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Social Security and Retirees' Decision to Work

Author

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  • Mark E. Votruba

    (Case Western Reserve University)

Abstract

The current paper addresses whether beneficiaries will respond to ongoing Social Security benefit reductions by increasing post-retirement labor supply. Non-linearities in the benefits formula allow one to estimate the effect of benefit size on retirees' probability of working while simultaneously controlling for inputs into the benefits formula. Consistent with economic theory, larger benefits significantly decrease the probability of work among married retirees. A 10% increase in benefit size decreases the probability of work 3-4 percentage points for recently retired husbands (from a mean of 25.5%) and 2-3 percentage points for recently retired wives (from a mean of 12.8%). For both spouses, the effect disappears in the later years of retirement, suggesting earnings are unlikely to offset benefit reductions for older retirees.

Suggested Citation

  • Mark E. Votruba, 2003. "Social Security and Retirees' Decision to Work," Working Papers 853, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:474
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hugo Benítez-Silva & Debra Sabatini Dwyer & Warren Sanderson, 2006. "A Dynamic Model of Retirement and Social Security Reform Expectations: A Solution to the New Early Retirement Puzzle," Working Papers wp134, University of Michigan, Michigan Retirement Research Center.
    2. Hugo Benitez-Silva & Debra S. Dwyer & Frank Heiland & Warren C. Sanderson, 2006. "Retirement and Social Security Reform Expectations: A Solution to the New Early Retirement Puzzle," Department of Economics Working Papers 06-05, Stony Brook University, Department of Economics.
    3. Hugo Benitez-Silva & Na Yin, 2007. "An Empirical Study of the Effects of Social Security Reforms on Claming Behavior and Benefits Receipt Using Aggregate and Public-Use Administrative Micro Data," Department of Economics Working Papers 07-05, Stony Brook University, Department of Economics.
    4. Hugo Benítez-Silva & Frank Heiland, 2007. "The social security earnings test and work incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 26(3), pages 527-555.
    5. Hugo Benítez-Silva & J. Ignacio García-Pérez & Sergi Jiménez-Martín, 2015. "The Effects of Employment Uncertainty, Unemployment Insurance, and Wealth Shocks on the Retirement Behavior of Older Americans," Working Papers 2015-06, FEDEA.
    6. Hugo Benitez-Silva & Frank Heiland, 2008. "Early Retirement, Labor Supply, and Benefit Withholding: The Role of the Social Security Earnings Test," Working Papers wp183, University of Michigan, Michigan Retirement Research Center.
    7. Hugo Benitez-Silva & Frank Heiland, 2006. "The Social Security Earnings Test Revisited: Information, Distortions, and Costs," Department of Economics Working Papers 06-04, Stony Brook University, Department of Economics.
    8. H. Benitez-Silva & F. Heiland, 2008. "Early claiming of social security benefits and labour supply behaviour of older Americans," Applied Economics, Taylor & Francis Journals, vol. 40(23), pages 2969-2985.

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    More about this item

    Keywords

    Social Security; retirement; labor supply;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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