Reationship Between the Retirement, Disabiity, and Unempoyment Insurance Programs The US Experience by Virginia P Reno and Danie N, Price* This artice was prepared initiay for an internationa conference of socia security program administrators and researchers They examined the reasons for, and impications of, a recent trend in severa European countries toward making it easier to quaify for retirement or disabiity benefits as a way of aeviating ong-term unempoyment The artice notes that the United States has not foowed this trend Instead, this country has continued to use temporary extensions of unempoyment insurance benefits as a way to hep the ong-term unempoyed during recessionary periods Since the mid-1970 s, the emphasis in retirement and disabiity insurance programs has been to strengthen the financia integrity of these programs rather than to expand eigibiity Described here are the progression of extended benefit provisions of unempoyment insurance through the most recent recession, the historica deveopment of eary retirement features in the socia security program, and the more recent attention that has been paid to the financing issues that have payed a centra roe in egisation during the ate 1970 s and eary 1980 s Unempoyment experience and trends toward eary retirement are examined, aong with the roe of pubic and private empoyee pension pans that suppement socia security retirement benefits Preiminary data from the Socia Security Administration s New Beneficiary Survey show the prevaence of such pension coverage for recent retirees and the extent b which these pension benefits were caimed before norma retirement age Persistent, high rates of unempoyment have been a serious concern in the United States as we as in other highy industriaized countries The recent trend in some European countries has bekn to extend eigibiity under * Reno is Director of the Program Anaysis Staff, Office of Research, Statistics, and Internationa Poicy (ORSIP), Office of Poicy, Socia Security Administration, and Price is an ORSIP anayst This artice is based on a paper prepared by the authors for presentation by John J Carro, then Acting Director of ORSIP, at the Research Conference on Interreationships Between the Socia Contingencies of Unempoyment, Iness, Invaidity and Od Age, conducted by the Internationa Socia Security Association on September 11-13, 1984, in Vienna The authors wish to acknowedge the hep of Linda Drazga Maxfied, who provided data from the New Beneficiary Survey for this anaysis, and Say Sherman, who assisted in assembing research materias for it For the proceedings of the Research Conference, see Socia Security, Unempoyment and Premaure Retirement (Studies and Research Series, No 22), Internationa Socia Security Association, Geneva, Switzerand, 1985 programs traditionay designed for the retired or the disabed as a way to aeviate unempoyment The US response to high unempoyment has foowed a more traditiona approach-that is, to maintain separate, categorica remedies to hep the ong-term unempoyed and to reject poicy options to expand eigibiity under pubic retirement or disabiity programs The United States experienced high unempoyment eves during the mid-1970 s and eary 1980 s that were unprecedented since the depression of the 1930 s In 1983 and 1984, however, unempoyment rates were again decining (chart 1) Despite unprecedented peaks in unempoyment over the past decade, the number of empoyed persons has grown, from 808 miion workers in 1970 to 1025 miion in 1983 Contributing to the growth of the US workforce are 24 Socia Security Buetin, May 1985/Vo 48, No 5
Chart 1 - Quartery unempoyment rates for tota US civiian abor force and for oder workers, 1965-84 Unempoyment rate percent) 10 9 a 7 6 ; s 8, **, + Age 16 or oder - 9 * = f ; b 1966 1968 1970 1972 1974 1976 1978 I 982 1984 Socia Security Buetin, May 1985/Vo 48, No 5 25
the arge number of persons born in the 20 years foowing Word War II This baby-boom generation reached aduthood and joined the workforce in the 1970 s and eary 1980 s In addition, growing proportions of women have been entering and remaining in the workforce The arge number of new workers has chaenged the capacity of the US economy to provide enough jobs, particuary in economic downturns The recent economic recovery, however, has brought a decine in unempoyment from a high of 106 percent in the ast quarter of 1982 to 71 percent in June 1984 This artice describes the response of US socia insurance programs to the economic probems of the 1970 s and eary 1980 s The poicy response has been to maintain separate and distinct remedies for unempoyed workers in the unempoyment insurance program and to enact changes in the od-age, survivors, and disabiity insurance (OASDI) program to stabiize both the ongterm and short-term financing of those programs The first section of this artice describes the US unempoyment insurance program and documents the ways in which temporary extensions of unempoyment benefits have been provided in every major recession since the ate 1950 s It aso describes briefy the experience of oder workers under the unempoyment insurance program and changes that recenty have been introduced to imit payment of unempoyment benefits to oder workers who receive retirement benefits The second section, which summarizes OASDI poicy changes, notes that the United States has not expanded eary retirement provisions under the socia security program since 1961, when reduced benefits were first made avaiabe to men at age 62 The 1961 change was made, in part, to hep aeviate unempoyment of oder men during the 1961 recession But during the 1970 s and eary 1980 s, when the United States again experienced high rates of unempoyment, both ong-range and short-range OASDI financing probems required attention and forestaed any interest in expanding eary retirement options In fact, the 1983 Amendments to the Socia Security,Act changed future retirement-age poicy to encourage ater retirement and, in that way, to hep contro the ong-range cost of the program The OASDI program is financed amost excusivey from earmarked taxes, primariy payro taxes evied equay on empoyees and empoyers A sound ong-term baance between projected revenues and projected program costs is essentia in maintaining pubic confidence in the program The third section reports briefy on US retirement trends during the 1970 s and eary 1980 s and notes that an increasing proportion of men are eaving the abor force before age 62, even though socia security poicy has not been changed to encourage such a trend The fourth section describes briefy the private and pubic empoyee pension systems in the United States These pension pans, which typicay are designed to suppement socia security, often provide retirement benefits before age 62 The section aso presents findings from the Socia Security Administration s New Beneficiary Survey indicating that significant numbers of men and women who draw retirement benefitsunder socia security have begun receiving other pensions before age 62 Unempoyment Compensation- Poicy Responses Unempoyment rates in the United States decined throughout most of 1983 and again in 1984 The 71- percent rate of June 1984 was sti higher than desirabe, but was ceary an improvement over the 106-percent rate experienced in the ast quarter of 1982 The recent high unempoyment rates prompted government action, resuting in Federa Suppementa Compensation, a temporary extension of unempoyment insurance benefits to hep the ong-term unempoyed This section briefy describes the current unempoyment insurance system, the evoution of programs that extend benefit duration when unempoyment becomes severe, and the reationship of unempoyment insurance to probems experienced by oder unempoyed workers