The growing social security problem in Bangladesh

Experts are calling on Bangladesh to improve social security for the quickly growing elderly population in the country. From IRIN we take a look at the problem for the country that has 6 percent of it's population at the age 60 or older.

With a growing number of older people and a large impoverished population, Bangladesh needs to improve social security support for the country’s most vulnerable groups, experts say.

Over 6 percent of the population or 7.2 million people are aged 60 or over, according to the last census in 2001.

About 80,000 people are added to this older population every year, which is projected to be over 17 million people by 2025, growing at a rate faster than that of Europe’s, according to government officials.

However, most of these older people and many of the poor in the country - about 50 percent of the population lives on less than US$1 a day, according to the UN - are not covered by any form of social security.

Meanwhile, existing social security measures are unable to meet the needs of vulnerable people, and the scope of these programmes urgently needs to be widened, say experts.
Bangladesh is exposed to natural disasters, extreme weather events and other shocks, leaving the poorest without any form of protection, said Wahiduddin Mahmud, a member of the UN Committee for Development Policy (UNCDP), a subsidiary body of the UN Economic and Social Council (ECOSOC).

“The vulnerable condition of Bangladesh may force people who are now barely above the poverty line into the depths of poverty any moment,” Wahiduddin told a recent NGO-organized seminar in Dhaka on extreme poverty alleviation.

“To ensure sustainable social security for the poor, the efforts of the local government units must be supplemented by a strong framework of government economic regulations,” he said.

Weak capacity

About 1.2 million people are employed by the government and are eligible for pensions after they retire at age 57, but most of the country’s labour force, which is rural, does not receive a pension.

Another 1.7 million people over 65 who are unable to work or do not have family support receive allowances through a programme introduced by the Ministry of Social Welfare.

However, few other safety nets exist, and officials and experts say that providing social security benefits to assure food, lodging and health care facilities for the impoverished should become the country’s top priority.

Minister of Food and Disaster Management Muhammad Abdur Razzaque said current social security and welfare programmes were unable to cover more than 50 percent of the extremely impoverished in the country.

Almost 25 percent of the population of Bangladesh falls within this category, he told the poverty seminar, held in Dhaka last month.

Allowances, food stamps and food rations, subsidies for basic goods, public programmes which provide livelihoods and income for the poor, and fee waivers for services such as healthcare are identified by experts as examples of needed social security nets.

VGF and VGD

The government runs two major programmes for supporting vulnerable populations.

The Vulnerable Group Feeding (VGF) programme provides food to low income and other vulnerable groups who cannot meet basic needs for survival due to natural disasters or socio-economic circumstances, such as age, illness or disease.

The Vulnerable Group Development (VGD) programme, on the other hand, exclusively enables the poorest rural women and their family members to overcome food insecurity and their low social and economic status.

VGD includes sustained, longer-term activities such as risk management for natural disasters, HIV/AIDS prevention, maternal and child health and livelihood skills.

Officials acknowledge the government should focus its efforts more on longer-term development programmes, rather than short-term relief efforts.

“Over time, the relief programmes such as VGF, should move towards becoming sustainable development programmes like VGD,” Naser Farid, policy research director of the Food Planning and Monitoring Unit (FPMU) of the Ministry of Food, told IRIN.
“About two-thirds of food assistance programmes are now financed by the government. In the mid 1990s, this used to be only 40 percent,” he said.

Hussain Zillur Rahman, a former government adviser, said there was a disparity in spending on different poverty alleviation programmes.

“Currently the government spends more than five times more money on feeding vulnerable people than it invests on programmes that help the hardcore poor to earn their own living,” he told the poverty seminar.

[Comment] Our society's safety net could use some mending

from the Fort Worth Star Telegram

By JACK Z. SMITH

Former House Majority Leader Dick Armey once asked, "If Social Security is such a great program, why is it mandatory?"

Actually, Social Security is a great program precisely because it is mandatory. Ninety-six percent of American workers pay into the system. As a result, Social Security has a strong, steady flow of funding that has made it a tremendous safety net for the nation.

Along with Medicare, Social Security has played a huge role in slashing the poverty rate for the elderly from about 30 percent to less than 10 percent over the past 40 years.

