Modeling (Simulation)
Disability
Disability Benefit Coverage and Program Interactions in the Working-Age Population
It is widely known that about three-fourths of the working-age population is insured for Disability Insurance (DI), but the substantial role played by the Supplemental Security Income (SSI) program in providing disability benefit coverage is not well understood. Using data from the 1996 panel of the Survey of Income and Program Participation (SIPP) we find that over one-third (36 percent) of the working-age population is covered by SSI in the event of a severe disability. Three important implications follow: (1) SSI increases the overall coverage of the working-age population; (2) SSI enhances the bundle of cash benefits available to disabled individuals; and (3) interactions with other public programs—most notably the SSI path to Medicaid coverage—also enhance the safety net. Ignoring these implications could lead to inaccurate inferences in analytic studies.
Counting the Disabled: Using Survey Self-Reports to Estimate Medical Eligibility for Social Security's Disability Programs
This paper develops an approach for tracking medical eligibility for the Social Security Administration's (SSA's) disability programs on the basis of self-reports from an ongoing survey. Using a structural model of the disability determination process estimated on a sample of applicants, we make out-of-sample predictions of eligibility for nonbeneficiaries in the general population. This work is based on the 1990 panel of the Survey of Income and Program Participation. We use alternative methods of estimating the number of people who would be found eligible if they applied, considering the effects of sample selection adjustments, sample restrictions, and several methods of estimating eligibility/ineligibility from a set of continuous probabilities. The estimates cover a wide range, suggesting the importance of addressing methodological issues. In terms of classification rates for applicants, our preferred measure outperforms the conventional single variable model based on the "prevented" measure.
Under our preferred estimate, 4.4 million people—2.9 percent of the nonbeneficiary population aged 18–64—would meet SSA's medical criteria for disability. Of that group, about one-third have average earnings above the substantial gainful activity limit. Those we classify as medically eligible are similar to allowed applicants in terms of standard measures of activity limitations.
A Structural Model of Social Security's Disability Determination Process
We estimate a multistage sequential logit model reflecting the structure of the disability determination process of the Social Security Administration (SSA), as implemented by state Disability Determination Services (DDS) agencies. The model is estimated using household survey information exactly matched to SSA records on disability adjudications from 1989 to 1993. Information on health, activity limitations, demographic traits, and work is taken from the 1990 Survey of Income and Program Participation. We also use information on occupational characteristics from the Directory of Occupational Titles, DDS workload pressure, and local area economic conditions from unpublished SSA sources. Under the program provisions, different criteria dictate the outcomes at different steps of the determination process. We find that without the multistage structural approach, the effects of many of the important health, disability, and vocational factors are not readily discernible. As a result, the split-sample predictions of overall allowance rates from the sequential model performed considerably better than the conventional approach based on a simple allowed/denied logit regression.
Macrosimulation
Stochastic Models of the Social Security Trust Funds
The 2003 Trustees Report on the Old-Age and Survivors Insurance and Disability Insurance Trust Funds contains, for the first time, results from a stochastic model of the combined trust funds of the OASDI programs. To help interpret the new stochastic results and place them in context, the Social Security Administration's Office of Policy arranged for three external modeling groups to produce alternative stochastic results. This article demonstrates that the stochastic models deliver broadly consistent results even though they use significantly different approaches and assumptions. However, the results also demonstrate that the variation in trust fund outcomes differs as the approach and assumptions are varied.
Stochastic Models of the Social Security Trust Funds
Simulating the Long-Run Aggregate Economic and Intergenerational Redistributive Effects of Social Security Policy
This paper reports on the status of a long-run simulation model of the U.S. economy and its relationships with the Social Security program that was designed with these considerations in mind. The model was developed specifically to analyze the potential equity and efficiency effects of alternative Social Security policies in a long-run context.
