Differential Mortality by Income and Social Security Progressivity
There is a widespread belief that people with low lifetime labor income have higher age specific mortality and lower remaining life expectancies at age 60 or 65 than those with middle or high lifetime earnings. In this paper, we assess the implications of differential mortality by lifetime income for Social Security progressivity. Social Security has a highly progressive formula to determine monthly benefits in that those with low lifetime earnings get a much higher replacement rate than those with high lifetime earnings. However, recent studies on the mortality gap by lifetime income suggest that at least some of this progressivity is counterbalanced by the longer average lifetimes experienced by higher lifetime income recipients of Social Security. To reassess the progressivity of Social Security, we calculate internal rates of return and net present values for the program under assumptions of differential mortality and compare these measures of progressivity to the same measures calculated assuming all individuals experience average population mortality rates. Under the assumption of constant mortality across lifetime income subgroups, the Social Security system is progressive regardless of the measure shown. However, a good deal of the progressivity is undone or even reversed when differential mortality is taken into account.
|Date of creation:||May 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (650) 725-1874
Fax: (650) 723-8611
Web page: http://siepr.stanford.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jeffrey B Liebman, 2002.
"Redistribution in the Current U.S. Social Security System,"
02-09, Center for Economic Studies, U.S. Census Bureau.
- Jeffrey B. Liebman, 2002. "Redistribution in the Current U.S. Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 11-48 National Bureau of Economic Research, Inc.
- Jeffrey B. Liebman, 2001. "Redistribution in the Current U.S. Social Security System," NBER Working Papers 8625, National Bureau of Economic Research, Inc.
- Julia Lynn Coronado & Don Fullerton & Thomas Glass, 2000.
"The Progressivity of Social Security,"
NBER Working Papers
7520, National Bureau of Economic Research, Inc.
- James E Duggan & Robert Gillingham & John S Greenlees, 2008.
"Mortality and Lifetime Income: Evidence from U.S. Social Security Records,"
IMF Staff Papers,
Palgrave Macmillan, vol. 55(4), pages 566-594, December.
- John S. Greenlees & James E. Duggan & Robert Gillingham, 2007. "Mortality and Lifetime Income; Evidence From U.S. Social Security Records," IMF Working Papers 07/15, International Monetary Fund.
- Garrett, Daniel M, 1995. "The Effects of Differential Mortality Rates on the Progressivity of Social Security," Economic Inquiry, Western Economic Association International, vol. 33(3), pages 457-75, July.
- Julian P. Cristia, 2007. "The Empirical Relationship Between Lifetime Earnings and Mortality: Working Paper 2007-11," Working Papers 19096, Congressional Budget Office.
When requesting a correction, please mention this item's handle: RePEc:sip:dpaper:08-061. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Shor)
If references are entirely missing, you can add them using this form.