This is the ninth consecutive annual convention of the American
Federation of Labor that I have been privileged to address on the
subject of social security. These nine years measure the full span
of development and operation of the present social security system
in this country. I think the American Federation of Labor has a
right to feel gratified that the social security program, which
it has supported so faithfully and so effectively, has advanced
so far in such a short period of time. However, gratified as we
should be, as to the progress that has been made, I am sure that
we all realize that the present program is far from perfect and
far from providing effective protection against all of the economic
hazards which beset the workers of this country.
But while we may feel some disappointment that during the last
two or three years progress in the development of an effective system
of social security has not been so rapid as during the previous
years, we must recognize that we have a war to win and that necessarily
the attention and energies of everyone have been directed toward
that end. I think we would all have to agree that another reason
why the people of this country have not given as much thought and
attention to ways and means of improving our social security system
during the last two or three years is because full employment has
obscured the fact that destitution and fear of destitution continue
to be grim realities to millions of our people.
Of course we are all agreed that probably the number one economic
and social objective of this nation must be full employment and
full production. Everybody wants to make his maximum contribution
toward the creation of the sum-total of goods and services necessary
to maintain an ever improving standard of living. However, what
many people fail to realize is that even with full employment the
chief causes of human destitution will continue to exist. Unemployment
is only one cause of separation of a worker from his pay check.
Sickness alone in normal times has been a far greater cause of cessation
of earnings and consequent destitution than has unemployment. When
we add to sickness, permanent disability, old age and premature
death we must recognize that cessation of earnings from these causes
constitutes a constant and serious threat to the welfare and happiness
of the workers of this country and their families.
Individual savings, private insurance, home ownership, and the
help of friends and relatives do not provide the necessary protection.
However, the industrial nations of the world have discovered that
at least a minimum basic degree of protection can be afforded through
the device of contributory social insurance. As Winston Churchill
has said, social insurance is merely a device for "bringing the
magic of averages to the rescue of the millions." That is to say,
like all forms of insurance, it enables people who are exposed to
the same risk to share that risk, thereby making that risk bearable
when it could otherwise be unbearable to the individual and his
family. Or, putting it another way, it enables workers to spread
their income over periods of non-earning as well as over periods
of earning, thereby assuring them of a constant minimum purchasing
power with which to obtain the necessities of life.
Contributory social insurance has proven to be such an effective
means of protection against economic hazards that no nation which
has adopted a system of social insurance has ever abandoned it,
but, on the contrary, has sought to extend and strengthen it. Indeed,
social insurance has survived not only changes in governments, but
also survived and grown despite the rise and fall of nations themselves.
Undoubtedly the reason why social insurance has proved to be such
an effective means of protection against persistent economic hazards
is that it provides for benefits on a specific and pre-determined
basis; it provides these benefits as a matter of right, it buttresses
this right through the payment of contributions by or on behalf
of the beneficiaries; and it provides a systematic long-range method
of financing these benefits.
What we should have in this country is a unified, comprehensive
social insurance system providing protection against all of the
hazards that I have mentioned. At present, as you know, we have
two social insurance systems. One is a straight Federal system covering
the hazards of old-age and premature death, which we call the Federal
old-age and survivors insurance system. The other is a Federal-State
system of unemployment insurance, which came into existence because
of a Federal unemployment tax, but which is operated by the States
themselves. There is no reason why we cannot convert these two social
insurance systems into a single unified, comprehensive system of
social insurance which should require only one contribution, one
report, one record, and one local office where employers and employees
could go to ascertain their rights and duties. Such a system could
be decentralized in its operation and could provide for representation
of groups affected. Thus decisions regarding benefits would be made
by local officials in immediate contact with the persons affected
and in immediate contact with the circumstances surrounding the
individual case.
Such a system should of course cover all of the workers of this
country, not only those working for others but also those working
for themselves. Such a system would provide the maximum amount of
protection at a minimum cost and in the simplest and most efficient
manner. However, our belief that such a system would be the most
effective should not discourage or prevent us from undertaking to
improve the two separate social insurance systems we already have.
And that is what I want to talk about today.
