SSG

Nigeria.
Old Age, Disability, and Survivors
Regulatory Framework
First law: 1961 (provident fund).
Current law: 1993 (social insurance), implemented in July 1994.
Type of program: Social insurance system.
Coverage
Employees of firms with 5 or more workers.
Exclusions: Civil servants, diplomats, noncitizens covered by an

equivalent program in another country, self-employed persons, and the
clergy.
Voluntary coverage for some excluded categories of worker under

specified conditions.
Special system for pensionable public-sector employees.
Source of Funds
Insured person: 3.5% of gross salary. (Gross salary includes basic

salary and housing and transport allowances.)
Employer: 6.5% of gross salary. (Gross salary includes basic salary

and housing and transport allowances.)
Government: None.
The maximum annual earnings for contribution and benefit purposes are
48,000 naira.
Qualifying Conditions
Old-age pension: Age 60 with 120 months of contributions. Retirement

from regular employment is necessary.
Retirement grant: Age 60 with at least 12 months of contributions.

Retirement from regular employment is necessary.
Disability pension: Permanently disabled with 36 months of

contributions including 12 consecutive months.
Disability grant: Permanently disabled with at least 12 months of

contributions.
Survivor pension: The insured person was eligible for the disability
pension or old-age pension at the time of death.
Survivor grant: The insured person was eligible for the disability or
retirement grant at the time of death.
Funeral grant: The insured person was receiving the disability or

retirement pension or had 60 months of contributions.
Old-Age Benefits
Old-age pension: 30% of average monthly insurable earnings plus

1.5% of those earnings for each 12-month period of paid or credited
contributions exceeding 120 months of contributions.
The minimum pension is 4,400 naira a month (80% of the national

minimum wage).
The maximum pension is 65% of average monthly contributions.
Retirement grant: A lump sum equal to the final month's contributions

multiplied by the number of months of contributions.
Permanent Disability Benefits

Disability pension: 30% of average monthly insurable earnings
increased by 1.5% for each 12-month period of contributions exceeding
36 months' contributions up to age 60.
The minimum pension is 40% of final average contributions or 80% of

the national minimum wage.
Disability grant: A lump sum equal to the month's contributions

immediately prior to the onset of disability multiplied by the number of
months of contributions.
Survivor Benefits
Survivor pension: 100% of the insured's pension. The pension is

payable to a surviving spouse or to other dependent relatives.
Survivors grant: 100% of the insured's retirement grant or disability

grant.
Funeral grant: A lump sum of 2,000 naira.
Administrative Organization
Federal Ministry of Labor and Productivity provides general supervision.
Managed by a board of directors and a management committee, the

Social Insurance Trust Fund administers the program.
Sickness and Maternity
First and current law: 1961 (provident fund), not implemented.
Type of program: Provident fund system. Cash sickness benefit only.
The labor code requires employers to provide employees with 12 days

of paid sick leave a year and to provide paid maternity leave at 50% of
wages for 6 weeks before and 6 weeks after the expected date of
childbirth.
Coverage
Employees of firms with 5 or more workers. (Not implemented.)
Exclusions: Casual workers, noncitizens covered by an equivalent

program in another country, and self-employed persons. (Not
implemented.)
Special system for public-sector employees.
Workers' Medical Benefits
None. (Limited free medical care is available to the population via public
dispensaries and hospitals.)
Dependents' Medical Benefits
None. (Limited free medical care is available to the population via public
dispensaries and hospitals.)
Federal Ministry of Labor and Productivity provides general supervision.
Work Injury
First and current law: 1942 (workmen's compensation), with 1957 and
1987 amendments.
Type of program: Employer liability system, normally involving

insurance with a private carrier.
Coverage
Manual workers; nonmanual employees (including federal and state

public-sector employees) earning 1,600 naira a year or less.
Exclusions: Agricultural or handicraft employees of commercial
enterprises normally employing fewer than 10 workers, casual workers,
and family workers.
Source of Funds
Insured person: None.
Employer: Total cost met through the direct provision of benefits or the
payment of insurance premiums.
Government: None.
Work injury benefits: There is no minimum qualifying period.
Temporary Disability Benefits
100% of salary for 6 months, 50% for next 3 months, and 25% for the
following 15 months.
A lump sum of 54 months' earnings, if totally disabled.
Constant-attendance supplement: 25% of the permanent disability

benefit.
Partial disability: A lump sum proportionate to the degree of disability,

according to the schedule in law.
Medical care, hospitalization, medicines, appliances, and transportation.
Survivor Benefits
A lump sum of 42 months' earnings, less any temporary disability
benefit paid to the deceased. Courts determine how the lump sum is
divided among the survivors.
Federal Ministry of Labor and Productivity enforces the law.
Courts participate in the adjudication of benefit claims and settle

disputed benefit claims.
Employers may insure the assessed liability with private insurance

companies.
Unemployment
For insured persons who contributed to an individual account under the

previous provident fund system, the 1961 provident fund legislation
permits limited cash drawdowns after 1 year of unemployment.
Social Security Programs Throughout the World:
Africa, 2007
Nigeria
Exchange rate: US$1.00 equals 128 naira.
Old Age, Disability, and Survivors
First law: 1961 (provident fund).
Current law: 2004 (pensions).
Type of program: Mandatory individual account system.
Note: A unified system of mandatory individual accounts has been fully

implemented for public- and private-sector employees and has replaced
the former separate systems for public- and private-sector workers. New
entrants to the workforce beginning January 2005 for private-sector
workers (July 2004 for public-sector workers) must open an individual
account with a publicly or privately run pension fund administrator.
When the reform was implemented, workers who were covered by the
old social insurance system were required to switch to the new system
unless they were within 3 years of retirement. The contributions of
workers excluded from individual accounts are paid to the single publicly
operated pension fund administrator. Such excluded workers receive a
lump sum benefit or periodic benefits calculated on the basis of the
value of contributions paid and life expectancy.
Coverage
All federal public-sector employees (including the military), public-sector
employees in the federal capital territory, and private-sector employees
working in firms with five or more workers.
Voluntary coverage for some excluded categories of worker under

specified conditions.
Exclusions: Public-sector employees in state and local governments,

judges, diplomats, noncitizens covered by an equivalent program in
another country, self-employed persons, the clergy, private-sector
employees working in firms with fewer than five workers, and
employees within 3 years of retirement.
Source of Funds
Insured person: 7.5% of gross salary; 2.5% of gross salary for military
personnel.
Gross salary includes basic salary, housing allowances, and

transportation allowances.
Additional voluntary contributions are possible.
There are no maximum earnings for contribution purposes.
In addition, pension fund administrators may charge up to a maximum

of 100 naira a month and up to 2% of assets per year for administration
fees.
Self-employed person: Not applicable.
Employer: 7.5% of gross salary; 12.5% of gross salary for military

personnel.
Gross salary includes basic salary, housing allowances, and

transportation allowances.
There are no maximum earnings for contribution purposes.
Employers must also finance life insurance policies for their employees,
guaranteeing a lump sum equal to a minimum of three times the
employee's annual earnings.
Government: None.
Old-age pension: Age 50 or older; employees in certain categories of

employment may retire before age 50. Employment must cease.
Guaranteed minimum pension: Paid at retirement to members who have

contributed for at least 20 years.
The old-age pension is not payable abroad.
Disability pension: The insured must be assessed as disabled and

incapable of work.
The disability may be reassessed every 2 years by the medical board or

a qualified doctor at the insured's request.
The disability pension is not payable abroad.
Survivor pension: The deceased was eligible for the disability pension
or the old-age pension at the time of death.
Eligible survivors are the deceased's spouse and children or persons

named by the deceased; in the absence of a spouse and children, the
pension is paid to the next-of-kin or the administrator of the deceased's
estate.
The survivor pension is not payable abroad.
Old-Age Benefits
Old-age pension: The pension is based on the insured's contributions

plus accrued interest. At retirement, the insured may purchase an
annuity or receive periodic payments on a monthly or quarterly basis
calculated on the basis of life expectancy.
The insured can opt to receive a partial lump sum from the balance in
the individual account, provided that the remaining value of the
individual balance is sufficient to purchase an annuity or fund periodic
payments equal to at least 50% of annual earnings at the date of
retirement.
After a 6-month waiting period, insured persons who retire before

age 50 and who have not started new employment may request to
receive a maximum of 25% of the balance in their individual account as
a lump sum.
Guaranteed minimum pension: The value of the guaranteed minimum

pension is set by the government on the recommendation of the
National Pension Commission.
Disability pension: The pension is based on the insured's contributions

plus accrued interest. The insured may purchase an annuity or receive
periodic payments on a monthly or quarterly basis calculated on the
basis of life expectancy.
The insured can opt to receive a partial lump sum from the balance in
the individual account, provided that the remaining value of the
individual balance is sufficient to purchase an annuity or fund periodic
payments equal to at least 50% of the annual earnings received at the
time the disability began.
Survivor Benefits
Survivor pension: The benefit is calculated on the basis of 100% of the

balance of the deceased's individual account, plus the lump sum from
the employer-sponsored life insurance policy.
The survivor may purchase an annuity or receive periodic payments on

a monthly or quarterly basis calculated on the basis of his or her life
expectancy.
The survivor can opt to receive a partial lump sum from the balance in
the deceased's individual account, provided that the remaining value of
the individual balance is sufficient to purchase an annuity or to fund
periodic payments equal to at least 50% of the deceased's annual
earnings at the time of death.
Federal Ministry of Labour provides general supervision.
National Pension Commission regulates, supervises, and provides

licenses to pension fund administrators (PFAs).
Pension fund administrators administer individual accounts.
Overseen by a tripartite board, the Trustfund Pensions Plc administers

all contributions paid previously to the Nigeria Social Insurance Trust
Fund (NSITF).
Trustfund Pensions Plc also administers contributions of workers

excluded from individual accounts and administers benefits for those
who became eligible before the implementation of, or who are excluded
under, the 2004 law.
Trustfund Pensions Plc also competes with other PFAs to administer

individual accounts for new entrants to the workforce.
Beginning June 2009, all former contributors to the NSITF who are
covered by the new individual account system will be permitted to
transfer their accumulated contributions from the Trustfund Pensions
Plc to other licensed PFAs.
Sickness and Maternity
No statutory cash benefits for sickness and maternity are provided. (The
2004 Pension Reform Act provides enabling legislation for the National
Social Insurance Trust Fund to introduce a social insurance program for
sickness and maternity benefits.)
The 1999 National Health Insurance Decree provides medical benefits

to insured employees of firms with 10 or more workers. The benefits are
financed by contributions of 5% of basic monthly salary from insured
persons and 10% of basic monthly salary from employers.
Limited free medical care is available to the population through public
dispensaries and hospitals.
The labor code requires employers to provide employees with up to

12 days of paid sick leave a year and to provide paid maternity leave at
50% of wages for 6 weeks before and 6 weeks after the expected date
of childbirth.
Work Injury
First and current law: 1942 (workmen's compensation), with 1957 and
1987 amendments.
Type of program: Employer-liability system, normally involving

insurance with a private carrier.
Coverage
Manual workers and nonmanual employees (including government

employees) with earnings below a ceiling.
Exclusions: Agricultural employees or handicraft employees of

commercial enterprises normally employing fewer than 10 workers,
casual workers, and family workers.
Source of Funds
Insured person: None.
Self-employed person: Not applicable.
Employer: The total cost is met through the direct provision of benefits
or the payment of insurance premiums.
Government: None.
Work injury benefits: There is no minimum qualifying period.
Temporary Disability Benefits
The monthly benefit is paid for a maximum of 24 months: 100% of basic

pay for 6 months, 50% for the next 3 months, and 25% for the next
15 months.
If the insured is assessed as totally disabled, a lump sum is paid equal

to 54 months' earnings.
Constant-attendance allowance: A lump sum is paid equal to 25% of the

permanent disability benefit.
Partial disability: A percentage of the total disability lump sum is paid

according to the assessed degree of disability.
Medical benefits include medical care, hospitalization, medicines,

appliances, and transportation.
Survivor Benefits
A lump sum is paid equal to 42 months' earnings minus any temporary

disability benefit already paid to the deceased.
Courts determine how the lump sum is split among the survivors.
Federal Ministry of Labour enforces the law.
Courts participate in the adjudication of benefits and settle disputed

benefit claims.
Employers may insure against liability with private insurance

companies.
Unemployment
No statutory benefits are provided. (The 2004 Pension Reform Act

