Social Security Biased, Panel Is Told : Retirement: The system discriminates against women and two-income couples, witnesses tell a House subcommittee.

The Social Security system, devised in the 1930s, discriminates against women and two-income couples, a House subcommittee was told Thursday. The panel’s hearing is expected to spur legislative efforts to overhaul retirement and pension laws.

Statistics released at the hearing by the House subcommittee on retirement income and employment indicate that two-income families often pay substantially more in Social Security taxes than single-earner families earning the same income. Yet Social Security benefits for the two-earner family are often less.

Witnesses at the hearing also testified that a wide range of factors, including inequities in the Social Security system, are likely to leave elderly women impoverished. Women are 70% more likely to spend their retirement in poverty than men, according to newly released data from the General Accounting Office. More than half of the elderly women living alone survive on incomes amounting to $9,400 or less, said Rep. Sherwood Boehlert (R-N.Y.).

Married women who work confront one of the greatest inequities in the system, added Rep. William J. Hughes (D-N.J.), who chairs the subcommittee. Frequently, he said, these women find that their Social Security benefits are completely offset by their husband’s benefits, which leaves them in the same financial position at retirement as if they had never worked.

Additionally, a widow from a one-earner family can receive substantially higher Social Security benefits than a widow from a two-income family earning the same amount.

Single people also earn retirement protection solely for themselves, while individuals with spouses and children earn protection for an entire family in return for the same amount of taxes. And divorced women also frequently suffer under the current Social Security system, added Edith U. Fierst, a Washington-based attorney active in retirement issues.

These inequities are by no means new, Social Security experts note. However, interest in them appears to be gaining steam thanks to the rapidly aging population and increasing numbers of women in the work force.

To be sure, Fierst said, current laws do not differentiate between benefits owed to women and men. But practical issues--such as the fact that women are usually the main care givers in a family and often drop out of the work force for a period of years to raise children or care for elderly relatives--usually result in women earning less than men. That causes a sort of de facto discrimination against women, according to witnesses at the hearing.

The main problem is that Social Security laws were designed to address the needs of a traditional family in the 1930s, when the husband worked and the wife stayed home with the children, Hughes said. They do not address the needs of today’s society, which is primarily made up of two-income families.

“What should determine a woman’s income when she retires?” Boehlert asked at the hearing. “If you are like me, you would think that the amount of money she earned as a worker would be the most important factor. Not so. Today, despite the increased numbers of working women, marital status remains one of the most influential factors in determining a woman’s income status at retirement age.”

Hughes plans to introduce legislation within the next few months to eliminate some of these inequities, said Elaina Goldstein, counsel for the subcommittee. However, what form the legislation will take is not yet clear.

Additionally, some Washington insiders doubt that the bill will be able to gain sufficient support to pass.

Unfair Deal?

One-income families are favored under the Social Security system in a variety of ways. They pay the same--or less--in tax as a two-income family earning the same amount. But the one-income family often receives substantially higher benefits. As these charts show, the widow of a man who earned $24,000 a year would get $366 more per month than a widow who earned $12,000 a year while her husband also earned $12,000.

Under Social Security rules, non-working spouses are eligible for spousal benefits equivalent to half the working spouse’s benefits, while working spouses get their own benefits or half their spouse’s benefit, whichever is greater. In many cases, this means that one-income families get greater retirement benefits than two-income families, even when total earnings were identical.

Here are hypothetical examples showing the disparities. The figures represent average annual lifetime earnings and 1992 monthly Social Security retirement benefits.

Family A

Earnings

Husband: $24,000

Wife: $0

Family total: $24,000

Benefits

Husband: $957 (WB)

Wife: $478 (SB)

Family total: $1,435

Survivor benefit: $957

Family B

Earnings

Husband: $12,000

Wife: $12,000

Family total: $24,000

Benefits

Husband: $591 (WB)

Wife: $591 (WB)

Family total: $1,182

Survivor benefit: $591*

Family C

Earnings

Husband: $16,000

Wife: $8,000

Family total: $24,000

Benefits

Husband: $712 (WB)

Wife: $468 (WB)

Family total: $1,180

Survivor benefit: $712

Family D

Earnings

Husband: $24,000

Wife: $8,000

Family total: $32,000

Benefits

Husband: $957 (WB)

Wife: $478 (SB)

Family total: $1,435

Survivor benefit: $957

WB: Worker’s benefit

SB: Spousal benefit

* Spouse continues to collect on her own benefit; survivor benefit does not apply.

Source: House subcommittee on retirement income and employment