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PUBLIC SOCIAL SECURITY
PROGRAMS IN
THE UNITED STATES
1949-50
♦
♦
♦
♦

Analysis of Laws
Federal-State Cooperation
Operating Experience
Further Needs




Bulletin No. 982
UNITED STATES DEPARTMENT OF LABOR
Maurice J. Tobin, Secretary
BUREAU OF LABOR STATISTICS
Ewan Clague, Com m issioner

[From the Monthly Labor Review, January, February, and March 1950 Issues]




PUBLIC SOCIAL SECURITY
PROGRAMS IN
THE UNITED STATES
1949-50
♦
♦
♦
♦

Analysis of Laws
Federal-State Cooperation
Operating Experience
Further Needs

Bulletin No. 982
UNITED STATES DEPARTMENT OF LABOR
Maurice J. Tobin, Secretary
BUREAU OF LABOR STATISTICS
Ewan Clague, Com m issioner
For sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C.



Price 15 cents

Letter of Transmittal
U nited S tates D epartment of L abor ,
B ureau of L abor S tatistics,
The S ecretary

of

L abor :

Washington, D. C.y May 4, 1950.

I have the'honor to transmit herewith a report on the operations of the public social
security programs in the United States in 1949 and early 1950.
Labor-management negotiations for pensions and related benefits coupled with the
consideration by the Congress of amendments to social-insurance legislation led to
Bureau plans for the publication of summary background information on the public
provisions in this field. Four experts operating in different phases of the program gave
their services in this project, under the editorial direction of Margaret H. Schoenfeld of
the Office of Publications. Each contributed an analytical section to this bulletin.
The Bureau is indebted to Anne E. Geddes and Jacob Perlman of the Federal
Security Agency and Ruth Reticker and William H. Wandel of the Bureau of Employ­
ment Security, United States Department of Labor, for this report.
E wan C lague , Commissioner.
Hon. M aurice J. T obin ,
Secretary oj Labor.




Contents
Old-age and survivors insurance__________________________________________________________
Historical developments_____________________________________________________________
Provisions under the present program________________________________________________
Experience under the present program________________________________________________
Relation to other programs__________________________________________________________
Adequacy of present program________________________________________________________
Legislative developments____________________________________________________________
Insurance against unemployment_________________________________________________________
State law provisions________________________________________________________________
Operating experience________________________________________________________________
Value of program___________________________________________________________________
Current problems___________________________________________________________________
Financing unemployment insurance______________________________________________________
Employed experience rating________________________________________________________
War-risk insurance__________________________________________________________________
Trends in rates and rate schedules___________________________________________________
Criticisms of experience rating_______________________________________________________
Solvency of State funds_____________________________________________________________
Public assistance programs______________________________________________________________
Extent of assistance________________________________________________________________
Trends in assistance________________________________________________________________
Financing of programs______________________________________________________________
Program changes under discussion. __________________________________________________
Future role of assistance____________________________________________________________




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Public Social Security Programs in the United States,
1949-50
Old-Age and Survivors Insurance
The fourteenth anniversary of the passage of
the Social Security Act, which now provides
benefits to retired workers and their dependents
and to the survivors of deceased workers insured
under the program, was marked in August 1949.
Benefits under the old-age and survivors insurance
program had been paid for only 9}£ years on
June 30, 1949, but monthly payments had reached
over 51. 5 million dollars for almost 2. 6 million
persons. For the fiscal year 1949, the Treasury
Department certified 595 million dollars for
monthly benefits and an additional 32 million
dollars for lump-sum payments.
Historical Developments

The United States lagged far behind other
countries in providing “social security” for its
older workers chiefly because the problem of the
older worker was not conspicuous until after
World War I. A declining birth rate and the
reduction in immigration produced a sharp in­
crease in the ratio of the aged to the total popula­
tion during the 1920's. Furthermore, during
these years accelerated development of mechaniza­
tion and mass-production shifted the emphasis in
the demand for labor from the skilled to the semi­
skilled worker. Industry began to discriminate
against the older worker in hiring, and technologi­
cal unemployment became an important factor.
These developments led to agitation in favor of
pensions for older workers.
Both industry and government moved slowly.
Company pension plans established during the
1920's were relatively limited in scope and largely
restricted to executives and other salaried people.
Some old-age pension laws were introduced for
State and local government employees, and the
Federal Civil Service Retirement System was
started in 1920. But the majority of workers had
no guarantee of security in their old age. In fact,



social insurance on a government basis was widely
opposed, on the grounds that it would destroy
individual enterprise and initiative, that it con­
stituted regimentation, that it was unconstitu­
tional, and that it would bankrupt the Nation.
Even organized labor opposed it as late as 1932
arguing that, if wages were adequate, the worker
could take care of himself in his old age.
With the onset of mass unemployment in the
severe depression starting in 1929, the problem of
protection against loss of earnings in old age came
to the fore. The older worker, in particular, had
almost no chance of finding a job. Need became
urgent for an immediate as well as a long-range
plan for providing economic security for the aged
and other persons without means to take care of
themselves.
Accordingly, early in 1934 President Roosevelt
recommended to Congress consideration of eco­
nomic security legislation and, on August 14,1935, a
law embodying the recommendations of a specially
created Committee on Economic Security was
adopted. Although this law did not go as far as
the Committee had recommended, it established
a broad system of federally administered old-age
pensions.
In general, the law provided old-age benefits to
workers in industrial and commercial establish­
ments, which constitute the major segment of the
Nation's economy. Excluded were the selfemployed, agricultural labor, domestic workers in
private homes, government employees, those
working for certain nonprofit institutions (re­
ligious, charitable, and educational), casual labor,
and those engaged in certain maritime services.
Administrative reasons justified some of these
exclusions. Others were authorized because the
employment was already covered by a retirement
system, and still others because those concerned
were opposed to coverage. Railroad employment

1

2

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

was not listed in the exclusions, but the Railroad
Retirement Act of 1935 specifically exempted
railroad workers from coverage under the Social
Security Act.
In order to become insured under the program,
a worker was required to have total wages of at
least $2,000 from covered employment earned in
five separate calendar years. Wages earned after
age 65 did not count towards eligibility, thereby
excluding from protection the older workers who
were most in need of it. Monthly benefits were to
be paid to insured workers after attainment of
age 65, beginning in 1942, with no provision for
survivors except a lump-sum payment. Provision
was made for lump-sum payment to contributors
who had not met the requirements for monthly
benefits. Benefits were to be financed by con­
tributions by employer and employee of 1 percent
of wages up to $3,000 a year from any employer,
beginning in 1937, and rising to 3 percent each in
1949 and thereafter. Provision was made for an
old-age reserve account in the Federal Treasury,
to which sufficient funds were to be appropriated
annually by Congress to provide for the payments
under the program, determined on a reserve basis.
As a next step, what has been called the worlds
largest bookkeeping system was established in
order to record the wages of workers covered under
the old-age benefit system. It was necessary to
assign numbers to approximately 26 million
workers and more than 2 million employers in a
mass registration. An individual ledger sheet was
set up for each employee, and machines were either
invented or adapted to handle the posting of
reported wages.
Provisions Under the Present Program

legislative changes have been made subsequently,
the act as amended in 1939 remains the basis of
the current program.
The 1939 amendments started a trend toward
the concept of presumed need, which is the essence
of social insurance, and away from the principles of
individual savings and equity as known in private
insurance. Coverage was expanded to provide
benefits for survivors and dependents of those
insured. Benefits were made payable in 1940
instead of 1942. Furthermore, changed eligi­
bility provisions considerably increased the num­
ber of the aged who could qualify in 1940 or
shortly thereafter for retirement benefits. The
benefit formula was changed to increase many
retirement benefits payable in the early years of
the program on the basis of limited contributions.
Under these amendments, a wage earner who
reaches age 65 or over and retires is eligible for all
types of benefits if he is “ fully insured.” * If he is
1
“ currently insured,” only certain survivorship
benefits may be paid.2
Benefit amounts were related to average monthly
rather than accumulated wages, under a formula
favoring those with low earnings.3 By this
change, the amounts payable to persons retiring
soon after benefits became payable were increased
and benefits were also related more closely to the
wage loss due to retirement than formerly. The
basic monthly benefit is equal to 40 percent of the
first $50 of the average wage, plus 10 percent of
the next $200. To this basic amount is added a
1-percent increment for each year in which the
worker received wages of $200 or more. If the
benefit computed according to the formula is less
than $10, it is raised to $10. Examples of monthly

“ Social Security” soon became generally ac­
cepted and the insurance provisions of the act
were upheld by the Supreme Court of the United
States in 1937. However, serious shortcomings
in the old-age benefits program became obvious
and controversy developed over the financing
provisions. In 1937, therefore, the Social Secur­
ity Board and the Senate Finance Committee
appointed an Advisory Council to study these
problems. Following the recommendations of
the Council, Congress substantially amended
the Social Security Act in 1939. Although several

1 In general, he is fully insured when he has half as many “quarters of
coverage” as there were calendar quarters after 1936 (or after his twenty-first
birthday, if that is later) and before the quarter in which he reaches age 65
or dies, whichever occurs first. A quarter of coverage is a calendar quarter in
which the individual is paid wages of at least $50 in covered employment.
There must be at least 6 quarters of coverage in any case. This minimum
applies in the case of persons who reached age 65 before July 1, 1940. The
amended act allows credit for employment after age 65, retroactive to January
1, 1939. When a worker has 40 quarters of coverage he is permanently fully
insured, regardless of age. Quarters of coverage may be acquired at any time
after 1936 and need not be consecutive.
* A person is currently insured if he has earned 6 quarters of coverage during
the period consisting of the quarter in which he died and the 12 calendar
quarters immediately preceding such quarter.
* An individual’s average monthly wage is computed by dividing all of his
wages received in covered employment by the number of months which have
elapsed after 1936, or after he attains age 22, whichever is later, and before the
time when he dies or becomes entitled to benefits.




OLD-AGE AND SURVIVORS INSURANCE

benefits (i. e. “primary benefits”) payable to
retired workers follow:
Average monthly wage
of—
$50_____________
$100____________
$150____________
$200____________
$250____________

5

Years of coverage
10
B0

40

$21. 00 $22. 00 $24. 00 $28. 00
26. 25 27. 50 30. 00 35. 00
31. 50 33. 00 36. 00 42. 00
36. 75 38. 50 42. 00 49. 00
42. 00 44. 00 48. 00 56. 00

If a worker is- “fully insured,” benefits may be
payable to his wife or widow at age 65; his
unmarried children under 18; and his widow,
regardless of age, if she has such children in her
care; or to aged dependent parents. If he is
“currently insured,” monthly benefits may be pay­
able to his children and his widow if she is caring
for the children. A wife, child, or dependent
parent receives half of the primary benefit; a
widow receives three-fourths. However, the total
benefits based upon one worker’s wages may not
exceed the smallest of the following: Twice the
amount of the primary benefit, or 80 percent of
the worker’s average monthly wage, or $85. The
maximum provision does not apply if family
benefits total less than $20.
Provisions with respect to lump-sum payments
were also changed in 1939. Such payment to a
worker at age 65 was discontinued, and, in view of
the new survivors’ benefits, the death payment
was limited to a sum equal to 6 months of the
primary benefit. It was further limited to those
who could be presumed to have suffered an eco­
nomic loss because of the worker’s death or who
had paid the funeral expenses, and could be made
only if there was no one immediately entitled to
monthly benefits.
All benefits are suspended for any month in
which the retired wage earner returns to work in
covered employment and receives $15 or more per
month. Likewise, if his dependents or survivors
(who draw benefits) work for more than $14.99
a month, their individual benefits are withheld.
This provision was adopted in order to assure
payments only to those individuals who have
substantially retired from work in jobs covered
by the law and who, therefore, might be presumed
to need benefits.
A broad extension of coverage was not provided.
Certain previously excepted services were included
under the 1939 amendments, notably those per­



3

formed by persons aged 65 and over, beginning in
1939. As of January 1, 1940, coverage was also
extended to approximately 1.6 million workers.4*
Concurrently, however, the 1939 amendments
restricted coverage in other areas, notably in
connection with agriculture.6 Among other
groups excluded at this time were student nurses
and interns, newsboys under 18, employees of
foreign governments, and domestic servants in
fraternities, etc. The coverage of family employ­
ment was also limited.
Some further extensions have been made in
coverage. In 1943, it was extended for the dura­
tion of the war to seamen employed by or through
the War Shipping Administration. Employees
of the Bonneville Power Administration who were
not covered under the Federal Civil Service Re­
tirement Act were covered by a 1945 law, for em­
ployment performed after December 31, 1945.
Further restrictions were imposed in 1948.
Under one law, services performed by certain
newspaper and magazine vendors were excluded.
Another redefined the term “ employee” to restrict
it to the “usual common-law rules” applicable in
determining employer-employee relationship. The
result was more restricted coverage than that
under the test of “ economic reality” to determine
what constitutes employment, as handed down
by the Supreme Court in an opinion in June 1947.
As mentioned before, considerable interest and
controversy on the financing of old-age benefits
developed after passage of the Social Security Act.
The amendments of 1939 revised the financial
provisions, with the establishment of a Federal
Old-Age and Survivors Insurance Trust Fund to
take over the assets of the old-age reserve account.
The size of the reserve account, as estimated in
connection with the 1935 act (47 billion dollars
by 1980), had been severely criticized as unneces­
sary in a Government program, and strong senti­
ment developed for placing the system on a “payas-you-go” basis. In response to this sentiment,
the 1939 amendments provided that the Fund
trustees were to report to Congress whenever, in
« The extension of coverage applied to maritime service on American ves­
sels, except certain fishermen, and to employment by governmental bodies
or instrumentalities not wholly owned by the Federal Government, such as
national banks, building and loan associations, and State banks which are
members of the Federal Reserve System.
s The term agricultural labor was so defined as to exclude certain borderline
activities which were closely related to farming, and which previously
been considered as covered.

