Committee on Economic Security (CES)

Volume II. Old Age Security

Papers in Support of Old-Age Provisions of Bill


Seward C. Simons,

Executive Director, Pasadena Community Chest and Council of Social Agencies, Institute of Public Affairs, University of California at Los Angeles, with the co­operation of the Pacific Southwest Academy and the Pacific Sociological Society.

July 27, 1934.

President Roosevelt in his message to Congress delivered June 8, 1934, said:  “The third factor relates to security against the hazards and vicissitudes of life.  Fear and worry based on unknown danger contribute to social unrest and economic demoralization. If, as our Constitution tells us, our Federal Government was established, among other things, 'to promote the general welfare,' it is our plain duty to provide for that security upon which welfare depends. Next winter we may well undertake the great task of furthering the security of the citizen and his family through social insurance.”

As the general topic of this Institute is the Recovery Program of the National Administration and as the President has indicated that social insurance to be one of the next features of such a program, it is well that we pause to look at it with some attention.

In a group such as this, I take it that there is little necessity for the plea not to prejudge the case. On the street, I often hear a statement such as “Oh, social insurance! It's a socialistic scheme. I'm against it." On the other hand, people without any real understanding but much sympathy were enthusiastic over unlimited or even extravagant proposals to provide benefits of all sorts.  In preparing to meet with you today, I have taken occasion to review at some extent the existing literature on our subject. This has impressed upon me how inadequate any brief presentation must be, measured by what might be said upon whole topic, or even one of its more limited phases. Not only a number of very comprehensive volumes (and for the benefit of those of you who wish to carry on more extensive studies I would like to mention particularly the one by Professor Barbara Nachtrieb Armstrong of the University of California,  “Insuring the Essentials;" Abraham Epstein's "Insecurity, a Challenge to America;" and the very recent publication by Dr. I. M. Rubinow, "The Quest for Security") but scores of booklets under widely varying auspices and hundreds of articles, technical and otherwise, published in periodicals particularly during the last 12 months, attest not only the intricacies and problems of the subject itself but also the widespread interest in this field.

Four specters are always present to haunt all families with the exception of a comparatively few in the upper income brackets. When any one of them materializes, the very economic basis of the family is shattered; when a large proportion of our families are shattered our whole society totters. These specters are Accident, Illness, Loss of a Job, and Old Age.

When we realize that a survey made in 1927 by Professor Leo Wolman of Columbia University disclosed that 67% of the families in the United States had annual incomes under $1450 and that the lowest of any accepted estimates as to the cost of maintaining an adequate standard of living is $1500 to $1700, allowing nothing for emergencies or savings, it can be readily seen that even if we anticipate a return of prosperity equal to that of 7 years ago, we cannot exercise these specters by the simple expedient of saying "Be thrifty." It must not be forgotten that these specters, with the exception of Old Age, strike suddenly and with great severity. It does not help the family where a disabling illness suddenly appears to be told that on the average only 4% of working time is lost by sickness.  Almost any wage earner can stand the loss of 2 weeks illness in a year but the trouble is that the illness may be 8 weeks or 10 weeks not only causing a terrific increase in expense but to the great majority of wage earners a complete loss of income for the period.

For a large proportion of our population then there is a constant dread of the future. This dread itself is one of the serious features in society, respon­sible as it is for much of the mental disorder which is filling our hospitals and institutions at an alarming rate today.

Our economic structure as a whole feels the effect of these incapacities in various ways. In the first place; Purchasing Power is greatly reduced. At a time of widespread unemployment, for example, without social insurance there is not only a heavy load on public treasuries for relief but a tremendous reduction in purchases from all types of business establishments, increasing the outgo and decreasing the income of the Government.

Just as for the individual it is extremely difficult to accumulate a fund against these hazards so also neither the community nor the Government put aside reserves. As a result, we have a necessity of outpouring billions of dollars from the treasuries already showing heavy deficits. The principle of insuring against such hazards, which we accept for the individual, applied also in giving greater security the finances of the governmental agencies which in the last resort must bear the strain. We shall see in our later, more detailed, discussion of unemploy­ment insurance how this has been effective in Great Britain.

