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Home > The Pros And Cons Of Social Security Privatization > How Social Security Privatization Will Affect Young Workers

Back in the 1930s when Social Security was first established, it has worked well and provided economic security for old workers. But today Social Security is facing a big challenge with the privatization plan proposed by President Bush. Bush’s plan is to replace Social Security’s guaranteed benefits with individual investment accounts that would take money out of Social Security and have it invest in private accounts. Under this plan, not only are workers that are retired or nearing retirement age that will be affected but also young workers.

Today’s young workers believe that job opportunities are not as good as before. According to the Monthly Labor Review of the Bureau of Labor Statistics, today’s workers are paid about twelve percent less than Baby Boomers who were at the same age. Hence, if Social Security will be privatized they will have to pay twice. One is for the fund that provides benefits to current retirees and another one to fund their own individual accounts. If this happens they will receive little from Social Security when they retire. Somehow, young workers are correct in this view for it was according to the Congressional Budget Office that the cost of privatization would reduce the rate of return on today’s young workers to a level lower than the rate of return on Social Security.

Nevertheless, the advocates of Social Security privatization argued that it is the best way to guarantee young workers that get some benefits. But what opponents see is that privatization would only guarantee reduced benefits, loss of retirement security and increase in debt rather than the promise of one hundred percent benefits for the next half century. They pointed out three important drawbacks. First, the privatization plan would increase debt to the nation in the first twenty years alone reaching up to $4.9 trillion. Second, the formula used to calculate benefits would be changed whether or not they opt for private accounts. Finally, an average wage earner investing in private account retiring in 2055 will have a combined loss of sixty-six percent from their Social Security benefit.

Hence, Social security should and must be strengthened and enhanced to give younger workers a better deal and to make sure that Social Security could continue in providing benefits for decades to come. But not in a way that would put the benefits of these young or old workers at risk. Whatever decision makers decide on regarding the Social Security must not only be beneficial to retirees of today but also for people who will retire in the next decades to come.

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