United States General Accounting Office

GAO Report to the Honorable

William V. Roth, Jr., U.S. Senate

April 1996 SOCIAL SECURITY

Issues Involving

Benefit Equity for

Working Women

G O A

years

1921 - 1996

GAO/HEHS-96-55

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-259611 

April 10, 1996

The Honorable William V. Roth, Jr.

United States Senate

Dear Senator Roth:

This report responds to your request that we review concerns about the treatment of married

women and widows under the Social Security system, proposals that have been made to

address these concerns, and the likely impact of recent and projected economic and

demographic trends on women’s future benefits.

As agreed with your office, we are sending copies of this report to the Commissioner of Social

Security. Copies will be sent to others on request.

This report was prepared under my direction. Please contact Michael D. Packard, Senior

Economist, at (202) 512-7250 if you have any questions.

Sincerely yours,

Jane L. Ross

Director, Income Security Issues
Executive Summary

Purpose Social Security is a large and complex program that protects most workers

and their families from income loss because of a worker’s retirement,

disability, or death. In 1994, about 95 percent of all jobs in the United

States were covered by Social Security, and almost 43 million people

received $317 billion in benefits from the program.

In the 1930s, when the program was established, less than 15 percent of

married women worked for pay outside of their homes, and, as a result,

most married couples were one-earner couples. Today, about 60 percent

of married women are paid workers, and most married couples are

two-earner couples. However, Social Security’s benefit structure remains

largely unchanged despite this and other demographic changes, leading

some to question the structure’s fairness.

To better understand this matter, Senator William V. Roth, Jr., asked GAO

to (1) describe concerns about the fairness of the benefits received by

wage-earning women and their families in retirement, (2) discuss how

economic and demographic trends might affect the benefits of such people

in the future, and (3) discuss past proposals to address these concerns.

Background Policymakers in 1935 based the Social Security Act’s (the act) original

benefit structure on the principle that only those who contributed to

Social Security should receive benefits and individual benefit levels should

relate to individual earnings levels. This may be termed the “individual

equity” principle.

In 1939, policymakers decided the program should also provide benefits to

the families of covered workers, and the Congress amended the act to

provide benefits to covered workers’ wives, widows, eligible children, and,

in a few instances, parents.1

 These benefits are provided without

additional contributions from the worker. By reflecting the notion that the

worker and his family were the unit to be protected, the 1939 amendments

incorporated a “social adequacy” rationale into the benefit structure.

The 1939 expansion of benefit categories resulted in some people being

entitled to benefits both as a retired worker and as the spouse or survivor

of another worker. These individuals are said to be “dually entitled” to

benefits. However, dually entitled beneficiaries do not receive the sum of

these two benefits. Rather, they receive (1) the retired worker benefit they

1

The wife’s benefit is currently based on 50 percent of the worker’s benefit and the widow’s on

100 percent (see app. I). These benefits were made available to husbands and widowers in 1950.

Page 2 GAO/HEHS-96-55 Benefit Equity for Working Women
Executive Summary

earned plus (2) the difference, if any, between that benefit and the benefit

they would receive simply as a spouse or survivor. In other words,

because of the dual entitlement provision (or dual entitlement limitation),

married (and widowed) beneficiaries receive a benefit equal, in effect, to

either their own earned retirement benefit or their spousal (or survivor)

benefit, whichever is higher.

Results in Brief The provision of spousal and survivor benefits on social adequacy grounds

and the workings of the dual entitlement limitation laid the groundwork

for concerns about the fairness of the Social Security benefit structure.

Some question whether benefits are equitably distributed among different

categories of beneficiaries and contributors to the program. For example,

a two-earner couple will receive lower combined benefits in retirement

than an otherwise identical one-earner couple. And, a married woman who

works and pays Social Security taxes might not, because of the dual

entitlement limitation, receive higher benefits than if she had never

worked and received only a spousal benefit.

The movement of women into the paid labor market is likely to increase

the concerns about the fairness of the Social Security benefit structure. As

women’s labor force participation continues to grow, increasing numbers

of women will earn benefits in their own right. This, in turn, will increase

the number of two-earner couples, heightening concerns about the

fairness of their benefits (and those of their survivors) vis-a-vis those of

one-earner couples with identical lifetime earnings. It will also increase

the proportion of married women subject to the dual entitlement

limitation and may lead more women to question whether they receive an

adequate return on their contributions.

Several proposals have been made over the years to address these equity

issues. These include two broad proposals—“earnings sharing” and a

“double-decker” plan—and several more narrow proposals, such as

reducing spousal benefits. However, none of the proposals has been

adopted, in part because they would either increase program costs or

reduce benefit amounts for some groups of beneficiaries. Their enactment

could also impose a large administrative burden on the Social Security

Administration (SSA).

Principal Findings The Social Security Act’s benefits provisions are “gender neutral” in that

individuals, identical in all respects aside from gender, will receive

Page 3 GAO/HEHS-96-55 Benefit Equity for Working Women
Executive Summary

identical earned benefits from the program. However, because spousal and

survivor benefits are not earned benefits, these provisions result in benefit

outcomes that raise certain fairness concerns. Because women tend to

have lower lifetime earnings and longer life expectancies than men, they

are more likely than men to qualify for spousal and survivor benefits and,

thus, to be affected by the dual entitlement limitation. As a result, these

concerns are generally perceived as women’s issues.

Implications of the Benefit

Provisions on Individual

Equity

The main equity concerns about the treatment of working women and

their families result from the characteristics of the spousal and survivor

benefits and how benefits are affected by the act’s dual entitlement

limitation. First, a two-earner couple receives a lower monthly benefit in

retirement than a one-earner couple with identical lifetime earnings (and

other relevant characteristics, such as age). Each couple receives the full

retired worker benefits it earned.2

 In addition, the one-earner couple

receives a spousal benefit based on the lifetime earnings of the worker.

The spousal benefit for the two-earner couple, smaller than that for the

one-earner couple because it is based on the smaller lifetime earnings of

the primary earner, is further reduced, and often eliminated, by the dual

entitlement limitation. As a result, the monthly benefits for a two-earner

couple can be as much as one-third less than those for a one-earner couple

having identical demographic characteristics and identical lifetime

earnings.

Second, the disparity in monthly benefits can be even greater for the

survivors of these couples. A survivor is entitled to a benefit that is

essentially equal to the larger of the pre-death retired worker benefits

received by the couple. The survivor of a one-earner couple receives

67 percent of the total benefit received when both were alive.3

 The

survivor of a two-earner couple, however, can receive as much as

67 percent or as little as 50 percent of the couple’s combined pre-death

benefits.4

 As a result, the survivor of a two-earner couple can receive a

2

The benefit formula is progressive (see app. I) and a two-earner couple usually has a larger portion of

its average indexed monthly earnings (AIME) replaced at the 90-percent tier of the benefit formula

and, therefore, receives larger combined retired worker benefits than an otherwise identical

one-earner couple.

3

This assumes both the husband and wife were aged 65 when they first received benefits. If not, the

survivor could receive a different percentage of the couple’s pre-death benefit.

4

The larger reduction occurs when each partner receives equal pre-death retired worker benefits, again

assuming both were aged 65 at first benefit receipt. At the death of one of the partners, one of those

benefit streams is eliminated, resulting in a 50-percent reduction from the pre-death combined

benefits. The smaller reduction occurs when the secondary earner is dually entitled.

Page 4 GAO/HEHS-96-55 Benefit Equity for Working Women
Executive Summary

benefit that is as little as one-half that received by the survivor of a

one-earner couple with identical lifetime earnings.

Third, a retired married person (usually the wife) might be eligible for

larger benefits as a spouse or survivor than as a retired worker even

though she (or he) made contributions to Social Security for many years.

Because of the dual entitlement limitation, these contributions do not

always result in an increase in monthly benefits. This raises questions of

whether married women receive a fair return on the contributions they

make. Even though these contributions may not increase their retirement

benefits, they can provide the worker with disability coverage and the

worker’s family with survivor coverage—coverages not provided to those

who make no contributions.

Finally, spousal and survivor benefits may provide some people with

higher benefits than other people who had higher lifetime earnings and

who made higher contributions to Social Security.

Trends Most of these concerns about benefit fairness are likely to become more

widespread in the future because of two trends. First, women are spending

an increasing portion of their lives in the paid labor force. The labor force

participation rates for women have doubled since 1940, and those of

working-aged women (those aged 25 to 54) are expected to continue to

increase in the future. This stronger labor force participation will result in

more women receiving benefits based, at least in part, on their own work

records and may exacerbate concerns about the return married women

receive on their contributions. It will also increase the proportion of

couples who are two-earner couples, which may increase the concerns

that two-earner couples (and their survivors) receive lower benefits than

identical one-earner couples.

Second, the earnings of women are rising relative to those of men.

Because of the dual entitlement limitation, these higher lifetime earnings

will increase the proportion of married women whose earnings will be too

high for them to qualify for any spousal benefits, which may reduce the

concerns about returns on contributions. However, it may increase

concerns that people who had lower lifetime earnings and made smaller

contributions to Social Security could receive higher benefits from the

program.

Page 5 GAO/HEHS-96-55 Benefit Equity for Working Women
Executive Summary

Proposals for Reform Several proposals have been made during the past 25 years to address

individual equity concerns. Two of the broader proposals—“earnings

sharing” and a “double-decker” plan—would address several of these

concerns at one time. Earnings sharing would combine the covered

earnings5

 of the husband and wife for each year the couple was married

and credit half of this combined total to each spouse’s Social Security

earnings record. There would be no separate spousal or survivor benefits,

but, under most variations of earnings sharing, survivors would inherit

“earnings credits” from deceased partners for the years of marriage.

Because benefits would be based only on each spouse’s shared earnings

credits, couples with the same total lifetime earnings would receive equal

retirement benefits, as would their survivors.6

 In addition, because there

would be no spousal benefits, a married woman would not face the

prospect of working and paying Social Security taxes only to find that she

is entitled to a spousal benefit larger than the benefit she earned in her

own right.7

The double-decker plan, which is used in many countries, would also

equalize benefits in situations in which couples’ lifetime earnings were the

same. Each person who works in covered employment would, upon

retirement, receive benefits from two “decks.” The first deck would

provide a flat-rate benefit to all qualified beneficiaries, while the second

deck would provide benefits proportional to the beneficiary’s lifetime

covered earnings. Spousal and survivor benefits would be eliminated, but,

under some versions of the plan, survivors would inherit earnings credits

from deceased partners.

None of these proposals, broad or narrow, has been adopted. One obstacle

has been costs. Many of the proposals would entail increasing the benefits

for certain categories of beneficiaries thought to be disadvantaged by the

current system (for example, two-earner couples), which would raise

program costs if no offsetting benefit reductions were made. Financing

such increases in a “cost neutral” manner—that is, without the need for

additional Social Security payroll taxes—would require corresponding

benefit decreases for other categories of beneficiaries, which could raise

5

Covered earnings are earnings on which Social Security taxes are paid.

6

This assumes that the couples are identical except for the distribution of total earnings within the

couples and that the survivor of each couple could inherit all of the earnings credits of his or her

deceased partner.

7

Earnings sharing would not necessarily equalize benefits of like-earning individuals who, under

current law, have different monthly benefits, if, for example, their spouses have different earnings.

Page 6 GAO/HEHS-96-55 Benefit Equity for Working Women
Executive Summary

certain concerns about the adequacy of their benefits. Also, implementing

any proposed reforms could put a large administrative burden on SSA by

forcing it to revise its reporting, recording, and operational procedures.

Recommendations GAO is making no recommendations.

Agency Comments GAO provided a draft of the report to the Commissioner of Social Security

with a request for the agency’s comments. In commenting on our report,

the Commissioner stated that the report “adequately addresses the

objectives of the study.” However, she noted a few concerns.

First, she indicated the report follows the premise that the authors of the

1939 amendments did not envision a world in which most wives would

work. The report has been modified to indicate the authors of the 1939

amendments did envision such a world. However, GAO’s point is that the

increase in the number of women workers combined with the current

benefit structure has given rise to anomalies that lead to the concerns

discussed.

Second, the Commissioner suggested GAO discuss what impact certain

proposals to address the equity concerns, such as eliminating spousal and

survivor benefits, would have on adequacy concerns. Appendix II covers

adequacy concerns in some detail, and chapter 5 notes that reforming the

program to address equity concerns could create or exacerbate existing

adequacy concerns.

Finally, the Commissioner noted that GAO’s use of cross-sectional data for

the analyses in chapter 3 could provide biased estimates of Social Security

lifetime earnings and wealth, and she offered GAO the use of an alternative

data set created by SSA’s Office of Research and Statistics. GAO did not use

the recommended data set in its analyses. However, it included some

published findings from studies that used this data set.