In my position as a social worker, I see another very fundamental and far-reaching consideration which the recent years are beginning to make clear to all.  So long as our only method of dealing with these contingencies is on the basis of charity, just so long will be continually or repeatedly breaking down the independence and self-reliance of a large part of the 67% of our population who are always subject to such hazards. What this has cost in the past and will cost in the future we can only guess.


A beautiful theory, says the man on the street, but idealistic, impractical and impossible. Let us see:


The first of the four specters has been to a large part laid low in the United States by the development of Workmen's Compensation Insurance which is now in successful operation in 44 States, and three territories. Those of you who are old enough to remember the conditions in 1911 when the first Compensation Act was passed, will recall not only the devastating effect of industrial accidents upon many thousands of families but also the skepticism and distrust with which the proposals to meet this hazard by compulsory insurance was greeted. Except for the difficulties arising out of our State form of government, so that we have 47 different Compensation Laws, it can be stated without fear of dispute that in the minds of most people, employers as well as employees, it has been a great success. According to the United States Bureau of Labor statistics, some $240 million is paid out annually to injured workers and an additional $72 million for medical aid.  Along with the removal of the individual hazard to the workman has been a notably successful campaign for safety and accident prevention, resulting not only in reducing the suffering through injuries and permanent disabilities but in lowered costs to employers. The only recent test of the general approval of a Workmen's Compensation Act was in Arizona where on Nov. 8, 1932, an initiative petition to abolish the system was defeated by a more than three to one vote.

Thus we have settled one of the ghosts, but what about his dread companions unemployment and Old Age. Has insurance been found practical in these fields?

Health Insurance
Fifty-one years ago, Bismarck, the Iron Chancellor, established in Germany a compulsory health insurance act.  While this was the first national act of the kind, it was by no means the beginning of organized provision against the hazards of illness, for the principle had been established on the Continent for many years through the operation of mutual benefit societies. At the present time some 25 countries have compulsory health insurance plans and 15 more have voluntary systems under government supervision. The list of countries read very much like the index of the atlas of the civilized world. Of special interest to us is the fact that the British system, operating since 1911, now covers 35% of the entire population.

Unemployment Insurance
As a Government program, unemployment insurance dates back to 1900 when the city of Ghent, Belgium, began to supplement the outofwork benefits which had been in effect through the local unions many years. The program spread rapidly over the Continent and formed part of the English system adopted in 1911.  At the present time nine important countries have Compulsory State Plans, for unemployment insurance and an additional nine have Voluntary State Plans, while a further list of five countries provide partial systems of more or less similar type.  Over 50 million of the world's workers, not counting their dependents, are insured against the hazards of unemployment in this way.

In the United States, the first State measure of this type went into effect in Wisconsin on July 4th of this year. Otherwise, with the exception of individual company programs, we have no results to show for the years of interest in the sub­ject heightened public attention.

OldAge Insurance
Provision for old age raises a mass of complicated social and financial problems. To a greater extent than in other forms of social insurance, provisions vary widely between different countries. At the present time, since the inception of Government oldage systems in Germany and Denmark in 1889 and 1891, one or other of the various forms of protection for aged is in effect in some form in 13 countries.

Here in America, the record is not quite so blank, as we have State Acts in 29 States, theoretically providing some form of old age pension. Many of these, however, are inoperative and others are so restricted as to hardly warrant their inclusion in the list. The three most important States in which such systems are in effect are California, Massachusetts, and New York. It has been estimated that there were over 125,000 persons receiving oldage pensions in the United States at the end of 1933. As of June 1, 1934, the report of the State Department of Social Welfare shows 17,306 persons in California receiving a monthly total of $173,343.

