The Blackwell Companion to Sociology (90 page)

1986; Brody, 1990; Chang and White-Means, 1991).

Providing intense care for a frail older relative takes a toll on caregivers,

economically, physically, and emotionally ± though it may also be rewarding

work. One study showed that 21 percent of caregivers compensated for their

extra responsibilities by reducing work hours and 19 percent took time off

without pay (Scharlach, 1994). Another study estimated that family members

lose $8 billion dollars a year in lost wages (Ward, 1990). The resulting forgone wages, pensions, and Social Security places these women in a vulnerable economic situation (Smeeding et al., 1999). Physical repercussions of caregiving

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383

include sleeplessness and exhaustion, lack of exercise, increases in chronic conditions, and drug misuse (Brody 1990; Hoyert and Seltzer, 1992). Finally, the

emotional consequences of caregiving include marital tension and depression

(Gallagher et al., 1989; Stephens and Franks, 1995).

Medicare and Medicaid lessen the caregiving burden on young generations.

Proposals to reduce Medicare or Medicaid expenditures typically overlook how

beneficial these programs are for younger generations by enabling older people

to provide for their own care. It is evident that cuts to Medicare and Medicaid

may well reduce taxpayer burden, but they tend to increase caregiver burden.

Are you willing and able to absorb these transferred costs? What types of policies would you like to see in place by the time your parents ± or you ± need long-term care?

Economic

Economic Security

Economic security is tricky in old age because many older people no longer have

jobs. As people age they tend to limit or terminate participation in the paid labor force. Their previous participation, however, which varies significantly by gender, race, and class, has a dramatic impact on whether or not they will be

financially secure in retirement. Because of a lifetime of cumulative advantage

or disadvantage, the elderly are the most economically diverse age group. While

a significant proportion are well off and live a life of leisure and travel, a less visible group struggles to make ends meet. Poverty rates for the elderly are the lowest they have been in decades, and they are lower than poverty rates for other age groups. Still, about 12 percent of all older people are poor. Older women are twice as likely as older men to be poor, and older blacks and Hispanics are two

to three times as likely as older whites to be poor (Hobbs and Damon, 1996).

Those who live alone are particularly likely to be poor. Only one-fourth of older women, compared to three-fourths of older men, are married, and marriage

rates are even lower for black than for white women. Thus, figure 26.4 reveals,

20 percent of white women, compared to 54 percent of Hispanic women and 40

percent of Black women, who lived alone in 1997, were at or below the poverty

level (US Bureau of the Census, 1998a). Clearly, though the economic condition

of the elderly has improved dramatically, pockets of poverty persist.

Retirement Income: Employer-based Pensions

Receipt of a private pension reduces the chances of being poor in old age

substantially, but many older people are not fortunate enough to receive one.

Indeed, among those aged 65 and over in 1992, pensions accounted for only 10

percent of total income (Grad, 1994). Pension eligibility, and pension size, vary markedly by gender and race. In 1994, while 48 percent of older men had a

pension, only 30 percent of women did (National Economic Council, 1998).

In 1992, 53 percent of white men and 30 percent of white women had a pension.

Among Hispanics, 35 percent of men and 13 percent of women had a

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M. Harrington Meyer and P. Herd

Figure 26.4 Percentage over age 65 living alone or married and in poverty, 1997.

Source: US Bureau of the Census, Poverty in the United States, 1997. Current Population Reports, Series P60±201. Washington DC, US Government Printing Office, 1998.

pension. And among African Americans, 32 percent of men and 19 percent of

women had one (Grad, 1994). Among whites, the median pension varied from

$8,045 for men to $4,725 for women. Black women actually had a median

pension slightly higher than white women, $4,828, but black men's was only

$5,428 (US House of Representatives, 1992).

Studies indicate that the main determinants of pension coverage include

income, job tenure, full-time status, and union membership (Even and MacPher-

son, 1998). Despite women's increased labor force participation, many remain

concentrated in low-wage, service, part-time, non-union, and small firm jobs

that tend not to provide pensions (Hounsell, 1996). Even among professions that

have high rates of pension coverage, women are less likely than men to be

covered (DeViney, 1995). When women are covered by pensions, their pensions

are smaller than men's because of both women's interrupted employment and

their lower wages; women earn 70 percent of what men earn (Hooyman and

Gonyea, 1995).

Racial differences in pension coverage are due to the same set of factors. In

1997, black men earned 69 percent of what white men did (US Bureau of the

Census, 1998a), and they are two to three times more likely than whites to be

unemployed (US Bureau of Labor Statistics, 1995). Additionally, African Amer-

icans suffer disproportionately from the plant closings that took place in the

1980s. During the 1990±1 recession, African Americans were the only racial

group to experience a net job loss; that is, job loss associated with the recession Aging and Aging Policy in the USA

385

was concentrated among African Americans relative to other racial groups, such

as whites (Oliver and Shapiro, 1995). The combination of these factors makes

pension coverage, and pension size, significantly less for black than for white

Americans.

Pension coverage, already sporadic for today's elderly, is expected to be even

less comprehensive for future generations. For example, pension coverage of

men aged 21±36 declined from 62 percent in 1979 to only 49 percent in 1993;

for women the comparable numbers increased slightly from 46 percent in 1979

to 48 percent in 1993 (Quadagno, 1999). Given a college degree, you may well

be able to land jobs which include private pensions as fringe benefits, but how

will the rest of your cohort fare?

