New paper: “Disability Benefits, Consumption Insurance, and Household Labor Supply”

From the American Economic Review.

Disability Benefits, Consumption Insurance, and Household Labor Supply

David Autor, Andreas Kostøl, Magne Mogstad and Bradley Setzler

There is no evaluation of the consequences of Disability Insurance (DI) receipt that captures the effects on households' net income and consumption expenditure, family labor supply, or benefits from other programs. Combining detailed register data from Norway with an instrumental variables approach based on random assignment to appellant judges, we comprehensively assess how DI receipt affects these understudied outcomes. To consider the welfare implications of the findings from this instrumental variables approach, we estimate a dynamic model of household behavior that translates employment, reapplication, and savings decisions into revealed preferences for leisure and consumption. The model-based results suggest that on average, the willingness to pay for DI receipt is positive and sizable. Because spousal labor supply strongly buffers the household income and consumption effects of DI allowances, the estimated willingness to pay for DI receipt is smaller for married than single applicants.

Full-Text Access | Supplementary Materials

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2019 Retirement and Disability Research Consortium Meeting Agenda

2019 Retirement and Disability Research Consortium Meeting

The 2019 Retirement and Disability Research Consortium Meeting will be held on August 1-2, 2019 at the National Press Club in Washington, DC.

View the agenda and register.

Learn more about the Consortium.

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New working papers from the Center for Retirement Research at Boston College

The Center for Retirement Research at Boston College has recently released four working papers:

Is the Drop in Fertility Due to the Great Recession or a Permanent Change?
Alicia H. Munnell, Anqi Chen, and Geoffrey T. Sanzenbacher
Will Fewer Children Boost Demand for Formal Caregiving?
Gal Wettstein and Alice Zulkarnain
The Relationship between Occupational Requirements and SSDI Activity
Matthew S. Rutledge, Alice Zulkarnain, and Sara Ellen King

How Does Contingent Work Affect SSDI Benefits?
Matthew S. Rutledge, Alice Zulkarnain, and Sara Ellen King

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New paper: “Do People Save More After They Marry?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Do People Save More After They Marry?”

by Geoffrey T. Sanzenbacher and Wenliang Hou

The brief’s key findings are:

• The question is whether people getting married later has any effect on retirement saving.
• The analysis focuses on individuals' contributions to a 401(k) plan before and after marriage.
• The results show that marriage is associated with higher participation and contribution rates for both men and women.
• These effects are relatively modest, however, so the impact on retirement wealth from delaying marriage is likely to be small.

This brief is available here.

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New paper: “Social Security’s Financial Outlook: The 2019 Update in Perspective”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Social Security’s Financial Outlook: The 2019 Update in Perspective”

by Alicia H. Munnell

The brief's key findings are:

• Contrary to media reports, the 2019 Trustees Report shows little change overall:
  • Social Security’s 75-year deficit ticked down from 2.84 percent to 2.78 percent of payroll.
  • Trust fund exhaustion moved out by one year, to 2035, after which payroll taxes still cover about three quarters of promised benefits.
• This shortfall is manageable, but action should be taken soon to equitably share the burden among cohorts, restore public confidence, and give people time to adjust.
• The Report did include one noteworthy change: a big improvement in the financial outlook for the Disability Insurance program.

This brief is available here.

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New paper: “Do Benefit Cuts Encourage Public Employees to Leave?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Do Benefit Cuts Encourage Public Employees to Leave?”

by Laura D. Quinby and Gal Wettstein

The brief’s key findings are:

• Financially troubled state and local pensions may need to cut benefits for current workers, but such cuts could also induce some workers to leave.
• To assess this human resource impact, the analysis looks at a 2005 reform in Rhode Island that reduced benefits for some current workers.
• The results show that the affected employees were significantly more likely to leave the government over the next four years.
• Although the direct cost of hiring new workers was relatively small, governments should consider how losing skilled workers affects the quality of public services.

This brief is available here.

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New paper: "The Implications of Social Security’s 'Missing Trust Fund'"

The Center for Retirement Research at Boston College has released a new Issue in Brief:

"The Implications of Social Security’s 'Missing Trust Fund'"

by Alicia H. Munnell, Wenliang Hou, and Geoffrey T. Sanzenbacher

The brief’s key findings are:

• As policymakers consider restoring balance to Social Security, understanding the reason for the shortfall is important.
• Specifically, the program’s “pay-as-you-go” approach, which dates back to the late 1930s, makes it expensive.
• Paying full benefits to Depression-era workers essentially gave away the trust fund that would have accumulated, along with the interest on those contributions.
• To make up for the missing interest, costs are higher than in a funded system.
• Little rationale, however, exists for burdening today’s workers for the long-ago decision of allowing Depression-era workers to retire with dignity.
• These additional costs could be funded more equitably through the income tax, rather than the payroll tax.

This brief is available here.

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New paper: “Women, Marriage, and the National Retirement Risk Index”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Women, Marriage, and the National Retirement Risk Index”
by Alicia H. Munnell, Wenliang Hou, and Geoffrey T. Sanzenbacher

The brief's key findings are:

• Women are spending a growing share of their lives single, so it is useful to consider how their marital history affects their retirement preparedness.
• While married women have much higher household earnings and wealth, they are more at risk of failing to maintain their standard of living in retirement.
• This surprising result is driven by two-earner couples who:
  • get less from Social Security relative to their earnings due to the decline of the spousal benefit; and
  • save less in 401(k)s since often only one spouse has coverage.
• These findings highlight the need for expanding coverage to all households and underscore the value of Social Security to single women.

This brief is available here.

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Four Lessons from the Latest Social Security Trustees’ Report

Courtesy of Chuck Blahous, writing at e21.

1. Social Security faces a huge financing shortfall.
2. The shortfall is certain.
3. We are running out of time to save Social Security, if we haven’t already.
4. We need public trustees.

Check out the whole article here.

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Coming up! Saving and Retirement Forum with Peter Brady. “Using Form 1099-R Detailed Codes to Better Understand Income from Retirement Plans”

Join us in June!

For a Lunch Meeting with Guest Speaker:

Peter Brady

Senior Economist at Investment Company Institute

Who will discuss his new paper:

Using Form 1099-R Detailed Codes to Better Understand Income from Retirement Plans

Tuesday,
June 11, 2019
Noon-1:00 p.m.

Location:
- The Tax Foundation -
1325 G St NW
Suite 950
Washington, DC
(Lunch will be provided)

RSVP to depinto.patrick@gmail.com

Peter J. Brady, is a Senior Economist in the Retirement and Investor Research Division at the Investment Company Institute (ICI). At the Institute, Mr. Brady focuses on pensions, retirement savings, and the taxation of capital income.  Prior to joining the Institute, Mr. Brady worked as a financial economist in the Office of Tax Analysis at the U.S. Department of Treasury and, prior to working at the Treasury Department, as a staff economist in the Research Division at the Federal Reserve Board. Mr. Brady is a graduate of St. Lawrence University and holds a Ph.D. in economics from the University of Wisconsin.

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