Social security is supposed primarily to be a social insurance program. The social security program provides social protection to the residents of a particular country against all possible social conditions including mainly; unemployment, poverty issues, physical disability, orphan and old age homes etc. Though social security program is very famous, still it is also a misinterpreted and misunderstood program offered by governments. These programs offer two objectives; its first objective is to strive for the settlement of income floor or minimum wage that can assist people to eliminate themselves from poverty line. Its second main objective is to supersede income from some past job or work. The first objective of the social security program is considered to be a sort of insurance against poverty whereas its second objective is supposed to be a scheme that force people towards savings. The objectives of the social security can be achieved by other means as well but social security is more convenient and effective way. The activities undertaken by government under the umbrella of social security include following;
- Social Insurance; People of a particular country are awarded with special services and other benefits as recognition of their contributions towards some insurance program. Social insurance majorly includes; retirement pension, insurance for unemployment and insurance for physical or mental disability.
- Maintenance of Income; This mode of social security is based on direct disperse of cash in special events or conditions like; unemployment, retirement, accidental or other sort of disabilities and etc.
- Special services that are provided by social security administration to general public of the country. These special services may include; basic medical care facilities and other social works that are generally beneficial to the people of the country.
Though theoretically the concept of social security is very beneficial to the people of a particular country, but practically financing such activities is a major challenge. As for as the financing of social security is concerned, the people are stunningly ignorant about this issue, therefore they have different approaches towards government’s social security programs. On one extreme people regard these types of programs as a bunch of fake promises by government. The people with extreme school of thought call social security program as Ponzi scheme that merely comprises of lies and false promises. The people with other extreme school of thought follow the thinking that social security programs are worthy welfare programs and according to them these sorts of programs cannot be regarded as Ponzi schemes. In reality both these two extreme schools of thoughts about the mechanism of social security are not correct and their views are both dangerous and poor. If school of thought that consider such programs as Ponzi schemes are adopted and instead of continuing social security programs, fully funded programs are implemented then it would be very expensive and comparative to its benefits its cost will be higher. The financing of social security programs can be arranged by increasing some taxes and by reducing some of the progressive programs. Financing through tax increases and reduction of progressive benefits is easily implementable and as sooner such strategies are implemented the cheaper will be the financing of social security programs. Extending the time for the implementation of such financing strategy would not only be expensive but also implantation will require greater degree of hard work.
It is wrong perception that social security programs are fake government promises and the basis of such programs is set of lies. Most of the activities of such programs are executed with considerable transparent procedures and systems. Therefore, the worth and benefits of this scheme can never be ignored. The social security benefits are strictly based on the income of an individual and average growth in salary or wage rate, therefore it can be concluded that such programs also carry some amount of risk. As there is the involvement of some risk, many people regard such programs as investment. Therefore it should be assumed that investment in social security may reveal unfavorable outcomes. It is generally believed that this investment would generate beneficial and required outcomes only if the GDP of United States continues to experience long term growth. If practically the GDP growth remains positive then social security investment should be priority of individuals. On the other hand the social security investment can also reveal unfavorable outcomes. Unfavorable outcomes are faced if the long term growth of GDP stops to grow.