oversight

Social Security Reform: Implications of Raising the Retirement Age

Published by the Government Accountability Office on 1999-08-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Chairman and Ranking
                  Minority Member, Special Committee on
                  Aging, U.S. Senate


August 1999
                  SOCIAL SECURITY
                  REFORM
                  Implications of Raising
                  the Retirement Age




GAO/HEHS-99-112
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-282269

      August 27, 1999

      The Honorable Charles E. Grassley, Chairman
      The Honorable John Breaux, Ranking Minority Member
      Special Committee on Aging
      United States Senate

      Americans are now living longer than ever. Since 1940, the additional life
      expectancy at 65 years of age has increased 38 percent, and men and
      women born in 1997 can expect to live 73 years and 79 years, respectively.
      This growth in longevity has contributed to Social Security’s projected $3
      trillion financial shortfall over the next 75 years by lengthening the period
      during which retirees receive benefits. The Congress has introduced
      numerous proposals addressing Social Security’s financial difficulties,
      many of which would represent comprehensive reforms of the program.
      Several proposals focus on raising the normal retirement age (NRA) beyond
      67 and some would also raise the earliest eligibility age (EEA) beyond 62.
      The Congress already approved a change in the retirement age in 1983
      when it enacted legislation that phased in an increase in the NRA from 65 to
      67 over a 22-year period beginning in 2000.

      In light of the potential costs and benefits associated with higher
      retirement ages, you requested that we assess how raising retirement ages
      could affect (1) the Old-Age and Survivors Insurance (OASI) and Disability
      Insurance (DI) Trust Funds and the Supplemental Security Income (SSI)
      program, (2) the labor market for older workers, and (3) vulnerable
      population groups such as blue-collar workers and minorities.1 We
      presented preliminary findings on these issues in July 1998.2 In this report,
      we expand upon that testimony by providing additional information on the
      potential effect of raising the retirement ages on the Social Security Trust


      1
       The OASI program of the Social Security system provides monthly cash benefits to retired workers
      and their dependents and survivors. Benefits are paid from the OASI Trust Fund, which is financed
      primarily by payroll taxes. The DI program of the Social Security system provides monthly cash
      benefits to workers who, having worked long enough and recently enough to be insured, become
      disabled and unable to work. The Social Security Administration (SSA) considers a person to be
      disabled when he or she is not only unable to do his or her previous work but, considering his or her
      age, education, and work experience, is also unable to do any other kind of substantial work. Benefits
      are paid from the DI Trust Fund, which is financed primarily by payroll taxes. The OASI and DI Trust
      Funds are collectively referred to as the Old-Age, Survivors, and Disability Insurance (OASDI) Trust
      Funds or Social Security Trust Funds. SSI is a means-tested, federally administered income assistance
      program that is financed by general tax dollars. The program was authorized by title XVI of the Social
      Security Act and began paying benefits in 1974. SSI provides monthly cash payments in accordance
      with uniform, nationwide eligibility requirements to needy aged, blind, and disabled persons.
      2
      Social Security Reform: Raising Retirement Ages Improves Program Solvency but May Cause
      Hardship for Some (GAO/T-HEHS-98-207, July 15, 1998).



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                   Funds and the challenges facing certain older workers in extending their
                   work lives.

                   To meet our objectives, we analyzed a nationally representative data
                   set—the Health and Retirement Survey (HRS) compiled by the Institute for
                   Social Research of the University of Michigan—and data from SSA.
                   Because of the extensive use by, and the widespread familiarity of,
                   researchers with these databases, we did not verify the accuracy of the
                   data. We also interviewed experts in retirement behavior and conducted a
                   thorough review of the relevant literature. To assess the effects of
                   retirement age increases on trust fund solvency, we used a policy
                   simulation model (EBRI-SSASIM2).3 We conducted our work between
                   March 1998 and May 1999 in accordance with generally accepted
                   government auditing standards.


                   Raising the normal or earliest eligibility age or both could have substantial
Results in Brief   net positive effects on the financial integrity of the OASDI Trust Funds by
                   reducing the retirement benefits paid out and increasing the payroll taxes
                   collected. The extent of the improvement in solvency would depend on
                   how high and how quickly the ages were raised, particularly with the NRA,
                   and how workers alter their retirement behavior in response to the
                   change. Raising the retirement ages might also contribute to economic
                   growth because workers would be likely to extend their careers. However,
                   raising the retirement ages could increase DI and SSI caseloads. More older
                   workers would be likely to apply for disability benefits because benefits
                   for retired workers would fall relative to these programs’ benefits for the
                   disabled, and a greater number of employed older workers would lead to a
                   greater number of DI participants. According to our estimates, however,
                   the increases in DI participation and the associated increases in DI
                   payments should not offset a substantial amount of the cost savings that
                   would accrue to the OASI portion of the Social Security Trust Funds.4

                   Raising the retirement ages would increase the number of older workers in
                   the labor force, as more workers would be employed for longer periods of
                   time. The magnitude of this increase would depend on whether the EEA,
                   the NRA, or both were raised. Another key factor is the size of the increase

                   3
                    The EBRI-SSASIM2 model, developed by the Policy Simulation Group with funding from the
                   Employee Benefit Research Institute, is designed to closely approximate cost and benefit projections
                   calculated by the Social Security Office of the Chief Actuary. See appendix I for a discussion of the
                   model.
                   4
                    Because SSI is financed through general revenues, it does not have a direct effect on the OASDI Trust
                   Funds.



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             in the EEA or the NRA and the transition period allowed for the changes to
             be implemented. Changes in the retirement ages could have a potentially
             substantial effect on the decisions of older workers to remain in the labor
             force if they were implemented quickly. The total population of persons
             aged 55 to 64 is expected to grow from 21 million to 30 million over the
             next decade as the baby boom generation ages, creating the potential for a
             significant increase in the number of persons in this age group in the labor
             force, currently approximately 12 million.

             Increasing the number of older workers in the labor force, however, could
             also create the potential for additional unemployment. For example,
             although the health of the older population has generally improved, some
             groups of older workers—those who are less healthy and those in
             blue-collar occupations—may face significant barriers to continued
             employment. These obstacles could be most severe for African American
             and Hispanic workers, who are the most likely to be in blue-collar
             occupations and to experience unemployment.5 Current unemployment
             rates for African American and Hispanic workers aged 53 to 63 are about
             twice as large as those for older white workers. However, individual
             proposals such as raising the retirement ages are often part of more
             comprehensive proposals to reform the Social Security system. In this
             context, an understanding of the cumulative effects of an entire reform
             proposal is essential to prevent any adverse effects from falling
             disproportionately on a single vulnerable population.


             The Social Security program is the foundation of the nation’s retirement
Background   system, providing benefits to retired and disabled workers and their
             dependents and survivors. The original Social Security Act first
             established old-age benefits for retired workers in 1935. Benefits for
             dependents and survivors were added in 1939 and benefits for disabled
             workers were added in 1956. The primary source of revenue for OASI and DI
             Trust Funds is the payroll tax paid by workers covered by the program and
             their employers. Currently, an estimated 96 percent of the nation’s
             workforce is covered by Social Security.

             Originally, the Social Security Act established 65 as the minimum age at
             which retirement benefits could be obtained. This age was selected as a
             compromise between 60, which appeared to be too low an age from a cost

             5
              Most of the data sources we relied on used the terms African American, white, and Hispanic.
             Therefore, for the remainder of this report we use the same terms. Although we recognize that there
             are other racial groups, such as Asians and Native Americans, for the most part the data were not
             broken down finely enough for us to look at them separately.



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standpoint, and 70, which appeared to be too high given that life
expectancy at birth in 1935 was 59 years for men and 63 years for women.
Since 1956, women have had the option to take reduced benefits at age 62,
and since 1961, this option has also been available to men. As a result, 62
has been defined as the EEA and 65 as the NRA. In an effort to improve
Social Security’s financial condition, the Congress approved a change in
the retirement age in 1983 when it enacted legislation that phased in an
increase in the NRA to 67 over a 22-year period beginning in 2000.

The Social Security Trust Funds have a projected financial shortfall or
funding gap of approximately $3 trillion over the next 75 years. This
long-term financing problem is largely a result of greater life expectancy,
lower birth rates, and the forthcoming retirement of the baby-boom
generation (persons born from 1946 through 1964). Social Security is
financed primarily on a pay-as-you-go method, which means that current
workers pay current retirees’ benefits. In 1997, there were approximately
3.4 workers for every beneficiary, and by 2030 this number is projected to
fall to 2.1. Thus, in the foreseeable future relatively fewer people will be
paying into the system and more people will be drawing benefits.

Legislative proposals introduced during the 105th Congress (1997-98) and
106th Congress (1999-2000) would raise the retirement ages faster and
higher than the increases mandated in 1983. These proposals are being
driven by the recognition that people are living longer and spending a
growing proportion of their lives in retirement. In 1940, the first year
Social Security benefits were paid, men and women aged 20 were
expected to receive benefits for 7 years and 9 years, respectively, if they
retired at the NRA.6 This “expected benefit period” has now climbed to 12
years for men and 17 years for women and is projected to increase further
over the next several decades. (See figure 1.) Raising retirement ages
would alter this trend toward drawing benefits for an increasing portion of
one’s lifetime.




6
 In 1937, Social Security provided one-time payments to beneficiaries. Regular monthly payments were
initiated in 1940.



