Social Security Privatization: Lessons From The United Kingdom

Abstract

This study draws lessons for the debate about the proposed partial privatization of Social Security in the United States based on evidence from the United Kingdom. The British case suggests that privatization may lead to a reduction in the pension burden on the national budget if combined with substantial cuts in benefits. Such reforms may have positive effects on the economy, but any such benefits would come at the cost of increased inequality and lower pension benefits for many low-wage workers, particularly women. Because Social Security is a path dependent process, policy history differences make it less likely that Americans will easily accept the level of privatization found in Britain.