Modeling Lifetime Earnings Paths: Hypothetical versus Actual Workers

TitleModeling Lifetime Earnings Paths: Hypothetical versus Actual Workers
Publication TypeReport
Year of Publication2004
AuthorsMitchell, OS, Phillips, JWR, Au, A
InstitutionUniversity of Pennsylvania, Boettner Center for Pe, Pension Research Council WP 2004-3
Call Numberwp_2004/Mitchell_etal_WP2004-3.pdf
KeywordsNet Worth and Assets, Pensions, Social Security

To assess the distributional effects of social security reform proposals, it is essential to have good information on real-world workers lifetime earnings trajectories. Until recently, however, policymakers have relied on hypothetical earnings profiles for policy analysis. We use actual lifetime earnings data from the Health and Retirement Study (HRS) to compare actual workers covered earnings profiles to these hypothetical profiles. We show that the hypothetical profiles do not track earnings patterns of current retirees; thus lifetime pay levels are much higher than for most HRS workers. Therefore, using hypothetical profiles could misrepresent benefits paid and taxes collected under such reforms.

Endnote Keywords

Pensions/Retirement Wealth/Social Security

Endnote ID


Citation Key5606