Introduction
Social Security System is one of the most important phenomena in the modern society. Having originated in the United States of America in the early 1930s, it has developed into the basis on which the lives of the elderly people are built after their retirement from work (Calmes, 2006). Workers donate money to the specialized funds, and after their retirement they receive social security payments monthly. The crucial role in this system is played by the age distribution of the population of every country. Accordingly, demographic data are vital for the development of the Social Security System (Siegel, 2002). This paper aims at analyzing the most important demographic factors influencing the system. Another goal of this paper is to offer certain solutions to the issues of the Social Security System.
Social Security System
To start with, it is necessary to consider the basis of the Social Security System. The most important demographic factor of the age distribution of the population that affects it is the relative number of elderly retired people to the number of those of the working age. It is also called elderly age-dependency ratio. Moreover, fertility, mortality and net immigration play a substantial role in the system (Siegel, 2002).
The measurement of the first aspect is carried out through relating the US Census Bureau data on the number of people of the elderly age group to the numbers reflecting the working-age population. The results of this relation are taken as the dependency ratio. The next aspects mentioned can be measured by both considering the past demographic trends in the society, like 1950s baby boom, and forecasting the future trends on their basis (Siegel, 2002).
These measurements are weak as they are always relative and approximate, based on the forecasts and might be affected by various factors that are impossible to foresee – natural disasters, epidemics, etc.
Age Distribution
Age distribution, as one of the most important factors for the development of the Social Security System, can be viewed differently according to different projections presented by the US Census Bureau in 2000. For example, according to the Middle Series Projections for 2010, the number of people aged between 20 and 59 years will amount to 162, 782, 258 while the elderly people dependant upon the payments made by the former group will amount to 55, 967, 475. Accordingly, the ratio discussed in the first section amounts to 20.9. At the same time, the High Series projections forecast the numbers to be 168, 360, 222 and 57, 005, 183 respectively with the age-dependency ration amounting to 29.5 (US Census Bureau, 2000).
These differences can be explained by such factors as the already mentioned fertility, mortality and net immigration rates with or without taking into consideration the circumstances of the irresistible force. Accordingly, the age distribution patterns differ in respect of the age-dependency ratio from 20.9 to 29.5. Respectively, the alternative suggested in the High Series is the most favorable for the Social Security System as under this alternative the system can be better funded to ensure the post-retirement wellbeing of the aged people. The least favorable alternative is thus the one offered in the Middle Series because in it the age-dependency ratio is lower which makes it harder for the working-age population to contribute to the Social Security System enough money to pay to the retired.
50-Year Forecast
Based on the same measures, it is also possible to carry out the forecasts for the 50 years. The major general trend observed in the human society over the previous century was the decline of fertility rates which led to the constant increase in the population of elderly people and the reduction of children and adults numbers. In the American society, the situation developed according to the same pattern with the only possible exception of the baby boom years in the middle of the 20th century.
Accordingly, the 50-year forecast for the US population manifests the same changes. The people born during the baby boom years will age at first creating the overwhelming population of the middle age people of approximately 40 years, while closer to the years 2010 – 2020, they will be 70 – 80 years of age. This will lead to the decline in population rates in general and in population of the young people of working age in particular as fertility rates are rather low while mortality is on the rise (Gladwell, 2006).
Retirement Age Change
Drawing from the above presented data, the ideas to change the retirement age to 70 years seem to be threatening for the society but rather favorable for the Social Security System. The point here is that the US Census Bureau forecasts the permanent mortality rate growth in combination with low fertility. If the constant aging of the population is taken into account, in 2020 retiring people will be a great minority compared to the working-age population. The retiring people number will amount to 34, 669, 257 persons while the working-age population will exceed them over 6 times amounting to 193, 306, 775 (US Census Bureau, 2000).
However, by the year 2050 these figures will be critically opposite creating the huge numbers of those who can receive the social security payments but dangerously little population of those who can make payments to the Social Security System. The retiring persons 70 years old and over will amount to the population of 54, 089, 542 people, while the population of the working-age people will fall to the level of 190, 015, 123 (US Census Bureau, 2000).
Projection Alternative
Having considered all the important aspects of the age distribution and other factors influencing the development of the Social Security System, it is possible to make a forecast for 2050. However, considering the four possible scenarios presented by the US Census Bureau are to generalized in the sense that they put all the factors to be considered in the same conditions, forecasting either low or medium, or high rates of all the factors. To achieve the more objective and probable picture of such things as the Total Fertility Rate, Life Expectancy Rate and Net Immigration Figures, it is necessary to combine the assumptions available considering the possible development of each of the factors separately. To visualize this, the following table can be used:
Thus, TFR figures are those of the low serious as the trend for the fertility decrease will obviously remain dominant in the society. Life expectancy will equal the middle series figures as the elderly people can have high income rates and living standards (US Census Bureau, 2000). As for net migration, it will coincide with the highest series scenario, especially if the current economic crisis will develop further (Myers, 2007).
Social Security System Strategies
Finally, after all the issues of the Social Security System are considered, I can state certain strategies that I would implement to solve them if I were the President of the United States. First of all, I would consider the latest data of the US Census Bureau in respect of demographic situation in the country. Secondly, I would reform the Social Security System in accordance with the data obtained. For example, observing the aging of the population, I would change the retirement age to 70 years. By this I would make pressure of social security payments on the working age population less severe. Taking into account the decreased of fertility rates, it would be obvious that the working age population is decreasing and it is difficult for it to finance the after-retirement life of the constantly growing elderly population. So, I think by these strategies I would solve the current issues of the Social Security System.
Conclusion
To conclude, it is necessary to state that the Social Security System is one of the basic institutions of the American society. It depends much upon the demographic development of the country, and namely on such fundamental factors as age dependency, fertility, mortality and net migration rates. The measurements of these factors are weak as they are based mainly on assumptions and forecasts not taking force majeure circumstances into consideration. However, these measurements can be helpful in developing the combined picture of the demographic situation provided all the contingencies including epidemic and natural disasters are considered. So, this paper, using this combined approach, managed to analyze the basic factors influencing the Social Security System and to offer certain ways of the issues faced by the system. The assumptions this paper offers tend to be objective, while the solutions offered are realistic.
Works Cited
Calmes, J. “How social security might change.” 2006. The Wall Street Journal. Web.
Gladwell, M. “The Risk Pool.” 2006.The New Yorker. Web.
Myers, D. “Testimony before the House Committee on the Judiciary Ellis Island.” New York and New Jersey, 2007.
Siegel, J. “Demographic aspects of selected public policy issues.” Applied Demography: Applications to Business Government, Law, and Public Policy. Academic Press, San Diego, CA, 2002. 595-605
US Census Bureau. 2000. Key Assumptions for US Population Projections 2000 to 2050. Web.