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SOCIAL SECURITY
IN AMERICA
The Factual Background of the Social Security Act
as Summarized from Staff Reports to the
Committee on Economic Security

..

SOCIAL SECURITY BOARD
WAsBiNGTON,

...

.

D. C.

·AMERICAN FOUNDATION
FOR.THE BLIND INC.

SOCIAL SECURITY IN AMERICA
The Factual Background of the Social Security Act
as Summarized from Staff Reports to the
Committee on Economic Security

Published
_Jfor the
COMMITTEE ON ECONOMIC SECURITY
by the
SOCIAL SECURITY BOARD
WASHINGTON,

D.

C.

UNITED STATES
GOVERN MENT PRINTING OFFICE
WASHI NGTON : 1937

For sale by the Superintendentrof Documents, Washington, D. C.

•

.

•

•

•

Price 75 tents (Paper)

SOCIAL SECURITY BOARD
PUBLICATION

(
I

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No. 20

PREFACE
The Social Security Act became law on August 14, 1935. This act
·"vas a final development from the work of the Committee on E conomic
Security, the report of which the President transmitted to Congress in
a special message on January 17, 1935, with r ecommendations for the
passage of legislation to carry out the Committee's suggestions. This
message and report represented the fulfillment of a prOinise made by
the President in a special message on June 8, 1934, to the effect that
he expected to make recommendations at the beginning of the next
session of Congress for additional measures of protection against the
major vicissitudes of life which result in destitution and dependency
for many individuals.
The Committee on Economic Security was a temporary agency
created by the President in Executive Order No. 6757, on June 29,
1934, as a first step in the fulfillment of this promise. This Committee consisted of the Secretary of Labor as chairman, the Secretary
of the Treasury, the Attorney General, the Secretary of Agriculture,
and the Federal Emergency Relief Administrator. Its function was
to study the problems relating to economic security and to make
recommendations, both for a long-time and an i1mnediate program of
legislation which would promote economic security for the individual.
This Committee completed the major part of its task when it filed its
report with the President, which he transmitted to Congress in the
special message of January 17, 1935. It was continued in existence,
however, with a small staff throughout the consideration of the· social
security bill in Congress, to give such assistance to the congressional
committees as they might request. I ts existence terminated October
1, 1935, when the Social Security Board came into operation as the
permanent agency to administer this legislation.
In Executive Order No. 6757, creating the Committee on Economic
Security, three subordinate agencies were created to assist the Committee in the discharge of its assigned duties. One of these was the
Advisory Council on Economic Security, consisting of citizens outside of the Government, whose function was that of giving advice
on the legislation to be recommended. Another was the Technical
Board on Economic Security, composed of individuals within the
Government service, selected by the Committee on Economic Security,
who had special know ledge of the problems to be dealt with. This
Board was given general direction of the studies and investigations
1lI

IV

PREFACE

to be undertaken by the Committee, and throughout the entire period
in which the Committee's recommendations were formulated functioned in closest cooperation with the Committoo and its staff. Finally, the Executive Order provided for the appointment by the Committee of an Executive Director, who was placed in immediate charge
of the studies and investigations and served also as secretary of the
Committee, the Technical Board, and the Advisory Council. The
Director was authorized to and did employ a staff of specialists who
undertook numerous studies concerned with problems of social security, which were made available to the members of the Committee as
completed.
A list of the members of the Advisory Council and of the Technical Board, as well as of the eight additional advisory committees
which were subsequently created on special phases of the problems of
social security is published in appendix XIII. A complete list of
the members of the staff appears in appendix XIV. The Report of
the Committee on Economic Security to the President was published
by t he Committee and also as a congressional document. The reco1nmendations of the Advisory Council to the Committee on Economic
Security, with all supplemental statements which were submitted by
individual members, was published in both the House and Senate
hearings on the economic (social) security bill. The Technical Board
made no final report and the staff studies have not heretofore been
published in any collected form. A complete .list of these staff studies
is published in appendix XV.
The present report is a summary of some of the most important
information in the staff studies. Completely omitted from consideration in this summary were numerous studies which concerned problems not dealt with in the Social Security Act or which have been
published privately. In many instances the specific recommendations
included in the voluminous staff reports have been omitted, as these
are now largely only of historical interest. In this stunmary informational data in the staff reports have also been greatly reduced in volume, but it is believed that the most essential facts have been included.
The preparation and publication of this summary have been deemed
advisable, first to make available to interested persons the most important part of the data gathered by the staff of the Committee on
Economic Security; second, as a partial statement of the f actual background underlying the Social Security Act itself. This measure~ as it
became law, differed in many details 1 and in some essential respects
from the legislation which was recom1nended by the Comn1ittee on
E conomic Security. The factual material in t he staff reports, however, applies to the final measure no less than to the original bill,
except for such portions of the Social Security Act as differ from the
legislation recommended by the Committee. Moreover, in addition

PREFACE

V

to the factual material gathered prior to the enactment of the Social
Security Act there has been included an analysis of the provisions
of that act.
This summary was prepared principally by Miss Martha D . Ring
under the direction of Dr. Joseph P. Harris, Assistant Director, and,
in the last months of its existence, Acting Director of the Committee
on Economic Security. The unemployment compensation section was
prepared by Merrill G. :Murray, also connected with the Committee
on E conomic Security and now Associate Director of the Bureau of
Unemployment Compensation of the Social Security Board.
At the beginning of each section of this report are listed the
authors of the major staff reports from which the data summarized
were taken. A ll credit for the data presented should go to the
specialists who made these r eports, but they are not held responsible
for the summary here presented. vVhile every effort was made to
summarize fairly and accurately all factual data in the longer staff
reports, this summar y necessarily suffers from omissions. The Social
Security Board assumes no r esponsibility for any of the statements
in the staff reports to the Committee on E conomic Security herein
summarized.
The publication of this summary of the staff reports of the Committee on Economic Security has been made possible by the Social
Security Board. The Board assumed the cost of publication and of
completing the preparation of the summary, which was unfinished
when the Committee on Economic Security went out of existence. It
jg hoped that this summary 1nay have practical value justifying this
cffort and expenditure.
EowIN E . WrTTE,

Executive Director,
The President's Oommittee on Economic Se(;Urity, 1934-35.

Digitized by the Internet Archive
in 2010 with funding from
Lyrasis Members and Sloan Foundation

http://www.archive.org/details/socialsecurityinOOunse

TABLE OF CONTENTS

PART I. UNEMPLOYMENT COMPENSATION
P age

I. INTRODUCTION-- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The E volution of Unemployment Insurance ____ ___________________ _
Insurance Principles in Unemployment Compensation ________ ______ _
Relation of Unemployment Insurance to Other Protective Measures ___
CH APT ER II. A SUMMARY OF FOREIGN EXPERIENCE WITH U NEMPLOYMENT
CHAPTER

INSURANCE----------------------- - ----- --- - - ---- -- -- ---

Great Britain ___ ______ ___ _____ ___ ________ ___ __________ _______ ___
Administration ___ ______________ ______________ ___ ___ ___ ____ __ _
Coverage ____ _____ _______________ __ ___________ __ _____________ _
Contributions ____ __________________ ___ ________ __ _____________ _
Benefits _____ _____________________ ____ ______ _________________ _
Amount of Benefits ________ ____ __ _____ _________ ____ _________ _
Duration of Benefits __ __________ _______ ____ __ _____ ___ ____ ___ _
Statutory Conditions for the Receipt of Benefifa, __ _____________ _
Waiting Period ____ ______ ___ ______ _________ ___ _______ ___ ___ _
Disqualification From Benefits ______ __ ______ __ ________ ______ _
Germany __ ______ _____ ___ ___ _______ ____ ____ ______ _____ ____ _____ _
Administration __________________ _____ ___________ ___ ____ _____ _
Coverage ______________________________________ ______ __ ______ _
Contributions _____ _____ ______________ ___ ______ _______________ _
Benefits ___ __ ___ __ __ ______ ___ _____ __________ __ __ ___ __ __ ___ __ __
Amount of Benefits ____ ___ _____ ___ ________ ___ ______ ___ ______ _
Duration of Benefits ______ __________ __ ____ _____ _______ ____ ___
Statutory Conditions for the Receipt of Benefit s __ ____________ __
Wai ting P eriod ___ ___________ ___ __________ ___ _______ __ _____ _
Disqualification From Benefits ____ ____ _______ _____ __________ _
Belgium ____ ________ __ ___ _______ _____ _________ _____________ ____
Administration ________ _____ __ ___ _____ __ ___ ____ _____ ________ _ _
Coverage ___ ___ ___ _________ _____ _____ ___ ____ ____ __________ ___ _
Contributions ______ __________ __ _____ ____ _____ ___ ___ _____ _____ _
Benefits __ __ ______ __ ______ _____ __ _______ ______ _________ ___ ___ _
Amount of Benefits ___ _____ ____ ____________ ________ _____ ___ -Duration of Benefits ____ _______ _________ ____ ___________ _____ _
Waiting P eriod _____ ______________ __________ __ ___ ____ ____ __ _
Statutory Conditions for the Receipt of Benefits __ ____ _____ ____ _
Method of Payment __ __ ____ ______ ____ __ _____ ______ _______ __ _
Switzerland _____ ________ _ · _______ ____ __ ___________ - - - - - - - - - - - - The Federal Law of 1924 ______ _______________________________ _ _
The Federal Orders of 1925 and 1929 _________ ___ __________ ___ __ _
Unemployment Insurance During the Depression __ ___________ __ __
Administration ________________ ______ __ ______ _____________ ___ _
Coverage____ _______ __ ___________ __ ____ __ ________ __ ___ ____ __ _ _
Contributjons-., •• --- --- -•- w-• ---- -------------- -- ------------

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CONTENTS

VIII

PART I. UNEMPLOYMENT COMPENSATI ON-Continued
CHAPTER

II. A

SUMMARY OF FOREIGN EXPERIIDNCE WITH U NEMPLOYMEN T

I NSURANCE-Oontinued.

Switzerland-Continued.
Benefits______ ____________________________ ___ _______ ____ ___ ___
Duration of Benefits_ ________________________________________
Wai ting Period ___ ____ ____ ____ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Qualifications for Receipt of Benefits___________________ ____ ___
Disqualification From Benefits_ _ _ __ _ _ __ ___ _ __ ___ __ _ ___ __ ___ __

Page

III. ESTI MATES OF U NEMPLOYMENT IN THE UN ITED STATES____
Total Volume of Unemployment- _____ ________ -- __ -- - - - - -- - _- _ __ __
Variations by Industries ______________ ____· ____ - - - - - - - - - - - _- - - - - _ __
Variations by States ___________________________ _- - - - - - - - - - - - - ____
Long-Time Trends in Employment _________ _- _- - - - - - - - - - - - - - - - - - __
Part-Time Employmen t_ ________ ___ __ __ - - - - - - - - - - - - - - - - - - - - - - - - - Periodic and Seasonal Fluctuations in Unemployment_____________ ___
Duration of Unemployment _________________ --------_ - -- --- -- __ __

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CHAPTER

THE ACTUARIAL BASIS F OR UNEMPLOYMEN T COMPENSATION_

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Maintenance of an Actuarial Basis____ ___________ _____ __ ________ ___
Actuarial Estimates of an Unemployment Compensation Plan____ ____
Coverage____________ __________ _______ ________________ ________ __
Contributions_____ _____________ ______ ______ _- _- - - _- - - - - - _- - - __ __
Benefits____ ___ ____ ________ ______ _______ ___ ______________ _______

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CHAPTER

CHAPTER

IV.

V.

THE ROLE OF THE FEDERAL GOVERNMENT IN UNEMPLOY-

MENT COMPENSATION __ - -- - - -- - -- - - - - - - - - - - - - - - - - -- - -- - - -

Alternatives in Unemployment Compensation Legislation__ ______ _____
Unemployment Compensation Provisions in the Federal Social Security
Act______ __________ _____ ____ ______________ ________ _____
Federal Tax on Employers ___________ _____ ___ ________ - -- __ __ __ __
Coverage_____ ___ ________________________ ______ ________ _____
Interstate Commerce _______ ___ _________ - _- ___ __ - _- _- _- _- _ ___
Collection of Tax ___ ________ ___ ___ ______ - _- _____ __- _- _- _- _- _General Credit Against the Federal Tax_______ _______ ______ ____
Additional Credit_ ________ _________ ____ _- - ____ - - - - - ___ - - - -- - Conditions of Federal Approval__________ ________ _____ ____ ____
Certification of State Plans____________ ______ _________ ___ _ ____
Federal Unemployment Trust Fund_ _________ ___ _____ ___________
Gr.ants to States for-Unemployment Compensation Administration__
Payments to States________________________________________ __
Suspension of Grants____________ ________ _________________ ___
Federal Cooperation With States________ ___ ___ ____ ______ ___ _____
CHAPTER VI. STANDARDS OF UNEMPLOYMENT COMPENSATION: STRUCTURAL PROVI SIONS _______ _ ______ _ ___________ _ ___ ___ _ _ _ __ _

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Coverage _____ ______ _______________ _________ _____ ___________ ___ _
Unemployment Compensation Fund ________________ ___ ___ ___ -- -- __
Types of State Funds _________________ ____ ________ ____ ________ _
Contributions ________ __ _______ _____________ ____ ___ ___________ ___
Benefits _____________ __ ______ __ __ __________ ____ ______ __________ _
Rate of Benefits ___________ . _________ ________________ __ __ ____ _
Dependents' Allowances __ ____ ______________ ________ _______ ___ _
Partial Unemployment __ ____ ___ ______ _____ __ ______ ______ - _____ _
Seasonal Unemployment ________ _________ __ __ __ _______ ___ ____ __

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CONTENTS

IX

PART I. UNEMPLOYMENT COMPENSATION-Continued
CHAPTER

VI.

S TANDARDS OF U NEMPLOYMENT C OMPENSATION : STRUCTURAL

PROVISIONS-Continued.
Benefits-Continued.

Ratio of Benefits to Employment _______ ______ ____________ ____ __
Maximum Weeks of Benefits in Any Year__ __________ ___ _____ __ __
Additional Benefits ______ ________ ______ ___ _______ ____ - - - - - - - - - Eligibility for Benefits __ __ __ _____ ___________ _ . _- _- - - -- - -- - - - - - - - Qualifying Period____ _______ __ __ __ _________ __ ___ __ ___ _________
Availability and Registration for Work __ ______ ___ ___ ___ ___ ____ __
Waiting Period ______ _____ _______ ___ ____ _____ - - - - - - - - - - - - - - - - Labor Disputes_ ____ __ __ ___ _____ _____ ______ ___ _____ __ ___ ____ __
Voluntary Unemployment__ __ __________ __ _____ ____ ___ ____ _____ _
Discharge for Misconduct___ ________ ____ _____ ___ ______________ _
Refusal of Suitable Employment_ __ ____ ___ ____ ___ ___ ____________
Protection of Labor Standards______ ________ _____ ____ _____ _____ _
Wage Disqualifications______ ____ ____ ______ ___________ _____ ____ _
Claim and Appeals Procedure______ _______ ________ _____ __________ _
Administration and Finance ______ ______ ____ ___ _____ __ _____ -- _ _ ___
Administrative Agency___ _ __ _ __ _ _ _ ____ __ __ _ _ __ __ __ __ __ __ __ __ __
General Rules___________ _______ ________ ___ ____ _____ ________ __
Personnel____________ ________ __ _______________ ___ ____ ___ _____
Advisory Councils ____ __ ___ ___ ______ _ ___ _ __ ___ _ __ ___ __ __ __ __ _ __
Employment Stabilization__ ______ __ _______ ___ _______ _________ __
Records and Reports________ ______ _____ ___________ _____ __ __ ___
Representation in Court____ ___ _____ ___ ___ __ ___________ _____ ___
State-Federal Cooperation______________ _____ ___ __ ___ ____ ____ ___
Employment Offices_____ ____ _________ _____ ______ ____________ __
Protection of Rights and Benefits_______ ____ __ ____ ___ ___ _____ ___
Collection of Delinquent Contributions__ ____ _____ ___ __ __ ___ _____
Penalt ies____ ____ ______ ____ _________ __ __ ___ _____ __ _____ ___ ___ _
Administration Fund __ ____ ___ __ ___ ____ ____ __ ____ ________ -- _ __ _
Saving Clause_____________ __ ___ _______ __ ______ ______ _________

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PART II. OLD-AGE SECURITY
CHAPTER VII. THE ECONOMIC PROBLEMS OF OLD AGE __ __ ______ _____ __
I ncrease of Aged Persons in the United States___ ___ ____ ____ __ __ ____
Employment Difficulties of the Older Worker __ ___________ ____ __ ____
Extent of Old-Age Dependency in the United Sta.tes__ ____ _____ ___ ___
CHAPTER VIII. PROVISIONS FOR THE AGED IN THE UNITED STATES. _____
Development of State Old-Age Assistance Laws_ ________ _____ _______
Summary of t he Provisions in Effect, J anuary 1, 1935_ _ _ _ __ ___ _ __ _
Operation of State Laws______ ________________ ________ ___ __ ____
Activities of State Legislatures From J anuary 1, 1935, to October
15, 1935 ___ _____________ ___ _________ ___ ___ __ ___ __ ____ __
Industrial Pension Systems ______ ____ _____ __ __ _____ ____ ______ . .:_ __
Railroad Retirement Act_ _ _ _ ____ __ __ __ __ ___ ___ _ __ ___ __ _ __ ___ ___ __
Retirement Systems for Public Employees____ __ ___ ______ ___ ______ __
CHAPTER IX. OLD-AGE SECURITY ABROAD___ - -- --- ___ ____ __-- -- __ -CHAPTER X. FORMULATION OF R ECOMMENDATIO NS FOR AN OLD-AGE
SECURITY PRO.GRAM FORT.HE U NITED STATES___ ________ ___
Old-Age Assistance____ ___ ____ _____ _______ _____ ____ __ __ ___ ___ __ __
Basic Considerations_ _ _ _ __ __ ___ __ ___ __ __ ___ _ ____ __ __ __ _ __ ___ __

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CONTENTS

X

PART II. OLD-AGE SECUR I TY-Continued
CHAPTER X. FORMULATION OF RECOMMENDATION S FOR A N OLD- AGE SECURITY
PROGRAM F OR THE UNITED STATES-Continued.
Old-Age Assist ance- Continued.
Proposals to the Congress__ ___ _____ __ __ _______ ______ ______ _____
Legislative Modifications of the Proposals_______________________ _
A System of Old-Age Annuities _____ ________________ ______________
The Advantages of the Insurance Method_____ ___ ___ _____ ________
The Necessity of a Single Federal System_ ___ ____________________
Basic Principles of an Old-Age Annuity System___ ________ _____ __ _
The Character and Amount of I nsurance Benefits_______ ___ ____ _
The Source and Amount of Contributions ____ ___ _ __ __ __ __ _ ___ __
The Accumulat ion and Maintenance of a Reserve____ ___________
Coverage_ ___ _____ ___ ___________ __ __ ____ ___ ________ ______ ___
Administration__ ______ __ _____ ____ ___ _______________ ________
Legislative Proposals_ __ _ __ __ __ __ _ __ _ _ ___ __ _ __ ___ _ __ _ ___ _ __ ___ _
Congressioual Reconstruction of the Program__ ________ ___ _ ______ _
Voluntary Old-Age Annuities ______________ ___ _____ ______ _________
Voluntary Continuance in the Old-Age Annuity System_ ________ ____
Annuity Certificates__ ___ ___________________________ __ _____ ____

CHAPTER

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X I.

OLD-AGE PROVISIONS OF THE FEDERAL SocIAL S E CURITY
A c T______________________ _ _ _ ___ _ _______________ _ __ ____

Old-Age Assistance________ _____ _____ __ ____________ _______ _______
Administration of Federal and State Plans___________ ____________
Maximum Eligibility Requirements for Old-Age Assistance____ __ ___
Financial Participation by the State__ ____ ______ __ ____ ___________
Methods of Computing and Paying Federal Grants__ _____ _____ ____
Amounts Payable to the States______ ________ ___ ______ ____ ____ __
Suspension of Grants_________ ______ ___ ___ __________ ___ ____ ___ _
The Federal Old-Age Benefits System_ ____ ___ ___ ___ ______ ____ _____
Coverage __ _____ __ _______________ ___ ____ ___ _________ ______ ____
Monthly Benefits____________________ ___ __ ___ _______ __________
Eligibility for Benefits_______ ____ ______________ _________ __ _____
Payments Upon Death__ ___ ___ ____ _________ ___ ____ _____ _____ __
Method of Making Payments___ __________ ___ ___ ___ ________ __ ___
Protection of Benefit Rights__ ____ ____ _______ _____ ______ __ _____ _
Old-Age Reserve Account_ ________ _____ ______________________ __

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PART III. SECURI TY FOR CHILDREN
CHAPTER

XII.

CHILD WELFARE I N A GENERAL P ROGRAM OF ECONOMIC
SECURITY____ _ _____________ ____ __ _ _ ___ _ _____ __ _ _______ _

XIII. Arn TO DEPENDENT CHILDREN __ _ _ _ _ _ _ _ _ _ _ _ __ ____ : _ _
Purpose and Extent of Legislation for Aid to Dependent Children ___ __
Families and Children Benefited _ _ _ _ _ _ ___ _ __ __ _ __ __ __ ___ _ __ __ __ __ _
Families of Dependent Mothers Receiving Emergency Relief_ __ ___ ___
Estimated Expenditures for Aid to Dependent Children ___ __ ______ ___
Adequacy of Grants_____ __ ________ ____________ _______ ____ _____ __
Need for State and Federal Subsidy_ __ ____________ _____ _______ ____
Estimated Amount Needed for Aid to Dependent Mothers and Children_____ ________ _________________ ___ __ ____ ___ ___ _____ _

CHAPTER

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CONTENTS

XI

PART III. SECURITY FOR CHILDREN- Continu ed
Page

CHAPTER XIV. WELFARE SERVICES FOR CHILDREN NEEDING S PECIAL
CARE __ _____ _______ __ __ _____ ________ ___ ___ ____________ _
Present Provisions for Care of Children ___ ____ ___ _____ ________ ___ _ _
Social Services in R ural Areas ____ ____ __ __ ______ _____ ____ ________ _
Need for Federal Assistance ___ ______ _________ ____ _______ ___ _____ _
CHAPTER XV. MATERNAL AND CHILD-HEALTH SERVICES _________ ____ _
Maternal and Infant Mortality ___ _____ __ __ ______ _________ _____ __ _
Health of P reschool, School, and Adolescent Children ______ ___ ______ _
Development and Present Status of Provisions for Maternal and
Child Health ___ __ __ ____ _____ ____ __ ________ ____________ _
Plan for Expansion of Maternal and Ch ild-Health Program ___ _____ __
Local Progra ms for Maternal and Child Health ___ ___ ______ __ ___ ___ _
Local Medical, Dental, and Nursing Service ________ ________ _____ _
Provision for Medical Care in Connection with Maternal and ChildHeal t h Program ____ ____ ___ ______ ____ __ __________ ____ __ _
Educational Program ___ ______ _________ __ _______ ___ ___ ____ ____ _
State-Wide Program __________________________ _____ ___ ___ ____ __ __
Care for Crippled Children ________________ ____ ________ ___ _______ _
CHAPTER XVI. A PROGRAM OF SPECIAL SECURITY M EASURES FOR
CHILDREN________________________________________ _____ _
The Program Proposed _____________________ ______ ______ ______ __ _
Aid to D ependent Children ____ __ ____ ________ __ _______ _.. ____ _ .. __
Welfare Services for Children Needing Special Care ______ ___ __ ___ _
Maternal and Child-Health Program ____ _____ __ __ _______ ____ ___ _
Provisions of the Social Security Act.- -- - - ---- --- - ---- - ------- ---Aid to Dependent Children ___ __ ___________ ___________ ___ ______ _
Maternal and Child-Health Services________ ________ _______ _____ _
Services for Crippled C hildren .: ___ __ ______________ ___ ______ ___ __
Child-Welfare Services____ ___________________ _____ __ ___ ____ ___ _

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PART IV. PROVISIONS FOR THE BLIND

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CHAPTER XVII. PROVISIONS FOR THE BLIND ___ _______________ ___ __ _
State Legislation for t he Blind ______ _____________ ___ __ _________ __ _
Provisions for the Blind in the F ederal Social Security Act ______ ____ _

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PART V. TH E EXTENSION OF PUBLIC-HEALTH SERVICES
CHAPTER XVIII. THE EXTENSION OF P UBLIC-HEALTH SERVICES______ __
Prevention of Illness_____________ __ ____ ___ _______ __ __ ______ __ ___ _
Preventable Diseases and Mortality_ __ ___ ________ _______ __ __ ______
Past and Present Developments of the Federal Public H ealth Service__
Responsibility for Public H ealth__ __ ___________ ______ __________ __ _
Basic Requirements of Local P ublic- Health Services_ ___ ___ __________
Nature of Local Organization __ ___ __ _______ _____ ___ __ ___ __ ____ __
Local H ealth Services_ ___________ ___ ___ ____ __ ___ ________ __ __ ___
Cost of Local Service____ ___ ___ ____ _____ ___ _ __ __ __ ___ ___ _ _ ___ _ _
The Functions of State Health Departments___ ____ ___________ ______
Organization of State Health Depart ments_ __ __ ________ _________ _
Aid to Local Health Services_____ __ ______ __ ______ ______________
Cost of State ·Health Work ________ __ .__________________________

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CONTENTS

PART V. THE EXTENSION OF PUBLIC-HEALTH SERVICES-Continued
CHAPTER XVIII. THE EXTENSION OF PUBLIC-HEALTH SERVICES-Continued.
Federal Responsibilities for the Public Health ____ . .... _.... __ . __._ .
The Cost of a National Program . .••• ... ·-·· · · · · ··· ·············
Public•Health Provisions of the Social Security Act.... ....... . ......

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PART VI. T HE NEED FORFEDERALSUPPORTOFSOCIAL
SECURITY PROGRAMS
CHAPTER XIX. THE NEED FOR FEDERAL SUPPORT OF SOCIAL SECURITY
PROGRAMS..... ........ .............................. .. .
Expenditures for Public Welfare.. ...... . .......... . ..... . ..... . . .
The Financial Condition of Local Units of Government.. . . . .........
Tax Revenues and Assessed Valuations.. .... . . . . . . . . ..... . . . ....
Tax Delinquency ..................... •······ ············- · ··-·
Tax Limitations .. _ .......... _. ...... _. __._ ._ . . . _..... _. _... _.
Public D ebt of Local Governments._ .... . . _._ . . . ... __ . . . _... . .. _
Trend of Local Governmental Expenditures. __ .. ___ • ••.• __ ._.....
T he Need for State and Federal Aid __ ·---·····-·•·-·-··--·•-· · ··
The Financial Condition of State Governments_·-- · •- · ··- · ··· · ·····
RecentTrends ... .. . ·-·-·---· ···· ········ · ···-··-·---· - - - ··· -·
I ndexes of Wealth and Income.-·•·•- ··· · - ··· - · · · · ·----·--····-State and Local Tax Receipts....... . ........... . ...............
State and Local Indebtedness .......... . ... _.. .. __ ._............
The Need for Federal.State Cooperation. ........................
Costs of the Federal Program.....................................
New Sources of Federal Revenue ............... . ......... - . . ·-- · ·The New Federal Responsibility ...... ..... . .... ·-·-- ··-·- · · · --· · ·

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APPENDI XES
APPENDIX I. PROCEDURES FOLLOWED IN ESTIMATING UNEMPLOYMENT
COMPENSATION COVERAGE IN THE UNITED STATES, 1922-33. .
Total Compensable Labor Force, April 1930. . ............... . ......
Mines and Quarries ... _..... _.... . . ....... _. _.... . . . . . . . . . . . . .
Manufacturing....... ~ ....... .... -.•··-····· · · ·- · ··- · ··-·····Distribution Industries ..... . . ...... _.... _. .. . . . _.... _. _._ . __ ...
Wholesale Distribution . ...... _. . __ .. _.. . . _.. _.. _........ _.__
Retail Distribution . . . .. .. _... ---· ..... _... _....... _._.......
Other Industries....... .......................................
The Employment Status of the Compensable Labor Force, April 1930. .
Employment Status of the Compensable Labor Force, 1922-33 .... _.
Compensable Labor Force and Its Employment Status, 1922- 28_._ _
Compensable Labor Force and Its Employment Status, 1929-33. .. .
The Compensable Labor Force by States . . . ..... _-·_ . ___ _.. __ .. __
APPENDIX II. P ROCEDURES FOLLOWED IN ESTIMATING DURATION OF
UNEMPLOYMENT IN THE UNITED STATES, 1922-33 ........ _.
Sources and Inadequacies of Available Data . . . __ .. .. .. .. . . __.. _.. __
Studies Used and Information Taken From Them.. . .......... .. _...
Adjustment of Data to a Comparable Basis....... ........ . ... .....
Combining the 92 Frequency Distributions and Applying the Resulting
Composite Curves ...... . ... . .... . ....... . ..... _. . . __ .. _.
Estimating Time Lost by the Unemployed... . .. . ..................

385
386
387
388
388
388
390
391
392
394
397
397
399
403
403
404
405
408
412

CONTENTS

XIII

APPENDIXES-Continued
Page

APPENDIX III. PROCEDURES FOLLOWED IN ESTIMATING THE MAXIMUM
DURATION OF BENEFIT$ ___ -- __--- - -- -- - - -- - - -- - - --- - - - - Contributions_____ ___ _____ __ ____ ______ __________ ___________ ___ __
Compensable Wage Loss___ __ ________ ______ _______ ___ ______ ______
Adjustments_______ ______ __ ________ ____ ___ __________ ___ ______ ___
Final Estimates of Duration _____ _____ ______ ____ ____ ____ __ _. _______
APPENDIX IV. THE HISTORY AND DEVELOPMENT OF THE UNITED STATES
EMPLOYMENT SERVICE____ ___ ______ __ ____________________
The Pre-War Period __ ___ ___ ______ ______ ___ - - - - - - - - - - - - - - - - - - - - - Activities During the World War_ _______ ________________ - ___ __ __ _
The Post-War Period _____ _______________ - - - - - - - - - - - - - - - - - - - - _- _ _
The Contribution of t he D emonstration Centers __ ______ __________ __
The Reorganization of 1931- __ ________ ____ ___ _ - - - _- - - - - - - - __ __ __ _
The Principles of the Wagner-Peyser Act_____ _____ __ _____ ____ __ ___
Operation Under the Wagner-Peyser Act________ ___ _____ __ ______ ___
Emergency Needs and the National Reemployment Service_ _________
The Progress R ecord in Employment Work _____ _-- ___________ --- _ _

415
415
41 6
417
421
423
423
425
428
429

430
431
432
434
436

APPENDIX V. SUMMARY OF STATE UNEMPLOYMENT COMPENSATION LAWS,
JANUARY I, 1936________________________ _______ facing page 440
APPENDIX VI. UNEMPLOYMENT I NSURANCE PROVISIONS OF THE CANADIAN EMPLOYMENT AND SocIAL INSURANCE AcT____________
APPENDIX VII. OLD-AGE I NSURANCE IN GREAT BRITAIN__ __ __________
Noncontributory Pensions _________ __ _------- --- _____ -- - __ -- __ _ __ _
Contributory P en~ons_____________________ __ _____ ____ __________ _
APPENDIX VIII. THE CANADIAN PENSION SYSTEM$_____ ____________ _
Noncontributory Pensions __ _____ ________ _-- _--- __--- ___ -- -- _ __ __ _
Voluntary Annuities___ ___________ _______________ __ __ _______ ____ _
APPENDIX IX. SURVIVORS' INSURANCE IN FOREIGN COUNTRIES____ ____
APPENDIX X. FINANCIAL HISTORY OF THE WORKERS' I NVALIDITY, OLDAGE, AND SURVIVORS' I NSURANCE OF GERMANY___ _______ __ __
A Short History of the Law_______________ __________ ______ ______ _
Distribution of Costs____ _____ _____ ______ _______ ______ ___________
The Share of the Federal Government____ __________ ____ __ ____ ___
Common Reserve Fund and Individual Funds__ ________________ __
Reserve System Versus Pay-As-You-Go System_____ ____________ ____
The Investment of the R eserve_ _______ ______ __ _____________ ______
General Investments__ _____ ___ ______ ____ ___ ___ _____ _______ ____
Investments Promoting the General Welfare____ __ _____ _______ __ __
Interest on Investments___ ___ ________________ ____ ______ ____ ___
Administration_ _ _ _ _ _ __ __ __ _ ___ ____ __ ____ __ _ ___ __ _ ____ __ _ ___ __ __
Coverage_______ _____ _________ ______ ____ ____ ____ ______ ___ ______
Contributions ______ _____ _____ ____________ _________ ___ _____ _____
Benefits__ __ ____________ _________ _____ _____ ____ ____ ___ __________
Old-Age Pensions____ _______ ______ ____ ____ ___ ___________ ______
Invalidity Pensions____ _____________ _____ _______ ____ _________ __
Survivors' Pensions_____ ___ __ __ __ ___ _ ___ __ __ ___ __ __ __ _ ____ _ ___ _
Widows' Pensions_____ _________ __ _____ __ ___ ___ ___ _ __ ___ __ __ _
Orphans' Pensions________ ______ __ ___ ________ __ ____ ___ __ ____
The Number of Pensioners __ ___ ___ ____ ___ ___ ______ _____ __ ____ ____
Summary ___ ___ ___ ______ ____ ___ _____ ______ ____ _ -· ____ __________ .
:Bibliography ___ ___ __ ___ ___ _______ ____ ________ ____________ _._ ____

441

4.49
449
450
453
453
454
459

469
469
470
470
471
476
477
477
480
482

482
485
485

487

481
489
490

492
493
494

496
497

XIV

CONTENTS

APPENDIXES- Continued
Page

APPENDIX XI. BIRTH RATE AND INFANT AND MATERNAL MORTALITY
TABLES______________ __________ ____ ____________________
499
APPENDIX XII. SUMMARY OF PROVISIONS OF THE SOCIAL SECURITY AcT
RELATING TO FEDERAL GRANTS TO STATES FOR PUBLIC-WELFARE PURPOSEs ____ __ _____________________ ___ __ facing page 514
APPENDIX XIII. CREATION AND MEMBERSHIP OF THE COMMITTEE ON
ECONOMIC SECURITY AND AFFILIATED GROUPS___ __ ___ ____ ___
APPENDIX X I V. STAFF OF THE COMMITTEE ON ECONOMIC SECURITY___ ____
APPENDIX XV. LIST OF STAFF REPORTS____ __ ______ _____ _____________
APPENDIX XVI. THE SocIAL SECURITY AcT _ ___ __ __ __ ___ _ __ __ ___ __ __ __
Indev______________________ ___________ __ __ _____________ _________

515
521
52-5
531
561

LIST OF TABLES
PART I. UNEMPLOYMENT COMPENSATION
No.

1. Countries in which compulsory unemployment insurance or compen-

2.
3.
4.

5.
· 6.

7.

sation laws have been enacted and number of workers covered in
each, 1935___________ __________________ ________ __________ ___
Countries in which laws have been enacted subsidizing voluntary
insurance systems and the number of workers covered in each, 1935 _
Maximum weekly incomes below which a state of need exists, Belgium_
Unemployment in manufacturing, transportation, building trades,
and mining, 1897-1926, as estimated by Paul H. Douglas___ ______
Estimates of average nonagricultural employment and unemployment,
by States, 1930-33___ __ _____ ___ ____ _____ _____________ _facing page·
States arrayed by average percentage of unemployment within the
compensable labor force, April 1930; 1933 average; and 1930-33
average ______________________________________________ _____ _
Estimated numbers of employees attached to the various industries,

6
7
41
56
58
60

1920-27_ ___________________________ __ ____ ______ _____ _______

62

8. Average annual indexes of employment in selected manufacturing
industrie~ 1923-28___ ___ _____ _______ ______________ __ ________

63

9. Estimated numbers of employees attached to transportation and
communication industries, 1920-27 _ __ _ ________________________
10. Proportion of full time worked by all employed workers in 29 industries, United States, 1922- 33__ _______________ _________________
11. Employment status of gainful workers enumerated in four areas_____
12. Employment status of employed workers in three areas_____ ________
13. Indexes of seasonal variations in factory pay rolls in the United States,

1923-31__________ ______ ____ ________ __ ___ __ ____ _____________
14. Estimated compensable labor force in the United States, April 1930___
15. Estimated compensable labor force, United States, 1922-33_ ________
16. State cumulated contributions available for benefits at 3-, 4-, and 5percent contribution rates, United States, 1922-33_______________
17. Estimates of the compensable wage loss of the covered unemployed
in the United States, 1923- 33_______________ __ _______ _________
18. Percentage and cuµmlative percentage distribution of the unemployed

64
65
67
68
70
78
79
81
82

able and willing to work, by duration of unemployment at date of
census qr survey1 according to various magnitudes of unemployment_
H~. Cumulative distribution of the total compensable wage loss, 1923-33_
ZQ. Adjusted cumulative distribution of the total compensable wage loss,

84
86

l9~3-33- ~-- ~- ~----- ~-, -~---· · -- -, ,- -- ~~- -~-- -T- Y-~ T-- --~-- -

87

xv

LIST OF TABLES
PART I. UNEMPLOYMENT COMPENSA'l'ION- Con t inuecl
No.

Page

21. Adjusted cumulative distribution of the total compensable wage loss,
1923-30_______ _ ______ __ ___ _____ ________ ______ ____ ________ __
88
22. State grants for unemployment compensation administration and
conditions for credit allowance against tax on employers of eight
or more ______________ ____ ____ ________ ___ ___ ___ _____ facing page 96
23. Estimated coverage of assumed unemployment compensation system,
by States, average for 1930_ _________ ______ _____ __ ____ ___ _____
24. Estimated number of employed workers covered, by States, 1933_ __ _
25. Estimated wages and salaries of compensable labor force and income
from a 3-percent contribution, by States, 1933___________ ____ ___

108
109
117

PART II. OLD-AGE SECURITY
26. ~ctual and estimated number of persons aged 65 and over compared
to total population, 1860-2000________ ___ __ _______ ______ __ ____
27. Rate of increase of population by age groups for the United States,
1870-1930_ ______ ____ ___ __ ________ _____________ __ ______ _____
28. Age distribution of the total, urban, and rural population of the
United States, 1920 and 1930_________ ___ ___ _____ _____ _____ ___
29. Percentage of persons 45 years of age and over among gainfully occupied, by sex, for the United States, 1890-1930___ _______ _____ __ __
30. Percentage of unemployment (14 weeks and over) among males and
females in each age group for the United States, 1930_ _____ ____ __
31. Persons with previous work experience at nonrelief employment
seeking work, classified by length of time since last nonrelief employment of 4 weeks or more and by age ____ _____________ _____ __ ___
32. Percentage of persons 65 and over having property less than $5,000
and income less than $300 annually__ ______ ______ _________ ___ __
33. Old-age dependency in the State of New York, July 1, 1929____ __ __ _
34. Economic status of aged studied in the District of Columbia, 1934_ _ ___
35. Years of residence in State of persons 65 and over on relief______ _____ _
36. Principal features of the old-age assistance laws of the United States
(as of Jan. 1, 1935) ____ ____ ___ ___ _____ _____ __ ____ ___ faci11g page
37. Operation of State old-age assistance acts during 1934__ __ _ __ __ __ ___
38. Provisions of the old-age assistance laws in the United States (as of
Oct. 15, 1935) ___ ___ _____ __ ___ ____ ______ ____ ___ _____ -·- - - - _- - 39. Old-age assistance and insurance legislation in foreign countries
through 1933______ ____ _____ ____________________________ ____ _
40. Principal provisions of foreign noncontributory old-age assistance laws
through 1933 __________ ___ ______ ______________ __ ____ facing page
41. Weekly contributory old-age pensions for various countries in relation
to weekly wages in those countries__ ____ _____ _________ __ ______ _
42. Number of recipients of old-age a ssistance (noncontributory) and
contributory pensions in foreign countries and number of people of
eligible age_ _ _ _ ___ _ _ ___ __ ___ __ __ ___ __ _ ___ __ __ ___ __ _ __ _ _ ____ _
43. Foreign noncontributory old-age assistance systems (changes in proportion of recipients to population of eligible age since effective
date of law)______________ ______________ ____ ______ _____ ______
44. Estimates of the number of old-age assistance recipients and the
amount of Federal subsidy to State old-age assistance programs____ _
45. Progress of tax and benefit payments under proposed old-age annuity
plan__ ____ ______________ ______ ____ __ __________ ______ __ __ ___

141
141
142
143
146

148
151
152'
152
157
160
164
168
182
184
186

186

187
194
212

XVI
~-

LIST OF TABLES

PART II. OLD-AGE SECURITY- Continued

46. Summary of provisions for Federal grants to States for old-age assistance__ __ __ __ __ ___ _ __ ___ __ ___ __ __ ___ _ __ ___ __ ___ _ __ ___ __ __ ___
47. Summary of principal provisions of the Federal Social Security Act
relating -to Federal old-age benefits______ ____________ __________
48. Monthly benefits payable for specified total wages as defined for the
purposes of title II of the Social Security Act___________________

Pap

219
223
224

PART III. SECURITY FOR CHILDREN
49. Conditions under which aid to dependent children may be granted and
limitations on amount of aid ' (1934) __________________ _________ _
50. Extent to which aid to dependent children is provided: Annual percapita expenditure and percentage of counties granting aid, 1934 __
51. Estimated number of families and children receiving aid to dependent
children (based on figures available Nov. 15, 1934) _____________ _
52. Marital status of families with female heads and number of children
under 21 years and under 10 years: United States population
census, 1930 (unpublished figures) __ ___ ______ _______ ___ _______ _
53. Distribution of widowed and separated or divorced women heads of
relief families in urban areas with children under the age of 16
years, based on 5-percent sample study of occupational characteristics of relief families in 79 cities, May 1934___________________ _
54. Characteristics of households with widowed and separated or divorced
women heads of relief families in urban a1eas with children under
the age of 16 years, based on 5-percent sample study of occupational characteristics of relief families in 79 cities, May 1934 ___ __ _
55. Estimated annual expenditures for aid to dependent children (based
on figures available Nov. 15, 1934) _______________ ________ ___ _
56. Average monthly grant per family for aid to dependent children ____ _
57. Funds for State maternal and child-health work, 1928 and 1934 ____ _
58. State funds for maternal and child-health work, 1934 _____ ____ ____ _
59. Permanent public-health nursing service in the counties of 24 States,
1934 ______ ____ ____ _____ ___ _______ __ __ ___ ____ ______________ _
60. Permanent prenatal and child-health centers in the counties of 18
States, 1934 _________ ________ ________________ ____________ __ _

235
237
238

240

243

244
245

247
272

273
275
275

61. Physical defects or conditions needing attention as reported by mother

to visiting nurse among 9,472 children included in 3,500 families
under the care of public-health nursing agencies in 25 .c ities, N ovember 1934____________ ___________________________________ ____ _
62. Adequacy of family milk supply in 3,500 families under the care of
public-health nursing agencies in 25 cities, November 1934_______ _
State
and county public funds for care of crippled children____ __ ___ _
63.
64. Summary of provisions for Federal grants to States for aid t o dependent children (mothers' aid) _______ _______________________ ___ _

277
278
285
293

PART IV. PROVISIONS FOR THE BLIND
65. Data on the operation of systems for aid to the blind in the United
States, 1934 _____________________ _____ ___ ______ ________ • _ _ __
66. Principal provisions of State laws providing for allowances for the
blind (as of Aug. 1, 1935)_____ _____ _____ _____ ___ ______ ________
67. Summary of provisions for Federal grants to States for aid to the blind_

303
306
311

LIST OF TABLES

xvu

PART VI. THE NEED FOR FEDERAL SUPPORT OF SOCIAL
SECURITY PROGRAMS
Page

No.

68. Statutory placement of financial responsibility for various welfare
activities in the several States, Aug. 1, 1935____________________
69. Distribution of financial responsibility, August 1935_______ _____ ___ _
70. Assessed valuations and general property-tax receipts of local units of
government, 1922 and 1932___________________________________
71. Trend of population, assessed valuation, and tax levy, city of Detroit,
1915-34____________ _____ ______________________________ _____
72. Receipts by local authorities of England and Wales________________
73. Trend of net indebtedness of local units of government, 1902- 32_ __ _
74. Net bonded debt of cities of over 500,000 population (excluding selfsupporting indebtedness), Jan. 1, 1929, and 1934_ _ __ __ __ __ __ __ __
75. Revenues, expenditures, and indebtedness of cities (with 1924 population of 300,000 or more), 1924-32____ ______________ __ __________
76. Trend of relief expenditures________________ ________________ _____
77. Trend of State government tax receipts, 48 States, 1925-32_ _ __ __ ___
78. Trend of State expenditures for government, 48 States, 1925-32_ __ __
79. Indexes of State wealth and income___ __ _________________________
80. State and local tax receipts, 1932, and ratios of tax receipts to indexes
of State wealth and income______________________________ __ ___
81. Ratio of State and local tax receipts, 1932, (a) to income, 1929; (b) to
retail sales, 1933; and (c) to taxable wealth, 1931________________
82. State and local net indebtedness, 1912-32_______________ __________
83. Per-capita State and local net debt, 1922 and 1932, and ratio of 1932
net debt to income and wealth________________________________
84. Grants to States for social security__________________ ______ _______
85. The cost of a 1-, 3-, and 6-percent tax on pay rolls of wage earners and
salaried workers for selected industries in terms of value added by
manufacture and total value of products______________ __ __ ______

349
350
353
353
357
357
358
359
359
361
362
364
367
368
368
370
372

376

APPENDIXES
I-1. Occupations excluded from the unemployment compensation
plan, United States, April 1930___________________________
I-2. Occupational exclusions of gainful workers from the unemployment compensation plan by industries, United States, April
1930_____________________________________________ _____ _
I-3. Number and percent of coal-mining establishments and wage
earners, by number of wage earners per establishment, United
States, 1929 ___ _ __ ___ __ __ __ __ ___ __ _ ___ __ _ __ _ ___ __ __ _ ___ _
I-4. Number and percent of mining and quarrying establishments and
wage earners, by number of wage earners per establishment,
United States, 1929_________________ _____________ _______
I-5. Number and percent of manufacturing establishments and wage
earners, by number of wage earners per establishment, United
States, 1929 _ __ _ ___ __ __ ___ _ __ __ ___ _ ___ _ __ ___ __ ___ __ __ __ _
I-6. Estimated distribution of "wholesalers only" establishments and
employees, by average number of employees per establishµient, United States, 1929_____ _______ _____________ __ _____
I-7. Estimated distribution of , establishments and employees in
wholesale trade, by average number of employees per establishment, United States, 1929____ __ __ __ __ _ _ ____ _ __ __ __ ___ _
78470-37--2

386

387

388

388

389

390

390

XVIII

LIST OF TABLES

APPENDIXES-Continued
No.

1-8. Estimated distribution of retail stores, employees, and average
number of employees per store, by vol ume of sales per store,
united States, 1929____ ___ ____________________ ___ _____ __
I- 9. Estimated distribution of establishments and employees in
retail trade, by number of employees per average establishment, United States, 1929__ _________________ __ ___ _____ ___
I-10. "Size-of-firm" exclusion of gainful workers by industries, United
States, April 1930_______ ______________________ __ __ ______
1- 11. Distribution of total gainful workers and unemployed workers
by socio-eco1wmic groups in the United States, April 1930_ __ _
I- 12. Employed compensable labor force by industry and by type of
exclusion, United States, April 1930_________ ____ __________
I- 13. Employed compensable labor force by mdustries, United States,
April 1930 ___ __ _________ ___ ___ _____ _____ ___ ___ _________
I-14. Unemployed compensable labor force, United States, April 1930_
I-15. Estimated compensable labor force in the United States, April
1930__ ________ _______ ______________________ ___ ____ ____ _
I-16. Estimated compensable labor force, United States, 1922-33____
I- 17. Estimates of the compensable labor force, 1930-33, by States_ ___
II-1. Distribution of the unemployed by duration of unemployment,
Los Angeles, California, April 1930 and January 193L_____ __
II-2. Duration of unemployment by weeks, Los Angeles, California,
April 1930 and January 193L ________ __ __________________
II- 3. Average unemployment rate in compensable labor force, for
years represented by each composite curve, and in cities in
corresponding years_ _ _ _ ___ _ __ ___ __ _ ___ __ __ ___ __ _ ___ __ __ _
III-1. Assessable wages and salaries of employed compensable labor
force, United States, 1922-33___________ _____________ _____
IV-1. Personnel of public employment offices by States, 1935, compared with estimated number needed for u nemployment compensation activities_______ ____ _____ ______________ ______ __
VIII- 1. Noncontributory old-age pensions in Canada________ ________ _
VIII-2. Distribution of noncontributory old-age pensioners by Provinces
in Canada_ __ ___ ______________ _______________________ __ _
VIII- 3. Distribution of Canadian Government annuity contracts written
in 1930_________ ____ ____ _______________ _____ ________ ___
IX-1. The insured population and beneficiaries of foreign survivors'
insurancelaws_________ __ ___ ___ ____ _____ _____________ ___
IX- 2. Comparison of average survivors' pensions with weekly wages
for unskilled l:l.bor in engineering trades____ ___ ____ _ ___ _ ___ __
X- 1. Legal provisions for computing iuvalidity, old-age, and survivors' pensions ________ ___ ___ ___ ____ ______ _______ _____ ____ X-2. T otal benefit payments and distribution of cost__ ___ ___ ____
X-3. Percentage distribution of cost of pensions between the individual funds, the common fund, and the Federal Government__
X-4. Investment of reserve, 1891- 1933__ ____ __________________ ___
X-5. Investment of reserve by type of investment________________ __
X-6. Investments promoting the general welfare___ ______ ________ _
X-7. Receipts and expenditures, 1891-1934_____ ______ ______ ____ __
X-8. Proportion of cost of administration to t otal expenditures and
total receipts______ _______________ ___ _____ _____ ___ ______

Page

391

391
393
394
395
396
396
397
398
400
405
407

412
416

438
454
454
455
462
466
4 72
474

476
478
480
481
483
485

LIST OF TABLES

XIX

APPE NDIXES- Cont inued
p~

~

X- 9. Wage classes and contribution rates, 1891- 1934___ ______ ___ __
X-10. Rate of cont ribution as percent of lower and upper limit of each
wage class_ _____ ___________ ______________________ __ _____
X-11. Yearly amount of old-age pension ___ ____ ____ _____ __ _______ __
X- 12. Average yearly amount of old-age pension grants___ ________ _ _
X- 13. Yearly amount of invalidity pension___ __ __ _ ____ ____ ____ _____
X-14. Average yearly amount of the invalidity pension grants _____ ____
X- 15. Average yearly amount of widows' pension grants_ _______ _____
X-16. Average yearly amount of orphans' pension grant s_ _____ ______
X-17. N umber of persons in receipt of pensions, 1891- 1934__ ___ ___ _ __
X- 18. Number of pensioners 65 years of age or over___ _____ ______ __ _
XI- 1. Trend of birth rates in the United States expa ndi ng birthregistration area by States, 1915-34____ __________ __ ______ _
XI- 2. Trend of maternal mortality in the United States birt h-registration area by States, 1915-34_________ ____________ _________
XI-3. Trend of maternal mortality by color in the United States birthregistration area and in States having 1,500 or more Negro
births in 1934; 1915- 34 _____ ________ ________ ·- - - - -- -----X I-4. Trend of maternal mortality in the United States and certain
foreign countries, 1915-34_______ ____ ____ _______ __ _____ ___
X I- 5. Trend of infant mortality in the United States birth-registration
area by States, 1915- 34 __ ___________ ____________ ________ _
X l-6. Trend of infant mortality by color in the United Stat es birthregistration area and in States having 1,500 or more Negro
births in 1934; 1915-34_________________ __________ _______
X I- 7. Trend of infant mortality in urban and rural dist ricts of the
United States birth-registration area by States, 1915-34______
Xl- 8. Infant mortality rates (deaths under 1 year per 1,000 live births),
by specified groups of causes, in the United States birthregistration area of 1921, exclusive of South Carolina, 1921- 34_

486
486
488
489
491
492
493
494
494
495
499
500

502
504
505

506
509

513

LIST OF FIGURES
1. Actual and estimated number of persons aged 65 and over compared to total population, 1860-2000 _____ ____ ____ ________ _
2. Employed male population 40 years and over compared to total
male population 40 years and over___ ____ _____ _____ ____ ___
3. Maternal mortality in the United States, 1933_ __ _ ___ __ __ __ __ _
4. Infant mortality in the United States, 1933____ ____ _______ ____
5. Mortality in the first month and the first year of life, United
States, 1934, from specified groups of causes_. _ __ __ __ __ ___ _ _
6. Trend of infant mortality in urban and rural districts of the
United States_ ________ _____ _____ __ ___ ________ __________ _
II- 1. Curves showing cumulative distribution of the unemployed by
duration of unemployment, Los Angeles, Calif___ __ _________
Il- 2. Typical curves showing hypothetical distributions of the unemployed by duration of unemployment ___ __ ___ _________ ____ _
II- 3. Curves showing composite cumulative duration distributions of
the unemployed.,. ~_,. ____ __ ______ ______ _______ __ . _. ___ . __

140
147
262
264
266

268
406
409
411

.......
:.•:
t.

Part I

lTNEMPLOYMENT COMPENSATION
The basic data for part I are drawn
from staff reports on unemployment compensation
by Bryce M. Stewart, Merrill G. Murray,
W. R. Williamson, actuary, and
Fred Jahn, statistician

Chapter I
INTRODUCTION
HE HAZARD of invohu1tary unemployment is one of t he most
serious and disastrous of t he many risks which confront wage
earners in an industrial society. Industry moves through alternating periods of prosperity and depression which introduce serious employment risks ; workers, because of conditions entirely beyond
their control and largely beyond t he control of the men and institutio11s which employ them., are from time to bme deprived of all
sources of income. Under normal conditions the period of unemployment is rarely of long duration f or those workers who are not
handicapped by old age or ill health. But even f or relatively short
periods the results of unemployment can be devastating. Savings,
if any have been accumulated, a.re exhausted ; living standards sink
to a lower level; and the nutritional and health needs of the family
are neglected. E ver since the industrial revolution in t he early
eighteen hm1dreds, large-scale efforts toward public relief have been
periodically necessary to provide for thousands of wage earners who
have become involuntarily unemployed.
The unprecedented extent and durat ion of une1nployment in the
United States since 1930 has left no one who is dependent upon a
wage or salary untouched by the dread of loss of ,'V ork. Unemployment re.lief distributed as a form of public charity, t hough necessary
to prevent starvation, is not a solution of the problem. It is expensive to distribute and demoralizing t o both donor and recipient. A
device is needed which will assure those who are involuntarily 1.memployed a small steady income for a limited period. Such income,
received as a right, is provided by an unemploym·ent insurance or unemployment compensation system. Even though it cannot offer
complete protection of the wage earner's income d t1ring periods of
severe industrial retrenchment, and even t hough it cannot maintain
benefits which will equal normal wages in amount or duration, unemployment compensation serves t o lessen the in1111ecliate effects of a
major depression and to prevent its cumulative results.
Unemployment insurance has already been tested abroad and found
a valuable aid to the industrial system. It will be of inter est to t race
its evolution and development over nearly a century and a half.

T

3

4

UNEMPLOYMENT COMPENSATION

THE EVOLUTION OF UNEMPLOYMENT INSURANCE
Like many other forms of social insurance, unemployment compensation had its origins in trade-unions and mutual-benefit societies,
where pooled .Periodic contributions of members were used to pay
out-of-work benefits to those who were unemployed. Group action
to protect workers against the new hazards of industrial life began
as ~arly as 1789 when Basel Town in Switzerlan<J established an
unemployment insurance plan which lasted for several years before
it went out of existence. I n England in 1824 the Journeymen
Steam Engine vVorkers' Society distributed out-of-work benefits to
its unemployed members, and in Brussels the Printers' Union adopted
a system of traveling benefits for members in 1846. In all countries
government legislation on unemployment compensation has followed
experimentation by trade-unions. Union experience with unemployment funds, though limited in scope and effectiveness, developed
a code of practice which was largely adopted later when public
authorities established unemployment insurance schemes.
The union schemes failed to reach the large portion of unorganized
workers of the lower-paid and unskilled type, who, in periods of
unemployment, were forced to depend on the charity dispensed by
public poor relief and private organizations. Therefore the next ·
step in the evolution of unemployment insurance was the establishment of municipal, provincial, and national government subsidies to
voluntary benefit plans organized for nonunion workers. Berne,
Switzerland, was the first city to inaugurate this plan which was
started in 1893. Basel and Zurich followed suit, and similar municipal funds were created in Cologne, Germany, in 1896, in Leipzig in
1903, and in Bologna, Italy, in 1896. These funds had the disadvantage of attracting primarily workers engaged in occupations
which were subject to irregular employment. The funds became
unduly loaded with bad risks and most of the schemes were shortly
abandoned.
·
Several cities tried the experiment of subsidizing unemployment
funds of trade-unions. Dijon and L:unoges, France, in 1896 and
1897, respectively, were the pioneer cities in this approach, and in
1901 Ghent, Belgium, established a system of direct subsidies to
trade-union members under the administration of a communal unemployment fund. The Ghent system was adopted by several cities
in Germany (Strasburg in 1907; Muhlhausen, Erlangen, and J\IIainz
in 1909) and in two Italian cities (Milan in 1905; Brescia in 1909) .
It was widely adopted in those countries which developed voluntary
systems and still forms the basis of these systems.
The Ghent system provided a fixed amount 0£ benefit to each unemployed worker in addition to the amount which he r eceived from

INTRODUCTION

5

the union. The subsidies were granted annually and were computed
on the basis of benefits paid in the previous year. No provision was
made for the accumulation of reserves, and in depression years the
union funds were forced to bear a larger proportion of expenditures
for benefits than in other years. Liege, Belgium, in 1909 established
a different basis of subsidy, with a subvention which was related to
the amount of member contributions to the union as well a.s to benefits paid. This municipal subsidy was paid to the unions rather than
to the unemployed workers. The Liege plan was not so widely
adopted as the Ghent system.
Several of the provinces in Belgium and a number of the Swiss
cantons began to add their subsidies to those of the municipalities.
The first participation by a national government was in 1905 when
France passed a law providing for a national subsidy to voluntary
unemployment funds. With the outbreak of the World-War these
various European voluntary systems had considerable coverage but
probably failed to apply to half the industrial wage earners in any
of the countries where they were in operation. Since they were
purely voluntary schemes and since they were limited to union members, they left large numbers of nonunion workers unprotected.
With the failure of the voluntary plans for nonunion workers
established during the period 1890-1905, compulsory insurance
against unemployment was attempted. The first compulsory plan
on record is one established in St. Gall, a Swiss canton, a3 early as
1894. By a cantonal order municipalities were empowered to establish compulsory insurance . for worker s receiving less than a
stipulated wage. The municipality of St. Gall, acting on this
authority, established a fund in the following year. Workers were
requited to pay contributions in proportion to wages and their
benefits were graduated in proportion to contributions. After 2
years of operation the fund ceased to function, largely because of
the unwillingness of the more regula.rly employed workers to
contribute.
The idea of compulsory insurance acfter this brief experience
seems to have been abandoned until it was revived in Great Britain
a decade later in discussions of the inadequacy of the poor laws.
The administrative machinery of a national system of employment
exchanges was set up in 1909 and the first national compulsory unemployment scheme was established in 1911. It applied to six
industries and covered about 2,500,000 workers. The scheme was
extended in 1916 and again in 1920, when it covered practically the
entire wage-earning population of the country except f.arm workers
and domestic servants.
Following the example of Great Britain, seven European countries
established nation-wide compulsory unemployment insurance. These

6

UNEMPLOYMENT COMPENSATION

countries and the dates of enactment of their laws are as follows:
Austria, March 24, 1920; Bulgaria, April 12, 1925; Germany, July
16, 1927; Irish Free State, August 9, 1920; Italy, October 19, 1919 ;
Poland, July 18, 1924 ; Yugoslavia, D ecember 15, 1935. I n addition:
Queensland, Australia, enacted a compulsory insurance law on O ctober 18, 1922. Thirteen cantons of Switzerland also have such
legislation, the first of which was passed in 1925. ( See table 1.)
Canada on June 28, 1935, enacted a compulsory unemployment
insurance law to cover the entire domjnion (see appendix VI).
1.- Coiuntries in which compulsory u nemploymen t i r1s1.1,ramce or com pensation la w s have been enacted and mtmber of w orkers cov ered in each, 1935

T A BLE

Country 1
Australia (Queensland)_ . . -··- -.. -· _... ___ . .. _.... -· __ .. -· ..
Austria 4 __ _ ____ _ • _ _ _ _ _ _ _ _____ _ •• _______ __ _ • _ · - ____ • _ ___ _ _ · -Bulgaria._. _. . ·-· . __ ·-.----- -·_. · - ... . . .. . . _. __. . . . . . . . .. · -Canada·- · · · -- -- --- ---· - ---- -- --· · --- --- -- --· - -· ·-· - · -- -· · ·Germany _.. . . --·- ··- . . · --. ·-.... · ·--· -· _..... -· ·-.. ___ ·- . ·Great Britain and Northern Ireland . . . . ... -- ··· · · · - --· -· · ··
Irish Free State-· ·- · -----· · · · ··- ··---···· -· ---------·---- · · ·
Italy· ·-·----·---- · · · ·-·- -· ·--· · ···-····· ··- ··········---· ·· ·
Poland . . . ... •-······- · · --·· · ·-··- -··-·· - · -· -·······-···- -· ·
Switzerland (13 cantons) ... . --·- .... . __ .. . .... ·· -- .. __··- · _.
United States:
Alabama . . ----·- . . ·- __.. ·· -.. ___ __ __··-- .... -· ._ .. __ ___.
California. . . __ ... · --·· .... . .... . .......... . .. -· ... ·---..
District of Columbia _____ ___ ·-____ .. . . .... . ___.. _. __ ___ _
Massachusetts·-·- ··--··-·-· · ···· ··-·-·-··-········ · · -· ·
New Hampshire. __. __ ._ .. -- -·. ___ ·--_ ... . . _. . ___ ·-- . ·- New York . . -· ______ __ ____ _______ ___ _____ ___ _______ _. . · Oregon. _.•. ____... _. _. __•.• __. . . .. ___.. _. _.. _. _. . _. . .. _
Utab--·----------·- · ----- · --· · - -· ·-····-· · -·····-- · ·- -·

~i;~ig~~o-~~~=:::::::::::::::::::::::::::::::::::::::::

Date of law

N umber
insured 3

2

Oct. 18, 1922_____ ·- - ------ -· ·
Mar. 24, 1920..• ·- --· - - · - - -- ·
Apr. 12, 1925 . • · - -- ·--·· · -·· ·
June 28, 1935_· -·-- --··· -·--July 16, 1927..--· · ----·-··-- ·
Dec. 16, 191 L _. •.• ___. . ·---Aug. 9, 1920.•• .• · - · - ··--·-· ·
Oct.
. · -----·--·
-· · ___
July 19,
18, 1919
1924.___
. ______ _____
_

(~----------·- ----- ·--------Sept. 14, 1935--- - - - ------- ·-June 25, 1935____ __________ __
Aug. 28, 1935.·--·· · ·---- -·-·
Aug.
12, 1935_
1935.·-·
-·-·······
-·_
M
ay 29,
•. ___
_______ __
Apr. 25, 1935___ __ _. ___ ___ __ _
Nov. 15, 1935•. - · •• .• _· -·--•.
Mar. 25, 1935. · ----- ··- - - - - - Mar. 21, 1935__ __ __ ·--· - - -- - ·
Jan. 29, 1932__ . ____ .. _.. __ ..•

Total, 10 jurisdictious __. · - .. _. __ __.. ___ . .. _. ___·-· _. -· . __ _·---. __. . .. _. _____ . ___ ___ .
Yugoslavia_. _. ___ _· --· · - -- -· -- . ________ - · -·-- -- __ _. ___ ____ _ Dec. 15, 1935 1 _ _ _ - · ·-- -· - · - · ·
Total number insured . _. __ . ____. . __ _. __ · --- ____ ______ _____. ___ ______ _________ .. . ___

5

175,000
] , 012, 000
280,000
1,784,000
13. 472,000
14,003,000
380,000
4,500,000
957, 000
245, 000
256,000
1,587,000
75,000
937,000
107, 000
3, 000, 000
200,000
50,000
250,000
400,000
6, 862, 000
(8)

I= = = ==
43, 670, 000

A compulsory law was passed in Russia in 1922, but bene6t payments were suspended in 1930.
are t he dates upon which the laws were ""nacted, not the da 1es upon which they went into effect.
3 These are the most recent figures available.
4 Although the Austrian system is in many respects similar to unemployment insurance systems of
other European countries, it is dist inguished from t hem b y requiring a means test of applicants for
benefits.
1 The sharp decline from earlier years is due to the elimination of unemployed workers who ha"e ex•
ba usted their rights to benefits and to n ew restrictions in coverage.
6 The 6rst of the cantonal measures was passed in 1925.
7 Date of regulations issued by Yugoslav M inister of Social Policy a nd Public Health.
s Data not yet available.
1

2 These

In the Uni.t ed States, Wisconsin enacted a law for compulsory mtemployment compensation on January 29, 1932, which began to operate on July 1, 1934. Utah, Washington, New York, New Hampshire, California, Massachuset ts, the District of Columbia, Alabama,
and Oregon enacted compulsory legislation during 1935. Eighteen
States had similar bills before their legislatures during that period.
Eleven European countries have unemployment insurance systems
in operation under which government subsidies are paid to voluntary plans. These countries and the dates of enactment of their
laws are : Belgium, December 30, 1920; Czechoslovakia, July 19,

7

INTRODUCTION

1921; Denmark, April 9, 1907; Finland, November 2, 1917, repealed
in 1934 and substitute legislation enacted in 1934; France, September
9, 1905; Greece ( date not available) ; the Netherlands, Deoember 2 1
1916; Norway, August 6, 1915; Spain, May 25, 1931; Sweden, June
15, 1934; and 12 canton s of Switzerland, October 1'7, 1924. (See
table 2.)
A ccurate estimates of the total number of worker s covered by the
various compulsory and voluntary unemployment insurance laws are
impossible to assemble since during the prolonged unemployment of
recent years many persons have exhausted t heir rights to unemployment benefits. The estimates for 1935 shown in tables 1 and 2 place
the number insured under compulsor y sy terns at 43,670,000 and the
number insured under voluntary schemes at 4,161,000.
2.-0ountries vn ivhfoh laws have been enacted subsidJiz ing volwntary
insurance systems and the number of workers covered in each, 1935

T ABLE

Country
Belgium _______________ _____ ___ ________ _____ ___ ___ __________
Czecboslovakia __ ________________ . _________ _________ ________
Denmark _________ _____ _____ ______ ____________ __________ ____
Finland_____ ____ ________ ___ __ _______ __ _____________________ _
France ____ _______ ______ ______ ____________ ____ __ ____________ _
Greece ______________ ______ ______________ ___ _____________ ____
Netherlands _________ _______________ _____________ ___ ____ ____
Norway __ ______ ______________ ______ __ ____________________ __
Spain____ ____ _________ __________ _____ ____ ____ ___ ____ ______ __
Sweden _______ ___________ ___ ________ _______ ________ __ _____ __

Date of law

1

Dec. 30, 1920 ______ __ _____ ___
July 19, 19213_____ __ ______ __
Apr. 9, 1907 __ -- ------ ------Nov. 2, 1917___________ __ ____
Sept. 9, 1905__ ________ ___ ____
(5) ____2,---- - __
---- - ___
------Dec.
1916
__ __
__ ___--__ -_
Aug. 6, 1915 ___________ _____ _
M ay 25, 1931_ ___ __ __ ___ ___ __
June 15, 1934 ___ _____ _____ __ _
Oct. 17, 1924 s________ _______ _

Switzerland (12 cantons) 7 _ - - ------- - - --- - - - - - - - - - - - - ---- - - -Total _________ ________ ______________________ __________ ------------------------- -----

Number insured 2
899, 000
1,407,000
375,000
1 15,000
192,000
46,000
564,000
54,000
62,000
e 240,000
307,000
4,161,000

These are the dates for the enactment of the national laws, not the dates upon which they took effect.
These are the most recent figures available.
3 This act came into effect on Apr. 1, 1925.
1 The 1917 law was repealed and replaced by a new law on Mar. 23. 1934. Number iosured uoder the
new law is not available.
s There is no informatioo available on the date of the law. Data from Industrial and Labour Information,
Nov. 18, 1935, vol. 56, no. 7, indicates that insurance funds were in existen<le in tbe tobacco, milling,
and baking industries and the Athens newspaper sta1Is.
6 Includes 190,000 persoos under laws not yet appro ved.
7 Nine of these cantons specify that communes may enforce compulsory insurance ,within their horders.
s This is the date of the national measure. The first of the cantonal acts was passed in 1925.
1

2

Only one country which has enacted nation-wide compulsory insurance against the- hazards of unemployment has ever revoked the
act. Rather, the tendency has been to extend the coverage of compulsory systems to larger groups of workers. Russia, the one country
which has repealed unemployment insurance legislation, is reported
to have taken this step because unemployment no longer existed.
The present depression has proved a severe test of unemployment
insurance syst ems. The chief difficulty has been that, as unemployment became more and more extensive, workers exhausted their
rights to benefits and were obliged to seek public relief. The magnitude of the relief problem has demanded funds beyond the resources of local governments. A s a result, national governments

8

UNEMPLOYMENT COMPENSATION

have, of necessity, assumed responsibility for the provision of work
relief and direct relief. Reliance on insurance principies has in
consequence been shaken; workers who had contributed to the insurance fund were allowed to draw on the fund beyond the time limit
set in the original law if they had no means of subsistence. Thus
nn intermediary stage between insurance benefits and poor relief
was introduced, the insurance fund financing benefits on a needs
basis.
During this emergency period little attention has been given to
the possibility of using the insurance system as a vehicle for prevention of unemployment, since this problem was overshadowed by
the need for providing relief for those who were out of work. The
necessity for large government subsidies to the insurance system has
had the following results: the control of unemployment insurance
and relief measures has been centralized; systems of public employment offices have been developed, strengthened, and centralized;
and the tendency toward nation-wide compulsory legislation rather
than local voluntary measures for unemployment insurance has
received considerable impetus.
The optimism of ,a growing country, the long predominance of
agriculture, and the relative breadth of employment opportunity
have been factors in the slow development of an attack on unemployment in the United States. Here until 1932 all plans were
entirely voluntary and, as in other countries, trade-unions were the
initiators of the movement. Although the first union plan was
established as early as 1831, less than 100,000 union members were
covered by unemployment insurance reserves in 1934, some of which
were supported by employers or jointly by employers and union
members. Recurrent depressions in the last 20 years stimulated a
few companies to initiate schemes which together affected about
88,000 employees, approximately two-thirds of which were in a single
company.

INSURANCE PRINCIPLES IN UNEMPLOYMENT COMPENSATION
All forms of insurance represent attempts to evaluate the extent
of loss incurred through commonly recognized contingencies ( death,
accident, fire, illness, invalidity, or unemployment) and to devise a
scale of compensatory payments which shall be at least a partial
restitution of the loss. Successful application of the insurance
principle necessitates a fairly accurate measurement of the risk to be
incurred, a pooling of reserves to meet the risks, and a scale of
benefits which are calculated to maintain the solvency of the :funds.
The risk concept of insurance involves the coverage of many persons

INTRODUCTION

9

under a single plan in order to reduce the cost of meeting t he risk.
S1nall periodic payments on behalf of a large number 0£ persons,
many 0£ whom will not experience the catastrophe fo-r which insur.ance is carried, are necessary to provide adequate financial resources
:w hich will afford compensation for the persons who suffer the catas.t rophe. Certain people will be. less subject to the contingency than
others, but the mechanism 0£ shared risk is necessary to carry out
the purposes 0£ insurance. There is less variance from expected
experience in a l arge exposure than in a small group.
Certain basic concepts determine whether the unemployed are to
be provided for under an insurance system or a plan 0£ public aid
or out-of-work donation. An application of the insurance principle
in unemployment compensation means that an employee who fulfills
certain qualifying conditions becomes eligible for inalienable ~ontractual rights. These rights are measured by computations of the
incidence and duration of unemployment over a secular period, and
over this period a balance is maintained between the income and
expenditures of the fund. Large reserves must consequently be accumulated in good years i£ the anticipated drains 0£ poor years
are to be met.
In one sense unemployment "insurance" might be considered as
devoid of humanitarian n1otives. Its structure would merely represent statistical answers to such a question as "given an expectancy
of x periods of unemployment and of y weeks' duration during a
specified period, how much will it cost to provide z weeks of benefit
at so many dollars per week1" This cost, when computed, is merely
figured in terms of weekly assessments upon the contr acting individual.
Data are not available in this or any other country to compute
accurately any of the f actors in the equation. Even life tables of
insurance companies are revised periodically to allow for differences
in population characteristics and health conditions, as well as the
progress of medical science. A purely insurance principle as a
basis of an unemployment system would need constant r evision with
the accumulation of experience. These revisions would, however, be
legally applicable only to new contracts.
The policy underlying an unemployment compensation plan determines to what extent insurance principles will be maintained.
I£ the policy is to emphasize protection against seasonal and technological unemployment, with little attempt to accumulate reserves
for periods of extended unemployment, insolvency of the fund is
inevitable when a major depression occurs. This course may be
deliberately chosen in the interests 0£ providing more adequate protection in normal times. The maximum duration of benefits pro-

10

UNEMPLOYMEN'r COMPENSA'l'ION

vided is in this case adjusted to short periods of experience (2 or 3
years), the exigencies of a major depression are left out of reckoning, and a pay-as-you-go principle adopted. When a fund of this
character is faced by a period of severe unemployment, contribution
and benefit rates must be adjusted, or the government must provide
a subsidy or loan to meet the deficit incurred by maintaining higher
benefit r ates than the income of the fund would warrant. Reduction of benefits and increase of contributions meet with great opposition in periods of depression, hence resort to loans or government
subsidy is the usual result of a compensation system of this kind.
A closer approximation to genuine insurance is possible if an unemployment compensation plan can be computed statistically on the
basis of the experience of a business cycle, and as such cover a major
depression as well as the minor fluctuations of employment. This
basis establishes lower benefit rates and less liberal provisions with
respect to qualifications than are possible when the experience of a
major depression is ignored. Yet, basically, even this type of unemployment compensation plan cannot be termed pure "insurance",
since its benefits are not granted on a mathematical basis as to amount
and duration. Social good is placed above individual right, so that
some classes of workers may be favored. For example, seasonal
workers may be allowed to draw disproportionately on the fund, or
a minimum benefit may be provided for t he lower-paid worker and
a maximum benefit for the higher-paid worker: Similarly workers
with very long records of employ1nent may not receive the full proportion of the contributions accumulated on their behalf even if additional credit is given them for long periods of steady employment
under this system. Furthermore, the impossibility of accurately .
predicting rates of unemployment, particularly in severe depressions,
may make it impossible to maintain indefinitely even this type of
plan on a solvent basis without adjustment of benefit rates and contributions or by government loans or grants.
Most European countries, concerned with protection against unemployment rather than prevention, have provided for a wide pooling
of risks. vVhen in 1920 Great Britain extended unemployment insurance to practically the entire industrial population, the system
adopted was a national pool. All contributions, whether received
from England, Wales, Scotland, or Northern Ireland, were placed
in one fund. It was provided, however, that industries submitting
approved schemes might be permitted to operate them independently
of the main syste1n, and it was contemplated that perhaps one-third
of the insured population might ultimately be covered by such plans.
After the banking and insurance industries had established their
own unemployment insurance systems, or "contracted out", the privi-

INTRODUCTION

11

lege was withdrawn because of the high post-war unemployment
rate, the persistence of which prevented any restoration of the original provision.
In contrast to the broad national pooling of risks in Great Britain,
Germany in 1927 adopted a system which allowed the pooling of
widely divergent risks by r egions which cut across state lines. It
was thought that this procedure would stimulate competition among
the r egional areas for reduction of the, extent of unemployment with
consequent lowering of contributions. The continuous high unemployment rate necessitated withdrawal of this provision , however,
and Germany has actually pooled her resources in a manner similar
to that of Great Britain.
In Belgium, because of its strong trade-union organization, unemployment insurance was initiated mainly by funds of small local
unions. In part, the need for pooling of risk forced amalgamation
of many of these funds into national organizations, and in 1920
the post-war unemployment situation prompted the Government to
weld these units into the semblance of a national system with provision of national subsidies for further assistance during depressions. The assistance from the Federal treasury has recently been
increased and control of all money centralized.
The experience of these three countries shows the necessity of
wide application of the pooling principle, especially in periods of
serious unemployment. In the absence of any form of adequate reserves the British and German limitations on pooling had to be
withdrawn , and in Belgium the granting of subsidies from an emergency fund largely amounts to national pooling.
The social value and the practical simplicity of pooling the risk
points to this method as the most desirable. At present adequate
data are not available for differentiation among risks. Any attempt at establishing preferential rates for groups with the most
favorable experience, or "merit rating", will create problems. The
major danger will be that too great credence may be given to inadequate experience. Furthennore, the use of smaller units of coverage will tend to immobilize considerable portions of the general
funds so that, while not needed by some of the units, they will not
be available to other units with an adverse experience. To give
adequacy of provision in separate funds, therefore, higher rates of
contribution are required than if a comprehensive pool is provided.
Certainly any limitation on the pooling principle must be carefully
considered.
Unemployment compensation cannot prate.c t the insured population against the entire risk of unemployment. It must be considered
only as the first line of defense. Recognition of the need £or social

12

UNEMPLOYMENT COMPENSATION

insurance in the United States and other countries had its origin
in a desire to segregate the risks of dependency from poor relief
in general and to provide separate treatment for special problems.
The risk of unemployment must similarly be broken down and its
different parts must be given specialized treatment. Unemployment
compensation must then be limited by strict definition to those persons who are ordinarily employed with a fair degree of regularity.
Efforts to e.x tend an unemployment insurance scheme beyond these
proper limits have invariably converted it into a relief measure and
brought it into disrepute.
Recognition of the limited function of unemployment compensation and the desirability of providing-outside of the insurance system-for those on the borderline of insurance and relief is the basis
of the British Unemployment Act of 1934. Under this legislation unemployment insurance was restored to the original conception underlying the acts of 1911 and 1920, and transitional payments-the last
of a long series of post-war provisions for benefits to those on the
borderline of insurance and relief-were de.finitely severed from unemployment insurance. Transitional payments, linked to the insurance system, were replaced by a system of unemployment allowances
administered by a new national agency on a basis slightly different
from that of the former transitional payments. This change was
effected by restricting unemployment benefits to a limited period and
to those with a specified minimum of previous insured employment;
at the same time, an independent system of unemployment allowances was provided for those who lacked the requisite amount of
previous insured employment to qualify for benefits, for those who
had drawn the maximum number of weeks of unemployment benefits
permitted, and for a limited group of persons not covered by unemployment insurance. Unemployment allowances differ fundamentally from unemployment benefits in that they are not available as
a contractual right but are given only on the basis of need to applicants who have passed a "means test." The disqualifications also differ somewhat, but in the case of both unemployment allowances and
unemployment benefits applicants must be registered for work at public employment offices and are disqualified when unemployment is due
t.o a trade dispute. Financing also differs; unemployment benefits
are jointly financed by the worker, the employer, and the National
Government; unemployment allowances are entirely financed from
public :funds.
Unemployment allowances are administered by a new national authority-the Unemployment Assistance Board-which has largely
talrnn over the functions perfonned by the local poor-law authorities
in assessing need in connection with the earlier, temporary plan of

INTRODUCTION

13

transitional payments. The relief aspect of unemployment allowances is evident in the detailed fonnulas for assessing need and in the
disciplinary powers given the board for certain "difficult" cases, disciplinary powers which approach those exercised by the poor-law
authorities in granting "out-door" relief to the able-bodied unemployed.
The Germans, too, felt that unemployment insurance could not
cover the entire problem of unemployment. Setting up their scheme
from the vantage point of more than a decade and a half of British
unemployment insurance experience and after 9 years' experience
with national unemployment relief, their approach consisted of a
coordinated system including three kinds of protection : (1) unemployment insurance, financed from joint contributions of employers
and employees, with limited benefits on a contractual basjs for a
specified period; (2.) an emergency benefit scheme, providing benefits,
financed four-fifths by the Federal and one-fifth by the local governments and applicable to those insured persons who had either exhausted their rights to insurance benefits or who had not yet qualified
for them and who were in need; (3) beyond these two, a local relief
system, first established in 1924, which assured maintenance to all
needy persons who were willing to work. This relief system was
designed for the care of the unemployables rather than the ablebodied unemployed.
After more than two decades of experience with unemployment
insurance, the fact has finally been established, as the new British
law recognizes, that a sound system must have strictly defined limits;
that an insurance scheme must serve merely as the first line of defense, to be supplemented by other measures for able-bodied unemployed ineljgible for statutory benefits.

RELATION OF UNEMPLOYMENT I NSURANCE TO OTHER
PROTECTIVE :MEASURES
The various expedients to provide security against the hazards
of unemployment, accidents, illness, and old age are interrelated
from the standpoint of the employer, the employee, and society
itself. So far as costs are imposed upon the employer, they all
represent to him an increase of the labor cost of production. From
the standpoint of the employee, each form of protection adds to his
total measure of security. From the standpoint of society, they
have an essential unity in that they sustain purchasing power, afford
protection against destitution, and so promote economic and social
stability.
It is inevitable that if protection is not a.:fforded for all the industrial hazards, any one specific system will be made to carry some
78470-37-3

14

UNEMPLOYMENT COMPENSATION

of the burden of the other risks unprovided for. This is especially
true during a period of industrial depression when the fact of
unemployment impels many workers to make undue claims on other
insurance funds if no unemployment insurance benefits exist. This
principle is evident even in the limited American experience; :Murray
,iV. Latimer found in his study of industrial old-age pensions that
the number of pensioners in some American companies rqse almost
50 percent in the single year 1931, and in all companies by probably
14 percent. In short, with unemployment increasing during the
depression, many workers were pensioned who would have been
entitled to unemployment benefits if such a system had been in
existence. Experience with the 'Ohio workmen's compensation fund
in the depression years 1931-33 bears out this point. Increased
unemployment brought increased claims on the fund and a greater
number of revived compensation claims. During the year 1931-32
the cost of compensation exceeded that of any previous year. The
catastrophe and general surplus fund which amounted to about
$3,250,000 in 1931 fell to approximately $115,000 in August 1933.
It was shown that in a prolonged compensation case the medical
cost per claim during the second year of treatment was 67 percent
higher in 1931 than in 1925, about 50 percent higher during the
third year of treatment, and 150 percent higher in the fourth. "\Vith
a system of unemployment insurance in operation, some of the risks
now falling on workmen's compensation and industrial pensions in
the United States would be removed, and the real cost of each of
these types of compensation would be more properly allocated.
In the absence of a health-insurance system which provides benefits to compensate for a portion of the income loss resulting from
illness, a worker who has been out of work because of illness may
consider himself unemployed and clai1n benefits from the unemployment compensation system. Similarly, protection against oldage dependency is needed to preYent an unemployment compensation system from coinpensating for old-age risks which are outside
its compass.
I n Europe the different types of social insurance have deYelopecl
separately and have only recently begun to be considered in their
interrelationships. Under the German system, the une.mployment
insurance fund maintains the st atus of an unemployed person in
the old-age, invalidity, and health-insurance systems. An unemployed worker receives in sick benefits the same amount that he
would receive in unemployment benefits, so that he may not ha.v e a
special advantage in either. ,Vhen the system of sickness insurance
in Germany was paralleled by a plan of unemployment in nrance.
expenditure on sick benefits ·was considerably reduced. In France,

INTRODUCTION

15

too, the recent social insurance scheme made integrated provjsi.on
for all the economic risks, except that of unemployment, but special
provision was made to keep employees in good standing in the other
social insurance systems when unemployed.
Quite recently thought has been directed in this country to the
integration of all these measures into a broad program for economic
security. The widespread unemployment that has characterized this
country during the depression has prompted the view that direct
assistance for the unemployed must become a part of a general
program of protection :in the interest of the individual as well as
of the stability of business and the whole economic structure. This
conception of integration is hampered by traditional thinking and
the practical problems that must attend any effort to merge the
separate administrations that have been built up. Since our own
experience in the field of social insurance is almost entirely confined
to accident compensation, the United States is in a strategic position
to .establish well-integrated social insurance programs.
As a supplementary measure in times of widespread and prolonged depression some form of emergency relief or transitional
benefit has been deemed necessary in all foreign countries with
unemployment insurance system ·. In its report to the President,
the Committee on Economic Security recommended that persons
who remain unemployed after their benefit rights are exhausted be
given work-an opportunity to suppor t themselves and their families at work provided by the Government-rather than a cash
benefit..

Chapter II

A SUMMARY OF FOREIGN EXPERIENCE
WITH UNEMPLOYMENT INSURANCE
I NETEEN European _count:·ies, Canada, and Q~1eensland, At~stralia, now have nat10n-wide unemployment insurance legislation adopted on either a compulsor y or a voluntary basis.
Since the compulsory systems of unemployment insurance in Great
Britain and Germany are of particular interest because of their wide
coverage and highly industrialized conditions, their provisions will
be discussed in the present chapter. The voluntary systems of Belgium and Switzerland are also considered in some detail because of
the interesting parallel between the local political autonomy of these
countries and the F ederal-State relations of the United States.

N

GREAT BRITAIN 1
In its National Insurance Act passed by Parliament in 1911, Great
Britain was the first country in the world to establish national compulsory unemployment insurance. The provisions of the insurance
act were £rankly experimental in nature. Political demands subsequently resulted in many amendn1ents and, as a result of the recommendations of three commissions appointed to study the system,
the act has been frequently and extensively revised in the years
since the initiation of the plan. The latest modifications of the system were embodied in an act of June 28, 1934, later incorporated
in a consolidated unemployment insurance act which was passed
on February 26, 1935. The various revisions and amendments have
had reference to coverage; amounts and rates of contribution;
1

The principal sources of information on the provisions in Great Britain are as follows :
Industrial Relations Counselors, Inc., An H istorical Basis for Unemployrnent l nsm·ance
(The University of Minnesota Press, Minneapolis, 1934) ; "Unemployment-Benefit Plans
in the United States and Unemployment I nsurance in Foreign Countries", Bulletin of the
U. S . Bureau of Labor Statistics No. 544 (U. S. Government Printing Office, Washington,
D. C., 1931) ; " Operation of Unemployment Insurance Systems in the United States and
~'oreign Countries", Monthly Labor Review, June, July, August, and September 1934;
Hill, A. C. C., Jr., and Lubin, I sador, The British Attack on Unemployment (The Brookings Institution, Washington, D. C., 1934) ; F inal Report of the Royal Commission on
Unemployment lnsura·n ce (B. M. Stationery Office, London, 1932), Cmd. 4185.

17

18

UNEMPLOYMENT COMPENSATION

amounts, rates, and duration of benefits; qualifications for benefits;
length of waiting period; correction of anomalies and abuses; and
coordination with other measures for the assistance of the unemployed during the critical post-war and depression periods. The
provisions of the law cover England, Northern Ireland, Scotland,
and Wales. The territory now comprising the I rish Free State,
before its establishment in 1922, was also covered by the British act,
but now has its own system of insurance.
Administration.-The British system of unemployment insurance
was first administered by the board of trade through a series of employment exchanges established by t he Labour Exchanges A ct of
1909. Later, with the formation of a Ministry of Labour in 1917, the
functions of both labor exchanges and unemployment insurance
were transferred to the new government department. At present the
Ministry of Labour is assisted by an unemployment insurance statutory committee, which has supervision over the financial aspects of
the unemployment insurance scheme and acts in an advisory capacity
on questions relating to the operation of the act. The statutorJ
committee consists of a chairman a,ncl from. four to six member s appointed for periods of 5 years. A t least one member must be a
woman. The forern.ost duty of this committee is to assure the solvency of the sche1ne. It exam.ines the finances at the end of each
calendar year and proposes amendments to the act to restore and
maintain a balance between contributions and expenditures.
The l\finistry of Labour maintained, on January 1, 1933, 420 local
employment offices or exchanges and 747 smaller branches throughout the area of its jurisdiction. F or administrative purposes the
local offices are grouped in seven territorial divisions, each with a
divisional office intermediate. between the other local offices of the
district and a central record office for the whole system in the Ministry of L abour at K ew. The central office at ICew is under a chief
insurance officer and each of the local offices is directed by a local
insurance officer. AU these officers are appointees of the :Minister
of Labour, and other personnel appointments are under t he civil
service. In branch offices the personnel are frequently on a parttime basis and are not civil-ser vice appointees.
The local and br.anch employment offices are the administrative
units of the system with responsibility for the registration of the
unemployed a.nd examination of their work qualifications ; the
maintenance of lists of industrial and other labor requirements and
vacancies; job placements; investigation of eligibility for benefits;
and payment of benefits.
The local employment office gives each insured worker an employment book which serves the threefold purpose of identification,

SUMMARY OF FOREIGN EXPERIENCE

19

record of contributions, and employment history. The book is valid
for 1 yea,r and when it has expired i ~ sent to the central office in
Kew where it is filed for permanent r ecord. "'\Y hile the book is
current, it is kept by the employer as long as the ,Yorker is employed,
and each week the employer affixe · and date-cancels stamps t o the
value of the requisite contribution. When a worker loses his job
he receives his insurance book from his employer and immediately
takes it to his employment office where he leaves it until he is
reemployed. The local office checks his contribution record, registers him as available for wor k, attempts to place him in suitable
employment, inquires as to whether there are any disqualifying
conditions, establish es the waiting period necessary to qualify him.
for unemployment benefits, requires him to r eport, usually once a
day, to sign an unemployment register, and, when statutory con ditions are fulfilled, pays the covenanted benefits.
Certain groups outside the official insurance scheme are established locally to carry on phases of administ ration. Local employment committees organized in 1917 in various districts, and
composed of workers' and employer s' r epresentahves, and other interested individuals, cover the whole country. These committees
advise the Minister of Labour on problems in connection with the
administration of the insurance syste1n and of the employment
offices and assist the exchanges in 111aintaining contacts with employers, trade-unions, and local industry. Bebveen 1921 and 192,6
these con1mittees also acted on behalf of the lVIinister of L abour in
determining eligibility under the special conditions attached £o the
receipt of benefits for which the worker was not qualified on the
bas is of his record of previous contributions. Local courts of
referees, consisting of a chairman appointed by the Minister of
Labour and a workers' and an employers' representative, hear cases
of dispute regarding ordinary benefits. I f this local court decides
against the claimant, an appeal may be made to the umpire who is
appointed by the Crown with jurisdiction over the whole country.
Administration of unemployment insurance and pl acement for
juveniles is the function of two separat e bodies, (1) the juvenile
advisory committees of the employment offices and (2) special juvenile
bureaus which perform all t he functions of employment exchanges.
W hen the national insurance act was made effective a number of
trade-unions and other workers' associations ,vere operating unemp loyment benefit schemes of their own. Under the original and
subsequent acts these organizations were permitted to continue their
insurance f unctions and to distribute the benefits to which their
members were eligible under the national unemployment insurance
system, provided that the iinions or associations fulfilled certain re-

20

UNEMPLOYMENT COMPENSATION

quirements. These requirements have been changed at frequent
intervals but in the main consist of £our general rules: (1) The
union must have the machinery to keep constantly informed concerning wages and working conditions on jobs held by its members;
(2) it must use an effective method £or securing notices of vacancies
from employers and for placing its unemployed members, including
a register in each district under the charge of a qualified officer;
(3) it must have a system, satisfactory to the Minister of Labour,
for recording the unemployment of its members, by requiring members to register at an employment exchange or at the local union
otlice and by providing a full-time official of the union for registration work; (4) it must pay benefits from its own funds in addi6on to state benefits. Since 1930 the minimum supplementary
union benefits required have been at least 75s. for 25 weeks of unemployment to be paid· over a period of not less than 10 weeks.
The rigid requirements imposed upon trade-union unemployment
insurance plans, the involved technique of their administration of
benefits, and the drain of the depression upon trade-union funds
have tended to reduce the number o:f unions availing themselves of
the permissive provisions of the law. Over 100 unions took advantage of the opportunity to act as agents for the insurance system
in 1911, when the law became effective, and by 1915- 16 nearly half
of all state benefits were, paid out through unions. Between 1920 and
1930, however, this percentage had dropped to less than 8 percent. In
practice the unions which take advantage of t he opportunity to
<listribute state unemployment benefits contain only one-third of
the total union membership of the country.2
Coverage.-As first established, the British unemployment insurrmce system provided coverage for only 2,500,000 workers in a few
selected manual trades (mechanical engineering, building, iron
tounding, shipbuilding, construction of vehicles, saw milling, and
machine work) having a high and similar incidence of unemployment. In 1916 workers engaged on or in connection with munitions work in any trade, as well as workers in the metal, chemical,
leather, rubber, and brick trades-a total of about 1,250,000 peoplewere added to the system. The following year, 1917, it was recommended that the insurance scheme be extended to all workers, and
on November 8, 1920, the scheme became practically universal.
All manual workers and all nonmanual workers earning less tha.n
at the r ate of £250 a year were brought within the system, except
agricultural workers, domestic servants, permanent employees on
the railroads, certain employees of local authorities and of the
2

Hill, A. C. C .. Jr., and Lubin, Isador, op. cit., pp. 2!l4- 299.

SUMMARY OF FOREIGN EXPERIEN CE

21

poor-law and asylum authorities, and certain employees in publicutility companies. Under amending legislation, the minimum age
was set at the school-leaving age and the maximum at 64.
In July 1935, 14,003,000 persons 16 to 64 years of age, inclusive,
were covered by unemployment insurance in Great Britain and
Northern Ireland. On November 25, 1935, 1,788,182 insured persons
were registered as unemployed in Great Britain. Of the insured
unemployed in Great Britain 851,694, or slightly less than one-half,
were claiming insurance benefits. The number of cla.i ms for unemployment allowances was 732,338 on November 25. Of these claims
34,572 were disallowed. 3
The unemployment insurance statutory committee, in accordance
with the provisions of the act of 1934, has studied the problem of
agricultural coverage. 4 A report issued by this statutory committee
in January 1935 recommended the establishment of unemployment
insurance for agricultural workers with lower rates of contribution
and benefit than those which obtain for the general unemployment
insurance system. The com1nittee recommended further that unpaid family labor, special seasonal workers (unless the worker so
employed is already covered by insurance), and private gardeners
should be excluded from coverage. In the opinion of the committee
special provisions exempting employees but not employers from
contributions will be necessary for piece-work contracts and for
Irish migratory labor.
The main r easons for the recommendation of a separate account
for agricultural workers are the following: (1) The general level
of money wages is lower than in other industries; (2) unemployment in agriculture, though substantial, is less than in the insured industries taken as a whole; (3) agriculture should not be made liable
to the debt incurred by the unemployment insurance fund during the
past 14 years.
On April 9, 1936, the une1nployment insurance act f or agricultural
workers was enacted into law (26 Geo. 5. and 1 Eclw. 8. Ch. 13) .
Contributions first became payable beginning Ma.y 4, 1936, and benefits will be paid beginning N oven1bBr 5, 1936. It is estimated that
750,000 agricultural workers will be covered by the act.
Contributions.-Three sources of contribution finance the unemployment insurance system; the National Government, the empl oyer,
and the employee are required to pay equal amounts to the insurance
f und. The contributions are flat rates based on sex and age differen3
4

The Ministry of Labowr Gazette, vol. XLIII, no. 12, December 1935, p. 481.
Report of the Unemployment Ins1irance S tatntory Cornm-ittee, in accol'dance with sec.

20 of the Unemployment Insurance Act, 1934, on the question of the insurance against
unemployment of persons engaged in employment in agriculture (Cmd. 4786) , January
1935.

22

UNEMPLOYMENT COMPENSATION

tials rather than on wages. The following weekly amounts are paid
by employers under the most recent act:
Maies
Age

Above 20-- - - ---------------- ------------ -- - ------ --------18
to 20_____ _________ __________________ _________ __________ _

16
to 17-16
- ______
-------------- ----------------___________________
------ ----- - - ------_
Under
________________________

Femaies

d.

d,.

10

9
8

9
5
2

41/2
2

The employees pay the same amount as weekly cont ributions, employees 65 years of age or over being exempt, and the exchequer
niakes an equal pa,yment to the insurance f und on behalf of each
insured person.
The employer is made responsible for the employee's share of
the contribution. H e purchases stamps from the post offices and
each weekly pay day affixes an unemployment insurance stamp t o
the employee's insurance book which has appropriate spaces for
each ca1enclar week from J uly 1 to June 30. The stamps are datecanceled by the employer when t hey are affixed. One-half the face
value of each stamp is thereupon deducted from the weekly pay
of each employee under 65 years of age for whom.· the contribution
has been made.
This method of collecting income at source has many advantages,
since the number of e1nployers is small in comparison with t he
number of insured individuals. The money obtained by the post
office f ron1. the sale of unemployment insurance stamps is turned
over to the insurance fund.
The rates established for contributions and the resources available for payment of benefits have varied d uring the 24 years that
t he system has operated. In the main , contributions have incr eased,
not only in amounts but also in proportion to wages. In 1931,
when the r ates now in effect were established, the total weekly contribution of worker, employer , and state for a m.an over 21 represented 4.6 percent of average weekly earnings.
Under the agricultural system contributions are to be paid in equal
shares by employer , employee, and exchequer, each to pay weekly
4½d. for males 21 year s of age and over and 4d. for females of t he
same age. The contributions for this age group are one-half of
those under the general system. Younger age gr oups pay l ower
contributions. R ebates are to be given to employers and employees
for agricultural labor hired on a yearly or half-yearly basis.
The 1911 U nemployment Insurance Act was based on actuarial
calculations on the a sumption that, on the average, 8.6 percent of
the workers in the industries covered would be unemployed during
a trade cycle of 10 to 15 yea rs. During the first 9 yea rs of th.e system, unemployment was less than the e timated average and r eserves

SU:\fMARY OF FORE IGN EXPERIENCE

23

were accumulated. In 1920, when 11,000,000 additional workers
were covered by the U nemployment Insurance Act, tbl actuarial
basis vvas lowered to 5.32 percent ns an av.erage rate of unemployment to represent more accurately the larger groups insured. Actually, since 1921, the average annual percentage of unemployment
has only once fallen below the 10-per cent average occurring in 1924
&nd has ranged from 10 to over 20 percent in the intervening years.
Benefits were increased under the 1920 law to allow for higher costs
of living, and contributions, though also increased, were not raised
in proportion to benefits. Furthermore no provision was made for
the accumulation of reserves for the newly admitted groups covered.
v\Tithin a month the fund faced a depres ·ion , and by the middle of
1921 th.e surplus accunrnlated in the first 9 years had been exhausted.
It was also found that the statutory benefit, available to those with
a specified minimum of previous employment and payable in propor tion to the amount of insured employment, was insufficient for the
needs of many insured workers. For such worker s benefits wer e
extended to those who lacked the requisite contributions or who had
exhausted their statutory benefit, provided that they fulfilled certain
other special conditions. These additional benefits were known by
variuus names at different times, " uncovenanted", "extended", and
"transitional" benefits and " transitional payments." The history
of the fund from 1921 to 1931 was characterized by incr€asjng deficits except for the year ending July 1924. Finally, the cost of
" transitional" benefits was thrown upon the exchequer, and beginning with the act of February 6, 1930, the insurance system was
relieved. of the responsibility f or providing payments to insured
persons who had exhausted their rights to statutory benefits or
lacked sufficient contributions t o qualify for these benefits. Under
the 1934 act the borrowing power of the fund was repealed, although
temporary advanc,es were pern1itted, and the existing debt is to be
repaid with interest to the exchequer, at the rate of £5,000,000 a year
during a period of 37 years.5
Benefits.- The benefits paid to uneinployecl workers covered by
unemployment insurance are, ljJ.{e contributions, flat rates based on
sex and age differentials rather than on wages. , v-orkers who qualify for stat utory benefits must meet requirements related to definitions of unemployment, duration of contribution period, total amount
of contributions , and duration of unemployment. The amounts
and duration of benefits, the waiting period, and the statutory quali5 Hill and Lubin. op. cit. , cbap. XIJI, "Tbe Story of the Unempl oyment Fund" ; U . S.
Department of Labor , "Unem ployment-Bene fit Plans in tbe United States a nd Unem ployment In;;ura nce in Fot·eign Countries," Bi,t,l.letin of t h e U . S. B u r ea n of Labor Stat istics
No. 544 ( U. S. Government Printing Office, Washington, D . C., 1931), p. 288.

24

UNEMPLOYMENT COMPENSATION

fications £or the receipt 0£ benefits are described in the paragraphs
which £ollow.
A.mount of Benefits.- As pointed out in the discussion of contributions, the amount of benefits to which a qualified unemployed
worker has been entitled has fluctuated in accordance with the provisions of various legislative amendments to the insurance acts.
Under the 1911 act benefit rates were low, being based upon tradeunion out-of-work benefit practice. They were designed merely to
bridge short gaps between j obs and to offer minimum subsistence
rather than to afford compensation which would approximate ordinary wages except for low-paid unskilled.l aborers. In a period of
high costs of living the benefits were increased, but were subsequently decreased partly as an economy measure and partly to permit extended benefits for unemployment 0£ long duration. The most
recent revision of the benefit schedule was the act of June 28, 1934,
incorporated into the consolidated act of 1935. The new r ates are
20 and 25 percent higher for men and for women, respectively, than
wer e t he provisions of the original act of 1911. The weekly rates
for ordinary benefits are now as £ollows:
Age

21 to 64 (inclu~ve) ______ _____ ______________ _________ ___ ___

18 to 2◊-- -------- ---- - ---- - ------------- ------------------17 to 18--- - --------------------------------------- ---------

Under 17____________ _______________ ____ _________ _________ _

Mciles
s.

17
14
9
6

Females
s. d.

15
12
7
5

6

, ¥hen an insured contributor, male or female, has a dependent child
or dependent children, the weekly r ate of benefits is increased by
2 shillings with respect to each child. A dependent child for the
purpose of this act is defined as younger brother or sister, half
brother or half sister , stepbrother or stepsister, stepchild, or offspring under 14 years of age. The age limit for a dependent child
is raised to 16 years (ai) if the child is receiving full-time school
instruction, ( b) if h~ is unable to find work after leaving school, or
( c) i£ he is physically or mentally unable to r eceive school instruction.
Benefits are likewise increased by. 9s. in respect 0£ not more than
one adult dependent. Female adult dependents are defined as :
(1) a wi£e who resides with the insured contributor or is wholly or
mainly supported by him ; (2) a widowed mother , widowed stepmother, mother who has never been married, or mother whose
husband is permanently disabled and unable to work, or person
who has the care of the insured contr ibutor's dependent children,
where these persons reside with the insured contributor and are
wholly or mainly supported by him ; (3) a person employed at the

SUl\:IMARY OF FORRIGN EXPERIENCE

25

rate of not less than 9s. a week who assists in the care of the insured
contributor's dependent children provided such per son was engaged
in these duties before the insured contributor became unemployed.
Adult male dependents are defined as follows: ( 1) a husband
who is p revented by physical or n1ental infirmity from supporting
himself and is wholly or mainly maintained by his wife; (2) a
physically or mentally incapacitated father or stepfather who
resides with the insured contributor and is wholly or mainly supported by him.
Benefits for agricultural workers are somewhat lower than those
for industrial workers. T he amount of benefits for agricultural
workers is 14s. a week for a man aged 21 to 65 and 12s. 6d. for a
woman between these ages. Allowances for dependents are 7s. a week
for a. dependent adult and 3s. a week for each dependent child. The
maximum benefit is 30s. a week.
Duration of B enefits.-After statutory requirements have been fulfilled and the required waiting period has elapsed, an insured cont ributor is entitled to receive ~eekly cash benefits, the amount of
which is determined by his age and sex. Under the Unemployment
A ct of 1934, these benefits are payable for 26 weeks ( 156 days) in
the 12 months following the date of application. Special provisions relating additional benefits to contributions enable persons with
good employment records in insured occupations to obtain benefits for
the full 52 weeks in a 12-month period. Thus, if the contributor has
been insured for 5 years previous to the date of application for benefits, he is allowed 3 additional days of benefits for each 5 weekly
contributions made in his behalf during the 5-year period. From
these additional days allowed is subtt acted 1 day for every 5 days
of benefits which he may have received during the 5 years. When a
claimant has exhausted his right to benefits, ten contributions on his
behalf are necessary before he may obtain benefits for another period
of unemployment.
Since t he insurance system has been in operation , the standard
dur ation of benefits, like rates of contribution and of benefits, has·
been frequently revised. Ever since 1921 it has been felt necessary
to make some special provision for persons who lost their jobs bef ore
they had the statutory number of contributions to their credit and
for those who had exhausted their rights to benefits. Systems of
"uncovenanted" "extended" and "transitional" benefits were es'
tablished in the' hope t hat during
a temporary e1nergency the insurance fund would be able to pay benefits in advance of contributions.
At one time uncovenanted and extended benefits were granted at the
discretion of the Minister of L abour; at other times, they were granted
as a right to all unemployed persons covered by insurance. As a

26

UNEMPLOYMENT COlVIPENSATION

result of the National E conomy A ct of 1931 transitional payments
were restricted to claimants who could prove their need.
The act of June 28, 1934, abolished transitional payments and
made a complete separation of the insurance system and unemployment n~lief through the establisnment of an unemployment assistance
fund. However, the continuation of transitional payments through
the labor exchanges was provided for until January 7, 1935, the
date set by the :Mini try of Labour for the transfer of these cases t o
the ne,Tly established unemployment assistance system. The cost of
unemployment assistance is met almost entirely by the national
treasury, though a small portion will be financed by local tax funds.
The employment exchanges will continue to act as the paying agents.
Under the system for agr icultural workers, contributions are collected for 6 months before payment of benefits, and each individual
must have paid 20 contributions within 2 year s before qualifying
for benefits. In order to begin a benefit year, the contributor must
have not less than 10 unexhausted contributions. The benefit period
in a benefit year is defined as 2 weeks of benefits for the first 10
unexhausted contributions and 1 further week of benefits for each 2
unexhausted contributions beyond 10, subject to a maximum of 50
,veeks of benefit in any benefit year.
Statutory Ooncl-itions forr the R eceipt of B enefits .-Four statutor y
conditions must be fulfilled before .an insured contributor may become entitled to unemployment benefits : (1) Not less than 30 contributions n1ust have been made to his credit during the 2 years
previous to the date of clain1 for benefits; (2) his application for
benefits must be made in the prescribed manner and he must have
been continuously unemployetl since the elate of application ; (3)
he must satisfy the authorities t hat he is capable of and available
for work ; ( 4) he must, if a juvenile under 18 years of age-, either
attend or show good cause for not attending authorized courses of
instruction designed to facilitate his chances for r eemployment.
Waiting Pe1-iod.-Six days must elapse between t he date of applica.tion for unemployment insurance benefits and the date when the
applicant first becomes eligible for benefit. Any 3 days of unemployment in 6 consecutive working da.ys are considered as continuous 3-day periods of unemployment. T wo such periods of unemployment satisfy the waiting-period requirement, p rovided they are
not separated by more than 10 weeks.
Disqualification F r01n B enefits.-Grouncls for disqualification from
benefits are failure or refusal to apply for a suitable job called to
the attention of the unem ployed contributor by the employment
exchange or failure or refu sal to cany out written instructions
given him by an employment exchange officer ,Yith a, vie,,, to assisting

SUMMARY OF FORBIGN EXPERIENCE

27

hjm in .finding suitable employment; ni isconduct; voluntarily leaving work without just cause; unemp loyment resulting from a trade
dispute. The maximum p eriod of disqualification is 6 weeks except
that for trade disputes the- applicant for benefits is disqualified f or
the duration of the d ispute. !nm.ates of a prison or workhouse, persons residing outside the United King dom, and those who are in
receipt of sickness-insurance benefits, invalidity benefits, or pen sions
for blindness are· not eljgib1e f or unemploy ment benefits.
GER~1AN Y

6

Although a pioneer in other form s of nation -wide, compulsory
social insurance, Germany did not enact unemployment insurance
legislation un t il July 1927, when an insurance system was developed
a8 a substitute for and an adjunct to national emergency relief for
the unemployed.
P ost-wa r unemployment had far exceeded the financial resources
of local public authodtie ·. In November 1918 a national r elief
system ·was established and financed from communal, state, and F ed eral funds to assist all persons able and willing to wo rk but in need
because of unemploymen t resulting from the war . The system was
an emergency measure intended for only 1 year of operation, but it
remained in -force, with minor revisions, until 1923, when a permanent system was set up.
The first step in the- transformation of e1nergency relief into un employment insurance was taken on October 15, 1923, when employers and employees were r equired to cont ribute toward the cost
of relief. Their contributions, based on wages, were to provide
four-fifths of the total u nemployment r elief expenditures and the
re,m aining one-fifth was to be derived from communal appropriations, with supplementa.ry aid from state and Federal G overnments
if these sources of income proved inadequate. At first co1nmunal
authorities administered the relief fund, but control was gradually
shifted to employment exchanges which h ad been consolidated
6

Sources: "Gesetz iibe r Arbeit svermittlung und Arbeitslosenversicberung vom 16. Juli

1927," Reichsgeset zblatt, T eil I, ,Jabrgang 1927 (Verlag des Gesetzsammlungsamts, Bei:lin,
1927). p. 1 87 ; Gesetz •iiber A rb eitsvennUtl.11.ng 'ltn d Arbeitslosenversicherung, In der
Fassung des Gesetzes vom 12. Oktober 1929 (Reichsgesetzblatt I, S. 162) und d er Ver ordnungen elf's Reicbspr.as idente n vom 26. .Tuli und 1. Dezember 1930 ( Reichsgesetzblatt I.
S. 318 und S. 520) nebst de r Ve1·01·duung des Reicbsarbeitsminister s tibel' d ie Krisenfiirsorge fi.ir At·beitslose vom 11. Oktober 1930 ( Re icbsgesetzblatt I , Nt·. 4 2) ; Reichsarbeitsblatt, Amtsblatt des Re ichsal'beitsministeriums. T eil I, Amtlicher T eil, J ahrgang 1928Jabrgang 1935 (incl.) ; Industria l Relations Counselors, Inc .. An 1-Iistor ·ical Basis f or
Unemployment Ins1tra-nce (T be Univer sity of 1'1'Iinnesota P ress. Minneapoli s. 1934) ; "Op-

eration of Une mplo,\·ment Ins urance Systems
tries . rn:n to 193-!,'' Monthly Labor R eriew,
Weigert, Oscar. A<lm,inistra,tion of Placemn1t
(Industrial Relations Counselors, Inc ., New
Committee on Economic Security.

in t b e l'nited States and in Foreign Counvol. 39. no. 2. August J934 . pp. 27 3- 307;
and U 11empl oy1ne11t Insurance in Germany

Yor k, 1934) ; studies o f the staff of the

28

UNEMPLOYMENT COMPENSATION

into a national system in July 1922. In 1926 a severe crisis prompted
an extension of the system beyond the time of previous regulations,
with funds supplied by the Feder al Government and communes in
proportions of three-fourths and one-fourth, r espectively.
The entire relief system was superseded by the Employment Exchange and Unemployment Insurance Act of July 16, 1927, to take
effect on October 1. In framing this act German authorities foresaw that the payment of ordinary benefits would not afford the
workers covered adequate protection during severe depressions. At
the very outset, therefore, the system was a combination of insurance
and r elief, with provision for extended out-of-work benefits to insured persons whose une1nployment was of longer duration than
the period of covenanted benefits. Applicants for emerge11cy benefits were required to pass a needs test, but this test was to be less strict
than that applied for local public assistance.
Ordinary benefits were to be financed by contributions of employers and workers. The Federal and local governments were
responsible for furnishing the funds :for emergency benefits, given
to workers who were not yet, or were no longer, qualified for ordinary benefits. The Federal Government was to pay :four-fifths o:f
such benefits, the local governments paying the remaining one-fifth.
If the worker remained unemployed after having drawn the maximum amount of ordinary and emergency benefits allowed him under
the law, he was then taken care of by the local poor-relief authorities. Thus there were three distinct steps in the help given an
unemployed worker: First, he received insurance benefits. These
were given to him as a matter of right, since h e ( or his employer)
had paid for them by contributions to the insurance fund. Second,
during severe depressions the Federal G overnment, in cooperation
with the local governments, promised to continue making payments
for a limited period of time to a worker after he passed a means
test administered by the employment exchanges. Third, the local
poor-relief authorities took care of all persons who were ineligible
for both insurance and emergency benefits.
Industrial and employment conditions were rather favorable at
the beginning of unemploymel!t insurance operations, but in 1928
and 1929 Germany suffered a severe depression and a crisis in government finance. To relieve some of the strain upon the insurance system which resulted from widespread unemployment, the Federal
Government made large loans to the insurance fund. A commission was appointed during the summer of 1929 to recomn1end reforms in the system. As a result, various measures to limit coverage,
to prolong the waiting period, to prevent abuses, and to tighten
restrictions were enacted. A month later (December 1929) the cont.ribution rate was increased for a 4-month period in the hope of

SUMMARY OF FOREIGN EXPE RIEN CE

29

removing the budget deficit. In the spring of 1930 the Reichstag
was dissolved because of its rejection of a bill to increase contributions by an additional 1 percent and to decrease benefits. The
measure became effective, however, by presidential decree. In October 1930 the contribution rate w.as again increased to a total of 6.5
p er cent of wages, shared equally by employer and employee.
Meanwhile the number of persons who had exhausted their rights
to emergency as well as statutory benefits and who had claimed local
poor relief had r educed many of the local governments t o the verge
of bankruptcy. The year 1931 brought an even more seriou'3 financial
crisis, in withdrawal of foreign credit, large reparations payments,
and reduced export trade. Uncertainty concerning the: political staLility and financial solvency of the country created a panic.
A . commission appointed in January 1931 was called to recommend
measures of economy. They unreservedly supported the continuance
of the insurance principle for the relief of unemployment and rejected the application of a needs test to r ecipients of ordinary benefits; but, in order to balance the budget, they advocated a longer
waiting period, reduction of benefit rates, stricter application of
eligibility requirements, and greater F ederal powers. They also recommended the continuance of emergency benefits as an intermediate
stage between insurance and poor relief. The recommendations of
the commission were incorporated in a presidential order and, to
meet the cost of extended benefits, an emergency tax was levied on
wages, salaries, and other income for a 2-year period. The various
economy measures introduced in 1931 resulted in a surplus in the
Federal insurance fund for the fiscal year ending March 31, 1933.
But the financial burden of emergency be.n efits continued to increase
beyond the financial capacity of local and National Governments.
In 1932 the Federal Government was therefore empowered to
revise benefit rates and to apply any surplus in the ordinary benefit
account to other expenditures for unemployment relief. These measures destroyed many of the insurance f eatures of the original act.
An attempt was made to adjust benefits in accordance with the cost
of living in communities of various size. Ordinary benefits were
paid for only 36 days without proof of need, and a rigorous needs
test was applied to claimants after they had received benefits for 6
weeks. The means test was similar to the test for recipients of poor
relief. The tax on all wages and salaries was continued to help pay
for emergency benefits.
Since the National-Socialist revolution other restrictions with r espect to financing the system have been introduced. Emergency
benefits are now entirely paid for by contributions from employers
and employees. The new Government in Germany has addressed its
major efforts t o the prevention of unemployment through regulation
78470-37--4

30

U NEMPL OYMENT COM P ENSATION

of employ1nent, bonuses to the employers for hiring persons over
40 years of age, and work programs.
Administration.-The F ederal Institut e for Employment E xchanges and U nemployment Insurance (Reichsanstalt fur Arbeitsvermittlung und Arbeitslosenversicherung), an autonomous organization
supervised by the Ministry of Labor , is the central administrative authority f or the unemployment insurance system, as well as for employment exchanges. B efore 1933 the powers of the pr esident of
the institute were circumscribed in accordance wit h democratic principles of administr atior.. The president carried out t he decisions of
t he board in charge of administ ering t he la w (Ver waltungsra t), on
which employers, employees, and the public wer e r epr esented. In
1933, in keeping with t he introduction of the "leadership principle" in other branches of the Government, the president t ook over
t he functions of the governing boar d and became solely r esponsible
for t he decisions made by him. The same fundamental change was
made in the state and district employment exch ange and unemployment insurance offices (L andesarbeitsam ter und Arbeitsamter ) .
The commit tees on which the interested p arties wer e r epresented
transferred their power s to the heads of the state and district offices,
who were responsible only to the president of the F eder al institute.
Thirteen distr ict employment exchanges super vise t he activities
of the local offices, of which there are more than 360, direct th e
transfer of worker s from one d istrict t o another, act as the depository of the moneys collected as contribut ions in their dist rict , and,
by making loans or g rant ing subsidies from the funds of the F ederal
instit utiqn, promote relief work calculated t o reduce unemployment.
L ocal health-insurance offices ( 10,000 in number ) r eceive th e
employer -employee contribut ions f or unemployment insurance at
t he same time that health-insur ance contributions are collected. The
sickness-insurance societies then t ransmit the insurance contributions
to the district employment exchanges ,Ybich , in turn, send part of the
surplus to the central office and keep t he r e1nainder for disbursement
t o local employment exchanges of their jurisdictions in accordance
wit h the local requirements for benefit payments.
The intermediary collection and t ransfer of cont ribut ions by t he
h ealth -insurance fu nds is supervised by the F ederal institut ion . T he
health-insurance societies r et ain as a collection fee a small per centage
of the unemployment contr ibutions which they collect. From the
unemployment insurance contributions are also p aid the costs of
p lacement, vocational guidance, and administration of the local,
district, and central offices of the F eder al institution.
vVhen unemployed, a worker r egister s at once at the placement
depart ment of his local employment exchange, wher e he receives a

SUMMARY OF FOREIGN EXPERIENCE

31

control or report card. The qualifying period, waiting period, and
duration of benefit all date from the time of thi r egistration.
If the worker cannot be placed immediat ely in new employment,
his case is at once transfened to the insurance department where
he files his application for benefits. This application is accompanied by evidence that he has been in insured employment, together with statement. of the clurntion of his last employment, his
earnings during the preceding 6 months, and the reasons for terminating employnwnt. H e must al ·o state the number of his dependents and the amount of money he has received as a discharge
bonus or other benefits. His claim to benefits is investigated and
his eligibility requirements are frequently checked during the course
of his unemployment. S ince the 1932 amendment went into effect ,
the applicant also ha · to furnish information on his resources.
vVhile the possession of income does not bar him from benefits for
the first 6 weeks, continuance of payments is made contingent upon
his need after that time. The local relief offices begin investigating
the financial status of the unemployed and of his relatives shortly
after the application is filed in order to determine whether benefits should be paid beyond the first 6 weeks. During the prescribed
waiting period and while he i · in receipt of benefits, the unemployed
worker must report three times a week at the placement office to
register his availability for work. B enefits are paid at the employment exchanges once a week in accordance with the wage class of
the insured worker.
The appeals proced ure was worked out on democratic principles
in the original law. There were attached to the local employment
offices committees which decided disputed points. Representatives
of employers and employees had a voice in the decision. The appeals
commissions attached to the district and state offices were organized
in a similar manner , and so was the commission of last resort,
which formed a part of the Federal insurance office (Reichsversicherungsamt) . 7 Under the National-Socialist Govermnent, these committees and commissions went out of existence, and the decisions
are now made by the heads of the local district and Federal offices
in accordance with the "leadership principle."
Coverage.-The German compulsory system of unemployment in-:urance covers all manual workers between the school-leaving age
nnd 65 and all salaried persons r eceiving no more than 8,400 marks
11 year, except that ag ricultural workers and domestic servants are
~xcluded from t he system.
The population of the count ry in June 1933 was 65,336,000, of
whom 32,300,000 were gainful workers. The total number of those
7
T his office a lso administers all forms of social insurance except unemployment
insurance.

