What Does Price Indexing Mean for Social Security Benefits?
AbstractA potential component of the administration’s Social Security proposal is to shift from “wage indexing” of benefits to “price indexing.” This change sounds modest, but, in fact, would change the nature of the Social Security program. Price indexing would preserve the purchasing power of Social Security benefits, but these benefits would represent an ever-declining percentage of earnings before retirement. This Just the Facts discusses the reasons for keeping benefits up-to-date with either prices or wages. Then it describes the mechanics of both wage and price indexing, and the impact of shifting from wages to prices. Finally, it explores the implications of price indexing in terms of possible long-run responses — periodic adjustments or increased reliance on welfare programs.
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Bibliographic InfoPaper provided by Center for Retirement Research in its series Just the Facts with number jtf_14.
Length: 5 pages
Date of creation: Jan 2005
Date of revision:
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price indexing; wage indexing; social security benefits;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-20 (All new papers)
- NEP-LAB-2005-08-20 (Labour Economics)
- NEP-PBE-2005-08-20 (Public Economics)
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- Carlsson, Evert & Erlandzon, Karl, 2005. "The Dark Side of Wage Indexed Pensions," Working Papers in Economics 178, University of Gothenburg, Department of Economics.
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