4

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

their opinion, the fund would exceed three times
the highest annual expenditure within the follow­
ing five fiscal years, implying that Congress would
keep the reserve from exceeding three times the
annual benefits. The contribution rates at 1
percent each for employees and employers were
maintained through 1949. In 1947, a new
schedule was adopted which increased the tax rate
to 1% percent each in 1950 and 1951 and to
2 percent each for 1952 and thereafter.
Percent Distribution of Living Persons W ith W age
Credits, by Insurance Status, January 1, Each Y ear

1
940

I94I

I942

I943

UNITED STATES DEPARTMENT OF LABOR
BUREAU OF LABOR STATISTICS

I944

I945

I946
Soarct:

I947

I948 I949

FEDERAL SECURITY AGENCY

Experience Under the Present Program

Old-age and survivors insurance has become
an essential of our national life. By the end of
1948, a total of 92.3 million social security accounts
had been established—2.7 million of them in that
year. The number of living persons with wage
credits under the program had grown from 40.8
million on January 1, 1940, to 78.9 million on
January 1, 1949. (See table 1.) During 1948,
some 49.6 million workers were employed in jobs



covered by old-age and survivors insurance, and
total taxable wages of 84.5 billion dollars were
reported by about 3.3 million employers. Aver­
age taxable wages per year were $1,704 as com­
pared with only $900 per worker in the first year
of the program’s operation.
Of all persons with wage credits on January 1,
1949 (see table 2), an estimated 38.3 million were
“fully insured,” of whom about 2 million were
over age 65.
Of those persons who were fully insured on
January 1, 1949, 13.2 million had permanent
insured status—that is, they or their dependents
or survivors could qualify for benefits even though
the wage earner had no further employment. An
additional 5.1 million workers were currently but
not fully insured, so that benefits could be paid
to the survivors in the event of their death. (See
chart.)
Of the fully insured workers over age 65, more
than half (1,048,000) were currently receiving
monthly benefits. Most of the 933,000 who were
not in payment status were still employed.
By contrast, 35.5 million persons were uninsured
under the program—having worked in covered
employment in too few calendar quarters to gain
insurance protection. Compared with the insured
workers, the cumulative amount of their wages
was small—on January 1, 1948, their average was
$1,300 compared with $12,200 for fully insured
workers. Some of the uninsured were seasonal or
part-time workers; others had just entered covered
employment; some had worked only a short time
and had withdrawn from covered employment;
and still others were shifting between covered and
noncovered employment. Among those who had
withdrawn from covered employment were many
women, whose participation in the labor force is
often interrupted by marriage and family re­
sponsibilities. However, many of them will re­
ceive benefits as wives, or widows, on account of
their husband’s wage records. Over a period of
future years, too, many workers who spend rela­
tively little time in covered employment may
acquire permanently insured status, thus entitling
them to benefits under the program.
Benefit rolls under old-age and survivors in­
surance have also grown. During the fiscal year
1949, monthly benefits were awarded to 622,000

OLD-AGE AND SURVIVORS INSURANCE

,

5

,

T a b l e "]..— Extent of coverage of the old-age and survivors insurance program in terms of workers wages and salaries and firms,

1987-48

Persons (in millions)
Popula­
tion 14
and over,
end of
year4

Year

1937......................................
1938.............................................
1939______ _______________
1940_____ ________________
1941............................................
1942______________________
1943______________________
1944______________________
1945 ____________________
1946______________________
1947_____________________
1948______________________

98.8
100.0
101.1
102.4
103.5
104.7
105.7
106.6
107.5
108.6
109.7
110.8

With covered wages
Cumulative to end
of year
Percent of
Number population
32.7
36.5
40.8
44.9
51.0
58.5
65.3
69.5
72.3
74.8
76.8
78.9

Firms (in thousands)

Wages and salaries in year
Covered industries

During
year

33.1
36.5
40.4
43.8
49.3
55.9
61.8
65.2
67.3
68.9
70.0
71.2

Total
United
States3

Total
(in billions)

$45.6
42.4
45.3
49.0
59.8
75.6
91.2
96.3
95.1
103.5
118.3
131.4

32.9
31.8
33.8
35.4
41.0
46.4
47.7
46.3
46.4
49.1
49.2
49.6

$32.8
29.0
32.2
35.7
45.5
58.2
69.7
73.3
71.6
79.3
92.5
102.7

During
year

Taxable

First
quarter
of year

Amount Percent of
(in billions) total U. S. Average
$29.6
26.5
29.7
33.0
41.8
52.9
62.4
64.4
62.9
69.1
78.4
84.5

2,421
2,239
2,366
2,500
2,646
2,655
2,394
2,469
2,614
3, 017
3, 250
3,300

$900
833
881
932
1, 021
1,142
1,310
1,392
1,357
1,407
1,593
1, 704

64.9
62.5
65.6
67.3
69.9
70.0
68.4
66.9
66.1
66.8
66.3
64.3

(3)1,876
1,967
2,069
2,188
2,204
1,971
2,010
2,076
2,287
2,509
2,590

1Includes Alaska and Hawaii, persons in institutions, and armed forces
overseas.
1 Includes continental United States and pay of Federal civilian employees
in all other areas.

* Not available.
Source: Covered data—Bureau of Old-Age and Survivors Insurance; popu­
lation—Bureau of the Census; and total wages—Office of Business Economics,
U. S. Department of Commerce.

persons, almost 295,000 of whom were retired
workers. As stated before, 2.6 million persons
were receiving monthly benefits on June 30, 1949,
with monthly benefit amounts totaling 51.5 million
dollars. The extent to which the rolls have ex­
panded since monthly benefits first became payable
is indicated by the 1940 and 1945 experience
reported in table 3.
On June 30, 1949, 46.1 percent of the benefici­
aries were retired workers; 14.1 percent were wives

of these workers; 24.1 percent were children of re­
tired or deceased workers; 9.3 percent were aged
widows; 5.9 percent were widows caring for child
beneficiaries; and 0.5 percent were aged dependent
parents of deceased workers. Persons aged 65 or
over thus comprised 70.1 percent of the total num­
ber receiving benefits. Furthermore, of the 1.8
million families represented in the 2.6 million per­
sons receiving monthly benefits, retired worker
families made up almost 67 percent of the total.

,

T a b l e 2.— Extent of protection afforded by old-age and survivors insurance program, in terms of number insured and average

primary benefit1 to insured persons 1989-48

Age 65 and over

All ages
End of year

1939_______________________________
1940_______________________________
1941_______________________________
1942________________________________
1943_______________________________
1944_________________________ ____
1945_______________________________
1946_______________________________
1947_______________________________
1948_______________________________

Persons with
wage credits Insured
cumulative
to end of year (in millions)
(in millions)
40.8
44.9
51.0
58.5
65.3
69.5
72.3
74.8
76.8
78.9

22.9
24.9
27.5
31.2
34.9
38.6
40.3
41.5
43.1
43.4

3 Primary benefit amount accrued to insured worker at end of year repre­
sents amount on which monthly survivor benefits or lump-sum death payments
would be based if the worker were to die at end of year; also primary benefit
to which worker would become entitled if he were fully insured, aged 65 or
over, and had filed an application for such benefit at end of year, and the basis
on which supplementary benefits would be computed. Not adjusted to
reflect changes in insured status and primary benefit amounts for (1) workers
with combined earnings under coordinated survivor provisions of the old-age
and survivors insurance and railroad retirement programs, and (2) veterans
880480— 50

------ 2




Average
accrued
primary
benefit
amount2

Percent
insured
56.1
55.5
53.9
53.3
53.4
55.5
55.7
55.5
56.1
55.0

(4)
(4)
(4)
(4)
$25.00
25.00
25. 25
25. 75
26.50
(4)

Persons with
wage credits
Fully
cumulative
insured
to end of year (in millions)
(in millions)
0.7
.9
1.1
1.4
1.8
2.1
2.4
2.7
3.0
3.4

0.2
.5
.7
.8
1.0
1.2
1.5
1.6
1.8
2.0

Percent
fully
insured
28.6
55.6
as. 6
57.1
55. 6
57.1
62.5
59.3
60.0
58.8

Average
accrued
primary
benefit
amount3
(4)
(4)
(4)
(4)$25.25
(<)

25.25
25.50
25.25
27.00

deemed to be fully insured only as a result of sec. 210 of title II of the Social
Security Act as amended in 1946. Averages estimated to nearest multiple
of 25 cents.
2 Excludes accrued primary benefit amounts for insured persons under 25
years of age. Includes primary benefit amounts for persons receiving benefits.
3 Includes primary benefit amounts for persons receiving benefits.
4 Not available.
Source: Bureau of Old-Age and Survivors Insurance.

6

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

,

T able 3.— Beneficiaries and monthly benefits in current-payment status, by type of benefit fiscal years 1940-49
Total in current-payment
status

End of fiscal year

Number
19401____ _______________ .
1941________________________
1942__________________ _ _
1943_______________________________
1944______________________________ .
1945_________________________
1946______________________________
1947_______________________________
1948_________ ______________________
1949________________________ _______

Monthly
amount (in
thousands)

Number of beneficiaries, by type of benefit

$1, 759
6,096
9, 555
12,199
15,351
20,163
28,211
35,071
42, 391
51, 520

95,500
336,240
529,876
676,302
846,303
1,106,002
1,502, 085
1,832, 285
2,162, 693
2, 554, 248

Wife’s

Primary
53,800
160,401
237,459
284, 063
339,954
430,723
632, 038
797,927
968, 682
1,180, 909

11, 200
44,320
68, 760
84,398
103,164
132,155
193, 241
245,364
296, 711
359,840

Child’s
21,500
88,091
147,674
201, 954
261,806
348, 413
431, 202
499, 246
556,834
614, 714

Widow’s
900
9, 567
21,694
37,680
57,126
81, 500
110,168
146,124
188, 612
236,394

Widow’s
current
7,900
32,444
51,789
64, 711
79,866
107, 597
128,688
134,673
140, 807
149, 724

Parent’s
200
1,417
2,500
3,496
4,387
5,614
6,748
8,951
11, 047
12,667

i Estimated.
Source: Bureau of Old-Age and Survivors Insurance.

The average primary benefit has increased only
moderately since 1940, as shown in the accom­
panying tabulation.
End of fiscal year

—

1940 1_____
1941______ ___
1942 __
1943______ ___
1944______

Average
monthly
primary
benefit

$21. 96
22.67
22. 87
23.23
23.61

End of fiscal year

—

Average
monthly
primary
benefit

1945_____ ____$23.94
1946_____ ____ 24. 43
1947_ ___ ____ 24. 72
1948_____ ____ 25. 13
1949_____ ____ 25. 72

i Estimated.
Source: Bureau of Old-Age and Survivors Insurance.

By type, the monthly average benefit in 1949
was $13.61 for a wife of a retired worker, $20.72
for an aged widow, $20.96 for a widow with child
beneficiaries, $13.09 for a child beneficiary, and
$13.70 for an aged dependent parent.
Naturally, the beneficiaries are concentrated in
the highly industrialized States. By contrast, the
agricultural States not only have relatively fewer
beneficiaries but their average benefits are also
lower. This is due to the fact that in the latter
States many workers divide their working time
between covered and noncovered employment.
Assets of the Old-Age and Survivors Insurance
Trust Fund on June 30, 1949, totaled 11,310 mil­
lion dollars, with contributions during the fiscal
year amounting to 1,690 million dollars. Except
for 79 million dollars held in cash for current with­
drawals, the money was invested in Government
securities. At the end of fiscal year 1939, assets
had been only 1,745 million dollars.



