I have been asked to discuss a very large topic, namely, "The Need
for Social Security in the Postwar World." It would be a very presumptuous
person who would pretend to be able to predict the exact future
development of what we in this country have come to call social
security. Its development depends first of all upon what kind of
a postwar world we shall have.
Of one thing we can be certain. It will be a world of intensive,
extensive, and rapid change--not only technological change but political,
economic, and social change as well. We are not yet able to grasp
even dimly the tremendous implications of the atomic bomb. While
its technological implications stagger the imaginations, its political,
economic, and social implications are even more tremendous.
But I do not propose to discuss the atomic bomb. Rather, I should
like to point out that even though the atomic bomb had never been
discovered this war that we have just fought has released psychological
forces which, when coupled with widespread human misery and want,
have set off "chain reactions" literally world-wide in their extent.
I refer to what you probably will say are very old concepts of liberty,
democracy, and equal opportunity. It is true that these concepts
are not new in the western world, but they have never before been
given global currency and application. The peoples in the far corners
of the world have now become keenly aware of them and apparently
are proposing to act accordingly.
It took hundreds of years for the rise and fall of ancient empires.
It has taken only a few decades to encompass the rise and fall of
modern empires. As a matter of fact, the mode of existence of the
common man was very much the same for thousands of years until a
little over 150 years ago, when the technological forces--which
we call the industrial revolution--and the political forces--which
we call democracy--began to sweep through the western world. The
result has been that there has been more change during the last
eight generations than there had been during all of previous recorded
history. What is important for us is that, so far as any one can
see now, the rate of change, rapid as it has been, seems to be accelerating
even more, rather than declining.
The reason I emphasize the fact that the postwar world will be
a world of change is because change means uncertainty and insecurity
for the millions of human beings who will inhabit this postwar world.
This, in spite of the fact that a basic human trait, perhaps so
we should call it instinct, is the yearning for security. This yearning
for security manifests itself in many ways. Likewise, as society
becomes more and more interdependent, the necessity of relying upon
group action rather than individual action grows greater and greater.
Group action may be either governmental or non-governmental in
character. Thus, the businessman may seek a tariff or a railroad
or a ship subsidy to protect himself against undue risks, or he
may turn to business and trade associations to protect his interests.
He may even join trusts or cartels to keep down what he considers
undesirable competition. The farmer may seek a tax on oleomargine
or an embargo on Argentine meat or a parity price or government
loans or government subsidies of one kind or another; or he may
join farm organizations and farm cooperatives to assure himself
a reasonable and stable income. The worker may seek government legislation
prohibiting court injunctions or a Wagner Act preventing employer
interference with labor organizations, or legislation placing a
floor below wages and a ceiling over hours; or he may resort to
his economic power through labor unions to control wages, hours,
and working conditions. The consumer usually must rely rather largely
on governmental action to protect his interests. Thus, we have a
law providing for meat inspection, a Pure Food and Drug Act, laws
regulating weights and measures, a Federal Trade Commission to enforce
truth in advertising, and of course an Office of Price Administration
which undertakes to control prices.
Sometimes the yearning for security on the part of businessmen,
farmers, workers, and consumers clash. In fact, sometimes the yearning
for security of the very same individual as a businessman or farmer
or a worker clashes with his yearning for security as a consumer.
Naturally, businessmen and farmers and workers want to get high
prices for what they sell as producers and pay low prices for what
they have to buy as consumers. Under such conditions, it is of course
necessary for the government to undertake to reconcile all of these
yearnings for individual security in order to achieve the maximum
amount of general security.
The particular form of security with which we are concerned is
what has come to be called social security. Hardly a decade ago
the very term social security had not come into existence. Now it
is in the process of acquiring such an inclusive meaning that its
usefulness as a term to describe a specific program of action is
in danger of becoming impaired. Thus, we find world statesmen asserting
that social security is the main motive of national life. We find
it listed as a chief objective in the Atlantic Charter.
In the large sense in which it is used by statesmen, it covers
all of the essentials of decent human existence, such as housing,
education, health, and full employment--as well as elimination of
destitution. However, in the narrower sense, when it is used to
describe a specific program of action, it is usually confined to
governmental measures designed to eliminate want by preventing the
loss of current income.
Many well-meaning and socially-minded people believe that if we
can maintain full employment and full production there is no need
to set up a specific social security program to prevent loss of
current income. However, those people fail to realize that even
though we achieve the goal of full employment and full production
the working people of this country will still be confronted with
the great economic hazards of sickness and physical disability,
that all employers should share alike in the financing of basic
benefits. Variation above the basic program provisions in employer
contributions and in the benefits available to particular groups
of workers can mean desirable flexibility and experimentation. I
do not believe, however, that we can much longer afford the complete
gaps in coverage and in protection which inevitably result from
voluntary provisions alone.
A basic public system is necessary also to assure complete coverage
over time as well as at any one period. The importance of continuity
of coverage is most obvious in the case of retirement benefits.
Mobility of labor is a necessary aspect of our economy and our way
of life. Only a public program covering all employments can provide
the necessary basic protection for workers who move from job to
job.
The importance of continuity of coverage is also evident in the
case of permanent disability benefits. Relatively few private pension
plans provide continuing disability benefits, and those which do
necessarily require, as a condition of eligibility, membership in
the particular plan (or employment by a particular employer) for
substantial periods.
