how does the changing role of women affect social security ?
DESCRIPTION
How Does the Changing Role of Women Affect Social Security ?. April Yanyuan Wu and Alicia H. Munnell (Center for Retirement Research at Boston College), Nadia Karamcheva (Urban Institute), and Patrick Purcell (Social Security Administration) - PowerPoint PPT PresentationTRANSCRIPT
April Yanyuan Wu and Alicia H. Munnell (Center for Retirement Research at Boston College), Nadia Karamcheva (Urban Institute), and Patrick Purcell (Social Security Administration)
14th Annual Retirement Research Consortium ConferenceWashington, DCAugust 3, 2012
How Does the Changing Role of Women Affect Social Security?
2
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
Labor Force Participation, by Marital Status
Changing role of women: labor supply
1931-1935
1936-1941
1942-1947
1948-1953
1954-1959
1960-1965
1966-1975
30%
40%
50%
60%
70%
80%
All women 25-34
Married women 25-34
Birth year
3
Changing role of women: earnings
1931-1935
1936-1941
1942-1947
1948-1953
1954-1959
1960-1965
1966-1975
20%
30%
40%
50%
60%
70%- - - - - Projected
Birth year
Ratio of Median Wife’s to Husband’s Lifetime Earnings
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
4
Changing role of women: marital patterns
1931-1935
1936-1941
1942-1947
1948-1953
1954-1959
1960-1965
1966-1975
30%
40%
50%
60%
70%
80%
90%
25-34
Birth year
Percent of Women Married, by Age
- - - - - Projected
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
Research question
• How do the changing lives of women affect Social Security replacement rates and the program’s finances?o Trends in replacement rates
A broad range of cohorts, from Depression to Generation X
By marital status and income distributiono Decompose differences into contributing factors o Estimate the impact of changes on Social Security’s finances
5
Preview of results• Decline in Social Security replacement rates 13 percentage points between the 1930s cohort and GenXers
• Changes vary by martial status and income distributiono Smallest among the never married o Largest for couples with husbands’ earnings in top tercile
• Factors explaining the drop in replacement rateso Increased labor supply and earnings: > 1/3o Changing marital pattern: relatively small impacto Increased FRA and changing claiming behaviors: 1/3
• The ratio of benefit to contribution has declined: 22 percent
6
• Health and Retirement Study (HRS)o Original HRS (1931-1941) o War Baby (WB, 1942-1947)o Early Baby Boomers (EBB, 1948-1953)
• Modeling Income in the Near Term (MINT)o Middle Baby Boomers (MBB, 1954-1959)o Late Baby Boomers (LBB, 1960-1965)o Generation X (GX, 1966-1975)
7
Data
• The replacement rate: Social Security benefit/career average indexed earnings (AIME)o Construct lifetime earnings profile
HRS: Gustman and Steinmeier (2001); Coe et al. (2012) MINT: simulate the whole earnings profile
o Estimate Social Security benefits Marital status at time of first receipt of benefits
o Calculate replacement rates at time of first benefit receipt Individual level Household level
8
Methods
Changes in replacement rates: current retirees
9
Household type HRS War Baby Early BoomerWeighted average 46% 40% 39%Never married 45% 38% 42%Currently married 44% 44% 38%Widowed 59% 54% 51%Divorced 47% 40% 39%
Estimated Replacement Rates, Household Level
Source: Authors' calculations using the University of Michigan. Health and Retirement Study. Ann Arbor, MI.
10
Estimated replacement rates (median, single-earner households) HRS War Baby Early Boomer
Husband's earningsLow 72% 79% 76%Median 54% 49% 51%High 47% 38% 40%
Estimated replacement rates (median, dual-earner households) HRS War Baby Early Boomer
Husband's earningsLow 51% 44% 46%Median 42% 36% 36%High 36% 31% 30%
Changes in replacement rates: current retirees (cont’d)
Source: Authors' calculations using the University of Michigan. Health and Retirement Study. Ann Arbor, MI.
Changes in replacement rates: projection
11
Estimated Replacement Rates, Household Level
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
Household type HRS 1931-1935
HRS 1936-1941
War BabyEarly
BoomersMiddle
BoomersLate
BoomersGeneration
Xers
Weighted average 50% 48% 45% 45% 44% 39% 39%
Never married 47% 47% 43% 44% 44% 40% 40%
Currently married 47% 45% 42% 42% 41% 37% 36%
Widowed 64% 61% 60% 55% 53% 48% 53%
Divorced 52% 48% 46% 46% 44% 40% 41%
Explaining differences over time
12
Factors contributing to the changes over time:
• Labor force participation
• Marriage pattern
• And…changes in FRA and claiming behaviors
13
Comparison of replacement rates
13
Actual Claiming Age vs. Claiming at FRA
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
HRS 1931-1
935
HRS 1936-1
941
War
Baby
Early B
oomers
Mid
dle Boom
ers
Late B
oomers
Genera
tion X
ers0%
20%
40%
60%Actual claiming age Claiming at FRA
14
Oaxaca-Blinder decomposition
14
Explained Unexplained
X: labor force; marital status; claiming behaviors
Explaining differences over time
15
0.00
0.04
0.08
0.12
0.16
Labor forceMarital statusClaiming behavior
Decomposition: Actual Gaps in Replacement Rates, All Households
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
1/3
1/3
Explaining differences over time (cont’d)
16
Percent of Actual Change
Changes between HRS1 and GenX
Actual changes in gap
Demographics
Claiming behaviors
Labor suppl
y
Spouse’s demographics
Spouse’s claiming behaviors
Spouse’s labor
supply
Unexplained
Married 0.1 1.7% 23.1% 25.5% 0.3% 18.2% 28.2% 3.0%
Widowed 0.2 7.3% 26.0% 55.9% 11.2%
Divorced 0.1 0.0% 50.2% 46.7% 2.9%
Never married
0.2 -0.4% 56.6% 41.8% 2.0%
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
17
Impacts on Social Security Finances
17
HRS
1931-1935
HRS 1936-1941
War Baby
Early boomers
Middle boomers
Late boomers
Generation X
All 1.6 1.6 1.4 1.3 1.3 1.2 1.2
Never married 1.4 1.4 1.2 1.2 1.2 1.2 1.2
Married 1.5 1.6 1.4 1.3 1.3 1.2 1.2
Widowed 2.6 2.5 2.0 1.6 1.5 1.4 1.4
Divorced 1.5 1.7 1.4 1.3 1.3 1.2 1.2
Median Ratio of Present Value of Benefits over Taxes across Cohorts
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.
18
Conclusions
18
• Replacement rates have declined and will continue declining for future retirees
• Increased labor supply explains over 1/3 of the decline over time
• Marital patterns: significant but small impact• Changes in FRA and claiming behaviors also play an
important role