provides enabling legislation for the National Social Insurance Trust
Fund to introduce a social insurance program for unemployment
benefits. However, the contingencies to be covered and sources of
funds have yet to be specified.)
For insured persons who contributed under the previous provident fund
system, the 1961 Provident Fund Act No. 20 permits limited cash
drawdown payments after 1 year of unemployment.
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Sunday 13 June
18
APR
2009
Social Security Policy For
Nigeria-Matters Arising
By Anyanate Ephraim
1 Comment
Social security is a human right, as well as an economic and political necessity. It is an indispensable
part of institutional tissue of an efficient market economy. It is well understood that without social
security poverty reduction and development are not possible. Systems of socio-economic security
were introduced in Europe in the late 19th century and were slowly implemented in most countries
during the early 20th century and consolidated after the Second World War.
In Nigeria piecemeal social security programmes have been in place since 1942 starting with the
workmens compensation. Others are benefits for temporary and permanent disability, unemployment,
maternity and sickness. All these have been going on without a unified policy with no clear funding.
Following a resolution of 11th International Labour Organisation African Regional Meeting (Addis
Ababa, 24-27 April 2007) a tripartite African ILO members committed themselves to develop national
action plans to build basic social security to all and Nigeria is an active player in the International
Labour Organisation's (ILO) affairs and playing host to the labour watchdog since 1960.
At 48 going to 49 it is better late than never and therefore a move in the right direction for the
Honourable Minister for Labour and Productivity to set up a committee in-order to produce a blue print
for a comprehensive Social Security policy in Nigeria. This task will by no means be an easy one.
However, assigning the task to no less a person than Dr Yakubu Gowon who during his youth as Head
of State initiated a very laudable NYSC programme which is one of the best social security instruments
that have happened to Nigeria is even a more positive decision. The committee the Minister said is
saddled with drafting a holistic national social security policy that will take into cognisance the formal
and informal sectors of the economy, recommend robust and sustainable financing options for an
integrated system and also recommend an administrative structure for the implementation of an
integrated national social security scheme with a view to harmonising the overlapping functions of
agencies, departments and ministries.
It is true that adequate social security policies can be an important endogenous factor in the process of
socio-political development and economic growth of our dear country. In Nigeria we like to copy what
is done in developed world. As such there is the temptation for us to come up with a system that is
operating in one of the developed countries. The type of social security programmes implemented in
industrialised or developed countries may not be economically or politically feasible in a poor
economy like ours. The example of our democracy has shown that we copy badly. We have been
struggling with how to carve out our own type of democracy and therefore despite our perceived well
meaning attempts we have not been able to convince ourselves that we know where we are going. It
may have been easier to put of a policy if we were a homogenous entity. Nigeria however is a
heterogeneous nation with differing local perceptions. It is therefore important for the committee to
take a step back and consult extensively before deciding for Nigerians based on evidence available
within the country and in other developing economies the type of social security policy that will be fit
for purpose taking into consideration the heterogeneity of the country.
According to the International Labour Organisation (ILO) social security programmes are defined by
the protection which society provides for its members through a series of public measures against the
economic and social distress that otherwise would be caused by the stoppage or substantial reduction
of earnings resulting from sickness, maternity, employment injury, invalidity and death; the provision
of medical care; and the provision of subsidies for families with children. This definition appears to put
emphasis on workers. In a country like ours where the basic needs of personal security, water, housing,
education and employment have not been met, it is obvious that we need to look for a different
definition of social security for ourselves.
Social security programmes are usually established as a means of improving the well-being of the
poor, reduce inequality within society and conciliate different social demands, thus avoiding the social
and political conflicts, which necessarily arose as capitalist forms of production evolved. Hands on
experience of wanting to help the poor in our society have always been commandeered by the rich. For
instance in some states, taxi schemes were set up to ease transportation difficulties but the cars were
distributed to the well to dos who increased their capitalist pockets and later abandoned the real idea
behind such schemes.
The underlying aim of Social security in any country is protection from fear and want. The extent of
insecurity, poverty, destitution and vulnerability in Nigeria reach far beyond the objectives of typical
systems of social security implemented in developed countries or even developing countries in the
same rank with us. Our social security should be for the young and old as well as the employed and
unemployed. We should therefore be aiming for a social security system that will be integrated within
the overall development strategy of the country rather than implemented as individual programmes.
Experiences of developing economies such as China, Costa Rica, Jamaica, Chile, Cuba, Sri Lanka and
the south Indian state of Kerala have shown that extensive systems of socio-economic protection based
on efficiently targeted policies, widespread public participation and careful integration of social and
economic policies can perform a central role in the maintenance of living standards and the well-being
of the most fragile groups in the population. We should start by gradually building basic social
security system before building progressively higher levels of protection.
Our Social security policy should therefore aim at the protection and promotion of both human and
physical capital and should include better health support, better access to clinics and hospitals, health
insurance policies, better nutrition, improved access to schools, universal primary education, and so
forth. Physical capital can be protected by policies aimed at employment creation, promotion of rural
development, research and incentives to encourage labour-intensive investments, better access to
housing and land, improved infrastructures like roads, provision of water and electricity, reduction of
remoteness of some population groups, measures to eliminate biases against women and other
vulnerable groups as producers and consumers (minimum wages, measures against discrimination),
improved access to capital through financial sector reforms of micro-credit schemes, implementation
of employment support schemes, and provision of secure ownership of key assets. It is delighful that
some of these have been highlighted by Dr Gowon.
The cost of implementing social security system can be enormous even in the developed world. Even
in Britain at the moment this is a problem and it is a front burner and election issue. The cost can
however be brought down to a manageable level by public commitment involved in the social
development strategies followed by an efficient administration. This is where it will not be business as
usual any longer in our country Nigeria. We must have a paradigm shift especially with our attitude to
taxation which is usually a major source of funding for social security activities as well as the way we
manage state owned organisations. The cost also depends on what type of social security system
should be implemented and therefore a careful thought needs to be given to this. We already know that
in Nigeria we are bad with implementing anything. This will therefore be a big challenge. A policy not
well implemented is a waste and I do hope this will not go the way of other previous policies. We must
know how we can measure success right from the begining and incorporate that in the policy. Social
security policies are prone to cheatings. There has to be measures to tackle this and appropriate
punishments prescribed from the onset for such cheats.
The plan to strengthen the institutions to safeguard social security is a welcome idea. There is need for
the actualisation of constitutional provision on social security as contained in Section 71(2) of the
Pension Reform Act, 2004 and other Acts relevant to a comprehensive and effective social security
system.
I believe it can be done and the time is now and as Dr Gowon said, we have to ensure corruption is not
glorified in this venture that is meant to help the poor.
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2009-04-19 01:19:26
Iroabuchi Onwuka
Re: Social Security Policy For Nigeria-Matters Arising
Dr.
Keeping pressing on this matter, I know and understand the critical nature of the social security. A
one-off write up will not do the due justice required. However you can start with a State in Nigeria or
two to begin with and then on. Nigerian productivity as a country is not very accountable without this
information system. In most Nigerian states, the coffer for pension is really empty.
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Leadership (Abuja)
Nigeria: Social Security Scheme, Long-Term Panacea for Poverty - CBN
Aminu Imam
25 August 2008
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The Central Bank of Nigeria (CBN), has said that provision of Social Security Benefits in
Nigeria is a long-term panacea for mass poverty, unemployment and an important tool for
the realisation of an egalitarian society.
Deputy Governor, Economic Policy of the CBN, Mrs. Sarah Alade, made this known during a
courtesy call on her by the Managing Director, Nigeria Social Insurance Trust Fund (NSITF),
Dr. Enukora Joe Okoli.
Mrs. Alade therefore advised the NSITF to intensify efforts towards the actualisation of
constitutional provision on social security as contained in Section 71(2) of the Pension
Reform Act, 2004 and the public mandate it had received at its last stakeholders conference
on social security.
Mrs. Alade advised the NSITF Management to explore ways of benefiting from the apex
bank's Entrepreneurship Development Centres for Micro-finance Banks to further enhance
the Fund's proposed Micro-finance scheme for the physically challenged.
Read comments. Write your own.

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Author: dontblink20
Mon Aug 31 16:18:19 2009
`trully its time for our noble law makers to arise and fulfill their destiny, which is the emancipation
of the common nigerian, every nigerian is born to be a king and a queen, and the constitution
has said that, so the law maker should implement that aspect of the law, they can do it, they
care about nigeria their father land and they will help the common man LETS NOT GET
DISCOURAGED.
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Leadership (Abuja)
Nigeria: Social Security Starts Next Year - FG
Moses John
28 August 2009
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Abuja After 49 years of independence, the Federal Government said it would begin the
implementation of national social security policy that would ensure a workable and holistic
social security system for Nigerians in January, next year.
General Yakubu Gowon (rtd), a former Head of State, who is also the Chairman of the
National Working Committee on Social Security Policy for Nigeria, yesterday submitted the
draft policy to the government.
Receiving the document on behalf of President Yar'Adua in Abuja, the Minister of Labour,
Prince Adetokunbo Kayode, said the implementation would begin in the next four months
because the present administration was desirous of providing social security for the people.
The essence of government itself was to provide security and welfare for its citizenry, he
added.
Kayode said the whole essence of the seven-point agenda of the Yar'Adua administration
was to make life easy for the people and ensure that they were adequately protected and
provided with good things of life, which social security was all about.
He informed that the policy document was as important as the Constitution of the Federal
Republic of Nigeria, stressing that Nigerians must support government with the belief that it
would better the lives of the citizens.
According to the minister, "Though it took us 49 years as a nation to do this, the most
important thing is that we have done it. The purpose of the government, according to the
laws and the constitution, is the security and welfare of the people and this (the document)
represents the social security and welfare of our people."
He added, "I want to assure you, even though it took us 49 years to do it and it took the
committee four months to put this together, the government will implement it and it will not
take four months for the Federal Government to implement it.
"Government must provide social security for our people. It is the duty of government to do
so, and this is my belief and I will drive this belief as long as I remain in office. The seven-
point agenda of President Yar'Adua is all about security and welfare of our people.
"With social security, we will handle poverty, crimes and other social vices. We will
implement this policy. We will drive it."
Kayode appealed to all Nigerians to be ambassadors to drive its implementation, adding that
the era of non-belief in government's position to do good things had gone.
He acknowledged the contribution of Gen. Gowon and other members of the committee,
stressing that the government had searched very carefully before the members were put
together.
The minister thanked them for their commitment, time and energy and assured that their
efforts would not be a waste as the government was also very committed to implementing
the policy.
Gowon, while submitting the draft policy, commended the government for considering it
imperative that Nigeria needed a holistic social security policy which would ensure a more
inclusive, responsive and humane society.
The former head of state said a nation that placed great premium on the welfare and well-
being of its citizens above all else was a nation that eyed greatness.
He expressed hope that the policy and the recommendations would meet the national
aspirations through substantial reduction in crimes and corrupt practices; increased
productivity through inclusion; reduction of poverty by reducing income vulnerability and
promotion of solidarity, patriotism and nationalism.
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He also expressed concern over the present state of the nation, adding that collapse and
non-existence of basic infrastructure had created a disincentive for millions of Nigerians who
flooded the cities, constituting serious danger to individuals and the public.
He said it was indeed paradoxical that as rich as Nigeria is, the vast majority of the populace
was unable to afford even the basic necessities of life, which are food, water and shelter.
According to him, "The steady decline in the standard of living and ethical values of our
countrymen and women over the years are attributable to ever widening income inequality,
mass unemployment, mass poverty and social exclusion. These socio-economic maladies
are due to external macro-economic dislocations and largely to internal mis-governance and
malfeasance across the board".
He added that it was exciting that the present administration had taken seriously the issue of
addressing the welfare and security of the citizenry as a first principle.
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Fri Aug 28 15:39:00 2009
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Leadership (Abuja)
Moses John
28 August 2009
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added.
together.
the policy.
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Nigeria
Labour
Business
Obama Administration Committed to AGOA

Partnership With Continent

Boss, Others
can't ... Trek, ...
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Author: fuguez
Fri Aug 28 15:39:00 2009

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Politics
Wednesday,May 05,2010
Jobs for the youths or fraud by
another name? Home >> Politics
In a depressed economy like ours,
characterised by job losses, Can Nigeria implement a social security scheme?
closure of companies and mass
youth unemployme.... By:
By Joel Nwokeoma Joel Nwokeoma
Monday,Apr 26,2010
How Jonathan Can Fix Electricity
(III)
Some readers had concerns with
my article last week. In their In what could be said to be a major paradigm shift in Nigeria
opinion, I was in the habit of s poverty reduction strategy, the Federal Government last
promoting friends and ....
By Ijeoma Nwogwugwu March empanelled a National Working Committee on Social
Security Policy headed by former Head of State, General
Sunday,Apr 25,2010
Benin-Ore Expressway: Beyond Yakubu Gowon, to advise it on the modalities of
Daggashs lame lamentation implementing a social security programme in the country.
It is often said that those who do
not learn from history, more often Hitherto, the former administration of President Olusegun
than not, tend to repeat mistakes Obasanjo had adopted an economic-growth led poverty
of the past....
By Joel Nwokeoma reduction strategy where it reckoned that a robust
performance of the national economy would necessarily lead
Saturday,Apr 24,2010
EU & Greece: Is Time Running Out to job creation, reduction in unemployment and elimination
for Greece? of attendant misery and poverty among the citizenry.
Challenges Greece is a member of
the European Union. Its national
debt currently stands at
approximately 300bn euro....
However, with the grim reports on the countrys economic
By Charles Malize indicators by development agencies such as the United
Nations Development Programme (UNDP), particularly on its
Friday,Apr 16,2010
Thailand: Protest(s) Capital of poverty rate, put at 70 per cent, obviously on account of the
Third World Countries poor performance of the economy, it is evident that the
It will be very appropriate if the
Save Nigeria Groups, various strategy has not been effective. The 2009 Fund for Peace
opposition groups/parties in
Nigeria could undertak....
Report, in fact, indicated that about 54 per cent of the
By Chinedu Vincent Akuta population in Nigeria live on less than a dollar per day,
ostensibly on account of what the United Nations Economic
Friday,Apr 16,2010
Abubakar Rimis humble end Commission for Africa (UNECA) claimed, in its 2009 report
In Alhaji Abubakar Rimi, Nigeria recently released, was the unsatisfactory performance of the
lost a true son. He lived fighting
for the development of Nigeria, economy. UNECA claimed that Nigeria s economy recorded
especiall.... a six per cent growth in 2008, a fact corroborated by The
By Fidelis Onyedikam
Fund for Peace, which even asserted that the indicator for
Friday,Apr 09,2010 the economy worsened from 5.4 in 2007 to 5.9 in 2008.
Babangida, Federalism, and 2011
Former military president General
Ibrahim Babangida is reportedly The Minister of Labour and Productivity, Adetokunbo
consulting widely on whether to
join the 2011 pre.... Kayode, had noted that governments new stance on poverty
By Jideofor Adibe reduction was informed by the urgent need to ensure that the
Monday,Apr 05,2010 Nigeria Social Insurance Trust Fund (NSITF) executes its
Yar'adua; Cock and Bull Stories mandate of delivering social security to the poor. The
Has anyone noticed, every time
the nation seems to be making minister lamented that the absence of a national policy had
some progress towards made it difficult for the Fund to perform this mandate, 49
years after Nigeria attained political independence despite the
country being an active member of the International Labour
Organisation.
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The other day, the Yakubu Gowon-led committee submitted

its final report, detailing sundry recommendations to the
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canvassing for a non-contributory National Social Assistance

Scheme.
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Nigeria
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humane society expressing optimism that if the
recommendations of the committee were accepted by the
government, the scheme would lead to substantial reduction
in crimes and corrupt practices, increased productivity,
reduction of poverty and promotion of solidarity, patriotism
and nationalism. He traced the steady decline in the standard
of living and ethical values among Nigerians to the ever-
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elijah Date:May 18, 2010
yesif and only the leaders can repent from national sins.and also
walk by election not selectionthen all it take to be nigeria as a
nation can stand.
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Nigeria: New social security policy aims to establish a welfare state

Four months ago, the Nigerian President Yar'Adua
and his government set up a National Working Committee on Social Security Policy for Nigeria. The new
policy is very encouraging and aims to establish a welfare state in which the poor, the weak and the
unemployed can look forward to a series of measures and actions taken by the government to make their
life better. The majority of the population in Africas most populous country live in a desperate, poor and
underprivileged situation. The new policy should - according to Prince Adetokunbo Kayode - be
implemented until the end of the year.
Though the Nigerian social security policy and system is yet to be unveiled, components of the new social
security are the several efforts at free primary education, the Universal Basic Education (UBE) and the
National poverty Eradication Programmes (NAPEP).
The new program is a step towards achieving article 25 of the Universal Declaration of Human Rights which
says, "everyone has the right to a standard of living adequate for the health and well-being of himself and of
his family, including food, clothing, housing and medical care and necessary social services, and the right
to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood
in circumstances beyond his control."
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There are two kinds of welfare services in Nigeriathose provided by voluntary
agencies and those provided by the government. Voluntary agencies comprise
those fully or partially subsidized by the government, those financed by a parent
body such as a church or mosque, and those financed from subscriptions of their
members. Workers are protected under the Labor Code Act (1958) and the
Workmen's Compensation Act, which provides protection for workers in case of
industrial accidents. A national provident fund scheme, inaugurated in 1961, was
the first broad social security measure in Nigeria. The scheme is contributory and
is designed to make systematic financial provisions for workers when
unemployment occurs due to old age or illness. This program covers employees of
firms with five or more workers, and a special system exists for public employees.
Although sex discrimination is banned under the 1999 constitution, traditional

practices still deprive women of many rights and the adoption of Shari'ah law by
many northern states has more severely limited the rights and freedom of
women. Women may not obtain a passport without her husband's permission. It
is customary for all assets to be turned over to the parents after the death of a
male, leaving the widow economically destitute. Segregation by gender occurs in
some schools, health facilities, and, in some states, on public transportation.
Purdah, the Islamic practice of completely segregating a woman from men other
than those within her family, is practiced in some families, primarily in the north.
In Shari'ah courts, women's testimony is given less weight than that of men.
Female genital mutilation (FGM) is widespread throughout the country despite
government opposition. Domestic violence is widespread, and wife beating is
permissible under the penal code.
Nigeria's human rights situation has improved under the Abubakar and Obasanjo
governments, but service abuses remain. Arbitrary arrest and detention are still used to
silence the government's critics. There are also reports of torture and extrajudicial
killings. Prison conditions, furthermore, are considered to be life threatening.
Overcrowding and poor sanitary conditions are compounded by limited food, water and
medicine for inmates. Sentences of stoning and amputation are still used
Social security
From Wikipedia, the free encyclopedia
This article is about the general concept of providing welfare. For other uses, see Social Security
(disambiguation).
The examples and perspective in this article may not represent a worldwide
view of the subject. Please improve this article and discuss the issue on the talk
page.
Social security is primarily a social insurance program providing social protection, or protection
against socially recognized conditions, including poverty, old age, disability, unemployment and others.
Social security may refer to:
social insurance, where people receive benefits or services in recognition of contributions to

an insurance scheme. These services typically include provision for retirement pensions, disability
insurance, survivor benefits and unemployment insurance.
income maintenancemainly the distribution of cash in the event of interruption of

