ACTUARIAL NOTE
 
 
SOCIAL SECURITY ADMINISTRATION
Number 103
May 1981
Office of the Chief Actuary
Baltimore, Maryland
AVERAGE WAGES FOR INDEXING UNDER THE SOCIAL SECURITY ACT
AND THE AUTOMATIC DETERMINATIONS FOR 1979-81
by Eli N. Donkar, Ph.D., A.S.A.
INTRODUCTION
CONSTRUCTION OF THE 1951-77 AVERAGE WAGE SERIES
1. Historical precedents for wage indexing and average wage
2. The preliminary series of average wages
3. Limitations on other historical sources of data available from SSA
4. The construction of the final average wage series for 1951-77
5. The final series—indications of reliability
AVERAGE WAGES FOR 1978 AND 1979
1. Sources of data for years after 1977
2. IRS wage data for 1977-79
3. Average wages for indexing, 1977-79
DETERMINATION OF WAGE-INDEXED PROGRAM AMOUNTS FOR 1979-81
1. The retirement test exempt amounts
2. Amount of earnings required for a quarter of coverage
3. Bend points in PIA formula and maximum family benefit formula
4. Contribution and benefit base
5. Contribution and benefit base under provisions in "old law"
Relevant Federal Register Publications

Table 1.—Average wage series for indexing earnings under the Social Security Act, calendar years 1951-79
Calendar year Average wage
1951 $2,799.16
1952 2,973.32
1953 3,139.44
1954 3,155.64
1955 3,301.44
1956 3,532.36
1957 3,641.72
1958 3,673.80
1959 3,855.80
1960 4,007.12
1961 4,086.76
1962 4,291.40
1963 4,396.64
1964 4,576.32
1965 4,658.72
Calendar year Average wage
1966 $4,938.36
1967 5,213.44
1968 5,571.76
1969 5,893.76
1970 6,186.24
1971 6,497.08
1972 7,133.80
1973 7,580.16
1974 8,030.76
1975 8,630.92
1976 9,226.48
1977 9,779.44
1978 10,556.03
1979 11,479.46


Table 2.—Social Security program amounts determined under the automatic provisions which depend on increases in average wages, calendar years 1978-81
Calendar
year		 Retirement test exempt amount
Contribution and benefit base Under age 65 Aged 65 and over2
Present law1 Prior law Monthly Annual Monthly Annual
1978 $17,700 $17,700 $270.00 $3,240 $333.33 1/3 $4,000
1979 22,900 18,900 290.00 3,480 375.00       4,500
1980 25,900 20,400 310.00 3,720 416.66 2/3 5,000
1981 29,700 22,200 340.00 4,080 458.33 1/3 5,500
Calendar
year		 Amount of earnings required for each quarter of coverage Bend points in PIA formula Bend points in maximum
family benefit formula
First Second First Second Third
1978 $250 --- --- --- --- ---
1979 260 $180 $1,085 $230 $332 $433
1980 290 194 1,171 248 358 467
1981 310 211 1,274 270 390 508
1 Amounts for 1979-81 represent ad hoc increases and are specified in the law.
2 Amounts for 1978-81 represent ad hoc increases and are specified in the law.

