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Committee on Economic Security


Unpublished CES Studies

pen nib   Volume IX. Committee Publications

Toward Economic Security

Toward Economic Security

A Review of President Roosevelt's Economic Security Program

* Harry L. Hopkins
* Arthur J. Altmeyer
* Murray Latimer
* Katherine Lenroot
* Dr. I. S. Falk

President's Committee on Economic Security
1734 New York Avenue, Washington, D. C.

 This pamphlet is based on a symposium entitled " The Economic Security Program" broadcast by the Columbia Broadcasting System, March 16, 1935
THE establishment of sound means toward a greater future economic security for the American people is dictated by a prudent consideration of the hazards involved in our national life. No one can guarantee this country against the dangers of future depressions but we can reduce these dangers. We can eliminate many of the factors that cause economic depressions, and we can provide the means of mitigating their results. This plan for economic security is at once a measure of prevention and a method of alleviation.

We pay now for the dreadful consequences of economic insecurity--and dearly. This plan presents a more equitable and infinitely less expensive means of meeting these costs. We cannot afford to neglect the plain duty before us. I strongly recommend action to attain the objectives sought in this report.

--President Franklin D. Roosevelt, January 17, 1935,
Congressional message transmitting report of Committee on Economic Security.

HARRY L. HOPKINS-- The Economic Security Program

MURRAY W. LATIMER-- Security Against Old Age Dependency

KATHARINE LENROOT-- Security for Children

ARTHUR J. ALTMEYER-- Features of the Unemployment Insurance Plan

DR. I. S. FALK-- Preventing Insecurity Caused by Illness

The Economic Security Program

Federal Emergency Relief Administrator

LIKE a lot of other perfectly good things, there has been so much tinkering around of late with the term economic security, that if the people of America have a clear picture of what it means, it's a marvel.

A number of individuals have been making cruel promises and raising useless hopes by noising about several impossible ideas. It's all right for little children to believe in Santa Claus, but when these alleged leaders offer their fantastic schemes to adults under the guise of pension plans and prosperity restoratives, it gets nauseating.

President Roosevelt's economic security program is now before Congress. None of us on the President's Committee on Economic Security pretends to know the last word about economic security. But before the committee took its report over to the White House we did a lot of good, hard labor in getting down to brass tacks on what could and could not be done on a realistic basis in America today.

An Instrument That Will Do the Job

As a result, the President presented to Congress a solid plan. He cut the last vestige of fuzz off the theories and prepared an instrument that will do the job.

Now as I see it, there are three things that can be done for a man or woman who is out of a job and broke. There is relief, and there is employment assurance, and there is unemployment insurance. I think a better name would be unemployment compensation.

Unemployment compensation boils down to this simple meaning. If a worker loses his job, there would be a fund from which he would receive a benefit for a certain period of unemployment. The Wagner-Doughton-Lewis bill which embraces President Roosevelt's recommendations for economic security is a realistic piece of legislation. It would not remove the necessity for all measures for unemployment relief, but it would lessen the need within the realm of possibilities.

Now about old age. We have two problems of old age to face. There must be security for the future of those still in their working years and security for those who are already old. Insurance for the future of those still working can be worked out on an actuarial basis. It is not easy, but this old-age insurance problem can be put on a basis of definite figures.

For the people whose job-holding days are over, it is a matter
of pensions, not insurance, in the usual sense of the word. The legislation also carries help for widows and children in homes without a breadwinner. That, too, calls for a pension system.

No Untried Principles

One important point about this whole matter of social and economic security is this: No untried principles are included in President Roosevelt's program now before Congress.

When he established the Committee on Economic Security, he said, in effect: "Look into every angle of this problem. Explore everything and find out what has been tried and proven and what will work."

We did that. We studied the experience of Europe which runs back 50 years. And right now I want to point out that European plans are not being recommended for America. Here in this country, too, voluntary social insurance plans among labor organizations and in the more enlightened large industries were studied.

