CONTENTS

Socrat Security In REVIEW A Basic Minimum Procram or Sociat SEcuRITY TRENDS IN DisQUALIFICATION From BeNeFits UNDER STaTE UNEMPLOYMENT CompEensat10on Laws, by Ewan Clague and Ruth Reticker Tue Basic Sxitt rn Sociat Security, by Karl de Schweinitz Fact Finpineé In THE Frevp Orrice, by Ralph Gower PuBLIC ASSISTANCE: Absorption of WPA workers by private employment Monthly data on the special types of public assistance and general assistance. . EMPLOYMENT SECURITY: Operations of the unemployment compensation program Employment service operations Railroad unemployment insurance and employment service Unemployment insurance and financial assistance for ex-servicemen: Great Britain, Canada, Australia, and New Zealand Oxp-AGE AND Survivors INSURANCE: Operations under the Social Security Act Monthly benefits in force and payments certified, November 1943 Applicants for account numbers, July-September 1943 Operations under the Railroad Retirement Act SocraL AND Economic Data: Social security and other income payments to individuals Financial and economic data RECENT PUBLICATIONS

Social Security Bulletin

Volume 7

JANUARY 1944

Number 1

Social Security in Review

In Novempser, for the third consecutive month, total payments for the special types of public assistance and general assistance moved upward; the $78.2 million expended was only a slight in- crease from October, however, and _ reflected increases in only old-age assistance and aid to dependent children. In comparison with Novem- ber 1942, payments to the aged rose 10 percent and the average payment per recipient, 14 per- cent; payments to blind recipients were only slightly higher. Payments to families receiving aid to dependent children, on the other hand, dropped 10 percent in the same period, though the average payment per family went up to 20 percent; payments to general assistance cases registered a 32-percent drop. The number of recipients downward in November under all programs. The number of aged recip- ients was the smallest in more than 2 years, and families receiving aid to dependent children reached the lowest number in 5 years. The uninterrupted drop since January 1942 in number of general assistance cases continued in November, though the percentage change was the smallest

continued

in any month during that period.

ALTHOUGH THE TOTAL AMOUNT paid in unemploy- ment benefits in November was about the same as in October—$3.5 million—changes varied greatly in individual States. Payments more than dou- bled in Oregon and rose 50 percent in Maine, while Wyoming, Nebraska, Alaska, and Hawaii each expended at least one-fourth less than in October. In the first 11 months of 1943, expenditures in the country as a whole were only about one-fourth the amount in the same period of the preced- ing year.

In November, both initial and continued claims increased in volume—initial claims by 24 percent (the largest gain in 1943) and continued claims by 7 percent; both, however, were less than half the numbers received in November1942. Thelag

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in benefit-payment procedures prevented a com- parable rise in the number of weeks of unemploy- ment compensated. The latter fell off slightly from the October level, in fact, and was 73 percent below that in November 1942. The average weekly number of unemployed workers receiving benefits dropped 7 percent to 56,400, the smallest number on record and 75 percent below that in November a yearago. The 8 States of the Rocky Mountain region, where unemployment has dropped more precipitately than in any other part of the country, had altogether a weekly average of only 327 beneficiaries out of some 1.5 million covered workers in the area. Wyoming, which paid no benefits in September, compensated only 1 week of unemployment in November.

MONTHLY OLD-AGE AND SURVIVORS INSURANCE benefits totaling almost $15.9 million were in force at the end of November for 870,900 individuals. At the end of November 1942, $12.3 million was in force for 677,000 beneficiaries. Both number and amount have risen slightly in each inter- vening month, but never more than 2.7 percent or less than 1.7. In November 1942, 13 percent of the total number in force was in conditional- payment status; a year later, the percentage had moved up to 15. Over the 12 months, pri- mary beneficiaries decreased from 45.6 to 43.1 percent of all beneficiaries. Almost $13.9 million was certified for monthly benefits during November, of which 53 percent went to primary, 9 percent to supplementary, and 38 percent to survivor beneficiaries.

