Social Security and elderly labor supply: Evidence from the Health and Retirement Study

This study uses panel data from the Health and Retirement Study (HRS) to estimate the effects of Social Security income on elderly labor supply in the 1990s and early 2000s. The identification strategy takes advantage of the 1977 amendments to the Social Security Act, which led to a large, unanticipated reduction in Social Security benefits for those born after January 1, 1917. Despite the advanced age of the notch cohorts, there is a significant, negative and surprisingly elastic relationship between Social Security income and hours of work. This suggests that currently proposed reductions in benefits would induce Social Security recipients to work more hours in retirement, even through their 70s and early 80s.

Graphical AbstractFigure optionsDownload as PowerPoint slideResearch highlights
► Elderly labor supply is highly responsive to changes in Social Security benefits.
► Wives' labor supply is more responsive to Social Security income than husbands'.
► For the less educated, lower benefits tend to make the elderly more likely to work.
► For the more educated, lower benefits tend to make the elderly work more hours.