Study shows minimum wage increases impacts retirement timing
By: Elaina Russell August 24, 2023
Understanding the economic impact of an increased minimum wage is complex. Dr. Matt Hampton, APSU assistant professor of economics, and Evan Totty, U.S. Census Bureau economist, examine the impact of minimum wage increases on retirement timing among low-wage, retirement-age workers in their recent publication, “Minimum wages, retirement timing, and labor supply.”
In the paper, Hampton and Totty investigate decades of survey data linked to administrative records from the Internal Revenue Service (IRS) and Social Security Administration (SSA). The data is available in the Survey of Income and Program Participation (SIPP) Gold Standard File, an intricate Census Bureau product containing rich information on American respondents. Then, they analyzed the employment patterns and retirement decisions of retirement-age individuals in response to changes in the minimum wage.
The study suggests that retirement-age individuals are responsive to minimum wage changes, encouraging low-wage earners to remain in the workforce longer, resulting in delayed benefit claims. The effect on employment is more prominent than typical in minimum wage research but aligns with recent evidence on labor supply effects of minimum wages and labor supply models. The results conclude that minimum wages may complement social security incentives encouraging more work and delayed benefit claims.
Totty emphasized the importance of the data combination, which contributes a new perspective to previous studies.
“The Census survey data allows us to focus on retirement-age workers whose wages would likely be impacted by increases in the minimum wage, while the Social Security data allows us to study how their work and retirement decisions evolved before and after the minimum wage increase,” Totty shared.
“Previous research often ignored how increases in the minimum wage affect the work and retirement decisions of retirement-age workers due to data limitations, but the combination of Census survey data and Social Security data allowed us to fill in this important gap in the literature.”
Their scholarly work contributes valuable insight into the relationship between minimum wage policies, labor market dynamics, and retirement decisions.
“It is a great honor for our work on minimum wages and retirement timing to be published in the Journal of Public Economics, a premier field journal in the economics discipline,” Hampton shared.
“I am proud that we were able to study an important question with unique data and modern econometric methods. Further, we were able to study how minimum wage hikes impact older workers, a group receiving little attention in the minimum wage literature.”
Forbes even noted their work, including it in a 2021 article, and was officially published this summer by The Journal of Public Economics, a top economics journal.
For more information about faculty research, contact Elaina Russell at russelle@apsu.edu.
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