The Basic Unempoyment Insurance System Unempoyment insurance is a Federa-State program estabished by the Socia Security Act of 1935 Each State operates its own program under its own aw within nationa guideines Standards are set under the Federa aw to assure that each State participating in the program has an insurance system that is financiay sound and fairy administered There are no Federa requirements concerning benefit amount or duration Federa oans are avaiabe to the States when their own funds are inadequate to meet current caims for benefits Benefits are financed from State taxes paid by empoyers on workers earnings up to an annua maximum A few States aso tax empoyees The tax rate varies by industry and empoyer, according to the firm s previous experience in maintaining a stabe workforce Funds for administration are provided through a Federa payro tax on empoyers The Federa payro tax rate was 35 percent of covered earnings of the empoyer s workers through 1984 However, empoyers coud credit toward the Federa tax (up to 27 percent of the 35 percent) the State tax payments and savings under their pan for maintaining abor-force stabiity After December 31, 1984, the Federa tax rate increased to 62 percent and the maximum credit rose to 54 percent, so the net Federa tax continues to be 08 percent 26 Socia Security Buetin, May 1985/Vo 48, No 5
The main objective of unempoyment insurance is to provide, as a matter of right, partia wage repacement for temporary periods of invountary unempoyment * It aso is intended to stabiize the economy during recessions by maintaining purchasing power, and prevent the dispersa of an empoyer s trained workforce, the sacrifice of skis, and the breakdown of abor standards during temporary unempoyment About 97 percent of a wage and saary workers are covered by unempoyment insurance Most of these persons are covered under the State programs, athough specia Federa programs protect Federa empoyees, members of the miitary, and rairoad workers Some persons fai to meet the coverage or eigibiity requirements needed to receive benefits because they have an insufficient attachment to the abor force-such as some farm, domestic, and casua workers-or are new job entrants Sef-empoyed workers are excuded from the aw To receive unempoyment benefits whie out of work, a covered individua must meet eigibiity criteria In genera, the worker must have been empoyed in at east two quarters during a recent period, caed the base period, and have earned specified minimum doar amounts or have worked for a specific number of weeks; show that he or she is abe and wiing to take a job; and be invountariy unempoyed Benefits may be postponed, reduced, or canceed under certain conditions of vountary job separation, discharge for misconduct, refusa of a suitabe job offer, or unempoyment due to a abor dispute, receipt of other income, or seasona unempoyment A weeky benefit is generay payabe in most States after 1 uncompensated waiting week Some States do not require a waiting period The benefit generay amounts to about haf the worker s wage, with a somewhat higher proportion going to ower paid workers in some States and an additiona dependents aowance avaiabe in 13 of the 50 States and the District of Coumbia In a the States, the weeky benefit may not exceed a specified State maximum amount This maximum is indexed with changes in wages in 35 of the States Benefits are most commony payabe for a maximum of 26 weeks, though the potentia duration may be shorter in most States if the worker has had insufficient attachment to the abor force Benefits have been extended beyond the 26-week duration of the basic pro- Unempoyment Insurance for the Long-Term Unempoyed Athough unempoyment insurance is basicay intended to provide a partia, wage-reated benefit for short-term temporary periods of unempoyment, cycic changes in the economy and recognition of structura unempoyment have caused the Federa Government to extend the duration of benefits a number of times during the past 25 years This section documents the ways in which the Federa Government has provided extensions of unempoyment insurance benefits in every major recession since 19582 Temporary program of Federa oans to States, 195849 During the recession of 1958-59, the 1958 Temporary Unempoyment Compensation Act provided a vountary program under which States coud make agreements with the Secretary of Labor to extend benefits for up to 13 additiona weeks to workers who had exhausted their reguar benefits (which usuay ast 26 weeks) The extended benefit amount was the same as the reguar amount The program was financed by interest-free oans from the Federa Government, to be repaid ater by the States Seventeen States participated in the program and another five paid additiona benefits under their own programs In a, $600 miion was paid in extended benefits during 1958-59 to 2 miion workers in the 22 States3 Participation was imited because of the repayment requirement Temporary program of extended benefits, 1961-62 During the 1961 recession, the Temporary Extended Unempoyment Compensation Act (TEUC) of 1961 extended benefits nationwide for up to 13 weeks to persons who had exhausted benefits under the reguar program The TEUC program was financed by a temporary addition to the Federa unempoyment insurance payro tax It paid $817 miion in benefits during 1961-62 to about 28 miion persons Permanent program of extended benefits activated by high unempoyment, 1970 to date The Extended Unempoyment Compensation Act of 1970 was the cumination of a number of bis considered during the 1960 s to initiate a permanent program of extended benefits The Extended Benefit (EB) program in 1970 foowed the earier pattern of exteiiding the worker s weeky benefit for up to 13 weeks beyond the reguar benefit duration of 26 weeks The EB program is financed by unempoyment insurance payro taxes, haf from the Federa and haf from the State tax A States are required to participate Under the origina program, extended benefits were activated nationay when the nationa insured unem- gram a number of times during economic downturns 2 Nationa Commission on Unempoyment Compensation, Fina Report, Juy 1980 1 Wiiam Haber and Merri G Murray, Unempoyment Insurance 3 Data on benefits paid are from unpubished tabuations by the in the American Economy, 1966, page 26 Unempoyment Insurance Service, Department of Labor Socia Security Buetin, May 1985/Vo 48, No 5 27
poyment rate reached a specified eve and were deactivated when the rate fe beow a certain eve Even if benefits had not been activated nationay, they coud have been paid in an individua State if that State experienced unusuay high unempoyment From 1972 to 1975, Congress enacted temporary changes in the specific provisions for activating and deactivating the program In 1981, the permanent EB program was narrowed in scope so that it now is activated ony on a State-by-State basis; it is not activated nationay And the State unempoyment eves that activate the program were raised The EB program has paid benefits every year since 1970 Tota payments through 1983 amounted to $172 biion, about the same as the combined amount of a the temporary extended benefit programs before and since the advent of the EB program Even with the EB program, adverse empoyment conditions during the 1970 s prompted the Federa Government to enact further extensions of benefits Temporary program of suppementa benefits, 1971-72 The Emergency Unempoyment Compensation Act of 1971 provided an additiona 13 weeks of benefits beyond the EB period (for a tota of up to 52 weeks of benefits) in States that experienced particuary adverse unempoyment conditions Neary $600 miion was paid in 197-72 Temporary program of suppementa benefits, 1974-78 The