Mrs. Ellen S. Woodward,
Member, Social Security Board
Delivered before the Alexandria Women's Club
Gadsby's Tavern, Alexandria, Virginia
January 27, 1943
SOCIAL SECURITY - IN WAR AND PEACE
On January seventh our Commander-in-Chief, the President of the United State reported on the state of the Union to the Congress and to the Nation. In that speech he charged us to study the problems of security - and, as he said, "to study them sympathetically and to work them out . . .with fairness to all and with injustice to none."
I think such a group as this can be of real help in achieving that security for the American people of which the President spoke. And our meeting here--in war time--can make a valuable contribution to this end if each of us will carry the threads of the discussion back to our homes, to our offices, to future meetings of this and other clubs. Thus we can add an informed voice to a sympathetic discussion of social security such as the President urged.
The Social Security Act specifically provides that the Social Security Board shall "have the duty of studying and making recommendations as to the most effective method of providing economic security through social insurance." The Board is glad to make available the information which it has obtained as a result of 7 years of day-to-day administration of the present law. In this way, the defects and the gaps in the present law can be studied and corrected. In this way, the basic foundation of the present law can be strengthened to achieve greater security for the family, the child, the mother, the wage earner--greater security for all the people of the United States, no matter where they live or how they earn their living.
You know, very frequently a man or a woman takes to his or her heart an ideal, and .lives with it and prays for it, but is unable to make a reality of that ideal or that dream because he or she is too poorly equipped or is working alone. But fortunately, so far as social security is concerned, we have today both the ideal and the means for making it approach reality.
The ideal that we are concerned with here is man's great dream of freedom from want. For generations, for centuries, in fact from the very beginning of time, man has dreamed about the day when he will be free from the demons of hunger, cold, and illness. He has sought to free himself from those chains of circumstances which condemn him to poverty--hourly worry about his bread, milk for his children, or medicine for his sick ones.
During the last 40 or 50 years, several countries have taken steps to assure a measure of economic security for at least part of their populations. We were among the last; but through the passage of the Social Security Act, in 1935, we, too, won the first round of battle in the fight for freedom from want.
How well have we, or the other Nations, succeeded? The answer is that the very war we are now fighting burst upon us because, for one thing, poverty and want continued to plague far too many millions of people. Even here in the United States the steps we took toward social security were short steps. They did not lead into the homes of all the people, nor into all the situations that breed the social hazards of life.
And so we are engaged in another war, to decide whether freedom from want, along with other sacred freedoms, can really be won. This time the fighting men and the families for whom they are fighting are unyielding and determined to achieve this ancient goal. And this time, we have the wherewithal for making that goal real for translating it into opportunity, into jobs, bread and butter, clothing, shelter, medical care, and the stuff necessary to ward off the tragedies which have their roots in poverty.
What then must we do, to realize this freedom?-
We -- all of us -- must first decide to bring it about.
We -- all of us -- must first rekindle the will to bring it about.
To lead 130 million people to such a decision is a gigantic task. And it is only proper that before they make that decision they know what it would entail. What would the costs be? What effort would it take? What would be the responsibilities of such a decision? And what benefits would it bring?
After seven years experience with even the limited type of social and economic protection we now have, we can give some answer to these questions. First of all we know that our social security program has given dignity to the lives of thousands of American families. For social security is basically the habit inherited from our forefathers of banding together to help each other in adversity. And social security, the basis for good living, is also the foundation for good business. And we have learned that our social security program -- if it is made truly strong -- will provide the least expensive method for building protection against the hazards that threaten us all. As far back as 100 years ago, a committee of the House of Commons recognized that fact. Here is the way they put it:
"Whenever there is a contingency, the cheapest way of providing against it is by uniting with others, so that each man may subject himself to a small deprivation in order that no man may be subjected to a great loss."
Of course, life, especially modern life, is full of contingencies, or hazards as we would call them now.
But in 1935, they were not merely hazards. They were stark realities for nearly a third of the entire population. Their effects -- the effects of unemployment, indigent old age, neglected childhood -- had to be mitigated. And so, after thorough debate in Congress and out, the Social Security Act became a law. Even as Congress was voting its overwhelming approval of the law, and even while the President was signing it, we all knew that the law was imperfect, that it was only a beginning, that many pieces had been left out. Congress realized that fact also, and charged the Social Security Board to study ways and means to strengthen and broaden the .Act. One series of improvements already have been made with the passage of the amendments in 1939. And this year, even though the new Congress has but recently convened, there is already evidence of great interest in an extended and expanded Social Security program.
At any rate, as the law now stands, three protective programs guard against want and misfortune. Today let us think of them as three protective umbrellas.
Under the first umbrella, which is labeled "old-age and survivors insurance," we covered the workers and their families in industry and commerce. In accordance with the social security law, each of these wage earners contribute to a common fund -- 1 cent out of every wage dollar. Their employers contribute a similar amount. Out of this fund the Social Security Board and the U.S. Treasury make monthly payments to those insured workers who have become too old to work and to the families of those who have died.
