This afternoon I spoke on a panel on Social Security reform held by the Woodrow Wilson Center. Unfortunately I can't embed the video, but it's available at C-SPAN.
Tuesday, February 22, 2011
C-SPAN Video of Woodrow Wilson Center Social Security Panel
Agenda for February 25 meeting of 2011 Technical Panel on Assumptions and Methods
2011 Technical Panel on Assumptions and Methods Meeting Agenda February 25-26, 2011 The meetings will be held in the offices of the Social Security Advisory Board: 400 Virginia Avenue SW, Suite 625, Washington, DC 20024 Friday, February 25, 2011 10:00-12:00 Share of Earnings Subject to OASDI Taxation: Importance, Trends, Mechanisms Presentation by Melissa Favreault, Panel member Discussion by Office of the Chief Actuary, SSA 12:00-12:30 Lunch 12:30-3:00 Overview of Distributional Modeling, Focusing on Dynamic Microsimulation Presentation by Melissa Favreault, Panel member Discussion by Office of the Chief Actuary, SSA 3:00-3:15 Break 3:15-5:00 Sensitivity of OACT projections to interactions between assumptions Presentation by Office of the Chief Actuary, SSA
Friday, February 18, 2011
New Social Security papers from the Social Science Research Network
"Health and Retirement Effects in a Collective Consumption Model of Elderly Households" Boston College Center for Retirement Research Working Paper No. 2011-4 ARTHUR LEWBEL, Boston College - Department of Economics Using data on older individuals and couples, we estimate a collective model of household consumption of a variety of goods, showing how resources are shared between husbands and wives, and how this allocation is affected by retirement and health status. We identify the extent to which shared consumption of goods by older married couples reduces the costs of living together relative to living alone. We also identify the fraction of household resources consumed by wives versus husbands, taking the jointness of some consumption into account. The results are relevant for household bargaining models and for a variety of welfare calculations. "Social Security and Retirement Around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms - Introduction and Summary" NBER Working Paper No. w16719 KEVIN MILLIGAN, University of British Columbia - Department of Economics, National Bureau of Economic Research (NBER) This is the introduction and summary to the fifth phase of an ongoing project on Social Security Programs and Retirement Around the World. The first phase described the retirement incentives inherent in plan provisions and documented the strong relationship across countries between social security incentives to retire and the proportion of older persons out of the labor force. The second phase documented the large effects that changing plan provisions would have on the labor force participation of older workers. The third phase demonstrated the consequent fiscal implications that extending labor force participation would have on net program cost-reducing government social security benefit payments and increasing government tax revenues. The fourth phase presented analyses of the relationship between the labor force participation of older persons and the labor force participation of younger persons in twelve countries. We found no evidence that increasing the employment of older persons will reduce the employment opportunities of youth and no evidence that increasing the employment of older persons will increase the unemployment of youth. This phase is intended to set the stage for and inform future more formal analysis of disability insurance programs, with this key question: Given health status, to what extent are the differences in LFP across countries determined by the provisions of disability insurance programs? Here we first consider changes in mortality over time and in particular the relationship between mortality and labor force participation, thinking of mortality as one indicator of health that is comparable across countries and over time in the same country. We then consider how mortality is related to other indicators of health status, in particular self-assessed health and then how trends in DI participation are related to changes in health. Finally we consider the effect on disability insurance participation of a natural experiment in which the disability insurance reforms were not prompted by changes in health status or by changes in the employment circumstances of older workers. We find that these exogenous reforms can have a very large effect on the labor force participation of older workers. "Performance Evaluation of Balanced Pension Plans" Quantitative Finance, Forthcoming LAURA ANDREU, University of Zaragoza - Faculty of Business and Economics This paper examines the ability of balanced pension plan managers to successfully time the equity and bond market and select the appropriate assets within these markets. In order to evaluate both market timing abilities in these balanced pension plans, we extend the traditional equity market timing models to also account for bond market timing. As far as we know, we are among the first to apply this multifactor timing model to investigate equity and bond market timing simultaneously. This performance evaluation has been conducted on two samples of Spanish balanced pension plans, one with Euro Zone and one with World investment focus. This allows us to decompose managers' skills in three components: selectivity, equity market timing, and bond market timing. Our findings suggest that the average stock picking ability of pension plans is positive. World schemes tend to have positive bond timing skills, while Euro Zone pension plans are on average not able to time equity or bond markets. "Regulating Investment Advice for 401(k) Plan Participants: Is More Advice the Answer?" NYU Review of Employee Benefits and Executive Compensation, Chapter 5, 2010 KATHRYN L. MOORE, University of Kentucky College of Law Today, most retirement plan participants are covered by a 401(k) plan that requires the plan participants to decide how to invest their plan assets. Yet plan participants are notoriously poor investors. Thus, there has been a trend toward providing plan participants first with investment education and now with investment advice. This Article discusses whether the provision of investment advice is likely to be successful. The Article begins by providing an overview of ERISA's fiduciary rules as they apply to investment advice. It then discusses the types of investment support that were permissible under ERISA prior to the Pension Protection Act of 2006 ("PPA"). It then discusses the PPA statutory prohibited transaction and the proposed regulation implementing that exemption. Finally, it discusses whether the provision of investment advice pursuant to the statutory exemption is likely to benefit plan participants.
