Social Security—Adequacy, Equity, and Progressiveness

This paper reviews and compares the Canadian and U.S. social security systems, based on criteria defined in a paper by Knox and Cornish, as to their adequacy, equity, and progressiveness. It concludes that the Canadian system provides larger minimum benefits and, thus, greater adequacy for the poor than does the U.S. system. On the other hand, the analysis indicates more emphasis on equity in the U.S. system (in total) than in the Canadian. Finally, both systems are shown to be highly progressive in that lower-wage earners get larger benefits per dollar of contribution than do higher-wage earners.The paper also studies the Seniors Benefit recently proposed in Canada that would have replaced the Old Age Security and the Guaranteed Income Supplement. The proposal was rescinded in July, 1998. Its failure points out the need for a further criterion for optimal social security design beyond those listed by Knox and Cornish.We conclude by noting that the social security systems in both Canada and the U.S. achieve the basic criteria defined in the paper despite having remarkably different actuarial formulas for determining benefits and remarkably different structures.