Arthur J. Altmeyer

Social Welfare In The United States

Arthur J. Altmeyer
Former U.S. Commissioner for Social Security

This monograph was prepared by the author in a private capacity, and he has graciously consented to its use in this form. The views presented are his own and do not necessarily reflect those of the United States Government, or any of its officers or constituent agencies.


It is difficult to fix limits to a discussion of social welfare in the United States. This is primarily because social welfare is such an all-embracing concept. It is also because the application of this concept in a pluralistic society and a Federal-State system of government, such as we have in the United States, is so varied and complex.

Many people speak of social welfare as meaning the good life for all members of society. This, of course, has been a dream of religious leaders, philosophers, and statesmen since the dawn of civilization. However, as Arnold Toynbee has said the twentieth century may well be remembered not as the bloodiest century in history, but as the first century in which people dared to thirds it practicable to make the benefits of civilization available for the whole human race.

At the other extreme, in the United States at least, the man on the street may use the expression in a very narrow sense when he speaks of "being on welfare." He, of course, is thinking only of the receipt of public aid by indigent persons.

In this discussion, we shall not attempt to cover all programs that may indirectly contribute to social welfare, but only those programs which are directly concerned with the economic and social well-being of individuals and families. In doing' so, we shall discuss both governmental and non-governmental programs, but concentrate largely on the governmental programs.

Social Security as Social Welfare

In the United States, the term "social security" is used to cover a large portion of the field of social welfare. This term first came into general use in the United States in 1935, during the Great Depression, when the Social Security Act was passed. It quickly achieved world-wide usage. It was included in the Atlantic Charter, signed by the President of the United States and the Prime Minister of Great Britain on August 14, 1941, and later adhered to in the Declaration of Philadelphia by twenty-six Allied governments at the International Labor Conference in 1944. It has been included in the constitution of many of the new nations which cane into existence after World War II as a major responsibility and objective.

The term "social security" has sometimes been used synonymously with "social welfare" in its widest sense. It is also used in a more restricted sense to mean a government program designed to prevent destitution by providing protection against major personal economic hazards such as unemployment, sickness, invalidity, old age, and the death of the breadwinner. In this sense, social security is primarily an income maintenance program which, in addition to providing cash benefits, may be accompanied by constructive social services to prevent or mitigate the effect of these hazards.

It is in this more restricted sense that the term "social security" is properly used in the United States. Most workers here use it to mean the program of Federal Old-Age, Survivors and Disability Insurance (OASDI) which covers more than 9 out of every 10 workers and their families and is administered nation-wide by the U.S. Social Security Administration. "Social security" and OASDI have become synonymous because, for one thing, the U.S. worker contributes directly from his regular earnings to pay for his protection under this program, and, for another, its history of nearly a quarter of century uninterrupted benefit payments and regular improvements to meet changing needs for protection have brought him to depend on the program as the basic protection for himself and his family in the event of lost income because of retirement, death, or invalidity.

"Social security," as used with reference to the Social Security Act in the United States also encompasses some of what we call "welfare" or "needs" or "assistance" programs. These are programs of grants to States for aid and services to needy families with children, maternal and child welfare, aid to the blind, aid to the permanently and totally disabled, and medical assistance to the aged. The term also encompasses programs of unemployment benefits to be administered by the States, and unemployment benefits for Federal employees and ex-servicemen. In addition, the term is frequently used in referring to programs not encompassed by the Social Security Act such as Workmen's Compensation (Employment Accident Insurance) administered by every State and at the Federal level for Federal employees, maritime workers and workers in interstate commerce, as well as programs of temporary cash sickness benefits in four States.

Now over 100 countries have put into effect programs they call social security which provide protection against one or more of the hazards just mentioned. Many of these progress have been in existence far longer than the one in the United States.

Other Government Programs as Social Welfare

Besides the government programs contained in the Social Security Act itself and the other Federal and State government programs in the United States which are properly classified as social security programs, there are many other government programs in the United States that fall within the broader field of social welfare. Certainly veterans' benefits, public health and medical programs, child welfare services, school lunches, food stamps, surplus food distribution, slum clearance and public housing should be included.

