Friday, July 26, 2013

New paper: "How Do the Changing Labor Supply Behavior and Marriage Patterns of Women Affect Social Security Replacement Rates?"

"How Do the Changing Labor Supply Behavior and Marriage Patterns of Women Affect Social Security Replacement Rates?"

APRIL YANYUAN WU, Boston College - Center for Retirement Research
Email: wuuv@bc.edu
NADIA S. KARAMCHEVA, Urban Institute, Boston College - Center for Retirement Research
Email: karamcheva@gmail.com
ALICIA H. MUNNELL, Boston College - Center for Retirement Research
Email: MUNNELL@BC.EDU
PATRICK PURCELL, Government of the United States of America - Social Security Administration
Email: patrick.purcell@ssa.gov

This paper seeks to determine the impact of the changing lives of women – increased labor force participation/earnings and reduced marriage rates – on Social Security replacement rates. First, our estimates, based on the Health and Retirement Study and Modeling Income in the Near Term, show that Social Security replacement rates have dropped sharply at both the household- and individual-level, and the decline will continue for future retirees. Our second finding is that this aggregate change masks a complex relationship between replacement rates and the marital status and income levels of individuals. The decline in replacement rates over time is largest for married couples with husbands whose earnings are in the top tercile. Decomposing the reasons for the overall decline shows that increases in the labor supply and earnings of women explain more than one-third of the change. In contrast, the impact of changing marital patterns is relatively small. Much of the remaining explanation rests with the increased Full Retirement Age and changing claiming behaviors.

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