The Committee on Economic Security, created by the President as I have described, took into account in its studies the widest variety of factors bearing upon the needs of the nation in meeting problems of economic insecurity. Prior to the organization of this study, a number of states had considered the enactment of unemployment compensation laws, but only in Wisconsin had the proposal passed both houses of the legislature. The fear of imposing a tax burden upon employers, which would drive industry to those states having no unemployment compensation, was a natural deterrent. This could be eliminated by the imposition of a uniform Federal tax which would remove the competitive disadvantage. Prior to passage of the Social Security Act, the 400,000 workers in Wisconsin were the only American wage earners afforded the protection of governmental unemployment insurance. Yet, approximately half of the gainfully employed of this country could be covered by a system of unemployment compensation if all states were willing to enact similar laws.
The necessity for public assistance for the needy aged, the needy blind, and dependent children left without a parent's support, has long been recognized by many states, but, except for laws to provide aid to dependent children, such public assistance was not widespread, and large numbers of the needy aged and blind were without protection. The inequality of provisions for these dependent persons has meant that thousands in need of public assistance were compelled to live upon intermittent charity. It is roughly estimated that 15 per cent of the persons aged sixty-five and over in our population need public assistance for survival, yet in 1934 only about 3 per cent of that age group received it.
Even in 1928 and 1929 the problem of dependency was increasing. During the depression it became more pressing. Only about half of the states had any legislation on the subject at all, and in some of them lack of funds prevented the administering of such benefits as their laws provided. In others the provisions were far from adequate. It was evident that the need for a more comprehensive system was very real, and that the only feasible way to provide temporary assistance was by the use of grants-in-aid, by which Federal funds could be made available to the states. Prior to the passage of the Social Security Act, the trend was toward less rather than more adequate state programmes of assistance. Many counties made no provision for their needy residents, and persons who were eligible for public assistance under the laws of their states were often left to relief agencies for support.
The reason for this neglect was not failure to recognize the need. The paramount difficulty was lack of funds.
States, counties, and municipalities were faced with decrease in assessed valuations of property, tax delinquency, and mounting costs of relief expenditures; the property tax, the large source of revenue for local governments, was no longer sufficient to meet their requirements. Adequate public-health and public-welfare activities could no longer be supported by many states and counties. But disease and economic distress recognize no state boundaries, and destitution in any one area may depress economic conditions in the whole country. It seemed, therefore, a situation in which Federal action was essential.
The major cause of much of the dependency and destitution among the aged arises from the fact that in the past wage earners have been unable to accumulate savings. The principal countries of Europe have long since recognized this reality and to meet it have developed national systems of old-age insurance. The migration of labor and the unequal distribution of the aged would preclude the adoption of forty-eight separate systems of annuities or old-age insurance in the United States, and here again it seemed evident that social security for the American people required the assumption of Federal responsibility in sharing with states the costs of a concerted attack against insecurity.
The depression has shown a marked increase in the number of aged dependents. We find that, although older men are not often discriminated against when work slacks off in industrial plants, it is much more difficult for them to be reëmployed when once off the payroll. The problem of old-age security is intensified because, while physical life is reaching further into the sixties and seventies, the economic life of the industrial worker is dropping back toward the fifties. This situation is not a product of the depression.
The benefits contemplated by the Social Security Act may be classified into two groups, those which are based upon the need of the recipient and those which are available to an eligible individual as a matter of right, irrespective of his need, but based upon his previous employment or wage-earning history.
The first group might be described as welfare, educational, and health enactments set up on a grants-in-aid basis, the grants being made by the Federal Government from general funds to the states on a matching basis. This group includes (1) grants for aged needy persons; (2) grants for aid to dependent children; (3) grants for aid to the blind.
The Social Security Board is charged with the administration of these three projects. Other grants to states for maternal and child health, treatment of crippled children, and child welfare will be administered by the Children's Bureau. An appropriation was also authorized under the Act to assist states and other political subdivisions of the state in establishing and maintaining adequate public-health services, to be administered by the Surgeon General of the Public Health Service. An additional sum was granted for the vocational rehabilitation of those physically disabled in industry, to be administered by the Office of Education, Department of the Interior.
I believe these provisions are in the interest of human conservation. They call for orderly expenditure, they will require accounting, and in a large measure they will replace other funds which are already an existing tax burden. The grant to states for aged needy persons provides for Federal matching of state funds up to a limit of $15 per month per individual, or a total of $30 unless the state chooses to make an additional allotment. No minimum was established and the amount paid to an individual falls within the discretion of the state authority. The Federal Government will provide an additional sum equal to 5 per cent of its grant for state administration.
While a state law setting seventy as the age limit of those receiving assistance is now acceptable in connection with a Federal grant-in-aid, the limit must be lowered to sixty-five years by 1940. The state must not require more than five years' residence within its borders out of the nine previous years, nor more than one year of residence immediately before application for old-age assistance.
In the second grouping under the Social Security Act we have a Federal system of old-age benefits, and what has been described as a 'coöperative Federal-state system' for unemployment compensation. The old-age benefits are administered directly and solely by the Federal Government, and are to be paid monthly to qualified individuals in proportion to the wages earned by them in the course of their employment subsequent to 1936. This is the largest undertaking assigned to the Social Security Board. It means, among other things, the keeping of Wage records for more than 5,000,000 men and women engaged in industry.