32

UNEMPLOYMENT COMPENSATION

insured against unemployment was 13,472,000 in November 1935.
During that month the Federal institution reported 1,984,452 as unemployed. Of these, 386,684 were receiving ordinary benefits, 666,466
were-in r eceipt of emergency benefits, and 340,017 were receiving
relief from local welfare authorities. The remaining 591,285 unemployed persons were receiving no . form of unemployment benefits
or assistance from public authorities.8
Contributions.-The insurance system is designed to operate solely
with employer and employee contributi•ons. A. total payment of 6.5
percent of t he first 300 marks per month in wages and salaries is
shared equally by employer and employee. The insurance system
has from time to time availed itself of its power to borrow from the
Federal Government, but contributions and benefits are now adjusted
to permit the funds to carry the entire load of ordinary and emergency benefits.
The insurance fund is completely pooled for all industries and
all districts except that the Carl Zeiss Optical Works has been permitted to maintain its own system of unemployment insurance with
participation in the administrative expenses •of the national system.
From time to time it has been recommended that contribution rates
should be varied for districts and industries in accordance with their
unemployment hazards, but it has been felt that departure from the
uniform basis would tend to restrict the mobility of labor, as well as
to handicap industries with high risks.
Benefits.-Ordinary benefits, like contributions, are graduated by
the income class of the insured contributor and, in addition, are
varied in accor dance with the size of the community. The benefits
paid are a higher percentage of the basic wage in the lower income
groups than in the higher. Additional "family allowances" in r espect of each dependent of the insured person are also paid. These
benefits are subject to deduction for a portion '◊f the income derived
from temporary employment.
The emergency be1i.efits and family allowances are the same as
ordinary benefits but are payable only to those who pass a rigid
means test and are reduced in proportion to any income which the
worker may possess.
Amownt of Benefits.-The following tabulation gives the range of
maximum weekly benefits payable to various wage classes in three
different types of communities:
Group

Range of mall}imttm
benl'fi,ts ( R eichsmai·ks)

No dependents ______________________________________________ 4.50 to 11.50
1 to 6 dependents ____________________________________________ 5.70 to 27.90
Partially unemployed (more than 3 days a week)----- --------- 0. 90 to 21. 00
8

Statisti~che B eilage zum R ei ch sarbeitsblatt, 1936, Nr. 1, pp. 5-6.

SUMMARY OF FOREIGN EXPERIENCE

33

Duration of B enefits.-Ordinary benefits are paid to a qualified
person for a period of 20 weeks, except that after 6 weeks they are
contingent upon a needs test. Emergency benefits, after exhaustion
of the right to ordinary benefits, are payable up to a period of 38
weeks or, in exceptional cases for persons over 40 years old, for a
period of 51 weeks.
Statutory Oonclitions for the R eceipt of B enefits.-In order to
qualify for the first benefit an insured person must have been employed and have paid his contributions for a period of 52 weeks
in the 2 years preceding his benefit claim. For subsequent periods
of unemployment he must have been employed and have paid contributions for 26 weeks in the 12 months preceding the filing of the
new clajm. Further statutory .conditions for benefits are reporting
for registration at the employ ment exchange, ability and willingness to accept work, performance of work or t r aining, and in the
case of persons m1cler 21 years of age, married won1en, and workers
who have received six weekly benefits, evidence of need. Additional eligibility requirements are imposed upon part-time workers.
Waiting Period.-After the cl aim for ordinary benefits has been
filed, a waiting period must elapse before the first benefit is payable.
The duration of this period is set at 14 days for persons with no
dependents, at 7 days for persons with one to three dependents, and
at 3 days for persons with four or more dependents. These waiting periods are reduced for persons who were employed only part
time prior to t heir total unemployment and for those who found
work after a, period of unemployment but lost it before the end of
13 weeks.
Disqualification From Benefits.-!£ unemployment is the result of
leaving work without j ust cause or of dismissal for just cause, the
right to benefits is withheld for 6 weeks; if the benefit claimant refuses to submit to vocational training or retraining, he is disqualified
for a period of 4 weeks; if unemployment is a direct r esult of a
strike or a lockout, benefits a re withheld for the duration of the
labor dispute.
BELGIUM 0
A voluntary system of unemployment insurance, except for a
period of financial collapse during the World vVar, has been functioning in B elgium for nearly 35 years. This system had its origin
9

Data on the Belgian insurance system have been taken from: I ndustrial Relations
Counselors, I nc., An Historical Basis for Un eniployment I nsiirance, op. cit.; Kiehel, Constance A., Unemployment Insu,rance in BeTgiitm (Indust rial Relations Counselors, Inc.,
New York, 1932) ; "Operation of Unemployment I nsurance Systems in tbe United States
and in Foreign Countries, 1931 to 1934", :M onthly Labor Review, vol. 39, no. 2, August
1934, pp. 273-307; Friedman, Gladys R., "Recent Developments in Unemployment Insurance in Belgium", Personnel, vol. 11, no. 2, November 1934, p. 51.

34

UNEMPLOYMENT COMPENSATION

in the Liege (1897) and Ghent (1901) plans of communal subsidy
to purely voluntary unemployment insurance established by tradeunions for their own members. As a subsequent development to
the comn1m1al subsidy, the provincial and eventually the National
Government contributed toward the benefits paid to the unemployed
members of trade-union funds which met certain requirements with
regard to methods of accounting. Communal funds under local
political control with a minimum of Federal regulation were set up
to distribute these Government subsidies and to extend insurance to
nontu1ion 111em.bers.
The population density of Belgium, the high degree of industrialization, the strong local .autonomy of the communes, and the politically, conscious character of trade-tmionism have all conduced to the
preservation of voluntary features in the insurance plan even with
the participation of the National Government in the finances of the
system. Recent developments have, however, tended to strengthen
central as opposed to local control. Eventually, with Government
participation and subsidy the need arose for uniformity of procedure
and benefits throughout the country, but not until the evils of local
political control had forced bas ic r eorganization of the system were
these results even approximated.
Just before the outbreak of the World War, 101 communes, or 4
percent of the total in the country, were affiliated with 39 comm1mal
funds. Approximately 130,000 workers "·ere insured by trade-union
and similar plans, representing an insurance coverage of about 10
percent of the working population. During this pre-war period industrial conditions were faYorable and unemployment rarely exceeded
4 percent. The low rates of benefit paid for short periods were
well within the financial limits of the systems. Almost 60 percent
of the total amount of benefits paid was financed from member
contributions, communal subsidies represented a little more than
25 percent, and national and provincial subsidies were responsible
for about 15 percent.
Unemployment assumed staggering proportions with the outbreak
of the war. Many trade-unions and communal governments were
bankrupt and all attempts to pay benefits were abandoned. The
National Government felt compe1led to offer some form of relief to
the unemployed, and in 1915 organized and financed the national
relief committee to provide for all unemployed wage earners without regard to their participation in insurance plans. This responsibility, though assumed only as an emergency measure, brought to
light many inadequacies of the trade-union insurance plans as measures designed to meet the hazards of unemployment. A R oyal Decree
of D ecember 1920, while reviving the bankrupt insurance societies,
amplified and unified to some extent· the provisions for contributions

SUMMARY OF FOREIGN EXPET.UENCE

35

and benefits. At the same time a national emergency fund, similar
in organization to the national relief committee, was established to
distribute a F ederal subsidy to societies that met Government r equirements.
In general the trade-union insurance societies were permitted to
conduct their affairs as they chose, provided they kept their unemployment insurance a.ccounts separate from other finan ces. U nemployed members ,-vere required on t he first da y of unemployment
to r egister for work at the employment exchanges which had been
coordinated with emergency relief distribution . But, in the absence of detailed F ederal regulations, societies varied greatly in
their insurance provisions. The national emergency fund supplemented the grants of insurance societies by paying basic grants
and family allowances to needy unemployed persons who had exhausted their rights to insurance benefits from the societies of
which they were members, as well as to workers who belonged to
societies that had exhausted their resources. The national emergency fund was supported (a) by a grant from the National Government; (b) by reimbursement, from. societies ,vhich v,1ere not financia.lly exhausted, of 15 percent of its payments to members in receipt
of benefits ; and ( c) by reimbursement, from the communes, of 10
percent of its payments to beneficiaries r esiding in those communes.
The communal funds distributed the basic grants and family allowances. These communal funds were controlled by communal
governments.
In the decade from 1920 to 1930 the unemployment insurance system was changed only slightly . B enefit provisions, r equirements, and
records of the various societies and communal funds t ended toward
greater uniformity, and rnember ship in societies was restricted to
persons under 65 years of age. By 1929, 70 communal funds had
been established; and although only about half of the Belgian communes were affiliated with these funds, the communes so affiliated
contained four-fifths of the entire population of the country. In
1929 Federal expenditures for unemployment insurance and relief
represented more than 40 percent of the total expenditures for
benefits.
With the beginning of the depression in 1930 unemployment rapidly mounted until, by December, it reached 26 percent of the total
insured population. A law was passed requiring all communes of the
country to affiliate with a communal fund and to reimburse the national emergency fund for 10 percent of its grants to their residents.
This law introduced the first element of nation-wide compulsion in
the hitherto entirely voluntary insurance system. Communal and
provincial governments, however, soon were in financial straits, and
the National Government through loans and advances to local govern-

36

UNEMPLOYMENT COMPENSATION

ments was carrying practically the entire load of unemployment
insurance benefits and relief. In 1934 nearly all the insurance societies also became bankrupt, and the national emergency fund
assumed their obligations.
Thoroughgoing reform of the insurance system was necessary.
Even though the entire system was practically supported by Federal
money, communal funds under local political control had the sole
authority for benefit payments. Supervision of the unemployed was
practically abandoned; no coordination existed be.t ween insurance
and placement; and the protection afforded an insured person depended more upon the accident of his residence and the liberality
of his commune than upon the severity of his employment risk. No
attempt was made to safeguard funds by adherence to eligibility
requirements, since the money was all furnished by the national
treasury. Societies, for political reasons, preferred to retain t he good
will of the unemployed rather than to abide by administrative regulations, since they knew that their obligations would be assumed by
the national emergency fund if their funds became insolvent.
As a result of this chaotic situation basic r eorganization of the
insurance and relief systems was undertaken. The National Government issued two decrees on May 31, 1933, amending and extending
unemployment insurance, providing for rigorous control of the unemployed, defining membership, contributions, and benefit require1nents on a uniform basis. The authority of the Central Government
was greatly increased and local governments, though r equired to contribute a larger proportion of expenditures, were deprived of their
long-cherished autonomy in the distribution of benefits. Although
the present system of insurance in Belgium utilizes the old machinery
of trade-unions and communal subsidy, the administrative functions
of the Ministry of Labor and Social Welfare through reporting,
supervisory, inspecting, and control procedures are as centralized as
in countries where purely national agencies administer the system.
The National Government has even deprived communes and provinces
of their right to decide whether or not they are financially able to
pay their share of relief and benefit expenditures. Assessments for
the national emergency fund are deducted from the taxes collected
by the Federal Government before the sums due to the provinces and
communes are allocated to them.
]\fore than a year after the basic reorganization of the insurance
system, steps were taken to remedy two other outstanding defects,
the lack of coordination with public employment offices and the
multiplicity of communal funds. Accordi11gly, on July 27, 193-!, an
order to take effect within 6 n1onths abolished communal funds and
substituted in their stead nationally controlled plaeement and unemployment offices which, in addition to placement activities. super-

SUMMARY OF FOREIGN EXPERIENCE

37

vise unemployment insurance societies and distribute to them sums
placed at their disposal by t he national emergency fund.
The history of the Belgian unemployment insurance system well
illustrates the ano1nalies and inequalities which may exist in a
country without the compulsion of a strong central control. The
war and the depression there, as in England and on the r est of the
European continent, created unemployment on a scale which swamped
the existing insurance machinery. The need f or emergency relief
administered on a nation-wide basis as a means of preventing starvation and demoralization of its unemployed citizens inevitably
strengthened central authority.
Administration.-The governing body of the national emergency
fund and the l abor office, two divisions of the Ministry of Labor
and Social Welfare, are charged with the central administration of
the unemployment insurance system in Belgium. The governing
body of the national emergency fund is a perm.anent board which
examines the statutes of unemploym.e nt insurance societies and recom.mends the societies for approval by the Minister. A director, a
clerical st aff, and an inspector comprise the personnel of the organization.
T he l~bor office supervises and directs the work of labor exchanges
and of the new placement and unemployinent offices which , by a
Royal Order of July 27, 1934, were to replace within 6 months the 72
local communal funds of the country. Each of the nine provinces
of B elgium is required to have at least one and not more than three
of these provincial employment offices with not more than six
branches, except that the provinces of Luxembourg and Namur may
share one provincial office. These offices are d esigned to take over
the former functions of comm.unal funds and to expand the work
of the inadequate employment exchanges in order that the system
may be unified and integrated with placement and emergency relief
of unemployed workers.
The duties of the p lacement and unemployment offices are as follows: D etermining eligibility for insurance of members of approved
unemployment insurance societies; verifying the unem.p loyment of
workers who are receiving benefits ; ascertaining the state of need;
stamping unemployment cards; investigating the nonacceptance of
work offered to unemployed persons; auditing the accounts of approved unemployment societies; distributing the funds allocated by
the national emergency fund as subsidies to approved societies and
their local branches; obtaining refunds from societies for unauthorjzed benefits paid to unemployed members; finding employment for
idle labor, either directly or through t he medium of employment exchanges established or approved by the Government. The 12 existing employment exchanges are placed under th e authority of the

38

UNEMPLOYMENT COMPENSATION

placem-ent and unen1ployment _offices in the district in which t hey are
established. The administrative cost of these placement and unemployment offices was first to be borne by the national treasury. An
order of September 12, 1934, however, decreed t hat provincial and
communal authorities should contribute toward the administrative
expenses of the offices in their jurisdictions.
Each placement and unemployment office and suboffice is to have
an appeals board with chairman, members, and secr etary constituting a committee to supervise its activities. Three members repre~ent workers' organizations and three represent employers, all appointed by the Minister of Labor and Social ,;velfare. The seventh
member is appointed by the :Minister as chairman and must be a
person who has never been an employer or a worker. This board
must meet regularly at least once a month to settle disputes regarding eligibility for insurance or the right to benefits.1 0
The insurance societies themselves are of four types, central , autonomous, auxiliary, and official societies. The central societies are
organized by central trade-unions with local unemployment insurance
societies corresponding to local branches of the union. Autonomous
societies are those of unions without local branches or subdivisions
and societies established by individual companies or groups_of con1panies. Auxiliary societies are branches of either central or autonomous societies formed for the distribution of additional benefits, usually upon the pay1nent of additional contributions. Official
societies are those organized for workers who are not members of
any other societies.
Coverage.11-Even though unemployment insurance in B elgium is
a voluntary system, it has achieved coverage and uniform protection
for practically the entire wage-earning population exposed to similar
unemployment risks. The persons excluded are agricultural workers, domestic servants, musicians, dramatic and variety artists~ independent workers, commercial travelers and insurance agents in the
service of several employers, and part-time and seasonal workers.
The age limits for insurance are set at 15 to 65 years. Belgimn in
December 1931 had a total population of 8,159,000. The nmnber
of gainfully occupied persons in December 1920 was 3,205,000. In
September 1935 approved unemployment insurance funds had a
total membership of 913,277 persons, of whom l!.9 percent were
totally unemployed and 11.9 percent were intermittently unemployed. 12
10

"Organization of Unemployment Insurance in Belgium.'' l11dttsft"ial and Labour I 11Jo1·mation, International Labour Office, \"Ol. LI, no. 9. Aug. ~7, 1934, p. 276.
u Indnstr·ia,l and La.boiir Inforrnation, International Labour Office, vol. LIII , no. 7,
Feb. 18, 1935, pp. 206- 207.
1
(Great 13rit&tu) , H!l , XLII.r, J:lO. 12, P~<;emger 1935 1
~ Ministry of La~our Ga::::ettc
p. 183,

SUMMARY OF FOREIGN EXPEin.RNCF.

39

Contributions.-Contribution rates throughout the early history
of the insurance. system have varied with individual societie and
with age and occupation within a given society. A Roy al D ecree of
May 31, 1933, doubled the rates then in existence and provided that
con tributions should be so calculated as to cover the risk of unem ployment in normal times. The minimum rate was set at 2.50 francs
per week. Early in 1935 the rates were ag ain increased by a decree
that existing rates were to be raised by 1 franc per week for all contributors except (a ) those under 18 years of age and ( b) those employed in public service and Government monopoly undertakings,
where the rates were t o be increased by 1 fran c p er month for manual workers, 1.25 francs f or salaried employees, and 50 centimes for
persons under 18 years of age. In other undertakings the rates f or
workers under 18 were to be increased by 50 centimes a week. The
maximum contribution p er member was limited to 3 francs a week.
The increases, however , were not to be required of member s of societies which were in a position to meet their liabilities for a year t o
come. The national treasury deposits with the national emergency
fund an a.mount equal to two-thirds of the annual contributions of
member s of each approved unemployment insurance society, as the
Government's financial share in contributions.
The unemployment insurance societies collect contributions from
their member s weekly, fortnightly, or monthly, according to the
rules of the particular group. In some instances society agents collect at the homes or work p laces of their member s; sometimes a central location is selected by a re.presentative of t he societ y for the receipt of contributions; but more often the member pays his insurance contribution weekly at the society h eadquarters together with
his union dues. A stamp method is rather generally used as a receipt for payment.
Benefits.-Individual societies in Be1gium are permitted t o establish their own rates of benefit f or unemploy ment. The National Government has, however , set a maximum to the amount and duration
of benefits which a society may grant.
Amount of B e,nefits.-During periods of unemployment for a
maximum p eriod of 60 days in a year an eligible insured contributor is entit]ed to statutory benefits from h is insurance society. Under
certain conditions he is also entitled to family and supplementary
allowances from the national emergency f und. The total of his
benefits may not exceed two-thirds of his normal wages unless he has
three children or more, in which case t he maximum is set at threefourths of the basic wages. If an insurance society is insolvent, t he
national emergency fund undertakes th e responsibility of paying it:;
covenanted benefits.

40

UNEMPLOYMENT COMPENSATION

The statutory benefits of unemployment insurance societies vary
with the societies t hemselves, but in no case may such benefits plus
the benefits derived from membership in an auxiliary society
e.xceed the basic grants of the national emergency fund which are
established at different rates according to age and family responsibility, as shown in the following tabulation :
Dai ly rate,

Groups

f ramcs

Unemployed married person, head of family ____________________________ 9. 00
Unemployed married woman, not head of family 13____________ ___ ____ _ _ _ 7. 00
Unemployed person, single, divorced, or widowed without children:
25 years of age or over _____________________________ _______________ 9.00
18-24 years--------- - ------- - ---------- ------- ----- - --------- --- - - 7.00
16-17 years____________ ____ ________ ___________ ___________________ 6.00
14-15 years ________________ __________________ _____________________ 3.00

Supplementary allowances are granted by the national emergency fund_to persons in receipt of statutory benefits in accordance
with age, family responsibility, and size of community. These
benefits are the following:
Group

Unemployed persons over 18 years:
Industrial and commercial localities :
Daily rate,
Population 50,000 and over:
francs
Brussels, Antwerp, and their enYirons _____________________ 4. 50
Other localities ___________________________________________ 4. 00
Populat ion under 50,00Q__________ ___________________________ __ 3. 00
Semi-industrial and commercial localities ___________________________ 2. 00
Agricultural communes _____________________ _____________ ________ __ 1. 00
Unemployed persons 16 to 18 years:
Industrial and commercial communes _______ ______ ______ ___________ 2. 00
Semi-industrial and commercial communes _______________ __________ 1. 00

The national emergency fund also grants family allowances to
unemployed persons in need, even though they are in receipt of
statutory benefits. The rates for these family allowances as established on May 31, 1933, are payable in respect of an unemployed person's dependent children and of his wife if, without other work,
she manages his household. The rates are as follows:
Daily

t·a t e,

fra11 cs

Wife ___________________________________ __ _______ _____________________ 9. 00
Children under 15 years 14_ ___ _ __ _ _ __ _______ _ __ _ ____ __ __ _ _________ _ __ _ _ 3. 00
Children 15 1 ~ to 16 years attending school or physically incapable of work_ 3. 00

A person is considered in a state of need if his maximum weekly
income is below stated amounts which vary according to age, family
13

This rate applies to partially unemployed manied women ; totally unemployed ma rried
women are excluded from benefits.
a '.rhe minimum age was raised from 14 to 15 years on July 14, 1933.

41

SUMMARY OF FOREIGN E XPERIENCE

responsibility, and size of community in which the person resides.
These are given in table 3.
Du1·ation of B enefits.-The length of time during which benefits
are payable varies with individual societies. The maximum stipulated duration of statutory benefits is 60 days a year divided equally
between two 6-month periods.
Post-statutory benefits are payable normally for 30 days in a
year but may be extended to a total of 300 clays in a year for the
combined statutory and post-statutory benefit period.
Waiting P eriod.-A waiting period of 3 days is required at the
beginning of each 6-month benefit period, and, in addition, a regular
T ABLE

3.-Maxim/Wn week ly 'inconies below which a state of need exists,
Jlelg,ium,
Weekly income in francs
Industrial and commercial commlllles
Groups

50,000 inhabitants or
over

Semi-indus- Agricultrial and tural com·
Less than commercial munes
50,000 in- communes
Brussels,
Antwer p, Other com- habitants
and their
IDlllleS
environs

Persons living alone:
25 years of age or over. __ _________ _____
Under 25 years of age. __ __ ____________
Household
of two__or
more
persons:
Two persons
____
______
_____ ___ _____ _
Each
additional
child
under
15 years
___ ___
ofage ____________ _____________
additional
person over__________
15 years
E ach
of age
_____________________

150
110

135
105

120
95

105

85

100
80

210

190

170

150

140

6

6

6

5

5

9

9

9

7

7

SOURCE: Friedman, Gladys R ., " Recent Developments in Unemployment Insurance in Belgium",

Personnel, vol. ll, no. 2, November 1934, p. 62.

waiting period of 2 days a. month is required for the receipt of
benefits. The month is calculated as beginning with its first Monday
and ending with the last Saturday preceding the first Monday of the
next month. Sundays and legal and local holidays are not reckoned
as days of benefits and are not counted in the waiting period.
An advance equal to statutory benefits for the 3-day waiting period
or f raction thereof may be paid to persons who have been completely unemployed for at least 2 weeks. The advance must be
repaid in full or in part when the beneficiary is again employed.
Statutory Conditions for the R eceipt of B enefits.- Insured persons
who are capable of work, who are under 65 years of age, and who
have been employed for at least 6 months in the preceding calendar
year are eligible for benefits in case of involuntary unemployment

42

UNEMPLOYMENT corvIPENSATION

jf they have been regularly enrolled members of unemployment
insurance societies for at least a year. If, however, the unemployment is the direct result of a strike or lockout, or of dismissal from
employment with subsequent refusal to accept new work under conditions customary in the region, the insured p erson is not quali fied
to receive benefits until a month has elapsed since he showed willingness to resume work. B elgian nationals who accept employment
abroad are also ineligible for ben efits until a month after their
return.
Transfer of membership from one society to another after the
completion of 1 year's membership does not entail a further qualifying period unless the laws of the society to which the transf er is
made require an additional p eriod. But the transf erred 1nember
is not entitled to receive benefits in excess of those authorized by ·
the society with which he was formerly affiliated until 6 months of
membership in the new society have elapsed.
A person who fails to pay contributions to the unemployment
society for 13 weeks is struck from the rnembershi p rolls unless
his delinquency of payment is the r esult of incapacity for work.
Persons so incapacitated are bound to pay their arrears in full,
except that their arrears shall not accrue for repayment beyond a
p eriod of 6 months.
In general, for eligibility to benefits an insured contributor is
re.quired to register for work at an employment office twice each
clay, but he is permitted to absent himself from this r egistration on
not more than 3 half days a. week if he utilizes this absence to seek
work. Proof of the search for work must be offer ed in t h e application for such leave of absence.
,vhen employment exchanges are notified of vacancies for unskilled labor, if the conditions of work and wages offered correspond
to the conditions cu stomary in the district , these positions are offered
first to insured p ersons who h ave been unoccupied for the longest
time and who do not appear to have made sufficient effort to obtain
employment . If such offers are refused, the p er on may be depriYed
of benefits for at least a month even if the po ition offered is n ot
in the insured person 's usual occupa t ion and is at a distance from
his ordinary place of work.
Method of P ay1nent.-Benefits are usually paid weekly by the
society agent who collects contribut ions. The procedure is in general as follows : (1) The unemployed member presents a certificat e
from his employer as evidence that his unemployment is i1H·oluntary ; (2) he presents his payment card for record of the date,
period, amount, and character of all the benefits he has r eceived
and for certification of the fa ct that he has r egist ered at an emp loyment exrhange; ( 3) h e presents his membership card as u record

SUl\lIMARY OF FOREIGN EXPERIENCE

43

of his contributions ; (4) he produces certification from the employment exchange that no suitable ·w ork is avail able.
The payment of benefits through the society includes in almost
ali instances the subsidy from the natjonal emergency fund and
its family and supplementary allowances.
SvVITZERLAND 1 5
The ·first a.ttempt at unemployment insurance in Switzerland was
made in Basel Town in 1789. All workers in the lace and ribbon
factories contributed 2 percent of their wages, which was turned
over to officials chosen by the town council. Before any benefits
could be distributed, however , the revolution of 1789 halted the
operation of t he fund, and the contributions were returned to the
contributors.
Switzerland is also credited with the first attempt to introduce
a compulsory unemployment insurance law. The Canton of St.
Gall enacted a law in 1894 permitting communes in its territory to
provide compulsor y unemployment insurance for certain workers.
The commune of St. Gall was the only one to establish a fund
under this act. It began in 1895 and ceased to function in 1897
because workers with rather stable employment moved to neighboring towns to a,yoid joining the fund. L eft with the bad risks the
fund soon showed a considerable deficit.
At the opening of the twentieth century Switzerland had made
but little progress in dealing with the recurrent problem of unemployment, although experimentation with public employment exchanges and private nnemployment insurance funds provided the
basis for further developments. The experience with relief measures
during the war and post-war periods showed conclusively that some
permanent method of dealing with unemployment was necessary.
The voluntary unemployment insurance fund s did not offer a sufficiently broad and stable basis to cope with the problem. The various unemployment insurance funds ha.cl functioned during the war
period and had been informally and irregularly subsidized by public
authorities. The Confederation, after consider ation of the question,
decided to formalize and place the sub.sidies on a permanent basis
and thus encourage the development of funds.
Switzerland is a democratic country with a F ederal constitution
like that of the United States, in that the central authority is limited
to delegated powers. The 25 cantons of the Confederation are en15
Data on the Swiss unemployment insurance system bave been taken from Spates,
T. C., and Rabinov itch, G. S., Unemployment Insu,rance -i.n Swi.tze-rland (Indus trial Relations Counselor s, Inc., New Yo~rk, 1931) ; Industrial Relations Counselors, Inc., .a n Historical Basis for Un cm.p loyment I nsura,ncc, op. cit.; "Unemployment Insurance in Swttze:r!and". MQnthl1J LabQr Rev iew? vol. 40, no. ~. May 1935, pp. 1203-1207.

44

UNEMPLOYMENT COMPENSATION

tirely autonomous except with respect to powers delegated to the Federal Government. No provision in the constitution authorizes the
Confederation to enact unemployment insurance legisl ation, much less
to make it compulsory for the cantons, or even to subsidize unemployment insurance funds voluntarily created by the cantons. Any
of these steps would r equire an amendment to the constitution by a
vote of a majority of the Swiss electors and of the cantons.
The Confederation likewis e had no power to set up a system of
employment exchanges but in 1909 had subsidized exchanges as
a method of stimulating the placement of the unemployed workers.16
This same principle was utilized, in view of the constitutional difficulties involved, to promote and assist the development of insurance
funds.
The Federal Law of 1924.- The Feder al act for the payn1ent of
subsidies to unemployment insurance funds was enacted by the Federal Assembly on October 17, 1924. The law provides that Federal
subsidies are to be granted to funds based on the principles of insurance which comply with conditions specified in the act. These
conditions relate to (1) the objectives, administration, and membership of the funds; (2) the benefits payable to members; (3) the
conditions entitling members to benefits; (4) the repayment of any
subsidies from unused balances upon the di·ssolution of any fund ;
and ( 5) the conditions under which partial unemployment benefits
may be included in the insurance system. I n addition to these provisions, the law specifies the amount of Federal subsidies to be
granted to funds and the general provisions for F ederal recognition
and supervision of the funds.
Under the section of the act dealing with the conditions relating
to the obj~ctives, administration , and membership of the funds are
found the following four conditions: (a) The fund shall not be carried on for profit or for any purpose other than the r,elief of unemployment; (b) it shall have its own books and accounts and
shall give guaranties for the proper administration of its moneys;
( c) it shall have precise. regulations respecting the contributions
of members, the ben.efits payable, and the utilization of the assets
and surplus balance; and (cl) no member of one fund shall be at the
same time a member of another fund.
The act stipulates that the funds shall not pay more than a
maximum of 50 percent of normal earnings to members who ha Y.e no
legal dependents and a maximum of 60 percent to members with legal
dependents.
16

By ~1irtue of the ratification of tbe first r esolution adopted at tbc I nte rnational Labor
Conference at Washington in 1919 for tbe establisbment of a srstem of free employment
exchanges, Switzerla nd a ssumed an interm1tional obligation which became the a uthor ity
for issuing in 1924 an orde r r equiring each canton to set up tbe number of exchanges
sufficient for tbe need and coordinated with a central exchange.

S UMMARY OF FOREIGN EXPERIENCE

45

The 1924 act provides that the funds shall not pay benefits unless
the insured person becomes unemployed through no fault of his own,
registers at an employment exchange, is unable to find suitable employment, and produces a certificate from his last employer stating
the reason for his unemployment. Subject to the approval of the
Federal labor offic,e registration at trade employment exchanges
may be substituted for registration at public employment exchanges.
The funds are eligible for subsidies only if they provide that members are not entitled to benefits unless they have belonged to the
fund and paid contributions for at least 180 days and h ave served
a waiting period of at least 3 days after registration. The maximum
period of benefits allowable is 90 days in a period o:f 360 days, but
by resolution of the Federal Council, the executive authority of the
Government, the benefit period may be extended beyond 90 days
during times of continued depression. The funds are required to
provide that unemployment as a r.esult of a collective labor dispute
disqualifies the member for the period of the dispute and for 30
days thereafter ; that incapacity for work disqualifies the member
for the duration of the incapacity; an9- that members who r efuse to
accept suitable employment, who mak.e insufficient effort to find
employment, who fail to comply with regulations, who supply
incomplete information, or who attempt to obtain benefits unlawfully
shall not be entitled to benefits.
The act of 1924 contains a provision covering the conditions under
which the funds may pay compensation for partial unemployment.
In such cases, the combined income from unemployment compensation and the actual earnings of the insured person shall not exceed
80 percent of the normal earnings for those with dependents and
70 percent in the case of all others. The right to compensation
shall cease when, during a period of 360 days, the combined compensation is equal to full benefit for 90 days.
The Federal subsidy to public :funds organized by the cantons and
communes, and to private funds administered jointly by employers
and employees, is set at 40 percent of the benefits paid in conformity
with the rules. The subsidy to trade-union funds is 30 percent.
The variation in the amount of the subsidies was made on the assumption that public and joint funds would have poorer risks. The
F ederal Assembly specifically reserved the right to increase the
subsidies temporarily by not more than 10 percent.
The legislation has additional provisions regarding the conditions
under which Federal subsidies are to be obtained. The F ederal labor
office is given t he right to inspect at any time the business operations of a fund subsidized by the Confederation and to receive statistical data. The Federal Council is empowered to make the rules
and regulations necessary to administer the act and to designate
78470- 37- 5

46

UNEMPLOYMENT COMPENSATION

the authority competent to decide matters rel ating to subsidies.
The act provides that the Federal Council may prescribe the minimum number of members which will entitle a fund to receive
subsidies and that the subsidy may be reduced if it, together with
other subsidies from public funds, would exceed a certain percentage
of the benefits paid. The Federal Council may, in view of special
circumstances, lay down further conditions for the payment of
Federal subsidies or may grant certain relaxations temporarily.
Advances from the Federal subsidy may be granted to the fund
if necessity is shown. The payment of the Federal subsidy may be
made conditional on its being used to increase the benefits or to
prolong the period during which benefits are payable or to constitute
a reserve fund. The Federal subsidy is not to cause any r eduction
in benefits or in contributions of the insured persons.
The Federal Orders of 1925 and 1929. -Federal orders, from time
ro time, have extended, modified, and more explicitly defined the
provisions of the act of 1924. Order I of the Swiss F ederal Council,
issued April 9, 1925, became effective on April 15, 1925, and stipulated· in greater detail the procedure by which recognition of funds
was to be made by the Federal labor office. I t provided that where
recognition by the labor office is refused or withdrawn, by virtue of
some alteration in the provisions of t he fund, appeal may be made,
within 14 days, to t he Federal Council. Any decision of the labor
office regarding subsidies and conditions upon which they are t o be
granted may be appealed, within 14 days, to the F ederal Department
of Public Economy, whose decision is final. The F ederal labor office
jg given authority to lay down certain forms and principles of procedure relating to notification of unemployment, employer's certificate of dismissal, and statistical reports, which must be approved by
t-he F ederal Department of Public Economy.
The act ·o f 1924 merely states that an insured person should receh e
benefits if unemployed through "no fault of his own" and if he is
" unable to find suitable employment." Section IV of the first order
defines in greater detail the scope of these two terms. Dismissal on
~ccount of gross or deliberate negligence, refusal to work, disregard
of rules or a contract, and voluntarily ]ea.v ing without good cause
l except when continued employment would be contrary to a collective agreement or to the usual wages or conditions of work in the
trade) are to be regarded as faults of the insured. Suitable employment is defined so that the capacity of the insured, the future exercise of his trade, and his health and morals are safeguarded. I t is
provided that exceptions may be made with regard to accepting either
employment made available through a strike or employment under
conditions contrary to a collective agreement covering the insured,
as well as employment which is inacceptable in view of the conditions

SUMM ARY OF FOREIGN EXPERIENCE

47 ·

and wages in the trade. In cases of reduced working capacit y, employment at a; correspondingly reduced wage may be regarded as
suitable. In allotting employment away from home, insured p ersons
with dependents must be given special considerati'Ol1. The F eder al
Department of Political Economy is authorized to prescribe furt her
provisions for the definition of the two terms.
The order provides that the rules governing partial unemploymeut
should be applied to any insured person who becomes temporarily
unemployed without terminating his employment contract and therefore suffers a loss of earnings.
Notification to and supervision by the employment exchange is
necessary for .partial unemployment only when there is a loss of
full working days, when the loss of earnings is more than half the
normal wage, and when no other adequate system of supervision
exists. These provisions also apply to homeworker s. If an unemployed worker accepts relief work or other employment outside
his trade, he may be compensated for the loss of earnings according
to the provisions for partial unemployment. H e must nevertheless
register at the employment exchange and accept any suitable employment in his trade.
The order provides that public funds must acce.pt members of
other recognized funds who have voluntarily resigned or have been
released through no fault of their own, provided they have fulfilled
their obligations to the fund and are not unemployed at the time
of transfer. Such members must be granted the same rights as other
members after they have paid contributions for 4 weeks. The qualifying period to elapse before a member is entitled to benefits in such
a case is to be reduced according to the period during which the in·
sured has paid contributions in the former fund.
Order II, dated December 20, 1929, came into force January 1,
1930. Among other things it provides that Federal subsidies shall
not be granted to funds with a membership of less than 200, except
in specia1 cases and that recognition may be withdrawn from funds
whose financial position does not guarantee the payment of benefits.
The amount of the Federal subsidy is to be reduced in proportion if
the total subsidies granted by public authorities exceed 80 percent
of the benefits paid. Exceptions may be made to permit the creation of an adequate reserve fund.
In addition to the provisions in the previous law and r egulations,
unemployment caused by holidays, loss of earnings resulting from
regularly recurrent work, such as stock-taking, cleaning or repairs
to the plant, or unemployability, is not compensable. Where unemployment results from a slight fault of the insured, benefits may
be paid him after the expiration of not less than 4 weeks. Where
the insured has received the maximum benefits for 3 consecutive

'48

UNEMPL OYMENT c m vIPENSATION

years, the maximum shall be r educed by at least one-h alf in the
fourth year, excepting in times of depression or other special circumstances.
The F ederal Department of Public Economy is authorized to
enact special provisions for members belonging to seasonal occupations and shall provide for a special waiting period, reduction in
the period of benefits during seasons when there are good possibilities of getting employment, and establishment of special rates
of contributions.
.
Unemployment Insurance During the Depression.-The depression necessitated significant changes in the unemployment insurance
laws and regulations in Switzerland. I t was soon found necessary
to increase the amount of Federal subsidies. On September 23,
1931, the Federal Assembly authorized the Federal Council to increase the subsidies 10 percent in certain specified industries for
the calendar year 1931 and :for any other industries seriously affected
by the crisis for the period October 1 to December 31, 1931. The
next year, on September 29, 1932, the Assembly authorized the Council to pay subsidies to seriously a:ff~cted industries for 1932 of not
more than 45 percent of benefits paid to public and joint funds and
40 percent to trade-union funds. A law enacted October 5, 1933,
authorized the Federal Council to subsidize funds in certain industries for the year 1933 and in other seriously affected industries
for the months between October 1 and December 31, 1933. This
subsidy to public and joint funds was not to exceed 43 percent, an d
to trade-union funds 38 percent of benefits paid. The increases in
the subsidies were made on the condition that cantonal and communal
subsidies .were not to be decreased and that when the subsidies paid
by Federal, cantonal, and communal authorities exceeded 90 percent
of benefits, the F ederal subsidy would be reduced in proportion.
In addition to these changes, the continuation of unemployment
necessitated both the extension of the statutory period of benefits
as well as the introduction of crisis relief to those individuals who
had exhausted their rights to benefits. Beginning in 1930, temporary
measures increased the statutory duration of benefits from time to
time. An order of November 4, 1933, authorized the F ederal authorities to extend the benefit period from 90 to 120 days during the
year 1933 to certain classes of workers, on condition that, during
the period of extension, benefits did not exceed certain r ates varying
between 4 francs a day for unmarried p ersons under 22 years of
age living at home, and 8.10 francs a day for married persons with
dependent children.17
Besides the extension of the statutory period of benefits, the F ederal Assembly found it necessary, by a law of December 31, 1933,
11

I ndustri al an d L abo1ir l nfornia t i on, vol. L, no. 7, Muy 14, 1934, pp . 2 42-243.

SUMMARY OF FOREIGN EXPERTRNCE

49

lo set up a relief scheme to supplement the insurance system by
offering a special subsidy for the cantons and f or intercantonal associations of workers in certain occupations paying emergency allowances to the unemployed. Workers who had exhausted their statutory right to benefits and who were in need might receive such
allowances, although exceptions were made to these rules for those
individuals who had not completed the required qualifying period
or who were not insured for other formal reasons. The duration of
the relief was fixed at 150 days a year. The subsidy was set at
one-third the amount of crisis relief given but could be increased,
under certain circumstances, to three-fifths of the expenditures.
A number of measures dealing with crisis relief were enacted
thereafter. An order of the Federal Council of October 23, 1933,
went into effect December 1, 1933,18 and stipulated that the maximum period for which emergency benefits were to be payable in
the course of a year be raised to 190 working days. This period
might be extended, however, to 310 working days for unemployed
persons who, through no fault of their own, were not entitled to
benefits from any insurance fund.
Emergency benefits may be paid only to unemployed persons in
need, in an amount not to exceed 50 percent of the earnings of persons without dependents, or 60 percent for those with dependents,
provided that such benefits do not exceed certain maximums established on the basis of locality, age, number of dependents, and the
time of year. Emergency benefits may be replaced wholly or in
part by benefits in kind. The payment of benefits is conditional upon
legislation by the cantons, 18 of which had taken action , dealing
principally with the unemployed in those inclustries most seriously
affected by the depression.19
A more basic revision of the Swiss system was put into effect f or
the duration of the depression by Order I V of the F ederal Council,
enacted February 27, 1934, and effective April 1, 1934.20
The act of 1924 provides that funds should not pay benefits to exceed 50 percent of earnings for wholly unemployed persons without
dependents, and 60 percent for those with dependents; 70 and 80
percent of earnings, respectively, were set as the maximum benefits
for persons partially employed. The actual amount of benefits
granted was paid according to the provisions of the fund of which
the insured was a member. Order IV, however, fixes the maximum
amount of wages to be taken into consideration for the purpose of
18

Recueil officiel des lois et ordonnances de la confed.eration suisse, nouvelle serie, Tome

49, annee 1933 ( I mpr imerie des Hoirs K.-J. Wyss, S. A., Berne, 1934 ), p. 873.

I ndustrial and Labo1tr Information, vol. L, no. 7, May 14, 1934, pp. 244-245.
officiel des lois et or donnances de la confederation s1iisse, nouvelle serie, Tome
50, annee 1934 (Imprimerie des Hoirs K.-J. Wyss, S. A., Berne, 1934) , p. 191; cf.
Industrial and Labour Inf or mation, vol. L , no. 7, May 14, 1934, p. 243.
19

20 Recueil

50

UNEMPLOYMENT COM P E N SATION

calculating total and partial unemployment benefi ts. Thus, unemployed persons with more than one dependent are to be considered
as receiving a maximum wage of 16 francs a day ; those with one
dependent, 12 francs; and those with no dependents, according to
whether they are over or under 22 years of age, 10 or 8 francs,
respectively. Any earnings in excess of these limits give rise to a
supplementary benefit calculated at a reduced rate of 30 percent.
Modifications of the waiting period and disqualification provisions
of the previous law made by this order are discussed below.
Administration.-Administrative coordination exists in Switzerland only insofar as the public authorities specify forms and procedures, audit accounts, and collect information from the various
funds. Simplification and uniformity are obtained t hrough standards established by the legislation providing for the granting of subsidies. The public funds, of course, are administered directly by
the public authorities creating them. Each public authority treats
separately with each fund. Since the public employment exchanges
function for both the insured and noninsured portions of the population, no data are available on the real administrative cost of the
Swiss insurance system. It is the endeavor of all funds to limit the
costs of administration to not more than 15 percent of r eceipts, but
during the depression this proportion has probably been exceeded. 21
Administrative costs have been generally low but are highest in the
public funds which r equire the organization of a special staff.
There is no provision in the F ederal law regarding procedure for
the settlement of grievances or disputes which may arise from conflicting interpretatioru; of the law r egarding claims to benefits.
Disputes and appeals are settled in different ways by the differ.ent
funds and by cantonal or communal regulations. In some funds:
disputes are heard by the cantonal courts, whose decision is recognized as final by the Federal labor office.
Coverage.-At the end of Septen1ber 1934 there were, in addition
to the Federal law, orders, and regulations r especting unemployment insurance, the laws of 24 cantons on the subject, the r egular
Eubsidies of 1,620 commun.es, and the rules and r egulations of 197
funds. These laws and these relationships constitute the unemployment insurance system of Switzerland.22
Since the enactment of the F ederal law all the 25 Swiss cantons
have enacted legislation based upon and supplementing the Federal law. Thirteen cantons now have compulsory unemployment
insuranc,e legislation, for specified classes of persons; eight cantons
grant to the communes t he right to decree compulsory insurance;
21
"Unemployment Insurance In Switzerland", Monthly Labor Review, vol. 88, no. 1,
July 1931. p. 28.
22
" Dix ans d'a ssurance--Chomage en Suisse" , L a, vie ecot101niq«e, septi~me ann~ ,
no. 11, novembre 1934. p. 507.

SUMMARY OF FOREIGN EXPERIENCE

51

and four cantons have voluntary insurance. All cantons except
one grant regular subsidies to recognized funds,23 in addition to the
Federal and any communal subsidies.
All the cantons which have adopted compulsory insurance have
found it necessary to create public funds as the only possible method
of covering all the eligible persons. The public fund is essential
to permit all workers not already members of a trade-union or a
joint fund to become insured as demanded under the terms of the
cantonal law. The compulsory laws specify the extent of coverage,
exempting certain groups from compulsory insurance for such
reasons as age, occupation, income, apprenticeship, and employment
tenure.
It should be noted that even in the cantons and communes which
have extended the compulsory features of the law beyond the
workers subject to the factory laws the act does not apply to
professional workers. Many wage earners or salaried workers whose
situation is too difficult of coverage by the normal insurance organization are excluded. This group includes those whose situation
leaves them more or less on the verge of unemployment or in need
of assistance. Homeworkers are nearly everywhere excluded as well
as persons working by the day in the employer's home, peddlers,
commercial travelers, members of the liberal or intellectual professions, employees in the administrative and public services, and
employees with incomes above a certain limit.
The development of unemployment insurance in Switzerland has
resulted in large part from the initiative of trade-unions and associations of employers. Some of the central employers' associations
founded joint funds open to the personnel of certain branches of
activity over all Swiss territory. In addition, numerous regional
employers' associations established joint associations open to many
establishments having the same type of activity or located in the
same reg10n.
There were 149,650 insured members of 60 funds at the encl of
September 1925. This number increased to 539,830 in 197 funds in
1934.24
At the end of September 1934 the F ederal Office of Industry, Arts
and Crafts, and Labor estimated that 62.6 percent of the wage
earners in the most important occupational classes usually covered
by unemployment insurance were members of unemployment insurance funds, as compared with only 28.6 percent at the end of September 1927.25
2a

"Le d~veloppement de l'assurance--Cbomage dans les cantons", La vie econoniique,

ge ann~e, no. 1, janvier 1935, pp. 36-37.
24 Ibid._, p. 36.
25
"Les chomeurs assures contre le chomage", La vie economique, 8° annee, no. 2,
f~nier 1935, p. 95.

52

UNEMPLOYMENT COMPENSATION

A majority of the persons covered by unemployment insurance
in Switzerland are covered through membership in trade-union funds.
At the end of September 1934, 51 percent of the total number of
persons insured in Switzerland were enrolled in trade-union funds,
30.6 percent in public funds, and 18.4 percent in joint employeremployee funds, as compared with 64.2, 17.7, and 18.1 percent, respectively, in 1927.26 Membership in all types of funds has steadily
increased, but the rate of increase for public funds has been faster
than that :for trade-unions.
The depression no doubt led many previously uninterested persons to join insurance :funds. Probably in most cases they have
joined municipal funds, since the joint and trade-union :funds would
be less inclined to accept new members at such a time, and in cantons with compulsory insurance all workers covered by the laws
would already be members of some fund. The joint funds have
experienced the most rapid rise during the depression both in number of funds and membership. There are three main reasons for
this. Federal subsidy to these :funds is higher than to trade-union
funds ; employers' contributions lead to a reduction in the contributions of the insured; and the workers have learned that employees who are not members of the joint :fund are dismissed first.
The :fund which has the largest number of members is the Swiss
Federation of Metal Workers and Watch Workers, a trade-union
fund , consisting of 65,699 members at the end of December 1934.
The largest public fund had a membership of 40,999-the Zurich
communal fund, in which insurance is compulsory by communal
law. The largest joint fund is the Basel general joint fund consisting of 6,970 members. In December 1934 there were only 77
:funds out of the 199 existing which had 1,000 members or more,
but these 77 funds ( representing 37 percent of the number of funds
existing) include nearly 85 percent of all members insured in
SwitzerIand. 27
Contributions.-Although most of the funds have increased their
members' rates of contribution greatly during the depression, the
average of the members' contributions has declined until in 1933 it
was 23.1 percent of benefits paid out, somewhat below the 30 percent
required by law. Certain funds in which members a.re in activities
suffering from little unemployment still contribute amounts equal to
50 percent and more of benefits.28
26

''Le developpement de l'assurance- Chomage dans les cant ons", La vie economique,

ge annee, no. 1. Janvier 1935. pp. 39-40.
27
"Les cbomeurs a ssures contre le chomage", La vie economi,que, ge annee, no. 2,
f evrier 1935, v. 97.
28
"Dix ans d'assurance- Chomage en Suisse", La vie cconomique, septi~me annee,
no. 11, novembre 1934, p. 506.

SUMMARY OF FORE IGN EXPERIENCE

53

The ratio of members' contributions to their wages, however, is
extremely small, representing only from one-tenth to three-tenths
of 1 percent of wages in many funds. 2 0 The average annual contribution of the worker was 10.59 francs in 1929. In that year
employees' contributions amounted to more than 50 percent of benefits paid out. In 1933, when the average annual contribution per
worker was 27.6 francs-or over two and one-half times more than
the average for 1929- employees, contributions totaled only 23 percent of benefits, or less than one-half as much as in 1929.30 These
figures testify to the expenditures during the depression.
The subsidies of the various publi<> authorities now amount to
more than 80 percent of all benefits paid out.31 During the years
1925-29 the average proportion of public subsidies to benefits paid
was slightly more than 65 percent.32 The increase during the depression resulted, of course, from the increase in subsidies during
this time, both Federal and local. The percentage of subsidies paid
by the cantons and communes averaged 42 percent for 1933 as against
35.5 percent for 1£29.33
Be:~efits.-Although the actual amount of benefits paid to an unemployed individual is determined by the provisions of the fund of
which he is a member, a limit is set by the Federal law. As previously stated the maximum payable may not be in excess of 60 and
50 percent of normal earnings for persons with and without legal
rlependents, respectively. The average amount of benefits paid in
1933 was 5.34 francs per day.34 The average amount of benefits was
much higher during the depression years 1930- 33 than during the
prev10us years.
Over 215,000 individuals were compensated for loss of earnings
through the Swiss unemployment insurance system during 1933.
This number represented 40.5 percent of the total number insured.
In 1930, 25.7 percent of the total number insured received compensation during the year.
Duration of Benefits.-The Federal law provides that the maximum period for which benefits are payable is 90 days within 360
days, but the Federal Council is given authority to extend this period
29

Of. Spates and Rablnovltch, op. cit., pp. 224-260.

"Dix ans d'assurance-Chomage en Suisse", La vie economique, septl~me ann~e,
no. 11, novembre 1934, p. 506.
81
The amount of the subsidies plus the amount of members' contributions need not
total an even 100 percent. If more money goes into the fund in a certain year than is
paid out In benefits, this merely means that a portion ls set a side as reser ve for the
following year.
32
Metropolitan Life Insurance Co., Unernploynient In s·urance, Monograph one (revised
edition) (New York, February 1935), p. 59.
33 "Dix ans d'assurance--Ch0mage en Suisse", La v-ie eco110111iq11e, septi~me a uoee
no. 11. novembre 1934, p. 505.
so

84

Ibid.,

v.

507.

54

UNEMPLOYMENT COMPENSATION

in times of depression. During the year 1933 the statutory period
of benefits to certain groups of workers was extended to 120 days
under certain conditions. The average duration of benefits per
beneficiary per year was 59 days for the year 1933. While the average duration of benefits has increased steadily during the operation
of the system, the largest increase took place in 1932 when the average
duration increased from 48.1 days in 1931 to 61.2 in 1932. The
average duration of benefits per member was 23.9 days in 1933 as
against only 4.8 in 1929 and 9.7 days in 1930.35
Waiting Period.-The minimum waiting period required by the
Federal Law of 1924 was 3 clays after registration, although some of
the various funds specified longer periods under certain conditions.
Order IV in 1934 liberalized this regulation by providing that the
insured person need not ser ve another waiting period if he has not
had full-time employment for at least 3 consecutive months. The
waiting period for partial unemployment is only 24 hours with the
same condition that if I he insured has not had 3 consecutive months
of full-time employment an additional waiting period is not to be
required.
Qualifications for Receipt of Benefits.-The 1924 act provided that
the funds should not pay benefits unless the insured person became
unemployed through no fault of his own, had registered at an employment office, was unable to find suitable employment, produced a
certificate from his last employer stating the reason for his unemployment, and paid contributions for at least 180 days. Order II of 1929
required individuals to be employed 150 days during the year preceding application for benefits in order to qualify under the definition of
a person "normally employed in regular work." Special circwnstances such as depression, sickness, or military service ser ve to modify the 150-day requirements.
Disqualification Fr01n B enefits.-Order I V of 1934 modified the
provisions of previously existing laws by providing that any person
who becomes unemployed through his own fault or does not take
advantage of suitable employment is excluded from benefits for at
least 4 weeks in minor cases and 12 weeks in serious cases, and, in
addition, the maximum duration of benefits for the individual is
reduced at least 20 days for the benefit year or following year.
The definitions of "fault" and "suitable employment" were contained in Order I of 1925 discussed above.
3~

Ibid.

Chapter III
ESTIMATES OF UNEMPLOYMENT IN THE
UNITED STATES
ADEQUATE statistics oi unemployment can be obtained only by
complete c,ensuses or a compulsory system of registration in
connection with an unemployment compensation system covering the entire industrial population. Present data on the extent of
unemployment in this country are so incomplete that it is necessary
to resort to estimates of the number out of work. Such figures as are
available indicate the existence of a large volume of unemployment in
both good years and bad, with a concentration of unemployment
in th,e years of cyclical depression. The estimates of unemployrnent set forth in this chapter indicate that about 70 percent of the
unemployment from 1922 to 1933, inclusive, occurred in the years
1930 to 1933.

1\.

TOTAL VOLUME OF UNEMPLOYMENT
Adequate statistics of unemployment are lacking in the United
States for a number of reasons. The trade-union movement has not
maintained satisfactory records of unemployment among its members; a Nation-wide public employment service is only now in process
of development; and unemployment compensation with its coroUary
of registration of unemployed persons has not been in existence
except on a limited basis. Even employment figures, which, until
recently, have been collected much more widely than unemployment,
figures, are chiefly in the field of manufacturing as reported to the
United States Bureau of Labor Statistics and to some State labor
departments by representative firms. The national census of unemployment in April 1930 and occasional censuses in a few localities
constitute practically the only other sources of information.
The lack of accurate data has neoossitated recourse to estimates,
among which are the studies of William A. Berridge in Oycles of
Unemployment in the United States, 1903-1922, and of Hornell Hart
in Fvuctuations in Employment in Oities of the United States, 19021917, the estimate of Leo Wolman and Meredith B. Givens of unem55

UNEMPLOYMENT COMPENSATION

56

ployment among nonagricultural labor from 1920 to 1927 in Recent
Economic Changes, and Paul H. Douglas' estimate of unemployment
in manufacturing, transportation, building tr ades, and mining from
1897 to 1926 in Real Wages in the United States, 1890-1926. Douglas' estimate, which covers the longest period of years, is given in
table 4. Unfortunately, it does not include the most recent years
and is limited in industrial scope. The estimate of Wolman and
Givens is wider in coverage, including all employees except those
attached to agricultural pursuits, but does not go beyond 1927. Comprehensive estimates of the unemployment in the United States from
1929 through 1933 have been published by Robert R. Nathan.1 His
T ABLE

4.-Unemployment in manufacturing, transportation, building trades, and
mining, 1891-1926, as estimated by Paul H. Douglas
Percent
unem•
ployed

Year

1897..................
1898..... .............
1899.. ................
1900..................
1901.. . . ..............
1902......... . . .......
1903..................
1904. .................
1905..................
1906...... ............

18. 0
16.9
10.5
10.0
7.5
6.8
7.0
10.1
6.7
5.9

Year

1907......... -.... ....
1908..................
1909..................
1910..................
1911..................
1912..................
1913..................
1914...... ........ ....
1915.... .......... . .. .
1916........... .......

Percent
unem•
ployed
6.9
16.4
8.9
7.2
9.4
7.0
8.2
16.4
15.5
6.3

Year

Percent
unem•
ployed

1917............. .....
1918..................
1919..... ... . . . . ......
1920.. ................
1921..................
1922............. .....
1923...... ............
1924........ ...... . ...
1925..................
1926............. .....

6.0
5.5
6.9
7.2
23.1
18. 3
7. 9
12.0
8.9
7.5

SOURCE: Douglas, Paul H., and Director, Aaron, The Problem of Unemployment (Macmillan Company,
New York, 1931), p. 28.

estimates, together with those of Wolman and Givens, are shown in
the following tabulation :
Estimated volume of unemployment 1922-1933

[In thousands]
1922 Minimum volume 2 ________________ _ ___________ _ ___ __ _______ _ _ ___
1923 Minimum vol ume 2 _ _ _ __ __ _____ __ __________ _ __ _ __ _ _ _____________ _
1924 llinimum volume 2_ ____ ________ ______________ _ ________ _ ____ _ _ _ _
2

1925 Minimum volume ~ - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1926 ~linimum volume 2 _________________ _ __ _ __ _ ______________ _ ______ _
1927 Minimum volume 2 ___________________ ___ _ _ _ _ _____ __ ___________ _ _
1928---------·· ----- ---------------------------- --- --- --------------1929 Average volume•- ---------------- - - ----- - ----------- - - --------1930 Average volume•------------- ----- ---------------------------1931 Average volume 4_____________ __ _________________ _ _ _ ___ _ ___ _ ___ _

3,441
1,532
2,815
1, 775
1, 669
2,055

(')
1,813
4,921

8,634

1932 Average volume•-- ------------- ------------------ -------------- 12,803
1933 Average volume'----------------------------- ------------ ---- - 13,176
1 Nathan, Robert R., "Estimates of Unemployment in the United Sta.'tes, 1929-1935",
I nternational Labour Review, vol. XXXIII, no. 1, January 1936, p. 49.
2 Committee of t he President's Conference on Unemployment, R ecent Economic Changes
(McGraw•Hill Book Co., New York, 1929), vol. II, p. 478. Excludes employees engaged
tn agricultural pursuits.
a No estimate available.
Nathan, Robert R., op. cit., table 1.

U N EMPLOYMENT IN THE UNITED STATES

57

In addition to the above estimates of the average annual -volume
,of unemployment, month-to-month estimates are now issued regufarly by the American Federation of Labor and the National In•dustrial Conference Board. The monthly estimates of the former
,date back to January 1930; those of the latter to January 1933.
Both are based on the census of unemployment of 1930, but have
deviated considerably, primarily because of differing estimates as
to the number of new workers who have entered industry since this
census was taken and because of differences in the definition of unemployment. The American Federation of Labor estimates are
published regularly in its official mont hly magazine, The A m,ericarn
F ederationist ; those of the National Industrial Conference Board
have appeared in newspaper releases issued from its offices in New
York.
V ARIATIO NS BY INDUSTRIES
The extent of unemployment varies greatly among different industrial groups. Wolman and Givens in R ecent E conomic Changes
estimated that unemployment in 1921 was 23.7 percent in manufacturing; 26.6 percent in construction; 14.4 percent in transportation
and communication; 38.1 percent in mines, quarries, and oil wells;
and only 3.7 percent in public service, mercantile, and miscellaneous industries. In July 1934, on the basis of the American
F ederation of Labor estimates, 64.9 percent of all persons engaged
in construction industries were unemployed, 38.1 percent in service
industries, 37.4 percent in mining, 36.2 percent in railroads, 27.4
percent in manufacturing, 19.5 percent in trade, 5.1 percent in public
service, and 1.1 percent in agriculture.
Within the manufacturing group a wide dissimilarity is also
found among the different branches. An analysis of the fluctuations in the employment indexes of the Bureau of Labor Statistics1
taking the 1929 and the 1933 averages, indicates decreases in employment since 1929 ranging from 53.7 percent in the lumber industry, 53.2 percent in the machinery industries, and 52 percent in
the stone, clay, and glass products industries to 15.4 percent in the
leather industries, 16.1 percent in t.e xtiles, and 16.3 percent in food
manufacturing. Higher unemployment rates are found for industries manufacturing durable goods and lower rates for those manufacturing nondurable goods. For these groups as a whole the de~
cline in employment betw.een 1929 and 1933 was 48.4 percent in
the durable goods industries and only 19.4 percent in the nondurable
goods industries. Over a period of years, however, the relative
divergences between these industries would not be so great.
Individual establishm.e nts within a branch of any industry also
vary widely in their employment experience. Some companies in

58

UNEMPLOYMENT COMPENSATION

any given year are expanding and consequently increasing their
working forc·e, whereas others are losing business or possibly extending mechanization and cutting down employment.
VARIATIONS BY STATES
Virtually no data on unemployment by States are available except
those in the April 1930 census of unemployment and some occasional
S tate or city unemployment censuses or surveys. Prior to 1930 the
compilation of employment statistics was very limited. Several
States published employment indicators of factory employ,ees, representative of manufacturing industries only, but most of these do not
go back beyond the 1920's.
During the last 4 or 5 years more complete and reliable employment statistics have been gathered. Not only have States recognized
t he need for such data, but the United States Bureau of Labor Statistics has been compiling national employment indexes month by
month, since 1929, for the following industrial groups: Manufacturing, wholesale trade, retail trade, mining, transportation, telephone
and telegraph, light and power, and hotels. In 1933 the scope of the
field covered was enlarged by the addition of real estate, banking,
insurance, and canning and preserving industries. Since 1932 these
indexes have be.en broken down by States, resulting in the first
comprehensive monthly State employment indexes.
U tilizing the Bureau of Labor Statistics indexes, the United
States census of occupations, and the census of unemployment of
April 1930, the yearly average ,e mployment and unemployment
by States was estimated for each year, 1930 through 1933, the
results of which are shown in table 5. The dependability of these
estimates is subject to question, at least for part of the period,
because of the inadequacy of the data upon which they were based
and also because of the crude statistical methods by which they wer e
necessarily treated in the limited time available. Several checks
with other information indicate,· however, that these estimates are
at least fair approximations. Th,ey, therefore, may be used as a
guide in the absence of better data. More accurate indicators could
probably be obtained from the statistical treatment of city surveys
of unemployment where such are available or from an examination
of actual employment records within a State.
It is at least immediately clear from the estimates that there has
been a wide variation in the degree of unemployment in individual
States during a cyclical decline. To illustrate this, the States wer e
arrayed according to the rate of unemployment in April 1930, the
average for 1933, and the average for 1930-33. (See table 6.) Comparing the extremes of the array, the rate in Michigan was more

Percent or gainful workers
St~mployed

1931
- - United S~
76.8
Alabama....... 6
79.8
Arizona........ 3
75.8
Arkansas..••.•
81. 5
California ____ .
76. 1
Colorado. -•... -3
79.3
Connecticut•.. ;)
75. 7
Delaware..•... 7
79. 1
Distr ict of Col~
87.3
Florida. •.....• g
77.0
Georgia....• •.• J
81. 7
Idaho.•.....••• ~
81. 0
Illinois........ . i
75.2
Indiana..... ___ ,
76. 4
Iowa•..... ____ ~
81. 5
Kansas ___ _____ ,
80. 1
Kentucky ____ _~
79. 2
Louisiana. . ____~
77. 7
Maine .....••.• ~
76. 6
Maryland ... . . ,
78.6
Massacbusett s.1
75. 3
Michigan ______ ~
70.3
Minnesota .•..• ~
77. 9
Mississippi.. .. ~
83.5
MissourL . ...•
78.2
Montana ______
77.0
Nebraska______~
81. 3
Nevada........ .j
73. 8
New Hampsbir1
76.0
New Jersey ____ J
74.5
New Mexico... t
79. 3
New York. ..•. .j
6/i. 2
North Carolina,
77. 4
North Dakota. ,.
82.2
Ohio.........• J
75.2
Oklahoma ....• ~
76.7
Oregon. ______ _J
75. 7
Pennsylvania.. t
76.5
Rhode Js!and.. 1
73.0
South CarolinaJ
81. 7
South Dakota.~
83. 4
Tennessee..... ~
80.3
Texas.... . ••.•• .;
78.6
Utab . ..... ...• ~
77. 3
Vermont. . . . •.
77.0
Virginia __ _____
80.6
Washington ... ~
76.9 '
West Virginia.-'
78. 7
Wisconsin..... ~
77. 1
Wyoming _____ J
80.9
I

g

i

j

Unemployed

1932

1933

- --

1930-33
average

1930

1931

1932

- --

1g33

- --

65.5

66.8

25.8

12. 1

23. 2

34. 5

33.2

66. 1
64.3
63.1
71. 1
67.2

70.9
61. 4
60.8
70.8
64. 7

23.2
27. 7
25.6
24.0
25. 1

10.4
11. 7
9.5
12.7
11. 7

20. 2
24. 2
18.5
23.9
20. 7

33.9
35. 7
36.9
29.9
32.8

29. 1
38.6
39.2
29.2
35.3

62.5
73. 7
80.9
63. 6
71. 9

68.3
83.3
85.0
63.4
87.4

26.4
18.. 3
13.2
27. 1
17.0

12. 0
9.3
5.8
12. 2
9.0

24.3
20.9
12.7
23.0
18. 3

37.5
26.3
19. l
36.4
28.1

31. 7
16. 7
15. 0
36.6
12. 6

70. 7
62.5
62. 7
70.5
72.0

71. 5
64.3
66.6
69.0
73. 1

21.8
28.0
26.6
21.8
21. 0

10. 5
13.8
12. 3
8.5
9. 3

19.0
24.8
23.6
18.5
19. 9

29.3
37.5
37.3
29.5
28.0

28.5
35. 7
33.4
31. 0
26.9

71. 6
67.5
68.4
78.6
65.0

77.3
69.4
79. 7
70.6
65.2

20.8
24. 1
21.8
23. 4
27.0

11. 7
11. 2
12. 0
9. 6
13. 2

22.3
23.4
21. 4
24. 7

20.8

28.4
32.5
31.6
33.0
35.0

22. 7
30.6
20.3
29. 4
34.8

56.9
70.2
72.3
67.5
59.3

54.1
69. 7
74. 9
68.5
63. 6

34.3
23.4
19.4
24.2
28. 4

18. 0
11. 5
10.0
11. 1
13. 7

29. 7
22. 1
16.5
21. 8
23.0

43.1
29.8
27. 7
32.5
40.7

45. 9
30.3
25. I
31. 6
36.4

71. 5
64.3
70. 2
C2.9
65.2

69.8
64.6
78. 7
61. 2
61. 7

21. 5
27.8
21. 8
28. 8
26.2

8.8
13.5
12. 0
13. 2
10. 7

18. 7
26. 2
24.0
25.5
20. 7

23.5
35. 7
29. 8
37. I
34.8

30. 2
35. 4
21. 3

63.6
67. 7
78. 2
62. 7
66.8

61.9
81. 6
72. 7
67.8
70.8

27.8
21. 3
18. 9
26.9
24.2

12.4
11. 8
9. 4
13.3
11. 2

24.0
22.6
17. 8
24.8
23.3

36.4
32. 3
21. 8
37.3
33.2

72.2
62. 7
60.6
70. 7
76. I

78. 7
59.8
63.4
87. 1
77.3

21. 7
28.3
29. 7
17.2
17.5

13.5
11. 8
15.3
8.6
7. 0

77. 4

65. 7
69. 1
74_. 4

20.4
24.0
25. 7
24.1
21. 1

9.8
10.2
11. 8
I l. 2
9. 2

24.3
23.5
27.0
18.3
16.6
~.
i9. 7
21. 4
22. 7
23.0
19. 4

32.8
33.9
31. 3
30. 7

69.3
70.6
71. 2
66. 1

24.4
23. 2
23.8
24.2

12. 1
IO. 1
11. 6
9.3

23. 1
21. 3
22.9
19.1

70.2
67.2
66. l
68. 7
69.3
68.6
68.0
67.8
65.6

68.4

78470-37

( Face p. 58 )

38.8

38. 3
38. I

18.4
27. 3
32. 2
29.2

27.8

21. 3
40.2
36.6
12. 9
22. 7

29.8

22.6
31. 6
34.3
30.9
25.6

31. 4
32.0
32.2
34.4

30. 7
29. 4

37.3
39.4
29. 3
23.9

28.8

33.9

58

UNEMPLOYMENT COMPENSATION

any given year are expanding and consequently increasing their
working force, whereas others are losing business or possibly extending mechanization and cutting down employment.
VARIATIONS BY STATES
Virtually no data on unemployment by States are available except
those in the April 1930 census of unemployment and some occasional
State or city unemployment censuses or surveys. Prior to 1930 the
compilation of employment statistics was very limited. Several
States published employment indicators of factory employ,ees, representative of manufacturing industries only, but most of these do not
go back beyond the 1920's.
During the last 4 or 5 years more complete and reliable employment statistics have been gathered. Not only have States recognized
the need for such data, but the United States Bureau of Labor Statistics has been compiling national employment indexes month by
1n onth, since 1929, for the following industrial groups: Manufacturing, wholesale trade, retail trade, mining, transportation, telephone
and telegraph, light and power, and hotels. In 1933 the scope of the
field covered was enlarged by the addition of real estate, banking,
jnsurance, and canning and preserving industries. Since 1932 these
indexes have be.e n broken down by States, resulting in the first
comprehensive monthly State employment indexes.
Utilizing the Bureau of Labor Statistics indexes, the United
States census of occupations, and the census of unemployment of
April 1930, the yearly average ,e mployment and une1nployment
by States was estimated for each year, 1930 through 1933, the
results of which are shown in table 5. The dependability of these
estimates is subject to question, at least for part of the period,
because of the inadequacy of the data upon which they were based
and also because of the crude statistical methods by which they were
necessarily treated in . the limited time available. Several checks
with other information indicate,· however, that these estimates are
at least fair approximations. Th.ey, therefore, may be used as a
guide in the absence of better data. ~1ore accurate indicators could
probably be obtained from the statistical treatment of city surveys
of unemployment where such are available or from an examination
of actual employment records within a State.
It is at least immediately clear from the estimates that there has
been a wide variation in the degree of unemployment in individual
States during a cyclical decline. To illustrate this, the States were
arrayed according to the rate of unemployment in April 1930, the
average for 1933, and the average for 1930-33. (See table 6.) Comparing the extremes of the a.rray, the rate in Michigan was more

TABLE

5.- Estimalea of ouerage nonagricultural employment and unemployment,

A ,·erege, numt>u .or galorul worker,

United Stot('IS............ 38,005,000
AlnbtlmDu ,,••••••••••••• ••••••

-540,000
--

J\,rllOn-11 ..... ....... ... ....... ..
ArkRDW .•• ...••••••••• •••••••
CDllfomlo ••••••••• ••••••••••••
Oolorodo••...•••• •••••.• •••••••

127,000
283,000
2,160,000
297,000

Conooo.tlcut •••••• H••·········
DalawarB•••.•••-·- -·-·-······

6•1~000
81,000
243,000
..~000

District of Co1nmtilo ...........
Jllorldn••••••••••••••• •••••• •••
OtlOrQ:ICI ............ . .... .......

ldnho. ..... ..... .. . - · - ····-·-

r,r,o,ooo
00,000

1111 no!,.•_.,_ ••. _._ .••. -·· ....

2,843,000

lowu•••••: ................... .

6,S3,000

1031

1932

- - - 38,570,000
38,676.000

529,000

SlQ,000
1'29,000
:Mti,000

1933

33,8'2,000

21), 017,000

SJ0.000

4$4, 000

42'Z,OOO

Ntbrnskn ........... . ..... . .. ..
• • • _ ._ _ ___ _ - · · - · · · • •

1, 089,000

137,000
310,000
34,000

Now IIEm1J1$hlra • ••••••• _ . ....
N6w JerSf!)' ........ . ... . .......
Now Men.loo................ . . .

l?l,000
I, 657,000

n••··· ··-·-

li, 279,001.1
&1~000

North C'mrollos•••••.••••• •.•.•
Norlh DakoLo •••4 . ,. .... ......
Ohio. ..................... . ...
Okla1lom11. •••••.••••••.. ••• ..•

86,000

47,000

37,000

172.000

176,000
78,000

SG.S
,u

210,000
300,000

H,000

001,000

~:~

637,000

.'11,000

86,000
2,-150,000

2. 151,000

00, 000

67, 000

18,000

'3,000

1,705,000

1,856,000

710,000
237,000

l,07(1,000

l07,000

r.,ooo

372,000
169,000

113,000
110,000

60,000
126,000

•173, 000

m,ooo
412.000

21'1,000

301, 000

16',000

,1.000

c.ro.ooo

m,ooo

IH0,000

7~7,000

026.000

G&l,000

533,000
422,000

472,000
372,000

f(H,000

33rooo

3!12,000
331),000

10,000
303,000
124,000
50,000
·H,000

488.000

430,000

361,000
3<8,000

406,000
307,000

65,000
69, 000

l,O(H,000

6Ui,OOO

258,000

m,ooo

997,000

211&.000
OOS.000
118,000

251,000
2.5.000
130,000
1,210,000
<G,000
-t,oi2,ooo

30'.l, 000
3i,OOO

301,000

172, 000

172. 000

1,077,000

I, 693, 000

I, 711,000

86,000

8~000

2>3,000
:?'J,000
161.000
1,415,000
70,000

6,300, 000

5,412,000

<,023, 000

632,000

666,000

2,327,000
6 18,000

2,330,000
&17, 000

2.004,000

493, 000
86,000
I, 748,000

•166,000

'102, 000

332,000
3, 00,,000
293.000

JJ..l,000
3, "'7,000

2~5,0CO
3,00S,000

2,673,000

29.S,000

'2.Jti,OOo
3 121000

213,000
2i0,000
◄&1, 000

116.000

17,000

113,000

109, 000

66$, 000

500,000
I, 376,000
130,000

630,000

008,000

I, 379,000
128, 000
103,000

1, 371,000

120,000
103,000

\Vtuhin~ton •••••••• ••••• ••••••
Wesl Vi~lol! •.•....••.•.•••••

>GZ,000
-16-t,OOO

605,000

Wi"o:>osln ••• ~·-··········•···•

841,000

600, 000
4.15,000
836.000
62,000

,t~,000
8'1,000
Sl,000

102,000

310,000

Vtnb ••••.••.•..•••• .••••••...
Vennool . . ........ ..... ... . .....
Vlrfilllll. . ........... . ..........