This year, almost 50 million Americans will receive $608 billion in Social Security benefits. Nine out of 10 people 65 and older receive the benefits. Among the elderly, 52 percent of married couples and 72 percent of singles receive more than half their income from it.

If Social Security had not been made mandatory, there would be a much higher poverty rate among the elderly today. Many Americans wouldn't put money into retirement savings unless required to, just as millions of workers today don't participate in voluntary corporate 401(k) programs despite their attractive features.

The program's benefits have served as a crucial financial lifeline for several of my relatives, including my maternal grandmother. As a widow in her twilight years, she scraped by with Social Security as her primary source of income.

Social Security has been on my mind because its trustees released their annual report Tuesday on its projected long-term funding shortfall.

Although the program currently is generating surplus revenues, its cost is projected to exceed incoming revenues by 2017 as more baby boomers hit their rockers. By 2041, the trust funds are projected to be exhausted, leaving incoming payroll tax revenues to pay only 78 percent of benefits.

But if we make some adjustments, the program can be put on a sound financial footing for many decades to come.

That probably will require increasing payroll taxes and some very modest, gradual reductions in benefits. Congress adopted bipartisan Social Security reform legislation 25 years ago and can do so again.

The payroll tax is levied only on the first $102,000 of annual income. That cap could be boosted appreciably, perhaps to $150,000 or $200,000, and indexed to inflation. Even if the cap were $200,000, affluent people earning more than that still would pay a smaller percentage of their income into Social Security than do low- and middle-income workers.

The payroll tax rate, now 12.4 cents per $1 of earnings (half from workers, half from employers), could be raised modestly -- perhaps a half-cent.

Some benefit cuts might be made. For example, the age for receiving full retirement benefits might be raised very slightly and very gradually, because people are living longer.

Several million state and local government employees currently not paying into Social Security might be brought into the system, as federal employees were in 1983.

Greater protection should be provided to the trust funds to ensure that Congress and the White House stop (or at least greatly decrease) the shortsighted practice of spending surplus Social Security revenues for other government programs.

President Bush's departure from the White House in January could ease congressional passage of bipartisan legislation to strengthen and preserve Social Security for future generations. The sooner that strong legislation is adopted, the less severe the remedial measures must be.

If you don't believe me when I say that this is a worthy program, you might recall Bush's words on May 15, 2000, in Rancho Cucamonga, Calif., when he was campaigning for president. Social Security, he said, is "the single most successful government program in American history."

Research Looks at Ways To Protect Vulnerable Elderly From Social Security Changes

from The Urban Institute

Stu Kantor

With Social Security's trust funds facing depletion by 2040, many observers suggest partly addressing the projected deficit by raising the age at which workers can first receive retirement benefits. While a higher retirement age would bolster the system by reducing benefits and encouraging people to work longer, would it disproportionately hurt vulnerable populations, who generally do not live as long as other retirees and typically depend more on Social Security?

New research from the Urban Institute's Retirement Policy Project says lifetime benefits for all groups would be lower, but less so for those with lower lifetime earnings and less education. The policy change would not disproportionately hit lower-income groups because the Social Security disability program provides some protection. High school dropouts, African Americans, and workers in the lowest fifth of earners are more likely to get disability payments than are college graduates, whites, and workers in the top fifth. Changes in the retirement age do not affect when disabled workers can apply for benefits or the amounts they can receive.

In "Would Raising the Social Security Retirement Age Harm Low-Income Groups?" Gordon B. T. Mermin and C. Eugene Steuerle look at what happens if the normal retirement age is increased to 69 years and 8 months (it is currently 66 years and scheduled to go to 67 for workers who reach age 62 by 2022). Lifetime benefits for today's young workers, they found, would decline to 90 percent of the levels scheduled under current rules. High school dropouts would experience an 8 percent drop, compared with 11 percent for college graduates. Workers in the bottom fifth of earners would see a 6 percent drop, compared with 13 percent for those in the top fifth.

While boosting the retirement age would not hit lower-income groups harder than others, it would push more retirees into poverty. Raising the age would increase the share of retirees with incomes below the wage-indexed poverty level in 2050 from 14.4 percent under the current system to 16.2 percent, an increase of 1.5 million people.

