Thursday, December 20, 2012

Chaining Social Security

It seems that Social Security's Cost of Living Adjustments (COLA) are going from a regular CPI to a chained CPI calculation. The upshot is that it social security payments would go up by less each year, thus reducing the benefit gradually over time.

Social Security plays a small, but I think still important, counter cyclical role in fiscal policy. A bad economy increases social security roles more quickly, as those nearing retirement might accelerate their exit from the work force instead of looking for a new position if they get laid off. This is very indirect, of course, compared to unemployment benefits which directly exert a counter cyclical fiscal moment.

I don't know if SS is too generous or too stingy right now, but I do think that it encourages bright, productive people, who have the benefit of years of experience, to exit the workforce too quickly


Blogger Tschäff Reisberg said...

"Too quickly" is a judgement call. It's not too quickly according to the decisions of the elderly leaving the workforce. Balance it with new young blood who have the benefit of fresh ideas and often a greater desire to give the company everything they've got being able to fill those vacancies or move up sooner.

4:30 AM  

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