How Does the Composition of Disability Insurance Applicants Change Across Business Cycles?
- Authors: Norma B. Coe, Matthew S. Rutledge
- Date: March 3, 2013
Much as in previous recessions, the number of applications to public disability insurance programs increased sharply during the Great Recession. We find that the composition of applicants also changes across business cycles. For example, applicants during economic downturns, and especially during the Great Recession, are younger, better educated, higher income, and more likely to have recent work experience. However, we find only mixed evidence supporting the theory that the increase in applications in downturns is caused by healthier applicants who apply to disability programs only because they are unemployed.
Great Recession-Induced Early Claimers: Who Are They? How Much Do They Lose?
- Authors: Matthew S. Rutledge, Norma B. Coe
- Date: March 3, 2013
During the Great Recession, more older workers have claimed Social Security benefits early. This paper addresses two important policy questions: Who are these early claimers? How much retirement income have they lost as a result of claiming early? Using the Health and Retirement Study (HRS) we estimate a discrete-time hazard model that makes claiming Social Security benefits a function of age, personal characteristics, and the national unemployment rate. We project that high unemployment rates during the Great Recession led to a 5-percentage-point increase in the probability of claiming early relative to a less severe recession such as the 2001-2003 downturn, and this increase was nearly uniform across socioeconomic groups. Our estimates also suggest that while the Great Recession did impact the claiming decision, it did not cause a dramatic change in benefits. “Great Recession Claimers” – those whom we simulate were likely to claim early during the Great Recession but would not have in a milder downturn – filed for Social Security only 6 months earlier, on average, than they would have in a minor recession. This modest change in timing reduced their monthly Social Security benefit checks by $56, or 4.6 percent of average monthly benefits, and the Social Security replacement rate fell by 1.7 percentage points relative to a more typical recession. The benefit reduction resulted from the combined effect of the actuarial reduction for early claiming and the foregone opportunity to continue working and increase the wage base used for calculating benefits.
Who Claimed Social Security Early Due to the Great Recession?
- Authors: Matthew S. Rutledge, Norma S. Coe, Kendrew Wong
- Date: July 7, 2012
Between 2007 and 2009, the percent of 62 year olds claiming Social Security benefits reversed a decade-long decline and increased sharply before reverting back to trend. This phenomenon raises two questions: 1) who was induced to claim early?; and 2) how much monthly retirement income have they lost as a result? To address these questions, this brief, which reflects findings from a recent paper, uses individual-level data from the Health and Retirement Study (HRS).
State-Local Pension Costs: Pre-Crisis, Post-Crisis, and Post-Reform
- Authors: Alicia H. Munnell, Jean-Pierre Aubry, Anek Belbase, Joshua Hurwitz
- Date: February 2, 2013
State and local governments have been facing an extraordinarily difficult fiscal environment in recent years. One of many challenges has been restoring public pension plans to a sound fiscal footing after the economic crisis of 2007-09. States have begun to respond by enacting a mix of revenue increases and benefit cuts. These changes will, over time, improve the financial outlook for plans and help ease their impact on other budget priorities. This study analyzes the nature and magnitude of these effects by analyzing pension costs before the financial crisis, after the financial crisis, and after reforms for a sample of 32 plans in 15 states. The results show that most of the sample plans responded with significant pension reforms, generally increasing employee contributions and lowering benefits for new employees; the changes were largest for plans with serious underfunding and those with generous benefits; in most cases, reforms fully offset or more than offset the impact of the financial crisis on the sponsors’ annual required contribution; and employer contributions to accruing benefits for new employees were cut in half, sharply lowering compensation for future workers. In short, states have made more changes than commonly thought. Whether these changes stick or not is an open question.
Recession Depression: Mental Health Effects of the 2008 Stock Market Crash
- Authors: Melissa McInerney, Jennifer M. Mellor, Lauren Hersch Nicholas
- Date: February 2, 2013
How do sudden, large wealth losses affect mental health? Most prior studies of the causal effects of material well-being on health use identification strategies involving income increases; these studies as well as prior research on stock market accumulations may not inform this question if the effect of wealth on health is asymmetric. We use exogenous variation in the interview dates of the 2008 Health and Retirement Study to assess the impact of large wealth losses on mental health among older U.S. adults. We compare cross-wave changes in wealth and health for respondents interviewed before and after the October 2008 stock market crash. We find that the crash reduced wealth and increased depressive symptoms and the use of anti-depressants. These results suggest that sudden wealth losses cause immediate declines in mental health; for example, a loss of $50,000 of non-housing wealth increases the likelihood of feeling depressed by 1.35 percentage points, or by 8%.
