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How to Evaluate the Effects of Social Security Policies on Retirement and Saving When Firm Policies Affect the Opportunities Facing Older Individuals

Author

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  • Alan L. Gustman

    (Dartmouth College and NBER)

  • Thomas L. Steinmeier

    (Texas Tech University)

Abstract

This project uses data from the Health and Retirement Study to examine, in the context of a structural retirement model, the effects on retirement of non-wage aspects of employment emanating from firm side factors. Factors examined include minimum hours constraints, layoffs, physical and mental requirements of the job, informal pressures to retire, accommodations made by the employer when a person has a health problem, and retirement windows. The most important effects found pertain to minimum hours constraints. Should minimum hours constraints be abolished, the percent of the population ages 62 to 69 who are completely retired will decline by 10 to 15 percentage points. The fraction in this age group who are working in partial retirement jobs will increase by roughly twenty percentage points of the population. Were minimum hours constraints abolished, more than twice as many people would enter partial retirement as would leave full time work. As a result, total FTE employment would increase were minimum hours constraints eliminated. Increasing the importance of partial retirement would affect the role of the earnings test and liquidity of the Social Security system, although the increase in partial retirement would be largely, but not entirely offset by the decline in full time work. This would limit the size of any effects on Social Security finances. Authors’ Acknowledgment This paper was supported by a grant from the U.S. Social Security Administration (SSA) to the Michigan Retirement Research Center, UM 03-03. The opinions and conclusions are solely those of the authors and should not be construed as representing the opinions or policy of SSA, the Michigan Retirement Research Center, or the National Bureau of Economic Research. Alan L. Gustman is Loren Berry Professor of Economics at Dartmouth College, Department of Economics, Hanover, N.H. 03755 (alan.l.gustman@dartmouth.edu). Thomas L. Steinmeier is Professor of Economics, Texas Tech University, Department of Economics, Lubbock, Texas 79409 (Thomas.Steinmeier@TTU.edu).

Suggested Citation

  • Alan L. Gustman & Thomas L. Steinmeier, 2004. "How to Evaluate the Effects of Social Security Policies on Retirement and Saving When Firm Policies Affect the Opportunities Facing Older Individuals," Working Papers wp078, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp078
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    References listed on IDEAS

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    1. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1995. "Retirement Measures in the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages s57-s83.
    2. Alan L. Gustman & Thomas L. Steinmeier, 1982. "Minimum Hours Constraints and Retirement Behavior," NBER Working Papers 0940, National Bureau of Economic Research, Inc.
    3. Roger H. Gordon & Alan S. Blinder, 1980. "Market wages, reservation wages, and retirement decisions," NBER Chapters,in: Econometric Studies in Public Finance, pages 277-308 National Bureau of Economic Research, Inc.
    4. Charles Brown, "undated". "Early Retirement Windows," Pension Research Council Working Papers 98-17, Wharton School Pension Research Council, University of Pennsylvania.
    5. Alan Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, "undated". "Retirement Measures in the Health and Retirement Survey," Pension Research Council Working Papers 94-2, Wharton School Pension Research Council, University of Pennsylvania.
    6. Gustman, Alan L. & Steinmeier, Thomas L., 2005. "Retirement Effects of Proposals by the President's Commission to Strengthen Social Security," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(1), pages 27-49, March.
    7. Chan, Sewin & Stevens, Ann Huff, 2001. "Job Loss and Employment Patterns of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 484-521, April.
    8. Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc.
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