Association for Public Policy Analysis & Management

Nowadays America is faced with a rapid increase in aging population. This demographic transition resulting from extended longevity significantly influences the benefits of older adults as well as the resource allocation among the whole society. As a result, such demographic change calls for corresponding policy reform to enhance the well beings of aged people and improve economic and social benefits of the whole society. One such policy change that has been discussed a lot is to increase the eligibility age of Social Security policy. Most related studies focus on the reduction of Social Security expenditures and financial security of aged beneficiaries. Recently some researchers begin to explore the effects of increase of Social Security eligibility age on market and non-market productive lives, and family wealth transfer of aged adults. Such studies provide implications of Social Security reform from a bigger picture. Previous researches show that increasing the Social Security retirement age impacts older adults' benefits claiming, while its impact on caregiving is modest, which may result from the heterogeneity of older workers. However, few researches specifically look at the heterogeneous effects of raising Social Security eligibility age and full retirement age on well beings of older adults with different socioeconomic status, one indicator of which is race. Understanding different groups' responses to the Social Security policy change, especially the minorities' responses, casts light on how the Social Security reform specifically affects each target population. 

This study mainly employs dynamic microsimulation to project the differential impacts of raising Social Security age on benefits claiming and market/non-market productive activities (work, volunteering and care-giving) of different groups of aged people. Our simulation result shows that  Hispanics are more sensitive to the increase in early retirement age, while the white are relatively sensitive to the normal retirement age to claim the Social Security benefits. In sum the Hispanic are more likely to claim benefits after the early retirement age while the white are more likely to claim benefits after the normal retirement age. This trend is projected to be consistent from 2010 to 2050. In addition, the heterogeneity also exists in differential responses to the delay of the Social Security entitlement age in terms of caregiving to grand children by different racial groups. The white are less probable to give care to their grand children compared to the black and the Hispanic, but the white caregivers on average provide more hours of caregiving compared to their Hispanic counterparts. The discrepancy peaks at normal retirement age. 

This research provides insights into varied responses and well beings of individuals with different socioeconomic characteristics toward increase of Social Security eligibility age. The main policy implication of this study is that policy makers should be aware of the heterogeneity of policy impacts on different target groups when making decision.