m.ooo

~4.000

m,ooo

llt,000

130,000
102,000
122,000

175,000

477,000

309,000
:W,000
172,000

$77,000

82,000
105,000

7S, Q
78. 2
76, 6
73, 0

4.SJ,000

I,

m:=

2.11,000

97,000

J, 084,000
"11,000

78. 2

76. 7

i S. 7

32,000

73. 8

3.llk~

3,3.11,000
.516,000
74,000

656,000
70, 000
10,000
307,000
69,000

1, Zi'7,000

l,1U2,.000

2, 001,000

346,000

210,ooO

3GO,OOO
263,000

..,•• ooo

205,000
22,000
569,000

763,000

81, I
73, I

17'2,000

1.$1,000

76.S

88. ~

92.000

71,000
I, 44.S,000

78.3

1, 307,000

SG.•

11.$,000

IOS.000

122.000

so,ooo

522_000

li$,(l()O

187,000
275, 000
87, 000

·H,000
29,000
8,000

70.000
Gl,000
J0,000

115,000
27,000

◄33,000

51,000
138,000
1$.000

113,000

169,000

87,000

~~

~~~

9-tl,(W

S>,000
71,000
436,000

12,000

&l.O

10,000
19,000

-411,000

221<.~o

72. 2
78. ;

ss.•

5761 000

2,152,000

'10,ooO

..o,ooo

03.6

0,000

434,000
307,000
043. 000

w.,oo

o.~.2
82.2
76.2

52,000

494,000
41)$, 000

Si.6
68, 2
90. •
U .7

'5,000

30,000

71. 2

68<),000

74.-4, 000

80.8
S9. a

G&l,000

2, IOS,000

2115,000
20,000

>t,000

449,000
·H.000

32.000

fl,000

r.o.o

7(. .:i
79.3

627,000

116,000
28,000

66,0

St.3
73.S

428,000
17,000

1,683,oc»

76.3

90.'

71.7

i0.3
82.8

68.2
84. 7
91. 4
93.0

i0.3

76.0

n. ◄

jtJ;,,5

70.2
72.3

HJ.6
'21.8

27. 7

32.0

Zl. 0

-tO. 7

31. 6
JG.•1

8.8
13.6
12.0
U. 2

18. 7
20, 2
2-1.0
2.5.6
20,7

2U

30. 2

3>.7

35.1
21. :3

GS.•
03.0

61.9
81,0

21.S
... 9
2o.O

O<l.8

72. '2
, .. 7

78. 7
.'11.8

61, 3

70.6

76.2
76.S

ss.,
90.'

68,6
'6.0
67.S

71. 2

~~

07,000

H0,000

Q!,000

193, 000

W,000

41,00o

-41,000

0,000

12,000

21,000

231),000
21,000

76.S

89.0

77, l

S0.9

6U

7◄. ◄

G9. 3
00.l

26.1

37.1

38.g

:W.8

38.'

2-C.O

3G. j
32.3

2-1.2.

22.0
17.8
>1.8
23.3

21. 7

13. 6

24.3

27,8
37. 3

40. 2

29. '
23.0

30.0
12.0
22. 7

28,3
29. 7

""·'

76. 9
78.7

:JO.'

11.8

77. •
'6. 4
65. 7
GD, I

87. V

4U

0. '
13. 3
Jl.2

70. 'l

7U

10. 7

2'J.S

:w.s

12.I

'°·'

77. 3

11.5

21. 3

80 3

08.l

5',7, 000

27, 8

17.2
17.6

03.<

67. '2

150,000

21.!i

Si. I

77.3
77.0
80.G

175,000
134.000

28.1

72. 7
6i. 8
70.8

18.6

18ZOOO

22. 7

30. 0
20. 3
20..

10.0
JI. I
13.7

68. 2
88.8
00. 8

17$,000

Zl. ◄

19, ..
21.2

75.9
,&.9

131,000

28.'
32.6

21. 4

7>1.9

i-4.3

116,000

20,8
22.3

11. 2

St.0
20.9

43. 1
29.8

f!i,000

66,000

11.7

z.i.'

3.1. 7
33.•I

>1.7

90. 2

68,000
4G, 000

19. D

29.•
28.0

37. 3

12.U

29. 7
22. l

70.0
70.0

39~000
322.000
694,000

30. 0

29. 3
37, .

12.3

16, 7

1~0

30.'
28.1

19, 0
Zt.8
Zl, O
13.6

lO.S

31. 7

19. 1

18.0

66. 2

08.7

37.15
2d. 3

12. 7
23. 0
lS. 3

27.0

23.'

28.8
20. 2

76. I

,.s

318

Zt. 3

3-1.3

"'·'

iO. 7

1'3. ◄

20,0

12. 7

GU

69. 1

81. 7

7U

lU
9.3

30. 0
29.•

31.8
33.0
35.0

61, 2
61. 7

(i2. 7

11. 7

20. l
38.0
3'J''
29. 2
35,3

u

36, 7

12.0
9.0
13.2

82.'

so.•

21.0

ll.8

67, 7

33. 2

20.S
Zt.l
21.s

20. G

69.8
6<. 0
78. 7

62,0

34. 6

33.0

8.5
0. 3

26,000

31.000

2'). <
18.3
13.2
21, I

23.2
20.2
:?t.2
18.6
23.D
20. 7

21.8

....

127,000

◄3-S,000

2.5.0
2-1.0
2.5.l

70.'2

71.6

"'··

1033

10.4

13.8

"'·' ""·'

01. 2

210,000

l,<~'.~

sc.s

1002

12.1
11. 7

17.0

W.1
70.0
0,.2

78.6

Zl, 7

21.S
28.0

71.6

i3.6

76.0

1931

,;,,3

77.3

ss.o

1930

12. 2
0.0

72,0

u.,

l,0.H,000

03. ◄
87. 4

71.6
67.6

78, 5
72. 2
78, 2

68,000

83.3
80.0

i'lt2
77. 7

07.6

121000
51,000

61. 7

80. l

59.3

0,000
41,00'I

70.8

OS. 3

88.3
88.8

7.S. 2

r.s,000

60.S

69.0
73. l

77.0

27,000
6,000
20,000

Zl. 2

i(U

so. J

76.8

2.5.8

i'0.9

81.6

70. 6

1930-,3.:1
ftVt!fll$:B

00.6
61..

01.S
90.l

71.0

so.o

1933

- -• - - -- - - - - -

87. 7

17.9
83.6

70. 6

1:35,000

9'2,000
lZOOO
37,000

71.0
70. 7

6:ts
62, 7

82.0
68. S
90.0

213,000
22.000

568,000
62,000

3-11.000
'8,000

65.1

221,000
22,000
121.000

70,000
483,000

:~:~

205,000
73,000
352,000
54,000

62,000

79.0

l,Of,l;,()(IO

91,ooO
6&2,000

l02,000

237,000
S0,000

G3.0

79. 2

708,000
208,000
(H,000

rn.ooo

77.0

UiS,000

02'2,000

lH,000

87.3

73, 7
80.Q

119,0(l(i

7-12,000

132,000

67.2

62.5

167,000

83.0

71. l

70.3

7/U
TIU

129,000

622.000

<t8,000

83. l

152,000

<1391000

121, 000

81.S
10. l

~1.7

508,000
163, 000

100.000
j-t2,00U

04,3

SI. O
7,5, 2

232, 000

1oz.oo0
731,000
'l'J,000

'6.1

SIJ.&

305,000
80,000
2~.000

2.1,,000

87. &

OU

91.0

~-U,U00

011,000

91.2

76.8

66.2

I, 16~000

<2<>.000

90. 7

1932

N.S

72.U
73.<
78.2

OSl),000

31,000
57,000

90.;

Uriamptoyod

7.5,8

7S. 2

1,202,000
53"7. 000
23.1,000
802,000
10:/,000

200,000

89.G

1931

27,000
1, 030,000
333,000
176,000
t2J,OOO

178,000

1, :134,000

133,000

Jl7,000

71. 4

l, 3SO.OOU

l,OS:,.000

0$7,000

101,000

170,000

1,USil.000

292,000

ss.s

307,000
I, 1'-S,000

GSll.000

331,000

70.8
72.3

198,000

600,000
279,000

033,000
lOZOOO

SU

r.o,ooo

..... ooo

1, 7a9,000
6%.000

5,3:lS,000
037,000

21,000

74. 2

1..8,000

227,000
533,000
1, G,0,000

I, i22, 000

,n.ooo

08,000
,;oo,ooo

12.841,000

267,000
69~000
1, 7$7,000

I, 700,000

l,OS0. 000
la?,000

61,000

46.COO

404,000

1,710,000

206. 000

75,000

3 1.000
61.000

4G2,000

LIS, 000

6!Jl,()[l(J
1,773,000

:m.ooo

GZ,000

81. 7

0 1,000
2,SM,000

'rtnnasseo. ..... .... - ---·-······

\Vyomlng•••••••••••••••-•••.• •

13,000

91,000
2,~~

331, 000

l,37•1,000

ss.o

1)32, 000

Hhode 1!1ll,nd .... ......... , n•• ·
South f'tlroll un ............... .
South Dakota . ••••• •.•••••••• •
'f'eAAS.....................,. ••••

7U

93,000

3, ◄96,000

2\9,000

S7. 3
SS.3

203, 000

&12,000

62.5,000

l'ennsylv1mrl\ ...~•.• ····- · · .••

i-1, 9

244,000

zsizooo

3"9,000
3, -ti01000

Oregoo •.•. - - ·--·-·· •..•.....

2.311, 000

o.\8,000
105, 000

?6,0

117,000

1(17, 000
17,000
31,000
109,000
117,000

f72, 000

lOS,000
2.3~.ooo
~24, 000

107,000

527,000

78,000
7,000

35,000

449,000
67, 000

418,000
616, 000

m,ooo

62.5.000

l\tlssourJ ............ . ..........
irouto.011................. . .. ..

277,000

W3,000

"'8,000
69,000
ltl'J,000

13-, 317,000

- 176.000
--

401,000

633,000

Missli>slJlill.._ .•• • - ••• .•.•• •••

107,000

l, '63.000
23Z ooo

.C(U,000

Minneso1u .•••••.• . •••••••••• •

8, iSS,000

:\0~000
1-4,000

64,000

1930

Ml,000
IS.ODO
27,000

U2.000
81,000
15i, OOO
1,694, 000

:?al,000

81,000

1000-:,3

<, Oil3. 000

3-13.000
83,000
167,000
l,l>00,000
109,000

l, Wl2, 000

m.ooo

1033

o,;eraJro

~,000

513,000
521).000
25$.000

I, 7'i2, 000

1032

G6i,OOO
81,000
ZH,000

<104,000

1,0011000
691, 000
21!1,000

~253,000

1931

662,000
l,0,000
246,000

m,ooo

653, 000

M lcblgoo•• •••••.•.••••. -- · ••••

--- 2.5,$1).f,000

1030

2. 2'2:6,000

203,000

400,000

~rl1$$fl.cbu.seu.s••• ••••••••••• •••

1933

&IS,000

Ke-otucky. ___ .. ··-·-··-·-···

2'8,000
690,000

00, 000

IQ32

2-, 210,000

270,000

KllD5tl3••• ••••• ••••• •••• • • •••••

Louislooo....... ~.- -·· ····· ···

112.000
25G,OOO

131,000

50S,OllO
4!.9,000

1'1alno ... ....... . .............
Moryland .••.•.• • •••.•.••.•.• •

1931

38,735,000

1,003,000

62-1,000

1930

~,.ooo
2,2.52,000

127,000

Inflfiu1n ... .....................

Now York. ...• , ••

Perootit.or ~loful wort.us

Emvlorc<l
1030

u

Avu11;e. number unemployed

A\'erage number tmployed

Stole

Novnd11 ••

by Stales, 1930-SS

2◄.0

2.5. 7
Zt. 1

11.8
I.S.3

8.D

7.0

o. s

23.G
27.0
10, 0

f. ·

19. 7

10. 2

21. 4

11.2

22. 7
23.0

11.8

20.8

318
33.9
31. 3

21. l

9.2

10. 11

30, 7

2◄, .

,2.1
10.l

23. 1
21.:i

:11.,1
32.0
322

23. 2
23.$
2◄. 2

11. (1

9, 3

78 470-37

22.9
l Q. 1

:w.'

O 'ace p. GB)

18.4

27.3
:12.2

3'1.4

13.3

38. 1

21. 8
37.3
33. '2

20.2
21.3

22.0
31.U
:H. i:I

30,.
2.5,0
3(),;

29, '

20.8

33.9

UNEMPLOYMENT IN THE UNITED STATES

59

than twice as high as in South Dakota in 1930, and more than three
times as high as in Georgia in 1933.
Over a period of years, of course, the deviation from average unemployment tends to diminish. For example, Michigan, with the
highest rate of unemployment in the 4-year period, was 39.2 percent
above the country as a whole in April 1930, but its average unemployment for the 4 years (1930- 33) was only 30.5 percent greater
than that of the country. South Dakota's unemployment, at the
other extreme in the array, rose from 38.5 percent below the average
in April 1930 to within 30.2 percent of the average f or the 4 years.
If data for a complete cyde could be included, it is evident that the
variation would be reduced still further. However, it is equally apparent that even over a long period, the individual States will experience fairly large differences in unemployment r ate~, because of
the individuality of their industrial structures.
In general, the more highly industrialized States experienced
the worst unemployment over the period. Unemployment was most
severe in 1933 in Michigan, which also stands at the head of the
array of the 1930-33 average with a rate of 35.9 percent. Michigan,
Rhode Island, New Jersey, Illinois, Pennsylvania, New York, Massachusetts, and Ohio are among the States with the highest percentage of unemployment, ranging from 28.7 to 35.9. Unemployment in Georgia, South Dakota, and South Carolina, at the lowest
end of the array, averaged about 19 percent from 1930 to 1933.
Delaware is probably most highly industrialized of the States found
at the lower end of the array. Mississippi, Kansas, North Dakota,
Tennessee, and Virginia also had low percentages of unemployment.
A part of the tendency toward less unemployment in agricultural
States is probably explained by the fact that these States presented better opportunities for unemployed city workers to move
to farms and out of the industrial labor market. In part, of cour£e,
the tendency in some States results from relatively smaller decreases in employment.
It should be remembered, then, that these estimates are most
reliable as indicators of the relative intensity of unemployment in
the States over the 4-year period. The estimates of the actual volume of unemployment are subject to the limitations outlined above
and are presented here as crude approximations to the actual figures, which may serve as a basis for some of the "informed guess
work" necessarily attendant on planning £or unemployment compensation. The unemployment variable is a function of two other
estimated variables, the average number of gainful workers and the
average number of employed workers. The estimates of employment, which are essential to unemployment compensation legislation, are probably the most reliable of the three variables.

TABLE

6.-S tates arrayed by average percentage of imemployment within the compensable labor force, April 1930; 1933 average; and 1930-33
average

State

Percent Ratio to
of com•
pensable average
of all
labor
States
force un• (percent)
employed

2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.

Un ited States . ... . . . ... . . .......
Nevada . ... . . ...... . . . ... ........
Michigan .. . ....... . ......•.... . .
Rhode Island . ....•.•........ ....
lllinois...•.... ...... . ........ ....
Ohio........................... ..
Oregon. . . ... ....... .. . ...... . . ...
New Jersey ....... . ........ . . ....
Massachusetts................. ..
Montana .................... . . ..
Vermont ............. . ... . .. . . . . .
California ........... .. ..... . .... .
U tab ................. . ..........
New York.......... . . . . . ........
Indiana . ......... ... . .... . .. . . . ..

14.3
20.0
19.9
17.4
15.9
15.4
15.3
15.3
15.2
15.2
15.0
14.8
14. 7
14. 6
14. 5

100.0
139.9
139.2
121. 7
111.2
107. 7
107.0
107.0
106.2
106. 2
104.9
103. 5
102.8
102.1
101. 4

15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.

W ashington ..... __ •. _............
Connecticut. ... .. .. . ... . .. . . .• . .
M aine......... . . ................
New Hampshi:-e...... ......... . .
Florida . . ... . .... .... . . ....•... . .
Colorado.•..................• . . . .
P ennsylvania. . ..........••......
Wisconsin. .....•..•• ........ ....
North Carolina ........ . •.• .... . .
M innesota.......••... ....... ..•.
Kentucky•..... . . .........•.. •. ..
Arizon a .•.. .. . . ...•........ .... . .
Oklahoma ....•............ .. ....
L ouisiana...... .•......•. ........
Missouri. ••.....................
A lahama..... .... ••. _.... •.. _....
Idaho.....•.......•......•... ....
West Virglnfa...•.....•..........
New Mexi<-0. •.••.• ..• •••••• •...•

14. 2
14.2
14. 1
14. 1
14. 0
14.0
14.0
13.8
13. 7
13. 7
13. 7
13. 7
13. 6
13.a
13. 2
12.5
12. 5
12. 5
12. 2
12.2

99.3
99.3
98.6
98.6
97.9
97.9
97.9
96.5
95.8
95. 8
95.8
96. 8
94. 4
03. 0
92.3
87.4
87.4
87. 4
85. 3
85.3

1.

34. T exfl.'I ••.....••••••••••••••••• •• ••

1930-33 average

1933 average

April 1930

State

~

0

Percent Ratio to
of com• average
pensable
of all
labor
States
force un• (percent)
employed

State

Percent Ratio to
of compensable average
of all
labor
States
force un• (percent)
employed

0

2i

1.
2.
3.
4.
5.
6.

7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.

au.

31.
32.
33.
31.

United States ... ........... . ....
Michigan .. ...... .. . ........... . .
Pennsylvania. . . ........•......•.
New Mexico... . .............. .•.
New Jersey......... . ...... . .....
Arkansas...•........... . . ...•••.
Nevada ............. . .. . ........
New York.......................
Arizona . ........... ...... . ..•.•..
Florida............ ........ ......
Montana........ . ...... . . .......
Rhode Island...... .. . . . . . ...... .
Illinois.. ..............• . . . . ...••
Colorado ..•. . ........ . ..•.......
M assachusetts. ..... . ..••••• _.. __
Wyoming .... ....... ........... .
Utah ...•.. . . ......... . ..........
Indiana.•.. . ................••..

34.8
47.2
41. 5
40.8
40. 3
40.3
40.0
39.5
39.5
38.3
38.2
38.0
37. 2
36.6
36.4
36.1
36.0
35.0

100.0
135. 6
119. 3
117. 2
115. 8
115.8
114.9
113.5
113. 5
110.1
109.8
109. 2
106.9
105.2
104.6
103. 7
103. 4
100.6

Ohio. .... .•.... . . . . . . . .......•.. .
Texas . . .......... ... ......•.. ...
Missouri. ..... ..... . . . . . ....... .
Connecticut. ... . . . . . __.... •. . . ..
Iowa . .. . . . ......................
Washington . ...............•. . ••
Louisiana . .... . ... . . ....... . . . .•
Vermont . .. . ............ ........
Minnesota ....... ... . ........... .
Nebrask a...... ...•.... . . . ...... .
West Virginia ......... . .. . ... . ..
M aryland . . . .. . ... . ........ .....
California. _. .. _........ . ........
Alabama ...... . . .......•........
Oklahoma ............. . .........
Wisconsin ............• ..........
Idaho•...... . .•..................

33.9
33. 3
33.2
33.2
32. 8
32.5
32.2
32. 2
32. 1
31. 8

97.4
95. 7
95.4
95.4
94.3
93.4
92.5
92. 6
92.2
91. 4
89. 4
89.4
88.8
88. 5
88.5
87.6
85. 1

31. 1

31. 1
30.9
ao.8
30.8
30. 5
29.6

1.
2.
3.
4.

5.
6.

7.
8.
9.
10.
11.

12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
2fl.

29.
30.
31.
32.
33.
34.

United States••......... . . . •....
Michigan....••••...... . ..•••...•
Nevada..•.•.•...••••....••......
Rhode Island.•••••••......•.....
New Jersey. .•••••.••..••••......
Pennsylvania•.••••.•.•.... ..•...
Illinois . •••.•.•.•.••••••.•••.....
Montana. •.....•.••••.•... .•.•..
New York....•...• •• . ... . . . .....
Arizona..•.•....•••.•• •..•.......
Florida.••..• . ••••••••..•.•••..••
Ohio. •.••••••••••..••••••• •. •..••
M assacbusetts...••••..••. . ••.. ••
Indiana•••.••... . ....•..••••.•..
Connecticut. ....••..••••...•..••
New Mexico. ...•.•.•.•.•...••.••

27. 5
35.9
32. 5
31.5
30.5
30.0
29. 7
29.5
29.5
29.3
28.9
28. 7
28. 7
28.4
28.2
28.2

100.0
130. 5
118.2
114. 5
110.9
109. 1
108.0
107.3
107.3
106.6
105.1
104.4
104.4
103.3
102.6
102.5

Utah •....•.. ....... •••.•..•••...
Arkansas •••..•.. ••.•• •... .......
Colorado. • ••••......•..••....•.•
Washington .•..•.....•••••......
Vermont . .•...•.••.•••.•...•..••
0 klahoma. ...•••.•..•.....•.....
Missouri. .•..•...•.••......... ..
Louisiana...•...•....•••••••...•
Wyoming. . ...••.•••...... ....•.
Oalifornia•••••..••..••• ••.••....
T exas • ..••••... .••••••......••. .
Wisconsin..•.•••••••.....•....••
Minnesota..... ....• •..••.. . ... ..
West Virginia .. •.••....•.•......
Alabama . . •. . •.. . .•..... .. . . ....
New Hampshire.. .•. ...•........
Iowa •..... .•••••.. . •.•... . •.....
Idaho....••.. .•.•.. •. .......••••.
Maine. .. . •.. •.. .....••.. ... . . •..

27.4
27.3
27.0
26.2
26. 1
26.0
26.0
26.0
25.9
25.8
25. 8
25. 7
25. 3
25.2

99.6
99.3
98.2
95.3
94. 9

25.1
24.3

23.8
23. 8
23. 7

94.5
94.6

94. 6
94.2
\l3. 8
93.8
93.6
92.0
91. 6
91. 3
88.4
86.6
86.6
86.2

t.=::I

~

1-d
t"i
0

I-<:

~

t:rj

z

~

0
0

~

~

z
Ul

~
.....

0

z

35.
36.
37.
38.
~ 39.
~ 40.
~ 41.
42.
c» 43.
.;i 44.
45.

I

1

46.

47.
48.
49.

Tennessee... . ....•..............
K ansas..•.... . . •.. .••. •..... . ..••
Mississippi. . ................ . .. .
Maryland. . ... . •..........•....••
Arkansas. .. . ................... .
Virgiuia ••••.••..•.•.•...•..•••.•
Georgia•........... . ... ...•••....
North pakota ..•••... . . ........ .
W yomrng•. . . ....•. •. ..•....• ....
Iowa . . ••••••.....••......... . •..
South Carolina . • . . . .••••..••..••
Nebraska...... ...........••••••.
Delaware •...•. •••• ..••...•......
District or Columbia. .•.........•
South Dakota.•••..•••...••..••..
SOURCE: Table l-17, p. 400.

12. I
11. 9
11. 8

11. 7
11. 6
II. 4
11. 3
11. 3
11. I

10. 7
10. 7
10.6
10.6
10.6
8.8

84. 6

83. 2
82. 5

81. 8
81. 1

79. 7
79. O
79. 0
77. 6

74. 8

74. 8
74. 1
74.1
74.1
61. 5

35. N orth D akota . . •. .••.• . . __. . _.. .
36. R ansas . ....••....... . ...... . . . . .
37. Virginia ....•.•••••...• ....• ..•..
38. Mississippi.. ..........•.........
39. Kentucky ••...•..•.... . .... . .. . .
40. Tennessee.•......••.••.. . .......
41. South D akota ..•... ...... . .• ....
42. Oregon . ....... . . . •.. . •.•.. .. . ...
43. District or Columbia •••... ......
44. New H ampshire . . •••••.•. ......
45. Maine.........• .. . ......... . . . . .
46. North Carolina... .• •....•• ... . ••
47. Delaware....... ................ .
48. South Carolina • •.. •...•. . .......
49. Georgia...••......•...... . •. . . . .•

82. 8

28.8
28. 6
27.4

82. 2

25. 6

78. 2
73.6
71. 0

27. 2
24. 7
24, 6
23.3
23. 1 ,

23,0 I
22. 1
22.05
19. 1 ·
15. 3

14. 9

78.7

70. 7
67.0

66.4

·66. 1

63.5
58. 9
54.9
44.0
42. 8

35. Oregon ...... . ...•..•.•... . ..•• ..
36. N ebraska . . ..• .•. . ...••.•...••.••
37. N orth Carolina •..•••.•.•......•.
38. Virginia........... . .... ..•.•••..
39. R ansas••. . •.•• . . . ..•....•.......
40. Kentucky.....••......••••.••.•.
41. Tennessee......... . . . •...• .••..•
42. Mississippi.. .. . ••• •.....••. ...•.
43. M aryland •.......• . ....•.. . .....
44. North Dakota..• . . . .••......••..
45. District of Columbia . .. •..•..•• ..
46. Delaware.•.•.....•........•••..•
47. South C arolina....•• ..........•.
48. South D akota •••••••••••••..••••
49. Georgia.••.••...••••••••••..•..•.

23. 5
23. 3

23.2

23.1
23. 0

22. 7
22.4
21. 2

21. 2
20. 7
20.6

20. 3

19. 4

19.2
19.1

85.5
84. 7
84.4
84. 0
83.6
82. 5
81. 5
77.1
77.1
75.3
74.9
73.8
70.5
69.8
69.5

q

ztzj

~
'ti
t'-1
0

,<

~

trj

z

1-j
j,,,,,,j

z

1-j

~

trj

q

z

j,,,,,,j

1-j
trj
t:j
U)

1-j

>

1-j
trj
U)

O':I
~

62

UNEMPLOYMENT COMPENSATION

LONG-TIME TRENDS I N EMPLOYMENT
Distinct trends may be discerned in employment in different industries over a period of years, with employment increasing in some
industries and decreasing in others. This results from a variety of
causes such as shifts in consumer demand, new products, displacement of labor by technological impr.ovements, and the effects of
tariff policy. During the 1920's there was much talk of technological
unemployment, since in those relatively prosperous years employment was decreasing in agriculture, manufacturing, railroading, and
coal mining. Most of the labor dispensed with because of mechanization was reabsorbed by manufacturing through an enormous in'.CABLE

7.- Est-imated ,;1,umbers of em,ployees a,ttached to the variOus -indu.str-ies,

1920- 21
(In thousands]

Industry

1920

1921

1922

1923

1924

1925

1926

1927

-All industries ____ ____ __ ___ ___ _____ __
Industries with de<:'reasing employment:
Agriculture__ ___________________
Manufacturing_____________ ____
Industries with increasing employment:
Transportation 1_ _ __ __ ___ _ _ _____
Mines, quarries, and oil wells __ _
Construction ___________________
Me, cantile ______ __________ __ ____
Banking _________ ____ ___________
Government____________________
Unclassified_____________________

29,948

30,753

31,284

32,129

33,105

33,106
-

34,678

35,573

2,490
11,183

2,473
10,754

2,372
10,737

2,328
10,713

2,328
10,487

2,329
10,488

2,329
10,677

2,30s
10, 598

4,235
1,217
932
3,215
228
2,719
3,729

4,149
1,234
932
3,298
243
2,689
4,981

4,431
1,250
1,199
3,694
249
2,618
4,734

4,691
1,254
1,277
4,237
262
2,633
4,734

4,658
1,196
1,352
4,015
267
2,674
6,128

4,582
1,182
1,613
4,297
274
2,736
6,345

4,744
1,278
1,594
4,412
284
2,785
6,575

5,204
1,285
1,563
4,623
288

2,819
6,885

Including bus and truck transportation.
King, Willford IsbelJ, The National Income and Its Purchasing Power (National Bureau of
Economic Research, New York, 1930), pp. 56-61.
1

SOURCE:

crease in the volume of physical output. David Weintraub, when
with the National Bureau of Economic Research/ estimated that of
a total of 2,832,000 workers who were displaced by technological
improvements from 1920 to 1929, a total of 2,416,000 were brought
back into other manufacturing employment, so that there were only
416,000 fewer workers in manufacturing in 1929 than in 1920. At
the same time, however, employment was increasing in transportation other than railroading, in communication, in mining other than
coal, in quarrying and oil-well drilling, in construction, in mercantile trades, in banking and government, and in various unclassified industries including the service trades (table 7). There is,
6 Weintraub, David, "Tl.le Displacement of Workers Through
Increases In Effl.clt>ucy
a nd Their Absorption by Indust ry, 1920- 19·31", Jo11.n1al of th e Am erican Statistical
Association, vol. XXVII, uo. 180, December 1932, pp. 383-!00.

63

UNEMPLOYMENT IN THE UNITED STATES

therefore, no clear evidence that unemployment was increasing on
the whole as a result of technological improvements, although there
was undoubtedly a lag in reabsorption into the same industry or
t ransfer to other industries on the part of those displaced, with
much attendant unemployment.
Opposite trends in employment will also be found in different
branches of manufacturing. During the 1920's, while there was a
downward trend in employment in manufacturing as a whole and
in most industries in that group, a few branches of manufacturing
showed an increase in employment. Thus, in contrast to decreased
T ABLE

8.-Average annual indexes of ernployment i,n, selected manuf,actur·i ng
industries, 1923- 28
[Monthly average for 1926=100]
Industry

General index.••........•.•.•. ..•.•...•...••••..••.•.
Selected industries with a decreasing trend in employ•
ment:
Slaughtering.•••••••••••••• •.••.. •.......•.••.•..
W oolen goods.•••••. .•.•. .......•.•.•. . .•.•.•.•.•
Clothing, men's.....•...•.. _....•.•.•.. _. ---· •.••
Stoves. •.. .••.•.•.•.•.••. . •. . . .••.. . .••..........
Sawmills..•.•.••••..•............ . ......... ...•..
Shoes••. . -------------·--·· · ·-·····-· ··· · - -·--- -.•.•. --------·--·
------·
------- ---- --·--Cement
Metal stamped
ware. ... ...•
_. ....
_. . ____________
Cigars and cigarettes ____ ____ __ ___________ _____ • __
Carriages••••..••• ___________ __ ________ ______ ••...
Pianos.•••••••.••••••••. ......•.•••.•............
Selected industries with an increasing trend ln
employment: 1
Newspapers••.•••.•.•.....•.•..•....•...•........
Automobiles..••••.•.•.•..•.•.• _•.•.••..•.•.•....
Automobile tires ..•.•••...••••• ••••••••. •. . . .....

1923

1924

I-

1926

1925

-

-

1927

1928

-

108.8

98.2

99.2

100. 0

96.4

93. 8

122.9
124.5
118.6
116.3
115. 1
111.1
109. 0
105. 2
118.3
108.8
105.3

115.1
113.3
106.9
100.3
108.0
101. 6
108. 9
94.7
110.4
90.8
99.9

104.4
110.7
103.1
97.8
103.6
102.9
105.3
99.0
109.0
100.2
98.9

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

99.5
99.7
97.8
91. 2
91. 0
97.7
95.8
88.9
98.1
78.7
90.4

99.5
95. 0
92.2
87. 6
86. 7
91. 9
87. 7
88.8
96.0
76. 7
77.1

89.5
93.0
91. 1

93.1
87.0
88.6

95.4
99.0
102.2

100.0
100.0
100.0

103.4
91. 2
97.3

105. 2
111. 3
103.3

1 The number of industries shown as reporting an increasing trend in employment was limited because
or the fact that the Bureau or Labor Statistics, until recently, did not secure adequate representation of
new and growing industries in its employment reports.
SOURCE: Monthly Labor Review, vol. 32, no. 2, February 1931, pp. 158-167.

employment in carriage making, there was an increase in employment
in automobile manufacture (table 8). Likewise, employment was
declining on steam railroads, in express companies, and in water
transportation, and increasing on street railways, in the Pullman
Compa.ny, in bus and truck transportation, and in the t elephone, telegraph, and electric light and power industries (table 9).
It should also be pointed out that geographical shifts take place
within an industry so that employment decreases in one area while
it is increasing in another. For example, combined employment
in the 13 leading branches of the textile industry declined in New
England from 322,946 in 1914 to 265,313 in 1929, and increased over
the same period in the ~outhern States of North and South Carolina,
Georgia, Alabama, and Tennessee from 111,611 to 253,379.

64

UNEMPLOYMENT COMPENSATION

PART-TIME EMPLOYMENT
The record of total unemployment does not represent the entire
unemployment problem. Account must also be taken of unemployment resulting from working short time. Information on partial
or under employment is even more fragmentary than for total unemployment. The few data which have been collected provide little
definite infor'm ation about part-time unemployment, other than a
general substantiation of the commonplace observation that there
is a considerable volume of part-time work in "nor mal" times, and
that this volume increases materially in depression years.
Ideally, it would be desirable to know ( 1) the number of par t-time
workers; (2) the proportion of full time worked by part-time
workers; (3) the proportion of total full-time man-hours lost
t hrough part-time employment; ( 4) the incidence of p ar t-time employment by industries. Detailed information of this char acter is
TABLE

9.-Estimated numbers of employees attached to t ransportation and
ccmvm1tnication industries, 19~0- ~1
[ In t h ousands]
Industry

1920

1921

1922

1923

1924

1925

19"..6

1927

- - - -- - -- - 4,149 4, 431 4, 691 4, 658 4,582 4,744
-- - -- - - - - - - - - - -5,204
- -

-

All industries.•- •••••••• •••••••. ....... . .... 4,235

Industries with decreasing em ployment:
Steam railroads, switching, and terminal companies ••• ---------·········· .. 2, 163
Express companies•••.•• ____ ••••.••. ....
91
Water tran!jportation•.•••.•••.•••••.. ..
399
Industries with increasing employment:
Street railways•••••••• ••• _••.......•••.•
307
23
Pullman ••••••.•...•.•.••••••••••••••••.
750
Bus and truck transportation •••.....••.
311
Telephone ••·-·-··· -·····•··-······-·-··
75
Telegraph••••••••••••••••••••...•.•....
116
Electric light and power••••......••...•

2, 122
82
394

2,097
77
392

2,080
75
388

2,041
70
369

1, 891
68
355

I, 903
68
354

1, 856
65
341

308
23
700
318
75
127

308
21

319
22
1,220
350
76
161

318

317
26
1,275
377
86
187

319
27
1,400
381
86
206

1, 900
3g·;)
86
221

1,000

322
75
139

25

1,220
370
77

168

322
28

SOURCE: Committee of the President's Conference on Unemployment, Recerit Ecoriomic Change8, vol. IT
(McGraw-Hill Book Company, New York, 1929), p. 476.

available for only four cities in the country-Columbus, Buffalo,
Syracuse, and Philadelphia. Virtually no information exists about
part-time work in the country as a whole.
Until late in 1933, the United States Bureau of L abor Statistics
.published a monthly r eport on the average percent of full time r eported by all operating manufacturing establishments and reported
by establishments operating part time only. This series, however, is
only a rough index of plant operating time and has no relation to
actual part-time hours worked by employees. The reporting firms
indicate to the Bureau simply the proportion of full-time hours
during which the doors of the plant are open. Thus, if any one department of an establishment were running full time, that .plant
would report 100 percent full-time operation, r egar dless of short
hours in any of its other departments. Finally, the figures as pub-

65

UNEMPLOYMENT IN T HE UNITED STATES

lished for the several manufacturing industries are simple averages
of the percentages reported by the individual p lants; that is, the
averages are not weighted by the number of wage earners in each
establishment or department.
The series was discontinued by the Bureau in 1933, chiefly because of the impossibility of determining actual full-time hours from
one period to another. Although t he National Recovery Administration codes of fair competition theoretically established standard
hours of operation, at the same time they made numerous allowances for extending the hours during peak .p roduction periods and
for contracting them below the code standard when orders were
slack. The confusion in reporting the proport ion of f ull time which
'rABLE 10.- Proportion of fu,ll time ivor ked by all employed workers in 29

industries, United States, 1922-33
Industry

1922

1924

1926

1927

1928

1929

1930

1931

1932

1933

- - - - - - - -- -- -1- - - - - - - - - - - - - - - - - - - N onmanufacturing:
Air transportation•• •••••••••••••••••••••••.•...•.•••.•.••........•.•••••.••• 98.1 •••••• 97. 5
Coal mining (bituminous) ... •.••.. 62. 0 58. 7 66.0 •••••• 62. 7 .••••• 50.0 ...•.. 50. 7 ..... .
Gasoline filling stations••••••••••••••••••.•••........ .......•.•...•••••.• •. •. 99. 2 ••.••••.••••
Metalliferous mining •••••• ••••••••••• ••• • ••••••• ••••••••...•.... .....• ...... 80. 6 .•..••.....•
Automobile garages•.••.•...........• ..••.•.... · · -·· · •• •••• • ••••..••••••••• . • 95. 5 .••......•.•
Manufacturing:
Aircraft engines..•••••••••••••.•••••••••••.•........ ••••••.••••• 102. 9 ••..•••••... .•...•.•••.•
Aircraft ••.•......•..•..•.•.......••••••• •••.•.••••.••••••..•••.• 98. 7 ...• .. •••••...•...•.••.•
Bread and bakeries.•••.••• .••....••••••••..••• .•.•.............••••••• . ..••. .•..•• 97.5 ••••••
Boots and shoes • ••.•.....•.•.....•...... •••••••••••••••••• 01.0 .•• •.. 86. 7 ...... 82. 6 ••...•
Cane•sugar refin ing. .•..•..•....•......•..•.•.... .....•.. •• ••••••. ..•.. 92. 3 ..••••..•.....••••
Cigarettes •••.••• •.. ••• ••••••...•• . •••.•• •••••••.•••• ..•....•..... •.••. 89. 6 •• •..•••••..••••••
Cotton goods...............................••• •• ..••••••.• 78.3 ..•• .• 80.0 ..•... 83. 0 ••.•..
Textile dyeing and finishing ..•••••.••••• ••.•••............•••••.• . .•.. 96. O ..•..• 97. 3 . .... .
Foundries....... ............ .... .. •••••• •••••. .•.•.. 91. 2 .•.••. 95. 5 . • . . .. 66. 6 ••• ••. 59. 6
Furniture..•.........• ..•......••..•.••. . ..... .•..• • .•••..•••••• 96. 5 .•..•. 79. 3 ..•....• •...
Glass•..• . ......•••..............••...••..•..••.•.•.•...•••.•••• ..•••.• ..••....•... 74.1 ••.•..
Hosiery••• •..•.•••••..••••.••• •••••••••• •••.....•......••• 90.4 •••••• 80.3 ••.•.• 79. 6 ...•..
Iron and steel..................... •••••• •••••• •••••• ..•• .. . . •..• ...... •..••. •• ..•• ••..•• 47. o
Leather.•. . ......••. •• ........ .....•.••. . . • . ..•••••••••• •• •.••••..•••....•...••••• 83.3 ...•.•
Men's clothing• • •••• ••••••••••••••••••••••••••..•••.....•• 92. O •••••• 85. 3 •••••• 84. 0 ••••••
Motor vehicles.................... ...••• .••••• •••••• •••••• 95. 0 ...... 70. 7 ...... 65. 9 •••••.
Portland cement. . . . .... . ......... ..•••• ...••. ... .•• •• •••. .••.•• 93.1 .••••• 77. 5 ...••..••••.
Sawmills. ..... . . ... . .............. .••••• •••••• ••••.. .•.•.. .•..•. •••••• 86. O .••••. 71. 9 ••••••
Rayon and synthetic yarns........ ..•••• .••••• ••.•.. .••.•• . •.. •• ..••.. 89. 2 ...•.. 96. 3 ••••••
Rubber tires............. .......... ...••• •••••• ..•••• •••••• 91. 0 ...... 86. 0 ....•. 71. 9 •.....
Silk and rayon goods • •• _• ••• ..••...•••••.........• ••••••••.••• ••...... •• •••• 89. 7 ..•••• 86. 4
Slaughtering and meat packing.... •• •••• •••••• .••••. . . .... . ..... 97. 6 ••.••• 92. 3 • ••••• ••••••
Knitted underwear. ............... ...... .•..•• .••••• •••••• 86. 8 .••... 80. 7 ...... 75. 0
Wool and worsted goods....... .... . ••••. .••... ...... .••••• 81. 9 •••••. 82. 1 •••••. 81. 3
SOURCE:

"Wages and Hours of Labor Series", bulletins of the U.S. Bureau or L abor Statistics.

resulted :from this situation left the r eports of the individual firms
incomparable with reports of other firms and with their own earlier
reports.
The United States Bureau of Labor Statistics from time to time
has made sample studies of wages and hours 0£ labor in some 24
manufacturing and 5 nonmanufacturing industries. In these studies
data have been collected indicating actual and full-time man-hours
in the sample plants covered. These data were used to compute the
average percentage of full-time man-hours worked by all employees,
which is reported by the Bureau in tlie bulletins 0£ the "Wages and
H ours of Labor'' series. (See table 10.)

66

UNEMPLOYMENT COMPENSATION

These averages have the advantage of representing actual, observed employee working hours. Their chief disadvantages derive
from the fact that the surveys have been spot studies and no industry has been covered more frequently than at 2-year intervals.
Because of t his fact and because not more than t wo or three observa.tions, at periods of varying comparability, are available for most
of the industries, it is difficult to make legitimate chronological comparisons with the data.
One general tendency in the individual industries covered is appa,rent: The proportion of part-time employment, which was relat-ively small until 1929, showed a considerable increase during the
subsequent depression years.
Volume II of the unemployment section of the Fifteenth United
States Census includes a brief section estimating the number presumably working part time in Apri11930. The estimates are based
on the report of "days worked last week" by .persons having a job
but on lay-off without pay, excluding those sick or voluntarily idle.6
The length of the full-time week, of course, varies, and the census
estimates were made on the basis of 5-, 5½-, 6-, or 7-day full weeks.
The combined estimates, therefore, indicate only the number of
persons presumably working part time in April 1930, and they include no indication of the proportion of full time or number of
working days lost.
The most complete information on part-time employment is found
in sample unemployment surveys made in three cities under the
direction of Fred C. Croxton. A survey of Columbus, Ohio, covers
the years from 1921 to 1925; a Buffalo, N . Y ., study has been conducted each year -since 1929; and a survey of Syracuse, N. Y., was
made in 1931. The surveys all were made about the first of November, and, since they cover carefully selected sections of the r espective
cities, they probably present fairly accurate results for the particular
areas. (See table 11.)
Tabulations were made of ·the employment status (full time, part
time, or wholly unemployed) of all gainful workers enumerated.
P art-time workers were tabulated also ·according to the proportion
of full time worked, the frequency class intervals ra:nging as f ollows: Less than one-third time; one-third to one-half t ime; one-half
to two-thirds time ; two-thirds but less than full time. T able 12
displays this distribution of part-time workers for the three cities.
8
U. S. Department of Commerce. Bureau of t h e Census, F ifteenth Cens11s of th r
Utllited Sta,t es: 1930, ''Unemployment ", vol. II, General Report (U. S. Government P rint-

Ing Office, Washington, D. C., 1932 ), pp. 355-360.

67

UNEMPLOYMENT IN THE UNITED STATES

The industrial research department 0£ the Wharton School of
Finance -and Commerce has compiled estimates of part-time unemployment in Philadelphia at four different periods since April 1930.
(See table 11.) However, it has released no estimates 0£ the proportion of full time worked on these dates.
From the several reports listed above the statistical and actuarial
staff of the Committee on Economic Security constructed estimates
of the proportion of full time worked by all workers and by parttime workers in all of these cities except Philadelphia. In general,
TABLE

11.- Emvloyment stat·us of gwilnf•u l workers enumerated in four areas
1

Gainful workers enumerated
Area and dale of
survey

Total
number

Full
time

Part
time

- Columbus: 2
Oct. 31, 1921-.... __
Oct. 31, 1922..... • •
Oct. 31, 1923.... .. _
Oct. 31, 1924... __ . .
Oct. 31, 1925. .. __ . .
Buffalo: a
November 1929.....
November 1930.....
November 1931. ....
November 1932•....
November 1933.....
Syracuse:'
November 1931. ....
Philadelphia: 6
April 1930..... .....
December
.....
April 1931.1930
_________
May 1932__________

10,758
11, 725
12,156
10,593
12,075

Employed workers

Unem• Total
ployed number

:F ull

time

--

Percent Percent Percent
78.2
10.3
11. 5
5.1
87.9
6.8
6.3
5. 7
88.0
80.8
12. 2
7.0
82. 7
9. 7
7.6

14,476
13,475
15,039
14,909
15,729

87.6
66.0
54.5
46.3
58. 2

6.7
17.3
21. 8
22.5
13.6

5. 7
16. 7
23. 7
31. 2

7,302

58. 7

890,000
894,000
896,000
902,500

79.8
51. 1
60.7
39.0

Part

time

Percent of full
time worked 1
P art•

All
time
workers workers

- -

--- 9,601

11, 261

11, 527
9,889
11, 191

Percent Percent
88.3
11. 7
92.S
7.2
93.3
6. 7
86.8
13. 2
89.5
10.5

\15
97
98
95
96

6U

62
66
65
66

28. 2

13,655
11,221
11,479
10,256
11,301

93. 2
79. 4
71.5
67. 3
81.0

6.8
20.6
28.5
32. 7
19.0

97
93
88
86
92

58
57
59

19.2

22.1

5,684

75.4

24. 6

89

5-1

5.2
24.0
13.8
21. 2

15.0
24.9
25.5
39.8

757,000
671,000
668,000
543,500

93.8
68.l
70.8
64.8

6.2
31. 9
29.2
35.2

63
64

-------- --------------- --------------·-------------- --------

Computed from weighted averages of midpoints of part-time frequency intervals.
, "Unemployment in Columbus, Ohio, 1921-25", United States Bureau of Labor Statistics, Bulletin
409, June 1926.
3 " Unemployment in Buffalo", New York Department of Labor Bulletin 179, 1932; "Buffalo Unem•
ployment Survey, November 1933, Revised Report", Monthly Labor Review, vol. 38, no. 3, March 1934,
p. 526.
, "Unemployment in Syracuse", New York Department of Labor Bulletin 173, 1932.
a "Unemployment in Philadelphia," Special Report No. 6, Industrial Research Department, Wharton
School of Finance and Commerce, University of Pennsylvania, 1932.
1

it appeared that part-time work tended to increase in close proportion to the increase in unemployment. In Columbus the proportion
0£ part-time work and unemployed workers tended to move together
:from the depression of 1921 through the winter recession of 1924.
In Buffalo the same similarity was apparent during the depression
until November 1932, when unemployment increased at a £aster
rate than part-time employment. The average loss from total fulltime man-hours apparently reached about 15 percent in 1932 compared with 3 or 4 percent from 1921 to 1925.
The proportion of employed workers on part time remained
fairly constant from 1921 to 1925 in Columbus and increased in
Buffalo from 7 percent in 1929 to 33 percent in 1932. Similar distributions occurred in the other cities.

TABL E

Total
numbe r

Numb er

% to full time

Part time

Full time

Percen t

00

Part•time workers

All employed workers

Area and date of survey

~

12.-E mplo ym ent status of employed worke rs in three areas

Numb er

½ to % t ime

¼to½ time

Less than ¼ time

t Percen t Percent Percent
Percent Percen t Percent Percent Percen
of part•
of all
of part•
all
of
part•
of
all
of
of part•
of all
time
ed
employ
time
ed
employ
time
Percent employed
ed
employ
time
workers
s
worker
s
worker
s
s
worker
worker
s
worker
s
workers worker

q
~

tz:j

Colum bus: 1
October 1921.. ••• ••••••• ··--··- ···· ••
October 1922••••••• •• ···-·· ••••••• • ·October 1923__. _• •••• ·- ••••••• •••.•••
October 1924.__ •••• .•••••• •••••.. . ··October 1925.•.••• _••••••• • ···- •••• -·
Buffalo: i
November 1929._ ·- •••• ·--·- --- __ . • ••
November 1930_· ··-···-- ··-··- ··-· -·
November 193L •••.• ·-·-··· --···-- ·····
November 1932._ · - --·- ·-- -----··----·
November 1933_ ··--····- ··-···Syracu se: a Novem ber 1931-. ····--- - --··

9,601
11,261
11,527
9,889
11,191
13,655
11,221
11,479
10,256
11,301
5,684

8,482
10,454
10,758
8,587
10,012
12, 720
8,908
8,209
6,902
9,157
4,285

88.3
92.8
93. 3
86.8
89.5
93.2
79. 4
71. 5
67.3
81. 0
76. 4

1,119
807
769
1,302
1, 179
935
2,313
3,270
3,354
2, 144
1,399

11. 7
7.2
6. 7
13.2
10.5

2.9
2.4
2.8
5. 4
4. 7

25.0
33.5
42. 3
41. 4
44. 2

6.6
3.5
3.0
5.4
4.3

57.4
48.4
45. 6
40. 7
40.5

1. 4
.7
.7
1.8
1. 1

11. 5
10.5
9.8
13.9
10.4

6.8
20.6
28.5
32. 7
19.0
24. 6

3.1
8.6
9.6
9.6
5.2
7. 2

45. 1
41. 9
33. 6
29.4

2. 7
8.1
10.7
12. 9
7. 6
8. 5

39.8
39.0
37.4
39.5
39.9
35.6

.7
2. 7
4.3
5.5
3. 4
4.0

10. 4
13. 3
15. 0
16. 7
18.1
·16. 4

27.5

30. 1

0. 7
.5
.2
.6
.5

6. 1
7.6
2.3
4.0
4.9

.6
1. 3
4.0
4. 7
2.8
4.9

4.7
6.8
14.0

14.4
14.3
17.9

n 409, June 1926.
Monthly Labor
1921-25", United States Bureau of Labor Statistlca, Bulleti
Unemp loyme nt Survey, Kovember 1933, Revised Repor t",lo
"Buffa
1932;
179,
ulletin
B
Labor
of
ment
Depart
ork
New Y
Rtuiew , vol. 38, no. 3, March 1934, p. 526. York Depart ment oJ Labor B ulletin 179, 1932.
se", New
1 "Unem ploym ent in Colum bus, Ohio,
2 " Unemp loymen t in Buffalo ",

a" Unemploymen t in Syracu

~

~

0
t-<:

~

t::j

z8
Q

0

~

~

z

00

~

~

0

z

UNEMPLOYMENT IN THE UNITED STATES

69

While the number of part-time workers tended to increase with
unemployment, the variation 1.n the proportion of full time worked
by part-time workers was surprisingly small. Averaging about 65
percent from 1921 to 1925 in Columbus, it fell no lower than 57
percent in Buffalo in 1932 and 54 percent in Syracuse in 1931.
The distribution of part-time workers according to proportion 0£
full time worked indicated that roughly 85 percent of them worked
half time or more in Columbus. The percentage working half timP.
or more had fallen to 70 percent in Buffalo and Syracuse in 1931.
PERIODIC AND SEASONAL FLUCTUATIONS IN
UNEMPLOYMENT
It is common knowledge that unemployment fluctuates widely
from year to year. It is evident also that a large proportion of
the total volume of unemployment over a considerable period of
years appears in depressions. In the 16-year period 1900~1915
the unemployment of 5 of those years-1900, 1904, 1908, 1914, and
1915-constituted approximately 45 percent of the total, and about
70 percent of the unemployment in the years 1922-33, inclusive, was
concentrated in the years 1930-33. There is also considerable fluctuation in employment from month to month during any year.
During the year 1928, for example, employment in manufacturing
for the United States as a whole was 7.5 percent higher in September than in January, and the total number of persons employed
in Ohio was 13.8 percent greater in the best month than in the
poorest month. 7
The estimates by Simon Kuznets in Seasonal Variations in Industry and Trade indicate that during the period 1923 to 1931 the range
in monthly fluctuations in pay rolls from a yearly average index
of 100 was 55 in women's clothing, 35 in automobiles, 25 in cement,
19 in steamfitting, 19 in furniture, and 17 in cigars and cigarettes
(table 13).
Fluctuations in seasonal employment are especially marked in
the construction industries. The 1930 census of the construction
industry showed that the number employed in January 1929 was
only 56.2 percent of the maximum number employed i.n August of
that year. Large seasonal fluctuations in employment also occur
in mining, railroading, and retailing. All industries have some
form of seasonal variation; the difference is one of degree. Some
measure must be established to select for special study those industries evidencing seasonal variation in employment of sufficient
amplitude to be especially expensive in the operation of a plan of
7

"Fluctua tions in Employment in Ohio, 1914 to 1929", U. S. Biweau of Labor Statistics.

Bulletin No. 'i5S.

·

70

UNEMPLOYMENT COMPENSATION

unemployment compensation. 0£ chief concern here is the industry
which has a definite period of the year when employment is materially curtailed, such as is true for the fertilizer or the canning
and preserving industries. On the other hand, the employment
record which tends to be level for most of the year but rises rapidly
and for a very brief time, such as might be r eflected by departmentstore employment at Christmas, is of no significance or importance
for present purposes.
TABLE

13.-Indexes of seasonal variati ...... 1,8 in factory pay rolls in the United
States, 1923-31
C

£
....

Seasonal index: Yearly average=lOO
Industry

...
"';::sC

..

I>,

Flour ______ _____ __ ___ ______ _
Slaughtering
and meat packing______________________
__
Cane-sugar retloing ______ _• _
Cigars and cigarettes________
Cott on goods. _. ____ ___ ____ _
Dyeing and finishing textiles.
Hosier y and knit goods. ___ _
Woolen
and
worsted
manufactures
__ ___
______ ____
____
Silk manufactures ______ ____
Men's clothing ______ ________
Women's clothing_____ . ___ ._
Leather __ ____ ______ ______. • _
Boots and shoes•••••• ______ _
Furniture (lumber) ________ _
A utomobile tires and tubes.
Petroleum refining ___ • _____ _
G lass._ .•.• _____ __• __ .• ____ _
Automobiles. ______ .• ____ . __
C lay products•• __ _________ _
Cement.•• ___ •• ______ __ _____
Lumber, sawmills _____ _____ _
Steel
works and rolling mills,
etc ________________________
Structural iron works __ _____
Steam fitting..•. _____ •• __ •• _

m
;::s
....

...
- --

.0
G)

.. ::g"'
.Cl
(.)

;::

I>,

m

i:i.

03

~

99

99

98

105
91
92
103
101
98

102
98
93
105
106
103

96
104
97
104
106
104

102
97
103
102
101
99
96
95
97
94
81
87
85
90

103
105
109
116
103
105
101
103
99
101
105
91
87
93

100
105
106
128
102
105
102
104
99
104
112
96
93
97

97
94
91

105
97
102

107
97
102

G)

C

I>,

<

en

G)

...

...

.0

.0

.0
0

C!)

C!)

G)

"'
i'.
G)

"'

s
... > s >"'.... C
0
z A < ~
-- -- -- -G)

G)

t:o

G)

t:o

(.)

0

105

107

103

100

3. 1

13

98
105
99
92
94
94

99
101
105
96
98
97

100
100
108
100
102
105

102
96
109
101
102
105

105
93
107
104
103
104

2.4
4.0
4.9
3. 7
3.8
4.0

10
14
17
13
15
16

94
92
103
73
98
103
90
102
101
92
95
102
106
101

98
98
107
91
100
112
98
102
102
97
98
104
110
102

99
98
103
110
101
109
103
100
100
98
97
103
107
105

103
104
99
116
101
105
109
95
100
103
100
104
106
105

104
100
92
95
99
89
108
87
99
103
89
101
100
92

105 2.8
102 3. 1
99 5. 3
96 13.2
101 I. 4
92 6.3
105 4.6
91 5.3
98 1.2
100 3. 2
88 8.6
98 4.8
95 6.8
98 3.8

11
13

93
101
91

96
105
98

95
102
101

99
103
110

97
99
103

98
101
100

... ...'3
-- --

;::s

95

96

100

103

95
102
93
104
103
102

97
104
98
101
100
102

100
105
101
98
94
99

100
105
99
92
91
89

97
90
107
99
96
99
107
100
103
116
103
100
100

98
101
88
89
98
93
96
110
101
103
115
106
105
104

98
97
101
77
98
94
94
104
102
102
103
107
107
105

107
98
101

105
101
101

101
103
99

102

8
Q)

...

(.)
G)

94

-

.0

0.

;::s

- - - -

G)

t:o

::g

<

...

..."';::s

I>,

-

G)

-

C!)

C:

4.2
2. 6
3. 4

21
55
5
23
19
23
5
12
35
20
25
15
14
11

19

SOURCE: Kuznets, Simon, Seasonal Variations in lndmtry and Trade (National Bureau of Economic
Research, New York, 1933), pp. 414-415.

DURATION OF UNEMPLOY~iENT
The staff of the Committee on Economic Security studied all available data for the purpose of determining the most probable distribution of the unemployed in the United States by t he duration
of unemployment from 1922 to 1933, inclusive. Appendix II gives
the sources of available information on the duration of unemployment and describes the procedures by which the various data were
adjusted to comparable bases for computation purposes.
In an analysis of 92 available surveys, covering about 5 000 000
persons, 5 groups were segregated according to the percentage of
gainful workers unemployed at the time the surveys \\"ere made.
Surveys in which the percentage of employment ranged from 3.0

U N EM PLOYM E NT TN THE U NITED ST ATES

71

to 6.~ percent of the total gainful workers were includecl in the firsL
group. For the second, third, fourth, and fifth groups the percentages of gainful worker s unemployed f ell within the ranges of
7.0-10.9, 11.0-19.9, 20.0-29.9, and 30.0-43.0 per cent, respectively.
The percentage distribution of the unemployed was t abulated by
duration of unemployment for each of these five groups. (See t ab1e
18, p. 84, and appendix II, fig. II- 3.)
These five duration distributions were then applied to national
employment, on the basis of two assumptions: (1) That the duration
curve varies with the degree of unemployment and (2) that a distribution curve at a certain percentage of unemployment is representative of the duration experience of the unemployed in the United
States when a corresponding percentage of unemployment exists in
that group. Since a £air correlation was found between the degree
and the duration of unemployment, it was possible to construct estimates of duration for the United States as a whole £or each of
the years 1923-33, even though no surveys were available £or 1926
and 1927, and for all years except 1929, 1930, and 1931 only a limited
area had been covered in the sample studies. The fairly close
agreement between the average rate of unemployment calculated for
the assumed total compensable labor force of the United States and
for the cities in which there were surveys in the corresponding
years indicates that employment conditions in these cities were
representative of the conditions in the country as a whole in the same
period.
The estimated time lost by the unemployed in each of the years
1923-33 was calculated on the assumption that the estimated percentage of the compensable labor force unemployed each year
and the percentage distribution of duration of unemployment assigned to each year represented the average unemployment and duration situations throughout the year. This assumption disregards
seasonal fluctuations except as they are reflected in the situation at
the time of the surveys utilized as basic data. It is also recognized
that the individuals who comprise the average number of unemployed shift constantly throughout the year, but for purposes of
computing total benefit costs it was not considered essential, even
if it were possible, to trace the history of separate unemployed
individuals who experience unemployment of specific duration.
If a census of the unemployed were taken every week in a year~
a set of consecutive duration distributions would result which would
give a picture of the shifting in the size of the duration intervals.
This also would afford more accurate means of determining the total
weeks lost by the unemployed in each different duration classification
for the entire year.

•

Chapter IV
THE ACTUARIAL BASIS FOR UNEMPLOYMENT
COlVIPENSATION
OR an established type of insurance it is customary to use the
most comparable results of past experience within the group
insured and to weigh their applicability to the problem of cost
estimates for the future. Well-designed, accurate record keeping
is basic to this procedure. The ability to recognize changes or
trends, to evaluate the credence which can be given to past experience
while applying it to the future is supplemental to the simpler
process of accumulation of experience.
In the analysis of a new type of insurance, since no exact data are
available, accuracy of past records is less important than judgment
in the selection of the data to be analyzed. In the experimental
advance procedure, any accurate determination of scope of coverage
and rate and duration of benefits is difficult but fundamental and
is reached through the method of successive trials to determine what
benefits can be given as a result of various rates of advance contribution. Especially must the immeasurable factors be recognized
as such ancl allowed for by a careful contingency margin. The need
of such a margin has been most thoroughly demonstrated in the
administration of workmen's accident compensation where the
failure to provide sufficiently for the unknown has created more
trouble than any other factor. It has been pointed out by numerous
serious students of the problem that in unemployment compensation
there is less random chance and more possibility that individual
businesses in time can create the contingency insured against than
is common in life insurance, but sufficient margin must be left so
that faulty cost calculations will not impair the protection given
to the insured.
Even in that simplest form of insurance-life insurance-there are
marked differences by regions, by industrial categories, and by time
periods. In order to obtain uniformity of protection, it is, therefore,
necessary to secure as broad a view as possible so as to determine
what may be regarded as long-term over-all probabilities of unemployment, and the value of unemployment statistics will be seriously

F

73

74

U NEMPLOYMENT COMPENSATION

limited if too small an area, too short a period o:f time, or too little
industrial differentiation enters into the statistical compilations.
While unemployment insurance has been carried on for more than
20 years in Great Britain a.nd for several years in ·other European
countries, no foreign country has maintained a uniform plan for
any long term of years without drastic modifications either in coverage or benefits; therefore, little satisfactory actuarial experience is
available from other countries.
In the United States neither exact unemployment rates nor exact
data as to what proportion of the apparent unemployment would
have been compensated are available. The measure of protection
afforded by an unemployment compensation law will depend to a
large extent on the bBhavior of the employment curve, and experience
has shown that no unemployment insurance system in existence has
ever made a sufficiently adequate estimate of benefit requirements.
The government actuary in Great Britain, in 1919, using trade-union
records of unemployment and material collected by the Ministry
of Labour, estimated the average rate of unemployment before the
war at a little over 4.5 percent for the trades to be covered by the
Unemployment Insurance Act of 1920. In the following decade,
however, Britain's unemployment average was about 12 percent and
even higher from 1930 on. The British law of 1920 provided certain
definite benefits which were based on estimates of unemployment
in pre-war years. The 1921 depression which immediately confronted the newly established scheme was more extreme than any
other similar crisis in British industrial history. With the upturn
in business conditions Great Britain was faced with chronic unemployment in certain heavy industries, of a type that the w1employment insurance scheme had not been designed to cover. The
recognition that this w.as a permanent condition was stubbornly
resisted with the result that the fund was usually in financial difficulties until 1934, . when contributions and benefits were finally
brought into balance. The German system, begun in 1927, was
soon affected by a depression, which necessitated doubling the
contribution rate and revising benefits downward in an effort to
keep the scheme intact. The Swiss Federal scheme established in
1924 did not make proper allowance for depressions, and as a r esult
a greatly increased amount of Federal aid was inevitable. A growing volume of benefit claims has also been the experience of every
voluntary plan in the United States.
The inherent limitations which a,ccompany the application of
data accumulated in the past to future conditions are greatly accentuated when the past data are inadequate. It is necessary to
estimate what has occurred in the past, and to be even more cautious in the application of this material to the future than when

THE ACTUARIAL BASIS

75

the past is a matter of accurate record. It has been suggested that
a single 10-year period is only a part o:f a much longer employment
cycle. Since unemployment is the result of intricate forces-individual, industrial, and social-and since a complete understanding
of these forces is impossible at present, not even the hardiest would
venture to claim that the course of future unemployment can be
foretold. The insurance technique, however, allows for this inadequacy by drawing from past experience as well as possible and
by adjusting for the contingency factors involved. The smaller
the unit of observation, the larger the essential loading to cover
contingencies, and, in addition, the greater its fortuitous variation
in one portion of the exposure from the aggregate experience on
- the whole.
MAINTENANCE OF AN ACTUARIAL BASIS
The British system was originally intended to take care of normal
unemployment in certain selected trades. The eligibility requirements were framed so as to keep from benefit those not genuinely
unemployed through lack of work. The act worked well. When,
however, coverage was extended to the vast majority of the British
working population almost simultaneously with the beginning of
the serious post-war depression, before adequate reserves had been
accumulated, difficulties immediately set in. Fro1n then on, the
many changes in the British law and, in particular the jntroduction
of uncovenanted benefits, grew out of the basic fact that the British
G-overnment did not wish to require insured persons who had either
exhausted their right to, or were not qualified for, insurance benefits to seek aid from poor-relief authorities.
The British actuary, Sir Alfred ~ Tatson, has pointed out that,
while he had established successive actuarial bases for the system
in Great Britain, they were soon broken down by action of Parliament in changing rates without relation to experience. In periods
of serious unemployinent, legislators are under social pressure to
liberalize the compensation terms, and they frequently do so at a
time when it is difficult to increase income proportionately. The
balance between contributions and benefits is therefore destroyed,
the system is soon forced into insolvency, and the legislators are
compelled to provide other measures of relief outside insurance
which should have been established as supplementary to insurance
nt the outset.
Recognizing the importance of these considerations, the new law
of Great Britain, passed in 1934, provided for an unemployment
insurance committee of experts, of which Sir William Beveridge
has been appointed chairman. The committee is to report to the

76

UNEMPLOYMENT COMPENSATI ON

Minister of Labour early in each year on the financial condition of
t.he fund at the end of the preceding yeM.', and, in addition, to report
whenever it is :felt that the :fund is likely to become inadequate to
meet its liabilities. In any such case the committee is to suggest
amendments to the law and estimate their effect on the fund. T he
~finister is required to report to Parliament on such recommendations within a specified time. The Minister may modify the proposed amendmeI?,ts but not to the extent of changing the anticipated
effect on the :fund; he must also give Parliament his reasons :for
altering the committee's suggestions.
Foreign experience has shown that the authorities administering
unemployment insurance, especially in the early years of the systems, are confronted with many unexpected problems and questions
affecting the solvency of the :fund and the just treatment of the
insured. It is quite impossible to anticipate all situations and to
provide for them in the initial legislation. Obviously as much discretion as possible must be vested in the administrative agency so
that prompt adjustment can be made to changing conditions, thus
keeping the :fund solvent. Yet without some limitations, flexibility
may prove a definite liability. It is probable that such important
changes as altering the amount or duration of benefits should be
left to legislative action, even if a special session of t he l egislature
becomes necessary in emergency situations.
ACTUARIAL ESTIMATES OF AN UNEMPLOYMENT
COMPENSATION PLAN
In building a scheme of unemployment compensation on an actuarial basis, estimates may take two forms: (1) The rate and duration
of benefits may be set, and contributions sufficient to meet the costs
of such standards may be levied, or (2) contributions may be set,
and benefit rates and duration may be estimated within these financial and other limitations. The first type of estimate is that commonly used in insurance schemes of all kinds; the second is based
on the principle that industry can assume only a certain additional
cost without suffering undue hardship, resulting, perhaps, in contraction of employment, and t hat consequently employers' contributions should be limited. The second type of estimate has been made
at contribution rates set at 3, 4, and 5 percent of pay rolls.
I n order to judge the validity of t he actuarial estimates of unemployment compensation it is necessary to analyze the interrelationship o:f the constituent elements. The choice of which elements
are used depends upon the available data. The British and Canadian actuaries could estimate the number of claims over a period
of time, the aver age duration of claim, and the average total benefits, and from these factors co.uld obtain an estimate of the total

THE ACTUARIAL BASIS

77

cost and rates of contribution. In this study approximate figures
on the number of unemployed at any one time, the proportion of
those unemployed eligible for benefits, an assumed rate of benefits
foi.· the unit of time selected, and an anticipated income based upon
a specified pay-roll tax were available.
The estimates that follow are based on the United States as a
whole, because of the more comprehensive statistics available . on
this basis. Adjustments will be necessary for individual States to
meet their particular conditions and unemployment experience.
Since a tentative estimate of the probable duration of the maximum benefit period is based upon a hypothetical experience in the
past, such estimates have been prepared covering the operation of
several types of plans for the United States as a whole for the
period 1922 through 1933, the summary of which will be presented
herein.
The period 1922 through 1933 was chosen because it included
what might be called a complete business cycle, covering the initiation of r ecovery after the depression of 1921, the subsequent years
of normal conditions, the crash of 1929, and the 4 years of major
depression which may be said to have swung into recovery in 1933.
The place of these years in· a longer cycle cannot as yet be appreciated. Nevertheless, d uring the combined period a wide range of
unemployment rates has been experienced and in the aggregate th.ere
is reason to believe that the period is a f air background from which
to predict the future.
The dearth of data concerning all phases of employment and unemployment as well as of income necessitated the use of 1nuch indirect methodology in deriving the estimates presented. A word of
caution is therefore injected to warn against too literal an application of the figures which appear, although it is felt that they are
the best indications obtainable of what would have happened had
an unemployment compensation system been in force in the United
States in the pa•st. It s hould be definitely noted that the statistics
presented are re:p resentative of the United States as a whole and
cannot be accepted without further research as typical of any State.

COVERAGE
For the purposes of calculating the number of persons who would
be covered by a uniform Nation-wide unemployment compensation
system in the United States on the basis of the April 1930 census, it
was assumed that all persons employed in. establishmein ts with 8 or
more employees during at least 20 different calendar weeks of the
year would comprise the compensable labor force, except t hat the
following occupations were excluded from coverage: agricultural
labor; domestic service in a private home; service performed as an
78470-37- 7

78

UNEMPLOYMENT COMPENSATION

officer or member of the crew of a vessel on the navigable waters
of the United States; service performed by an individual in the
employ 0£ his son, daughter, or spouse, and service performed by
a child under 21 in the employ of his father or mother; service performed in the employ of the United States Government or of an
instrumentality of the United States; service performed in the employ of a State, a political subdivision thereof, or an instrumentality
of one or more States or. political subdivisions; service performed
in the employ of a nonprofit corporation, community chest, fund, or
foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention 0£ cruelty to children or animals. These exclusions are the same
as the exclusions from the Federal tax on pay rolls imposed by title
IX of the Federal Social Security Act.
TABLE 14.-Estimatecl compensable labor force in the United States, April 1930

Employed

Total

Unemployed

Category
Number

Percent Number

Percent Number Percent

-All gainful workers••..••••••.•.••••••••••• 48,829,920

100. 00- 44,441,333

100. 00

4,388,587

100. 00

Number or workers excluded from plan by
occupation 1•••••••••••• _ ••••••••• _ _ ••••• 20,133,669
Size of firm 2•••••••••••••••••••••••••••••• 6,416,138

41. 30
13.10

20,045,131
5,293,224

45.11
11. 91

88,538
1,122, 914

2.02
25.58

Total number or workers excluded
from plan . •.....................•• 26,549,807

54.40

25, 338,355

57.02

1,211, 452

27.60

45.6

19,102,978

42. 98

3,177, 135

72.40

Compensable labor force . •........ .......• 22,280,113
1 Occupational exclusions eliminate all employments

excluded by title IX of t be Social Security Act .
, Size-of.firm exclusion eliminates workers employed by firms with 7 or less employees not eliminated by
occupation.

The Fifteenth Census of the United States, taken in 1930, r eported approximately 48,800,000 gainful workers, of whom about
54 ,percent would be excluded by the above provisions-some
20,134,000 because of occupation, and approximately 6,416,000 because
of the "size-of-firm"· exclusion-leaving about 22,280,000 as the total
compensable labor force. (See table 14.) These eliminations result
in the total exclusion of workers in public service, agriculture, construction and maintenance of roads, independent hand trades, and
preserving and canning, and leave in the covered group only about
338,000 in domestic and personal service, of whom none would be in
private homes. About 90 percent of all persons engaged in professional service are excluded. (See also table I-12 in appendix I.)
The division of the gainful workers who would have been covered
had an unemployment compensation system been in operation in
April 1930 between those employed and those unemployed is also
shown in table 14. Employment and unemployment by industries
were estimated from figures in the unemployment census of that year

79

THE ACTUARIAL BASIS

and from other data. Deductions of the unemployed by socio,
economic classes-managerial, professional, clerical, skilled, and unskilled-yielded an estimated distribution of the employed in each
industry and made possible the approximation of the number of
employed and unemployed eliminated from the plan by virtue of the
exclusions stated above. The fact that on this basis 72 percent of
the unemployed and only about 43 percent of the employed are included in the compensable group indicates that the coverage assumed
would apply to the group obviously most in need of it.
TABLE

15.-Estimatea compensable labor force, United, States, 1922-33
[Index: April 1930=-100 t]
Compensable labor force
Employed

Total
Total gainful workers

Year

Number

1922.. ·-----··-······-·
1923 ...•. • · -········-··
1924 ••. .............•.•
1925 ••• ___ ···-···· · ··· ·
1926 ........ ....•......
1927 .• •. _. . . . . . . . . .....
1928.•.. . - ...........•.
1929 .•..• ·-··--···· · ···
1930 .•.. · - · ···-- · -····
1931 ••................•
1932..•.. • ···· · · -· ··-··
1933 . . . ... ....... . .....
I
2

43,160,792
43,934,064
44,707,336
45,480,608
46,253,880
47,027,152
47,800,424
48,573,700
48,903,200
49,227,700
49,554,700
49,881,700

2 18, 789,

145
19,225,240
19,661,335
20,097,430
20,533,525
20,969,620
21,405,715
21,841,810
2 22, 277, 905
22,714,000
23,150,096
23,586,190

Percent or
gainful
workers

43.53
43. 76
43.98
41.19
44.39
44.59
44.78
44.97
45.56
46.14
46.72
47.28

Number

16,055,289
17,645,994
17,685,537
18,417,372
18,962,189
19,275,287
19,629,074
20,660, 062
18,743,460
16,385,579
13,783,563
13,782,608

Unemployed

Percent or
April 1930
compen- Number
sable
labor
force 1
84.046
92.373
92.580
96. 411
99.263
100.902
102. 754
108. 151
98. ll8
85. 775
72. 154
72. 149

Percent of
compensable
labor
force

2,733,856
1,579,246
l, 975,798
1,680,058
1,571,336
1,694,333
1,776,641
1, 181, 748
3,534,445
6,328,421
9,366,532
9,803,582

14.55
8. 21
10. 05
8.37
7.65
8.08
8.30
5.41
15. 87
27.86
40.46
41. 56

100.00= 19,102,978.
For any given year between 1922 and 1930 the number of the total compensable labor force=
22,277,905-(l93o-year) [ gainful workers 1920~~ainful workers 1930 _

i

(gainful workers in agriculture 1922-~-gainful workers in agriculture 1930) ] 79_2%

The extension of this coverage inquiry on the basis of yearly employment estimates applied to the compensable employed labor force
of April 1930 made possible the computation of the insured employed
labor force for each year from 1922 to 1933. 1 Estimates of the change
in the number of gainful workers from year to year applied to the
total coverage of April 1930 resulted in the derivation of the total
compensable labor force for the period. Table 15 displays the
changes in the number included in the compensable labor force for
1 For the period 1922-27 employment estimates were derived from the unempl oyment
estimates of Leo Wolman in Committee of the President's Conference on Unemployment,
Recent Economic Changes (McGraw.Hill Book Co., New York, 1929), vol. II, p. 478. For
the years 1928-33 Robert R. Nathan's estimates were used. These estimates by Mr.
Nathan have appeared in slightly revised form in "Estimates of Unemployment in the
United States, 1929-35", I nternational Labour Review, vol. XXXIII, no. 1, January 1936,
p. 49.

80

UNEMPLOYMENT COMPENSATI ON

each of these years and the estimated employment and unemployment
in the compensable labor force. This table, as well as the general
experience of other countries, indicates the wide variation in unemployment rates year by year. Unemployment in the covered
group appears in greater proportion than in the general population;
in this discussion consideration is given to the unemployment rates
believed to occur in this group.
It should be noted in this connection that the estimated unemployment rate of the covered group averages about 15 percent for the
period 1922-33, from a low of 5.41 percent in 1929 to a high of 41.56
percent in 1933. Since contributions increase with employment and
expenditures increaoo with unemployment, a ratio of contributions to
benefits must be maintained over periods of prosperity and depression, and the reserves in good years must be very sizable in order to
carry the fund through bad ones. Viewing the unemployment as a
cumulative total throughout the whole period, a little less than twothirds of the entire unemployment in the compensable labor f or ce
is found in the 4 years 1930-3"3 of the depression, averaging a little
over 30 percent of unemployment per year, whereas the 8 year s prior
to the depression comprise only approximately one-third of the total
unemployment, averaging less than 9 percent unemployment p er year.
This indicates a rate of unemployment almost four times as great in
a stage of depressed business activity as in a period of normal business conditions in the insurable group.
CONTRIBUTIONS
In th.is inquiry estimates are made of contribution levies of 3, 4,
or 5 percent on the total weekly wage or salary of the compensable
labor force.
The estimates of total contributions were based on national income
figures found for the period 1922 through 1928 in W. I. l{ing's study,
The N ational I ncome and I ts Pitrchasing P ower, and for the r emaining years 1929-32 in N atio1ial I ncome, 191£9- 31£, Senate Document 124. The income for 1933 was estimated by the staff of the
Committee on Economic Security.
Table 16 shows t hat t he application of a 1-percent levy in 1922,
a 2-percent levy in 1923, and a 3-percent levy thereafter would have
resulted in a total income to t he fund of approximately $8,746 000,000
for the period 1922 through 1933, ranging from a high of
about $991,000,000 in 1929 to a l ow of about $517,000,000 in 1933.
During the 6 years, 1924 through 1929, contributions would have
averaged approximately $890,000,000 per year. Contributions would

81

THE ACT UARIAL BASTS

have greatly diminished, however, with the depression, <luring 4
y~ars of which an average of only about $664,500,000 per year would
have been collected. The variation in annual income is t he r esult
not only of the variation in the number of employed cont ributing
but also of the fluctuations in wage rates.
BENEFITS
The amount that can be pa.id in uneni.ployrnent compensation benefits, accbrding to the method of approach employed, is limited by the
income available. This income ,vas assumed to be that calculated in
the preceding section, based on 3 percent of pay roll. The entire
TAB LE

16. -State cu1n1-t lated contr·i butions available for benefits at 3-,
5-ver cent contribution rates, United States, 1922-33

4-,

and

[In millions of dollars]
3 percent

Year

1922 ___ _______________ _________
1923 _______________ ___ _____ __ __
1924 _______ __________________ __
1925 _____ __ _____ __ ______ ____ __ _
1926 __ ___________________ __ ____
1927 __ _____ ____ ________________
1928 ___ __ _____ _______ __________
1929 _______ ____________ ________
1930 ___________________________
1931____ ____________ ___ _____ ___
1932____ __ ____________ _______ __
1933 ______ ______ ___ ____________
1

1
3

4 percent

5 percen t

Total
Total
Total
T otal
assessable Yearly
Yearly
funds
Yearl y
funds
funds
pay roll contribu- available
contribu- available contribu- available
tions 1 for bene- tion~ i for bene- tions 3 for benefits
fits
fits
26,638
2u,028
26,883
28,123
29,694
30,532
29,758
33,035
29,483
24,202
17, 685
17,229

226
521
806
844
891
916
893
991
884
726
531
517

226
747
1,653
2,397
3,288
4, 204
5,097
6,088
6,972
7,698
8,229
8,746

453
781
1,075
1,125
1,188
1,221
1,190
1,321
1,179
968
707
689

453
), 234
2, 309
3,434
4,622
5,843
7,033
8, 355
9,534
10, 502
11,209
11, 899

679
1, 041
1, 344
l, 406
l, 485
1,527
1,488
1,652
1,474
1,210
884
861

679

J , 720

3,064
4,471
5,955
7, 482
8,970
10,622
12,096
13,306
14,190
15,051

l percent first year, 2 percent second year, 3 percent third year and thereafter.
2 percen t first year, 3 percent second year, 4 percent third year and thereafter.
3 percent first year, 4 percent second year, 5 percent third year and thereafter.

income was assumed to be available for benefits, since the Social
Security Act r~.quires that all income from contributions be used for
the payment of compensation. Administrative expenses are to be
defrayed through grants by the Social Security Board to approved
State plans. The rate of benefits was assumed to be 50 percent of the
loss of average earnings not to exceed a $15 weekly maximum. On
this basis, a computation was made of the total benefits that would be
paid if no other limitations on benefits payable were set. This was
termed the "compensable wage loss." The total compensable wage
loss was then computed by multiplying the total man-years of unemployment in each year from 1924 to 1933 by the average compensa-

82

U NEMPLOYM ENT '0Dl.VIPIEN SATION"

ble wage loss per 111an-year. 2 (See table 11.) With these fixed assumptions of the amount of total income and the rate of benefits it
remained to calculate the length of the period during which benefits
might ne paid. Unlimited payment of benefits is, of course, impossible with the limited income available, as well as undesirable from
the standpoint of social policy. The time during which benefits are
payable must be definitely limited, in order to keep income and
outgo in balance over a period of years.
The first limitation in the time for which benefits ar,e .payable
is made by the waiting period. The limitations secured through
2-, 3-, and 4-week waiting periods were considered.
For the purpose of determining the proportion of the unemployed
who would have be.en ineligible to compensation by virtue of the
T ABUJ i7.- Est-imates of the cornpensable wage loss of the covered unenipl oyed

in the Urltited States, 1923-33

Year

1924______ ____ ____ __ ___ ___ ___ _____ _____ ____
1925____ __ ____ ____ ____ __ ________ __ _________
1926__ _______________ __ ____________ ________
1927__ ____ ____ _____ ____ _____ _____ __ ____ ____
1928_____ ___ _____ _____ ______ ____ _____ ______
1929____ ___ ___ _____ ____ ___________ _________
1930__ __ __________ __________ _____________ __
1931______ ____ ______ ____ ___ ____ _______ _____
1932__________ __________ __________ _________
1933______ ___ ____ __ _______ _______________ __
1
1

Total man- Average
years of
loss
unemploy- wage
per manment (in
year 1
thousands)
1,975
1,680
l, 511
1,694
1,776
1,181
3,534
6,328
9,366
9,80l

$1,520
1, 527
1,566
1, 584
l, 516
l, 599
1,573
1,477
1,283
], 250

compensable
Average Average
wage loss (in millions
compenof dollars)
sable wage
loss per
man-year i Amount Cumulated
$684
687
705
713
682
720
708
665
577
563

$1,351
l , 154
1,065
1, 208
1,211
850

2, 502
4, 208
5, 404
5,519

$1,351
2,505
3,570
4,778
5, 989
6, 840
9,342
13,550
18, 954
24,472

Table III-1, column 2.
45 oercent of third column.

waiting period as well as of determining what benefit period could
be allowed, a study of the duration of unemployment in the United
States was conducted, estimating the distribution of the unemployed
according to their duration of unemployment for each year, 1922
through 1933. This study utilized some 92 censuses or surveys in 46
cities and 10 different and nonconsecutive calendar years, involving
over 5,000,000 personal records. The 92 surveys were segregated
into 5 groups according to the percentage of gainful workers unemployed at the time the survey was made. Surveys for which the
percentage of unemployment ranged from 3.0 to 6.9 were includ,ed
:1 No computation was made for 1922 and 1923, since it was a ssumed t hat no benefits
would be pa id during the first 2 years of contributions. Tllis is in line witll tile
Social Security Act, which requires delay of 2 years before benefit s commence, in order
to increase the r eser ve ava ilable for t he payment of benefits.

THE ACTUARIAL BASI S

83

in the first group. For the second, third, fourth , and fifth groups,
the range was 7.0-10.9, 11.0-19.9, 20.0-29.9, and 30.0-42.9, respectively. Ten censuses fell into the first group; 24 fell into the second ;
36 in the third; 16 in the fourth; and 6 in the fifth. The percentage
and cumulative percentage from these groupings are shown in table
18, together with the composite distribution for the group.
The five cumulative percent distributions shown in t able 18 are
presumably descriptive of the length of time that the un.e mployed
remained idle at five different ranges of unemployment. Thus, to
the years when the average unemploym,e nt for the United States
was 5 percent of the total gainful workers, the distribution with
limits of 3 to 7 percent would be applied. To the years when th.e
jntensity of unemployment was between 7 and 11 p ercent, the distribution with those limits would be used, etc. The compensable
wage loss for each year from 1924 through 1933 was then distribut.e d according to the distribution of the duration of unemployment applicable to that year. The resulting distributions were
cumulated for the period 1923-33 (table 19).
This made possible a short-cut method of selecting the maximum
duration of benefits possible, by adding the compensable wage loss
in the waiting period to the income available for benefit and r eading
down the column showing the distribution of wage loss until the
figures approximately coincide.3
This method is now applied to the estimates so far obtained which
are not corrected for inadequacies. ( Actuarial adjustments will
follow later in the discussion.) Assuming a 3-percent contribution
rate, a benefit rate of 50 percent of average earnings not to exceed
a $15 weekly maximum, and a 2-week waiting period, it appears that
benefits could have been paid during a 13-week period, maintaining
the system in solvency to the end of 1933. On the ha.sis of a 4-percent
contribution, benefits could have been paid for 23 weeks.
At this point adjustments may be brought into the discussion to
evaluate those factors in the assumed plan for which no reliable
supporting data can be found and for those which are contingent
upon the operation of the plan. Mr. W. R . vVilliamson estimated
the extent to which the following assumed provisions and other
factors would affect the volume of wage loss compensable :
(1) Savings through the requirement that benefits will be paid only to
employees for whom contributions have been paid for at least 40 weeks in the
preceding 2 years;
(2) Savings through 3-week disqualification from benefits for employees who
voluntarily quit their work or who are discharged for proven misconduct;
8 This method was devised by W. R, Williamson, a(!tuary of the Committee on Economic
$i;!curity.

"TvB'IE

18.- Percentage an d w mulative percentage distri b1tti on of the unemployed able and willing to work, by duration of unemployment at
date of censiis or survey, according to various magnitudes of unemployment
Percent distributions at magnitudes of
unemployment 1
Interval

7.0-10.9 11.019.9
Com- 3.0-6.9
perperposite 2
percent
cent
cent

- -- ---

20.029.9
percent

Cumulative percent distributions at magnitudes
of unemployment 1

30.043.0
percent

100.0

100. 0

100.0

100.0

100. 0

100.0

I week or less--··-····-- · ····· ··-- · ·--··· ·· -··
2 weeks or less but more than 1 week... .......
-3 weeks or less but more than 2 weeks .... · -···
4 weeks or less but more than 3 weeks .. . ......
5 weeks or less but more than 4 weeks .. .. .....
6 weeks or less but more than 5 weeks . . .......
7 weeks or less but more than 6 weeks . . .......
8 weeks or less but more than 7 weeks.. . . .....
9 weeks or less but more than S weeks .... . ....
10 weeks or less but more than 9 weeks . ...... .
11 weeks or less but more than 10 weeks ___ ____
12 weeks or less but more than 11 weeks .... . ..
13 weeks or less but more than 12 weeks .......
14 weeks or less but more than 13 weeks.. . ....
15 weeks or less but more than 14 weeks ...... .
16 weeks or less but more than 15 weeks .. . ....
17 weeks or less but more than 16 weeks ...... .
18 weeks or less but more than 17 weeks .. . __ __
19 weeks or less but more than 18 weeks._. ____
20 weeks or less but more than 19 weeks .. . . . . .
21 weeks or less but more than 20 weeks. .. ___ _
22 weeks or less but more than 21 weeks .......
23 weeks or less but more than 22 weeks_. ___ __
24 weeks or less but more than 23 weeks . ..____
25 weeks or less bu t more than 24 weeks._. __ ..
26 weeks or less but more than 25 weeks ... __ __
27 weeks or less but more than 26 weeks---··-28 weeks or less but more than 27 weeks .......
29 weeks or less but more than 28 weeks _______
30 weeks or less but more thnn 29 weeks. . .....
31 weeks or less but more than 30 weeks-..... .
32 weeks or less but more than 31 weeks __._ .. .
33 weeks or less but more than 32 weeks. - .... .
34 weeks or less bu t more than 33 weeks._. ____
35 weeks or less hut more than 3,1 weeks _____ __
36 weeks or less but more Lban 35 weeks .. -....

7. 2
5. 8
4.5
3.9
3.5
3.3
3. 2
3.0
3.0
2.9
2. 7
2.6
2.5
2. 4
2.3
2.2
2.0
2. 0
1. 9
1. 8
1.8
1. 7
1. 6
1. 5
1. 4
1. 2
l.O

8. 7
6.8
6. 8
5.5
5.0
4.4
4.2
3.7
3. 7
3.3
3.0
2.9
2.6
2.5
2. 1
2. 1
1. 9
1.7
1.7
I. 6
1. 4
1. 3
l. 2
1.0
.9
.7
.6
.6

4.2
9.6
7. 1
5.3
4. 7
4.4
3. 9
3.7
3.6
3.3
3. 1
3.0
2.9
2.5
2. 5
2.3
2.3
2. 1
2. 1
1. 9
I. 8
I. 6

5.0
6.5
5. 1
4.5
4. 1
3. 9
3.7
3.6
3. 6
3.5
3. 3
3. 1
3.0
2. 8
2.7
2.5
2. 4
2. 4
2. 3
2. 1
2.0
1.9
1.8
l. 6
1. 5
l.3
1. l
.9
.9
.8
.7
.6

9.8
4. 5
3. 7
3. 1
3.0
2.8
2.6
2.5
2.5
2.4
2.4
2.2
2. 1
2. 1
I. 9
2.0
1.8
I. 9
1. 8
1.8
1.7
I. 6
1.6
1. 6
1. 4
1.3
1. l
1.0
.9
.9
.8
.8
.7
.7
.7
.7

10. 0
2.6
1. 8
2.2
1. 7
1. 7
1. 7
1. 7
1. 6
1.5
1. 5
1. 5
1. 4
I. 5
1.4
I. 4
1. 3
1.2
1. 2
1. 2
I. 3
1. 2
1. 2
1. 2
1. 3
1. 2
1. 2
1. l
1.0
1. 0
1. 1
.9
1.0
1.0
.9
1.0

. !l

.9
.8
.7
.7
.7
.7
.6
.6

.6

.6
.6
.4.

.5
.4

• :3

.3

1.4
1. 3
1. l
.8
.8
.7
.6
.6
.5
.4
.4
.4.
• <l

.6

.6
.6
,5

Interval

- --

Total . ••..•...• .. --•.... .....•... . - -. · - -

1. 6

~

7.0-10.9
Com- 3.0-6.9
perperposite 2 cent
cent

11.019.9
percent

20.029.9
percent

30.043.0
percent

- - - - - - - - - - -- - - -------- -- ------ -------- -------- -------- -----·-1 week or Jess ......•••....
2 weeks or less... ....•••••.
3 weeks or less. _______ ___ __
4 weeks or Jess•.•... . .•.•. _
5 weeks or less............•
6 weeks or less.•. . ____ ___ __
7 weeks or less ..... ·--·-···
8 weeks or less.•... --····-9 weeks or less. . . ...•.•... .
10 weeks or less.·-····-·-··
11 weeks or less..•.•••.•...
12 weeks or less-. •..... ....
13 weeks or less.......• _. __
14 weeks or less.----··-·-··
15 weeks or less --· -·-··-··
16 weeks or less---···--···17 weeks or less---·····-·-·
18 weeks or Jess. .. -..••••..
19 weeks or less-----·-···-·
20 weeks or less. ------·-···
21 weeks or less.·-··-· ·-··22 weeks or less . .•.... ____ _
23 weeks or less __________ __
24 weeks or less_. __________
25 weeks or less....__ __ ____
26 weeks or less------ --- -- 27 weeks or less __________ __
28 weeks or less---·-· ·-- --29 weeks or less.-------- --30 weeks or less .... ___ __ ___
31 weeks or less----- --·---·
32 weeks or less.. --·-----·33 weeks or less. ___________
34 weeks or less_________ • __
35 weoks or loss. ..•. _______
36 weeks or less ........ __ ..

7.2
13. 0
17.5
21. 4
24.9
28.2
31. 4
34.4
37.4
40.3
43.0
45.6
48.1
50.5
52.8
55.0
57.0
59.0
60.9
62. 7
64.5
66.2
67. 8
69.3
70. 7
71. 9
72. 9
73. 8
74. 7
75. 5
76.2
76.9
77. 6
78. 3
78.9
70. 6

8. 7
15.5
21. 3
26.8
31. 8
36. 2
40.4
44.1
47.8
51. 1
54. 1
57.0
69.6
62. 1
64. 2
66.3
68.2
69. 9
71. 6
73.2
74. 6
75.9
77. 1
78. 1
79.0
79.7
80. 3
80. 9
81. 5
82. 1
82. 6
83. 0
8:1. 5
83.9
84.2
811. 5

4. 2
13.8
20.9
26.2
30.9
35. 3
39.2
42.9
46.5
49. 8
52. 9
55.9
58.8
61. 3
63.8
66.1
68.4
70.5
72. 6
74.5
76. 3
77.9
79. 5
80.9
82.2
83.3
84.l
811. 9
85.6
86.2
86. 8
87. 3
87.7
88. l
88. 5
88. 9

5.0
11. 5
16.6
21. 1
25.2
29. 1
32.8
36.4
40. 0
43.5
46.8
49.9
52:9
55.7
58.4
60.9
63.3
65. 7
68.0
70. I
72. l
74.0
75. 8
77. 4
78.9
80.2
81.3
82. 2
83. 1
83. 9
84. 6
85. 2
81i. 8
86.4
87. 0
87.5

9.8
14. 3
18.0
21. 1
24. 1
26.9
29.5
32.0
34. 5
36. 9
39.3
41. 5
43. 6
45. 7
47.6
49.6
51. 4
53.3
55. 1
56.9
58.6
60. 2
61. 7
63. 2
64. 6
65.9
67.0
68.0
68. 9
69.8
70.6
71.4
72. 1
72. 8
73.5
74. 2

10.0
12. 6
14. 4
16. fi
18.3
20.0
21. 7
23.4
25.0
26.5
28.0
29. 5
30.9
32.4
33.8
35. 2
:l6.5
37. 7
38. 9
40.1
41.4
42. 6
43. 8
45.0
46. 3
47. 6
48.7
·19."8
50.8
51.8
52. 9
53.8
54.8
55. S
56. 7
57. 7

q

z

l:rj

~

~

0

~

~

l:rj

z

r-3
0
0

~

'1::1

l:rj

z

[I)

>

r-3
H

0

z

37 weeks or less but more than 36 weeks .......
38 weeks or less but more than 37 weeks.......
39 weeks or Jess but more than 38 weeks... ....
40 weeks or less but more than 39 weeks.....•.
41 weeks or less but more than 40 weeks... . ...
42 weeks or less but more than 41 weeks. ... . __
43 weeks or less but more than 42 weeks. .... __
44 weeks or less but more than 43 weeks..... __
45 weeks or less but more than 44 weeks..... __
46 weeks or less but more than 45 weeks. .. .. __
47 weeks or less but more than 46 weeks.......
4S weeks or less but more than 47 weeks.... . __
49 weeks or less but more than 48 weeks ____.•.
50 weeks or less but more than 49 weeks. . ... __
51 weeks or less but more than 50 weeks.......
52 weeks or less but more than 51 weeks..... __
Over 52 weeks ____________________________ ___ _

.6

.3

.6

•3

.6
.6
.6
.6
.6
.6
.6

•7
.7
.7
•7
.8
•8

.9
9.8

.3
.3
.3
.3
.3
.2
.2
.2
.2
.2
.2
.2
.1
.2
11. 7

.3
.3
.3
.4
.4
.3
.4
•4

.4
.4
.4

.4
.4

.5
•5
.5
4.S

•5
.5
•5
.5
.5
•5
.5
.5
.5
.5
.6
.6
.5
.6
.7
.8
3. 7

.7
.7
.7
.7
.8
,8
.8
.9
.8
.9
.9
.9
1.0
1. 0
1.0
I. 2
12.0

1.0
1.0
1.0
.9
1. 0
.9
.9
1. 0
1.0
1.0
I. 1
1. 2
1. 2
1.3
1. 4
1.5
24.9

37 weeks or less... -- . .... _.
38 weeks or less.... .,.......
39 weeks or le.ss.... ... . . . ..
40 weeks or less...... . _. ...
41 weeks or less. ... ...... . .
42 wee ks or less•... . .. _....
43 weeks or less............
44 weeks or less. ...........
45 weeks or less . ...... . . ...
46 weeks or less. . .. .. . ... ..
47 weeks or less ..... .... . ..
48 weeks or less. ...........
49 weeks or less... .. ...... .
50 weeks or less . . .... .... __
51 weeks or less........ _. __
52 weeks or less............
Over 52 weeks ..... . .....•.

80. 1
80. 7
81.3
81. 9
82.5
83. 1
83.7
84.3
84.9
85.6
86.3
87.0
87.7
88.5
89.3
90.2
100.0

84.8
85. 1
85.4
85. 7
86. 0
86. 3
86.6
86.8
87.0
87.2
87. 4
87. 6
87.8
88.0
88.1
88.3
100. 0

89.2
89.5
89.8
90.2
90.6
90.9
91. 3
91. 7
92. 1
92.5
92.9
93.3
93. 7
94.2
94. 7
95.2
100.0

88.0
88.5
89.0
89.5
90. 0
90. 5
91. 0
91. 5
92.0
92.5
93.1
93. 7
94.2
94.8
95.5
96.3
100.0

74.9
75.6
715.3
77.0
77.8
78.6
79.4
80.3
81. 1
82.0
82.9
83.8
84.8
85. 8
86,8
88.0
100.0

58. 7
59. 7
60. 7
61. 6
62. 6
63. 5
64.4
65. 4
66.4
67. 4
68.5
69. 7
70.9
72.2

73.6
75. 1
100.0

t The selection of these intervals was determined by the distribution of percentages of gainful workers unemployed in the United States, 1923-33, for the purpose of applying
this table to the unemployment occurring in each of these years.
a Composite distribution=distribution of the totaled samples utilized in the succeeding 5 columns. The distributions represent 92 surveys or censuses in 46 cities and in 10 years

8
~

t,:j

>

0
8

q

;.,..
,:I

~
td
>
en

"""'

U'J

00

c.n

86

UNEMPLOYMENT COMPENSATION

(3) Savings through suspension of benefits during trade disputes or while
accident compensation or other compulsory benefits are being received;
( 4) Savings resulting from t he requirement that the employee is able to work
and available for work;
(5) Savings through compensation for partial unemployment in excess of
$1 more than 50 percent of full-time wages;
(6) Savings through limitation of benefits in the ratio of 1 week of benefits
to 4 weeks of contributions ;
(7) Allowance of an additional maximum week of benefits for each 20
weeks of contributions without drawing benefits, up to a maximum of 10
additional weeks of benefits ;
(8) Increase in costs through commutation of benefits to a lump sum;
(9) Estimated increases in costs resulting from the fa ct tha t benefi ts will
be paid on a full-time wage basis while the contributions a r e made on actual
pay roll, including much part time.
TA.BLE

19. -0 ·urnitlative distr'ibuti cm of the total corn,pensable w age l oss, 1923-33
Distribut ion or
wage loss (1923-33)

Durat ion of unem ployment

1 week or Jess ____ . _. _.......
2 weeks or less __ .•...........
3 weeks or less __. . . .. .• . . . . •.
4 weeks or Iess __. _... ___... __
5 weeks orless _______ _____ ___
6 weeks or less. ___ . __ .... _. .. .
7 weeks or less._ .. . ..... . _. . .
8 weeks or less ___ ..... -.... . _
9 weeks or less. .. . _.. . __. _____
10 weeks or less . . . . . _____ _.. . _
11 weeks or less ___ .. ____ . . ___
12 weeks or less____ ___ ________
13 weeks or less.. __ ._. _- _----14 weeks or less..__ • _____ • _. __
15 weeks or less _______ ______ __
16 weeks or less______ __ ___ ____
17 weeks or less ______ ____ ___ __
18 weeks or less ____ _____ __ ____
19 weeks or Jess___ __________ __
20 weeks or I ess ______ ___ . __. __
21 weeks or less _____ ____ . . __._
22 weeks or less ___ __ _________ _
23 weeks or less______ ___ .• __ ••
24 weeks or less___ . .... _. _. ___
25 weeIi s or less ___ . ___ ____ .• __
26 weeks or Iess.•._. ______ _. __
27 weeks or Jess ___ . . _____ •. __ _

Amount
(in millions)
$1, 955
3, 224
4,178
5,026
5,765
6,467
7,123
7,758
8,375
8,953
9,511
10,049
10, 563
11,055
11,523
11,979
12,410
12,821
13,226
13,612
13,996
14,347
14,657
15,020
15,344
15,634
15, 893

D istribution or
wage loss (1923-33)
Duration of 1.m empluyment

Percent

8.0
13.2
17. l
20.5
23.6
26.4
29.1
31. 7
34.2
36. 6
38. 9
41. l
43.2
45. 2
47. 1
48.9
50. 7
52.4
54. 0
55.6
57.2
58.6
59. 9
61. 4
62.7
63. 9
64.9

mt

Amount
(in
lions

28 weeks or Jess..... . ....•... . $16,131
29 weeks or less.••. . . . .... . . . .
16, 347
30 weeks or less ______ ________ _ 16, 555
31 weeks or less___ _____ _._ ... .
16, 766
32 weeks or less.... _.... . __ . ..
16, 948
33 weeks or less. __• __. _. __ .. _17, 129
34 weeks or less _______ _______ _ 17, 309
35 weeks or less ___ _______ __ ___
17, 479
36 weeks or less. . ___ _.. . . ___ ._
17,656
37 weeks or less___ ___ _. . ____ . .
17, 829
38 weeks or less _____ _. _____.. .
17,999
39 weeks or less. __ ___· -- --- -- 18, 172
40 weeks or less _______ ___ __. __ 18, 338
41 weeks or less ____ _____ ______
18,521
42 weeks or less _____ ___ .• __ __ .
18, 685
43 weeks or less. _____. ___ ___ . _ 18,856
44 weeks or less ___ _____ _______
19,042
45 weeks or less ______ _______ __
19, 224
46 weeks or Jess ____ __ ____ _____
19, 408
47 weeks or Jess. __________ ____
19,606
48 weeks or less . . ______ . __ •• __
19,816
49 weeks or less _____ __ ____ ___ _ 20,027
50 weeks or less _________ _____ _ 20, 2-58
51 weeks or less _______ ____ ._ . .
20,502
52 weeks or less. ____ . ___ ____ __ 20,768
Over 52 weeks_____ _________ ._
24, 472

Percent

65.9
66.8
67. 6
68. 5
69.3
70. 0
70. 7
71. 4
72. I

72. 9
73.5
74.3
74.9
75. 7
76. 4
77. l
77. 8
78.6
79. 3
80. l
81. 0
81. 8

2. S

83.

4.9
100. 0

To these were added an adjustment upward in the est imate o:f
man-years o:f unemployment r esulting :fr om inadequacy o:f data ; and
allowances for various contingencies, among them the probability
o:f increased costs in the course o:f time, as is the experience in all
other forms of insurance. W eighting all these :factors, l\1r. Williamson arrived at a loading of 30 percent above the unadjust ed estimates
of compensable ,vnge loss.
Applying this incr ease of 30 percent to the total c01npensable
wage loss o:f the unemployed in each year r esulted in an increase in
the cumulative wage loss f r om 1924 to 1933 to $31,815,000,000. (See
tables 17 and 20.) This allowance causes a wider disparity between

87

THE ACTUARIAL BASIS

income available for benefits and the total compensable wage loss
t han was evidenced prior to the corrections. Consequently, after
the wage loss is adjusted, the maximum benefit period must be shortened if the amount of income and outgo are to balance.
Using adjusted data as the unadjusted were used, 10 weeks of
benefits could be allowed for t he United States as a whole with a
3-percent contribution rate and a 2-week waiting period. Benefits
could be increased in duration to 11 weeks, with 3-week waiting
period, and to 12 weeks with a 4-week waiting period. Other es-

a

TABLE

20.- Adj usted cumulative ,Ustribution of the total com pen sable w age loss,

1923-33
Distribution of wage
loss (1923-33)
Duration of unemployment

1 week or less•...•....•••••••
2 weeks or less. ••...•.....•..
3 weeks or less __ ________ _____
4 weeks or less___ _____ __ _____
5 weeks or less....... . . ..... .
6 weeks or less_______ ________
7 weeks or less• ...•........•.
8 weeks or less.••••..... . ....
9 weeks or less. . ____________ _
10 weeks or less.• ............
11 weeks or less.......••...••
12 weeks or less ...... ..• . ..••
13 weeks or less •..... . . ......
14 weeks or less . . . ...........
15 weeks or less .... .... . .... .
16 weeks or less ... •......... .
17 weeks or less .. ..•. ...•.••.
18 weeks or less ....... . ......
19 weeks or less . .•..• __ . . . .•.
20 weeks or less.... . . .. . . . . ..
21 weeks or less..• . •.. . _. . ...
22 weeks or less..............
23 weeks or less •.•... . .......
24 weeks or less . . ....... . . . . .
25 weeks or less . • .... .... •.. _
26 weeks or less ..... .........
27 weeks or less.••... ........

Distribution of wage
loss (1923-33)
Duration of unemployment

Amount
(in millions)

P ercent

Amount
(in millions)

$2,542
4,191
5,431
6,534
7,495
8,407
9,260
10,085
10,888
11,639
12. 364
13,064
13,732
14,372
14,980
15,573
16,133
16,537
17, 194
17,696
18,195
18,651
19,054
19,526
19,947
20,324
20,661

8.0
13. 2
17.1
20.5
23.6
26.4
29.1
31. 7
34.2
36.6
38.9
41. 1
43.2
45.2
47.1
48.9
50. 7
52.4
54.0
55.6
57.2
58.6
59.9
61. 4
62. 7
63.9
64.9

28 weeks or less .• ••...•.....• $20,970
29 weeks or less•....... .•... _ 21,251
30 weeks or less..•.••........
21,522
31 weeks or less•••.•......• •.
21, 796
32 weeks or less _____ •. ____ ___
22,032
33 weeks or less• . . __ . . . . ••• • _ 22,268
34 weeks or less.. • •.. ___ . __..
22,502
35 weeks or less .• . ... ..• •. _••
22,723
36 weeks or less••... _...•..••
22,953
37 weeks or less•.. . ......•• •.
23,178
38 weeks or less•.. •••. .....•.
23,399
39 weeks or less•. _.......••••
23,624
40 weeks or less •. .. _... _.... _ 23,839
41 weeks or less•... ....... . ••
24,077
42 weeks or less• . . ...••.... ..
24,291
43 weeks or less.... ...•.. . ___ 24,513
44 weeks or less•.• . ........ . .
24,755
45 weeks or less•........••. ..
24,991
46 weeks or less•. . ......•....
25,230
47 weeks or less.......••••. ..
25,488
48 weeks or less._ .••..... __ ..
25,761
49 weeks or less. __ .•..•••.. __ 26,035
50 weeks or less •. . . . . . .......
26,335
51 weeks or less .. .. ••••• _.••.
26,653
52 weeks or less•. . .....••••••
26,998
Over 52 weeks....••.•••••.•. _ 31,814

Percent

65. 9
66.8
67.6
68. 5
69.3
70. 0
70.7
71. 4
72. 1
72.9
- 73.5
74.3
74.9
75.7
76.4
77.1
77. 8
78.6
79.3
80. 1
81. 0
81. 8
82.8
83.8
84. 9
100.0

timates of the duration of benefits possible with a still longer waiting period or with income from a 4- or 5-percent contribution rate
can be readily computed. A summary of alternative plans possible
for the United States follows, based on solvency from 1922 through
1933:
E stiAnated ma,xilfYIIWl1i w eeks of benefits
Rate of contribu tions
Waiting period
3 percent
2 weeks.••... _. . _. _. ... ............ . ....... . ..... . . ... • . ....•......
3weeks·-·····-········ · ···· · · ··· · ········· · ········· · ·········· · · ·
4 weeks•. - ......• .... . • ...•..... . .... . .........•.... . •. .. ...•.. . ..•

10
11

12

4 percent
15
17
18

5 percent

21
24
26

88

UNEMPLOYMENT COMPENSATION

A word of warning should be injected, however, that the reliability
of these estimates decreases as longer duration periods are r eached.
It should also be borne in mind that the relationships shown in this
summary are not applicable to the political or industrial subdivisions
of this count ry. Each area £or which a system is to be evolved
must make its own estimates in order to approximate the probable
financial behavior of any plan considered.
TABLE 21.-Adju,sted cttmulati ve distribtt t-ion of the total conipensable w age loss,

1923- 30
D ist ribut ion o{ wage
loss (1923-30)

Distribution of wage
Joss (1923-30)
Duration o{ unemployment

1 week or Jess • •• •••..........
2 weeks or less ........••••.•.•
3 weeks or less . ...•••........
4 weeks or less ..••..••••.•....
5 weeks or less . •. ...........• _
6 weeks or less•...••.•........
7 weeks or less. .... •.•...••••.
8 weeks or less •....•..........
9 weeks or less.......•. .. •••. .
10 weeks or less..... ..........
11 weeks or less.••.. ••.•.. . . . .
12 weeks or Jess. .......... . .. .
13 weeks or less••..........•. •
14 wee ks or less . ...... . .......
15 weeks or less..... . . . . . ... ..
16 weeks or less . ... . .... .•.. ••
17 weeks or less . . .. . . . . . . ... .
18 weeks or less . . ... ..... . •.•.
19 weeks or less. . . . ... . . . .....
20 weeks or Jess ....•.. . ..•.•. •
21 weeks or less..... ......... .
22 weeks or less .• . . . •..... ...
23 weeks or less. .... . ... . . . . ..
24 weeks or less . . . .. . ...... . ..
25 weeks or less...........• . ..
26 weeks or less ... .••.... . ... .
27 weeks or less..•. . ....• •. . ..

D uration of unemployment
Amount
(in mil•
lions)
$586
1, 620
2, 4.02
3,023
3,578
4,095
4,556
5,012
5,450
5,857
6,239
6,605
6,959
7,271
7,576
7,861
8, 138
8,398
8,615
8, 889
9,110
9,309
9,507
9,680
9, 840
9,975
10,080

Amount
(in mil•
lions)

Percent
4.83
13. 34
19. 78
24. 89
29. 46
33. 72
37.60
41. 27
44.88
48.23
51. 38
54. 39
57. 31
59.88
62.39
64. 74
67.02
69.16
71.28
73.20
75.02
76. 66
78. 29
79. 71
81.03
82. 14
83.01

28 weeks or less••••••••••.. .•.
29 weeks or less...............
30 weeks or less.••..•••.•.• . ..
31 weeks or less...............
32 weeks or less..... .. . . ......
33 weeks or less...............
34 weeks or less ... . . . . . .. . ...
35 weeks or less.•.•.......... .
36 weeks or less. ......... . ....
37 weeks o r less . .•... . . ..... ..
38 weeks or less . . . . ..........
39 weeks or less•...•.•• .......
40 weeks or less..... ..........
41 weeks or Jess........•..• . .
42 weeks or less....... ..... . . .
43 weeks o r less. . . ... . •.......
44 weeks or less... . . . . ........
45 weeks or less.... . . . . ..... ..
46 weeks or less . .... . . . .. . . . . •
47 weeks or Jess... . ....... . . . .
48 weeks or less. . .... . ... . . . ..
49 weeks or less. . ....... . . ....
50 weeks or less........ . . •....
51 weeks or less. . . . .... . ..... .
52 weeks or less . .... ... .• . . ...
Over 52 weeks. ... •...........

$10, 179
10,269
10,348
10, 422
10,486
10, 542
10,596
10,651
10, 700
10, 745
10, 786
10,830
10,880
10, 932
10, 975
11,025
11,075
11, 125
11, 174
11,227
11,280
11,330
11,391
11,453
11, 521
12, 143

Percent

83. 82
84. 56
85.22
85.83
86.35
86. 81
87. 26
87. 71
88.12
88.48
88. 82
89. 19
89.59
90. 02
90.38
90. 79
91. 20
91. 62
92. 01
92. 45
92. 89
93.30
93.80
94. 32
94. 87
100.00

It should be again emphasized that the above estimates 0£ the
maximum possible duration 0£ benefits with varying contribution
r ates and waiting periods are based on the assmnption of the conservation of expenditures of accumulated reserves throughout the
first 7 years 0£ the system in order t o continue paying benefits to
eligible employees throughout t he depression.
It is possible to estimate the maximum duration of benefits on
another basis, assuming that all funds contributed during normal
years and years of minor depression are expended within those years.
This will 1nean that the emergency of a major depression with its
reduced contributions :from lo"·ered pay rolls and its incr eased
obligations :£or the payment 0£ benefits to the eligible unemployed
will bankrupt the unemployment compensation fund. Government
subsidy or borrowing to restore the solvency of the fund or other~
Government provisions £or t he unemployed will then be necessary .

THE ACTUARIAL BASIS

89

The adjusted cumulative distribution of the wage loss from 1922
through 1930 is shown in table 21. This table can be used to compute the maximum duration of benefits possible with the maintenance of solvency up to but not including a maj or depression. Thus
from table 16 it may be ascertained that the total estimated contributions to the unemployment compensation fund would be
$6,972,000,000 at the end of 1930, with a 3-per cent contribution rate.
This would permit the following durations of benefits with 2-, 3-,
and 4-week waiting periods as indicated below:
Ma x i 11111 in cl 11.ralVaiting p eriod

lion of benefits

2 ,veeks _______ ____________ __________ ______ _______ _________ __ ____ 17 ,veeks
3 weeks _____ _______ _______________ _____ _ -- - --- --- - - - --- --------- 19 weeks
4 weeks ______--- --- _-----_------ ----- --------- ---______________ _ 22 weeks

Chapter V
THE ROLE OF THE FEDER.AL GOVERNMENT
IN UNEMPLOYMENT COMPENSATION
ONSIDERATION of legislation for unemployment compen~
· sation in the United States began many years before the appointment of the Committee on Economic Security. As far
back as 1916 an unemployment insurance bill was introduced in the
Massachusetts Legislature. Five years later, Wisconsin followed
with a second bill, the well-known Huber bill, drafted by Prof.
John R. Commons. Although it never passed, it was reintroduced,
regularly, with some modifications, in each ,visconsin Legislature
during the following 10 years.
Meanwhile, interest in unemployment compensation was growing.
Bills were introduced in Connecticut, Massachusetts, Minnesota, and
New York in the twenties, but apart from the establishment of a
small number of voluntary plans, little progress was made. Although the number of unemployment insurance bills increased considerably in the depression years after 1929, the Wisconsin law,
passed in 1932, was the only legislation enacted. Many factors accounted for this record of almost complete failure, but the most important was the fear of the States that passage of an unemployment
compensation law would put their employers at a competitive
disadvantage with employers in States which had no similar law.
Because of this block to State action proponents of unemployment
compensation began to feel that the Federal Government should take
some action. Meyer London, a representative from New York, had
introduced a resolution in Congress in 1916 to create a committee to
draft a bill for a national unemployment insurance plan, but not till
12 years later, in 1928, did the subject come up again. In tj_hat year
Senator Couzens introduced a resolution for an investigation of unemployment insurance by the committee on labor. After hearings,
the committee reported that legislation for compulsory unemployment insurance was premature, but it favored the voluntary establishment of unemployment reserve funds by employers.

C

91

92

TJNEMPLOYMENT COMPENSATION

Little voluntary activity r esulted. Under a resolution introduced
by Senator Wagner in 1931, an investigation of foreign experience
with unemployment insurance was conducted. The committee endorsed compulsory unemployment insurance but felt that the Federal Government's role should be limited to allowing credit against
Federal income taxes for contributions by employers to State unemployment reserve funds. Although Senator Wagner introduced several bills embodying this principle, no11e of them ever came to a vote.
In February 1934 Senator Wagner and Representative L ewis
jointly offered a bill which would both raise revenue and encourage
the States to pass unemployment compensation laws. This bill attempted to r emove t he stumbling block to State action by levying an
excise tax of 5 percent on, the pay rolls of all employers of 10 or
more ( with certain exceptions) in the country. Against this tax
an offset was to be allowed equal to the contributions of employers
to State unemploy1nent reserve funds meeting the standards laid
down in the Federal act. Although this bill received high praise
from many exper ts, labor officials, and employers, it was not r eported
out of committee.
In part, the failure of legislative action was attributable to the
belief of many sincere supporters of unemployment compensation
that further study of the subject was necessary. R ecognizing the
need for thorough investigation of the subject the President, on
June 28, 1934 (Executive Order 6757), created t~e Committee on
Economic Security "to study problems relating to economic security"
and "report to the President not later than D ecember 1, 1934, the
recommendations concerning proposals which in its judgment will
promote greater economic security."
ALTERNATIVES ~N UNE:MPLOYMENT COMPENSATION
LEGISLATION
The Committee on ~conomic Security gave long and careful consideration to the possible alternative procedures in the approach
to unemployment compensation in the country. For obvious reasons
it soon discarded the ideas of voluntary operation and of leaving
the States to deal with this problem without Federal .assistance.
The fact that only one State had passed a law in the face of the
serious ~epression of the last years was deemed sufficient r eason to
warrant action by the Federal Government. Some way would have
to be found to remove the interstate competitive disadvantages in
States having unemployment compensation laws.
Once the Committee was convinced that the problem of unemployment compensation was of concern to the F ederal Government, the
next approach was to determine what the role of the Federal Gov-

THE ROLE OF T HE F~DERAL GOVERNMENT

93

ernment should be. Should it establish a compulsory national
system of unemployment compensation, or should the Federal Government confine its activity to promoting State action and developing
a Federal-State cooperative system? A F ederal plan which would
set up a complete system for the administration of unemployment
compensation, specifying all benefit conditions, h ad much to recommend it. It offered a chance for the pooling of the risk of unemployment over an area wider than could be possible under State
action; it would permit forecasts of costs on a national basis-at
present the only adequate basis, since unemployment statistics available by States are too incomplete to furnish sound actuarial estimates
:for each State; it provided uniformity of protection .to all employees
in the United States exposed to the same risks of unemployment;
and it furnished an easy uJ1d uniform method of handling the
problen1 of interstate employees-a problem that was pr actically
impossible of solution by State action alone, and one which would
inevitably be extremely complicated even in a F eder.al-State system.
A Federal plan would be preferable for the large employers of the
country whose operations cut across State lines and who would be
definitely opposed to the necessity for functioning under the different
regulations of many States.
The advocates of the Federal system argued that both Germany
and Great Britain, two highly industrialized countries, had both
adopted national unemployment compensation systems and that the
other countries which had begun on a local basis had gradually
broadened their systems into closer approach to national plans.
Although these national plans in foreign countries have been subjected to numerous amendments dictated sometimes more by political
considerations than by the needs of the scheme, the possibilities of
confusion from changes in a F ederal system would rank small in
comparison with the result of having 48 separate plans subjected to
alteration by 48 State legislatures.
On the other hand, against these many considerations was weighed
the fact that an exclusively F ederal system would be cumbersome
and would result in centralization of administrative functions and
bureaucratic methods which might paralyze action. In the absence
of experience with unemployment compensation in this country, i.t
was thought that it might be desirable to allow wide latitude for
experimentation, which would provide uniformity where essential
and diversity where necessary. This could best be accomplished by
a F ederal-State cooperative system where the Federal Government
would assume the leadership by removing the disadvantages in interstate competition that are always raised against purely State
legislation involving costs to industry. The States for their part
78470 - 3 7 -8

94

UNEMPLOYMENT COMPENSATION

should assume responsibility for State administration and thus
prevent the formation of a large bureaucracy in Washington.
An exclusively Federal system, too, would necessitate decisions at .
the very outset on all points which could not be left to administrative discretion, such as whether or not erg.ployee contributions should
be collected, whether there should he employer-reserve accounts, etc.
Even among persons who strongly believed in the F ederal plan and
among other advocates of unemployment compensation there was
wide difference of opinion on many of these most fundamental questions. Furthermore, a Federal system left little or no room for
experimentation; instead, mistakes in a Federal plan would have
much more serious consequences and wider repercussions than would
mistakes under individual State legislation.
Two types of Federal-State cooperation were given principal consideration: (1) A plan in which the Federal Government would
grant funds to t he States to pay unemployment compensation benefits if they passed laws which complied with definite. Federal standards; and (2) a tax-credit plan in which a Federal tax would be
levied on the pay rolls of all employers and a credit against the tax
allowed to all employers who contribu~d to State unemployment
C'Ompensation systems. In both these Federal-State cooperative syatems, the Federal Government was to impose a uniform excise tax
on pay rolls, and the States were to pass their own unemployment
compensation laws.
Under the plan for Federal grants of all funds the entire amount
of the Federal tax was to be collected by the Federal Government
and an amount equal to the tax so collected from each State returned
to it as a Federal grant if its unemployment compensation law complied with standards prescribed by Federal law. The advocates of
this procedure argued that it would make possible the writing of
definite standards into the Federal legislation ; Federal standards
would result in more uniform State legislation and administration.
To its proponents the plan had all the advantages of a Federal system
except that it did not provide for complete centralization, since it
was to be administered by the States; if found desirable, it could most
readily evolve into a Federal system. On the other hand, if this were
true, the procedure of entire Federal financing through grants had
the disadvantage of requiring immediate and important decisions in
relation to the entire unemployment compensation program, even
before agreement had been reached on the best policies. In addition,
there was the danger that the States would constantly look to the
Federal Government to increase Federal grants, since they would
have no part in the collection of the Federal tax contributions.
The second type of Federal-State system considered was the taxoffset plan, under which a F ederal tax was levied on the pay rolls of

THE ROLE OF THE FEDERAL GOVERNMENT

95

all employers and a credit up to 90 percent of the tax allowed for
contributions paid by employers into a State unemployment compensation fund. This plan provides for an equal burden on all employers
by the imposition of a Federal pay-roll tax. While the "subsidy" plan
makes certain that all funds for unemployment compensation would
first reach the Treasury, it has the disadvantage of encouraging State
laws that would include no revenue-raising features. Therefore, the
plan for Federal gr~nts could survive only if it received an adequate
annual appropriation by Congress, whereas a self-supporting State
law (taking advantage of the tax-offset device) would not depend
directly on Federal appropriations, since the source of income for
benefit purposes would continue irrespective of Federal action relative to appropriations. In this connection it should also be noted
that under the tax-offset plan there would be no pressure for increased
expenditures by the Federal Government, since benefits would come
solely from contributions paid into a State fund. The tax-offset plan
was the type recommended by the Committee on Economic Security
and enacted into law in the Social Security Act.
UNEMPLOYMENT COMPENSATION PROVISIONS IN THE
FEDERAL SOCIAL SECURITY ACT 1
Four objectives are sought by the provisions relating to unemployment compensation in the Social Security Act. These are (1)
to raise revenue which can be used, among other things, to meet
needs arising out of unemployment; (2) to encourage the States to
enact unemployment compensation laws and to protect those which
do so by equalizing the competitive costs in different States so far
as employer contributions to unemployment compensation funds are
concerned; (3) to insure that unemployment compensation reserves
are so invested that they will not adversely affect the general credit
situation and can be liquidated without depressing the investment
market; and (4) to assist the States financially in the administration of their unemployment compensation acts. The provisions
of the Federal Social Security Act are summarized in table 22
a.nd described in the following paragraphs.
Federal Tax on Employers.-The first and second of these objectives is sought through the imposition in title IX,2 of an excise
tax on the pay rolls of employers with respect to employments most
suitably covered by unemployment compensation. Credits will be
allowed for contributions made to State unemployment compensation
systems meeting certain minimum conditions. Therefore, if an employer in one State is contributing to an approved unemployment
1

~

u. s. C. (1930 Supp.), §§ 301-1305.
49 Stat. 639: 42 U. S. C. (1935 Supp.), U 1101-1110,

Ch. 531, 49 Stat. 620 : 42

96

UNEMPLOYMENT COMPENSATI ON

compensation system he will not be at a competitive disadvantage
with an employer in another State t hat has none, since the latter employer will be paying approximately as much through the Federal
pay-roll tax as the former is paying in contributions under the
State unemployment compensation act. The Federal pay-roll tax
should therefore remove the major reason for hesitation on the part
of the States considering unemployment compensation laws and,
instead, should stimulate the States to enact them.
The Federal tax will be equal to 1 percent of the total wages of
all employees in employments covered during t he calendar year 1936 ;
2 percent during 1937; and 3 percent in 1938 and thereafter.
ages
taxed will include all remuneration for employment, including the
cash value of all remuneration paid in any mediw11 other than cash.3
Ooverage.4-All employers who employ eight or more persons
within 20 or more weeks in a calendar year in employments covered
by the act will be subject to the Federal tax.
The employments covered include any service, of whatever nature,
performed within the United States by an employee for his employer, except:

,v

Agricultural labor ;
Domestic service in a private home;
Service performed as an officer or member of the crew of a vessel on
the navigable waters of the United States;
( 4) Service performed by an individual in the employ of his son , daughter,
or spouse, and service performed by a child under the age of 21 in the emplo)1
of his father or mother ;
(5) Service performed in the employ of the United States Government 01·
of a n instrumentality of the United States;
(6) Ser vice performed in the employ of a State, a political subdivision thereof, or an instrumentality of one or more States or political subdivisions;
(7) Service performed in the employ of a corporation, community chest,
fu nd, or foundation, organized a nd operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of
cruelty to children or animals, rio part of the net earnings of which inures to
the benefit of any private shareholder or individual.
( 1)
( 2)
(3)

I nterstate Oommerce.-No employer required under a State law to
make payments to an unemployment fund will be relieved :from compliance therewith on the ground that he is engaged in interstate commerce, or that the State law does not distinguish between employees
engaged in interstate commerce and those engaged in intrastate
commerce; States will therefore be free to cover employees of
common carriers engaged in interstate commer ce.5
49 Stat. 639, § 901; 42 U. S. C. (1935 Supp.), § 1101.
' 49 Stat. 643, § 907 (c); 42 U. S. C. (1935 Supp. ) , § 1107 (c).
6 49 Stat. 642, § 906; 4 2 U. S. C. (1935 Supp.) , § 1106.
3

l I tne .::SO\.:Ial O::,t:\.: U UI,,
hearing to the State !COMMER CE 15
entitled to compens atio
failed to comply substmk e payment s to an unemployment comBoar d shall notify suc~grou nd tllat he is engaged in intersta te
the Board is satisfied tl: distingui sh between employee s en gaged

49 Stat. 63 5 : 42 u. S.MPLO YERS OF E I GHT OR MORE
: 49 Stat. 626, § § 301-3)YE ES 1 0
49 Stat. 626, § 301; 4,
1

'The Social Security ~EDERAL TAX 17

appropria tion bill, fiscal 3
the Seventy-fout"th Congls employed on each of some 20 days in
Public, No. 440, 74th coiliffere nt calendar week, in employments
appropriation of $2,250,0GCept the followin g employm ents:
• 49 Stat. 626, § 302 ( a
• 49 Stat. 626, I 303 (a;
7 49 Stat. 639; 42 u. s] the cr ew of a vessel on the navjgahl e
• 49 Stat. 627, § 803 (b
• 49 Stat. 626; 42 u. s. s pou se ; employm ent of child under 21
10 49 Stat. 6 39, § 902;
u 49 Stat. 644, § 910 ; 41t or its instrume nt alities, or for State
12 49 Stat. 640, § 903 (t11ta1itie s or subdivis ions;
1 8 49 Stat. 640, § 903 ( \ODS operated exclusive ly for r eligions,
" 49 Stat. 640, § 904; ional purposes , or for the preventi on of
u 49 Stat. 642, I 906 ; ~
1e 49 Stat. 639, § § 901- )N EMPLOYRRS ts
17 49 Stat. 642, § 907; 1
18 49 Stat. 639, § 901 ; percent in 1937, 3 percent thereafte r.
78470-37 (Face p. 96)
1

96

UNEMPLOYMENT COMPENSATION

compensation system he will not be at a competitive disadvantage
with an employer in another State that has none, since the latter employer will be paying approximately as much through the F ederal
pay-roll tax as the former is paying in co·nt ributions under the
State unemployment compensation act. The F ederal pay-roll tax
should therefore remove the major reason for hesitation on the part
of the States considering unemployment compensation laws and,
instead, should stimulate the States to enact t hem.
The Federal tax will be equal to 1 percent of the total wages of
all employees in employments covered during the calendar year 1936 ;
2 percent during 1937; and 3 percent in 1938 and t hereafter . Wages
taxed will include all remuneration for employment, including the
cash value of all remuneration paid in any medium other than cash.3
Ooverage.4-All employers who employ eight or more persons
within 20 or more weeks in a calendar year in employments covered
by the act will be subject to the Federal tax.
The employments covered include any service, of whatever nature,
performed within the United States by an employee for his employer , except:
( 1) Agricultural labor ;
(2) Domestic service in a private home;
(3) Service performed as an officer or member of the crew of a vessel on
the navigable waters of the United States;
( 4) Service performed by an individual in the employ of his son, daughter,
or spouse, and service performed by a child under the age of 21 in the employ
of his father or mother;
(5) Service performed in the employ of the United States Government or
of an instrumentality of the United States ;
(6) Service performed in the employ of a State, a political subdivision thereof, or an instrumentality of one or more States or political subdivisions ;
(7) Service performed in the employ of a corporation, community chest,
fu nd, or foundation, organized and operated exclusively for r eligious, charitable, scientific, literary, or educational purposes, or for the prevention of
cruelty to children or a nimals, rio pa rt of the net earnings of which inures to
the benefit of any private shareholder or individual.

Interstate Oommerce.-No employer required under a State l aw to
make payments to an unemployment fund will be relieved from compliance therewith on the ground t hat he is engaged in interstate commerce, or that the State law does not distinguish between employees
engaged in interstate commerce and those engaged in intrastate
commerce; States will therefore be free to cover employees of
common carriers engaged in interstate commerce.6
3 49 Stat. 639, § 901; 42 U. S. C. ( 1935 S upp.), § 1101.
'49 Stat. 643, § 907 (c) ; 42 U. S. C. (1935 Supp. ) , § 1107 (c).
5
49 Stat. 642, § 906; 42 U. S. C. (1935 Supp.), § 1106.

TAOLF. 22,........stote qrant, for unemployment compensalio-n administration and co·n ditiona for credit al101rance t19alnsl ta~ ou employers of eiolrt or moro

(To be administered by the Social Security Boord estoblisbed by title VU' of the act)
(Ch. is1. 49 Stot. 6 20; 42 u. s . C. ( 1935 Sopp,), ii 301- 1305)

Fl'JDflRaL GRANTS TO STATES FOR ADlrlNISTRATfON OF UNEi\1·
PLOYi\JENT CO~JPENSATI0:-1'

CREDIT ALLOWED FOR CONTRlnU'l' lONS UNDER APPROVED STA'l'E
UNEl\lPLOTIIENT COMPENSATlON LAW
.A MOUNT Al'{D COND1'710N$ OF A _LLOWANCli:

AMOUl"<'T OF Ji"n>En-AL ..AP.f'JtOJ"'RUnON .AllTDOIU:Zt:D I

Flsc;i I yenr ending June 30, UY.16••••...• . •••••..••.•• .• •.... ... '$<!, 000, 000
l•'lscrol ycara thereafler•••.• - ------·--·-·····--····----··-·-·- ~9.000,000

S uch amount gru111.eil trom time to time as lbc Social Security n oard determines tQ I.Je uct-casnry tor the pro1}cr :ulmlnistratlon of tbe State law during tl1e
fiscal year In which payment ls to be rnacle, talclllg Into account:
l.. P upulutlon of Ille State:
2. Number of persona cove.re/I by the State law and the cost of proper ndmln•
lslrntlon tbei·eo.f ;
3. Such other !nctors as the Social Security Iloara finds relevant.
1 1
J he Secretary of the Treasury, ut,on recelnt of cerU6cation of the Sortal Security noard, ,ball pny, prior to audit or settlement by !be General A,·counting
omce, th~ 1uuo1mt certi!Je!l to lbe State ui;eoty charged witl1 the a,Iministrntlou
or the Jew.
The Soclal Security Iloard shall not certify payments In excess or the amount
nv,11·oprlnted fo,· ,.wy flse:i l ycnr.

None.
(fl.:QIIIRE.li PHOVJBION.8 OF STATE UN~MflIJ}\~MP.iNT C'"O.MPf'JNSi\TlON LAW FOi! REC:f'3t"1'
Oit Ii"Eot[L\L OllANTS.
.

l. A()J, roval of State law by Social Security Bon rd under lit le rx;'
2. Such methods of udmlnt.s trl\tloo (other than those rclnti11i; to selection,
tenure M umcr, and coo1pensntion of personnel) os nre found b:v lhe Ilonr(I to be
re-nsounhly cn1cu1ated to lnsul'e ruu payment of unemployment con'lpensntloo when
due; nnd

3. Payment of unemployment compensntlon solely through public employmeut
ofllccs In the State or such other agencies ns tbc Bonni may approve: nod
4. OppOl'tunlty for a fnir bearing before an Impartial trlbunol for all !ndlvidnal:s whose clnhns for unemployment eompensntlon are aen1ed: nod
5. The paymeut ot all mooey received Jn the unemployment fund of sucb Stale
l111werllately U!lOO sucb receipt to the Secretory of the Treasury to the credit of
the U11cm1>loyment Trust li'und established by section 904; and
6. Espendlture of nil money requisitioned by the State agency from tbe Unomp1oymeot Trust Fuod, in Ute payment of unemployment compens3tion, exclusiw~
of expenses of ndmintstrotlou; nnc1

7. '11he mnlclng of such reports in sucb form and coutainiug sucb ioform:ttiou,
as lbe Board mtlY from time to Ullle requlre, and compliance with such provisions
ns the Board may from time to time 6nd necessary to nssu1·e the correctness and
verJflcntion or sut b reports; oncl
8. Mnklug avoill,ble uvon request to nu.v ngency or the United States chnl'gcd
with the odministt·,ltion of oul.Hlc works or nssistnnce tliroush public employment,
the nun\e, address, vrclinnry occupation and cmplo,\ 'ment status of ('aCh recipient
or nnemployrueot comr,eosatlon, nnd n sta.fe.111eot of such recipient's rigbts to
further compcnsntion under suc.b law.
1

Jt the Social Security Board finds, nfter reasonable notice and opportunity for
bearing to Ille State nseocy, either (1 l that a substantial number of pe,·sons
entitled to compensation al'e helng denied compensation, or (2) tllut the State bas
failed to comply s uhstnntlnlly with the provisions required in section 303n,' tl1e
Doard shall notlf)• such Stnte ngency that further payment will not be mnde until
tile Donrd ls sat.lsfied tllnt there ls uo longer any such denial or failure to comply.
• 40 Stnt. 835; 42 U. $. C. (1035 Supp,) , ii 001--004.
'49 Slat. 820, II 801--308; 42 U. S. C. (1935 Supp.), H 501-503.
1 49 Stat. 620, 1801; 42 U.S. C. (1985 Supp,), I 501.
• 'l'he Soe:Jnl SC?curtty Act wns not approved unUI Aug. 14, 1935, nod the supplemental
llPProprlBtlon blll, fist'o.1 J•ear JO!lO [ El, R. 92m]. tolled o[ pngsn,s.e 1n tbe. Hut se.ss!On ot
the. Se11enty.tom·th CongTe9S. 'l'he Suppl<"me.nta l Approprfatle\n Act, Hsrnl yenr 1036,
l 1ubtle, No. ·HO. 7◄ tb Cong., 2d setts, [A. R. 10·18-1.J. approved li"eb. 11, HJ3G. lntlnded nn
npproprlntlon or $2,250,000 tor the re"nlndcr ot' the flscnl yc-ar ending- Juue 30. 1036.
' 49 Stat. 626, I 302 ( a) ; 42 U. $. C. (1930 Supp.). I 502 fa).
'40 Stnt. 628, f 303 ta); 12 U.S. C. (t035 Supp.), I 508 (o.).
'49 Stnt. 639; 42 U. S. C. (1035 Supp.), U 1101- 1110.
••o Stat. 627, I 303 (bl; 42 u. s. C. (1935 $UPI>,), I 503 (b).
'40 Stat. 826 : <2 U.S. C. (1930 Supp.), I 503 tnJ.
"40 Stat. 639, I 002 ; 42 u. S. C. (1035 Supp, J, I 1102.
" 40 Stat. OH, I 910; ,12 U. S. C. (1035 Su11p,) , I 1110.
u 40 Stnt. (1.10, I 903
42 u. S. C. lln3s Supp.), I 1103 (a).
"49 Stat. 640, I 903 (bl; 42 U. $. C. (1035 S11pp,) , 11103 (b).
" ·40 Stat. 040, I 904: 42 U.S. C. (1985 Supp,),! UM.
u 4 9 St•t. 642. I 00G; 42 U. S . C, (1985 Sl'PP,), § 1106.
"49 Slot. 039, II 901-910; 42 U.S. C. (1035 Supp.), 11 1101-1110.
"49 St.at. 642, I 907; 42 U. S. C. (1935 ~upp,). I 110 7.
"49 St.at. 039, I 001; 42 U. S. C. (1935 Suop.). I 1101.

<•>;

precedi.ug calendar year;
(oJ It tile employer contributes ton separate 1·eserve nccnuut, tbe lower rntc Is
permitted only If (1 ) compenSfttion has been paynble from U1e nccount throughout

the pt·ececling calendal' year, (2) lhe account amounts to not less tlatn five times
tile l,H'gest amount of comp~nsatJon 11111,1 clurlng ony I of the 3 11rccedlog calendar yea rs, and (3) such account amounts to 7'1., percent ot tbe wugea J)nld
du1'ing tbe preceding yeflr.
nEQUIRED PROVISIONS OF $TAT& UNP.MPI.OY.UENT CoMPEN8ATlQN

L~w

Fon

Ar..t.owANCE OF CREDIT u

"l. AU compensnlloo Is to be paid through -public e1nploymeut offices In the

STATl'l llfATCmNo IlEQm•m

SUSPENSION OP Gfu\NTS

1. Not to exceed. 00 percent of ~'edernl tn,i:."
2. After 19a7 credit is also allownble to nny employm· who because of fnvor·
able employment experience or adequate reserves Is 11el'mltted by tbe State lnw
to reduce llis payments, subject to the f ollowing conditions :11
(a) If lbe employer contributes to a Stale pooled fund, the lower rnte ls bnsed
upon not less tbon 3 years' compensntion expcrte.nce ;
(~) Jf tue employer coolt,i but.-s to a guarnntced-,,ooplosment nccouot, the lower
rate is pennitted only It !he gnnrnnty wns tultllled during tbe preceding yea.. nml
lite account amounts to not less than 7 ½ percent of total wnges paid during the

State or sucb oilier agencies ns tbe 13oord muy approve;
"2. No compensation s hall be nnrnble wltb respect to any dny or unemployment.
occm·1·1ng within 2 years after U1e first day of the first period wlt11 respect to
wbkb contl"ibutlons nre. re,1uired;
"3. All mouey received i11 the unemployment Cuod sholl ltnmedlntcly upon s uch
receipt be pair) over to U1c Secrctnry of tile 'l'rens ury to the credit of lhe Uucm•
ploymcnt 'l'rnst Ftmd established by secllon OOl ;
"4. All mone)• withdrawn from the unemployment trust flmrl by the State
ogency sh11ll be used solely in tbe payment of cornpensotlon, exclush•e of expenses
of :1dmlnistrnt1on;

"6. Comveusatlon sbnll not be dented In such State to ony otherwise eligible

lmth·icJunl t'ot· refusing to nccept new work uader nny or tlie following condl llous:
( A) If tile position offered is vacant due directly to a strike, lockout, or other

labor dispute; (Ill If tbe wages, hours. or other comlltlons of the worlc oll'ercrl
nre substantially less fn•ornble to tbe lndlvldunl than those prc,-i,i!lng for similar
work lo the locality: (0 ) it os a condition of being employed Jhe lndlvldnnl wonhl
be requh·ed to joiu o comrmny union or to resign from or refrnln from joining a11y
boon fide labor organization;
" 6. All the rights, pl'!sileges, or Immunities conferred by socb lnw or by octs
done pursuant thereto shall exist subject to the power of the lcglslal.,rc to
am~ml or repeal such lnw at nny tirne.1 '
RE'\'OOA'J'lON 01' Al'PROV,IL OF STATIJ LAW "
Tbe Social Security B oard way, nt the end of any year, otter reasonable notice
and oppo1·tunlty for bearing, refuse to certify a Stnte whose law hns been lll'C•
viously nppro1•ed lo case the Stnte law llns been chnnsed so lhnt It no lon~er
co11 t<1ius the ahoi•e conditions, or If the State hns tailed to comply substn11t1>1lly
with these conditions. H nt any time the Board bas reason to believe o Stnte
!Ow may not be certified, it shall promptly notify the Governo,·.
UNEM.PLOY.MENT TRUST F(rNo u

A11 moneys received in the State unemployment fund must be deposited In tile
Unemployme-ut 'l't'ust Fuod mniDl'nine<l h~• the Unit-ed States Treasury, subJeet to
requisHlon of tile State. 'l'bese fuocls al'e Jnvested by the Treasury and bear
interest at the a verage rnte paid t,y the United States npon nil lnterest•IJ(~arlng
obligaiious. A sepa rate account Is maintained for each State.
lNTEl!Sl'/\TE COMMEBCI! u

No person required by State law to make payments to no unemployment com.
n<msation fund shall be reliev~(l ou the ground that be Is engnged In lnterstale
commerce or Umt Lbe State law does not distlng,.,lsh between emolvyees engaged
in lnterstt1te 11ud Intrastate commerce.

FEDERAL EXCISE TAX UPON EMPLOYERS OF EIGHT OR MORE
EMPLOYEES"
CovF;nAO.® OF FEDERAL 1.'il u
Employers of eight or more individuals employed on eacb of some 20 days In
n calendar year, encb dny belng in a different calendar week, in employments
pel'fo1·med withh1 !be United States, except the following employments:

1. Ag-l'icuttm·al labor;
2. D omestic service In a private home;
3. Serricc as an officer or member or the crew of n vessel on the nav)sahlc

waters of Ule United States;
4. Emplo)11ncnt by son, daughter, or spouse; employment of child umler 21
yea1·s of age by parent;

5. Service for the Federal Governrneut or its lostrumentallties, or .for Stittc
or local governments or tbeir instrumentalities or subdivisions;
O. F,,nploymeot by nonprofit institutions nperated exclusively fo1· rellglons,
dHl.rHnble, sclent;fic. liternry, or educatjouul pm·poses, or for the prevcntloo of
cruelty to children or nnlmals.
R ,\TE OF TA."'C ON EMPI.OYIDIS u

One percent of wages paid In 1036, 2 percent In 1937, 3 percent therenfter.
78470-37

(Face p. 08)

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THE ROLE OF THE FEDERAL GOVERNMENT

97

Collection of Ta,m.6-The Federal tax is to be collected by t he Bureau of Internal Revenue under t he direction of t he Secretary of
the Treasury. A return must be made for any calendar year not
later than January 31 of the following year. T he t ax may be paid
in quarterly installments. Interest at the rate of one-h alf of 1 percent a month is charged on overdue payments, and when any installment becomes overdue the whole amount of the unpaid tax becomes
due. Extension of time for payment up to 6 months may be allowed,
provided interest is paid at the rate of one-half of 1 percent a month .
Gene'ral Credi t A..gavnst the Federal Ta,m.7-The employer may
credit against the pay-roll tax the amount he has actually p aid in
contributions into an unemployment compensation fund under an
approved State law. The total credit allowed may not exceed 90
per cent of the tax agai·nst which it is credited, so that at least 10
percent of the F ~deral tax must be paid in any case.
Additional Credit. 8- If an employer is allowed a lower contribution rate by the State than (1) the highest rate applicable to any
employer in the State during the year or (2) 2.7 percent of his pay
roll on which contributions are payable under the State law, under
specific conditions he may receive an additional credit for the difference between 90 percent of the pay -roll tax and (1) or (2) , whichever
is the lesser. This makes it possible for the State to give the employer a lower contribution rate if he has a favorable employment
experience whether under (1) a St ate-wide pooled-fund plan, (2)
an employer-re~erve account plan, or (3) a guaranteed-employment
plan. The conditions that must be met to receive "additional credit"
against the Federal tax are given as follows : 9
An employer will be allowed such additional credit for a lower
contribution rate only if the Federal Social Security Board finds
that under such law (1) with respect to contributions to a pooled
fund, such lower rate is permitted on the basis of not less than 3
years of compensation experience; (2) with respect to contributions
to a guaranteed-employment account, such lower rate is permitted
only when his guaranty of employment was fulfilled in the preceding
calendar year, and such guaranteed-employment account amounts to
not less than 7.5 percent of the total wages paya.ble by him, in accordance with such guaranty , with respect to employ1nent in such
State in the preceding calendar year; or (3) with respect to cont ributions to a separate reserve account, such lower rate is permitted
only when (a) compensation has been payable from such account
8

49
49
13
49
9
49
7

Stat.
Stat.
St at.
Stat.

641, § 905 (a) -(f) ; 4 2 U. S. C. (1935 Supp. ) , § 1105 (a) - ( f) .
6R9, § 902; 42 U. S. ~- (19R5 Supp.), § 1102.
643, § 909 (a)-(c); 42 u. s. C. (1935 Supp.) , § 1109 (a)-(c) .
644, § 910 (a)-(c); 42 U.S. C. (1935 Supp.), § 1110 (a)-(c).

98

UNEMPLOYMENT COMPENSATION

throughout the preceding calendar year, and (b) such account
amounts to not le.ss than five times the largest amount of compensation paid from such account within any 1 of the 3 preceding calendar
years, and (c) such account amounts to not less than 7.5 percent of
the total wages payable by him (plus the total wages payable by any
other ~mployers who may be contributing to such account) with
respect to employment in such State in the preceding calendar year.
Such additional credit will be reduced, if any contributions under
such State law are made by the employer at a lower rate under conditions not fulfilling the above requirements, by the amount bearing
the same ratio to such additional credit as the amount of contributions made at such lower rate· bear to the total of his contributions
paid for the year under such law.
The term "guaranteed-employment account", a1 defined in the
Federal act, means a separate account, in an unemployment fund , of
contributions paid by an employer ( or group of employers) who (a)
guarantees in advance 30 hours of wages for each of 40 calendar
weeks ( or more, with 1 weekly hour deducted for each added week
guaranteed) in 12 months, to all the individuals in his employ in one
or more distinct establishments, except that any such individual's
guaranty may commence after a probationary period included within
12 or less consecutive calendar weeks, and (b) gives security or
assurance, satisfactory to the State agency, for the fulfillment 0£
such guaranties. From this account compensation shall be payable
with respect to the unemployment of any such individual whose
guaranty is not fulfilled or renewed and who is otherwise eligible
for compensation under the State law.
Conditions of Federal Approval.10-The employer can receive
credit against the Federal tax only if the State law is approved by the
Federal Social Security Board. In order to secure such approval, the
State law must provide that:
(1) Compensation is to be paid solely through public employment offices in
the State or such other agencies as the Social Security Board may approve;
(2) No compensation shall be payable with respect to any day of unemployment occurring within 2 years after the first day of the first period with respect
1"o which contributions are required ;
(3) All money received in the unemployment fund shall immediately upon
such r eceipt be paid over to the Secretary of the Treasury to the credit of the
unemployment trust fund ;
( 4) All money withdrawn from the unemployment trust fund by the State
agency shall be used solely in the payment of compensation, exclusive of expenses
of administration;
(5) Compensation shall not be denied in such State to any otherwise eligible
individual for r efusing to accept new work under any of the following condi10

49 Stat. 640, § 903

(a)

(1- 6) ; 42 U.S. C. (1935 Supp.), § l103 (a) (1-6) .

THE ROLE OF THE FEDERAL GOVERNM ENT

99

tions: if the position offered is vacant due directly t o a strike, lockout, or other
labor dispute; if the wages, hours, or other conditions of the work offered are
substantially less favorable to the individual than those prevailing for simila r
work in the locality; if as a condition of being employed the individual would
be required to join a company union or to resign from or refrain f rom joining
any bona fide labor organization ;
(6) All the rights, privileges, or immunities conferred by such law or by acts
done pursuant thereto shall exist subject to the power of the legislature to
amend or repeal such law at any time.

These requirements are considered to be the minimum that will
insure that the State law is a bona fide unemployment compensation
law and that the investment objectives of the Federal act are secured.
The last provision is required so that if at any time either the State
or Federal Government desires to change its law, no vested inter est
in the existing law can be claimed.
Oertiftoation of State Plmns.11 - Within 30 days of application for
Federal approval, the Social Security Board shall approve any State
law submitted to it if the State law meets the requireme11t8 of the
Federal act. On December 31 of each taxable year t he Social Security Board shall certify to the Secretary of t he Treasury each
State whose law it has previously approved. If the B oard finds,
after reasonable notice and opportunity for hearing to t he State
administrative agency, that the State has changed its law so that
it no longer contains the provisions given above or has f ailed during
any calendar year to comply with any such provision, it m ust
promptly notify the Governor of the State and at the end of the
calendar year refuse to certify approval of such law to the Secretary of the Treasury. In this event, employers in that State can
receive no credits against the Federal tax, but must pay it in full.
It will therefore be to the interest of the employer s in t he State to
see that the State law is properly framed and administered.
Federal Unemployment Trust Fun d.-The F ederal Social Security Act makes it one of the conditions for the approval of State
unemployment compensation laws (for purposes of credit against
the tax levied in title IX 12 ) that all moneys which they collect for
unemployment compensation pµrposes shall immediately upon r eceipt be paid over to the Secretary of the Treasury ( or to a Reserv,c
bank or designated national bank) to the credit of the unemployment trust fund establi~hed in section 904.13
This trust fund will be under the control of the Secretary of the
Treasury as trustee, with the respective State agencies administering
the State unemployment compensation laws as beneficiaries of t he
trust. The fund is to be treated for investment purposes as a single
11

49 Stat. 640, § 903 (a), (b) . (c); 42 U.S. C. (1935 Supp. ) ,§ 1103 (a), (b), (c).
49 Stat. 639, §§ 901- 910, 42 U. S. C. (1935 Supp.), § § 1101-1110.
1
349 Stat. 640, § 903 (a) (3); 42 U.S. C. (1935 Supp.),§ 1103 (a) ( 3 ) .

12

100

UNEMPLOYMENT COMPE NSATION

fund , but the Secretary of the Treasury is required to keep separate
accounts with each State agency, creditiQg each account quarterly
with a proportionate part of the earnings of the fund.
It is made the duty of the Secretary of the Treasury to invest the
unemployment trust fund in securities which are direct obligations
of the United States or which ar e guaranteed as to principal and
interest by the United States. All such investments are r equired t o
be made on a basis which will yield a return to the fund equal to the
current average rate of interest on all interest-bearing obligations
of the United States (adjusted to the multiple of one-eighth of 1
percent next higher or lower than such average r ate, if this is not
itself a multiple of one-eighth of 1 percent). In making such invest ments the Secr etary of t he Treasury is authorized to buy new
Government securities at par or outstanding issues at the current
1n arket price, or may, in his discretion, issue special, nonnegotiable
obligations to the unemployment trust fund bearing the specified rate
of interest.
Upon requisition of the proper State agency ( under regulations to
be prescribed by him) the Secretary of the Treasury is required t o
pay out to the States amounts standing to their credit in the unemployment trust :fund as needed by them for the payment of unemployment compensation. The Secretary of the Treasury may either
sell on the open market the ordinary Government securities belonging to the unemployment trust fund or may redeem at par, with
accrued interest , any of its special obligations.
Summarizing these several provisions in a brief paragraph, the
Social Security Act: (1) Requires unemployment compensation
funds collected by and belonging to the States to be deposited in
the United States Treasury, :for investment purposes; (2) gives the
Secretary of the rreasury complete control over the investment and
liquidation of these :funds; and (3) through the device of special,
nonnegotiable obligations issued to the unemployment t rust fund
makes it possible to' liquidate these funds, when needed, without
necessitating the sale of any securities on the open market.
The provisions outlined above have two major purposes : (1 )
Safeguarding the unemployment compensation reserve funds, and
(2) investment and liquidation of these funds in such a manner
that unemployment compensation . will promote industrial stability
rather than the reverse.
The desirability of safeguarding the nnemployment reserve funds
as completely as is humanly possiible is obvious. I t, likewise, wi 11
not be disputed that the maximum possible degr ee of security i
assured through the r equirement t hat these funds sh all be invested
exclusively in obligations of the United St.a tes or in securities which

THE ROLE OF THE FEDERAL GOVERNMENT

101

are guaranteed, as to both principal and interest, by the United
States. The necessity for this requirement is shown by the sad experience of many State accident compensation insurance funds during this depression. In large part these funds have been invested
in municip,al, public-utility, and industrial bonds-as unemployment compensation funds very probably would also be invested if
no restrictions upon this point were included in the F ederal act . At
least in Ohio and Oregon, State accident compensation funds have
suffered serious losses on such securities in recent year s. Section
904 of the F ederal Social Security Act prevents a similar experience with unemployment compens,a tion funds.
The need for investing and liquidating the unemployment reserve
funds so as to promote industrial stability is less obvious but equally
important. A problem arises in this respect because demands for
payment of unemployment compensation fluctuate greatly, being
largest in periods of depression. Unemployment compensation
might almost be described as a plan under which r eserves are accumulated in p eriods of prosperity, and out o:f which payments are
made to workmen who become unemployed in periods of depressjon.
The reserves which are accumulated in periods of prosperity must
be invested in securities, and compensation can be paid to unemployed workers, when needed, only through the liquidation of these
securities. The sale o:f a large volume of securities in a depression
period, particularly when depression first sets in, which is the time
when the heaviest demands will come upon the unemployment compensation funds, is bound to ha Ye a depressing effect upon the market and to increase the tendency toward deflation. Payment of
compensation to unemployed workers when depression sets in has
of itself a stabilizing effect, since it tends to keep up purchasing
power, but this may be 1nore than offset through the deflationary
effects of dumping on the markets the securities in which the. unen1ployment compensation funds are invested. The net effect may
well be that the unemployment compensation system will operate
to increase the volume of unemployment.
That such a result should be avoided everyone will concede. As
President Roosevelt stated in his address at the National Conference on E conomic Security on November 14, 1934 : "Unemployment
insurance must be set up with the purpose of decreasing r ather than
increasing unemployment."
The plan for handling unemployment compensation reserve :funds
prescribed in section 904 will accomplish this purpose. Under this
plan, it is contemplated that a considerable part of the moneys in
the unemployment trust fund will be invested in the special nonnegotiable obligations which are authorized in section 904. Liqui-

102

UNEMPLOYMENT COMPENSATION

dation of these special obligations will not involve the sale of any
securities on the open markets but only t he redemption of these
securities at par with interest. Similarly, the Treasury can avoid
the .sale of the other Government securities held by the unemployment trust fund on the markets when it becomes necessary to liquidate these securities, through buying them itself or selling them to
the Federal R eserve banks.
In thi.s way the unemployment trust fund can become an instrumentality for stabilizing credit conditions. The total amounts which
will be collected for unemployment compensation purposes will, after
the 3-per cent rate has come into effect and p ay rolls have been restored to pre-depression levels, total above $800,000,000 per year.
This is a sum sufficiently large .so that its investment and liquidation may seriously endanger any control which the Government may
attempt to exercise over credit conditions. This is likely to be true
especially at the onset of a depression. At such times the Government, through its open-market operations, will seek to check the
deflationary tendencies. If at such a time the securities in which the
unemployment compensation funds are invested are dumped on the
markets-as t hey 3:re bound to be unless a plan like section 904 is
adopted-the effect will be to offset completely the Government's
efforts to uphold the market.
All such evil consequences can be avoided under section 904. Since
the Secretary of the Treasury will control the investments and liquidation of the unemployment trust fund, he can use t his fund to
strengthen the efforts of the Government in seeking to establish stable
credit and industrial conditions. In times when it is desirable to
check inflatjonary tendencies, he can avoid increasing these tendencies
(as will inevitably be the result of the purchase of Government securities on the open markets) by investing the funds received from the
States in the special obligations to the unemployment trust fund
authorized by section 904. In times when it becomes necessary to
liquidate the funds, for payment of unemployment compensation,
evil deflationary tendencies can be avoided through withholding the
securities in which these funds are invested from the open market.
Instead, the special obligations and other securities held by the unemployment trust fund ma,y be redeemed. As the President stated: "I t
is, of course, clear that because of their magnitude the investment
and liquidation of reserve funds must be within the control of the
Government itself."
Grants to States for Unemployment Compensation Administration.-Even with the competitive costs of unemployment compensation removed through the Federal pay-roll tax, States may
still hesitate to enact legislation because of the incre~sed appro-

THE ROLE OF THE FEDERAL GOVERNMENT

103

priations that may be necessary for its adminh;tration. 1J1 order
to assist the States in defraying the cost of the administration of
their unemployment compensation laws, the Social Security Act in
title III 14 authorizes the appropriation of $4,000,000 for the fiscal
year ending June 30, 1936, and of $49,000,000 :for each fiscal year
thereafter :for grants to the States :for their administrative expenses
in connection with their unemployment compensation laws. Such
laws must be approved by the Social Security Board under title IX 15
and must include provisions for: 16
(1) Such methods of administration (other than those relating to selection,
tenure of office, and compensation of personnel) as are found by the Board to
be reasonably calculated to insure full payment of unemployment compensation
when due ; and
(2) Payment of unemployment compensation solely through public employment offices in the State or such other agencies as the Board may approve; and
(3) Opportunity for a fair hearing, before an impa rtial tribunal, for all
individuals whose claims for unemployment compensation a r e denied ; a nd
( 4) The payment of all money received in the unemployment fund of such
State, immediately upon the receipt of such money, to the Secretary of the
Treasury to the credit of the unemployment trust fund established by section
904 ; and
(5) Expenditure of all money requisitioned by the State agency from the
unemployment trust fund, in the payment of unemployment compensation, exclu ~i ve of expenses of administration ; and
(6) The making of such r eports, in such form and containing such information, as the Boa rd may from time to time require, and compliance with such
provisions as the Board may from time to time find necessary to assure the
correctness and verification of such reports ; and
(7) Making available upon request to any agency of the United States charged
with the administration of public works or assistance through public employment, the name, address, ordinary occupation and employment status of each
recipient of unemployment compensation, and a statement of such recipient's
rights to further compensation under such law.

Payments to States. 11- For each State in which such conditions
are met t~e Board will certify to the Secretary o:f the Treasury for
payment to the State such amounts as the Board determines to be
necessary :for the proper administration of such law during the
fiscal year in which payment is to be made. The Board's determination is to be based on (1) the population of the State; (2) an estimate of the number of persons covered by the State law and of the
cost of proper administration of such law; and (3) such other
factors as the Board finds relevant. The Board is, of course, limited
to the amounts appropriated therefor for each fiscal year in making
such grants.
14

49
49
18
49
11 49
10

Stat,
Stat.
Stat.
Stat.

626,
626,
626,
626,

§§ 301- 303; 42 U.S. C. (1935 Su pp.),§§ 501-503.
§ 301 ; 42 U. S. C. ( 1935 Supp.), § 501.
I 303 (a) ; 42 U. S. C. (1935 Supp.), § 503 (a).
§ 302 (a) ; 42 U. S . C. (1935 Supp.), § 502 (a).

104

UNE1VIPLOY1\I ENT COMPENSATION

Suspension of Grcunts. 18- Whenever the B oard, after reasonable
notice and opportunity for hearing to the State agency charged with
the administration of the law, finds that in t he administration of the
law there is (1) a denial, in a substantial number of cases, of unemployment compensation to individuals entitled ther eto under such
law; or (2) a failure to comply substantially with any provision
required as a condition for receiving a grant for administration, t he
Board may refuse to certify f urther payments to the State until the
Board is satisfied that there is no longer any such denial or failure
to comply. This should insure honest and proper administration
of the State unemployment compensation laws.
Federal Cooperation With States.-It is planned, however, that
the Federal Social Security Board will not merely perform the r eview function of securing proper administration but will give expert
advice and assistance to the States in their legislative and administrative problems. Under title VII 19 of the Federal act the Board
is given the "duty of studying and making r ecommendations as to
ihe most effective methods of providing economic security through
social insurance, and as to legislation and matters of administrative
policy concerning * * * unemployment compensation * * * " 20
The Board should be of material a ·sistance to the States if it conscientiously performs this duty.
49 Stat. 627, § 303 (b); 42 U.S. C. (1935 Supp.) , §503 (b).
949 Stat. 635, §§ 701- 704; 42 U.S. C. (1935 Supp.) , §§ 901-904.
20 49 Stat. 636, § 702; 42 U. S. C. (1935 Supp.), § 902.

18
1

Chapter VI
STANDARDS OF UNEMPLOYMENT COMPENSATION: STRUCTURAL PROVISIONS

T

HE SOCIAL SECURITY ACT, 1 as outlined in the preceding
