Modeling Lifetime Earnings Paths: Hypothetical versus Actual Workers
AbstractTo assess the distributional effects of social security reform proposals, it is essential to have good information on real-world workers’ lifetime earnings trajectories. Until recently, however, policymakers have relied on hypothetical earnings profiles for policy analysis. We use actual lifetime earnings data from the Health and Retirement Study (HRS) to compare actual workers’ covered earnings profiles to these hypothetical profiles. We show that the hypothetical profiles do not track earnings patterns of current retirees; thus lifetime pay levels are much higher than for most HRS workers. Therefore, using hypothetical profiles could misrepresent benefits paid and taxes collected under such reforms.
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Bibliographic InfoPaper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp074.
Length: 34 pages
Date of creation: Mar 2004
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-13 (All new papers)
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