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 Washington, D. C. ■■•WWUP'^v p5 Z^ AmericanFoundation ForTHEBLIND inc. SOCIAL SECURITY IN AMERICA The Factual Background of the Social Security Act as Summarized from. Staff Reports to the Comm,ittee on Economic Security Published, for the Committee on Economic Security by the Social Security Board Washington, D. C. UNITED STATES "■■ ■ GOVERNMENT PRINTING OFFICE WASHINGTON : 1937 '^ '' ' ' I 1/ I ( '■< ^ f^ r r . • ^ For sale by the Superintendentj^of Documents, Washington, D. C. - - - - . Price 75 cents (Paper) :)Uv.'^ ■ ^' Y,ilA-^'^^ Social Security Board Publication No. 20 PREFACE The Social Security Act became law on August 14, 1935. This act was a final development from the work of the Committee on Economic Security, the report of which the President transmitted to Congress in a special message on January 17, 1935, with recommendations for the passage of legislation to carry out the Committee's suggestions. This message and report represented the fulfillment of a promise 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 Com- mittee consisted of the Secretary of Labor as chairman, the Secretary of the Treasury, the Attorney General, the Secretary of Agriculture, and the Federal Emergency Belief Administrator. Its function was to study the problems relating to economic security and to make recommendations, both for a long-time and an immediate 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. Its 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 Com- mittee in the discharge of its assigned duties. One of these was the Advisory Council on Economic Security, consisting of citizens out- side 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 knowledge of the problems to be dealt with. This Board was given general direction of the studies and investigations IV PREFACE to be undertaken by the Committee, and throughout the entire period in which the Committee's recommendations were formulated func- tioned in closest cooperation with the Committee and its staff. Fi- nally, the Executive Order provided for the appointment by the Com- mittee 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 secu- rity, which were made available to the members of the Connnittee as completed. A list of the members of the Advisory Council and of the Tech- nical 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 the Committee and also as a congressional document. The recom- mendations 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 considera- tion in this summary were numerous studies which concerned prob- lems 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 summary informa- tional data in the staff reports have also been greatly reduced in vol- ume, 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 im- portant part of the data gathered by the staff of the Committee on Economic Security ; second, as a partial statement of the factual back- ground underlying the Social Security Act itself. This measure, as it became law, differed in many details, and in some essential respects from the legislation which was recommended by the Conmiittee on Economic Security. The factual material in the staff reports, how- ever, 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 Conmiittee. Moreover, in addition PBEFACE 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 unemiDloyment compensation section was prepared by Merrill G. Murray, also connected with the Committee on Economic 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. All credit for the data presented should go to the specialists who made these reports, but they are not held responsible for the summary here presented. While every effort was made to summarize fairly and accurately all factual data in the longer staff reports, this summary necessarily suffers from omissions. The Social Security Board assumes no responsibility for any of the statements in the staff reports to the Committee on Economic Security herein summarized. The publication of this summary of the staff reports of the Com- mittee 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 is hoped that this summary may have practical value justifying this effort and expenditure. Edwin E. Witte, Executive Director, The Presidenfs Committee on Econonvic Security, 193Ji.-35. Digitized by tine Internet Arciiive in 2010 with funding from Lyrasis IVIembers and Sloan Foundation http://www.archive.org/details/socialsecurityinOOunse TABLE OF CONTENTS PART I. UNEMPLOYMENT COMPENSATION Page Chapter I. Introduction 3 The Evolution of Unemployment Insurance 1 Insurance Principles in Unemployment Compensation 8 Relation of Unemployment Insurance to Other Protective Measures 13 Chapter II. A Summary of Foreign Experience With Unemployment Insurance 17 Great Britain 17 Administration 18 Coverage 20 Contributions 21 Benefits 23 Amount of Benefits 24 Duration of Benefits 25 Statutory Conditions for the Receipt of Benefits 26 Waiting Period 26 Disqualification From Benefits 26 Germany 27 Administration 30 Coverage 31 Contributions 32 Benefits 32 Amount of Benefits 32 Duration of Benefits 33 Statutory Conditions for the Receipt of Benefits 33 Waiting Period 33 Disqualification From Benefits 33 Belgium 33 Administration 37 Coverage 38 Contributions 39 Benefits 39 Amount of Benefits 39 Duration of Benefits 41 Waiting Period 41 Statutory Conditions for the Receipt of Benefits 41 Method of Payment 42 Switzerland 1 43 The Federal Law of 1924 44 The Federal Orders of 1925 and 1929 46 Unemployment Insurance During the Depression 48 Administration 50 Coverage 50 Contributions.-^. ^ ^_^^^^_^ ^ 52 VIII CONTENTS PART I. UNEMPLOYMENT COMPENSATION — Continued Chapter II. A Summaey of Foreign Experience With Unemployment Insurance — Continued. Switzerland — Continued. Page Benefits 53 Duration of Benefits 53 Waiting Period 54 Qualifications for Receipt of Benefits 54 Disqualification From Benefits 54 Chapter III. Estimates of Unemployment in the United States 55 Total Volume of Unemployment 55 Variations by Industries 57 Variations by States 58 Long-Time Trends in Employment 62 Part-Time Employment 64 Periodic and Seasonal Fluctuations in Unemployment 69 Duration of Unemployment 70 Chapter IV. The Actuarial Basis for Unemployment Compensation. 73 Maintenance of an Actuarial Basis 75 Actuarial Estimates of an Unemployment Compensation Plan 76 Coverage 77 Contributions 80 Benefits - 81 Chapter V. The Role of the Federal Government in Unemploy- ment Compensation 91 Alternatives in Unemployment Compensation Legislation 92 Unemployment Compensation Provisions in the Federal Social Security Act 95 Federal Tax on Employers 95 Coverage 96 Interstate Commerce 96 Collection of Tax 97 General Credit Against the Federal Tax 97 Additional Credit 97 Conditions of Federal Approval 98 Certification of State Plans 99 Federal Unemployment Trust Fund 99 Grants to States for Unemployment Compensation Administration __ 102 Payments to States 103 Suspension of Grants 104 Federal Cooperation With States 104 Chapter VI. Standards of Unemployment Compensation: Struc- tural Provisions 105 Coverage 106 Unemployment Compensation Fund 109 Types of State Funds 110 Contributions 113 Benefits 118 Rate of Benefits 118 Dependents' Allowances 119 Partial Unemployment 120 Seasonal Unemployment 120 CONTENTS IX PART I. UNEMPLOYMENT COMPENSATION— Continued Chaptee VI. Standards of Unemployment Compensation : Structueal Pkovisions — Continued. Benefits— Continued. Paee Ratio of Benefits to Employment 121 Maximum Weeks of Benefits in Any Year 122 Additional Benefits 122 Eligibility for Benefits 123 Qualifying Period 123 Availability and Registration for Work 123 Waiting Period 124 Labor Disputes 125 Voluntary Unemployment 125 Discharge for Misconduct 126 Refusal of Suitable Employment 126 Protection of Labor Standards 126 Wage Disqualifications 127 Claim and Appeals Procedure 127 Administration and Finance 128 Administrative Agency 128 General Rules 128 Personnel 129 Advisory Councils 129 Employment Stabilization 130 Records and Reports 130 Representation in Court 130 State-Federal Cooperation 130 Employment Offices 131 Protection of Rights and Benefits 132 Collection of Delinquent Contributions 132 Penalties 132 Administration Fund 132 Saving Clause 133 PART II. OLD-AGE SECURITY Chapter VII. The Economic Problems of Old Age 137 Increase of Aged Persons in the United States 139 Employment Difficulties of the Older Worker 143 Extent of Old -Age Dependency in the United States 149 Chapter VIII. Provisions for the Aged in the United States 155 Development of State Old- Age Assistance Laws 156 Summary of the Provisions in Effect, January 1, 1935 161 Operation of State Laws 163 Activities of State Legislatures From January 1, 1935, to October 15, 1935 166 Industrial Pension Systems - — 167 Railroad Retirement Act 178 Retirement Systems for Public Employees 179 Chapter IX. Old-Age Security Abroad 181 Chapter X. Formulation of Recommendations for an Old-Age Security Program for the United States 189 Old-Age Assistance 191 Basic Considerations 191 X CONTENTS PART II. OLD-AGE SECURITY— Continued Chapter X. Formulation of Recommendations foe an Old-Age Security Program for the United States — Continued. Old-Age Assistance — Continued. Page Proposals to the Congress 195 Legislative Modifications of the Proposals 196 A System of Old-Age Annuities 197 The Advantages of the Insurance Method 198 The Necessity of a Single Federal System 200 Basic Principles of an Old-Age Annuity System 202 The Character and Amount of Insurance Benefits 202 The Source and Amount of Contributions 204 The Accumulation and Maintenance of a Reserve 207 Coverage 207 Administration 209 Legislative Proposals 210 Congressional Reconstruction of the Program 212 Voluntary Old-Age Annuities 214 Voluntary Continuance in the Old-Age Annuity System 214 Annuity Certificates 215 Chapter XI. Old-Age Provisions of the Federal Social Security Act 217 Old-Age Assistance 217 Administration of Federal and State Plans 218 Maximum Eligibility Requirements for Old-Age Assistance 218 Financial Participation by the State 220 Methods of Computing and Paying Federal Grants 220 Amounts Payable to the States 221 Suspension of Grants 221 The Federal Old-Age Benefits System 222 Coverage 222 Monthly Benefits 222 Eligibility for Benefits 225 Payments Upon Death 225 Method of Making Payments 225 Protection of Benefit Rights 225 Old-Age Reserve Account 225 PART III. SECURITY FOR CHILDREN Chapter XII. Child Welfare in a General Program of Economic Security 229 Chapter XIII. Aid to Dependent Children :_- 233 Purpose and Extent of Legislation for Aid to Dependent Children 233 Families and Children Benefited 237 Families of Dependent Mothers Receiving Emergency Relief 239 Estimated Expenditures for Aid to Dependent Children 244 Adequacy of Grants 246 Need for State and Federal Subsidy 246 Estimated Amount Needed for Aid to Dependent Mothers and Chil- dren 248 CONTENTS XI PART III. SECURITY FOR CHILDREN— Continued Page Chapter XIV. Welfare Services for Children Needing Special Care 251 Present Provisions for Care of Children 252 Social Services in Rural Areas 255 Need for Federal Assistance 257 Chapter XV. Maternal and Child-Health Services 259 Maternal and Infant Mortality 260 Health of Preschool, School, and Adolescent Children 267 Development and Present Status of Provisions for Maternal and Child Health 269 Plan for Expansion of Maternal and Child-Health Program 277 Local Programs for Maternal and Child Health 279 Local Medical, Dental, and Nursing Service 279 Provision for Medical Care in Connection with Maternal and Child- Health Program 281 Educational Program 281 State-Wide Program 281 Care for Crippled Children 283 Chapter XVI. A Program of Special Security Measures for Children 287 The Program Proposed 287 Aid to Dependent Children 288 Welfare Services for Children Needing Special Care 289 Maternal and Child-Health Program 290 Provisions of the Social Security Act. 291 Aid to Dependent Children 292 Maternal and Child-Health Services 295 Services for Crippled Children. 296 Child- Welfare Services 297 PART IV. PROVISIONS FOR THE BLIND Chapter XVII. Provisions for the Blind 301 State Legislation for the Blind 301 Provisions for the Blind in the Federal Social Security Act 309 PART V. THE EXTENSION OF PUBLIC-HEALTH SERVICES Chapter XVIII. The Extension op Public-Health Services 315 Prevention of Illness 316 Preventable Diseases and Mortality . 320 Past and Present Developments of the Federal Public Health Service.. 323 Responsibility for Public Health 327 Basic Requirements of Local Public-Health Services 328 Nature of Local Organization 328 Local Health Services 328 Cost of Local Service 329 The Functions of State Health Departments 332 Organization of State Health Departments 332 Aid to Local Health Services 333 Cost of State Health Work 334 XII CONTENTS PART V. THE EXTENSION OF PUBLIC-HEALTH SERVICES— Continued Chapter XVIII. The Extension of Public-Health Services — Continued. Page Federal Responsibilities for the Public Health 335 The Cost of a National Program 337 Public-Health Provisions of the Social Security Act 338 PART VI. THE NEED FOR FEDERAL SUPPORT OF SOCIAL SECURITY PROGRAMS Chapter XIX. The Need for Federal Support of Social Security Programs 345 Expenditures for Public Welfare 345 The Financial Condition of Local Units of Government 348 Tax Revenues and Assessed Valuations 351 Tax Delinquency 354 Tax Limitations 355 Public Debt of Local Governments 357 Trend of Local Governmental Expenditures 358 The Need for State and Federal Aid 360 The Financial Condition of State Governments 360 Recent Trends 361 Indexes of Wealth and Income 363 State and Local Tax Receipts 366 State and Local Indebtedness 368 The Need for Federal-State Cooperation 369 Costs of the Federal Program 373 Ne-w Sources of Federal Revenue 373 The New Federal Responsibility 378 APPENDIXES Appendix I. Procedures Followed in Estimating Unemployment Compensation Coverage in the United States, 1922-33. _ 385 Total Compensable Labor Force, April 1930 386 Mines and Quarries 387 Manufacturing 388 Distribution Industries 388 Wholesale Distribution 388 Retail Distribution 390 Other Industries 391 The Employment Status of the Compensable Labor Force, April 1930. _ 392 Employment Status of the Compensable Labor Force, 1922-33 394 Compensable Labor Force and Its Employment Status, 1922-28 397 Compensable Labor Force and Its Employment Status, 1929-33 397 The Compensable Labor Force by States 399 Appendix IL Procedures Followed in Estimating Duration of Unemployment in the United States, 1922-33 403 Sources and Inadequacies of Available Data 403 Studies Used and Information Taken From Them 404 Adjustment of Data to a Comparable Basis 405 Combining the 92 Frequency Distributions and Applying the Resulting Composite Curves 408 Estimating Time Lost by the Unemployed 412 CONTENTS XIII APPENDIXE S— Continued Page Appendix III. Pkocedures Followed in Estimating the Maximum Duration of Benefits 415 Contributions 415 Compensable Wage Loss 416 Adjustments 417 Final Estimates of Duration 421 Appendix IV. The History and Development op the United States Employment Service 423 The Pre-War Period 423 Activities During the World War 425 The Post-War Period 428 The Contribution of the Demonstration Centers 429 The Reorganization of 1931 430 The Principles of the Wagner- Peyser Act 431 Operation Under the Wagner- Peyser Act 432 Emergency Needs and the National Reemployment Service 434 The Progress Record in Employment Work 436 Appendix V. Summary of State Unemployment Compensation Laws, January 1,1936 facing page 440 Appendix VI. Unemployment Insurance Provisions of the Cana- dian Employment and Social Insurance Act 441 Appendix VII. Old-Age Insurance in Great Britain 449 Noncontributory Pensions 449 Contributory Pensions 450 Appendix VIII. The Canadian Pension Systems 453 Noncontributory Pensions 453 Voluntary Annuities 454 Appendix IX. Survivors' Insurance in Foreign Countries 459 Appendix X. Financial History op the Workers' Invalidity, Old- Age, and Survivors' Insurance of Germany 469 A Short History of the Law 469 Distribution of Costs 470 The Share of the Federal Government 470 Common Reserve Fund and Individual Funds 471 Reserve System Versus Pay-As-You-Go System 476 The Investment of the Reserve 477 General Investments 477 Investments Promoting the General Welfare 480 Interest on Investments 482 Administration 482 Coverage 485 Contributions , 485 Benefits 487 Old- Age Pensions 487 Invalidity Pensions 489 Survivors' Pensions 490 Widows' Pensions 492 Orphans' Pensions 493 The Number of Pensioners 494 Summary ' . 496 Bibliography 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-Wel- fare Purposes facing page 514 Appendix XIII. Creation and Membership of the Committee on Economic Security and Affiliated Groups 515 Appendix XIV. Staff of the Committee on Economic Security 521 Appendix XV. List of Staff Reports 525 Appendix XVI. The Social Security Act 531 Index 561 LIST OF TABLES PART I. UNEMPLOYMENT COMPENSATION No. 1. Countries in which compulsory unemployment insurance or compen- sation laws have been enacted and number of workers covered in each, 1935 6 2. Countries in which laws have been enacted subsidizing voluntary insurance systems and the number of workers covered in each, 1935_ 7 3. Maximum weekly incomes below which a state of need exists, Belgium. 41 4. Unemployment in manufacturing, transportation, building trades, and mining, 1897-1926, as estimated by Paul H. Douglas 56 5. Estimates of average nonagricultural employment and unemployment, by States. 1930-33 facing page- 58 6. States arrayed by average percentage of unemployment within the compensable labor force, April 1930; 1933 average; and 1930-33 average 60 7. Estimated numbers of employees attached to the various industries, 1920-27 62 8. Average annual indexes of employment in selected manufacturing industries, 1923-28 63 9. Estimated numbers of employees attached to transportation and communication industries, 1920-27 64 10. Proportion of fuU time worked by all employed workers in 29 indus- tries. United States, 1922-33 65 11. Employment status of gainful workers enumerated in four areas 67 12. Employment status of employed workers in three areas 68 13. Indexes of seasonal variations in factory pay rolls in the United States, 1923-31 70 14. Estimated compensable labor force in the United States, April 1930 78 15. Estimated compensable labor force, United States, 1922-33 79 16. State cumulated contributions available for benefits at 3-, 4-, and 5- percent contribution rates. United States, 1922-33 81 17. Estimates of the compensable wage loss of the covered unemploj'ed in the United States, 1923-33 82 18. Percentage and cumulative percentage distribution of the unemploj'ed able and willing to work, by duration of unemployment at date of census or survey, according to various magnitudes of unemployment.. 84 19. Cumulative distribution of the total compensable wage loss, 1923-33- 86 20. Adjusted cumulative distribution of the total compensable wage loss, -:.. 1923-33-.--.-------..-- ___.._.._.._.-_,---,.-- 87 LIST OF TABLES XV PART I. UNEMPLOYMENT COMPENSATION— Continued No. Page 2L 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 108 24. Estimated number of employed workers covered, by States, 1933 109 25. Estimated wages and salaries of compensable labor force and income from a 3-percent contribution, by States, 1 933 117 PART IL OLD-AGE SECURITY 26. Actual and estimated number of persons aged 65 and over compared to total population, 1860-2000 141 27. Rate of increase of population by age groups for the United States, 1870-1930 141 28. Age distribution of the total, urban, and rural population of the United States, 1920 and 1930 142 29. Percentage of persons 45 years of age and over among gainfully occu- pied, by sex, for the United States, 1890-1930 143 30. Percentage of unemployment (14 weeks and over) among males and females in each age group for the United States, 1930 146 31. Persons with previous work experience at nonrelief employment seeking work, classified by length of time since last nonrelief employ- ment of 4 weeks or more and by age 148 32. Percentage of persons 65 and over having property less than $5,000 and income less than $300 annually 151 33. Old-age dependency in the State of New York, July 1, 1929 152 34. Economic status of aged studied in the District of Columbia, 1934 152 35. Years of residence in State of persons 65 and over on relief 157 36. Principal features of the old-age assistance laws of the United States (as of Jan. 1, 1935) facing page 160 37. Operation of State old-age assistance acts during 1934 164 38. Provisions of the old-age assistance laws in the United States (as of Oct. 15, 1935) 168 39. Old-age assistance and insurance legislation in foreign countries through 1933 182 40. Principal provisions of foreign noncontributory old-age assistance laws through 1933 facing page 184 41. Weekly contributory old-age pensions for various countries in relation to weekly wages in those countries 186 42. Number of recipients of old-age assistance (noncontributory) and contributory pensions in foreign countries and number of people of eligible age 186 43. Foreign noncontributory old-age assistance systems (changes in pro- portion of recipients to population of eligible age since effective date of law) 187 44. Estimates of the number of old-age assistance recipients and the amount of Federal subsidy to State old-age assistance programs 194 45. Progress of tax and benefit payments under proposed old-age annuity plan 212 XVI LIST OF TABLES PART II. OLD-AGE SECURITY— Continued No. Page 46. Summary of provisions for Federal grants to States for old-age assist- ance 219 47. Summary of principal provisions of the Federal Social Security Act relating to Federal old-age benefits 223 48. Monthly benefits payable for specified total wages as defined for the purposes of title II of the Social Security Act 224 PART III. SECURITY FOR CHILDREN 49. Conditions under which aid to dependent children may be granted and limitations on amount of aid (1934) 235 50. Extent to which aid to dependent children is provided: Annual per- capita expenditure and percentage of counties granting aid, 1934. _ 237 51. Estimated number of families and children receiving aid to dependent children (based on figures available Nov. 15, 1934) 238 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) 240 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 character- istics of relief families in 79 cities, May 1934 243 54. Characteristics of households with widowed and separated or divorced women heads of relief families in urban aieas with children under the age of 16 years, based on 5-percent sample study of occupa- tional characteristics of relief families in 79 cities. May 1934 244 55. Estimated annual expenditures for aid to dependent children (based on figures available Nov. 15, 1934) 245 56. Average monthly grant per family for aid to dependent children 247 57. Funds for State maternal and child-health work, 1928 and 1934 272 58. State funds for maternal and child-health work, 1934 273 59. Permanent public-health nursing service in the counties of 24 States, 1934 275 60. Permanent prenatal and child-health centers in the counties of 18 States, 1934 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 .cities, Novem- ber 1934 277 62. Adequacy of family milk supply in 3,500 families under the care of public-health nursing agencies in 25 cities, November 1934 278 63. State and county public funds for care of crippled children 285 64. Summary of provisions for Federal grants to States for aid to depen- dent children (mothers' aid) 293 PART IV. PROVISIONS FOR THE BLIND 65. Data on the operation of systems for aid to the blind in the United States, 1934 303 66. Principal provisions of State laws providing for allowances for the blind (as of Aug. 1, 1935) 306 67. Summary of provisions for Federal grants to States for aid to the blind. 311 LIST OF TABLES XVII PART VI. THE NEED FOR FEDERAL SUPPORT OF SOCIAL SECURITY PROGRAMS No. Page 68. Statutory placement of financial responsibility for various welfare activities in the several States, Aug. 1, 1935 349 69. Distribution of financial responsibility, August 1935 350 70. Assessed valuations and general property-tax receipts of local units of government, 1922 and 1932 353 71. Trend of population, assessed valuation, and tax levy, city of Detroit, 1915-34 353 72. Receipts by local authorities of England and Wales 357 73. Trend of net indebtedness of local units of government, 1902-32 357 74. Net bonded debt of cities of over 500,000 population (excluding self- supporting indebtedness), Jan. 1, 1929, and 1934 358 75. Revenues, expenditures, and indebtedness of cities (with 1924 popula- tion of 300,000 or more), 1924-32 359 76. Trend of relief expenditures 359 77. Trend of State government tax receipts, 48 States, 1925-32 361 78. Trend of State expenditures for government, 48 States, 1925-32 362 79. Indexes of State wealth and income 364 80. State and local tax receipts, 1932, and ratios of tax receipts to indexes of State wealth and income 367 81. Ratio of State and local tax receipts, 1932, (a) to income, 1929; (b) to retail sales, 1933; and (c) to taxable wealth, 1931 368 82. State and local net indebtedness, 1912-32 368 83. Per-capita State and local net debt, 1922 and 1932, and ratio of 1932 net debt to income and wealth 370 84. Grants to States for social security 372 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 376 APPENDIXES I-l. Occupations excluded from the unemployment compensation plan, United States, April 1930 386 1-2. Occupational exclusions of gainful workers from the unemploy- ment compensation plan by industries. United States, April 1930 387 1-3. Number and percent of coal-mining establishments and wage earners, by number of wage earners per establishment, United States, 1929 388 1-4. Number and percent of mining and quarrying establishments and wage earners, by number of wage earners per establishment, United States, 1929 388 1-5. Number and percent of manufacturing establishments and wage earners, by number of wage earners per establishment, United States, 1929 389 1-6. Estimated distribution of "wholesalers only" establishments and employees, by average number of employees per establish- ment. United States, 1929 390 1-7. Estimated distribution of establishments and employees in wholesale trade, by average number of employees per estab- lishment. United States, 1929 390 78470—37 2 XVIII LIST OF TABLES APPENDIXES— Continued No. Page 1-8. Estimated distribution of retail stores, employees, and average number of employees per store, by volume of sales per store, United States, 1929 391 1-9. Estimated distribution of establishments and employees in retail trade, by number of employees per average establish- ment, United States, 1929 391 I-IO. "Size-of-firm" exclusion of gainful workers by industries, United States, April 1930 393 I-ll. Distribution of total gainful workers and unemployed workers by socio-economic groups in the United States, April 1930 394 1-12. Employed compensable labor force by industry and by type of exclusion, United States, April 1930 395 1-13. Employed compensable labor force by industries. United States, April 1930 396 1-14. Unemployed compensable labor force. United States, April 1930_ 396 1-15. Estimated compensable labor force in the United States, April 1930 397 1-16. Estimated compensable labor force, United States, 1922-33 398 1-17. Estimates of the compensable labor force, 1930-33, by States 400 II-l. Distribution of the unemployed by duration of unemployment, Los Angeles, California, April 1930 and January 1931 405 II-2. Duration of unemployment by weeks, Los Angeles, California, April 1930 and January 1931 407 II-3. Average unemployment rate in compensable labor force, for years represented by each composite curve, and in cities in corresponding years 412 III-l. Assessable wages and salaries of employed compensable labor force. United States, 1922-33 416 IV-1. Personnel of public employment offices by States, 1935, com- pared with estimated number needed for unemployment com- pensation activities 438 VIII-1. Noncontributory old-age pensions in Canada 454 VIII-2. Distribution of noncontributory old-age pensioners by Provinces in Canada 454 VIII-3. Distribution of Canadian Government annuity contracts written in 1930 455 IX-1. The insured population and beneficiaries of foreign survivors' insurance laws 462 IX-2. Comparison of average survivors' pensions with weekly wages for unskilled labor in engineering trades 466 X-1. Legal provisions for computing invalidity, old-age, and surviv- ors' pensions 472 X-2. Total benefit payments and distribution of cost 474 X-3. Percentage distribution of cost of pensions between the individ- ual funds, the common fund, and the Federal Government.. 476 X-4. Investment of reserve, 1891-1933 478 X-5. Investment of reserve by type of investment 480 X-6. Investments promoting the general welfare 481 X-7. Receipts and expenditures, 1891-1934 483 X-8. Proportion of cost of administration to total expenditures and total receipts 485 LIST OF TABLES XIX APPENDIXES— Continued No. Page X-9. Wage classes and contribution rates, 1891-1934 486 X-10. Rate of contribution as percent of lower and upper limit of each wage class 486 X-11. Yearly amount of old-age pension 488 X-12. Average yearly amount of old-age pension grants 489 X-13. Yearly amount of invalidity pension 491 X-14. Average yearly amount of the invalidity pension grants 492 X-15. Average yearly amount of widows' pension grants 493 X-16. Average yearly amount of orphans' pension grants 494 X-17. Number of persons in receipt of pensions, 1891-1934 494 X-18. Number of pensioners 65 years of age or over 495 XI- 1. Trend of birth rates in the United States expanding birth- registration area by States, 1915-34 499 XI-2. Trend of maternal mortality in the United States birth-registra- tion area by States, 1915-34 500 XI-3. Trend of maternal mortality by color in the United States birth- registration area and in States having 1,500 or more Negro births in 1934; 1915-34 502 XI-4. Trend of maternal mortality in the United States and certain foreign countries, 1915-34 504 XI-5. Trend of infant mortality in the United States birth-registration area by States, 1915-34 505 XI-6. Trend of infant mortality by color in the United States birth- registration area and in States having 1,500 or more Negro births in 1934; 1915-34 506 XI-7. Trend of infant mortality in urban and rural districts of the United States birth-registration area by States, 1915-34 509 XI-8. Infant mortality rates (deaths under 1 year per 1,000 live births), by specified groups of causes, in the United States birth- registration area of 1921, exclusive of South Carolina, 1921-34_ 513 LIST OF FIGURES 1. Actual and estimated number of persons aged 65 and over com- pared to total population, 1860-2000 140 2. Employed male population 40 years and over compared to total male population 40 years and over 147 3. Maternal mortality in the United States, 1933 262 4. Infant mortality in the United States, 1933 264 5. Mortality in the first month and the first year of life, United States, 1934, from specified groups of causes. . 266 6. Trend of infant mortality in urban and rural districts of the United States 268 II- 1. Curves showing cumulative distribution of the unemployed by duration of unemployment, Los Angeles, Calif 406 II-2. Typical curves showing hypothetical distributions of the unem- ployed by duration of unemployment 409 II-3. Curves showing composite cumulative duration distributions of the unemployed -..,. .-,-, ,-. 411 s u Parti UNEMPLOYMENT 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 THE HAZARD of involuntary unemployment is one of the most serious and disastrous of the many risks which confront wage earners in an industrial society. Industry moves through al- ternating periods of prosperity and depression which introduce seri- ous employment risks ; workers, because of conditions entirely beyond their control and largely beyond the control of the men and insti- tutions which employ them, are from time to time deprived of all sources of income. Under normal conditions the period of unem- ployment is rarely of long duration for those workers who are not handicapped by old age or ill health. But even for relatively short periods the results of unemployment can be devastating. Savings, if any have been accumulated, are exhausted; living standards sink to a lower level ; and the nutritional and health needs of the family are neglected. Ever since the industrial revolution in the early eighteen hundreds, 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 duration of unemployment in the United States since 1930 has left no one wdio is dependent upon a wage or salary untouched by the dread of loss of w^ork. Unemploy- ment relief distributed as a form of public charity, though necessary to prevent starvation, is not a solution of the problem. It is expen- sive to distribute and demoralizing to both donor and recipient. A device is needed which will assure those wdio are involuntarily un- employed a small steady income for a limited period. Such income, received as a right, is provided by an unemployment insurance or un- employment compensation system. Even though it cannot offer complete protection of the wage earner's income during periods of severe industrial retrenchment, and even though it cannot maintain benefits which will equal normal wages in amount or duration, un- employment compensation serves to lessen the immediate 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 interest to trace its evolution and development over nearly a century and a half. 3 4 UNEMPLOYMENT COMPENSATION THE EVOLUTION OF UNEMPLOYMENT INSUKANCE Like many other forms of social insurance, unemployment com- pensation 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 early as 1789 when Basel Town in Switzerland established an imemployment insurance plan which lasted for several years before it went out of existence. In England in 1824 the Journeymen Steam Engine Workers' 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 unemploy- ment 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 establish- ment 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 munici- pal funds were created in Cologne, Germany, in 1896, in Leipzig in 1903, and in Bologna, Italy, in 1896. These funds had the dis- advantage 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 Limoges, 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 un- employment fund. The Ghent system was adopted by several cities in Germany (Strasburg in 1907; Miihlhausen, Erlangen, and Mainz in 1909) and in two Italian cities (Milan in 1905; Brescia in 1909). It was widely adopted in those countries wliich developed voluntary systems and still forms the basis of these systems. The Ghent system provided a fixed amount of benefit to each un- employed worker in addition to the amount which he received 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 as to bene- fits 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 mem- bers, 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, as early as 1894. By a cantonal order municipalities were empowered to es- tablish compulsory insurance for workers receiving less than a stipulated wage. The municipality of St. Gall, acting on this authority, established a fund in the following year. Workers were required 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 regularly 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 un- employment 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 farm 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, December 15, 1935. In addition. Queensland, Australia, enacted a compulsory insurance law on Oc- tober 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 dominion (see appendix VI). Table 1. — Countries in which compulsory unemployment insurmice or compensa- tion laws have been enacted, and number of tcorkers covered in each, 1935 Country • Date of law 2 Number insured ^ 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 Utah Washington Wisconsin Oct. 18, 1922_. Mar. 24, 1920. Apr. 12, 1925. June 28, 1935. July 16, 1927- . Dec. 16, 1911. Aug. 9, ]920_. Oct. 19, 1919.. July 18, 1924.. (')— — - Sept. 14, 1935. June 25, 1935. Aug. 28, 1935. Aug. 12, 1935. May 29, 1935. Apr. 25, 1935.. Nov. 15, 1935. Mar. 25, 1935. Mar. 21, 1935. Jan. 29, 1932.. 175, 000 1,012,000 280, 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 Total, 10 jurisdictions- Yugoslavia Total number insured . 6, 862, 000 Dec. 15, 1935 '. m 43, 670, 000 ' A compulsory law was passed in Russia in 1922, but benefit payments were suspended in 1930. 2 These are the dates upon which the laws were enacted, not the dates upon which they went into effect. 2 These are the most recent figures available, * Although the Austrian system is in many respects similar to unemployment insurance systems of other European countries, it is distinguished from them by requiring a means test of applicants for benefits. ' The sharp decline from earlier years is due to the elimination of unemployed workers who ha^e ex- hausted their rights to benefits and to new restrictions in coverage. 6 The first of the cantonal measures was passed in 1925. ' Date of regulations issued by Yugoslav Minister of Social Policy and Public Health. 8 Data not yet available. In the United States, Wisconsin enacted a law for compulsory un- employment compensation on January 29, 1932, which began to oper- ate on July 1, 1934. Utah, Washington, New York, New Hamp- shire, California, Massachusetts, 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 volun- tary plans. These countries and the dates of enactment of their laws are: Belgium, December 30, 1920; Czechoslovakia, July 19, INTRODUCTION 7 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, December 2. 1916; Norway, August 6, 1915; Spain, May 25, 1931; Sweden, June 15, 1934; and 12 cantons of Switzerland, October 17, 1924. (See table 2.) Accurate estimates of the total number of workers 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 their rights to unemploy- ment benefits. The estimates for 1935 shown in tables 1 and 2 place the number insured under compulsory systems at 43,670,000 and the number insured under voluntary schemes at 4,161,000. Table 2. — Countries im, ivhioh laws have been enacted subsidizing volmntary insurance systems and the number of loorkers covered in each, 1935 Country- Date of law ' Number in- sured 2 Belgium Czechoslovakia Deimiark Finland France Greece Netherlands Norway Spain Sweden Switzerland (12 cantons)'. Total Dec. July Apr. Nov. Sept. («) — Dec. Aug. May June Oct 30, 1920 _. 19, 1921 3. 9, 1907... 2, 1917... 9, 1905... 2, 1916... 6, 1915... 25, 1931.. 15, 1934.. 17, 1924 8. 899, 000 , 407, 000 375, 000 * 15, 000 192, 000 46, 000 564, 000 54, 000 62, 000 ' 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. 2 These are the most recent figures available. 3 This act came into effect on Apr. 1, 1925. 4 The 1917 law was repealed and replaced by a new law on Mar. 23. 1934. Number insured under the new law is not available. 5 There is no information avaOable 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 existence in the tobacco, milling, and baking industries and the Athens newspaper staffs. 6 Includes 190,000 persons under laws not yet approved. ' Nine of these cantons specify that communes may enforce compulsory insurance ^within their borders. s This is the date of the national measure. The first of the cantonal acts was passed in 1925. Only one country which has enacted nation-wide compulsory in- surance against the hazards of unemployment has ever revoked the act. Rather, the tendency has been to extend the coverage of com- pulsory 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 systems. The chief difficulty has been that, as unemploy- ment became more and more extensive, workers exhausted their rights to benefits and were obliged to seek public relief. The mag- nitude of the relief problem has demanded funds beyond the re- sources of local governments. As a result, national governments 8 UNEMPLOYMENT COMPENSATION have, of necessity, assumed responsibility for the provision of work relief and direct relief. Reliance on insurance principles has in consequence been shaken ; workers who had contributed to the insur- ance 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 an 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 pre- vention 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 em- ployment 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 unem- ployment 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 COMPEN- SATION 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 the risk. Small periodic payments on behalf of a large number of persons, many of whom will not experience the catastrophe for which insur- ance is carried, are necessary to provide adequate financial resources which will afford compensation for the persons who suffer the catas- trophe. Certain people will be. less subject to the contingency than others, but the mechanism of shared risk is necessary to carry out the purposes of insurance. There is less variance from expected experience in a large 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 of 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 con- tractual 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 ac- cumulated in good years if the anticipated drains of poor years are to be met. In one sense unemployment "insurance" might be considered as devoid of humanitarian motives. Its structure would merely repre- sent 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 week?" This cost, when computed, is merely figured in terms of weekly assessments upon the contracting indi- vidual. Data are not available in this or any other country to compute accurately any of the factors 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 revision with the accumulation of experience. These revisions would, however, be legally applicable only to new contracts. The policy underlying an unemployment compensation plan de- termines to what extent insurance principles will be maintained. If the policy is to emphasize protection against seasonal and tech- nological 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 of providing more adequate pro- tection in normal times. The maximum duration of benefits pro- 10 UNEMPLOYMENT COMPENSATION Voided is in this case adjusted to short periods of experience (2 or 3 years), the exigencies of a major depression are left out of reckon- ing, 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 rates than the income of the fund would warrant. Reduc- tion of benefits and increase of contributions meet with great oppo- sition 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 un- employment 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 unem- ployment 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 the lower-paid worker and a maximum benefit for the higher-paid worker. Similarly workers with very long records of employment may not receive the full pro- portion of the contributions accumulated on their behalf even if ad- ditional 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 con- tributions or by government loans or grants. Most European countries, concerned with protection against unem- ployment rather than prevention, have provided for a wide pooling of risks. When in 1920 Great Britain extended unemployment in- surance 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 system, 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 origi- nal 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 regions which cut across state lines. It was thought that this procedure would stimulate competition among the regional areas for reduction of the extent of unemployment with consequent lowering of contributions. The continuous high unem- ployment 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, un- employment 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 pro- vision of national subsidies for further assistance during depres- sions. 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 re- serves the British and German limitations on pooling had to be withdrawn, and in Belgium the granting of subsidies from an emer- gency 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 at- tempt 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 inade- quate experience. Furthermore, the use of smaller units of cover- age 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 protect the insured popula- tion against the entire risk of unemployment. It must be considered only as the first line of defense. Recognition of the need for 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 per- sons who are ordinarily employed with a fair degree of regularity. Efforts to extend an unemployment insurance scheme beyond these proper limits have invariably converted it into a relief measure and brought it into disrepute. Eecognition of the limited function of unemployment compensa- tion and the desirability of providing — outside of the insurance sys- tem— for those on the borderline of insurance and relief is the basis of the British Unemployment Act of 1934. Under this legislation un- employment insurance was restored to the original conception under- lying 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 definitely severed from un- employment insurance. Transitional payments, linked to the insur- ance 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 allow- ances 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 unem- ployment insurance. Unemployment allowances differ fundamen- tally from unemployment benefits in that they are not available as a contractual right but are given only on the basis of need to appli- cants who have passed a "means test." The disqualifications also dif- fer somewhat, but in the case of both unemployment allowances and unemployment benefits applicants must be registered for work at pub- lic employment offices and are disqualified when unemployment is due to 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 au- thority— the Unemployment Assistance Board — which has largely taken over the functions performed 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 allow- ances is evident in the detailed formulas for assessing need and in the disciplinary powers given the board for certain "difficult" cases, dis- ciplinary powers which approach those exercised by the poor-law authorities in granting "out-door" relief to the able-bodied unem- ployed. 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) unem- ployment insurance, financed from joint contributions of employers and employees, with limited benefits on a contractual basis for a specified period ; (2) an emergency benefit scheme, providing benefits, financed four-fifths by the Federal and one-fifth by the local govern- ments and applicable to those insured persons who had either ex- hausted 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 able- bodied 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 de- fense, to be supplemented by other measures for able-bodied unem- ployed ineligible for statutory benefits. KELATION OF UNEMPLOYMENT INSURANCE 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 afforded for all the indus- trial 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 W. Latimer found in his study of industrial old-age pensions that the number of pensioners in some American companies rose 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 j^ears 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. With 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 bene- fits 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 claim benefits from the unem- ployment compensation system. Similarly, protection against old- age dependency is needed to prevent an unemployment compensa- tion system from compensating for old-age risks which are outside its compass. In Europe the different types of social insurance have developed separately and have only recently begun to be considered in their interrelationships. Under the German system, the unemployment insurance fund maintains the status of an unemployed person in the old-age, invalidity, and health-insurance systems. An unem- ployed worker receives in sick benefits the same amount that he would receive in unemployment benefits, so that he may not have a special advantage in either. When the system of siclmess insurance in Germany was paralleled by a plan of unemployment insurance, expenditure on sick benefits was considerably reduced. In France, INTRODUCTIOlSr 15 too, the recent social insurance scheme made integrated provision 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 pro- longed depression some form of emergency relief or transitional benefit has been deemed necessary in all foreign countries with unemployment insurance systems. 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 w^ork — an opportunity to support themselves and their fami- lies at work provided by the Government — rather than a cash benefit. Chapter II A SUMMARY OF FOREIGN EXPERIENCE WITH UNEMPLOYMENT INSURANCE NINETEEN European countries, Canada, and Queensland, Aus- tralia, now have nation-wide unemployment insurance legis- lation adopted on either a compulsory 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 Bel- gium and Switzerland are also considered in some detail because of the interesting parallel between the local political autonomy of these countries and the Federal-State relations of the United States. GREAT BRITAIN ^ In its National Insurance Act passed by Parliament in 1911, Great Britain was the first country in the world to establish national com- pulsory unemployment insurance. The provisions of the insurance act were frankly experimental in nature. Political demands subse- quently resulted in many amendments and, as a result of the recom- mendations 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 sys- tem 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; ^ The principal sources of information on the provisions in Great Britain are as follows : Industrial Relations Counselors, Inc., An Histoi~ical Basis for Unemployment Insurance (The University of Minnesota Press, Minneapolis, 1934) ; "Unemployment-Benefit Plans in the United States and Unemployment Insurance in Foreign Countries", Bulletin of the U. 8. Bureau of Labor Statistics No. 5U (U. S. Government Printing Office, Washington, D. C, 1931) ; "Operation of Unemployment Insurance Systems in the United States and Foreign Countries", Monthly Labor Review, June, July, August, and September 1934 ; Hill, A. C. C, Jr., and Lubin, Isador, The British Attack on Unemployment (The Brook- ings Institution, Washington, D. C, 1934) ; Final Report of the Royal Commission on Unemployment Insurance (H. M. Stationery Office, London, 1932), Cmd. 4185. 17 18 UNEMPLOYME^^T 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 unem- ployed 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 Irish 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 em- ployment exchanges established by the Labour Exchanges Act 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 statu- tory 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 statutory committee consists of a chairman and from four to six members ap- pointed for periods of 5 years. At least one member must be a woman. The foremost duty of this committee is to assure the sol- vency of the scheme. It examines 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 Ministry of Labour maintained, on January 1, 1933, 420 local employment offices or exchanges and 747 smaller branches through- out the area of its jurisdiction. For 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 Minis- try of Labour at Kew. The central office at Kew is under a chief insurance officer and each of the local offices is directed by a local insurance officer. All these officers are appointees of the Minister of Labour, and other personnel appointments are under the civil service. In branch offices the personnel are frequently on a part- time basis and are not civil-service appointees. The local and branch employment offices are the administrative units of the system with responsibility for the registration of the unemployed and 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 em- ployment 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 3^ear and when it has expired is sent to the central office in Kew where it is filed for permanent record. While the book is current, it is kept by the employer as long as the worker is employed, and each week the employer affixes and date-cancels stamps to 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, regis- ters him as available for work, attempts to place him in suitable employment, inquires as to whether there are any disqualifying conditions, establishes the waiting period necessary to qualify him for unemployment benefits, requires him to report, 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 estab- lished locally to carry on phases of administration. Local em- ployment committees organized in 1917 in various districts, and composed of workers' and employers' representatives, and other in- terested individuals, cover the whole country. These committees advise the Minister of Labour on problems in connection with the administration of the insurance system and of the employment offices and assist the exchanges in maintaining contacts with em- ployers, trade-unions, and local industry. Between 1921 and 1926 these committees also acted on behalf of the Minister of Labour in determining eligibility^ under the special conditions attached fo the receipt of benefits for which the worker was not qualified on the basis 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. If 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 placement for juveniles is the function of two separate bodies, (1) the juvenile advisory committees of the employment offices and (2) special juvenile bureaus which perform all the functions of employment exchanges. When the national insurance act was made effective a number of trade-unions and other workers' associations were operating unem- ployment benefit schemes of their own. Under the original and subsequent acts these organizations were permitted to continue their insurance functions and to distribute the benefits to which their members were eligible under the national unemployment insurance system, provided that the unions or associations fulfilled certain re- 20 UNEMPLOYMENT COMPENSATION quirements. These requirements have been changed at frequent intervals but in the main consist of four general rules: (1) The union must have the machinery to keep constantly informed con- cerning wages and working conditions on jobs held by its members; (2) it must use an effective method for 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 mem- bers to register at an employment exchange or at the local union office and by providing a full-time official of the union for registra- tion work; (4) it must pay benefits from its own funds in addi- tion to state benefits. Since 1930 the minimum supplementary union benefits required have been at least 75s. for 25 weeks of unem- ployment 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 of unions availing themselves of the permissive provisions of the law. Over 100 unions took ad- vantage 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 tlirough unions. Between 1920 and 1930, however, this percentage had dropped to less than 8 percent. In practice the unions which take advantage of the opportunity to distribute state unemployment benefits contain only one-third of the total union membership of the country.^ Coverage. — As first established, the British unemployment insur- ance system provided coverage for only 2,500,000 workers in a few selected manual trades (mechanical engineering, building, iron founding, shipbuilding, construction of vehicles, saw milling, and machine work) having a high and similar incidence of unemploy- ment. In 1916 workers engaged on or in connection with muni- tions work in any trade, as well as workers in the metal, chemical, leather, rubber, and brick trades — a total of about 1,250,000 people — were added to the system. The following year, 1917, it was recom- mended 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 than at the rate of £250 a year were brought within the sj'stem, except agricultural workers, domestic servants, permanent employees on the railroads, certain employees of local authorities and of the Hill, A. C. C. Jr., and Lubin, Isador, op. cit., pp. 204-299. SUMMARY OF FOREIGN EXPERIENCE 21 poor-law and asylum authorities, and certain employees in public- utility 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 claims for unem- ployment allowances was 732,338 on November 25. Of these claims 34,572 were disallowed.^ The unemployment insurance statutory committee, in accordance with the provisions of the act of 1934, has studied the problem of agricultural coverage.* 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 committee recommended further that un- paid 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 reasons 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) unemploy- ment in agriculture, though substantial, is less than in the insured in- dustries 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 unemployment insurance act for agricultural workers was enacted into law (26 Geo. 5. and 1 Edw. 8. Ch. 13). Contributions first became payable beginning May 4, 1936, and bene- fits will be paid beginning November 5, 1936. It is estimated that 750,000 agricultural workers will be covered by the act. Contributions. — Three sources of contribution finance the unem- ployment insurance system ; the National Government, the employer, and the employee are required to pay equal amounts to the insurance fund. The contributions are flat rates based on sex and age differen- 3 The Ministry of Laloiir Gazette, vol. XLIII, no. 12, December 1935, p. 481. * Report of the Unemployment Insurance Statutory Committee, in accordance 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 : Males Females Age d. d. Above 20 10 9 18 to 20 9 8 16 to 17 5 4^2 Under 16 2 2 The employees pay the same amount as weekly contributions, em- ployees 65 years of age or over being exempt, and the exchequer makes an equal payment to the insurance fund on behalf of each insured person. The employer is made responsible for the employee's share of the contribution. He purchases stamps from the post offices and each weekly pay day affixes an unemployment insurance stamp to the employee's insurance book which has appropriate spaces for each calendar week from July 1 to June 30. The stamps are date- canceled by the employer when they 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 employers is small in comparison with the number of insured individuals. The money obtained by the post office from the sale of unemployment insurance stamps is turned over to the insurance fund. The rates established for contributions and the resources avail- able for payment of benefits have varied during the 24 years that the system has operated. In the main, contributions have increased, not only in amounts but also in proportion to wages. In 1931, when the rates now in effect were established, the total weekly con- tribution of worker, employer, and state for a man over 21 repre- sented 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 4i/2d. for males 21 years of age and over and 4d. for females of the same age. The contributions for this age group are one-half of those under the general system. Younger age groups pay lower contributions. Eebates are to be given to employers and employees for agricultural labor hired on a yearly or half-yearW basis. The 1911 Unemployment Insurance Act was based on actuarial calculations on the assumption 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 years. During the first 9 years of the sys- tem, unemployment was less than the estimated average and reserves SUMMARY OF FOREIGlSr EXPERIENCE 23 were accumulated. In 1920, when 11,000,000 additional workers were covered by the Unemployment Insurance Act, th^ actuarial basis was lowered to 5.32 percent as an average rate of unemploy- ment to represent more accurately the larger groups insured. Ac- tually, since 1921, the average annual percentage of unemployment has only once fallen below the 10-percent average occurring in 1924 and 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. Within a month the fund faced a depression, and by the middle of 1921 the surplus accumulated 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 workers benefits were 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 various names at different times, "uncovenanted", "extended'', and "transitional" benefits and "transitional payments." The history of the fund from 1921 to 1931 was characterized by increasing def- icits except for the year ending July 1924. Finally, the cost of "transitional" benefits was thrown upon the exchequer, and begin- ning with the act of February 6, 1930, the insurance system was relieved of the responsibility for providing payments to insured persons who had exhausted their rights to statutory benefits or lacked sufficient contributions to qualify for these benefits. Under the 1934 act the borrowing power of the fund was repealed, although temporary advances were permitted, 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.'' Benefits.— The benefits paid to unemployed workers covered by unemployment insurance are, lij^e contributions, flat rates based on sex and age differentials rather than on wages. Workers who qual- ify for statutory benefits must meet requirements related to defini- tions 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 quali- ^ Hill and Lubin, op. cit., chap. XIII, "The Story of the Unemployment Fund" ; U. S. Department of Labor, "Unemployment-Benefit Plans in the United States and Unemploy- ment Insurance in Foreign, Countries," Bulletin of the V. 8. Bureau of Labor Statistics No. 5U (U. S. Government Printing Office, Washington, D. C, 1931), p. 288. 24 UNEMPLOYMENT COMPENSATION jfications for the receipt of benefits are described in the paragraphs which follow. Amotmt of Benefits. — As pointed out in the discussion of con- tributions, the amount of benefits to which a qualified unemployed worker has been entitled has fluctuated in accordance with the pro- visions of various legislative amendments to the insurance acts. Under the 1911 act benefit rates were low, being based upon trade- union out-of-work benefit practice. They were designed merely to bridge short gaps between jobs and to offer minimum subsistence rather than to afford compensation which would approximate or- dinary wages except for low-paid unskilled laborers. In a period of high costs of living the benefits were increased, but were subse- quently decreased partly as an economy measure and partly to per- mit extended benefits for unemployment of 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 rates are 20 and 25 percent higher for men and for women, respectively, than were the provisions of the original act of 1911. The weekly rates for ordinary benefits are now as follows : Males Females Age s. s. d. 21 to 64 (inclusive) 17 15 18 to 20 14 12 17 to 18 9 7 6 Under 17 6 5 When an insured contributor, male or female, has a dependent child or dependent children, the weekly rate 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 off- spring under 14 years of age. The age limit for a dependent child is raised to 16 years (oi) if the child is receiving full-time school instruction, (&) if he is unable to find work after leaving school, or (c) if he is physically or mentally unable to receive school in- struction. Benefits are likewise increased by. 9s. in respect of not more than one adult dependent. Female adult dependents are defined as: (1) a wife who resides with the insured contributor or is wholly or mainly supported by him; (2) a widowed mother, widowed step- mother, 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 contributor'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 SUMMARY OF FOREIGN EXPERIENCE 25 rate of not less than 9s. a week who assists in the care of the insured contributor's dependent children provided such person was engaged in these duties before the insured contributor became unemployed. Adult male dependents are defined as follows: (1) a husband who is prevented by physical or mental 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 sup- ported by him. Benefits for agricultural workers are somewhat lower than those for industrial workers. The 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 Ts. a week for a dependent adult and 3s. a week for each dependent child. The maximum benefit is 30s. a week. Duration of Benefits. — After statutory requirements have been ful- filled and the required waiting period has elapsed, an insured con- tributor is entitled to receive weekly cash benefits, the amount of which is determined by his age and sex. Under the Unemployment Act of 1934, these benefits are payable for 26 weeks (156 days) in the 12 months following the date of application. Special provi- sions 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 bene- fits, 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 subti'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 the insurance system has been in operation, the standard duration 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 before 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 that during a temporary emergency the insur- ance 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 Labour ; at other times, they were granted as a right to all unemployed persons covered by insurance. As a 26 UNEMPLOYMENT COMPENSATION result of the National Economy Act 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 unemploy- ment relief through the establishment 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 Ministry of Labour for the transfer of these cases to the newly established unemployment assistance system. The cost of unemplojanent 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 agricultural workers, contributions are col- lected for 6 months before payment of benefits, and each individual must have paid 20 contributions within 2 years 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 weeks of benefits in any benefit year. Statutory Conditions for the Receipt of Benefits. — Four statutory conditions must be fulfilled before an insured contributor may be- come entitled to unemployment benefits: (1) Not less than 30 con- tributions must have been made to his credit during the 2 years previous to the date of claim for benefits; (2) his application for benefits must be made in the prescribed manner and he must have been continuously unemployed since the date of application; (3) he must satisfy the authorities that 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 reemploj^ment. Waithig Period. — Six days must elapse between the date of applica- tion for unemployment insurance benefits and the date when the applicant first becomes eligible for benefit. An}^ 3 days of unem- ployment in 6 consecutive working days are considered as con- tinuous 3-day periods of unemployment. Two such periods of unem- ployment satisfy the waiting-period requirement, provided the}" are not separated by more than 10 weeks. Disquali^cation From Benefits. — Grounds for disqualification from benefits are failure or refusal to apply for a suitable job called to the attention of the unemployed contributor by the employment exchange or failure or refusal to carry out written instructions given him by an employment exchange officer Avith a view to assisting SUMMARY OF FOREIGN EXPERIENCE 27 him in finding suitable employment; misconduct; voluntarily leav- ing work without just cause; unemployment resulting from a trade dispute. The maximum period of disqualification is 6 weeks except that for trade disputes the applicant for benefits is disqualified for the duration of the dispute. Inmates of a prison or workhouse, per- sons residing outside the United Kingdom, and those who are in receipt of sickness-insurance benefits, invalidity benefits, or pensions for blindness are not eligible for unemployment benefits. GERMANY « Although a pioneer in other forms of nation-wnde, compulsory social insurance, Germany did not enact unemployment insurance legislation until July 1927, when an insurance system was developed as a substitute for and an adjunct to national emergency relief for the unemployed. Post-war unemployment had far exceeded the financial resources of local public authorities. In November 1918 a national relief system was established and financed from communal, state, and Fed- eral funds to assist all persons able and willing to work but in need because of unemployment 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 per- manent system was set up. The first step in the transformation of emergency relief into un- employment insurance was taken on October 15, 1923, when em- ployers and employees were required to contribute toward the cost of relief. Their contributions, based on wages, were to provide four-fifths of the total unemployment relief expenditures and the remaining one-fifth was to be derived from communal appropria- tions, with supplementary aid from state and Federal Governments if these sources of income proved inadequate. At first communal authorities administered the relief fund, but control was gradually shifted to employment exchanges wdiich had been consolidated * Sources : "Gesetz iiber Arbeitsvermittlung- und Arbeitslosenversicherung vom 16. Juli 1927," Reichsgesetzblattj Teil I, Jahrgang 1927 (Verlag des Gesetzsammlungsamts, Berlin, 1927), p. 187; Gesetz ilber Arheitsverniittlung und Arbeitslosenversicherung, In der Fassung des Ciesetzes vom 12. Oktober 1929 (Reichsgesetzblatt I, S. 162) und der Verord- nungen dts Reichspriisidenten vom 26. Juli und 1. Dezember 1930 (Reichsgesetzblatt I, S. 318 und S. 520) nebst der Verordnung des Reicbsarbeitsministers iiber die Krisen- fiirsorge fiir Arheitslose vom 11. Oktober 1930 (Reichsgesetzblatt I, Nr. 42) ; Reichsarbeits- blatt, Amtsblatt des Reichsarbeitsministeriums, Teil I, Amtlicher Teil, Jahrgang 1928- Jahrgang 1935 (incl.) ; Industrial Relations Counselors, Inc., An Historical Basis for Unemployment Insurance (The University of Minnesota Press, Minneapolis, 1934) ; "Op- eration of Unemployment Insurance Systems in the United States and in Foreign Coun- tries, 1031 to i9.34."' Monthly Labor Review, vol. 39, no. 2, August ]934, pp, 273-307; Weigert, Oscar. Administration of Placetnent and Unemployment Insurance in Germany (Industrial Relations Counselors, Inc., New York, 1934) ; studies of the staff of the Committee on Economic Security. 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 Federal Government and communes in proportions of three-fourths and one-fourth, respectively. The entire relief system was superseded by the Employment Ex- change and Unemployment Insurance Act of July 16, 1927, to take effect on October 1. In framing this act German authorities fore- saw 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 relief, with provision for extended out-of-work benefits to in- sured persons whose unemployment was of longer duration than the period of covenanted benefits. Applicants for emergeiicy bene- fits 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 hj contributions of em- ployers 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 ordi- nary benefits. The Federal Government w^as to pay four-fifths of such benefits, the local governments paying the remaining one-fifth. If the worker remained unemployed after having drawn the maxi- mum amount of ordinary and emergency benefits allowed him under the law, he was then taken care of by the local poor-relief authori- ties. 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 he (or his employer) had paid for them by contributions to the insurance fund. Second, during severe depressions the Federal Government, 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 unemployment insurance operations, but in 192S and 1929 Germany suffered a severe depression and a crisis in govern- ment finance. To relieve some of the strain upon the insurance sys- tem which resulted from widespread unemployment, the Federal Government made large loans to the insurance fund. A commis- sion was appointed during the summer of 1929 to recommend re- forms 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 con- tribution rate was increased for a 4-month period in the hope of SUMMARY OF FOREIGN EXPERIENCE 29 removing the budget deficit. In the spring of 1930 the Reichstag was dissolved because of its rejection of a bill to increase contribu- tions by an additional 1 percent and to decrease benefits. The measure became effective, however, by presidential decree. In Octo- ber 1930 the contribution rate was again increased to a total of 6.5 percent 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 reduced many of the local governments to the verge of bankruptcy. The year 1931 brought an even more serious financial crisis, in withdrawal of foreign credit, large reparations payments, and reduced export trade. Uncertainty concerning the political sta- bility 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 re- jected the application of a needs test to recipients of ordinary bene- fits; but, in order to balance the budget, they advocated a longer waiting period, reduction of benefit rates, stricter application of eligibility requirements, and greater Federal powers. They also rec- ommended 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 benefits 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 meas- ures destroyed many of the insurance features 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 re- spect 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 to the prevention of unemployment through regulation 78470—37 4 _ _ 30 UNEMPLOYMENT COMPENSATION of employment, bonuses to the employers for hiring persons over 40 years of age, and work programs. Administration. — The Federal Institute for Employment Ex- changes and Unemployment Insurance (Reichsanstalt fiir Arbeitsver- mittlung und Arbeitslosenversicherung) , an autonomous organization supervised by the Ministry of Labor, is the central administrative au- thority for the unemployment insurance system, as well as for em- ployment exchanges. Before 1933 the powers of the president of the institute were circumscribed in accordance with democratic prin- ciples of administration. The president carried out the decisions of the board in charge of administering the law (Verwaltungsrat), on which employers, employees, and the public were represented. In 1933, in keeping with the introduction of the "leadership prin- ciple" in other branches of the Government, the president took over the functions of the governing board and became solely responsible for the decisions made by him. The same fundamental change was made in the state and district employment exchange and unem- ployment insurance offices (Landesarbeitsamter und Arbeitsamter). The committees on which the interested parties were represented transferred their powers to the heads of the state and district offices, who were responsible only to the president of the Federal institute. Thirteen district employment exchanges supervise the activities of the local offices, of which there are more than 360, direct the transfer of workers from one district to another, act as the deposi- tory of the moneys collected as contributions in their district, and, by making loans or granting subsidies from the funds of the Federal institution, promote relief work calculated to reduce unemployment. Local health-insurance offices (10,000 in number) receive the employer-employee contributions for unemployment insurance at the same time that health-insurance contributions are collected. The sickness-insurance societies then transmit the insurance contributions to the district employment exchanges which, in turn, send part of the surplus to the central office and keep the remainder for disbursement to local employment exchanges of their jurisdictions in accordance with the local requirements for benefit payments. The intermediary collection and transfer of contributions by the health-insurance funds is supervised by the Federal institution. The health-insurance societies retain as a collection fee a small percentage of the unemployment contributions which they collect. From the unemployment insurance contributions are also paid the costs of placement, vocational guidance, and administration of the local, district, and central offices of the Federal institution. When unemployed, a worker registers at once at the placement department of his local employment exchange, where 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 this registration. If the worker cannot be placed immediately in new employment, his case is at once transferred to the insurance department where he files his application for benefits. This application is accom- panied by evidence that he has been in insured employment, to- gether with statements of the duration of his last employment, his earnings during the preceding 6 months, and the reasons for ter- minating employment. He must also state the number of his de- pendents 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. Since the 1932 amendment went into effect, the applicant also has to furnish information on his resources. While 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 bene- fits should be paid beyond the first 6 weeks. During the prescribed waiting period and while he is in receipt of benefits, the unemployed worker must report three times a week at the placement office to register his availability for work. Benefits are paid at the employ- ment exchanges once a week in accordance with the wage class of the insured worker. The appeals procedure 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 (Reichsversiche- rungsamt).'^ Under the National-Socialist Government, these com- mittees 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 and 65 and all salaried persons receiving no more than 8,400 marks a year, except that agricultural workers and domestic servants are excluded from the system. The population of the country in June 1933 was 65,336,000, of whom 32,300,000 were gainful workers. The total number of those "' This office also 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 un- employed. Of these, 386,684 were receiving ordinary benefits, 666,466 were in receipt of emergency benefits, and 340,017 were receiving relief from local welfare authorities. The remaining 591,285 un- employed persons were receiving no form of unemployment benefits or assistance from public authorities.^ Contributions. — The insurance system is designed to operate solely with employer and employee contributions. A total payment of 6.5 percent of the 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 emer- gency benefits. The insurance fund is completely pooled for all industries and all districts except that the Carl Zeiss Optical Works has been per- mitted 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 accordance 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 re- spect of each dependent of the insured person are also paid. These benefits are subject to deduction for a portion of the income derived from temporary employment. The emergency benefits 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. Atnownt of Benefits. — The following tabulation gives the range of maximum weekly benefits payable to various wage classes in three different types of communities : Range of maximum Group ienefits (Reichsmarks) 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 ' Statistische Beilage sum Reichsarieitshlatt, 1936, Nr. 1, pp. 5-6. SUMMARY OF FOREIGN EXPERIENCE 33 Duration of Benefits. — 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 Conditions for the Receipt of Benefits. — In order to qualify for the first benefit an insured person must have been em- ployed 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 con- tributions for 26 weeks in the 12 months preceding the filing of the new claim. Further statutory conditions for benefits are reporting for registration at the employment exchange, ability and willing- ness to accept work, performance of work or training, and in the case of persons under 21 years of age, married women, and workers who have received six weekly benefits, evidence of need. Addi- tional eligibility requirements are imposed upon part-time workers. Waiting Period. — After the claim 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 wait- ing periods are reduced for persons who were employed only part time prior to their 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. — If unemployment is the result of leaving work without just cause or of dismissal for just cause, the right to benefits is withheld for 6 weeks ; if the benefit claimant re- fuses to submit to vocational training or retraining, he is disqualified for a period of 4 weeks; if unemployment is a direct result of a strike or a lockout, benefits are withheld for the duration of the labor dispute. BELGIUM ^ A voluntary system of unemployment insurance, except for a period of financial collapse during the World War, has been func- tioning in Belgium for nearly 35 years. This system had its origin " Data on the Belgian insurance system have been taken from : Industrial Relations Counselors, Inc., An Historical Basis for Unemployment Insurance, op. cit.; Kiehel, Con- stance A., Unemployment Insurance in Belgium (Industrial Relations Counselors, Inc., New York, 1932) ; "Operation of Unemployment Insurance Systems in the United States and in Foreign Countries, 1931 to 1934", Monthly Labor Review, vol. 39, no. 2, August 1934, pp. 273-307 ; Friedman, Gladys R., "Recent Developments in Unemployment Insur- ance 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 trade- unions for their own members. As a subsequent development to the communal 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 nonunion members. The population density of Belgium, the high degree of industriali- zation, the strong local autonomy of the communes, and the politi- cally conscious character of trade-unionism 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 e\als of local political control had forced basic reorganization 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 communal funds. Approximately 130,000 workers were insured by trade-union and similar plans, representing an insurance coverage of about 10 percent of the working population. During this pre-war period indus- trial conditions were favorable 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 compelled 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 with- out regard to their participation in insurance plans. This responsi- bility, though assumed only as an emergency measure, brought to light many inadequacies of the trade-union insurance plans as meas- ures designed to meet the hazards of unemployment. A Eoyal Decree of December 1920, while reviving the bankrupt insurance societies, amplified and unified to some extent the provisions for contributions SUMMARY OF FOREIGN EXPERIENCE 35 and benefits. At the same time a national emergency fund, similar in organization to the national relief committee, was established to distribute a Federal subsidy to societies that met Government re- quirements. In general the trade-union insurance societies were permitted to conduct their affairs as they chose, provided they kept their unem- ployment insurance accounts separate from other finances. Un- employed members were required on the first day of unemployment to register for work at the employment exchanges which had been coordinated with emergency relief distribution. But, in the ab- sence of detailed Federal regulations, societies varied greatly in their insurance provisions. The national emergency fund supple- mented the grants of insurance societies by paying basic grants and family allowances to needy unemployed persons who had ex- hausted 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 emer- gency fund was supported (a) by a grant from the National Govern- ment; (b) by reimbursement, from societies which were not finan- cially 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 residing in those communes. The communal funds distributed the basic grants and family allow- ances. These communal funds were controlled by communal governments. In the decade from 1920 to 1930 the unemployment insurance sys- tem was changed only slightly. Benefit provisions, requirements, and records of the various societies and communal funds tended toward greater uniformity, and membership 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 com- munes 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 rap- idly 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 na- tional 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 UI^EMPLOYMENT COMPENSATION merits was carrying practically the entire load of unemployment insurance benefits and relief. In 1934 nearly all the insurance so- cieties 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 between insurance and placement; and the protection afforded an insured person de- pended 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 the good will of the unemployed rather than to abide by administrative regu- lations, 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 reorganization of the insurance and relief systems was undertaken. The National Govern- ment issued two decrees on May 31, 1933, amending and extending unemployment insurance, providing for rigorous control of the un- emplo3^ed, defining membership, contributions, and benefit require- ments on a uniform basis. The authority of the Central Government was greatly increased and local governments, though required to con- tribute 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. More 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. Accordingly, on July 27, 1934:, an order to take effect within 6 months abolished communal funds and substituted in their stead nationally controlled placement and unem- ployment 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 the national emergency fund. The history of the Belgian unemployment insurance system well illustrates the anomalies 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 rest of the European continent, created unemployment on a scale which swamped the existing insurance machinery. The need for emergency relief administered on a nation-wide basis as a means of preventing starva- tion and demoralization of its unemployed citizens inevitably strengthened central authority. Administration. — The governing body of the national emergency fund and the labor 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 permanent board which examines the statutes of unemployment insurance societies and rec- ommends the societies for approval by the Minister. A director, a clerical staff, and an inspector comprise the personnel of the organiza- tion. The labor office supervises and directs the work of labor exchanges and of the new placement and unemployment 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 Belgium 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 designed to take over the former functions of communal 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 placement and unemployment offices are as fol- lows : Determining eligibility for insurance of members of approved unemployment insurance societies; verifying the unemployment 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 ap- proved unemployment societies; distributing the funds allocated by the national emergency fund as subsidies to approved societies and their local branches ; obtaining ref imds from societies for unauthor- ized benefits paid to imemployed members; finding employment for idle labor, either directly or through the medium of employment ex- changes established or approved by the Government. The 12 ex- isting employment exchanges are placed under the authority of the 38 UNEMPLOYMENT COMPENSATION placement and unemployment offices in the district in which they are established. The administrative cost of these placement and unem- ployment offices was first to be borne by the national treasur3^ An order of September 12, 1934, however, decreed that 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 secretary consti- tuting a committee to supervise its activities. Three members repre- sent workers' organizations and three represent employers, all ap- pointed by the Minister of Labor and Social Welfare. 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 regard- ing eligibility for insurance or the right to benefits.^" The insurance societies themselves are of four types, central, au- tonomous, 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 com- panies. Auxiliary societies are branches of either central or au- tonomous societies formed for the distribution of additional bene- fits, usually upon the payment of additional contributions. Official societies are those organized for workers who are not members of any other societies. Coverage." — Even though unemployment insurance in Belgium 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 work- ers, domestic servants, musicians, dramatic and variety artists, inde- pendent w^orkers, 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. Belgium in December 1931 had a total population of 8,159,000. The number 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 1-4.9 percent were totally unemployed and 11.9 percent were intermittently unemployed.^^ 10 "Organization of Unemployment Insurance in Belgium." Industrial and Labour Infor- mation, International Labour Office, vol. LI, no. 9, Aug. 27, 1934. p. 276. ^^ Industrial and Labour Information, International Labour Office, vol. LIU, no. 7, Feb. 18, 1935, pp. 206-207. ^- Ministry of Labour Gazette (Great Britain), vol, XLIII. no. 12, December 1935, p. 483, SUMMARY OF F0R2IGN EXPERIENCE 39 Contributions. — Contribution rates throughout the early history of the insurance system have varied with individual societies and witli age and occupation witliin a given society. A Royal Decree of May 31, 1933, doubled the rates then in existence and provided that contributions 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 again increased by a decree that existing rates were to be raised by 1 franc per week for all con- tributors except (a) those under 18 years of age and (b) those em- ployed in public service and Government monopoly undertakings, where the rates were to be increased by 1 franc per month for man- ual workers, 1.25 francs for salaried employees, and 50 centimes for persons under 18 years of age. In other undertakings the rates for workers under 18 were to be increased by 50 centimes a week. The maximum contribution per member was limited to 3 francs a week. The increases, however, were not to be required of members of so- cieties which w^ere in a position to meet their liabilities for a year to come. The national treasury deposits with the national emergency fund an amount equal to two-thirds of the annual contributions of members of each approved unemployment insurance society, as the Government's financial share in contributions. The unemployment insurance societies collect contributions from their members weekly, fortnightly, or monthly, according to the rules of the particular group. In some instances society agents col- lect at the homes or work places of their members ; sometimes a cen- tral location is selected by a representative of the society for the re- ceipt of contributions; but more often the member pays his insur- ance contribution weekly at the society headquarters together with his union dues. A stamp method is rather generally used as a re- ceipt for payment. Benefits.— Individual societies in Belgium are permitted to estab- lish their own rates of benefit for unemployment. The National Gov- ernment has, however, set a maximum to the amount and duration of benefits which a society may grant. Amount of Bene-fits. — During periods of unemployment for a maximum period of 60 days in a year an eligible insured contribu- tor is entitled to statutory benefits from his insurance society. Under certain conditions he is also entitled to family and supplementary allowances from the national emergency fund. The total of his benefits may not exceed two-thirds of his normal wages unless he has three children or more, in which case the maximum is set at three- fourths of the basic wages. If an insurance society is insolvent, the national emergency fund undertakes the responsibility of paying its covenanted benefits. 