How Does Social Security Work Over

How Does Social Security Work Over Time?
The best way to think about the operation of Social Security is to contrast it to
a private pension plan. Private pension plans are funded plans: savings today
are invested in assets such as government bonds, corporate bonds, or stocks, and
the accumulated assets pay for (fund) the future benefits promised by the pension.
Social Security, on the other hand, has traditionally been an unfunded plan:
taxes collected from a worker today go directly to today’s retirees, rather than
being saved to pay for benefits when the taxed worker retires (this is often
referred to as a “Pay -As-You -Go” system).
There is no guarantee, however, that the system will actually work this way.
What if the Social Security program goes bankrupt, or if workers in 40 years
refuse to pay their taxes to fund retirees’ benefits? If this were to occur, retirees
would be out of luck: they would have paid into the program but would be
getting nothing back from it. In contrast, with a funded plan that is based on
accumulated assets, retirees would be assured that there are assets that can be
sold to finance their retirement income.
In other words, the promises of a funded private pension plan are backed by
the actual assets held by that plan. The promises of Social Security are backed
by the policies of the government. It seems highly unlikely that the government
would break those promises. Yet, as we noted in Chapter 4, the United
States (and other nations) face a very large long -term fiscal imbalance that will
have to be met somehow, and lower Social Security benefits are one way to
meet that imbalance. It is perhaps for this reason that, when polled, two-thirds
of young people (18–34) believe that Social Security will not provide them
with significant income by the time they retire.11
As some of you may know, Social Security today is not an unfunded system,
but rather a partially funded system. The taxes collected from today’s workers
finance not only the benefits to today’s retirees but also a Social Security trust
fund that is invested in U.S. government bonds. As we discuss later in the
chapter, that trust fund is a temporary solution to the financing problems that
face the Social Security system over the next half century. Yet, by 2042, this
trust fund is projected to run out of money, so Social Security will return to a
purely unfunded system.
How Social Security Redistributes Income The unfunded nature of Social
Security has important implications for the redistribution of income across
generations, as the following example illustrates. Consider the simplified world
illustrated in Table 13-1, in which people live for two periods. In the first period,
when they are young, they work and pay a tax to support the Social Security
program. In the second period, when they are old, they retire and live on their
Social Security benefits. In each period, the number of young people grows by
5% (population growth), and their wages go up by 5% (due to productivity
increases)

Hasil (Bahasa Indonesia) 1:

Bagaimana Jamsostek bekerja dari waktu ke waktu?Cara terbaik untuk berpikir tentang operasi jaminan sosial adalah untuk kontras untukrencana pensiun swasta. Rencana pensiun swasta yang didanai rencana: tabungan haridiinvestasikan dalam aset seperti obligasi pemerintah, obligasi korporasi atau saham, danakumulasi aset membayar (dana) manfaat masa depan yang dijanjikan oleh pensiun.Jaminan sosial, di sisi lain, secara tradisional telah didanai rencana:pajak yang dikumpulkan dari seorang pekerja hari pergi langsung ke pensiunan hari ini, daripadadiselamatkan untuk membayar manfaat ketika pekerja pajak pensiun (hal ini seringdisebut sebagai "membayar - sebagai-Anda-pergi" sistem).Tidak ada, namun, bahwa sistem akan benar-benar bekerja dengan cara ini.Bagaimana jika program Jamsostek bangkrut, atau jika pekerja dalam 40 tahunmenolak untuk membayar pajak untuk dana pensiunan manfaat? Jika ini terjadi, pensiunanakan beruntung: mereka akan membayar ke dalam program tetapi akanmendapatkan apa-apa kembali dari itu. Sebaliknya, dengan rencana yang didanai berdasarkanakumulasi aset, pensiunan akan menjadi yakin bahwa ada aset yang dapatdijual untuk membiayai pendapatan pensiun mereka.Dengan kata lain, janji-janji dari rencana pensiun swasta yang didanai didukung olehaset yang sebenarnya diselenggarakan oleh rencana itu. Janji-janji Jamsostek yang didukungoleh kebijakan-kebijakan pemerintah. Tampaknya sangat tidak mungkin bahwa pemerintahakan melanggar janji-janji. Namun, seperti yang kita catat di Bab 4, InggrisStates (and other nations) face a very large long -term fiscal imbalance that willhave to be met somehow, and lower Social Security benefits are one way tomeet that imbalance. It is perhaps for this reason that, when polled, two-thirdsof young people (18–34) believe that Social Security will not provide themwith significant income by the time they retire.11As some of you may know, Social Security today is not an unfunded system,but rather a partially funded system. The taxes collected from today’s workersfinance not only the benefits to today’s retirees but also a Social Security trustfund that is invested in U.S. government bonds. As we discuss later in thechapter, that trust fund is a temporary solution to the financing problems thatface the Social Security system over the next half century. Yet, by 2042, thistrust fund is projected to run out of money, so Social Security will return to apurely unfunded system.How Social Security Redistributes Income The unfunded nature of SocialSecurity has important implications for the redistribution of income acrossgenerations, as the following example illustrates. Consider the simplified worldillustrated in Table 13-1, in which people live for two periods. In the first period,when they are young, they work and pay a tax to support the Social Securityprogram. In the second period, when they are old, they retire and live on theirSocial Security benefits. In each period, the number of young people grows by5% (population growth), and their wages go up by 5% (due to productivityincreases)