The effects of changes in state SSI supplements on preretirement labor supply

Because the Supplemental Security Income (SSI) program has both income limits and asset limits, those on the margin of eligibility for the elderly component of the program face incentives to reduce labor supply prior to becoming eligible. The authors 'past research relying on cross-state variation in SSI benefits found evidence of negative labor supply effects. However, a reliance on cross-state variation implied less than ideal control samples. In contrast, this article uses CPS data covering a twenty-two-year period, which permits identifying the effects of SSI from within-state, time-series variation in SSI benefits, using a better control sample. The evidence points consistently to negative effects of more generous SSI payments on the labor supply of likely SSI participants aged sixty-two to sixty-four. For those with a high probability of SSI participation, the implied elasticities of employment and hours with respect to benefits are generally in the range of-0.2 to -0.3.