Now, we found out two interesting things: No European system is exactly suited to American needs. Protection must be extended to workers through a uniform law placing industry all over our country on the same unemployment insurance basis.

If you set up the criticisms of the President's program for economic security in two columns, they offset each other and in themselves indicate that the program is sensibly balanced with careful preparation for what is possible in this year, day, and hour.

I Would Wipe Out Relief

Now, we have had relief for the unemployed for quite a while, and I have no apologies for the system that has provided food, clothing, shelter, and medical care for the millions of workers whose jobs had evaporated from under their feet. But I would wipe out the whole business of relief, if I had my way. It is going to cost the American people far more in the future than the proposed 4 billion dollars; perhaps twice 4 billion dollars, if we keep up this relief.

But if you have nothing else to offer the unemployed, you can't refuse relief. How in this country with its enormous ability to produce necessities and the good things of life can you say to 4,600,000 families--how can you say, "You are not going to have any part of it. You are outside of it."

This proposed work program is something to do the trick now. Unemployment insurance, on the other hand, is the device for protecting against the unemployment needs of the future.

Our figures in the Federal Emergency Relief Administration show that there are now in the country about 4,600,000 families and about 800,000 single persons on relief. Among these people I believe we have about half of the unemployed in America.

I'm not much for second guessing, but it seems obvious that if there had been a system of unemployment insurance, of old-age insurance, of pensions for widows, we wouldn't be worrying about anything like the relief problem we have now. I can't see how it could have cost us anything like the money we have spent on relief.

I believe we are through temporizing and moralizing about this waste of money and waste of human values and I believe America is ready for sharp-edged thinking and action,

Security Against Old-Age Dependency

Chairman, Railroad Retirement Board

NO HUMAN spectacle is more poignant than that of old age when it is surrounded by poverty and indifference and given over to neglect and loneliness. That spectacle is unfortunately far more common today than it ever has been before. This is only in part the consequence of depression; and a further recovery to a high level of prosperity would of itself result in an improvement so slight as to be almost imperceptible. The savings of the group who are now old have been largely wiped out; their jobs are gone; and when employers add to their personnel it is the young, not the old, to whom they will turn.

Nor will the middle-aged who are unemployed--and they number millions--be, even under prosperity, in a much more favored position. It is against the policy of many of our greatest industries to employ or reemploy them. And the price of a job, for those who do succeed, will likely 'prove to have been the acceptance of work of a routine sort appreciably below their customary standard. Their savings have been spent, too, if not swallowed up by bank failures or worthless securities, and, more important, long disuse may have lessened their skills, not to mention the danger that the old skill, even if retained, may have been made useless by new inventions of processes and machines. Unless something is done, and quickly, these aged and middle-aged unemployed will constitute a tremendous burden on their children and will bind not one, but three generations in the slough of economic despond. In short, unless we take steps to prevent it, the depression of recent years will be levying its toll on human well-being in the time of our grandchildren.

Building on Tested Foundations

The Committee on Economic Security, upon whose recommendations the Economic Security Bill now before Congress is based, has fully recognized the immensity of this problem. They discovered no magic, white or black, by which either to solve the problem or remove it. They frankly admit that some problem will always remain. Rather than indulge in reckless experimentation, involving mountainous taxation of a socially vicious sort, in the hope that the whole population can be lifted by the purse strings of the aged-as indeed, it would be, but by the neck-the Committee recommended that we build immediately on tested foundations already in existence.

There are now 28 States which have old-age pension laws on their statute books. True, some of them exist only on paper, but in most of our larger States there already exists machinery for the investigations of claims and for the payment of benefits. There is no reason to scrap that machinery.

State finances have for the most part been inadequate to give, these systems the support which they require Largely for that reason the laws themselves are defective. They fix the age of eligibility too high; they require excessive periods of residence within States and counties; they fix no adequate standard for fixing the amount of benefits; and in some cases their application is not State-wide.

