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To claim or to retire: The social security claiming decision of employed and unemployed workers

Yarine Fawaz (CEMFI, Madrid, Spain)

International Journal of Manpower

ISSN: 0143-7720

Article publication date: 5 June 2017

Abstract

Purpose

The purpose of this paper is to use the Health and Retirement Study to examine the social security (SS) claiming decision of older Americans, with a focus on the behavior of the unemployed.

Design/methodology/approach

Using a duration model first, and a bivariate probit framework then, the author investigates whether older unemployed individuals lacking liquidity use SS benefits as a safety net in order to finance consumption during an unemployment episode, even if they do not retire at the same time. In this way, SS might be thought as a form of unemployment insurance (UI) which would allow them to maintain their standard of living during their job search.

Findings

The author finds evidence of a claiming pattern specific to the unemployed: they claim sooner than full-time workers, even when they do not retire at the same time. They also seem to discontinue this behavior when their access to UI is extended, which gives support to the author’s hypothesis that the unemployed workers, who lack liquidity, claim their SS benefits even if they do not wish to retire, as a source of alternative unemployment benefits.

Originality/value

By focusing on the SS claiming behavior of the unemployed rather than on their retirement patterns, this paper sheds light on the social insurance role of SS retirement benefits for unemployed workers who are not willing to retire, but need a new source of income while they continue looking for a job.

Keywords

Acknowledgements

The author would like to thank Jérôme Adda, Didier Blanchet, Agustin Casas, Andrew Clark, Richard Disney, Jean-Olivier Hairault, Yanos Zylberberg, and participants at Universitat Autonoma de Barcelona (Applied seminar series), Royal Economic Society Annual Conference, and the Spanish Economic Association Conference, for helpful comments. Yarine Fawaz acknowledges financial support of projects ECO2013-46516-C4-1-R (Ministerio de Ciencia y Tecnologia) and SGR2014-1279 (Generalitat de Catalunya). This research uses data from RAND HRS, version M, produced by the RAND Center for the Study of Aging, with funding from the National Institute on Aging and the Social Security Administration, Santa Monica, CA.

Citation

Fawaz, Y. (2017), "To claim or to retire: The social security claiming decision of employed and unemployed workers", International Journal of Manpower, Vol. 38 No. 3, pp. 392-416. https://doi.org/10.1108/IJM-08-2015-0127

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited