Principles of Social Security

Lecturer: Jack Wu

Social Security

Social Assistances: Means-Tested Programs (In Cash or In Kind)

Social Insurances

_Retirement Insurance

_Disability Insurance

_Unemployment Insurance

_Health Insurance

Financing

Pay-As-You-Go Fully Funded Partially Funded Defined Contribution Defined Benefit

Contribution

Social Security Payroll Tax Premium _Lump-Sum Premium _Salary-related Premium Shared by government, employer and emplo

yee

Benefit

Flat rate Salary-related Benefit

Social Security Wealth

Gross Social Security Wealth Net Social Security Wealth

Return

Implicit Return Rate Replacement Rate Marginal Benefit-Tax Linkage

Economic Impacts of Social Security

Saving Work Retirement

Insolvency

Aging Problem causes the insolvency crisis of Pay-As-You-Go system

Declining return makes social security less popular among young generations

Social security has to reform.

Reform Trend

Privatization

_ Advance funding

_ Portfolio Diversification

_ Individual Account

Economic Benefits of Privatization

Saving Efficiency Economic Growth Return Rate

Costs of Privatization

Transition Costs Risk Costs

China Social Security Reform

Early stage: Purely sponsored by enterprises

Middle stage: Social Security Pooling Recent stage: Multi-tier Social Security

System Future Trend: Privatization