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Figure 1: The Expected Number of Years Men and Women Will Receive Social Security Benefits If They Retire at the NRA

20   Number of Years Receiving Benefits



18



16



14



12



10



8



6



4



2



0

       1940        1950       1960           1970         1980    1990        2000        2010        2020       2030        2040        2050
       Year in Which Individual Becomes 20

                                                    Men

                                                    Women


                                                    Source: Life Tables for the United States Social Security Area 1900-2080, Actuarial Study No. 107,
                                                    Office of the Chief Actuary, Social Security Administration, U.S. Department of Health and Human
                                                    Services.




                                                    For many proposals, raising the retirement age is only a part of a more
                                                    comprehensive package of revisions to the Social Security program. Other
                                                    provisions include such items as the establishment of individual accounts
                                                    (either mandatory or voluntary), increasing the wage base of the Social




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                          Security payroll tax, modifying cost-of-living adjustments made to Social
                          Security benefits, expanding program coverage to newly hired state and
                          local government employees, eliminating the so-called earnings test, and
                          revising the benefit computation formula.7


                          Increasing the Social Security retirement ages could have substantial
Raising Retirement        positive effects on the financial integrity of the Social Security program.
Ages Would Improve        OASI Trust Fund solvency would improve as employees remained in the

Trust Fund Solvency       labor market longer, contributing more to payroll tax revenue and
                          receiving Social Security benefits for a shorter time. In addition, the
but Increase Disability   economy might grow because workers would be likely to extend their
Caseloads                 careers. These positive effects would vary, depending on how high and
                          how fast the ages were raised, particularly with the NRA, and how the
                          retirement behavior of workers responded to the change. Raising the
                          retirement ages could result in increased caseloads for DI and SSI.
                          However, for all the options we assessed, the increased costs from a
                          higher DI caseload would not offset the significant cost savings that would
                          accrue to the OASI portion of the Social Security Trust Funds.8 Because SSI
                          is financed by general revenues, any increase in SSI caseloads would affect
                          federal general funds but would not affect the solvency of the Social
                          Security Trust Funds.


                          Our analysis of different options for raising retirement ages illustrates
Changes to                their potentially substantial effects on the solvency of the trust funds and
Retirement Ages           the financial integrity of the Social Security program. The amount of the
Could Positively          funding shortfall that could be erased by retirement age increases depends
                          on the size and the speed of the changes, particularly with the NRA. The
Affect Trust Fund         size of a change would affect the amount of lifetime benefits paid to
Solvency                  retirees. If workers responded to the increase in retirement ages by
                          working more years, they would receive benefits for a shorter period of
                          time. If workers did not choose to work additional years, they would
                          receive smaller monthly benefits. The speed of a change could have a large



                          7
                           For example, see H.R. 2768, H.R. 3082, H.R. 4256, S. 1792, and S. 2313, introduced in the 105th
                          Congress. The earnings test refers to the amount of income Social Security recipients can earn without
                          having their benefits reduced. Currently, retirees younger than 65 can earn $9,600 a year, with benefits
                          reduced by $1 for every $2 earned above that amount. For retirees aged 65 to 69, the ceiling is $15,500
                          per year, with every $3 earned above that amount reducing benefits by $1. There is no ceiling for
                          retirees aged 70 and above.
                          8
                           The options we chose to assess are meant to illustrate a wide range of retirement age changes and
                          their effect on solvency.



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effect on solvency if it were made in time to affect the benefits that are
paid to the baby-boom generation.9

Figure 2 displays the effects of different retirement age changes that have
been discussed by policymakers and others seeking to restore solvency to
the trust funds. Currently, the OASDI Trust Funds have a payroll tax
shortfall of 2.07 percent over the next 75 years—OASI accounts for
1.70 percent of the shortfall and DI 0.36 percent.10 The payroll tax shortfall
refers to the immediate increase in Social Security payroll taxes,
expressed as a percentage of taxable wages that would be necessary to
make the trust funds solvent. The first three options for retirement age
changes depicted in figure 2 demonstrate how relatively large increases in
retirement age could reduce a substantial amount of the Social Security
Trust Funds financial shortfall. Option 1 shows that raising the EEA to 67
and the NRA to 71 by 2063 would reduce the shortfall by nearly 70 percent.
Options 2 and 3 depict relatively similar changes to the retirement ages but
the time periods for making the changes are different. Option 2 would
phase in the changes more slowly, option 3 more quickly, than option 1.
Thus, option 2 would have a smaller effect on solvency than option 1
whereas option 3 would have a larger effect.




9
 The effects of various retirement age options are also sensitive to participant behavior—that is, how
workers react to the policy change. See appendix I for a detailed description of the retirement age
changes and the associated behavioral assumptions we applied in using the EBRI-SSASIM2 policy
simulation model.
10
 Board of Trustees, Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds,
The 1999 Annual Report (Washington, D.C.: U.S. Government Printing Office, 1999), p. 113.



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Figure 2: The Effect of Raising the Retirement Ages on the Solvency of the Social Security Trust Funds

110   Percent Change in Solvency




 90




 70




 50




 30




 10


 0


-10
         Option 1                  Option 2                Option 3              Option 4               Option 5                Option 6
         By 2063                   By 2065                 By 2030               By 2029                By 2065                 By 2065
         NRA 71, EEA 67            NRA 72, EEA 67          NRA 72, EEA 67        NRA 70, EEA 62         NRA 70, EEA 62          NRA 70, EEA 65



                                                      OASI

                                                      DI

                                                      OASDI


                                                    Note: The percentage change in trust fund solvency refers to changes in the current 75-year trust
                                                    funds balance (negative or positive) expressed as a percentage of taxable payroll. For example,
                                                    if OASDI solvency is improved by 69 percent, the payroll tax shortfall would be 0.65 percent,
                                                    since the current shortfall is 2.07 percent (the amount taxes would have to be raised to erase the
                                                    funding deficit). See appendix I for a description of the time periods in which the retirement age
                                                    changes were assumed to be made for each option.




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                        Options 4-6 show the effects of more modest changes to the retirement age
                        and the significance of changes in the NRA. Option 4 shows that increasing
                        the NRA to 70 without a change in the EEA would reduce the solvency
                        problem by more than 50 percent. Options 5 and 6 would also raise the NRA
                        to 70 but would phase in the change over a longer time period, resulting in
                        a smaller effect on solvency. Option 6, which is the same as option 5 but
                        also raises the EEA to 65, would have only a slightly greater effect on
                        solvency. This suggests that increasing the EEA has only a small effect on
                        trust fund solvency, although its effect of encouraging people to work
                        longer could be beneficial for the economy as a whole in facilitating
                        growth.11


                        Raising the EEA or the NRA or both could provide incentives for individuals
Raising Retirement      in relatively poor health to apply for disability benefits. First, workers who
Ages Could Create       remain in the labor force longer are more likely to become disabled, so
Incentives Leading to   increasing retirement ages would increase the number of disabled workers
                        and the DI caseload. An additional incentive would arise because a higher
Increased DI            retirement age would increase the gap between retired worker benefits
Participation           and disability benefits that existed before the increase.12 Workers who are
                        awarded DI benefits receive a benefit amount comparable to what they
                        would have received if they had retired at the NRA. Thus, disabled workers
                        who are awarded DI benefits at age 62 currently receive a 25-percent
                        higher benefit than if they received retired worker benefits. If the NRA were
                        increased to 67, the gap between retired worker and DI benefits at age 62
                        would grow to 43 percent. To the extent that the NRA were raised further,
                        the gap between DI and retired worker benefits would also grow. Raising
                        the EEA would have an even greater effect, because retired worker benefits
                        would now be available only at the new higher EEA. This would greatly
                        increase the incentive for workers to apply for DI benefits once they
                        reached the previous EEA.

                        Medicare eligibility offers another incentive for individuals to apply to the
                         program. DI participants are eligible for medical coverage under
                        DI
                        Medicare 2 years after DI benefits commence. Thus, individuals awarded DI


                        11
                          Workers who retire at earlier ages receive lower monthly benefits throughout their lifetimes. SSA
                        benefits are designed such that the total lifetime value of benefits received by a person retiring at the
                        EEA is about equal, on average, to that received by a person who retires at the NRA. For those who
                        retire before the NRA, the reduced payroll tax receipts from the forgone years of work approximately
                        offset the lower monthly benefit level paid over the retirement years.
                        12
                          Once a person is placed on the DI rolls, benefits continue until death, until SSA determines that he or
                        she no longer meets the eligibility requirements, or until benefits are converted to Social Security
                        retirement benefits at the NRA.



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benefits before age 63 get extra Medicare coverage for which they would
not otherwise be eligible until age 65. If Medicare eligibility were raised
along with the EEA and NRA, individuals would thus have an incentive to try
to attain DI benefits. Medicaid represents an additional medical coverage
issue in that individuals who are dually eligible for DI and SSI benefits are
also generally eligible to receive Medicaid, thus possibly increasing costs
to this program.

Raising retirement ages would also change some of the administrative
disincentives that currently keep people from applying for DI benefits at
age 62. Although DI applicants can earn retired worker benefits while their
application is being processed, DI participation is likely discouraged at
ages 62 to 64 because of the lengthy disability determination process and
restrictions on earnings.13 Figure 3 illustrates this effect, showing a steady
increase in the rate of new disability awards from age 53 to age 61, which
drops substantially at age 62 and falls further through age 64. This decline
could occur for a number of reasons. There is a 5-month waiting period
after the onset of the disability until a person can apply for benefits and
the subsequent disability determination process is complex and can prove
lengthy. In comparison, the application process for Social Security
retirement benefits is straightforward—applicants must only meet the
coverage and age requirements.




