Social Security Benefits for Non-Working Spouses

Daniel Mazzola, CPA, CFA
Published Date:
Nov 1, 2017

In 1945, Michigan’s legislators passed a law requiring all bartenders to be licensed but prohibiting women to secure such licenses unless they were the wives or daughters of male bar owners. Whether this law was enacted for social, political, or economic reasons, Michigan—by limiting a woman’s right to contact her labor—kept occupational choice a part of male privilege and reinforced beliefs that men could and should govern women.  Valentine Goesaert challenged the law in Goesaert v. Cleary, arguing that it violated the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution and requesting an injunction against its enforcement. The district court rejected her motion, however, and the U.S. Supreme Court upheld the Michigan law. 

Social Security benefits for non-working spouses were implemented in an era when the law at issue in Goesaert v. Cleary could be promulgated. The Social Security program was originally established in 1935 to provide financial protection for working people and their families in the event a worker’s earnings were lost due to retirement, death, or disability.  Dependent benefits for spouses and children were added a few years later, effectively changing Social Security from a retirement plan for workers into a family based economic security program.  At that time, the typical American household—with a father in the workforce and a mother maintaining the home—stood to benefit from the conception of family as embraced by Social Security.  As a new program, Social Security still had its foes, and by offering higher benefits to a larger class of beneficiaries, policymakers were appeasing some of its opponents. Families that diverged from the traditional model were likely deemed insignificant as a voting bloc.    

Non-working spousal benefits are available without regard to the beneficiary’s participation in the workforce and are based solely on a recognized family relationship to the insured wage earner.  Non-working spousal benefits are available to spouses older than 62 or those caring for the worker spouse’s child, who must be under 16. Those who choose to collect a spousal benefit at full retirement age will receive an amount equal to half of the worker spouse’s full benefit.  A spouse with her own earnings history—and thus her own Social Security benefit—will receive the non-working spousal benefit if it is higher.

The inequitable nature of non-working spousal benefits is fairly obvious. Imagine Tom and Joe earn the same salary and have the same life expectancy, but Tom has a non-working spouse, Jane, and Joe is unmarried. The two men remit the same payroll taxes and have the same Social Security benefit of $2500. While Tom is alive and retired, his family annual benefits will be 50% higher due to Jane’s spousal benefits of $1250. 

Tom and Jane have two friends, John and Mary, both working.  John has earned a $2000 benefit.  Mary, his wife, has accrued a $1005 benefit by working 20 years. If she had not worked, she would be entitled to a spousal benefit of $1000. Her reward for remitting payroll taxes for 20 years is $5.

Finally, for the most egregious example, compare the two women.  Mary has worked, while Jane has not. Because Jane is married, she will receive a higher Social Security benefit simply due to her relationship to a higher income taxpayer.

The labor force participation rate for middle-aged American men has been declining for years. This has profound implications for our country, including increased substance abuse, reduced potential gross domestic product, and a weakening of the traditional family structure in which men previously assumed breadwinner responsibilities. Nicholas Eberstadt of the American Enterprise Institute asserts in Men Without Work that generous welfare programs discourage men from working and negatively affect the labor force participation rate. Putting the blame on these men themselves, he argues, “It is impossible to imagine an earlier generation in which such a huge swath of prime age men would voluntarily absent themselves from the workforce, living instead on the largesse of women they know and taxpayers they do not.” 

Non-working spousal benefits are a disincentive to employment. As married women year in and year out become a larger percentage of the working population, it will become easier for their non-working spouses to claim these benefits. Changes to non-working spousal benefits will not provide a major boost to the labor force participation rates for middle-aged men, but any policy that deters their participation in the workforce should be rescinded. 

Some argue it is not necessary to completely eliminate the non-working spousal benefit to address the inequities inherent in the system because the non-working spousal benefit does play a useful role within Social Security by recognizing the value of those charged with performing stay-at-home work duties and raising the next generation of wage earners.  One option suggested is to simply constrain its growth so that no future non-working spouse can receive a benefit exceeding the inflation-adjusted value of the benefits that today’s lowest wageworkers receive based on a full career of payroll tax contributions.  

In Goesaert v. Cleary, the Supreme Court upheld the Michigan law by a vote of 6-3.  Justice Felix Frankfurter, delivering the majority opinion, wrote that Michigan could, “beyond question,” prohibit all women from working behind a bar. When addressing the Equal Protection Clause, he observed that it only precludes “irrational discrimination”—and the Constitution itself, Justice Frankfurter asserted, “does not require legislatures to reflect sociological insight, or shifting social standards.”      

The picture of the American family has changed dramatically, and the inequalities of the Social Security system are more acute than ever.  Non-working spousal benefits are unfair to single and lower income taxpayers, are an impediment to those not inclined to work, and would be illegal under the rules governing private sector pension plans. In 2015, President Obama eliminated the file-and-suspend strategy, a claiming approach deployed by some dual entitlement beneficiaries. While a few expressed displeasure, our republic still stands.  As it is clear that Social Security is unsustainable over the long term at current benefit and tax rates, I cannot think of a more propitious time to take non-working spousal benefits off the table altogether.  

Daniel G. Mazzola, CPA, CFADaniel G. Mazzola, CPA, CFA, is an investment advisory representative with American Portfolios Advisors Inc. He is a Chartered Financial Analyst, Certified Public Accountant and Certified Financial Planner. Mr. Mazzola is a member of the NYSSCPA Personal Financial Planning Committee.
Daniel G. Mazzola, CPA, CFA, is an investment advisory representative with American Portfolios Advisors Inc. He is a Chartered Financial Analyst, Certified Public Accountant and Certified Financial Planner. Mr. Mazzola is a member of the NYSSCPA Personal Financial Planning Committee.

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