The distortion of the labor/leisure choice by social security during the period the earnings test is in effect is well known. This paper, using a life-cycle asset maximization approach to social security acceptance, shows that the earnings test is not a sufficient cause for such a distortion in the constrained period or over the life cycle. We use time-series analysis to test the net empirical importance of the substitution and wealth effects associated with social security on the market work of younger men and find that hours worked per week would have fallen from 2 to 3 hours since 1936 without the present social security system. Such findings suggest that large savings effects associated with social security are over-estimates.

The distortion of the labor/leisure choice by social security during the period the earnings test is in effect is well known. This paper, using a life-cycle asset maximization approach to social security acceptance, shows that the earnings test is not a sufficient cause for such a distortion in the constrained period or over the life cycle. We use time-series analysis to test the net empirical importance of the substitution and wealth effects associated with social security on the market work of younger men and find that hours worked per week would have fallen from 2 to 3 hours since 1936 without the present social security system. Such findings suggest that large savings effects associated with social security are over-estimates.

Use of Internal Revenue Service (IRS) tax records improves researchers’ ability to track income trends, although the focus on taxable market income in this research excludes important income sources. Using IRS data in combination with other data sources, we explore the effect of measuring inequality levels and trends with income, including real accrued capital gains based on Haig-Simons principles. While median market income fell 10% from 1989 to 2016, median economic income increased by 26% using our Haig-Simons-based measure. Top 1% income shares were lower and increased by only about one-third of that estimated using previous approaches over this period.

We evaluate progress in the War on Poverty as President Lyndon B. Johnson defined it, which established a 20% baseline poverty rate and adopted an absolute standard. While the official poverty rate fell from 19.5% in 1963 to 10.5% in 2019, our absolute full-income poverty measure—which uses a fuller income measure and updates thresholds only for inflation—fell from 19.5% to 1.6%. However, we also show that relative poverty reductions have been modest. Additionally, government dependence increased over this time, with the share of working-age adults receiving under half their income from market sources more than doubling.