employment, including retirement, disability and unemployment
services provided by administrations responsible for social security. In different countries this
may include medical care, aspects of social work and even industrial relations.
More rarely, the term is also used to refer to basic security, a term roughly equivalent to
access to basic necessitiesthings such as food, clothing, shelter, education, money,
and medical care.
Contents
[hide]
1 Social insurance
2 Income maintenance
3 Social protection
4 Social protection in sub-Saharan Africa
o 4.1 Equatorial Guinea
o 4.2 Mali
5 See also
6 References
7 Literature
8 Further reading
9 External links
[edit]Social insurance
Main article: Social insurance
Actuaries define social insurance as a government-sponsored insurance program that is defined by

statute, serves a defined population, and is funded through premiums or taxes paid by or on behalf of
participants. Participation is either compulsory or the program is subsidized heavily enough that most
eligible individuals choose to participate.
In the U.S., programs that meet this definition include Social Security, Medicare, the PBGC program,
the railroad retirement program, and state-sponsored unemployment insurance programs.[1]
[edit]Income maintenance
Main article: Unemployment benefits
This policy is usually applied through various programs designed to provide a population with income
at times when they are unable to care for themselves. Income maintenance is based in a combination
of five main types of program:
Social insurance, considered above
Means-tested benefits. This is financial assistance provided for those who are unable to
cover basic needs, such as food, clothing and housing, due to poverty or lack of income because
of unemployment, sickness, disability, or caring for children. While assistance is often in the form
of financial payments, those eligible for social welfare can usually access health and educational
services free of charge. The amount of support is enough to cover basic needs and eligibility is
often subject to a comprehensive and complex assessment of an applicant's social and financial
situation. See also, Income Support.
Non-contributory benefits. Several countries have special schemes, administered with no

requirement for contributions and no means test, for people in certain categories of need - for
example, veterans of armed forces, people with disabilities and very old people.
Discretionary benefits. Some schemes are based on the discretion of an official, such as a
social worker.
Universal or categorical benefits, also known as demogrants. These are non-contributory

benefits given for whole sections of the population without a test of means or need, such as family
allowances or the public pension in New Zealand (known as New Zealand Superannuation). See
also, Alaska Permanent Fund Dividend.
[edit]Social protection
Social protection refers to a set of benefits available (or not available) from the state, market, civil
society and households, or through a combination of these agencies, to the individual/households to
reduce multi-dimensional deprivation. This multi-dimensional deprivation could be affecting less active
poor persons (e.g. the elderly, disabled) and active poor persons (e.g. unemployed). This broad
framework makes this concept more acceptable in developing countries than the concept of social
security. Social security is more applicable in the conditions, where large numbers of citizens depend
on the formal economy for their livelihood. Through a defined contribution, this social security may be
managed. But, in the context of wide spread informal economy, formal social security arrangements
are almost absent for the vast majority of the working population. Besides, in developing countries, the
state's capacity to reach the vast majority of the poor people may be limited because of its limited
resources. In such a context, multiple agencies that could provide for social protection is important for
policy consideration. The framework of social protection is thus capable of holding the state
responsible to provide for the poorest sections by regulating non-state agencies.
Collaborative research from the Institute of Development Studies debating Social Protection from a
global perspective, suggests that advocates for social protection fall into two broad categories:
'instrumentalists' and 'activists'. 'Instrumentalists' argue that extreme poverty, inequality and
vulnerability, is dysfunctional in the achievement of development targets (e.g. the MDGs). In this view
social protection is about putting in place risk management mechanisms that will compensate for
incomplete or missing insurance (and other) markets, until a time that private insurance can play a
more prominent role in that society. 'Activist' arguments view the persistence of extreme poverty,
inequality and vulnerability, as symptoms of social injustice and structural inequality and see social
protection as a right of citizenship. Targeted welfare is a necessary step between humanitarianism and
the ideal of a 'guaranteed social minimum' where entitlement extends beyond cash or food transfers
and is based on citizenship, not philanthropy.[2]
[edit]Social protection in sub-Saharan Africa

Social protection in sub-Saharan Africa tends not to be very developed and yet the growth of some of
the region's economies and concerted attempts to tackle poverty mean that this situation may change
considerably in the future.
[edit]Equatorial Guinea
Equatorial Guinea has enjoyed some of the highest growth rates in the world (37% a year on average
in the past 10 years), based largely on its oil sector. With an economy 20 times bigger than it was in
the mid 90s, the government can now afford to start expanding it social programmes, especially as
tremendously inequality means that despite a $14,941 average GDP per capita ($30,000 according to
UN population estimates), over 75% of the population live below the poverty line and over 40%
in extreme poverty[3]. One particularly vulnerable group in Equatorial Guinea are the under 18s, who
make up 50% of the population and whose poor levels of nutrition and education risk the country's
future stability and economic growth[4]. The country's under five child mortality rate is the fourth highest
in the world and deteriorating, maternal mortality is also very high. Costs remain a key barrier to
access to key public services and despite few waivers for the particularly vulnerable, confusion
prevents many from taking advantage. Low demand, as well as poor supply, of public services is also
important in understanding the limits to social protection and poverty relieve in Equatorial Guinea[5].
Despite the free provision of primary education and enrolment being relatively high, net primary school
attendance rates are low, at 61% for boys and 60% for girls in 20002007, according to UNICEF data.
Drop-out rates are high and only 33% reach the last grade of primary school, while at secondary
school net attendance rates are even lower, at 23% for boys and 22% for girls. A key cause is that
children are involved in child labour, in 2001, a UNICEF study showed that 51% of boys and 58% of
girls worked during school hours[6]. Youth migration (over 50% of have moved to urban areas and do
not live with their parents) and sexual exploitation risks their development and Equatorial Guinea's[7]. A
small formal social security system does exist but reaches only a small proportion of the employed (or
formerly employed) in the urban formal sector and social protection coverage for the poor is very
limited. One promising recent initiative is the establishment of the Social Needs Fund, financed by the
Government and administered by USAID, and is designed to bring in international technical expertise
to support institutional capacity building in the social sectors and to support social sector service
delivery[8].
[edit]Mali
Mali has made significant economic progress (on average 5% a year between 1994 and 2006)
considering a series of adverse economic shocks (such as drought) and has made some progress on
reducing poverty and poverty related indicators, yet poverty remains high at 59.2% in 2006 and as in
many sub-Saharan African countries, children make up a high proportion of the population - 54% in the
case of Mali[9]. Malis National Social Protection Policy recognises the multiple dimensions of social
protection that correspond to a range of social, economic, health and environmental risks. Its main
focus is health-related risks and interventions, with areas of the strategy that relate to the social and
economic risks of the poor classified as social development, including social action and social
assistance, e.g. vulnerable children (defined as those living without parental care or in households
where the head has disabilities or is ill) qualify for some forms of social assistance[10]. There are also
movements towards expanding social security. Two new health-related social protection programmes,
the Compulsory Medical Insurance (AMO) and the Medical Assistance Regime (RAMED) are to start
operating in 2010[11]. AMOs beneficiaries will be active or retired functionaries, formal sector
employees, and members of parliament[12]. RAMED aims to provide free health care to the destitute
(those proven to have no sources of income). Mali's social protection programmes are addressed in
one of the three pillars of the Growth and Poverty Reduction Strategy Paper (GPRSP), which refers to
strengthening the social sector through risk mitigation and social protection for the poorest and most
marginalised groups, extending better social protection coverage for the whole population.[13] However,
criticisms remain that the main focus of the GPRSP 20072011 is the other two pillars: development
of infrastructure in the productive sector and consolidation of structural reforms. Financial limits
remain a major barrier to the extension of social protection. Other criticisms relate to the need to
address to the demand for public services, as well as the supply side[14].
[edit]See also
Cash transfers
Civil defense
Contingencies fund
Department for Work and Pensions
Employees' Provident Fund Organisation of India
Generational accounting
Health care system
Human rights
Human security
Intergenerationality
International Social Security Association
Franco Modigliani
National Health Service
Prevention
Publicly-funded health care
National health insurance
National Insurance (UK)
Social policy
Social safety net

Social Security Administration
Social Security debate (United States)
Social Security Disability Insurance
Social Security number
Social Security Trust Fund
Social Security in France
Social welfare provision
South African Social Security Agency
The Four Pillars
Welfare Rights
Welfare state
Social Security (United States)
Social Security (Sweden)
Social Security (Australia)
Central Provident Fund (Singapore)
[edit]References
1. ^ "Social Insurance," Actuarial Standard of Practice No. 32, Actuarial Standards Board,
January 1998
2. ^ 'Debating Social Protection' Devereux, S and Sabates-Wheeler, R. (2007) IDS Bulletin
38 .3, Brighton: Institute of Development Studies
3. ^ Rebecca Holmes (2009) Social protection to tackle child poverty in Equatorial
Guinea London: Overseas Development Institute
4. ^ ibid
5. ^ ibid
6. ^ ibid
7. ^ ibid
8. ^ Rebecca Holmes (2009) Social protection to tackle child poverty in Equatorial
Guinea London: Overseas Development Institute
9. ^ Paola Pereznieto (2009) Social protection to tackle child poverty in Mali London:
Overseas Development Institute
10. ^ ibid
11. ^ ibid
12. ^ ibid
13. ^ ibid
14. ^ Paola Pereznieto (2009) Social protection to tackle child poverty in Mali London:
Overseas Development Institute
[edit]Literature
'Reforming European Pension Systems' (Arun Muralidhar and Serge Allegreza (Eds.)),
Amsterdam, NL and West Lafayette, Indiana, USA: Dutch University Press, Rozenberg Publishers
and Purdue University Press
[edit]Further reading
Modigliani, Franco. Rethinking pension reform / Franco Modigliani, Arun Muralidhar.

Cambridge, UK ; New York : Cambridge University Press, 2004.
Muralidhar, Arun S. Innovations in pension fund management / Arun S. Muralidhar. Stanford,

Calif.; [Great Britain] : Stanford Economics + Finance, c2001.
"The Three Pillars of Wisdom? A Reader on Globalization, World Bank Pension Models and
Welfare Society" (Arno Tausch, Editor). Nova Science Hauppauge, New York, 2003
Amazon.com, "When the Public Works: Generating Employment and Social Protection in
Ethiopia" Peter Middlebrook , Lambert Academic Publishing. 2009. ISBN 978-3838306728
[edit]External links
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security
Social security Web portal of the International Social Security Association
GESS - Knowledge sharing platform on the extension of social security
Social Protection & Labor Program of the World Bank
Social Protection Program of the World Bank Institute
Social Protection research from the Overseas Development Institute
Online guide to basic social protection concepts and issues

Further resources on social protection (particularly in reference to developing countries) are
available on the Governance and Social Development Resource Centre's topic guide on social
protection
Arno Tausch (2005) World Bank Pension reforms and development patterns in the world
system and in the "Wider Europe". A 109 country investigation based on 33 indicators of economic
growth, and human, social and ecological well-being, and a European regional case study'. A
slightly re-worked version of a paper, originally presented to the Conference on "Reforming
European pension systems. In memory of Professor Franco Modigliani. 24 and 25 September
2004", Castle of Schengen, Luxembourg Institute for European and International Studies
OECD - Social Expenditure database (SOCX) Website
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Contact Us
Social Security
Social Security is not sustainable without reform. Simply put, it cannot pay promised future benefits with
current levels of taxation. Yet raising taxes or cutting benefits will only make a bad deal worse. However,
allowing younger workers to privately invest their Social Security taxes through individual accounts will
improve Social Security's rate of return; provide better retirement benefits; treat women, minorities, and low-
income workers more fairly; and give workers real ownership and control of their retirement funds.
Get the latest on Social Security: RSS
Books and Book Chapters

Social Security: A Fresh Look at Reform Alternatives, by Jagadeesh Gokhale (University of Chicago Press,
2010)
"Social Security," Chapter 17, Cato Handbook for Policymakers, 7th Edition (2009).
It's Your Money: A Citizen's Guide to Social Security Reform, (2005).
Social Security and Its Discontents, Edited by Michael D. Tanner (2004).

A New Deal for Social Security, by Peter J. Ferrara and Michael D. Tanner (1998).
[View more Books and Book Chapters]
Cato Studies
"The Connection between Wage Growth and Social Security's Financial Condition," by Jagadeesh Gokhale,
Policy Analysis no. 607, December 10, 2007
"KidSave: Real Problem, Wrong Solution," by Michael D. Tanner and Jagadeesh Gokhale, Policy Analysis
no. 562, January 24, 2006
"The Personal Lockbox: A First Step on the Road to Social Security Reform," by Michael D. Tanner, Policy
Analysis no. 550, September 13, 2005
"Social Security Status Quo versus Reform: What's the Tradeoff?," by Jagadeesh Gokhale, Social Security
Choice Paper no. 35, July 22, 2005
"Noble Lies, Liberal Purposes, and Personal Retirement Accounts," by Will Wilkinson, Social Security
Choice Paper no. 34, June 28, 2005
[View more Cato Studies]
Articles and Newsletters

"Bushs Economic Agenda Deserves Support," by William A. Niskanen, Cato Policy Report, March/April
2005.
"Toward the Ownership Society," by Edward H. Crane, Cato Policy Report, November/December 2004.
"Liberating Workers: The World Pension Revolution," by Jos Piera, Cato's Letters, no. 15, 2001.
"Pair Tax Cuts with Social Security Reform," by William A. Niskanen,Cato Policy Report, March/April 2001.
"The Great Social Security Debate of 2000," by Edward H. Crane,Cato Policy Report, May/June 2000.
[View more Articles and Newsletters]
Opinion and Commentary

"$13,050,826,460,886.97," by Michael D. Tanner, New York Post,June 6, 2010
"The Coming Entitlement Tsunami," by Michael D. Tanner, Daily Caller, April 6, 2010
"Social Security Private Option," by Michael D. Tanner, Washington Times, January 22, 2010
"Social Security's Coming Crash: The Certain End of Entitlement," by Doug Bandow, Chronicles, October
20, 2009
"A Path to Fiscal Sanity," by Jagadeesh Gokhale, National Review (Online), August 31, 2009
[View more Opinion and Commentary]

Events
"Social Security: A Fresh Look at Policy Alternatives," June 7, 2010 [Capitol Hill Briefing]
"Social Security: A Fresh Look at Policy Alternatives," May 27, 2010 [Book Forum]
"Obama's Blueprint for Growing the Welfare State," March 31, 2009 [Capitol Hill Briefing]
"GROW-ing Our Way to Social Security Reform?," October 14, 2005 [Capitol Hill Briefing]
"Social Security Reform for Deficit Hawks," May 26, 2005 [Capitol Hill Briefing]
[View more Events]
Speeches and Congressional Testimony

"Testimony before the Subcommittee on Social Security of the Committee on Ways and Means," by William
G. Shipman, June 21, 2005.
"Testimony before the Committee on Ways and Means, Subcommittee on Social Security," by Ian Vsquez,
June 16, 2005.
"Testimony before the Committee on Banking, Housing and Urban Affairs, Subcommittee on Securities and
Investment," by Michael Tanner, June 14, 2005.
"Testimony before the Committee on Ways and Means," by Michael Tanner, May 12, 2005.
"Testimony before the Senate Commitee on Finance," by Michael Tanner, April 26, 2005.
[View more Speeches and Congressional Testimony]
Multimedia
Jos Piera on America's soaring debts. February 22, 2010 [Flash Video, 18:56]
Jos Piera discusses privatizing social security on FBN February 22, 2010 [Flash Video, 19:18]
"U.S. Should Cash Out of Social Security" featuring Michael D. Tanner, January 26, 2010 [Flash Audio,
04:26]
"Social Security Surpluses Rapidly Shrinking" featuring Michael D. Tanner, April 2, 2009 [Flash Audio,
04:40]
"Obama, Entitlements and Private Accounts" featuring Michael D. Tanner, January 23, 2009 [Flash
Audio, 06:10]
[View more Multimedia]

