The Impact of Income on Mortality: Evidence from the Social Security Notch

Abstract

There is widespread and longstanding agreement that life expectancy and income are positively correlated. However, it has proven much more difficult to establish a causal relationship since income and health are jointly determined. We use a major change in the Social Security law as exogenous variation in income to examine the impact of income on mortality in an elderly population. The legislation created a "notch" in Social Security benefits based upon date of birth; those born before January 1, 1917 generally receive higher benefits than those born afterwards. We compare mortality rates after age 65 for males born in the second half of 1916 and the first half of 1917. Data from restricted-use versions of the National Mortality Detail File combined with Census data allows us to count all deaths among elderly Americans between 1979 and 1993. We find that the higher income group has a statistically significantly higher mortality rate, contradicting the previous literature. We also find that the younger cohort responded to lower incomes by increasing post-retirement work effort. These results suggest that moderate employment has beneficial health effects for the elderly.

Is There an American Way of Aging? Income Dynamics of the Elderly in the U.S. and Germany

“…Menchik argues that Ross et al's finding of increasing income after retirement may be just an artifact of differential mortality. But this has been called into question in a more recent study by Snyder and Evans (2002) who find that elderly men in the higher income groups have higher mortality rates than lower income elderly men.…”

The Effect of Plant Downsizing on Disability Pension Utilization

“…The mortality results appear to be primarily driven by persons suffering poorer work outcomes in 1999, with a non-linear pattern similar to the employment results. Thus, the higher mortality rates in downsizing plants could reflect the impact of labor force participation on health (as in Snyder and Evans, 2002) rather than a direct effect of downsizing on health.…”

“…suggests that the adverse health effect of downsizing could be related to the poor employment outcomes of workers in downsizing plants (Snyder and Evans, 2002).…”

“…Thus, the stress of experiencing a job loss could be a direct cause of disabling health problems. In addition, a recent paper by Snyder and Evans (2002) suggests that working has a positive effect on health, measured by differences in mortality rates. 12 We find that downsizing has a sizable negative effect on the future labor force participation of affected workers, which could adversely affect their health.…”

Health shocks, disability and work

“…For instance, Lindahl (2005) used lottery prize winners and Snyder and Evans (2006) used changes in the social security law to assess the causal effect of income on health. They find small effects of income on health.…”