Microsimulation
Earnings Sharing in Social Security: Projected Impacts of Alternative Proposals Using the MINT Model
Earnings sharing is an alternate method of calculating Social Security retirement benefits whereby earnings are assumed to be shared by married couples. This article presents a microsimulation analysis to estimate the impact of three earnings sharing proposals on the aged population of married, divorced, and widowed men and women in 2030. The impact of earnings sharing differs by marital status and sex, as measured by the percentage change in benefits and by the percentage of beneficiaries with increased and reduced benefits.
Uses of Administrative Data at the Social Security Administration
This article discusses the advantages and limitations of using administrative data for research, examines how linking administrative data to survey results can be used to evaluate and improve survey design, and discusses research studies and SSA statistical products and services that are based on administrative data.
Social Security and Marginal Returns to Work Near Retirement
Using the Social Security Administration's MINT (Modeling Income in the Near Term) model, this paper calculates the marginal returns to work near retirement, as measured by the increase in benefits associated with an additional year of employment at the end of an individual's work life. With exceptions for certain population subgroups, the analysis finds that marginal returns on Social Security taxes paid near retirement are generally low. The paper also tests the effects on marginal returns of a variety of potential Social Security policy changes designed to improve incentives to work.
A Progressivity Index for Social Security
Using the Social Security Administration's MINT (Modeling Income in the Near Term) model, this paper analyzes the progressivity of the Old-Age, Survivors and Disability Insurance (OASDI) program for current and future retirees. It uses a progressivity index that provides a summary measure of the distribution of taxes and benefits on a lifetime basis. Results indicate that OASDI lies roughly halfway between a flat replacement rate and a flat dollar benefit for current retirees. Projections suggest that progressivity will remain relatively similar for future retirees. In addition, the paper estimates the effects of several policy changes on progressivity for future retirees.
Estimated Retirement Benefits in the Social Security Statement
Alternate Measures of Replacement Rates for Social Security Benefits and Retirement Income
Replacement rates are common and useful tools used by individuals and policy analysts to plan for retirement and assess the sufficiency of Social Security benefits and overall retirement income. Because the calculation and meaning of replacement rates differs depending on the definition of preretirement earnings, this article examines four alternative measures: final preretirement earnings, constant income payable from the present value of lifetime earnings (PV payment), wage-indexed average of lifetime earnings, and inflation-adjusted average of lifetime earnings (CPI average). The article also calculates replacement rates for Social Security beneficiaries aged 64–66 in 2005.
Research on Immigrant Earnings
As the first in a trio of articles devoted to incorporating immigration into policy models, this article traces the history of research on immigrant earnings. It focuses on how earnings trajectories of immigrants differ from those of U.S. natives, vary across immigrant groups, and have changed over time. The highlighted findings underscore key lessons for modeling immigrant earnings and pave the way for representing the earnings trajectories of immigrants in policy models.
Disability Benefit Coverage and Program Interactions in the Working-Age Population
It is widely known that about three-fourths of the working-age population is insured for Disability Insurance (DI), but the substantial role played by the Supplemental Security Income (SSI) program in providing disability benefit coverage is not well understood. Using data from the 1996 panel of the Survey of Income and Program Participation (SIPP) we find that over one-third (36 percent) of the working-age population is covered by SSI in the event of a severe disability. Three important implications follow: (1) SSI increases the overall coverage of the working-age population; (2) SSI enhances the bundle of cash benefits available to disabled individuals; and (3) interactions with other public programs—most notably the SSI path to Medicaid coverage—also enhance the safety net. Ignoring these implications could lead to inaccurate inferences in analytic studies.
Adding Immigrants to Microsimulation Models
Given immigration's recent resurgence as an important demographic fact in the U.S. economy, U.S. policy modelers are just beginning to grapple with how best to integrate immigrants into policy models. Building on the research reviewed in the first article of this series, this article puts forth a conceptual basis for incorporating immigration into a key type of policy model—microsimulation—with a focus on the projection of immigrant earnings.
Incorporating Immigrant Flows into Microsimulation Models
Complementing the second paper's focus on forecasting immigrant earnings and emigration in a "closed system" for a given population, the last article of the trilogy explores how to project immigrant earnings for an "open system"—a system that includes future immigrants. A simple method to project future immigrants and their earnings is presented.
