Tuesday, August 9, 2016

New issue brief: “How Job Options Narrow for Older Workers by Socioeconomic Status”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“How Job Options Narrow for Older Workers by Socioeconomic Status”

by Matthew S. Rutledge, Steven A. Sass, and Jorge D. Ramos-Mercado

The brief’s key findings are:

  • Job-changers over age 50 increasingly end up in “old-person” jobs, with a high share of older hires relative to prime-age hires.
  • These basic findings hold by gender and by education.
  • However, the overall outlook has improved since the late 1990s for all groups, particularly for older women with more education.
  • Also, older job-changers hired into “old-person” jobs are paid no less than other jobs.
This brief is available here. Read more!

Friday, August 5, 2016

New papers from the Social Science Research Network

"Introduction, A New Deal for Old Age: Toward a Progressive Retirement"
Introduction, A New Deal for Old Age: Toward a Progressive Retirement (Harvard University Press, 2016).
Yale Law School, Public Law Research Paper No. 570

ANNE ALSTOTT, Yale University - Law School
Email: anne.alstott@yale.edu

As America’s haves and have-nots drift further apart, rising inequality has undermined one of the nation’s proudest social achievements: the Social Security retirement system. Unprecedented changes in longevity, marriage, and the workplace have made the experience of old age increasingly unequal. For educated Americans, the traditional retirement age of 65 now represents late middle-age. These lucky ones typically do not face serious impediments to employment or health until their mid-70s or even later. By contrast, many poorly educated earners confront obstacles of early disability, limited job opportunities, and unemployment before they reach age 65.
America’s system for managing retirement is badly out of step with these realities. Enacted in the 1930s, Social Security reflects a time when most workers were men who held steady jobs until retirement at 65 and remained married for life. The program promised a dignified old age for rich and poor alike, but today that egalitarian promise is failing. This introductory chapter to A NEW DEAL FOR OLD AGE outlines a progressive program that would permit all Americans to retire between 62 and 76 – but would offer more generous benefits for early retirement for workers with low wages and physically demanding jobs. The chapter also sketches the case for a more equitable version of the outdated spousal benefit and a new phased-retirement option to permit workers to transition out of the workforce gradually.

"Pension Incentives and the Retirement Decisions of Couples"
IZA Discussion Paper No. 10013

KADIR ATALAY, University of Sydney
Email: kadir.atalay@sydney.edu.au
GARRY F. BARRETT, University of Sydney
Email: garry.barrett@sydney.edu.au

Recent reforms to social security in many countries have sought to delay retirement. Given the family context in which retirement decisions are made, social security reforms have potentially important spill-over effects on the participation of spouses. This paper analyses the impact of women's pension incentives on the retirement decision of their husband. The 1993 Age Pension reform in Australia increased the eligibility age for Age Pension benefits for women. This reform caused an increase in participation of men married to women in the affected cohorts. The behavioral responses are due to wealth effects and preferences for shared leisure.

"Does Social Health Insurance Reduce Financial Burden? Panel Data Evidence from India"
IZA Discussion Paper No. 10018

MEHTABUL AZAM, Oklahoma State University - Stillwater, Institute for the Study of Labor (IZA)
Email: mehtabazam@gmail.com

Indian government launched the Rashtriya Swasthya Bima Yojana (RSBY), a national health insurance scheme, in 2008 that provides cashless health services to poor households in India. We evaluate the impact of RSBY on RSBY beneficiary households' (average treatment impact on the treated) utilization of health services, per capita out-of-pocket (OOP) expenditure, and per patient OOP expenditures on major morbidities. To address the issue of non-randomness in enrollment into the scheme, we exploit the longitudinal aspect of a large nationally representative household survey data to implement a difference-in-difference with matching. We find some evidence of positive impact of RSBY on utilization of health services by RSBY beneficiary households in rural India but not in urban India. However, there is no evidence that the RSBY reduced per person OOP expenditure for RSBY households in both rural and urban areas. Conditional on having received medical treatment for major morbidity, we find that RSBY increased probability of hospitalization and being treated by a government doctor in rural areas but no significant impact in urban areas. We also find lower expenditure on medicine for a RSBY cardholder patient in rural areas.