40 UNEMPLOYMENT COMPENSATION The statutory benefits of unemployment insurance societies vary with the societies themselves, but in no case may such benefits plus the benefits derived from membership in an auxiliary society exceed the basic grants of the national emergency fund which are established at different rates according to age and family responsi- bility, as shown in the following tabulation : Daily rate, Groups panes Unemployed maiTied person, head of family 9.00 Unemployed married woman, not bead of family " 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 emer- gency fund to persons in receipt of statutory benefits in accordance with age, family responsibility, and size of community. These benefits are the following : Oroup Unemployed persons over 18 years : Industrial and commercial localities : ^ ., . Daily rate, Population 50,000 and over: francs Brussels, Antwerp, and their environs 4. 50 Other localities 4. 00 Population under 50,000 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 estab- lished on May 31, 1933, are payable in respect of an unemployed per- son's dependent children and of his wife if, without other work, she manages his household. The rates are as follows : Daily rate, fra >i cs Wife 9.00 Children under 15 years" 3.00 Children 15 " 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 " This rate applies to partially unemployed married women ; totally unemployod married women are excluded from benefits. "The minimum age was raised from 14 to 15 years on July 14, 1933. SUMMARY OF FOREIGN EXPERIENCE 41 responsibility, and size of community in which the person resides. These are given in table 3. Duration of Benefits. — The length of time during which benefits are payable varies with individual societies. The maximum stipu- lated 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 days in a year for the combined statutory and post-statutory benefit period. Waiting Period. — A waiting period of 3 days is required at the beginning of each 6-month benefit period, and, in addition, a regular Table 3. — Maximum weekli/ incomes heloiD tvhich a state of need exists, Selgium Weekly income in francs Industrial and commercial communes Semi-indus- trial and commercial communes Groups 50,000 inhabitants or over Less than 50,000 in- habitants Agricul- tural com- Brussels, Antwerp, and their environs other com- munes munes Persons living alone: 25 years of age or over 150 110 210 6 9 135 105 190 6 9 120 95 170 6 9 105 85 150 5 100 Under 25 years of age 80 Household of two or more persons: Two persons 140 Each additional child under 15 years ofage.. 5 Each additional person over 15 years of age 7 Source: Friedman, Gladys R., "Recent Developments in Unemployment Insurance in Belgium", Personnel, vol. 11, 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 fraction thereof may be paid to persons who have been com- pletely unemployed for at least 2 weeks. The advance must be repaid in full or in part when the beneficiary is again employed. Statutory G onditio7is for the Receipt of Benefits. — 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 COMPENSATION if they have been regularl}' enrolled members of unemployment insurance societies for at least a year. If, however, the unemploy- ment is the direct result of a strike or lockout, or of dismissal from employment with subsequent refusal to accept new work under con- ditions customary in the region, the insured person is not qualified to receive benefits until a month has elapsed since he showed willing- ness to resume work. Belgian nationals who accept emploj^ment abroad are also ineligible for benefits 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 qualify- ing period unless the laws of the society to which the transfer is made require an additional period. But the transferred member 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 membership rolls unless his delinquency of payment is the result 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 period of 6 months. In general, for eligibility to benefits an insured contributor is required to register for work at an employment office twice each day, but he is permitted to absent himself from this registration 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 offered in the appli- cation for such leave of absence. When employment exchanges are notified of vacancies for un- skilled labor, if the conditions of work and wages offered correspond to the conditions customary in the district, these positions are offered first to insured persons who have 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 person may be deprived of benefits for at least a month even if the position offered is not in the insured person's usual occupation and is at a distance from his ordinary place of work. Method of Payment. — Benefits are usually paid weekly by the society agent who collects contributions. The procedure is in gen- eral as follows: (1) The unemploj^ed member presents a certificate from his employer as evidence that his unemployment is involun- tary; (2) he presents his payment card for record of the date, period, amount, and character of all the benefits he has received and for certification of the fact that he has registered at an employ- ment exchange; (3) he presents his membership card as a record SUMMARY OF FOREIGN EXPERIENCE 43 of his contributions; (4) he produces certification from the em- ployment exchange that no suitable work is available. The payment of benefits through the society includes in almost all instances the subsidy from the national emergency fund and its family and supplementary allowances. SWITZERLAND ''^ The first attempt at unemployment insurance in Switzerland was made in Basel Town in 1T89. All workers in the lace and ribbon factories contributed 2 percent of their wages, wdiich 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 the 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 ])rovide compulsory 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 neighbor- ing towns to avoid joining the fund. Left 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 unem- ployment, although experimentation with public employment ex- changes and private unemployment 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 funds did not offer a suffi- ciently broad and stable basis to cope with the problem. The vari- ous unemployment insurance funds had functioned during the war period and had been informally and irregularly subsidized by public authorities. The Confederation, after consideration of the question, decided to formalize and place the subsidies on a permanent basis and thus encourage the development of funds. Switzerland is a democratic country with a Federal constitution like that of the United States, in that the central authority is limited to delegated powers. The 25 cantons of the Confederation are en- 15 Data on the Swiss unemployment insurance system tiave been taken from Spates, T. C, and Rabinovitch, G. S., Unemployment Insurance in Sioltzerland (Industrial Rela- tions Counselors, Inc., New York, 1931) ; Industrial Relations Counselors, Inc., An His- torical Basis for Unemployment Insurance, op. cit.; "Unemployment Insurance in Switzer- land". MQnthly Lahqr Review, vol. 40, no. 5, May 1935, pp. 1203-1207. 44 UNEMPLOYMENT COMPENSATION tirely autonomous except with respect to powers delegated to the Fed- eral Government. No provision in the constitution authorizes the Confederation to enact unemployment insurance legislation, much less to make it compulsory for the cantons, or even to subsidize unem- ployment insurance funds voluntarily created by the cantons. Any of these steps would require an amendment to the constitution by a vote of a majority of the Swiss electors and of the cantons. The Confederation likewise 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.^^ This same principle was utilized, in view of the constitutional diffi- culties involved, to promote and assist the development of insurance funds. The Federal Law of 1924. — The Federal act for the payment of subsidies to unemployment insurance funds was enacted by the Fed- eral Assembly on October 17, 1924. The law provides that Federal subsidies are to be granted to funds based on the principles of in- surance which comply with conditions specified in the act. These conditions relate to (1) the objectives, administration, and member- ship 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 dissolution of any fund; and (5) the conditions under which partial unemployment benefits may be included in the insurance system. In addition to these pro- visions, the law specifies the amount of Federal subsidies to be granted to funds and the general provisions for Federal recognition and supervision of the funds. Under the section of the act dealing with the conditions relating to the objectives, administration, and membership of the funds are found the following four conditions: (a) The fund shall not be car- ried on for profit or for any purpose other than the relief of un- employment; (5) 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 benefits payable, and the utilization of the assets and surplus balance; and (d) no member of one fund shall be at the same time a member of another fund. The act stipulates that the funds shall not pa}^ more than a maximum of 50 percent of normal earnings to members who have no legal dependents and a maximum of 60 percent to members with legal dependents. " By virtue of the ratification of the first resolution adopted at the International Labor Conference at Washington in 1919 for the establishment of a system of free employment exchanges, Switzerland assumed an internntional obligation which became the authority for issuing in 1924 an order requiring each canton to sot up the number of exchanges sufflcienl for the need and coordinated with a central exchange. SUMMARY 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 em- ployment, and produces a certificate from his last employer stating the reason for his unemployment. Subject to the approval of the Federal labor office 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 mem- bers are not entitled to benefits unless they have belonged to the fund and paid contributions for at least 180 days and have served a waiting period of at least 3 days after registration. The maximum period of benefits allowable is 90 days in a period of 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 result 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 ; and that members who refuse to accept suitable employment, who make 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 compensa- tion 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 com- pensation 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 as- sumption that public and joint funds would have poorer risks. The Federal 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 Federal labor office is given the right to inspect at any time the business opera- tions of a fund subsidized by the Confederation and to receive statis- tical 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 COMPElSrSATION the authority competent to decide matters relating to subsidies. The act provides that the Federal Council may prescribe the min- imum 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 reduction 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 Federal Council, issued April 9, 1925, became effective on April 15, 1925, and stipu- lated' in greater detail the procedure by which recognition of funds was to be made by the Federal labor office. It provided that where recognition by the labor office is refused or withdrawn, by virtue of some alteration in the provisions of the fund, appeal may be made, within 14 days, to the Federal Council. Any decision of the labor office regarding subsidies and conditions upon which they are to be granted may be appealed, within 14 days, to the Federal Department of Public Economy, whose decision is final. The Federal labor office is given authority to lay down certain forms and principles of pro- cedure relating to notification of unemployment, employer's certifi- cate of dismissal, and statistical reports, which must be approved by the Federal Department of Public Economy. The act of 1924 merely states that an insured person should receive 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 account of gross or deliberate negligence, refusal to work, disregard of rules or a contract, and voluntarily leaving without good cause (except when continued employment would be contrary to a collec- tive agreement or to the usual wages or conditions of work in the trade) are to be regarded as faults of the insured. Suitable employ- ment is defined so that the capacity of the insured, the future exer- cise of his trade, and his health and morals are safeguarded. It 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 SUMMARY OF FOREIGN EXPERIENCE 47' and wages iii the trade. In cases of reduced working capacity, em- ployment at a; correspondingly reduced wage may be regarded as suitable. In allotting employment away from home, insured persons with dependents must be given special consideration. The Federal Department of Political Economy is authorized to prescribe further provisions for the definition of the two terms. The order provides that the rules governing partial unemployment should be applied to any insured person who becomes temporarily unemployed without terminating his employment contract and there- fore 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, w^hen 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 homeworkers. If an un- employed 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. He must nevertheless register at the employment exchange and accept any suitable em- ployment in his trade. The order provides that public funds must accept 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 quali- fying 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 special 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 crea- tion of an adequate reserve fund. In addition to the provisions in the previous law and regulations, 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 unem- ployment 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 UNEMPLOYMENT COMPENSATION years, the maxinmin shall be reduced by at least one-half in the fourth year, excepting in times of depression or other special cir- cumstances. The Federal Department of Public Economy is authorized to enact special provisions for members belonging to seasonal occu- pations and shall provide for a special waiting period, reduction in the period of benefits during seasons when there are good possi- bilities of getting employment, and establishment of special rates of contributions. Unemployment Insurance During the Depression. — The depres- sion necessitated significant changes in the unemployment insurance laws and regulations in Switzerland. It was soon found necessary to increase the amount of Federal subsidies. On September 23, 1931, the Federal Assembly authorized the Federal Council to in- crease 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 Coun- cil to pay subsidies to seriously affected 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 in- dustries 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, and 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 Federal 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 Federal author- ities 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 rates varying between 4 francs a day for unmarried pei-sons under 22 years of age living at home, and 8.10 francs a day for married persons with dependent children.^'' Besides the extension of the statutory period of benefits, the Fed- eral Assembly found it necessary, by a law of December 31, 1933, >' Industrial and Labour Information, vol. L, no. 7, May 14, 1934, pp. 242-243. SUMMARY OF FOREIGN EXPERIENCE 49 to set Up a relief scheme to supplement tlie insurance system by offering a special subsidy for tlie cantons and for intercantonal asso- ciations of workers in certain occupations paying emergency allow- ances to the unemployed. Workers who had exhausted their statu- tory 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,^® and stipulated that the maxi- mum 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 per- sons without dependents, or 60 percent for those with dependents, provided that such benefits do not exceed certain maximums estab- lished 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 industries most seriously affected by the depression.^^ A more basic revision of the Swiss system was put into effect for the duration of the depression by Order IV of the Federal Council, enacted February 27, 1934, and effective April 1, 1934.-° The act of 1924 provides that funds should not pay benefits to ex- ceed 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 ^ Recueil offlciel des lois et ordonnances de la confM6ration Suisse, nouvelle sSrie, Tome 49, annge 1933 (Impiimerie des Hoirs K. — J. Wyss, S. A., Berne, 1934), p. 873. i» Industrial and Labour Information, vol. L, no. 7, May 14, 1934, pp. 244-245. 2« Recueil offlciel des lois et ordonnances de la confederation Suisse, nouvelle s^rie, Tome 50, annee 1934 (Imprimerie des Hoirs K. — J. Wyss, S. A., Berne, 1934), p. 191; cf. Industrial and Labour Information, vol. L, no. 7, May 14, 1934, p. 243. 50 UNEMPLOYMENT COMPENSATION calculating total and partial unemployment benefits. Thus, unem- ployed 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 Switzer- land only insofar as the public authorities specify forms and pro- cedures, audit accounts, and collect information from the various funds. Simplification and uniformity are obtained through stand- ards established by the legislation providing for the granting of sub- sidies. 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 popu- lation, 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 receipts, but during the depression this proportion has probably been exceeded.-^ Administrative costs have been generally low but are highest in the public funds which require the organization of a special staff. There is no provision in the Federal law regarding procedure for the settlement of grievances or disputes which may arise from con- flicting interpretations of the law regarding claims to benefits. Disputes and appeals are settled in different ways by the different funds and by cantonal or communal regulations. In some funds, disputes are heard by the cantonal courts, whose decision is recog- nized as final by the Federal labor office. Coverage. — At the end of September 1934 there were, in addition to the Federal law, orders, and regulations respecting unemploy- ment insurance, the laws of 24 cantons on the subject, the regular subsidies of 1,620 communes, and the rules and regulations of 197 funds. These laws and these relationships constitute the unemploy- ment insurance system of Switzerland.^- Since the enactment of the Federal law all the 25 Swiss cantons have enacted legislation based upon and supplementing the Fed- eral law. Thirteen cantons now have compulsory unemploj'ment insuranc.e legislation, for specified classes of persons; eight cantons grant to the communes the right to decree compulsory insurance; ^ "Unemployment Insurance in Switzerland", Monthly Lalor Review, vol. 33, no. 1, July 1931. p. 28. ^'^ "Dix ans d'assurance — ChOmage en Suisse", La vie iconomiquej septifeme aun6e, no. 11, novembre 1934. p. 507. SUMMAKY OF FOREIGN EXPERIENCE 51 and four cantons have voluntary insurance. All cantons except one grant regular subsidies to recognized funds,^^ 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 or- ganization 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 profes- sions, 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 as- sociations 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 region. There were 149,650 insured members of 60 funds at the end of September 1925. This number increased to 539,830 in 197 funds in 1934.24 At the end of September 1934 the Federal 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 insur- ance funds, as compared with only 28.6 percent at the end of Sep- tember 1927.25 ^ "Le dSveloppement de Tassurance — Chomage dans les cantons", La vie economique, 8« ann^e, no. 1, Janvier 1935, pp. 36-37. 2* nid., p. 36. '^ "Les chSmeurs assures centre le ch5mage", La vie Economique, 8" annee, no. 2, f6vrier 1935, p. 95. 62 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 employer- employee funds, as compared with 64.2, 17.7, and 18.1 percent, re- spectively, in 1927.^*^ 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 per- sons 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 can- tons 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 num- ber 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 con- tributions of the insured; and the workers have learned that em- ployees 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 con- sisting 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 Switzerland.^^ 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 are in activities suffering from little unemployment still contribute amounts equal to 50 percent and more of benefits.^^ ^^ "Le developpemcnt de I'assurance — ChSmage dans les cantons", La vie I'conomique, 8« ann^e, no. 1, janvler 1935, pp. 39-40. ^ "Les chomeurs assures centre le cbfimage", La vie iconomiqiie, 8® ann^e, no. 2, f^vrier 1935, p. 97. ^"Dix ans d'assurance — ChSmage en Suisse", La vie (conomique, septiSme annSe, no. 11, novembre 1934, p. 506. SUMMARY OF FOREIGN EXPERIENCE 63 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.-^ The average annual con- tribution of the worker was 10.59 francs in 1929. In that year employees' contributions amounted to more than 50 percent of bene- fits 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 per- cent of benefits, or less than one-half as much as in 1929.^^ These figures testify to the expenditures during the depression. The subsidies of the various public authorities now amount to more than 80 percent of all benefits paid out.^^ During the years 1925-29 the average proportion of public subsidies to benefits paid was slightly more than 65 percent.^' The increase during the de- pression 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 1929.^^ Bei^efits. — Although the actual amount of benefits paid to an un- employed individual is determined by the provisions of the fund of which he is a member, a limit is set by the Federal law. As pre- viously stated the maximum payable may not be in excess of 60 and 50 percent of normal earnings for persons with and without legal dependents, respectively. The average amount of benefits paid in 1933 was 5.34 francs per day.^* The average amount of benefits was much higher during the depression years 1930-33 than during the previous 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 compensa- tion during the year. Duration of Benefits. — The Federal law provides that the maxi- mum period for which benefits are payable is 90 days within 360 days, but the Federal Council is given authority to extend this period ^ Cf. Spates and Rabinovitch, op. cit., pp. 224-260. '" "Dix ans d'assurance — Chomage en Suisse", La vie ^conomique, septlfeme annSe, no. 11, novembre 1934. p. 506. ** 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 is set aside as reserve for the following year. ^Metropolitan Life Insurance Co., Unemployment In»urance, Monograph one (revised edition) (New York, February 1935), p. 59. ^ "Dix ans d'assurance — ChOniage en Suisse", La vie icononiiqiie, septifenie annge no. 11, novembre 1934, p. 505. »* IMd.. p. 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 aver- age 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.^^ Waiting Period. — The minimum waiting period required by the Federal Law of 1924 was 3 days 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 serve 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 the 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 em- ployment office, was unable to find suitable employment, produced a certificate from his last employer stating the reason for his unemploy- ment, and paid contributions for at least 180 days. Order II of 1929 required individuals to be employed 150 days during the year preced- ing application for benefits in order to qualify under the definition of a person "normally employed in regular work." Special circum- stances such as depression, sickness, or military service serve to mod- ify the 150-day requirements. Disqualification From Benefits. — Order IV 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 con- tained in Order I of 1925 discussed above. 35 n\&. Chapter III ESTIMATES OF UNEMPLOYMENT IN THE UNITED STATES A DEQUATE statistics of unemployment can be obtained only by l\ complete censuses or a compulsory system of registration in -^ -^ connection with an unemployment compensation system cover- ing 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 the years of cyclical depression. The estimates of unemploy- ment 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. 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 mem- bers ; a Nation-wide public employment service is only now in process of development; and unemployment compensation with its corollary 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 un- employment in April 1930 and occasional censuses in a few localities constitute practically the only other sources of information. The lack of accurate data has necessitated recourse to estimates, among which are the studies of William A. Berridge in Cycles of Unemployment in the United States, 1903-1922, and of Hornell Hart in Fluctuations in Employment in Cities of the United States, 1902- 1917, the estimate of Leo Wolman and Meredith B, Givens of imem- 55 56 UNEMPLOYMENT COMPENSATION ployment among nonagricultural labor from 1920 to 1927 in Recent Economic Changes^ and Paul H. Douglas' estimate of unemployment in manufacturing, transportation, building trades, and mining from 1897 to 1926 in Real Wages in the United States^ 1890-1926. Doug- las' 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. Com- prehensive estimates of the unemployment in the United States from 1929 through 1933 have been published by Kobert R. Nathan.^ His Table 4. — Unemployment in manufacturing, transportation, building trades, and mining, 1897-1026, as estimated "by Paul E. Douglas Year 1897 - 18.0 1898 16.9 1899 - 10.5 1900 - 10.0 1901 7.5 1902 6.8 1903 7.0 1904 10.1 1905 - 6.7 1906 5.9 Percent unem- ployed Year 1907 6.9 1908 16.4 1909 8.9 1910 7.2 1911 9.4 1912 7.0 1913 8.2 1914 -- 16.4 1915 - 15.5 1916 6.3 Percent unem- ployed Year 1917. 1918. 1919. 1920. 1921. 1922. 1923. 1924. 1925. 1926. Percent unem- ployed 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^ 3,441 1923 Minimum volume" 1,532 1924 Minimum volume" 2,315 1925 Minimum volume"- 1,775 1926 Minimum volume" 1,669 1927 Minimum volume" 2,055 1928 (') 1929 Average volume ^ 1, 813 1930 Average volume* 4,921 1931 Average volume* 8,634 1932 Average volume* 12,803 1933 Average volume* 13,176 1 Nathan, Robert R., "Estimates of Unemployment in the United Stages, 1929-1935", International Labour Review, vol. XXXIII, no. 1, January 1936, p. 49. 2 Committee of the President's Conference on Unemployment, Recent Econotnic Changes (McGraw-Hill Book Co., New York, 1929), vol. II, p. 478. Excludes employees engaged In agricultural pursuits. • No estimate available. Nathan, Robert R., op. cit., table 1. . UNEMPLOYMENT 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 regu- larly 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 diifering 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 un- employment. The American Federation of Labor estimates are published regularly in its official monthly magazine, The Americam Federationist\ those of the National Industrial Conference Board have appeared in newspaper releases issued from its offices in New York. VARIATIONS BY INDUSTRIES The extent of unemployment varies greatly among different in- dustrial groups. Wolman and Givens in Recent Economic Changes estimated that unemployment in 1921 was 23.7 percent in manufac- turing; 26.6 percent in construction; 14.4 percent in transportation and communication; 88.1 percent in mines, quarries, and oil wells; and only 3.7 percent in public service, mercantile, and miscel- laneous industries. In July 1934, on the basis of the American Federation 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 fluctua- tions in the employment indexes of the Bureau of Labor Statistics, taking the 1929 and the 1933 averages, indicates decreases in em- ployment since 1929 ranging from 53.7 percent in the lumber indus- try, 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 textiles, and 16.3 percent in food manufacturing. Higher unemployment rates are found for indus- tries manufacturing durable goods and lower rates for those manu- facturing nondurable goods. For these groups as a whole the de- cline in employment between 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 establishments 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 force, whereas others are losing business or possibly extend- ing mechanization and cutting down employment. VAKIATIONS 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 employees, repre- sentative 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 employ- ment statistics have been gathered. Not only have States recognized the need for such data, but the United States Bureau of Labor Statis- tics has been compiling national employment indexes month by month, since 1929, for the following industrial groups : Manufactur- ing, 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 been 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 .employment 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 were necessarily treated in the limited time available. Several checks with other information indicate,' however, that these estimates are at least fair approximations. They, 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 were arrayed according to the rate of unemployment in April 1930, the average for 1933, and the average for 1930-33. (See table 6.) Com- paring the extremes of the array, the rate in Michigan was more Percent of gainful workers Stl^mployed United Sfe Alabama g Arizona. ..3 Arkansas 5 California 3 Colorado 3 Connecticut.. _j Delaware 7 District of CoIl^ Florida ^ Georgia j Idaho. -- Illinois-. Indiana. Iowa Kansas., Kentucky .j Louisiana ^ Maine .) Maryland { Massachusetts.^ Michigan 4 Minnesota 4 Mississippi j Missouri j Montana 4 Nebraska j Nevada. ..I New Hampshir] New Jersey 4 New Mexico... 4 New York 4 North Carolina^ North Dakota. 4 Ohio .r Oklahoma j Oregon 4 Pennsylvania.-) Rhode Island..,' South Carolina4 South Dakota. 4 Tennessee. Texas Utah Vermont. . Virginia.. - Washington ) West Virginia..) Wisconsin [ Wyoming r 1931 76.8 79.8 75.8 81.5 76.1 79.3 75.7 79.1 87.3 77.0 81.7 ■5 81.0 ^ 75.2 7 76.4 ■) 81.5 7 80.1 79.2 77.7 76.6 78.6 75.3 70.3 77.9 83.5 78.2 77.0 81.3 73.8 76.0 74.5 79.3 65.2 77.4 82.2 75.2 76.7 75.7 76.5 73.0 81.7 83.4 80.3 78.6 77.3 77.0 80.6 76.9 78.7 77.1 80.9 1932 65.5 66.1 64.3 63.1 71.1 67.2 62.5 73.7 80.9 63.6 71.9 70.7 62.5 62.7 70.5 72.0 71.6 67.5 68.4 78.6 65.0 56.9 70.2 72.3 67.5 59.3 71.5 64.3 70.2 62.9 65.2 63.6 67.7 78.2 62.7 66.8 72.2 62.7 60.6 70.7 76.1 70.2 67.2 66.1 68.7 69.3 68.6 68.0 67.8 65.6 66. 70.9 61.4 60.8 70.8 64.7 68.3 83.3 85.0 63.4 87.4 71.5 64.3 66.6 69.0 73.1 77.3 69.4 79.7 70.6 65.2 54.1 69.7 74.9 68.5 63.6 64.6 78.7 61.2 61.7 61.9 81.6 72.7 67.8 70.8 78.7 59.8 63.4 87.1 77.3 77.4 68.4 65.7 69.1 74.4 69.3 70.6 71.2 66.1 Unemployed 1930-33 average 25.8 23.2 27.7 25.6 24.0 25.1 26.4 18.3 13.2 27.1 17.0 21.8 28.0 26.6 21.8 21.0 20.8 24.1 21.8 23.4 27.0 34.3 23.4 19.4 24.2 28.4 21.5 27.8 21.8 28.8 26.2 27.8 21.3 18.9 26.9 24.2 21.7 28.3 29.7 17.2 17.5 20.4 24.0 25.7 24.1 21.1 24.4 23.2 23.8 24.2 1930 12.1 10.4 11.7 9.5 12.7 11.7 12.0 9.3 5.8 12.2 9.0 10.5 13.8 12.3 8.5 9.3 11.7 11.2 12.0 9.6 13.2 18.0 11.5 10.0 11. 1 13.7 13.5 12.0 13.2 10.7 12.4 11.8 9.4 13.3 11.2 13.5 11.8 15.3 8.6 7.0 10.2 11.8 11.2 9.2 12.1 10.1 11.6 9.3 23.2 20.2 24.2 18.5 23.9 20.7 24.3 20.9 12.7 23.0 18.3 19.0 24.8 23.6 18.5 19.9 20.8 22.3 23.4 21.4 24.7 29.7 22.1 16.5 21.8 1932 34.5 33.9 35.7 36.9 29.9 32.8 37.5 26.3 19.1 36.4 28.1 29.3 37.5 37.3 29.5 28.0 28.4 32.5 31.6 33.0 35.0 43.1 29.8 27.7 32.5 23.0 18.7 40.7 28.5 26.2 35.7 24.0 29.8 25.5 37.1 20.7 34.8 24.0 36.4 22.6 32.3 17.8 21.8 24.8 37.3 23.3 33.2 24.3 27.8 23.5 37.3 27.0 39.4 18.3 29.3 16.6 23.9 19.7 29.8 21.4 32.8 22.7 33.9 23.0 31.3 19.4 30.7 23.1 31.4 21.3 32,0 22.9 32.2 19.1 34.4 1933 33.2 29.1 38.6 39.2 29.2 35.3 31.7 16.7 15.0 36.6 12.6 28.5 35.7 3.3.4 31.0 26.9 22.7 30.6 20.3 29.4 34.8 45.9 30.3 25.1 31.5 36.4 30.2 35.4 21.3 38.8 38.3 38.1 18.4 27.3 32.2 29.2 21.3 40.2 36.6 12.9 22.7 22.6 31.6 34.3 30.9 25.6 30.7 29.4 28.8 33.9 78470—37 (Face p. 58) 58 UNEMPLOYMENT COMPENSATION any given year are expanding and consequently increasing their working force, whereas others are losing business or possibly extend- ing mechanization and cutting down employment. VAKIATIONS 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 employees, repre- sentative 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 employ- ment statistics have been gathered. Not only have States recognized the need for such data, but the United States Bureau of Labor Statis- tics has been compiling national employment indexes month by month, since 1929, for the following industrial groups : Manufactur- ing, 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. Utilizing the Bureau of Labor Statistics indexes, the United States census of occupations, and the census of unemployment of April 1930, the yearly average .employment 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 were necessarily treated in the limited time available. Several checks with other information indicate,' however, that these estimates are at least fair approximations. They, 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 were arrayed according to the rate of unemployment in April 1930, the average for 1933, and the average for 1930-33. (See table 6.) Com- paring the extremes of the array, the rate in Iklichigan was more Table 6. — Bsiimates of average nonagricuUurai empioyment and unemployment, by States, 19S6-SS Average number at gainful workers Average nnm ber employed Average number unemployed Percent of gainful workers state 1030 1031 1932 1933 1930 1931 1932 1933 1030 1931 1932 1933 Employed Unemployed 1930-33 1930 1931 1932 1933 1930-33 1930 1031 1032 1033 United States 38, 505, 000 38,675,000 38, 670, 000 38, 735, 000 33. 842, 000 29,617,000 25, 253, 000 25,894,000 4.663,000 8, 958, 000 13, 317, 000 12,841,000 74.2 87.9 76.8 66.6 60.8 01! 4 60.8 70.8 64.7 68.3 83.3 86.0 63.4 87.4 71.5 66! 0 69.0 73.1 77.3 69.4 79.7 70.6 65.2 69! 7 74.9 63! 0 04! 0 78 7 01.2 61.7 61.9 81.6 70! 8 78.7 59.8 03.4 87.1 77.3 77.4 68.4 09! 1 69.3 71! 2 66.1 26.8 27!? 26.6 24.0 25.1 26.4 18.3 13.2 27.1 17.0 21.8 28.0 20.0 21.8 21.0 20.8 24.1 21.8 23.4 27.0 34.3 23.4 19.4 28! 4 21.5 27.8 21.8 26! 2 27.8 21.3 20! 0 24.2 21.7 28.3 17! 2 17.5 20.4 25! 7 24.1 21.1 23! 2 23.8 12.1 11! 7 12! 7 11.7 12.0 9.3 5.8 12.2 9.0 10.5 113 8.5 12! 0 9.0 13.2 11! 6 10.0 117 13! 5 12.0 13.2 10.7 12.4 11.8 13! 3 11.2 13.5 11.8 8! 6 7.0 9.8 10.2 11.8 11.2 9.2 ii!o 23.2 20.2 24.2 18.6 23.9 20.7 24.3 20.9 12.7 23.0 18.3 19.0 23! 0 18.6 20.8 22.3 23.4 21! 7 29.7 22.1 10.6 21.8 23.0 18.7 20,2 26! 6 20.7 24.0 24! 8 24.3 27! 0 18.3 10.0 f-- 19.7 217 23.0 19.4 23.1 21.3 34.6 33.2 640, 000 127,000 283, 000 2, 189, 000 207,000 043,000 81,000 243,000 469, 000 060,000 06, 000 2,843,000 1,003,000 6S3, 000 466,000 653,000 621,000 258,000 690,000 1, 091, 000 294^000 1, 089, 000 310, 000 34, 000 171,000 1,057,000 85, 000 5,279,000 042,000 107, 000 2,311,000 329,000 3,479,000 2S9, 000 341, 000 587,000 1, 374, 000 129, 000 103,000 008,000 502,000 4M,000 841,000 62,000 127' 000 270, 000 2, 210, 000 293,000 648,000 81, 000 245, 000 472, 000 642, 000 93,000 2, 802, 000 1,004,000 679,000 464, 000 543,000 520,000 258,000 1, 773! 000 1,710,000 690, 000 1,089! 000 132, 000 309, 000 34, 000 172, 000 ' 83>00 6,328,000 037,000 105,000 2,324,000 524,000 3, 495[ 000 202, 000 no! 000 577, 000 1,379,000 128,000 599; 000 565, 000 454.000 841,000 61,000 519, 000 129.000 265, 000 2, 226, 000 296, 000 652,000 80,000 246,000 473,000 032,000 2, 87li 000 998, 000 46li000 633,000 516,000 258,000 592, 000, 1, 780, 000 1, 722, 000 086,000 .205,000 1,083,000 133.000 309.000 34.000 172.000 1, 093, 000 85.000 5.366.000 633.000 102.000 2.327.000 518.000 332, 000 3, 505, 000 293, 000 323, 000 114,000 568.000 1.371.000 130.000 102, 000 592, 000 566.000 455. 000 836. 000 62.000 610, 000 258>00 2, 252. 000 657.000 247! 000 478. 000 615. 000 2,880! 000 997.000 508, 000 525, 000 615, 000 257, 000 695,000 1,787.000 1.730,000 686,000 254,000 1,083,000 132, 000 304, 000 34, 000 172,000 1,711,000 84.000 5, 412, 000 632, 000 102, 000 2,336,000 617,000 334,000 3.697.000 295.000 316. 000 113. 000 660, 000 1, 376, 000 130,000 102,000 580,000 508, 000 450,000 833, 000 62,000 484, 000 112,000 250, 000 1,912,000 202.000 66.5. 000 74. 000 229.000 412. 000 601.000 86.000 2. 450, 000 879, 000 533, 000 422, 000 488, 000 462,000 227,000 533.000 1.530,000 1,386,000 011,000 265.000 968.000 118.000 2S3.000 29.000 151.000 1, 438. 000 76.000 4. 023. 000 666, 000 97, 000 2, 004, 000 •166.000 286.000 3. 068. 000 245.000 312.000 109. 000 530. 000 1, 230, 000 114,000 91,000 562.000 494.000 408. 000 744. 000 66, COO 422,000 96, 000 225, 000 1, 683, 000 232, 000 491, 000 64, 000 214, 000 363, 000 625, 000 75, 000 2,152,000 767, 000 472, 000 372,000 430,000 404, 000 198, 000 564,000 1,334.000 1.202.000 537.000 233.000 852.000 102.000 251.000 25. 000 130. 000 1. 249. 000 66, 000 4,052,000 493, 000 l,74s!000 402,000 251,000 2,673.000 213.000 270. 000 97.000 464, 000 1.084.000 09,000 79,000 483,000 434, 000 357,000 648,000 49, 000 343, 000 83, 000 167, 000 1, 560, 000 199, 000 408.000 59.000 199. 000 301. 000 461. 000 60.000 1. 705, 000 026. 000 404, 000 332,000 381,000 348,000 176,000 397,000 1.158.000 980.000 481.000 192.000 731.000 79.000 221. OOO 22.000 121.000 1.006.000 65.000 3. 414. 000 428, 000 SO, 000 1, 458, 000 346, OOO 240.000 2. 198, 000 178, 000 228,000 87,000 399,000 922,000 86, OOO 70, 000 410, 000 388,000 309,000 567,000 41,000 362.000 81.000 157.000 1.594.000 193, 000 440,000 67,000 210, 000 303, 000 637, 000 67, 000 1,866,000 064,000 392,000 336, 000 406, 000 357, 000 206, 000 420, 000 1,165.000 941.000 477.000 190. 000 742.000 84. 000 213. 000 22. 000 135. 000 ' 52! 000 3. 351, 000 516, 000 74,000 1, 583, 000 366, 000 263.000 2.152,000 187, 000 275,000 87,000 433,000 941,000 85, 000 71, 000 430,000 393,000 322,000 594, 000 41,000 56, 000 15,000 27, 000 277,000 36,000 78, 000 14! 000 67.000 10, 000 393. 000 124. 000 50. 000 44. 000 65.000 31! 000 57. 000 232. 000 305, 000 80, 000 29,000 121. 000 19,000 27,000 5,000 20,000 219,000 9,000 656,000 70,000 10,000 307,000 59,000 44, 000 411, 000 44,000 29,000 8,000 67,000 138.000 15, 000 12, 000 56, 000 68,000 46, 000 97, 000 6,000 107,000 31, 000 61, 000 527,000 61, 000 157, 000 17, 000 109! 000 117,000 18, 000 710, 000 237, 000 107, 000 92,000 113,000 116,000 60,000 126,000 439, 000 508,000 163,000 46.000 so! 000 9io00 41,000 428, 000 1, 277, 000 144, 000 19, 000 676, 000 122,000 SO, 000 822, 000 79, 000 61, 000 19, 000 113,000 295,000 29,000 24,000 116,000 131, 000 193! 000 12,000 176. 000 46,000 98, 000 606, 000 97, 000 244, 000 21,000 47,000 172, 000 178, 000 28,000 1, 076, 000 372, 000 169,000 120, 000 152,000 167,000 82,000 195, 000 622,000 742, 000 206,000 73,000 352,000 54,000 88,000 5i;000 627,000 30,000 1, 952, 000 22! 000 869, 000 172, 000 92, 000 1, 307, 000 116,000 95, 000 169, 000 - 440, 000 HOOO 32, 000 182,000 178, 000 146, 000 269, 000 21,000 148, 000 50,000 101,000 058, 000 105, 000 208, 000 13,000 37,000 175, 000 78. 000 27. 000 1.030.000 333, 000 176,000 123,000 168! 000 52. 000 175,000 022,000 708, 000 208,000 64,000 341,000 48,000 92,000 12, 000 37,000 664,000 32,000 2,061,000 116,000 28,000 753,000 151,000 71,000 1. 445, 000 108,000 41,000 26,000 127,000 435, 000 45, 000 31,000 150, 000 175, 000 134,000 239,000 21,000 713 74.4 74^9 73.6 81.7 80.8 72.9 83.0 78.2 72.0 78 2 79.0 79.2 76.9 78.2 73:0 66.7 76.6 80.0 76.8 71.0 78,5 72.2 78.2 71.2 73.8 72.2 78.7 81. 1 73.1 75.8 78.3 71.7 70.3 82.8 82.6 79.6 76.0 74.3 78! 0 70! 8 76.2 75.8 89.6 88.3 90.6 87.3 88.3 88.0 94! 2 87.8 89.5 80.2 87.7 91.5 90.7 88.3 88! 0 90 4 80.8 82.0 88.6 8S!9 86.3 91.2 86.5 86'. S 89.3 87.6 88.2 90.0 88!? 86.6 88.2 84.7 93! 0 so! 8 88.2 88.8 90.8 87.9 88:4 90.7 79.8 76.8 81.5 79:3 76.7 79.1 87.3 77.0 81.7 81.0 75.2 8L6 80.1 79.2 77.7 78! 6 75.3 70.3 77.9 78! 2 77.0 81.3 73,8 76.0 79! 3 6.5.2 77.4 75! 2 76.7 76.7 76.5 8l!7 83.4 80 3 78.6 77.3 77.0 80.6 76.9 78.7 77.1 80.9 66.1 63! 1 71.1 62.6 73.7 80.9 63.0 71.9 62 6 62.7 72! 0 67! 5 68.4 65! 0 66.9 70.2 72.3 67.5 69.3 71.5 64.3 62 9 65.2 63.0 67.7 62 7 66.8 72.2 62.7 70! 7 76.1 70.2 66! 1 68.7 68.0 68.0 65! 0 33.9 35.7 30.9 318 37.6 26.3 36! 4 28.1 20.3 37! 3 29.6 28.0 28.4 315 31.0 33.0 35.0 43.1 29.8 27.7 40!7 28.6 35.7 29.8 37.1 34.8 30.4 313 21.8 37.3 33.2 27.8 39! 4 29.3 23.9 20.8 33! 0 31.3 30.7 31.4 310 34! 4 Massaobusetta 34.8 21.3 Now York 38.1 27.3 Pennsylvania 40,2 78470—37 (Face p. 58) 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 un- employment 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 unem- ployment 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 for the 4 years. If data for a complete cycle could be included, it is evident that the variation would be reduced still further. However, it is equally ap- parent that even over a long period, the individual States will ex- perience fairly large differences in unemployment rates, 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, Mas- sachusetts, and Ohio are among the States with the highest per- centage of unemployment, ranging from 28.7 to 35.9. Unemploy- ment 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 pre- sented better opportunities for unemployed city workers to move to farms and out of the industrial labor market. In part, of course, the tendency in some States results from relatively smaller de- creases 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 vol- ume of unemployment are subject to the limitations outlined above and are presented here as crude approximations to the actual fig- ures, which may serve as a basis for some of the "informed guess work" necessarily attendant on planning for unemployment com- pensation. 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 employ- ment, which are essential to unemployment compensation legisla- tion, are probably the most reliable of the three variables. 60 UNEMPLOYMENT COMPENSATION 2® mo Sooo-s'o ooooooooooo O^O3O3O)ddOad&C3OdCSO3C^O2O^C^060000Q0 ■ s> a ® s (3 2 fe 3 >> CqcOCOC0«COlNSSIIM(N«(NC5lN(NIM 'i'moe^—ioooosoocot^coc^i-iecoooot- — t< (> o ® Ss£ ® i 3.2 §«o^ p.^o^^oS>S^6e^§l^ll2l ,9 :& s "1 ' a »-HC^co-**'»ocot^ooo30'-o)a;o^a^O)CiOi0^ciooccoxoGcocc 00C^*000C0e0O»0»OC0NOC^CD^r-tOO •<:jit^*t- t> C3 ? , J > ^ ^.is^ is CS c3 a> ^ c3 c3 fl I 3 ■2 S o 2.9-2 § ^ «^ -2 S.« S I § 3 E.S-g S fe^ «• 1— i— ^(rMCM(rMrMrsjr*a(^roro^rtii»o, o a , j: o o •-i.000>O^C^e0'^OC0t^ 000iO^C>lC0- HCSCSC4C^C^C^MCSC^C^CCCOCOCOCO o oi oi ^* '-H r>; t^ i>l -t^t^^-i0CCC^iCi0 40C^CS TjJ -*t* -^* T^* 'rjJ Tt5 Tf* CO (TO CO CO CO CO CO cc' cm' im' csi i>i c^^ •Is I 03 O >r 3 b . o a o ^^.<^ * s ►< rHCSCOTj'iQCCl-^OOOlCT-tCSCC"^ lOOWOOOSQ^CS MC^CS(NC^C5^MCSC^C0COC0C0C UNEMPLOYMENT IN THE UNITED STATES 61 ior^'*0(0ioi0i-t»-icoa>ooooo»o ciooooooooooocor*i>-t*i>t*r^«o«o CO CO CO* CO CO c4 C^I i-T *-H o o* o oi oi oi 3 11 M-^^._ l^^'Si svxi I, 6/3 o a 3 OOfNt-WCOOt^O-^T 00O'^(NC0t^C0C0i-IOrHO<-HC00S 00 (XJ ^^ |> lo T^ rjf CO CO CO cq c4 as »o rr Q OS. a C3 ® c3 ■ o COCOCOCOCO"^"^^"^Tt^'.t^J>.t^t>.t-*CD C^^ ^' ^" ^* ^" tM r-; r-I r-I O O O* O O QO 78470—37- 62 UNEMPLOYMENT COMPENSATION LONG-TIME TRENDS IN EMPLOYMENT Distinct trends may be discerned in employment in different indus- tries 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, displace- ment of labor by technological improvements, and the effects of tariff policy. During the 1920's there was much talk of technological unemployment, since in those relatively prosperous years employ- ment was decreasing in agriculture, manufacturing, railroading, and coal mining. Most of the labor dispensed with because of mechani- zation was reabsorbed by manufacturing through an enormous in- Table 7. — Estimated numbers of employees attached to the various industries, 1920-27 [In thousands] Industry 1920 1921 1922 1923 1924 1925 1926 1927 All industries. 29, 948 30,753 31.284 32, 129 33, 105 33, 106 34, 678 35, 573 Industries with decreasing employ- ment: Agriculture 2,490 11,183 4,235 1,217 932 3,215 228 2,719 3,729 2,473 10, 754 4,149 1,234 932 3,298 243 2,689 4,981 2,372 10, 737 4,431 1,250 1,199 3,694 249 2,618 4,734 2,328 10,713 4,691 1,254 1,277 4,237 262 2,633 4,734 2,328 10,487 4,658 1,196 1,352 4,015 267 2,674 6,128 2,329 10, 488 4,582 1,182 1,613 4,297 274 2,736 6,345 2,329 10, 677 4,744 1,278 1,594 4,412 284 2,785 6,575 2,308 Manufacturing . 10, 598 Industries with increasing employ- ment: Transportation' 5,204 Mines, quarries, and oil wells... Construction 1,285 1,563 Meicantile... . . 4,623 Banking 288 Government 2,819 Unclassified 6.885 1 Including bus and truck transportation. Source: King, Willford Isbell, The National Income and Its Purchasing Power (National Bureau of Economic Research, New York, 1930), pp. 5fr-61. 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 transporta- tion other than railroading, in communication, in mining other than coal, in quarrying and oil-well drilling, in construction, in mer- cantile trades, in banking and government, and in various unclassi- fied industries including the service trades (table 7). There is, s Weintraub. David, "The Displacement of Workers Through Increases in Efficiency and Their Absorption by Industry, 1920-1931", Journal of the American Statistical Association., vol. XXVII, no. 180, December 1932, pp. 383-400. UNEMPLOYMENT IN THE UNITED STATES 63 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 transfer 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 Table 8. — Average annual indexes of employment in selected manufacturing industries, 1923-28 [Monthly average for 1926=100] Industry 1923 1924 1925 1926 1927 1928 108.8 122.9 124.5 118.6 116.3 115.1 111.1 109.0 105.2 118.3 108.8 105.3 89.5 93.0 91.1 98.2 115.1 113.3 106.9 100.3 108.0 101.6 108.9 94.7 110.4 90.8 99.9 93.1 87.0 88.6 99.2 104.4 110.7 103.1 97.8 103.6 102.9 105.3 99.0 109.0 100.2 98.9 95.4 99.0 102.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 96.4 99.5 99.7 97.8 91.2 91.0 97.7 95.8 88.9 98.1 78.7 90.4 103.4 91.2 97.3 93.8 Selected industries with a decreasing trend in employ- ment: 99.5 95.0 Clothing, men's ... - . . 92.2 87.6 Sawmills . . 86.7 91.9 87.7 Metal stamped ware - . - - 88.8 Cigars and cigarettes ....... 96.0 Carriages 76.7 Pianos -- 77.1 Selected industries with an increasing trend in employment: ' 105.2 Automobiles 111.3 Automobile tires ... .. 103.3 ' The number of indtistries shown as reporting an increasing trend in employment was limited because of the fact that the Bureau of Labor Statistics, until recently, did not secure adequate representation of new and growing industries in its employment reports. Souece: Monthly Labor Revitw, 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 Company, in bus and truck transportation, and in the telephone, tele- graph, 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 southern States of North and South Carolina, Georgia, Alabama, and Tennessee from 111,611 to 253,379. 64 UNEMPLOYMENT COMPENSATION PAKT-TIME EMPLOYMENT The record of total unemployment does not represent the entire unemployment problem. Account must also be taken of unemploy- ment resulting from working short time. Information on partial or under employment is even more fragmentary than for total unem- ployment. The few data which have been collected provide little definite information about part-time unemployment, other than a general substantiation of the commonplace observation that there is a considerable volume of part-time work in "normal" times, and that this volume increases materially in depression years. Ideally, it would be desirable to know (1) the number of part-time workers; (2) the proportion of full time worked by part-time workers; (3) the proportion of total full-time man-hours lost through part-time employment; (4) the incidence of part-time em- ployment by industries. Detailed information of this character is Table 9. — Estimated numbers of employees attached to transportation and communication industries, 1920-27 [In thousands] Industry 1920 1921 1922 1923 1924 1925 1926 1927 4,235 4,149 4,431 4,691 4,658 4.582 4,744 5,204 Industries with decreasing employment: Steam railroads, switching, and termi- 2,163 91 399 307 23 750 311 75 116 2,122 82 394 308 23 700 318 75 127 2,097 77 392 308 21 1,000 322 75 139 2,080 75 388 319 22 1,220 350 76 161 2,041 70 369 318 25 1,220 370 77 168 1,891 68 355 317 26 1,275 377 86 187 1,903 68 354 319 27 1,400 381 86 206 1,856 65 Water transportation 341 Industries with increasing employment: Street railways 322 Pullman . 28 Bus and truck transportation 1,900 Telephone . 385 Telegraph 86 Electric light and power 221 Source: Committee of the President's Conference on Unemployment, Recent Economic Changes, vol. II (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 Labor Statistics published a monthly report on the average percent of full time re- ported 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 de- partment of an establishment were running full time, that plant would report 100 percent full-time operation, regardless of short hours in any of its other departments, Finally, the figures as pub- UNEMPLOYMENT IN THE UNITED STATES 65 lished for the several manufacturing industries are simple averages of the percentages reported by the individual plants; 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 be- cause of the impossibility of determining actual full-time hours from one period to another. Although the National Recovery Adminis- tration codes of fair competition theoretically established standard hours of operation, at the same time they made numerous allow- ances for extending the hours during peak production periods and for contracting them below the code standard when orders were slack. Tlie confusion in reporting the proportion of full time which Table 10. — Proportion of full time ivorked by all employed industries, United States, 1922-33 iDorkers in 29 Industry 1922 1924 1926 1927 1928 1929 1930 1931 1932 1933 Nonmanufacturing: Air transportation 98.1 '99'2' 80.6 95.5 '50.'7" 97.5 Coa! mining (bituminous) 62.0 58.7 66.0 62.7 50.0 Gasoline filling stations Metalliferous mining Automobile garages Manufacturing: Aircraft engines 102.9 98.7 Aircraft Bread and bakeries 97.5 82.6 Boots and shoes 91.0 86.7 92.3 89.6 80.0 96.9 Cane-sugar refining Cigarettes Cotton goods 78.3 "66^6' 79.3 83.0 97.3 Textile dyeing and finishing Foundries 91.2 95.5 96.5 59.6 Furniture Glass 74.1 79.6 Hosiery 90.4 80.3 Iron and steel 47.0 Leather 83.3 84.0 65.9 Men's clothing . 92.0 95.0 '93a' 85.3 70.7 '86^5' 89.2 86.0 '77." 5' '89." 7" 92.3 Motor vehicles Portland cement Sawmills 71.9 96.3 71.9 Rayon and synthetic yarns Rubber tires 91.0 Silk and rayon goods 86.4 Slaughtering and meat packing 97.6 82.1 Knitted underwear 86.8 81.9 75.0 81.3 Wool and worsted goods Souece: "Wages and Hours of Labor Series", bulletins of the U. S. Bureau of Labor Statistics. resulted from this situation left the reports 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 of 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 the bulletins of the "Wages and Hours of Labor'' series. (See table 10.) 66 UNEMPLOYMENT COMPENSATION These averages have the advantage of representing actual, ob- served employee working hours. Their chief disadvantages derive from the fact that the surveys have been spot studies and no in- dustry has been covered more frequently than at 2-year intervals. Because of this fact and because not more than two or three observa- tions, at periods of varying comparability, are available for most of the industries, it is difficult to make legitimate chronological com- parisons with the data. One general tendency in the individual industries covered is ap- parent: The proportion of part-time employment, which was rela- tively 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 pre- sumably working part time in April 1930. 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.' The length of the full-time week, of course, varies, and the census estimates were made on the basis of 5-, 5i/^-, 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 in- clude 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 con- ducted each year since 1929 ; and a survey of Syracuse, N. Y., was made in 1931. The surveys all were made about the first of Novem- ber, and, since they cover carefully selected sections of the respective 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. Part-time workers were tabulated also according to the proportion of full time worked, the frequency class intervals ranging as fol- lows: Less than one-third time; one-third to one-half time; one-half to two-thirds time; two-thirds but less than full time. Table 12 displays this distribution of part-time workers for the three cities. * U. S. Department of Commerce. Bureau of the Census, Fifteeiifh Census of flic United Stwtes: 1930, "Unemployment", vol. II. General Report (U. S. Gorernment Print- ing Office, Washington, D. C, 19.S2), pp. 355-360. UNEMPLOYMENT IN THE UNITED STATES 67 The industrial research department of the Wharton School of Finance and Commerce has compiled estimates of part-time unem- ployment in Philadelphia at four different periods since April 1930. (See table 11.) However, it has released no estimates of the pro- portion 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 part- time workers in all of these cities except Philadelphia. In general, Table 11. — Employment status of gainful workers enumerated in four areas Gainful workers enumerated Employed woi kers Percent of full time worked ' Area and date of Total Full Part Unem- Total Full Part All Part- time workers number time time ployed number time time workers Columbus: ' Percent Percent Percent Percent Percent Oct. 31, 1921 10, 758 78.2 10.3 11.5 9,601 88.3 11.7 95 60 Oct. 31, 1922 11,725 87.9 6.8 5.1 11,261 92.8 7.2 97 62 Oct. 31, 1923 12, 156 88.0 6.3 6.7 11, 527 93.3 6.7 98 66 Oct. 31, 1924 10, 593 80.8 12.2 7.0 9,889 86.8 13.2 95 65 Oct. 31, 1925 12, 075 82.7 9.7 7.6 11,191 89.5 10.5 96 66 Buflalo: ' November 1929 14, 476 87.6 6.7 5.7 13, 655 93.2 6.8 97 63 November 1930 13, 475 66.0 17.3 16.7 11,221 79.4 20.6 93 64 November 1931 15,039 54.5 21.8 23.7 11,479 71.5 28.5 88 58 November 1932 14,909 46.3 22.6 31.2 10, 256 67.3 32.7 86 57 November 1933 Syracuse: * November 1931 15, 729 58.2 13.6 28.2 11,301 81.0 19.0 92 59 7,302 58.7 19.2 22.1 6,684 76.4 24.6 89 54 Philadelphia: ' AprU 1930 890, 000 79.8 5.2 15.0 757, 000 93.8 6.2 December 1930 894, 000 51.1 24.0 24.9 671, 000 68.1 31.9 April 1931 896, 000 60.7 13.8 25.5 668, 000 70.8 29.2 May 1932 902, 500 39.0 21.2 39.8 543, 500 64.8 35.2 ' Computed from weighted averages of midpoints of part-time frequency intervals. ' "Unemployment in Columbus, Ohio, 1921-26", United States Bureau of Labor Statistics, Bulletin 409, June 1926. 3 "Unemployment in Buflalo", New York Department of Labor Bulletin 179, 1932; "Buflalo 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. » "Unemployment in Philadelphia," Special Report No. 6, Industrial Research Department, Wharton School of Finance and Commerce, University of Pennsylvania, 1932. it appeared that part-time work tended to increase in close propor- tion to the increase in unemployment. In Columbus the proportion of 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 faster rate than part-time employment. The average loss from total full- time man-hours apparently reached about 15 percent in 1932 com- pared 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 dis- tributions occurred in the other cities. 68 UNEMPLOYMENT COMPENSATION Kl :« PL, o ^ P4 o ^ ^ g t^ OJ Icd coo OO CO ^O t* O CO CD Q 00 c4 oi '^ ost^oic^oj i2^P:5!!3^ r-i O CO O t- CO i-f ^^ 'O -^ o woo^-cO'-' c:i CO o umb uffal 1934 ■acus ■a(» "Ap-, %^ a a rod §^ o,a« p. ap • H 0 "^ a c ^ u Pt3 .U3 UNEMPLOYMENT IN THE UNITED STATES 69 While the number of part-time workers tended to increase with unemployment, the variation in 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 w^orkers according to proportion of full time worked indicated that roughly 85 percent of them worked half time or more in Columbus. The percentage working half time or more had fallen to TO 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 fluc- tuation 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 Septem- ber 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.^ The estimates by Simon Kuznets in Seasonal Variations m Indus- try 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 in 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 in- dustries evidencing seasonal variation in employment of sufficient amplitude to be especially expensive in the operation of a plan of '' "Fluctuations in Employment in Ohio. 1914 to 1929", U. S. Bivreau of Labor Statistics, Bulletin No. WS. 70 UNEMPLOYMENT COMPENSATION unemployment compensation. Of chief concern here is the industry which has a definite period of the year when employment is ma- terially 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 reflected by department- store employment at Christmas, is of no significance or importance for present purposes. Table 13. — Indexes o f seasonal variatw.is in States, 1923-Sl factory pay rolls in the United Seasonal index: Yearly average =100 a o e> -a < Industry a 03 1-^ ea d 1^ 1 03 C3 5 ■3 3 3 a m o o O Si S > o a e s> Q a Flour 99 105 91 92 103 101 98 102 97 103 102 101 99 96 95 97 94 81 87 85 90 97 94 91 99 102 98 93 105 106 103 103 105 109 116 103 105 101 103 99 101 105 91 87 93 105 97 102 98 96 104 97 104 106 104 100 105 106 128 102 105 102 104 99 104 112 96 93 97 107 97 102 94 95 102 93 104 103 102 97 102 90 107 99 96 99 107 100 103 116 103 100 100 107 98 101 95 97 104 98 101 100 102 98 101 88 89 98 93 96 110 101 103 115 106 105 104 105 101 101 96 100 105 101 98 94 99 98 97 101 77 98 94 94 104 102 102 103 107 107 105 101 103 99 100 100 105 99 92 91 89 94 92 103 73 98 103 90 102 101 92 95 102 106 101 93 101 91 103 98 105 99 92 94 94 98 98 107 91 100 112 98 102 102 97 98 104 110 102 96 105 98 105 99 101 105 96 98 97 99 98 103 110 101 109 103 100 100 98 97 103 107 105 95 102 101 107 100 100 108 100 102 105 103 104 99 116 101 105 109 95 100 103 100 104 106 105 99 103 110 103 102 96 109 101 102 105 104 100 92 95 99 89 108 87 99 103 89 101 100 92 97 99 103 100 105 93 107 104 103 104 105 102 99 96 101 92 105 91 98 100 88 98 95 98 98 101 100 3.1 2.4 4.0 4.9 3.7 3.8 4.0 2.8 3.1 5.3 13.2 1.4 6.3 4.6 5.3 1.2 3.2 8.6 4.8 6.8 3.8 4.2 2.6 3.4 13 Slaughtering and meat pack- ing 10 Cane-sugar refining 14 Cigars and cigarettes Cotton goods. 17 13 Dyeing and finishing textiles. Hosiery and knit goods Woolen and worsted manu- factures.. 15 16 n Silk manufactures 13 Men's clothing ?1 Women's clothing 5.=; Leather .■; Boots and shoes .. ?3 Furniture (lumber) .. 19 Automobile tires and tubes. Petroleum refining 23 5 Glass - . - 1? Automobiles . 3.=! Clay products ?0 Cement ?5 Lumber, sawmills. 15 Steel works and rolling mills, etc 14 Structural iron works Steam fitting.. . 11 19 Source; Kuznets, Simon, Seasonal Variations in Industry and Trade (National Bureau of Economic Research, New York, 1933), pp. 414-415. DURATION OF UNEMPLOYMENT The staff of the Committee on Economic Security studied all avail- able data for the purpose of determining the most probable dis- tribution of the unemployed in the United States by the duration of unemployment from 1922 to 1933, inclusive. Appendix II gives the sources of available information on the duration of unemploy- ment 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 were made. Surveys in which the percentage of employment ranged from 3.0 UNEMPLOYMENT TN THE UNITED STATES 71 to 6.9 percent of the total gainful workers were included in the first group. For the second, third, fourth, and fifth groups the per- centages of gainful workers unemployed fell within the ranges of 7.0-10.9, 11.0-19.9, 20.0-29.9, and 30.0-43.0 percent, respectively. The percentage distribution of the unemployed was tabulated by duration of unemployment for each of these five groups. (See table 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 dis- tribution curve at a certain percentage of unemployment is repre- sentative of the duration experience of the unemployed in the United States when a corresponding percentage of unemployment exists in that group. Since a fair correlation was found between the degree and the duration of unemployment, it was possible to construct esti- mates of duration for the United States as a whole for each of the years 1923-33, even though no surveys were available for 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 per- centage of the compensable labor force unemployed each year and the percentage distribution of duration of unemployment as- signed to each year represented the average unemployment and dura- tion 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 unem- ployed 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 COMPENSATION FOR 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 con- tribution. Especially must the immeasurable factors be recognized as such and 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 unem- ployment, and the value of unemployment statistics will be seriously 73 74 UNEMPLOYMENT COMPENSATION limited if too small an area, too short a period of 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 and 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 cover- age 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 behavior 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 con- fronted 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 unem- ployment in certain heavy industries, of a type that the unemploy- ment insurance scheme had not been designed to cover. The recognition that this was a permanent condition was stubbornly resisted with the result that the fund was usually in financial diffi- culties 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 result a greatly increased amount of Federal aid was inevitable. A grow- ing volume of benefit claims has also been the experience of every voluntary plan in the United States. The inherent limitations which accompany the application of data accumulated in the past to future conditions are greatly ac- centuated when the past data are inadequate. It is necessary to estimate what has occurred in the past, and to be even more cau- tious 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 of a much longer employment cycle. Since unemployment is the result of intricate forces — indi- vidual, 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 in- adequacy by drawing from past experience as well as possible and b}'- 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 require- ments 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. From then on, the many changes in the British law and, in particular the introduction of uncovenanted benefits, grew out of the basic fact that the British Government did not wish to require insured persons who had either exhausted their right to, or were not qualified for, insurance bene- fits to seek aid from poor-relief authorities. The British actuary, Sir Alfred Watson, 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 Parlia- ment in changing rates without relation to experience. In periods of serious unemployment, 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 at 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 COMPENSATION Minister of Labour early in each year on the financial condition of the fund at the end of the preceding year, 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. The Minister is required to report to Parliament on such recommenda- tions within a specified time. The Minister may modify the pro- posed amendments 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 sys- tems, 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 dis- cretion 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 the legislature becomes necessary in emergency situations. ACTUARIAL ESTIMATES OF AN UNEMPLOYMENT COMPENSATION PLAN In building a scheme of unemployment compensation on an actua- rial basis, estimates may take two forms: (1) The rate and duration of benefits may be set, and contributions sufiicient 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 finan- cial and other limitations. The first type of estimate is that com- monly 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 con- traction of employment, and that consequently employers' contribu- tions should be limited. The second type of estimate has been made at contribution rates set at 3, 4, and 5 percent of pay rolls. In order to judge the validity of the actuarial estimates of un- employment compensation it is necessary to analyze the interrela- tionship of the constituent elements. The choice of which elements are used depends upon the available data. The British and Cana- dian actuaries could estimate the number of claims over a period of time, the average duration of claim, and the average total bene- fits, and from these factors could 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 for 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 maxi- mum 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 initia- tion of recovery 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 appreci- ated. Nevertheless, during the combined period a wide range of unemployment rates has been experienced and in the aggregate there is reason to believe that the period is a fair background from which to predict the future. The dearth of data concerning all phases of employment and un- employment as well as of income necessitated the use of much indi- rect methodology in deriving the estimates presented. A word of caution is therefore injected to warn against too literal an applica- tion 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 past. It should be definitely noted that the statistics presented are representative 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 establishments with 8 or more employees during at least 20 different calendar weeks of the year would comprise the compensable labor force, except that 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 of his son, daughter, or spouse, and service performed by a child under 21 in the employ of his father or mother ; service per- formed in the employ of the United States Government or of an instrumentality of the United States; service performed in the em- ploy 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, chari- table, scientific, literary, or educational purposes or for the preven- tion of 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. — Estimated compensable labor force in the United States, April 1930 Category- Total Employed Unemployed 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 of workers excluded from plan by occupation ' 20, 133, 669 6, 416, 138 41.30 13.10 20, 045, 131 5,293,224 45.11 11.91 88,538 1, 122, 914 2.02 Size of firm ' 25.58 Total number of workers excluded from plan 26,549,807 54.40 25, 338, 355 57.02 1, 211, 452 27.60 Compensable labor force 22, 280, 113 45.6 19, 102, 978 42.98 3, 177, 135 72.40 ' Occupational exclusions eliminate all employments excluded by title IX of the Social Security Act. ' Size-of-flrm 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, re- ported 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, con- struction 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 pro- fessional service are excluded. (See also table 1-12 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 THE ACTUARIAL BASIS 79 and from other data. Deductions of the unemployed by socio- economic classes — managerial, professional, clerical, skilled, and un- skilled— 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 in- cluded in the compensable group indicates that the coverage assumed would apply to the group obviously most in need of it. Table 15. — Estimated compensable labor force, United States, 1922-33 [Index: AprU 1930=1001] Total gain- ful workers Compensable labor force Total Employed Unemployed Year Number Percent of gainful workers Number Percent of April 1930 compen- sable labor force I Number Percent of compen- sable labor force 1922 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 43.63 43.76 43.98 41.19 44.39 44.59 44.78 44.97 45.56 46.14 46.72 47.28 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 84.046 92.373 92.580 96.411 99. 263 100. 902 102. 754 108. 151 98. 118 85. 775 72. 154 72. 149 2, 733, 856 1,579,246 1, 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 1923 8.21 1924 10.05 1925 8.37 1926 7.65 1927... 8.08 1928 . 8.30 1929 5.41 1930... 15.87 1931 . 27.86 1932 40.46 1933 41.56 1 100.00=19,102,978. ' For any given year between 1922 and 1930 the number of the total compensable labor force = 22,277,905- (1930— year) r gainful workers 1920- gainful workers 1930 .IT, /gainful workers in agriculture 1922-28— gainful workers in agriculture 1930\ "1„ „„- 2 1^ — 8 ; J 79.2% The extension of this coverage inquiry on the basis of yearly em- ployment 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.^ 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 ^For the period 1922-27 employment estimates were derived from the unemployment 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", International Lahour Review, vol. XXXIII, no. 1, January 1936, p. 49. so UNEMPLOYMENT COMPENSATION each of these years and the estimated employment and unemployment i]i the compensable labor force. This table, as well as the general experience of other countries, indicates the wide variation in un- employment 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 unemploy- ment 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 increase with unemployment, a ratio of contributions to benefits must be maintained over periods of prosperity and depres- sion, 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 two- thirds of the entire unemployment in the compensable labor force is found in the 4 years 1930-33 of the depression, averaging a little over 30 percent of unemployment per year, whereas the 8 years prior to the depression comprise only approximately one-third of the total unemployment, averaging less than 9 percent unemployment per 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 busi- ness conditions in the insurable group. CONTRIBUTIONS In this 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. King's study, The National Income and Its Purchasing Poioer, and for the re- maining years 1929-32 in National Income^ 1929-32, Senate Docu- ment 124. The income for 1933 was estimated by the staff of the Committee on Economic Security. Table 16 shows that the 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 the 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 low 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 THE ACTUARIAX, BASK 81 have greatly diminished, however, with the depression, during 4 years of which an average of only about $604,500,000 per year would have been collected. The variation in annual income is the result not only of the variation in the number of employed contributing but also of the fluctuations in wage rates. BENEFITS The amount that can be paid in unemployment compensation bene- fits, according to the method of approach employed, is limited by the income available. This income was assumed to be that calculated in the preceding section, based on 3 percent of pay roll. The entire Table 16. — State cumulated contributions available for benefits at S-, 4-1 <*«<^ 5-i)erce7it contribution rates, United States, 1922-33 [In millions of dollars] Year 1922 26, 638 1923... 26,028 1924 26, 883 1925 28, 123 1926 29, 694 1927 30, 532 1928 29, 758 1929 33, 035 1930 29, 483 1931 24, 202 1932 17, 685 1933 17, 229 Total assessable pay roll 3 percent Yearly contribu- tions ' 226 521 806 844 891 916 893 991 884 726 531 517 Total funds available for bene- fits 226 747 1,653 2,397 3,288 4,204 5,097 6,088 6,972 7,698 8,229 8,746 4 percent Yearly contribu- tions 2 453 781 1,075 1,125 1,188 1,221 1,190 1,321 1,179 968 707 Total funds available for bene- fits 453 1,234 2,309 3,434 4,622 5,843 7,033 8,355 9,534 10, 502 11, 209 11,899 5 percent Yearly contribu- tions 3 679 1,041 1,344 1,406 1,485 1,527 1,488 1,652 1,474 1,210 884 861 Total funds available for bene- fits 679 1,720 3,064 4,471 5,955 7,482 8,970 10, 622 12, 096 13, 306 14, 190 15, 051 ' 1 percent first year, 2 percent second year, 3 percent third year and thereafter. 2 2 percent first year, 3 percent second year, 4 percent third year and thereafter. 3 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 requires 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 un- employment in each year from 1924 to 1933 by the average compensa- B2 UNiEMPLOYMENT COMPENSATIOjn ble wage loss per nianyear.^ (See table 17.) With these fixed as- sumptions of the amount of total income and the rate of benefits it remained to calculate the length of the period during which benefits might be paid. Unlimited payment of benefits is, of course, impos- sible 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 are 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 been ineligible to compensation by virtue of the Table 17. -Estimates of the compensable wage loss of the covered unemployed in the United States, 1923-33 Year Total man- years of unemploy- ment (in thousands) Average wage loss per man- year ' Average compen- sable wage loss per man-year ' Average compensable wage loss (in millions of dollars) Amount Cumulated 1924. 1,975 1,680 1,511 1,694 1,776 1,181 3,534 6,328 9,366 9,803 $1,520 1,527 1,566 1,584 1,516 1,599 1,573 1,477 1,283 1.250 $684 687 705 713 682 720 708 665 577 563 $1,351 1,154 1,065 1,203 1,211 850 2,502 4,208 5,404 6,519 $1,351 1925 2,505 1926 3,570 1927 4,778 1928- 5,989 1929 6,840 1930 9,342 1931.. 13, 550 1932 18, 954 1933 24,472 ' Table III-l, column 2. > 45 percent 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 6 groups according to the percentage of gainful workers unem- ployed at the time the survey was made. Surveys for which the percentage of unemployment ranged from 3.0 to 6.9 were included '^ No computation was made for 1922 and 1923, since it was assumed that no benefits would be paid during the first 2 years of contributions. This is in line with the Social Security Act, which requires delay of 2 years before benefits commence, in order to Increase the reserve available for the payment of benefits. THE ACTUAKIAL BASIS 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, respec- tively. 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 table 18 are presumably descriptive of the length of time that the unemployed remained idle at five different ranges of unemployment. Thus, to the years when the average unemployment for the United States was 6 percent of the total gainful workers, the distribution with limits of 3 to 7 percent would be applied. To the years when the intensity of unemployment was between 7 and 11 percent, the dis- tribution with those limits would be used, etc. The compensable wage loss for each year from 1924 through 1933 was then dis- tributed according to the distribution of the duration of unemploy- ment 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 reading down the column showing the distribution of wage loss until the figures approximately coincide.^ 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 basis 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. Williamson 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 ; " This method was devised by W. R. Williamson, actuary of the Committee on Economic Security. 84 UNEMPLOYMENT COMPENSATION ^^^^^C^CMMC^C^WMfOC <" r)- CO oi (^i ■^ CD o --J CO uri t^" C5 '-H cc u^ '^ 00 o ^ cc Tf ic r~l oc a: Ci o i— ■' c^" ^^ f'-HC^C^(M "(j^ CO o CO o lO cJ c4 cd o> M lo CO --H cc o oc* o C'i T*-* CO ^^ OS o c^' CO ■^ -^* o' o^ jco-^-^Tpioomcocococor-i -t^OOQOOOOOCOXi'XJGOOOXOOGOaO t^iOCOOOOOC^'^'-HGO'-<'-HOtO'-HC^COC^OiCOC^cOO;'-t'-HOt^COC5iO'-'COO^CSC*fliO 00 lO i-H CD i-H CO O* -^ ^^ »-^' "^ ^^ OS C^ ■^ CO CO 05 •-H CO* rt< »d t^ 00 OS Ci O O '-H c^^ i-HC^C^COCO-^'»r'^iOiO*OiOCOCOCOCDCOr^l>>l>.t^r--t>'t-^t-«OOOOOOOOX)OOOOQOOOOO C^OW3Tf<05C*^TfTHTj4COOCO»-'iOoOOOOOM^»OCCOCOCO^Tj'-«*.t--t>.r^t^t^t^t^t^t^t^t* 'fl,3QJQJ®©C?Qi'S0JC/CiQ3QSC>0PO5JOQjd)©OO©O 'l_,tjjHl-i(-.U.J-.»-000000000000000000000000000 ^OOOOOOOOj^ ®®®©®®®®©©®®®®®©®®®®®®®®©®©®®®®©©©©® i-HWcoTt'iocDr^coo'.T tC^C0Tt*iOc0t-»000lO'-i(MC0^iOC0r-00OO— 'C^CO-^iOCD ■ ■ ■ ■ Hr-t,-(i-l.-(C^I.r--t^t^CDiOiOiO-^iO'^Tl-iO'^'<:t- CD :o ©®©©©©©.QO ©©©©©©©©©©©©© ©©©©©©©©©©© ©© O'-HCMCO-^'O^t-OOOiO'-'C'l ©©©©©©©©©©©©© ; CO r^ 00 Ci o - I CM CO '^ i-O .--- -JC3c3c3c3rtc3c3c3cdc3^c3c^ ^ x3 J3 J3 jq jn ^ jq ©©©©©od?© oooooooo aaaaaasE 3 33 a a 33 3 XJ X2 X3 ,Q ,Q rD .Q ^ OOOOOOOOOOOOOCOOOOOO' aaaaassaESEaaaEEEaEaaEEBSEE 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 "^ '" -^ -^ -^ t-U(V-fcHUiOOOOOOOOOOOOCO ^oooooooo j^^MMiiiM^iiiMMii:^^^^^^^:^^^. iQjtDQPQjajQ^jQjQj a; OP i" i; i) &fe CMCO'^iCCDh-000>'-''-< CMcoT*.c^o OS Ci Oi o o o >■ ifMC-JC^ICOCO-^-^iOO ooooGOOiOsososoioiOiOiasoiaiOsoio 00*H-«J t^ i>^ r^ !>-" 00 CO oo' o oooooooooooocooooocoooooooooccooo i-l|>.COOSiO<-iI:^COOiCDCOOIr^OcOlMO o o rH ,-H cN CO CO '^ ^* lo CD t^ r^ CO oi o o QOOOGOOOOOOOOOOOOOQOOOOOGOOOOOCfiO 'Q>o®CGi>ajQ^QiOJOJ03CJaj' oooooooooooooooog r^cooiO'~'C^JcO"«*'iooi^ooo50'-icNX COCOCOTt<'^TjirJ<-tJl'5t^-(lHTt*-^'^ir:itOu^^ OO O OiO OSOi OOO'-HiN CI CO-^iO OS 4OiOiOiOiOiOiO*OiOtOCOCDiOCDt~-00t^ COCOCOTt<"«*®©'i>a>iD©ajiiJO'-iC^C0Tji»0cDI>iC00iO^C^/^ a ^ s^a -j3 a, s ° > n ^ rl ■o -.4 CI 0 a) o J3 s--^ «M id PJ a 3XJ (U o ja » o o p. ® F ^ o H ^ U 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 the 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 fact that benefits will be paid on a full-time wage basis while the contributions are made on actual pay roll, including much part time. Table 19. — Cumulative distrihution of the total Gompensable tcage loss, 1923-83 Distribution of wage loss (1928-33) Duration ol unemployment Distribution ol wage loss (1923-33) Duration ot unemployment Amount (in mil- lions) Percent Amount (in mil- lions) $16, 131 16, 347 16, 555 16, 766 16, 948 17, 129 17, 309 17, 479 17, 656 17,829 17,999 18, 172 18, 338 18, 521 18, 685 18,856 19,042 19, 224 19, 408 19, 606 19, 816 20,027 20,258 20, 502 20,768 24,472 Percent $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 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 65.9 29 weeks or less 30 weeks or less. 66.8 67.6 4 weeks or less 31 weeks or less . 68.5 32 weeks or less 69.3 33 weeks or less 70 0 7 weeks or less .- 34 weeks or less 70.7 71.4 36 weeks or less 72.1 10 weeks or less..- -- 37 weeks or less 72.9 11 weeks or less 38 weeks or less 73.5 39 weeks or less 40 weeks or less .. . .. .. 74 3 13 weeks or less 74.9 75.7 42 weeks or less. . . . 76.4 16 weeks or less.. 43 weeks or less 77.1 17 weeks or less ... . . 44 weeks or less 77.8 18 weeks or less .. 45 weeks or less.. 78.6 19 weeks or less.. . 46 weeks or less 79 3 20 week s or 1 ess 47 weeks or less. 80.1 21 weeks or less 48 weeks or less... 81.0 22 weeks or less 49 weeks or less 81.8 23 weeks 01 less 50 weeks or less 82.8 24 weeks or less ... 83.8 25 week s or less 52 weeks or less 84 9 26 weeks or less Over 52 weeks 100.0 27 weeks or less.. . To these were added an adjustment upward in the esthnates of man-years of unemployment resulting from inadequacy of data ; and allowances for various contingencies, among them the probability of increased costs in the course of time, as is the experience in all other forms of insurance. Weighting all these factors, Mr. William- son arrived at a loading of 30 percent above the unadjusted estimates of compensable wage loss. Applying this increase of 30 percent to the total compensable wage loss of the unemployed in each year resulted in an increase in the cumulative Avage loss from 1924: to 1933 to $31,815,000,000. (See tables 17 and 20.) This allowance causes a wider disparity between THE ACTUARIAL BASIS 87 income available for benefits and the total compensable wage loss than was evidenced prior to the corrections. Consequently, after the wage loss is adjusted, the maximum benefit period must be short- ened 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 the 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 a 3-week waiting period, and to 12 weeks with a 4-week waiting period. Other es- Tablb 20. — Adjusted cumulative distribution of the total compensable wage loss 1923-33 Distribution of wage loss (1923-33) Duration of unemployment Distribution of wage loss (1923-33) Duration of unemployment Amount (in mil- lions) Percent Amount (in mil- lions) Percent 1 week or less „ $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 21, 251 21, 522 21, 796 22, 032 22, 268 22, 502 22, 723 22, 953 23, 178 23, 399 23,624 23, 839 24,077 24,291 24,513 24, 755 24,991 25,230 25, 488 25, 761 26, 035 26, 335 26, 653 26, 998 31,814 65 9 2 weeks or less 66.8 67.6 68.5 69.3 70.0 70.7 71 4 3 weeks or less 30 weeks or less 4 weeks or less 31 weeks or less 5 weeks or less - 6 weeks or less 33 weeks or less 7 weeks or less 8 weeks or less 9 weeks or less 36 weeks or less 72.1 72.9 73 5 10 weeks or less 11 weeks or less 38 weeks or less 12 weeks or less 39 weeks or less. 74 3 13 weeks or less.- 74.9 76 7 14 weeks or less 41 weeks or less 15 weeks or less 42 weeks or less 76 4 16 weeks or less.. 77 1 17 weeks or less 44 weeks or less ... 77 8 18 weeks or less 45 weeks or less 78 6 19 weeks or less. 79 3 20 weeks or less 47 weeks or less 80 1 21 weeks or less 81 0 22 weeks or less.- 49 weeks or less 81 8 23 weeks or less 50 weeks or less 82 8 24 weeks or less 83 8 25 weeks or less 62 weeks or less 84 9 26 weeks or less.. Over 52 weeks 100 0 27 weeks or less . timates of the duration of benefits possible with a still longer wait- ing 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: Estimated maximAim weeks of benefits Waiting period Rate of contributions 3 percent 4 percent 5 percent 2weeks 10 11 12 15 17 18 21 3 weeks 24 4 weeks 26 88 UNEMPLOYMENT COMPENSATION A word of warning should be injected, however, that the reliability of these estimates decreases as longer duration periods are reached. 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 country. Each area for 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. — Adjusted cumulative distribution of the total compensable wage loss, 1923-30 Distribution of wage loss (1923-30) Duration of unemployment Distribution of wage loss (1923-30) Duration of unemployment Amount (in mil- lions) Percent Amount (in mil- lions) Percent $586 1,620 2,402 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 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 SI. 03 28 weeks or less -.. $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 83.82 29 weeks or less 84.56 30 weeks or less -. 85.22 31 weeks or less 85.83 32 weeks or less -. 86.35 33 weeks or less - 86.81 34 weeks or less 87.26 35 weeks or less 87.71 36 weeks or less 88.12 37 weeks or less 88.48 38 weeks or less -. 88.82 39 weeks or less 89.19 40 weeks or less 89.59 41 weeks or less 90.02 42 weeks or less 90.38 43 weeks or less 90.79 44 weeks or less 91.20 45 weeks or less 91.62 46 weeks or less 92.01 47 weeks or less 92.45 48 weeks or less 92.89 93.30 93.80 51 weeks or less 94.32 94.87 9, 975 82. 14 10, 080 83. 01 Over 52 weeks 100.00 1 It should be again emphasized that the above estimates of the maximum possible duration of benefits with varying contribution rates and waiting periods are based on the assumption of the con- servation of expenditures of accumulated reserves throughout the first 7 years of the system in order to continue paying benefits to eligible employees throughout the 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 mean that the emergency of a major depression with its reduced contributions from lowered pay rolls and its increased obligations for the payment of 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 for the unemployed will then be necessary. THE ACTUAEIAL 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 com- pute the maximum duration of benefits possible with the mainte- nance of solvency up to but not including a major depression. Thus from table 16 it may be ascertained that the total estimated con- tributions to the unemployment compensation fund would be $6,972,000,000 at the end of 1930, with a 3-percent contribution rate. This would permit the following durations of benefits with 2-, 3-, and 4- week waiting periods as indicated below : Maximum dura- Waiting period tion of benefits 2 weeks 17 Aveeks 3 weeks 19 Aveeks 4 weeks 22 weeks Chapter V THE ROLE OF THE FEDERAL GOVERNMENT IN UNEMPLOYMENT COMPENSATION ("CONSIDERATION of legislation for unemployment compen= sation in the United States began many years before the ap= -^ pointment 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 Wisconsin 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 oi voluntary plans, little progress was made. Al- though the number of unemployment insurance bills increased con- siderably in the depression years after 1929, the Wisconsin law, passed in 1932, was the only legislation enacted. Many factors ac- counted for this record of almost complete failure, but the most im- portant 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 that year Senator Couzens introduced a resolution for an investigation of un- employment insurance by the committee on labor. After hearings, the committee reported that legislation for compulsory unemploy- ment insurance was premature, but it favored the voluntary estab- lishment of unemployment reserve funds by employers. 91 92 UNEMPLOYMENT COMPENSATION Little voluntary activity resulted. Under a resolution introduced by Senator Wagner in 1931, an investigation of foreign experience with unemployment insurance was conducted. The committee en- dorsed compulsory unemployment insurance but felt that the Fed- eral Government's role should be limited to allowing credit against Federal income taxes for contributions by employers to State unem- ployment reserve funds. Although Senator Wagner introduced sev- eral bills embodying this principle, none of them ever came to a vote. In February 1934 Senator Wagner and Kepresentative Lewis jointly offered a bill which would both raise revenue and encourage the States to pass unemployment compensation laws. This bill at- tempted to remove the 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 unemployment reserve funds meeting the standards laid down in the Federal act. Although this bill received high praise from many experts, labor officials, and employers, it was not reported 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. Eecognizing 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 December 1, 1934, the recommendations concerning proposals which in its judgment will promote greater economic security." ALTERNATIVES XN UNEMPLOYMENT COMPENSATION LEGISLATION The Committee on Economic Security gave long and careful con- sideration 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 depression of the last years was deemed sufficient reason 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 unemploy- ment compensation was of concern to the Federal Government, the next approach was to determine what the role of the Federal Gov- THE ROLE OF THE FEDERAL. GOVERNMENT 93 ernment should be. Should it establish a compulsory national system of unemployment compensation, or should the Federal Gov- ernment confine its activity to promoting State action and developing a Federal-State cooperative system? A Federal plan which Avould set up a complete system for the administration of unemployment compensation, specifying all benefit conditions, had much to recom- mend it. It offered a chance for the pooling of the risk of unem- ployment 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 avail- able 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 and uniform method of handling the problem of interstate employees — a problem that was practically impossible of solution by State action alone, and one which would inevitably be extremely complicated even in a Federal-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 sub- jected to numerous amendments dictated sometimes more by political considerations than by the needs of the scheme, the possibilities of confusion from changes in a Federal 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 Federal 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, it 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 Federal-State cooperative system where the Federal Government would assume the leadership by removing the disadvantages in in- terstate competition that are always raised against purely State legislation involving costs to industry. The States for their part 78470—37- 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 administra- tive discretion, such as whether or not employee contributions should be collected, whether there should be employer-reserve accounts, etc. Even among persons who strongly believed in the Federal plan and among other advocates of unemployment compensation there was wide difference of opinion on many of these most fundamental ques- tions. 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 con- sideration: (1) A plan in which the Federal Government would grant funds to the States to pay unemployment compensation bene- fits if they passed laws which complied with definite Federal stand- ards; 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 contributed to State unemployment compensation systems. In both these Federal-State cooperative sys- tems, 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 Goverimient and an amount equal to the tax so collected from each State returned to it as a Federal grant if its unemployment compensation law com- plied 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 tax- offset plan, under which a Federal tax was levied on the pay rolls of THE KOLE 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 compen- sation 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 grants 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 rela- tive 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 ^ Four objectives are sought by the provisions relating to unem- ployment 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 administra- tion of their unemployment compensation acts. The provisions of the Federal Social Security Act are summarized in table 22 and described in the following paragraphs. Federal Tax on Employers. — The first and second of these ob- jectives is sought through the imposition in title IX,^ 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 em- ployer in one State is contributing to an approved unemployment iCh. 531, 49 Stat. 620; 42 U. S. C. (193.'! Supp.), §§ 301-1305. '49 Stat. 639 ; 42 V. S. C. (1936 Supp.), if 1101-1110. 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 em- jDloyer 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 the calendar year 1936 ; 2 percent during 1937; and 3 percent in 1938 and thereafter. Wages taxed will include all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash.^ Coverage^ — ^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 em- ployer, 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 j^erformed in the employ of a State, a political subdivision there- of, 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, chari- table, scientific, literary, or educational 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. Interstate Commerce. — ^No employer required under a State law to make payments to an unemployment fund will be relieved from com- pliance therewith on the ground that he is engaged in interstate com- merce, or that the State law does not distinguish between emploA'ees 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.