The Effects of Wage Indexing on Social Security Disability Benefits

by L. Scott Muller
Social Security Bulletin, Vol. 68, No. 3, 2008

Appendix B

Table B-1. Annual earnings in nominal dollars, by earnings decile, 1978–2004 (Chart 3)
Year Earnings
10th percentile 20th percentile 30th percentile 40th percentile 50th percentile (median) 60th percentile 70th percentile 80th percentile 90th percentile 99th percentile
1978 979 2,399 4,138 5,977 7,800 9,874 12,395 15,700 20,905 46,900
1979 1,117 2,688 4,609 6,592 8,570 10,800 13,526 17,129 22,525 49,304
1980 991 2,563 4,590 6,813 9,004 11,448 14,445 18,420 24,521 54,500
1981 1,061 2,798 5,034 7,476 9,916 12,631 15,959 20,425 27,333 60,307
1982 1,225 3,130 5,545 8,150 10,742 13,605 17,112 21,785 29,167 67,279
1983 1,352 3,390 5,969 8,691 11,496 14,552 18,290 23,345 30,952 69,397
1984 1,438 3,597 6,275 9,118 12,069 15,341 19,314 24,636 32,837 75,864
1985 1,566 3,875 6,674 9,636 12,731 16,112 20,243 25,790 34,327 79,674
1986 1,560 3,933 6,853 9,981 13,230 16,787 21,067 26,826 35,805 84,320
1987 1,677 4,175 7,219 10,528 13,927 17,623 22,050 27,880 36,928 88,600
1988 1,633 4,191 7,317 10,719 14,307 18,147 22,739 28,800 38,288 96,424
1989 1,836 4,558 7,816 11,331 14,994 18,942 23,694 30,000 39,910 100,046
1990 1,955 4,843 8,232 11,853 15,610 19,719 24,669 31,228 41,490 102,788
1991 1,990 4,944 8,388 12,075 16,009 20,297 25,425 32,306 42,954 104,600
1992 1,996 5,040 8,690 12,538 16,607 21,044 26,383 33,589 44,783 111,580
1993 1,965 5,048 8,760 12,703 16,859 21,400 26,830 34,146 45,889 117,000
1994 2,019 5,206 9,026 13,071 17,315 21,946 27,499 34,978 47,157 120,290
1995 2,254 5,630 9,596 13,692 17,983 22,685 28,330 35,954 48,550 126,243
1996 2,352 5,879 10,007 14,284 18,711 23,547 29,342 37,146 50,289 133,992
1997 2,536 6,277 10,565 15,000 19,594 24,616 30,602 38,637 52,458 143,813
1998 2,730 6,710 11,251 15,839 20,589 25,764 31,917 40,214 54,765 151,875
1999 2,896 7,040 11,758 16,494 21,392 26,730 33,082 41,588 56,902 160,000
2000 3,044 7,417 12,348 17,321 22,390 27,895 34,500 43,445 59,703 171,431
2001 3,029 7,500 12,628 17,781 23,067 28,795 35,656 44,914 61,862 172,846
2002 2,965 7,420 12,625 17,964 23,373 29,291 36,311 45,907 63,051 170,186
2003 2,939 7,392 12,636 18,131 23,752 29,864 37,103 46,976 64,767 175,164
2004 3,084 7,732 13,183 18,821 24,591 30,940 38,466 48,734 67,287 185,209
SOURCE: Author's calculations using Continuous Work History Sample data.
Table B-2. Percentage change in nominal earnings by earnings decile, 1978–2004, 1978–1990, and 1990–2004 (Chart 4)
Period Percentage change in earnings
10th percentile 20th percentile 30th percentile 40th percentile 50th percentile (median) 60th percentile 70th percentile 80th percentile 90th percentile 99th percentile
1978–2004 315.0 322.3 318.6 314.9 315.3 313.3 310.3 310.4 321.9 394.9
1978–1990 199.7 201.9 198.9 198.3 200.1 199.7 199.0 198.9 198.5 219.2
1990–2004 157.7 159.7 160.1 158.8 157.5 156.9 155.9 156.1 162.2 180.2
SOURCE: Author's calculations using Continuous Work History Sample data.
Table B-3. Average wages (AWI), median earnings, and the Consumer Price Index (CPI), 1978–2004 (Charts 5 and 6)
Year Average wage series (AWI) Median earnings Ratio of median to mean (percent) CPI
Amount (dollars) Percentage increase Amount (dollars) Percentage increase Index a Percentage increase
Annual Cumulative Annual Cumulative Annual Cumulative
1978 10,556.03 … … 7,204 … … 68.25 66.40 … …
1979 11,479.46 8.75 8.75 7,930 10.08 10.08 69.08 74.40 12.05 12.05
1980 12,513.46 9.01 18.54 8,549 7.81 18.67 68.32 83.90 12.77 26.36
1981 13,773.10 10.07 30.48 9,361 9.50 29.94 67.97 92.90 10.73 39.91
1982 14,531.34 5.51 37.66 9,914 5.91 37.62 68.22 98.17 5.67 47.84
1983 15,239.24 4.87 44.37 10,318 4.08 43.23 67.71 100.53 2.41 51.41
1984 16,135.07 5.88 52.85 10,704 3.74 48.58 66.34 104.07 3.51 56.73
1985 16,822.51 4.26 59.36 11,265 5.24 56.37 66.96 107.33 3.14 61.65
1986 17,321.82 2.97 64.09 11,831 5.02 64.23 68.30 108.70 1.27 63.70
1987 18,426.51 6.38 74.56 12,327 4.19 71.11 66.90 113.27 4.20 70.58
1988 19,334.04 4.93 83.16 12,824 4.03 78.01 66.33 117.80 4.00 77.41
