Sustainable social security: Four options

Arbeitspapier

This paper presents four policy options to make Social Security sustainable under the coming demographic shift: 1) increase payroll taxes by 6 percentage points, 2) reduce the replacement rates of the benefit formula by one-third, 3) raise the normal retirement age from sixty-six to seventy-three, or 4) means-test the benefits and reduce them one-to-one with income. While all four policies achieve the same goal, their economic outcomes differ significantly. Options 2 and 3 encourage own savings, and capital stock is more than 10 percent higher than in the other two options. The payroll tax increase in option 1 discourages work effort, but means-testing the benefits as outlined in option 4 yields the worst labor disincentives, especially among the elderly.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 505

Classification and Topics

• Classification: Wirtschaft ; Social Security and Public Pensions
• Subject: Social Security reform and sustainability ; general equilibrium ; labor force participation ; retirement age ; demographic shift ; overlapping generations

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kitao, Sagiri
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/60943
• Last update: 10.03.2025, 11:42 AM CET