The Pros And Cons Of Social Insurance Programs

One of the arguments for the implementation of social insurance programs is that the government will be able to provide some sort of safety net for citizens in the event of sudden unemployment, disability, or injury. Gruber (2013), on the other hand, proposes the idea of “social savings accounts” whereby citizens would be able to make contributions to their own fund, eliminating the need for social insurance programs such as workers’ compensation, unemployment and disability insurance. While Gruber’s social savings accounts idea is certainly plausible, his idea could have serious repercussions for a majority of recipients of these social insurance programs. For this reason, it is important to consider the pros and cons of his proposal, keeping in mind the interests of citizens and if Gruber’s idea is in fact, feasible.

It is worth examining the advantages of Gruber’s idea, as social savings accounts may have additional benefits for individuals that the government cannot provide through social insurance programs.

Gruber (2013) finds support for reduced moral hazard in the absence of social insurance programs (414). Social savings accounts then, encourage citizens to assume responsibility and take a more proactive role in managing their consumption while unemployed, disabled, or injured. For example, the lack of a safety net and the impending realization one will have to use one’s own savings accounts will motivate unemployed citizens to actively seek and return to work faster. This would especially hold true in absence of worker’s compensation, where individuals would no longer be paid for lost wages. Additionally, some will argue that in the case of unemployment insurance, pressure and time constraints will lead to inefficient job matches; however, unemployment benefits do not necessarily lead to better job matches (Gruber

404).
Another point that is particularly important to the social insurance program debate is how these programs deter or delay citizens from reentering the workforce. With the introduction of social savings accounts, one can imagine that citizens will be more inclined to reenter the workforce sooner rather than later. While the objectives of social insurance programs are to protect citizens from the detrimental effects of unemployment or sudden injury, another objective of social insurance programs is to help ease citizens’ transition to gainful employment. With unemployment benefits, for instance, citizens will procrastinate or stall in their job searches, as Gruber (2013) reports a 16.5% increase in the exit rate in the twenty -sixth week of unemployment benefits (401). In this regard, social savings accounts achieve this goal more efficiently, as there is less moral hazard involved and a greater sense of personal responsibility to protect against potentially disastrous events.
More importantly, we must also examine how these social savings accounts could have negative implications for both the communities and their economies. Social insurance programs not protect the most vulnerable populations from catastrophes that would otherwise lead to financial ruin but also promote the overall health and well being of citizens in the long -run.
Furthermore, many recipients depend on disability insurance to live. Khazan (2015) in her article, “Life in the Sickest Town in America” reports that Buchanan county has one the highest percentages of disability insurance recipients in the nation, which means that with social savings accounts, many would be left without a safety net.
While the premise of social savings accounts would allow individuals more autonomy in the management of their own contributions, these accounts do not take into consideration how adverse events affects populations differently.

Individuals from a low -income background for example, may not have had the chance to save money to pay for medical expenses, much less for consumption during retirement. With social savings accounts, low -income individuals may be at a disadvantage, as accidents that leave citizens disabled can prove very costly, and if individuals do not have the sufficient funds to pay for these accidents, these individuals will have to borrow money they do not have. In fact, Gruber’s idea fails to take into account how citizens from low -income backgrounds will have difficulty or not be able to pay back the money they borrowed. Thus Gruber’s proposal will not only deny many citizens their only source of income in the event of an injury, but for the citizens of Buchanan county as well similar counties, the absence of social insurance programs such as disability insurance, may lead to increased poverty in areas where many are and have been, struggling to make ends meet.
After careful consideration of the pros and cons of the debate surrounding Gruber’s social savings accounts, I would not recommend such a proposal. While I recognize the advantages of the proposal such as minimizing moral hazard and increased personal responsibility of workers, I cannot support a proposal that would financially disadvantage and hurt entire communities where many work hard yet live paycheck to paycheck. So for the many citizens in Buchanan county for instance, many have dedicated their lives to working in the coal mines, not knowing whether they will suffer an accident or if their bodies will give up at any point, but that they can count on the income social programs to stay alive. Keeping in mind the interests of citizens, then, one must think of the potential spillover effects of Gruber’s social savings accounts and if they would exacerbate or ameliorate the larger social problems plaguing these communities.