Technical Paper Series

Congressional Budget Office

Washington, D.C.

SOCIAL SECURITY OPTIONS FOR REDUCING

POVERTY AMONG OLDER WOMEN

Theresa J. Devine

May 2000

2000-2

Papers in this series are preliminary and are circulated to stimulate discussion and

critical comment. The author prepared this paper while she was a principal analyst

at the Congressional Budget Office. She is now at the Office of the Public Advocate,

One Centre Street, 15th Floor, New York, New York 10007. These papers are not

subject to CBO’s formal review and editing processes. The analysis and conclusions

expressed in them are those of the author and should not be interpreted as those of

the Congressional Budget Office or the Office of the Public Advocate for the City of

New York. Any reference to this paper in other publications should be cleared with

the author. Papers in this series can be obtained by sending an email to

techpapers@cbo.gov.
ABSTRACT

This paper examines changes in Social Security that have been proposed as ways to

reduce poverty among elderly women. For each option, the paper asks three

questions: How much would the option reduce elderly poverty? How much would

the option cost? How would the option affect the relationship between payroll taxes

and benefits? In general, the proposed changes in Social Security present trade-offs:

the broader the target group and the greater the benefit or income guarantee, the

larger the expected impact of an option on elderly poverty. But these features would

also raise program costs and weaken the link between payroll taxes and benefits.

Some options would also provide significant assistance for people who are not poor,

while providing little to those most in need. 
CONTENTS

INTRODUCTION .................................................1

POVERTY AMONG OLDER WOMEN ...............................4

How Social Security Affects Older Women’s Poverty Status . . . . . . . . . . 8

Prospects for the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

POLICY OPTIONS IN SOCIAL SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Minimum Benefit Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Proposals Targeted to Specific Groups . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ALTERNATIVE PROPOSALS FOR POVERTY REDUCTION . . . . . . . . . . . 38

Supplemental Security Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

ADDITIONAL CHANGES IN SOCIAL SECURITY

AND OTHER PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Social Security Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Other Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

APPENDIX A. THE CURRENT SOCIAL SECURITY PROGRAM . . . . . . . 48

APPENDIX B. MINIMUM BENEFITS UNDER CURRENT LAW . . . . . . . 53

APPENDIX C. SUPPLEMENTAL SECURITY INCOME (SSI) . . . . . . . . . . 55

APPENDIX D. PROPOSALS TO TRANSFER

BENEFITS TO SURVIVORS . . . . . . . . . . . . . . . . . . . . . . . . . 57

APPENDIX E. PROPOSALS FOR CARE-GIVING CREDITS . . . . . . . . . . . 60
1

INTRODUCTION

Elderly women currently have much higher poverty rates than either older men or

younger women. For all women age 65 and older, the poverty rate was 12.8 percent

in 1998—nearly twice the poverty rate for older men. For older women who lived

alone, the poverty rate was 21.4 percent.

Several changes in Social Security benefits have been proposed to alleviate

this poverty among elderly women. Indeed, most major discussions of fundamental

Social Security reform have included such proposals. This paper examines these

proposed changes in Social Security using three measures:

& How much would the option reduce elderly poverty? 

& How much would the option cost? 

& How would the option affect the relationship between payroll taxes and

benefits? 

The reasons for the first two measures are clear, given the policy goals of poverty

reduction and efficiency. The third measure reflects concern about what proposed

changes would do to Social Security’s status as a social insurance program and

incentives to work.
2

In general, the proposed changes in Social Security provisions present tradeoffs: the broader the target group and the greater the benefit or income guarantee, the

larger the expected impact of a policy on elderly poverty. But these features would

also raise program costs and weaken the link between payroll taxes and benefits.

Some options would provide significant assistance for people who are not poor,

while providing little to those most in need. The proposal that could be expected to

be most effective in reducing poverty and also most target-efficient—means-tested

minimum benefits—would weaken the link between benefits and payroll taxes

significantly for some workers. 

The paper also considers proposals other than changes in Social Security to

reduce elderly poverty. Chief among these is expansion of the federal Supplemental

Security Income (SSI) program, the means-tested cash assistance program for the

elderly, blind, and disabled. Under current rules, the federal SSI program guarantees

an income level for the elderly that is less than the poverty line (with Social Security

benefits and other cash income counted toward the income guarantee), and few states

provide large enough supplements to make up the difference. Raising SSI benefits,

the seemingly natural solution to elderly poverty, has its own limitations, however.

Evidence suggests that because many elderly people who are eligible for SSI

payments do not participate, the effects of this policy could be sharply limited.
1. See Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 1999, Tables

5.A6, 5.A10, and 7E.1.

3

The paper is organized as follows: The first section summarizes and

describes the income and poverty status of older women today, how current Social

Security rules affect their status, and how other factors could affect the financial

status of older women in the future. The next sections turn to Social Security and

SSI proposals that proponents present as ways to alleviate elderly poverty. The paper

concludes with a brief discussion of how the introduction of individual accounts and

other changes in Social Security could affect poverty among the elderly. 

Note that the Social Security and SSI options considered here are targeted at

the population age 65 and older, and only changes in Old-Age and Survivors

Insurance (OASI) and SSI benefits for the aged are considered. In Social Security,

the age 65-plus population represents about 70 percent of all beneficiaries. In SSI,

this age group represents about 30 percent of all recipients.1

 The paper does not

address the possible complications that these restrictions could cause for

implementation.
2. These poverty statistics use the official poverty definition of the Census Bureau: total cash family income

(excluding capital gains and other lump sums) below the poverty threshold relevant for a person's family; the

threshold depends on family size and age composition. For 1998, the thresholds were $7,818 for one person age

65 or older and $9,862 for a couple with one spouse age 65 or older.

4

POVERTY AMONG OLDER WOMEN

Many older women are poor, despite the existence of Social Security and SSI (see

Table 1). The poverty rate for all women age 65 and older was 12.8 percent in

1998—a level comparable to the overall poverty rate for the United States that year

(12.7 percent), but nearly twice the poverty rate of 7.3 percent for older men.2

Overall, about 2.4 million women age 65 and older were poor in 1998. 

Some groups of older women face significantly greater risk of poverty than

others. The oldest old are much more likely to be poor than younger women.

Women who are not currently married are more likely to be poor than women who

are married with spouse present (see Table 2). Widows (who represented 45 percent

of all women age 65 and older in 1998) had a poverty rate of 16.8 percent. Other

unmarried women had even higher poverty rates. Married women, in contrast, had

a poverty rate of 4.7 percent. Poverty rates for older women also vary systematically

with living arrangements. Older women who lived alone or with nonfamily were

more than twice as likely to be poor as women who lived with family members other

than a husband, and they were more than four times as likely to be poor as the older

women who lived with husbands.
5

TABLE 1. POVERTY RATE BY SEX AND AGE, 1998 (in percent)

Age Women Men

55 to 59 10.2 8.2

60 to 64 11.8 8.2

65 to 69 10.1 6.9

70 to 74 11.3 7.2

75 to 79 14.1 7.8

80 to 84 15.0 7.2

85 and Over 17.5 7.6

Total Age 65 and Over 12.8 7.3

Total Age 75 and Over 15.1 7.6

SOURCE: March 1999 Current Population Survey.
6

TABLE 2. POVERTY RATES OF WOMEN AGE 65 AND OLDER,

BY MARITAL STATUS AND LIVING ARRANGEMENT, 1998

Percentage

in Category

Percentage

in Poverty

Marital Status

Married 42 4.7

Widowed 45 16.8

Divorced 7 22.7

MSA/Separateda 3 30.6

Never Married 4 24.2

Living Arrangement

Alone 40 21.4

Spouse 36 4.6

Spouse and Family 6 5.4

Family 16 10.4

Nonfamilyb 2 28.2

All Women Age 65 and Older 100 12.8

SOURCE: March 1999 Current Population Survey.

a. MSA denotes married with spouse absent.

b. Nonfamily denotes other unrelated persons.
3. See Constance F. Citro and Robert T. Michael, Editors, Measuring Poverty: A New Approach, Washington, D.C.:

National Academy Press, 1995; U.S. Department of Commerce, Bureau of the Census, Experimental Poverty

Measures: 1990-1997, P60-205, 1999; Thomas Corbett, “Poverty: Improving the Measure after Thirty Years,”

Focus, Vol. 20, No. 2, Spring 1999; Kelly Olsen, “Application of Experimental Poverty Measures to the Aged,”

Social Security Bulletin, 2000.

7

Note that some people have challenged the validity of the official poverty

definition, which is the one used in this paper. Some argue that counted income

should include the value of in-kind government benefits (including health care

coverage), asset values, and capital gains. The rental value of housing equity, in

particular, is often mentioned in discussions of elderly poverty. Counting these

resources could reduce measured elderly poverty significantly. Some also propose

new poverty thresholds that are based on current consumption patterns and

alternative adjustments for family size. These changes could raise measured poverty

rates for some groups, while lowering rates for others. At present, the debate about

poverty measurement remains active.3

Note also that this paper (like the official poverty statistics) uses data from

the March 1999 Current Population Survey (CPS), another target of criticism. While

the March CPS provides extensive income information for a large sample of

households in the United States, the CPS data also have potentially important

limitations for measuring income and poverty for the elderly. First, the CPS sample

excludes the institutionalized population, which the Census Bureau estimated to be

7.6 percent of women age 65-plus and 4.2 percent of men age 65-plus in 1995. It is

not clear how the official definition of poverty might be applied to the
4. See Daniel H. Weinberg, Charles T. Nelson, Marc I. Roemer, and Edward J. Welnaik, Jr., “Fifty Years of U.S.

