The Social Security Earnings Test Removal. Money Saved or Money Spent by the Trust Fund?

by Giovanni Mastrobuoni; WP CeRP N° 51/06



Beneficiaries of Social Security face restrictions on how much they can earn without incurring the earnings test (ET). In 2000, President Clinton eliminated the ET between age 65 and 70. In this paper I evaluate how this removal impacts the long-term finances of the Trust Fund. I find that starting in 2006 the Social Security Administration is actually saving money and that the removal appears to be Pareto-efficient. A removal of the remaining part of the ET is likely to be even less costly and to produce larger increases in labor supply and contributions.


September 2006


WP_51.pdf (PDF document — 965 KB)