Labor Market Shocks and the Timing of Social Security Benefit Claims
Many displaced workers suffer near-permanent losses in earnings capacity. Recent estimates suggest that individuals who lost their jobs during mass-layoff events in the 1982-83 recession, for example, experienced long-term earnings losses of 15% or more. For workers who are age-eligible, one reaction to a negative earnings shock is to begin claiming Social Security retirement benefits. Younger workers with a serious health condition may initiate a Social Security disability benefit claim.
We are using data from the Continuous Work History Sample to study the relationship between recent labor market shocks and the rates of initiating Social Security retirement and disability benefit claims.
Recognizing that individuals experience lower wage opportunities for many years after they lose their job during a recession, a particular focus will be on the transmission of labor market shocks to current and future increases in the fraction of insured workers who initiate Social Security benefits as early as possible (i.e., soon after their 62nd birthday).