^ 3 49 Stat. 639, § 901 ; 42 U. S. C. (1935 Supp.), § 1101. «49 Stat. 643, § 907 (c) ; 42 U. S. C. (1935 Supp.), § 1107 (c). M9 Stat. 642, § 906; 42 U. S. C. (1935 Supp.), § 1106. II tne cjociai iseuuni,, hearing to the State scommeece" entitled to compensatio failed to comply substsake payments to an unemployment com- Board shall notify such ground that he is engaged in interstate the Board is satisfied tt distinguish between employees engaged 1 49 Stat. 635 : 42 U. S.j/jpLOYERS OF EIGHT OR MORE 2 49 Stat. 626, §§ 301-3 „„ ag "49 Stat. 626, §301; 4'^^^^ * The Social Security A^^j,pj2j ^^^ Tax " appropriation bill, fiscal j , , «„ j . the Seventy-fourth Congls employed on each of some 20 days m Public No 440 74th Coiiifferent calendar week, in employments appropriation of $2,250,0(;cept the following employments : »49 Stat. 626, § 302 (a • 49 Stat. 626, § 308 (a; . , , T 49 Stat. 639 ; 42 U. S.' the crew of a vessel on the navjgable •49 Stat. 627, § 303 (b , «^ 9 49 Stat. 626 ; 42 U. S. spouse ; employment of child under 21 10 49 Stat. 639, § 902 ; ' j, „ ^ 49 Stat. 644, § 910 ; 4it or its instrumentalities, or for State «49 Stat. 64o[ § 903 '(^^talities or subdivisions; " 49 Stat. 640, § 903 ( ons operated exclusively for religious, " 49 Stat.' 640,' § 904 ; ioual purposes, or for the prevention of " 49 Stat. 642, | 906 ; ^ «49 Stat. 639, §§ 901-,^^ Employees ^« i' 49 Stat. 642, § 907 ; - « 49 Stat. 639, § 901 ; percent in 1937, 3 percent thereafter. 78470—37 (Face p. 96) 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 em- ployer 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 the calendar year 1936 ; 2 percent during 1937 ; and 3 percent in 1938 and thereafter. Wages taxed will include all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash.^ Coverage^ — ^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 em- ployer, 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 there- of, 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, chari- table, scientific, literary, or educational 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. Interstate G onmnerce. — ^No employer required under a State law to make payments to an unemployment fund will be relieved from com- pliance therewith on the ground that he is engaged in interstate com- merce, 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.^ M9 Stat. 639, § 901; 42 U. S. C. (1935 Supp.). § 1101. *49 Stat. 643, § 907 (c) ; 42 U. S. C. (1935 Supp.), § 1107 (c). M9 Stat. 642, § 906; 42 U. S. C. (1935 Supp.), § 1106. Table 22. — Htate grants for unemployment compensation administration and conditions for credit aUoicance against tax on employers of eiffJit t (To be administered by the Social Security Board established by title VII* of the act) (Ch. 531, 49 Stat. 620; 42 U. S. C. (1935 Snpp.), S§ 301-1305) FEDERAL GRANTS TO STATES FOR ADMINISTRATION OF UNEM- PLOYMENT COMPENSATION - AMOtTNT OF Federal Appropriation Authokized ' Fiscal year ending June 30, 1936 .. \?4,000,000 Fiscal years thereafter 49,000,000 Amount of Grant to Each State" Such amount granted from time to time as the Social Security Board deter- mines to be necessary for the proper administration of the State law during the liscal year in which payment is to be made, taking into account ; 1. Population of the State; 2. Number of persons covered by the State law and the cost of proper admin- istratiou thereof; 3. Such other factors as the Social Security Board finds relevant. The Secretary of the Treasury, upon receipt of certification of the Social Se- curity Board, shall pay, prior to audit or settlement by the General Accounting Oflice, the amount certified to the State agency charged with the administration of the lew. The Social Security Board shall not certify payments in excess of the amount appropriated for any fiscal year. State Matching Requthed 1. Approval of State law by Social Security Board under title IX; ^ 2. 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 3. Payment of unemployment compensation solely through public employment offices in the State or such other agencies as the Board may approve ; and 4. Opportunity for a fair hearing before an impartial tribunal for all indi- viduals whose claims for unemployment compensation are denied; and 5. The payment of all money received in the unemployment fund of such State inuuedlately upon such receipt to the Secretary of the Treasury to the credit of the Unemployment Trust Fund established by section 904 ; and 6. Expenditure of all money requisitioned by the State agency from the Unem- ployment Ti'ust Fund, in the payment of unemployment compensation, exclusive of expenses of administration ; and 7. The making of such reports in such form and containing such information, as the Board 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 8. Making available upon request to any agency of the United States charged with the administration of public works or assistance through public employmeut, tliG 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. Suspension of Grants' If the Social Security Board finds, after reasonable notice and opportunity for hearing to the State agency, either (1) that a substantial number of persons entitled to compensation are being denied compensation, or (2) that the State has failed to comply substantially with the provisions required in section 303a,' the Board shall notify such State agency that further payment will not be made until tJie Board is satisfied that there is no longer any such denial or failure to comply. 149 Stat. 635; 42 U. S. C. {1035 Supp.), gg 901-904. M9 Stat. 628, §5 301-303; 42 D. S. C. (1935 Supp.), §§ 501-503. «49 Stat. 626, § 301 ; 42 U. S. C. (1935 Supp.), § 501. * The Social Security Act wag not approver! until Aug. 14, 1935, and the supplemental appropriation bill, fiscal year 1036 [H. R. 9215], failed of passage in the first session of the Seventy-foui-th Congress. The Supplemental Appropriation Act, fiscal year 1936, Public, No. 440, 74th ^ong., 2d eess. [H. R. 10464], approved Feb. 11, 1936. included au appropriation of $2,250,000 for the remainder of the fiscal vear ending June 30, 1936. •49 Stat. 626, g 302 (a) ; 42 U. S. C. (1935 Supp.), § 502 (a). •49 Stat. 626. S 303 (a) ; 42 U. S. C. (1935 Supp.). § 603 (a). '49 Stat. 639: 42 U. S. C. (1935 Supp.). §§ 1101-1110. •49 Stat. 627. § 303 (b) ; 42 U. S. C. (1935 Supp.), § 503 (b). »49 Stat. 626; 42 U. S. C. (1935 Supp.), g 503 (a). "49 Stat. 639, g 902; 42 V. S. C. (1935 Supp.), g 1102. "49 Stat. 644, g 910; 42 U. S. C. (1935 Supp.), § 1110. "49 Stat. 640, g 903 (a) ; 42 U. S. C. (1035 Supp.), g 1103 (a). " 49 Stat. 640, g 903 (b) ; 42 V. S. C. (1935 Supp.), g 1103 (b). »M9 Stat. 640, g 904; 42 U. S. C. (1935 Supp.), § 1104. "49 Stat. 642. g 906; 42 U. S. C. (1935 Supp.), § 1106. "49 Stat 639, gg 901-910; 42 U. S. C. (1935 Supp.), g§ 1101-1110 "49 Stat. 642. § 007; 42 U. S. C. (1935 Supp.), § 1107. "> 49 Stat 639. S 901; 42 U. S. C. (1935 Supp.), § ilOl. CREDIT ALLOWED FOR CONXKIBUTIONS UNDER APPROVED STATE UNEMPLOYMENT COMPENSATION LAW Amount and Conditions of Allowanch 1. Not to exceed 90 percent of Federal tax." 2. After 1937 credit is also allowable to any employer who because of favor- able employment experience or adequate reserves is permitted by the State law to reduce his payments, subject to the following conditions:" (o) If the employer contributes to a State pooled fund, the lower rate is based upon not less than 3 years' compensation experience ; (h) If the employer contributes to a guaranteed -employment account, the lower rate is permitted only if the gimranty was fulfilled during the preceding year and the account amounts to not less than TV^ percent of total wages paid during the preceding calendar year ; (c) If the employer contributes to a separate reserve account, the lower rate is permitted only if (1) compensation has been payable from the account throughout the preceding calendar year, (2) the account amounts to not less than five times the largest amount of compensation paid during any 1 of the 3 preceding cal- endar years, and (3) such account amounts to 7^^ percent of the wages paid during the preceding year. "1. All compensation is to be paid through public employmeut offices !u the State or such other agencies as the Board may approve ; "2. No compensation shall be payable with respect to any day of unemployment occurring within 2 years after the lirst day of the first period with respect to which contributions are required ; "3. All money received in the unemployment fund shall immediately upon such receipt be paid over to the Secretary of the Treasury to the credit of the Unem- ployment Trust Fund established by section 904; "4. All money withdrawn from the unemployment trust fund by the State agency shall be used solely in tlie payment of compensation, exclusive of expenses of administration ; "5. Compensation shall not be denied in such State to any otherwi.se eligible individual for refusing to accept new work 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 refrain from 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." Rm'ooATiON OF Approval of State Law " The Social Security Board may, at the end of any year, after reasonable notice and opportunity for hearing, refuse to certify a State whose law has been pre- viously approved in case the State law has been changed so that it no longer contains the above conditions, or if the State has failed to comply substantially with these conditions. If at any time the Board has reason to believe a State law may not be certified, it shall promptly notify the Governor. Unemployment Trust FtTND " All moneys received in the State unemployment fund must be deposited in the Unemployment Trust Fund maintained by the United States Treasury, subject to requisition of the State. These funds are invested by the Treasury and bear interest at the average rate paid by the United States upon all interest-bearing obligations. A separate account is maintained for each State. Interstate Commerce" No person required by State law to make payments to an unemployment com- pensation fund shall be i-elieved on the ground that he is engaged in interstate commerce or tiiat the State law does not distinguish between employees engaged in interstate and intrastate commerce. FEDERAL EXCISE TAX UPON EMPLOYERS OF EIGHT OR MORE EMPLOYEES " Cov] ! OF Federal Tax ^' Employers of eight or more individuals employed on each of some 20 days in a calendar year, each day being in a different calendar week, in employments performed within the United States, except the following employments: 1. Agricultural labor ; 2. Domestic service in a private home ; 3. Service as an officer or member of the crew of a vessel on the navigable waters of the United States; 4. Employment by son, daughter, or spouse; employment of child under 21 years of age by parent; 5. Service for the Federal Government or its instrumentalities, or for State or local governments or their instrumentalities or subdivisions; 6. Employment by nonprofit institutions operated exclusively for religions, charitable, scienlific, literary, or educational purposes, or for the prevention of cruelty to children or animals. Rate of Tax on Employees" One percent of wages paid in 1936, 2 percent in 1937, 3 percent thereafter. 78470—37 (Pace p. 96) fTCifirfirT^ '}s[(irf-q rTr^frrKfTf.-k'Tf'?''. .r ^(\ -JfTo :> :*a* f»i,»>«ir.rf OJ t'iiioel^'jiii Uuii tii.' f.'iT.-irO uo woi.av!a'^!8'j8 .■t» THE EOLE OF THE FEDERAL GO"\rERNMENT 97 Collection of Tax.^ — The Federal tax is to be collected by the Bu- reau of Internal Revenue under the direction of the Secretary of the Treasury. A return must be made for any calendar year not later than January 31 of the following year. The tax may be paid in quarterly installments. Interest at the rate of one-half of 1 per- cent a month is charged on overdue payments, and when any install- ment 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. General Credit Against the Federal Tax.'' — The employer may credit against the pay-roll tax the amount he has actually paid in contributions into an unemployment compensation fund under an approved State law. The total credit allowed may not exceed 90 percent of the tax against which it is credited, so that at least 10 percent of the Federal tax must be paid in any case. Additional Credit.^ — If an employer is allowed a lower contribu- tion 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 differ- ence 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 em- ployer a lower contribution rate if he has a favorable employment experience whether under (1) a State- wide pooled-fund plan, (2) an employer-refeerve 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 : ^ 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 payable by him, in ac- cordance with such guaranty, with respect to employment in such State in the preceding calendar year; or (3) with respect to contri- butions to a separate reserve account, such lower rate is permitted only when {a) compensation has been payable from such account «49 Stat. 641, § 905 (a)-ff) ; 42 U. S. C. (1935 Supp.), § 1105 (a)-(f). M9 Stat 639, § 902; 42 U. S. C. (1935 Supp.), § 1102. «49 Stat. 643, § 909 {a)-(c) ; 42 U. S. C. (1935 Supp.), § 1109 (a)-(c). »49 Stat. 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 legs than five times the largest amount of compensa- tion 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 employers 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 con- ditions not fulfilling the above requirements, by the amount bearing the same ratio to such additional credit ag the amount of contribu- tions made at such lower rate bear to the total of his contributions paid for the year under such law. The term "guaranteed-employment accoiint", a^ 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 (&) gives security or assurance, satisfactory to the State agency, for the fulfillment of 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}^ — 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 unemploy- ment occurring within 2 years after the first day of the first period with respect to which contributions are required ; (3) All money received in the unemployment fund shall immediately upon such receipt 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 refusing to accept new work under any of the following condi- W49 Stat. 640, | 903 (a) (1-6) ; 42 U. S. C. (1935 Supp.), § 1103 (a) (1-6). THE ROLE OF THE FEDERAL GOVERNMENT 99 tions : if the position offered is vacant due directly to 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 similar 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 from 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 tlie 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 interest in the existing law can be claimed. Gertijication of State Plcms}^ — ^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 requirements of the Federal act. On December 31 of each taxable year the Social Se- curity Board shall certify to the Secretary of the Treasury each State whose law it has previously approved. If the Board finds, after reasonable notice and opportunity for hearing to the State administrative agency, that the State has changed its law so that it no longer contains the provisions given above or has failed during any calendar year to comply with any such provision, it must promptly notify the Governor of the State and at the end of the calendar year refuse to certify approval of such law to the Secre- tary 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 employers in the State to see that the State law is properly framed and administered. Federal Unemployment Trust Fund. — The Federal Social Se- curity 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 ^^) that all moneys which they collect for unemployment compensation purposes shall immediately upon re- ceipt be paid over to the Secretary of the Treasury (or to a Reserve bank or designated national bank) to the credit of the unemploy- ment trust fund established in section 904.^^ 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 the trust. The fund is to be treated for investment purposes as a single "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. "49 Stat. 640, § 903 (a) (3) ; 42 U. S. C. (1935 Supp.), § 1103 (a) (3). 100 UNEMPLOYMENT COMPENSATION fund, but the Secretary of the Treasury is required to keep separate accounts with each State agency, crediting 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 are guaranteed as to principal and interest by the United States. All such investments are required to 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 rate, if this is not itself a multiple of one-eighth of 1 percent) . In making such invest- ments the Secretary of the Treasury is authorized to buy new Government securities at par or outstanding issues at the current market 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 to pay out to the States amounts standing to their credit in the unem- ployment trust fund as needed by them for the payment of unem- ployment compensation. The Secretary of the Treasury may either sell on the open market the ordinary Government securities belong- ing 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 Treasury complete control over the investment and liquidation of these funds; and (3) through the device of special, nonnegotiable obligations issued to the unemployment trust 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 unemployment reserve funds as completely as is humanly possible is obvious. It, likewise, will not be disputed that the maximum possible degTee of security is assured through the requirement that these funds shall be invested exclusively in obligations of the United St.ates 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 ex- perience of many State accident compensation insurance funds dur- ing this depression. In large part these funds have been invested in municipal, public-utility, and industrial bonds— as unemploy- ment compensation funds very probably would also be invested if no restrictions upon this point were included in the Federal act. At least in Ohio and Oregon, State accident compensation funds have suffered serious losses on such securities in recent years. Section 904 of the Federal Social Security Act prevents a similar experi- ence with unemployment compensation 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 reserves are ac- cumulated in periods of prosperity, and out of which payments are made to workmen who become unemployed in periods of depression. The reserves which are accumulated in periods of prosperity must be invested in securities, and compensation can be paid to unem- ployed workers, when needed, only through the liquidation of these securities. The sale of 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 com- pensation funds, is bound to have a depressing effect upon the mar- ket and to increase the tendency toward deflation. Payment of compensation to unemployed workers when depression sets in h,as of itself a stabilizing effect, since it tends to keep up purchasing power, but this may be more than offset through the deflationary effects of dumping on the markets the securities in which the un- employment 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 Confer- ence on Economic Security on November 14, 1934: "Unemployment insurance must be set up with the purpose of decreasing rather 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 non- negotiable 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 the redemption of these securities at par with interest. Similarly, the Treasury can avoid the sale of the other Government securities held by the unemploy- ment trust fund on the markets when it becomes necessary to liqui- date these securities, through buying them itself or selling them to the Federal Reserve banks. In this way the unemployment trust fund can become an instru- mentality for stabilizing credit conditions. The total amounts which will be collected for unemployment compensation purposes will, after the 3-percent rate has come into effect and pay rolls have been re- stored to pre-depression levels, total above $800,000,000 per year. This is a sum sufficiently large so that its investment and liquida- tion 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 Govern- ment, 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 they are 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 liqui- dation of the unemployment trust fund, he can use this 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 inflationary tendencies, he can avoid increasing these tendencies (as will inevitably be the result of the purchase of Government secur- ities 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 unem- ployment trust fund may be redeemed. As the President stated : "It 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 Adminis- tration.— Even with the competitive costs of unemployment com- pensation removed through the Federal pay-roll tax, States may stiU hesitate to enact legislation because of the increased appro- THE ROLE OP THE FEDERAL GOVERNMENT 1U3 priations that may be necessary for its administration. In order to assist the States in defraying the cost of the administration of their unemployment compensation laws, the Social Security Act in title III " 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 ^^ and must include provisions for : ^^ (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 employ- ment offices in the State or such other agencies as the Board may approve ; and (3) Opportunity for a fair hearing, before an impartial tribunal, for all individuals whose claims for unemployment compensation are denied ; and (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 fciive of expenses of administration ; and (6) The making of such reports, in such form and containing such informa- tion, as the Board 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 employ- ment, 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?-'' — For each State in which such conditions are met the Board will certify to the Secretary of 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 determi- nation is to be based on (1) the population of the State; (2) an esti- mate 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. "49 Stat. 626, §§ 301-303; 42 U. S. C. (1935 Supp.), §§ 501-503. "49 Stat. 626, § 301 ; 42 U. S. C. (1935 Supp.), § 501. "49 Stat. 626, S 303 (a) ; 42 U. S. C. (1935 Supp.), § 503 (a). "49 Stat. 626, § 302 (a) ; 42 U. S. C. (1935 Supp.), § 502 (a). 104 UNEMPLOYMENT COMPENSATION Suspension of Grants}^ — ^Whenever the Board, after reasonable notice and opportunity for hearing to the State agency charged with the administration of the law, finds that in the administration of the law there is (1) a denial, in a substantial number of cases, of unem- ployment compensation to individuals entitled thereto under such law; or (2) a failure to comply substantially with any provision required as a condition for receiving a grant for administration, the Board may refuse to certify further 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 re- view function of securing proper administration but will give expert advice and assistance to the States in their legislative and adminis- trative problems. Under title VII ^^ of the Federal act the Board is given the "duty of studying and making recommendations as to the most effective methods of providing economic security through social insurance, and as to legislation and matters of administrative policy concerning * * * unemployment compensation * * *." -^ The Board should be of material assistance to the States if it con- scientiously performs this duty. "49 Stat. 627, § 303 (b) ; 42 U. S. C. (1935 Snpp.), §503 (b). ^"49 Stat. 635, §§ 701-704 : 42 U. S. C. (1935 Supp.), §§ 901-904. 2«49 Stat. 636, § 702; 42 U. S. C. (1935 Supp.), § 902. Chapter VI STANDARDS OF UNEMPLOYMENT COMPEN- SATION: STRUCTURAL PROVISIONS THE SOCIAL SECURITY ACT/ as outlined in the preceding chapter, establishes a Federal-State system of unemployment compensation which leaves to the States the option and initia- tive of 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 from mere relief. "When the Social Security Board has approved a State law, the State becomes eligible for grants from the Federal Government for the administrative expenses of the State unemployment com- pensation system. Except for these requirements, the States will have freedom to set up any unemployment compensation system they wish, without re- striction from the Federal 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 sys- tem if they so desire. Likewise, the States must determine their own compensation rates, waiting periods, and maximum duration of benefits. Such latitude is very essential, because the rate of unem- ployment varies widely in different States, in some being twice as great as in others. It is in accordance wdth 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 sugges- tive 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 Wis- » Ch. 531, 49 Stat. 620 ; 42 U. S. C. (1935 Supp.), §§ 301-1305. 105 106 UNEMPLOYMENT COMPENSATION consin), 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 those 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 the provisions contained in titles III and IX of the Federal Social Security Act.^ While, in a general way, the esti- mates 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 an 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 Secur- ity Act and European experience. Where pertinent, reference is also made to available data on unemployment compensation and to the recommendations of the Committee on Economic Security." COVEEAGE 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, are 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 there 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.^ 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 Stat. 626, §§301-303, 639, §§901-910; 42 U. S. C, (1935 Supp.), §§501-503, §§ 1101-1110. 3 The Staff of the Committee on Economic Security prepared "model State bills" em- bodying many of the suggestions that follow. These bills have been superseded by draft State bills prepared by the Social Security Board. M9 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:^ (1) Agricultural labor, (2) domes- tic 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, daugh- ter, or spouse, or by a child under 21 years in the employ of his father or mother, (5) employment by Federal, State, or local govern- ments, and (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 navigable waters is under Federal jurisdiction. Employees of religious, charitable, and other types of institutions enumerated in class 6 above 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 at that date. If adjusted to account for the natural increase in the population, 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 pri- marily engaged in the manufacturing industries. It should be borne in mind, however, that the groups included in the coverage are those M9 Stat. 643, § 907 (c) ; 42 U. S. C. (1935 Supp.), § 1107 (c). 108 UNEMPLOYMENT COMPENSATION 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 that group represents less than one-half of the working population.*' Table 23. — Estimated coverage of assumed unemployment compensation system-, hy States, average for 1930 Gainful workers Compensable labor force State Total April 1930 Nonagri- cultural (in thousands) Number (in thousands) Percent of total gain- ful workers United States. 48.832,590 38, 505 22, 279 45.6 Alabama . - 1, 026, 320 165, 304 667, 870 2, 500, 969 402,894 677, 292 98, 104 243, 859 599, 010 1. 162, 174 162, 223 3, 184, 875 1,251,177 912, 832 694, 276 907, 166 815, 725 308, 617 672, 906 1,814,422 1, 927, 498 992, 847 844,877 1, 458, 054 216,471 507, 022 42, 885 192, 671 1, 712, 125 142, 866 5, 523, 085 1,141.129 240, 317 2,615,938 828,029 409, 680 3, 722, 428 297,168 687. 721 247, 688 958, 209 2,207,118 170,013 141,191 880, 276 664,813 570,459 1,129,546 92,451 540 127 283 2,189 297 643 81 243 469 660 96 2,843 1,003 583 466 553 521 258 590 1,762 1,691 691 294 1,089 137 310 34 171 1,657 85 5 279 642 107 2,311 525 329 3,479 289 341 117 587 1,374 129 103 608 662 454 841 62 312 73 161 1,267 172 372 47 112 271 382 56 1,645 580 337 270 320 301 149 341 1,019 978 400 170 630 79 179 20 99 959 49 3,084 371 62 1,337 304 190 2,013 167 197 68 340 795 75 60 352 325 263 487 36 30.4 44.2 24.6 California 50.7 42.7 54.9 47.9 District of Columbia -.- 46.0 Florida 45.2 Georgia . - - . 32.9 Idaho . -- 34.5 niinois 51.7 46.4 36.9 Kansas 38.9 35.3 36.9 48.3 ."^O. 7 56.2 50.7 Minnesota . _ . 40.3 20.1 43.2 Montana . . - 36.5 Nebraska . - - - 35.3 46.6 51.4 New Jersey - 56.0 34.3 New York - -- --- 55. 8 32.5 25.8 51.1 Oklahoma .... _ . . 36.7 Oregon .. 46.4 .■i4. 1 Rhode Island ... 56.2 28.6 27. 5 Tennessee . .. 35.5 36.0 Utah.. 44.1 42.5 Virginia 40.0 48. 9 West Virginia... . _ 46.1 43.1 Wyoming 38.9 • See table 14, p. 78. STANDARDS OF STRUCTURAL PROVISIONS 109 For a rough approximation of the number of employed workers who would be covered if such a plan were initiated now, see table 24, which presents 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 would, of course, exclude from immediate cover- age all persons now unemployed, but they will be covered when reemployed in occupations and establishments to which the State law is applicable. Eventually 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, dij States, 1933 state United States Alabama Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota.. _ . . Mississippi Missouri Montana Number of employed workers covered 14, 611, 000 204, 000 46, 000 89, 000 900, 000 109, 000 254, 000 38, 000 110,000 171,000 303, 000 38, 000 1, 048, 000 375, 000 221,000 190, 000 229, 000 202, 000 116,000 237, 000 668, 000 531, 000 269, 000 107, 000 419, 000 47, 000 State Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina. North Dakota.. Ohio Oklahoma Oregon Pennsylvania. _- Rhode Island... South Carolina.. South Dakota... Tennessee Texas Utah Vermont Virginia Washington West Virginia... Wisconsin Wyoming Number of employed workers covered 120,000 12,000 76, 000 591, 000 29, 000 1, 892, 000 291, 000 42, 000 894,000 207, 000 148, 000 1, 215, 000 106, 000 155, 000 49,000 244,000 531, 000 48,000 40, 000 246, 000 222, 000 182, 000 335,000 23,000 UNEMPLOYMENT COMPENSATION FUND Tlie first step in legislation for unemployment compensation is the establishment of an unemployment compensation fund. This fund is customarily defined to include all contributions and money paid into and received by the fund, and property and securities acquired by and through the use of moneys belonging to the fund, and of interest earned upon the moneys belonging to the fund, and is admin- istered without liability on the part of the State beyond the amounts paid into and earned by the fund. 78470—37- 110 UNEMPLOYMENT COMPENSATION The stipulation that the fund be used solely to pay benefits is neces- sary to conform to the requirements .for Federal approval/ Admin- istrative 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 pay- ments 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 con- sistent 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 bene- fits 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 pro- cedure 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 "un- employment trust fund" maintained by the Treasury of the United States Government.^ The State agency of an approved State un- employment compensation system may requisition from the unemploy- ment trust fund such amounts from time to time as are required for the payment of benefits. The wording of State laws creating State unemployment compen- sation funds is important because of constitutional provisions con- cerning the custody and management of State funds in several States. Four States (California, New Mexico, Wyoming, and Michigan) re- quire 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 requirements of the Federal Social Security Act for the deposit of State unemploy- ment compensation funds with the unemployment trust fund of the United States. Other details of State legislation concerning the deposits, invest- ments, 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 the State unemployment compensation fund have been proposed: (1) M9 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); 640, §903 (a) (3); 42 U. S. C. (1935 Supp.>, § 503 (a) (4), § 1103 (a) (3). STANDARDS OF STRUCTURAL PROVISIONS 111 State -wide pooling of funds with or without adjustment of contribu- tion 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 dis- continued 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 equi- tably available employment among all employees. On the other hand, if all funds are pooled, the employer may actually increase the 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 reduce his force during depressions rather than to reduce hours and spread work. Those who advocate pooling all contributions maintain that the im- portant thing in building an unemployment compensation fund is to provide protection against unemployment. It is argued that the finan- cial incentive contained in the possible reduction 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 pro- duction, 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 the 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 to all workers, inasmuch as it spreads the risks of unemployment over a large group of employers and a 112 UNEMPLOYMENT COMPENSATION wide variety of industries, thus utilizing the principle of insurance with the broadest possible spread of the risks. In the reserve-account system, on the other hand, the reserve accounts of employers with a high rate of lay-offs may at times be inadequate to provide bene- fits to all their workers, while funds may be immobilized in the reserve accounts of other employers not subject to such fluctuations in business. It is held that, since the employees, and often the em- ployer, are not responsible for such high rates of unemployment they should not be penalized. Under a pooled-fund plan, the reserves are available to any employee irrespective of his employer. The Committee on Economic Security recommended that Federal legislation recognize both types of plan, or combinations of the two types. Feeling, however, that the favored employer in a stable busi- ness should make some contribution to the general burden, the Com- mittee recoimnended partial pooling of contributions, i. e., that em- ployers with individual-reserve accounts be required to contribute at least 1 percent of pay roll (when the 3-percent tax becomes effective) to a general pooled fund. This fund would constitute a reinsurance fund to pay benefits when an employer's reserve account had been exhausted. The Social Security Act does not require employers hav- ing individual accounts to contribute to a general State fund, as out- lined above, but it is permissible under the Federal act to do so. It has also been proposed that employers be permitted to adopt systems of guaranteed employment in lieu of unemployment com- pensation. This is permissible for the tax credit under the Social Security Act under the following conditions : Plans 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 months ^ to all employees in one or more distinct establishments of an employer, who must give security — satisfactory to the State agency — for the fulfillment of such guarantee. Employees may be required to serve a probationary period of 12 weeks before they are included under the guaranteed-employment plan. Employers having such plans must contribute to a guaranteed-employment account iji the State fund until such account reaches 7.5 percent of the employer's annual pay roll.^° Guaranteed-employment plans have been voluntarily adopted by several employers in this country who have stabilized their employ- ment and recently by a number of employers under the Wisconsin law. Although a substitute for unemployment compensation, guar- anteed employment has many dissimilar characteristics. The protec- tion which it affords the worker at the beginning of a contract year 9 49 Stat. 644, § 910 (c) (3) ; 42 U. S. C. (1935 Supp.), § 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 guar- anteed, 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 wrecks 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 protec- tion derived from his past employment unless provision is so made. The employers w^ho 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. Care, however, must be exercised to assure actual protection fully as ade- quate 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 organiza- tion of State funds. ^^ The act, however, does not permit credit offset against the Federal excise tax imposed by title IX ^^ for contributions to a reserve-account or guaranteed-employment plan exempted from a State unemployment compensation system. CONTKIBUTIONS The Federal Social Security Act imposes taxes on the pay rolls of employers who employ eight or more workers at some time in at least 20 weeks of the calendar year for all employees in the occupations covered. These taxes are effective on and after January 1, 1936, at the rate of 1 percent of pay roll for the first year, 2 percent for the second year, and 3 percent thereafter, and are payable into the Fed- eral Treasury.^^ States which establish unemployment compensa- tion systems approved by the Social Security Board will be given grants from the Federal Government for administrative expenses, and, in addition, the 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 Federal excise tax under the following conditions: "49 Stat. 643, 644, §§ 909, 910; 42 U. S. C. (1935 Supp.), §§ 1109, 1110. This will be more fully discussed in connection with the section on contributions. 1=49 Stat. 639, §§ 901-910; 42 U. S. C. (1935 Supp.), §§ 1101-1110. "49 Stat. 640. § 903 (a) (3) ; 42 U. S. C. (1935 Supp.), § 1103 (a) (3). 114 UNEMPLOYMENT COMPENSATION (a) It the employer contributes to a State pooled fund, the lower rate is based upon not less than 3 years' compensation experience. (6) If the employer contributes to a guaranteed-employment account, the lower rate is permitted only if the guaranty was fulfilled during the preceding 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 reserve account, the lower rate is permitted ohly if (1) compensation has been payable from the account 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 the wages paid during the preceding year." 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 Eng- land the division is one of "equal thirds" between employers, em- ployees, 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 hav- ing to contribute to a State unemployment compensation system. The Federal law does not tax employees, since there is no element of interstate competition involved. The decision as to whether em- ployees 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 that 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 draft- ing the Social Security Act. The customary argmnents for and against employee contributions are as follows : For Against (1) Employee contributions justify (1) Wage rates of many employees giving employees a greater voice in the are so low that even a small rate of administration of unemployment com- contribution will constitute a serious pensation and a feeling of responsi- burden. bility which will help to prevent abuse (2) Employer contributions can be of the benefit provisions. passed on to the consumer ; this is not (2) They will remove the taint of possible for employee contributions, charity from benefits. Exclusive employer contributions are (3) They will permit more ade- a recognition of the fact that unem- quate benefits. Benefits made possible ployment is a legitimate cost of pro- by a 3-percent levy can be paid 50 duction. percent longer if employees contribute (3) The employee as a consumer an additional 1 percent. will pay the large part of employer "49 Stat. 644, § 910; 42 U. S. C. (1935 Supp.), § 1110. STANDARDS OF STRUCTURAL PROVISIONS 115 For Against (4) Employer contributions in the contributions; it is unfair to require long run tend to be deducted from him to pay an additional amount di- wages ; the employee will gain by mak- rectly out of his wages. ing a small direct contribution. (4) The employee necessarily bears (5) Employee contributions are al- the greater part of the economic bur- most universally required in foreign den of unemployment even when com- unemployment insurance systems. pensated ; 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 unemploy- ment compensation. The District of Columbia law is the only one in the United States which provides for Government contributions in addition to its con- tributions as an employer. The amounts are $100,000 for the cal- endar 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 f ollowg : "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 taxa- tion." " Instead of a flat rate for all employers, the State law may provide for different rates in future years, depending upon the unemploy- ment experience of the particular employer. This may be provided in several different ways. If a State chooseg 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 lor which such additional credit would be allowable. A State, however, may wish to provide in its basic act for a system of rating contri- butions. If the State desires to adopt an employer-reserve account system, it will want to require at least the reserve necessary to obtain "addi- tional 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. " Unenvployment Oompensation for the District of OolumMa, Rept. No. 858 (to accom- pany H. R. 7167), 74th Cong., 1st sess., House of Representatives, p. 10. 116 UNEMPLOYMENT COMPEIvrSATION and (3) at the start of the calendar year in which such reduction is made his reserve account equals at least five times the largest amount of benefits paid from such account within any 1 of the 3 most recently completed calendar years. When these condi- tions are met, the State is free to reduce the employer's contribu- tions to zero. However, the "model" bill prepared by the staff of the Committee ^^ suggested that when the employer's reserve account reaches 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 roll throughout the given calendar year; and, if his account reaches at least 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 that, if the benefits payable from an employer's reserve account within any calendar year are greater than his contributions to such account for such year, his contribu- tion 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 increased to the standard rate of contributions, whichever is higher. The suggested bill further provided for a contribution of 1 percent to a pooled account by employers having individual-reserve accounts. This pooled account would serve as a reinsurance fund for reserve accounts that may become exhausted and would provide compensa- tion for employees when they have credits for benefits based on em- ployment with a specified employer and only on the basis of em- ployment with such employer. If such a pooled account is pro- vided, the employer should in any case be required to make a con- tribution to it, no matter what his reserve account amounts to. If a State wishes to allow guaranteed-employment plans, it will wish to follow the standards required in the Federal act so as to permit employers with such plans to obtain "additional credit." Table 25 gives by States a rough approximation of the 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 com- pensation systems will vary year by year according to fluctuations in the number of covered persons employed as well as in their earnings. Both factors will have an important bearing on the total amount raised. Tracing the estimated income through the 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 low reached in 1933. Since low rates of pay tend to accompany high rates of unemploj'^ment, 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 " See footnote 3, p. 106. STANDARDS OF STRUCTURAL PROVISION'S 117 accumulated during less adverse times to meet depression emergen- cies, drastic measures may be necessary to maintain the system on a solvent basis during prolonged and widespread unemployment. Table 25. -Estimated wages and salaries of compensahle lator force and income from a 3-percent contribution, by States, 1933 State Total wages and salaries of gainful workers, 1929 (in millions) Wages and salaries of total compensable la- bor force (in millions) 3-percent contributions for total com- pensable 1929 1933 labor force, 1933 (in thousands) United States -- $59, 797 $33, 785 $17, 602 $528, 060 1 589 209 320 3,738 445 995 122 400 528 654 147 5,024 1,512 819 658 689 622 326 800 2,709 3,000 1,032 300 1,614 237 449 61 217 2,752 120 9,906 632 153 3,855 748 492 5,481 404 300 161 676 1,855 203 145 733 891 657 1,309 108 2 333 118 181 2,112 251 562 69 226 298 370 83 2,839 854 463 372 389 351 184 452 1,531 1,695 583 170 912 134 254 34 123 1,555 68 5,596 357 86 2,178 423 278 3,096 228 170 91 382 1,048 115 82 414 503 371 740 ,61 3 173 61 94 1,100 131 293 36 118 155 193 43 1,479 445 241 194 203 183 96 235 798 883 304 89 475 70 132 18 64 810 35 2,915 186 45 1,135 220 145 1,613 119 89 47 199 546 60 43 216 262 193 386 32 5, 190 Arizona - .-... ..--- 1,830 2,820 33, 000 Colorado Connecticut - - - - 3,930 8,790 Delaware - -- 1,080 3,540 Florida 4,650 Georgia - - 5,790 Idaho . - . - - 1,290 Illinois . - - - - - - 44, 370 13, 350 Iowa -- -. 7,230 Kansas . - - - 5,820 Kentucky 6,090 Louisiana .---_ - 5,490 Maine . - . _ . 2,880 Maryland..- .. .. 7,050 Massachusetts 23, 940 Michigan . 26, 490 Minnesota ...... 9,120 Mississippi .... . .. 2,670 Missouri . . . 14, 250 2, 100 Nebraska ... . . . . . . ^ ._ 3,960 Nevada 540 1,920 New Jersey ... ... 24, 300 1,050 87, 450 North Carolina ...... ... . .. 5,580 1,350 Ohio 34, 050 6,600 Oregon . 4,350 Pennsylvania . _ . .. 48, 390 3,570 South Carolina. . 2,670 South Dakota... .. .. . . ... 1,410 Tennessee. . 5,970 Texas.. - 16, 380 Utah 1,800 Vermont . 1,290 6,480 Washington. 7,860 West Virginia 5,790 11, 580 Wyoming ... ..... . 960 1 Leven, Moulton, and Warburton, America's Capacity to Consume (Brookings Institution, Washing- ton, D. C, 1934), p. 175, table 19 (Income from Occupation). . Employed compensable labor force for United States Total employed gainful workers for United States Total assessable pay roll, 1933 2 Index = 0.565 = ■ 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 ap- proved State unemployment compensation plans that 2 calendar years must elapse between the initial collection of contributions and the initial payment of benefits." 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 tliird 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 flat 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. Sea- sonal and part-time employment 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 as flat amounts are geared to the wage of the lowest-paid worker and provide no more than a subsist- ence 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 larger 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 argu- ment for making benefits proportionate to wages. Two alternative methods are available — establislmient of a number of wage groups with a flat amount or proportion of earnings for each, as in Germany, or a fixed percentage of wages for all eligibles. In the former procedure the percentage 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 workers 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 vary- ing wage rates and the same amount of protection would be provided "49 Stat. 640, § 903 (a) (2) ; 42 U. S. C. (1935 Supp.), § 1103 (a) (2). STANDAKDS OF STKUCTURAL PROVISIONS 119 for all. Increases and decreases in wages would be automatically reflected in benefits without resort to the administrative difficulties present in the German use of wage categories. This rule, however, is usually modified by the stipulation of minimum and maximum 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 pay- ments will have to be supplemented from relief sources. On the other hand, a high rate may reduce the incentive to seek employ- ment. Practically all the special State commissions which have studied unemployment compensation in this country have recom- mended that the benefit rate be placed at 50 percent of full-time weekly earnings. With 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 compensation system will desire to fix a maximum weekly benefit which is appropriate to its own conditions. States may also de- sire to establish a minimum weekly benefit for total unemployment. It is impracticable to suggest a minimum benefit applicable to all States by reason of the wide difference in the earnings of the lower- wage groups in different parts of the country. Dependents' Allowances. — European laws generally provide de- pendents' allowances. Such provision is open to the objection that it introduces the element of need with all its implications of investi- gation and administrative detail ; it prevents relating benefits closely to contributions and favors racial or other groups with high birth rates. The theoretical problem involved is whether it is more so- cially desirable to pay a slightly higher benefit rate to all unem- ployed 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 wages 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 defini- tions 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 less 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 decreased wages, whether in units of hours, daj^s, or weeks. If, however, it is thought that the scheme should provide an incentive to employers to spread work, compensable total unemploy- ment 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 ^® recommended 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 totally 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. Whereas 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 incentive to an eligible benefit claimant to seek odd jobs or part-time sources of income, it has the advantage to the recipient 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 par- tially employed persons, the primary purpose of the fund is to pro- vide protection to employees who are totally unemployed. To avoid excessive administrative costs it is also desirable to avoid large numbers of claims for small amounts of partial unemployment. Seasonal Unemployment. — Unless special provisions are made for highly seasonal industries by the payment of a lower rate of benefits, by the requirement of a higher rate of contribution, or by the exclu- 18 See footnote 3, p. 106. STANDARDS OF STRUCTURAL PROVISIONS 121 sion of seasonal industries from the system, employees in these indus- tries will draw from a general pooled unemployment compensation fund far in excess of the contributions paid by the industry. There have been cases in Great Britain where workers in a particular sea- sonal industry were on the average drawing benefits which amounted to more than 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. It also forces stable industries to subsidize unduly the unstable ones. For- eign 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 condi- tions in this country can be found. Possibly the wisest legislative step at this time is to postpone definite action until the State agency can investigate the problem in the particular State and make Recom- mendations 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 type of unemployment. Unless this course is fol- lowed, 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 participate unduly in the fund to the prejudice of other workers who might subsequently be unemployed. A ratio of benefits to contributions such as 1 week of benefits to 4 weeks of prior employment limits to some extent the annual benefit outlay for these persons, but the restriction is probably not suiRcient. Similarly, the requirement 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 admin- istrative authority in the State to decide which are seasonal indus- tries, indicate the normal slack period for each, and provide that unemployment in such period shall not be compensable unless the worker's record indicates that in the slack season during several preceding years he has usually obtained other employment in indus- tries covered by unemployment compensation. Ratio of Benefits to Employment. — Plans proposed in this coun- try 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 ratio serves to guard the fund against excessive payment of benefits 122 UNEMPLOYMENT COMPENSATIOlsr 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 em- ployment 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 esti- mates for the United States as a whole, with a 3-percent contribu- tion 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 em- ployment and unemployment statistics by States makes it im- possible 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 pos- sible with a 3-percent contribution. For example, with the assump- tions of solvency through major depressions and a 4- week waiting 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 un- employed according to the duration of their unemployment taken from surveys or censuses of unemployment, which show that a larger proportion of the idle are unemployed for short periods of time than are unemployed for long periods. For example, on the basis of the tables on duration of unemployment (table 18) of 5,000,000 unem- ployed, 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 necessarj^ to finance the benefits. As a result, an additional 1- or 2-percent contribution will make pos- sible 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 pre- pared by the staff of the Committee ^^ 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 the close of the employee'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 indi- cates that a large proportion of employees will draw no benefits for a number of years. These employees will have an esj)ecially 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 uni- versally 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 em- ployment. 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 prac- tice 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 bene- fits is required to register for work at the nearest public employment office and to report from time to time as required by the gen- 19 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 requirements 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 has 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. Dur- ing periods of severe unemployment, congestion has often resulted at the public employment offices abroad, and various methods of rotating 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 the 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 of 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 wash 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 be- gin, in order to allow time for establishing the applicant's right to benefits. Such a period may also serve to limit the financial expendi- tures without inflicting undue hardship on the unemployed person. If no waiting period were exacted, the minor ebbs and flows of em- ployment in normal times would result in large drains on the resources of the system for a type of unemplojanent that causes least hardship to the worker. Provisions concerning the waiting period vary greatly in existing plans and are often different for total and partial unemployment. Recently, as a result of the depression experience, opinion m 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 w^eeks in a year for both total and partial unemployment seems to fit these needs, since estimates reveal that the STANDARDS OF STRUCTURAL PROVISIONS 125 unemployment concentrated in the first 4 weeks constitutes a con- siderable portion of the total, varying- from about 30 percent in good times to about 15 percent in times of depression. A 4-week waiting period would, therefore, make possible considerable increase in the duration of benefits without subjecting the unemployed to undue hardship before their benefits begin. The States, of course, are free 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 before 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 the 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 esti- mates 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 Disputes. — 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 Unemployment.- — Considerable difference of opinion exists as to the treatment of an employee who leaves his employment voluntarily without good cause. European laws usually disqualifj' such an employee for a limited period. The suggested "model" bills prepared by the staff of the Committee ^° 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 wait- ing period. The penalty, therefore, consists in effect in a prolonga- tion of the waiting period for those who leave 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 pre- pared by the Committee's staff ^^ 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 addi- tional 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 em- ployee contributions are required. Refusal of Suitable Employment. — Although an insured person has proved the involuntary character of his unemployment, there must be some test of his willingness to accept new employment before he is entitled to benefits. The only satisfactory test of willingness is an offer of a job, and successful administration of unemployment compensation depends largely on an adequate system of public em- ployment offices. Even so, the test can be effective only to the degree that work exists and that employers make use of the employment service. If a worker is known to refuse an offer of suitable employ- ment, he is considered unwilling to work and disqualified for benefits, usually for a limited period. All European schemes make such a provision. Protection of Labor Standards. — With the aim to protect labor standards, all foreign measures define suitable work similarly. Gen- erally, 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 sit- uations not vacant by a trade dispute. In this country it has also been recommended 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 organi- zation or association of worlnnen, or to retain membership in and observe the rules 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 condi- tions under which an employee may be considered justified in refus- ing 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 21 See footnote 3. p. 106. STANDARDS OF STRUCTURAL PROVISIONS 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 substan- tially less favorable to the individual than those prevailing for sim- ilar work in the locality; (C) if as a condition of being employed the individual would be required to join a company union or to re- sign from or refrain from joining any bona fide labor organization."^- 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 Federal tax applies to all employees, regardless of wages received, it will prob- ably not be feasible to limit to lower-wage groups the benefits pro- vided 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 Economic Security embodied in its suggested bills -^ 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 amendment^. The procedure outlined pro- vided that claims for benefit should first be filed at the local employ- ment office or other designated agency, and disputed claims should be heard locally, either by a deputy of the administrative authority or by an appeals tribunal consisting of representatives of employers and employees with a deputy of the administrative authority as chairman. Appeals were to be allowed to the State administrative authority if the decision of the compensation office were reversed. 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 com- pel the attendance of witnesses and the production of 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; (&) the court or courts to be used; (c) transmission 2249 Stat. 640, § 903 (a) (5) ; 42 U. S. C. (1935 Supp.), § 1103 (a) (5). 23 See footnote 3, p. 106. 128 UNEMPLOYMENT COMPENSATION by the administrative agency of the record in the case; {d) assess- ment of court costs, etc. Some States have found it desirable, under their accident compen- sation laws, to have a single court handle all such cases, thereby devel- oping a tribunal with specialized knowledge and experience in this field. Such procedure might well be followed in the new field of unemployment compensation. ADMINISTRATION AND FINANCE The Federal Social Security Act leaves to the States the determina- tion of the administrative organization for unemployment compensa- tion, as w^ell as of the 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 ob- viously occur because of Federal requirements with regard to the pay- ment of compensation and the deposit and withdrawal of funds if the State law is to be approved by the Social Security 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 amount equal to 10 per- cent of the annual contribution. Title III of the Social Security 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 tlie existing State labor department with a full-time salaried director subject to the super- vision 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 administra- tive 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, full-time commission of three members may be estab- lished 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 prob- lems which cannot be foreseen and which are not amenable to legis- lative prescription, the administrative agency for unemployment compensation will need authorization to adopt such rules and regu- lations as may be necessary for the interpretation and application STANDARDS OF STRUCTURAL PROVISIONS 129 of the intent of the act. Administrative practices with regard to such matters as collection of 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 un- employment compensation act and affecting all or classes of em- ployers, employees, or other persons or .agencies, will be necessary. The manner of their adoption by the administrative agency, in- cluding 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 recog- nized that unemployment compensation is a large undertaking. A large part of the work requires highly trained persons, such as actu- aries, auditors, accountants, attorneys, economists, statisticians, per- sons 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 per- sonnel 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 un- trained, poorly qualified, politically appointed, and constantly shift- ing 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 civil- service system, employees of the unemployment compensation sys- tem, 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- sonnel 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 manipula- tion of the personnel and would help to build up a tradition against fills practice. Advisory Councils. — The provision of a State-wide advisory coun- cil 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 formulating policies and discussing problems related to the administration of the unemployment compensation act, and (&) in assuring impartiality, neutrality, and freedom from political influ- ence 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 tliis would be to publish studies of the methods utilized by employers to stabilize employment ; to encourage and assist in the adoption of prac- tical methods of vocational training, retraining, and vocational guid- ance; to investigate, recommend, advise, and assist in the establish- ment 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 to 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 rep- resentative at any reasonable time and as often as necessary. The administrative agency should have authority to require from any employer any reports relative to employment, wages, hours, unemploy- ment, 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 employee 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 relating to unemploy- ment compensation or its administration and enforcement. It may also be advisable, in unusual cases, to permit it to emploj^ 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 public employment offices) , the administrative agency should be authorized STANDARDS OF STRUCTURAL PROVISIONS 131 and directed to cooperate in all necessary respects with the appro- priate 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 in- terested Federal agency or department, to accept any sums allotted or apportioned to the State for such administration, and to comply with all reasonable Federal regulations governing the expenditures of these sums.^* Employment Offices. — The Federal Social Security Act requires that unemployment compensation be paid solely through public em- ployment offices or such other agencies as the Social Security Board may approve.^^ 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, en- titled "The History and Development of the United States Employ- ment Service", gives a brief suimnary of the development of public employment offices in the United States and outlines their functions and activities. Unemployment compensation laws everywhere provide as a con- dition to qualification for benefits that the employee register with the employment exchange and accept suitable employment if avail- able. 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 inconceiv- able that any State would ever attempt to administer unemployment compensation except through public employment offices. There must, accordingly, be the closest possible connection between the employ- ment offices and the administration of unemployment compensation. It is doubtful whether this can be accomplished without unification or merger of these two activities. The Cormnittee on Economic Security strongly recommended the acceptance by the State of the provisions of the Wagner-Peyser Act of June 6, 1933,-*^ 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 facili- tate 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. ^ This will be necessary in order to receive Federal grants for unemployment compen- sation administration. 2549 Stat. 626, 640, §§303 (a) (2), 903 (a) (1); 42 U. S. C. (1935 Supp.), §§503 (a) (2), 1103 (a) (1). 2« 48 Stat. 114, § 4 ; 29 U. S. C, § 49 (c) ; entitled "An act to provide for the establish- ment 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 com- pensation legislation it will be necessary to ha^e a section which will provide legal protection of the employee's rights and benefits. Such a section should declare void any waiver of rights by an em- ployee, 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 recourse to the method and procedures provided for deciding bene- fit 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 adminis- trative agency or its representatives, in any claim or appeal pro- ceedings. Any employee claiming benefits in any proceeding or court action jshould 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 charge or receive for such services in the proceeding or court action. Unemployment compensation benefits which are due or may 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 remedy 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 States 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 pay- ment; (2) false statements or representations by an employer to avoid liability to the tax for unemployment compensation or to re- duce the amount of contribution or payment to which he is legally liable; (3) willful failure or refusal to make contributions or pay- ment due and failure or refusal to furnish reports or to testify or produce records; (4) the requirement of employees, by wage de- ductions, to pay all or any part of the required employer contribu- tions, or to waive any right established by the unemployment compensation act. Administration Fund. — Since the Federal Social Security Act has established as a requisite for Federal approval that all money with- oTANDAKDS OF STRUCTURAL PROVISIONS 133 drawn from the Federal unemployment trust fund be used for the payment 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 handled 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 maintained in the fund, containing any sums re- ceived under the Wagner-Peyser Act or segregated to pay for the operation of the State employment 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 available on a matching basis from the United States Employ- ment Service under the Wagner-Peyser Act, it will be necessary for the State to appropriate about 3 cents per capita of the State popu- lation. Such an appropriation will be relatively small, as compared to the total cost of the State's employment service, in view of its enlarged functions under an unemployment compensation act. The larger part of administrative costs will be financed from Federal money authorized to be appropriated under title III ^'^ of the Social Security Act, but an effective State-wide employment service will benefit not only employees covered by the unemployment compensa- tion 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 provid- ing that all the rights, privileges, or immunities conferred by such law or by acts pursuant thereto shall exist subject to the power of the legislature to amend or repeal such law at any time.^^ This provi- sion 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. ^49 Stat. 626; 42 U. S. C. (1935 Supp.), §§ 501-503. 23 49 Stat. 640, § 903 (a) (6) ; 42 U. S. C. (1935 Supp.), § 1103 (a) (6). 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 OLD-AGE noncontributory pensions and contributory old-age insurance are two forms of social legislation designed to pre- vent destitution among the aged in lower-income groups. The Approaches of the two are different in principle, for a noncontribu- tory old-age pension system provides a small periodic payment from public funds to old persons after they have become destitute, whereas an insurance plan permits 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 part of the worker and his employer for old-age security, with government con- trol 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. For society as a whole, provision to enable the voluntary retire- ment 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 in- validity renders him incapable 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. Eetirement of the older worker at a specified age is usually made compulsory under a contributory old-age insurance system. When no provision is made for an assured retirement in- come, 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 enormously expensive not only in the cost of actual assistance rendered by governments, pri- vate charity, and the generosity of relatives and friends but also in 137 138 OLD-AGE SECUKITY the psychological results of the loss of self-respect and the constant fear of insecurity. Therefore, recognizing both the tangible and intangible values of an earned retirement income, the principal coun- tries 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 of funds from channels of chari- table assistance or public relief to channels of insurance against the hazard of dependency. This step would be justified from the stand- point of sound economic policy even if the net cost of insurance were far in excess of the future relief which it replaces, for the quality of self-respect and the relative freedom from fear of old age engendered by old-age insurance have a doUar-and-cents value to worker, em- ployer, and government alike. In view of the fact that the health, morale, and standard of living of 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 institu- tions 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 higlily urbanized and industrial areas, do not permit the wage earner, unaided, to pro- vide for his old age. Unless wages are increased, thrift encouraged, and savings safeguarded by the government, the community 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 par- ents, 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 of his budget is the one least urgent, least stressed by adver- tising 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 complicate 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. Hence 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 reasonable accuracy the number who will survive 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 that each day's work builds up an investment for his old age, permitting independence of the charity of the community or financial aid from sons and daughters already overburdened by the cost of maintaining their own families, much of the wage earner's haunting 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 that 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. i INCREASE OF AGED PERSONS IN THE UNITED STATES At the time of the 1930 census there were 6i/^ 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 rate in this coun- try, which manifested itself about 1820 and persisted from that time, the ratio of aged persons to the total population has shown a con- tinuous increase for more than a century. The increase was very slow for 40 years, more rapid from 1860 on, and noticeably accel- erated between 1920 and 1930, resulting from a rather sharp decline in birth rate which set in about 1920. This decline is expected to per- sist, moreover, and will, of course, produce a correspondingly sharp increase in the ratio of the aged to the population as a whole. The restriction of immigration, curtailing as it has the influx of younger persons to this country, likewise tends to increase the proportion of older age groups in the population. As table 26 shows, while the percentage of persons over 65 rose from 2.7 to 4.Y percent of the total population (a 74-percent in- crease) in the 60 years from 1860 to 1920, it is expected to rise to 11.3 percent (a 140-percent increase) in the 60-year period fol- lowing 1920. Figure 1 gives the actual and estimated number of 140 OLD-AGE SECURITY svo^uaj JO fUOijj2jY S'll07]J2J^ ECONOMIC PKOBLEMS OF OLD AGE 141 persons aged 65 and over, compared 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. Whereas the total population in 1930 was only 16.2 percent greater than in 1920, the proportions of per- sons aged 45 to 64 and 65 and over increased, respectively, by 25.7 and 34.5 percent during the decade. Table 26. — Actual and estimated numher of persons acred 65 and over compared to total population, 1860-2000 Year Number aged 65 and over 1860 849, 000 1, 154, 000 1, 723, 000 2, 424, 000 3, 089, 000 3, 958, 000 4, 940, 000 6, 634, 000 1870 1880 1890 1900 1910 1920 1930 Total popu- lation Percent aged 65 and over 31, 443, 000 2.7 38, 558, 000 3.0 50, 156, 000 3.4 62, 622, 000 3.9 75, 995, 000 4.1 91, 972, 000 4.3 105,711,000 4.7 122, 775, 000 5.4 Year Number aged 65 and over 1940 8, 311, 000 10, 863, 000 13, 590, 000 15, 066, 000 17, 001, 000 19, 102, 000 19, 338, 000 1950 1960 1970 1980. - 1990 2000 Total popu- lation 132, 000, 000 141, 000, 000 146, 000, 000 149, 000, 000 150, COO, 000 151, 000, 000 151, 000, 000 Percent aged 65 and over 6.3 7.7 9.3 10.1 11.3 12.6 12.7 SODRCB : Data for years 1860 to 1930 from the United States censuses. Estimates for subsequent years by the actuarial staff of the Committee on Economic Security. These forecasts are made on the assumption of a net immigration of 100,000 annually in years 1935-39, and 200,000 annually In 1940 and thereafter. Table 27.- -Rate of increase of population hy age groups for the United States, 1870-1930 Total popula- tion (4-ge groups Years Total popula- tion Age groups Years 30-44 45-64 65 and over 30-44 45-64 65 and over 1870-1880 1880-1890 1890-1900 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.. 21.1 15.0 16.2 26.2 19.1 18.6 29.1 26.9 25.7 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 of the age distribution of the United States population in 1920 and 1930, with a breakdown between urban and rural groups. In 1930 it appears that 5.4 percent of the total population of the country was 65 years of age or over, and that 5.1 percent of the urban and 5.8 percent of the rural population was in this age group. Persons over 40 years of age represented 29.3 percent of the total 1930 population, 30.4 percent of the urban group, and 28 percent of the rural. 78470—37- -11 142 OLD-AGE SECURITY ^ 53 g 03 Cf C^ C^ i— < <-*"'—* .-HC^"TH^ot^o6ocoi>^c^odioc4«-H 05 00 t* CO "^ -^ CO CO C^ •— ' '-< J ^COi— <00i— 'CO'^COOil>-CCiOTfC^t^iOCOh-r~-C:cO i4.-^-ji— ^l(-^^^^occ<^^"0'-^coc^cO'— "-— 'co-rr-occco •COCO(N-^-c^ioioi— ito C^rH^^C^I>t--I--COCqOi»0!MCNeOCO':00(N 5C'-|OS»00;;7'COCOC to" 50^ lo" co" CD^ CD lOiO'^^COCSC^'— l^H i-HcO(NCOOiGOOr*OiOiOlr^OO'— 'r— toc^coco-— iiO lOlr^'— tCDOiiOiOCO— iC0I>-'^O5G0C0C0iOi-tC^C^0CC0 l>-(NC0a5OOU0"*'-C0'rfOC0C^0000 iCO'^iOC^03':OCCC^OCO»r3000000iOOiI>'"^'--tOO r-iOCO-^O'— 'C^^^OOi"- <01(MOCOCS00C0i— 1_ _ Ol CqoO"«'-'C^C CD lo '^ CO c^ c^ i-t '-' j; >0it^i00000'-H»OiO0i'^t^*-'iCTf*OcD05' )Or-'— 't— oc^Tpoit^ot-c^oocsr-cDi JOOOi— •cOCO-^CD'— 'C^OOCDCScDOCOCO'^CDOOiO lOOCSr-CDCDCOCDC^ rJ• Tp O l>- lO O CO O lO •— I 05 Tt^COOlOOOOO»— tCS0SO0SCDt^t--05'— <*OC^ .-T c>f irT i-T o oT os' oi" t^ i> ^ "^ co" c< r-T ^ O'or-cD'-i'-HcO'— 'r^oco-^co"DcDOOiOsoost>-03 COt^COi004ClOSOOiOC^I>-C^-rfl>-COCDt-fOGOr-CCO COQOi— lOb-CD-— 'iOiOCO"^05C^OOtOcOC^COOiC5^00 l>»Oi'^CO^-COI>-t^-^OCO"^OOcOC7SiOOir3cO tt* lO CO CD ■^ C^ O O t^ CO I>- t- lO ai O CO CO -^ 1— ' t-H 0 to CDt^r~ 000005 OS'-ll—' C3J3 ECONOMIC PROBLEMS OF OLD AGE 143 EMPLOYMENT DIFFICULTIES OF THE OLDER WORKER The increase in the number and proportion of older persons in the population has been accompanied by an increase in the per- centage of gainfully occupied persons who are 45 years of age and over, as table 29 indicates. In 1930 some 300 in every 1,000 gain- fully occupied persons in the population were 45 or over, whereas in 1890 only 244 out of every 1,000 were in this age group. This increase of older persons in the group which is employed or seeking work means that, unless the number of employment op- portunities increases at the same rate, the competition for employ- ment will become keener and more difficult as time goes on. In such competition the position of older persons tends to become more and more unfavorable. Table 29. — Percentage of persons Ji5 years of age and over among gainfully occupied, "by sex, for the United States, 1890-1930 Year All gain- fully oc- cupied 45 years and over Year All gain- fully oc- cupied 45 years and over Total Male Female Total Male Female 1890 100.0 100.0 100.0 24.4 24. 1 24.0 26.4 26.0 26.1 15.1 15.7 16.0 1920 . 100.6 100.0 27.9 30.0 30.4 32.7 18.1 1900 1910..- - 1930 20.3 Soukce: Barkin, Solomon, The Older Worker in Industry, Report of Joint Legislative Committee on Unemployment Transmitted 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. Definitions of the age limit which divides the "younger" from the "older" wage earner are lacking, and con- ditions which determine the relative advantages of youth and vi- tality over maturity and experience must obviously vary with dif- ferent 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 begin- ning of the industrial revolution the dynamics of a machine civili- zation have necessitated constant employment adjustments for all workers. Mechanization has placed an increasing emphasis upon youth, physical strength, and ability to stand nervous strain. 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 in- dustry. 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 liiring-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 unem- ployment relief as well as of those registered for work at employ- ment offices give further evidence of the handicaps of middle or advanced age. And the unemployment census of 1930 reveals sig- nificant data on the qualitative and quantitative aspects of the prob- lem. 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 employment, and that his problem is a growing one, is supported by findings of several official investiga- tions, such as those made in New York, California, and Maryland.^ Although such graphic phrases as "old at 40" and the "scrap heap at 45" suggest an exaggeration of the actual facts, there is unde- niable evidence of the progressive use of maximum hiring-age limits in industry. These limits automatically cut off employment oppor- tunities 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 state- ment 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 the younger worker. This is because he possesses positive value for his firm. If, however, the older em- ployee 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.^ 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 age distri- bution 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 ratio ,1 See Maryland Commissioner of Labor and Statistics, The Older Worker in Maryland (Allied Printing Trades Council, Baltimore, 1930), pp. 8-10; also State of California De- partment of Industrial Relations, Special Bulletin No. 1, Middle Aged and Older Workers (California State Printing Office, San Francisco, 1930), pp. 8-11; State of California Department of Industrial Relations, Special Bulletin No. 2, Middle Aged and Older Workers in California (California State Printing Office, San Fi-ancisco, 1930), pp. 11-13; also Solomon Barkin, The Older Worker in Industry, State of New York Report of the Joint Legislative Committee on Unemployment, Transmitted to the Legislature Feb. 20, 1933 (J. B. Lyon Co., Albany, 1933), chs. X and XI. 2 See Barkin, Solomon, The Older Worker In Industry, op. cit. ECONOMIC PROBLEMS OF OLD AGE 145 in each employment group is less than that in the corresponding population age group. ^ Surveys of the unemployed in Philadelphia indicate that age is an increasingly important characteristic in the employability of un- employed 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 indi- vidual. The squeeze which has occurred in the upper and lower hiring-age limits has brought the mass 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 self- sustaining 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 3 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, Bureau of the Census, Fifteenth Census of the United States: 1930, vols. I and V (U. S. Government Printing Office, Wash- ington, D. C, 1933). 146 OLD-AGE SECUBITY registrants were also applicants for relief, 42.4 percent of the men and 26.1 percent of the women applicants were over 40.* 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 30. — Percentage of unemployment (14 weeks and over) among males amd females in each age group for the Umted States, 1930 ^ Males Females Age group Males Females Age group Class A2 Class B3 Class A2 Class B3 Class A> Class B3 Class A» Class B3 All ages.- .. . 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 31.3 27.5 29.4 30.5 31.9 32.9 34.7 10.2 9.0 8.9 9.1 9.6 9.9 11.4 45-49. . - 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 10-19 - 50-54 13.4 20-24... 55-59 60-64 65-69 70 and over 14.6 25-29 16.0 30-34 . 16.8 35-39 20.4 40-44 • U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 19S0, "Unemplo3rment", 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. ' 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 expe- rience 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, Pennsylvani;i Department of Labor and Industry, 1933 ; Palmer, Gladys L., The Applicants at Three Pennsylvania State Employment Offices in 19S3, Special Report A-3, Wharton School of Finance and Commerce, Industrial Research Department, University of Pennsylvania, Oct. 31, 1934, and unpublished material for 1934. See also appendix IV. ECONOMIC PROBLEMS OF OLD AGE 147 ^ ^^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 considerable percentage of older workers, who dropped out of more strenuous 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 age " — i. e., permanent inactivity and consequent cessation of earn- ings— begins in many cases early in middle life, often antedating by a considerable number of years the period of physiological old age. Table 31. — Persons with previous icork experience at nonrelief employment seeking work, classified hp length of time since last nonrelief emplo%ment of If. weeks or more and by age ^ Ai e Time since last non- relief employment All ages 16-24 25-44 45-54 55-64 65 and over Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Total 10, 058 100.0 1,854 100.0 4,958 100.0 1,934 100.0 972 100.0 340 100.0 Under 6 months—. . 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 12.0 13.1 17.3 20.0 16.6 21.0 98 105 172 182 168 244 3 10.1 10.8 17.8 18.8 17.3 25.2 26 37 47 67 57 104 2 7.7 6 to 11 months 10.9 12 to 23 months 13.9 24 to 35 months.- 19.8 36 to 47 months 16.9 48 months and over Unknown ' 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, and Finance, Federal Emergency Relief Administration. ' Unknown distributed in computation of percentage. Obviously, if the earning period is to be shortened by earlier onset of 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, oifer little hope of such increase on the basis of our American experience between 1890 and 1928.^ When real rather than nominal earnings are analyzed, popular impressions of greatly increased earnings in this country during the last four decades prove to be based more upon fiction than upon fact. s Douglas. Paul H., Real Wages in the United States, 1S90~1926 (Houghton Mifflin Co., Boston, 1930) ; Douglas, Paul H., and Jennison. Florence Tye, The Movement of Money and Real Earnings in the United, States, 192G-2S (The University of Chicago Press, Chicago, 1930). ECONOMIC PROBLEMS OE OLD AGE 149 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 States as a whole, although a number of surveys of old people have been made in individual States. Very often these State com- missions limited themselves to estimating the number of people who would become eligible under a projDosed State law, which, in addi- tion to requiring a means test, made children and relatives respon- sible 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 prop- erty and income, without taking into account the economic status of children and relatives. These surveys give a more accurate pic- ture 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 class. In comparing the estimates of old people who have an in- come 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: Percentage of aged people icith less than $300 annual income Percent Percent Connecticut, 1932 (persons 65 and over)' 49.2 l^^'^ urban [ 45. 7 rural Wisconsin, 1915 (persons 60 and over)^ 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.^ An evaluation of the property which the old person possesses provides a less satisfactory classifiqation. Obviously, it is difficult « Connecticut Commission to Investigate the Subject of Old Age Pensions, Report on Old Age Relief (Hartford, 1932), appendix tables 13 and 14, pp. 70-71. ^ Industrial Commission of Wisconsin, Report on Old Age Relief (Madison, 1915), p. 7. 150 OLD-AGE SECUaiTY 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 two surveys with respect to the value of property : Aged persons classified "by property Connecticut ^ (65 years and over) Property Percent No property 34. 9 Below $1,000 47. 6 Below $1,500 Below $3,000 58. 7 Wisconsin " (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 report 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 this "danger line" is drawn, and different commissions have drawn it at different points. The New York Commission of 1930 ^° was anxious to make a comparison of its findings with those of the Massachusetts survey of 1925 ^^ and the National Civic Federation study of 1926-27,^^ 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 the same basis. It will be seen that the figures of the Massachusetts Commission and of the National Civic Federation study are much lower than they are for the other two surveys. This, at least in part, results from the fact that the Massachusetts and National Civic Federation surveys counted the amount of prop- erty and income owned jointly by an old couple at the full value for each member of the couple. It is felt that because of this pro- * See footnote 6 on p. 149. » See footnote 7 on p. 149. 10 New York State Commission on Old Age Security, Old Age Security (J. B. Lyon Co., Albany, 1930). " Massachusetts Commission on Pensions, Report on Old-Age Pensions (Wright & Potter Printing Co., Boston, 1925). " National Civic Federation, Industrial Welfare Department, Extent of Old Age De- pendency (New York City, 1928). ECONOMIC PROBLEMS OF OLD AGE 151 cediire they do not give a true picture. The Connecticut Conunis- sion 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 gen- eralization was attempted. The dependency figures given in table 32 show a very great di- vergency. 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 com- munities are better off than urban communities. The New York survey does not bear out this conclusion, though it must be remem- bered that its sample was extremely small. Otsego County, a strictly rural area, has a very high percentage of poor old people. TAELE3 32. — Percentage of persons 65 and over having property less than $5,000 and income less than $300 annually Survey Connecticut, 1932; i Total Urban Rural New York, 1930: « Canton Village Selected cities Otsego County New York City Massachusetts, 1925 '- National Civic Federation, 1926-27 <_ Individuals Percent 45.7 49.6 39.2 36.9 46.5 69.2 74.5 House- holds Percent 19. 21. 16. 10. 18. 31. Total Percent 25.0 33.5 50.2 65.1 32.8 22.7 ' 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. 3 "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 situa- tion than are single individuals. In some localities the percentages for dependency of single individuals are two 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 ,^^ while the Connecticut Commission puts this figure at 25 percent for single individuals and at 7 percent for households with persons over 65.^* A somewhat different classification of old-age dependency was made in New York. The Commission estimated the number of old " National Civic Federation, op. cit., p. 34. " Connecticut Commission, op. oit., appendix, tables U and 12, pp. 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 propor- tionate 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. Table S3.^0ld-age dependency in the State of Netv York, July 1, 1929 Category Percentage distribution Persons 65 and over Persons 70 and over Self-dependent: Public pensioners.- Private pensioners Self-support on current earnings Self-support on income Total Dependent: On private homes for the aged. . On relatives and friends On public and private charity . . Confined by Government.. Total 8.3 1.8 28.5 5.0 11.0 3.0 17.0 5.0 43.6 36.0 1.0 49.4 3.5 2.5 1.5 .55.6 4.5 2.4 56.4 64.0 Source: New York State Commission on Old Age Security, op cit., p. 39. Table 34. — Economic status of aged studied in the District of Columbia, 193Jf status Percentage distribution White Negro Total Independent Supported by relatives Other means of support (friends, public or private relief). Dependent, but source of support not reported Status not reported Total - 100 Source: "Study of the Aged in the District of Columbia", Monthly Labor Review, vol. 39, no. 2, August 1934, p. 328. A similar study has recently been made in the District of Colum- bia. 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 pre- depression 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 indi- cate 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 sav- ings 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 workers had increased in the 15 years prior to the depression. As a matter of fact, the average savings account de- creased 29 percent between 1913 and 1928, and the value of the dollar likewise decreased almost 60 percent during this same interval.^^ The New York Commission on Old Age Security's study of de- posits in mutual savings banks (considered the chief depository of wage earners) presents similar evidence. The gain in the size of deposits in the decades before the 1929 crash w^as more than coun- terbalanced by the drop in the value of money. Consequently, the average real deposit decreased rather than increased during this period.