female retiree earns approximately $621 per month, 
compared to her male counterpart at $810 per month.
  The formula used to calculate benefits for women, as well as men, 
assumes the highest 35 years of earnings. Today, nearly 75 percent of 
women earn $25,000 or less. For those years an individual is out of 
work--for instance, taking time off to raise a family or care for an 
ailing loved one--the salary is counted as ``zero.''
  In addition, any length of time less than 35 years of working count 
as ``zero'' earnings. As a result, the median number of years with 
``zero'' earnings for workers turning 62 in 1993 was 15 years for 
women, compared to only 4 years for men.
  This means nearly half the years being considered in the benefit 
formula for women are counted as ``zero'' earnings years and the 
average salary for earning years is $25,000 or less.
  Currently, there are some advocating the benefits formula be raised 
to 38 years.
  While the number of working women continues to grow, the Social 
Security Administration's own projections reveal that only 30 percent 
of female retirees in 2020 will have 38 years of earnings--compared to 
about 60 percent of their male counterparts.

[[Page S8986]]

  This is extremely detrimental to unmarried women who either divorced 
before 10 years of marriage or never married, because their benefit 
calculations are exclusively dependent upon their own earnings 
calculations.
  And currently, the poverty rate for elderly divorced, separated, or 
never-married women is the highest of any group--nearly 30 percent.
  But marriage in and of itself doesn't always improve a woman's 
situation.
  In fact, 64 percent of all elderly women living in poverty are 
widows. This is because when a spouse dies, the widow's benefits are 
reduced by up to one-half. Meanwhile, statistics show that to live 
alone, a widow requires at least 75 percent of what it costs as a 
couple.
  Furthermore, if a widow has yet to reach age 65 when a spouse dies, 
and has no dependent children, she is not entitled to any survivor 
benefits. Thus, without private savings, the benefit reduction leaves 
most widows financially unprepared for retirement.
  Let me share with you the real story of two women. Susan of Colorado 
made an annual income of $20,000, and she paid the 12.4 percent payroll 
tax into the Social Security system from each of her paychecks while 
raising kids, sending them to schools, and seeing them married.
  But when Susan died at age 64, she left nothing from Social Security 
for her children.
  Joan of New York, a 46-year-old homemaker, never worked outside the 
home after being married, and instead chose to raise her children.
  Her husband was self-employed, and paid a 15.3 percent payroll tax 
into the Social Security and Medicare programs. When Joan's husband 
died of a heart attack at age 49, all she received from Social Security 
was $200 for his funeral.
  Since she has no skills to help her find a job, no savings, and gets 
no help from Social Security despite the thousands and thousands of 
dollars her family poured into the system, Joan is now helpless and 
suffering from depression.
  I then ask if the system is so harmful to women, why are there so 
many out there arguing against change? How can we sit back and hold 
women hostage to a program for nostalgia's sake?
  I would argue we cannot, and it is our job to ensure that every woman 
has an opportunity to live out her golden years in financial security. 
And I agree we must dispel the ``myths'' that threaten efforts to 
improve women's retirement security.
  One fact-based ``myth'' is that because women may feel less confident 
about their retirement security, we will be unable to change it for the 
better.
  First and foremost, it is critical to ensure that current and future 
beneficiaries remain unaffected by any change to the Social Security 
program if they choose to stay with the traditional system. We made a 
covenant with our older Americans and have a responsibility to protect 
them from any uncertainty during the transition from a pay-as-you-go 
system to a future funded one.

