Summary of The Caregiver Credit Proposal supported by SecureMom.com and MOTHERS: One Half The Social Security Annual Average Wage For Up To Five Years

 

By Melody Webb (April, 2003)  Based upon a model developed by Melissa Favreault of the Urban Institute

 

We support the caregiver credit proposal that provides caregivers with credit for earning half the Social Security average annual wage in each care-giving year for up to five care-giving years.  The credit would be given for caregiving to children under the age of six.  In 2000, the Social Security average annual wage was $32,154.82, and, thus, the countable annual earnings for purposes of computing Social Security benefits under the caregiver credit proposal in 2000 was $16,077.41.  This proposal would impose a cap on the amount of credit. The initiative would essentially index the caregiver credit to the average annual wage and thus, the value given to care-giving would increase along with the growth of the annual wage.

 

The benefits of caregiver credits would be distributed among women of all income levels, racial and marital categories.  This caregiver credits initiative would distribute 45% of all of its gains to the lowest 20% of wage earners, whose average income in the model is $10,744.  This group stands to gain $418 per year in benefit levels. These workers receive the largest share of income from Social Security benefits at 82%.  The highest earners would receive a gain of $227 in their benefit - 3.8 % of the gains of this proposal.  Never married women would gain $341 in benefit levels per year, and widows would receive an increase of $352, with married women obtaining an added $333 in income per year.

 

Caregiver credits will lift the income of unmarried mothers and minority mothers because these groups are disproportionately lower and moderate wage earners.  Unmarried mothers and minorities experience the highest poverty rates at 15% to 22%, and can expect an amelioration of poverty from the boosts to Social Security income that caregiver credits will provide.

 

 This caregiver credit proposal was developed and modeled by Melissa Favreault of The Urban Institute.

 

Sources:

 

Favreault, Melissa M. and Frank J. Sammartino (The Urban Institute).  2002. The Impact of Social Security Reform on Low-Income And Older Women.”  Washington: AARP. (This is the best of the caregiver credit proposals that seeks to grant caregivers substantial credits.  No models or distributional effects could be located for the $16,500 model that is most often linked with the 2000 Al Gore’s presidential campaign platform.  Of the credit proposals made, it is the only one to our knowledge for which models have been run).