ROLE OF INVESTMENT ON SOCIAL SECURITY AND ECONOMIC INEQUALITY

Abstract

Social security is one of the important factors to achieve societal progress and there by achieve sustainable economic growth.  One of the important measures of social security is to provide income security to individuals and households. There is a strong need for investing in systems that protect people from income insecurities. The adverse effects of income insecurity are more prominent where the income inequality exists. In each period, each person gets a different draw, of earnings or of asset returns, so that whenever differences cumulate over time, the members of any group will draw further apart from one another, and inequality will grow. Inequality at a moment of time is the fossilized record of the history of personal differences in risky outcomes. Income inequality and its economic effects have become a matter of generalized concern.  Hence investment on social security is one of the ways in which economic inequality can be alleviated or reduced. Investments on social security should be made with a view to achieving a reasonable balance between security and profitability objectives. A subsidiary objective of the investment is the social and economic utility with an objective to con­tribute to long-term national economic growth. Investments shall be managed in a cost-effective manner and invested in such a way as to exclude any loss, achieve a reasonable return and ensure adequate liquidity.

This paper studies the relation between investment pattern in social security and its role in bringing down economic inequality. Wealth or income inequality has a negative impact on economic growth. However, little is known about the exact mechanisms that drive these detrimental effects and in which specific circumstances these effects materialize. Indeed, inequality can affect economic growth through a number of different channels, such as social unrest, redistribution or aggregate saving and investment. By investing on social security measures this paper suggests that income inequality can be reduced and there by society can achieve a better economic growth.