Education as Social Welfare

In the United States, public education is not usually thought of as a social welfare activity, probably because it is taken so much for granted, having existed for 125 years. However, in other countries where public education is a much more recent development and at the United Nations it is usually included as falling within the social welfare field.

Private Efforts as Social Welfare

Besides all the government programs in the field of social welfare, there are many non-governmental programs. The two most important kinds of non-governmental welfare programs are those supported by private philanthropy and those which grow out of the employer-employee relationship (which are usually referred to as "fringe benefits").


Probably the best way to measure the magnitude, character and growth of public expenditures for social welfare in the United States is to relate these expenditures to the gross national product. As late as 1929, the total public expenditures for social welfare, exclusive of veterans' programs and education, were less than 1 % of the gross national product. If we include public education, we find that now the Federal, State and local governments in the United States are spending about 12% for social welfare.

Effect of Chances in Public Awareness

The belated development of large-scale governmental programs in the field of social welfare was due to the fact that during the 1920's the American people did not realize that, while life in the United States had become safer and more prosperous, living had become less secure. By 1929 the United States was predominantly an urban and industrialized nation. Free land had not been available for forty years. The self-sufficient family and community had been largely superseded by large commercial and industrial enterprises whose employees were dependent upon their pay-check for a living. The immediate family and neighborhood had become less adequate for helping people in trouble.

It was not until the Great Depression of the 1930's that the nation as a whole became aware of the serious social consequences of the great economic changes that had taken place. The onset of the depression had the two-fold effect of increasing the need for public aid and reducing the gross national product, so that the percentage spent for social welfare had increased greatly by 1934-5. World War II, which brought full employment, reduced the need for public aid and the percentage fell accordingly.

It will be noted that the total public expenditures for social welfare, increased ten-fold from 1934-35 to 1962-3, in dollar amount, but only from 9.3% to 11.7% as a percentage of the gross national product. But there was a great change in the proportion represented by public aid and the social insurances. The former (which includes direct relief and work relief) declined from 4.4% to .9%, and the latter increased from .6% to 4.5%. This was not only because 1934-1935 represented the depth of the Great Depression, but also because in 1962-3 the social insurance prevented a great amount of destitution which would otherwise have required public aid.

Comparison of Federal and State Expenditures

A very important characteristic of all these public social welfare programs, is whether the program is carried on by the Federal government itself, or by the State and local governments. Many of the programs are financed jointly by the Federal and State governments.

It will be observed that both in 1934-5 and in 1962-3 the total expenditures by the Federal government and by the State and local governments were approximately equal. However, as regards the Federal government, a large part of the increase between these two dates was for the social insurances, public health and medical services, and veterans' programs. As regards the State and local governments, a large part of the increase was for public education.

If we look at the proportion of the expenditures for each program, we find that the Federal government now pays 75.9% of the cost of social insurance instead of 25.8% in 1934-5. The proportion of public aid paid by the Federal government has declined from 79.2% to 55.8%. Moreover, the proportion paid by the Federal government now is in the form of grants to the States and not direct payments to individuals. As regards public health and medical services, we find that the Federal government now pays 45.4% of the cost instead of 11.8% in 1934-5. But the proportion of the cost of public education paid by the State and local governments is still high, namely 92.5%, as compared with 93.6% in 1934-35.

It will be noted that no expenditures for social insurance are shown for 1912-13. Actually there were some negligible expenditures. The United States Employees Compensation Act was passed in 1908 covering work injuries sustained by Federal employees. Nine States had also passed workmen's compensation laws in 1911, but not all of them were actually in effect. A number of States and many local units of government had established retirement systems for their employees. However, expenditures for all of these forms of social insurance constituted less than 0.05% of Gross National Product and are, therefore, not shown.

The public aid expenditures for the periods 1912-13 and 1928-29 were all made by the State and local governments. In 1912-13, these expenditures consisted almost entirely of the cost of maintaining "poor houses" and providing assistance in kind for indigents living outside these poor houses.

By 1928-29 these expenditures also included cash assistance for certain groups in the population, namely the needy aged, the needy blind, and dependent children. This assistance was provided under State laws.