1989 20,099.55 3.96 90.41 13,392 4.43 85.90 66.63 123.33 4.70 85.74
1990 21,027.98 4.62 99.20 13,910 3.87 93.09 66.15 129.90 5.32 95.63
1991 21,811.60 3.73 106.63 14,278 2.65 98.20 65.46 134.70 3.70 102.86
1992 22,935.42 5.15 117.27 14,739 3.23 104.59 64.26 138.77 3.02 108.99
1993 23,132.67 0.86 119.14 15,000 1.77 108.22 64.84 142.37 2.59 114.41
1994 23,753.53 2.68 125.02 15,560 3.73 115.99 65.51 146.40 2.83 120.48
1995 24,705.66 4.01 134.04 16,108 3.52 123.60 65.20 150.23 2.62 126.26
1996 25,913.90 4.89 145.49 16,712 3.75 131.98 64.49 154.63 2.93 132.88
1997 27,426.00 5.84 159.81 17,562 5.09 143.78 64.03 157.87 2.09 137.75
1998 28,861.44 5.23 173.41 18,513 5.42 156.98 64.14 160.00 1.35 140.96
1999 30,469.84 5.57 188.65 19,265 4.06 167.42 63.23 163.93 2.46 146.89
2000 32,154.82 5.53 204.61 20,225 4.98 180.75 62.90 169.70 3.52 155.57
2001 32,921.92 2.39 211.88 20,909 3.38 190.24 63.51 174.13 2.61 162.25
2002 33,252.09 1.00 215.01 21,198 1.38 194.25 63.75 176.57 1.40 165.91
2003 34,064.95 2.44 222.71 21,581 1.81 199.57 63.35 180.30 2.11 171.54
2004 35,648.55 4.65 237.71 22,308 3.37 209.66 62.58 185.10 2.66 178.77
SOURCES: SSA (2006a), SSA Office of the Chief Actuary (see http://www.socialsecurity.gov/OACT/COLA/AWI.html and http://www.socialsecurity.gov/OACT/STATS/cpiw.html).
NOTES: … = not applicable; AWI = average wage index.
a. 1982–1984 = 100. The CPI measure used here is based on Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). SSA averages the monthly values for July, August and September to determine CPI value for that year.
Table B-4. Workers aged 18–64 in the Continuous Work History Sample (CWHS) active file, total and with earnings, 1979–2004 (Chart 7)
Year Workers aged 18–64 Number with earnings Percent with earnings
1978 1,455,066 941,743 64.7
1979 1,486,730 970,140 65.3
1980 1,518,257 970,913 63.9
1981 1,548,196 985,139 63.6
1982 1,576,787 967,224 61.3
1983 1,601,988 1,001,918 62.5
1984 1,625,351 1,033,152 63.6
1985 1,646,359 1,065,954 64.7
1986 1,665,326 1,082,861 65.0
1987 1,686,070 1,129,912 67.0
1988 1,707,497 1,165,812 68.3
1989 1,726,375 1,195,396 69.2
1990 1,742,524 1,216,117 69.8
1991 1,757,376 1,215,081 69.1
1992 1,771,730 1,221,708 69.0
1993 1,785,416 1,234,057 69.1
1994 1,799,513 1,255,265 69.8
1995 1,813,934 1,278,178 70.5
1996 1,829,227 1,291,848 70.6
1997 1,845,424 1,316,030 71.3
1998 1,862,829 1,336,776 71.8
1999 1,879,168 1,362,142 72.5
2000 1,894,711 1,388,154 73.3
2001 1,908,803 1,391,347 72.9
2002 1,921,322 1,385,846 72.1
2003 1,931,021 1,385,181 71.7
2004 1,936,382 1,388,899 71.7
SOURCE: CWHS.
NOTE: The CWHS active file is a 1 percent sample, thus the actual populations of working-age individuals and workers with earnings are 100 times the values shown above.
Table B-5. Hypothetical replacement rates for disability-insured workers aged 18–61 based on lifetime earnings (AIME), for selected replacement rate percentiles, 1979–2004 (Chart 8)
Year Hypothetical replacement rates
5th percentile 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile 95th percentile
1979 0.37 0.39 0.42 0.47 0.57 0.75 0.90
1980 0.37 0.38 0.42 0.47 0.57 0.77 0.90
1981 0.36 0.38 0.42 0.47 0.57 0.77 0.90
1982 0.36 0.38 0.42 0.47 0.58 0.79 0.90
1983 0.36 0.37 0.42 0.48 0.59 0.80 0.90
1984 0.35 0.37 0.42 0.48 0.58 0.79 0.90
1985 0.35 0.37 0.42 0.48 0.58 0.78 0.90
1986 0.34 0.37 0.42 0.48 0.58 0.78 0.90
1987 0.34 0.36 0.42 0.48 0.58 0.78 0.90
1988 0.34 0.36 0.42 0.48 0.58 0.78 0.90
1989 0.34 0.36 0.42 0.48 0.58 0.79 0.90
1990 0.33 0.36 0.42 0.48 0.59 0.79 0.90
1991 0.33 0.36 0.42 0.48 0.59 0.80 0.90
1992 0.33 0.35 0.42 0.48 0.59 0.80 0.90
1993 0.33 0.35 0.42 0.48 0.59 0.80 0.90
1994 0.33 0.35 0.42 0.48 0.59 0.80 0.90
1995 0.33 0.35 0.42 0.48 0.59 0.79 0.90
1996 0.32 0.35 0.42 0.48 0.59 0.79 0.90
1997 0.32 0.35 0.42 0.48 0.59 0.79 0.90
1998 0.32 0.35 0.42 0.48 0.59 0.79 0.90
1999 0.32 0.35 0.42 0.48 0.59 0.79 0.90
2000 0.32 0.35 0.42 0.48 0.59 0.80 0.90
2001 0.32 0.35 0.42 0.48 0.60 0.81 0.90
2002 0.32 0.35 0.42 0.49 0.60 0.82 0.90
2003 0.32 0.35 0.42 0.49 0.61 0.82 0.90
2004 0.32 0.35 0.42 0.49 0.60 0.82 0.90
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTE: AIME = average indexed monthly earnings.