Social Security

The most important source of income for the majority of Americans aged 65 and

over is Social Security (Grad, 1994). The Social Security Act of 1935 created this old age income program as a means of helping to ensure economic security for

older Americans who were particularly vulnerable to unemployment and pov-

erty (Quadagno, 1999). Like private pensions, Social Security is based upon life course labor participation. Social Security is administered by the Social Security Administration (SSA) and is paid for by employees and employers through the

FICA tax. If you worked in the USA in 1999, 6.2 percent of your gross income

went toward Social Security, and your employer matched that with another 6.2

percent (SSA, 1998). Because Social Security has a maximum benefit, the tax is

capped; thus in 1999, any earnings above $72,600 were not taxed (SSA, 1999).

Those who qualify for Social Security benefits include retired workers, their

spouses, widows, and children, and disabled workers. Beginning in 2003, the

eligibility age will gradually increase until 2027 when it will be 67. Those who take benefits at 62 face a 30 percent reduction in them (SSA, 1999). Those

who qualify as spouses receive a benefit equal to 50 percent of the working

spouse's benefit, even if they never contributed to the program themselves.

Similarly, those who qualify as widows receive a benefit equal to 100 percent

of their working spouse's benefit.

Although Social Security comprises close to 40 percent of the income of those

aged 65 and older, one-fourth of the elderly rely on it for 90 percent or more of their income (SSA, 1995). Because of decreased access to private pensions and

savings, in 1992, African Americans and Hispanics relied on Social Security for

48 and 44 percent of their annual incomes respectively (Grad, 1994). This is

particularly troubling given the modest size of their benefits. While white

women's average benefits in 1992 were $569, white men's were $748, black

women's were only $490, and black men's were $569 (SSA, 1995). Women's

benefits are less than men's because of a lifetime of lower earnings and frequent episodes out of the labor force to care for young children and frail older

relatives, while black and Hispanic benefits are less than whites' because of a

lifetime of lower earnings and a greater propensity to be unemployed or under-

employed (Hooyman and Gonyea, 1998; Castro, 1995).

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M. Harrington Meyer and P. Herd

Social Security benefits are based upon years of work and income earned, yet

they are calculated in a way that redistributes to low-income Americans. The

replacement rate is the percentage of pre-retirement income that Social Security benefits replace. A high wage earner's replacement rate is 28 percent, whereas a low income earner's replacement rate is 78 percent (Koitz, 1996). Nonetheless, a worker who received a pre-retirement income of $3,877 a month in 1997 would

have received $1,311 in Social Security benefits, whereas someone whose

monthly income was $800 would have received $519 a month (Quadagno,

1999).

The future of Social Security has been at the forefront of policy debate in recent years. There are concerns that the fund will go bankrupt when babyboomers

start collecting due to the small number of workers relative to recipients

(Quadagno, 1996). A variety of proposals have been put forth to mitigate the

effects of the babyboomers, which Quadagno (1999) summarizes. First, privat-

izing Social Security would allow workers to invest their own incomes in the

stock market. However, while the stock market is presently strong, some argue

that when the babyboomers retire they will sell their stocks and the market will crash or people simply risk making bad investments and losing their lifetime

savings. Additionally, this would disadvantage women, mostly single mothers,

who do not have strong rates of labor force participation due to their primary

parenting responsibilities. It would also take a well educated (and lucky) person to know what are appropriate and strong investment strategies.

Making Social Security a means tested program is another option, whereby

those who are wealthy will not receive benefits that they do not need. Many

argue, however, that this move would threaten the program's present popularity

and means testing would simply result in a scaled back and eventually ineffective Social Security program (Kingson, 1994). Australia tried this approach and each

year the means test has tightened and fewer and fewer workers are eligible

(Shaver, 1991).

Another option is raising the retirement age. This proposal would dispropor-

tionately affect women and minorities who tend to retire earlier due to their own or a family members' health problems or due to sex and race discrimination in

the labor force (Burkhauser et al., 1996).

Despite the ongoing controversy, many scholars argue that there is no crisis

with Social Security at all ± and that minor changes such as raising the FICA

payroll tax for employers and employees by just 1.1 percent ± from 6.2 to 7.3

percent ± would stabilize Social Security as we ride out the old age of the

babyboomers (Quinn, 1997, p. 1c). Many fear that this 1.1 percent rise in

taxes would be burdensome, but nearly 20 nations already have higher Social

Security taxes than the USA (Quadagno, 1999).

Work and Retirement

Since the implementation of the Social Security Act in 1935, most workers have

left the labor force by, or even before, age 65 (Haber and Gratton, 1994). Social gerontologists initially viewed retirement as the final major stage in the life

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387

course. But we now understand retirement as a process that may begin with

being laid off or a voluntary reduction in hours, and may culminate a decade or

two later with a shift to volunteering, golfing, or becoming homebound. Race

differences in labor force participation are relatively smaller compared to gender differences. For example, in 1996, among those aged 35±39, the employment

rate for white men was 91 percent and for white women it was 74 percent. The

gap was smaller between black men and women with employment rates of 78

compared to 72 percent respectively. From age 30 to 65, employment rates for

white men averaged 15±20 percent higher than those for white women. Between

black men and black women the gap was between 5 and 10 percent (US Bureau

of Labor Statistics, 1996). Among workers retiring in 1996, the median woman

was employed for 27 years, compared to 39 years for the median man (National

Economic Council, 1998). This has profound implications for financial security

and retirement satisfaction for older women.

A great deal of research has focused on how we may plan for and enjoy a

successful retirement period. Studies show that a pleasurable retirement is

dependent upon economic security, physical health, and a strong social support