These State laws were usually referred to as "old age pensions," "blind pensions," and "mothers' pensions," although the payments were made only to needy persons. They represented a great advance in the humane treatment of these groups of needy persons. However, it is important to note that they differ fundamentally from social insurance which provides benefits to workers suffering loss of income from unemployment, disability, or old age retirement without subjecting them to a means test.


The most prominent feature of the American social welfare field is social security, if we exclude public education which, as stated at the outset, is not regarded as a phase of social welfare in the United States. Prior to the passage of the Social Security Act in 1935, there was practically no permanent Federal legislation in the field of social welfare. This was due to two reasons. Basically, it was because the American people did not feel the need for their Federal government to engage in social welfare activities. It was also due to the fact that the United States Supreme Court had interpreted the Federal Constitution as precluding such activities.

However, the great depression shocked the Nation into a realization that only the Federal government could cope with this National catastrophe. One out of every three workers was unemployed. One out of every five persons had to seek public aid to stay alive.

The Initial Role of the Federal Government

First the Federal government made loans to the States to help cover the cost of emergency relief. But the Congressional appropriation for this purpose, made in 1932, was exhausted by March 1933. The new administration coming into office at that time then embarked on a nation-wide program of out-right grants to the States for emergency relief to unemployable persons and a Federal work-relief program for employable persons.

The Social Security Act of 1935

The new Administration also proceeded to develop a long-range permanent social welfare program which would eventually supercede the emergency program. President Roosevelt instructed his advisers to follow two basic principles in developing this program: 1. Rely to the maximum extent on the States to administer the program; 2. Rely to the maximum extent on contributory social insurance for protection against destitution.

By contributory social insurance, the President meant a system under which contributions and benefits were related to past earnings. He was familiar with workmen's compensation which possessed this characteristic. The American workmen' s compensation laws had been modeled after similar European laws which had been in existence for many years.

The Social Security Act of 1935 is based upon the two basic principles laid down by the President. Of ten separate programs included in the Social Security Act, nine are administered by the States, with Federal grants to cover a large proportion of the cost. Likewise, the Social Security Act included two types of contributory social insurance: old-age retirement insurance and unemployment insurance.

Old-Age Insurance (now Old-Age Survivors and Disability Insurance)

The old-age retirement system (which subsequently was expanded to include survivors' benefits and disability benefits) is operated directly by the Federal government. Under the original program, only employees in commerce and industry were covered and coverage was compulsory. In 1950 and subsequent years, coverage was extended to the non-agricultural self-employed, including most professionals and to both the self-employed and workers in agriculture.

Benefits under the original program were payable only to workers at age 65 who retired after 1941. But in 1939, the program was revised and expanded to provide benefits for wives and children of retired workers, and for widows, children and dependent parents of deceased workers. The first benefits became payable to persons who qualified in January, 1940. A death benefit to help defray the funeral expenses of the worker was also added. In 1950 benefits were made available to dependent husbands and widowers of female workers. In 1954, a disability freeze (similar to a waiver of premium) for the permanently and totally disabled was instituted and in 1956, cash disability benefits provisions were added.

Unemployment Insurance

The unemployment insurance system is federal-state in character. All the States were induced to pass unemployment insurance laws because the Social Security Act included a Federal Unemployment Tax on employers' payrolls. If a State passed an unemployment insurance law, an employer was permitted a credit up to 90% of the Federal tax for contributions made under the State law. The old-age retirement system is completely Federal in character because the actuaries believed that the great movement of workers across State lines made a State by State system unfeasible.

Public Assistance

The two social insurance systems were intended to provide a first line of defense against the two causes of destitution which were recognized as most important at that time. However, it was realized that it would be many years before a contributory old-age insurance system could pay sizable benefits based upon past earnings. Therefore, the Social Security Act also provided for Federal grants to the States to enable them to pay cash assistance to persons over 65 years of age, based upon their needs. Thirty States and Territories already had old age assistance laws on their statute books. However, most of these laws provided for grants to the local units of government and were permissive in character. The result was that in only 10 States were they in State-wide effect.

Likewise 27 States had laws providing for cash payments to the needy blind. But most of these laws too provided for grants to the local units of government and a large number were permissive.

