How Important Are Wages to the Elderly? Evidence from the New Beneficiary Data System and the Social Security Earnings Test

Published: 2003


More than 40 percent of Social Security beneficiaries continue to work after age 65. This research investigates the extent to which these individuals substitute labor across periods in response to anticipated wage changes induced by the Social Security earnings test. While we find that a disproportionate number of individuals choose earnings within a few percentage points of the earnings limit, we find no evidence that these individuals substitute labor supply between ages 69 and 70 when, in our sample, the tax on earnings falls from 50 percent to zero. Authors’ Acknowledgements This work is supported by a grant from the Social Security Administration through the Michigan Retirement Research Center (Project #UM02-09). The opinions and conclusions are solely those of the authors and do not necessarily represent the opinions or policy of the Social Security Administration or any agency of the Federal Government.

Key Findings