Skip to main content

The effects of changes in state SSI supplements on preretirement labor supply (Neumark & Powers 2005)

Absence of conflict of interest.

Citation

Neumark, D., & Powers, E. T. (2005). The effects of changes in state SSI supplements on preretirement labor supply. Public Finance Review, 33(1), 3-35.

Highlights

  • The study examined the impact of a theoretical increase in Supplemental Security Income (SSI) benefits on the preretirement employment outcomes for likely SSI participants ages 60 to 64.
  • Using data from the annual Current Population Survey from 1979 to 2001 and state-level SSI receipt data, the authors used regression methods in a nonexperimental analysis of likely SSI participants to compare the outcomes of workers ages 62 to 64 with those of workers ages 60 to 61.
  • The study found that an increase in monthly SSI benefits was associated with a statistically significant decrease in the employment rate and number of hours worked for likely SSI recipients ages 62 to 64 compared with those ages 60 to 61.
  • The quality of causal evidence presented in this report is low because the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to changes in SSI benefits; other factors are likely to have contributed.

Intervention Examined

Supplemental Security Income (SSI) benefits

Features of the Study

The SSI program provides supplemental benefits for people who are elderly, blind, or have disabilities. The program is means-tested and includes income and asset limits. Older people can become eligible for the program at age 65.

Older workers on the margin of eligibility for the age-based component of SSI might be inclined to reduce labor supply or earnings before becoming eligible at age 65. This study examined the relationship between increases in potential future SSI benefits on the preretirement labor supply outcomes of men ages 60 to 64 who are likely to participate in the SSI program after retirement.

The authors relied on the 1979 to 2001 data from annual Current Population Survey for employment information and state-level data on SSI benefit receipt. The sample included male heads of household ages 60 and older. The authors used a two-stage analysis approach. Using data from workers ages 65 and older, the authors first predicted the likelihood of future SSI participation among men ages 60 and 64. From this, the authors identified people ages 60 to 64 that are likely future SSI participants. To model the relationship between an increase in future potential SSI benefits and employment outcomes, the authors compared likely SSI participants ages 62 to 64 against likely participants ages 60 and 61. The study used statistical analyses to examine the effect of potential increases of future SSI benefits on two outcomes: weekly hours worked and employment.

Findings

Employment

  • The study found that an increase in monthly SSI benefits was associated with a decrease in employment rate for likely SSI participants ages 62 to 64 compared with likely participants ages 60 and 61. The increase in benefits was associated with a reduction in weekly hours worked, comparing likely participants ages 62 to 64 with those ages 60 and 61. The results are statistically significant.

Considerations for Interpreting the Findings

The statistical models included several control variables, including race, education, past welfare use, and state unemployment rate, but the authors did not account for other factors that could have affected the difference between the treatment and comparison groups, including past employment.

Causal Evidence Rating

The quality of causal evidence presented in this report is low the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to changes in SSI benefits; other factors are likely to have contributed.

Reviewed by CLEAR

January 2020

Topic Area