Table B-6. Hypothetical replacement rates for disability-insured workers aged 18–61 based on last year of nonzero earnings a (indexed to CPI), for selected replacement rate percentiles, 1979–2004 (Chart 9)
Year Hypothetical replacement rates
5th percentile 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile 95th percentile
1979 0.24 0.24 0.29 0.39 0.58 1.24 2.58
1980 0.23 0.24 0.29 0.39 0.61 1.40 2.98
1981 0.22 0.23 0.29 0.40 0.63 1.48 3.19
1982 0.22 0.24 0.30 0.41 0.69 1.72 3.76
1983 0.23 0.25 0.31 0.43 0.71 1.79 3.97
1984 0.23 0.24 0.31 0.42 0.67 1.61 3.54
1985 0.23 0.25 0.31 0.42 0.66 1.55 3.39
1986 0.23 0.25 0.31 0.42 0.67 1.56 3.41
1987 0.23 0.25 0.31 0.42 0.66 1.51 3.28
1988 0.23 0.25 0.31 0.41 0.64 1.42 3.04
1989 0.23 0.25 0.31 0.42 0.65 1.44 3.07
1990 0.23 0.25 0.32 0.42 0.66 1.47 3.12
1991 0.24 0.25 0.32 0.43 0.70 1.59 3.44
1992 0.24 0.26 0.32 0.43 0.70 1.61 3.53
1993 0.24 0.26 0.33 0.44 0.69 1.58 3.43
1994 0.24 0.26 0.33 0.44 0.69 1.52 3.27
1995 0.24 0.26 0.32 0.43 0.66 1.45 3.08
1996 0.24 0.26 0.32 0.42 0.66 1.42 2.97
1997 0.24 0.26 0.32 0.42 0.64 1.35 2.82
1998 0.24 0.26 0.32 0.42 0.63 1.31 2.71
1999 0.24 0.26 0.32 0.42 0.64 1.32 2.71
2000 0.24 0.26 0.32 0.43 0.64 1.32 2.75
2001 0.24 0.26 0.33 0.44 0.68 1.44 3.04
2002 0.24 0.27 0.34 0.45 0.72 1.62 3.52
2003 0.24 0.27 0.34 0.46 0.73 1.69 3.70
2004 0.24 0.26 0.33 0.45 0.72 1.65 3.65
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTE: CPI = Consumer Price Index.
a. If earnings in the last year prior to the hypothetical onset were zero, the year prior was used. If the last year of nonzero earnings was more than 2 years before disability onset, the observation was dropped.
Table B-7. Hypothetical replacement rates for disability-insured workers aged 18–61 based on last 3 years' average earnings a (indexed to CPI), for selected replacement rate percentiles, 1979–2004 (Chart 10)
Year Hypothetical replacement rates
5th percentile 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile 95th percentile
1979 0.26 0.27 0.31 0.42 0.66 1.14 1.92
1980 0.24 0.25 0.30 0.41 0.65 1.11 1.85
1981 0.23 0.24 0.30 0.42 0.67 1.17 2.01
1982 0.24 0.25 0.32 0.44 0.73 1.35 2.46
1983 0.25 0.27 0.34 0.47 0.80 1.54 2.91
1984 0.24 0.26 0.34 0.47 0.80 1.55 3.01
1985 0.24 0.26 0.34 0.47 0.78 1.47 2.81
1986 0.25 0.27 0.34 0.47 0.77 1.42 2.66
1987 0.24 0.26 0.34 0.46 0.75 1.36 2.52
1988 0.24 0.26 0.33 0.45 0.73 1.30 2.39
1989 0.24 0.26 0.33 0.45 0.73 1.28 2.31
1990 0.24 0.26 0.33 0.45 0.73 1.26 2.25
1991 0.24 0.26 0.34 0.46 0.74 1.31 2.34
1992 0.25 0.27 0.34 0.47 0.76 1.37 2.49
1993 0.25 0.27 0.35 0.47 0.77 1.40 2.58
1994 0.25 0.27 0.35 0.47 0.77 1.40 2.57
1995 0.25 0.27 0.34 0.46 0.75 1.33 2.42
1996 0.25 0.27 0.34 0.46 0.73 1.29 2.30
1997 0.25 0.27 0.34 0.46 0.73 1.27 2.22
1998 0.25 0.27 0.34 0.46 0.73 1.25 2.16
1999 0.26 0.27 0.35 0.46 0.72 1.23 2.10
2000 0.25 0.27 0.34 0.46 0.72 1.21 2.04
2001 0.25 0.27 0.35 0.46 0.73 1.25 2.13
2002 0.26 0.28 0.36 0.48 0.77 1.32 2.32
2003 0.26 0.28 0.36 0.48 0.79 1.39 2.52
2004 0.25 0.27 0.35 0.48 0.79 1.43 2.65
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTE: CPI = Consumer Price Index.
a. In determining the average of the last 3 years of earnings, zeroes were included in the calculation, unless earnings in all 3 years were zero, in which case the observation was dropped.
