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U.S. Demographics to the Year 2050 and the Outlook for Social Security - Essay Example

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The aim of the US social security system is to aid the retired people financially using social security taxes contributed by the working class. This is quite an effective method of ensuring that former employees can still have a decent life after retirement…
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U.S. Demographics to the Year 2050 and the Outlook for Social Security
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U.S. Demographics to the Year 2050 and the Outlook for Social Security

Download file to see previous pages... Using predictions that assume a low birth rate, at one time, its expenditure will have been outrun by the income generated. Consequently, in the absence of a suitable alternative source of income, the system will fail (Bergmann 2). It is, therefore, quite essential to make correct and accurate predictions, especially the ones that assume the worst-case scenarios. This prepares the system managers for the worst, and the necessary arrangements made to avoid the situation.
Assuming the worst does not happen would give a moral boost for the system but will leave it unprepared for any drastic future changes (Boskin 2). The two segments that most influence the social security system are the people that fall between ages 18 and 64, and 65 years and above, representing the working class and the retired respectively. For clear analysis of the effect of the number of people in these two groups, it is essential to find the ratio of the numbers in both groups. One advantage of using this measure of comparing groups in a population is that it gives a general overview of the situation by elimination method. Consequently, the next merit of this technique i.e. simplicity is seen. It enables one to analyze complex ideas albeit with some simplicity. The major weaknesses of this method arise from the assumptions it makes. Though the official age to start working is 18 years, there are people as young as 15 and 16 who are working and thus contribute to the social security kitty. On the other hand, others reach the age of 65 and continue working, and they too contribute to the social security system. This reality compromises accuracy of this estimation method. It also ignores the contribution made by these two groups in the population (U.S. Population Projections 2020-2050 1). In cases where fertility and immigration remain low, the dependency ratio of the working class reduces against the retired citizens. This means that the number of retired people per every employed person increases. This scenario would mean disaster for the social security system as less and less people would be funding it while the number of dependents would increase exponentially (See table 1). This is the least favorable alternative to the social security system; it would mean less money would be available to fund the increased expenditure (Lee, Anderson and Tuljapurka 4). Current trends aggravate the situation as improved medical care, and higher standards of living have resulted in increased life expectancy. This, however, does not mean that the paper advocates for low life expectancy. Within the 50-year forecast, the workforce population to age ratio changes depending on the availability of new labor force to replace the retiring one (See figure 1). Based on the measure that predicts an increase in the dependency ratio caused by low population growth due to low fertility, reduced immigration and increased life expectancy, the rate of employment does not match that of retirement. This exerts undue pressure on the working population, and the balance has to be reestablished somehow, either by reducing benefits (expenditure), or by increasing income. The most likely scenario is whereby the population will increase but at a rate that would not keep up with the increasing retirees. The dependency ratio is expected to change from 4.88 in 2000 and will reach nearly 2.7 by 2050. This means that each dependent will be taken care of by taxes ...Download file to see next pagesRead More
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