chapter, establishes a Federal-State system of unemployment
compensation which leaves to the States the option and initiative 0£ passing unemployment compensation laws, permits the States
wide latitude with regard to the type of system they establish, and
offers encouragement and inducement to the States to meet certain
minimum requirements which limit Federal approval to those State
systems which provide actual compensation as distinct £ro1n mere
relief. Wben the Social Security Board has approved a State law,
the State becomes eligible £or grants from the Federal Government
for the administrative expenses of the State unemployment compensation system.
Except £or these requirements, the States will have freedom to set
up any unemployment compensation system they wish, without r estriction from the F ederal Government. The State may or may not.
add employee contributions to those required from the employers.
States may also make provision for State contributions to the system if they so desire. Likewise, the States must determine their own
compensation rates, waiting periods, and maximum duration of
benefits. Such latitude is very essent~al, because the rate of unemployment varies widely in different States, in some being twice as
great as in others. It is in accordance with the entire spirit of the
Social Security Act that the Federal Government should not attempt
to dictate to the States the form or provisions of the unemployment
compensation law they may adopt. The discussion of standards in
unemployment compensation in this chapter is intended to be suggestive only and is not to be taken as a statement of requirements with
which the States must comply.
Any unemployment compensation system must, of course, designate
the broad groups protected by its provisions, the conditions under
which the individuals within these groups may receive benefits, the
provisions concerning contributions, the amount and duration of
benefits, and the administrative features for the operation of the
system. At the beginning of its study and in advance of the actual
adoption of State unemployment compensation plans ( except in ,vis1

Ch. 531, 49 Stat. 620; 42 U.S. C. (1935 Supp.),§§ 301-1305.

105

106

U N EMPLOYMEN T COMPENSATION

cousin), it was found necessary to make certain general assumptions
concerning the probable features of State plans. Otherwise it would
have been impossible to make any quantitative estimates of coverage
and costs such as thos~ presented in tables 23 to 25, in the tables in
chapter IV, and in appendixes I, II, and III. A uniform plan for
the whole United States was assumed. The coverage and estimates
are based upon th~ pr.ovisions contained in titles III and IX of the
Federal Social Secu~ity Act.2 While, in a general way, the estimates of cost are based upon these assumed provisions, they would
not be affected by many variations. If these estimates ( see tables 23
to 25, the tables in chapter IV, and appendixes I to III, inclusive)
are used in devising aii unemployment compensation plan, care must
be exercised to make allowance for variations from the structural
provisions, such as waiting period, ratio of contributions to benefits,
and amount of benefits that have been assumed.
This chapter deals with the various features of unemployment
compensation plans which must be covered by State legislation.
These features are discussed in the light of the Federal Social Security Act and European experi,ence. Where pertinent, reference is also
made to available data on unemployment compensation and to the
recommendations of the Committee on Economic Security.s

COVERAGE
Since no form of unemployment compensation offers protection to
the entire working population, the categories to be included and
excluded must be clearly specified at the outset. An unemployment
compensation plan can cover only persons ordinarily employed by
others. Self-employed persons, such as farmers and farm tenants,
business and professional men, ar.e obviously not properly within the
scope of unemployment compensation protection. The anticipated
administrative difficulties in collecting contributions have led to the
exclusion, in the Social Security Act, of workers attached to small
concerns, although th~re is no precedent in European experience for
such a practice.
An employer is defined in the Social Security Act as any person
who employs eight or more persons for some part of 1 day (whether
or not at the same moment of time) in each of 20 weeks within any
calendar year.4 In order to take full advantage of the tax credit
allowable against the Federal tax, States will obviously desire to
include under their unemployment compensation plans all employees
2

49 St at. 626, § § 301-303, 639, § § 901- 910 : 42 U. S. C. (1935 Supp.), § § 501-503,

§§ 1101-1110.
3
Tlle Staff of tlle Committee on E conomic Security prepared " model State bills " embodying many of tlle suggestions tllat follow . These bills bave been superseded by dra ft
State bllls prepared by tbe Social Security Board.
'49 Stat. 642, § 907 (a) ; 42 U. S. C. (1935 Supp.), § 1107 (a).

STANDARDS OF STRUCTURAL PROVISIONS

107

covered by the Federal tax. The State law may well have a broader
coverage, but in no case should it be narrower. The Federal law does
not cover the following classes: 5 (1) Agricultural labor, (2) domestic service in a private home, (3) service performed by officers and
crews of vessels on the navigable waters of the United States, ( 4)
service performed by an individual in the employ of his son, daughter, or spouse, or by a child under 21 years in the employ of his
father or mother, (5) employment by Federal, State, or local goven1ments, an,d (6) employment by nonprofit institutions which are
operated exclusively for religious, charitable, scientific, literary, or
educational purposes, or for the prevention of cruelty to children
or animals. The first, second, and fourth classes were exempted
for administrative reasons; while public employees of State and
local governments were exempted because they are beyond the taxing
power of the Federal Government. Employment on navigahle
waters is under Federal jurisdiction. Employees of religious,
charitable, and other types of institutions enumerated in class
6 a:bove were not exempted in the social security bill as originally
introduced, but the bill was later amended to exempt them.
Many employees within the group are subject to the hazard
of unemployment and might well be covered by State plans. The
same is true of public employees of State and local governments who
are not employed upon an annual basis.
Table 23 shows by States and Territories a rough approximation
of the number of gainful workers who would have been covered in
April 1930 by a plan with the coverage of the Federal tax had one
been in operation for some years. The figures indicate the total
number of workers (the employed plus the unemployed) who would
have come within the scope of the plan aLthat date. If adjusted
to account for the natural increase in the. populatiorr, the figures
would represent the maximum number of gainful workers who would
be covered by the assumed plan in the various States at any time.
The proportion of the total number of gainful workers that would
have been covered by such a plan varies considerably from State to
State and from the national average. Massachusetts would have had
a maximum of about 56 percent of its working population covered,
in contrast to Mississippi, which would have had only 20 percent of
its workers participating in the plan. These variations exist because
of differences in the industrial make-up of the States. States having
a large agricultural population, for example, would have a smaller
proportion covered than would States whose populations are primarily engaged in the manufacturing industries. It should be borne
in mind, however, that the groups included in the coverage are those
6

49 Stat. 643, § 907 (c); 42 U.S. C. (1935 Supp.),§ 1107 (c).

108

UNEMPLOY1\[ENT COMPENSATION
1

which suffer the largest burden of unemployment. For the United
States as a whole, over 70 percent of all unemployment is estimated
to occur within the group which would be covered by the assumed
plan on which table 23 is based, although t hat g roup represents less
than one-half of the working population.6
T ABLE

23.- E sUmiated coverage of assumed l!.IIIW1nploym€mt compensation system,
by States, (Jjl)erage for 1930

Gainful workers
State

Total
April 1930

Compellsable labor force

Nonagriof
(in Percent
total gaincultural (in Number
thousands)
thousands)
ful workers

United States---- --- --------- --------------- -- -- ----

48,832,590

38,505

22, 279

45.6

Alnbama.-----------------------------------------Arizona _____________________ ______ ____________
______
Arkansas __ __ ____ ___ _________________ ____ ____ ________
California... _... ___ __ ________________ ___... ______ ___
Colorado ... . --------- ----- ------- --- ---------------Connecticut.
... _________ _--. ------_
--------.
-· ---·
Delaware
______________________
_________
_____ -_____
___
District of Columhia. _. ________. ___ ____ ... __ _. ___ ___
Florida_ . . ........ __ .. ____ ..... _.. ___. _. _. . . _-. ... --Georgia... _____________________________ __ ___________
Idaho ______ ___ _____ ___________________ ____________ __
Illinois_
. ____ --_____
-- -______________
__ .. -. . . ---__
Indiana ._______
________
______ ______ ____________
____ .__
Iowa _______ ____ _________________ ______ _______ ____ __ _
Kansas ____________ ____ ______________________________

1,026,320
165,304
667,870
2,500,969
402,894

540
127
283
2, 189
297

312
161
1,267
172

30. 4
44.2
24.6
50.7
42.7

677,292
98,104
243,859
599,010
1, 162, 174

643
81
243
469
660

372
47
112
271
382

54.9
47.9
46.0
45. 2
32. 9

162,223
3,184,875
1,251,177
912,832
694,276

96
2,843
1,003
583
466

56
1, 645
580
337
270

34.5
51. 7
46.4
36.9
38.9

907, 166
815,725
308, (H7
672,906
I, 814,422

553
521
258
590
l, 762

320
301
149
341
1, 019

35.3
36.9
48.3
1-0. 7
56.2

1,927,498
992,847
844,877
1,458,054
216,471

1, 691
691
294
1,089
137

978
400
170
630
79

50. 7
40.3
20.1
43.2
?.6. 5

Nebraska ____ ____ ___ __ ________ ___________ ____________
Nevada ________ ________________________________ _____
New Hampshire ___: _____ __________ .. ____ _______ . ____
New Jersey_____ ______________ _____________ __ ___ __ ___
New Mexico ____ __________ _________ _________________

507,022
42,885
192,671
1,712,125
142,866

310
34
171
1,657
85

179
20
99
959
49

35.3
46.6
51. 4
56.0
34.3

New York... ... ___ . __ . ________ ._. _________. _____ __._
North Carolina____________ __ ____ _. ______ __________ __
North
-- --- ----Ohio ___Dakota--------____________ _________
_____~----------------___ _________ ______--_
Oklahoma ____ . . . ... ___ ... _. __ ___ _____ . ______________

5,523,085
1, 141, 129
240. 317
2,615,938
828,029

5. 279
642
107
2,311
525

3,084
371
62
1,337
304

55.8
32.5
25.8
51. 1
36. 7

0 regon ... _._. ___ . _______________________ _______ _____
Pennsylvania. _________________ _________ _______ _. . _.
Rhode Island ____________ ______ . ____ _____ .. __________
________------ __ ______________________
South Carolina
South
Dakota ______________________________ ______ ___

409,680
3, 722,428
297,168
687, 721
247,688

329
3,479
289
341
117

190
2, 013
167
197
68

56.2
28.6
27.5

Texas ______ __ _________
Tennessee-------------_____
--------------------________________________
-- --- --_
Utah ___________________________ _____________________
Vermont. .. _____________________. _______ ___________ .
Virginia. ____________________ ____ ___________ _________

958,209
2,207, 118
170,013
141, 191
880,276

687
1,374
129
103
6(\8

340
795
75
60
352

35.5
36.0
44.1
42.5
40.0

Washington _________ ....... ______ . _. ___. ___ ._ .. _. ___ .
Wrst Virginia _____ _____ . __ __ ______ __ ____ ____ __ ______
,visconsio.. --___-- ___ --____ __ ____ ______. _____ . .... __
Wyoming____ _____ _____ _____________________________

664,813
570,459
1,129,546
92,451

562
454
841
62

325

48.9
46.1
43.1
SS!. 9

fiii\~~~r~====== ================================== ==
Maine ______ . ______ -. ------------------------ ---- --- 'l\1aryland .. __. _. --_____. ____ __ __ ____ __. ___.. __.. _--_
Massach1Jsetts ________. ___ -_. ___ . -. __ ----_----- -----J\ilicbignn ___________ __ ___________ ____ __ _____ ________ _
Minnesota--- ---------- --- ------ --- --------- -- -----Mi~~~~Y~!================
==== ======
============ =
===
Montana __________ _____ __________
_______________
____

0

See table 14, p. 78.

73

263

487
311

46. 4
54. l

STANDARDS OF STRUCTURAL PROVISIONS

109

For a rough approximation of the number of employed workers
who would be covered if such a plan were jnitiated now, see table 24,
which p resents estimates of the size of coverage under a plan assumed
to have been initiated in 1933. Employment conditions have since
improved and coverage would consequently be considerably increased.
A plan initiated now -n-ould, of course, exclude from immediate coverage all persons now unemployed, but they will be covered when
reemployed in occupations and establishn1ents to which the State
law is applicable. Event ually the maximum coverage estimated in
table 23 will probably be exceeded through the increase in the number
of employables since 1930. The speed with which this may happen
depends largely upon the rapidity of industrial recovery.
TABLE

24..-Estimated number of employed workers covered, by States, 1933

~= = = == = = = = = = = = = == == = = == = = == = == = =
Number of
Number of
employed
employed
State
State
workers
workers
covered
covered
United States___ __________ ___ ______ ___ 14,611,000
Alabama-----------·······-······
· · ···
Arizona_-· __ __ . _______ ._ ... __ . . . _.·-..
Arkansas. . . .... · -··· -· · ···· -- ·-···-··
California._ . .... __ ... _........... ... _.
Colorado.................. .......... _.

204,000
46,000
89,000
900, 000
109,000

Connecticut .... _. .................. _.
Delaware...... .... . ............. _... .
District of Columbia_... _...... -····-Florida.... . ............... -. . .. --··- ·
Georgia... .. . ·-·· · ·················· ··i
Idaho............... ·-···· · ·-··· ·--···
Illinois.. __._ .. ___ _-· ... _··-. · · - _.. ··-Indiana.-. ________ · - __ ···-. . ......... .
Iowa __. . .. _. -· . _. _. . __ .. __ ____ .. __ . __ _
Kansas ...... · -· · -·····-········-·····

254,000
38,000
110, 000
i 71,000
303,000

f i~~~;!r:_~~=====:::::::::::=========
Maine_·-· -· ----··
-- ·_...
· -· __
-- ...
· ···.
Maryland _·...
_____ ..-·····
_......
Massachusetts. ...... _. .... __ ... ___ .. .

Michigan. .... · -_.· -_______ _......... .
Minnesota.. _. . ....... _. ... _.... __ . __ _

~l:~sit~~~ ~===:::: :::::: ::::::::::::

Montana.·--·-·--······· ·············

38,000
1, 048,000
375,000
221,000
190, 000
229,000
202,000
116,000
237,000
658,000
531,000
269,000
107,000
419,000
47,000

Nebraska. .. · -· -··-· -·····-··---·· ··-·
Nevada. . ... ·--········· · ···········-New Hampsbire. . · -·····- ···· -· · ··--New Jersey·· · --····-·-----·· ·--··-· -·
New 11exico-·· ··· · · -- ···-· ·· ---·--·-·
New York......... __··-_ . .. · -__·-· __ .
North Carolina..... .... . ............ .
North Dakota ..... . ...... . .. · -····· ··
Obio_···· ···· ··········· ······ · · ···-· Oklahoma ............. . ... ...... . ... .

120,000
12,000
76,000
591,000
29,000
1,892,000
291,000
42,000
894,000
207,000

Oregon_ ....... ... . ............ -. .... Pennsylvania.............. . ......... .
Rhode Island ... ............ ...... .. . .
South Carolina . .. .... . . . . . ... __ ·-.. _.
South Dakota·-- -··-···--····--··· -··
Tennessee .. _. .. -· ___ . ____ ·-· _._ ... . __
Texas·-··- ····••··•·-··· ·-···· -· ··· -·Utah . . __ . .......... .... __ . . . _. _. .... _
Vermont_··-··- -··---·--·-·····-·-·--Virginia .. __-· ·· ·- ___ _____ --·- __ ··-- __

148,000
1,215,000
106,000
155,000
49,000

Washington ... . .... _.. ··-_ . . . __ . . ... .
West Virginia. __· - ___ . _. __ . __ ___ .. _. __
vVisconsin_· · · ····-·· -· ·-· ·····-···· ·Wyoming.... . . _... _. ........... .... --

222,000
182,000
335, 000
23,000

244,000
531,000
48,000
40,000
246,000

UNEMPL OYMENT COMPENSATION FUND

TI1e first step in legislation for unemployment compensation is the
establishment of an unemployn1ent compensation fund. This fund
is customarily defined to include all contributions and money paid
into and received by the fund, and property and securities acquir ed
by and through the use of moneys belonging to the fund, and of
interest earned upon the moneys belonging to the fund, and is administered without liability on the part of the State beyond the amounts
paid into and earned by the fund.
78470-37--9

110

UNEMPLOYMENT COMPENSATION

The stipulation that the fund be used solely to pay benefits is necessary to conform to the requirements .for Federal approval.7 Administrative expenses will have to be paid from Federal allotments for
this purpose or from other sources and should be kept in a separate
fund. Attention is called to the fact that the number of benefit paym,e nts to be made from the State funds will be extremely large in most
States, though the amount of the individual payments will be small.
It is, therefore, advisable to utilize a method of withdrawals from the
funds which will involve a minimum of administrative expense consistent with adequate protection of the fund. In some States the
customary procedure now used for payment from public funds would
be unnecessarily expensive and would make prompt payment of benefits difficult. Where this is the case and the customary procedure is
not adapted to unemployment compensation payments and can be
modified without violating constitutional requirements, a suitable procedure should be ·specified in the State unemployment compensation
law.
In order to meet conditions for Federal approval, all contributions
under the State act must, upon collection, be deposited in the "unemployment trust fund" maintained by the Treasury of the United
States Government.8 The State agency of an approved State unemployment compensation system may requisition from the unemployment trust fund such amounts from time to time as are required for
the payment of benefits.
.
The wording of State laws creating State unemployment compensation funds is important because of constitutional provisions concerning the custody and management of State funds in several States.
Four States (California, New Mexico, "\iVyoming, and :Michigan) require the deposit of State funds or public funds in State or national
banks. Since it is anticipated that the United States Treasury will
designate banks within the State to act as its agents, constitutional
provisions of these States should not conflict with the r equirements of
the Federal Social Security Act for the deposit of State unemployment compensation funds with the unemployment trust fund of the
United States.
Other details of State legislation concerning the deposits, investments, management, and payments out of the State unemployment
compensation fund must be adapted to the fiscal organization of the
State.
Types of State Funds.-Two main methods of organizing t he
State unemployment compensation fund have been proposed: (1)
7
49 Stat. 626, § 303 (a) (5); 640, § 903 (a) (4); 42 U. S. C. (1935 Supp.) , § 503 (a)
(5), § 1103 (a) (4).
8
49 Stat. 626, § 303 (a) (4); 6 40 , § 903 (a) (3); 42 U. S. C. (1935 Supp., ,
§ 5 03 (a) (4), § 1103 (a) (3).

STANDARDS OF STRUCTURAL PROVISIONS

111

State-wide pooling of funds with or without adjustment of contribution rates according to experience, and (2) separate reserve accounts
within the fund for all employers ( or groups of employers) to which
contributions would be credited and from which benefits would be paid
only to the eligible employees of the employer.
The employer-reserve account type of fund has been advocated
as a device to stimulate employers to stabilize their employment.
Under this plan the employer's contributions are paid into his own
account, which is used to pay benefits to his own employees, or his
former employees. Since his contributions may be reduced or discontinued when his reserve account reaches specified levels, it is to
his interest to keep withdrawals from his account to a minimum
by keeping his employees steadily employed. It is argued that not
only the financial incentive of reduced contributions, but also the
psychological effect of having the costs of irregular employment
brought directly to his attention will lead the employer to bend his
efforts to stabilize his production and thereby his employment as
much as possible and, when this is not possible, to distribute equitably available employment among all employees. On the other
hand, if all funds are pooled, the employer may actually increase
t he irregularity of his operations if this is advantageous to him or
his employees, since he knows that the employees he lays off
will receive unemployment compensation. Particularly will he be
more ready to r educe his f orce during depressions rather than to
reduce hours and spread work.
Those who advocate pooling all contributions maintain that the important thing in building an unemployment compensation fund is to
provide protection against unemployment. I t is argued that the financial incentive contained in t he possible r eduction in contributions is
too small to have much effect upon employers-that other factors in
the cost of production, such as storage charges and the risks of style
and price changes, may far outweigh any savings to be gained by
stabilizing ·.employment; or if these factors are immaterial, the
savings that would be effected in overhead charges if plant production, and, therefore, personnel, could be stabilized, would have
long since caused the employer to stabilize his business without
waiting for the cost of unemployment compensation to supply the
incentive. It is also argued that the differences between employers
in t he stability of their employment could be recognized ( insofar
as desirable) through variations in their rates of contribution to the
pooled fund, as is now the practice in accident compensation. The
great advantage in the pooled fund, according to its advocates, is
that it gives equal protection tu all workers, inasmuch as it spreads
the risks of unemployment over a large group of employers and a

112

UNEMPLOYMENT COMPEN SATI ON

wide variety of indust ries, thus utilizing the principle of insurance
with the broadest possible spread of the risks. I n the reserve-account
system, on the other hand, the reser ve accounts of employers with
a hig h rate of lay-offs may at times be inadequate t o provide benefits to all their workers, while funds may be immobilized in t he
reserve accounts of other employers not subj ect to such fluctuations
in business. I t is held that, since the employees, and often the employer , are not responsible for such high rates o:f unemployment they
should not be penalized. Under a pooled-fund plan, the r eserves are
available t o any employee irrespective of his employer .
The Committee on Economic Security recommended that F ederal
legislation recognize both types of plan, or combinations of the t wo
ty pes. F eeling, however, that the favored employer in a stable business should make s01ne con t ribution to the general burden, the Committee recommended p artial pooling of contributions, i . e., that employers with individual-reserve accounts be r equired to contribute at
least 1 percent of pay roll ( when the 3-percent tax becomes effective)
to a general pooled fund. T his :fund would constitute a reinsurance
f und to pay benefits when an employer 's reserve account had been
exhausted. T he Social Security Act does not require employers having individual accounts to contribute t o a general Stat e fund, as outlined above, but it is permissible under the F ederal act to do so.
I t has also been proposed that employers be permitted to adopt
systems of guaranteed employment in lieu of nne1n ploy ment compensation. This is permissible for the t ax credit under the Social
Security Act under the following conditions : P lans must guarantee
in advance 30 hours of wages for each of 40 calendar weeks (or more,
with 1 hour per week deducted for each added week guaranteed) in
12 m onths 9 to all employees in one or m ore distinct establislu u ents
of an employer, who must give security- satisfactory t o the State.
agency-for the fulfillment of such guarantee. Employees may be
required to serve a probat ionary period of 12 weeks before t hey are
included under the guaranteed-employment pl an. Employers having
such plans must contribute to a guaranteed-em ploy ment account i11
the State :fund until such account reaches 7.5 percent of the employer 's
annual pay roll.10
Guar anteed-employment plans have been voluntarily adopted by
several employers in this country who have stabilized t heir employn1ent and recently by a number of employers under the W isconsin
law. Although a substitute for unemployment compensation, g uaranteed employment has many d issimila1~characteristics. T he pr otection which it affords the worker at the beginning of a contr act year
9

10

49 S tat. 644, § 910 (c ) (3); 42 U. S . C. ( 1935· Su p p. ) , § 1110 (c) (3 ) .
49 Stat. 644, § 910 (a ) (2 ); 42 U. S. C. (1935 Supp.), § 1110 (a) (2).

STANDARDS OF STRUCTURAL PROVISIONS

113

is superior to unemployment compensation, since the worker is guaranteed a specified income during the year . As time goes on, however,
the guarantee means less and less during the year until at the end of
the specified number of weeks it expires entirely and unemployment
after that date is uncompensated. Furthermore, at the end of a
contract year, if the contract is not renewed , the worker has no protection derived from his past employn1ent unless provision is so made.
The employers who would elect to set up a guaranteed-employment
account are those who, because of the stability of their employment,
will feel confident that they can fulfill the guarantee by providing
work, thus avoiding payment out of their guaranty fund. Ca.re,
however, must be ex.ercised to assure actual protection fully as adequate as unemployment compensation. The employee should not be
left stranded at the end of a contract year without any protection
derived from long periods of employment.
The Social Security Act allows any of these methods of organization of State funds.11 The act, however, does not permit credit offset
against the Federal excise tax imposed by title IX 12 for contributions
to a reserve-account or guaranteed-employment plan exempted from
a State unemployment compensation system.
CONTRIBUTIONS
The F ederal Social Security Act imposes taxes on the pay rolls of
employers who employ eight or 1n ore worker s at some time in at least ·
20 weeks of t he calendar year for all employees in the occupations
covered. These taxes are effective on and after J anuary 1, 1936, at
the rate of 1 percent of pay r oll for the first year, 2 percent for the
second year , and 3 percent thereafter, and are payable into the Federal Treasury. 13 States which establish unemployment compensation systems approved by the Social Security Board will be given
grants from the Federal Goveriu11ent for administrative expenses,
and, in addition, t he employers in the State will be permitted to credit
the amount they have paid as contributions to a State plan up to 90
percent of the Federal tax due.
The Social Security Act not only allows the employer credit against
the Federal tax for the contributions he has actually paid under the
State plan but also, if he has been permitted a lower contribution
rate by the State, allows him "additional credit" after 1937 up to a
maximum of the 90-percent permissible offset against the F ederal
excise tax under the following conditions:
11
49 Stat. 643, 644, § § 909, 910 ; 42 U . S. C. (1935 Supp.), § § 1100, 1110.
more fully discussed in connection with the section on contributions.
12
49 Stat. 639, § § 901- 910; 42 U. S. C. (1935 Supp.), §§ 1101- 1110.
13 49 Stat. 640, § 903 (a) (3); 42 U.S. C. (1935 Supp. ),§ 1103 (a ) (3).

This will be

114

UNEMPLOYMENT COMPENSATI ON

(a) If the employer contributes to a State pooled fund, the lower rate is based
upon not less than 3 years' compensation experience.
( b) If the employer contributes to a guaranteed-employment account, the
lower rate is permitted only if the guaranty was fulfilled during the precedin~
year and the account amounts to not less than 7.5 percent of total wages paid
during the preceding calendar year.
(c) If the employer contributes to a separate resen·e account, the lower
rate is permitted otl.ly if ( 1 ) compensation has been payable from the accouat
throughout the preceding calendar year, (2) the account amounts to not less
than five times the largest amount of compensation paid during any one of the
3 preceding calendar years, and (3) such account amounts to 7.5 percent of th~
wages paid during the preceding year.14

The State law may provide for contributions by the employer
only, by employer and employee, or by the State from general taxes.
Foreign compulsory unemployment compensation plans generally
provide for contributions from employer and employee. In England the division is one of "equal thirds" between employers, employees, and the Government. The Federal tax, however, is limited
to employers, who may credit against this tax their own payments
to the State plan. It will be recalled that this uniform Federal tax
with its credit allowance is designed to remove any disadvantage in
interstate competition from which an employer might suffer in having to contribute to a State unemployment compensation system.
The Federal law does not tax employees, since there is no element of
interstate competition involved. T he decision as to whether employees are to contribute to the State plan is left entirely to the
States.
Upon the question of employee contributions the Committee on
Economic Security made no recommendation, except t hat employees
should not be taxed by the Federal law and that the matter be left
entirely to the States for decision. This policy was followed in drafting the Social Security Act. T he customary argurnents for and
against employee contributions are as follows:
For

Against

(1) Employee contributions justify
giving employees a greater voice in the
administration of unemployment compensation and a feeling of responsibility which will help to prevent abuse
of the benefit provisions.
(2) They will remove the taint of
charity from benefits.
(3) They will permit more adequate benefits. Benefits made possible
by a 3-percent levy can be paid 50
percent longer ,if employees contribute
an additional 1 percent.

(1) Wage rates of many employees
are so low that even a small rate of
contrib~tion will constitute a serious
burden.
(2) Employer contributions can be
passed on to the consumer ; this is not
possible for employee contributions.
Exclusi\'e employer contributious are
a recognition of the f act that unemployment is a legitimate cost of production.
( 3) The employee as a consUIDer
will pay the large part of employer

1449 Stat. 644, § 910; 42 U.S. C. (1935 Supp.), § 1110.

STANDARDS OF STRUCTURAL PROVISIONS

115

Against

For
( 4) Employer contributions in the

long run tend to be deducted from
wages; the employee will gain by making a small direct contribution.
(5) Employee contributions are almost universally required in foreign
unemployment insurance systems.

contributions; it is unfair to require
him to pay an additional amount directly out of his wages.
( 4) The employee necessarily bears
the greater part of t he economic burden of unemployment even when compensated; he is not compensated during
the required waiting period and, when
he qualifies for benefits, he receives
usually only about 50 percent of
wages and for only a limited period.
He should therefore not be asked to
bear part of the cost of unemployment compensation.

The District of Columbia law is the only one in the United States
which provides for G·o vernment contributions in addition to its contributions as an employer. The amounts are $100,000 for the calendar year 1936, $125,000 for 1937, and $175,000 for 1938. In the
House report on the District bill for unemployment compensation,
the reason for District contributions was set forth as follow1:,: "Since
unemployment benefits will materially reduce the relief burden on the
community, it is considered that part of the cost of unemployment
benefits should be levied on the entire community through taxation." 15
Instead of a fl.at rate for all employers, the State law may provide
for different rates in :future years, depending upon the unemployment experience of the particular employer. This may be provided
in several different ways.
If a State chooses• the pooled type of fund it may wish to defer
decision as to whether it will vary contribution rates in accordance
with benefit experience. The Social Security Act does not allow
additional credit against the Federal tax for reduced contributions
to a pooled fund until the employer has had 3 years of experience
after compensation is payable, hence 1941 would be the first year :for
which such additional credit would be allowable. A State, however,
may wish to provide in its basic act for a system of rating contributions.
If the State desires to adopt an employer-reserve account system,
it will want to require at least the reserve necessary to obtain "additional credits" under the Federal Social Security Act. In other
words, the State law should not allow a reduction in contributions
from the standard rate until (1) compensation has been paid
throughout the preceding year, (2) the employer's reserve account
equals 7.5 percent of the employer's pay roll in the preceding year,
1

15 Unern,ploym·e nt Oompensation for the District of Ooltimbia, Rept. No. 858 (to accompany H. R. 7167), 74th Cong., 1st sess., House of Representatives, p. 10.

116

UNEMPLOYMENT COMPENSATION

and (3) at the start of the calendar year in which such reduction
is made his reserve account equals at least five times t he largest
amount of benefits paid from such account within any 1 of the
3 most recently completed calendar years. When these conditions are met, the State is free t o reduce the employer's contributions to zero. However, the "model" bill prepared by the staff of
the Committee 16 suggested that when the employer's r eserve account
reache.s 7.5 percent of his pay roll for the preceding calendar year ,
the contribution rate be reduced only to 1.5 percent of his pay r oll
t hroughout the given calendar year; and, if his account r eaches at
lea.st 12 percent of such preceding pay roll, his total contribution
rate be reduced to 0.5 percent of his pay roll.
It was further suggested t hat, if the benefits payable from an
employer's reserve account within any cale~dar year are greater
than his contributions to such account for such year, his contribution rate for the next calendar year be increased by 1 percent of
his pay roll, unless his reserve account then equals at least 7.5 percent
of his pay roll for the last completed calendar year, or be incr eased
to the standard rate of contributions, whichever is higher.
The suggested bill further provided for a contr ibution of 1 p ercent
to a pooled account by employers having individual-reserve accounts.
This pooled account would serve as a reinsurance fu!).d for reserve
accounts that may become exhausted and would provide compensation for employees when they have credits for benefits based on employment with a specified employer and only on the basis of employment with such employer. If such a pooled account is provided, t he employer should in any case be r equired to make a contribution to it, no matter what his reser ve account amounts to.
If a State wishes to allow guaranteed-employment plans, it will
wish t o follow the standards required in the F ederal act so as to
permit employers with such plans to obtain "addit ional credit."
Table 25 gives by States a rough approximation of t he total income
that would have been collected in 1933 if a 3-percent tax on pay
rolls had been in effect. State collections under unemployment compensation systems will vary year by year according to fluctuations in
the number of covered persons employed as well as in their earnings.
Both f actors will have an important bearing on the total amount
raised. Tracing t he estimated income through t he years 1922-33
for the United States as a whole (see table 16), a peak in yearly
amounts collected appeared in 1929 which was nearly 92 percent
higher than the l ow reached in 1933. Since low rates of pay tend to
accompany high rates of unemployment, the years when the income
of the fund is .smallest will also be the years when the number of
unemployed eligible for benefits is greatest. Unless reserves are
16

S ee footnot e 3, p. 106.

117

STANDARDS OF STRUCTURAL PROVISIONS

accumulated during less adverse times to meet depression emergencies, drastic. measures may be necessary to maintain t he system on
a solvent basis during prolonged and widespread unemployment.
TABLE 25.-

Estim ated w ages a;nd salaries of compensable labor f orce and income
from, a. 3•percent contribution, by States, 1933
Total wages
and salaries
or gainful
workers,
1929 (in
m illions)

State

United States.•. . •.•••... •.....•.•..•.•. . ...•.•...

$59,797

Wages and salaries of
3•percent
tota l compensable la• contribu tions
bor force (in millions) for total com•
pensable
l abor force,
1933 (in
1929
1933
thousands)
$33,785

$17, 602

$528,060

- -- - -1 - -- - -1 - - - -- 1

Alabama .. . •. ....... •....• •. •..•••..•..• .... .. ..•.
Arizona .••. . ..• ... •..•...••. ...••. . ....... .•..•. . .
Arkansas•... __•. . ........... ... .•........•...... . .
California ••• . . •...••....•. .....•. ...••.. . . . . .. ..•.
Colorado ...... .... . .••...•.•.... . ........... .. ••• .

589
209
320
3,738
445

118
181
2, 112
251

173
61
94
I, 100
131

5, 190
1,830
2,820
33,000
3,930

Connecticut. . •••..•... ...•...••• . . ...• .... . . •.•...
Delaware ••.. .......... _......... ........ •. . _..... .
District of Columbia ......•.......•.... _•.•..... . .
Flor ida. •••..•..•..•••.........••..•.. ...•... .•....
Georgia•••..••• ... .••.. ........ . . . ......•.. . ...... .

995
122
400
528
654

562
69
226
298
370

293
36
118
155
193

8,790
1,080
3,540
4, 650
5,790

I d aho •• • ••••..•...•••.. .•..•..•....••.•.•• ... . ... .
II linois • •. . . ..•.... ••. . . .......... . .. ......... .•...
Indiana....•.•.... ••....•....... . . .. . . .. •...•.••. .
Iowa .••..••.•• • . . .•.•. ••••..•• ....•••...•...•. ....
K a nsas ...••.• ••...•....•.•..••....•............. ..

147
5, 024
1,512
819
658

83
2,839
854
463
372

43

445
241
194

1, 290
44,370
13,350
7,230
5,820

689
622
326
800
2,709

389
351
184
452
1, 531

203
183
96
235
798

6,090
5,490
2,880
7, 050
23,940

Montana. . •.••••....•. ..•.... ...•. .. ..•. . • . .....•.

3,000
1,032
300
I, 614
237

1,695
583
170
912
134

883
304
89
475
70

26,490
9, 120
2,670
14,250
2, 100

Nebraska......•... ..•.•. •.... ..... ...• ... .•. . . , .. .
Nevada •••. •.........•..••••.. •.•......•......•.• .
New Hampshire.•..... . .•• . ......•.••...•••...•• ..
New J ersey.•.••••.•.•••.••..........•... . ••..•. . . .
New Mexico ..•....••.. ..•. ... _. ....... . .••...... . _

449
61
217
2,752
120

254
34
123
1, 555
68

132
18
64
810
35

3,960
540
1, 920
24,300
1,050

New York ...•.••...••.•. _•. .... _...........•.... . _
North Carolina. .. _....•. _.. . _... ..... _... _.. . . ... .
North Dakota. . ...... ..... . ...•...•.•..... ..•.•.•.
Ohio . . . . •••. •••..... . . .. ..... ....••••. ..•...•.....
Oklahoma. •••...••..•.... _........•..• ..•. . . •.....

9,906
632
153
3,855
748

5, 596
357
86
2,178
423

2,915
186
45
1, 135
220

87, 450
5,580
I, 350
34,050
6,600

Oregon .••• •.••. . •••.•......... . ....•....•.... . ....
Pennsylvania ....•• ...••.... . •.. _. ..... . ......•.. . .
Rhode Island...•. . . .. ............. .. . . .. ... .......
South Carolina...• .... ...........•••..•. ..•.•.•.••
South D akota . • ... •. .. •.. . ..... .........•. . ••. •.•.

492
5,481
404
300
161

278
3,096
228
170
91

145
119
89
47

4,350
48, 390
3,570
2,670
1,410

Tennessee . ••• . .•.••.••.••... ...... . .. • ....•.••. .••
Texas . • . ••.. ••.•........•.• ....... ...•. . ••.• .... . •
Utah . . ..•.• • ..••.•.....• . ......... ... ...........•.
Vermont • • •••••• •...•..• . ..••.. •• .•••.• .•.•.....••
Virginia •••• ••..••. ..•...... ........•....•..••.....

676
1, 855
203
145
733

382
1,048
115
82
414

199
546
60
43
216

5,970
16,380
1,800
l, 290
6,480

Washington • . ••....•..... ... . . . . ....•...•. •••.•. • .

891
657
1,309
108

503
371
740
.61

262
193
386
32

7, 860
5,790
11,580
960

f;~fs1~~f::==::::=:::::==:::::::::::::::::::::::::
Maine. . ...• .... ... .... . ....... ... . . ..... ........•.
Maryland .. .. .. .•. ....••..•.•...........•.••... .••
Massachusetts.••..•.•.. .. . .•.•..•...•.•. •..••••. ..

Michigan •......•••..••••..•••...•... .. ...••.•.....
Minnesota...••.•.••.•••.. .••...•.•..•.• .•. . .•...•.

~::~~~~f_I~i=========:::::::::::::::::::::::::::::::

:r:Jo!!rt~~~==:
::::::::::::::::::::::::::::::::::
'\,Vyoming_ . -· · ·- .. .•.• ...... .. ••... ••.•.•••.•.•..•

I

2 333

3

I, 479

I , 613

1 Leven, Moulton, and Warburton, America's Capacity to Consume (Brookings I nstitution, Washing•
ton, D. C., 1934), p. 175, table 19 (Income from Occupation).
2 Index = 0. 565 = Employed compensable labor force for United States
Total employed gainful workers for U nited States
Total assessable pay roll, 1933
3 Index=0. 521
Total assessable pay roll, 1929

=

118

UNEMPLOYMENT COMPENSATION

BENEFITS
The Social Security Act prescribes as a condition for the allowance
of ·credit against the Federal pay-roll tax for contributions to approved State unemployment compensation plans that 2 calendar years
must elapse between the initial collection of contributions and the
initial payment of benefits.17 This requirement is designed to provide
adequate reserves before benefits are paid. This is essential since the
Federal pay-roll tax will not reach 3 percent until the third year, and
most States will probably levy their contributions accordingly.
Unemployment insurance benefits are necessarily limited by the
amounts that are raised in contributions. Within this limit there can
be considerable variation in the benefit provisions. The benefit may
be paid in fl.at amounts or as a proportion of earnings. A high rate
may be paid for a short period or a low rate for a longer period. Seasonal and part-time employn1ent may be compensated differently, and
dependents' allowances may or may not be paid. A number of such
considerations enter into the formulation of a plan, but the chief
determinant should always be that assistance be given to the greatest
number of unemployed with a minimum of discrimination in favor
of minority groups.
Rate of Benefits.-Benefits paid !s flat amounts are geared to the
wage of the lowest-paid worker and provide no more than a subsistence income. European experimentation with this device has resulted
in considerable modification of the original flat rate, and, except in
Great Britain, some adjustment of benefit to wages is now the general
rule. This latter procedure enlists a l~rger interest on the part of the
higher wage groups who would regard flat benefits mainly as a relief
measure. The greater spread between the highest and lowest wages
here as compared with European countries also provides an argument for making benefits proportionate to wages.
Two alternative methods are available-establishment of a number
of wage groups with a fl.at amount or proportion of earnings for each,
as in Germany, or a fixed percentage of wages for all eligibles. In the
former procedure the per centage rate for the lower-paid employees
may be higher than that for those receiving the higher wages. This
wage-group method is vulnerable in periods of rapid wage changes,
which necessitate :frequent administrative revisions as "TI"orkers move
from one wage group to another. It is almost universally proposed
in this country that benefits be a uniform percentage of full-time
wages. This is considered the more equitable policy for all groups
since regional differences in the cost of living are reflected in the varying wage r ates and the same amount of protection would be provided
17

49 Stat. 640, § 903 (a) (2); 42 U.S. C. (1935 Supp.), § 1103 (a) (2) .

STANDARDS OF STRUCTURAL PROVISIONS

119

for all. Increases and decreases in wages would be automatically
reflected in benefits without resort to the aclministrative difficulties
present in t he German use of wage categories. This r ule, however, is
usually modified by the stipulation of minimum and maxi.mum
benefits.
The rate of benefits may be low, permitting a longer duration, or
high with a shorter duration. If ,a low rate is adopted it will not
yield a subsistence benefit for the low-wage groups and their payments will have to be supplemented from r elief sources. On the
other hand, a high rate may reduce the incentive to seek employment. Practically all the special State commissions which have
studied unemployment compens,a tion in this country have recommended that the benefit rate be placed at 50 percent of full-time
weekly earnings. vVith contributions of 3 or even 4 percent of pay
rolls, this is virtually the maximum weekly rate of benefits which
can be provided without unduly shortening the duration of benefits.
It is probable that each State in establishing an unemployment
compens,a tion system will desire to fix a maximum weekly benefit
which is appropriate to its own conditions. States may also desire to establish a minimum weekly benefit for total unemployment.
It is im.practicable to suggest a minimum benefit applicable to all
States by reason of the wide difference in the earnings of the lowerw,age groups in different parts of the country.
Dependents' Allowances.-European laws generally provide dependents' allowances. Such provision is open to the objection that
it introduces the element of need with all its implications of investigation and administrative detail ; it prevents relating benefits closely
to contributions and favors r acial or other groups with high bfrth
rates. The theoretical problem involved is whether it is more socially desirable to pay a slightly higher benefit rate to all unemployed persons, or to redistribute the cost in such a way as to benefit
to a higher degree those persons having family responsibilities. This
is a matter of social policy on which the State must make its own
decision. Only one law in the United States provides for dependents'
allowances. The District of Columbia law, enacted on August 28,
1935, provides for an additional benefit allowance of 10 percent of
the employee's wage's for a dependent spouse, and of 5 percent for
each other dependent relative in his household, up to a maximum of
65 percent of wages. Dependent relatives are limited in the definitions to "mother, father, stepmother, stepfather, brother, or sister ,
who, because of age or physical disability, is unable to work, or a
child under 16 years of age who is wholly or mainly supported by
the employee."

120

UNEMPLOYMENT COMPENSATION

Partial Unemployment.-The question whether partial and total
unemployment shall be differently defined and compensated must
be decided. In foreign countries where the labor supply is usually
Jess mobile than in the United States total unemployment arises
when the contract of service ends, and partial unemployment is a
temporary stoppage of work while the employee still possesses a
labor contract. In the United States total unemployment has
usually been considered unemployment of a full week and partial
unemployment as loss of work or wages for shorter periods. The
distinction, however, is not always valid. One firm may work an
employee, 1 week and lay him off the next; another may give him
half time each week. To the employee, unemployment is all lost
time involving decr eased wages, whether in units of hours, days, or
weeks. If, however, it is thought th at the, scheme should provide an
incentive to employers to spread work, compensable total unemployment may be defined as total loss of weekly earnings from lack of
work and partial unemployment as reduction of weekly earnings
from lack of work below a specified proportion of regular earnings.
In no case should partial unemployment involving more than 50
percent loss of wages go uncompensated.
The suggested "model" bills of the Committee 18 r ecommended
that an employee who involuntarily suffers partial unemployment
in any week be paid sufficient benefits so that when his compensation
is added to his week's wages and any other pay for personal services,
including net earnings from self-employment, the total will be $1
more than the weekly benefit to which he would be entitled if totall~·
unemployed in that week. Unless larger contributions than a rate
of 3 percent of pay roll are required, it is probable that partial
benefits cannot greatly exceed this amount. W hereas the provision
gives only a slight advantage in total weekly income to the partially
unemployed person as compared with the totally unemployed, and
consequently offers only a slight incent ive to ~n eligible benefit
claimant to seek odd jobs or part-time sources of income, it has the
advantage to the r ecipient of partial benefits that he will not exhaust
his benefit rights as rapidly as the one who draws total benefits.
Although it would be desirable to give more liberal benefits to partially employed persons, the primary purpose or the fund is to provide protection to employees v-1ho are totally unem.ployed. T o a-void
excessive administrative costs it is also desirable to avoid large
numbers of claims for small a.mounts of partial unemployment.
Seasonal Unemployrnent.-Unless special provisions a.re n1a.de f or
highly seasonal industries by the payin ent of a lower rate of benefits.
by the requirement of a higher rate of contribut ion, or by the excluis See footnote 3, p. 106.

STANDARDS OF STRUCTURAL PROVISIONS

121

sion of seasonal industries from the system, employees in these industries will draw from a general pooled unemployment compensation
fund f ar in excess of the contributions paid by the industry. T here
have been cases in Great Britain where workers in a particular seasonal industry were on the average drawing benefits which amounted
to more t han three times the contributions made on their behalf.
This, of course, is unfair to employees in stable industries who may
find the funds depleted when they become unemployed. I t also
forces stable industries to subsidize unduly the unstable ones. Foreign countries have been forced to take special measures to safeguard
the fund against undue drain from this group of employees. The
problem at best is a very knotty one and will require considerable
study and experimentation before a solution satisfactory to conditions in this country can be found. Possibly the wisest legislat ive
step at this time is to postpone definite action until the State agency
can investigate the problem in the particular State and make t ecomm·endations to a later session of the legislature before benefits are
payable.
One method of dealing with seasonal unemployment is to limit
benefits to employees in seasonal industries to the customary busy
season. Foreign experience indicates a disposition to compensate
only the latter t ype of unemployment. Unless t his course is followed, and in the absence of other restrictions, a large proportion
of the workers in seasonal industries would draw the maximum
duration of benefits annually and thus p articipate unduly in t he
fund t o the prejudice of other workers who might subsequently be
unemployed. A ratio of benefits to contributions such as 1 week
of benefits t o 4 weeks of prior employment limits to some extent
the annual benefit outlay for these persons, but the restriction is
probably not sufficient. Similarly, the r equirement of a specified
number of weeks of employment during the preceding year or 2 years
will operate to exclude the most highly seasonal workers. A possible
solution, following British experience, is to empower the administrative authority in the State to decide which are seasonal industries, indicate the normal slack period for each, and provide that
unemployment in such period shall not be compensable unl~s the
worker's record indicates that in the slack season during several
preceding years he has usually obtained other employment in industries covered by unemployment compensation.
Ratio of Benefits to Employment.-Plans proposed in this country usually provide that the aggregate number of weeks of benefits
an employee may at any time receive should be determined by a
specified ratio to the number of his past weeks of employment. This
r atio serves to guard the fund against excessive payment of benefits

122

UNEMPLOYMENT COMPENSATION

to those with only a limited amount of previous employment to their
credit. The ratio most often proposed is 1 week of benefits for
each 4 weeks of employment in a specified period. The ratio
may be lowered to 1 week of benefits to 3 weeks of insured employment if it is desired to liberalize this provision, or it may be
raised to 1 to 5 if it is desired to make benefit requirements more
stringent. The actuarial considerations would be different under
each of these ratios.
Maximum Weeks of Benefits in Any Year.-According to estimates for the United States as a whole, with a 3-percent contribution rate and a 4-week waiting period, 12 weeks of benefit could be
granted under a scheme designed to remain solvent throughout
periods of severe depression. (See p. 87.) The scarcity of employment and unemployment statistics by States makes it impossible to calculate accurately the extent of benefits which can be
allowed within each State. It may seem desirable to some State
legislatures to increase the rate of contribution (either by increasing
the employer's rate above the Federal tax, by requiring employee
contributions, or by providing a contribution by the State) in order
to provide longer durations of benefits than those indicated as possible with a 3-percent contribution. For example, with the assumptions of solvency through major depressions and a 4-week waiti.J.1g
period, the 3-percent contribution would roughly have permitted the
payment of 12 weeks of benefits, whereas on the same assumptions,
a 4-percent contribution rate would have increased the duration of
benefits to 18 weeks, and a 5-percent contribution would have made
possible the payment of 26 weeks of benefits. Thus the increase in
the length of benefits is greater in proportion than the increase in the
contribution rate. This is explained by the distribution of the unemployed according to the duration of their unemployment taken
from surveys or censuses of unemployment, which show that a larger
proportion of the idle are une1nployed for short periods of time than
are unemployed for l◊-ng periods. For example, on the basis of the
tables on duration of unemployment (table 18) of 5,000,000 unemployed, 21 percent were unemployed 4 weeks or less_, 13 percent were
unemployed 5 to 8 weeks, while only 6 percent were unemployed from
18 to 20 weeks. Therefore, as the duration of benefits is increased,
each additional week added will require a proportionately smaller
addition to the rate of contributions necessary to finance the benefits.
As a result, an additional 1- or 2-percent contribution will make possible an extension of benefits to a duration that will more adequately
protect the unemployed against long periods of unemployment.
Additional Benefits.-Owing to the short duration of regular
benefits that is possible, a State may wish to provide more generously

STANDARDS OF STRUCTURAL PROVISIONS

123

for those who have had stable employment records and have not
previously drawn upon the fund. The suggested "model" bills prepared by the staff of the Co1nmittee 19 contained a plan whereby an
eligible employee who had received the maximum benefits permitted
by statute might receive additional benefits in the ratio of 1 week
of total unemployment benefits ( or its equivalent) to each unit of 20
aggregate weeks of employment within the 260 weeks preceding t he
close of the e1nployee's most recent week of employment, against
which benefits have not been charged. For the employee with a
steady record of employment over the preceding 5 years as much as
10 weeks of additional benefits could be provided. This provision
of additional benefits was suggested because foreign experience indicates that a large proportion of employees will draw no benefits for
a number of years. These employees will have an especially valid
claim to the additional benefits thus provided when, because of a
depression or technological change, they lose their jobs and are unable
to find other work.

ELIGIBILITY FOR BENEFITS
An unemployment compensation system must define clearly the
conditions of eligibility to receive benefits, covering such matters as
previous employment required, the waiting period, the character of
unemployment to be compensated, and the statutory requirements
of registration and availability for work.
Qualifying Period.-Unemployment compensation systems universally require the employee to have been employed for a minimum
period in compensable employment in order to qualify for benefits.
A requirement of this kind is necessary to prevent the fund from
being depleted at the expense of the regularly employed worker
by the payment of benefits to persons who work only intermittently,
spasmodically, or for brief seasonal periods in compensable employment. The State may, at its option, modify or even eliminate
this provision, but account would need to be taken of the actuarial
effect of such modification or elimination.
Availability and Registration for Work.- It is universal practice in compulsory systems of unemployment compensation that an
employee is not eligible for benefits in any week of unemployment
unless in such weeks he is physically able to work and available for
work, whenever duly called for work through a public employment
office. To prove such availability for work, every applicant for benefits is required to register for work at the nearest public employment
office and to report from time to time as required by the gen19

See footnote 3, p. 106

124

UNEMPLOYMENT COMPENSATION

eral rules of the administrative authority. No employee is eligible
for benefits for any week in which he fails without good cause to
comply with such requirements. As with accident compensation
laws, the administrative rules covering such r equirements should
be furnished to each employer, who should be required to inform
his employees of the terms thereof when they become unemployed.
In foreign systems the unemployed person who has otherwise
proved his eligibility for benefits must also prove that he h as not
obtained other employment, by reporting at a specified place, such
as a public employment office, within ordinary working hours.
Provisions for the frequency of such reporting vary greatly. During periods of severe unemployment, congestion has often r esulted
at t he public employinent offices abroad, and various methods of
r otating registrants by sex, occupation, or industry have been
adopted. It is suggested that the State administrative authority
be given power to work out methods by which such overcrowding
can be prevented by allowing it to prescribe by general rule the
frequency and manner (whether in person or in writing) by which
t he claimant shall register for work.
The fact that a person has been working and is able to report at
the employment office is generally taken as proof that he is able to
work, unless he is in receipt o:f such other types of benefit as old-age,
invalidity, or sickness allowance. Provision is customarily made that
no person shall receive two benefits at the same time. The States, in
their legislation, will wish to avoid duplicate payments by providing
that no unemployed person may receive unemployment benefits while
he is in receipt of accident compensation or other types of social
insurance benefits.
Waiting Period.-Every system of compulsory unemployment
compensation requires a waiting period before benefit payments begin, in order to allow time for establishing the applicant's right to
benefits. Such a period may also serve to limit the financial expenditures without inflicting undue hardship on the unemployed person.
If no waiting period were exacted, the minor ebbs and flows of e1nployment in normal times woul d result in l arge drains on the
resources of the system for a type of unemployment that causes least
hardship to the worker. Provisions concerning the 1'aiting period
vary greatly in existing plans and are often different for total and
partial unemployment.
Recently, as a result of the depression experience, opinion in the
United States has favored a relatively long waiting period in order
to conserve the resources of the system for prolonged unemployment.
A waiting period of 4 weeks in a year for both total and partial
unemployment seems to fit these needs, since estimates reveal that the

STANDARDS OF STRUCTURAL PROVISION S

125

unemployment concentrated in the first 4 weeks constitutes a consider able portion of the total, varying from about 30 percent in good
times to about 15 percent in ti1nes of depression. A 4-week waiting
period would, therefore, 1nake possible considerable increase in the
duration of benefits without subjecting the unemployed to undue
hardship before their benefits begin. The States, of course, are ,f ree
to impose shorter or longer waiting periods. Decision will rest upon
whether or not it is desired to emphasize conservation of funds for
serious periods of unemployment. It is customary to require the
employee to register for employment befoi-:e his waiting period is
started, and he must be unemployed and available for work, under
the same rules as for the payments of benefits, in order to have the
time counted in satisfaction of t he waiting period.
Since the cost of compensating the earlier weeks of unemployment
is greater than that of compensating the later weeks, it follows that
the length of the waiting period has a considerable effect upon the
duration for which benefits can be paid. According to actuarial estimates for the United States as a whole, a change of 1 week either way
from a 3-week period would result in a corresponding change of from
1 to 5 weeks in the length of benefits permissible, depending upon the
rate of contributions.
Labor Dis_putes.-In order that the unemployment compensation
fund may not be used as an instrument for or against labor disputes,
most European systems of unemployment insurance disqualify from
benefits for the duration of a strike or lockout those employees whose
unemployment is a direct result of the labor dispute still in active
progress in the establishment in which he is or was last employed.
The States will no doubt want to include a similar provision. This
should be carefully defined so as to avoid injustice or discrimination.
Voluntary Unernployrnent.- Considerable difference of opinion
exists as to the treatment of an employee who leaves his employment
voluntarily without good cause. European laws usually disqualify
such an employee for a limited period. The suggested "model" bills
prepared by the staff of the Committee 20 proposed that employees
quitting without good cause be considered ineligible for benefits for the
week in which such leaving occurred and for the 3 following weeks.
This period of ineligibility would be in addition to the required waiting period. The penalty, therefore, consists in effect in a prolongation of the waiting period for those who leate work without just
cause. If a State so desires, persons who leave work voluntarily .may
be entirely disqualified from benefits or the period of ineligibility
may be lengthened or varied according to the reason for quitting.
20

See footnote 3, p. 106.

78470-37-10

126

UNEMPLOYMENT COMPENSATION

Discharge for Misconduct.-A State may wish to provide for
flexibility in its regulations with regard to unemployment resulting
from discharge for misconduct, or it may desire to establish rigid
restrictions. A flexible provision suggested in the "model" bills prepared by the Committee's staff 21 provided a penalty which could be
varied by the administrative agency to suit the circumstances of each
individual case by a prolongation of the waiting period for an additional 3 to 6 weeks, as determined by the administrative agency in
each individual case.
On the other hand, there is considerable opinion, especially on the
part of employers, in favor of complete disqualification from benefits
in cases of discharge for misconduct. The State should give serious
consideration to the injustice of such entire disqualification if employee contributions are required.
Refusal of Suitable Employment.-Although an insured person
has proved the involuntary character of his unemployment, there
n1ust be some test of his willingness to accept new employment before
he is entitled to benefits. The only satisfactory test of willingness js
an offer of a job, and successful administration of unemployment
compensation depends largely on an adequate system of public employment offices. Even so, the test can be effective only to the degree
t.hat work exists and that employers make use of the employment
service. If a worker is known to refuse an offer of suitable employment, he is considered unwilling to work and disqualified for benefits,
usually for a limited period. All European schemes n1ake such a
prov1s10n.
Protection of Labor Standards.-1'rith the aim to protect labor
standards, all foreign measures define suitable work similarly. Generally, it is considered employment at a reasonable distance, which
would not endanger the individual's health, safety, or morals, at
wages and working conditions prevailing in the locality, and in situations not vacant by a trade dispute. In this country it has also
been rec01mnended by the American Federation of Labor that work
be considered unsuitable if acceptance would abridge or limit the
right of the employee either to refrain from joining a labor organization or association of workmen, or to retain membership in and
observe the rule~ of such an organization. All these provisions are
designed to protect the skill and standard of living of the worker.
The Federal Social Security Act defines very specifically the conditions under which an employee may be considered justified in refusing work which offers serious threat to labor standards. According
to section 903 (a) (5) "Compensation shall not be denied * * *
to any otherwise eligible individual for refusing to accept new work
zi

See footnote 3, p . 106.

STANDARDS OF STRUCTURAL PROVlSIONS

127

under any of the following conditions : (A) If the position offered is
vacant due directly to a strike, lockout, or other labor dispute; (B) if
the wages, hours, or other conditions of the work offered are substantially less favorable to the individual than those prevailing for similar work in the locality; (C) if as a condition of being employed
the individual would be required to join a company union or to resign from or r efrain from joining any bona fide labor organization." 2 2
Wage Disqualifications.-Unemployment compensation systems
abroad generally do not apply either the taxes or the benefits to
higher-paid employees. Because of the fact that the F ederal tax
applies to all employees, regardless of wages received, it will probably not be feasible to limit to lower-wage groups the benefits provided under State systems. A maximum limit upon benefits will
necessarily penalize more or less severely the higher-paid employee.
The States may, if they deem it appropriate, go further and debar
higher-paid employees from benefits, but it should be remembered
that employers are required to pay taxes on this group of employees.

CLAIM AND APPEALS PROCEDURE
The staff of the Committee on E conomic Security embodied in its
suggested bills 23 general flexible arrangements for the settlement
of benefit claims. The recommended procedures were so framed
that they could be set up and changed by the State administrative
authorities on the basis of further study and experience without the
necessity of legislative amendments. The procedure outlined provided that claims for benefit should first be filed at the local employment office or other designated agency, and disputed claims should
be heard locally, either by a deputy of the administrative authority
or by an a ppeals tribunal consisting of representatives of employers
and employees with a deputy of t he administrative authority as
chairman. Appeals were to be allowed to the State administrative
authority if the decision of the compensation office were r eversed.
On points of law, a further appeal was to be allowed to the civil
courts. All persons delegated to handle claims or appeals would be
given authority to administer oaths, to take depositions, and to compel the attendance of witnesses and the production o~ necessary
papers and records.
In its unemployment compensation act each State will need to draft
provisions consistent with its judicial structure and procedure to
specify (a) the type of legal action to be used for judicial review of
contested cases ; ( b) the court or courts to be used; ( c) transmission
:?249 Stat. 640, § 903 (a) (5); 42 U. S. C. (1935 Supp.) , § 1103 (a) (5).
See footnote 3, p . 106.

28

128

UNEMPLOYMENT COMPENSATION

by the administrative agency of the record in the case; ( d) assessment of court costs, etc.
Some States have found it desirable, under their accident compensation laws, to have a single court handle all such cases, thereby developing a tribunal with specialized knowledge and experience in this
field. Such procedure might well be followed in the new field of
unemployment compensation.
ADMINI STRATION AND F I NANCE
The Federal Social Security Act leaves to the States the determination of the administrative organization for unemployment compensation, as well as of t he substantive provisions of the State law. This
latitude will doubtless give rise to many variations in types of control
and administrative procedures, though certain similarities will obviously occur because of Federal requirements with regard to the payment of compensation and the deposit and withdrawal of funds if the
State law is to be approved by the Social Secur ity Board.
The work involved in the administration of a State unemployment
compensation law will be very considerable, and the administrative
expenses (including the operation of public employment offices) will,
judging by experience abroad, be at least an amoi.mt equal to 10 percent of the annual contribution. Title I II of the Social S ecurity Act
provides for grants to States for administrative expenses.
Administrative Agency.-The type and size of the agency created
or designated to administer the State unemployment compensation
act will be dependent to a large extent on the size and degree of
industrialization of the State. The bodies designated to administer
the unemployment compensation system may conceivably be of two
different. types, as follows:
(1) A separate division for unemployment compensation under the existing
State labor department with a full-time salaried director subject to the supervision of the chief officer.of the labor department. If this procedure is adopted.
there should be two coordinate sections of the division, the employment service
section and the unemployment compensation section, with separate administrative functions, personnel, and budgets. If the existing State labor department
is administered by a single commissioner, a special board of review should be
created to review disputed claims for benefit.
(2) A new, salaried, fuU-time commission of three members may be established with power to determine policies, adopt necessary rules and regulations.
act as the board of review for appealed cases, and have general supervision of
the routine administration through a director or a secretary.

General Rules.- Because of the complicated administrative problems whfoh cannot be foreseen and which are not amenable to legislative prescription, the administrative agency for unemployment
compensation will need authorization to adopt such rules and regulations as m,ay be necessary f or the interpretation and application

STANDARDS OF STRUCTURAL PROVISIONS

129

of the intent of the act. Administrative practices ,'\1 ith r egard t o
such matters as collection 0£ contributions, payment of benefits, and
procedure for the establishment of claims will have to be developed
and should be defined by administrative rules and regulations rather
than by statutes. General rules, interpreting or applying the unemployment con1pensation act and affecting all or classes of emp loyers, employees, or other persons or ,agencies, will be necessary.
The manner of their adoption by the administrative agency, including official notice of their adoption and content, will need to be
set forth in the statutes.
Personnel.-No phase of the administration of unemployment
compensation is more important than personnel. It must be recognized that unemployment cori1pensation is a large undertaking. A
large part of the work requires highly trained persons, such as actuaries, auditors, accountants, attorneys, economists, statisticians, persons with training and experience in personnel work, employment
placement, etc. The administrative work will be similar to that of
a large insurance corporation, requiring the adoption of sound personnel policies and the selection of capable personnel, chosen wholly
on the basis of qualifications for the work. Nothing would so greatly
discredit the whole system of unemployment compensation as poor
administration which would inevitably result from the use of untrained, poorly qualified, politically appointed, and constantly shifting personnel.
Each State will have to deal with the personnel problem in the
light of its own institutions and traditions. If the State has a civilservice system, employees of the unemployment compensation system, with possibly a very few exceptions, should be placed under this
system with a permanent status and be selected upon a competitive
merit basis. In States which have no civil-service system, it would
be appropriate to authorize or to require the administrative agency
in charge to prepare and adopt a standard classification of its per som1el positions and to make appointment thereto upon a strictly
merit, nonpartisan basis.
A reasonable degree of security against arbitrary and political
removals should also be provided. The statute might provide that
all appointments should be made for an indefinite term and that
after a reasonable probationary period, fixed by the rules of the
agency, the employee should be subject to removal only for cause,
after written notice and opportunity for hearing. These provisions
would constitute some protection against future political manipulation of the personnel and would help to build up a tradition against
this practice.
Advisory Councils.-The provision of a State-wide advisory council and also of local advisory councils, composed of employer and

130

UNEMPLOYMENT COMPENSATION

employee representatives and of members representing the public
generally, will be of great assistance to the administrative agency
(a) in for.mulating policies and discussing problems related to the
administration of the unemployment compensation act, and (b) in
assuring impartiality, neutrality, and freedom from political influence in the solution of such problems. Advisory councils of this kind
usually serve without compensation but are reimbursed for any
necessary expenses.
Employment Stabilization.-It should be one of the functions of
an unemployment compensation system to.promote the regularization
of employment.
Ways by which the administrative agency could accomplish this
would be to publish studies of the methods utilized by employers t-0
stabilize employment; to encourage and assist in the adoption of practical methods of vocational training, retraining, and vocational guidance; to investigate, recommend, advise, and assist in the establishment and operation (by municipalities, counties, school districts, and
the State) of reserves for public works to be used in times of business
depression and unemployment; and to these ends t-0 employ experts
and to carry on and publish the results of investigations and research
studies.
Records and Reports.-Every employer of any person in the State
should be required to keep true and accurate employment records of
all persons employed by him, of the weekly hours worked by each, and
of the weekly wages paid to each employee. Such records should be
open to inspection by the administrative agency or its authorized representative at any reasonable time and as often as necessary. The
adn1inistrative agency should have authority to require from any
employer any reports relative to e1nployment, wages, hours, unemployment, and related matters, which are considered necessary for effective
administration. Information thus obtained should ·not be published
or open to public inspection in any manner revealing the employer's
identity, and any eniployee of the administrative ·agency guilty of
violating this provision should be subject to appropriate penalties.
Representation in Court.-The administrative agency will need
authority to call upon the attorney general or the equivalent officer
in the State to represent it in any court action r elating to unemployment compensation or its administration and _enforcement. It may
also be advisable, in unusual cases, to pern1it it to employ special
counsel with the approval of the governor.
State-Federal Cooperation.-In view of the advantages that will
accrue to the State from the Federal Social Security Act and the
Wagner-Peyser Act (providing for a Federal-State system of publ1c
employment offices), the administrative agency should be authorized

STANDARDS OF STRUCTURAL PROVISIONS

131

and directed to cooperate in all necessary respects with the appropriate agencies and departments of the Federal Government in the
administration of unemployment compensation and of free public
employment offices, to make all reports requested by any directly interested Federal agency or department, to accept any sums allotted or
apportioned to the State for such administration, and to comply with
all r~asonable Federal regulations governing the expenditures of
these sums. 24
Employment Offices.-The Federal Social Security Act requires
that unemployment compensation be paid solely through public employment offices or such other agencies as the Social Security Board
may approve.25 It will be necessary for the State to establish and
maintain free employment offices throughout the State for the proper
administration of unemployment compensation. Appendix IV, entitled "The History and Development of the United States Employment Service", gives a brief summary of the development of public
employment offices in the United States and outlines their functions
and activities.
Unemployment compensation laws everywhere provide as a condition to qualification for benefits that the employee register with
the employment exchange and accept suitable employment if available. He is entitled to benefits only in case it is impossible to find
other employment. This is the only effective provision which makes
it possible to ascertain willingness to work. It is almost inconceivable that any State would e·v er atten1pt to administer unemployment
compensation except through public employment offices. There must,
accordingly, be the closest possible connection between the employment offices and the ad1ninistration of unemployment compensation.
I t is doubtful whether this can be accomplished without unification
or merger of these two activities.
The Committee on Economic Security strongly recommended the
acceptance by the State of the provisions of the Wagner-Peyser Act
of June 6, 1933,26 so that the State employment service would be
affiliated with the United States Employment Service. This would
establish a Nation-wide system of employment offices that could facilitate the interstate transfer of workers to places where a labor shortage
exists and would make possible national statistics on the state of the
labor market.
2,1 This will be necessary in order to receive Federal grants for unemployment compensation administration.
25
49 Stat. 626, 640, §§ 303 (a) (2), 903 (a) (1); 42 U.S. C. (1935 Supp. ), §§ 503
(a) (2) , 1103 (a) (1).
20
48 Stat. 114, § 4; 29 U. S. C., § 49 ( c) ; entitled " An act to provide for the establishment of a national employment system and for cooperation with the States in the
promotion of such systems, and for other purposes."

132

UNEMPLOYMENT COMPENSATION

Protection of Rights and Benefits.- In State unemployment compensation legislation it will be necessary to ha-,-·e a section which
will provide legal protection of the employee's rjghts and benefits.
Such a section should declare void any waiver of rights by an employee, should limit the ·fees charged by the employee's counsel or
agents in claim proceedings or court action, and should prohibit
assignment or garnishment of benefits.
Any employee claiming a violation of this section should have
r ecourse to the method and procedures provided for deciding benefit claims; and the administrative agency should have power to
take any steps necessary or suitable to correct and prosecute any
such violation.
No employee should be charged fees of any kind by the administrative agency or its representatives, in any claim or appeal proceedings. -A-ny employee cl~iming benefits in any proceeding or
court action 1should be allowed representation by counsel or other
duly authorized agent; but the State may desire to limit the fees
that such counsel or agent should together ch arge or receive for
such services in the proceedin~ or court action. U nemployment
compensation benefits which are due or n1ay become due should not
be assignable before payment. When awarded, adjudged, or paid,
the benefits should be exempt from all claims of creditors, and
from levy, executions, and attachments, or other r emedy provided
for recovery or collection of debt. It should be stipulated that this
exemption may not be waived.
Collection of Delinquent Contributions.-State unemployment
compensation statutes must necessarily · make some provision for
delinquent collection, covering such matters as interest payments,
bankruptcy, and court actions for recovery.
Penalties.-The unemployment compensation law in the St ates
will need to establish penalties for misrepresentation or fraud on
the part of employees and employers. Fraudulent practices to be
guarded against include: (1) False statements or representations by
employees or others to obtain or increase any benefit or other payment; (2) false statements or r epresentations by an employer to
avoid liability to the tax for unemployment compensation or to reduce the amount of cont ribution or payment to which he is legally
liable; (3) willful f ailure or refusal to make contributions or payment due and failure or refusal to f urnish reports or to testify or
produce r ecords ; ( 4) t he r equirement of employees by wage deductions, to pay all or any part of the required employer contributions, or to waive any right established by the unemployment
compensation act.
Administration Fund.-Since the Federal Social Security Act hns
established as a requisite for Federal approval that all money with-

dTANDARDS OF STRUCTURAL PROVISIONS

133

drawn from the Federal unemployment trust fund be used for the
pay111ent of unemployment compensation, a special administration
fund should be created to consist of all money received by the State
for administrative purposes. This special fund may be h andled by
the State treasurer as other State moneys are handled, but the
amounts in the administration fund should be expended only for the
specified purpose of paying administrative expenses in connection
with unemployment compensation. A separate employment service
account should be mai11tainecl in the fund, containing any sums received under the Wagner-Peyser Act or segregated to pay for the
operation of the State en1ployment service, if this service is placed
under the unemployment compensation system.
To enable the State to receive its full share of the Federal money
now avail able on a matching basis from t he United States Employment Service under the Wagner-Peyser Act, it will be necessary for
the State to appropriate about 3 cents per capita of the State population. Such an appropriation will be relatively small, as compared
to the total cost of the State's employment service, in view of its
enlarged f unctions under an unemployment compensation act. The
larger part of administrative costs will be financed from Federal
money authorized to be appropriated under title I II 27 of the ·social
Security Act, but an effective State-wide employment service will
benefit not only employees covered by the unemployment compensation act but also the entire community.
Saving Clause.-As a requisite to Federal approval of a State
unemployment compensation system, the Federal Social Security Act
has stipulated that State laws shall include a saving clause providing that all the rights, privileges, or ii11munities conferred by such
19,w or by acts pursuant thereto shall exist subject to the power of the
legislature to amend or repeal such law at any time. 28 This provision is designed to permit flexibility in the relation of State laws to
possible subsequent amendments to the Federal act which may, as
more experience is accumulated, be revised or amended.
27

49 Stat. 626 ; 42 U. S. C. ( 1935 Supp.), § § 501- 503.
Stat. 640, § 903 (a) (6); 42 U. S. C. (1935 Supp.), § 1103 (a) (6) .

28 49

•

Part II

OLD-AGE SECURITY
The basic data for part II are
drawn from staff reports on old-age security, prepared by
Barbara Nachtrieb Armstrong, J. Douglas Brown,
Murray W. Latimer, and Otto C. Richter,
actuary, and a consulting group
of actuaries

..

Chapter VII
THE ECONOMIC PROBLEMS OF OLD AGE
LD-AGE noncontributory pensions and contributory old-age
insurance are two forms of social legislation designed to prevent destitution among the aged in lower-income groups. The
,a pproaches of the two are different in principle, for a noncontributory old-age pension system provides a small periodic payment from
public funds to old persons after they have become destitute, whereas
an insurance plan per1nits workers, through the periodic payment of
a small percentage of their wages and with the assistance of their
employers, to build up a modest retirement income guaranteed by
the government. On the one hand aged persons who are without
resources are recognized as the responsibility of the community; on
the other hand machinery is provided for savings on the p,a rt of the
worker and his employer for old-age security, with government control of the investment of his savings. In the majority of countries
where old-age insurance systems are in operation, government funds
and employer contributions supplement the wage earner's periodic
payments to his old-age annuity fund.
F.or society ,as a whole, provision to enable the voluntary retirement of the aged from the labor market appears justified by at least
three strong arguments : (1) The worker, after years of productive
effort, has earned the right to rest; (2) his advanced age or invalidity renders him incap,able of an effective part in productive
enterprise; (3) his continuance at work prevents a younger man
from filling his place and gaining occupational skill, experience, and
promotion. Retirement of the older worker at a specified age is
usually made compulsory under ,a contributory old-age insurance
5ystem. When no provision is made for an assured retirement income, the majority of elderly wage earners continue to work or to
seek employment until they are ultimately forced to dependency,
either upon their children or upon the community in which they
live.
The effect of destitution and dependency is enorn1ously expensive
not only in the cost of actual assistance rendered by governments, private charity, and the generosity of relatives and friends but also in

0

137

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OLD-AGE SECURITY

the psychological results of t he loss of self-respect and the constant
fear 0£ insecurity. Therefore, recognizing both the tangible and
intangible values of an earned retirement income, the principal countries of Europe have provided that worker, employer, and state
shall contribute toward a fund :for old-age annuities. In one sense,
this merely represents the diversion 0£ funds from channels 0£ charitable assistance or public relief to channels 0£ insurance against the
hazard of dependency. This step would be justified from the standpoint of sound economic policy even i£ the net cost of insurance were
far in excess 0£ the future relief which it replaces, for the quality of
self-respect and the relative freedom from £ear o:f old age engendered
by old-age insurance have a dollar-and-cents value to worker, employer, and government alike. In view of the fact that the health,
morale, and standard of living o:f the wage earner have definitely
improved under social insurance wherever it has been in force, it is
easy to understand the great development of social insurance institutions in the civilized world today. The United States, entirely alone
among industrialized countries, has lagged behind in social insurance
legislation.
In actual money value the old-age annuity provided in foreign
countries, even with generous government contributions, is small in
comparison with American standards. But even a small, steady
income earned as a right bridges the wide gap between complete
dependency and independence. .
The conditions of modern society, especially in highly urbanized
and industrial areas, do not permit the wage earner, unaided, to provide for his old age. Unless wages are increased, thrift encouraged,
and savings safeguarded by the government, the comrm.1ni ty as a
whole will inevitably have to meet an increasing problem in the
care of the dependent aged. A man's productive, wage-earning period
is rarely more than 45 years. Under present conditions he must earn
enough in this period to contribute toward the support of aged parents, rear and educate children, maintain his family at a standard of
living more or less consistent with American ideals, and save enough
in the form of insurance or absolutely safe investment to provide a
modest income until death , if he survives his working period. This
last item 0£ his budget is the one least urgent, least stressed by advertising propaganda, and most easily disregarded among the many
financial demands.
For a given individual the problem of old-age dependency may
begin when he is 60 or 65 years old and may last until he is 80 or 90.
His health or that of his family may or may not co111plicate the
problem. Moreover, his economic, occupational, marital, or family
status may each contribute in turn to make his situation different

ECONOMIC PROBLEMS OF OLD AGE

139

from that of his neighbor. H ence the date and conditions of the
ultimate interruption of his earning power, when the head of a
family or a single person must face the fact that he is no longer
able to earn a living, is unpredictable for an individual. For a large
enough group of wage earners, however, calculations can reveal with
reason able accuracy the number who will sur vive to old age and the
amount of weekly, monthly, or annual contribution on behalf of each
member of the group which will provide a given retirement income
for each. It is, therefore, possible and practicable through social
insurance to provide a safe, adequate income for the period when the
individual will be no longer able to earn a living.
When he has the assurance t hat each day's work builds up an
investment for his old age, permitting independence of the charity
of the community or financial aid froin sons and daughters already
overburdened by the cost of maintaining their own families, much
of the wage earner's ham1ting fear of insecurity is removed.
The increase in the proportion of older persons in the population
of the United States, the mounting ratio of dependency in old age,
and the difficulties which an older worker meets in his attempt to
find and hold employment make it imperative t hat legislative and
collective action be taken in this country to avoid ever-mounting
costs of relief to the aged and the humiliation of subsistence upon
charity.
INCREASE OF AGED PERSONS IN THE UNITED STATES
At the time of the 1930 census there were 6½ million people 65
years of age and over in the United States, representing 5.4 percent
of the population. As a result of a declining birth r ate in this country, which manifested itself about 1820 and persisted from that time,
the ratio of aged persons to the total population has shown a continuou~ increase for more than a century. The increase was very
slow for 40 year s, more rapid from 1860 on, and noticeably accelerated between 1920 and 1930, resulting from a rather sharp decline
in birth rate which set in about 1920. This decline is expected to p ersist, moreover, and will, of course, produce a correspondingly sharp
increase 111 the ratio ,o f t he aged to the population as a whole. The
restriction of immigration, curtailing as it has the influx of younger
persons to th~ country, likewise tends to increase the pr oportion of
older age groups in the population.
As table 26 shows, while the percentage of p er sons over 65 r ose
from 2.7 to 4.7 percent of the total population (a 74-per cent increase) in the 60 years from 1860 to 1920, it is expected to r ise
to 11.3 percent (a 140-percent increase) in the 60-year period following 1920. Figure 1 gives the actual and estimated number of

1-4

~

0

m,»1

150-

i1//J7A

v/1//4

v)Ps-150

~ .!Vamher oi per.sons under 65
-

Number of persons a.fed 6.5 and over

r..i

"'i

~
I,,:,

~

I;:)

100 ~

I... JOO-

~

~ II

0

t-t
tj

~

~
~

~

~

...

i:::

-~
~

~

I;:)

jO ~

50-

~

1900

1920

1930

I

I

>
Q

i:rj

UJ
i:rj

0

q
~

H

H
k1

0

F 1oon1,; 1.-Actual a nd estimated numbel' of persons aged 65 and over compared to total populil tion, 1860-2000.

·"

141

ECONOMIC PROBLEMS OF OLD AGE

persons aged 65 and over, com pared to the total population from
1860 to the year 2000.
Since 1870 the three older age groups (30--44, 45-64, and 65 and
over) have been increasing -faster than the total population. This
fact is brought out in table 27. vVhereas the total population in 1930
was only 16.2 percent greater than in 1920, the proportions 0£ p ersons aged 45 to 64 and 65 and over increased, r espectively, by 25.7
and 34.5 per cent during the decade.
TABLE

26.- Aotual and estimated niumber of persons agecl 65 ancZ over compared
to total popiilatforn, 1860-2000

Year

Nu mber
aged 65
and over

Total popu•
lation

Percent
aged 65
and over

31,443,000
38,558,000
50,156,000
62,622,000
75,995,000
91,972,000
105, 711, 000
122,775,000

2. 7
3.0
3.4
3.9

Year

Number
aged 65
and over

1940.........
1950.........
1960. ........
1970.. ·---·-1980.........
1990 .........
2000 ... .. ....

8,311,000
10, 863,000
13,590,000
15,066,000
17,001,000
19,102,000
19,338,000

Total popu• Percent
aged 65
lation
and over

-1860 .........
1870. ........
1880 . ........
1890. ........
1900.........
1910.. . --__ ..
1920.........
1930 .•... . ...

849,000
1,154,000
I, 723,000
2,424,000
3,089,000
3,958,000
4,940,000
6, 634,000

4. l

4.3
4. 7
5.4

132,000,000
141,000,000
146, 000, 000
149,000, 000
150,000,000
151,000, DOG
151, 000, 000

6.3
7. 7
9.3
10. l

11. 3
12.6
12.i

SOURCE: Data for years 1860 to 1930 from the United States censuses. Estimates for
subsequen t years by the actuarial staff of the Committee on Economic Security. These
forecasts are made on t he assumption of a net immigration of 100,000 annually in year s
1935-39, and 200,000 annually in 1940 and ther eafter.
T ABLE

27.- Rate of increase of popiilation by age gro1ivs for the Un'ited, Stcites,
18"/0-193 0
.Age groups

Age groups
Years

Total
popula•
tion
3D-44

45-&i

65 and
over

Years

-1870-1880. .... . ..
1880-1890.-......
1890-19GO........

30.1
24.5
21. 3

29. 6
31. 6
27.0

37.0
29.9
27.0

49. 4
40.3
27.4

1900-1910... . ....
1910-1920. . ......
1920-1930. ..... . .

Total
popula·
tion
3D-44
-21. 1
15.0
16. 2

26. 2
19. I
18. 6

45-64
29. 1
26.9
25. 7

65 and
over
28.2
24. 9
34. 5

SOURCE: Thompson, Warren S., and Whelpton, P. K., Population Trends in the United

States, 1933, p. 110.

Table 28 gives further details 0£ the age distribution of the United
States population in 1920 and 1930, with a breakdown between urban
and rural groups. In 1930 it appears t hat 5.4 percent o-f the total
population of the country was 65 years of age or over, and that 5.1
per cent of the urban and 5.8 percent of the rural population was in
this age group. Persons over 40 years of age r epresented 29.3 percent
of the total 1930 population , 30.4 percent of the urban group, and
28 percent of the rural.

78470-37-- 11

....
~

t-:>
TABLE

28.-Age distribution of the total, urban, and rural population of the United States, 1920 and 1930
Total population
1920

Urban population
1920

1930

Rural population

1930

1920

1930

Age group
Accumulated percentage 1

Number

Number

11, 444,390
12, 607, 609
12,004,877
11,552, 115
10,870,378
9,833,608
9,120,421
9,208, 645
7,990, 195
7, 042, 279
5,975,804
4, 645, 677
3,761, 221
2,770,605
1,950,004
1,106,390
534, 676
205, 469
51, 664
11,033
3,961
94,022

---------90.6

55 to 69. ...... . - -. -- -. --- -- ---- ---- - . - --- - - - - - - -- - -- - - ----- 60 to 64 ••. ------ - - - --·--- -- · --- --- - - ----- - - - - - - - ---------- - 65 to 69---- - ------ ---- - ---- - - - - - - ------------- - -- - ------ ---70 to 74 .. . . -- .. --- - _____ . ... -- . - . ------- .. - - . -- ------ - - - ____
75 to 70 ..... -- . --- --. ___ _. ______ - -------- - - . ---- ---- ___ ____ _
80 to 84 .. -.. . . . - - - -.... -. .. -. - . - . •. - - - . - - -. - - -. -- - - •. - . . . - - 85 to 89 ___ ... .. ... _. .•.. . .. __. . . . •. . ••. __ .. _. _. __. ______ ____
90 to 94.
______
. •...____
- .....
_. __.___
. . _______
. . - .....
_.• _-_________________
. - .• _. .. __ .•... ___
95to
99 ___
__ _____
_______
__
100 and over . ____ . . . . . _. _... ___ _.• _..... _... . • .. . .. __. _. ___
Unknown ____ __.•.. . .. _ ... . ... •. . ____ •.... __. ___ . . ••.• ____

11,573,230
11,398,075
10,641,137
9,430,556
9, 277, 021
9, 086, 491
8, 071,193
7, 775,281
6,345,557
5,763,620
4,734,873
3,549,124
2,982,548
2,068,475
1,395,036
856, 560
402,779
156, 539
39,980
9,579
4, 267
148,699

'T'ot a l population . •• _. _•..• ••.. __ . _.... _... _.• ___ .• ___

105,710,620

122, 775, 046

.
...••.... - .•... __ . __
• ...._____________
_... • _•..••••_____
• __ . ________
_. _.. __ ___
5Under
to 9 ___5___________________
_____
__
!Oto
14------------------ -- --------- - -____
- ---_________
---------to 19
____ _____ __________--__ _____
_______ --_____
__
15
20 to 24 ______ - ---- --- . ----- - --- -- - -·--- -- - - --- - ---- -.. ------25 to 29 ... .... . --- _________ - -. __ . . . __ __ ______ ___ __________ __
30to 34 _______ _____ __ ________ _________________ _____ ________ _
40to
44 _____
____________
____ ____
__________
__
... ----------------- - ---__________
---- - ---- -______
- - -------- - - -- -35 to 39
45 to 49 _______ __________________ ___ ___________ ______ ___ ___ __
50 to 54 __ _____ _______ __ _______ ______________________ ______ __

Number

Number

Accumulated percenta ge 1

Accumula ted percentage 1

-------·-89.1

.1

5,818,030
6,396,468
6,055, 184
5, 536,704
4,450,070
3,661,657
3,346,945
3,434, 881
3,057,809
2, 819,450
2,484,647
1,989, 261
1,630, 1161
1,242,881
918,772
643, 173
266,961
103,336
26,517
6,026
2, 604
27,986

100.0

51, 406, 017

53, 820,223

100.0

------91.--7

•1

5,626,360
6,211, 141
5, 949,693
6,015,411
6,420,308
6,171,951
5,773,476
5,773,764
4,932,386
4,222,829
3,491,257
2,656,416
2, 120,260
1,527,724
1, 031, 232
563,217
267, 715
102, 133
25,147
li, 007
1,360
66,036

100.0

54,304,603

68,954, 823

(3~
(3

Number

6, 297,479
6,347, 799
5,976,825
4,984,593
4,174,922
3,767,433
3,344,637
3,321,844
2,743, 438
2,572,981
2,121,803
1,653, 277
1,454,458
1,067, 489
734, 305
457,923
217,324
287, 527
2 22,354
2 5, 356
2 2,386
49, 864

5,275,751
5,050, 276
4,664,312
4,445,963
5, 102,099
5,319,058
4,726,556
4,453,437
3,602, 119
3, 190,639
2, 613,070
1, 895,847
1, li28, 090
1,000,986
660, 731
398,637
185,455
269,012
2 17, 626
2 4, 223
2 1, 881
98,835

80. 3
70.5
61. 1
52. 2
44.2
36.8
29.3
22.8
17. 1
12.2
8.5
5.4
3. 1
1. 6
.7
.2
.1

Number

82. 7

74. 1

65.4
56. 1
47. l
38.8
30. 4
23.2
17. 1
12.0
8. 2
5. 1
2.9
1.4
.6
.2
~8)
3)

(3)

Accum ulated percentage based on all over first age mentioned in each age group.
2 E st imated.
a L ess than Ho of 1 percent.

1

SOURCE: U. S. Departmen t or C ommerce, Dureau or tbe Census ,

Fifteenth Censua of the United States: 1930, vol. II, "Popula tion," tables 7 and 16, pp. 576, 587-689.

77. 3
66.0
55. 7
47. 4
40. 6
34.4
28. 0
22.4
17. l
12. 6
8. 8
5.8
3. 6
1. 8
.8

.3
.1

f>3)
.1

0

G

>

Q

t:_:,:j

U>.
t:_:,:j

0

d

~

H

~

143

ECONOMIC PROBLEMS OF OLD AGE

El\ilPLOYMENT DIFFICULTIES OF THE OLDER WORKER
The increase in the number and proportion 0£ older persons in
t he population has been accompanied by an increase in the percentage of gainfully occupied persons who are 45 years 0£ age and
over, as table 29 indicates. In 1930 some 300 in every 1,000 gainfully occupied persons in the population were 45 or over, whereas
in 1890 only 244 out 0£ every 1,000 were in this age group.
This increase 0£ older persons in the group which is employed
or seeking work means that, m1less the number of employment opportunities incr eases at the same rate, the competition for employment will become keener and more difficult as time goes on. In
such competition the position of older persons tends to become more
and more unfavor able.
TABLE

29.-Percentage of persons I,5 yea,rs of age and over among gainfully
occupiea, by se:JJ, for the United States, 1890-1930

Year

45 years and over
All
gain•
fully oc•
cupied Total
Male Female

1890... . _____ __ _
19QQ___ _______ ___
1910....... . ... ..

100.0
100. 0
100. 0

24. 4
24. 1
24. 0

Year

45 years and over
All
gain•
fully OC·
cupied Total Male Female

-26.4
26. 0
26.1

15.1
15. 7
16. 0

1920..•..........
1930.•. •• .•••••••

100.0
100.0

.

27.9
30. 0

30.4
32. 7

18.1
20. 3

SOURCE: B arkin, Solomon, The Older Worker in Industry, Report of Joint Legislative Committee on
Unemployment T ransmitted to the Legislature Feb. 20, 1933 (J.B. Lyon Co., Albany, 1933), p. 48.

Much has been written on the employment difficulties of the older
worker, yet no comprehensive or authoritative data are available for
the country as a whole. D efinitions 0£ the age limit which divides
the "younger" from the "older " wage earner are lacking, and conditions which determine the relative advantages of youth and vitality over maturity and experience must obviously vary with different types of occupation as well as with sex. The problem of the
older worker is not of recent origin, though it has undoubtedly been
intensified by the severity of the depression. Ever since the beginning of the industrial revolution the dynamics of a machine civilization have necessitated constant employment adjustments for all
workers. Mechanization has placed an increasing emphasis upon
youth, physical strength, and ability to stand nervous str ain. Over
the past century it has been increasingly difficult for all workers
to maintain their skill, their employment, and their security. The
burden of unemployment has fallen with great severity on "older"
workers-individuals whose obligations, training, and capabilities
in general cannot keep pace with the speed demands of modern industry. The older-worker problem is most acute in those industrial
and manufacturing processes where age entails a physical liability
rather than an experience asset.

144

OLD-AGE SECURITY

Surveys of hiring-age policies in specific localities help to throw
some light on the nature and extent of the employment difficulties of
the older worker. Age distributions of persons in receipt of unemployment relief as well as of those registered for work at employment offices give further evidence of the handicaps of middle or
advanced age. And the unemployment census of 1930 reveals significant data on the qualitative and quantitative aspects of the problem. Thus, despite the lack of comprehensive, direct data, certain
broad conclusions can be drawn for the United States as a whole.
The general conviction that the older worker finds difficulty in
either obtaining or keeping employ1nent, and that his problem is a
growing one, is supported by findings of several official investigations, such as those made in New York, California, and Maryland.1
Although such graphic phrases as "old at 40" and the "scrap heap
at 45" suggest an exaggeration of the actual facts, there is undeniable evidence of the progressive use of maximum hiring-age limits
in industry. These limits automatically cut off employment opportunities of men who find themselves competing in the labor market
in middle life. There seems to be no proof of a general policy of
dismissal of older workers. It is likely that the statement made in
the New York report on the older worker in industry is a fair statement of the general dismissal and employment system, to wit: If
the worker has reached middle age with a long service record, he is
less likely to be dismissed than th~ younger worker. This is because
he possesses positive value for his firm. If, however, the older employee has served only short periods in the employ of any one firm
in his years under 40, he is just as likely to be dismissed as any
younger worker.2 In all cases the older man is far less apt than the
younger worker to secure new employment.
Both the Maryland and California surveys of age distribution in
their local industries indicated that, beginning with the a.ge distribution 40-44 years, there is a tendency toward lessened employment
for wage earners in 'mechanical and manufacturing industries and
in retail trade. With each 5-year age group after 40 years, the r atio
.1 See Maryland Commissioner of Labor and Statistics, The Older Worker in Maryl and
(Allied Printing Trades Council, Baltimore, 1930) , pp. 8-10; also State of California Departme nt of Industrial Relations, Special Bulletin No. 1, Middle Aged and Olde,· Workers
(California State Printing Office, San Francisco, 1930), pp. 8- 11; State of California
Department of Industrial Relations, Specia l Bulletin No. · 2, Middle .Aged a11d Older
Workers in CaUfornia (California State Printing Office, San Francisco, 19 30) , pp. 11- 13;
a lso Solomon Barkin, The Older Work~,· in I ndustry, Sta t e of New York Report of the
Joint Legislative Committee o,n Unemployment, Transmitted to the Legislature Feb. 20,
1933 (J. B. Lyon Co., Alba ny, 1933), chs. X and X I.
2 See Barkin, Solomon , The Older Worker ,j,n Ind,,iistry, op. cit.

ECONOMIC PROBLEMS OF OLD AGE

145

in each employment group is less than that in the corresponding
population age group. 3
Surveys of the unemployed in Philadelphia indicate that age is
an increasingly important characteristic in the employability of unemployed workers. Among employment office applicants, 34.5 per cent of the men and 23.6 percent of the women were over 40 years of
age. In a sample survey of the unemployed, a larger proportion of
men (39 percent) but a smaller proportion of women were over 40.
Among employable persons on relief, a large percentage of both
sexes (39.2 percent for men and 25.3 for women) were over 40 years
of age. This cumulation of older unemployed workers on the rolls
of the employment and relief offices in Philadelphia is paralleled in
other cities. When data for relief and nonrelief applicants in five
reemployment and three State employment offices in Pennsylvania
are separated, a higher proportion of older workers is found on relief
rolls than among nonrelief employment office applicants throughout
the State.
Age is, next to occupation, the most important factor of economic
significance in the employment or unemployment situation of the individual. The squeeze which has occurred in the upper and lower
hiring-age limits has brought the 1nass of the working population
within the ages of 20 and 40. Forty years may therefore be taken as a
convenient line of division for measuring the relative employability
of the registrants at employment offices. In 10 counties in Pennsyl vania and 2 in New York, the proportion of women over 40 years of
age ranged from slightly less than one-fifth to one-fourth of the total
number of women registered for work. Among men applicants in
these counties the proportion over 40 years old ranged from 30 to 38
percent. When registrants on relief are separated from the selfsustaining unemployed, higher proportions in the age groups over 40
are found for both sexes among the work applicants in the relief as
compared with the nonrelief files.
It is significant to note that the proportion of applicants over 40
years of age for both sexes in the city of Philadelphia has increased
during the 3 consecutive years of the depression, 1932, 1933, and
1934. In 1932, 31.8 percent of the men and 22.8 percent of the women
were over 40 years old. In October 1934, when three-fourths of the
See Maryland Commissioner of Labor and Statistics, op. cit., pp. 13-14, and pp. 30-31.
Also State of California Department of Industrial Relations, Special Bulletin No. 1,
op. cit., pp. 16-20. Cf. U. S. Department of Commerce, But"eau of tbe Census, Fifteenth
Cens1is of the United States: 1930, vols. I and V (U. S. Government Printing Office, Washington, D. C., 1933).
3

146

OLD-AGE SECURITY

registrants were also applicants for relief, 42.4 percent of the men and
26.1 percent of the women applicants were over 40.4
The depression quickly increased the quantitative dimensions of
the problem. The unemployment census of 1930 showed that the rate
of unemployment among males began to rise most significantly in the
older age groups, beginning with 40 to 44 years. (See table 30.)
Even in 1930 it was evident that older workers were bearing the
heaviest burden in terms of duration of unemployment. It is believed
that a census of unemployment taken at the present time would reveal
a greater incidence of unemployment among middle-aged and older
workers.
TABLE

3O.-Percentage of unemplo11ment (14 weeks and over) among males and
females in each age group for the United States, 1930 1
Males

Age group

All ages ______ ___
10-19___ ____ ___ __
20-24 ______ ____ __
25-29__ . ___ .... . .
30- 34............
35-39..... . ......

40-44... __ ____ __ _

Females

Class
A2

Class

41. 2
35.8
37. 1
35. 9
37.4
39.5
41. 4

14.1
12. 2
13. 4
12.1
12.1
12.1
13.0

Ba

Class
A2
31.3
27. 5
29.4
30.5
31. 9
32.9
34.7

Class

Age group

B3

10.2
9.0
8.9
9. 1
9.6
9.9
11. 4

Females

Males

45-49 __ ___ ____ ___
50-54 ________ __ __
55-59 ___________ _
6Q-64.. --- . ---- -65-69...... : ___ __
70 and over.....

Class
A'

Class
Ba

Class
A'

Class
B3

---43.5
46. 3
49.4
52.3
54.7
54.2

14.3
15. 7
18.5
20.6
23.3
26.0

35.1
35.7
37.1
37.5
37.5
35.7

12.3
13. 4
14.6
16.0
16.8
20.4

1 U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States; 19-'30,
"Unemployment", vol. II, General Report (U.S. Government Printing Office, Washington, D. C., 1932),
pp. 329-330. For each sex and age group total unemployment equals 100 percent for each class.
2 Persons out of work, able to work, and looking for work.
3 Persons having jobs but on lay-off without pay, excluding those sick or voluntarily idle.

Once unemployed, older workers tend to have great difficulty in
finding reemployment and their chances of reabsorption become less
and less with advancing age. Analysis of relief figures clearly shows
that older employable persons remain on relief rolls longer and experience longer "relief" periods between jobs than do younger workers.
The percentage of persons that had been unemployed for long periods
of time was progressively larger with each group beyond the age of
44, as is indicated in table 31.
The same general conclusions are reached by an analysis of census
data. Beginning with the age group 40 to 45 the ratio of employed
persons to the estimated total number of wage earners and salaried
employees other than principal officers is progressively smaller in each
successive 5-year age group than the corresponding ratio of the age
group in the general population. ( See fig. 2.)
Palmer, Gladys L., Thirty Thousand, in Search of Work, Pennsylvania Department ot
Labor and Industry, 1933; Palmer, Gladys L., The Applicants at T111'ee P ennsylv ania
State Employment Offices in 1933, Special Report A-3, Wharton School ot Finance a nd
Commerce, Indust rial Research Department, University of Pennsylvania, Oct. 31, 1934,
and unpublished material for 1934. See also appendix IV.
4

.Zj

-Zj

Percentage Distribution - Based on
9,112, 7)2 Employed Male Population and 18,684.555 Total Male Population

-1930
t(J

- 20

tr:!
Q

-

0
2j
0

Per cent o/' total emploflt>tl male population

~

"

male pof'uletion

~
H

"'Jj
i::

-Jj ~

"

-

I;.)

"

"'

I.,

'-

"

~JO

- 10~

Q,.

0

~

0
to

ti
t_,,j

~

Ul

0

lzj

0

t'-i
0

j

5

P>
~
t:,:j

0

40 - .1{4

45- 49

5_0- 5-4

5J - ~9
Age

FIG URE

60 - 64

Groups

6'.;- 69

'TO- 14

75 & over

2.- E mployed male population 40 years a nd over compared to total male population 40 years a nd over.

0

1-l

1-+:a-

-J

148

OLD-AGE SECURITY

With the enormous shrinkage in employment brought about by the
recent severe depression, it is clear that large groups of normally
secure, competent older workers have been discharged. The small
shop and business, moreover, which formerly absorbed a considerabh
percentage of older workers, who dropped out of more strenuoua
industrial pursuits, are becoming less and less prevalent. This trend
reduces the economic opportunities previously open to men and
women after their peak of physical activity was passed. As a result
of these industrial trends, what may be described as "economic old
a.ge "-i. e., permanent inactivity and consequent cessation of earnings-begins in many cases early in middle life, often antedating by
a considerable number of years the period of physiological old age.
31.-Person s with previous w ork experience at nonrelief employment
seelving work, olassified by l ength of t ime since last 1wnrelief emvloym-ent of
4 weeks or more and by age 1

TABLE

Age
Time since last nonrelief employment

All ages

16-24

25-44

45-54

55-64

65 and over

Num- Per• Num• Per• Num• Per• N um• Per• Num• Per• Num• Per•
ber cent ber cent ber cent ber cent ber cent bar cent

---- -- - - - - -- -340 100.0
972 100.0
TotaL . .....•.•... 10,058 100.0 1,854 100.0 4,958 100.0 1,934 100.0
- -- - - - - - - -- - - - - - - - - - - -- 26
7. 7
12.0
98 10. 1
- -

Under 6 months.........
6 to 11 months.......••.
12 to 23 months ••••..•.•
24 to 35 months.•.......
36 to 47 months ...•.•.•.
48 months and over•....
Unknown 2•••••• •••• ••••

1,609
1,611
1, 873
1,809
1,364
1,750
42

- - ---- - 16. 1
16. 1
18. 7
18. 1
13. 6
17.4

---·-·

467
414
378
269
165
146
15

25.4
22.5
20.6
14. 6
9.0
7.9

------

788
803
943
906
654
851
13

16.0
16.2
19. 1
18.3
13.2
17. 2

------

230
252
333
385
320
405
9

13. 1
17.3
20.0
16.6
21. 0

------

105
172
182
168
244

3

10.8
17. 8
18.8
17.3
25.2

------

37
47
67
57

104

2

10. 9
13.9
19.8
16.9
30.8

------

1 Based on 5-percent sample of "Survey of Occupational Characteristics of Persons Receiving Relief"
May 1934, furnished by the Research Section, Division of Research, Statistics, &nd Finance, Federal
Emergency Relief Administration.
2 Unknown distributed in computation of percentage.

Obviously, if the earning period is to be shortened by earlier onset
o.f economic old age, earnings must be higher during working years
and savings increased to avoid old-age dependency. Analyses of wage
trends, however, such as those made by Prof. Paul H. Douglas in his
Real Wages in the United States, offer little hope of such increase ·on
the basis of our American experience between 1890 and 1928.5 When
real rather than nominal earnings are analyzed, popular impressions
o.f greatly increased earnings in this countr y during the last fonr
decades prove to be based more upon fiction than upon fact.
5 Douglas, Paul H., Real W ages in the United. s tates, 1890-1926 (Houghton Mifflin Co.,
Boston, 1930) ; Douglas, Paul H., and Jennison, Florence T ye, The Movement of Mon ey
and R eal Earnings in the United States, 19~6-ZS (The Univer sity of Chicago Pl'ess,
Chicago, 1930).

149

ECONOMIC PROBLEMS OF OLD AGE

EXTENT OF OLD-AGE DEPENDENCY IN THE UNITED
STATES
It must be pointed out from the very beginning that there are no
figures available indicating the extent of old-age dependency for the
United St.ates as a whole, although a number of surveys of old people
have been made in individual States. Very often these State commissions limited themselves to estimating the number of people who
wo~ld become eligible under a proposed State law, which, in addition to requiring a means test, made children and relatives responsible for the support of aged dependents. These estimates give no
true picture of the economic status of the old people. There are
some surveys, however, which classify old people according to property and income, without taking into account the economic status
of children and relatives. These surveys give a more accurate picture of the extent of old-age dependency than do the reports which
estimate the number of old people who will be eligible for old-age
assistance under the State laws.
The simplest method of measuring the economic status of the
aged is to ascertain their annual income. It has been customary to
place a person with an annual income below $300 in the dependent
dass. In comparing the estimates of old people who have an income of less than $300 a year ( without taking into account any
property they might possess), there is close agreement between the
two available surveys. As will be seen by the following tabulation,
they both place this number at slightly _below 50 percent of the
aged:
Percen,tage of aged veople with less than $300 anmital

Connecticut, 1932 (persons 65 and over)

6

___ __ ___ __ _ ____ _

in.come

Percent

Percent

49. 2

51. 3 urban
{ 45.7 rmal

Wisconsin, 1915 (persons 60 and over) 1 __ ____ __ _____ _ _ ___ 47.1

The Connecticut survey of 1932 brought out the fact th,at 33.5
percent of the old people over 65 years old in that State had no
income whatsoever. The Wisconsin report of 1915 indicated that
21 percent of the old people over 60 had incomes below $100. Only
29 percent of the old people surveyed in Wisconsin had incomes
above $500.7
An evaluation of the property which the old person possesses
provides a less satisfactory classific,ation. Obviously, it is difficult
11
Connecticut Commission to Investigate the Subject of Old Age Pensions, Report on
Old Age Relief (Hartford, 1'932), appendix tables 13 and 14, pp. 70-71.
7
Industrial Commission of Wisco,nsin, Report on Old Age Relief (Madison, 1915), p. 7.

150

OLD-AGE SE CURITY

to estimate the true value of a home, and even if this were possible,
the ownership of a dwelling house does not keep an old person from
becoming dependent. The tabulation below indicates the findings
of the t wo surveys with respect to the value of property:
Aged persons classi.f ied by property
Connectic1,t 8 (65 years ana over )
P roperty

Percent

No property ____ _______________________________________________ _______ 34.9
Below $1,000 ----------- --- --- ----------- -------- - --- --- - - ---------- -- 47. 6
Below $1,500 ------------ ------------- - - - - ---------- ------------ ------ ____ _
Below $3,000 - --- --------- - ----- -------------------------- - ------ - - - -- 58. 7
Wisconsi n° (60 years and over )

No property ________________________________________ _______________ ___ ____ _
Below $1,000 - ------------ ------------- - - --- - - - - - - ---------- ---------- 41. 5
Below $1,500 ------- --------------- ---- ------- ---- ------ - -- - - ----- - -- 49. 8
Below $3,000 -------------- --- ---- - ----------- ---------- ---------- ---- -----

As in the income classification, the Connecticut survey indicates
that old people living in cities are considerably worse off than those
in rural areas. The percentage of old people owning property worth
less than $3,000 is 61.1 percent for urban areas, while it is 54.1
percent for rural areas.
More important for the purposes of this r eport than the above
classification by income or property separately are the attempts
on the part of a number of commissions to combine income and
property of the old people, and then place persons with property
and income below a specified amount in the dependent group. It is
quite arbitrary where t his "danger line" is dra.wn, and different
commissions have drawn it at different points. The New York
Commission of 1930 10 was anxious to make a comparison of its
findings with those of the Massachusetts survey of 1925 11 and the
National Civic Federation study of 1926-27,12 hence the danger line
was placed at property below $5,000 and income below $300 a year.
In order to furnish a comparison, the Connecticut figures were
placed on t he same basis. It will be seen that the figures of the
Massachusetts Commission and of the National Civic F eder ation
study are much lower than they are for the other t wo surveys.
This, at least in part, results from the fa.c t that the Massachusetts
and National Ci vie F ederation surveys counted the amount of property and income owned jointly by an old couple at· the :full value
for each member of t he couple. It is felt that because of this proSee footnote 6 on p. 149.
See footnote 7 on p. 14 9.
10 New York State Commission on Old Age Security, Old Age Secm-ity (J. B. Lyon Co.,
Albany, 1930 ).
11 Massacbusetts Commission
on Pensions, Repo,·t on Old-Age Pensi ons (Wright &
Potter Printing Co., Bost on, 1925).
12 Na tional Civic F ederation , Industrial Welfare Department, Emtent of Old, Age D ependency (New York City, 1928 ).
8

9

151

ECONOMIC PROBLEMS OF OLD AGE

cedure they do not give a true picture. The Connecticut Com.mission tried to solve this difficulty by analyzing data separately for
old persons living by themselves and for those living with others.
Their samples were large enough to enable the Commission to make
generalizations for the entire State. The New York samples, on
the other hand, were extremely limited, and for this reason no generalization was attempted.
The dependency figures given in table 32 show a very great divergency. They range from 10 percent for old couples in Canton
Village, N. Y., to 74.5 percent for single individuals in New
York City. The Connecticut report would indicate that rural communities are better off than urban communities. The New York
survey does not bear out this conclusion, though it must be remembered that its sample was extremely small. Otsego County, a strictly
rural area, has a very high percentage of poor old people.
TABLE

32.- P ercentage of persons 65 and over having property less than $5,000
and income less tha,n $300 annually
Survey

Individuals

H ouse•
bolds

T otal

Connecticut, 1932: 1
Percent
Percent
P ercent
Total ...•.... . .............. ...... ....... ................ ........
45. 7
19.8
Urban ••.•.... ... . .......... . . . . ..... ...... . . ................. . ..
49.6
21. 7
Rural ••........... . . . . . . ... . . . ......... . ..... . ......... . ....... .•
39. 2
16.5
2
New York, 1930:
Canton Village... .. . ... . ...... . ..... . ...... . ...... .............. .
36. 9
10. 0
25.0
46. 5
18. 2
Selected cities.... . . . ...... . . . . ... ... . . . . . ....... ........ . ........
33.5
69. 2
31. 8
Otsego County..... . . . . . ........... . . . .......... . . .. . ... . ........
50.2
New York City.................. . .................. . .... ........
74. 5
48. 4
65.1
Massachusetts, 1925 3•••••••••••••••• • • •• •• ••• • •••• ••• •••• • ••• • • •••• • • ••••••••••••••••••••••••
32.8
National Civic Federation, 1926-27 •.... . . ... . ... ..... . ....... . . . .... . ......•..... .......... . .
22.7
1
i
3
4

Connecticut Commission, op. cit., appendix, tables 11 and 12, pp. 68 and 69.
New York State Commission on Old Age Security, op. cit., pp. 52 to 65.
"Care of the Aged", Monthly Labor Review, vol. 30, no. 4, April 1930, p. 13.
New York State Commission on Old Age Security, op. cit. , p. 61.

It becomes clear from the above figures that old married couples
or people living with other families are in a better economic situation than are single individuals. In some localities the percentages
for dependency of single individuals are t wo or three times as high
as for households with old people.
It might be interesting to investigate what percentage of old
people own absolutely nothing and have no income. The National
Civic Federation study estimated that 17 percent of the old people
surveyed were without income or property,13 while the Connecticut
Commission puts this figure at 25 percent for single individuals and
at 7 percent for households with persons over 65. 14
A somewhat different classification of old-age dependency was
made in New York. The Commission estimated the number of olq
13

National Civic Federation, op. cit., p. 34.
cit., appendix, tables 11 and 12, pp. 68-69,

u Connecticut Commission, op.

152

OLD-AGE SECURITY

people who were self-supporting and those who were dependent on
relatives, friends, and charity. Table 33 gives these figures. The
outstanding fact disclosed is the very high percentage of old people
who are dependent upon relatives and friends. This figure increases
considerably between the ages of 65 and 70, when there is a proportionate decline in the number of people who earn their own living.
It must be borne in mind that these are predepression figures and
that at the present time the situation is probably more unfavorable.
T ABLE

33.- 0 ld-age dependency in the State of N ew York, Jitiy 1, 1929
Percentage distribution
Category

Persons 65 Persons 70
and over
and over

Self.dependent:
Public pensioners.. ............ ...... . .............. ... . . . ........... . ..... .
Private pensioners. . ........... .................... . . . ......... . ........... .
Self.support on current earnings . - · · .. -·. . ............................ ..... .
Self.support on income... _.·-·..... . . . . .......... . ..... . ........ ............
T otal.. ........................... . . . ................. . . . . ................
Dependent:
On private homes for the aged.. ............................................
On relatives and friends. ........ . . . . .... . .............. . .......... ....... . . .
On public and private charity...... . . . . . . . . . .............. . . . ..............
Confined by Government.... .. . . . .. . ........... ............................
Total. . .. . . . . .. . . . .. . . . . .. .. . . .. . . .. .. . . ...... .. . . . . . ... . ..... . ... . . . . . . . .

8. 3
1. 8

11. 0
3. 0
H. O
5. 0

____5 ,____
28.

5. 0

43. 6
36. o
= ===I= = = =
1. 0

1. 5

49. 4

.'is. 6

3. 5
2. 5

4. 5
2. 4

56. 4

64. 0

- - --1- -- -

SOURCE: New York State Commission on Old Age Security, op cit., p. 39.
T A BL E

34.-Econornia status of aged studied in the D istrict of Col'l.111'Y1,bia, 1934
P ercentage distribution
Status
White

Independent .... . ..... . . . .......................... . . . . ........ . . ........
Supported by relatives. .............. ................. . ................. .
Other means of support (friends, public or private relief) ......... ... . . ....
Dependent, but source of support not reported . ...... .... . . ..............
Status not reported. . . ................................. ............. . ....

63
30

Total ....................- .... . ......................... . ..........

100

2
I

4

Negro

T otal

30

52

50
15
2. 5
2.5

37

100

6
l

4

100

SouRcE: " Study of the Aged in tbe District of Columbia", Monthly Labor R eview, vol. 39, no. 2 ,
August 1934, p. 328.

A similar study has recently been made in the District of Columbia. Table 34 is interesting because it gives a breakdown of the aged
into white and colored. The dependency of old Negroes at 65 runs
as high as 67.5 percent, while that for the white people is only 33
percent, which is considerably lower , it will be noticed, than the predepression figures of the State of New York. The District of
Columbia, however, is not a typical example.
Scattered estimates of the extent of old-age dependency thus indicate that a large proportion of the aged have made no adequate
provision for the period when self-support by working is impossible.

'

ECONOMIC PROBLEMS OF OLD AGE

153

The growth of savings accounts in the United States cannot be
cited as contrary evidence, for the savings-account situation has been
popularly misrepresented. Even were the gain in the number of savings depositors attributable to wage earners' savings accounts (no
proof of this is available), there would be no basis for a claim that
the reserves of worker.s had increased in the 15 years prior to the
depression. As a matter of fact, the average savings account decreased 29 percent between 1913 and 1928, and the value of the dollar
likewise decreased almost 60 percent during this same interval.15
,T he New York Commission on Old Age Security's study of deposits in mutual savings banks ( consider ed the chief depository of
wage earners) presents similar evidence. The gain in the size of
deposits in the decades before the 1929 crash was more than counterbalanced by the drop in the value of money. Consequently , the
average real deposit decreased rather th an increased during this
period.16
T he accumulations of many wage earners' families were lost in the
business and bank failures of 1929. These losses have been extended
by the inroads made upon savings caused by the widespread unemployment since that time. This sit uation is not only reflected in the
figures of contemporary old-age dependency but will also augment
the economic problems of old age for at least 30 or 35 years in the
future. The workers who have lost their life savings at 40 will have
small prospect of accunrnlating new reserves before their earning
period is over.
The chief support of old people is furnished by their childran or
by relatives. The Massachuset ts investigation of 1925 had estimated
that of the dependent aged, 74 percent were supported by t heir children, while another 14 percent were supported by r elatives or
friends.11 This is the reason why the estimates for eligibility to old~ge assistance are much lower than the dependency figures would
indicate, for it is assumed that most old people will continue to be
supported by their children. The following is a tabulation of the
estimates of eligibility to old-age assistance. It must be r emembered
t hat a certain number of people ar e excluded under the old-age
15

See American Bankers Association, savings banks division, Savvngs Deposits and
Depositors for the Years 1915, 1920, 1925, 1930 (New York, 1930), p. 7:

Year

Total
savings
deposits

1913 ____ __ __ ______ __ ___ _ ______ $8,548,345, 000
1928 _____ _______________ _ _____ 28,412,961, 000

Total number
of savings
depositor s

A v erage
savings
accomit

11, 295,931
$757
53,188,348
534
A_nd see "Ch ange in the Cost of Living in the United S tates", .Monthly Labor Review,
vol. 30, n o. 2, February 1930 , p. 241, or cost-of-living index number 1913 = 100;
1928 = 170+.
16
17

New York State Commission on Old Age Security, op. cit., p. 182.
"Care of the Aged", Monthly l .1abor Review, vol. 30, no. 4, April 1930, p. 13.

154

OLD-AGE SECURIT Y

assistance laws because o:f the :fact that they do not :fulfill citizenship
or residence requirements.
Esti rnated eligibility for old-age assistance under State laws
Percent
P ercent
of persons of persons
over 65
ov er 10

New J ersey 18- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - New York 19__ _ ____ __ _ _ _ __ _ _ _______ __ __ _ _ ____ _ ____ __ __ _ ____ _
New York- projected by Connecticut commission 20___ __ __ __ __
21
Connecticut - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

9. 9
12. 7
11. 2

11. 4
14. 5
15. 9
11. 0

How many of the aged persons at present in this country are without sufficient means o:f self-support is, therefore, a question which can
be answered only with estimates. Like all other statistics of major
social problems, those bearing on old-age dependency must be built up
for the country as a whole from meager samplings.
Beyond the fact that about 700,000 old people are members o:f
families t hat received Federal emergency relief in May 1934, and
230,000 were in receipt of old-age assistance grants a.t the end of
1934, it is not known how many aged persons in the United States
are being supported from public funds. No almshouse sur vey has
been made for more than 10 years, and r ecent estimates of the public
poorhouse population are not available. The United States Children's Bureau records of the almshouse population in a small group
of urban areas, however, indicate a sharp increase of nearly 75 percent between 1929 and the end of 1933.22 Of the aged in private institutions, endowed and semiendowed, t here is no count. No clearing
house exists to furnish statistics of either private or public local
charitable assistance to old people not in institutions.
Despite lack of complete statistics, however, it can be said with conviction that for some years old age has presented a very substantial
economic problem in the United States-a problem which has directed
public interest toward old-age security legislation.
18 Sta te of New J ersey Pension Survey Commission, r eport no. 1
(MacCrellisb a nd
Quigley Co., Trenton, 1931), p. 18.
19
New York State Commission on Old Age Security, op. C>it., p. 77.
2°Connecticut Commission, op. ci t., p. 41.
21 Ibid., pp. 42 and 43.
22 U. S. Depar tment of Labor, Children's Bureau, Monthly Bulletin on Social Statistics,
vol. I , no. 2, August 1933, pp. 1- 2.

Chapter VIII
PROVISIONS FOR THE AGED IN THE
UNITED STATES
HE AGED in the United States may be classified in 10 groups,
as follows: (1) The old person who is still engaged in some
occupation until 70 or perhaps even until 80. (2) The fortunate minority which may rest on its economic laurels, drawing
upon inherited wealth or upon savings of a successful economic life.
(3) Those who have earned and receive a satisfactory pension from
their former private or public employer. (4) The large, though
gradually decreasing, number of recipients of war pensions, whose
number may perhaps increase if the pension principle is applied to
the veterans of the World War. (5) The very large, perhaps the
largest, number of those ,,ho are supported by their children or other
relatives. (6) A rather limited number of persons receiving regular
relief from private philanthropic agencies. (7) Guests or inmates of
private homes for the aged, showing a very great variety of standards of comfort. (8) The aged population of our poorhouses or
almshouses or county farms. ( 9) The aged in homes for incurables
or insane asylums. (10) The recipients of State old-age assistance,
the latest development in the care of the aged.
Unfortunately, there are no figures to indicate the distribution of
the 6½ million persons over 65 years of age among those ten classes.
At least approximate estimates, however, can be made of recipients
of public and war pensions, inmates of public almshouses, private
old folks' homes, and hospitals for incurable and mental disease,
and fairly complete data are available showing the number of recipients of old-age assistance in the several States. The total number
of these classes, however, a1nounts to considerably less than a million.
Only rough guesses can be made of those still employed, living on savings, or living in children's homes. And the population of cheap
lodging houses and the utterly destitute are an absolutely unknown
quantity. A few local investigations which have been made are not
sufficiently trustworthy. No study made in the predepression era

T

155

156

OLD-AGE SECURITY

can serve as a guide because of the tremendous changes which have
taken place in the value of savings, in the employment of the aged,
and in the ability of the majority of workingmen's families to support their parents. P erhaps a thorough investigation of the distribution of our aged population among these classes should be the
first task in a scientific study of the old-age problem.
DEVELOPMENT OF STATE OLD:AGE ASSISTANCE LAWS
A series of State commissions began almost 30 years ago to investigate the plight of the aged, and shortly thereafter the American
Association :for Labor Legislation and the fraternal orders led by
the Eagles, began to urge legislation on behalf of the needy aged.
Until 10 years ago the only permanent provision £or the needy aged
in nearly all the States was through the medium of the so-called
" almshouse" or "poor £arm." The shocking conditions existing in
the majority of these institutions were described in a book by Harry
Carroll Evans, published in 1926 by a group of fraternal organizations.1 This book summarized the findings of the surveys of American almshouses conducted by these organizations, with the aid of ,
special examiners from the United States Department of Labor.
Insufficient and unfit food, filth, and unhealthful discomfort characterized most of them. Even in institutions with sanitary and physically suitable buildings, it was found that feeble-minded, diseased,
and defective inmates were frequently housed with the dependent
aged.
.
The cost of maintaining old people in these institutions, as was
revealed by a financial survey of almshouses made by the Federal
Department of Labor in 1925, was high, principally because of
inefficient "overhead." 2
Stimulated by the facts disclosed in these two r eports, the drive
for regular noninstitutional aid for needy old people made more
progress. A series of measures variously described as "old-age penRions," "old-age assistance," "old-age relief," and "old-age security"
were passed by State after State, beginning with :Montana in
1923, totaling 18 by the middle of 1931, and 28, with two additional
Territorial laws, by January 1, 1935. These measures offer citizens
of long residence, who have small assets and no financially competent relatives, monthly grants to enable them to maintain themselves
outside institutions. The n1aximum 111onthly sums authorized range
from $15 to $30 ( the latter being the commonest figure) . New York
1

Evans, Harry C., The American Poor-Fa1-1ro an d Its I nmates ( Des l\Ioines, 1926 ) .
Stewart, Estelle M., "The Cost of American Alms houses", Bu,lletin of tlle U . S. B11reati
of Labat· Statistics No. 386 (U. S. Government Printing Office, Washington, D. C., 1925) .
2

157

PROVISIONS I N THE UNITED STATES

and Massachusetts put no maximum on their possible grants. From
January 1 to J uly 1, 1935, 7 additional Sta.tes enacted old-age
assistance laws, and about 10 other Sta.tes r evised and liberalized
their old-age assistance laws in anticipation 0£ F ederal aid.
The early 1neasures m ade the county the fiscal unit. T he trend
now is toward State aid to t he counties or State assumption of the
entire responsibility.
The old-age assistance statutes mentioned above mark the first
legislative attempts to re1nedy the complete and shameful neglect of
the old -age problem in the United States. E ven with their limited
functioning they have enabled 236,000 destitute old people, who have
no family able to support them, to escape the m iserable almshouse
T ABLE

1

35.- Yea:rs of residence in State of persons 65 and over on relief
Boston,
Mass.

Dallas,
Tex.

Rockford,
Ill.

Salt Lake
City, Utah

Newa rk,
N.J.

Los Angeles,
Calif.

Total years of residence
N um- Per- Num- Per- Num• Per- Num• Per- N um- Per• Num- Perber cent ber cent ber cent ber cent ber cent ber cent

- - - - - - - -- - - - - - - - - - - - - Total . ............ .

886 100. 0

587 100.0

827 100.0 1,076 100. 0

443 100. 0

738

-100. 0

- - -- - - - - - - - - - - -- - - - - - - 3
0 -----0 -----0 ---- -Less than 1 year......... .
0 -- ---0 - - -- -2
l
.2
1
.2
1
.1
2
.2
l year .... . . . . ............
0 --- --7
3
.3
0 -----2years... . . ........ .... . .
1
.1
0 -----0
1
.2
13
.2
.4
0 ---- -1
0 -----3
3 years........... . . ......
.2
4
.4
3
.7
25
2
.2
6
1. 0
2
4 years ...................
5 to 9 years... . _._ .. ..... .
10 to 14 years . .. ........ . .
15 to 19 years... . . -- · -....
20 years and over . . .......
Unknown . . .. ......•.... .

11
I. 3
10
I. 7
2.6
21
2.4
15
2.2
19
3.
2
19
823 93. 7
536 91. 3
8 - - - - -- ---- -- ------

41
42
52
685
1

5.0
5. 1
6.3
82.9

31
56
50
930

------

------

2. 9
5.2
4. 6
86. 4

------

22
5.0
33
7.5
39
8.9
341 7i. 5
3 - - - - --

106
207
94
264
17

-

.4

.3
1. 0
1. 8
3.5
14, 7
28.7
13. 0
36.6

------

1 Furnished from a sample study made through courtesy of the Federal Emergency Relief Administrn•
tion, Division of Research, Statistics, and Finan ce.

existence to which many needy aged persons previously were doomed.
One of the serious limitations of these n1easures is the long residence
qualification, 15 years or more, which characterizes most 0£ them. In
this regard a sampling survey made in six cities by the R esearch Section of the Federal Emergency R elief Administration, Division of
Research, Statistics, and Finance, is pertinent. Table 35 presents
the results of this survey. While the residence requirements of the
various States differ widely, it would appear from this sampling investigation that a reduction of required residence to 5 years in the
last 9 before applying for assistance would include practically all the
old people on relief at the time of the survey and yet not fasten
upon the States the burden 0£ providing special assistance for mere
transients.
It must be conceded, however, that the maximum possible grants
in some of the acts are inadequate for comfortable existence and that
78470-37--12

158

OLD-AGE SECURITY

actual grants, as information recently gathered indicates, in some
States are even below general relief standards. In only 16 of the
States were the measures functioning at all at the end of 1933, and
only 9 more States started to give pensions in 1934. Moreover,
during 1934 the grants were given throughout the whole State in
only 11 States and 1 Territory. To quote from the recent
report made by the United States Bureau of L abor Statistics,
"sharply curtailed benefits and refusal to take on new pensioners,
even the discontinuance of the system altogether until times improve, these are some of the measures to which the pension officials
have been forced. In certain other jurisdictions, the result has been
to crystallize the plan and to build up a waiting list as large or larger
than the number of actual beneficiaries." 8
The history of the old-age assistance movement in the United
States 4 indicates that the American States were slow to enact legislation giving aid to the destitute aged. Long before they took action, European countries, industrial as well as nonindu,strial, had
recognized the problem of old-age dependency by making provisions
for old people. In Australasia, public old-age relief systems had
become well established before the World War. In the United
States, on the other hand, the movement for old-age assistance did
not get unde.r way until after the depression of 1920-21.
This indifference to the problem of the aged can be explained
only partially by the An1erican public'13 lack of confidence in State
action. The fact is that a large portion of the American people
were convinced that persons who had been hard working and thrifty
all their lives would not become destitute in their old age; only shiftless and lazy people were faced with dependency in their later years.
This meant that to give State old-age relief was tantamount to r ewarding the one who had not done his duty toward society. I n
addition to this philosophy of thrift and self-reliance, there wasand t here still is-extant in the United States a conviction that it
is the duty of the children, and not of the State, to take care of the
old. It is assumed that if the State relieves the children of this
responsibility, family ties are loosened, and, since the family is one
of our most highly valued institutions, this danger is to be a voided
at all costs.
Investigations on the extent of old-age dependency made by a number of State commissions in the twenties and early thirties disrupted
a Parker. Florence E., "Experience Under State Old-Age Pension Acts in 1933", M onthly
Labor R eview, vol. 39, no. 2, August 1934, p. 257.
4
The following summary of the history of the old-age assistance movemen t is based on
chap. III of Report on Old Age Relief by Connecticut Commission to Investigate tbe
Subject of Old Age Pensions ( Hartford, 1932).

PROVISIONS IN THE UNITED STATES

159

once and for all the comfortable belief that "deserving" citizens do not
become dependent in their old age. But the laws which were passed
following the recommendations of the commissions made it clear that
even though the States instituted a system of old-age relief, children
and relatives were not to be relieved of the responsibility to provide
for their aged parents. All laws, with the exception of those of Arizona and Hawaii, exclude from State assistance all those who have
financially competent children or relatives.
The movement for State old-age relief began in Massachusetts,
where, in 1903, the Bureau of Statistics of Labor made an investigation in which it attempted to calculate the cost of a system of oldage assistance. The next step in the history of the movement was
again taken by Massachusetts, where, in 1907, the legislature appointed a commission which was instructed to investigate old-age
dependency. The report of this commission was not made until 1910.
From that time on a number of old-age survey commissions investi•
gated the problem.5
There are to be distinguished in these investigations two periodsone period before the depression of 1920- 21 and the other since then.
In the first period the commissions held very divergent views on the
reasons for old-age dependency. A number of them recommended
health insurance as a solution to the problem of old age; others were
opposed to State action in the field, while only two were sympathetic
toward old-age assistance grants. The Pennsylvania report of 191921 marked the beginning of a new trend. In it, the attitude that
poverty and pauperism were the direct consequences of laziness and
deliberate transgressions was abandoned for the first time, and the
State was urged to grant old-age assistance. From that time on the
many commissions which were appointed to study t he question all
reached the conclusion that it is the responsibility of the State to
provide for its dependent aged if no children or relatives are able
to do so.
The brief history of legislation in the various States, given in the
following paragraphs, is based on Bulletin No. 561 of the Bureau of
Labor Statistics, Public Old-Age Pensions and lnsur_arnce in the
United States and in Foreign Oowntries. The first State law was
passed in Arizona in 1915 by an initiative act, which abolished almshouses and established provisions for old-age assistance and aid to
The following is a list of these commissions and the years in which their investigations
were started: 1910, Massachusetts; 1914, Massachusetts; 1915, Wisconsin; 1917, New
Jersey (two commissions), California, Massachusetts; 1919, Ohio, Connecticut; 1919-21,
Pennsylvania; 1922. Montana; 1925, Massachusetts, Nevada, Indiana; 1926, Virginia ;
1928, California; 1929, New Jersey, Minnesota, Maine; 1930, New York; 1932, Connecticut.
6

160

OLD-AGE SECURITY

dependent children in their stead. However, it was worded so loosely
that it was declared unconstitutional on account of its vagueness. In
the same year Alaska passed a law providing assistance to its aged
pioneers. This law, though it has been amended on different occasions, is still in effect at the present time.
No action was taken by any State until 8 years later, in 1923. In
that year three States (Montana, Pennsylvania, and Nevada) passed
old-age assistance laws, but only one of them, that of Montana, has
remained on the statute books. In 1925 the Nevada State Legislature
passed a bill repealing the 1923 law and putting another one in its place.
The Pennsylvania law was declared unconstitutional in 1924 on the
ground that it was in conflict with a provision in the State constitution,
which prohibited the legislature from making appropriations for charitable, benevolent, and educational purposes. A movement was started
immediately to amend the constitution, but it was not !lntil 1931 that
the amendment passed the legislature. Since this amendment had to
be repassed in 1933 and then submitted to a referendum vote for
approval, it was not until 1934 that Pennsylvania secured action.
Thus the decision of the court deferred legislation for 10 years in
Pennsy1vania.
Ohio, too, took some first steps in the year 1923. The question of
old-ag@ assistance was submitted to a referendum vote, but it was
decided adversely by a vote of almost 2 to 1.
By 1925 the movement had gained considerable impetus. Although only Wisconsin enacted a la.w in that year, there was much
activity in a number of the States. California passed a law, which,
however, was vetoed by t he Governor. Bills were introduced in the
legislative sessions of Illinois, Indiana, l{ansas, Maine, Michigan,
Minnesota, New Jersey, Ohio, and Texas. In Indiana and Illinois
the bills passed the lower house but were not acted upon by the
upper chamber. In four States (Colorado, Minnesota, Pem1sylvania, and Utah) commissions were .appointed.
In 1926 one law was added, that of Kentucky. In the same year
the Washington State Legislature approved a bill, which was vetoed
by the Governor. In 1927 Maryland and Colorado enacted old-age
assistance laws.
At the end of 1928, after 6 years of agitation, there were only six
States and one Territory which had made provision for their aged.
They were Colorado, Kentucky, Maryland, Montana, Nevada, Wisconsin, and Alaska. All the State laws were of the optional type,
i. e., they left the adoption or rejection of an old-age assistance
system to the discretion of the counties. For this reason these laws
had very limited effect. In these six States there were slightly

~tates (as c

i vided by-

'mty
------------·
_________ ,

and liquor ,
tax.
revenues ___ _
cities_____ ___
mty_________ _

s as yet_ ____ .
;; liquor tax __

1-------------·

!town, villag,
tfund ____ ____ _

,ax __________ .

tance tax

1

d.

I, city __ __ ___ _
tax__________ _

tax; county g

,------------, local __ _____ _
fund___ _____ _

vagrant, or I
least $1 per
ren able to fr
e involving
D work accord
olent, charita
parent, or chi
Ind able to su:

~

' . I

'' •

..

160

OLD-AGE SECURITY

dependent children in their stead. However, it was worded so loosely
that it was declared unconstitutional on account of its vagueness. I n
the same year Alaska passed a law providing assistance to its aged
pioneers. This law, though it has been amended on different occasions, is still in effect at the present time.
No action was taken by any State until 8 years later, in 1923. I n
that year three States (Montana, Pennsylvania, and Nevada) passed
old-age assistance laws, but only one of them, that of Montana, has
remained on the statute books. In 1925 the Nevada State Legislature
passed a bill repealing the 1923 law and putting another one in its place.
The Pennsylvania law was declared unconstitutional in 1924 on the
ground t hat it was in conflict with a provision in the State constitution,
which prohibited the legislature from making appropriations for charitable, benevolent, and educational purposes. A movement was started
immediately to amend the constitution, but it was not until 1931 that
the amendment passed the legislature. Since this amendment had to
be repassed in 1933 and then submitted to a referendum vote for
approval, it was not until 1934 that Pennsylvania secured action.
Thus the decision of the court deferred legislation for 10 years in
Pennsy1vania.
Ohio, too, took some first steps in the year 1923. The question of
old-ag~ assistance was submitted to a referendum vote, but it was
decided adversely by a vote of almost 2 to 1.
By 1925 the movement h ad gained considerable impetus. Although only Wisconsin enacted a law in that year, there was much
activity in a number of the States. California passed a law, which,
however, was vetoed by t he Governor. Bills were introduced in the
legislative sessions of Illinois, Indiana, K ansas, Maine, Michigan,
Minnesota, New J ersey, Ohio, and Texas. In I ndiana and Illinois
the bills passed the lower house but were not acted upon by the
upper chamber. In four States (Colorado, Minnesota, P ennsylvania, and Utah) commissions were appointed.
In 1926 one law was added, that of K entucky. I n the same year
the Washington State Legislature approved a bill, which was vetoed
by t he Governor. I n 1927 Maryland and Colorado enacted old-age
assistance laws.
At the end 0£ 1928, after 6 years of agitation , there were only six
States and one T erritory which had made provision £or their aged.
They were Colorado, K entucky, Maryland, Montana, Nevada, Wisconsin, and Alaska. All th e State laws were of the optional type.
i. e., they left the adoption or rejection of an old-age assistance
system to the discretion of the counties. For this reason these laws
had very limited effect. In these six States there were slightly

TABLE

36.-Prinripal]eaturu o} the old•age a,•istance law• oj the United Statea (a, of J an. t , iosi;)

••·

61&'4

acted

Date
ame.otle4

lD
ellect

NAtllfflOf
law

Quollftc:atioo.s for recipient&

Allocation or f l l ~

Adwlnlstratlon

Date

Degree ol Sta to supe.rvlsJoo
Statti

Statti

Town

CoUDtY

Cltlienshlp I- S-to-to~ --

Ago

()'effl)

- -- - -- l • -- l - -Ahsta-- --~ u ••··

10 15

Arw)nt,_

Ull3

_

_- · · ·

Clolilamb.•••••• •••

-1-- - 1- -- -11 - - --

HID:~~· } 1916
1033

••.••do••••••. Oepe.rtment. of social welf::ire.,
Division or Stato ald for tbe

Couni.y boa.rd or su-pe.rvlsors,

t.m..

um

• • •• •do..•••• •• Rig8~·or appe:it to district

c:.&/~urt; board orcoo.uty Annuol rop,ort to Set-retary of St11te rutid oll0(.'3ted to eouuue.s In

1Q3t,

1!131

1m .......

1931 •••••do•.•••••

Ban!L...- -·-

11133

um....•.•

l93i

Iclallo••••..••.•....

1931

1931
,.,,

1933
11134

1113'

~=~:::::::::: :~
~ ::::: ::;

1928
(•)

1031.... ...
1m 1m..

ldiDoesoto ••• - ••••

wD-:=
--·N:nda. ·····-··-New Hs.mP'Jhn...

1m

~=

1027
1031

1.033

1933
1931, 1933 . •

1m

local depiutmeut of public

s:~1~?s~!uJ>!1~:: :~I$- ...~~~~1~.~~~~ _~~~~·- -···

Completeso.pervl!lot:1: month•
ly reports.

J~f::.~~!~:1'0;0oe....._

sloe.

I

192.I

t«y from Jnl1 1, lW, OD..

300 e,l, L ••••••.. A,D,C ••• $16umootb. ••.•

Do.

~: ::~:~:~:::a::.: t:B:%.?.: 1~: ::~ri~Pi:::::

Do.
Do.

IS

15_._.••••••

i

g~~~ ~ r:::d..•••••••••• .

U

None.•. .•.•

(')

Couot,f • •••...• :::::::::::::: :

Ma.odatory . None.... • ..••••••••••••••••. •• Oou.niy rommlssloners• •••.. _. 1\one••. -·-- · ·· ····- · · ·····• • .. None••.••• All .•••• • •• Relr.nburse . ••••do. . ••••. _.••••••• • •••••••.

70 • •••• do• •••••
70

~!~:······
~n-······· ~!~t·····
None:::::: An:::::::: None. :::::

oounty.
None... .•. State lnhe.rllaoeo tax and
county fund.

Public we.Hare district omc:itll • •••••do. -·-· ·····-··· ········-· O.ce-h&ll •• Ooe·bti.U public we.J.

St.ate., oouoty, clt.y • •••••••••••
fared.Jsuict..
Donrdofcountycommt.ss!oner,. . ••••do•••• •••••••.• ••. .•••.•••• All .••••••• Nooe. u.~ NODe••••. . Stat4speela l tar•. - . . -··-····- ·

••••• do.•••• ••

. . ••. do.... ... Depart.me.at of we lfare•• • H~•·

Bo:,.rd or trustees or old•age
a.sst: tftnce fll.Dd.

:::::~g:::::: ~~~:-··-·.·--.....··~···

B08~1

A:f~!t~~~rt to State boM"d

Part of State liquor tax
distri buted lo COUO·
ties. be.lance. paid by

ti.ton &..-·-·- State liQuor tax; Ct'.lunt:r gt D·
ernl rund.

counties.

Comple le supervlslon . • ..••• -· State rund 11lloca~d to
State••.•....•.••.•••••••••••••
countlesaccordlng co
~~~ r'!;ir.op!e on
None•.•••• •.i..11. _•••••• Nooe•••••• County •••••••••••••••••• .••••
n
• • •• •
orcou.oty oommlsslon~.
None.· -··· A ll._···-·· None_••.•• ••••• do.•••• ..•...••••••• •..••.•
Option.al •• •• !-lone....... ..... . ............ _ County courL ••.•• ••••••••••• .AnnWll au dit by w oommls• None. ••••.•"i.11........... None•••••• . •. •-do..•.••.. •••••••. •• - -- -·--