Table B-8. Earnings history, bracket, and total effects of using alternate indexing to calculate benefits: Mean change, maximum reduction, and maximum increase in benefits as percentages of current benefits, 1979–2004 (Charts 11–13)
Year Mean change Maximum reduction Maximum increase
Earnings history effect Bracket effect Total effect Earnings history effect Bracket effect Total effect Earnings history effect Bracket effect Total effect
1979 -0.490 0.000 -0.490 -9.380 0.000 -9.380 0.710 0.000 0.710
1980 -0.300 0.130 -0.200 -8.800 0.000 -8.800 1.310 0.380 1.310
1981 -0.050 0.380 0.330 -7.900 0.000 -7.900 2.400 1.080 2.400
1982 -0.260 0.160 -0.100 -8.150 0.000 -8.150 1.380 0.440 1.380
1983 -0.330 0.050 -0.280 -8.580 0.000 -8.580 0.870 0.150 0.870
1984 -0.200 0.130 -0.090 -8.300 0.000 -8.300 1.220 0.370 1.220
1985 -0.300 -0.030 -0.400 -8.400 -0.080 -8.400 0.470 0.000 0.470
1986 -0.700 -0.400 -1.100 -9.900 -1.200 -9.900 0.000 0.000 0.000
1987 -0.430 -0.250 -0.680 -9.350 -0.710 -9.350 0.760 0.000 0.760
1988 -0.002 0.150 0.150 -7.700 0.000 -7.700 2.540 0.430 2.540
1989 -0.400 -0.300 -0.700 -9.000 -0.800 -9.000 0.640 0.000 0.640
1990 -0.500 -0.400 -0.900 -9.800 -1.300 -9.800 0.000 0.000 0.000
1991 -0.400 -0.400 -0.700 -9.400 -1.000 -9.400 0.410 0.000 0.410
1992 -0.500 -0.500 -1.000 -10.300 -1.400 -10.300 0.000 0.000 0.000
1993 -0.600 -0.700 -1.300 -10.400 -2.000 -10.400 0.000 0.000 0.000
1994 -0.900 -1.100 -2.000 -11.900 -3.000 -11.900 0.000 0.000 0.000
1995 -0.600 -0.900 -1.500 -10.900 -2.500 -10.900 0.740 0.000 0.740
1996 -0.400 -0.700 -1.000 -9.600 -2.000 -9.600 1.700 0.000 1.700
1997 -0.420 -0.790 -1.200 -10.570 -2.220 -10.570 1.210 0.000 1.210
1998 -0.600 -1.000 -1.600 -10.400 -2.800 -10.400 0.200 0.000 0.200
1999 -0.700 -1.200 -1.800 -11.100 -3.200 -11.100 0.000 0.000 0.000
2000 -0.600 -1.100 -1.700 -10.500 -3.100 -10.500 0.140 0.000 0.140
2001 -0.800 -1.400 -2.200 -11.000 -3.900 -11.000 0.000 0.000 0.000
2002 -0.800 -1.500 -2.300 -11.400 -4.200 -11.400 0.000 0.000 0.000
2003 -0.500 -1.300 -1.800 -9.700 -3.700 -9.700 0.830 0.000 0.830
2004 -0.400 -1.200 -1.600 -9.400 -3.500 -9.400 1.200 0.000 1.200
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTES: Alternate indexing is calculated using median earnings. Current benefit is based on average indexed monthly earnings (AIME).
Table B-9. Total effect of using alternate indexing to calculate benefits: Mean change in benefits as a percentage of current benefit, for selected current replacement rate percentiles, 1979–2004 (Chart 14)
Year Dollar change in benefits as a percentage of current benefit AIME
5th percentile 10th percentile 25th percentile 50th percentile 75th percentile 90h percentile 95th percentile
1979 -0.190 -0.310 -0.750 -0.490 -0.470 -0.410 -0.850
1980 0.022 -0.030 -0.450 -0.220 -0.120 0.060 -0.380
1981 0.419 0.374 -0.020 0.218 0.433 0.851 0.228
1982 0.064 -0.008 -0.340 -0.150 -0.040 0.150 -0.370
1983 -0.090 -0.140 -0.460 -0.280 -0.250 -0.160 -0.590
1984 0.054 -0.004 -0.290 -0.120 -0.040 0.106 -0.340
1985 -0.180 -0.250 -0.490 -0.360 -0.360 -0.380 -0.720
1986 -0.732 -0.903 -1.088 -1.022 -1.231 -1.640 -1.603
1987 -0.440 -0.520 -0.690 -0.610 -0.740 -0.960 -0.900
1988 0.165 0.131 0.013 0.122 0.189 0.331 0.159
1989 -0.460 -0.530 -0.640 -0.610 -0.730 -1.000 -0.870
1990 -0.654 -0.771 -0.868 -0.860 -1.081 -1.479 -1.086
1991 -0.510 -0.590 -0.660 -0.650 -0.820 -1.140 -0.680
1992 -0.700 -0.780 -0.850 -0.870 -1.110 -1.560 -0.930
1993 -0.983 -1.070 -1.144 -1.197 -1.532 -2.193 -1.320
1994 -1.485 -1.599 -1.704 -1.788 -2.278 -3.288 -2.034
1995 -1.183 -1.275 -1.303 -1.361 -1.780 -2.579 -1.295
1996 -0.811 -0.927 -0.886 -0.927 -1.254 -1.877 -0.624
1997 -0.923 -1.047 -1.005 -1.058 -1.430 -2.132 -0.783
1998 -1.208 -1.355 -1.333 -1.405 -1.869 -2.769 -1.203
1999 -1.374 -1.538 -1.518 -1.596 -2.121 -3.140 -1.353
2000 -1.290 -1.451 -1.399 -1.464 -1.973 -3.019 -1.071
2001 -1.657 -1.852 -1.853 -1.918 -2.614 -3.922 -1.577
2002 -1.761 -1.968 -1.972 -2.091 -2.773 -4.233 -1.590
2003 -1.449 -1.633 -1.570 -1.647 -2.324 -3.529 -0.923
2004 -1.307 -1.481 -1.383 -1.457 -2.036 -3.249 -0.672
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTES: Alternate indexing is calculated using median earnings. Current benefit is based on average indexed monthly earnings (AIME).
