THE EFFECT OF SOCIAL-SECURITY ON LABOR SUPPLY - A COHORT ANALYSIS OF THE NOTCH GENERATION

This article uses aggregate birth year/calendar year level data derived from the Current Population Survey (CPS) to estimate the effect of Social Security wealth on the labor supply of older men in the 1970s and 1980s. The analysis focuses on measuring the impact of the 1977 amendments to the Social Security Act, which created a substantial, unanticipated reduction in Social Security wealth for individuals born after 1916. This differential in benefits has become known as the benefit notch. Results indicate that labor supply continued to decline for the "notch babies" who received lower Social Security benefits than earlier cohorts.