Introduction
Social security is significant in the economic and social sustainability of every economy’s population, more so in making retirement decisions. For many employees, social security implies greater resources on reaching the age of eligibility for benefits than they would have had otherwise. For some other workers, social security means waiting until eligibility for benefits before retirement can be afforded. Retirement incentives are affected by the details of the rules determining benefits, for instance, since benefits are paid as an annuity, the perceived payoff to continued work depends on life expectancy. It also depends on the extent to which workers appreciate the insurance benefits inherent in annuities. The relationship between the size of benefits and the age at which they start determines the retirement incentives; social security matters for the labor supply of younger workers whose take-home pay is reduced by payroll taxes. Moreover, the effect of social security on their labor supply also depends on how they perceive and appreciate the way that current earnings increase the retirement benefits that they may eventually receive (Koitz 46).
Social security affects the level of savings employees undertake to provide for their retirements, while its impact on government finances can affect the government’s contribution to national savings. Beyond its impact on labor and capital supplies, social security plays a significant role in the allocation of risks in the economy, for instance, by holding assets, a partially or fully funded social security system spreads the risk in returns to capital over a wider population. By having a system that is not fully funded, social security spreads the risks to cohort-wide wages over more generations than current employees. Consideration of policy recommendations for social security must go beyond normative economic analysis to also consider politics. Moreover, due to its high visibility, legislative consideration of social security lends itself to thinking about the links between policy recommendations and political and economic outcomes (Diamond 2).
Contemplation of the effects of social security on the labor and capital markets involves the study of multiple links and subtle interactions. For various reasons including missing markets, time-inconsistent behavior, and asymmetric information, normative analysis of social security must be approached as part of the second-best theory, not as an application of the Fundamental Welfare Theorem. In this research paper, I will propose a new work support system that will enhance and improve the living standards of employees. This has resulted from the fact that the current plans have been politicized and as a consequence, many workers have lost huge sums of money to politicians. A new work support system is needed that will have clear strategies on how to overcome political influence.
Workers and redistribution
Many workers are living between dependency and self-sufficiency. However, irrespective of all the significant efforts that have been made, the workers cannot earn enough to support themselves and their families. Nevertheless, the policymakers have not ignored the plight of the workers who ought to struggle to meet their life demands. Several recent federal policy amendments have multiplied and enhanced the opportunities for needy workers to combine earned income with means-tested tax-transfer benefits. I wish to propose a State-level policy choice, which if adopted by the state government can o create and expand the programs to assist needy workers. The program will be referred to as a work support system. Three main groups are going to be served by the work support system: low-wage workers, low-income workers as well as people making the transition from welfare to work. It has two related goals: to discourse welfare dependency and to help needy workers escape poverty and achieve self-sufficiency.
The work support system will be formed through influential social policy trends. The devolution revolution will empower the nation to make significant policy choices, especially in the areas of cash welfare payments, child care grants, and medical assistance programs. Consequently, there will be significant variation in the nature and generosity of the work support system from one state to another. Policymakers can use program benefits as leverage to encourage people to behave responsibly. Although personal responsibility is demanded in many areas, such as education, child support, and teenage pregnancy, the notion expressed most often is an expectation that able-bodied people must work. By connecting the receipt of means-tested benefits to earned income, the work support system is intended to encourage and reward work. Furthermore, the system will link the well-being of needy workers to the performance of the economy, especially to the employment prospects of workers at the bottom of the labor market (Stoker and Wilson, p. 7).
Features of the new work support system
Despite the influence that devolution and personal responsibility have had on the structure and development of the former work support system, in many ways the system’s recent history contrasts with the welfare policy trends the dominated the 1990s. After the welfare system is reformed by the devolution of policymaking authority to the states, the new work support system will be influenced by devolution, the expansion of national programs, and the creation of federal mandates to the states. The new work support system is intended to overcome the effects of devolution by lying strategies that will accommodate the expansion of national programs.
Although welfare benefits will be reduced at the state and federal levels, many work support benefits become more generous. Decisions to enhance benefit generosity will be made by both the federal and the state governments. Furthermore, cash assistance benefits from the work support system will be made more generous. Many states will use their discretion to enhance the value of the means-tested benefits they provided to needy workers.
Whereas welfare recipients will be disciplined by reforms that create work requirements and time-limited benefits, they will also grant privileged status as work support beneficiaries. People who make the transition from welfare to work will enjoy exclusive eligibility for some work support benefits as well as priority eligibility for others.
I advise the welfare recipients to leave the welfare system and enter the labor market to earn their keep. However, the opportunities to combine means-tested benefits with earned income will be expanded and enhanced (Stoker and Wilson, p. 7).