^^ The 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 unem- ployment since that time. This situation 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 wdio have lost their life savings at 40 will have small prospect of accunmlating new reserves before their earning period is over. The chief support of old people is furnished by their children or by relatives. The Massachusetts investigation of 1925 had estimated that of the dependent aged, 74 percent were supported by their chil- ilren, while another 14 percent were supported by relatives or friends.^^ This is the reason why the estimates for eligibility to old- ige 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 remembered that a certain number of people are excluded under the old-age " See American Bankers Association, savings banks division, Savings Deposits and Depositors for the Years 1915, 1920, 1925, 1930 (New York, 1930), p. 7: Total Total number Average savings of savings savings Year deposits depositors account 1913 $8,548,345,000 11,295,931 $757 1928 28,412,961,000 53,188,348 534 And see "Change in the Cost of Living in the United States", Monthly Lador Review, vol. 30, no. 2, February 1930, p. 241, or cost-of-living index number 1913 = 100; 1928 = 1704-. " New York State Commission on Old Age Security, op. cit., p. 182. " "Care of the Aged", Monthly Labor Review, vol. 30, no. 4, April 1930, p. 13. 154 , OLD-AGE SECURITY assistance laws because of the fact that they do not fulfill citizenship or residence requirements. Estimated eligibility for old-age assistance under State laws Percent Percent of persons of persons over 65 over 70 New Jersey" 9.9 11.4 New York'' 12.7 14.5 New York — projected by Connecticut commission -° 15.9 Connecticut ^ 11. 2 11. 0 How many of the aged persons at present in this country are with- out sufficient means of 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 of families that received Federal emergency relief in May 1934, and 230,000 were in receipt of old-age assistance grants at the end of 1934, it is not known how many aged persons in the United States are being supported from public funds. No almshouse survey has been made for more than 10 years, and recent estimates of the public poorhouse population are not available. The United States Chil- dren's Bureau records of the almshouse population in a small group of urban areas, however, indicate a sharp increase of nearly 75 per- cent between 1929 and the end of 1933.^- Of the aged in private in- stitutions, endowed and semiendowed, there is no count. No clearing hou^e 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 con- viction 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. 1* state of New Jersey Pension Survey Commission, report no. 1 (MacCrellish and Quigley Co., Trenton, 1931), p. 18. " New York State Commission on Old Age Security, op. cit., p. 77. 2" Connecticut Commission, op. cit., p. 41. ^lUd., pp. 42 and 43. " U. S. Department of Labor, Children's Bureau, Monthly Bulletin on Social Statistics. vol. I, no. 2, August 1933, pp. 1-2. Chapter VIII PROVISIONS FOK THE AGED IN THE UNITED STATES THE 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 fortu- nate 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 who 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 stand- ards 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 6^ 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 re- cipients of old-age assistance in the several States. The total number of these classes, however, amounts to considerably less than a million. Only rough guesses can be made of those still employed, living on sav- ings, 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 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 sup- port their parents. Perhaps a thorough investigation of the distri- bution of our aged population among these classes should be the first task in a scientific study of the old-age problem. DEVELOPMENT OF STATE OLDtAGE ASSISTANCE LAWS A series of State commissions began almost 30 years ago to investi- gate 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 for the needy aged in nearly all the States was through the medium of the so-called "almshouse" or "poor farm." 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 organiza- tions.^ This book summarized the findings of the surveys of Ameri- can 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 charac- terized most of them. Even in institutions with sanitary and physi- cally 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." ^ Stimulated by the facts disclosed in these two reports, the drive for regular noninstitutional aid for needy old people made more progress. A series of measures variously described as "old-age pen- sions," "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 compe- tent relatives, monthly grants to enable them to maintain themselves outside institutions. The maximum monthly sums authorized range from $15 to $30 (the latter being the commonest figure). New York * Evans, Harry C, The American Poor-Farm and Its Inmates (Des Moines. 1926). '^ Stewart, Estelle M., "The Cost of American Almshouses", Bulletin of the U. S. Bureau of Labor Statistics No. SS6 (U. S. Government Printing Office, Washington, D. C, 1925). PROVISIONS IN THE UNITED STATES 157 and Massachusetts put no maximum on their possible grants. From January 1 to July 1, 1935, 7 additional States enacted old-age assistance laws, and about 10 other States revised and liberalized their old-age assistance laws in anticipation of Federal aid. The early measures made the county the fiscal unit. The trend now is toward State aid to the counties or State assumption of the entire responsibility. The old-age assistance statutes mentioned above mark the first legislative attempts to remedy the complete and shameful neglect of the old-age problem in the United States. Even with their limited functioning they have enabled 236,000 destitute old people, who have no family able to support them, to escape the miserable almshouse Table 35. — Years Of r ssidence in State of persons 65 and over on relief * Boston, Mass. Dallas, Tex. Rockford, ni. Salt Lake City, Utah Newark, N.J. Los Angeles, Calif. Total years of residence Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Num- ber Per- cent Total -- 886 100.0 587 100.0 827 100.0 1,076 100.0 443 100.0 738 100.0 0 0 1 1 2 11 21 19 823 8 .1 .2 .2 1.3 2.4 2.2 93.7 0 1 0 0 6 10 15 19 536 '~".~2 "Y.o 1.7 2.6 3.2 91.3 0 1 0 3 2 41 42 52 685 1 '"'."4" .2 5.0 5.1 6.3 82.9 0 2 3 0 4 31 56 50 930 '"'.~2 .3 2.9 5.2 4.6 86.4 0 1 0 1 3 22 33 39 341 3 "".'2 "".2 .7 5,0 7.5 8.9 77.5 3 2 7 13 25 106 207 94 264 17 .4 .3 2 years .. - 1.0 1.8 3.5 14.7 28.7 13.0 36.6 I Furnished from a sample study made through courtesy of the Federal Emergency Relief Administra- tion, Division of Research, Statistics, and Finance. existence to which many needy aged persons previously were doomed. One of the serious limitations of these measures is the long residence qualification, 15 years or more, which characterizes most of them. In this regard a sampling survey made in six cities by the Eesearch Sec- tion of the Federal Emergency Relief 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 in- vestigation 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 of 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 SECUfilTY 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 Labor Statistics, "sharply curtailed benefits and refusal to take on new pensioners, even the discontinuance of the system altogether until times im- prove, 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." ^ The history of the old-age assistance movement in the United States * indicates that the American States were slow to enact legis- lation giving aid to the destitute aged. Long before they took ac- tion, European countries, industrial as well as nonindu^trial, 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 under way until after the depression of 1920-21. This indiilerence to the problem of the aged can be explained only partially by the American public'^ 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 shift- less and lazy people were faced with dependency in their later years. This meant that to give State old-age relief was tantamount to re- warding the one who had not done his duty toward society. In addition to this philosophy of thrift and self-reliance, there was — and there 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 avoided at all costs. Investigations on the extent of old-age dependency made by a num- ber of State commissions in the twenties and early thirties disrupted » Parker, Florence E., "Experience Under State Old-Age Pension Acts In 1933", Monthly Labor Review, vol. 39, no. 2, August 1934, p. 257. * The following surcrmary of the history of the old-age assistance movement is hased on chap. Ill of Report on Old Age Relief by Connecticut Commission to Investigate the 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 Ari- zona 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 investi- gation in which it attempted to calculate the cost of a system of old- age assistance. The next step in the history of the movement was again taken by Massachusetts, where, in 1907, the legislature ap- pointed 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.^ There are to be distinguished in these investigations two periods — one 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 1919- 21 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 the 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 Insurcmce in the United States and in Foreign Gowntries. The first State law was passed in Arizona in 1915 by an initiative act, which abolished alms- houses 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, Con- necticut. 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 occa- sions, 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 chari- table, 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 Pennsylvania. Ohio, too, took some first steps in the year 1923. The question of old-age 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. Al- though 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 the Governor. Bills were introduced in the legislative sessions of Illinois, Indiana, Kansas, 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, Pennsyl- vania, 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 Avas 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, Wis- consin, 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 States {as jvided by— inty...- \ and liquor tax. revenues cities IntyS." '.'.'.'.'. I B as yet' i; liquor tax. i town, vlllagi fund .oiv:...4...0.g .A j-a.t.I-. jtance tax t t, city, tax O ,A L. ^ tax; county g 'lisvi^ 10 rffftorfS'!- o I, local lund . vagrant, or I ^t least $1 per iren able to fi bae involving 3 work accord blent, charita parent, or chi Ind able to su -1UZ si!) -.o laaoiEfisq 5o ifJf%- 11,'vi :; rry,M i 'ii\ yT! 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 occa- sions, is still in effect at the present time. No action w^as 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 chari- table, 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 Pennsylvania. Ohio, too, took some first steps in the year 1923. The question of old-age 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. Al- though 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 the Governor. Bills were introduced in the legislative sessions of Illinois, Indiana, Kansas, 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, Pennsyl- vania, 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, Wis- consin, 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 Table 36. — Prind-pal features of the old-age assistance laws of the XJnited Staies (as of Jan. 1, 1985) ,._ Date acted Date amended In effect Nature of IflW Administration Degree of State supervision Allocation of expemes Fund provided by- QuallUcatious for recipients Disqualifica- tions (see explanatory footnotes) Other pro- visions (see explanatory footnotes) Maximum amount of pension state State Ijocal State County Town Age Citlzensblp Residence Property limit Annual income limit Period of pay- State (years) County (years) AlRStR. , ... 1915 1033 1929 1927 1931 1933 1931 1933 19» 1933 1927 1930 1933 1929 1923 1933 1925 1931 1931 1930 1933 1933 1933 1934 1929 1933 1931 1925 1029 fI917, 1919, \1925, 1929 I 1915 1933 1929 1031 1934 1934 1934 192« (») 1927 1931 1933 1929 1923 1933 1925 1931 1932 1930 1933 1934 1934 1934 1029 1033 1031 1925 1929 Mandatory. do do do do Optional Mandatory. do do Optional Mandatory. Optional.... Mandatory. -.—do Optional.... do Mandatory. Optional Mandatory. do —.-do do do do do do do Optional (») Mandatory. Alaska Pioneers noroe No local administration County oid-ago pension com- Couniy board of supervisors, local department of public welfare. County court; board ofcoonty commissioners, trustees. Territory administration Duplicate certiflcate to audi- tor; annual report. Complete supervision; month- ly reports. Annual report to Secretary of State. All G7 percent- One-half.. State fund proportio None 33 percent- One-balf.. None None Territory f M65 I W60 70 70 66 65 65 70 C5 70 65 65 70 70 70 70 65 70 70 70 68 65 70 70 65 70 65 JRequired... do 16 years.— do Not re- quired.* 30 years.... 15 years.... do do do Required... 15 years.... Required... 15 years.... do do do do do Required... do do 15 years.... do do do do do do do (') 35 10 10 10 10 20 10 15 15 15 15 10 20 15 15 16 15 10 15 15 None Required... flnsiUBcien I support. •$3,000 ■2.000 means of $300 365 365 300 300 300 180 • 365 m 365 365 Bed ,. • 365 366 300 300 390 360 (•) support ISO i 300 360 kn fM $35 a month- \W $45 a month.. $30 a month i Quarterly. *riMnft B, 0 A 1931, 1933.. 1931, 1033.. 1933 1933 Department of social welfare, Division of State aid for the aged. Right of appeal to district court and supreme court. State old-age welfare commis- sion. do a,(,D,o a,b,c,d,f,n. a, d, f, 1, n suite estate and liquor tax; local liquor tax. State currout revenues A, B. C- do $26 a month $15 a month $25 a month SlSamontb $25 a month $250 a year n to population. None 1 None Shared by county and city. terly. Old-age pension commission.- do-. - Board of county commissioners Old-age assistance boards County commissioners Old-age pension boards County commissioners Bureau of old-age a.ssistance- - - Annual report to Territorial auditor. None None - One-half.. All None One-half-. None One-third- (') (') (■) 2,500 A,B, C... A.B.CD- A,B,C— . A,B,C,D. Department of public welfare- a,b,c,d,e,t,i,m. a,b,c,(i,e,I,i,n.. a, b, c, d, f, i, i. a,d,r,h,l,l,n.. a,b,c,e,f,i,k. a,cd,B,f,i,n. d, "Deserving a, b,c,d",'f, i.. a,c,d,o,f,l,n. b,c,d,e,t,l.. b, c, li, e, f, i.. a,b,c,d,e,(,i. a,c,d,e, ^,i,n- ■i,e,^g Annual report; duplicate cer- tiflcate to auditor. Complete supervision One-balf- . None None None Old-age assistance com .nisslon- Monthly or guar- teriy. Maine ' Dcp3rtment of health and wel- fare. One-bait cities, towns, plantations. All 1 None Two-thirds cities and A,B,C— 0 1931 1932, 1933.. Annual report to Qovernor Complete supervision do Adequate assist- $30 a month $laday. $25 a month $20 a month 'Maiiffp^hn'ip tt; State department of public welfare. State welfare department, old- age pension bureau. State poU tax: liquor tai None None None speci '3,500 '3,000 "3,000 2,000 3,000 Unable to self. (') 1 > 3,000; s« ■3,000 MtelUgan A,B,.C,D. A, B,C.- A, B, 0— A, B, C-- A.B.CD- A, B, C— A, 0 T^ITlfWTto 1931, 1033- . Board of county commissioners. Old-age pension commission— do Board of county commissioners- County commissioners-— None None None All All All Reimburse county. None None. None County, city, town, village Annual report to State auditor. do Annual report to Governor — None None None terly. Auditor of public accounts Nevada. "V""" Monthly or quar- N(w iT<»rnpihirn $7.50 a week terly. Weekly or month- New/eisey 1932, 1933.. 1934 Department of institutions and agencies, division of old- age relief. State department of social wel- fare. Secretary of agriculture and labor. Department of public welfare, division of aid for the aged. Three- fourths. One-half. - All county. One-fourth. None State inheritance tax and county £und. ly- New Yorir Public welfare district official. Board of county commissioners. do do Determined by official. $150 a year $25 a month $30 a month do $25 a month $30 a month fare district. None- a,f,i,m,D,p. a, b,c, d,f-..- a, b, c, d, t, i. 1. a, b,c, d, 1.... a, b, c, d, e, f, 1. a, b, 0, d, e, f.. a,,d,^e,f,g,b, a,c.d,6,f,i.n. b.c, d,6. r,i.. A, B A, B, C, D- A.B.C.D. C „ A, B, C... A, B, C... Monthly. Ohio. ... None None Do. Oregon- Old-age pension com mission..- Board of trustees of old-age assistance fund. Board of county commissioners. Annual report to State board of control. Part of State liquor tax distributed to coun- ties, balance paid by State liquor tax; county gen- eral fund. Feonsflvania Department of welfare None — terly. Monthly. Viab None counties according to number of people on pension roils. None All None None. None Reimburse county. None County 6 (■) 1 300 (1) 1 360 No property or in- '3,000 365 (!) 360 Do. Do. Do. wert^^inia::":: Annual audit by tax commis- do-.M"":;; - 1029, 1931, 1933. 1931 One-third. Two-thirds do Monthly or quar- WyoBDlng. Annual report to State auditor. County ooJtuud terly. Monthly. * Since lifA. 1 Annual income of a ' Anansl invymp of a 7 property to lie computed at 3 percent of Its value. y property to be computed at 5 percent of its value. 1 United States, 15 years. b. Desertion of spouse. r correctional institution. k." Spoi it least $1 1 — -^ d children able to furnish support. 1. Convicted of crkoe Involving moral turpitude. m. To have failed to work according to ability, n. Inmate of benevolent, charitable, or fraternal institution, o. Husband, wife, parent, or child able and responsible for support, p. Children liable and able to support. Other provisions: ^ , , . . ,„_ A. Transfer of applicant's property to pension authority may be demanded oeiore pension is granted. , B. Amount of payments to be collected from estate on death of pensioner or tne sor- r of a married couple. inmate. 78470 — 37 (Face p. 160) 9tej8 'taaol . f^l^lTT .?WBl aJi-'-ia i.'i i; »j'.iii;r:Tii PEOVISIONS IN THE UNITED STATES 161 more than 1,000 recipients of old-age assistance grants, and these were found almost exclusively in Montana and Wisconsin, the former having 884, the latter 295 old people on their old-age assist- ance rolls. The total amount spent by the six States in 1928 was, in round numbers, $200,000.° 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 Wyoming 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 that 100 bills were introduced in the legislatures of 38 States in 1931. In 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 the mandatory type, but only Delaware and New Jersey provided for State funds. Colorado and Wisconsin amended their laws mak- ing them mandatory upon the counties as well as making State funds available for the purpose of old-age assistance. Ten more laws were added in 1933 in Arizona, Indiana, Maine, Michigan, Nebraska, North Dakota, Ohio, Oregon, Washington, and Hawaii. With the exception of Hawaii, they were all mandatory upon the counties, but in Oregon and Washington the State did not share in the expenses of the locality. Arkansas passed a law in 1933, but it was declared unconstitutional by the State supreme court. Iowa and Pennsylvania passed mandatory laws in 1934, the State bearing the entire cost. By the end of 1934, 28 States and 2 Terri- tories 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 the 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 the responsibilities of administration and cost. The State has com- plete supervision or exclusive State administration only in those States where it bears the whole cost. This is the case in Alaska, Dela- 0 "Operation of Old Age Pension Systems in the United States in 1931", Monthly Lahor 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 assist- ance, there is a considerable amount of State supervision. This is true in Arizona, California, Indiana, Maine, Massachusetts, New Jersey, and New York. Colorado and Wisconsin are the only States 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 as- sistance 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 laws 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 requirements. Under most of the laws, in order to receive old-age assistance, a per- son 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. Many States require also a long period of residence in the county or city. The great majority of the States have income and property qualifica- tions. 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 alto- gether these property and income qualifications and leave to the ad- ministrator 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 de- manded before assistance is granted. In most laws there is a pro- vision 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 laws 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 sup- port 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 asylums 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 be- comes 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 assist- ance laws, particularly the requirement 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 non- contributory old-age pension legislation. The percentage of old people on assistance rolls in the United States is far below that of European countries, Canada, and Australasia. Several of these coun- tries 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 old- age 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 OLD-AGE SECURITY Table 37. — Operation of State old-age assistance acts during 193^ Funds supplied by- Number of eligible age, 1930 I Number of recip- ients at end of 1934 Percent recip- ients formed of 1930 popula- tion of eligible age Amount disbursed Monthly grant State Maxi- mum pay- able Aver- age paid, 1934 State and county do 8,370 210, 379 56, 720 16, 678 17, 402 133, 720 184, 239 (») 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 1,820 19, 619 3 10, 098 1,583 1,712 23, 533 6 8, 300 21.7 9.3 17.8 9.5 9.8 21.6 4.5 $427, 527 2 4, 288, 508 * 1, 256, 190 193, 231 138, 440 5 1, 134, 250 7 220, 000 $30.00 30.41 30.41 25.00 25.00 15.00 25.00 $19. 57 20.21 .. do. 9.74 Delaware . . .. State... County.-. State and county .. State 9.91 Idaho Indiana 6.74 4.50 13.25 County 8 State and county » County State and county State Maryland... 267 12 21, 473 3,557 4,425 2,780 926 7 1,483 11,401 51, 834 3,914 36, 543 18 6, 525 18, 261 902 1,588 11.5 12 13. 7 2.8 6.6 27.1 4.6 2.8 5.8 10.3 13.9 16 17. 4 8.8 17.1 6.3 5.7 6.8 65, 228 13 5, 628, 492 103, 180 15 577, 635 177, 426 13, 577 1,552 311,829 1, 773, 320 12, 650, 828 24, 259 17 1, 434, 416 18 639, 296 18 386, 717 86, 416 103, 408 30.41 ('«) 30.00 30.41 25.00 20.00 30.41 32.50 30.41 (H) 12.50 25.00 30.00 30.00 25.00 30.00 22.64 Massachusetts 26.08 9.99 County 10.97 do 5.32 do 1.22 do 18.48 New Hampshire.. - State and county .... do 17.51 14.87 do - . .- 20.65 State.. .69 Ohio .... do. 6.54 Oregon County. State 8.16 21.18 Utah County 7.98 Washington West Virginia Wisconsin State and county County 8.. _ State and county 5.43 2,127 719 5.1 10.2 459, 146 82, 732 30.41 30.00 19.95 9.59 Total - 1 2, 439, 437 2,935 7,638 235, 397 454 354 9.7 15.5 4.6 32, 177, 603 108,485 27,427 2i"35."5o' 15.00 14.68 Territory.. 25.00 Hawaii County . -. .. -. 7.06 Grand total . '2,450,010 236, 205 9.6 32, 313, 515 14.68 1 Where system was not State-wide in operation, the number given in this column is an estimate of num- ber of eligible age only in the counties reporting. 2 Approximate; estimated on basis of State disbursements (about J^) . 3 In 55 of -the 63 counties of the State. * Estimated on basis of returns by individual counties and report of State disbursements. « 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. ' Estimated; last 2 months of 1934 only. 8 Inoperative. « Census reports 84,252 of eligible age in State. 1" 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. i< No limit. 15 In 38 counties. 16 Computed on basis of estimated population 68 years of age and over. i^ Last 6 months of 1934. ■8 In 32 of the 36 counties in the State. 19 Month of December 1934. 26 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", Monthly Labor Review, vol. 41, no. 2, Aug. 1935, pp. 303-312. PROVISIONS IN THE UNITED STATES 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 Massachusetts, and $20.65 in New York. These data were collected in the annual survey of old-age assist- ance made by the Bureau of Labor Statistics. The figures indicate, however, that 13 States and 1 Territory were paying grants averag- ing less than $10 per month in 1934. How far the grants actually paid fell below the maximum allow- able 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 require- ments 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 in 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 : Numier of applications received by old-age assistance authorities (November 193 ^y State Num- ber of persons receiv- ing grants Number of applications received Number of people on waiting list Arizona 1,974 2,098 from Aug. 1, 1933, to June 30, 1934. 5,685 since 1931 10. Delaware -- 1,700 applications not yet investigated; Idaho .. 1,275 23,418 3,000 141 2,660 1,781 10, 560 51, 228 None 24, 000 l,9f9 3,525 since 1931 of these about 1,200 will qualify. 200 at close of 1933. Indiana 39,304 from January through August 1934. 60,000 since April 2,168 since 1931 .- 3,059 applications not investigated August 1934. Estimated that 28,000 will qualify. Applications are investigated only Iowa Maryland (Baltimore County only). Michigan . - - - 42,358 since October 1933 4,444 since 1936 26,269 since July 1932 when there is a vacancy. 6,575 applications approved; 27,032 applications not yet investigated. New Jersey . .-. 3,080 pending applications not yet investigated. 5,123 pending applications not yet investigated. 3,761. New York 136,482 since September 1930... 4,201 - North Dakota Ohio 105,000 since May 1934 Wisconsin 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 appli- cations far exceed the number of recipients of actual grants. Activities of State Legislatures From January 1, 1935, to Octo- ber 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 anticipa- tion 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, Missouri, Oklahoma, Rhode Island, and Vermont) and the District of Colum- bia passed new old-age assistance laws in the period from January 1 to October 15, 1935. In addition, the Florida Legislature adopted a law, which, to become effective, had to be approved by a referendum vote. The provisions of these 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. All 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 dat^ of applica- tion— a considerable liberalization in comparison with the laws passed prior to 1935. The same is true of the county residence requirement, 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 require- ment 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, wliich up to that time had been optional, became mandatory upon all political subdivisions (Hawaii, Maryland, Minnesota, Montana, Wisconsin). Central State admin- istrative agencies were established in eight jurisdictions (Hawaii, Maryland, Minnesota, Montana, Nebraska, Nevada, "Washington, and Wyoming). At the same time legal provisions for State financial participation were introduced in eight jurisdictions (Hawaii, Mary- land, Minnesota, Montana, Nebraska, New Hampshire, 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 otherwise eligible citizens should not be barred because they had not been citizens for a required period of time (California, Hawaii, Iowa, Michigan, Minnesota, Montana, Nebraska, New Hampshire, Oregon, Washington, and Wyoming). Eesidence requirements were liberalized in 14 of the jurisdictions (Alaska, California, Colorado, Hawaii, Iowa, Maryland, Massachu- setts, 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 tliis 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. INDUSTEIAL PENSION SYSTEMS Beginning in a modest way about 1875, several 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 modern industry. A third closely related motive has been to use the pen- sion 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 more satisfied with their own jobs and their own pros- pects. A fourth motive, also relating to economy, has been a desire on the part of certain companies to maintain conditions of employ- ment so attractive as to draw into their service persons of superior capabilities. One motive of the pension systems of the railroads has been to facilitate the retirement of older persons who might consti- 168 OLD-AGE SECURITY CO ® « .-1 0-H M'-rJ . a CO a) ^ 2 1-1 CO < p <1 2 ^ 2 -^ <1 a. SST > C3 O ©'^' CO SOTS ■£ 3 i o >^ PS aO g i §>:£■£ a o« » s o &^ 0 a> h aco >,o3 >> o "2 o o . . >2 — c 5 3-' 3 O'S O) O O tH o> O ° a a a^> o 2 1-2 -2^3 3 ,; o o , ft ^ So.: m a £ CM c c a 03 O'K O) m O ai O g b£ ss = a. 3 i^ o © O o 0! t. U o » m m E;t3 o o ^ g 03 >. C C3-S o O 3 3 .a P. o £ <5 a o a a .i; o ^ Q Q Q PROVISIONS IF THE UNITED STATES 169 • 2 03 01 1 '^ ,-1 w .t3 " ^" d .a M »-i CO w (So: o U <1 ■ MOT >0 m |2 o »' 2 00 ^ CO J o . ."" " rt OCO C ^ C7) O »0 ^H O ■a .a m • ■■0 . cc '^ >. -.2 .O CD fl "3 '3 ft w !l5 >t ^ o >>>> 5 o« ■^+^ id B.2 «— ca O i-c s 0) t^ bB oi rg O O fe d t; i- V tD — ^ ^« o > i ft 3 -^1 ; $2,000 ( ried); in year. $400 a $2,500. t: o o OOO ° s i • 1 o ■o ® _ !3 ^ l> ^ 1 c2»3- - a3" C^ a o s 1 i Assets if m $300 Incom asset 1 ; ' 1 1 III i -^ n 2 o CO "3 §2 CO ^^ o o a d o oV^2 O 1 --I o 1-1 > ■d a » g ft-d o d o o n< CO o o m w a MOO CO -3 OOC<1_ [Q •2^g M m s M >s o o 03 CS M 03 ^ 0) o -o « d'^ « O (D^ <^ < o -^ <^ < <) > 1 o p. 73 (B S 3 t. ftp., ,a o 05 pV o U I-. 1 „_ o d d 0? d •d d a 3 S8§5 M O M "3 jn « m "SO W S °5 d o O a "c ^ 'ca o o d- 3 ft 3 \^ .a a L T3 2 '3 a ■a <1 .2 o ii > a § 2 1 1 .2 1 o 9 ga »s «a "2 03 o d d -^ o d dm K o 03 1 O d o - -§5 ^ §" 03 mo a II •C t. d ft bJD 2 d d ca^ o m 03 ^ ca o do o-s d -55 d 2 .2 § > m d » ^ bxi p be 'd C3 o 03 6 S 1 a o o d d d » a Is S a ^■d 05 II si: g;d-3 IS o — d a o d 05 a ft ■a o a ii It. — O 05 Ph O o O o hJ ^^ O °a -rji O ft d 1 a o «• s o o d &| a^ 11 ! " 03 o ^ d CO a> i to p 1 ** (» C3 (fi o . i f 1 1! OO 1 "S as o © S 1 <5 d „.. uu 1 ■^ §^ >> •0 1 1-1 ^ rt ^ o 1 p *^ 1 o i 3 o O « 1 5. T) o Ui *m 5 00 iO iO o S lO lO ■o UO lO o ^ ■!3 (3 09 •o lO U3 C a n ,-, ,-^ '^ .-^ ^^ J^ rt 3 3 ^^ - ■-' : ; ; £g : _' ,' a a o 03 M a 1 a ^ o ^ 1 o i O d«* o . a^i a ^§ 3" p o a 03 .a d o a 03 d -d J3 d o a i d ■d 43 d o a 03 lO C) O) o o o 00 ^ OO o o o o be t^ t^ t>- to to to o t^ CO -^ " " ^ ca I r 1 i o ■a . 1 ' 1 ' SI Ob 1 § 1 d o d d d o d d 13 ■d^ x) T3 •d ■d "d -o a 1 i i 3 ; ; C3 .2 •d CQ ft p4 a S O O Q 03 a g' 'S ca > p _C3 o o J3 — d o bjo d •d o OS CB « o s 3 O) jd Z "A :? ;? o o O Pm « s PKOVISIONS IN THE UNITED STATES 171 • M H CO « ^ -. O 03 « a" fto a a 5s . rn 73 a P 0) !>. ■a o o to a o OJ 1 C3 ^ a 2 03 C^ i^ 1 Oi ■S- > a a a o 03 5S a ? a a-a o t> ^ n ^ S? ft^ ^.^j CD 0) p a m t- 03 CO-- t» ■S o a > S3 ® lia^i°!£=2£-S||||§ld "-'■C.dpdl^KQ.rlQ, -^■KmSd^® tf-9§o'§|s>.a^^«£|°^^'§ ^^S-glisf^llgfeafiSs ?!BS.r-2£H'dSg'3 2s5i|°2gd« •° 9 b a<» a 03^S-" n mr^° 2 => d 313 >*?■§ w"" to !^ rt ® S S 5.-^ o fe a-c« o o ® 3 m fe« u^ %._a d-: l&S^'d. 5-Ho3o«!--OSv2d°doqdajriPffi— ' as2 aa D'S ^ ds oS^Ko-S^-a-S-sg 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 restric- tions, was considered the means of accomplishing the results indi- cated 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 service, reduc- ing 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 discouragement of strikes as much as anything else. In the initial stages the pension movement grew rather slowly in this country. By 1900 only about a dozen plans had been estab- lished.^ 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.^ 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, were on class I railroads; another 18 percent were employed on public utilities; 11 percent in iron and steel companies; 7 percent in com- panies 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 smaller today than in 1930, because most of the * These figures and those which follow in this section were taken from Latimer. M. W., Industrial Pension Systems in the United States and Canada (Industrial Relations Coun- selors, Inc., New York, 1933). ' Estimated by the pension division of the Metropolitan Life Insurance Co. Library. PROVISIONS IN THE UNITED STATES 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. In 1930 about 25 percent of all employees affected were engaged by companies which had more than 100,000 employees. Almost 70 per- cent of the employees were in companies which had more than 25,000' workers, and 98 percent in companies which had more than 2,000. While the recent expansion in the number 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 pre- dominantly confined to large industry. At no time have more than 15 percent of the gainfully occupied employees engaged in manufac- turing, mining, and mechanical industries, and in trade and trans- portation 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 num- ber 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 em- ployee is based upon continued employment for a considerable period of years and is contingent upon the employee's being attached to the company in active service at the time of attaining the age of retire- ment or at the 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 em- ployee 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 numer- ous. Under the majority of the plans, in terms of employees covered, the benefit is 1 or 1.5 percent of the average pay during the final few years of service 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 superannu- ated and disabled persons without a pension. As a matter of fact, however, considerable numbers, at least in the railroacl industry, are 78470—37 13 174 OLD-AGE SECURITY retired without pension, even though a pension plan is in opera- tion.^" 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 minimum- service qualification for receipt of pension. Prior to about 1925, with few exceptions, voluntary pension sys- tems 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 compa- nies, the effects of various policies calculated to reduce labor turnover, 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 pen- sion system involved very considerable costs and that proper account- ing and safe financing involved setting aside funds currentlj^ at interest to be used later to pay retirement annuities. • The recognition of the principles of sound financing and account- ing was hastened by the entrance of the insurance companies into this field, for these companies began to solicit group annuity con- tracts actively at about the same time. In order for the insurance company to assume the 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 ]olans revised to induce employees to share the financial burden. In practically every case this involved an agreement to refund emploj^ee contribu- tions upon Avithdrawal 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 com- pany would receive a deferred annuity earned both in respect 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 the propor- " Transcript of record, United States Court of Appeals for the District of Columbia, October term, 1934, po. 6355, Railroad Retirement Board et al. v. TJie Altott Railroad Co. et al., p. 178, PROVISIONS IN THE UNITED STATES 175 tion was probably about 60 percent, although the considerable ma- jority 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. When the necessity for setting aside funds currently came to be realized, it was recognized that if such funds were to serve their purpose some safeguards had to limit their use ; and, of course, insur- ance companies for their own protection could accept funds only on condition that they be used as intended. These financial considera- tions, coupled with the increasing skepticism by which the completely discretionary type of plan came to be view^ed by the employees them- selves, led to a material strengthening of the legal foundations of vol- untary 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 provi- sion was made for accumulating funds to meet the liabilities. Almost without exception the pension payments made during the year were charged to current operating expenses ; indeed, until 1928 the account- ing regulations of the Interstate Commerce Commission 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 they still failed to take into account the fact that there were additional liabilities for active employees wdth 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 the insurance companies into the field. Thereafter the growth in funds was rapid and con- tinued 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 sum set aside for pension purposes was $625,000,000, of which $105,000,000 was in the hands of insurance companies, $460,000,000 in trust funds, and $60,000,000 consisted of balance-sheet reserves.^^ Not all these funds were irrevocably earmarked for pensions, but probably at least ^ 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 of 1935 total funds set aside for 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.^^ At the begin- ning of 1935 there were about 175 companies (including railroads), employing normally in excess of 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 of marked cyclical and seasonal variation in the number of employees and because of their refusal to rehire em- ployees after a certain age when once they have been dropped from the pay roll. The rate of turn-over of business enterprise itself con- tinues high and employees periodically are thrown out of work because their employers fail to continue in business. It is a reason- able conclusion that in the future pension plans on a voluntary basis will be confined, as in the past, to large-scale industries and spe- cifically to "public utilities and manufacturers of the basic conmiodi- ties required for the functioning of a mechanized civilization." ^^ Even within the field which these voluntary pension systems em- brace, 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 awarded pensions. Probably no survey of industrial pension systems has ever dis- covered 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." An estimate from the same source for 1931 was that pensioners did not i2/6tU, p. 609. " Ibid., p. 945. ^^■nid., p. 216. PROVISIONS IN THE UNITED STATES 177 exceed 140,000 at the end of tliat year and that pension payments aggregated no more than $97,000,000. Latest available information, for 1933, indicates that pensioners at the end of the year were not more than 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 of the railroads. Moreover, these voluntary plans contain many elements of dis- crimination. In most cases, at least until recent years, the benefits have been related to the pay of the final few years of service. While this has protected all employees to a certain extent against the hazard of change in price levels, it has nevertheless produced pen- sions which were much larger in proportion to the total value of service rendered for executives and supervisory employees than for the rank and file. Moreover, the continuous-service requirements 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 conse- quences. A concomitant of these plans is a hiring-age limit which forbids the employment of persons over 45 to 55 years old. Whereas 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 view- point, of maintaining low hiring-age limits might, in the main, be eliminated by a modification of existing regulations. This modifi- cation would entail a provision that employees might receive upon retirement age whatever pension they had earned during their period of actual service, without forfeiture because of failure to remain in the service of a single employer. Moreover, the provi- sions of pension plans which attempt to tie employees to a partic- ular firm are undesirable even though their actual effectiveness is open to question. Insofar as they have been effective in this direc- tion, however, they are not desirable. Generally speaking, industrial pension systems viewed as a man- agerial device to limit superannuation among the personnel, clear !• Based on material supplied by Industrial Relations Counselors, Inc., New York. 178 OLD-AGE SECURITY channels of promotion, and add to the relative attractiveness of the employment, of a jDarticular 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 inade- quate. Nor do they give promise of substantially adequate protec- tion in the future. Social insurance with a far broader coverage and without these restrictions is essential to old-age security. So- cial legislation aimed to provide insurance against old-age depend- ency 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 dependency by imposing a uniform burden on the pay rolls of all industries and employers, by spreading over the whole employed community 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. RAILKOAD RETIREMENT ACT The first important legislative measure toward the provision of old-age security in the United States was the Railroad Retirement Act passed by Congress in 1934.^^ This established contributory old-age annuities for employees of steam railroads, sleeping-car com- panies, and express companies. When 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 inseparable 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." ^' A second Railroad Retirement Act was passed by Congress and approved on August 29, 1935.^® 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 18 Ch. 868, 48 Stat. 1283; 45 U. S. C, §§ 201-214. "Railroad Retirement 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.), §§ 215-228. PROVISIONS IN THE UNITED STATES 179 due him on the basis of the number of years of railway service. An- nuities vary with the wage and the number of years of service. A higher percentage of the first $50 of monthly wages is used in com- putations so that the annuity drawn by the loAver-paid worker consti- tutes a higher percentage of his average wage than the annuity 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 becoming 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 steam railroads, sleeping-car companies, and express companies, and former employees on leave of absence or furlough, subject to call for service and ready 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 Treasury. The effective date of the act is March 1, 1936, and annuities become due and payable 90 days thereafter. EETIEEMENT SYSTEMS FOE PUBLIC EMPLOYEES Approximately 75 percent of all public employees in the United States now enjoy old-age protection under retirement systems estab- lished pursuant to law and financed generally by employee and em- ployer (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 em- ployees' retirement fund in the entire world. Civil-service employees contribute 3I/2 percent of their basic wages to the fund, and Congress appropriates amounts Avhich to date have been appreciably less than the employee contributions. The congressional appropriations will have to be greatly increased in future years, as the system contem- plates full credits for prior service, the costs of which are to be borne by the Government. Eetirement 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. The average annuity in the last fiscal year was $988.03. Besides this large system the Federal Government maintains smaller retirement 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 diploniatic 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 annui- tants. Additional State and local teachers' retirement 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 actuarially 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 abandonment 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 GENERAL INTEREST in providing old-age security mani- . fested itself in Europe about the middle of the nineteenth century. The earliest legislative efforts were made in Bel- gium, France, and Italy. Purely 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 of substantial governmental subsidies did not induce many workers to make provision for themselves. Subsequent legislation toward old-age security followed two pat- terns. 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 of compulsory contributory old-age insurance adopted by Germany ^ in 1889 and patterned after that of the customary miner's funds that had existed in European mining communities from the Middle Ages. By the outbreak of the World War, systems of noncontributory old- age assistance had been established in Denmark, Great Britain, New Zealand, Australia, Newfoundland, 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, two British Dominions, Canada ^ and the Union of South Africa, 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 deferred its operation. In this same period, 15 countries, including France, Great Britain,^ and Italy, have legislated and organized general con- ^ See appendix X for an account of the German system of contributory oM-age insurance. ^ See appendix VIII. ' The British systems of noncontributory and contributory old-age insurance are de- scribed 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 summary of the countries which have enacted leg'islation 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 coun- tries, the state, by a noncontributory plan, provides a gratuitous grant on proof that the aged person has insufficient income for self- support and has been guilty of no serious misconduct. A tabular summary of the 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 are 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 work- ers, 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 age, and two-thirds of them also include survivors' insurance, i. e., pensions for the sur- viving widow and children in the event of the insured worker's death. Tajklb 39. — Old-age assistance and insura/nce legislation in foreign countries through 1933 A. NONCONTRIBUTORY OLD-AGE ASSISTANCE LAWS Country Year when passed Coverage 1908 1927 1891 1905 1908 1926 1909 1908 1911 1898 1923 1928 1919 All citizens with insufficient income, resident 20 vears. Canada .. . All citizens with insufficient income; resident in Canada 20 years, in Denmark ... Province 5 years. Citizens with insufficient means, resident 5 years. France' (see also sec. B). Great Britain (see also sec. B). All citizens with insufficient means. Citizens with insufficient means; 12 years' residence since age 50 for natural-born citizens; 20 years' residence in all for naturalized sub- jects. Ail Greenlanders without subsistence income. Citizens with insufficient means. Citizens with insufficient means, resident 30 years. Newfoundland - . . All citizens with insufficient means. Citizens with insufficient means and 25 years' continuous residence. Norway (will not go into effect until announced by royal decree). South Africa All citizens with insufficient income. All citizens (of 5 years' standing) with 15 vears' residence out of pre- Uruguay i (see also sec. C). ceding 20 years; other persons with 25 years' residence out of pre- ceding 30 years; insufficient income. All persons with insufficient means. (For naturalized subjects or aliens 15 years' residence is required.) ^ Old-age assistance legislation combined with noncontributory invalidity benefits. OLD-AGE SECURITY ABROAD 183 Table 39. — Old-age assistance and insurance legislation in foreign countries through 1933 — Continued B. COMPULSORY CONTRIBUTORY OLD-AGE INSURANCE LAWS OF GENERAL COVERAGE Country Austria ' ' Belgium 2 Bulgaria • 2 Chile' Czechoslovakia > ' France ' ' (see also sec. A). Germany ' 2. Great Britain ' ' (see also sec. A). Greece ' * _ Hungary ' ^ Italy I Luxemburg • > Netherlands • 2 Poland n Portugal 1 Rumania ' Spain Sweden ' Union of Soviet Socialist Republics.! 2 Yugoslavia ' 2. Year when passed 19273 1924 1924 1924 1924 1889 1925 1922 1928 1919 1911 1913 1933 1919 1912 1919 1913 1922 1922 1924 1907 Coverage Workers in industry and commerce, including domestic workers, except casual 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 salaried employees and miners. Employed persons, including agricultural workers and domestics. Special scheme for public officials. Wage earners under 65 earning les? than 8,000 pesos a year; independ- ent workers with annual incomes below 8,000 pesos a year. Employed workers over school age and under 60, including agricul- tural, domestic, and home workers. Special schemes for salaried employees, miners, state employees, employees of statutory corpo- rations, such 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 indus- trial areas, 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, including agricultural, domestic, and home workers. Special scheme for salaried employees with annual earnings below 8,400 reichsmai;ks. Special scheme for miners. All workers, including agricultural workers and domestics; salaried employees with incomes below £250 a year. All persons employed in industry and commerce. All persons 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; navi- gating staff in civil aviation; various categories of salaried em- ployees. All wage earners except household casuals, farm labor, and sea fisher- men. (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. 1 Old-age insurance combined with invalidity insurance. 2 Old-age insurance combined with survivors' insurance. 3 The 1927 law for workers has not yet been put into effect. An old-age assistance scheme takes care of aged workers on a basis of need. 184 OLD-AGE SECURITY Table 39. — Old-age assistance and insurance legislation in foreign countries through 1933- — Continued C. COMPULSORY CONTRIBUTORY OLD-AGE INSURANCE LAWS OF LIMITED COVERAGE Country Year when passed Coverage 1921 1924 1923 1926 1931 1927 1928 1916 1925 1931 1919 1925 Public-utility employees. Brazil' 2 Bank staffs. Railway workers. Cubai K. Dock workers. Staffs of public-utility undertakings. Seamen and harbor workers. Ecuador ' Staffs of banks. Switzerlaoid: Canton Qlarus • Appenzell .. . Legal residents between ages 17 and 50. All legal residents between ages 18 and 64. Basel Town ^ All persons between ages 20 and 65 who have been resident in the Uruguay > > (see sec. A). also Canton for 2 years. Staffs of public-utility undertakings. Staffs of banks and stock exchange. > 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 Re- ports, series M, no. 10 (Geneva, 1933); International Labour Office, Noncontributory Pensions, Studies and Reports, series M, no. 9 (Geneva, 1933); Armstrong, Barbara Nachtrieb, Insuring the Essentials (Macmillan Co., New York, 1932). The shift of interest abroad from gratuitous old-age assistance to contributory insurance has been prompted mainly by two considera- tions : (1) The widespread objection to the "means-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 finan- cial strain upon the public exchequer occasioned by the increasing percentage of aged persons who qualified as in need of help and tlierefore were entitled to old-age assistance. Both France and Great Britain, in setting up their contributor}^ old-age insurance schemes for wage earners, recognized that in addi- tion to the insured population there would always be a small number of needy aged from higher income levels and other uninsured eco- nomic groups who would not be eligible for insurance benefits. They have therefore retained their noncontributory plans to provide old-age assistance for these destitute uninsured men and women. The French old-age insurance scheme, wliich 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 guaranteed them. The clause on minimum pensions, however, modifies this situation radi- cally and guarantees all pensioners who have been insured at least 5 years (no pension being due for a shorter insurable period) annuities which amount to five-sixths of the normal full pension of the lowest- paid workers and nearly one-half of the normal full pension of the \tws through 1933 ides. taken at Annual en: £32l0s.; friendl; and tr allowa childrei sions. $125 100 to 201 ing wit) life annu- Earnings 400 fran ings (6i recipien 3 childri t £39 annual income c S; £26 5s. annual inci e and personal eflei y or trade-union. )roperty. £15 12s. 6d bal effects; sickness 1 ion. .i;oijji .i-i>-Mifiv V I £39 7 society; house (incl n which recipient liv assistance authority. y owned md from )mputed in terms £24 for wl £18 for sons. 10 pesos.. ■. .A ;,irt .Cici ,civ»'U;TV'i ■{',!*' isi.- • 184 OLD-AGE SECURITY Table S9.— Old-age assistance and insurance legislation in foreign countries through 1933 — Continued C. COMPULSORY CONTRIBUTORY OLD-AGE INSURANCE LAWS OP LIMITED COVERAGE Country- Year when passed Coverage 1921 1924 1923 1926 1931 1927 1928 1916 1925 1931 1919 1925 Public-utility employees. Brazil ' 2 _. Bank stafls. Railway workers. Cuba" 2 Dock workers. Staffs of public-utility undertakings. Seamen and harbor workers. Ecuador • Staffs of banks. Switzerlajid: Canton Qlarus ' Appenzell .. Legal residents between ages 17 and 50. All legal residents between ages 18 and 64. Basel Town ^..^ All persons between ages 20 and 65 who have been resident in the Uruguay ' ' (see sec. A). also Canton for 2 years. Staffs of public-utility undertakings. Stafls of banks and stock exchange. • Old-age insurance combined with invalidity insurance. ' Old-age insurance combined with survivors' insurance. Source: Compiled from International Labour Office, Compulsory Pension Imurance, Studies and Re- ports, series M, no. 10 (Geneva, 1933); International Labour Office, Noncontributory Pensions, Studies and Reports, series M, no. 9 (Geneva, 1933); Armstrong, Barbara Nachtrieb, Insuring the Essentials (Macmillan Co., New York, 1932). The shift of interest abroad from gratuitous old-age assistance to contributory insurance has been prompted mainly by two considera- tions: (1) The widespread objection to the "means-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 finan- cial strain upon the public exchequer occasioned by the increasing percentage of aged persons who qualified as in need of help and tlierefore 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 addi- tion to the insured population there would always be a small number of needy aged from higher income levels and other uninsured eco- nomic groups who would not be eligible for insurance benefits. They have therefore retained their noncontributory plans to provide 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 w^orkers. 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 guaranteed them. The clause on Tninimum pensions, however, modifies this situation radi- cally and guarantees all pensioners who have been insured at least 5 years (no pension being due for a shorter insurable period) annuities which amount to five-sixths of the normal full pension of the lowest- paid workers and nearly one-half of the normal full pension of the Table 40. — Principal provisions of foreign noncontributory old-age assistance laws through 1933 Qualifications for recipieots British Columbia, Manitoba. Ne laud. Saskatchewan, Oreeolaod Iceland- Irish Free Slate- Norway" SoQth Africa Required Not required— 20 years In Dominion; 5 years 1 all for naturalized sub- 0 years in State.- 25 years in StaLe.. 15 years out of 20 just before daimiug for persons who None required for natural- 0 of real property taken nuity purchasable p )rty= government a J of property taken at Income from capital equal to lif nuity purchasable with it. I from first £375 prop- circumstances. . except exempt property (£50). Annual income from any property owned and occupied by recipient and from all other uninvested assets computed at 10 percent. Property must be expressed in terms 275 to 375 kr. (varying iugs of pensioner. £80; married couple. £54 for white persons; £36 for colored per- 202 pesos a year Property exemption which recipient resides. r property taken at e from capital equal to life a 100 to 200 kr. (vary- Earnings of recipient, benefit from friendly society or trade-ui e from £25 of property. £15 12s. 6d. annual i: arship is transferred to assistance authority. i.nnual income from property owned and occupied by recipient and from other uninvested assets computed £24 for white persons; £18 for colored per- Amount of grant exempt property. 378 to 642 kr.o; adjusted with locality), 900 francs (varying ?. a week; reduced in pro- Amount fixed by district council.. Minimum 20 kr. a J Maximum £40 lOs. a year;' reduced in proportion to means; increased for recipients with 2 or more dependent children. Fi.xed so that 60 percent of amount ?i Duuiinion; Ki Provlm State pnys 240 francs on each balance. District partly reimbursed 50 perceut State; 50 percent State. Administrative respon- ■ers amount of grant on death of recipient or of si :epts transfer of house in which recipient residi ' Noncontributory grants being replaced by contributory pensions. * 65 for widow of beneficiary. 83, value is disregarded in assessing 1 13 deterred beyond a C. Desertion of spouse. s living under tribal conditions. Barbara Nachtrteb, op. t Shared by Dominion and Provinces. Shared by Oentr Govoruraent ai localities. Central Ooverument. mbgr of special national D. Imprisonment for dishonorable action. E. Habitual drunkenness. F. Rec-eipt of poor relief within 3 years of claiming. G. Relatives liable and able to support. H. Aboriginal natives. Source: Compiled from International Labour Oflice, Noncontributory Pentm 78470 — 37 (Face p. 184) tan 0-: ! -^w ! i -ei .! K^t I . . ., fl.! ^>^I ^f:'.»'al''i j OLD-AGE SECURITY ABROAD 185 next stratum of the insured. Thus, at least a subsistence pension is assured all annuitants 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, restrict their cover- age almost exclusively to employed workers. 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 practical difficulty of collecting from the inde- pendent 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 coverage 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 workers has not yet been put into operation. It should also be men- tioned that Sweden's experience has resulted in contribution delin- quencies in industrial centers running well over 40 percent, which suggests that the broader coverage is more nominal than factual. Chile's system includes independent artisans, and several of the Euro- pean laws cover certain selected classes of self-employed workers. Contributions from both employers and the insured workers are I'equired in all these systems except those of Soviet Russia, Spain, and the Netherlands. In all the countries except Russia, the gov- ernment 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 employers 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, is based upon uniform contributions and uniform annuities, while the continental systems graduate both their contributions and annuities in accordance with the wages of the insured person. The British scheme 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 received, stated in terms of foreign cur- rency, mean little if anything to most Americans. For purposes of illustration a comparative table which expresses the contributory old-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 pen- sioners in foreign countries who were in receipt of annuities in the 186 OLD-AGE SECURITY most recent year for which the data were available. Table 42 also shows these pensioners as a percentage of the population of eligible age, while table 43 indicates the variation in these percentages in several countries since the noncontributory pension systems were placed in operation. Table 41,— Weekly contributory ol&age pensions for various countries in rela- tion to toeekly wages in those countries Country- Monetary unit Old-age pension (weekly)' Weekly wages unskilled labor in engineer- ing trades Old-age pension as a per- cent of wages schillings .- 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 francs - - 42.1 crowns - 51.4 francs -- 47.0 marks - --- 34.8 shillings and pence ._ 45.3 56.2 Italy . - - - lire 47.7 1 Calculated for a worker and his wife at the age at which benefits begin. Source: Armstrong, Barbara Nachtrieb, op. cit., p. 417. The pensions have been calculated for a worker whose average wage during the whole period involved is equal to or falls within the same wage class as the average weekly wage paid to unskilled laborers in the engineering trades. Table 42. — Number of recipients of old-age assistance (noncontributory) and contributory pensions in foreign countries and number of people of eligible age [Contributory and noncontributory systems] Date of law Type of law Age require- ment Recipients Number of eligible age Recip- ients Country Number Year as per- cent of niunber of eli- gible age Australia 1908 1927 1927 1891 1905 1889 1908 1926 1909 1908 1919 1911 1913 1898 1928 1913 Noncontributory. . Contributory Noncontributory. . '""do-I-"'"""" Contributory Contributory and noncontributory. Noncontributory . - do do Contributory do do Noncontributory. . do •- Contributory M 65; W 60... 60 (unless em- ployed). 70 183, 317 68, 366 98,111 99, 830 369, 977 2, 126, 336 2,231,016 500 2,466 112, 059 189, 698 1,425 330, 666 34,932 46, 997 3 269, 606 1932 1929-30 1934 1932 1930 1932 1932-33 1929 1928 1928 1933 1928 1929 1933 1933 1932 507, 755 790, 689 1 372, 000 1 268, 000 1 2,206, 000 3,593, 613 ' 3,466, 000 1981 1 10, 790 170. 468 3, 005, 444 18,071 404, 000 108,911 1 231, 100 t 469, 193 36.1 8.6 Canada 26.4 Denmark 65 -. . 37.3 70 16.8 65 - 59.2 Great Britain 65 .. 64.4 55 51.0 60 22.9 Irish Free State 70 65.7 Italy . 65 6.3 65. . 7.9 Netherlands 65 81.8 New Zealand M 65; W 60... 65 32.1 20.3 of. 67 54.3 1 Estimated. 2 These figures are only for the gratuitous grants. There are a number of other special schemes for miners, railroad workers, seamen and employed persons in Alsace-Lorraine, in effect at this time. However, for these the age requirement varies too widely to be included here. 3 Estimated number of people 65 and over in receipt of invalidity or old-age pensions. 4 Population 65 years and over in 1920. OLD-AGE SECURITY ABROAD Table 43. — Foreign noncontributory old-age assistance systems [Changes in proportion of recipients to population of eligible age since efEective date of law] 187 Country and eligible age: recipients as percent of number of eligible age Year Aus- tralia M 65 W60 Denmark 60 to 1922 inc. 65 from 1923 on France 70 Great Britain 70 to 1927 inc. Iceland 60 New Zealand M65 W60 South Africa, Union of 65 1891 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 20.4 20.9 21,5 22.0 21.9 22.3 22.5 22.7 22.9 22.9 22.9 23.0 23.8 24.0 24.4 38.4 44.0 44.3 43.0 42.0 39.7 38.7 37.7 37.4 37.3 Percent Percent Percent Percent Percent 1892 1893 1894- 1895 1896 1897 1898 1899 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 29.1 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 1900 1901. 1902... 1903 1904 1905 1906 - 1907 1908 - 15.4 18.6 28.9 32.2 32.8 33.3 34.3 34.4 33.7 33.5 33.1 32.3 32.2 32.1 31.7 31.1 31.1 30.6 31.3 31.0 30.6 30.5 31.7 34.3 36.1 18.6 19.6 19.9 20.7 22.2 20.5 1909 44.1 46.8 59.7 61.2 61.7 61.9 61.4 60.1 57.2 56.3 54.4 55.8 57.6 58.5 58.7 59.0 63.6 65.9 72.6 1910 1911 . 17.6 1912 1913 . 1914... 1915 18.5 18.1 18.3 20.0 19.5 18.4 18.6 19.1 19.7 19.5 19.0 21.0 22.9 22.9 1916 1917 1918 1919 1920 - 20.0 19.4 18.3 17.4 17.0 16.5 16.0 16.0 16,1 16.1 16.8 1921 .. 1922 1923 1924... 1925 1926 1927 1928 1929 20.3 1930 22.0 1931 .. 22.7 1932. 19.6 1933 20.3 The most significant post-war incident in old-age security legis- lation abroad was Great Britain's insurance act of 1925. Her ac- ceptance of the contributory insurance principle after nearly a gen- eration's experience with gratuitous assistance is of special im- portance to the United States. It is of major interest, moreover, that pensions were made payable to the insured workers as of right, shortly after the institution of the contributory plan. This was made possible through Government provision of the necessary funds for the older workers. The scheme will ultimately be self-sustaining. In view of the interest in the British plans, detailed data on their old-age security provisions are given in appendix VII. X88 OLD-AGE SECURITY The Canadian systems of noncontributory old-age assistance and of voluntary annuities are described in appendix VIII, and appen- dix X gives a detailed account of the financial history of the German contributory old-age insurance system which is combined with inva- lidity 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 occupation 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, Bul- garia, Chile, Czechoslovakia, Ecuador, France, Germany, Great Brit- ain, 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 em- ployer's share of the contribution. This provision permits self- employed persons and those outside the occupations compulsorily 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 gov- ernment 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. In Canada,* Ecuador, France, Japan, and the Netherlands, which have such systems, it is found that relatively few persons (except in France) take advantage of the opportunity for the purchase of annuities from the e:overnment. •• See appendix VIII for an account of the Canadian system of voluntary annuities. Chapter X FORMULATION OF RECOMMENDATIONS FOR AN OLD-AGE SECURITY PROGRAM FOR THE UNITED STATES THE PKECEDING 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 in- adequacy 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 legis- lative 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 subcom- mittee 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 sug- gestion. The conclusions here summarized include, therefore, the contributions of many persons who with varied training and ex- perience 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 opin- ion as both wasteful and inhumane. Noninstitutional assistance for those who are not in need of institutional care has become an accepted standard of 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 old- age 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 assist- ance 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 78470—37 14 189 190 OLD-AGE SECURITY future. It can, on the other hand, afford younger workers the oppor- tunity to build up a certain protection against dependency in their old age. Regular benefits are unquestionably to be preferred to assist- ance 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 long- time planning for old-age security. In consideration of the advan- tages of old-age insurance, the limitations imposed upon the Federal Government by our Constitution which would affect the adoption of such a program were fully recognized. The recommendations for a system of old-age insurance outlined in the succeeding pages must, therefore, be considered in the light of the specific recommendations 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 recommen- dations 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 was pro- posed. Yet there are many aged 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 persons. The lack of factual data bearing on these county institutions and their inmates prevented intelligent planning for this problem. It was, therefore, recommended that the proper Federal agency undertake at once a special survey of such institutions with a view to recom- FORMULATION OF AN OLD-AGE PROGRAM 191 mending a constructive 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 Terri- tories 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 infiuencing the rec- ommendations for a program of old-age assistance were as follows : (1) To help in the expansion of the use of the old-age assistance technique, 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 encour- aged. The inadequacy of the grants paid in most States with assist- ance plans indicated the pressing need for additional funds. (3) To permit and aid improvement in standards of administra- tion, minimum grants, and coverage of State 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. (6) 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 Federal Government and the particular State in cooper- ating to raise the level of effectiveness of assistance programs throughout the country. (c) The assurance to any claimant for assistance of the right of appeal to the State authority. This would provide a further assur- ance of the uniformity 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 assistance 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 subsist- ence 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 Government might well make it possible to raise the level of the assistance afforded by State programs under normal conditions. An established minimum would, however, avoid the spreading of funds too thinly or the progressive lowering of grants in time of financial stringency. (/) 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 eligi- bility 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 must be aided in some manner, arbitrary requirements of years of citizenship and many j-ears 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 expe- rience during the recent depression indicate that the limitation of assistance to persons aged 70 or over excludes far too great a propor- tion 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 likely to occur. The raising of the property limit was intended to permit greater flexibility in handling those situations where the claimant might pos- sess such useful assets as a home, a small piece of land, tools, or fur- nishings. To the extent that income accrues from these assets, this income might reduce the amount of the grant necessar3\ It was pro- posed that a lien be placed against the estate of the recipient at least for the amount of the assistance granted by the Federal 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 similar ties, be expected to sup- port 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. Kather, it was to avoid the distress which might occur when relatives obligated to pro- vide support failed to do so or failed to afford sufficient aid. It did not seem proper that the aged person should be excluded from assist- ance in such situations. Rather, assistance should be given, with the possibility of legal suit for the recovery of the amount of such assist- ance 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 indifferent 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 Govern- ment to an amount equal to the assistance afforded by the States (but limited to $15 per month on account of any individual) under ap- proved plans would not only cause the extension of State assistance legislation but would make possible the adoption of these more ade- quate standards throughout the country. While earlier proposals for Federal subsidization called for a ratio of Federal to State appro- priations of but one to two, on account of the growing urgency of the need for assistance programs, the financial stringencies faced by many 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 sug- gested 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 propor- tion of funds assigned to administration, the Federal and State au- thorities 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 assump- tion 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 the increase in the ratio of de- pendency might well be less rapid than that which was counted upon in this estimate. Table 44. — Estimates of tlie num'ber of old-age assistance reoipients and the amount of Federal subsidy to State old-age assistance programs ^ Assumption 1 2 Assumption II ^ Year Assumption 1 2 Assumption II ' Year Number receiving old-age assist- ance (in thou- sands) Amount of Fed- eral sub- sidy (in millions of dol- lars) Number receiving old-ago assist- ance (in thou- sands) Amount of Fed- eral sub- sidy (in millions of dol- lars) Number receiving old-age assist- ance (in thou- sands) Amount of Fed- eral sub- sidy (in millions of dol- lars) Number receiving old-age assist- ance (in thou- sands) Amount of Fed- eral sub- sidy (in millions of dol- lars) 1936 897 1,046 1,200 1,372 1, 580 2,293 3,153 i $72. 2 131.8 151.2 172.8 199.1 289.0 397.3 897 1,307 1,765 2,287 2,746 3,631 4,675 $136. 6 199.0 268.7 348.2 418.1 552.8 711.8 1955 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 1937 I960- 1, 035. 5 1938 - 1965 1970 1,091.5 1939 1,146.9 1940 1975 1, 219. 1 1945 1980 1,294.3 1950_— 1 These estimates assume that no Nation-wide system of contributory old-age insurance or a substitute therefor is in effect. 2 Assuming: (1) dependency ratio 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 month: (3) Federal subsidy of one-half total costs, excluding that portion of individual grants in excess of $30 per month and that portion of administrative expenses in excess of 10 percent of total payments to individuals. 5 Assuming: (1) dependency ratio of 15 percent in 1930, 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 1957 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 nf $30 per month and that portion of administrative expenses in excess of 10 percent of total payments to individuals. * 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 several reasons for this conviction. The assurance of an old- age assistance grant 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. It becomes reflected in the attitude of children toward 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 the more pension he receives, has an effect which is the inverse of inducement to thrift. The number of aged persons who arrive at old age without any income is actually increased. FORMULATION" OF AN OLD-AGE PROGRAM 195 The justification of a Federal subsidy to State old-age programs is readily apparent from 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 matters are discussed elsewhere in this report.^ 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 for their needy aged under plans that are approved by a Federal authority, such plans to include proposed administrative arrangements, esti- mated administrative costs, and the method of selecting personnel. (2) That the grants-in-aid constitute one-half of the expenditures, including administrative expenses, for noninstitutional old-age as- sistance made by any State or Territory under a plan approved by this Federal authorit}', 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 per- sons in such State or Territory nor more 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 administrative agency unless it — {a) Is State-wide or Territory-wide and, if administered by sub- divisions of the State or Territory, is mandatory upon such subdi- visions; and (&) 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 ((?) 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 minimum assistance grant which will afford a rea- sonable 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 chapters VII, VIII, and XIX. 196 OLD-AGE SECURITY (/) Provides that whether or not assistance shall be denied to cer- tain needy aged persons it shall be granted at least to any person who: (1) Is a United States citizen; and (2) Has resided in the State or Territory for 5 years or more witliin the 10 years immediately preceding application for assistance ; and (3) Is not an inmate of an institution; and (4) Has an income inadequate to provide a reasonable subsistence compatible with decency and health ; and (5) Possesses no real or personal property, or possesses real or personal prop- erty of a market value of not more than $5,000 ; and (6) Is 70 years of age or older; provided that after January 1, 1940, assist- ance shall not be denied to an otherwise qualified person after he is 65 years of age or older; and (ff) Provides that at least so much of the sum paid as assistance to any aged recipient as represents the share of the United States Gov- ernment in such assistance shall be a lien on the estate of the aged recipient which upon his death shall be enforced by the State or Territory and the amount collected reported to the Federal adminis- trative 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 the Senate by Senator Wagner (S. 1130) and in the House of Repre- sentatives by Congressmen Doughton (H. E.. 4120) and Lewis (H. R. 4142) . After hearings before the House Ways and Means 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 passed Congress adopted the basic principle of Federal grants-in-aid to States with old-age assistance programs meeting certain requirements. How- ever, several important changes were made in Congress in the pro- posed standards for State old-age assistance programs required as a condition for Federal subsidy. The principal legislative modifica- tions were the following : (1) The required condition that State old-age assistance plans should furnish assistance sufficient, when added to the income of the recipient, for "reasonable subsistence compatible with decency and health" was rejected by Congi'ess. (2) The proposal that the test of need, to be used in approved State old-age assistance plans in the determination of eligibility for grants, be limited to the adequacy of the income of the aged person, together with that of his or her spouse, was rejected. (3) Congress rejected the proposal that a State plan for old-age assistance should not be approved if it denied assistance to any United States citizen who met the requirements of minimum age FORMULATION OF AN OLD-AGE PROGRAM 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 ap- plication for aid, or an age requirement of more than 65 years (70 years until January 1, 1940), or a citizenship requirement which ex- cludes 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 not to exceed 5 percent of the State's total expenditures was modified to a provision that 5 percent of the Federal grant payable 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 con- clusion 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.^ The estimates of the number of aged persons probably becoming dependent have been pre- sented.^ 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 assist- ance expenditures. The experience of other countries lends weight to this conclusion. It was, therefore, concluded that a system of con- tributory 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 con- tributions 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 See pp. 139-141. » See pp. 149-154. 198 OLD-AGE SECURITY A corollary reason for the early establiskment of a system of old- age 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 re- ceived as a matter of right, based on contributions related to wages, workers 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 w^ould 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 re- current 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 insur- ance program seemed marked. The conditions surrounding the payment of benefits under an old-age insur,ance system would enhance the economic effects of an old-age security program. 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 satisfactory existence. Assistance grants may prove a subsidy to superannuated workers which will permit them to accept lower wages than younger workers in competition for jobs. Administrative authorities seeking to hold down assistance expenditures may stimulate such competition as a means of reducing grants in individual cases. The effect on the employment opportunities of younger men and upon wage rates might prove most unfortunate. Under a system of old-age insur- ance, the opposite effect would ensue. Since retirement from regular employment could be made a condition for receipt of benefits, the displacement of superannuated workers from the labor market would be accelerated. The certainty and regularity of benefit pajmients under an old- age insurance program would serve to stabilize in some degree the flow of consumption expenditures on the part of our superannuated population. With a definite retirement income assured, superan- nuated persons would be more likely to maintain a normal rate of FORMULATION OF AN OLD-AGE PROGRAM 199 expenditure in good times and bad. As benefit payments rose and more persons became eligible to receive tliem, 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 advan- tages of an old-age insurance program. The more adequate pension programs have served to protect those eligible for benefits from dis- tress 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 con- tinued initiative on the part of the prospective recipient. They have also enhanced thrift through increasing the appreciation of the satis- factions of planned security. At the same time, pension payments, where adequate, have served to prevent the necessity for superan- nuated persons to compete for jobs against younger and more active workers. In these cases, they have increased employment oppor- tunities, 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 pro- grams 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 pro- grams prevent, however, any reliance upon such programs in meeting the problem of old-age dependency facing the country.* In the few instances where private pension plans afford more generous protec- tion 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.^ ^ See p. 176 for a discussion of tlie 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 pro- gram. A social insurance program serves a broad public purpose and is designed to meet basic needs. Private pension plans are adjusted to the interests of a relatively small 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 prob- lems of finance and administration in attempting to safeguard both the general insurance system and the employees affected. On the other hand, employers desiring to provide more liberal benefits will be able to work out supplementary programs which will be entirely apart from governmental supervision. 200 OLD-AGE SECURITY The experience of other countries with various types of old-age security measures serves to justify further the conclusion that old- age 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 the 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 to establish the more constructive programs. While the source of funds in most of these foreign plans is in part the contributions of workers and employers, appropriations from the general governmental funds are quite usual. The shift from gratuitous pensions granted 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 question 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 through a single national ad- ministration could effective operation be assured. The reasons lead- ing to this decision may be summarized : (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. While such estimates as 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 result 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 virtually insuperable administra- tive difficulties, excessive costs, and almost certain failure in many States. (2) Aside from the actuarial problems involved in State admin- istration 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 pro- grams by 48 States would involve both investment and administra- tive problems of serious proportions. Not only might the degree of safety and the adequacy of 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 pro- grams might affect seriously the competitive costs of doing business in the several States. For interstate corporations, the adjustment of industrial pension 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 old- age 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 advan- tages in economy and convenience resulting 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 adminis- trations. It became clear, therefore, that State action could not prevent old- age dependency by establishing independent old-age insurance systems. A study of foreign insurance systems confirmed this con- viction. In the field of unemployment insurance a number of na- 202 OLD-AGE SECURITY tional governments in foreign countries limit their function to fctimulating voluntary efforts by offering subsidies to regional, local, or industrial 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 em- ployers or labor unions. Basic Principles of an Old-Age Annuity System. — Before for- mulating a program for presentation to Congress, decision had to be reached on the basic provisions 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 ATnount of Insurance Benefits. — Although pay- ments to beneficiaries under a system of old-age insurance should bear a definite relationship to the previous earnings of the benefi- ciary, many factors must be considered in determining the precise relationship which is proper and feasible. After balancing these factors the following conclusions were reached : (1) The immediate payment of benefits at a rate justified in a system long in operation seems financially impossible. While a rate approximating 60 percent of previous average earnings is socially desirable, the cost of such benefits would be far 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 contribu- tions had been levied over a period of years could the flow of funds necessary for a full scale of benefits be attained. The charges neces- sary for such benefits for persons now old should not be suddenh^ assessed upon the present younger generation of contributors. In- stead, the amounts of benefits paid to individuals might, in general, rise gradually over the next generation based on the increasing period of insurable employment of prospective beneficiaries previous to retirement. In this way the costs of the system would be adjusted to the period in which the beneficiaries had contributed to the cost of operating the system either directly through wage deductions or indirectly through the economic income they had helped to produce. (2) The minimum benefit granted should, however, be sufficient to prove a considerable item of income to the recipient and to warrant the administrative costs of distribution. It was concluded, therefore, that no benefits should be paid during the first 5 years in which the system was in effect and in which contributions were paid. At the end of 5 years annuities should be begun at an initial rate of not less than 15 percent of average wages. After that time the rates would FORMULATIOISr OF AN OLD-AGE PROGRAM 203 increase with the number of contributions made. The annuity would amount to approximately 50 percent of average wages for a person on whose behalf contributions were paid throughout his entire work- ing 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 re- quired. A benefit of these proportions would greatly exceed for many years that "earned" by the contributions assessed in the indi- vidual 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. For this reason, it was believed that the minimum such as that proposed should be established. (3) Insurance benefits should be so graduated relative to contribu- tions that (a) persons of lower average income and (&) persons coming under the system relatively late in life should receive higher proportionate benefits. As a social mechanism aimed at the preven- tion of dependency, an old-age insurance system should be adjusted in some measure to the relative needs of various classes of benefici- aries 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 persons 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 adversely affected by such subsidized competition, it w'as felt that old-age insurance benefits should be suspended in those cases where otherwise qualified persons were regularly employed. It was be- lieved that the social advantages of encouraging retirement 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 204 OLD-AGE SECURITY could be preserved between the benefits accruing to those who survive to 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 supple- mentary system of survivors' insurance paying regular monthly bene- fits 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 Amount of Contrihutions. — 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 emplo^^ments determined as a percentage of pay roll, and (3) subsidies by the Federal Government financed through taxes not borne by workers. The reasons support- ing 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 re- ceived as a matter of right without a test of means, the employee eligible to coverage would obtain a virtual equity in the protection afforded. It seemed but proper that the group of our citizens obtain- ing 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 retire- ment. The determination of contributions as a percentage of earn- ings rather than as a fixed sum avoids the possibility of hardships in those cases where low earnings are received. Since adjustments in the scale of benefits would be possible, there would be no occasion for a graduated scale of contributions in seeking to approximate more closely the greater proportionate ability of higher income groups. FORMULATION OF AN OLD-AGE PROGRAM 205 The setting aside of a percentage of wages has long been a cus- tomary 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 estab- lish an earned right to a benefit related to the contribution made. It is believed that such an arrangement would be both practical to administer and acceptable to the great majority of American em- ployees. By sharing in the cost of the old-age insurance system, the workers of the country would be led to assume a greater interest m its proper administration. The importance of efficiency and econ- omy of operations, the necessity for conservative policy in the deter- mination 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 reason- able charge against production. Just as industry, generally, has become accustomed to meeting charges for the depreciation and re- placement of its material equipment, many employers have developed programs for the payment of retirement allowances to their super- annuated employees. These employers include industrial corpora- tions, railroads, public utilities, governments, educational institu- tions, and other organizations. Such costs are considered proper additions to the cost of production. It appeared appropriate and reasonable, therefore, that employers in covered employments should contribute to a system of old-age insurance designed to protect their employees. In order to main- tain 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 deter- mining 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 serv- ices 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 vmjust. It was felt that 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 indi- cates the advisability of equal contributions. With such sharing of costs, an insurance system would be accepted as a truly joint enter- prise of the employers and workers of the country, aided and super- vised by the Government as representing the public as a whole. Since the assessment of new charges of the character here consid- ered would involve a complex series of adjustments on the part of industry and the public, it was felt that the initial rates of contribu- tions established should be as low as economical administration would permit. Expenditures 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 remem- bered that even if benefits began after contributions had been col- lected for 5 years, only that age group just reaching retirement would be eligible for benefits. Meanwhile, contributions would be received 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. It was felt, therefore, that the joint rates of contributions should be raised in steps of 1 percent each at intervals of 5 years 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 gradu- ally 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 employers and employees hivolved 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 this FORMULATION OF AN OLD-AGE PROGRAM 207 charge could be determined sufficiently to warrant more than limited use. Employee contributions might well impair the living standards of the workers if rates encroached upon income 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. Em- ployers, 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 adequate 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 Govern- ment would be reduced— a saving which should not accrue at the expense of insurance contributors. It was felt that the maximum 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 approxi- mately 25 years. After this period subsidies would be necessary. The Accuniulation and Maintencmce of a Reserve. — In order to insure the availability of funds for the regular payment of old-age in- surance benefits to eligible beneficiaries at all times, it was decided that a reserve fund should be accumulated from contributions made 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 reserve 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 indi- cate 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. Coverage. — 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 of contributions. The administrative difficulties involved in such universal coverage are, however, readily apparent. An attempt to base contributions on incomes accruing in the form of profits, interest, or rents would be fraught with many difficulties of identification and measurement which would far outweigh the advantages of bringing the recipients of these incomes, as such, within such a system. On the other hand, incomes received in the form of wages or salaries could be more readily determined as a basis for assessment. As a class, wage earners are more in need of old-age protection than are the recipients of other types of income, hence public support for the enforcement of contributions on their behalf could be more readily secured. Fur- ther, the payment of wages is a practical basis for contributions as- sessed on both the employer and the employee. With the employer acting as the agent of the Government in the collection of the em- ployee'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 of contributions would serve as an aid in the enforcement of accurate reporting upon less conscientious employers. For these reasons it was deemed desirable to limit the coverage of an old-age insurance system to persons employed for wages or salaries. Administrative difficulties suggested further limitations of coverage to eliminate, at least in the early years of a system, certain types of employments in which it would be difficult to enforce the collection of contributions. In the case of farm labor and domestic servants in private homes, a large number of 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. Wliile the need of these groups for protection in old age was very apparent, it seemed expedient to postpone their inclusion until after adminis- trative experience could develop in less difficult areas of operation. Since Congress 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 em- ployees 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-AGE PROGRAM 209 With these exceptions, it seemed proper to inckide within the system all gainfully employed workers regardless of the character or size of the establislmient in which they were employed. All workers face 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 constitutional 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 obli- gations, especially at the outset. It was believed, however, that the extent of noncompliance w^ould, 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 w^as 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 administrative difficulties of ascertaining coverage under a plan lim- ited to establishments with a certain number of employees might prove quite as formidable as those faced in assuring coverage of all establishments. Administration. — The administrative requirements of old-age in- surance are not complicated in comparison with those involved in unemployment compensation, with its need to determine the cause of severing employment, the possibility of reemployment, the suitability of available work, and similar questions. The volume of individual contribution records 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 expe- rienced 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 Depart- ment 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 out- standing persons in the field of social insurance administration whose services could be procured with difficulty if they were offered positions 210 OLD-AGE SECURITY as lesser officials in any department. In the interests of the insured population, both in the formulation of regulations and in the develop- ment 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. — It was recommended to the Congress that the Federal Government adopt a program of old-age benefits.'