Labor Supply Effects of the Recent Social Security Benefit Cuts: Empirical Estimates Using Cohort Discontinuities

Author
Keywords
Abstract

In response to a "crisis" in Social Security financing two decades ago Congress
implemented an increase in the Normal Retirement Age (NRA) of two months per
year for cohorts born in 1938 and after. These cohorts began reaching retirement
age in 2000. This paper studies the effects of these benefit cuts on recent retirement
behavior. The evidence strongly suggests that the mean retirement age of the
affected cohorts has increased by about half as much as the increase in the NRA.
If older workers continue to increase their labor supply in the same way, there will
be important implications for the estimates of Social Security trust fund exhaustion
that have played such a major role in recent discussions of Social Security reform.

Year of Publication
2006
Number
514
Date Published
10/2006
Publication Language
eng
Citation Key
7882
URL
Working Papers