Table B-10. Total effect of using alternate indexing to calculate benefits: Maximum reduction in benefits as a percentage of current benefit, for selected current replacement rate percentiles, 1979–2004 (Chart 15)
Year Dollar change in benefits as a percentage of current benefit AIME
5th percentile 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile 95th percentile
1979 -1.020 -1.030 -2.240 -2.440 -2.710 -2.750 -9.380
1980 -0.800 -0.770 -1.980 -2.140 -2.170 -2.170 -8.840
1981 -0.270 -0.230 -1.480 -1.520 -1.490 -1.270 -7.850
1982 -0.640 -0.720 -1.930 -1.940 -2.030 -2.240 -8.150
1983 -0.840 -0.800 -1.960 -2.170 -2.220 -2.420 -8.580
1984 -0.640 -0.700 -1.750 -2.010 -2.040 -2.030 -8.270
1985 -0.990 -0.960 -2.040 -2.510 -2.680 -2.530 -8.390
1986 -1.477 -1.559 -2.826 -3.146 -3.764 -4.202 -9.943
1987 -1.150 -1.180 -2.590 -2.700 -3.010 -3.320 -9.350
1988 -0.420 -0.470 -1.430 -1.860 -1.910 -2.210 -7.670
1989 -1.060 -1.190 -2.290 -2.680 -3.060 -3.720 -9.020
1990 -1.243 -1.442 -2.539 -3.050 -3.628 -3.952 -9.769
1991 -1.100 -1.330 -2.330 -2.710 -3.100 -3.940 -9.420
1992 -1.510 -1.440 -2.550 -3.010 -3.510 -4.170 -10.260
1993 -1.634 -1.731 -2.882 -3.384 -4.078 -4.681 -10.435
1994 -2.458 -2.328 -3.513 -4.178 -5.061 -6.476 -11.904
1995 -1.765 -2.034 -3.169 -3.733 -4.352 -5.530 -10.877
1996 -1.685 -1.712 -2.626 -3.221 -4.008 -4.339 -9.611
1997 -1.846 -1.641 -2.724 -3.156 -3.997 -4.867 -10.572
1998 -2.186 -2.051 -3.082 -3.649 -4.377 -5.267 -10.418
1999 -2.005 -2.192 -3.486 -3.899 -4.598 -5.795 -11.053
2000 -1.954 -2.158 -3.279 -3.782 -4.704 -6.344 -10.521
2001 -2.400 -2.652 -3.927 -4.685 -5.118 -6.759 -10.963
2002 -2.347 -2.727 -3.769 -4.807 -5.440 -6.926 -11.395
2003 -2.126 -2.365 -3.413 -4.376 -5.289 -6.087 -9.736
2004 -2.004 -2.173 -3.134 -3.731 -4.665 -5.647 -9.389
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTES: Alternate indexing is calculated using median earnings. Current benefit is based on average indexed monthly earnings (AIME).
Table B-11. Total effect of using alternate indexing to calculate benefits: Mean change in benefits as a percentage of current benefit, by age group, 1979–2004 (Chart 16)
Year Dollar change in benefits as a percentage of current benefit AIME
Under age 30 Ages 30–39 Ages 40–44 Ages 45–49 Ages 50–54 Ages 55–59 Ages 60–61
1979 -0.080 -0.400 -0.800 -1.000 -1.100 -1.200 -1.200
1980 0.170 -0.100 -0.400 -0.620 -0.750 -0.790 -0.840
1981 0.568 0.435 0.169 -0.020 -0.140 -0.190 -0.230
1982 0.144 0.019 -0.250 -0.440 -0.600 -0.660 -0.690
1983 -0.040 -0.150 -0.410 -0.600 -0.790 -0.870 -0.900
1984 0.130 0.040 -0.200 -0.400 -0.600 -0.600 -0.700
1985 -0.140 -0.240 -0.470 -0.640 -0.850 -0.960 -0.990
1986 -0.800 -1.000 -1.200 -1.400 -1.700 -1.800 -1.900
1987 -0.380 -0.570 -0.780 -0.960 -1.180 -1.340 -1.400
1988 0.330 0.275 0.093 -0.050 -0.220 -0.380 -0.430
1989 -0.420 -0.559 -0.728 -0.897 -1.085 -1.298 -1.374
1990 -0.660 -0.850 -1.020 -1.190 -1.380 -1.610 -1.720
1991 -0.440 -0.610 -0.770 -0.930 -1.110 -1.340 -1.460
1992 -0.670 -0.860 -1.010 -1.170 -1.360 -1.590 -1.740
1993 -0.996 -1.226 -1.380 -1.538 -1.731 -1.968 -2.150
1994 -1.574 -1.895 -2.060 -2.220 -2.432 -2.682 -2.908
1995 -1.119 -1.419 -1.602 -1.756 -1.956 -2.181 -2.386
1996 -0.711 -0.923 -1.116 -1.259 -1.438 -1.646 -1.823
1997 -0.877 -1.058 -1.255 -1.390 -1.565 -1.770 -1.950
1998 -1.230 -1.441 -1.648 -1.778 -1.950 -2.165 -2.350
1999 -1.413 -1.651 -1.874 -2.001 -2.169 -2.389 -2.572
2000 -1.289 -1.495 -1.734 -1.855 -2.022 -2.233 -2.409
2001 -1.729 -2.007 -2.258 -2.383 -2.552 -2.761 -2.952
2002 -1.831 -2.129 -2.392 -2.528 -2.687 -2.890 -3.081
2003 -1.419 -1.636 -1.902 -2.052 -2.197 -2.389 -2.568
2004 -1.283 -1.414 -1.668 -1.829 -1.967 -2.150 -2.324
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTES: Alternate indexing is calculated using median earnings. Current benefit is based on average indexed monthly earnings (AIME).
