Think You’re Worried About Social Security Now?

If you are worried about how Social Security is going to remain solvent through the entirety of the twenty-first century and beyond, you may be thrilled, or horrified, to realize that the solvency of Social Security might just end up folded into the larger problem of what to do if increased automation by ai and robotics decimates the number of jobs available.

Unless there is some unforeseen new area of work that arises to absorb all of those misplaced workers, the way industrialization absorbed the people that mechanization displaced from farms during the 19th and 20th centuries, there are going to be a whole lot of people who can’t find employment that will keep them alive. Against the mass of those people, the problem of how to pay Social Security benefits might seem small potatoes indeed.

There is a growing consensus about the idea that robots, and computers in general are poised to take over many of the mundane workaday tasks that people are performing today. Even though the common thinking is that this revolution is only going to affect low level workers like the counter people at fast food joints and the checkouts at the grocery store, nothing could be further from the truth. Many quality jobs, like those done by accountants and even stock brokers are increasingly being impacted by smart software programs. Even hands on trades like construction are likely to be impacted as increasingly automated processes invade their domain. Remember all the people who used to work on automobile assembly lines?

Why should you care about this? After all you might well be out of the workforce before this really gets going. (But you might not, some projections show major impacts in some fields in the next ten years.) Well beyond the fact that it is going to be a major factor in the lives of your children and grandchildren, you should care because you likely will be affected as well.

That is because of the way that social security is funded. It is common to think of Social Security as an investment account where you put money in the bank for years through your contributions and then you withdraw it when you retire. That is not quite how it works. The payments being made today are financed by current workers’ contributions. When current contributions are more than is needed to pay current benefits the excess goes into a trust fund.

That is why you often hear that one of the problems with Social Security these days is that when it was first instituted there were more than 15 workers paying in for every person drawing benefits. These days there are less than 3 workers per retiree. By 2030 there will only be 2 workers per retiree.

When current workers don’t contribute enough to cover current benefits the Social Security Administration has to dip into the trust fund to make up the difference. Much like the advice you hear to be careful about touching your investments principal in retirement, once the government starts tapping the Social Security trust fund principal it will eventually run out. This is what the pundits are talking about when they talk about Social Security going broke in 2034. That may be optimistic.

If those projections hold true, at that time the only money available to pay benefits will be what the government is receiving in current taxes. The money those two workers are paying in to cover each retired person. This number, the number of people paying taxes currently vs the number receiving checks is where the Robot Revolution is likely to affect you.

It is difficult to tell exactly how the revolution in Artificial Intelligence will play out. After all the world didn’t end when the industrial revolution displaced workers, and when mechanization pushed millions of workers off the farms they found work on production lines. But there is reason to think that this revolution in labor is unlike those that came before. Steven Hawking, for example thinks that automation will wreak havoc with middle class jobs. By some reports, up to 50% of all jobs are at risk in the next 20 years.

It’s not hard to see where this is going. If the Social Security trust fund is being depleted now because there aren’t enough workers paying in, what is going to happen once jobs start to disappear. If predictions hold true, by 2037 every worker will be supporting one retired person. And that just won’t work.

It’s hard to see exactly what the solution is to this dilemma, but if you think it isn’t going to impact you, you are likely in for a surprise. An unpleasant one.

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