It is always a pleasure to meet with State and local
officials and to have the opportunity of discussing some of our
mutual problems. In selecting the subject of "Persistent Problems
in Social Security" I wanted to direct attention to problems that
are not only timely, but that possess more than passing significance.
It is true that the popular topic for discussion today is post-war
readjustments. It is likewise true that in post-war readjustments
social security will have an important part to play. However, many
of us recognize that the "new" problems that may be expected to
appear are really old and persistent problems. We have been confronted
with these problems in the past and must face them in the long-time
development of social security.
One need not remind an audience of public welfare
officials that the misfortunes to which social security ministers
are persistent risks, which continue, though in varying degree,
in prosperity and in depression, in war and in peace. Sickness,
death and the infirmities of age do not choose their incidence to
fit any man-made order of events. In periods of high employment,
such as the present, many aged persons and dependent children are
still in need. Last year over $1 billion was expended on public
assistance. Even today there are one million persons who are unemployed.
And, as you could well testify, there is ample evidence that the
substantial social security rolls are attributable, not to any slackening
of individual effort, but rather to the persistent character of
human needs arising out of the kind of world in which we live. Because
social security deals with these permanent and ever-present types
of needs, may I first direct our attention for a moment to the permanent,
long-range objectives of the program--objectives which we must hold
steadily in mind as we strive to solve the problems which a system
of such far-reaching consequence inevitably evokes?
In these days money income determines much of man's
welfare. A principal approach, therefore, to social security is
the provision in time of misfortune of cash payments which partially
replace the individual's income that has been interrupted or terminated.
In the United States there are two means by which this type of social
security is made available: social assistance and social insurance,
each of which has a special but related function to perform. The
late Oswald Stein, the world's greatest authority on social security
at the time of his recent and tragic death, best characterized the
true nature of these two systems. He said, in a report of the International
Labour Office: "Social assistance is a progression from poor relief
in the direction of social insurance, while social insurance is
a progression from private insurance in the direction of social
assistance." This statement suggests that there are areas of similarity
and areas of distinction in the two programs. Let me briefly sketch
in what respects it seems to me the present programs have like aims
and in what respects their structure and methods differ.
Assistance and insurance are alike in that they seek
to provide a minimum degree of economic security. In so doing both
strive to remove uncertain and subjective tests of eligibility and
to create certainty and objectivity. Both have endeavored to obtain
improved methods of financing and thus to create confidence that
benefits will be available when they are needed and both are continuously
providing more nearly adequate payments to those who qualify for
them.
The methods which each program employs complement
one another and are both essential in order that protection may
be well-rounded and able to meet all foreseeable contingencies that
are common to mankind. At the moment in this country social assistance
is playing the dominant role, since it must care for those cases
where the wage earner was old or died before our social insurance
program got under way. As social insurance develops and spreads
its protection more widely, it is hoped that it will eventually--perhaps
before another generation has passed--become the predominant program
and will take care of the bulk of the problem, providing benefits
for the great mass of the population. Such a development would not
mean, however, that a system of social security can ever dispense
with social assistance. Assistance would always be needed as a residual
program for those who are not protected by social insurance because
they cannot be feasiblely covered or because they become disqualified
from social insurance benefits. Assistance would also be required
to supplement social insurance benefits when they prove inadequate
to meet special needs of individuals.
The two programs, similar in purpose but different
in provisions which enable them to meet their respective obligations,
show certain rather significant contrasts as they are constituted
today. To illustrate, an applicant for social insurance benefits
may qualify without regard to his other resources, whereas the applicant
for social assistance will have his other resources taken into account.
Associated with this difference is another: insurance benefits are
provided on the presumption that most people, when they meet certain
defined risks, will be in need of cash income, although it may happen
that an individual beneficiary may not be. The applicant for social
assistance on the other hand, must show actual need if he is to
qualify for a grant.
The social insurance beneficiary, moreover, probably
enjoys an advantage which is not ordinarily shared by the assistance
recipient in that he has the psychologically satisfying feeling
that he has paid for his own benefit and that his government is
obligated to pay him this benefit. This is owing to the fact that
social insurance makes special provision for financing benefit payments
by means of contributions or taxes levied upon employers and, in
most insurance programs, upon employees as well. While it is true
that both types of payments--assistance grants and insurance benefits--are
received as a matter of statutory right, the insurance beneficiary
is likely, for this reason, to have a greater feeling of confidence
about his right than the person who is receiving an assistance grant.