  But we also have a responsibility to future beneficiaries to clearly 
notify them that without dramatic change to the system, they will not 
receive adequate benefits from Social Security.
  They are more likely to see reductions in alternative means of 
savings as a result of the economic impact of the system going 
bankrupt. Because women are living longer than men, they are most 
likely to experience the hardship longer.
  As Members of Congress, we owe it to women to preserve and improve 
their retirement security.
  The next fact-based ``myth'' is that because women are less likely to 
take financial risks, their earnings may be less than their male 
counterparts under a market-based system.
  It is true, statistically, that women have historically invested more 
conservatively than men. Furthermore, women may have less invested in 
outside accounts than men.
  But it is interesting to note that according to the National 
Association of Investors Corporation, all-women investment clubs earn 
higher returns than all-men clubs do. Who says women cannot make 
financial decisions?
  Even under the most conservative investment strategies, such as 
super-safe U.S. Treasury Bonds, women fare better than they would under 
the current system.
  According to a recent Cato Institute study, if women retiring in 1981 
were provided the opportunity to invest their savings in personal 
retirement accounts with earnings sharing, the average single woman 
could expect to receive 57.9 percent more in retirement benefits and 
the average female divorcee could expect 67.2 percent more.
  The average widow could expect 96.5 percent more, nearly double the 
benefits than under Social Security. The average wife could expect to 
receive 207.5 percent more than under the existing Social Security 
program.
  While the National Center for Women and Retirement Research has found 
women may feel less confident about making financial decisions, there 
is no reason to believe women lack the skills to understand the 
challenges and long-term benefits of investments. Pension experts agree 
that education is a critical factor in helping individuals make better 
investment choices, and the GAO has found evidence that investor 
education can help to alleviate the problem.
  So even though some advocates of the status quo argue men may fare 
``better'' than women under a market-based system, I believe they are 
missing the point that both would fare better than they do under the 
current system. It appears as though some would prefer ``equality'' in 
misery than the potential for some ``inequality'' at a much higher 
standard of living for all. Furthermore, there is nothing to show that 
women retirees could not fare better than men, even though, 
statistically, they are not doing so now under the current system.
  One of the most troubling fact-based myths is that the current system 
protects women from running out of benefits before they die more than a 
personal retirement account would. The premise is that since women live 
longer than men do, they will need benefits longer. Under the current 
system, retirees are promised benefits until death, even though on 
average, they exhaust their contributions within the first five years 
of retirement. In a system of personal retirement accounts, benefits 
would be based upon one's own contributions, the age at which one 
retires, and the performance of their account.
  It is true that women, again, tend to outlive men. And yes, it is 
true that an independent study found women are more likely than men to 
spend a lump sum distribution from a defined contribution plan. 
However, that should not imply that women could not be trusted with a 
private savings account. In fact, that same study showed women are 
equally as likely as men to rollover lump sums from a defined benefit 
plan into an IRA, or to save and invest the money. We must also 
remember these studies are based upon the current situation, where 
these men and women anticipate uninterrupted benefits from Social 
Security.
  In the future, however, if the current system remains unchanged, a 
maximum of 75 percent of the current benefit level will be available to 
retirees. In other words, future retirees could expect to lose 25 
percent of retirement benefits. Once the IOU's that now make up the 
Social Security trust fund begin being cashed in, the economy will 
suffer, employment rates may suffer, taxes may need to be raised, and 
the ability for an individual to prepare for the reduction in Social 
Security benefits will be significantly reduced.
  Mr. President, I would say to those arguing for the status quo that 
urging women to hold out for some future promise of benefits that are 
not likely to be there is folly. And in fact, holding out will likely 
leave women increasingly dependent upon their benefits at the same time 
those benefits are being reduced.
  But as I mentioned earlier, women are not the only individuals being 
misled by some in the debate. Race continues to be an important factor 
in determining the retirement security for some Americans. Retirement 
studies similar to those that focus on women have looked at minority 
workers, and I would like to briefly touch on the Hispanic and African-
American populations.
  By all accounts, the Hispanic population is relatively youthful. 
However,

[[Page S8987]]

as the Social Security system approaches insolvency and the rate of 
return on these workers' investments declines, Hispanics will be forced 
to bear a disproportionate share of that growing financial burden. The 
Census Bureau estimates that by the year 2050, Hispanics will make up 
nearly 25 percent of the work force, compared with only 11 percent last 
year. This will come at the same time tax rates, if the system stays 
the same, will need to be increased to cover the bankrupt trust 
fund. Some have estimated that the tax rate increase would have to be 
nearly 40 percent by then to cover benefit expenses--40 percent first 
for Social Security expenses. Such a tax burden promises to severely 
hamper the ability of young Hispanics to save for themselves.