13
  J.L. Mashaw and V. Reno (eds.), Balancing Security and Opportunity: The Challenge of Disability
Income Policy (Washington, D.C.: National Academy of Social Insurance, Disability Policy Panel,
1996).



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Figure 3: New Disability Awards as a Percentage of the DI-Covered Population, Ages 53-64

1.6 Percent of DI-Covered Population



1.4



1.2



  1



0.8



0.6



0.4



0.2



  0
       53          54          55      56       57         58          59          60          61         62          63          64
        Age

                                              Actual

                                              Projected
                                            Note: Predicted values are based on the trend from ages 55 to 61.

                                            Source: SSA, Annual Statistical Supplement (Washington, D.C.: 1993-96), table 6.A4.




                                            For participants with wage earnings, DI benefits are also generally subject
                                            to a more stringent earnings test; they are reduced to a greater degree than
                                            are Social Security retirement benefits. Currently, retired beneficiaries
                                            who are younger than 65 may have average monthly earnings up to $800
                                            with no benefit reduction, after which benefits are reduced by $1 for every
                                            $2 over that amount. In contrast, after a trial period, DI recipients have
                                            their full benefit withheld if they earn more than the amount considered to




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                      be substantial gainful activity (average monthly earnings of $700). Finally,
                      DI benefits are offset by workers’ compensation benefits, while Social
                      Security retirement benefits are not. Thus, the availability of retired
                      worker benefits at age 62 currently creates an incentive for many workers
                      to apply for retired worker benefits rather than DI benefits. If the EEA were
                      raised, these incentives would change and more workers would apply for
                      DI.


                      Our analysis indicates that the increase in DI participation would not offset
                      a substantial amount of the cost savings that could accrue to the OASI
                      portion of the trust fund if retirement ages were raised to levels
                      comparable to those in figure 2. For example, if option 3 (which raises the
                      EEA to 67 and the NRA to 72 by 2030) were adopted, the incentives
                      mentioned above that encourage workers to apply for Social Security
                      retirement benefits instead of DI benefits would be applicable at age 67
                      rather than age 62. Figure 3 illustrates the expected rate of increase in new
                      DI participation if retired worker benefits were no longer available at ages
                      62-67.14 This trend line assumes that the new increase in DI participation
                      would be similar to the rate of increase in participation at ages 53 to 61,
                      when retired worker benefits are currently not available.15 If we assume
                      this rate of change in new DI participation, the DI Trust Fund would incur
                      an increasing payroll tax shortfall. However, the improvement in solvency
                      for the OASI Trust Fund would offset the DI cost increases, resulting in a net
                      improvement in solvency for the OASDI Trust Funds.


                      The SSI program would also experience an increase in the number of
Raising Retirement    participants as a result of raising the retirement ages. Seventy-nine percent
Ages Would Slightly   of SSI participants receive benefits because they are disabled or blind and
Increase SSI          have income and other resources below specified thresholds. The
                      remaining 21 percent are qualified participants by being 65 years old or
Participation         older with income and other resources below the specified thresholds. As
                      with DI, the number of disabled SSI recipients would likely increase with a
                      higher OASI retirement age because more individuals are likely to become
                      disabled as the number of working years increases. The increase in
                      participation would depend on the extent to which these disabled
                      individuals have income and other resource levels that qualify them for SSI.


                      14
                       Figure 3 extends the trend line only to age 64. For purposes of the estimation, we continued the trend
                      until age 67.
                      15
                       According to SSA officials, the rate of increase in DI participation could be even higher than the
                      estimates we present in figure 3 because the likelihood of meeting disability requirements increases
                      with age.



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On the basis of our estimations of increased participation in the DI
program, we expect a small increase in SSI participation from disabled
individuals if retirement ages are raised. In addition, according to SSA, if
the NRA is raised but the EEA is not, the reduction in benefits at the early
eligibility ages may cause some individuals’ benefits to be sufficiently low
as to make them eligible for SSI. Because SSI is financed through general
revenues, increases in program participation would affect the overall
federal budget rather than the Social Security Trust Funds. Moreover,
individuals who receive SSI benefits are generally eligible for Medicaid
benefits.16 Thus, raising retirement ages might also indirectly affect the
Medicaid program.

In contrast to the increase in the number of disabled SSI participants, the
number of older SSI participants might actually decrease if the EEA were
changed. This is because SSI currently creates an incentive for low-income,
nondisabled individuals to retire at the EEA. Raising the EEA could induce
prospective SSI recipients to stay in the labor force, likely reducing their
eligibility for SSI.

SSI’sincentive for low-income, nondisabled individuals to retire at the EEA
is that such retirement maximizes their lifetime benefits from Social
Security and SSI.17 Individuals who elect to receive Social Security benefits
at age 62 and subsequently qualify for SSI at age 65 earn more total benefits
than if they first receive Social Security benefits at age 65. For individuals
aged 65 or older with incomes below the SSI threshold, benefit payments
are raised to the SSI threshold even if they began receiving Social Security
benefits before age 65. For example, an individual who was entitled to a
Social Security benefit of $400 at age 62 in 1993 could have received this
benefit from age 62 to age 64 and then applied to the SSI program at age 65.
His or her monthly benefit would then be $470 at age 65 ($400 from Social
Security and an additional $70 from SSI). If the EEA were raised, this could
induce prospective SSI participants who can work to remain in the labor
force, which would increase the amount of their Social Security benefit
and their accumulation of assets. Both of these factors would reduce their
ability to qualify for SSI and reduce the number of older SSI beneficiaries.




16
  Medicaid is a joint federal and state entitlement program providing medical assistance for
low-income children and pregnant women, members of families with dependent children, and
low-income persons who are aged, blind, or disabled.
17
 D. Neumark and E. Powers, Welfare for the Elderly: The Effects of SSI on Pre-retirement Labor
Supply, working paper 6805 (Cambridge, Mass.: National Bureau of Economic Research, 1998).



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                           Thus, an increase in the EEA may decrease the number of older SSI
                           participants.18


                           Raising the retirement ages would increase the number of older workers in
Raising Retirement         the labor market, particularly as the baby-boom generation ages. The
Ages Would Increase        magnitude of this increase would depend on whether the EEA, the NRA, or
the Number of Older        both were raised, the size of the increase, and the transition period
                           allowed for the change to be implemented. Although the health of the
Workers in the Labor       older population has improved, older workers may face significant
Market                     barriers to continued employment. Employers’ needs for particular skills
                           and their perceptions about older workers’ productivity may form
                           potential barriers to older workers retaining their current jobs, finding
                           new jobs if they are laid off, or reentering the labor force after retirement.
                           However, many older workers are currently leaving a career job and then
                           finding similar full- or part-time work.


Social Security Is One     From 1950 to 1985, there was a downward trend in labor force
Factor Among Many          participation among men aged 55 and older.19 (See figure 4.) However,
Affecting the Retirement   labor force participation among older men has been relatively constant
                           since 1985, varying between 66 and 68 percent of all men 55 to 64 years old
Decision                   and between 16 and 17 percent of all men 65 and older. Labor force
                           participation rates for older men are projected to increase slightly over the
                           next decade.20




                           18
                             If the NRA but not the EEA were raised, then the incentive to take retired worker benefits at the
                           earliest possible age would not change. Under this scenario, raising the NRA would be likely to have
                           little effect on the number of older SSI participants.
                           19
                             Much of the literature concerning long-term trends in labor force participation has focused on men. It
                           is often assumed that past employment patterns of men should reflect the future employment patterns
                           of women, as more women enter the labor force at earlier ages.
                           20
                            H.N. Fullerton, “Labor Force 2006: Slowing Down and Changing Composition,” Monthly Labor
                           Review, Nov. 1997, pp. 23-38.



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Figure 4: Labor Force Participation Rates of Men Aged 55 and Older, 1950-98

100     Percent in Labor Force


 90


 80


 70


 60


 50


 40


 30


 20


 10


  0


      1950      1954        1958   1962   1966        1970      1974      1978        1982       1986        1990   1994    1998

                                             Men 55-64

                                             Men 65 and Older


                                            Source: Current Population Survey, Bureau of Labor Statistics.




                                            The specified eligibility ages for benefits under Social Security provide an
                                            important benchmark for considering when to retire; however, many other
                                            aspects of the Social Security program also influence the retirement
                                            decision, such as the level of Social Security benefits. Social Security
                                            benefits, adjusted for inflation, increased substantially during the 1970s
                                            and this tended to encourage early retirement, although benefit increases




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leveled off during the 1980s and 1990s.21 Other changes in the program
have encouraged continued employment. For example, the amount of
income Social Security recipients can earn without having their Social
Security benefits reduced (the earnings test) has been increased in recent
years. Recently enacted legislative changes raising the delayed retirement
credit, which boosts Social Security benefits for working beyond the NRA,
will further increase the attractiveness of employment at later ages.22

Other factors besides the Social Security program affect workers’ decision
to retire, and many of these tend to encourage employment in later ages.
For example, between 1945 and 1985, up to half of all workers were
subject to mandatory retirement policies, usually at age 65, limiting the
labor force participation of older workers. However, the Age
Discrimination in Employment Act of 1986 (ADEA) eliminated most forms
of mandatory retirement.23 Increasing levels of income and wealth
following World War II also meant that a greater number of individuals
could afford to retire at earlier ages. However, real wage growth for many
employees has declined since the late 1970s, picking up only during the
past few years. The shift from defined-benefit to defined-contribution
pension plans has also provided incentives for employees to work to later
ages.24 In the past, a greater percentage of pension plan participants were
covered by employer-sponsored defined-benefit pensions, which could
encourage early retirement because they often provide relatively little
additional retirement benefit after the worker reaches the plan’s target
retirement age, usually specified in terms of years of service with that
employer. However, over the past 2 decades, an increasing percentage of

