scholarly journals Social Security, Labor Supply and Health of Older Workers: Quasi-Experimental Evidence from a Large Reform

2020 ◽  
Author(s):  
Itay Saporta-Eksten ◽  
Ity Shurtz ◽  
Sarit Weisburd
Keyword(s):  
Social Security ◽  
Labor Supply ◽  
Older Workers ◽  
Household Wealth ◽  
Extensive Margin ◽  
Tax Rate ◽  
Pension Systems ◽  
Mortality Effect ◽  
Retirement Timing ◽  
Quasi Experimental

Abstract We study the effects of public pension systems on the retirement timing of older workers and, in turn, the health consequences of delaying retirement by those workers. Causal inference relies on a social security reform in Israel that shifted payments from husbands to their (non-working) wives, thereby substantially reducing the implied tax on the husband's employment while keeping overall household wealth constant. Using administrative social security data, we estimate extensive-margin labor supply elasticities w.r.t. the average net-of-tax rate of about 0.43 for men over 65. Using the reform to instrument for employment, we find that working an additional full year at old age decreases longevity. This mortality effect occurs after age 75 and is driven by workers holding blue-collar jobs. Finally, we evaluate the effect of the reform on earnings. The results imply a small value for an additional year of life, suggesting that workers underestimate the health cost of employment at older ages.

scholarly journals Work incentives in the Social Security Disability benefit formula

2018 ◽  
Vol 18 (2) ◽  
pp. 165-189 ◽  
Author(s):  
GOPI SHAH GODA ◽  
JOHN B. SHOVEN ◽  
SITA NATARAJ SLAVOV
Keyword(s):  
Social Security ◽  
Older Workers ◽  
Extensive Margin ◽  
Disability Benefit ◽  
Payroll Tax ◽  
Payroll Taxes ◽  
The Social ◽  
Social Security Disability ◽  
Work Disincentives ◽  
Different Levels

AbstractWe examine the connection between taxes paid and benefits accrued under the Social Security Disability Insurance (SSDI) program on both the intensive and extensive margins. We perform these calculations for stylized workers given the existing benefit structure and disability hazard rates. On the intensive margin, we examine the effect of an additional dollar of earnings on the marginal payroll taxes contributed and future benefits earned. We find that the present discounted value of disability benefits received from an additional dollar of earnings, net of the SSDI payroll tax, generally declines with age, becoming negative around age 40 and reaching almost zero at age 63. On the extensive margin, we determine the effect of working an additional year on the additional payroll taxes and future benefits as a percentage of income. The return to working an additional year at an income level just large enough to earn Social Security credits for the year is large and positive through age 60. However, the return to working an additional full year is substantially smaller and becomes negative at approximately age 57. Thus, older workers face strong incentives to earn enough to obtain creditable coverage through age 60, but they face disincentives for additional earnings. In addition, workers aged 61 and older face work disincentives at any level of earnings. We repeat this analysis for stylized workers at different levels of earnings and find that, while the program transfers resources from high earners to low earners, the workers experience similar patterns in the returns to working.

scholarly journals Minimum Wages and Retirement

ILR Review ◽  
2019 ◽  
Vol 73 (1) ◽  
pp. 153-177
Author(s):  
Mark Borgschulte ◽  
Heepyung Cho
Keyword(s):  
Social Security ◽  
Labor Supply ◽  
Minimum Wage ◽  
Older Workers ◽  
Employment Outcomes ◽  
Minimum Wages ◽  
Financial Resources ◽  
Positive Effects ◽  
Wage Increases ◽  
Social Security Beneficiaries

The authors study the effect of the minimum wage on the employment outcomes and Social Security claiming of older US workers from 1983 to 2016. The probability of work at or near the minimum wage increases substantially near retirement, and previous researchers and policies suggest that older workers may be particularly vulnerable to any disemployment effects of the minimum wage. Results show no evidence that the minimum wage causes earlier retirements. Instead, estimates suggest that higher minimum wages increase earnings and may have small positive effects on the labor supply of workers in the key ages of 62 to 70. Consistent with increased earnings and delayed retirement, higher minimum wages decrease the number of Social Security beneficiaries and amount of benefits disbursed. The minimum wage appears to increase financial resources for workers near retirement.

scholarly journals Social security and endogenous demographic change: child support and retirement policies*

2021 ◽  
pp. 1-19
Author(s):  
Giam Pietro Cipriani ◽  
Tamara Fioroni
Keyword(s):  
Social Security ◽  
Labor Supply ◽  
Older Workers ◽  
Child Support ◽  
Optimal Allocation ◽  
The Elderly ◽  
Social Optimum ◽  
Fertility Decisions ◽  
The Social ◽  
Endogenous Retirement