Emergency Unempoyment Compensation Act of 1974, pus three subsequent amendments, estabished the Federa Suppementa Benefits (FSB) program, which paid benefits from 1975 through eary 1978, This program provided a onger benefit duration than ever before, up to a tota of 65 weeks The fina amendments to this program provided for genera revenue financing, instead of the payro tax financing that had characterized a previous programs of extended benefits Benefits amounting to more than $65 biion were paid under the program Temporary program of benefits for the uninsured, 1974 In 1974, the Emergency Jobs and Unempoyment Assistance Act estabished a temporary program, not to extend benefits for insured workers, but to provide unempoyment assistance to workers who were not covered under the reguar program This program, financed from genera revenues, heped farm workers, domestic workers, and State and oca government workers and paid $25 biion in benefits Experience with this program ed to coverage of these groups under the reguar Federa-State system Temporary program of suppementa benefits, 1982-85 In 1982, the Federa Suppementa Compensation (FSC) program was enacted to provide benefits to workers who exhausted their reguar and extended benefits Through March 1985, 8-14 weeks of FSC were payabe (pus extra benefits under certain circum- stances) Because extended benefits were paid ony on a State-by-State basis, some workers start receiving FSC benefits directy after exhausting their reguar benefits FSC benefits were financed from genera revenues About $75 biion was paid through March 1984 As of March 1985, when the program ended, ony three States were paying extended benefits under the permanent program, but a the States were paying FSC benefits Unempoyment and Oder Workers In genera, unempoyment rates for oder workers are ower than for the US workforce as a whoe As shown in chart 1, historica unempoyment rates for workers aged 55-64 and for workers aged 65 or oder have remained consideraby beow tke rates for the entire workforce aged 16 or oder In the ast quarter of 1982, when the nationa unempoyment rate reached 106 percent, the rate for workers aged 55-64 was 53 percent and that for workers aged 65 or oder was 34 percent In recent years, the highest rates of unempoyment have been experienced by young workers-teenagers and persons in their eary twenties-as the foowing annua average unempoyment rates for 1982 and 1983 show Aages16oroder ( 16-19,,,,,,, 20-24 25-54 55 or oder The young unempoyed incude a arge number of abor-force entrants and reentrants The unempoyment insurance program provides benefits to workers who ose their jobs and generay does not pay benefits to persons who ack recent covered work experience The insured unempoyment rate is used to measure experience under the unempoyment insurance program and is cacuated as the proportion of workers covered under the program who fie for unempoyment insurance benefits Oder workers generay account for a arger proportion of the insured unempoyed than they do of t he tota unempoyed popuation Danie S Hammermesh estimated that about 10 percent of the unempoyed in 1977 were aged 55 or oder but that 16 percent of those caiming unempoyment insurance were concentrated in those ages4 Thus, the oder unempoyed appear to be more ikey than their younger counierparts to receive unempoyment insurance benefits During the 1970 s, however, oder unempoyed workers were ikey to experience onger spes of unem- 4 Danie S Hammermesh, Unempoyment Insurance and the Oder American, WE UpJohn Institute for Empoyment Research, 1980, pages 4-6 Socia Security Buetin, May 1985/Vo 48, No 5
poyment before finding work than was the case for than benefits under State aw, and for an additiona their younger counterparts During the period 1968-81, duration of benefits, for a combined State and TRA men aged 60 or oder experienced an average of 16 duration of up to 52 weeks An additiona 26 weeks of weeks of unempoyment before finding work, whie benefits was provided for individuas who were in remen aged 25-44 searched an average of 12 weeks before training programs and for workers who were at east 60 doing SO~ years od Data from the extended benefit programs show whether oder workers are more ikey than their younger counterparts to exhaust their reguar benefits and turn to the specia extended benefit programs During the recent economic downturn, oder workers did not In 1981, the weeky TRA aowance was set at the same amount as for reguar State benefits and the basic duration was imited to 26 weeks An additiona 26 weeks of benefits are payabe to workers in retraining, but overa duration is imited to 52 weeks The oder appear to rey disproportionatey on the extended worker benefit was eiminated benefit programs In Juy-August 1983, for exampe, persons aged 50 or oder accounted for 194 percent of those receiving reguar unempoyment insurance benefits but ony 167 percent of those receiving extended benefits under the Federa Suppementa Compensation program j Simiar resuts are found in a March 1984 study of FSC recipients for the US Department of Labor That study found that The age and sex distribution of FSC recipients was quite simiar to the distribution of unempoyment insurance recipients who did not receive these extended benefits This finding contrasts with the experience in the 1974-75 recession when extended benefit recipients were more ikey to be oder and more ikey to be women than other groups of the insured unempoyed During the 1960-61 recession, caimants under the extended benefit program were oder than the recipients of reguar program benefits8 Thus, the experience during the 1982-83 period represents a departure from experience in both the 1974-75 and 1960-61 periods, when recipients of extended benefits tended to be oder than the recipients of reguar unempoyment benefits Trade Adjustment Assistance Between 1974 and 1981, a Federa program provided extended unempoyment benefits to oder workers (those aged 60 or oder) whose job oss was caused by imports These extended benefits for oder workers were part of a package of benefits and specia aowances for workers of a ages to assist in retraining, job search, and reocation expenses when their unempoyment was attributabe to internationa trade In 1974, the Trade Readjustment Aowances (TRA s) provided for an augmented weeky unempoyment benefit, generay higher s Phiip L Rones, The Labor Market Probems of Oder Workers, Monthy Labor Review, Department of Labor, May 1983, page 7 6 Background Materia and Data on Programs within the Jurisdiction of the Committee on Ways and Means, US House of Representatives, February 21, 1984, page264 Water Corson, Characteristics of FSC I/II Recipients, Mathematica Poicy Research, March 1984, page 2 * The Long Term Unempoyed, Comparison with Regtar Unempoyment Insurance Caimants, Specia TEUC Report Number 3, November 1965, page 12 Unempoyment Benefits and Retirement Benefits In recent years, concern had been expressed that payment of unempoyment benefits to retired workers was unjustified based on the concept that retired workers are no onger in the abor force In response to this concern, Congress enacted a provision to offset unempoyment benefits against retirement benefits Proposas have aso been made to extend additiona unempoyment benefits to oder workers to encourage them to remain in the abor force instead of retiring eary No action has been taken on these atter proposas Offset between unempoyment and retirement benefits Congress enacted in 1976, and amended in 1980, a provision to offset unempoyment insurance benefits doar for doar by any pension the caimant receives from his or her previous empoyment9 The offset appies to socia security retirement benefits as we as to private