Social Security and Pensions

Recent and proposed changes in the social security statutes can have profound effects on worker behavior and on pensions themselves. In the context of an optimal lifetime compensation plan, pensions depend on efficient dates of retirement. To the extent that changes in social security affect the efficient date of retirement, both the pension and the wage profile itself will react. Four proposed changes in the social security system are analyzed.The cost savings associated with the change, as well as the effect on pensions and worker compensation in general are discussed.