Social Security expert: Modest changes may offer more protection
UW–Madison sociologist Pamela Herd has been a scholar of Social Security for more than a decade, but her most poignant lesson may have come from her own mother’s experience last fall.
Herd says her mom is an example of someone “who did everything right” in terms of retirement planning, dutifully socking away money in her 401(k) even as, while a single mother, she was paying for her daughter’s college education. Yet that track record doesn’t change the fact that, only weeks after retiring at age 67, the stock market took a 30 percent nosedive.
For Herd, nothing could better illustrate the enduring importance of Social Security, now 74 years removed from its origin at UW–Madison. It is exactly in times like these, when two of the three legs of the retirement stool —personal savings and pensions —start to wobble, the third leg of Social Security should be sturdy enough to safeguard America’s elderly population.
“I look at her and say, wow, how profoundly grateful I am for Social Security, as a child who would feel financially responsible for her if something happened,” says Herd, also an affiliate of the La Follette School of Public Affairs. “And I see how profoundly grateful she is that she has this income that is stable, that won’t change and that she can rely on.”
While her mother’s experience reflects how this program, born out of the Great Depression, is intended to work, Herd’s research focuses more on the exceptions to the rule. There are still core inequalities built into Social Security, especially as they relate to women recipients, and they tend to have the biggest impact on America’s most vulnerable populations.
Herd is part of a network of researchers funded by the Rockefeller Foundation developing policy proposals to improve the program. Her research focuses on why certain categories of women fare better than others with regard to benefits, and how certain circumstances actually conspire against the people who need Social Security the most.
For example, divorce can take a major toll on benefits. Women married for 10 years or more are eligible for spousal and survivor benefits, but women married fewer than 10 years have no such access. This policy tends to create big disparities along racial lines, Herd says.
“We project that in the next 30 years, about 80 percent of white and Hispanic women will qualify for these benefits, but only about 50 percent of black women will qualify,” she says. “These policies discriminate against black women because the policies are not tied to participation in the work force, they are just tied to getting married.”
Not only does being unmarried raise financial vulnerability, raising children takes a further financial toll. Women cut back their hours or stop working to raise children, and single parents invest most of their resources into their children’s well-being, rather than their retirement security. While raising children is one of our highest cultural priorities, it also increases the risk of poverty for many women.
“So one very simple solution,” Herd says, “would be to, instead of rewarding people through Social Security for getting and staying married, we reward people for raising children —kind of like a child income tax credit that would apply to Social Security benefits.”
Herd adds: “Most people recognize that raising children is a huge contribution that women make — also men, but more proportionately women. We need to think about policies that can help us along with this shared value.”
The stakes are too high to continue to place so much emphasis on marriage as a key to financial security. While the poverty rates of retired Americans is relatively low at about 9 percent, the rates for single black elderly women living on their own can be as high as 60 percent in some communities, she says.
For the average retiree in America, Social Security makes up about 40 percent of their total income, with the majority still coming from the personal savings and pensions. And despite widespread rhetoric in recent years that the baby-boomer demographic would break the back of Social Security, Herd argues that the program remains on solid financial ground.
Social Security is paid for with roughly 14 percent of payroll taxes, 7 percent of which is from the employer and 7 percent from the individual. To fix fiscal problems that are projected all the way out to 2080 would require about a 1 percent increase in payroll tax, she says. But more likely fixes would include a slight raise of the retirement age, a slight cut in retirement benefits, or removal of a small “minimum benefit” payout — all things that were implemented successfully the last time Social Security faced difficulty in 1982.
“If your goal is the financial security of older Americans, then this program has by all means been extraordinarily successful,” Herd says. “We’re focusing on some gaps within the system.”