Women, boys, and men of 60 years and older— the current group of labor-force reserves, which in the third quarter of 1941 had made up 77 per- cent of all applicants for account numbers and a year later 84 percent—accounted for 90 percent of all applications in July-September 1943. Al- though the rate at which women of all ages are being brought into the labor force has slowed

considerably, the number of applications from women and girls was almost 8 percent higher than in the third quarter of 1942, and the number of women applicants of 60 years and over almost doubled. The number of men in the older ages, on the other hand, decreased by 14 percent. Con- tinued induction of young men into the armed forces and the lessening number who are without account numbers probably account for the 14-per- cent decrease from the third quarter of 1942 in applications from boys under 20. The 326,000 Negro applicants represented the largest number in any quarter since the initial period of registra- tion and 6 percent more than in July-September 1942; in comparison with the second quarter of 1943, the number of Negro men applying for ac- counts increased 31 percent and the number of Negro women and girls, 12 percent. In all, 2.1 million new accounts were established in July

September 1943, and the cumulative total stood at 74.5 million at the end of the quarter. The number of living account-number holders is esti- mated at 68.1 million, or nearly 65 percent of the total population aged 14 and over; at the end of the second quarter, the estimated number was 66.4 million, 63 percent of the total population of

working age.

Freezing the Federal Insurance Contributions Rate

By CONGRESSIONAL ACTION in the closing days of the first session, increase in the tax rates under the Federal Insurance Contributions Act, sched- uled for January 1, was suspended for the months of January and February through an amendment to House Joint Resolution 171 (Public, No. 211, Ist sess., 78th Cong.). In the absence of legislation, the contribution rates, which were frozen for the year 1943 at 1 percent for the employee and 1 per- cent for the employer, would have increased auto- matically to 2 percent each on January 1,1944. In a report to accompany the Resolution, Senator Vandenberg explained that the Committee on Finance had agreed to an amendment to the revenue bill of 1943 which would postpone the scheduled increase in rates until January 1, 1945, but when it became clear that the revenue bill would not become law before January 1 of this year it seemed “wise to postpone the increase temporarily until the Congress has an opportunity to determine whether or aot it should be post-

9 =

poned for another year.”” The amendment, which was signed by the President on December 22, provides that the rate shall remain at 1 percent for the first 2 calendar months of 1944 and in- crease to 2 percent for the remaining 10 months of 1944 and the entire year 1945.

Mexican Social Insurance in Operation

Tue Mexican Social Insurance Act of January 1943 went into operation in the Federal District on January 1 of this year. The act established a system of compulsory insurance covering the risks of industrial accidents and occupational disease, sickness and maternity, invalidity, old age, and death (see the March 1942 Bulletin, pp. 11-16). It was left to the Federal Government, with the advice of the Mexican Social Security Institute, to decide when and where the various programs were to be put in operation, taking into account the factors of industrial development, geographic situation, numbers of insurable population, and facilities for establishing the necessary services. The Institute’s studies led to the conclusion that the Federal District offered the best conditions for inaugurating the program. It contains about a third of the total number of insurable workers in the country; it constitutes a geographic unit, with a degree of industrial development greater than in any other part of Mexico; and it offers the best facilities for medical services. More- over, the administrative experience gained from initial operations among the wide variety of occu- pations found in the Federal District would, it was believed, facilitate expansion of the program to other sections of the Republic.

A decree issued on April 25, 1943, established the program in the Federal District; another decree, issued the same day, provided regulations for registration of all employers and workers liable to insurance. The initial registration for the Federal District began July 1. Once the system is ‘n operation, every new establishment must be registered not later than 15 days after it begins operations. An employer must also register a new worker within 15 days of the date on which he begins work, and must notify the Institute when a worker leaves his employ; other- wise the employer is liable for continuing con- tributions with respect to the worker. Informa- tion demanded by the Institute concerning such

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details as conditions of work, degree of risk in- volved, and nature of the business must be fur- nished by all employers. Each insured worker, as proof of his registration, will receive a card carrying the basic information necessary for identi- fying him and his dependents.