^ To this end it was specifically proposed that legislation should include two separate measures, one a taxing measure and the other a per- manent appropriation measure. The taxing measure was to contain (1) a tax upon the income of the workers wdio 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 considered de- sirable that the amount yielded be equivalent to the worker and employer contributions which would have been required if the pro- gram proposed had been a contributory old-age insurance sj^stem. The following tax schedule was recommended : Excise tax on Income tax on employers' employee^ pay rolls wages Years (percent) (percent) 1937-41 i/2 y.2 1942-46 1 1 1947-51 1% xy., 1952-56 2 2 1957 and thereafter , 2.y.2 21/. The proceeds derived from these taxes were to be allocated to an old- age fund to be established in the Treasury. While it has been recognized that administrative difficulties might stand in the way of 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 accord- « See Committee on Elconomic Security, Report to the President (U. S. Government Print- ing Office, Washington, D. C, 1935), p. 29; Committee on Ecouomic Security, Old-Age Security Staff Report (mimeographed report, January 1935), p. 30. FORMULATION OF AN OLD-AGE PROGRAM 211 ance with recommendations submitted by the Committee on Eco- nomic Security to the President on January 15, 1935. It was considered advisable to bring under the tax program as wide a group of 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 recom- mended. The most important groups exempted and the reasons for their exclusion from the tax and annuity program may be briefly summarized. The annuity program was primarily designed for per- sons 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 recom- mended. Because they were already provided for under public retire- ment systems, it was recommended that employees of the Federal Govermnent 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. Fur- thermore, since, under the Constitution, the Federal Government cannot impose taxes upon States and subdivisions of States, it was considered necessary to exempt 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 appro- priation to be used for building and maintaining the fund from which the old-age benefits should be paid. This proposed appropria- tion measure provided that 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, a worker was not eligible for an annuity unless 200 weekly tax pay- ments 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 retirement from gainful employment. For workers entering the system during the first 5 years of its existence a mini- mum benefit of 15 percent of average wages was proposed. Gradu- ally these benefits would increase with the number and amount of tax payments. It was estimated that a worker who had been cov- ered by the system during his entire working life would receive an annuity representing between 40 and 50 percent of his average wage.'' While it was hoped that the annuities proposed would be adequate for workers of modal earnings, it was realized that the benefit sched- ule would not permit low-paid workers to earn annuities sufficiently ■^ The proposed method of computing the old-age annuities on the basis of the tax payments made on behalf of a worker is described in detail on pp. 36-38 of Committee on Economic Security, Old-Age Security Staff Report (mimeographed, January 1935). 212 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 fir.st $15 of aver- age wages in the computation of benefits. In addition to the annuities payable to workers under the condi- tions described above, it was proposed that death benefits be pro- vided for the survivors of workers who had been covered by the system. The death benefit was to equal the aggregate amount of the worker's own tax payments less the total amount which the worker had received as an annuity. It was also recommended that provisions be made for a lump-sum endowment to a person who 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 the worker's own tax payments plus interest. Table 45 shows the progress of the tax and benefit payments during the next half century under the proposed old-age annuity plan. Under the proposed old-age annuity program the taxes collected would be in excess of the benefits paid out for about 25 years. For this reason a reserve would be accumulated in the old-age fund, which, according to actuarial forecasts, would amount to approxi- mately 15 billion dollars in 1965. Since the forecasts indicated that after that time the benefit payments would be in excess of the taxes collected, it was recommended that, in order to keep the reserve at that level, the Federal Government should obtain the necessary addi- tional funds from taxes borne by the recipients of higher incomes. Tabilb 45. — Progress of tax and ienefit payments under proposed old-age annuity plan [All estimates in millions of dollars] Year Net tax collec- tions 1 Interest on reserve Federal contribu- tion Benefit payments Reserve end of year 1937 302.9 306.0 308.9 312.0 672,3 1, 073. 3 1. 520. 0 1,979.2 2, 058. 3 2, 137. 5 2, 216. 7 2, 216. 7 0 9.1 18.4 28.1 122.4 230.3 345.3 437.9 458.0 458. 0 458.0 458, 0 0 0 0 0 0 0 0 0 165. 7 632.8 1, 034. 3 1, 478. 7 0.7 2.0 3.3 4.8 268.0 683.6 1,318.9 2, 100. 4 2, 682. 0 3, 228. 3 3, 70S. 9 4, 153, 3 302 3 1938 ... 615. 3 1939 - 939.3 1940 1, 274. 7 1945 4, 606, 4 8,293.9 12, 058. 0 14,912.4 1950.- 1955 1960 1965 . 1970 15, 266. 7 15, 266. 7 1975 1980 15, 266. 7 15, 266. 7 ' Tax collections less administrative expenses; administrative e.xpenses as percent of collections as follows: 1937-41 10 1942-46. 8H 1947-51 _ 6J6 1952-56 5 1957-80 - 5 Congressional Reconstruction of the Program. — The recom- mendations briefly outlined above were embodied in titles III and FORMULATION OF AN OLD-AGE PROGRAM 213 IV of the economic security bill introduced in the House of Rep- resentatives 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.).« The provisions of the Social Security Act differ considerably from tlie economic security bill as originally introduced. The following schedule of taxes was adopted by Congress : Ewcise tax on Income tax on employers' employees' pay rolls wages Years {percent) (percent) 1937-39 1 1 1940-42 11/2 11/2 1943-45 2 2 1946-48 21/2 21/2 1949 and thereafter , 3 8 A comparison of this schedule with the one recommended (see p. 210) shows that the income taxes levied upon workers and the excise taxes levied upon employers not only start at higher rates than in the recommended program but that a maximum of 3 percent is reached in 1949 instead of the maximum of 2i/^ 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 earn- ing in excess of $250 per month be exempted from the tax was not adopted. Under the Social Security Act the remuneration of man- ual 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 em- ployees and their employers regardless 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 amount required from year to year may be much more or considerably less than the revenues from the taxes levied in title VIII. « 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 of his status as a w^orker 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 old-age account is not con- ditioned 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 employ- ments 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 ex- empted employments .are 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.alary paid to the individual by an employer should be counted in the comjDutation of benefits. Thus, under the provisions of the Social Security Act there exists no interdependence between the taxing and the appropriation pro- visions. 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 contributory fea- tures of the proposed program submitted to Congress, the Govern- ment in the Social Security Act has accepted the responsibility of building up a fund from which the worker in industry will receive a retirement income related to his standard of living as reflected in the wage level at which he has worked VOLUNTAKY OLD-AGE ANNUITIES Voluntary Continuance in the Old-Age Annuity System. — In the report of the Committee on Economic Security to the President it was suggested that persons who under the Nation-wide annuity system qualified for annuities by fulfilling minimum requirements of 5 years of coverage and 200 tax payments be permitted to FORMULATION OF AN OLD-AGE PROGRAM 215 continue tax payments voluntarily until age 65 if 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 employ- ment 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, de- ferred 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 difficulty : (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 administration and to minimize misunderstand- ing 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 insurance authority along with the old-age annuity system. 216 OLD-AGE SECUKITY No estimates were made as to the amount of annuity reserves 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 THE FEDERAL SOCIAL SECURITY ACT ^ establishes two types of provisions for old-age security, (1) Federal aid to States to enable them to give more adequate aid to their needy aged, and (2) a system of Federal 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 the 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 individ- uals 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 assist- ance 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 for a system of grants-in-aid to the several States to enable them, 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 qualifica- tions for eligibility to old-age assistance and to insure State financial iCh. 531, 49 Stat. 620; 42 U. S. C. (1935 Supp.), §§ 301-1305. 217 218 OLD-AGE SECURITY participation in the system, the Federal law establishes certain requirements which a State plan must meet in order to qualify for Federal funds. Table 46 gives in summary form the provisions of the Federal Social Security Act with respect to old-age assistance. The follow- ing paragraphs also briefly outline these provisions. Administration of Federal and State Plans. — The Federal 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 Federal 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 Fed- eral grants and will indicate the amount to which each State is entitled. The Federal 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 adminis- tration, 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 relat- ing to selection, tenure of office, and compensation of personnel) as are found by the Social Security Board to be necessary for the effi- cient administration of the plan; (5) that the State agency shall make reports from time to time to the Social Security Board, fur- nishing 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 which 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 than 65 years, PROVISIONS OP THE SOCIAL SECURITY ACT 219 TABLE 46. — Summary of provisions for Federal grants to States for old-age assistance To be made by the Social Security Board under title I^ of the Social Security Act. Definition "Old-age assistance" means money payments to aged needy individuals. Certification of State Plan for Federal Grants A State in order to receive 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 the State and, it administered by them, ^^2 Pim^sion "^for *^fln'ancial participation by the State, except tliat this condition is waived until July 1, 1937, if the Board finds that a State's constitution prevents such participation ; , . . ^- • , c^ j. „ ,„ 4.^ 3 Either provision for the establishment or designation of a single State agency to administer the plan, or for the establishment or designation of a single State agency to supervise the administration of the plan; 4 Provision for granting to any individual whose claim for old-age assistance is denied, an opportunity for a fair hearing before such State agency ; 5 Such metliods of administration (other than those relating to selection, tenure ot office, and compensation of personnel) as are found by the Social Security Board to be necessary for the efficient operation of the plan ; , . ^ ^. ^i, 6 Submission of such 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 which the Board may from time to time find necessary to assure the correct- ness and verification of such reports ; . , ,_ 7. Provision that if the State or any of its political subdivisions collects from the estate of any recipient of old-age assistance any amount with respect to old-age assist- ance furnished him under the plan, one-half of the net amount so collected shall be promptly paid to the 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 requirement of as much as 70 years may be imposed ; 2. A residence requirement which excludes any resident of the State who has resided therein 5 years during the 9 j'ears immediately preceding the application for old- age assistance and who has resided therein continuously for 1 year preceding application ; 3. A citizenship requirement which excludes any citizen of the United States. Amount of Grant to Each State 1. A quarterly amount which shall be used exclusively as old-age assistance equal to one-half of the total sums expended in the State in such quarter as old-age assistance to needy individuals 65 years of age or older who are not inmates of public institutions, not counting 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 State plan, or for old-age assistance, or both. Methods of Computing 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 old-age assistance, with statement of amount appropriated or made available by the State and its political sub- divisions. (If the amount appropriated is less than one-half of the total sum of esti- mated quarterly expenditures, the 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 the time or times fixed by the Social Security Board : (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 quarter was greater or less than the amount which should have been paid ; (6) By the Secretary of the Treasury, through the Division of Disbursement, prior to audit or settlement by the General Accounting Office. Suspension of Grants If the Social Security Board finds, after reasonable notice and opportunity for hear- ing to the State agency administering or supervising the administration of the State plan, that the plan has been so changed as to impose prohibited age, residence, or citizenship requirements, or failed 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 ?49,750,000 for fiscal year ending June 30, 1936 ;= thereafter an annual amount sufficient to carry out the purposes of the title. 149 Stat. 620; 42 U. S. C. (1935 Supp.), §§ 301-306. 2 The Social Security Act was not approved until Aug. 14, 19.35, 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, 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. 220 OLD-AGE SECUKITY 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 resi- dence requirement which excludes any resident of the State (1) who has resided therein for 5 years during the 9 years immediately pre- ceding application for old-age assistance and (2) who has resided in the State continuously for 1 year preceding the application. More- over, a State plan 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 Se- curity 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 participa- tion, 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 deter- mine 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 appro- priated 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 expendi- tures for the quarter, the State report must show the source or sources from which the difference is to be derived. The 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 Disbursement of the Treasury Department and prior to audit or settlement of the General Account- ing 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 OF 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,^ from which to defray the costs of grants to the States with approved old-age assistance plans, and, for subse- quent years, appropriations of amounts sufficient to carry out the pur- poses 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 law does not place any minimum or maximum limits on the amount of old-age assistance which the States may pay to their needy aged, but stipulates that the Fed- eral 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 indi- vidual 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 Avill pay 5 percent of its total quarterly grants to the State. This sum may be used for paying the cost of administering the State old-age assistance plan, or, if the State pays all or a part of its administrative expenses, this addi- tional grant may be used Avholly 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. — If 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 The Social Security 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, 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 require- ments 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^ a Nation-wide old-age benefit system is provided. Title II ^ of the act establishes an old-age reserve account in the Treasury of 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 per- formed 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 indi- viduals 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 employ- ment must amount to not less than $2,000. Only the first $3,000 a year from any one employer, including the cash value of remunera- tion 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. = 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. PROVISIONS OF THE SOCIAL SECURITY ACT 223 Table 47. — Sttmmary of principal provisions of the Federal Social Security Act relating to Federal old-age benefits (49 Stat. 622, title II; 42 U. S. C. (1935 Supp.), §§ 401-410) Coverage ^ 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 home ; 3. Casual labor not in the course of the employer's trade or business ; 4. Service performed as an ofiicer 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 instru- mentality 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 foun- dation, organized and operated exclusively for religious, charitable, scientific, literary, or educational 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.* Conditions to Qualify fob Receipt op Monthly Old-Age Benefits ^ 1. At least 65 years of age. 2. Not less than $2,000 total wages from included employment after December 31, 1936, and before age of 65. 3. Wages were for employment on some day in each of 5 calendar years after December 31, 1936, and before age of 65. Monthly Old-Age Benefit Payments ^ 1. Date monthly benefits first payable, January 1, 1942. 2. The amount of the monthly benefits payable is determined as follows : Total icages from included employments after Dec. 31, 1936, total waaes and prior to age 65 p^^^ J [Not counting wages from any one employer in excess of monthly $3,000 annually] benefits First $3,000 if. Next $42.000 ut All over .$45,000 ij^ The maximrum monthly benefit is $85. Ldmp-Sum Benefit Payments 1. Individuals whose total wages or periods of service are insufficient for them to qualify for monthly benefits are paid, upon reaching age 65, a lump sum equal to 3% percent of the total wages from included employment after December 31, 1936, and before the attainment of age 65.^ 2. Upon death of individual before age 65, death benefits will be paid equal to 3% percent of his total wages from included employment after December 31, 1936. If a person dies without having received at least 3% percent of his wages in a lump sum or monthly payments the difference between such 3% percent and Federal payments previously made will be paid as a death benefit.^ Reduction of Benefits An amount equal to 1 month's benefit Mill be deducted for each month in which a qualified individual Avho has attained age 65 received wages for regular included employment. Federal Administration Social Security Board determines the qualifications of the individual and the amount of benefits payable,^ and certifies to the Treasury persons entitled to payments.* M9 Stat. 625, § 210 (b) ; 42 U. S. C. (1935 Supp.), § 410 (b). 2Ch. 812, 49 Stat. 967; 45 U. S. C (1935 Supp.), §§ 215-228. = 49 Stat. 625, § 210 (c) ; 42 U. S. C. (1935 Supp.), § 410 (c). *49 Stat. 623, § 202; 42 U. S. C. (19-35 Supp.), § 402. M9 Stat. 624, § 204; 42 U. S. C. (1935 Supp.), § 404. 8 49 Stat. 625, § 203; 42 U. S. ,C. (1935 Supp.), § 403. '49 Stat. 623, § 202 (a) ; 42 U. S. C. (1935 Supp.), § 402 (a). *49 Stat. 624, § 207; 42 U, S. C. (1935 Supp.), § 407. 224 OLD-AGE SECUEITY Table 48 illustrates the monthly benefits payable to eligible indi- viduals. No monthly old-age benefits are payable before January 1, 1942. Since the aggregate of wages from employment must be at least $2,000, the smallest monthly benefit payable will be $10. The Social Security Act limits the benefit to a maximum of $85 a month. An amount equal to 1 month's benefit will be deducted 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 the computation of monthly benefits, the benefit scale is designed to give greater 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 payable for specified total loages as defined for the purposes of title 11^ of the Social Security Act Total wages $2,000.- $2,500.. $3,000.. $3,500.. $4,000.- $4,500.. $5,000.. $10,000. $15,000. $20,000. $25,000. $30,000. Monthly benefit at specified rate 0.5% of first $3,000 $10.00 12.50 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 yi2 of l%of next $42,000 $0.42 0.83 1.25 1.67 5.83 10.00 14.17 18.33 22.50 5^4 of 1% of all over $45,000 Total $10.00 12.50 15.00 15.42 15.83 16.25 16.67 20.83 25.00 29.17 33.33 37.50 Total wages $35,000.. $40,000.. $45,000.. $50,000. . $60,000.. $70,000.. $80,000.. $90,000.. $100,000. $110,000. $120,000. $130,000- Monthly benefit at specified rate 0.5% of first $3,000 $15.00 l.o.OO 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15. 00 15.00 H2 0f l%of next $42,000 $26. 67 30.83 35.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00 H4 0f 1% of all over $45,000 Total $41. 67 45.83 50.00 52.08 56.25 60.42 64.58 68.75 72.92 77.08 81.25 2 85.00 1 49 Stat. 622, §§201-210; 42 TJ. S. C. (1935 Supp.) , §§401-410. 2 Maximum monthly benefit. long period of employment accumulate large amounts as total wages. The greater weight thus assigned to the earnings of the lower- income groups has been adopted in 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 radical increase in costs of living this amount may often be sufficient to provide for the person's needs without supple- mentary assistance from State old-age assistance plans. The Fed- eral old-age benefit system 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 Federal Govern- ments for charitable assistance. PROVISIONS OF THE SOCIAL SECURITY ACT 225 Eligibility for Benefits. — In order to be eligible for monthly ben- efits 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 of 65, and all his wages counted from such employment must not total less than $2,000. If his wages from included employment are less than $2,000 or his periods of employ- ment are insufficient to meet the conditions just mentioned he will receive a lump-sum payment equal to 3i/2 percent of such wages. Payments Upon Death. — If a person covered by the old-age bene- fit system dies between December 31, 1936, and his sixty-fifth birth- day, his estate will receive an amount equal to 3i/2 percent of his total wages during the period. Similarly, when an individual dies after the commencement of his monthly life income, any surplus will be paid which remains after the sum total of his benefit payment has been deducted from the amount representing 3I/2 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 ben- efit, 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 there- upon, through the Division of Disbursement of the Treasury Depart- ment, 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, old- age benefit payments shall not be subject to execution, levy, attach- ment, garnishment, or other legal process or to the operation of any banl^ruptcy or insolvency law. Old-Age Reserve Account. — The act creates an old-age reserve account in the Treasury, to which Congress is authorized to appro- priate 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 Treas- ury is to submit annually to the Bureau of the Budget an estimate of the appropriations to be made 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 old- age reserve account which will not be needed for current with- drawals. The funds are to be invested only in interest-bearing obli- gations 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 invest- ment the Secretary of the Treasury may purchase outstanding obli- gations at the market price. In addition, through an amendment to the Second Liberty Bond Act, special obligations of the United States may be issued at par exclusively for 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 obligations 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 THE CHIEF AIM 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 economic and social structure of our civili- zation. Among them are an adequate wage level and a reasonable workday and workweek, with provision of regular and full employ- ment necessary to yield a stable and sufficient family income ; unem- ployment 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, the sick, the widowed, and the orphaned ; adequate opportunities for edu- cation 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 respon- sible 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 fact, as affecting child welfare^ — even old-age security, which lifts the burden of sup- port 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, have a responsibility. Such protection should begin with the preparation 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, 229 230 SECURITY FOR CHILDREN orphanage, desertion, or grave conditions of incompetency, discord, neglect, and demoralization in the home. The effect of economic insecurity up^on children is brought vividly to public attention by the fact that in December 1934 about 8,000,000 children under 16 years of age were in families receiving unem- ployment relief — representing about 40 percent of the total number of persons on relief — and by evidences, given later in this report, of the effect of the depression upon the health and welfare of chil- dren 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 con- cerned 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 of the needs of 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 of financial or administrative responsibility between the Federal Oov- ernment 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 Fed- eral Government has a responsibility in these matters which it shares with the States and the local communities. Development of provisions for the health and welfare of children has been uneven in both extent and quality. In many areas, particu- larly 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 bread- winners are absent. This is also true of unemployment compensa- tion. For these groups of 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 with regard to sections or parts of the security program relating to child health and child welfare. An advisory committee on child welfare worked Math the Children's Bureau in developing the factual material and recommendations submitted to the Cabinet Committee on Economic Security. The membership of this advisory committee is given in appendix XIII, page 519. CHILD WELFAKE IN A GENERAL PROGRAM 231 The measures tliat were thus recommended are, of course, in no sense representative of a complete child-welfare or child-health pro- gram 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 child- welfare or child-health problem which were very closely related to the problem of unemployment; in the second place, measures which would attempt to meet the basic needs of children throughout the country, such as the need for economic security when the father is absent from the home and the need for a measure of health protection, which must be supplied through community activities and community 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 pro- gram relating to aid to dependent children, welfare services for children needing special care, and maternal and child-health services, including services for crippled children — a group 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 the 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 con- template 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 program recom- mended would attempt to make universally available throughout the United States certain minimum measures of public protection, with- out 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 meas- ures, building upon American experience and designed to establish a foundation of Federal, State, and local cooperation which will not lead to any difficult administrative realms or to any unpredictable costs. Chapter XIII AID TO DEPENDENT CHILDREN A ID to dependent children, also known as mothers' aid, mothers' l\ 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 form of care.^ 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. PUKPOSE AND EXTENT OF LEGISLATION FOE 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 house- keeping and the care of her children, releasing her from the inade- quacies 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 month 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. 233 234 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 large proportion of the counties have not provided the benefits which the laws contemplated. This is explained by the fact that (1) the majority of these statutes, unlike most of the recently 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 inadequate 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 has 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 administrative practice great variation is found in the definitions of persons eligible for aid — variations with respect to marital status of the mother, residence and citizenship, ages of children, and other items. In practice, in 1931, 82 percent of the families receiving aid to de- pendent children for which marital status was ascertained were families of widows. Information available in 1934 shows that in 36 States, the District of Columbia, Alaska, and Hawaii aid may be extended to mothers whose husbands have deserted (frequently granted only under specified conditions as to attempts to secure sup- port and as to duration of the father's desertion) and in 21 States, the District of Columbia, and 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 father is dead, divorced, physically or mentally incapacitated, imprisoned, or where he has AID TO DEPENDENT CHILDREN 235 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. Table 49 shows the conditions under which aid may be granted. Table; 49. — Conditions under which aid to dependent cMldren may be granted and limitations on amount of aid {193 Jf) State Alabama '_ Alaska Arizona... Arkansas. California. Colorado Connecticut. Delaware District of Colum- bia. Florida Georgia ' Hawaii.. Age under whicli aid may be given «16 Conditions under which family deprived of father's support is eligible for aid Father dead, deserting, divorced, incapacitated, in penal institution. 2 Father dead, deserting, incapacitated Father dead, deserting, incapacitated, in penal institution. Father dead, incapacitated, 2 in institution (pen- al or other). Any mother 2 Father dead Father dead, deserting, incapacitated, 2 in penal institution. Any mother 2 Law broadly inclusive 2 1 Years of resi- dence State Coun- ty or town 6mos. 33 Idaho Illinois Indiana Iowa... .Kansas... Kentucky Louisiana " Maine Maryland Massachusetts. Michigan Minnesota Mississippi. Missouri Montana. .. Nebraska Nevada New Hampshire. New Jersey New Mexico. New York... North Carolina. North Dakota.. Ohio. Oklahoma. Oregon. Peimsylvania Puerto Rico Rhode Island South Carolina ' . South Dakota... Tennessee.- 15 16 0 16 16 14 6 14 «16 16 6 14 16 17 16 16 16 16 16 5 16 16 « 16 16 16 14 15 6 16 14 5 14 16 s 14 16 17 Father dead, deserting, in institution (penal or other). 2 Father dead, in institution (penal or other) 2 Father dead, deserting, incapacitated Any mother i" Father dead, in State institution (penal or other). Law broadly inclusive * Any mother 2 Father dead, incapacitated, in penal institution. Any mother _. Father dead, incapacitated. Any mother _ Law broadly inclusive « Father dead, deserting, incapacitated, in State institution (penal or other) .2 Any mother 2 Law broadly inclusive « Father dead, incapacitated, in State institution (penal or other) . Law broadly inclusive «. Any mother Any mother 2 Father dead, deserting, incapacitated, in insti- tution (penal or other). Law broadly inclusive 8 Father dead, deserting, incapacitated, in institu- tion (penal or other) . Law broadly inclusive « Father dead, deserting, incapacitated, in penal institution. do Father dead, in State institution (penal or mental). Father dead, incapacitated, in institution (penal or other). Father dead, in hospital for insane Father dead Any mother 2 Law broadly inclusive 2 » Father dead, deserting, incapacitated, in penal institution. 6 mos. 2 Footnotes at end of table. 236 SECURITY FOR CHILDREIST Table 49. — Conditions under which aid to dependent children may le granted and limitations on amount of aid (1934) — Contimied State Texas Utah Vermont Virginia Wastiington.. West Virginia. Wisconsin Wyoming Age under which aid may be given 16 16 16 15 6 14 5 16 14 Conditions under which family deprived of father's support is eligible for aid Father dead, deserting, divorced, in institution (penal or mental). Law broadly inclusive ' Father dead, deserting, incapacitated, in insti- tution (penal or other).!" Law broadly inclusive 2 « Any mother- Father dead, deserting, incapacitated Law broadly inclusive 2 «. Father dead, deserting, incapacitated, in penal institution. Years of resi- dence State Coun- ty or town Maxi- mum grant for family of 3 chil- dren $27.00 40.00 26.00 (*) 25.00 45.00 (<) 40.00 1 No law for aid to dependent children. 2 May be granted to other person having care of the child. 3 Citizenship or application for such required (in New York under certain conditions only). < Amount of grant not limited. 5 Extension possible under specified conditions, usually invalidity or during school attendance. 6 Includes families in which parent is divorced, deserting, physically or mentally incapacitated, im- prisoned. ' A ge not specified in law. * Maximum grant in Cook County, $55. 9 Granted to girls under 17; aid may be continued during minority. 1" Court must commit children to administrative agency. II Provisions of 1920 law. A law broader in scope was enacted in 1930, but funds have not been available to carry out its provisions. Legislative authorization for public aid to mothers with depend- ent children has been provided by all the States except Alabama,^ Georgia, and South Carolina, by the Territories of Alaska and Hawaii, and by Puerto Rico. Alabama has authorized home care of dependent children under a law comparable to poor relief. Infor- mation obtained in 1934 indicates that, 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 for 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 discon- tinued 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 providing aid to dependent children that is com- parable to the laws previously enacted in other St.ites for this purpose. AID TO DEPENDENT CHILDREN 237 homes in 1934 were actually giving aid. Table 50 shows the infor- mation 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 per- centage 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 local 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 of 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 per month per family to about $51 per month per family, although the laws permitted much more, as is shown in table 49. Table 50. — Extent tx) tvhich aid to dependent children is provided: Armudl per- capita expenditure and percentage of counties granting aid, 1934 State Percentage of counties granting aid An- nual per- capita expend- iture state Percentage of counties granting aid An- nual per- capita expend- iture Alabama -- No special law Montana 3 82 .... $0 46 Alaska -. 0) -. State-wide (') $0.05 "Ms" .14 .46 .39 .30 .15 Nebraska 86 .20 71 .41 Arkansas. Aid discontinued State- wide . New Hampshire. New Jersey New Mexico New York North Carolina. - North Dakota Ohio.. State-wide .18 California do Law not in operation.. 81 .61 54 Connecticut State-wide .93 Delaware do 74 02 District of Colum- 77 - . 39 bia. 67.. 96 .31 Florida Oklahoma Oregon 3 62 05 Georgia. No law 69 .26 Hawaii (I) (') .10 .20 .11 .29 .04 .02 .004 .39 .07 .58 .51 .44 "Ms' Pennsylvania Puerto Rico Rhode Island South Carolina. .- South Dakota Tennessee Texas Utah 85 . . - .34 Idaho 75 81 Illinois State-wide 39 Indiana 75 Iowa 98 78 __ 4 47 Kansas 36 03 Kentucky (2) 3 48 .008 Louisiana 5 . 15 Maine State-wide Vermont . . State-wide 13 Maryland 33 . 44 92 . . 01 Massachusetts State-wide Washington West Virginia Wisconsin Wyoming .36 Michigan 43 4 89 007 Minnesota 91 .74 Mississippi Aid discontinued 3 10 3 43 . . 10 Missouri ' No report. ' Less than 1 percent. 3 Based on counties granting aid June 30, 1931. FAMILIES AND CHILDEEN BENEFITED It is estimated, on the basis of information obtained by the Chil- dren's Bureau through a Nation-wide survey in 1931 and supple- mentary information obtained in 1933 and 1934 through State 78470—37- -17 238 SECURITY FOR CHILDREN departments of welfare, that on November 15, 1934, approximately 109,000 families were receiving benefits under laws for aid to de- pendent 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 under State laws were 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 that 32,476 such families (about 30 percent of the total group) lived in nine large cities,^ 18,723 of them in New York. Table 51.- -Estimated numher of famiUes and children receii>ing aid to depend- ent children (based on figures availahle Nov. 15, 1934) state Number of fami- lies re- ceiving aid Number of chil- dren benefit- ing from aid State Number of fami- lies re- ceiving aid Number of chil- dren benefit- ing from aid Total 109, 036 280, 565 Montana* 839 1,654 200 260 7,711 1,969 3 4, 300 3 520 Alabama ■ Nevada * . ... 106 379 761 Arkansas 2 New Jersey 18, 789 7,056 552 1,271 348 209 2,564 17, 642 3 1, 435 3,276 855 720 6,164 Colorado New York ..- . .. - 23, 493 314 978 8,923 1,896 1,040 7,700 513 56, 524 Connecticut North Carolina 947 Delaware North Dakota < --- 2,644 District of Columbia _. _ _. Ohio 24, 470 Florida Oklahoma * .... 5, 166 Georgia L ,-. .. . 2.259 Idaho< 230 6,217 1,332 3,527 768 137 88 817 267 3,939 6,938 3,597 619 14, 802 3,856 3 9, 170 3 1, 997 3 356 3 229 3 2, 124 3 694 11,817 3 18, 039 9,152 Pennsylvania . - 22, 587 Illinois- - -- . -. Rhode Island 1,666 Indiana. .. - . _. Iowa. South Dakota * .... 1,290 241 332 622 206 136 3,013 108 7, 173 95 3,324 Kansas . . 3 627 Kentucky Texas - - 3 863 Louisiana ... Utah 3 1,617 Maine Vermont 461 Maryland ... Virginia . . . 545 Massachusetts . . . Washington ' West Virginia 3 7, 834 Michigan 3 281 Minnesota . . .. Wisconsin .... 17, 932 Mississippi 2 . ._ 279 Missouri 336 3 874 > No law. 2 Aid discontinued. 3 Estimated on basis of 2.6 children per family, the average rate for 20 States reporting in December 1933. * Estimated on basis of trends in comparable States from which reports have been received. ' Law not in operation. The estimated number of families and children receiving aid to dependent children in each State, according to reports received in 1933 or 1934, is shown in table 51. New York State, with 23,493 families receiving aid, is the onl}^ State in which the number reached or exceeded 10,000. In 6 States less than 200 families were aided: Arizona, Kentucky, Louisiana, Virginia, West Virginia, and Wyoming. ' Boston, Chicago, Cleveland, Detroit, Los Angeles, Milwaukee, New York, Philadelphia, and Pittsburgh. AID TO DEPENDENT CHILDREN 239 Great variation existed among the States, and in the different counties in the same States, in the extent to which aid to 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 granting 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 to 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 average Year . number of families 1929 31,849 1930 33,683 1931 38,443 1932 43,667 1983 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 rear- ing 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 techni- cally eligible under laws for aid to dependent children, and further, how many would be found to measure up to policies established 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 admin- istration of aid to dependent children and relief is to the effect that Table 52. — Marital status of families with female heads and nuinber of children under 21 years and under 10 years: United States population census, 1930 (unpublished figures) Families with female heads Total Families with white or Negro female heads for which marital status was tabulated Families with Number of children Total Marital status female heads for whom Married, husband not present Widowed Di- vorced Single marital status wasun known ' Number of children under 21 years Total families 3, 792, 902 3, 742, 432 400,695 2, 534, 630 235, 893 571,214 50, 470 Families tabulated 3, 742, 432 2, 250, 624 640, 302 382, 756 468, 750 50, 470 3, 742, 432 2, 250, 624 640, 302 382, 756 468, 760 400, 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, 487 571, 214 504, 856 41,041 13, 905 11,412 No children 1 child 2 children 3 or more children Families not tabulated 50,470 Number of children under 10 years Total families 3, 792, 902 3, 742, 432 400, 695 2, 534, 630 235, 893 571, 214 50,470 Families tabulated 3, 742, 432 3, 108, 734 364, 147 162, 500 69, 190 37, 861 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 2,176 571, 214 550, 729 12, 775 4,764 1,901 1,045 No children under 10 1 child- 2 children 3 children 4 or more children Families not tabulated 60,470 ' Includes 10,022 families with white and Negro female heads for whom marital status was not reported 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 in- creasing need forces many mothers and children legally eligible for aid to apply for emergency relief or the old type 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 relief families in 79 cities, representing all the main geographic divisions, made by the AID TO DEPENDENT CHILDREN 241 Federal Emergency Belief Administration for the period May 1934 included information as to the number of relief households* with female heads, the marital status of the women, and the number of dependents under 16 years of age. Tabulation of a representative 6-percent sample of the returns affords a basis for estimating the pro- portion of urban relief households (living in towns of 2,500 popula- tion 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 the 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 relief population. The estimates are, of course, very crude, but they afford some indication of the extent to which emergency relief provided for fatherless families and children. On the basis of these figures it is estimated that 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 follows : Estimated Estimated number of number of families children United States 358,000 719,000 Urban areas , 260,000 494,000 Rural areas 98,000 225,000 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 chil- dren. 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. The occupational characteristics study, however, showed that 94 percent of the relief households consisted of single families. 242 SECURITY FOR CHILDREN Studies in certain States bear out the findings of the urban and rural studies made by the Federal Emergency Eelief 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 chil- dren and 5,914 families of similar type receiving relief.^ 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 re- ceiving aid to dependent children and 2,153 families apparently eligible, under the law, for such aid were receiving emergency relief.® The average number of children per family in families receiving 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 o-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 mothers with dependent children, had only one dependent child under the age of 16 years. Such families often have been excluded from aid to de- pendent children under administrative policies, though never by law, on the theory that a woman ought to be able to support herself 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 them- selves and their children without assistance. In 44 percent of the relief families included in this summary the mother was a widow (about half the proportion found among fam- ilies 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 sam- ple of the occupational study had no members or only one member of the household working or seeking work (undoubtedly the mother in the great majority of cases). The mothers in these relief fam- ilies were predominantly women with no established occupation (32 percent) or women who had been engaged in domestic or personal service (37 percent) or in semiskilled occupations (19 percent). ^Social Welfare in Florida, report of a survey by Emma O. Lundberg (Publication No. 4, State Board of Public Welfare, Tallahassee, 1934), pp. 96, 106. 'Children's Aid and Child Care in Cincinnati and Hamilton County, Ohio (Cincinnati Bureau of Governmental Research, 1*935), vol. IV, p. 2. AID TO DEPENDENT CHILDREN 243 Only 12 percent 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.) Table 53. — Distribution of widoived and separated or divorced women heads of relief families in urban areas toith children under the age of 16 years, based on 5-percent sample study of occupational characteristics of relief famUies in 19 cities, May 1934 ' Characteristics Total women Marital status: Widowed Separated Divorced Number of dependent children: 1 2 3 4 5 or more Employment status: Employed at nonrelief job Unemployed, but seeking work Unemployed, but not seeking work Housework and unpaid care of dependents Chronic illness or physical disability Feeble-mindedness or insanity... Old age or general disability Other Not reported Occupational status: No usual occupation Servant classes Semiskilled workers in manufacturing Other semiskilled workers Clerks and kindred workers Wholesale and retail dealers Professional persons Other Total Number 973 429 454 90 474 269 124 55 51 119 556 297 194 85 1 14 3 1 316 360 127 59 83 6 9 13 Percent distribu- tion « White 545 237 237 71 266 157 63 31 28 51 278 215 159 47 1 5 3 1 230 93 95 33 77 5 7 5 Colored 192 217 19 208 112 61 24 23 68 278 82 35 38 n 9 n 0 86 267 32 26 6 1 2 8 ' Data supplied by the Federal Emergency Relief Administration. ' Less than 1 percent. A very rough estimate of the probable monthly relief expendi- tures 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 the approxi- mate 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 Fed- eral funds spent for relief during the last few months of 1934 were to prevail in this group. 244 SECURITY FOR CHILDREIsr Table 54. — Characteristics of households with widowed and separated or di- vorced women heads of relief families in urian areas with children under the age of 16 years, based on 5-percent sample study of occupational characteris- tics of relief families in 79 cities, May 1934 ^ Characteristics Total Number Percent distribu- tion White Colored Total households - 883 100 496 Employment status: None working or seeking work 1 working 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, less than $10 $10 or more Not reported 128 510 165 59 21 711 68 42 41 21 36 16 405 17 28 34 12 42 242 75 23 5 306 51 14 7 ' Data supplied by the Federal Emergency Relief Administration. ESTIMATED EXPENDITURES FOR AID TO DEPENDENT CHILDREN 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 rep- resents an increase of about $3,600,000 over the amount reported in 1931, a figure, however, known to be incomplete. Only $5,900,000 of the annual expenditure of $37,500,000 for aid to dependent children came from State funds, the remaining $31,600,000 coming from local governments, chiefly counties. In 1934, 16 States ^ 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 fmids, and the 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 de- pendent 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 expenditures for aid to dependent children in 93 cities 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 Hampshire, New Mexico, North Carolina, Pennsylvania, Rhode Island. Vermont, Virginia, Wisconsin. (In New Jersey the State bears the cost of administration.) AID TO DEPENDENT CHILDREN 245 The expenditure for 1934 was slightly higher than the amount re- ported for 1933 but was considerably below the expenditure for 1932-. Amount expended in 93 Year cities and city areas 1929 $16, 141, 227 1930 17, 360, 107 1931 21, 127, 500 1932 23, 176, 033 1933 22, 137, 279 1934 22, 719, 983 Table 55. — Estimated annual eoependitures for aid to dependent children {based on figures available Nov. 15, 193 Jf) State Estimated expenditures for aid State —county and Total County State Total $37,487,479 $31, 621, 957 $5, 865, 522 Alabama . (') 20,940 (?) 2, 133, 999 149, 688 734, 627 93, 000 143, 997 222, 286 36, 315 1,837,012 352, 224 719, 772 75, 721 62,889 9,312 310,000 117,459 2, 450, 000 2, 448, 962 1, 138, 176 (?) 93, 440 213, 623 272,036 44,035 82, 440 2, 445, 564 i?) 11,731,176 58, 706 238, 314 2, 116, 908 123,314 247, 140 3, 197, 640 267, 252 (0 285, 986 71,328 43, 987 78, 651 46,976 33, 876 519, 538 16,086 2, 180, 790 22, 294 (0 (') Arizona. . . . . . . . - . - 20, 940 (2) 224, 252 149,688 489, 752 46, 500 143, 997 222, 286 (0 36, 315 1, 533, 217 352, 224 719, 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 i?) California. - 1, 909, 747 Colorado ... _.-.-. . - . Connecticut-.- . . 244, 875 Delaware _- . 46, 500 District of Colunibia- ...-__ . Florida . . Georgia .. (0 Idaho Illinois 303, 795 Indiana ... . ... . . ... ... Iowa , . Kansas -.__ ...._.... Kentucky . _..._.. ... Louisiana Maine . 155,000 Maryland . ... ...... . Massachusetts ....... . . 1, 050, 000 Michigan . Minnesota.. . .. .-_.. Mississippi . ........... (0 Missouri Montana. . Nebraska . ............... .-. Nevada . _ . .. New Hampshire . . . . . 82, 440 New Jersey . . ......... . .. 2, 445, 564 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, 651 23,488 16, 938 519, 538 16,086 1,930,790 22,294 New Mexico . . . . . . (3) New York . ... North Carolina ..- 29.353 North Dakota- ... .-..-.. . Ohio.- Oklahoma _ ... Oregon .... -..-_...... Pennsylvania .. . . . . .. 1, 598, 820 Rhode Island . 133, 626 South Carolina. ........ ...... (') South Dakota.-. ..... . Tennessee . . .. Texas... Utah.. Vermont 23,488 Virginia.. .. . . 16,938 Washington .. West Virginia Wisconsin ..... ... . .. 250, 000 Wyoming _ 1 No law. 2 Aid discontinued. » Law not in operation. 246 SECURITY FOR CHILDREN ADEQUACY OF GRANTS The theory of the system of aid to dependent children is that the famihes 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 Massa- chusetts 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 than $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 monthly grants per family of $60 to $65 in 6 cities and $50 to $60 in 13 cities. In 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 average monthly grant per family in areas granting aid to dependent children, based on annual or monthly expenditures for grants during 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 neces- sity for assistance from State funds is now widely accepted. State equalization funds for education have been provided in many States, ajid a number of old-age assistance laws providing for some measure of State aid have been passed. Although in 1934, 16 States had au- thorized 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. Laws for aid to dependent children should be mandatory upon the local AID TO DEPENDENT 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 adminis- tered, State aid will act as an effective, powerful lever in raising administrative standards of investigations, budgetary practices, and other procedures. Table 56.— Average monthly grcmt per fcumily for aid to dependent child/ren state Alabama Alaska Arizona-. Arkansas California Colorado.- Connecticut Delaware.- District of Columbia Florida. - Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine -.- Maryland Massachusetts Michigan Minnesota Mississippi Missouri Average monthly grant (0 $16. 46 26.89 22.60 44.41 22.26 60.14 9.76 (') 18.08 20.55 22.03 17.01 * 14. 05 « 38. 26 8.81 29.60 36.66 51.83 28.31 26.37 (3) * 26. 22 State Montana Nebraska.. Nevada New Hampshire New Jersey New Me.xico New York North Carolina. North Dakota-. Ohio- Oklahoma Oregon Pennsylvania.. - Puerto Rico Rhode Island-.. South Carolina- South Dakota.. - Tennessee Texas Utah Vermont Virginia Washington West Virginia... Wisconsin Wyoming ' No law. * No report. ' Aid discontinued. * Average grant in 1931. • Aid available only in Jefferson County. • Law not in operation. ? Aid available 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, recommended with reference to State participa- tion: (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 by 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.* Federal grants-in-aid can be extended to this tax-supported and publicly administered form of child care without unusual adminis- * White House Conference on Child Health and Protection, Dependent and Neglected Children (D. Appleton-Century Co., New York, 1933), pp. 243-244. 248 SECUKITY FOR CHn^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 backward 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 de- prived of the support of the normal breadwinner through death, absence from the home, or physical or mental disability. It is impossible to tell with any degree of accuracy what propor- tion of the entire number would be found eligible for aid to de- pendent children under the definitions in State laws, as the require- ments for eligibility for the two types of relief are not alike. For example, in a number of States the families on emergency relief 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 to dependent children. For the sake of arriving at a very crude estimate, it may be assumed that half of the relief families headed by widowed, sepa- rated, or divorced women with dependent children under the age of 16 years would be found eligible for aid to dependent children without very marked modification of policies. On this basis emer- gency relief data indicate that approximately 179,000 families 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 receiving 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 required in the large urban centers. If the percentage of rural families estimated to AID TO DEPENDENT CHILDKEN 249 prevail among fatherless families on relief rolls (27 percent) were found to apply for the whole group, the assumed 300,000 families eligible for ,aid 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 prevail- ing average grants) would require a total estimated expenditure of something over $120,000,000 per year. In the largest 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 distribu- tion 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 THERE are many conditions requiring special social service for children — situations of extreme neglect in homes, feeble- mindedness 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 disturb- ances 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 of 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 in 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 foster- family homes for children who should have the benefit of life in an individual family unit. Nevertheless, as was pointed out by the Whit« 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.^ Almshouses, con- demned 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 * White House Conference on Child Health and Protection, Dependent and Neglected Children (D. Appleton-Century Co., New York, 1933), p. 6. 251 252 SECURITY rOR CHILDREN suggestion made by the Child Welfare League of America, in Decem- ber 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 contri- butions, which heretofore have played a large part in the support of needy children ; lower returns from endowment funds ; lessened abil- ity of needy parents to pay toward the support of their children; and lack of employment for needy children reaching 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.^ 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 de]3artments 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 reduc- tions 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 have been reduced during these 2 years. These reductions in institutional pro- grams 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 State- wide program of child care and protection. PRESENT PROVISIONS FOR CARE OF CHILDREN According to the most reliable estimate available in January 1935, approximately 250,000 dependent and neglected children in the United States were receiving care away from their own homes, of => See mimeographed report, i58 Children Recommenfled for Placement by Six Social Agencies, by Helen Walker (School of Applied Social Sciences, Western Reserve University Cleveland, 1931). CHILDEEN NEEDING SPECIAL CABE 253 whom about three-fifths were in institutions and the remainder 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 Hamp- shire, the average being 23. Approximately one-fourth of the whole number of children under care were provided for by institutions or agencies conducted by State or local governments and about three- fourths 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.® 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 down- ward in private agencies, upward in public. Information collected by the Child Welfare League and by the Children's Bureau has por- trayed the great curtailment of the resources of agencies for the pro- tection of children deprived of normal family support and care. Federal Emergency Relief funds have not been available for the care of children away 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 pro- tection and supervision from child-welfare agencies, public or pri- vate, or from juvenile courts. The total number of delinquent chil- dren 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 White House Conference on Child Health and Protection, Committee on Physically and Men- tally Handicapped, estimated 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 de- ficient or disordered, or those suffering from tuberculosis or cardiac or parasitic diseases. The parents of many of these children must be assisted by social-service as well as by medical agencies in making plans for the specialized care their needs require. » Lundberg, Emma O., OMld Dependency in the United 8tate» (Child Welfare League of America, New York, 1933), pp. 55-70. 78470—37 18 254 SECURITY FOR CHILDREN In cities of 100,000 or more population throughout the United States services for the protection and care of dependent, neglected, delin- quent, and physically and mentally handicapped children are usually available through both private and public agencies. Although in many cities these agencies operate only within the city limits, in others they serve the county in which the city is located. In counties having no large cities and in the towns which are the units of welfare admin- istration 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 wel- fare boards or departments, which were given responsibility for services to children. In addition to these States a few others 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. All 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. It 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 coun- ties into larger welfare districts so that adequate services can be pro- vided at reasonable overhead cost. Even in the States having a county-welfare program progress has been extremely slow in employing social workers for services to chil- dren 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 than 30,000 population had public social workers for services to chil- dren and families. Emergency relief brought fully into focus the needs of isolated, scattered, and financially impoverished populations. In a few States which had developed county child-welfare programs the time of the child-welfare workers was fully or partly transferred to relief admin- istration. 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 in the ovorwhehning rehef problems with which they were confronted. CHILDRElSr NEEDING SPECIAL CARE 255 Many kinds of services to children are needed which are not pro- vided by an emergency relief program, including, for example, in- vestigations of children in almshouses and the development of plans for caring for them elsewhere ; investigations of cases in which appli- cations for institutional or foster-home care have been made ; protec- tion 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 dis- charge; 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 prob- lems of child care, and also to pay for the support of children who need it, in their own homes or elsewhere/ Standards for number of workers needed and cost of services of the kinds that have been described are still indefinite. The experi- ence of two States where county children's workers have been pro- vided 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 rein- stated.) The population of counties employing one worker varied from 12,000 to 59,000, but the general average for the State, includ- < White House Conference on Child Health and Protection, Organization for the Care of Handicapped Children, National, State, and Local (Century 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 em- ployed by county superintendents of public welfare. 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 these counties. It is probable that for most or all of those with less than 20,000 population welfare administration should be based on a district plan, combining two or more coun- ties 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 100,000 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 service. A suggested minimum budget for a broad program 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 Office expenses 100 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 pro- gram of local service 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^, and help to relate this local service to the institutional care provided by the State, so that the necessary investigations before admission, and also follow- up care after discharge, can be provided. The experience of the State welfare departments that have accom- plished 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 of counties would result in more effective service. The ac- tual 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 refer- ence to special problems — for example, juvenile delinquency — are needed. In addition, the State must provide adequate personnel for inspection and supervision of institutions and child-placing activi- ties, for direct care of children by the State if that is a function of the State department, and for research and statistical service. As- sistance 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 powerful impetus toward the development of improved standards of care. The White House Conference Committee on Organization for the Care of Handicapped 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.^ 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 pro- moting child welfare and in securing the establishment of that national minimum of care and protection which is the hope of every citizen." ® 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 child- 's 76i(i., p. 20. «md., p. 6. 258 SECURITY FOR CHILDREISr 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, public- welfare services for the protection and care of homeless, dependent, and neglected children, and children in danger of becoming delin- quent, should result in far-reaching improvement in the standards of child care and protection throughout the country. Chapter XV MATERNAL AND CHILD-HEALTH SERVICES THAT 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 pro- posed 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 the beginning of 1935 there were 8,000,000 children under 16 years of age in families on the relief 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 I'emediable defects which handicap growth, and that many were undernourished. Among adolescents were found evidences of in- creasing mental instability and inability to meet the problems that arise from unemployment and depleted family resources. To some extent the need for expansion of the program for pro- moting the health of mothers and children can be measured by mor- tality 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 dis- aster 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 condi- tions 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 improv- ing child health under favorable economic and social conditions, or in mitigating the effects of bad conditions, has been demonstrated suffi- ciently 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 increasing our knowledge of causes of deaths 269 260 SECUEITY 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 commmiicable 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 to- day, 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 child-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 con- fronts 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 of infants MATERNAL AND CHILD-HEALTH SERVICES 261 during the first month of life are closely related to prenatal and natal conditions and to causal factors in maternal mortality. The preven- tion of death and disability associated with childbearing has there- fore 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 lessen many child-welfare problems which are the direct results of homes broken by the loss of the mother. Though there has been a downward trend in the maternal mortality rate in the United States from 1921 to 1934 (computed from the rates for the 26 States and the District of Columbia that have been con- stantly 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 : Maternal Maternal Tear mortality rate Year mortality rate 1921 67.3 1928 64.2 1922 65.4 1929 63.7 1923 65.8 1930 62.1 1924 64.0 1931 62.5 1925 64.3 1932 59.2 1926 64.6 1933 58.4 1927 62.3 1934 55.5 The rate of 59 for the whole United States in 1934 ^ 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 several States. On this map the black areas represent the highest rates (75 or more). Only three States (Cali- fornia, Vermont, and Wisconsin) are in the lowest group with rates of 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 mor- tality 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 »The birth-registration area comprised all the States from 1933 on. 262 SECURITY FOR CHILDREN MATERNAL AND CHILD-HEALTH SERVICES 263 gives the following comparison with recorded rates available through 1931: Urban 2 Rural 3 Year Urban > Rural 3 Year Re- corded rate * Resi- dent rate * Re- corded rate * Resi- dent rate< Re- corded rate * Resi- dent rate< Re- corded rate * Resi- dent rate * 1927 69.3 ' 72.8 68.5 64.5 60.8 63.2 61.0 53.8 37.6 33.8 31.9 36.7 59.2 58.3 51.0 58.2 1931 67.1 57.5 60.3 60.3 53.8 37.2 57.1 1928 1932 62.4 1929 1933 55.1 1930 1934 . . 57.2 2 Places (exclusive of New York City) with population of 2,500 or more. ^ Places with population of less than 2.500. * Deaths per 10,000 live births and stillbirths. Figures from Ohio for 1930 and from Wisconsin for 1932 and 1933 show similar changes in rates as a result of reallocation to place of residence. Whether 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 had remained at home are questions that cannot be answered. The fact is, however, that distances to be traveled to obtain care and the frequent lack of regional hospitals and consultants make the rural problem of mater- nal care in many ways more difficult than the urban one. Recent reports of studies of large numbers 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, includ- ing 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 of 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 of mothers 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 mortality 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 certain other countries. The comparability of these rates has been challenged in the past on the basis that the procedure in ascribing deaths of women to causes connected with childbirth was not comparable as between the United States and different countries. An extensive study, in connection with the Wliite House Conference on Child Health and Protection, has been made by the Children's Bureau in cooperation 264 SECURITY FOR CHILDREN MATERNAL AND CHILD-HEALTH SERVICES 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/ 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 have 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 extent by education of the public in methods of infant care and by the effective operation of certain general public- health measures. The decrease in rates for infants dying under 1 month of age (neonatal death rate) has been relatively slow, amount- ing on the average to only 1.41 percent annually, while that for in- fants 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. Fur- thermore, 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 ^ Tandy, Elizabeth C, "Comparability of Maternal Mortality Rates in the United States and Certain Foreign Countries", U. 8. Department of Labor, Children's Bureau Publication No. 229 (U. S. Government Printing Office, Washington, D. C, 1935). 266 SECURITY FOR CHILDREN" to ~ (D o >^ E 4J 4J O <0 L c U. u. O 02 m o (0 (D O «3 o c Q. •D C ^ o C Q. W U) (U (0 ro o _w (0 ■5 4) _«J (0 ^ <0 (D _o • — c T) o "(0 E c E 45 o a; TJ o c "cil a> w TJ V 1 <0 ~ 3 • — (0 L o O 5 i. o o c ■u j: X c llj => o 5 CO (1) (0 o u p o ?^'^']^^"^*i,".1*^ Congress. The Supplemental Appropriation Act, fiscal year 1936, J?,?^"^V?'?-- "^^^ IP^n^?.JlS-J^ ^^^''- fH. R. 10464], approved Feb. 11, 1936. included an appropriation of $5,000,000 for the remainder of the fiscal vear 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 de- prived 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, micle, 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 whicli the difference is expected to be derived must be reported to the Social Security Board. The Board will then 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 the 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 the 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 to 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, the Board 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 annual appropriation authorized under title V, part 1, of the act « is $3,800,000,^ "for the purpose of enabling each State to extend and improve, as far as practicable under the conditions 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 par- ticipation 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 opera- tion of the plan ; provide that the State health agency will make such reports, in such form and containing such information, as the Sec- retary 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 re- ports ; provide for the 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 demonstra- tion 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 services 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 imtil 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, Public, No. 440, 74th Cong., 2d sess. [H. R. 10464], approved Feb. 11, 1936, included an appropriation of $1,580,000 for the remainder of the fiscal year ending June 30, 1936. 296 SECUEITY FOR CHTLDREl^I" Allotments to the States from this appropriation are directed by section 502 ^ of the act to be made by the Secretary of Labor on the following basis : An initial uniform allotment of $20,000 ® 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 ^ 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 considera- tion. 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 ^^ is $2,500,000,^^ "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, cor- rective, and other services and care, and facilities for diagnosis, hos- pitalization, and aftercare, for children who are crippled or who are suffering from conditions which lead to crippling." 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 the approval of the Chief of the Children's Bureau. The State plan must provide for financial participation by the State; provide for the ad- ministration of the plan by a State 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 oper- ation of the plan; provide that the State 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 carrying out the purposes of section 511, quoted in the paragraph above; and provide for cooperation with medical, health, M9 Stat. 629, 42 U. S. C. (1935 Supp.), § 702. 8 The Supplemental Appropriation Act, fiscal year 1936, Public, No. 440, 74th Cong., 2(1 sess. [H. R. 10464], approved Feb. 11, 1936, cut the allotment to five-twelfths of the amount specifically authorized in the Social Security Act. (See also footnote 7.) i»49 Stat. 631, § 511; 42 U. S. C. (1935 Supp.), § 711. " The Social Security 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, Public, No. 440, 74th Cong., 2d sess. [H. R. 10464], approved Feb. 11, 1936, included an appropriation of $1,187,000 for the remainder of the fiscal year ending June 30, 1936. SPECIAL MEASURES FOR CHILDREN 297 nursing, and welfare groups and organizations and with any agency in such State charged, witli administering State laws providing for vocational rehabilitation of physically handicapped children. (See appendix XII for a summary of the provisions of the Social Security Act relating to Federal 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 ^" are on the following basis : A uniform grant of $20,000 ^^ available to each State and the balance available according to the need of each State as determined by the Secretary of Labor after taking into consideration the number of crippled children in such State in need of the services 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 ^* is $1,500,000 ^^ "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 tliis 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 Federal 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 serv- ices and services for crippled children, these funds do not have to be matched by the States. A uniform allotment of $10,000^^ is avail- able to each State and the remainder is allotted on the basis of the ratio of the rural population of the State to the total rural popu- lation of the United States. Although there is no provision for matching funds, the act indicates that there must be financial par- ticipation by the State or by local communities, since the act requires that "the amount so allotted shall be expended for payment of part "49 Stat. 631, § 512; 42 U. S. C. (1935 Supp.), § 712. 1^ The Supplemental Appropriation Act, fiscal year 193G, Public, No. 440, 74th Cong., 2d sess. [H. R. 10464J, approved Feb. 11, 193G, cut the allotment to five-twelfths of the amount specifically authorized in the Social Security Act. (See also footnote 11.) "49 Stat. 633, § 521 : 42 U. S. C. (1935 Supp.), § 721. *6 The Social Security 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, Public, No. 440, 74th Cong., 2d sess. [H. R. 10464], approved Feb. 11, 1936, included an appropriation of $625,000 for the remainder of the fiscal year ending June 30, 1936. ^^ The Supplemental Appropriation Act, fiscal year 1936, Public, No. 440, 74th Cong., 2d sess. [H. R. 10464], approved Feb. 11, 1936, cut the allotment to five-twelfths of the amount specifically authorized in the Social Security Act. (See also footnote 15.) 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 predominantly rural and other areas of special need." Another difference between part 3 (child- welfare services) and parts 1 and 2 (maternal and child-health services and services for 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 com- parative 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 THE 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 of the census takers neglect to ask the question whether any memlier in the household is blind. Further, there is no agreement as to the degree of loss of vision which constitutes blindness. There are probably 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. Of 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 reported 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 per- sons 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. STATE LEGISLATION FOE THE BLIND ^ State legislation for the blind has taken four principal forms : (1) educational and vocational training, principally of blind chil- dren; (2) workshops for the adult blind, maintained with State as- sistance; (3) field work in locating the blind, extending to them medical and similar assistance, help in procuring employment, and ^ Unless otherwise noted, data in this section were tal?en from "Public Provision for Pensions for the Blind in 1934", Monthly Labor Review, vol. 41, no. 3, September 1935, p. 584-601. 301 78470—37 21 302 PEOVISIONS FOR THE BLIND assistance in the marketing of products produced by the blind ; and (4) cash grants to the blind. Educational and vocational training 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 considerable number of private institu- tions of this character. Workshops for the blind have long been maintained as State insti- tutions, 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, Idaho, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota) carry on some field work for the blind. In 13 States (Alabama, Florida, Iowa, Kansas, Minnesota, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Washington, West Virginia), how- ever, 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 Hamp- shire, and New York) expended this amount for this purpose in the latest year for which data are available.^ Mr. Irwin, in his testimony before the Senate Finance Committee,^ outlined the requirements of a constructive program for the blind as including medical care for the eyes, if sight can be restored or im- proved, 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 preschool age. An amendment to the social security bill, introduced in the Senate, carried an appropriation of $1,500,000 to be distributed to the States for the purj^ose 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 was dropped by the conference committee. As of August 1, 1935, 27 States had laws providing for cash pay- ments to the blind. These are Arkansas, California, Colorado, Con- necticut, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky. Louisiana, 2 From supplementary statement submitted by Robert B. Irwin, executive director. American Foundation for ttie Blind, Inc., New York, N. Y., in Hearings before the Com- mittee on Finance, U. S. Senate, 74th Cong:., 1st sess., on S. 1130 (Economic Security Act) (U. S. Government Frinting Office, Washington, D. C, 1935), pp. 729-730. V^ ^^ ^^ 0 PKOVISIONS FOE THE BLIND 303 Maine, Maryland, Missouri, Minnesota, Nebraska, Nevada, New Hampshire, New jersey. New- York, Ohio, Oklahoma, Pennsylvania, Utah, Washington, Wisconsin, and Wyoming, i No complete data are at hand regarding the expenditures in thes€ States for aid to the blind.Vv^i'om the latest reports it would appear, however, that in 24 Table 65. — Data on the operation of systems, for aid to the Mind in the United States, 1934 Recip- ients of grants Blind popula- tion, census, 1930 Recipi- ents as percent of 1930 blind popula- tion Amount disbursed in 1934 Monthly grants paid state Total State funds County funds Aver- age Maxi- mum pay- able Range of individual grants Total 31,909 39, 675 68.4 $6, 880, 015 $3, 397, 219 $3, 482, 796 $19. 96 1,165 3,179 701 374 86 4,484 956 66 383 420 922 62 442 4,336 325 3 79 372 2,200 5,352 4,142 21 185 1,854 1,101 2,597 751 581 156 4,490 1,577 1,246 1,977 1,252 626 799 1,049 3,879 552 64 251 1,222 5 4. 418 4,154 4, 373 238 792 1,530 105.8 122.4 93.3 64.4 55.1 99.9 60.6 5.3 19.4 33.5 147.3 7.8 23.7 111.8 59.0 4.7 31.4 30.4 5 16. 1 124.0 94.7 8.8 23.4 121.2 11,650 1, 085, 408 140, 287 22, 820 16, 989 2 1, 309, 745 158, 562 8,996 42, 129 63, 000 148, 317 7,817 147, 203 i 1, 265, 831 45, 103 600 8,797 91, 090 583, 670 620, 393 651, 228 2,105 25, 808 422, 467 11, 650 542, 704 65, 000 22, 820 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 $25. 00 50.00 25.00 30.00 20.00 30.42 25.00 50.00 20.83 25.00 25.00 20.83 25. 00 25. 00 50.00 12.50 40.00 25.00 33.33 30.00 50.00 33.33 30.00 $0.83 California . 542, 704 75, 287 5. 00-50. 00 Colorado. 0) (0 16, 989 2 823, 343 158, 562 8,996 42, 129 63, 000 10. 00-25. 00 Illinois- 2 486, 402 1. 00-30. 42 4. 00-25. 00 5. 00-25. 00 Kentucky 1. 33-20. 83 (') 148, 317 (') Maryland 7,817 3. 33-20. 00 147, 203 41,265,831 (') (') 45, 103 600 2,733 91, 090 583, 670 620, 393 5. 00-25. 00 0) New Hampshire. -- New Jersey 6,064 8. 00-12. 50 0) Ohio 1. 25-35. 00 Pennsylvania Utah.. 651, 228 (') 2,105 25, 808 372, 467 3. 00-20. 00 Washington Wisconsin .. 3.00-40.00 50, 000 (') 1 No data. > Data are for 60 counties which reported as to amounts furnished by State and counties. 3 No limit; except for married couples, both blind, in which case not over $30 per month. * Includes oculists' fees. 8 Exclusive of New York City. Source: "Public Provision for Pensions for the Blind in 1934", Monthly Labor Review, vol. 41, no. 3, September 1935, pp. 584-601. 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,^ The total expenditures 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 in California. (See table 65.) ^ A report from Wisconsin gives 3,742 as the number of blind persons in the State. The 1930 census reported only 1,530 blind persons in Wisconsin, while the State records showed 3,033 in that year. The census therefore underestimated the blind population by nearly one-half. The figure presented in table 65 indicates that 121.2 percent of the State's 1930 blind population was in receipt of pensions in 1934'. Utilizing corrected data for the 1930 census this percentage becomes 54. Wisconsin State Board of Control, Blind Persons in Wisconsin, 1907-3i (mimeographed report), 1935, p. 8. 304 PROVISIONS FOR THE BLIND The maximum grants payable range from $150 per year in New Hampshire to $600 a year in four States (California, Kansas, Nevada, and Utah). In Wyoming also, a maximum of $600 a year is paid to a blind person who is the head of a family. The Minnesota law sets no maximum, except in the case of two blind persons who have 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 grants set by State laws: Maximum yearly grant Num- ber State Maximum yearly grant Num- ber State $600 4 1 2 1 4 [California. J Kansas. 1 Nevada. (Utah. New Jersey. /Ohio. \Washington. Illinois. [Connecticut. 1 Pennsylvania. [Wisconsin. Wyoming. $300 10 2 1 1 ■Arkansas. Colorado. Indiana. Iowa. Louisiana. $480 - Maine. Missouri. Nebraska. $400 $250 $365 $360 New York. .Oklahoma. 'Kentucky. Maryland Idaho. $240 $150 New Hampshire. In eight States the average grants were less than one-half the maximum payable under the State law^s ; in eight States the average grants were between one-half and two-thirds of the maximum; and in six States the average was more than two-thirds of the maximum allowable. The average allowance in California was about 30 per- cent higher than the average paid in Illinois, the State with the next highest average. In these two States and in four others (New York, New Jersey, Pennsylvania, Missouri), w^hich are highly industrial- ized, the average amount paid w^as over $20 a month. 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 month. In Arkansas, where the grants averaged 83 cents a month, blind persons were given a flat grant of $10 a year, although tlie maximum allowed by law is $800 a year. The range in individual monthly grants is very wide, varying from $1 to $50 a month. The distribution of recipients of aid to the blind according to the size of their monthly grants is available for two States (Colorado and New Jersey). In Colorado for the year end- ing June 30, 1933, 685 persons received monthly grants in accordance with the following percentage distribution: $5, 0.1 percent; $6.25, 5.0 percent; $8, 0.4 percent; $10, 7.2 percent; $12.50, 1.0 percent; $15, 24.5 percent; $20, 18.8 percent; $25 (the maximum payable), 42.9 per- cent. In New Jersey monthly grants to the blind were paid 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 percent; $30, $35, or $40, 11 percent. It may be noted, from table 65 that less than one-half of the States contribute toward the costs of aid to the blind. In Arkansas, Con- necticut, Maine, Minnesota, Missouri, and Pennsylvania, the costs of the system are borne entirely by the State. In Idaho, Iowa, Kansas, Kentucky, Louisiana, Maryland, Nebraska, Nevada, New York, Ohio, Utah, and Washington, 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 the remaining five States (California, Colorado, Illinois, New Hampshire, and Wis- consin) 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, Maine, Minnesota, Missouri, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Washington, Wisconsin, Wyoming) . In 15 of these States, with a total population of 61,047,000 in 1930, the laws were operative in T54 of the 895 counties in 1934 and covered a population of 54,681,000, or 93 percent of the total number of persons residing in these States in 1930. In eight States (Connecticut, Iowa, Kansas, Kentucky, 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 coun- ties, 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 per- cent of the total number of persons in the seven States in 1930. Most of the laws establish a minimum age, which is commonly either 18 or 21 years, but California and Utah have a 16-3-ear mini- mum, 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 years in 3 States, and 9 years in 9 States. All State laws, except that of Kansas, have a means qualification, which is similar to the property and income qualification in old-age assistance laws. The acts of 11 States prohibit persons from receiving blind allowances if they have financially competent relatives (Colo- rado, Indiana, Kansas, Louisiana, Maryland, Missouri, Nebraska, New Jersey, Utah, Washington, and Wisconsin), whereas no such exclusion is provided in the laws of the 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, Kentucky, Maine, Minnesota, Missouri, Oklahoma, Pennsyl- vania, Utah, and Washington) ; Colorado further excludes inmates 306 PROVISIONS FOR THE BLIND ' 1 ^ (^ "3 3 P 3 73 o o a> o -g ■? o 03 o3 o Si 6 s P Si a 6 0 d Q 'Tj « a aj 0? a Q -^ 03 ■^ 3 o "M C3 3 o 3 03 ^-c s il-p o3 a C3 0 C3 'S 0 Ph S m ra O M M Q fin m 0 W M 0 1 o ^fe .S3 a 3 o t-' [3 Ut [ Ol ■a p 3 !>^ 3 0 ■3 a a la i ; 'E f-t ftja (B no t^ m bi O. C/3 C3 p. jO ^ zn 1 1 3 o § ta 3 §> 3 o oS"^^ 0 <«■§ §§ a 3 1 0 1 O O o m O O M o O 0 i-q M 0 0 ; O Si „ 0 »- >» 1 — 1 i m U o 3 ° ^ =^S- >> 3 1 a 03 O X! SI a 0 — a a 0 a 9 1 ;:3 a a 3 "o c P > 0. n 3 3^ " 0 3 ; o a o •a O ■3 o p _o 1 1 O 3 "o '3 c 3^ '^'Er 1 1 0 P C3 J3 p c > 3 a 0 0 a 0 a > 0 *a 0 a « *3 ^ a. £ a S « "o 1 S a w p. gn 03 M 1 > J Q iJ > ►J P 1 t-i .. t-l u Ui .. 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C3 -3 03 =! 1 bi C3 ra 03 •a o 2 2 o o 03 P .2 03 o i 3 P .2 a a 03 0 a 3 C ->1 "3 o o Q a o O si 03 -3 a ■a a p 03 M p M '3 0 1-5 '3 C3 a i XJ > PROVISIONS FOR THE BLIND 307 a •0 3 TS frH t) s >. .1— a (_, ^_S ^ 3C 4-3 6 •° 2 1 g as » 6 6 6 6 "-^ ^6 3 0 3 . 3 03 QQ P « aQ 0? ta 3 o 03 S^ ra w O M CO 1 , ■ u. 1 ^ t3 a> ] ] t=! ^-* 1 a S o 1 o a 0 03 £ *4-< S 03 '• 1 "O !