Working Paper: NBER ID: w0562
Authors: Alan S. Blinder; Roger H. Gordon; Donald E. Wise
Abstract: This paper shows that, contrary to commonly held views, the provisions of the social security law actually provide strong work incentives for older men. The reason is that, for most workers, higher current earnings lead to higher future social security benefits. These incentives have been particularly strong for workers under 65 years of age and, although they will be reduced somewhat when the 1977 amendments to the social security law become fully effective, they will remain substantial. The findings raise serious questions about recent econometric work attributing the decline in labor force participation rates of older men to the social security system.
Keywords: Social Security; Labor Supply; Work Incentives
JEL Codes: H55; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Social Security provisions (H55) | Strong work incentives for older men (J26) |
| Higher current earnings (G19) | Higher future benefits (J17) |
| Higher future benefits (J17) | Increased work effort among older individuals (J26) |
| Automatic benefit recomputation (H55) | Significant wage subsidies (J38) |
| Significant wage subsidies (J38) | Incentivizing work among older workers (J26) |
| Social Security law (H55) | Distorting labor-leisure choices (H31) |