  But what do all those numbers mean? The Heritage Foundation did a 
model of a Hispanic community. They assumed 50,000 people lived there--
all families of four made up of dual- income 30-year olds with two 
kids. By forcing these families to throw their payroll taxes into the 
Social Security system, the analysts estimated the community, as a 
whole, lost $12.8 billion in 1997 dollars over what it could have 
earned had they invested in a conservative portfolio. This small 
minority community, in effect, lost nearly half--this is just this 
small community--lost nearly half what the federal government spends on 
food stamps or education for this entire Nation!
  But if an Hispanic couple from that community were able to take the 
dollars they would be required to pay into the current Social Security 
system and instead invest them in a portfolio, the outcome would have 
been remarkably different. Under the current system, the couple could 
expect about $420,000 in exchange for a lifetime of contributions. But 
with a conservative portfolio comprised of 50 percent U.S. Treasury 
Bonds and 50 percent blue chip equities, that same couple could nearly 
double their benefit to $767,000 in today's dollars. Treasury Bonds 
alone would yield over $100,000 more in benefits. That means this 
family would have enough to convert their benefit to an annuity paying 
out exactly what Social Security promised and still have more than 
$200,000 left over for any expenses --long-term health care or even 
just passing along to their children--something impossible under 
today's Social Security system.
  The findings within the African-American community are similarly 
stunning. Like single Hispanic males, single African-American males 
have a lower life expectancy and are especially disadvantaged by the 
current Social Security system. Although the system aims to transfer 
funds to low-income individuals, these minorities are particularly hard 
hit.
  According to the Heritage Foundation, a low-income, African-American 
male born after 1959 can expect to receive less than 88 cents back on 
every dollar he contributes to the Social Security trust fund. This 
translates into a lifetime cash loss of some $13,377--a loss these 
individuals can hardly afford Not a gain on their investment, but an 
actual loss on their investment. If we allowed that same male to invest 
his Social Security taxes in T-bonds, he would receive a post-tax 
increase in his lifetime income of nearly $80,000.
  African-American women are similarly disadvantaged by the current 
system. Enabling a 21-year-old single mother to invest her payroll 
taxes into low-risk/low-yield government bonds, rather than the Social 
Security system, would more than double her rate of return. That means 
this woman could expect to get back $93,000 more, after taxes, than she 
would under the current system. And with a little risk, the numbers 
could even more than double.
  Mr. President, many solutions have been proposed to stave off the 
impending Social Security trust fund crisis: raising retirement ages, 
increasing payroll taxes, decreasing benefits--the list goes on. But we 
cannot forget that those choices will only exacerbate a problem that is 
already becoming progressively worse. Such proposals put at greatest 
risk those the system was aimed to help the most.
  When our Founding Fathers created this great Nation, they declared 
each American had the right to life, liberty, and the pursuit of 
happiness. If we continue on our present track with the current Social 
Security system, we are truly undermining those principles. Sentencing 
women and minorities to a retirement life of poverty is unfair. The 
threat of raising payroll taxes by nearly 40 percent to fund a bankrupt 
retirement system threatens to steal away our children's liberty. And 
turning our backs on the reforms we have the power to undertake--
reforms that will truly revive our ailing system--steals away every 
American's right to pursue happiness. Mr. President, rather than 
scaring women and minorities away from the options we have before us, 
let us give them the freedom that comes with personal retirement 
choices, the peace of mind that retirement security provides, and the 
ability to lead a better life in retirement than the one they are being 
promised today.

                          ____________________