Labor Market Shocks and the Timing of Social Security Benefit Claims

Published: 2011
Project ID: UM11-14


Many displaced workers suffer near-permanent losses in earning capacity. Recent estimates suggest that job losers from mass-layoff events during the 1982-83 recession, for example, experienced long-term earnings losses of 15% or more. For workers who are age-eligible, one reaction to a negative earnings shock is to begin claiming Social Security retirement benefits. Younger workers with a serious health condition may initiate a Social Security disability benefit claim. We propose to use data from the Continuous Work History Sample to study the responses of Social Security retirement and disability benefit claim initiation rates to recent labor market shocks. Recognizing that job losers experience lower wage opportunities for many years after the loss event, a particular focus will be on the transmission of labor market shocks to current and future increases in the fraction of insured workers who initiate Social Security benefits as early as possible (i.e., soon after their 62nd birthday).