Relation to Other Programs

In providing for the establishment of FederalState programs of public assistance under the
Social Security Act of 1935, Congress took into
account a number of factors. Some people, such
as those already old when the old-age insurance
program began and those handicapped since birth
or childhood, would never be able to meet the re­
quirements of the insurance system, and the need
of others would be greater than this system was
able to meet. However, the assumption that the
insurance program would provide the necessary
basic protection was not fulfilled, namely, that
assistance cases would decline as more people be­
came insured under the contributory system.
Instead, the number receiving old-age assistance
has almost doubled, while the number receiving
old-age insurance has lagged relatively by com­
parison, notwithstanding that the average worker
prefers a benefit for which he has paid rather than
relief.
Private industrial pension systems have suc­
cessfully supplemented the protection of old-age
and survivors insurance. Old-age and survivors
insurance extends broadly over the whole field of
private industry, providing continuous protection
for persons who move from job to job within that
field; private retirement plans, each limited to a
single firm or industry, are used to supplement this
protection and to reward faithful service.
In other fields, however, this basic relationship
has not been clearly worked out. Railroad em­
ployees, for example, have their own system, which

OLD-AGE AND SURVIVORS INSURANCE

7

provides retirement benefits entirely separate from
those under old-age and survivors insurance. The
survivor benefits of the two programs were coordi­
nated in 1946, and employment under both sys­
tems is now counted toward benefits, which are
payable under a single system. By this device,
loss of benefits on the one hand, and excessive
duplication of benefits on the other, are prevented
if an individual has moved back and forth between
the two programs. Nevertheless, an individual
who attains retirement age and whose working
lifetime has been divided between the two pro­
grams may receive somewhat less in retirement
benefits than is appropriate in view of his com­
bined periods of service.
No coordination has been worked out between
the Federal civil service retirement and the old-age
and survivors insurance program. The Federal
program providing compensation and pension for
veterans and their survivors also is separate and
apart from the old-age and survivors insurance
program, with one minor exception. Three years
of guaranteed survivorship protection under oldage and survivors insurance was provided in 1946
for veterans following their discharge from World
War II military service. It does not apply where
compensation or pension is payable under veterans’
law.

held for any month in which he earns $15 or more
in a covered job. In 1935, when the act became
law, unemployment was widespread and Congress
assumed that this requirement would help to
provide jobs for younger persons who had rela­
tively greater need. However, the result has
been that many beneficiaries must get along on
either inadequate jobs or inadequate benefits.
The limitation of coverage of this insurance
program is perhaps its most .serious shortcoming.
In June 1949, over 25 million persons out of an
employed civilian labor force exceeding 60 million
were in jobs in which their earnings did not
count toward benefits under this program. Some
of these 25 million will never acquire any wage
credits; others, who move from covered to noncovered jobs, may lose their benefit rights or
suffer a reduction in the amount payable to them
or to their dependents.
Lack of protection against wage loss caused by
extended disability is also serious. Except for
veterans and relatively small groups of workers
who have total disability protection under special
retirement systems, there is no security for work­
ers who have extended disability which is not
work connected.

Adequacy of Present Program

Both Houses of Congress have recognized the
shortcomings of the old-age and survivors insur­
ance system and steps have been taken toward
legislative action to extend and liberalize it.
In 1947, the Senate Committee on Finance ap­
pointed an Advisory Council on Social Security
composed of prominent citizens to further study
the programs established under the Social Security
Act. The Council reported on old-age and sur­
vivors insurance to the Senate Finance Committee
on April 8, 1948, referring to the three major de­
ficiencies of the program as follows: (1) Inadequate
coverage; (2) unduly restrictive eligibility require­
ments for older workers; and (3) inadequate bene­
fits. It went on record as favoring contributory
social insurance with benefits related to prior earn­
ings and awarded without a needs test.
During February 1949, H. R. 2893, a bill “to
extend and improve the old-age and survivors
insurance system, to add protection against disa­
bility and for other purposes.” was introduced in

Surveys of families to which benefits are being
paid, made by the Bureau of Old-Age and Sur­
vivors Insurance, show that some have no re­
sources except their benefits, and that even for
many with some resources benefits are entirely in­
adequate. Nearly half of the aged beneficiary
groups included in the surveys had insufficient
income from all sources to provide a maintenance
living, although individuals shared a household
with relatives.
Even in 1940, the amounts payable failed to
provide basic security. Subsequent rises in living
costs have resulted in large numbers of elderly
workers continuing at work after age 65. Others
have retired only because they were ill and unable
to work. Even maximum benefits do not meet
the requirements of most beneficiaries.
A worker who would like to supplement his
benefits by part-time employment incurs hardship
because, under the act. his benefits must be with­



Legislative Developments

8

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

the House of Representatives at the President’s
request. This bill, in general, incorporated the
improvements which the Social Security Adminis­
tration has urged for many years. The Ways
and Means Committee of the House made exten­
sive study of the proposed changes and held public
hearings on them for 2 months. On August 15,
1949, Chairman Doughton presented the com­
mittee’s bill to Congress (H. R. 6000), recommend­
ing the enactment of*major amendments. In con­
nection with the old-age and survivors insurance
program, the bill if enacted into law would provide

for substantial increases in benefit amounts, exten­
sion of coverage to approximately 11 million per­
sons not now covered, liberalization of the eligi­
bility and other requirements, and the establish­
ment of a system of monthly benefit payments in
cases of permanent and total disability.
H. R. 6000 was passed by the House of Re­
presentatives on October 5, 1949, and sent to the
Senate. Senator George, Chairman of the Senate
Finance Committee, stated that his committee
would commence hearings early in January on the
social security bill.

Insurance Against Unemployment
Dependency on earnings is characteristic of
modern industrial society. In the United States,
only a fifth of those at work in October 1949
were self-employed. The remaining four-fifths,
who derived their earnings from employment by
others, ran the risk of having their incomes cut
off by permanent or temporary interruption in
employment over which the employer and the
employee commonly have no direct control.
Unemployment is a hazard to the individual
directly affected, to nations, and to international
relations. Insurance is part of organized society’s
answer to the problem of wage loss due to lack
of work for those who have been separated from
their jobs and desire work.
After experimentation with private unemploy­
ment insurance and the adoption of public plans
in several foreign countries and in the State of
Wisconsin in 1932, a Nation-wide system for the
United States was adopted by Congress in 1935.6
This plan was established under the terms of two
titles in the Social Security Act, which provided
for a Federal-State system.
By means of a tax-offset device, the individual
States were encouraged to enact and administer
their own unemployment insurance laws which
would meet certain general Federal standards.
Provision was made for grants to the States of
funds sufficient for the proper and efficient admin­
istration of those laws.
8This section is confined to a discussion of the Federal-State unemployment
insurance system. The Federal programs covering veterans and railroad
employees are excluded.



The Federal Government has levied a tax on
the pay rolls (up to $3,000 per employee per year)
of employers within the covered industries who
had eight or more employees for 20 weeks in the
taxable year. Exempted from coverage are
chiefly persons engaged in services for nonprofit
organizations, agricultural labor, domestic service,
and government service. Rates were fixed at 1
percent for 1936, 2 percent for 1937, and 3 percent
thereafter. But an employer who is subject to a
State law meeting the general requirements of the
Federal law is permitted to credit, against the
Federal tax, amounts he is required to pay as
taxes (commonly called contributions) under the
State law. Such tax credits cannot exceed 90
percent of the Federal tax. In practice, this
provision constitutes an incentive to States to
retain, for the benefit of their own work force,
90 percent of the Federal tax; and all States, the
District of Columbia, Alaska, and Hawaii enacted
unemployment insurance laws within 2 years
after the Social Security Act was passed. Twentythree States started to pay benefits in 1938, and
all were paying benefits in July 1939.
From annual Congressional appropriations for
this purpose, the responsible agency (since August
20, 1949, the U. S. Department of Labor) grants
funds to each State for the administration of its
unemployment insurance program, provided its
law and its administration conform to certain
general standards. These grants are generally
made quarterly.
The applicable Federal standards for approval
of State laws, both for tax-offset and administra­

UNEMPLOYMENT INSURANCE

9

tive grants, are very general. For tax-offset those subject to the Federal tax: 29 States cover
purposes, the State law must provide that (1) firms with fewer than eight employees and 17
all monies collected under its terms will be depos­ States cover firms having one or more employees.
In accordance with the changing level of the
ited to the State’s account in a Federal trust fund
and withdrawn solely for the payment of benefits; Federal tax, noted above, States generally col­
(2) benefits will be paid only through public em­ lected 0.9 percent in 1936 and 1.8 percent in 1937;
ployment offices; (3) benefits will not be denied the standard rate subsequently has been 2.7 per­
to any otherwise eligible individual who refuses cent. Under the terms of the Federal act, any
available new work because of a labor dispute, reduced rates under the State laws are allowable
which is at wages, hours, or other conditions of only on the basis of an individual employer’s
work substantially less favorable than those pre­ experience, never on a uniform flat-rate basis.
vailing in the locality, or when as a condition of By July 1948, all States had adopted experience­
being employed, the individual would be required rating provisions, Mississippi having been the
to join a company union or to refrain from join­ last to do so. Several, quite diverse, formulas are
ing, or to relinquish membership in, a bona fide used by the States for the determination of em­
union. In order to meet the requirements for ployers’ rates of contribution. However, most
administrative grants, a State law must provide of them use benefits paid to former employees as
for such methods of administration as are reason­ a primary determinant of the rate. This factor
ably calculated to insure full payment of benefits is used differently under various laws. Sometimes
when due, opportunity for a fair hearing to any­ the actual duration of benefits paid to the firm’s
one whose claim is denied, and the making of previous employees is disregarded; commonly,
reports as required by the Federal agency. Grants benefits are not “charged” when paid under
can be withheld if, in a substantial number of certain circumstances. An employer having ex­
cases, the State fails to pay benefits due under actly the same experience in more than one State
its law.
may be assigned quite different rates in those
Different rates of contributions by employers States. At some time, nine States have required
because of their experience with some measure contributions from employees as well as from
of unemployment risk are levied under an “ ex­ employers. However, such contributions have
perience rating” system. If the State law has been eliminated or diverted to the support of
approvable experience-rating provisions, an em­ temporary disability programs in all but two
ployer who is required to pay to the State less States, Alabama and New Jersey; in New Jersey,
than 90 percent of the Federal tax can still obtain the employee contribution for unemployment
the full 90-percent credit against the Federal insurance is only 0.25 percent.
tax. Any reduced rate must be based on the
The benefit structures of most State laws have
employer’s experience with unemployment, or much in common. All States attempt to pay
other factors directly relating to unemployment only part of the wage loss suffered by the w~age
risk, during not less than the preceding 3 years.
earner, commonly about 50 percent. All States
require a claimant to have evidence or prior
State Law Provisions7
attachment to the labor force (usually, earnings of
a certain amount over a minimum period within
The basic provisions of State unemployment the year prior to the period for which benefits are
insurance are modeled on the Federal legislation claimed). All States but one use the concept of
only with regard to coverage and general financial a benefit year to limit the amount of benefits which
structure. State laws generally cover only those an individual may claim, and of a base period, also
employments which are subject to the Federal a year, which precedes the benefit year and is the
unemployment tax. Exceptions are one State
which covers nonprofit organizations, a few States period within which the claimant must have had
that include certain forms of agricultural services, his qualifying earnings or employment and the
and nine which cover some State and local govern­ wages upon which the amount of his weekly benefit
ment services. Most States also provide cover­ 7 For a tabular summary of the provisions of State Unemployment Insur­
age for work with firms that are smaller than ance Laws, September 1949, see p. 46 January 1950 Monthly Labor Review.