But even for the short-term benefits, cash sickness and accident
benefits, or hospital and medical care and related benefits, there
is a problem of continuity of protection which can only be met by
a public program. I am thinking not so much of the qualifying requirements
(frequently 3 or even 6 months) which a worker may have to meet
each time he shifts employment and comes under a different plan,
but of the failure of most plans to continue the protection during
periods of unemployment. A period of prolonged illness may also
result in loss of hospitalization and medical care protection not
only for the worker, but also for his dependents if they had such
protection at all. Yet it is precisely in such periods that the
worker and his family may have the greatest need of sickness or
medical benefits. An employee benefit plan for a single plant or
firm, whether financed by employer contributions or employee pay-roll
deductions or both, cannot very well extend the protection of the
plan long beyond the time when the employee's connection with the
job and pay roll is severed. Some union and union-management plans
covering more than one employer have attempted to continue protection
during brief periods of unemployment, usually two or three months.
Basically, however, the problem can only be met simply and adequately
through a public program.
Finally, I would just mention the advantages of economy and simplicity
which can be obtained through a comprehensive, basic public program,
as in no other way. Assuming that our goal is basic protection for
everybody, and not just for a few fortunate or for a few selected
and superior risk groups, I do not hesitate to say categorically
that the goal of basic protection can be attained at a lower aggregate
cost and with fewer administrative complications under a single
public program than under many separate voluntary programs.
Having thus testified to my continuing belief in the need for a
comprehensive basic social insurance program, let me summarize what
seem to me the appropriate functions of voluntary employee benefit
plans, both when we have a comprehensive public program and today.
The general relationship of the voluntary plans to the public program,
I have already suggested, should be that of supplementing the provisions
of the basic program. I might indicate more specifically some of
the kinds of supplementation which might be desirable. Even if the
old-age and survivors insurance benefits are liberalized in accordance
with the recommendations of the Social Security Administration,
they will still be small and there would remain ample room for provision
of additional benefit amounts through voluntary plans. Such plans
might also provide for payment of retirement benefits at a lower
age than 65 in some industries or occupations, or provide survivor
protection for classes of dependents who are not protected under
the public program, such as widowers under retirement age who do
not have young children in their care, or by permitting the individual
worker to designate any beneficiary he chooses.
It may be assumed that when permanent disability benefits are included
in a comprehensive public program they would be of about the same
size as age retirement benefits and might also leave ample room
for supplementation through payment of additional amounts. The situation
is not so clear with respect to temporary disability benefits, which
might be at a higher level. There is a limit beyond which total
disability benefits, in relation to previous and prospective earnings,
cannot go without unduly discouraging a return to work. How much
room there would be for supplementation of temporary disability
benefits could depend on the adequacy of the basic program.
With respect to medical care plans, the problem is somewhat different.
In the first place there would not exist the same difference between
basic benefits and adequate benefits as in the case of at least
some of the cash wage-loss benefits. A fully-developed health insurance
system would provide all essential medical services. In the early
years of a health program, when some types of services--principally
dental care and home nursing services--would probably have to be
limited, there would be broad opportunity for supplementary benefits.
There would also be room for some supplementation of hospital benefits
for long duration cases and those desiring more expensive hospital
accommodations than may be properly covered by a social insurance
system. But the more important relations to be anticipated between
voluntary medical care plans and a health insurance system are of
a different kind. Medical care plans which provide service benefits
(rather than cash reimbursement) could continue to provide such
services as insurance benefits if the workers choose to continue
obtaining medical care from the organization. Whether or not the
plan continued as such, there would of course be no question as
to the opportunity for its doctors, hospitals, laboratories, etc.
to participate in the health insurance system. I think it likely,
however, that any voluntary medical service plan which is organized
on a sound basis and which is providing high quality care could
and would want to continue as a service organization under a health
insurance system.
I look upon existing and proposed voluntary employee benefit plans,
therefore, as either supplementary to social insurance or temporary
substitutes for and forerunners of social insurance. In both roles,
they can--if soundly developed--be constructive. Though this aspect
of the question is outside the topic I was asked to discuss, may
I say that it seems to me the development of industrial benefit
plans offers important opportunities for real employer-employee
and union-management cooperation. Such plans are providing much
needed protection for some workers--protection which is not now
available under our social insurance program.
It is fortunate that except in the case of permanent disability
the plans which substitute for, rather than supplement, social insurance
provide short-term benefits and involve no long-term commitments.
Moreover, a number of these plans include explicit provisions for
termination or suitable modification of the plan when a public program
providing similar benefits is adopted. Whether or not the possibility
is spelled out, it seems to me that those who are responsible for
the design of any voluntary plan should keep in mind the problem
of relations to future public programs.
In addition to giving needed protections, now, to some workers,
voluntary plans cannot help but play an important educational role.
They can also contribute to our knowledge of the effect on costs,
and on the successful operation of a plan, of alternative benefit
specifications, alternative methods of handling claims, alternative
methods of organizing medical services, and similar matters. While
I believe we now have sufficient experience and knowledge to design
a sound public program, we should not forego the opportunity of
learning more from voluntary programs.
I hope, therefore, that as new voluntary health, welfare and retirement
plans are established and existing plans continued, provision will
be made for adequate records of operations and of costs, and for
careful and unbiased analysis of those records. I would commend
the furtherance of such provision as a worthwhile objective for
this organization, whatever may be your opinions as to the ultimate
relations which should obtain between such voluntary employee benefit
plans and our social insurance program.
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