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on Economics of Ageing |
| By: | George Kudrna; John Piggott; Phitawat Poonpolkul |
| Abstract: | This paper examines the economy-wide effects of government policies to extend public pensions in emerging Asia - particularly pertinent given the region’s large informal sector and rapid population ageing. We first document stylized facts about Indonesia’s labour force, drawing on the Indonesian Family Life Survey (IFLS). This household survey is then used to calibrate micro behaviours in a stochastic, overlapping-generations (OLG) model with formal and informal labour. The benchmark model is calibrated to the Indonesian economy (2000- 2019), fitted to Indonesian demographic, household survey, macroeconomic and fiscal data. The model is applied to simulate pension policy extensions targeted to formal labour (contributory pension extensions to all formal workers with formal retirement age increased from 55 to 65), as well as to informal labour (introduction of non-contributory social pensions to informal 65+). First, abstracting from population ageing, we show that: (i) the first set of pension policy extensions (that have already been legislated and are being implemented in Indonesia) have positive effects on consumption, labour supply and welfare (of formal workers) (due largely to the formal retirement age extension); (ii) the introduction of social pensions targeted to informal workers at older age generates large welfare gains for currently living informal elderly; and (iii) the overall pension reform leads to higher welfare across the employment-skill distribution of households. We then extend the model to account for demographic transition, finding that the overall pension reform makes the contributory pension system more sustainable but the fiscal cost of non-contributory social pensions more than triples to 1.7% of GDP in the long run. As an alternative, we examine application of a means-tested social pension system within the overall pension reform. We show that this counterfactual reduces the fiscal cost (of social pensions) and further increases the welfare for both current and future generations. |
| Keywords: | Informal Labour, Population Ageing, Social Security, Taxation, Redistribution, Stochastic General Equilibrium |
| JEL: | E26 J1 J21 J26 H55 H24 C68 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-14&r= |
| By: | Hyunjeong Hwang; Oliver Roehn |
| Abstract: | Slovakia’s population is ageing rapidly, with the share of the working-age population expected to shrink by about a fifth in the next 30 years. Ageing-related costs are projected to increase much more strongly than in other EU countries and ageing will put pressure on potential growth and living standards. To prepare for an ageing society, pension, health and long-term care, as well as labour market reforms are needed to extend working lives, improve the health of the ageing population, and enhance the efficiency of public spending. Linking the retirement age to life expectancy and tightening early retirement pathways notably for mothers and disability pensioners is important to extend working lives and improve pension sustainability. Health outcome are lagging behind other OECD countries largely due to high preventable mortality, especially among disadvantaged groups, highlighting the importance of a national strategy to reduce preventable mortality, as well as targeted approaches. Measures are also needed to improve the efficiency of health and long-term care spending, notably through reforming the network of hospitals, expanding central procurement of pharmaceuticals, and expanding the supply of in-home long-term care services. Higher employment of older workers is hampered by a range of labour market barriers, including fewer training opportunities, higher job strain, and a lack of flexible working arrangements. Labour participation of mothers with young children is also low, reflecting excessively long parental leave, low financial work incentives, and a lack of childcare facilities. |
| Keywords: | fiscal sustainability, health care system, labour supply, long-term care system, pensions, population ageing |
| JEL: | J11 J26 J08 O52 H55 I11 |
| Date: | 2022–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1701-en&r= |
| By: | Jean-Pierre Aubry; Kevin Wandrei |
| Abstract: | The conventional wisdom is that all state and local government workers receive a lifetime annuity from their employer pension plan. This brief investigates the extent to which this presumption is correct by examining the payout options offered by state and local plans, including those for the roughly 6.5 million employees who do not participate in Social Security. Since these “noncovered” workers do not earn credit towards a Social Security annuity during their time in government, they need annuitized income from their employer plan more than their covered counterparts. The discussion proceeds as follows. The first section describes the most common benefit payout options for major state and local defined benefit (DB) plans and highlights the fact that some plans allow retirees to convert a portion of their annuitized benefit into a lump-sum payout. The second section focuses on state and local workers with defined contribution (DC) plans as their primary retirement plan and highlights the fact that most of these plans offer annuitization as an option but not as a default. The final section concludes that while most state and local workers receive an annuity, a small share do not. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:crr:slpbrf:slp79&r= |
| By: | Robert L. Siliciano; Gal Wettstein |
| Abstract: | Past generations drew down their wealth slowly in retirement, leaving much of their savings untouched. However, this pattern may not hold as the Baby Boomer generation retires, because they are less likely to have a defined benefit (DB) plan and will need to tap the assets in their defined contribution (DC) plans to support their consumption. This paper uses data from the Health and Retirement Study to estimate the relationship between access to DB plans and the speed at which past generations drew down their wealth. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-11&r= |
| By: | Jean-Pierre Aubry; Kevin Wandrei |