21
  See Richard A. Ippolito, “Toward Explaining Early Retirement After 1970,” Industrial and Labor
Relations Review, Vol. 43, No. 5 (July 1990), pp. 556-69. This study attributed a 20-percent decline in
labor force participation among men aged 55 to 64 years old from 1970 to 1986 primarily to a
50-percent increase in Social Security benefits in the 1970s and to changes in employer-sponsored
pension plans that favored early retirement.
22
 Under current law, workers who delay retirement until after the NRA receive delayed retirement
credits (DRC). Such credits increase benefits by additional amounts for every year up to a maximum.
The Congress has increased the DRC since the early 1980s. The DRC was 1 percent per year for
workers who attained age 65 before 1982 and 3 percent per year for workers who attained age 65
between 1982 and 1989. Starting in 1990, the DRC began increasing by one-half of 1 percent every other
year until it reaches 8 percent for workers reaching age 65 after 2007.
23
  This federal law protects older workers, those aged 40 or more, from employment discrimination.
However, some forms of mandatory retirement are still permissible under federal law. For example, a
state or political subdivision may institute a mandatory retirement program pursuant to a bona fide
retirement plan in effect before March 3, 1983. Tenured faculty members may be subject to
compulsory retirement at age 70. Finally, bona fide executives or high policy makers who are age 65,
have been in such positions for 2 years, and are entitled to an immediate nonforfeitable annual
retirement benefit of at least $44,000 may be subject to compulsory retirement.
24
  A defined benefit pension plan promises the worker a benefit based on a specific formula linked to
the worker’s earnings and years of employment. In a defined contribution plan, a percentage of the
worker’s pay is contributed to an account from which the worker receives a benefit upon retirement.


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                         workers have been covered by defined contribution plans. These plans,
                         because they are dependent on workers’ and employers’ contributions, do
                         not create incentives for retiring early.25


Increasing the EEA Can   The EEA of 62 encourages early retirement. The availability of Social
Have a Major Effect on   Security benefits allows workers to substitute nonlabor income for
Older Workers’ Labor     earnings, which induces many older workers to retire. Social Security
                         replaces about 40 percent of an individual’s preretirement income, on
Force Participation      average, if benefits are taken at the EEA of 62.26 Thus, individuals who work
                         beyond age 62 pass up the opportunity to obtain a substantial portion of
                         their salary without working. Although individuals who work beyond 62
                         gain increased benefits, they must continue to pay Social Security taxes
                         with the possibility that they will not fully collect these additional benefits.
                         According to one study on the effects of these factors on the retirement
                         decision, the lifetime benefits from Social Security are roughly equivalent
                         whether benefits start at age 62, 63, or 64.27 Thus, individuals who work a
                         few years beyond the EEA are fairly compensated, in terms of Social
                         Security benefits, for staying in the labor force.28 However, a person who
                         works beyond 64 is not currently fully compensated for the extra years in
                         the labor force because the benefit increases beyond the NRA do not offset
                         benefits forgone and extra taxes paid.29

                         Raising the EEA is likely to substantially affect older workers’ retirement
                         decisions. Although the lifetime benefits that a retiree earns from Social
                         Security are nearly equivalent whenever benefit payments are started from
                         age 62 through age 64, the EEA is the preferred age for initially receiving

                         25
                           See J. Quinn, “New Paths to Retirement,” in O. Mitchell, B. Hammond, and A. Rapport (eds.),
                         Forecasting Retirement Needs and Retirement Wealth (Philadelphia: University of Philadelphia Press
                         (forthcoming)) for a complete discussion of the factors influencing retirement.
                         26
                          P. Diamond and J. Gruber, “Social Security and Retirement in the United States,” Social Security
                         and Retirement around the World (Chicago: University of Chicago Press, 1999).
                         27
                           Diamond and Gruber, “Social Security and Retirement in the United States.”
                         28
                           The approximate equivalency in lifetime benefits at the earliest eligibility ages is referred to as
                         “actuarial fairness.” This actuarial fairness means that substantial cost savings to the OASDI Trust
                         Funds will likely not occur if the earliest eligibility age is raised, because the total payment of benefits
                         will continue to be roughly the same in the absence of a change in the NRA. The lower benefits when
                         retiring at the EEA are counterbalanced by the forgone payroll taxes that would have been paid if the
                         worker retired at a later date. For example, we estimated a change in the EEA to age 64 with the
                         currently mandated change in the NRA to age 67. The change in the EEA actually worsened the
                         solvency of the trust funds (the change in solvency was less than 1 percent) because the small cost
                         savings that accrued to OASI from raising the EEA were more than offset by increased costs to DI.
                         29
                          As noted earlier, the delayed retirement credit is steadily being increased until it reaches 8 percent in
                         2007. This will increase the level of benefit payments for persons choosing to retire after the NRA and
                         bring benefit payments closer to actuarial fairness.



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                                         Social Security benefits. As table 1 shows, 60 percent of new retirees begin
                                         to receive benefits at age 62. This preference for retirement at age 62 can
                                         be partially explained by the many older workers who cannot afford to
                                         stop working until they can receive Social Security benefits. Also, many
                                         older workers leave a career job and work part-time before age 62 in jobs
                                         that provide enough income to finance their retirement until they are
                                         eligible to receive Social Security benefits. If the EEA were raised, these
                                         workers might be inclined to stay in the labor force until they attained the
                                         new EEA. Thus, raising the EEA could keep workers in the labor force
                                         longer.

Table 1: Percentage of Individuals
Electing to Start Receiving Social                                                                                           Average
Security Benefits at Age 62 and Later,   Year                                 Age 62 Ages 63-64     Age 65     Ages 66+          age
1940 to 1996                             1940                                      a           a
                                                                                                        8.3%        91.7%         68.7
                                                                                   a           a
                                         1950                                                          23.1         76.9          68.5
                                         1960                                   10.0%       7.9%       35.3         46.7          66.2
                                         1970                                   27.8       23.2        36.9         12.1          64.2
                                         1980                                   40.5       22.2        30.7          6.6          63.7
                                         1990                                   56.6       20.2        16.6          6.7          63.6
                                         1996                                   60.2       17.8        16.2          5.8          63.5
                                         a
                                          Benefits not available before age 65.

                                         Source: Staff, Committee on Ways and Means, U.S. House of Representatives, 1998 Green Book
                                         (Washington, D.C.: U.S. Government Printing Office, 1998).



                                         A change in the EEA, particularly if it were implemented quickly, could
                                         affect a substantial number of older workers. In 1996, there were nearly
                                         21 million persons (11 percent of the labor force) in the United States aged
                                         55 to 64 and 42 percent of them did not participate in the labor force. Over
                                         the next decade, the number of persons aged 55 to 64 is projected to grow
                                         to 30 million (14 percent of the labor force), and 37 percent are not
                                         expected to be in the labor force.30 Raising the EEA could induce many of
                                         these persons to change their retirement plans.


The Effects of Increasing                Raising the NRA could also affect an individual’s decision to continue
the NRA Will Depend on Its               working, depending on how high it is raised in relation to the EEA. If the
                                         NRA rises without increasing the EEA, as was legislated in 1983, then benefit
Relationship to the EEA
                                         levels at all ages between the EEA and the NRA will be reduced. (See table
                                         2.) In other words, as the gap between the EEA and the NRA grows,

                                         30
                                             Fullerton, “Labor Force 2006.”



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                                       individuals will earn lower benefit rates at pre-NRA ages. However, if the
                                       structure of benefits is maintained such that lifetime benefits are the same
                                       at all EEAs and the NRA, as now, then incentives might not be created to
                                       keep workers in the labor force beyond the EEA. The extent to which a rise
                                       in the NRA will affect decisions to work to older ages will depend on the
                                       degree to which individuals need to obtain additional income from other
                                       sources to offset the cut in benefit rates. On one hand, individuals can
                                       expect the same lifetime benefit if they retire before the NRA; therefore,
                                       they might be likely to continue to retire at the EEA. On the other hand, the
                                       lower benefit rates at pre-NRA ages might induce many individuals to
                                       continue to work in order to earn a higher monthly benefit.

Table 2: The Percentage Reduction in
Benefits Upon Retirement Before the    Age of retirement                                                           NRA = 65       NRA = 67
Current NRA Compared With the          62                                                                                20.0             30.0
Reduction When the NRA Rises to 67
                                       63                                                                                13.3             25.0
According to the 1983 Legislation
                                       64                                                                                 6.7             20.0
                                                                                                                              a
                                       65                                                                                                 13.3
                                                                                                                              a
                                       66                                                                                                  6.7
                                       a
                                        Not applicable.

                                       Source: Staff, Committee on Ways and Means, U.S. House of Representatives, 1998 Green Book
                                       (Washington, D.C.: U.S. Government Printing Office, 1998).




Improved Health Among                  Raising the retirement ages would be consistent with the findings of recent
Older Workers Increases                studies about the health of the elderly population that show that people
Their Ability to Work to               have the ability to continue working as they age. One study estimated that
                                       from 1982 to 1994 the disability rates among persons aged 65 to 69 fell
Later Ages                             from 11.7 percent to 9.7 percent.31 This study found a similar trend toward
                                       improved health among persons 70 years old and older. Another study
                                       estimated that the expected number of disability-free years after age 65
                                       rose during the 1980s in the United States for men from 6.8 to 7.4 and for
                                       women from 9.3 to 9.8.32 This research suggests that improvements in life
                                       expectancy have been accompanied by improvements in “work life”
                                       expectancy.



