Potential Consequences of Raising the Social Security Eligibility Age on Low-Income Older Workers

Abstract

To examine the potential consequences of raising the Social Security retirement age on future cohorts of low-income elders, this study, based on data from the Health and Retirement Study, 1992–1994, identifies factors that may hinder or facilitate continuous employment among older workers born between 1931 and 1941. Specifically, following the analysis of labor-force participation rates and self-reported reasons for non-work, multivariate logistic regression models tested the relationship between individual strengths and constraints, social-structural opportunities and constraints, and economic need variables and the likelihood of work. The findings show that for both men and women, having disabilities was the most significant predictor of non-work. Racial differences, especially in men's labor-force participation rates, appeared to be due in large part to significant racial differences in disability rates. A higher proportion of blacks and Hispanics than whites also reported that they were unemployed. Based on the findings, raising the Social Security eligibility age is likely to result in increased numbers of Disability Insurance (DI) claimants, and the fiscal impact of such an increase needs to be examined. The need to assist unemployed older persons is also discussed.     

Labor Supply of Older Men: Does Social Security Matter?

This article presents evidence of a negative and significant relationship between the level of Social Security wealth and the labor force participation of older men. The empirical analysis utilizes a panel data set containing participation, wage, and Social Security information for cohorts defined by birth year and educational attainment from 1967 to 1996. Increases in Social Security wealth levels are found capable of explaining most of the observed decline in labor force participation rates of older men since 1967.     

Increasing older persons' employment in Finland: in search of a new strategy.

Using Finland as a case study, it is argued that early retirement will probably no longer be used on a large scale to reduce older-worker labor-force participation and unemployment among older workers. Instead, new strategies are needed to enhance the ability of older workers to remain productive and in the labor force, and to facilitate the reintegration of unemployed older persons back into working life. Both tasks require massive pioneering efforts. Reducing unemployment rates among older workers, particularly, requires completely new kinds of labor-market measures.     

The Polls-Review: Inaccurate Age and Sex Data in the Census Pums Files: Evidence and Implications

We discover and document errors in public-use microdata samples ("PUMS files") of the 2000 Census, the 2003-2006 American Community Survey, and the 2004-2009 Current Population Survey. For women and men age 65 and older, age- and sex-specific population estimates generated from the PUMS files differ by as much as 15 percent from counts in published data tables. Moreover, an analysis of labor-force participation and marriage rates suggests the PUMS samples are not representative of the population at individual ages for those age 65 and over. PUMS files substantially underestimate labor-force participation of those near retirement age and overestimate labor-force participation rates of those at older ages. These problems were an unintentional byproduct of the misapplication of a newer generation of disclosure-avoidance procedures carried out on the data. The resulting errors in the public-use data could significantly impact studies of people age 65 and older, particularly analyses of variables that are expected to change by age.     

Increasing Older Persons' Employment in Finland

ABSTRACT

Using Finland as a case study, it is argued that early retirement will probably no longer be used on a large scale to reduce older-worker labor-force participation and unemployment among older workers. Instead, new strategies are needed to enhance the ability of older workers to remain productive and in the labor force, and to facilitate the reintegration of unemployed older persons back into working life. Both tasks require massive pioneering efforts. Reducing unemployment rates among older workers, particularly, requires completely new kinds of labor-market measures.     

The Challenge of an Aging Work Force

This article reviews labor-force trends and olderworker employment policies in Japan and the United States. Both countries have aging work forces, but Japan's labor force is and for some time has been older than that of the United States. Japan's Ministry of Labor began addressing older-worker issues over 30 years ago and in the ensuing years has promulgated numerous initiatives to extend working life. Mandatory retirement, however, remains both legal and common in Japan, yet labor-force participation rates are higher for older persons in that country than in the United States, where mandatory retirement is illegal. Japan's older-worker programs and policies clearly seem to have an impact on labor-force rates, although those rates are dropping among the elderly in Japan as well as in the United States. The transferability of these programs and policies to the United States is discussed.     

