Social Security and Labor Supply Incentives

Roger Gordon

No 986, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many provisions of the Social Security Program distort an individual's labor supply incentives. In particular, the payroll tax, the earnings test, the offsetting actuarial adjustment, and the dependence of the size of future benefits on the level of current earnings all affect the net return to extra work. The purpose of this paper is to estimate the size of the net tax rate on labor income in a variety of circumstances, taking into account all these provisions, as well as the personal income tax. We find that the Social Security Program on net in the past has provided a large subsidy to labor supply, which for many people effectively offset the personal income tax. This subsidy rate, however, has been declining steadily over time.

Date: 1982-09
Note: PE
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Published as Gordon, Roger H. "Social Security and Labor Supply Incentives." Contemporary Economic Policy, Vol. 1, no. 3. (April 1983), pp. 16-22.

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Journal Article: SOCIAL SECURITY AND LABOR SUPPLY INCENTIVES (1983)
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