Federal Government to Lend a Helping Hand

Such a situation cannot be remedied without more funds. It was recommended that the Federal Government agree to pay for half the expenditures under State laws which meet certain standards, but give no more than $15 per month in respect to any single individual. In view of the standards, this provision obviously does not contemplate that $30 per month will be the maximum limit on the income of beneficiaries-and by that same standard the actual benefit will always and necessarily be related to the local conditions having a bearing on the cost and standard of living.

This part of the old-age security program is designed to get immediate Action. It is not a panacea and it is not utopian.

But Abraham Epstein, executive secretary of the American Association for Social Security, who has been the leading figure in the fight for old-age security in this country for 20 years, testified before the Senate Committee on Finance that if this country affords to its old people an average income of $30 monthly "we shall have attained the highest state of old-age security of almost any other nation in the world."

Preventing Future Dependency by Insurance

These old-age pension laws are remedial measures.. They are essential now; and there will always be some need for them. But it is clearly the part of wisdom to do all we can to prevent the recurrence of the sort of acute situation with which we are now faced. It is in this light that the Committee's recommendation that we adopt a national compulsory system of old-age insurance should be viewed. Under this system men and women, with the aid of their employers, will, through their own contributions, build up the right to an annuity of their own on an inalienable contractual basis, which will enable them to retire from gainful employment when they become old.

Clearly it would be impossible for these annuities to be provided, at a reasonable cost, by persons who are now middle-aged or older. And it is just as obvious that unless reasonable annuities are paid quickly we shall gain no benefits from an insurance system for many years. The problem is not one of great difficulty. The socialization of contributions and benefits under Government auspices will enable such a system to do what no single employer could possibly do--that is, operate on a low reserve basis, which will in turn enable the payment of relatively large annuities as soon as benefits become payable.

Industry as well as the insured persons themselves will have much to gain from the operation of an old-age insurance system. For many years a number of individual employers have maintained private pension systems for their own employees. These systems have been expensive, and the results have not been satisfactory from the standpoint of the companies and, in some respects, they have operated in an antisocial direction.

I repeat again, this program is not utopian; it is based on realities. It will benefit all sections of the community ani ought to command undivided support.

Security for Children

Chief of Children's Bureau, Department of Labor

THE provisions of the Economic Security Bill are designed to strengthen the economic basis for family life, which is the primary essential of child welfare. The bill also includes, as integral parts of the security program, special provisions for the security of children which constitute the most forward-looking legislation for child welfare ever given serious consideration by the Congress.

For Children Without a Father's Support

In the first place, the bill makes provision for children in families deprived of a father's support through death, desertion, or incapacity-families whose needs cannot be met by a program of reemployment either in private industry or public works, because there is no person in the family able to work, other than a mother whose services are needed for the care of her children. It is estimated that there are 8,000,000 children under the age of 16 years in families receiving relief, and that nearly one-tenth of these children-between 700,000 and 800,000--are in families of widowed, deserted, or divorced mothers. It is this type of family which mothers' pension laws are intended to aid. Forty-five States and the District of Columbia have enacted such laws, but this form of care is financed chiefly from local funds. It is estimated that less than half of the local units authorized to grant this aid are actually doing so. Only about 109,000 families are receiving mothers' aid under provisions of State laws, in contrast with over three times this number of fatherless families receiving emergency relief. The problem is one of shifting these families from the relative insecurity of emergency relief to the regular assistance, during the period of the child's dependency, provided through mothers' pensions.

Title II of the Economic Security Bill provides for an annual appropriation of $25,000,000 to be available for allotments to States to meet one-third of the total cost of mothers' aid, the other two-thirds to be met by State and local appropriations. According to the provisions of the bill as introduced, grants will be made only to States meeting certain general standards intended to make sure that aid is available throughout the State, and that adequate plans for administering the money are developed. In a number of States some broadening and strengthening of State mothers' pension laws will be necessary to enable the State to benefit from the Federal assistance which would be made available.