Income Data from the Current Population Survey: Alternatives, Trends, and Quality,” American Economic

Review, Vol. 89, No. 2, 18-21.

8

institutionalized population. Second, comparisons of CPS income data and

administrative data suggest that Social Security, SSI, other government transfers, and

other nonwage income are significantly underreported in the CPS.4

 Taken alone,

such underreporting of income will bias poverty rates upward. 

How Social Security Affects Older Women's Poverty Status

Social Security makes a major contribution to the economic well-being of older

women, but it is not designed to eliminate poverty across the board. Social Security

provides retired worker benefits based primarily on a person's labor force attachment

and does not specifically disadvantage women relative to men. Indeed, because of

their longer lives and lower lifetime earnings, today’s older women have benefited

more than their male counterparts from Social Security's progressive benefit

schedule, auxiliary benefits for spouses and survivors, and inflation-protected

lifetime annuity payouts (see Appendix A). 

Social Security is the most important source of income for older women. 

Nearly all women age 65 and older received some income from Social Security in

1998, and Social Security was the largest component of family income for a majority
5. See Economic Report of the President, February 1999, Box 4-6, page 154.

6. Asset income should not be confused with conversion of assets to cash, or with capital gains and losses (that is,

changes in asset values realized when assets are sold). The March 1999 Current Population Survey used here

(and by the Census Bureau for the official measurement of poverty in the United States) does not collect data on

gains or losses from the sale of assets.

9

of beneficiaries (see Table 3). Some people emphasize that the generosity of the

Social Security program allows many older women to live on their own.5

Most older women have little income based on their own earnings from

sources other than Social Security, however, so they tend to rely more heavily than

older men on their Social Security benefits. Only 41 percent of all women age 65

and older reported any family income from pensions in 1998, and many of the

women with pension income received small amounts (see Table 3). Asset income

was received by a large percentage of older women, but most amounts were small.6

Paid employment was an important source of family income for some older women,

but these were primarily women who lived with husbands or other family members.

SSI provided only limited support (see Appendix C).

Older women who live alone are particularly dependent on Social Security,

and many of these women receive low benefits (see Table 4). In part, this reflects the

marital status of older women who live alone. A divorced woman who spent at least

10 years in a marriage is eligible for auxiliary Social Security benefits based on her

former spouse's earnings, but these benefits are just one-half the size of her exhusband's full benefits while her ex-husband is alive. Women who have never
10

TABLE 3. FAMILY INCOME FROM ALTERNATIVE SOURCES,

WOMEN AGE 65 AND OLDER, 1998

Percent of Women

with Family

Income from

Source

Women with Family

Income from Source

Mean

Percentage

from Source

Median Amount

from Source

(in dollars)

Social Security 92 59 10,900

Earnings 30 52 20,000

Pension and Other

Retirement 41 31 8,000

Assets 67 18 2,200

SSI and Other Cash

Public Assistance 6 34 3,200

All Other 14 23 4,300

Total Income 21,900

SOURCE: March 1999 Current Population Survey.

NOTE: SSI = Supplemental Security Income.
11

TABLE 4. FAMILY INCOME FROM ALTERNATIVE SOURCES,

WOMEN AGE 65 AND OLDER WHO LIVE ALONE, 1998

Percent of Women 

with Family

Income from

Source

Women with Family

Income from Source

Mean

Percentage

from Source

Median Amount

from Source

(in dollars)

Social Security 94 70 8,900

Earnings 12 43 8,400

Pension and Other

Retirement 28 30 4,600

Assets 62 20 1,600

SSI and Other Cash

Public Assistance 7 43 2,200

All Other 17 29 4,300

Total Income 12,500

SOURCE: March 1999 Current Population Survey.

NOTE: SSI = Supplemental Security Income.
7. See, for example, Karen C. Holden and Cathleen Zick, "The Impact of Widowhood in the 1990s: Evidence from

the Survey of Income and Program Participation," paper presented at the Annual Meetings of the Population

Association of America, 1997.

8. The Social Security Administration estimates that 96 percent of all jobs are now covered. Workers without

coverage include some federal civilian workers who were hired before 1984, some state and local workers

covered by public sector retirement plans, and some household, farm, and other self-employed workers who do

not meet earnings requirements. All industry and commerce workers are covered, regardless of earnings amounts.

See the Social Security Bulletin, Annual Statistical Supplement, 1999, Table 2.A, Introduction.

12

married can have low retired worker benefits due to low lifetime earnings, and they

are not eligible for any auxiliary benefits. For women who remain married until

widowhood, income from sources other than Social Security often declines or stops

when their husbands die, and family-level Social Security benefits can drop by onethird to one-half (see Appendix A).7

 The likelihood of living alone also rises with

age, while assets and other sources of income tend to decline with age. 

There are also some older women who lack any claim to Social Security

benefits. In 1998, more than one out of five poor women age 65 and older reported

no family income from Social Security (see Table 5). These women may be

ineligible because of limited attachment to the labor force and marriages that lasted

less than 10 years. Immigrants may have insufficient covered earnings for eligibility,

due to late arrival in the United States. Others could be ineligible because of limited

Social Security coverage; although nearly all jobs are covered today, many jobs were

not covered in the past.8

 Some women may also postpone the start of their benefits,

despite currently low income. 
13

TABLE 5. FAMILY INCOME FROM ALTERNATIVE SOURCES,

POOR WOMEN AGE 65 AND OLDER, 1998

Income Source

All Women Women with Family

Income from Source

Percent

with Family

Income from

Source

Percentage of

Family Income

from Source Mean

Percentage

from Source

Median

Amount

from Source

50+ 90+ (in dollars)

Social Security 78 72 51 88 6,000

Earnings 10 4 2 53 3,000

Pension and Other

Retirement 9 3 2 46 2,000

Assets 25 4 2 20 300

SSI 20 7 5 47 2,200

Other Cash Public

Assistance 2 -- -- 20 1,200

All Other Cash 5 1 1 34 1,600

Total Cash Income 6,700

SOURCE: March 1999 Current Population Survey.

NOTE: SSI = Supplemental Security Income; -- = less than 0.5 percent.
14

In sum, the current Social Security program contributes significantly to the

income and well-being of nearly all older women today. But Social Security has no

explicit shield from poverty for beneficiaries, and some women receive no Social

Security benefits at all. SSI fills in some of the remaining gap for some older

women, but only a limited part. Only a few states guarantee cash incomes at the

poverty line for SSI recipients (see Appendix C).

Prospects for the Future

The continued rise in women’s labor force participation and earnings will

undoubtedly improve the financial status of many older women in the years ahead.

But high levels of poverty for elderly women could persist nonetheless. 

The movement of women into the paid labor force has been dramatic since

World War II. Women born since 1950, in particular, have been much more likely

to stay employed during their childbearing years than women born before them.

Employment at older ages has jumped as well. By 1998, the labor force participation

rate for women age 16-plus was 60 percent, up from 33 percent in 1948. 

At the same time, however, a large minority of women have little or no

attachment to the labor market at any given point in time. One out of four women

age 18 to 64 did no work for pay in 1998. Forty-one percent of working women in
9. See Theresa J. Devine, “Women and Social Security Reform,” paper presented at the annual meeting of the

American Economic Association, January 2000. 

15

that age group worked less than full-time year-round. Women with young children

continue to work less for pay, on average, than women their age without children.

Increases in women's labor force participation between birth cohorts have also

tapered off significantly, suggesting that the long-term upward trend in women's

participation could be ending—with rates for female labor force participation still

much lower than men’s.9

Women's earnings have also grown sharply, but they remain substantially

lower than men's earnings at every age, on average. For full-time wage-and-salary

workers age 16 and older, median weekly earnings of women equaled three-quarters

of men's in 1998. For all workers age 18 to 64 (that is, including part-time, part-year,

and self-employed workers), women's median annual earnings were 60 percent of

men’s in 1998 (see Table 6). Although 23 percent of all wives age 18 to 64 earned

more than their husbands in 1998, most wives earned much less than their husbands

(see Table 7). On average, all wives age 18 to 64 earned 31 percent of couples'

earnings that year. 
16

TABLE 6. MEDIAN ANNUAL EARNINGS BY AGE AND SEX, 1998 (in dollars)

Age Male Female Female/Male Ratio

All Workers

18 to 24 10,000 7,480 .75

25 to 34 27,000 18,720 .69

35 to 44 35,000 20,000 .57

45 to 54 38,000 23,000 .61

55 to 61 35,000 20,000 .57

62 to 64 27,000 14,900 .55

Total, 18 to 64 30,000 18,000 .60

SOURCE: March 1999 Current Population Survey.

TABLE 7. WIFE’S SHARE OF COUPLE’S EARNINGS, BY WIFE’S AGE, 1998

Wife’s Share of Couple’s Earnings

No 30 Percent 50 Percent Mean

Age Earnings or More or More Percentage

18 to 24 26 39 17 26

25 to 34 25 45 20 29

35 to 44 23 45 21 30

45 to 54 22 47 26 34

55 to 61 40 41 29 32

62 to 64 61 30 25 26

Total, 18 to 64 27 44 23 31

SOURCE: March 1999 Current Population Survey.
10. According to the Social Security Administration, 88 percent to 90 percent of women age 25 to 49 were fully

insured in 1998, where full insurance means that the person has one quarter of coverage for each year between

age 21 and their current age (up to 61). Full insurance rates for women age 50 and older were lower—ranging

from a low of 66 percent for women age 75-plus to a high of 84 percent for women age 50-54. But these rates

have also crept upward over time. See the Social Security Bulletin, Annual Statistical Supplement, 1999, Table

4.C5.

