Report

Stylized Earnings for Birth Cohorts 1931-60

Barry P. Bosworth



Introduction

This chapter presents stylized earnings profiles for workers in birth cohorts 1931-60. It displays the patterns of Social Security qualifying earnings between three periods of a worker’s career—ages 31-40, 41-50, and 51-60. It divides workers into groups based on the level and shape of their career earnings patterns and then displays the earnings patterns for the average or typical workers in each group. Separate earnings patterns are shown for male and female workers.

The next section of the chapter discusses the methodology used. The following section displays some preliminary earnings patterns for workers in the 1931-40 birth cohort who have completed their working careers. This was the basis for much of the initial exploration of the characteristics of the earnings patterns. The last section creates patterns for all the 1931-60 birth cohorts, based on the projections of earnings reported in Chapter 2.

II. Basic Methodology

Individuals’ earnings are expressed as relatives by dividing each year’s earnings by the economy-wide average wage of that year. Because the reported earnings are truncated by the taxable wage ceiling of each year, we adjusted earnings of those at the ceiling to put them on a basis that is consistent with the current relationship of the taxable ceiling to the average wage.1 The wage data are then lined up by age, and we developed a classification system based on the pattern of individuals’ earnings from age 32 through age 61.2 We excluded earnings for ages below 32 because nearly all workers had rising earnings over this period and some individuals have very low earnings because they are still in school. We computed the average of the earnings relatives in each of the three 10-year sub-periods extending from age 32 through age 61, labeled as A, B, and C.

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