How Women Workers Saved Social Security

Copyright, The New York Times Company

One of the great advances of 20th century was increased life expectancy. This advance might have bankrupted Social Security, if it were not for women in the work force.

When the Social Security program was created in the 1930s, life expectancy was 60 years, as compared to 75 years in the 1980s and 78 years today. With 1930s life expectancy, a great number of people were expected to pay Social Security taxes while they worked, but never live long enough to ever collect benefits. The early planners of the system understood that the prior contributions of the now-deceased were one way that a retiree could collect more in benefits than he paid in taxes.

Although there are still some Americans who work, pay taxes, and then die before collecting Social Security benefits, this life cycle is much less common than it used to be. Thus you would think that Social Security would have had a huge deficit years ago.

Social Security’s architects did not anticipate another major advance in the 20th century: women’s progress in market work, and how that progress would fill Social Security’s coffers.

Once they turn 62 years old, married people, widows and widowers are eligible for Social Security, regardless of whether they ever worked for pay during their lifetimes. When Social Security was in the planning stages, it was expected that most working-age couples would have only one person working (and thereby paying the payroll tax) — typically the husband. Yet when these couples retired, Social Security would pay benefit checks to both of them as long as they lived (see the chapter in this book written by Professors Jeffrey Miron and David Weil, for more on the economic and demographic projections originally used to design Social Security).

Thus, a payroll tax rate was planned that could bring in enough revenue from working men to pay both the retired men and the retired women.

History did not quite turn out that way. In fact, millions of married women worked for pay and paid the payroll taxes as they did. This was largely profit for the Social Security system, because the system would have paid those women benefits regardless.

The revenues of governments in the future will depend just as much on how women spend their time. Governments can expect more revenue if women continue significantly with their labor market progress, and less revenue if some of women’s payroll gains are reversed in the years ahead.