Skip to main content
×
Home

Redistribution under the Social Security benefit formula at the individual and household levels, 1992 and 2004*

  • ALAN L. GUSTMAN (a1), THOMAS L. STEINMEIER (a2) and NAHID TABATABAI (a3)
Abstract
Abstract

Studies using data from the early 1990s suggested that while the progressive Social Security benefit formula succeeded in redistributing benefits from individuals with high earnings to individuals with low earnings, it was much less successful in redistributing benefits from households with high earnings to households with low earnings. Wives often earned much less than their husbands. As a result, much of the redistribution at the individual level was effectively from high earning husbands to their own lower earning wives. In addition, spouse and survivor benefits accrue disproportionately to women from high income households. Both factors mitigate redistribution at the household level. It has been argued that with the increase in the labor force participation and earnings of women, Social Security now should do a better job of redistributing benefits at the household level. To be sure, when we compare outcomes for a cohort with a household member age 51 to 56 in 1992 with those from a cohort born twelve years later, redistribution at the household level has increased over time. Nevertheless, as of 2004 there still is substantially less redistribution of benefits from high to low earning households than from high to low earning individuals.

Copyright
Footnotes
Hide All
*

This research was supported by a grant from the U.S. Social Security Administration (SSA) through the Michigan Retirement Research Center (MRRC) under grant number UM11-06. The findings and conclusions expressed are solely those of the authors and do not represent the views of SSA or the MRRC. David Olson of the Social Security Administration was extremely helpful to us in dealing with the ANYPIA program. We also thank Mike Hurd, Olivia Mitchell and participants at the MRRC workshop for their helpful comments.

Footnotes
References
Hide All
Biggs Andrew G., Sarney Mark and Tamborini Christoper R. (2009). A progressivity index for Social Security. Social Security Issue Paper No. 2009-1. January 2009.
Coe Norma B., Karamcheva Zhenya, Kopcke Richard W. and Munnell Alicia (2011). How does the personal income tax affect the progressivity of OASI benefits? Paper Presented at the Meeting of the Retirement Research Consortium, Washington, DC.
Coronado Julia Lynn, Fullerton Don and Glass Thomas (2000). The progressivity of social security. NBER Working Paper 7520.
Goda Gopi Shah, Shoven John B. and Slavov Sita Nataraj (2011). Differential mortality by income and social security progressivity. In Wise David A. (ed), Explorations in the Economics of Aging. Chicago: University of Chicago Press for NBER, pp. 189204.
Gustman Alan L. and Steinmeier Thomas L. (2001). How effective is redistribution under the social security benefit formula? Journal of Public Economics, 82(1): 128.
Gustman Alan L., Steinmeier Thomas L. and Tabatabai Nahid (2012). The growth in social security benefits among the retirement age population from increases in the cap on covered earnings. Social Security Bulletin, 72(2): 4962.
Harris Amy Rehder and Sabelhaus John (2005). How Does Differential Mortality Affect Social Security Finances and Progressivity? Washington, DC: Congressional Budget Office, Working Paper.
Hurd Michael (2011). Comment on differential mortality by income and social security progressivity. In Wise David A. (ed), Explorations in the Economics of Aging. Chicago: University of Chicago Press for NBER, pp. 205208.
Iams Howard M., Phillips John W.R., Robinson Kristen, Deang Lionel and Sushi Irena (2008). Cohort changes in the retirement resources of older women. Social Security Bulletin, 68(4): 113.
Liebman Jeffrey B. (2002). Redistribution in the current U.S. social security system. In Feldstein Martin and Liebman Jeffrey B. (eds). The Distributional Aspects of Social Security and Social Security Reform. Chicago: University of Chicago Press, pp. 1148.
Smith Karen, Toder Eric and Iams Howard (2003). Lifetime distributional effects of Social Security retirement benefits. Social Security Bulletin, 65(1): 3361.
Steuerle C. Eugene and Bakija Jon M. (1994). Retooling Social Security for the 21st Century: Right and Wrong Approaches to Reform. Washington, DC: Urban Institute.
Tamborini Christopher R., Iams Howard M. and Whitman Kevin (2009). Marital history, race, and social security spouse and widow benefit eligibility in the United States. Research on Aging, 31(5): 577605.
U.S. Social Security Administration (2010). The 2010 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds. Washington, DC: U.S. Social Security Administration.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Pension Economics & Finance
  • ISSN: 1474-7472
  • EISSN: 1475-3022
  • URL: /core/journals/journal-of-pension-economics-and-finance
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords:

Metrics

Full text views

Total number of HTML views: 2
Total number of PDF views: 21 *
Loading metrics...

Abstract views

Total abstract views: 180 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 24th November 2017. This data will be updated every 24 hours.