10

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

is based. All States but two require a waiting
period of 1 or 2 weeks before benefits are paid in
any benefit year. Eleven States now pay (in
addition to the basic weekly benefit amount) sup­
plemental amounts in accordance with the number
of dependents the claimant has. Fifteen States
pay benefits for the same maximum duration to
all qualified claimants, but most States vary the
maximum duration in relation to the amount of
earnings or employment in the base period. All
States impose periods of disqualification if the
claimant’s unemployment is due to a voluntary
quit, discharge for misconduct, or refusal of suit­
able work, and benefits are not payable for weeks
in which the individual is not able and available
for work or in which his unemployment is caused
by a stoppage of work due to a labor dispute.
Nevertheless, there are significant differences
between the State laws. Most States base the
weekly benefit amount on a fraction of earnings
in the highest calendar quarter of the base period,
but the fraction used ranges from % to %q, Some
&
States base the weekly benefit amount on total
earnings in the base period or an average of earn­
ings in selected recent weeks. Minimum weekly
benefits vary from $0.50 (accumulated to $3) to
$15. Maximum weekly benefits (excluding de­
pendents’ allowances) vary from $15 to $27;
dependents’ allowances do not increase the maxi­
mum in one State but nine States paying such
allowances increase the maximum by $7 up to $14
and, in Massachusetts, up to the amount of the
individual’s average weekly wage. Amounts
granted because of the existence of dependents and
the definitions of a dependent vary considerably.
Maximum potential duration of benefits varies
between 12 weeks and 26% weeks, although in
States with more than 90 percent of covered
workers, the maximum potential duration is 20
weeks or more; almost half of the workers are in
States with a 26 veeks’ maximum. However, in
nine States the maximum duration is available
only to those eligible for the maximum weekly
benefit. Maximum basic benefits payable in a
benefit year vary from $240 to $689 and maximum
augmented benefits (including dependents’ allow­
ances) from $312 to $936.
Only six States limit disqualifications to
voluntary leaving, discharge for misconduct,
refusal of suitable work, and labor disputes.
Many States have added other disqualifications,



such as leaving because of marital or domestic
responsibilities. The disqualifications vary greatly
between the States in their severity, from a few
weeks’ postponement of benefits to the cancellation
of all rights to benefits. Twenty-two States have
supplemented their availability requirement by a
provision requiring the claimant to make an
independent search for work.
The State administrative agencies, in most cases,
are independent of other State departments—
either administered by commissions or boards (in
21 States) or single administrators (in 12 States).
In 18 States, however, they are in the State
department of labor and, in two States, in the
same agency which administers the State work­
men’s compensation law. These agencies operate
through approximately 1,700 local employment
offices, affiliated with the United States Employ­
ment Service, at which claims are taken. A
strong trend exists toward having as many deci­
sions as possible on eligibility and qualification
made finally in the local office; a few States
actually make the benefit payment in the local
offices rather than through the mail.
Operating Experience

A simplified outline of the manner in which the
program operates is shown below for 1948:
Number having sufficient wage
credits_________________________ 37, 000, 000
Number claiming benefits_________ 6, 584, 600
Number found to have sufficient
wage credits___________________ 1 5, 153, 800
Number disqualified or found un­
available_______________________ 1 1, 022, 200
Number drawing at least 1 week’s
benefits________________________ 4, 008, 400
Average potential duration (weeks)21. 1
Average actual duration (weeks)___
10. 7
Number exhausting benefits________ 1,027, 500
Average weekly benefit amount____
$19. 03
i These totals do not add to the total number of claimants. For example,
the number who were found to have insufficient wage credits are excluded.

Women formed about 40 percent of the claim­
ants during 1948. They were unemployed a bit
longer than the men and filed 45 percent of the
claims for continued weeks of unemployment.
More than 60 percent of the beneficiaries during
1948 were in seven States: California, Illinois,
Massachusetts, Michigan, New Jersey, New York,
and Pennsylvania. These States included about
half the country’s covered employment. Unem­

UNEMPLOYMENT INSURANCE

ployment has been above the national average in
most of these large States as well as in New
England generally and on the Pacific Coast.
The proportions of beneficiaries who exhaust
benefits depend on many factors. Basically, the
exhaustion rate has depended on the number and
characteristics of the unemployed in relation to the
duration of benefits provided by the State law.
The rate has been generally high in years of slack
economic activity and low during full-employment
years. Other things being equal, the rate has been
the lowest in the States which provide a rela­
tively long duration of benefits, and highest where
the duration was less adequate. Exhaustion rates
Unemployment Insurance

tend to be higher for the older worker and among
women than for other groups in the population.
Major developments within the program’s
history have reflected changing levels of employ­
ment, unemployment, and wages.
The average number in employment covered
by the State programs rose from less than 20
million in 1938 to almost 33 million in 1948.
Many more were employed some time during
these years. This increase has been due in part
to changes in State laws broadening coverage, but
chiefly to increases in the employed labor force.
The history of claims, benefit payments, and
the growth of reserves can perhaps be understood
best if it is divided into three periods: pre-defense,
war, and postwar. When benefits were first paid
in 23 States in 1938, the country was in the latter



11

phases of a short business recession. Some of
the States, e. g., New Hampshire, Rhode Island,
Oregon, and West Virginia, paid more in benefits
that year than they collected at a rate of 2.7
percent. In 1940, when all States for the first
time were paying throughout a full year, benefits
totaling 518.7 million dollars were the heaviest
until 1946. This was true even though the
average weekly benefit was less than $11 and
average duration of benefits less than 10 weeks.
Almost million individuals became beneficiaries
in that year. Beginning in 1941, the amount of
benefits paid dropped sharply as preparation for
war, and the war itself, increased employment, and
unemployment dropped to levels previously be­
lieved impossible. Although the average weekly
benefit had risen to almost $16 by 1944, benefits
in that year were only 62.4 million dollars, paid to
about 533,000 persons for an average duration of
7.7 weeks.
At the end of the war, unemployment increased
severely in some industries, reconversion was
undertaken in others, and a period of adjustment
took place in the labor force. The aggregate
amount of benefits paid rose from 62.4 million
dollars in 1944 to 445.9 million in 1945 and 1.1
billion in 1946; the number of beneficiaries
jumped from 533,000 to 2.8 million in 1945 and to
almost 4.5 million in 1946. There was some
dropping off in these figures for the subsequent
postwar years until 1949. Both 1947 and 1948
were years of high-level employment and, in
relation to the total labor force, low unemploy­
ment. However, beginning in the fall of 1948
and extending into the middle of 1949, unemploy­
ment furnished noticeable evidence of a second
postwar transition period. Consequently, it was
estimated that benefit payments for 1949 would
total approximately 1.7 billion dollars. Owing
to increases in wages and improvements in State
laws, these were to be paid at an average weekly
rate of almost $21 as compared with less than
$11 before 1941 and $16 in 1944.
Expressed differently, the benefit experience
has ranged from the point in 1940 when benefits
were 1.7 percent of taxable pay roll, down to 0.1
percent in 1943 and 1944, moved up to 1.7 per­
cent in 1946, and down again to 1.0 percent in
1948. It was estimated that the benefits would be
over 2.0 percent in 1949.

12

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

The history of unemployment insurance reserve
funds, nationally, has been determined by the
relation between the level of benefit disbursements
and contributions. Although there has been a
steady decline in the rate of income, dropping to
2 percent of taxable wage by 1943 and to 1.2
percent by 1948, in every year except 1946 and
1949 the income has exceeded benefit disburse­
ments. The margin was greatest in 1943 and
1944 when benefits were approximately 5 percent
of contribution income. (In 1943 benefits were
only 2 million dollars more than that year’s interest
on the State reserves.) The total reserves, which
were 1.8 billion dollars at the end of 1940, grew
to almost 7 billion dollars by the end of 1945 and
resumed their growth in 1947 so that at the end
of 1948 they amounted to 7.6 billion dollars, or
9.5 percent of taxable pay rolls.
Of course, all of these national figures conceal
wide differences between the States. For in­
stance, benefit costs in 1948 were as low as 0.2
percent of taxable pay roll in one State, 2.5 per­
cent in another. In the same year, contribution
rates were 0.3 percent in one State, 2.0 percent in
another. At the end of the year, reserves were
5.3 percent of taxable pay roll in one State, 14
percent in another.
Value of Program

The unemployment insurance program has
definitely established its worth over the years.
A great virtue is that it brings unemployed workers
into contact with a Nation-wide employment
office system. More important, the benefit pay­
ments are timely, increasing in volume in quick
response to an increase in unemployment. By
their timeliness, their use by beneficiaries for
consumer goods, and the release they give un­
employed men from desperation and despair,
benefits have, made a major contribution to this
Nation’s attack on unemployment and its de­
termination to achieve full employment.
The program has also demonstrated that workers
in this country do not prefer idleness and benefits
to work and wages. Actual duration of unem­
ployment experienced by covered workers has
operated independently of the allowable duration
of benefits; and, historically, the duration of
benefits has gone down, even when allowable
duration was being increased.



A significant byproduct of the program is the
supply of information on absolute numbers in,
and changing levels of, employment in major
industries, monthly and by State, and on unem­
ployment characteristics by State and locality.
In Rhode Island, California, and New Jersey,
the program has also supplied a base upon which
to provide benefits for temporary disability as
well as unemployment due to lack of work. In
each of these States, the same collection pro­
cedures, wage records, and administering agency
are used for both unemployment insurance and
temporary disability benefits. Washington State
has also enacted a law providing for such co­
ordinated administration but it will not be effec­
tive until after a referendum at the end of 1950.
Current Problems

In spite of the advances under the program and
the great contribution it has made to national
well-being, serious problems remain. The first of
these questions is the adequacy of the program.
Thirty percent of employed persons are excluded
from coverage. Chiefly because the maximum
weekly benefit amounts under State laws are low
enough to prevent benefits from bearing a fairly
uniform relation to wage loss, benefits are only
approximately 35 percent of average weekly
wages. The percentage of beneficiaries who
exhaust their rights to benefits in any benefit year
has been as high as 50 percent and currently is
about 30 percent. The variety and severity of
disqualifications tend to undermine the basic
security offered by the program. The goal is to
avoid that point at which workers will no longer
have the assurance of being compensated when
unwillingly unemployed because of forces com­
pletely beyond their control, or at which they
might be forced to sacrifice their experience and
skills even during short periods of unemployment.
Diversity between State provisions creates a
second problem. Examples of the spread in
these provisions are given above. For instance,
a worker earning a weekly average of $475 in
his high quarter and $1,300 in his base period
would be entitled to a maximum in benefits of
$572 in one State but only $240 in an immediately
adjoining State. In addition to the problems of
inequity from such diversity, administration and

UNEMPLOYMENT INSURANCE FINANCING

interpretation differ. These differences raise prob­
lems, especially in interstate claims and appeals.
Experience rating has long been considered a
problem. Several questions are involved as to
its effects on stabilization of employment, its
adaptability to sound financial policy, and the
conflicting incentives it provides to maintain em­
ployers’ interest in proper payment of benefits
and to minimize benefit payments in disregard
of the program’s purposes.
In spite of the accumulation of large reserves in
many States—and, indeed, partly because of such
accumulation—one basic problem is that of the
marked differences between the States in their

13

benefit experience. These differences have dis­
turbing implications for interstate competition.
They make clear the need for securing a more
rational relationship in all States between benefits,
income, and reserves.
Obviously these problems are not simple; they
have been considered by Congressional committees,
advisory councils, State administrators, and various
private organizations. The vital part that unem­
ployment insurance plays in stabilization of the
national economy and in measures to attain full
employment assures a continued and alert public
interest in the program.

Financing Unemployment Insurance
The financing provisions for unemployment
insurance under Federal legislation guaranteed
the enactment in 1935-37 of unemployment insur­
ance legislation in each of the 48 States, the Dis­
trict of Columbia, Alaska, and Hawaii.8 Title
IX of the Social Security Act of 1935, now the
Federal Unemployment Tax Act, was so framed
that employers in States having unemployment
insurance laws were not financially handicapped
compared with those in other States. A Federal
tax of 3 percent of pay rolls (but only 1 percent
in 1936 and 2 percent in 1937) was levied on em­
ployers of eight or more persons in commerce and
industry. If they were taxed under an approved
State law, they could be excused from as much as
90 percent of the Federal tax, and their workers
could draw unemployment benefits under the
State law.
In addition, if they were to be excused later
from paying State contributions under a system
of employer experience rating—generally based
upon employers’ relative experience with unem­
ployment risk—they could receive credit against
the Federal tax for the State contributions that
were excused. Title III of the Social Security
Act provided that all the expenses of “proper and
efficient administration” under all the State laws
would be federally financed, thus assuring a com­
parable and reasonably adequate standard of
administrative financing for the State programs
regardless of the States’ ability to pay. The

framework of the Federal act has continued to
influence the coverage and financing provisions
of State laws; in turn, the State financing provi­
sions have interacted on benefits and disqualifica­
tions.
Though there is no Federal tax on employees,
nine States9 have collected employee contribu­
tions to the amount of 660 million dollars; only
Alabama and New Jersey currently require such
contributions. The employee tax rate has always
been less than the employers’. In Alabama,
workers pay 0.1 to 1.0 percent (in 0.1 percent
intervals) on their wages while their employers
pay 0.5 to 2.7 of pay rolls; in New Jersey all work­
ers pay one-fourth of 1 percent of their wages for
unemployment insurance and employers pay 0.3
to 3.6 percent. In California and Rhode Island,
workers currently pay 1 percent of their wages and
in New Jersey three-fourths of 1 percent for a re­
lated system of temporary disability insurance.
In 1946, the Congress amended the Social Security
Act so that contributions which had formerly been
collected from workers for unemployment insur­
ance could be withdrawn by the States, if they so
desired, to help finance the payment of disability
benefits under a special State disability benefits
law.
All funds collected by the States are deposited
to their individual accounts in the unemployment
trust fund in the United States Treasury, and
interest is credited to the State accounts. The

8 Under the Social Security Act, these 51 jurisdictions are defined as 51
States and this same terminology is used throughout this section.

