I have been asked to discuss the subject of "social security in
post war America." Before I plunge into a discussion of this subject,
I think it might be well to pause and consider just what we mean
when we use the term "social security." I say this because social
security has come to have such an inclusive meaning that its usefulness
as a term to describe a specific program of action may be impaired.
In its larger sense I think we would all agree that social security
must mean above all full employment and full production. I think
we would all agree that it must also include decent housing, education
and health, as well as the elimination of destitution.
I do not propose to discuss with you social security in this larger
sense of the term. I shall discuss social security only as a specific
program designed to eliminate want by preventing the loss of current
income. Regardless of how completely and quickly we achieve the
goal of social security in the larger sense, it is not only feasible
but vitally necessary that we establish a specific program for the
elimination of want in this country of ours.
Some people have said that we do not need a social security program
if we achieve our goal of fill employment and full production. Other
people have said, and indeed the same people have said, that unless
we do achieve reasonably full employment and full production we
will not be able to support a social security program. These statements
seem to suggest that either way we should not have a social security
program. However, I think they fail to take into account that it
is necessary to provide a system designed to eliminate want, even
though we achieve the goal of full employment and full production,
because the working people of this country will still be confronted
with the great economic hazards of sickness, physical disability,
old age, and death, as well as intermittent unemployment. All of
these great hazards mean interruption of earnings, and loss of earnings
will still spell want even in a land of plenty.
I mention intermittent unemployment as a continuing major cause
of loss of earnings because under a system of free enterprise we
must encourage invention, improvement, elimination of waste, variety,
and continual adaptation to changing ideas and circumstances. This
must mean that as the processes of production and distribution change
individuals will be forced out of one employment and be obliged
to seek another. This is the price, if it can be called a price,
that we pay for maximum production, free enterprise, and free labor.
Of course, to the extent that we fail to achieve full employment
and full production, a system of social security designed to eliminate
want is all the more necessary. Nor should we overlook the fact
that a system designed to eliminate want also does actually make
a great contribution to the maintenance of full production and full
employment by assuring the maintenance of mass purchasing power,
upon which mass production must depend.
When we undertake to establish a social security system designed
to eliminate want we are not striving for strange and new ideals,
nor is it even necessary for us to depend upon strange and new methods.
We have a world history and world experience upon which to base
our planning and our action. Indeed, we already have in our own
Social Security Act the fundamental elements of a program of social
security designed to eliminate want. It is only necessary for us
to extend, expand, and improve upon our present Social Security
Act in the light of the experience and thinking that has developed
since that act was passed in 1935.
Since the security of the large majority of people is dependent
upon their earnings, the focal point of our efforts should be to
provide reasonable protection against interruption of income due
to sickness, accidents, old age, death, and unemployment. In other
words, we should strive to devise a system which will spread income
over periods of non-earning as well as over periods of earning.
This can be accomplished to a large extent by a system of contributory
social insurance under which benefits are paid to compensate for
a reasonable proportion of the wage loss sustained. The cost of
such benefits should be financed out of contributions made by the
workers of this country and by their employers, supplemented ultimately
with some contribution from the Government, representing the entire
community.
However, even a comprehensive contributory social insurance system
cannot provide complete protection under all conceivable circumstances.
A social insurance system is somewhat analogous to a tremendous
group insurance policy which undertakes to provide a minimum degree
of protection to all the individuals insured but, by its very nature,
cannot take into account the circumstances of each individual. Moreover,
a contributory social insurance system cannot insure against hazards
that have occurred prior to its establishment any more than a fire
insurance policy can insure a house that has already burned down.
Therefore, there is also need for a basic and comprehensive system
of public assistance to meet the needs of individuals and their
families which cannot be met out of their own resources.
That, in brief, is the sort of social security program I think
we should have in post war America. Now I should like to discuss
a little more fully the social security program we already have
in operation and how I think it should be strengthened. Since the
problem of unemployment is upper most in all of our minds, I should
like to discuss first of all how a system of unemployment compensation
can help deal with that problem.
You will be interested to know that the peak of employment was
reached as long ago as July 1943 and that ever since October 1943
the number of people seeking jobless insurance has been increasing.
