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53 Soc. Sec. Bull. 2 (1990)
The Effects of the Social Security Earnings Test on the Labor-Market Activity of Older Americans: A Review of the Evidence

handle is hein.journals/ssbul53 and id is 280 raw text is: Numerous scholarly studies have examined the effect of the Social Security retirement test on the labor supply of older workers. Virtually all of this research indicates that the effect is probably small and that eliminating the test would have a minor impact on the work activity of older Americans. There are several reasons for this conclusion. First, retirement decisions are known to be influenced by many other factors including private pensions, Social Security benefit levels, health, job opportunities, family circumstances, and personal preferences for work. These other determinants appear to be dominant. Second, other Social Security features, particularly the actuarial adjustment for early retirement, the delayed retirement credit, and the automatic benefit recomputation provision, significantly offset much of the retirement test's apparent penalty. Third, the test has been substantially liberalized over the years, permitting beneficiaries to earn more money without loss of benefits. Although earlier, more stringent, forms of the test may have posed significant work disincentives, the current rules are far less restrictive. Fourth, some beneficiaries are undoubtedly sensitive to the retirement test and respond by making important adjustments in their labor-supply plans. Nonetheless, the relatively small size of this group limits any impact that their response can have when the aggregate behavior of millions of people is measured. '*Division of Economic Research, Office of Research and Statistics, Office of Policy, Social Security Administration. The helpful comments of Benjamin Bridges, Janet Hunt, Kathy Krynski, Selig Lesnoy, Jan Olson, Michael Packard, David Pattison, and John Straka are gratefully acknowledged. Social Security Bulletin, May 1990/Vol. 53, No. 5

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