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The Employment Effects of the Social Security Earnings Test

Author

Listed:
  • Alexander Gelber
  • Damon Jones
  • Daniel W. Sacks
  • Jae Song

Abstract

We investigate the impact of the Social Security annual earnings test (AET) on the employment decisions of older Americans. The AET reduces Social Security benefits by one dollar for every two dollars earned above the exempt amount. Using a differences-in-differences design, we find that the employment rate of those predicted to become subject to the AET decreases substantially relative to those not predicted to become subject to it. The point estimates suggest that the AET reduces the employment rate of Americans aged 63-64 by at least 1.2 percentage points.

Suggested Citation

  • Alexander Gelber & Damon Jones & Daniel W. Sacks & Jae Song, 2022. "The Employment Effects of the Social Security Earnings Test," Journal of Human Resources, University of Wisconsin Press, vol. 57(2), pages 341-371.
    • Handle: RePEc:uwp:jhriss:v:57:y:2022:i:2:p:341-371
    Note: DOI: 10.3368/jhr.57.2.1018-9830R2
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    Cited by:

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    2. Irene Ferrari & Jan Kabátek & Todd Morris, 2023. "Longer careers: A barrier to hiring and coworker advancement?," Working Papers 2023:06, Department of Economics, University of Venice "Ca' Foscari".
    3. Duggan, Mark & Dushi, Irena & Jeong, Sookyo & Li, Gina, 2023. "The effects of changes in social security’s delayed retirement credit: Evidence from administrative data," Journal of Public Economics, Elsevier, vol. 223(C).
    4. Itay Saporta-Eksten & Ity Shurtz & Sarit Weisburd, 2021. "Social Security, Labor Supply, and Health of Older Workers: Quasi-Experimental Evidence from a Large Reform [Identification and Estimation of Local Average Treatment Effects]," Journal of the European Economic Association, European Economic Association, vol. 19(4), pages 2168-2208.
    5. Abby Alpert & David Powell, 2020. "Estimating Intensive And Extensive Tax Responsiveness," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1855-1873, October.
    6. Myhre, Andreas, 2021. "Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs," MPRA Paper 109547, University Library of Munich, Germany.
    7. Johnsen, Julian V. & Willén, Alexander, 2022. "The effect of negative income shocks on pensioners," Labour Economics, Elsevier, vol. 76(C).
    8. Yu, Zhixiu, 2024. "Why are older men working more? The role of social security," Journal of Public Economics, Elsevier, vol. 231(C).
    9. Abdoulaye Ndiaye, 2017. "Flexible Retirement and Optimal Taxation," Working Paper Series WP-2018-18, Federal Reserve Bank of Chicago.
    10. Wenqun Gao & Yang Chen & Shaorui Xu & Oleksii Lyulyov & Tetyana Pimonenko, 2023. "The Role of Population Aging in High-Quality Economic Development: Mediating Role of Technological Innovation," SAGE Open, , vol. 13(4), pages 21582440231, October.
    11. Hampton, Matt & Totty, Evan, 2023. "Minimum wages, retirement timing, and labor supply," Journal of Public Economics, Elsevier, vol. 224(C).

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    More about this item

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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