Email: Arthur.Lewbel@bc.edu
SHANNON SEITZ, Boston College
Email: shannon.seitz@bc.edu
Among other results, we find that older couples save between 24 and 40 percent on expenditures by sharing consumption of goods, that older wives consume between 30 and 42 percent of total household expenditures (taking sharing of goods into account), and that these shares are little affected by retirement, but increase dramatically when the husband's health is poorer.
Email: kevin.milligan@ubc.ca
DAVID A. WISE, National Bureau of Economic Research (NBER), Harvard University - Harvard Kennedy School (HKS)
Email: dwise@nber.org
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Email: landreu@unizar.es
LAURENTIUS (LAURENS) ADRIANUS PETRUS SWINKELS, Robeco Quantitative Strategies, Erasmus University Rotterdam (EUR)
Email: l.swinkels@robeco.nl
Email: kmoore@pop.uky.edu
Should we increase the Social Security retirement age – or lower it??
The American Prospect hosts competing op-eds on the Social Security retirement age. The Urban Institute's Gene Steurle argues that, with lifespans rising, maintaining the current retirement age effectively turns Social Security into a program for the middle aged. The problem is, this leaves less money for the truly old, many of whom are also the truly poor. Steurle says: In the case of the retirement age, we should be asking whether we really intended to create what Social Security has become -- increasingly a retirement system for people in middle age, most of whom report good or excellent health. For over half of beneficiaries retiring in their early 60s today, the result is that one member of a couple with average life expectancy spends well more than a quarter century retired. We need to ask whether such a system leaves Americans adequately prepared for old age and, more broadly, allows society to take advantage of older citizens' tremendous potential. That is, does the typical 62-year-old have more ability to give and less need for support than the typical 90-year-old? By contrast, University of Texas professor James Galbraith argues for a lower retirement age as a way to stimulate the economy: Once workers are retired and receiving steady pensions, they will become sources of effective demand and not weak petitioners for jobs. As a result, the private sector will grow around the provision of food, shelter, care, and services to this population. Thus, a dual effect helps to cut joblessness. Wage rates would also rise -- a third benefit, as workers become a bit scarce. And older people, of course, need not remain idle. Freed from wage toil, they can devote themselves to whatever pursuit they choose, including participation in civic and cultural life. As a short-term measure it might have some effect, since it is effectively a large payout to near retirees. If the typical person claims reduced benefits at 63 and is allowed to retire with the full benefit that would be payable at age 66, that generates a roughly 21 percent benefit increase for affected cohorts. That said, this would be a tough policy to back out of once people realized the size of the giveaway. Moreover, it wouldn't work over the long term. Over their lifetimes, people consume (more or less) what they produce, and if they produce less by retiring earlier they'll also lower their consumption by a little bit each year. (This is basically the 'life cycle' theory of consumption.) Now, retiring earlier might open up some positions, reduce the workforce and increase the demand for labor, but the lower spending due to shorter work lives would produce a roughly matching reduction in the demand for goods and services. Once we see that production and demand are linked, then the idea that less work equals more jobs pretty much falls apart.
Thursday, February 17, 2011
Upcoming event: RETHINKING RETIREMENT: THE PAST AND FUTURE OF SOCIAL SECURITY
The United States Studies Program and the Program on America and the Global Economy of the Woodrow Wilson International Center for Scholars invites you to a Panel Discussion: RETHINKING RETIREMENT: THE PAST AND FUTURE OF SOCIAL SECURITY With panelists: The future of Social Security is central to discussions of the current budget crisis, but whether—and how—it can be reformed remains to be seen. Policymakers and analysts have offered a range of proposals, many of them based on differing demographic projections and assessments of the future solvency of the Social Security Fund. A group of leading experts will come together to discuss the current state of Social Security and how it will affect Americans' retirement plans in the future. Tuesday, February 22, 2011, 3:00pm – 5:00 p.m. Woodrow Wilson Center, 1300 Pennsylvania Avenue N.W., Washington, D.C. This is a free public event, but RSVPs are requested. Please respond with acceptances only to usstudies@wilsoncenter.org.
Tuesday, February 15, 2011
Social Security Trust Fund to Go Under in 2035?
Jed Graham does some back-of-the-envelope math regarding Social Security's long-term financing, based on CBO's projections of a grimmer short-term prognosis for the system's revenues and costs. I don't know for sure how the short-term will play into the long term, given that lower payroll tax revenues today will tend to produce lower benefit obligations in the future, although not always on a one-for-one basis. Nevertheless, we don't have reason to be complacent.
Thursday, February 10, 2011
Kristol vs Ponnuru on entitlement politics
It's an inter-conservative debate: should the House Republican majority take on entitlement reform? The Weekly Standard's Bill Kristol says yes: "Leaving entitlements on cruise control is not a serious position for an aspiring governing party—especially one that aspires to reduce the deficit and restore our fiscal solvency." But National Review's Ramesh Ponnuru says no: Whether entitlements stay on cruise control is not really the question in dispute, since they are going to do so regardless of what the House budget resolution says. What Bill is really saying is that House Republicans should go on record supporting specific entitlement reforms even though the Senate won't go along and even though the resolution wouldn't actually reform entitlements even if the Senate did go along. That's an odd test of seriousness. Sad to say, I sided with Ramesh on this in a post from a while back. I didn't mean Republican's shouldn't talk about entitlements and shouldn't put forward reform plans, but if there's no chance of passing reform now they should also think about conserving political capital for when there is.
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