Why Social Security Will Collapse

Social Security is an important topic in the United States, especially for Americans in the baby boomer generation and thus the aging population of the country. Many younger individuals ask "will the money that I paid into the system be there when I get older?", and the answer is probably not. I say this not with pessimism, but with a realistic attitude. Social Security was developed in the 1930s, when the country's demographics were very different than they are today. Birth rates were high, and death rates were high as well, yet the relatively higher birth rates created a massive net growth in the population of the United States. This is a key point as demographics have changed; now birth rates are low and death rates are low. The net growth of the population of the United States is far lower than it used to be, and death rates will soon increase exponentially as the baby boomer generation soon passes on.

Yet, it is important to realize that the baby boomer generation is still present and does require welfare assistance provided by the Social Security Administration to aid them in retirement. The coming years will prove to be a test to the concept of social security and whether it will fail or not.

The respective demographics are extremely important for this article and are the basis for my thesis: the current and future expected demographics of the United States cannot possibly support the current social security situation. I say this from an objective stand point and not for political purposes. I invite you to keep reading as I discuss the important demographic changes that have, are and will take place in the United States through the lens of demographic transition.

When social security was developed in the 1930's, demographics of the country were very different than they are now. The great depression primarily influenced the need for a social security net, and thus also assisted Americans pyschologically that another depression would never affect them the same way again.

So what were the demographics like back then? Death rates were high and birth rates were high as well. It is key to understand that the birth rates were higher than the death rates, much higher. A lot of people were dying due to a health care system that was still developing, and lack of contraceptives (since they weren't developed yet). The birth rates though were higher due to large families--this being a characteristic of developing countries. The population was growing exponentially.

I feel that it is now nessecery to bring in the topic of population pyramids. Most of us have seen one (below), and are important tools for judging a country's then-and-now demographics. It is especially important for future population studies. The population pyramid of the United States during the 1930's looks a lot like... well.. a pyramid! It looks like China in the 1960's or India in the 1980's. Yet, times have changed, and so have demographics; the population pyramid today looks a lot different (bottom).

So what does this mean? How can we decipher these changes into an objective opinion about social security? Well, back then there was much more of a younger population (under 55) that could support those who were older (over 55). In order for social security to function, there need to be about 8-10 people under the age of 55 to support those who are over 55. In the 1930's, this was no problem at all. Now with the changing demographics, there is only 4-5 people under the age of 55 to support those who are over 55. The system is thus unsustainable, and the future demographics show that there will be relatively even less people to support those over the age of 55.

The demographic transition is a tool to help predict future population expectations. It utilizes birth rates, death rates, level of economic development and the most important concept--time, to compute a graph. There are 4 stages in the demographic transition, and a theoretical 5th. The United States in the 1930's was at the end of stage 2 and beginning stage 3 of the demographic transition. The United States is now in stage 4, and is soon expected to reach the theoretical stage 5 before 2030. Some geographers and demographers claim that other developed countries have enterted stage 5 already, such as Sweden.

Please take note that some natural and artificial variables do "throw off" the demographic transition graphs, such as the AIDS epidemic in sub-saharran Africa, and the one child policy in China, among others.

Please honestly ask yourself if the younger population of today can realistically support the aging population. How can it be mathematically possible to continue social security? Even considering the variables of inflation, wage increases and level of development--it still does not answer the question since these variables are indexed accordingly and correlate strongly with each other. Was social security the first pyramid scheme? If social security collapses, then we will know our answer. I certainly hope to be proven wrong, because I want to retire too, one day.