The second umbrella is raised against the hardships of unemployment. It provides the insured worker, who loses his job, payments to tide him and his family over until he finds work again.
The third umbrella, which we raised in 1935 extends over those men and women and children who cannot, for various reasons, earn a living. It provides monthly cash allowances to the needy blind; to children who are in want because they lack a parent's support; to men, and women over 65 who have no means of livelihood.
Can we be satisfied with our present social security system?
Let me tell you, first, what the American people themselves think about the adequacy of our system.
From the letters we receive in Washington, from our field studies, and from conversations with people in all walks of life -- we know that people recognize at least two major inadequacies in our social security system.
First, they say, there are too many holes in the umbrellas we have spread; and second, no umbrellas have been raised against some of the most serious and certain hazards of our society.
Let us consider first, the holes in the old-age and survivors insurance umbrella. So large are these that they leave unprotected about 20,000,000 Americans who work for their living--domestic and farm workers, self-employed, employees of non-profit and educational institutions, public employees and men and women in the armed forces.
Looking closely at the problems of only two or three of these excluded groups we discover some disconcerting inequalities.
The other day two young women, both secretaries, were talking and both complaining, mildly, I should say, about the things that seem to happen to their pay envelopes each week. You know, high cost of living, and so on. Finally one said, "Now take that social security tax. I don't mind that in the least. That will get me something when I'm old and wobbly."
The other girl looked up and said, "Social security tax? I don't pay that." Nor could she understand why she was deprived of the protection which payment of that tax represents. It was because she worked for a non-profit organization; the other girl was secretary in a real estate office.
Or turn to the perennial problem--your maid. In one of those "exit" interviews that are becoming so commonplace, a friend of mine asked her maid why she was leaving. "Why, ma'am," the maid answered, "when you work in a kitchen you're not even considered a worker. You won' t even get social security doing that." And so you have the testimony of one of about 2 ½ million domestic workers.
Now consider the small shopkeeper, the beauty shop operator, or the free-lance writer, or the huckster, or any of the 5 million or so who work for themselves. Their income is uncertain and often below that of other workers. Yet these millions of the self-employed are denied the protection we accord other people who work for their living.
Then there are our fighters -- those for whose rights we should be most jealous and zealous. When they left their civilian employers to risk their lives on the battlefronts; they also left the protection which they had been building up under the old-age and survivors insurance system. Unless the law is changed, these men and women may lose the protection they had previously earned in private employment.
Finally, we come to that large group -- agricultural workers. There is no good reason why that large, productive group of our Nation should not have the same benefits as industrial workers.
Let's consider next the holes in the unemployment compensation umbrella.
We now have, in reality, 51 small umbrellas each held up by a State, or a territory rather than one which would give the same protection to all workers in the Nation.
While it seemed advisable back in 1935 to set up unemployment insurance as a partnership between the Federal Government and the States, experience has shown that plan to have been a mistake.
The Federal-State plan is difficult to administer. It threatens the solvency of the whole system. Furthermore, it makes for inequality toward employers and workers.
I will, take just a minute to illustrate how the Federal-State system is unfair to wage-earners for whose protection the law was passed.
American workers are people on the move. During the last two years of defense and war activity, especially, millions of workers have moved from one State to another. As a worker crosses a State line and leaves the protection of his State unemployment insurance umbrella he may find himself out in the rain. It has become obvious to millions of the workers themselves as well as to students of the social security law, that the 51 State systems should be merged into one National system of unemployment insurance.
With a single national system, the unemployment funds of all States would be pooled. Then we would have an ample national fund to guard against what everyone recognizes is a national hazard.
Other changes are needed to make our unemployment insurance system a genuine protection. For instance, workers who lose their jobs should get larger payments over a longer period. And payments should be in the same amount and for the same number of weeks, regardless of what State the worker lives in.
Under such a single National umbrella there would certainly be ample room for workers who are now excluded from unemployment insurance. I am referring again to the agricultural and domestic workers; and to the employees of non-profit and public enterprise. And why should we deny coverage to employees of small firms? Today, many States exclude workers of firms which employ less than 8 persons. In other words, jobless Mr. Smith gets benefits if he has been employed by a firm with seven other employees. Jobless Mr. Brown gets no benefits, if his firm had less than seven other employees. Yet both may have the same needs, and the same obligations. The inequality of such a scheme is obvious.
Finally, a serious flaw is that no provision is made for the dependents of jobless workers. A bread winner with five or six children must get along on the same benefits as a childless worker.
Looking at the Public Assistance umbrella we find the it fails to protect many needy persons. Only the blind, dependent children, and persons over 65 can qualify. In order to permit the Federal Government to help the States meet the needs of other persons who have nothing to live on, the law should be amended.