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Social Security: A Fresh

Look at Policy Alternatives [Hardcover]
Jagadeesh Gokhale (Author)
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Editorial Reviews
Review
Social Security is innovative, interesting, and important. Gokhale
delivers on the promise in the title, providing a new appraisal of a
variety of plans to reform Social Security that will appeal to a wide
range of readers, including policy makers in Congress and the White
House and economists concerned with retirement income.Dale
Jorgenson, Harvard University
(Dale Jorgenson )
"Jagadeesh Gokhale once again pushes the state of the art in Social
Security analysis, warning us that the largest federal spending
program is in far worse financial condition than commonly supposed.
Gokhale builds his analysis of Social Security from the ground up, in
the process showing how more limited approaches used by
government agencies don't tell the full story. Gokhale's analysis of
Social Security is both technically first-rate and accessibly written, and
it should serve as a warning to policymakers and the public not to
delay in addressing this important issue."-Andrew Biggs, American
Enterprise Institute (Andrew Biggs )
Let there be no mistakedespite the urgency of the recent financial
crisis and recessionthe most daunting economic challenge facing our
nation remains that of reducing the enormous deficits facing the
United States as a result of our entitlement programs. In Social
Security, Jagadeesh Gokhale provides a rigorous analysis of options for
reforming this important program. His analysis serves both as a call-
to-action for our nation to take on this problem head-on and as a
useful analytical framework for understanding how reform would work.
Policy makers should not only read this book, they should act on it.
Jeffrey R. Brown, University of Illinois at Urbana-Champaign
(Jeffrey R. Brown )
Product Description
Many of us suspect that Social Security faces eventual bankruptcy. But
the government projects its future finances using long outdated
methods. Employing a more up-to-date approach, Jagadeesh Gokhale
here argues that the program faces insolvency far sooner than
previously thought.
To assess Social Securitys fate more accurately under current and

alternative policies, Gokhale constructs a detailed simulation of the
forces shaping American demographics and the economy to project
their future evolution. He then uses this simulation to analyze six
prominent Social Security reform packagestwo liberal, two centrist,
and two conservativeto demonstrate how far they would restore the
programs financial health and which population groups would be
helped or hurt in the process.
Arguments over Social Security have raged for decades, but they have
taken place in a relative informational vacuum; Social Securityprovides
the necessary bedrock of analysis that will prove vital for anyone with
a stake in this important debate.
See all Editorial Reviews
Product Details
Hardcover: 374 pages
Publisher: University Of Chicago Press (April 15, 2010)
Language: English
ISBN-10: 0226300331
ISBN-13: 978-0226300337
Product Dimensions: 9 x 6 x 1.1 inches
Shipping Weight: 1.4 pounds (View shipping rates and policies)
Average Customer Review: 3.0 out of 5 stars See all
reviews (1 customer review)
Amazon Bestsellers Rank: #218,127 in Books (See Top 100 in
Books)
#12 in Books > Nonfiction > Politics > Social Security
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3.0 out of 5 stars An Only search this product's
alternative model?, June 3, reviews
2010
By Steven Mason (California)
- See all my reviews
(REAL NAME)
This review is from: Social
Security: A Fresh Look at Policy
Alternatives (Hardcover)
I've just listened to a 90
minute lecture on this book,
though I haven't read it. Based
on what I heard, and given the
high price of the book, I don't
think I want to buy and read
it, but maybe another reviewer
can change my mind, because
I am interested in reading
good books about "the Social
Security problem."
The author, Mr. Gokhale,

spoke for the first 30 minutes,
then two other experts
provided some comments and
feedback, and finally there was
a brief question-answer
section. It seems that the
meat-and-potatoes of this
book is about predictive
modeling for Social Security.
The host of the lecture
referred to the book as
"wonkish." Well, I would
expect any analysis of Social
Security to be wonkish. But I
would also expect to hear
some conclusions expressed in
plain language as well; after
all, this was a lecture aimed at
a lay audience, not
mathematical modelers. The
entire lecture focused on the
challenge of modeling, though
I can't say I learned anything
useful even about that.
Creating good models is a
challenge for anyone, not just
Social Security policy wonks.
After listening for 90 minutes I
felt like the consensus was
"garbage in, garbage out."
This is hardly revelatory.
Anyway, I did manage to get a

little more out of the lecture.
Mr. Gokhale has come up with
a model for the Social Security
system which is a bit more
pessimistic than the
government's models. He said
that his model assumes no
policy changes and that all the
current trends will continue.
He also considers six different
government "fixes" that have
been proposed. Of those six
fixes, he says that two are
pretty good. At no point in the
lecture does anyone describe
"the problem" with Social
Security that needs to be
fixed. If you read the product
description on Amazon you will
see that "the problem" is that
Social Security is going to go
bankrupt. We've all heard this
before, and the only
disagreement seems to be
over which year it will go
bankrupt. But then, there are
those who say that Social
Security is not in any danger
of going bankrupt, at least not
in the sense that it will
collapse and disappear.
Neither did Mr. Gokhale
provide any information about
the two fixes that he thought
were pretty good (though he
did mention them by name -
Diamond-Orszag and Liebman-
MacGuineas-Samwick - and it
should be easy enough to look
them up). What do they entail?
Raising the retirement age a
bit? Decreasing benefits a bit?
Increasing the Social Security
tax cap a bit, or the general
tax rate? Imposing a bit of a
means test for benefits? Some
or all of the above? And if the
problems with Social Security
can be fixed, is it really fair to
say that it's a "broken system"
that's going to "go bankrupt"?
Perhaps it's off topic, but I

can't help but mention a
couple of comments from the
audience. I had to laugh at the
67-year-old university
professor of economics who
had two jobs (he didn't say
what his other job was) and
couldn't afford to retire
because of the high cost of
medical insurance and because
his employer "wouldn't let him
go because he had so much
knowledge and experience." A
retired professor can't afford
insurance? His employer won't
let him go? What, does the
university have some kind of
military stop-loss policy? :-)
And then there was a woman
who asked why people who are
homemakers and stay-at-
home parents, as well as
people who work many years
as volunteers, aren't covered
by Social Security. Her
question was essentially
ignored, but still, it made me
think about the kinds of
"productivity" that we value
and reward. And then there
was another economics
professor who said he was still
looking for a good Social
Security primer for a class he
would teach, and he didn't
seem too keen on using this
book because it was still a
work in progress. Even the
auther seemed to admit that it
was a work in progress, and
that he wasn't sure if his
model was better than the
government's models.
Anyway, like I said, this book

may be fine as a one-man
challenge to the official
government models for Social
Security, and in the sense that
a challenge can be seen as a
"fresh look," it seems to me
that it is better suited for those
who are already familiar with
the official models. But it's not
as if the government has been
saying that changes to the
system aren't necessary. After
all, the Social Security tax rate
has increased over the years
and the age of retirement is
being raised. I'm sure that
there are more changes in
store. But I'm looking for a
good primer on the subject
that is supported by
reasonable models and takes
into account "best case" and
"worst case" scenarios. For
example, perhaps the "worst
case scenario" is that when I
retire (I'm a baby boomer) I
will only receive 80% of what I
was "promised," and I will
have to downsize my
expectations and my lifestyle
by 20%. That kind of news is
nothing to celebrate, but such
information is more useful
than being told that the
system will go bankrupt.
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Executive Summary
Opponents of President Bushs proposal to
make individually owned personal retirement
accounts a part of the Social Security program
routinely charge that it is motivated by ideological
animosity toward the values Social Security is
supposed to embody, such as equality and social
cohesion. However, a frank look at the Social
Security status quo reveals that the program is
very poorly designed to realize liberal ideals.
Social Security has a barely progressive overall
structure, if it is progressive at all. The huge volume
of transfers inherent in the system accomplishes
very little income redistribution within
generational cohorts. Furthermore, it works to
the disadvantage of current workers, who will
receive a smaller return on their payroll taxes
than do current retirees. The terms of the imaginary
compact between the generations are
manifestly unfair.
What is worse is that the Social Security status
quo embodies a government-perpetuated
deception designed to generate its own political
support by misleading voters into believing that
their payroll taxes entitle them to later benefits.
The architects of Social Security created a
structure and accompanying rhetoric that were
specifically intended to encourage the false
belief that the system provides a kind of insurance,
similar to private insurance based in contract
and property, and therefore involves a
binding entitlement to benefits.
However, there is no justification for this
deception on contemporary liberal grounds.
The persistent intentional misrepresentation
the noble lieembedded in the structure and
language of the Social Security system is in fact
antithetical to the ideals of transparent government,
open democratic deliberation, and equality
among citizensideals at the core of contemporary
liberal thought.
A system of personal retirement accounts plus
a means-tested safety net would serve the social
insurance function better than the Social
Security status quo according to liberal standards.
Contrary to critics of reform, personal
retirement accounts would materially enhance
equality and social cohesion by more fully integrating
workers into the market, providing everyone
with a stake in its growth, closing the gap
between the investing and noninvesting classes,
and making more salient the mutuality of interests
in a market society.
June 28, 2005 SSP No. 34
Noble Lies, Liberal

