Saturday, February 12, 2011

Mark Thoma on Social Insurance

Mark's postings are reliably good, but today's is especially good:

...There is a need for social insurance. I had hoped this recession would show people that it can happen to anyone, that high moral character is not enough to protect you from the vagaries of the market system. One day a job can be gone, morals or not, savings can evaporate as a result, and all those years of doing the right thing -- putting a little away each month for the future -- provides little protection against financial ruin when there are no jobs to be found.

Don't get me wrong. I think it's good to make people aware of the amount of government services they consume, and that such awareness could help some in getting support for social insurance and other programs. So I'm not saying that making people aware of their own use of these services has no value. But I really do think the key to more widespread support is to make people aware of the need for social insurance, and the fact that insurance -- by it's very nature -- means that those people unlucky enough to need it will often consume more than they put in (just as would be the case under fire insurance if your house burns down), while others will consume less. That's how insurance works and we shouldn't resent those unlucky enough to need it.

The key here is to overcome the belief that the majority of people using these services are "gaming" the system to get handouts they don't deserve. If we are going to successfully defend the social insurance system, it is this belief that must be countered. Of course such behavior goes on, there will always be people who try to take advantage of any system that is put in place (in the public or private sector), but this is not the predominant feature of these programs. The share of "deadbeats" is not large, it is relatively small given all the good such programs do, and that's the message that needs to be delivered. The social benefits clearly exceed the costs of providing these services, but it will be tough to make this case convincingly -- the opposition can always find isolated cases where people take advantage of the system and surround them with negative publicity. This has been a successful strategy, and it will take a concerted effort to counter overcome such efforts.