Table B-12. Bracket effect of using alternate indexing to calculate benefits: Mean change in benefits as a percentage of current benefit, by age group, 1979–2004 (Chart 17)
Year Dollar change in benefits as a percentage of current benefit AIME
Under age 30 Ages 30–39 Ages 40–44 Ages 45–49 Ages 50–54 Ages 55–59 Ages 60–61
1979 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1980 0.140 0.130 0.130 0.140 0.130 0.130 0.130
1981 0.386 0.367 0.380 0.385 0.383 0.376 0.372
1982 0.158 0.150 0.155 0.158 0.158 0.155 0.154
1983 0.050 0.050 0.050 0.050 0.050 0.050 0.050
1984 0.130 0.120 0.130 0.130 0.130 0.130 0.130
1985 -0.030 -0.030 -0.030 -0.030 -0.030 -0.030 -0.030
1986 -0.500 -0.400 -0.400 -0.400 -0.400 -0.400 -0.400
1987 -0.260 -0.240 -0.240 -0.250 -0.250 -0.250 -0.250
1988 0.155 0.146 0.146 0.150 0.152 0.152 0.148
1989 -0.279 -0.261 -0.261 -0.267 -0.272 -0.271 -0.267
1990 -0.460 -0.430 -0.430 -0.440 -0.440 -0.440 -0.440
1991 -0.370 -0.340 -0.340 -0.340 -0.350 -0.350 -0.350
1992 -0.520 -0.480 -0.480 -0.490 -0.490 -0.490 -0.500
1993 -0.748 -0.689 -0.680 -0.688 -0.699 -0.703 -0.712
1994 -1.149 -1.054 -1.035 -1.045 -1.059 -1.070 -1.071
1995 -0.958 -0.880 -0.860 -0.867 -0.878 -0.890 -0.882
1996 -0.740 -0.682 -0.664 -0.668 -0.674 -0.684 -0.683
1997 -0.843 -0.776 -0.755 -0.757 -0.764 -0.774 -0.777
1998 -1.081 -0.994 -0.966 -0.968 -0.971 -0.985 -0.992
1999 -1.238 -1.136 -1.104 -1.104 -1.107 -1.120 -1.129
2000 -1.200 -1.104 -1.074 -1.069 -1.073 -1.083 -1.089
2001 -1.502 -1.392 -1.354 -1.345 -1.347 -1.357 -1.370
2002 -1.611 -1.501 -1.458 -1.445 -1.445 -1.454 -1.469
2003 -1.406 -1.312 -1.274 -1.261 -1.256 -1.262 -1.274
2004 -1.333 -1.240 -1.200 -1.190 -1.184 -1.187 -1.195
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTES: Alternate indexing is calculated using median earnings. Current benefit is based on average indexed monthly earnings (AIME).
Table B-13. Earnings history effect of using alternate indexing to calculate benefits: Mean change in benefits as a percentage of current benefit, by age group, 1979–2004 (Chart 18)
Year Dollar change in benefits as a percentage of current benefit AIME
Under age 30 Ages 30–39 Ages 40–44 Ages 45–49 Ages 50–54 Ages 55–59 Ages 60–61
1979 -0.080 -0.400 -0.800 -1.000 -1.100 -1.200 -1.200
1980 0.030 -0.230 -0.530 -0.750 -0.880 -0.920 -0.960
1981 0.180 0.067 -0.210 -0.400 -0.520 -0.560 -0.590
1982 -0.010 -0.130 -0.400 -0.600 -0.760 -0.810 -0.840
1983 -0.090 -0.200 -0.460 -0.660 -0.840 -0.910 -0.950
1984 -0.006 -0.090 -0.300 -0.500 -0.700 -0.800 -0.800
1985 -0.110 -0.220 -0.450 -0.610 -0.820 -0.940 -0.970
1986 -0.400 -0.600 -0.800 -1.000 -1.200 -1.400 -1.500
1987 -0.130 -0.330 -0.540 -0.710 -0.930 -1.100 -1.170
1988 0.174 0.129 -0.050 -0.200 -0.370 -0.530 -0.580
1989 -0.141 -0.300 -0.470 -0.634 -0.821 -1.036 -1.118
1990 -0.200 -0.430 -0.600 -0.770 -0.950 -1.190 -1.300
1991 -0.070 -0.280 -0.440 -0.590 -0.770 -1.000 -1.120
1992 -0.150 -0.380 -0.540 -0.700 -0.880 -1.110 -1.260
1993 -0.252 -0.546 -0.714 -0.866 -1.053 -1.292 -1.474
1994 -0.436 -0.862 -1.054 -1.211 -1.415 -1.666 -1.898
1995 -0.165 -0.550 -0.759 -0.911 -1.105 -1.326 -1.545
1996 0.030 -0.245 -0.459 -0.602 -0.779 -0.982 -1.166
1997 -0.034 -0.287 -0.510 -0.646 -0.818 -1.019 -1.203
1998 -0.153 -0.457 -0.699 -0.832 -1.006 -1.214 -1.399
1999 -0.181 -0.528 -0.791 -0.924 -1.096 -1.312 -1.493
2000 -0.091 -0.401 -0.678 -0.809 -0.979 -1.187 -1.363
2001 -0.234 -0.634 -0.935 -1.077 -1.251 -1.459 -1.647
2002 -0.228 -0.649 -0.968 -1.125 -1.292 -1.498 -1.683
2003 -0.013 -0.333 -0.648 -0.818 -0.974 -1.168 -1.345
2004 0.052 -0.179 -0.480 -0.659 -0.809 -0.996 -1.170
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTES: Alternate indexing is calculated using median earnings. Current benefit is based on average indexed monthly earnings (AIME).
