Volume 31, Number 2 (Spring) 1996
Reimers, Cordelia, and Marjorie Honig. 1996. "Responses to Social Security by Men and Women: Myopic and Far-Sighted Behavior." Journal of Human Resources 31(2):359-382.
The labor supply response to critical aspects of the Social Security program depends on whether behavior is “myopic” (conditioned by current benefits only) or “far-sighted” (conditioned by the entire future benefit stream). This behavior reflects attitudes toward risk and ability to borrow, as well as underlying time preferences. The individual’s effective time horizon is treated as an empirical question in this paper. Responses to the Social Security earnings test and the delayed retirement credit are examined, as well as the question of whether older men and women are able to work while keeping their earnings below the exempt earnings limit, in other words, whether the earnings test affects participation as well as hours of work. Hazard functions for labor market reentry after retirement are estimated using the Longitudinal Retirement History Study. We find striking gender differences, in that women respond to Social Security wealth and are not deterred from working by the earnings test, while men respond to current benefits and their labor force participation is impeded by the test. Increases in the delayed retirement credit, as provided by the 1983 amendments to the Social Security Act, , should therefore increase the labor supply of older women but not of men, though its intention was to increase the supply of both; however, increasing or abolishing the earnings limit, as proposed in Congress, would increase older men's participation but not that of older women.
Both authors cure professors of economics at Hunter College and at the Graduate School of the City University of New York. Earlier versions of this paper were presented at the 1993 annual meetings of the Association for Public Policy Analysis and Management in Washington, the American Economic Association in Anaheim, and the Eastern Economic Association in Washington. The authors would like to thank Steven Sandell, members of the Applied Econometrics Seminar at New York University, and referees of the journal for their comments. This research was supported by the U.S. Social Security Administration and the PSC-CUNY research award program. Computing resources were provided by the University Computer Center of CUNY The data used in this article can be obtained beginning in November 1996 through October 1999 from the authors at Department of Economics, Hunter College, 695 Park Avenue, New York, NY 10021.
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