Working Paper: NBER ID: w21601
Authors: Theodore Figinski; David Neumark
Abstract: Reducing or eliminating Social Security’s Retirement Earnings Test (RET) can encourage labor supply of older individuals receiving benefits. However, these reforms can encourage earlier claiming of Social Security benefits, permanently lowering future benefits. We explore the consequences, for older women, of eliminating the RET from the Full Retirement Age to age 69 (in 2000), relying on the inter-cohort variation in exposure to changes in the RET to estimate these effects. The evidence is consistent with the conclusion that eliminating the RET increased the likelihood of having very low incomes among women in their mid-70s and older – ages at which the lower benefits from claiming earlier could outweigh higher income in the earlier period when women or their husbands increased their labor supply.
Keywords: Social Security; Earnings Test; Low Income; Older Women
JEL Codes: H2; J14; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| eliminating the RET (Y60) | increased likelihood of very low incomes among women aged 75 and older (J14) |
| eliminating the RET (Y60) | labor supply decisions (J22) |
| labor supply decisions (J22) | benefit claiming behavior (D91) |
| benefit claiming behavior (D91) | lower monthly benefits (H55) |
| lower monthly benefits (H55) | increased poverty among older women (I32) |