It follows from these contrasting characteristics
that the two programs employ somewhat different procedures. In establishing
an applicant's eligibility for benefits and the amount of his benefits,
social insurance endeavors to employ objective and routinized tests:
age, easily determinable family relationships, and the individual's
wage record can be ascertained with a minimum of scrutiny of his
personal affairs. However, social assistance, as presently conceived,
even with the best of procedures, cannot avoid some examination
of those factors that affect an individual's need and, therefore,
the determination of his grant. For, as I pointed out a moment ago,
it is not presumed need but the actual need of the
individual assistance applicant which must be determined, and there
is no other method by which this may be done except to inquire into
whatever of his affairs are relevant to the problem.
And, finally, social insurance enhances the security
of the wage earner who anticipates future benefits and of the person
who is already entitled by assuring that funds for paying the benefits
provided will be available through regular contributions and the
creation of reserve funds. Social assistance must generally depend
upon annual or biennial appropriations, whether out of general taxation
or out of earmarked taxes which are not necessarily related to social
assistance needs. This uncertain method of financing, intensified
by the absence of reserve funds, puts the greatest strain on social
assistance finances during periods of business depression when there
is the greatest need for funds.
I have taken time to review these objectives and characteristics
of our social security system, which are, of course, perfectly familiar
to you, because I wanted to use this common understanding as to
what the program now is for a platform from which to launch a discussion
of what the program is in process of becoming. Certainly we are
all likely to agree that the differences between social insurance
and public assistance are being lessened, at least in degree. Look,
in the first place, at social insurance. Modifications in the old-age
insurance program which were provided in 1939 and which made it
a program of old-age and survivors insurance, were designed to give
better recognition to the presumptive needs of beneficiaries. The
changes took into account the fact that old age beneficiaries with
dependents need a higher proportion of former wages than those without
dependents and that a surviving family has needs which are not measured
by a lump-sum payment to the estate of the deceased wage earner,
as was formerly the case. In thus providing dependents' benefits,
social insurance places greater stress on adequacy of payments and
less on the strictly actuarial equivalent in the individual case.
The attention to need and adequacy which are such prominent features
of the amendment has always been a basic characteristic of social
assistance; its emphasis in insurance reveals one of the principles
which the two programs are now sharing. Another similarity has likewise
been evident since 1939; the changes in old-age and survivors insurance
provided then have made it necessary to employ some administrative
techniques developed by social assistance, such as those necessary
to deal with guardianship, for example, or those involved in determining
the extent of support by the wage earner.
If we look at social assistance, we discover evidence
in many places that that program, on its side, is moving in the
direction of social insurance. The simplicity and objectivity which
characterize social insurance are being increasingly adapted to
the purposes of social assistance. Let me point out a few straws
in the wind. To pay benefits without regard to the resources of
the individual is a fundamental characteristic of social insurance,
as we have noted. But social assistance laws in the States are more
and more providing for the conservation of certain resources or
means of the applicant in the determination of his need. Therefore,
insofar as his resources are exempted in determining the individual's
need, the assistance program takes on one aspect of the insurance
program. There has been, as you know, the general practice of exempting
real or personal property below a stated amount and in recent years
there has been a trend toward raising the exempted amount. There
is an increasing tendency, either through law or by practice, not
to take into account casual or unpredictable earnings, gifts from
friends, or the production in the household of goods in kind. And
there is an inclination to focus on the actual resources of the
applicant including only contributions actually received from relatives
rather than to undertake to compel relatives to contribute who are
not doing so.
The procedures for investigating need are also becoming
more standardized and objective. Even where relatives are required
to give support, standards for determining their responsibility
are becoming more objective, so that fewer relatives need be queried.
Standard budgets that look toward defining a minimum scale of living
are being developed, and thus there is less room for discretion
or caprice on the part of the staff worker. Reinforcing this tendency
to rule out subjective judgments is the statutory minimum of assistance
which has made its appearance in two States. Under this provision
no grant to an old-age assistance recipient can be less than the
stated monthly minimum minus his income. Thus his total income cannot
fall below the "floor" provided, although if his needs exceed that
amount a higher grant may be allowed. The two States do not by law
place a maximum on the payment.
The legal right of the social assistance recipient
is being strengthened both by law and by public opinion. The statutory
right to an appeal is the means by which this theoretical right
is translated into protection in practice. Likewise the abandonment
of poor law procedures is progressively removing the stigma from
the receipt of the assistance payment. These tendencies certainly
are removing some of the differences between social assistance and
social insurance.