About 300,000 workers and 15,000 employers

in the Federal District are covered by the com- pulsory insurance provisions, but not agricultural workers and government employees, who are ex- cepted for the present. Provisions authorized in the act for the voluntary insurance of certain groups who do not come within the compulsory insurance system are also to be put into effect.

A Basic Minimum Program of Social Security *

THE PURPOSE of a comprehensive program of social security is simple. Basically, it is to enable the working population to maintain economic independence throughout the cycle of family life by distributing the return from labor over the periods in which breadwinners can earn and those in which they cannot; at any one time, contribu- tions made by the many who are subject to the risk are available to compensate the relatively few who at that time are suffering its impact. In addition, there must be systematic measures to assure the subsistence of persons who have not been able to share in social security provisions based on work or who have met with extraordinary individual catastrophes.

It is not the aim of social security to provide a lifetime insurance — represents, rather, a safeguard against economic hazards besetting the long road of self-support and family support, which is arduous and risky for most in

bonus. Social

any working generation. Among workers, as among a party of mountain climbers, some at any moment will have a secure foothold, while others, except for the safety rope, would slip to disaster. Some persons in each generation are not able to share in gainful work while some others at any given time will not have acquired an insurance stake commensurate with their indi- vidual needs. For these, public assistance, repre- senting the effort of the entire population, pro- vides a secondary safeguard to the maintenance of personal and social integrity.

The major functions of a program of social security are therefore to cope with wage losses arising from the interruption or cessation of earn- ings and to remedy deficiencies in the personal

*Excerpt from Eighth Annual Report of the Social Security Board for the fiscal year 1942-43, pp. 31-45.

Bulletin, January 1944

resources of individuals who lack the means of subsistence. Rights to insurance stem from the individual’s previous participation in work; rights to assistance, from his current need. Since capacity and opportunity to work are the foun- dation of both individual and national security, public measures to prevent and care for sickness and to assure access to jobs are essential to organ- ized programs of social security.

The existence of opportunities for work is governed, of course, by basic economic factors beyond the scope and control of the social security system. Insurance and assistance payments facil- itate the smooth and orderly operation of economic forces by augmenting purchasing power when and where it is most needed. A comprehensive and flexible system of social security thus enables individuals, and aids communities and the Nation as a whole, to adjust to the changes and dislo- cations which are inherent even in progress. When disaster threatens, the system is all the more necessary.

Progress under the Social Security Act has been more substantial than its proponents would have dared to predict 8 years ago. The provisions of law and the process of administration have been tested through an arc of widely differing economic conditions in years of depression, recovery, and war. The objectives of the program have been found in accord with the traditions and desires of the American people. Nearly all the principles incorporated in the original law and the 1939 amendments have proved sound and workable. On the other hand, certain minor provisions have been found cumbersome or defective, and experi- ence has demonstrated one major fault in the design of the program. Certain gaps in its pro- visions, recognized and postponed for later action

by those who were responsible for the formulation of the program, have become increasingly evident as it has developed.

No one can doubt that victory will bring sharp and sudden changes in all the factors in American life with which the social security program is concerned. Whether that time comes sooner or later, it is now none too soon to design and im- plement the social security provisions which will be needed during the demobilization of war industry and the armed forces, later readjustments to peacetime conditions, and the more remote future. If the program is to fulfill the anticipa- tions and expressed desires of those who look to it—on battle fronts abroad and in homes and factories within our own borders—such considera- tion is needed now. The following pages outline in brief and general terms the areas in which, in the opinion of the Board, the program must be extended, changed, or implemented if it is to play its part now and in the years just ahead.