Disabled Workers and the Indexing of Social Security Benefits
This article presents the distributional effects of changing the Social Security indexing scheme, with an emphasis on the effects upon disabled-worker beneficiaries. Although a class of reform proposals that would slow the rate of growth of initial benefit levels over time—including price indexing and longevity indexing—initially appear to affect all beneficiaries proportionally, there can be different impacts on different groups of beneficiaries. The impacts between and within groups are mitigated by (1) the offsetting effect of changes in Supplemental Security Income benefits at the lower tail of the income distribution, and (2) the dampening effect of other family income at the upper tail of the income distribution. The authors present estimates of the size of these effects.
Benefit Adequacy Among Elderly Social Security Retired-Worker Beneficiaries and the SSI Federal Benefit Rate
The federal benefit rate (FBR) of the Supplemental Security Income program provides an inflation-indexed income guarantee for aged and disabled people with low assets. Some consider the FBR as an attractive measure of Social Security benefit adequacy. Others propose the FBR as an administratively simple, well-targeted minimum Social Security benefit. However, these claims have not been empirically tested. Using microdata from the Survey of Income and Program Participation, this article finds that the FBR is an imprecise measure of benefit adequacy; it incorrectly identifies as economically vulnerable many who are not poor, and disregards some who are poor. The reason for this is that the FBR-level benefit threshold of adequacy considers the Social Security benefit in isolation and ignores the family consumption unit. The FBR would provide an administratively simple but poorly targeted foundation for a minimum Social Security benefit. The empirical estimates quantify the substantial tradeoffs between administrative simplicity and target effectiveness.
The Never-Married in Old Age: Projections and Concerns for the Near Future
This article focuses on a growing yet understudied subgroup of the elderly in the United States—the never-married. The first section, based on data from the Current Population Survey and a review of the academic literature, examines the current circumstances of never-married retirees, particularly their economic and health well-being. The succeeding section uses the Modeling Income in the Near Term (MINT) model to assess the projected (1) changes in the marital status composition of the future retirement-age population; (2) demographics of future never-married retirees, and (3) economic well-being of never-married retirees. The results highlight important links between marital trends, Social Security, and retirement outcomes and offer insight into some of the characteristics of current and future never-married retirees.
The Distributional Consequences of a "No-Action" Scenario: Updated Results
Under the Social Security program, benefits are paid to retired workers, survivors, and disabled persons out of two trust funds—the Old-Age and Survivors Insurance and the Disability Insurance (OASDI) Trust Funds. In their 2005 report, the Social Security Trustees projected that the combined OASDI trust funds would be exhausted in 2041. Because the trust funds are used to pay benefits, retirement benefits would have to be reduced somewhat in 2041 and more drastically in 2042.
If no action were taken to strengthen Social Security, the benefit reductions necessitated by the exhaustion of the trust funds would double the poverty rate of Social Security beneficiaries aged 64–78 in 2042, from 1.5 percent to 3.3 percent. However, this increased poverty rate would still be lower than the current poverty rate for beneficiaries aged 62–76, which is 4.6 percent. In addition, the trust funds' exhaustion could lead to lower returns on payroll taxes using traditional "money's-worth" measures.
The Distributional Consequences of a "No-Action" Scenario
The 2001 report of the Social Security trustees projected that the combined trust funds for the Old-Age and Survivors Insurance and Disability Insurance programs will be exhausted in 2038. This analysis explains the effects of insolvency on future retirement benefits and poverty rates of beneficiaries if no action is taken to strengthen Social Security.
Modeling SSI Financial Eligibility and Simulating the Effect of Policy Options
This article presents the Supplemental Security Income (SSI) Financial Eligibility Model developed in the Division of Policy Evaluation of the Office of Research, Evaluation, and Statistics. Focusing on the elderly, the article simulates five potential changes to the SSI eligibility criteria and presents the effects of those simulations on SSI participation, federal benefits, and poverty among the elderly. Finally, the article discusses future directions for research and potential improvements to the model.
