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The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply

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  • David Neumark
  • Elizabeth T. Powers

Abstract

Because the Supplemental Security Income (SSI) program is means-tested, with both income limits and asset limits, those on the margin of eligibility for the elderly component of the program face incentives to reduce labor supply (or earnings) prior to becoming eligible. Our past research relying on cross-state variation in SSI benefits found evidence consistent with the predicted negative labor supply effects. However, a reliance on cross-state variation necessitated reliance on less-than-ideal control samples. In contrast, this paper uses CPS data covering a 22-year period, which permit identification of the effects of SSI from within-state, time-series variation in SSI benefits, using a better control sample. The evidence points consistently to negative effects of more generous SSI payments on the labor supply of likely SSI participants aged 62-64. The implied elasticities of labor supply with respect to benefits, for those with a high probability of SSI participation, are generally in the range of 0.2 to 0.3, looking at both employment and hours of work.

Suggested Citation

  • David Neumark & Elizabeth T. Powers, 2003. "The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply," NBER Working Papers 9851, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9851
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    References listed on IDEAS

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    1. Goodman-Bacon, Andrew & Schmidt, Lucie, 2020. "Federalizing benefits: The introduction of Supplemental Security Income and the size of the safety net," Journal of Public Economics, Elsevier, vol. 185(C).
    2. Neumark, David & Powers, Elizabeth T., 2005. "SSI, Labor Supply, and Migration," IZA Discussion Papers 1820, Institute of Labor Economics (IZA).
    3. Hugo Benítez-Silva & Richard Disney & Sergi Jiménez-Martín, 2010. "Disability, capacity for work and the business cycle: an international perspective [Has the boom in incapacity benefit claimant numbers passed its peak?]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(63), pages 483-536.
    4. Hugo Benitez-Silva & Moshe Buchinsky & John Rust, 2005. "Induced Entry Effects of a $1 for $2 Offset in SSDI Benefits," Department of Economics Working Papers 05-03, Stony Brook University, Department of Economics.
    5. Oskari Juurikkala, 2008. "Punishing The Poor: A Critique Of Means‐Tested Retirement Benefits," Economic Affairs, Wiley Blackwell, vol. 28(1), pages 11-16, March.
    6. David Neumark & Elizabeth Powers, 2006. "Supplemental security income, labor supply, and migration," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(3), pages 447-479, July.

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    More about this item

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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