Social Insurance

A comprehensive system of social insurance would include provisions to compensate part of the involuntary loss of earnings experienced by the working population for any common reason beyond the control of individual! workers. Such reasons may be grouped into those which cause prolonged or permanent loss of earnings—old age, death, and permanent disability of the wage earner, and those which cause more or less tem- porary interruption of earnings—unemployment and sickness. An approach to both types of risks is made under the Social Security Act through the provisions for old-age and survivors insurance and for unemployment compensation. In the opinion of the Board, the existing measures need revision and extension. The act contains no provision for offsetting wage losses due to sickness and disability except those incurred in old age.

Old-age and survivors insurance.—The fundamen- tal limitation of this Federal insurance program is its restriction of coverage, the extent and character of which have been outlined in earlier pages. The Board believes that the wartime situation gives particular urgency to its recom- mendation that coverage be extended to agricul- tural workers, domestic workers in private homes, employees of nonprofit organizations, and _self- employed persons. The high levels of current

employment and earnings now would make it possible for many workers to pay contributions and thus gain insurance rights which they may not be able to acquire in future years, in particular the older workers who may be in need of retire- ment provision when the war ends and younger men return to civilian life. Extension of coverage would not entail serious administrative difficul- ties. For appropriate groups, it might be effec- tive to use a stamp system, under which employ- ers purchase stamps at post offices or from rural mail carriers to place in a book which evidences the contributions made by workers and employers. Extension of the basic protection of old-age and Federal,

would also be feasible and

survivors insurance to public employees State, and would round out insurance protection of survivors,

local

now lacking to nearly all these employees, and provisions for old-age retirement, now unavailable to many, and would assure continuity of rights. Extension should be made in such a way as not to endanger any rights of these workers under exist- ing special systems and to increase, not lessen, the total insurance protection available to them.

An immediate problem related to coverage arises from the situation of the millions of persons now in the armed forces. Because of the eligibil- ity provisions and the method of computing benefits under the program, the insurance protec- tion which servicemen and women may have acquired before their induction will be partly or wholly used up, and the amount of potential benefits payable to them or to their survivors will diminish. Servicemen and women have protec- tion against death while in service, or after service from service-connected causes, in the form of benefits provided under veterans’ legislation; in some cases, survivors of veterans who die while in service will be eligible for both veterans’ benefits and old-age and survivors insurance benefits. After discharge veterans will be without any survivorship protec-

from service, however, many tion in the event of death from non-service-con-

nected causes. The problem with respect to veterans who live to retirement age is less acute, since very few who leave military service after the war will be ineligible for old-age and survivors insurance benefits because of their military service, and, though benefit amounts will be somewhat reduced in all cases, the amount of the reduction will be small. Moreover, the great majority of

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the present members of the armed forces will not reach retirement age for many years. As a solu- tion to the problems with respect to the armed forces, the Board recommends the adoption of provisions which will equitably protect potential insurance rights developed before entrance into the armed forces and which will give equitable ware credits based on periods of national service in lieu of private employment. Such provisions should be accompanied by appropriate arrange- ments to reimburse the insurance system out of general funds of the Treasury.

The Board is also prepared to offer recommen- dations with respect to changes in the present program which would strengthen its protection and remove certain anomalies, inequities, and administrative complexities. Among changes to improve adequacy are those which relate to the age at which benefits become payable to women, the amount and conditions for payment of parent’s benefits, the conditions for payment of lump-sum death benefits, the maximum amount of all benefits payable with respect to the wages of an insured worker, and the recomputation of benefit amounts after an application for primary benefits has been filed.

Since wives are ordinarily younger than their husbands, the qualifying age of 65 for receipt of a wife’s benefit often works hardship on aged couples when the husband must or wishes to give up work on reaching retirement age, while the benefit for his wife is not payable until several years later. There is little doubt that the proportion of women who are unable to engage in regular employment a age 60 is larger than the proportion of men a age 65. A minimum qualifying age of 60 years, rather than the present 65, would therefore be desirable for wives of primary beneficiaries, for

~ -

women workers who claim benefits in their own right, and for widows of insured workers.