Page 7 GAO/HEHS-96-55 Benefit Equity for Working Women
Contents

Executive Summary 2

Chapter 1 

Introduction

10

Development of Social Security’s Benefit Structure 10

How Benefits Are Calculated 12

The Benefit Structure and Women 13

Objectives, Scope, and Methodology 14

Chapter 2 

Implications of

Benefit Provisions on

Individual Equity

15

Couple Benefits 15

Survivor Benefits 18

Benefits for Married Working Women 21

Benefits for Working and Nonworking Individuals 23

Chapter 3 

Trends in Women’s

Social Security

Benefits

26

Women’s Labor Force Participation 26

Women’s Earnings Patterns 31

Marital Status 35

Women’s Benefit Trends 36

Chapter 4 

Proposals Aimed at

Addressing Women’s

Equity Concerns

41

Earnings Sharing 41

The Double-Decker Plan 44

Other Representative Proposals 45

Chapter 5 

Conclusions and

Agency Comments

48

Conclusions 48

Agency Comments and Our Evaluation 50

Appendixes Appendix I: Benefit Calculations 52

Appendix II: Adequacy Concerns 57

Appendix III: Comments From the Social Security Administration 64

Bibliography 65

Tables Table 3.1: Women’s Labor Force Participation Rates, 1940-93 27

Page 8 GAO/HEHS-96-55 Benefit Equity for Working Women
Contents

Table 3.2: Labor Force Participation Rates for Women, by Marital

Status and Presence and Age of Children, March 1960-93

28

Table 3.3: Percentage of Men and Women Who Were Fully

Insured, 1950-93

28

Table 3.4: Median Earnings of Year-Round, Full-Time Workers, by

Sex, 1951-94

32

Table 3.5: Projected Percentage Distribution of Women Aged

65-69, by Marital Status, 1995-2020

35

Table 3.6: Percentage Distribution of Women Beneficiaries Aged

62 and Older, by Type of Benefit and Dual Entitlement Status,

1960-93

37

Table 3.7: Percentage of New Retired Worker Beneficiaries

Whose Benefits Are Reduced for Early Retirement, by Sex,

1960-93

38

Figures Figure 2.1: Total Couple Benefits for 65-Year-Old Couples With

Various Within-Couple Distributions of a $2,000 AIME

17

Figure 2.2: Couple and Survivor Benefits for Different

Within-Couple Distributions of the Couples’ Total $2,000 AIME

20

Figure 2.3: Social Security Benefits of Two Married Women 22

Figure 2.4: Illustrative Benefits for Retired Worker Only, Dually

Entitled, and Spouse Only Beneficiaries

24

Figure 3.1: Past and Projected Labor Force Participation Rates

for Women, Selected Years

30

Figure 3.2: Spouse AIME Needed to Receive Benefits as a Retired

Worker, Both Husband and Wife Aged 65

34

Figure 3.3: Median Covered Earnings for Men and Women and

the Maximum Taxable Earnings Level, 1940-95

40

Figure I.1: Converting Average Indexed Monthly Earnings Into a

Primary Insurance Amount for a Person Attaining Age 62 in 1996

54

Abbreviations

AIME average indexed monthly earnings

BLS Bureau of Labor Statistics

COLA cost of living adjustment

DRC delayed retirement credit

PIA primary insurance amount

SSA Social Security Administration

SSI Supplemental Security Income

Page 9 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 1 

Introduction

When Social Security was enacted 60 years ago, relatively few women

worked in wage-paying jobs. As a result, during the first decades of the

program, most women became eligible for benefits as either the spouse or

survivor of their Social Security-covered husbands. Today, a larger

proportion of women work and earn Social Security benefits in their own

right. However, the benefit structure has not significantly changed to

reflect this trend, leading to concerns about its fairness for retired women

and their families.

Development of

Social Security’s

Benefit Structure

The Social Security Act (the act) was signed into law by President

Franklin D. Roosevelt in August 1935. It originally was designed to provide

retirement benefits only to people in commerce and industry occupations.

Workers in these occupations could receive benefits at age 65 or older if

they had no earnings.

Benefits under the original act had a strong “individual equity”

component—that is, benefits were to go only to retired individuals who

had contributed to Social Security during their working years, and

individual benefit levels were to be based on lifetime earnings. Benefits

were not strictly proportional to earnings, however, because there was

(and still is) a larger increase in benefits for the first increment of earnings

than for later earnings increments. Thus, there was also a “social

adequacy” component to the benefit structure.

The original act had no provision providing monthly benefits to workers’

dependents or survivors.8

 The first Advisory Council on Social Security,

believing that the family—not simply the worker—should be the unit

protected by the act, concluded in 1938 that this was a shortcoming. In

their view, the social adequacy goals of the program needed strengthening.

The Council therefore recommended that benefits be extended to the

wives, widows, and eligible minor children.

The Congress in 1939 adopted the Council’s recommendations and

provided “auxiliary” benefits to wives and widows aged 65 or older,

children under age 18 (but generally only if the covered worker was male),

and some dependent parents of deceased covered workers.9

 Today,

8

However, a deceased worker’s survivor was eligible for a lump sum payment equal to 3.5 percent of

the worker’s lifetime covered earnings less the lifetime benefits received by the worker.

9

In 1950, the Congress made men eligible for spousal and survivor benefits, albeit with more

restrictions than applied to women. Today, the requirements to receive such benefits are identical for

men and women. Only the marriage partner with the lower lifetime earnings can qualify for auxiliary

benefits.

Page 10 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 1 

Introduction

spousal benefits are 50 percent of the worker’s age 65 benefit and the

survivor benefits are 100 percent. The auxiliary benefits were (and are)

funded, not by an additional tax on married workers or a reduction in their

own benefits, but from Social Security funds to which all covered workers

contribute. Thus, auxiliary benefits are not “earned” benefits.

When the 1939 Congress provided auxiliary benefits to wives and widows,

it recognized that many married women would also be wage earners

entitled to Social Security retired worker benefits in their own right. The

Congress did not want to deny such women the opportunity to receive at

least some spousal or survivor benefits because doing so could result in

lowered benefits for working wives. The auxiliary benefits of many

women, particularly those with low-paying jobs or few years of work,

might be larger than the benefits the women earned from their own jobs.

At the same time, however, the Congress did not want working women

who were not dependent on their husbands to receive auxiliary benefits.

The Congress’ solution, seen in the act’s dual entitlement provision (or

limitation), was to provide that a working woman in retirement could

receive benefits from two sources—(1) her own retired worker benefit

plus (2) any excess of her spousal or survivor benefit over her retired

worker benefit. In effect, this meant that she would receive not the sum of

these two benefits but either her retired worker benefit or her auxiliary

benefit, whichever was higher.10,11

By providing benefits to people other than the workers themselves, the

1939 amendments improved the “social adequacy” part of the program but,

in so doing, laid the groundwork for the “individual equity” concerns.

Subsequent debates about the program have often been over the

appropriate balance between these two, often conflicting goals. It is not

easy to move the program closer to one goal without moving it away from

the other.

10For example, if a dependent married woman is entitled to a retired worker benefit of $300 per month

based upon her own work record and a spousal benefit of $400 per month based upon her husband’s

work record, she will receive a dual entitlement benefit of $400—that is, her own retired worker

benefit of $300 plus the $100 by which her spousal benefit exceeds her retired worker benefit. In

effect, she gets the larger of the two, the amount of her spousal benefit.

11Although dually entitled people receive the same benefit amounts they would have received had they

never worked, their work provides advantages not enjoyed by spouses and survivors who never

worked. First, their earnings increase their family’s income during the years they work. Second, these

women are often eligible for disability benefits. Third, their families are eligible for survivor benefits.

Finally, they can receive retired worker benefits at the time they choose (after attaining age 62) and do

not have to wait for their spouses to retire or die to receive a Social Security benefit.

Page 11 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 1 

Introduction

Since 1939, the act has been amended many times, with the changes

tending to strengthen the social adequacy features of the program—for

example, the 1956 amendments introduced disability benefits. Other

changes included expanding the types of jobs covered, adding beneficiary

categories (such as benefits for disabled workers and divorced spouses),

increasing benefits, introducing automatic cost of living adjustments

(COLA), and changing the payroll tax rate and level of earnings subject to

the payroll tax.12

Today, about 95 percent of all jobs in the United States are covered by

Social Security. Workers in the program, provided they have made the

necessary contributions and met other requirements, may receive

retirement benefits upon reaching age 62 or disability benefits upon

becoming disabled. In 1994, more than 138 million workers contributed

almost $345 billion to the program, and nearly 43 million people received

$317 billion in benefits.

How Benefits Are

Calculated

The calculation of Social Security benefits is essentially a three-step

process (see app. I for a detailed description). First, a worker’s lifetime

covered earnings over his or her 35 highest earnings years are calculated.

Social Security uses “average indexed monthly earnings” (AIME) as its

measure of lifetime covered earnings.

Second, a progressive benefit formula is applied to these lifetime earnings

to determine the benefit that would be payable to the worker at age 65.13

This age-65 benefit is called the “primary insurance amount” (PIA). Finally,

the benefit is adjusted for the age at which the worker first receives the

benefit.14 If auxiliary benefits are being calculated, a factor is applied to

the PIA for the particular type of benefit, and the resulting amount is

adjusted for the auxiliary beneficiary’s age.15

12Workers whose earnings are subject to the Social Security payroll tax (also called contributions) are

called “covered” workers, and the earnings on which payroll taxes are levied are known as “covered”

earnings.

13The benefit formula is progressive in that it replaces a relatively larger portion of lifetime earnings for

people with low earnings than for people with high earnings.

14Benefits are reduced if first taken before age 65 and increased if first taken between ages 65 and 70.

15A spousal benefit is 50 percent of the worker’s PIA and a survivor’s benefit, 100 percent. Each will be

reduced if first received by the auxiliary beneficiary before age 65, but not increased if first taken at

age 65 or older.

Page 12 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 1 

Introduction

The benefits of retired and disabled workers are based on their own PIAs.

The benefits of auxiliary beneficiaries, such as those receiving spousal

benefits, are normally based on the PIAs of their current or former spouses.

The benefits for persons entitled to auxiliary benefits and retired worker

benefits in their own right—“dually entitled” individuals—are based in part

on their own PIAs and in part on those of their current or former spouses.

The Benefit Structure

and Women

Today, the act’s benefit provisions are gender neutral. At retirement, men

and women with identical Social Security earnings histories and other

relevant characteristics, such as age and marital status, will receive

identical earned benefits from the program. However, because women, on

average, have lower lifetime earnings than men, their average Social

Security benefits are smaller. In December 1994, benefits of female retired

workers averaged $601 compared with $785 for male retired workers.16

The lower earnings for women reflected their “weaker attachment” to the

workplace in terms of fewer years with earnings and lower wage rates for

their years of employment. Also, women’s benefits tend to be lower than

men’s because women generally begin receiving benefits at younger ages

than men. The younger the age at retirement, the larger the benefit

reduction.

Because women tend to have lower earnings than men, their benefits,

relative to their lifetime earnings, are likely to be higher than men’s

because of Social Security’s progressive benefit formula. Also, because

women have lower earnings than men, more women than men receive

auxiliary benefits as spouses or survivors,17 and, thus, more women will be

subject to the dual entitlement limitation on benefit amounts. Finally,

women have longer life expectancies than men and will, therefore, receive

Social Security benefits for a longer period of time than men, on average.18

As a result, the ratio of the total benefits women and men receive over

their lifetimes will be higher, on average, than the ratios of their monthly

benefits.

16Averages include the portion of spousal or survivor benefits received by dually entitled persons.

17For example, in December 1994, more than 3 million women, but fewer than 40,000 men, were

receiving spousal benefits.

18A woman aged 65 today can expect to live another 19 years, but a 65-year-old man can expect to live

only about 15 more years.

Page 13 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 1 

Introduction

Objectives, Scope,

and Methodology

To better understand the issues involved, Senator William V. Roth, Jr.,

asked us to (1) describe the concerns about the fairness of the benefits

received by job-holding women and their families in retirement,

(2) discuss how economic and demographic trends might affect the

benefits of such people in the future, and (3) discuss past proposals to

address these concerns.

To address these objectives, we reviewed current and historical Social

Security documents to understand the rationale for the current Social

Security benefit structure; interviewed experts and researchers who have

studied Social Security’s treatment of women; reviewed the literature that

described concerns about Social Security’s treatment of women during the

past 25 years and that proposed solutions to alleviate these concerns; and

obtained historical evidence and available projections of the changing

labor force participation and earnings levels of women.

Most of the data we used to analyze economic and demographic trends

were published or provided by the Social Security Administration (SSA),

the Department of Labor’s Bureau of Labor Statistics and Women’s

Bureau, and the Bureau of the Census. Because of a lack of suitable and

readily available longitudinal data to analyze these trends, we relied

heavily on cross-sectional data for our analysis. Using these data, we

determined the likely effect of economic and demographic trends on the

Social Security benefits women will receive in the future. We conducted

our work from November 1994 to December 1995 using generally accepted

government auditing standards.