By 1944 the weekly average of total claims had risen to approximately
134,000; May 1st of this year the weekly average increased another
17 percent. Then, in the week preceding the collapse of Japan, total
claims more then doubled. By the first week after the close of the
war, this total had tripled to reach its highest point in history:
961,000. Since then the total has continued to mount and it is now
about a million and a half.
But the fact that a million and a half people have filed claims
for unemployment compensation does not mean that this is all the
unemployment there is throughout the country.
In the first place unemployed Federal Government workers, including
those in Army arsenals or Navy shipyards, are not covered under
unemployment compensation and, therefore, are not eligible for benefits.
Nor are the layoffs among maritime workers, employees in small establishments,
agricultural labor and others, which are specifically excluded in
the law, reflected in the number of unemployment compensation claims
filed.
Six industrial States alone accounted for 60 percent of the nation's
claims load in the week ending September 15. Michigan, with more
than 228,000 total claims, carried the heaviest load. As you might
guess, the five other States severely affected were: New York, Illinois,
New Jersey, California and Pennsylvania. Illinois alone shouldered
eleven percent of the nation's total.
Within these States, unemployment fell heaviest upon cities where
large munitions orders had been concentrated during the war. In
Chicago, during the week ending September 15, close to 92,000 of
workers asked for out-of-work insurance at their local employment
service offices. Only Detroit and New York reported heavier claims
loads.
Trend of Reconversion Unemployment
I think it is generally agreed that reconversion unemployment has
by no means reached its peak. The arrival of V-J Day precipitated
bulk cancellation of war orders, causing lay-offs of about 1,800,000
workers during the following 10-day period. But it takes time for
such cancellations to stop production all the way down the line,
through the whole pattern of contractors and subcontractors. Therefore,
lay-offs are still continuing at the rate of 250,000 a week. In
addition we must not forget that, with the demobilization of troops
under way, we may expect more and more veterans in these next few
months to join the ranks of civilian war workers in search of jobs.
Last month discharges from the armed forces amounted to 135,000,
but by next February the number will be close to a million a month.
Just stop to think what it means to absorb that number into the
labor market.
Four factors, however, are calculated to offset this potential
pool of unemployment: (1) readjustment of hours of work; (2) withdrawal
of war emergency workers (i,e., women, school-age youngsters, elderly
workers, etc.); (3) the pending demand for unfilled jobs; and (4)
the expansion of peacetime production. But before these four factors
can operate to bring the supply and demand for labor into substantial
equilibrium, it appears certain that we must undergo a period of
reconversion involving extensive unemployment.
The Director of War Mobilization and Reconversion has predicted
that the total number of jobless workers in this country will probably
be 6 million by the end of the year and that by early spring the
total may reach 8 million.
Therefore, we are fortunate that we have in existence in this country
today a nation-wide system of unemployment compensation. Unemployment
compensation, as you know, is one of the three major programs provided
under the Social Security Act; the other two programs include the
Federal old-age and survivors insurance system and the Federal-State
system of public assistance.
Prior to 1935, when the Social Security Act was passed, only one
State had an unemployment compensation law, your neighbor State,
Wisconsin, which is also my home State. I do not believe that Wisconsin
would have been able to continue its law if the Social Security
Act had not been passed, because of the fear of Wisconsin employers
that they would be at a competitive disadvantage with employers
in other States if they had to pay a payroll tax for unemployment,
and employers in other States did not.
The Social Security Act, as you know, levies a 3 percent unemployment
tax on payrolls, but allows employers to offset 90 percent of that
tax by contributions they have made (or have been forgiven) under
a State unemployment compensation law. As a result, all of the States
enacted unemployment compensation laws, the last State being Illinois.
Possibly the reason for Illinois' delay was that a committee of
the American Bar Association, the Chairman of which was an eminent
lawyer in this city, had reported that this feature of the Social
Security Act was unconstitutional. However, the United States Supreme
Court upheld its constitutionality in May 1937 and Illinois acted
immediately thereafter.
The purpose of unemployment insurance is to provide quick money
payments to workers temporarily between jobs. It differs from public
assistance insofar as the latter leans heavily on individual case
work investigations. Unemployment insurance is payable to workers
involuntarily unemployed who fulfill a few simple conditions without
the requirement of a means or needs test. Necessarily, an unemployed
worker must have earned a minimum amount of wages in insured employment;
he must also be able to work and willing to accept suitable work.
