THE US SOCIAL SECURITY SYSTEM: AN INTERNATIONAL COMPARISON

Elaine Fultz

International Labor Organization, Social Security Department (retired)

Based on OECD Pensions at a Glance 2013 report

2

Demographic challenge

Benefit adequacy

US in relation to other OECD countries:

3

OECD Member States

4

Demographic challenge

1

?

5

Public Expenditure on Old Age and Survivors’ Benefits, % of GDP

Source: European Commission (2012), EU Ageing Report 2012; Canada: Office of the Chief Actuary; United States Social Security Administration (2010)

0

5

10

15

20 2010 2050 (based on 2010) 2050 (based on 2007)

6

Employee Employer Total

US

4.2 6.2 10.4

OECD

8.4

11.2

19.6

Pension contribution rates (2012), % of gross earnings

7

Fertility Life expectancy

OECD

1.74

77.2 (men) 82.7 (women)

US

1.97

76.4 (men) 81.2 (women)

Fertility rates and life expectancy, 2010-15

8

• 1983 Amendments mandated increase in full retirement age from 65 to 67, beginning in 2000 – Reached 66 in 2012 – Rising to 67 by 2022

• Early retirement age not increased

US Social Security Retirement Age

9

0

5

10

15

20

62 63 66 68 70

SVK

61 64 65 67 69

FRA

SVN

GBR

AUS

DNK

DEU ISL ISR (64F)

USA

NOR

Normal pensionable age, years

Number of OECD-34 countries

ESP

PRT

SWE

TUR CHE (64F)

JPN

AUT BEL

CZE

CHL (60F)

FIN

GRC

HUN

IRL ITA

KOR LUX MEX

NLD NZL

POL

CAN

EST

US retirement age in comparative perspective – legislated future ages

Effective retirement age, present legal retirement age, and long-term legal

retirement age

Men

50 53 56 59 62 65 68 71

Luxembourg France

Italy Germany

Netherlands United Kingdom

Canada OECD

Ireland Australia

United States Sweden

New Zealand Iceland

Japan Chile

Mexico

effective legal current legal in the LT

Women

50 53 56 59 62 65 68 71

Luxembourg France

Italy Germany

Netherlands United Kingdom

Canada OECD

Ireland Australia

United States Sweden

New Zealand Iceland

Japan Chile

Mexico

effective legal legal in the LT

Age, years

11

Benefit adequacy

2

?

12

Gross (pre tax)

Net (after tax)

US

41

49

OECD

58

69

Wage replacement rates – public pension - median earner (2012)

13

0 20 40 60 80

100 120 140

OECD: 81.7%

Low-earners

Future public pension (net) replacement rates

0

20

40

60

80

100

120

OECD: 65.8%

Average earners Net replacement rate, per cent

Source: OECD Pension Models

14

0 5

10 15 20 25 30 35 40 45 50 % of the over 65s with income below the 50% of the median equivalized income

OECD: 12.8%

Old-age poverty rates - 2012

15

• The demographic challenge that dominates public discourse is modest by international standards.

• On benefit adequacy, the US ranks significantly lower than the OECD average.

What is our social security system’s main challenge, viewed from abroad?