Projecting Retirement Income of Future Retirees with Panel Data: Results from the Modelng Income in the Near Term (MINT) Project
This article describes a model that projects the retirement income of Social Security beneficiaries from 1997 through 2031 using a number of panel data sources. With these data, we examine the composition of retirement income for future retirees in various birth cohorts, racial groups, marital states, and educational categories.
Two Papers on a New SIPP-Based Microsimulation Model of SSI and OASDI
This working paper includes two interrelated papers presented at the annual meeting of the American Statistical Association in August 1991. The papers outline the central ideas and the progress to date associated with the development of a new microsimulation model for program analysis at the Social Security Administration (SSA). The first paper, Rationale for a SIPP-Based Microsimulation Model of SSI and OASDI, relates the analytical potential of the proposed model to data development efforts intended to overcome specific information gaps. It also suggests areas in which the model can enrich SSA's abilitiy to address issues specifically related to either the Supplemental Security Income or Old-Age, Survivors, and Disability Insurance programs or issues requiring comparative analysis of both programs. The second paper, Implementing an SSI Model Using the Survey of Income and Program Participation, describes progress on a preliminary version of the model focusing on the SSI program. It includes a brief description of the model, presentation and discussion of initial results, and comparisons with other studies.
Retirement
A Progressivity Index for Social Security
Using the Social Security Administration's MINT (Modeling Income in the Near Term) model, this paper analyzes the progressivity of the Old-Age, Survivors and Disability Insurance (OASDI) program for current and future retirees. It uses a progressivity index that provides a summary measure of the distribution of taxes and benefits on a lifetime basis. Results indicate that OASDI lies roughly halfway between a flat replacement rate and a flat dollar benefit for current retirees. Projections suggest that progressivity will remain relatively similar for future retirees. In addition, the paper estimates the effects of several policy changes on progressivity for future retirees.
Estimated Retirement Benefits in the Social Security Statement
Estimating the First Instance of Substantive-Covered Earnings in the Labor Market
Comparing Replacement Rates Under Private and Federal Retirement Systems
This article presents a comparison of replacement rates for employees of medium and large private establishments to replacement rates for federal employees under the Civil Service Retirement System and the Federal Employees Retirement System. This analysis shows the possibility of replacement rates exceeding 100 percent for FERS employees who contribute 6 percent of earnings to the Thrift Savings Plan over a full working career. Private-sector replacement rates were quite similar for workers with both a defined benefit and a defined contribution pension plan.
Methods in Modeling Income in the Near Term (MINT I)
This paper summarizes the work completed by SSA, with substantial assistance from the Brookings Institution, RAND, and the Urban Institute, for the Modeling Income in the Near Term (MINT I) model. In most cases, several methods of estimating and projecting demographic characteristics and income were researched and tested; however, this appendix describes only those methods eventually used in the MINT I model.
Other
The Out-of-Sample Performance of Stochastic Methods in Forecasting Age-Specific Mortality Rates
This paper evaluates the out-of-sample performance of two stochastic models used to forecast age-specific mortality rates: (1) the model proposed by Lee and Carter (1992); and (2) a set of univariate autoregressions linked together by a common residual covariance matrix (Denton, Feavor, and Spencer 2005).
Poverty-level Annuitization Requirements in Social Security Proposals Incorporating Personal Retirement Accounts
In the current discussions of Social Security reform, voluntary personal retirement accounts have been proposed. Recent research and debate have focused on several aspects of these accounts, including how such accounts would affect aggregate saving, system finances, and benefit levels. Little attention, however, has been paid to policies that would govern the distribution of account balances. This analysis considers such policies with respect to the annuitization of account balances at retirement using the Social Security Administration's Modeling Income in the New Term (MINT) model and a modified version of a recent legislative proposal to evaluate the effects of partial annuitization requirements.
