Question about How people respond to incentives (Principles of Economics - N.Gregory Mankiw.)?

Question

The Social Security system provides income for people over age 65. If a recipient of Social Security decides to work and earn some income, the amount he/she receives in Social Security benefits is typically reduced.
a. How does the provision of Social Security affect people's incentive to save while working?
b. How does the reduction in benefits associated with higher earnings affact people's incentive to work past age 65?
(Question no.7 page 17)

Answer 1

a. Until the 1980's American's did not have an incentive to save for retirment. Concequently, the IRA (Individual Retirement Accout) was created as incentives to get the Baby-Boombers to save outside of the SS.

b. When the benefites are reduced (like an increase in the age you can start collecting ... or a decrease in the inflation adjustment) then the dependants of SS will find they do not have enough money to pay their bills. This will entice many to find employment to compensate for what they cannot purchase (medicines, rent, food, etc-etc-etc).

BOOK Answer Key quote: "12. a. If everyone were guaranteed the best health care possible, much more of our nation's output would be devoted to medical care than is now the case. Would that be efficient? If you think that currently doctors form a monopoly and restrict health care to keep their incomes high, you might think efficiency would increase by providing more health care. But more likely, if the government mandated increased spending on health care, the economy would be less efficient because it would give people more health care than they would choose to pay for. From the point of view of equity, if poor people are less likely to have adequate health care, providing more health care would represent an improvement. Each person would have a more even slice of the economic pie, though the pie would consist of more health care and less of other goods." <1>

Answer 2

The government is forcing people to save during the time that they're under 65. Therefore, their incentive to save decreases because they're already "saving." They know that if they don't save any additional money they'll still get social security.

Because social security benefits decrease when you work after the age of 65, most people would have less incentive to work.

The exception to both of these statements are people who make a lot of money. In which case, they would a) save money because social security would not be enough to support their lifestyle and b) continue working because they would make significantly more money than the reduction in social security would amount to.

Answer 3

a]. we know that social security is a farce we must save and scrimp along with hope and prayers that we will make it until we die.and no i don't mind paying now so our fathers and mothers will receive something for what they worked for and believed in.
b] so what? i can work under the table or even above and make more than this farce of a system pays out. retire? only after i am cremated.

Answer 4

That just proves he is a real american average joe, just like the guy next door. It proves he is someone you can trust, not like those elitist communist marxist nazi terrorists with their education and knowing what they're talking about and all that.