Is Social Insurance the Safety Net We All Need? A Look at Personal Identity and Why It Matters

Lena Voss in Politics & Policy August 2025 • 4 min read.

"Explore how social insurance, beyond just financial aid, protects our core identities and ensures a stable society."

Social insurance, providing compulsory coverage against income loss due to sickness or unemployment, is a cornerstone of many welfare states. While widely implemented, it remains a subject of debate. Unlike market insurance, social insurance operates on a non-actuarial basis, meaning that lower-risk individuals share the costs of insuring those considered higher risk. This structure often faces criticism as a form of compulsory income redistribution.

Critics like Robert Nozick have argued that taxing earnings for redistribution equates to forced labor, while Milton Friedman claimed it undermines individual freedom. These arguments challenge the ethical basis of social insurance, framing it as an infringement on personal liberties and economic rights.

This article explores a different perspective, presenting an argument for compulsory social insurance rooted in the protection of personal identity. Often called the 'argument from identity,' it emphasizes the importance of safeguarding living standards and social positions—factors crucial to maintaining our sense of self. This approach aims to address criticisms by demonstrating that social insurance can prevent exploitation and uphold individual freedom.

Why Living Standards and Social Identity Are Intertwined

A surreal image representing social insurance as a safety net protecting personal identities.

Explanations for the rise of social insurance vary. Historians link its emergence to industrialization and the need for social stability. Economists justify it as a stabilizer for the market economy, especially during high unemployment, and as a response to market failures in providing income security.

Arguments in welfare state debates often highlight the role of social insurance in sustaining living standards and social positions during crises. For instance, the 1944 Swedish Social Welfare Committee emphasized that sickness payments should maintain living standards during temporary work incapacity. Similarly, a 2006 Swedish report asserted that social insurance protects our living standards. These viewpoints underscore a broader concern for preserving socio-economic stability.

Personal Identity Defined: Personal identity, psychologically, encompasses the central facts about a person's personality, self-perception, and sense of individuality.
Social Identity's Role: Social identity refers to aspects of self-knowledge derived from membership in social groups. Social psychologist Marilyn B. Brewer and Miles Hewstone highlight that group membership shapes expectations, customs, and beliefs, central to our self-perception.
Income and Identity: Economist Lars Osberg notes that our sense of identity is linked to observable manifestations through consumption and socio-economic factors like job type and neighborhood. Economic insecurity can significantly threaten personal identity.

Maintaining a steady income is essential for pursuing ambitions, preserving relationships, and upholding long-term commitments. Economic hardship can strain family relations and friendships, highlighting income stability as a prerequisite for overall stability. Social position and identity are also tied to residence and housing, where losing one's home can lead to feelings of personal failure and identity loss, as noted by Barbara L. Gross in her study on home foreclosures.

The Path Forward: Reconciling Social Insurance and Personal Identity

The ideas presented here lay the groundwork for future discussions on compulsory social insurance, offering a framework to address income inequality, protect personal identities, and promote social stability. By grounding social insurance in the principles of personal identity, this article provides a basis for broader acceptance and effective implementation. Continuing the dialogue is essential for adapting social insurance to meet changing societal needs and upholding individual well-being.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

Everything You Need To Know

What is the core function of social insurance, and how does it differ from market insurance?

Social insurance primarily offers compulsory coverage against income loss due to sickness or unemployment, serving as a foundational element of many welfare states. A key distinction from market insurance lies in its operational basis: social insurance functions on a non-actuarial principle. This means that lower-risk individuals contribute to support higher-risk individuals, which often leads to debates and criticism. Market insurance, in contrast, typically operates on actuarial principles, where premiums are based on individual risk assessments.

How does social insurance relate to personal identity, and why is this connection important?

Social insurance is linked to personal identity through the protection of living standards and social positions, which are vital for maintaining one's sense of self. Economic insecurity, caused by factors like job loss or illness, can significantly threaten personal identity. Maintaining a steady income, supported by social insurance, allows individuals to pursue ambitions, preserve relationships, and uphold long-term commitments. This perspective emphasizes social insurance as a means to prevent exploitation and uphold individual freedom by safeguarding the socio-economic stability that underpins personal identity.

What are some common criticisms of social insurance, and how does the 'argument from identity' attempt to address them?

Critics such as Robert Nozick and Milton Friedman have raised significant concerns about social insurance. Nozick argues that taxing earnings for redistribution constitutes forced labor, while Friedman believes it undermines individual freedom. The 'argument from identity' counters these criticisms by focusing on how social insurance protects living standards and social positions, which are fundamental to personal identity. By framing social insurance as a protector of individual well-being and freedom, it attempts to counter the notion that it infringes on personal liberties and economic rights.

How do living standards and social identity intertwine, and what role does income play in this relationship?

Living standards and social identity are closely connected, as our sense of identity is linked to observable manifestations such as consumption, job type, and neighborhood. Economist Lars Osberg notes this connection. Maintaining a steady income is crucial for pursuing ambitions, preserving relationships, and upholding long-term commitments. Economic hardship can strain family relations and friendships, highlighting the importance of income stability for overall well-being. Social position and identity are also tied to residence and housing, where losing one's home can lead to feelings of personal failure and identity loss.

Why is the ongoing discussion about social insurance essential, and what future implications does it hold?

Continuing the dialogue on social insurance is crucial for adapting to evolving societal needs and upholding individual well-being. By grounding social insurance in the principles of personal identity, a framework is provided to address income inequality and promote social stability. Future implications include the potential for broader acceptance and more effective implementation of social insurance programs, ensuring they continue to meet the changing needs of society while protecting the personal identities of individuals.