Earnings Responses to Social Security Contributions: Evidence from Older Workers in Canada

Adam Lavecchia and James Stutely

Department of Economics Working Papers from McMaster University

Abstract: This paper documents sharp bunching in third-party reported employment earnings at a basic exemption for social security contributions among older workers. Beginning in 2012, workers age 60-64 who were receiving a public pension were required to make social security contributions equal to 9.9 percent of their employment earnings above a basic exemption threshold of $3,500. Using administrative data on third-party reported earnings and a differences-in-bunching estimator we document sharp bunching at the $3,500 threshold. We argue that our results represent new evidence on the role of firms in mediating the earnings response to payroll taxes.

Keywords: Social security contributions; Sharp bunching; Employment Earnings (search for similar items in EconPapers)
JEL-codes: H20 H24 H25 H31 H32 H55 J22 J23 J38 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2025-09
New Economics Papers: this item is included in nep-pbe
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http://socialsciences.mcmaster.ca/econ/rsrch/papers/archive/2025-07.pdf (application/pdf)

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Working Paper: Earnings Responses to Social Security Contributions: Evidence from Older Workers in Canada (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2025-07

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