Arthur J. Altmeyer
HOW DISTANT IS THE GOAL OF SOCIAL SECURITY?
A. J. Altmeyer, Chairman, Social Security Board
National Convention of Grand Aerie Fraternal Order of Eagles
Cincinnati, Ohio, August 3, 1944
In these days when everyone is preoccupied with the dramatic news from the war fronts, and when political crises in the enemy camp vie for attention with nine billion dollar international banks, it is gratifying to be asked to speak on the more human, or perhaps I should say humane, subject of social security which constitutes one of our chief hopes for a better world. It is yet more agreeable to be invited to address the Eagles. For here, I know, social security will not fall on deaf ears. I am well aware that no audience in America could be more sympathetic to the cause of social security than this audience.
Long before there was a social security plan in America, before the term itself had come into use, the Eagles were "social security conscious." They were the first to agitate for mothers'-pensions. They put through the first legislation of the kind in this country. We who have responsibility for administering the present social security programs have not forgotten that it was the enthusiasm and drive of the Eagles that caused the enactment of the first two old-age pension laws--those in Montana and Nevada. And not many months ago we rejoiced when once again the Eagles picked up the standard and came out in support of some of the recommendations the Social Security Board has made to Congress for amending the Social Security Act. At its meeting in Chicago, as you know, the Old-age Pension and Social Security Commission of the Fraternal Order of Eagles recommended the passage of Federal legislation to give those presently in the armed forces of our country full credit under the Social Security Act for their time in military service. It also endorsed the extension of social security protection to cover all wage and salary earners not now adequately protected by pension or retirement systems.
I do not think it is necessary to describe in detail to you the objectives of social security. You know them. And yet I should like to set those objectives freshly before you that you may the better judge how far we have advanced towards our goal--and how much farther we still have to go.
Social security is a plan to assure for every family at all times the basic necessities of life. It is a plan to provide for every family an income throughout the whole cycle of family life--in periods when the breadwinner is earning and in periods when he is not.
Strange as it may seem to you, there are those who even after the illusion-shattering experience of the depression--when there were 28 million people receiving emergency relief--still hold to the notion that there is no necessity for a program of social security at all. They insist that by establishing a program we take the challenge out of life. Security, they say, should be every individual's own responsibility; each should save out of his earnings enough to tide himself and his dependents over periods when no earnings are coming in.
I think you must know that this is merely wishful thinking. The reality does not admit of such a solution. Most of the American people do not earn enough to be able to save adequately for all conceivable periods of stress--unemployment, temporary and permanent disability (with their accompanying drains for doctors' bills), old-age, and death of the breadwinners. We try and we shall always go on trying to save for that rainy day, but most of us know well that a prolonged period of unemployment, an accident, a serious operation, can eat up the savings of years of the average American family and force it to begin at rock bottom again.
No, the problem of spreading earnings over a lifetime cannot be solved for the Nation as a whole solely on the basis of individual savings. The solution lies to a great extent in social insurance. That it does not lie there entirely is due to the fact that social insurance involves ability to work and to pay contributions, or premiums. For many this is impossible. There are those who are already too old to work and those who are too young and those who are physically handicapped. These many, although they cannot contribute a percentage of wages, or cannot do so over a long enough period, must be assured the basic needs of life. Public assistance is the name of the program we have adopted to assure an income for the needy aged, the needy blind, and dependent children.
Social insurance is still so new in this country that many people are yet not sure exactly how it works. Actually it works on the same principle as private insurance. That is the principle of spreading the risk. As Winston Churchill has said, it brings the magic of averages to the rescue of the millions. Disaster, to which millions are subject, actually strikes only a few of us at any given time. If we collect a small premium from the many who are exposed to the risk, we can build a fund out of which we can pay benefits to those who at any given time are suffering from the impact of the risk. Only there is this distinction. In the case of private insurance the policy holder does all the paying for the protection he gets; with social insurance it is different. The person who pays the premium on unemployment insurance is--in most States--the employer, while in the case of old-age and survivors insurance the employer and the employee share the cost, the Federal Government standing by ready to help in case of need.
How well do our two systems of social insurance serve to provide for families an income in periods when the breadwinner's earnings are cut off?
Unemployment insurance, of course, is not the answer to prolonged mass unemployment; only full employment can be that. Nor is it a substitute for employment; the only real substitute for a job is another job. But unemployment insurance does act as a first line of defense against destitution. When an insured worker loses his job, his family is not immediately thrown on its own resources; for some weeks a regular weekly income continues to come in. That income is much smaller than the wages the worker earned when employed, but it does help to tide him over until he gets work again.