Table 3.—First-quarter averages used in constructing the preliminary indexing series, calendar years 1951-77
Calendar
year		 Average taxable wage per employee from 100% data Average taxable wage per wage item from 100% data1 Average taxable wage per wage item excluding State and local2 Preliminary first-quarter series after linking3
1951 --- --- $592.90 $692.17
1952 --- --- 630.69 736.29
1953 --- --- 661.55 772.32
1954 --- --- 690.74 806.40
1955 --- --- 717.46 837.59
1956 --- --- 758.01 884.93
1957 --- --- 802.41 936.76
1958 --- $825.96 824.84 962.95
1959 --- 853.43 --- 994.98
1960 --- 889.50 --- 1,037.03
1961 --- 918.45 --- 1,070.78
1962 --- 956.60 --- 1,115.26
1963 --- 980.37 --- 1,142.97
1964 --- 1,010.44 --- 1,178.03
1965 --- 1,026.45 --- 1,196.69
1966 --- 1,071.44 --- 1,249.14
1967 --- 1,138.79 --- 1,327.66
1968 --- 1,218.59 --- 1,420.70
1969 --- 1,281.63 --- 1,494.20
1970 --- 1,348.39 --- 1,572.03
1971 --- 1,430.35 --- 1,667.58
1972 --- 1,554.59 --- 1,812.43
1973 $1,895.04 1,625.45 --- 1,895.04
1974 2,007.69 --- --- 2,007.69
1975 2,157.73 --- --- 2,157.73
1976 2,306.62 --- --- 2,306.62
1977   2,444.86   ---   ---   2,444.86
1 Equals the average taxable wage per wage item for the first quarter from 100-percent data in "Current receipts by servicing Internal Revenue District."
2 Equals the average taxable wage per wage item for the first quarter from 100-percent data in "Current receipts by servicing Internal Revenue District" excluding amounts of wages and numbers of wage items reported by State and local governments. Wages for 1951 estimated from Treasury certification letters.
3 Figures for 1958-72 equal 100-percent wage-item averages multiplied by 1,895.04/1,625.45. Figures for 1951-57 equal wage-item averages excluding State-and-local data multiplied by (1,895.04/1,625.45) x (825.96/824.84), each such product being rounded to the nearest cent.
Note: Preliminary indexing series equals four times the first-quarter series.


Table 4.—First-quarter averages used in constructing the final indexing series, calendar years 1951-77
Calendar
year		 Average taxable wage from 100% data Average taxable wage from 1% sample 1 Average taxable wage from 0.1% sample 2 Final first-quarter series after linking 3
1951 --- --- $691 $699.79
1952 --- --- 734 743.33
1953 --- --- 775 784.86
1954 --- --- 779 788.91
1955 --- --- 815 825.36
1956 --- --- 872 883.09
1957 --- $902.41 899 910.43
1958 --- 910.36 --- 918.45
1959 --- 955.46 --- 963.95
1960 --- 992.95 --- 1,001.78
1961 --- 1,012.69 --- 1,021.69
1962 --- 1,063.40 --- 1,072.85
1963 --- 1,089.47 --- 1,099.16
1964 --- 1,134.00 --- 1,144.08
1965 --- 1,154.42 --- 1,164.68
1966 --- 1,223.71 --- 1,234.59
1967 --- 1,291.87 --- 1,303.36
1968 --- 1,380.66 --- 1,392.94
1969 --- 1,460.46 --- 1,473.44
1970 --- 1,532.93 --- 1,546.56
1971 --- 1,609.96 --- 1,624.27
1972 --- 1,767.73 --- 1,783.45
1973 $1,895.04 1,878.34 --- 1,895.04
1974 2,007.69 --- --- 2,007.69
1975 2,157.73 --- --- 2,157.73
1976 2,306.62 --- --- 2,306.62
1977   2,444.86   ---   ---   2,444.86
1 Equals the average taxable wage per employee for the first quarter for workers represented in the 1-percent sample LEED file.
2 Estimated average taxable wage per employee for the first quarter based on the 0.1-percent sample. Sources for these published estimates are as follows: 1951 figure from February 1958 Social Security Bulletin (p.22); figures for 1952-54 from October 1961 Social Security Bulletin (p.27); figures for 1955-57 from October 1963 Social Security Bulletin (p.25).
3 Figures for 1957-72 equal 1-percent sample figures multiplied by 1,895.04/1,878.34. Figures for 1951-56 equal 0.1-percent sample figures multiplied by (1,895.04/1,878.34) x (902.41/899), each such product being rounded to the nearest cent.
Note: Final indexing series equals four times the first-quarter series.


