The Future of the Safety Net: Social Insurance and Employee Benefits edited by Sheldon Friedman and David C. Jacobs, Champaign, Illinois: Industrial Relations Research Association, 2001, 268 pp., ISBN 0-913447-81-1

This most recent volume of the Industrial Relations Research Association series is no exception to a tradition of engaging empirical and policy contributions to the field. The introductory chapter, by editors Friedman and Jacobs, outlines the current American social safety net debate. Critics are charging that bankruptcy looms for publicly funded social welfare programs. Demographic shifts and increasing life expectancies will make public pensions and health care untenable in the near future. Furthermore, declines in unionization and collective bargaining, increases in the use of contingent labour, and escalating benefit costs are eroding the private system. In the ten chapters that follow, contributors debate the efficacy and sustainability of social security in the United States. Overstatement of the funding crisis and critiques of privatization schemes, both supported by empirical studies, provide the dominant themes. Authors point out that significant portions of the American population remain unprotected by current plans, and the situation is unlikely to improve under a private system. Rather than attempting a comprehensive survey of social welfare programs, the editors have chosen to offer an in-depth analysis limited to pensions and health care. This means that some integrated services such as unemployment insurance, welfare, and disability programs are excluded. Although this might be considered a weakness, the complexity of the material suggests that the decision was well warranted. In order to mitigate the concentration on details of the American experience, the editors have included several comparative articles, analysing conditions in a variety of Organization for Economic Co-operation and Development (OECD) nations. Although Canada is not investigated, Canadian readers will recognize and gain insight into debates mirrored in their own public policy arena. Chapters two through five examine public pensions. Christian Weller begins with an excellent evaluation of the key issues and a comparative study of public social security systems in six industrialized economies. He argues that the social security funding dilemma in the United States has been significantly exaggerated, suggesting that public pensions may encounter a “willingness-to-pay crisis but not an ability-to-pay crisis”. While the number of individuals over the age of 65 will rise dramatically in the next 50 years, this lone statistic offers an incomplete picture. Gains in labour productivity and employment growth may actually make it easier for the working population to support the elderly. Drawing on simulations of adjustments in productivity, employment, wage growth and income distribution inequality (acknowledged as a detrimental factor), Weller illustrates the sensitivity of projections to underlying assumptions and shows that almost all of the OECD countries analysed will be able to maintain or increase benefits. In addition to providing useful country-specific pension system details, Weller also addresses the privatization argument. Privatization proponents suggest that individual accounts generate higher rates of return and therefore reduce contribution needs without reducing resulting benefits. In contrast, Weller compares the return rate stability of public pensions to the transition costs, increased beneficiary risks and generally higher administration expenses of private plans. For Weller, public pensions can be sustained for the foreseeable future if policies are adjusted to meet changing economic conditions whereas private pensions are likely to put the social safety net in jeopardy. For Dean Baker, as well, the supposedly negative influence of the aging population on future living standards is overly pessimistic. Examining the relative impact of productivity growth, population aging, health care costs and wage inequality on projected living standards, Baker shows that productivity growth affects future wages substantially more than any of the other factors. Regardless of the negative impact of other factors, the average standard of living in all 19 of the OECD countries examined will still rise. Valerie Walston …