Benefits cannot be denied, however, if a worker refuses unsuitable
work. Thus, he can decline work that entails lower wages, longer
hours, or poorer working conditions than prevail generally in the
community for that kind of a job. These provisions protect not only
workers but conscientious employers and the community generally.
Likewise, a worker is not required to take a job which is not suitable,
having regard for his particular skill, age, sex, health, or other
personal circumstances.
At any one time some people who fall out of work do not have the
qualifications for the jobs that are open, or are not located in
the communities where jobs for which they are qualified exist. This
happened even in war-time. However, there is no evidence that paying
benefits under such circumstances was an inducement to idleness.
The fact that benefits are a percentage of the wage loss, that they
are not paid for the first week or two of unemployment, and that
they continue for only a limited number of weeks of unemployment,
provides enough economic pressure on most beneficiaries to take
jobs when they can get them.
But the question has been raised whether people who have been earning
relatively high wages in a war job will be willing to take a lower
wage if they can draw unemployment compensation. Naturally, any
one is reluctant to take a cut in his income, regardless of whether
he can draw unemployment compensation while he is unemployed. In
that respect unemployed workers do not differ from you and me.
It is true that unemployment compensation will permit an unemployed
worker a greater opportunity to hunt for a job paying somewhat as
much as his former job. But is that an evil? Should not the workers
of this country have a reasonable opportunity to find a job which
utilizes their highest skill? It is only by utilizing skills to
the utmost that this country can achieve maximum production and
maximum income.
Economic Contribution of Unemployment
Compensation
To the individual worker, suddenly dismissed from his war job,
unemployment insurance provides a small weekly income that will
help to tide him over between jobs. Some recent studies indicate
that large numbers of workers have very small savings in spite of
the figures on total national savings which have been so widely
quoted. Where the worker has no savings his unemployment insurance
may be the only source of income on which to support himself and
his family until he finds work. This is important not only for the
worker's economic well-being but also for his morale because he
is depending on insurance, not charity. It is also important
to such a city as Chicago. Without unemployment insurance many of
these 92,000 dismissed war workers, who have applied for benefits
might have to turn to public relief for financial help, while out
of work.
Where workers do have savings, unemployment insurance will
shift some of the burden of living expenses from the bank account.
This has important implications for industry. When another job is
found, the worker will have some of his savings intact to buy those
durable goods which he was unable to secure during the war. It is
this demand for radios, automobiles, refrigerators, etc. that will
really keep the wheels of industry turning. But insofar as workers
have to dig into their savings to support themselves during unemployment,
the money for these durable goods will be drained off to buy bed-rock
day-to-day necessities.
Old-Age and Survivors Insurance
Lest I give the impression that the present social security program's
only contribution to the reconversion period is through unemployment
insurance, let me say a few words about our other insurance program:
old-age and survivors insurance. This program, as the name implies,
has a two-fold function: (1) to pay benefits to retired elderly
workers and certain of their dependents, and (2) to provide a monthly
income for widows of insured workers and their dependent children.
During the war period, when labor was at a premium, nearly three-quarters
of a million workers who qualified for old-age and survivors insurance
have chosen to forego their insurance and stay on the job. Now that
the pressure for workers in war industries has been lifted, many
of these men and women will be encouraged, with the help of their
old-age benefits, to retire from the labor force.
For the same reason, survivors insurance will enable many widow's
with children to give up their jobs and devote their energies to
the care of their children and home. In both instances, old-age
and survivors insurance will help men and women who wish to retire
from the labor force to do so, making more job opportunities available
for those seeking work. The benefits they receive will give them
a degree of independence and at the same time help to maintain their
purchasing power.
It is a recognized fact that the income which flows out in social
insurance benefits has a value disproportionate to its size in maintaining
the nation's purchasing power. These benefits are paid to persons
whose usual income has been reduced or stopped. Their insurance
benefits give them purchasing power which, by and large, they otherwise
would lack. Soon spent for essentials, these payments pass quickly
into the stream of commerce through the hands of the neighborhood
grocer, the landlord and others who provide their basic necessities.
Moreover, the feeling of protection which a comprehensive program
of social security creates for the individual - whether or not he
has occasion to claim his rights - is essential to social stability
and economic progress.
After the Reconversion
These next few months of reconversion will prove critical in determining
what kind of postwar economy we will develop. The worker envisions
a bright future in terms of full employment; the business man, in
terms of high production levels. All of us wish to see the results
of our contribution in terms of an ever increasing standard of living.
