Do Elderly Workers Substitute for Younger Workers

calculator. 1 The Social Security program has been the single biggest social insurance program in the U.S. for decades. It is viewed as a vital piece of the nation’s safety net, providing security and well-being for the elderly. Yet it is also a program with a long run fiscal shortfall that soon will be spending more than it collects, and that by roughly 2050 will have no savings left from the existing trust funds to finance that benefit shortfall. As a result, there is a wide ranging policy discussion over reform to the program. Suggestions range from the straightforward (raising the payroll tax that finances the program) to the more exotic (private savings accounts to replace the existing system). A number of the policy options considered would impact the labor force decisions of the elderly, as discussed in Coile and Gruber (2004, 2007). For example, Coile and Gruber (2004) estimate that raising both the early and normal retirement age by three years would lead to significantly lower retirement rates, with the odds of participating in the labor force at age 65 rising by as much as twenty percentage points