                                       31
                                        K.G. Manton, L.S. Corder, and E. Stallard, “Chronic Disability Trends in Elderly United States
                                       Populations: 1982-1994,” Proceedings of the National Academy of Sciences of the United States of
                                       America, Vol. 9 (March 1997), pp. 2593-98.
                                       32
                                        E.M. Crimmins, Y. Saito, and D. Ingegneri, “Trends in Disability-Free Life Expectancy in the United
                                       States, 1970-1990,” Population and Development Review, Vol. 23, No. 3 (1997), pp. 555-72.



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                        In addition to the findings about improved health at older ages, it appears
                        that poor health is not the primary reason why many people retire early.
                        Some evidence suggests that raising the EEA would have only a limited
                        effect on individuals in poor health.33 For example, one study found that
                        the majority of persons who retire at the EEA do so because they are
                        financially able and not because of poor health. Thus, if the EEA were
                        increased, the primary effect would be to deny benefits to individuals who
                        retired early for financial reasons rather than to deny benefits to
                        individuals who retired early because of poor health.34


Older Workers Face      Although the improved health of the elderly population suggests the
Barriers to Continued   potential for increased employment by older workers, those workers must
Employment              still seek and secure employment in the labor market. Employers may not
                        want to hire or retain older workers for several reasons. Recent research
                        suggests that employers who provide health care coverage are less likely
                        to hire older workers.35 The researchers who found this negative
                        correlation indicate that it is probably the result of a provision in the ADEA
                        that firms must offer workers who have similar experience the same level
                        of benefits.36 Since younger employees are less costly to insure, firms
                        prefer them. The shorter potential length of time an older worker may
                        remain with an employer is another obstacle to hiring older workers,
                        because some employers are less likely to recoup recruitment and training


                        33
                         R.V. Burkhauser, K.A. Couch, and J.W. Philips, “Who Takes Early Social Security Benefits? The
                        Economic and Health Characteristic of Early Beneficiaries,” The Gerontologist, Vol. 36, No. 6 (1996),
                        pp. 789-99. A 1999 study by the Congressional Budget Office, Raising the Earliest Eligibility Age for
                        Social Security Benefits (Washington, D.C.: Jan. 1999), came to a similar conclusion.
                        34
                          The Burkhauser, Couch, and Philips study is the culmination of a shift in conclusions about
                        retirement from health toward financial determinants. In 1990, J. Quinn, R. Burkhauser, and D. Myers
                        documented this shift in thinking that began in the middle 1960s in Passing the Torch: The Influence of
                        Economic Incentives on Work and Retirement (Kalamazoo, Mich.: W.E. Upjohn Institute for
                        Employment Research, 1990). Before this time, health was thought to be the primary consideration for
                        an individual’s decision to retire. However, research in the 1970s and 1980s began to highlight the role
                        of employer-provided benefits, household wealth, and Social Security benefits in individual retirement
                        decisions.
                        35
                         F.A. Scott, M.C. Berger, and J.E. Garen, “Do Health Insurance and Pension Costs Reduce the Job
                        Opportunities of Older Workers?” Industrial and Labor Relations Review, Vol. 48, No. 4 (1995), pp.
                        775-91.
                        36
                          The ADEA makes it unlawful for an employer to discriminate against individuals with respect to their
                        compensation, terms, conditions, or privileges of employment because of their age. However, the act
                        applies only to firms with 20 or more employees, excluding a not insignificant proportion of the labor
                        force. Although the states have their own laws protecting older workers at small firms, some do not
                        provide additional coverage of such small businesses. For example, Alabama and Louisiana cover only
                        businesses with 20 or more employees, and Nebraska covers only employers with 25 or more
                        employees. Other states, like California and Illinois, still fail to cover all small employers, exempting
                        those with fewer than five employees.



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                          costs for them than for younger workers.37 Recruitment involves such
                          activities as job advertising and conducting applicant interviews. Newly
                          hired employees may also require significant training to perform their jobs.
                          If turnover rates between younger and older workers do not differ,
                          younger workers provide employers a longer period to recoup these costs
                          than older workers do.

                          A final obstacle that older workers face is a negative perception among
                          employers about their productivity.38 Surveys have found that managers
                          have both positive perceptions about the productivity of older
                          workers—for example, that they have superior judgment and commitment
                          to quality, have better work habits, and are very reliable—and negative
                          perceptions—for example, that they have reduced ability to learn new
                          skills or technologies and lower physical vigor. However, these studies
                          conclude that most managers believe that the so-called negative aspects of
                          older workers outweigh the positive aspects, suggesting that they may be
                          less likely to hire, or retain, older workers when given the opportunity.


Questions Remain About    A major issue facing many older workers is the availability and the income
the Access and Adequacy   adequacy of so-called bridge jobs—the transitional employment from a
of Transitional           career job until complete retirement. Increasingly, workers who retire
                          from career jobs are continuing to work.39 In addition, many companies
Employment for Older      that are downsizing their workforces offer early retirement incentives.40
Workers                   Older workers who act on an early retirement incentive may
                          underestimate their need for financial resources during retirement and
                          may need to reenter the labor force to earn additional income to meet
                          their retirement needs. If Social Security retirement ages are raised and
                          employers continue to offer early retirement incentives, then these bridge
                          jobs are likely to become more important. Individuals will have longer
                          time periods to fill between leaving a career job and qualifying for Social
                          Security benefits.



                          37
                           R.M. Hutchens, “Do Job Opportunities Decline with Age?” Industrial and Labor Relations Review,
                          Vol. 42, No. 1 (1988), pp. 89-99.
                          38
                           M.C. Barth, “Older Workers: Perception and Reality,” paper delivered by the Executive Vice
                          President, ICF Kaiser Consulting Group, at the U.S. Senate Special Committee on Aging Forum, n.p.,
                          July 25, 1997.
                          39
                           D.E. Herz, “Work After Retirement: An Increasing Trend Among Men,” Monthly Labor Review,
                          April 1995, pp. 13-20, and Quinn, “New Paths to Retirement.”
                          40
                           M.L. Marks, “Restructuring and Downsizing,” in Building the Competitive Workforce: Investing in
                          Human Capital for Corporate Success (New York: John Wiley & Sons, 1993), pp. 60-94.



                          Page 21                                           GAO/HEHS-99-112 Raising the Retirement Age
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In 1996, nearly half of all workers aged 55 to 65 who had left their career
job were employed in a bridge job.41 The baby boom generation appears to
be ready to seek more employment in bridge jobs. According to a survey
of persons born from 1946 through 1964, 80 percent expect to work during
their retirement years.42 Most older workers move into bridge jobs that are
similar to their career jobs. (See figure 5.) For example, 79 percent of
workers who had a highly skilled white-collar job during their careers
were able to find a highly skilled white-collar bridge job. However, there is
a shift in employment toward lower-skilled blue-collar occupations and
part-time work as workers leave their career jobs and move into bridge
jobs. Twenty-one percent of bridge jobs were in a lower-skilled blue-collar
occupation compared with 13 percent of career jobs. Because of the
increased percentage of lower-skilled labor and part-time work, bridge
jobs tend to pay less than career jobs. According to one study, 65 percent
of career jobs pay more than $10 per hour but only 39 percent of bridge
jobs pay this much.43 Employment in bridge jobs is likely to shift further
toward the lower-skilled service sector. The Bureau of Labor Statistics
projects that employment in service-producing industries will grow at
more than twice the rate of all other nonfarm industries over the next
decade.44




41
 Approximately 46 percent of workers in this age group were still employed in their career job
according to Quinn, “New Paths to Retirement.”
42
  This finding is based on an American Association of Retired Persons survey of 2,001 members of the
baby boom generation. The survey was conducted by Roper Starch Worldwide. According to the
survey, 35 percent of respondents expect to work part-time, mainly for the interest and enjoyment
work provides, 23 percent expect to work part-time for income, 17 percent expect to start their own
business, and 5 percent expect to retire from their current jobs and work full-time doing something
else.
43
  Quinn, “New Paths to Retirement.”
44
 J.C. Franklin, “Industry Ouput and Employment Projections to 2006,” Monthly Labor Review,
Nov. 1997, pp. 39-57.



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Figure 5: Comparison of Career Job
Employment With Bridge Job           50   Percent Employed
Employment by Job Type and Skill
Level
                                     45



                                     40



                                     35



                                     30



                                     25



                                     20



                                     15



                                     10



                                      5



                                      0

                                           White-Collar            White-Collar            Blue-Collar              Blue-Collar
                                           Highly Skilled          Other                   Highly Skilled           Other

                                                    Career Job

                                                    Bridge Job



                                     Source: J. Quinn, “New Paths to Retirement,” in O. Mitchell, B. Hammond, and A. Rapport (eds.),
                                     Forecasting Retirement Needs and Retirement Wealth (Philadelphia: University of Philadelphia
                                     Press, forthcoming).




                                     Another issue concerning the expansion of bridge job employment is the
                                     matching of available employment with the physical conditions or needs
                                     of older workers. While the number of service-sector jobs (cleaning,



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                          protection, food preparation, health, and personal services) is expected to
                          increase, these jobs may not be suitable for retirees. According to our
                          analysis of the HRS, many service jobs require older workers to exert
                          themselves physically or to lift heavy loads. Sixty-two percent of workers
                          aged 53 to 63 in the service sector reported that their jobs required a lot of
                          physical exertion all or most of the time.45 Twenty-seven percent of these
                          workers said that their jobs required them to lift heavy loads all or most of
                          the time. Thus, many bridge jobs may not be suitable for individuals who
                          are in poor health.