11. Under the Employee Retirement Income Security Act of 1974, any pension plan with an annuity payment option

must have a joint and survivor annuity (with a 50 percent minimum survivor payment) as its default payment plan

for participants who have been married at least one year; under the Retirement Equity Act of 1984, any

alternative arrangement requires signatures from both spouses. 

17

Overall, the data on women's earnings and employment suggest that the

percentage of women collecting their own retired worker benefits will rise sharply

above today's percentage if current benefit rules are still in effect.10 But the data on

the division of earnings within couples also suggest that a large majority of evermarried women will also collect survivor benefits based on their husbands' earnings

records—and those survivor benefits will not be affected by women's higher

earnings.

Pension income will also be higher for older women in the future. The

increase in women’s employment will mean more pension income based on women's

own earnings. Moreover, more widows will probably collect survivor pension

benefits based on their husbands' employment, because spousal consent is now

required when married pension holders request single-life annuity payouts of defined

benefit pensions.11 Note, however, that existing evidence also suggests that more

than half of all older women will have no pension income from any source. Women

with low incomes when young will be the least likely to receive pension income

when old.
12. Analysts at the Social Security Administration predict that 7.7 percent of women born between 1946 and 1964

will not marry by age 62, up from 3.8 percent of the 1926-30 female birth cohort at age 62. See Table 1 in

Barbara Butrica, Lee Cohen, and Howard Iams, "Introduction and Findings from the MINT Project," a paper

presented at the "New Developments in Retirement Research" First Annual Joint Conference for the Retirement

Research Consortium, Washington, D.C., May 20-21, 1999.

18

Changes in women’s marital histories could also have some bearing on older

women’s economic status in the future. The Social Security Administration and

others predict that a growing percentage of women will reach old age without

marrying.12 Like today’s older women who have not married, these women will

probably have more education, more labor market experience, and higher lifetime

earnings, on average, than women who have married. But tomorrow’s older women

who have not married are also more likely than their counterparts today to be single

mothers with low lifetime earnings. The larger number of women in this low-earner

category could raise the poverty rate for never-married older women from a level that

is currently quite high. 

The Social Security Administration and others also predict that more older

women will be divorced from marriages that have lasted fewer than 10 years (the

number now required for auxiliary benefits), but these women will remain a small

percentage of all older women. Moreover, because divorced women work and earn

more than other women, on average, divorced women are likely to have lower

poverty rates than other women who are ineligible for auxiliary benefits.
13. The Modeling Income in the Near Term (MINT) team at SSA, which uses Social Security-covered earnings

records and survey data, predicts that poverty rates for the elderly will be close to current levels in 2020. See

the MINT Presentation to the 1999 Technical Panel of the Social Security Advisory Board. 

19

In sum, women will probably reach old age in the future with more years of

labor market experience, greater lifetime earnings, and fewer years of marriage

experience, on average, than today's older women. But the lifetime employment and

earnings of many women will be low, and most women will probably spend most of

their adult lives in marriage. All of this suggests that older women's economic status

will still vary widely—and that significant poverty could persist for older women .13

POLICY OPTIONS IN SOCIAL SECURITY 

Because Social Security is the main source of income for older women today—with

nearly all older women receiving some benefits, and some women relying exclusively

on this income—proposals to alleviate elderly poverty have centered on raising

Social Security benefits (see Table 8). 

Proposals fall into two general categories: raise minimum benefits for retired

workers, and raise benefits for certain groups of beneficiaries. Minimum benefit

proposals have included a flat minimum equal to the poverty line, a benefit formula

based on years of covered earnings, and means-tested minimum benefits. Targeted

benefit proposals would take a variety of approaches to raising the benefits of
TABLE 8. OPTIONS FOR REDUCING ELDERLY POVERTY 

Proposed Benefit Rule

Expected Outcomes

Poverty Reduction

HypotheticalOne-Year Cost 

Potential Benefit-E

Social Security Minimum Benefit Proposals

Poverty Line Minimum Benefit for Families of RetiredWorkers

All beneficiaries & theirfamilies moved out ofpoverty

$26 billiona Weakens 

wage wor

Years-Based Minimum Benefit Formula 

 Example: 60% of one-person poverty line for 20

years of covered earnings, plus 2% of poverty lineper additional year, with highest minimum equal topoverty line

Modest(Few women & few lowwage men have 40 yearsof covered earnings)

$2 billionb Weakens 

low-wage 

Means-Tested Poverty Line Minimum Benefit for Familiesof Retired Workers 

All poor beneficiaries &their families moved outof poverty

$5 billiona

(no asset test) Weakens 

low-wage 

Social Security Targeted Proposals

Surviving Spouses

Example: 75% Rule, which gives minimum benefitequal to 75% of benefit couple would havereceived if both spouses were alive

Modest(Increase for widowsdepends on couple’searnings)

$12 billionb

Strengthespouses wearnings tspouses’

Surviving Spouses

Example: Cost-neutral transfers of benefits fromcouples to their surviving spouses

Modest(Increase for widowsdepends on couple’searnings; couples &divorced spouses lose)

None because ofpolicy design 

Negligibl

 Very Old Beneficiaries

Example: 5% benefit increase at age 85

Modest(Younger poor womenunassisted)

$2 billionb Negligibl
Proposed Benefit Rule

Expected Outcomes

Poverty Reduction

HypotheticalOne-Year Cost 

Potential Benefit-E

 Divorced Spouses

Example: Earnings sharing during each marriage,regardless of marriage length

Modest(Some divorced womenwould get smallincrements and somewould get less) 

Uncertain withoutmore detailedproposal

Could wesome and for others 

 Unpaid Caregivers

Example: Reduce years of earnings in benefitcalculation 

Modest(Survivor benefits unaffected; credit riseswith earnings in countedyears)

Uncertain withoutmore detailedproposal

Weakens givers

SSI Proposals

Poverty Line Minimum Benefit for Families of PoorElderly People 

All elderly moved out ofpoverty if all poor elderlyparticipate; all SSIparticipants & theirfamilies otherwise

$9 billion if all poorelderly participate;about $1.2 billion ifonly 1998 SSIrecipientsparticipatea,d

Weakens wage wor

a This hypothetical one-year cost estimate is not an official Congressional Budget Office (CBO) cost estimate. This estimate is based on a rough polic

program participation data from the March 1999 Current Population Survey. Complexities of implementation and changes in beneficiary behavior and cthan Social Security and SSI are ignored, and no adjustments are made for changes in spending on Food Stamps, Medicaid, and other in-kind benefitsprovided to illustrate relative costs of the proposed changes.

b This hypothetical one-year cost estimate is not an official CBO cost estimate. This estimate is based on a rough policy description, a 75-year cost est

from the Office of the Actuary for the 1994-1996 Advisory Council on Social Security, and current administrative data on taxable payroll. Complexities oin beneficiary behavior and cash income from sources other than Social Security and SSI are ignored, and no adjustments are made for changes in spendinand other in-kind benefits. All estimates in the table are provided to illustrate relative costs of the proposed changes.

C Because any of the transfer proposals would be forced saving with actuarial adjustment for delayed receipt of benefits, the expected value of lifetime b

unaffected by the transfers. Thus, the benefit-earnings link should be unaffected.

d Differences between the March 1999 CPS and administrative data suggest that this $1.2 billion cost increase for the proposal for current beneficiaries 

discussion. 
22

surviving spouses, very old beneficiaries, divorced spouses, and unpaid caregivers.

None of these policies, as proposed, would be restricted to female beneficiaries.

Nonetheless, all of these policies would benefit women more than men, on average,

because women typically earn less, live longer, and devote more time to unpaid care

of family members than men do. 

This section evaluates these proposed changes in Social Security benefits

using three criteria: First, how much would the option reduce elderly poverty?

Second, how much would the option cost? Third, how would the option affect the

link between Social Security benefits and payroll taxes for individuals and couples?

Note that the hypothetical one-year cost estimates presented here are not

official Congressional Budget Office (CBO) cost estimates. They are based on rough

policy descriptions and incomplete data, and complexities of implementation and

behavioral responses are generally ignored. Changes in the costs of Food Stamps,

Medicaid, and other in-kind benefits are also ignored. The cost estimates in this

paper are intended to illustrate the relative costs of alternative proposals. 

The bottom line of this analysis is that the proposed changes in Social

Security benefits present trade-offs: The broader the target group and the higher the

benefit or income guarantee, the larger the expected impact of a policy on elderly
14. Minimum benefits are now based on benefit formulas that depend on a worker’s earning history. A dollar

minimum benefit was repealed for new beneficiaries in 1981.

23

poverty. But these features would also add to program costs and weaken the taxbenefit link. 

Minimum Benefit Proposals

Social Security currently provides minimum benefits for retired workers, but the

minimum benefit amounts are significantly less than the one-person poverty line (see

Appendix B).14 To receive a retired worker benefit equal to the one-person poverty

line ($7,818 in 1998), a person retiring at the normal retirement age (NRA) of 65 in

1998 needed average indexed annual earnings in his or her top 35 years equal to

$14,057. To put this amount in perspective, note that only half of all women age 35

to 44 earned more than $14,057 in 1998; of all men age 35 to 44, one in five earned

less.

