Comments by Paul S. Davies*

Social Security Administration

The Great Recession, the Social Safety Net, and Economic

Security for Older Americans

Presented at the 17th Annual RRC Annual Meeting

August 7, 2015* The opinions expressed are my own and do not represent the opinions or policy of the Social Security Administration or any agency of the Federal government.

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Highly Commendable Paper

A traditional tour de force by Johnson and Smith 6 national surveys 21 tables 3 figures 6 appendix tables

Thorough and comprehensiveVirtually no stone left unturned

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Some Details

Unemployment, labor force participation, and employment CPS, with cross-checks against ACS and SIPP

Income CPS and SIPP, with cross-checks against ACS and HRS

Wealth SCF, with cross-checks against SIPP and PSID

Social Security claiming SIPP-SSA linked data

Impacts of unemployment SIPP-SSA linked data

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Key Findings for Older Workers (62+)

Unemployment lower among older workers, but longer spells and lower earnings in new job Median spell > 24 months for those aged 62+ Median earnings loss in new job = 32.6%, largely through reduced

hoursLabor force participation rates increased among older age

groupsIncome losses lower for older unemployed workers

Surge in Social Security claiming among older workersLarge increases in receipt of unemployment insurance and

public assistanceLower but substantial decline in wealth for older ages

Mostly driven by decline in home value Value of retirement accounts did not change much for 62+

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For Further Consideration

Cohort-based analysis

Labor force exit and entry

Defined benefit pensions

Effects of changes in Social Security claiming

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Cohort-Based Analysis

Much of the analysis looks at changes over time for given age groups Estimates for workers age 62-64 in 2007 compared with workers

age 62-64 in 2014, for example Unemployment rate, labor force participation rate, employment-

population ratio, family income, poverty rate, household wealth

Would be interesting to use HRS to look at these measures across birth cohorts as they age through the Great Recession Analysis of SIPP-SSA data does this to some extent, with a focus on

long-term unemployed workers Perhaps could use HRS to sharpen the focus on retired individuals

and individuals approaching retirement

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Labor Force Exit and Entry

What about labor force exits among older workers? Much of the analysis focuses on unemployment and

impacts of long-term unemployment

How about labor market entry? Some findings point to higher labor force participation

rates among older age groups

With longitudinal data from SIPP or HRS, it may be possible to: Track job losses that lead to labor market exit and examine

income and wealth changes for this potentially vulnerable group Identify labor force entrants, perhaps spouses who exit

retirement or enter the labor market to bolster family income

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Defined Benefit Pensions

Older age groups more likely to have defined benefit pensions; younger groups more likely to be contributing to defined contribution retirement accounts

DB pensions protected older groups from more severe income and wealth losses during Great Recession Social Security benefits play an important role as well, as the paper

demonstrates

DC retirement accounts, however, have greater potential for recovery and growth among younger groups

Dushi, Iams, and Tamborini (2013); Gustman, Steinmeier, and Tabatabai (2013, 2014)

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Changes in Social Security Claiming

Good news… Social Security provides a steady, stable stream of income to partially offset lost wages of

older insured workers Nearly four-fifths of long-term unemployed workers received Social Security benefits after

the Great Recession Some workers may need to work longer and delay claiming, thus increasing their Social

Security benefit

(Potentially) bad news… Some older workers displaced by the Great Recession may have claimed Social Security

earlier than they otherwise would have, leading to permanently lower monthly Social Security benefits

Workers in their 50s and facing long-term unemployment may claim Social Security upon reaching age 62, perhaps earlier than planned, and suffer permanently lower monthly Social Security benefits

The model in this paper finds a rise in claiming probability in recession periods. Perhaps the analysis could be expanded to look at distributional effects on retirement income security for early claimers and delayed claimers.

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Final Thoughts

Very thorough analysisExploits comparative strengths of available

data sources CPS for unemployment and poverty, SCF for wealth,

SIPP for income and longitudinal analysisCan tinker around the edges, but should be

required reading for anyone studying the economic effects of the Great Recession