A guaranteed social minimum can manage labor market risks. But to do so it needs to be complemented by insurance that does not depend on steady wage employment.
Growth in social protection expenditure per recipient fell between 2013 and 2014. Eurostat breaks down expenditure into 8 broad categories. This reveals that current models mingle redistribution and risk-sharing functions and require contributions that many see as taxes on work.
Basic Regulations
ביטוח לאומי is based on the simple principle that while you work, you pay into the system and, in return, you and your family receive benefits. These payments are based on your reported earnings. Generally, only earnings from covered employment qualify for Social Security benefits.
The majority of private sector employers participate in Social Security by paying payroll taxes on behalf of their employees. However, there are some exceptions. Some State and local government agencies have special agreements with the Social Security Administration to cover their employees. The Social Security Act also provides for Federal disability insurance coverage for certain State and local government employees who are not covered by a State or local public pension program.
In addition, a number of private sector employers establish and administer their own employee retirement and welfare benefit plans. These plans are subject to a number of rules and regulations, including the Employee Retirement Income Security Act (ERISA). ERISA requires a number of disclosure, reporting and fiduciary responsibilities for plan administrators and gives participants the right to sue over breaches of fiduciary duty. ERISA also provides for the establishment of an insurance system to guarantee payments in the event of the failure or cessation of a defined benefit plan.
These regulations and laws exclude informal workers, who represent more than two-thirds of the workforce in developing countries and up to 1 in 10 in some countries, including Ethiopia. Enhanced social assistance and insurance could expand access to protection while providing people the freedom to choose how they engage in the labor market.
Insurance
Nine out of ten workers pay Social Security taxes through their paychecks and earn benefits when they retire, become disabled, or die. In addition, certain family members can receive survivors’ benefits or a lump-sum death payment.
To qualify for insurance, you must meet certain requirements. Your insured status depends on the number of Social Security credits you have earned. These credits (previously called quarters of coverage) are based on your earnings in covered jobs. A worker must have at least 40 credits to be fully insured for retirement, disability, or survivor’s benefits and 20 to be automatically enrolled in Medicare Part B. You may need more than 40 credits to qualify for Medicare disability payments or a Medicare hospital insurance benefit.
In most cases, State and local government employees who are covered by Section 218 agreements also have Social Security protection. These employees pay into both their States’ public pension programs and Social Security, so they get the same benefits as private-sector workers.
Some employers offer group life, accidental death and dismemberment, or long-term care insurance policies that are separate from the Social Security program. You should carefully consider these options before deciding whether they provide adequate protection. Many such plans have a limited duration and do not build cash value. In some cases, these plans may be taxed in the same way as Social Security benefits.
Risk Management
Risk management policies can be implemented to prevent risks from causing problems. They can include identifying the most important risks and their impact, the likelihood of risk occurring and how severe the impact could be should it occur. Identifying the most critical risk can help managers prioritize and assign resources to manage those risks.
Many organizations rely on a variety of techniques to evaluate and monitor risks, including risk assessment forms, project-level risk registers and enterprise-level risk lists. These processes are often designed to provide visibility into a project’s most critical risks and the impact of those risks on the project schedule, budget and scope. They can also reduce risk by exposing vulnerabilities faster and helping to ensure that projects are completed on time, within budget and with the expected results.
Whether the goal is to meet regulatory or internal compliance mandates, reduce financial risk, or increase business opportunities, effective risk management can improve organizational performance. The heads of enterprise risk management teams typically report to the chief executive officer, an acknowledgment that risk is a key element in company strategy.
While the specific methods of risk management differ across businesses, all should focus on developing a continuous risk assessment process and identifying issues that could endanger achievement of critical objectives. The assessments should be documented and reviewed on a regular basis, with higher-level management to resolve any issues that may arise.
Redistribution
A key question in this context is whether redistribution can be enhanced without jeopardizing efficiency. Many OECD countries could do more to boost redistribution by making their tax and transfer systems more pro-poor, without unduly hampering growth. This would include stepping-up carefully designed in-work support, and ensuring that benefits are not withdrawn too quickly as earnings rise to avoid undermining work incentives. Governments might also consider the possibility of leveraging synergies between equity and efficiency objectives by expanding access to a more comprehensive set of education and training opportunities, including technical vocational qualifications.
While there is a growing recognition of the need to address inequality, support for redistribution has been stagnant or declining in many OECD countries over recent decades. One explanation for this trend is that policies have become less progressive. Another is that people are increasingly turning against redistribution, particularly when it affects them directly.
Yale’s Vivekinan Ashok, Princeton’s Ilyana Kuziemko, and Ebonya Washington study data to explore these trends. They find that blacks and the elderly are among those groups whose support for redistribution has declined. But they find that neither of these explanations explains why. Controlling for income, social and economic status variables, subjective well-being and “hot button” political issues, they show that the decline in redistribution is mostly explained by changes in policy design.