May I mention just one more evidence of increasing
similarity? Greater financial stability for social assistance is
being achieved in a number of States. Federal grants-in-aid, of
course, have done their part. But within the States one discovers
a greater stability in appropriations and a greater adequacy of
them. One also observes measures for enlarging the tax base which
supports social assistance.
To summarize these trends we may say that the social
insurance program has been modified to give greater attention to
presumptive needs and the social assistance program has at the same
time been gaining in simplicity, objectivity, and adequacy. I do
not wish to imply that those trends have been consciously directed
with the principles of the other program always the goal. Merely
this has happened: experience in adapting both programs to our economic
and social organization has demonstrated that certain values in
each actually have worth in both.
However, we should not lose sight of the fact that
in a continental country like our own there are marked differences
in principles, ideas and standards respecting social assistance,
because it developed from the ancient institution of poor relief.
The system which we have allows wide latitude among the States for
development in conformity with diverse principles. The trends in
some States, as I pointed out, have been in the direction of greater
objectivity and simplification; in some States, however, a greater
degree of individualization is being stressed. Change in different
regions has not been uniform in degree nor even moving in the same
direction. Nevertheless, the trends which have been cited are apparent
in enough States to justify reference to them as significant movements,
and to document the generalization of the International Labour Office
which I quoted, namely that, "Social assistance is a progression
from poor relief in the direction of social insurance, while social
insurance is a progression from private insurance in the direction
of social assistance."
In the changes which have been occurring in both programs
one can perceive a striving for simplicity and a desire to meet
minimum needs with unconditional payments. Since these modifications
tend in some respects to bring the two programs of cash payments
closer together, they have suggested to many observers drastic modifications,
or at least queries which are fundamental and which reflect genuine
public concern with the course of social security.
Putting it simply and bluntly, some people want to
know why it would not be easier and preferable to abolish both existing
programs--social insurance and social assistance--in favor of a
unified system paying flat pensions without a needs test to all
persons falling within defined categories, such as the aged, the
young, the unemployed, the sick and disabled. That question is being
asked by thoughtful, informed and socially-minded people. It deserves
our earnest and thoughtful consideration, even though such an apparently
simple question raises so many fundamental questions that we do
not have a completely satisfactory answer--satisfactory to the questioner
or to the questioned.
There is not much doubt that a unified system paying
flat pensions without the requirement of a needs test would satisfy
the criteria of simplicity, objectivity and unconditional payments.
All persons who fulfilled certain eligibility requirements, such
as age, physical condition, or family relationship, would receive
identical payments. The financial situation of the recipient would
not be examined and would have no bearing on his pension. If such
a system could be established without creating new difficulties
and without the loss of the values existing in the present systems
all of us I am sure would certainly pray for its speedy inauguration.
However, there are a number of considerations that must be kept
in mind and a number of problems that must be solved in making such
a change.
Most people who advocate a minimum flat payment would
base it upon the cost of a reasonable minimum of subsistence. While
such a concept is useful in orienting ourselves, it is a most difficult
concept to apply in actual practice. The cost of living varies greatly
not only as between geographical regions but also as between contiguous
districts and as between city and urban communities. Even if agreement
could be reached on what constitutes the actual cost of specified
articles and services, there would be wide difference of opinion
as to what articles and services should be included, since individual
and community judgments of what constitutes a minimum of subsistence
vary widely in accordance with what is considered to be a reasonable
standard of living. Then, too, in a country such as ours where wage
rates vary so widely as between occupations and communities serious
anomalies might arise as between the income of a person working
at prevailing wage rates and the income of a person receiving a
flat benefit payment. We might agree that prevailing wage rates
should yield at least the same amount as would be fixed as a reasonable
national minimum of subsistence but the fact remains that they might
not in many communities.
But, in any event, we would not have as a criterion
for the determination of the amount of the flat payment the completely
objective test of the actual wage loss es in the case of social
insurance or the fairly objective test of actual need as in the
case of social assistance. It is reasonable to suppose that the
amount of the flat payment would be a resultant of heated political
debate as to what constituted a reasonable minimum of subsistence.
I am not arguing against political debate to give substance to an
ethical concept such as minimum of subsistence, because I think
it is an essential element in the democratic process. But I think
it is desirable that political debate should proceed from a factual
and objective basis.
