Date of this Version
To assess the distributional effects of social security reform proposals, it is essential to have good information on real-world workers’ lifetime earnings trajectories. Until recently, however, policymakers have relied on hypothetical earnings profiles for policy analysis. We use actual lifetime earnings data from the Health and Retirement Study (HRS) to compare actual workers’ covered earnings profiles to these hypothetical profiles. We show that the hypothetical profiles do not track earnings patterns of current retirees; thus lifetime pay levels are much higher than for most HRS workers. Therefore, using hypothetical profiles could misrepresent benefits paid and taxes collected under such reforms.
Social Security and Public Pensions, Earnings, Social Security, Retirement
Working Paper Number
©2004 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved.
This research was conducted with support from the Social Security Administration via the Michigan Retirement Research Center at the University of Michigan, under subcontract to the University of Pennsylvania. Additional support was provided by the Pension Research Council, the Boettner Center for Pensions and Retirement Research, and the Huebner Foundation, all at the Wharton School. The authors offer thanks to Michael Clingman, Steve Goss, Orlo Nichols, Syl Schieber, Alice Wade, and members of the TAMU Applied Micro Seminar, for their helpful comments on earlier versions of this paper, but they absolve them from any errors that remain. Opinions are solely those of the authors and not of the institutions with which the authors are affiliated.
Date Posted: 30 August 2019