What can be a potential consequence of demographic changes on the Social Security program?

The need for structural reforms in the Social Security program is a potential consequence of demographic changes primarily due to shifts in the population, such as an aging population and declining birth rates. As the number of retirees grows relative to the working-age population, the Social Security system faces increased financial pressure. The primary funding for Social Security comes from payroll taxes collected from current workers, which are used to pay benefits to current retirees.

When demographic changes lead to fewer workers supporting more retirees, the financial sustainability of the program could be jeopardized. Structural reforms may be necessary to address these challenges, which could involve adjusting benefit amounts, raising the retirement age, changing the funding mechanisms, or introducing new contributions to ensure that the system remains solvent for future generations. This proactive approach aims to adapt the program to reflect the realities of demographic shifts and maintain its effectiveness and reliability.