| Abstract: | At the outset of the COVID-19 pandemic, many observers feared that the resulting recession would undermine workers’ employer-sponsored retirement plans. The one-quarter of state and local government workers who are not coverd by Social Security would have been particularly vulnerable, as they lack the buffer this program provides. For this group, a prolonged recession, with poor investment returns and government revenue shortfalls, would have eroded the finances of their defined benefit plans – their only source of retirement income. This brief – based on a recent study – assesses how COVID affected the pensions of these noncovered workers.2 The discussion proceeds as follows. The first section briefly describes the universe of state and local plans for workers who are not covered by Social Security (i.e., noncovered plans). The second section documents the impact of COVID-19 on the current financial status of these plans. The third section examines the likelihood that noncovered plans will default on their future benefit promises due to depleted pension trust fund assets. The final section concludes that the impact of COVID on noncovered plans has been minimal and, looking forward, structural headwinds such as negative cash flows and lower-than-expected investment returns continue to pose little risk to their ability to pay future benefits. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:crr:slpbrf:slp81&r= |
| By: | Stipica Mudrazija; Barbara A. Butrica |
| Abstract: | This study explores the association between debt burdens and health at older ages. It examines a range of physical and mental health measures and assesses how they may be shaped by the debt held by older adults. It compares health outcomes for older adults with and without debt. It also explores whether the amount or type of debt modifies the debt-health nexus. To address the likely endogeneity of debt and health, the study employs marginal structural models, developed specifically as an identification strategy in the presence of possible endogeneity, alongside population-averaged models that allow us to compare outcomes for populations with and without debt without having to rely on unverifiable assumptions regarding the underlying population distribution, as is the case with random- and fixed-effects models. Data for this study come primarily from the Health and Retirement Study, and the sample is limited to respondents ages 55 and older from the 1998 through 2016 survey waves. This study of online claiming is based on a survey of older individuals who either claimed their Old Age and Survivor (OASI) benefit in the past five years or intend to claim within the next five years. The survey covered: 1) how they submitted (or intend to submit) their benefit application; and 2) how they communicated (or intend to communicate) with SSA during the process. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-17&r= |
| By: | Rory McGee (University of Western Ontario) |
| Abstract: | Elderly households hold most of their wealth in housing, maintain high levels of wealth throughout retirement, and often leave bequests. The value of their houses are subject to large shocks. To what extent do these shocks affect their savings, consumption, and bequests? Answering this question requires separating precautionary savings, bequest motives, and the desire to remain in one's home. I develop and estimate a structural model of retirement savings decisions with realistic risks, housing, and heterogeneity in bequest preferences. I exploit policy changes to the taxation of housing and bequests to separately identify the different motives for holding wealth. Estimates show approximately half of retirees have no bequest motive. House price changes are quantitatively important, with 1/4 of increases passed on to future generations. I use the estimated model to evaluate means-tested programs insuring retirees' LTC expenses. I find exemptions providing marginal liquidity have larger insurance value than fully eliminating LTC expense risk per pound it costs the government. |
| Keywords: | savings; housing, long term care, ageing |
| JEL: | D1 D12 D14 D15 E21 G5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:uwowop:20214&r= |
| By: | Jordan W. Jones (USDA Economic Research Service); Charles J. Courtemanche (University of Kentucky and NBER); Augustine Denteh (Tulane University); James Marton (Georgia State University); Rusty Tchernis (Georgia State University and NBER) |
| Abstract: | Senior participation in the Supplemental Nutrition Assistance Program (SNAP) has traditionally been lower than other groups among those eligible, with historical estimates below 50 percent. We examine the impacts of state SNAP policies on program participation among low-income senior (age 60 and older) and non-senior households using data from the 2001-2014 December Current Population Survey Food Security Supplement. Our results suggest that policies designed to expand SNAP eligibility modestly increased participation among seniors but led to larger increases among non-seniors. In contrast, we find little evidence of effects of policies related to transaction costs, stigma, or outreach on either group. |
| Keywords: | Supplemental Nutrition Assistance Program, program participation, low-income senior and non-senior households |
| JEL: | I32 I38 J14 Q18 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2202&r= |
| By: | Anqi Chen; Alicia H. Munnell |
| Abstract: | Whether households prefer a constant, increasing, or decreasing path of consumption in retirement has important implications for our understanding of retirement adequacy. Financial planners and researchers have often assumed that retirees would like to maintain their pre-retirement standard of living. However, several studies suggest that retired households decrease their consumption over time. This project builds on the existing literature by: 1) examining retirement consumption over longer periods; 2) using wealth to separate constrained and unconstrained households in order to analyze whether declines in consumption are driven by necessity or preferences; and 3) exploring whether, within unconstrained households, those with steeper mortality profiles are more likely to front-load consumption. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-21&r= |