In any event, it would be too much to expect that
any system of flat payment would entirely eliminate the need for
social insurance or social assistance. A uniform payment could not
cover actual needs under all conceivable circumstances. Therefore,
some system of social assistance would be necessary to cover needs
of some individuals in every community and to cover the needs of
a large proportion of recipients in high cost communities.
It is also true that wage rates vary widely in this
country, with consequent variation in standards of living and in
the amount of the wage loss sustained when work ceases. Therefore,
some system of social insurance under which benefits would be related
to past wages and present wage loss would probably still be necessary
from a social and economic standpoint.
We should also bear in mind that in abandoning entirely
social insurance as a method of coping with economic insecurity
we would sacrifice the advantages of a system which not only automatically
relates benefits to wage loss but also automatically protects benefit
rights and automatically controls costs. This automatic relationship
arises out of the fact that under social insurance a large proportion
of benefits are financed by contributions based on the same pay
roll which is used as a basis for determining benefit rights. This
creates an inherently stable situation, since any proposal to raise
benefits automatically requires consideration of the contributions
necessary to support increased benefits and any proposal to reduce
benefits would meet with opposition from the beneficiaries who would
feel that their past contributions created vested rights.
I have already referred to the psychological satisfaction
that social insurance beneficiaries enjoy arising out of the fact
that they feel they have paid for their benefits and that the government
will meet its obligation to pay them these benefits. It may be argued,
and it has been argued, that under a system of flat payments financed
out of general taxes the recipients have also paid for their benefits.
The usual argument is that they have paid their share of general
taxes and have made a contribution to the economic system which
entitles them to this payment from their government as a matter
of right. However, the fact remains that the relationship between
the contribution and the benefit is not nearly so direct as in the
case of contributory social insurance. Therefore, whether we like
it or not, there is a psychological difference which arises out
of the concepts underlying our entire social and economic organization.
But if we do not accept the thesis of those who urge
the abolition of the present programs and the substitution of a
unified system paying flat pensions without a needs test, we are
under the obligation of suggesting ways and means of achieving simplicity,
objectivity, certainty, and adequacy through improvement in the
present programs. It behooves us as social security administrators
to discharge that obligation.
We must frankly admit at the outset that the present
programs are far from being perfect. So far as social insurance
is concerned, both of the two existing programs of unemployment
insurance and old-age and survivors insurance fail to provide protection
to millions of workers whom it would be perfectly feasible to protect.
They do not cover agricultural workers, domestic workers, or workers
employed by non-profit organizations. In the case of unemployment
insurance, workers employed in small establishments are also excluded
from protection. The benefits payable to workers who are insured
are far from being adequate. In the case of old-age and survivors
insurance, surveys show that 9 percent of the primary beneficiaries
were obliged to seek public or private assistance to supplement
their inadequate social insurance benefits. In the ease of unemployment
insurance, the average weekly benefit paid is only about one-third
of the average weekly wage loss sustained and the duration of benefits
is so short that even in a year such as 1941 fifty percent of the
beneficiaries exhausted their benefit rights before they were able
to find another jobs.
While there has been some improvement in the scale
of benefits under the unemployment insurance system, that improvement
has been more then offset by the increasingly drastic disqualification
provisions that are being imposed. Everybody would of course agree
that no person should receive unemployment insurance benefits if
he unreasonably refused to accept suitable work. Everybody probably
would also agree that there should be some penalty for a worker
quitting his job without good cause. Every State provides disqualification
provisions in cases where a worker refuses suitable work or voluntarily
leaves his job without good cause; or is discharged for misconduct.
In 24 States, the individuals' benefits are postponed, usually from
one to six weeks depending upon the circumstances in the individual
case. However, in 19 States an unemployed worker who quit his old
job for perfectly good personal reasons and who is willing to accept
suitable work is nevertheless disqualified from receiving benefits
unless he can prove that his employer was at fault. Thus, a worker
obliged to quit his job because of housing or transportation difficulties
or because of family circumstances is disqualified from receiving
benefits. Likewise, a person who quits one job to seek another job
which more fully utilizes his skills is also disqualified from receiving
benefits, even though he does so at the urging of his governments.
What is even worse, in 27 States benefit rights are not only suspended,
but canceled in whole or in part if a worker commits any of the
acts which disqualify him. Thus, some employment insurance laws
have taken on the aspect of a penal statute.
Aside from the limited coverage and inadequate benefits
provided under our present social insurance systems, the greatest
lack is failure to provide any protection whatsoever against non-industrial
ill-health and permanent disability. Not only is no protection provided
against wage loss but there is no provision for spreading the cost
of adequate medical care.