However, what many people fail to realize is that even in prosperity
the chief causes of destitution will continue to exist.
Of the five chief causes of poverty in the United States - sickness,
disability, old-age, death of the family breadwinner and unemployment
- only unemployment is closely related to the war economy and the
business cycle. The other four will continue to be major threats
to our economic security whether or not prosperity exists.
How can our present social security system be strengthened to provide
our people with a minimum of security against these economic hazards?
Under unemployment insurance, the amount a jobless worker receives
and the number of weeks for which he can draw benefits if he remains
unemployed differs greatly from State to State for workers with
similar records of past earnings. Contribution rates differ like-wise
for employers in the same business and with like employment and
unemployment experience. Minimum standards need to be established
to eliminate such disparities as those which allow a worker in one
State to collect a maximum of $624 in benefits and a worker with
the same wage record in an almost adjoining State, only $210. Too
many jobs are excluded from the program. Benefits are too short
in duration and too small in amount. In many States, payments are
further restricted by severe disqualification provisions. All these
shortcomings can be eliminated, some by State action alone, some
only through changes in the Federal law. It is these shortcomings
which have given rise to the recent debates in Congress relative
to supplementation by the Federal Government of benefits payable
under State laws.
Turning to our basic insurance program - old-age and survivors
insurance - we find that it covers only about three-fifths of all
the jobs in the nation. Agricultural labor, domestic servants, federal
workers, employees in nonprofit institutions, and the self-employed
constitute the bulk of the group now excluded. Protection needs
to be extended to these 20 million men and women. Likewise, the
benefits should be made more adequate; women should be eligible
for old-age insurance at 60, instead of the present 65, and service
in the armed forces should be counted toward the insurance rights
of our veterans.
And now let me discuss the greatest threat of all to the economic
security of working people, aside from mass unemployment. Earlier
I mentioned five basic threats to an individual's earning power.
Three of these - unemployment, old age, and death of the family
breadwinner - are now covered by social insurance. Sickness and
disability, however, are the two remaining areas for which no provision
has been made under the Social Security Act. And yet, the losses
and costs attributable to sickness and disability have been the
greatest single cause of poverty and dependency in the United States.
The United States is the only nation among the major industrial
countries of the world with no provision for offsetting loss of
earnings when a worker is sick or disabled or for assuring that
adequate medical care is available to persons who require it, regardless
of their ability to pay for such care at the time they need it.
Contrary to popular assumption, the United States is not
the healthiest nation in the world. Probably the best single basis
for international comparison is the death rate among babies in their
first year of life. Yet League of Nations' statistics show that
in the years preceding the war, seven countries had lower infant
mortality rates than the United States. Death rates among the Negro
population in the United States are typically higher than those
of white persons. Yet even if international comparison is restricted
to the white population, our death record is by no means the lowest.
In the expectation of life for white boys at birth, the United States
ranked fifth among the prewar nations; for white men at age 20,
it ranked ninth; at age 40, twelfth; and at 60, thirteenth.
The present method of paying for medical care is by far the most
important reason for lack of needed care. The cost of medical care
for the nation as a whole is not excessive - somewhere between 3
percent and 4 percent of the national income. The trouble is that
the cost to the individual is unpredictable and uneven from one
year to another. Health insurance would spread the cost evenly and
equitably.
I should like to point out, however, that this type of social insurance
is not to be confused with so-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 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.
Health insurance should, of course, provide protection against
loss of wages as well as against the cost of medical care. When
a family breadwinner is sick, not only do his expenses increase
because of medical bills, but chances are his weekly income has
been stopped altogether. Unemployment compensation insures workers
against loss of their earnings when they are able to work.
However, they now have no protection against wage loss when they
are unable to work because of non-occupational sickness or
disability.
Experience with health insurance is not new. Already 32 countries
have such insurance. Indeed, more countries have this type of social
insurance than any other.
Social insurance is likewise needed for the worker who finds himself
permanently disabled. This is a pressing problem when you consider
that the number of permanently and totally disabled persons in this
country is as large as the population of Chicago.