Support For a New Work Support System (social security plan)
Reflects of Dependency and Self-sufficiency
Many workers live between dependency and self-sufficiency since the income and benefits they receive from the labor market are not sufficient to support their families. These workers are beyond dependency because they work, but they earn less for them to be self-supporting. They require materials support to make ends meet, and the work support system that I am proposing provides that help in various diverse methods. The programs that compose the system are not welfare traps; work supports will combat poverty in addition to promoting self-sufficiency simultaneously by redistributing income through work.
Redistribution through work may be a proactive idea to some readers because it challenges influential views of dependency and self-sufficiency. There are some links between participation in means-tested programs the irresponsible, antisocial behaviors the result in dependency and perpetuate the cycle of poverty. Work, on the other hand, is associated with self-sufficiency. Even though some welfare clients use means-tested benefits as a way to evade work responsibilities, it is also true that millions of needy working families combine means-tested benefits with earned income to mitigate the limitations of their earning power. The distinctive nature of redistribution through work is reflected in the welfare dependency literature.
Means-tested programs contribute to dependency when receiving benefits is an alternative to work. However, when means-tested benefits complement and support work, the link between participation in means-tested programs and dysfunctional, antisocial behavior is broken. This link defines the underclass and the welfare dependency problem. As eligibility for means-tested benefits is linked to work requirements and as means-tested benefits become available to needy working families, it is no longer plausible to consider means-tested programs and work as alternatives. Recent policy changes have subjected welfare programs, like cash assistance and food stamps, to ever-demanding work requirements. Similarly, programs that provide child care and medical assistance support people who are moving from welfare to work.
Although workers strive to be self-sufficient, the income and benefits they command in the labor market may not allow them to be fully self-supporting. When work is not enough, a work support system or program can help needy working families to make ends meet. In this perspective, work supports contributes to self-sufficiency. This is a point where a family is minimally self-sufficient when the combined income and benefits it receives from work and work support programs meet its needs. As work support programs become more generous, opportunities for needy working families to escape poverty and privation are created. By combining means-tested benefits with work, the work support system can alter the established relations among work, and poverty in addition to creating new possibilities for redistribution in many states (Livingston, p. 32).
Nature of the problem: work, welfare, and poverty
Workers are less likely to be poor than non-workers. In America, families with at least one worker had a poverty rate of 7.6 % in 2001 as compared to a poverty rate of 30.5 % for families in which no one worked. This relationship is consistent irrespective of the family type, showing that work is a powerful means of avoiding or escaping poverty. However, it is a fact that many poor people work and many workers are poor. The working poor is people who spend at least 27 weeks in the labor force (working or looking for work), but whose income falls below the official poverty level. The work support program will help such workers in sustaining their families and meeting other financial demands. The work support system which is a new social security plan will raise the standard of living of such people by enabling them to acquire material wealth or meet health bills in addition to sustaining them when they grow old and retire (Livingston, p. 32).
Women, young people, and members of minority groups are more likely to be among the working poor. In addition, those with low educational achievement or work in the service sector are also more likely to be among the working poor. Therefore, a new social security plan (work support system) will greatly assist these categories of people to overcome some of the burdens of life that they experience (Diamond and Orszag, p. 164).
The new work support system will help many families as there are families that are above the poverty level that are eligible for a variety of means-tested government benefits and still struggle to make ends meet. The federal poverty standard is too low to identify all of the working poor, because it does not account for the additional expenses incurred when working, such as for child care and transportation. The standard also excludes those that are looking for jobs. This makes it essential to have a work support system that will assist them in various ways including financial support. Low-income working families are likely to have young children. They are also likely to be headed by a person with low educational achievement. Such families are also not likely to be having secondary workers who can support them. Once a work support system is put in place, such families will manage to get an extra coin or material wealth that can help them meet the demands of life. A third of all workers are low earners. The majority of the low earners have limited education, having attained a high school diploma or less. Women and members of minority groups are more likely to be low earners (Stricker, p. 226).
Most low earners suffer from both low wages and limited work opportunities. These same low earners are responsible for providing a significant contribution to total family income in low-income families since more than a third of such families have young children to support. With these kinds of problems not only in America but in other countries, new work support systems that will help these families meet their life demands will be of great importance. The work support system will help meet the school fees of the young children of these families, in addition, to helping put food on the table. There are health-related problems that do arise when a family is not able to meet all of its basic needs. These problems then result in the family spending more money on medication. A work support system that will have a medical care section will be of great help to the workers.
There is of great importance to developing a work support system that will look into the welfare of women and young people since they are the most affected groups. It is found that women and minority groups are the ones that have low educational achievements and there is a great need for them to be assisted to meet their needs. Low educational achievement limits their ability to find profitable employment and to advance through the ranks when they are working (Bovbjerg, p. 21).
