The multidimensional adequacy of social insurance benefits and insurability

In this article the adequacy of social insurance benefits is addressed from the perspective of eight fundamental goals of social insurance. With respect to these goals, the legislated level of the benefit and other conditions represent tools to achieve adequate levels of benefits vis-à-vis contributory effort. The goals address income risks of various sorts: (i) income compensation; (ii) securing a decent standard of living; (iii) universality, implying simplicity and a high takeup of social rights; (iv) reducing income risk deriving from physical incapacity; (v) safeguarding insurability by balancing the expected payoff to the insured and the value of the contributions paid over the lifetime; (vi) intergenerational equity; (vii) containing work and savings disincentives; and (viii) risk reduction (prevention). A simple model serves to clarify what is needed to achieve benefit adequacy together with insurability and contribution adequacy. An example of income support in working age, based on Israeli data, illustrates the use of specific instruments to achieve a decent standard of living while containing economic disincentives. The example stresses the importance of synchronizing efforts with institutions outside the social insurance system.