شواهد جدید بر روی درآمد و ادعاهایی در پیرو تغییرات در آزمون درآمد بازنشستگی در سال 2000

This paper examines the labor force activity and timing of benefit claims of workers aged 65–69 in response to the removal of the retirement earnings test in 2000. We use the 1% sample of longitudinal Social Security administrative data that covers the period from 4 years before to 4 years after the removal of the test. Using a reduced-form quantile regression method, we find that effects on earnings are limited to workers with earnings just around the test threshold and above, as predicted by economic theory. Our estimated effects suggest that labor supply elasticities with respect to the net-of-tax rate are approximately 0.05–0.07 for working primary beneficiaries aged 65–69 whose earnings are between the median and the 80th percentile. Further, results show that applications for Social Security benefits following the earnings test removal accelerated by 2 to 5 percentage points among individuals aged 65–69 and by 3 to 7 percentage points among those reaching age 65.

Social Security benefits are designed to protect against the loss of earnings due to retirement, disability, and death. Under the retirement earnings test, Social Security benefits for workers who have claimed benefits (and their dependents and survivors) are withheld or reduced when the beneficiaries earn a substantial amount. The retirement earnings test, which has been part of the Social Security Old-Age and Survivors Insurance (OASI) program since its inception in 1935, has been gradually modified by exempting certain age groups, increasing allowable earnings, and decreasing withholding rates. A rationale for modifications is to encourage older people to work so that their earnings can supplement their Social Security benefits as people live longer and healthier lives. The most recent major modification occurred in April 2000, when Congress enacted the Senior Citizens Freedom to Work Act of 2000, which removed the earnings test for individuals at the full retirement age (FRA), age 65 and over.1 The removal of the test in 2000 is one of the most substantial changes in recent years because it affects both the most recent cohorts of persons who have reached the FRA and a wider range of ages than have other modifications. Although the earnings test compensates individuals for postponing benefit entitlement by increasing their future benefit streams through the delayed retirement credit and automatic benefit recomputation, many people view the earnings test as a tax on earnings above the test threshold. Consequently, the earnings test may cause both a reduction in work effort (for example, hours of work, earnings, and work participation) of old-age beneficiaries and a delay in applications for Social Security retirement (old-age) benefits. This tax aspect of the earnings test causes kinks in the budget constraint in a static labor supply model (Burtless and Moffitt, 1985, Friedberg, 1998 and Friedberg, 2000).2 In the static model, removing the earnings test causes a decline in the marginal tax rate for those who earn above the threshold. A number of studies have analyzed how incentives generated by Social Security program rules have affected work participation and benefit claims. Those studies relied primarily on cross-sectional variations in benefit amounts as identification information (see Krueger and Meyer, 2002 for an overview and survey). In response to the identification problem caused by the fact that all workers face an identical benefit schedule in the Social Security system, the earnings test has drawn attention from economists who seek to investigate the disincentive effect that Social Security program rules have on labor supply. Three recent studies—Friedberg (2000), Gruber and Orszag (2003), and Haider and Loughran (2006)—used the quasi-experimental approach by noting that modifications of the earnings test in the United States affected some age groups but not others.3 Using a structural model built on the kinked budget constraint resulting from the imposition of the earnings test, Friedberg found a small but significant effect of the earnings test on the labor supply of older workers. Gruber and Orszag, using a reduced-form approach, found that the earnings test removal had no robust influence on labor supply but appeared to accelerate benefit receipt among eligible individuals. Gruber and Orszag noted that accelerated benefit claims would reduce benefit levels and the standard of living of early claimers as they approached older ages. Haider and Loughran studied the effects of the earnings test removal following the 1983 and 2000 changes using a reduced-form model and found that the earnings test had a substantial impact on hours worked and benefits claimed for men. Two other noteworthy studies on the earnings test used reduced-form approaches on non-U.S. data. Disney and Tanner (2002) and Baker and Benjamin (1999) examined the elimination of a similar earnings test in the United Kingdom and Canada. Disney and Tanner reported that the elimination of the earnings test increased hours worked by men in the United Kingdom by about 4 hours per week. Baker and Benjamin found a shift from part-time to full-time work among Canadian men aged 65–69. Most past studies of the earnings test rely on a reduced-form difference-in-difference approach in which mean changes in work hours (or earnings) of affected groups before and after the rule change are compared with corresponding changes for unaffected groups. An important limitation of that reduced-form approach is that a simple mean-based regression fails to detect the uneven impact of the earnings test removal across the earnings distribution predicted by the kinked budget constraint. In this paper, we use quantile regression methods to examine the uneven impact of the earnings test removal across the distribution of earnings. Unlike other studies, this study focuses on the most significant single change in the history of the U.S. earnings test and relies on highly precise administrative data.4 Whereas most past studies use survey data, the administrative files from the Social Security Administration (SSA) used here provide a large and accurate source of longitudinal data. Earnings test rules are quite complicated, and the withholding amounts depend on month and year of birth, month and year of benefit entitlement, and beneficiary status (primary or auxiliary).5 Such detailed information is typically not available in survey data. Further, our analysis covers the period from 4 years before to 4 years following the removal (1996–2003), enabling us to investigate responses not only immediately after the removal but also several years after. This extended period can help us understand dynamic responses to changes in the relative price of labor among older workers, some of whom face substantial constraints on reentering the labor force because of deteriorating health and outdated skills.