Adding a floor to Social Security could mitigate the impact on vulnerable groups of an older retirement age. Under one scenario Mermin and Steuerle examined, a minimum benefit in conjunction with a higher age would minimize the new policy's effect on poverty compared with current law, raising lifetime benefits for workers in the bottom fifth of earners by 6 percent. The cost of the minimum could be paid for by raising the normal retirement age by another six months (to 70 years and 2 months).

"These findings demonstrate the importance of evaluating policies as part of larger packages rather than in isolation," said Mermin. "A policy that, in one form, achieves certain desirable goals yet harms at-risk groups can be made more acceptable and effective when combined with other reforms."
Minimum Retirement Benefits

The Mermin-Steuerle report is one of five research briefs released today that assess the impact of raising the retirement age, ways to ameliorate its fallout for vulnerable populations, and boomers' plans to work beyond age 65.

"Minimum Benefits in Social Security: Design Details Matter," by Melissa M. Favreault, Gordon Mermin, and Eugene Steuerle, analyzes five minimum-benefit designs and shows how they could help reduce elderly poverty. They found

* Many minimum-benefit arrangements would lose value if not tied to wage growth.
* Approaches that best alleviate poverty tend to reward work less.
* Designs that do not take into account the truncated work histories of disabled workers will have less success at reducing poverty.
* Different approaches to cutting Social Security benefits—such as across-the-board reductions versus changes to cost-of-living adjustments—have distinct implications, both on their own and when combined with a minimum.

Almost 8 percent of Social Security beneficiaries 65 and older had incomes below the poverty line in 2004, according to the Social Security Administration. That figure jumps to 17 percent among unmarried older women, 24 percent for African Americans, and 19 percent for Hispanics.

"Minimum Benefits in Social Security Could Reduce Aged Poverty," by Melissa Favreault, Gordon Mermin, Eugene Steuerle, and Dan Murphy, looks at two scenarios involving minimum benefits funded with across-the-board benefit cuts to address Social Security's long-term financing problem. A generous minimum that increases over time with average wages would see poverty among elderly African Americans in 2050 decline to 2.9 percent, compared with 6.2 percent under current-law scheduled benefits. Such a minimum would cut poverty rates nearly in half for older Hispanics and unmarried women.
Retirement Plans

The solvency of the U.S. retirement system partially hinges on how long baby boomers stay in the workforce. If they retire as early as their parents, the number of workers per retiree will soon plummet, reducing the tax base and squeezing budgets for Social Security and all other government programs.

But "How Long Do Boomers Plan to Work?" by Gordon Mermin, Richard W. Johnson, and Dan Murphy, offers some encouraging signs. Using data from the Health and Retirement Study, a national survey of older Americans funded by the National Institute on Aging, the researchers found that as boomers approach retirement, they intend to work longer than people born a dozen years earlier did, a shift that will help promote economic growth and partly offset the economic pressures created by an aging population.

Among workers ages 51 to 56 in 2004, 51 percent said they expect to work past age 62, up from 47 percent among comparable workers in 1992. The probability of working full-time past age 65 increased faster, growing from 27 to 33 percent. The declining availability of retiree health benefits, increasing levels of educational attainment, and falling traditional pension coverage accounted for most of the increase in work expectations.

Although 50-something African Americans plan to work longer than they did a decade ago, they lag behind other racial and ethnic groups, Dan Murphy, Richard Johnson, and Gordon Mermin indicate in "Racial Differences in Baby Boomers' Retirement Expectations." Twenty-eight percent of African-American boomers said they expect to work full-time past age 65, as opposed to 33 percent for all other racial groups.

While education, health status, wages, and wealth generally affect retirement plans—less-educated racial groups, for example, are more likely to be in physically demanding jobs that become difficult for older workers—racial differences in these factors do not explain African Americans' early retirement plans. Labor market discrimination, family care responsibilities, and cultural differences may play a more important role in their later-life work decisions.
Reading the Reports

* "Would Raising the Social Security Retirement Age Harm Low-Income Groups?" is available at http://www.urban.org/url.cfm?id=311413.
* "Minimum Benefits in Social Security: Design Details Matter" can be found at http://www.urban.org/url.cfm?id=311417.
* "Minimum Benefits in Social Security Could Reduce Aged Poverty" can be accessed at http://www.urban.org/url.cfm?id=311416.
* "How Long Do Boomers Plan to Work?" can be read at http://www.urban.org/url.cfm?id=311415.
* "Racial Differences in Baby Boomers' Retirement Expectations" is available at http://www.urban.org/url.cfm?id=311414.

