NCPA Study Confirms: Accounts Progressive for Women

November 10, 2003

According to a recent National Center for Policy Analysis study, women have the most to gain from a reformed Social Security system that includes personal retirement accounts. In "The Impact of Social Security Reform on Women in Three Countries," authors Estelle James, Alejandra Cox Edwards, and Rebeca Wong examined the experiences of women in Chile, Argentina, and Mexico, just three of the many nations that have already allowed for private ownership and investment of pensions.

The study found that "Latin American reforms have raised the level of benefits of women relative to those of men and of low-income workers—many of whom are women—relative to high earners."

"Women rely on Social Security more than men for financial security during their older years," said Estelle James, former economist with the World Bank. "Yet women also have the most to gain from a Social Security system that includes personal accounts and other reforms."

The release for the study states:

"This finding contradicts the long-standing argument from many women and senior's groups that maintaining Social Security's status quo was essential to women's financial security.

"The NCPA study examined reformed systems in Argentina, Chile and Mexico and projected how representative men and women would fare under the new and old systems. Because the old systems in these countries were unsustainable, like the U.S. Social Security system, the NCPA study compared the relative position of men and women with similar education under the new and old systems, rather than comparing the absolute dollar-value of benefits. The result showed a shift in favor of women. For example, comparing married women and men high school drop-outs:

• In Chile, the lifetime benefits of married women with full work careers rose from 71 percent of men's benefits to 96 percent.



• In Argentina, the same women's benefits rose from 65 percent to 108 percent of men's.



• In Mexico, the same women's benefits rose from 80 percent to 98 percent of men's.

"The total pensions of women in these countries come from three sources: personal accounts, public benefits that are targeted toward low earners, and joint pensions that husbands are required to provide. In all three countries, husbands are required to purchase, with the money in their personal accounts, a joint annuity (or other pension) to provide for surviving wives. Most important, women are allowed to keep their own pension in addition to this joint annuity. This means that working women are no longer penalized, as they are in the U.S. and other countries where they must give up their own benefit (to which they have contributed for years) in order to receive the widow's benefit.

"The demographic realities of our Social Security system are going to force us to reform it sooner or later," said James. "By learning from the experiences of these countries, we can design a personal account system that not only solves Social Security's long-term debt, but also makes it a better deal for women."

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