a. measures a worker’ s monthly retirement benefit divided by monthly earnings before taxes in the year prior to retirement.
b. measures a worker’ s monthly retirement benefit divided by monthly earnings after taxes in the year prior to retirement.
c. is an increasing function of gross monthly earnings prior to retirement. d. is independent of gross monthly earnings prior to retirement.
3. A worker earns $ 2,000 per month before taxes. He pays $ 140 per month payroll tax on those wages. In addition, the income taxes on those wages are $ 360 per month. On retirement, the worker receives a Social Security pension of $ 750 per month. Which of the following statements is true?
a. The worker’ s gross replacement rate is 50 percent. b. The worker’ s net replacement rate is 50 percent. c. The worker’ s net replacement rate is 38 percent. d. The worker’ s net replacement rate is 75 percent.
4. The growth in hourly wages over the past 50 years has averaged about 2 percent per year. However, the growth in Social Security pensions has far exceeded this 2- percent rate. The growth in tax revenue to finance Social Security benefits in excess of 2 percent per year can be accounted for by:
a. increases in payroll tax rates. b. use of other taxes beside the payroll tax to pay Social Security benefits. c. an increase in the number of workers paying Social Security taxes. d. either( a) or( b) e. either( a) or( c)
5. Given the structure and level of gross replacement rates and the expected future growth of labor earnings subject to the payroll tax, the tax rates used to tax payrolls were increased in the 1980s because:
a. the number of retirees per worker will increase. b. the number of retirees per worker will decrease.