The challenge of an aging work force: keeping older workers employed and employable

This article reviews labor-force trends and older-worker employment policies in Japan and the United States. Both countries have aging work forces, but Japan's labor force is and for some time has been older than that of the United States. Japan's Ministry of Labor began addressing older-worker issues over 30 years ago and in the ensuing years has promulgated numerous initiatives to extend working life. Mandatory retirement, however, remains both legal and common in Japan, yet labor-force participation rates are higher for older persons in that country than in the United States, where mandatory retirement is illegal. Japan's older-worker programs and policies clearly seem to have an impact on labor-force rates, although those rates are dropping among the elderly in Japan as well as in the United States. The transferability of these programs and policies to the United States is discussed.     

‘Under the wife's feet’: renegotiating gender divisions in early retirement

There has rightly been much recent sociological concern with the effects of recession and the restructuring of the economy on family relationships. One important aspect of recent economic changes has been the pressure on older people to leave the workforce before the age of conventional retirement. Male early retirement has been a significant factor in accounting for the dramatic fall in the economic participation rates of older male workers over the last decade. Yet early retirement has been a relatively neglected topic in social scientific literature. Studies of unemployed and redundant males have tended to suggest that there is little renegotiating of the domestic division of labour within the home due to the ways in which traditional notions of masculine identity are called upon to protect the position of the unemployed male. This paper reports findings relating to these issues from a study of men from West Yorkshire who had taken early retirement from the local chemical industry. These findings suggest considerably more renegotiation than studies of unemployed and redundant males but neither the amount or type of such renegotiation seemed to be related to either marital disharmony or quality of life in retirement.     

Policies for a smoother transition from work to retirement

Japan has maintained a relatively high labor-force participation rate among older people. Although the rate had declined steadily until the mid-1980s, the trend has since reversed and the participation rate is expected to rise in the future. In contrast, the labor-force participation of older people has sharply declined in the United States and European countries, especially since the 1970s. This article explores why Japan's experience differs markedly from other advanced countries. Improved pensions have a strong influence toward early retirement, even in Japan. However, other factors such as a low replacement ratio, improved health, and several loopholes in the income test of the pension systems push up the participation rate of older people. The government also encourages active labor-force participation of senior citizens by introducing reformed partial working pensions and wage subsidies for workers in their second and third careers.     

Racial differences in retirement income: the roles of public and private income sources

Despite great overall improvement in the elderly's economic status over the past two decades, minority elders still comprise the poorest population group of all. Nonetheless, the income security of minority elders has not been given special attention in the scrutiny in recent years of the size and the future of various federal programs affecting older persons. Based on data from the 1971, 1981, and 1991 public-use data tapes of the Current Population Survey, the racial difference in income status of the elderly and the role of Social Security and Supplemental Security income versus that of income from private sources are analyzed in terms of how income inequality among races is ameliorated or escalated. The findings show that racial/ethnic differences in income status increased between 1970 and 1990. The findings also confirm that, for both elderly singles and couples, Social Security is the most important income source. Without it, poverty rates among elderly black couples, for example, would have increased by as much as 48.5 percentage points in 1990. Policies that would help improve the income status of the low-income elderly are discussed.     

Nursing Home Reform

Abstract

Based on data from the 1982 Social Security New Beneficiary Survey (NBS), the 1991 New Beneficiary Follow-up (NBF), and Social Security administrative records, this study analyzed determinants of the elderly's Supplemental Security Income (SSI) participation, denied application, and nonapplication. In the analysis, SSI application is conceptualized as an outcome of a complex interaction among financial, sociodemographic, health, and informational factors as well as those indicative of elderly persons' subjective perception of need. The findings indeed confirmed that objective financial need does not automatically lead to SSI application. Sociodemographic and health-related factors mediating the objective financial need are identified, although the subjective perception of need and informational barriers requires further evaluation. Policy implications include continued dissemination of information about SSI and relaxation of the resource test to qualify more low-income elderly.     