"Are Early Claimers Making a Mistake?"
CRR WP 2016-5

ALICIA H. MUNNELL, Boston College - Center for Retirement Research
GEOFFREY SANZENBACHER, Boston College Economics Department
Email: geoffrey.sanzenbacher.1@bc.edu
ANTHONY WEBB, Boston College - Center for Retirement Research
Email: webbaa@bc.edu
CHRISTOPHER M. GILLIS, Boston College, Center for Retirement Research
Email: gillisch@bc.edu

Using Health and Retirement Study (HRS) data and Latent Class Analysis for three cohorts (those born in 1931-1936, 1937-1941, and 1942-1947), this paper explores: 1) who claims Social Security benefits at age 62; 2) what percentage of households claiming at 62 are unprepared for retirement; and 3) whether the unprepared early claimers were pushed into claiming through job shocks and/or poor health or simply decided to take benefits early. Looking across three cohorts makes it possible to see whether these patterns have changed as the average claim age has increased and pension coverage has shifted away from defined benefit (DB) plans. That is, have those who have moved out of age-62 claiming been educated, financially prepared households or unprepared households that have recognized the need to delay claiming?
The paper found that:
- Consistent with previous research, the HRS shows a decline in those claiming at 62.
- Age-62 claimers are less well off than “postponers” in some ways and better off in others.
- Latent class analysis shows that this mixed picture reflects the average of: 1) those with little education and poor job prospects (disadvantaged); and 2) those with at least some college and sufficient resources to claim early (advantaged).
- The percentage of the age-62 claimers in each of these groups has remained virtually constant over the three cohorts.
- Comparing the calculated household replacement rates with target rates from previous research shows that, overall, roughly 65 percent of households claiming at 62 are not prepared; the rate for the disadvantaged group is twice the rate of the advantaged group.
- The percentage unprepared at 62 has increased over time, reflecting an overall trend toward less preparedness.
- A simple probit regression suggests that health and employment shocks and the absence of a DB pension are related to the lack of preparedness for both the disadvantaged and advantaged.
The policy implications of the findings are:
- Given the increasing trend in unpreparedness, further cuts to Social Security benefits would exacerbate this problem.
- Workers claiming at 62 with DB plans were especially likely to be prepared; these plans are not coming back, so the challenge is whether the 401(k) system can be enhanced.

Read more!

Tuesday, August 2, 2016

New Working Papers from the Center for Retirement Research

The Center for Retirement Research at Boston College has recently released six working papers:

Labor Force Dynamics in the Great Recession and Its Aftermath: Implications for Older Workers
Gary Burtless
The Interconnected Relationships of Health Insurance, Health, and Labor Market Outcomes
Matthew S. Rutledge
Pension Participation, Wealth, and Income: 1992-2010
Alicia H. Munnell, Wenliang Hou, Anthony Webb, and Yinji Li
Marital Histories, Gender, and Financial Security in Late Mid-Life: Evidence from Four Cohorts in the Health and Retirement Study
Amelia Karraker and Cassandra Dorius
Are Early Claimers Making a Mistake?
Alicia H. Munnell, Geoffrey T. Sanzenbacher, Anthony Webb, and Christopher M. Gillis
How Would Investing in Equities Have Affected the Social Security Trust Fund?
Gary Burtless, Anqi Chen, Wenliang Hou, Alicia H. Munnell, and Anthony Webb

Read more!

Thursday, July 28, 2016

Comparing the Democratic and Republican Platforms on Social Security

Courtesy of the Fiscal Times

Read more!

New paper: "Labor Force Dynamics in the Great Recession and Its Aftermath: Implications for Older Workers"

"Labor Force Dynamics in the Great Recession and Its Aftermath: Implications for Older Workers"
CRR WP 2016-1, July 2016

GARY BURTLESS, Brookings Institution, Boston College - Retirement Research Center

Unlike prime-age Americans, who have experienced declines in employment and labor force participation since the onset of the Great Recession, Americans past 60 have seen their employment and labor force participation rates increase. In order to understand the contrasting labor force developments among the old, on the one hand, and the prime-aged, on the other, this paper develops and analyzes a new data file containing information on monthly labor force changes of adults interviewed in the Current Population Survey (CPS). The paper documents notable differences among age groups with respect to the changes in labor force transition rates that have occurred over the past two decades. What is crucial for understanding the surprising strength of old-age labor force participation and employment are changes in labor force transition probabilities within and across age groups.

The paper identifies several shifts that help account for the increase in old-age employment and labor force participation:
- Like workers in all age groups, workers in older groups saw a surge in monthly transitions from employment to unemployment in the Great Recession.
- Unlike workers in prime-age and younger groups, however, older workers also saw a sizeable decline in exits to nonparticipation during and after the recession. While the surge in exits from employment to unemployment tended to reduce the employment rates of all age groups, the drop in employment exits to nonparticipation among the aged tended to hold up labor force participation rates and employment rates among the elderly compared with the nonelderly. Among the elderly, but not the nonelderly, the exit rate from employment into nonparticipation fell more than the exit rate from employment into unemployment increased.
- The Great Recession and slow recovery from that recession made it harder for the unemployed to transition into employment. Exit rates from unemployment into employment fell sharply in all age groups, old and young.
- In contrast to unemployed workers in younger age groups, the unemployed in the oldest age groups also saw a drop in their exits to nonparticipation. Compared with the nonaged, this tended to help maintain the labor force participation rates of the old.
- Flows from out-of-the-labor-force status into employment have declined for most age groups, but they have declined the least or have actually increased modestly among older nonparticipants.
Some of the favorable trends seen in older age groups are likely to be explained, in part, by the substantial improvement in older Americans’ educational attainment. Better educated older people tend to have lower monthly flows from employment into unemployment and nonparticipation, and they have higher monthly flows from nonparticipant status into employment compared with less educated workers.