We shall return to a discussion of the character of these various systems and the effects which they have had upon the problems which they were designated to solve.  But enough has been said to show that these forms of social insurance at least are not a novelty, that in effect they are in common operation in most European and even Oriental countries. They have been going long enough so that if they spelt immediate bankruptcy or disaster they could long ago have been discontinued. Why then have we in the United States been so slow in adopting these answers to the need for security? The reasons may be classified under four headings:

Conservative Controlling Opinion.

Controlling opinion in the United States has been extraordinarily conservative. For years a sufficient condemnation of almost any proposal has been to label it "socialistic." This has been a natural attitude when we consider American backgrounds. To the extent to which our country remained in a frontier or predominantly agricultural condition, there was a great deal of significance to the now somewhat smiledat term "rugged individualism." On a farm of the old type, raising most of the necessities of the family, there is little to worry about in the nature of unemployment or old age. And while sickness was of course a problem, medical services even for the prosperous were extremely limited. This tradition of individualism has carried forward into the present industrial era in considerable part because of the rapid development of large fortunes or accumulations of capital during the expansion of the last 40 years.  It is natural that businessmen should look with apprehension and opposition upon any increase of Government control or participation in business. We cannot blame an individual for looking out for what he considers to be his own interest, although we may criticize his shortsightedness or wish for him a greater unselfishness.

If, however, this fear of the extension of Government activities could be considered valid 4 or 5 years ago, we can hardly oppose social insurance on that ground today. How many of our banks, railroads, or even insurance companies would be operative had the Government not participated through the RFC and by extending other financial assistance? Certainly social insurance, much of which is frankly considered by the insurance companies themselves as not adaptable to private administration, is not nearly so much of an encroachment as many other types of operations which we consider commonplace as proper Governmental activities today. 

Bankrupting the Nation.

The second objection comes from those who feel that the cost will bankrupt the nation. It may not be an adequate answer but it is significant that Great Britain, where a relatively complete system of social insurance has been in effect for 23 years, finds itself today in perhaps the soundest financial conditions of any large country in the world. As we shall see when we examine more closely the details, the Exchequer is receiving reimbursement on the loans made to the British Unemployment Fund at the rate of 10 million pounds per year. And the income tax rate in Great Britain has recently been reduced l0%

In the United States, it is estimated that during the last fiscal year, Federal, State, County, and City governments spent around $200 million per month on various forms of poor relief including work relief projects like the CWA and the FERA. In addition to this, organized private philanthropy for the year 1933 added at least $175 million. It is impossible even to estimate the additions to these figures if we could include unorganized individual and private philanthropy and the very considerable figure represented by union outofwork benefits. Now, the greater part of the cost of social insurance would directly be an offset to these enormous expenditures. I think it can be safely said that the cost is greatly exaggerated in the minds of those who raise this question and that it would largely offset other expenditures which we are forced to make today. It must also be borne in mind that the costs necessary to provide satisfactory social insurance will, in general, be divided between the Government, employer, and the employee; thus, whatever burden the system entails will be spread among many without undue weight for any of the three classes.

Loss of Business

Analogous to the two preceding types of reasoning are those who definitely fear a loss of business should this system be extended.  Insurance companies, as might be expected, have feared that if the Government goes into one form of insurance it will go into all forms. At the same time, authoritative persons in the insurance group have stated that insurance compa­nies do not seek to write unemployment insurance. If we may again draw upon the experience of other countries, we do not find any lessening of the power of the great British insurance companies in their particular field because of the national social insurance program. If the private companies are therefore still alarmed, I believe they are unduly so.

Opposition of Medical Profession.

In the field of Health Insurance, many doctors, dentists, nurses, and hospital operators have feared the disorganization of the traditional system which has been built up. It will suffice at this point to state that a very large number among the leaders of these professions are publicly recognizing the necessity for health insurance and expressing the conviction that a plan can be developed which will retain the best features of the present relationship.


