تامین اجتماعی و عرضه نیروی کار سالمندان: بررسی بازنشستگی و شواهدی از بهداشت و درمان

This study uses panel data from the Health and Retirement Study (HRS) to estimate the effects of Social Security income on elderly labor supply in the 1990s and early 2000s. The identification strategy takes advantage of the 1977 amendments to the Social Security Act, which led to a large, unanticipated reduction in Social Security benefits for those born after January 1, 1917. Despite the advanced age of the notch cohorts, there is a significant, negative and surprisingly elastic relationship between Social Security income and hours of work. This suggests that currently proposed reductions in benefits would induce Social Security recipients to work more hours in retirement, even through their 70s and early 80s.

The Social Security system of old age, survivorship and disability benefits is the largest and best-known social insurance program in the United States. Unfortunately, it is also well-known that the Social Security system is fiscally unsustainable at current levels of benefits and payroll taxes. Because of this, numerous proposals have been made to reform it in some way, most of which involve reducing benefits in one form or another (e.g., Moynihan and Parsons, 2001 and Diamond and Orszag, 2005). An important factor to understand when assessing the welfare effects of these proposals is the elasticity of elderly labor supply. If older workers can offset lost Social Security income with labor earnings, either by delaying retirement or working part-time in retirement, they will be less negatively affected by reductions in benefits than otherwise. Models of the joint retirement and post-retirement hours of work decision predict this response (Burtless and Moffitt, 1985), and there may even be health benefits from doing so (Snyder and Evans, 2006). On the other hand, continuing an attachment to the labor force at later ages may be difficult, particularly for the less-educated or those in more physically intensive jobs. This paper contributes to an understanding of these welfare effects with estimates of how workers beyond traditional retirement ages respond to legislated changes in Social Security benefits. At present, very little is known about the labor supply behavior of this segment of the population. Nevertheless, the matter is of critical public interest: since the typical retirement extends well past the range of traditional retirement ages, any assessment of the welfare effects of a possible across-the-board benefit cut must necessarily take this information into account. From an academic perspective, the results are also important because elderly labor supply has generally been thought of as fairly inelastic to changes in Social Security benefits (Krueger and Pischke, 1992). However, this does not appear to be the case any longer. A priori, there are a number of reasons to believe that the relationship between Social Security income and elderly labor supply has changed since the 1970s and 1980s, the years studied by much of the earlier literature ( Hurd and Boskin, 1984, Burtless, 1986, Krueger and Pischke, 1992 and Snyder and Evans, 2006). On a policy level, the enactment of laws against age discrimination and the abolition of mandatory retirement have also encouraged the employment of older workers ( Neumark and Stock, 1999). Moreover, the implicit tax imposed by the Social Security earnings test, which discourages recipients of retirement benefits from earning labor income, was progressively reduced and ultimately eliminated for beneficiaries at or above the normal retirement age ( Gruber and Orszag, 2003, Benitez-Silva and Heiland, 2007, Haider and Loughran, 2008 and Engelhardt and Kumar, 2009). Finally, a critical background element of Krueger and Pischke's (1992) analysis – the fact that elderly labor supply had been declining, notwithstanding legislatively imposed reductions in Social Security wealth – is simply no longer the case. This trend reversed itself in the early 1990s, and elderly workers are now a rapidly growing segment of the labor force ( Gendell, 2008). This paper examines the link between Social Security income and elderly labor supply with detailed Health and Retirement Study data and a well-established instrumental variables strategy based on the structure of the Social Security benefits formula. The intuition behind the estimation strategy is to exploit the fact that Social Security benefits are determined by different sets of rules depending on beneficiaries' years of birth. Because of this, individuals who are otherwise identical – i.e., individuals with the same real earnings profile, but born in different years – will receive different amounts of benefits. Numerous recent studies have taken advantage of this aspect of the Social Security rules to quantify the effects of retirement income on various economic outcomes (e.g., Engelhardt et al., 2005, Engelhardt and Gruber, 2006, Moran and Simon, 2006, Snyder and Evans, 2006, Engelhardt, 2008 and Gustman and Steinmeier, 2008). The estimation strategy is conservative on purpose: since the “natural experiment” involved is very well known, the empirical results can be interpreted and accepted by the widest possible audience of economists. The empirical results show that the relationship between Social Security income and elderly labor supply is strongly negative, and much more elastic than one would expect given the advanced age of workers in the sample (who are, on average, 79).1 For instance, a $1000 increase in Social Security income (in 2009 dollars) reduces beneficiaries' labor force participation by 0.9 percentage points (to put this number in perspective, the overall labor force participation rate for this group is 12.3%). Among married couples, wives' labor supply is more responsive to changes in Social Security income than husbands' labor supply. In addition, the labor supply of less-educated workers is more sensitive to variation in Social Security income than the labor supply of more-educated workers, particularly on the extensive margin (i.e., the decision whether or not to work). This paper is organized as follows. The next section provides a brief overview of changes in the Social Security benefits formula. The third section describes the data, instruments and first-stage relationships; the fourth section details the empirical results; and the last section concludes.

Krueger and Pischke (1992), who were the first to examine the labor supply of the notch cohorts, generally concluded that these cohorts were not particularly responsive to changes in Social Security benefit levels. In large part, this was because labor force participation continued to decline even for those born after January 1, 1917, whose benefits were significantly reduced by the 1977 amendments. But this conclusion is worth revisiting, not least because this critical background fact has reversed itself: labor force participation among the elderly bottomed out in the early 1990s and has been increasing ever since (Gendell, 2008). The empirical results in this paper show that the labor supply of the notch cohorts is now very sensitive to the level of their Social Security benefits, even at advanced ages. A $1000 reduction in nonlabor income (in 2009 dollars), which is roughly equivalent to the cut that would be imposed by a 15-month increase in the full retirement age, increases elderly labor supply by an average of 0.85 h per week (a 27% increase relative to average hours worked per week). The response is even greater for singles, spouses of beneficiaries, and the less-educated elderly. As a future research direction, it will become increasingly important to understand the work decisions of individuals past the traditional retirement age, who face unique constraints on their income, the nature of their spending, and the working opportunities available. From a policy standpoint, the results indicate that if concerns about fiscal solvency lead Congress to reduce Social Security benefits, older workers – even those in their 70s and early 80s (the ages of Social Security beneficiaries in the HRS data most affected by the Social Security notch) – are likely to compensate by increasing their participation in the labor force and working more hours. To some extent, this mitigates the welfare losses elderly workers would suffer if such cuts were imposed. Moreover, the least painful cuts would be those targeted at Social Security beneficiaries with the most capacity to work. Examples of recently discussed proposals along these lines are those that make the benefits formula more progressive (i.e., reduce payments to those with relatively high lifetime earnings). By contrast, changes to the indexing formula (for instance, one suggestion of the President's Commission to Strengthen Social Security was to index lifetime average earnings by prices instead of wages) or raising the full retirement age would reduce benefits more uniformly, and have more negative effects on those who can take up employment less easily.