Unemployment Insurance
First, as to unemployment insurance, there is much that can be
done by the States themselves to improve the present unemployment
insurance laws. Forty-four legislatures will meet next year. The
Social Security Board has already called to the attention of the
Governors of these 44 States and the State unemployment insurance
agencies the desirability of seeking appropriate legislative action
at the forthcoming sessions of the State legislatures. Here are
some of the things the States themselves can do to improve their
own State unemployment insurance laws:
1. The States could make their laws applicable to all employers
in the kinds of businesses now covered by their laws instead of
only to employers of a certain size. Already 13 States do cover
all employers regardless of the number of employees, and there is
no reason why the 38 other jurisdictions could not do so as well.
2. All States have sufficient funds so that they could increase
the maximum unemployment benefit payment to at least $25 a week.
At present, only one State pays as much as $22 and 26 States have
a maximum of $16 or less. The result of these low maximum provisions
is that on the average an unemployed worker receives only about
one-third of his wage loss in benefits.
3. All States have sufficient funds so that they could pay benefits
for at least 26 weeks to any eligible worker who is out of work
that long. At present, there are only 3 States that pay as much
as 20 weeks to all eligible workers who are out of work that long.
The majority of States do not pay for more than 16 weeks. The effect
of such limited duration of benefits is demonstrated by the fact
that in 1940, which was a reasonably good year, fifty per cent of
unemployed workers exhausted their benefit rights before they found
another job.
4. The highly restrictive disqualification provisions that have
been written into State laws to prevent workers who are involuntarily
unemployed from drawing benefits should be modified. While we would
all agree that only workers who are able and willing and available
for work should receive unemployment insurance benefits, there is
no place in a social insurance law for purely penal provisions or
provisions which require an unemployed worker not only to prove
that he is involuntarily unemployed but also to prove that it is
due to the fault of his employer.
All of the foregoing changes that I have suggested can be made
in the State laws and do not require any further legislation by
Congress. If these changes are not made in our present system of
unemployment insurance there is no question but that it will not
be the strong first line of defense against unemployment which it
can and should be. An independent economist working for the Committee
for Economic Development has estimated that these State laws in
their present form will probably compensate for only ten per cent
of the annual wage loss which will be sustained during the postwar
period.
It would be necessary for the Congress itself to act in order to
provide unemployment insurance protection to Federal employees.
It also would be necessary for Congress to act in order to provide
unemployment insurance protection to maritime workers, regardless
of whether they are Federal employees or employees of private concerns.
I think we would all agree that it is not only fair but necessary
to provide unemployment insurance protection to Federal employees,
who for the most part are war workers in arsenals and navy yards
and in other employments which make them subject to the same lay-offs
as employees of private employers. I think we would also agree that
maritime workers exposed to the extraordinary hazards that war entails
should also be provided this protection. There are other ways in
which Federal legislation could improve and strengthen the present
Federal-State system of unemployment insurance without affecting
its basic character. Thus, requiring that a State law meet certain
minimum benefit standards in order that employers in that State
receive credit against the 3 per cent Federal unemployment tax would
protect States that desire to improve their standards from unfair
competition by employers in other States. Since these State laws
came into existence because of the imposition of the 3 per cent
Federal unemployment tax, there is no logical reason why the Congress
of the United States should not lay down the conditions that the
States should meet in order that their employers receive credit
under this Federal tax law. In addition to prescribing minimum benefit
standards, the Congress could provide a Federal re-insurance fund
to protect State unemployment insurance funds in case the claims
upon any State fund should be more than it could meet at the normal
rate of contribution of 2.7 per cent of payroll. If this were done,
the States could not only be protected but also encouraged to make
their scale of benefits more adequate.
Old-Age and Survivors Insurance
Let me now discuss briefly some ways in which our present Federal
old-age and survivors insurance system could be improved. This system,
as you know, provides monthly insurance payments to the insured
worker and his family when he is old, or to his family when he dies
whatever his age. Last August we began paying the one-millionth
benefit under this program. Those payments go, by the way, to the
family of a union molder in Cleveland, Ohio--a young man who had
been secretary of local 218 of the International Molders and Foundry
Workers Union. The young widow and the 2 little children in that
family are receiving approximately $40 a month and monthly payments
will continue until the children are 18 years old. Such benefits
will total more than $11,000 during the children's school years
and might reach $15,000 or more, counting benefits payable to the
widow after she is 65 if she lives out her normal life expectancy.
Our old-age and survivors insurance system is sound and successful
as far as it goes, and it covers millions of workers and their families.
