Why the Social Security Earnings Penalty Should Be Repealed

Policy Backgrounders | Social Security

No. 152
Monday, February 28, 2000
by Bruce Bartlett

Impact on the Labor Force

The earnings test was originally imposed for a reason that now makes no economic sense. Its purpose was to get workers out of the labor force during the Great Depression in order to open up jobs for younger workers.2 Today, however, one of the biggest problems facing the country is not a lack of jobs, but a lack of workers. The earnings test is not only depriving American businesses of labor they desperately need, but is keeping out of the labor force some of our best educated and most experienced workers.3 As a nation we cannot afford to keep doing this.

"In 1995, 743,000 workers had all or part of their benefits reduced."

Keeping older workers out of the labor force is also harmful to them. When they are forced into idleness by retirement, it often impacts negatively on their health and self-esteem.4 And the notion that older workers are not healthy enough to continue working is simply no longer valid. Rising life expectancy and improved medicine mean that today's average 65-year-old is probably in better physical shape than a 40-year-old worker was before World War II.5 Of course, no retiree should be forced to work if they prefer leisure, but actively penalizing those who want to work and are able to work is harmful both to them and the economy.

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