For Child Health

We often think of economic security in terms of income, but we all recognize that good health is one of the chief factors in the security of the home, and that sickness and death are most devastating to that security. Each year over 12,000 mothers die from causes connected with childbirth. At least half of these maternal deaths are preventable. The depression has had a grave effect upon child health. The infant mortality rate, which had been dropping year by year, was stationary between 1932 and 1933, and preliminary figures for 26 States for the first 6 months of 1934 indicate that it was beginning to rise. Many mothers and children, particularly those in rural and isolated districts, are without medical and nursing care. Rural children are now less favored than city children, as regards child health, because the cities are more adequately supplied with health services. Since 1929 the rural infant mortality rate has been higher than the city rate. State funds for expansion of maternal and child health programs are not available in most States.

For Crippled Children

Other children whose needs for diagnostic service, medical treatment, and convalescent care are very great, are the crippled children. Especially in rural areas and small towns, many of these children will be forced to go through life with severe handicaps unless public funds are made available for their care. Only a few States have developed comprehensive, State-wide plans for these children. Private effort, through rendering notable service, does not begin to meet the need.

For Homeless Children

Social services for the protection and care of homeless, dependent, and neglected children and children in danger of becoming delinquent are also needed for making life more secure for children. Even today, in some parts of the country, children are being cared for in almshouses with the aged, the degenerate, and the feeble-minded. Two hundred thousand delinquent children pass before the courts each year. Seventy-five thousand are born out of wedlock annually. Social ' services which help to reconstruct homes and keep children with their parents or return them to their mothers or fathers after periods of care elsewhere, are more generally available in cities than in rural districts. State and local cooperation in extending these services to all children in need are required.

Title VII of the Economic Security Bill provides for Federal cooperation with the State agencies of health and welfare, and other State agencies concerned with crippled children, in extending and strengthening these health and social services for children. Appropriations of $4,000,000 for maternal and child health, $3,000,000 for crippled children, and $1,500,000 for protective and social services for children, are authorized. The funds are to be granted to cooperating States, chiefly on a matching basis, for services to be developed mainly in rural areas, in accordance with plans making reasonable provision for the administration of the funds provided. The provisions of this title are to be administered by the Children's Bureau under the supervision of the Secretary of Labor.

Success Is Up to States

As with other provisions of the Security Bill the success of these child-welfare titles will rest with the States. Only through adequate State agencies can these services reach children in need in their home communities. Action by the State legislatures now in session, in bringing their laws and appropriations into harmony with the Federal bill, is essential if full utilization is to be made of the resources which will be available if the bill becomes law.

Features of the Unemployment Insurance Plan

Second Assistant Secretary of Labor and Chairman of the Technical Board on Economic Security

THERE is considerable misunderstanding as to what unemployment insurance can be expected to do in solving the problem of unemployment. Unemployment insurance will not furnish jobs for idle workers, nor will it eliminate unemployment. The primary function of unemployment insurance is to distribute more equitably the economic risk of unemployment. Instead of requiring an unemployed worker to bear the entire wage loss that he suffers due to unemployment it spreads that risk so that many will assist in sharing the wage loss which the individual workers suffers.

In this respect unemployment insurance is analogous to fire insurance. When we take out a fire-insurance policy on our home we do not expect that by so doing we shall prevent our home from being burned down, but we do expect that if our home does burn down we shall be reimbursed at least partially for the economic loss which we sustain. Therefore, those critics who point out that countries with a system of unemployment insurance still have unemployment indicate a complete misunderstanding of the function of unemployment insurance. Likewise, those critics who point out that the duration of benefits under most systems of unemployment insurance is so brief that it cannot take care of the extended unemployment occurring during periods of depression fail to appreciate that under any system of insurance the beneficiaries can only receive what is paid for. Thus, it is probable that few of us carry enough life insurance to protect fully our dependents in case of death, but certainly no one would advocate abandoning the institution of life insurance for that reason. Each government must decide for itself how much protection its system of unemployment insurance shall give and then provide sufficient funds.