* These States are Alabama, California, Indiana, Kentucky, Louisiana,
Massachusetts, New Hampshire, New Jersey, and Rhode Island.




14

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

States’ money in the unemployment trust fund
may be withdrawn only to pay benefits or to re­
fund contributions erroneously paid.
The employers’ State contribution, like the
Federal tax, is based on the first $3,000 paid to
(or earned by) a worker wfithin a calendar year.
Most States follow the Federal pattern in exclud­
ing from taxable wages voluntary dismissal pay­
ments, payments by the employer of the employ­
ees’ tax for Federal old-age and survivors insur­
ance, and payment into certain special benefit
funds for employees. Wages include the cash
value of remuneration paid in any medium other
than cash and, in many States, gratuities received
in the course of employment from other than the
regular employer.
Employers’ Experience Rating

Before the Social Security Act established the
Federal-State system of unemployment insurance
in 1935, Wisconsin had enacted a law which set up
a special reserve fund for each employer from which
benefits were payable to his workers until his fund
was exhausted. The more stable employment an
employer provided for his workers, the lower the
payments from his reserve fund and the less the
employer would have to pay. It was assumed
that the lower rates would be an incentive to em­
ployers to stabilize their operations so that they
could provide steady employment.
In 1935, the House of Representatives passed a
social security bill which would have required all
employers (including those in Wisconsin) to have
paid the same total tax rate (State and Federal)
regardless of their experience with unemployment.
Then the Senate passed, and the conferees accepted,
a provision under which employers may receive
credit not only for the contributions which they
have paid under an approved State law but also for
those which they have been excused from paying
(so-called additional credit) because of their good
experience with unemployment. To assure ample
funds at the beginning of the program, however,
no system of experience rating could be effective
for at least 3 years.
The Federal act includes the conditions for
additional credit, based on employer experience
rating. If individual employer reserves are es­
tablished, the conditions are necessarily more strict
than if risks are pooled on a State-wide basis.



Under the Federal Unemployment Tax Act as
amended in 1939, a taxpayer in an employer
reserve State can receive additional credit against
his Federal tax only if (1) contributions have been
payable for 3 years, (2) benefits have been payable
from his account for the preceding year, and (3)
the balance of his reserve for future benefit
payments equals at least five times the largest
amount of benefit payments in any one of the last
3 years and at the same time equals 2.5 percent of
his aggregate taxable pay roll for the last 3 years.
With a pooled fund, however, additional credit is
allowed to taxpayers for a lower rate of contribu­
tions based on “not less than 3 years of experience
with respect to unemployment or other factors
bearing a direct relation to unemployment risk.”
Eight States originally enacted employer-reserve
laws similar to Wisconsin’s financing pattern.
Currently only Kentucky and North Carolina
have such laws and both of them provide for a
partial pool for the payment of benefits when a
given employer’s reserve account is exhausted.
Most of the States enacted “pooled-fund” laws
on the theory that the risk of unemployment
should be spread among all employers in the State
and that unemployed workers should receive
benefits regardless of the balance of the contribu­
tions paid by their employer over the benefits
paid the employer’s workers. Most States with
pooled funds set up bookkeeping accounts for
keeping records of individual employers’ contribu­
tions and of the benefit payments charged to these
contributions, either for use in future experience
rating plans included in their laws or for study of
the effect of experience rating. The first ex­
perience-rating provisions became effective in
Wisconsin in January 1938, the last in Mississippi
10 years later.
If experience-rating provisions were uniform,
differences in employer tax rates would arise from
differences in the benefit levels and in economic
conditions within the State. Moreover, as between
a State which has little unemployment and another
which has major economic dislocations, tax rates
would differ even if all statutory provisions con­
cerning taxes and benefits were the same. When
two States have similar conditions of employment
and unemployment and similar unemployment
insurance laws but different wage levels, the
income and outgo of their funds also differ.

UNEMPLOYMENT INSURANCE FINANCING

15

When States have similar employment conditions should be held responsible for benefits paid be­
and similar wage levels but different benefit cause of a worker’s illness or injury. In unem­
formulas, rates determined under similar ex­ ployment insurance, however, it is not so easy to
identify the employer whose account should be
perience-rating provisions will differ.
Actually, the experience-rating provisions of the charged with the benefits paid a given worker.
State laws vary greatly and the number of varia­ Except in very temporary or partial unemploy­
tions increases each legislative year. Five distinct ment, compensated unemployment occurs after
systems are in effect—usually called the reserve- a worker-employer relationship has been broken.
ratio, benefit-ratio, benefit-wage ratio, compen­ Furthermore, if Employer A laid off Claimant X
sable separations, and pay-roll decline formulas. after 2 years of employment and Employer B
A few States have combinations of these systems. employed him on a temporary job for a month,
The reserve ratio was the earliest of the experi­ who is really responsible for his unemployment
ence-rating formulas and continues to be the most after B dismisses him? The laws have had to
popular. Early in 1950, it was used in 28 pooled- indicate in some detail which one or more of a
fund States and the two reserve-account States.10
Unemployment Insurance (Contributions and
Regardless of the type of fund, the formulas are
Benefits)
the same. The system is essentially one of cost
accounting, whereby the amount of his pay roll,
his contributions, and the benefits paid to his
workers are entered on each employer’s record.
The benefits are subtracted from the contribu­
tions, and the resulting balance is divided by the
pay roll to determine the size of the balance in
terms of the potential liability for benefits in­
herent in wage payments. The employer must
accumulate and maintain a specified reserve before
his rate is reduced; then rates are assigned accord­
ing to a schedule of rates for specified ranges of
reserve ratios; the higher the ratio, the lower the
rate. The formula is designed to make sure that
no employer will be granted a rate reduction
unless over the years he contributes more to the
fund than his workers draw in benefits. As the
funds available for benefits have increased, the
rates for given reserves have been decreased, but
in 16 of the 28 States, provision has been made for
higher rates, should the aggregate State funds
decrease.
Under these reserve-ratio plans and under
benefit-ratio, benefit wage-ratio, and compensable
separations formulas used in a few States, benefits
(or benefit wages) must be charged to some em­
ployer’s account. In workmen’s compensation
where the idea of experience rating originated, claimant’s former employers should be charged
there is usually no question which employer with his benefits. No solution is wholly satis­
factory, i. e., whether the charges are against the
10 These States are Arizona, Arkansas, California, Colorado, the District
last employer or all base-period employers in the
of Columbia, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky,
inverse order of employment or all base-period
Louisiana, Maine, Missouri, Nebraska, Nevada, New Hampshire, New
Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Penn­
employers in proportion to the wages earned by
sylvania, South Carolina, South Dakota, Tennessee, West Virginia, and
the beneficiary with each employer.
Wisconsin.



16

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

Seven States11 have a formula which is inde­
pendent of benefit payments to individual workers.
An employer’s experience with unemployment is
measured by the decline in his pay rolls from year
to year or from quarter to quarter. Under this
system it is assumed that declines in pay rolls
reflect the curtailment of business activity and
that the greatest drains on the fund come from
business declines. The pay-roll declines are ex­
pressed as a percentage of pay rolls so that the
experience of employers with large and small pay
rolls can be compared. The employers whose
pay rolls show no decrease or the smallest per­
centage decrease are eligible for the largest pro­
portional reductions in their payments.
War-Risk Insurance

During the Second World War, it was clear that
the steadiness of jobs depended more on general
business conditions than on individual employers’
efforts at stabilization. Hence, the emphasis in
experience rating shifted from variable tax rates
as an incentive to employers to stabilize employ­
ment to such rates as a method of assessing the
cost of unemployment among employers. It
was recognized that rapidly expanding pay rolls
of employers engaged in war work would be
followed by lay-offs after the war. One result of
this awareness was the adoption in 12 States12of
what were called “war-risk insurance provisions”
which imposed additional taxes on employers
whose pay rolls showed rapid expansion. The
revenue thus raised aggregated almost 200 million
dollars in 1943-46.
Trends in Rates and Rate Schedules

In 47 States, rates are assigned to individual
employers in accordance with rate schedules in
their laws. The other four States 13—States with
pay-roll decline systems—distribute “surplus
funds” by credit certificates which employers
apply against the contributions figured at the
standard rate. If an employer’s credit equals or
m These States are Alaska, Mississippi, Montana, New York. Rhode Island,
Utah, and Washington. In New York and Montana, these formulas are
used in combination with others of the more conventional sort.
12 These States are Alabama, Florida, Georgia, Illinois, Iowa, Kansas,
Indiana, Minnesota, Missouri, Ohio, Oklahoma, and Wisconsin.
i* These States are Alaska, New York, Utah, and Washington;




exceeds his computed contribution for the next
year, he has in effect a zero rate.
During recent years, the schedules have been
amended to reduce average rates paid in most
States. But the number of rate schedules and
the number of variable rates in the State laws
have been increasing. The number of schedules
has been increased because of the States’ concern
to adjust income to program needs. As rate
reduction was made easier, schedules of higher
rates were retained or established to be applied
when the fund has fallen to a certain level, ex­
pressed in dollar amounts or in relation to pay rolls
or to benefit payments. Increases in the number
of rates mean that slight variations in employers’
experience with unemployment will not produce
widely different rates; such increases usually also
reduce the amount of change from year to year
in the rates paid by individual employers.
In 1945, only 11 States had more than one
schedule of varied rates. By the end of the 1949
legislative sessions, 25 States had two to eight
schedules and 2 had an indefinite number.14
In 1945, 17 of the 44 States with rate schedules
had fewer than six rates, including the standard
rate of 2.7 percent and any rates in excess of the
standard. In 1949, only seven States had so few
rates in the most favorable schedule. In the same
period, the number of States with 10 or more
rates had increased from 4 to 18.
All but 11 States decreased their minimum
contribution rate during 1945-49, and 6 of these
11 had a minimum of zero in 1945. The number
of States where employers with the best records
could be excused from contribution to the State
fund increased from 6 to 12, and the number with
minimum rates of 0.1 percent increased from 1
to 7 by 1949. The States with minimum rates
of 1.0 percent or more decreased from 13 to 4.
When experience rating was inaugurated, most
of the States provided for rates in excess of 2.7
for employers who had the worst experience with
unemployment. As the solvency of the State
funds was assured, these penalty rates were elimi­
nated. By 1945, only 16 of the 45 States with
14 These States are Arizona, Arkansas, California, Colorado, Connecticut,
Delaware, the District of Columbia, Florida, Iowa, Kansas, Maine, Massa­
chusetts, Minnesota, Mississippi, Missouri, New Jersey, New Mexico,
North Dakota, Ohio, Pennsylvania, Rhode Island, Tennessee, Texas,
Vermont, Virginia, West Virginia, and Wyoming.