pensions States have some atitude in determining how to appy the offset It must appy if the private pan was provided by the same empoyer who provided unempoyment insurance coverage for the worker and if the recent work for that empoyer (in the unempoyment insurance base period ) counted toward the worker s pension rights As of January 1984, many of the States appied the offset on a broader basis than required by the Federa aw In 22 States, the offset is appied even if the immediate work for the empoyer did not enhance the worker s pension In five other States and the District of Coumbia, the offset is appied to any private pension The aw requires that socia security retirement benefits aso serve to reduce the unempoyment benefit amounts even if socia security coverage in the base period did not enhance the worker s socia security benefit amount The Federa aw aows each State to take into account the effect of empoyee contributions to pension pans in determining how to appy the offset 9 Unempoyment Compensation Amendments of 1976 (Pubic Law 94-566) and Mutiempoyer Pension Pan Amendments Act of 1980 (Pubic Law 96-364) Socia Security Buetin, May 1985/Vo 48, No 5 29
The offset appies ony to retirement benefits based their husbands retired, and to women who became on the worker s own empoyment, not to spouse or sur- widowed before age 65 Athough the Congress recogvivor benefits It is sti to be resoved whether disabiity nized that job opportunities were imited for oder benefits are to be treated as pensions or, retire- women, the change was not primariy a response to ment benefits and thus be subject to the offset unempoyment I 2 Proposas to extend unempoyment benefits Proposas have been made specificay to add benefits for oder unempoyed workers to encourage them to remain in the workforce and forgo eary retirement benefits The Report of the Nationa Commission on Unempoyment Compensation recommended that an unempoyment benefit ifetime reserve program be estabished to reward the abor-force attachment of oder workers This reserve woud provide up to 52 weeks of extra benefits to those aged 60-64 after they had used up their norma unempoyment insurance entitement According to the Commission, such benefits woud be important in maintaining and making the fuest use of the skis and experience of the abor force as we as in conserving socia security funds O Another proposa outined a series of aternative provisions for giving extra unempoyment benefit protec- In 1961, when the same eary retirement option was extended to men, the United States was in a recession and the unempoyment eve had reached 7 percent Extending the eary retirement option was seen as a way to reduce unempoyment among oder workers The change was in part a response to ong-term technoogica unempoyment, recognizing that persons who ost their jobs at oder ages might never find other workt3 To imit the cost of the eary retirement option, benefits were permanenty reduced by 5/9 of 1 percent for each month of eary receipt (or 20 percent if they were caimed at age 62) The reduction in benefits for eary retirement was designed to take account of the onger period benefits woud be paid to eary retirees so that the ong-range cost of paying benefits caimed at age 62 woud be about the same as if the retiree had waited unti age 65 tion to oder workers Up to 52 weeks of extra benefits woud be made avaiabe to workers as young as age 55 This proposa, made by Steve L Barsby, aso emphasized the objective of strengthening the abor-force attachment of oder workers and deaying their receipt of socia security retirement benefits Thus far, itte if any action has been taken to impement these types of proposas The Socia Security System The basic OASDI (or socia security) program for retirement and disabiity benefits is administered separatey from the unempoyment insurance program Athough they were both part of the same origina act, the OASDI and unempoyment insurance programs are administered by separate Federa agencies and are considered by separate subcommittees of Congress Eary Retirement Options Rationae Eary retirement with actuariay reduced benefits before age 65 under socia security was first made avaiabe in 1956 for women and in 1961 for men No program changes since then have expanded the eary retirement options In 1956, the option for women to caim benefits as eary as age 62 was prompted mainy by a concern for extending benefits to married women, who were often not od enough to receive benefits when 1 Nationa Commission on Unempoyment Compensation, Fina Report, Juy 1980, page 71 tt Steve L Barsby, The Unempoyment Experience of Oder Workers and the Transition to Retirement, Unempoyment Compensation Studies and Research, Voume 3, Nationa Commission on Unempoyment Compensation, Juy 1980, pages 73-33 Later in the 1960 s, when unempoyment rates had decined, poicy issues about oder workers shifted from concerns about access to benefits to the eve of their reduced eary retirement benefits Large numbers of men and women continued to caim reduced benefits before age 65, and many of the eary retirees had ow benefits even before the actuaria reduction was appied A Socia Security Advisory Counci in 1965 considered a change in retirement-age poicy to appy a ess-thanactuaria reduction in eary retirement benefits as a way to raise the incomes of oder workers who were forced into eary retirement But the Counci had reservations about the cost and side-effects of a change that might create a positive incentive to retire eary Instead of recommending the change, the Counci asked the Socia Security Administration (SSA) to conduct studies to find out why workers were caiming eary retirement benefits, how many were primary earners in their famiies, and what kinds of income eary retirees had in addition to their reduced socia security benefitsr4 SSA conducted a survey of newy entited beneficiaries in 1968-70 and found that the eary retirees were a diverse group Many men reported that they had retired invountariy because of heath or empoyment probems Others, however, were vountary eary retirees who had attractive eary retirement pensions to suppement socia security Aso, married women ac- t2 Committee on Ways and Means, US House of Representatives, Socia Security Amendments of 1955 (Report No 1189, to accompany HR 7225, 84th Cong, 1st sess), Juy 14, 1955, pages 6-7 ts Committee on Ways and Means, US House of Representatives, Socia Security Amendments of 1961 (Report No 216, to accompany HR 6027, 87th Cong, 1st sess), Apri 7, 1961, page 5 I4 The Status of the Socia Security Program and Recommendations for Its Improvement (Report of the Advisory Counci on Socia Security), Socia Security Administration, 1965, page 57 30 Socia Security Buetin, May 1985/Vo 48, No 5