Table 5.—Average wages, percentage increases and indexing factors resulting from the preliminary average wage series, the final average wage series, and an average wage series derived from Department of Commerce (DoC) estimates, calendar years 1951-77
Average wage Annual percentage increase Indexing factor1
Calendar
year		 Preliminary
series		 Final
series		 DoC
series		 Preliminary
series		 Final
series		 DoC
series		 Preliminary
series		 Final
series		 DoC
series
1951 $2,768.68 $2,799.16 $3,037.31 --- --- --- 3.532 3.494 3.615
1952 2,945.16 2,973.32 3,212.03 6.37 6.22 5.75 3.321 3.289 3.419
1953 3,089.28 3,139.44 3,372.22 4.89 5.59 4.99 3.166 3.115 3.256
1954 3,225.60 3,155.64 3,431.47 4.41 .52 1.76 3.032 3.099 3.200
1955 3,350.36 3,301.44 3,584.39 3.87 4.62 4.46 2.919 2.962 3.063
1956 3,539.72 3,532.36 3,757.41 5.65 6.99 4.83 2.763 2.769 2.922
1957 3,747.04 3,641.72 3,906.44 5.86 3.10 3.97 2.610 2.685 2.811
1958 3,851.80 3,673.80 4,024.55 2.80 .88 3.02 2.539 2.662 2.728
1959 3,979.92 3,855.80 4,210.33 3.33 4.95 4.62 2.457 2.536 2.608
1960 4,148.12 4,007.12 4,343.41 4.23 3.92 3.16 2.358 2.441 2.528
1961 4,283.12 4,086.76 4,450.60 3.25 1.99 2.47 2.283 2.393 2.467
1962 4,461.04 4,291.40 4,624.91 4.15 5.01 3.92 2.192 2.279 2.374
1963 4,571.88 4,396.64 4,786.70 2.48 2.45 3.50 2.139 2.224 2.294
1964 4,712.12 4,576.32 5,008.54 3.07 4.09 4.63 2.075 2.137 2.192
1965 4,786.76 4,658.72 5,206.53 1.58 1.80 3.95 2.043 2.099 2.109
1966 4,996.56 4,938.36 5,431.65 4.38 6.00 4.32 1.957 1.980 2.022
1967 5,310.64 5,213.44 5,674.82 6.29 5.57 4.48 1.841 1.876 1.935
1968 5,682.80 5,571.76 6,069.10 7.01 6.87 6.95 1.721 1.755 1.809
1969 5,976.80 5,893.76 6,474.21 5.17 5.78 6.67 1.636 1.659 1.696
1970 6,288.12 6,186.24 6,891.05 5.21 4.96 6.44 1.555 1.581 1.593
1971 6,670.32 6,497.08 7,326.91 6.08 5.02 6.33 1.466 1.505 1.499
1972 7,249.72 7,133.80 7,817.50 8.69 9.80 6.70 1.349 1.371 1.405
1973 7,580.16 7,580.16 8,308.12 4.56 6.26 6.28 1.290 1.290 1.322
1974 8,030.76 8,030.76 8,917.32 5.94 5.94 7.33 1.218 1.218 1.231
1975 8,630.92 8,630.92 9,581.05 7.47 7.47 7.44 1.133 1.133 1.146
1976 9,226.48 9,226.48 10,292.23 6.90 6.90 7.42 1.060 1.060 1.067
1977   9,779.44 9,779.44 10,980.60   5.99 5.99 6.69   1.000 1.000 1.000
1 Represents an approximate factor by which earnings in the year would be multiplied to raise them to the level of 1977 wages. The factor represents the average wage for 1977 divided by the average wage for the specified year, rounded to three decimal places.


Table 6.—Number of "wage items" per employee tabulated from the 1-percent sample LEED file, calendar years 1957-73
Calendar
year		 Number of
"wage items"1		 Number of
employees		 Number of "wage
items" per employee
1957 583,678 514,907 1.134
1958 569,326 512,073 1.112
1959 587,024 522,848 1.123
1960 607,598 540,278 1.125
1961 599,913 538,414 1.114
1962 624,118 554,731 1.125
1963 634,813 565,839 1.122
1964 656,383 581,280 1.129
1965 679,385 600,538 1.131
1966 733,235 632,840 1.159
1967 760,204 659,394 1.153
1968 782,529 677,767 1.155
1969 814,463 704,043 1.157
1970 826,274 719,274 1.149
1971 797,280 707,315 1.127
1972 822,100 723,769 1.136
1973   864,545   753,967   1.147
1 Represents number of different employer-employee combinations tabulated in the sample.