Another weakness of the public assistance umbrella is that it shelters the richer States more adequately than the poorer ones. The Federal Government gives a State as much for a dependent child, for example, as the State itself can and will give--up to certain limits. Obviously, the richer States can give more and thus receive more from the Federal Government. It has been urged that a system of variable grants be authorized, whereby grants are made to the States on the basis of their economic resources and the needs of their citizens.
We in the Board have long felt that the help the Federal Government gives to children should be at least as substantial as that given to the aged and the blind. We recommend therefore that it be made possible to pay higher allowances to children, in accordance with their need.
But let's turn to some of the other hazards of life which face all of us--young or old, needy or not--and against which no umbrellas have been raised. Illness is perhaps the most serious. On an average day of the year about 3 or 4 million people cannot go to work. In a sense they are unemployed--not because they do not have a job but because of illness or some temporary physical disability. In other words, temporary disability is much like unemployment. But although an insured worker can claim benefits for joblessness he cannot claim benefits because of illness. Or take our old-age coverage provision. We pay benefits to persons who stop working permanently because of old.-age but we do not pay workers any benefits when they stop working because they become permanently disabled. A person who stops working because of permanent disability may be in much greater need than one who stops working because of old age. And yet our law makes no provision for those permanently disabled. We recommend insurance protection against both temporary and permanent disability.
Hospital and other sickness costs are so serious a drain upon the average American's income, that they frequently work havoc with the family pocketbook. The social insurance method is as equally applicable to the risk of sickness as it is to the risks of old age, unemployment, or death.
Invariably, when I talk about the changes which should be made in the social security programs, threes questions come up: First, won't we rob our people of their initiative? Wouldn't the individual--who is naturally lazy, anyway ( so they say)--just sit back and let the Federal Government take care of him from the cradle to the grave? Next, how much will i t costs? And finally; why do it now-in the in the midst of war?
The answer to this first question was well stated by Ernest Lindley, the newspaper columnist. He said: "Social insurance is not a substitute for full employment. It depends upon full employment." In other words, a worker can receive insurance benefits only if he has worked for them.
Now as to the question of cost. If this war has taught us anything it is that nothing is a gift from heaven--whether freedom from want or freedom from fear, freedom of speech or freedom of worship. We are now paying the price for liberty. We will have to pay the price for freedom from want also.
The amazing fact is that the price is so low. In terms of money, insured workers and their employers now pay only one percent each on wages for the benefit of old-age and survivors insurance. The cost of unemployment compensation under the law is 3 percent of payrolls.
If and when we expand our system, the costs will run higher. We think they should fall equally upon employer and employee. Labor for one, is willing to pay its one-half of the cost. We believe the employer will be willing to pay his share. No one wants to pay the consequences of the lack of social security--unemployment, poverty, wretchedness, disease, and above all, loss of faith in democracy which professes to be--and can be--the rich destiny of common man.
And, finally, why should we urge a comprehensive social security system at a time when we are bending superhuman efforts toward military victory?
The answers, I believe, go beyond even the President's statement that "it is part of our war effort to maintain civilian services which are essential to the basic needs of human life." They rest in a situation that argues eloquently for action this year.
Today the great bulk of our workers are employed at good wages. When war ends there maybe a serious dislocation of business and industry; even the most optimistic American admits that there may be a period of substantial unemployment while industry retools and readjusts to a peacetime basis. While the sun shines the workers should be making hay--that is, storing up benefits against the time when they will need them. They can do this adequately under a broadened, liberalized, solvent, nation wide social insurance system.
Today the Government needs the people's savings as never before. Uncle Sam can borrow it all from the banks and bondholders or he can borrow some of it from the workers and their employers in the form of social security contributions. In the latter case the workers get it back in monthly benefits and as they need it.
Organized labor wants this kind of taxation so badly they are willing to have the workers assume one-half of its burden.
Another argument for action now is that by salting away buying power now we enlist in the Nation-wide war against inflation.
Social security is not an American issue only. That fifth plank of the Atlantic Charter whose object is to secure "for all improved labor standards, economic advancement and social security" is being implemented by the peoples of the free nations all about us. Witness the Beveridge Report, the action just taken by Mexico in passing a new cradle-to-the-grave" social security law, current discussions in Canada, New Zealand, Chile, Ecuador, Costa Rico, and other countries. Everywhere the voices of the people demanding freedom from fear and want become more articulate.
"If you hold your ear close to the ground," wrote Stuart Chase recently, "you can hear a muffled roar. It does not come from bombs or thunder on the Russian Front. It is the voice of the people demanding security. They want to be rid of worry about where the next meal is coming from; whether the rent can be paid; whether the wife can go to the hospital for the new baby; whether illness or old age is going to leave one an object of scorn and icy charity."
"The United States has everything it takes to meet the challenge, except recognizing that there is one. It has the resources, the manpower, the science, and the technical skills to give the people all they demand without surrendering the ballot of the Bill of Rights.''