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The Effect of Part-Time Work on Wages: Evidence from the Social Security Rules

Author

Listed:
  • Daniel Aaronson

    (Federal Reserve Bank of Chicago)

  • Eric French

    (Federal Reserve Bank of Chicago)

Abstract

This article identifies the part-time wage effect, using hours variation caused by the social security rules. We show that work hours and wages drop sharply at ages 62 and 65. We argue that the hours decline causes the wage decline, resulting in a 25% wage penalty for men who cut their work week from 40 to 20 hours. However, we find little evidence for such an effect among women. We also show that models that fail to account for the joint determination of hours and wages will understate the labor supply response to a tax change by about 26%.

Suggested Citation

  • Daniel Aaronson & Eric French, 2004. "The Effect of Part-Time Work on Wages: Evidence from the Social Security Rules," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 329-352, April.
  • Handle: RePEc:ucp:jlabec:v:22:y:2004:i:2:p:329-352
    DOI: 10.1086/381252
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    References listed on IDEAS

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