Aging population and the institution of social security

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Would the US economy be able to support the high expenditure on healthcare and social security for the elderly, which necessitates a significant tax from a large young and active workforce? The US population is aging as a result of lower birth rates and an increase in life expectancy (He & Wan 65). As a result, the tendency poses major dangers to the nation's economy and social order. In a country like the United States, where the population of persons aged 65 and up is growing, the work force is likely to decline, low fertility rates and an increase in dependency ratio based on age. Bogetic and Zeljko (p 17) Argue that by 2050, there is likelihood that there will be only four workers per one person aged 65 and above compared to 10 workers per one person aged 64 or more 1950's. The projection explains the extents to which age dependency ratio would reach. Aging population is posing a challenge to many developed economies' macroeconomic and fiscal policy stability. The reason being, the trend increases expenditure on social welfare including pensions, medical care and other social benefit programs and this phenomenon has raised concerns among economists as to whether the country (US) will stumble in the face of increased population of people above 65 years or not. This is a retrospective paper that discusses, in depth, the causes and effects of aging population on the stability of social security programs.

Causes of population aging in the US

The decline in fertility rate

In 2014, the US celebrated a 50-year anniversary of the beginning of a new demographic shape of the US: the end of the postwar high fertility rate commonly referred to as the postwar baby boom. A period marked by remarkably high rates of fertility endured from, roughly, 1946 to 1964 (Mather and Mark 77). In fact, during this period, more that 75 million births were recorded in the US books. Reportedly, fertility rate increased too a maximum of 3.5 births per woman at its highest notch in the 1950's. After the end of the period of many births, the fertility rate dipped sharply up to below 3 births per woman hence reducing the number of new borne babies (Mather and Mark 77). This significantly fuelled the growth of the pupation of aged people in the US. Research has projected a strain in the provision of social security programs in the years to come. (Boldrin and. Jones 267)

Rising life expectancy

It is imperative to note that life expectancy is increasing almost allover in the world. The US, not being an exceptional, is experiencing a rise in life expectancy; the number of years individuals are living have steadily increased. The increase in life expectancy has been a consequence of improved quality of life and medical care. Furthermore, this increase can be attributed to better sanitation, refrigeration and vaccination programs. Additionally, indirect causes of the same arise from affordable energy from fossils and many more (Rosset 67). Chiefly, rising life expectancy if a major factor that fuel increases in aging population.

Aging population growth rates

In an article publishes by SeniorCare, US is said to have a population of more than 51 million of people aged 65 years and more. Using an interpolation of population approximation monthly in the year 2015, the Census Bureau was able to project more than 50 million people aged 65 and above years in November 2016. The surge in the aging people in the US stemmed from the end of the baby boom after the world war and increased life expectancy (Gordon and Robert J 35). The graph below show the combination of these two factors has influence a change in demographic dynamics in the US.

Figure 1: trend of the aging population in US (Anderson 67)

The social security in the US

Social security is one of the highly organized federal social-economic institutions that cater for the welfare of the old age, people with disability as well as survivors. The program is governed by the Social Security Act first approved by President Franklin Roosevelt back in 1935. The United States has over five programs of social security which function for specific groups of people (Kerka and Amy 67). The Internal Revenue Service is charged with the responsibility of collecting tax. Therefore, all salaried individual are required to pay payroll taxes. The payouts of the social security are done when an individual's income is reduced due to disability and age (Duggan and Rennane 45). The payouts to beneficiaries form supplementary income that sustains them throughout the remaining part of their life.

The effect of growth of the aging population on social security

Since 1935, the US government has had quite successful social security programs. However, the question of sustainability of the programs in the near future is raising eyebrows in the public sector. Furthermore, the question of sustainability of the programs remains a huge threat to financial budgeting and planning. Bogetic and Zeljko argued that the number of working individuals is dropping while the number of the aged increase creating a crisis in the labor market. Basically, the working population funds the social security programs and an increase in the number of beneficiaries would strain the programs since the working population would no longer sustain increasing social security beneficiaries. Consequently, the trend would affect the government budgets and economic growth. Inadequate labor supply directly translates to unsustainable production activity hence a decline in economic growth. Additionally, necessary reforms may seem difficult to effect since a large population of aged people divert the political wave hence resulting to political will that is a complete reflection of the older people (Clark and Clark 65). Therefore effecting changes in social security programs may face this challenge.

Generally, aged population poses a challenge in the sustainability of the social security system through sharp increases in expenditure on pensioned beneficiaries, medical care and other benefits to the aged people. As consequence of such spending on social welfare, the government may be forced to divert funds from other public sectors to fund the expanded social security institution hence reduction in the quality of life and a drop in economic growth. The increase in the number of beneficiaries as well reduces the quality of services social security currently offers hence a drop in the living standards of many people in the old age. Therefore opting to spread the available funds may not work well in a society that has had a reputation of high living standards.

Saving social security programs

The biggest problem that the social security initiative is facing stems from the demographic dynamics in the US. The people are continually living longer and the birth rates have slackened. It has been projected that the treasury for social security funds may run out of funds in the coming 20- 25 years. Moreover, there will be a decrease in the number of workers paying into the program while the number of beneficiaries increases. This paper looks at some of the solutions that can be used to sustain the program as follows;

One of the viable solutions to the problem is encourage the people who have attained retirement age to remain at work longer. The scheme ensures that some population of the elder people remain productive hence funding the social security initiative. This is called phased-in retirement scheme. The scheme helps societies and governments to reduce expenditures on pensions and allow for a continuation in revenue collection (Poterba and James 26).

Many experts have suggested reduction of social security payouts as one of the fairest way of dealing with an increase in beneficiaries. However, this suggestion has not been received well in the public.

Rising the age of retirement may as well help to reduce the effect of the crisis of increasing beneficiaries. Some studies have suggested an increase of full retirement age to 70 years. This will mean that benefits will start flowing in the beneficiaries' accounts at the age of 70 (Poterba and James 25).


Conclusively, the aging population raise is a real threat to the social security institution. The increase in population of the old people is chiefly brought about by decrease fertility rates and rising life expectancy. Therefore, the problem can be solved by getting the elderly engaged in productive activities, raise retirement age or cut payouts to sustain the institution as a long-term solution is looked for.

Works cited

Anderson, Margo J. The American census: A social history. Yale University Press, 2015.

Bogetic, Zeljko, et al. "Fiscal policy issues in the aging societies." (2015).

Boldrin, Michele, Mariacristina De Nardi, and Larry E. Jones. "Fertility and social security." Journal of Demographic Economics 81.3 (2015): 261-299.

Clark, Robert Louis, and Robert L. Clark, eds. The economics of an aging society. Blackwell Publishing, 2004.

Duggan, Mark, Melissa S. Kearney, and Stephanie Rennane. The Supplemental Security Income (SSI) Program. No. w21209. National Bureau of Economic Research, 2015.

Gordon, Robert J. The rise and fall of American growth: The US standard of living since the civil war. Princeton University Press, 2017.

He, Wan, et al. 65+ in the United States: 2005. US Department of Commerce, Economics and Statistics Administration, Bureau of the Census, 2005.

Kerka, Amy. "Social Security." Evolution 5 (2017): 17.

Mather, Mark. "Fact sheet: The decline in US fertility." Population Reference Bureau 20122012 (2012).

Poterba, James M. "Retirement security in an aging population." The American Economic Review 104.5 (2014): 1-30.

Rosset, Edward. Aging process of population. Elsevier, 2017.

May 02, 2023
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