counted for a substantia portion of eary retirees and in most cases they had not been the primary earners in their famiies The study found that ow benefits were aso paid to groups other than eary retirees and, because of the diversity of the eary-retirement group, more generous eary retirement benefits woud not be the most effective way to raise benefits of ow-income retirees Increased Benefits in 1972 The year 1972 marked a watershed in the deveopment of the socia security retirement and disabiity benefits program Concern about the ow benefits of the retired and disabed, together with the reative prosperity of the 1960 s-which made increases seem affordabe-cuminated in egisation in 1972 that Extended Medicare to the disabed The Medicare program, which provides hospita and medica insurance, was enacted for the aged in 1965 The 1972 change extended this protection to persons who have been on the disabiity insurance ros for at east 2 years Provided a 20 percent benefit increase across the board for the retired, disabed, and their dependents and survivors Provided further ad hoc increases totaing 11 percent in the foowing 2 years Provided for automatic cost-of-iving increases in benefits, based on the Consumer Price Index, beginning in 1975 Created a Federa suppementa security income program, which provides a nationa foor of income for the aged and disabed These were the ast major changes that were designed soey to raise the eve of benefits across the board Later in the 1970 s, when the United States, ike most European countries, experienced high eves of unempoyment, the socia security retirement and disabiity programs were experiencing both ong-range and shortrange financing probems In this context, unempoyment was seen as one of the causes of the financing probems for the retirement and disabiity insurance programs, rather than as a probem to be soved by these programs Financing Probems and Remedies Since the Mid-1970 s The major preoccupation in socia security poicy since the mid-1970 s has been the financing of the 15 Virginia P Reno, Background of the Survey and Summary of Findings, in Reaching Retirement Age Findings From a Survey of Newy Entited Workers, 1968-70 (Research Report No 47), Office of Research and Statistics, Socia Security Administration, 1976, page 3 OASDI Trust Funds The program trust funds are financed amost excusivey from earmarked taxes, primariy payro taxes from empoyees and empoyers By aw, the funds cannot draw on genera revenues to make up deficits The OASDI payro tax rate is currenty 57 percent of earnings up to $39,600 for both empoyees and empoyers The eve of earnings subject to the tax is indexed by wage growth Short-range financia imbaances occur when annua benefit outays rise faster than the payro tax revenues used to finance them A rise in unempoyment reduces the fow of payro tax revenues into the trust funds and can increase outays as unempoyed oder workers caim retirement benefits earier than they otherwise might have In the 1950 s and 1960 s, trust fund reserves had covered the fuctuations in cash fows caused by cycica unempoyment But, in the 1970 s, benefits were aso rising because of ad hoc and then automatic increases to keep pace with infation When both unempoyment and infation reached historicay high eves in the mid- 1970 s and again in the eary 1980 s, trust fund reserves were no onger adequate Legisative action was needed to remedy the short-run imbaance between revenues and outgo At the same time, probems in ong-range financing received increased attention Long-term financing projections are an integra part of the on-going evauation of the OASDI program in the United States Sound financing in the ong, as we as the short, term is important in maintaining pubic confidence in the program Each year, the Board of Trustees of the OASDI programs issues a report to Congress on program financing, and incudes 75-year projections of income and outgo to the trust funds Any significant imbaance between income and outgo is a cause for concern by program administrators, Congress, and the pubic Three factors contributed to ong-term financing concerns during the 1970 s and each cuminated in egisation to contro the future growth of the program Method of indexing benefits First, it quicky became cear that the ong-term impications of the automatic indexing provisions enacted in 1972 were highy dependent on the reationship between assumed wage and price growth over the ong term This occurred because of a faw in the way in which benefits had been indexed for infation in 1972 Under that method, if infation were to account for a arge share of future wage growth, then initia benefits for new beneficiaries in the future woud rise more rapidy than their previous earnings Their rising repacement rates (benefits as a percentage of previous earnings) meant that benefit costs woud rise more rapidy than payro-tax revenues On the other hand, if infation were to account for ony about haf of future wage growth, then future benefit costs and payro-tax revenues woud remain in reasonaby cose baance Under the historica experience of the 1940 s, Socia Security Buetin, May 1985/Vo 48, No 5
1950 s, and 1960 s, the atter scenario seemed reasonabe But the persistent, high rates of infation in the mid- 1970 s indicated that revised assumptions were needed With revised assumptions about wage and price growth, the retirement and disabiity insurance programs woud be in serious, ong-term imbaancer6 Revised assumptions were incorporated in the 1975 Trustees Report and the ong-term financing probem became evident in the officia projections Tabe 1 shows how the projected ong-range costs of the OASDI program rose as ong-range assumptions were revised between 1973 and 1976 Athough unempoyment was high in 1975 and 1976, the beak, ong-term financing picture for the OASDI program discouraged any interest in iberaizing retirement or disabiity insurance benefits to aeviate unempoyment Legisjation enacted ate in 1977 was designed to remedy both the short-term and the ong-term financia imbaance in the OASDI program by Raising payro-tax revenues by increasing the payro-tax rate between 1981 and 1990 and by raising the maximum eve of earnings subject to the payro tax Modifying the method of indexing benefits to take account of infation The change in the method of indexing benefits sti provided that beneficiaries on the ros woud receive automatic benefit increases that kept pace with infation The change corrected the method of adjusting benefits for new retirees so that initia repacement rates woud 161974 Annua Report of the Board of Trustees of the Federa Od- Age and Survivors Insurance and Disabiity Insurance Trust Funds (House Document No 93-313,93rd Cong, 2nd sess), 1974, page 45, and Oro R Nichos and Steven F McKay, The Effect of the 1976 Automatic Benefit Increase on Dynamic Projections of Benefits (Actuaria Note No 90) Socia Security Administration, August 1976 remain stabe for the successive cohorts of new retirees Growth in the disabiity insurance ros A second major factor contributing to concern about socia security financing during the mid-1970 s invoved the dis- abiity program The disabiity insurance program experienced unprecedented growth in the eary and mid-1970 s The rapid growth in the program was unexpected because the test of disabiity in the program is quite strict The program is not designed to pay benefits to abe-bodied unempoyed persons or to persons with ony margina impairments Under the aw, disabiity insurance benefits are payabe ony if the appicant is insured and is unabe to engage in any substantia gainfu work by reason of a medicay determined physica or menta impairment that is expected to ast at east 12 months or resut in death The impairment must be so severe that the appicant is not ony unabe to do his or her previous work, but cannot, considering age, education, and work experience, engage in any kind of substantia gainfu work that exists in the nationa economy, regardess of whether a specific job vacancy exists for the individua, or whether he or she woud be hired upon appication for the work With no change in the disabiity insurance benefit eigibiity criteria, the number of persons appying for, and being awarded, benefits grew rapidy in the eary 1970 s The number of appicants grew from about 870,000 to about 13 miion between 1970 and 1974 The number of persons awarded benefits grew from 350,000 to 590,000 between 1970 and 1975 The tota number of persons receiving disabed-worker benefits grew from 15 miion in 1970 to 29 miion in 1978 This rapid growth caused a great dea of uncertainty and concern about the future size and cost of the disabiity insurance program With rising benefit eves during the 1970 s, initia benefits coud exceed predisabiity take-home pay for some disabed workers, particuary those receiving Tabe I-Long-range economic assumptions and 75-year average costs and revenue (as percentages of taxabe payro) under intermediate assumntions and nroiections in Trustees Reoorts 1973-84 Long-range assumptions 75year average (as percent of taxabe payro) Year of Trustees Report Wage Price - growth growth Expenditures Revenue Surpus or OASI D OASDI OASDI deficit 1973 50 275 941 I 54 1095 1063-032 1974, 50 30 I I 97 192 1389 IO91-298 1975 60 40 1329 297 1626 1094-532 1976 575 40 1542 351 1893 1097-796 1977 575 40 IS51 368 1919 1099 820 1978 575 40 1129 226 1355 1216 - I 40 1979 575 40 I I 47 192 1338 1219 - I20 1980 575 40 1224 15 1374 1222-152 1981 55 40 1254 I 52 1407 1225-182 1982 55 40 1259 15 1409 1227 I82 19x3 55 40 I I 46 I38 1284 1287 02 1984 56 40 1151 I45 1295 1290-06 Long-range revenue projections made in 1983 and 1984 incude revenue from taxation of benefits for high income beneficiaries These revenues account for055 percent of taxabe payro in 1983 and 056 percent tn 3984 32 Socia Security Buetin, May 1985/Vo 48, No 5