One straightforward approach to reducing poverty would be an increase in the

minimum retired worker benefit to the one-person poverty line. A poverty-line

minimum benefit for retired workers would directly protect all insured workers from

poverty. Under current auxiliary benefit rules, the policy would also protect the

spouses and survivors of insured workers. The minimum survivor benefit would rise

to the one-person poverty line. The minimum couple benefit would be 150 percent
24

of the one-person poverty line, while the two-person poverty line would be 126

percent of the one-person poverty line. 

Alternatively, because poverty is measured at the family level, the minimum

family Social Security benefit might be set equal to the family-level poverty line.

Although the poverty-line minimum benefit would move all Social Security

beneficiaries out of poverty, it would cost much more than the poverty gap for the

elderly and their family members (that is, the sum of differences between total cash

family income and the family poverty line for all poor families with elderly Social

Security beneficiaries). Sixty-eight percent of the women age 65-plus and 80 percent

of the men age 65-plus who would have received higher benefits under this proposal

in 1998 were not actually poor. Family income from other sources kept these

beneficiaries out of poverty. Adults and children not otherwise eligible for Social

Security would also have income gains under this family-based proposal. 

Data on family-level Social Security benefits from the March 1999 Current

Population Survey suggest that the net cost of a family-level minimum benefit policy

for beneficiaries age 65-plus would have been roughly $26 billion in 1998. This was

about eight percent of total spending on Old-Age and Survivors Insurance (OASI)

benefits that year, and over five times the poverty gap for Social Security

beneficiaries age 65-plus and their families (that is, the sum of differences between
15. Of the total estimated cost, $12 billion would have been spent on elderly persons who lived alone, with a spouse

but no other family members, or with nonfamily, and $18 billion would have been spent on families of elderly

people who lived with other family members. 

16. In the simulation presented here, family Social Security benefits are raised to the family poverty line for every

beneficiary age 65 or older, regardless of the beneficiary's age when he or she started benefits. If the minimum

benefit was reduced to reflect benefit receipt before the normal retirement age, however, some beneficiaries could

have family incomes below the poverty line and below the eligibility income level for SSI. 

25

total cash family income and the family poverty line for all poor families with elderly

Social Security beneficiaries).

The CPS data show that 6.7 million women age 65-plus and 3.2 million men

age 65-plus had family Social Security benefits under the poverty line appropriate for

their family size in 1998, and that the total gap between family Social Security

benefits and family poverty lines for these families was $30 billion.15 

Partially offsetting this amount would be a reduction in federal spending on

SSI. At present, federal SSI guarantees income levels below the poverty lines for

individuals and couples, so an increase in the minimum Social Security benefit would

make most Social Security beneficiaries ineligible for SSI (see Appendix C).16 For

example, an elderly person with a monthly Social Security benefit of $400 and no

other income in 1998 would have been eligible for an SSI benefit equal to $114

[$494- ($400-$20)], where $20 is the amount of unearned income excluded from SSI

payment calculations. With the Social Security benefit set equal to the poverty line

($651.50 per month in 1998), this same individual would not be eligible for any SSI.
17. Social Security Administration data indicate that 61 percent of all SSI beneficiaries age 65-plus in federally

administered SSI programs in December 1998 received Social Security. See Social Security Bulletin, Annual

Statistical Supplement, 1999, Table 7.D2. The March 1999 CPS shows that three-fourths of all female SSI

recipients age 65-plus received Social Security. Note that the minimum Social Security benefit would also

reduce state spending on SSI (see Appendix C). 

26

Data from the March 1999 CPS show that families with OASI income received about

$3.6 billion from federal and state SSI programs.17 

Spending on Food Stamps, Medicaid, and other means-tested government

assistance could also decline if the minimum benefit proposal was in place. The $26

billion estimate does not reflect those savings on in-kind benefits.

Benefits Based on Years with Covered Earnings. One concern about a poverty-line

benefit guarantee is its potential effect on the link between payroll taxes and benefits.

A worker would get no additional benefits for increases in lifetime covered earnings

between the level required for the poverty-line benefit (10 years at $2,800 per year,

using 1998 dollars and program parameters) and the 35-year average annual earnings

currently required for a poverty-line benefit ($14,057 using 1998 parameters).

Auxiliary benefits would add to that range. Those changes would blunt the financial

incentives for work, especially among low-wage older workers. 

To maintain a tighter link between work and benefits, several proposals use

a minimum benefit formula based on the number of years with covered earnings.

The National Commission on Retirement Policy (NCRP) proposed a formula that
18. See the memorandum on "Distribution of Retired Worker Awards by Number of Years of Earnings" from Seung

H. An, Office of the Actuary, August 25, 1997.

27

would give workers with 20 years of covered earnings a minimum benefit equal to

60 percent of the one-person poverty line, and then increase this amount by 2 percent

of the poverty line for each additional year of covered earnings up to the full poverty

line. The earnings required for one year’s credit would have been $2,800 in 1998,

the amount required by current rules. Members of the 1994-1996 Advisory Council

on Social Security, the Task Force on Women of the Gerontological Society of

America (Gerontological Society), and others have proposed similar formulas for

minimum benefits. 

This work-based minimum benefit provision would have a modest effect on

poverty among older women. First, because most older women would have far fewer

than 40 years of covered earnings, most women would be eligible for minimum

retired worker benefits that were much lower than the poverty line. Only one-fourth

of new female retired worker beneficiaries in 1993 had at least 35 years of covered

earnings, and nine percent had 40 or more. Moreover, just 31 percent of all new male

retired worker beneficiaries in 1993 had 40-plus years of covered earnings—

suggesting that years of covered earnings could remain far short of 40 years for many

men and many women for several decades to come.18 
19. The Office of the Actuary of the Social Security Administration expresses the costs of proposals as the percentage

increase in the payroll tax necessary to cover the change in benefits over a 75-year period. The Office of the

Actuary estimated that this proposal for minimum benefits for OASI would cost about 0.0439 percent of taxable

payroll over the 1999-2073 period. According to the office’s year-by-year estimates, however, costs would not

rise until the end of the first decade, and they would then rise steadily through 2073. The amount of $2 billion

was therefore obtained by multiplying the projected total change in the annual balance for the year 2037 (0.2334

percent) by 0.3 (the proportion of the long-term change attributed to OASI, with the remaining 0.7 spent on

disability insurance) and $3 trillion (the approximate value of taxable payroll). The long-term cost estimates for

the minimum benefit were prepared by the Office of the Actuary as part of its estimate of the cost of the 21st

Century Retirement Act (H.R. 4824). Reported taxable earnings appear in the Annual Statistical Supplement to

the Social Security Bulletin, 1999, Table 4.B1.

28

Second, because many of the women who did have many years of work

experience would also have relatively high lifetime earnings, many of the women

who would be eligible for a poverty-line minimum benefit would also be eligible for

a much larger retired worker benefit. Third, although the minimum benefit provision

could raise the incomes of some poor widows by raising the benefits of their

husbands, many of the husbands with very low lifetime earnings would also get small

benefit increases because they too would have fewer than 40 years of covered

earnings.

Because the minimum benefit based on years of covered earnings would

affect relatively few beneficiaries, its costs would be relatively low. Related

estimates from the Office of the Actuary suggest that the provision would add about

$2 billion to the one-year cost of Social Security.19 Like the more general minimum

benefit policy, this change would also result in lower spending on SSI, Food Stamps,

and Medicaid, but the limited number of people affected would limit this cost

reduction. In general, the impact on poverty and program costs of an experiencebased minimum benefit policy would be larger when the earnings required for a
29

year's credit toward the benefit are lower, the number of years required for the lowest

level of the benefit is lower, and the benefit schedule provides larger amounts at

every experience level. But features such as these would also push up program costs

and reduce the connection between Social Security benefits and payroll taxes—and

maintaining a stronger work incentive is the main purpose of a years-based formula.

Means-Tested Minimum Benefits. Any policy that guarantees a larger minimum

Social Security benefit will raise the incomes of some people who would not be poor

without the new minimum. For this reason, the Gerontological Society and others

have proposed that minimum benefits be means-tested. 

One set of proposals would make the minimum benefit conditional on low

family income, but not require an asset test. With the minimum benefit equal to the

family poverty line, the additional cost of the income-based minimum benefit would

be the current poverty gap for Social Security recipients (that is, the sum of

differences between total cash family income and the family poverty line for all poor

families with elderly Social Security beneficiaries). Data on family incomes from the

March 1999 CPS show that the poverty gap for the 2.3 million poor families with

Social Security beneficiaries age 65-plus was about $5 billion in 1998. The cost of

SSI payments that are now counted in beneficiaries’ family incomes (about $3.6

billion, according to CPS data) would also shift from the SSI program to the Social

Security program because Social Security would substitute for these benefits, but this
20. Because the new Social Security benefits would replace some state SSI supplements, there could be some shift

of expense from the states to the federal government, but it would probably be relatively small. The federal share

of SSI payments for the elderly far exceeds the states’ shares.

21. Administrative costs for the federal SSI program, which has an income test and an asset test to determine

eligibility and benefits, were about $350 per recipient in 1998 according to data provided by the Social Security

Administration. In contrast, the Social Security Administration reports administrative costs of approximately

$80 per beneficiary for Old-Age, Survivors, and Disability Insurance (OASDI) for 1998. The higher

administrative costs for SSI partly reflect the fact that 80 percent of SSI recipients receive benefits because they

are disabled or blind, as compared with 14 percent of OASDI beneficiaries. See Social Security Bulletin, Annual

Statistical Supplement, 1999, p. 13 and Table 7.A1. 