Forty-five States also had on their statute books laws providing for aid to dependent children, sometimes called "mothers' pensions." These laws provided for State aid to local government units to help finance this form of cash assistance based on need. As in the case of old age and blind assistance, most of these laws were optional on the part of the local units of government. The result was that these laws were actually in operation in less than half of the local units of government in these States.

The Social Security Act provided for Federal grants to the States for old age assistance, blind assistance and for aid to dependent children upon condition that a State actually put these laws in effect throughout the State. Practically all the States soon complied with this requirement.

Besides the two types of social insurance and the three types of public assistance, the Social Security Act provided for grants to the States to expand their public health programs, to expand their maternal and child welfare programs, and to expand their vocational rehabilitation programs.


As has already been mentioned, this great reliance upon the States to administer the provisions of the Social Security Act was due to the belief on the part of President Roosevelt, which was shared by most of his advisers, that this was desirable. It was felt that a nation-wide social welfare program affecting the daily lives of millions of people throughout the continent should provide opportunity for variation in its substantive provisions and in its administration, subject of course to the basic principles contained in the Federal law.

President Roosevelt's views had probably been influenced by his experience as a State Governor and perhaps by his acquaintance with James Bryce, the former British Ambassador to the United States and the author of a book entitled The American Commonwealth, who felt that the great strength of the American

Federal-State system was that the States constituted laboratories for experimentation. The President's reaction to a radical proposal of Upton Sinclair, who was a candidate for Governor in California was typical. Sinclair's proposal was known as EPIC, initials which stood for End Poverty in California. His comment was, "Perhaps they'll get EPIC in California. What difference, I ask you, would that make in Dutchess County, New York, or Lincoln County, Maine? The beauty of our state-federal system is that the people can experiment."

The Question of Constitutionality

There was also a very important constitutional reason why maximum reliance should be placed on State action. Under the Federal Constitution, the Federal government possesses only those powers which are delegated to it by the states, such as the power to regulate interstate commerce and to levy taxes. Two Federal child labor laws had been declared unconstitutional by the Unites States Supreme Court, the first as not authorized under the interstate commerce clause and the second as an invalid exercise of the taxing power. Even while the Social Security Act was being considered by Congress in 1935, a Federal Railroad Retirement Act was declared unconstitutional as an invalid exercise of the power to regulate interstate commerce.

Fortunately, when the Social Security Act reached the United States Supreme Court in 1937, the court adopted a liberal interpretation of what is known as "the welfare clause" in the Federal Constitution which reads, "The Congress shall have the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United Stated."

In a land-mark opinion upholding the constitutionality of the Social Security Act, Justice Cardozo wrote:

"Congress may spend money in aid of the 'general welfare.' There have been great statesmen in our history who have stood for other views. We will not resurrect the contest. It is now settled by decision. . .

"The purge of the nation-wide calamity that began in 1929 has taught us many lessons. Not the least is the solidarity of interests that may once have seemed to be divided. . . Spreading from state to state, unemployment is an ill not particular but general, which may be checked, if Congress so determines, by the resources of the Nation. If this can have been doubtful until now, our ruling today. . . has set the doubt at rest. . . The hope behind this statute is to save men and women from the rigors of the poorhouse as well as from the haunting fear that such a lot awaits them when the Journey's end is near. . ."


The Social Security has been substantially improved by Congress on 8 different occasions since 1935. The coverage of the Federal-State unemployment insurance system has been extended to include 80% of all employed wage and salary workers. Benefits are now being paid to 1,500,000 temporarily unemployed workers totaling 200 million dollars a month. The coverage of the Federal old-age survivors and disability insurance system has been extended to include 90% of the entire labor force including the self-employed. Monthly benefits are now being paid to 19 million totally disabled and retired workers, and their dependents, and to the widows, orphans, and parents of deceased workers. These benefits total 1 billion dollars a month.

The public assistance provisions of the Social Security Act have been improved to include Federal grants to needy disabled persons who do not qualify for social insurance benefits or whose insurance benefits are not adequate. The percentage of the cost of this category and the other categories of public assistance borne by the Federal government has been greatly increased. The Federal grants to the States for maternal and child welfare have also been greatly increased, and Federal grants are now available to the States to provide medical assistance to the indigent aged.


