The Effects of Social Security Reform on Saving, Investment, and the Level and Distribution of Worker Well-Being

Center for Retirement Research at Boston College, 2000

Posted: 9 Mar 2010

See all articles by Barry Bosworth

Barry Bosworth

Brookings Institution - Economic Studies Program

Gary Burtless

Brookings Institution; Boston College - Retirement Research Center

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2000

Abstract

All observers agree that Social Security reform is needed to restore the program's solvency. This paper examines the impact of alternative reforms on Social Security finances, on the wider U.S. economy, and on workers who contribute to and receive benefits from the program. In one reform we consider, Social Security benefits are eventually reduced about one-third so that benefits can be financed with the present 12.4 percent payroll tax rate. Workers are required to contribute an additional 2 percent of their wages to a new defined-contribution pension. We embed Social Security's finances in a neoclassical growth model and show how additions to Social Security and defined-contribution pension reserves, if they are saved, can increase the future growth of productivity and wages and reduce the rate of return on capital. These economy-wide impacts in turn affect the lifetime wages and pensions of workers born in successive generations. They have differing effects on workers depending on workers' relative earnings and the trend in their earnings over their careers. Our model includes a microsimulation component to measure these effects on individual workers...

Suggested Citation

Bosworth, Barry and Burtless, Gary T, The Effects of Social Security Reform on Saving, Investment, and the Level and Distribution of Worker Well-Being (January 1, 2000). Center for Retirement Research at Boston College, 2000, Available at SSRN: https://ssrn.com/abstract=1127805

Barry Bosworth (Contact Author)

Brookings Institution - Economic Studies Program ( email )

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Gary T Burtless

Brookings Institution ( email )

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Economic Studies Program
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United States
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HOME PAGE: http://https://www.brookings.edu/experts/gary-burtless/

Boston College - Retirement Research Center ( email )

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