IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/0986.html
   My bibliography  Save this paper

Social Security and Labor Supply Incentives

Author

Listed:
  • Roger H. Gordon

Abstract

Many provisions of the Social Security Program distort an individual's labor supply incentives. In particular, the payroll tax, the earnings test, the offsetting actuarial adjustment, and the dependence of the size of future benefits on the level of current earnings all affect the net return to extra work. The purpose of this paper is to estimate the size of the net tax rate on labor income in a variety of circumstances, taking into account all these provisions, as well as the personal income tax. We find that the Social Security Program on net in the past has provided a large subsidy to labor supply, which for many people effectively offset the personal income tax. This subsidy rate, however, has been declining steadily over time.

Suggested Citation

  • Roger H. Gordon, 1982. "Social Security and Labor Supply Incentives," NBER Working Papers 0986, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0986
    Note: PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w0986.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Burkhauser, Richard V & Turner, John A, 1978. "A Time-Series Analysis on Social Security and Its Effect on the Market Work of Men at Younger Ages," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 701-715, August.
    2. Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1980. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alan L. Gustman & Thomas L. Steinmeier, 1983. "Social Security Reform and Labor Supply," NBER Working Papers 1212, National Bureau of Economic Research, Inc.
    2. Louis Kaplow, 2014. "Government Policy and Labor Supply with Myopic or Targeted Savings Decisions," NBER Chapters, in: Tax Policy and the Economy, Volume 29, pages 159-193, National Bureau of Economic Research, Inc.
    3. Barro, Robert J & Sahasakul, Chaipat, 1986. "Average Marginal Tax Rates from Social Security and the Individual Income Tax," The Journal of Business, University of Chicago Press, vol. 59(4), pages 555-566, October.
    4. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    5. Alan J. Auerbach & Laurence J. Kotlikoff, 1985. "The Efficiency Gains from Social Security Benefit - Tax Linkage," NBER Working Papers 1645, National Bureau of Economic Research, Inc.
    6. Michael J. Boskin & Laurence J. Kotlikoff, 1985. "Pubic Debt and U.S. Saving: A New Test of the Neutrality Hypothesis," NBER Working Papers 1646, National Bureau of Economic Research, Inc.
    7. Sandro Gronchi & Sergio Nisticò, 2008. "Theoretical Foundations Of Pay‐As‐You‐Go Defined‐Contribution Pension Schemes," Metroeconomica, Wiley Blackwell, vol. 59(2), pages 131-159, May.
    8. Brian S. Armour & M. Melinda Pitts, 2002. "Incorporating insurance rate estimates and differential mortality into net marginal Social Security tax rate calculations," FRB Atlanta Working Paper 2002-29, Federal Reserve Bank of Atlanta.
    9. Edgar K. Browning, 1985. "The Marginal Social Security Tax on Labor," Public Finance Review, , vol. 13(3), pages 227-251, July.
    10. Richard V. Burkhauser & John A. Turner, 1985. "Is the Social Security Payroll Tax a Tax?," Public Finance Review, , vol. 13(3), pages 253-267, July.
    11. Hee‐Seung Yang, 2018. "Social Security Dependent Benefits, Net Payroll Tax, And Married Women'S Labor Supply," Contemporary Economic Policy, Western Economic Association International, vol. 36(2), pages 381-393, April.
    12. Louis Kaplow, 2006. "Myopia and the Effects of Social Security and Capital Taxation on Labor Supply," NBER Working Papers 12452, National Bureau of Economic Research, Inc.
    13. David T. Ellwood, 1985. "Pensions and the Labor Market: A Starting Point (The Mouse Can Roar)," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 19-54, National Bureau of Economic Research, Inc.
    14. Feldstein, Martin & Samwick, Andrew A., 1992. "Social Security Rules and Marginal Tax Rates," National Tax Journal, National Tax Association;National Tax Journal, vol. 45(1), pages 1-22, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Laurence J. Kotlikoff & David A. Wise, 1988. "Pension Backloading, Wage Taxes, and Work Disincentives," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 161-196, National Bureau of Economic Research, Inc.
    2. Richard B. Freeman, 1980. "The Evolution of the American Labor Market 1948-1980," NBER Working Papers 0446, National Bureau of Economic Research, Inc.
    3. David S. Loughran & Steven Haider, 2007. "Do the Elderly Respond to Taxes on Earnings? Evidence from the Social Security Retirement Earnings Test," Working Papers 223-1, RAND Corporation.
    4. 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.
    5. Yamada, Tetsuji, 1990. "The effects of Japanese social security retirement benefits on personal saving and elderly labor force behavior," Japan and the World Economy, Elsevier, vol. 2(4), pages 327-363, December.
    6. Louis Kaplow, 2014. "Government Policy and Labor Supply with Myopic or Targeted Savings Decisions," NBER Chapters, in: Tax Policy and the Economy, Volume 29, pages 159-193, National Bureau of Economic Research, Inc.
    7. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-584, May.
    8. Leora Friedberg, 2000. "The Labor Supply Effects of the Social Security Earnings Test," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 48-63, February.
    9. Gary S. Fields & Olivia S. Mitchell, 1984. "Economic Determinants of the Optimal Retirement Age: An Empirical Investigation," Journal of Human Resources, University of Wisconsin Press, vol. 19(2), pages 245-262.
    10. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-437, October.
    11. Michael D. Hurd & Michael J. Boskin, 1984. "The Effect of Social Security on Retirement in the Early 1970s," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 767-790.
    12. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    13. Casey B. Mulligan, 2002. "A Century of Labor-Leisure Distortions," NBER Working Papers 8774, National Bureau of Economic Research, Inc.
    14. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    15. Tetsuji Yamada & Tadashi Yamada, 1987. "Social Security and Earlier Retirement in Japan: Cross-Sectional Evidence," NBER Working Papers 2442, National Bureau of Economic Research, Inc.
    16. Sheng Cheng Hu, 1983. "Value-Added Tax as a Source of Social Security Financing," Public Finance Review, , vol. 11(2), pages 154-180, April.
    17. Feng, Jin & He, Lixin & Sato, Hiroshi, 2009. "Public pension and household saving: evidence from China," BOFIT Discussion Papers 2/2009, Bank of Finland Institute for Emerging Economies (BOFIT).
    18. Charles W. Meyer & Nancy L. Wolff, 1987. "Intercohort and Intracohort Redistribution under Old Age Insurance: The 1962–1972 Retirement Cohorts," Public Finance Review, , vol. 15(3), pages 259-281, July.
    19. Daniel S. Hamermesh, 1980. "Transfers, Taxes, and the NAIRU," NBER Working Papers 0548, National Bureau of Economic Research, Inc.
    20. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Effects of Tax-Based Saving Incentives On Saving and Wealth," NBER Working Papers 5759, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0986. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.