Lastly, we find opposition from those who may be called the ultranationalists, who inveign against anything foreign in origin. They represent a type of ignorance and fancied superiority, with which it is hard for some of us to be tolerant. It is strange that in this Nation, which has been so ready to adopt the mechanical and scientific progress of other lands, we have been so reluctant to concede their ability in matters of human relationships. Probably the cause lies close to the explanation we gave of individualism. In the expansion era, our general standards of living have been undeniably superior to those in most other countries. The only answer to this group is a closer understanding. We can overcome ignorance only by education; and when provisions of a social insurance system are carefully developed, analysis will show that there is nothing of the bogy about it.

We have so far been dealing throughout in generalities applicable to the whole field of social insurance. Let us turn now to the more specific examination of the ways of meeting the dangers of illness, unemployment, and old age.


Sir Arthur Newsholme, in his book on "Medicine and the State," says:

"Civilized communities have arrived at two conclusions from which there will be no retreat, though their full realization in experience has nowhere been completely achieved. In the first place, the health of every individual is a social concern and responsibility; and secondly, as following from this, medical care in its widest sense for every individual is an essential condition of maximum efficiency and happiness in a civilized community.”

It will probably be conceded in this company that the majority of our popula­tion do not receive adequate health services. Even in the prosperous period from 1928 to 1930, the findings of the Committee on the Cost of the Medical Care showed that in an average year 52% of the people receive no service from a physician, 79% get no attention from a dentist, 89% receive no health examination or similar preventive service. It has also been shown by the studies of the United States Public Health Service, in collaboration with the Milbank Memorial Fund, that the incidence of disabling illness is far greater in the wageearning families who have been re­duced to poverty by the depression than among their more fortunate neighbors.

It is true that through public agencies, such as the County Charities, extensive ­medical services are rendered to those who have become subjects of public relief. The costs of such service are enormous. We need only realize that the appropriation for the maintenance of the Los Angeles General Hospital is 8 million dollars and that this represents but a fraction of the total cost of caring for the so-called indigent sick to understand the present public expenditure for these purpose, and yet, what of the very large group still above the dependency class who are barely obtaining enough employment to eke out a meager existence? As we have shown before, they have no funds to pay for medical care. Their only hope is either the personal charity of the doctors serving them without cost or suffering the catastrophe of unemployment and becoming objects of County care.

What then are the essentials of a Health Insurance Program? An important point upon which much division has taken place is whether the system shall be compulsory or voluntary. Gradually the opinion of those who have studied the matter seems to be crystallizing into the conclusion that the only ultimate solution is the Compulsory plan. Those who still advocate the voluntary system do so on the ground that it is a bridge to the ultimate compulsory program. The danger of this conception is that inconsistencies of the voluntary plan may be carried over and become fixed in the compulsory program. Among the chief dangers of the voluntary plans are what the actuary would call "adverse selection of risks." Another objection is the shortsightedness of the average individual. We are well at the moment; we hope to remain so; we do not face frankly the possibility that we may be ill. It is very hard to expect a continuation of a regular voluntary payment in the face of the enticements and the incentives to greater spending. I confess to a shudder every time my radio invites me to buy a complete new outfit of stylish clothes for myself and my family, assuring me that I won't have to pay a penny down!

