Thursday, March 15, 2012

New papers from the Social Science Research Network

"The Impact of Changes in Couples’ Earnings on Married Women’s Social Security Benefits"
Social Security Bulletin, Vol. 72, No. 1, pp. 1-9, 2012

BARBARA A. BUTRICA, The Urban Institute
KAREN E. SMITH, Urban Institute

Women’s labor force participation and earnings dramatically increased after World War II. Those changes have important implications for women’s Social Security benefits. This article uses the Social Security Administration’s Modeling Income in the Near Term (version 6) to examine Social Security benefits for current and future beneficiary wives. The projections show that fewer wives in more recent birth cohorts will be eligible for auxiliary benefits as spouses because their earnings are too high. If their husbands die, however, most wives will still be eligible for survivor benefits because, despite the increase in their earnings over time, they still typically have lower earnings than their husbands. Even so, the share of wives who would be ineligible for widow benefits is projected to double between cohorts.

"Mathematical Constraints on Financially Viable Public Policy" MARTIN GREMM, Pivot Point Advisors
MARK B. WISE, California Institute of Technology

Social Security and other public policies can be viewed as a series of cash in and outflows that depend on parameters such as the age distribution of the population and the retirement age. Given forecasts of these parameters, policies can be designed to be financially stable, i.e., to terminate with a zero balance. If reality deviates from the forecasts, policies normally terminate with a surplus or a deficit. We derive constraints on the cash flows of robust policies that terminate with zero balance even in the presence of forecasting errors. Social Security and most similar policies are not robust. We show that non-trivial robust policies exist and provide a recipe for constructing robust extensions of non-robust policies. An example illustrates our results.

"Social Security Claiming: Trends and Business Cycle Effects" Center for Retirement Research at Boston College Working Paper No. 2012-5

RICHARD WARREN JOHNSON, Urban Institute - Income and Benefits Policy Center, National Academy of Social Insurance (NASI)
OWEN HAAGA, affiliation not provided to SSRN

This study examines Social Security claiming behavior, which has important implications for older Americans and for the system itself. Retirees may begin collecting benefits as early as age 62, but early claimants receive lower monthly benefits for the rest of their lives. Our data come from Survey of Income and Program Participation (SIPP) files from 1984 to 2009 linked to administrative records on earnings and benefits. The sample is restricted to respondents with 40 quarters of covered employment who did not claim benefits before age 62. Results indicate that early claiming has declined over the past decade, after increasing over the previous 10 years. For men, the share claiming at age 62 fell from 55.3 percent in the 1930-34 birth cohort to 46.4 percent in the 1940-44 cohort. Over the same period, the share of women claiming at 62 fell from 59.3 to 49.0 percent. The recent trend toward delayed claiming is evident among all educational groups, not just college graduates. Hazard models show that high unemployment boosts Social Security claiming among men with limited education. A 1 percentage point increase in the state unemployment rate is associated with a 0.4 percentage point increase in the likelihood each month that men who never attended college will claim benefits, a relative increase of 6 percent. This estimate implies that the Great Recession increased claiming for men with limited education by about 40 percent. Claiming behavior among women and well-educated men is not significantly correlated with the state unemployment rate, however.

"What Does the Literature Tell Us About the Possible Effect of Changing Retirement Benefits on Public Employee Effectiveness?" PERI Working Paper No. 243

CHRISTIAN E. WELLER, University of Massachusetts Boston - Department of Public Policy and Public Affairs, University of Massachusetts at Boston - Gerontology Institute

Proposals exist to change public employees’ retirement benefits from defined benefit (DB) pensions. This could increase employee turnover and raise initial compensation. More experienced employees are replaced with less experienced ones, reducing effectiveness. But, new hires’ effectiveness could increase with higher compensation. We simulate the net impact of these offsetting effects and find that there is a 60% to 70% chance that effectiveness will fall relative to the effectiveness that would have prevailed without benefit changes. There could be substantial transition costs, which could increase to 0.8% of payroll in the third decade after the switch for a typical DB pension.

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