UNEMPLOYMENT INSURANCE FINANCING

experience rating had rates exceeding 2.7 percent,
and by 1949, only 10 of the 51 States. Only 6
of these 10 States have penalty rates effective in
the most favorable schedule.
In addition to the changes in the schedules of
rates—lower minimum rates and lower maximum
rates—most States have reduced the standard an
employer must meet to obtain a given rate. All of
these amendments tend to reduce the average
tax rate that employers pay.
Criticisms of Experience Rating

Experience rating in the State unemployment
insurance laws is obviously complicated to admin­
ister. In addition, it has made for interstate
competition among employers to obtain favorable
tax rates, and all the systems except that of pay­
roll variation have given employers an incentive
to challenge benefit payments.
Diverse experience-rating provisions have re­
sulted in different rates in the different States for
employers with the same experience. For exam­
ple, an employer whose reserve is 7 percent of his
annual or average annual pay roll must pay the
standard rate in three States but is entitled to a
rate of less than 1 percent in seven others. If his
reserve increased to 10 percent of his pay roll, he
would be entitled to contribution rates varying
from zero in four States to 1.9 percent in one.
Most of the experience-rating systems give
employers a financial interest in the benefit pay­
ments made to their former workers. This has
led to contests over individual benefit awards and
to pressures by employer groups upon State
legislatures to increase the period of disqualifica­
tion or to cancel or reduce benefit rights when
workers (1) leave jobs voluntarily without good
cause, or (2) are discharged for misconduct con­
nected with the work, or (3) refuse suitable work
without good cause.
Some States have provided by law that the cost
of benefits of certain types should not be charged
to individual employers. More than half of the
States make no charge to an individual employer
for benefits paid following a period of disqualifica­
tion for one or more of the causes mentioned above
or for benefits following a potentially disqualifying
separation for which no disqualification was im­
posed (for example, because the claimant had
good personal cause for leaving a job). The intent



17

is to relieve the employer of charges for unemploy­
ment due to circumstances beyond his control,
without disqualifying workers for the duration of
their unemployment or canceling their benefit
rights. By such means, the pressure for legisla­
tion has been relieved to some extent. In some
States, however, the noncharging provisions seem
to have increased the incentive for employers to
contest benefit payments in the hope that claim­
ants will be disqualified and that there will be no
charge to the employer’s account even if benefits
are paid in cases where the claimant is unemployed
after the disqualification period has expired.
Experience rating tends to lower tax rates when
employment is high and raise them when un­
employment rises and the employers can least
afford the higher rates. Because most of the
years since the unemployment insurance laws
became operative have been years of relatively
high employment, the accumulated reserves have
met the benefit demands of the reconversion
period and during the 1949 curtailment of pro­
duction. However, the recent drain on the funds
in a few States have called attention to the
problem raised by the cyclical trend in tax rates.
Solvency of State Funds

The standard contribution rate of 2.7 percent
established for the States in the Federal Unem­
ployment Tax Act has proved much more liberal
than needed. The original Federal and State
laws were influenced by the depression psychology.
Up to 1943, concern over the solvency of the un­
employment fund—or at least some of the individ­
ual State funds—was widespread. However, low
benefit expenditures and high taxable wages in the
period of high employment during wartime made
it clear that in general the program was over­
financed. By the end of 1943, the unemployment
fund had risen to 4.7 billion dollars; by the end of
1944, to 6 billion dollars. Beginning in May
1947, it has been approximately 7 billion dollars
or higher; the peak of 7.6 billion dollars was
reached at the end of 1948. Even with the ex­
penditure of 1.7 billion dollars for benefits during
1949, the fund stood at 7 billion dollars, or about
9 percent of taxable wages, at the end of the year.
Under the Federal Unemployment Tax Act,
employers would not have received credit for the
contributions they were excused from making to a

18

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

State fund if any State had adopted a flat reduced
rate for all employers because of the excess
reserves on hand. This situation, among others,
led to the complex development of experience
rating already described.
The States accumulated in taxes and interest
more than 14 billion dollars up to December 31,
1949; it is estimated that without experience
rating employers would have paid an additional
4.7 billion dollars during the 10 years 1939-48.
The financing provisions produced more revenue
than was needed since only 7 billion dollars were
spent in benefits through December 1949. Up
to that time, only 59 cents had been spent in
benefits for each dollar collected. During the
calendar year 1949, however, $1.76 was spent for
each dollar collected.
The average employer contribution rate and
the total benefits paid are shown in the accom­
panying chart as percentages of taxable wages
for selected years. The contribution rate includes
war-risk contributions in 1944. The 1938 figure
for benefits paid is based on returns from the
23 States that paid benefits at the beginning of
that year; the later figures in this series cover
all 51 States. (See p. 15.)
The national averages naturally conceal many
State differences. In individual States, the aver­
age employer tax rate in 1949 ranged from 0.5
percent in Minnesota (where 70 percent of em­
ployers had zero rates) to almost 2.7 percent in
Washington. Fourteen States had an average
rate of less than 1 percent and 15, an average of
more than 1.5 percent. Expenditures for benefits
varied from 0.4 to slightly over 6 percent of
taxable wages. At the end of 1949, reserves
varied among the States from almost 14 percent
to 3.3 percent of taxable wages. The high
benefit costs which reduced the fund so sharply
in the two States (Mass, and R. I.) with the
lowest reserves are expected to continue because
of adverse economic conditions within the States
and a further drop in reserves may occur during
1950 in spite of increased contribution rates.
The sharp rise in benefit payments in many
States which began late in 1948 can be expected to
increase the average employer's tax rate. Little
such increase was reflected in 1949 rates, partly
because rates effective in 1949 were based on
earlier favorable experience, and partly because in



1949 many States enacted new lower rates or
lowered requirements for old rates, or both.
Several major industrial States have already
had to put into effect higher schedules in 1950.
California employers, for instance are paying 1
to 2.7 percent instead of 0 to 2,7 percent as in
1948 and 1949 because on January 1, 1950, its
fund15 was not equal to 7.5 percent of taxable
wages paid by all employers during the year
ended June 30, 1949. Ohio employers will pay
more on the average because the State fund has
fallen from 11.0 to 10.2 percent of the last 3
years' average pay rolls. For the same individual
reserve ratios, employers must pay 0.2 percent
more than formerly.
At the beginning of its new rate year, October 1,
1949, New York had no surplus to distribute. Its
fund exceeded 900 million dollars as required by
law but the surplus of 9 million dollars was 20
million dollars below the required 10 percent of
taxes payable for the previous year. The State
of Washington which operates a pay-roll decline
system could not issue any experience-rating
credits for the rate year beginning on July 1, 1949.
Other States which have announced higher rates
include the District of Columbia where rates
will go up from an average of 0.4 percent to an
average of 0.6 percent.
Some States have announced a continuation of
the same rates in 1950 as in 1949. For example,
Illinois with a benefit-wage-ratio formula has
the same State experience factor as in 1949, but
only because of 1949 amendments. Kansas with
a reserve-ratio system is continuing the four
reduced rates 0.35 to 1.1 percent because its trust
fund continues to exceed 50 million dollars.
In 1944, Congress provided for Federal loans
to States threatened with inability to meet their
benefit payments. No State had needed such an
advance and this provision (title X II of the Social
Security Act, entitled “ Advances to State unem­
ployment funds") expired December 31, 1949.
Experience during the past year has led to pro­
posals for reinstitution of the Federal loans or for
a system of Federal reinsurance. The first State
unemployment insurance legislation passed in
1950 was a Rhode Island resolution (approved
January 3, 1950) petitioning Congress to enact
is Excluding employee contributions which may be withdrawn for purposes
of disability benefits.

PUBLIC ASSISTANCE

Federal “ legislation which would incorporate the
principle of reinsurance as a means of enabling the
Federal Government to assume its responsibility

19

in financing in part the unemployment compensa­
tion program and thereby equalizing the tax
burden among the States.”

Public Assistance Programs
About 1 person in 30 in the United States is de­
pendent upon public assistance for full or partial
support. The annual cost of assistance is more
than 2 billion dollars—about 1 percent of the
national income payments to individuals in 1948.
Approximately half the cost is borne by the
Federal Government, the remainder by the States
and localities. The Federal appropriation for
public assistance for the current year is the largest
single budget appropriation for current expendi­
tures for any program not connected, directly or
indirectly, with national defense. In most States,
the amount appropriated for public assistance is
one of the largest items in the State budget.
Public assistance supplements the income and
resources of needy persons in order that they may
be able to obtain the essentials of living. Assist­
ance programs are residual and have a function to
perform only to the extent that other measures,
such as minimum wage laws, programs for full
employment, and the social insurances, fail to
avert need.
Public assistance is of four major types—old-age
assistance, aid to the blind, and aid to dependent
children, which come under the Social Security
Act, and general assistance, which is currently a
responsibility only of the State and local govern­
ments. The number of recipients of aid in rela­
tion to the population groups at risk and the aver­
age monthly payment in June 1949, and amounts
spent in relation to population for assistance in
the fiscal year 1949 are shown, by program for
each State in table 4.
General assistance had its origin in the Eliza­
bethan poor laws and in this country dates back
to Colonial times. The special types of public
assistance, on the other hand, are a development
of the twentieth century.
The depression of the 1930’s had far-reaching
effects on public assistance legislation and pro­
grams. During 1933-35, for the first time, the
Federal Government made grants to States for
general assistance (or general relief) and in whole
or in part, financed other programs designed to



provide work for unemployed persons determined
or presumed to be needy. In 1935, both emer­
gency and permanent legislation was enacted,
establishing a network of income-maintenance
programs. A part of the 1935 legislation was the
Social Security Act, which provided on a continu­
ing basis for (1) grants to States to help them to
finance cash assistance to needy aged and blind
persons and dependent children, and (2) a FederalState system of unemployment compensation and
a Federal system of old-age and survivors
insurance.
The assistance provisions of the Social Security
Act—amended in 1939, 1946, and again in 1948—
supply the basic framework within which State
programs of old-age assistance, aid to the blind,
and aid to dependent children are established and
operate. All States are receiving Federal grants
for old-age assistance, all but one for aid to
dependent children,16 and all but four for aid to
the blind.17 Since 1935, general assistance has not
come within the scope of Federal legislation.
Certain conditions which a State must meet in
order to get Federal funds for special types of
public assistance are established under the Social
Security Act. But substantial latitude is allowed
to the States under the law in determining how
their programs shall be organized and adminis­
tered, who shall be eligible for assistance, and how
much assistance eligible persons shall receive.
The characteristics of the individual plans for the
operation of the programs vary from State to
State in many respects, reflecting differences in
philosophical attitudes, economic resources, and
established patterns of State and local govern­
ments.
Although the determination of need is common
to all assistance programs, the policies, standards,
and procedures for such determinations vary not
only from State to State, but often within a State
16 The exception is Nevada.
17 The exceptions are Alaska, Missouri, Nevada, and Pennsylvania. Alaska
has no program for needy blind persons; the remaining jurisdictions have
blind aid programs operated outside the Social Security Act.

20

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

from program to program. Each State decides
what goods and services needy people require to
live on, how much it will allow for such goods and
services, and how to evaluate each individual's
resources in relation to the cost of these essentials.
The difference between the cost of what individ­
uals require and the value of their resources
represents the amount of assistance needed.

However, limits established by law or policy on
the amount of assistance an individual may
receive monthly often reduce payments below the
amount that budgetary procedures determine
to be needed. Shortages of funds also may
necessitate reduction in individual payments
below the amount the State finds to be needed or
below the maximum fixed.

,

,

T able 4.— Recipient rates and average assistance payments, June 1949 and average assistance [expenditures payment] per
inhabitant fiscal year 1949, by program and State
Old-age assistance
State

United States____________
Alabama.................................
Alaska_____ ____________
Arizona_________________
Arkansas ______ _____ _
California...............................
Colorado________________
Connecticut_____________
Delaware________________
District of Columbia............
Florida_________ ________
Georgia_________________
Hawaii__________________
Idaho.___ ______________
Illinois__________________
Indiana___ _____________
Iowa____________________
Kansas . ________________
Kentucky.......... .............. .
Louisiana___ ____________
Maine_____ ____________
Maryland_______ _______
Massachusetts__________
Michigan__________
Minnesota..............................
Mississippi______________
Missouri___________
Montana ---------------------Nebraska____ ___________
Nevada_________________
New Hampshire__________
New Jersey______________
New Mexico__________ _
New York______ ________
North Carolina__________
North Dakota___________
Ohio___ __________ _____
Oklahoma_______________
Oregon._________________
Pennsylvania____________
Rhode Island____________
South Carolina___________
South Dakota........................
Tennessee_______________
Texas___________________
Utah____________________
Vermont.......... ......................
Virginia............. ..............
Washington______________
West Virginia____________
Wisconsin_______________
Wyoming..................... ..........