•" S a " a 3 33 Lh en 1 03 1-. 1 +j 3 1 O §.2 >- « 1 a 3 . 03 -t-i So a u o 3 1 1 0 a.2 .2 ^ T3 ^.2 1 3 03^3 1 -• »,a aag 03 >. -SiSft ft ■ ® .13 d o o " u a 3 o o as i 03 o 3 ^ a? 3 03'^ ^ 03 +j o d ip 1"S iS 0-2 C3 ^ O 1 0 fta3 0 O 1 o „ i O 0 Ui a I w ti ' s. o3 O 1 03 O r-< 1 « 0 1 0" > e. i^i o 1 CB 0. 1 o a ft 1 r I'B ^ 3 1 Va Q "^ a >2 a 1 o^ s '1 1 a S ' 00 -a w i-o "" CO r-O ^ 1 o c is 0 a C3 d o 1 o 3 i a„ cd OS n > 1 C > ^ 1 d > sa o £ 1 O 1.2 ft 1 ^^ > |> h^ '> hJ t ^ ^ 1 o 0 t-i ki c8+j 03 2^3 ^ (D cS'S 03 '0 §e ft S o 3 S 3 00 ^'.S t^^ .9^ 0 m 0 o o o o o. -a -a o as s§ 5S 3 g " a 03 rH 03 3 1 " 1 1 " lOiO lO ■o o t^M< 0 0 2 " '^ 1^ ^ CO oo CO ^ |(M 1 1 ; ; ^' ;-' «' a C8 03 03 (D CB ca 03 O 0) "S o a si 03 03 >.!>) !>> >>?■. i*"^ 0 a Lri t-i M f-i L.) >-< Ui 0) > 1 T I >> Lh 1 ^ O 1 —I o 03 -^ d d d d ■2^ d d a-^ ■a -o-a X) -o X) § 1 ] oS (I) 1 "T t-i 1 XI ' •S P.>. " 'S 1 a 11 o 1 03 la C3 1 ° 1 bfl d to a o O 83 S3 oo a a Pi |1 0 0 a 0 €/3- C3 3 3 t- a ;:5 03 -K 03 .sag o.g s'^C-sa-d ft-, ° g g.a I a „ 03-^ o 2jo- ^aa O'O'S-" gS 03 C3 >0 C.S'— S O 03 03 " ce 3 0.3^x3 T3 s-3 s ft-w ".a.s^ o,o3o3P„M,„;3;3o3 ,g S ag5!l^.9s::3£ *Cn+^ C34J+^ r-jOOO'^ o33X33iioooooo ft ^ 03 T1 ^J ho PI H 03 03 ■3 ft a a 03 03 ^ ^ s§ a s-« s 3 ■n ^ s ft 03 -S w 43 0 sa ^ 03 ft ecomi in CO uired must 0 a .Q 03 cr»o 0 3 ■3 8 £ t since Welfar ship re over $2 03 E 3 03 sigh ublic Itizen ount •- a 03 ft s ■spm "a. c a ■ emale r hav ureau year ut an Adul a 0 a 03 CO ■JUri, SnOMr-ipq- B^ r> ot 308 provisio:ns for the blind of private charitable institutions ; Maine and Wisconsin also exclude inmates of penal institutions ; Oklahoma and Pennsylvania deny aid to persons confined in houses of correction; and Missouri excludes inmates of either penal institutions or institutions for the insane. In Maine and in Oklahoma a blind person may receive an allowance after leaving the institution to which he was committed. The acts of 10 States (California, Indiana, Kentucky, Maryland, Minnesota, 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 joint grant to blind persons who contracted marriage after passage of the act. Definitions of blindness in five State laws limit aid to those whose vision is "so defective as to prevent self-support" (Indiana, Mary- land, New York, Oklahoma, and Washington). The laws of two States (Kentucky and Nebraska) define blindness as "destitute of useful vision." The Kansas law requires that the applicant for aid to the blind must have lost the sight of both eyes; the Missouri law defines blindness as "no more than light perception"; the Minnesota 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 than 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, Indiana, Maine, Minnesota, Missouri, Pennsylvania, and Wyoming) provide for complete financing of the system for aid to the blind by the State government ; California, Colorado, and Illinois laws specify that the State shall bear one-half the cost; and the Wisconsin law provides that the State shall make one-third of the total expenditures. State disbursements for blind allowances in 1934, however, fell below the legally specified proportions in Colorado, in Illinois, and in Wis- consin. In New Hampshire, on the other hand, 68.9 percent of the total cost was borne by the State government in 1934, even though State participation is not provided for in the law. During 1934 aid to the blind in New Hampshire was financed as a part of the relief program, utilizing county, State, and Federal 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 Wisconsin by a property tax; and Wyo- ming by taxes on liquor. In the other States which provide for State PKOVISIONS FOR THE BLIND 309 financial participation the appropriations are jDresumably made from general funds. Counties in eight States are authorized to pay blind allowances from general county funds (Idaho, Illinois, Kentucky, Louisiana, New Hampshire, New Jersey, Ohio, and Oklahoma) ; and in Iowa, counties may use either general funds or poor funds for this purpose. Five States authorize counties to levy special property taxes for revenue for aid to the blind (California, Maryland, Nevada, Utah, and Wash- ington). Table 66 indicates the administrative authority for aid to the blind in the 27 States which have blind pension laws.'' As a rule applications for grants are first passed upon by the designated county authorities, such as the commissioners or local courts. In some of the States a State office is charged with ultimate supervision and control, but in 10 States (Illinois, Kansas, Kentucky,- Nebraska, Nevada, New Hamp- shire, Ohio, Utah, Washington, and Wisconsin) the county commis- sioners, and in Iowa the county board of supervisors, have entire charge of the system. In Idaho the authority for the system is the judge of the county probate court. In Arkansas, California, Colorado, Louisiana, Maryland, Missouri, Pennsylvania, and Wyoming the de- cision of the local authority is subject to review by a State agency; whereas in Connecticut, Maine, Minnesota, 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 prac- ticable under the conditions in each State, to needy blind individuals, the Social Security Act has authorized $3,000,000 ^ 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 summarizes the provisions of the Social Security Act for Federal grants to the States for aid to the blind. In order to be approved by the Social Security Board, a State plan for aid to *As of Aug. 1, 1935. ^ The Social Security Act was not approved until Aug. 14, 1935, and tbe supplemental appropriation bill, fiscal year 1936 [II. R. 9215], failed of passage 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 Feb. 11, 1936, included an appropriation of $2,000,000 for the remainder of the fiscal year ending June 30, 1936. 310 PROVISIONS FOR THE BLIND the blind must be in effect in all parts of the State and be admin- istered 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 Federal 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 resi- dence 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 con- sidered 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 Federal 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. PROVISIOlSrS FOR THE BLIND 311 Table 67. — Summary of provisions for Federal grants to States for aid to the blind [To be made by the Social Security Board under title X ^ of the Social Security Act] Definition Aid to the blind means money payments to needy blind individuals. Certification of State Plan for Federal Grants A State, in order to receive 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 the State and, If administered by them, mandatory upon them ; 2. Provision for financial participation by the State ; 3. Either provision for the establishment or designation of a single State agency to administer the plan, or for the establishment or designation of a single State agency to supervise the administration of the plan ; 4. Provision for granting to any individual whose claim for aid is denied, an oppor- tunity for a fair hearing 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 the efQcient operation of the plan ; 6. Submission of such 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 which the Board may from time to time find necessary to assure the correct- ness and verification of such reports ; 7. Denial of aid to any individual under the plan with respect to any period when he is receiving old-age assistance under a federally approved plan. A State plan will not be approved if it imposes : 1. A residence requirement which excludes any resident of the State who has resided therein 5 years during the 9 years immediately preceding the application for aid and who has resided therein continuously for 1 year preceding application ; 2. A citizenship requirement which excludes any citizen of the United States. Amount of Grant to 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 so much of such expendi- . ture 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 State plan or for aid to the blind, or both. Methods of Computing and Paying Grants 1. Estimates of amounts to be paid States will be based on : (o) 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 sub- divisions. (If the amount appropriated is less than one-half of the total sum of esti- mated quarterly expenditures, the source or sources from which the difference is expected to be derived must be stated.) (6) 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 prior 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. Suspension op Grants If the Social Security Board finds, after reasonable notice and opportunity for hearing 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 re- quirements, 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. M9 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 Arising out of III Health''^ (the sections on public-health services derived from this source were prepared by W. F. Walker and Ira V. Hiscock under the direction of Edgar Sydenstricker ) ; (2) A statement of Josephine Roche, Assistant 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 re- garded in any sense as complete or effective without adequate provision for meeting the risks to security which arise out of 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 depres- sion; it threatens people of small means even in good times. The problem is not created in a depression period ; it is only exaggerated and made more 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 hos- pitals, 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 rep- resents 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 losseg are not distributed equally among the peo- ple. Some individuals have much more sickness than others in any given year. Actuarial experience shows that among an average mil- lion persons there will occur annually between 800,000 and 900,000 315 316 EXTENSION OF PUBLIC-HEALTH SERVICES cases of illness. This might seem to mean nearly one case of sick- ness 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 nor- mal 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 disabled for periods varying from 1 week to the entire year. The situation may be visualized from the actual experience in nor- mal "times of 1,000 typical families in large cities, with annual in- comes ranging from $1,200 to $2,000, as follows: 218 had medical bills in a single year in excess of $100, and 80 in excess of $200; ol these 80 families 16 had medical costs ranging 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 costs were additional to wage losses. The situation in families 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 indi- vidually to budget against the costs of sickness. A substantial pro- portion of families in cities, towns, and rural areas actually obtain no medical care, or receive insufficient care during sickness. It has been shown by surveys that the proportion of families receiving inadequate care is largest among those with small incomes and that, step by step, as family income increases the proportion of families with inadequate care diminishes. In normal times, about one-tliird 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. Thus, the risks to economic security arising out of ill health are of three kinds, namely : (1) Loss of efficiency aud health itself, aud therehy loss of the capacity to be employed ; (2) Loss of earnings caused by disabling illness among gainfully employed persons ; (3) Costs of medical care to gainfully employed persons and their families. PEEVENTION OF ILLNESS A^ stated by the medical advisor}^ board of the Committee on Economic Security: A logical step in dealing with 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 remains that despite great advances in medicine and public-health protection, EXTENSION OF PUBLIC-HEALTH SERVICES 317 millions of our people are suffering from diseases and thousands die annually from causes that are preventable. The mortality of adults of middle and older ages has not been appreciably diminished. With the changing age composition of our population the task of health conservation must be broadened to include adults as well as children. Evidence is accumulating that the health of a large proportion of the population is being affected unfavorably by the depression. The rate of disabling sickness was found to be 48 percent higher among families having no employed wage earners in 1932 than in families having full-time workers. The group of workers that had droj)ped from fairly comfortable circumstances to relief rolls during the depression showed a rate of disabling illness 73 percent higher than that of their more fortunate neighbors who had remained in the comfortable class.^ For the first time in many decades the an- nual death rate in our large cities has increased, the rate for 1934 being higher than for 1933 despite the absence of any serious epi- demics,- Concurrently with these evidences of increased need, local appropriations for public health have been decreased 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.^ It has long been recognized that the Federal, State, and local governments all have responsibilities for the protection of all the 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 w^ell-established prece- dents for Federal aid for State and local health 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 meas- ures 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 the hurden of preventable illness and premature death has been lifted in progressive communities since modern public-health procedures were introduced, there is recognized opportunity for continued prog- ress in this field. Only a fraction of the population has benefited to the fullest extent from the application of existing knowledge of disease prevention through public-health procedures. 1 Perrott, G. St. J., and Collins, Selwyn D., "Relation of Sickness to Income and Income Change in 10 Surveyed Communities", Puhlio Health Reports, vol. 50, no. 18 (May 3, 1935), p. 622. 2 "Provisional Summary of Mortality Statistics for the United States, 1932, 1933, and 1934", Public Health Reports, vol. 50, no. 42 (Oct. 18, 1935), p. 1442. * Walker, W. F., "Analysis of Public Health Expenditures hy Geographic Subdivisions", American Journal of Puhlic Health, vol. 25, no. 7, July 1935, pp. 851—856. 78470—37 22 318 EXTENSION OF PUBLIC-HEALTH SERVICES (2) The policy of leaving 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* counties and 102 cities') of the 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. The Federal Government has 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. The 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 loans 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 developed, it has been demonstrated that expenditures for carefully planned health programs executed by trained workers yield large dividends. 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 serv- ice. In many of our States there are counties in ^Yhich 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 communities are to enjoy the benefits of health protection to which they are — certainly from a humane standpoint — entitled as citizens of this country. With regard to the need for outside aid for demonstration pur- poses, 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 county commissioners to make the initial appropriation for the establish- ment of a new full-time county health unit unless financial aid can be offered from an outside source. The reason is not hard to under- ^ Freeman, A. W., M. D., A Study of Rural Public Health Service (The Commonwealth Fund, New York, 1933), and unpublished material. ^ Public Health Reports, 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, "Municipal Health Department Practice for the Year 1923. Based Upon Surveys of the 100 Largest Cities in the United States", Public Health Bulletin No. 16k; Research Division of the Amejican Child Health Association, A Health Survey of S6 Cities (American Child Health Association, New Yorli, 1925). EXTENSION or 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 work, the anticipated re- sults 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 im- provements 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 scien- tific 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 communities are still far from satisfac- tory, 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 ref- erence is made to divisions of vital statistics, laboratories, and sani- tary 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 establish- ment of full-time 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 real progress can be made in the extension of full-time local health service, there must be created in each State a reserve of trained health officers, public-health nurses, sanitary engineers, and inspectors to fill the positions which will be established in the new units, for in spite of the curtailment of appropriations for health work in recent years there is a shortage of individuals trained for health work. Until the public-health service throughout the country can offer careers which will attract qualified workers and warrant specialized training in colleges, medical schools, and univer- sities, it will be necessary to raise personnel standards gradually. Opportunities for graduate study, extension courses, and demonstra- tions 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. PKEVENTABLE DISEASES AND MORTALITY « While it is true that the general death rate and the rates for tuber- culosis and infant mortality for the country as a whole declined to the lowest figures on record in 1933, we should not be misled by this fact into the belief that further safeguards of the Nation's health are unnecessary. These death 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 thousands annually die from causes that are preventable through the use of existing scien- tific knowledge and the application of common social sense.'' Ample evidence exists to support this sweeping statement. Ap- proximately 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 the leading sanitarians in this country believe that mortality in the infant age group can again be reduced by 50 percent. It is also confidently believed by some of the leading authorities on tuberculosis that the Y4,000 deaths which occurred from this disease in 1933 could again be cut in half; and there is good reason to assume that, with proper health protection for pros- 8 Much of the factual data used in this chapter lias appeared already iu the statement submitted by Assistant Secretary of the Treasury Josephine Roche, to the Senate Com- mittee on Finance, on Feb. 4, 1935. Economic Security Act: Hearings before the Committee on Finance, United States Senate, 74th Cong., 1st sess.. on S. 1130 (U. S. Government Printing Office, Washington, D. C. 1935), pp. 374-407. ''Sydenstricker, Edgar, "Health in the New Deal," Annals of th^ American Acadcmij of Political and Social Science, vol. 176, November 1934, p. 131. EXTENSION OF PUBLIC-HEALTH SERVICES 321 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 Health Service from mortality figures of the United States Bureau of the Census, shows that, 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. Numljer of deaths in the United States from prcveiita'bJe diseases, 1933 Typhoid fever 4, 389 Paratyphoid fever 84 Typhus fever 81 Undulaut fever 72 Smallpox 39 Measles 2, 813 Scarlet fever 2, 546 Whooping cough 4, 463 Diphtheria 4, 936 Influenza 33, 193 Dysentery 2, 814 Erysipelas 2, 017 Acute poliomyelitis, acute polioencephalitis 797 Epidemic encephalitis 1,357 Epidemic cerebrospinal meningitis 1, 482 Anthrax 11 Rabies 65 Tetanus 1, 253 Tuberculosis of the respiratory system 67, 417 Other forms of tuberculosis 7, 419 Leprosy 27 Syphilis 11, 039 Gonococcus infection and other venereal diseases 998 Purulent infection, septicemia (nonpuerperal) 931 Malaria 4, 678 Other diseases due to protozoal parasites 61 Ancylostomiasis 20 Scurvy 28 Beriberi 1 Pellagra 3,955 Rickets 339 Pneumonia, all 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 re- garded 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- 322 EXTENSION OF PUBLIC-HEALTH SERVICES cumstances attending their occurrence; yet, had similar losses oc- curred 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 headlines for days. Nor do deaths alone tell the whole story. It is estimated that for each death from typhoid fever there are 10 cases ; for each death from diphtheria, 12 cases. Although accurate figures are not avail- able with respect to cases of preventable diseases for 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 of cases of typhoid fever at 43,000, and of diphtheria at 58,800, in the United States in 1933. A recent survey by the Public Health Service showed by actual blood test of only 200,000 people in 11 southern States a total of 14,000 known cases of malaria. This survey was made during the winter, when malaria is least active, and included only school chil- dren. It is estimated that in the whole population in the malarious section of the South there are, every year, at the height of the ma- laria 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. Here again, the dis- ease is not only of public-health importance but also of economic imijortance, 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 be- cause they are ignorant of the nature of the disease, because the cost of treatment is high, or because facilities are lacking for the treat- ment at a cost that can be borne by the patient, more than half of these cases do not obtain treatment during the first 2 years of their infection. This 2-year period is the interval of greatest commu- nicability and is of vast importance in the control of syphilis. Ade- quate treatment during this time will not only prevent the spread of this disease but will also make possible the cure of the indi- vidual. 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 of gonor- rhea as with syphilis. About 679,000 new cases of gonorrhea annu- ally seek treatment in this country. This number does not give a true picture of the actual number of gonorrheal infections annu- ally because many more patients with gonorrhea than with syphilis EXTENSION OF PUBLIC-HEALTH SERVICES 323 fail to seek treatment. While the late and crippling manifesta- tions 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 epi- demics, establishment of quarantine regulations for the prevention of the introduction of cholera, collection of sanitary data and publica- tion 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 con- ducting studies relating to public health, the Hygienic Laboratory was established in 1887 for investigations of contagious and infectious diseases and matters pertaining to public health. With the establish- ment of this laboratory the work of the Service in the field of scien- tific research had its definite origin. Scientific studies and investiga- tions of yellow^ fever, cholera, malaria, tuberculosis, pneumonia, and the potency of various gaseous disinfectants were immediately under- taken. In 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 establish- ments 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 estab- lisliments 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 of 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 under- take systematic field investigations of scientific and practical public- 324 EXTENSION OF PUBLIC-HEALTH SERVICES health problems resulted in the act of Congress approved August 14, 1912, when the name Public Health Service was given to the existing services and the powers were broadened as follows : The Public Health Service may study and investigate the diseases of man and conditions influencing the propagation and spread thereof, including sanitation and sewage and the pollution either directly or indirectly of the navigable streams and lakes of the United States, and it may from time to time issue information in the form of publications for the use of the public. The enactment of this law marked the beginning of a new epoch in the development of public-health work by the Federal Govermnent. For convenience the organization of the Division of Scientific Re- search may be divided into two general fields, laboratory stations and field offices, although the activities of the two are so interrelated that no arbitrary boundary can be set. The laboratory stations carry on research into guch problems as stream pollution, Eocky Mountain spotted fever, cancer, public- health relations, coordination of research by public-health officials and other scientists, demonstrations of sanitary methods and appli- ances, breeding and rearing of pure strains of animals in connec- tion with the control of biologies. Field investigation offices of the Service are developed and main- tained in accordance with the necessity arising in their particular fields of work. These offices are not permanent, but their work ma}^ be enlarged or terminated or additional offices established as the demand of research work of the Public Health Service indicates. At present some of the activities are investigations of heart disease, leprosy, malaria, nutritional diseases, plague, child hygiene, milk, public-health methods, industrial hygiene and sanitation, amebic dysentery, encepiialitis, and poliomyelitis (infantile paralysis). There can be no doubt that the knowledge of scientific preventive methods in our possession today, if universally applied, would en- able us to go far toward eliminating much of the unnecessary eco- nomic loss now chargeable to preventable diseases in this country. That intensive application of known scientific measures for com- municable disease control can completely eradicate certain diseases has been demonstrated repeatedly. The complete banisliment of j^ellow fever from the United States, Cuba, and Panama alfords an excellent example. Bubonic plague was completely stamped out in San Francisco some years ago through the intensive application of rat control. Many other examples could be cited. Even in the face of the lack of adequate health service in much of our rural area and in many of our cities, remarkable progress has been made in the reduction of deaths from communicable diseases in the United States during the past half century. Fifty years ago EXTENSION OF PUBLIC-HEALTH SERVICES 325 infectious diseases prevailed to such an extent and were accom- panied by such a high case-fatality rate that fifteen-sixteenths of all deaths were chargeable to this group. Today, as a result of only a partial application of known scientific methods, deaths from com- n.unicable diseases have dropped to less than 50 percent of the total. Numerous instances could be cited where intensive health work carried on by county health organizations has reduced sickness and mortality rates. In one county the health department conclusively demonstrated between 1927 and 1932 that maternal deaths could be greatly reduced in immber when prenatal cases came under super- vision of the department. With only 10.8 percent of mothers under supervision in 1927, the maternal mortalitj'- rate (deaths per 1,000 births) was 7.4, whereas in 1932, with 74.1 percent of the mothers under supervision, the rate was 2.2 per 1,000 births. In another county, in 1911, where typhoid was prevalent, as coop- eration of the local. State, and Federal Governments in sanitary im- provements proceeded, the incidence of typhoid fever markedly diminished instead of rapidly increasing as usual in early summer. The county health department began full-time operation in 1911 and the average of 3-year annual death rates from all causes during 1912-14 was over 100 deaths less than the number in 1910. In addition to specific instances of help in localized areas, the Public Health Service has worked on research investigations, either international or interstate in character, or problems of long-time and higher-cost study than States or communities can afford. For in- stance, the Public Health Service has been engaged in the study of stream pollution and sewage disposal for the past 20 years. The in- creasing pollution and dumping of industrial wastes into these streams have made it imperative for the Service to investigate the biological facts in connection with stream purification and necessary control of the situation through adequate sewage and waste disposal. Another problem of importance and one which demands immediate attention is that of mottled enamel, a disfiguring condition of the teeth caused probably by excessive amounts of fluorine in the water supply. The problem is not only one of public-health importance, but also of economic importance, since it may prevent further settle- ment of rich land areas where the condition is prevalent. A study of the permissible amounts of fluorine in the drinking water and of a method to remove excessive amounts is most urgently needed. There is probably no field of investigation where there is need for greater development than in industrial hygiene. Not only is every State affected but the great majority of the 48,000,000 persons in this country engaged in gainful occupations are directly or indirectly affected, as are their families. The health hazards of industries are 326 EXTENSION OF PUBLIC-HEALTH SEII\T:CES almost as diversified as are the number of different industries. Here Hgain, the cost of investigations leading to the prevention of incapaci- tating industrial disease is extremely small compared to the economic values accruing to both industry and the industrial worker. With its limited funds the Public Health Service has contributed consider- able aid in this special field. Acting as an impartial fact-finding body its investigations are accepted by the general public and by both labor and industry. Its studies of the health hazards of dusty trades, so far as time and funds have permitted, especially in the field of silicosis, a disease which affects workers in many industries wherever silica is quarried or used, serve as one of the principal guides for the control of the disease in this country. So far as it has been possible, the Public Health Service has at- tempted to meet the demands of State health authorities in the in- vestigation of diseases which are interstate in character or which have appeared in epidemic form. The ultimate control of all epi- demic diseases, even the more common ones such as measles, diph- theria, and scarlet fever, can come only from continued epidemio- logical investigations of such diseases and by laboratory studies of the nature of the causative agent and the development of vaccines or serums for their prevention and cure. In 1933 the epidemic of encephalitis at St. Louis resulted in an excellent cooperative investi- gation under the general direction of the Service with the State, city, and the universities of the city of St. Louis. Besides the pertinent facts gained in the epidemiological survey — of benefit to the entire world — the virus of this disease was for the first time successfully transferred to animals, offering thereby an opportunity for the continued study of the disease in nonepidemic times. Epidemics of infantile paralysis which occur in some State or city almost an- nually have required Federal cooperation since the preliminary in- vestigation of 1910. From field and laboratory studies in regard to this disease has come a substantial laiowledge upon which hope of control and prevention can be based. Venereal diseases form one of our major social problems in caus- ing disability during the most active years of life as well as con- tributing substantially to the death rate in the older age periods. The Public Health Service has attacked these problems — first, in aiding States in the development of venereal-disease clinics for the treatment of those already infected, a measure which has been exten- sively tried out in England with an actual reduction in infected cases in the last few years; second, in cooperative studies on treat- ment in the cure of syphilis ; third, the study of methods of making recently infected cases noninfectious in order to prevent the spread of the disease. EXTENSION OF PUBLIC-HEALTH SERVICES 327 The few brief examples of the type of public-health investigations which are carried on by the Public Health Service do not in any way cover the whole field of public health, nor do they give any evidence of the number of similar problems of equal importance which are now before the Service. They do serve, however, to explain the interstate and national aspects of the investigational work of the Service. EESPONSIBILITY FOE PUBLIC HEALTH The protection and promotion of the public health has long been recognized as a responsibility of govermiient — national, State, or local. In the United States, however, this responsibility has not generally been discharged in so systematic or adequate a manner as such other functions of government as the protection of projperty, the provision of means of communication (highways, postal, and similar services) , the administration of justice, and education. There is, in fact, marked inequality of health service now being rendered in different communities, resulting in unequal opportunities for citi- zens to acquire and maintain health. These differences derive from : (1) Lack of local services for organized health protection; (2) lack of appreciation and understanding on the part of citizens of the measures necessary to preserve and promote individual health; and (3) lack of ability of citizens and communities unaided to obtain needed preventive services. The improvement of economic security in this country requires a comprehensive, Nation-wide program of public health, supported and administered by local communities and by States, financially and technically aided by the Federal Government. Aside from certain services such as the improvement of a water supply or the provision of safe means of sewage disposal, the im- provement of public health depends upon the summation of the improvement of protection of individual health. Health services, therefore, are best rendered on a community basis, localized or indi- vidualized to the greatest degree commensurate with economy of administration. The responsibility of government is twofold: (1) It should supply those facilities which can best be maintained on a community basis and which the individual cannot be expected to provide for himself; (2) it should, through mass education, ac- quaint the citizens with the health problems, the local facilities avail- able, and the advantage to himself and to the community of making early and full use thereof. 328 EXTENSION OF PUBLIC-HEALTH SERVICES BASIC REQUIREMENTS OF LOCAL PUBLIC-HEALTH SERVICES What, in the opinion of public-health experts, are the basic require- ments of public-health services in a community? In the following brief outline and. discussion, the standards established by the Ameri- can Public Health Association have been kept closely in mind. Nature of Local Organization. — The basis of a satisfactory health service in a community is a ^Yell-org•anized health department, ade- quately financed, with trained personnel, supported by suitable laws and ordinances, by favorable public opinion, and by all professional groups. Recognition of the need of a large population unit, and the importance of a full-time, trained, administrative head has led away from the establishment of services on the town or village basis to the county or district (city or groups of cities, part of county, or combi- nation of counties) of 50,000 population or more, in a reasonable compass, as the unit of organization. The basic principles of organization of such service in a com- munity are : (1) That the health administrative agency be a recognized part of the government of tlie area and be correlated with the government of the State ; (2) That in view of the responsibilities which must be placed upon the healtli officer or administrative head of such services, a board of health or advisory council be established as an essential factor in the administrative plan to advise the health officer regarding policies and otherwise to bring a broader community viewpoint to the administration of the service ; and that such a board or council include physicians, members of other public-health professions, and representa- tives of the general public; (3) That the health officer be (a) selected and appointed on the basis of pro- fessional qualifications and protected against political interference, (6) ade- quately compensated commensurate with the public responsibilities placed upon him, (c) required to devote his full time to the duties of his office, and (d) directly responsible either to the board which may have the appointing power or to the chief government executive of the area ; (4) That the major divisions of the department likewise be directed by full-time trained persons responsible to the health officer. Local Health Services. — The physicians in a commmiity, whether in private offices, clinics, hospitals, or homes, perform a service in the treatment of disease either as individuals or as members of or- ganized groups. This is the usual form of medical care in this country for those able to pay for such services. Because of their training, numbers, and relationships to their clientele, physicians in private practice constitute the group which is potentially most capable of applying the lessons of preventive medicine to the habits and circumstances of the individual. The public generally, however, is not yet accustomed to demand or privately pay for such guidance in the application of preventive medicine to its own or its com- EXTENSION OF PUBLIC-HEALTH SERVICES 329 munity's health problems. The program of local health work must, therefore, provide for activities which will : (1) Carry out the legal responsibilities in disease control imposed by law; (2) Provide tbose facilities for institutional care (acute communicable dis- ease, including tuberculosis), laboratory service, and diagnostic aid — services which the individual patient cannot provide for himself alone ; (3) Stimulate a public demand for services in the prevention of illness; (4) Supplement the services of the private physician in the community; (5) Aid in developing the interest and ability of physicians to render pre- ventive services in their private practice. A comprehensive local health program will include services aimed at the control of preventable diseases (the acute communi- cable diseases, syphilis and gonorrhea, tuberculosis), heart disease, cancer, industrial disease, and mental diseases; care of crippled chil- dren; improvement of nutrition; the promotion of maternal, infant, and other child-health services; the supervision of general sanitary conditions of the community; services for diagnostic aid (laboratory services and expert consultants) ; and service for the collection, tabulation, and analysis of vital statistics. Health conferences or health-center preventive and medical services conducted by the health department or other agencies in cooperation with medical groups, especially for mothers and children, are justified and desir- able as a means of creating a demand for such services, as a practice ground for physicians in the art of preventive medicine, as an agency for inaugurating proper standards for such services, and as a supple- ment to the preventive services of private practitioners. Cost of Local Service.— Experience with well-organized and well-administered health services in ma.ny county and city de- partments indicates that an expenditure of $1 per capita from official funds is required to provide these essential services for com- munity health protection in the minimum effective degree. This minimum cost is based on the assumption that the preventive services by private physicians rendered in their own practice, as above out- lined, will be improved and maintained. Many cities and some rural areas have found it desirable and profitable, in terms of increased protection, to develop services in excess of these minimums. Since, as has been pointed out, the responsibility for the provision and administration of the public-health program rests primarily with the government, it follows that the major support of this service must be met through local taxation. Studies of the ability of counties to meet the cost of health administration from local resources show a wide variation and suggest the need that State governments be pre- pared where necessary to assist local communities in providing the minimum health program compatible with protection for the State. 330 EXTENSION OF PUBLIC-HEALTH SERVICES Such assistance is already being given to some degree in certain States and takes the form either of supplying service which can be satis- factorily rendered from the State department of health or of direct grants of money (through the State health department) to aid the local program, or both. In addition to the advantage of building up a sound local program, appropriations for State aid exercise a bene- ficial influence upon the standardization and improvement of the character of local work throughout the State. The need of train-ed IDersonnel for effective local health work makes it imperative that the State be prepared to assist local communities by furnishing esxoecially qualified persons and by providing special training services as already done in a number of States. Studies of local health services, both in urban and rural communi- ties, indicate that the minimum essentials of service, as outlined here, will require more than $1 per capita ; ® that a comprehensive ]jrogram will require in addition facilities for the hospitalization of certain acute and chronic diseases. Unusually acute health problems, re- gional or special problems, or great community interest and demand for service may require additional services not provided in this pro- gram and budget. Some cities and rural areas have demonstrated that as much as $2.50 per capita ^ can be wisely and profitably ex- pended. In such forward-looking programs, voluntary agencies us- ually participate to a substantial degree in money support. If we consider, however, $1 per capita for the field program, aside from in- stitutional facilities and hospital care, the total allotment for public health in the local tax budgets would be $126,000,000 a year, repre- senting less than a mill on the gross assessed property valuation of $163,000,000,000 in 1931." It is evident that a reasonable levy over the entire country would yield suificient funds to carry this minimum program. It is recognized that assessed valuations vary from one period to another in their relation to the true value in different areas, and that the proposal of a specific tax rate to be generally applied has limitations. Considering the problem broadly, the total assessed val- uation with specific millage for health purposes is used as a practical and convenient basis of discussion. The problem, however, is one of distribution, since not all comnmnities have sufficient resources to support such a program with a reasonable tax rate. The solution of this problem necessarily rests with the State and the Federal Govern- ment. 'American Public Health Association, An Official Declaration of Attitude on Desirable Btandard Minimum Functions and Suitable Organization of Health Activities, approved on Tuesday, Oct. 10, 1933, Indianapolis, Ind. (American Tublic Health Association. New York City, 1933). " Hiscock, Ira V., editor. Community Health Organisation (American Public Health Association, New York City, 1927). 1" Bureau of the Census, Financial Statistics of States (U. S. Government Printing Office, Washington. D. C, 1931). EXTENSION OF PUBLIC-HEALTH SERVICES 331 The following tabulation indicates for the counties of a southern State the money needed for a minimum health program and the amount which a reasonable tax of 1 mill would yield : Cost of minimum effective Yield of a local 1-mill tax Countjj program levy A $22, 845 $17, 579 B 23,929 15,589 C 32, 286 19, 339 D 28, 800 15, 595 E 232, 200 273, 818 Total 340, 066 341, 920 It is evident that all but one of these counties must have outside assistance even if only minimum health services are rendered locally, for the tax collected within the county boundaries will be insufficient to finance the health program. Obviously not every community and not every political subdivi- sion is large enough or wealthy enough to equip itself with facilities and personnel to meet satisfactorily its health needs. Many com- munities, on the other hand, are amply able to provide financial support for their own health programs and to lend assistance to other less able communities. With present methods of travel, there is no isolated part of the country. Communicable diseases may read- ily and rapidly spread bej^ond political boundaries. The flow of travel is to the more urban areas which are also more able to pro- vide for an adequate health program. To meet this condition health services are organized on a city, county, or district basis in order to provide a sufficiently large aggregate of population and wealth to support efficient organization. Yet, there are services which the local community cannot and should not provide for itself alone. These needs should be met through assistance from the resources of official State or Federal health agencies or from local voluntarily supplied resources for health service, or both. Voluntary and nonofficial agencies at present provide approxi- mately one-fourth of the support of all public-health work in the country.^^ Such agencies, assisting in the local health program, have grown up more extensively in cities than in rural areas because these areas contain a larger proportion of individuals who are conscious of the acute public-health problems and who also have available funds to support such work. The services which these voluntary agencies render include public-health nursing, promoting health education, maintaining clinics of a public-health nature, initiating "White House Conference on Cbild Health and Protection, Public Health Organization (Century Co.. New York. 1933). 332 EXTENSION OF PUBLIC-HEALTH SERVICES studies of local problems, and encouraging the maintenance of sound standards. It is believed that the continued participation of vol- untary groups in the community health program should be encour- aged in order to provide services supplemental to the official actiAd- ties which the local official agency may not be equipped or ready to render. Usually through their extensive roots in the comLmunity the voluntary groups are able to affect public opinion favorably and thus bring support for a well-rounded public-health program which the health officer finds exceedingly helpful. They have further re- sponsibility in aiding the development of new fields of activity be- yond the minimum essentials of health service here discussed. THE FUNCTIONS OF STATE HEALTH DEPARTMENTS With health services organized and administered locally as dis- cussed above, the function of the State health department becomes that of (1) stimulating local areas to recognize their health prob- lems and (2) organizing the necessary facilities to handle them ade- quately. The State should assist in providing those services which it is uneconomical for the local community to provide for the sole use of a small population unit. This may include laboratory facili- ties and special technical services in handling problems of sanita- tion, water supply and sewage disposal, occupational diseases, facili- ties for the institutional care of tuberculosis, etc. The State should also provide advisory and supervisory service to the local adminis- trator and through standards of performance of professional service assist the local health officer in keeping local work at an effective level. The training of public-health personnel for work in the local area should be as much a State responsibility as is the training of teachers in education. Only in limited fields and under unusual cir- cumstances should the State department become an agency fimction- ing directly in the local community dealing personally with the public. Organization of State Health Departments. — Tlie form or or- ganization of State departments of health is similar in character to the local organization already discussed. There should be a well- trained and especially qualified commissioner or State health officer supported by a board of health or advisory council, the members of which should be appointed without political regard and solely for the knowledge which they can bring to bear upon the health problems of the State and their contribution to the solution of these problems. Such a body should assist the State health administration in the formulation of policies and in the preparation of the sanitary code. The bureaus of the State health department should be headed by especially trained and qualified individuals devoting full time to the EXTEN'SIOlSr OF PUBLIC-HEALTH SEEVICES 333 service. A plan of organization which has been found effective in practice, and which conforms to the plan of local organization just discussed, would provide for a commissioner of health with a supporting advisory body appointed by the Governor and a dei:)art- ment comprising a major division of central administration having to do with the stimulation, guidance, and supervision of county and other local health work. Auxiliary divisions would provide services for the control of preventable diseases including epidemi- ology, maternal and child health, laboratory servdce, and sanitary engineering. A division concerned with the collection, tabulation, and analysis of vital statistics completes the organization of the department. As the function of the department is largely advisory and supervisory, the number of subordinate persons needed is rela- tively small. Aid to Local Health Services. — Since at the present time less than one-fourth of the counties of the country have organized full-time health departments and nearly 50 percent of the popula- tion is without fidl-time health supervision, State departments have a major responsibility in acquainting local government officials and the public at large with the importance and advantages of effec- tive local health service. It is conservatively estimated that not more than 25 percent ^^ of the counties having organized full-time health departments and not more than 50 percent ^^ of the cities have as jet developed their departments to include efficient service in the minimum essentials of health protection and promotion here outlined. The State's responsibility for effective health service extends to such areas as well as to the areas which at present have no organized health departments. In fact, it must assume a con- tinuing responsibility for the stimulation of the local departments to avail themselves of new knowledge of pTiblic-health protection. An equally important function of the State department is that of aiding poorer counties and local areas through direct subsidy to obtain a satisfactory health program. Not all counties Avithin the State will be in position to raise the necessarj^ funds for a satisfac- tory program from local taxes. It frequently happens that the magnitude of local health problems is overwhelming, and the re- sponsibility for the solution of these problems does not rest entirely upon the local community. The State, then, through its general taxing power, must act as an equalizer and, through services ren- dered or direct monetary contributions to such areas, or both, insure the conduct of a satisfactory program and the protection of the citizenry as a whole. The precedent for participation of the State ^ Freeman. A. W., M. D., op. cit. ^^"Pimic Health Reports, vol. 49, no. Sfl Sept. 28, 1934, United States Public Health Service. 78470 — 37^^23 334 EXTENSION OF PUBLIC-HEALTH SERVICES in the financing of local government is found in the administration of schools and highways. The guiding and supervisory functions which have already been discussed as responsibilities of the State are much easier and more effectively administered if the State assists the local area financially in carrying its health service. However, not all States are able, within their local resources, to meet the demand of health work, and there is a national problem of adjustment which must be met through Federal aid to States in the organization of State administrative services and in assisting the States to carry the burden of the poorer counties. An analysis of the assessed valuation and the cost of minimum effective health programs of local services by counties shows a tax deficiency in available resources on the basis of a 1-mill. tax levy of $13,409,000 for the country as a whole. States must look to the Federal Government for some assistance in meeting this problem. Cost of State Health Work. — To carry out the normal functions of a State health department, including the stimulation and guidance of local health work, the State health department will need a staff, in addition to the health officer, of approximately 6 people per 100,000 population. The size of personnel will vary with the area and population density of the State. For example, groups of people in sparsely settled areas will require more personnel per 100,000 population. Such services as are usually provided, excluding in- stitutional care, now require an expenditure of not less than 20 cents per capita. In addition, the State will need funds for aid to local health work on a county basis averaging about $5,000 per county to cover the cost, in part at least, of those services which are rendered locally but have a definite State implication and provide protection to citizens outside the county. On such a basis of organ- ization, the total cost of State administration throughout the United States is $40,000,000 ($25,000,000 for State-administered service plus $15,000,000 for subsidies to counties) apart from additional subsidies to counties whose residents are too poor to carry the tax burden of the health program. This is an increase of $26,000,000 over the present expenditure. The need of this increase is better understood when it is realized that only 20 percent ^* of the States at the present time have a program of administration which comprehends the responsibilities of the State department just discussed; and, more- over, several of these programs are at present not adequately financed to permit effective operation. This total cost of State health service, aside from the funds needed to level the inequalities of county re- ^* Health Departments of States and Provinces of the United States and Canada, United States Public Health Service, PuJ)Uc Health Bulletin No. isi (U. S. Government Printing Office, Washington, D. C, 1929). EXTENSION OF PUBLIC-HEALTH SERVICES 335 sources, would amount to 32.5 cents per capita for the country as a whole. The average expenditure in 1934 was 10 cents per capita. The range of expenditures is from 1 cent to 43 cents per capita, with only four States appropriating 20 cents or more per capita. FEDERAL RESPONSIBILITIES FOR THE PUBLIC HEALTH The policy of leaving to localities and States the entire responsi- bility for providing even nominal public-health facilities and services has failed in large measure. The uneven development of health service in the United States has resulted largely from expecting local governments to take the initiative in the organization of health activities. An adequate program with the necessary local and State support for public-health services calls for broader planning and more uniform and intensive stimulation of communities and govern- mental officials to recognize and meet their responsibilities for public health. The Federal Government has a definite responsi- bility for the protection of all the Nation's population against disease. The responsibility of the Federal Government for national health is already accepted by the conduct of health activities through sev- eral Federal agencies. Furthermore, it is well recognized that the constructive development of public-health work cannot proceed in an effective manner throughout the entire country without assistance from the Federal Government. As has been shown, local and State governments have a great responsibility for the provision of more adequate health service. Public health, a primary government func- tion, has for years received a relatively small share of local, State, and Federal appropriations. Recently, even these modest appropria- tions and this limited service have been reduced in drastic propor- tion^ in many localities. The experience of cities in 1934 shows that health budgets have been reduced on the average about 20 percent from the experience of 1931, reductions varying from 1 or 2 percent to as high as 50 percent. Where this reduction has amounted to 30 percent or more, practically complete breakdown of the public- health protective facilities has resulted. National support of local health activities is indicated as a necessary development to insure that public-health measures may go forward hand in hand with constructive economic measures in meeting the present critical na- tional situation. Though public health, unlike certain of the social problems under consideration at the moment, is not solely an emer- gency demand but a continuing responsibility, the early development of a reasonably adequate public-health program reaching both the centers of population and the far corners of rural areas is urgently 336 EXTENSION OF PUBLIC-HEALTH SERVICES needed if the people of the Nation are to receive the care which they deserve and which scientific heakh service will give them. Such a program of national health service would provide for the coordination of Federal, State, and local funds and activities, the training of necessary administrative and scientific personnel, the set- ting up of adequate standards of efficient administration, the evalua- tion of results, the efficient use of Federal, State, and local funds, and the resources of voluntary agencies according to the needs as determined by health and not by political conditions. The public-health responsibilities of the Federal Government already recognized and to a degree provided for are : (1) The study of international healtli conditions and the protection of tlie country from international hazards to health ; (2) The study of national health conditions and control of interstate trans- mission of disease by regulation of the movement of persons and goods ; (3) The use of all educational means to promote public Interest in disease prevention and control, in safeguarding the lives and health of mothers and children, and in the health of the worker, and in the attainment of more com- plete physical and mental health ; (4) The promotion of the study of hygiene and public health as a recog- nized part of education ; (5) The stimulation of States and local governments to organize health activities as discussed to insure more effective service to all people ; (6) The provision of personnel to State and local departments for consul- tation, education, demonstration, and other technical services (the training of workers for all aspects of public-health service is necessarily a part of this responsibility ) ; (7) The development and promotion of standards of performance of techni- cal services in the several fields, including general administration ; (8) The conduct and coordination of research in any or all aspects of public health, particularly those problems beyond the capacity of local and State organizations relating to disease prevention, control of the incidence of morbidity and mortality at all ages, the influences — physical, social, eco- nomic, and mental — atfecting or contributing to a more healthy people : (9) The provision of direct grants to States to encourage the organization of State and local health services for all people in accordance with current knowledge and to equalize the tax burden of the public-health progTam. These responsibilities are now met through the services of a num- ber of different bureaus in several Federal departments. The Fed- eral agencies which have to do, for the most part, with the problems of State and local health work are : United States Public Health Service, Children's Bureau, Bureau of the Census, The Office of Education. Food and Drug Administration, Bvu'eau of Animal Industry. Other divisions having certain public-health asjiects and responsi- bilities, yet not directly nor uniformly concerned with the promotion EXTENSION OF PUBLIC-HEALTH SERVICES 337 and administration of local health work, are : Bureau of Labor Sta- tistics, Women's Bureau, Employees' Compensation Commission, Consular Service, Office of Indian Affairs, National Park Service, Bureau of Mines, Bureau of Dairying, and the Bureau of Home Eco- nomics. These Federal services have grown up in response to the I'ecognized public need and each, within its field, contributes mark- edly to public understanding and appreciation of health and to the improvement of the national health. With all the public interest over a long period wdiicli the present organization of services in the various departments indicates, the Federal responsibility in the spe- cific fields just mentioned is still far from adequately met, owing pri- marily to lack of resources specifically directed toward the promulga- tion of a national plan of health services. It is obvious from the wide responsibilities and their dispersion among many departments that the efficient administration of a national health program under the Federal Government demands the close coordination of these health services. Such coordination can be assured in part through the detail of qualified personnel from the United States Public Health Service and through its study and solution of special health problems which may arise within local departments wdiere the health aspects of the program are subordinate to other considerations. This procedure has already developed with the Bureau of Indian Affairs, Bureau of Innni- gration, Bureau of Mines, Employees' Compensation, Coast Guard Service, Bureau of Standards, Federal Emergency Relief Admin- istration, and the National Park Service. ]\Iany bureaus are deeply interested in various aspects of public-health promotion and protection and are carrying on effective educational and regulatory activities. The precedent of Federal aid to States for State health administration and local public-health facilities has been established in various laws for granting aid and in loans of technical personnel to States and localities. The Cost of a National Program. — Federal agencies previously mentioned are now^ spending a total of slightly more than $5,000,000 in the discharge of their responsibilities directly related to public health. The Federal agencies primarily concerned wdth public health need far more funds than heretofore provided for trained personnel to be made available to States or local areas for the pur- poses of demonstration and initiation of work to inaugurate the en- larged State program discussed. The appropriations for further research activities by the United States Public Health Service and the United States Children's Bureau have been grossly inadequate. The more important of these ^oroblems arise : (1) As requests for aid from State health officers, for problems usually in- terstate in character, such as malaria, typhus fever, Rocky Mountain spotted 338 EXTENSION OF PUBLIC-HEALTH SERVICES fever, industrial liygiene, stream pollution, milk sanitation, public-health meth- ods, statistical, dental, and nutrition studies. (2) As a result of the requirements placed upon the Public Health Service by law, such as the control of biological products, development of standards and of new biological products. (3) Within the Public Health Service to meet a national emergency of the future *or other changing conditions, such as sewage disposal, water purifica- tion, cancer investigation, and public-health education. (4) In the fields of maternal and child hygiene, including studies of mortality, growth, development, and diseases of children, mental health, and the relation of economic and industrial conditions to the health and welfare of children aHd mothers. This research work is an integral part of the national plan of public-health services since the investigations undertaken are essen- tially concerned with problems of a regional or interstate character. The solution of these problems is not only of national significance but of vital importance to the State health officers in allowing them to utilize fully the State and Federal funds available to them in the prevention and control of disease, the improvement of the environ- ment, and the promotion of health. The majority of such research problems come to the Public Health Service from the health authori- ties of the several States. PUBLIC-HEALTH PEOVISIONS OF THE SOCIAL SECURITY ACT Recognizing the role of sickness as a cause of insecurity, the pre- vention of disease as the most humane and the least expensive method of dealing with this cause of insecurity, and the need for extension of Federal, State, and local public-health service, Congress author- ized an appropriation for public-health purposes in the Social Secu- rity Act. For the fiscal year ending June 30, 1936, and annually thereafter the sum of $8,000,000 ^^ was authorized for allotment to assist States, counties, health districts, and other political sub- divisions of the States in establishing and maintaining adequate public-health services, including the training of personnel for State and local health work. The Surgeon General of the Public Health Service, with the ap- proval of the Secretary of the Treasury, is made responsible for the administration of these grants to States. After consultation with a conference of the State and Territorial health authorities, he will determine the rules and regulations for the allotment of the State grants. The amounts allotted will be based upon the popula- "The Social Security 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, Public, No. 440, 74th Cong., 2d sess. [H. R. 10464], approved Feb. 11, 1936, included an appropriation of $3,333,000 for the remainder of the fiscal year ending June 30. 1936. EXTENSION OF PUBLIC-HEALTH SEKVICES 339 tion, the special health problems, and the financial needs of the respective States. Prior to the beginning of each quarter of the fiscal year the Surgeon General will determine the amount to be paid the State for the quarter and will certify this amount to the Secretary of the Treasury. The grants after certification will be paid through the Division of Disbursement of the Treasury Department, prior to audit or settlement by the General Accounting Office. If any part of the grant to any State remains unpaid at the end of a fiscal year, the unexpended balance due a State will be held available for dis- bursement to the States in the next fiscal year in addition to the amount appropriated for the new period. The Federal funds granted to States under the provisions of title VI are to be expended solely for establishing and maintaining ade- quate public-health services and for the training of personnel for State and local health work. The Surgeon General proposes to use the funds for Federal grants to the States for the following purposes: (1) To strengthen service divisions of State health departments; (2) To assist in providing adequate facilities in State health departments especially for the promotion and supervision of full-time city, county, and district health organizations ; (3) To give, through the State health departments, direct aid toward the development and maintenance of adequate city, county, and district health organizations ; (4) To assist in developing trained personnel for positions to be established in the extension of city, county, and district health organizations; (5) To provide, through the State health departments, aid in the purchase of biological products and other drugs needed for individual immunization and other preventive activities among the poor. While it is considered unlikely that all of that part of the $8,000,- 000 allocated to aid of State and local health organizations which would be used for the development and maintenance of full-time county or district health units could be utilized satisfactorily in the organization of such units during the first year, it is proposed that the funds available for this purpose could be used to great advantage temporarily to aid the most needy of the 2,000 counties now with- out any health service whatever in providing at least a public-health nursing service until adequate full-time health service under full- time specially trained medical health officers can be established. It is further proposed that funds wdll be allotted to the States on the basis of budgets showing contributions from State and local sources for each project for each year, and that the maintenance of certain generally accepted standards of personnel qualifications and service will be required. 340 EXTEisrsiON of public-health sekvices Under the Surgeon General's regulations for the fiscal year 1936/" for the allotment of State grants on the basis of (1) population, (2) special health problems, and (3) financial needs, the following appor- tionment has been made : 57.5 percent of the total sum available for the year 1936 will be allotted on a per-capita basis; 22.5 percent of the total sum will be allotted to the several States on a basis of special health problems ; and 20 percent of the total sum for 1936 will be allotted to the States on a basis of financial need. Payments to aid existing State or local projects will not replace State or local appropriations already made for such projects but will supplement such appropriations. Payments to States from the fund to be allotted on the basis of population (1930 census) fall under two classifications: (1) One- half of the amount thus apportioned will be used to match (dollar for dollar) existing appropriations of public funds within the State for public-health w^ork. (2) One-half of the apportioned sum will be used to match (dollar for dollar) new appropriations or appro- priations made for the specific purpose of matching funds to become available under the Social Security Act, subject to modification by the Surgeon General where States already have made substantial appropriations. Payments to States from the fund to be allotted on the basis of special health problems fall under two classifications: (1) For special health needs, to include unusual exposure throughout the State to public-health hazards as in the case of certain types of epidemics or special industrial hazards, 10 percent of the entire appropriation for payments to the States Avill be allotted to be matched (dollar for dollar) by the States. (2) The remaining ap- portionment to be used for payments to the States on the basis of special health problems will be allotted, in accordance with the needs of the several States, for the training of personnel, establishment of suitable training centers, and payment of living stipends, tuition, and traveling expenses of trainees. The States will not be required to match these payments. Payments to the States from the sum apportioned to be allotted on the basis of financial need fall under two classifications: (1) One- fourth of the amount will be used for payments to the 51 State and Territorial health jurisdictions to which the act applies to assist in providing leadership and administrative guidance in the effective use of Federal aid. The States will not be required to match these pajj-ments. (2) Three-fourths of the allotment will constitute an equalization fund to be used in assisting States most in need of 10 "Regulations Governing: Allotments and raymonts to States from Funds Appro- priated Under the rrovisions of Section GOl, Social Security Act, for tlie Fiscal Year 1936", American Journal of PuMlc Health, vol. 26, no. 1, .January ]936, pp. 59-62. EXTENSION OF PUBLIC-HEALTH SERVICES 341 financial aid. These funds are to be used for local health services exclusively. State financial participation is not required. In addition to the amount authorized for aid to the States, the Social Security Act authorizes an appropriation for the extension of public-health investigations by the Public Health Service. An annual approjH'iation of $2,000,000 " was established for each fiscal year beginning with 1935-36, to be expended by the Public Health Service for investigation of disease and problems of sanitation and for the pay, allowances, and traveling expenses of commissioned officers and personnel of the Public Health Service engaged in such investigations or detailed to cooperate with the health authorities of any State. Other personnel of the Service may also be detailed to assist in this investigation or cooperation with the States, and the account from which they are paid may be reimbursed from the $2,000,000. The act provides, however, that a request for Federal cooperation with a State must come from the proper State authorities before personnel may be detailed from the Federal Service to assist a State in the extension of its public-health work. The Surgeon General of the Public Health Service proposes to use this annual appropriation of $2,000,000 for the following purposes : (1) The employment of personnel necessary to maintain supervision and guidance over the expenditure of funds annually allotted to the States, and in such manner to render assistance to them in the continuous and steady (development of State and local health services ; (2) The employment of professional, technical, and other personnel necessary to conduct the investigational work of the Public Health Service; (3) The extension and broadening of the investigative work of the Service in relation to investigations of diseases, sanitation, and matters related thereto. The major portion of the investigative work arises from three general sources : (1) From problems which are interstate in character and which are brought to the Service by State health officials, through the cooperative work of the Service with the States. (2) From problems which arise within the Service as a result of the respon- sibilities placed upon it by law, as, for example, the development of biologic standards in connection with the control of biologies. (3) From problems which the trends of public health indicate will be of national or international importance in both the fields of environmental sanita- tion and the control of disease. "The Social Security Act was not approved until Aug. 14, 19.35, and the supplemental appropriation bill, fiscal year 19.36 [H. R. 921.5], failed of passage 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 Feb. 11, 1936, included an appropriation of $375,000 for the remainder of the fiscal year ending June 30, 1936, for the purposes of section 603 of the Social Security Act, section 1 of the act of Aug. 14, 1912, and section 6 of the act of Aug. 23, 1912 (31 U. S. C, § 669). 342 EXTENSION OF PUBLIC-HEALTH SEKVICES It is evident, therefore, that to a large extent this investigative work of the Public Health Service is noncompetitive with the research work of imivei-sities or States. It should be clearly understood that the additional funds which are appropriated do not mean so much the development of new fields of investigational work in the Public Health Service as (1) the oppor- tunity for a more immediate and broader study in the fields of work which the Service is at present carrying on, and (2) undertaking problems of the greatest national importance which hitherto have been refused or delayed because of the lack of necessary funds. It would seem a corollary that the full benefits of the funds al- lotted to the several States for the promotion of public health cannot be achieved if the public-health problems with which these States and their local subdivisions have to deal are not studied coinci- dentally and the information given to the health authorities of the States.^^ In comiection with the administration of the funds authorized by the Social Security Act for aid to States and the extensive research activities to be carried on by the Public Health Service, it will be necessary to have additional medical, sanitary engineering, and other officers. The number of officers already in the Public Health Serv- ice who have the required training in public-health work and re- search methods will be entirely inadequate to meet the immediate demand for personnel of this type. The Public Health Service, therefore, must plan to obtain from outside sources the highly specialized, thoroughly trained, medical, engineering, and other officers of ability that will be needed. It will be impossible to at- tract personnel of this type to the Service unless they can be offered either larger salaries than they are now receiving or other induce- ments. The advantages of a career in the Public Health Service in a commissioned status will, it is believed, attract, at much lower entrance salaries, many individuals who otherwise would not be in- terested. This will enable the Public Health Service to obtain at once the desired personnel at much lower cost to the Federal Gov- ernment, probably as much as one-third less. Officers commissioned in the Service now would not for several jesLVs receive salaries equaling those being paid to individuals of comparable ability in many State and local health departments. The technical and cleri- cal personnel added to the Service under the authority of the Social Security Act will be drawn from the civil-service eligible lists. ^* statement of Josephine Roche, Hearings Before the Committee on Finance. Vvitrd States Senate, 74th Cong., 1st sess., on S. 1130 (U. S. Government Printing Office, Washington, D. C, 1935), pp. 3S6-3S7. Part VI THE NEED FOR FEDERAL SUPPORT OF SOCIAL SECURITY PROGRAMS Part VI was prepared by Joseph P. Harris Chapter XIX THE NEED FOR FEDERAL SUPPORT OF SOCIAL SECURITY PROGRAMS THE MAGNITUDE and diversity of need for economic security and the meagerness of protection offered in the United States against the hazards of dependency and destitution clearly point to the need for Federal participation in a program to ]>romote the general welfare of the people of the country. With the change from an agricultural to an industrial economy proceeding at different rates in the several States and even in various counties of the same State, public-welfare provisions have developed unevenly throughout the country. This results not so much from backwardness or lack of social consciousness in some sections as compared with others, but from the unevenness of distribution of the national wealth and in- come. An examination of Federal emergency relief expenditures by States gives conclusive evidence of the differences in the ability of States and sections of the country to provide for their destitute resi- dents. It is also evident from a study of revenues and expenditures that the costs of public welfare, even without the catastrophe of the depression, have rapidly grown bej^ond the financial capacity of State and local govermnents with their limited taxing powers. It is therefore of interest to analyze the trend of expenditures for public welfare and to examine the financial conditions of local and State government units from the standpoint of their tax revenues, their expenditures, and their indebtedness. EXPENDITURES FOR PUBLIC WELFARE Until a few years ago, public expenditures for ordinary welfare activities ^ in the United States were very small. Definite figures for the entire country are not available, but from estimates which 1 By "ordinary public-welfare expenditures" is meant expenditures for charitable insti- tutions, outdoor relief, welfare departments, and part of the health, hospital, and correc- tional expenditures which may be regarded as public welfare. It does not include expenditures for military veterans. 345 346 NEED FOR FEDERAL SUPPORT have been made by Prof. Clarence E. Heer, expenditures for ordinary welfare activities for all units of government were as follows : ^ Year Amount (thou- sands) Percent of national income Percent of total cost of govern- ment Year Amount (thou- sands) Percent of national income Percent of total cost of govern- ment 1903 $105, 860 182, 587 250,044 0.52 .55 .44 6.7 9.25 (') 1923 1928 $372, 291 535, 459 0.54 .64 3.63 1913 4.29 1918 ^ Any computed percentage would be meaningless owing to abnormal World War costs of government. It is particularly significant that the ratio of the expenditures for ordinary welfare purposes to the national income remained fairly constant during the first quarter of the century, amounting to approximately one-half of 1 percent. In comparison with the total cost of government, however, welfare expenditures showed a considerable decline, dropping from slightly under 7 percent in 1903 to about 4 percent in 1928. Since 1928 there has been a very great increase in public expendi- tures for welfare work. Most of this increase has come since the depression and in large measure is a result of the depression. As would be expected, such statistics as are available for recent years show an extraordinary increase. Many of our large cities met the problem of destitution in the early years of the depression by in- creasing the expenditures for charities enormousl3^ Municipal ex- penditures for charities in cities of 300,000 population and over in the United States increased from $22,000,000 in 1924 to $114,000,000 in 1932.^ Some of these cities, however, ha^-e curtailed their ex- penditures for welfare purposes very sharply since the Federal Gov- ernment entered the field of unemployment relief. As a specific illustration, Cincinnati spent $52,000 for charities in 1928, $900,000 in 1931, $600,000 in 1932. but only $55,000 in 1933. As a further illustration of the trend of increased local expendi- tures for social work, the city of Boston spent $4,768,000 for char- ities and hospitals in 1929, and spent approximately $16,000,000 in 1933 and in 1934. The expenditure for charities and corrections by the counties of the State of Wisconsin totaled $6,390,000 in 1924. By 1928 the figure had increased to $8,583,000 and by 1932 to $17,331,000, or nearly three times the expenditures of 1924. ISIilwaukee County had an expenditure of less than $3,000,000 in 1928 for social work, 2 Heer, Clarence E., University of North Carolina, Trends in Public Welfare Costs, 1931. (Unpublished manuscript.) ^ From the reports of the U. S. Department of Commerce, Bureau of the Census, Finan- cial StatisUca of Oities. NEED FOR FEDERAL SUPPORT 347 whereas it increased the amount to approximately $6,000,000 an- nually for 1931 and the following years. The counties of California spent $12,285,000 for charities in 1924, about $20,000,000 in 1928, and $32,000,000 in 1932. The counties of the State of Washington spent $1,250,000 for relief and charities in 1923 (not including hos- pitals or corrections), and approximately $4,000,000 in 1933. In 1932 the counties of Washington spent over $7,000,000 for public charities, but the total dropped off in the following year with the establishment of the State Emergency Eelief Administration.* These few figures show the rapid rise in public expenditures by local units of government for social work since 1920. They show also a tendency to decline within the last year or two, in part be- cause of Federal expenditures for unemployment relief, but also because of the financial difficulties in which many local governments have found themselves during the last several years. The largest present expenditure by far for public charity comes under the classification of unemployment relief, financed partly by the Federal Government and partly by the State and local govern- ments. The total expenditures in 1933 for this purpose, including local, State, and Federal Governments and including the expendi- tures for unemployment relief and civil-works administration, amounted to $967,000,000, while the total for 1934 was approximately $1,887,000,000. These figures, of course, are much larger than the total expenditures for ordinary welfare purposes and have caused considerable apprehension. Those who fear the consequences of such large expenditures have raised the question, "Where is the money coming from?" However, even including emergency relief, expenditures for wel- fare purposes in the United States are not large when compared with those of Great Britain. Great Britain, with a population of only about one-third of ours, spent for public charity and social insurance, including old-age pensions, unemployment insurance, and health insurance, a total of $1,369,000,000 in 1932.® If health insurance is omitted, the expenditure was approximately $1,200,000,000. A simi- lar expenditure in the United States in proportion to population would run about $4,000,000,000 annually. In 1933, while $25,000,000 was spent in the United States for old-age assistance, Great Britain spent nearly $400,000,000 for the aged through noncontributory and contributory pensions. In order to provide as adequately as Great Britain for the aged, we would need to spend annually about $1,200,000,000 for this purpose. ^ These figures have been compiled from the State and local financial reports in connec- tion with studies of the financial abilities of counties of Wisconsin and Washington. ^ Compiled from the Statlstioal Abstract for the United Kingdom, 193Ji, and the Abstract of Labour Statistics of the United Kingdom, 1919-33. 348 NEED FOR FEDERAL SUPPORT It is inevitable that future public-welfare expenditures in the United States will be considerably larger than they have been in the past. For a quarter of a century prior to the depression the public expenditures for social work amounted to only about one-half of 1 percent of our national income, but in the future we will un- doubtedly have to contribute a much larger share of our national income for this purpose. Even assuming the return of a high degree of prosperity, a large number of our population may never- theless be unemployed and destitute. The financing of public assistance in the future constitutes our largest problem of public finance. Only one aspect of this problem is discussed here, namely, the need for Federal aid. It is often stated that the care of the poor is a function of the local community, and that accordingly the Federal and State gov- ernments should provide financial support only when it becomes imperative. This theory of exclusive local responsibility for public- welfare activities does not fit into the economic and social structure of society today. The local community is no longer a self-contained unit. Our economic life overflows our political boundaries of town- ships, municipalities, counties, and States. Destitution today arises from causes with which the local community is powerless to deal, and creates financial obligations beyond the capacity of the local resources. The whole problem of financing public-welfare activities needs to be considered in the light of present conditions. THE FINANCIAL CONDITION OF LOCAL UNITS OF GOVERNMENT Public welfare has been historically a concern of the local govern- ment in the United States. The States have confined their charitable activities largely to the institutional care of special classes of mental and other defectives requiring specialized treatment which the local units were not able to provide. Within recent years State subsidies for special types of charity, such as old-age assistance, aid to de- pendent children, and unemployment relief have been provided. But public assistance has been regarded as a community rather than a State responsibility. In New England the municipality is en- trusted with the function of poor relief, but in many other parts of the country it is the function of the county or the township. In a few States the municipalities and the counties share the responsibility. Table 68 indicates the status of financial responsibility (as of Aug. 1, 1935) for old-age assistance, blind assistance, aid to de- pendent children in their own homes, and institutional or other NEED FOR FEDERAL SUPPORT 349 care of dependent children in the several States. The checks in the columns of the table signify that the State, county, and other local units, respectively, assume all or a part of the financial respon- sibility for the welfare activity listed. Table G9 gives in a different form the distribution of financial responsibility for public-assistance measures in States. Local political subdivisions of the State now Table 68. — Statutori/ placement of financial responsibilitu for various welfare aotivities in the several States, Aug. 1, 1935 State County Other local units State c 1 Ei to CZ 5 c o is S - c a ? ■a O o |o-g o H 03 1 O a o c o ?^ CD'S < CD ^ Sag mTU 'O goo Alabama X Arizona. - . . . _-_ X X X X X X X x" X X X X x" x" X X X X X X 1 X X Arkansas X X X X X X California X X X X X X X Colorado __ _. - ._- Connecticut X X X X Delaware 2 X Florida X X Georgia X X X X X X X Idaho - - X X X X x" X X X X X X X X Illinois X X X X X X X Indiana. -._.-- X Iowa -- . _ __. X Kansas. . ----_-.-_ Kentucky . . . _ X X Louisiana ---._.._. X X X X X X 3X X Maine X X X X X X X X X X X 3 X X X Maryland X X X Massachusetts x ' X X " x" X Michigan,. .... " x" X X X X X X X X "x" X X X X X X X X X X X X Minnesota X Mississippi Missouri . ... ... X X X X X X X X X X ) (in thousands) ,618,109 771, 19, 221, 20, 54, 9, 29, 31, 41, 3, 144, Total value of products (in thousands) $31, 358, 840 6, 604, 111, 919, 385, 439, 111, 211, 574, 342, 60, 1,490, Value added by manufac- ture (in thousands) $14, 610, 401 2, 393, 021 69, 424 491,313 68,669 171, 568 56,011 97, 669 135, 539 266, 753 36, 934 287,546 Cost of pay-roll taxes per dollar of value of product 1936, 1- percent tax $0. 0021 .0012 .0017 .0024 .0005 .0012 .0008 .0014 .0005 .0012 .0005 ,0010 1937, 3 percent tax $0. 0063 .0036 .0051 .0072 .0015 .0036 .0024 .0042 .0015 .0036 .0015 .0030 1949,6- percent tax $0. 0126 .0072 .0102 .0144 .0030 .0072 .0048 .0084 .0030 .0072 .0030 .0060 NEED FOR FEDERAL SUPPORT 377 Table 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 — Continued Industry Textile products Bags Wool rugs Women's clothing Men's clothing _ Cotton goods Dyeing and finishing Hats Knit goods Shirts SOk and rayon goods Forest products Furniture Mechanically processed wood Paper and allied products... Bags Boxes Paper Printing and publishing Book binding and blank books Printing: Books, music Periodicals and newspapers Chemicals and allied products Druggists' preparations Paints and varnishes Patent and proprietary remedies Rayon and allied products Soap Products of petroleum and coal. Gas (manufactured) Refining Rubber products Other than tires and shoes Tires and tubes. Leather and its manufactures Boots and shoes Leather, finished Stone, clay, and glass products Cement Glass Pottery Iron and steel and their products (not in- cluding machinery) Blast furnace products Bolts, etc.- Steam and hot-water apparatus RoUing-mUl and steel- work products Tin cans Nonferrous metals and their products Aluminum products Jewelry Machinery (not including transportation equipment) Agricultural implements Electrical machinery. Machine tools Radios and phonographs Textile machinery. Transportation equipment Aircraft and parts Motor-vehicle bodies and parts Motor vehicles Ship and boat building Miscellaneous industry. Cigars and cigarettes Earnings (wages plus salaries ') (in thousands) $1, 154 9 2o: 147, 105: 232, 71, 13: 148, 29, 82, 341 92, 11 219, 7, 47, 100, 582, 2o; 169, 332, 311 20, 36; 15, 43, 20, 201 68 111 125, 37 70, 254, 159, 48, 175, 18, 54 21; 612, 13 9 25: 304: 27, 212, 14 14; 695, 12 163: 18, 37 23 388, 13: 174: 129: 41 258, 51 Total value of products (in thousands) $4,811 92 71 846 445: 861 278, 40: 498, 119 290, 1, 127 297, 41 1, 172, 49, 223 560, 1, 733 56, 519, 1, 004, 2, 117, 146, 289, 138, 156, 200, 1,871 295 1, 378, 472, 131 299, 996 553 237: 191 43 2,463 213 32 69: 1, 143: 207: 1, 068 6I: 42: 2, 30, 553, 41 121 60 2, 058: 26, 761 1, 096; 92, 2, 312, 777 Value added by manufac- ture (in thousands) $2,351, 33 41 389, 230, 457, 136: 21 260: 60: 146: 618 155 23: 518: 20: 96: 249: 1, 355, 40, 378, 820 1, 149, 103 136 99: 112; 106, 585, 216, 314 26i: 73 159: 452, 267 59 128 31 1, 062, 29, 17 49, 451 70 427: 27: 25; 1, 280, 18 340, 30, 63 41 765, 18, 321 329; 61 679, 200, Cost of pay-roll taxes per dollar of value of product 1936, 1- percent tax .0025 .0010 .0029 .0017 .0024 .0027 .0026 .0033 .0030 .0024 .0028 .0030 .0031 .0029 .0019 .0014 .0021 .0018 .0034 .0036 .0033 .0033 .0014 .0014 .0008 .0011 .0028 .0010 .0009 .0023 .0008 .0027 .0028 .0024 .0025 .0029 .0021 .0029 .0021 .0029 .0048 .0025 .0006 .0030 .0037 .0027 .0013 .0020 .0024 .0034 .0034 .0042 .0030 .0045 .0031 .0040 .0019 .0052 .0023 .0012 .0045 .0011 .0007 1937, 3- percent tax .0075 .0030 .0087 .0051 .0072 .0081 .0078 .0099 .0090 .0072 .0084 .0090 .0093 .0087 .0057 .0042 .0063 .0054 .0102 .0108 .0099 .0099 .0042 .0042 .0024 .0033 .0084 .0030 .0027 .0069 .0024 .0081 .0084 .0072 .0075 .0087 .0063 .0087 .0063 .0087 .0144 .0075 .0018 .0090 .0111 .0081 .0039 .0060 .0072 .0102 .0102 .0126 .0090 .0135 .0093 .0120 .0057 .0156 .0069 .0036 .0135 .0033 .0021 1949, 6- percent tax .0150 .0060 .0174 .0102 .0144 .0162 .0156 .0198 .0180 .0144 .0168 .0180 .0186 .0174 .0114 .0084 .0126 .0108 .0204 .0216 .0198 .0198 .0084 .0084 .0048 .0066 .0168 .0060 .0054 .0138 .0048 .0162 .0168 .0144 .0150 .0174 .0126 .0174 .0126 .0174 .0288 .0150 .0036 .0180 .0222 .0162 .0078 .0120 .0144 .0204 .0204 .0252 .0180 .0270 .0186 .0240 .0114 .0312 .0138 .0072 .0270 .0066 .0042 ' Excluding officials. SODKCH.: U. S. Department of Commerce,- Bureau of the Census, Census of Manufactures: 933 J Summary by Industries (mimeographed release of Jan. 23, 192>5). 