There are strong indications that some form of privatization of Social Security will happen soon. President Bush may not get everything that he wants but there is a reason why he is starting off with such an ambitious agenda (Related article: How to negotiate smartly?). He is hoping that at least even partial privatization will start the process of complete privatization in a few years.
So what does privatization of Social Security mean for business leaders?
While it is still too early to predict what kinds of business opportunities (Read previous article: New business opportunities from privatization of Social Security), a few things are certain:
- The equities market will go up. According to the Social Security Administration, with 1% point of the 12.4% Social Security payroll tax, when invested in private accounts starting in 2006, and returning an average 6% per year, by 2013 the pie will be as large as half-a-trillion dollars. This will definitely have a huge impact on the US (and global) economy.
- The private accounts will also bring a completely new set of investors into the market. While they would be doing so through funds and vast majority of them may never bother to find out anything about how the markets work, a small number of Americans will definitely be exposed to the world of investing and trading. That is great news for financial planners and online trading firms.
- Many CEOs are concerned that with already very high costs of providing healthcare to their employees, they may be hurt further if payroll taxes are raised to shore up Social Security. Implmentation of President's plan would enable businesses to control their personnel costs and be able to invest that capital elsewhere.
Recommended next steps
- The Social Security debate has just begun; so stay informed. If you can influence the policy debate, this is a good time to do it.
- Think tanks and lobbying groups are preparing excellent analyses of the impact of privatization of Social Security on US economy, budget, Medicare, Medicaid, personal incomes of Americans, standards of living for retirees, impact by gender/ethnic group/marital status/age, etc. Try to study these analyses to glean insightful information on demographic and economic trends. A lot of new business opportunities are hidden in these trends. Note: Not all analyses are without a political agenda; so read carefully and watch out for the assumptions.
- Put a business plan together to capitalize on one of the biggest change ever in the lives of American people.
Recommended link: Growth opportunities