The Necessity for Federal-State Action

However, no industrial nation wherein the majority of the gainfully occupied persons are dependent upon jobs which may be given or taken away at the will of another or through circumstances over which they have no control can avoid the responsibility for making some provision for protecting its workers against wage loss due to the loss of their jobs. Under our particular form of government a reasonably adequate and nationwide coverage of unemployment insurance cannot be obtained without action by the Federal Government itself. An individual State is deterred from imposing burdens on its employers in excess of the burden placed upon employers in other States for fear that the unequal costs will render it difficult or impossible for its employers to compete in a nation-wide market.

However, the necessity for Federal action does not mean that a system of unemployment insurance must be established, wholly financed, and administered by the Federal Government. Because of the wide variation in conditions throughout the United States and the wide expanse of territory, a Federal-State system appears to be preferable. That is to say, a system whereby the Federal Government furnishes the necessary stimulus and protection to the States so that the States themselves may enact appropriate and adequate unemployment insurance laws. This is the system that is provided in the Economic Security Bill now pending before the Congress. It is proposed in this bill that a uniform Federal excise tax of at least 1 percent be levied upon the total payroll of every employer employing four or more persons. An employer making contributions under an approved State unemployment insurance law would be entitled, on account of such contributions, to an offset against his Federal tax up to 90 percent of such Federal tax. Thus, if the Federal excise tax amounted to $10,000 and an employer had made contributions amounting to $10,000 under an approved State unemployment insurance law he would be required to pay into the Federal Treasury only $1,000. The 10 percent, or the $1,000 involved in the foregoing illustration, would be utilized to pay the administrative costs of the Federal Government and of the State governments.

The States Are Given Wide Latitude

Under the bill the States are given wide latitude in the type of law which they may enact and have approved by the Federal Government. They may enact either the so-called pooled-fund type, under which contributions of all employers are paid into a common fund, or they may enact the so-called reserve type of law under which the contributions of an individual employer or group of employers are kept separate and distinct from those of other employers. They may determine as they see fit how long an employee shall receive benefits, what rate of benefits he shall receive, and under what conditions he shall receive such benefits. There are only four basic conditions which a State unemployment insurance law must incorporate.

Four Basic Conditions

They are as follows:

(1) Payment of all compensation must be made through public employment offices so that applicants may be advised of available jobs and their willingness to work tested, it being a cardinal principle of any unemployment insurance act that benefits shall be paid only to persons who are able and willing to work.

(2) Benefits may not be denied by any State to otherwise eligible employees for refusing to accept jobs under any of the following conditions:

(a) If the position offered is vacant due directly to a strike or lockout or other labor dispute.

(b) If the wages, hours, and other conditions of the work offered are substantially less favorable to the employee than those prevailing for similar work in the locality.

(c) If the acceptance of the job would either require the employee to join a company union or would interfere with his joining or retaining membership in any bona fide labor organization.

(3) All moneys collected must be deposited with the Secretary of the Treasury of the United States for safe-keeping and investment.

(4) All money requisitioned from the Secretary of the Treasury must be used only for the payment of unemployment compensation. It may not be used for any other purpose, even payment of administrative expense.

A State may obtain a grant-in-aid from the Federal Government covering all expenses of administration of its unemployment insurance act provided that its administration conforms to the following standards:

(1) Persons employed in the administration of the act are appointed on a merit basis.

(2) Administrative regulations and practices are reasonably calculated to insure full payment of unemployment compensation when due.

(3) Unemployment compensation is paid as a matter of right and all persons whose claims are denied are given opportunity for a fair hearing before an impartial tribunal.

A Federal Social Insurance Board composed of three members is charged with the duty of assisting the States in the administration of their unemployment insurance laws.

This briefly covers the important provisions relating to unemployment insurance. In deciding upon the wisdom of setting up a system of unemployment insurance in this country we must not forget that whether or not we set up such a system the cost of unemployment is with us and that someone must bear the wage loss involved. The only issue confronting us is whether the worker himself will bear the entire loss or whether it will be distributed in a more equitable and tolerable manner.