Purposes,
and Personal Retirement
Accounts
by Will Wilkinson
Will Wilkinson is a policy analyst at the Cato Institute.
Introduction
President Bushs proposal to make individually
owned personal retirement accounts a part
of the Social Security program has provoked
ferocious opposition. A recurrent theme in the
attacks on personal account proposals is that
they represent an ideologically motivated attack
designed, not to save Social Security, but to
destroy it.
The crown jewel of the New Deal faces an
existential threat, writes Jonathan Chait in the
New Republic.1 Greg Anrig, vice president of
the Century Foundation, charges that advocates
of personal accounts are fixating on unproven
ideology.2 Robert Scheer argues in the Nation
that would-be reformers of Social Security are
animated by a hatred of the status quo simply
because it works and that ideological hostility
to progressive taxation and income redistribution
is the real issue behind the assault on
Social Security.3 In the American Prospect,
Jon Margolis charitably allows that the push for
personal accounts is ideology, not greed, and
evenhandedly observes that advocates of personal
accounts are neither more avaricious nor
more dishonorable than their opponents. Their
desire to dismantle Social Security is motivated
by sincere belief, one founded on an aggressive
hostility to equality.4
Rep. David Obey (D-WI) contends that matters
of fundamental principle are at stake. We really
do believe it would be immoral to blow up the one
program that sends the signal that we are all in this
together.5 Elaborating along similar lines, political
theorist Benjamin Barber maintains that
President Bushs proposal amounts to a kind of
reverse social contract: It dissolves the bonds that
tie us together. According to Barber, any move
toward Social Security privatization . . . makes us
less of a public. It diminishes the republicthe
res publica, or public things that define our commonweal.
It turns the common we into a collection
of private mes.6
What is the basis for such charges? Here are
some facts. Under President Bushs proposal,
individuals under the age of 55 would be given
the option of diverting a certain portion of their
Social Security payroll taxes into personal
investment accounts. When workers retired, the
accumulated capital in those accounts would
supplement regular Social Security benefits that
would be reduced to reflect the partial diversion
of payroll taxes. A floor would be set so that,
regardless of the performance of the investments
in their private accounts, all individuals
would be guaranteed a minimum retirement
income. In other words, the presidents plan
calls for a move away from the current, purely
pay-as-you-go systemin which tax revenues
from current workers support benefits for
current retireesin the direction of a system in
which most peoples retirement income would
be based, at least to some extent, on their own
savings.
For the sake of clarifying the relevant issues,
let us concede that the hybrid system proposed
by President Bush is not the ultimate goal of
some advocates of Social Security reform.
Scholars at the Cato Institute, in particular, have
long supported a total transformation to a system
from which the pay-as-you-go element has been
completely eliminated. Under that scenario,
most people would fund their retirement entirely
with private savings. A safety net of a guaranteed
minimum retirement income would also be
available, funded by general tax revenues.
Presumably, whatever criticisms have been
leveled at President Bushs hybrid plan would
apply with added force to a full-scale move
from pay-as-you-go to mandatory private savings
plus a means-tested safety net. What is it
about such a move that strikes opponents as so
threatening to cherished ideals? Does supporting
substitution of private accounts for taxes
and transfers really betray aggressive hostility
to equality? Would implementing a private
savings-based retirement system truly threaten
continued transmission of the signal that we
are all in this together?
Opponents of Social Security reform have
cast the current debate in terms of a clash
between libertarian and welfare-liberal values.
Libertarians and classical liberals put primary
stress on the political values of individual
responsibility and limited government; welfare
liberals, as opposed to classical liberals, place
relatively greater weight on the values of equality
and social solidarity.7 Opponents of reform
seem to assume that changing Social Security is
a zero-sum game: because a savings-based system
would clearly advance the self-reliant libertarian
cause, it must therefore represent a setback
for egalitarian welfare liberals.
The assumption of a zero-sum conflict on
this particular issue, however, deserves to be
Does
supporting
substitution of
private
accounts for
taxes and
transfers really
betray
aggressive
hostility to
equality?
2
A strong case
can be made
that a savingsbased
retirement
system could
do a much
better job of
promoting
equality and
social
solidarity than
the status quo.
3
called into question. A strong case can be made
that a savings-based retirement system could do
a much better job of promoting equality and
social solidarity than the status quo manages to
accomplish. Further, it can be argued convincingly
that the status quo is in fact jarringly
inconsistent with welfare-liberal ideals.
Accordingly, thoughtful liberals ought to find a
move toward personal accounts worthy of support
notwithstanding the fact that the Cato
Institute hatched the idea and President Bush
now supports it.
Making Sense of Social
Insurance
The assumption of zero-sum conflict rests on
another, deeper assumption, namely, that there
is something about the structure of the current
system that is especially congenial to welfareliberal
values and that would be irretrievably
lost by the move to private accounts. That
underlying assumption, however, turns out to
be bogus. On the contrary, the Social Security
status quo violates core principles of welfare
liberalism.
First, any claim that the Social Security status
quo is an irreplaceable bulwark of egalitarian
values cannot be based on the income redistribution
achieved by the program. Of course, there is
a great deal of gross redistribution: in 2004
workers were forced to part with $658 billion in
earnings via payroll taxes, while retirees
received $493 billion in benefits.8 This snapshot
picture doesnt tell the whole story, however.
When you look at the whole lifetime of Social
Security participants, it becomes clear that the
total amount of net redistribution is quite limited.
Research by Jeffrey Liebman of Harvard
Universitys Kennedy School of Government
shows that income-related [net] transfers are
only 5 to 9 percent of Social Security benefits
paid.9 In other words, more than 90 percent of
the money taken in Social Security taxes is recycled
back to people in the same income bracket
as those from whom the money was originally
taken.
How can that be the case? First, the benefit
structure of Social Security is only mildly progressive,
if at all, and it is funded by a highly
regressive payroll tax. Moreover, people with
higher incomes tend to live longer and enter the
workforce later, thereby sweetening the deals
they receive over the course of their lifetimes.
According to research by economists Julia Lynn
Coronado, Don Fullerton, and Thomas Glass,
the net result of Social Security taxes and benefits
is to leave the lifetime Gini coefficientthe
main statistical indicator of income inequality
basically unaffected. They find that Social
Security does not redistribute from people who
are rich over their lifetime to those who are poor.
In fact, it may even be slightly regressive.10
Martin Feldstein of Harvard University concludes
that social insurance programs [such as
Social Security] are not designed to be vehicles
of income redistribution.11
The minimal income redistribution effected
by Social Security, if there is any, cannot supply
a sound reason for rejecting personal retirement
accounts on welfare-liberal principle. After all,
it would be fairly simple to design a safety net
for a private savings-based retirement system
that would render that system more progressive
in terms of reducing income inequality than the
pay-as-you-go status quo. What then, if anything,
does the status quo accomplish that a system
based on personal retirement accounts
could not hope to duplicate?
The usual answer is that Social Security functions
as social insurance. The purpose of
Social Security, supposedly, is to insure against
the risks of life in a volatile market economy by
guaranteeing retirement security for all. From
that perspective, the egalitarianism of the program
lies, not in the details of its benefit structure
or its level of redistribution, but in its universal
nature. The program includes all Americans in
its sweep: all workers contribute to the program
with payroll taxes, no matter how poor they are;
all retirees receive benefits, no matter how rich
they are. All for one, one for all.
Because Social Security is billed as a social
insurance program, opponents of Social Security
reform routinely accuse proponents of personal
accounts of making a kind of category mistake
whenever they point out that Social Security
benefits represent low returns relative to private
investments. For example, it would be obtuse to
complain that one has seen a low return from the
premiums paid on an auto insurance policy. The
point of the insurance policy is that you will be
reimbursed if you experience a loss, not that you
get a positive return on your premiums. If you
never file a claim, and never see a dime from the
insurance company, then you should consider
yourself lucky. In this vein Chait writes:
Privatizers portray Social Security as a kind of
low-performing 401(k) plan. But the program
was never intended as a personal retirement plan.
Its a form of social insurance, designed to
spread risks throughout the population.12
Notwithstanding strongly held beliefs to the
contrary, Social Securitys status as social insurance
is decidedly problematic. There are two distinct
possibilities, neither of them comforting to
defenders of the status quo. First, it can be
argued convincingly that Social Security as currently
operated is not properly classified as insurance
at all, social or otherwise. Alternatively, it
may be conceded that Social Security is a kind of
social insurance, but in that case so is a safety net
attached to a private savings-based retirement
system. Either way, to the extent the concept of
social insurance has any coherent meaning, support
for social insurance offers no basis for
opposing personal retirement accounts.
Social Security Is Not Social Insurance
At first blush, such an assertion seems outlandish.
After all, Social Security is just the popular
name for the Old-Age, Survivors, and
Disability Insurance program.13 American workers
and their employers pay a 12.4 percent payroll tax
that is labeled Federal Insurance Contributions.
These taxes are deposited in the Old-Age and
Survivors Insurance and Disability Insurance Trust
Funds, from which retirement benefits are paid.
A system of dedicated insurance contributions
and insurance trust funds certainly sounds a lot
like an insurance system. But is it?
Well, what is insurance, anyway? Insurance is
a device for guaranteeing an individual against
loss by transferring the risk of loss from the
insured individual to the insurer. In private insurance,
the agreement between the insured and the
insurer is a legal contract, a policy, which sets
out the terms and conditions of coverage. The fee
paid by the insured individual is the premium.
Reimbursement of losses incurred by the insured
through the incidence of an event covered by a
policy is paid from a fund constituted by the premium
payments of many individuals exposed to
a similar risk of loss. The group contributing to
this fund is sometimes called the risk pool.
Premiums are determined by actuarial principles
sensitive to the probability of the occurrence of
the insurable event and the likely cost of the loss
should the event occur.14
Presumably, social insurance, to be worthy
of the name, should function roughly like private
insurance. The key differencethe difference
that transforms mere insurance into social
insuranceis that the risk pool for social insurance
is the general public, instead of merely
those individuals who voluntarily decide to
hold policies and pay the associated premiums.
So, for example, for the disability insurance
component of Social Security, all workers pay
premiums in the form of payroll taxes, and all
receive predetermined benefits upon the occurrence
of the insurable eventnamely, the
onset of a medical condition that prevents the
worker from performing her job for at least one
year.15 However, the main element of Social
Security, assistance for senior citizens, differs
significantly from the disability component. It
is altogether baffling how the prospect of reaching
a certain age, or voluntarily withdrawing
from the labor force, constitutes a risk of loss.
Achieving the age of 62 or 65 simply does not
carry with it a significantly heightened risk of
poverty, nor does retirement. On the contrary,
old age is correlated with wealth, the average
70-year-old being rather better off than the
average 25-year-old. Becoming older and retiring
from the workforce are not a risk to insure
against but a near-inevitability to prepare for. A
loss might occur on a birthday, but a birthday is
not a reimbursable loss.
In his 1910 book Social Insurance: A Program
for Reform, the first systematic American work on
the topic, Columbia University economics professor
Henry Rogers Seager laid out his criteria for
determining which events should and should not
trigger coverage by social insurance:
If the need is one the wage earner clearly
foresees as certain to arise, then I should be
the last person to wish to relieve him of
responsibility for meeting it. If, for example,
we were discussing means of helping
wage earners to pay their rent, I should say
that the only safe means are measures
designed to increase their energy, ambition,
and efficiency. Only in extreme cases
should a need of this sort be met by outside
help. But the future needs we are considering
are not of this sort. Many wage earners
go through life without being the victims
It is altogether
baffling how
the prospect of
reaching a
certain age, or
voluntarily
withdrawing
from the labor
force,
constitutes a
risk of loss.
4
The
phenomenal
rise in life
expectancy
over the
course of the
20th century
has simply
removed
retirement
from the
category of
risk and has
therefore
rendered the
idea of old-age
insurance
obsolete.
5
of industrial accidents, without serious illness,
never lacking for work, and not living
long enough to become superannuated.
These are all risks to which wage earners
are exposed, not certain needs which they
can clearly foresee.16
When Seager wrote those words, life expectancy
at birth was about 51 years. A 25-year-old in
1910 could expect to expire just before reaching 65
years of age, todays age for full Social Security
eligibility. It was not unreasonable, then, to consider
living well past that age, living long enough to
become superannuated, as an unforeseeable risk
to which one was exposed and against which one
might wish to be insured. Similarly, when Social
Security became law in 1935, life expectancy barely
exceeded the age of eligibility.17
Today, a representative 25-year-old can
expect to make it to her 80th birthday.18 The
need to prepare for the interim between retirement
and death is now one the wage earner
clearly foresees as certain to arise, or, at least,
foresees as very likely to arise. Under these
conditions, no honest proponent of social insurance
should wish to relieve him of the responsibility
of meeting it. The phenomenal rise in
life expectancy over the course of the 20th century
has simply removed retirement from the
category of risk and has therefore rendered the
idea of old-age insurance obsolete.
Or Is It?
Although most of Social Securitys sloshing
of funds back and forth within income brackets
does not constitute net income redistribution, a
limited degree of redistribution does occur, so
the program is not a complete wash. In the
same way, it may be argued that a limited
degree of social insurance occurs as well. While
retirees receive benefits irrespective of whether
they have suffered any kind of loss (in this case,
lack of other retirement income), and while the
level of benefits they receive is totally independent
of whether or not they have suffered a
loss, still, at the end of the day, some of the
retirees receiving Social Security benefits do
lack sufficient other retirement income, and so
for them Social Security does function to safeguard
against misfortune. To be charitable,
then, it is possible to say that there is an element
of social insurance in Social Security.
However, the term social insurance stretched
this loosely would also apply equally to a private
savings-based retirement program with a safety
net. First, if an income-supplementing stream of
government Social Security checks functions as
insurance, then it is difficult to see how an
income-supplementing stream of personal retirement
account annuity checks fails to perform the
same function. One might wish to argue that the
loosely defined insurance function is fulfilled
only when the government taxes everybody in
order to pay benefits to those who have suffered
some misfortune. And personal accounts do not
involve this kind of interpersonal redistribution.
However, welfare programs for the poor, price
supports for farmers, and disaster relief for hurricane
victims can all be seen in this light as kinds
of social insurance. But so, too, can a means-tested
benefit program for retirees funded from general
tax revenues.
A retirement safety net could easily be
designed that would qualify as paradigmatic
social insurance. If the safety net were funded by
special payroll taxes earmarked for the purpose
(but taxes far lower than todays Social Security
payroll taxes, since they would be funding benefits
only for people who actually needed them),
the analogy to disability insurance would be
exact. Accordingly, if social insurance more narrowly
defined is thought to be especially praiseworthy
from the perspective of welfare liberalism,
a private savings-based retirement system
with an appropriately designed safety net ought
to be preferable to the crude blunderbuss
approach of the current pay-as-you-go system.
Social Securitys Noble Lie
To recap, Social Security doesnt do much, if
anything, to redistribute income, and what it
does do could easily be replicated or surpassed
by a private savings-based system. Likewise,
Social Security doesnt have much to do with
social insurance, and the limited extent to
which it does provide an insurance function
could easily be replicated or surpassed by a private
savings-based program.
So what does the Social Security status quo
offer that a move toward private accounts cant
match? The key virtue of the current system,
according to its supporters, is political, not substantive.
And that virtue is that Social Securitys
design and accompanying rhetoric encourage
voters to think of Social Security benefits as an
entitlementas something theyve earnedin
order to ensure the long-term political viability
of the redistribution that the system does effect,
redistribution voters might not otherwise support.
In other words, Social Security is supposedly
preferable to a private savings-based system
because it is deceptive.
In fact, Social Security payroll taxes and
retirement benefits are not linked in any legally
binding way. As the Supreme Court established
authoritatively in the 1960 Flemming v. Nestor
decision, retirees do not have a contractual right
to a particular level of Social Security benefits.
19 Social Security, described neutrally, consists
of a tax, on the one hand, and a set of government
transfers, on the other, and no legally
binding connection between the two. Paying
the tax creates no claim to benefits. Congress
may decide to cut benefits, or to cut the program
altogether, without trespassing on any
legally recognized right. Since legislatures cannot
legally bind future legislatures, the existence
and level of payroll taxes and Social
Security transfers are a matter of popular will
and legislative discretion.
From the programs inception, however, the
lack of a legally binding entitlement to benefits
was deliberately obscured. The idea was to bill
the program as insurance, thereby making benefits
seem earned rather than part of a socially
stigmatized dole. Accordingly, during fireside
chats and public speeches, Franklin
Roosevelt told American workers that they had
an insurance policy with the government, that
the insurance policy . . . is bought with a payroll
tax premium and is far more favorable
to [workers] than any policy that any private
insurance company could afford to issue.20 He
told Congress that the old-age insurance system
created individual accounts for millions
of workers who may be likened to the policy
holders of a private insurance company.21
There can be no doubt that the language of
individual accounts, private insurance policies,
premiums, and so forth was meant to
evoke in voters minds the familiar framework
of secure property rights and legally enforceable
contracts. In her comprehensive survey of
the history of the Social Security program,
political scientist Martha Derthick notes that
[i]nsurance industry executives complained
privately that leaders of social security were
hostile to their industry but eager to exploit its
good name for their own purposes.22 Roosevelt
encouraged voters to think of their taxes as
buying an insurance policy and thereby
establishing morally and legally binding property
rights to benefits.
The political value of presenting Social
Security as insurance trumped competing policy
considerations. Thus, when a visitor to the
Oval Office pressed Roosevelt on the regressive
nature of the payroll tax, the president candidly
replied:
I guess you are right about the economics,
but those taxes were never a problem of
economics. They are political all the way
through. We put those payroll contributions
there so as to give the contributors a
legal, moral, and political right to collect
their pensions. . . . With those taxes in
there, no damn politician can ever scrap
my social security program.23
To consolidate public perceptions, Roosevelt
attacked with astonishing vehemence anyone
who dared describe the program outside of the
administrations preferred rhetorical frame. To
those who made the reality-based observation
that ones Social Security benefitsones
insurance policy with the governmentin
fact included no contract, property, or legal
right and were secured by nothing stronger than
the discretion of future legislatures, Roosevelt
lashed out with a charge of treachery verging
on treason:
When they imply that the reserves . . . will
be stolen by some future Congress . . . they
attack the integrity and honor of American
Government itself. Those who suggest that
are already aliens to the spirit of American
democracy. Let them emigrate and try their
lot under some foreign flag in which they
have more confidence.24
The Roosevelt administrations success in
framing old-age benefits as social insurance
was so complete that it is now widely considered
heretical to deny that Social Security is, in
fact, a social insurance program. To challenge
the insurance analogy or resist using the terms
was to show oneself an enemy of the program,
Social
Securitys
design and
accompanying
rhetoric
encourage
voters to think
of Social
Security
benefits as an
entitlementas
something
theyve
earnedin
order to
ensure the
long-term
political
viability of
redistribution
voters might
not otherwise
support.
6
In the cases
before the
Supreme
Court in
1937, the
government
argued
forcefully,
truthfully, and
successfully
that the Social
Security Act
did not
establish an
insurance
program.
7
Derthick observed.25 That is no less true today.
An interesting historical footnote: The
Roosevelt administrations political strategy
was constrained in the first years of the Social
Security program by the threat that the
Supreme Court would rule the program unconstitutional.
Given the inconvenient fact that the
Constitution created no federal power to implement
a scheme of so-called social insurance,
the administration had to walk a fine line, using
its formidable rhetorical resources to aggressively
brand Social Security as insurance
while simultaneously guarding itself against an
inevitable constitutional challenge.
Despite the Roosevelt administrations fullcourt
press to characterize Social Security as
insurance, the word insurance is conspicuously
absent from the original 1935 Social Security
Act. Title II of the act introduces old age assistance.
Following the plan of previous New Deal
bills to keep new taxes and new programs of
government wealth transfer conceptually and
legally separate, Title VIII introduces new taxes
and makes no connection whatsoever with the
new benefits introduced in Title II. The text and
structure of the bill appear to scrupulously avoid
any intimation of intent to insure.26
Just prior to the 1937 Supreme Court cases
challenging the constitutionality of the Social
Security Act, administration officials systematically
purged educational and promotional
materials of insurance language.27 And, in the
cases before the Supreme Court, the government
argued forcefully, truthfully, and successfully
that the Social Security Act did not establish
an insurance program. The Supreme Court
agreed and upheld the program.28
Wilbur Cohen, at the time an assistant to
Social Security Board chairman Robert
Altmeyer, reported that just after the Supreme
Court handed down its decision, he walked down
the steps of the Court in a glow of ecstasy. . . .
When I got back to the office I received Mr.
Altmeyers approval to send out a memo to the
staff stating that because of the decision, we
could now call the old age benefits program old
age insurance. Now that Social Security had
been ruled constitutional, because it was not
insurance, it became safe finally to call it insurance.
Cohen went on to explain the reasoning
behind the choice of language: The American
public was and still is insurance-minded and
opposed to welfare, the dole and handouts.29
In a fascinating article titled Preferences,
Promises, and the Politics of Entitlement,
Stanford University economist Paul Romer
points to government pamphlets explaining
Social Security just before and just after the
Supreme Court decision.30 A 1937 pamphlet,
written shortly before the Supreme Court decision,
described the program accurately and
with a minimum of manipulative art:
The United States Government will send
checks every month to retired workers . . .
under the old-age benefits plan. . . . The
same law that provides these benefits for
you and other workers sets up certain new
taxes to be paid to the United States
Government.
A 1938 pamphlet, published after the decision,
shows the insurance framing project once again
in full flower:
Your [Social Security] card shows that
