I am very glad to discuss with this Committee the problems of
certain of the fixed income groups in our population in whom the
Social Security Board has a particular interest.
I have been asked first to describe briefly the figures on average
earnings of selected groups of white collar and non-white-collar
workers which were made available to your Committee on request.
These figures were computed from the reports made to the Social
Security Board by the State unemployment compensation agencies and
relate only to workers covered by the State unemployment compensation
laws, which in general exclude workers in very small firms. The
information which we have is for industries, not for occupations.
However, we have selected certain industries in which the majority
of the workers are white-collar workers--stenographers, bookkeepers
and other clerical employees, or salesmen and executives, or technical
and professional workers such as architects, engineers, doctors
and lawyers. In certain other industries--manufacturing, mining,
transportation--the majority of workers are manual workers and average
earnings in these industries reflect primarily the wages of non-white-collar
workers.
We have computed for selected industries the average weekly earnings
in each quarter from the first quarter of 1940 through the second
quarter of 1943. I am submitting for the record the detailed figures,
and an explanation of the limitations of the data, which have already
been sent to your Committee as well as a brief analysis of the figures.
In general, these figures tell much the same story as that which
is told by the published wage statistics of the Bureau of Labor
Statistics. From the early part of 1940 to the middle of 1943, average
weekly wages in manufacturing establishments covered by State unemployment
compensation laws increased 71 percent, from $26 to $45; average
weekly wages in the combined group of industries we have classified
as white-collar increased 21 percent, from $24 to $29. However,
average wages in the transportation, communication and other public
utilities industry group, in which most of the employees are non-white-collar
workers, increased only 32 percent, while in several industries
which are manned primarily by white-collar workers, such as real
estate and law offices, professional and social service agencies
and non-profit organizations, the increase was 40 or 50 percent.
In interpreting these figures there are several points which must
be kept in mind. These are average earnings for all workers, those
employed only part-time as well as those employed full-time. The
amount of part-time work probably decreased markedly from 1940 to
1943 in the non-white-collar industries. Part of the increase in
average weekly earnings in these industries then results from fuller
employment. We know also from Bureau of Labor Statistics data that
the average hours worked per week have increased substantially in
most manufacturing industries but have decreased in such industries
as a number of the retail trade groups. Longer hours and overtime
rates, rather than increases in basic wage rates, account for a
large part of the increase in average weekly earnings of manual
workers. You are probably familiar the estimates recently prepared
by the Bureau of Labor Statistics on average hourly earnings. As
compared with a 71 percent increase in average weekly earnings
in manufacturing from the first quarter of 1940 through the second
quarter of 1943, according to Bureau of Labor Statistics estimates
average hourly earnings increased 47 percent and straight-time
average hourly earnings (excluding premium pay for overtime) increased
40 percent. We do not have comparable figures for the white-collar
groups, but we know that hours worked have probably changed very
little for most of these workers.
Unfortunately, from our data we have no information about the age
or sex or family responsibilities of workers in any of these industries.
Neither do we know how many individuals have been able to shift
more readily to higher-paying jobs because of the great demand for
workers. We all know of course that many individual workers have
shifted during the past two years from low-wage to high-wage industries
and occupations, and that other workers have been drawn into the
labor market to take their place in the low-wage occupations. To
the extent this has occurred, the actual earnings of a specific
individual would have increased more than a simple comparison of
earnings by occupation or industry would indicate.
The conclusion I reach in examining what little information we
have on the so-called white-collar workers is that the group is
not at all homogeneous with respect to earnings and changes in earnings.
Average earnings in some white-collar industries have increased
substantially, in others hardly at all. And, of course, these averages
conceal many differences in individual earnings or in earnings for
different classes of workers. However, persons working in so-called
white-collar industries since 1940 have certainly been at a relative
disadvantage due largely to their lack of overtime pay for long
hours. The common factor which affects all these groups is the rise
in the cost of living which has occurred since the beginning of
the war and which has reduced the purchasing power of all earnings.
I turn next to a discussion of those groups in our population who
are perhaps least protected against the impact of the rise in living
costs since 1940. I am referring to families dependent, in whole
or part, upon social insurance and related benefits, military allotments
and allowances, and public assistance. We estimate that there were
in November 1943 some 4.5 million families in receipt of social
insurance and public assistance income, of whom 1.7 million received
monthly social insurance benefits, and 2.8 million, public assistance.
