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The Effects of Changes in Women's Labor Market Attachment on Redistribution Under the Social Security Benefit Formula

Listed author(s):
  • Alan L. Gustman
  • Thomas L. Steinmeier
  • Nahid Tabatabai

Studies using data from the early 1990s suggested that while the progressive Social Security benefit formula succeeded in redistributing benefits from individuals with high earnings to individuals with low earnings, it was much less successful in redistributing benefits from households with high earnings to households with low earnings. Wives often earned much less than their husbands. As a result, much of the redistribution at the individual level was effectively from high earning husbands to their own lower earning wives. In addition, spouse and survivor benefits accrue disproportionately to women from high income households. Both factors mitigate redistribution at the household level. This paper compares outcomes for the earlier cohort with those of a cohort born twelve years later. The aim of the study is to see whether, after the recent growth in two earner households, and the growth in women's labor market activity and earnings, the Social Security system now fosters somewhat more redistribution from high to low earning households. The analysis is based on data from the Health and Retirement Study and includes members of households with at least one person age 51 to 56 in either 1992 or in 2004. As expected, women enjoyed a more rapid growth of labor force participation, hours of work and covered earnings than men. This increased the redistribution of Social Security benefits among households. Nevertheless, a considerable gap remains between the labor market activities and earnings of women versus men. As a result, the Social Security system remains much less successful in redistributing benefits from households with high covered earnings to those with lower covered earnings than in redistributing benefits from individuals with high covered earnings to those with lower covered earnings.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17439.

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Date of creation: Sep 2011
Publication status: published as "Redistribution Under the Social Security Benefit Formula at the Individual and Household Levels, 1992 and 2004". Journal of Pension Economics and Finance 12(1), January, 2013: 1-27
Handle: RePEc:nbr:nberwo:17439
Note: AG LS
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  1. Martin Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Aspects of Social Security and Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number feld02-1, November.
  2. repec:aei:rpbook:24949 is not listed on IDEAS
  3. Andrew G. Biggs, 2011. "Social Security," Books, American Enterprise Institute, number 6033, September.
  4. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2010. "The Growth in Social Security Benefits Among the Retirement Age Population from Increases in the Cap on Covered Earnings," Working Papers wp227, University of Michigan, Michigan Retirement Research Center.
  5. Norma B. Coe & Zhenya Karamcheva & Richard W. Kopcke & Alicia, 2011. "How Does the Personal Income Tax Affect the Progressivity of OASI Benefits?," Working Papers, Center for Retirement Research at Boston College wp2011-21, Center for Retirement Research, revised Nov 2011.
  6. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2011. "Differential Mortality by Income and Social Security Progressivity," NBER Chapters,in: Explorations in the Economics of Aging, pages 189-204 National Bureau of Economic Research, Inc.
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