Do Workers with Low Lifetime Earnings Really Have Low-Earnings Every Year? Implications for Social Security Reform

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Do Workers with Low Lifetime Earnings Really Have Low-Earnings Every Year? Implications for Social Security Reform

Author Info

Thomas L. Hungerford (The Levy Economics Institute)

Abstract

When it comes to retirement income policy, there is a general perception that workers have full 40-year working careers before retiring. Further, it is generally assumed that workers with low lifetime earnings have low earnings in each year during a normal working career. The basic research question is why do some workers have low lifetime earnings? Is it due to low earnings in every year, or is it due to some years of no earnings combined with years of relatively modest earnings? The key findings from this paper are: (1) most individuals with minimum (and subminimum) wage lifetime average earnings are women, and (2) most of these women have low lifetime average earnings because of fewer years with earnings, rather than low earnings in each year of a 40-year working career.

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Paper provided by EconWPA in its series Labor and Demography with number 0309007.

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Length: 21 pages
Date of creation: 22 Sep 2003
Date of revision:
Handle: RePEc:wpa:wuwpla:0309007

Note: Type of Document - word; prepared on PC; to print on PostScript; pages: 21; figures: included
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Find related papers by JEL classification:
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

This paper has been announced in the following NEP Reports:

NEP-LAB-2003-09-28 (Labour Economics)
NEP-PBE-2003-09-28 (Public Economics)

References listed on IDEAS
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Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April. [Downloadable!] (restricted)
Barry Bosworth & Gary Burtless & Eugene Steuerle, 2002. "Lifetime Earnings Patterns, The Distribution Of Future Social Security Benefits, And The Impact Of Pension Reform," Working Papers, Center for Retirement Research at Boston College 1999-06, Center for Retirement Research. [Downloadable!]
Dimitri B. Papadimitriou & L. Randall Wray, . "Does Social Security Need Saving? Providing for Retirees throughout the Twenty-first Century," Economics Public Policy Brief Archive 55, Levy Economics Institute, The. [Downloadable!]
Ralph E. Smith & Bruce Vavrichek, 1992. "The wage mobility of minimum wage workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 46(1), pages 82-88, October.
Samuel Bowles & Herbert Gintis & Melissa Osborne, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December. [Downloadable!] (restricted)
Quinn, Joseph F, 1987. "The Economic Status of the Elderly: Beware of the Mean," Review of Income and Wealth, Blackwell Publishing, vol. 33(1), pages 63-82, March.

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