The next question is Who is to pay for Social Insurance?  We may well start with the realization that the Government is now paying out of its tax funds a very large part of the total health costs. Dr. E.T. Remmen,  Past President of the Public Health League of California, states that in 1930, 50% of all hospitalizations in California were at the expense of some branch of the Government. The Milbank Memorial Fund experts very conservatively state that Government is now spending at least 20% of the total cost of medical care in the United States. Clearly then, the Governmental agencies can well afford to contribute substantially to the total cost of health insurance. The insured individual should also contribute. So, too, should the employer. As one studies the factors which disable one from being capable to perform his job, one realizes the difficulty of clear demarcation between accident and illness. We know of such spectacular industrial diseases as lead poisoning and phosy mouth. We recall the radium poisoning suffered by the girls who paint watch dials, but we do not always realize the possibility of illness, temporary or chronic, brought on by working conditions. If it is proper for an employer to pay the cost of industrial accidents, it is also clear that he should share in the cost of sickness. Just what the proportions of these three contributors should be need not be settled in this general statement. It is interesting, however, to glance at what the total cost for the nation might be. It is estimated that the medical services of the kinds which are ordinarily purchased privately would cost about $27 per person per year and that to provide complete health and medical services of a high quality such as should be available, would be about $36. While these figures projected upon the total population of the United States might seem to reach a staggering total, we must realize that a large percentage of this amount is already being expended. It is estimated, for example, that selfmedication—the remedies which are purchased at a drug store including patent medicine--reach the unbelievable total of $360 million a year. I have been impressed by the suggestion of John A. Kingsbury of the Milbank Memorial Fund, and others, that under a health insurance plan, services might be rendered in two classes, those which would be furnished to all under the compulsory program, and a second class which might be obtained by a voluntary addition to the annual obligatory premium. This seems to me practical although frankly a concession as against the ideal of truly adequate services being available to all.

Another highly difficult question to decide is: "For whom shall Health Insurance be available? From a study of costs of living, it would seem that the insurance should be available to those having incomes at least as large as $2,500 per year. This is not customary in the English or European plans, but I think it accords much more closely with our American tradition and with the rendering of adequate health care. Provision should be made in the system for personal choice of the physician, for adequate professional supervision both of the ethics and of the quality of the medical services, and for adequate preventive procedure. 

Clearly, the question requires a high degree of informed and intelligent planning. Here is where our physicians have their opportunity! Many of the initial difficulties of the British system resulted from the attitude on the part of the British Medical Society in holding aloof and having nothing to do with its organi­zation. It is encouraging to find evidence in a large part of the profession in the United States of a different attitude. The physician has, for centuries, been generous of his professional time and services but all too generally has failed in his conception of the social relations of his art. The barrier today between the average individual and adequate medical care is an economic one. Doctors by the nature of their work tend to become individualistic. They have now the opportunity of showing their ability for leadership in the economic phases of their profession.  And it is to their interest, as well as the public needing their services, that they do so.

It is interesting in this connection to note the marked change of attitude both of individual physicians and of the organized profession. At the last meeting of House of Delegates of the California Medical Association, a proposal for compulsory health insurance received a favorable vote of 65 with 54 voting against. It failed of passage by the necessary twothirds, but the majority vote is significant.  One of the interesting instances of this change is cited by Dr. Michael Davis in a recent article in "The Survey." He states:

"In 1912, when the British law went into effect, it was strongly opposed by the British Medical Association. In 1921, when there had been 9 years' experience with the law, the secretary of the Association wrote that 'not one doctor in a thousand who is doing national health work would willingly go back to the old system.'  In

1925, the Association endorsed the insurance system in an official memorandum to a Royal Commission. In 1933, the Association joined with other British agencies in formal felecitation of David Lloyd George on the occasion of the twentyfirst anniversary of the law which he had sponsored."

As we indicated in our discussion of workmen's compensation, one of the difficulties in launching a practical plan in the United States is the conflict between State and National jurisdictions. Doubtless we shall see the matter left in the hands of the States although there would seem to be many advantages in providing a national program.

Millions of our people are receiving inadequate health care under our present system; thousands of physicians, dentists, nurses, and others connected with these professions, are in financial distress because those who need service have not the money to pay. Can we not bridge this gap by HEALTH INSURANCE as has been done in 36 countries in the world?


One of the oldest and largest, and at the same time least understood, systems of Unemployment Insurance is that of Great Britain. During the early years of our present economic crises, many pointed the finger of scorn at England and inveighed against the "dole" which was supposedly demoralizing and bankrupting that country. Let us look briefly at the facts:

The basic British defense against unemployment is a definitely organized insurance program which has been functioning since 1911. We have no time here to discuss the gradual broadening of the Act and the legislative changes which have taken place in these 23 years, but it may be helpful to trace its present operation.

