Feminist Group Fails to Refute Cato Study

December 7, 1999

The Institute for Women's Policy Research has released a new study designed to refute Cato's research on the benefits of Social Security Privatization for women. However, the poor research (the paper wrongly claims that the Cato Institute supports a national sales tax to finance the transition to a privatized system) study relies on a number of dubious assumptions and ultimately fails to make its case.

The study, entitled "Why Privatizing Social Security Would Hurt Women: A Response to the Cato Institute Proposals for Individual Accounts," makes absurd assumptions to make its case, such as that: private capital markets will produce future rates of return as low as 3 percent; the transition must be paid for entirely through new taxes; and that administrative costs will run as high as 40 percent. The report also assumes that women will work only 25 years or less during their careers, which seems unrealistic given the changing dynamics of women in the workforce.

However, using more reasonable assumptions about rates of return, administrative costs, transition financing, and women's earning patterns, Cato has found that all categories of women (working, non-working, single, married, widowed, and divorced) would do better under a system of individually-owned privately invested accounts.

For a look at Cato's research on Social Security and women see "The Benefits of Social Security Privatization for Women" and "Greater Financial Security for Women with Personal Retirement Accounts."

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