The Earnings Test and Work Patterns: Experiences of Canada and the United States
Tracy, Martin Booth
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https://hdl.handle.net/2142/71480
Description
Title
The Earnings Test and Work Patterns: Experiences of Canada and the United States
Author(s)
Tracy, Martin Booth
Issue Date
1982
Department of Study
Social Work
Discipline
Social Work
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Social Work
Abstract
A stated policy goal in the United States is to increase the labor force participation rates among men ages 65-69 as a means of alleviating the long-term financial difficulties of the old-age pension program under social security. It is widely held that eliminating the earnings test will contribute to this goal because people respond to economic incentives. The purpose of this study is to empirically examine what has happened when the earnings test has been liberalized in the United States and completely removed in a country with similar socio-economic characteristics, in this case Canada.
This study examines the influence of the earnings test and other pension-related variables on the labor force participation rates of men ages 65-69 from 1960 to 1980 in the United States and Canada. The central question addressed was: did labor force participation rates of men ages 65 and over increase following the elimination of the earnings test in Canada?
It was found that the elimination of the test in Canada led to lower, not higher, labor force participation rates of men ages 65-69. This was because the availability of a pension at age 65 served to institutionalize that age as the normal retirement age.
The experiences of both countries support prior research that shows that the age of first eligibility and level of benefits are instrumental in the retirement decision. It does not support previous findings that eliminating the earnings test will increase labor force participation rates of older men.
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