As now in effect, it covers about 13 1/2 million workers, or approximately 61% of the working population, the only important excluded classes being those earning more than 250 pounds per year, together with agricultural workers, domestic servants, and those casually employed.

The fund for paying benefits is established by contributions substantially 1/3 each from the worker, the employer, and the Public Treasury. At the present time, each of these 3 contributors pays in 7 1/2 pence per week for each man between 18 and 65 years of age, with different amounts for other age and sex classes.  In return for these contributions, the worker is entitled to receive payments when unemployed of 15 shillings, 3 pence, per week if in the above age group, with additional amounts for various types of dependents. The maximum dura­tion of the benefits under the insurance plan is 26 weeks, and there is a further limitation that not more than 1 week's benefits can be paid for each 5 weeks of employment. Benefits do not begin for a period of 6 days after unemployment starts.

During the years from 1921 to 1931, England was struggling with disorgan­ized internal and world conditions which were not relieved in that country during the boom period of 1925 to 1929 to the same degree as here. During this period, it was not thought wise to terminate the benefits at the end of 26 weeks and to continue them in effect on the basis of what are called "transitional benefits" large sums were borrowed from the Exchequer. These borrowings reached the total of 115 million pounds by May 1933. From an insurance standpoint, it can be argued that even with the extended benefits the fund might have been able to carry the load upon the basis of the established contributions, had it not been that the Act of 1921 just before the occurrence of that depression greatly widened the eligible classes and, therefore, the financial obligations of the fund, without having given the opportunity to build up a reserve during the time of prosperity.

The encouraging facts about the present situation are that during the last year 10 million pounds have been repaid to the Treasury, and there is every indica­tion that this rate of repayment can be continued. From a total of approximately 2,700,000 persons registered as unemployed at the peak year of 1932, the number has now dropped as of May of this year to 2,148,000. It should be made clear that the benefits are payable up to the 26weekperiod whether or not need is shown; they are the right of the insured worker as under any other type of insurance policy. By the Act of 1931, any continuation of the benefits beyond the 26 weeks period is chargeable direct to the Treasury as relief, and to obtain such continued benefits need must be shown. This is the basis of the argument 2 years ago as to the "Means Test", and I think we would entirely agree with the conclusion of the Royal Commission that the application of this test is fully justified when the payments are made on a relief basis.

One of the most significant and important features of the British plan is the system of Employment Exchange which is maintained throughout Great Britain. The person out of work must immediately register with these Exchanges, which maintain records of all work opportunities existing anywhere in the country. The worker cannot receive the benefits if he refuses to accept a job offered to him, control being established by the fact that the administration of this insurance fund itself is in the hands of the Exchange directors.

Some very interesting data were compiled by the British Ministry of Labor in 1930, based on a study of 7 1/2 years of the operation of the extended system. It is sometimes assumed that the great mass of workers has continued to receive benefits whereas, as a matter of fact, the personnel is continually shifting.  The study showed:

  • 43.2% of those enrolled had not applied for benefits
  • 23.9% benefits 1 to 100 days
  • 10.6% benefits 101 to 200 days
  • 1.3% drew for more than 1001 days
  • Only 2.9% of the males,
  • And 1.2°% of the females had drawn benefits in each of the 7 1/2 years.

Putting the matter in a different way, we may quote Miss Bondfield, Former Labor Minister of Great Britain:

"It is not generally realized that 60% of the persons registered as unemployed have been unemployed for less than a month. There is a constant change in the personnel of the unemployed and there is no stigma to the receipt of unemployment benefits during the periods of temporary unemployment."

It has been difficult to convince people in America that the British Unemployment Insurance system has not resulted in the demoralization of the worker and the destruction of his desire for independence. Sir William Beveridge, a British authority on the subject, states:

"Charges that the 'dole' was helping numbers of men to live in idleness when they could get work have been made incessantly in the press, by local authorities, by public men. Whenever they have been investigated, they have been shown to be idle and irresponsible talk."

