Social Security, Social Insurance, & More

[ReijiTabibito]

Alright.  I’ve thought about establishing this thread for a time, and considering the topic I want to cover, PROC seems the best place to put it.  In the election cycle, Donald Trump did one of the most audacious things a Republican candidate in history has ever done: promise not to touch Social Security.  That, along with conversations with others I’ve had on E, has led me to establish this particular thread related to the subject of Social Security, both the US specific and other national forms of it, and what is to be done about it in the long-term.

To run down a quick history of the program in the United States.  The Social Security Administration was established by President Franklin Delano Roosevelt during the New Deal in 1935, after the signing of the Social Security Act.  This was in response to the Great Depression and the economic problems that faced the country during that period of time.  It’s been through several iterations, with the most current amended version in (I think) 2009.

Social Security is a form of social insurance.  Imagine your basic insurance program – you pay into a gigantic pool of money, which is withdrawn from when there are expenses that need to be paid.  In difference to medical or car insurance, though, after you turn a certain age and/or ‘retire,’ you are automatically paid each month out of Social Security.  Paying into Social Security is done through payroll taxes, either the FICA or SECA tax, depending on the nature of your employment.  There is also a cap on the amount of income that can be taxed in this manner, currently about $118,000 a year.

The more recent debate about Social Security usually involves the privatization of it.  This doesn’t involve the usual privatization moves of taking Social Security out of the hands of government and having it run by private businesses.  Rather, privatizing Social Security would mean taking an individual’s contribution into Social Security and placing it into a private investment account.

Social Security’s real problems, however, are how it will remain fully funded in the long-term picture.

So, here’re my questions/requests to the thread.

A: If you’re not from the United States, do you have social insurance where you live, and how does it function/operate?

B: If you are, what do you think about the privatization of Social Security?

C: Regardless of nation, what do you think should be done to solve the funding problem?

(You are, of course, free to answer any of the questions above, or even propose your own, I’m just giving you a place to start from.)

[Cassandra LeMay]

Reiji, before I try to answer some of your questions, could you perhaps define "Social Security" in the context you use it here? Here in Germany (and I believe in many other countries) Social Security covers a number of different programs, including not just old age pension (OAP), but also health insurance (if government mandated), unemployment insurance, support for low-income families, and more. It seems to me you use the term Social Security as a synonym for OAP only, so perhaps we should make certain what we are talking about?

[RedRose]

France here, same as above. Though I call "sécu(rité sociale)" mostly health.
As much as we Frenchies love to complain and whine about it, we are actually quite spoiled... Some of the best things would be paternity leave (unless there's an extended family nearby how do women do without??), "social apartments" for cheap, monthly money for each child, basically free hospital everything (private clinic may be different, sometimes very expensive - or just 25 euros/day). I have friends who couldn't have a baby, and they benefitted from IVF for free once exams showed a real problem (don't know details). I know there's a program to get a very cheap cleaning lady when pregnant or with a baby. I've also seen that some hospitals carry kosher or hallal food for free.

Unless you don't go and collect your benefits, you basically can't starve or end up with no glasses and toothless (despite President Hollande's stupid joke). That said many people do choose to also get a mutuelle, health wise.

Hope it helps! I can't swear every single detail is accurate but that's an overview.

[ReijiTabibito]

Reiji, before I try to answer some of your questions, could you perhaps define "Social Security" in the context you use it here? Here in Germany (and I believe in many other countries) Social Security covers a number of different programs, including not just old age pension (OAP), but also health insurance (if government mandated), unemployment insurance, support for low-income families, and more. It seems to me you use the term Social Security as a synonym for OAP only, so perhaps we should make certain what we are talking about?

Of course.

In the US, we do actually have programs for...I think MOST of the stuff you've described.

Social Security is classified as an OASDI program, which stands for: Old Age, Survivors, Disability Insurance.  So my grandmother, who is 90+ something, gets a Social Security check every month...but so does my IRL GM, who has a highly autistic son that is still a minor.

Government provided/mandated health insurance, prior to the institution of Obamacare, was one of two programs.  Medicare and Medicaid.  Medicare was the usual one you hear about in the same breath as Social Security, because Medicare is government health insurance for old people.

Medicaid is for people with low incomes (poverty) as well as disability.  Medical insurance for disabled people tends to be a bit wonky here in the US.  If you're under 65, then you're covered by Medicaid.  Over 65, you're on Medicare...and that's not even getting into things like disabled veterans or federal employees.

Unemployment insurance exists, but it's getting tighter and tighter, even in the blue states, to get.

Support for low-income families is also a bit difficult.  The key to getting that is one word - families.  My IRL table GM was on food stamps for a while, but he got them regularly every month because he has minors in the house.  My wife and I could qualify, but we would (by our state law) only get them for 90 days, and we would have to wait for 3 years to qualify for them again.