30

shift would not cause an increase in total federal spending.20 Food Stamp and

Medicaid spending would go down, partly because higher incomes would reduce

eligibility and benefit amounts and partly because of reduced SSI eligibility.

Medicaid eligibility is automatic for most SSI recipients. Income-tested minimum

benefits could raise administrative costs significantly, however, because income

tracking and periodic recalculation of benefits would be required.21

By design, income-tested benefits with a poverty-line minimum level would

lift all poor elderly Social Security beneficiaries out of poverty. Children and adults

who would not otherwise be covered by Social Security would also move out of

poverty under the proposal. At the same time, however, the use of an income test but

no asset test could also allow people with low incomes but substantial wealth to get

higher benefits under the proposed rule. Moreover, income-tested minimum benefits

would weaken the link between benefits and payroll taxes for workers with low

family income from sources other than their own earnings. This weakened taxbenefit link could discourage low-wage workers, and workers with minimal

attachment to the labor market for other reasons, from working. On balance, the
22. Estimates of the number of older widows include an unknown number of divorced women with deceased exhusbands who call themselves widows when surveyed. See David A. Weaver, "The Accuracy of SurveyReported Marital Status: Evidence from Survey Records Matched to Social Security Records," ORES Working

Paper Number 80, Social Security Administration, Office of Research, Evaluation, and Statistics, January 1999.

Unfortunately, the CPS does not show which women who call themselves widows are really divorced, or which

divorced women have deceased ex-husbands but still call themselves divorced. Length of past and current

marriage is also unknown. 

31

introduction of means-testing for minimum benefits would shift Social Security

further away from its role as an earnings-based insurance program and closer to a

welfare program.

Proposals Targeted to Specific Groups

Several proposals would raise benefits for specific groups of beneficiaries based on

a presumption of low income for the group. These groups include surviving spouses,

unpaid caregivers, the very old, and divorced spouses of retired workers. In general,

the design of such targeted policies involves trade-offs: The smaller the target group,

the fewer needy people likely to get assistance. But the larger the target group, the

greater the number of non-needy likely to get assistance and the greater the cost of

the policy. 

Special Provisions for Surviving Spouses. Because widows represent a majority of

poor older women (59 percent of poor women age 65-plus in 1998), several

proposals to reduce elderly poverty focus strictly on raising survivor benefits.22 One

approach would raise the survivor benefit from its current level to a percentage of the

total amount that the couple would have received if both spouses had lived. A
23. The Office of the Actuary estimated that this 75 percent rule (phased in gradually over the 1998-2037 period)

would cost 0.39 percent of taxable payroll over the 1998-2072 period. This 0.39 percent was multiplied by $3

trillion, the approximate value of total taxable earnings, to get $12 billion. See estimate F10, Appendix III,

Report of the 1994-1996 Advisory Council on Social Security, Volume I, p. 236. More recently, the Office of

the Actuary has made estimates of variations on the initial proposal. With the survivor benefit capped at the level

of a retired worker benefit for a worker with 35 years at the maximum level of covered earnings (i.e., the

maximum retired worker benefit) and full implementation in 2000, the office estimated an increase in the 75-year

actuarial balance of 0.46 percent; for the same rule with a 10-year phase-in, it estimated an increase of 0.33

percent in the long-term actuarial balance. See Stephen C. Goss, "Estimated Long-Range OASDI Financial

Effects of Provisions to Increase Benefits Paid to a Widow(er)—INFORMATION," memorandum, May 28,

1999. 

32

second approach would cut the benefit for a couple and then raise the benefit for that

couple’s surviving spouse by the amount of the couple benefit cut and an actuarial

adjustment.

75 Percent Rule Benefit. One option suggested by members of the 1994-1996

Advisory Council on Social Security is the 75 percent rule: a survivor would be

eligible for a minimum benefit equal to 75 percent of the amount that the couple

would have received if both spouses had lived. A surviving spouse could receive this

75 percent rule benefit, the current survivor benefit (equal to the deceased spouse's

retired worker benefit), or the survivor's own retired worker benefit, whichever was

highest. Estimates from the Office of the Actuary for the 1994-1996 Advisory

Council suggest that the 75 percent rule would raise benefit costs by about $12

billion.23 

The feature of the 75 percent rule most emphasized by proponents is its

potential effect on the link between survivor benefits and payroll taxes for second

earners within couples. The 75 percent rule would improve work incentives for
24. Note that the low earner's Social Security payroll taxes currently count toward the level of the low earner's own

Social Security disability benefits and toward the benefits of the low earner's survivors. 

25. Estimates by Iams and Sandell of the Social Security Administration suggest that the 75 percent rule would have

reduced the poverty rate for widow beneficiaries age 62-plus by about 15 percent in 1992. See Howard J. Iams

and Steven H. Sandell, "Cost-Neutral Policies to Increase Social Security Benefits for Widows: A Simulation

for 1992," Social Security Bulletin, Vol. 61, No. 1, 34-43, 1998.

To limit the costs of the 75 percent rule and the gains from the rule to the least needy, some people suggest that

the new benefits should be capped at the amount of the average primary insurance amount for all retired workers

collecting benefits in the year before benefits begin. Estimates of the Office of the Actuary suggest that this cap

could reduce the cost of the proposal by about 80 percent. Note, however, that this cap would also lessen the

work incentives of the 75 percent rule for second earners within couples, a feature emphasized by proponents

of the original rule. See Stephen C. Goss, "Estimated Long-Range OASDI Financial Effects of Provisions to

Increase Benefits Paid to a Widow(er)—INFORMATION," memorandum, May 28, 1999. 

33

second earners relative to the incentives provided by current rules because it would

allow earnings of a couple’s low earner to raise the benefits of the couple’s survivor.

Indeed, among couples with the same combined level of covered lifetime earnings,

larger benefits increases would go to the survivors of couples with more equal

earnings between husbands and wives. At present, a low earner's additional payroll

taxes can raise a couple's old-age benefits only while both spouses are alive.24

The 75 percent rule benefit would also exceed the benefit provided by current

rules for nearly all widows and thus reduce the size of the income drop faced by the

vast majority of women at widowhood. Because the amount of the benefit increase

for a survivor would depend directly on the lifetime earnings of the survivor and his

or her spouse, however, the 75 percent rule would probably have only a modest effect

on elderly poverty. Widows of low-income couples would probably gain little, while

widows of high-income couples could gain a lot.25 Moreover, some of the gains for
26. See, for example, Richard V. Burkhauser and Timothy Smeeding, “Social Security Reform: A Budget Neutral

Approach to Reducing Older Women’s Disproportionate Risk of Poverty,” Policy Brief 2, Center for Policy

Research, The Maxwell School, University of Syracuse, Syracuse, New York, 1994; Steven H. Sandell and

Howard M. Iams, "Reducing Women's Poverty by Shifting Social Security Benefits from Retired Couples to

Widows," Journal of Policy Analysis and Management, Volume 16, Number 2, 279-297, 1997.

34

low-income beneficiaries would be offset by the loss of SSI, Food Stamps, Medicaid,

and other means-tested benefits.

A second problem with the 75 percent rule—and any other benefit rule

targeted only at surviving spouses—is that it would neglect poor couples and poor

women who either never married or divorced after fewer than 10 years of marriage.

In 1998, 41 percent of all poor older women (nearly a million women) were not

widows, and this percentage is expected to grow.

Transfers from Couples to Their Surviving Spouses. To raise Social Security benefits

for survivors without raising total benefit costs, some people have proposed a transfer

of benefits from couples to their surviving spouses. Under these proposals, the

benefits of a couple's surviving spouse would be raised by the sum of a cut in the

couple's benefit and an actuarial adjustment for delayed receipt of the benefits. The

Social Security Administration estimates that each dollar cut in the couple benefit

would result in a $1.45 increase in the survivor benefit.26

Analysts have considered three approaches to calculating the benefit transfer:

a transfer of part of the spouse’s benefit, a transfer of part of the low earner’s retired
35

worker benefit, and a transfer of part of the couple’s combined benefit. The choice

from that set would influence who would receive higher or lower benefits than

current rules provide (see Appendix D). But none of those three transfer policies

would have a major impact on elderly poverty. The increase in a survivor’s benefits

would depend directly on the lifetime earnings of one or both spouses in a couple, so

survivors of low-income couples would tend to gain less than survivors of couples

with high earnings. Some gains for low-income beneficiaries would also be offset

by a loss of SSI, Food Stamps, Medicaid, and other means-tested benefits. Some

low-income couples and divorced beneficiaries could actually wind up in poverty

because of their benefit cuts.

Special Rules for the Very Old. Some groups have proposed greater benefits for

people beyond a certain age. The Gerontological Society has suggested a minimum

benefit equal to the poverty line for beneficiaries who are age 80 and older. The

1994-1996 Advisory Council on Social Security considered a 5 percent increase in

benefits starting at age 85.

Proponents of these policies argue that very old women are less likely than

younger women to have asset or spouse income, and that their decisions about

employment and savings are less likely to be affected by more generous benefits. An

age-based policy would also require no extra information collection, so it could have

lower administrative costs than some of the other proposed targeting strategies.
27. Recall that the data used here exclude the institutionalized population, and the proportion of the population

institutionalized gets larger as the population ages. 