The policy implications of the paper are:
- A serious recession inflicts severe and immediate harm on workers and potential workers in all age groups, in the form of layoffs and depressed prospects for finding work.
- Unlike younger age groups, however, workers in older groups have high rates of voluntary exit from employment and the workforce, even when labor markets are strong. Consequently, reduced rates of voluntary exit from employment and the labor force can have an outsize impact on their employment and participation rates.
- The aged, as a whole, can therefore experience rising employment and participation rates even as a minority of aged workers suffer severe harm as a result of permanent job loss at an unexpectedly early age and exceptional difficulty finding a new job.
- Between 2001 and 2015, the old-age employment and participation rates rose, apparently signaling that older workers did not suffer severe harm in the Great Recession.
- Analysis of the gross flow data suggests, however, that the apparent improvements were the combined result of continued declines in age-specific voluntary exit rates, mostly from the ranks of the employed, and worsening reemployment rates among the unemployed. The older workers who suffered involuntary layoffs were more numerous than before the Great Recession, and they found it much harder to get reemployed than laid off workers in years before 2008. The turnover data show that it has proved much harder for these workers to recover from the loss of their late-career job loss.

Read more!

Wednesday, July 27, 2016

Provisions of the “Save Our Social Security Act”

Wisconsin Republican Rep. Reid Ribble recently introduced the “Save Our Social Security Act,” which combines tax increases and benefit reductions to restore Social Security to 75-year actuarial balance. The bipartisan bill has been co-sponsored by Reps. Dan Benishek (MI), Jim Cooper (TN), Cynthia Lummis (WY), Scott Rigell (VA) and Todd Rokita (IN).

More information is available at Rep. Ribble’s web page, but following are the main provisions of the bill and the percentage of the 75-year actuarial deficit that each provision would address.

Increase Contribution and Benefit Base (34%)

  • Increase payroll subject to taxes over 5 years to 90%, then index to 90% (current cap is $118,500)
    • FY2017: $156,550
    • FY2018: $194,600
    • FY2019: $232,650
    • FY2020: $270,700
    • FY2021: $308,750
    • FY2022: shall be determined by the Commissioner – “such that the percentage of the total earnings for all workers that are taxable is equal to 90% for each calendar year.”

Modification of Primary Insurance Amount (PIA) formula (10%)

Changes to the formula factor used to calculate benefits of high earners from 15% to 5% over 5 years or 2% a year from 2017-2021.

  • Adds an additional benefit of 2.5% of earnings over $9,875 (# is equal to current tax cap)
  • Current PIA formula for an individual becoming eligible in 2016, will be the sum of:
    • 90 % of the first $856 of average indexed monthly earnings (AIME), plus
    • 32 % of AIME over $856 and through $5,158, plus
    • 15 % of AIME over $5,157 up to $9,875 (# will change to current the tax cap)

Increase Full/Maximum Retirement Age, early retirement remains 62 (35%)

  • Starting in 2022, full retirement age increases from age 67 to 69
    • Phase-in of adding 2 months to retirement every year for 12 years (currently 1 month).
  • After the phase-in is complete in 2034
    • Increase the NRA 1 month every 2 years to keep up with life expectancy and the ratio of work/retirement, examined every 10 years in case of needed adjustments.
  • Extension of maximum age for entitlement to delayed retirement credit to 72 (was 70)

Cost of Living Adjustments (19%)

  • Move from current CPI-W to C-CPI-U
    • CPI-U is a more general index and seeks to track retail prices as they affect all urban consumers.
      • Encompasses about 87 % of the U.S. population.
    • C-CPI-U accounts for how people switch their purchases as relative prices change
    • CPI-W is a more specialized index and seeks to track retail prices as they affect urban hourly wage earners and clerical workers.
      • Encompasses about 32% of the U.S. and is a subset of the CPI-U group
      • Places a slightly higher weight on food, apparel, transportation, and other goods and services.
      • It places a slightly lower weight on housing, medical care, and recreation.

Create minimum benefit at 125% Poverty (-5%)

  • Percentage of benefit is phased-in dependent upon number of eligible working years

Offer bump-up for very old beneficiaries (-6%)

  • Increase benefit amount after 20 years of eligibility

Calculate benefit based on highest 38 years (13%)

  • Changes a portion of how benefits are calculated to be based on highest 38 years of work instead of the current 35.
  • Change is phased in

Protection of Social Security Trust Fund

  • Provides a point of order against consideration of any spending or tax legislation that would cause Trust Fund totals to be less than needed for the covered fiscal year.
Read more!

