Does The Social Security Earnings Test Affect Labor Supply And Benefits Receipt?
) (Center for Retirement Research at Boston College) Peter Orszag Abstract On April 7, 2000, President Clinton signed into law the ìSenior Citizens Freedom to Work Act of 2000,î which eliminated the unpopular earnings test that applied to those over the Social Security normal age of retirement (currently age 65). The earnings test, a version of which still applies to those ages 62-64, reduces immediate payments to beneficiaries whose labor income exceeds a given threshold. Although benefits are subsequently increased to compensate for any such reduction, the earnings test is typically viewed as a tax on working. As a result, it is commonly viewed as an important disincentive to paid work for older Americans. For example, when President Clinton signed the legislation that removed the earnings test for beneficiaries at or above the normal retirement age, he noted, ìbecause of the Social Security retirement earnings test, the system withholds benefits from over 800,000 older working Ameri