Social Adequacy Issues In examining concerns about the fairness of the benefits structure for

working women and their families, our focus is on working women’s (and,

by extension, couples’) earnings and how they affect, or do not affect,

retirement benefits. Insofar as the focus is on the link between earnings

and benefits, the report addresses mainly “individual equity” issues.

There are, as well, “social adequacy” concerns pertaining to the Social

Security benefits of women—for example, whether benefits for aged

widows should be increased or whether the program’s treatment of

divorced women is fair. Although these concerns were outside the scope

of this study, we have summarized some of the more common ones in

appendix II.

Page 14 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

Concerns about the fairness of the act’s benefit provisions for women and

their families arise from two sources—the unearned nature of the act’s

spousal and survivor benefit provisions and its dual entitlement limitation.

Because women tend to have lower lifetime earnings and longer life

expectancies than men, they are more likely than men to qualify for

spousal and survivor benefits and to be affected by the dual entitlement

limitation. As a result, the following fairness concerns are generally

viewed as women’s issues, although the concerns can apply to men as

well.

Couple Benefits One fairness concern is that a two-earner couple receives lower combined

retirement benefits than a one-earner couple with identical lifetime

earnings and other identical characteristics.19 The reason this occurs is

that the two-earner couple will receive a smaller spousal benefit than the

one-earner couple and, in fact, may receive no spousal benefit at all.

Both couples receive all the retired worker benefit each partner earned

through his or her covered employment. Because the benefit formula is

progressive, the two-earner couple will usually receive larger total retired

worker benefits than the one-earner couple.

The one-earner couple also receives a spousal benefit (usually for the

wife) based on one-half the worker’s benefit. This spousal benefit is not

reduced by the dual entitlement limitation because the spouse receives no

retired worker benefits of her own. Thus, the one-earner couple’s total

benefit is 150 percent of the worker’s retired worker benefit (if both first

received benefits at age 65).

The unreduced spousal benefit for the two-earner couple will be smaller

than that for the one-earner couple because it is based on the benefit of

the couple’s primary earner, whose lifetime earnings are smaller than

those of the worker in the one-earner couple. The dual entitlement

limitation will further reduce, or perhaps eliminate, this smaller spousal

benefit by subtracting the secondary worker’s retired worker benefit from

it. The total benefit of the two-earner couple will consist of the two retired

worker benefits plus, perhaps, a spousal benefit supplement. The

difference in spousal benefits always exceeds the difference in total

19The benefit formula used to calculate benefits is adjusted each calendar year and applies to all people

attaining age 62 in that year. Also, benefits are adjusted depending on the age at which benefits are

first received. Thus, assuming that these other characteristics of couples are identical, especially the

years of birth and the ages at first benefit receipt, is important.

Page 15 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

retired worker benefits, so a two-earner couple always receives lower

benefits than an otherwise identical one-earner couple.

A hypothetical example can illustrate how this occurs. We assume there

are two couples who begin receiving benefits in 1995 and that all four

persons are aged 65. We assume that the husband in the one-earner couple

has an AIME of $2,000 and that his wife had no covered earnings.20 In the

two-earner couple, we assume each spouse has an equal AIME of $1,000, for

a total of $2,000.

In this example, the worker in the one-earner couple would receive a

retired worker benefit of $939 per month and his wife, an unreduced

spousal benefit of $469 per month for a total benefit of $1,408. Each

worker in the two-earner couple would receive a monthly retired worker

benefit of $591. Neither would be eligible for a spousal benefit because of

the dual entitlement limitation. Their total benefit would be $1,182, $243

more than the retired worker benefit received by the one-earner couple

but $226 less than the one-earner couple’s total benefit.

The total monthly benefit of the two-earner couple in this example is

about 16 percent less than that of the one-earner couple. The reduction

can be greater or smaller depending on the relative earnings of the

husband and wife in the two-earner couple and the couples’ total AIME. In

some cases, a two-earner couple can receive total benefits that are

one-third less than an otherwise identical one-earner couple’s benefits.

Figure 2.1 shows how varying distributions of earnings would affect the

combined benefits of couples with a combined AIME of $2,000 (assuming

that benefits always start at age 65 in 1995). At the left end of the line, the

wife’s share of the couple’s AIME is 0 percent (the one-earner couple in our

example), and the couple’s total monthly benefit is $1,408. At the right end,

the wife’s share is 50 percent (the two-earner couple in the example), and

the couple’s total monthly benefit is only $1,182. The connecting line

shows the monthly benefit totals for two-earner couples with various

within-couple distributions of the $2,000 AIME.

20Recall that AIME stands for “average indexed monthly earnings,” the measure of lifetime earnings

SSA uses to calculate a person’s Social Security benefit.

Page 16 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

Figure 2.1: Total Couple Benefits for

65-Year-Old Couples With Various

Within-Couple Distributions of a $2,000

AIME

0 0.1 0.2 0.3 0.4 0.5

0

200

400

600

800

1,000

1,200

1,400

1,600

Couple's Total Benefit

Wife's Share of $2,000 AIME

Benefit Amount

The declining segment of the line represents couples whose secondary

earner (the wife) is dually entitled to retired worker benefits and spousal

benefits. The line declines because, as the wife’s share of the couple’s AIME

Page 17 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

increases, the husband’s share falls. This reduces both the husband’s

retired worker benefit and the spousal benefit based on it. Until the wife’s

retired worker benefit exceeds her benefit as a spouse, the couples’ total

benefits will fall. Once both husband and wife are receiving retired worker

benefits, the couples’ total benefit will either increase (if the wife’s AIME

puts her on a higher tier of the benefit formula than her husband [see app.

I]) or remain constant (if both partners are on the same tier).21

Survivor Benefits A second concern is that the disparity in the monthly benefit received by

one-earner and two-earner couples with identical lifetime earnings can be

even greater for the survivors of these couples. The survivor of a couple is

entitled to the higher of the two retired worker benefits earned by the

couple before the death of one partner.22 Because women tend to outlive

their husbands, they are the ones most often affected.

The surviving member of a one-earner couple receives about 67 percent of

the couple’s total monthly benefit when both were alive.23 In essence, the

retired worker benefit continues, and the spousal benefit ends.

The surviving member of a two-earner couple can receive as much as

67 percent of the couple’s total monthly benefit (if the secondary earner

was dually entitled) or as little as 50 percent (if each earner had identical

lifetime earnings). Because two-earner couples have lower couple benefits

than identical one-earner couples, the survivors of two-earner couples

always receive lower survivor benefits. These survivors receive only the

higher of the two retired worker benefits the couple earned. The retired

worker benefit of the secondary earner and any spousal supplement he or

she might have received as a dually entitled beneficiary are eliminated. As

a result, the survivor of a two-earner couple can receive benefits that are

as low as one-half those received by the survivor of an identical one-earner

couple.

Continuing our hypothetical example, the survivor of the one-earner

couple would receive $939 (two-thirds of the couple’s $1,408 monthly

benefit) as shown in figure 2.2. The survivor of the two-earner couple in

which the husband and wife had identical lifetime earnings would receive

21For 65-year-old couples in 1995, the line will have a rising segment when a couple’s combined AIME

level is less than about $1,860.

22In a one-earner couple, the spouse has a retired worker benefit of $0.

23The exact percentage depends on the ages of the husband and wife when benefits were first received.

In our example, the survivor would receive two-thirds of the couple’s benefit.

Page 18 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

only $591 (half the $1,182 the couple received while both were alive). The

benefits of the survivor of our two-earner couple are 37 percent less than

those of the one-earner couple survivor, even though both couples had

identical lifetime earnings.

Page 19 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

Figure 2.2: Couple and Survivor Benefits for Different Within-Couple Distributions of the Couples’ Total $2,000 AIME

0 0.1 0.2 0.3 0.4 0.5

0

200

400

600

800

1,000

1,200

1,400

1,600

Couple Benefit

Survivor Benefit

Wife's Share of $2,000 AIME

Benefit Amount

As seen in the figure, the survivor benefit of a two-earner couple whose

secondary earner was dually entitled while both partners were alive will

receive a benefit one-third smaller than the couple’s total benefit while

Page 20 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

both were alive. Once the secondary earner is no longer dually entitled,

the percentage reduction will increase because the secondary earner’s

retired worker benefit, which now exceeds the spousal benefit based on

the primary earner’s benefit, is eliminated.

Benefits for Married

Working Women

A third concern is that a married person (usually the wife) may work and

pay Social Security taxes only to discover at retirement that she is entitled

to a spousal benefit that is larger than the retired worker benefit she

earned in her own right. Because the act’s dual entitlement limitation

effectively limits a beneficiary to the larger of these benefits, her

contributions do not result in a larger benefit at retirement. It is sometimes

argued that such a limitation is unfair because it does not sufficiently

reward a person for years of contributions.24

The first bar in figure 2.3 (“Working Wife”) illustrates this point. In this

figure, we assume that the wife had earned a retired worker benefit of

$250. Her husband, however, earned a benefit of $1,000, making her

eligible for a $500 spousal benefit. She receives a dually entitled benefit of

$500—her own $250 retired worker benefit and the $250 difference

between it and her full spousal benefit. Had she never worked, she still

would have been eligible for a spousal benefit of $500 (the second bar in

the figure [”Nonworking Wife”]).

24We note, however, that, while the dually entitled beneficiary’s benefit is not increased as a result of

her contributions to the program, her benefit is larger than the benefit that would be received by a

beneficiary who had identical lifetime earnings but who is not dually entitled.

Page 21 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

Figure 2.3: Social Security Benefits of

Two Married Women

0

100

200

300

400

500

600

Spouse Benefit

Retired Worker Benefit

Working Wife Nonworking Wife

Monthly Benefit

Page 22 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

Benefits for Working

and Nonworking

Individuals

Related concerns have also been raised about the relative benefits that can

be received by those who worked and contributed to the program versus

those who receive benefits solely as spouses or survivors and about the

benefits that can be received by those who are dually entitled versus those

who are not. The first issue is that workers, in spite of the taxes they pay

to Social Security, may not receive higher benefits in retirement than

nonworkers who paid no such taxes. The second is that some workers

may receive benefits that are smaller than those received by people having

lower lifetime earnings and making lower contributions to the program.

These concerns are most apparent when comparing benefits received by

single workers with those received by the lower earner in a married

couple.

These issues are illustrated in figure 2.4. “Person 1” has a monthly retired

worker benefit of $500 and is not dually entitled. “Person 2” has lower

lifetime earnings and a lower retired worker benefit ($400 per month) but

is a dually entitled spouse and receives a total monthly benefit of $550.

“Person 3” never worked and receives no retired worker benefit, but her

spouse was a high earner. Her spousal benefit is $575 per month.

Page 23 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

Figure 2.4: Illustrative Benefits for

Retired Worker Only, Dually Entitled,

and Spouse Only Beneficiaries

0

100

200

300

400

500

600

700

Spouse or Survivor Benefit

Retired Worker Benefit

Person 1 Person 2 Person 3

Monthly Benefit

Page 24 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 2 

Implications of Benefit Provisions on

Individual Equity

Persons 1 and 3 illustrate the first concern, that workers may receive

smaller benefits than nonworkers. For this to occur, the covered earnings

of the nonworker’s spouse must be more than twice as large as the

worker’s covered earnings.

Persons 1 and 2 illustrate the second concern. Person 1 had larger lifetime

earnings and a larger retired worker benefit than person 2. However, he

had a smaller total benefit because person 2 had a relatively high-earning

spouse. As an extreme example, in December 1994, several thousand

dually entitled spouses had monthly benefits in excess of $900 per month.

This is a larger monthly benefit than was received by more than

three-quarters of all retired worker beneficiaries in that month.

These concerns can intensify when a couple’s primary earner dies. The

survivor then becomes eligible for the deceased’s full retired worker

benefit. Widows who were the couples’ secondary earners are even more

likely than married spouse beneficiaries to have larger benefits than

workers who contributed more to the program than the widows did.

Page 25 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

The recent and projected trends in women’s labor force participation and

earning levels are likely to heighten the concerns discussed in chapter 2.

The type and amount of Social Security benefits women receive depend

upon several factors, including their “attachment” to the labor force, their

lifetime earnings (or AIMEs) relative to those of current or former

husbands, and their marital history.

Women’s labor force participation has been increasing, which should

increase the proportion of women qualifying for retired worker benefits in

the future. This, in turn, will increase the proportion of couples who are

two-earner couples. The earnings of women relative to men’s have also

been increasing, which should increase the proportion of women receiving

only retired worker benefits (as opposed to being dually entitled). Finally,

changes in marital status have affected the types of benefits these women

can receive.

Women’s Labor Force

Participation

There has been a long-term trend toward greater labor market

participation by women. This is seen in table 3.1. In 1940, only 28 percent

of all women were in the labor force, and less than 15 percent of married

women were working.25 By 1993, almost 60 percent of all women were in

the labor force and married women were slightly more likely than other

women to be working.