                          Another question about the growth of employment in bridge jobs concerns
                          the effective balancing of employers’ and workers’ scheduling needs and
                          flexibility. Employees may prefer to work fewer hours with their current
                          employers rather than take bridge jobs. According to our analysis of the
                          HRS, more than half of employees aged 53 to 63 want to reduce the hours
                          they work on their current jobs as they get older while keeping their
                          hourly pay the same. Thus, many older workers would prefer a more
                          flexible schedule even if it reduced their total compensation. Some
                          employers accommodate older workers by offering them “less
                          demanding” jobs. Thirty percent of older employees said their employers
                          would let older workers move to a less-demanding job with less pay.46


Raising Retirement Ages   Although the long-term health prospects of older workers have improved,
Could Hurt Some Groups    the main factor that impedes individuals from working to later ages
of Workers                remains poor health. Furthermore, poor health remains concentrated
                          among certain groups of workers, particularly blue-collar workers, who
                          constitute 41 percent of workers aged 53 to 63. Physically demanding
                          blue-collar work tends to lead to health problems that inhibit work at
                          older ages. According to our analysis of the HRS, more than twice as many
                          blue-collar workers as white-collar workers reported that poor health was
                          an important factor in their decision to retire. Moreover, because racial
                          minorities make up a disproportionate share of blue-collar workers, they
                          are more likely to be adversely affected by retirement age increases. Many
                          individuals who have poor health but are not able to qualify for DI benefits
                          may have difficulty affording retirement. Their poor health makes them
                          less employable than healthy workers and, thus, their wages tend to be
                          lower and their unemployment rates higher. Such individuals may find


                          45
                            Excluding workers who are fully or partially retired and self-employed.
                          46
                           This statistic comes from an HRS question that asked respondents, “Would your employer let older
                          workers move to a less demanding job?” The question did not define whether “less demanding”
                          meant less responsibility or less physically demanding duties.



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                           themselves both unable to afford to retire and unable to find or retain
                           appropriate work should Social Security retirement ages rise.


Blue-Collar Workers Have   Our analysis of HRS data suggests that older blue-collar workers are likely
More Health Problems at    to have more difficulties in extending their careers than older white-collar
Older Ages Than            workers if retirement ages are raised.47 Because of the nature of their jobs
                           or their socioeconomic status, many older blue-collar workers experience
White-Collar Workers       health problems that may both inhibit their ability to continue working to
                           later ages and make them less employable. Older blue-collar workers are
                           at greater risk for having several health problems than older white-collar
                           workers. (See table 3.) After the effects of employment status, age, race,
                           gender, alcohol consumption, and smoking are controlled for, blue-collar
                           workers are more likely to have musculoskeletal problems, respiratory
                           diseases, diabetes, and emotional disorders than white-collar workers.
                           Blue-collar workers are 58 percent more likely to have arthritis, 42 percent
                           more likely to have chronic lung disease, and 30 percent more likely to
                           have a foot or leg problem. In addition, these workers are 33 percent more
                           likely to have asthma, 21 percent more likely to have diabetes, and
                           25 percent more likely to have emotional disorders.48 White-collar workers
                           are not at greater risk for any of the health problems examined in table 3.
                           White-collar workers do have higher rates of cancer, but the difference is
                           not statistically significant.




                           47
                             For this analysis, we defined blue-collar workers as those employed in the following occupational
                           categories: cleaning services (1.0 percent of the labor force); protection services (1.8 percent); health
                           services (1.9 percent); material handlers (2.4 percent); farming, fishing, and forestry (2.6 percent); food
                           preparation services (2.7 percent); construction and mining (3.8 percent); mechanics and repair
                           (3.8 percent); precision production (3.8 percent); transportation operators (4.9 percent); personal
                           services (5.0 percent); and machine operators (6.2 percent). We defined white-collar workers as those
                           employed in the following occupations: sales (9.9 percent), clerical (16.2 percent), professional
                           specialty (16.4 percent), and managerial (17.4 percent). These data are from the HRS.
                           48
                            The logistic regression models were specified according to J.S. Petersen and C. Zwerling, “A
                           Comparison of Health Outcomes Among Older Construction and Blue-Collar Employees in the United
                           States,” American Journal of Industrial Medicine, Vol. 34, No. 3 (Sept. 1998), pp. 280-87.



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Table 3: Health Outcomes of
Blue-Collar Workers Compared With                                                   Likelihood:                  Frequency
White-Collar Workers Aged 53-63     Outcome                                         blue-collar           Blue-collar        White-collar
                                    Arthritis                                                 1.583****         45.1%                  37.8%
                                    Asthma                                                    1.328*              4.8                   4.3
                                    Back problem                                              1.108             27.3                   25.4
                                    Cancer (other than skin)                                  1.096               5.1                   6.4
                                    Chronic lung disease                                      1.423***            9.0                   6.6
                                    Diabetes                                                  1.207*            12.2                    8.8
                                    Emotional problem                                         1.245**           10.3                    8.8
                                    Foot or leg problem                                       1.302****         28.3                   24.2
                                    Heart problem                                             0.932             13.4                   13.2
                                    Hypertension                                              1.048             42.9                   39.2
                                    Kidney or bladder problem                                 1.140               7.2                   6.2
                                    Stomach or intestine ulcer                                1.254               6.5                   4.9
                                    Stroke                                                    0.926               2.2                   1.9
                                    Note: Number of observations = 6,589. Independent variables = blue-collar occupation,
                                    completely retired, partially retired, age, gender, race, smoking behavior, alcohol consumption,
                                    and alcoholic tendencies.

                                    ****Statistically significant at the .0001 percent level.

                                    ***Statistically significant at the .001 percent level.

                                    **Statistically significant at the .01 percent level.

                                    *Statistically significant at the .05 percent level.

                                    Source: Wave 2 of the HRS, 1994.



                                    When all blue-collar occupations are grouped together, blue-collar
                                    workers are 80 percent more likely than white-collar workers to
                                    experience pain that affects their ability to perform their jobs. (See table
                                    4.) The blue-collar occupations with risk factors for pain affecting
                                    performance are personal services; farming, fishing, and forestry;
                                    mechanics and repair; construction and mining; precision production;
                                    machine operators; transportation operators; and material handlers.
                                    Moreover, twice as many blue-collar workers (27 percent) as white-collar
                                    workers (13 percent) reported that poor health is a very important factor
                                    in their decision to retire.49




                                    49
                                      This statistic refers to individuals who reported themselves as completely retired.



                                    Page 26                                                   GAO/HEHS-99-112 Raising the Retirement Age
                                        B-282269




Table 4: Pain Affecting Ability to Do
Normal Work Among Blue-Collar and                                                                         Odds ratio for         Frequency
White-Collar Workers Aged 53-63                                                                                    pain             of pain
                                        All blue-collar occupations                                                1.813****           12.9%
                                                                                                                        a
                                        All white-collar occupations                                                                     8.4
                                        Specific blue-collar occupations
                                             Cleaning services                                                     1.145               11.1
                                             Construction and mining                                               2.428****           13.7
                                             Farm, fish, forestry                                                  1.710*              10.7
                                             Food preparation services                                             1.494               13.5
                                             Health services                                                       1.565               14.8
                                             Machine operators                                                     2.074****           15.1
                                             Material handlers                                                     2.050**             13.2
                                             Mechanics and repair                                                  2.061***            11.9
                                             Personal services                                                     1.632**             13.4
                                             Precision production                                                  1.588*              10.4
                                             Protection services                                                   1.649               10.8
                                             Transportation operators                                              2.057****           12.5
                                        Note: Number of observations = 6,582. Independent variables = blue-collar occupation,
                                        completely retired, partially retired, age, gender, race.
                                        a
                                         Not applicable.

                                        ****Statistically significant at the .0001 percent level.

                                        ***Statistically significant at the .001 percent level.

                                        **Statistically significant at the .01 percent level.

                                        *Statistically significant at the .05 percent level.

                                        Source: Wave 2 of the HRS, 1994.



                                        The health problems of older blue-collar workers could diminish if the
                                        labor market shifts toward less physically demanding work or if
                                        technological improvements make blue-collar work less physically
                                        demanding. However, physically demanding jobs currently do not show
                                        signs of diminishing. SSA reported that in 1982 11.4 percent of newly retired
                                        workers had jobs with heavy strength requirements.50 In this study, SSA
                                        predicted that 8 to 10 percent of workers will be in jobs with heavy
                                        strength requirements by 2000 and 7 to 9 percent will be in such jobs by
                                        2027. However, our analysis of the HRS shows that 15 percent of older
                                        workers reported that they had jobs that required them to lift heavy loads

                                        50
                                         SSA, “Increasing the Social Security Retirement Age: Older Workers in Physically Demanding
                                        Occupations or Ill Health,” Social Security Bulletin, Vol. 49, No. 10 (1986), pp. 5-23.



                                        Page 27                                                   GAO/HEHS-99-112 Raising the Retirement Age
                         B-282269




                         all or most of the time in 1994, a significantly larger estimate. Thus, it
                         appears that the proportion of jobs that require older workers to perform
                         physically demanding work is still significant.