Preventing the Insecurity Caused by Sickness

Health Consultant, Committee on Economic Security

THE FIRST step in protecting people against sickness and its costs is to prevent sickness so far as this is possible. Much progress has been made in keeping people from becoming sick, but much more remains to be done. Despite great advances in medicine and public-health protection, millions. of our people are suffering from disease and thousands die each year from causes that are preventable. There are many large areas in the United States which do not have even a reasonable minimum of public-health protection. Of our 3,000 counties, only 528 have essential health protection and only 21 percent of the local health departments were rated in 1933 as having the minimum personnel and service necessary for their populations and to deal with their local problems. Though health department appropriations were too small even in our good years, they have been reduced still lower during the last 4 years by cuts which, on the average, amount to about 20 percent.

Only a fraction of all sickness can be prevented by present-day knowledge. But we should prevent all sickness which is preventable. Efficient health service more than pays for itself; it pays dividends to the community.

What Needs to Be Done for Public Health

We have studied the deficiencies in public health. With the help of various experts and an advisory committee of public health leaders, we have proposed a modest plan to improve public-health practice in the United States. This plan was adopted by the Committee on Economic Security, was recommended to the Congress by the President, and is contained in title VIII of the Economic Security Bill now before Congress. This part of the bill proposes that the Congress shall appropriate each year the sum of $10,000,000, of which $2,000,000 shall be used to strengthen the work of the United States Public Health Service, and $8,000,000 shall be used as grants-in-aid to the States by the Public Health Service to build up and strengthen the work of State and local health departments. This is a very modest program which takes into account not only what needs to be done in the country as a whole, but also what can at once be done efficiently. It will not usher in a millennium; but it will make a beginning toward the further prevention of sickness. Ten million dollars a year spent for prevention will bring great benefits to many families which will be spared both the suffering of sickness and the costs which sickness brings. This explains why a modest appropriation for public-health work is contained in the Economic Security Bill.

It is gratifying that there is strong support for this public-health plan among professional authorities. The public-health profession is urging the plan. The American Medical Association has endorsed the proposed appropriations for public health contained in title VIII, and I believe the same views are held by the dental and nursing professions, by hospital managers and by other professional groups. The proposal should, in addition, have the support of all citizens interested in the public welfare.

I wish to turn now to the question: What about sickness which cannot be prevented with present-day knowledge?

Meeting the Costs of Sickness

There are two kinds of risks to economic security against which people who have small incomes need protection. First, there is the loss of wages when the wage earner becomes sick and cannot work. Second, there are the costs of all kinds of medical services. Both of these are risks against which the wage earner can only partly protect himself by his own efforts, no matter how careful and prudent he may be. The reason for this is simple. It is true that we know how much sickness occurs in an ordinary year among each million people. We know how much will be lost in wages because of sickness and how much will have to be paid to doctors, dentists, hospitals, nurses, druggists and others who help in the care of the sick. We know the average wage loss and the average costs of medical care. Unfortunately, no individual and no family can tell whether it will have no sickness or a little sickness or a great deal of sickness. No wage earner can tell whether he will have a year with no sickness that will keep him from working or whether he will be disabled for a long time. No wage earner can tell whether his family will have small medical costs or large ones. In the individual family, sickness may bring costs which will be small and easily taken care of, or it may bring loss of wages or medical costs which will use up savings or even make the family dependent upon public or private charity. If the wage earner and his family are to be protected against loss of income caused by sickness and against the costs of medical services, they must be protected by insurance.

Serving Both the Public and the Medical Profession

The subject of insurance against the costs of sickness has not yet come before the Committee on Economic Security for final action. The report of these studies was postponed so that the plans could be carefully studied by the professional advisory boards which were created by the President's committee upon our recommendations. These advisory boards included groups of leading physicians, dentists, nurses, hospital administrators, and public-health authorities. The results of our studies on these subjects will soon be reported to the committee. We hope the committee will then formulate plans to give the American people protection against sickness costs. In our studies we have taken careful account of the interests not only of the public but of the professions which serve sick people. These studies contemplate only actions which will be as much in the interest of the professions as of the families with low incomes.
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