The growth in women’s labor force participation is even more dramatic for

women in their prime earning years—ages 25 to 54. The labor force

participation rate for these women increased from 42 percent in 1960 to

75 percent in 1993. The rates for married women within this age range

increased even more rapidly.

25The labor force participation rates cited in this chapter include all workers regardless of whether

their employment is covered by Social Security.

Page 26 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

Table 3.1: Women’s Labor Force

Participation Rates, 1940-93 All women Married womena

Year

Aged 16 and

older Aged 25-54b

Aged 16 and

older Aged 25-54b

1940 27.9c NA 14.7c NA

1950 33.9c NA 23.8c NA

1960 37.7 41.6 31.9 34.6

1970 43.3 50.1 40.5 45.2

1980 51.5 64.3 49.9 59.3

1990 57.5 73.9 58.4 70.7

1993 57.9 74.5 59.4 72.3

Note: NA indicates data not available for this age breakdown.

aMarried women with husbands present.

bAs of March of the given year.

cAged 14 and older.

Sources: Historical Statistics, Colonial Times to 1970, series D 29-41 and 49-62; Statistical

Abstract of the United States 1994, table 625; and data from the Bureau of Labor Statistics.

This increased labor force participation reflects not only a higher

proportion of women working but also women staying in the labor force

for longer periods. According to one study, recent generations of married

women have much stronger attachments to the labor force at a given age

than older generations did.26 For example, married women born from 1945

to 1949 were three times more likely to have worked 17 or more of the 20

years between ages 22 and 41 than were married women born from 1930 to

1934 (34 percent versus 11 percent).

The stronger attachment to the labor force of recent generations of

women is also demonstrated by the increasing percentage of mothers in

the labor force, especially those with young children (table 3.2), and by the

increasing percentage of women who have gained fully insured status

under Social Security (table 3.3).27

26Howard M. Iams, “Earnings of Couples: A Cohort Analysis,” Social Security Bulletin, Vol. 56, No. 3,

pp. 22-32.

27Being fully insured is necessary for entitlement to retired worker benefits and for one’s dependents

to be entitled to spouse, children, or survivor benefits. To be fully insured, a person needs 1 quarter of

coverage for each year after 1950, or the year age 21 is attained, if later, and the year before the person

reaches age 62, dies, or becomes disabled. In 1995, 1 quarter of coverage (up to a maximum of 4) was

credited for each $630 of covered earnings received during a calendar year.

Page 27 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

Table 3.2: Labor Force Participation Rates for Women, by Marital Status and Presence and Age of Children, March 1960-93

Total Under age 6 Ages 6-17 only

With children

Year Single Marrieda Otherb Single Marrieda Otherb Single Marrieda Otherb

1960 44.1 30.5 40.0 NA 18.6 40.5 NA 39.0 65.9

1970 53.0 40.8 39.1 NA 30.3 52.2 NA 49.2 66.9

1980 61.5 50.1 44.0 44.1 45.1 60.3 67.6 61.7 74.6

1990 66.4 58.2 46.8 48.7 58.9 63.6 69.7 73.6 79.7

1993 64.5 59.4 45.9 47.4 59.6 60.0 70.2 74.9 78.3

Note: NA indicates data are not available.

aHusband present.

bWidowed, divorced, or separated.

Source: Statistical Abstract of the United States 1994, table 626.

Table 3.3: Percentage of Men and

Women Who Were Fully Insured,

1950-93

Percentage fully insured

Year Men Women

1950 50.3 22.2

1955 75.5 44.7

1960 80.7 43.2

1965 85.6 54.3

1970 87.7 58.3

1975 88.9 63.8

1980 90.2 69.4

1985 89.2 72.3

1990 90.1 76.2

1993 90.1 77.5

Source: Social Security Administration, Office of the Actuary.

The implication of this strong growth in women’s participation rates is that

a higher percentage of women retiring in the future will be fully insured

and qualify for benefits based on their own work records. Also, they will

have fewer years with no earnings in their work histories when they apply

for benefits than do women retiring today.28 A more complete work

28The median number of $0 earning years for insured workers attaining age 62 in 1993 was 4 for men

and 15 for women. After dropping the 5 years with lowest earnings, each year of $0 earnings reduces

the AIME by about 2.9 percent compared with what it would have been had the earnings for that year

equaled the worker’s average earnings for all years with work.

Page 28 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

history, in turn, will increase the AIMEs of women retiring in the future, and

this should increase the proportion of married women receiving benefits

based solely on their own work records.

Women’s Future Labor

Force Participation

Both the Office of the Actuary within SSA and the Department of Labor’s

Bureau of Labor Statistics (BLS) estimate future labor force participation

rates for women. As seen in figure 3.1, SSA estimates women’s overall labor

force participation rates will peak at about the year 2000 and then decline

slowly as the baby boom generation of women moves out of the labor

force; while BLS estimates that women’s overall labor force participation

rates will continue to increase over at least the next 10 years.

Page 29 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

Figure 3.1: Past and Projected Labor Force Participation Rates for Women, Selected Years

1950 1960 1970 1980 1990 2000 2010 2020 2030

30

35

40

45

50

55

60

65

Historical

SSA

BLS

Year

Labor Force Participation Rate

Sources: Department of Labor, Bureau of Labor Statistics; and Social Security Administration,

Actuarial Study No. 108.

Page 30 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

The BLS estimates assume an increase in women’s participation rates at all

ages, but especially for those aged 25 to 54 whose participation rates are

expected to increase by almost 4.5 percentage points (from 74.7 percent in

1992 to 79.1 percent in 2005). SSA estimates assume more modest increases

in women’s labor force participation rates within this age range during the

same period.29

Although these two estimates of women’s future labor force participation

rates differ, the implications of the differences for projections of Social

Security benefits would take several years to become evident because

Social Security benefits are based on lifetime employment, not

employment in the last few years before retirement. Thus, the projections

of the distribution of women’s Social Security benefits by type for the next

few years would be similar regardless of which estimate of future labor

force participation rates is used.30

Women’s Earnings

Patterns

Women’s benefits are not only influenced by their growing attachment to

the labor force but also by their lifetime earnings (see table 3.4). Women’s

median year-round, full-time covered earnings were a relatively constant

60 percent of men’s earnings until about 1980. Since 1980, women’s

earnings have risen to about 70 percent of men’s. This changing

relationship will increase women’s retired worker benefits relative to

those for men, but only slowly because benefits are based on average

earnings over the workers’ entire lifetimes.

29There are several reasons for the differences in the SSA and BLS estimates. Most result from

different assumptions SSA and BLS used in making their estimates, especially those for future

disability prevalence rates. SSA assumed an increase in this rate, while BLS did not. This difference

makes the SSA labor force participation rate estimate lower than the BLS estimate, other things being

equal.

30The BLS estimates would project a slightly larger proportion of women receiving benefits based on

their own work records than would the SSA estimates.

Page 31 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

Table 3.4: Median Earnings of

Year-Round, Full-Time Workers, by

Sex, 1951-94 Earnings

Year Women Men

Women’s median

earnings as a

percentage of men’s

1951 $2,305 $3,605 63.9

1960 3,293 5,417 60.8

1970 5,323 8,966 59.4

1980 11,197 18,612 60.2

1983 13,902 21,854 63.6

1985 15,624 24,195 64.6

1990 19,822 27,678 71.6

1994 22,205 30,854 72.0

Source: Department of Labor, Women’s Bureau.

Social Security benefits are based on earnings in covered employment

rather than on all earnings. Social Security covered earnings data show

that younger women have higher median covered earnings relative to men

their own age than do older women. Relative covered earnings fall as

women age, reach a low in the women’s early 30s when many have left the

labor force or reduced their hours of work to care for children, and then

rise slowly. This “U-shaped” relative earnings profile (relative earnings fall

with age and then increase) is flatter for more recent generations of

women, reflecting their tendency to have children later in life than older

generations and to return to work sooner after childbirth. The higher

relative lifetime covered earnings of more recent generations of women

will increase their lifetime earnings and retired worker benefits relative to

those of men in their age group.

In addition to the increase in women’s relative median earnings, the

percentage of married women whose earnings exceed those of their

husbands’ has also been increasing. In families where both the husband

and wife have earnings (about 60 percent of all married family households

in 1992), the percentage in which the wife’s earnings exceed the husband’s

increased from 15.9 percent to 22.3 percent between 1981 and 1993. It is

difficult to tell from the data whether these women consistently earn more

than their husbands or whether this is only an occasional occurrence. The

distinction is important because Social Security benefits are based on

lifetime earnings.

The ratio of a wife’s lifetime earnings to those of her husband that moves

the wife from being dually entitled to receiving retired worker benefits is

Page 32 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

not a constant. The ratio will depend on the husband’s lifetime earnings,

the difference in the ages of husband and wife, the age when each begins

to receive benefits, and the relative growth in wages and prices from the

time the older spouse is age 62.

Figure 3.2 shows the AIMEs of a 65-year-old couple in 1995, both receiving

benefits for the first time at age 65, that just allow the lower earning

spouse (the wife) to receive only retired worker benefits.31 For

comparative purposes, it also shows the AIME equal to one-third of the

husband’s AIME (worker AIME/3). To receive a benefit based only on her

own earnings, this wife needs an AIME as high as 50 percent of her

husband’s (if his AIME is less than about $387) or as low as about

26.6 percent (if his AIME is about $1,500). In general, her “break even” AIME

will be between about 28 percent and about 35 percent of her husband’s

AIME.

31That is, the AIME level at which her retired worker benefit exceeds her benefit as a spouse.

Page 33 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

Figure 3.2: Spouse AIME Needed to Receive Benefits as a Retired Worker, Both Husband and Wife Aged 65

0

200

400

600

800

1,000

1,200

Worker AIME/3

Spouse AIME

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

3,200

AIME Husband

AIME Wife

The recent increase in women’s earnings relative to men’s should increase

women’s relative AIMEs for many years to come, regardless of what

happens to women’s relative earnings in the near future. The higher

Page 34 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

married women’s AIMEs are, relative to their husbands’, the more likely

they are to receive retired worker benefits rather than benefits as dually

entitled spouses.

Future Relative Earnings We were unable to locate any quantitative estimates of the future relative

earnings of men and women. We were also unable to obtain a consensus

on whether researchers think women’s earnings will increase or decrease

relative to men’s in the future.32

Marital Status A woman’s marital history at retirement determines if she is eligible for

spousal benefits based on her current or former husband’s work record, or

for survivor benefits based on a deceased husband’s work record.

Eligibility for retired worker benefits is not dependent upon one’s marital

status.

As life expectancies for men increase, the percentage of women who enter

their retirement years either married or divorced should increase, and the

percentage entering as widows should decline. As seen in table 3.5, SSA

projects that the proportion of women aged 65 to 69 who are married will

remain relatively constant over the next 25 years, and that the proportion

who are divorced will more than double over this period.

Table 3.5: Projected Percentage

Distribution of Women Aged 65-69, by

Marital Status, 1995-2020

Marital status

Year Total Single Married Widowed Divorced

1995 100 4.5 58.6 29.6 7.3

2000 100 4.3 58.6 27.3 9.8

2005 100 4.4 59.8 24.0 11.9

2010 100 4.9 59.6 21.2 14.3

2015 100 5.4 58.9 19.4 16.4

2020 100 5.8 59.1 18.1 17.0

Source: Social Security Administration, Office of the Actuary.

32The Women’s Bureau at the Department of Labor believes women’s earnings will continue to

increase relative to men’s as the work experience and educational attainment of women increase. SSA

assumes, for the Social Security trustees’ annual report, that the real wage growth for men and women

will be the same in the future. This implies that their relative earnings will be constant. And an

economic demographer working with the 1994 Social Security Advisory Council thinks women’s

earnings will fall somewhat relative to men’s in the future because (1) of the types of flat-earnings jobs

women have been taking over the past decade and (2) she does not think men’s earnings will continue

to stagnate as they have during the past 10 years.

Page 35 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

The divorce rate has more than doubled since Social Security was enacted

and the percentage of women aged 65 and older who are divorced almost

quadrupled between 1960 (1.5 percent) and 1993 (5.8 percent). However,

most divorced women do not qualify for divorced spouse benefits because

most marriages that end in divorce last less than 10 years, the minimum

marriage duration needed to qualify for such benefits. In addition, many

divorced women who were married at least 10 years do not receive

divorced spouse benefits because they either subsequently remarry or

have retired worker benefits that exceed their benefit as a divorced

spouse.

If the pattern of divorce after a relatively short marriage continues, most

women who divorce will not be eligible for divorced spouse or surviving

divorced spouse benefits in the future. Lack of eligibility for divorced

spouse benefits may not pose a serious problem for most divorced women

retiring in the future because women’s increased labor force participation

suggests that many will be receiving adequate retired worker benefits

based on their own work records.

