Question

For a number of years, pundits have predicted that the Social Security retirement system will fail at some future date. Explain why the current system is considered to be in trouble, noting the demographic and societal changes that have contributed to this situation. Outline a couple of modifications to the system that may stabilize it for the long run, so that current and future workers can confidently expect to receive benefits when they retire.

Answer 1

The main demographic factor is declining fertility rates, because this change reduces the proportion of young people in relation to the elder people.Second factor is an increase in life expectancy which is seen both in developed and developing countries. The third factor is variations in birth and death rates have impacts on the productivity of the organization and the family also. If the birth rates will not increase in proportion to death rates then there will be shortage of younger working force in many companies. If the productivity system of the organization is hampered then there will be changes in social security system.

Increasing labor force participation among women and older people of male/female has led to an increase in earned income among the age group of 65-69. Above 70 and older depend on their social security benefits for the rest of their life. Some older people may demand early social security benefits due to their growing age, which results in reduced amounts of social security benefits relative to the benefits they would have received if they had claimed at full retirement age. Also, the changing marital histories, educational achievements and the pattern of working period of both men and women have generally increased the retirement benefits to which they are actually eligible based on their own earnings while reducing benefits for their survivors. These social changes have reduced the social security benefits of many retired couples.

There should be modifications in the educational system, more young people should be highly qualified to provide effective contributions to the organizations. More productivity means more social benefits after retirement. Secondly, there should be a balance between birth rate and death rate. The survival of more young and dynamic people is required to achieve the long-run objectives of the company. Another change should be in the mindset of the working people that they should have a desire to work, keep themselves healthy and fit to increase their productivity for a long period of time and should retire only when their retirement age appears. This will stabilize the situation and the workers of different generations can confidently expect to receive benefits after their retirement age.