0. How Does the Changing Role of Women Affect Social Security?
April Yanyuan Wu and Alicia H. Munnell (Center for Retirement Research at Boston College), Nadia Karamcheva (Urban Institute), and Patrick Purcell (Social Security Administration)
14th Annual Retirement Research Consortium Conference
Washington, DC
August 3, 2012

1. Changing role of women: labor supply
Labor Force Participation, by Marital Status
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.

2. Changing role of women: earnings
Ratio of Median Wife’s to Husband’s Lifetime Earnings
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.

3. Changing role of women: marital patterns
Percent of Women Married, by Age
Projected
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.

4. Research question
How do the changing lives of women affect Social Security replacement rates and the program’s finances?
Trends in replacement rates
A broad range of cohorts, from Depression to Generation X
By marital status and income distribution
Decompose differences into contributing factors
Estimate the impact of changes on Social Security’s finances

5. Preview of results Decline in Social Security replacement rates
13 percentage points between the 1930s cohort and GenXers
Changes vary by martial status and income distribution
Smallest among the never married
Largest for couples with husbands’ earnings in top tercile
Factors explaining the drop in replacement rates
Increased labor supply and earnings: > 1/3
Changing marital pattern: relatively small impact
Increased FRA and changing claiming behaviors: 1/3
The ratio of benefit to contribution has declined: 22 percent

6. Data Health and Retirement Study (HRS) Original HRS (1931-1941)
War Baby (WB, )
Early Baby Boomers (EBB, )
Modeling Income in the Near Term (MINT)
Middle Baby Boomers (MBB, )
Late Baby Boomers (LBB, )
Generation X (GX, )

7. Methods
The replacement rate: Social Security benefit/career average indexed earnings (AIME)
Construct lifetime earnings profile
HRS: Gustman and Steinmeier (2001); Coe et al. (2012)
MINT: simulate the whole earnings profile
Estimate Social Security benefits
Marital status at time of first receipt of benefits
Calculate replacement rates at time of first benefit receipt
Individual level
Household level

8. Changes in replacement rates: current retirees
Estimated Replacement Rates, Household Level
Household type 
HRS
War Baby
Early Boomer
Weighted average
46%
40%
39%
Never married
45%
38%
42%
Currently married
44%
Widowed
59%
54%
51%
Divorced
47%
Source: Authors' calculations using the University of Michigan. Health and Retirement Study. Ann Arbor, MI.

9. Changes in replacement rates: current retirees (cont’d)
Estimated replacement rates (median, single-earner households)
HRS
War Baby
Early Boomer
Husband's earnings
Low
72%
79%
76%
Median
54%
49%
51%
High
47%
38%
40%
Estimated replacement rates (median, dual-earner households)
44%
46%
42%
36%
31%
30%
Source: Authors' calculations using the University of Michigan. Health and Retirement Study. Ann Arbor, MI.

10. Changes in replacement rates: projection
Estimated Replacement Rates, Household Level
Household type
HRS
HRS
War Baby
Early Boomers
Middle Boomers
Late Boomers
Generation Xers
Weighted average
50%
48%
45%
44%
39%
Never married
47%
43%
40%
Currently married
42%
41%
37%
36%
Widowed
64%
61%
60%
55%
53%
Divorced
52%
46%
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.

11. Explaining differences over time
Factors contributing to the changes over time:
Labor force participation
Marriage pattern
And…changes in FRA and claiming behaviors

12. Comparison of replacement rates
Actual Claiming Age vs. Claiming at FRA
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC. 12

13. Oaxaca-Blinder decomposition Explained Unexplained
X: labor force; marital status; claiming behaviors 13

14. Explaining differences over time
Decomposition: Actual Gaps in Replacement Rates, All Households
1/3
1/3
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.

15. Explaining differences over time (cont’d)
Percent of Actual Change
Changes between HRS1 and GenX
Actual changes in gap
Demographics
Claiming behaviors
Labor supply
Spouse’s demographics
Spouse’s claiming behaviors
Spouse’s labor supply
Unexplained
Married
0.1
1.7%
23.1%
25.5%
0.3%
18.2%
28.2%
3.0%
Widowed
0.2
7.3%
26.0%
55.9%
11.2%
Divorced
0.0%
50.2%
46.7%
2.9%
Never married
-0.4%
56.6%
41.8%
2.0%
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC.

16. Impacts on Social Security Finances
Median Ratio of Present Value of Benefits over Taxes across Cohorts
HRS
HRS
War Baby
Early boomers
Middle boomers
Late boomers
Generation X
All
1.6
1.4
1.3
1.2
Never married
Married
1.5
Widowed
2.6
2.5
2.0
Divorced
1.7
Source: Authors calculations using U.S. Social Security Administration. Modeling Income in the Near Term, Versions 5 and 6. Washington, DC. 16

17. Conclusions
Replacement rates have declined and will continue declining for future retirees
Increased labor supply explains over 1/3 of the decline over time
Marital patterns: significant but small impact
Changes in FRA and claiming behaviors also play an important role 17