Women would get a dandy deal from privatization of the Social
Or would they?
Two new graduates of the Kennedy School of Government, Harvard
University, maintain they would.
"Virtually all women would be better off (many significantly)
under a system of individually owned, privately invested accounts
than under the current Social Security system," Ekaterina Shirley and
Peter Spiegler write in a new study.
Women better look at the study's assumptions before buying this
More likely, privatization would increase the risk of retired
women living in financial misery.
Notes a study by the Institute for Women's Policy Research: "It is
essential to maintain the social insurance aspects of the current
system in order to ensure that women, especially widows and other
non-married women, are not thrust into poverty as a result of changes
in Social Security policies."
There's no doubt women need to be concerned about their financial
security in retirement. Women typically earn less than men, work 11
fewer years, and live longer than men. So women receive, on average,
lower Social Security benefits than men.
Poverty rates among elderly women are twice as high as for elderly
men: 13.6 percent vs. 6.2 percent. Women in general accumulate fewer
financial assets than men and aren't so likely to have a company
pension. As a result, on average nonmarried women over 65 rely on
Social Security for 72 percent of their retirement income. Of that
group, 40 percent get 90 percent of their retirement income from
Aware of this situation, 39 Democratic women in the House of
Representatives sent a letter in July to President Clinton and Vice
President Al Gore asking them to address women's interests in the
debate over Social Security.
The Shirley-Spiegler paper is distributed by the CATO Institute as
part of its Wall Street-financed effort to promote privatization.
One problem with the paper's comparison of privatization and
Social Security benefits is the annual rate of return - 6.2 percent -
that Ms. Shirley and Mr. Spiegler assume in reckoning how much the
money contributed to a private plan would grow by retirement time.
For one thing, it ignores administrative costs for private plans.
Mutual-fund costs generally run about 1 percent a year of the
portfolio. It might have to be higher for the small amounts many
low- income women would be setting aside each year.
In Britain and Chile, administrative and sales costs have been
even higher for privatized pension plans. …