Research and Analysis by Robert J. Mackay

Labor Supply, the Payroll Tax, and Internal Rates of Return to Social Security
ORES Working Paper No. 6 (released April 1979)
by Alan Freiden and Robert J. Mackay

There is empirical evidence that in the recent past the Old-Age Insurance portion of the Social Security program has acted as a net wage subsidy. In addition, the program had significant intragenerational redistributive effects. Our purpose is to demonstrate how these findings alter conventional views of the labor supply effects of Social Security. Our method is the analysis of a labor supply model that is extended to include empirically significant operational components of the program. We show that the analyses of others are special cases of our more general approach.