Table B-14. Earnings history, bracket, and total effects of using alternate index to calculate benefits: Mean change in benefits as a percentage of current benefit, by sex, 1979–2004 (Chart 19)
Year Dollar change in benefits as a percentage of current benefit AIME
Women Men
Earnings history effect Bracket effect Total effect Earnings history effect Bracket effect Total effect
1979 -0.530 0.000 -0.530 -0.470 0.000 -0.470
1980 -0.320 0.142 -0.180 -0.300 0.128 -0.170
1981 -0.030 0.403 0.378 -0.070 0.363 0.291
1982 -0.270 0.165 -0.110 -0.240 0.148 -0.100
1983 -0.370 0.054 -0.310 -0.310 0.049 -0.260
1984 -0.240 0.140 -0.110 -0.210 0.120 -0.080
1985 -0.390 -0.030 -0.420 -0.310 -0.030 -0.340
1986 -0.800 -0.470 -1.260 -0.610 -0.420 -1.020
1987 -0.490 -0.270 -0.760 -0.380 -0.240 -0.610
1988 -0.003 0.160 0.160 -0.002 0.140 0.140
1989 -0.460 -0.280 -0.750 -0.350 -0.260 -0.610
1990 -0.590 -0.470 -1.050 -0.450 -0.420 -0.860
1991 -0.420 -0.370 -0.790 -0.320 -0.330 -0.650
1992 -0.540 -0.520 -1.050 -0.410 -0.470 -0.880
1993 -0.713 -0.745 -1.447 -0.554 -0.676 -1.218
1994 -1.052 -1.137 -2.163 -0.824 -1.032 -1.830
1995 -0.720 -0.947 -1.652 -0.565 -0.857 -1.407
1996 -0.408 -0.731 -1.132 -0.321 -0.662 -0.976
1997 -0.468 -0.831 -1.291 -0.372 -0.752 -1.115
1998 -0.658 -1.063 -1.706 -0.526 -0.960 -1.471
1999 -0.739 -1.214 -1.934 -0.594 -1.097 -1.672
2000 -0.617 -1.176 -1.778 -0.499 -1.063 -1.547
2001 -0.871 -1.477 -2.321 -0.710 -1.337 -2.019
2002 -0.900 -1.585 -2.454 -0.738 -1.437 -2.145
2003 -0.585 -1.381 -1.949 -0.481 -1.254 -1.718
2004 -0.440 -1.303 -1.731 -0.364 -1.184 -1.536
SOURCE: Author's calculations using Continuous Work History Sample data.
NOTES: Alternate indexing is calculated using median earnings. Current benefit is based on average indexed monthly earnings (AIME).
Table B-15. Detailed data used in comparisons with Autor and Duggan: Changes in replacement rates for men from 1984 to 2002 based on hypothetical rates, by age group and selected current benefit replacement rate percentile (Table 1)
Age AIME percentile 1984 2002
N Replacement rates a (percent) Median replacement rate (percent) N Replacement rates a (percent) Median replacement rate (percent)
Minimum Maximum Mean Minimum Maximum Mean
Last year of nonzero earnings
30–39 10 4041 11.9617 64,027.5660 347.7442 59 4002 9.5811 91,279.5756 306.2345 63
30–39 50 12862 12.4638 739,768.0000 200.8308 37 12734 10.5577 55,453.3417 114.9925 41
30–39 90 14684 11.9570 41,141.8564 39.8235 25 6524 10.2276 141,104.0000 78.2262 28
40–49 10 2582 10.8811 106,660.0000 339.2012 50 3851 11.0212 184,828.0000 298.0617 56
40–49 50 11748 10.8976 100,947.0000 104.7091 34 12441 9.5629 98,003.5418 112.4959 42
40–49 90 16669 10.6315 23,287.8055 30.8196 24 10217 10.1689 35,718.5830 57.2315 26
50–51 10 2057 12.4083 36,718.3167 212.4219 50 2474 9.5405 127,499.0000 233.8239 55
50–51 50 13799 10.4453 801,109.0000 265.1523 36 11027 10.4323 361,507.0000 315.3583 44
50–51 90 18721 8.2675 42,965.9572 39.4008 23 14555 10.3126 2,236,219.0000 480.0746 26
Average of last 3 years of CPI-indexed earnings
30–39 10 4041 16.5070 43,538.0151 306.5957 69 4002 18.9290 131,129.0000 271.8407 65
30–39 50 12862 15.4293 2,142,554.0000 252.4363 39 12734 13.9995 86,038.3001 84.0339 42
30–39 90 14684 13.0109 1,456.8513 28.5907 27 6524 12.1479 423,312.0000 99.3779 29
40–49 10 2582 14.5662 73,617.4933 312.5343 56 3851 12.0465 66,084.9918 161.0462 58
40–49 50 11748 12.5346 2,291,523.0000 287.6655 36 12441 14.0774 145,510.0000 102.0488 42
40–49 90 16669 12.7804 11,289.7465 27.3887 25 10217 13.9000 12,475.2464 37.7646 27
50–51 10 2057 13.0689 110,155.0000 268.2393 56 2474 11.9771 404,622.0000 345.0247 57
50–51 50 13799 12.0556 255,751.0000 162.8865 37 11027 14.1160 268,750.0000 222.5272 44
50–51 90 18721 11.6906 12,114.2957 28.3515 24 14555 13.3702 46,187.4020 64.7021 27
Lifetime earnings (AIME)
30–39 10 4041 53.9858 56.2990 55.0828 55 4002 62.1868 65.3627 63.6942 64
30–39 50 12862 42.3606 43.4509 42.8905 43 12734 45.4260 46.8391 46.1192 46
30–39 90 14684 33.1757 35.0883 34.1085 34 6524 33.9390 35.9320 34.9447 35
40–49 10 2582 48.8275 50.5981 49.6434 50 3851 56.1093 58.6465 57.3151 57
40–49 50 11748 39.4770 41.7780 40.6853 41 12441 42.3555 43.4454 42.8911 43
40–49 90 16669 34.1017 36.1118 35.2342 35 10217 30.4884 32.1186 31.2801 31
50–51 10 2057 49.6943 51.5554 50.5793 51 2474 52.9707 55.1748 54.0297 54
50–51 50 13799 40.5959 42.2249 41.5593 42 11027 39.1980 41.6665 40.4313 40
50–51 90 18721 36.1358 38.3605 37.5071 38 14555 30.3935 32.0134 31.1895 31
SOURCE: Author's calculations based on Continuous Work History Sample data.
NOTE: N = number of observations; AIME = average indexed monthly earnings.
a. These replacement rates are for individuals whose AIME is within 5 percent (plus or minus) of the percentile AIME value.
