In: Economics
Before begining with the condition given in the question we discuss about first of all about the social security benefits .
Social security benefits is a term commonly used in USA which indicates at providing a partial replacement income to retirees and their families after the working years are over for them. As it is mentioned in the question , as the baby boomer generation continues to retire and as a result the number of retirees goes on rising this results in a demographic change in the society. But with it we also consider the fact that the coditions under which these baby boomers retire have also undergone a transition including changes in marriage patterns, earnings and work patterns and this altogether has been a huge concern for the policymakers. In 1935 the social security program was designed as a social insurance program to provide income security to the elderly in there retirement period as retirement benefits.
The impact on the social security due the change in the demography can be explained as below:
1. As the baby boomer generation has different patterns and trends over the early retirees, they seem to have attained a better education and thus spend a greater time in the labour market leading to greater social security benefits than earlier. This in turn results in the shortfall for funds for the authiorities to manage the surging conditions.
2. In the baby boomer generation the number of people involved per family in labour market is greater than before as the indiviuals attain a greater eligibilty to work in the sector. So the income of the family increases and so the benefits to be distributed also surge. As a result the social security programs initaited earler need restructuring on the follow up conditions.
3. Many of the retirees face the problem of outliving their respective retirement funds. According to reports, in USA itself 30% were afraid of same, about 28% were afraid of maintaing pre retirement lifestyle and 18% were unsure about the healthcare expenses. So as the social security seems to grow heavy on the authorities the burden incraeses further with increase in the number of retirees.
4. The concept of social security is more beneficial for those related with longitivity of life, as it deals with a guarenteed monthly payments and so a longer life span faces greater benefits which becomes difficult to manage for the authorities to keep up for so many year to come with the increasing population of retirees.
Coming to the solutions to offset the harmful effects of such a demography change on the social security programs can be given below:
1. RAISING SOCIAL SECURITY TAX CAP :
As the retirees population goes on increasing government tends to face a budgetary shortfall in such a situation the tax imposition on the earnings from social security programs would incraese the income for the government and the restructuring of the payoff taxes would play a role in this regard.
2. RAISING THE RETIREMENT AGE :
In this context , USA which has a pattern of a full retirement age from whereon full benefits are recieved by the retirees should be raised, which in turn renders a greater period for the government to manage funds for the upcoming retirees. But this would intrigue problems to increased unemployment as the vacancies will be lately released.
3. CHANGE IN BASIS TO MEASURE HIKE IN PAYMENTS FROM SOCIAL SECURITY PROGRAMS :
Right now in regard to USA, CPI (consumer price index) is used as the basis to measure the hike in the social security benefits,which can be shifted to CPI with regard to spending habits of the elderly class, this would help to deplete the expenses of the government in this regard.
4. The search of alternative means to manage funds for progressive working of the programs helps to cover up the major issue of shortfall of funds.
On a conclusion , for the working of the social security programs about 2/5 of the total national income of the nation will be recieved by the baby boomer generation retirees and the government has to keep up with the changing functions to keep up with these social security programs .