The Treatment of Married Women by the Social Security Retirement Program

It is generally accepted that the Social Security program pays women a higher average ratio of lifetime benefits to lifetime taxes than it does men. Social Security’s progressive benefit structure and annuity payment combine with women’s lower average earnings and longer average life spans to provide women with more favorable treatment on a lifetime basis. This more favorable treatment does not necessarily imply that women are presented with stronger incentives to participate in the labor force and contribute to Social Security than are men. If anything, Social Security does the opposite. The auxiliary benefit provisions, including spousal and widow’s benefits, mean that many women do not receive higher benefits in return for their contributions than they would have received had they never worked or contributed to the program. In this paper, we calculate two measures of treatment by Social Security using the SSA’s Modeling Income in the Near Term (MINT) micro-simulation model: the net tax rate, which reflects the net value of Social Security taxes and benefits as a percentage of lifetime earnings; and the generated net tax rate, which represents the net value of benefits received in return for a participant’s taxes relative to lifetime earnings. While women pay low and even negative average net taxes to Social Security, their generated net tax rates are higher and often equal the full statutory tax rate. Men, by contrast, pay higher net tax rates but lower generated net tax rates, as their earnings may generate additional benefits for their spouse or survivor. The work incentives presented by Social Security may differ significantly from those implied by measures of overall treatment by the program.