By and large these families are made up of persons who have not
been able to take advantage of the employment opportunities of the
past three years. They consist chiefly of aged persons, disabled
veterans, the blind, widows with young children, and other persons
unable to support themselves. In addition, there were in November
1943 about 3.5 million families, dependents of men in the armed
forces, who were receiving military allowances, and for many of
whom the allotments and allowances represented the major source
of income.
The Committee will be interested in the changes which have taken
place since January 1940 in the average monthly payments under the
several social insurance and assistance programs. They reveal very
clearly the relatively rigid nature of such payments and the contrast
in that respect between income from these sources and income from
wages and salaries.
I take social insurance benefits, to begin with. In January 1940
the average monthly benefit paid under the old-age and survivors
insurance program to a primary annuitant was $21.97. In November
1943 the average was $23.42, an increase of 7 percent. The loss
in the purchasing power of this benefit between these two dates
is not measured by the difference between 7 percent and the estimated
increase of 24 percent in the cost of living as measured by the
Bureau of Labor Statistics index. The loss suffered by each primary
annuitant, assuming he did not die or return to covered employment
in the interim, was the full 24 percent, since his individual benefit--and
I want to stress this point--remained unchanged. The increase of
7 percent reflects the fact that those annuitants who started to
receive their annuities at later dates receive larger awards than
were made in January 1940. Benefits awarded more recently have,
on the average, been based on a longer period in covered employment
and have also reflected somewhat the favorable influence which the
rising trend in wages prior to the date of retirement had upon the
average monthly wage on which the benefit is computed. The awards
made in 1940 and still payable today are being paid in the same
amounts in which they were then paid. These comments apply in principle
to changes in the average monthly amount of other benefits paid
under the old-age and survivors insurance program.
The same observations can be made as to persons receiving benefits
under other retirement programs--retired railroad workers or civil-service
workers. Benefits once awarded remain fixed in amount unless the
law under which they are paid is amended.
The question may well be asked: "Don't these families have other
income and hasn't this other income gone up since 1940?" We don't
have all the information we need to answer that question. Some old-age
and survivors insurance beneficiaries, it is true, and some railroad
retirement annuitants have gone to work in non-covered employment,
which does not affect at all their right to benefits; some disabled
veterans have taken employment; other veterans receiving benefits
for partial disabilities have been employed right along and to the
extent that they benefitted from wage increases their condition
has improved since 1940. Wage earners among annuitants represent,
however, a very small proportion of the total.
Some light is thrown on the total income of old-age and survivors
insurance beneficiaries by studies we made in 1941 and 1942 in seven
cities. Philadelphia, Baltimore, St. Louis, Birmingham, Memphis,
Atlanta and Los Angeles. Persons whose sole source of income was
the old-age and survivors insurance benefit comprised 11 percent
of all beneficiaries--10 percent of all male primary annuitants,
12 percent of all female primary annuitants, and 14 percent of all
survivor groups. These are the people who are completely defenseless
against price rises, because for them there are no wage or salary
increases to compensate in whole or part for higher living costs.
The other annuitants had sources or income in addition to the benefit.
It would be a mistake, however, to assume that these other items
of income were in general very much more flexible in character than
the insurance payment. About one out of every four male primary
beneficiaries had as his additional source of income private retirement
pay, veteran's pension, a private annuity or income from assets--in
other words, forms of income which are more or less rigid in character
and which do not move with prices. The same was true of one out
of every six beneficiary groups consisting of a widow and young
children.
Only 37 percent of the beneficiaries had any wage income during
the survey year. Little of it, however, was substantial in character,
and the favorable effect of wage increases upon total beneficiary
income was therefore slight indeed. Although some of the beneficiaries
lived in families with employed members, whose wage income may have
increased, many could not count upon such contributions towards
their support.
Some notion of the low economic level on which many of these beneficiary
families are living is afforded by the proportion receiving relief
from public and private sources, during the survey year, to supplement
the insurance benefit. Thirteen percent had recourse to aid of this
character, including, in the city of Los Angeles, one out of every
four male primary beneficiaries, and one out of every three female
primary beneficiaries.
I would say, in summary that persons receiving old-age and survivors
insurance are at a considerable disadvantage as a result of the
price rise because (1) many have no source of income except the
fixed benefit; and (2) with some exceptions, the non-benefit income
available to many or most of the others is equally unresponsive
to shifts in wage levels or prices.
When we turn to the recipients of public assistance, who numbered
2.8 million cases in November 1943, we find ourselves dealing with
a group upon whom the rise in living costs has had a somewhat less
severe impact than it has had upon social insurance beneficiaries.