This paper evaluates responses to the removal of the earnings test in 2000 by examining annual earnings and retirement-benefit claim records that cover the 4 years subsequent to the change. Three findings emerge from the study. First, the effect on earnings of removing the earnings test is uneven over the distribution of individuals' earnings. While the effect on earnings in the lower percentiles is not statistically significant, the effect on earnings in the higher percentiles (50th to 80th percentiles) is large and significant. Such a finding indicates that effects of the removal are limited to earnings levels above the test threshold. The largest increases in earnings are found at the 70th percentile for those who have attained ages 65–69, where earnings increase between $180 and $1670, and at the 60th percentile for those turning 65, where earnings increase between $1500 and $2800. Second, there is no clear evidence of the effect of the removal on the overall rate of labor force participation. A small rise in work participation among individuals aged 65–69 may be at least partially attributable to the trend already underway. Increases in work participation that do occur are mostly attributable to retaining older workers rather than inducing older workers back into the workforce. The effect appears to increase over the postremoval period, suggesting that the removal has long-lasting effects on work participation due to the state-dependent nature of work and labor market rigidities. Third, following the removal of the earnings test, applications for benefits accelerated by 2 to 5 percentage points among individuals aged 65–69 and by 3 to 7 percentage points among those reaching age 65. Results show relatively constant effects for individuals of the same age in different years, indicating that the long-term effects can be estimated from responses immediately after the removal or from responses among those who have just attained the FRA. The results shown in this paper apply specifically to a change in the retirement earnings test, but the response to changes in thresholds may generalize to other policies. For example, the amount that Disability Insurance beneficiaries can earn without losing benefits, known as the substantial gainful activity (SGA) limit, increased from $500 per month during the 1990s to $700 per month in July 1999. On January 1, 2001, the SGA limit became $740 per month and was indexed to average wage growth. We might expect to find increased earnings among persons close to the threshold after the increase in the SGA, just as we found increased earnings among persons close to the earnings test threshold for whom the earnings test was relaxed or eliminated. We have several ideas for future research. First, we would like to explore the work activities and claiming behavior of women in response to the removal of the earnings test separately from that of men. Second, the behavior of high-income beneficiaries in response to the removal of the earnings test might be worth further exploration. Those workers received a windfall when the earnings test was eliminated, but it appears from our results that they did not change their earnings or the timing of benefit claims much, perhaps because of reasons we discussed earlier in the paper. Such a result could also be caused by small sample sizes in the top end of the earnings distribution of older workers, or it might be the result of some as yet unexplored factors. Third, policymakers are interested in the net programmatic cost or gain to the Social Security system that arises from three sources: the loss of revenue following the elimination of the earnings test, higher payroll taxes coming from older workers who earn more, and accelerated benefit claims. Estimating both an annual cost and a long-term cost would be informative. Fourth, we would like to expand our analyses of spillover effects among persons who are younger than the FRA.