Besides the social Insurances included in the Social Security Act, there are two other Federal social insurance systems covering railroad workers. One is the Railroad Retirement Act. As previously stated, the first such Act, passed in 1934, had been declared unconstitutional in 1935. However, another one was passed in 1935. This law provided benefits for permanent total disability as well as old age retirement. The Railroad Retirement Act and the Old-Age Survivors and Disability insurance system are coordinated to provide continuing protection to workers moving into or out of the railroad industry.

There is also a Railroad Unemployment Insurance Act that provides benefits for temporary disability as well as unemployment. This Federal system operates separately from the State unemployment insurance systems.


Federal civilian and military personnel in active service have separate retirement, sickness, and survivors' benefit systems. There is also a vast Federal program of veterans' benefits providing pensions and other cash benefits, as well as extensive medical services.

Unemployment insurance benefits are also provided for Federal civilian and military personnel. These benefits are paid in accordance with the provisions of the State unemployment insurance in effect where the applicant files his claim, but the cost is borne by the Federal government.


As regards State activities in the field of social welfare, these have grown along with those of the Federal government. As we have seen, the Federal government helps finance these activities to a considerable extent. As regards the social insurances, all States now have workmen's compensation and unemployment insurance laws. Four of the States also have temporary disability insurance laws.

All of the States have in effect public assistance programs for the needy aged, the needy blind and dependent children. All except one have in effect public assistance for needy disabled persons. About half have in effect a newer public assistance program for which Federal grants were first made available in 1961. This program extends the aid to dependent children to include children in need of aid because of the unemployment of a parent. Previously Federal grants had been available only if a child was in need of aid because of the death, disability or desertion of a parent. Of course, the law in all of the States provides for assistance to needy persons who do not fall within the categories for which Federal grants are available; in many cases, these are financed entirely by local funds.

As previously pointed out, State and local government expenditures for public health and medical care have increased greatly. The Federal government shares in the cost of most of these expenditures. However, the States and local government units bear almost all of the coat of institutional care of the mentally ill.


Public health and vocational rehabilitation are no longer included in the Social Security Act, but are in separate Federal laws. As has already been mentioned, the increase in the expenditures of the Federal government for public health and medical care since 1934-35 has been tremendous. Most of the increase in public health expenditures has been for research. The Federal government now spends a billion dollars for this purpose which is two-thirds of the cost of all the health research carried on in this country. However, there has also been a considerable increase in Federal grants to the States for public health activities.

Practically all of the increase since 1934-35 in direct Federal medical care expenditures, is for military personnel and their dependents. However, beginning in 1946, the Federal government has been making grants to the States, local units of government, and non-profit organizations for the construction of hospital and other medical facilities. These grants have increased year by year and now total a half-billion dollars a year. Moreover, medical care expenditures by the Federal government under "Veterans Programs" have increased during this period from $59 million to more than $1 billion.


Health Insurance

It should be noted that in the United States there is no public health insurance system or general health service, as there are in two-thirds of the nations having a social security program. Of course, medical care, as well as cash benefits, is provided under workmen's compensation laws in the case of work-injuries. In addition, indigents, members of the armed forces and their dependents, and veterans are provided medical care at public expense. All told, if we also include medical research, about one-fourth of the nation's medical bill is paid for out of public funds. Another fourth is covered by private insurance.

Maternity Benefits

Although there is no general program of maternity benefits in the United States, millions of women are eligible for maternity benefits through health and insurance programs provided under voluntary plans or, in some cases, through legislative action. These benefits take the form of cash payments to meet part or all of the expense of obstetrical care; or they may provide medical and hospital services. For women workers they may also include maternity leave provisions and cash payments to compensate in part for loss of wages during disability.

Federal legislation provides benefits for women railroad workers, women federal employees, women in military service, and wives of servicemen. Federal, State, and local laws provide assistance for women who are "medically needy." But the trend in the United Sautes is toward voluntary protection, and this is provided for under informal employer policies, through collective bargaining agreements, or through private subscription to commercial insurance plans.

