Does Eliminating the Earnings Test Increase Old-Age Poverty of Women?

Published: 2015
Project ID: UM15-08


Reductions in the implicit taxation of Social Security benefits from reducing or eliminating the earnings test are an appealing means of encouraging labor supply of older individuals. The downside, however, is that the same policy reforms can encourage earlier claiming of Social Security benefits, which permanently lowers a recipient’s benefits in the future. Depending on the magnitude of the effects on earnings and how households or individuals adjust their consumption and saving, the net effect can be lower incomes at ages well beyond retirement. We explore the consequences of the 2000 reforms eliminating the earnings test from the Full Retirement Age to age 69 for the longer-run evolution of income and poverty of older individuals, especially women.


David Neumark