Women’s Benefit

Trends

The increasing labor force participation and earnings of women are

already reflected by an increase in the percentage of women who receive

benefits based, at least in part, on their own work records. As seen in table

3.6, in 1960, 43 percent of women aged 62 or older were retired worker or

dually entitled beneficiaries, while in 1993, 61 percent were. As women

with stronger attachments to the labor force retire in the future, the

percentage of women beneficiaries who are receiving retired worker or

dually entitled benefits should increase and the percentage who are

receiving spouse-only or widow-only benefits should decrease.

Page 36 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

Table 3.6: Percentage Distribution of

Women Beneficiaries Aged 62 and

Older, by Type of Benefit and Dual

Entitlement Status, 1960-93

Year

Type of benefit 1960 1965 1970 1975 1980 1985 1990 1993

Entitled as

workera 43.3 47.3 50.6 54.1 56.9 58.7 60.3 61.3

Worker only 38.7 40.7 42.1 42.3 41.0 38.6 36.9 36.2

Dually entitled 4.6 6.6 8.5 11.8 15.9 20.1 23.4 25.1

Wife’s benefit 2.4 3.1 3.4 4.4 6.2 8.7 10.4 11.2

Widow’s

benefit 2.1 3.6 5.0 7.4 9.6 11.5 13.0 13.9

Entitled as wife or

widow onlyb 56.7 52.7 49.4 45.9 43.1 41.3 39.7 38.7

Wife’s benefit 32.8 27.1 22.4 19.6 17.6 16.4 15.3 14.8

Widow’s

benefitc 23.4 25.2 26.8 26.1 25.4 24.9 24.3 23.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

aIncludes disabled workers.

bIncludes parents.

cIncludes mothers and disabled workers.

Source: Barbara A. Lingg, Social Security Bulletin (July 1990), pp. 2-12; and Social Security

Bulletin (Summer 1994), pp. 70-71.

If women’s labor force participation is increasing, more women should be

dually entitled and fewer entitled as a wife or widow only. The data

support this expectation. The percentage of women receiving benefits

solely on their own work records should also be expected to increase, but

this percentage turned downward after 1975.

There are a number of reasons that, combined, probably explain the

downturn. Women who might be eligible for retired worker benefits

include fully insured women who never married; those who were divorced

after being married less than 10 years (20 years before 1978); married

women whose husbands had not yet taken Social Security benefits; those

whose husbands’ jobs were not covered by Social Security; and those

women whose retired worker benefits exceeded their benefits as a spouse

or survivor.

The percentage of women aged 65 and older who never married has been

falling since 1960. As the percentage of working women who are married

increases, we would expect more to be dually entitled.

Page 37 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

The percentage of older women who are divorced has been rising. In

addition, the dependency requirement divorced women faced was

removed in 1972,33 and the years-of-marriage requirement was halved in

1977. The impact of these demographic and legislated changes has been a

large increase in the number of women receiving divorced spouse and

surviving divorced spouse benefits. These rule changes also appear to

have allowed some divorced women to became dually entitled as divorced

spouses and surviving divorced spouses, whereas, without these changes

they would only have received retired worker benefits.

As seen in table 3.7, the percentage of men whose benefits are reduced

because of early retirement is increasing. Thus, fewer of their wives will

receive retired worker benefits while waiting for larger dually entitled

benefits their husbands’ retirements can bring.

Table 3.7: Percentage of New Retired

Worker Beneficiaries Whose Benefits

Are Reduced for Early Retirement, by

Sex, 1960-93

Year Men Women

1960 NA 48.5

1965 30.2 48.4

1970 39.4 56.0

1975 48.9 62.3

1980 51.7 63.9

1985 65.7 75.2

1990 66.1 72.9

1993 67.8 73.0

Notes: Figures include dually entitled beneficiaries.

NA = reduced benefits not available.

Source: Annual Statistical Supplement, 1994 to the Social Security Bulletin, p. 262.

Finally, the 1983 amendments brought into covered employment many

workers who were not already in jobs covered by Social Security. This

should increase the proportion of married women who are eligible for dual

entitlement benefits rather than retired worker benefits or spousal

benefits alone.

Three other changes may also help explain the decline in the proportion of

women receiving benefits as retired workers. First, the number of years of

earnings used to calculate benefits increased by 1 year each year from

1960 until 1991 (with the exception for men noted in the next paragraph)

33Under this requirement, the divorced woman must have received at least half her support from her

former husband.

Page 38 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

when it reached 35 years. It is scheduled to remain at 35 years. Because

women tend to have more years without earnings than men, the

lengthening computation period often added years for which they had no

earnings and, thus, reduced their calculated AIMEs relative to men’s.

Second, the number of years of earnings used to compute men’s retired

worker benefits was reduced by 3 years by the 1972 amendments. This had

the effect of increasing men’s AIMEs and PIAs slightly. The higher PIAs were

reflected in men’s higher retired worker benefits and higher auxiliary

benefits based on their work records. This, in turn, could reduce the

number of women whose own benefits exceeded their benefits as a

spouse.

Third, the 1977 amendments provided for ad hoc increases in the

maximum taxable earnings level for 1978 through 1981. The maximum

taxable earnings level is now increasing faster than the growth in median

covered earnings (see fig. 3.3).34 Because more men had earnings above

the maximum taxable level before the ad hoc increases, this change

increased the covered wages of men more than women, resulting in higher

AIMEs and PIAs for men than for women. A higher PIA for men increases

both the auxiliary benefits based on this PIA and the proportion of wives

receiving benefits as dually entitled spouses rather than as retired

workers.

34Maximum taxable earnings is the dollar amount ($62,700 in 1996) above which earnings in covered

employment are neither subject to Social Security taxes nor creditable for benefit computation

purposes.

Page 39 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 3 

Trends in Women’s Social Security Benefits

Figure 3.3: Median Covered Earnings for Men and Women and the Maximum Taxable Earnings Level, 1940-95

1940

1945

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Tax Max

Men

Women

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

Year

Current Dollars

Source: Annual Statistical Supplement, 1994 to the Social Security Bulletin, pp. 169-70.

Page 40 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 4 

Proposals Aimed at Addressing Women’s

Equity Concerns

Many proposals have been put forth over the past 25 years to address the

equity issues that arise because of existence of spousal and survivor

benefits and the workings of the dual entitlement limitation. Two of the

broader proposals—“earnings sharing” and the “double-decker”

plan—while addressing the key concerns, also have possible drawbacks or

trade-offs associated with them.

Although variations of the earnings sharing and double-decker proposals

are possible that would not be “cost neutral,”35 our discussion of these

proposals assumes that the features have been designed to be cost neutral

in their impact on the Social Security program. That is, the benefit costs of

the Social Security program under either proposal would approximate the

benefit costs of the current program. These costs do not reflect the

potentially large administrative burden on SSA that enactment of either of

these proposals would require.

The other representative proposals discussed generally affect only one or

two of the equity concerns. These proposals were usually not designed to

be cost neutral but could be made so, for example, by adjusting general

benefit levels.

Earnings Sharing Earnings sharing is a proposal that received a great deal of attention in the

late 1970s and early 1980s.36 Under earnings sharing, unlike under the

current Social Security law, the partners in a marriage would be treated as

coequals. The basic premise is that both partners contribute equally to

building a family and home, even if only one has a wage-earning job.

Under the proposal, for each year a couple is married, the annual covered

earnings of the husband and wife would be combined and one-half of this

total would be credited to each spouse’s Social Security earnings record.

Earnings sharing would cease if one spouse becomes eligible for a

disability benefit or a retired worker benefit. The benefit received by an

individual would be based on his or her own earnings for the years he or

35Under some variants of the double-decker plan, the flat amount would be means tested. These

variations are generally referred to as two-tier plans.

36Four reports with a major focus on earnings sharing were issued during this period—U.S.

Department of Health, Education, and Welfare, Social Security and the Changing Roles of Men and

Women (February 1979); U.S. Department of Health and Human Services, Report on Earnings Sharing

Implementation Study (January 1985); Center for Women Policy Studies, Earnings Sharing in Social

Security: A Model for Reform (1988); and Congressional Budget Office, Earnings Sharing Options for

the Social Security System (January 1986).

Page 41 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 4 

Proposals Aimed at Addressing Women’s

Equity Concerns

she was single and on his or her half of the couple’s combined earnings for

the years of marriage.

Auxiliary benefits for spouses and surviving spouses would be eliminated

under earnings sharing because each spouse would be eligible for a benefit

based on his or her own shared earnings record. However, under most

versions of earnings sharing, a surviving spouse would inherit the earnings

credits of the deceased spouse for the years the two were married.37

Without this inheritance feature, many survivors would receive lower

benefits than they do under current law.

Earnings sharing essentially redistributes a portion of a couple’s covered

earnings from the higher earner to the lower earner. Because women tend

to have lower earnings than their husbands, earnings sharing would

increase the retired worker benefits of most married women.

Several Concerns

Addressed by Earnings

Sharing

Many of the concerns about the fairness of the Social Security benefit

structure would be addressed by earnings sharing. It would tend to

equalize the benefits of identical one-earner and two-earner couples with

the same lifetime earnings by reducing the benefits of one-earner couples.

Unlike under current law, there would be no spousal benefit to increase

the combined benefits of the one-earner couple. In fact, if the husbands

and wives of two couples with equal lifetime earnings were married for

their entire working careers, earnings sharing would credit each spouse

with one-half the couple’s earnings and both couples would receive

identical benefits.

Earnings sharing also would tend to equalize the benefits of the survivors

of these one-earner and two-earner couples. Unlike under the current act,

there would be no survivor benefits as such. Under most versions of

earnings sharing, survivors would inherit the earnings credits of their

deceased spouses for the years they were married. However, a restricted

inheritance provision would result in some survivors receiving smaller

benefits than they would under current law.

Also, a worker would not pay Social Security taxes only to find out at

retirement that the benefit she receives is the same as the spousal benefit

she would have received had she never worked. However, because a

couple’s earnings would be shared for the period of marriage, an

individual worker could still find that his or her retired worker benefit was

37The combined earnings would be capped at the annual maximum taxable limit for each year.

Page 42 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 4 

Proposals Aimed at Addressing Women’s

Equity Concerns

matched or exceeded by that of another person who, as an individual, had

lower lifetime earnings.

Earnings Sharing Would

Involve Trade-Offs

Earnings sharing would increase the benefits for certain categories of

beneficiaries and decrease them for others. As noted above, married

women generally would receive higher benefits than they do under current

law as would many survivors. However, the husbands of these married

women, one-earner couples, and two-earner couples with dually entitled

wives would receive lower benefits. Other categories of

beneficiaries—such as married disabled men, women who qualify for

divorced spouse benefits under current law, and certain categories of

survivor beneficiaries—would also generally receive smaller benefits

under earnings sharing.

Administrative Burden for

the Social Security

Administration

The Department of Health and Human Services reported that earnings

sharing would impose a large new administrative burden. SSA would have

to obtain and maintain data on all marriages and divorces of all individuals

who work in covered employment. Given data limitations, SSA would find it

difficult to implement earnings sharing retroactively. Prospective

implementation would require a lengthy transition or phase-in period if it

were decided that the benefits of those nearing retirement should be

protected. SSA would also have to modify current, or establish new,

operational procedures to ensure the accuracy of initial and continued

benefit determinations under earnings sharing.

Proposals Similar to the

Basic Earnings Sharing

Model

Several proposals have been made that are similar to the basic earnings

sharing “model” described above. These proposals would improve the

fairness of benefits for one-earner and two-earner couples that were

otherwise identical and for their survivors, but would not split earnings on

a yearly basis. The following are examples:

• Base a couple’s benefit on its total lifetime earnings. Under this proposal,

the lifetime earnings of the husband and wife would be combined and

used to calculate a benefit. Each partner would receive a given percentage

(usually 50 or 75 percent) of this “couple’s” benefit.

• Base survivor benefits on the couple’s total benefits. Benefits for a couple

would be calculated as they are under current law. However, when one

spouse dies, the survivor would receive a given percentage (usually

67 percent) of the couple’s total pre-death benefit.

Page 43 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 4 

Proposals Aimed at Addressing Women’s

Equity Concerns

The Double-Decker

Plan

Double-decker retirement systems are in use in a number of countries,

including Canada, Japan, Norway, Sweden, and the United Kingdom

among others. These systems generally pay a flat amount to all qualified

beneficiaries (the adequacy deck) and then a proportional earnings-based

amount on top of that (the equity deck). Thus, the “social adequacy”

component of benefits can be separated from the “individual equity”

component.

In the double-decker plan, as in the earnings sharing plan, spousal and

survivor benefits would be eliminated. In addition, some variations allow

the inheritance of the earnings credits of a deceased spouse and the

sharing of earnings credits at divorce.