Work Incentive and Labor Force Participation after the Senior Citizens Freedom to Work Act of 2000

A larger share of individuals 65 and older have been staying in or returning to the labor force since the late 1980s. Because Social Security was changed from providing incentives for earlier withdrawal from the labor force to providing incentives to remain in the labor market longer, we can expect to find a relationship between the Retirement Earnings Test removal and labor force participation. The findings have implications for welfare policy such that they can increase the portion of older adults who work.     

Teenagers in the U.S. Labor Force: Local Labor Markets,Race, and Family1

Abstract Drawing on theories of family organization and labor-market structures, it is argued that teenagers represent a useful target population for research on the effects of race, household characteristics, and local labor markets on labor-force participation. Toward this end, predictive models of labor-force participation are applied to a sample of all white and black 16- to 18-year-olds living at home in nonmetropolitan and metropolitan labor-market areas in the United States. Beyond the higher labor-force participation of white youths, both local labor-market characteristics and family resources affect teenage labor-force participation. Participation of white youths was more closely linked to family resources and local economic conditions than that of black youths. Queuing theories of labor-force participation are used to interpret these findings.     

Demographic and employment shifts: implications for benefits and economic security

This Issue Brief examines factors affecting the population's age distribution and composition, such as mortality rates, fertility rates, and immigration. In addition, it examines factors affecting labor force composition, such as immigration, increased labor force participation of women, and retirement trends, and discusses the potential impact of these changes on publicly financed programs: Medicare, Medicaid, Social Security, and federal employee retirement systems. The discussion also highlights the implications of these population and labor force changes on employers, employees, and retirees. The elderly population--now 31.8 million, representing 12.6 percent of the population--is projected to experience tremendous growth between 2010 and 2030, when the baby boom generation reaches age 65, rising from 39.7 million, or 13.3 percent of the population, to 69.8 million, or 20.2 percent of the population. Growth in the elderly population has implications for retirement and health care systems. Population projections suggest that the traditionally pyramid-shaped work force, with a proportionately greater number of younger workers than older workers, will be replaced with a more even age distribution. Consequently, significant and continued modifications to benefit packages, such as changes in compensation structures in which earnings automatically rise with age, are likely to occur. Women's labor force participation began to accelerate in the mid-1950s, rising 75 percent among women aged 25-44 in 1991, although there is some indication that this growth may be flattening. With women comprising a greater part of the labor force, employers will be encouraged to develop and implement programs to better accommodate their needs. Increased life expectancy, a decreased percentage of entry level workers, changes in Social Security's normal retirement age from 65 to 67, and employer plans to raise the normal age of retirement or provide incentives to delay retirement, could raise the average age of retirement. However, other factors, such as poor health, other sources of retirement income, and individual preferences for retirement, could still dominate the retirement decision. The combination of increased average life expectancy guaranteeing more years of retirement to finance and rising dependency ratios increases the future cost of Social Security financing. Medicare financing is also an important policy issue because the program is projected to experience financial difficulties in the short term, resulting from explosive health care costs. In addition, Medicaid expenditures are consuming increasing amount of shrinking state budget resources--a large portion of which is used to finance nursing home care for a growing elderly population.     

Trends in the Economic Status of the Aged and the Implications for State Policy

This paper examines recent trends in the economic status of the elderly. Particular attention is given to shifts in the income composition of older households and why these shifts have taken place. It is shown that most of these shifts are attributable, either directly or indirectly, to Social Security and private pension policies. The data also reveal that the income mix of poor older households differs greatly from that of more affluent older households. This has implications for the formulation of policies to improve the economic status of the elderly in poverty. Unfortunately, the current policy environment, characterized by large federal deficits, places severe constraints on developing federal programs to aid poor older persons. Thus, it is likely that state governments will need to take increasing responsibility for programs targeted to the aged poor. The paper concludes by considering the potential effectiveness of such programs.     