Health Problems Reduce   Older blue-collar workers with health problems have lower earnings and
Individuals’ Financial   are less employable. Since blue-collar work is often physically demanding,
Ability to Retire        employers may foresee a risk of more workers’ compensation claims or
                         health care costs from hiring older employees and thus may be less likely
                         to hire them. This greater difficulty in obtaining employment means some
                         older workers will accumulate less wealth, which makes it more difficult
                         for them to afford to retire. For example, while it might be expected that
                         persons who have health problems would have significantly higher rates of
                         retirement, 18 percent of blue-collar workers who have two or more health
                         problems are retired compared with 14 percent of those with no problems.
                         (See table 5.) In addition, individuals who have more health problems are
                         in jobs that have lower rates of pension coverage. Pension coverage can
                         give individuals the flexibility to be able to afford to retire if they have
                         poor health and cannot work to later Social Security retirement ages.




                         Page 28                               GAO/HEHS-99-112 Raising the Retirement Age
                                         B-282269




Table 5: Earnings, Retirement Rate, Unemployment Rate, and Pension Coverage by Health Status Among Blue-Collar
Workers Aged 53-63, 1994
Number of health Percent with number      Percent of all       Median         Percent Unemployment            Percent with
problemsa             of health problems older workers        earnings          retired   rate (percent) pension coverage
0                                 36.8              14.7            $14,114                 14.2                  6.2                    63.5
1                                 32.4              13.0              11,616                15.8                  7.7                    59.6
2                                 20.3                8.1              8,524                18.4                  8.2                    56.9
3 or more                         10.5                4.2              3,278                19.8                  9.4                    53.3
                                         a
                                          The number of health problems refers to the health problems that blue-collar workers were at
                                         greater risk for developing compared with white-collar workers.

                                         Source: Wave 2 of the HRS, 1994.



                                         Our analysis also shows that older blue-collar workers with health
                                         problems have higher unemployment rates than healthy blue-collar
                                         workers. (See table 5.) Blue-collar workers also have higher
                                         unemployment rates than white-collar workers with similar health status.
                                         Corresponding to these higher unemployment rates, the blue-collar
                                         workers with health problems have lower earnings. For example, the older
                                         blue-collar workers who have arthritis or chronic lung disease have
                                         38-percent and 27-percent lower median earnings, respectively, than those
                                         who do not.


Raising Retirement Ages                  Racial minorities are particularly likely to be adversely affected by
Would Have a                             retirement age changes because they make up a disproportionate share of
Disproportionately                       blue-collar workers. Table 6 shows that African Americans are 9.5 percent
                                         of older workers and 15.4 percent of older blue-collar workers while the
Adverse Effect on African                comparable percentages for Hispanics are 5.4 and 9.1. Thus, the health
American and Hispanic                    problems that tend to arise among older blue-collar workers would be
Workers                                  disproportionately spread across these populations. Older African
                                         Americans and Hispanics are also more likely to be unemployed than older
                                         white workers. Although members of each racial group are about as likely
                                         to report themselves as retired, approximately 30 percent of older African
                                         Americans and Hispanics report that poor health is a very important factor
                                         in their decision to retire compared with 16.4 percent of older whites. (See
                                         table 7.)




                                         Page 29                                           GAO/HEHS-99-112 Raising the Retirement Age
                                       B-282269




Table 6: Employment Among Workers
Aged 53-63 by Race, 1994                                                             African
                                                                         White      American        Hispanic           Other            Total
                                       Population of all older
                                       workers                             82.5%            9.5%           5.4%            2.6%          100%
                                       Blue-collar workers                 73.1           15.4             9.1             2.4           100
                                       Note: Blue-collar workers constituted about 41.4 percent of all workers aged 53-63.

                                       Source: Wave 2 of the HRS, 1994.



Table 7: Selected Employment
Statistics for Workers Aged 53-63 by                                                                                                 All
Race, 1994                                                                           African                                   workers
                                                                         White      American        Hispanic           Other aged 53-63
                                       Unemployment rate                    4.7%            9.1%          13.7%            8.8%           5.7%
                                       Retired                             16.8%          18.5%           14.3%          10.6%           16.6%
                                       Those who retired
                                       citing poor health as a
                                       very important factor
                                       in their decision                   16.4%          29.9%           28.6%          22.6%           18.3%
                                       Source: Wave 2 of the HRS, 1994.



                                       African American men and women will be further disproportionately
                                       affected by an increase in retirement ages because they have lower life
                                       expectancies than any other racial group. Figure 6 shows that African
                                       American males and females have the lowest life expectancy at birth and
                                       at age 65. In addition, the projected rate of growth in life expectancy is
                                       slower for African Americans compared with most other racial groups.51
                                       Therefore, if retirement ages were raised, African Americans would
                                       experience the largest percentage decline in their expected lifetime benefit
                                       compared with other racial groups because they will have fewer years in
                                       which to collect benefits. For example, African American men and women
                                       at age 20 can expect 8.6 and 13.4 years of retirement, respectively, if they
                                       retire at age 65. In contrast, the comparable projected numbers for whites
                                       at age 20 are 12.5 years for men and 16.8 years for women. The expected
                                       number of years of retirement at age 20 with a retirement age of 70 is 5.8
                                       years for African American men, 8.8 years for white men, 9.7 years for
                                       African American women, and 12.6 years for white women. African
                                       American men who retired at a new NRA of 70 would receive benefits for
                                       33 percent fewer years compared with 30 percent fewer for white men,


                                       51
                                        For example, the rate of growth in men’s life expectancy at age 65 over the next 50 years is
                                       35 percent for whites and Hispanics, 15.9 percent for Asians, and 20.4 percent for African Americans.



                                       Page 30                                            GAO/HEHS-99-112 Raising the Retirement Age
                                                    B-282269




                                                    and African American women would receive benefits for 28 percent fewer
                                                    years compared with 25 percent fewer for white women.



Figure 6: Life Expectancy at Birth and at Age 65 by Race, 1998

90 Age
                                                    85.1
                                                              82.6
                       79.7          80.3
80
         74                   75.1           74.4

70
                64.3

60


50


40


30
                                                                                                                      23.1   22.2
                                                                                       18.9   18.9      19.5
20                                                                                                             17.6
                                                                         15.9
                                                                                13.6

10


 0

         Males at Birth               Females at Birth                   Males at Age 65                Females at Age 65


                                                      White

                                                      African American

                                                      Asian

                                                      Hispanic


                                                    Source: U.S. Department of Commerce, Bureau of the Census, Population Projections of the
                                                    United States by Age, Sex, Race, and Hispanic Origin: 1995 to 2050 (Washington, D.C.: 1999).



                                                    Raising the retirement age can have many positive implications for the
Concluding                                          Social Security program. Depending on how high and how fast the ages
Observations                                        were raised, the solvency of the Social Security Trust Funds could be




                                                    Page 31                                          GAO/HEHS-99-112 Raising the Retirement Age
                  B-282269




                  significantly improved. In addition, raising retirement ages would create
                  financial incentives for workers to extend their careers. To the extent that
                  older workers who continued to work did not displace younger workers,
                  their lengthened work lives should contribute to economic growth.
                  However, such proposals also pose clear costs for some segments of the
                  population, particularly workers who are in poor health and older minority
                  workers, groups that already fare less favorably in the labor market.

                  While it is useful to assess the effects of individual proposals, such as
                  increasing the retirement age, these proposals are often only elements of
                  larger, more comprehensive Social Security reform packages. Many of
                  these broader initiatives contain a variety of provisions for addressing the
                  trust funds’ solvency difficulties. These range from adjusting the programs’
                  current tax and benefit provisions to introducing features such as
                  individual accounts that could substantially alter the existing program
                  structure. In this context, it is important to analyze the distributional
                  consequences of the individual components of each initiative, and their
                  interaction, to determine the cumulative effect on different segments of
                  the population. Such an understanding is essential to keep certain groups,
                  particularly those who may already be at risk, from bearing a
                  disproportionate portion of the costs of reform. Analyzing the
                  distributional effects of comprehensive Social Security reform proposals
                  can also assist in developing remedial provisions. For example, older
                  minority workers could be helped by policies to direct federal job training
                  resources to facilitate their efforts to obtain bridge jobs. In any case, such
                  analysis is necessary to ensure that both the benefits and the burdens of
                  reform are borne by all segments of the population and not only by a few.


                  We provided a draft of this report to SSA and the Employee Benefit
Agency Comments   Research Institute. In commenting on our report, the reviewers generally
                  agreed with our characterization of the factors that need to be evaluated
                  when considering an increase in the retirement ages. Their comments
                  were primarily technical and clarifying in nature and we made changes
                  where appropriate.

                  SSA expressed concern that limitations in the HRS because of the age range
                  of the group of respondents would preclude making conclusive cause and
                  effect statements about their possible reaction to an increase in the
                  retirement ages. We were aware of the HRS limitations and, as indicated in
                  the report, our conclusions are based on other academic and government
                  studies. SSA’s written comments are printed in appendix II.



                  Page 32                                GAO/HEHS-99-112 Raising the Retirement Age
B-282269




We are sending copies of this report to the Commissioners of the Social
Security Administration and others who are interested. We will also make
copies available to others on request. If you or your staff have any
questions concerning this report, please call me on (202) 512-5491. The
major contributors to this report are Charles A. Jeszeck, Assistant
Director, (202) 512-7036; Jeffrey S. Petersen, Evaluator-in-Charge; and
Barbara Smith, Senior Economist.