At present, benefits to children aged 16 and 17 must be suspended if the child fails to attend school regularly and attendance is feasible. Since ordinarily it is found that school attendance is not feasible for the older children who are not in school, the Board recommends deletion of this requirement, which results in a large number of fruitless investigations.

Unemployment insurance.—The course of events since Pearl Harbor has emphasized what had be- come increasingly evident in prior years—that em-

Bulletin, January 1944

ployment and unemployment are no respecters of State lines. When the social security program first came under discussion, it was argued that establishment of State systems for unemployment compensation would afford an opportunity for experimenting in different types of unemployment insurance and for adapting State systems to the widely varying economic conditions of the differ- ent States. It was also pointed out that the Federal-State system itself should be regarded as an experiment. Both the present world situation and the results of 4 years’ full operation of all State programs now make it urgent to evaluate experience.

Serious administrative complexities are inherent in the present basis of operation because of the duplication of effort on the part of various Federal and State agencies concerned with the collection of contributions and maintenance of wage records for social insurance purposes. The multiple system of tax collection is unduly costly in terms of public expenditures and expenses of employers for tax compliance. Nearly all establishments are subject to Federal contribution for old-age and survivors insurance, the Federal unemployment tax, and contributions under one or more State unemployment compensation laws. On the other hand, some small employers are not subject to the Federal unemployment tax, though liable for Federal old-age and survivors insurance contribu- tions and unemployment contributions under State law. A few are subject only to the last and not to any Federal tax. When an employer is taxable by both Federal and State governments, the respective coverage does not necessarily relate to the same employees or the same amounts of wages. An interstate employer may be required to make reports to several different States on differ- ent forms, under different instructions, and at different rates. He may not be sure in which State 2 worker is covered. ‘Triplicate tax collec- tions must be made—by the Federal Government for the two Federal insurance taxes and by the State unemployment compensation agencies. Du- plicating wage records are necessarily maintained by the Federal Government for purposes of old- age and survivors insurance and by the State un- employment compensation agencies.

Difficulties and conflicts in administration also result from the present division of responsibilities for unemployment insurance between the Federal

Government and the States. Federal grants to States under the Social Security Act supply the total costs of “‘ proper and efficient administration” of State laws. The State agency is responsible for administering the State law; it spends Federal money without responsibility for providing the funds. ‘The Social Security Board must ascertain that the funds have been used in accordance with the terms of the Federal law, yet it lacks authority to prescribe methods which have proved econom- ical and efficient without infringing on the respon- sibility of the State. Appropriate discharge of the responsibility of one agency almost inevitably conflicts with the responsibility possessed by the other.

Of greater importance is the increasing evidence that the Federal-State system results in great diversity in the protection afforded against the risk of unemployment. Development of unem- ployment insurance under the 51 separate laws of the States and Territories has resulted in serious discrepancies in the adequacy of the provisions for unemployed workers in various parts of the coun- try. It has also resulted in a segregation of insur- ance reserves under which there is a possibility that some States may become insolvent while other States have unnecessarily large reserves. The variations in contribution rates now permissible under the Social Security Act through State pro- visions for experience rating place disproportionate burdens on employers in interstate competition and set a penalty on the efforts of any particular State to improve its benefit standards and a pre- mium on measures to restrict payments to workers.

In the opinion of the Social Security Board, these and other discrepancies, complexities, and lacks in the existing Federal-State program all lead to a single conclusion—that the origin and character of mass unemployment and of measures to combat it are such that responsibility for unemployment insurance cannot safely be divided among 51 separate systems. Evidence accumulates daily on the extent to which the tides of employment and unemployment are governed by Nation-wide or world-wide conditions. The conditions of employ- ment within the United States are and will be governed largely by circumstances which only the Federal Government can influence—for example, policies concerning the cancelation of war contracts

and demobilization of the armed forces. Because

of the differences in size and economic structure, the States are not equally sound financial units for unemployment payments of benefits to qualified unemployed

insurance purposes. To ensure workers in any part of the country, reserves segre- gated in 51 funds must be far larger, in the aggre- gate, than would be necessary if the total were available to pay benefits wherever the claims originated.