Policies for a Smoother Transition from Work to Retirement

Japan has maintained a relatively high labor-force participation rate among older people. Although the rate had declined steadily until the mid-1980s, the trend has since reversed and the participation rate is expected to rise in the future. In contrast, the laborforce participation of older people has sharply declined in the United States and European countries, especially since the 1970s. This article explores why Japan's experience differs markedly from other advanced countries. Improved pensions have a strong influence toward early retirement, even in Japan. However, other factors such as a low replacement ratio, improved health, and several loopholes in the income test of the pension systems push up the participation rate of older people. The government also encourages active labor-force participation of senior citizens by introducing reformed partial working pensions and wage subsidies for workers in their second and third careers.     

When self-interest and age sterotypes collide: elders opposing increased funds for programs benefiting themselves

Elders tend to be portrayed by the media as selfishly promoting programs that benefit the old. We predicted, however, that older individuals who choose positive stereotypes about the young over positive stereotypes about the old would oppose an increase in spending on these programs. By analyzing the responses of 1656 individuals, we found: (1) older participants were more likely than younger participants to oppose increased funding of Social Security, Meals on Wheels, and Medicare; and (2) this opposition to increased funding for Social Security and Meals on Wheels was predicted by a stereotype of aging based on a more favorable perception of the capabilities of the young than of the old. Our findings suggest that elders' evaluation of programs that benefit their age group may be more influenced by stereotypes internalized decades earlier than by their current group interests.     

Options for balancing the OASDI Trust Funds for the long term

This article explores policy alternatives that can bring Social Security (OASDI) into long-term balance. The alternatives conform to long-standing principles that benefits are: an earned right, related to pay and time in the workforce, not based primarily on need; and related to annual changes in the cost of living. Furthermore, the OASDI is self-financed, employers and employees contribute equally, and participation is compulsory. In order to maintain public support, the policy alternatives also spread the "pain" of change between workers and beneficiaries, maintain income replacement rates for low-income earners, and retain a positive correlation between taxes and benefits. The article discusses varying four policy parameters to balance the funds: the primary insurance amount, the cost-of-living adjustment; the normal retirement age; and the payroll tax rate. Only by changing several policy parameters can all the objectives be satisfied. Discussed in detail are three scenarios, each of which includes a COLA cut and a pay-as-you-go FICA tax rate.     

Options for Balancing the OASDI Trust Funds for the Long Term

This article explores policy alternatives that can bring Social Security (OASDI) into long-term balance. The alternatives conform to long-standing principles that benefits are: an earned right, related to pay and time in the workforce, not based primarily on need; and related to annual changes in the cost of living. Furthermore, the OASDl is self-financed, employers and employees contribute equally, and participation is compulsory. In order to maintain public support, the policy alternatives also spread the "pain" of change between workers and beneficiaries, maintain income replacement rates for low-income earners, and retain a positive correlation between taxes and benefits. The article discusses varying four policy parameters to balance the funds: the primary insurance amount, the cost-of-living adjustment; the normal retirement age; and the payroll tax rate. Only by changing several policy parameters can all the objectives be satisfied. Discussed in detail are three scenarios, each of which includes a COLA cut and a pay-as-you-go FICA tax rate.     

Women and Social Security:

This article explores some major assumptions underlying the Social Security system and alternative approaches to rendering the system more economically viable, meeting the income needs of the elderly and/or providing greater equity under its benefit and taxation provisions. It attempts to show that the current structure of Social Security not only reinforces but also exacerbates the underlying economic inequalities in our nation's political economy under the guise of a social insurance program. In addressing selected benefit and taxation issues, the article focuses on how working and older women are faring in the 1990s under the Social Security system. It argues that although the program theoretically is gender neutral, its impact is not. Women, particularly those who are single, are poorly served. The article concludes that a progressive restructuring of the Social Security system itself is imperative if we are to meet the needs of a large percentage of workers, older people, and the economic and social demands of the 1990s and beyond. It also offers some suggestions for such change.