you have an insurance account with the
U.S. GovernmentFederal old age and
survivors insurance. This is a national
insurance plan for all workers in commerce
and industry . . . taxes are like the
premium on any other kind of insurance.
In 1972, more than three decades after he glided
ecstatically down the steps of the Supreme
Court, Wilbur Cohen engaged the future Nobel
Prize winner Milton Friedman in a debate over
Social Security. Not unlike the Roosevelt administrations
argument before the Supreme Court,
Friedman maintained that social security is not in
any meaningful sense an insurance program in
which individual payments purchase equivalent
actuarial benefits. It is a tax plus a program of
government transfers in which all sorts of considerations
other than the amount paid determine
the amount received.31 The government,
Friedman charged, was therefore guilty of manipulating
the public through misleading rhetoric.
Arguing in fine nominalist fashion, Cohen
maintained that Social Security must be insurance
because the government calls it insurance
and that, furthermore, he once wrote an article in
the Encyclopedia Britannica stating that it was.
In any case, Cohen argued, rhetoric has its
virtues. I believe in rhetoric, Cohen said,
because it makes a lot of things palatable that
might be unpalatable to economists.32 But it is
not only economists, Cohen goes on to clarify, to
whom a lot of things might seem unpalatable.
Let me emphasize that the reason why
[welfare] programs dont get appropriations,
dont get support from the taxpayer,
is simply that they do not appeal to the
middle class, middle income person.33
Cohens point is absolutely central to the design
and labeling of the current Social Security program:
to make a program of wealth redistribution
palatable to voters who would not otherwise
find it so. This is the noble lie of Social
Security.
Cohens reasoning has become conventional
wisdom among defenders of the status quo. In
a recent book, political scientist Max J.
Skidmore asks:
If it were necessary for everyone to go
through the humiliating process of proving
poverty in order to receive benefits, could
middle-class support for Social Security
continue, or would it vanish overnight? If
that support vanished, there is no doubt
that the system would vanish also.34
Max Sawicky, an economist at the left-ofcenter
Economic Policy Institute, puts the point
forcefully: I pity the poor who wind up isolated
in a ghetto of means-tested programs.
Programs for the poor isolate their beneficiaries
politically and end up poorly supported.35
President Bushs recent endorsement of
Robert Pozens progressive indexing plan,
which would make Social Security more progressive
by reducing promised benefits to highincome
retirees, has sparked a rash of Cohen-like
arguments. Writing in Slate, Berkeley economics
professor Brad DeLong even quotes Cohen:
Even without private accounts, aggressive
means-testing la Pozen risks undermining
Social Security over time. Insulating
the poor from cuts is a left-wing goal. But
it will create a large class of Americans
who get much, much less out of Social
Security than they put in and for whom
Social Security as a whole is demonstrably
a very bad deal. Early Social Security
guru Wilbur Cohen may well have been
correct in his belief that in the United
States, a program that deals only with the
poor will end up being a poor program.36
Princeton economist and New York Times
columnist Paul Krugman harbors similar suspicions
of progressive indexing, arguing that
Bushs embrace of Pozens idea is an attempt to
turn Social Security into nothing but a program
for the poor, with the goal of transforming
F.D.R.s most durable achievement into an
unpopular welfare program, so some future president
will be able to attack it with tall tales about
Social Security queens driving Cadillacs.37
Most supporters of the Social Security status
quo recognize that a means-tested program paid
for out of general tax revenues could in principle
serve the loosely construed insurance
functions of Social Security. And most
acknowledge that it could do so more efficiently,
be funded by less regressive taxes, and have
a more progressive benefits structure. The
Pozen plan, for example, would increase the
progressivity of Social Security benefits.
However, it is conjectured that the more a program
looks like means-tested welfare, the more
politically unpalatable it will be. If retirement
programs fail to appeal to the middle class,
they will isolate their beneficiaries politically
and lead to inadequate levels of benefits. But, as
DeLong puts it, Insulating the poor from cuts
is a left-wing goal. Therefore, the fact that voters
supposedly have policy preferences that
might lead to inadequate benefits is deemed
unacceptable from a left-wing perspective. It is
therefore necessary to move massive amounts
of money from the middle class back to itself,
behind a mirage of manufactured entitlement,
in order to secure a residue of adequate redistribution.
The deception is explicitly acknowledged,
but it is rationalized as a necessary means to a
morally obligatory end. Fearing that Americans
would not support the level of assistance that a
just state is thought to be obligated to provide,
status quo-ists argue that it is not only permissible
but necessary for citizens to be manipulated
into supporting a program that will, under
cover of obfuscatory language and structure, do
what morally must be done. The end of ensuring
a sufficiently high level of benefits to the
elderly poor justifies the means: purposefully
deceptive manipulation of public opinion.
To make a
program of
wealth
redistribution
palatable to
voters who
would not
otherwise find
it so, is the
noble lie of
Social Security.
8
Because the
structure and
rhetoric of
Social Security
are designed
to mislead and
manipulate,
the rules by
which we are
governed are
not sufficiently
public and
therefore are
inconsistent
with basic
tenets of
liberalism.
9
Should conscientious liberals accept that reasoning
as sufficient justification for perpetrating
an enduring deception? Is the false rhetoric
of insurance permissible on liberal grounds?
Can a liberal political philosophy countenance
this kind of noble lie? According to the leading
lights of contemporary welfare-liberal
political philosophy, the answer is no.
Publicity, Deliberation, and
Democratic Legitimacy
In her detailed historical analysis of Social
Security, Derthick concludes that the policymakers
responsible for our Social Security system
sought to foreclose the options of future
generations and had designed social security
to be uncontrollable.38 Such insulation from
public control, Derthick goes on to argue, is
unacceptable in a democratic society:
That the gross features and relative burdens
of the leading government programs
should be open to debate, and therefore
vulnerable to fluctuations in politics and
policy, would seem essential to any realistic
theory of democracy.39
If Derthick is correct, Social Security has been
insulated from serious democratic reform largely
because the deceptive manner in which the
program has been framed distorts public understanding
of its nature, and that prevents voters
from fairly weighing their preferences about
competing policies, skews their deliberations
together as citizens about the common good
and the terms of social cooperation, and therefore
undermines their full agency as free and
equal citizens in a liberal democracy.
John Rawls, the dominant liberal political
philosopher over the past half century, has articulated
two principles of publicity that underlie
the legitimacy of the liberal-democratic state.40
First, the rules that govern fair social cooperation
must be public, in the sense that they are publicly
known, and not secret, covert, or obfuscated.41
Second, the reasons that citizens and policymakers
give each other to justify the rules of social
cooperation must be public, in the sense that they
are not based in parochial interests or couched in
terms of moral, religious, or ideological conceptions
that some reasonable citizens may reject.42
A public reason, or public justification, is one
each reasonable citizen can accept from the perspective
of his role as a participant in the shared
enterprise of fair social cooperation. In Political
Liberalism, Rawls emphasizes why both public
rules and public reasons are necessary for the
legitimacy of state coercion:
[I]f the basic structure relies on coercive
sanctions, however rarely and scrupulously
applied, the grounds of its institutions
should stand up to public scrutiny. When
. . . basic social arrangements and individual
actions are fully justifiable, citizens
can give reasons for their beliefs and conduct
before one another confident that this
avowed reckoning itself will strengthen
and not weaken public understanding.
The political order does not, it seems,
depend on historically accidental or
established delusions, or other mistaken
beliefs resting on the deceptive appearances
of institutions that mislead us as to
how they work.43
Although it is quite unlikely that Rawls had
Social Security in mind, it would appear to be a
paradigmatic example of public policy that, as
the previous section shows, depends on established
delusion, or other mistaken belief resting
on the deceptive appearances of institutions that
mislead us as to how they work. Because the
structure and rhetoric of Social Security are
designed to mislead and manipulate, the rules
by which we are governed are not sufficiently
public and therefore, by Rawlss standards, are
inconsistent with basic tenets of liberalism.
Political theorist and Nobel Prizewinning
economist James Buchanan has written lucidly
on the incentives of those with political power
to create fiscal illusions that cause tax payers
to think that the taxes to which they are subjected
are less burdensome than they actually
are and make beneficiaries consider the values
of public goods and services to them to be
larger than may actually be the case. Buchanan
notes that Social Security is ready made for
criticism as a fiscal illusion, for it is apparent
to almost everyone . . . that the effects of promoting
the institutions under the insurance
rubric, which implies actuarial independence
and integrity, tends [sic] to conceal from participants
the real flows of costs and benefits.
Buchanan argues: There seems little question
but that, if the same fiscal transfers were proposed
openly and without attempts at illusion,
there would be significantly greater political
resistance.44 That is, Social Security engenders
so little resistance precisely because its nature
is not public in the way Rawls demands.
Rawls also emphasizes that a just liberal state
must govern according to rules that have a sufficiently
public justification. The grounds of a just
societys institutions must stand up to public
scrutiny. A just liberal order is one the principles
of which each citizen has reason to affirm. In a
diverse, pluralistic society, in which there are
many competing comprehensive conceptions of
morality and value, justification of policy must not
be offered from within the confines of any particular
private ideology, religion, or moral system but
must be offered on public terms all reasonable citizens
have sufficient grounds to accept. Our exercise
of political power is proper, Rawls writes,
only when we sincerely believe that the reasons
we would offer for our political actionswere we
to state them as public officialsare sufficient,
and we also reasonably think that other citizens
might reasonably accept those reasons.45
Similarly, Dennis Thompson and Amy Gutmann
of Princeton, laying out the conditions for a legitimate
democracy, write, The reasons that officials
and citizens give to justify political actions,
and the information necessary to assess those reasons,
should be public.46
The redistributive end justifies the manipulative
means argument manifestly fails the test
of public justification. It should be clear why
that is an argument reasonable citizens have
reason to reject, for the argument is predicated
on the assumption that the policy it promotes is
not widely accepted by the public. The argument
is that too few members of the voting public
would endorse a principle of redistribution
that would provide a level of benefits to the elderly
poor that Cohen, Skidmore, Sawicky,
DeLong, Krugman, and their ideological allies
would consider sufficient, and so the voting
public must be tricked into supporting that
level. Obviously, it cannot be reasonable to ask
a citizen to accept a policy that is intended to
manipulate and deceive him.47
Although the liberal emphasis on public justification
is one that was revived in recent times
by Rawls and his followers, the idea of public
justification has a long and distinguished liberal
pedigree. In 1795 Immanuel Kant argued,
A maxim which I cannot divulge without
defeating my own purpose must be kept
secret if it is to succeed; and, if I cannot
publicly avow it without inevitably exciting
universal opposition to my project, the
necessary and universal opposition which
can be foreseen a priori is due only to the
injustice with which the maxim threatens
everyone.48
Because the principles of a just social order are
principles that everyone has reason to affirm
and comply with, a principle that cannot be
publicly articulated without eliciting reasonable
resentment and resistance cannot meet the standards
of liberal justice. As Buchanan observes,
Social Security excites so little opposition
because it perpetrates a fiscal illusion. And the
redistributive end justifies the manipulative
means argument is a prime example of a political
maxim or principle that cannot be publicly
avowed without undermining its own aim.
Kant was animated by a belief in the necessary
universality of reason, but contemporary
liberals are more concerned with what Rawls
called the fact of pluralism, the fact that
todays liberal democracies are populated by
citizens with a wide array of competing comprehensive
philosophies about the nature of
morality and value. The noble lie argument
for manipulating the framing of Social Security
was driven by the conviction that a single, specific
vision of redistribution was the substantively
correct standard for evaluating public
policy. According to the moral logic of the New
Deals version of comprehensive welfare liberalism,
the manipulative technocratic design of
the Social Security program may have been justified
by the perceived moral urgency and
weight of its aim. However, because this is a
moral conception that is not (and never was)
shared by all or most reasonable citizens, it is
an inappropriate basis for policy in a pluralistic
liberal society. Worse yet, a program that persists
because of a concerted government policy
of manipulation, and which therefore obscures
from citizens the true terms of their political
association, cannot be squared with basic liberal
requirements of legitimacy.
The propagation of false conceptions of our
political institutions also hinders the ability of
A program that
persists
because of a
concerted
government
policy of
manipulation
cannot be
squared with
basic liberal
requirements
of legitimacy.
10
The more it is
subject to
scrutiny, the
more the
welfare-liberal
case for the
Social Security
status quo
crumbles
away.
11
citizens to deliberate together about terms of
political association and therefore undermines
the conditions for mutual respect and solidarity
in a democratic society. Deliberation involves
finding common ground and offering reasons for
political principles that other citizens have reason
to accept. Willingness to engage in public
deliberation is one of the main ways that we
express respect for one another as free and equal
citizens who are in this together. Political
philosopher Thomas Christiano argues that a
society in which individuals deliberate publicly
before making decisions embodies a kind of
mutual respect and concern among citizens.49
Similarly, Amy Gutmann and Dennis
Thompson, prominent champions of the value
of deliberative democracy, write:
The practice of deliberation . . . seeks to
realize the root value of reciprocity that
should prevail among democratic citizens.
Citizens who have effective opportunities
to deliberate treat one another not
merely as objects who are to be judged by
theoretical principles but also as subjects
who can accept or reject the reasons given
for the laws and policies that mutually
bind them. The reasons are not to be
regarded as binding unless they are presented
to citizens who have the chance to
consider and reject them either directly or
through their accountable representatives
in a public forum.50
Political manipulation that obscures the
laws and policies that mutually bind us treats
citizens as objects, undercuts the conditions for
mutual respect, and violates the principle of
reciprocity, which says that citizens owe one
another justifications for the laws they collectively
enact.51
Social Security has a deep and pervasive
effect on citizens lives. It determines how
much of their wages workers can keep and
therefore what they have left to save or consume.
It conditions our expectations about old
age, frames the way we plan our lives, and
alters the nature of our relationships with our
parents and children. Because liberal citizens
are not to be treated as mere objectsnot to be
used as pawns in a game played by other more
politically powerful citizens to satisfy their
political preferencesthe ways in which our
political institutions shape our lives and condition
our aspirations must be transparent to us
and must not be obscured. As Rawls argues:
[P]ublicity ensures, so far as practical
measures allow, that citizens are in a position
to know and to accept the pervasive
influences of the basic structure that
shape their conception of themselves,
their character and ends. . . . [T]hat citizens
should be in this position is a condition
of their realizing their freedom as
fully autonomous, politically speaking. It
means that in their public political life
nothing need be hidden.52
By maintaining that the nature of a political
institution that shapes our lives should be
obscured, those who espouse the redistributive
end justifies the manipulative means argument
fail to take seriously their fellow citizensfreedom
as autonomous, self-governing persons. They fail,
in other words, to live up to their liberal principles.
As Friedman said in his debate with Cohen,
Men who would not lie to their children,
their friends, or their colleagues, whom
you and I would trust implicitly in personal
dealings, have propagated a false
view of social securityand their intelligence
and exposure to contrary views
make it hard to believe that they have
done so unintentionally and innocently.53
Personal Accounts and
Social Cohesion
The more it is subject to scrutiny, the more
the welfare-liberal case for the Social Security
status quo crumbles away. The pay-as-you-go,
tax-and-transfer structure of the current system
offers little in the way of income redistribution,
and whatever social insurance function it provides
is roundabout, scattershot, and easily
improved upon. The only real advantage of
the current system, it turns out, is that it
deceives voters into believing there is some
nexus between the taxes they pay and the benefits
they later receive. But that deception cannot
be justified in liberal terms.
Proposals to replace, partially or fully, the
current system with one based on personal
retirement accounts are savaged as attacks on
social cohesionon the shared sense that
were all in this together.Yet the social cohesion
provided by the Social Security status quo
is fundamentally phony and therefore morally
compromised. It is nothing more than the common
participation in an illusion of property
entitlement. Cant we do better than that?
Yes, we can. Personal accounts offer, not the
illusion of property rights, but the real thing. If
an ersatz entitlement is supposedly good for
social cohesion, isnt a real, legally binding
entitlement even better?
Independent of green-eyeshade questions of
the status quos solvency and demographic stability,
a system of mandatory personal savings
accounts could go a considerable way toward
rectifying the flaws of Social Security as an
expression of liberal ideals. Personal accounts
have a transparent structure, and their appeal
does not require manipulative framing. They
possess the virtues of actual private property and
contract upon which the deceptive appeal of
Social Security as insurancewas built. There is
a straightforward connection between contributions
and future benefits. And the sense of entitlement
to benefits need not be manufactured, for
the funds in the accounts begin and end as property
in which the citizens have genuine legal and
moral rights. Furthermore, a system of personal
accounts would put an end to the practice of
making political promises to ourselves that can
be met only by future generations on unfair
terms to which they have not agreed, and rationally
would not agree.
Equality
A system of personal accounts would be able
to advance egalitarian values currently neglected
by the status quo. In particular, the Social
Security status quo is substantively inegalitarian
in terms of intergenerational distribution. Social
Security is a system of wealth transfer from later
to earlier generations. As the number of workers
per retiree shrinks, and as life expectancy continues
to climb, later generations must receive a
lower rate of return on their tax dollars in order
to keep the system sustainable.
There is no egalitarian justification for this
kind of unequal treatment of different generations.
The larger burdens placed upon later generations,
simply by virtue of being born later,
are not offset by any compensating benefits, a
state of affairs that violates the reciprocal sharing
of burdens and benefits that contemporary
liberals understand to be at the heart of justice.
Advocates of the status quo constantly trumpet
the sanctity of Social Securitys compact
between the generations.54 But a compact that
systematically benefits one party at the expense
of another is manifestly unfair. Such a compact
would not gain the disadvantaged partys consent
and, therefore, could not be morally binding.
A compact between the generations ought
not to be a raw deal for those with later birth
dates.55
Personal retirement accounts would avoid
the inegalitarian consequence of the status quo
while providing real benefits in terms of equality.
Personal retirement accounts do not involve
redistribution from one generation to another
and therefore do not face problems of intergenerational
inequality or unfairness. Insofar as
personal accounts involve redistribution at all, it
is from earlier stages of a persons life to later
stages of the same life, and egalitarian concerns
normally do not apply to questions of distribution
within the individuals life.
Personal accounts would promote equality in
another, deeply significant way. They would
involve all working members of society in capital
markets, thereby breaking down the distinction
between investing and noninvesting classes
of citizens. The Social Security system was
designed 70 years ago under vastly different
social and economic conditions. In 1935 owning
stocks and bonds was the privilege of the
exceptionally wealthy. In 2005 almost half of
all U.S. households own stocks or stock mutual
funds. However, stock ownership remains out
of the reach of many poorer Americans. Eightyfour
percent of those with annual household
incomes of $75,000 or more own stocks or
stock funds. But only 26 percent of those with
incomes less than $30,000 own stock.56
Personal retirement accounts would instantly
narrow that chasm of ownership.
But it is not the investment gap, per se, that we
should worry about. Holding assets has empowering
effects on citizens financial attitudes and
expectations. Catherine Montalto of Ohio State
University reports that [h]ouseholds with low
net assets have shorter planning horizons, are
less likely to take financial risk when saving or
investing, and are less likely to save, compared to
A system of
personal
accounts would
be able to
advance
egalitarian
values
currently
neglected by
the status quo.
12
Opponents of
Social Security
reform wildly
underestimate
market
cooperation as
a source of
social
cohesion.
13
the total population of households.57 That pattern
of behavior helps explain why poverty is
often self-reinforcing. Owning a piece of the
market through personal retirement accounts
will help poorer citizens and families to build
assets, providing an important incentive to
acquire the information, skills, and confidence
that will help them improve their overall ability
to save, invest, and acquire even more assets and
further shrinking the gap between the investing
middle and upper classes and the noninvesting
lower classes. Workers with investments are avid
consumers of financial journalism, and the growing
pool of investors has created a market for
more and better sources of financial information.
58 By providing them a stake in the market,
personal retirement accounts would help to
demystify investment and finance for millions of
Americans, thereby lowering the barriers to
wealth for those who most need it.
It is not sufficiently acknowledged that the
Social Security status quo is itself a barrier to
wealth, especially for the least well-off. In the
current system, the least wealthy workers are hit
hardest by the regressive Social Security payroll
tax and are left with little or no discretionary
income to invest. For many of the least well-off
members of society, the opportunity cost of the
payroll tax is the ability to acquire a direct claim
on the growth of capital. Wealthier Americans
are able to hitch their wagons directly to the performance
of the system of capitalist production,
to build real assets through a legal claim on the
productivity of capital. The least wealthy, after
they have paid a 12.4 percent tax on their wages
and covered lifes necessities, are left with little
more than a nonbinding political promise to a
claim on the income of future workers.
Social Security also contributes to inequality
by making it most difficult for the poor to pass
on wealth to their children and grandchildren.
Economists Jagadeesh Gokhale and Laurence
Kotlikoff have found that Social Security
appears to be raising wealth inequality, as
measured by the Gini coefficient, by roughly one
fifth, substantially increasing the share of total
wealth held by the richest members of society,
and greatly reducing the flow of bequests to the
next generation.59 The rich get richer, and the
poor get a promise. It is difficult to see how this
consequence of the Social Security status quo
can be justified by those who profess to care
about equality.
Even if we assume, contrary to fact, that the
expected value of the claim on the income of
future workers under Social Security and the
expected value of the claim on the productivity
of capital under a system of personal retirement
accounts are equalthat the two approaches
have an equivalent rate of returnwe are still
obligated to ask which approach best encourages
self-respect, a sense of personal efficacy,
