Work and Retirement

Policy Backgrounders | Social Security

No. 162
Friday, November 03, 2006
by Liqun Liu and Andrew J. Rettenmaier


"These changes would improve the finances of seniors and Social Security by encouraging work."

This study examined several ways to update Social Security. The primary effect of these changes would be to increase work by older Americans. Eliminating the earnings test, reducing OASI payroll taxes on individuals eligible to receive benefits, increasing the normal and early retirement age, and rewarding continued work though actuarially fair adjustments will give individuals increased incentives to remain in the labor force. On balance, these reforms would likely improve the Social Security system's finances.28 Increased labor market participation by older workers would raise income tax revenues as well as provide Medicare payroll taxes. It will also improve Medicare's finances as older Americans stay active in the labor force and receive some of their health coverage in the form of compensation from their employers.

Liqun Liu is an associate research scientist with, and Andrew J. Rettenmaier is executive associate director of, the Private Enterprise Research Center at Texas A&M University . Rettenmaier is a senior fellow with the National Center for Policy Analysis.

NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.

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