Under our present Federal old-age and survivors insurance system
monthly retirement benefits are paid for the insured working man
who reaches 65 and is no longer at work. But if a man is permanently
disabled before he becomes 65 and can no longer earn his living
he is not entitled to any benefits. In fact, the benefit rights
he has accumulated begin to decline because he is no longer working
in insured employment.
There has been some agitation to reduce the age at which a person
can begin to draw old age retirement benefits. However, paying retirement
benefits in the case of permanent total disability would be much
more flexible and effective. Indeed, permanent total disability
may be regarded as premature old age.
Other countries consider permanent disability in this light. Already
31 nations have provided social insurance for wage earners against
permanent disability. The United States remains the only nation
which insures workers against old age without also insuring them
against permanent or chronic disability.
A well-rounded contributory social insurance program such as I
have outlined would guarantee the wage earner and his family something
to live on whenever his earnings are cut off by reason of any of
the major economic hazards to which he is exposed.
As I pointed out at the beginning, no system of social insurance
can insure against hazards that have already occurred or can provide
adequate protection under all conceivable circumstances. Therefore,
it will also be necessary not only to maintain but also to greatly
strengthen our present system of public assistance, under which
cash payments are made on the basis of individual need.
At present the Federal Government makes grants-in-aid to the States
for the payment of cash assistance to the needy aged, the needy
blind, and dependent children. I believe that the Federal Government
should also make grants to the States for assistance rendered to
other needy persons who do not happen to fall within these three
categories. Many States and localities do not have adequate resources
with which to meet the total relief problem. The resources that
they do have are now being used disproportionately to help needy
persons who are eligible under the three categories for which the
Federal Government now grants aid, as against other needy persons
who are not eligible under these limited categories.
I believe that it is also essential to supplement the present system
of uniform 50 percent Federal grants-in-aid with additional Federal
aid that would not have to be matched by States whose per capita
income is low in relation to that of other States. It should be
possible to establish such a system of additional Federal aid on
an objective basis which would utilize existing governmental data
to measure the per capita income of the various States.
I should like to emphasize that the program I have outlined would
provide only a minimum basic security for the people of this country.
It is not a plan for giving everybody something for nothing or for
paying people not to work. It is a plan under which the benefits
would be directly related, either to proven wage loss or to proven
need. It is a plan under which all those who are able to work would
be required to work if there is a job available. It a plan which
would provide a maximum amount of security to the people of this
country at a minimum cost.
In fact, in a very real sense the costs of insecurity are now being
borne by the individual citizens of this country. A sound social
security program makes these costs more bearable by distributing
them more systematically and equitably. This is true of both the
public assistance and the social insurance phases of the social
security program, although it is more apparent in the case of social
insurance.
There are some who fear that social security will destroy individual
initiative and thrift and enterprise. There are some who believe
that providing a minimum basic security for the people of this country
will merely encourage them to rely upon the government instead of
upon themselves. I submit that such fears arise out of a basic lack
of confidence in democracy and the common man. I believe that assuring
people a minimum of subsistence will encourage them to strive for
something still better for themselves and their families. I do not
believe that we can expect the helpless and the hopeless to practice
the prized virtues of independence.
Because only a minimum basic security would be provided, there
would be every inducement to the individual to provide still better
security for himself and his family through individual savings and
private insurance. This has already happened in the case of the
Federal old-age and survivors insurance system. The amount of group
annuity business written since the Social Security Act was passed
is many times the amount written in all the previous years. As you
may have noticed from advertisements and the radio, there are several
large life insurance companies that are basing their sales promotions
largely on the feasibility and desirability of additional insurance
to supplement the basic insurance protection provided under the
Government system. I am confident that insurance companies generally
believe that this government system educates and induces the public
to obtain additional protection through private insurance.
Let us also not forget that under a contributory social insurance
system the workers of this country and their employers would pay
for the benefits that are received. Therefore, in reality it is
a plan for organized thrift. As Prime Minister Churchill puts it,
the essence of social insurance is "bringing the magic of averages
to the rescue of the millions."
In the case of public assistance, I am merely proposing that we
do better what this Nation from its inception has always accepted
as a public responsibility, namely, the care of the poor who would
otherwise lack the necessities of life. We cannot and we will not
let people starve in this country.
I do not pretend that the program I have outlined will usher in
Utopia; but I do believe that it will abolish want. Is this too
ambitious a goal for post-war America? I do not believe that it
is and I trust that you will agree.
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