Social Security boosts sons' mobility, earnings across generations
A new Federal Reserve Bank of Atlanta working paper finds that early Social Security coverage enabled sons of recipients to move farther from home, earn more, and live in better neighborhoods. These intergenerational gains significantly exceeded the associated Social Security benefits.
Migration unlocks economic gains
Sons whose parents had greater predicted Social Security coverage moved farther from their childhood homes, earned more, and lived in better neighborhoods late in life.
These long-lasting financial gains were substantial: a 10-year difference in fathers' earliest eligibility age led to a 12 percent full-career average earnings gain and an expected present value gain of about $130,000 per son (in 2020 dollars).
Aggregating across all children of the average recipient family, the total gain was estimated to be about six times the associated Social Security benefits.
This increase in total family earnings implies that these early Social Security expansions may have paid for themselves, challenging conventional views on program costs.
The primary driver of these gains was migration to better-matched labor markets, as Social Security displaced location-dependent family support.
Coverage differences reveal long-run impacts
The study introduces a novel source of variation in early Social Security eligibility, exploiting within-occupation, cross-industry differences in coverage.
For instance, janitors in private firms were covered in 1935, while those in non-profit hospitals were covered only in 1950.
This allowed researchers to compare outcomes for children whose parents differed in eligibility likelihood and timing.
A new dataset linking Social Security death records to 1930 and 1950 US Censuses was built to track children's later-life outcomes.
Crucially, no such effects were found for daughters, who historically provided forms of support less easily replaced by Social Security, such as hands-on caregiving.
Rethinking Social Security's true cost
This study challenges conventional views on Social Security's costs by highlighting significant intergenerational benefits that extend beyond direct recipients.
The findings suggest that early expansions may have paid for themselves through improved labor market matching and increased lifetime earnings for children.
Policymakers should consider these broader societal gains when evaluating the long-term welfare effects of social insurance programs.