Monday, January 27, 2020

New paper: “The Employment Effects of the Social Security Earnings Test”

The Employment Effects of the Social Security Earnings Test

Alexander M. Gelber, Damon Jones, Daniel W. Sacks, Jae Song

NBER Working Paper No. 26696
Issued in January 2020
NBER Program(s):Program on the Economics of Aging, Labor Studies Program, Public Economics Program

We investigate the impact of the Social Security Annual Earnings Test (AET) on the employment decisions of older Americans. The AET reduces Social Security benefits by one dollar for every two dollars earned above the exempt amount. Using a differences-in-differences design, we find that the employment rate of those predicted to become subject to the AET decreases substantially relative to those not predicted to become subject to it. The point estimates suggest that the AET reduces the employment rate of Americans aged 63-64 by at least 1.2 percentage points.

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