~~g:::::::::::::::::::::::::::
sioaer.

(•}
SlAte board of control. • •••.• • . Oouoly Judge .•.. •.••.•.••••. • An.oual re-port.._. . - ---·--·-·· · Ooe-tblrd. Two-tbtrds Reimburse; State, «>unty, locnL_•.•.••.••
county.
Ma.n~t.ory. Ncma·-···- · · ·•· ···· ·····~····· Old•age pe,osloncomm.iSsion._. Aoounlreport.toStateaudHor. Nono.•.•.• .\11• ••••••. None. ..•• . Countypoorfu.ml. . - ..• •••.•• •

!=~~~~ fl~~,:~~';=,~ al 5 perOCDt of i t, \·Glue.
:~ ~!:P~}f!~pl.
!
~•!,~,!f£~\ lives not lO ~ con!ldertd property.
•~

-

Dls(luelliicstionJI:
a. Inmat.e of any pri.Son, Joll, Jn5aoe Mylu.m, or correellontl.l in.slltutJoo.

:: }f;-'~~~!!f,j{~~reCHJt just cause to p rO\'ide ,:upport for wile and minor ehililren.

d . Relative, legAll y liable a.od able 10 support.

e. s ~uteooo tor crime.

I. Dis-posed or or d tprlved one.sell of prOPftt)' to quality for ptoslon.

t·. i:?p?~r:f~et~~~~ ::~ .Federal, Stole, Or (llrtlgo gotCUllllttlll,

M

'300

15 years..• _

Requtrt:d ..•

IS
10

3,000

Nooe.••••...
Nooe•••••••

• 3,000

15

15• •••••••• •

zooo

IS

1.•••• ••••.•

3,000

(')

365

11, c,rl 1 0,f, l,o. A,B,0••• $1 adoy. ....... MootWf or quar•

300
300

b, c, d, e, f, I•• A, B, 0 •..
b, c, d, e, f, I.. A, 8, 0 •.•

aSIO

t.uly,

$ZS a month~· ·-· Monthl y.
$'20 a mont-h .•••.
Do.

a, b,c,d.~,r. t. A , D, O,D. S l ad&}'·••H••·· Monthly or quar•

tuly.
360 a ,c,d,&,r,f,o_ A,D,O •• _ S7.50aweok.. •.•• Weekly or moolb·
ly.
Mootbly.

,(;>000.1}

o., d, f1 g ••••••• ..••••. •••• . OetumlDOO bf Not spttlft"'1.
officio.I.
~. f, f, m, n, p. A, D ••• ••• $100 & yoor.. ... Moolhly.
300 a, b, c, d , t_ ••• A , B, C, 0. $25 s month• . _. .
Do.

I 3, 000

3!4 a, b, c, d, !, l, L A, B, C, D. $30 a mootb• ... _ Mocthly Cir QUllr·

10

1.•••••••• •• OMblo to support

OS • ••••do•••. •.

'20

Nono. _..... . .

15 years_ •.•

16

1.•. ·-·-· · ··

70 •• . • • d o. . •• ••

16

2 ..•- - •.--..

GS • ••••do••••••

.15
Hi
10

,6,• •• ••••••••
<•>
300
3f~
6 •• ·-······· No (')
property or io•
10·- --·-• ···

70 ••••• do•••.••

15

15. .••• · - ·-·

6S •••• •d:o••••••

15

6 •• · --· ·····

setr.

1 ~~~~

150

wt,.

10 • •••• do .•••••

~ ••••• do. •..••
66 ••••• do. . . -••

I. llabltuBJ tt:lmp, vai;rruH. or betrt1.r.

J:1. ~nvlcted
r~~~e:~l!h~1d~~:':t1! t~J:lsh suppor t.
or crime lovolving moml turpitude.
1

ru.
n.
o.
1>.

• 365 a, b, c,d,r,l,J. A,B, O,D. $2Samontb. • •.. M onthly or 11u.11,r•
terly.
400 a,d,f,h,1,J,n.• D----·--·· s:zroo Jtlr_._...
Do.
3M B, b,c, e, f, f, k . A, B, C •.• $1 a dt1f...... ~. Notspeclfted.

zsoo

70 • •••• 40. w.•••

M

111.J:llof"·

1lri~!h·1,.

Pl
1,000

70 •...• do.••• ••
8S •.••• do.••••.
~ • • ••• do.•••••

•6lnot&i6,
1
A.nmm1 l.ocoma.of a.ny prope:rt, t.o be computed at 8 peroent or Its value.

=

(')

G,

(' )

70 _• • •. do•... _.

1

Board of t11ld tort.he ag~d •••• •• . • •••do......................... AIL .. . • .• Nono. ..••• Nono... -•• St.ote.•• •••• •••.•••. ••••• - -···-

1029

J

Oounty. cltr, towo, viUnge.--.

1

Old•nge pension commis.!ion. ..

1933.

115••••••• •••

R(l(IUlred•••

• .•_.do_...•..

lJXU •••• •••

3 ..•.• -·-···

15

15 years.•..

••••.do•.•••• _

lnl,11131,

10

i O ••••• do•. ••.•

70

1933

""'
w,. -.......... 1!!20

1$

15 year!....

70

1933

~=

30 y~1on••••

05,

County __· · -·- --·--· . . • . · -···Stau.~ poll t&x, liQuor tu .... . .

1930 •••• •do•••••••

19:U

quired.•

G5

State poll tlU... .•• •••• _• • _· · --·-

0f'!'10D--·-······

1933

300 n, d, t, I, o_•••• C . · ·-··· -· $26 n month.~- -·

N~9.i!~ .••••••••••••• ••••.•• ••.• Cou.Dty t-0mmis$1oners•.•. -.-· Am:mal report to Gover-nor •••• Nono...•.• At~~.~.~~l'¼one•••.• •
St.Me dop:i.rt.me.ot of public Bureau ofold•age assist.3nce• • • Complete supervision.. . . .... Ooe·lhird. Two-thirds cities a.od
we:JCJ)re.
towns.
• ••••do ••••••• Sbtowelf&rodepMtment,old• OJd.age p&nSlon bo:ird.-··-·- ·· . •• ••do••.. •.•.•••• •• •.••.. -••.• All• •••••_ N one.·-··· None__....
&ie ptioslon bureau.
Oplionol .•.. N~oe.- ...................... . Bi»rdorc:o,untroommls.slonezs. Nooe•••••••••.•.•.•••.•••.•.• . Non&. . •• •• AIL_ •..•. nelmblll'Se
cou.ot.y.

U:!~~"J;ry:

b, c, d , r, a . A, B , 0 ..• •.•.. do...••••.• __ :M ootbly Of

o.s Not r e•

IO• • •·-··-··
L·--· · · - -

Couni, w-olfare board·-··· - - ·· Comple.tesnl)Uflston ••• -.• - •• Th r e & - OD&-fou.rth
IOUl"lbs.

1931

mms

Do.

2 . . •.•. . . . . .

1933

1..,.

Perf0€! or pay•

3M

10
16

1930

w~ : = :
~-···

M .Wll\t.un
aroou.nt of
pe.osloo

15 years. •••

10

New YorL---.. -

il&b. -····-····

70

05, •• ••• do.•....

North Duota.......
Ohio••••••••• _ _

11134

other pro'l'l3fons(se6
nxplanatory
footnotes)

6S •••• .do••••••

70 -• .•.do__···& Req,uirod.••

1931

Feum,-lnula••••••

?:~~f

Uon.s (see
axplon~tor y
footnotes)

- - - - - - - - - - - - - - ,,- - - - - 1 - - - -1-- - - - •1-- - --

County ••... •.•. -············No pro\·lsloma-s yet. • . • .••. -•

1931

1933

- --

Umlt

::~~~:~z~::::::: ~g~ep;;iesup;r~•ls10D::::::::: t!~.t"aii:: ~~e:b3ii t:"111!:!?~~wm:·

~f~ds:;'~·r);: ~~::rtmeotor1~1tii8lld;;ei: 8f3.~~!

11123

11134.......

State esbte n.ad liquor w;
1ocalliQuor w .
St.ate. curroot ro9enues. ..•.•..

Optional. ••. Terruori31 auditor._ ••••• ·-··· Old-;i_ge pension COU\mis.'llon..• Annunl report. to 'l'enitod&I None. ••••• Sht\red by county and Counties and cities.•.•.. ....•.
auditor.
city.
M1rndator}' . Oepllll.t.ee.u.1. ot publlc weUa.ro. . . .••do............. · -······ · ··· Annual report only......... ... N ooe_._. __ AIL . .•..•. None-..•-•• Count.y. · ·-·· --·--··· ·······- .
••.. .do•...••• Statoaudlt-Or••••••.••• u H•-· · Boardorc<1untyooromissloners. Annual roport: duplfcato cer• O ne•hl'llf•• ODt.•baH• • Non&... •. . Stateond county •. . ••.••••.•••
,IOcate 10 aud [tor.
___•.do••••~ •• Old••ioa.sststaneecot01J1Isston . Old-age o.ssistan~ boorJs. •.• . . Complecos.uper\11.sioo .••• •• ••• AIL ... . •. N ono. . ••• - None.••.•. St.ale poll tu.....•.... •.. ..••.

"Kia!3St4"rf: ~~~~l~t ·orp·Ubiic·aecoiiaii;~::: .~ .~J!~-~~~.~~.~~i~~~~:~: .':.~do~.~~~~~-~~.~.~-~~~- ~~:
1•~
Optlollfil. ••• Noae..•••••••••••••••••••••••• Do1rdo!<'OUDlycomtolss1oners. Annual report. to Oovet nor• . _.
192.I

1931

One•haU • • On&-half•• None. . ____ .•...do_·-········ --- --- -···-·-·

SL~:':dmtniJtmtlon_. -· __•. __ AB~~~~:l~o

1913

Nnr 1eray........ ..

-1- -

income

Drfr~l~r::u:r:!=t~

1029

19'27

...

· 1- - - - 1• - -- - -- --

1V31,J033 .•

Calorsdo- ~ ..... -

····· ···•···

-

Ao.nuol

- -1 Pwg_iity

Ma.odatorr- A.Jssk6 PJon,ars Horne.••••.. • No local 11dmiol~tration• . _.... Territory odtulolslratlo1:1 ••• ••• All .••••••• None...... None.••••• Ter-ritory.......• ••• ..•••.•••• { ~ : }Re-quired . .•
;o •. ••• do•.--.. ••
. .... do••••••• $Lato auditor. ..•.•....•• ••••• • C~t:t'o:!d•ago pension com·
lo nudi• G7 peroc.ot.. 33 percent. None•... •• State 11nd couotf ••• _.. ... ... ..

Doh~•••••....•

-

- - - - - + - - - - - - - - - - - i· - - -- -- - -- 1 - - - - i - --

Dlsqu,ma..,.

'Reslde.noo

Fund provided by-

To have failed to work accordlni; to ability.

locaate or benevl.lleot, cbarltable, or frattrnlll lru&lt ullon.
Ilwbaad. wire:, pa.rent, or cblld able and r~pon.~ible for support.
Obild,ea liable a.ad able to support.

I

come.

• 3 . 000
(')

I

U,S

a, b,c,d,e,f,I. A, B, 0 •.• $"...Samootb_ .•• Do.
Do.
a, b, "• d, I!, L . A, B, C ••• $30 a mouth ..•••
Do.
tt, d, e, I, g, b , B · - ··· ···· $1 a day .•..•.••.
I, o.
a, c,d,e, f, l, o. A, B, 0 .. - . •.••(lo••••• •••••• b~~fY or quY-

300

b, c, d, o, t, I.. A, B, 0 ..• $30 B tnonlb ..••. Monthly.

Ob~.Pf~~!r:~
rBpplJCIUlt'S property to pension nlllborlty tnay bt dtlllanded beJ'Ot'1!1
0
n . AJr;;:,':;i,~ 0:sl;,!a.~e:'8 to be oollet:ttd ltotn tsltlte. oo death of pemlooe:r or tbeo sur•
vlvor or a manled couple.
~: fd:ro~~
::;~U:1,1~o.rttab!e or bene\'0letit 1w!IluUon U peD!,iootr is
lnmate.
t

8onc:a.: Comp!J,fd I/om St.a~-19.ws.

78470-ST

(F.<t p. 160)

I ;

.,

I

I

t

< I
IL

'I

•

q

PROVISIONS I N THE UNITED STATES

161

more than 1,000 recipients of old-age assistance gl'ants, and these
were found almost exclusively in Montana and Wisconsin, the
former having 884, the latter 295 old people on their old-age assistance rolls. The total amount spent by t he six States in 1928 was,
in round numbers, $200,000.6
From 1929 on the trend in legislation has been toward making
the adoption of the old-age assistance systems mandatory upon the
counties. This type of legislation proved much more effective,
especially when it was accompanied by a provision by which the
State shared in the expense of the county. Of this latter type was
the California law which was passed in 1929. In the same year
Minnesota, Utah, and "\Vyoming passed laws which did not provide
such State assistance, although those of Utah and Wyoming made
the adoption of the system mandatory upon the counties.
In 1930 the Massachusetts and New York laws were passed which
not only were of the mandatory type but also provided that the
State share in the expense of the locality.
In 1931 and 1933 State legislatures were very active in the field
of old-age assistance. It is estimated tha.t 100 bills were introduced
in the legislatures of 38 States in 1931. I n that year five new laws
were enacted in Delaware, Idaho, New Hampshire, New Jersey, and
West Virginia. Of these, all except the West Virginia law were
of t he mandatory type, but only D-elaware and New Jersey provided
for State funds. Colorado and Wisconsin amended their laws making them mandatory upon t he counties as well as making State
funds available for the purpose of old-age assistance.
Ten n1ore laws were added in 1933 in Arizona, Indiana, Maine,
Michigan, Nebraska, North Dakota, Ohio, Oregon, Washington, and
Hawaii. With the exception of Hawaii, t hey were all mandatory
upon the counties, but in Oregon and Washington the State did not
share in the expenses of t he locality. Arkansas passed a law in 1933,
but it was declared unconstitutional by the State supreme court.
I owa and Pennsylvania passed mandatory laws in 1934, the State
bearing the entire cost. By the end of 1934, 28 States and 2 Territories had passed old-age assistance laws.
Summary of the Provisions in Effect, January 1, 1935. -Table
36 summarizes the provisions of the various laws of t he United States.
As indicated in the discussion above, the effectiveness of these laws
depends to a large extent on the degree to which the State shares in
t he responsibilities of administration and cost. The State has complete supervision or exclusive State administration only in those
States where it bears the whole cost. This is the case in Alaska, Delae "Operation of Old Age Pension Systems in tbe United States in 1931", Monthly Labor
Review, vol. 34, no. 6, June 1932, table 5, p. 1266.

162

OLD-AGE SECURITY

ware, Iowa, Michigan, North Dakota, Ohio, and Pennsylvania. In
other States, where the State bears part of the cost of old-age assistance, there is a considerable amount of State supervision. This is
true in Arizona, California, Indiana, Maine, Massachusetts, New
Jersey, and New York. Colorado and Wisco.nsin are the only S t ates
which give money to the counties and leave to them the administration
of the fund, requiring only an annual report to the State office. Such
an annual report is required in a number of other States from the
counties administering the laws. This provides little guaranty that
the laws are actually enforced. A number of States left the entire
responsibility to the counties, requiring not even an annual report.
These States were Kentucky, Minnesota, New Hampshire, Utah,
and Washington.
It is safe to make the general statement that the purpose of these
old-age assistance laws has been carried out more effectively in the
States which provide effective State supervision than in those which
make the counties entirely responsible. The ratio of recipients of
assistance grants to the number of people of eligible age is highest in
the States where there is complete State supervision.
In other respects the various laws are quite similar. All State
laws require that the recipient of assistance grants must be needy.
With the exception of Arizona and Hawaii, they all specify that assistance grants must not be paid to old people who have children or
relatives able to support them. New York and :Massachusetts are
the only laws which do not set a maximum amount of assistance ;
this maximum is as low as $15 in some States, but most of the l aws
set it at $30 a month. The age limit is 65 years of age in a majority
of the States; but in quite a few of them it is 70. The most serious
restrictions are the citizenship and very long residence r equirements.
Under most of the laws, in order to receive old-age assistance, a person must have been a citizen and a resident in the State for 15 years,
and in a few States the residence requirement is even higher. 1\1any
States require also a long period of residence in the county or city.
The great majority of the States have income and property qualifications. The property limit is $3,000 in most of the laws, while the
income limit is $300 to $365 a year. A few of the newer laws omit altogether these property and income qualifications and leave to the administrator the decision of whether or not a person is in need. Many
of the laws include the provision that the transfer to the assistance
authority of any property the applicant may possess may be demanded before assistance is granted. In most laws there is a provision that assistance must be denied to persons who have deprived
themselves of property in order to qualify for aid. Almost all the
laws provide that the amount of assistance paid shall be a lien on

PROVISIONS IN THE UNITED STATES

163

the estate of the recipient and shall be collected upon his death or
the death of the surviving spouse. The majority of the l aws provide
for a small funeral allowance.
In addition to these qualifications, several old-age assistance laws
make sure that the recipients of aid are "deserving" citizens. People
who have deserted their husbands or wives, who have failed to support their families, who have been convicted of a crime, who have
been tramps or beggars, who have failed to work according to their
ability, are ineligible to assistance in most of the States. Inmates of
jails, prisons, infirmaries, and insane asyl urns are also barred from
receiving grants. A few States permit the payment of the assistance
grant to a benevolent and fraternal institution after a recipient becomes an inmate, but they make such payment subject to the proviso
that the institution may be inspected by the old-age assistance
authority.
After this survey of the many restrictions in the old-age assistance laws, particularly the require1uent that the recipient must be in
actual need, it is not surprising to find that their operation has been
much more limited than in other countries which have adopted noncontributory old-age pension legislation. The percentage of old
people on assistance rolls in the United S tates is far below t hat of
European countries, Canada, and Australasia. Several of these countries pay pensions to all aged persons whose income is less than a
specified amount, not requiring proof of actual need.
Operation of State Laws.-Data furnished by the Bureau of
Labor Statistics indicate the experience under old-age assistance acts
in 1934. Some 236,000 old people were being cared for through the
medium of public old-age assistance at the end of 1934. During the
year over $32,000,000 was spent for this purpose. (See table 37.)
Although 28 States and 2 Territories had old-age assistance acts
on the books at the end of 1934, in only 25 States and 2 Territories
were grants actually being paid. In 3 States the act was entirely
inoperative because of lack of funds. In only 10 States was the
system State-wide.
The average monthly grant paid ranged in the various States from
69 cents in North Dakota to $26.08 in Massachusetts. In the former
State a total of $507,744 should have been available to meet the oldage assistance obligations. The system is, however, financed by a
property tax of 0.1 mill, which, during 1934, yielded only $28,534.
The amount paid in grants totaled $24,259. The sum available for
distribution, therefore, fell short of the sum awarded by more than
$475,000. Dividing the funds among the recipients on a pro-rata
basis, the average was 69 cents a month.

164

GLD-AGE SECURITY
TABLE

37.-0peration of State old-age assistance acts d,uring 1934

State

Funds supplhid by-

Percent
recipNumber ients
Number of of recip- formed Amount
eligible
ients at of 1930
age, 1930 1 end of popula- disbursed
1934
tion of
eligible
age

Monthly grant
Max:imum
payable

Average
paid,
1934

--Arizona _________ __ State and county ______
California. ________ _____ do _____ ___ ________
Colorado __________ ____ _do---- -----------Delaware __________ State ________ ___ ___ ____
Idaho __ _________ __ County_. _____ ________
Indiana ___________ State and county ____ :_
Iowa ___ ___________ State __________________
Kentucky _________ County s__ ____ _____ ___
Maine. ___ . ________ State and county 8___ _
Maryland . ____ ____ County _______________
county____ __
State.and
Massachusetts _____ State
. ________________
Michigan _______ ._.
Minnesota__ _______ County.. __ ___ __.. ____
Montana__________ . _. __ do - ____ ___ • _... - -Nebraska___ _______ _____ do ______________ __
Nevada ___ ________ _____ do - __ . • ___ • _-_-_-New Hampshire ___ State and county ______
New Jersey __ ______ ____ .do·. ____ ___ .. -- _--New York___ ______ ___ _.do ___ . ____________
North Dakota _____ State.. _____________ ___
Ohio ______ ________ .... . do. __ _____ ________
Oregon ____________ County.. ___________ __
Pennsylvania. ____ State __ ________ ________
Utah . .. _______ ____ County ______________ _
Washington. ______ State and county ______
West Virginia __ ___ County 8________ ______
Wisconsin ___ •. _. __ State and county______
Wyoming _________ County. _____ . _______ .
TotaL ______
----------____________
------------.
Alaska._ .. ________ --Territory
Hawaii__ ___ __ ___ __ County_. ____________ _
Grand total_

------------------------

8,370
210,379
56,720
16,678
17,402
133,720
184,239
(9)
(10)
50,391
156,590
129,353
67,025
10,265
20,256
246
25,714
110,567
373, 878
22,468
414,836
38,193
289,705
15,730
23,447
(20)
41,818
7,070
I

I

1,820
19,619
3 10,098
1, 583
1,712
23,533
68,300

21. 7
$427,527
9.3 24,288,508
17. 8 4 1,256, 190
9.5
193, 231
9.8
138,440
21. 6 5 1,134,250
7 220,000
4.5

$30. 00
30.41
30. 41
25.00
25.00
15. 00
25.00

$19.57
20. 21
9. 74
9.91
6. 74
4.50
13.25
·--- ...... -- .................

21,473
3,557
4,425
2,780
926
7
1,483
11, 401
51,834
3,914
36, 543
186,525
18,261
902
1,588

13. 7 13 5, 628, 492
2.8
103,180
15 577,635
6.6
177,426
27. 1
4.6
13,577
2.8
1,552
311,829
5.8
10.3
1,773,320
13.9 12,650,828
16 17. 4
24,259
8.8 171,434,416
17. 1 18 639,296
19 386, 717
6.3
5. 7
86,416
6.8
103,408

12.50
25.00
30.00
30.00
25.00
30.00

9.99
10.97
5.32
1. 22
18.48
17.51
14.87
20.65
.69
6.54
8. 16
21. 18
7. 98
5.43

82,732

30.00

19.95
9.59

--- -------- -------- -----------·
------------------------------11 . 5 -----------30.41
22.64
65,228
267
12

12

(14)

30.00
30.41
25.00
20.00
30. 41
32.50
30.41
(14)

.................. -------------·--·-----------2,127
5. 1
459,146
30.41

719

10. 2

2,439,437
2,935
7,638

235,397
454
354

9. 7
15.5
4.6

2,450,010

236,205

9. 6

26.08

32,177,603 ..................
108,485 21 35. 00
27,427
15. 00

14. 68

--------

14.68

32,313,515

25.00

7.06

1 Where system was not State-wide in operation, the number given in this column is an estimate of number of eligible age only in the counties reporting.
2 Approximate; estimated on basis of State disbursements (about ½).
3 In 55 of-the 63 counties of the State.
1 Estimated on basis of returns by individual counties and report of State disbursements.
5 11 months ending Nov. 5, 1934.
6 A total of 4,589 actually on roll Dec. 31, 1934; others put on roll later, payments being retroactive to No~.
1, 1934.
1 Estimated; last 2 months or 1934 only.
8 Inoperative.
9 Census reports 84,252 of eligible age in State.
10 Census reports 69,010 of eligible age in State.
11 Based only upon reporting counties in which act was in operation.
12 As of Mar. 31, 1935.
13 Year ending Apr. 30, 1934.
u No limit.
1s In 38 counties.
1s Computed on basis of estimated population 68 years of age and over.
11 Last 6 months of 1934.
18 In 32 of the 36 counties in the State.
19 Month of December 1934.
20 Census reports 73,043 of eligible age in State.
21 Men; women, $45.
SOURCE: Parker, Florence E., "Experience Under State Old-Age Pension Acts in 1934", J.Io11lhl11 Labor
R8Uiew, vol. 41, no. 2, Aug. 1935, pp. 303-312.

PROVISIONS I N THE U N ITED ST ATES

165

The three State-wide systems of longest experience are those of
California, Massachusetts, and New York. It is an interesting fact
that year after year the average allowance runs practically the same
in these three States (one of which has a maximum of $30, while
the other two have no maximum). In 1934 the average grant was
$20.21 in California, $26.08 in Massachuset ts, and $20.65 in New York.
These data were collected in the annual survey of old-age assistance made by the Bureau of Labor Statistics. The figures indicate,
however, that 13 States and 1 Territory were paying grants averaging less than $10 per month in 1934.
How far the grants actually paid fell below the maximum allowable under the law is indicated by comparison of the last two columns
of table 37. One column of the table shows the number of persons
in each State who had reached the age at which they would be
eligible for benefits under the act. It should be borne in mind in
this connection , however, that age is only one of the requirements
that must be met. Practically all the laws also make certain requirements as to residence in the State and county, citizenship, means, etc.
The number of recipients of old-age assistance is very low in States
which have financial difficulties. That many more people are i n
need of assistance becomes clear from the following tabulation, which
shows the number of applications received in some of the States since
the passage of the law:
Nitmber of appUJCations rece,vved, by old-age assistcvnce aitthorities ( November
1934)7

State

Num•
ber of
persons
receiv•
ing
grants

Arizona----·----·--·---

l, 974

Delaware· - -- · · ····--·Idaho .--··--------- -· -Indiana _____ ·- -·· --·· -·
Iowa.·--···· · · · ········
Maryland (Baltimore
County only).
Micbigan·-· -········ · ·
Montana........ ... . . . .
New J ersey ......... ___
New York ........... ..
North D akota. . .... . ...
Ohio . . ... . _... . . . ...•..
Wisconsin.... ·-· · ···-··
7

Number of applications
received

Number of people on waiting list

2,098 from Aug. 1, 1933, to 10.
June 30, 1934.
----··- · 5,685 since 193L--··-··-----··· 1,700 applications not yet investigated;
of these about 1,200 will qualify.
l, 275 3,525 since 193L---··· - · -· · -··· 200 at close of 1933.
23,418 39,304 from J anu ary through 3,ll59 applications not investigated
August 1934.
August 1934.
3,000 60,000 since ApriL·----·-··- · · E stimated that 28,000 will qualify.
141 2,168 since 1931. .. ..•• -...•.... Applications are investigated only
when there is a vacancy.
2,660 42,358 since October 1933. - · ··· 6,575 applications approved; 27,032
applications not yet investigated.
1,781 4,444 since 1936..... . . ·-··-·· · IO, 560 26,269since July 1932. •. .. . ... . 3,080 pending applications n ot yet
invest igated .
51,228 136,482since September 1930... 5,123 pending applications not yet
investigated.
None 4,201.. _. . . . ... . . . _.. . . . . .. . . . . 3,761.
24,000 105,000 since May 1934...•... . .
1, 9C9 4,912 since 1930 . .. . .•......•.. . 234.

The information presented in this tabulation was obtained through correspondence with State officials.

166

OLD-AGE SECURITY

In all the States for which this information is available the applications far exceed the number of recipients of actual grants.
Activities of State Legislatures From January 1, 1935, to October 15, 1935.-In the first 10 months of 1935, State legislatures all
over the country were very active. During this period action on the
social security program was pending in Congress, and, while the
Social Security Act did not become law until August 14, 1935, many
of the States passed new laws or amended their old laws in anticipation of proposed Federal aid. The trend in State legislation during
that period reflects in most cases the provisions of the Social Security
Act as they crystallized during congressional discussion.
Eight States (Alabama, Arkansas, Connecticut, Illinois, l\fissouri,
Oklahoma, Rhode Island, and Vermont) and the District of Columbia passed new old-age assistance laws in the period from January 1
to October 15, 1935. In addition, the F lorida L egislature adopted a
law, which, to become effective, had to be approved by a referendum
vote. The provisions of t hese laws are briefly summarized in table
38. It is worthy of note that, with the exception of the Florida law,
all these new statutes are of the mandatory type. A ll provide for a
central State agency to administer or supervise the administration
of the law, and all provide for State financial participation. None
of these new laws makes citizenship of many years' duration an
eligibility requirement, and the State residence requirement is in
most cases 5 years within the 9 or 10 years preceding date of application- a considerable liberalization in comparison with the laws passed
prior to 1935. The same is true of the county residence requir ement,
which, in a number of the new State laws, was canceled entirely.
Only the Arkansas and Missouri laws have an age requirement as
high as 70 years, and the Arkansas law provides that its age require1nent is to be lowered to 65 beginning with 1940.
The same general trend toward more liberal provisions can be
traced through the many amendments adopted by States which had
laws prior to 1935; 16 States and 2 Territories amended their laws
in the period from January 1 to October 15, 1935.
In five jurisdictions the laws, which up to that time h ad been
optional, became mandatory upon all political subdivisions (Ha.waii,
l\ifaryland, Minnesota, Montana, Wisconsin ). Central State administrative agencies were established in eight jurisdictions (Hawaii,
Maryland, Minnesota, Montana, Nebraska, Nevada, Washington and
·w yoming). At the same time legal provisions for State financial
participation were introduced in eight jurisdictions (Hawaii, Maryland, Minnesota, Montana, Nebraska, New H ampshire, Washington,
and Wyoming).

PROVISIONS IN THE UNITED STATES

167

The requirement that a person must have been a citizen of the
United States for many years before he could become eligible for
aid was canceled quite generally by State legislatures. A provision
was substituted according to which other wise eligible citizens should
not be barred because they had not been citizens for a required period
of time (California, Hawaii, I owa, Michigan, Minnesota, ~lfontana,
Nebraska, New Hampshire, Oregon, vVashington, and Wyoming) .
Residence requirements were liberalized in 14 of t he jurisdictions
(Alaska, California, Colorado, H awaii, Iowa, Ma.r yland, Massachusetts, Minnesota, Montana, Nebraska, New Hampshire, Oregon,
Washington, and Wyoming) . Four States (California, Minnesota,
Montana, Wisconsin) lowered their age requirement from 70 to 65,
and one (Michigan) provided that it was to become 65 in 1940. A
number of other changes were made in the laws within this period.
Table 38, summarizing the provisions of State old-age assistance
laws as of October 15, 1935, shows that at that time there were 36
States, 2 Territories, and the District of Columbia which had passed
old-age assistance laws. The Florida Legislature had passed a law,
which, to become effective, had to be submitted to a referendum vote.
INDUSTRIAL PENSION SYSTEMS
Beginning in a modest way about 1875, sever.a l hundred of the
most important companies in American industry have voluntarily
created systems providing pensions for their own employees when
they become superannuated or permanently and totally disabled.
The motives behind the establishment of these systems have been
many, and the reasons for their continuance have not always been
those which led to their original initiation. Generally speaking,
the managements starting and maintaining these systems have not
only desired to provide employees with security in their old age,
but have also wished, usually from necessity, to dispose of aged
personnel who ,are inefficient in the productive processes of 1nodern
industry. A third closely related motive has been to use the pension system to clear out older employees periodically in order to give
younger employees a chance to move up in the ordinary channels
of promotion, a measure which not only replaces inefficient employees
with younger men who are more efficient, but one which makes the
younger men n10re satisfied with their own jobs and their own prospects. A fourth motive, also relating to economy, has been a desire
on the part of certain companies to maintain conditions of employment so attractive as to draw into their service persons of superior
capabilities. One motive of the pension systems of the railroads has
been to facilit,a te the r etirement of older persons who might consti-

TABLE

......

38.-Provisions of the old-age assistance laws in the United States (as of Oct. 15, 1935)

O':>
00

Required period orState

Type or
law

Age

Maximum
grant

- -- - - - l - - - - l --l- - -Alabama.. . ..••.•• l Manda•
tory.

Alaska........ . ••• 1. . . do. .....

65

I{

Arizona . • . . .••.•.. 1. . . do.... . .

4 65
1 60

Cali!ornia . •.. . . . . .l ... do . . . . .. l

- 1-

65

-

l --

Years

I $30 a month 1• • I (2)
$35 a month,
males; $45 a
month, fe·
males.
$30 a mo·nth..•

1
70

Arkansas ...•..... . l...do . .... . l e 70

1-

Years
35

25

(2)

(2)

35

l.....do . ••..... 1••••••••
I $35 a month. . . ! (2)

Connecticut. . . _. . . _. . do. . . . ..

65

$7 per week. . .

(2)

Delaware... . ...•• . ... do. .... .

65

$25 a month.. .

10

DistrictofColum• . •. do. . . ...
bia.

65

Nolimit. . ....

(2)

3

Florida 11 •• .• •••• • • OptionaL

65

$35 a month 11.

(2)

10

65

I $30 a month•. . l

(2)

35

I

1. . . . . . . . 1. . . . . . . . . . . . . . . . . . . . . . . . 1

1.. . •.••• 1

15
5
5

15

5

department of
public welfare and
county governing
board.
Board of trustees of
Alaska Pioneers
H ome.

Income,$300ayear .•.. 1 County commission•
ers.
State <lepartment of
public welfare and
county public•wel•
rare boards.
County or city and
county boards of
su pervisors.

Citation

1 - -- - -- -

One•fourth by State; Acts or 1935, ch. 448.
one•fourth by coun•
ty; ooe•half by Fed·
eral Government.
Territ,ory.... •....•••.. Comp. Laws 1933, secs .
1781 t o 1826 (as
amended 1935, ch.
47).
Acts of 1933, ch. 34.
67 percent by State;
33 percent by
county.
State and county.•... . Acts or 1935, Act No.
322.

Dearing's Gen. L . 1931,
act 5846 (as amended
1933, ch. 840; 1935,
ch. 633).
1 r)..................... County commission· State.... ..... •. •... . .. Acts of 1933, chs. 144
and 145 (as amended
ers.
1935, ch. 171).
·--- -· · · ... . . •••.. . .. . . . . ..•.•• . Bureau of old•age as• . . . . . do. 9••••••••••• • • •• Acts of 1935, p. 117.
sistance.
.1 Acts of 1931, ch. 85.
. ....... ···· -· · · · · · · ··-··-······ State old•age welfare . . . . . do.
commission.
. . . . . ... --· · · ····-·-· -··--··· · ·· Board of commission• Congress.....• . . .... . . I Public, No. 319.
ers through desig•
nated agent.
I
1 I I ncome, $400 a year . . . I State board of pen• State 1J •••• • •• • • • •• •• • • 1 Acts of 1935, S. B. 606.
sioos and boards of
county commission•
ers.
County or city nod Rev. L. 1935, ch. 259
1. . . . . ... 1 Assets, $1,500. . ... ..... 1 County commission•
(as amended 1935,
county; Territory to
ers and T erritorial
series D - 159, 160) .
reimburse 60 per•
board.
cent, if Federal
funds available.
Real property, $3,000;
personal property,
$500.

65 j $1 a day....... l

Funds provided by-

l- - - - - - -1 - -- - -- - 1- - -- - --

to $2,500 excluded.

(1)

15

-

Administered by-

I Years1 I I ncome, $360 a year.... I State

5 1····· · ·· Assets, $300; house up

Colorado •. . . .• •.. . j.•. do •••. . . l

E awaiL . ...... ... I Ma nn a •
tory.

Maximum property
limitations

Residence
Citizen•l--- : - - -ship
State ICou nty

Half by county, or
city and county;
half by State.

0

t-t

1::1
I

:,i..

Q

~

U1
t,rj

§
p:j
H

~

~

Idaho. __ ... -···· . . I... do... ... .

65 I $25 a month ...

Illinois...•••..... . I... do.....•.

65

I $1 a day.•••.•.

Indiana ....•..••.• ,. . . do •......

70

I $180a year •••.

Iowa ..... -•---·--· ...do . ..... .

65

$25 a month...

Kentucky ••..•.••. ! OptionaL

70

I $250 a year •••.

Maine. ·········•-•I M a nd a •
tory.

65

I $1 a day... ... .

Maryland •.•.••- •. I...do ...... .

65 l.--··do .....•...
70 I No limit. ..•..

Massachusetts..... 1-·.do •..•. ..
Michigan.•....... . l... do .•...•.
Minnesota is. ••••. • I... do •.....
Miss9uri .• -·-··· •. I... do ..... .

6

15
(2)

15

15

15

(2)

(2)

65

l..... do .•. . ....

(19)

a month
(couple, $45
a month).

I No limit. •....

(2)

Nebraska. ···-··· ·l···do . • •..

65

I $30

(2)

Nevada ...•....... 1 Optional. .

65

I $1 a day...... .

a month
(couple, $/\0
a month) .

10

16

3

5

5

10
3

3

(2)

65

15

15

(2)

I $30 a month ...

I $30

10

us

(2)

Montana.......... I... do •.....

Footnotes at end of table.

11

70

70

10

16

5

5

5

35

15

10

Code, 1932, secs. 30-3101
3 I Income, $300 a year. •. County probate judge County•.
to 30-3125.
and county comm is•
sioners.
1 I Assets, $5,000......... . State department of State. . . ......•...•.•.• ! Acts of 1935, p. 259.
public welfare and
county old•age se•
curity boards.
15 I Assets. $1,00L ....... . County commission• Ha.Jf by State; half by Acts of 1933, ch. 36.
county.
ers.
Assets, $2,000 ($3,000 County boards under State.......•.•.••..... Spec. sess. 1934; ch. 19·
(as amended 1935,
State commission.
if married); income,
ch. 55)
$300 a year.
10 I I ncome, $400 a year; County judge ..••..... ! County..... ..• - ..... . Carroll's Stats. 1930,
art. 15, ch. 34, secs.
assets, $2,500.
938i-1 to 938i-7.
1 I Assets, $300....•....•. T own and city boards H alf by State; half by Acts of 1933, ch. 267.
under super vision of
cities, towns, and
State department of
plantations.
health and welfare.
D epartment of old-age Two-thirds by State: Acts of 1935, ch. 592.
l••·•··••I••·····•·•·•·····
.
one-third by county.
pensions and relief
and county welfare
boards.
Two•thirds by county ' Gen. L. 1932, ch. 118A
1•••••••• 1••••••• • _ •••••••• ••••••• Cou nty or city board
or city; one-third b y ' (as amended 1932, ch.
of public welfare.
259; 1933, chs. 219,
State.
285,328;1935,ch. 494).
Assets, $3,500 17 •••• ••• • State welfare depart- State. ....•............ Acts of 1935, no. 159.
ment and county
boards.
1 I Assets, $5,000 ...•.•..• County commission- Half by State; half by Supp. 1934 to Mason's
Stats. 1927, ch. 15 (as
er:; under supervi•
county.
amended 1935, ch.
sion of State board
357).
of control.
I........ I Assets, $1,500 (couple, State board of manag- State...•.••...•.•.•... Acts of 1935, p . 308.
ers of eleemosynary
$2,000).
inst itutions and
county old•age assistance boards.
County old-age pen• County; State to re- Acts of 1935, ch. 170.
imburse not to exsion commission un·
ceed 75 percent.
der State old · age
pension commission.
1. . . . . . . . 1 Assets,
$3,000; in· County pension State. ....•.....•.. . •. . J Acts of 1935, ch. 135.
boards under State
come, $250 a year
old-age pension com•
(couple, $500 a year).
missioner.
County . ........ ..... . 1 Comp. L . 1929, secs.
1. ....... 1 Assets. $3,000. ....•.•.• State and county
5109-5136; acts of
boards of relief, work
1935, ch. 138.
planning and pen•
sion control.

~

0

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z

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Ill
t;:j

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H

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TABLE

.....

38.-Provisions of the old-age assistance laws in the ·United States (as of Oct. 15, 1935)-Continued

'-l
0

Required period ofT ype of
law

State

Maximum
grant

Age

Maximum property
Residence
limitations
Citizen•li- - --:--- ship
State I County j
Years

Years

Years

New H ampshire. . . ! M a nd a• 1
tory.
New Jersey...•.. ..... do.......

70 I $30 a month . ..

(2)

70

$1 a day.. ~ .• . .

(?)

15

l

N ew York . ........ l...do....... l

70

I No limiL •.••

(2)

10

1 1••••••••••••.•.•••••••••

North Dakota.... -1 ...do . . ..... l

Ohio .. .

. .. , . . . do. ....•.

Oklahoma .........
Oregon

20 • • •• •• •••

68

65

I $150 a year ..••

J ... do..... .. l

70

(2)

I $25

a mont h
(couple, $50
a month).

L..do... .... l{ : ~~ 1}$30 a month...
L ... do......•..

3

5

20

15

I

1

I Assets,

$3,000 ($4,000
if married); income,
$300 a year, couple
$600.

5

(2)

16

(2)

165

1

State, 5?p er cent; Acts of 1935, ch. 127.
county, 95 percent.
One.fourth by county; Acts or 1931, ch. 219 (as
amended 1932, ch.
three.fourths by
262; 1933, ch. 149;
State.
1935, chs. 108 and
213) .
Public welfare officials, Hal(by city or cou nty; Cahill's Consol. L.
half by State.
under supervision of
1930, ch. 49½ , secs.
State department of
122-124p (as amend•
ed l 934, ch. 815).
social welfare.
County commission• State................. . Acts of 1933, ch. 254.
ers under supervi·
sion of secretary of
agriculture and labor.
County boards under .... . do . ....•.•.. •..•••• I Adopted 1933 by refer•
supervision of State
endum vote.
division of aid for
aged.
Commission for old· ... . . do .. . ....•.•••.... ! Initiative Petition N o.
age pensions and se•
144 adopted Sept. 24,
curity.
1935.
County relief com• Half by Feder a I Acts of 1935, ch. 407.
mittee under State
Government; o n e •
fourth by State; onerelief committee.
fourth by county.
Local boards under State... ... ............ Acts of 1933 (spec.sass.)
no. 64.
State department of
welfare.
Local directors of pub- . . . . . do.. ...... ... ... ... Acts of 1935, ch. 2101.
lic aid under State
department of public welfare.
County commission• County ....•......... . ! Rev. Stats. 1033, secs.
19- 12- 1 to 19-12- 18.
ers.

1•••••••••• • •••• • ••••••• •

I

1

P ennsylvania... ... 1. . . do . ..... l

70

I

Rhode Island . •.•. • i... do•.... . J

65

l..... do.•...•...

Utah •.•.•.......•. l. ..do...... -1

65

I $25 a month . . .

$30amonth 2•• •

15
(2?)

15

15
16

5

15

1• •••• • •• , • •••••••••••••• •• • ••

I Assets, $5,000... ·--·· · ·

(23)

5

Citation

Funds provided by-

County commission•
ers.
Assets, $3,000..•. ....•. State division of old·
age relief and county
welfare boards.

I........ I Income, $150 a year .. .

15

Administered by-

I Income

during past
year, $300.

0

g
I

~

t,:j
00
t,:j

Q

q

~

f<

Vermont- ____________ do ______ _

65

$30 a month
(couple, $45

(2)

16

5

$30 a month ___

(2)

16

5

a month).

Washington. ______ ___ do _______

65

West Virginia _____ Optional..
Wisconsin _________ Mandatory.

$1 a day_______
65 _____
do __ __ __ ___
65

Wyoming _________ ___ do. - ____

65

$30 a month ___

15
15

(2)

10
15

16

5

State, provided .ted- Acts or 1935, no. 82.
era! Government reimburses one-half.
State __ ____ _________ ___ Acts of 1935, ch. 182.
of public
-------- ------------------------ Department
welfare.
County
court.
_______ _ County __________ _____ Acts of 1931, ch. 32.
10 -----------------------15 Assets, $3,000. ____ ___ __ County judge . _______ _ Payments by county; Stats. 1931, secs. 49.2049.39 (as amended
State to refund one1933, chs. 375 and
third; city, town,
458; 1935, ch. 391).
and village to refund two-thirds.
board of pub- County; State to re- Acts or 1935, ch.101.
-------- Income, $360 a year __ _ County
fund 50 percent.
lie welfare under
State department of
public welfare.

--------

Income, $360 a year (if
married, $500); assets, $2,500 (if married, $4,000).24

Old-age assistance
commission; local
officials.

;g
0

<
H
"(fl

H

For veterans of the War between the States, $50 is the maximum.
I' Citizenship required, but no period specified.
a Within 9 years immediately preceding.
• Males.
4 Females.
o Until 1940; thereafter, 65.
7 With adoption of Federal act, State residence 5 years within 9 years immediately preceding.
s Applicant having property in excess of $2,500 must offer to assign all to assistance fund, but may retain home in which be resides, valued at $2,500 or less.
'Annual State tax of $2,100,000 imposed on the several towns of the State.
·
10 Required period of residence in United States.
11 Must be approved by referendum of the people. Act covers persons infirm physically, regardless of age. These may not receive Federal aid until reaching the age prescribed.
u $60 where more than 1 member of family living together com!' under the provisions or the act.
13 Counties are authorized to raise contributory funds.
11 Within 15 years immediately preceding.
14 Also domiciled for 9 years immediately preceding.
16 Within 10 years immediately preceding.
17 Or $1,000 in personal proper ty, with $500 in household goods excepted.
18 The amendment of 1935 was declared invalid by the attorney general.
10 Citizen of United States or resident of State for over 25 years.
20 Act becomes operative on passage of Federal law making funds for old-age assistance available to State.
11 And $15 per month for each other person in the same family entitled to assistance.
u Citizenship required or residence in the United States for 20 years.
23 Residence required, but no period specified.
24 $1,000 in value of home excluded.
SOURCE: "Public Old-Age Pension Legislation in the United States as or Oct. 15, 1935," .lvlonthly Labor R eview, vol. 41, no. 5, November 1935, pp. 1179- 1183.
1

0

~

"(fl

H

~

t-3

~

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lz
H
t-3

t,,:j

tj
"(fl

t-3

~

t_xj
Ul

.......
--.:J
~

172

OLD-AGE SECURITY

tute a menace to the safety of the traveling public. With the great
expansion of various mechanisms for automatic control of train
movements and improvement in safety conditions generally, this
motive perhaps h,as not been as strong in recent years as it once
was.
The use of the offer of a pension, coupled with certain restrictions, was considered the means of accon1plishing the results indicated by the motives which have already been mentioned, without
undue burden on the company. These restrictions, as will be pointed
out presently, were so framed, however, that two further important
ends were comprehended. First, since the pensions were payable
only to persons who continued in the company's service to the time
of their superannuation or disablement, the deferment of pensions
acted as an inducement for employees to remain in the servi ce, reducing various expenses connected with training new employees in place
of others who had left the service. Ordinarily the qualification for
receipt of pension is further conditioned upon uninterrupted service,
and voluntary interruption in service by resignation or otherwise
results in forfeiture of service credits acquired prior to such event.
This latter class of restriction was aimed at discour agement of
strikes as much as anything else.
In the initial stages the pension movement grew rather slowly in
this country. B y 1900 only about a dozen plans had been established.8 By 1910 the number of plans in force was about 60; by
1920 about 270; and by 1930 about 420. On January 1, 1935, there
were approximately 750 voluntary pension plans in effect. 9
The majority of the plans, considered in terms of employees
affected, have been in the heavy industries. Over 40 percent of all
employees affected by these voluntary pension plans in 1930, the last
date for which comprehensive employment data were available, " ere
on class I railroads; another 18 percent "'IT"ere employed on public
utilities; 11 percent _in iron and steel companies; 7 percent in companies engaged in production of chemicals and allied products; and
approximately the same -percentage in companies engaged in the
manufacture of machinery exclusive of transportation equipment.
The number of employees affected by pension plans in 1930 was
approximately 3,500,000. Despite the unusually rapid growth in the
number of plans since that time, the number of employees affected is
probably substantially sn1aller today t han in 1930, because most of the
8
T hese figures and those which follow in this section were taken from La timer , M. W.,
Industrial Pension Systems in the United States and Canada (Industrial Relations Counselors, Inc., New York, 1933).
•
8
Estimated by the pension division of the Metropolitan Life Insurance Co. Library.

PROVISIONS IN THE UNITED STATE S

173

new pension systems have been established in companies of relatively
small size, and employment in the companies already maintaining
plans has been greatly reduced.
Following the passage of the Railroad Retirement Act in 1934:
some of the railroads limited the operation of their voluntary pension
plans and some have cut their retirement benefits.
Generally speaking, the great majority of employees affected by
voluntary pension plans are in the employ of companies of great size.
I n 1930 about 25 percent of all employees affected were engaged by
companies which had more than 100,000 employees. Almost 70 percent of the employees were in companies which had more than 25,000'
'V\,.orkers, and 98 percent in companies which had more than 2,000.
vVhile the recent expansion in the nmnber of industrial-pension plans
has affected necessarily a group of companies of much smaller size in
point of number of employees, the movement still remains one predominantly confined to large industry. At no time have more than
15 percent of the gainfully occupied employees engaged in manufacturing, mining, and mechanical industries, and in trade and transportation been covered by these plans.
With but few exceptions all the employees of the companies which
maintain pension plans are eligible to participate in those plans,
Where a contributory system is established, participation is ordinarily
optional for the whole staff at the time of initiation of the plan, and
frequently this is true for employees hired subsequently. In a number of important instances, however, participation is a condition of
employment for new employees.
As has already been indicated, the award of a pension to an employee is based upon continued employment for a consider able period
of years and is contingent upon the employee's being attached to the
company in active service at t he time of attaining the age of retirement or at t he time of becoming disabled. There are many differences
in detail in the retirement age and in the length of service period
required as qualifications. Generally speaking, however, the employee must have attained the age of 65 and have completed from 20
to 25 years' service and be permanently and totally disabled.
The methods of computing the benefits are themselves quite numerous. Under the majority of the plans, in terms of employees covered,
the benefit is 1 or 1.5 percent of the average pay during t he final few
years of ser vice multiplied by the number of years of service.
Reference has been made to the fact that these large companies
have established pension plans, among other reasons, because they
have found it inadvisable to follow a policy of retiring superannuated and disabled persons without a pension. As a rqatter of fact,
however, considerable numbers, at least in the railroad industry, are
78H0-37-l3

174

OLD-AGE SECURITY

retired without pension, even though a pension plan is in operation.10 Figures for industries other than railroads are not available,
but it is probable that many employees retire without pensions, since
many plans are similar to those in effect in the railroad industry in
that they fix a compulsory retirement age and prescribe a minimumser vice qualification for receipt of pension.
Prior to about 1925, with few exceptions, voluntary pension systems provided that the companies were to bear the whole cost of
paying the pensions. Most of the plans were begun with but little
knowledge of the costs involved, and no very careful study was given
to the financing of the liabilities assumed. By reason of a number
of factors, including the rapid rise in money wages in the period after
1915, the slackening of the rate of expansion of individual companies, the effects of various policies calculated to reduce labor tuTnover,
the decline in mortality rates, and various other causes, the pension
payments of individual companies grew rapidly. By about 1925 it
began to be more widely appreciated that the maintenance of a pension system involved very considerable costs and that proper accounting and safe financing involved setting aside funds currently at
interest to be used later to pay retirement annuities.
The recognition of the principles of sound financing and accounting was h astened by the entrance of the insurance companies int o
this field, for these companies began to solicit group annuity contracts actively at about the same time. In order for the insurance
company to assume t he obligation of paying annuities, it would, of
course, be necessary for them to collect premiums in respect of all
promises of benefits. As companies became more cognizant of the
costs involved, they were increasingly reluctant to assume the total
burden themselves. New plans were arranged and old plans r evised
to induce employees to share the financial burden. In practically
every case this involved an agreement to refund employee contributions upon withdrawal or death before qualifications for retirement
were fulfilled, though in a number of cases no interest was paid upon
such refunds. Occasionally insurance companies were able to induce
companies to provide that after a certain period of service employees
who were willing to leave their contributions with the insurance company would receive a deferred annuity earneJ both in r espect of their
own contributions and those of the employer. But this practice has
been relatively unimportant. In 1925 less than 15 percent of all
plans involved employee contributions. Early in 1935 t he propor10 Transcript of record, United States Court of Appeals for the District of Columbia,
October term, 1934, ro. 6355, Railroad, Retirement Boord et al. v. Th e A lton Railroad
Co. et al., p. 178.

PROVISIONS IN T HE UNI TED STATES

175

tion was probably about 60 percent , although the considerable majority of employees were still under plans in which they bore no
part of the cost.
Early pension plans were in large part established and maintained
by the management without reference to or approval of stockholders.
Failing this approval, the plans were ordinarily subject to revision or
discontinuance at any time and the payment of pensions was also
subject to suspension, even where a grant of pension had actually
been made. vVhen the necessity for setting aside funds currently came
to be realized, it was recognized that if such funds were to serve t heir
purpose son1e safeguards had to limit their use; and, of course, insurance companies for their own protection could accept funds only on
condition that they be used as intended. These financial considerations, coupled with the increasing skepticism by which the completely
discr etionary type of plan came to be viewed by the employees t hemselves, led to a material strengthening of the legal foundations of voluntary pension plans, although even in such cases the action taken
was not put up to the stockholders for ratification.
As has already been pointed out, the early pension plans were
begun without an adequate realization of costs and no special provision was made for accumulating funds to meet the liabilities. Almost
without exception the pension payments n1ade during the year were
charged to current operating expenses; indeed, until 1928 the account ing regulations of the Interstate Commerce Com111ission prohibited
the use of any other method by companies under the jurisdiction of
that Commission. As early as 1918 or 1919 some companies began to
set up book reserves to meet the liabilities for pensions which had
been granted, although t hey still failed to take into account the fact
that t here were additional liabilities for active employees with long
periods of service which would ultimately have to be recognized in
the calculation of annuities payable. The real accumulation of funds
coincided approximately with the entrance of t he insurance companies
into t he field. Thereafter the growth in funds was rapid and continued even in the depression years, probably because during the
period of liquidation many large companies became possessed of large
sums which were not needed in their business and thus found an
unusual opportunity to provide funds to cover liabilities already
accrued. It has been estimated that by the end of 1931 the total sun1.
set aside for pension purposes was $625,000,000, of which $105,000,000
was in t he hands of insurance companies, $460,000,000 in trust :funds,
and $60,000,000 consisted of ·b alance-sheet reserves.11 Not all these
funds were irrevocably earmarked for pensions, but probably at least
11

Latimer, op. cit., p. 873.

176

OLD-AGE SECURITY

the sum of $500,000,000 to $550,000,000 was so designated. At the
beginning 0£ 1935 total funds set aside £or pensions under private
industrial plans probably aggregated $800,000,000, of which about
$700,000,000 was so restricted as to be usable only for pension purposes.
Large as these funds were in 1935, they were probably far from
meeting the total liabilities which had accrued to that date. It was
estimated that as early as 1928 total liabilities for pension funds were
as much as $2,200,000,000, and probably since that time the liabilities
have increased despite the shrinkage of employment.12 At the beginning 0£ 1935 there were about 175 companies ( including railroads),
employing normally in excess 0£ 2,000,000 persons, which made no
guaranty whatever of awarding the pension or of continuing the
annuity payments once the pension was granted.
The half century of experience with voluntary pension plans has
shown that they have been inefficient and inadequate as sound social
insurance measures. The proportion of all employees in the field
affected has been small, never rising above 15 percent; nor are there
very good grounds for supposing that the field is capable of any
material expansion. Many industries never have any acute problem
of aged persons because 0£ marked cyclical and seasonal variation in
the number of employees and because of their refusal to rehire employees after a certain age when once they have been dropped from
the pay roll. The rate of turn-over of business enterprise itself continues high and employees periodically are thrown out of work
because their employers fail to continue in business. It is a reasonable conclusion that in the future pension plans on a voluntary basis
will be confined, as in the past, to large-scale industries and specifically to "public utilities and manufacturers of the basic commodities required £or the functioning of a mechanized civilization." 13
Even within the field which these voluntary pension systems embrace, the terms of the plans are restricted so that relatively :few
employees qualify :for pensions. On the railroads, for example,
although :fully :four to five million persons have at one time or another
probably been employed by railroads with pension plans, less than
120,000 have been a warded pensions.
Probably no survey of industrial pension systems has ei;-er discovered every system in existence. But it has been estimated that
in 1927 the number of pensioners did not exceed 90,000 and that the
total annual pension payments were not more than $55,000,000. 14 An
estimate from the same source for 1931 was that pensioners did not
12

13
1

'

Ibid., p. 609.
Ibid., p. 9 45.
Ibid.• p. 216.

PROVISIONS I N THE UNITED STATES

177

exceed 140,000 at the end 0£ that year and that pension payments
aggregated no more than $97,000,000. Latest available in-formation,
for 1933, indicates that pensioners at the end of the year were not
more t han 165,000 and that payments in that year were not in excess
Of $115,000,000. 1{;
Average per-capita pensions were about $50 per month in 1927, $58
in 1930, $61 in 1931, and about $58 in 1933. The decline after 1931
was mainly the result of reductions in pensions by most 0£ the
railroads.
:i\1oreover, t hese voluntary plans contain 1nany elements of discrimination. In most cases, at least until recent years, the benefits
have been r elated to the pay of the final few years of service. vVhile
this has protected all employees to a certain extent against the
hazar d of change in price levels, it has nevertheless produced pensions which were much larger in proportion to the total value of
service rendered for executives and supervisory employees than £or
the rank and file. Moreover, the continuous-service r equirements
have discriminated against low-salaried employees as compared
with those in official and executive positions. And, as has already
been pointed out, there are many elements of insecurity, inadequate
financing, and lack of sound legal basis in pension systems even at
the present time.
Apart from these inadequacies in the plans themselves, industrial
retirement systems have entailed certain unfortunate social consequences. A concomitant of these plans is a hiring-age limit which
forbids the employment of persons over 45 to 55 years old. "\iVher eas
the genesis of these age restrictions is frequently to be found in
conditions other than pension plans, the pension systems, none the
less, have introduced a further reason for keeping these limits in
effect. The apparent desirability, from the strictly company viewpoint, of maintaining low hiring-age limits might, in the main, be
eliminated by a modification 0£ existing regulations. This modification would entail a provision that employees might receive upon
retirement age whatever pension they had earned during their
period of actual ser vice, without forfeiture because of failure to
remain in the ser vice of a single employer. Moreover, the provisions o:f pension plans which attempt to tie employees to a particular firm are undesirable even though their actual effectiveness is
open to question. Insofar as they have been effective in this direction, however, they are not desirable.
Generally speaking, industrial pension systems viewed as a manugerial device to limit superannuation among the personnel, clear
a

Based on material supplied by Industrial Relations Counselors, Inc., New York.

178

OLD-AGE SECURITY

ehannels of promotion, and add to the relative attractiveness of the
employment of a particular firm, and, in general, improve personnel
efficiency can be helpful and successful, although for various reasons
they have frequently not had such results. Viewed as a means of
providing security to industrial workers in old age, because of their
limited application and restrictive provisions requiring long and
continuous service for a single employer they are wholly inadequate. Nor do they give promise of substantially adequate protection in the future. Social insurance with a far broader coverage
and without these restrictions is essential to old-age security. Social legislation aimed to provide insurance against old-age dependency will in no way interfere with the solution of these strictly
managerial problems. On the contrary, a social insurance scheme
aimed to prevent old-age depen-dency by imposing a unifor!Il burden
on the pay rolls of all industries and employers, by spreading over
the whole employed conununity the costs of the high proportion of
aged employees which characterize many firms maintaining private
pension systems and by making absolutely secure the payment of
such part of the total benefits as is provided under the law, will be
of material assistance to companies which for various reasons may
wish to supplement the stipulated benefits.

RAILROAD RETIREMENT ACT

.

The first important legislative measure toward the prov1s10n of
old-age security in the United States was the Railroad R etirement
Act passed by CongTess in 1934. 16 This established contributory
old-age annuities for employees of steam railroads, sleeping-car companies, and express companies. vVhen the act was tested in the
Supreme Court in 1935, it was declared unconstitutional by a five-four
decision on the ground that "several of its insepar able provisions
contravene the due process of law clause of the fifth amendment"
* * * and that "the act is not in purpose or effect a regulation
of interstate commerce within the meaning of the Constitution." 17
A second Railroad Retirement Act was passed by Congress and
approved on August 29, 1935.18 The new act provides annuities for
employees on the same scale as the first Railroad Retirement Act.
As in the first act, credit toward annuities is guaranteed the older
workers so that the system will function for them as well as for the
young men just entering the service. The worker who leaves railway
employment before reaching the age of 65 is entitled to the annuity
16

Ch. 868, 48 Stat. 1283; 45 U. S. C., § § 201-214.
R<llilroad Ret-irement Board, et al. v. Alton Railroad Co. et al., 295 U. S. 330.
18 Ch. 812, 49 Stat. 967; 45 U. S. C. (1935 Supp.), § § 216-228.
17

PROVISIONS IN THE U N ITED ST ATES

179

due him on the basis of the number of years of r ailway service. Annuities vary with the wage and the number of years of service. A
higher percentage of the first $50 of monthly wages is used in computations so that the annuity drawn by the lower -paid worker constitutes a higher percentage of his average wage than the a11nuity of
the better-paid man. This is sound public policy, as the low-paid
worker needs a higher ratio of his wage for subsistence. There is a
death benefit, payable to widow or dependent next of kin of persons
dying after beginning to receive, or becomi11g entitled to receive, an
annuity; and retiring employees may elect to receive reduced
annuities and have the annuity continued to a surviving spouse.
Employees in the active service of stean1 r ailroads, sleeping-car
companies, and express companies, and former employees on leave
of absence or furlough, subject to call for ser vice and r eady and
willing to serve, as of the date of enactment, August 29, 1935, are
included in the retirement system. All benefits under the act are
payable from appropriations from the general funds of the T reasury.
The effective date of the act is Mar ch 1, 1936, and annuities become
due and payable 90 days thereafter.

RETIREMENT SYSTEMS FOR PUBLIC EMPLOYEES
Approximately 75 percent of all public employees in t he United
States now enjoy old-age protection under retirement systems established pursuant to law and financed gener ally by employee and employer (Government) contributions.
The largest of the public retirement systems is the civil-service
retirement and disability fund :for civil-service employees of the
· United States Government. This fund was established in 1920, and
on June 30, 1935, had 48,665 annuitants on its rolls, to whom it paid
$48,082,396 during the fiscal year ending on that date. With an
active membership of 420,000 employees, it is the largest public employees' retirement fund in the entire world. Civil-ser vice employees
contribute 3½ per cent of their basic wages to the fund, and Congress
appropriates amounts which to date have been appreciably less than
the employee contributions. The congressional appropriations will
have to be greatly increased in fut ure years, as the systein contemplates full credits for prior ser vice, the costs of which are to be borne
by the Government. R etirement allowances are payable after 15
years of service and attainment of specified retirement ages. Seventy
years is the retirement age for most classes of employees, but for
extra-hazardous employments the age may be as low as 62 years. T he
average annuity in the last fiscal year Wlils $988.03.
Besides this large system t he F ederal Government ma.intains
smaller reti'rement systems for special groups of employees. The

180

OLD-AGE SECURITY

most important are those for the Army and Navy, which at the end
of 1935 had over 21,000 men on their retired lists. The men enlisted
in the Marine Corps, the employees of the Panama Canal Zone, the
Lighthouse Service, the Coast and Geodetic Survey, the diplomatic
service, the Coast Guard, and the commissioned officers of the Public
Health Service are all protected against superannuation by special
pension funds.
In addition to the retirement systems of the Federal Government,
several States and municipalities pension their employees. Nine
States at the close of 1934 had retirement systems for (general) State
employees with somewhat less than 100,000 members and 5,000 annuitants. Additional State and local teachers' r etirement funds had
560,000 members, 12,000 annuitants, and annual pension costs of
$20,000,000. Between 400 and 500 retirement systems for municipal
employees were also in existence, some covering substantially all
municipal employees, but the majority providing only for policemen
and firemen. At the end of 1934 these municipal systems applied
to approximately 160,000 employees and had 25,000 pensioners on
their rolls, with annual pension costs of $18,000,000.
A considerable number of public retirement systems are not on an
actuar ially sound basis. This applies to most of the policemen's and
firemen's funds and to many of the older retirement systems for
teachers. Even in the Federal employees' system Congress, until the
present year, failed to make any appropriations to meet the accrued
liabilities assumed by the Government for past-service credits. Only
a few of the public retirement systems, however, have thus far been
in serious financial difficulties, compelling their abandonn1ent or a
reduction of promised annuities. On the whole, public employees .
enjoy far better old-age protection than any other group in the
population, although that protection is neither complete nor perfect.

Chapter IX
OLD-AGE SECURITY ABROAD
ENERAL INTEREST in providing old-age security mani:fested itself in Europe about the middle o:f the nineteenth
century. The earliest legislative efforts were made in Belgium, France, and Italy. P urely voluntary old-age and invalidity
:funds were set up and offered to the working population, which was
permitted to purchase small old-age annuities. Very little, however,
was accomplished :for the wage earners by this voluntary insurance.
Even the addition o:f subsi,antial governmental subsidies did not
induce many workers to make provision :for the1nselves.
Subsequent legislation toward old-age security followed two patterns. One was that of noncontributory assistance grants ":for the
aged and deserving poor" on a plan similar to that adopted in 1891
by Denmark, the pioneering country in old-age assistance. The other
was that o:f compulsory contributory old-age insurance adopted by
Germany 1 in 1889 and patterned a:fter that o:f the customary miner's
:funds that had existed in European mining communities :from the
Middle Ages.
By the outbreak o:f the World War, systems of noncontributory oldage assistance had been established in D enmark, Great Britain, New
Zealand, Australia, N ew:foundland, and Iceland, and nominally in
France, while contributory insurance had been instituted in Germany,
Luxemburg, Rumania, and Sweden, and legislated for later operation
in the Netherlands.
Since the war, t wo British Dominions, Canada 2 and the Union of
South A:frica, one South American state (Uruguay), and the island
of Greenland have established gratuitous systems, while Norway has
enacted a noncontributory old-age assistance law but de:ferred its
operation. In this same period, 15 countries, including France,
Great Britain,8 and Italy, have legislated and organized general con-

G

1

See appendix X for an account of the German system of' contributory old-age
insurance.
2
See a ppendix VIII.
8
The British systems of noncontributory and contributory old-age insurance are described in appendix VII.

181

182

OLD-AGE SECURITY

tributory old-age insurance measures. A half dozen other nations
have established insurance schemes for selected industrial groups.
Table 39 gives a srunmary of the countries which have enacted
legislation for old-age security through noncontributory old-age
assistance and contributory insurance, together with the year of
enactment of the law and its coverage. From this summary it will
be noted that in the British Dominions and a half dozen other countries, the state, by a no.ncontributory plan, provides a gratuitous
grant on proof that the aged person has insufficient income for selfsupport and has been guilty of no serious misconduct. A tabular
summary of t he principal provisions of the ·foreign noncontributory
old-age assistance laws may be found in table 40.
Twenty countries abroad, including all large industrial nations
and many small ones, have enacted legislation for the protection of
superannuated industrial workers through contributory insurance.
In addition to these 20 countries there ~re general old-age schemes
operative in several Swiss cantons, as well as limited systems in five
nations in Central and South America. These limited systems give
protection to selected groups of wage earners, chiefly railroad workers, seamen, and employees of public utilities and banks. Most of
these laws, including both those of general and those of restricted
coverage, insure against invalidity as well as old a.ge, and two-thirds
of them also include survivors' insurance, i. e., pensions £or the surviving widow and children in t he event of the insured worker's death.
TABLE

39.- 0td-age ass'istance and insi1,rance l eg'islation in foreign, c01mtries
through 1933
A. NONCONTRIBUTORY OLD-A.GE ASSI STANCE LAWS

Country

Year
when
passed

Australia t______________
Canada_________________

1908
1927

Denmark____ ___________
France t (see also sec.

1891
1905

Great Britain (see also
sec. B).

1908

Greenland._____________
Iceland ____ ___ .__ _______
Irish Free State_______ __
Newfoundland____ ______
New Zealand._ _________
Norway (will not go into
effect until announced
by royal decree).
South Africa____________

1926
1909
1908
1911
1898
1923

Uruguay 1 (see also sec.

1919

B).

C).
1

1928

Coverage

All citizens with insufficient income, resident 20 years.
All citizens with insufficient income; resident in Canada 20 years, in
Province 5 years.
Citizens with iusufficient means, resident 5 years.
All citizens with insu fficient means.
Citiz.e us with insufficient means; 12 years' residence since age 50 for
n atural-born citizens; 20 years' residence in all for naturalized subjects.
All Greenlanders without subsistence income.
Citizens with insufficient means.
Citizens with insufficient means, resident 30 years.
All citizens with insufficient means.
Citizens with insufficient means and 25 years' continuous residence.
All citizens with insufficient income.
All citizens (of 5 years' standing) with 15 years' residence out of preceding 20 years; other persons with 25 yea.r s' residence out of preceding 30 years; iusufficient income.
All persons with insufficient means. ( For n aturalized subjects or
aliens 15 years' residence is required.)

Old-age assistance legislation combined with noncontributory invalidit)· benefits.

OLD-AGE SECURITY ABROAD
TABLm

183

39.- 0ld.age assistan ce and insitrance l egisla-tion 1111, fore'ign, coivntries
through 1933- Continued

B. COl.VlPULSORY CONTRIBUTORY OLD·AGE INSURANCE L.A WS OF GENERAL
COVERAGE

Country

Austria

12. . . . . . . . . . . . ..

Year
when
passed
19273

Belgium 2__ . _____ • • _ __ __

1924

Bulgaria 1 2_____________

1924

Chile 1__ ___ ________ ____ _

1924

Czechoslovakia 1 2_ ______

1924

France 1 2 (see also sec.

1910

A).

Germany 1 2 __ • _ •• -· •• -·

1889

Great Britain 1 2 (see
also sec. A).
Greece 1 2··----·---·--··
Hungary 1 2_·----·-·--··

1925

Italy

1922
1928

1 •• • ••••• ••••••••• •

1919

Luxemburg 1 2_ •••••••••

1911

Netherlands 1 2··--··--··

1913

Poland t 2...............
Portugal 1............ ...

1933
1919

Rumania '··············

1912

Spain.·---··--·--····-··

1919

Sweden 1_···---·· ··----·

1913

Union of Soviet Socialist
Republics. 1 2

1922

Yugoslavia 1 2__ ·-···--··

1922
1924

1907

Coverage

Workers in indust.ry and commerce, including domestic workers,
except casuftl domestics. Special schemes for agricultural workers,
salaried employees, and miners.
All wage earners, including agricultural workers and domestics (except
casual domestics); and independent workers with incomes below
18,000 francs a year. Special schemes for sala ried employees and
miners.
E mployed persons, including agricultural workers and dome;;tics.
Special scheme for public officials.
Wage earners under 65 earning Jes:, than 8,000 pesos a year; independ
ent workers wi.th annual incomes below 8,000 pesos a year.
Employed workers over school age and under 60, including agricultural, domestic, and home workers. Special schemes for salaried
employees, miners, state employees, employees of statutory corpo
rations, suc,l:l as railways. Special act for independent workers,
passed in 1925, not yet enforced.
All employed persons under 60 whose annual earnings do not exceed
18,000 francs a year in cities with over 200,000 inhabitants or industria l a reas, 15,000 francs elsewhere. (Income limit raised by 2,000
francs in respect of each child.) Persons employed in agriculture
subject to insurance against old age and death only. Special
scheme for miners.
All workers, includini agricultural, domestic, and home workers.
Special scheme for salaried employees with annual earnings below
8,400 reichsmai;.ks. Special ~cheme for miners.
All workers, incfuding agricultural workers and domestics; salaried
employees with incomes below £250 a year .
All persons employed in industry and commerce.
All pe,rsons employed in specified employments. Employments
may be added by Minister's order. Salaried employees with in
comes below 6,000 pengos a year. Special scheme for miners.
All employed persons, including agricultural and domestic workers.
Salaried employees with incomes below 800 lire a month.
Workers in industry and commerce. Special scheme for salaried
employees in industry and commerce.
All employed persons, including agricultural and domestic workers,
whose annual remuneration does not exceed 2,000 florins. Insured
persons whose remuneration rises above 2,000 florins remain liable
to insurance. If their remuneration has been above 3,000 florins
for some time, they are exempted at their request. Special schemes
for railway workers and miners.
All workers in commerce and industry. Insurable wage limit.
All employed persons over 15 years earning less than 900 escudos
annually.
All persons employed in industry and commerce, and craftsmen.
Special scheme for miners in Ardeal, which includes survivors'
insurance.
All employed persons whose annual earnings do not exceed 4,000
peseta. Domestic servants excluded.
All citizens between 16 and 66 years unless already guaranteed pen
sion under army, navy, etc.
All manual workers; engineers and skilled technical workers; navigating staff in civil aviation; various cat.egories of salaried employees.
All wage earners except household casuals, farm labor, and sea fishermen. (Not yet enforced.)
All workers and other persons employed under mining act.
Salaried employees in Slovenia and Dalmatia who have reached
age 18 and whose annual earnings are not less than 150 dinari.

Old-age insurance combined with invalidity insurance.
' Old-age insurance combined with survivors' insurance.
3 The 1927 law for workers bas not yet been put into effect. An old-age assistance scheme takes care
of aged workers on a basis of need.
1

184

OLD-AGE SECURITY

T A BLE

39.-0ld-age assistance and i n surance legislation in foreign coun tries
through 1933-0ontinued

C. COMPULSORY CONTRIBUTORY OLD-AGE INSURANCE LAWS OF LIMITE D

COVERAG E

Country

Argentina,'-----------Brazil 1 2 ________ _ ______ _
Cuba, i _ ______________ _
Ecuador'--------- ---- -Switzerla.nd:
Canton Glarus'---AppenzelL ________ _
Basel Town i ______ _
Uruguay 1 J
sec. A).