suppementa dependents benefits for their minor chidren Such high repacement rates were viewed as a possibe incentive for persons to caim disabiity insurance benefits and a disincentive for those receiving benefits to become rehabiitated and return to work In response to concern about growth of the disabiity insurance program, egisation was enacted in 1980 that was designed to (1) imit what were considered excessivey high repacement rates being paid to some categories of disabed workers, (2) create positive incentives for disabed workers to return to work and eave the benefit ros, and (3) ensure that the rues governing eigibiity for disabiity insurance benefits were accuratey administered Demographics The third important factor affecting ong-range financing of the OASDI program grew out of changes in the age composition of the popuation The arge cohort of persons born in the 20-year baby boom foowing Word War II began reaching aduthood in the mid-1960 s The rate of abor-force participation was high for young women during the 1970 s and birth rates decined As the ower fertiity rates were incorporated into ong-range projections, it became cear that the beneficiary popuation woud grow more rapidy than the working-age popuation when the babyboom cohort began reaching retirement age around 2010 In addition, mortaity experience during the 1970 s indicated a significant increase in ife expectancy after age 65 In 1983, average ife expectancy at age 65 was estimated to be 168 years 144 years for men and 189 years for women Under midde-range assumptions about mortaity improvements,!ife expectancy at age 65 is expected to increase by 2 /2 years by 2025 The average man reaching age 65 in 2025 coud expect to reach his 81st birthday, whie the average woman coud expect to reach her 87th17 The ower fertiity rate and increased ongevity after age 65 portend a sharp shift in the worker-to-beneficiary ratio Currenty, about 33 covered workers are paying into the socia security system for every 10 persons drawing benefits With the demographic shifts anticipated in the coming decades, this ratio is projected to drop to ony 20 workers for every 10 beneficiaries by 203518 Three advisory groups that convened in the ate 1970 s considered changes in socia security retirementage poicy as a way to aeviate the ong-range financia imbaance caused by the change in the ratio of workers to beneficiaries The 1979 Advisory Counci on Socia Security John C Wikin, Socia Security Area Popuation Projections, 1983 (Actuaria Study No 88) Socia Security Administration, August 1983, page 29 1s 1984 Annua Report of the Board of Trustees of the Federa Od- Age and Survivors Insurance and Disabiity Insurance Trust Funds (House Document No 98-200,9Sth Cong, 2nd sess), 1984 recommended that serious consideration be given to enacting in the near future an increase in the norma retirement age to become effective after the turn of the century I9 In March 1981, the Nationa Commission on Socia Security recommended that the eigibiity age for eary retirement benefits be raised from 62 to 65 and that the age for fu benefits be raised from 65 to 68 Both changes were to be phased in between 1998 and 201220 Aso in 1981, the President s Commission on Pension Poicy recommended a change simiar to that recommended by the Nationa Commission but suggested it be phased in 10 years earier21 At the same time that the pubic was becoming increasingy aware of the ong-range financing probems caused by the demographic crunch, the OASDI system was again experiencing short-range financing probems because of adverse economic conditions Because prices rose consideraby faster than wages in 1979 and 1980, the automatic cost-of-iving increases in benefits in 1980 and 1981 exceeded the increase in payro-tax revenues needed to finance them High unempoyment exacerbated the cash fow probem and trust fund reserves were no onger adequate In December 1981, President Reagan estabished the Nationa Commission on Socia Security Reform to make recommendations on socia security financing by December 1982 The Commission was given the charge To propose reaistic, ong-term reforms to put socia security back on a sound financia footing, and to forge a working, bipartisan consensus so that the necessary reform can be passed into aw Legisation enacted in the spring of 1983 foowed cosey the bueprint of recommendations made by that commission The egisative changes were a carefuy forged compromise of tax increases and contros over future benefit growth that Congress deemed necessary to bring the socia security system into both short-term and ong-term financia baance Major provisions 22 of that egisation incuded deaying automatic cost-of-iving increases in benefits by 6 months, so that future increases wi be paid in January, ratter than Juy; I9 Socia Security Financing and Benefits Report of the 1979 Advisory Counci, Socia Security Administration, 1979 oaee I 159 2 Socia Security in America s Future Fina Report of Ihe Nationa Commission on Socia Security, March 1981, pages 120-140 21 Coming of Age Toward a Nationa Retirement Income Poicy, President s Commission on Pension Poicy, February 26, 1981, page 46 22 John A Svahn and Mary Ross, Socia Security Amendments of 1983 Legisative History and Summary of Provisions, Socia Security Buetin, Juy 1983, pages 3-48 Socia Security Buetin, May 1985/Vo 48, No 5
acceerating schedued increases in socia security payro taxes; for higher-income beneficiaries, subjecting up to 50 percent of socia security benefits to the persona income tax, with reventpc from this tax transfered to the socia security trust funds; extending socia security coverage to newy hired Federa empoyees; graduay raising the eigibiity age for fu retire ment benefits from 65 to 67, and increasing the eary retirement reduction in benefits caimed at age 62 from 20 to 30 percent, with both changes phased in graduay between 2002 and 2027; and increasing the benefit increment for deayed receipt of retirement benefits from 3 percent per year to 8 percent per year With these changes, the OASD! system was brought into cose financia baance under the ong-range projections in the 1983 Report of the OASDI Board of Trustees (tabe 1) Whie these difficut choices about socia security financing were being considered, first by the Nationa Commission on Socia Security Reform in 1982 and then by the Congress in eary 1983, the United States was again experiencing high eves of unempoyment However, the immediate financing probems of the socia security system, and the growing awareness of adverse worker-to-beneficiary ratios in the next century forestaed any serious interest in