People Retire Later If They Understand Social Security Better

Among women who received the information [about Social Security], there was a 7.2 percentage point increase in labor force participation.

If individuals do not fully understand the incentives created by government tax and social insurance programs, they may make economic decisions that are less than optimal for them. In Would People Behave Differently If They Better Understood Social Security? Evidence From a Field Experiment (NBER Working Paper No. 17287), authors Jeffrey Liebman and Erzo Luttmer describe an experiment that they conducted to examine whether it is possible to affect individual behavior by using a relatively inexpensive informational intervention. A group of 2,483 older workers was randomly divided so that some received information about key Social Security provisions and others did not. The authors find that one year after the experiment, those who were sent an informational brochure and an invitation to a web-based tutorial were 4 percentage points more likely to be working than those who did not receive these materials. Among women who received the information, there was a 7.2 percentage point increase in labor force participation. In addition to affecting actual labor supply behavior, having more information increased survey measures of the perceived returns to working longer, especially among the female recipients.

The authors speculate that the reason that the intervention primarily affected the retirement behavior of women was that it counteracted the notion that working women get no benefit on the margin from Social Security. This would have been true for most women who retired twenty or thirty years ago, but for women today who are working into their 60s, the authors estimate that 70 percent or more are receiving benefits based on their own earnings record, rather than on that of their spouses.

--Lester Picker