Labor market
Other than reforming the social security plan, there is a need to expand the labor market by expanding the economy. Economic expansion will benefit poor as well as near-poor workers. Economic growth promotes employment opportunities. The poor and the near-poor are more likely than others to be unemployed or underemployed; economic growth will expand their opportunities and assist them by providing regular work, the opportunity to earn income. The economic growth will be accompanied by better terms of medical care which will go hand in hand with the new work support system in raising the living standards of workers and especially the low earners.
The aspect of the new work support system (social security plan)
The new work support system (social security plan) will aim at moving beyond the fringes of libertarian discourse. It will be able to incorporate individual accounts. The new system will incorporate the options of the private sector. Once the system is incorporated, we anticipate that by 2016, the benefits paid out by the program will exceed payroll taxes and these benefits will exhaust the Social Security trust fund and its interest earnings by 2038, at which point incomings receipts will be sufficient to pay for a bit more than two-thirds of promised benefits.
The new system will include the private sector since private accounts are funded through the redirection of existing payroll taxes. This will hasten the time at which the exhaustion of the trust fund will occur. This is because the funds that go into these private accounts are reserved for the account holders until their retirement and cannot be used to pay for present benefits. The new work support system will be able to lay strategies that will overcome the long-term deficit. This long-term deficit is caused by the future decline in the ratio of workers to retirees. Though at the moment the current social security is running a surplus and the deficit is small, the prospects of increased taxes and an increased number of retirees might call for reform of the current plan. The structure of this new work support system will employ measures that limit the political influence from the politicians as it is evident that most of the plans that have been discussed in the past have failed because of political influence (Leimgruber, p. 42).
As opposed t the Medicare program which bears only the cost of a specified population, the largest and most expensive elderly group, this system or program will have a fiscal standing that is far more sensitive to the age profile of the population. There is a great need to deviate from politics since they have collapsed many other plans that otherwise would have been of great help to the citizens. The social security plan will enable workers to save money and the beneficiaries will receive a fixed amount that will help them purchase either private or public medical cover. This fixed amount can be taken as the government’s defined contribution for Medicare coverage and how quickly it grows over time will be crucial in determining what proportion instead falls on beneficiaries. The contributions will be required to grow at a faster rate than premiums of health plans so that the financial protection offered by the new system will not constrict in the future (Hacker, p. 329).
Social security will be privatized to overcome the powerful policy-feedback effects that have made the retrenchment of the program perilous in the past. The policy feedback has hindered so many other plans that would have helped workers and non-worker in the country. This is due to the political influence that they have faced when restructuring them. However, once this new security plan is privatized; there will be minimized the influence of politics in the way it will run its operations. This will help the plan to survive future turbulences of politics as it will not be run by political agendas. This means that even when there will be new governance, the plan will hold to its mission and will have a high probability of remaining in the course despite changes in politics.
Transition
The proposed new social security plan will cover their medical bills as well as their work-related financial problems. Thus it requires a good plan for an effective transition. The transition will take place in three main phases. The first phase will be civic education for the workers. This education is geared to generate a clear understanding of how the system will work and benefit the workers.
The second phase will be to endorse the plan in working areas. This will involve several steps to make sure that the workers do not lose when shifting to the new plan. Heir shares from the former system are going to be transferred to the new system. Our committee has sophisticated computerized systems that will enable this transition.
The final phase will be to introduce the new system in the hospital and healthcare systems. This phase is intended to cater to the hospital bills that are outstanding for the new members of the plan. I wish to stress that this is not a political game and no propaganda will be entertained.
Conclusion
In modern times, people from all over the world have become aware of the importance of social security to an extent of even establishing privately funded plans to complement the government-sponsored pension plans. Even though there are significant aspects of all evolutions, every state that makes such a changeover encounters a distinctive difficulty, more so based on the endowment of that country in terms of demographic, economic strength, as well as opportunities expected from the rule of law. Indeed, “in the United States, the actuarial projection that the social security trust fund will be depleted by the year 2030 has fostered an interest in options to shift from the pay-as-you-go system to a funded or privatized system” (Feldstein 215). Moreover, the limitations of the pay-as-you-go scheme have influenced people to change to partly or fully funded schemes, and in particular with individual funded accounts.
Works Cited
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- Stricker, Frank. Why America lost the war on poverty– and how to win it. California, UNC Press. 2007. Web.
- Stoker, Robert P. and Wilson, Laura A. When work is not enough: state and federal policies to support needy workers. Virginia, Brookings Institution Press. 2006. Web.