iberaizing socia security retirement or disabiity poicy to aeviate unempoyment Concern about unempoyment entered the socia security debate ony as an argument by the minority against the gradua increase in the fu retirement benefit eigibiity age in the next century In considering the socia security amendments, however, egisators were fuy aware of the need for immediate reief for the unempoyed, for the same egisation that enacted the Socia Security Amendments of 1983 incuded provisions for extending the Federa Suppementa Compensation program for unempoyed workers who had exhausted their reguar and extended unempoyment insurance benefits Congress was aso aware of the specia probems the future deay in the retirement age might pose for oder workers and it incuded as part of the 1983 amendments a mandate for a study of the impications of that change for oder workers who, because of heath probems or arduous jobs, might not be abe to deay retirement Specificay, the mandate stated that benefit from improvements in ongevity The Secretary sha submit to the Congress no ater than January 1, 1986, a fu report on the study and anaysis incuding recommendations for the provision of protection against the risk associated with eary retirement due to heath considerations which the Secretary finds necessary or desirabe as a resut of the findings The Office of Research, Statistics, and Internationa Poicy is currenty engaged in a program of research to meet the requirements of that mandate Retirement Trends in the 1970 s Athough socia security poicy in the 1970 s was not changed to encourage eary retirement, and, in fact, future poicy was changed to encourage ater retirement, the decade of the 1970 s was one in which retirement rates of men increased The trend toward earier retirement can be seen both in terms of the proportion of oder men who are out of the abor force and in the proportion of oder men who receive socia security benefits Chart 2 shows that, from 1970 to 1983, the propor- Chart 2-Percent of eigibe men aged 62-64 receiving OASDI retirement or disabiity insurance benefits and percent of the mae popuation aged 62-64 out of the abor force, 1963-83 Percent 100 80 60 40 The Secretary [of the Department of Heath and Human Services] sha conduct a comprehensive study and anaysis of the impications of the changes made by this section in retirement age in the case of those individuas (affected by such changes) who, because they are engaged in physicay, demanding empoyment or because they are unabe to extend their working careers for heath reasons, may not Percent receiving disabiity 20 insurance benefits \,*- --=-a,*- * **,*- *- I,,,1 I II 1 II I I I I[ 0 1965 1970 1975 1980 1 Data not avaiabe for 1963-64 34 Socia Security Buetin, May 1985/Vo 48, No 5
tion of men aged 62-64 who were out of the abor force increased from 3 1 percent to 52 percent and the proportion of eigibe men of those ages who were receiving socia security eary retirement or disabiity insurance benefits grew from 34 percent to 56 percent Those out of the abor force are not seeking work and therefore are not counted as unempoyed Athough socia security retirement benefits are not avaiabe before age 62, the abor-force participation rates of men just under age 62 aso decined during the 1970 s (chart 3) Among women, any trend toward earier retirement was offset by an increase in their overa abor-force participation rate But, for men aged 60-61, the proportion out of the abor force grew from 17 percent in 1970 to 30 percent in 1983 Of even younger men, those aged 55-59, the proportion out of the abor force grew from about 10 percent in 1970 to about 20 percent in 1983 Ony a sma portion of men aged 55-59 (not more than 5 percent) receive socia security disabiity benefits The others who are out of the workforce may incude workers who have retired under systems other than socia security as we as persons who have experienced unsuccessfu attempts to find work before dropping out of the abor force Further research is needed to determine the reative size of each group Preiminary data from a recent survey, however, suggest a trend toward retirement before age 62 under pension pans other than socia security Chart 3-Labor-force by age, 1959-83 (Percent) A00 80 60 40 20 g participation rates of oder men, 0, II II 1111 1111 II I 960 1965 1970 1975 1980 Empoyee Pensions The Private Pension System Private pensions in the United States are typicay designed to suppement socia security and usuay are financed by empoyers, athough empoyees aso contribute under some pans In a, there are more than a haf miion private pension pans in the United States Many are quite sma, covering fewer than 10 empoyees, whie others cover many thousands of workers23 Each private pension pan has its own rues for computing beneftis and its own eigibiity criteria and eary retirement rues Federa aws and reguations, however, specify criteria for favorabe tax treatment of private pension pan contributions, and, in that way, infuence the broad design of private pans Some private pans are formay inked to socia security, with the avaiabiity and amount of the private pension directy coordinated with the socia security benefit structure Others are ess formay inked, but most refect the assumption that socia security wi provide the foundation of retirement income and that the private pension wi be a suppement Most private pension benefit formuas are based on ength of service and earnings under the pan A 1979 survey of private pension pan coverage found that about 50 percent of a men and 31 percent of a women who were empoyees in private industry were covered by private pensions The coverage rates were somewhat higher among oder workers of those aged 45-64, about 66 percent of the men and 43 percent of the women were covered Coverage rates are aso higher among higher-paid than ower-paid workers, and were higher among unionized workers or those in arge firms than among nonunionized workers or those in sma firms24 A 1982 Department of Labor survey of empoyee benefits indicates the prevaence of eary retirement options in pension pans of medium and arge-sized firms (empoying at east 100 to 250 workers, depending on the industry) 25 According to that survey, many pans permit norma retirement -that is, retirement with an unreduced pension-before age 65 In a, 58 percent of covered workers were in pans that woud permit retirement before age 65 with an immediatey payabe fu pension Those pans typicay specify a combination of age and ength of service under the pan to quaify for 23 Unpubished 1980 counts of the number of private empoyee pension pans, based on form 5500 and 5500~ reports fied with the Department of Labor -1 Gaye Thompson Rogers, Pension Coverage and Vesting Among Private Wage and Saary Workers, 1979 Preiminary Estimates from the 1979 Survey of Pension Pan Coverage (Working Paper No 16), Office of Research and Statistics Office of Poicy, Socia Security Administration, 1980 25 Empoyee Benefits in Medium and Large Firms, 1982 (Buetin No 2176), Bureau of Labor Statistics, Department of Labor, August 1983, pages 41-42 Socia Security Buetin, May 1985/Vo 48, No 5 35
