SOCIAL SECURITY

Waikato Times, Volume 119, Issue 19887, 16 May 1936, Page 15 (Supplement)

SOCIAL SECURITY

AMERICAN EFFORTS : NEW GROUND BROKEN.

(Ronald Davison in Manchester Guardian)

Last SUMMER President Roosevelt wrung from the seventy-fourth Congress a measure which is likely to have a more lasting effect upon American institutions than all the rest of the New Deal. The Social Security Act is probably the most comprehensive piece of social legislation that the world has ever seen. In effect the Act falls into three categories; (1) It sets up a centralised Federal contributory old-age pension insurance for over 20,000,000 wage-earners; (2) It creates a financial inducement to the forty-eight States to set up their own unemployment insurance schemes, financed by compulsory levies upon employers; (3) It offers six new kinds of Federal grants-in-aid to States which set up adequate services for public health, for the aged poor, and for mothers and children. At the moment the real trouble lies with the two vast schemes of social insurance guaranteeing contractual payments for old-age pensions and for unemployment benefits. Here the United States is on new ground which is unfamiliar in the highest degree. For many years she has observed our British social insurances and those of Germany with mingled envy and doubt. Now at laf>t she is Taking The Plunge. To British eyes the- proposed Federal pensions seem to be ambitious. In return for 6 per cent tax on wages (only 2 per cent in the first year, 1937) a weekly annuity varying from 10s to £4 5s is to be payable from age 65 to death. Within these limits pensions are to calculated (like contributions) as an exact percentage of the claimant’s average wages. Workers and employers are to begin contributing in January, 1937, but no benefits are payable until 1942. This delay is a serious political handicap, and, on British precedents, a needless one, seeing that in 1926 our Conservative Government paid old-age and widows’ benefits on the day after contributions first became due. Admittedly that meant non-contributory pensions to the earliest claimants, and our Exchequer is still paying off the debt, but President Roosevelt could w T ell have done the same. One good feature is that the American pensions will be conditional on retirement from regular wage-earning. A less good feature is that in basing pensions on the per r centage of average wages the Act sets the Social Security Board a fearsome task either of current record-keeping or of archaelogieal research after 1942 into the employment histories of claimants. . It is, of course, possible that under the American Constitution that lethal anachronism the Supreme Court may Frustate the Whole of this Courageous Effort to place a vital piece of social machinery on a Federal and nation-wide basis. Time alone c-an show\ There is to be no national unemployment insurance system in the United States. Under the Social Security Act each State is urged to set up its own plan, hut not compelled to do so. It is unlikely that all the States will move in the matter, but the penalty of inaction will be that employers in an inactive State will have to pay an Excise tax on their pay-rolls to the Federal Treasury amounting to about the same figure as the State Insurance contribution, yet the State will get nothing in return. This Federal Excise tax is now being collected, and in due course the active and virtuous States will be entitled to a refund of 90 per cent of it, together with a grant in aid of their administrative expenses. Wisconsin already had a company reserve scheme of its own—that is, a separate insurance account for each employer,—and ten other States have so far responded with new Acts. The Social Security Board’s present task is to persuade the States to conform either to the Wisconsin pattern, with no pooling of risks between employers, or to the pooled insurance plan on European lines. Model bills, with various optional clauses, are being issued from Washington for their guidance. In these bills the minimum “coverage” is to be “all employers of eight or more persons for twenty weeks in a year,” agriculture, domestic service, and non-profit institutions being excepted. Even in the pooled plan there is to be a rather mystical

“merit rating,” under which employers with a sma " our turnover will pay a lesser tax than those xxith a S turnover. The American mind is, indeed, beset by the idea that “merit rating- or the Wisconsin plan will persuade employers to stabilise their employment and will, in an case, make the punishment fit the crime. In scheme that idea has been tried and abandoned, \\hethe it will work in the United States is exceedingly doubtful, having regard to the unavoidable fluctuations and excessive seasonality of many businesses—for instance, tne building trades. The test will only come some time after January, 1938, when benefits begin to be payable. The Doctrine in The States to-dav is that the rate of a man’s wages should determine his benefits; there are to be no dependants’ allowances, but he should have 50 per cent of his full-time wages for at least 12 weeks of unemployment, with a minimum benefit of £1 and a maximum of £3 per week. And the United States thinks that, on the whole, the European system ot requiring employee contributions is a mistake. The ate States'are, however, -going different ways about this, and some schemes will require 1 per cent of weekly earnings from workers. Reciprocity of benefit between States is not yet contemplated; it is t-QO baffling a problem. To the English mind this at once suggests forebodings. How can 48 different systems of insurance be applied, within a single country, to a comparatively mobile labour force? Inevitably there must be much movement across State frontiers among workers in businesses employing eight or more persons. However, such is the respect for State rights and resignation to the consequences that only one major interstate industry has so far revolted. Already the railway companies and brotherhoods are promoting a new bill for a special Federal system of insurance for themselves and for other carriers by road, water, and air. The Social Security Board are to administer this separate transportation scheme. Two Other Major Difficulties confronting the board may be briefly mentioned. One is that the employment ex-change service is not under their control. It is a separate Federal State organism, supervised and given grants-in-aid by the Department of Labour, and it is acutely anxious that its proper business of placement should not be submerged by the onrush of Insurance functions. The Government are, however, doing their best to cope with this threatened dualism. The second problem is: How will the different authorities ascertain what lias been t'he average full-time rate of wages of claimants who have 'worked for, say, ten or even twenty different firms during the preceding two or five years? All his jobs will have to be taken into account In determining the rate and duration of a man’s benefit. So far the idea has been to wait till the claims come in and then to make the necessary researches Into each claimant’s past record. Meanwhile employers are bidden to keep precise accounts of wages and -hours. The alternative of requiring every employer of eight persons or more to send in to the State Insurance Commission monthly lists of wages and hours is theoretically sound, but It does not look attractive to those who will have to enforce It upon a community of Wild and Untamed Employers. The fact is that there is too much theory and wishful thinking in all these varieties of the American plan. If ever there was a country that could only hope to administer unemployment insurance on the simplest possible lines, that country Is the United States to-day. Above all, they might -have been content with a uniform and flat rate of benefits. Indeed, many Americans -have always admitted as much. True, they would probably have to add dependants’ -allowances, but these are far easier to administer than the wage-percentage system. In any case, It Is well to remember that for years to come the United States will have some millions of unemployed, most of whom will be in need of assistance, outside any State insurance schemes which may now be set up.