| By: | Laura D. Quinby; Gal Wettstein |
| Abstract: | Disability-free life expectancy had been rising continuously in the United States until 2010, suggesting working longer as a solution for those financially unprepared for retirement. However, recent developments suggest improvements in working life expectancy have stalled, especially for minorities and those with less education. This paper uses data from the National Vital Statistics System, the American Community Survey, and the National Health Interview Survey to assess how recent trends in institutionalization, physical impediments to work, and mortality have affected working life expectancy for men and women age 50, by race and education. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-8&r= |
| By: | Laura D. Quinby; Matthew S. Rutledge; Gal Wettstein |
| Abstract: | This paper uses the monthly Current Population Survey to study older workers’ transitions out of employment and into retirement before and during the pandemic. It examines whether the effect of the pandemic was particularly acute for workers with certain demographic characteristics and working conditions, and for those who faced different local public health and economic conditions. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-13&r= |
| By: | Jean-Pierre Aubry; Kevin Wandrei |
| Abstract: | Retiring baby boomers are increasing the demand for Social Security Administration (SSA) services at a time when budget constraints and retiring staff are limiting its capacity to deliver these services. In theory, investing in web-based tools that people can use to serve themselves could help SSA meet the projected increases in demand, even with fewer staff. But, despite investments in tools with significant labor-saving potential, such as online benefit application, usage of these tools has stalled since 2016. This study of online claiming is based on a survey of older individuals who either claimed their Old Age and Survivor (OASI) benefit in the past five years or intend to claim within the next five years. The survey covered: 1) how they submitted (or intend to submit) their benefit application; and 2) how they communicated (or intend to communicate) with SSA during the process. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-15&r= |
| By: | Jean-Pierre Aubry; Kevin Wandrei; Laura D. Quinby |
| Abstract: | Federal law allows certain state and local government employees to be excluded from Social Security if they are covered by an employer pension of sufficient generosity. As a result, approximately one-quarter of state and local workers are not covered by Social Security on their current job. Before COVID-19, these “FICA replacement plans†all satisfied the letter of the law in terms of providing benefits of sufficient generosity. This study has three aims. The first is to document the immediate impact of COVID-19 on the financial status of FICA replacement plans. The second is to investigate whether COVID-19 has led to cuts in benefit promises among plans, as well as the likelihood of future cuts. The third is to investigate the likelihood that FICA replacement plans will exhaust their trust fund assets and default on benefit promises. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-19&r= |
| By: | Barbara A. Butrica; Stipica Mudrazija; Jonathan Schwabish |
| Abstract: | Retiring baby boomers are increasing the demand for Social Security Administration (SSA) services at a time when budget constraints and retiring staff are limiting its capacity to deliver these services. In theory, investing in web-based tools that people can use to serve themselves could help SSA meet the projected increases in demand, even with fewer staff. But, despite investments in tools with significant labor-saving potential, such as online benefit application, usage of these tools has stalled since 2016. This study of online claiming is based on a survey of older individuals who either claimed their Old Age and Survivor (OASI) benefit in the past five years or intend to claim within the next five years. The survey covered: 1) how they submitted (or intend to submit) their benefit application; and 2) how they communicated (or intend to communicate) with SSA during the process. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-16&r= |
| By: | Damir Cosic; C. Eugene Steuerle |
| Abstract: | This paper analyzes the demand for older workers, their substitutability with younger workers, and how well the demand for older workers tracks changes in the age composition of the labor force. The main data source for the analysis is the Quarterly Workforce Indicators from 2000 to 2018, which provides earnings and employment by sector and metropolitan statistical area. The analysis also uses KLEMS national data to estimate the sector-specific price and quantity of capital and the Annual Social and Economic Supplement of the Current Population Survey to estimate educational attainment and annual hours worked by age group and sector. The paper posits a translog production function using capital and three types of labor as inputs – young workers (ages 16 to 34), mature workers (ages 35 to 54), and older workers (55 and older) – to estimate partial cross-elasticities of factor demand and factor price as measures of the substitutability between labor categories. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-18&r= |
| By: | Jody Schimmel Hyde; Amal Harrati |