The early discussion of adapting unemployment insurance to the particular conditions of a State overlooked the fact that variations in wage scales, types of industry, risks of unemployment, and other important factors are at least as great within States as among the 51 jurisdictions participating in the present program. A national system under which benefits are a proportion of wages, as is the case under the Federal old-age and survivors insurance system, effects an automatic adjustment of benefit payments to differences in pay scales in different areas. Present differences the States in coverage, benefit provisions, and assets available for benefits bear little consistent relation to underlying economic differences.

The Board therefore is of the opinion that administration of unemployment insurance should be made a Federal responsibility in order to gear

among

unemployment compensation effectively into a comprehensive national system of social security. Only Nation-wide measures to counter unemploy- be effective when the need arises for

ment can swift and concerted action to harmonize insurance activities with national policy during the change-

over of our economic system to peace. At that time, any need for quick and unforeseen changes obviously can be met far more effectively by Nation-wide policy and by a single act of Congress than through the administrative

agencies and the necessarily cumbersome process

action of 51

of amending as many separate laws.

Even if the special stresses of post-war years were not impending, the Federal-State basis of the unemployment compensation program would have merited reconsideration and revision at this time. The actual course of its operation during a relatively favorable period of years has given no indication, in the opinion of the Board, that it possesses the advantages which it was hoped thus to achieve; on the contrary, experience has mar- shaled impressive evidence of its flaws and short- unemployment in-

comings. Incorporation of

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surance in a unified national system of social insurance would result, the Board believes, in a safer, stronger, and more nearly

program far of unemployed

adequate from the standpoint workers and the Nation, and would permit more economical and effective methods of admin- istration.

Losses and costs of disability—Loss of earnings from permanent and total disability has been widely accepted in other countries, and under retirement plans in this country, as a risk parallel- ing loss of earnings in old age. The worker who is permanently disabled in youth or middle age is in very much the same situation as the worker incapacitated by age, except that his need for insurance may be even greater because he has had less time to accumulate savings while his respon- sibilities for family support are likely to be greater. The Board recommends that insurance against permanent total disability be incorporated in the Federal system of old-age and survivors insurance and extended to all covered by that system under provisions, including benefits to dependents, which would follow the general pattern of this Federal program.

Cash benefits for temporary sickness and the early period of disabilities which may later prove permanent would strike at another serious cause of poverty and dependency. The Board believes that such provision is a feasible and needed adjunct to the social security program. Com- pensation of disability would be most effective and also most readily administered if provisions for both types of benefits were coordinated, so that the worker who had received the maximum number of weeks of benefits for temporary dis- ability and was still incapacitated could continue to receive compensation, with appropriate adjust- ment of levels of benefits to the duration of dis- ability. A unified system of disability compensa- tion merits careful consideration.

Costs of medical care, as has been pointed out, are a peculiarly appropriate field for insurance provisions, since the problem does not lie in the average annual cost but in the uneven and unpre- dictable incidence of a risk to which nearly all the population is subject. These costs, as well as losses of earnings, constitute an important direct factor in causing dependency. Moreover, there is impressive evidence that the barrier of currently meeting costs of medical care keeps many indi-

Bulletin, January 1944

viduals from receiving services which might pre- vent or cure sickness and disability and postpone death. From the standpoint of the general welfare and of safeguarding public funds for insurance, assistance, and public services provided in de- pendency, the Board believes that comprehensive measures can and should be undertaken to distrib- ute medical costs and assure access to services of hospitals, physicians, laboratories, and the like to all who have need of them. For all groups ordinarily self-supporting, such a step would mean primarily a redistribution of existing costs through insurance devices. It should be effected in such a way as to preserve free choice of doctor or hospital and personal relationships between phy- sicians and their patients, to maintain professional leadership, to ensure adequate remuneration— very probably, more nearly adequate than that in customary circumstances—to all practitioners and institutions furnishing medical and health services, and to guarantee the continued inde- pendence of nongovernmental hospitals.

