Arthur J. Altmeyer
NEXT STEPS IN SOCIAL SECURITY
An Address by
A. J. Altmeyer, Chairman, Social Security Board
Before the 64th Annual Convention of the American
Federation of Labor,
New Orleans, Louisiana, November 22, 1944
This is the ninth consecutive annual convention of the American Federation of Labor that I have been privileged to address on the subject of social security. These nine years measure the full span of development and operation of the present social security system in this country. I think the American Federation of Labor has a right to feel gratified that the social security program, which it has supported so faithfully and so effectively, has advanced so far in such a short period of time. However, gratified as we should be, as to the progress that has been made, I am sure that we all realize that the present program is far from perfect and far from providing effective protection against all of the economic hazards which beset the workers of this country.
But while we may feel some disappointment that during the last two or three years progress in the development of an effective system of social security has not been so rapid as during the previous years, we must recognize that we have a war to win and that necessarily the attention and energies of everyone have been directed toward that end. I think we would all have to agree that another reason why the people of this country have not given as much thought and attention to ways and means of improving our social security system during the last two or three years is because full employment has obscured the fact that destitution and fear of destitution continue to be grim realities to millions of our people.
Of course we are all agreed that probably the number one economic and social objective of this nation must be full employment and full production. Everybody wants to make his maximum contribution toward the creation of the sum-total of goods and services necessary to maintain an ever improving standard of living. However, what many people fail to realize is that even with full employment the chief causes of human destitution will continue to exist. Unemployment is only one cause of separation of a worker from his pay check. Sickness alone in normal times has been a far greater cause of cessation of earnings and consequent destitution than has unemployment. When we add to sickness, permanent disability, old age and premature death we must recognize that cessation of earnings from these causes constitutes a constant and serious threat to the welfare and happiness of the workers of this country and their families.
Individual savings, private insurance, home ownership, and the help of friends and relatives do not provide the necessary protection. However, the industrial nations of the world have discovered that at least a minimum basic degree of protection can be afforded through the device of contributory social insurance. As Winston Churchill has said, social insurance is merely a device for "bringing the magic of averages to the rescue of the millions." That is to say, like all forms of insurance, it enables people who are exposed to the same risk to share that risk, thereby making that risk bearable when it could otherwise be unbearable to the individual and his family. Or, putting it another way, it enables workers to spread their income over periods of non-earning as well as over periods of earning, thereby assuring them of a constant minimum purchasing power with which to obtain the necessities of life.
Contributory social insurance has proven to be such an effective means of protection against economic hazards that no nation which has adopted a system of social insurance has ever abandoned it, but, on the contrary, has sought to extend and strengthen it. Indeed, social insurance has survived not only changes in governments, but also survived and grown despite the rise and fall of nations themselves.
Undoubtedly the reason why social insurance has proved to be such an effective means of protection against persistent economic hazards is that it provides for benefits on a specific and pre-determined basis; it provides these benefits as a matter of right, it buttresses this right through the payment of contributions by or on behalf of the beneficiaries; and it provides a systematic long-range method of financing these benefits.
What we should have in this country is a unified, comprehensive social insurance system providing protection against all of the hazards that I have mentioned. At present, as you know, we have two social insurance systems. One is a straight Federal system covering the hazards of old-age and premature death, which we call the Federal old-age and survivors insurance system. The other is a Federal-State system of unemployment insurance, which came into existence because of a Federal unemployment tax, but which is operated by the States themselves. There is no reason why we cannot convert these two social insurance systems into a single unified, comprehensive system of social insurance which should require only one contribution, one report, one record, and one local office where employers and employees could go to ascertain their rights and duties. Such a system could be decentralized in its operation and could provide for representation of groups affected. Thus decisions regarding benefits would be made by local officials in immediate contact with the persons affected and in immediate contact with the circumstances surrounding the individual case.
Such a system should of course cover all of the workers of this country, not only those working for others but also those working for themselves. Such a system would provide the maximum amount of protection at a minimum cost and in the simplest and most efficient manner. However, our belief that such a system would be the most effective should not discourage or prevent us from undertaking to improve the two separate social insurance systems we already have. And that is what I want to talk about today.