Abstract This paper studies retirement and child support policies in a small, open, overlapping-generations economy with PAYG social security and endogenous retirement and fertility decisions. It demonstrates that neither fertility nor retirement choices necessarily coincide with socially optimal allocation, because agents do not take into account the externalities of fertility and the elderly labor supply in the economy as a whole. It shows that governments can realize the first-best allocation by introducing a child allowance scheme and a subsidy to incentivize the labor supply of older workers. As an alternative to subsidizing the elderly labor supply, we show that the first-best allocation can also be achieved by controlling the retirement age. Finally, the model is simulated in order to study whether the policies devoted to realizing the social optimum in a market economy could be a Pareto improvement.

Using Nonlinear Budget Sets to Estimate Extensive Margin Responses: Method and Evidence from the Earnings Test

2021 ◽  
Vol 13 (4) ◽  
pp. 150-193
Author(s):  
Alexander M. Gelber ◽  
Damon Jones ◽  
Daniel W. Sacks ◽  
Jae Song
Keyword(s):  
Social Security ◽  
Older Workers ◽  
Reduction Rate ◽  
Extensive Margin ◽  
Social Security Administration ◽  
Percentage Point Increase ◽  
Earnings Test ◽  
Regression Kink Design ◽  
Annual Earnings ◽  
The Impact

We estimate the impact of the Social Security Annual Earnings Test (AET) on older workers’ employment. The AET reduces social security claimants’ current benefits in proportion to their earnings in excess of an exempt amount. Using a regression kink design and Social Security Administration data, we document that the discontinuous change in the benefit reduction rate at the exempt amount causes a corresponding change in the slope of the employment rate, suggesting that the extensive margin of labor supply is more sensitive to this policy than commonly thought. We develop a model and method that allow us to translate the behavioral responses into a lower bound estimate of 0.49 for the extensive margin elasticity, which implies more than a 1 percentage point increase in work in the absence of the AET. (JEL H55, J14, J22, J26, J31)

Fertility and labor supply of the old with pay-as-you-go pension and child allowances

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Hung-Ju Chen ◽  
Koichi Miyazaki
Keyword(s):  
Social Security ◽  
Labor Supply ◽  
Overlapping Generations ◽  
Fertility Rate ◽  
Tax Rates ◽  
Overlapping Generations Model ◽  
Tax Rate ◽  
The Social ◽  
Child Allowances ◽  
The Interest Rate

Abstract We investigate the effects of pay-as-you-go pension and child allowances on fertility, labor supply of the old, and welfare. For this purpose, we analyze a small open overlapping-generations model in which fertility and an old agent’s labor supply (retirement time) are endogenized with pay-as-you-go pension and child allowances. We find that how the pay-as-you-go pension tax rate affects the fertility rate depends on whether an old agent retires. When an old agent fully retires, then the size of the interest rate and fertility rate determine the effect of the pay-as-you-go pension tax rate on the fertility rate. When an old agent works, the pay-as-you-go pension tax rate certainly reduces the fertility rate. In addition, how child allowances affect the fertility rate depends on whether an old agent works. If an old agent retires fully, then an increase in the child allowance tax rate increases the fertility rate. When an old agent works, this is not necessarily true, which suggests that an old agent’s labor status should be taken into account when we evaluate the effects of the social security system on economic variables. In addition, we examine the effect of the social security tax rates on welfare and provide numerical examples.

scholarly journals Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins

2011 ◽  
Vol 101 (3) ◽  
pp. 471-475 ◽  
Author(s):  
Raj Chetty ◽  
Adam Guren ◽  
Day Manoli ◽  
Andrea Weber
Keyword(s):  
Steady State ◽  
Business Cycle ◽  
Labor Supply ◽  
State Of The Art ◽  
Extensive Margin ◽  
Business Cycle Fluctuations ◽  
Extensive And Intensive Margins ◽  
Quasi Experimental ◽  
Order Of Magnitude ◽  
Cross Country

We evaluate whether state-of-the-art macro models featuring indivisible labor are consistent with modern quasi-experimental micro evidence by synthesizing evidence on both the intensive and extensive margins. We find that micro estimates are consistent with macro estimates of the steady-state (Hicksian) elasticities relevant for cross-country comparisons on both the extensive and intensive margins. However, micro estimates of intertemporal substitution (Frisch) elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours by preferences. The key puzzle to be resolved is why micro and macro estimates of the Frisch extensive margin elasticity are so different.

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