The Great Recession and the Social Safety Net
- Author: Robert A. Moffitt
- Date: April 4, 2013
The social safety net responded in significant and favorable ways during the Great Recession. Aggregate per capita expenditures grew significantly, with particularly strong growth in the SNAP, EITC, UI, and Medicaid programs. Distributionally, the increase in transfers was widely shared across demographic groups, including families with and without children, single-parent and two-parent families. Transfers grew as well among families with more employed members and with fewer employed members. However, the increase in transfer amounts was not strongly progressive across income classes within the low-income population, increasingly slightly more for those just below the poverty line and those just above it, compared to those at the bottom of the income distribution. This is mainly the result of the EITC program, which provides greater benefits to those with higher family earnings. The expansions of SNAP and UI benefitted those at the bottom of the income distribution to a greater extent.
Public Attitudes About Macroeconomic Policy in the U.S.
- Authors: Steven M. Fazzari, Stanley Feldman, Cindy D. Kam, and Steven S. Smith
- Date: April 4, 2013
Since at least the Great Depression, most economists and most Americans appear to have accepted that the government should play a significant role in managing the economy by adopting policies that stabilize employment, encourage economic growth, and control inflation. Nevertheless, Americans have always differed on the proper form and extent of government intervention, and these differences may have sharpened in recent decades. In general, policy attitudes appear to have sorted into liberal and conservative clusters and aligned more fully with partisan preferences (Abramowitz 2010). The Great Recession occurred in this context of party polarization and probably contributed to a continuation of change in party control of the institutions of government.
Recession, Religion, and Happiness, 2006-2010
- Authors: Michael Hout, Orestes P. Hastings
- Date: December 12, 2012
The General Social Survey panel of 2006-2010 tracked Americans' reactions to the election of Barack Obama and the Great Recession (officially lasting from December 2007 to March 2009) as well as to events in their personal lives. Americans were less happy in 2010 than in 2006; the percent "very happy" decreased by four percentage points and the percent "not too happy" increased almost as much. In the cross section, standard predictors - including church attendance, family income, and marital status - continued to matter. Looking from the dynamic perspective of the panel study, though, we see that job loss and changing family incomes mattered far more. Changes in marital status were also important for changing morale; marrying made people happier while divorcing made them unhappy. The subjective sense that finances were improving mediated a significant portion of the income-happiness association. The effects of unemployment and marriage are estimated in a way that supports the inference that finding a job or a mate actually causes happiness to increase.
Lost Generations? Wealth among Young Americans
- Authors: Eugene Steuerle, Signe-Mary McKernan, Caroline Ratcliffe, Sisi Zhang
- Date: March 3, 2013
Despite the Great Recession and slow recovery, the American dream of working hard, saving more, and becoming wealthier than one's parents holds true for many. Unless you're under 40. Stagnant wages, diminishing job opportunities, and lost home values may be painting a vastly different future for Gen X and Gen Y. Today's political discussions often focus on preserving the wealth and benefits of older Americans and the baby boomers. Often lost in this debate is attention to younger generations whose wealth losses, or lack of long-term gains, have been even greater.
Private Financial Transfers, the Great Recession, and Family Context
- Authors: Aaron Gottlieb, Natasha V. Pilkauskas, Irwin Garfinkel
- Date: May 5, 2013
Using longitudinal data from the Fragile Families and Child Wellbeing Study (N=16,156), we study private financial transfers among mothers with young children. We describe patterns of transfers over time and explore whether the Great Recession influenced transfer behaviors. We find that the great majority of mothers participate in transfers at some point between years 1 and 9 of their child’s life. We also find that an increase in the unemployment rate is associated with higher odds of receiving a transfer and an increase in transfer dollars received. We find few differences in the association between the unemployment rate and transfers by mother’s family structure. In comparison, we find that poor and near poor mothers, those most likely impacted by the Great Recession, increased both their likelihood of receiving a transfer and the amount received whereas mothers earning between two and three times the poverty threshold reduced transfer dollars received.