Barbara D. Bovbjerg, Associate Director
Education, Workforce, and Income Security Issues




Page 33                             GAO/HEHS-99-112 Raising the Retirement Age
Contents



Letter                                                                                          1


Appendix I                                                                                     36

Description of the
Social Security
Simulation Model
Appendix II                                                                                    40

Comments From the
Social Security
Administration
Tables               Table 1: Percentage of Individuals Electing to Start Receiving            18
                       Social Security Benefits at Age 62 and Later, 1940 to 1996
                     Table 2: The Percentage Reduction in Benefits Upon Retirement             19
                       Before the Current NRA Compared With the Reduction When the
                       NRA Rises to 67 According to the 1983 Legislation
                     Table 3: Health Outcomes of Blue-Collar Workers Compared With             26
                       White-Collar Workers Aged 53-63
                     Table 4: Pain Affecting Ability to Do Normal Work Among                   27
                       Blue-Collar and White-Collar Workers Aged 53-63
                     Table 5: Earnings, Retirement Rate, Unemployment Rate, and                29
                       Pension Coverage by Health Status Among Blue-Collar Workers
                       Aged 53-63, 1994
                     Table 6: Employment Among Workers Aged 53-63 by Race, 1994                30
                     Table 7: Selected Employment Statistics for Workers Aged 53-63            30
                       by Race, 1994
                     Table I.1: Economic and Demographic Intermediate Assumptions              38

Figures              Figure 1: The Expected Number of Years Men and Women Will                  5
                       Receive Social Security Benefits If They Retire at the NRA
                     Figure 2: The Effect of Raising the Retirement Ages on the                 8
                       Solvency of the Social Security Trust Funds
                     Figure 3: New Disability Awards as a Percentage of the                    11
                       DI-Covered Population, Ages 53-64
                     Figure 4: Labor Force Participation Rates of Men Aged 55 and              15
                       Older, 1950-98




                     Page 34                            GAO/HEHS-99-112 Raising the Retirement Age
Contents




Figure 5: Comparison of Career Job Employment With Bridge Job             23
  Employment by Job Type and Skill Level
Figure 6: Life Expectancy at Birth and at Age 65 by Race, 1998            31




Abbreviations

ADEA       Age Discrimination in Employment Act of 1986
DI         Disability Insurance
DRC        delayed retirement credit
EEA        earliest eligibility age
HHS        Department of Health and Human Services
HRS        Health and Retirement Survey
NRA        normal retirement age
OASDI      Old-Age, Survivors, and Disability Insurance
OASI       Old-Age and Survivors Insurance
SSA        Social Security Administration
SSI        Supplemental Security Income


Page 35                            GAO/HEHS-99-112 Raising the Retirement Age
Appendix I

Description of the Social Security
Simulation Model

                          To assess how changes in the Social Security retirement ages affect the
                          solvency of the Social Security Trust Funds, we conducted a variety of
                          simulations using the EBRI-SSASIM2 model. EBRI-SSASIM2 was originally
                          developed under a series of contracts from the Social Security
                          Administration (SSA) as part of the 1994-96 Advisory Council on Social
                          Security’s activities and has been enhanced subsequently with support
                          from the Employee Benefit Research Institute (EBRI) and the American
                          Association of Retired Persons (AARP). The model can simulate a variety of
                          policy reforms to the Social Security program, from incremental changes
                          to the OASI and DI programs to broader structural reforms that would
                          introduce a defined contribution (individual account) component to the
                          Social Security system.

                          The EBRI-SSASIM2 model simulates the dynamic interaction of the labor
                          force, the economy, and the Social Security programs and can be used to
                          generate aggregate program cost and income estimates as well as
                          estimates for the OASI and DI Trust Funds. Changes in program structure
                          can be analyzed for any specified future time periods.

                          For this report, we relied on the model for its capability in analyzing the
                          implications of revisions in the EEA, the NRA, or both on the actuarially
                          adjusted cumulative solvency of the trust funds over a specified time
                          period. Consistent with SSA’s annual projections, we explored the effect of
                          such changes on OASDI Trust Fund solvency for the 75-year period
                          1999-2073. The implications of a reform relative to current-law policy are
                          determined by comparing the output results from a simulation that
                          assumes the reform policy with results from a simulation that assumes the
                          current law.


                          To illustrate the sensitivity of differential changes in the magnitude and
Options Illustrating      timing of the EEA and NRA on the solvency of the Social Security Trust
the Effects of Revising   Funds, we used the EBRI-SSASIM2 model to estimate the effect of six
the Retirement Ages       different options:52

on Trust Fund             Option 1: Increase in both the EEA and NRA. After 2015, when EEA = 65 and
Solvency                  NRA = 69, both the EEA and NRA are indexed to projected life expectancy. By
                          2063, EEA = 67 and NRA = 71.




                          52
                            We consulted with the model’s developer, Martin Holmer of Policy Simulation Group Inc., in using
                          the model to conduct our own simulations.



                          Page 36                                           GAO/HEHS-99-112 Raising the Retirement Age
                      Appendix I
                      Description of the Social Security
                      Simulation Model




                      Option 2: Slower increase in both the EEA and NRA than in option 1 until
                      2029. Thereafter, increases occur more quickly. EEA = 65 and NRA = 70 in
                      2029. By 2065, EEA = 67 and NRA = 72.

                      Option 3: Large and rapid increase in the EEA and NRA. EEA = 66 and NRA =
                      70 in 2015. By 2030, EEA = 67 and NRA = 72.

                      Option 4: Rapid increase in the NRA with no increase in the EEA. NRA = 68 in
                      2017 and 70 in 2029.

                      Option 5: Slower increase in the NRA than option 4. NRA = 68 in 2017 and 70
                      in 2065.

                      Option 6: Option 5 with an increase in the EEA. EEA = 63 in 2017 and 65 in
                      2065.

                      These options were constructed to reflect a range of possible changes in
                      the EEA and NRA.53 Because of the large number of years over which the
                      projections are made, the estimates corresponding to these options should
                      not be interpreted as precise estimates of the effects on trust fund
                      solvency.


                      In our analysis, we made a number of assumptions. With respect to
Assumptions Used in   population and economic projections, we used the intermediate
the Construction of   assumptions in The 1999 Annual Report of the Board of Trustees of the
the Solvency          Federal Old-Age and Survivors Insurance and Disability Insurance Trust
                      Funds. (See table I.1.)
Scenarios




                      53
                       We also estimated a change in the EEA to age 64 with the currently mandated change in the NRA to
                      age 67.



                      Page 37                                          GAO/HEHS-99-112 Raising the Retirement Age
                                      Appendix I
                                      Description of the Social Security
                                      Simulation Model




Table I.1: Economic and Demographic
Intermediate Assumptions                                                                                                               Year
                                                                                                                                   ultimate
                                                                                                                   Ultimate           value
                                      Assumption                                                                      value       attaineda
                                      Annual percentage
                                      Labor force participation
                                           Women                                                                        60.6           2075
                                           Men                                                                          73.8           2075
                                      Unemployment rate                                                                   5.5          2009
                                      Inflation rate                                                                      3.3          2007
                                      Labor productivity growth rate                                                      1.3          2008
                                      Growth rate of wages as share of compensation                                     –0.2           2008
                                      Growth rate of hours worked                                                       –0.1           2008
                                      Nominal interest rate                                                               6.3          2007
                                      Mortality rate decline                                                              0.6          2023
                                      Annual number
                                      Total fertility rate                                                                1.9b         2023
                                      Net immigration                                                               900,000c           1999
                                      Note: The intermediate assumptions represent the trustees’ “best estimates” of likely future
                                      economic and demographic conditions.
                                      a
                                       The ultimate value is maintained for the remainder of the 75-year projection period.
                                      b
                                          Number of children per woman.
                                      c
                                       Number of persons per year.



                                      We actuarially adjusted the benefits as appropriate when the NRA and EEA
                                      changed. We also needed to make assumptions about the behavior of
                                      program participants—that is, the ages at which workers elect to receive
                                      Social Security benefits.

                                      Most workers begin receiving benefits at either age 62, the earliest age
                                      when benefits can be received, or at age 65, the age when full benefits can
                                      be received.54 The Office of the Chief Actuary at the Social Security
                                      Administration, in its projections, assumes that the average age for
                                      receiving initial benefits increases by 3 months each time the NRA
                                      increases by 1 year. Because of the way the EBRI-SSASIM2 model is
                                      structured, we incorporated this assumption into the model by assuming
                                      that workers do not change their retirement behavior as the NRA increases

                                      54
                                        Benefits received at age 62 are actuarially reduced to compensate for the greater number of years
                                      they are received, assuming a normal life span. Actuarial reduction ensures that lifetime benefits
                                      received remain approximately the same, regardless of when workers retire.



                                      Page 38                                            GAO/HEHS-99-112 Raising the Retirement Age
Appendix I
Description of the Social Security
Simulation Model




first to 66 and then to 67. That is, workers are assumed to continue to
retire primarily at age 62 or 65, even though the level of initial benefits
received at those ages will decline as the NRA increases. This assumption
enabled us to replicate the estimates for the actuarial balance under
current law made by the Office of the Chief Actuary. We further assumed
that when the NRA increased to ages greater than 67, workers originally
receiving benefits at age 62 would continue to do so. However, we also
assumed that persons originally receiving benefits at age 65 would now
choose to receive benefits at the new NRA—that is, at ages 68 or older,
depending on the option and year. These assumptions enabled us to
replicate estimates made by the Office of the Chief Actuary on similar
policy options.




Page 39                               GAO/HEHS-99-112 Raising the Retirement Age
Appendix II

Comments From the Social Security
Administration




              Page 40       GAO/HEHS-99-112 Raising the Retirement Age
           Appendix II
           Comments From the Social Security
           Administration




(207046)   Page 41                             GAO/HEHS-99-112 Raising the Retirement Age
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