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)

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 The Postretirement Well-Being of Workers With Disabilities

2018 ◽  
Vol 30 (1) ◽  
pp. 46-55 ◽  
Author(s):  
April Yanyuan Wu ◽  
Jody Schimmel Hyde
Keyword(s):  
Social Security ◽  
Older Workers ◽  
Well Being ◽  
Vulnerable Groups ◽  
Retirement Age ◽  
Social Security Administration ◽  
Retirement Benefits ◽  
The Social ◽  
Social Security Disability ◽  
Better Than

Older workers who develop significant limitations in health or functioning face declines in income and consumption and an increased likelihood of poverty in the years prior to retirement. We assess the extent to which those differences persist after reaching retirement age. We use the Health and Retirement Study (HRS) linked to Social Security Administration (SSA) records to compare the postretirement financial well-being of workers who experienced disability onset during their working years with those who did not, based on their claiming behavior for Social Security disability and retirement benefits. We find that even after full retirement age, gaps that emerged prior to retirement persist; those who experienced disability prior to retirement had lower incomes, were more likely to be in poverty, and had significantly lower wealth. Workers with disabilities who claimed Social Security Disability Insurance (DI) fared better than those who were rejected for such benefits, yet both groups were worse off than those who delayed claiming benefits until they were eligible for Social Security Old Age and Survivors Insurance (OASI) benefits. Our findings indicate that any changes to the Social Security benefit structure must be mindful of the short- and longer term implications for already-vulnerable groups of workers.

scholarly journals The impact of different data sources on the level and structure of income inequality

SERIEs ◽  
2021 ◽  
Author(s):  
Luis Ayala ◽  
Ana Pérez ◽  
Mercedes Prieto-Alaiz
Keyword(s):  
Income Inequality ◽  
Social Security ◽  
Survey Data ◽  
Administrative Data ◽  
Living Conditions ◽  
Data Sources ◽  
Social Security Administration ◽  
The Social ◽  
Income Data ◽  
The Impact

AbstractThis paper aims to analyze the effect on measured inequality and its structure of using administrative data instead of survey data. Different analyses are carried out based on the Spanish Survey on Income and Living Conditions (ECV) that continued to ask households for their income despite assigning their income data as provided by the Tax Agency and the Social Security Administration. Our main finding is that the largest discrepancies between administrative and survey data are in the tails of the distribution. In addition to that, there are clear differences in the level and structure of inequality across data sources. These differences matter, and our results should be a wake-up call to interpret the results based on only one source of income data with caution.

scholarly journals Social security personal-account participation with government matching

2005 ◽  
Vol 4 (2) ◽  
pp. 155-179 ◽  
Author(s):  
GARY V. ENGELHARDT ◽  
ANIL KUMAR
Keyword(s):  
Social Security ◽  
Older Workers ◽  
Structural Model ◽  
Design Parameters ◽  
Personal Account ◽  
Empirical Estimates ◽  
Match Rate ◽  
Personal Accounts ◽  
Low Educated ◽  
The Impact

This paper examines the potential impact of government matching contributions on personal-account participation in the President's Commission on Strengthening Social Security's Model 3 for Social Security reform. Given the government's choice of four plan-design parameters, the magnitude of the match is determined solely by the differential return personal-account assets receive above the notional return, referred to as the ‘personal-account premium’, akin to the equity premium. The impact of matching on personal-account participation is simulated for older workers (ages 40 to 65) in the first wave of the Health and Retirement Study (HRS) using empirical estimates from a structural model of the impact of employer matching on participation in corporate 401(k) plans. For a personal-account premium of three percentage points, which implies a match rate of 7.5% for middle- to lower-income workers, the simulations imply that 72% of mid-career and older workers would participate in voluntary personal accounts. The response of participation to matching is very inelastic; it seems not unlikely that participation by mid-career and older workers would achieve the mid-range assumption by the Commission of 67%. There is substantial heterogeneity in participation across subsets of older workers: participation would be the lowest for low-educated, minority, female, and unmarried mid-career and older workers.

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 Can Information Change Personal Retirement Savings? Evidence from Social Security Benefits Statement Mailings

2018 ◽  
Vol 108 ◽  
pp. 93-97 ◽  
Author(s):  
Susan Payne Carter ◽  
William Skimmyhorn
Keyword(s):  
Social Security ◽  
Retirement Savings ◽  
Natural Experiments ◽  
Social Security Administration ◽  
Retirement Benefits ◽  
Retirement Accounts ◽  
The Us ◽  
Social Security Benefits ◽  
Information Change ◽  
The Impact

Despite concern about the viability of public retirement programs and potential undersaving for retirement, we still know little about the impact of government provided information on individual behavior. We exploit plausibly exogenous variation in exposure to the world's largest personalized retirement benefits statement from the US Social Security Administration to evaluate the effects of information and encouragement on individual retirement savings decisions. Using three natural experiments between 2011 and 2014 and administrative data, we find no impact of the statements on individual retirement savings in their employer provided retirement accounts.

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