The Great Recession, the Social
Safety Net, and Economic Security
for Older Americans
Comments by
Paul S. Davies*
Social Security Administration
Presented at the 17th Annual RRC Annual Meeting
August 7, 2015
* The opinions expressed are my own and do not represent the opinions or policy of the Social
Security Administration or any agency of the Federal government.
Highly Commendable Paper
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 A traditional tour de force by Johnson and Smith
 6 national surveys
 21 tables
 3 figures
 6 appendix tables
 Thorough and comprehensive
 Virtually no stone left unturned
Some Details
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 Unemployment, labor force participation, and
employment

CPS, with cross-checks against ACS and SIPP
 Income
 CPS and SIPP, with cross-checks against ACS and HRS
 Wealth
 SCF, with cross-checks against SIPP and PSID
 Social Security claiming
 SIPP-SSA linked data
 Impacts of unemployment
 SIPP-SSA linked data
Key Findings for Older Workers (62+)
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 Unemployment lower among older workers, but longer spells
and lower earnings in new job


Median spell > 24 months for those aged 62+
Median earnings loss in new job = 32.6%, largely through reduced hours
 Labor force participation rates increased among older age
groups
 Income losses lower for older unemployed workers

Surge in Social Security claiming among older workers
 Large increases in receipt of unemployment insurance and
public assistance
 Lower but substantial decline in wealth for older ages


Mostly driven by decline in home value
Value of retirement accounts did not change much for 62+
For Further Consideration
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 Cohort-based analysis
 Labor force exit and entry
 Defined benefit pensions
 Effects of changes in Social Security claiming
Cohort-Based Analysis
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 Much of the analysis looks at changes over time for given
age groups


Estimates for workers age 62-64 in 2007 compared with workers age 6264 in 2014, for example
Unemployment rate, labor force participation rate, employmentpopulation ratio, family income, poverty rate, household wealth
 Would be interesting to use HRS to look at these
measures across birth cohorts as they age through the
Great Recession


Analysis of SIPP-SSA data does this to some extent, with a focus on longterm unemployed workers
Perhaps could use HRS to sharpen the focus on retired individuals and
individuals approaching retirement
Labor Force Exit and Entry
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 What about labor force exits among older workers?

Much of the analysis focuses on unemployment and impacts of
long-term unemployment
 How about labor market entry?

Some findings point to higher labor force participation rates
among older age groups
 With longitudinal data from SIPP or HRS, it may be
possible to:


Track job losses that lead to labor market exit and examine income and
wealth changes for this potentially vulnerable group
Identify labor force entrants, perhaps spouses who exit retirement or
enter the labor market to bolster family income
Defined Benefit Pensions
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 Older age groups more likely to have defined benefit
pensions; younger groups more likely to be contributing
to defined contribution retirement accounts
 DB pensions protected older groups from more severe
income and wealth losses during Great Recession

Social Security benefits play an important role as well, as the paper
demonstrates
 DC retirement accounts, however, have greater potential
for recovery and growth among younger groups
 Dushi, Iams, and Tamborini (2013); Gustman,
Steinmeier, and Tabatabai (2013, 2014)
Changes in Social Security Claiming
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 Good news…

Social Security provides a steady, stable stream of income to partially offset lost wages of
older insured workers

Nearly four-fifths of long-term unemployed workers received Social Security benefits after
the Great Recession

Some workers may need to work longer and delay claiming, thus increasing their Social
Security benefit
 (Potentially) bad news…

Some older workers displaced by the Great Recession may have claimed Social Security
earlier than they otherwise would have, leading to permanently lower monthly Social
Security benefits

Workers in their 50s and facing long-term unemployment may claim Social Security upon
reaching age 62, perhaps earlier than planned, and suffer permanently lower monthly Social
Security benefits
 The model in this paper finds a rise in claiming probability in recession periods.
Perhaps the analysis could be expanded to look at distributional effects on
retirement income security for early claimers and delayed claimers.
Final Thoughts
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 Very thorough analysis
 Exploits comparative strengths of available data
sources

CPS for unemployment and poverty, SCF for wealth, SIPP for
income and longitudinal analysis
 Can tinker around the edges, but should be required
reading for anyone studying the economic effects of
the Great Recession