social security contributions

Quick Reference

Charges levied on individuals or their employers to pay for the costs of social security benefits. The argument for having specific charges for this purpose rather than simply paying for social security through the tax system is possibly the hope that such charges will be less resented than taxes and that calling the benefits system an insurance scheme will remove stigma from accepting benefits, and the political freedom it confers to raise additional revenue without ‘raising taxes’. Social security systems are generally not true insurance schemes: in the UK, for example, National Insurance contributions are not sufficient to make the National Insurance system actuarially solvent.

Subjects: Economics.

Reference entries