The improvidence of social security

There are two main approaches to the analysis of the present financial crisis of thesocial security system. To some, the crisis has structural roots, as the gap between benefit paymentsand payroll contributions tends to rise in the absence of a profound reform in the system.To others, the explanation is still one of a conjectural nature as the recessive policies have oppositeeffects on the two sides of the social security budget: lower revenues cannot match an increasingexpenditure in a situation where the benefits are fully indexed. The paper reviews themain arguments of these two versions as well as additional explanations that refer to a prematureliberalization of the benefits and the lack of a sound financial policy in the past, which didnot allow the accumulation of reserves to face periods of distress. The main propositions followingthe distinct interpretations of the crisis are, then, analysed, the emphasis being on theredistributive effects of cutting benefits and/or changing the financial basis. The paper ends byarguing that before going into the discussion of specific measures to solve the crisis, it will benecessary to appraise the degree of protection offered to distinct social groups through the socialsecurity system. JEL Classification: H55; J32.