and the development of capacities necessary for
a decent life in a market society. A system of
personal retirement accounts would integrate
millions of citizens into the system of American
wealth creation, empower workers to take control
of their financial well-being, and further
blur the class line between workers and capitalists.
The Social Security status quo, by making
it difficult for the least wealthy to buy a stake in
the growth of the market economy, helps to
ensure that millions remain mere workers who
only incidentally gain from its growth.
Those who care about equality and fairness
therefore have ample reason to reject the Social
Security status quo and instead promote a system
of personal accounts combined with a means-tested
safety net. If it is true, as Margolis charged, that
advocates of personal retirement accounts desire
to dismantle Social Security because of an
aggressive hostility to equality, then they have
decided to promote an exceedingly counterproductive
policy. It would make more sense for the
aggressively hostile anti-egalitarian to promote
the Social Security status quo instead.
Solidarity
Opponents of Social Security reform are able
to characterize the move toward personal retirement
accounts as a move away from social cohesion
only because they wildly underestimate
market cooperation as a source of social cohesion.
With privatization, Barber writes, [the
Bush] administration is trying to seduce us back
into the state of nature, where the strong dominate
the weak and anarchy ultimately dominates
the strong and the weak, undermining security
for both.60 Just how it is that a program that provides
workers the choice of placing a portion of
their payroll tax in an investment account, while
retaining the assurance of a means-tested safety
net, edges us closer to an anarchic war of all
against all must remain a mystery. After all, there
are no mutual funds in the state of nature.
There is no question that a thoroughgoing
system of personal retirement accounts would
change the pattern of interdependence among
Americans. Individually prefunded retirement
accounts would make citizens more independent
or self-reliant in the sense that they would
rely increasingly on the fruits of their own labor
in retirement rather than on coerced transfers
from other workers through the government. It
is possible to see this move toward greater individual
responsibility as an erosion of social solidarity
only if one thinks that the structure of
society begins and ends with the pattern of government
transfers.
The worry about solidarity might be illustrated
with a game kids play at camp to help break
the ice and build trust in the group. In that
game, everyone sits on the lap of the person
behind her, and the line wraps around until the
group forms a single interdependent circle.
Everyone is supported by everyone else; they
are all in this together. The move to personal
accounts is like everyone simultaneously standing
straight up, each person removing his
weight from the lap behind, and removing his
support from the person in front. Everyone
stands alone, separate. Under a system of personal
retirement accounts, then, society
becomes a collection of free-standing, self-supported
individuals rather than an integrated network
of mutual support.
However, that picture of social cohesion, like
the game, is for children. Advanced market
economies function through immensely complex
networks of interdependence and cooperation.
To provide citizens with a direct stake in
the market is to integrate them more fully into a
web of mutual support that is vastly more intricate
and organic than the pattern of government
transfers. As market-based interdependence
develops, workers become ever more specialized
and therefore ever more dependent on the
network of cooperative exchange. People in
advanced market societies, who grow none of
their own food, make none of their own clothes,
and would not know how to build shelter if their
lives depended on it, are truly in this together.
Modern highly developed market societies
are the paradigm of interdependent, mutually
advantageous cooperation and are as far as can
be imagined from a society of atomistic predators.
Market societies are wealthy because they
rely on and reinforce a high level of social trust
and norms of cooperation. Empirical studies
find that the level of trust in a society is strongly
positively correlated with its level of economic
development. Wealthier societies are
more trusting and cooperative. And societies
with strong market institutions are wealthier.
World Bank economists Stephen Knack and
Philip Keefer find that trust and norms of civic
cooperation are stronger in countries with formal
institutions that effectively protect property
and contract rights.61 In a large cross-cultural
experimental study, a team of anthropologists
and economists recently found that the higher
the degree of market integration and the higher
the payoffs to cooperation, the greater the level
of prosociality found in experimental games.62
Markets promote the habits of the heart that
create social solidarity and cohesion.
More important, however, is the fact that it is
through the system of cooperative market
exchange that our interests are most deeply and
genuinely intertwined. The web of positive-sum
market exchange gives us reason to consider perfect
strangers as virtual friends whose wellbeing
and productivity positively affect our own,
thereby encouraging a social ethos of benevolence
and cooperation.63 Personal retirement
accounts, by providing citizens with a direct
stake in the performance of the market, make
explicit and salient what is too often implicit and
abstract: our interests are bound together through
the system of market cooperation.
By broadening the investment class to include
all workers, a system of personal retirement
accounts would help to align the interests of all
segments of society with the sources of our common
prosperity and security and would thereby
strengthen our connection to the res publica. As
Nobel Prizewinning economic historian Robert
Fogel notes: A century ago, the typical household
in OECD nations spent over 80 percent of
its income on food, clothing, and shelter. Today
these commodities account for less than a third
of consumption.64 That astounding decline in
the price of lifes necessities was the consequence
of high rates of economic growth due
primarily to market-driven technological innovation,
not the redistribution of wealth.
Because of market competition and innovation,
almost all Americans in the lowest income brackets
have refrigeration, quality plumbing, spacious
living arrangements, and labor-saving appliances.
Many own multiple cars, TVs, computers, and
To provide
citizens with a
direct stake in
the market is
to integrate
them more
fully into a web
of mutual
support that is
vastly more
intricate and
organic than
the pattern of
government
transfers.
14
Personal
retirement
accounts
would
strengthen
American
social
solidarity by
unifying us
behind the
true sources
of our
interdependence,
wealth,
and economic
security.
15
devices unavailable to anyone a few decades
ago.65 But too few of the least wealthy Americans
own a piece of the market, and therefore too few
have a personal, direct stake in the performance of
the system that has put microwave ovens and cell
phones within their reach.
The ways in which our wealth and well-being
are affected by economic performance, and by
government policy that influences performance,
are not salient to too many Americans. Expanding
the base of investors to encompass all working
Americans would give the nation a truly
common interest in the institutions that in fact
bind our interests together. Far from unraveling
the social fabric, personal retirement accounts
would strengthen American social solidarity by
unifying us behind the true sources of our interdependence,
wealth, and economic security.
But what about the argument that defenders
of the status quo consider their trump card
namely, that a means-tested safety net would
not attract sufficient public support to keep it
properly maintained? Again, it bears repeating
that this argument is basically an expression of
contempt for the American electorate. It
assumes, by welfare-liberal standards at least,
that most Americans are less generous and caring
than whoever is making the argument.
However insulting, is the argument correct? Is
there any reason to believe that a decently funded
safety net for retired Americans would be unable
to maintain public support? Perhaps, 70 years
ago, New Dealers had cause for concern about
Americans rugged-individualist aversion to the
dole. But today? Is disability insurance
which, unlike the old-age dimension of Social
Security, goes only to people who have suffered a
lossunpopular? Unemployment insurance?
How about the earned income tax credit? Or disaster
relief for hurricane victims?
Yes, it is true that the old Aid to Families with
Dependent Children program attracted plenty of
conservative ire, but AFDC lacked strong public
support because of well-founded concerns about
its perverse effects of encouraging dependence
and illegitimacy. The program was in many ways
too generous in terms of eligibility and benefits,
as is now acknowledged by those who agree that
the mid-1990s welfare reform has been a great
success. But total means-tested non-AFDC/
TANF welfare spending has increased significantly
since the advent of Clintons plan to end
welfare as we know it.66
Despite worries that means-tested assistance
for the elderly poor would be underfunded,
there is at least as much reason to believe that
such programs would be overfunded. The political
power of groups like the AARP, high voter
turnout among the elderly, the desire of middleaged
workers not to be burdened by their parents
financial woes in retirement, and general
sentimentality about the elderly poor could
result in high benefit levels that would create
perverse incentives for savings and retirement
planning.67
A system of personal retirement accounts
would minimize problems of perverse incentives
by virtue of the fact that a means-tested safety
net would serve only as an adjunct to the main
retirement system based on mandatory private
savings. Absent a requirement to set aside money
in personal accounts, a means-tested benefits
program for retirees would create a moral hazard
problem: workers would have an incentive
to game the system and consume their
incomes earlier rather than save sufficiently for
retirement.68 Well-designed personal retirement
accounts funded over workers careers, however,
would simultaneously reduce the moral hazard
problem and, by ensuring that workers have
accumulated assets, diminish the likelihood that
retirees would require assistance in old age.
There are further economic grounds for believing
that moving to a means-tested retirement program
and eliminating the churning of tax and
transfer dollars within income bracketswould
result in a more generous allowance for the elderly
poor. As Feldstein observes, optimal tax theory
predicts that the heavy taxes needed to sustain the
current churning exert downward pressure on
means-tested programs generally:
The deadweight burden of an extra dollar
of taxes increases with the share of
income taken in taxes. The high level of
taxes that is needed to finance middle
class social insurance programs therefore
increases the deadweight burden of any
incremental taxes that would be used to
finance means tested poverty programs.
The large social insurance programs thus
reduce the optimal size of means tested
poverty programs.69
If Feldstein is right, then defenders of the status
quo who think they are protecting the poor have
got matters completely backwards. Showering
money on the rich and poor alike, far from
being a favor to the poor, may in fact result in
less money for the poor. As empirical support
for this proposition, the fact that 10 percent of
Americans over 65 live below the poverty line
indicates that the status quo is hardly a bonanza
for the elderly poor.70
Conclusion
Social Security reform isnt just for libertarians.
As this paper demonstrates, egalitarian liberals
have little reason to defend the Social
Security status quo and compelling reasons to
promote the adoption of a well-designed system
of personal retirement accounts.
Social Security as we know it is based on a
self-conscious program of manipulation designed
to obscure the nature of the program and
create a sense of entitlement that makes the program
extremely difficult to change. This kind of
political manipulation violates liberal ideals of
publicity, public justification, and democratic
deliberation among equals. Moreover, anyone
devoted to the ideals of equality and solidarity
should be far from enamored of the current system.
A program of personal retirement accounts,
together with a means-tested safety net, would
serve the commonsense objectives of old age
insuranceprotecting the elderly poor from
financial calamitybetter than the status quo,
and without resorting to systemic deception.
Furthermore, broadening ownership through
personal accounts promises to enhance equality
and solidarity in profound and appealing ways. It
is only a reflexive ideological antipathy to market
institutions that prevents liberals from grasping
the deep liberal appeal of personal accounts.
Although Social Security may have ceased to
be a fatally electrifying third rail, the design of
the Social Security system still embodies the
most successful strategy of structural political
manipulation in the history of American politics.
Roosevelts handiwork in forging a perception of
moral connection between the payroll tax and
payments to retirees, thereby manufacturing a
sense of entitlement, remains robust, as is evidenced
by the enduring popularity of Social
Security. So far, Roosevelts strategy has ensured
that no damn politician can ever scrap my social
security program, and it may continue to doom
the efforts of politicians, such as President Bush,
who hope to fundamentally reshape FDRs ironclad
structure to promote the blessings of broader
ownership.
Public opinion, however, is not to be confused
with public justification, and the status quo cannot
be justified on liberal termsregardless of
whether ones preferred brand of liberalism is
classical or egalitarian. If personal retirement
accounts fail to gain legislative purchase within
this political cycle, they may in the future require
champions from the party of Roosevelt to bring
them into political reality. In that event, bona fide
liberals should recognize that they have compelling
reasons to support a move to personal
retirement accounts. However, if it is too much to
grab the rail, look Roosevelt in the eye, and do
what ought to be done, the honest liberal might
at least acknowledge that the manipulation at the
center of the current system is wrong and admit
no obligation to defend it.
Notes
1. Jonathan Chait, Blocking Move, New Republic,
March 21, 2005, p. 21.
2. Greg Anrig, The Presidents Gift, American
Prospect Online, March 10, 2005, http://www.pros
pect.org/web/page.ww?section=root&name=View
Web&articleId=9307.
3. Robert Scheer, Because It Works, Nation,
March 8, 2005, http://www.thenation.com/doc.
mhtml?i=20050321&s=scheer0308.
4. Jon Margolis, Antisocial Security, American
Prospect Online, http://www.prospect.org/web/
page.ww?section=root&name=ViewWeb&articleI
d=9374.
5. Quoted in E. J. Dionne, Bushs Misplayed
Hand, Washington Post, March 9, 2005.
6. Benjamin Barber, Privatizing Social Security:
Me over We, Los Angeles Times, January 27, 2005.
7. Classical liberalism is, roughly, the view that
each person ought to have, and the state ought to
protect, the greatest amount of freedom consistent
with the equal freedom of others, where freedom
is understood negatively as freedom from
interference or coercion. Welfare liberalism modifies
classical liberalism by arguing that freedom
must not be merely formal but must also be
given fair value by the state guarantee of minimum
levels of certain goods and services, thereby
The status quo
cannot be
justified on
liberal terms
regardless of
whether ones
preferred
brand of
liberalism is
classical or
egalitarian.
16
17
licensing coercive state redistribution of wealth.
8. Board of Trustees, Federal Old-Age and Survivors
Insurance and Disability Insurance Trust Fund, 2005
Annual Report of the Federal Old-Age and Survivors
Insurance and Disability Insurance Trust Fund (Washington:
Government Printing Office, 2005), p. 10.
9. Jeffrey Liebman, Redistribution in the Current
U.S. Social Security System, in Distributional
Aspects of Social Security and Social Security Reform, ed.
Martin Feldstein and Jeffrey Liebman (Chicago:
University of Chicago Press, 2002), p. 4.
10. Julia Lynn Coronado, Don Fullerton, and
Thomas Glass, The Progressivity of Social Security,
NBER Working Paper no. 7520, February, 2000.
11. Martin Feldstein, Rethinking Social Insurance,
American Economic Review 95, no. 1 (March 2005): 3.
12. Chait, p. 20.
13. Personal retirement accounts would affect
only the Old-Age and Survivors Insurance (OASI)
part of Social Security and leave the Disability
Insurance (DI) part untouched. In what follows, I
am addressing OASI, not DI, and by Social
Security I mean to refer to OASI only, unless otherwise
indicated.
14. For standard definitions of insurance, see, for
example, Insurance, The Columbia Encyclopedia, 6th
ed. (New York: Columbia University Press, 2004); or
Insurance, Wikipedia: The Free Encyclopedia, http:
//en.wikipedia.org/wiki/Insurance (accessed May 10,
2005).
15. The Social Security Administration website
says: We consider you disabled under Social
Security rules if you cannot do work that you did
before and we decide that you cannot adjust to
other work because of your medical condition(s).
Your disability must also last or be expected to last
for at least one year or to result in death. http:
//www.ssa.gov/dibplan/dqualify4.htm. Unemployment
insurance is similar, although unemployment
insurance is state based and is funded by a tax
on employers rather than by worker payroll withholding.
Of course, workers do pay at least part of
this tax through lower wages.
16. Henry Rogers Seager, Social Security: A Program
for Reform (New York: Macmillan, 1910), p. 21.
Emphasis added.
17. Elizabeth Arias, United States Life Tables,
2002, National Vital Statistics Reports (U.S.
Department of Health and Human Services) 53,
no. 6 (November 10, 2004).
18. There is good reason to believe that current life
expectancy figures may be seriously underestimated.
See Arnold Kling, The Long and Short of
Lifespan, Tech Central Station, January 18, 2005,
http://www.techcentralstation.com/011805B.html.
19. Flemming v. Nestor 363 U.S. 603 (1960).
20. Franklin D. Roosevelt, Madison Square
Garden Speech, October 31, 1936, http://www.our
documents.gov/doc.php?doc+69&page=transcript.
21. Franklin D. Roosevelt, A Message Transmitting
to the Congress a Report of the Social Security
Board Recommending Certain Improvements in
the Law, January 16, 1939, http://www.ssa.gov/his
tory/fdrstmts.html#1939.
22. Martha Derthick, Policymaking for Social Security
(Washington: Brookings Institution, 1979), p. 199.
23. Quoted in ibid.
24. Roosevelt, Madison Square Garden Speech.
25. Derthick, p. 199.
26. See Larry DeWitt, The 1937 Supreme Court
Rulings on the Social Security Act, U.S. Social
Security Administration, 1999, http://www.ssa.
gov/history/court.html.
27. See Paul Romer, Preferences, Promises, and
the Politics of Entitlement, in Individual and Social
Responsibility: Child Care, Education, Medical Care, and
Long-Term Care in America, ed. Victor R. Fuchs
(Chicago: University of Chicago Press, 1995).
28. DeWitt.
29. Congressional Record, September 16, 1957, p.
28874, cited in Derthick, p. 199.
30. Romer cites Jerry R. Cates, Insuring Inequality
(Ann Arbor: University of Michigan Press, 1983),
pp. 3233.
31. Wilbur J. Cohen and Milton Friedman, Social
Security: Universal or Selective? (Washington:
American Enterprise Institute, 1972), p. 26.
32. Ibid., p. 54.
33. Ibid.
34. Max J. Skidmore, Social Security and Its Enemies:
The Case for Americas Most Efficient Insurance
Program (Boulder, CO: Westview, 1999), p. 7.
35. Max B. Sawicky and Tyler Cowen, Federal Tax
Code Draws Criticism from Citizens, Experts,
Economists, Wall Street Journal Online, March 16,
2005, http://online.wsj.com/public/article/0,,SB1
11089397931779810,00.html.
36. Brad DeLong, Pozen Pill, Slate, May 3, 2005,
http://slate.msn.com/id/2117948/.
37. Paul Krugman, A Gut Punch to the Middle,
New York Times, May 2, 2005.
38. Derthick, p. 417.
39. Ibid., p. 418.
40. For a discussion of publicity, see Axel
Gosserries, Publicity, in Stanford Encyclopedia of
Philosophy (Spring 2005 edition), ed. Edward N.
Zalta, http://plato.stanford.edu/entries/publicity.
41. In saying that an institution, and therefore
the basic structure of society, is a public system of
rules, I mean then that everyone engaged in it
knows what he would know if these rules and his
participation in the activity they define were the
result of an agreement. John Rawls, A Theory of
Justice, rev. ed. (New York: Oxford University Press,
1999), pp. 4849.
42. John Rawls, Political Liberalism (New York:
Columbia University Press, 1989), pp. 21254.
43. Ibid., p. 68. Emphasis added.
44. James M. Buchanan, Collected Works of James M.
Buchanan, vol. 4, Public Finance in Democratic Process:
Fiscal Institutions and Individual Choice (Indianapolis:
Liberty Fund, 1999), chap. 10. Buchanan credits
Italian theorist Amilcare Puviani with the idea of
fiscal illusion.
45. Rawls, Political Liberalism, p. 68.
46. Dennis Thompson and Amy Gutmann,
Democracy and Disagreement (Cambridge, MA:
Belknap, 1998), p. 54.
47. Welfare liberals are sometimes tempted to argue
that (1) the principle of public justification requires
only that policies be justifiable to citizens with reasonable
opinions and that (2) citizens who worry that
generous government welfare benefits have perverse
unintended consequences, and that poverty is best
ameliorated through nonstate institutions, are not
being reasonable. However, this argument turns on
little more than a persuasive definition of reasonable,
begs the question, and refuses to take the
fact of reasonable pluralism seriously.
48. Immanuel Kant, Perpetual Peace, in Kant:
Political Writings, ed. H. Reiss (Cambridge: Cambridge
University Press, 1991), http://www.constitution.
org/Kant/append2.htm.
49. Thomas Christiano, The Significance of
Public Deliberation, in Deliberative Democracy:
Essays on Reason, ed. James Bohman and William
Rehg (Cambridge, MA: MIT Press, 1997), p. 247.
50. Amy Gutmann and Dennis Thompson,
Democratic Disagreement, in Deliberative Politics:
Essays on Democracy and Disagreement, ed. Stephen
Macedo (New York: Oxford University Press,
1999), p. 243.
51. Ibid.
52. Rawls, Political Liberalism, p. 68.
53. Cohen and Friedman, pp. 2627.
54. See Daniel Shapiro, The Moral Case for Social
Security Privatization, Cato Institute Social
Security Choice Paper no. 14, October 29, 1999, p. 4.
55. And, as Milton Friedman asks: [I]s there not
something immoral in our making promises to
ourselves that can be redeemed only by our children?
. . . The continuation of civilization requires
many measures that can succeed only with the
compliance of future generations. But should we
not minimize rather than enlarge such compacts
between generations? Cohen and Friedman, pp.
3940.
56. Joseph M. Anderson, American Family Wealth:
Analysis of Recent Census Data, Consumer
Federation of America, October 1999.
57. Catherine P. Montalto, Wealth-Poor
Households in the U.S., Consumer Federation of
America, 2002, http://www.consumerfed.org/
cfa5_wealth_poor_final_report.PDF.
58. Richard Nadler, The Rise of Worker Capitalism,
Cato Institute Policy Analysis no. 359,
November 1, 1999, p. 22.
59. Jagadeesh Gokhale and Laurence J. Kotlikoff,
The Impact of Social Security and Other Factors on
the Distribution of Wealth, Federal Reserve Bank of
Cleveland Working Paper 9913, November 1999.
60. Barber.
61. Stephen Knack and Philip Keefer, Does Social
Capital Have an Economic Payoff? A Cross-
Country Investigation, Quarterly Journal of
Economics, November 1997.
62. Joseph Heinrich et al., Economic Man in
Cross-Cultural Perspective: Behavioral Experiments
in Fifteen Small-Scale Societies, Santa Fe Institute
Working Paper no. 01-11-063, 2001, p. 1.
63. The term virtual friends is taken from Paul
Seabright, In the Company of Strangers (Princeton,
18
19
NJ: Princeton University Press, 2004).
64. Robert William Fogel, The Escape from Hunger and
Premature Death, 17002100: Europe, America, and the
Third World (New York: Cambridge University Press,
2004), p. 67.
65. See W. Michael Cox and Richard Alm, Myths of Rich
and Poor (New York: Basic Books, 1999), pp. 1417.
66. See Douglas J. Besharov, The Past and Future
of Welfare Reform, Public Interest, Winter 2003.
67. On the disproportionate political power of the
elderly, see Casey B. Mulligan and Xavier Sala-i-
Martin, Social Security, Retirement, and the Singlemindedness
of the Electorate, National Bureau of
Economic Research Working Paper 9691, http://
www.nber.org/papersw9691. Mulligan and Sala-i-
Martin note that the share of elderly benefits in
GDP has grown more than the share of elderly in
total population and argue that this is because the
elderly, whose interests are unified by common
retirement, are more politically single-minded than
the young, who divide their political efforts among
different occupation-related interests.
68. See Feldstein, pp. 711.
69. Ibid., p. 6.
70. See ibid., p. 26.
OTHER SOCIAL SECURITY PAPERS
AVAILABLE FROM THE CATO INSTITUTE
33. Social Security Choices for the 21st-Century Woman by
Leanne Abdnor
(February 24, 2004)
32. The 6.2 Percent Solution: A Plan for Reforming Social
Security
by Michael Tanner (February 17, 2004)
31. The Better Deal: Estimating Rates of Return under a System
of
Individual Accounts by Michael Tanner (October 28, 2003)
30. Large Accounts and Small Cash Deficits: Increasing
Personal Account
Size within a Fiscally Responsible Social Security Reform
Framework
by Andrew G. Biggs (April 25, 2003)
27. Perspectives on the Presidents Commission to Strengthen
Social
Security by Andrew G. Biggs (August 22, 2002)
26. The Trust Fund, the Surplus, and the Real Social Security
Problem
by June ONeill (April 9, 2002)
24. No Second Best: The Unappetizing Alternatives to Social
Security
Privatization by Michael Tanner (January 29, 2002)
23. The Impact of Social Security Reform on Low-Income
Workers
by Jagadeesh Gokhale (December 6, 2001)
22. Reengineering Social Security in the New Economy by
Thomas F. Siems
(January 23, 2001)
21. Social Security: Is It A Crisis That Doesnt Exist? by
Andrew G. Biggs
(October 5, 2000)
14. The Moral Case for Social Security Privatization by Daniel
Shapiro
(October 29,1999)
RELEVANT BRIEFING PAPERS
93. Keep the Cap: Why a Tax Increase Will Not Save Social
Security by
Michael Tanner (June 8, 2005)
92. A Better Deal at Half the Cost: SSA Scoring of the Cato
Social Security
Reform Plan by Michael Tanner (April 26, 2005)
13. Facts and Fantasies about Transition Costs by William
Shipman
(October 13, 1998)