Aid to dependent children

Average Assistance
Recipient assist­ expendi­
rate,
ance ture per
June payment, inhabi­
tant,
1949 2 June fiscal year
1949
1949
231
456
(•)290
403
262
433
100
63
45
349
502
121
244
186
141
186
198
294
810
158
78
214
216
218
480
335
259
198
220
132
66
336
103
281
191
185
601
153
109
158
392
235
286
461
251
182
96
316
199
171
227

$43.60
22.61
55.97
54.86
20.95
70. 55
67.08
54.01
28.06
41.67
40.19
20.54
35.33
46. 57
44.87
35.22
48.08
50.10
20.83
47.05
41.34
36.88
61.13
42.88
47.15
18.80
42.57
44.93
42.00
54.05
43.48
47.80
34.22
52.74
21.55
46. 56
46.72
52.10
48. 21
40.01
45.04
24.70
38.02
27.15
34.23
50.27
32.13
20.28
67.11
21.35
41.60
55.63

$8.63
6. 25
(6)
9.67
6. 50
15.99
34.56
5.14
1.56
1.54
12.22
6.88
1.81
9.70
7. 71
5.24
10.21
9.96
4.61
23.86
6.41
2.37
14.04
7.45
9.97
5.18
15.21
11.24
9.24
8.79
6.76
2.62
6.54
5.04
3.18
7.97
8.57
26.00
7. 74
3.91
6.57
5. 02
8.56
5.57
11.51
8.84
7.44
1.34
20.28
2.97
7.05
9.45

Average assist­ Assistance Average Assistance
Recipient ance payment, expendi­ assist­ expendi­
June 1949
ture per ance ture per
rate,
inhabi­ payment, inhabi­
June
tant,
tant,
19493
Per fiscal year June fiscal year
Per
1949
family child
1949
1949
29
30
(6) 34
39
18
35
15
17
24
69
25
32
26
27
19
16
24
45
65
32
24
22
29
21
25
52
31
20
82
24
11
52
33
23
20
15
78
18
39
38
26
24
43
18
32
22
17
36
47
20
14

1 Recipient rate not available; number of blind persons not known.
2 Persons aided per 1,000 population 65 years of age and over.
3 Children aided per 1,000 population under 18 years of age.
4 Persons aided per 1,000 civilian population.
3 Number of persons aided is not available.



Aid to the blind1

$72.71 $28.58
36.28 13.32
69.64 29.07
92.70 32.78
37.17 14.43
113.70 50.97
76.61 28.15
100.38 41.36
72.69 24.57
79. 75 26.32
41.95 17.13
40.85 15.85
92.20 31.03
94.97 37.59
101. 27 39.87
55.93 22.62
62. 78 24.50
82.80 32.08
38.43 15. 27
59.08 22.77
81.21 29.43
82.95 27.39
112.84 46.27
86.05 37.18
69.17 27.29
9. 79
26.49
53.50 20.99
72.42 28.19
84.01 35.19
(i°)
(iO)
87.47 34.61
84. 20 32.48
52. 53 20.48
107. 20 46.24
41.48 14. 72
97.97 36.46
61.92 22.82
52.20 20.62
107.48 42.73
91.34 35.32
85.77 34.66
35. 51 12.46
55.36 22.48
48.14 17.88
47.18 17.00
106.68 42.01
48.36 17.80
44.15 15.55
135.44 57.37
43.53 16.10
95.17 37.93
97.11 35.83

$2.84
1.77
(6)
3.87
2.33
2.63
4.01
1.85
1.30
1.84
4.07
1.55
3.62
3.78
3.22
1.42
1.28
2.51
2.61
5.10
3.15
2.39
3.12
3.66
2.03
1.08
3. 55
3.27
2.50
8.11
2.55
1.02
5.16
4.42
1.34
3.23
1.24
6. 25
2. 27
4.34
3.93
1.41
1.91
3.12
1.19
6.07
1.38
1.03
5.44
3.10
2. 57
1.80

$45.02
25.02
(7)
63.07
24.64
82.54
55. 79
47. 77
37.16
43.86
42. 21
25.75
38.75
51.56
46.87
37.60
52.88
52.14
22.13
42.31
42.11
40.83
60.65
45.83
55. 26
25. 79
835.00
46.23
49.85
(i°)
46. 77
53.04
38.19
59.46
30.09
45.99
44. 79
53.18
55.66
839.97
51.05
28.73
34. 57
36.13
38. 58
54. 53
35.67
27.47
77. 59
25.02
45.38
55.46

$0.31
.12
(«) .77
.25
.76
.21
.05
.19
.14
.61
.22
.08
.21
.29
.21
.28
.23
.18
.31
.32
.10
.19
.14
.23
.34
8.31
.49
.24
8. 09
.32
.08
.34
.18
.32
.11
.23
.70
.15
8. 69
.12
.22
.14
.28
.36
.18
.24
.14
.25
.13
.20
.23

General assistance
Recipient
rate,
June
19494

(5)
(6)2.9
1.9
8.8
6.6
(!)
(s)
1.8
(5)
1.8
8.1
1.3
9.5
8.1
3.9
5.3
2.7
10.5
10.1
2.4
9.8
14.2
7.4
.4
9.4
4.3
2.6
4.3
8.7
5.7
4.3
12.1
2.2
2.3
11.1
(5)7.7
7.1
14.5
3.2
2.9
1.2
(5)
4.7
(3)
(5)9.9
3.1
5.7
3.0

Average
assist­
ance
payment,
June
1949 (per
case)

Assistance
expendi­
ture per
inhabi­
tant,
fiscal year
1949

$47.92
16.88
28.11
36.74
12.28
50. 06
38.09
50.45
35.10
46.47
(8) 56
15.
54.29
31.98
55.59
26.80
26. 56
44.96
21.13
39.06
39.03
42.61
49.09
49.16
45. 26
10.90
31.14
30.76
30.47
23.94
39.48
55. 71
22.88
73.16
14. 75
35.84
45. 70
(8) 20
54.
53.37
52.03
16.17
23.83
13.72
(8)
54. 61
(8) 99
22.
67. 58
15.15
43. 71
46.83

$1.59
.43
(6) 1.09
.20
2.01
1.98
1.25
1.43
.85
.35
.20
1.73
.50
2.32
.57
.52
1.47
.20
3.16
1.71
1.05
2.32
2.83
1.42
.03
1.38
1.04
.46
.56
1.34
1.02
.92
3.91
.18
.62
1.90
.42
2.53
1.84
3.01
.44
.37
.09
.12
2.04
1.01
.37
4.03
.34
1.01
.98

6 Population data are not available.
7 No program.
8 Not computed because number of cases was estimated.
• Program administered under State laws without Federal participation.
10 Not computed; base too small.

PUBLIC ASSISTANCE

Extent of Assistance

In June 1949, more than 5 million persons in the
United States were receiving all or a part of their
income from public assistance. Of these, 2.6
million persons, or about a fourth of all persons 65
years of age or over, were receiving old-age
assistance. About 1.4 million children under 18
years of age, or fewer than 3 per 100 children in the
population, were receiving aid to dependent chil­
dren. In addition, in most families that received
aid to dependent children the funds helped to sup­
port one or more adults. The number of persons
on the general assistance rolls was 1 million or 7.6
per 1,000 in the civilian population. About
90,000 blind persons, or slightly more than a
third of the estimated blind population, were
receiving aid to the blind.
National rates conceal striking interstate differ­
ences. They are explained by variations in the
income-status of the population; by differences
in the amount of protection afforded against the
risks of unemployment, premature death of the
wage earner, and old age retirement by the social
insurance systems; and by State attitudes toward
meeting need.
The proportions of aged and blind population
and of children on the assistance rolls tend to be
disproportionally high in the lower-income States,
which are predominantly agricultural, and where
many workers are in employments that are not
covered by unemployment and old-age and survi­
vors insurance. In relation to population, general
assistance loads are relatively low in these same
States. This seemingly anomalous situation is
explained by the fact that Federal funds—and
often State funds—are not available for financing
general assistance, whereas they are available for
the special types of aid.
For old-age assistance, the average monthly
payment per recipient in mid-1949 was $44, with
a range from $19 in Mississippi to $71 in California.
Aid-to-the-blind payments averaged $45, with an
even greater spread, from $22 in Kentucky to $83
in California. For aid to dependent children, the
average payment per family was $73; Mississippi’s
average was $26, in contrast to $135 in the State
of Washington. The average payment per generalassistance case was $48; New York topped the
States with a $73 average payment whereas Missis­
sippi’s average was only $11 a month.



21

In measuring the adequacy of assistance, the
amount of the recipient’s other income in cash
and in kind is important. No up-to-date and
comprehensive information is available on this
subject but earlier studies shed some light on the
extent to which assistance and other income sup­
plement each other.
For example, a study of the Requirements and
Incomes of Recipients of Old-Age Assistance in 21
States in 1944 showed that about one case in four
had cash income from sources other than the
assistance payment. This income was derived
from earnings, contributions from relatives, OldAge and Survivors Insurance (OASI) benefits, and
other sources. The amounts of such cash income
were small. In all cases consisting only of the
recipient, the average amount was $2.46 a month;
for all cases consisting of the recipient and spouse,
the average amount was $7.49. The cash income
from sources other than assistance of cases with
some such income was as follows: $11.42 for cases
consisting only of the recipient and $14.43 for
cases consisting of the recipient and spouse.
Nearly two cases in five had some income in kind,
such as rent-free shelter and produce raised and
consumed. Of the latter cases more than one in
three had income in kind valued at less than
$5 per month.
A 1942 Study of Family Income of Families Re­
ceiving ADC in 16 States indicated that about two
families in three had some cash income in addition
to the assistance payment. This additional income
was obtained primarily from earnings and contribu­
tions of relatives. Somewhat over half of the
families had some nonmonetary income. About
one family in four had housing that was rent-free
or supplied in return for services.
Old-age and survivors insurance has become a
more important source of cash income than at the
time of the two foregoing studies. In June 1948,
of all recipients of old-age assistance, 6 percent
were also receiving benefits under old-age and
survivors insurance. Of the ADC families, about
5 percent were OASI beneficiaries.
Trends in Assistance

The assistance rolls are characteristically re­
sponsive to changing economic conditions and to

22

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

changes in other programs for income-mainte­
It is difficult to determine the degree of success
nance. During World War II years, substantial of unemployment insurance in the prevention of
numbers of old people and families with dependent need among unemployed workers and their fam­
children went off the rolls because family members ilies. The reason is that, many places, general
found jobs as the result of acute manpower short­ assistance agencies fail to provide aid to employ ~
ages and because they received allowances author­
ized for dependents of servicemen. The number
Chart 1.
A verag e Assistance Payments
of general assistance cases was more than halved.
Since YJ-day, the number of persons dependent
PER RECIPIENT UNDER APPROVED PLANS
on public aid has been steadily mounting. Fac­
tors in the upswing have been population growth
and postwar adjustments. With the cessation of
production for war and the return to civilian pur­
suits of millions of men in the armed forces, many
inexperienced young workers and adults with
limited skills were pushed out of employment, and,
in some cases, left the labor force. The termina­
tion of dependents’ allowances with the separation
of servicemen from the armed forces also con­
tributed significantly to the rise in assistance loads.
The effect on assistance rolls of temporary
changes in economic conditions is exemplified by
recent rising case loads in coal-mining and steelproduction centers. In these areas, strikes in the
coal and steel industries and the stoppage of bene­
fit payments under the United Mine Workers’
fund all contributed to the case load.
In many States, old-age and survivors insurance
is gradually gaining over public assistance as a
means of providing income-maintenance to certain
groups. Although in the country as a whole the
number of recipients of old-age assistance in June
1949 was 147 per 100 aged beneficiaries of old-age
and survivors insurance, in 15 States the number
of aged OASI beneficiaries exceeded the number of
OAA recipients. Moreover, in 42 States the num­
ber of child beneficiaries of old-age and survivors
insurance (i. e., unmarried children under 18 years ables, however dire their distress, and consequently
of age) exceeded the number of fatherless children the need is not expressed. In some of the more
receiving aid to dependent children. In the Na­ industrial areas where needy unemployed persons
tion, 191 children were receiving old-age and sur­ can get general assistance, relatively few of the
vivors insurance per 100 fatherless children on the cases accepted for aid are in need because they
ADC rolls. In two States, the number of child have exhausted their unemployment benefits.
beneficiaries of old-age and survivors insurance In 18 States (both agricultural and industrial), less
exceeded the total number of children aided under than 3 percent of the cases added to the rolls in
the program for dependent children (including the first half of 1949 were accepted on discon­
those with an incapacitated parent or a parent tinuance of unemployment benefits. Much of
absent from home, as well as those with a parent the need among families with employable mem­
bers resulted from one of two causes: loss of
dead).