But it should be extended to the millions not yet covered by it,
and we should liberalize the benefit payments and we should add
disability insurance protection. This can be done only by Act of
Congress, and our recommendations have accordingly been sent to
Congress. One thing, however, the Board itself has the power to
improve, and I am glad to tell you today that we are taking action
to improve it.
This relates to the re-calculation of benefits of the elder men
and women who have gone back to work--usually to war work--after
having retired and claimed their old-age benefits. The monthly benefits
they had been drawing were based, of course, on their wages of pre-war
years.
But war-time wages are higher. Moreover, workers and employers
pay social security taxes, or premiums on those war-time wages,
just as they did on their pre-war wages. It has, therefore, seemed
peculiarly unfair that war workers who had once retired and received
their insurance benefits on the basis of pre-war pay should not
be able to get the larger benefits, based on their wage records
down to date, including their much higher war-time wages.
This situation was not foreseen when the Social Security Act was
passed in 1935, or even in 1939 when it was amended, but as applied
to the present problem the intent of the law seems clear, and the
Board has ruled accordingly. I am, therefore, glad to tell you that,
upon application, we will re-calculate the monthly benefit payments
of any worker who, since retiring, and claiming his benefits, has
gone back to work on a covered job at pay which could increase his
benefit rate.
I hope you will pass on this news to the older men and women in
your membership and among your acquaintance everywhere. Remember
it stands to benefit only the worker past 65 who filed his claim
and later returned to work for higher average pay than he had received
before.
We have made progress on a plan worked out with the United States
Civil Service Commission to protect the old-age and survivors insurance
rights to the large number of persons who have left insured employment
to work for the Federal Government during the war. This has been
a long and complicated job because it is necessary to work out a
plan that would not interfere with the functioning of the Civil
Service Retirement Fund. We believe we have worked out a solution
whereby persons who contribute to the Civil Service Plan but who
secure no annuity because they worked less than 5 years for the
Federal Government will have their social security rights protected.
This can be done by transferring the necessary employee social security
contributions from the Civil Service Retirement Fund to the old-age
and survivors insurance fund, and refunding to the employee the
balance of the amount to his credit in the retirement system. In
this way persons who have worked for the Federal Government and
also have an insurance status under the Social Security Act will
gain additional insurance protection toward old-age benefits and
survivors benefits. In some cases the value of the total survivors
benefits may be equivalent to $5,000 or $10,000 of insurance protection.
Another matter that can and should be taken care of right away
is to protect the social security rights of men and women who have
gone into military service. We relieve that service in the armed
forces should be counted toward insurance benefits just as under
existing law we count employment in private business or industry.
A number of bills have been pending in the Congress for some time.
However, the problem was a complicated one and only within the last
few days has a plan been worked out which not only protects the
social security rights of the men and women who have gone into military
service but also does not interfere with any veterans benefits to
which they may be entitled.
I am confident that not only these matters that I have mentioned
will receive the attention of Congress but also other fundamental
proposals for improving the present social insurance system. Some
of them of course are more controversial than others. The ones I
have mentioned are relatively non-controversial. Probably the least
controversial are proposals to provide Federal grants-in-aid to
the States to enable them to provide adequate assistance to all
needy persons. Probably the most controversial are the proposal
to incorporate the present unemployment insurance system into a
comprehensive national social insurance system and the proposal
to include health insurance in this national system.
Time will not permit me to discuss the pros and cons of these two
controversial but fundamental proposals. However, before closing
I should like to point out that health insurance is quite different
from what has been called "socialized medicine" or "state medicine."
Health insurance is not a system of medical practice but a method
of paying for the cost of medical care. It is a method whereby workers
can pay a little at a time and in advance medical bills which are
unpredictable in time and in amount, but are an ever present threat
and a serious barrier toward obtaining adequate medical care. In
short, health insurance is a device whereby workers can pay their
medical bills without hardship and whereby doctors and hospitals
will be guaranteed payment for the services they render. Patients
will be free to choose their own doctors and doctors will be free
to choose their own patients.
But while we are debating these fundamental but still controversial
phases of an ideal social insurance system, we must also continue
to bend our efforts toward improving the two social insurance systems
we already have. That is to say, we should not let our striving
for what we consider the best system prevent us from also undertaking
to make the present system better.
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