Family Allowances

Another feature which is not included in the social welfare program of the United States is what is called family or children's allowances. About half of all the nations of the world have such a program. Probably the chief reason that the United States does not is that the general high level of wages in this country does not create the same need for supplementation for workers with families. In any event, employers in this country have never proposed family allowances in lieu of a general wage increase as has been true in a number of other countries. Nor has organized labor ever shown any interest whatsoever in family allowances, either as a result of collective bargaining or as a result of legislation.

Another reason that there has been no interest in family allowances is that an aid to dependent children program has developed in this country to a far greater extent than anywhere else, although it is true that it does not apply to the normal family where the breadwinner is working.


There can be no question that in the United States governmental programs in the field of social welfare are more important than non-governmental programs in term of expenditures and individuals affected. However, it would be a mistake not to recognize the vital role of non-governmental social agencies.


Throughout our history, religious organizations have engaged in philanthropic activities such as providing assistance to the needy and caring for dependent and neglected children. Secular philanthropic organizations came into existence early in the 19th century, and in the 1870's, charity organization societies were established in the larger cities to deal more effectively with social needs arising out of increasing urbanization.

In 1929, at the outset of the Great Depression, it was hoped that the private welfare agencies would be able to meet the needs of the increasing number of unemployed workers. This proved not to be the case. Soon the States and then the Federal government was obliged to provide funds to assist local public relief agencies.

As the local, State and Federal governments assumed responsibility for providing cash assistance to indigent persons, the non-governmental welfare agencies devoted most of their efforts to providing health and welfare services (rather than cash assistance) for individuals and families. These services are not limited to the indigent. They include institutional care, hospital nursing services, recreational activities, family counselling and other types of services. The total expenditures of three non-governmental agencies for health and welfare activities have steadily increased in amount and as a percentage of the gross national product. They now aggregate about two and a half billion dollars, and constitute a valuable supplement to governmental welfare activities.

Employment Fringe Benefits

Beside philanthropy, another valuable supplement to governmental welfare activities are the health and welfare plans based on the employer-employee relationship. These are usually referred to as "fringe benefits" in the United States. They include life insurance, health insurance. disability benefits, sick-leave, supplemental unemployment benefits, and retirement benefits. Prior to 1935, the number of employee benefit plans was very small, about 1,000 covering 2,600,000 workers (exclusive of those covered by life insurance policies). By 1962, 43 million employees or 71% of all employees in the country, plus 68 million dependents were covered under such plans. The benefits paid in 1962 amounted to $9,769,000,000. There are a number of reasons accounting for this dramatic growth. The Social Security Act of 1935 facilitated the establishment of private pension plans on a sound actuarial basis. High corporation taxes coupled with allowance of explorer contributions as a deduction permitted the establishment at a low net cost. The "wag-freeze" during World War II and the Korean War, which permitted increased compensation in the form of "fringe benefits" and labor union demands for "fringe benefits," were other reasons.

Employers pay about half of the cost of health and welfare benefits, exclusive of retirement benefits. They pay about 85% of the cost of retirement benefits.


It is apparent from the foregoing discussion that the development of social welfare programs in the United States has encompassed both governmental and non-governmental efforts. In so doing, it has been demonstrated that there need be no conflict between the two. Voluntary welfare organizations recognize that the assumption by government of the obligation to provide financial aid to indigent people has enabled them to use their resources more effectively in providing constructive social services. Likewise, the large life insurance companies have used successfully the basic protection afforded by the Old-Age, Survivors and Disability Insurance system to promote the sale of additional protection.

It is also apparent that this development has come about as the result of felt needs--on a pragmatic basis rather than on an ideological basis. However, it would be unfortunate if we did not recognize that it constitutes an expression of the paramount objective of democratic government--the welfare of people. While judges debated for 150 years as to the respective role of the Federal and State governments in achieving this objective, it is well to recall that the very first sentence of the Federal Constitution reads as follows: "We the People of the United States in order to form a more perfect Union, establish Justice, insure domestic Tranquillity, provide for the common defense, promote the general welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this CONSTITUTION for the United States of America."

The underlined words indicate that the founding fathers recognized that a democracy had an affirmative obligation to promote both the liberty and the welfare of the people. Thus, their concept of liberty was a positive one of equal opportunity for all which can only be achieved through promoting the general welfare.