Social Security is at the center of many current debates, with many politicians and citizens arguing that the program will become unsustainable in the near future. When looking at the program, it is important to look at the past figures and the present to get an understanding of the future of the Social Security Program.
One useful way to look at the change of the program overtime and the effects of the changing workforce population is by comparing the ratio of beneficiaries to workers from the past and present. For the past few decades, there have been approximately 3.3 workers per beneficiary; however, according to future projections, by 2030, there will only be approximately 2 workers per beneficiary.
According to statistics provided by the Social Security Administration, with the average worker benefit at around $1,000/ month, each worker needs to provide around $300/month in order to meet these needs; however, with future ratio projections at 2 workers per beneficiary, each worker will need to provide $500/month in the future to continue to meet the needs of the beneficiary, under current standards.
This is largely a result of the “Baby Boomer” generation starting to retire, resulting in an increased retired population, with a smaller workforce. As illustrated in the figure below, the increased fertility in the 1950’s and 60’s resulted in the baby boomer generation; Due to their current retirement and the decrease in the workforce due to the slowing of fertility rates from 1970’s onward, we are experiencing a decrease in the worker to beneficiary ratio, thus creating a dilemma with the Social Security Program.
It is important to realize that some form of change is necessary moving forward in order to save the program. Furthermore, it is important to realize that this issue is not specific to Social Security, but that the change in demographics affects many other government sponsored programs, such as Medicare.