Public assistance, in theory, at any rate, is based upon need, and
consequently assistance payments are more likely to respond to changing
costs of living, rising when prices go up and falling when prices
go down. However, such payments are also influenced by the availability
of funds, by the effects of legislative and administrative maximums
on the amounts of aid granted, by local practices with regard to
the measurement of need in individual cases, and by the availability
of income from sources other than assistance. These factors vary
in their effects on payments not only among States and localities
but also among the several assistance programs. For old-age assistance,
in the country as a whole, average payments increased from $19.87
in January 1940 to $26.46 in November 1943, or 33 percent. In the
aid to dependent children program, average payments per family increased
from $32.31 to $43.40, or 34 percent, in States having approved
plans in operation in both periods. For the aid to the blind program,
average payments increased from $23.44 to $27.84 or 19 percent in
States having approved plans in both periods.
During the period, as I have already indicated, the cost of living,
as measured by the Bureau of Labor Statistics index, rose about
24 percent. For families on assistance the rise in the cost of living
has doubtless been greater, since expenditures for food constitute
a larger share of total expenditures for the family on assistance
than for the wage earner and lower salaried worker. Food costs have
risen more steeply than the total costs of living.
In considering the percentage rise in average assistance payments
in relation to the percentage rise in the cost of living, it should
be borne in mind that the level of assistance payments in many States
was extremely low in 1940 and in some States is still extremely
low. Consequently, a rise in average payments, even though commensurate
with the increase in cost of living, does not necessarily mean that
assistance payments fully meet the needs of families.
An additional factor to be considered in appraising the rise in
assistance payments between January 1940 and November 1943 is that
it does not take into account the loss in income suffered by many
assistance families by the suspension of the food stamp plan on
March 1, 1943, and by the discontinuance of the direct distribution
of surplus commodities on June 30, 1943, since these commodities
were received in addition to the cash assistance. In December 1942
approximately 11 percent of old-age assistance recipients, 34 percent
of aid to dependent children recipients, 12 percent of aid to the
blind cases and 46 percent of all general assistance cases, participated
in the stamp plan. In that month the average value of blue stamps
issued was $5.77 per old-age assistance case, $12.39 per aid to
dependent children case, and $7.23 per aid to the blind case.
The substantial increases which have occurred in average assistance
payments for the country as a whole conceal very striking variations
in the increases in average payments in individual States. These
increases in most instances represent the adjustment of payments
to meet the rising cost of living, in some instances the provision
of more nearly adequate assistance, and sometimes the attempt to
compensate for the loss of food stamps and surplus commodities.
In some States, the increases in payments have not been sufficient
to compensate for the rise in cost of living alone.
As you know, the Social Security Board has recommended to the Congress
numerous changes to strengthen our existing social insurance and
public assistance programs. Among steps recommended to increase
the adequacy of assistance payments are (1) variable grants to States
to provide a larger share of Federal funds to the poorer States,
(2) removal of the maximum amounts of payments for aid to dependent
children in which the Federal Government will share, and (3) the
extension of Federal matching to recipients of general assistance
who are not included in the present categories. The Board believes
the coverage of the old-age and survivors insurance system should
be extended to all workers--those employed by others but not covered
under the present system, and those in business for themselves or
employed on their own farms. The Board would also recommend a liberalization
of the old-age and survivor benefits and the addition of protection
against temporary and permanent disability. The assurance of a continuing
income when the wage earner is sick or disabled and the provision
of a more adequate retirement income would increase the security
and well-being of many families. The Board has also recommended
that workers be enabled to pay in advance for needed medical care
and hospitalization through social insurance contributions. Such
budgeting of the costs of medical care would be of great benefit
to low-income and moderate-income families.
All such changes take time, not only to legislate soundly but to
bring into effect. I am hopeful that the Congress will be able to
give attention to proposals for an expanded and strengthened social
security program, because I am sure that we shall need such a program
to help assure an orderly demobilization at the end of the war and
to provide a continuing base of security in the years ahead. I recognize
that there remains the immediate problem of individuals and families
who must live today on the social insurance benefits or the public
assistance payments now available. If the cost of living continues
to increase, some emergency provisions for these groups may be necessary.
I believe, however, that the best hope for them, as for the rest
of the people of this country, is that stabilization measures are
so strengthened that the cost of living does not increase further
while we work out a comprehensive social security program.
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