[Press Release] Minimum Benefits in Social Security

from The Urban Institute

Author(s): Melissa Favreault, Gordon Mermin, C. Eugene Steuerle
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in PDF Format.

The text below is a portion of the complete document.

Abstract
In light of Social Security reform proposals that include provisions for minimum benefits, this paper considers the redistributive purpose of Social Security and whether a minimum benefit may reduce need among aged and disabled people more equitably or efficiently than current law structures. We then examine several minimum benefit designs. We find that minimum benefits could help reduce poverty among the aged substantially, even in the context of benefit reductions to improve the program's long-term fiscal deficit. However, trade-offs exist; generous minimums could reduce Social Security's earnings relationship, which has helped the program garner strong political support.

Introduction
In 1998, the bipartisan National Commission on Retirement Policy advanced a reform proposal that contained a minimum benefit within Social Security. Since then, numerous congressional proposals have included minimum benefits as part of a package of reforms, and a commission President George W. Bush set up during his first term also recommended one. Little effort, however, has been made to develop the rationale for a minimum benefit or to examine alternative designs. As a consequence, the design of a minimum benefit—or, for that matter, of almost all redistributive formulas within Social Security—has seldom been based on any theoretical or empirical notion of exactly what goals are sought and what types of formulaic adjustments would best achieve them.

This study attempts to fill that gap. It has three main sections. In the first, we examine Social Security's redistributive purpose and how it relates to the program's other purposes. We discuss the current system's redistributive features, and consider whether a minimum benefit might improve program adequacy in a more equitable or efficient way. We also consider an alternative: increasing the basic means-tested program that provides an income floor for the aged and disabled.

With this theoretical context in mind, we turn to the second section, in which we design a few minimum benefits based on years of work and the poverty threshold. In this section, we consider how Social Security currently treats low-wage workers, review literature on minimum benefits, and examine benefit design elements. Our benefit design draws from the principles outlined above, as well as from empirical research about distributions of numbers of years in covered employment for men and women.

In the third section, we empirically examine how well different types of minimum benefits achieve various goals, such as reducing poverty. We compare the minimums with similar mechanisms (for example, changes to the benefit formula bend points). We use DYNASIM, the Urban Institute's dynamic microsimulation model of the U.S. population (Favreault and Smith 2004), in these analyses. Our aim is not to reach a definitive conclusion about how minimum benefits should be designed but rather to show how certain Social Security purposes—particularly those associated with poverty relief—can be better achieved when they are solidly grounded in thoughtful analysis and empirical research.

We make roughly fiscally equivalent comparisons assuming a system that is reduced relative to scheduled benefits because of Social Security's long-term fiscal deficit (OASDI Board of Trustees 2005). We assume that increased contributions meet approximately half of Social Security's annual deficit in 2050, and benefit reductions meet the other half. These estimated reductions, based on Social Security cost projections, are inherently uncertain. Social Security may require smaller or greater adjustments depending on how accurate these predictions turn out to be. Nonetheless, this is a reasonable starting place.

This report is available in its entirety in PDF Format.

Report: Retirement Poverty Risk Rises

from Forbes

Without changes in the U.S. retirement system, poverty among people 65 and over is likely to increase, according to a report released Tuesday by the Center for Retirement Research at Boston College.

The center measures households at risk of being unable to maintain their standard of living once they stop working. For the highest income households, being unable to maintain their standard of living may mean cutting back on extras. But for the lowest third of households, 45 percent of whom are at risk, being unable to maintain their standard of living may mean cutting back on essentials, the report said.

The bottom third of households are less likely to own their homes, have pensions and have meaningful 401(k) assets, making them more reliant on Social Security than their wealthier peers. As a result, the increased minimum age for Social Security benefits, from age 65 for those born in 1937 or earlier to age 67 for those born after 1960, will hurt them more, according to the report.