378 NEED FOR FEDERAL SUPPORT THE NEW FEDERAL RESPONSIBILITY For the first time in the history of the United States the Federal Government has utilized its taxing and appropriating powers for a Nation-wide, permanent attack against destitution and its causes. The Social Security Act has launched a program for the general welfare whereby the Federal Government will share with the States the financial responsibility for certain public-welfare services. The role of the Federal Government in the social security program is threefold : (1) Granting funds to States — (a) For aid to dependent individuals and administration of State public- assistance plans, (6) For the provision or extension of services for the alleviation or prevention of conditions leading to dependency, and (c) For the administrative expenses of unemployment compensation systems ; (2) Levying a tax throughout the United States with credit offset to remove the economic deterrent in the establishment of State unemployment compensation systems ; and (3) Establishing an old-age benefit system which will serve to reduce old- age dependency among wage earners who are employed in industry or commerce. The grants to States, which cover nine different types of welfare activities, in all instances require State initiative in the establishment of State plans or services which meet the approval of the Federal agency authorized to allot funds to the States. The States must take the initiative in plans for adequate State- wide measures to provide for the dependent aged, for the dependent blind, and for dependent children in families deprived of a parent's support. In these three types of public-assistance programs the Federal Government shares the financial responsibility for admin- istration of the State agencies and for money payments to the indi- vidual recipients of State aid. State plans for each of these three public-assistance measures must receive the approval of the Social Security Board before the Federal grants may be allotted. The conditions for approval of each State plan, which are summarized in appendix XII, require State-wide operation of the program, financial participation by the State, cen- tralization and efficient operation of State administration or super- vision, submission of reports required by the Social Security Board, and opportunity for fair hearing to persons whose claim for assist- ance is denied. The Social Security Act also specifies the limits of the citizenship and residence requirements and, in the case of old-age assistance, the age requiremeiitg which the State laws may impose. NEED FOR FEDERAL SUPPORT 379 The Federal Government in the Social Security Act also author- izes grants to States (1) to raise the standard and increase the extent of (a) maternal and child-health services and services for crippled children, (h) child- welfare services, (c) public-health services, (d) vocational rehabilitation; and (2) to pay the costs of administering State unemployment compensation systems. The conditions established by the act for grants to States for maternal and child-health services and services for crippled chil- dren— like those for public assistance — require the submission of State plans and State financial participation. The Children's Bureau, through the Secretary of Labor, will authorize the annual distribution of $20,000 to each State for maternal and child-health services and $20,000 for services and facilities for crippled children or for children suffering from conditions which lead to crippling. The remainder of each of the appropriations for these purposes authorized by the Social Security Act ($2,780,000 for maternal and child health, and $1,830,000 for crippled children) will be distributed to States on the basis of such factors as birth rates and need. In the Social Security Act, the appropriations for child welfare and for public health are not specifically conditioned on State finan- cial participation. The Children's Bureau and the Public Health Service are responsible for administering the $1,500,000 and $8,000,000, respectively, authorized as annual appropriations for these two purposes in cooperation with State authorities. (See appendix XII.) An earlier act "to provide for the promotion of vocational reha- bilitation of persons disabled in industry or otherwise and their return to civil employment", approved June 2, 1920, and as amended,^^ requires the submission of a State plan of vocational rehabilitation to the Federal agency for approval. Appendix XII summarizes the conditions required for Federal grants to the States with plans for vocational rehabilitation. The provisions of the Social Security Act merely supplement the Federal funds available to the States as grants to State vocational rehabilitation programs, bringing the total to $1,938,000 a year until June 30, 1937. After that date an annual appropriation of $1,938,000 is authorized for this purpose by the Social Security Act. The Office of Education of the Department of the Interior is the Federal agency authorized to administer the service. The grants to States for the administrative expenses of their unemployment compensation systems are administered by the Social Security Board which must approve State unemployment corapensa- 1^29 U. S. C, ch. 4, §§ 31, 32, 34, 35, 37, 39, 40. 380 NEED EOR FEDERAL, SUPPORT tion laws before the grants may be allotted. The conditions for approval are those which will guarantee that the State law in its framework and operation provides a genuine compensation system, efficiently administered on a sound financial basis. These grants, for which an annual appropriation of $49,000,000 is authorized after June 30, 1936, represent only one phase of Federal action to promote State protection of workers against the hazard of unemployment. Title IX, with its uniform tax upon employers throughout the coun- try, removes a competitive economic barrier which has hitherto pre- vented the enactment of State laws except in Wisconsin. State legis- lators have feared that the imposition of an unemployment com- pensation tax on employers would drive industry to States without such legislation. A credit offset allowed against 90 percent of the uniform Federal tax on the pay rolls of employers of eight or more will remove this deterrent. Employers in States without unemploy- ment compensation laws will not escape the tax burden imposed in progressive States which protect their workers against the risk of unemployment. The program widest in scope and affecting the largest number of individuals is that incorporated in the section establishing an old- age benefit system. While the old-age assistance grants to States are designed to alleviate the destitution of individuals who are old now and are without sufficient means for self-support, the old-age benefit system looks forward toward prevention of old-age depend- ency among individuals who have not yet reached old age. All workers in industry and commerce, regardless of the size of the establishment by which they are employed, will, after December 31, 1936, accumulate credit on their wages toward retirement incomes. Of all the programs it will be the slowest to get under way, since no annuities will be paid to workers before January 1, 1942. But once annuities become payable, more individuals will benefit from this section of the act than from any other part of the program. The initial coverage of the system is estimated at 25 million workers. A word needs to be said about the method of administration which will be used in the old-age benefit system. It is the only part of the program which is not based on Federal-State cooperation, the prin- ciple which underlies all other sections of the act. Instead the Federal Government assumes the entire responsibility for its ad- ministration. Throughout their working lives, individuals employed in industry and commerce will gradually accumulate wages which will entitle them to old-age benefits payable by the Federal Goverimient when they reach the retirement age. Wliile the States do not share in the NEED FOR FEDERAL SUPPORT 381 responsibility of administering the old-age benefit system, it is ex- pected that their burden of providing for destitute aged residents will gradually be lightened. The old-age benefit system of the Social Security Act is perhaps the most significant and far-reaching of the entire program, for it touches at many points upon other phases of economic security. Permitted to retire at 65 years of age from gainful occupations with the income given them on the basis of their past employment, super- annuated workers will leave open many employment opportunities for younger persons, thus reducing the volume of unemployment. Younger persons will in large measure be freed from the cost of supporting their aged parents and relatives and, as a result, will be able to provide more adequately for their own children. Moreover, public and private welfare agencies, when the drain of assisting the needy aged is lessened, can concentrate their efforts to a greater de- gree upon eradicating the causes of economic insecurity rather than alleviating its effects. Under the Social Security Act, $49,750,000 was authorized as an appropriation for old-age assistance for the fiscal year 1935-36, an amount constituting nearly half of the total Federal appropriation authorized for the entire program. (See table 84.) Approximately one-third of the total appropriations authorized in the act for the first year were for measures designed to improve the physical and economic welfare of children. Approximately one- twelfth was to be allocated to vocational rehabilitation and aid to the blind and the remaining one-twelfth to the furtherance of public- health services in the States. When, through the operation of the old-age benefit system, old-age dependency assumes smaller propor- tions in the sum total of economic distress a far larger proportion of the Federal and State expenditures for the general welfare may be diverted to remedial rather than palliative measures. 78470—37 26 APPENDIXES Appendix I PKOCEDUEES FOLLOWED IN ESTIMATING UNEMPLOY- MENT COMPENSATION COVERAGE IN THE UNITED STATES, 1922-33 The coverage, or the compensable labor force, of a plan for unemployment compensation might be deiined as that portion of the persons able and willing to work (employables) who would be affected by the operation of the unemploy- ment compensation program. This group would include the employed for whom contributions are made to the compensation fund as well as the unemployed who draw benefits from it. The size of the group would necessarily be influenced by limitations included in the provisions of the program. In arriving at the esti- mates presented in the tables which supplement this discussion, only two general limitations have been imposed, since they constitute the only ones that are meas- urable. The first of these, which will be referred to hereafter as an "occupa- tional" exclusion, provides that all self-employed workers and workers in certain employments are not eligible to participate in the plan ; and the second, termed hereafter a "size-of-firm" exclusion, removes from participation in the program employees attached to firms with less than eight employees in at least 20 weeks in the year. The assumed occupational exclusion eliminates all proprietors, owners, independent operators, and other self-employed, and the following em- ployments : agriculture; domestic service in private homes ; ofiicers and crews of vessels on the navigable waters of the United States; persons working for a son, daughter, or spouse, and children under 21 in the employ of a father or mother ; employees of the United States Government or of its instrumentalities, of a State government or of its political subdivisions or instrumentalities ; employees of nonprofit organizations operated exclusively for religious, charitable, scien- tific, educational, or literary purposes, or for the prevention of cruelty to children or animals. These limitations could, in any plan, be modified and other limitations added. For example, workers 65 years and over might be excluded ; workers on common carriers engaged in interstate commerce might be excluded ; or all employees might be included regardless of occupational or size-of-firm factors. Such modifications in exclusions would, however, change the estimates of coverage. The most abundant source of data for estimating the coverage of an unem- ployment compensation plan limited by the exclusions stated above is the fifteenth census of the United States, taken in April 1930. The general report on occupations, which includes a tabulation of gainful workers distributed by industry, occupation, and age, was especially valuable since as a rule it made possible the segregation of most occupational exclusions in absolute numbers. This general report was also the source used as a base for Mr. Nathan's esti- mates of employment and unemployment so that fortunately these estimates could be utilized in the coverage calculations without additional adjustment which would otherwise have been necessary. The year 1930 was the base year for all the coverage calculations as well as for the employment and unemployment estimates. 385 386 APPENDIXES TOTAL COMPENSABLE LABOR FORCE, APRIL 1930 The first step in the procedure for estimating coverage was to eliminate from the gainful workers those made ineligible by the occupational exclusion. For this purpose it was possible to use the census enumeration in all cases except those in which only a portion of the number in an occupational group, or only a part of an industry, was excluded. The nature of these exclusions and sources of data are indicated in table I-l, and the amount of the reduc- tions by industries is shown in table 1-2. It may be seen, for example, from table I-l, that 33 percent of manicurists and barbers, 90 percent of oystermen and fishermen, and all those in the independent hand trades are excluded as self-employed workers. It was estimated that 10 percent of the employees in electric-power plants and 5 percent of the employees in gas works were attached to municipally owned concerns. Consequently, these employees were excluded as public servants. The aggregate of all the occupational exclusions amounts to about 20,134,000, or 41 percent of the gainful-worker group. Variation from industry to industry in the proportion of gainful workers excluded may be seen in table 1-2. Table I-l. — Occupations excluded from the unemployment compensation plan, United States, April 1930 Industry Occupations excluded Agriculture - Forestry and fishing --. Coal mines... Other mines and quarries Oil and gas wells — Manufacturing Gas works Electric power plants Building industry Independent hand trade Construction and maintenance of roads.-. Garages, greasing, etc . Postal service Steam railroads Street railroads Telephone and telegraph Other transportation and communication Truck, transfer, and cab Water transportation Trade (wholesale and retail) Banking and brokerage Insurance — Real estate -- Pubhc service -.. Pofessional service Recreation and amusement Hotels, boarding houses, and restaurants. Domestic and personal service.. Laundries Cleaning, dyeing, and pressing Industry not specified... All. All owners, operators, proprietors, forest rangers, foresters (as public servants), and 90 percent of oystermen and fishermen (as self-employed) . All owners, operators, proprietors. Do. Do. All owners, operators, proprietors, and all fruit and vege- table canning industries. All owners, operators, and proprietors plus 5 percent of all gainful workers, as public servants (public-owned plants) . All owners, operators, and proprietors plus 10 percent of all gainful workers, as public servants (public-owned plants) . All owners, operators, proprietors. All gainful workers as self-employed. All owners and operators plus 40 percent of the residual group as public servants. All owners, operators, proprietors. All gainful workers as public servants. All owners, operators, proprietors. Do. Do. Do. Do. All except 50 percent of boatmen, canal men, and lock- keepers, and 50 percent of longshoremen and stevedores. All owners, operators, proprietors. Do. All owners, operators, proprietors, and agents (as self- employed) . Do. All professional pursuits operated for religious, charitable, scientific, literary, educational purposes, and for the prevention of cruelty to children or animals. Do. All owners, operators, proprietors, and self-employed in professional pursuits. All owners, operators, proprietors. 33 percent of barbers, manicurists, etc. (as self-employed), and all domestic servants in private homes. All owners, operators, proprietors. Do. Do. Source : U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930, "General Report on Occupations," vol. V (U. S. Government Printing Office, Washington, D. C, 1933), ch. 7, table 2. UNEMPLOYMENT COMPENSATION COVERAGE 387 The next step in estimating coverage was to eliminate from the groups remaining after the occupational exclusions those employees made ineligible by attachment to small establishments. For the purpose of this exclusion, the only sources of available data are the 1929 United States industrial censuses of mines and quarries, of manufacturing, and of the distributive industries. Failure of even these censuses to show the exact analysis desired made it neces- sary to use different methods for different industries in order to find the percentage of workers to be excluded. A description of each procedure follows. Table 1-2. — Occupational exclusions of gainful workers from the unemploy- ment compensation plan hy industries, United States, April 1930 Industry Total Agriculture Forestry and fishing __ Coal mines Other mines and quarries Oil and gas wells Manufacturing Manufacturing Gas works Electric power plants Building industry Independent hand trades Construction and maintenance of roads Garages, greasing, etc Postal service Steam railroads Street railroads Telephones and telegraph Other transportation and communication Truck, transfer, and cab Water transportation Other transportation and communication Trade (wholesale and retail) Banking, brokerage, real estate, insurance Banking and brokerage Real estate Insurance Public service... Professional service Recreation and amusements Hotels, restaurants, and boarding houses Domestic and personal service.. Laundries, cleaning, dyeing Laundries Cleaning, dyeing, pressing Industry not specified Total gainful workers (A)i 48, 829, 920 10, 483, 917 268, 992 691, 288 266, 643 198, 446 406, 075 001, 890 114,930 289, 255 574, 968 360, 329 454, 823 423, 843 283, 936 583, 067 195, 408 578, 602 918, 734 483, 148 299, 804 135, 782 109, 790 420, 274 624, 783 288, 192 507, 299 049, 576 965, 742 443, 205 357, 381 037, 568 419, 624 310, 379 109, 245 337, 689 Occupational exclu- sion Number (B)i 20, 133, 669 10, 483, 917 79, 659 2,863 3,436 9,556 295, 869 261, 008 5,819 29, 042 153, 746 360, 329 190, 369 50, 718 283, 936 678 20 324 292, 742 30, 752 260, 005 1,985 1, 835, 600 471, 350 221, 504 117,767 132, 079 1, 049, 576 2,272,115 212, 561 366, 625 1, 685, 324 31,715 15, 440 16, 275 641 Percent (C) 41. 232 100. 000 29. 614 .414 1.289 4.815 2.594 2.372 5.063 10. 040 5.971 100. 000 41.856 11.966 100. 000 .043 .010 .056 31. 864 6.365 86. 725 1.462 30. 044 33. 187 35. 453 40. 864 26. 036 100. 000 76.612 47. 960 27. 010 55. 483 7.558 4.977 14. 898 .048 Net in- cluded after occu- pational elimina- tion (D) 28, 696, 251 189, 333 688, 425 263, 207 188, 890 11,110,206 10, 740, 882 109,111 260, 213 2, 421, 222 264, 454 373, 125 1, 582, 389 195, 388 578, 278 625, 992 452, 396 39, 799 133, 797 4, 274, 190 948, 924 403, 279 170, 425 375, 220 693, 627 230, 644 990, 756 1,352,244 387, 909 294, 939 92, 970 1, 337, 048 ■^U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930, "General Report on Occupations", vol. V (U. S. Government Printing Office, Washington, D. C, 1933), ch. 7, table 2. Mines and Quarries. — The data available in the census of mines and quarries are limited in two ways : The scope of enumeration excludes establishments having less than $5,000 annual sales volume, thus omitting the number of wage earners working in many of the small establishments ; and the only tabulation on the size of firm includes wage earners only, thus excluding salaried workers, the majority of whom are employed by the larger establishments. Since these limitations have opposite influences, and because of the minuteness of the per- centages of exclusion, it was assumed that they were offsetting, and, therefore, the distribution found in the census was not adjusted in any way. Since no distribution was given by the census for firms with eight or more employees, it 388 APPENDIXES was necessary to interpolate on a smoothed curve of size-of-firm distributions. Tables 1-3 and I^ summarize the distributions found in the census of mines and quarries, and indicate that 33 percent of the establishments and about 1 percent of the workers in the industry are excluded from coverage. Manufacturing. — The data reported on the distribution of employees by size of firm in the census of manufactures is subject to the same limitations as in the census of mines and quarries and was consequently treated in the same manner. Table 1-5 summarizes the estimated distribution, which shows 112,863 or 53 percent of the establishments and 362,388 or 4 percent of the employees excluded from coverage. Table 1-3. — Number and percent of coal-mining establishments and wage earners, by number of ivage earners per establishment, United States, 1929 Number of wage earners per establishment Total 1-7 » 8 and over ' Establishments Number Percent 5,174 1,707 3,467 100. 00 33.00 67.00 "Wage earners Number Percent 601, 533 6,015 595, 518 100.00 1.00 99.00 ' Distribution between 1-7 and 8 and over obtained by interpolation on a smoothed curve of census size-of-flrm distribution. Source : U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States; Mines and Quarries: 1929 (U. S. Government Printing OflSce, Washington, D. C, 1933), table 18, p. 23. Table 1-4. — Number and percent of mining and quarrying establishments and wage earners, by number of ivage earners per establishment, United States, 1929 Number of wage earners per establishment Establishments Wage earners Number Percent Number Percent Total* - 10, 068 100. 00 806, 418 100. 00 1-7 J _. 3,322 6,746 33.00 67.00 12, 096 794, 322 1.50 98.50 » Exclusive of data for 36 enterprises employing no wage earners, which operated 36 plants. » Distribution between 1-7 and 8 and over obtained by interpolation on a smoothed curve of census size-of-firm distribution. Sodbcb: U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States; Mines and Quarries: 1929, op. cit., table 18, p. 23. Distribution Industries. — The censuses of wholesale and of retail distribution show no tabulations of the distribution of employees by size of establishment. However, both report the size of establishment by volume of sales. It was therefore necessary to assume a relationship between the volume of sales and the number of employees, and to make estimates on this basis. Wholesale distribution. — The following distributions were used from the census of wholesale distribution: (1) Wholesale trade. — A summary of the number of employees and the volume of sales by type of establishment includes all establishments and employees In the industry. (2) Wholesalers only. — A distribution of 79,840 establishments, employees attached, and volume of sales, by type of establishment. (3) Wholesale merchants. — A distribution of 76,590 establishments by type of estab- lishment and volume of sales. This group Is included in the group "Wholesalers only." UNEMPLOYMENT COMPENSATION COVERAGE 389 "Wholesale merchants" is the only group classified by volume of .sales and this, therefore, was used as the basic distribution. This classification included about 96 percent of "wholesalers only" establishments. The distribution, how- ever, did not include an enumeration of the number of employees attached to the establishments. It was necessary, therefore, to estimate the number of employees in the "wholesale merchants" group on the basis of the number of employees enumerated under the classification of "wholesalers only" before distributing them according to the volume of sales per establishment in the "wholesale merchants" group. This was done by reducing the number of employees in proportion to the difference between total sales. The resulting number of employees was distributed in proportion to sales in each sales classifi- cation (by type of establishment) and the number thus placed in each classifica- tion was then divided by the number of establishments within that classification to find the average number of employees per store. The establishments were then arrayed according to these averages and the results summarized. How- Table 1-5. — Number and percent of ma/rmfacturing establisTiments and wage earners, by number of wage earners per establishment, United States, 1920 Number of wage earners per establishment Establishments ' Wage earners Number Percent Number Percent Total : 210,959 100. 00 8, 838, 743 100. 00 1-72 - 8 and over 2 . 112,863 98, 096 53.50 46.50 362, 388 8, 476, 355 4.10 95.90 > Establishments with less than $5,000 sales in 1929 not included. « Distribution between 1-7 and 8 and over obtained by interpolation on a smoothed curve of census size-of-flrm distribution. SouECB : U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States; Manufactures: 1929, vol. I (U. S. Government Printing OfQce, Washington, D. C, 1933), ch. 4, table 1, p. 62. ever, the "wholesale merchants" group included only 45 percent of whole- sale-trade employees. This distribution was adjusted to include the employees and establishments in the entire "wholesalers only" group, as shown in table 1-6. To make the distribution more inclusive, those wholesale-trade groups with characteristics somewhat similar to those contained in the "wholesale merchants" group were considered to have the same percentage distribution of employees and establishments as the type to which they were compared. This process increased the size of the distribution to include about 75 percent of all establishments. To the remaining 25 percent, i. e., the establishments for which no comparison could be made, arbitrary estimates were assigned. They are chiefiy such types as chain-store warehouses, district-sales houses, general-sales houses, etc., and it was assumed that a large proportion of the employees would be covered by an insurance plan. Consequently, in most cases the entire enumeration was included in the compensable part of the distribu- tion. However, for a few types such as bulk-tank stations, brokers, commis- sion merchants, resident buyers, etc., which have no great significance in terms of the relative number of employees represented, smaller percentages of inclusion were applied. Wholesale manufacturers were entirely excluded from the estimates since they are covered in the 1929 census of manufactures. The summary of the results is shown in table 1-7, which shows 117,703, or approxi- mately 70 percent of the establishments, and 263,862, or only about 17 percent of the employees excluded. 390 APPENDIXES Retail Distrihution. — The 1930 census of retail distribution contained the fol- lowing data that were usable in obtaining desired estimates : The total number of employees, the number of owners and firm members, total volume of sales, number of stores classified by annual net volume of sales, and number of stores classified by type of operation. Again, assuming that the average sale per worker remained constant, workers were distributed according to volume of sales. 0\^ti- Tablb 1-6. — Estimated distribution of "wholesalers only" estahlishments and employees, hy average numder of emplo'yees per estaWsJiment, United States, 1929^ Distribution of establishments Distribution of employees Average number of employees per establishment Number Percent Cumula- tive percent Number Percent Cumula- tive percent Total 79,840 100. 00 912, 143 100.00 0 to 0.9 16, 795 10, 144 5,612 8,755 2,473 2,194 9,508 2,037 8,944 5, 331 3,414 3,406 1,227 21.05 12.71 7.03 10.97 3.10 2.75 11.92 2.55 11.21 6.68 4.28 4.27 1.48 21. 05 33.76 40.79 51. 76 54.86 57.61 69.53 72.08 83.29 89.97 94.25 98.52 100. 00 7,763 15, 396 14, 330 30, 155 10, 982 13, 133 61, 539 18, 321 106, 252 104, 584 115, 537 255, 474 158, 777 0.85 1.69 1.57 3.31 1.20 1.43 6.75 2.01 11.65 11.47 12.67 28.00 17.40 0.85 1 to 1.9- 2.54 2to 2.9 4.11 3 to 3.9 7.42 4to4.9 - 8.62 5 to 5.9 10.05 6 to 7.9 - - 16.80 8 to 9.9 18.81 10 to 14.9 30.46 15 to 24.9 41.93 25 to 49.9 - -- 54.60 50 to 99.9 - 82.60 100. 00 ' See p. 389 for method used in compilation of this table. Source: U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: lf>30 ; Distribution, Vol. II, "Wholesale Distribution" (U. S. Government Printing Office, Washington, D. C, 1933), table 4, p. 81. Table 1-1. -^Estimated distribution of estaWishments and emploi/ces in tcliole- sale trade, by average number of employees per establishment, United States, 1929 Average number of employees per establishment Establishments Employees Number Percent Number Percent Total- I 169, 285 100. 00 1, 569, 130 100. 00 0 to 7 117, 704 51,581 69.53 30.47 263, 614 1,305,516 16. SO 8 and over S3. 20 ' Wholesale manufacturers employing 35,912 and numbering 417 establishments have been excluded from the distribution since they are included in the census of manufactures. Sources: U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930: Distribution, vol. II, "Wholesale Distribution," op. cit., table 4, p. 81 ; see table 1-6 above. ers and firm members were then deducted. It was assumed that stores having a sales volume of less than $10,000 were operated solely by owners or firm members. The stores with sales volume from $10,000 to $75,000 were assumed to have one owner or firm member per store actively engaged in sales work. Results of this procedure are shown in table 1-8. Since many chain stores presumably fall below the $75,000 annual sales-volume classification, it was deemed necessary to make an adjustment to include stores belonging to chain organizations. It was estimated that 70 percent of all chain UNEMPLOYMENT COMPENSATION COVERAGE 391 stores appear in the group with less than $75,000 annual sales, and that this group employed 50 percent of the employees in the chain-store type of retail out- let. Therefore, these proportions were shifted for the purposes of coverage into the higher group with more than $75,000 annual sales. The adjusted summary distribution is given in table 1-9, which shows 1,466,000, or about 95 percent, of the establishments as excluded as against 1,681,029, or 42.5 percent, of the em- ployees. Graphic interpolation was used to determine more accurately the vol- ume-of-sales size of the stores having eight or more employees. Table 1-8. — Estimated distribution of retail stoi'es, employees, and average number of employees per store, iy volume of sales per store, United States, 1929^ Distribution of stores Distribution of employees Average number of em- ployees per store Annual volume of sales per store Number Percent Cumu- lative percent Number Percent Cumu- lative percent Total 1, 543, 158 100.0 2 3, 955, 362 100.0 Less than $5,000 419, 378 254, 308 312, 865 173, 458 176, 767 92, 049 36, 820 49, 497 12, 966 8,467 4,524 2.059 27.2 16.5 20.3 11.2 11.5 6.0 2.4 3.2 .8 .6 .3 .1 27.2 43.7 64.0 75.2 86.6 92.6 95.0 98.2 99.0 99.6 99.9 100.0 $5,000 to $9,999 $10,000 to $19,999. 184, 400 277, 022 524, 284 454, 147 333, 449 661, 947 307, 027 314,018 302, 883 596, 185 4.7 7.0 13.3 11.5 8.4 16.7 7.8 7.9 7.7 15.0 4.7 11.7 25.0 36.5 44.9 61.6 69.4 77.3 85.0 100.0 0.59 $20,000 to $29,999 1.60 $30,000 to $49,999 2.97 $50,000 to $74,999 4.93 $75,000 to $99,999 9.06 $100,000 to $199,999 13.36 $200,000 to $299,999 23.68 $300,000 to $499,999 37.09 $500,000 to $999,999 66.95 $1,000,000 and over _ . . 289. 55 1 See p. 390 for method used in compilation of this table. 2 Adjustd for part-time workers and chain-store managers. SODRCE : U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930; Distribution, vol. I, "Retail Distribution," pt. I (U. S. Government Printing Office, Washington, D. C, 1933), table 4-A, p. 59. Table 1-9. — Estimated distrihution of estaNishments and employees in retail trade, hy number of employees per average establishment, United States, 1929 Average number of employees per establishment Establishments Employees Number Percent Number Percent Total.. 1, 543, 158 100. 00 3, 955, 362 100. 00 0 to 7 1, 466, 000 77, 158 95.00 5.00 1, 681, 029 2, 274, 333 42.50 8 and over 57.50 Source: Table 1-8, above. Other Industries. — The foregoing discussion outlines the procedures for the industries for which the size of establishment was available. These industries, however, included only 60 percent of the total compensable labor force. To the remaining 40 percent a percentage exclusion for each industry on the size- of-firm basis was arbitrarily determined and applied. Assistance was obtained from specialists in the various industries in determining each of these per- centages whenever possible. It was assumed that the size-of-firm exclusion would not affect employment in gas works, electric power plants, steam rail- roads, street railroads, telephone and telegraph companies, and water trans- 392 APPENDIXES portation. The estimates of exclusions in the other industries are shown in the tabulation below: Estimated percent of workers attached to establishments with seven or less employees, United States, 1922-33 [Industries for which no data were available] Percent of workers excluded Forestry and fishing 75 Oil and gas wells 15 Building 30 Construction and maintenance of roads 10 Garages 85 Truck, transfer, and cab 60 Other transportation and communication 40 Banking and brokerage 25 Real estate 30 Insurance 10 Professional service 90 Recreation and amusement 50 Hotels, restaurants, and boarding houses 40 Domestic and personal service 75 Laundries 25 Cleaning, dyeing, and pressing 30 Industry not specified 25 The size-of-firm reduction in all industries amounts to about 6,416,000 or 22 percent of the total number of gainful workers. The final number of gainful workers, approximately 22,280,000 in April 1930, eligible for participation in the unemployment compensation plan, is displayed by industry in table I-IO. It will be seen that industries in which the higher incidence of unemployment occurs, such as manufacturing, transportation, and mining, have a relatively high coverage; THE EMPLOYMENT STATUS OF THE COMPENSABLE LABOR FORCE, APRIL 1930 Having derived an estimate of the eligible compensable labor force in April 1930, it was next necessary to determine the employment status of the com- pensable labor force in order to discover how many persons would be covered by the system and how many would be beneficiaries of the fund. In determining the exclusions from total employment in each industry it was necessary to estimate the employment in the industries by occupations since the incidence of unemployment is decidedly less as the skill of the occu- pation becomes more significant. Since employment statistics by socio-economic groupings ^ were not available for April 1930, the number unemployed had to be estimated in each grouping and deducted from the gainful workers in each cor- responding grouping in order to obtain the number employed therein. Obtain- ing unemployment by industry and occupation was the chief difficulty in such a procedure. However, in volume II of the "General Report on Unemploy- ment," Fifteenth Census of the United States: 1930, an occupational enumeration is made of gainful workers and of the imemployed in classes A and B. This is summarized by socio-economic groups in table I-ll. 1 These are summary occupational groupings and include the managerial, professional, clerical, skilled, and unskilled groups. UNEMPLOYMENT COMPENSATION COVERAGE 393 Since classes A and B combined constitute over 90 percent of the enumer- ated unemployed, it was assumed that the occupational distribution of the unemployed in classes A and B would hold for the total estimated unemployed. Accordingly, these ratios were applied to "gainful workers" in the various occu- pational groups in each industry and the resulting estimates were adjusted so that their summation would equal the estimated number of unemployed in each industry in April 1930. By deducting these adjusted estimates from the num- ber of gainful workers, the number of employed in each industry by occupa- tional groupings was obtained. Table I-IO. — "8ise-of-firm" exclusion of gainful workers by industries, United States, April 1930 Industry Total-. Agriculture Forestry and fishing Coalmines Other mines and quarries Oil and gas wells Manufacturing _._ Manufacturing Gas works , Electric power plants , Building industry Independent hand trades Construction and maintenance of roads Garages, greasing, etc Postal service Steam railroads Street railroads Telephone and telegraph Other transportation and communication Truck, transfer, and cab Water transportation Other transportation and communication Trade (wholesale and retail) Banking, brokerage, real estate, and insurance Banking and brokerage Real estate Insurance Public service Professional service Recreation and amusement Hotels, restaurants, and boarding houses Domestic and personal service Laundries, cleaning, dyeing, and pressing Laundries Cleaninp, dyeing; pressing Industry not specified Net in- eluded af- ter occupa- tional elim- ination 28, 696, 251 0 189, 333 688, 425 263, 207 188, 890 11,110,206 10, 740, 882 109,111 260, 213 2, 421, 222 0 264, 454 373,125 0 1, 582. 289 195, 388 578. 278 625, 992 452, 396 39, 799 133, 797 4, 274, 190 948, 924 403, 279 170, 425 375. 220 0 693, 627 230, 644 990, 756 1, 352, 244 387, 909 294, 939 92, 970 1, 337, 048 Size-of-firm exclusion Number Percent 6, 416, 138 0 142, 000 6,884 3,948 28. 334 440, 376 440, 376 0 0 726, 367 26, 445 317, 156 0 0 0 0 324, 957 271, 438 0 53, 519 1, 624, 192 189, 470 100, 820 51, 128 37, 522 0 624, 264 115, 372 396, 302 1, 014, 183 101, 626 73, 735 27, 891 334, 262 75. 000 1. 000 1.500 15. 000 4.000 4.100 0.000 0.000 30. 000 0.000 10. 000 85. 000 0.000 0.000 0.000 51. 900 60.000 0.000 40. 000 38. 000 20. 000 25. 000 30. 000 10. 000 90. 000 50. 000 40. 000 75. 000 26. 200 25. 000 30. 000 25. 000 Compen- sable labor force 22,280,113 0 47, 333 681.541 259, 259 160, 556 10,669,830 10, 300, 506 109, 111 260, 213 1, 694, 855 0 238, 009 55, 969 0 1, 582, 389 195, 388 578, 278 301, 035 180, 958 39, 799 80, 278 2. 649, 998 759, 454 302, 459 119,297 337, 698 0 69, 363 115,272 594, 454 338, 061 286, 283 221,204 65, 079 1, 002, 786 Percent of indus- try covered 45. 628 0.000 17. 596 98. 590 97. 231 80. 907 93. 545 93. 625 94. 937 89. 960 65. 820 0.000 52. 330 13. 205 0.000 99. 957 99. 990 99. 944 32. 766 37. 454 13. 275 59. 123 43. 373 53. 472 48. 410 41. 395 66. 568 0.000 2.339 26. 009 43. 794 11. 129 68. 224 71. 269 69. 572 74. 964 Source: Tables and text, pp. 386-392. The next step was to reduce these estimates of employed gainful workers by the occupational and size-of-firm exclusions. It was assumed that the percent- age of employed workers in each occupational grouping within each industry who are barred from eligibility to the plan by the occupational exclusion would be the same as was the percentage of gainful workers eliminated by that exclusion from the corresponding occupational grouping within the industry; these percentages were accordingly applied to employed workers. After the occupational reduction had been made, the same percentage ex- clusions were applied to the employed in industrial groups as were applied to gainful workers for the size-of-firm exclusion. The employed coverage, resulting from the two reductions, is shown by type of exclusion in table 1-12, and in somewhat different form in table 1-13. It 394 APPENDIXES may be seen that the percentage of the employed workers within each industry included in the compensation plan differs slightly from the percentage of total gainful workers covered within each corresponding industry (table I-IO). These differences are caused by the higher incidence of unemployment in the lower socio-economic groups, especially among the skilled and unskilled groups, where unemployment is much greater than in the managerial group. Table I-ll.^ — Distribution of total gainful workers and unemployed workers by socio-economic groups in the United States, April 1930 Socio-economic group Gainful workers Unemployed Percent « 4, 760, 647 3, 253, 884 7, 868, 844 6, 129, 466 2 19, 145, 315 106, 946 90, 506 325, 263 689, 784 1, 976, 248 2.24 2.78 4.13 Skilled 11.25 Unskilled 10.32 Total -- 41, 158, 116 3, 187, 647 7.75 iFarm owners omitted (6,012,012). -All unpaid family workers in agriculture omitted (1,659,792). Source : U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930; "Unemployment," vol. II (U. S. Government Printing Office, Washington, D. C, 1932), ch. 1, table 3, p. 13. The procedure thus far may be summarized as follows : First, the total com- pensable labor force was obtained by excluding agricultural workers, domestics, family workers, sailors, public servants, employees of nonprofit organizations, and employees working in small establishments ; next, the number of employed who would contribute to the operation of the plan was estimated. The number of unemployed covered in the plan remains to be obtained. This was estimated as the difference between the total compensable labor force and the covered employed, and amounted to approximately 3,177,000, or about 72 percent of the total number unemployed ; it is shown by industries in table 1-14. All three are compared in table 1-15. It should be remembered that these estimates of employed, unemployed, and total compensable labor force are all influenced by restrictions specifically defin- ing coverage. Were these restrictions changed, coverage would vary accordingly. The procedure outlined herein, however, is illustrative of the methods that may be utilized in estimating the actual coverage finally determined upon. EMPLOYMENT STATUS OF THE COMPENSABLE LABOR FORCE, 1922-33 The foregoing discussion applies to April 1930 only and merely serves as a starting point for the determination of the compensable labor force and its employment status during the whole period 1922-33. On tbe basis of indexes of gainful workers and employment it was possible to extend the estimates for April 1930 forward and backward. Data available for this procedure were much more meager for the years 1923-28 than for the years 1929-34; consequently these two segments of the period were treated separately. However, the procedure in general was the same and included the following steps : First, total coverage was determined on the basis of changes in the number of gainful workers ; second, employed cover- age was extended by means of employment indexes ; and. finally, by the difference between total and employed coverage, unemployed coverage was found. 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CO 05 Oi «D ^ !>. ^ rt M CO CO(N C-1 -^ 3or— cDOicoiooiccr^coTfco ^toocD(^»ast^"^'^'^^'=^ccco c^ CO <: ^ «■. ,« ^ « C^COO5CDCOOit*^"^C^^'-'0CO — H^ coir- ««^rvi^ -l-^00O^"3OC*CO^(NCD00CO P4PH0QCQ eg,, >^si fQ.9 M Appendix II PROCEDUEES FOLLOWED IN ESTIMATING DURATION OF UNEMPLOYMENT IN THE UNITED STATES, 192^33 The amount of benefits paid under any unemployment compensation plan is based upon the number of weeks lost by the eligible unemployed within a specified benefit period. In order to find the proportion of total time lost by the unemployed which will be compensated by benefit payments, it is necessary to estimate the distribution of the eligible unemployed by the duration of their unemployment. A study of duration of unemployment was undertaken for the purpose of determining from the available data the most probable distribution of the eligible unemployed in the United States by duration of unemployment in the different years in order to estimate the amount of benefits payable under a hypothetical plan of unemployment compensation in effect from 1922 to 1933, inclusive. SOURCES AND INADEQUACIES OF AVAILABLE DATA Complete data on unemployment duration can be obtained only from enu- merations covering both the employed and the unemployed taken at frequent and regular intervals of time. In fact, a history of the employment of each individual in a group would have to be traced in order to procure complete data for accurately computing benefits to be paid to the group. No such record of employment and unemployment experiences exists for any considerable number of persons over any considerable period of time. Such unemployment data as have been accumulated in recent years are those collected by the United States Bureau of the Census, the United States Bureau of Labor Statistics, various State departments of labor, and local re- search organizations. These are fragmentary and sporadic from the stand- point of a chronological record for the United States as a whole over a period of time. The United States census of unemployment taken in April 1930 cov- ered the entire United States, whereas the unemployment census taken in January 1931 covered only 19 cities. During previous and succeeding years surveys have been made in only a few localities and only in very few instances for consecutive periods. Not only are various years and areas inadequately represented in the available studies, but unemployment itself is incompletely surveyed. Only those unem- ployed on the day a census was taken are listed in the unemployment tabula- tions, and consequently the part-time unemployment and the idleness previously experienced by those employed on the enumeration day are ignored. Further- more, no account is taken of intermittent unemployment. These census or survey results thus present a discontinuous or static picture of unemployment rather than a continuous or dynamic picture. This necessitated the assumption that the duration characteristics of the unemployed at the time of the census or survey would also apply to the unemployed at other times when the rate of unemployment was practically the same. There are other inadequacies in the data: (1) the surveys were made inde- pendently for diverse purposes and under various circumstances; (2) some were 403 404 APPENDIXES complete coverages, others were samples, selective and random; (3) duration was only one factor considered ; (4) the definition of unemployment and classi- fications of the unemployment tabulations varied ; (5) the method of presenta- tion of the tabulations differed ; e. g., the first duration interval in one study • was expressed as "more than 1 day", in another study as "1 week or less", in yet another as "less than 1 month", etc. ; (6) duration intervals varied, some surveys showing duration by weeks, some by months, and others by still longer periods. Various procedures or adjustments were devised to minimize as much as possible the effects of the limitations of the original data, and it is thought that the different distributions of unemployment by duration secured in this study are the best obtainable from the available material and are fair approximations for the United States in the various years under consideration. STUDIES USED AND INFORMATION TAKEN FROM THEM Of the available surveys on duration only those were utilized which cov- ered entire cities, or areas representative of entire cities, which segregated the unemployed "able and willing to work" from the total unemployed population, and which presented enumerations in such form that they were either com- parable or could apparently be made comparable with other enumerations used. These surveys were drawn from the following sources : United States Bureau of Labor Statistics, Bulletin No. 195, July 1916, 16 cities in the East and Middle West, March and April 1915. United States Bureau of Labor Statistics, Bulletin No. 195, July 1916, New York City, February and September 1915. United States Bureau of Labor Statistics, Bulletin No. i09, June 1926, Columbus, Ohio, last week in October, each year ] 921-1925. Monthly Labor Review, April 1930 ; Maryland Commissioner of Labor and Statistics Survey, Baltimore, Md., February, each year 1928-1930. New York State Department of Labor, Bulletin No. 163, 1930, and Bulletin No. 179, 1932 ; Buffalo Foundation Surveys, Buffalo, N. Y., November, each year 1929-1932. United States Bureau of Labor Statistics, Bulletin No. 520, June 1930, and Bulletin No. 555, March 1932 ; University of Pennsylvania Industrial Research Department, Wharton School of Finance and Commerce, Special Report ^'o. 3, March 1, 1932, Phila- delphia, Pa., April, each year, 1929-1932. LTniversity of Minnesota, Employment Stabilization Research Institute Bulletin, vol. I, no. 6, August 1932, Minneapolis, St. Paul, and Duluth, Minn., November 1930. U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930; "Unemployment" (U. S. Government Printing OfSce, Washington, D. C, vol. I, 1931; vol. n, 1932). New York State Department of Labor Statistics, Special Bulletin No. 173, 1932, Syracuse, N. Y., November 1931. Report Louisville Employment Survey, Commonwealth of Kentucky, Department of Labor, Louisville, Ky., March 16-May 16, 1933. The above surveys yielded material of two types : (1) Distributions of unemployment. — Ninety-two different "duration" distributions of the unemployed able and willing to work, including over 5,000,000 schedules, and representing 46 different cities widely scattered over the United States, in 10 different and nonconsecutive years. Nineteen of these distributions represent the results of the United States Unemployment Census in 19 cities in January 1931, and 35 cities were selected from the April 1930 United States Unemployment Census. (2) Percent of gainful workers unemployed. — The number of gainful workers, the number of unemployed able and willing to work, and the percentage of gainful workers unemployed within a city on the day the survey was made were also used for the majority of the enumerations. The 92 enumerations were recorded in such fashion that for each an absolute frequency, a percentage frequency, and a cumulative percentage frequency dis- DURATION OF UNEMPLOYMENT 405 tribution of the unemployed according to the length of their idleness (since their last regular employment) at the date of the survey were displayed or could be readily computed. Table II-l and figure II-l, showing the data for Los Angeles for April 1930 and January 1931, are illustrative of the 92 sets of distributions obtained from the studies. In the cases where the enu- merations were limited to representative areas, it was assumed that the distri- bution of the unemployed able and willing to work within the area was representative of all the unemployed able and willing to work in the entire city, and the frequency distributions were weighted accordingly. Table II-l. — Distribution of the unemployed by duration of unemployment, Los Angeles, California, April 1930 and January 1931 Distribution April 1930 i Distribution January 1931 ' Interval Number 2 Percent Cumu- lative percent Number ' Percent Cumu- lative percent Total 50, 047 100.0 104, 542 100.0 Under 1 week 3,081 9,667 8,479 9,032 7,284 3.512 4,479 1,542 1,899 751 320 6.2 19.3 16.9 18.0 14.6 7.0 8.9 3.1 3.8 1.5 .6 6.2 25.5 42.4 60.5 75.0 82.0 91.0 94.1 97.9 99.4 100.0 5,249 10, 304 13, 747 18, 612 15,933 8,596 14, 149 6,385 8,398 2,618 551 6.0 9.9 13.2 17.8 15.2 8.2 13.5 6.1 8.0 2.5 .6 5.0 1 or 2 weeks . . . 14.9 3 or 4 weeks 28.0 5 to 8 weeks --. 46.8 9 to 13 weeks 61.1 69.3 18 to 26 weeks .-. 82.8 27 to 39 weeks 88.9 40 to 52 weeks 97.0 63 to 104 weeks 99.5 105 weeks and over . . . 100.0 1 U. S. Department of Commerce, Bureau of the Census, Fifteenth Census of the United States: 1930; "Unemployment", op. oit. Classes A and B combined. Class A = Persons out of a job, able and willing to work, and looking for a job. Class B = Persons having jobs but on lay-off without pay, excluding those sick or voluntarily idle. ^Ibid., vol. I, table 8, p. 151. "Ibid., vol. n, table 4, p. 378. Where the percentage unemployed was given for a sample area only, this percentage was assumed to be representative of the entire city. Some studies failed to record the number of gainful workers ; in these instances an approxi- mation of the number of gainful workers was obtained from the next preceding and following United States census of occupations figures by straight-line inter- polation ; the percentage of unemployed was then based on this approximation. The 92 distributions of the unemployed and the 92 percentages of unemploy- ment, together with the estimates of unemployment in the compensable labor group in the United States during the years 1922-33, composed the basic material from which duration estimates were obtained. ADJUSTMENT OF DATA TO A COMPARABLE BASIS Since no one of the 92 distributions could tenably be presumed to represent the situation in the United States as a whole, the only possible procedure was to combine them in some logical manner. Unfortunately, however, the distributions from different surveys were presented in different time intervals. For example, the United States Bureau of Labor Statistics surveys of New York City in 1915 used these intervals : 1 to 7 days. 8 to- 1?> days. 14 to 30 days. 31 to 60 days. 61 to 90 days. 91 to 120 days. 121 to 180 days. 181 days and over. 406 APPENDIXES The intervals used in the University of Pennsylvania survey of Philadelphia in 1931 were : 1 day and over. More than 1 week. More than 1 month. More than 2 months. More than 3 months. More than 4 months. More than 5 months. More than 6 months. More than 7 months. More than 8 months. More than 9 months More than 10 months. More than 11 months. More than 1 year. This disparity in classification made it necessary to adopt a common class inter- val to which all the series were converted. This was done by interpolation. For each enumeration the original percentage distribution was plotted on a cumu- 1 ^, H — — .—• "• ,^ ^^^ April 1930 -•^* -"'' a^% ~ ■: >'' ^ /^ .^^ / / / Jan.l '931 t / / U 1 1 1 > / i 1 1 / 1 1 1 1 / 1 1 1 1 / 1 1 1 1 i / 1 1 ■3?% - 30^ - 20% - lf% - /0% - 1 1 \ 1 / If 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ! "'^ 0 / a 12 16 20 2tl 28 32 36 40 4 J JS 32 Wee k s Figure II— 1.^ — Curves showing cumulative distribution of the unemployed by duration of unemployment, Los Angeles, Calif. DURATION OF UNEMPLOYMENT 407 Table II-2. — Dm^ation of unemployment iy weeks, Los Angeles, California, April 1930 and January 1931 ^ Distribution, April 1930 Distribution, January 1931 Interval 2 Percent, cumula- tive Percent Fre- quency Percent, cumula- tive Percent Fre- quency Total 100.0 50, 047 100.0 104, 542 1 week or less, 7.3 24.5 34.8 42.3 47.5 52.5 56.9 60.5 64.1 67.2 70.1 72.7 75.0 76.8 78.6 80.4 82.0 83.4 84.8 86.0 87.2 88.2 89.1 89.8 90.5 91.0 91.4 91.7 92.0 92.2 92.4 92.6 92.8 93.0 93.2 93.4 93.6 93.8 94.0 94.2 94.5 94.8 95.1 95.4 95.7 96.0 96.3 96.6 96.9 97.3 97.6 97.9 100.0 7.3 17.2 10.3 7.5 5.2 5.0 4.4 3.6 3.6 3.1 2.9 2.6 2.3 1.8 1.8 1.8 1.6 1.4 1.4 1.2 1.2 1.0 .9 .7 .7 .5 .4 .3 .3 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .3 .3 .3 .3 .3 .3 .3 .3 .3 .4 .3 .3 2.1 3,654 8,610 5,156 3,754 2,602 2,502 2,202 1,802 1,802 1,551 1,451 1,301 1,151 901 901 901 801 701 701 601 601 500 450 350 350 250 200 150 150 100 100 100 100 100 100 100 100 100 100 100 150 150 150 150 150 150 150 150 150 200 150 150 1,051 5.0 14.8 22.1 28.0 33.0 37.6 41.8 45.8 49.2 52.5 55.6 58.5 61.1 63.3 65.4 67.5 69.3 71.3 73.1 74.7 76.3 77.9 79.3 80.5 81.8 82.8 83.5 84.2 84.8 85.3 85.8 86.3 86.7 87.1 87.5 87.8 88.2 88.6 89.0 89.5 90.0 90.5 91.0 91.6 92.3 92.9 93.5 94.3 94.9 95.6 96.4 97.0 100.0 5.0 9.8 7.3 5.9 5.0 4.6 4.2 4.0 3.4 3.3 3.1 2.9 2.6 2.2 2.1 2.1 1.8 2.0 1.8 1.6 1.6 1.6 1.4 1.2 1.3 1.0 .7 '.% .5 .5 .5 .4 .4 .4 .3 .4 .4 .4 .5 .5 .5 .5 .6 .7 .6 .6 .8 .6 .7 .8 .6 3.0 5,227 2 weeks or less . . - 10, 241 7,633 4 weeks or less _ - 6,169 5 weeks or less . 5,227 6 weeks or less 4,809 7 weeks or less - 4,391 4, 182 9 weeks or less . 3,554 3,450 11 weeks or less 3,241 12 weeks or less . .. --.- 3,032 2, 718 14 weeks or less 2,300 2,195 16 weeks or less .-- 2,195 17 weeks or less . - . . 1,882 2,091 19 weeks or less . . 1,882 1,673 1,673 22 weeks or less . - 1,673 1,464 24 weeks or less 1,255 25 weeks or less 1,359 1,045 27 weeks or less -. 28 weeks or less .. . - . 732 732 627 30 weeks or less . 523 523 523 33 weeks or less .- - -.. 418 34 weeks or less 418 35 weeks or less.. -.. 418 36 weeks or less .. .- ... 314 418 38 weeks or less 418 39 weeks or less - 418 523 41 weeks or less . . . . . . . 523 523 523 44 weeks or less . . -. . 627 732 46 weeks or less 47 weeks or less - .. 627 627 836 627 50 weeks or less 732 836 52 weeks or less . . . . . . 627 Over 52 weeks — . . 3,136 1 Interpolated cumulative psrcent values as read from cumulative curves and derived percent and fre- quency distributions. 2 These intervals apply to cumulative percent distributions only. The second interval for percent distri- bution and frequency distribution would read, "2 weeks or less, but more than 1 week"; the third, "3 weeks or less, but more than 2 weeks", etc. Source : Table II-l. 408 APPENDIXES lative basis, and through the plotted points a smoothed curve was drawn. By reading successive differences of cumulative percentages taken from the curve, a percentage distribution classified by weekly intervals was obtained ; and com- parable frequencies in terms of absolute numbers were obtained by applying the derived percentage distribution to the number unemployed. Table II-2 shows the values read from the cumulative percentage curves, together with the derived percentage and absolute frequency distributions, for Los Angeles, Calif., April 1930 and January 1931, and is typical of the 92 sets of data derived by the interpolation method.^ The cumulative percentage curve was used for breaking down the original data into small and regular intervals because of the peculiar properties which this curve, as contrasted with the simple frequency curve, for instance, is recog- nized to possess. The individuals in a large group of unemployed might be classified into a number of different frequency distributions ; one distribution of the group is obtained when the difference between successive duration intervals is 1 week ; another results when the difference is 1 month, etc., but, if the percentages of each of these frequency distributions are cumulated and plotted against time, the resulting cumulative curves will tend to be identical. In other words, a cumulative distribution curve represents all the different frequency distributions that can be made of a given group. Once the cumula- tive curve for the group is determined, any desired frequency distribution can be obtained by reading points at equal intervals along the curve. The points plotted for each of the 92 curves occurred at irregular and often infrequent intervals, so that it was sometimes diflScult to determine the exact direction of the curve. Therefore, preliminary to drawing curves through the plotted points, certain hypothetical frequency distributions, presumably representing all the types which might occur, were set up, and corresponding frequency and cumulative curves were plotted from these hypothetic data. In constructing the distributions it was assumed that an unemployment duration classification for a given locality at a given instant of time does not necessarily produce a normal or bell-shaped probability curve, nor necessarily a skewed curve. Figure II-2 shows these hypothetical distributions and the correspond- ing curves. Curves I, II, III, V, and VI have the largest percentage of unem- ployed occurring within a single duration interval. Curve IV shows a con- centration of the unemployed at two duration intervals. It would be possible to have even three peak periods in the frequency distribution. However, such a distribution is not very probable if the longest unemployment period is only 1 year. An analysis of the six types of curves was very helpful in drawing the cumulative curves representing the 92 tabulations. It is interesting that all six types of hypothetical curves were represented among those plotted from the original data, and that of the six, curve V occurred most frequently. COMBINING THE 92 FREQUENCY DISTRIBUTIONS AND APPLYING THE RESULTING COMPOSITE CURVES If all years in the period 1922-33 and all areas for each year had been ade- quately represented in the sample, the most logical basis for combining the distributions would have been on a time basis by years. However, a repre- sentative sampling of different sections of the country during any given year *A large-scale, millimeter-ruled graph paper, 20 centimeters wide, was used in order to insure accurate plotting and readings from the cumulative percentage curves. On the scale. 1 centimeter equaled 2 percent plotted vertically, and 1 centimeter equaled 2 weeks plotted horizontally. DURATION OF UNEMPLOYMENT 409 / / j t Cumutarive ft ^^y /| ^ / • |V J / / 1 1 -1 ' Fre r-1 -1 >^ -1 100 90 y ^ r^ A Camulative / "^/ / [I - — I / 1 Frr, luenctt . yUyil HI4 100 9« > / / Cumuiarioe 1 ^1 /iTl / / rrecfuena, l^' ■' ^rT'T'l ■■■ r-' jr-^ -" ■" Cumulative / <- )'• ' 1 S ^•. Frequi 2» '^\..X Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. CHART I Pd. Pet. Pd. Pd. Pd. Pd. Pd. Pd. Pd. Pd. Pd. Pd. Frequency 7.5 10.5 16.5 16.5 10.5 9 0 6 5 6 0 5 3 4 7 4 0 3.0 100.0 Cumulative 7.5 18.0 34.5 51.0 61.5 70.5 77.0 83.0 88.3 93.0 97.0 Chart ii Frequency 4.5 6.3 8.5 10.0 14.0 15.5 14 5 9 0 6 0 5 0 4 0 3 0 Cumulative 4.6 10.5 19.0 29.0 43.0 58.5 73.0 82 0 88 0 93 0 97 0 100 0 CHART ni Frequency 3.0 3.8 5.0 4.9 6.3 7.3 8.0 10.7 15.5 20.0 11.3 4.2 Cumulative 3.0 6.8 11.8 16.7 23.0 30.3 38.3 49.0 64.5 84.5 95.8 100.0 CHART IV Frequency 7.9 18.1 13.2 7.1 4.5 3.2 4.3 5.7 8.3 14.7 8.7 4.3 7.9 26.0 39.2 46.3 50 8 54 0 58 3 64 0 72 3 87 0 95 7 100 0 CHART V Frequency 7.7 11.3 19.0 13 0 9 5 6 8 5 7 4 1 2 9 4 6 6 4 9 0 Cumulative- 7.7 19.0 38.0 51.0 60.5 67.3 73.0 77.1 80.0 84.6 91.0 100.0 -: CHART VI -Frequency 23.4 19.0 16.1 13.5 10.5 7.6 3.9 1.8 1.2 1.0 1.0 1.0 Cumulative 23.4 42.4 58.5 72.0 82.5 90.1 94.0 95.8 97.0 98.0 99.0 100.0 Figure II-2.— Typical curves showing tiypottietical distributions of the unemployed by duration of unemploymdnt. 410 APPENDIXES was not furnished by the data, and the different years within the period were by no means equally represented in the sample. In fact, enumerations were entirely lacking for 1 or 2 years of the period and for several other years data were available for only one or two cities. Consequently some reasonable basis of combination other than a time basis had to be sought. A logical basis seemed to be the percentage of unemployment, and a set of composite distributions of duration of unemployment for different magnitudes of unemployment was ac- cordingly built. The 92 surveys were segregated into 5 groups according to the percentage of gainful workers unemployed at the time the survey was made. Originally 10 percentage intervals of approximately equal height were used as a basis for combining the 92 surveys. But a number of the resulting composite dis- tributions were without distinguishing characteristics. Consequently consecu- tive distributions which were practically alike were combined, and the five curves shown in figure II-3 were obtained. Surveys for which the percentage of unemployment ranged from 3.0-6.9 were included 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 composite distributions obtained from these groupings are shown in table 18 on page 84. Figure II-3 shows the corresponding cumulative curves. After obtaining the five duration distributions, the next step was to apply them to national unemployment. Two assumptions offered a basis for the application of tlie curves. The first was that the duration curve varies with the degree of unemployment or, in other words, as the relative proportion of workers unemployed increases, the average duration of unemployment also increases. One would expect a larger proportion of the unemployed within the shorter duration intervals if, for instance, the percentage unemployed was only 3.0. If 48.0 percent of the gainful workers were idle, one would expect the majority of the unemployed to have been without work for relatively long periods. The larger the proportion of the labor force unemployed, the greater the difiiculty of speedy reemployment, and the longer the duration of unem- ployment. To check the validity of this assumption a correlation between average dura- tion and the percentage of unemployment for each of the 92 enumerations was made using the Pearsonian coefficient of correlation formula. A positive co- efficient of 0.71 with a probable error of plus or minus 0.03 was obtained for those unemployed less than 1 year. This coefficient is sufficiently high and the probable error sufficiently small to lend support to the supposition that a fair positive correlation exists between the shape of the distribution curve and the relative amount of unemployment. The second assumption was that a distribution curve at a certain percentage of unemployment is representative of the duration situation in the covered group in the United States when a corresponding percentage of unemployment exists in that group. Thus if the rate of unemployment in the covered group is 6.0 percent in 1929, the "3.0^6.9" curve derived from the surveys is accepted as representative of the group. Table II-3 tends to support this assumption. In the third column, table 1 1-3 shows to which years each of the five com- posite curves was assigned. The fifth and sixth columns show the average percentage of unemployment in the compensable group in the United States for each of the five combinations of years as compared with the average per- centage of unemployment in cities for which surveys of unemployment for the corresponding years were used. The fairly close agreement between percent- DURATIOJSJ" OF UNEMPLOYMENT 411 100% 90% SO' T0% ^0% 40% 100% yX o€'>-''' .^' Figure II-3. — Curves showing composite cumulative duration distributions of the unemployed. 412 APPENDIXES ages in columns 5 and 6 indicates that the unemployment conditions prevailing during given years in cities sampled in this study were generally representa- tive of the compensable group in the United States during the same years.* The composite census distributions are assumed to be more typical of the duration experience of the compensable unemployed than of the total unem- ployed population. The total number of unemployed includes farmers and farm laborers, and the incidence of unemployment in that group is quite dis- similar to that for urban gainful workers. Both the 92 "duration" enumera- tions and the unemployed covered group exclude agricultural labor almost com- pletely. For this reason the unemployed compensable labor force was neces- sarily used with reference to the duration curves in table II-3 and throughout this study. Table II-3. — Average unemployment rate in compensable labor force, for years represented by each composite curve, and in cities in corresponding years Composite curve (1) Rate of Average rate of un- Range in Years unem- employment unemploy- repre- ploy- ment rate sented by ment in for each each com- total com- In total In cities composite posite pensable compen- m corre- curve curve labor sablelabor sponding force force years (2) (3) (4) (5) (6) 3. 0-6. 9 1929 / 1923 1926 1925 6.1 7.3 7.4 7.8 6.1 8.7 7. 0-10. 9 { 1927 1928 1924 [ 1915 1 1922 8.3 8.5 9.4 10.0 13.1 \ 8.3 7.9 11. 0-19. 9 { 1930 1921 15.3 15.9 14.8 11.7 20. 0-29. 9 1931 26.6 26.6 24.9 30.0-43.0 f 1932 \ 1933 39.0 39.2 1 39.1 38.1 Num- ber of cities (7) I.- II. Ill [V. v.. ' Although no curve was assigned to 1915 since it is outside the period covered, it is necessarily included in the third column because it is included in the basic data represented in the sixth column. Souece: See p. 404. ESTIMATING TIME LOST BY THE UNEMPLOYED After having estimated the duration distribution of the unemployed for each year from 1922 through 1933, the probable time lost by them remained to be calculated before compensation costs could be approximated. The method utilized assumed that the estimated percentage of the compensable labor force unemployed each year and the "percentage" distribution assigned to each year represented the average unemployment and duration situations throughout tlie year. For example, the twelfth column of table 18 (on p. 84) shows for years when unemployment affected from 11.0 to 19.9 percent of the gainful workers the percentage distribution of the unemployed by duration of unem- ployment. During 1922 the degree of unemployment was in this range. Read- ing from the table it appears that 5 percent of the gainful workers were 2 The apparent discrepancy in 1929 is probably caused by the small number of city surveys used. DURATION OF UNEMPLOYMENT 413 unemployed 1 week or less, 21.1 percent 4 weeks or less, 25.2 percent 5 weeks or less, 43.5 percent 10 weeks or less, 70.1 percent 20 weeks or less, 89.5 percent 40 weeks or less, and 94.8' percent 50 weeks or less. The average number of unemployed in 1922 is estimated as 2.61 million persons.^ These percentages of unemployment by duration are assumed to be the same for the first 1-week period and for all subsequent 1-week periods throughout the year. Seasonal fluctuations are disregarded except to the extent that seasonal factors are reflected in the averages of the basic data. This means that although the identity of the unemployed is recognized to shift continually throughout the year, the average number unemployed for the year and the distribution of that number are assumed to be represented by the one set of data. In other words, at the end of each week in the year 1922, 2.61 millions of the unemployed are assumed to have lost a full week's time, though the individuals represented by the 2.61 millions are not identical for each week. The total time lost by all the unemployed in 1922 would therefore be estimated as 135.72 million man-weeks (2,610,000X52 weeks) or as 2.61 million man-years. Suppose a benefit period of 16 weeks and a waiting period of 4 weeks were provided by the unemployment compensation plan. Then at the end of each week in 1922, 49.0 percent of the unemployed would have been unemployed from 5 to 20 weeks, inclusive, and would therefore have been eligible for a full week of benefits (70.1 percent — 21.1 percent). The total compensable weeks lost would equal 66.50 million weeks (2,610,000X52 weeks X 49.0 percent) or 1.28 million years. By applying compensable man-weeks to average weekly benefits or compensable man-years to average yearly benefits, the total amount of benefits could be approximated. The detail of this procedure is set forth in appendix III. * This estimate and the computations based upon it are on the basis of the coverage assumed in the report of the Committee on Economic Security to the I'resident. 78470—37 28 Appendix III PKOCEDURES FOLLOWED IN ESTIMATING THE MAXIMUM DURATION OF BENEFITS Through procedures outlined in appendixes I and II, an attempt was made to collect and arrange pertinent data into an order usable in estimating the cost of an assumed unemployment compensation system for the United States. The financial considerations of compensation for unemployment will be determined by the income derived from contributions, by the compensable wage loss of the employees covered, and by the duration of unemployment. The cost of the system is dependent in pait upon the length of the benefit period, and this in turn is determined by the established policy of the system, i. e., whether solvency is to be maintained throughout a complete business cycle, including a major depression, or during prosperous periods and minor depressions only. The maximum duration of benefits established under either policy would doubt- less be maintained throughout the business cycle, but a deficit would be incurred during major depressions if the system had been constructed on the basis of maintaining solvency during minor depressions only. In the pages which follow the maximum duration of benefits for the un- employed has been estimated for the United States as a whole on the basis of maintaining solvency through what might be considered f major business cycle, namely, the years 1922-33. A considerably longer maximum duration of bene- fits would have resulted if the depression years 1931-33 had been excluded and the computations had been based on the unemployment experience of 1922^30. CONTRIBUTIONS Since the source of funds for operation of the assumed plan of unemploy- ment compensation is a percentage tax on pay rolls, it was necessary to obtain the total amount of pay roll taxable in order to approximate the probable income yielded by the tax. The general procedure was to determine the aver- age earnings of the covered group each year and to apply this figure to the employed compensable labor force. The data available, however, necessitated the division of the experience period into two segments, 1922-28 and 1929^33. The source of data for the first period was The National Income and Its Pur- chasing Poicer, by Willford I. King, published by the National Bureau of Eco- nomic Research in 1930. The estimates of wages and salaries for all groups except agriculture, government, and unclassified industry were used, the latter industry being eliminated since it consisted chiefly of service employees of whom only a small portion were assumed to be covered by the system. To arrive at an estimate of average earnings for the other half of the experience period, National Income. 1929-32 ^ was used. Agriculture, government, and domestic and personal-service industries were excluded from the calculations, and yearly aggregate and average earnings were calculated for the residue. ' U. S. Bureau of Foreign anrl Domestic Commerce, Division of Economic Research. Letter from the Acting Secretary of Commerce. National Income 1929— S2, S. Doc. No. 124, 7.3d Cong., 2d sess. (U. S. Government Printing Office, Washington, D. C, 1934). 415 416 APPENDIXES The procedure described above resulted in the assessable earnings estimates shown in table III-l. Contributions at rates of 3, 4, and 5 percent are shown in table 16 on p. 81. Table III-l. — Assessable wages and salaries of employed compensable labor force, United States, 1922-33 Year 1922 1923 1924 1925 1926 1927 Average earnings $1,410 1,475 1,520 1,527 1,566 1,584 Number (in thou- sands) 16, 055 17,646 17, 686 18,417 18, 962 19, 275 Total as- sessable pay roll (in mil- lions of dollars) $22, 638 26,028 26, 883 28,123 29, 694 30, 532 Year 1928 1929 1930 1931 1932 1933 Average earnings $1,516 1,599 1,573 1,477 1,283 1,250 Number (in thou- sands) 19,629 20,660 18, 743 16, 386 13, 784 13, 783 Total as- sessable pay roll (in mil- lions of dollars) $29,758 33, 035 29,483 24, 202 17, 685 17,229 COMPENSABLE WAGE LOSS The general method of determining the benefits possible on the basis estab- lished in appendix II was to estimate the total compensable wage loss for each year and to distribute it according to the composite "percentage" distribution of duration of unemployment (table 18, p. 84). To arrive at the total compensable wage loss, the basis used was that employed in determining the income from the compensable labor force. In table III-l the estimated average earnings of the employed compensable labor force are displayed for each year. It was assumed that this would be the wage base used in calculating benefits. (See table 17 on p. 82.) Since a benefit rate of 50 percent was assumed, with a maximum of $15 per week, the average compensable wage loss (per man-year) was estimated to be 45 percent of the wage loss per man-year. This assumption would not be strictly accurate, since the provisions of the plan stipulated that benefits were to be one-half of the usual full-time pay rather than the average pay. A correction in wage-loss estimates for this provision was impossible, first and chiefly because of the absolute lack of perti- nent data, and second, because of the difficulty of defining the usual full-time wage. A correction factor for this inaccuracy is included in the actuarial adjustments. (See p. 419.) The average compensable wage loss having been computed, it was multiplied by the estimated total man-years of unemployment (derived from table 17) to arrive at the total compensable wage loss for each year. The total compensable wage loss for each year was then distributed in accordance with the assigned distribution of the duration of unemployment previously displayed in table 18 (p. 84). The wage-loss distributions for 1923 through 1933 were combined into one cumulative distribution, as shown in table 19 on p. 86. This table may be readily used to ascertain the number of weeks of benefits payable with a 3-percent contribution rate under a system aiming at solvency through 1933. For example, the estimated total income available for benefits for the period 1923-33 is $8,746,000,000. If a waiting period of 4 weeks is required, $5,026,000,000 of the compensable wage loss will not be compensated by benefits. The sum of these two is $13,772,000,000, which in table 19 falls between the compensable wage losses for 20 and 21 weeks of unemployment. If benefits are paid for 17 weeks MAXIMUM DURATION OF BENEFITS 417 (21 weeks less the 4-week waiting period), $8,970,000,000 will be paid out (13,996,000,000^5,026,000,000) and the fund will have a deficit of $224,000,000. If benefits are paid for 16 weeks (20 vv'eeks less the 4-week waiting period), $8,586,000,000 will be expended (13,612,000,000—5,026,000,000) and the fund will retain a surplus of $160,000,000 (8,746,000,000—8,586,000,000). Table 19 can also be used in similar manner to ascertain the combination of any waiting period and duration of benefits which will match the total income avail- able for benefits. The results of the preceding method of estimating maximum duration and amount of benefits take no account of factors yet to be discussed, which are not measurable by available data and which tend to change the maxi- mum benefit period. Before final cost estimates can be obtained adjustments for these factors should be considered. ADJUSTMENTS There are a number of factors in the legislative provisions of the assumed un- employment compensation system which have not been evaluated in any of the previous sections and which will definitely affect the cost ; furthermore, there are limitations in the data which will also afEect the cost and for which no adjustments have been made; and, lastly, the effect of the imposition of a plan of this nature must be measured in terms of claim experience. The present section attempts to evaluate these factors. The surveys of unemployment which have been analyzed and built up into a series of distribution tables showing the percentage of employees who are unem- ployed for varying intervals (table 18, p. 84) give so impressive a display and have been forced into so orderly an arrangement that it is very diflicult to remem- ber throughout that the material is not directly applicable to the problem of cost determination. The data cover only unemployment at the time of the surveys and do not show total unemployment records as they will develop over a period of time. Dr. I. Rubinow carefully points out the inherent limitations of this type of census, but says that nothing better is available.^ Mr. A. D. Watson's actuarial report on the Canadian unemployment insurance bill,' based on censuses showing aggregate duration of unemployment during the preceding 12 months, provides data which are a little closer to the form of duration table applicable to benefits of this sort. The Railroad Retirement Board's data on the duration of unemployment among a closed group of railroad employees which had been put on furlough and taken back into employment also were valuable as a check on the distributions developed.^ However, comparison of these distributions reveal limi- tations in each of these sets of material. The Canadian data are incomplete for the period of unemployment which occurred prior to the beginning of the 12 months' period but which was completed within the 12-month period, and, like- wise, it was impossible to ascertain the duration of the unemployment of an unemployed person beyond the date that the census was taken. In the railroad data information on a special group of men taken back into their original employ- ment is not indicative of what may have happened to the other employees whose unemployment histories were not available after severance of employment. 2 Dr. I. M. Rubinow in his discussion of a paper, "Calculation of the Cost of Unemploy- ment Benefits With Particular Reference to Ohio and Pennsylvania," by Prof. Clarence A. Kulp {Casualty Actuarial Proceedings, vol XX, pp. 170-179). 3 Actuarial Report on the Contributions Required to Provide Unemployment Insurance Benefits Within the Scheme of the Draft of an Act Entitled "The Employment and Social Insurance Act." (No. 158 A — 1935). - ♦ Unpublished data furnished by the Railroad Retirement Board. 418 APPENDIXES When one attempts to modify a duration-frequency table he must recognize that any modification requires that the whole schedule be completely replaced by some other schedule or schedules. In the absence of material which would pro- vide an adequate substitute it seemed advisable to use the estimated distributions in their present form and then attempt to assess in some aggregate fashion the weight of the many factors which should be considered and which might modify the result. The various factors arising from special provisions of the plan and from the inadequacy of the data may now be weighted and an allowance given to other immeasurable contingencies. I. ADJUSTMENTS FOR SPECIAL PROVISIONS OF THE PLAN 6 (1) Requirement of 1,0 weeks of insured employment and contribution in the pre- ceding S years.— The 2-year waiting period before benefits are paid means that only on additions to employment is this limitation effective. A period of 40 weeks will elapse before any real coverage exists for the new entrants. Although the employed compensable labor force in 1933 is estimated at only 13,783,000 persons, the number may rise to nearly 21,000,000 if the level of 1929 is again reached, adding 6,877,000 employed persons to the group covered, or a gain of 50 percent among the present group. If this increase were spread over a period of 10 years by uniform percentage rates of increase, 4 percent of the em- ployed grour) at any time might be excluded from benefits because of the re- cency of the'ir employment. If this increase in employment took place very speedily, but still uniformly, for example, over only 3 years, the percentage not eligible for benefits might go to S percent (assuming 17,000,000 average coverage with periodic groups of 700,000 and 1,400,000 new employees, respectively). This progress, however, will not be smooth; it will be supplemented by further lav-offs and further reemployment, and it is even possible that the reemploy- ment will occur very slowly. Failure to reemploy might be accompanied by an increased stability among those at work. Although it is not possible to estimate exactly the influence of reemployment and stability of employment in the future, these factors have been assessed to- gether at a weight of (2) Three weeks' disqualification from benefits for workers discharged for proved misconduct or voluntary quits without reasonable cau^e.— It seems improbable that more than 20 percent of the terminations of employment in the compen- sable gro:up will result from discharge for proved misconduct or from voluntary quits without reasonable cause. It is also doubtful if any compensation plan will entirely exclude these cases from benefits. In accordance with the assumed provisions for an unemployment compensation system the average disqualifica- tion from benefits will be at least four weeks. If only 20 percent of the benefit claims had this disqualification, the cost for that group would not be reduced by more than 15 percent and the cost for the entire group would result in a correc- tion of 3 percent. The weight is estimated as (3) Suspension of benefits during trade disputes and workmen's compensation or other compulsory insurance benefits.— Reduction of benefits from these sources cannot be clearly assessed. Without health insurance in the social insurance picture, there will be no credits for compensable illness. For nonpayment of benefits during trade disputes and during the receipt of accident compensation it seemed that a generous credit to cost would involve a weight of. (4) Ability to work.— One of the fundamental principles of unemployment compensation systems is that only those who can prove their ability to work and their attempt to find work are eligible for benefits. Many of those who are out of work because of illness at the time of their termination of employment will not be reported as unemployed and probably have not been so reported in many of the censuses, although some censuses show as high as 3 percent of employ- ment terminations resulting from disability. Some other surveys have indi- cated that 1.5 or 2 percent of the unemployed are out of work because of sickness; some studies show even more. In these surveys, however, the unemployed individuals might tend to give "poor health" as the reason for their unemploy- ment, whereas if poor health in unemployment compensation plans disqualified the benefit claimant, a smaller proportion would probably use this as a reason. Since not all sickness will be reported as unemployment, and since many cases of such sickness will be of short duration, enabling the individual to go back to work to a place which has been held open for him, a reasonable credit seemed to entitle this item to a weight of - - Correction factor ! Positive Negative Percent 'A positive correction factor increases and a negative factor decreases each interval in the distribution of compensable wage loss by the percentage specified. 6 Estimates of W. R. Williamson, staff actuary, Committee on Economic Security. MAXIMUM DURATION OF BENEFITS 419 I. ADJUSTMENTS FOR SPECIAL PROVISIONS— Continued (5) Special treatment of part-time unemployment. (a) Part-time unemployment of those receiving in wages less than $1 more than full-time benefits.— An analysis of part-time work (see p. 64) showed that in the present unemployment situation a certain group was employed at less than 50 percent full-time work. Possibly 5 percent of the current working force may have been working less than 50 percent of its time for 2 or 3 years. If they are working less than 50 percent of their time, workers cannot qualify for more than 5 or 6 weeks of benefits by the assumed rule which allows 1 week of benefits to 4 weeks of covered employment. In normal years the proportion of such part- time workers is probably similar. Some extra benefits will be drawn under this provision. The addition to cost has been placed at (6) Benefits for regular part-time workers.— II benefits are to be paid for unem- ployment arising only in that part of time customarily worked, it is assumed that the workers will be compensated for the loss of such limited time. The correction for such treatment would be (6) "Four-to-one" ratio of weeks of employment to weeks of benefits. — This limi- tation of the benefits payable to those customarily unemployed may act as a balance against the extra benefits for those customarily employed. Distribution tables of unemployment from 1923 to 1930 in Great Britain lead one to expect that about 15 percent of the unemployed will be subject to this limitation, reducing anticipated costs by 5 percent. In the absence of any other very authoritative information, a reasonable weight to give to this factor is therefore assumed as... (7) Extra weeks of unemployment benefits for long service without benefits in "l-to-20 ratio."— Assuming that the existence of concurrent contributions is also necessary to warrant these longer duration benefits, it will be several years before this factor adds very much to the cost. It is desirable, however, not to under- estimate the weight of the factor when the plan is in full operation. It is cor- rectly believed that unemployment is most common among those with short periods of service with a given employer and least frequent among those with a long period of service with the same employer. In this case, however, it is not service with one employer which qualifies for benefits. The man who leaves one position to take another, with no intervening period of unemployment, will build up rights to added benefits in the same manner as the man who retains a single position. In fact, the British experience seems to show that year by year at least 60 percent of the employees were continuously employed. With addi- tional credit allowed for these good risks, a considerable volume of additional benefit rights would be accumulated by these per.sons. Over a period of 7H years nearly 45 percent of the insured British workers collected no benefits whatever. It may be assumed that there is a large stable force of workmen in the United States, just as there is in Great Britain, who experience long periods of service without unemployment. In normal times many would be free from the risk of unemployment, although, even in such times, many men with long service periods lose their positions. In times of depression, lay-offs involve a considerable number of men with long, almost uninterrupted, records of service. The bene- fit of extra weeks for long service depends upon the distribution of the unem- ployed by such past qualifying service. While in good times it is possible that 75 percent of the unemployed might claim only a week or two additional at the most, 25 percent might be entitled to several extra weeks of benefit. In depres- sions, when the unemployed group is composed of hitherto steady as well as unsteady workers, a distribution such as the following might be found: Distribution Extra weeks (.Percent) (Per capita) 40 None 20 3 20 6 20 9 Total 100 Weeks (Aggregate) 60 120 180 360 Average, 3.6 extra weeks. This would probably represent at least a 35-percent increase in the amount of time compensated, and the provision of additional benefits introduces the possi- bility of a decided increase in cost. While the added benefits may not be so serious in good times, they will intensify the strain in bad times, and the pro- vision unquestionably implies a continuity of program upon which the employee will count. A cautious estimate of increase in cost seems to justify a minimum weight of. (8) Commutation of benefits to a lump sum. — This provision might tend to overvalue at the time of commutation the benefits which might otherwise be paid, and give a little more benefit in some instances than would otherwise be the case. It does not seem necessary, however, to weight this factor at more than (9) Wage base for benefits.— One very important correction factor derives from the fact that contributions are made on the basis of wage received including both part- and full time work, while benefits are paid in the main on the basis of proportion of full time lost. It appears that from 1924 to 1929 this might place benefits 5 percent above the contribution base, while for 1930 to 1933 this increase might be 10 percent. Since the greater weight of benefits occurs in these later years, this correction factor is conservatively fixed at Correction factor Positive Percent +2 Negative Percent -fio +6 420 APPENDIXES II. ADJUSTMENTS FOR INADEQUACY OF DATA (1) Correction for type of census.