A double-decker system would redistribute benefits. Those with very small

benefits under the current system would receive larger benefits. Those in

the middle of the benefit distribution currently, and possibly those at the

high end, would receive lower benefits. The extent of the redistribution

would be controlled by the relative levels of the flat benefit and the

generosity of the earnings-based benefit. (To keep program costs relatively

constant, a larger flat benefit would necessitate a less generous

earnings-based benefit.) If the earnings-based benefit is generous enough,

those with very high benefits under the current program could receive

even higher benefits under a double-decker system. Whether women and

couples with certain characteristics will be absolutely better off or worse

off under the double-decker plan will depend in large measure on the

extent of this redistribution.

Assuming that each member of retired couples receives the flat benefit

amount,38 the equity deck payment—because it is proportional to

earnings—would equalize the benefits of two-earner and one-earner

couples with identical lifetime earnings. The survivors of such couples

(assuming all earnings credits may be inherited) would also have equal

benefits. However, if earnings could only be inherited for the years of

marriage, some of these survivors could receive smaller benefits than

others. A survivor from a shorter marriage could inherit less than a

survivor from a longer marriage.

Also, a married working woman would not enter retirement and find that

her spousal benefit is larger than her retired worker benefit because there

would be no spousal benefit. Married individuals would have larger

38In some proposals, a minimum number of quarters with credited covered earnings would be needed

to receive the full flat benefit amount.

Page 44 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 4 

Proposals Aimed at Addressing Women’s

Equity Concerns

benefits than other married individuals with lower lifetime earnings.

However, widows could receive smaller benefits than other widows who

had lower individual lifetime earnings but who inherited more earnings

from a deceased spouse.

As under earnings sharing, there would be added administrative burdens

for SSA under a double-decker plan. The entire process of determining

eligibility for benefits and computing benefit amounts would change, and

many procedures would also need to be changed. If earnings credits were

shared at divorce or inherited at the death of one spouse, SSA would also

have to obtain and maintain detailed marital history records for all

covered workers.

Other Representative

Proposals

Reduce Spousal Benefits One proposal would reduce spousal benefits from 50 percent of the retired

worker’s benefit to 33.3 percent and increase retired worker benefits by

12.5 percent. This preserves the combined benefits of one-earner couples.

At the same time, it increases the benefits of all two-earner couples and

single workers.

Because retired worker benefits would be increased, benefits for survivors

would increase as well. However, benefits for divorced wives would

decline by one-third. The proposal would be costly because the benefits of

retired workers and survivors would increase substantially.

A second proposal would reduce couples’ benefits by either reducing the

spousal benefit or modifying the benefit formula. Benefits for survivors

would be a specified fraction (two-thirds or three-fourths) of the couples’

benefit. Benefits for many survivors of two-earner couples would be

increased under this proposal.

Cap the Spousal Benefit Spousal benefits were implemented because of concerns about the

adequacy of benefits for families of retired workers. This proposal would

provide a limit on the maximum size of spousal benefits (and possibly

other auxiliary benefits), either by placing an upper limit, or cap, on the

spousal benefit or by limiting the dollar amount of the retired worker’s

Page 45 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 4 

Proposals Aimed at Addressing Women’s

Equity Concerns

benefit that can be used as the base for spousal benefits. Such a cap would

reduce, but not eliminate, the benefits for spouses of workers with high

AIMEs.

A cap on spousal benefits was enacted as a part of the 1967 amendments

to the Social Security Act. However, this cap was repealed by the 1969

amendments.

Eliminate the Spousal

Benefit

Eliminating the spousal benefit would reduce benefits for one-earner

couples by one-third and for dually entitled two-earner couples by less

than one-third. This proposal would not equalize benefits for all couples

with identical lifetime earnings because the progressive benefit formula

would be used to determine the benefit of each spouse in two-earner

couples, but only of the worker in a one-earner couple. As a result, the

combined benefits for two-earner couples would be larger than those for

the one-earner couple with identical combined AIMEs.

Reduce the Dual

Entitlement Benefit Offset

A person currently entitled to a spousal benefit has that benefit reduced,

or offset, by $1 for each $1 of retired worker benefits he or she earned.

Benefits for such beneficiaries can be increased by changing the dual

entitlement benefit offset so that it reduces the spousal benefit by less

than $1 for each additional $1 of retired worker benefits earned. This

would allow the beneficiary to receive an incremental benefit increase for

every additional dollar of covered earnings he or she earns.

The size of the increase would depend on the size of offset established

under the proposal.39 Many two-earner couples would receive an increase

in benefits while one-earner couples and single workers would receive the

same benefits as they do under current law. Therefore, the current gap

between the benefits received by like-earning one-earner and two-earner

couples would shrink under this proposal.

Allow Survivors to Inherit

Their Spouses’ Earnings

Credits

Allowing a survivor to inherit his or her spouse’s earnings credits has also

been proposed. These inherited credits would be added to the survivor’s

own credits and a benefit would be calculated based on these total lifetime

earnings. If all the deceased’s earnings credits could be inherited, survivor

39If the offset were small enough, both the husband and wife could receive increased benefits,

especially if their lifetime earnings were nearly identical.

Page 46 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 4 

Proposals Aimed at Addressing Women’s

Equity Concerns

benefits for one-earner and two-earner couples would be equalized.40

However, if credits could only be inherited for the years of marriage,

benefits for survivors could fall if the couple had a marriage of short

duration.

Reduce the Period Used in

Computing Benefits

Workers currently becoming eligible for retired worker benefits have their

benefits based on their highest 35 years of indexed yearly earnings.

Reducing the number of years used to compute benefits would result in

higher AIMEs and higher benefits for all workers, but especially for women,

who are more likely than men to have years with no earnings (see ch. 3). If

shortening the benefit computation period sufficiently increased wives’

retired worker benefits relative to those of their husbands, more women

would have retired worker benefits that exceeded their spousal benefits.

This proposal would increase program costs, however, because the

shortened benefit computation period would increase retired worker

benefits and the related auxiliary benefits for all retired workers. In

addition, this proposal raises concerns about the fair treatment of workers

with many years of covered work. In this scenario, long-term workers

could receive the same benefits as short-term workers even though the

long-term worker would have paid more Social Security taxes.

40This assumes no restrictions on the total earnings credits the survivor could have for any 1 year. If

yearly earnings credits were limited to the annual maximum taxable amount, benefits for all survivors

might not be equalized.

Page 47 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 5 

Conclusions and Agency Comments

Conclusions Spousal and survivor benefits were incorporated into Social Security’s

benefit structure in 1939. To ensure these benefits went only to persons

who were dependent on another for their support, a dual entitlement

provision limiting the total benefit that could be received was also

enacted. The introduction of these benefits improved the social adequacy

goal of the program and led to the equity concerns we have discussed.

These concerns are that (1) two-earner couples receive smaller retirement

benefits than identical one-earner couples; (2) survivors of these

two-earner couples can receive even smaller benefits proportionally than

survivors of one-earner couples; (3) dually entitled beneficiaries make

contributions to the program but receive the same benefit they would have

received had they never worked; and (4) people who contribute to the

program may receive smaller benefits than people who either contributed

less or contributed nothing at all. Because women receive spousal and

survivor benefits more often than men and, hence, are subject to the dual

entitlement limitation more often, these concerns are often viewed as

women’s issues.

These concerns do not arise because Social Security reduces the benefits

of any group of beneficiaries. Social Security is gender neutral. All

beneficiaries receive a benefit at least as large as the benefit to which their

earnings histories entitle them. The concerns arise because some couples

and survivors receive, for adequacy reasons, benefits that exceed those

based on their earnings alone. The size of this benefit supplement will vary

according to the characteristics of the couple or survivor.

As the participation in the labor force of women—especially married

women—increases, we anticipate that some of these concerns could

intensify because the proportion of women who will be affected by one or

more of these concerns is expected to increase. This will have an impact

on these equity concerns in several ways.

First, as women’s earnings and labor force commitments increase relative

to those of men, Social Security will be paying benefits to more two-earner

couples. A larger proportion of couples will receive benefits that are less

than the total benefit received by a one-earner couple with the same total

lifetime earnings, which may magnify the concerns relating to couples’

benefits.

Second, the increase in the number of two-earner couples will also

increase the concern about the equity of survivor benefits. Because (1) the

Page 48 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 5 

Conclusions and Agency Comments

survivor of a one-earner couple receives approximately two-thirds of the

couple’s total benefits when both husband and wife were alive, (2) the

survivor of a two-earner couple can receive a smaller portion, as low as

one-half, and (3) two-earner couples have smaller total benefits to begin

with than one-earner couples with the same total lifetime earnings, we

anticipate that there could be increased demands that benefits for

survivors of like-earning couples be equalized.

Third, the anticipated growth in the percentage of women receiving only

retired worker benefits could reduce or increase the concern that married

women receive little or no incremental return for the payroll taxes they

pay. These women will receive the same benefit and the same return on

their Social Security taxes as other retired worker beneficiaries with the

same earnings history. This could reduce the concern that they may not

receive a fair return on their payroll taxes. However, the concern may

intensify because more married retired-worker women will find that their

contributions to the program result in only a small incremental increase to

the spousal benefits for which they were already qualified.

Finally, the anticipated increase in the number of women receiving only

retired worker benefits may lessen the concern that some persons receive

larger benefits than other people who had higher lifetime earnings and

made larger contributions to the program. However, because there will

always be some people who either never work for pay (and receive pure

spousal or survivor benefits) or who have covered earnings sufficiently

low that they receive dually entitled spousal or survivor benefits, we do

not expect this concern to disappear entirely.

A number of proposals have been made that would address concerns

about the fairness of the Social Security benefit structure for working

women and their families. However, these proposals have not been

enacted, in part because they would either involve additional costs to the

program or require reductions in benefits to some categories of

beneficiaries. This latter effect could create or exacerbate benefit

adequacy concerns for those categories of beneficiaries. In addition,

several of the proposals, including earnings sharing and the double-decker

plan, would require substantial changes in the program’s operations and,

thus, would impose a large administrative burden on SSA.

Page 49 GAO/HEHS-96-55 Benefit Equity for Working Women
Chapter 5 

Conclusions and Agency Comments

Agency Comments

and Our Evaluation

We provided a draft of the report to the Commissioner of Social Security

with a request for the agency’s comments. In commenting on our report,

the Commissioner stated that the report “adequately addresses the

objectives of the study” (see app. III for the full text of her letter).

However, she noted a few concerns.

First, she indicated the report follows the premise that the authors of the

1939 amendments did not envision a world in which most wives would

work. The report has been modified to indicate the authors of the 1939

amendments did envision such a world. However, our point is that equity

concerns arise because the increase in the number of women workers

combined with the current benefit structure creates certain anomalies. In

spite of these equity concerns, the benefit structure has not been modified

to eliminate these anomalies.

Second, the Commissioner suggested we discuss how certain proposals to

address the equity concerns, such as eliminating spousal and survivor

benefits, would affect adequacy concerns. Eliminating spousal benefits

would lower benefits received by all one-earner couples and those

two-earner couples in which the lower earning spouse is currently dually

entitled. Eliminating the survivor benefit would eliminate benefits for the

nonworker in one-earner couples and would lower benefits for all

survivors who were the lower earners in two-earner couples. Appendix II

covers adequacy concerns in some detail and this chapter notes that

reforming the program to address equity concerns could create or

exacerbate existing adequacy concerns.

Finally, the Commissioner noted that our use of cross-sectional data for

the analyses in chapter 3 could provide biased estimates of Social Security

lifetime earnings and wealth, and she offered us the use of an alternative

data set created by SSA’s Office of Research and Statistics. We did not use

the recommended data set in our analyses. However, we included some

published findings from studies that used this data set.

SSA also provided us with a number of technical clarifications. We

modified the report as appropriate.

Page 50 GAO/HEHS-96-55 Benefit Equity for Working Women
Page 51 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix I 

Benefit Calculations

This appendix describes how various types of Social Security benefits are

calculated.41 Today, the calculation of a retired or disabled worker’s

benefit is essentially a three-step process—(1) determining a worker’s

average indexed monthly earnings (AIME, a measure of the worker’s

lifetime earnings), (2) applying a benefit formula to the AIME to determine

the beneficiary’s primary insurance amount (PIA, the benefit payable at age

65 or at disability), and (3) adjusting the PIA for the worker’s age at first

benefit receipt, if different from age 65. In addition, if auxiliary benefits are

to be based on this PIA, then the appropriate auxiliary benefit adjustment

factor must be applied.42

The AIME calculation requires indexing the worker’s covered earnings for

each year before he or she attains age 60. Indexing is accomplished by

dividing the average wage in the national economy in the year the

beneficiary turned age 60 by the average wage for an earlier year and

multiplying the resulting amount by the beneficiary’s covered earnings for

that earlier year.43 This is done for each year the beneficiary had earnings

after 1950 and before age 60. Earnings at age 60 or older are entered into

the AIME calculation at their nominal (unindexed) amount. The AIME is

calculated by summing the 35 years of highest indexed earnings and

dividing by 420, the number of months in 35 years.44

Once the AIME is determined, a benefit formula is applied to determine the

beneficiary’s PIA. The benefit formula has three tiers—90 percent,

32 percent, and 15 percent. The AIME levels at which one moves from one

tier to the next are known as bend points. The bend points are

wage-adjusted annually and each year’s bend points apply only to those

attaining age 62 (or becoming disabled or dying before age 62) in a

particular year. In 1996, these bend points are $437 and $2,635.