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Nigeria.

Old Age, Disability, and Survivors

First law: 1961 (provident fund).

Current law: 1993 (social insurance), implemented in July 1994.

Type of program: Social insurance system.

Employees of firms with 5 or more workers.

Exclusions: Civil servants, diplomats, noncitizens covered by an

Voluntary coverage for some excluded categories of worker under

Special system for pensionable public-sector employees.

Insured person: 3.5% of gross salary. (Gross salary includes basic

Employer: 6.5% of gross salary. (Gross salary includes basic salary

Old-age pension: Age 60 with 120 months of contributions. Retirement

Retirement grant: Age 60 with at least 12 months of contributions.

Disability pension: Permanently disabled with 36 months of

Disability grant: Permanently disabled with at least 12 months of

Funeral grant: The insured person was receiving the disability or

Old-age pension: 30% of average monthly insurable earnings plus

The minimum pension is 4,400 naira a month (80% of the national

The maximum pension is 65% of average monthly contributions.

Retirement grant: A lump sum equal to the final month's contributions

Permanent Disability Benefits

The minimum pension is 40% of final average contributions or 80% of

Disability grant: A lump sum equal to the month's contributions

Survivor pension: 100% of the insured's pension. The pension is

Survivors grant: 100% of the insured's retirement grant or disability

Funeral grant: A lump sum of 2,000 naira.

Federal Ministry of Labor and Productivity provides general supervision.

Managed by a board of directors and a management committee, the

Sickness and Maternity

First and current law: 1961 (provident fund), not implemented.

Type of program: Provident fund system. Cash sickness benefit only.

The labor code requires employers to provide employees with 12 days

Employees of firms with 5 or more workers. (Not implemented.)

Exclusions: Casual workers, noncitizens covered by an equivalent

Special system for public-sector employees.

Workers' Medical Benefits

Dependents' Medical Benefits

Federal Ministry of Labor and Productivity provides general supervision.

Type of program: Employer liability system, normally involving

Manual workers; nonmanual employees (including federal and state

Insured person: None.

Work injury benefits: There is no minimum qualifying period.

Temporary Disability Benefits

Permanent Disability Benefits

A lump sum of 54 months' earnings, if totally disabled.

Constant-attendance supplement: 25% of the permanent disability

Partial disability: A lump sum proportionate to the degree of disability,

Workers' Medical Benefits

Medical care, hospitalization, medicines, appliances, and transportation.

Federal Ministry of Labor and Productivity enforces the law.

Courts participate in the adjudication of benefit claims and settle

Employers may insure the assessed liability with private insurance

For insured persons who contributed to an individual account under the

Old Age, Disability, and Survivors

First law: 1961 (provident fund).

Current law: 2004 (pensions).

Type of program: Mandatory individual account system.

Note: A unified system of mandatory individual accounts has been fully

Voluntary coverage for some excluded categories of worker under

Exclusions: Public-sector employees in state and local governments,

Gross salary includes basic salary, housing allowances, and

Additional voluntary contributions are possible.