The Effects of Changes in Women's Labor Market Attachment on Redistribution Under the Social Security Benefit Formula

42 Pages Posted: 23 Sep 2011

See all articles by Alan L. Gustman

Alan L. Gustman

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Thomas L. Steinmeier

Texas Tech University - Department of Economics and Geography

Nahid Tabatabai

Dartmouth College - Department of Economics

Date Written: September 2011

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. This paper compares outcomes for the earlier cohort with those of a cohort born twelve years later. The aim of the study is to see whether, after the recent growth in two earner households, and the growth in women's labor market activity and earnings, the Social Security system now fosters somewhat more redistribution from high to low earning households. The analysis is based on data from the Health and Retirement Study and includes members of households with at least one person age 51 to 56 in either 1992 or in 2004. As expected, women enjoyed a more rapid growth of labor force participation, hours of work and covered earnings than men. This increased the redistribution of Social Security benefits among households. Nevertheless, a considerable gap remains between the labor market activities and earnings of women versus men. As a result, the Social Security system remains much less successful in redistributing benefits from households with high covered earnings to those with lower covered earnings than in redistributing benefits from individuals with high covered earnings to those with lower covered earnings.

Suggested Citation

Gustman, Alan L. and Steinmeier, Thomas L. and Tabatabai, Nahid, The Effects of Changes in Women's Labor Market Attachment on Redistribution Under the Social Security Benefit Formula (September 2011). NBER Working Paper No. w17439, Available at SSRN: https://ssrn.com/abstract=1932570

Alan L. Gustman (Contact Author)

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Thomas L. Steinmeier

Texas Tech University - Department of Economics and Geography ( email )

Lubbock, TX 79409-2101
United States
806-742-2201 (Phone)

Nahid Tabatabai

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States

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