Thus in 1996, the PIA for a 62-year-old worker would be 90 percent of his or

her AIME if the AIME was $437 or less; $393.30 (that is, 90 percent of

$437) plus 32 percent of the AIME in excess of $437 if his or her AIME was

41To be eligible for Social Security benefits on one’s own work record, one must meet certain age and

insured status requirements. The insured status requirements are earned by having sufficient numbers

of quarters with recorded covered earnings.

42If auxiliary benefits are paid on this PIA, a family maximum limitation may be imposed if total

benefits paid exceed 150 percent of the PIA.

43AIMEs of disabled and deceased workers are calculated by indexing earnings to 2 years before the

disability or death occurred.

44The AIMEs of workers deceased or disabled before age 62 are calculated using fewer than 35 years of

indexed earnings as are those for workers born before 1929. Workers born before 1917 have benefits

calculated using earnings that are not indexed.

Page 52 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix I 

Benefit Calculations

between $437 and $2,635; and $1,096.66 (that is, 90 percent of $437 plus

32 percent of $2,198 [= $2,635 - $437]) plus 15 percent of the AIME in excess

of $2,635, if his or her AIME exceeded $2,567. For example, a 62-year-old

worker with an AIME of $400 would have the entire amount valued at the

90-percent level and his or her PIA would be $360 (that is, 90 percent of

$400). A worker of similar age with an AIME of $1,000 would have $437

valued at the 90-percent level and the remaining $563 valued at the

32-percent level for a PIA of $573 ($437 x 0.9 + $563 x 0.32 = $573) (see

fig.I.1).

Page 53 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix I 

Benefit Calculations

Figure I.1: Converting Average Indexed Monthly Earnings Into a Primary Insurance Amount for a Person Attaining Age 62

in 1996

0 400 800 1200 1600 2000 2400 2800 3200 3600

0

200

400

600

800

1,000

1,200

1,400

AIME

PIA

The PIA is increased by any cost of living adjustments (COLA) that have

occurred since the worker first became eligible for benefits (this will be

age 62 for retired worker beneficiaries). Thus, someone who waits until

age 65 to claim retired worker benefits will use the benefit formula in

place when he or she was 62 and his or her PIA will be increased by all

COLAs provided beginning with the year he or she attained age 62.

Page 54 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix I 

Benefit Calculations

The PIA is the figure from which almost all benefit amounts for the worker

and his or her dependents or survivors are derived. Benefits of retired

workers and disabled workers are based on their own PIAs. Benefits of

auxiliary beneficiaries are based on the PIAs of their current or former

spouses.45 Benefits of dually entitled beneficiaries are based in part on

their own PIAs and in part on those of their current or former spouses.46

For a retired worker, the PIA will be adjusted for the age at first benefit

receipt, if other than the month the worker attains age 65 (the normal

retirement age).47 If retired worker benefits are first taken before age 65,

the monthly benefit will be the PIA reduced by five-ninths of 1 percent for

each month benefits are taken early. If benefits are first taken after age 65

but before age 70, the monthly benefit usually will be the PIA increased by

the delayed retirement credit (DRC).48 No DRC increases are given after age

70 is attained. Disabled worker benefits usually are equal to the worker’s

PIA and are not adjusted for the age benefits are first received.

To calculate an auxiliary benefit, the worker’s PIA is multiplied by a factor

that varies according to the type of auxiliary benefit. For spouses and aged

survivors, the benefit is then usually reduced if the auxiliary beneficiary is

under age 65 at first benefit receipt. No DRCs are given to auxiliary

beneficiaries who first receive benefits after age 65, although a survivor’s

benefit is increased by any DRC the deceased worker would have received.

Spouse (wife and husband) benefits and divorced spouse benefits are

available at age 62 and are equal to 50 percent of the worker’s PIA. These

benefits are reduced by 25/36ths of 1 percent for each month the spouse

first takes benefits before age 65. Benefits for spouses under age 65 who

qualify because they have eligible children of retired or disabled workers

in their care (mothers and fathers) are equal to 50 percent of the worker’s

PIA. These benefits are not reduced for age at first receipt.

45Parents’ benefits are based on the PIAs of their deceased son or daughter.

46In a few infrequent instances, a person can be dually entitled to benefits based on the work records

of two other individuals, for example, as the spouse of a current marriage partner and as the survivor

of a former marriage partner.

47The normal retirement age is scheduled to increase gradually beginning in 2000.

48The DRC is being gradually increased. For those attaining age 65 after 1970 and before 1982, the DRC

was 1/12th of 1 percent per month that benefit receipt was delayed between ages 65 and 72. For those

attaining age 65 after 1981 and before 1984, the DRC was one-fourth of 1 percent for each month that

benefit receipt was delayed over those ages. For those attaining age 65 after 1983 and before 1990, the

DRC was one-fourth of 1 percent for each month that benefit receipt was delayed between ages 65 and

70. For those attaining age 65 after 1989 and before 2008, the DRC will be increased by 1/24th of

1 percent every other year and will apply between the normal retirement age and age 70. The DRC will

be two-thirds of 1 percent per month (8 percent per year) for those attaining age 65 in 2008 or later.

Page 55 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix I 

Benefit Calculations

Survivor (widow or widower) benefits and surviving divorced spouse

benefits are available at age 60 and are equal to 100 percent of the

worker’s PIA reduced by 19/40ths of 1 percent for each month the survivor

is under age 65 when benefits are first received. However, if the survivor

benefit is first received after age 65, the survivor benefit will not be

reduced even if the survivor had first received another type of benefit (for

example, as a retired worker or spouse) that was reduced because it was

first received before the survivor attained age 65. Benefits of widowed

mothers and fathers and surviving divorced mothers and fathers, who

qualify because they are caring for an entitled child, are equal to

75 percent of the deceased worker’s PIA. These benefits are not reduced

for age at first benefit receipt. Disabled survivors and disabled surviving

divorced spouses are eligible for benefits as early as age 50. If first

received before age 60, these benefits are equal to 71.5 percent of the

worker’s PIA.

Retired, disabled, and auxiliary beneficiaries will receive benefits as

calculated above. Benefits of dually entitled beneficiaries require

additional steps. First, the PIA of the current or former spouse is multiplied

by the appropriate factor to determine the unreduced benefit for the

auxiliary beneficiary. Subsequent steps differ for dually entitled spouses

and dually entitled widows.

For dually entitled spouses, the dually entitled beneficiary’s retired worker

PIA is subtracted from the unreduced spouse (auxiliary) benefit to

determine the unreduced incremental auxiliary benefit. Then, the

appropriate age-at-retirement adjustment factors are independently

applied to the beneficiary’s retired worker PIA and the unreduced

incremental auxiliary benefit. Finally, the resulting figures are summed to

determine the total dually entitled benefit.

For dually entitled widows, the age-at-retirement adjustment factors are

independently applied to the beneficiary’s retired worker PIA and to the

unreduced survivor benefit. The beneficiary then receives the larger of

these two amounts.

Page 56 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix II 

Adequacy Concerns

The primary focus of this report is equity concerns relating to Social

Security and women, but discussions of Social Security and women often

include adequacy concerns as well. These adequacy concerns are based on

the notion that Social Security should provide at least a minimal standard

of living for workers and their families and survivors. In this appendix, we

discuss adequacy concerns for three groups—elderly unmarried women,

divorced women, and homemakers and caregivers—and list some options

that have been proposed for improving the benefits of these groups. In

addition, we discuss a proposal that was not specifically designed to

address either equity or adequacy concerns but that would affect the

benefits for spouses and survivors, if enacted.

Elderly Unmarried

Women

The low incomes of elderly women, especially of unmarried women aged

75 and older, raise concerns about the adequacy of Social Security

benefits.49 For example, in 1992 almost one in four unmarried women aged

75 or older was poor (had an income below the poverty line) and nearly

two in five were poor or near poor (had incomes below 125 percent of the

poverty line).50 In contrast, only about one in four unmarried men aged 75

or older was poor or near poor. Elderly married couples were less likely

than unmarried men to be poor or near poor.

The problem these women have is one of low incomes, not necessarily one

of low Social Security benefits. Most widows already receive Social

Security benefits based on their deceased husbands’ work records and

these benefits are indexed to offset the effects of inflation, thus

maintaining the benefits’ purchasing power over time. Other sources of

income, such as private pensions and income from assets, are rarely

indexed and sometimes disappear upon the death of the spouse who

“owned” them.

To improve income adequacy for these women, some advocate increasing

Social Security survivor benefits. Increasing Social Security benefits for

widows (who account for more than 80 percent of the unmarried women

aged 65 and older living in poverty) and elderly divorced spouses (the

elderly group with the highest poverty rate) is seen as a relatively direct

and focused way of addressing this problem. Others believe that Social

Security is doing the job it was intended to do and that any income

improvement for these women should come from a different program such

49“Unmarried” women refers to those who are widowed, divorced, or never married.

50These rates were significantly higher for black and hispanic unmarried women than for white

unmarried women.

Page 57 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix II 

Adequacy Concerns

as the Supplemental Security Income (SSI) program, which is designed to

assist the aged, blind, and disabled who have low incomes and low levels

of assets.

If it is decided that Social Security benefits should be increased to improve

the incomes of the very elderly, the proposals listed below would

accomplish this. However, each of these proposals would increase

program costs and most would do a poor job of targeting those elderly

truly in need.

Increase Benefits of the

Very Elderly

This option would provide a special benefit increase (for example,

10 percent) once a beneficiary attained a specified age (for example, age

80 or age 85). Such an increase would allow the benefits of these elderly to

catch up with improvements in the country’s standard of living that

occurred since the beneficiary first began drawing benefits.51 This option

is not well targeted to those in or near poverty because it presumably

would be given to everyone attaining the specified age regardless of the

adequacy of their incomes.

Increase COLAs for Elderly A second option would give a special, one-time COLA to beneficiaries once

they reach a given age. A related option would provide COLAs in excess of

the annual increase in prices for beneficiaries above a specified age. Both

of these options would increase benefits for all elderly beneficiaries, and,

thus, do not target just the poor.

Provide Unreduced

Benefits for Survivors

Currently, beneficiaries who first receive survivor benefits before age 65

have their benefits reduced (by as much as 28.5 percent if survivor

benefits are first received at age 60). Providing unreduced survivor

benefits regardless of the survivor’s age at first receipt would increase the

benefits of many widows. This option would improve benefits only for

those who become widowed before age 65.

51Social Security benefits are indexed by a COLA to maintain the benefits’ purchasing power over time.

If all the beneficiary’s income were fully indexed, he or she would be able to maintain the same

standard of living he or she enjoyed when benefits were first received. However, real wage increases

raise the standard of living for the country as a whole. Over time, the beneficiary’s standard of living

will fall relative to the standard of living in the country as a whole and what once might have been

considered an adequate income level might no longer be.

Page 58 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix II 

Adequacy Concerns

Allow Survivors to Inherit

Earnings Credits of Their

Deceased Spouses

This option would allow the survivor to inherit the earnings credits of his

or her deceased spouse, which would increase survivor benefits for

survivors of all two-earner couples. However, it would not improve the

benefits of survivors of one-earner couples.

Base the Survivor Benefit

on the Couple’s Total

Benefit

Under this proposal, the survivor of a married couple would receive a

benefit equal to two-thirds the combined benefit of the couple. This would

effectively increase the benefit for the survivor of a two-earner couple to

the level of the benefit received by the survivor of a one-earner couple

under current law.

Divorced Women As shown in chapter 3, divorced spouse benefits are available if the

marriage lasted at least 10 years before the divorce. However, divorced

spouse benefits are often considered to be inadequate. For married

couples, the spousal benefit is intended to supplement the worker’s

benefit and, if both spouses first collect benefits at age 65, the total benefit

is 150 percent of the worker’s benefit alone. The divorced wife’s benefit, in

contrast, is only 50 percent of her former husband’s benefit (again, if first

taken at age 65), but this benefit is not paid in addition to a higher benefit.

On a per person basis, the married couple is receiving benefits that are

50 percent larger than those received by the husband’s divorced spouse

(75 percent of the husband’s PIA each for the married couple but only

50 percent of his PIA for the divorced spouse).

The following options would improve benefits for divorced beneficiaries.

