Title

Three essays on Social Security and retirement

Date of Award

2005

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

Advisor(s)

Gary V. Engelhardt

Keywords

Payroll tax incidence, Covered earnings' cap, Labor force participation, Manufacturing, Social Security, Retirement

Subject Categories

Economics | Social and Behavioral Sciences

Abstract

The financing problem of the Social Security system has captured great attention. The 2005 OASDI Trustees' Report projects that the combined OASI and DI Trust Funds will become exhausted in 2041. Solutions to this problem include raising the covered-earnings' cap, encouraging people to work longer, or making people postpone their participation in the Old Age program. This dissertation addresses these issues respectively in three essays.

My first essay examines the impact of the increase in the covered-earnings' cap from the 1965, 1972 and 1977 Amendments on the gross wage and employment. An increase in the percentage of workers earning above the pre-law-change cap resulted in a decline in the post-reform gross wage for the three Amendments. I find no employment effect for the 1965 Amendments but negative employment effects for the 1972 and 1977 Amendments. However, the employment effects are sensitive to the specification forms.

In the second essay, I use the geographic variation in manufacturing concentration to examine the impact of de-industrialization on older workers' labor force participation. My results show that a one percentage point decrease in local earnings due to de-industrialization raised older workers' labor force non-participation rate by 0.78, and the probability of leaving the labor force by 0.80. In addition, the labor force participation of older workers fell more than twice as fast in the industrial cities as in the non-industrial cities between 1980 and 1990, a period of rapid decline in manufacturing.

The third essay exploits shocks to the Appalachian coal mining and shocks to US manufacturing to examine the impact of local labor market conditions on Social Security. I find that a 10 percent increase in the growth rate of earnings induced by the coal shocks or the manufacturing shocks resulted in a 1.3 percent decline in the growth rate of Old Age expenditure and a 0.9 percent decrease in the growth rate of recipients. In addition, a one percentage point decrease in local earnings caused by de-industrialization raised the Social Security take-up rate by 0.77, and the probability of participating in Social Security by 0.63.

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