The Social Security system's "earning test," which limites benefits to a retired person who continues to earn an income, has been defended as basic to the system and attacked as an insult to the American work ethic.
Under the test in its current form, a Social Security recepient who works after retirement may earn up to $3,000 per year without penalty.
If he or she exceeds that amount, the benefit is reduced during each month the recipent earns $250 or more - $1 drops off the Social Security payment for every $2 earned.
Opponents of the earnings test say it financially cripples retired people already burdened by a drop in income. Social Security spokesmen say abandoning the test would cost $7 billion the first year. Beside, they say the recipients most frequently affected by the test are earning enough that they can afford it.
A new study of 1973 beneficiaries affected by the earnings test seems at least in part to bear this out. In a report for the September, 1977. Social Security Bulletin, researcher Barbara A. Lingg found that 42.5 per cent of the men who worked while collecting Social Security in 1973 earned $9,000 or more.
Although earnings restrictions had been more liberal in 1973 than in the previous six years, they were stiffer than they are now. A Social Security recipient was allowed $2,100 earned income without penalty in 1973, and his or her benefit was then cut for each month the recipient earned more than $175. As under the current arrangement, the benefit was reduced $1 for every $2 earned.
The study found that 1.4 million Social Security recepients - about one-sixth of all retired workers then on by the system's payroll - were affected by the earnings test. "It should be remembered." the study noted. "that the number of beneficiaries on the rolls would undoubtedly be higher if it were not for the earnings limitiation."
About 70 per cent of the affected workers were men, and 42.5 per cent of them earned $9,000 or more during 1973. An additional 20.9 per cent earned from $6,0000 to $9,000 that year. Women's earnings were considerably less: 17 per cent earned at least $9,000 and 23 per cent earned from $6,000 to $9,000.
Fewer black workers than white workers had high earnings, the study showed. White 14 per cent of the white men receiving benefits warned $9,000 or more, only 21 to 24 per cent of men of other races had earnings in that range. Seventeen per cent of the white women earned at least $9,000, while 11 per cent of the nonwhite women reached that figure.
Social Security spokesmen say the point of the earnings test is to preserve the system as a retirement insurance program, rather than a guarantee old-age annuity. "The concept was that you would stop working." said spokesman Jim Brown.