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. 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. 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. Today, 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. 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. 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. 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. 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.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. 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. 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. 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.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, 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.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. 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. 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. 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.