Intergeneration Solutions to the Social Security Dilemma

Abstract

The contemporary discussion of state-run social security plans follows two paths. The first one is characterized by the search for a social insurance scheme which might be feasable, at least under minor revisions, for future periods up to the middle of the next century. For example, Lawrence Thompson (1983, 1432) presents projections on the ratios of “covered workers per OASDI beneficiary” for the year 2060. Various formulas have been analyzed in theoretical and empirical models in order to test whether the corresponding insurance scheme is feasible under alternative short-term economic fluctuations, alternative growth rates of the economy and the population and long-term Kontratieff and Esterlin cycles. By feasibility is meant that, on the one hand, the pensioners receive a per capita income which allows them to have a “decent” eve of their lives, and on the other hand, the working population is left with a “reasonable” net income after paying the premiums into the social insurance budget.

I would like to thank Harry Verbon for perceptive comments on an earlier version of this paper.