First, as to unemployment insurance, there is much that can be done by the States themselves to improve the present unemployment insurance laws. Forty-four legislatures will meet next year. The Social Security Board has already called to the attention of the Governors of these 44 States and the State unemployment insurance agencies the desirability of seeking appropriate legislative action at the forthcoming sessions of the State legislatures. Here are some of the things the States themselves can do to improve their own State unemployment insurance laws:
1. The States could make their laws applicable to all employers in the kinds of businesses now covered by their laws instead of only to employers of a certain size. Already 13 States do cover all employers regardless of the number of employees, and there is no reason why the 38 other jurisdictions could not do so as well.
2. All States have sufficient funds so that they could increase the maximum unemployment benefit payment to at least $25 a week. At present, only one State pays as much as $22 and 26 States have a maximum of $16 or less. The result of these low maximum provisions is that on the average an unemployed worker receives only about one-third of his wage loss in benefits.
3. All States have sufficient funds so that they could pay benefits for at least 26 weeks to any eligible worker who is out of work that long. At present, there are only 3 States that pay as much as 20 weeks to all eligible workers who are out of work that long. The majority of States do not pay for more than 16 weeks. The effect of such limited duration of benefits is demonstrated by the fact that in 1940, which was a reasonably good year, fifty per cent of unemployed workers exhausted their benefit rights before they found another job.
4. The highly restrictive disqualification provisions that have been written into State laws to prevent workers who are involuntarily unemployed from drawing benefits should be modified. While we would all agree that only workers who are able and willing and available for work should receive unemployment insurance benefits, there is no place in a social insurance law for purely penal provisions or provisions which require an unemployed worker not only to prove that he is involuntarily unemployed but also to prove that it is due to the fault of his employer.
All of the foregoing changes that I have suggested can be made in the State laws and do not require any further legislation by Congress. If these changes are not made in our present system of unemployment insurance there is no question but that it will not be the strong first line of defense against unemployment which it can and should be. An independent economist working for the Committee for Economic Development has estimated that these State laws in their present form will probably compensate for only ten per cent of the annual wage loss which will be sustained during the postwar period.
It would be necessary for the Congress itself to act in order to provide unemployment insurance protection to Federal employees. It also would be necessary for Congress to act in order to provide unemployment insurance protection to maritime workers, regardless of whether they are Federal employees or employees of private concerns. I think we would all agree that it is not only fair but necessary to provide unemployment insurance protection to Federal employees, who for the most part are war workers in arsenals and navy yards and in other employments which make them subject to the same lay-offs as employees of private employers. I think we would also agree that maritime workers exposed to the extraordinary hazards that war entails should also be provided this protection. There are other ways in which Federal legislation could improve and strengthen the present Federal-State system of unemployment insurance without affecting its basic character. Thus, requiring that a State law meet certain minimum benefit standards in order that employers in that State receive credit against the 3 per cent Federal unemployment tax would protect States that desire to improve their standards from unfair competition by employers in other States. Since these State laws came into existence because of the imposition of the 3 per cent Federal unemployment tax, there is no logical reason why the Congress of the United States should not lay down the conditions that the States should meet in order that their employers receive credit under this Federal tax law. In addition to prescribing minimum benefit standards, the Congress could provide a Federal re-insurance fund to protect State unemployment insurance funds in case the claims upon any State fund should be more than it could meet at the normal rate of contribution of 2.7 per cent of payroll. If this were done, the States could not only be protected but also encouraged to make their scale of benefits more adequate.
Old-Age and Survivors Insurance
Let me now discuss briefly some ways in which our present Federal old-age and survivors insurance system could be improved. This system, as you know, provides monthly insurance payments to the insured worker and his family when he is old, or to his family when he dies whatever his age. Last August we began paying the one-millionth benefit under this program. Those payments go, by the way, to the family of a union molder in Cleveland, Ohio--a young man who had been secretary of local 218 of the International Molders and Foundry Workers Union. The young widow and the 2 little children in that family are receiving approximately $40 a month and monthly payments will continue until the children are 18 years old. Such benefits will total more than $11,000 during the children's school years and might reach $15,000 or more, counting benefits payable to the widow after she is 65 if she lives out her normal life expectancy.