A comprehensive unified system of social insur- ance.—The present recommendations of the Board would result in the establishment of a single com- prehensive system of social insurance with pro- visions for compensating a reasonable portion of wage losses due to unemployment, sickness and disability, old age, and death, and a considerable part of the expense of hospital and medical services. It is believed that all these types of insurance should include specific provisions not only for the insured worker himself but also, as is now the case in old-age and survivors insurance, for his wife or widow and his dependent children. The system should cover all persons who work for others, including the large groups of agricultural and domestic workers now almost wholly without social insurance protection and, except probably for unemployment compensation and temporary disability farmers and other self- employed persons. It is difficult to extend in- surance against unemployment or temporary dis- ability to self-employed persons, because of the problem of determining whether interruption of work has resulted in loss of income.

A unified system which is comprehensive with respect to both the risks and the population in- cluded would close the gaps and obviate the over- laps that result from variations and restrictions in the multiplicity of existing Federal, State, and

insurance,

local provisions for social insurance purposes. This result would be of special importance not only in ensuring protection for workers who now lack any insurance coverage, but also for improv- ing the levels of benefits for those whose employ- ment has been partly outside the coverage of a given system and those whose covered employ- ment has been interrupted by periods of unem- ployment or disability. It would be feasible to remedy the disparities and inequities in benefits of different types, gearing all benefits to levels of earnings and presumptive requirements, with respect both to the short or long-term character of the risk and the worker’s family responsibilities.

A comprehensive national system, moreover, would make possible much greater simplicity and One system for collection One employer

economy in operation.

of contributions would report and one set of wage records would supply the information needed for computation of bene- fits. One local administrative office could main- tain contacts with workers, claimants, and em-

suffice.

ployers, with respect to all the types of insurance. Administration of such a system should, in the the Board, be decentralized, with appeals

opinion of advisory councils and boards in the several States

The costs of a comprehensive system are not great in relation to the return to be anticipated in national and individual protection and the alter- native costs now borne directly and indirectly by individuals, employers, and the general public. For at least the first decade, the current cost for all types of the benefits mentioned above would be more than met by a rate of 12 percent of cov- ered earnings for employers and employees com- bined, as compared with ‘the combined standard rate of 7 percent payable by employers and work- ers for insurance programs under the Social Secu- rity Act beginning January 1944. If the total is divided equally between employers and workers, there would be an increase from 5 percent to 6 per- cent in the basic employerrate and from 2 percent to The 4-percent increase for employees does not exceed the present

6 percent in the rate for employees.

average annual cost of medical care among wage- earning families, without allowance for the uncom- pensated wage losses they experience from such causes and other contingencies for which the sys- tem would provide. When account is taken of the increases already scheduled in the Federal

Insurance Contributions Act by 1949, the proposed 12 percent would mean no increase in employer rates and an addition of 3 percent of wages for employees. If all employees were covered and, except for unemployment and temporary disabil- ity insurance, all self-employed persons, future costs of public assistance would be considerably lightened.

Since a rise in current expenditures for old-age and survivors benefits is to be anticipated for some decades to come and a similar cumulating increase would occur in long-term benefits for permanent total disability, the rate of 12 percent may become insufficient after a decade or more to meet total benefit expenditures under such a program. The Board recommends that any costs in excess of 12 percent should be met by a Federal contribution to the system, and that eventually employers, workers, and the Federal Government should each bear one-third of the cost.

The Board that essentially national in character. In the of a working lifetime, many individuals move from State to State. that the maintenance of lifetime records of earnings,

believes social insurance is

course

Congress determined among other considerations, pointed to the desira- bility of a national system of old-age and survivors insurance. Similar problems would be involved in the long-term risk of permanent total disability. Experience in the operation of the Federal-State unemployment compensation system has made it clear that protection of current-risk programs is

weakened by segregation of separate State funds and that administrative complexities and costs are increased by the existence of separate State sys- tems. Since the cost of social insurance is met in considerable part from pay rolls, the presence

or absence of particular insurance programs and differences in the rates of contributions for exist- ing programs both serve to create unfair inter- state competition when programs are on a State basis.