(see also

Year
when
passed

Coverage

1921
1924
1923
1926
1931
1927
1928

Public-utility employees.
Bank staffs.
Railway workers.
Dock workers.
Staffs of public-utility undertakings.
Seamen and harbor workers.
Staffs of banks.

1916
1925
1931

Legal residents between ages 17 and 50.
All legal residents between ages 18 and 64.
All persons between ages 20 and 65 who have been resident in the
Canton for 2 years.
Staffs of public-utility undertakings.
Staffs of banks and stock exchange.

1919
1925

1 Old-age
1 Old-age

insurance combined with invalidity insurance.
insurance combined with survivors' insurance.
SOURCE: Compiled from International Labour Office, Compulsory Pension Insu rance, Studies and Reports, series M, no. 10 (Geneva, 1933); International Labour Office, Noncontributorv Pensions, Studies
and Reports, series M, no. 9 (Geneva, 1933) ; Armstrong, Barbara Nachtrieb, Insurin g the Essemials
(Macmillan Co., New York, 1932).

The shift of interest abroad from gratuitous old-age assistance to
contributory insurance has been prompted mainly by t"o considerations: (1) The widespread objection to the "means-test" basis 0£
noncont ributory old-age assistance and the desire to make grants
available as of right on arrival at old age; (2) objection to the financjal strain upon the public exchequer occasioned by the increasing
percentage of aged persons who qualified as in need of help and
therefore were entitled to old-age assistance.
Both France and Great Britain, in setting up their cont ributory
old-age insurance schemes for wage earners, recognized that in addition to the insured population there would always be a small number
of needy aged from higher income levels and other uninsured economic groups who would not be eligible for insurance benefits. They
have therefore retairied their noncontributory plans to provide old-age
assistance for these destitute uninsured men and "omen.
T he French old-age insurance scheme, which was included in the
general social insurance bill of 1928, merits special mention on the
score of transitional arrangements, i. e., the provision made for older
workers. Casual reading of the measure might suggest that little
security is afforded this class of insured persons, as only a benefit
proportioned to their years of insurance is guar anteed them. T he
clause on minimum, pensions, however , modifies t his situation r adically and guarantees all pensioners who have been insured at least 5
years (no pension being due f or a shorter insurable period) annuities
which amount to five-sixths of the normal full pension of the lo"estpaid workers and nearly one-half of the normal full pension 0£ tho

:z.ws through 1933

AnnuaJ.

en:

ides.

taken at

£3210s.; ·
friend!:
and tr
allowa
childre,
sions.
$125___ ___

100 to 20,
ing witl

life annu-

Earnings
400 fran
ings (61
recipien
3childn
£39 annual income c
s; £26 5s. annual inc,
e and personal effe,
y or trade-union.

I

,--------- ----------?roperty. £15 12s. 6d
aal effects; sickness I
ion.

._----____ j-£39 ___ ___
r society; house (incli
n which recipient !iv
assistance authority.
y owned
md from
>mputed

£24 for wt
£18 for
sons.

in terms

JO pe.sos __

\

..

184

OLD-AGE SECURITY

T ABLE

39.-0ld-age assistance and insurance legislation in foreign cou,ntries
through 1983-0ontinued

C. COMPULSORY CONTRIBUTORY OLD-AGE INSURANCE LAWS OF LIMITED
COVERAGE

Countr y
Argentina 1 , _____ _ _____ _
Brazil I i ________ __ _____ _
Cuba 1 , _ _____________ _ _
Ecuador'-------·------Switzerland:
Canton Glarus 1 ___ _
AppenzeJL ________ _
Basel Town'------Uruguay 1 2 (see also
sec. A) .

Year
when
passed

Coverage

1921
1924
1923
1926
1931
1927
1928

Public-utility employees.
Bank staffs.
Railway workers.
Dock workers.
Staffs of public-utility undertakings.
Seamen and harbor workers.
Staffs of banks.

1916
1925
1931

Legal residents between ages 17 and 50.
All legal residents between ages 18 and 64.
All persons between ages 20 and 65 who have been resident in t he
Canton for 2 years.
Staffs of public-utility undertakings.
Staffs or banks and stock exchange.

1919
1925

Old-age insurance combined with invalidity insurance.
Old-age insurance combined with survivors' insurance.
SOURCE: Compiled from International Labour Office, Compulsory Pension Insurance, Studies and Reports, series M, no. 10 (Geneva, 1933); International Labour Office, Noncontributory Pension&, Studies
and Reports, series M, no. 9 (Geneva, 1933); Armstrong, Barbara Nachtrieb, Insuring the Essentials
(Macmillan Co., New York, 1932).
1
2

The shift of interest abroad from gratuitous old-age assistance to
contributory insurance has been prompted mainly by t,To considerations: (1) The widespread objection to the "1neans-test" basis of
noncontributory old-age assistance and the desire to make grants
available as of right on arrival at old age; (2) objection to the financjal strain upon the public exchequer occasioned by the increasing
percentage of aged persons who qualified as in need of help and
therefore were entitled to old-age assistance.
Both France and Great Britain, in setting up their contributory
old-age insurance schemes for wage earners, recognized that in addition to the insured population t here would always be a small number
of needy aged from higher income levels and other tminsured economic groups who would not be eligible for insurance benefits. They
have therefore retained their noncontributory plans to pro,ide old-age
assistance for these destitute uninsured men and women.
The French old-age insurance scheme, which was included in the
general social insurance bill of 1928, merits special mention on the
score of transitional arrangements, i. e., the provision made for older
workers. Casual reading of the measure might suggest that little
security is afforded this class of insured persons, as only a benefit
proportioned to t heir years of insur ance is guaranteed them. The
clause on 1nini111,i1,1n v ensions, however, modifies this situation radically and guarantees all pensioners who ha-ve been insured at least 5
years (no pension being due :for a shorter insurable period) annuities
which amount to five-sixths of the norm.al full pension of the lo"estpaid workers and nearly one-half of the normal full pension o:£ tho

TAnLE

40.-Principal provisions of f oreign noncontributory old-age assistance laws th.rough 19SS
QualiRcatioos for rc,cipicot.s

Oou.otry
Ago

AUSlnL.11111 ' · ············· ·

UXIS

M:.~:•.·

R6$1deooo

OJUz.oosblp

Othor Dlsa.ue.110·

~.~j~

Annual•inooma Lim it.

Property limit

catlom

DrlllslJ subJoct.. ___ 20 )'&US in Commonwcoltb •• G..••.. A, n, 0 • . • £400 •• .•.• .••• ••••.•..••.• •••••. ••••.. £88.............. . . . . .

Property exeroptlon

Annuo.J.-incomo oz.
emption

!~use·io·\,.-ti1Cb·rec1vieo."t·;;;,ctai."•····

£3210s.: beocfit.sfrom
trieodly societies
a nd trade uaioas;
allownuces from
cbildreu; woT pen·

onoo.1
Co.md.a.

ElleotJve la
8 Provina,.s; A.lberLD.,
British OolumlJla.
J.(en llobn. , Now
Drunswlolc, Nova

S col.le..

19'17

1\(I\Xintw:u .£4S tas. a year.I Redu ood
by.£ l ror e a<:h .t: tOor property tlxoop1

Admlnistnulve rMpon•
s.lbllll Y

Source of (ulld

Amou.ot of 1::ran t

Comrnoowenllh •• . .

~•u••···

Federul Oi,vamu.1ent.

exem11t. property.

sions.

70••••••. . .•.. do•••• •• •••••• ~,!o~ 1~!'i~lnlon;6)·631s ••••••.• B . . .... . . . A~~~al~~:~eori::~ur~~~~~~!~f
0
personol propert.r-tovernmeot OD·

s12.1••• • ••• · -· · ··· ···· Maximum $2-10 A yeci.r;1 reduNd by
amouot o! rcciploot.'s income {less
exem ption).

9i Do1Dlo!on; Vi

o:,•. ... .. noriulrod .......... t, yoru·s Io St11to......•.••.... • •.•..•• ].), It lo"... Annual in oome of rronerty t.nken nt
• perooot or Its: vi.iue.

100 to 200 k r. ( vary•
1ng with 100,1.tlty).

~ : St,11&; ~h co1111uuu\lS•.•. Shmcd by Oen Lrcil
OoYer nmon t find
localltl~.

nuUy purcbn.sable wit h i t.

r ro\'lnce. . . 8borOO by DoU)lnlon
oud ProvJuoo.,,

oourlo,

Prlnoo Eclwtu'd bland, S~btcbowno.

Denm&rll:................

ISD1

10••••••••••••do... . ............ None •••.••• ••.••••••• ••••..••.•• •••. 0 • ••••••.. loeomo from cnpltnl equal to ll(o :10•
ouity J)UICh!lSl\ble Wilb

Income Crom roplU.I equ"I to nee 9-U.nu•
ity purch&SPble with it.

u.

Orsn Brit6Jq r.. ••• •• • ••

UICS

Oreenl&Dd.-n••······ ..

1020

]C18laod.-.... . . . ...... ....

1900

lNb. Free Stat&. . .......

loo-3

3~~w~~

.~::::::: _Roqulrod •••••••••• ••.••••••••••••••••••. .•••••.• : --··· · ··--·-··--· · .In n;:-i<ous circum~tooces. •••••..•• -·· ··-·· · ···············
70••.•••• Not r&!llllred.~ ••-

30n~:s: 11i, ~~:1~e,aa;:~ ........ E••••••••.
tor c>the~.

New Zeab.od............

UHl

lbOS

?li••••••• •••••do..... ........ '2Cl :rcnn; lo State. •••• •• • ••••••••• ••• • H • • · · ·· · •·•
M!~::• Brlttsb subject•... 2S yoors In Stute. ..•. ..•... •• u . • •••• A£~' D ,

Norway ''··· ···-.. •·••· 1m

Urueu&Y t...............

11)28

101'1

Do.

IJOn.'!loo; 0011Jll)UD6 J}u)'$

baln.a~ .

~:II r:~

······················--···:--··::-:·--·1::····::::··-----·--····
ft_~:!°::ifZ:e~'::ip:~rcts;£si~l~6t·0~~g~~~~:

A:~t~al(~~rcrm~h~~mp~o~rf:7;;:~~t £39 Ss.....•. . .••••••.. A~::i~~ i1~~0
ally e njoyed by recipient) compmed
friend!>' soeioty OT trade•un[ou.

1

Amouu t Ond b y disLrlct. c1mncll. •.. .. Di!trlet PB.TllY T(lht,bursod
by SUit.ft.
Poll tlll oa n]J per$QO.'f b&--

Mlnlmmn20kr.ayeor; maximum200
kT. e. year.
).bximum 109, a week: reduced i n
proporlloo to rccfpien L'.s Income.

LW~ D US ond 00 years,

Stns.o•••.•••~-· ··············

Do.

nt S percent.: balance at JO percent.

~~50~ee~~n·u~··1nco~&··;Jf·proPtrtY· ·£sa:· ~a;;ied··oo11P1~:· ·:cw:::................................[·£39 • • •••• ••.......••.. ~:i~~~~ .£•1(119$. I\ year,J reduced· ,o· .....3:..............
fixed at 10 perooo, ror o.11 l)roper t.y
exceJ>l
properly (.C5Q).

f'unero.1 boneftt from friendly socieLY; houso (Including furn!•
proportion to means; 1acreased ror
ture. aod perSonal effects) lo which reclplcm lives provided
recirieot.s with 2 or more depeodenl
ownerShil> is tmus!erl'e(J to essist4nca 1tuthorit y ,
childre n.
70•..•.•. Required •••••• • • - · · · · ···············•· '"·· · ··· · o•••••• •••••••••••• I oado<iua1e income.••. .•..••.••.•....• · · · · - ··········-··· · ··· · · ··-·- ··· · ··· -······--······· · · ··· ··· ··· . . ••.•• . .•. ..•. • . . • . •••• Fixed so l11sl GO percent or uroouot
will b1,1y necessaries of IHe.
GS... .... Not requfffi.l •••. . • 15 ye11rs out of 20 ju.st. beloro
£24 far white per.sons; Maxhn uin £30 a year for white perA~!~~ i~::.u1~~opo/edai~
A~~~~~~1:rt::c1fp?.!:~1:n~i'r~~
.£ IS for colored per•
sons; ma.:id.mum £IS o year for col•
~:~~artirr.fio~J~bi
ond from ~I other twim•e:s'ed n.sset.,
sons.
ot.h~r UDtn\' e:!lte4 assets computed
io proportion
!or 6 years; 2.'.) yeBCS oul of
com.Puled at 10 pe.room.
st. 10 percent.,
30 (or othc~.
00•••••••••...do...•••••••••• Nooe rnQuired !or natu.rnl• "'· --·- 0 •• •••..•• Propcrtr must be expr ~
in ter ms 202 pesos~ year• ••• • •• Property rousl be e:tpressed in terms 10 J)('.SOi••• • • • ••••••• •• Mlldmum 00 ~ s 9 year; reduced in
boru sub)ects; Hi yonrs for
or n.nnu:al inoome.
of nuaunl looome.
proportion lo rocl1>ie.11t's me:aw.
nauu&ftitd 1mblects or

exempt

einOO.•

S..<b A!rlcn.·-· ········

SU\te pay~ ~-40 fmnc, OD CACb

70. . ..... Urltlsb subJoot•••• 12 )'0(U"S sinco4ge 50 !or DRt· -· ·-··· · E . ........ Annual lncomo from Brs.t £375 prop. .£40 17s. 6d... . . . ...... locoma from £25 of property; £3'9annunl income dedvo~ lrotn Mt1xlmum llls.n week; n,duced la pro• Sto.to•••••••••••••••••••••••• Cea tral Ooverumea t.,
urol•bor-ncilltens '20years
ony (other t.huo property 1)(1,l'SOD•
souroes 01l1e.r thon e,,rnings; .£?6 5$. annual income derived
portion to recipient's JnOOmt,.
for IL'\turollzad sub~tl~~~~tb~·~~g:e:tL)1r:r~~~
~~o~lr~:C~1~C:~1~~~~~~o~Dt~!lA):.~o:~. etlccl$; slckn e&S

. 1~~.'

N ewrou.cdltmd.... .... ..

e omings of Tccfplont,
-too frallcs from su•
i.ngs (000 rraucs It

j\forrled oouvlt11, mnxiuuuu 000 lo,.~
k r.•: si ngle mnn, m.ox.iwum 402 to
G7S k r.•; sh1gll!I womo.u, 11.1r1ximum
378 10 &12 kr.•; adjusted to me..'lm.
}l.(axiJ;num roo to 000 froocs (vurylng
with loc:slily).1

--······ A,O. n ...

r~rsfl:~l{

n

• •• • • ••

£121.

£~Jt,:?~1To~!:l~';;~

.....

W peroonl State;

com1.11unei.

r.-4)

Do.

11oroeoL

State. •...•.•.•. . ••.• ...•.• . .

Do.

A OllUlbtr olspechil OlltlOonl

Do.

f~e~f:~~~~:.d

l0li$.1.

aliens.

Noooontributory grants befog replaced by contribu tory penslons.
• G5 for widow or bcneflclflry.
• Reduttd by S yeses ror claimants having 2 or moro d0pendent child ren u nder 15.
Will uot go into elfect until annou nced by royal deuee.
n. Good ebaraeter.
Ji.. Peno as ol non·Eurol)Mn exIra.ct.ion.
D. AborlgiDAI ru'l.tives Jivia g und~r tribal conditions.
O. Oesertioo or spouso.
1

1'

D. ~mprisonm&nt for dishononible actioo.
E. B &bitu a..l dru.nken.ness.
F. R eceipt.or poor relief wit-bin 3 ye:!ITT o( cl.Jlimiog.
0. n chuiv~ liable a nd able to 1;111pport.

.a. Aborlgl.nal nat:iv es.

n!~~t~:~reg~~~~~Tt. l n tero1Ulonal Labour Om~. Non~hibutorv Pemion.t, op. di.;
78470-----37

Armstrou,:.

(Facop.18<)

t.

'

,.

)

,.

I.

,

..

..

•j

..,
;

...
'

,.

....,

. r ·.
:.,·

..

.. •.

OLD-AGE SE CURIT Y ABROAD

185

next stratum of the insured. Thus, at least. a subsistence pension is
assured all annuit ants from the year of initial benefit payments.
All the insurance systems, except those of Sweden and the three
Swiss cantons, which cover the entire population, r estrict their coverage almost exclusively to employed worker s. From the standpoint of
needed protection, an old-age insurance scheme, of course, should
include all persons of low earnings, whether self-employed persons
or wage earners. The practjcal difficulty of collecting from the independent workers, however , has stood in the way of their inclusion on
a compulsory basis. All the administrative problems of a poll tax
are involved. It is on practical and not on theoretical grounds that
the usual cover age of old-age insurance laws is confined to persons
who can be reached through their employers.
It is worth noting that a Czechoslovakian measure enacted in 1925
calling for a separately organized insurance scheme for independent
'Norkers has not yet been put into operation. It should also be mentioned that Sw9den's experience has resulted in contribution delinquencies in industrial center s r unning ,Yell over 40 percent, which
suggests that the broader coverage is more nominal than factual.
Chile's system includes independent artisans, and several of the European laws cover certain selected classes of self-e1nployed worker s.
Contributions from both employers and the insured workers are
r equired in all these systems except those of Soviet Russia, Spain,
and the Netherlands. In all t he countries except Russia, the government contributes either by paying part of the premium or, more
commonly, by adding to the annuities which contributions will
yield. In Russia the entire cost of the insurance is assessed to the
employer who is in most cases the state itself. In Spain and in
the Netherlands the insurance cost of small basic annuities is shared
by employer s and the public exchequer. Employees contribute if
they desire to do so in order to obtain annuities more adequate than
the basic pensions. The British old-age insurance scheme, like the
other parts of their social insurance program, i3 based upon uniform
contributions and uni'form annuities, while the continental systems
graduate both their cont ributions and annuities in accordance wit h
the wages of the insured per son. The British sche1ne has the great
advantage of simplicity. It could be suitable, however, only in a
country without substantial variations in .the cost of living.
The pensions actually r eceived, stated in terms of foreign currency, mean little if anything to most Americans. For purposes of
illustration a comparative table which expresses the contributory
ol d-age pension as a percentage of the engineering laborer's wage
in each of the countries is given in table 41.
Tables 42 and 43 give a summary of the number of old-age pensioners in foreign countries who were in receipt of annuities in the

186

OLD-AGE SECURI TY

most recent year for w.b.ich the data were available. Table 42 also
shows t hese pensioners as a percentage of t he population of eligible
age, while table 43 indicates the var iation in these per cent ages in
several countries since the noncontributory pension systems were
placed in operation.
T ABLE

41.- W eekiy oontri b-utor y oldrage pensions f or v ariou-s countries in r el ation to week ly wages in those oountr i es
Weekly
Old-age
wages
Old-~ge unskilled pension
pens10n labor in as a per(weekly) 1 engineer- cent of
ing
wages
trades

Country

Monetary unit

Austria__________________________ ____
Belgium__ ____________ __ __ ___ ________
Czecboslovakia. _____________________
F rance ______. _____ ___________________
Germany_____________ ___ _____ __ _____
Great Britain ________ __ ________ _____ _
Hungary ____ ____ ______ ____ ________ __
Italy .. ------- ------------ ------ ---- -

scbillings. . _______________ _________
francs ________ __________ ___________
crowns. _____________ _______ ______ _
francs _____ ______---- -- _____ . --....
marks _________ ____________ ____ ___ _
sbilJings and pence_______ __ __ _____
pen gos ___ _____ ___ ________________ _
lire ______________ ____ ______________

15.23
61. 50
87. 50
72.00
12. 15
20/0
13.16
58. 14

38. 89
145. 80
170. 26
153.21
34. 89
44/2
23. 52
121. 88

39. 2
42.1

51. 4
47. 0
34. 8

45. 3
56. 2
47. 7

Calculated for a worker and bis wife at the age at which benefits begin.
S OURCE: Armstrong, Bar bara N acbtrieb, op. cit., p. 417. The pensions bave been calculated for a w orker
whose average wage during tbe whole period involved is equal to or falls within tbe same wage class as the
average weekly wage paid to unskilled laborers in the engin eering trades.
1

42.- Number of r eoip-ients of old-age assist ance ( noncontr i butory ) and
contribu t or y pension s i n for ei gn coun tr-i es and nu m ber of people of eligible
age

T ABL E

[Contributory and noncon tributor y systems]
Recipients
Country

Date
of
Jaw

Australia ___ ________ _ 1908
Austria______________ 1927
Canada._. _______ ____
Denmark _____ _______
France 1_ _________ ___
Germany ____ __ ____ __
Great Britain. _______

1927
1891
1905
1889
1908

Greenland ________ . __
Iceland. ____________ _
Irish
F ree
... . .
Italy ___
___State
__________
Luxemburg_____ _____
N etberlands. ___ _____
New Zealand __ ______
South Africa, Union
of.
Sweden ___ ____ _______

1926
1909
1908
1919
1911
1913
1898
1928
1913

T ype of law

Age requirement

N umber

N oncontributory __ M 65; W 60 __ _ 183,317
Contr ibu tory_. ___ 60 (unless em68,366
70ployed).
________ ___ __
ibutory __
_N
___oncontr
· do ___________
_ 65 _______ __ ___ _ 98,111
99. 830
____ _do ______ ___ ___ 70 _______ __ ____
65____ ___ ___ __ _ 369, 977
Contributory. . . . _ 55 _______ ______ 2, 126, 336
Contributory and
2,231,016
noncontributory.
__ 55
500
60 ___
- -----__________
---- _Noncontributory
__ __do. _________ __
2, 466
_____do ____ _______ _ 70 ___ ______ ____
65 ___ _____ _____ ll2,059
_. .__
. 65 _______ ______ 189, 698
_Contributory.
___. do __ ____ ____
1,425
_____do.. __ ____ ____ 65 _______ ______ 330,666
M
65;
W
6Q
_
__
N on
con___
tri;bu___
tory
___
__ do
____._ 65 _____ __ ____ __ 34,932
46,997
67________ ___ __ 3
Contributory .....
269,606

Recipients
N umber as per•
of eligible cen t of
number
age
of ellgible
age

Year

1932
1929-30

507,755
790,689

36. 1
s. 6

1934
1932
1930
1932
1932---33

372, 000
268,000
2,206, 000
3,593,613
3,466,000

26.4
37. 3

i 929
1928
1928
1933
1928
1929
1933
1933
1932

I
I

I
I

I

I

981

10. 790

170,468
3, 005, 444
18,071
404,000
108, 911
I 231, 100
4

469, 193

16.8

59. 2
64. 4
51. 0
22. 9
65. 7
6.3
7. 9
81. 8

32. 1
20. 3

5-1.3

E stimated.
These figures are only for the gratuitous grants. There are a number of otber special schemes for miners,
railroad workers, seamen and employed persons in Alsace-Lorraine, in effect at this t ime. H owever. for
tbese the age requirement varies too widely to be included here.
3 Estimated num ber of people 65 and over in receipt of ix.validity or old-age pensions.
i Population 65 years an<l ov~r in 1920.
·
1
2

187

OLD-AGE SECURITY ABROAD
T Al3LE

43.-Ji'ore•ign noncontributory oldrage assistance systems

[Changes in propor tion of recipients to population of eligible age since effective date of law]
Country and eligible age: r ecipients as percent of number of eligible age

AUS·

Year

tralia
M65
W 60

1891............ . .. ... . .. ..... .
1892._ . __. __ ··--··· ·---·-·· ---1893 . . · -· ············ · -·· ······
1894 ....... .. . ..... . . .. - .. . ••. .
1895... . ............ ....... ....
1896 •...... ·• · ····· · ···· ·····-1897 .. ·· · · · ····· ··· · ···········
1898. ·-·····-· · ·- · -·- ···- -·····
1899 ...... · -···-····· · ······· ··
1900..•. . -··· ···-·-···· ·-· · ·-··
1901. ...• .......... ...•.. .•.. ..
1902--······-····-·--··-·--·· ··
1903. · · ···-·-····· - · · ·····----1904...• . ... ...... . . . .... •... . .
1905.•• ·--· · ·•· · ··--··-·· · · ····
1906..... . . ······· · ···· · ····- ··
1907. . . . . . . . . . . • . . . . . . • . . . . . . . .
1908... .• . •. ....... ... . . . .••• ..
1909· - - ···· -··· ··· ···-···-··· ··
1910.. ··-········· · -··-·-·-··- ·
1911. . . . . .... -. ....... ... . .....
1912 .• · - · -··-· · ·- · - ----······- ·
1913• . ...... . ..• ... .•....... _. .
1914. . ... . . .......... .... . ... ..
1915...... .. . .... ............ ..
1916·- · · ···· · · · · ··· · · ··········
1917 .•. · - · · ······ · ········ · -···
1918 .. . ·-·· · · ·-·-········ ··-· ··
1919 . • •.. . . ........... _... . ....
1920.. . ... . ..... . . . .......... ..
1921..... ......................
1922..... . . ........ . .. ....... . .
1923........... . ... . . . . . . . . . . . .
1924... .... . ..... ..............
1925... . . ..... .................
1926 . . . . . . . • •. .. ·-· · · ··········
1927 .. ·•• ···• ·•····· · ···-··--··
1928........ ·-··············· ··
1929 .. .•. .... . •.. _.. . . . . . . . . . . .
1930..... . . .. . .... . . ... .... .. . .
1931.. .........•... ....... . . . . .
1932 . . · · · ···· · ··• · ··········· ··
1933 ...... . .. ...... . . . . .. . . ....

D enmark France
60 to 1922
inc.
65from
1923on

70

Great
Britain

Iceland

New
Zealand

South
Africa,
Union of

70 to 1927
inc.

60

M65
W 60

65

Percent
·· · ·-·-·-·
-·····-···
..........
······ --··
· ·· · ·--···
·······-··
-·········
· · · · ·····21. 3
30. 3
31. 5
30. 6
28. 3
25. 8
24. 4
25.0
25. 6
25. 5
26.3
27. 2
27. 7
28.0
27. 1
28. 8
30. 2
30. 3
29. 4
29. l
28.1
27.6
26. 7
26.9
27.0
26.7
26.6
26.9
27. 0
27. 4
27. 9
27. 7
28. 9
31. 0
32. 1

Percent
·· · -- · -·-......... .
-·----··-....•...•.
· · ••·· · · ··
......... .
- --·-·····
.... ..... .
. ..•... ...
..... ...•.
····- · - - -·
··-·······
·-········
-·-·- · - · ··
......... .
···---··-·
.. .. . .. . . .
......... .
.. .• ......
···-- -···•
· · •••·•··•
· ·······----- · -·· · •
. . . ...... .
. . ......•.
........••
· ·•···•·· ·
•.....•..•
········- ·
··········
...... •..•
.... ••....
··•···••·•
• · · · ··•• · •
· - --·· ··· ·
··•···•• · ·
--···-····
· · --·-····
20. 3
22. 0
22. 7
19. 6
20. 3

Percent
Percent Percent Percent
Percent
. ... . . ....
10.6 ··-· ··--·- ·--- -----· · ···-·-·-• · ···---· ·
13. 6 . .............•..• . . - ·--······
..........
14.3 · ·····•·•· ·········· ·· ···· ····
···· · · ·· ··
15.0 .................... ·•········
. . . . . . ....
15.5 .... •••••.... ....•.. ········-·
··········
16. 2 . ... . . . . .. · •···· ·· ·· ·•·· ···· ··
·• ·••·····
16. 5 ......... . .. ..................
··· · ·•····
17. 1 ·-·· ······ · --····· · · ·····•····
···· ······
17. 5 ······ --·· ····- · ·- -· ···· ··--··
····-···-17. 6 -- ·· ······ -· · ·· ·· · ·· ·······•··
·· -·······
18. 2 - · ········ ..•••..... · ·······-·
··········
18. 7 ·····---·· ··- ·--· · ·· ····-·-···· ··-- ····
19. 2 ·- · · ·· ···· ·-···· · ··· ---·· · ····
· · ·· ······
19.1 ···· ··· --· . . •....... · ··· ···-······· ·· ··
19. 7 ··-······ · · ·-·-· · . .. ·····• · · · ·
· ···--····
20.1 -· · ··· ·· · ··· · ··· ········· · ····
. . . . . . .. . .
20. 3 . . . . . • . . . . . . .... . •• _ . . . . . . . . . .
15. 4
20. 4
18. 6 . . .. . . . ... . . .. . .....
18.6
20.9
19.6
44.1 ···---····
28. 9
21. 5
19. 9
46. 8 ······• ···
32.2
22.0
20.7
59.7
17.6
32.8
21.9
22.2
61.2 -·-·· · ·· · ·
33. 3
22. 3
20. 5
61. 7 ··········
34. 3
22.5 . ....•.. ..
61.9 ..........
34. 4
22. 7 ···· · · · · ··
61. 4
18. 5
33. 7
22. 9 .... .•.•. .
60. l
18. l
33.5
22. 9 · · · · -·····
57. 2
18. 3
33. 1
22. 9 .•.... . . ••
56. 3
20. 0
32.3
23. 0 ·······-· 54.4
19.5
32. 2
23.8
20.0
55.8
18.4
32.1
24.0
19. 4
57. 6
18. 6
31. 7
24.4
18.3
58.5
19. 1
31. 1
38. 4
17.4
58. 7
19.7
31.1
44.0
17.0
59.0
19. 5
30.6
44.3
16.5
63. 6
19. 0
31. 3
43.0
16.0
65. 9
21.0
31. 0
42. 0
16. 0
72. 6
22. 9
30. 6
39. 7
16. 1 ...... . ...
22. 9
30. 5
38. 7
16. 1 .... _. . . .. . ... --. . . .
31. 7
37. 7
16. 8 •••• ······ ·· ···· •-··
34. 3
37. 4 · · • ······· · · ··· ·· · - · · ····· ··- ·
36.1
37. 3 . . . . .. . . •. ...... . ... .•........
·- - -·---· · ···· ·--· -· .••. .... .. . . •.•..... .•..•..• ..

The most significant p ost-war incident in old-age security legislation abroad was Great B rit ain's insurance act of 1925. H er accept ance of t he contributory insur ance principle after nearly a generation's experience with g rat uit ous assistance is of special import ance t o the U nited States. I t is of major interest, moreover:
that pensions were made payable to t he insured workers as of right,
shortly after the institution of the cont ributor y plan. This was
made possible through Government provision of the necessar y funds
for the older workers. The scheme will ult imately be self-sustaining.
In view of t he interest in t he Brit ish plans, detailed dat a on t heir
old-age security provisions are given in appendix VII.

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OLD-AGE SECURITY

The Canadian systems of noncontributory old-age assistance and
of voluntary annuities are described in appendix VIII, and appendix X gives a detailed account of the financial history of the German
contributory old-age insurance system which is combined with invalidity and with survivors' insurance.
Many of the foreign systems of old-age insurance are combined
with survivors' insurance, providing pensions to widows and orphans
of the insured. Appendix IX describes the provisions for survivors
in Europe.
In a number of countries which have compulsory, contributory
old-age insurance systems, persons who are exempt by change in
occupat ion or income level after a specified length of coverage in
the compulsory system are permitted to continue their insurance
voluntarily, by paying the equivalent of both employer and employee
contributions. These countries are: Austria, Belgium, Brazil, Bulgaria, Chile, Czechoslovakia, Ecuador, France, Germany, Great Britain, Greece, Hungary, Italy, Luxemburg, Netherlands, Poland,
Rumania, and Yugoslavia.
In certain other countries persons who are not covered by the
compulsory, contributory pension system are permitted to insure
voluntarily by paying their share and the equivalent of an employer's share of the contribution. This provision permits selfemployed persons and those outside the occupations compulsor ily
covered to participate in the benefits of the insurance system. Such
provisions occur in the contributory old-age pension laws of Austria,
Belgium, Brazil, Bulgaria, Chile, Czechoslovakia, France, Germany,
Greece, Hungary, Italy, Luxemburg, Netherlands, Poland, Spain,
Sweden, and Yugoslavia. Especially when combined with invalidity
insurance these systems require a medical certificate and are limited
to persons under specified ages. An income limit is also set in a
number of countries.
Only a few countries have voluntary annuity systems under government auspices. This type of voluntary insurance differs from
voluntary participation in a compulsory old-age pension plan in
that no income limits or occupational qualifications are set. I n
Canada,4 Ecuador, France, Japan, and the Netherlands, which have
such systems, it is found t hat relatively f ew persons (except in
France) take advantage of the opportunity for the purchase of
annuities from the government.
4

See appendix VIII for an account of the Canadian system of vol untary annuities.

Chapter X
FORMULATION OF RECOMMENDATIONS FOR
AN OLD-AGE SECURITY PROGRAM FOR
THE UNITED STATES
HE PREQEDING chapters have indicated the need for old-age
security in the United States, have summarized the existing
provisions for old-age protection in this country and their inadequacy in providing either relief or prevention of dependency, and
have reviewed foreign methods of meeting this problem. The present
chapter sets forth the steps taken in formulating a definite series of
proposals for consideration of the Congress in the framing of a legislative program. The recommendations which follow, while based
upon the preliminary proposals of the staff assigned to study the
problem, evolved into their present form through an extended process
of criticism and revision. Repeated conferences with the subcommittee on old-age security and with the executive committee of the
technical board resulted in successive adjustments and amendments.
The revised recommendations were presented to the advisory council
and to experts outside the committee's staff for criticism and suggestion. The conclusions here summarized include, therefore, the
contributions of many persons who with varied training and experience made a detailed analysis of the findings of the staff.
In entering upon an exposition of proposals for old-age security, it
.should be asserted that the "poorhouse" or "almshouse" method of
providing :for all aged dependents has been rejected by thinking opinion as both wasteful and inhumane. N oninstitutional assistance :for
those who are not in need o:f institutional care has become an accepted
standard o:f decent provision for the dependent aged.
In popular discussion of proper plans for the aged in an economic
security program, the issue of choosing between noncontributory oldage assistance and a system of contributory old-age insurance has
been raised. It seems apparent, however, that an effective old-age
security program for this country involves not a choice between assistance and insurance but a combination of the two. It seems equally
apparent that only assistance programs can serve to meet the problem
of the millions of persons who are, or soon will become, superannuated
and dependent. An insurance program coming into operation some
years hence obviously offers no solution for the problems of the near

T

78470-87-14

189

190

OLD-AGE SECURITY

future. It can, on the other hand, afford younger workers the opportunity to build up a certain protection against dependency in their
old age. Regular benefits are unquestionably to be preferred to assistance grants. They come to the workers as a right, whereas assistance
is conditioned upon a "means" test. Assistance, moreover, in fairness
to the legitimate demands of other needy groups, must limit all grants
to a minimum standard. Insurance benefits, on the other hand, can
be ample for a comfortable existence, bearing some relation to
customary wage standards.
An old-age insurance program could be expected in time to carry
the major, but never the entire, load. Administrative problems
stand in the way of covering in an insurance program all employed
persons who need old-age protection. Moreover, it may always be
expected that some persons whose income has been derived from other
sources than wages will come to financial grief and dependency in
old age. Assistance programs have a definite place, even in the longtime planning for old-age security. In consideration of the advantages of old-age insurance, the limitations imposed upon the F ederal
Government by our Constitution which would affect the adoption of
such a program were fully recognized.
The recoll1lnendations for a system of old-age i11surance outlined
in the succeeding pages must, therefore, be considered in the light of
the specific recoll1lnendations later advanced for a fundamentally
altered program of old-age benefits believed to be legally feasible at
this time. The reasoning which has led to these specific recommendations can be reported, however, only by outlining the more general
conclusions from which they have evolved.
The old-age security program proposed comprised three separate
plans:
(1) A Federal program of grants-in-aid to the State old-age
assistance laws.
(2) A Federal system of old-age annuities covering those classes
of employed persons which can be effectively brought within such a
system.
(3) A system of voluntary old-age annuities for persons of low
and moderate incomes not covered by the old-age insurance system.
No provision for any type of institutional maintenance ,,.-as proposed. Yet there are n1any agea persons not needing hospitalization
who require constant custodial care. The almshouses of most of the
States are most unsuitable to provide for the needs of these per sons.
The lack of factual data bearing on these county institutions and their
inmates prevented intelligent planning for this problem. I t "-as.
therefore, recommended that the proper F ederal agency undertake
at once a special survey of such institutions with a view to recom-

FORMULATION OF AN OLD-AGE PROGRAM

191

mending a constr uctive program for the improvement of institutional
maintenance of the aged.

OLD-AGE ASSISTANCE
As has been stated previously in this report, there were, prior to
the introduction of the Social Security Act, 28 States and 2 Territories with old-age assistance laws which professedly offered to aged
persons varying standards of aid. Six of these laws were practically
nonfunctioning. Four were just getting under way. Many of the
others, because of financial stringencies, had cut assistance grants
below a proper minimum and had long waiting lists of needy persons.
It would seem quite clear that, as a result of the financial problems
of many of the States and the indifference of others, State action
alone could not be relied upon to provide either adequate or universal
old-age assistance.
Basic Considerations.-The specific reasons influencing the recommendations for a program of old-age assistance were as follows:
(1) To help in t he expansion of the use of the old-age assistance
t.echnique, both to additional States and to all subdivisions of States
with nonmandatory laws. The provision of matching grants had
proved to be an effective means of aiding States to enact welfare
legislation.
(2) To permit and aid more adequate financing of State plans.
By the provision of Federal aid on a matching basis, not only would
a Nation-wide tax base be utilized as a source of a part of the funds,
but the use of a broader tax base within the State would be encouraged. T he inadequacy o:f the grants paid in most States with assistance plans indicated the pressing need for additional :funds.
(3) To permit and aid improvement in standards of administr ation, minimum grants, and coverage o:f St ate plans. The particular
standards which were deemed worthy of aid were:
(a) State-wide coverage either under State administered plans or
plans mandatory on State subdivisions.
(b) The establishment or designation of a State welfare authority
responsible for the administration of the plan. It was believed that
centralized responsibility :for administration not only would avoid a
diversity of operating standards in the subdivisions within the State,
but would permit closer contacts between the several States and
between the F ederal Government and the particular State in cooperating to r aise the level o:f effectiveness of assistance programs
throughout the country.
(o) The assur ance to any claimant for assistance of the right of
appeal to the State authority. This would provide a further assurance of the unif ormity of administrative effectiveness within the
State.

192

OLD-AGE SECURITY

(d) Adequate reporting through the requirement that complete
reports be made to the Federal administrative agency in accordance
with regulations established by that agency.
( e) The assurance that the minimum assistan~ grant made by
the State would provide a reasonable subsistence compatible with
decency and health when combined with any income the claimant
might possess. While the monetary cost of such reasonable subsistence would vary throughout the country, it was believed that a lower
limit to grants, related to local costs of living, should be established.
The provision of matching grants by the Federal Governmen,t might
well make it possible to raise the level of the assistance afforded by
State programs under normal conditions. An established minimum
would, however, a void the spreading of funds too thinly or the
progressive lowering of grants in time of financial stringency.
(f) A widened coverage through the elimination of a required
period of citizenship; the· reduction of the period of required residence
in the State; the raising of the property limit; and the lowering of the
age limit, at least after a few years. The diverse standards of eligibility in State old-age assistance laws greatly reduced the effectiveness
of assistance programs in meeting the growing need for old-age relief.
Since needy old persons n1ust be aided in some manner, arbitrary
requirements of years of citizenship and many years of residence for
eligibility for assistance merely shift individual claimants :from a
more adequate system of relief to a less adequate. With the extension
of assistance legislation to more States, the fear of an incursion of
older dependent persons into a particular State would be lessened.
The provision of Federal funds would lessen the justification of a
restriction of assistance grants to American citizens of long residence
in a particular State. Statistics of dependency and of relief experience during the recent depression indicate that the limitation of
assistance to persons aged 70 or over excludes far too great a proportion of dependent aged persons. Not only had the depression itself
left many older persons permanently dependent, but persistent changes
in our economic life have lowered the age at which superannuation is
like}y to occur.
The raising of the property limit was intended to permit greater
flexibility in handling those situations where the claimant might possess such useful assets as a home, a small piece of land, tools, or furnishings. To the extent that income accrues from these assets, this
income might reduce the amount of the grant necessary. It was proposed that a lien be placed against the estate of the recipient at least
for the amount of the assistance granted by the F ederal Government.
This requirement indicated a practical method whereby the States
might control expenditures or assistance to persons with considerable
assets.

FORMULATION OF AN OLD-AGE PROGRAM

193

(g) The use of the inadequacy of the claimant's income as the test
of need in providing a reasonable subsistence compatible with decency
and health, and not the inadequacy of the income of other persons
who might, on account of family or sjmilar ties, be expected to support the claimant. It was not the intention, in recommending this
narrower application of the means test, to discourage in any way the
support of needy aged persons by their relatives. Rather, it was to
avoid the distress which might occur when relatives obligated to provide support failed to do so or failed to afford sufficient aid. It did
not seem proper that the aged person should be excluded from assistance in such situations. Rather, assistance should be given, with the
possibility of legal suit for the recovery of the amount of such assistance brought by the State assistance authority against any legally
responsible relatives. It was considered more advantageous, both
socially and administratively, to encourage an arrangement whereby
legal action against ii1di:fferent relatives, where necessary, would be
brought by a public authority rather than by the needy aged person.
The possibility of such suits might go far to render them unnecessary.
It was believed that the offer of a subsidy by the Federal Government to an amount equal to the assistance afforded by the States (but
limited to $15 per month on account of any individual) under approved plans would not only cause the extension of State assistance
legislation but would make possible the adoption of these more adequate standards throughout the country. While earlier proposals
for Federal subsidization called for a ratio of Federal to State appropriations of but one to two, on account of the growing urgency of the
11eed for assistance programs, the financial stringencies faced by
1nany States, and the higher standards of legislation now called for,
it was deemed advisable to recommend the more favorable ratio of
dollar for dollar. To encourage effective administration, it was suggested that State expenditures for administration be matched at the
same ratio up to a maximum of not more than 10 percent of the total
expenditures for assistance in the State. With an adequate proportion of funds assigned to administration, the Federal and State authorities could cooperate more effectively in the development and
extension of improved administrative techniques.
Estimates of future subsidy costs, like all forecasts, must of course
be offered as probabilities rather than certainties. In table 44 are
presented two different estimates of the number of persons who will
be eligible for old-age assistance and the costs of Federal subsidy
over a period of years. The two sets of estimates were based on
different assumptions as indicated in the subhead. The data that
were studied as a basis for the estimates included material collected
and analyzed by the several State commissions on old-age dependency,

194

OLD-AGE SECURITY

statistics of the functioning of State old-age assistance laws, and the
history of the functioning of gratuitous pension laws elsewhere in
operation, particularly those of Denmark, Australia, and Canada.
The first estimate presented in table 44 was predicated on an assumption which seemed liable to error on the side of understatement of
upward trends. The average pension used in the computation, $20,
was undoubtedly too low for the period covered. This was felt to
be counterbalanced by the fact that t he increase in the ratio of dependency might well be less r apid than t hat which was counted upon
in this estimate.
T ABLE

44.-Estimates of the n1111nber of old-age assistance reoivients and th(;
am,O'U,nt of Federal siibsi<J;y to State old-age assistance program,s 1
Assumption I

Year

1936...- .... .
1937.........
1938... ......
1939.........
1940.........
1945.. ..... -1950.........

2

Number Amount Ntunbet
receivln~ of Fed- receiving
old•age eral sub· old•ago
assist• sidy (in as~istance millions ance
(in thou• of dol• (in thou•
sands)
Jars)
sands)
897
1,046
1,200
I, 372
1,580
2,293
3,153

I

$72. 2
131. 8
151. 2
172.8
199.1
289.0
397.3

Assumption I

Assumption II a

897

l, 307

1,765
2,287
2,746
3,631
4,675

Amount
of F edera! snb•
sidy (in
millions
of do!•
Jars)
$136.6
199.0
268. 7
348.2
418.1
552.8
711. 8

Year

1955.........
1960.........
1965. ........
1970... . ·- ...
1975. . . ......
1!)80....... . .

2

Assumption II~

Number Amount !Number Amount
receiving of Fed• recei,ing of Fed•
old·age era! sub• old•age era! i:ubassist• sidy (in assist• sidy (in
ance millions an,:e millions
(in thou• of do!• (in thou• of do!•
Jars)
sands)
Jars)
sandl')
4,140
5,304
5,735
6,026
6,405
6,800

$521. 6
668.3
722. 7
759.3
807.0
856.8

5,844
6. 801
7,169
7,533
8,007
8,501

$889. 7

I, 035. 5

l , 091. 5

1,146.9
1,219.1
1. 294. 3

1 These estimates assume that no Nation•wide system of contributor y old•age insurance or a substitute
therefor is in effect.
2 Assurnlng: (1) dependency rat.io of 15 percent in 1936, increasing thereafter by yearly increments of
1 percent to maximum of 40 percent in 1961 and subsequent years; (2) average grant of $20 per montb: (3)
FedE\ral subsidy of one-half total costs, excluding tbat portion of individual grants in excess of $30 per
month and that portion or administrative expenses in excess of IO percent of total payments to individuals.
~ Assuming: (1) dependency ratio of 15 percent in 1036, increasing to 20 percent in 1937, 25 percent in 1938,
30 percent in 1939, 33 percent in 1940, and thereafter. by 1 percent yearly increments, to maximum of 50
percent in 19.'i7 and subsequent years; (2) average total grant of $25 per month from State and Federal Oov•
ernment combined; (3) Federal subsidy of one-half of total costs, excluding that portion of individual
grants in excess of $30 per month and that portion of adrnini!-trative expenses in excess of 10 percent of
total payments to inrlividuals.
4 Full-year cost reduced for administrative lag.

In spite of the fact that the actual figures might vary from those
presented in any one ·year, it was felt that the trend indicated in
the two estimates presented in table 44 would be inescapable. There
were sever al r easons for this conviction. The assurance of an oldage assistance gr ant in case of need tends to produce the reaction in
the minds of many persons that the assistance grant is available in
old age as a matter of right. This impression would tend to become
still more widespread should the Federal Government participate in
the financing of such assistance. I t becomes reflected in the attitude
of children towar d supporting their parents and causes a mounting
number of claims for assistance. Moreover, the very principle of
gratuitous assistance, namely, that the less income the applicant has
t he more pension he receives, has an effect which is the inverse of
inducement to thrift. The number of aged persons who arr ive at old
age without any income is actually increased.

FORMULATION OF AN OLD-AGE P ROGRAM

195

The justification of a Federal subsidy to State old-age programs is
readily apparent fron1 a study of current conditions as to old-age
dependency, the shortcomings of existing State old-age assistance
programs, and the limitations of State and local public finance.
These matter s are discussed elsewhere in this report.1
Proposals to the Congress.-It was recommended to Congress :
(1) That the Federal Government offer grants-in-aid to those
States and Territories which provide old-age assistance :f or their
needy aged under plans that are approved by a Federal authority,
such plans to include proposed administr ative arrangen1ents, estimated administrative costs, and the method of selecting per sonnel.
(2) That the grants-in-aid constitute one-half of the expenditures,
including administrative expenses, for noninstit utional old-age assistance made by any State or T erritory under a plan approved by
this Federal authority, provided that in computing the amount of
said grants-in-aid not more than $15 per month shall be paid in
Federal subsidy on account of assistance provided for any aged persons in such State or Territory nor n1ore than 5 percent of the total
expenditures for assistance on account of administration.
(3) That a State or Territory, on account of administration, shall
be free to impose qualifications upon the granting of assistance to
needy aged persons, but that it be stipulated in the congressional
statute providing for the grants-in-aid that no plan shall be approved
by the Federal administratiYe agency unless it(a) Is State-wide or Territory-wide and, if administered by subdivisions of the State or T erritory, is mandatory upon such subdivisions; and
(b) Establishes or designates a State welfare authority which shall
be responsible to the Federal Government for the administration of
the plan in the State, and which shall administer the plan locally
through local welfare authorities ; and
( c) Grants to any claimant the right of appeal to such State
authority ; and
(d) Provides that such State authority shall make full and com.plete reports to the Federal administrative agency in accordance with
rules and regulations to be prescribed by the Federal administrative
agency ; and
(e) Provides a mini1num assistance grant whj ch will afford areasonable subsistence compatible with decency and health, provided that,
if the claimant possesses income this minimum grant may be reduced
by the amount of such income; and
1

See cha pters VII, VIII, and XIX.

196

OLD-AGE SECURITY

(f) Provides that whether or not assistance shall be denied to certain needy aged persons it shall be granted at least to any person
who:
(1) Is a United States citizen; a nd
(2) Has r esided in the State or T erritory for 5 years or more within the 10
years immediately preceding application for assistance; and
(3) I s not a n inmate of an institution; and
( 4) Has an income ina dequate to provide a r easonable subsistence compatible
with decency and health ; and
(5) Possesses no r eal or personal property, or possesses r eal or per sonal property of a market value of not more than $5,000; and
(6) I s 70 year s of a ge or older; provided tha t a f ter J a nuar y 1, 1940, assistance shall not be denied to an otherwise qualified pe rson a fter he is 65 years of
age or older; a nd

(g) Provides that at least so much of the sum paid as assistance t o
any aged recipient as represents the share of the United States Government in such assistance shall be a lien on the estate of the aged
recipient which upon his death shall be enforced by the St at e or
Territory and the amount collected reported to the Federal administrative agency.
Legislative Modifications of the Proposals.-These proposals
were embodied in the original economic security bill introduced in
Congress on January 17, 1935. This bill was introduced in t he
Senate by Senator vVagner (S. 1130) and in the House of R epr e~entatives by Congressmen Doughton (H. R. 4120) and Lewis (H. R.
4142). After hearings before the House , vays and N[eans Committee
this bill was not recommended. In its stead the social security bill
(H. R. 7260) was introduced and recommended for passage; this bill
became law on August 14, 1935. In the act as passBd Congress
adopted the basic principle of F e.deral grants-in-aid t o States " ith
old-age assistance programs meet ing certain r equii-ement s. H owever, several important changes " ere made in Congress in the proposed standards for State old-age assistance progr ams r equired as a
condition for F ederal subsidy . The principal legislative 1nodifications were the following :
( 1) The required condition that State old-age assistance plans
should furnj sh assistance sufficient, when added to t he income of
the recipient, for "reasonable subsi~tence compatible with decency
and health" was rejected by Congress.
(2) The proposal tha t t he test of need, to be used in approved
St ate old-age assistance plans in t he determinat ion of eligibility
for grants, be limited t o t he adequacy of the income of the aged
person, together with that of his or her spouse, was r ejected .
(3) Congress r ejected the proposal that a Sta te plan for old-age
assistance should not be ap proved :if it denied assi t ance to any
United States citizen who met t he r equirements of 1ninimum age

1' ORMULATION OF AN OLD-AGE PROGRAM
7

197

and residence, whose property and income were not in excess of a
specified maximum, and who was not an inmate of an institution.
Under the act as passed, a State which wishes to receive Federal
aid is left free to impose any requirements upon applicants for
assistance, except that it cannot impose a residence requirement in
excess of 5 years within the last 9 years immediately preceding application £or aid, or an age requirement of more than 65 years (70
years until January 1, 1940), or a citizenship r equirement which excludes any citizen of the United States.
( 4) The proposal that the Federal Government should share with
the States the cost of administration by payment of an amount n \)t
to exceed 5 percent of the State's total expenditures was modified
to a provision that 5 percent of the Federal grant pflynble to the
State for giving assistance to individuals should be paid to the
State. The State might use this amount either for paying the
costs of administration or for assistance to individuals, or both, but
for no other purpose.

A SYSTEM OF OLD-AGE ANNUITIES
With the recognition of the conditions which necessitate Federal
financial participation in buttressing existing techniques in meeting
old-age dependency in this country, there follows inevitably the conclusion that existing techniques will soon prove inadequate to cope
with this mounting problem. The trends in the proportion of aged
persons in our population have been discussed. 2 The estimates of the
number of aged persons probably becoming dependent have been presented.8 The improvement of assistance techniques and the financial
participation of the Federal Government in their operation would not
only meet more adequately the existing problem of dependency but,
through encouraging reliance on assistance in old age, might well
accelerate rather than retard the growth of Federal and State assistance expenditures. The experience of other countries lends weight to
_this conclusion . It was, therefore, concluded that a system of contributory old-age insurance should be established at the earliest
possible time to control the upward trend in expenditures for old-age
assistance. Only through the method of preventing dependency
through some form of cooperative thrift can the cost of relief be kept
down. Old-age insurance financed in large measure from the contributions of workers and their employers would serve to protect an
increasing proportion of our citizens from the hazard of old-age
dependency and at the same time retard the mounting trend of
assistance expenditures.
2

a

See pp. 139-141.
See pp. 149-154.

198

OLD-AGE SECURITY

A corollary reason for the early establishment of a system of oldage insurance was the urgent necessity of preventing the untoward
social consequences of increasing dependence upon old-age assistance
on the part of our citizens. Since assistance is granted on the basis
of need, it tends to discourage thrift, which would render assistance
unnecessary. Under a system of old-age insurance, individual need
would not be a determinant. Since insurance benefits would be received as a matter of right, based on contributions related to wages,
,-vorkers would be encouraged to maintain the best possible record of
employment and wages in order to earn the right to a high rate of
benefits. Savings or other assets would in no way reduce the amount
of benefits received but would provide a means of augmenting income
in the later years of life.
The Advantages of the Insurance Method.- The certainty and
regularity of insurance benefit payments would greatly enhance the
sense of security of the superannuated person. The prospect of recurrent investigations and possible changes in status and grants based
upon varying regulations, interpretations, and conditions in State
finances limit the degree of assurance which the recipient of assistance
can feel. Benefits paid under a system of old-age insurance would
be determined at the time of retirement and continued without change
during the period of retirement. The social advantages of an insurR,nce program seemed marked.
The conditions surrounding the payment of benefits under an
old-age insur,a nce system would enhance the economic effects of an
old-age security progTam. Under the method of old-age assistance
superannuated persons are encouraged to compete in the labor
market as long as possible to eke out a more satisfactor y existence.
Assistance grants may prove a subsidy to superam1uated workers
which will permit them to accept lower wages than younger workers
jn competition for jobs. Administrative authorities seeking to hold
down assistance exp~nditures may stimulate such competition as a
means of reducing grants in individual cases. The effect on thb
employment opportunities of younger men and upon wage r,a t.es
might prove most unfortunate. Under a system of old-age insurance, the opposite effect would ensue. Since r etirement from regular
employment could be made a condition for receipt of benefits, the
disp]acement of superannuated workers from the labor market would
be accelerated.
The certainty and regularity of benefit payments under an oldage insurance program would ser ve to stabilize in some degree the
flow of consumption expenditures on the part of our uperannuated
population. , vith a definite retire1nent income assured, superannuated per sons would be n1ore likely to maintain a normal r ate of

FORMULATION OF AN OLD-AGE PROGRAM

199

expenditure in good times and bad. As benefit payments rose and
more persons became eligible to r eceive them, it might safely be
prophesied that this added element of stability in our economic
system would have considerable influence. The less tangible effects
should not be disregarded. The confidence and sense of security of
,a mature group of citizens could not but affect the attitudes of
younger groups.
American experience with industrial pension programs, while
strictly limited in extent, and by no means universally successful,
serves as a basis for demonstrating the social and economic advantages of an old-age insurance program. The more adequate pension
programs have served to protect those eligible for benefits from distress in old age and thus have afforded some sense of security both
before and after retirement. Related to employment and wages,
such programs have tended to encourage rather than discourage continued initiative on the part of the prospective r ecipient. They have
also enhanced thrift through increasing the appreciation of the satisfactions of planned security. At the same time, pension payments,
where adequate, have served to prevent the necessity for superannuated persons to compete for jobs against younger and more active
workers. In these cases, they have increased employment opportunities, accelerated promotions, and prevented the depressing effect
on wage rates which the competition of superannuated persons might
cause. For a limited number of individuals industrial pension programs have served to make retirement from active life a cause of
satisfaction rather than a misfortune. The very limited coverage
and frequent shortcomings of most existing industrial pension programs prevent, however, any reliance upon such programs in meeting
the problem of old-age dependency facing the country.4 In the few
instances where private pension plans afford more generous protection than the public system here considered, the industrial plans
could be readily adjusted to supplement such a system. Only
through a uniform basic program can industrial employees generally
be effectively protected in old age.5
4

See p. 176 for a discussion of tbe limitations of industrial pension programs.
It was considered neither feasible nor desirable to exempt employers and workers
party to private pension plans from coverage under a compulsory old-age insurance program. A social insurance program serves a br oad public purpose and is designed to meet
l>asic needs. Private pension plans are adjusted to the interests of a relatively s mall
group of persons- those attaining retirement age with a record of faithful service for a
particular employer. To warrant exemption, existing private pension plans would need
to undergo thorough reconstruction in coverage, financing, standards, and administration.
At the same time, the Government would, under such an arrangement, face serious problems of finance and administration in attempting to safeguard both the general insurance
system and tbe employees affected. On the other band, employers desiring to provide
more liberal benefits will be able to work out supplementary progra ms which will be
entirely apart from governmental supervision.
~

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OLD-AGE SECURITY

The experience of other countries with various types of old-age
security measures ser ves to j ustify further the conclusion that oldage assistance cannot be permanently relied upon as the sole means
of meeting the problem of old-age dependency in an industrial
country. Contributory old-age insurance programs developed in
other important industrial nations include t he features of definite
payments to eligible beneficiaries, paid as a matter of right and
computed on the basis of previous earnings in gainful employment.
The inadequacies and social and economic effects of means-test
assistance have weighed heavily in the decision t o establish the more
constructive programs. While the source of funds in most of these
foreign plans is in part the contributions of workers and employer s,
appropriations from the general government al funds are quite usual.
The shift from gratuitous pensions gTanted on a needs basis to
annuities earned as a right through contributions to an insurance
system is a significant feature in development of old-age security
abroad.
The Necessity of a Single Federal System.-In considering a
program of old-age insurance, the question soon arose whether a
more or less related aggregation of State plans or a single Federal
system was preferable. The answer to this quest ion was not merely
one of preference but of absolute necessity. After thorough canvass
of the technical, economic, and administrative problems involved,
the conclusion was reached that only t hrough a single national administration could effective operation be assured. The reasons leading to this decision may be smrunarizecl. :
(1) The mobility of population across State lines would make
the use of the actuarial procedures necessary in any workable plan
impossible on any but a country-wide base. vVhile such estin1ates
a.s those of population growth, age distribution, and mortality could
be developed with sufficient accuracy for the total population, future
migrations of young or old persons from one State to another,
whether for climatic ·considerations or as a r esult of shifts in indus•
try, would make such estimates untenable if constructed on the
basis of a. single State. The operation of 48 separate systems of
old-age insurance would involve virt ually insuperable administrative difficulties, excessive costs, and almost certain failure in many
States.
(2) Aside from the actuarial problems involved in State administration of old-age insurance, many other disadvantages of separate
State systems were apparent after even casual examination. With
varying standards of benefits and the probability that many States
would fail to act, large numbers of workers moving from one State
to another in the course of adult life would reach old age without

FORMULATION OF AN OLD-AGE PROGRAM

201

adequate protection. The mobility of labor would be affected if
there were any considerable variation in rates of contributions and
benefits. Federal administration, on the other hand, would afford
uniform standards over the entire area.
(3) The accumulation of reserves under old-age insurance programs by 48 States would involve both investment and administrative problems of serious proportions. Not only might the degree of
safety and the adequacy 0£ funds vary, but the effects of diverse
investment policies upon the credit structure of the country might
prove unfortunate. Furthermore, the transfer of individual credits
from the reserve account of one State to that of another would
require a great amount of administrative labor. Where the reserve
policies of States varied in the degree to which accrued liabilities
were funded, the transfer of individual credits would lead to difficult
adjustments in equities.
(4) Varying rates of contributions under State insurance programs might affect seriously the competitive costs of doing business
in the several States. For inter state corporations, the adjustment of
industrial p ension plans to various State old-age insurance programs
would become a most discouraging task.
(5) The argument for State experimentation with social security
techniques has much less validity in the case of old-age insurance
than in the case of unemployment or sickness compensation, since
50 to 75 years are required to test an old-age insurance system
through one complete life cycle. The confusion of various systems
in all stages of maturity would, without doubt, soon kill any urge
toward continued experimentation.
(6) Finally, the routine character of the administration of oldage insurance would make it more adapted to large-scale operation.
Since rates of benefits would be based on past contributions alone,
with little if any discretionary determination, the machinery for
administering an old-age insurance system would be much simpler
than that for administering unemployment compensation. With
broad policies determined by a central Federal authority, operating
procedures could be reduced to standardized routines. The advantages in economy and convenience r esulting from such a uniformity
of procedure alone would seem to warrant the paralleling of old-age.
insurance with such services as the Federal postal system rather than
incurring the vagaries of State workmen's compensation administrations.
It became clea,r, therefore, that State action could not prevent oldage dependency by establishing independent old-age insurance
systems. A study of foreign insurance systems confirmed this conviction. In the field of unemployment insurance a number of na-

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OLD-AGE SECURITY

tional governments in foreign countries limit their function to
stimulating voluntary efforts by offer ing subsidies to regional , local,
or industr ial funds. However, no foreign government which has
adopted the principle of old-age insurance leaves the responsibility
of building an old-age fund for the protection of its working people
to political subdivisions or to voluntary action on the part of employers or l abor unions.
Basic Principles of an Old-Age Annuity System.- Before formulating a program for presentation to Congress, decision had to be
reached on the basic pr ovisions to be incorporated in a Federal old age annuity system, such as the amount of the old-age annuity, the
method of financing the benefits, the accumulation of a reserve, the
groups to be covered, and the administrative machinery for putting
the program into effect .
The Character and Amownt of I nswrance Benefits.-.A.lthough payments to beneficiaries under a system of old-age insurance should
bear a definite relat ionship t o the previous earnings of the beneficiary, many factor s must be considered in determining the precise
relationship which is proper and feasible. .A.fter balancing these
factors t he following conclusions were reached:
.(1) The immediate payment of benefits at a rate justified in a
system long in operation seems financially impossible. W hile a rate
approximating 50 percent of previous average earnings is socially
desirable, the cost of such benefits would be f ar too great to be met
from worker and employer contributions or to be absorbed by the
Government in the early years of the system. Only after contribut ions had been levied over a period of years could the flow of funds
necessary for a full scale of benefits be attained. The charges necessary f or such benefits for persons now old should not be suddenly
assessed upon the present younger generation of contributors. I nstead, t he amounts of benefits paid to individuals might, in general,
rise gradually over the next generation based on the increasing
per iod of insurable employment of pr ospectiYe beneficiaries previous
to ret irement. In this way the costs of the system would be adjusted
to the period in which the beneficiar ies had contributed to the cost
of operating the system either directly through wage deductions or
indirectly t hrough the economic income they had helped to produce.
(2) T he minimum benefit granted should, however, be sufficient to
prove a considerable item o:f income to the recipient and to war rant
the administrative costs of distribution. I t was concluded, therefore~
that no benefits should be paid during the first 5 years in "hich the
system was in -effect and in which contributions "TI'ere paid. At the
end of 5 years annuities should be begun at an initial r ate of not less
t han 15 percent of average wages. After that time the rates would

FORMULATION OF AN OLD-AGE PROGRAM

203

increase with the number of contributions made. The annuity would
a.mount to approximately 50 percent of average wages for a person
on whose behalf contributions were paid throughout his entire working life. For many years the benefits would be insufficient to provide
subsistence unless supplemented from other sources ; yet they would
have considerable effect in lessening the amount of assistance required. A benefit of these proportions would greatly exceed for
many years that "earned" by the contributions assessed in the individual case. The limitation of benefits to those amounts which could
be financed by the contributions of the beneficiary and his employer
would result in seriously inadequate protection for a large majority
of individuals for a generation to come. F or t his r eason, it ,vas
believed that the minimum such as that proposed should be
established.
(3) Insurance benefits should oo so graduated relative to contributions that (a) persons of lower average income and (b) persons
coming under the system relatively late in life should receive higher
proportionate benefits. As a social mechanism aillled at the prevention of dependency, an old-age insurance system should be adjusted
in some measure to the relative needs of various cl asses of beneficiaries even though need is not a determinant in the individual case.
A further method of insuring that the system will be geared to the
needs of per sons of small or moderate incomes is the elimination of
such income as exceeds a stated amount per week or per month from
the wage base upon which benefits and contributions are based.
(4) If old-age insurance benefits are paid to persons continuing
in regular employment after attainment of age 65, they will become,
in effect , a subsidy to older workers in competing in the labor market.
Since the employment and wage rates of younger workers would be
:idversely affected by such subsidized competition, it was felt that
old-age insurance benefits should be suspended in those cases where
otherwise qualified persons were regularly employed. It was believed that the social advantages of encouraging r etirement at age
65 far outweighed the objection that individual equities would be
reduced when benefits were thus suspended. Since the benefits paid
after retirement would, in most instances, greatly exceed those
financed by the employee's contribution, there was little basis for this
objection. In any event, the main purpose of the plan is to provide
a partial compensation for the loss of earned income.
It was felt that a death benefit related to contributions should
be paid in a lump sum on the death of persons covered under the
system. Where old-age insurance benefits have been paid to the
deceased individual, the death benefit should be reduced by the
amount of such payments. In this way an equitable relationship

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OLD-AGE SECURITY

could be preserved between the benefits accruing to those who survive
tq an old age and to the dependents of persons who die at younger
ages. A fair arrangement would be the return of the contributions
made by the deceased worker to his dependents. While a supplementary system of survivors' insurance paying regular monthly benefits to qualified dependents is socially far more desirable than the
benefit here described, it was not deemed advisable to recommend
such a system until further investigation was possible.
The Source and A mount of Oontributions.-In deciding upon the
question of how to meet the cost of an old-age insurance system, all
possible sources of Federal revenue were considered. It was believed
that personal income taxes with the present exemptions could not be
expected to yield sufficient additional revenues to meet the new charges
even on the basis of sharply increased rates. Corporate income taxes
and inheritance taxes were likewise considered inadequate as a main
source of additional funds. Sales taxes, both general and limited,
were seen to involve serious fiscal and economic problems warranting
their rejection. The incidence of such sales taxes, furthermore, did
not appear to bear a reasonable relationship to the purposes served
by the new expenditures. After a thorough canvass of the possible
sources of income :for a system of old-age insurance, it was decided
that the following should be utilized: (1) Taxes paid by employees
in covered employments determined as a percentage of earnings, (2)
taxes paid by employers in covered employments determined as a
percentage of pay roll, and (3) subsidies by the Federal Government
financed through taxes not borne by workers. The reasons supporting the use of each of these sources may be outlined.
(1) It is both just and expedient that the :future beneficiaries of a
system of old-age insurance should bear a part of the cost of its
operation. Since benefits under an insurance system would be r eceived as a matter of right without a test of means, the employee
eligible to coverage JVOuld obtain a virtual equity in the protection
afforded. It seemed but proper that the group of our citizens obtaining this assurance of security in their old age should assist in making
it possible. Income from gainful employment is a fair measure of
financial ability to pay as well as a proper determinant of normal
benefits needed to maintain a satisfactory existence following retirement. The determination of contributions as a percentage o:f earnings rather than as a fixed sum avoids the possibility o:f hardships
in those cases where low earnings are received. Since adjustments
in the scale o:f benefits would be possible, there would be no occasion
for a graduated scale of contributions in seeking to approxin1ate
more closely the greater proportionate ability or higher income
groups.

FORMULATION OF AN OLD-AGE PROGRAM

205

The setting aside of a percentage of wages has long been a customary method of thrift among American wage earners. Percentage
deductions from wages are now being made by many employers in
all types of private and public enterprises in financing pensions and
other forms of thrift. By contributing through similar deductions
to an old-age insurance system, the individual worker would establish an earned right to a benefit related to the contribution made.
It is believed that such an arrangement would be both pl'actical to
administer and acceptable to the great majority of American employees. By sharing in the cost of the old-age insurance system, the
workers of the country would be led to assume a greater interest
in its proper administration. The importance of efficiency and economy of operations, the necessity for conservative policy in the determination of benefit rates, and the advantages of strict enforcement
of collections would be far better understood by persons who, week
by week, were helping to finance the system. Resting on a broad
base of sustained public interest, the program would gain a large
measure of stability.
(2) The cost of maintaining industrial employees in old age after
years of productive employment has long been accepted as a reasonable charge against production. Just as industry, generally, has
become accustomed to meeting charges for the depreciation and replacement of its material equipment, many employers have developed
programs for the payment of r etirement allowances to their superannuated employees. These employers include industrial corporations, railroads, public utilities, governments, educational institutions, and other organizations. Such costs are considered proper
additions to the cost of production.
It appeared appropriate and reasonable, therefore, that emp]oyers
in covered employments should contribute to a system of old-age
insurance designed to protect their employees. In order to maintain a direct relationship between labor services obtained and the
contributions paid by the employer, it was felt that contributions
should be computed as a percentage of the earnings paid to an
employee covered under the system. The basis of computation of
the employer contribution should be identical with that used in determining the contributions of his employees.
There was much reason to believe that the burden of employer
contributions to an old-age insurance system would in large measure
be shifted to the consumer. The uniform application of the charge
throughout a particular industry would serve to facilitate this shift.
Competitive conditions, variations in labor costs per unit of output,
and relative elasticities of demand for particular products and services would, however, affect the degree to which such shifting might
78470-37-15

206

OLD-AGE SECURITY

take place in any situation. It might be that a part of the burden
of employer contributions would in some instances be borne partly
by the wage earners of an industry through indirect effects upon
employment and wage -rates. It was believed, however, that in time
the incidence of the cost of employer contributions would be spread
so broadly over the whole community that no hardship would be
imposed upon any particular group. Since the great majority of
our citizens, whether rich or poor, employed or self-employed, would
be benefited by the establishment of an effective program of old-age
security, a broad distribution of the costs of such a program did not
seem unjust.
It was felt t hat the contributions of employers and employees
should be at the same rate. While arguments could be advanced for
other ratios, experience under contributory pension plans in this
country and under compulsory contributory programs abroad indicates the advisability of equal contributions. "\V ith such sharing of
costs, an insurance system would be accepted as a truly joint enterprise of the employers and workers of the country, aided and supervised by the Government as representing the publ ic as a whole.
Since the assessment of new char ges of the character here considered would involve a complex series of adjustments on the part of
industry and the public, it was felt that the initial rates of contributions established should be as low as economical administration would
permit. . E xpenditures for benefits would mount but gradually under
the program here considered so that such low initial contribution
rates would provide adequate income not only for current benefits
but :for the creation of a contingency reserve. It must be remembered that even if benefits began after contributions had been collected for 5 years, only that age group just reaching retirement would
be eligible for benefits. Meanwhile, contributions would be recei,ed
from all other age groups from youth through middle age. As time
passed and more persons qualified for benefits under the system, it
would be necessary" to increase the income from contributions. I t
was felt, therefore, that t he joint rates of contributions shouJd be
raised in steps of 1 percent each at intervals of 5 year s from an initial
rate of 1 percent. Under such a program, industry, employees, and
the public would have adequate time to become adjusted to the gradually increasing cost of the system without serious hardship on any
group in our population.
(3) The determination of the maximum rates of contribution to be
levied upon employer s and employees involved the question of how
far the cost of an old-age insurance system should be assessed upon
these groups. Since the charge upon the employer might be shifted
elsewhere, the question arose as to whether the final incidence of t his

FORMULATION OF AN OLD-AGE PROGRAM

207

charge could be determined sufficiently to warr ant more than limited
use. Employee contributions might well impair the living standards
of the workers if rates encroached upon inco1ne necessary for decent
subsistence.
Contributory old-age insurance would in years to come assume an
increasing proportion of the public cost of old-age security. Employers, and especially workers, should not be expected to bear the
cost involved in paying more adequate benefits in the early years of
the system than individual contributions would warrant, if they are
also to build up even partial reserves for the future. Such more
8.dequate benefits would be intended, among other things, to relieve.
the recipient of the need for State old-age assistance. To the extent
that assistance costs were reduced, the expenditures of the Government would be reduced-a saving which should not accrue at the
expense of insurance contributors.
It was :felt that the 1naximum joint rate of contributions by
employers and employees to the old-age insurance program should
be set at 5 percent. It was estimated that the rates of contributions
here considered would be sufficient to finance the system for approximately 25 years. After this period subsidies would be necessary.
The Accwmulation an,d M aintenwnce of a Reserve.-In order to
insure the availability of funds for the regular payment of old-age insurance benefits to eligible beneficiaries at all times, it was decided
that a reserve fund should be accumulated from contributions m.ade to
the system in the early years of its operation. An important function
of this reserve is to provide funds to meet increasing expenditures
which may result in the future from gradual secular changes in the
following factors: (1) a decline in the average age of retirement,
(2) an increase in the average wage level, and (3) variations in
mortality rates before and after retirement. A major depression,
moreover, might unexpectedly accelerate any or all of these changes
and might call for an unanticipated drain upon the old-age account.
The assets of this r eser ve fund should be invested in the securities
of the Federal Government in order to insure the utmost safety and
• liquidity. During the 25 years when the income exceeds outgo
and when reserves are being accumulated, experience would indicate a basis for more accurate decisions as to the exact size of the
reserve, how it should be accumulated and over what period of time,
and what functions it should serve in addition to those enumerated
above.
Ooverage.-Since a compulsory program of contributory old-age
insurance is intended to prevent destitution in old age, it may be
argued that the benefits of the system should be extended to all per-

208

OLD-AGE SECURITY

sons whose incomes warrant the payment 0£ contributions. The
administrative difficulties involved in such universal coverage are,
however, readily apparent. An attempt to base contributions on
incomes accruing in the £orm of profits, interest, or rents would be
fraught with many difficulties of identification and measurement
which would far outweigh the advantages 0£ bringing the recipients
of these incomes, as such, within such a system. On the other
hand, incomes received in the form 0£ wages or salaries could be
more readily determined as a basis £or assessment. As a class, wage
earners are more in need 0£ e:ld-age protection than are the recipients
of other t ypes of income, hence public support £or the enforcement
0£ contributions on their behalf could be more readily secured. Furt her, the payment of wages is a practical basis f or contributions assessed on both the employer and the employee. With the employer
acting as the agent of the Government in the collection of the employee's contribution and remitting the proceeds along with his own
contributions, great economies in administration would be possible.
At the same time the employee's interest in insuring a complete record
0£ contributions would serve as an aid in the enforcement of accurate
r eporting upon less conscientious employers. For these reasons it
was deemed desirable to limit the coverage 0£ an old-age insurance
system to persons employed for wages or salaries.
Administrative difficulties suggested further limitations of coverage
to eliminate, at least in t he early years 0£ a system, certain types of
employments in which it would be difficult to enforce the collection 0£
contributions. In the case of farm labor and domestic servants in
private homes, a large number 0£ individual workers are employed in
small establishments scattered over a wide area, frequently at some
distance from any city or town. The close relationship which exists
between employer and employee, the frequent absence of accounting
records, and the usual provision of a part of compensation in the form
of maintenance would greatly handicap effective enforcement. While
the need of these gToups for protection in old age was very apparent,
it seemed expedient to postpone their inclusion until after administrative experience could develop in less difficult areas of operation.
Since CongTess had already established retirement programs cover- •
ing a large proportion of the employees of the Federal Government,
it did not seem expedient to include such employees under a general
contributory old-age insurance program at this time. Railroad employees had also been covered under special enactments and should be
excluded. The employees of the several States and their subdivisions
must be excluded because of constitutional limitations on Federal
jurisdiction.

FORMULATION. OF AN OLD-A.GE PROGRAM

209

With these exceptions, it seemed proper to include within the system
all gainfully employed workers regardless of the character or size of
the establishment in which they were employed. All workers f ace the
contingency of dependent old age, whether employed in large factories
or in small shops or offices, and only serious administrative difficulties,
previous legislation, or constitubonal limitations should be permitted
to interfere with the provision of basic, uniform protection related to
contributions.
It was fully recognized in advocating full coverage that there would
be a real likelihood that many small employers might evade their obligations, especially at the outset. It was believed, however, that the
extent of noncompliance would, with proper educational effort on the
part of the Government and with a policy of severe penalties for
deliberate evasion, steadily diminish. Since there is a constant flow
of workers from large to small establishments, it was believed that
limited coverage would eat at the actuarial foundation of the system
as well as lessen the adequacy of the benefits afforded. Moreover, the
admu.1istrative difficulties of ascertaining coverage under a plan limited to establishments with a certain number of employees might prove
quite as formidable as those faced in assuring coverage of a11
establishrnen ts .
.Administration.-The administrative r equirements of old-age insurance are not complicated in comparison with those involved in
unemployment compensation, with its need to detennine the cause of
severing employment, the possibility of reemployment, the suitability
of available work, and similar questions. The volume of individuai
contribution r ecords which must be kept, however, would involve
administrative technique on a scale which is new to this country.
Efficient administration would therefore require the services of a
staff of specialists in administrative detail. It was felt that experienced administrators from both Great Britain and Germany should
be included in any group of experts who might be assembled. The
administration of the old-age insurance plan should be the function
of an independent board vested with authority to direct all phases of
social insurance, working in close cooperation with both the Department of Labor and the Treasury. It would cooperate with the former
in all relations with wage earners and employers, with particular
reference to the employment agencies, and, with the latter in the
collection, investment, and disbursement of funds.
The advantages of an independent board were considered numerous
and important. The membership of the board should include outstanding persons in the field of social insurance administration whose
services could be procured with difficulty if they were offered positions

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OLD-AGE SECURITY

as lesser officials in any department. I n the interests o-f the insured
population, both in the -formulation of regulations and in the development of new policies and practices, the board should be a nonpolitical
organization, protected as :far as possible from political influence, even
such as might arise from an executive department under a politically
minded administration. The actual handling and investment of
:funds would be carried on by the Treasury. The smooth :functioning
of a program of this magnitude would necessitate a highly competent
technical staff. It would probably be easier to obtain appropriate
classifications for such employees under the Classification Act in a new
independent board than in a new bureau in an established department.
In inaugurating an insurance system the Government would assume a
new type of financial responsibility to its citizens which should be
focused in a body where full time and interest would be directed
toward meeting that responsibility.
Legislative Proposals.-I t was recommended to the Congress that
t.l1e Federal Government adopt a program of old-age benefits.6 To
t.his end it was specifically proposed that legislation should include
two separate measures, one a taxing measure and the other a permanent appropriation measure.
The taxing measure was to contain ( 1) a tax upon the income of
the workers who were to receive annuities upon reaching retirement
age; and (2) .an excise tax upon the pay rolls of the employers of
these workers. In determining the tax rates, it was c0nsidered desirable that the amount yielded be equivalent to the worker and
·employer contributions which would have been required if the program proposed had been a contributory old-age insurance system.
The :following tax schedule was recommended:
Exc-i se t aa; on Income ta:D on
employers'
employees'
pay mlls
wages
Y ears

( p ercent)

1937-41_______________________________ ______________________
1942-46_____________________________________________________
1947-51 _____________________ ________________________________
1952-56_____________________________________________________
1957 and thereafter______________________________,____________

½

1
11/2
2
2½

(perce1it)

½

1
1½
2
2½

The proceeds derived from these taxes were to be allocated to an oldage fund to be established in the Treasury.
While it has been recognized that administrative difficulties might
stand in the way o:f collecting taxes from agricultural and domestic
workers and their employers, these groups of workers were included
in the bill originally introduced in Congress. This was in accord0
See Committee on Economic Security, Report to tlle Pres-i den t (0 . S. Government Printing Office, Washington, D. C., 1935 ), p. 29; Committee on E conomic Security, Old-Age
Security Staff R eport (mimeographed report, January 1935). p. 30.

FORMULATION OF AN OLD-AGE PROGRAM

211

ance with recommendations submitted by the Committee on Economic Security to the President on January 15, 1935.
It was considered advisable to bring under the tax progra,m as
wide a group 0£ workers as possible, for under the proposed plan
only through the payment of taxes could a worker earn the right to
an old-age annuity. However, certain exemptions were recommended. The most important groups exempted and the reasons for
their exclusion £ron1 the tax and annuity program may be briefly
summarized. The annuity program was prin1arily designed for persons in lower-income groups. It was, therefore, recommended that
nonmanual workers earning in excess of $250 a month be exempted
:from the taxes, and in consequence excluded from the benefits recommended. Because they were already provided £or under public retirement systems, it was recomn1ended that employees of the Federal
Government subject to the United States Civil Service Retirement
Act and persons covered by the United States Railroad Retirement
Act, together with their employers, be exempt from the tax. Furthermore, since, under the Constitution, the Federal Government
cannot impose taxes upon States and subdivisions of States, it was
considered necessary to exen1pt these political jurisdictions, together
with their employees, from the tax.
The appropriation measure proposed the authorization of the
amount raised by the taxes described above as a permanent appropriation to be used for building and maintaining the fund from
which the old-age benefits should be paid. This proposed appropriation measure provided t hat a worker, on arrival at the age of 65
years, should receive an annuity based upon the number and amount
of tax payments· made on his behalf. Under the proposed program 1
a worker was not eligible for an a.nnuity unless 200 weekly tax payments had been made on his behalf within a 5-year period prior to
his attaining age 65. A further condition for the receipt of an
annuity was r etirement from gainful employment. For workers
entering the system during the first 5 years of its existence a minimum benefit of 15 percent of average wages was proposed. Gradually these benefits would increase with the number and amount of
tn.x paym13nts. I t was estin1ated that a worker who had been covered by the system during his entire working life would receive an
annuity representing between 40 and 50 percent 0£ his average wage.7
While it was hoped that the annuities proposed would be adequate
for workers of modal earnings, it was realized that the benefit schedule would not permit low-paid workers to earn annuities sufficiently
7

The proposed method of computing the old-age annuities on the bas is of tlle tax
payments made on bebalf of a worker is described in detail on pp. 36-38 of Committee
on Economic Security, Old-Age SecU1•ity Staff Report (mimeographed, January 1935).

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OLD-AGE SECURITY

large to permit them to retire from gainful employment. For this
reason it was proposed that a larger relative annuity be provided for
lower -paid workers by weighting more heavily the first $15 of average wages in t he computation of benefits.
I n addition to the annuities payable to workers under t he condit ions described above, it was proposed that death benefits be provided for the survivors of workel's who had been covered by t he
system. T he death benefit was t o equal the aggregate amount of
the worker's own tax payments less the tot al amount wh ich t he
worker had received as an annuity. I t was also recommended that
provisions be made for a lump-sum endowment to a per son wh o had
made tax payments but who reached age 65 without being qualified
for an annuity. The amount proposed as this lump-sum payment
was to equal t he worker 's own tax payments plus interest.
Table 45 shows the progress of the tax and benefit payments dur ing
the next half cent ury under the proposed old-age annuity plan .
Under t he proposed old-age annuity program t he taxes collected
would be in excess of the benefits paid out for about 25 year s. For
this reason a reserve would be accumulated in the old-age fund,
which , according t o actuar ial forecasts, would amount to appr oximately 15 billion dollars in 1965. Since the forecasts indicated that
after t hat t ime the benefit payments would be in excess of t he taxes
collected, it was recommended that, in order to keep the r eser ve at
that level, t he Federal Government should obtain the necessary additional funds f rom taxes borne by the recipients of higher incomes.
T ABILE

45.- Pr ogress of tam and, ben efit payrnents itnd,er proposed, old,-age amnuit y
plan
[All estimates in millions or dollars)

Year
1937____ ___ ____ _______ _____ ___ _____ __ ______
1938 _______ ___ __ ___ _____ ___ __ _______ ______
1939 _____ _______ ______ ______ ______________ _
1940 ___ ___ ____ ____ ________ _____ ___ __ _____ __
1945 _______ ____ ________ __ _________ ______ __
1950 __ _____ ________ ___ ______________ ______
]955 ____ ___ _______ __ ___ __ __ ____ _______ __ __
19GO_____ _. . . __ . --- . .... -- ---- --- ---- -. . -- 1965------- ---- . -------· __ . __. _---- . .. _--- .
1970 _____ ______ _____ _-- -------- ---- ---- -· -1975.------------ ··______
· -- - ··____
· ------ __
-1980_____ ____-·__· __
______
__ __- -·
____
1

Net t ax
collectioos 1
302. 0
306.0
308.9
312. 0
6i 2.3
1, 073. 3
1,520.0
], 979. 2
2,058. 3
2,137. 6
2,216. 7
2, 216. 7

Interest on
reserve
0
9. 1
IS. 4

28. 1

122.4
230. 3
345. 3
437.9
458. 0
4.'>8. 0
458.0
458. 0

Federal
ron tribu·
t ion
0
0

0
0
n
0
0
0
165. 7
632. 8
1,034. 3
1, -178. 7

Benefit
payments

o. 7

2.0
3. 3
4. 8
268. 0
683. 6
1,318.9
2,100.4
2,682.0
3,228. 3
3,703.9
4,153. 3

Reserve
end of
year
302. 3
615. 3
939.3
1,274. 7
4, 606. 4
8, 293.9
12,058.0
14,912. 4
15, 266. 7
15,266. 7
15,266. 7
15,266.7

T ax collections less admin istrative expenses; administrative expenses as percen t or collections as follows :
1937-4} ___ ____ ___ _________ ________ _____ ____ ____ _____ _____ ___ _____ __ _________ _____ ______ __ 10

iii~1!:· ::·--------------------------------- --------------------------------------------

itl

1957-SO____ _________ _______ _____ _________ ____ _----- ---- ---- --- -- ------· · ----· -· - -·-·· -- -- 5

Congressional Reconsh·uction of the Prog-ra m.- T he l'ecomµiendations brieflr outlined above were embodied in t itles I II and

FORMULATION OF AN OLD-AGE PROGRAM

213

IV of the economic security bill introduced in the House of Representatives on January 17, 1935 (H. R. 4120), but this bill was
not enacted. On April 4, 1935, the social security bill (H. R. 7260)
was introduced and became law on August 14, 1935 (Public, No.
271, 74th Cong.).8
The provisions of the Social Security Act differ considerably from
the economic security bill as originally introduced. The following
schedule of taxes was adopted by Congress :

Years

Excise tax on I ncome tax 011
e1nploye1·s1
employees'
pay rolls
wages
(percent )
(percent)

1937-39 ____________________________ _________________________ 1
1940-42_________________________________ ____________________ 1 1/2
1943-45_____________________ ________________________________ 2
1946-48___________________________________ __________________ 2 1/2
1949 and thereafter_ ___________ _______. . ,______________________ 3

1

1 1/2

2

2½

3

A comparison of this schedule with the one r ecommended (see
p. 210) shows that the income taxes levied upon ,-yorkers and the
excise taxes levied upon employers not only start at higher rates
than in the recommended program but that a maximwn of 3 percent
is reached in 1949 instead of the maximum of 2½ percent in 1957
proposed in the economic security bill. In addition to the variance
in rates, the Congress exempted certain employments which were
covered by the tax in the original bill. The most important of
these exemptions are agricultural labor and domestic service in a
private home. The recommendation that nonmanual workers earning in excess of $250 per month be exempted from the tax wa.s not
adopted. Under the Social Security Act the remuneration of manual and nonmanual workers in excess of $3,000 a year from any one
employer will not be subject to the tax. In this manner all employees and their employers r egardless of wage level will pay taxes
with respect to the first $3,000 of annual wages.
Under the act the taxes are collected as are other internal revenues
and are not allocated as was proposed to an old-age fund, but are
merged with the general funds of the Government in the Treasury.
The provisions of title II of the act differ considerably from
the underlying principles of the proposed program. In the first
place, the appropriations authorized are not measured by any taxes
collected under title VIII, but are measured by an "amount to be
determined on a reserve basis in accordance with accepted actuarial
principles." The a.m ount required fro1n year to year may be much
more or considerably less than the revenues from the taxes levied
in title VIII.
8

Ch. 531, 49 Stat. 620.

214

OLD-AGE SECURITY

Secondly, the worker's right to an annuity and the right of his
estate to a death benefit are not conditioned upon the payment of
taxes by him or on his behalf; nor is the amount of benefit measured
by the amount of taxes paid as was the case under the provisions
of the economic security bill. Benefits are paid to the worker or to
his estate on the basis 0£ his status as a worker and are measured by
the wages he has earned. Should no taxes be paid, the worker will,
nevertheless, receive his annuity and his heirs will be protected.
The obligation of the Government to the ol d-age account is not conditioned upon the realization of sufficient revenue from the taxes
to reimburse the Treasury for the appropriation to the old-age
account.
The original economic security bill made the receipt of benefits
contingent upon the payment of taxes. Thus, persons in employments exempted from the taxes were automatically excluded from
the receipt of benefits. In the Social Security Act it is provided
that wages received in certain employments are not to be counted
in the computation of benefits. The most important of these exempted employments ,a re agricultural labor and domestic service in
a private home.
The economic security bill was based on the assumption that
higher-paid employees would make their own provision for old-age
protection. In the measure as enacted, Congress brought under the
benefit system all workers in covered employments regardless of
their earnings, but with the provision that only the first $3,000 of
yearly s,ala.ry paid to the individual by an employer shouid be
counted in the computation of benefits.
Thus, under the provisions of the Social Security A ct there exists
no interdependence between the taxing and the appropriation provisions. In the sense in which the term is used in other countries,
the old-age benefit provisions do not constitute a system of old-age
insurance. However, in spite of eliminating the cont ributory features of the proposed program submitted to Cong ress, the Government in the Social Security Act has accepted t he responsibility of
building up ,a fund from which the worker in industry will receive
a retirement income related to his standard of living as r eflected in
the wage level at which he has worked .

VOLUNTARY OLD-AGE ANNUITIES
Voluntary Continuance in the Old-Age Annuity System.-In
the report of the Committee on E conomic Security t o the President
it was suggested that persons who under t he Nation-wide a1u1uity
system qualified for annuities by fulfil.ling minimum r equirements
of 5 years of coverage and 200 tax payments be per mitted t o

FORMULATION OF AN OLD-AGE PROGRAM

215

continue tax payments voluntarily until age 65 i£ they left covered
employment before reaching the retirement age. This provision would
have made it possible for workers who had only a short period of
service in an employment covered by the old-age annuity system to
increase the amount of their old-age benefits.
The structure of the old-age benefit program enacted by Congress
in the Social Security Act left no possibility for the continuance in
the system on a voluntary basis for workers who left covered employment prior to the retirement age.
Annuity Certificates.-In addition to the old-age benefit plan, it
was proposed that there be established, as a related but separate
undertaking, a voluntary system of old-age annuities. Under such a
plan the Government would sell to individuals, on a cost basis, deferred life annuities similar to those issued by commercial insurance
companies. In consideration of premiums paid at specified ages, the
Government would guarantee the individual concerned a definite
amount of income starting at approximately age 65 and continuing
throughout the lifetime of the annuitant.
The primary purpose of a plan of this character would be to offer
persons not included within the old-age benefit scheme a systematic
and safe method of providing :for old age. However, the plan could
also be used by insured persons as a means of supplementing the
limited old-age income provided under the old-age benefit plan.
It was believed that a satisfactory and workable plan, based on the
following principles, could be developed without great djfficulty:
(1) The plan should be self-supporting, and premiums and benefits
should be kept in actuarial balance by any necessary revision of the
rates indicated by periodic reexaminations of the experience.
(2) The terms of the plan should be kept as simple as practicable
to effect economical aclminjstration and to minimize misunderstanding on the part of the individuals served. This could be accomplished
by limiting the types of annuity offered to two or three of the most
usual standard :forms.
(3) In recognition of the fact that the plan would be intended
primarily for the lower- and middle-wage classes, provision should
be made :for the acceptance of relatively small premiums, such as $1
per month, and :for limitation of the maximum annuity payable to
any individual under the plan to approximately $100 per month.
(4) The plan should be aimed primarily at the provision of old-age
income, and this objective should be recognized by eliminating from
the annuity contract the features of cash surrender and loan values
and, possibly also, the return of premiums in the event of death prior
to retirement.
(5) The plan should be managed by the i11surance authority along
with the old-age annuity system.

216

OLD-AGE SECURITY

No estimates were made as to the amount of annuity r eser ves which
would be accumulated under a plan such as that proposed above. It
was believed, however, that the fiscal problems presented by such
reserves would not be serious.
The proposal for a system of voluntary annuities supplementing
the old-age benefit system was not included in the Social Security
Act as passed by Congress.

Chapter XI
OLD-AGE PROVISIONS OF THE FEDERAL
SOCIAL SECURITY ACT

T

H E FEDERAL SOCI AL SECURITY ACT 1 establishes two
types of provisions for old-age sequrity, (1) Federal aid to
States to enable them to give more adequate aid to their needy
aged, and (2) a system of F ederal old-age benefits for superannuated
workers. The first measure is designed to give immediate aid to aged
individuals and to assist the States in the care of old people who are
ineligible for Federal emergency relief and who are not employable
on work projects. The second is a preventive measure which aims to
reduce t he extent of future dependency among the aged and to assure
a worker that the years of employment during his working life will
entitle him to a life income.
OLD-AGE ASSISTANCE
The extent of suffering and destitution of the past 5 years has
accentuated and brought to light the large numbers of aged individuals in the United States who are without means of self-support.
Even those States with the most liberal provisions for the assistance
of their needy aged have long waiting lists of eligibles to such assistance whom they are financially unable to aid. Furthermore, as many
as 13 States and the District of Columbia on July 1, 1935, had no
laws providing for their needy aged, and the provisions in the 35
States with such laws show a wide divergence in age and residence
requirements for eligibility, as well as in the amount and extent of
assistance made available throughout the State. To rectify and
improve these conditions, title I of the Federal Social Security
Act provides f or a system of grants-in-aid to the several States to
enable t hem, as far as practicable under the conditions in each State,
to furnish financial assistance in the form of money payments to
their destitute aged residents. But to provide a degree of uniformity
in administrative standards, age, residence, and citizenship qualifications for eligibility to old-age assistance and to insure State financial
1

Ch. 531, 49 Stat. 620; 42 U. S. C. (1935 Supp.) , § § 301-1305.

217

218

OLD-AGE SECURITY

participation in the system, the F ederal law establishes certain
requirements which a State plan must meet in or der to qualify for
Federal funds.
Table 46 gives in summary form the provisions of the F ederal
Social Security Act with respect to old-age assistance. The following paragraphs also briefly outline these provisions.
Administration of Federal and State Plans.-The F ederal
agency authorized to administer the old-age assistance provisions of
the Social· Security Act is the Social Security Board. To obtain
Federal approval and to qualify for F ederal grants, a State must
submit to this Board its plan for old-age assistance, and the Board
will determine whether or not the State plan and its operation
comply with the Federal requirements. The Board will then certify
to the Secretary of the Treasury those States which qualify for Federal grants and will indicate the amount to which each State is
entitled.
The F ederal law leaves to the States the actual administration of
the State plan but specifies (1) that the plan must be State-wide in
operation; (2) that a single State agency must be established or
designated either to administer the plan or to supervise the administration, if such administration is delegated to political subdivisions
of the State; (3) that the plan must be mandatory upon all political
subdivisions of the State if administered by them ; (4) that the plan
shall provide such methods of administration ( other than those relating to selection, tenure of office, and compensation of personnel) as
are found by the Social Security Board to be necessary for the efficient administration of the plan; ( 5) that the State agency shall
make reports from time to time to the Social Security Board, furnishing such information as the Board may deem necessary, and that
the State agency shall comply with such provisions as the Board may
from time to time make to assure the correctness and verification of
reports; (6) that the plan must provide for granting to an individual
whose claim for old-age assistance is denied an opportunity for a fair
hearing before the State agency; and (7) that the plan must provide
for the payment to the United States of one-half of any amount
which the State or its political subdivision may collect from the estate
of an old-age assistance recipient with respect to the assistance
furnished him under the plan.
Maximum Eligibility Requirements for Old-Age Assistance.As indicated in chapter VIII, present State provisions for old-age
assistance vary greatly in their age and residence requirements. The
Federal law establishes maximum requirements wh ich a State plan
may not exceed if it is to receive Federal approval. Thus, the State
plan may not impose an age requirement of more tha.n 65 years,

PROVISIONS OF THE SOCIAL SECURITY ACT
TABLE

219

46.-S1t1111nary of vrovisions for Federal grants to States for old-age
asS'i,stance

To be made by the Social Security Board under title I

1

of the Social Security A.ct.

DEFlNITION

"Old-age assistance" means money payments to aged needy individuals.

.

CERTIB'ICA'l'ION OF STATE PLAN FOR FEDERAL GRANTS

A State in order to receive a Federal grant, mus t submit a plan and have it approved
by the Social Security Board as meeting the following requirements: . .
1. Effective in all political subdivisions of the State and, it a dm101stered by them,
mandn tory upon them ;
.
.
. .
.
2. ProYision for finan cial participation by the State. e~cept that _tlus condition 1s
waived until July 1, 1937, if the Board finds that a States constitution prevents such
participation;
3. Either provision for the establishment or designation of a single State agency t o
administer the plan, or for the establishment or designation of a single State agency to
supervise the administration of the plan ;
4. Provision for grant ing to any individual wllose cla im for old-age assistance i s
denied, an opportunity for a fa ir h earing before such State ag~ncy ;
5. Such methods of administration (other than those relating to selection, t enure of
office, and compensation of personnel) as are found by the Social Secul'ity Board to be
necessary for the efficient operation of the plan ;
6. Submission of such reports in such form and containing such information as the
Federal Social Security Board may from t ime to time require, and complian ce with the
provisions which tlle Board may from t ime to time find necessary to assure the correctness and verification of such reports ;
7. Provision t h at if the S tate or any of its political sutdivisions collects from the
estate of any recipient of old-age assistance any amount witb r espect to old-age assistance furnished him under the plan, one-half of the net amount so collected shall be
promptly paid to tbe United States;
A State plan will not be approved if it imposes:
1. An age requirement of more than 65 years, except that until Jan. 1, 1940, an age
requiremel.lt of as much as 70 years may be imposed;
2. A residence r equirement which excludes any resident of the State who bas
resided therein 5 years during the 9 years immediately preceding the application for oldage assistance and who has resided therein continuously fo1· 1 year preceding application;
3. A citizenship r equirement which excludes any citizen of the United States.
AMO UNT OF GRAN'l' 'l'O EACH STATE

1. A. quarterly amount which shall be used exclusively as olcl-age assistance equal to

one-half of the total sums e xpe nded in the State in such quarter as olcl-age a ssistance
to n eedy individuals 65 years of age or older who are not inmates of public institutions,
not co~nting so much of such expenditure to any individual in excess of $30 a month ;
2. Five percent of the total Federal quarterly grant to be used solely for costs of
administering the S tate p lan, or for old-age assistance, or both.
METHODS OF COiIPOTING AND PAYING GRANTS

1. E s timates of amounts to be paid States will be based on:

(a) State r eport of total sun:r to be expended each quarter for old-age assistance, with
statement of amount appropriated or made available by the State and its political subdivisions. (If the amount appropriated is less than one-half of the total sum of estimated quarterly expenditures, tbe source or sources from which the difference is expected
to be derived must be stated.)
(b) Records of the total number of aged individuals in the State.
(c) Such investigation as the Social Security Board may find necessary.
2. Payments will be made to the State at tbe time or times fixed ty tbe Social Security
Board:
,
(a) After certification by the Social Security Board to the Secretary of the Treasury
of the amount due the Sta te reduced or increased by any sum by which its estimate for
any quarter was greater or less than the amount which should have been paid·
(b) By the Secretary of the Treasury, through the Division of Disbursement, prior to
audit or settlement by the General Accounting Office.
S USPENSION OF GRANTS

. If the Social Security Board finds, after reasonable notice and opportunity for bearmg to the State agency administering or super vising the administration of tbe State
p~a.n, tb~t the _plan bas been. so changed as to impose prohibited age, r esidence, or
c1t1zensb1p reqmrements, or failed to comply substant ially with conditions required for
F ederal approval, the Board shall notify the State agency that Feueral grants will not
be made until such conditions are rectified.
A.~'lOUN'.l' OF FEDERAL APPROPRIATION AUTHORIZED

$49,750,000 for fiscal year endinir June 30, 1936 ;2 thereafter an annual amount sufficient
to carry out the purposes of the title.
: 49 Stat.. 620; 42_ U. S. C. (1935 Supp.), §§ 301-306.
The ,So_cial ~ecunty Act was not approved until Aug. 14, 1935, and the supplemental
appropriation bill, fiscal year 1936 ( H. R. 9215), failed of passage in the first session of
the _Seventy-fourth Congress. The Supplemental Appropriation Act, fiscal year 1936,
Pubhc, ~o: 440, 74th Cong.. 2d sess. (H. R. 10464). approved Feb. 11, 1936, included a n
appropriation of $24,660,000 for the remainder of the fiscal year ending June 30, 1936.

220

OLD-AGE SECURITY

except that, until January 1, 1940, an age requirement of as much as
70 years may be in effect. The State plan may not impose a residence requirement which excludes any resident of the State ( 1) who
has resided therein for 5 years during the 9 years immediately preceding application for old-age assistance and (2) who has resided in
the State continuously for 1 year preceding the application. Moreover, a State pl an will not be approved by the Federal Government
if it imposes any citizenship requirement which excludes any citizen
of the United States.
Financial Participation by the State.-The Federal Social Security Act stipulates as one of its main requirements that a State
plan for old-age assistance must provide for State participation in
financing the plan if it is to qualify for Federal approval. However,
until July 1, 1937, this requirement will be waived in the case of any
State which the Social Security Board, upon application by the State
and after reasonable notice and opportunity for hearing to the State,
finds is prevented by its constitution from providing such financial
participation. The exemption of the State from financial participation, however, does not alter the provision that the Federal aid will
be limited to 50 percent of the total assistance paid, thus requiring
local participation of at least 50 percent.
Methods of Computing and Paying Federal Grants.-To determine the amount payable by the Federal Government to each State
with an approved old-age assistance plan the Social Security Board,
before the beginning of each quarter, will examine reports from the
State agency giving estimates of the total amount of expenditures
necessary for old-age assistance in the quarter and the amount appropriated or made available for these expenditures by the State and its
political subdivisions. If the amount appropriated or available
within the State is less than one-half of the total estimated expenditures for the quarter, the State report must show the source or sources
from which the difference is to be derived. T he State must also report
to the Social Security Board the total number of aged individuals in
the State and must furnish any other information based on such
other investigation as the Board may find necessary.
The Social Security Board will then certify to the Secretary of the
Treasury the amount which is due the State under the provisions of
the Social Security Act, and the Secretary of the Treasury will pay to
the State, through the Division of D isbursement of the Treasury
Department and prior to audit or settlement of the General Accounting Office, at the time or times fixed by the Board, the amount so
certified, increased by 5 percent, to be used either for administration or
for the payment of old-age assistance. The estimated Federal appro-

PROVISIONS Olf THE SOCIAL SECURITY ACT

221

priation to the State for each quarter will be reduced or increased by
any sum by which the Board's estimate for the previous quarter was
greater or less than the amount due the State under the provisions of
the act.
Amounts Payable to the States.-An appropriation of $49,750,000
has been authorized by the Social Security Act for the fiscal period
ending June 30, 1936,2 from which to defray the costs of grants
to the States with approved old-age assistance plans, and, for subsequent years, appropriations of amounts sufficient to carry out the purposes of the old-age assistance title of the act authorized. From
these appropriations there will be paid for each quarter an amount
to each State equal to one-half of the total sums (not exceeding $30
per month for any individual) expended as old-age assistance during
such quarter under an approved State plan. Old-age assistance is
defined as money payments to an individual who, at the time of such
expenditure, is 65 years of age or older and is not an inmate of a
public institution. The Federal l aw does not place any minimum
or maximun1 limits on the amount of old-age assistance which the
States may pay to t heir needy aged, but stipulates that the F ederal Government's share of such payment shall not exceed $15 per
month per person. Thus, if the State grant to an aged person is $30
a month, the Federal Government will pay $15, or one-half of the
amount paid in respect of this individual recipient of assistance; if in
certain areas or under certain conditions the State pays a grant of
$45 a month, the Federal grant will be $15 a month for each individual receiving this amount; and if the State pays $20 a month, the
Federal Government's share on behalf of each individual receiving
this amount will be $10 per month.
In addition, the Federal Government will pay 5 percent of its total
quarterly grants to the State. This s1un may be used for paying
the cost of administering the State old-age assistance plan, or, if the
State pays all or a part o:f its administrative expenses, this additional grant may be used wholly or in part for money payments to
needy individuals eligible for old-age assistance under the State plan.
The use of this additional grant is, however, limited to the payment
of old-age assistance and the administrative costs of the State system.
Suspension of Grants.-!£ a State plan, after approval by the
Social Security Board, is found by the Board to have been so modified
that it fails to comply with any requirement of the Federal law, the
Board, after reasonable notice and opportunity for hearing to the
2

Tbe Socia l Security Act was not approved until A ug. 14, 1935, and the supplemental
appropriation bill, fiscal year 1936 ( H. R. 9215), failed of passage in the first session of
tbe Seventy-fourth Congress. The Supplemental Appropriation Act, fiscal year 1936,
Public, No. 440, 74th Cong., 2d sess. (H. R. 10464), approved Feb. 11, 1936, included an
appropriation of $24,660,000 for the remainder of the fiscal year ending June 30, 1936.

78470-37-16

222

OLD- AGE SECURITY

State agency, will notify the State that no further grants-in-aid.
will be paid until the Board is satisfied that the prohibited requirements are no longer imposed and that the State plan no longer fails
to comply with Federal requirements.
THE FEDERAL OLD-AGE BENEFITS SYSTEM
Under the Federal Social Security Act 3 a Nation-wide old-age
benefit system is provided. Title II 4 of the act establishes an old-age
reserve account in the Treasury or the United States from which
there will be paid after December 31, 1941, an old-age benefit in
the form of a monthly life income to eligible wage earners after
they have reached the age of 65. From December 31, 1936, there
will be paid certain death benefits and lump-sum payments at 65.
Table 47 gives a digest of the provisions of the Federal Social
Security Act with respect to coverage of the old-age benefit system,
the conditions required as qualifications for the receipt of benefits,
and the method of computing benefits.
Coverage.-Benefits are based upon wages from all services perfor111ed after 1936 and before age 65 except agricultural service,
domestic service in a private home, any form of Government service,
casual labor not in the course of the employer's trade or business,
service on a documented vessel, service performed in the employ of
religious, charitable, scientific, literary, or educational institutions
and institutions for the prevention of cruelty to children or animals
which are not organized for profit, or service in the employ of a
carrier as defined in the Railroad Retirement Act of 1935. Since
the self-employed do not receive wages, their services are also
excluded.
Monthly Benefits.-Monthly benefits are payable to qualified individuals after age 65. They will be determined by the total amount
of wages from regular employment covered by the old-age benefits
provisions of the act,-with the requirement that the individual must
have worked in included employment at some time in at least 5 years
after 1936 and before age 65 and that his wages from such employment must amount to not less than $2,000. Only the first $3,000 a
year from any one employer, including the cash value of r emuneration other than in the medium of cash, is considered as counting
toward the total of annual wages on which benefits are to be based.
The monthly benefit is paid at the rate of one-half of 1 percent of
the first $3,000 of total wages, plus one-twelfth of 1 percent of the
next $42,000, plus one-twenty-fourth of 1 percent of any additional
amount.
3

4

Ch. 531, 49 Stat. 620; 42 U. S. C. (1935 Supp.), § § 301-1305.
49 Stat. 622, § § 201-210 ; 42 U. S. C. (1935 Supp.) , § § 401-410.

223

PROVISIONS OF THE SOCIAL SECURITY ACT
TABLE

47.-Su,mmary of princ'i,pal provisions of the Federal Social Sec11rity . l et
relatilng to Federal old-age bene"fi,ts
(49 Stat. 622, title II; 42 U. S. C. (1935 Supp.), §§ 401-410)
COVERAGE 1

Old-age benefits are to be based upon wages received in employments performed within
the United States, Alaska, and Hawaii except:
1. Agricultural labor;
2. Domestic service in a private borne;
3. Casual labor not in the course of the employer's trade or business ;
4. Service performed as an officer or member of the crew of a vessel, documented under
the laws of the United States or of any foreign country ;
5. Service performed in the employ of the United States Government or of an instrumentality of the United States;
6. Service performed in the employ of a State, a political subdivision thereof, or an
instrumentalitY. of one or more States or political subdivisions;
7. Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or
educationaJ. purposes, or for the prevention of cruelty to children or animals, no part
of the net earnings of which inures to the benefit of any private shareholder or
individual;
8. Employment by a carrier as defined in Railroad Retirement Act of 1935.2
CONDITIONS TO QUALIFY FOR RECE IPT Oli' l\f0NTHLY OLD-AGE BENEFITS 3

1. At least 65 years of age.
2. Not less than $2,000 total wages from included employment after December 81,
1936, and before age of 65.
3. Wages were for employment on some day in each of 5 calendar years after
December 81, 1936, and before ag,e of 65.
MONTHLY OLD-AGE BENEFIT PAYMEJNTS

4

1. Date monthly benefits first payable, January 1, 1942.
2. The amount of the monthly benefits payable is determined as follows:
Total ica ges from irMluded employments after Dec.
and prior to age 65

81, 1936,

t~i~fe:;!;fs
paid as

[Not counting wages from any one employer in excess of
monthly
$3,000 annually]
benefits
First $3,000_
______________________ _____ __ _______________ _______
;2
Next
$42.000 ____ _____ __ ___ _____ ___ __________________________ ___
All over $45,000--------------------- --- --------------- --------- ; 2~
The maximum monthly benefit is $85.

l2:

LUMP-SOM B ENEFIT PAYMENTS

1. Individuals whose total wages or pe riods of service are insufficient for them to
qualify for monthly benefits are paicl, upon reaching age 65, a l ump sum equal to 3½
percent of the total wages from included employment after December 31, 1936, and
before the attainment of age 65. 5
2. Upon death of individual before age 65, death benefits will be paid equal to 8½
percent of his total wages from included employment after December 31, 1936. If a
person dies without having received at least 3½ percent of bis wages in a lump sum or
monthly payments the difference between such 3½ percent and Federal payments
previously made will be paid as a death benefit.0
REDUCTION OF BENEFITS

An amount equal to 1 month's benefit "ill be deducted for each month in which a
qualified individual who has attained age 65 r eceived wages for regular included
employment.
0

FEDERA L AD~IINISTRATION

Social Security Board determines the qualifications of the individual and the amount of
benefits payable,7 and certifies to the Treasury persons entitled to payments.8
149 Stat.
2
Ch. 812,
3
49 Stat.
q9 Stat.
6
49 Stat.
8
49 Stat.
7 49 Stat.
8 49 Stat.

625, § 210 (b); 42 U.S. C. (1935 Supp.). § 410 (b).
49 Stat. 967; 45 U. S. C. (1935 Supp.), § § 215-228.
625, § 210 ( c) ; 42 U. S. C. (1935 Supp.), § 410 (c).
623, § 202; 42 U. S. C. (1935 Supp.), § 402.
624, § 204; 42 U.S. C. (1935 Supp.),§ 404.
625, § 203; 42 U. S. ,C. (1935 Supp.), § 403.
623, § 202 (a); 42 U. S. C. (1935 Supp.), § 402 (a).
624, § 207; 42 U. S. C. (1935 Supp.), § 407.

224

OLD-AGE SECURITY

Table 48 illustrates the monthly benefits payable t o eligible individuals. No monthly old-age benefits are payable before J anuary 1,
1942. Since the aggregate of wages from employment must be at
least $2,000, the smallest monthly benefit payable will be $10. T he
Social Security Act limits the benefit to a maximum of $85 a month.
An amount equal to 1 month 's benefit will be deduct ed for each
month in which a qualified individual who has reached age 65
receives wages for regular included employment. Wages in excess
of $3,000 a year from any one employer will not be counted in the
computation of benefits.
Since a higher percentage of the first $3,000 of total wages is used
in t he computation of monthly benefits, t he benefit scale is designed
to give g reater weight to the earnings of lower-paid, middle-aged,
and older workers than to persons who through high salaries and a
TABLE

48.-Monthly benefits pCli]Jable for spe&ified total wages as defined, for the
piwposes of title II 1 of the Social Secwrity A ct
I

Monthly benefit at specified rate
Total wages

of ½4 of
0.5%of ½2
l % of 1%ofall
first
over
next
$3,000 $42,000 $15,000

Monthly benefit at specified rate
Total wages

Total

½2 of ½4 or
0.5%of 1%
of 1%of all Total
first
next
over
$3,000 $42,000
$45,000

--

$2,000 _____ __ ____ $10.00
$2,500________ ___ 12. 50
$3,000 ___________ 15.00
$3,500___ ______ __
$4,000 _____ ______ 15.00
15.00
$4,500.
-- --- -. 15. 00
$5,000 ___
___--_____
15.00
$10,000.. __ ______ 15. 00
$15,000__________ 15.00
$20,000____ _____ _ 15.00
$25,000.. . ---. --- 15. 00
$30,000....... . .. 15.00
1

2

-------- ------------·-- ---------------------$0.42 -------0.83 -------1. 25 -------1. 67 -------5. 83 -- - -- --10.00 -------14. 17 -------18.33 -------22.50
--------

$10.00
12.50
15.00
15. 42
15. 83
16. 25
16.6i
20. 83
25.00
29.17
33.33
37. 50

$35,000 __________ $15.00
$40,000 ____ .. -- -- l.'i.00
$45,000__________ 15.00
$50,000 ___ -______ 15.00
$60,000 __________ 15. 00
$70,000 _________ _ 15.00
$80,000 _____ ___ __ 15.00
$90,0QO __________ 15.00
$100,000 ____ ----- 15.00
$110,000......... 15.00
$120,000.. -- . ---- 15.00
$130,000 __ __. __ -- 15.00

$26.67
30.83
35. 00
35.00
35.00
35.00
35.00
35.00
35.00
35.00
35.00
35.00

------·--------·-----$2.08
6. 25
10. 42
14. 58
18. 75
22.92
27.0S
31. 25
35. 42

$41. 67
45.83
50.00
52.08
56.25
60.42
64. 58
68. 75
72. 92
77. 08
81. 25
1 85. 00

49 Stat. 622, §§201-210; 42 u. S. C. (1935 Supp.), §§401-410.
Maximum monthly benefit.

long period of employment accumulat e large amounts as total wages.
The g reater weight · thus assigned to the earnings of the l owerincome groups has been adopted jn lieu of a, maximum wage limit
for coverage by the plan. The $85 maximum monthly benefit has a
similar influence.
Forty-five years after this part of the act becomes effective persons
whose wages from included employment have averaged $50 a month
will be eligible at age 65 to a life income of $35 a month. In the
absence of any r adical increase in costs of living this amount may
often be sufficient to provide for the person's needs without supplementary assistance from State old-age assistance plans. The F ederal old-age benefit syst em will thus serve in the course of time to
reduce materially the extent of old-age dependency among wage
earners and the resulting burden on the State and F ederal Governments for charitable assistance.

