Post-War Trends in Labor Income in the Social Security Earnings Records
The attractiveness of Social Security retirement benefits compared with a defined contribution (DC) individual account pension hinges crucially on workers’ lifetime earnings patterns. A DC pension looks more attractive if earnings are concentrated early in workers’ careers, allowing contributions to earn investment income for a relatively long period. The Social Security benefit formula appears more attractive if earnings are concentrated late in workers’ careers and if workers are favorably treated because they earn low lifetime wages. This project will use the 2006 Earnings Public-Use File (EPUF) to examine the lifetime patterns of Social Security contributors to see how earnings are concentrated in early and late careers, how these patterns differ for low, moderate, and high lifetime earners, and how career earnings patterns have evolved over the past half century. The goal is to shed light on the shifting relationship between peak career earnings, the length of workers’ careers, and the potential gains or losses that workers would experience if part of their contributions were shifted to an individual account DC pension.