How Do the Changing Labor Supply Behavior and Marriage Patterns of Women Affect Social Security Replacement Rates?

49 Pages Posted: 18 Jul 2013

See all articles by April Yanyuan Wu

April Yanyuan Wu

Mathematica Policy Research, Inc.

Nadia S. Karamcheva

Government of the United States of America - Congressional Budget Office (CBO); Boston College - Center for Retirement Research; IZA Institute of Labor Economics

Alicia H. Munnell

Boston College - Center for Retirement Research

Patrick J. Purcell

U.S. Social Security Administration

Date Written: July 2013

Abstract

This paper seeks to determine the impact of the changing lives of women – increased labor force participation/earnings and reduced marriage rates – on Social Security replacement rates. First, our estimates, based on the Health and Retirement Study and Modeling Income in the Near Term, show that Social Security replacement rates have dropped sharply at both the household- and individual-level, and the decline will continue for future retirees. Our second finding is that this aggregate change masks a complex relationship between replacement rates and the marital status and income levels of individuals. The decline in replacement rates over time is largest for married couples with husbands whose earnings are in the top tercile. Decomposing the reasons for the overall decline shows that increases in the labor supply and earnings of women explain more than one-third of the change. In contrast, the impact of changing marital patterns is relatively small. Much of the remaining explanation rests with the increased Full Retirement Age and changing claiming behaviors.

Suggested Citation

Wu, April Yanyuan and Karamcheva, Nadia S. and Munnell, Alicia and Purcell, Patrick J., How Do the Changing Labor Supply Behavior and Marriage Patterns of Women Affect Social Security Replacement Rates? (July 2013). Available at SSRN: https://ssrn.com/abstract=2294676 or http://dx.doi.org/10.2139/ssrn.2294676

April Yanyuan Wu (Contact Author)

Mathematica Policy Research, Inc. ( email )

P.O. Box 2393
Princeton, NJ 08543-2393
United States

Nadia S. Karamcheva

Government of the United States of America - Congressional Budget Office (CBO) ( email )

Ford House Office Building
2nd & D Streets, SW
Washington, DC 20515-6925
United States

Boston College - Center for Retirement Research

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Chestnut Hill, MA 02467
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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Alicia Munnell

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States
617-552-1762 (Phone)

Patrick J. Purcell

U.S. Social Security Administration ( email )

Washington, DC 20254
United States
202-358-6348 (Phone)

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