PROVI SI ONS OF T H E SOCIAL SECURITY ACT

•

225

Eligibility for Benefits.-In order to be eligible £or monthly benefits providing a life income from the Federal Government, a person
must have worked in included employment at some time in each of 5
separate calendar years in the period subsequent to 1936 and prior
to attaining the age 0£ 65, and all his wages counted from such
employment must not total less than $2,000. I£ his wages from
included employment are less t han $2,000 or his periods of employment are insufficient to meet the conditions just mentioned he will
receive a lump-sum payment equal to 3½ percent 0£ such wages.
Payments Upon Death.-If a person covered by the old-age benefit system dies between D ecember 31, 1936, and his sixty-fifth birthday, his estate will receive an amount equal to 3½ percent of his
total wages during the period. Similarly, when an individual dies
after the commencement 0£ his monthly life income, any surplus
will be paid which r emains after the sum total of his benefit payment
has been deducted fron1 the amount representing 3½ percent of his
total wages.
Method of Making Payments.-The Social Security Board will
from time to time certify to the Secretary of the Treasury the name
and address of each person entitled to receive a monthly old-age benefit, lump-sum payment, or death settlement, from the old-age
reserve account, and will establish the amount of such payment and
the time when it is due. The Secretary of the Treasury will thereupon, through the Division of Disbursement of the Treasury Department, make these payments.
Protection of Benefit Rights.-The Federal Social Security Act
stipulates that the future benefit rights of any individual shall not
be transferable or assignable at law or in equity. Furthermore, oldage benefit payments shall not be subject to execution, levy, attachment, garnishment, or other legal process or to the operation of any
bankruptcy or insolvency law.
Old-Age Reserve Account.-The act creates an old-age reserve
account in the Treasury, to which Congress is authorized to appropriate for each fiscal year beginning with the year ending June 30,
1937, "an amount sufficient as an annual premium to provide for the
payments required" for old-age benefits. The Secretary of the Treasury is to submit annually to the Bureau of the Budget an estimate
of the appropriations to be 1nade to this account, such estimate to
be made by the Secretary of the Treasury "on a reserve basis in
accordance with accepted actuarial principles."
The Secretary of the Treasury is to invest that portion of the oldage reserve account which will not be needed for current withdrawals. The funds are to be invested only in interest-bearing obligations of the United States or in obligations guaranteed as to both

226

OLD-AGE SECURITY

•

principal and interest by the United States. For purposes of investment the Secretary 0£ the Treasury may purchase outstanding obligations at the market price. In addition, through an amendment
to the Second Liberty Bond Act, special obligations 0£ the United
States may be issued at par exclusively £or the purpose of investing
the funds of the old-age reserve account. The special obligations and
those purchased at market price are to yield not less than 3 percent,
and the interest on these obligatic;ms is to be credited to and form a
part of the account. The obligations purchased for the account may
be sold at the market price; those issued exclusively for the account
may be redeemed at par plus accrued interest.

Part III

SECURITY FOR CHILDREN
Part III is based on material provided by
Katharine F. Lenroot, Chief of the Children's Bureau
and Martha M . Eliot, M. D., Assistant Chief

•

Chapter XII
CHILD WELFARE IN A GENERAL PROGRAM
OF ECONOMIC SECURITY
H E CHIEF All1 of social security is the protection of the
family life of wage earners, and the prime factor in family life
is the protection and development of children. Security for
families, the broad foundation upon which the welfare of American
children must rest, involves economic, health, and social measures
which pertain to the entire economi.c and social structure of our civilization. Among them are an adequate wage level and a reasonable
workday and workweek, with provision of regular and full employment necessary to yield a stable and sufficient family income; unemployment insurance or compensation when full employment fails;
provision of adequate medical care and promotion of physical and
mental health; prevention of accidents; provision for the old, t he
sick, the widowed, and the orphaned; adequate opportunities for education and for vocational guidance and placement; crime prevention
and correction; and social services for persons whose welfare is
threatened by the inadequacy or instability of those naturally responsible for their care and support, by their own instability, or by the
breakdown of the primary measures of economic and social security.
All social security measures may be described, in f act, as affecting
child welfare-even old-age security, which lifts the burden of support of the aged from those of middle age whose resources are needed
for the care of children.
In planning for any form of security adequate consideration must
be given to the protection of the health and welfare of the children
in the families coming within its scope. All children need health
protection, to provide which the community and the State, as well
as individual parents, h ave a responsibility. Such protection should
begin with the prepar ation of boys and girls for marriage and
parenthood; should then provide for adequate care of the mother
during the prenatal period, at childbirth, and following delivery;
and should be extended throughout the infant, preschool, school, and
later adolescent periods. Many children require special medical care
or social protection by reason of physical handicaps, mental defects,

T

229

230

SECURITY FOR CHILDREN

orphanage, desertion, or grave conditions 0£ incompetency, discord,
neglect, and demoralization in the home.
The effect of economic insecurity UJ\On children is brought vividly
to public attention by the fact that in December 1934 about 8,000,000
children under 16 years 0£ age were in families receiving unemployment relief-representing about 40 percent of the total number
0£ persons on relief-and by evidences, given later in this report,
of the effect 0£ the depression upon the health and welfare of children and the resources of the agencies created to serve their needs.
Those engaged in the administration of relief and others having
an opportunity to know the problems at first hand are deeply concerned over the gravity of the health, educational, employment, and
social problems of the children and young people in relief families~
and are impressed by the necessity of adequate consideration 0£ the
needs 0£ children, both in the relief program itself and in transition
to other forms of aid or rehabilitation, such as emergency work,
rural rehabilitation, insurance, or pensions. In reaLlocations o:f
financial or administrative responsibility between the Federal Government and the States, between States and local communities,
and between emergency relief and permanently established welfare
or health agencies, special care must be taken to see that no gaps are
left which may mean suffering and neglect to children. The Federal Government has a responsibility in t hese matters which it shares
·w ith the States and the local communities.
Development of provisions £or the health and welfare 0£ children
has heel} uneven in both extent and quality. In many areas, particularly in rural territory, there has been general neglect of these needs.
During the depression period the degree of care which had been
achieved at the cost of much planning and struggle has been put in
jeopardy and often seriously curtailed or eliminated by reason of the
financial retrenchment of public and private agencies.
Attempts to provide social security for the unemployed, especially
for the unemployed now on relief, by measures which will enable them
to become again self-supporting, through private industrial recovery
or through a work program, will not benefit families whose breadwinners are absent. This is also true of unemployment compensation. For these groups 0£ families special provision must be made:.
The United States Children's Bureau was asked by the Committee
on Economic Security to act in a consultative capacity wit h regard
to sections or parts 0£ the security program relating to child health
and child welfare. An advisory co11JJ11ittee on child '\\Plfare " ·orked
with the Children's Bureau in developing the factual material and
recommendations submitted to the Cabinet Committee on E conomic
Security: The me1nbership of this advisory committee is given in
appendix XIN, page 519.

CHILD WELFARE I N A GEN ERAL PROGRAM

231

The measures that were thus recommended are, of cour se, in 110
sense representative of a complete child-welfare or child-health program in this country. It was felt that it would be most logical and
most reasonable to select, in the first place, those parts of the cl1ildwelfare or child-health problem which were very closely related to
the problem of unemploy1nent; in the second place, 1neasures ,T hich
would attempt to meet the basic ooeds of children t hroughout the
country, such as the need for economic security when the father is
~ bsent from the home and the need for a measure of health protection,
which must be supplied thro1-1gh community activities and co1nmunity
agencies; and, in the third place, special social protection when grave
conditions of incompetency, neglect, abuse, or defect in the child
himself are present.
These principles are incorporated in the three sections of the program relating to aid to dependent children, welfare services for
children needing special care, and maternal and child-health services1
including services for crippled children-a gToup of handicapped
children needing special attention. Other handicapped groups-the
feeble-minded, the blind, and the deaf-have not been included in the
program except insofar as t he child-health services and the social
services provided will place our local communities in a very much
better position to find out where there are children in need of care,
to bring together existing resources, and to develop :further experience
concerning the total child-care problem in the country.
The provisions with reference to security for children do not contemplate any lessening of the burden now being carried by State and
local agencies or by private voluntary agencies, which are rendering
very great service to children in this country. The progTam recommended would attempt to make universally available throughout the
United States certain minimum measures of public protection, without which any private effort or any purely local effort is bound to be
uneven and most inadequate in the places and areas where children
are in the greatest need.
Moreover, the recommendations regarding security for children do
not set up any new or untried methods of procedure, but build upon
experience that has been well established in this country. In that
sense the children's security measures are essentially American measures, building upon American experience and designed to establish
a foundation of F ederal, State, and local cooperation which will not
lead to any difficult administrative realms or to any unpredictable
costs.

•

Chapter XIII
AU) TO DEPENDENT CHILDREN

AID to dependent children, also known as mothers' aid, mothers'

_fl_

pensions, and mothers' assistance, is designed for a group of
families deprived of a father's support by death, desertion, or
other reasons defined by the laws of the various States, and requiring
care planned on a long-time basis, the assistance to be given in the
form of a definite grant. Such assistance is authorized by the
laws of 45 States, but is actually granted by less than half the local
units empowered to provide this forn1 of care. 1 Intended to afford
the essentials for family life and the upbringing of children, mothers'
aid, if well administered, relieves not only the insecurity but also
the sense of dependency and inadequacy from which those receiving
general relief often suffer. Experience shows that this security and
the assistance given to the mother in meeting the problems of family
life and child-rearing are important influences in preventing juvenile
delinquency and other social difficulties.
PURPOSE AND EXTENT OF LEGISLATION FOR AID TO
DEPENDENT CHILDREN
The purpose of legislation for aid to dependent children has been
to prevent the disruption of families on the ground of poverty alone
and to enable the mother to stay at home and devote herself to housekeeping and the care of her children, releasing her from the inadequacies of the old type of poor relief and the uncertainties of private
charity. The assurance of a definite amount of aid, not subject to
change from week to week or 1nonth to month unless conditions in
the family change, is one of the chief advantages of this form of
assistance. The enactment of laws for aid to dependent children
was evidence of public recognition of the fact that long-time care
must be provided for those children whose fathers are dead, are
incapacitated, or have deserted their families; that security at home
is an essential part of a program for such care; and that this security
1

Information as of 1934.

234

SECURITY FOR CHILDREN

can be provided for this whole group of children only by public
provision for care in their own homes.
This program was accepted promptly in State after State because
experience had shown that unless the mother who was left with young
children to support belonged to the highly skilled or professional
group her contribution in the home was greater than her earnings
outside the home. Before the adoption of these laws it frequently
and even usually happened that either her children were taken from
her and cared for at greater cost in institutions or foster homes, or
she was encouraged to make the attempt to be both homemaker and
wage earner, with the result in such cases that the home was broken
up after she had failed in her dual capacity and the children had
become delinquent or seriously neglected.
Although legislative approval of this principle has been given
by nearly all the States, in many States ,a ]arge proportion of the
counties have not provided the benefits which the laws contemplated.
This is explained by the fact that (1) the majority of t hese statutes:
unlike most of t he r ecently enacted old-age assistance Laws, were
permissive rather than mandatory, and in all but a few States the
costs were borne entirely by the county or town, with the result that
in many counties grants were never made or were. inadequ,ate in
amount (see table 55, p. 245); and (2) the numbers of dependent
children have greatly increased during the depression, because more
widowed mothers have been left without sufficient funds to care for
their children, and no commensurate expansion of public funds for
this type of care h,as occurred.
State laws for aid to dependent children were intended to afford
assistance to families without male breadwinners, and all such laws
apply to children of widows. In the laws and in administr.a tive
practice great variation is found in the definitions of persons eligible
f or aid-variations with respect to marital status of the mother,
residence and citize1~ship, ages of children, and other items. In
pr,a ctice, in 1931, s2· percent of the families receiving aid to dependent children for which marital status was ascertained were
families of widows. Information available in 1934 shows that in 36
States, the D istrict of Columbia, Alaska, and a awaii aid may be
extended to mothers whose husbands have deserted (frequently
granted only under specified-conditions as to attempts to secure support and as to dura.tion of the father 's desertion) and in 21 States,
the District of Columbia, ,a nd Alaska: to divorced mothers. The
laws of these 21 States, the District of Columbia, and Alaska are
very liberal, permitting aid to any mother with dependent children,
or to a dependent family in which the f ather is dead, divorced,
physically or mentally incapacitated, imprisoned, or where he has

235

AID TO DEPEN DENT CHILDREN

deserted his family. According to 1934 information, in 29 States,
the District of Columbia, Alaska, and Puerto Rico aid may be granted
for children up to 16 years of age, and in 2 States for children up to
17 or 18 years. T able 49 shows t he conditions under which aid may
be granted.
TABLE

49.-0ondiUons unde1· which atid to dependent clllildren may be granted
and l imitations on amoivnt of alid (1934)

State

Age
under
which
aid
may
be
given

- - - - - - - ·!- --

Years of resi•
deuce
Conditions under IVhich family deprived of
father's support is eligible for aid
State

County or
town

Maxi•
mum
grant
for
family
of3
children

- -- - - - - - - - - - - - - ---1- -- - - - - - -

Alabama•·---··------··---·
Alaska______________
16 Father dead, deserting, divorced, incapacitated,
1
in penal institution.2
Arizona. . . _._ ...... .
16 Father dead, deserting, incapacitated·-· -- _______
J 1
Arkansas ______ ____ _
15 Father dead, deserting, incapacitated, in penal ·------ institution.
16 F ather dead, incapacitated,2 in institution (pen•
California____ --··-·2
al or other) .
Colorado__.. __ . ____ _
18 Any mother 2·---- ·--------· · - ·- --------- ----- -·
Connecticut. __ ·-·-·
16 Father dead ___ __ ····----··········-··-··-·······
34
16 Father dead, deserting, incapacitated, 2 in penal
3
Delaware_· ----··--institution.
District of Col um16 Any mother 2---······ ······ - · · ······ · ·········· ····- - ··
bia.
Florida.-·--··-·-· -·
6 16 Law broadly inclusive 2 6---- ··-·-· · · - · · ---·-····
2
Georgia•·---···----·-·· ------·----H awaii.·--·-- --··-·
(7)
Father dead, d,eserting, in institution (penal or -····-- ·
other) .2
15 Father dead, in institution (penal or other) 2· - · · ·
2
Idaho_······- · .•••..
Illinois. _____ ---· ....
16 Father dead, deserting, incapacitated ... -·····-·
Indiana.. _. _. ______ _
Q}6 Any mother 10_··--·-------------·-·-············ . ...... .
16 Father dead, in State institution (penal or other). . •••.. ..
Iowa
___._.··-·-·-·-·
Kansas
_____ .... -__
14 Law broadly inclusive 6·-··· ···- ·-····· · -·······
2
6 14
Kentuck y.-·----- ·Any mother 2· ·····--· ·-··· · ·-············-····· ···- · ···
6 16
Father dead, incapacitated, in penal institution.
L ouisiana 11-·-·----·
16 Any mother.................... . ... . . ...........
5
Maine ..... ·- ····· -·
5 14
Maryland .·---·--··
Father dead, incapacitated.· -·-·-··-·--··- -·-· ··
Massachusetts.. . .. .
16 Any mother. ··-·······-·····-·-··-····-··-·-··-·
2
17 Law broadly inclusive 6·· · · · ···· · · ·-·-···•· · ···- --··-·-Michigan __ · -· ·-·. _.
3 2
Minnesota.. ··-· __ ..
16 Father dead, deserting, incapacitated, in State
institution (penal or other) .2
16 Any mother 2· ·· · -· ·---- ··· · · -- --- ·--··- -·· ····- --· --··Mississippi. _.·-··-·
M issouri.. __· ·-.... .
16 L aw broadly inclusive 6····-·-·· ···-··· -·--···-- ---· · ·-Montana .......... .
16 Father dead, incapacitated, in State institution
(penal or other).
Nebraska···--·- __ ..
16 Law broadly inclusive 6··-·· -·······-······-···s 16 Any mother. . .. _._ . . .... __-·-·-- ---- .. --··-._.__
Nevada. _.••........
New Hampshire .. . .
16 Any mother 2••• •• ·-·-·····- · · · · · · - - - - · · · · · - - --2
New Jersey.. __ .... .
6 16
Father dead, deserting, incapacitated, in insti· ·-··-···
tution (penal or other).
2
New Mexico·- ·· · --·
16 Law broadly inclusive 6· ----··· · · - · --- - · ······-New York __ ___ _··-·
16 Father dead, deser ting, incapacitated, in institu·
32
tion (penal or other).
North Carolina ____ _
14 Law broadly inclusive s· ·-··------·--·----·-··-3
North Dakota·-··-15 Father dead, deserting, incapacitated, in penal ··· · · --·
institution.
Ohio_._. ____ .·- .··· 6 16 ___ __do.·-·--- · •·•••--·-·---- --- ------·---- -·----- - -·- · ···
14 Father dead, in State institution (penal or · ···-·· ·
Oklahoma. ··- · --···
mental) .
5 14
Father dead, incapacitated, in institution (penal
3
Oregon __--···-·-· · ·
or other).
S}4 Father dead, in hospital for insane . . ··---------·
Pennsylvania.. ---·2
Puerto Rico._._··-.
16 Father dead... ______ . ··· -··.-- -··-· ____. ---·-- -33
Rhode Island.. _.. __
33
S!4 Any mother 2.. ··--·····-··-···-·-···········-· ·
South Carolina• - --South Dakota.. __ _.
16 Law broadly inclusive 26_··-- -·---·- ----·--•·- -1
2
17 Fatber dead, deserting, incapacitated, in penal
T ennessee.· ·- -----·
institution.
Footnotes at end or table.

------- -·------

$55. 00
(4)

J

1

20. 00

· --·----

60.00

-------·

(1)

69.33
28. 00

··-·--··
- - ----·3

I

1
1

6 mos.
3

3

1
1
2
1
3

1
1
1
1
31
2
2

5

1
··-· · --·
3

41. 00
---···-·
1
()

8

20.00
35. 00
67.50
32,50
50. 00
(l)

35.00
(4)
(4)

( ◄)

60.67
50.00
(4)

32.00
30.00
30.00
55. 00
31.00
(4)

40.00

(4)

1
l

30.00
45.00

2
1

55.00
20.00

1

52.00

1
--·-··-·

40.00
25.00

6mos.

42.50
35.00

1

2

(◄)

236

SECURITY F OR CHILDREN

TABLE 49.-Con ditions wnder which aid to dependent childlren may be gr(l/Y/,ted

and limitations on amount of aid (1934)-Continned

State

Age
under
which
aid
may
be
given

Maxi•
mum
grant
for
Coun• family
of3
ty or
chil•
town
dren

Years of resi•
dence
Conditions under which family deprived of
father's support is eligible for aid
State

-Texas.... . . .........

16

Utah ... ............
Vermont.·--·· .•.. -·

16
16

Virginia ...•••......
Washington. .. __ ._.
West Virginia ... . _._
Wisconsin._ ....... .
Wyoming.··---·. ___

16
15
6 14
616
14

-F ather dead, deserting, divorced, in institution
(penal or mental).
Law broadly inclusive 6··-··•- ·----- -----· -----Father dead, deserting, incapacitated, in insti·
tution (penal or other).10
Law broadly inclusive 2 6·····--··--··-· · · -··---Any mother ••..... ......••. •••.•...... .•........
F ather dead, deserting, incapacitated _- --· -· -·-Law broadly inclusive 26···············-···· ·-··
F ather dead, deserting, incapacitated, in penal
institution.

--------

2

$27.00

2

40.00
26.00

1
1

(4)

-------- -------2
3
3 2
l

--------

1

-------l

25.00
45.00

(4)

40.00

No law for aid to dependent children.
May be granted to other person having care of the child.
Citizenship or application for such required (in New York under certain conditions only).
• Amount of grant not limited.
6 Extension possible under specified conditions, usually invalidity or during school attendance.
6 Includes families in which parent is divorced, deserting, physically or mentally incapacitated, imprisoned.
1 i\ ge not specified in law.
s Maximum grant in Cook County, $55.
1 Granted to girls under 17; aid may be continued during minority.
10 Court must commit children to administrative agency.
11 Provisions of 1920 law. A law broader in scope was enacted in 1930, but funds have not been available
to carry out its provisions.
1

2
3

Legislative authorization for public. aid to mothers with dependent children has been provided by all the States except Alabama,2
Georgia, and South Carolina, by the Territories of Alaska and
H awaii, and by Puerto Rico. Alabama h as authorized home care of
dependent children unde:r a law comparable to poor relief. Information obtained in 1934 indicates t hat, although authorized by law,
aid to dependent children was not granted anywhere in Arkansas,
Mississippi, or New Mexico.
Except in New England, where the local administrative unit is
the city or town, the county is the local unit responsible f or granting
aid to dependent children. Information obtained by the Children's
Bureau in 1931 indicated that of the 2,723 counties in the United
States •authorized to give this form of aid, 1,490 (55 percent) were
actually doing so, and in 1934 reports received from 25 States
indicated that at least 171 counties in these States had discontinued aid. It is probable that less than half the counties with
legal authority to aid dependent fatherless children in their own
2 Alabama in 1935 enacted a law prov iding a id to dependent children t h at i s comparable to the laws previously enacted i n other States for tbis pmpose.

AID TO DEPENDENT CHILDREN

237

homes in 1934 were actually giving aid. Table 50 shows the information available on the extent to which aid to dependent children is
provided in the United States. The great diversity in the present
coverage of various State laws is illustrated by the fact that the percentage of counties within a State granting aid ranges from less than
1 percent to 100 percent, and the per-capita expenditures within a
State range from less than one-half of 1 cent per capita to 93 cents.
The total loca.l and State expenditures now being made under
statutes :for aid to dependent children, about $37,500,000, not only
:fail to reach more than half o:f the counties authorized to grant aid,
but in many instances afford a very small amount of aid per :family.
For example, the average amounts actually granted in 1933 or 1934
ranged from about $9 p er month per family to about $51 per month
per family, although the laws permitted much more, as is shown in
table 49.
i.s provided: Annual percapita expendi ture wnd per cent age of coimties gran t in!J aid, 1934

TABLE 50.- Extent to w hi ch ai d to dependent chi ldren

Annual
Percentage of counties per•
capita
granting aid
expenditure

State

Alabama ____ ______ No special law ___ ____ _
Alaska ____ ________ (l) •••••.. - - - •..••.• .•.. (1)
Arizona. . ......... State-wide. _. ___ _. .... $0.05
Arkansas_____ . ... . Aid discontinued . ..... ------·
.35
California_.• . . . •.. State-wide._ .... . . ·--Colorado ____ ...... 54.·------ ·-········--.14
.46
Connecticut....... State-wide.· · - -------Delaware_.. ___. __ ___ __do ...•.. _·--- -- --. 39
District of Col um- ---------- --------- -- --.30
bia.
Florida ____ _______ . 67. . ...•...............
. 15
No law _____ ....... ___ .
Georg!~--·-·······
Hawau ___ ____ ____ _
Idaho. -- ....... ...
Illinois. __ ._ .......
Indiana.. _... . . ...
Iowa______ __. . . . . .
Kansas____ . _.. . ...
Kentucky_____ ___ _
Louisiana. . _. .. _..
Maine ___ ________ .
Maryland. __ __ ____
Massachusetts. __ _
Michigan _________
Minnesota __ ___ .. .
Mississippi.. _____ _
Missouri._ .• __._ •.

(1) ----- - . - - ••••• - - • • -- -

75. ----- ·---- -· -- ··---81
...__. __
. . ._______
...... .____
. .. ._
75..
__ .___
98.
--- ----_______
--·-- --36____
_. -____
__ -__
(Z)
··•- · · ·_______
-- •• -· .__- ---•.
5 _______
______

State-wide. __ . .... __ . _
33---------·--- -- ---- -·
State-wide
43
_____ ____.......
__ __ ____. ....
__ ._
91----- ·---- --- -····--·
Aid discont inued. __ .. .
3 10-------- ------ ----- -

(l)

. 10
.20
. 11

. 29
.04
. 02
. 004
. 39
.07
.58
. 51
.44
. 03

State

Annual
Percentage of counties pergranting aid
capita
expend·
iture

--

M ontan a _____ ____ 3 82 ___ __ ___ ____ __ __ ____ $0. 46
Ne braska .•..... - 86. . .. . . .. ••.. •.•......
. 20
Nevada. __ _... --- 71........•.. .•.. ..... .
.41
New H ampshire. State-wide._ -------- · ·
. 18
New Jersey. __ _. _ . ..•. do. __. _____. _.... _.
. 61
New Mexico . . . . - L aw not in operation. .
New York ... ---- 81.....................
. 93
North Carolina . _ 74
______
_····
·.02
77 ___
______
_. --·_____---. __ __
North D akota...- 96. . ..... ____ __ ______ __
.39
. 31
···
Ohio
. . ------··
Oklahoma
____ ____
3 62. . . _..••... . . . .. . • . .
.05
Oregon. •... . .•.. - 69.. .• . . .... ..... . .... .
. 26
Pennsylvania. ___ 85.... . . ...........•.• .
. 34
Puerto Rico... •.. L aw not in operation ..
Rhode Island .. __ State-wide._. ___ ._ ....
. 39
South Carolina ___ 78
No..law
•. . .___
.....
.. . . .__
.
.. __. ___
_______
South D akota. . . .47
T ennessee. __ __ • __ 4..... ........... . . . . . .
.03
T exas ... .• . ... -. . 3-------·-------- -· ---·
. 008
. 15
Utah..-- --·- --- ·· 48 ..................•. .
Vermont. •... . . .. State-wide. __ . . ... . __.
.13
Virginia. __ . ___ • __ 44·--- -·- -----·-- --· -- .01
Washington . . . •.. 92
. . . . ...............
..
. 36
4______
. ________ ___ ____
West Virginia .. . .
. 007
Wisconsin. ____ ___
. 74
89
.
.
·
·······
·
··-··
-·
43
__
______
__
____
___
___
W yoming ________ 3
.10

1 No report.
' Less than 1 percent.
a Based on counties granting aid June 30, 1931.

FAMILIES AND CHILDREN BENEFITED
It is estimated, on the basis of information obtained by the Children's Bureau through a Nation-wide survey in 1931 and supplementary information obtained in 1933 and 1934 through State
78470-37--17

238

SECURITY FOR CHILDREN

departments of ,·velfare, that on November 15, 1934, approximately
109,000 families were receiving benefits under laws for aid to dependent children. The number of children benefiting from this form
of aid is estimated as 280,500. (See table 51.)
Fifty-one percent of the estimated number of families receiving
aid tinder State laws ,vere living in cities of 50,000 population or
more or in counties containing such cities, the number of families
being approximately 55,500 in these urban areas and 53,500 in other
areas. From reports available in November 1934 it was estimated
t hat 32,476 such f amilies (about 30 percent of t he total group) lived
in nine large cities,3 18,723 of them in New York.
TABLE

51.- Esti1nated number of famiiUes and ohildren reoeiving aid to d ependent ohildiren (brised on figwres available Nov. 15, 1934)

Sta te

Total _____ __ ____ ____ __ _

Number
of families receiviog
aid

Number
of children
benefiting from
aid

109,036

280,565

Alabama•-------------- ---- ·Arizona ____ _._ ... ____.. __-- . - ---- -----106 --------379
Arkansas 2_ • • ____ _ _ • ___ _ _ __ _ _ ------ -----------California __ . _. _______ ______ __
7,056
17,642
Colorado.- _. __ _______ _. . ____ _
3 1,435
552
Connecticut_ _______ __ ___ _. __ .
], 271
3,276
Delaware _____ ___ _. __ . . ____ __
348
855
District of Colum bia ___ ______
72()
209
Florida ____ _. . ______________ _.
2,564
6, 164
Georgia 1_• • ___ • __ •• __ ___ ••• _ _
Idaho 4_ _ _ _ ---- - - - _ __ _______ •• ---------619
230 -- ---- --Illinois __ _. _____ . . .... -. __ ... 6,217
14,802
Indiana ___. . __. __. ___ . ____. . _
1, 332
3,856
Iowa _______ ___ __ _________ ____
J 9, 170
3, 527
Kansas. __ __ ------ ___ _---- --- _
3 I, 997
768
Ken_t1:1cky ___ _. __ _________ . ___
J 356
137
Loms1ana. _. .. ___. ___.. ____. _
J 229
88
M aine_. . ______ ____ ___ _..... _
3 2, 124
817
M aryland . .... ___ . ... ________
3 694
267
Massachusetts . . _______. . ___.
3,939
I 1, 817
Michigan ___ __ _____ __ ________
6,938
J 18,039
Minnesota ___ _____ _______ ___ _
3,597
9,152
M\ssissii;>Pi 2 _ . _ ___ _ __ _ __ _____
---- ---------Missouri __.... _._ . _._ ._._ . . . . -- ---- 336
J 874

State

N umber Number
chllof fami- ofdreo
lies rebenefitceiving iog
from
aid
aid

839
Montana'-- ---- - -- -- ------ -Nebraska ____ ____. - ----- ----1, 654
Nevada 4 __ _ _ __ _ _ __ _ _ _ __ _ _ _ __ _
200
New H ampshire __ ____ ____ ___
260
New Jersey. ___. . ____.. __ . ___
7, 711
New M exico I _ ___ _ _____ __ ___ _
New York . . . . ____ _____ . __ . __ ---------23,493
North Carolina __ ____________ _
314
North D akota i _ _ _ _ _ __ __ ___ __
978
0 b io. -- ____ ____ __. ___ ______ . _
8,923
Oklahoma 4 _ _ __ __ __ _ __ _ _ ___ _ _
l, 896
Oregon . ____ . __ ____ _______ __ .
1,040
Pennsylvania ______________ . .
7,700
Rhode Island __ . ___ __-- --- -. 513
Carolina
,
_____
_______
_
South
Dakota
i _____ _ _ _ _ . _ _ _ _ ---------South
1, 290
Teo oessee _. _• __ ... . . ___ ___ _.
241
Texas._•. . __.. _.•••... _. - .•. .
332
Utah _________ _____. _
622
Vermont __________ ____ ______
206
Virginia ___ ___ __. .. _._ . .... _.
136
3,013
Washington•- ----·- · -·-•-West Virginia ____________
____
108
Wisconsin . _____ ____________.
7. 173
95
Wyoming •- -·-· · · · --· -· ··- ---

1,969
a 4, 300
3 520
i 61
18, 789

---------56,524

947
2, 644
24,470
5, 166
2, 259
22. 5 7
1,666

-----3,
----324

621
863
1, 611
46 l
3
3

3

54 5

7. 34
32 1
17,932
r_, 9

3

No law.
Aid discontinued.
J Estimated on basis of 2.6 children per family, tbe average rate for 20 States reporting in December 1933.
4 Estimated on basis of trends in comparable States from which reports have been received.
6 Law not in operation.
1
2

The estimated number of families and children receiving aid to
dependent children in each State, according to reports receiYed in
1933 or 1934, is shown in table 51. New York State, with 23,493
families r-e~eiving aid, is the only State in which the number reached
or exceeded 10,000. In 6 States less than 200 families were aided:
Arizona, K entucky, Louisiana, Virginia, vVest Virginia, and
"\Vyoming.
3

Boston, Chicago, Cleveland, Detroit, Los Angeles, Milwaukee, New York, P bilad elpbia,
and Pittsburgh.

239

AID TO DEPENDENT CHILDREN

Great variation existed among the States, and in the different
counties in the same States, in the extent to which aid t o dependent
children, even prior to the depression, was reaching all families which
would be eligible under a fairly liberal law. For the United States
as a whole, in 1931 the average number of families aided per 10,000
population, in areas grant ing aid to dependent children, was 10, and
the number of children, 28. This ratio of families aided ranged from
1 in Maryland to 24 in Wisconsin. The median State, Maine, had a
rate of 8. If aid to dependent children had been provided as exten sively throughout the country as in Wisconsin, approximately 295,000
families would have been receiving aid in 1931, or nearly three times
the estimated number actually receiving aid.
Monthly figures obtained by the Children's Bureau for 93 cities
and city areas show trends from 1929 t o 1934 in the monthly average
number of families receiving aid to dependent children in each year.
From 1929 to 1934 the increase was 41 percent.
Monthly a,rerage
Y ea,r

number of families

1929__________ ________ ______ _________________________ _______ 31, 849
1930____________________ ______________ _________ _____________ 33,683
1931------ - ------- ---- - - --- ------ - - ----------------------443
1932______________________________________________________
__ 38,
43,667
1933- - ------------- - ------ ---- ------- - --- --- --- ------------- 46,647
1934______________________________________________ __________ 47,499

FAMILIES OF DEPENDENT MOTHERS RECEIVING
EMERGENCY RELIEF
The 1930 census showed 3,792,902 families with female heads, of
whom 2,534,630 were widowed (table 52). In 1,055,053 of these
families with widowed mothers there were children under the age of
21, and in 431 ,424 families, children under the age of 10 years. The
families with children under the age of 21 years were distributed as
follows: 1 child, 447,209; 2 children, 267,502; 3 or more children,
340,342.
These families of widows would be given primary consideration in
broad plans for survivors' insurance or insurance for widows and
orphans. Whether or not such plans are developed and adopted:
many families deprived of a male head will require public support if
their home life is to be maintained on a basis necessary for the rearing of children. Expansion of systems of aid to dependent children,
already adopted by nearly all the States, is immediately feasible as a
method of providing for the needy group.
It is impossible without detailed case investigations to determine
accurately how many families receiving emergency relief are teclu1ically eligible under laws for aid to dependent children, and further,
how many would be found to measure up to policies estahlished with

240

SECURITY FOR CHILDREN

reference to the character of the mother and her competency to give
proper care to her children. Some agencies administering aid to
dependent children, in order to limit the number granted aid to those
who can be cared for with some degree of adequacy, have adopted
policies of excluding certain groups, mainly women with only one
dependent child. General testimony of those responsible for administration of aid to dependent children and relief is to the effect that
52.-Maritai status of families with female heads and number of children
under fl years and under 10 years: United States population census, 1930
( unpublished figures)

TABLE

Families with female heads

N umber of children
Total

Families with white or Negro female heads for
which marital status was tabulated
Families
with
female
Marital status
heads for
whom
Total

Married,
husband Widowed
not
present

marital

Divorced

Single

571,214

status
wasun
known 1

Number of children under 21
years

Total families ••....•.... 3,792,902

3,742,432

400,695

2,534,630

235,893

Families tabulated.· · --------- 3,742,432
No children.•..........•.. 2, 250,624
1 child.•••••.••••••. _.••••.
640,302
2 children ..............•..
382,756
3 or more children ..•......
468, 750
Families not tabulated ___ .... _
50,470

3,742,432
2,250,624
640,302
382,756
468,750

400,695
159,851
91,710
64,625
84,509

2,534,630
1,479,577
447,209
267,502
340,342

235, 893
106,340
60,342
36,724
32,487

T otal families ___ __ ______ 3,792,902

3,742,432

400,695

2,534,630

235,893

Families tabulated_. ____ ___ __ _ 3,742, 4~2
No children under 10. . .... 3, 108,734
l child•••.••... ___ ________ _ 364,147
2 children •.. . _____ . ___ .•••
162,500
3 children • . ___ ________ ____
69,190
4 or more children • . •••••••
37,861
Families not tabulated .. ______
50,470

3,742,432
3,108,734
364,147
162,500
69,190
37,861

400,695
275,180
66,630
33,735
15, 805
9,345

2,534,630
2,103,206
249,468
.109, 963
46,698
25,295

235,893
179, 619
35,274
14,038
4, 786
2,176

----------- --------- ---·--·-·-- ---------

50,470

571,214 ---------504, 856
41,041
.........................
13,905 ------·--11, 412 ---------50,470
---------

--··------

Number of children u nder JO
years

------·- .. -- ---·--·-- ------·---- ---------

571,214

50,470

----·--··-

571,214
550, 729
----------.
12,775 ........................
4,764 ---------1, 901 . . ...... ...... _.
1,045 ---------·
60,470
---------

1 Includes 10 022 families with white and Negro female heads for whom marital status was not reported
1
and 40,448 families with female heads of other races for which information was not tabulated.

curtailed State or local appropriations for aid to dependent children
or failure to expand such appropriations connnensurately with increasing need forces many mothers and children legally eligible for
aid to apply for emergency relief or the old t ype of poor relief. In
some States, because the pre-depression standards were on the pauper
level, this has meant a continuation of insecurity and inadequate care
for the children, and in others it has meant a loss of the security
which the pension system gave or should have given.
The study of occupational characteristics of r elief families in 79
cities, representing all the main geographic divisions, made by the

241

AID TO DEPENDENT CHILDREN

Federal Emergency Relief Administration for the period May 1934
included information as to the number of relief households 4 wit h
female heads, the marital status of the women, and the number o:f
dependents under 16 years of age. Tabulation of a representative
5-percent sample o:f the returns affords a basis for estimating the proportion of urban relief households (living in towns of 2,500 population and over) with dependents under 16 years of age, headed by
women who were widowed, separated, or divorced-a group roughly
comparable to the group being aided by laws for aid to dependent
children. Studies of 61 rural counties in problem areas and the
unemployment relief census of October 1933 also affords a basis for
estimating roughly t he prevalence of this type of family on rural relief
rolls. The ratios prevailing in the samples have been applied by the
Federal Emergency Relief Administration to the August 1934 r~lief
population. T he estimates are, of course, very crude, but they afford
some indication of the extent to ,,,hich emergency relief provided for
fat herless families and children.
On the basis of these figures it is estimated t hat 358,000 households
comprising a widowed, separated, or divorced woman and one or more
dependent children under the age of 16 years were receiving emergency
relief in August 1934. The number of children under the age of 16
years in these households was estimated to be approximately 719,000.
In urban areas 8.8 percent and in rural areas 10 percent of all relief
cases were cases of this type, according to the samples tabulated.
The estimated urban and rural distribution of relief households with
dependent children, whose heads were widowed, separated, or divorced
women, was as fallows :
E stimated
nwniber of
fami lies

United States _____________________________________ 358,000

Urban areas-- --- --- ----------------------~- ------ - - ---- 260,000
Rural areas_______________ ______________________________ 9·8, 000

Estimated
number of
chAldren

719,,000
494,000

225,000

The estimated number of relief households whose composition is
similar to that of families eligible for aid to dependent children is
nearly three and one-half times as large as the estimated number of
families receiving aid to dependent children under State laws, and
the estimated number of children in the former group is over two
and one-half times the number benefiting from aid to dependent children. To recapitulate, 109,000 families with 280,500 children were
receiving aid to dependent children, and 358,000 similar households
with 719,500 children were receiving emergency relief.
'A~ relief household may consist of one or more blood families. Tbe occupational
characteristics study, however, showed that 94 percent of the relief households consisted
of single families.

242

SECU RITY F OR CHILDREN

Studies in certain States bear out the findings of the urban and
rural studies made by the Federal Emergency Relief Administration,
to the effect that large numbers of families of the same general
types as those receiving aid under State laws for aid to dependent
children are on emergency relief rolls. In Florida a study made
early in 1934 showed 2,564 families receiving aid to dependent children and 5,914 families of similar type receiving relief.5 In a
study made in the spring of 1934 in Cincinnati, Ohio, by the United
States Children's Bureau, it was found that 478 families were r eceiving aid to dependent children and 2,153 families apparently
eligible, under the law, for such aid were receiving emergency
relief.6
The average number of children per family in families r eceiving
aid to dependent children is 2.6; in urban relief cases of similar
type, 1.9; and in the same type of rural relief cases, 2.3. On the
basis of the 5-percent sample of the occupational characteristics
study of urban relief cases, it is estimated that 49 percent of such
families, headed by widowed, separated, or divorced mother s with
dependent children, had only one dependent child under the age of
16 years. Such families often have been excluded from aid to dependent children under administrative policies, though never by
law, on the theory that a woman ought to be able to support her self
and one child-a theory that even in prosperous times frequently
meant neglect of the child and inadequate income for mother and
child. In periods of unemployment mothers with only one child
find almost as great difficulty as other mothers in maintaining themselves and their children without assistance.
In 44 per cent of the relief families included in this summary the
mother was a widow ( about half the proportion found among families receiving aid to dependent children in 1931) , in 47 percent she
was separated from her husband, and in 9 percent she was divorced.
Seventy-two percent of the urban relief households of a type similar
to families receiving-aid to dependent children included in the sample of the occupational study had no members or only one memb~r
of the household working or seeking work ( undoubtedly the mother
in the great majority of cases). The mother s in these relief families were predominantly women with no established occup ation (32
percent) or women who had been engaged in domestic or personal
service (37 per cent) or in semiskilled occupations ( 19 per cent) .
~ Sooial W elfare in F lori da, r epor t of a s urvey by Emma O. Lundberg (P ublication No.
4, Sta t e Board of P ul:rlic Welfa re, T alla hassee, 1934), pp. 96, 106.
e Ohi ldren's A.id an d, Child Ca re in mnci nna ti and H amilto1i County . Ohio (Cincinnati
Bureau of Governmenta l Research, 1'9 35) , vol. IV, p. 2.

243

AID TO DEPENDENT CHILDREN

Only 12 p ercent of the women heads of relief families of the type
under consideration were employed at nonrelief work. At the time
of the study 81 percent of these relief households had no weekly
earnings, being entirely dependent on relief, and 89 percent had no
earnings or earnings of less than $5 per week. ( See tables 53
and 54.)
53.-Distribution of widowed and separated or cli,1,;orced w omen heads
of r elief families in 11,rban areas wUh ch-ilclren under t he age of 16 years,
based on 5-percent sample .st11,cly of 0001tpat-ional characteristics of r elief
/Cll11'1A!1ies in "19 cit ies, May 1934 1

TABLE

Total
Characteristics

Percent
Number distribu•
tion

White

Colored

100

545

428

429
454
90

44

237
237

192
217
19

474
269
124
55
51

49
Z8
13
6
5

266
157
63
31
28

208
112
61

119
556
297
194
85

12
57
31
20
9

51
278
215
159
47

68
278
82
35
38

1

5
3

9

Total women ..... . ....... .... . . . . ......... . . ....... . . . . .

973

Marital status:
Widowed... . .................. . ..................•........
Separated .. ..... . . .... ......... ...........................
Divorced .. . ....... . ..... . ......... .... .... ....... . ..... . . .
Number of dependent children:

1........ . .. ...... . . ... .. .. . . ...... ...... ..... . . . ... . .. ....

2..•..• •• . ....•.•.. .... . •..•.. . .........•.•.......•...•....
3.......•........ . . .... .... . ... ... ... . . . . . . ........... . ....
4 ..... . .................. . . . ... . . . . .... .... . . ..... .... . ....

5ormore.......... . ........ . . ... . . . . .... . . . . ..............
Employment status:
Employed at non relief job. . . ..... .........................
Unemployed, bu t seeking work.... ................. . . . ....
Unemployed, but not seeking work ........... . ...•........
Housework and un paid ca re of dependents ... _..•.....
Chronic illness or physical disability .. . ....... . ... . ...
Feeble•mindedness or insanity . . ...•. •....•.........•.
Old age or general disability . . _. .... __ _...... . .........
Other. . . ....... . . ................... .... . ... . ....•. . . .
N ot reported .•. _... _.... . . ......... ..... . ....... ..........
Occupational status:
No usual occupation. . ..... ....... _. ..... . .. _....... _... . . .
Servant classes . ..... . ..... ...... . ........ . . ..... . . . .......
Semiskilled workers in manufacturing ...••........... •....
Other semiskilled workers. . .... . . .. . ... . ...... . . .. . . . . . . ..
Clerks and kindred workers . . ........ . ............. . ... ...
W holesale and retail dealers . . . . . . ........ . ... . ..... . ......
Professional persons• •. ............ . . _._. __ __....... . .... _.
Other .••.............. . . . . ............................•...
1

2

l

- --47
9

(2)

14

3

1

316
360
127
59
83
6
9
13

(2)
(2)

32
37
13
6
9
1
1
1

71

]

Z4

23

0
0

I

0

230
93
95
33
77
5
7
5

86
267
32
26
6
1

2
R

D ata su pplied by the Federal Emergency Relief Administration.
Less than 1 percent.

A very rough estimate of the probable mont hly relief expenditures for the families of widowed, separated, and divorced women
with dependent children has been made by the Federal Emergency
Relief Administration. On the basis of this estimate t he approximate monthly expenditure is $10,000,000, including $8,000,000 in
urban and $2,000,000 in rural areas. This would mean an annual
expenditure of $120,000,000, of which approximately three-fourths
comes from Federal funds, if the general average proportion of Federal funds spent for relief during the last few months of 1934 were
to prevail in this group.

244

SECURITY FOR CHILDREN

54.-Characteristics of households with widowed and separated or divorced women heads of reUef f amiUes in urban areas with children under t he
age of 16 years, b(J)sed on 5-percent sample study of occu pational characteristics of reUef f amiUes in 79 cities, May 1934 1

T ABLE

Total
Characteristics

Percent
Number distribution

Total households- _____________ _______ ----------_____ ---Employment
status:
None working
or seeking work ___ ______ _______ _________ ___
1 work.ing or seeking work ____ _______ ______________________
2 working or seeking work__ ____ -------- ----- -------------3 working or seeking work ________ _____________________ ____
4 or more working or seeking work ___ ___ _____ ______________
Weekly
earnings:______________________ _____________ __________ __
No earnings
Less than $5 _______________________________________________
$5,
than___________
$10_ . ---------------- -----------------------$10 less
or more
____ __ _______________________________
Not reported _--------------------------------------------1

883

100

128

14

510
165
59
21

58

711

White

496
86

Colored

387
42

268

242

19

90

7

75
23

2

36
16

68
42

81
8
5

41

5

405
17
28

21

2

34

12

5

306
51
14
7
9

Data supplied by the Federal Emergency Relief Administration.

ESTIMATED EXPENDITURES FOR AID TO DEPENDENT
CffiLDREN

On the basis of figures compiled by the Children's Bureau in 1934,
the annual expenditure for aid to dependent children by State and
local governments approximates $37,500,000 (table 55). This represents an increase of about $3,600,000 over the amount reported in
1931, a figure, however, known to be incompl ete.
Only $5,900,000 of the annual expenditure of $37,500,000 for aid
to dependent children came from State funds, the r emaining
$31,600,000 coming from local governments, chiefly counties. In 1934,
16 States 7 had provided for State participation in financing grants
for aid to dependent children, but the actual aid given had not
always kept pace with the legislation adopted. Of these States
Louisiana and New Mexico had never supplied such funds, and t he
appropriations in North Carolina, Virginia, and Wisconsin had been
far below the amounts needed in these States.
Approximately 44 percent of the total expenditure for aid to dependent children was made by nine large cities, spending more than
$500,000 each, the same cities noted on p. 238. Of the $16,273,204
spent in these cities, $9,762,997 was expended by New York.
In 1930, 1931, and 1932 there were increases in total e::s:penditures
for aid to dependent children in 93 citjes and city areas reporting
to the Children's Bureau. A decrease in funds was reported for 1933.
Arizona, California, Connecticut, Delaware, Illinois, Louisiana, Maine. Massachusetts.
New H ampshire, New Mexico, North Carolina, P ennsyl,ania, Rhode I sland, ,ermont,
Virginia, Wisconsin. (In New Jersey the State bears tbe cost of administration.)
7

245

AID TO DEPEN DENT CHILDREN

The expenditure £or 1934 was slightly higher than the amount reported £or 1933 but was considerably below t he expenditure for 1932·.
Amount expended, in 93
cities and City areas

Year

1929 __________________________________ ________________ _________
1930___________________________ ________________________________
1931 ___________________________________________________________
1932___________________________________________________________
1933 ________ ___________________________________________________
1934____________________________________ ____ ___________________
TABLE

$16,141,227
17,360,107
21,127,500
23,176,033
22, 137,279
22,719,933

55.- Estirnated wnnual expenditwres for aid to dependent children ( based
on figures available Nov. 15, 1934)

Estimated expenditures for aid-county and
State
State
Total
Total ___________________________________________ _

County

State

$37,487,479

$31, 621, 957

$5,865,522

719,772
75,721
62,889
9,312
310,000
117,459
2,450,000
2,448,962
1,138,176

719,772
75,721
62,889
9,312
155,000
117, 459
1,400,000
2,448, 962
1,138,176

----------------------------------------------

93,440
213,623
272,036
44,035
82,440
2,445,564

93,440
213,623
272,036
44,035
2,445,564

11,731, 176
58,706
238,314
2,116,908
123,314
247,140
3, 197, 640
267,252

11,731,176
29,353
238,314
2,116,908
123,314
247,140
1, 598,820
133,626

285,986
71,328
43,987
78,1551
46,976
33,876
519,538
16,086
2,180,790
22,294

285,986
71,328
43,987
78,651
23,488
16,938
519,538
16,086
1, 930,790
22,294

- - - -1- - -- - Alabama. ______________________________________________1 - -(1)- - -- 1 - - (1)
(1)
Arizona ________________________________________________
20,940
20,940
Arkansas. ______________________________________________
(2)
(2)
(2)
2,133,999
224,252 _____ .,. __________
1,909,747
California ____ · -· ··-·---· ··········-··················-·
149,688
149,688
-..
·········-·-·-·-·-···-·
-·-·
---···---Colorado
.......
Connecticut__ ..__ -· _____ .. -· ______·-____ -· _. __________.
489,752
734,627
244,875
93,000
46,500
46,500
Delaware- -·-------·-·---·-·-·---·-···-·-· -· ---·-·---·143,997
143,997 ---------------District of Columbia_._.·-·---------·---------··-·----222,286
222,286
Florida_ .. -·-·----__ · -·---·-·--·· _______ -··--··----·•Georgia_____.--·-_. __..._-·· - __-· ___ .-·--··_--· ______ _
(1)
(1)
(1)
36,315
36, 315 ------------- .. -Idaho.·--·-····----·-···-···-· --··---·-·-·-·-···-·-·-··
1,533,217
1,837,012
303,795
Illinois ........-.. ·····-·-·················· ········-·-·
352,224
352,224 ---------------Indiana_··-·-·--·-·-···-·-···--··---------------·------

~:O~as-~============•================:::::=:::::::=::::
fi~i~i~!!==============================================
Maine·--····-·-- --· -·--··-------·-·-· ---·--·-·--··--·-

Maryland..... _____ ._. __.._._. ___._._ ... _. ___ .... .. -.. Massachusctts---··--··
··-·---·-·-·---···-··---·
Micbigan
... _. ____ . ______________
._._._._._. ___ . ------_._. __ _

(2)

;1r~1;viL=
================
========== ====== ====== ==== =
Montana
-···-----·-·-·--··-·----··----------·-·---Nebraska...
.. ·__
. _____._.... _.. _... __. __._. ___. ___________
Nevada·-··--··-··----·---···-·-·-· ----··----··---·---New Hampshire. . --·------·-------------·---·---·----.
New JerseY- ---···--··-· -·-·-··--·-····-·············-New Mexico_·-······-----·---------·-·-·-------------New York·- · --·------··---·-·-·-·-·---·-·-·-·---·--·-·
North Carolina __· ··· · -· ---····-··· --·---··---···-·---North___
Dakota·-------··---------·---·-----·-Obio.
... ________________________._. _________-------·
. _. ____-_
0 klahoma. _-·-------·-- ___ ----·-- ________________ -·--.
Oregon
_______..
·-·-·---·---·------·--·------------·----Pennsylvania
_._. _. ___. _. ____________________________Rhode Island . .. ---·---· -·-----·-·-·-·-·-·-·-·-·---··-J
South Carolina___··-· -·-·-··--·-·····-· -···-·--·--____ _
South Dakota·----------··--·---__ ---·------ ________ .. _
Tennessee___...._._._. -·_·-·-·-·_. ___ . . . -·_ ...... -.... .
Texas· -·-·-·-·--· ---------·--··-------·----------·-·--Utah ____ . ____._ . . _... ----------------------·-----·---·-

~i!~rii~t==========
=========================
============
Washington
.. ____ ··--····---·
---------· ---· ---··-·---·West Virginia ... -·-· _____. __ -· _. ___· - __·-_.. _· ---·_.·-Wisconsin ... ___ -·-·-· _·-· _. _____. _..______ ·-_-·-__ ---· _
Wyoming__··· ----·--------·--------------------·-·--·No law.
Aid discontinued.
• Law not in operation.

1
2

(3)

(1)

(3)

(3)

(1)

155,000

--- -- --1,050,000
---- ----··
-·----------------------------(2)
-------------------------------------·----------------------82,440
---------------(3)
29,353

------------------------------------------------------------1, 598,820
(1)

133,626

------------------------------------------------------------23,488
16,938

------------------------------250,000
----·--·--------

246

SECURITY FOR CHILDREN

ADEQUACY OF GRANTS
The theory of the system of aid to dependent children is that the
families will be given enough assistance to meet their minimum
budgetary needs, without necessitating gainful employment for
mothers of young children, which would be detrimental to home life.
The more progressive laws permit aid according to family need, but
the majority fix a maximum allowance per child and some laws set a
limit on the sum. In 1934 it was found that the maximum grants
specified in the laws would permit an allowance to a mother and
three children ranging from $20 and less than $30 per month in
seven States and Puerto Rico with the lowest amounts specified, to
$60 and less than $70 per month in :four States with the highest
amounts specified. The average monthly aid granted per family
ranged in 1933 or 1934 from $8.81 in Louisiana to $51.83 in Massachusetts and $60.14 in the District of Columbia.
Variations in the amount of monthly grants within a single State
are sometimes greater than variations between States. For example~
in Ohio in December 1933, 35 counties were granting aid averaging
less t han $10 per family, whereas in 5 counties grants averaged from
$30 to $50. In one mining and "hill" county the average monthly
grant was $2.63. Twenty-one counties in Illinois were granting an
average of less than $10 per month per family.
Information obtained by the Children's Bureau in 1933 for 103
cities of 50,000 population or more showed average ~onthly grants
per family of $60 to $65 in 6 cities and $50 to $60 in 13 cities. I n
16 cities the average monthly grant per family was $40 to $50, and
in 68 cities it was under $40.
Table 56 indicates the estimated aver age monthly grant per family
in areas granting aid to dependent children, based on annual or
monthly expenditures ·for grants dur ing 1933 or 1934.
NEED FOR STATE AND FEDERAL SUBSIDY
Experience under laws for aid to dependent children , most of which
have provided for financing the system entirely through local tax
funds, has demonstrated the need for a broader tax base. The necessity for assistance from State funds is now widely accepted. State
equalization funds for education have been provided in many States,
and a number of old-age assistance laws providing for some measure
of State aid have been passed. Although in 193-!, 16 States had authorized State contributions to grants for aid to dependent children,
in at least 5 of them, as has been shown, no appropriation had been
made or the State fund was too small to be of real assistance. L aws
for aid to dependent children should be mandatory upon the local

AID TO DEPEN DENT CHILDREN

247

units, and State equalization funds should be made available to
counties for aid purposes, in amounts sufficient to bring this aid
throughout the State at least to a minimum level of adequacy, both as
to number of families aided and amount of grant. If well administered, State aid will act as an effective, powerful lever in raising
administrative standards of investigations, budgetary practices, and
other procedures.
T A BLE

56.- A:verage monthly gra;n,t per fam.ily for aid to dependent clvilcllren

State

Alabama ____ ·- · · ···················-- · ·
Alaska. . -·· ·· .....•.......•. . .. ___ ..• . .
Arizona .....•. • . •.. ··-· .........•... ...
Arkansas. .•................... . . .......
California . ............................ .
Colorado . . ......•••••.....• . .... .......
Connecticut. ...•••••••. . ...............
Delaware ......•.•..•... . ..... . . ... . . ..•
District of Columbia ................. . .
Florida . ..... . ..... ................... -.

i:~~tf.~~==::::::::::::::::::::::::::::

Idaho . .......•.... . ...... •. ..... ...•...
Illinois ...... . ... _··········-···· · ······
Indiana......... ..•......... . . .... . . ...
Iowa...•..... . .... ................... ..
Kansas... ..... . .......•...•....... . .. . .

fi~i~~~!I:~ ::::::::: ::: ::::::::::::::::

Maine... -·· . . . . .......•.•...........•. .
Maryland.... . ...•..... . . ............ ..
Massachusetts .... .•.•.. . . •.......... . ..
Michigan ............... . . . . .......•....
Minnesota •. . ........ ........ ..........
Mississippi.. ... . ... .....•........... . ..
i{issouri .... . . .................c • • •••••

Average
monthly
grant
(1)
(2)
$16. 46
(3)
26.89
22. 60
44.41
22.26
60.14
9. 76
(1)

(2)
18.08
20.So
22. 03
17. 01
4 14. 05
6 38. 26
8.81
29.60
36.66
51. 83
28.31
26.37
(3)
4 26. 22

State

Montana.... •• . ... ....•..•....•.........
Nebraska.........•.......•.............
Nevada . . ............ .... ·-·····--······
New H am pshire ... ·-·· .... ..•..•.......
New Jersey •....•... . . .......... . ... : .•.
New Mexico ..•... .............•....••..
New York.. .. ••...•....... . . ...........
North Carolina........................ .
North Dakot.a _.•..... .....•.....•..•.. .
Ohio. . •.••.. ...•..........•....... . .....
0 klahoma. • •....... . .................. .
Oregon................ . ....•.... . . ..... .
Pennsylvania...... . . . . ... . ............ .
Puerto Rico. .•......................... .
Rhode Island ....... . ......•.....•......
'fou th Carolina •. .......• •............• .
South Dakota... ...... ..... . ...... . .... .
·rennessee. .•••.• . . . . ..... . .......•....•.
T exas ...••••.•••. ...............•.......
Utah..••..••....... . ............ ........
Vermont.•.................•...... . .....
Virginia.•..•......... . . .•.. . . . . . ........
W asbington...... ................. . . ... .
W ~st Vq-ginia ............ . . . . • . ..... .• . .
W1scons1n. . .•. ........ . ..... ........... .
Wyoming..... ....... . . . . ........•.... . .

Average
monthly
grant
$24.00
13. 62
17.98
26. 42
26.43
(8)
42. 77
15. 93
22.07
19. 77
4

7. 29

19. 80
34.61
(2)
47.00
(1)

21. 78
24. 9 1
12. 07
10.64
17. 86
20. 76
17. 35
13. 20
25.82
4 22. 55

4
7
4

1 No law.
, No report.
s Aid discontinued .
1 Average ~ant in 1931.
a Aid available only in Jefferson County.
e Law not in operation.
7 Aid availal.Jle only in Knoxville and Memphis.

The Committee on Dependency and Neglect, of the White House
Conference on Child Health and Protection, in its report on aid to
dependent children, r:ecommended with reference to State participation: (1) State supervision with an adequate staff of social workers
to help the local units to organize for efficient work, to set and enforce
minimum standards of aid and administration, and to raise standards
b)· means of conferences, studies, and publications; (2) provision of
State funds, distributed to the local units according to need, with the
object of equalizing resources on the same principle which operates in
distribution of educational funds in many States.8
Federal grants-in-aid can be extended to this tax-supported and
publicly administered form of child care without unusual adminis8

White House Conference on Child Health and Protection, D ependent and Neglected
Children (D. Appleton·Century Co., New York, 1933) , pp. 243-244.

248

SECURITY FOR CHIT.,DREN

trative difficulties. Through Federal participation laws for aid to
dependent children can be made effective in the States and in local
areas which have made no provision, or have markedly inadequate
provision, for this method of preserving family life for dependent
children. Like the State fund in relation to the counties, a Federal
fund would be an instrument for improving standards in backwar d
States and would tend to equalize costs.
ESTIMATED AMOUNT NEEDED FOR AID TO
DEPENDENT MOTHERS AND CHILDREN
Convincing evidence of the need for greatly increased provision
for aid to dependent mothers with young children is afforded by
figures compiled by the Federal Emergency Relief Administration
showing _the number of families on relief rolls who have been deprived of the support of the norm.al breadwinner through death:
absence from the home, or physical or mental disability.
It is impossible to tell with any degree of accuracy what proportion of the entire number would be found eligible for aid to dependent children under the definitions in State laws, as the requirements for eligibility for the two types of relief are not alike. For
example, in a number of States the families on emergency r elief
rolls for which reports are obtained by the Federal Emergency
Relief Administration exclude those classified as "unemployable,"
as these are dealt with entirely by local agencies. Besides, as has
been pointed out on pages 239-244, the families on emergency relief
rolls include a smaller proportion of widows' families and of
families with only one child than do the families in receipt of aid t o
dependent children.
For the sake of arriving at a very crude estimate, it may be
assumed that half of the relief f.amilies headed by widowed, separated, or divorced women with dependent children under the age
of 16 years would be found eligible f or aid to dependent children
without very marked modification of policies . . On this basis emergency relief data indicate that approximately 179,000 f amilies now
receiving relief should be given long-time, regular assistance.
Adding the estimated number of families on emergency relief
rolls who would probably be eligible for aid to dependent children
under existing State laws, to the 109:000 families now r eceiving
assistance under the system of aid to dependent children, gives a
total of 288,000 families, or, for estimate purposes, a round number
of 300,000.
The amount of aid needed to supply the necessities of life in rural
communities is frequently less than the amount requfred in the large
urban centers. If the percentage of rural fa.milies estimated to

AID TO DEPENDENT CHILDREN

249

prevail among fatherless families on r elief rolls (27 percent) were
found to apply for the whole group, the assumed 300,000 families
eligible £or ,a id to dependent children would include 81,000 rural
and 219,000 urban families. A monthly grant averaging $40 for
city areas and $20 for small towns, villages, and rural areas (sums
below standards of ,adequacy but somewhat above present prevailing average grants) would require a total estimated expenditure of
something over $120,000,000 per year. In the l argest cities monthly
averages of more than $40 would be required ; in some of the smaller
cities perhaps an average of less than $40 might be a reasonable
grant under present circumstances, and in some rural areas a fairly
small cash allowance might suffice. It must be borne in mind that
these are ,averages and mask a possible wide range, depending on
family needs and resources.
The Federal Government at the end of 1934 was probably spending
approximately $45,000,000 yearly on families of widowed, separated,
and divorced mothers on relief that might be assumed to be eligible
for aid to dependent children, and the State and local governments
were probably spending in the neighborhood of $15,000,000 for the
same group. Local communities spent in addition about $31,600,000
yearly for aid to dependent children, and the States spent about
$5,900,000. If local contributions :for families receiving and eligible
for aid to dependent children could be increased to $40,000,000 and
the State contributions to the same figure, the Federal Government
would need to supplement to the extent of $40,000,000 if a ratio of
one-third Federal, one-third State, and one-third local contributions,
which has been suggested, is to be maintained. This would mean an
increase of about $28,000,000 in State and local contributions for
assistance in these families. Obviously, State and local contributions
cannot be brought up to the proposed figure immediately, nor can
administrative responsibility for the families now receiving relief be
transferred at once. Permanent planning for an equitable distribution of costs and for adequate State and local administration will
require some time, and the shift from emergency relief to aid to
dependent children must be somewhat gradual. A Federal grant
of $25,000,000 per year for the first 2 years · would seem to be a
reasonable contribution, to be made under specified conditions as to
State and local appropriations and other items. This grant might
be increased to not more than $50,000,000 per year as the program
develops to include all families eligible for aid to dependent children.

Chapter XIV
WELFARE SERVICES FOR CHILDREN
NEEDING SPECIAL CARE
HERE are many conditions requiring special social service for

T

children-situations of extreme neglect in homes, feeblemindedness in parents and children, cruel and abusive parents,
illegitimate children without competent guardians, children who are
delinquent, truant, or wayward, or who suffer from mental disturbances or physical handicaps. The basic service necessary to deal with
these situations is child-welfare service, which should be very closely
related to, and an integral part of, public-welfare service. This
child-welfare service is designed to furnish skilled investigation o.f
, the individual needs of the child and to make available the services
of any agencies in the community or the State that may be adapted
to the particular situation .
Great progress has been made in the past 20 years i.n providing
resources for social investigations to determine the needs of children
for whom care away from home is sought, assistance to parents in
furnishing proper care for their children at home, and care in fosterfamily homes for children who should have the benefit of life in an
individual family unit. Nevertheless, as was pointed out by the
, ¥bite House Conference Committee on Dependency and Neglect,
large numbers of children still suffer, unrelieved, in their own homes,
or are separated from their homes because of poverty alone; and
many child-caring agencies lack responsible organization, do not
receive adequate inspection to see that certain standards of care are
maintained, and have inferior, inadequate staffs.1 Almshouses, condemned a hundred years ago as unsuitable for children, are still used
for institutional care, of children in some localities, and the practice
has increased during the depression period. Gross forms of child
exploitation, such as the virtual sale of illegitimate babies by un scrupulous persons conducting baby farms for profit, are still
reported.
The Conference on Present Emergencies in the Care of Dependent
and Neglected Children called by the Children's Bureau, following a
1

White House Conference on Child Health a nd Protection, D ependent antl N eglected

Chtildren (D. Appleton-Century Co., New York, 1933), p. 6.

25 1

252

SECURITY FOR CHILDREN

suggestion made by the Child Welfare League of America, in December 1933, reported that the welfare of destitute and neglected children
has been seriously affected by several factors arising from the long
financial depression, among them a reduction in State and local
appropriations in many areas for the support of needy children by
public and private agencies; a general reduction in private contributions, which heretofore have played a large part in the support of
needy children; lower returns from endowment funds; lessened ability of needy parents to pay toward the support of their children;
and lack of employment for needy children r eaching the age of 16 or
17 years. By reason of these facts, the conference found, many
children were already suffering and the welfare of many more was
seriously endangered. In some communities social agencies had lists
of children living in their own homes under conditions of serious
neglect for whom foster care was not available.2
Much variation is to be found among the States in the extent to
which State resources for children have been curtailed because of
reduced appropriations during the period of economic depression.
Comparison of appropriations for 1932 and 1934 for the work of the
State departments or of divisions or bureaus of such departments
serving children show that in 11 States appropriations during these
2 years increased or remained the same, that only slight decreases in
funds available were found in 4 States, but that in 26 States reductions in 1934 were serious, ranging from 10 to 52 percent of the
amount available in 1932. Undoubtedly a. certain proportion of
this cut has been met in most States by salary reduction. When this
has proved insufficient to meet the lowered income, travel allowances
essential to a supervisory program have been reduced and special
services of various kinds have been eliminated.
State funds for institutional services for children also h ave been
reduced during these 2: years. These reductions in institutional programs result in increased need for local provision for safeguarding
children in their own. homes and for careful selection of children for
whom institutional care is to be provided and return of the children
to the community at the earliest possible moment. Local public
child-welfare services constitute the most important part of a Statewide program of child care and protection.

PRESENT PROVISIONS FOR CARE OF CHILDREN
According to the most reliable estimate available in January 1935
.
approxrmately
250,000 dependent and neglected children in the'
United States were receiving care away from their own homes, of
2

See mimeographed report, 458 Cl~ildren Recommenlfed f o,· Placement by Sim Social
Agencies, by Helen Walker (School of Applied Social Sciences, Western Reserve University,
Cleveland, 1931).

CHILDREN NEEDIN G SP ECIAL CARE

253

whom about three-fifths were in institutions and t he re1nainder in
foster homes. These children were cared for by approximately 1,600
institutions and 400 child-placing agencies. The ratios of dependent
children per 10,000 population cared for away from their homes in 32
States in 1930 ranged from 7 in South Dakota to 41 in New Hampshire, the average being 23. Approximately one-fourth of t he whole
number of children under care were provided for by institutions or
agencies conducted by State or local governments and about threefourths by organizations under private auspices. Many institutions
and agencies under private auspices receive tax funds. A survey of
children under care of institutions and agencies in 1930 showed that
31 States were conducting institutions or child-placing activities for
dependent children and that more than 36,000 children were receiving
such care.8
The general trend of institutional care, on the basis of statistics of
city areas reporting to the Children's Bureau, has been downward
during the period of the depression, though public institutional care
increased somewhat in 1933 over 1932. Foster-home care rapidly
expanded to meet emergency needs, but in 1933 the trend was downward in private agencies, upward in public. Information collected
by the Child Welfare League and by the Children's Bureau has portrayed the great curtailment of the resources of agencies for the protection of children deprived of normal family support and care.
Federal Emergency Relief funds have not been available for the care
of children a way from their homes, although homeless young people
have been included in the·transient program.
In addition to the children being cared for away from home, many
thousands of children in their own homes are receiving special protection and supervision fro1n child-welfare agencies, public or private, or from juvenile courts. The total number of delinquent children coming before the courts each year is estimated to be over 200,000,
many of them requiring probationary supervision for considerable
periods. More than 75,000 illegitimate children are born each year,
and special medical and social care for both mother and child must
be provided in many of these cases. The 1i\Thite House Conference
on Child Health and Protection, Committee on Physically and Mentally Handicapped, estin1ated that there were more than 10,000 000
'
handicapped children in the United States-the blind and partially
seeing, the deaf and hard of hearing, the crippled, the mentally deficient or disordered, or those suffering from tuberculosis or cardiac or
parasitic diseases. The parents of many of these children n1ust be
assisted by social-service as well as by medical agencies in makino0
plans for tli'e specialized care their needs require.
.

8
Lundberg, Emma 0., OMld Dependency i1, the United. State& (Child Wel!are League ot
America, New York, 1933), pp. 55-70.
78470-37-18

254

SECURITY FOR CHILDREN

I n cities of 100,000 or more population throughout the United States
services for the protection and care of dependent, neglected, delinquent, and physically and mentally handicapped children are usually
available througp both private and public agencies. Although in
many cities t hese agencies operate only within the city limits, in others
they serve the county in which the city is located. I n counties having
no large cities and in the towns which are the units of welfare administration in the New England States, protective services for children
are seldom available unless a definite program has been developed in
the State for employing county or district social workers responsible
for services to children.
Up to January 1935, 12 States had recognized the need for local
public services for children throughout the State and had undertaken
to further such services through legislation establishing county welfare boards or departments, which were given responsibility for
services to children. In addition to these States a few other s had
created county agencies responsible for services to dependent children,
or the State department had furthered the development of local
public service for children without special legislation. A.11 these
State programs place responsibility for services for children upon the
county agency, and in about half of the States the agency is designated
as a child-welfare board. I t is desirable to develop these local welfare
agencies on a broad basis of service to both children and families,
including the administration of relief, and to consolidate small counties into larger welfare districts so that adequate services can be provided at reasonable overhead cost.
Even in t he States having a county-welfare program progress has
been extremely slow in employing social worker s for services to children and to families in which there are children's problems. In
many States only the counties with large populations have employed
such workers, and as a result the needs of a large proportion of the
children throughout the State are not met. It was estimated in 1932
that only about 5 percent of all counties in the United States with less
t han 30,000 population had public social workers for services t o children and families.
Emergency relief brought fully into f ocus the needs of isolated,
scattered, and financially impoverished populations. In a few St ates
which had developed county child-welfare progran1s the time of the
child-welfare workers was fully or partly transf erred to relief administration. In many rural areas the relief workers were the first to
make available any of the methods or resources of social work and
their time, of necessity, was absorbed jn the <>YC'nThelming r elief
problems with which they were confronted.

CHILDREN NEEDING SPECIAL CARE

255

Many kinds of services to children are needed which are not provided by an emergency relief program, including, for example, investigations of children in almshouses and the development of plans
for caring for them elsewhere; investigations of cases in which applications for institutional or foster-home care have been made; protection of children against neglect and abuse ; development of plans for
caring for children in institutions who have reached an age when they
should be discharged and supervision of these children after discharge; investigation and supervision of delinquency cases coming
before the courts; plans for securing needed medical attention for
physically handicapped children and custodial care or supervision for
children who are mentally defective. For effective operation local
child-welfare programs should be closely related to family-welfare
and relief programs and where possible should be part of a unified
public-welfare service.

SOCIAL SERVICES IN RURAL AREAS
The standards for the development of local public social services
for children have been described by the White House Conference
Committee on- Organization for the Care of Handicapped Children
as including (1) field service to discover the children who need care
and protection, to inquire into their circumstances, and to devise and
carry through individualized treatment; (2) various types of care,
within the local unit or available to it, including provision for family
adjustments, with home relief when necessary, care and support
( away from home), and medical, diagnostic, and remedial services;
and (3) public funds appropriated to pay the salaries of persons
qualified by training and experience to deal with the intricate problems of child care, and also to pay for the support of children who
need it, in their own homes or elsewhere.4
Standards for number of workers needed and cost of services of
the kinds that have been described are still indefinite. The experience of two States where county children's workers have been provided for most of the counties gives some indication of the size of
the rural and town population that has been served by one worker.
In Alabama special children's workers have been made available to
all but a few counties through State funds for this purpose. (This
service was largely discontinued during 1933 but is now being reinstated.) The population of counties employing one worker varied
from 12,000 to 59,000, but the general average for the State, includ4 White House Conference on Child Health and Protection, Organization for the Care
of Handicapped Chlildrcn, National, State, and Local (Centlll'y Co., New York, 1933),

pp, 14-15.

256

SECURITY FOR CHILDREN

ing counties employing two or more persons, was one worker for
30,000 population. In New York children's workers have been employed by county superintendents of public weHare. In the smaller
counties the average population served per worker is 36,000.
Exclusive of the New England States, in which the cities and the
towns are the administrative units, there are 2,859 counties in the
United States having populations of less than 100,000. Of these,
1,720 have populations of less than 20,000 and 543 have populations
of 20,000 to 30,000. The service of children's workers should be
available to all the,se counties. It is probable that for most or all
of t hose with less than 20,000 population welfare administration
should be based on a district plan, combining two or more counties in a welfare district. Some of the counties having populations
between 20,000 and 30,000 also should be included in larger welfare
districts, more than one worker being provided. The number of
county workers needed to provide ,social services to children in
counties of 30,000 to lOOiOOO population will be influenced by the
facilities for such service that may be provided by the cities within
the county and the need for specialization in ser vice.
A suggested minimum budget for a broad pr-0gran~ of service to
children in a county with a population of 15,000 to 20,000, starting a
program, is given below:
Service expenditures________________________ ,_ ___________ $3, 700-$4, 600
Salary of social worker______________________________________ 1, 800- 2, 400
Salary of clerical worker_____________________________________
900- 1,200
Automobile---------- - ------- ----- ---- - ---------------------500
Travel expenses______________________________________________
400
100
Office expenses_______________________________________________

The development of local public services for children is one of the
important functions of a State department of welfare. Without an
adequate staff little can be accomplished in building up a sound program of local servi~e in rural areas or small towns. State workers
are necessary to demonstrate the need for social services to the county
and to stimulate the interest of county officials. Where local workers
are appointed, the State workers must develop the standards of case
work, serve as consultants on special problem,s, and h elp to relate
this local service to the institutional care provided by the State, so
that the necessary investigations before admission, and also followup care after discharge, can be provided.
The experience of the State welfare departments that have accomplished the most in the development of local services indicates that
a State supervisor of children's work should be provided :for each
12 or 15 counties or districts as a maximum. Supervising a smaller

CHILDREN NEEDING SPECIAL CARE

257

number 0£ counties would result in more effective service. The actual number of counties or districts assigned to State supervisors
must depend upon the training and experience of the local workers,
the development of the local social services, and the stability of the
local program. In States with services to children and families
combined in the same local units the State supervisory staff should
give service in both fields. Under any form of organization persons
on the staff of the State department equipped to advise with reference to special proble1ns-for example, juvenile delinquency-are
needed. In addition, the State must provide adequate personnel for
inspection and supervision of institutions and child-placing activities, for direct care of children by the State if that is a function of
the State department, and for research and statistical service. Assistance in developing standards :for the selection of personnel and
promoting opportunities for training in social work are important
aspects of a State welfare program.
State grants-in-aid for local child-welfare services, utilizing the
equalization principle, are essential to the development of services
outside the largest cities and afford a po:werful impetus toward the
development of improved standards of care. The White House
Conference Committee on Organization for the Care of Handica.pped
Children stated that the vast differences in the wealth of counties
and the likelihood that the poorest localities will require relatively
more service and more money for support make it imperative that
some plan of equalization be adopted so that State and Federal funds
may help meet the costs of county child-welfare programs, as they
now contribute to the cost of schools. 5 Except in the field of aid
to dependent children, for the benefit of children remaining in their
own homes, only Alabama, New Mexico, and North Carolina have
made a beginning in State contributions to county child-welfare
.
service.
NEED FOR FEDERAL ASSISTANCE
The White House Conference Committee on Organization for the
Care of Handicapped Children stated that grants-in-aid constitute
"the most effective basis for national and State cooperation in promoting child welfare and in securing the establishment of that
national minimum of care and protection which is the hope of every
citizen." 6 Contribution by the Federal Government of part of the
funds required to develop the child-welfare services of State welfare
departments, including assistance in the development of the child5
11

Ibid., p. 20.
Ibid., p. 6.

258

SECURITY FOR CHILDREN

welfare services of local public-welfare or child-welfare units, would
help to bring the protection afforded to children in the backward
and the poorer areas to a reasonably adequate level. An annual
Federal appropriation of $1,500,000, for the purpose of cooperating
with State public-welfare agencies in establishing, extending, and
strengthening, especially in predominantly rural areas, publicwelfare services for the protection and care of homeless, dependent.,
and neglected children, and children in danger of becoming delinquent, should result in far-reaching in1provement in the standards of
child care and protection throughout the country.

Chapter XV
MATERNAL AND CHILD-HEALTH SERVICES
HAT any program for the promotion of the health of mothers
and children as part of a total program for greater social and
economic security for children should be closely coordinated
with a general program for public health, such as has been proposed by the Public-Health Committee, advisory to the Committee
on Economic Security, is obvious. The great need for expansion of
the program is evident. At t he beginning of 1935 there were 8,000,000
children under 16 years of age in families on the r elief rolls and
probably as many more in families on the border line of relief. There
is evidence that many children in these groups were not getting the
medical care they needed, either in sickness or for the correction of
remediable defects ,vhich handicap growth, and that many were
undernourished. Among adolescents were found evidences of increasing mental instability and inability to meet the problems tlrnt
arise from unemployment and depleted family resources.
To some extent the need for expansion of the program for promoting the health of mothers and children can be measured by mortality rates, especially those of certain groups of the population; it
may be estimated from reports of morbidity and lack of medical care
among mothers and children; or it may be judged by the social disaster that takes place yearly in the thousands of homes where the
death of the mother in childbirth leaves one or more children to be
cared for by others. Though favorable social and economic conditions are undoubtedly important underlying factors in reducing infant
mortality and in maintaining the health and permitting normal
growth of children, the part that can be played by educational and
health services in further reducing infant-mortality rates and improving child health under favorable economic and social conditions, or in
mitigating the effects of bad conditions, has been demonstrated sufficiently to warrant the conclusion that increased and more widespread
effort would be justified. If deaths of infants and mothers are to be
prevented and the level of child health is to be raised, not only must
there be improvement in those economic and social conditions that
make for a better standard of living, but provision must be made for
better maternal care, for incr easing our knowledge of causes of deaths

T

259

260

SECURITY FOR CHILDREN

among newborn infants, for providing more adequate facilities for
the care of newborn infants ( especially of those prematurely born),
for extension of the well-known educational and service programs for
infants and young children, and for further control of communicable
diseases and community milk and water supplies and development of
other general public-health measures.
Just as there is a lag in the appearance of the effects of widespread
economic disaster on general mortality rates, so also may the effects
of general educational and service measures be gradual in making
their appearance. It is important, therefore, that the program for
promotion of the health of mothers and children be a continuous one,
planned especially to reach those population groups which are most
in need. When economic conditions are unfavorable, as they are today, for large groups of the population, the need for an expanded
program of education and service to protect the lives and health of
mothers and children is even greater.
Available data with regard to maternal and infant deaths and
mortality rates, the health and nutritional condition of children, and
resources for maternal and chjld-health work in the States are given
in this chapter. These indicate the need for special effort in rural
areas and among certain groups of the population.
MATERNAL AND INFANT MORTALITY
In the United States during 1934,' according to the United States
census reports, 2,167,636 infants were born alive. The birth rate per
1,000 estimated population in the expanding birth-registration area
decreased from 25.1 in 1915 to 17.1 in 1934, or an average of about
2 percent per year. (See appendix table XI-1.) The census reports
for 1934 also show that 12,859 women died from causes ascribed to
pregnancy and childbirth; 130,185 infants died during their first
year of life (73,841 of these dying during the first month) ; 43,175
children died at ages from 1 to 4 years, inclusive ; 37,103 died at
ages from 5 to 14 years, inclusive; and 26,885 died at ages from 15
to 19 years, inclusive. The social significance and waste of this loss
of maternal, infant, and child life is evident. Deaths of infants
under 1 year of age form 9 percent of the total deaths; those of
infants under 1 month of age, 5 percent. The problem which confronts us-that of conserving the lives of infants and of women in
childbirth-is, therefore, still very great. The magnitude of the
problem is much greater if one considers as part of it. the tremendous
loss of fetal life. The registration of stillbirths is admittedly very
incomplete, yet 78,503 stillbirths were reported during 1934. The
causes of stillbirths and of the largest proportion of deaths o:f infants

MATERNAL AND CHILD-HEALTH SERVI CES

261

during the first month of life are closely related to prenatal and natal
conditions and to causal factors in maternal mortality . The prevention of death and disability associated with childbearing has therefore a significance which extends far beyond the preservation of
maternal life and health for its own sake. It may be expected to
decrease the losses of fetal and early infant life which form at the
present time so large a proportion of infant mortality and further to
Jessen many child-welfare problems which are the direct results of
homes broken by the loss of the mother.
TJ\ough there has been a downward trend in the maternal mortality
r ate in the United States from 1921 to 1934 (computed from the rates
for the 26 States and the District of Columbia that have been constantly in the birth-registration area since 1921), the decrease has
been slow, amounting on the average to only 1 percent annually, as
the following figures for this area show :
Year

Maternal
mortality rate

1921______ ______,_______ 67.3
1922___________________ 65.4
1923___________________ 65.8
1924___________________ 64.0
1925___________________ 64.3
1926___________________ 64.6
1927________ ___________ 62. 3

Y ear

Maternal
mortality rate

1928____________ _______ 64.2
1929___________________ 63. 7
1930________________ ___ 62.1
1931_______ ____________ 62.5
1932------------------- 59.2
1933_______ ____________ 58.4
1934 ___________________ 55.5

The rate of 59 for the whole. United States in 1934 1 masks rates
for different States ranging from 39 for Vermont to 87 for South
Carolina. (See appendix table XI- 2.) Figure 3 shows the number
of deaths of mothers ascribed to causes related to childbirth per
10,000 live births in the sever.al States. On tlus map the black areas
represent the highest rates (75 or more). Only three States (California, Vermont, and Wisconsin) are in the lowest group with rates
o:f less than 45.
Differences are apparent when the rates are computed separately
for white and Negro women and for urban and rural communities.
In 1934 the rate for colored women in the United States was 90, as·
compared with 54 for white women. (See appendix table XI-3.)
Though United States census reports in 1934 show the maternal mortality rate for urban communities to be 71 and that for rural regions
only 50, studies in several States show that when deaths taking place
in cities are reallocated to the place of residence of the women the
rural rates are increased, often to a considerable degree, indicating
that the rural problem is quite as important as the urban one. For
instance, in New York State reallocation of deaths from 1927 to 1934
1

The birth-registration area comprised all the States from 1933 on.

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Maternal Hortality Rate~
Death:, a:i:iigned to puer-per81 cau:,e:1
per 10,000 live births

[IlI]

Les~ Chan 45

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45- 5 +
55-64
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FCGO RJJl 3. -Materna l mo r t ality in t be United St ates, 1033.

.

Source : u. ~. llur-edu of the Ctn:, u:i

263

MATE RN AL AN D CHILD-HEAL TH SERVI CES

gives the following comparison ·w ith recorded rates available through
1931:
Urban
Year

Recorded
rate •

- -

ti~
t =========== .
1929.... . . . . . . . ..
1930. . .. . . .......

69. 3
72. 8
63. 5
64. 5

2

Rural a

ResiReden t corded
rate • rate •
-- - 60.8
37.6
63. 2
33. 8
31. 9
61. 0
36. 7
53. 8

Resident
rate •

Urban
Year

Recorded
rate •

Rurnl a

2

Resident
rate 4

Recorded
ra te •

--59.2
.'i8. 3
51. 0
58.2

1931... . . ..... . . .
1932. ... . . . . . . ...
1933 . ............
1934.. ..... . . . . ..

67. l

-------------------- --

Residen t
rate •

-

57.5
37.2
60. 3 --- ----·
60. 3 -------53.8 --------

,57. 1
62. 4
55. l
57. 2

P laces (exclus ive of New York City) wi th popula t ion of 2.500 or mo1·e.
Places with population of less thau 2.500.
,t Deaths per 10,000 live birt hs a nd stillbir ths.
2

3

Figures :from Ohio for 1930 and from Wisconsin for 1932 and 1933
show sjmilar changes in r ates as a result o:f reallocation to place of
residence. vVhether all deaths of rural women who die in urban
areas are justly chargeable to the rural area and whether all women
who died away from home would have died if they h ad remained at
home are questions that cannot be answered . The f act is, however ,
that distances to be traveled to obtain care and the frequent lack of
regional hospitals and consultants make the rural problem of 1n a.1er nal care in many ways more difficult than the urban one. Rccer,t
r eports o:f studies of large number s of individual maternal deaths
have indicated the controllable nature of many of them, have brought.
out the inadequacy of care, and have pointed to the need for more
widespread provision for prenatal and better obstetric care, including improved education of physicians, nurses, midwives, and the
public as to what constitutes such care. Few women in rural areas
or in the smaller cities have skilled nursing service at delivery. The
need :for the immediate provision o:f more adequate maternal care,
including that given by physicians and by public-health or maternity
nurses, and for education of both professional and lay groups is clear
if lives o:f mot hers in childbirth are to be saved. Because of the
difficulties of making such provision in rural areas, attention should
be especially focused on this aspect of the problem.
The United States has a poor record when its maternal mor tality
rate is compared with the rates :for :foreign countries. Appendix
table XI-4 indicates the trend of maternal mortality in the United
States from 1915 to 1934, together with similar data for cer tain other
countries. The comparability of these rates h as been ch allenged in
the past on the basis that the p rocedure in ascribing deaths of women
to causes connected wit h childbirth was not comparable as bet ween
the United States and different countries. An extensive study, in
connection with the White House Conference on Child H ealth and
Protection, has been made by the Children's Bureau in cooperation

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.'.lourc :e : U. :!. llur-e au oft~c C.en.,u ,

MATERNAL AND CHILD-HE ALTH SERVI CES

265

with the Bureau of the Census, and the results of this study show
that, in general, although there would be some changes if methods in
use in certain foreign statistical offices were followed, the changes
would be of minor importance. Unquestionably the United States
has an exceedingly high rate as compared with the rates of most
foreign countries.6
The map presented as figure 4, based on 1934 figures, indicates
the great variation in infant mortality between the States. The
solid-black States have rates of 75 or more infant deaths per 1,000
live births. In contrast with these are Oregon and Nebraska, which
ha.ve rates of 40 and 45, respectively.
The reduction in infant-mortality rates as a whole since 1915 has
been striking. (See appendix table XI-5.) In the group of States
that have been constantly in the birth-registration area since 1921,
this decrease has amounted on the average to 2.7 percent annually.
The reduction in total rates that has thus far taken place has
occurred largely from the second to the twelfth month and can be
accounted for to a great extont by education of the public in methods
of infant care and by the effective operation of certain general publichealth measures. The decrease in rates for infants dying under 1
month of age (neonatal death rate) has been relatively slow, amounting on the average to only 1.41 percent annually, while that for infants dying after the first month has averaged 4.14 percent. The
decrease in rates :for deaths due to prematurity has been even slower
than that for all neonatal deaths, being 0.91 percent annually. Furthermore, the infant mortality rate of 60 in 1934 for the entire United
States masks rates varying from 40 in the State of Oregon to 126
in New Mexico and rates of 55 among white infants and 94 among
colored infants. (See appendix table XI-6.) In urban areas the
decrease has been more rapid than in rural areas. Prior to 1929 the
urban rate invariably exceeded the rural; since then the rural has
been from 2 to 6 percent in excess of the urban. ( See appendix
table XI-7 and fig. 6.)
· The chart shown as figure 5 gives the 1934 mortality in the United
States :from specified groups of causes of death in the first month and
in the first year of life. This chart reveals that the high mortality
is largely the result of natal and prenatal causes and that most of the
deaths from these causes occur in the first month of life. (See also
appendix table XI-8.)
Further reduction of the general infant-mortality rate necessitates,
in addition to improvement in economic conditions that will raise
5
Tandy, Elizabeth C., "Comparability of Maternal Mortality Rates in the Unit ed
States and Certain Foreign Countries", U. S. Department of Labor, OMZdren's Bureau
Publication No. 229 (U. S. Government Printing Office, Washington, D. C., 1935).

0

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•

1\IATERNAL AND CHILD-HEALTH SERVICES

267

standards of living, better maternal care, an incr eased knowledge of
the causes of death of newborn infants, more adequate facilities f or
the care of newborn infants ( especially of those who are prematurely
born), an extension of well-established educational and service procedures for infants and young children to be conducted by physicians
and nurses, as well as further control of communicable diseases and
of the milk: supply and the development of other general publichealth measures.

HEALTH OF PRESCHOOL, SCHOOL, AND ADOLESCENT
CHILDREN
Data with regard to the health of children in the so-called preschool years (from 1 to 6) , of school children, and of adolescents indicate that in certain groups of the population, largely those of the
lower economic levels, there has been an increase in r ecent years in
the number of children who are undernourished or in need of medical care in sickness and f or the correction of remediable defects that
interfere with normal growth and development. Though mortality
rates for children over 1 year of age still show a decline, the siclcness rates among children in £a111ilies most severely affect ed by the
depression has been shown to have increased (as it has for all members of the group) during the depression years, and the amount of
medical care received has decreased. Ther e are evidences not only
of increasing ill health and lack of 111edical car,e among adolescents
but, according to psychiatrists, of increasing mental instability and
inability to meet the problems that arise out of unemployment and
depleted family resources.
The r elation of high infant-mortality rates t o low economic and
social conditions has long been known and is shown repeatedly even
in r ecent investigations. Various aspects of the, health of children,
especially such factors as uncorrected physical defects, malnutrition,
and inadequate diet, bear a close relatjonship t o economic status.
Although the establishment of facilities for the health supervision
of children will not in itself supply those ba~ic needs of food, shelter,
and clothing, of opportunity for recr eation and security in the home
that ave necessary to maintain the health of children , nevertheless
such facilities can do much to mitigate the effects of poor conditions
and to educate the public as to the best use that can be made of
available means for the protection of child health. In December 1934
there were 8,000,000 children under 16 years of age in families on
relief and probably as man:y more in families on the borderline of r e1ief. Among these are many who are not getting the medical care
they would have had in "good times", many who need correction of de-

150

140

LLI·

130

'

120
(/) 110

·.sL.

'

>

0

90

0
0

-~
L.
8_

,
80

(.
(ti
q)

~ 70
t.

C:

::I

.s:.

60

.,

-+--t--,➔11
I

j

.....

+--,--L~I ~~.--

~I-,

I
Urban

J J -I J l

I

l

J J J J1

l

140

J

00

130
l i?O

-

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' I

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,-

J -

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,---,--- _JI

,--

100

90

J

I

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=- ,, .Aj~--,J'
,
j I ~.,. I u7~
,..
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_ --- . .;.;: ·.---

Ul

tx:!

Q

q
80

1

i ~.,,.~._-

•

,I.)
(0

-,-

,,·r.. _,,...."',

. -~~.--~-- l
'

Cl)

-0
(/)

.

J J

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!.-- -

l

±-·
l'l
I

~

0:,

110

~
jj
=I
'\
_r_--1',, L, , ·,' ~
· Rural

1

j

l J

100

Q)

·

-

J J J
1

1LL_
J

I

..c:
.:,

I~

150

'RuralI

~

H

1--3
kl
lzj

70

1

...

0

~

Q

60

~
H
t'-i
tj

~

,

A

tx:!

I

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50

50

'
4-0 l

1

l

1915 1916

jI

l

1917

J
1918 '"9

1

l

1.

l

1
'

l

l

l

l

l

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l

1920 1921 1922 1923 1924 1925 1926 1927 1926 1929 1930 1931

Source: u . .s. eureau of t;he census
Fwumn 6.-Trend of infant mor tality In urban and rul'al districts of the United States.

l

l

l

J
40

1932 1933 1934

MATERNAL AND CHILD-HEALTH SERVICES

269

fects, many who are not getting enough milk. The need for adequate
health supervjsion for these groups of children is certainly greater
than ever before.
DEVELOPMENT AND PRESENT STATUS OF PROVISIONS
FOR MATERNAL AND CHILD HEALTH
During the past 40 years there has been a gradual but steady
development of the progran1 for the pr otection of the health of
infants and children and for better maternal care. Activities for
the control of infant mortality, and subsequently for the prevention
of maternal mortality, and the promotion of maternal and child
health began in the large cities. The establishment in New York
City in 1893 of the Straus I nfant Milk Stations for the distribution
of pasteurized milk for infant f eeding is generally cited a.s the first
large effort to control t he diar rheal diseases of infancy. T he establishment of similar infant milk stations by charitable organizations
followed in other large cities. Although early efforts were directed
and largely limited to providing pasteurized and "modified" milk
for infant feeding, there gr adually developed a realization of the
necessity f or preventing disease in inf ancy t hrough providing opportunities for mothers to consult physicians regularly at t hese stations regarding the growth , physical condition, feeding, and general
care of their children and to receive from the nurses attached to
these centers home demonstrations in the care of the baby and the
preparation of his food. As pasteurized and otherwise improved
milk supplies became more generally available in cities, the work
of the infant-feeding stations gradually became more educational in
nature, and they became largely known as infant or child-health or
welfare centers.
According to Dr . S. Josephine Baker ,6 by 1910 there were in the
United States 42 organizations, located in 30 cities, maintaining some
type of baby-health station. F rom 1921 to 1929, the per iod when
the Federal Maternity and I nfancy Act was in operation, 2,978
centers were established, chiefly in rural . areas, for child-health ,
prenatal, or combined prenatal and child-health service. Some of
these were discontinued after the act lapsed in 1929, but there are
no figures to show how many ceased to operate. In 1930 a survey
made by a committee of the "\Vhite H ouse Conference on Chi.Id
Healt h and Protection showed that there were at that time, in addition to the consultation centers in r ural areas, 1,511 permanent childhealth centers located largely in communities of more than 10,000
population. No exact information is available with regard to the
number of child-health centers in 1934.
6

Baker, S. Josephine, M. D., Child Hygiene (Harper and Brother s, New York, 1925),

n. 215.
78470-37-19

270

SECURITY ~OR CHILDREN

School health programs began in Boston in 1894 as a means for
the control of communicable diseases. The first school nurses were
employed in 1902 in New York City. In 1931, 4,422 nurses were
giving full time to school nursing, and 3,376 were giving part time
to this activity.
In 1908 the first bureau of child hygiene in a city department of
health was established in New York City. Since then ma.ny municipal health departments have created such bureaus· or divisions. The
first division of child hygiene in a State department of health was
established in Louisiana in 1912. From that year to 1917, seven
more State divisions of child hygiene were set up, but during the
years 1918, 1919, and 1920, when Nation-wide concern :for the child
was aroused as a result o:f the World War and the Children's Year
campaign, 24 new State divisions or bureaus of child hygiene were
organized. By the end of 1920, 32 States had established divisions
or bureaus of child hygiene. In 1921, the year of the passage of t_he
Maternity and Infancy Act, 4 States created divisions of child
hygiene and in 1922 and 1923, 11 more did the same. Thus, by the
end of 1923 all the States except one had such a division. In 1925
Hawaii reported the formation of one.
It was not until 1912, with the establishment of the F ederal Children's Bureau, that special F ederal activities on behalf of child and
maternal health were begun. Previous to this time the only Federal
activity relating especially to this matter was that of the United
States Public Health Service in connection with its studies of the
relation of contaminated milk to infant mortality, reported in 1909.
The need for more widespread maternal and child-health measures
was revealed by Children's Bureau studies of social and economic
factors in (1) infant mortality, (2) conditions of maternal, infant,
and child welfare and health in rural areas, and (3) maternal mortality. Added weight was given by the discovery of such large
numbers of physical defects in men examined during the World War
under the draft, many of which defects, it was thought, could have been
prevented had proper health care been given during childhood; the
Children's Year activities in 1918, during which some 7,000,000 preschool children were weighed and measured and, where possible, given
medical examinations, which showed many children to be suffering
from preventable and rern.ediable defects; the demonstrations in New
York and Boston and other communities of the benefits of prenatal
care to maternal and infant health; the continued demonstrations in
nrban communities of the beneficial effect of infant health supervision on the death rate of the infants who received such supervision;
and the results of many other observations and investigations. All

MATERNAL AND CHILD-HEALTH SERVICES

271

this evidence led ultimately to the demand for national effort £or the
protection of the health of mothers and children, and resulted in the
passage by Congress in 1921 of the so-called Maternity and Infancy
Act for F ederal-State cooperation in the promotion of the welfare
and hygiene of maternity and infancy. This measure was in operation for 7 years, from 1922 to 1929.
The work done by the cooperating States and by the Federal Government under this act is reviewed in detail in the annual reports
of the administration of the act. In the program were included the
establishment of permanent and itinerant prenatal, infant, and preschool-child health centers and conferences in counties and local
commuities through the divisions of child hygiene of the State departments of health, the placing of nurses in counties to develop
county-wide programs of maternal and child health, and the development of many types of educational programs for mother s and other
lay groups. In some States special demonstration programs were
carried out by the Division of Child Hygiene in cooperation with
medical, nursing, and other local groups. The study of more than
7,000 maternal deaths in 15 States was one of the most important
research activities of this program.
To evaluate the results of the child-health program as it has developed and expanded throughout the years and to distinguish them
from the effects of changing economic conditions is not possible on
a large scale. The results of a long educational and service program are cumulativ,3 and the effects of good times and improved
health services carry over into periods of depression and less adequate service. That infant-mortality rates did not begin to go up
until 1934 may be attributed in no small degree to the earlier education of mothers and various lay groups in infant and child health.
But credit must be given also to the relief measures more recently
instituted by local, State, and F ederal agencies throughout the Nation, which in a number of States have included increased publichealth nursing and child-health activities developed as part of the
program for emergency relief. As has been pointed out, there is
unquestionably definite evidence at hand from demonstrations in
individual communities that educational and service programs have
a definitely beneficial effect on child health-an effect such as to
justify fully an expansion of the maternal and child-health program
in all States.7 But State funds £or such expansion are not available
in most States, and many States are more seriously handicapped in
their programs today than for a number of years past because of
7 The need for expansion is emphasized by the fact that the infant-mortality rate tor
11:134 was significantly higher t han that fo1· 1933.

272

SECURITY FOR CHILDREN

reduction jn the appropriations to State health departments for
maternal and child health. ( See table 57.)
TABLE

57.-Funds for State maternal and ohi.ld~health work, 1928 and 1934
1928 1
1934

State
Total funds
Delaware ____________ ____
Pennsylvania ______ _____ .
Maine ___ _.. -- --------- -Massachusetts __ . ___ --- -New Hampshire_._ -- ....
Rhode Island ____________
Jllinois... _·---------.
- -Connecticut
i __ _ _ _ _ ______
New Jersey. ____ _____ ___ _
Wisconsin._._ ...• -- --- ..
Maryland ___________ . -- -Minnesota _______________
South D akota ____ . --- -. -Arizona ___ . . __________ --New York __ _____________
Virginia __ _. _____ . --- --· -Kentucky ________ . _____ ..
Michigan'·-------------Missouri.
________ - ..•.
--Texas
______________
______
Montana___________ --·--Geor~ia ____ ___ _________ __
North Dakota ___________
North Carolina .. _... - --.
Washington ________ -----·
Mississippi.. _____ -·----- Wyoming'----------·-- -Louisiana ___________ ----.
Kansas ____ •.. __•. --- -- --West yirginia __ ___ __ _____
Bawau ..... -·---·-. ______
California 1 ----- - -- - --·-· ·
Florida ____ -- ---- -. --- -- -Ohio. _. ______ _.. -------- Oregon
____
_- ----___
. - ---Iowa ____
_______
___--____
Idaho ___ ___ _____ ________ _
South Carolina ________ __ _
Tennessee ___ __________ _..
Alabama __ ____ __ . . . ____ -.
Arkansas ____ . __ . -- --• -- . Colorado ____ __-- .. --- ... Indiana _____ ... __ ._ ...• -Nebraska ___ __ ____ ______ _
Nevada .. ____ __ . --------New Mexico. __ _____ ___ __
Oklahoma. ____ . __ _____ __
Utah ______________ _______
Vermont_. ___ _. . .. ____ ___
1

$18,008.02
132,621.98
25,000.00
78,275.00
20,976.62
24,276.28
70,000.00
32,760.00
118,163.55
50,752.00
33,554.00
47,000.00
7,500.00
19,507.42
210,041.78
75,574.00
47,597.48
64, 741. 11
49,186.81
77,902.52
24,400.00
64,438.89
8,000.00
49,519.66
8,387.00
49,076.58
10,000.00
30,042.00
35,000.00
40,443.48
18,451.92
57,580.00
37,906.00
53,334.00
27,533. 46
42,298.91
12,500. 00
37,711.30
55,767.00
64,173.90
38,635.02
15,000.00
53,897.00
17,000.00
16,044.00
19,860.66
42,358.96
20,500.00
5,000.00

Federal

State

$11,504.01
68,810.00
15,000.00

$6,504.01
63,810.99
10,000.00
78,275.00
7,988.31
10,200.00
70,000.00
32,760.00
86,879.00
23,000.38
14,277.00
20,900.35

-------------12,988.31
14,076. 28

-------------·

---------·---31,284.55
27,751.62
19,277.00
26,099.65
7,500.00
12,253.71
80,041.78
25,574.00
26,298.64
34, 741.11
24,186.81
41,450.52
13,700.00
35. 451.10
6,500. 00
27,259. 56
5,000.00
22,076.58
7,500.00
7,521.00
20,000.00
19,571. 74
11,725. 96
31,290.00
16,531. 72
23,585.57
15,283.46
21,085.31
7,500.00
21,355.65
25,767. 00
25,836.95
21,817.51
10,000.00
31,927.00
11,000.00
10,522.00
12,430.33
23,679.48
12,500.00
5,000.00

-------------7,253.71

$33,000.00
197,539.00
26,300.00
80,850.00
21,620.50
24,065.00
69,070.00
29,392.00
103,872.52
43,350.00
26,844.00
36,000.00
5,000.00
12,890.00
134,500.00
40,372.00
25,200.00
31,940.00
23,799.00
34,840.00
10,500.00
26,000.00
3,056.00
18,500.00
3,000.00
15,150.00
2,500.00
7,000. 00
8,000.00
9,140.00
4,100.00
12,225.00
7,330.00
10,048.00
4,701.00
6,600.00
1,430.00
2,046.00
2,912.00
2,520.00

P ercent
increase
1934
over
1928

Percent
decrease
)934
under
1928

83. 3 ---------48.9
5.2 ------------------3.3 ---------3. 1 ---------0.9
---------1. 3
-------·-10.3
---------12. l
---------14.6
---------20.0
---------23.4
--·------33.3
---------33.9
---------36. 0
---------46.6
--------- 47.1
---------50. 7
---------51. 6
--------- 55.3
--------·-57.0
--------- 59.7
---------61. 8
---------62.6
----·----64. 2
---------69. l
---------75.0
---------76. 7
------ ---77.1
------- --77.4
----·-·-·77. 8
---------·
78.8
---------80.7
----------

130,000.00
50,000.00
21,298.84
30,000.00
25,000.00
36,452.00
10,700.00
2-8, 987. 79
1,500.00
22,260.00
3,387.00
27,000.00
2,500.00
22,521.00
)5, 000. 00
20,871. 74
6,725.96
26,290.00
21,374. 28
81. 2
29,748. 43
---------82.9
12,250.00
---------84.4
21,213.60
---------88.6
5,000.00
---------94.6
16,355.65
-----·---94.S
30,000.00
---------96. l
38,336.95
---------16,817. 51 -------------- ·---·--------·----5,000.00
---·------ ---------·
21,970.00 -----·------------ ----- --------- 6,000.00 ---·----------------------- ---- ------ ---------5,522.00 ----------------------- ---· -·---7,430.33 ------------- - ------------------18,679.48 -------·----·----------- ---------8,000.00 -------------- -------- -- --··------

-------------- -------------- ---------- ------ ----

For 4 States (California, Connecticut, Michigan, and Wyoming) 1929 figures are given.

By 1927 all the States except three were receiving Federal funds
under t he terms of the Maternity and Infancy Act. During 1928 the
States had appt oximately $2,158,000 for maternity and infancy work,
of which about $1,140,000 was from State funds. Following the expiration of the act, the legislatures in a number of States jncreased their
appropr iations for maternal and child health, in some instances in an
amount that exceeded the previous combined F ederal and State funds.

273

MATERN AL AND CHILD-HEALTH S:B:RVI CES

However, in 1934 funds for this ·work reported to t he Children's
Bureau by the State departments of health had been reduced to
approximately $1,157,000 and nine States reported no special appropriations for this purpose. Of the 39 States and H a·waii which reported funds for maternal and child-health vvork, 5 reported increases
over amounts expended in 1928 and 35 reported decreases, the latter
ranging from 0.9 per cent in Rhode Island to 96.1 percent in Alabama.
It is significant that 22 of t hese States and Hawaii reported funds in
1934 which were less than 50 percent of those expended in 1928.
T ABLE

58.-State fun ds for rnaternai cind oh'ilcl,..hea,lth ioork, 1934
States

Amount

States reporting no special funds for
maternal and cbild•bealtb work:
Arkansas ...... . ... . . ........ . .•... . ... . . . ....
Colorado ._ •.•.....•.. •. .. . ..•........ .....•.•
Inniana..... . ...... . ................ . ........ .
Nebraska . .• •..•..• .••.• . . . . . •.... . . . .••.•. .. .
Nevada.......•....... . . ......... . . . ....•.....
New Mexico............ . . . .....•..• .......•..
Oklahoma ..•. • .. • . •.. . . . ... .. . .....•• .•......
Utah • • . . ......•.. . ..•.. .. . . .•.... . . ......... .
Vermont..•.• . .......... . ....... . . .. . .. • ......
States reporting less t han $3,000:
Idabo. ... ...... . . •• . .... . ........ .••
$1,430
Sou tb Carolina . . ... .. . . . ...... ... . .
2,046
Wyoming •••. . . ......•.. . . . _. . _... . .
2,500
Alabama._ •...... .......... ........
2,520
2,912
Tennessee . . . ... . ...... . .. . . . .... . •.
States (including H awaii) reporting
$3,000 but less tban $5,000:
Washington . . . _.•.. . . . . • . . ... ..... .
3,000
3,056
Nortb Dakota . . . . _. . . .. . ... ..... .. .
4, 100
E a waii. •... ...... . . . . . ... _.... . __ •.
Oregon .• . •. •. ..• ... _... _.. . ....... .
4,701
States reporting $5,000 but less than
$10,000:
5,000
South Dakota • . .. . . . . .. . . . . . . ••• . ..
6, 600
Iowa ........ •.• •.... . ....•. ....... . .
7,000
Louisiana•. .......... ....... _. . . ... .
Florida.•.. . ..... _... _.... . . . . . .. . . .
7,330
Kansas ...... . ... . . . ....... . . .... . . .
8,000
9,140
West Virginia ........... . . . . ...... .
States reporting $10,000 but less than
$20,000:
10,048
Ohio .... ... . . ...••... ...... ... . .....

I

States
States reporting $10,000 but less than
$20,000-Continued.
Montana . ....•..•••..••.•• •.•••....
California. . ................ ....... . .
Arizona.•.. _•...•. ...... _....... _. . .
M ississippi . . . . •. . ........ . ....... . .
North Carolina •....................
States reporting $20,000 but less tban
$30,000:
N ~w Ha_m psbire..... . ............. .
M 1ssoun .•........ . ...... .......•...
Rhode Island .......... ....... . ...••
Ken tucky ............ .... . . ...... . .
Georgia•.. ........ .......... . . . . . . •.
Maine.... . ............. ..... . . . ..••
Maryland ........ . .......... . ..... .
Connecticut. . . .... •.....••..•...••.
States reporting $30,000 but less than
$50,000:
Michigan.... ... . . . . ..... . .... . . . .. .
Dela ware •. __. __ . .. _. . . ... _.. . . . _. . .
Texas.... . ... . . . .. . . . . . ............ .
l\'1innesota. . ... ..... . . . . . . . . .... .•. .
Virginia . . ...... . . . . ......... . ... . . .
Wisconsin . . ...... . ..... . . ........ . .
States reporting $50,000 bu t less t han
$100,000:
Illinois. .......... . ...•••.......... . .
Massachusetts .. .. .... . ........... . .
States reporting $100,000 or more:
N ew Jersey. ..... . .......... ..... . . .
New York.......... ...... . . ..... .. .
Pennsylvania. . . .. . . . .•.. . ... . ......

Amount

$LO, 500
12,225
12, 890
15, 150
18, 500
21,620
23, 799
24,065
25, 200
26, 000
26,300
26,844
29,392
31, 940
33,000
34,840
36,000
40,372
43, 350
69,070
80,850
103,872
134, 500
197,539

To recapitulate, at the expiration of t he Maternity and Infancy
Act in 1929, or soon thereafter , appropriations equahng, nearly equaling, or exceeding combined Federal and State funds had been made
by the legislatures of 21 States and Hawaii, but in 1934, 17 of these
21 States and Hawaii reported ''no special approp rjation" or reported
decreases in funds for maternal and child-health \"\' Ork as compared
with 1928.
Consideration of relative degrees of curtailment of funds does not
bring out the grave inadequacies in some States which are disclosed
by analysis of the actual amount available for maternal and childhealth work in 1934. This inadequacy is strikingly illustrated in
table 58, which shows that State funds for expansion of the maternal
and child-health program are not available in most States. This table

274

SECURITY FOR CHILDREN

shows that 23 States and Hawaii had less than $10,000 for maternal
and child-health work for 1934, and of these, 14 had no special funds
for maternal and child health or less than $3,000; 14 States had between $10,000 and $30,000; 6, between $30,000 and $50,000; and only
5, more than $50,000.
Other evidence of the lack of resources in many of the States for
effective maternal and child-health activities, particularly in rural
areas, is seen in the general inadequacy of such accepted measures as
public-health nursing service in counties and permanent prenatal and
child-health centers conducted by physicians. One of the most effective ways of reaching the problem of infant and maternal mortality
and health protection of children is the development of public-health
nursing services, because it is through these services that the mothers
are made to realize what kind of medical attention is needed and how
important it is to place themselves under the care of a physician early
in pregnancy; also it is through the public-health nurse that the
mother learns how to take care of the baby and to give the child the
best possible start in life.
The extent to which the mothers and babies of this country are
without the essential services has been shown by certain studies. For
example, the public-health nurse is a valuable agent in decreasing
maternal and infant mortality. Her services include advice to the
mother during pregnancy and instruction in feeding and caring for
the baby, of course under medical instruction. Reports have been
made of the public-health nursing services available in 1934 in the
counties of 24 States which average fairly well in the provision for
public-health service. ( See table 59.) Of 1,018 rural counties in
these States, only 364, or about one-third, including 46 percent of the
population, had any permanent county-wide nursing service in 1934.
Thus 54 percent of the population in these counties was without any
service of this kind. Frequently in a county having county-wide
nursing service one nurse serves the entire county.
Another very important aspect of the maternal and child-health·
program is the provision of health centers where mothers can go for
advice, consultation, and examination, both in the prenatal period and
with the children after the children are born. This service is developed in close relation to the public-health nursing services. Figures
are available on the number of prenatal and child-health centers in
the counties of 18 States in 1934, and here, again, these 18 States do
not represent the most needy group. They represent States from
which information could easily be obtained. In t he urban counties of

275

MATERN AL AND CHILD-HEALTH SERVICES

those States 55 percent had prenatal or child-health centers, but in
the rural counties only 11 percent had such centers. Table 60 gives
the figures on which these statements are based.
TABLE 59.-Permanent

pu,blic--health nursing service in the counties of
States, 1934 1

~-~

Population of counties 2
Type of nursing service

Number
of coun•
ties

Number

Percent
distribu•
tion

Total counties in States ••. ......... .... ..............................

