Essays on intragenerational and intergenerational inequalities in the social security program and their implications

Abstract

This dissertation consists of three studies concerning intragenerational and intergenerational inequalities in the Social Security Program caused by different mortality rates across age cohorts and racial groups. The first study estimates the net marginal social security tax rate for black and white populations of the United States. The study shows that the differential mortality between racial groups reduces the progressivity of the effective social security tax rate, but does not fully eliminate it. The effective marginal tax rate differences may potentially impose distortionary effects on labor supply and affect labor distribution within the household. The second study concerns the inequality of the Social Security Program across future cohorts which is generated by rules fixed for all cohorts and constantly declining mortality. Imposing intergenerational equality through individual retirement age for each cohort, the study solves the retirement age schedule for cohorts in 2005-2080. The Social Security Trust Fund is expected to be solvent if the retirement age for the current cohort is set at 66 years. The Lee-Tuljapurkar stochastic forecasting model is used to obtain this result. The third essay concerns the equality of Social Security benefits across age cohorts in the past. The retirement age for each cohort retiring during 1957 through 2005 is calculated based on the equality of benefits. The study shows that there would not be the current financial pressure on the Social Security Trust Fund and 1983 reforms would be likely unnecessary.