The delay in Social Security means that 60 percent of Generation Xers in the bottom third of income are at risk for being unable to maintain their standard of living in retirement.

The increased prevalence of two-income households could also hurt low-wage families in retirement. Social Security awards a non-working spouse a benefit equal to 50 percent of the worker's benefit. As women go to work, they increase the family's pre-retirement earnings but do not increase the couple's Social Security benefits unless they earn more than 50 percent of their husband's earnings, according to the report.

Aging gets harder for the poor

from The Mail Tribune

Unexpected illnesses can leave even the well-off in dire straits
By Martha M. Hamilton

Barbara Davis was 57 when the heart attack struck at midnight in April 1996. She had just turned over to look at the clock, and as she turned back, "the pain hit me between my breasts and went all the way through to my back."

Until that day, Davis had worked as a chef at the College of Preachers at the Washington National Cathedral, but the heart attack and subsequent open-heart surgery made it hard to continue at the job she had held since 1972, although she tried briefly. As a result, she retired sooner than expected — before she was eligible for a full pension, she said.

Now she gets along on a little less than $15,000 a year in retirement — her combined net income from Social Security and a pension benefit of $216.02 a month.

She is more typical than it often seems when you live in the world of the worried well — those with the luxury of wondering whether to open a Roth or a traditional individual retirement account or whether to annuitize that lump sum. Nearly a quarter of all retirees have no income other than Social Security. For 40 percent of elderly recipients, Social Security is more than 90 percent of their income — which underscores why strengthening Social Security is so important.

Davis raised her grandson and put him through Beauvoir, Annunciation and Georgetown Prep with the help of grants and other assistance. That used up any discretionary income she might have saved for retirement.

"I didn't have anything saved," said Davis. "But I don't regret it one bit, because he was such a good child, especially for a boy child." Two years ago, she watched him graduate from Indiana University. Shortly after she returned, she suffered another heart attack. Now she lives in subsidized senior housing operated by Asbury United Methodist Church. But she still has bills to pay and in recent weeks has been struggling to pay for the medications she takes. The new prescription benefit through Medicare made her drugs affordable until she hit the limit that requires patients to pay full price after total individual and government expenditures exceed $2,250.

Statistically, you are more likely to end up poor or nearly poor if you are a woman or if you are black or Hispanic. It's hard to imagine you might end up in that category when you are working, but it can happen, especially if you get hit by something unexpected: a heart attack, a layoff, the need to quit work to take care of an aging parent or an ailing spouse. Suddenly, instead of adding to savings, you're using them up — long before anticipated.

When you're on a limited income, as Davis is, an increase in costs for prescriptions or anything else can throw you for a loop. "I have been putting medicines on my credit cards, and I've been saying, I've got to stop that because I'm putting myself further in the hole," she said.

Emmaus Services for the Aging, which serves about 850 older residents of Washington, is helping her to find alternatives and lined up three months' worth of pharmaceutical company samples to cover one of her medications until the first of the year, when she will be eligible again for discounted medications.

Emmaus was founded in 1978 by Arthur Fleming, secretary of health, education and welfare in the Eisenhower administration and a force in shaping Social Security policy for more than four decades, said Mauri Carter, development director.

"He said, 'There are a lot of senior citizens in poverty, living alone,' and he believed a community approach was the best way to care for seniors," she said. With a small staff but a large number of volunteers, Emmaus works by visiting clients at home and providing services at a center opened a few years ago.

"It's a community that often suffers in silence," said Carter. Clients may not have friends or family nearby who can check on them to make sure they are getting what they need. "If seniors are lonely, we visit them. If they're hungry, we feed them, and everything in between."

Poverty rates among the elderly have fallen over past decades, thanks largely to increases in Social Security benefits, according to the Congressional Research Service. In 1959, the poverty rate for those age 65 and older was 35 percent. Today, it's closer to 10 percent. But the CRS also points out that many older people in the U.S. "have family incomes that put them just above the official poverty threshold." Nearly a quarter of older people in the U.S. had family incomes that were below $14,050 for an individual and $17,722 for a couple.