Many, and with much justice, attribute England's stability, both politically and economically during the recent disturbed years, to the British Unemployment Insurance system and feel that Britain could not have escaped serious upheaval during this difficult period without the aid of its compulsory insurance system.

There has also been an important business value. As stated by Professor Leo Wolman of Columbia University:

"Viewed simply as a source of unemployment relief, the English system of insurance has been an unprecedented achievement. Largely, if not exclusively, as a result of the unemployment insurance, English work­ingmen have been able to maintain their standard of living . After more than ten years of general depression in the majority of industries and virtual stagnation in the rest, it is the consensus of informed opinion that poverty in England has been reduced, and that average standards of life are higher than they were before the war."

As a final comment on the success of the British system, we may note that it has resulted in maintaining the morale of the working population. It is upon morale that a sound society is based. A pauperized population brings problems more farreaching than even the serious question of unemployment. After the receipt of charity, it is never again quite so hard to give way and take assistance.

There is one feature of the British system which it seems might well be modified.  The benefit rate is uniform for all occupations, instead of being expressed as a percentage of previous earnings. Most of the European systems follow the latter principal and it would seem that to fix the rate at some such figure as 662/3% of previous wages would be in order.

We have given extensive discussion of the British system because it is one of the most complete and, on the whole, practical systems in operation. Space does not permit our similar review of the other successful systems, but it is a fact that all of the systems in 18 countries are in operation at the end of this trying period.

In the United States, while many proposals have been made for some form of unemployment insurance, in only one State, namely Wisconsin, has any official system been set up. Wisconsin follows the plan of plant reserves which was the recommendation of the California State Unemployment Commission of 1932. In this plan, each individual firm or employer is required to establish with the State a cash reserve until it reaches a given percentage of the total annual payroll. No contributions are required by the employee and none are made by the State. While significant as a beginning, this Wisconsin plan seems inadequate in many details.

Several bills are now pending in Congress designated to establish unemployment systems. The WagnerLewis bill contemplated encouraging the States to set up their own systems and sets up standards for such State laws.

The Lundeen bill aims at a nationwide system carried entirely by Federal taxation on incomes and inheritances. Neither of these proposals seems to me satisfactory. Unless the worker makes a contribution, the plan is not insurance and he will not feel the same interest nor be entitled to participation in its operation. Unless the employer contributes, he will not have the incentive to stabilize employment, which is one of the great benefits from such a plan. The Government should contribute because it will be relieved of large relief expenditures and will be fulfilling the obligation to its citizens which has been fully established during the last 2 years.

But however we may differ as to the details of a proper system of UNEMPLOYMENT INSURANCE, does not our experience with millions out of work, with the necessity for enormous public and private doles in the form of relief, demoralizing and costly as they have been, and the evidence of the value of the stablilizing effect of outofwork benefits, convince us of the importance of prompt action in supplying our economic engine with this valuable flywheel to convert the irregular impulses of employment into smoothrunning, non-jarring operation.


The increased intensity of competition for all types of employment has multiplied enormously the difficulties of the aged. When is a person old? At will of the employment offices with which I am familiar, employers insist that they will not accept construction workers over 45 years of age. Certainly the man or women over 55 seeking a job has far more difficulty than the person of 35 or 40.  Referring to our discussion as to the large fraction of our population which goes through life on the barest minimum of existence, we can see how difficult it is to accumulate a fund which will permit of retirement at any given age, be it 55, 60, 65, or 70.