The Board is not unmindful that the program here proposed would entail modifications of many existing arrangements for social insurance and related programs as well as the establishment of new mechanisms in areas where none now exists. It has given study and thought to many of the particulars which would be involved in imple- menting this plan or some modification of it, and is

prepared to offer more specific information and

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ge or 1g or nt

—

recommendations should these be desired by the Congress.

Public Assistance

In public assistance, as contrasted with social insurance, the Board believes that there is a strong presumption in favor of State programs. The costs of assistance are met from general reve- nues, rather than on the basis of pay rolls, and payments are made on the basis of current indi- vidual need. Since, however, the Federal Gov- ernment shares assistance costs under the Social Security Act, it must be concerned that the basis and extent of Federal participation are such as will effect the purpose of the social security pro- gram.

Special types of public assistance—The most serious lack in operations under present provisions of the Social Security Act is that evidenced by inadequacies of assistance in many collaborating States. A major factor underlying this situation, as has been pointed out, is the uniform-matching basis of Federal grants for the needy aged, chil- dren, and the blind, in combination with the inequalities in State resources for assistance. The present basis of Federal financial partici- pation has not served effectively to diminish State differences in the availability of assistance to needy persons; at its worst, it has heightened these differences in some respects. The Board therefore recommends consideration of a variable- matching basis, under which the Federal grant- in-aid would cover more than half the total cost in States which themselves have only small economic resources.

The studies made by the Board during the past 8 years lead to the conclusion that State per capita income, as indicated in annual estimates now prepared regularly by the Federal Govern- ment for other purposes, affords a reasonable basis for objective measurement of State differ- ences in economic and fiscal capacity. It might be found feasible, for example, to continue the Federal grant at 50 percent of expenditures under an approved State assistance plan for States in which per capita income is at or above the national per capita. When average income in a State is below the national average, the Federal grant to the State might be increased accordingly. For example, if per capita income in a State is only half that in the country as a whole, the Federal

Bulletin, January 1944

568419—44 2

share in assistance costs might be twice that of the State.

It would be appropriate to require, as a con- dition of Federal grants, that the States them- selves make similar adjustments among localities which share assistance costs under Federal-State programs. The Board also believes that it would be reasonable to require, as a condition of approval of the State assistance plan, elimination of State residence requirements for recipients of assistance. Legal settlement in a locality has long been a characteristic condition of eligibility for older forms of public aid since, typically, all costs of relief were met by localities. The Social Security Act specifies maximum State residence require- ments which may be imposed in a State plan that is approved by the Social Security Board, and that some State funds be provided even though there is local financial participation. If an increased part of the total assistance cost is borne by Federal funds, it would seem reasonable to eliminate State residence requirements.

Among the three assistance programs now maintained under the Social Security Act, the gravest inadequacies are in aid to dependent children. Studies of the Board lead to the con- clusion that need among children is at least as great as that among the aged, while aid actually given for children is only a fraction of that for the aged in terms of either the number of recipients or the total amounts. Serious limitations in the availability of Federal funds for needy children arise under two conditions of the Federal act: the restriction in the situations in which Federal matching funds may be used and in the amounts of individual payments to be matched. The Social Security Board recommends that Federal funds under the Social Security Act be available for use under approved plans for children who are needy for any reason whatever, not merely, as at present, for those who have been deprived of parental care or support by reason of the death, absence, or incapacity of the parent. The Board also recommends elimination of the Federal maxi- mums, under which matching Fcderal funds now can be used only within the limits of $18 a month for the first child and $12 for each additional child aided in the same home. States may and do provide larger amounts when they are able; in the latter half of 1942, total Federal funds for aid to dependent children represented only 67 cents per