Of course if we strengthened our social insurance
system by extending coverage, providing more adequate benefits for
the risks already covered, and providing protection against the
cost of medical care and wage loss due to ill health, we would greatly
lighten the load that social assistance must carry. But even so
there are many changes that would need be made in our system of
social assistance if it is to meet the criteria of simplicity, objectivity,
certainty, and adequacy which I have already mentioned. Under social
assistance we have made some progress in establishing the right
of privacy, the right to cash assistance, and the right to a fair
hearing. But we must admit that social assistance still carries
much of the stigma and many of the practices which grew up under
the poor laws.
We must admit that there is great inequality in the
treatment of persons in similar circumstances not only as between
different States but also as between different sections in the same
State. We must also admit that we are far from meeting the acknowledged
minimum needs of persons who are found to be eligible. While all
of us have been aware that assistance payments have been inadequate
in many instances, I don't think any of us realized the extent of
the inadequacy. The studies conducted by the Social Security Board
disclosed that in the 40 States studied in 1941-42, there were 11
States which met the determined need in only 30 percent or less
of their cases. These studies also disclosed that the extent of
the unmet need was far greater in the case of dependent children
than in the case of the aged or the blind.
Just what can we do to remedy these admitted defects?
Certainly there is one practice carried over from the old poor laws
that ought to be abandoned--that is the practice of denying or reducing
assistance to eligible individuals whose relatives fail to meet
their responsibilities. Even though legal responsibility of relatives
is retained, there is no justification for denying assistance to
an eligible individual while the public authority is attempting
to compel the relative to discharge his responsibility.
Federal grants related to the economic capacity of
the States would do much to enable the States to meet the full needs
of eligible individuals as determined by the State. However, unless
within the State funds are made available to every locality in accordance
with its need gross inequalities of treatment would still exist.
Federal grants to the States to assist in meeting the needs of needy
persons not falling within the present categories are also necessary.
However, if the Federal government provides additional assistance
to low income States and if the Federal government makes grants
to the States to cover assistance rendered needy persons not falling
within the present categories, restrictive residence and citizenship
requirements should be eliminated.
Another way in which our present social assistance
program should be improved would be to provide Federal matching
for the cost of medical care to recipients which is not included
in their cash grants but is paid for directly by the public agency.
Likewise, the present maximum limitation on Federal matching in
the individual case should either be eliminated in the various programs
or at least be considerably raised in the case of dependent children.
I thinks that all of us here could probably agree
upon most of the suggestions that I have made. All of these suggestions
build upon the foundation that we have already laid. They are in
accordance with principles and practices which are time-tested and
world-tested. None of us would contend that their adoption would
spell Utopia but I believe it is not too much to say that they would
spell the elimination of human destitution and suffering throughout
the length and breadth of this land.
What then, you may ask, are the prospects for their
fulfillment? You can answer that question better than I. What our
legislatures do in the field of social security, as in all other
fields, depends upon what the people of this country want them to
do. What the people of this country want their government to do
is determined by whether they consider that government action is
necessary and desirable. Of course people who believe that destitution,
by and large, is due to personal inadequacy or dereliction are convinced
that government action aggravates rather than relieves the problem.
The attitude of such people at best is kindly toleration and at
worst contempt for the poor. Abe Martin must have had such people
in mind when he said, "It is not a crime to be poor, but it might
just as well be." Some people feel that social security can be provided
only at the expense of individual liberty. While it may be true
that some who have security are not free, it certainly is also true
that no person can be really free who does not have security.
Some people also believe that providing social security
will destroy individual initiative and thrift. They fail to realize
that all that is proposed is a bare minimum of subsistence upon
which individuals will have every incentive to build for themselves
a more desirable measure of comfort and well-being through the well-known
devices of individual savings, private insurance, and home ownership.
But some would argue that providing even this bare minimum destroys
the incentive to provide for oneself--apparently the term "incentive"
being a polite euphemism for fear of starvation. People who believe
this really have very little faith in man as a spiritual being with
an innate desire to develop himself to the utmost, to make his greatest
contribution to the common good and thereby win the approval of
his fellow men. Those who feel that social security destroys incentive
are really saying that it is fear, not hope, that must be relied
upon as the mainspring of human conduct. But I am sure that the
people of this country will decide that social security based upon
hope is a surer foundation for our democracy than fear, which is
the basis of the totalitarianism now being wiped from the face of
the earth.
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