Closing the gender pay gap would do more than just help working women: It could also help shore up the nation’s finances, a new study suggests.
Making sure women earn equal pay for equal work could trim Social Security’s long-term shortfall by up to a third, according to a study released Thursday by Social Security Works, a non-profit group advocating to protect Social Security. That’s because boosting women's pay would put more money into the program's coffers.
Closing the pay gap between men and women who are the same age and have similar levels of education and hours of work would have generated $447.6 billion in extra income in 2012, according to figures from the Institute for Women's Policy Research cited in the study. Most of that income would have been subject to Social Security taxes, boosting annual revenue for the Social Security Trust Fund by at least $40 billion, said Ben Veghte, the research director of Social Security Works.
Extrapolating such gains over 75 years, higher pay for women could close much of what could be a nearly $10 trillion gap in Social Security's ability to pay benefits by 2087, according to one estimate.
The solvency of Social Security has been a major political issue over the past few years. As more baby boomers retire and start using the fund instead of paying into it, officials are looking for ways to make sure the program doesn't run out of money. Earlier this year, President Obama proposed cutting Social Security benefits in an attempt to strike a budget deal with Republicans. He ultimately withdrew the proposal after it became clear that a "grand bargain" on the budget was unpopular on both sides of the aisle.
Pay equality for women would also give them more money to save for retirement, making it less likely they'll have to rely only on Social Security, or a spouse's benefits, in retirement.
“Unequal pay has had a profound impact on women's economic security, and that includes their retirement security,” Rep. Rosa DeLauro (D-Conn.) said on a conference call with reporters Thursday. “Women live longer and are much more reliant on Social Security because of lost wages over a lifetime.”
DeLauro is a sponsor of the Paycheck Fairness Act, a bill that would make employers give legitimate reasons for pay discrepancies and ban retaliation against workers who talk about their pay. She added that, for millions of women, an extra boost in earnings -- and, ultimately, in Social Security benefits -- could mean “the difference between health and hunger.”
More than 2.6 million women over the age of 65 lived in poverty in 2012, according to an analysis from the National Womens’ Law Center.
The Social Security Works authors also suggested that women (and men) not be penalized for temporarily leaving the workforce to have and raise children. Social Security benefits are based on average earnings over the best 35 years of a career. Leaving the workforce weighs on those average earnings.
The authors back proposals that would give workers credit for something like half the national average wage each month for the years they’re caregiving. That way, when it’s time to calculate their Social Security benefits, these people don’t have several years with a bunch of zeros weighing down their average earnings.
“Instead of having them get an F for those years, they get a C-,” Veghte said.