The sensitivity of proposed Social Security benefit formula changes to lifetime earnings definitions.
Several Social Security proposals have included benefit formula changes that apply to earners above a specified percentage of the combined male and female (unisex) lifetime earnings distribution. The unisex distribution is an average of two disparate groups with large lifetime differences in labor market participation. This study finds that if Social Security's median unisex average indexed monthly earnings (AIME) amount is used to define an earnings threshold below which benefits will be held roughly unreduced, the percentage of fully insured men subject to benefit reductions (70 percent) exceeds the unisex estimate of the population subject to benefit reductions (50 percent) by 20 percentage points. If policymakers wish to adjust future benefits and focus benefit reductions on middle or high primary or full-time wage earners in a household, the male, rather than unisex, AIME would come closer to achieving such a goal.
Division of Economic Research, Office ofResearch, Evaluation, and Statistics, Office of Retirement and Disability Policy, Social Security Administration, USA.
Hilary
H
Waldron
D000293:Adolescent; D000328:Adult; D004651:Employment / Q000191:economics* / Q000706:statistics & numerical data; D005260:Female; D006801:Humans; D007342:Insurance Benefits / Q000191:economics*; D008297:Male; D008875:Middle Aged; D017059:Models, Econometric; D011640:Public Policy; D012456:Salaries and Fringe Benefits / Q000191:economics* / Q000706:statistics & numerical data; D012943:Social Security / Q000191:economics*; D014481:United States