Academic journal article Social Security Bulletin

Earnings of Couples: A Cohort Analysis

Academic journal article Social Security Bulletin

Earnings of Couples: A Cohort Analysis

Article excerpt

This article looks at Social Security covered earnings of wives relative to their own husbands, using interview responses from the 1990 Survey of Income and Program Participation linked to Social Security Administration records of covered earnings. It examines earnings at ages 22-31, 22-41, and 22-51 for birth cohorts of wives born in the 1930's, 1940's and 1950's. More recent cohorts of wives had more years of earnings and higher levels of indexed earnings. As expected, differences in earnings of wives relative to their husbands declined among more recent cohorts. Nevertheless, if these earnings patterns continue through retirement age, the majority of wives born in the 1930's and 1940's and two-fifths of those born in the 1950's can expect to receive spouse benefits, and, if widowed, most can expect to receive widow benefits based on their husband's covered earnings. The article explores which characteristics are significantly associated with wives having low earnings relative to their husbands.

The majority of older women receive Social Security benefits based partly or totally on their husband's earnings. About three-fifths of current beneficiary women aged 62 or older received benefits either partly or totally as wives or widows based upon the earnings records of their husbands (Lingg 1990). One-fifth received retired-worker benefits as well as some wife or widow benefits because their retired-worker benefits were less than the benefits that they received as wives or widows. (This type of benefit receipt is known as dual entitlement.) Over lime, the percentage of older women with exclusively wife and widow benefits has decreased, while the percentage with dual entitlement has increased (chart 1). (Chart omitted) The proportion exclusively with retirement benefits has been roughly stable between 1960 and 1988 at almost two-fifths.

Wife and widow benefits are based on marital status and in some cases on marital history. If age requirements are met, current wives of insured workers can receive spouse benefits and widows of insured workers can receive survivor benefits. Divorced women must have at least 10 years of marriage to be eligible for these benefits.

Social Security benefits are based on a lifetime of covered earnings.(1) In the fully mature Social Security system serving persons born after 1928, an individual must be aged 62 and have at least 40 quarters of Social Security covered earnings to be eligible for a retired-worker benefit. The benefit is based on the 35 years of highest earnings from age 22 to age 61, after dropping the five lowest years. Any years with higher earnings before age 22 or after age 61 may be substituted for earnings from ages 22 to 61. The earnings are wage indexed, and an average of indexed monthly earnings (AIME) is calculated. The basic benefit--the primary insurance amount (PIA)--is derived from the AIME, giving greater weight to lower earnings.(2) If the highest 35 years of earnings include years with low or zero earnings, they are averaged into the AIME, which lowers benefits.

The types of benefits that wives receive depend on their history of covered earnings relative to their own husbands. Disregarding adjustments for early or late retirement, a wife beneficiary is eligible for half of a worker's basic benefit (that is, primary insurance amount), while a widow beneficiary is eligible for the full basic benefit of the deceased spouse. When an aged wife or widow of an insured worker is so entitled to her own retirement benefit based on her own earnings record, the wife or widow benefit is reduced by an amount equal the retirement benefit. She receives the higher of her own worker benefit or the wife or widow benefit.(3)

Women's labor-force activity has changed substantially over time. Perhaps the "single most important development in the labor market over the past 40 years has been the increase in the number of women, especially married women, at work for pay" (Gunderson 1989, p. …

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