The Effects of Changes in Women’s Labor Market Attachment on Redistribution Under the Social Security Benefit Formula
AbstractStudies using data from the early 1990s suggested that while the progressive Social Security benefit formula succeeded in redistributing benefits from individuals with high earnings to individuals with low earnings, it was much less successful in redistributing benefits from households with high earnings to households with low earnings. Wives often earned much less than their husbands. As a result, much of the redistribution at the individual level was effectively from high earning husbands to their own lower earning wives. In addition, spouse and survivor benefits accrue disproportionately to women from high income households. Both factors mitigate redistribution at the household level. This paper compares outcomes for the earlier cohort with those of a cohort born twelve years later. With greater growth in women's earnings, the aim of the study is to see whether, after the recent growth in two earner households, and the growth in women's labor market activity and earnings, the Social Security system now fosters somewhat more redistribution from high to low earning households. We use data from the Health and Retirement Study to study a population consisting of members of households with at least one person age 51 to 56 in either 1992 or in 2004. We use four different measures of redistribution: the ratio of the present value of benefits to taxes for households arrayed by decile of covered earnings; the fraction of total Social Security benefits redistributed from households with high earnings to those with low earnings; the share of total benefits paid to members of each cohort redistributed from households falling in the highest deciles of earners to those with lower covered earnings; and the rate of return to Social Security taxes for members with different amounts of covered earnings. Considering differences in earnings between cohorts, women enjoyed a more rapid growth of labor force participation, hours of work and covered earnings than men. This increased the redistribution of Social Security benefits among households. Nevertheless, a considerable gap remains between the labor market activities and earnings of women versus men. As a result, the Social Security system remains much less successful in redistributing benefits from households with high covered earnings to those with lower covered earnings than in redistributing benefits from individuals with high covered earnings to those with lower covered earnings.
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Bibliographic InfoPaper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp248.
Length: 44 pages
Date of creation: Aug 2011
Date of revision:
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Other versions of this item:
- Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2011. "The Effects of Changes in Women's Labor Market Attachment on Redistribution Under the Social Security Benefit Formula," NBER Working Papers 17439, National Bureau of Economic Research, Inc.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
- J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
- J - Labor and Demographic Economics
This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-09-22 (Economics of Ageing)
- NEP-ALL-2011-09-22 (All new papers)
- NEP-LAB-2011-09-22 (Labour Economics)
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