the eary fu pension In addition, fuy 97 percent of the covered workers were in pans permitting eary retirement with reduced pensions Age 55 was the most common minimum age for receipt of a reduced eary retirement pension Pubic Empoyee Pensions In addition to the private pension system, State and oca governments aso operate more than 6,000 pension systems that provide retirement benefits to their empoyees26 State and oca government empoyees are covered under socia security if the government entity chooses to have its empoyees covered Currenty, about 70 percent of State and oca empoyees are covered under socia security and, therefore, their pensions suppement socia security In addition, separate pension systems cover civiian empoyees of the Federa Government and miitary service personne Eary retirement options before age 65, or even before age 62, are quite common in government empoyee pension systems Recent Findings on Eary Retirement Pensions The New Beneficiary Survey, conducted by the Socia Security Administration, documents the prevaence of private and pubic empoyee pensions among recent retirees Preiminary findings from this survey indicate that a significant portion of men and women who retired on socia security in the eary 1980 s had been covered by private or government empoyee pension pans on their ongest job and that receipt of such pensions before age 62-the eariest age for socia security benefits-was not uncommon Interviews in the New Beneficiary Survey were conducted in ate 1982 with a nationay representative sampe of men and women who began receiving socia security retired-worker benefits between mid-1980 and mid-198127 These data on pension provisions of the ongest job are for the retirees who were empoyees (rather than sef-empoyed persons) on that job The 20 percent of mae retired workers and 8 percent of femae retired workers who reported they had been sef-empoyed (in either incorporated or unincorporated business) are excuded Pension coverage rates were quite high among those who had been Federa, State, or oca government empoyees on their ongest job just over 90 percent of *6 The Desirabiity and Feasibiity of Socia Security Coverage for Empoyees of Federa, State, and Loca Governments and Private, Nonprofit Organizations (Report of the Universa Socia Security Coverage Study Group), Department of Heath, Education, and Wefare, March 1980, pages 151-243 ;Y Linda Drazga Maxfied, The New Beneficiary Survey An Introduction, Socia Security Buetin, November 1983, pages 3- I those men and just over 80 percent of the women reported they had been covered by a pension pan on that job (tabe 2) The private empoyees, which incude those in a sectors other than government or sef-empoyment on their ongest job, had somewhat ower pension coverage rates 64 percent of the men and 39 percent of the women said they were covered by a pension pan The arge majority of both private and government empoyees who said they had been covered by a pension pan reported they were receiving retirement benefits from the pan (tabe 3) A few, however, were not yet Tabe 2-Pension coverage among pubic and private empoyees on ongest job 1982 data for persons who began receiving socia security retired-worker benefits in June 1980-May 1981 Pension coverage Tota number (in thousands) Tota percent Covered by a pension pan Not covered Unknown Tota number (in thousands) Tota percent Covered by a pension pan Not covered Unknown Private Government Tota empoyees empoyees Men 548 I 4261 1153 100 oo oo 70 64 93 28 34 6 I I I Women 4840 3968 777 100 oo oo 46 39 82 53 60 17 1 1 I Excudes a sef-empoyed persons on the ongest job; incudes those not reporting type of empoyment Source Preiminary data from the 1982 New Beneficiary Survey Tabe 3-Pension receipt among covered empoyees on ongest job 1982 data for persons who began receiving socia security retired-worker benefits in June 1980-May 1981 Pension receipt Number covered (in thousands) Tota percent Receiving a pension ~ Expecting a future pension Received a ump sum No benefit Unknown Private Government Tota t empoyees empoyees 3857 2740 o! 100 100 100 81 77 92 4 5 2 10 12 3 4 5 2 I 1 I Women Number covered (in thousands) 2235 1554 641 Tota percent 100 100 100 Receiving a pension 63 57 79 Expecting a future pension 10 II 7 Received a ump sum 18 20 II No benefit 7 9 2 Unknown 2 3 I t Excudes a sef-empoyed persons on the ongest job; incudes those nc reporting type of empoyment Source Preiminary data from the 1982 New Beneficiary Survey 36 Socia Security Buetin, May 1985IVo 48, No 5
receiving benefits but expected to receive them in the future Those who were neither receiving nor expecting benefits were asked \vhether they had ever received a ump-sum payment from the pan Such ump-sum payments were reported by most of those who were neither receiving nor expecting benefits from the pan Women were more ikey than men to report receipt of a umpsum payment These new survey findings indicate that pension coverage and receipt of pensions was more widespread among retirees in the eary 1980 s than in the ate 1960 s An earier survey of persons newy entited to socia security retired-worker benefits in 1968-70 found that 47 percent of the men and 21 percent of the women who had been private empoyees on their ongest job reported that they had been covered by a pension pan At that time, those who had been covered were not as ikey to report they were receiving or expecting pensions from the pan (tabe 4) The earier survey did not ask about receipt of ump-sum payments i ieu of reguar pension benefits In the 1982 survey, a significant portion of the retirees who were receiving pensions from their ongest job reported they began receiving the pension before age 62-the eariest eigibiity age for socia security retiredworker benefits Of those receiving private empoyee pensions, about one-fourth of the men and the women Tabe 4-Pension coverage and receipt of pensions from ongest job Persons newy entited to socia security retired-worker benefits, Juy 1968-December 1969 Private Government Pension coverage and receipt Tota empoyees empoyees rotai percen Covered by a pemion pan Not covered nknown Tota percen, colered Receiving or wi recci\c a pension Wi not receive Unknown 100 100 c5 47 40 45 8 5 tm oo 84 83 7 7 9 IO Women 100 oo IO0 Covered by a pen\ion pan 28 21 68 Not covered 64 69 28 nknown 8 IO 4 Tota percent cokered oo 100 oo Receiving or wi receive a pemion 76 73 83 Wi not receive I3 15 9 Unknown II 12 8 t Excudes a sef-empoyed pertonr on the ongest job Source 196X-70Surrey of Newy Enrited Workers 100 79 16 5 IO0 89 5 6 said they began receiving the pension before age 62 (tabe 5) Of those with government empoyee pensions, just over haf the men and 30 percent of the women began receiving the pension before age 62 Those who received their pensions before age 65 accounted for about 7 in 10 of the recent retirees with pensions Summary The United States has responded to peaks in unempoyment by foowing the historica approach of temporariy extending the duration of unempoyment insurance benefits Federa income maintenance poicy has not been changed to encourage eary retirement In fact, future incentives have recenty been added to the OASDI program to encourage ater retirement Workers whose empoyers provide suppementary pension pans appear to have an increasing range of options for eary retirement And some of today s retirees are accepting those options before socia security retirement benefits are payabe Tabe S-Age at first receipt of pension from ongest job 1982 data for persons who began receiving socia security retired-worker benefits in June 1980-May 1981 Age at pension receipt Number receiving pension (in thousands) Percent receiving pension Tota percent Under 55 55-59 60-61 62 63-64 65 66oroder Unknown Number receiving pension (in thousands) Percent receiving pension Tota percent Under 55 55-59 60-61 62 63-64 65 66 or oder Unknown Priuate Governmenr Tota empoyees empoyees Men 3117 2100 990 57 49 86 oo 100 IO0 8 2 23 I5 I3 18 II IO I2 19 21 13 I9 22 13 I5 18 9 12 12 11 1 1 I Women 1414 893 29 23 100 IO0 2 1 12 11 13 12 20 21 20 I9 17 19 15 I5 I I 503 65 I00 Excudes a sef-empoyed persons on the ongest job; incudes those not reporting type of empoyment, Source Preiminary data from the 1982 New Beneficiary Survey 2 14 I4 19 21 13 I6 Socia Security Buetin, May 1985/Vo 48, No 5