Reduce the 10-Year

Marriage Requirement

Reducing the 10-year marriage requirement would make more individuals

eligible for divorced spouse benefits but would also increase the

probability that several former spouses would receive benefits on one

worker’s earnings record. This option raises the question of why a person

should be eligible for years of benefits based on a former spouse’s lifetime

earnings history when the couple was married for only a short time. In

addition, it does not address the primary concern—the adequacy of

benefits for divorced spouses.

Split the Couple’s Earnings

Credits at Divorce

Splitting the couple’s earnings credits at divorce, a component of the

earnings sharing proposal, would equally divide the couple’s total covered

earnings for each year of marriage. Divorced women, who were married

Page 59 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix II 

Adequacy Concerns

less than 10 years and, thus, are not eligible for divorced spouse benefits

under current law, and currently eligible divorced spouses, whose retired

worker benefits exceed their divorced spouse benefits, would generally

benefit from this option.

However, the proposal could reduce benefits for other divorced women

who are currently eligible for divorced spouse benefits or especially

surviving divorced spouse benefits because their benefits would no longer

be based on their former husbands’ full lifetime earnings as is presently

the case. This proposal would also reduce the benefits available to most

divorced men and to their subsequent wives and families.

Homemakers and

Caregivers

Homemakers are only eligible for spouse and survivor benefits based on

their husbands’ work records. The contributions these women make to

their families are not compensated with paid wages and, therefore, are not

reflected with Social Security credits. If a homemaker becomes disabled

or dies, the family will incur a cost to replace the services she provided.

Social Security does not provide funds to replace these services.

A related group of women, caregivers, have some attachment to the

covered workforce, but spend a portion of their working lives out of the

labor force caring for children or other relatives. Caregivers can lose

disability coverage when they drop out of the labor market.52 In addition,

the time spent out of the labor force performing caregiver activities is

reflected in their Social Security earnings histories as years with no

earnings or years with low earnings (if they worked only part of the year

or part time) and results in small retired worker benefits.

The following options could improve benefits for homemakers and

caregivers.

Homemaker Credits Retired worker, disability, and survivors coverage would be provided to

homemakers through credits that would be based on the imputed value of

the homemaker’s unpaid services in the home. Spousal benefits would be

eliminated. Providing homemakers with earnings credits would recognize

the economic value to the family of their work in the home. Such

52To be insured for disability coverage, a person generally needs to have earned 20 quarters of

coverage during the 40-quarter period ending with the quarter in which the worker became disabled.

People under age 31 need quarters of coverage in at least half the quarters beginning with the quarter

after they attained age 21 and ending with the quarter of disability onset (with a minimum of 6 quarters

of coverage).

Page 60 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix II 

Adequacy Concerns

homemaker credits would also benefit those who drop out of the labor

force to care for family members.

However, the homemaker credit option poses several questions. Should

women who hold full- or part-time jobs in addition to performing unpaid

homemaker services receive homemaker credits? How is the economic

value of homemaker services determined? Who pays for the earnings

credits provided to homemakers? If they are paid for by the homemaker

and her spouse through a supplemental payroll tax, are such payments

voluntary or mandatory? How would low-income families afford their

payments? If the earnings credits are financed out of general revenues, an

equity problem would be created since covered workers have to pay Social

Security taxes to receive earnings credits.

Caregiver Credits The caregiver credits option would reduce the 35-year benefit computation

period by the number of years the caregiver was out of the labor force

providing caregiving activities. Usually, the proposal specifies a maximum

number of caregiver credits that could be earned by any one person (for

example, 5 or 10 credits), and often the caregiver would be required to

have a preschool-aged child in her or his care. This proposal would reduce

the number of years of highest earnings used to calculate AIMEs and would

result in increased AIMEs and benefits for caregivers.

However, this option may not accurately target the population of concern

because women are returning to work more quickly after the births of

their children. If economic necessity causes mothers from low-income

families, but not high-income families, to return to work while their

children are young, then mothers from high-income families would be the

primary beneficiaries of this change, while mothers from low-income

families, presumably the primary target group for this proposal, would

forfeit caregiver credits for the years they worked.

Earnings Sharing and the

Double-Decker Plan

Under earnings sharing, homemakers would become eligible to receive

retired worker and disabled worker benefits and their dependents would

be insured for survivor benefits because earnings sharing would provide

the homemakers with an earnings history and a benefit eligibility of their

own. Married women who reduce their attachment to the paid labor force

to care for children or other people would also find that their earnings

histories and benefit eligibility generally improved from earnings sharing.

However, if they could not inherit all their spouses’ earnings credits, they

Page 61 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix II 

Adequacy Concerns

could receive lower benefits than under current law when they become

widowed.

Under the double-decker plan, homemakers and caregivers would each be

entitled to the flat-rate benefit designed to provide an adequate floor-level

benefit. The caregiver would also receive the earnings-related component

based on her covered earnings; the homemaker would not because she

would have no covered earnings.

The Joint and

Survivor Plan

This joint and survivor proposal is not directly related to adequacy

concerns, but its implementation would have consequences for the

benefits women receive as spouses and survivors.

The rationale under which Social Security pays benefits to married

workers, their spouses, and their survivors is based in large part on the

adequacy goal of the system. As currently structured, benefits to auxiliary

beneficiaries are not earned benefits. Married workers did not pay a higher

payroll tax than unmarried workers to provide the funding for auxiliary

benefits. Nor are their retired worker or disabled worker benefits reduced

to provide funding for such benefits. Instead, these auxiliary benefits are

transfers to the auxiliaries from the program and are paid for by a

combination of higher taxes on all workers than would be necessary and

lower benefits for all retired and disabled beneficiaries than could be

provided if these auxiliary benefits were not available.

Another major source of retirement income, pensions, does not embody

an adequacy goal. Like Social Security, pension plans very often pay

benefits in the form of a life annuity; that is, a benefit that is paid to the

retiree as long as he or she lives. Spousal benefits are rarely, if ever,

provided by pension plans and survivor benefits are usually provided only

under a joint and survivor option.

The joint and survivor option reduces a retired worker’s benefit and, in the

event of his or her death, pays an annuity for the life of his or her

designated survivor. The annuity value of the joint and survivor option

must be as great as the annuity value of the single life option covering the

retired worker alone. However, many pension plans allow the joint and

survivor option to be waived, in which case, the survivor would not

receive an annuity upon the death of the worker.

Page 62 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix II 

Adequacy Concerns

If Social Security auxiliary benefits were restructured following the joint

and survivor model, spousal benefits would not be paid. The benefits of all

married retired worker and disabled worker beneficiaries would be

reduced to provide survivor benefits to their spouses in the event of the

beneficiaries’ deaths. Thus, all married couples, especially one-earner

couples and two-earner couples in which the lower earner is dually

entitled, would receive lower benefits than they would receive under

current law. However, the cost savings from eliminating the spousal

benefit and reducing the transfers inherent for many in current survivor

benefits could be used to increase retired worker and disabled worker

benefits.

The survivor would receive his or her own retired worker benefit (which

also would have been reduced to provide a survivor benefit in the event he

or she died before his or her spouse) plus the survivor benefit from his or

her deceased spouse. Survivors of one-earner couples and many

two-earner couples with uneven within-couple distributions of earnings

would receive lower benefits than under current law, while survivors of

two-earner couples with a more equal distribution of earnings could

receive increased benefits.

Page 63 GAO/HEHS-96-55 Benefit Equity for Working Women
Appendix III 

Comments From the Social Security

Administration

Page 64 GAO/HEHS-96-55 Benefit Equity for Working Women
Bibliography

Ball, Robert M. Social Security Today and Tomorrow. New York: Columbia

University Press, 1978.

Board of Trustees, Federal Old-Age and Survivors Insurance and Disability

Insurance Trust Funds. 1995 Annual Report of the Board of Trustees of the

Federal Old-Age and Survivors Insurance and Disability Insurance Trust

Funds. Washington, D.C.: Board of Trustees, Federal Old-Age And

Survivors Insurance and Disability Insurance Trust Funds, Apr. 3, 1995.

Bureau of Labor Statistics, U.S. Department of Labor. The American Work

Force: 1992-2005. Washington, D.C.: U.S. Government Printing Office,

1994.

Burkhauser, Richard V., and Karen C. Holden, eds. A Challenge to Social

Security: The Changing Roles of Men and Women in American Society.

New York: Academic Press, Inc., 1982.

_____, and Timothy M. Smeeding. Social Security Reform: A Budget

Neutral Approach to Reducing Older Women’s Disproportionate Risk of

Poverty. Syracuse, N.Y.: Maxwell School, Center for Policy Research,

Syracuse University, 1994.

Clarke, Sally C. Advance Report on Final Divorce Statistics, 1989 and 1990.

Monthly Vital Statistics Report, Vol. 43, No. 9 Supplement. Hyattsville, Md.:

National Center for Health Statistics, 1995.

Congressional Budget Office. Earnings Sharing Options for the Social

Security System. Washington, D.C.: Congressional Budget Office, 1986.

Ferber, Marianne A. “Women’s Employment and the Social Security

System.” Social Security Bulletin, Vol. 56, No. 3 (1993), pp. 33-55.

Fierst, Edith U., and Nancy Duff Campbell, eds. Earnings Sharing in Social

Security: A Model for Reform. Washington, D.C.: Center for Women Policy

Studies, 1988.

Grad, Susan. Income of the Population 55 or Older, 1992. Washington,

D.C.: U.S. Government Printing Office, 1994.

Hughes, William J., and Sherwood L. Boehlert, Chairman and Ranking

Republican of the Subcommittee on Retirement Income and Employment

of the Select Committee on Aging, House of Representatives. How Well Do

Page 65 GAO/HEHS-96-55 Benefit Equity for Working Women
Bibliography

Women Fare Under the Nation’s Retirement Policies? (Comm. Pub. No.

102-879.) Washington, D.C.: U.S. Government Printing Office, 1992.

Iams, Howard M. “Earnings of Couples: A Cohort Analysis.” Social

Security Bulletin, Vol. 56, No. 3 (1993), pp. 22-32.

_____, and Steven H. Sandell. “Changing Social Security Benefits to Reflect

Child-Care Years: A Policy Proposal Whose Time Has Past?” Social

Security Bulletin, Vol. 57, No. 4 (1994), pp. 10-24.

Lingg, Barbara A. “Women Beneficiaries Aged 62 or Older, 1960-88.” Social

Security Bulletin, Vol. 53, No. 7 (1990), pp. 2-12.

_____. “Social Security Benefits for Aged Women, December 1993.” Social

Security Bulletin, Vol. 57, No. 2 (1994), pp. 70-71.

Myers, Robert J. Social Security, 4th ed. Philadelphia: Pension Research

Council, Wharton School of the University of Pennsylvania and University

of Pennsylvania Press, 1993.

National Conference on Social Welfare. Report of the Committee on

Economic Security of 1935 and Other Basic Documents Relating to the

Development of the Social Security Act, 50th anniversary ed. Washington,

D.C.: National Conference on Social Welfare, 1985.

Ross, Jane L., and Melinda M. Upp. “Treatment of Women in the U.S.

Social Security System, 1970-1988.” Social Security Bulletin, Vol. 56, No. 3

(1993), pp. 56-67.

Social Security Administration. Social Security Handbook, 1993, 11th ed.

Washington, D.C.: U.S. Government Printing Office, 1993.

_____. Social Security Bulletin, Annual Statistical Supplement, 1994.

Washington, D.C.: U.S. Government Printing Office, 1994.

Subcommittee on Retirement Income and Employment of the Select

Committee on Aging, House of Representatives. How Will Today’s Women

Fare in Yesterday’s Traditional Retirement System? (Comm. Pub. No.

102-873.) Washington, D.C.: U.S. Government Printing Office, 1992.

Page 66 GAO/HEHS-96-55 Benefit Equity for Working Women
Bibliography

_____. Congressional Symposium on Women and Retirement. (Comm.

Pub. No. 102-897.) Washington, D.C.: U.S. Government Printing Office,

1992.

Subcommittee on Social Security of the Committee on Ways and Means,

House of Representatives. Women and Social Security: Families Are

Changing, The Workplace Is Changing, Should Social Security Change

Too. (Serial 102-113.) Washington, D.C.: U.S. Government Printing Office,

1992.

U.S. Department of Health, Education, and Welfare. Report of the HEW

Task Force on the Treatment of Women Under Social Security.

Washington, D.C.: Department of Health, Education, and Welfare, 1978.

_____. Social Security and the Changing Roles of Men and Women.

Washington, D.C.: U.S. Department of Health, Education, and Welfare,

Feb. 1979.

U.S. Department of Health and Human Services. Report of Earnings

Sharing Implementation Study. Washington, D.C.: U.S. Department of

Health and Human Services, Jan. 1985.

Women’s Bureau, U.S. Department of Labor. 1993 Handbook on Women

Workers: Trends and Issues. Washington, D.C.: Women’s Bureau, U.S.

Department of Labor, 1994.

(105678) Page 67 GAO/HEHS-96-55 Benefit Equity for Working Women
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100