Tuesday, July 26, 2016

NBER Summer Institute Agenda and Papers (Aging)


SI 2016 Aging

David M. Cutler, and Jonathan S. Skinner, Organizers

July 25-29, 2016


Nicole Maestas, Harvard University and NBER
Kathleen Mullen, RAND Corporation
David Powell, RAND Corporation
Till M. von Wachter, University of California at Los Angeles and NBER
Jeffrey B. Wenger, RAND Corporation
American Working Conditions

Daniel K. Fetter, Wellesley College and NBER
Lee Lockwood, Northwestern University and NBER
Government Old-Age Support and Labor Supply: Evidence from the Old Age Assistance Program

David M. Cutler, Harvard University and NBER
Wei Huang, Harvard University
Adriana Lleras-Muney, University of California at Los Angeles and NBER
Economic Conditions and Mortality: Evidence from 200 Years of Data

Ruixue Jia, University of California at San Diego
Hyejin Ku, University College London
The Price of the East Asian Miracle: Generational Cultural Shift and Elderly Suicide

Itzik Fadlon, University of California at San Diego and NBER
Torben Heien Nielsen, University of Copenhagen
Intra-Household Dependencies in Health and Health Behaviors

Gopi Shah Goda, Stanford University and NBER
Matthew Levy, London School of Economics
Colleen Flaherty Manchester, University of Minnesota
Aaron Sojourner, University of Minnesota
Joshua Tasoff
The Role of Time Preferences and Exponential-Growth Bias in Retirement Savings

Daniel J. Benjamin, University of Southern California and NBER
Mark Fontana
Miles S. Kimball, University of Michigan and NBER
Reconsidering Risk Aversion

Partha Bhattacharyya, National Institutes of Health
NIH Funding for Health Economics

Lorenz Kueng, Northwestern University and NBER
Evgeny Yakovlev, Acumen LLC
Long-Run Effects of Public Policies: Endogenous Alcohol Preferences and Life Expectancy in Russia

Sumit Agarwal, National University of Singapore
Jessica Pan, National University of Singapore
Wenlan Qian, National University of Singapore
Age of Decision: Pension Savings Withdrawal and Consumption and Debt Response

Paul Bingley, The Danish National Centre for Social Research
Alessandro Martinello, Lund University
The Effect of Schooling on Wealth Accumulation Approaching Retirement

Xi Chen, Yale University
Lipeng Hu, Peking University
Jody Sindelar, Yale University and NBER
Leaving Money on the Table? Social Pension Enrollment and Well-being of the Aging Population in China

Thomas DeLeire, Georgetown University and NBER
Andre Chappel, U.S. Department of Health and Human Services
Kenneth Finegold, U.S. Department of Health and Human Services
Emily Gee, U.S. Department of Health and Human Services
Do Individuals Respond to Cost-Sharing Subsidies in their Selections of Marketplace Health Insurance Plans?

Jonathan Gruber, Massachusetts Institute of Technology and NBER
Jason Abaluck, Yale University and NBER
Addressing Choice Inconsistencies in Choice of Health Insurance Plans

Pietro Tebaldi, Stanford University
Estimating Equilibrium in Health Insurance Exchanges: Price Competition and Subsidy Design Under the ACA

Amanda Starc, University of Pennsylvania and NBER
Robert Town, University of Pennsylvania and NBER
Internalizing Behavioral Externalities: Benefit Integration in Health Insurance

Leemore Dafny, Northwestern University and NBER
Kate Ho, Columbia University and NBER
Robin S. Lee, Harvard University and NBER
Price Effects of Cross-Market Combinations: Theory and Evidence from Hospital Markets

Nicolas R. Ziebarth, Cornell University
Stefan Pichler, ETH Zurich
The Pros and Cons of Sick Pay Schemes: Testing for Contagious Presenteeism and Shirking Behavior

Benjamin Friedrich, Yale University
Martin Hackmann, Pennsylvania State University
Parental Leave Programs, Nurse Shortages, and Patient Health


David W. Silver, University of California at Berkeley
Haste or Waste? Peer Pressure and the Distribution of Marginal Returns to Health Care

Diane E. Alexander, Princeton University
How do Doctors Respond to Incentives? Unintended Consequences of Paying Doctors to Reduce Costs

Zack Cooper, Yale University
Amanda E. Kowalski, Yale University and NBER
Eleanor N. Powell, University of Wisconsin-Madison
What Does a Hospital Do with Eighteen Million Dollars? Evidence From the Passage of Medicare Part D

Scott Barkowski, Clemson University
The Effect of Specialist Cost Information on Primary Care Physician Referral Patterns

Read more!