Our old-age and survivors insurance system is sound and successful as far as it goes, and it covers millions of workers and their families. But it should be extended to the millions not yet covered by it, and we should liberalize the benefit payments and we should add disability insurance protection. This can be done only by Act of Congress, and our recommendations have accordingly been sent to Congress. One thing, however, the Board itself has the power to improve, and I am glad to tell you today that we are taking action to improve it.
This relates to the re-calculation of benefits of the elder men and women who have gone back to work--usually to war work--after having retired and claimed their old-age benefits. The monthly benefits they had been drawing were based, of course, on their wages of pre-war years.
But war-time wages are higher. Moreover, workers and employers pay social security taxes, or premiums on those war-time wages, just as they did on their pre-war wages. It has, therefore, seemed peculiarly unfair that war workers who had once retired and received their insurance benefits on the basis of pre-war pay should not be able to get the larger benefits, based on their wage records down to date, including their much higher war-time wages.
This situation was not foreseen when the Social Security Act was passed in 1935, or even in 1939 when it was amended, but as applied to the present problem the intent of the law seems clear, and the Board has ruled accordingly. I am, therefore, glad to tell you that, upon application, we will re-calculate the monthly benefit payments of any worker who, since retiring, and claiming his benefits, has gone back to work on a covered job at pay which could increase his benefit rate.
I hope you will pass on this news to the older men and women in your membership and among your acquaintance everywhere. Remember it stands to benefit only the worker past 65 who filed his claim and later returned to work for higher average pay than he had received before.
We have made progress on a plan worked out with the United States Civil Service Commission to protect the old-age and survivors insurance rights to the large number of persons who have left insured employment to work for the Federal Government during the war. This has been a long and complicated job because it is necessary to work out a plan that would not interfere with the functioning of the Civil Service Retirement Fund. We believe we have worked out a solution whereby persons who contribute to the Civil Service Plan but who secure no annuity because they worked less than 5 years for the Federal Government will have their social security rights protected. This can be done by transferring the necessary employee social security contributions from the Civil Service Retirement Fund to the old-age and survivors insurance fund, and refunding to the employee the balance of the amount to his credit in the retirement system. In this way persons who have worked for the Federal Government and also have an insurance status under the Social Security Act will gain additional insurance protection toward old-age benefits and survivors benefits. In some cases the value of the total survivors benefits may be equivalent to $5,000 or $10,000 of insurance protection.
Another matter that can and should be taken care of right away is to protect the social security rights of men and women who have gone into military service. We relieve that service in the armed forces should be counted toward insurance benefits just as under existing law we count employment in private business or industry. A number of bills have been pending in the Congress for some time. However, the problem was a complicated one and only within the last few days has a plan been worked out which not only protects the social security rights of the men and women who have gone into military service but also does not interfere with any veterans benefits to which they may be entitled.
I am confident that not only these matters that I have mentioned will receive the attention of Congress but also other fundamental proposals for improving the present social insurance system. Some of them of course are more controversial than others. The ones I have mentioned are relatively non-controversial. Probably the least controversial are proposals to provide Federal grants-in-aid to the States to enable them to provide adequate assistance to all needy persons. Probably the most controversial are the proposal to incorporate the present unemployment insurance system into a comprehensive national social insurance system and the proposal to include health insurance in this national system.
Time will not permit me to discuss the pros and cons of these two controversial but fundamental proposals. However, before closing I should like to point out that health insurance is quite different from what has been called "socialized medicine" or "state medicine." Health insurance is not a system of medical practice but a method of paying for the cost of medical care. It is a method whereby workers can pay a little at a time and in advance medical bills which are unpredictable in time and in amount, but are an ever present threat and a serious barrier toward obtaining adequate medical care. In short, health insurance is a device whereby workers can pay their medical bills without hardship and whereby doctors and hospitals will be guaranteed payment for the services they render. Patients will be free to choose their own doctors and doctors will be free to choose their own patients.
But while we are debating these fundamental but still controversial phases of an ideal social insurance system, we must also continue to bend our efforts toward improving the two social insurance systems we already have. That is to say, we should not let our striving for what we consider the best system prevent us from also undertaking to make the present system better.