INDEX

PUBLIC ASSISTANCE

employment because of the disablement of the
wage earner, a risk insured under the unemploy­
ment insurance programs of only a few States; or
lay-off from employment that is excluded from
coverage under the unemployment insurance laws.
Flexibility is inherent in public assistance.
Payments are determined on the basis of standards
that are usually established administratively
rather than by law. From time to time, State
agencies adjust the cost figures for the items in­
cluded in their budgets to reflect price changes.
When new cost figures go into effect individual
payments are revised accordingly. In a period of
rising prices the ability of a State to make neces­
sary changes in cost figures, and thus in payments,
depends upon the availability of sufficient funds.
Liberalizations in 1946 and again in 1948 in Federal
limits on the amount of individual monthly pay­
ments subject to Federal participation and in the
formulas for determining the Federal share of
payments within the maxima have stimulated
and helped States to revise their cost figures and
to finance larger payments, despite mounting case
loads. (See chart 1.) In contrast, under old-age
and survivors insurance, individual benefits,
determined on the basis of a fixed formula that
has not been revised since 1939, have remained
stationary.
Financing of Programs

In the year ending June 1949, national expendi­
tures from Federal, State, and local funds for the
four types of assistance and their administration
were about 2.1 billion dollars. Both the number
aided and the amounts spent for each type of aid
both under and outside the Social Security Act
in June 1949 follow.
Number of Expenditures
Type of program

Old-age assistance____ _____
Aid to dependent children:
Families_______________
Children______________
Aid to the blind:
Under Social Security
Act______ __________
Outside Social Security
Act_____ ___________
General assistance__________

recipients for payments
{In thousands)

2, 626

$114, 463

5371
1, 366j

39, 027

71

3, 311

18
461

710
22, 085

Expenditures by each level of government for
the different types of aid are shown in chart 2.



23

In relation to population the largest State
expenditures for the fiscal year for the 4 types of
assistance were 14 times the smallest. Colorado’s
expenditures amounted to $40.76 per inhabitant and
Virginia’s to $2.88. For the country as a whole,
expenditures per inhabitant totaled $13.37.
Chart 2.

N a tio n a l Expenditures (or Public Assistence, Y e a r Ending June 1 9 4 9

Federal funds for public assistance are appro­
priated from general revenues, unlike those for
old-age and survivors insurance and unemploy­
ment insurance which are derived from pay roll
taxes. Under the provisions of the Social Security
Act, the Federal appropriations for old-age assist­
ance, aid to dependent children, and aid to the
blind are open-ended and the Federal Govern­
ment meets its share of whatever amounts the
States spend, so long as the expenditures are made
in compliance with the conditions laid down in the
Federal Act and under plans of operation approved
by the Social Security Administration. State
funds for public assistance are derived from both
general revenues, and earmarked taxes. In
the individual localities, the real estate tax is the
chief revenue source.
Patterns of financing public assistance vary
greatly among the States and often, within a
State, among programs. Only Federal and State
funds are used for old-age assistance in 31 States,
for aid to dependent children in 23 States, and for
aid to the blind in 34 States. In the remaining

24

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

States, local funds bear a share of the cost and
often are an important factor in determining the
amount of Federal and State funds that may be
spent within the particular locality. General
assistance in 6 States is financed from State funds
only, in 31 States from State and local funds, and
in 14 States solely from local funds.
Program Changes Under Discussion

The Congress has given extensive consideration
to Social Security legislation and to the relative
roles of public assistance and the social insurances
in the broad social security system of the Nation,
in the past few years. In 1946, the Committee on
Ways and Means of the House of Representatives
held extensive hearings on social security bills.
In 1947-48, an Advisory Council on Social Sec­
urity to the Senate Committee on Finance studied
the limitations of the Social Security Act and
made recommendations for amendment of the
assistance and social insurance provisions of the
act. In 1949 the Committee on Ways and Means
of the House of Representatives held hearings on
H. R. 2892, an administration-sponsored bill to
amend the assistance provisions of the Social
Security Act. The principles contained in H. R.
2892 were endorsed by the American Public Wel­
fare Association. The Committee on Ways and
Means reported out H. R. 6000 which would
amend the act along lines that the committee
deemed most desirable. Early in 1950, hearings
were scheduled to be held by the Senate Com­
mittee on Finance on H. R. 6000 and related bills.
Some of the major gaps and deficiencies of exist­
ing legislation and measures recommended by
the Advisory Council or contained in H. R. 6000
for extending and strengthening the assistance
programs are discussed below.
Coverage. For many years, the Social Security
Administration has recommended to Congress
extension of the assistance provisions of the Social
Security Act to include any needy person and not
merely the needy aged, blind, and certain de­
pendent children. WTien the act was originally
passed it was generally assumed that the States,
without Federal help, would provide for needy
persons who could not qualify for aid under the
federally aided categorical programs. Although



every State furnishes some general assistance,
conditions of eligibility are extremely restrictive
in many of them. In those States which have
programs financed wholly or almost entirely by
the localities, each locality establishes its own
conditions of eligibility. Some localities are en­
tirely without general assistance. Furthermore,
in many States and localities the amount of aid a
needy individual or family can get is exceedingly
meager. For the most part, the needy people who
must look to general assistance for their mainten­
ance receive less than those for whom the Federal
Government has assumed a share of the responsi­
bility.
Among the needy persons who do not come
within the scope of the Social Security Act are
persons of advanced years not yet 65 years of age;
persons 65 years of age and over and blind persons
who are living in public institutions; persons who
have handicaps other than blindness or are ill;
children living with parents or other relatives who
lack support or care for reasons other than death,
incapacity, or continued absence from home of a
parent; unemployed persons not eligible for
unemployment insurance; and marginal workers
whose earnings are insufficient for self-support.
Most of the persons receiving general assistance
in the Nation are ill or handicapped for employ­
ment and do not differ fundamentally in their
characteristics from the more favored groups who
can get assistance with Federal help.
The assistance provisions of the act do not apply
to Puerto Rico and the Virgin Islands where need
is widespread and resources for meeting need are
limited.
The Advisory Council on Social Security to the
Senate Committee on Finance has recommended
extension of grants-in-aid to States for general
assistance, though with less liberal financial
participation than in old-age assistance, aid to
dependent children, and aid to the blind. The
Council also recommends covering recipients of
old-age assistance who are living in public medical
institutions—a group currently excluded. The
elimination of all residence requirements, except
for a 1-year requirement in old-age assistance,
is also advocated.
Under H. R. 6000, the Committee on Ways and
Means of the House of Representatives would
provide somewhat less extension of coverage.

PUBLIC ASSISTANCE

25

of assistance costs within the maxima also has
important fiscal implications for both Federal and
State governments. Under the original Social
Security Act and under the act as amended in
1939, 1946, and 1948, very wide State variations
in the levels of payments have existed in each
assistance program. In July 1949, the ratio of the
highest State average payment to the lowest was
roughly four to one in old-age assistance and aid to
the blind and five to one in aid to dependent
children. In general assistance, which is out­
side the provisions of the Social Security Act, the
ratio is nearly seven to one. In general, average
payments are low in low-income States and high in
Assistance Payments. The Social Security Admin­ high-income States. The disparities in levels of
istration is greatly concerned over the wide dis­ payments are greater than can be explained by
parity that exists in Federal maxima in aid to differences in living costs or the extent of resources
dependent children on the one hand, and in among recipients. To enable the States with low
old-age assistance and aid to the blind on the economic capacity to raise their assistance pay­
other. The Social Security Act limits the amount ments, the Social Security Administration has
of a monthly ADC payment in which it can recommended variable grants to States under a
participate to $27 for one child in a family and formula that would relate the Federal share to
$18 for each child beyond the first. No specific the economic resources of the State.
Under existing formulas, matching is provided
recognition is given to the needs of the parent or
other relative with whom the child is living. The on a basis that results, proportionately, in a larger
maximum amount subject to Federal participation Federal contribution in States with low levels of
in old-age assistance and aid to the blind is $50 payments than in those with high levels. In oldfor each recipient. State agencies have made age assistance and aid to the blind, for example,
great effort to provide assistance to dependent the Federal share is three-fourths of the first $20
children on the basis of standards reasonably of the average payment and half of the balance
related to what it costs to live. A little more than up to $50. Thus, if payments in a State average
half of all ADC payments in the country are $20 and no payments of over $50 are made, the
greater than the amounts in which the Federal Federal share is three-fourths. If the average of
Government shares. In 26 States, three-fourths matchable payments is $45, the Federal share is 61
or more of all payments exceed these amounts.
percent. A State with meager economic resources
Both the Advisory Council and the Committee can get a high proportion of Federal funds only by
on Ways and Means have indicated that the keeping its payments low. An appropriate variable
Federal maxima in aid to dependent children grant formula would enable the low-income States
should be liberalized. The Advisory Council to make more nearly adequate payments than they
recommends limits of $50 for each of two eligible can under current requirements, since the Federal
persons in a family and $15 for each additional share would not diminish as payments rise, pro­
person beyond the second. The needs of adult vided they remain within the set limits. The
members of the family as well as of the children Administration bill H. R. 2892 contained a vari­
would be taken into account. H. R. 6000 would able-grant formula in which the Federal percent­
authorize taking into account the needs of one ages were related to State per capita income.
adult in the family and would establish maxima
The Advisory Council did not recommend any
of $27 for each of two persons in the family and change in the basis of determining the Federal
$18 for each additional person.
share of payments in old-age assistance and aid to
In programs of the magnitude of public assist­ the blind. It did recommend a higher Federal
ance, the method of determining the Federal share share in aid to dependent children.
The bill would create a new category of assistance
for needy persons who are permanently and
totally disabled. H. R. 6000 would also authorize
Federal participation in assistance to recipients of
old-age assistance, aid to the blind, and aid to the
permanently and totally disabled living in public
medical institutions; would reduce to 1 year the
maximum residence that could be required in aid
to the blind and establish a 1-year maximum in
aid to the permanently and totally disabled; and
would extend the assistance provisions of the act,
with some modifications, to Puerto Rico and the
Virgin Islands.




26

SOCIAL SECURITY PROGRAMS IN THE UNITED STATES

The formulas in H. R. 6000 are of the same
general type as those already effective, but would
provide for more liberal Federal participation than
that existing. In old-age assistance, aid to the
blind, and aid to the permanently and totally
disabled, for example, the Federal share would be
four-fifths of the first $25, half of the next $10,
and a third of the next $15 of the average monthly
payment. Adoption of this formula would result
in a substantial rise in Federal participation in
States with low payment levels.
Both the Federal and State governments are
concerned about the mounting bill for public
assistance. The Committee on Ways and Means
in its report on H. R. 6000 has requested the Social
Security Administration to study the problem of
relative responsibility and to report on the find­
ings. States vary greatly in their policies govern­
ing the responsibility of relatives to support their
needy kin. As of early 1950, two States pro­
hibited the staff of the public assistance agency
from asking legally responsible relatives whether
they are able or willing to contribute to the sup­
port of an aged person. At the other extreme,
some States assume that income is contributed,
whether or not it is.
Medical Assistance. The Social Security Act cur­
rently makes it extremely difficult for States to
provide effectively for the medical needs of recipi­
ents. The Federal Government can now share
only in the cost of money payments to recipients
(within the maximums). States often find it de­
sirable to make payments directly to the hos­
pital, clinic, or doctor for medical care supplied to
a recipient, particularly when bills are sizable.
Moreover, within the maxima, only a small
amount can be included in the money payment
to provide for medical care, if a recipient has no
resources to meet his maintenance needs. Thus
the recipient may find it necessary to pay his bill
in small installments over a long period of
months—an arrangement that is highly unsatis­
factory to recipients, suppliers of services, and
assistance agencies alike. The Administration
bill H. R. 2892 would provide for Federal sharing
of the cost of medical assistance to a monthly




maximum of $6 per adult and of $3 per child.
The Advisory Council recommends provision
for matching of expenditures for medical assist­
ance for recipients of the three special types of
public assistance, but not for general assistance,
under maxima similar to those in H. R. 2892.
H. R. 6000 would authorize Federal sharing in
payments made by assistance agencies to individ­
uals and agencies supplying authorized medical
services to recipients. The maximum monthly
amount paid to or in behalf of an individual for
cash and medical assistance in which the Federal
Government would share would be limited to $50
under the programs for old-age assistance, aid to
the blind, and aid to the permanently and totally
disabled.
Future Role of Assistance

In the future, the role of public assistance in
providing income-maintenance will depend upon
the decisions that are made by the Congress with
respect to social insurance. Unemployment in­
surance and old-age and survivors insurance have
already been effective in keeping large groups of
persons from want. Because of the limitations of
coverage of the insurance programs and the in­
adequacy of benefits (especially in old-age and
survivors insurance), the need for assistance is
greater than those concerned with the system had
anticipated would exist almost 15 years after the
enactment of the initial social security legislation.
Extension of coverage of the programs of old-age
and survivors insurance and unemployment in­
surance to provide for persons currently in excluded
employments, liberalization of the benefit formu­
las, provision of benefits for temporary and
extended disability, and the establishment of a
system of health insurance would greatly reduce
the burden of public assistance. Even with an
adequate and comprehensive system of social
insurance, some assistance would always be needed.
Some persons would still not be covered by the
system, some would exhaust their benefits before
becoming self-sustaining, and some getting benefits
would require supplementary assistance to meet
exceptional needs.