1,393

76,887,743

100

P ermanent nursing service .... . ..... . .............. ..............

834

68,074. 901

89

County.wide service..•............. .•....... .........•... . . .
Local service only......... . ............... . . . . . . . . ...........

629
205

51,354,807
16. 720,0?4

67
22

No permanent nursing service. ........ . ... . ...........•••........

559

8,814, 842

11

Total rural counties in States._ . . .. ____ ......................... .....
Permanent county•wide nursing ~ervice..•.•.••..•.. .....•. . . . . . .
No permanent county•wide nursing service·-······· ·-··· · · ······

1,018
364
654

19,754,839
9,042,631
IO, 712,208

100
46
54

Compiled from data received by U. S. Children's Bureau from State health departments.
U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930,
"Population" (U.S. Government Printing Office, Washington, D. C., 1933).
1
2

TABLE

60.- P ermanent prenatal and child•health, centers in the counties of 18
States, 1934 1
Number Percent
of coun- distribu•
ties
tion

Prenatal and child-health centers

Total counties ...•.•.......••..•••••........•••••... . ........ ................ .......

982

Prenatal and child•health centers . . ..•.•. .•..•......... . . . ..... . . .. . ............

220

Both prenatal and child·health centers......•...............................
Prenatal centers only ... .............•................. . .......•. •...••• ....
Child•health centers only....•• . ..•.• ••.•..... . .....•.......................

100

22
___
____
,..,.._
137
6 ----- ----77

-- --------

762

78

261

100

1---

Neither prenatal nor child•health centers ..•.•. .•. .....••................ ........
Urban counties •••.••. . ..•.......•••.... . . . •••.•.. . ..•.........•................ . . ..

l====i: =

l====I==
Prenatal and child-health cen ters .••..... ................. . . . . ...... . . ......... .
144

55

1- - - - 1 - -

Both prenatal and child·health centers......... . . ......•.•...•...•... . •. . . . .
Prenatal centers only............•......••.•.... . . . .•...•. . . . • . . . • •...•. ... .
Child-health centers only. ................•.•............... . ........•......
Neither prenatal nor child-health centers ...................................•.•..

--·---------------·
-·-------l====I==
97
4
43

117

l= = ==I==
Rural counties......•••..........•.........•.•. ................... ...........•.•.•..
721
l====I==

Prenatal and child•health centers. . . ... ............ . ...... ...... . .•.•....•.•.•..
Both prenatal and child•health centers. . ............ _.··-· · · -··· ...•••.•. . ••
Prenatal centers only.•..•••••.•••...•..•.•..••••••••••••.••...... _........ .
Child·health centers only• •.•................... -···- ...................... .
Neither prenatal nor child·health centers•.....•......... ...................••.•.
1

76

45

100
11

40 ---------2 -·-· ---·· ...
34 ---- ----- 89
645

Compiled from data received by U. S. Children's Bureau from State health departments.

276

SECURITY FOR CHILDREN

Such reports indicate very clearly that large groups of the rural
population "Were at that time without any public-health nursing m·
permanent prenatal and child-health conference service. How much
prenatal or child-health service was given by private physicians i.n
these regions is not known.
Evidence is also available of a striking dearth of a service which is
a recognized necessity for adequate maternity care, namely, the
provision of home-nursing ser vice at delivery and postpartum for
patients who cannot pay for such nursing care. Reports on this subject were received by the Children's Bureau in 1934 from 27 States.
Of these 27 States, 9 r eported no, provision whatsoever for a permanent maternal home-nursing ser vice. Eight States reported permanent maternal nursing services in some towns of less th an 10,000
population and 12 States in some cities of more than 10,000 population. No State reported a rural county-wide maternal nursing service.
Although in cities and towns maternal and child-health services are
more often available than in rural areas, in many urban communities
there have been decreases in appropriations or in funds raised through
private sources. Such reductions in funds, as well as the increasing
load of bedside nursing service required, have curtailed to a considerr. ble extent activities of public-health nurses in the field of maternal
nnd child healt h, and even in some of the largest cities child-health
conferences have been reduced. I n rural areas and in commw1ities of
small population, organized facilities for these services to mothers and
children had always been far from adequate, even when Federal funds
"·ere available to assist States in this program, and later they became
still more inadequate, as has been sho,,n, because of curtailment in
t.he resources of the State health departments, local boards of health
and education, and private agencies.
The need for State leadership, par ticularly in rural areas, in the
development of local child-health work, as well as in the general
health program, is well recognized. With the limited funds availablr.
in 1934 for maternal and child health, such leadersh ip was impossible
in a large number of the States.
The need for public-health nursing service and medical care for
children was shown by r eports made in 1934 of Yisiting nurses in 25
cjties, relating to 9,472 children in 3,500 families, shown in table 61.
The number of children reported as having defects t hat needed attenti.on was 31 percent of the total number. These reports wer e not based
on medical examinations, which " ·ould have r evealed a great many
defects not obvious to the mother s and the nurses. Treatment was
not arranged for in almost half of the cases reported as h aving defects. In 833 of the approximately 1,300 cases in which treatment
"·as not arranged for, the reason given \\as financial distress.

277

1v[ATERNAL AND CHILD- H E ALTH SERVICE S

61.- Physicai clef ects or conditions n eeding attention as r eport ed by
mother to v isiting nurse among 9,472 chilclren incli tded, in 3,500 fami lies
11,nde1· the care of public-heaith rl/Ursing age1w i es fa 25 cities, November 1934

'l.'ABLE

Age of child

Physical defects or conditions
needing attention

Total

U nder 1 year

1 year, under
6 years

6 years, under
16 years

Percent N um- Percent N um- Percent
Num- Percent
dist ridistridistri- Numdistriber
ber
ber
ber
bution
bution
bution
bution
------ T otal children _____ ______ _____ 9,472
100
1,238
100 3,509
100 4,725
100

-- - -

No defects. ____________ .. ___ .. . . . __ _
Defects. ________ ---- . .. -- --- .--- ----

6,557
2,915

T reatment reported .. ... ____ _. ___ . . .
Treatment arranged for _____________

2,833 -------1, 497 - --- - ---

Treatment not arrangsd for. __... . __

1, 336

Because ofFinancial reasons ________ ___
Other reasons...... ____ . ____
Reasons not reported. __ ____
Treatment not reported. ........ ___ .

69
31

--------

833 -------403 -------100 - - - ----82

----·---

1,059
179

86
14

2,558
951

2,940
1,785

62
38

------------- ---------

1, 733

---------------·------

240 -------153 - ---- - - 31 --------

584
235
66

172 -------145 --------

928
504

--------

424

27

9 -----·-15 -------3 -- -- - -- -

7

--------

23

73
27

--------

848

885

52

------------------------·----

Table 62, based on this same group, shows the adequacy of milk
8upply in these families. In t he total group 56 percent of the familieB
were receiving less than 50 percent of the milk estimated to be necessary on the basis given in the table. These families were divided into
those receiving relief and those not receiving relief. Sixty-four percent of the families receiving relief had a milk supply less than 50
percent adequate, as compared with 49 percent of the families not
1·eceiving relief.

PLAN FOR EXPANSION OF MATERNAL AND CHILDHEALTH PROGRAM
In view of the facts and conditions outlined, it is believed that a
program should be developed, especially in rural areas and in areas in
special economic need, that will permit the F ederal Governn1ent
through t he Children's Bureau to cooperate with the States and Territories in the promotion of the health and welfare of children and
mothers. The general program would be one of consultation, education, and demonstration services, with aid to States and T erritories,
and through them to local communities, and would involve State and
local administrative leadership by public-health authorities in close
cooperation with medical groups. It would also be assumed that such
a program for the promotion of maternal and child health would
require cooperation in planning and in procedure with F eder al and
State authorities that are administering other phases of the publichealth program, with those departments of Fede~·al and State gov-

278

SECURITY FOR CHILDREN

ernments that have to do with administration in the fields of social
welfare, education, and labor, and with other national and State
professional and Jay organizations. I n addition to the general program for maternal and child health, special programs are suggested
for demonstration and research •in the development of more adequate
provisions for maternal care of women in rural areas and for the care
of cr ippled children in the smaller cities and towns and rural areas.
T ABLE

62.- Adequacy of family mil'k supp·vy in 3,500 families under the ca,re of
public-health nursing agencies in 25 cities, November 1934
Families under care

Adequacy or family milk supply

Total

Receiving relief

Not receivi ng
relief

Not reported
whether
receivNum- Percent
Num• Percent
Num- Percent
ing
distridistridistriber
ber
ber
bution
bution
bution relief

--

-1,828 .............. --

146

100

1,805

100

143

3

1
96

141
38
1,626

8
2
90

-------137

134

9

217

12

14

26

355

23

520

29

33

997

29

438

29

526

29

33

809
130

23
4

431
88

29
6

331
32

18
2

47
10

Total families .. __ .......•..........••.

3,500

-----·--

1, 526

Adequacy of supply for entire family:
Adequacy reported.••••••••••••.•••.•• ••

3,459

100

1,511

More than adequate.••. •••••...•....
Adequate. . . ••. ...•... . ..............
Inadequate.••••••• ••••••••..••••.•••

197
53
3,209

6
2
93

50
15
1,446

365

11

908

From 75 to 99 percent of amount
necess~ry..... •...... . . . •...•..
From 50 to 74 p ercent of amount
necessary··--·-··-···-·········
From 25 to 49 percent of amount
necessarY---··-··· -······-·-···
L ess than 25 percent of amount
necessary•..•.••••••••••••• ••••
No milk. ______________ · - ··· --···
Adequacy not reported •.•..•.•••...• ••..
Families with children under 6 years
of age ••••••.•. •••••••.•.• . .•• •••• ••

41
2,322

Adequacy of supply if all used by children
under 6:
Adequacy reported.............. . .....

2,295

Adequate . ..... . . .......... ........
Inadequate..... ... ..·. . ...... ......

1,263
1,032

Adequacy not reported ...... ... .......
Families with no children under 6 or
nursing children only..............

27
1,178

----·----------

--...... ·---

--------

3

--·- ...

104

1,115

100

102

692
423

62
38

46
56

15

--------

23

1,087

--------

1, 131 - -

100

1,078

100

55
45

525
553

49
51

----·-·-----· ~

9
439

---------------

6

-- -

16

697

---------------

2
42

In the f urtherance of t he general program of maternal and child
health, special consideration should be given (a) to local services for
children and mothers-ser vices to be administered by local publichealth units with the use of combined local, State, and Federal funds;
( b) to conditions in rural and other especially needy areas ; (c) to the
development of demonstration services or services of a more permanent character in localities in special need; and ( d) to the development of adequate divisions of maternal and child health in State
departments of health that can provide the leadership and administrative assistance necessary to develop local services and State-wide

MATERNAL AND CHILD-HEALTH SERVICES

279

maternal and child-health educational activities. In such a program,
though the lives and health of mothers, infants, and young children
may be considered as a major responsibility, attention must also be
given to the physical and mental health needs of children of all ages,
especially to those problems that have to do with mental health and
its relation to delinquency, with the health of ,adolescents in school
and of youths who are seeking employment or are already in industry,
•with the health needs of special groups of children, such as children
who are physically or mentally handicapped, children in institutions
or foster homes, children in families in which. the father is dead or
absent from home because of illness or desertion, and children in
families on relief rolls.

LOCAL PROGRAMS FOR MATERNAL AND CHILD
HEALTH
In planning a local health program for mothers and children in
counties or districts, especially in rural areas and small centers of
population, it is believed that emphasis should be placed on the
development by the health authorities, in cooperation with medical
and other local groups, of certain minimum health servi~es for
mothers and children unable to obtain them otherwise, and on State
and local programs for education of lay and professional groups in
the essentials of adequate maternal and child care. The use of local
committees on child health and welfare ( composed of representatives of local professional and lay groups) to assist in developjng the
educational program, in establishing the minimum services, and in
extending them to meet local needs should be considered in developing any plan. Such health services for counties and local co1rununities with special reference to rural areas may include the services
·
outlined in the paragraphs which follow.
Local Medical, Dental, and Nursing Service.-These services are
to be provided preferably by local physicians and dentists qualified
to do the special work required and by full-time public-health
nurses employed by health departments, working under the general
supervision of the health officer and other physicians. The physicians and dentists should be paid by the local health department for
their services. When local practitioners are not available, other
arrangements for the various services may be made. The educational and preventive aspects of both maternal and child-health services should iorm an important part oi the service rendered by physicians and dentists. In all the health services iull cooperation of
local medical and dental groups should be obtained.
The medical, dental, and nursing service program should consist of
the following five major categories:

280

SECURITY FOR CHILDREN

(1) Prenatal, infant, and preschool ser vices:

(2)

( 3)

(4)

( 5)

(a) I n permanent conferences located in the center or centers of
population of the county or district.
( b) I n regular itinerant conferences reaching out from s uch centers
to rural areas of the county or district.
(o) In physicians' or dentists' offices when found to be practicable and
advisable by health and medical groups.
School health services, including health examinations and healtheducation programs, to be provided preferably by local phrsicians
through the local departments of heal th or education, or both, in a
cooper ative program with medical groups in the community.
(a) Health examinations (including dental ) of all children on entering school and at stated intervals thereafter and of other children as indicated. Special attention should be given to highschool children and to children leaYing school for work, and
emphasis should be placed on the part played by health examinations in the health-education program.
( b) Follow-up. Plans should be formulated by physicians with
nurses, social workers, nu tritionists, and others for adequate
follow-up for correction of defects.
Heal th service to children entering employment or at wor k. An educational and health-service pr ogram, including medical and dental examinations, carried out by health agencies i n cooperation with school
authorities, junior employment agencies, or other social services existing i n the county, district, or other local community.
Health ser vice to special groups of children, such as handicapped children, children in institutions, and children in fam ilies on relief, carried out in cooperation with social-welfare agencies of the county,
district, or other local community.
Public-health nursing service for mothers and ch ildren.
(a) As part of the generalized service of the official county or district health u nits, primarily an educational and demonstration
program.
(,i) Home visiting in connection with the maternal and childhealth program in all its phases.
(ii) Ser vice at prenatal and child-health conferences.
(iii) Assisting at school health examinations and in conference
with parents and teachers for t he purpose of securing
correction of remediable defects.
(iv) Cooperation with physicians, county welfare and education
a u thorities, nutrition and extension workers, and lay organizations in connection with health supervision of
individuals and in bringing about community organization for improved health services for all mothers and
ch ildren.
( b) Maternity nursing service for care of mothers at deli-rery a nd
postpartum ; a bedside nursing service and educational program
in maternal care for the women of the county and local communities. ( Such service as this is proYided now as part of the
generalized program or as a specialized program in a number
of cities. It has been developed but little in small towns and
cities and, with t he exception of a few demonstrations. not at
all in rural areas.)

MATERNAL AND CHILD-HEALTH SERVICES

281

Provision for Medical Care in Connection With Maternal and
Child-Health P1·ogram.-Though it is not t he function of physicians conducting a health service to render general medical care to the
sick, it should be their responsibility as part of a preventive program
and in cooperation with local medical, nursing, welfare, and socialservice groups to see that provision for adequate care is made through
private physicians and dentists or, in the case of children in families
unable to provide the necessary care, through appropriate welfare
agencies. In the maternal and child-health field this is especially
necessary for the correction of r emediable defects that handicap the
normal growth and development of children and for the provision of
adequate obstetric care of women at and following delivery. Plans
for cooperation with hospitals, con valescent homes, and other institutions for care of the sick or handicapped should be worked out with
medical social workers a,nd others.
Educational Program.-A continuing program .of education in
the essentials of adequate maternal and child care should be developed
by local county or community health ser vices in cooperation with
medical groups, educational authorities, nutrition experts, and others.
Though such a program of education is probably carried out most
effectively in the fcrm of the individual instruction of health officials,
physicians, and nurses already outlined, it should also include (a,)
health instruction in schools, (b) group instruction of adults, (c)
community organization for the establishment o:r; improvement of
health services for mothers and children, and ( cl) the use and distribution of printed matter, such as bulletins and posters on child and
maternal health, emphasizing preventive measures, health habits, nutrition, and general standards of good care. Education in the field
of mental health may be developed through any of these channels as
qualified per sonnel becomes available for t his aspect of the total health
program.
STATE-WIDE PROGRAM
In order to develop local health services for the promotion of the
health of mothers and children, leadership must come from the State
healt h department through its division of maternal and child health
and, for those local communities unable to develop even minimum
services, assistance is also necessary in the form of funds or personnel,
or both. The function of a division of maternal and child health is
primarily advisory and educational in nature, the program developing
along the lines of (a ) consultation with and guidance of local communities in developing their services for mothers and children, (b)
demonstration of services in local communities for which personnel
may need to be provided, ( c) assistance in the provision of more

282

SECURITY FOR CHILDREN

permanent services in localities in special need, and (d) State-wide
educational programs for promotion of maternal and child health.
In its activities the division should work in close cooperation with
other divisions of the State health department, all of which have
functions that are fundamental to the health of mothers and children.
In the same way cooperation by the division with State departments
of welfare, education, labor, et cetera, is essential to a comprehensive
program of child and maternal health. Furthermore, because many
of its services are primarily clinical in nature, the division must work
closely with those medical groups that are specially concerned with the
health of children and mothers and also with the general medical
groups of the State and local communities.
To fulfill its function a division of maternal and child health might
well have a, staff as follows:
A director who should be a physician, preferably one trained in the clinical
aspects of pediatrics or obstetrics and with experience in child and maternalhealth activities.
(a) Additional medical staff for consultation and advisory service composed of full-time or part-time physicians with training and experience in either child or maternal health, the size of such staff to
depend on the needs of individual States. To this medical staff _a
full-time dentist should be added.
( b) Part-time regional consultants in the fields of pediatrics, obstetrics,
and dentistry.
(c) State supervisory and regional advisory nurses, trained and experienced in public-health nursing, preferably with special experience
in maternal and child-health activities.
(i) Part-time service of field nurses carrying a generalized publichealth nursing program for the purpose of demonstration in
cooperation with other divisions of the h ealth department in
counties where needed to promote interest or to supplement
budgets temporarily.
(ii) Field nurses for special demonstration programs.
( d) Additional special staff in fields of nutrition, mental hygiene, health
education, etc.

The activities of the· State division of maternal and child health
might well be divided into those which are administrative, those which
have to do with health services or special demonstrations to be developed on a State-wide or local basis, and those which are largely educational in nature. The organization of State-wide or local health
services or educational programs should be carried out in cooperation
with other divisions of the State health department and with local
health and medical groups. Where State and Federal funds are
available for local purposes the State division would probably assist
in formulating plans and should have the responsibility for approving them. The activities of the division should be :flexible, so that

MATE RNAL AND CHILD-HEALTH SERVICE S

283

new programs may be developed from time to time and new methods
of administration or demonstration tried.
The development, in collaboration with local health units, of an
educational program that would reach all groups, both lay and professional, would be an important responsibility of the State division.
Such an educational program might include:
The development of State-wide planning, in cooperation wit h medical
and other professional groups, for education of parents and lay groups
in the essentials of adequate maternal and child care, with special
emphasis on the ways and means of obtaining these essentials through
local physicians, health departments, etc.
(2) Cooperation with professional groups (medical, nursing, social welfare,
education, home economics, etc.) in the development of a continuing
program of education of these professional groups in the form of instit utes, refresher courses, etc., that will bring to physicians, nurses, and
others current knowledge in the fields of pediatrics and obstetrics and
their practical application in the county-wide program of child and
maternal health.
(3) The continued instruction of midwives and subsequent raising of standa rds of licensing that are an important part of this program of
education.
( 4) Cooperation with departments of public instruction and other education
groups in developing an educational program for students in high
schools and vocational schools, in normal schools, and in colleges in the
essentials of maternal and child care.

(1)

CARE FOR CRIPPLED CHILDREN
Another large group of children for whose needs, from the point
of view of diagnostic services, medical treatment, and convalescent
care, very inadequate and uneven provision is being made are the crippled and those suffering from chronic diseases, such as heart disease
a.nd tuberculosis. The actual number of such children is not definitely known, and many of the general estimates of need are based
on surveys in urban areas, but State-wide surveys to discover crippled
children have given definite evidence that a large number of children
in rural and small-town areas will be forced to go through life with
severe handicaps unless more public funds are made available for
their care.
By 1934 some provision had been made in 37 States for a State
department or commission or a State hospital to undertake special
ser vices for crippled children, and 35 of these States 8 ( table 63)
have made appropriations for this purpose. Except in a few States
in which funds are available only for hospital care, the services pro8 The statutes of North Dakota and Wyoming authorize a State department to provide care for crippled children, but no special appropriations have been made for this
purpose.

284

SECURITY FOR CHILDREN

vided include the location and registration of crippled children by
surveys or by a school census ; development and extension of diagnostic and follow-up clinics-either permanent or itinerant or bothstaffed by a physician and a nurse and assisted by county social
workers and physiotherapists ; and the provision of medical and
nursing care. and after-care, in the child's home, in a hospital, in a
convalescent home, or in a foster home.
In the different States the agencies charged with r esponsibility for
locating crippled children and seeing t hat needed care is given vary
greatly. In some States this work is done by a special commission
for crippled children; in others by the department of health, public
welfare, or education; in other s it is a cooperative ser vice of t wo or
more of these departments. The basis for this variation lies in the
combined medical, social, and educational services that are needed by
the crippled child, often during a period of years, to assist him in
overcoming his handicaps. The most effective agency is the one t hat
can best coordinate. the resources of the State f or this work.
It is estimated that approximately $5,500,000 is spent annually
from State and county funds for the care of crippled children. As
is shown in table 63, State funds have been appropriated for (1) a
general program of care, including clinics, treatment, and reh abilitation, and (2) for hospital service, either in special orthopedic hospitals or in general hospitals, usually State university hospitals,
which provide a special orthopedic service. A large part of all appropriations is spent for hospital care, since as a rule surgical and
medical care must be provided out of t he appropriations for the
general program. In addition to State funds, county funds are
reported for 11 States, the largest county expendit ures being made
in New York and Ohio. In New York the counties reimburse the
State for half its expenditures for this purpose, in Ohio f or the
entire sum.
In addition to State and county funds, it is probable t hat a fairly
large sum is spent annually by municipalities for orthopedic care,
although no data are available on this point. In the cities are also
found the strongest of the private organizations for crippled children and the bulk of private funds for their care. I t is difficult tu
judge from the reports of services provided by State agencies the
extent to which State services are provided for children in the large
cities. An analysis of the number of children under car e in four
States (New York, Ohio, ,vest Virginia, and "'\Visconsin) showed t hat
from 59 to 100 percent of the children wer e from counties that did
not include a city of 100,000 or more population.

285

MATERNAL AND CHILD-HEALTH SERVICES
TABLE 63.- S t at e and co1.tnty pitblic f m1ds f or care of Cr'ippZed ch'ildren

1

State funds for

State

T otal

2

County
funds
Clinics, Mainte• su
pple•
treat•
nance of menting
ment,
State
State
and re•
funds
habilita• hospital
ser vice
tion

Agency administering funds

State board of education.
$9,250 . .......•• 'l'rustees of Child ren's H ome a nd Hos•
pital.
California.............
36,478
10,000 . . . .•.. •.. $26,478 State department of health.
Connecticut..........
84, 000 .• . . . . .• . . 3 84, 000 . . . •.....• Board of trustees of Newington Home
for Crippled Children.
Florida. ............ ..
50,000
50,000 .... .... .....••• . • •. Commission for crippled children.
1
1
Illinois. .......... ..... . .........
()
89,558 . ... . . . . . . Department of health.
State university hospital.
Indiana... . . . .......... . . .... .............
(6)
(6)
Do.
Iowa. . ......... . ..... ........... ...... ....
(7)
.•...•••..
Crippled children's commission.
Kansas. . . . ........... . ..... . ...
5, 000
(7)
(8)
Kentucky............ 110,000
110,000 . . . ....... . ..•...... State board of health; crippled chil•
dren's commission.
Maine. . . ... ..... ..... . ......... .•... ... ..
(1)
••• • •• • • • • State department of public welfare.
1
Maryland......................
()
926, 000 948, 889 Board of State aid and chari ties; de•
partment of health.
5 5, 000
175, 824
Department of public welfare.
Massachusetts........ 180, 824
51, 000 10 500,000
Crippled children 's commission; State
Michigan........•.....•......•.
university hospital.
Minnesota.......•.•.. . . . . . ........•. . . . . . 11 201,750 ......... . State department of institutions.
Mississippi...........
17,500 1217, 500 .......... . . . •...... State board of education.
Missouri... . ..........
50,000 ..... . ....
50,000 .... . .... . State university hospital.
Montana...... . . . . ...
13,200
13,200 . . .........•••.•••.. Ort hopedic commission.
Nebraska............. 145,114 . .... ...•• 145,114 . ........ . State board of control.
New H ampshire......
3,000
3,000 .•. . . .....•.... ..... Department of public welfare.
New Jersey. ....... ... 115,850
15,000 . ......... 100,850 Department of health; crippled chil
dren's commission.
New York. . . . •....... 1,135,970
321,405
493, 160
321,405 Department of education; department
of health.
100,800
Department of health; State orthopedic
North Carolina . ...•.. 108, 800
8,000
hospital.
Ohio. ... . .......... . .. 295,836
17,772 . .... . .... 13 278,064 Department of public welfare.
State lllliversity hospital.
Oklahoma..... . ......... ................. 179, 188
(8)
Oregon. .... .......... . . .. . . . . . . .•.. . • . . . .
(6)
(6)
Do.
Pennsylvania......... 123,210
25,000
98,210 .. . . ...•.. Department of public welfare; depart•
ment of health.
South Carolina . ......
10, 112
10, 112
State department of health.
State board of health.
South D akota. .......
2, 500
2, 500
'fennessee... . ........ ... ... .... . s IO, 000 ····-·--··
32,638 Department of instit utions.
20,000
Texas..... ...... . . ....
45,300
25,300 ......... . State orthopedic hospital (university
hospital); department of education.
Department of public health.
Vermont..............
8, 000
8,000
25,000
25,000
State board of health.
Virginia. . .. ..........
85,000
85,000 .... . ...... . ....... . Department of public welfare.
West Virginia........ .
Wisconsin ...............•••..••...•.. __ ..
State orthopedic hospital; board of
control; department of education.
Alabama. ... . . . •••... .
Arkansas .. ....• . •.•..

$5,000
9,250

$5,000

1 Figures given represent appropriations except those for Massachusetts and New York, and local funds
in California, which are expenditures. Figures for the year 1933 are used for 15 States and for 1931, 1932,
or 1934 for others. (Exclusive of vocational rehabilitation funds.)
2 Calculated only when data on public expenditures were known to be fairly complete.
3 State aid given to private hospital.
1 Amount not known.
5 Approximate expenditures.
6 Care provided in State university hos pital, cost paid entirely or partly by counties.
7 Care provided in State university hospital, cost paid by State.
s Levy of one•tenth mill pro vided by statutes.
i State aid and local contributions to two orthopedic hospitals.
10 Estimate based on total appropriation for both ill and crippled children.
11 In addition some children receiving care in State uni versity hospital paid for jointly by State and
county.
12 Includes medical care of crippled ad ults.
13 Exclusive of Cuyahoga County.

78470- 37--20

286

SECURITY FOR CHILDREN

The amounts of public funds that have been made available in the
different States vary widely, and in many there is great need for
more adequate public provision for saving children from serious
crippling conditions. Reports indicate that services formerly available have been curtailed during the depression and that in many
instances needed care has not been given because of financial distress
of the family or the community. On the basis of the experience of
States having the most comprehensive programs, it is estimated
that between 8 and 9 million dollars of combined Federal, State,
and local funds are needed for these children at the present time.
The need for services in any State may be greatly increased by an
epidemic of poliomyelitis or infantile paralysis, which has been shown
by various studies to have been the cause of crippling from 15 to 51
percent of the children needing care. It is most important, therefore, that Federal funds be so distributed that these special needs
will be met.
The types of services that have been outlined are largely restorative, preventive, and general medical and health services. There is
need also for the development of educational opportunities for crippled children, especially in rural areas, and State programs for
physical restoration must be closely allied with State educational
programs, especially the program for vocational rehabilitation of
handicapped children 14 years of age or older.

Chapter XVI

A PROGRAM OF SPECIAL SECURITY
MEASURES FOR CHILDREN

T

HE PROPOSALS incorporated in the program which is out-

lined in this chapter were prepare<l in the light of the reports
presented to themedical and public-health advisory committees
and were developed in consultation with the child-welfare advisory
committee.1 The reports and discussions of these groups emphasized
the necessity of developing coordinated public-health and social-welfare programs covering all types of need, with definite provision for
participation of the Federal Government, the States, and local communities.
The recommendations of the Committee on Economic Security for
legislation to promote the security of children were largely incorporated in the Social Security Act, as may be seen from a comparison
of the proposed program with the provisions of the Social Security
Act, which are described in the final section of this chapter.
THE PROGRAM PROPOSED
It was considered that Federal, State, and local participation
would be necessary for the development of more adequate and more
generally available public-welfare services for children. The term
"child-welfare services" covers a wide range of activities receiving
support from State and local governments and to a very considerable
extent from voluntary contributions. It was felt that three forms
of public service needed strengthening through a cooperative Federal, State, and local program, namely, (1) care of dependent children in their own homes (aid to dependent children); (2) welfare
services for children needing special care, such as homeless and neglected children and children whose surroundings are such as gravely
to impair their physical and social development; (3) services for maternal and child health, including services for crippled children.
These three groups of measures are closely related, one to the other,
for child health is dependent upon adequate home care, and conversely, family life and child development are profoundly affected by
1

See appendix XIII tor a list ot members of these committees.

287

288

SECURITY FOR CHILDREN

the health 0£ mothers and children. Briefly, the proposals were as
follows:
(1) Strengthening and expansion of the system giving aid to dependent children, which provides home care for children deprived
of parental support. It was estimated that approximately $25,000,000
a year from Federal funds would be required for aid to dependent
children for the first 2 years, rising to a possible maximum of
$50,000,000 as the program developed. The Federal Government
has been spending much more than $25,000,000 on relief families
that would probably be eligible for aid to dependent children.
(2) Strengthening of State and local services £or the protection and
care of homeless and neglected children and children in danger of
becoming delinquent, through a joint program of service supported
by State and local funds with the assistance of Federal grants-in-aid.
An appropriation of $1,500,000 a year was proposed for assistance
to State welfare departments in promoting more adequate car e and
protection of ch ildren and strengthening local public services.
(3) A maternal and child-health program involving Federal assistance to the States, and through the States to local communities, in
the extension of maternal and child-health ser vices, especially in
rural areas, including ( a) education 0£ parents and professional
groups in maternal and child care and super vision of the health of
expectant mothers, infants, preschool and school children, and children leaving school for work; (b) provision for rural maternalnursing service; ( c) demonstration and research in child and maternal care, with special emphasis on the problems of rural 1nothers;
and (d) provision for medical and other care for crippled children
in counties predominantly rural. I t was recommended that the program be developed under the leadership of public-health authorities
in close cooperation with medical and public-welfare agencies and
groups and other agencies, pubHc and private, concerned with these
problems. I t was estimated t hat approximately $7,000,000 a y~ar
would be required for this program., to be increased as the program
develops.
Aid to Dependent Children.- Local administration of aid to dependent children, now vested in various local agencies, should be
brought as soon as possible jnto a unified public-welfare administr ation. State administration should be vested in a State welfare
department, and Federal administration should be brought into close
relationship with other forms of F ederal relief and welfare service.
In the absence of a permanent Federal department of public welfare
it was proposed that Federal administration be placed in the Chil•
dren's Bureau of the United States Depa,rtm.ent of Labor.

SPECIAL MEASURES FOR CHILDREN

289

The plan proposed was based upon a gradual expansion of the
program giving aid to dependent children as State laws, State and
local appropriatjons, and administrative facilities were broadened
and developed to take care of the increased load. It was recognized
that this method would not immediately r-elease e1nergency relief
adroinistrations, Federal, State, and local, from responsibility for the
care of childr en deprived of parental support. Adminjstration of
the new plan would have to be developed in the light of general relief
policies and coordinated with the services of relief administrations,
or of welfare admjnistrations taking over responsibilities for general
relief. The •extent to which States ,vould be induced to increase
State appropriations for aid to dependent children on a, basis of a
Federal contribution of one-half of t he combined State and local
expenditures vrnulcl depend upon the general policies developed as
part of a comprehensive program of F ederal, State, and local responsibility for relief and welfare services. I t is obvious that States
receiving a very high proportion of their total relief expenditures
from the Federal Government would be reluctant to transfer relief
cases to the system for aid to dependent children. Moreo.v er, many
States would receive comparatively little benefit from Federal assistance in a program for aid to dependent children until they were in a
position to jncrease substantially their State appropriations for this
purpose. I n order to stimulate the extension of aid to dependent
children to States and areas in wh ich this service was neglected or
inadequately pr ovided, it was proposed that a portion of the Federal
appropriation be set aside at the beginning of each year as a reserve
and discretionary fund, to be available for States not able immediately to contr ibute two-thirds of the total expenditu res through
State and local :funds.
Welfare Services for Children Needing Special Care.-Fecleral
administration should be coordinated with other features of a unified
public-wel:fare program. The Childr en's Bur eau of the United
States D epartment o:f L abor has had many years of experience in
cooperating with State and local welfare agencies and has been
designated as th e F 'e deral admiHistrative agency, cooperating with
the State departments of public welfare in the development of the
&ervices pr ovided.
The proposed plan of Federal participation with the States in
the development of child-welfare services included the following
recommendations :
That the Feder al aid for this purpose in the social security program be designed to enable the Federal Government to cooperate
with the States and Territories, and through them with local gov-

290

SECURITY FOR CHILDREN

ernments, in the protection and care of homeless, dependent, and
neglected children, and children in danger of becoming delinquent,
through encouraging and assisting in the development of adequate
methods of community organization for child welfare, and giving
financial assistance to local public-welfare services for children,
especially in rural areas and other areas of special need.
•
Maternal and Child-Health Program.-In order to promote
Nation-wide interest in and facilities for adequate State programs
for the protection of the lives and health of mothers and children,
it was recommended that the Federal Government participate
through the Children's Bureau with States and through States with
local communities in programs for maternal and child health. That
the ability of local communities and States to finance such programs
varies greatly according to their resources is common knowledge.
~{any States have never been able to carry on adequate programs
and within States many communities are without resources or have
very limited resources for such work with mothers and children.
To provide more equitable distribution of the opportunities :for
education and for service to mothers and children in the various
States and local communities and to promote improved methods of
administration and care, Federal funds were made available to States
in the past and should again be provided.
The function of the Federal administrative bureau would be primarily consultative, educational, and promotional, with the power of
approval o:f plans made by State departments of health receiving
Federal funds for cooperative Federal-State programs. The consultative and promotional functions would be exercised through a
field staff-medical, nursing, and other; the educational function
through demonstrations of special maternal and _child-health services in cooperation with State health departments and through the
provision of opportunities for certain types of professional education, such as institut~s and "refresher" courses. On the administrative side the Federal Government would assist States in building up
well-staffed divisions of maternal and child health and through such
divisions improve services to mothers and children in local communities. The general program to be developed in States receiving
Federal aid or in local communities receiving combined State and
Federal aid, and the standards for personnel and procedure, should
be in accordance with generally accepted public-health practice, as
determined by the Children's Bureau previous to the making of
grant$.
In addition, the Federal Government, through the Children's
Bureau, should undertake further research and conduct investigations or demonstr.ations that have to do with the health or mortality

SPECIAL MEASURES FOR CHILDRE N

291

of mothers and children or with improvement in methods of car e
that cannot be conducted by individual States or communities. As
part of its program of demonstl'ation and investigation t he Children's Bureau, thl'ough its various divisions, would promote joint
activities among groups interested in various phases of child wel fare, as, for instance, further community demonstrations in the field
of delinquency and its relation to mental health and recreation, and
studies of health of children entering employment.
Under the provisions for Federal aid to States, fund s would be
made available for four general purposes:
First, a general program to stimulate the development of more
adequate State divisions of matel'nal and child health and thl'ough
them to build up improved health services to mothers and children
in local communities, especially those in rural areas and in areas in
economic need. The development of this general program of mater nal and child care would be considered a prerequisite to participation in the second program.
Second, a program of maternity nursing for delivery and postpartum care of mothers in rural areas. The need to develop this
special aspect of the general maternal-care program is very great.
Few mothers have this service in the smaller cities or towns or in
rural areas, yet it is of great importance in the program for the
reduction of maternal deaths.
Third, a program of demonstration and research in child and
maternal care, with special emphasis on the problems of rural
mothers.
Fourth, a program of aid to States for medical care and other
services for crippled children in counties predominantly rural.
PROVISIONS OF THE SOCIAL SECURITY ACT 2
In addition to the indirect benefits to children provided by other
titles of the Social Security Act, grants-in-aid to the States for promoting the health and welfare of children are provided specifically in
title IV,8 Grants to States for Aid to Dependent Children, and title
V,4 Grants to States for Maternal and Child Welfare. These grants
must be considered in relation to the grants for health and welfare
services authorized in other portions of the act, especially title I ,
Grants to States for Old-Age Assistance, title X , Grants to States
for Aid to the Blind, and title VI, Public Health Work.
2

Ch. 531, 49 Stat. 620; U.S. C. (1935 Supp.).§§ 301-1305.
49 Stat. 627; 42 U. S. C. (1935 Supp. ) , § § 601-606.
'49 Stat. 629; 42 U. S. C. ( 1935 Supp.) , § § 701- 7 31.
3

292

SECURITY FOR CHILDREN

Aid to Dependent Children.-The Social Security Act in title IV
establishes a system of Federal-State cooperation under the adminjstration of the Social Security Bo,ard "£or the purpose of enabling
each State to furnish financial assistance, as far as practicable under
the conditions in such State, to needy dependent children." A smn
of $24,750,000 5 was authorized for appropriation for the fiscal year
ending June 30, 1936, and for each fiscal year thereafter a sum
sufficient to carry out the purposes of the t itle was authorized for
appropriation. The Federal funds authorized are to be used for
making payments to States which have submitted and had approved
by the Board State plans for aid to dependent children.
The requirements :for approval are sumn1arized with other provisions of title IV in table 64. To receive Federal approval a State
plan for aid to dependent children must be effective in all political
subdivisions of the State, and, if administered by them, must be mandatory upon them; it must provide for financial participation by the
State; it must provide either for the establishment or designation of
a single State agency to administer or supervise the administration of
the plan; it must provide an opportunity for a fair hearing before the
State agency to any individual whose claim with respect to aid to a
dependent child is denied; it must provide such methods of administration ( other than those relating to selection, tenure of office, and
compensation of personnel) as are found by the Board to be necessary
for the efficient operation of the plan; and it must provide that the
State agency will make such r eports, in such form and containing
such information as the Board may fr01n time to time require, and
comply with such provisions as the Board may from time to tin1e
find necessary to assure the correctness and verification of such
reports.
In addition to these requirements established as a condition for the
receipt of F ederal grants, the Board is not permitted to approve any
State plan which imposes as a condition for eligibility for aid to
dependent children a r esidence require1nent which denies aid with
respect to any child residing in the State who has resided in the State
for 1 year immediately preceding the application for aid, or who
·was born within the State within 1 year i1runediately preceding the
application, if its mother has resided in the State for 1 year immediately preceding the birth.
s The Social Security Act was not approvecl until Aug. 14, 1935, and the supplemental
appropriation bill, fi scal year 1936 [H. R. 9215]. faile<l of pai::sage in tile first session of
the Seventy-fourth Congress. The Supplemental Approp1•iation Act, fiscal year 1936,
Public, No. 440, 74th Cong., 2d sess. [H. R. 10464], approved Feb. 11, 1936, included an
appropriaHon of $5,000,000 for tile 1·emainder of t he fiscal yea r e ncliug June 30, 1936.

SPECIAL MEASURES FOR CHILDREN
TABLE

64.- Sn,mnary of

vro visio11s for F ederr,/, [/rants to States for aid to

293
d e[)C11d -

e11t clii1£lren (11wt fl cr.s· oicl)
[To be made !Jy tbe Social Security Board under title I V
DEF! N

1

of tbe Social Security Ac t]

rrrro N

Aid to dependent children means money payments to a nePdy clcpendent child (or
dependent childre n) under tbe age of l 6 who has been rleprived of p::irr ntal support or
care by reason of the death, continued absence from the h ome, or phys ica l 0 1· mc>ntal
incapacity of a parent, and who is living with fathe r, mother,. grandfather, g randmother, brother, sister, stepfather, stepmother , s tepbrothe r, l-'trps1ster , uncle, or aunt,
in a place maintained by oue or more sucb r elatives as his o r her own home.
CERTIFICA'rION OF STATE PLAN FOR FEDERAL GRANTS

A State in order to r eceive a Federal g rant, must subm it a plan and have it approved
by the Social Security Board as meetiu~ the followin~ r equirements:
t. Effective in all political subdivisions of tile State, and, if administered by them,
mandatory upon them;
2. Provision for financial participation by tbe State;
3. Either provision for the es tablishment or designation o[ a single State ageucy to
administer the plan. or for the establis hment or designation of a s iugle State agency to
supervise the administration of the plan ;
4. Provision for granting to any individual whose claim with r espect to aid to a
dependent child is denied, an opportunity for a fair bearing before such State agency;
5. Such methods of administration (other tllan tbose r elati ng to selection , teuure of
office, trnd compensation of personnel) as are found by tbe Social Security Board to b~
necessary for the pfficient ope ration of the plan;
6 . Submission of s uch r eports in such form and contafoing such information as the
Federal Social Security Board may from time to time require, and compliance with
tile provisions which the Board may from time to time find n ecessary to assure the
con-ectness and verification of snch r eports :
A State plan will not be approved H it imposes a residence requirement whic!J excludes
any child wbo has resided in the State for 1 year immediately preceding tile application
for such aid or who was born within tbe State within 1 year preceding the application,
if its mother bas resided in the State for 1 year immediately preceding the birth.
AMOUNT OF GRANT TO EACH STATE

A quarterly amount which l--ba11 be used exclusively for carry ing l)Ut the State plan,
equal to on e;tbi rd of the total of the sums expended in the State during su ch quarter.
not counting so much of s uch expenditure to any d epenclent child for any month as
exceeds $18, or if tbere is more than one dependent child in the same home, as exceeds
~18 for any month with r espect t o one such d ependent child and $12 for such month
with respect to each of the other dependent children.
METHODS OF CO~IPUTING AND PA YI 1'0 GRANTS

1. Estimates of amou nts to be paid States will be based on:

(a) State r eport of total sum to be expended each quarter for aid to dependent
children, with statement of amount appropriated or made available by tbe State and
its political subdivisions. ( If the amount appropriated is less than two-thirds of the
total sum of estimated quarterly expenditures. the source or sources from which the
difl'nence is expected to be d erived must be staterl.)
(b) Records of the total number of d epend('nt children in the State.
(c) Such investigation al-' the Social Security Board may find n ecessary.
2. Payments will be made to the State at the time or times fixed by the Social
Security Board :
.
(a) After certification 1:,y the Social Security Board to the Secr etary of the Treasury
of the amount due the State reduced or increa::;e<'I by any sum b.v which its estimate for
any quarter was gr eater or less than the amount which r;hould have been paid:
(~) By the Secretary of the Treasury, through the Division of Disburseme nt, prior to
audit or settlement by the General Accounting Office.
SUSPENSION OF GRANTS

If the Social Security Board finds, after r easonable notice and opportunitv for h ea rino
to the State agency administering or supe1•vising the administration of the State plan":
th!lt the plan bas be1>n so ch a nged as to impose prohibited rel-'idence requirements or
failed to. comply suhstantially with conditions r eqmred for FPderal approval. the B~ard
shall uo.tify the State agency that Federal g rants will not be made until s uch conditions
are rectified.
AMOUNT Oil' FEDERAL APPROPRIA'rfON AUTHORIZED

Twenty-four million seven hundred fifty thousand dollars for fiscal year ending June
30. 1936; z thereafter an annual amount sufficient to carry out the purposes of the title.

!'Ihe_.So_c1a
4,9 Stat..627. H ~01- 406; 42 U. S. C. (19:l5 Supp.), § § 601- 606.
l ~ecunty Act was not approved until Aug. 14, 1935.

and tbe supplemental
appropnation bill. fiscal year 1936 [H. R. 921.5]. failed of passage in the fil'st session
of t~e Srvent.v-fourth Congress. The Supplemental Appropriation Act, fiscal year 1936.
Pubhc. ~o: 440. 74th Cong-., 2d sess. [H. R. 10464]. approved Feb. 11. 1936. included an
approprrnt1on of $5,000,000 for the remainder of tbe fiscal year ending June 30, 1936.

294

SECURITY FOR CHILDREN

Aid to dependent children is defined as money payments with
respect to a child or children under the age of 16 who have been deprived of parental support or care by reason of the death, continued
absence from home, or physical or mental incapacity of a parent,
and who is living with his father, mother, grandfather, grandmother,
brother, sister, stepfather, stepmother, stepbrother, stepsister, uncle,
or aunt, in a place of residence maintained by one or more of such
relatives as his or their own home.
The amount of Federal aid to the States will be determined from
State estimates of their quarterly expenditures for aid to dependent
children, together with records of the number of dependent children
in the State. The Federal Government will pay for each quarter
an amount, which shall be used exclusively for carrying out the State
plan, equal to one-third of the total of the sums expended during such
quarter under such plan, not counting so much of such expenditure
with respect to any dependent child for any month as exceeds $18,
or, if there is more than one child in the same home, as exceeds $18
for any month with respect to one such dependent child -and $12 for
such month with respect to each of the other dependent children.
Prior to the beginning of each quarter the Board will estimate the
amount to be paid to each State with an approved plan for aid to
dependent children for each quarter. These estimates will be based
upon (1) reports filed by the State agency containing its· estimates
of the sums to be expended in the quarter under the plan, (2) records
showing the number of dependent children in the State, and (3) such
other investigation as the Board may find necessary. The amount
to be appropriated or made available by the State and its political
subdivisions must be shown in the report of estimated quarterly
expenditures. If this amount is less than two-thirds of the total sum
of the estimated expenditures, the source or sources from which the
difference is expected to be derived must be r eported to the Social
Security Board.
The Board will thei1 certify to the Secretary of the Treasury the
amount of Federal grant to the State, reduced or increased, as the
case may be, by any sum by which it finds that its estimate for any
prior quarter was greater or less than the amount which should have
been paid to the State :for such quarter, except to the extent that
such sum has been applied to make the amount certified for any prior.
quarter greater or less than the amount estimated by the Board for
such prior quarter. The Secretary of t he Treasury, through the
Division of Disbursement of the Treasury Department and prior to
audit or settlement by the General Accounting Office, will pay to the
State, at the time or times fixed by the Board, the amount certified as
t he Federal grant to the State for aid to dependent children.

SPECIAL MEASURES FOR CHILDREN

295

If the Social Security Board finds after a State plan for aid t o
dependent children has been approved that it has been changed so
as to impose a prohibited requirement or that in its operation there
is failure to comply with required conditions for approval, t he Boar<l
must notify the State agency that further Federal payments will
not be made. Such suspension of Federal grants will be preceded
by reasonable notice and opportunity for hearing to the State
agency, and Federal grants will be resumed when the Board is
satisfied that the prohibited requirement is no longer imposed and
that there is no longer any failure to comply.
Maternal and Child-Health Services.-The ann~1al appropriation
authorized under title V, part 1, of the act 6 is $3,800,000,7 "for t he
purpose of enabling each State to extend and improve, as far as
practicable under the condition~ in such State, services for promoting
the health of mothers and children, especially in rural areas and in
areas suffering from severe economic distress." The act provides
that "the sums made available under this section shall be used for
making payments to States which have submitted, and had approved
by the Chief of the Children's Bureau, State plans for such services."
To be approved by the Chief of the Children's Bureau, a State plan
for maternal and child-health services must provide for financial particip,a tion by the State; provide for administration or the supervision
of administration by the State health agency; provide such methods of
administration ( other than those relating to selection, tenure of office,
and compensation of personnel) as are necessary for the efficient operation of the plan; provide that the State health agency will make such
reports, in such form and containing such information, as the Secretary of Labor may from time to time require, and comply with
such provisions as the Secretary of Labor may from time to time
find necessary to assure the correctness and verification of such reports; provide for t he extension and improvement of local maternal
and child-health services . administered by local child-health units;
provide for cooperation with medical, nursing, and welfare groups
and organizations; and provide for the development of demonstration services in needy areas and among groups in special need.
The conditions under which a State may receive Federal funds
for maternal and child-health ser vices are summarized in appendix
XII, together with other provisions of the act relating to Federal
grants.
49 Stat. 629, § 501; 42 U. S . c. (1935 Supp.), § 701.
The Social Security Act was not approved until Aug . 14, 1935, and the supplemental
appl'Opl'iation bill, fiscal year 1936 [H. R. 9215), failed of passage in tbe first session
of the Seventy-fourth Congress. The Supplemental Appropriation Act, fiscal year 1936,
Public, No. 440, 74th Cong., 2d sess. [H. R. 10464 ) , approved Feb. 11, 1936, included an
a ppropriation of $1,580,000 for the r emainder of tbe fiscal year ending June 30, 1936.
6

1

296

SECURITY FOR CHILDREN

Allotments to the States from this appropriation are directed by
section 502 8 of the act to be made by the Secretary of Labor on the
following basis: An initial uniform allotment of $20,000 n to each
State (Hawaii, Alaska, and the District of Columbia are considered
as States for the purposes of the act), an additional allotment based
on the ratio of live births in the State to the total number of live
births in the United States, and an allotment of $980,000 9 based upon
the need of the State for financial assistance in carrying out its State
plan, the number of live births in the State being taken into consideration. Funds allotted under this latter provision need not be matched.
Other allotments .are to be matched equally by State or State and local
funds.
Services for Crippled Children.-The annual appropriation
authorized under title V, part 2, of the act 10 is $2,500,000,11 "for the
purpose of enabling each State to extend and improve ( especially
in rural areas and in areas suffering from severe economic distress),
as far as practicable under the conditions in such State, services for
locating crippled children and for providing medical, surgical, corrective, and other services and care, and facilities for diagnosis, hospitalization, and aftercare, for children who are crippled or who are
suffering from conditions which lead to cri ppljng." Plans for such
services are to be submitted to the Chief of the Children's Bureau
for approval.
The Social Security Act specifies the conditions which a State plan
for services for crippled children must meet in order to receive t he
approval of the Chief of the Children's Bureau. The State plan must
provide for financial participation by the State; provide for the administration of the pJan by a State agency ; provide such methods of
administration ( other than t hose relating to selection, tenure of office,
and compensation of personnel) as are necessary for the efficient operation of the plan; provide that the State agency will make such
reports, in such form and containing -such information as the
Secretary of L abor may from time to time require, and comply with
such provisions as the Secretary of Labor may from time to t ime find
necessary to assure t he correctness and verification of such reports ·
provide for carrying out the purposes of section 511, quoted in the
paragraph above; and provide for coopera tion with medical, health ,
8

49 Stat. 629, 42 U. S. C. (1935 Supp.) , § 702.
The Supplemental Appropriation Act, fiscal year 1936, Public, No. 440, 74th Cong..
~d sess. [H. R . 10464), appr oved F eb. 11, 19 36, cu t tbe allot ment to fi"e-twelfths of the
amou nt s pecifically authorized in the Socia l Security Act. (See also footnote 7.)
10
49 Stat. 631, § 511; 42 U. S. C. (1935 Supp.), § 711.
11 Tbe Social Secu.rity Act was not approved ·until Aug. 14. 1935. a nd the supplemental
appropriation bill, fiscal year 1936 [H. R. 9~15], fo iled or passage in the first s es sion of
t he Seventy-fourth Congr ess. The Supplemental Appropriation Act, fiscal year 1936 ,
Public, No. 440, 74th Cong., 2d sess. [H. R. 10464] , a pproved Feb. 11, 1936, included an
appropriation of $1,187,000 tor the remainder of the fisca l year ending June 30, 1936.
9

SPECIAL l\IEASURES FOR CHILDREN

297

1mrsing, and welfare groups and organizati ons and with any agency
in such State charged. with administering State l aws providing for
vocational r ehabilitation of physically handicapped children. (See
appendix XII for a strmfi1:ary of the provisions of the Social Security
Act relating to F ederal grants for services for crippled children as
well as those relating to the other grant features of the act.)
Allotments for services for crippled children 1 2 are on the following
basis: A uniform grant of $20,000 13 available to each State and the
balance available according to the need of each State as determined by
the Secretary of L abor after taking into consideration the number of
crippled children in such State in need of the ser vices referred to in
section 511 and the cost of furnishing such services to them. These
grants are to be matched dollar for dollar by State or State and local
funds.
Child-Welfare Services.-The annual appropriation authorized by
this part of the act 14 is $1,500,000 15 "for the purpose of enabling the
United States, through the Children's Bureau, to cooperate with
State public-welfare agencies in establishing, extending, and
strengthening, especially in predominantly rural areas, public-welfare
services (hereinafter in this section referred to as 'child-welfare
services ' ) for the protection and care of homeless, dependent, and
neglected children and children in danger of becoming delinquent."
The F ederal funds are to be allotted by the Secretary of Labor for
use by cooperating State public-welfare agencies on the basis of
plans developed jointly by the State agency and the Children's
Bureau. Unlike funds allotted for maternal and child-health services and services for crippled children, these fund s do not have to be
matched by the States. A uniform. allotment of $10,000 16 is available to each State and t he r emainder is allotted on the basis of the
ratio of the rural population of t he State to the total rural population of the United States. Although there is no provision for
matching funds, the act indicates that there n1ust be financial participation by the State or by local communities, since the act requires
that "the amount so allotted shall be expended for payment of part
12

49 Stat. 631, § 512; 42 U. S. C. (1935 Supp.). § 71 2.
Tbe Supplemental Appropriation Act, fiscal year 1936, Public, No. 440, 74th Cong..
2d sess. [H. R. 10464], approved Feb. 11, 1936, cut tbe a llotment to five-twelftbs of t h e
a mount specifically a~tborized in the Social Security Act. (See a lso footnote 11. )
u 49 Stat. 633, § 5 21: 42 U. S. C. (1935 Supp.), § 721.
16 The Social Security Act was not approved until Aug. 14, 1935, a nd the supplemental
appropriation bill, fiscal year 1936 [H. R. 9215 J, failed of passage in the first session of
t he Seventy-fourth Congress. The Supplemental Appropriation Act, fiscal year 1936,
Public, No. 440, 74th Cong., 2d sess. [B. R. 10464 ), approved Feb. 11, 1936, included an
a ppropriation of $625,000 fo r the remaind er of the fiscal year e nding June 30, 1936.
18 T he Supplem ental Appropriation Act, fiscal year 1V36, Public, No. 440, 74th Cong ..
2d sess. [ H. R. 10464], approved Feb. 11, 1936, cut the a llotment to five-twelfths of
the a mount s pecifically authorized in the Social Security Act. ( See a lso footnote 15.)
13

298

SECURITY FOR CHILDREN

of the cost of district, county, or other local child-welfare services
in areas predominantly rural, and for developing State services for
the encouragement and assistance of adequate methods of community
child-welfare organization in areas predo1:11inantly rural and other
areas of special need." Another difference between part 3 (childwelfare services) and parts 1 and 2 (maternal and child-health
services and services £or crippled children) lies in the provisions
relating to approval of State plans. No conditions are prescribed
for approval of State plans for child-welfare services other than
that they are to be "developed jointly" by the State agency and the
Children's Bureau. Appendix XII gives in tabular form a comparative analysis of all the provisions of the Social Security Act
relating to Federal grants to States.

Part IV
PROVISIONS FOR THE BLIND

•

Chapter XVII

PROVISIONS FOR THE BLIND
HE CENSUS of 1930 listed 63,489 people in the United States
as being blind. This represents 52 blind people for each 100,000
in the total population. There are, however , great differences
between the States in this ratio, the range being from 30 per 100,000
in New Jersey to 143 per 100,000 in New Mexico.
All people who have studied the problem are agreed that the
census understates the number of the blind in this country. The
major reason for this understatement appears to be that many 0£ the
census takers neglect to ask the question whether a.ny member in the
household is blind. Further, t here is no agreement as to the degree
0£ loss of vision which constitutes blindness. There are pr?bably
at least 100,000 people in this country who are blind within the
definitions of the term used in State laws for aid to the blind.
Among the blind the older people predominate. 0£ all the blind
listed in the census, 28,113 were over 65 years of age, representing
more than 40 percent of the total number of the blind. Another
17,814 were from 45 to 64 years of age.
The great majority of the blind are needy. Of all the blind in
the United States listed in the census of 1920, only 7,177 r eported
that they were gainfully occupied. Similar information is not found
in the census of 1930, but data available from State censuses indicate
that since the advent of the depression the percentage of blind perEons gainfully employed has decreased. Not more than 15 to 20
percent of all the blind are gainfully occupied, and most of those who
are so classified are not entirely self-supporting.

T

STATE LEGISLATION FOR THE BLIND 1
State legislation for the blind has taken four principal forms :
(1) educational and vocational training, principally of blind children; (2) workshops for the adult blind, maintained with State as1:iistance; (3) field work in locating the blind, extending to them
medical and similar assistance, help in procuring employment, and
1
Unless otherwise noted , data in this section wer e taken from "Public Prov ision for
Pensions for the Blind in 1934", Monthly Labor Review, vol. 41, no. 3, September 1935,
p. 584-601.

301
78470-37-21

302

PROVISIONS FOR THE BLIND

assistance in the marketing of products produced by the blind; and
( 4) cash grants to the blind.
Educational and vocational t raining is carried on principally in
State schools for the blind and in special day classes established in
connection with the public-school system, particularly in urban
centers. There are also a consider able number of private institutions of this character.
,iVorkshops for the blind have long been maintained as State institutions, and are also conducted by private organizations. In these
workshops adult blind people carry on some occupations for which
they have training, particularly basket weaving, rug making, etc.
The number of blind people employed in such special workshops has
never exceeded a few thousand.
All but 10 States (Arizona, Arkansas, Georgia, I daho, Montana,
Nebraska, Nevada, New Mexico, North D akota, South D akota) carry
on some field work for the blind. In 13 States (Alabama, Florida,
I owa, ICansas, Minnesota, J\1ississippi, North Carolina, Oklahoma,
South Carolina, Tennessee, Texas, Washington, West Virginia), however, expenditures for this purpose are less than $5 per year for each
blind person in the State. A minimum_expenditure of $25 per blind
person per year is generally regarded as necessary, but only six
States (Connecticut, Delaware, Massachusetts, Missouri, New H ampshire, and New York) expended this amount for this purpose in the
latest year for which data are available. 2
Mr. Irwin, in his testimony before the Senate Finance Committee,2
outlined the requirements of a constructive program for the blind as
including medical care for the eyes, if sight can be restored or improved, vocational guidance and training, placement, sheltered
employment, home instruction in Braille (the embossed type used by
the blind), social service, and care of blind children of pre~chool age.
An amendment to the social security bill, introduced in the Senate,
carried an appropriation of $1,500,000 to be distributed to the S tates
for the purpose of assisting them on a matching basis in locating
blind persons, in providing diagnoses of their eye conditions, and in
training and employment of the adult blind. This amendment ~ as
dropped by the conference committee.
As of August 1, 1935, 27 States h ad laws providing for cash payments to the blind. These are Arkansas, California, Colorado, Connecticut, Idaho, Illinois, Indiana, Iowa, ICansas, I(entuck_v, L011is1ann,
F r om s upplementary s t atement submitted by Robert B . Irwin. eser utfre dir ector.
American F oundat ion for the Blind. Inc., New York, N. Y., in B earings befor e the Committee on Finance, U. S. Senate, 74th Cong., 1s t sess.. on S. 1130 (Economic Security
Act) (U. S. Governmen t P r int ing Office, Washington, D. C., 1935 ), pp. 7 29-730.
2

303

PROVISIONS FOR THE BLIND

lV[aine, Maryland, Mjssouri., Minnesota, Nebraska, Nevada, New
Hampshire, ~ew J ersey, New~York, Ohio, Oklahoma, P ennsylvania,
Utah, Washington, Wisconsin, and vVyoming. l No complete data are
at hand regatding the expenditures in these States for aid to the
blind.:~(-From the latest reports it would appear, however, that in 24
TABLE

65.- Data on the operation of systems, for aid to the blind in the UnUed
States, 1934

Monthly grants paid
Amount disbursed in 1934
RecipiBlind
ents
as
Recip- popula- percent
ients tion, of 1930
MaxiState
Range of
of
County Aver- mum individual
blind
State
Total
grants census,
payage
funds
funds
1930 popula•
grants
able
tion
- - --- ----$3,482,796
$19. 96 _.,.. ___ ___ -·--------219
$6,880,015
$3,397,
Total.._ ..... 31,909 39,675
68. 4
Arkansas____. ______
California••. .••....
Colorado....... .. __
Connecticut....•.. _
Idaho........... . __
Illinois_ ••• _•..... __
Iowa..•......... ...
Kansas ..•.•.....•..
Kentucky....... ___
Louisiana•.•. ·--· .•
Maine _____ ........
Maryland.•........
Minnesota .........
Missouri.---··--·-Nebraska ... --··· ..
Nevada ___ . . .......
N ew Hampshire . . _
New Jersey_ ..... . .
New York .........
Ohio ______ __ _____ __
Pennsylvania ......
Utah __ __ .... .. __ ...
Washington. . __ ... .
Wisconsin·-······ __

1,101
1.165
3,179
2,597
751
701
374
581
156
86
4,490
4,484
956
1, 577
1,246
66
383
I, 97i
420
1,252
626
922
62
799
I, 049
442
4,336
3,879
325
552
3
64
79
251
1,222
372
2,200 s 4,418
fi, 152
4,154
4, 142
4,373
21
238
185
792
1,854
1,530

11,650 --·------105. 8
11,650
542, 704
542,704
122.4 1,085,408
65, 000
75,287
140,287
93. 3
64.4
22,820
22,820 ------ ---16,989
55. I
16,989
2 486,402 2 823,343
99.9 ii, 309, 745 ---------158,562
60. 6
158,562 ---------8,996
5.3
8,996 ---·-----42,129
19. 4
42,129 ---------63,000
63,000 ·--------33.5
147.3
148,317
148,317 --·------7,817
7,817
7.8
23. 7
147,203 ----·----147,203 ---------111.8 1 I, 265, 831 l l, 265,831 --·------45, 103
45,103 ------ ---59.0
600
4. 7
600 -------- -8,797
6,064
2,733
31. 4
91,090
30.4
91,090
5 16. 1
583,670
583,070 ------------------620,393
124.0
620,393 ---------94.7
651,228
651,228 ---------2,105
8.8
2,105
23.4
25,808 ---------25,808
---·-----372,467
121. 2
422,467
50,000

0.83
33. 12
15.47
5.09
16.46
25.75
13.89
11. 36
9.17
12. 50
13. 33
11. 84
27. 75
24.33
11. 77
16.67
9.28
21. 98
21. 93
10.04
23.30
8.35
11. 63
19.40

$0.83
$25.00
50.00 5.00-50.00
(1)
25.00
(!)
30.00
20.00 10.00-25.00
30. 42 1. 00-30. 42
25.00 4.00-25.00
50.00 5. 00-25. 00
20.83 1. 33-20. 83
(1)
25. 00
(1)
25.00
20. 83 3.33-20.00
(3)

25.00
25.00
50. 00
12.50
40.00
25.00
33. 33
30.00
50.00
33.33.
30.00

(1)
(1)

5. 00-25. 00
(l}

8.00-12.:iO
(1)
(1)

1. 25-35. 00
(!)

3.00-20.00
3.00-40.00
(1)

No data.
Data are for 60 counties whicb reported as to amounts furnished by State and counties.
a No limit; except for married couples, both blind, in which case not over $30 per month.
• Includes oculists' fees.
s Exclusive of New York City.
SOURCE: "Public Provision for Pensions for the Blind in 1934", Jvlo11thlv Labor Review, vol. 41, no. 3,
September 1935, pp. 584-601.
1
1

of these States there was a total of 31,909 recipients of grants at the
end of 1934, or 68.4 percent of the total blind population of the 24
States in 1930.3 The total expenditurns for blind · persons in these
States amounted to $6,880,015 in 1934. The average grant paid was
$19.96 per month, with a range from $0.83 in Arkansas to $33.12 1n
California. ( See table 65.)
a A report from Wisconsin gives 3,742 as tbe numbe r of bliucl person s io tbe State.
The 1930 cen~sus r eported only 1,530 blind persons in Wiscon sin, while the State records
showed 3,033 in tba t yeat·. The census therefore underestimated t be Mind population
by nearly one-half. The figure presented in table 65 indicates tbat 121.2 percent of tbe
State's 1930 blind population was in r eceipt of pensions in 1934·. Utilizing corrected
data for the 1930 census tbis percentage becomes 54. Wisconsin State Board of Control,
Blind Persons in Wisconsin, 1907-84 (mimeographed report), 1935, p. 8.

304

PROVISION S FOR THE BLIN D

The maximum grants payable range from $150 per year in New
Hampshire to $600 a year in four States (Calif ornia, Kansas, Nevada,
and Utah). In W yoming also, a maximum of $600 a year is paid
to a blind person who is the head of a f amily. T he Minnesota law
sets no maximum, except in the case of two blind per sons who h ave
contracted marriage after the passage of the act, where the maximum
joint grant is limited to $360 a year.
The following tabulation indicates the maximum yearly gr ants set
by State laws:
M aximum yearly
grant

Num•
her

$600. . . . ...... . .......

4

$480. .... : . . . ..... . .. .
$400. ....... ...... . ___

1

$365- ----- ---· ·-······

I

$360_·-- ---- · ··· · ····-

4

2

State
JCalifornia.
Kansas.
\Nevada.
Utah.
New Jersey.
{Ohio.
Washington.
Illinois.
! Connecticut.
Pennsylvania.
Wisconsin.
Wyoming.

M aximum yearly
grant

$300. . . . . . ... . ....... .

$250- -- ---·-· ···-·····
$240-,., . .... . ... . ....
$150. . . . ... · - --·-·· - --

Num•
her

State

Arkansas.
Colorado.
Indian a.
Iowa.
Louisiana.
10
Maine.
M issou ri.
Nebraska.
York.
- New
Oklahoma.
2 {Kentucky.
M aryland
I
I daho.
1 New H ampshire.

I n eight States the aver age grants were less than one-half the
maximum payable under the State laws ; in eight States the average
grants were between one-half and t wo-thirds of t he maximum ; and
in six States the average was more t han t wo-thirds of t he maximum
allowable. T he average allowance in California was about 30 per cent higher t han the average paid in I llinois, the State with the next
highest average. In these t wo States and in four others (New York,
New J er sey, rennsylvania, Missouri) , which are highly industrialized, t he average amount paid was over $20 a 111011th. Yet Ohio,
also an industrial State, ranked among the lowest five States in the
size of its average grant to the blind-only $10.04 a mont h. I n
Arkansas, where the gr ants averaged 83 cents a 1nonth , blind persons
were given a flat gr ant- of $10 a year, although the maximum allolfed
by law is $300 a year.
The range in individual monthly grants is very wide, varying froru
$1 to $50 a month. The distribution of recipients of aid to the blind
according to the size of their monthly grants is a,-,ailable for two
States ( Colorado and New J er sey). I n Colorado for the year ending June 30, 1933, 685 persons received n1011thly grants in accordance
with ·the following per centage distribution : $5, 0.1 percent · $6.25
5.0 percent ; $8, 0.4 percent ; $10, 7.2 per cent; $12.5·0, 1.0 per cent; $15,
24.5 per cent; $20, 18.8 percent; $25 (the maximum payable), 42.9 percent. I n New J ersey 111onthly grants to t he blind "-er e pa i.d during
1934 in accordance with the following percentage distribution :

PROVISIONS FOR THE BLIND

305

$10-$12, 42.0 percent; $15 or $20, 2.0 percent,; $25, 42.0 per cent; $30,
$35, or $40, 11 percent.
It may be noted from table 65 that less than one-half of the States
conh·ibute toward the costs of aid to the blind. In A1l:ansn.s, Connecticut, Maine, Minnesota, Missouri, and P ennsylvania, the costs of
the system are borne entirely by the State. In Idaho, Iowa, Kansas,
l(entucky, Louisiana, JYiaryland, Nebraska, Nevada, New York, Ohio,
Utah, and vVashington, the State takes no part in the financing, and
in New Jersey the State merely bears the cost of administering the
system, spending $1,013 for this purpose in 1934. In tl te r emaining
five States (California, Colorado, Illinois, New H ampshire, and Wisr;onsin ) the systems are financed jointly by State and county funds.
The existing laws for aid to the blind differ considerably in their
provisions ( see table 66). The laws of 19 States are mandatory
(Arkansas, California, Colorado, Idaho, Illinois, Indiana, Louisiana,
JYiaine, Minnesota, Missouri, New H ampshire, New Jersey, New York,
Ohio, Oklahoma, P ennsylvania, vVashington, Wisconsin, W yoming).
In 15 of these States, with a total population of 61,047,000 in 1930, the
laws were operative in 754 of the 895 counties in 1934 and covered a
population of 54,681,000, or 93 percent of t he total number of persons
residing in these States in 1930. In eight States ( Connecticut, Iowa,
Kansas, K entucky, Maryland, Nebraska, Nevada, and Utah) the laws
are optional with the counties. Seven of these States have a total of
487 counties, with a 1930 population of 105,575,000. Of these counties, 162, or one-third of the total, had adopted systems of aid to the
blind in 1934, covering a population of 3,765,000, or less than 36 percent of the total ntm1ber of persons in the seven States in 1930.
Most of the laws establish a minin1um age, which is commonly
either 18 or 21 years, but California and Utah have a 16-year minimum, Colorado has a 40-year minimum, and Louisiana has a 60-year
minimum. Most States also prescribe a specified residence period
within the State, which is 4 years in 1 State, 5 years in 10 States, 7
year s in 3 States, and 9 years in 9 States.
All State laws, except that of l{ansas, have a means qt1alification,
which is silnilar to the property and income qualification in old-a~e
assistance laws. The acts of 11 States prohibit persons from receiving
blind allowances if they have financially con1pete11t relatives (Colo1·ado, Indiana, Kansas, Louisiana, JYiaryland, :Missouri, Nebr aska,
New Jersey, Utah, Washington, and Wisconsin), whereas no such
(:xclusion is provided in the laws of t he other 16 States with systems
for aid to the blind. Thirteen States refuse grants to inmates of
public charitable institutions (California, Colorado, Illinois, Indiana,
Iowa, l(entucky, Maine, Minnesota, :Missouri, Oklahoma, Pem1sylvania, Utah, and vVashington); Colorado further excludes inmates

TABLE

66.-Principal provisions of State laws providing for allowances for the blind (as of Aug. 1, 1935)

C>,:)

0

~

Eligibility requirements
State

I

Type of law

J

Maximum
grant

State
I Age I dence
resi-

COUJ?,tY
res1dence ,
(years) (years)

-- - -

Arkansas......___ _I Mandatory __ $25 per month.

21

California_________ 1· -···do. .... ·-- $600 per year ..

16

Colorado a_···· ---·1 •---·do........ l $300 per year ..

40

Definition of blindness

Maximum property
limitation

5 · ------- Means insufficient for

support.

10

l

5

1

Income, $1,000 a year;
assets, $3,000.2
Means insufficient for
support.

1

J

8

7

3

l..... do ....•.. • ---·-----· I--•-··················-··-

Chancery court of district
under State Confederate
Pension Board.
County board of super•
visors under depart•
ment of social welfare.
County board of supervisors under State com•
mission for blind.
State board of education
for blind.
County probate court. ..._

Income, $465 per year
County commissioners 1. __
($1,000, if married).
Means insufficient for Vision so defective as to State board of industrial
support.
prevent self-support.
aid for the blind.
1~ ' ··-··-~·
County board of super•
5
1 Income, $300 per year ... ·····-· ··· ····· ·-··-····· Iowa.-·•······-· ·· OptionaL........do...•.... { ~~
visors.
10
Kansas..••.. . .... . . _...do...... .. $50 per month~ 21
2 ··-···-··········· · · ······ Loss of sight of both County commissioners ....
eyes.
10
5 Income, $400 per year; Destitute of u s e f u 1 .•..•do.............. ·-···-·
Kentucky-···· -··· . ....do. ....... $250 per year__ (tO)
assets, $2,500.
v1s1on.
5
Louisiana.·---· ··· Mandatory.. $300 per year..
60
u 1 Income, $300 per year __ . -·-·· ·············--·-···· County police jury, under
State board.
than one-tenth or State department of
21
0
10
Means insufficient for Less
normal vision.
health and welfare.
0 7 · · · ··· •· ·--· suRgort. -·-····-······ Vision so defective as to
1~ :
~~t~o ~~;:: : : :
18
Local authorities and
Maryland Workshop for
prevent self-support.
Blind.
13
0
6
1
•
•••••••
,
••••••
•••••••
•
•
•
•
•••
••
•••
Insufficient
o
c
u
I
a
r
State
board of control......
Mlnnesota a•••••--1 M andatory . . ! No limit ••• • I • - - · ·power for ordinary
affairs.
o 10
Income, $600 per year; Light perception only... County judge of probate
21
Missouri. ..••. ... -1• •..•do...••• -.l $300 per year ..
assets, $5,000.
court, under State commission for blind.
Nb k
O L'
I
b
21
Means insufficient for Destitute of u seful C
.
N:v: :/~~::::::: ••. ~.: :~-~:::~ $:~:;:;Yo;:_: ..1. ~~• • : : : : : : : · - · - · ; ; · •••
...••... _... . ... ~!~~~~~················ ...

Ulinois s···--··-·-- . . _..do........ $365 per year._ {: ~~ }
Indiana s.. --·····- .....do........ $300 per year..
21

! }

:::;~~~.::~:::::1·
I

1--·····-1

1-;; ~: ~·~~~·r·

I$

1r I}

Funds provided by•

- --

-

ConnecticuL----· I OptionaL ___ $30 per month. 1---··· 1----·---1--- ·---• 1- - --.do .... ·--·------·---1------------·-----------·• 21 }
Idaho ...--······-· Mandatory... $20 per month. { 118

Administered by-

I

I

~~gg_o~~~

~

State.
f,:I

State, half; county,
half.

Do.

~

0

<

H
U)

H

0

State.

z

U)

County.
State, half; county,
half.
State.

,zj

County.
Do.

t:,::j

Do.
Parish.
State.
County.
Stato.1•
State.

I ~~:~~.~~~-~.!~~~~~~~~:::: I

Cou~~:·

0

~

1-3
~
td
t"-1
H

zt:,

Mandatory __ $150 per year __ -----New Hampshire __ _____
do ______ __ $480 per year. _
New Jersey _______
21
____
_
do.
_____
__
New York 3_______
$300 per year __

5
5

Utah ______________ Optional. ____ $600 per year __
Washington _______ Mandatory __ $400 per year 11_
Wisconsin _________ _____ do ________ $360 per year u_
Wyoming _________ ..•. . do _____ ___ $30 per month20

--------

____
---- ---------____ __do
do ____
___________
______ _

65

1 ____ do __ _. _____ ______ ___

21

(!6)
65

1 ____ _dp __ _______ _______ __

21

10

16
18

q

------

Ohio __ ____ ___ ____ _ _____ do ________ $400 per year __
Oklahoma______ ___ ____ _do _______ - $300 per year __
Pennsylvania _____ ____ _do ________ $30 per month_

l

18
21

6
6

_____ do __________________

--------------- _____ do .. _.. _____________
1

4

10
10

-------1

--------

Tncome, $1,000 a year ____
Means insufficient for
support.
Income, $480 per year 19__
Means insufficient for
support.

6 months, if a resident of State when became blind.
' Clear of encumbrance.
3 Citizenship required, but no period specified.
• Males.
a Females.
e Or have lost sight since becoming a resident.
7 Bureau of Public Welfare in counties having over 500,000 population.
s 15 years of citizenship required.
9 But any amount over $25 must be specifically authorized by vote of electorate.
10 "Adults."
1

__ ___ do ____ _______________ _
Do.
Do.u
State department of institutions and agencies.
Vision so defective as to State commission for
Do.
prevent self-support.
blind.
County commissioners ____
Do.
-------------------------Vision so defective as to State commission for State, reimbursed in
prevent self-support.
adult blind.
full by county.
Less than 3/60 of normal Mothers' assistance fund State.
vision.
of county, under State
department of welfare.
County commissioners ____ County.
-------------------------Vision so defective as to _____ do .. _.. --------------Do.
prevent self-support. _____ do _____ _______ ________
State, one • third ;
-------------------------county, two-thirds.
Less than 3/60 to 10/200 County department of State.
normal vision.
public welfare, under
State department .

---------------------------------------------------

Residence in parish.
But may be raised to $350 in special cases.
1a Except in case of husband and wife, both blind, not over $30 per month.
11 But counties with population of 150,000 are authorized to contribute.
u But the State pays all of the cost of administration.
16 Must have lost sight since becoming a resident.
11 $600 in case of couple, both blind.
1s $480 if both blind and deaf.
19 $780 if both blind and deaf.
w $50 if head of a family.

11
12

~
~

0

~

'(fl
H

0

z

'(fl

1-zj

0

~

1-3
~

l:tj

t;,:j

s:.:

ztl

C>,j

0

~

308

PROVISIONS FOR THE BLIND

of private charitable institutions; Maine and Wisconsin also exclude
jnmates of penal institutions; Oklahoma and Pennsylvania deny aid
1.o persons confined in houses of correction; and Missouri excludes
inmates of either penal institutions or institutions for the insane. In
J\1aine and in Oklahoma a blind person may receive an allowance
H-fter leaving the institution to which he was committed.
The acts of 10 States (California, Indiana, Kentucky, Maryland,
l\1innesota, Missouri, Oklahoma, Utah, Washington, and Wisconsin)
refuse aid to professional beggars, and in Missouri benefits are denied
persons who refuse training or other measures designed to make them
self-supporting.
Aid to the blind is discontinued in New York if a recipient of aid
marries another blind or partially blind person, and in Minnesota a
limit of $30 a month is set as the maximum j oint grant to blind
persons who contracted marriage after passage of the act.
Definitions of blindness in five State l aws limit aid to those whose
vision is "so defective as to prevent self-support" (I ndiana, Maryland, New York, Oklahoma, and , i'\Tashington). The laws of t""o
States (ICentucky and Nebraska) define blindness as "destitute of
useful vision." The J(ansas law r equires that the applicant for aid
to the blind must have lost the sight of both eyes; the Missouri la"·
(lefines blindness as "no more than light perception"; the Mi1u1esot a.
law defines blindness as insufficient ocular power for ordinary affairs;
and three State laws specify the proportion of loss of normal vision
which qualifies an individual for a grant as follows: Maine, less tha11
one-tenth of normal vision; Pennsylvania, less than 3/ 60 of normal
vision; Wyoming, less than 3/ 60 to 10/ 200 of normal vision.
The laws of eight States (Arkansas, Connecticut, I niliana, Maine~
Minnesota, l\1issouri, Pennsylvania, and Wyoming) provide for
complete financing of the system for aid to the blind by the State
government; California, Colorado, and I llinois laws specify that the
State shall bear one-half the cost; and the vVisconsin law provides
that the State shall make one-third of the total expenditures. State
disbursements for blind allowances in 1934, however, fell belo" tlrn
legally specified proportions in Colorado, in Illinois, and in W isconsin. In New Hampshire, on the other hand, 68.9 percent of the
total cost was borne by the State go,ernment in 1934, e,en though
State participation is not provided for in the law. During 1934 aid
t.o the blind in New Hampshire 'TT'as financed as a part of the relief
program, utilizing county, State, and F ederal funds.
Only five State laws specify the method to be used in raising State
funds for aid to the blind : Arkansas, by a tax on billiard and pool
rooms; Illinois, Missouri, and ~ Tisconsin by a property tax~ and Wyoming by taxes on liquor. In the other States which provide for State

PROVISIONS FOR THE BLIND

309

financial par ticipation the appropriations are presumably made fron1
general funds.
Counties in eight States are authorized to pay blind allowances
from general county f unds (Idaho, Illinois, l(entucky, Louisiana, New
Hampshire, New J ersey, Ohio, and Oklahoma); a11d in Iowa, counties
may use either general funds or poor funds for this purpose. Fi vc
States authorize counties t o levy special property taxes for revenue
for aid to the blind (California, lVIarylan<l, Nevada, Utah, and \i\Tashington).
Table 66 indicates the administrative author ity for aid to the blind in
the 27 States which have blind pension laws.4 As a rule applications
for grants are first passed upon by the designated county authorities,
such as the commissioners or local courts. In ome of the States a
State office is charged with ultimate supervision and control, but in 10
States (Illinois, l(ansas, Kentucky,· Nebraska, Nevada, New Hampshire, Ohio, U tah, Washington, and vVisconsin) the county commissioners, and in Iowa the county board of supervisors, have entire
charge of the system. In Idah o the authority for the system is the
judge of the county probate court. In Arkansas, California, Colorado,
Louisiana, Maryland, J\1issouri, Pennsylvania, and vVyoming the decision of the local authority is subject to review by a State agency;
whereas in Connecticut, :Maine, l\!Iinnesota, New Jersey, and New York
the entire authority is placed in a special commission :for the blind
or in some other State office.
PROVISIONS FOR THE BLIND IN THE FEDERAL SOCIAL
SECURITY ACT
To enable the States to furnish financial assistance, as far as practicable under the conditions in each State, to needy blind individuals,
the Social Secur ity Act has authorized $3,000,000 5 for the fiscal year
ending June 30, 1936, and has authorized for each fiscal year thereafter
the appropriation of a sum sufficient to carry out the purposes of the
title of the act. The sums thus made available will be used :for making
payments to States which have submitted and had approved by the
Social Security Board, State plans for aid to the blind.
Table 67 sumn1arizes the provisions of the Social Security Act for
Federal grants to the States for aid to the blind. In order t o be
approved by the Social Security Board, a State plan for aid to
4

As of Aug . 1, 1935.
The Social SecUt·ity Act was n ot approved until Aug. 14, 1935, and the su pplemental
appropriation bill, fisca l year 1936 [ H. R. 92151, fail ed of p assage in the first session
of the Seventy-fourth Congress. The Supplemental Appropriation Act, fiscal year 1936,
Public, No. 440, 74th Cong., 2d sess. [H. R. 10464), approved F eb. 11, 1936, iucluded an
a ppropriation of $2,000,000 for the remainder of the fiscal year ending June 30, 1936.
5

310

PROVISIONS FOR THE BLIND

the blind must be in effect in all parts of the State and be administered by a single State agency or, if it is administered by political
subdivisions, its administration must be supervised by a single
State agency. It is further required that the State shall participate
in financing aid to the needy blind. With respect to methods of
administration ( other than those relating to selection, tenure of
office, and compensation of personnel ) and reports to the F ederal
agency the State plan must comply with whatever regulations the
Social Security Board may find necessary. Furthermore, individuals
whose claims are denied must be afforded opportunity for a fair
hearing before the State agency; they must not be excluded by a residence requirement in excess of 5 years within the 9 years preceding
date of application and 1 year's continuous residence immediately
preceding application; the State's citizenship requirement must not
exclude any citizen of the United States; and applicants must be considered ineligible for aid to the blind if they are in receipt of old-age
assistance under a State plan approved by the Federal Social Security
Board.
The Secretary of the Treasury, on certification of a State plan by
the Social Security Board, will pay to the State (1) a quarterly amount
equal to one-half of the amount paid by the State to each needy, blind
individual who is not an inmate of a public institution, except that the
Federal grant shall not exceed $15 per month per individual in receipt
of money payments from the State; and (2) 5 percent of the F ederal
grant for money payments to individuals to be used solely for State
administrative expenses or for aid to the blind or for both purposes.
The amount to be paid each State will be computed each quarter by
the Federal Social Security Board after the receipt of reports from
the State agency relative to the total number of blind persons in the
State, the amounts to be expended by the State, and the amount and
source of State funds to be made available.
If, after approval of a State plan for aid to the blind, the Social
Security Board finds that the operation of the plan fails to comply
with the requirements of the Federal law, the Board, after due notice
to allow opportunity for hearing to the State agency, will inform the
agency that further payments will be withheld until conditions are
rectified.

PRO VISIONS FOR THE BLIND

311

67.-Siimmary of provisions for Federal grants to States for aid to the
blincl
[To be made by tbe Social Security Board under title X 1 of tbe Social Security Act]

TABLE

DEFINITION

Aid to t he blind means money payments to needy blind individuals.
CERTIFICATION OF STATFl PLAN FOR FEDERAL GRANTS

A State, in order to receire a Federal grant, must submit a plan and have it approved
by the Social Security Board as meeting the following requirements :
1. Effective in all political subdivisions of tbe State and, If administered by them,
mandatory upon them ;
2. Provfaion for financial participation by the State;
3. Either provision for the establisbment or designation of a single State agency to
administer tbe plan, or for t he establishment or designation of a single State agency to
supervfae 1hr aclministration of the plan;
4. Provision for granting to any individual wbose claim for aid is denied , an opportunity f or a fair bearing before such State agency;
5. Such methods of administration (other than those relating to selection, tenure of
office, and compensation of personnel) as are found by the Social Security Board to be
necessary for tbe efficient operation of tbe plan;
6. Submission of sucb reports in such form and containing such information as the
Federal Social Security Board may from time to time require, and compliance with the
provisions wbich the Board may from time to time find necessary to assure the correctness and ve1•ification of such reports ;
7. Denial of aid to any individual under the plan with respect to any period when be
is receiving old-age assistance under a federally approved plan.
A State plan will not be appro,ed if it imposes:
1. A residence requlrement wbicb excludes any resident of the State who has resided
therein 5 years during the 9 years immediately preceding the application for aid ancl
who bas resided therein continuously for 1 year preceding application ;
2. A citizenship requirement which excludes any citizen of the United States.
AMOUNT OF GRANT 11'0 EACH STATE

1. A quarterly amount which shall be used exclusively as aid to the blind, equal to
one-half of the total sums expended in the State in such quarter as aid to the needy
blind who are not inmates of public institutions, not counting ,:;o much of such expeudi-.
ture to any individual in excess of $30 a month;
2. Fi,e percent of the total Federal quarterly grant to be used solely for costs of
administering the State plan or for aid to tbe blind, or both.
METHODS OF CO~IPOTI NG AND PAYING GRANTS

1. Estimates of amounts to be paid States will be based on :

(a) State report of total sum to be expended each quarter for aid to the blind, with
statement of amount appropriated or made available by the State and its political subdivisions. ( If the amount appropriated i s less than one-half of the total sum of estimated quarterly expenditures, the source or sources from which the difference is expected
to be deri,ed must be stated. )
(b) Records of the total number of blind individuals in the State.
(c) Such investigation as the Social Security Board may find necessary.
2. Payments will be made to the State:
(a) After certification by the Social Security Board to the Secretary of the Treasury
of the amount due the State reduced or increased by any sum by which its estimate for
any pri.or quarter was greater or less than the amount which should have been paid;
( b) By the Secretary of the Treasury, through the Division of Disbursement, prior to
audit or settlement b:v the General Accounting Office.
SUSPENSION OF GRANTS

If the Social Security Board fin ds, after reasonable notice and opportunity for bearing
to the State agency administering or supervising the administration of the State plan,
that the plan has been so changed as to impose prohibited residence or citizenship requirements, or fails to comply substantially with conditions required for Federal approval,
the Board shall notify the State agency that Federal grants will not be made until such
conditions are rectified.
AMOUNT OF FEDERAL APPROPRIATION AUTHORIZED

Three million dollars for fiscal year ending June 30, 1936 ; thereafter an annual
amount sufficient to carry out the purposes of the title.
1

49 Stat. 645; 42 U. S. C. (1935 Supp.), §§ 1201-1206.

Part V
THE EXTENSION OF
PUBLIC-HEALTH SERVICES
The basic data for part V have been abstracted from ( 1) Staff
reports on " Risks to Economic Security A rising out of Ill
Health" ( the sections on public-health services derived f rom
this source were prepared by W. F. Walker and I ra V. Hiscock
under the direction of Edgar Sydenstricker); ( 2) A statement
of Josephine Roche, A ssistant Secretary of the Treasury,
made on February 4, 1935, at the public hearing held by the
Committee on Finance of the United States Senate; and ( 3)
Regulations Governing Allotments and Payments to States
From Fund Appropriated Under the Provisions of Section 601,
Social Security Act,for the Fiscal Year 1936,
Issued by the Surgeon General

Chapter XVIII
THE EXTENSION OF PUBLIC-HEALTH SERVICES

N

O NATIONAL PROGRAM of economic security can be regarded in any sense as complete or effective without adequate
provision for meeting the risks to security which ,a rise out or
ill health. Fear of sickness with its attendant loss of earnings when
the wage earner is disabled and dread of the costs of medical care are
specters which haunt the great majority of the American people.
Economic insecurity from illness is not the consequence of a depression; it threatens people of small means even in good times. The
problem is not created in a depression period; it is only ex,aggerated
and made n1ore severe.
Every careful study of the economic experience of wage-earning
families has revealed the inadequacy of individual savings to afford
full protection against the costs of ill health. Tens of millions of
families live in dread of sickness. Millions of families that are
independent and self-sustaining in respect to the ordinary, routine
needs of life sacrifice other essentials of decent living in order to
pay for medical service. Three possibilities are open to low-income
families which suffer extensive illnesses: (1) they may go without
needed medical care; (2) they may carry the burden of medical
debts; or (3) they may rely upon the charity of doctors and hospitals, or receive their services from tax-supported and philanthropic
agencies.
The annual money loss caused by sickness in families with incomes
of less than $2,500 a year in the United States in 1929 was estimated
as nearly $2,500,000,000. Of this huge sum about $1,500,000,000 represents the expenses of these families for medical care and about
$900,000,000 constitutes their loss in wages resulting from sickness.
The cost of care in sickness thus exceeds wage loss due to temporary
disability. These figures are direct costs. They ignore the much
larger costs of sickness represented by the losses in capital values
of human life and the losses to commerce, and industry.
These enormous losse.s are not distributed equally among the people. Some individuals have much more sickness than others in any
given year. Actuarial experience shows that among an average million persons there will occur annually between 800,000 and 900,000
315

316

EXTENSION OF PUBLIC-HEALTH SERVICE S

cases of illness. This might seem to mean nearly one case of sickness to each person. Actually, however, the economic burden will
fall more heavily on some than on others. For although 470,000
among an average million persons will not be sick during a normal year, 460,000 will be_sick once or twice, and 70,000 will suffer
three or more illnesses. Of those who become ill, about one-fourth
will be disab]ed £or per iods varying from 1 week to the entire year.
The situation may be visualized from the actual experience in nor1nal -times of 1,000 typical families in Jarge cities, with annual incomes ranging from $1,200 to $2,000, as follow,s : 218 had medical
bills in a single year in excess of $100, and 80 in excess of $200; ot
these 80 families 16 had medical costs r anging from $400 to $700,
or about one-third of the year's income, and 4 families had sickness
bills amounting to more than one-half of their incomes. All these
co~ts were additional to wage losses. The situation in farn.ilies with
less than $1,200 annual income is far worse, even in normal times.
The fact must be faced that, even if a minimum annual income
of $2,000 could be maintained through various ways for American
families, this amount would still be insufficient to enable them individually to budget against the costs of sickness. A substantial proJ_Jortion of families in cities, towns, and rural areas actually obtain
no medical care, or receive insufficient care during sickness. I t has
been shown by surveys that the proportion of families r eceiving
inadequate care is largest among those with small incomes and that,
step by step, as fam.ily income increases the proportion of families
with inadequate care diminishes. In norn1al times, about one-third
to one-half of all the families who have to seek public or private
charity are compelled to do so because of the economic effects of
accident and illness.
T hus, the risks to economic security arising out of ill health are of
three kinds, namely:
(1) Loss of e:fficiepcy and h ealth itself, an d thereby loss of the
capacity to be employed;
(2) L oss of earnings caused by disabling illness among gainfully
employed persons ;
(3) Costs of medical care to gainfully employed persons nod t heir
families.

PREVENTION OF ILLNESS
A,s stated by the medical advisory board of the Committee on
Ecunomic Security :
A logical step in dealing wit h the risks and losses of sickness is
to begin in preventing sickness so far as is possible.

Much progress has been made in this respect, yet the fact r emains
that despite great advances in medicine and public-healt h p r otection.

EXTENSION OF PUBLIC- HEALTH SERVICE S

317

millions of our people are suffering from disease~ and thousands die
annually from causes that are p reventable. The mortality of adulb
of middle and older ages has not been appreciably diminished. , iVith
the changing age composition of our population the task of health
conser vation must be broadened to include adults as well as children.
Evidence is accumulating that the health of a large proportion of
the population is bejng affected unfavorably by t he depression.
The rate of disabling sickness was found to be 48 percent higher
among families having no employed wage earners in 1932 t han in
families having full-time workers. The group of workers that had
dropped from fairly comfortable circumstances to relief rolls cl uring
the depression showed a ra.te of disabling illness 73 percent higher
than t hat of t heir more fortunate neighbors who had remained in
the comfortable class.1 For the first time in many decades t he annual death rate in our large cities has increased, the rate f or 1934
being higher than for 1933 despite the absence of any serious epidemics. 2 Concurrently with these evidences of increased need, local
appropriations for public healt h have been decr eased on the average
20 percent since 1930. The per-capita expenditure from tax funds
for public health in 53 cities in 1934 was 77.5 cents as contrasted
with 93.8 cents in 1931.3
It has long been recognized that the F ederal, State, and local
governments all have r esponsibilities f or the protection of all t he
population against disease. The Federal Government has recognized
its responsibility in this respect in the public-health activities of
several of its departments. There also are well-established precedents for F ederal aid for State and local healt h administration and
for the loan of technical personnel to States and localities.
A comprehensive, Nation-wide program of lessening the risks to
economic security must include adequate provision of effective measures for the prevention of ill health through organized public-health
work. The soundness of the principle of prevention is obvious. Its
application here, however , should be viewed in the light of four other
broad considerations, as follows :
( 1) Although one-third of t he burden of preven table illness ancl premature
death has been lifted in progr essive communities since modem public-health
procedures were int roduced, t here is recognized opportunity fo r continued progress in this field. Only a fraction of the population has benefited to the fullest
extent from the application of existing knowledge of clisease prevention through
public-hea lth proceclures.
1 Perrott, G. St. J., and Collins, Selwyn D., "Relation of Sickness to In come an,1
Income Change in 10 Surveyed Con."11Iluni ties", P iiblio H ealth R eports, vol. 5 0, no. 18
(May 3, 1935) , p. 622.
2 "Provisional Summary of Mortality Statistics for the United States, 1032, 1033, and
1934", P ublic Health R eJPorts, vol. 50 , no. 42 (Oct. 18, 1935), p. 1442.
3 Walker, W. F., " Ana l ysis of Public Health Expenditures by Geog raphic Subdivisions'',
Ameri,can Journal of P1iblic H ealth, vol. 25, no. 7, July 19:35, pp. 51- GG.

78470-37--22

318

EXTENSION OF PUBLI C-HEALTH SERVICES

(2) The policy of leaviog to localities and States the entire responsibility for
providing even minimal public-health facilities and services has failed in large
measure. Only 21 percent (75 4 counties and 102 cities G) of tbe counties and
cities of the United States have thus far developed a personnel and service
which can be rated as even a satisfactory minimum for the populations and the
existing problems. T he Federal Government bas a definite responsibility for
the protection of all the Nation's population against disease.
(3) The responsibility of the Federal Government for national health is well
established in the United States Public Health Service and in several other
Federal agencies, such as the Children's Bureau, the Bureau of the Census, the
Office of Education, the Food and Drug Administration, and the Bureau of
Animal Industry. T he precedent of Federal aid to States for State health
administration and local public-health facilities also has been established in
various laws for grants-in-aid and in loa ns of technical personnel to States
and localities.
( 4) Public health has been demonstrated as a sound economic investment.
Public-health authorities estimate that our annual national economic loss in
wage earnings and in other items incident to preventable sickness directly
attributable to lack of reasonably efficient rural health service is over $1,000,000,000. On the other hand, where reasonably effective health programs have
been de,eloped, it has been demonstrated that expenditures for carefully
pianned health programs executed by trained workers yield large dindends.
To fail to include the fullest possible use of this powerful preventive weapon
in a program of economic security would be short-sighted-even stupid.

Little need be said with respect to the need for outside assistance to
certain counties too poor to meet the entire cost of public-health service. In many of our States there are counties in which the taxable
wealth or other source of revenue is so small that adequate local
appropriations cannot be made for a health department -without
making the allotment for health out of all reasonable proportion to
expenditures for other necessary functions of government. State
health departments must give assistance to the counties in this group
if the people in these conununities are to enjoy the benefits of health
protection to which they are-certainly from a humane standpointentitled as citizens of this country.
vVith regard to the need for outside aid for demonstration purposes, it is well known to all national and State agencies which have
endeavored to promote the expansion of full-time health service in
the past that it is almost impossible to induce local boards of com1ty
commissioners to make the initial appropriation for the establishment of a new full-time county health unit unless financial aid ca.n
be offered from an outside source. The reason is not hard to m1derFreeman, A. W., M. D., A Study of Riwai P1tbTio Health Serl'ice (Tbe Commonwealth
Fund, New York, 1933). and unpublished material.
"Public Health Re-pat·ts, vol. 49, no. 5, Feb. 2, 1934; Committee on .Administrative
Practice of the American Public Health Service in cooperation with United States Public
Health Service, "l\Iunicipal Health Department Practice for the Year 1923, Based Upon
Smveys of the 100 Largest Cities i n the United States", P11blio Healtll Bulletin N o. 164;
Resear ch Division of the .American Child Health .Association, ..4. Health S1wuey of 86
Oities (American Child Health Association, New York, 1925).
4

EXTENSION OF PUBLIC-HEALTH SERVICES

319

stand; health work, to a large extent, does not deal with material
things. It has for its objective the prevention of catastrophe which
may occur in the future. The wisdom of expending public funds for
school buildings and roads and for maintenance of our schools is
apparent to anyone, because we see and use the buildings and roads
and know that our children use the schools. Except to statisticians,
who are trained to use death rates and other "measuring rods" for
demonstrating the effectiveness of health '\\Ork, the anticipated results of such work are often not tangible. It is difficult, therefore,
to persuade local appropriating bodies to provide funds to support
an activity the result of which cannot be readily demonstrated in
advance of the expenditure.
The situation in many of our smaller cities, and in some of the
larger ones, is almost as bad as that existing in a large part of our
rural area. There are numerous urban communities throughout the
country in which such health activities as are being carried on today
are under the direction of part-time physicians engaged in private
practice or lay health officers untrained in modern public-health
administrative practice. In some of these communities such health
protection as has been afforded has been largely incidental to improvements instituted for economic and esthetic reasons or to ready
access of the population to good medical care rather than a credit to
activity of the health department. In many of our cities the chief
health department activity still consists largely in the inspection of
private premises for nuisances having little bearing on public health
and an attempt to control communicable diseases through quarantine
procedure-admitted by leading health workers, in this day of scientific control methods, to be of little avail in reducing the incidence of
such diseases. More specifically it may be pointed out that many of
the milk supplies for urban commw1ities are still far from satisfactory, and that the unsightly, open-back, unsanitary privy still exists
in the outlying sections of most of our small cities, with the result
that typhoid fever is rapidly becoming more prevalent in towns and
small cities than in the rural areas.
Nor is the need for extension of public-health service confined to
rural and urban health organizations. Not more than half of the
State health departments are adequately staffed or satisfactorily
equipped to render the service which they alone can give regardless
of the extent to which local facilities may be developed. Specific reference is made to divisions of vital statistics, laboratories, and sanitary engineering service for the supervision of local water supplies,
sewage disposal, and other environmental sanitation activities. At
least a third of the States are not now able to promote the establishment of full-tin1e local health departments or to give proper super-

320

EXTENSION OF PUBLIC-HEALTH SERVICES

vision to local health work because of the lack of properly trained
scientific personnel, capable of performing such duty, on the State
health department staff.
Before any r eal progress can be made in the extension of full-time
local healt h service, there must be created in each State a reserve
of trained health officers, public-health nurses, sanitary engineer s,
and inspectors to fill t he positions which will be established in the
new units, for in spite of the curtailment of appropriations for
he-;tlth work in recent years there is a shortage of individuals trained
for health work. Until the public-health service throughout the
country can offer car eers which will attract qualified workers and
warrant specialized training in colleges, medical schools, and universities, it will be necessary to raise personnel standards gradually.
Opportunities £or graduate study, extension courses, and demonstrations under experienced officials offered to or required of personnel in
office may serve to bring personnel standards to a level of good
public-health practice.
PREVENTABLE DISEASES AND MORTALITY 6
While it is true that the general death rate and the rates for tuberculosis and infant mortality for the country as a whole declined to
the lowest figures on r ecord in 1933, we should not be misled by this
fact into the belief that further safeguards of the Nation's h ealth
are unnecessary. These deat h rates do not tell the whole truth
Edgar Sydenstricker recently said :
The plain fact must be faced that notwithstanding great advances in medicine
and public-health protection, the American people are not so healthy as they
have a right to be. Millions of them are suffering from diseases and thousandsa nnually die from causes that a re preventa ble through the use of existing scientific knowledge and the a pplication of common social sense.7

Ample evidence exists to support this sweeping statement. Approximately 120,000 infants under 1 year of age died in 1933.
Although our infant death rate has been reduced by half during the
past 25 years, many of t he leading sanitarians in this count ry believe
that mortality in the infant age group can again be r educed by 50
percent. It is also confidently believed by some of the leading
authorities on tuberculosis that the 74,000 deaths which occurred
from this disease in 1933 could again be cut in half· and there is
good reason to assu me that, with proper health protection for pros0

l\fnch of the factual data used in this chapter has a ppear ed a l rrady in the statement
submitted by Assistant Secretary of the Treasury J osephine Rocbe, to the Senate Committee on Finance, on Feb. 4. 1935. Economic Security Act : H earings before t he
Committee on Finance. United States Senate. 7-!tb Cong.. 1st sess., on S. 1130 (U. S.
Government Printing Office, Washington, D. C., 1935). pp. 374-407.
7
Sydenstrickcr. Edgar, " Hea lth in the New Deal," Annals of the American Academy of
Political and Social Science, vol. 176, November 1934, p. 131.

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pective mothers, at least two-thirds of the 13,000 mothers who die
each year in childbirth could be saved.
Examination of the following table, compiled by the United States
Public R ea.Ith Service from mortality figures of the United States
Bureau of the Census, shows t hat, in spite of the low general death
rate, a total of 246,272 deaths occurred in the United States from
causes that may be classed as preventable.
Nmnber of dea ths in the Uni-tecl Btates from, prcventaole clisease.'$, 1933

Typhoid fe,er _____ ______________________ ______ ________ _
Paratyphoid fever _____________________________________ _
Typhus fe,er __________________ ____ __________________ __
Undulant fever _______________________________________ _
Smallpox ________________________________________ _____ _
Measles __________ _____________________________________ _
Scarlet fever _______________ ________________ ___________ _
Whooping cough _______ _______________________________ _
Diph theria ___ ________________________________ __________
Influenza _____________________________________________ _
Dysentery-------------- ------------- ------------ --- --Erysipelas _____________________________________________
Acute poliomyelitis, acute polioencepbalitis ______________
Epidemic encepha litis--- --- ----------------- ------ ----Epidemic cerebrospinal meningi tis ______________________ _
Anthrax ______________ _________ _______________________ _
Rabies ___ _____________________________________________ _
T etanus ____________________________ __________________ _

4,380
84
81
72

39
2,813
2,546
4,463
4,936
33,19-3
2,814
2,017
797

1,357
1, 482
11
65

1,253

Tuberculosis of the r espiratory system __________________ _ 67,417
Other form s of tuberculosis ____________________________ _ 7,4m
Leprosy __________________________ _________________ ____

27

Syphilis-- - ----------- ----- ---------- ------------------ 11,0,39
Gonococcus infection and other venereal diseases_________
998
Purulent infection, septicemia (non puerper a l) ___________ _
931
~1alaria _______________________________________________ _
Other diseases clue to protozoa! parasi tes______ _________ _
Ancylostomiasis________ ________________________________
Scurvy ________________________________________ __ _____ _
Beriberi ____________________________ ___________________

4, 678
61
20
28

1
3,955

P ellagra ------ ------ ---------------------------- - -----Rickets_______________________________________________ _
339
Pneumonia, a ll forms ___________________________________ 86,947
Total ______________________________________ ______ 246,272

Typhoid fever and diphtheria, both now regarded as diseases easily
prevented when known control measures can be applied , each took toll
of more than 4,000 lives. Measles and whooping cough, often regarded by the uninformed as simple and relatively harmless diseases
of childhood, killed respectively 2,800 and 4,400 in 1933.
So far as the public was concerned, these appalling, unnecessary
losses of life went unnoticed, because of the lack of spectacular cir~

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EXTENSION OF PUBLIC-H EALTH SERVICES

cumstances attending their occurrence; yet, had similar losses occurred in a series of single disasters, such as an earthquake or the
sinking of an ocean liner, the Nation would have been shocked and
our newspapers would have carried front-page h eadlines for days.
Nor do deaths alone tell the whole story. It is estimated that
£or each death from typhoid fever there are 10 cases; for each death
from diphtheria, 12 cases. Although accurate figures are not available with respect to cases of preventable diseases £or the country
as a whole ( for the reason that reporting of cases is not complete
where satisfactory health organizations do not exist) , it is believed
that a conservative estimate will place the number 0£ cases of typhoid
fever at 43,000, and 0£ diphtheria at 58,800, in the United States in
1933.

A recent sur rey by the Public Health Service showed by actual
blood test of only 200,000 people in 11 southern States a total 0£
14,000 known cases of malaria. This survey was made during t he
winter, when malaria is least active, and included only school children. It is estimated that in the whole population in the malarious
section of the South there are, every year, at the height of the malaria season, probably 6,750,000 cases of malaria. Malaria is still
one of the most serious problems of our southern States and further
knowledge of control methods is imperative. H ere again, t he disease is not only of public-health importance but also of economic
importance, for each year malaria puts the wage earner out of the
position as the supporter of his family and makes both him and his
family dependent upon charity for their maintenance.
Three-quarters of a million patients with syphilis seek treatment
annually in the United States. Unfortunately, however, largely because they ar e ignorant of the nature of the disease, because the cost
of treatment is high, or because facilities are lacking f or the treatment at a cost that can be borne by the patient, more than half of
these cases do not obt ain treatment during the first 2 years of their
infection. This 2-year period is the interval of greatest communicability and is of vast importance in the control of syphilis. Adequate treatment during this time will not only prevent the spread
of this disease but will also make possible the cure of the individual. For this reason it is of the utmost importance that adequate
treatment facilities for syphilis be made available for all indigent
and borderline economic cases in both rural and urban districts of
the United States.
The same factors exist in connection with the control o:f gonorrhea as with syphilis. About 679,000 new cases of gonorrhea annually seek treatment in this country. This number does not give a
true picture of the actual number of gonorrheal infections annually because many more patients with gonorrhea than with syphilis

EXTENSION OF PUBLI C-HEALTH SERVICES

323

fail to seek treatment. While the late and crippling manifestations of the gonorrheal process are not as marked as in the case of
syphilis, the vast prevalence of gonorrhea makes the disease one of
primary importance.
PAST AND PRESENT DEVELOPMENTS OF THE FEDERAL
PUBLIC HEALTH SERVICE
The activities of the Public Health Service were established by
successive laws enacted by Congress during the period 1799 to 1879.
At the beginning of the year 1880 the Service was concerned with the
conduct of maritime quarantine, control measures in the case of epidemics, establishment of quarantine regulations for the prevention of
the introduction of cholera, collection of sanitary data and publication of the Public Health Reports, and cooperation with State and
local authorities in the prevention of the introduction of infectious
and contagious diseases.
Because independent studies of yellow fever and other diseases were
made necessary on account of their occurrence in epidemic form and
because it became apparent that provision should be made for conducting studies relating to public health, the H ygienic Laboratory
was established in 1887 for investigations of contagious and infectious
diseases and matters pertaining to public health. vVith the establishment of this laboratory t he work of the Service in the field of scientific research had its definite origin. ·Scientific studies and investigations of yellow fever, cholera, malaria, tuberculosis, pneumonia, and
the potency of various gaseous disinfectants were immediately undertaken. I n 1901 a Hygienic Laboratory building was provided by act
of Congress, and the main work was divided into the four large
divisions: {1) Chemical, (2) biological, (3) pharmaceutical, and
(4) pathological.
In 1901 the organization of a Bureau division of scientific research
was effected. In 1902 another act of Congress required that establishments manufacturing biologic products be inspected by a medical
officer of the Service and upon his report, when acted upon by the
sanitary board of the Service, is based the decision whether establishments shall be granted licenses for the manufacture of these
products.
The Scientific Research Division activities resulted in a gradual but
steady increase in work. Among the projects undertaken up to 1912
were investigations into Rocky Mountain spotted fever , special studies
o:f milk in relation to public health, studies of Mexican typhus fever,
and sanitary surveys of pollution of navigable waters.
Long-time recognition of the need of additional authority to undertake systematic field investigations of scientific and pr actical public-

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EXTENSION OF PUBLIC-HEALTH SERVICE S

health problems r esulted in the act of Congress approved August 14,
1912, when the name Public Health Service was given t o the existing
services and the powers were broadened as follows :
T he P ublic H ealth Ser vice may s tudy and investigate the diseases of man and
conditions influencing t he propagation and spread ther eof, including sanitat ion
a ud sewage a nd t he pollution either directly o r indirectly of the navigable
. streams and lakes of t he United States, a nd it may from time to time issue
information in t he form of publica t ions fo r t he use of the public.

The enactment of this law marked t he beginning of a new epoch in
the development of public-health work by the F eder al Government.
F or convenience t.he organization of the Division of Scientific Resear ch may be divided into t wo general fiel<ls, l aboratory stations and
field offices, although the activities of the two are so interrelated that
no arbitr ary boundary can be set.
The laboratory st ations carry on research into ;;uch problems as
stream pollution, Rocky Mountain spot ted fever, cancer, publichealth r elations, coordination of r esearch by public-health officials
and other scientists, demonstrations of sanitary methods and appliances, breeding and rearing of pure strains of animals in connection with the control of biologics.
Field investigat ion offices of the Ser vice are developed and maintained in accordance with t he necessity arising in their particular
fields of work. These offices are not permanent, but t heir work
may be enlarged or tern~inat~d or ncklitional 0flices established as
the demand of research work of the Publjc H ealth Service indicates.
.At present some of the activities are investigations of hear t disease,
leprosy, malaria, nutritional diseases, plague, child hygiene, milk,
public-healt h methods, indust rial hygiene and sauit ation, amebic
dysentery, encephalitis, ,.1nd poliomyelitis (in f antile paralysis) .
T here can be no doui.Jt that the knowledge cf scientific p reventi,e
methods in our possession today, 1f universaily applied, '\Yould enable us to go far toward elimi11ating much of the mlllecessary economic loss now chargeable to preventable diseases in this com1t ry.
That intensive application of known scientific measures f or communicable disease control can completely er adicate cert ain diseases
has beeu <lemonst ratecl r epeatedly. T he complet e banishment of
yellow fever from the United S tates, Cuba, and P anama affords an
excellent example. Bubonic plague was completely stamped out in
8an Francisco some years ago t hrough the inten,si,e application of
rat control. Many other examples could be cited.
E ven in t he face of the lack of adequate health ser vi ce i11 much
of our rural area and in many of onr cities, r emarkable progress has
been made in the reduction of deaths from communicable diseases
in the United States during the past h alf century. F if ty years ago

EXTENSION OF PUBLIC-HEALTH SERVICES

325

infJctious diseases prevailed to such an extent and were accmnpanied by such a high case-fatahty rate that fifteen-sixteenths of all
deaths were chargeable to this group. Today, as a r esult of only a
partial applicat10n of known scientific methods, deaths from comn:unicable diseases have dropped to Jess than 50 percent of the total.
Numerous instances could be cited ,vb.ere intensive health work
carried on by co