28. Also note that a benefit increase equal to some percentage of a person's basic benefit amount will give bigger

dollar increases to people who have larger basic benefits, relative to those with lower basic benefit amounts. 

36

Not all older women who would benefit from an age-based policy would be

poor, however, and younger people with very low incomes would not be helped at

all. Although the poverty rate for women age 85 and older was 17.4 percent in 1998,

poor women age 85-plus represented just 15 percent of the 2.4 million women age

65 and over who were poor.27 Forty-four percent of all poor women age 65-plus were

under age 75 that year. In general, the higher the threshold age, the greater the

number of elderly poor people left without protection—but the lower the threshold

age, the greater the number of non-needy beneficiaries likely to gain from an agebased minimum benefit policy.28

Special Rules for Divorced Women. Because a growing proportion of women are

expected to reach old age either divorced after marriages of less than 10 years (the

minimum length required for auxiliary benefits) or divorced with their former

spouses still alive, and because divorced older women currently have high poverty

rates, some people have proposed that new rules either replace or supplement the

current rules for divorced spouse and survivor benefits.

The Gerontological Society of America, Steuerle and Bakija, and others have

suggested that auxiliary benefits for each spouse be based on the length of a marriage
29. See Eugene Steuerle and Jon M. Bakija, Retooling Social Security for the 21st Century: Right and Wrong

Approaches to Reform, Washington, D.C.: Urban Institute Press, 1994.

37

according to some sort of earnings sharing rule (that is, creditable earnings would be

split during and perhaps after marriage).29 With any budget-neutral rule for earnings

sharing, however, someone’s payment would be reduced in order to raise the

payment of someone else. If earnings credits were shared among all spouses, for

example, more surviving former spouses would be eligible for some auxiliary

benefits, but the amounts of these benefits could be significantly lower than the

amounts that current rules would provide. Thus, the proposal could move some

former spouses into poverty.

Credits for Caregivers. Because the low lifetime earnings of many older women

reflect time devoted to unpaid care for children and other family members, some have

proposed that a Social Security earnings credit be awarded for caregiving as a way

to boost the incomes of older women. A variety of arrangements have been

proposed, including a reduction in the number of years used to compute retired

worker benefits and a simple lump sum credit for each year of care, each care

recipient, or each caregiver (see Appendix E). 

In practice, caregiving policies such as those would probably have little effect

on elderly poverty. Relatively affluent women would probably get the biggest boosts

in their retired worker benefits because they would be in the best position to take
38

significant time off from paid employment. And even those women who did get big

boosts in their retired worker benefits would probably receive only modest increases

in their lifetime benefits, on average. Most of those women would collect their

husbands’ benefits when widowed—and relatively few husbands would probably

collect care-giver credits. 

ALTERNATIVE PROPOSALS FOR POVERTY REDUCTION 

Proposed changes in Social Security present policymakers with fundamental tradeoffs. Means-tested Social Security benefits promise the largest impact on poverty at

the lowest cost per person lifted out of poverty. But means-tested benefits would also

sever the relationship between benefits and payroll taxes for workers with low

lifetime earnings, and this break could challenge the status of Social Security as a

social insurance program. Another approach would be to strengthen Supplemental

Security Income, a program that specifically targets the poor.

Supplemental Security Income

Expansions of the SSI program could be part of the effort to reduce poverty among

the elderly (see Appendix C). Proposed options include an SSI income guarantee
30. Studies based on different data sets for different years all report estimates of about 50 percent for SSI

participation rates for persons age 65 and older who are eligible for SSI. See, for example: Enrique Lamas,

Judith Eargle, and Patricia Ruggles, "Estimating Eligibility and Participation in the AFDC and SSI Programs,"

1992 Proceedings of the Social Statistics Section, American Statistical Association, August 1992, and "Eligibility

and Participation in Means-Tested Assistance Programs," paper presented at the 1993 meetings of the American

Statistical Association; Kathleen McGarry, "Factors Determining Participation of the Elderly in Supplemental

Security Income," Journal of Human Resources, Volume 31, No. 2, 331-358. 

39

equal to the poverty line, larger exclusions from countable income, and greater asset

exclusions. 

SSI strategies have certain advantages over Social Security options for

reducing poverty among the elderly. SSI could be made available to all poor elderly

people, including those who received no Social Security income. In 1998, this group

represented more than one out of five of all poor women age 65 and older (see Table

3). Distribution of benefits based strictly on need could also mean lower costs than

the other Social Security options discussed above, except for the Social Security

proposal that would mimic SSI. 

Weighing against these arguments, however, is evidence that SSI has limited

effectiveness in reducing poverty due to low take-up rates. Several studies have

found that only half of all eligible persons age 65 and older participate in SSI.30 These

studies also find that many factors contribute to this low participation rate, including

incomplete or incorrect information about SSI, a burdensome application process,

asset and income disclosure requirements, the modest size of SSI payments for many

eligibles, and the stigma associated by some with welfare receipt. Such low take-up

rates could limit the effectiveness of new SSI provisions as ways to reduce elderly
40

poverty. SSI expansions could also involve significant administrative costs and

reduce incentives to work and save. 

Poverty-line Income Guarantee. In 1998, the federal income guarantee for an

individual SSI recipient was 76 percent of the one-person poverty line for the aged;

for a couple, the guarantee was 90 percent of the two-person poverty line for the

aged. The Gerontological Society and others have suggested that the federal SSI

income guarantee be raised to the poverty line as an alternative to the income-tested

Social Security benefits discussed above.

The cost of this poverty-line income guarantee would depend on the response

of elderly people to the higher benefits. If there were no changes in SSI participation

or any action that might affect eligibility for the program, the cost to the SSI program

would be the sum over all elderly SSI recipients of the gap between their families'

total cash income (including their federal SSI income but excluding any state SSI

income that brought their total income to the poverty line) and their family poverty

lines. 

Data on family income from the March 1999 Current Population Survey

indicate that the cost of filling the poverty gap for SSI recipients would have been

about $1.2 billion, but there are several reasons to believe that the provision would

cost considerably more. First, the CPS shows 1.8 million SSI participants for all of
31. Researchers at the Census Bureau report that total SSI income reported in the CPS accounted for 89 percent of

their benchmark for 1990 and 100.5 percent of their benchmark for 1996, with both benchmarks based on SSI

administrative records. For Social Security, they report that CPS amounts equaled 93 percent of their benchmark

for 1990 and 94 percent for 1996. See Daniel H. Weinberg, Charles T. Nelson, Marc I. Roemer, and Edward

J. Welnaik, Jr., “Fifty Years of U.S. Income Data from the Current Population Survey: Alternatives, Trends, and

Quality,” American Economic Review, Vol. 89, No. 2, 18-21.

41

1998, while administrative records show 2 million for November 1998 alone.31

Accounting for this undercount would raise the cost to slightly more than $1.3

billion, assuming that the missing observations would receive the same monthly SSI

payment. A second problem is the inclusion of state SSI supplements in family

income; federal SSI payments would replace these state supplements under the

proposal and thus raise costs above $1.3 billion. 

If SSI participation rose to 100 percent, the cost would be significantly higher.

If SSI completely filled the poverty gaps for all poor elderly people in 1998, the cost

would have been $9 billion. This cost exceeds the estimated cost of the poverty-line

income-based benefit for Social Security recipients that same year because this SSI

proposal would cover the 0.7 million families of poor elderly people who reported

no family income from Social Security in 1998.

Larger Income Exclusion. Under current rules, up to $20 of Social Security benefits

or other unearned monthly income is excluded from income when SSI payments are

calculated. The Gerontological Society and others have suggested that this unearned

income exemption be raised from $20 so that total income could reach the poverty

line. In 1998, for example, this proposal would have raised the unearned income
42

exemption from $20 to $158 for an individual; the poverty line was $651.50 per

month and the maximum benefit was $494. A disadvantage of this option is that it

would favor SSI recipients with Social Security benefits and other unearned income

over others. SSI recipients with no income from other sources would gain nothing.

Larger Asset Allowance. The 1992 SSI Modernization Project Commission, the

Gerontological Society, and others have suggested that the asset limit be raised to

$10,000. Proponents argue that the low limits now in effect ($2,000 for individuals

and $3,000 for couples, with no indexation) discourage savings. Like larger income

exemptions, however, a larger asset allowance would favor SSI recipients with more

resources over those with less. 

ADDITIONAL CHANGES IN SOCIAL SECURITY AND OTHER PROGRAMS

Debate over fundamental restructuring of Social Security is likely to intensify in the

coming years. If a privatization proposal was adopted, it would create new

opportunities and new challenges for reducing elderly poverty. Less global policy

changes in Social Security and other federal programs would also raise new issues

in that regard. 
43

Social Security Reform

Most attention has focused on the possible consequences of introducing individual

accounts to Social Security. In addition, both scheduled and proposed increases in

the benefit eligibility age, changes in the benefit cost-of-living index, and other

changes being debated could result in significant changes in the economic status of

the elderly.

Individual Accounts. Certain characteristics of an individual accounts program could

have a major impact on the financial status of many older women. Among these

features would be annuitization requirements for accounts at retirement, provisions

for survivors, and any changes in the level and distribution of defined benefits that

accompany the individual accounts. 

Annuitization requirements for account balances at retirement would be very

important for many women. Because women live longer than men, on average,

mandatory annuities with unisex prices would serve to transfer income from men to

women. Lump sum distributions could reduce women’s lifetime benefits relative to

the amount they would receive with mandatory annuities. 