Unemployment insurance serves business also, because it provides income to the customers of business--income with which to pay the butcher, the grocer, the landlord. Even in wartime, unemployment insurance helps our economy to function more smoothly. Although unemployment is practically at rock bottom now there are many instances where war workers are thrown out of work temporarily.
Let me give you an example. Recently, a cannery had to lay off over a hundred workers in the midst of the canning season, because some shipments of vegetables did not arrive. There were no other jobs in the vicinity for the unemployed men and woman. If these workers hadn't received unemployment payments, many undoubtedly would have gone to jobs in other towns. Then when the cannery was ready to operate at full force again it would have had the difficult task of finding and bringing in workers from other communities. Unemployment insurance helped to keep the cannery workers where they would be needed soon again to put up food for our armed forces.
We look to unemployment insurance to ease the Nation's transition from war to peace. In view of the vast labor turnover that will occur then, we must expect that millions of working men and women will be without jobs for at least a short period. Can we feel confident that our present system is good enough and strong enough to meet that situation? I would like to outline just a few facts that throw some light on that question.
We have 51 different unemployment compensation systems in this country, each operating under a different State law. The total reserves in the unemployment funds of the States now amount to over five billion dollars. That is a lot of money. It is enough to pay benefits of $20 a week for 20 weeks to 12,500,000 workers. But, unfortunately, this does not mean that our minds may be at ease regarding the protection unemployed workers will get in the difficult postwar period. Unemployment is likely to be uneven, for mass unemployment has its roots in national rather than local or State conditions. This will be particularly true in the postwar period, for employment conditions then will be largely affected by the policies of the Federal Government on such things as termination of war contracts, sale of surplus war materials, disposal of government-owned war plants, and international trade arrangements.
There has been much talk of unifying and nationalizing our 51 separate unemployment insurance systems, but it would be unfortunate if debate on this subject obscured our main objective; namely, to provide adequate benefits for workers when they are temporarily unemployed, However, as they stand now, the State systems have serious deficiencies.
What are some of these weaknesses? In the first place, benefits are too low. The maximum weekly payments vary from $15 a week in 22 States, and $16 or $18 a week in 17 States, to $20 or more in 12 States. In general, these top limits on size of payments were established in the pre-war days when actual earnings and the cost of living were much lower than today. In the post-war period many workers will receive benefits which represent but a small fraction of their weekly wages and but a small fraction of the amount needed to maintain themselves and their families.
Second, the benefits are payable for too short a period of time, and will not continue as long as many of the unemployed workers will be out of work. In 29 States the maximum period for which benefits can be drawn is 16 weeks or less. We cannot hope that such small payments for such brief periods will suffice.
And there are still other weaknesses. There is the question of coverage. You Eagles are well aware of the inequities springing from the fact that unemployment insurance covers only wage and salary earners in private industry and commerce, and not all of them. Millions for this reason have only their own meager--or altogether nonexistent--resources to fall back on if they lose their jobs. Among these are about 3 million workers employed by small firms who have less than 8 employees and whose workers, therefore, are not covered under the State law. Merchant seamen are excluded; so are Federal employees in Army arsenals, Navy yards and other government establishments.
Our returning veterans are guaranteed protection against unemployment by provisions in the GI bill. This bill establishes a system of readjustment allowances, payable at the rate of $20 a week, for a maximum of 52 weeks during the two years after the veteran is mustered out. In effect, this amounts to a special system of unemployment insurance for veterans. It is by far the most liberal system now in existence, and may well prove to be a stimulus to the liberalization of other systems. One unique feature is that it provides benefit payments for self-employed ex-servicemen who earn less at their occupations than $100 per month. This represents the first attempt in this country to pay unemployment benefits to the self-employed.
Improvement of our unemployment insurance program before the war's end is of urgent importance. An adequate program can be of great help to both workers and business by providing purchasing power for families whose breadwinner is temporarily unemployed. It can offset the tendency of people to "hoard" their income and savings unnecessarily by removing the fear that even a short period of unemployment would exhaust their resources. Unemployment insurance can be a powerful constructive force, if we wish to make it that, in keeping our economy on an even keel.
What is the story with our other system of social insurance?
You Eagles who were among the first to appreciate the problem of old age in America and who were so driving a force in the early legislation will be glad to hear that our Federal old-age and survivors insurance system is meeting well the test of time and experience.