Table 7.—Average wages for the first quarter for private industry population covered by unemployment insurance1, calendar years 1951-75
Calendar
year		 Average wage for
first quarter2		 Annual percentage
increase
1951 $816.33 ---
1952 865.26 5.99
1953 908.94 5.05
1954 927.31 2.02
1955 960.43 3.57
1956 1,027.36 6.97
1957 1,070.49 4.20
1958 1,080.20 .91
1959 1,126.83 4.32
1960 1,180.94 4.80
1961 1,203.79 1.93
1962 1,258.99 4.59
1963 1,292.62 2.67
1964 1,344.45 4.01
1965 1,359.91 1.15
1966 1,418.75 4.33
1967 1,503.36 5.96
1968 1,591.32 5.85
1969 1,674.99 5.26
1970 1,753.16 4.67
1971 1,834.26 4.63
1972 1,958.60 6.78
1973 2,053.50 4.85
1974 2,188.67 6.58
1975   2,360.25   7.84
1 Based on data compiled by the Bureau of Labor Statistics and published in the Department of Labor publication "Employment and Wages." The data were obtained from: (1) "First Quarter 1975" issue, Table A-2, p. 13, for 1975; (2) "First Quarter 1974" issue, Table A-2, p. 12, for 1964-74; (3) "First Quarter 1968" issue, Table 2B, p. 22, for 1958-63; and (4) "First Quarter 1961" issue, Table 2, p. 16, for 1951-57.
2 Equals total wages for the first quarter of the year divided by highest monthly employment totals for the same quarter.


Table 8.—Estimated amounts of Average Indexed Monthly Earnings for maximum wage earners retiring at age 62 in each year 1979-90, calculated using three different wage series for indexing
AIME calculated using —
Year of
retirement		 Preliminary series Final series Series from Department
of Commerce estimates
1979 $1,084 $1,095 $1,121
1980 1,196 1,208 1,234
1981 1,328 1,340 1,368
1982 1,432 1,444 1,472
1983 1,539 1,552 1,580
1984 1,651 1,664 1,693
1985 1,768 1,781 1,809
1986 1,889 1,903 1,932
1987 2,017 2,030 2,060
1988 2,150 2,186 2,193
1989 2,289 2,303 2,334
1990   2,435   2,449   2,480
Note: For purposes of these calculations, each of the average wage series was extended for years after 1977 by assuming an increase in average wages of (1) the increase observed in the IRS Form 1040 data for 1978 and 1979, and (2) 5 percent per year for years after 1979.


Table 9.—Summary of wage data tabulated by the Internal Revenue Service from individual tax returns filed for tax years 1977-79
Calendar
year		 Number of
tax returns		 Number of
wage earners		 Amount of wages Average wage
per wage earner
1977 76,065,028 95,003,682 $954,135,979,198 $10,043.15
1978 78,495,600 97,998,362 1,062,368,672,591 10,840.68
1979   80,447,077   100,199,302   1,181,250,359,264   11,789.01
Notes: The 1977 data are based on individual tax returns filed for the tax year 1977 and processed by IRS during the period January 1, 1978, through December 31, 1978. The 1978 data are based on individual tax returns filed for the tax year 1978 and processed by IRS during the period January 1, 1979, through September 15, 1979. The 1979 data are based on individual tax returns filed for the tax year 1979 and processed by IRS during the period January 1, 1980, through August 11, 1980. In each case, IRS estimates that the above counts represent data from over 97 percent of the individual tax returns that would be processed for the respective tax years.

Notes published in the 1980s