Does Eliminating the Earnings Test Increase the Incidence of Low Income Among Older Women?

37 Pages Posted: 6 Oct 2015 Last revised: 13 Oct 2015

See all articles by Theodore F. Figinski

Theodore F. Figinski

Government of the United States of America - Department of the Treasury

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

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Date Written: October 2015

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.

Suggested Citation

Figinski, Ted and Neumark, David, Does Eliminating the Earnings Test Increase the Incidence of Low Income Among Older Women? (October 2015). NBER Working Paper No. w21601, Available at SSRN: https://ssrn.com/abstract=2669792

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David Neumark

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