Removing the Disincentives in Social Security for Long Careers

Abstract

The U.S. labor market has proved to be very flexible in absorbing new workers as evidenced by its ability to accommodate large numbers of workers as women entered the labor force in the past few decades, and the economy has benefited greatly as a result of the larger workforce. There are a number of features of Social Security that distort incentives toward increased retirement length by imposing high implicit tax rates on longer careers and working at older ages. By eliminating the disincentives against working longer careers, the good fortunes of increasing life expectancy and favorable health status can be capitalized on the good fortunes by paving the way for more capable individuals to stay in the labor force.

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