The social security sky is not falling, but -

Every so often some politician in Washington starts crying that the social security sky is falling. Alicia H. Munnell, an economist with the Federal Reserve Bank of Boston, reckons such Chicken Little talk is nonsense.

''There is no serious crisis out there,'' she maintains.

Mrs. Munnell finds all the cries of alarm disquieting, however, because of their effect on the mental peace of those nearing retirement. ''People depend on social security,'' she noted.

There is a short-term financing problem in this decade which she reckons can be solved with minor adjustments.

But there are some fundamental decisions that need to be made about the future of the program which will affect those retiring in the first half of the 21st century - now not so long in the future.

About 2010, the postwar baby boom people will be retiring and the succeeding smaller generation will be supporting them through the social security system. Making some assumptions on fertility, the Social Security Administration projects that the number of beneficiaries per 100 covered workers will rise from 31 in 1981 to 50 by 2035, an increase of about 60 percent. The tax burden of workers together with their employers will rise from about 11 today to 17 percent of taxable payroll.

That wouldn't be terrible, Mrs. Munnell implies in an article in her bank's latest New England Economic Review. She points out:

1. Higher social security taxes in the next century will be offset by a decline in the resources required for clothing, feeding, and educating children.

The overall burden of dependents - senior citizens and children - will be lower in the 21st century than it was in 1965.

2. The scheduled tax rates are actually lower than the current payroll tax levy in many European countries (see chart).

West Germany, for instance, already has a rate of 18 percent of payroll.

3. If the large elderly, dependent population is not supported through social security, the working population will probably end up providing equivalent support through some other program. That's because of ''the historical inability of people to save for retirement and the inadequacies of the private pension system.''

At present less than half of the private nonfarm work force is covered by private plans. Further, Mrs. Munnell notes, the ''private system is incapable of offsetting the impact of inflation or of protecting workers who change jobs frequently. Moreover, pension benefits are concentrated among highly paid people; low-wage workers receive almost no private pension benefits.''

Whatever, many people figure that a combined employer-employee tax rate of roughly 17 percent is simply too high. So there is much talk of how the long-run costs of the system can be reduced.

Mrs. Munnell rejects proposals that would reduce the so-called ''replacement rate'' over time. That rate is the size of the pension as a percentage of pre-retirement income. A system of ''price indexing'' benefits, for example, would reduce the average replacement rate from the current 42 percent to 30 percent by 2010 and 25 percent by 2055.

If that price indexing system were adapted, those retiring in 2055 may not be literally poorer than those retiring today, but they certainly would feel it compared with their working neighbors. New retirees would not participate in the higher standards of living of the future.

Mrs. Munnell also rejects the assumption of such a system that private pensions would replace the weaker social security system. ''Lower-paid workers, '' she states,'' are simply not able to save for retirement, since their incomes are barely adequate to cover current consumption.'' Even middle-income workers are unlikely to undertake retirement saving, she adds, because many do not see far enough into the future to provide sufficiently for their old age. It was this shortsightedness that provided the initial justification for the social security program. Besides, people find it difficult to appraise their purchasing needs so far in the future, particularly because of high inflation.

The solution the Boston Fed economist proposes is to raise the retirement age from 65 to 68 in the 21st century. She offers several reasons that this would be feasible:

* Older workers will be in greater demand as the growth of the labor force slows. Moreover, an increasing proportion of employment will be in the service industries, where the work is generally less physically demanding.

* People are living longer. The life expectancy for men at age 65 has risen from 12 years in 1940, when social security benefits were first paid, to 14.3 in 1980. It is expected to increase to 15.8 years by 2000 and 17.3 by 2050. The comparable figures for women are more dramatic, increasing from 13.7 years in 1940 to 18.7 in 1980 and projected to rise to 21.1 years in 2000 and 23.2 by 2050.

* Tomorrow's elderly are expected to be healthier, more capable of working. Already a large majority of people under 70 are free of physically disabling limitations.

* Older workers after the turn of the century will be better educated than their counterparts today. The baby boom generation has achieved a higher level of formal schooling than any previous generation. ''Improved education and training will enable them to adapt to the changing technological demands of the workplace.''

Besides, Mrs. Munnell adds, if older people work longer, it might ''alleviate their isolation in a society that seems to have no place for them, and restore their dignity and self-reliance.''

As for those elderly not able to work, she suggests an expanded disability insurance program.

If the retirement age is boosted to 68, costs in the year 2035 would be 15.4 percent of taxable payroll rather than 17 percent.

So, in fact, the adjustments needed for social security are quite manageable. Mrs. Munnell is just worried that Congress will do them ''messily.''

US social security tax burden --not so bad (1980 tax rates for selected countries)

Country Employer pays Employee pays Total (percent) (percent) (percent) Austria 25.5 13.95 39.20 Belgium 27.43 10.13 37.56 Canada 4.49* 3.95 8.44 France 37.41 11.04 48.45 West Germany 17.62 16.12 33.74 Italy 47.57 7.45 55.02 Japan 11.47 9.10 20.57 Netherlands 27.72 24.57 52.29 Sweden 32.60 .15 32.75 Switzerland 8.24 9.48 18.02 United Kingdom 13.70 6.75 20.45 United States 10.68 6.13 16.81

* Excludes work injury insurance. Source: Federal Reserve Bank of Boston

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