Restrictions on the transfer of account balances to surviving spouses could

also have a major impact on the financial status of many widows. As discussed
44

above, women have generally benefited more than men from the current program's

combination of individual-based payroll taxes and family-based benefits. Women

have collected nearly all auxiliary benefits to date, and the data for younger women

today suggest that this pattern would continue if current rules remained in effect. To

encourage protection of widows, members of the 1994-1996 Advisory Council and

others have suggested mandatory annuitization of all individual accounts, with

spousal consent required for all married workers who request single-life annuities.

 

Rules for account distribution after divorce might also be introduced. Under

the current program, the number of aged spouses or survivors collecting on the

account of an individual insured worker has no effect on amounts received by the

worker or any current or former spouse. With individual accounts, additional people

collecting from one worker's account would certainly lower the average amount

received by each person. 

Because low-wage workers will not have sizable account balances under most

proposals, many decisions about specific rules for individual accounts might have a

small effect on their lifetime incomes. However, because workers with low earnings

are the main beneficiaries of the progressive structure of defined benefits in the

current system, they could be affected significantly by any changes in the defined

benefit formulas. Specific policies, such as a more progressive defined benefit
45

schedule, would have to be developed if average defined benefits are to be reduced

without reducing benefits for low-income individuals. 

Raising the Benefit Eligibility Age. Under current law, the eligibility age for full

defined benefits (called the normal retirement age, or NRA) is scheduled to rise from

age 65 to age 67 between 2000 and 2022. The earliest eligibility age (EEA) is

scheduled to stay at 62, but the permanent cut in monthly benefits for entitlement at

age 62 will rise from 20 percent to 30 percent. Members of the Advisory Council

and others have suggested that this scheduled increase in the NRA be accelerated and

that further changes in the NRA be linked to a mortality index. 

Because most retired workers begin collecting benefits before the NRA, any

increase in the NRA would lower potential retired worker benefits and could

substantially reduce auxiliary benefits for spouses and survivors. Recall that a

benefit equal to the one-person poverty line started at the NRA in 1998 would have

required average indexed annual earnings of $14,057. With the NRA equal to 65 and

a 20 percent cut in the monthly benefit if started at age 62, a poverty-line benefit

would have required average annual indexed earnings of $20,164. With the NRA at

67 and a 30 percent cut for starting benefits at 62, required earnings would have been

$24,527. Thirty-five percent of women age 35 to 44 and 66 percent of men age 35

to 44 had earnings that high in 1998. 
46

If an insured worker started benefits before reaching the new NRA, his or her

survivor would be eligible for smaller auxiliary benefits. Moreover, these auxiliary

benefits could be further reduced if the spouse or survivor had not reached the NRA

when benefits started. 

Some members of the Advisory Council also proposed an increase in the

eligibility age for survivor benefits from 60 to 62, but this change would probably

affect a relatively small group. In 1998, 18 percent of all women age 60 to 62 were

widowed. Moreover, those widows who are in poorest health could still qualify as

disabled widows.

Adjustments to the Cost-of-Living Index. Under current law, Social Security benefits

are indexed to the Consumer Price Index (CPI) to protect beneficiaries against

inflation. This provision is particularly important for those who live long lives

because the purchasing power of their benefits would decline continuously if there

was no indexation, and a longer life would mean a larger drop. In turn, this provision

is more important for women than men, on average, because women tend to live

longer.
47

Other Programs

Changes in the eligibility and benefit rules for Social Security and SSI are not the

only policy options available to policymakers for improving the well-being of the

elderly. 

Policymakers could adjust the differential treatment of home equity versus

other assets in the asset tests for means-tested transfer programs, for example. At

present, home equity is not counted, but financial assets are. This preferential

treatment of home equity could discourage older people from obtaining reverse

mortgages, which would raise their income flows, or from selling their homes and

living off the proceeds. 

Special policies for low-wage workers might be developed, as well. Social

Security payroll tax credits might be added to the Earned Income Tax Credit (EITC)

income received by low-income workers today, for example. As it stands, EITC

income represents a large percentage of current income for many low-income

families, but payroll taxes are not paid on EITC income and it will not be counted

toward Social Security benefits. Particularly for never-married mothers, counting

this income could boost Social Security benefits significantly.
32. OASI rules are identical for men and women; references to women's benefits here reflect the focus of the paper

on high levels of poverty among older women. 

48

APPENDIX A. THE CURRENT SOCIAL SECURITY PROGRAM

Social Security is a social insurance program that covers almost all workers and their

families today. People’s Social Security benefits depend on their own lifetime

earnings, their marital history, their spouses' earnings if they have married, and the

ages that both spouses begin collecting benefits. These factors determine whether a

person receives a benefit as a retired worker, a spouse, or both, and the amount of the

monthly payment.32

Retired Worker Benefits

Eligibility for a retired worker benefit requires 40 quarters of coverage (QC), where

one QC is defined as covered earnings above an indexed amount in a calendar year

($700 in 1998), and up to four QCs may be awarded for a single year. 

The amount of the retired worker benefit is based on a worker's top 35 years

of indexed covered earnings. Specifically, a worker's average indexed monthly

earnings (AIME) are converted to a primary insurance amount (PIA) using a

progressive formula, and this PIA is the basis for his or her benefit. In 1998, the PIA

for a newly qualified retired worker equaled 90 percent of the first $477, 32 percent
33. See the Social Security Bulletin, Annual Statistical Supplement, 1999, Table 2.A11.

34. The Social Security Administration distinguishes between the terms eligible and entitled. When an eligible

worker starts to collect benefits, the worker is called entitled. 

49

of the next $2,398, and 15 percent of that part of the AIME above $2,875.33 Benefits

therefore rise with lifetime covered earnings, but by less than dollar for dollar.

Annual earnings and the benefit formula are both indexed up to the year that a worker

reaches age 60 using an index of national wage growth, and the CPI-W is used to

index benefits after age 62. Social Security benefits are inflation-protected life

annuities. 

A worker is eligible for his or her full retired worker benefit at the normal

retirement age (NRA), which is 65 and 2 months for individuals turning 62 in 2000,

but scheduled to rise gradually to 67.34 Alternatively, a worker can collect a

permanently reduced benefit if he or she starts collecting benefits between the earliest

eligibility age (EEA) and the NRA; the EEA is now 62 and not scheduled to change.

The benefit reduction is intended to equate the expected value of lifetime benefits

started before the NRA and the expected value of lifetime benefits started at the

NRA. Likewise, the delayed retirement credit (DRC) raises the monthly benefit

amount if benefit receipt is postponed by a worker who is fully insured, over the

NRA, and under age 70. The monthly benefit can also go up permanently if postentitlement earnings raise a worker's AIME, and it can drop temporarily if postentitlement earnings exceed the earnings test threshold. Federal income tax can also
35. Benefits are also available for a surviving spouse before age 60 if she is caring for the deceased worker's child

who is under 16.

50

be owed on a portion of Social Security benefits if income from other sources is

sufficiently high. 

Auxiliary Benefit Rules for Spouses and Survivors

A married, widowed, or divorced woman may be eligible for an auxiliary benefit

based on her husband's earnings history, regardless of her eligibility for a retired

worker benefit. 

If a woman's husband is alive and entitled to a retired worker benefit, she is

eligible at the NRA for a spouse benefit equal to 50 percent of his PIA. Between the

EEA and NRA, she can also collect a spouse benefit, but this early receipt reduces

her monthly benefits thereafter. 

If a woman's husband is deceased, she is eligible at the NRA for a survivor

benefit equal to her husband's retired worker benefit—after adjustment for his early

or delayed retirement, but no less than 82.5 percent of the amount her husband would

have received if he started his benefits at the NRA. At age 60, a widow is eligible

for a reduced benefit. If disabled, she can start benefits at age 50.35
51

Spouse and survivor benefits are available to an insured worker's former

spouse if the former spouse was married to the insured worker for at least 10 years

and is not remarried when she applies for benefits. If the woman has been divorced

for at least two years or she was entitled to a spouse benefit at the time of her divorce,

she is eligible for spouse benefits when her husband is eligible for benefits, even if

he has not yet claimed benefits. 

Dual Entitlement

When a beneficiary is eligible for both her own retired worker benefit and either a

spouse benefit or a survivor benefit, she can receive the larger of the two amounts.

If a woman's spouse or survivor benefit exceeds the amount of her own retired

worker benefit, the Social Security Administration (SSA) calls her “dually entitled”

and records her benefit in two distinct parts: her retired worker benefit and an

auxiliary benefit equal to the difference between her spouse or survivor benefit and

her retired worker benefit. 

If a dually entitled woman collects only her own age-reduced retired worker

benefit before she reaches the NRA, her survivor benefit is not actuarially reduced

for her early entitlement. She can collect her full survivor benefit at the NRA.

Alternatively, a widow can collect an age-reduced survivor benefit as early as age 60
36. See the Social Security Bulletin, Annual Statistical Supplement, 1999, Table 5.A14.

52

and then shift to her own retired worker benefit at the EEA or later if her own benefit

exceeds the auxiliary benefit.

Beneficiary Status of Older Women

In 1998, 63 percent of all female beneficiaries age 62-plus still received auxiliary

benefits based on their husbands' earnings in 1998—nearly the same level as in

1960.36 Although 64 percent of all female beneficiaries age 62 and older collected

retired worker benefits based on their own earnings records, up from 43 percent in

1960, the percentage of women entitled only to their own retired worker benefits

dropped slightly. Women’s dual entitlement to both retired worker and auxiliary

benefits rose sharply. 
37. See the Social Security Bulletin, Annual Statistical Supplement, 1999, Table 2.A12.

