Post-War Trends in Labor Income in the Social Security Earnings Records

WP#2015-7

Abstract

The Earnings Public-Use File (EPUF) contains complete information on annual Social Security-covered earnings for a sample of 3.13 million Americans who had earnings in at least one year between 1951 and 2006. The panel data are used to examine patterns and trends in lifetime earnings. The EPUF data show the increasing convergence of female and male lifetime earnings patterns across a number of dimensions: (1) the shape and level of the average age-earnings profile; (2) the age at first entry into covered employment; and (3) the age of labor force exit. The full lifetime earnings profiles for birth cohorts that entered work after 1951 and exited before 2006 reveal associations between workers’ ages of labor force entry and exit and the peak earnings they attain during their careers. We find that workers who enter employment at older ages and exit at earlier ages on average earn lower incomes in their 40s than those who enter employment earlier and exit later. Among men born between 1941 and 1945, those who began working between ages 20 and 22 earned about one-fifth less when they were in their 40s compared with men who had their first covered earnings when they were 15. The EPUF data show a clear and strong positive association between workers’ age of exit from covered employment and their earnings in mid-career. Workers who retire later, up through about age 62, tend to earn higher incomes during their 40s than workers who retire closer to age 50. For each birth cohort we examine and for both sexes, we find that workers who have a high level of earnings in years when they are employed also tend to have the longest careers. We also report the average and net return that successive cohorts of workers obtain on their Social Security contributions.