| Abstract: | This paper examines the alignment between self-reported and administrative records of applications to and receipt of federal disability benefits. It uses data from the Health and Retirement Study (HRS), specifically the cross-wave consistent version developed by the RAND Corporation. The HRS has surveyed adults over the age of 50 every other year since 1992 to be nationally representative of the non-institutionalized older adult population, replenishing the sample with a new cohort every six years. The HRS asks respondents periodically if they are willing to have their survey information linked to earnings and benefits information maintained by the U.S. Social Security Administration (SSA). Most respondents agree to the linkage, which provides another source of information about application and receipt patterns for Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) than the data that is collected from respondents in the survey. This information may be valuable in understanding disability program participation among older workers and the extent to which survey respondents accurately report their benefit receipt. Using information in the HRS linked to SSA's Form 831 records about disability benefit applications and its Disability Analysis File about benefit receipt, the paper compares survey and administrative reports of having ever applied to SSDI and SSI as well as the receipt of those benefits in each HRS survey wave from 1996 through 2016. It presents statistics on the characteristics of HRS respondents based on whether they consented to have their records linked to administrative files as well as whether those who consented to the linkage accurately reported their benefits status. The analyses make comparisons by calendar year and HRS sampling cohort, as well as by each age from 51 through full retirement age. An appendix to the paper offers a primer for other researchers considering using the HRS-SSA linked data. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-26&r= |
| By: | Valentina Duque; Lauren L. Schmitz |
| Abstract: | We show that earnings over the life cycle and health and productivity around retirement age vary with exposure to economic conditions in early life. Using state-year-level variation from the most severe and prolonged economic downturn in American history \'96 the Great Depression '96 combined with restricted microdata from the Health and Retirement Study, we find that changes in macroeconomic indicators during the in utero period and early childhood are associated with changes in accumulated earnings, human capital, metabolic syndrome, and physical limitations decades later. After evaluating changes in endogenous fertility responses and mortality rates for Depression-era birth cohorts in the U.S. Census and Vital Statistics Death Records, we conclude that these effects likely represent lower-bound estimates of the true impacts of the economic shock on aging outcomes. Our results could help inform the design of retirement and healthcare systems and pinpoint the long-term costs of business cycles. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-24&r= |
| By: | Alicia H. Munnell; Gal Wettstein |
| Abstract: | Although annuities would ensure higher levels of lifetime income, reduce the likelihood that people will outlive their resources, and alleviate some of the anxiety associated with post-retirement investing, the market for annuity products is minuscule. Explanations for the low demand include the high cost of private annuities due to adverse selection, a reluctance to hand over a pile of accumulated assets for a stream of future income, and a failure to understand the value of insurance against outliving one's resources. To address these impediments, employers could increase the availability of lifetime income by adopting a Social Security 'bridge' strategy within their 401(k) plans. The bridge option would use 401(k) assets to pay retirees an amount equivalent to their Social Security benefits so they can postpone claiming benefits, thereby increasing their monthly payment when they do eventually claim. This paper gauges workers' potential interest in a bridge option, using an online sample representative of the relevant population, and experimentally tests whether framing the bridge as insurance and making it a default affects the outcome. The results indicate that a substantial minority (up to about one-third) of respondents would use the bridge even though the concept was totally new. The experiment shows that framing increases the share of assets allocated to the bridge strategy and that defaulting workers into the strategy is even more effective. Further, the two treatments both substantially increase projected Social Security benefits. While the opt-out rate of the default is quite high, it likely reflects the ease of doing so within the experiment. The results do suggest that the default allocation to the bridge up to half the participant's assets may be too aggressive and that the opt-out would be lower under a default with a smaller share of assets devoted to the bridge. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-27&r= |
| By: | Lindsay Jacobs |
| Abstract: | This paper examined health, demographic, and disability trends over four birth-year cohorts using data from the Health and Retirement Study (HRS) and restricted linked SSA data with the goal of understanding current and future Social Security Disability Insurance (SSDI) prevalence. The analysis included (1) identifying physical and mental health responses in the HRS most predictive of SSDI receipt and how these responses and the likelihood of SSDI receipt have changed over cohorts; and (2) a decomposition to determine what share of the changes in SSDI receipt can be attributed to differences in the effects of health and other factors over cohorts, while accounting for the changing selection into program coverage. Key aspects to be addressed in future work include analysis of the younger adult population and modeling application timing and behavior, as this work focused instead on ultimate SSDI application approval among older birth-year cohorts. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-25&r= |
| By: | Andrew G. Biggs; Anqi Chen; Alicia H. Munnell |
| Abstract: | Whether parents adjust their consumption after their children leave home has important implications for our understanding of retirement income adequacy. Prior studies have found that parents reduce consumption after their children become independent, allowing them to save more for retirement. Other studies, however, have found that savings for retirement does not increase. If households are both consuming less but not saving more after the children leave, where are the resources going? The project examines three ways to reconcile these seemingly inconsistent results: 1) parents may be saving by paying down debt faster, 2) parents may still be providing financial support to their grown children, and 3) parents may be adjusting their labor. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2021-20&r= |