53

APPENDIX B. MINIMUM BENEFITS UNDER CURRENT LAW

Current rules provide minimum benefit levels in two ways. First, the minimum

earnings required for eligibility for a retired worker benefit imply a minimum amount

for Social Security benefits. Steady real earnings for 40 quarters of coverage at the

1998 threshold amount ($700 per quarter, or $2,800 per year) imply a primary

insurance amount (PIA) of $60 (in 1998 dollars), for example. Current rules also

provide a special minimum benefit for workers who have many years of low covered

earnings. 

The special minimum benefits are based on a "special minimum PIA"

formula—an indexed dollar amount multiplied by the number of years in excess of

10 that a worker has covered earnings above a designated threshold, up to a

maximum of 20 years. In 1998, the special earnings threshold was $7,605, and the

special PIA amount per year was $28.37 in December 1998.37 Thus, the special

minimum PIA at the normal retirement age was $28.37 for a worker with 11 years

above the threshold and $567.30 for a worker with 30 years above the threshold.

Like standard benefits, the monthly benefit based on the special minimum PIA is

reduced if started before the normal retirement age, but delayed retirement credits are

not added to the special minimum. 
38. See the Social Security Bulletin, Annual Statistical Supplement, 1999, Tables 5.A7 and 5.A8. 

54

In December 1998, about 105,000 women collected special minimum benefits

as retired workers (less than 1 percent of the 13.3 million females who collected

retired worker benefits), and fewer than 15,000 women collected auxiliary benefits

based on the special minimum PIA.38
39. Maximum SSI benefit levels are indexed by the same percentage and at the same time as Social Security, but the

amounts of other income and earnings exempted and asset thresholds are not indexed.

40. See State Assistance Programs for SSI Recipients, January 1999, Social Security Administration, Office of

Policy, Office of Research, Evaluation, and Statistics, Publication Number 13-11975.

55

APPENDIX C. SUPPLEMENTAL SECURITY INCOME (SSI) 

Federal SSI uses nationally uniform rules to provide cash payments to people who

are at least age 65, blind, or disabled and who have low incomes and assets. In 1998,

the maximum monthly federal SSI payments were $494 for an individual living

independently and $741 for a couple, but actual benefits are lower for many

recipients. If a recipient lives in someone else's household for a full calendar month

and also receives food from that person, the benefit is reduced by one-third. Benefits

are also reduced dollar for dollar for unearned income (including Social Security)

above $20, and by 50 cents for each dollar of labor market earnings above $65. SSI

eligibility also requires that a person or couple pass an asset test. Excluding a

primary residence, partial value of an auto, life insurance with a face value of $1,500

or less, and most personal belongings, assets must be valued at less than $2,000 for

individuals and less than $3,000 for couples.39

Many states supplement federal SSI payments. In January 1999, 43 states and

the District of Columbia provided supplements that ranged between a few dollars and

hundreds of dollars.40 In December 1998, about 44 percent of all 1.4 million aged
41. See the Annual Statistical Supplement to the Social Security Bulletin, 1999, Table 7.A3.

56

SSI recipients received both federal and state SSI payments, and about 10 percent

received only state SSI.41 Most SSI participants are also eligible for Medicaid. 
42. See, for example, Richard V. Burkhauser and Timothy Smeeding, “Social Security Reform: A Budget Neutral

Approach to Reducing Older Women’s Disproportionate Risk of Poverty,” Policy Brief 2, Center for Policy

Research, The Maxwell School, University of Syracuse, Syracuse, New York, 1994; Steven H. Sandell and

Howard M. Iams, "Reducing Women's Poverty by Shifting Social Security Benefits from Retired Couples to

Widows," Journal of Policy Analysis and Management, Volume 16, Number 2, 279-297, 1997.

57

APPENDIX D. PROPOSALS TO TRANSFER BENEFITS TO SURVIVORS

Analysts have considered three approaches to transferring benefits from a couple

with two living spouses to its surviving spouse: transfer part of the spouse auxiliary

benefit, transfer part of the retired worker benefit for the spouse with lower earnings,

and transfer part of the couple’s combined benefit.42 By design, none of these

approaches would raise total benefit costs. All would be forced saving. The choice

from this set would influence who would receive higher or lower benefits than

current rules would otherwise provide.

Transfer Part of the Spouse Benefit

Currently, the spouse of a retired worker is eligible for an auxiliary benefit equal to

one-half of the retired worker’s benefit. This option would cut the potential auxiliary

benefit for the spouse from 50 percent to 25 percent of the retired worker’s benefit

and then use the savings from this cut (if any) to raise benefits for the couple’s

surviving spouse. This policy would have its largest effects on one-earner couples

and couples with very different earnings. Low earners in these couples would collect

a larger spouse benefit under current rules, so more benefits would be transferred to
58

the surviving spouses. Spouses with primary insurance amounts (PIAs) equal to onehalf or more of their spouses' PIAs would receive no spouse benefits before

widowhood, so their benefits both before and during widowhood would be left

unchanged by this transfer rule. 

Transfer Part of the Low Earner's Retired Worker Benefit

A second option would transfer the difference, if positive, between 50 percent of the

high earner's PIA (i.e., the amount of the spouse benefit) and 100 percent of the low

earner's PIA. In direct contrast to the spouse benefit transfer, this option would not

affect the benefits of one-earner couples or couples with a dually entitled spouse.

This policy would only transfer benefits for those couples in which neither spouse

qualified for any part of a spouse benefit—that is, couples in which each spouse

would collect the amount of his or her own retired worker benefit while both spouses

were alive under current law. Among couples with the same level of combined

lifetime earnings, the amount transferred would be largest for couples in which

husbands and wives had equal lifetime earnings.
43. Research by Sandell and Iams suggests that all three transfer policies would have had a significant but small

effect on poverty among female beneficiaries in 1990. Their results suggest that the couple benefit transfer might

have a larger impact on elderly poverty than the other two options because it would shift fewer couples into

poverty, but they do not consider the policy's effects on poverty among divorced women. 

59

Transfer Part of the Couple's Benefit

A third proposal would transfer a percentage of a couple's combined benefit to its

surviving spouse. Relative to the above two options, this approach would have the

advantage of raising benefits for all surviving spouses, not just some. The

disadvantage of this option is that it would cut benefits for all intact couples and all

divorced beneficiaries with living former spouses.43
60

APPENDIX E. PROPOSALS FOR CARE-GIVING CREDITS

Because many women reduce their paid employment to provide unpaid care for

children, parents, and other family members, many people have proposed that Social

Security earnings credits be awarded to caregivers as a way to raise older women’s

incomes and reduce elderly poverty. As proposed, however, most provisions for

care-giving credits would not have a significant effect on elderly poverty. Indeed,

those with the least need could gain the most from the care-giving credits. 

First, most of the proposed care-giving credit policies would have their largest

impacts on the primary insurance amounts (PIAs) of people with the highest potential

earnings. Some proposals would reduce the number of years of earnings used to

calculate a worker's PIA from its full number (now 35 years) by the number of years

devoted to caregiving, for example, or by a specified number of years for each care

recipient or caregiver. This shortened computation period, as the Social Security

Administration calls it, would be equivalent to substituting average earnings in highearnings years for zeros and low earnings in the credit years. Thus, workers with

high wages who reduced their paid hours of work for any reason or who experienced

significant earnings growth over their lifetimes would gain more from the shortened

computation period than workers with low wages or flat lifetime earnings profiles.
61

An alternative approach would count earnings in all years in the numerator

when calculating average lifetime earnings but reduce the denominator for years of

care-giving time. Like counting earnings for fewer years, this approach would also

favor high-wage workers over low-wage workers. But among women with similar

hourly earnings, this policy would have a greater effect on the PIAs of women who

worked more rather than less. 

A third alternative would simply set a dollar amount for the child care credit.

In contrast to the above credit proposals, this option would favor workers with low

potential earnings. 

Under any of those approaches, however, even workers with large boosts to

their PIAs would probably realize limited benefit gains when they were most in need.

Under current auxiliary benefit rules, the credits would have no effect on women’s

survivor benefits if they had lower lifetime covered earnings than their spouses—and

the spouses of high earners would be in the best position to reduce their employment

to provide unpaid care. 

Given these potential problems with earnings credits for caregiving, some

people have suggested that caregivers instead be given the opportunity to pay extra

payroll taxes later in life. While this policy would limit work disincentives and

spending on the non-needy, as intended, this sort of catch-up contribution policy
44. For additional discussion of care-giver credits, see Howard M. Iams and Steven H. Sandell, "Changing Social

Security Benefits to Reflect Child-Care Years: A Policy Proposal Whose Time Has Passed?" Social Security

Bulletin, Vol. 57, No. 4, Winter 1994.

62

might also have little effect on elderly poverty. Extra payroll contributions might

raise a woman's PIA, but it might leave her spouse and survivor benefits unchanged.

The precise consequences of a care-giving policy would depend partly on

whom the policy targeted. The policy might apply only to mothers who reduced their

paid hours of employment to provide child care or elder care. But that approach

would require monitoring, which could be cumbersome and costly. Alternatively, the

credits might be awarded to low earners within couples with children. These are the

two cases typically referenced. In principle, however, a care-giving policy could also

apply to other groups of potential caregivers, such as single parents, legal guardians,

and adults who care for parents and other family members.44