Relaxing Household Liquidity Constraints through Social Security

29 Pages Posted: 5 May 2020 Last revised: 11 May 2020

See all articles by Sylvain Catherine

Sylvain Catherine

University of Pennsylvania - Finance Department

Max Miller

University of Pennsylvania, The Wharton School, Finance Department

Natasha Sarin

University of Pennsylvania Law School

Date Written: May 4, 2020

Abstract

More than a quarter of working-age households in the United States do not have sufficient savings to cover their expenditures after a month of unemployment. We explore proposals to alleviate financial distress arising from the COVID-19 pandemic. We show that giving workers early access to just 1% of their future Social Security benefits allows most households to maintain their current consumption for at least two months. Unlike other approaches (like early access to retirement accounts, stimulus relief checks, and expanded unemployment insurance), access to Social Security serves the needs of workers made vulnerable by the crisis, but does not increase the overall liabilities of the federal government or have distortionary effects on the labor market.

Keywords: COVID-19, Social Security, Household Finance

JEL Classification: E21, G51, H55, H12

Suggested Citation

Catherine, Sylvain and Miller, Max and Sarin, Natasha, Relaxing Household Liquidity Constraints through Social Security (May 4, 2020). Available at SSRN: https://ssrn.com/abstract=3593054 or http://dx.doi.org/10.2139/ssrn.3593054

Sylvain Catherine

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Max Miller

University of Pennsylvania, The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Natasha Sarin (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

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