The Demographics of Social Security

James Capretta has written a useful article on The Demographics of Social Security.

Here’s a very brief excerpt:

The relationship between social insurance and fertility points toward an internal contradiction in the social insurance model. To finance programs providing for the retired elderly, society needs a growing working-age population, but the presence of the state-based pension benefit—particularly if it is large—reduces the incentive of younger workers to have children. Thus, U.S. Social Security, like government pension plans the world over, is built on a fundamental and poorly understood contradiction: it reduces the economic incentive within a family to invest in children even as it remains ever-dependent on a new generation of productive workers to keep the program afloat.

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