The Challenge for Social Security

Subject: Sociology
Pages: 2
Words: 316
Reading time:
< 1 min

Social security refers to the programs that provide social protection against socially recognized conditions like poverty, disability, unemployment, old age, etc. It also refers to access to food, clothing, education, shelter and medical care.


The social security future challenges are caused by the aging population in European countries. Social security is unsustainable at the current scheduled levels over the long term with the current tax rates without large injection of the additional revenues hence would lead to the growth of the shortfall once the trust fund reserves are depleted years to come.

The benefits of the current active workers would have to be reduced due to the possible increases of the payrolls taxes if no alterations are made. Another possible action that the government may take is to reduce the sources of other revenues, for example, the general reserve transfers and most likely the alteration effects would be concentrated on few years on which the scheduled benefits would have to be financed. Also, benefits could be reduced to the levels that are payable with the prevailing tax rates in every year and is also affected by the deteriorating government finances.

The pay-as-you-go system refers to the cases of either the defined benefits plans or the defined contributions plans being either unfunded or funded. The unfunded defined benefit plan has got no assets set aside and the benefits are paid for by the employer or the sponsors and when due, benefits are paid directly from the works contribution and the taxes hence its known as the pay-as-you- go system. Most of the systems of the social securities of the United States and other European countries are unfunded and their benefits are paid directly out of the social security contributions or from the current taxes.