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How Representative are Representative Workers? An Assessment of the Hypothetical Workers Commonly Used in Social Security Studies

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  • Wade D. Pfau

    (National Graduate Institute for Policy Studies)

Abstract

An understanding of the financial and distributional consequences of Social Security reform requires knowledge about the actual life circumstances of participants, including the level and pattern of their lifetime earnings and their age at retirement. Some analyses of Social Security reform make simplifying assumptions about these characteristics by using ‘hypothetical workers’ with set career paths. We seek to develop greater understanding about actual lifetime earnings patterns to compare with hypothetical workers and find discrepancies which lead typical hypothetical workers to produce a more favorable impression for defined-contribution pension reforms. We suggest modifications to make a more suitable hypothetical worker.

Suggested Citation

  • Wade D. Pfau, 2009. "How Representative are Representative Workers? An Assessment of the Hypothetical Workers Commonly Used in Social Security Studies," Journal of Income Distribution, Ad libros publications inc., vol. 18(2), pages 92-117, June.
    • Handle: RePEc:jid:journl:y:2009:v:18:i:2:p:92-117
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    1. Thomas L. Hungerford, 2003. "Do Workers with Low Lifetime Earnings Really Have Low-Earnings Every Year? Implications for Social Security Reform," Labor and Demography 0309007, University Library of Munich, Germany.
    2. Edward Whitehouse, 2007. "Pensions Panorama : Retirement-Income Systems in 53 Countries," World Bank Publications - Books, The World Bank Group, number 7177, December.
    3. Andrew Au & Olivia S. Mitchell & John W. R. Phillips, 2004. "Modeling Lifetime Earnings Paths: Hypothetical versus Actual Workers," Working Papers wp074, University of Michigan, Michigan Retirement Research Center.
    4. Thomas L. Hungerford, 2003. "Do Workers with Low Lifetime Earnings Really Have Low Earnings Every Year?: Implications for Social Security Reform," Economics Working Paper Archive wp_389, Levy Economics Institute.
    5. Steven Caldwell & Melissa Favreault & Alla Gantman & Jagadeesh Gokhale & Thomas Johnson & Laurence J. Kotlikoff, 1999. "Social Security's Treatment of Postwar Americans," NBER Chapters, in: Tax Policy and the Economy, Volume 13, pages 109-148, National Bureau of Economic Research, Inc.
    6. Julia Lynn Coronado & Don Fullerton & Thomas Glass, 1999. "Distributional Impacts of Proposed Changes to the Social Security System," NBER Chapters, in: Tax Policy and the Economy, Volume 13, pages 149-186, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    social security; hypothetical workers; defined-contribution pensions;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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