As you know, when the Social Security Act was passed in 1935, no provision as made for the worker's family. Monthly benefits were payable only in old age and only to the worker himself. But four years later, in 1939, far-reaching changes were made. Those changes made the system one of family insurance. Under this system not only the wage earner but also his wife and young children receive protection. Under this system, moreover, the family receives monthly payments not only when the breadwinner is too old to work, but also when he dies.
Nearly a million monthly benefits are in force. Monthly payments are now being made at an annual rate of more than $220,000,000 a year. This means something more than just that a lot of money is being paid out. Translated into human terms it means that hundreds of thousands of families have been helped to remain independent, hundreds of thousands of families have been kept together, hundreds of thousands of children have escaped the crushing blow of a broken home and are growing up under the care of their own mothers.
This is a proud accomplishment. But we must admit that it is not enough. Given the opportunity, old-age and survivors insurance would carry us much nearer the goal of social security for all our people.
Today some 67,000,000 wage and salary earners have earned credits counting towards benefits under the system. Many of then will never receive benefits, however, because of failure to work long enough in jobs that come under the law. Some 20,000,000, about one-third of our working population, earn their living most of the time in employment that is excluded. Old-age and survivors insurance, like unemployment insurance, is at present available only to those who work for wages or salaries in private industry or business. Farmers and farm workers are excluded. Domestic workers in private homes are excluded. Employees of non-profit religious, educational, and humane organizations, and those who work for Federal, State, county and local governments are excluded. The men and women who work for themselves in small businesses or professions are excluded. All these groups are denied the opportunity of building old-age and survivors insurance protection for themselves and their families.
You Eagles have already expressed yourselves as being in favor of extending social security protection to all wage and salary earners not now adequately protected by pension or retirement systems. And in the article which I wrote for the May issue of your Eagle Magazine I pointed out how very important it is for all workers, the self-employed as well as wage and salary earners, to be included under old-age and survivors insurance. I shall therefore not take up your time with a full discussion of this. But I should like to point out how very wise the Eagles' National Social Security Commission was in placing that word"adequately" before "protected." Their phrase is "wage and salary earners not now adequately protected by pension or retirement systems." That is a very important inclusion. As you perhaps know, and as your Commission certainly knows, many of the special pension and retirement systems are far from adequate; yet the fact that groups are covered at all--no matter how inadequately--is used as valid argument against including them under social security.
The Social Security Board would go somewhat farther than your Commission has recommended. We believe that all workers should be included under old-age and survivors insurance, regardless of what protection they now have; for only by bringing all groups under the system can all families get basic and continuing protection. This can be done without jeopardizing the protection which people already have under special plans. It is argued by some that adjustments in existing plans would be difficult if not impossible to make. I would like to point out, however, that the same problem confronted the private retirement systems which many industrial and commercial companies had established before the Social Security Act was passed. In general those private pension plans ware adjusted satisfactorily, and many more companies have adopted such plans since the Federal system has been in operation.
The present limitation of old-age and survivors insurance to wage and salary earners in private industry and commerce leaves a broad gap in our social security system. There are other gaps. We have said that the objective of social security is to assure an income at all times, in all periods when earnings are cut off. Our present program, however, provides protection against only three of the great risks which threaten the welfare of American families--unemployment, old-age, and death. What about periods when the breadwinner is sick and cannot work? What about permanent disability which may put a permanent stop to a family's income?
It would be wholly logical to protect workers against both these risks through social insurance. At present if an insured person is out of work because he cannot find a job, he gets unemployment payments. If, however, he is sick and cannot work, he gets no benefits for the reason that he is not available for work. As for permanent disability, it differs very little from old age in its economic effects. In fact, the family of the young or middle aged man who is permanently disabled is in even a worse situation than the family of the man who has grown too old to work. We all know that when a man is old, his heaviest responsibilities towards his family are, in most cases, already discharged, whereas the young father who is permanently disabled loses his earning power at a time when the requirements of his family are at their height. Moreover, as in the case of the worker who is sick temporarily, the man who is permanently disabled causes an extra, and often a very heavy strain on the family purse.
There is another heavy risk against which the Social Security Board recommends social insurance. It is the cost of medical and hospital care. All of you have undoubtedly had intimate experience with these costs and know to your grief how very burdensome they are. Yet I should like to quote some statistics which will point up the fact that yours is not an unique experience. More than one-fifth of our urban families of low incomes spend for medical and related costs more than $100 every year, and many have sickness bills of above one-fourth and even one-half of their entire family income. It is an old adage that sickness and poverty go together; but such figures give a clue to at least one of the reasons why they are companion evils.