Whereas if we did the irresponsible thing and had a baby, we could qualify for all that stuff tomorrow, until they turned 18.  (Side note, that's one of my bigger pet peeves on government assistance programs.  My table GM grew up on entitlements, but here was the thing, that was because his father died when he was 10 in a tragic accident and he and his mother needed the money to survive.  I'm all for that.  People who specifically choose to make bad decisions - knowing that they are bad - so they can qualify for stuff like food stamps should not be awarded for their choice.  But this is not the thread to discuss that.)

So yes, CLM, I am mostly referring to what you over there call OAP.

[Cassandra LeMay]

Okay, lets tackle those questions. I'll restrict myself to talking about only the Old Age Pension aspect of "social security". That's complex enough and probably fits the US definition of "social security" best. (I assume you might call other aspects "welfare" instead of "social security"?)

So, here’re my questions/requests to the thread.

A: If you’re not from the United States, do you have social insurance where you live, and how does it function/operate?

B: If you are, what do you think about the privatization of Social Security?

C: Regardless of nation, what do you think should be done to solve the funding problem?

Re. B:
Such a change might be impossible in Germany, as our OAP program is a redistributive model, not a savings model. Contributions are directly used to pay the pensions of old people, essentially just flowing through the social security system and being paid out as soon as they are collected. Originally the German OAP was a savings model that collected money and invested it for future payments, but between two world wars and the great depression of the 1930s financial reserves evaporated. So in the 1950s, German social security was switched to a redistributive model. There has been some talk now and then about switching to a "savings model", but I don't see where the money for that could realistically come from.

Re. A:
Yes, we have it here in Germany. Employees pay a certain percentage of their income into the OAP scheme (essentially a payroll tax reserved exclusively for pension payments). Employers also pay into the pension scheme, matching the employees' contributions. (Unemployment and health insurance work the same way, i.e. employers and employees both pay a share.) If your income is above a certain threshold you fall outside the public OAP scheme and have to see to your own old age income.

Unlike employees in the private sector, civil servants have their pensions guaranteed by the state. They don't pay into any OAP scheme, but usually have a lower income than they might have if employed in the private sector, which (supposedly) balances out with their lack of social security contributions.

Most people who are self-employed have to take care of their old age savings through private insurance/savings. There are exceptions for certain professions that can be broadly categorized as being in the fields of science, art, healthcare. They pay into pension schemes run by their respective professional associations. Typical examples would be doctors, lawyers, journalists.

I know it sounds overly complex, but the roots of Germany's social security programs reach back to the last years of the 19th Century. The whole system has grown and changed for over a hundred years now, which doesn't exactly make for a streamlined system.

Re. C:
Raising the retirement age is an obvious way to tackle funding problems. Here in Germany, the retirement age is slowly being raised from 65 to 67 over the next years. Then of course you could just raise contributions, either by having people pay more into the pension pot, or raising the "cut off limit", keeping people on higher income in the OAP system.

In Germany some also advocate for having everyone pay into the same OAP system, i.e. treat private sector and public sector employees the same. I don't know the underlying financial and economic factors well enough to say if that would work, but (so far) it's only talk anyway. The current system has been in place so long, any radical change seems unlikely to me.

That aside, I think looking only at the funding of the existing pension schemes may be too shortsighted.

Pensions should allow people an income in their old age. (I'll ignore disability pensions and the like, for ease of argument.) That income should cover basic needs and allow for at least a modicum of social life, i.e. cover more than what is needed for physical survival alone. But if we only look at how high (or low) pensions are and ask if those pensions are high enough to allow people a decent living, I think we might overlook what could/should perhaps be done to bring the cost of living down, both in general, and for pensioners especially.

If pensions are so low that pensioners end up in poverty we can try to raise their pensions – and that seems to be what is generally debated. But if poverty is a result of high costs of living, shouldn't we also look at ways to bring the cost of living down?

Poverty is not a generational problem, it's a general problem. Affordable housing, keeping utility prices (electricity, water, etc.) in check, affordable public transportation, all that and more can help anyone with a low income, regardless of their age.

Yes, the income side is important, because disposable income provides freedom of choice, but the cost of basic needs is something that might easily be overlooked, and I think it is the real problem, the thing that should really be addressed. Thinking only in discrete categories like pension income strikes me as a mistake, as it ignores the larger picture.

[CuriousEyes]

Phase eligibility age up by a couple of years. Social Security as a program originally was intended to pay a small stipend for the last five or so years of your life. Now we have people using it for 15+, which is good in the living longer sense but bad from a financing one.

Of course bad side of that is that it might encourage some older workers to postpone retirement and keep younger workers delayed on entering/climbing the workforce. Dunno if there are studies or not.

Increase the required contributions to SS from all workers, as well as the income limits (currently around $120k). The first part is more painful on lower earners, but is also going to do more to improve long term solvency.

Finally, I'd adjust SS payments based on personal assets so that individuals with significant net worth see reduced payments. This could be reported as part of a federal tax return, and as their assets dipped below thresholds, they would see increased payments.


I don't support the privatization of SS, treating funds like retirement accounts, etc. I think at its core the program works best as what it is - a helping hand to the elderly in the form of a small pension. Its a pretty straightforward equation from there - if we need X amount of money we need to save more and spend less while attempting to create the least harm.