Table B-16. Detailed data used in comparisons with Autor and Duggan: Differences in replacement rates for men from 1984 to 2002 based on alternate calculation as compared to the current (AIME) calculation in percent, by age group and selected current benefit replacement rate percentile (Table 1)
Age AIME percentile 1984 2002 Percentage point change a 1984–2002
N Percentage difference between current and alternate replacement rates N Percentage difference between current and alternate replacement rates
Minimum Maximum Mean Minimum Maximum Mean
30–39 10 4041 -1.1275200 0.3876000 0.0058300 4002 -4.3482400 -2.3126100 -3.0222100 -3.03
30–39 50 12862 -1.4755700 0.2482800 -0.0004680 12734 -3.1411400 -1.0191000 -1.6477300 -1.65
30–39 90 14684 -0.1299700 0.1983300 0.1144100 6524 -2.2192200 -1.4214700 -1.7000900 -1.81
40–49 10 2582 -1.8246100 0.1833100 -0.4852300 3851 -4.3044800 -2.0617800 -3.0655800 -2.58
40–49 50 11748 -1.4431400 0.1907500 -0.1250000 12441 -3.0663800 -1.0930700 -1.9739700 -1.85
40–49 90 16669 -0.5538900 0.1569800 0.0025435 10217 -2.1414800 -1.3670300 -1.6712500 -1.67
50–51 10 2057 -2.0451700 0.1861600 -0.8259400 2474 -4.7833200 -1.9870500 -3.3410000 -2.52
50–51 50 13799 -1.7462200 0.1012200 -0.6996900 11027 -3.4687700 -2.1065400 -2.6272600 -1.93
50–51 90 18721 -0.7028700 0.0689872 -0.1955000 14555 -2.3467700 -1.4804300 -1.8640800 -1.67
SOURCE: Author's calculations based on Continuous Work History Sample data.
NOTE: N = number of observations; AIME = average indexed monthly earnings.
a. Estimated using a difference-in-differences approach. The difference between the current benefit calculation and the alternate index calculation is computed for 1984 and 2002 and then differenced again to determine the change over the period.

Appendix C

Table C-1. Average wages (AWI), median earnings, the Consumer Price Index (CPI), and PIA formula first and second bend points under each indexing method, 1979–2004 (Charts 20 and 21)
Year Average wage series (AWI) (dollars) Median earnings (dollars) CPI a Change in CPI-indexed earnings (percent) CPI-indexed earnings b (dollars) Bend points based on average wage series (AWI) (dollars) Bend points based on median earnings (dollars) Bend points based on CPI-indexed earnings (dollars)
First Second First Second First Second
1979 11,479.46 7,930 74.4 10.8 11,624.83 180 1,085 180 1,085 180 1,085
1980 12,513.46 8,549 83.9 11.3 12,941.11 194 1,171 196 1,179 193 1,165
1981 13,773.10 9,361 92.9 9.7 14,194.82 211 1,274 215 1,298 214 1,290
1982 14,531.34 9,914 98.2 5.4 14,956.38 230 1,388 232 1,399 238 1,436
1983 15,239.24 10,318 100.5 2.4 15,308.47 254 1,528 254 1,532 261 1,575
1984 16,135.07 10,704 104.1 3.4 15,828.23 267 1,612 269 1,622 275 1,659
1985 16,822.51 11,265 107.3 3.0 16,309.96 280 1,691 280 1,689 282 1,698
1986 17,321.82 11,831 108.7 1.3 16,515.02 297 1,790 291 1,752 291 1,756
1987 18,426.51 12,327 113.3 4.0 17,180.87 310 1,866 306 1,844 300 1,810
1988 19,334.04 12,824 117.8 3.8 17,842.05 319 1,922 321 1,936 304 1,832
1989 20,099.55 13,392 123.3 4.5 18,642.53 339 2,044 335 2,017 316 1,906
1990 21,027.98 13,910 129.9 5.1 19,584.94 356 2,145 348 2,099 328 1,980
1991 21,811.60 14,278 134.7 3.6 20,282.85 370 2,230 364 2,192 343 2,068
1992 22,935.42 14,739 138.8 2.9 20,877.25 387 2,333 378 2,276 360 2,173
1993 23,132.67 15,000 142.4 2.5 21,405.17 401 2,420 388 2,337 373 2,250
1994 23,753.53 15,560 146.4 2.8 21,994.89 422 2,545 400 2,412 384 2,316
1995 24,705.66 16,108 150.2 2.6 22,556.10 426 2,567 407 2,455 394 2,375
1996 25,913.90 16,712 154.6 2.8 23,197.93 437 2,635 422 2,546 405 2,440
1997 27,426.00 17,562 157.9 2.0 23,673.05 455 2,741 437 2,636 415 2,503
1998 28,861.44 18,513 160.0 1.3 23,988.69 477 2,875 454 2,735 427 2,574
1999 30,469.84 19,265 163.9 2.4 24,564.26 505 3,043 477 2,874 436 2,626
2000 32,154.82 20,225 169.7 3.4 25,399.00 531 3,202 503 3,030 442 2,661
2001 32,921.92 20,905 174.1 2.5 26,045.64 561 3,381 523 3,153 452 2,725
2002 33,252.09 21,194 176.6 1.4 26,404.58 592 3,567 549 3,310 467 2,818
2003 34,064.95 21,622 180.3 2.1 26,951.32 606 3,653 568 3,421 479 2,890
2004 35,648.55 22,308 185.1 2.6 27,650.22 612 3,689 575 3,468 486 2,930
SOURCES: SSA (2006a), SSA Office of the Chief Actuary (see http://www.socialsecurity.gov/OACT/COLA/AWI.html and http://www.socialsecurity.gov/OACT/STATS/cpiw.html).
NOTES: AWI = average wage index; PIA = primary insurance amount.
a. 1982–1984 = 100. The CPI measure used here is based on Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). SSA averages the monthly values for July, August and September to determine CPI value for that year.
b. For CPI adjusted earnings the 1978 AWI measure was used and adjusted each year by the percentage change in the CPI from the prior year.