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The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply

Archived Abstract of Former PSC Researcher

Neumark, David, and Elizabeth T. Powers. 2005. "The Effects of Changes in State SSI Supplements on Pre-Retirement Labor Supply." Public Finance Review, 33(1): 3-35.

Because the Supplemental Security Income (SSI) program is means-tested, with both income limits and asset limits, those on the margin of eligibility for the elderly component of the program face incentives to reduce labor supply (or earnings) prior to becoming eligible. Our past research relying on cross-state variation in SSI benefits found evidence consistent with the predicted negative labor supply effects. However, a reliance on cross-state variation necessitated reliance on less-than-ideal control samples. In contrast, this paper uses CPS data covering a 22-year period, which permit identification of the effects of SSI from within-state, time-series variation in SSI benefits, using a better control sample. The evidence points consistently to negative effects of more generous SSI payments on the labor supply of likely SSI participants aged 62-64. The implied elasticities of labor supply with respect to benefits, for those with a high probability of SSI participation, are generally in the range of 0.2 to 0.3, looking at both employment and hours of work

DOI:10.1177/1091142104270655 (Full Text)

Country of focus: United States.

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