Term Paper on "Impact and Influence Social Security Has on Public Personnel Management"

Term Paper 8 pages (2503 words) Sources: 1 Style: APA

[EXCERPT] . . . .

Social Security

It's been more than 70 years that Social Security became the part of American personnel administration policy. Today it has become the part of the social fabric of American society. The Social Security Act of 1935 included a broad range of initiatives: old age assistance, Federal-state public assistance, unemployment compensation, public health services, and vocational rehabilitation. Through these packages of retirement, disability and survivors insurance Social Security provides American public economic security for their future. Today many workers are earning Social Security protection, and millions receive retirement, survivors and disability benefits from Social Security.

Social Security has been implemented by using the contributions from both employer and employee. A special payroll tax was created to support Social Security so that people would be aware of it every time they received their wages. The Federal Insurance Contributions Act (FICA) tax was labeled a contribution from both employer and employee and people knew they had to work a certain period of time to become eligible.

The design of Social Security is made in a way that the contributions made and benefits received have a link between them. The benefits availed by the citizens are very important to them and therefore all American people consider the issues related to Social Security very important as this program is meant to secure their future financial needs.

Social Security as a Tax Not Insurance: Some people consider social security as kind of insurance. They have this misconception that it is a form of social insurance to which members add during their working lives, and then draw upon at retirement but that is not the way the system in fact works. From the beginning, Social Security was a 'pay-as-you-go' operation, as the money that was being paid in went right out in the form benefits. The fact is that Social Security is an intergenerational transfer of money from workers to non-workers. In fact, People paying Social Security tax have no property right to that money, as they would have if it were an insurance policy or retirement account. Once Americans accept that what is paid in is a tax and not their money, other myths automatically will be dispelled. For instance, people often compare the amount of money they paid in FICA tax during their work years with the amount they receive in benefits, as they would with an investment. However, it is not an investment it is a tax.

Benefits for Elderly: Senior citizens of United States become the biggest beneficiary of this system. This system ensures that elderly receive benefits after attaining the retirement age. It is this age and phase of life that people are generally more worried about. Since, Social Security is a way to ensure smooth earnings and benefits for the elderly, the program its changes and reforms are very important for those in the younger or middle age brackets as well. Elderly in America today depend on the benefits in the form of monthly income provided by the social security. Elderly have the option of retiring early that is at the age of 62 and get reduced benefits or they can choose to retire at the age of 67 and get full benefits. A majority of elderly in America today has Social Security as their main income source while some are absolutely dependent on Social Security in the absence of any other source of income. "We do not believe that an individual's obligation to work and to earn should be perpetual. As nature has decreed that our physical capacities decline as we age, however this decline is retarded by science, so do human societies now tend to believe that some respite is due in the twilight of life, during which it is understood that the material and emotional needs of the elderly will not be contingent upon continued labor. When the elderly are in poverty, we do not believe that this is because they are shiftless or worthless, but because the proper arrangements have not been made to provide for a period of retirement" (Blahous III, 2000).

Benefits for Those with Disability & Survivors: Generally, the perception is that the Social Security program is restricted to retirees only. However in reality it also covers those with disability & survivors. It is said that almost one third of beneficiary of Social Security program is not a retiree. Through its valuable disability and survivors insurance protection many young American and their families are also receiving the benefits. Just like retiree benefits Americans consider disability and survivors benefits equally important. For example, there is a worker with a steady job and it is expected that he would continue to hold this or a similar kind of job and receive regular income, then in the event of his becoming disabled he or she can get compensated with a certain amount from the Social Security. Similarly the same person with spouse and children could also get benefits through survivors program in the event of death.

History

The foundations of the Social Security program were laid during 1930s. Due to great depression many elderly were experiencing abject poverty. It was great depression that stirred the process faster for the social security program. Finally the Social Security Act was signed by the President Roosevelt in 1935. President Roosevelt's committee on economic security made the draft of this Act which was finally passed by the congress.

Ever since the Act was paassed, it has faced criticsms as well as attained immense popularity. The Act, however remained embroiled in various controvorsies. Initially, critcs argued that this program would result jobb losses and some even went on to say that that the recession period betewwn 1937 & 38 resulted because of this program. However, with the passage of time Act not only became accptable but also famous. Also known as the Old Age Pension Act, this program raised a new hope for retirees as they started getting payments financed by a payroll tax on current workers' wages, half directly as a payroll tax and half paid by the employer. 1937 was the year in which collection of payroll taxes was started and the very same years payments were made.

As mentioned earlier critics of the Act and program made several allegation and some cases were also filed in the Court to determine the constitutionality of the Act. Even Supreme Court in such cases ruled in favor of Social Security Act vouchinf for its constitutionality. However, ther were some flaws in the law in terms of distribution of benefits to all and sundry as it paid retirement benefits only to the primary worker. Initially tax rate was set at 2.0% of the first $3,000 of the employee's earnings, shared equally between the employee and the employer. Also some new people were included in the list of beneficiaries. The Act was expanded in 1939 to include the widowed, nonworking spouse of someone entitled to an old-age benefit, survivors (widows and orphans), and even retirees who had never paid any FICA taxes. After the inclusion of these new gruoup of people in the security benfits this program became even more popular. As years passed the tax rate was increased gradually. In the middle of the 50s the tax rate was raised to 4% and this rate reached to 6% by the decade of 60s.

By the year 1965 Medicare also became part of the Social Security Act while 1975 saw the inclusion of cost of living allowances (COLA) into the program. Later amendments were also made regarding the age limit for availing retiement benefits. The retirement

Age or eligibility for old age bensfits age was raised from 65 to 67 for all those born after 1959.

Social Security & Personnel Administration

In wealthy democratic nations like United States most people earn a livelihood by working for and so governments mandate security and health requirements for employers. Since, retirement, disability, layoffs, and injuries limit the earning power of many citizens, government intervened with Social Security. The implications of Social Security for the personnel administration are multiple. Specialists need to explain Social Security to general public as a number of employees do not realize that the employer must make these deductions by law. Employees especially those with large families and low incomes do not understand why social security is a bigger deduction than income tax. It is therefore personnel administrators' and specialists' duty to reduce confusion and morale affecting resentment by explaining how social security works. The local Social Security Administration offices in different states can provide informative booklets for use in orientation and pre-retirement counseling sessions. Also HR or personnel departments of organizations must also consider Social Security in designing other company benefits and services for employees. Social Security is one of the most comprehensive and least understood social programs ever enacted in the United States and so there are many myths surrounding this Act. Although it is a cornerstone of financial security, to some people it is a high-priced pension. Others see… READ MORE

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