How the pay as you go social security system increase or may not increase the social...

How the pay as you go social security system increase or may not increase the social welfare and how the fully funded social security system increase or may not increase the social welfare

Expert Solution

Pay as you go means the pensioners are directly paid by the pay sponsor.If a person gets $500 this month it means the sponsor pays $500.Fully funded means the sponsor starts putting money aside much before the retirement of Jim and then Jim gets paid once he retires.Public plans are pay as you go because money is not set aside by the government much before time.The money that the person pays into social security at present is utilised to pay current retirees. Personal savings are fully funded.A person gets pension based on his earnings as well as his service. A person doesnt know the amount of his pension until he finally retires.The retirement benefit amount is not guaranteed.It is not certain whether individual and social welfare can be improved by replacing the pay as you go system by the fully funded system in which pensioner gets periodic income payments but the retirement benefit amount is not guaranteed. So social welfare is not increased .Pay as you go gives a minimum retirement income guarantee and improves the social welfare.Thus pay as you go will be welfare improving through a minimum retirement income guarantee .

Rahul Sunny answered 6 months ago

Suppose a pay-as-you-go social security system where social security is funded by a lump sum tax...

Suppose a pay-as-you-go social security system where social security is funded by a lump sum tax (t1) on the young and on the old. Retirement benefits are given out as a fixed amount b to each old consumer. Can social security work to improve welfare for everyone under these conditions? Use diagrams.

Social Security system is a pay as you go retirement plan. Money taken from workers checks...

Social Security system is a pay as you go retirement plan. Money taken from workers checks is transferred to retirees. At one time there were 42 workers per retiree; today the ratio is now under 3 to 1. By 2030, the ratio is expected to fall to 2 to 1. The only way to keep the current system solvent is to raise taxes on those currently working or cut benefits to those already retired. Neither of these options is particularly...

a) How do the pay-as-you-go and fully funded social security systems affect the equilibrium in the...

a) How do the pay-as-you-go and fully funded social security systems affect the equilibrium in the model with interrupted generations? b) In the Fisher two-period model, if the consumer is a saver, consumption in periods one and two are normal goods, and the income effect of an increase in interest rate is greater than the substitution effect, then saving: A) will increase. will decrease. will not change. may either increase or decrease.

Why are workers willing to accept a pay-as-you-go unfunded plan for Social Security, but not for...

Why are workers willing to accept a pay-as-you-go unfunded plan for Social Security, but not for a private pension plan?

what do economics mean when they say social security and medicare are pay as you go...

what do economics mean when they say social security and medicare are pay as you go plans?What are these trust funds?and how long will they have money left in them?What is the key long -run problem for both social security and medicare?

the Social Security System or a perceived needed change in some aspect of the Social Security...

the Social Security System or a perceived needed change in some aspect of the Social Security System. an arguement and real life problems

Explain how the Social Security tax system works and the challenges it faces.

Social Security began as a ?"payminus?asminus?youminus??go" ?system, meaning that payments to current retirees were paid A....

Social Security began as a ?"payminus?asminus?youminus??go" ?system, meaning that payments to current retirees were paid A. from taxes collected from current workers.?? B. from taxes collected from past workers. C. as the government collected tax revenues. D. as long as the government had funds available.

You may have heard that Social Security is in danger of failing. Why? Is the sky...

You may have heard that Social Security is in danger of failing. Why? Is the sky falling? What might be done to correct the situation? Use some of the things that you have learned to come up with some ideas to fix Social Security.

The current age pension system in Australia is best described as a pay-as-you-go system (PAYG). An...

The current age pension system in Australia is best described as a pay-as-you-go system (PAYG). An alternative system is a fully-funded social security system. Explain the two systems. The Australian Federal Parliament has approved the early access to the superannuation fund up to $20,000 before 30 June 2021 in order to help people adversely financially affected by COVID-19 Crisis. What motivates the Australian government to make such a move? Discuss the impact of this policy on Australian output per worker...

Question