A new report from the Brookings Institution notes that the status of women in retirement has not gotten much attention. The authors of this report, Grace Enda and William G. Gale, point out that significant differences exist in economic status for women in retirement compared to the status of men. They identify a range of factors that contribute to this gender inequity, including that
- Women earn 81 percent of median men’s earnings for similar full-time work. This number obscures the larger pay gaps for women of color.
- Lower lifetime earnings lead to lower Social Security benefits for women. Women receive benefits that are, on average, 80 percent of those men receive.
- Women with one child earn 28 percent less on average over their careers than a woman with no children. Each additional child reduces a woman’s earnings by 3 percent.
- The motherhood penalty—when career interruptions occur after the birth of a child—result in an average of reduced Social Security benefits of 16 percent. Each additional child increases the gap by 2 percent.
- Caregiving for elderly parents and relatives usually falls on women more than men. People who leave the labor force early to care for an elderly relative lose an average of $142,000 in wages.
- Progressive income taxation of family income provides a disincentive to married women to stay in the paid labor force, with long-term consequences for their retirement benefits.
- Lower lifetime earnings can reduce the amount of wealth women can accumulate from employer-sponsored retirement plans.
- Women tend to live longer than men, often draw down their savings over a longer period, and thus are more likely to run out of retirement savings.
- Poverty rates for women rise with age. In every marital status group, women with children had higher poverty rates than women without children, a pattern that does not hold for men.
Enda and Gale offer suggestions for policy changes that can address the retirement gap for women. They point out that labor market practices, retirement systems, and social policy are not set up to accommodate women’s life experiences. They suggest the following policy changes that can close the gaps for women in retirement:
- A robust federal paid family leave policy and subsidized high-quality childcare will make it more tenable for women to stay in the paid work force, save for retirement, and earn Social Security credits.
- Under a Social Security Caregiver Credit, the government would assign a value to caregiving work that would be used in calculations of Social Security benefits. The United Kingdom, France, Germany, and Sweden provide caregiver credits for public pensions, and we could do this too.
- Reform the tax code to either provide a second-earner credit or tax individuals rather than families to improve incentives for married women to work.
- Strengthen the social safety net by boosting Supplemental Security benefits to close the gap between Social Security income and the poverty threshold.
- Increase support from Medicare and Medicaid for end-of-life care. These costs for a spouse often drain the savings of widows and leave them destitute.
- Reform divorce laws.
In addition to the structural problems described in the Brookings report resulting in gaps in retirement wealth and higher levels of poverty for older women, we now have the Covid-19 pandemic exacerbating the situation. As Mark Miller, writing for the New York Times, notes, “One of the most important factors affecting your retirement security is how long you work.” But the pandemic is making it harder for people to work longer, especially older people:
- The combined rate of unemployment and underemployment for workers over sixty-five in May 2020 was 26 percent and are much higher for older workers who are less educated, Black, and Latino.
- The New School for Social Research forecasts that the poverty rate in retirement among workers who are now fifty to sixty will rise to 54 percent because of the pandemic economic shock. Employers do not want to hire older workers in the pandemic.
In other words, the policy changes described above are more important going forward than they have ever been—especially for women. Let’s keep the pressure on our lawmakers to legislate these policy changes.
Photo by Mariia Chalaya on Unsplash