Social insurance started in practically every other country not with unemployment or old age but with health insurance. Recently one of our Board officials, talking with a representative of a South American country, asked him about old-age insurance in his homeland. The South American replied, "We are not providing for old age...because they don't live to be old--they die at 45 or 50."
In this country, fortunately, we do not have such a situation. Owing to the advance of medical science, and largely through public health and sanitary measures to safeguard water and milk supplies and to prevent and control such diseases as typhoid, diphtheria, tuberculosis, and malaria, the average life span has been increased. Almost thirds of us do live beyond 65, and we do have an old-age problem that has to be met through social insurance. But I could not help thinking the other day when I read the testimony at the hearings held before the Senate Subcommittee on Wartime Health and Education that insurance against the costs of medical and hospital care is even more important for the American people.
At those hearings Colonel Rowntree, medical director of the Selective Service System, testified that as many as one-third of the young men examined for service proved to have mental or physical defects. He said that the Selective Service physical examiners had expected to find "a rough, virile, manhood." Instead they had found that too many of American youth are "soft and flabby." More than 4,000,000 men were found ineligible for military service. Colonel Rowntree called the situation "appalling," and said "We can no longer regard ourselves as a sturdy, healthy nation; the country is ailing."
What does this mean?
It means that our social progress has not kept pace with medical progress. We have not extended the benefits of medical progress to all the people. It is true that we have to a certain extent raised average physical well-being. But "average" is a word that covers a multitude of individual differences. There are many regions in our country today where the chance of survival is no greater than it was 60 years ago. There are places in our country today--and this is especially true of rural areas--where people are almost without access to modern facilities to prevent and cure sickness. The Selective Service examinations sharply brought out the medical deficiencies in our rural areas. Whereas among a large group of 18--and 19--year old registrants about 25 percent were rejected on physical or mental grounds, among boys classified as farmers the rate of rejection was 40 percent.
This country as a whole has in peacetime adequate medical facilities and nearly enough doctors. Unfortunately they are not distributed evenly in relation to the need for services. Some medical services--hospitals, laboratories, and so on--scarcely exist outside of the great cities. Physicians, also are concentrated there. In 1938 strictly rural communities had on the average one doctor for 1,450 persons--this as compared with counties containing cities of 50,000 or more people, where there was one doctor per 575 persons.
But the more even spread of services and doctors would in itself be no solution; the cost of medical and hospital care would still be prohibitive for the masses or our people. Many who are within reach of facilities today cannot take advantage of them. Knowing beforehand what the bills will be like, many may not even have the courage to face a doctor and find out what is wrong with them.
There are two ways in which this problem might be met. Personal medical care might be provided as a public service, in the same way that education is provided. Under such a method, everybody in the community would be entitled to call on these services to the extent he needed them, and the costs would be met through general taxation. Such a system of public medical service could naturally require extensive changes in present medical practice. In countries where medical facilities are lacking and where there are few doctors, that method would probably offer the most speedy protection to the greatest number. But here in the United States it would hardly be considered an acceptable pattern.
We of the Social Security Board recommend another plan. We recommend that the serious health problem of this country be met through social insurance against the costs of medical and hospital care. Under this plan workers and their families would be able to get all the care they need because it would have been paid for beforehand through social security contributions. Each person would be left free to choose his own doctor. Each doctor would be left free to accept or reject his own patients. The Board's recommendation, as you may know, has been violently opposed by some sections of the medical profession. Most of the opposition is due to the failure to distinguish between social insurance, which merely provides a method for spreading the cost of medical care over a period of time and over a large group, and a system of State medicine. However, I will not go into all that. I will merely quote Surgeon General Thomas A. Parran, who at the Senate Committee hearing said, "There has been too little light and too much heat in our discussions of the socialization of medicine."
I think that from what I have said to you this afternoon you will conclude that we have been moving towards the goal of social security. But I think you will also draw the conclusion that we still have some distance to go before we have achieved minimum basic security for all. The Social Security Board is very happy to learn that the Eagles are shortly going to undertake a social security information program designed to acquaint all members with their rights and benefits and responsibilities under social security. I hope that on your "Social Security Rights" you will consider also some of the gaps in the program. We have a firm and solid foundation in the Social Security Act. It has brought us steadily towards the goal of social security. But new legislation is in order now. I hope that in your social security discussions you will consider what legislation will most surely and rapidly bring us to the goal of social security for all.