The alternatives are support by one's children or maintenance by public or private charity except for the very limited proportion who are protected by some form of independently established pension fund. In the America of 40 years ago, there were ordinarily five or six children divided among whom the burden of caring for the aged parents was often negligible. Today, as we all know, families are much smaller and at the same time, the numbers of the aged are continually increasing.  Dr. Rubinow estimates that the proportion of persons over 65 was only 2.5% in 1850 and now it is 5.5%. As we have said before, under agricultural conditions, the problem of the aged is a limited one. Here again 40 years of change show their results. Whereas in 1890 more than half of all employed persons were agriculturists, in 1930 only about onefourth were so occupied in the United States. All those conditions, then, have tremendously intensified the problem of old age. What shall we do about it?

Clearly, our aged must be cared for as many of them are today by all of us; in other words, by the Government. If this is the fact, it remains to discuss how it shall be done.

Here most of the arguments which we have previously advanced with regard to the other hazards of life apply again. There is one additional point in favor of a definite retirement plan for the aged which does not apply to the other forms of insurance. If there is an established provision by which the aged can be assured of a living, they will cling less tenaciously to their jobs and thus make way for younger persons. In this manner, opportunity will be given for increased employment which will be one of our needs for many years to come. David Cushman Coyle, in an address at the California Conference of Social Work at San Diego in May last, offered another argument which is worthy of note although open to some qualification. If retirement is assured, said he, persons will spend more liberally during their working years, thus disseminating purchasing power.

President Roosevelt is one of those who has sensed the necessity for this greater diffusion of buying power. Earlier this afternoon, we have referred to the fact that California was one of the three States having an Old Age Security Act and that some 17,000 persons were beneficiaries at the present time. In substance, this Act requires the beneficiary to have reached the age of 70, to have lived in the State 15 years, to be in actual need and to have no immediate relatives able to support him. These last two provisions are the ones which are the despair of the actuary and account for the wide discrepancies as to the proportion of the population which take advantage of the benefits in the various countries having old age pensions. In Great Britain, for example, with a population of 45,000,000, the number of pensioners is approximately one million, or a little over 2%. In California, with a population of about 6,000,000, the percentage is only onefourth of one percent. Put in another way, only about 10% of the persons who have reached the age limit, receive pensions in the three States which are most representative of our American practice. In Great Britain, 80% of those eligible as to age are beneficiaries.

It is plain that our conception of old age security has been colored by the principles of scientific case work as interpreted in modern charity practice. To some extent this should be modified. Because of the difficulty of obtaining contributions from those who already have no margin above necessity, I believe that provision for old age should be made by direct governmental grants. This is in effect the prevailing system today in the 13 countries and the various States which have established plans. The age limit should be set at not higher than 65 years.  The  pension should be granted only to those in need but we should eliminate the provision requiring children to support the parent except where it might be shown that the applicant had deeded his property to his children in anticipation of retirement.

Discussion of this subject without at least a brief reference to the Townsend plan would be incomplete. In substance, this proposes that every person reaching the age of 60 should be paid $200 per month on condition that he should refrain from profitable employment of all kinds and that he should spend the entire $200 within the month after its receipt. Funds for the enormous cost are proposed to be raised by a sales tax on all commodities, the theory being that the greatly increased expenditures would so stimulate business and sales that the percentage would not to be a burden. As there are approximately ten million people in the United States 60 years of age or over, this would involve the annual expenditure of something in the neighborhood of 24 billion dollars, a figure which is staggering even to our already muchstretched imaginations. The idea of dated money seems to be also impossible of practical administration. Nevertheless, we find several hundred thousand signatures supporting the plan in Southern California.


Does not all of our study and discussion resolve itself into comparatively simply conclusions:

That we have in this country passed the stage where the individual, unaided, can protect himself against the hazards of existence;

That we can observe in the success of other countries dealing with similar conditions, solutions made effective by means of GROUP ACTION;

That these group actions have resulted not in the destruction of society, but in its strengthening, not in demoralization of the citizen but in stabilization of morale, not in bankrupting business but in supporting it in times of stress.

Can we not, therefore, pledge ourselves to an intelligent and careful consideration of the proposals which President Roosevelt has made touching the great task of obtaining basic economic security for the citizen and his family through SOCIAL INSURANCE?

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