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The Impact on Inequality of Raising the Social Security Retirement Age

Author

Listed:
  • Dean Baker
  • David Rosnick

Abstract

There have been a number of proposals in policy circles that involve raising the Social Security retirement age. This is viewed as both a way to reduce or eliminate the projected shortfall in the program and also a response to projected increases in longevity. This paper examines the impact of an increase in the retirement age on various demographic groups. Treating future Social Security benefits as a form of wealth, it projects the impact of a gradual increase in the normal retirement age from 67 to 70 (2 months a year for 18 years) on each quintile of the wealth distribution using data from the Federal Reserve Board’s 2007 Survey of Consumer Finances. It constructs separate projections for homeowners and non-homeowners, single individuals and couples in the age cohorts 35-44, 45-54, and 55-64. The projections show that Social Security wealth is a far larger share of the wealth of the bottom four quintiles in each of these categories, therefore a reduction in Social Security benefits will have the effect of increasing inequality.

Suggested Citation

  • Dean Baker & David Rosnick, 2012. "The Impact on Inequality of Raising the Social Security Retirement Age," CEPR Reports and Issue Briefs 2012-12, Center for Economic and Policy Research (CEPR).
    • Handle: RePEc:epo:papers:2012-12
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    File URL: http://www.cepr.net/documents/publications/ss-2012-04.pdf
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    Citations

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    Cited by:

    1. Daniel Baksa & Zsuzsa Munkacsi, 2016. "Aging, (Pension) Reforms and the Shadow Economy in Southern Europe," Bank of Lithuania Working Paper Series 32, Bank of Lithuania.
    2. Youngwon Nam & Cäzilia Loibl, 2021. "Financial Capability and Financial Planning at the Verge of Retirement Age," Journal of Family and Economic Issues, Springer, vol. 42(1), pages 133-150, March.
    3. Cherrie Bucknor & Dean Baker, 2016. "Still Working Hard: An Update on the Share of Older Workers in Physically Demanding Jobs," CEPR Reports and Issue Briefs 2016-04, Center for Economic and Policy Research (CEPR).

    More about this item

    Keywords

    social security; retirement; inequality; retirement age;
    All these keywords.

    JEL classification:

    • H - Public Economics
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J - Labor and Demographic Economics
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • D - Microeconomics
    • D6 - Microeconomics - - Welfare Economics
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D3 - Microeconomics - - Distribution
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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