— The censuses used as the basis of estimates purport to show the length of unemployment since the date of last work. The figures for the first week seem altogether too small, undoubtedly indicating that very brief periods out of work have not been regarded as real unemployment by the employees questioned. In the distribution the weight of the first week of unemployment is, therefore, probably understated. The number of unem- ployed in that period should probably be increased by as much as 50 percent. On the other hand, if successive periods of unemployment are to be totaled for a true duration table applicable to the plan, some sizable proportion of those who, in the census, said that they had been unemployed less than 4 weeks, are really, for benefit purposes, members of the group unemployed from 4 to 16 weeks. Because of former periods of unemployment within the year (which are of less financial importance the longer the present period of unemployment) these un- employed persons would be thrown into the period beyond the 16 weeks and would be eligible for no benefits for the weeks in excess of 16. This means (a) that the proportion within the waiting period is probably really less than shown by the duration tables, even taking into account the understatement of unem- ployment of less than 1 week, and (6) that the nonbenefit group beyond the 16 weeks is probably really larger than shown. Dr. I. M . Rubinow ' assumes that these corrections will cancel out. The change in cost estimates, however, is considered to be worth a weight of (2) Correction for tack of recent data on duration of unemployment.— Tne dura- tion tables have been built up from censuses among the unemployed taken in urban districts where the majority of the compensable labor force will reside. The data have in the main been collected in periods of rather level, or Increasing rates of unemployment, and very little in the census material is directly applica- ble to such a year as 1922— a period of diminishing unemployment. In a period of diminishing unemployment it seems probable that the duration tables shown will overstate the group falling within the waiting period, that is, the group recently unemployed, since prolonged periods of unemployment will be rarer, employers will tend to reemploy the workers who have been unemployed for shorter periods. In 1933 a decrease in benefit costs might occur differently. It has been stated, in certain quarters, that one-third of the unemployed recently interviewed had been unemployed for a 2-year period. In the duration distri- bution for high rates of unemployment, only 25 percent are shown as having had more than 1 year of unemployment. If the proportion beyond the benefit period is understated, possibly only 16 percent of the unemployed would be eligible for benefit in 1933 instead of 21 percent. This might make some reduction in cost for 1933. The assigned weight is -. III. CONTINGENCY ALLOWANCES Increased benefits because of the "use" of the ptan.— The conviction that, if an unemployment compensation plan were in existence, it would be "used" more effectively as time went on, results from a consideration of the following (actors: , , ^ ,. , , (a) In the absence of an unemployment compensation system , many employers have hopefully carried a few excess workers on the pay rolls or have spread work among the entire personnel instead of laying men off. Where the workers car- ried cannot be effectively used, and their retention creates a waste from the standpoint of production cost, employers would doubtlessly be justified, legally and ethically, in dismissing more promptly these superfluous workers if a com- pensation system were available to provide benefits. (6) As Sam Lewisohn said in the discussion at the Conference on Economic Security, Washington, D. C, Nov. 14, 1934: "Everybody likes a vacation." Persons who receive unemployment compensation, when work opportunities are slight, will not look for a new position sozealously when they have a little income to live on. (c) Scarcity of work and the probable low wage receipts for each wage earner, together with the existence of unemployment benefits may induce many persons to enter the labor market. These persons ordinarily would not be classed as gainful workers. The experience of an increasing number of married women seeking work in Great Britain illustrates this feature, adding to the compensable labor force a considerable number of other workers and, without increase in avail- able work, adding to the number of the prospective beneficiaries. id) Taxation for unemployment compensation will increase production costs, reducing profits unless, or until, the costs are passed on to consumers. Employ- ers will tend to cut production costs as far as possible by permanent elimination of the workers who are substandard in efficiency and health. In the absence of an unemployment compensation system humanitarian considerations might make the employers reluctant to weed out such employees, but if the discharged workers were to be eligible for unemployment benefits the claim lists would be increased by unemployment of this type. The operation of group life insurance in the southern textile mills is an illustration of this point. Large groups of em- ployees were eliminated with the apparent knowledge that they would be sup- ported by the disability provisions of the group life contracts. Large unem- ployment benefits were paid under this guise. The issue is rather a serious one, not only in the South but among similar types of organization in the North. 'Chap. XII, Report of the Ohio Commission on Unemployment Compensation, pt. II CF. J. Heer Printing Co., Columbus, Ohio, 1033), pp. 215, 216. Correction factor Positive Percent MAXIMUM DURATION OF BENEFITS 421 Correction factor Positive Negative III. CONTINGENCY ALLOWANCES— Continued («) The same increased desire for eflBciency will demand better technological methods and will eliminate more employees by the simplification of methods and as an early effort toward stabilization of employment. Manufacturers will be forced to increase their efficiency of operation, since price competition will be- come increasingly important. (/) A growing knowledge of ways in which unemployment can be made com- pensable will undoubtedly appear. Some of these influences cannot be regarded as of permanent importance. Unemployment, as such, will hardly be seriously affected by them, but unem- ployment which is compensable can reasonably be increased and employer and employee alike, being human beings and having human needs, will undoubtedly recognize the existence of a plan which will furnish compensation to ward off immediate need and so will develop an ability to "use" the plan. In addition to the increased cost occasioned by the "use" of the plan, some allowance must be made for still other items not measured or measurable at this time. The weight given these contingency allowances is Total. Net increase Percent Percev.t +33 +52 +30 The weights assigned to the various factors listed above give a total negative correction factor of —22 percent and a total positive factor of +52 percent. The net increase is therefore +30 percent. FINAL ESTIMATES OF DURATION For the estimates of duration of benefits the total adjustment determined in the previous section was applied to the material presented in appendix II. The 30-percent adjustment factor was applied to the wage loss in each duration interval for the period 1923-33. From the tabulation on page 89 it may be observed that with a 3-percent contribution rate and a 4-week waiting period the maximum length of benefit period permitted by the adjusted figures would be 12 weeks (as compared with 16 weeks permitted by the unadjusted data) under a plan designed to remain solvent through 1933. By matching income approximations with wage-loss estimates, table 20 (p. 87) can be used to determine the maximum duration of benefits and maximum amount of benefits for any combination of contribution rates or waiting period. However, it is recommended that not too trusting a use be made of the intervals of the distribution as one approaches 52 weeks, since the degree of the reliability of the distribution decreases as the length of the duration interval increases. If the features upon which the above adjustment factor depends are changed, the size of this factor will change, and so also the wage-loss distribution. Once the size of a new adjustment factor is determined upon, the wage-loss distribution may be computed by multiplying the amounts shown in table 19 (p. 86) by 1 plus the percentage adjustment. Changes in actual benefit requirement may introduce other modifications, but the crudeness of the basic data has been suflSciently set forth to suggest that little addition of accuracy will be gained as a result of any further small adjustments. Many of the above factors used in adjusting the estimates of the duration of compensable wage loss are little more than reasonable guesses based on the best judgment which could be exercised. Only a few of the factors could be derived from basic data even of limited nature and scope. Appendix IV THE HISTORY AND DEVELOPMENT OF THE UNITED STATES EMPLOYMENT SERVICE ^ This report is a brief summary of tlie history of the United States Employ- ment Service and an outline of its functions and activities. Tlie data are presented under the following heads : (1) The Pre-war Period, (2) Activities During the World War, (3) The Post- War Period, (4) The Contribution of the Demonstration Centers, (5) The Reorganization of 1931, (6) The Principles of the Wagner-Peyser Act, (7) Opera- tion Under the Wagner-Peyser Act, (8) Emergency Needs and the National Reemployment Offices, (9) The Progress Record in Employment Work. The development of a public employment system in the United States has been spasmodic and irregular because it has been conceived until I'ecently as an emergency service to meet a temporary and limited type of public-welfare need. Public employment offices in this country were originally established to meet the problem of distributing immigrant labor which tended to concen- trate in ports of entry to inland industrial centers. This service was later expanded to enable workers for the agricultural districts to be recruited from across State boundaries. The first program of national significance arose in answer to the needs of (1) recruiting workers for the war industries during the World War and (2) demobilizing soldiers and workers after the war. It was not until 1933 that the foundations of a sound public employment system were laid in the Wagner-Peyser Act, which was passed as part of the recovery program. With the passage of the Federal Social Security Act of August 1935 the public employment ofiices became a permanent branch of the social- welfare agencies of the country. THE PRE-WAR PERIOD The United States Employment Service had its inception in the creation, in February 1907, of the Division of Information in the Bureau of Immigration ttnd Naturalization, a unit in the (then) Department of Commerce and Labor. There were two aspects of its work at that time, the first being the direction of the flow of immigrant labor to job openings, the second the collection of information that would be of value in this distribution process.^ From the beginning it was realized that all functions of the Service were dependent upon ^ This report was prepared by Gladys L. Palmer. * The purpose of the Division of Information, as expressed by the Secretary of Com- merce and Labor, was "to bring about a distribution of immigrants arriving in this country, thus preventing, as far as possible, the congestion in our larger Atlantic seaport cities that has attended the immigration of recent years ; and, second, to supply informa- tion to all our workers, whether native, foreign-born, or alien, so that they may be constantly advised in respect to every part of the country as to what kind of labor may be in demand, the conditions surrounding it, the rate of wages, and the cost of living in the respective localities." U. S. Department of Commerce and Labor, Annual Report, 1908 (U. S. Government Printing Office, Washington, D. C, 1909), p. 25. 423 424 * APPENDIXES accurate knowledge of available jobs and of available workers, and of economic conditions in the area in which the Service was operating. Contacts were made with widespread sources of information : Associations of manufacturers, indi- vidual employers of labor, trade-unions, township correspondents of the Depart- ment of Agriculture, postmasters, farmers. State boards of agriculture, State bureaus of labor and statistics, boards of trade, chambers of commerce, factory- inspection departments, newspaper items announcing new work or new factories. Material from these sources presented the first outline picture of the employ- ment market throughout the country. Little actual placement or distribution work was done by the Division. The information collected on lands available for rent and sale, soil, climate, and market conditions, on details of farm and farm work, and to a lesser extent of business and industrial opportunities, was published in bulletins and made available to those immigrants who wanted it. Some effort was made to list openings and to direct applicants to specific jobs, but the placement accom- plished was unimportant and was limited by the resources of the Division itself and the fact that few newly arrived immigrants were able to pay their trans- portation to inland points where jobs were to be had. The work of the Divi- sion did not extend much beyond that of helping aliens, although no limitation in this respect was imposed either by law or policy. One employee in each of the immigration oflBces was detailed to the information and distribution work. Two conditions resulting from the outbreak of the World War in 1914 were conducive to an expansion in the functioning of the Division of Information. On the one hand, immigration decreased materially and left the immigration offices with little to do, and, on the other hand, unemployment became serious in the country as a result of the industrial dislocation caured by the war. The Federal Department of Commerce and Labor had been reorganized into two separate departments in 1913. The Bureau of Immigration, and with it the Division of Information, became a bureau of the newly created Department of Labor. Legislative authority to include among its duties advancement of opportunities of workers "for profitable employment" was contained in the organic act establishing the' Department of Labor. The three factors — the need for finding work for large numbers of unemployed, together with available per- sonnel, and the legislative authority to carry out an employment program — were so timed that a Nation-wide placement agency for citizens resulted. A serious unemployment situation was thus responsible for the first recognition of the need of a public employment system. Plans were formulated for an organization of Federal employment exchanges upon a national scale. The country was divided into 18 administrative zones, each zone in charge of a supervisor delegated from the personnel of the immi- gration oflices within the zone. The entire distribution service was thus coor- dinated with the immigration field service. The Farm Labor Seiwice was the first of the specialized employment services to be developed. Through cooperation with the Post Oflice Department and the Department of Agriculture, representatives of the employment service who were located in the harvest and fruit districts directed applicants across State boundaries. The Farm Labor Service made the first move toward edu- cating the public and gaining its cooperation by arranging with railroad repre- sentatives to report farm labor shortages to public, rather than private, employ- ment agencies. The Division of Information served the shipmasters, who complained of a shortage of qualified seamen. It also directed the unemployed to other States, the successful placement of persons thrown out of work after UNITED STATES EMPLOYMENT SERVICE 425 the Salem fire being an example. It helped in placing Mexican refugees in 1915 and 1916 and directed 15,000 returning National Guardsmen to jobs.' Thus, during the years from 1914 to 1916, the character of the Employment Service changed from that of directing aliens to inland jobs to that of a place- ment agency for the unemployed. The number of citizen applicants for place- ment first exceeded the number of alien applicants in 1916. ACTIVITIES DURING THE WORLD WAR The entrance of the United States into the World War in April 1917 again changed the major functions and administrative relationships of the Employ- ment Service. All phases of the Service were now devoted to directing the human productive energies of the Nation into the channels most necessary for carrying on the war. Fundamentally the task of the Federal Employment Service became one of recruiting labor, both on behalf of private industry and the Government. It had also to direct and apportion the labor supply, once recruited, to the work most essential in the war emergency. The Employment Service underwent numerous changes during the latter half of 1917 and the first half of 1918. Reorganization was necessary in the development of the Service to meet the war needs of the country. State lines were made zone lines. The increasing volume of war woi'k and changing con- cepts concerning the function of the Service brought a demand for the separation of the Employment Service from the Bureau of Immigration. This was accom- plished in January 1918. The difficulties under which the public employment offices were conducted at this time seriously affected their efiiciency.* The public had not yet realized that the Service was not limited to aliens ; most of the headquarters and sub- branches were in charge of persons who had had little or no experience with any sort of placement work. In addition it was felt throughout the Immigration Service that the employment work was merely incidental and that with the return of immigration, such as the country had had before the war, the em- ployees in the Division of Information would be reassigned to regular immigra- tion work. In the mind of the public, the Employment Service was still overshadowed by the Immigration Service, and the demands of war necessitated basic changes in organization. As reorganized in January 1918, the Employment Service was made a separate bureau of the Department of Labor, and the Division of Information was made a part of the enlarged Employment Service. This had been made possible by a congressional appropriation of $250,000 in October 1917 and by an allotment from the President's fund for "national security and defense" of $825,000 early in December of that year to defray expenses in connection with the work of the distribution of productive labor throughout the United States. The availability of new funds with which to organize services upon a more elaborate scale made it imperative that all the activities and facilities of the United States Employment Service should be placed under a single directing head. The Division of Information, which formerly included the United States Employment Service, was temporarily separated from the Bureau of Immigra- * Smith, D. H., The United States Employment Service, Institute for Government Research, Service Monographs of United States Government, no. 28 (Johns Hopkins Press, Baltimore, 1923), pp. 5-8. * Herndon, John J., Jr., Public Employment Offices in the United States, U. S. Depart- ment of Labor, Bureau of Labor Statistics, Bulletin no. 241, July 1918, p. 51. 426 APPENDIXES tion; the entire energy, until tlie close of tlie fiscal year, was devoted to the extension of the employment service.^ The United States was then divided into 13 employment districts, which ap- proximately followed the geographical lines of the Federal Reserve Bank System, with the exception that the employment districts in all instances were organized to follow State lines. A memorandum of the Secretary of Labor, effective as of March 1, 1918, contained provisions for a director and assistant director of the Employment Service, and a Policies and Planning Board, com- posed of the chiefs of the eight different divisions into which the service was divided ; a division of information, adminstration, and clearance ; a division of personnel ; a public-service reserve division ; a boys' working-reserve divi- sion ; a farm-service division ; a woman's division ; a Negro division ; and a division whose duty it was to issue the United States Employment Service Bulletin. The Policies and Planning Board was abandoned shortly after its creation, but the organization of the other divisions remained substantially the same to the end of the fiscal year. The newly established plan of organization soon became insufficient to meet the emergency employment needs of the country. The War Labor Policies Board took the initiative in proposing that the employment function in all war contract work be centralized in the United States Employment Service." This was immediately followed by a Presidential proclamation which pointed out that "a central agency must have sole direction of all recruiting of civilian workers in war work ; and in taking over this great responsibility must, at the same time, have power to assure essential industry an adequate supply of labor, even to the extent of withdrawing workers from nonessential production." The President therefore urged "all employers engaged in war work to refrain after August 1, 1918, from recruiting unskilled labor in any manner except through this central agency." The task thvis imposed resulted in an acute situation for the Employment Serv- ice, and its executives realized the inadequacy of the organization to fulfill the new demands placed upon it. Upon recommendation of a committee of employ- ment experts, they adopted a policy of centralized control and decentralized operation. In substance, the changes made in the organization consisted in (a) abolition of the system of 13 employment districts, thereby automatically mak- ing the State the unit of operation, gradually eliminating the district superin- tendencies; (&) centralization of responsibility for field organization in the Federal directors of employment for the States; (c) establishment of uniform methods of office operation; and (d) concentration of the administrative work at Washington into five divisions, each in charge of a director.' These five divisions — control, field organization, clearance, personnel, and information — ^ All officers, clerks, and employees of the Bureau of Information and the Immigration Service who were found to be experienced in the work of the U. S. Employment Service were transferred without prejudice to the Employment Service with the understanding that should appropriations for this purpose be discontinued such officers, clerks, and employees should be retransferred to their former positions. Sixth A7inual Report of the Secretary of Labor (U. S. Government Printing Office, Washington, D. C 19 IS), p. 207. ' "All recruiting of industrial labor for public or private work connected with the war shall be conducted through or in accordance with methods authorized by the V. S. Employment Service. * * * The full power of the Government shall be exercised through such agency to supply all the labor requirements of war industry and by means of volunteer recruitment to transfer men to such extent as may be necessary from non- war work to war Avork. * * * An immediate campaign to secure the unskilled labor needed in war work shall be made by the U. S. Employment Service." Quoted in "Public Employment Services", Monthly Labor Review, vol. 32, no. 1, January 1931, p. 17. '' Siorth Annual Report of the Secretary of Labor (U. S. Government Printing Office, Washington, D. C, 1918), p. 216. UNITED STATES EMPLOYMENT SERVICE 427 absorbed the previously existing services, sections, and divisions. The special- ized vpork of these units, however, was carried on without a break. This new plan went into effect August 5, 1918. In order to assist in the recruiting of unskilled labor for war work and to aid in the further extension of the machinery of the Employment Service through- out the country, a system of State advisory boards, community labor boards, and State organization committees, composed of joint representation from employers, employees, and the United States Employment Service was initi- ated. There were, in addition, industrial advisers who furnished information concerning the need for skilled labor and the labor supply in each community and who assisted the district boards in arriving at their decisions as to whether or not individuals were performing work necessary to the effective operation of the military forces. The results of this entire plan were evidenced in a reduc- tion of labor turnover, the expedition of transfer of unskilled labor from non- war work to war work, and the direction of the unemployed or partially employed to industries closely allied to the prosecution of the war. Some appreciation of the contribution rendered by the United States Employ- ment Service may be had from the following brief summary of its activities during the 18 months the United States was in the War.^ Few of the pre- war specialized services retained their identity. The Farm Labor Service was an exception, and it continued its distribution of farm labor to the wheat, cotton, apple, peach, and gi'ape districts. The United States Boys' Working Reserve was made up of boys over 16 who were organized from the cities in order to help with the seasonal farm work. There was some guidance toward work with a reasonable future career for those boys desiring industrial em- ployment. The Women's Land Army was a group of trained and supervised women who helped with the cultivation and harvesting of crops. Efforts were made to place the "aged" worker as a measure of alleviating the drain upon manpower. One of the largest divisions of work was that of the Public Service Reserve which acted as a registration agency for patriotic citizens desiring to offer their services to the Government with or without pay. It registered over 300,000 men of various skilled and unskilled trades. A shipyard and marine section was one of the emergency sei-vices of the Employment Service. It recruited 19,000 mechanics for the United States Shipping Board and aided in directing and placing stevedores and other marine workers who are ordi- narily an immobile labor group. On October 1, 1917, the Department of Labor took over the work of the National League for Women's Service which had been contacting, registering, and placing women available for war work. There was the large task of informing the public, and particularly manufacturers, concerning the service. The greatest volume of work came in connection with the selection and placement of skilled and unskilled labor. The work of this division exceeded even that of the Farm Labor Division. It appealed to trade- unions, it arranged for the furlough of men of certain trades from the Army into industry, it recruited all unskilled labor except for railroads, farms, and nonwar work, after August 1, 1918 ; and it administered a revolving fund of $250,000 for the transportation of labor. This fund was left almost intact, since in most cases the employer receiving the labor was charged with the cost of transportation. At the height of its war-time expansion in the fiscal year 1918-19, the United States Employment Service registered over 6 million workers, received * Smith, D. H., The United States Employment Service, Institute for Government Research, Service Monographs of United States Government, no. 28 (Johns Hopkins Press, Baltimore, 1923), pp. 13-28. 428 APPENDIXES notice of over 10 million job oi)enings, and placed approximately 5 million workers. 9 There were 773 oflBces located in 605 cities in 48 States and the District of Columbia. The total Federal appropriation for operation of the employment offices in the fiscal year 1918-19 was $5,772,0O0.io THE POST-WAR PERIOD The end of the war brought a complete reversal in the employment situation and consequently necessitated a readjustment of the activities of the United States Employment Service to meet the new conditions. The Emjjloyment Service was now faced with the problem of finding jobs for all the returning soldiers as well as for all those who had been employed in the war industries and were no longer needed. From a seasonal point of view the armistice came at a difficult time: jobs were needed in the early winter months when normal out-of-door work was being suspended and when farmers, having just released all the extra help which they had employed during the summer and fall, made no demands for additional labor. Cooperation between the War Department, the War Industries Board, and the Department of Labor led to a judicious cancelation of war contracts, demobilization of the Army with, the least possible danger to the labor situa- tion, and the creation of over 2,000 bureaus throughout the country for assist- ing returning soldiers and sailors. The war-time divisions, such as the Boys' Working Reserve, the Public Service Reserve, the Stevedores and Marine Workers' Division, and the Mining Division, were discontinued. After the armistice was signed several special types of work were undertaken, the most significant ones being the Junior Section for the purpose of giving vocational guidance to boys and girls between the ages of 16 and 21, the Handicap Sec- tion for the purpose of helping persons handicapped by age or some physical disability, and the Professional and Special Section for the purpose of assisting highly trained men and women to find positions for which they were qualified. The major problem facing the United States Employment Service after the war was the inadequacy of financial appropriations. Because the service had been considered by the public as an emergency service rather than a part of a permanent program for organizing the labor market in the country, there was not sufficient public support to maintain a permanent public employment system on an adequate basis. Within a year after the peak of maximum activity in 1918, the entire chain of Federal employment offices was abandoned or turned over to the States and municipalities for continuation. From 1919 to 1931 the United States Employment Service continued to func- tion only as a clearing house for information, standards, and statistics, and, to a limited extent, for interstate clearance on placements. A skeleton organiza- tion was maintained which operated on an annual budget of about $200,000. The Farm Labor Division for recruiting and distributing harvest labor was maintained, some activity was continued in the Junior Division, and the place- ment service for handicapped workers was carried on in cooperation %^ith rehabilitation agencies. Leadership in the development of adequate public employment offices throughout the country, however, passed to the municipali- ties and the States and to private organizations interested in the field. The States had taken the initial lead in the development of public employ- ment offices in this country. As early as 1S90 Ohio passed a law establishing " Compiled from tbe Seventh Annual Report of the Secretary of Lalor (U. S. Govern- ment Printing Office, Washington, D. C, lf)19), p. 275 and p. 292. " Harrison and Associates, Puilic Employment Offices, Russell Sage Foundation (New York, 1924), p. 624. UNITED STATES EMPLOYMENT SERVICE 429 State-city employment oiBces in its five principal cities. By January 1, 1933, about half of the States supported 139 such ofiices. Many of these offices had unsuitable quarters and were staffed with untrained or poorly qualified per- sonnel, because appropriations were meager and salaries too low to attract the type of person needed for the work. THE CONTRIBUTION OF THE DEMONSTRATION CENTERS The major exceptions to the inadequate type of local employment ofiice that generally prevailed were found in certain experimental centers. Three such centers were supported jointly by State funds and private foundation grants in the years from 1931 to 1938. These demonstration centers were instrumental in promoting the development of adequate standards of operating efficiency in local employment ofiices and had planned a research program designed to pro- mote a better understanding of unemployment problems and the diflSculties involved in a large-scale effort to organize the labor market. Duluth, Minneapo- lis, and St. Paul were combined into a tri-eity demonstration center under the Employment Stabilization Institute of the University of Minnesota. Special experimental offices were developed in Rochester and Philadelphia, and some experimentation was also carried on in the New York City employment offices. In connection with these demonstrations, and in other States as well, a num- ber of State commissions were appointed to study unemployment problems or to improve the existing facilities of the public employment ofiices. It is dijfficult to appraise adequately the contribution of the demonstration centers, hence only a brief summary of their activities is attempted here. The Minnesota experiment emphasized research. A well-rounded program of re- search was developed, stressing analysis of the economic factors governing employment and unemployment in the State and analysis of the individual unemployed person in relation to his vocational aptitudes and chances of suc- cess on a job. This clinical approach to the solution of the problems of unem- ployed individuals has received increasing attention in recent years, and the Minnesota studies of occupational patterns or profiles have laid the ground- work for interesting experimentation in job analysis in terms of psychological test results. The Tri-City Employment Stabilization Committee also assumed advisory control of the Minnesota Employment Service for a 2-year period be- ginning in 1931. The functions and arrangements of the local employment offices were reorganized, a more adequate record-keeping system was intro- duced, and other improvements in the service effected. In the Rochester Public Employment Center emphasis was placed on promot- ing community contacts, particularly those with employer groups, and on experimentation with refined public employment techniques. Considerable ex- perimentation with psychological tests for clerical workers was made here, not primarily for research purposes as in Minnesota but as a tool for vocational guidance to the individual. The research program in Rochester stressed the analysis of costs of placement and other administrative problems in the local employment office. Possibly the outstanding contribution of the Rochester center was in the field of experimentation in record keeping and the analysis of functional or administrative problems in the office. The Philadelphia Employment Office was, from the beginning of its experi- mental period, swamped with the problems arising from a high rate of unem- ployment in a large metropolitan center. Its contribution therefore came to be largely that of demonstrating adequate employment work for large numbers of applicants. The office made interesting experiments in lay-out and general office policy and procedure, and the results of many of these experiments were 78470—37 29 430 APPENDIXES later adopted by the United States Employment Service. It demonstrated that adequate personal interviews could be given unemployed workers, although hundreds of thousands were "at the gates." The Philadelphia office actually did a great deal of vocational counseling in a wide range of occupations, although it was not equipped for psychological testing. Special research studies of the occupational trends in the city and of the characteristics of unemployed workers in the local labor market were made. The employment center and its sponsors, during the period of experimentation, laid the groundwork for a long-time program of research in the problems of the local employment market in Philadelphia. It was upon the experience of these three demonstration centers and the work of such cities as Milwaukee and Cleveland and such States as Wisconsin and New York that the growing science of public employment administration was based. Out of this experience came the new principles of employment work incorporated in the Wagner-Peyser Act. THE REORGANIZATION OF 1931 A number of attempts were made during the period from 1919 to 1932 to obtain Federal funds for a Nation-wide public employment system. Conferences of interested persons were held, and several bills were introduced into Con- gress. The Kenyon-Nolan bill was introduced in the Senate in June 1919. This bill in amended form was later sponsored by Senator Wagner and reached pub- lic hearings in 1928, 1929, and 1930. Although the bill passed both houses in 1931, it was vetoed by the President. The "Doak reorganization" of the employ- ment offices was launched a few weeks later to meet the growing demand for public employment offices. The reorganized employment service failed to take cognizance of much of the experience of the United States Employment Service during the war period and also failed to benefit by the experience of the States which had developed in- creasingly effective public employment offices between 1920 and 1931. The greatest need of the public employment offices at the time was for well-planned coordination of all public employment activities. Under Secretary Doak, Federal employment offices were set up as a competing system to other estab- lished services. Fifty-three of the 96 cities which had Federal employment offices in 1932 were cities in which a State or State-city employment office was already located." Even the veterans' employment offices and farm-labor agencies, which were under Federal control, were not coordinated with the other offices or the service as a whole. A second major need of the public employment offices was for trained and well-qualified personnel. From its very beginning the effectiveness of the work and the reputation of the Federal service had been hampered by the "spoils system" and by the appointment of untrained workers. There was little indi- cation of a reversal of this trend in the years 1931 and 1932. A third major need of the public employment system in 1932 was for ade- quate standards of premises and operation. The United States Employment Service during this period sacrificed the adequacy of housing, lay-out, and effective operation of local employment offices to obtain geographic coverage on a Nation-wide scale. As a result, the competing offices set up in the cities where other employment offices were already in operation frequently had less attractive housing and were operated less efficiently than the older local offices " Kellogg, Ruth, The United States Employment Service (University of Chicago Press, Chicago, 1933), p. 83. UNITED STATES EMPLOYMENT SERVICE 431 on the other side of the street or around the corner. There was so much confusion in the use of terms and in the reporting systems of the Federal offices and those cooperating with them, that it is difficult to procure any reliable data on the activities of the Federal employment service during this period. The inadequacy of the service rendered by the Federal organization, the vv'aste engendered by two competing systems of public employment offices, and growing public interest in the problem led to the introduction of a revised employment service bill by Senator Wagner, later known as the Wagner- Peyser Act. This act was passed as part of the recovery program and became efeective June 6, 1933. THE PRINCIPLES OF THE WAGNER-PEYSER ACT The Wagner-Peyser Act abolished the then existing United States Employment Service and created a new service as a separate bureau in the Department of labor. Its major function is to promote and develop a national system of em- ployment offices by assisting in establishing and maintining them in the States. This provision recognizes the principle that the organization and conduct of em- ployment offices is best done by State and municipal governments. The function of the Federal office under this arrangement is to develop and maintain minimum standards of operation, promote uniformity in procedures and record keeping, maintain interstate clearance of labor, and thus integrate the local and State services into a Nation-wide employment system. The United States Employment Service is authorized on its own responsibility to maintain a special placement service for veterans and for farm labor and to operate a public employment office in the District of Columbia." The Wagner-Peyser Act permits grants-in-aid to the State employment systems when affiliated with the United States Employment Service. For the first year of operation an appropriation of $1,500,000 was authorized, and $4,000,000 was au- thorized for each of the 4 succeeding years. Three-fourths of each annual appropriation is apportioned to the States on the basis of their populations. The remainder may be used for administrative purposes or to maintain authorized special services. The Federal funds granted to the affiliated State services will match each State appropriation, provided the State appropriation is not less than 25 percent of the apportionment according to population, and in no event less than $5,000 for the year. An amendment to the act was approved May 10, 1935, to the effect that after January 1, 1935, the minimum Federal appropriation to an affiliated State would be $10,000. Under the act a plan for the operation of a State employment service must be submitted by the proper State agency and be approved by the United States Employment Service. In this plan of operation the State employment service must agree to conform to the standards of the United States Employment Service relating to personnel, premises, procedures, and other administrative arrangements, and to submit such reports of expenditures and operations as are required. A State advisory council, composed of representatives of employers, "The veterans' placement service of the United States Employment Service formerly operated separate veterans' placement offices. These have been discontinued and a State veterans' placement representative acts to clear all employment questions affecting veterans and sees that the interests of veterans are protected in the regular work of the local offices. This is another step in the integration of the activities of various branches of the service. The farm-labor division is maintained as a semi-independent unit and the District of Columbia office is conducted as an independent unit of the service. All three units are responsible to the Director of the United States Employment Service. 432 . APPENDIXES employees, and the public at large, must also be appointed with the cooperation of the United States Employment Service. By November 1934, 22 State employment services had become affiliated with the United States Employment Service. These services are in the following States : Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Virginia, West Virginia, Wisconsin, and Wyoming. These State services operate 168 employment offices in 140 cities. The 140' cities include 85 percent of all cities with over half a million population and 62 percent of the cities with over 100,000 population. They also include 75 percent of the total workers normally engaged in manu- facturing industries." During the fiscal year ending June 30, 1934, when only 18 State employment systems were affiliated with the Federal Service, 3,445,5.53 new applications for employment were received and 1,470,131 job openings were filled by the affiliated offices." By June 21, 1935, 24 States had presented plans for State employment offices which were approved as meeting the requirements of the Wagner-Peyser Act and 16 additional States had passed laws providing for affiliation with the United States Employment Service. Thus, only 8 States have made no provision for such affiliation. OPERATION UNDER THE WAGNER-PEYSER ACT Possibly the most interesting features in the Wagner-Peyser Act were (a) the establishment and formulation of standards as the major function of the Federal office, and (&) State compliance with minimum standards as a condition of Federal grants-in-aid. Federal grants had previously been given to States for other public-welfare needs, but no device had ever before been developed to set minimum technical standards of operation and then to test for compliance with the accepted standards. This process of setting Federal standards is still in a stage of experimentation for several reasons. The major interest of the United States Employment Service is to improve and strengthen existing employment offices rather than to exert pressure on States to "administer a system." The time required for conformity to standards must be somewhat flexible, and the local groups must be carried along in an educational campaign. No group of well-established local services can be changed overnight. The administrative organization in the States, for example, may have to be completely changed and the local offices relocated and reorganized. The adoption of a merit system in the appointment of personnel may work havoc in certain local centers. In the meantime the employment offices since 1933 have been under tremendous pres- sure to perform emergency services in connection with the relief program and other community activities in addition to their regular placement functions. Ail these factors make the establishment of standards a slow and experimental process. The major work of Federal-State relationships under the Wagner-Peyser Act is at present divided between two sections of the central administrative organi- zation in Washington. The Division of Operations approves operating agree- ments with the States, conducts "compliance surveys" to assure mamtenance of standards, and controls such regional offices or field-work activities as may be 1' Speech by Frank Persons, Director of the United States Employment Service, Boston, Sept. 29, 1934, before the International Association of Governmental Labor Officials. " United States Employment Service, Twelve and One-half Million Registered for Work, 193i (U. S. Government Printing Office, Washington, D. C, 1935), appendix tables. UNITED STATES EMPLOYMENT SERVICE 433 established by the United States Employment Service. The Division of Stand- ards and Research is responsible for the initial development of forms and pro- cedures to be used in the States, for the organization of a statistical program, and for experimentation and reseax'ch in the general field of employment problems. Possibly the most interesting of the experiments in the formulation of stand- ards by the United States Employment Service is in the field of personnel. Although the States aflBliating with the Employment Service have been per- mitted several choices with regard to the selection of personnel, a majority of them have elected to use the merit system of appointments initiated by the United States Employment Service. In the fall of 1934 all but 4 of the 22 State affiliated systems and the District of Columbia had utilized the services of the merit examination system conducted by the United States Employment Service or had made appointments according to State civil-service requirements. This represents no mean achievement in the first 2 years of operation of the Wagner-Peyser Act. A number of other important aspects of public employment work have received consideration and have been the basis of policy determination. Stand- ards with regard to adequacy of premises and signs or other advertising have been developed as the minimum basis of operation of local employment offices. The State advisory councils have been considered valuable enough to be re- quired as a condition of State affiliation with the Federal employment service and, in addition, local advisory councils have been recommended. Policy on such important questions as the referring of workers to plants in which there is a labor dispute has been developed on a uniform basis, insofar as State labor laws do not interfere with such uniformity. Other problems of policy and office procedure are being discussed and eventually minimum standards for these will also be developed. To date, no program of field supervision has been worked out. The States have been left to administer their part of the agreement with little if any supervision. "Compliance surveys" may have had an indirect supervisory effect, but are not intended to replace the plans for regional supervision originally contemplated. Experimentation with expansion of the supervisory functions of the United States Employment Service has of necessity proceeded carefully, with due allowance for the State interests involved. Progress has also been made in the direction of developing an adequate clearance system. Several States, such as Wisconsin, Pennsylvania, and New York, maintain intrastate clearance systems.^" The United States Employment Service has developed plans for intrastate and interstate clearance for place- ment in public-works projects. This experiment like the others discussed above indicates the type of work which will be of increasing importance in future years when the public employment system becomes an established part of every community's public-welfare activities. Under the Wagner-Peyser Act, the United States Employment Service is commissioned to publish information concerning "opportunities for employment and other information of value in the operation of the system." To this end the Division of Standards and Research has developed a statistical program based on daily reporting of the major activities of all local offices in the system. This statistical information, if sufficient analytical service can be maintained, will present the most detailed picture of the important economic factors in local ^ Pennsylvania cleared over 500 applicants between offices in 1933 ; New York filled 40 jobs a month in the summer of 1934 through its district clearance system. 434 APPENDIXES and national employment markets that any country has undertaken.^' It should become in time the basis for a program of extensive planning on the occupa- tional and vocational aspects of major unemployment situations. An allied activity of the Division of Standards and Research is the proposal of a job- specification research program. One phase of this project will be useful in establishing standard terminology in job specifications and occupational classi- fications. Another phase of this project wUl use clinical methods in studying individuals who are successful in the jobs analyzed and will attempt to define specification standards of training, experience, and ability. This project is being partially supported by private foundation grants and is being supervised by a technical advisory committee composed of members named by the Social Science Research Council and members designated from the national advisory council of the United States Employment Service. Another service which has been performed by the Division of Standards and Research concerns the checking of alleged labor shortages throughout the country. The N. R. A. code authorities received requests to permit extension of the regula- tions on maximum hours because of alleged labor shortage in specified occupa- tions in certain areas. The United States Employment Service checked the short- ages through its local offices to see whether any bona fide labor shortages existed. Temporary local shortages may occur frequently, but it is seldom that a regional or Nation-wide labor shortage exists. In the spring of 1934, for example, many such requests were cheeked, and only one alleged Nation-wide shortage was actually verified upon investigation. Most of the States which have been slow to take advantage of Federal subsidy under the Wagner-Peyser Act have been handicapped by lack of funds. This problem may delay for some years the affiliation of the States not now affiliated. But the 40 States which have provided for affiliation and which include most of the industrialized sections of the country are now assured of more adequate financial support and the technical assistance necessary to expand their functions and activities in a Nation-wide program of great future promise. The principles established in the Wagner-Peyser Act are viewed by most students of the question as a sound basis for the slow but permanent expansion of public employment work in the United States. EMERGENCY NEEDS AND THE NATIONAL REEMPLOYMENT SERVICE Although the Wagner-Peyser Act incorporated the principles considered impor- tant in a permanent development program of employment offices, it was not flexible enough to meet emergency needs for rapid expansion. The first emer- gency need arose in July 1933, when it was decided that labor for public-works projects (except for the employment of union labor in customary ways through recognized locals of the unions) was to be obtained through employment agencies designated by the United States Employment Service. This was to assure that the designated legal employment preferences " on public-works projects would be. " The Canadian employment offices supply similar information to a central office, but adequate statistical analysis has never been developed for the interpretation of local labor market conditions or of special occupational or industrial situations. "Section 206 (4) of the National Industrial Recovery Act (48 Stat. 205) read.s to the effect that "in the employment of labor in connection with any such (public-works) project, preference shall be given, where they are qualified, to ex-service men with dependents, and then in the following order : (a) To citizens of the United States and aliens who have declared their intention of becoming citizens, who are bona fide residents of the political subdivision and/or county in which the work is to be performed, and (b) to citizens of the United States and aliens who have declared their intention of becoming UNITED STATES EMPLOYMENT SERVICE 435 maintained and that wasteful migration of labor from place to place would be dis- couraged. In November 1933 the Civil Works Program was launched, and the United States Employment Service was given the task of selecting half or more than half of the 4 million individuals placed on civil-works projects. The com- bination of these emergency tasks necessitated some sort of employment agency in every county in the United States. To meet this need the National Reemploy- ment Service was created as an emergency organization, financed and adminis- tered by the Federal Government. It supplements the work of the permanent State employment services, and in no State is there overlapping or duplication of effort. At the peak of its activity in 1933 the National Reemployment Service had 3,320 local olBces and registered some 9,000,000 applicants within a 10 weeks' period. The number of offices has recently been reduced to 600 district offices, each serving an area of one or more counties." For the fiscal year ending in June 1934, the National Reemployment Service registered 9,189,421 applicants and made 5,481,392 placements, 8.5 percent of which were in public employ- ment." During this same period the record of activity for all public employ- ment offices in the country was a total of 12,634,974 applicants and 6,952,000 placements." The difficulties to be met in such a rapid expansion of public employment work were very real. Adequate facilities were frequently lacking; floor space and equipment had to be borrowed by the reemployment offices. The relief administrations generously gave personnel to staff the offices — in many States contributing half or more than half of the personnel required — and volunteer workers were effectively used in some States. The difficulties attendant upon providing adequate employment service in remote rural outposts tested the ingenuity of the staffs of the reemployment offices. Itinerant agents and chains of substations were tried. In some counties, as many as 36 substations were established for registration of the unemployed and of persons in families on relief. New workers had to be trained in the work of registration since few experienced employment experts were available at the time. The facilities of the established employment offices in the affiliated systems were also taxed to the utmost to meet the demands of the emergency works program. Important community services in relation to the relief program have thus been performed by the public employment offices under both systems. The National Reemployment Service has been an effective demonstration of registration and placement activities in many counties ©r States which have never before had a public employment office. It is to be hoped that this demon- stration will stimulate popular support for acceptance of the provisions of the Wagner-Peyser Act and for expansion of the existing employment service. The difficulty is that as long as the Federal Government establishes and main- tains employment offices in the States and counties which do not have them, local legislators are under no incentive to match funds for affiliation under the Wagner-Peyser Act. citizens, who are bona fide residents of the State, Territory, or District in which the work is to be performed, provided that these preferences shall apply only where such labor is available and qualified to perform the work to which the employment relates • • *." These preferences applied only to the work program of 1933—34. 18 Speech by W. Frank Persons, Director of the United States Employment Service, before the Twentieth Annual Meeting of the International Association of Government Labor Officials, Boston, Sept. 29, 1934. ^ United States Employment Service, Ttoelve and One-half Million Registered for Work, op. cit., appendix tables. 436 APPENDIXES Mr. Persons, the Director of the United States Employment Service, recently stated that "in those States which have affiliated employment services, it is the objective of the United States Employment Service to merge the State service and the National Reemployment Service as quickly as it is financially and administratively possible." '" In New York, New Jersey, and Connecticut there has been an amalgamation of the two services. In other States, on the other hand, there are two uncoordinated services reporting to different divisions in the United States Employment Service, one under Federal control, and one under Federal-State control. There are, therefore, three relationships of States to the Federal Government in the Employment Service; one group of States has National Reemployment Service offices under Federal control only ; one group has both National Reemployment Service and State employment service offices under separate Federal and Federal-State control; and a third group has both types of offices under a unified administration. Eventually, both sys- tems will probably meet the same standards of operation required by the United States Employment Service, but it is essential that the two services in the States whero there is no coordination of activities be merged as rapidly as possible. THE PROGRESS RECORD IN EMPLOYMENT WORK It was only a few years ago that the future looked dark for public employ- ment work except in one or two States and in a few demonstration cities. In the short time since the passage of the Wagner-Peyser Act and the development of an employment policy for placement on public-works and work-relief proj- ects, tremendous progress hag been made in the development of an adequate system of public employment offices in this country. There has been a slow but substantial improvement in the standards of operation of the offices already in existence which have become affiliated with the United States Employment Service. Both the established offices and the emergency offices have benefited by the experience of registering and classifying large numbers of applicants and placing workers on all types of work projects. The States which have had considerable experience with public employment offices have forged ahead with their experiments, assured of more financial support than was formerly available. Salaries in employment work are still low in comparison with similar types of professional work, and facilities are frequently less than adequate. In many communities the long-time program of developing a high type of placement service had to be temporarily set aside the past years to take care of emergency projects. But despite these drawbacks progress is noticeable in all States. Some cities, for example, are experiment- ing with specialized bureaus for certain industries or selected occupational groups. Special programs have been developed for young unemployed persons in a number of cities. Vocational training and retraining projects have been 20 Speech before the International Association of Governmental Labor Officials, Boston, Sept. 29, 1934. A recommendation of the Committee on Employment Exchanges adopted by the National Conference for Labor Legislation, Washington, Feb. 14-15, 1934, stated : "That the place- ment services now conducted by local offices of the National Reemployment Service in States where there are regular State employment services affiliated with the United States Employment Sei-vice, insofar as these local reemployment offices fit into the permanent long-time program of the State services, be merged with the latter as rapidly as practicable, with due regard to the financial problems involved and to the maintenance of the necessary placement services in the regions naturally tributary to the offices so merged." Report of Proceedings, p. 74. UIsriTED STATES EMPLOYMENT SERVICE 437 sponsored or assisted by the public employment offices in many centers. At least one State has experimented in the transfer of unemployed workers from dying trades in one county to expanding industries in another section of the State. Research projects in the problems of local and regional employment markets have been started or continued. All these local experiments need further financial support and might be more valuable if coordinated into a general research and planning program on unemployment problems in local employment centers. But the impression of most observers who have been in touch with public employment work for more than 2 years is that "the employ- ment offices are on the upgrade." The experience of the United States Employment Service since June 1933 has been invaluable preparation for the administration of an unemployment compensation plan, no matter what its form may take. The success of State unemployment compensation systems, as well as of any work-relief program, depends in part upon the adequacy of the placement work of the public employ- ment offices and any other contribution they can make to the solution of unem- ployment problems. The development of this aspect of the work of a public employment service is at best a slow process. The administrative problems involved, for example, in attempting to offer a placement service or a qualified employment agent within the walking distance of every workingman in the country are stupendous. There is every reason to believe that the principles of expansion provided in the Wagner-Peyser Act are sound, and that the adequate functioning of the public employment system should not be sacrificed to procure widespread geographic coverage in the immediate future. The Federal Social Security Act specifies as a condition for approval of a State unemployment compensation plan that all benefits shall be paid through public employment offices or such other agencies as the Social Security Board may approve. When, in addition to the present placement activities of State employment offices and the National Reemployment Service, the public employ- ment offices in the United States are called upon to handle the work of registry, certification, and payments for all unemployed persons within the State who are covered by the State unemployment compensation system, the number of branch offices and of personnel will need to be greatly increased. In the early summer of 1935, the total personnel in the United States employed by the State employment offices and the National Reemployment Service was 7,750, or approximately 1 per 3,500 persons who would be covered by unemployment compensation if all States enacted legislation with the same coverage as that of the Federal Social Security Act. This number would have to be increased at least fivefold to offer facilities comparable to those available in the German and British employment exchange systems." ^ In the administration of both placement and compensation functions, the British employment exchanges had in 1931 an average total staff of 25,521 persons, including those employed at the headquarters in Kew. This represents approximately 1 employee of the employment exchange for every 490 persons covered by the insurance system. In Germany the ratio of employment office personnel to persons insured was approximately 1 : 595 in 1932. Table IV— 1 indicates by States the distribution of employment office personnel in the United States, the approximate number of persons who would be covered by a State unemployment compensation system, and the number of employment office personnel who would be required on a basis of 1 : 500 persons covered. Approximately 44,000 persons will be needed to perform the employment office functions on this basis, an increase of 471 percent over the 1935 total personnel in State employment offices and the National Reemployment Service. The estimates of personnel required by States are purely relative and talce no account of variations in the severity of unemployment between States. In times of widespread unemployment the worlj of the employment offices will be very extensive. 438 APPENDIXES Table IV-1. — Personnel of public employment offices by States, 1935, compared with estimated num,l)er needed for unemployment compensation activities Personnel employed in public employment offices, 1935 Approxi- mate un- employ- ment com- pensation coverage, 1933 3 Approxi- mate num- ber of em- states State employ- ment offices 1 National Reem- ploy- ment Ser- vice 2 Total ploj-ment office per- sonnel needed on basis of 1:500 covered Total, United States 1,503 6,247 7,750 22, 416, 000 44,832 191 69 209 207 103 41 13 191 75 209 256 130 75 13 22 104 113 33 345 193 222 310 87 70 40 74 184 130 279 73 215 134 166 28 36 118 73 567 170 70 535 64 55 772 61 167 101 116 390 71 23 148 102 106 196 35 295, 000 76, 000 149, 000 1, 303, 000 172, 000 380, 000 47, 000 114,000 277, 000 356, 000 54,000 1, 670, 000 577, 000 329, 000 266, 000 308, 000 298, 000 149, 000 344, 000 1, 034, 000 1, 006, 000 396, 000 147. 000 627, 000 76,000 176,000 20, 000 100,000 990, 000 49, 000 3, 159, 000 366, 000 59, 000 1, 352, 000 299, 000 193, 000 2, 080, 000 171, 000 183, 000 65,000 324. 000 796, 000 75, 000 59, 000 339, 000 329, 000 264. 000 482, 000 36, 000 590 6 152 Arkansas 298 49 27 34 2,606 Colorado . .. 344 760 Delaware 94 22 228 riorida 104 113 33 170 121 173 310 87 554 Georgia - . - 712 108 Illinois - --- 175 72 49 3,340 1,154 Iowa --- 658 Kansas - . 532 Kentucky 616 Louisiana - 70 596 40 74 110 78 214 73 165 134 166 22 27 41 67 309 170 70 366 46 31 684 61 167 101 116 390 71 23 131 102 90 135 29 298 Maryland 688 Mas.sachus8tts 74 52 65 2,068 2,012 Minnesota 792 Mississippi 294 50 1,254 Montana .. . 152 352 6 9 77 6 258 40 200 1,980 98 New York 6,318 732 North Dakota . .. 118 169 18 24 88 2,704 Oklahoma 598 386 4,160 342 South Carolina 366 130 Tennessee - .. - ...... 648 Texas . . 1,592 Utah 150 118 Virginia.. 17 678 658 West Virginia. ... .. 16 61 9 528 964 Wyoming 72 ' Data furnished by U. S. Employment Service, Department of Labor. The numbers given are the total personnel paid by Wagner- Peyser and P. W. A. funds as of July 10, 1935, from reports submitted by State directors of employment. s Data furnished by U. S. Employment Service, Department of Labor. The numbers represent the total personnel paid by the U. S. Employment Service, the Federal Emergency Relief Administration, and by county and community governments in May 1935. 3 From table 1-17, p. 400. A greater concentration of the employment function of the relief program in the public employment offices has accompanied recent work-program devel- opments and appears to be good governmental administrative polic.v and sound economic policy. Local offices not only register and classify all employable persons on relief, but refer and place workers on all types of work pro.iects. What amounts to a perpetual occupational inventory of applicants on relief is UNITED STATES EMPLOYMENT SERVICE 439 maintained, and the labor supply available for all work projects is reported to the relief and works authorities. The employment oflSces report to the relief authorities when persons on relief are placed in private employment. The work program in the country as a whole should be enriched by utilization of employment techniques under skilled personnel and by the increasing use of the knowledge of employment office workers concerning local, State, and national employment conditions. The program of the United States Employment Service, in the last analysis, is a long-time as well as an emergency program, with work ahead in good times as well as bad. Its contribution to the emergency needs of the present is not in any way minimized by this comment. The problem of lack of balance and adjustment between the demand for labor and its supply in the hundreds of occupations in which American workers are employed is always present. End- less "pounding the pavements", looking for work, is just as wasteful in periods of prosperity as in periods of depression. Careful selection of workers for jobs is an important social and economic function during any phase of the business cycle. The mass of American workers now depend, and will continue to depend, upon jobs in private employment as their main sources of income. Thus, the efforts of the public employment offices to organize the labor market constitute both a direct and an indirect approach to economic security for the individual. The United States Employment Service, consequently, is one of the most stra- tegically placed governmental agencies for making an important and lasting contribution to the movement for greater economic security for American workers. • fO/Ujent)' cfmozi.iij I,. :■: 78470—37 (Face p. 440) SUMMARY OF STATE UNEMPLOYMENT COMPENSATION LAWS, JANUARY 1, 1936' ,..,-, c..™. ,r„>..^"Kffi'r,.p.,™,. ...... ^.- — Ratio 01 booiBl J^lj^l^'l^""- of P™»louJ 'KBs^as- 'SSSaSm s..,„ — .„„.„.„ .„,„„ -- '- --= T.u...«,i.re,»i '--"■■'-■ — o„,„ — ^""tSISd^'" «.„ "•*"" "'"""" *UD.«X n,ri»nila( »*rs".rs "■■fSsss 2^^iS5T°ViK- "'""*"■'"■■" """""' ■■'"" "isSs'lS"^ '•"'■'•" "SFS2 l=»i "™",'" ""■" " Cn.^mplo"m.a. "■"■"■""■ """'"'""" cimottii Si|.£ffiffi plojTucat mifflponMUoo r,ct of Sfs SI^^H"^V!3^? 'S£",L!rrs |Safs CiUTOniOA S&is; 'S'iim S. ""'""""- 1^ sis fis?r.sSs n«^w %u?i"n m°™ "5SS?""""" 'Bli ".:£" "'"" ■■ °iri"""" 3a'!L."" ""^ ^CITtoB^ui ~jiE MM ffiSsCsf" •"'■■" '"""'" weeks wliblniimoollu ".S" -""" " °EIS'°" itQj,M.rs,ins, "SF= ■pis li?l™to.°.'ni%?j^?nf" C""""^ """"""' ""^^ "" '••'*""' is^'~ Ssisajfi: 'E«S; "•" - "SKis'Sirt ""■""""" """'""" ""'""> "'"""""■ '"■'■'"- — IfSii '^ bQf J^ct'^orj' ihS*"; ■sE,.si:'" l._TOk, ,l,bl. ,! ■■~;"- c. » m'„«u. 'arSTs Am«™ll«», Wal. i^Tij^T and feotOi eijwrloan; Ms§ ''SFSS ^ o..!"™. E« '""•"•'"■ """""""^ SlssasSSS; 'IS " ■""'■" "ssrac"' "■""'" ■"■"■■""■ "„SS.-»«"" -as: '■"■■ cb'rsrL. '-"""' "" ';BE-S".r.i "•■• |H "E"Si"r "SIS gfS'€3 """■'""""•»"■ ' iW """" =" »,S' '»"■ » ..„,.,™> ^i .==r. .ael^ plua/ biHd'iipon'^Dl hor iuj' dJlw mq ai k Appendix VI UNEMPLOYMENT INSUEANCE PROVISIONS OF THE CANADIAN EMPLOYMENT AND SOCIAL INSURANCE ACT^ [Assented to June 28, 1935 ; 25-26 George V, Chap. 38] I. Type op Law A national ^ pooled system of unemployment compensation in conjunction with a national system of public employment offices. Contributions are to be collected by the Dominion to be used for the direct payment of benefits to the unemployed. Effective date to be set by the administrative authority. II. Scope of Law The law is limited mainly to compensation of total unemployment ; partial unemployment is compensated only when the insured contributor is vmemployed three or more days in a week, and no benefits are payable for fractional days of unemployment. Seasonal employment is in the main excluded from coverage by the requirement of 24 weeks of employment in a year. In addition the administrative authority may make regulations regarding contributions and benefits for persons who are normally employed in seasonal occupations. Regu- lations may also be made by the administrative authority regarding contribu- tions, the amount and duration of benefits, and the definition of continuous unemployment for part-time workers, married women, and piece workers. III. Coverage A. Persons included. Employment of any person in Canada 16 years of age and over is covered by the act, whether the employed person is paid by one or more employers, by time, or by the piece, or otherwise. Employment outside of Canada or partly outside is included if the purpose is the execution of some particular work by persons who were insured con- ^ This act also contains provisions entitled "National Health" which empower the administrative authority to cooperate with any governmental units or other organizations on the problem of health and to collect information and report from time to time on the subject of health insurance. 2 The preamble of the act asserts that under the provisions of the Treaty of Versailles, to which Canada was signatory, Canada agreed that it would endeavor to secure and maintain fair and humane conditions of labor and that the well-being of industrial wage earners is of supreme international importance. In order to discharge these obligations and for the purpose of maintaining interprovincial and international trade, the unemploy- ment insurance measure was enacted. This law was declared unconstitutional by the Supreme Court of Canada on July 17, 1936, in a decision entitled : "In the Matter of a Reference as to Whether the Parliament of Canada Had Legislative Jurisdiction to Enact the Employment and Social Insurance Act, Being Chapter 36 of the Statutes of Canada, 1935." On July 29, 1936, the Judicial Committee of the Privy Council granted the Dominion Government leave to appeal this decision. The Privy Council, on Jan. 28, 1937, declared the act invalid. 441 442 APPENDIXES tributors immediately before leaving Canada for an employer resident of Canada or having business in Canada, being employment vphich, if it were emplosrment in Canada, would make the person covered by the act, subject to any prescribed conditions, modifications, or exceptions. Unless excluded by the act or by special order of the administrative authority, employment by the Dominion Government or by provincial or municipal govern- ments is covered by the act. B. Employment exclusions. (1) Agriculture, horticulture, and forestry. (2) Fishing. (3) Lumbering and logging, exclusive of such saw, planing, and shingle mills, as are reasonably continuous in their operations. (4) Hunting and trapping. (5) Transportation by water or by air, and stevedoring. (6) Domestic service, exclusive of employment in profit enterprises. (7) Professional nurse or probationer undergoing training as a nurse. (8) Teacher, including teachers of music and dancing in schools or private capacity. (9) Royal Canadian Mounted Police, Navy, air force, and permanent active militia. (10) Dominion, provincial, or municipal police. (11) Civil-service employment, and employment in public service certified as permanent by the administrative authority of the act. (12) Agent employed on commission, fee, or profit-sharing basis. (13) Casual employment otherwise than for the purpose of the employer's trade or business. (14) Employment defined by the administrative authority as subsidiary only and not as the principal means of livelihood. (15) Employment by husband or wife. (16) Employment for which no wages are paid where the person employed is the child of, or is maintained by, the employer. (17) Employment in which persons are employed and paid for plajdng any game. C. Wage exclusions. Employment other than by way of manual labor and at a remuneration exceeding in value $2,000 a year is excluded from both contributions and benefits ; provided that any person in respect of whom contributions have been paid as an insured contributor for not less than 500 weeks may continue as an insured contributor. IV. CONTBIBTJTIONS Contributions are flat rates payable weekly by the employer and employee which vary in accordance with the age and sex of the employee, as follows : Age and sex of employed person Employer contribu- tion Employee contribu- tion Age and sex of employed person Employer contribu- tion Employee contribu- tion 21 years and over: Men $0.25 .21 .18 .15 $0.25 .21 .18 .15 18-17 years: Boys . . $0.11 .09 .07 .06 $0.11 Women Girls 09 21-18 years: Men 17-16 years: Boys 07 Women Girls . .06 The Dominion Government contributes to the unemployment fund one-fifth of the aggregate deposits of employers and employees and also bears the cost of administering the system and of maintaining the public employment offices. Ex- clusive of administrative expenses, the costs of the system are borne in the fol- lowing proportions : Employer, five-twelfths ; employee, five-twelfths ; Government, two-twelfths. CANADIAN SOCIAL INSURANCE ACT 443 The employer pays the total of his own and his employees' contributions. The portion due from the employee may be recovered by the employer by wage deduction. A weekly contribution is due if the individual is wholly or partly employed in any calendar week, but is not due if no remuneration has been received and no services rendered during any such week. An employee is entitled to a refund of contributions paid by him for any days of any such week (exclusive of any frac- tion of a day) in respect of which he proves that he was unemployed within the period of 5 years immediately preceding the date on which he makes application for unemployment benefit, and the whole of the refund to which he may be so entitled shall be payable to him at the same time as the first payment of unem- ployment benefit is payable to him on that application. V. Benefits A. Amount of benefits. Benefits are flat rates which vary in accordance with the age and sex of the insured and with tlie number and class of the dependents, as follows : Age and sex of insured person Daily rate Weekly rate Age and sex of insured person Daily rate Weekly rate 21 years and over: Men $1.00 .85 .70 .60 .45 .35 $6.00 5.10 4.20 3.60 2.70 2.10 17-16 years: Boys $0.30 .25 .45 .15 $1.80 Women Girls 1.50 21-18 years: Men Dependents' benefit: Adult- 2.70 Women Child .90 18-17 years: Girls Benefits paid to insured contributor with dependents cannot exceed 80 per- cent of wages. B. Duration of 'benefits. (1) Normal benefits. — Normal benefits are paid for a maximum of 78 days (or 13 weeks of 6 days) of continuous unemployment. (2) Additional benefits. — Additional benefits beyond the 78-day period are allowed if the insured contributor has made not less than 100 contributions during the preceding 5 insurance years. One day of additional benefit is al- lowed for each weekly contribution during the 5-year period (maximum 260), and from this total is subtracted 1 day for each 3 days of benefit received dur- ing the same 5-year period. Fractions of a day are disregarded in the above computation, and every two contributions paid for a contributor under the age of 18 years are counted as one contribution. The number of additional days so computed is in no case to con- tinue the benefit rights of the insured beyond the end of his benefit year. The benefit year is a period of 12 months beginning on the date on which the insured, in making his application for benefits, proves for the first time that he fulfills statutory conditions for benefits. C. Statutory conditions for the receipt of benefits. (1) Contribution period. — Not less than 40 full weeks of contributions during the 2 years preceding the claim for benefit. The insured cannot credit to this period any days of unemployment for which he received a refund of contri- butions paid by him, but if the insured can prove, for a period, physical or mental disability, noninsured or self employment, such period shall extend the 444 APPENDIXES 2-year qualification period to a period not to exceed 4 years in all. The insured must have had bona fide employment in insurable employment for such weeks which are credited toward the qualification period. A person who has exhausted his benefit rights must have paid 13 weekly contributions since the Sunday last before the last day for which he received benefits in order to qualify for benefits in his succeeding benefit year. (2) Application for benefits. — Application for unemployment benefit must be made in the prescribed manner and proof given that unemployment has been continuous since the date of application. (3) Bona fide unemployment. — The applicant for benefits must prove that he is capable of and available for work but unable to find suitable employment. Refusal of employment offered in consequence of a shortage of work due to a trade dispute; or at wages lower, or under conditions less favorable, than those habitual to the individual in his usual occupation, or less favorable than those observed by agreements between employers and employees ; and refusal of employment if by acceptance thereof the insured contributor would lose the right to membership in organizations of workers shall not be considered as disqualifying the applicant for eligibility for benefits. D. Waiting period. Nine days of continuous unemployment must elapse before the commencement of benefit. Any 3 days of unemployment, whether consecutive or not, within a period of 6 consecutive days shall be treated as a continuous period of unemployment, and any two such continuous periods separated by a period of not more than 6 weeks shall be treated as one continuous period of unemployment. No payment of benefits is made for any fraction of a day. E. Disqualifications from benefits. (1) Statutory disqualifications. — Persons who fail to meet the three statutory conditions (40 weeks of contribution within the past 2 years ; prescribed method of application for benefits; bona fide unemployment) are completely disqualified from receiving benefits. (2) Trade disputes. — If an insured contributor has lost his employment by reason of a trade dispute he is disqualified from receiving benefits so long as the stoppage continues. This disqualification does not apply in any case where the insured person proves that he is not participating in, financing, or directly interested in the trade dispute and does not belong to a grade or class of work- ers of which immediately before the commencement of the stoppage there were members employed at the premises at which the stoppage is taking place any of whom are participating in or financing or directly interested in the dispute. Where separate branches of work which are commonly carried on as separate businesses in separate premises are carried on in separate departments on the same premises, each of these departments shall be deemed to be a separate factory. (3) Temporary disqualification for other causes.— An insured person may be temporarily disqualified from receiving benefits for not more than 6 weeks, beginning with such date as may be determined by the court of referees or the umpire, as the case may be, in the following instances : (a) Misconduct. — If he has been discharged from his employment by reason of his own misconduct. (&) Voluntary leaving. — If he has voluntarily left his employment with- out just cause. CANADIAN SOCIAL INSURANCE ACT 445 (c) Failure to compli/ ivith instructions for -jinding suitable employment. — If he neglects to avail himself of an opportunity for suitable employment or refuses or fails to carry out written instructions of the employment office to find suitable employment. Employment arising out of a trade dispute, employment at wages or under con- ditions less favorable than his usual occupation, or employment less favorable than that observed by agreements between employers and employees is not deemed suitable employment except that after a reasonable interval of unemployment any employment shall not be deemed unsuitable if it is not the usual occupation of the insured, so long as such employment is at wages not lower and under conditions not less favorable than those observed by agree- ments, or failing such agreements those recognized by reasonable and fair employers. No insured person is to be disqualified, how- ever, for refusal to accept employment if such acceptance would make him lose the right to become a member, continue to be a member and observe the lawful rules of, or to refrain from becom- ing a member of any association, organization, or union of workers. (4) Other disqualifications.— Individuals who are inmates of any prison or public- institution, permanently or temporarily not in Canada, or in receipt of an old-age pension, are disqualified from the receipt of benefits. VI. Adminisiration A. Employment and Social Insurance Comtnission. (1) Commissioners. — The act is to be administered by an employment and social insurance commission, consisting of a chief commissioner and two other commissioners appointed by the governor in council. One of the commissioners is to be appointed after consultation with organizations representative of workers, and the other after consultation with organizations representative of employers. The term of ofiice is 10 years, and the commissioners are eligible for reappointment if they are under 70 years of age at the expiration of their terms. Retirement is automatic at the age of 70. The salaries of the commissioners are fixed by the governor in council. (2) Other employees. — Employees of the commission are subject to civil service and are to be employed subject to the approval of the governor in council. Technical and professional persons may be employed by the commis- sion subject to the approval of the governor in council. (3) Powers of the commission.- — The commission is given wide powers to make regulations. It is authorized to appoint insurance oflacers and panels of employer representatives for the courts of referees, to organize and operate a national employment service, and to prescribe procedures, penalties, and the manner and methods of paying contributions and benefits. It is also directed to make investigations for the purpose of proposing to the governor provisions for (a) insurance for those excluded from coverage, (6) assistance during unemployment to insured and noninsured not entitled to benefits, (c) voca- tional training and rehabilitation. (4) Administrative expenses. — The administrative costs of unemployment insurance are to be borne by the Dominion Government. B. Employment service. (1) Establishment, maintenance, and control. — The act provides for the organization, management, maintenance, and control of a national employment 78470—37 30 446 APPENDIXES service under the supervision of tlie commission. The governor in council may repeal by proclamation the Employment Offices Coordination Act of 1927, under which the Dominion Department of Labour cooperated with provincial governments in maintaining free public employment offices. (2) Location. — The commission is directed to establish regional divisions with a central office for each division and such employment offices as are necessary. (3) Local advisoi-y committees. — The commission may establish local advisory committees for the offices which shall include equal numbers of members chosen after consultation with local organizations representative of workers and em- ployers, respectively. C. Advisory committee. (1) Functions.— The governor in council appoints the unemployment insur- ance advisory committee to give advice and assistance to the commission and to make recommendations for amendments of the act. The committee is directed to study the financial conditions of the unemployment insurance fund and to make recommendations for its solvency. (2) Membership. — The committee is to consist of a chairman and not fewer than four nor more than six other members. The regular term of office is to be 5 years. Other than the chairman, one or two members are to be appointed after consultation with organizations representative of workers and an equal number after consultation with employers. D. The unemployment insurance fund. (1) Deposit of revenue. — All revenue received from the sale of unemployment insurance stamps or other means, if any, is to be deposited by the minister of finance in the Bank of Canada to the credit of the commission. The fund is to be used solely to pay insurance benefits. The minister of finance is also to deposit one-fifth of the aggregate deposits from funds provided by Parliament. (2) Investment of funds. — The funds are to be invested only on the authoriza- tion of an investment committee of three members, one nominated by the com- mission, one by the minister of finance, and one by the governor of the Bank of Canada. The commission may pledge any of the securities of the fund to borrow money to pay unemployment benefits. E. Claims and appeals. (1) Insurance officers. — These officers are employed by the commission in each regional division. All claims for benefits and all questions arising in connection with claims are to be submitted to an insurance officer who may allow a claim, but who cannot disallow a claim on the following grounds: (a) That the claimant has failed to fulfill the qualification of being capable of and available for work but unable to obtain suitable employment ; (6) That the claimant is disqualified by reason of discharge for mis- conduct, voluntary leaving without just cause, or for having refused or failed to apply for suitable employment ; (c) That the claimant does not fulfill one or more of the additional conditions for the receipt of benefits or is subject to restrictions on the amount or period of benefits imposed by such regulations. The insurance officers refer to the court of referees all claims in which there Is any question whether the claimant's benefits are to be reduced. (2) Courts of referees. — The courts of referees are to be composed of a chairman appointed by the governor in council and one or more members CANADIAlSr SOCIAL USTSURANCE ACT 447 chosen to represent employers with an equal number of members chosen to represent insured contributors, chosen from panels set up by the commission. Courts may be set up in such a manner and in such numbers as the governor in council finds necessary for each regional division. When a claim is disallowed by an insurance officer the claimant, at any time within 21 days after the decision of the insurance officer is communicated to him, or as the commission may allow, may appeal to the court of referees. (3) Umpire. — The umpire is designated by the governor in council from among the judges of the exchequer court of Canada and of the superior courts of the Provinces of Canada. Such deputy umpires as may be deemed necessary may also be appointed. An appeal to the umpire can be made from a decision of the court of referees at the instance of: (a) An insurance officer; (6) An association of employed persons of which the claimant is a member ; (e) The claimant, where the decision is not unanimous or with the permission of the chairman. Such appeals must be made within 6 months from the date of decision of the court of referees or such longer period as the umpire may allow. Appendix VII OLD-AGE INSURANCE IN GREAT BRITAIN ^ In 1932 Great Britain and Northern Ireland were providing old-age pensions to a total of 2,231,016 persons aged 65 and over under the combined Old-Age Pensions Act, 1908-24, and under the Widows', Orphans', and Old-Age Con- tributory Pensions Act, 1925-32. Of the total old-age pensions, 699,853 were granted to men and women between 65 and 70 under the "contributory pen- sions" scheme ; and 1,531,163 to persons over 70 under the noncontributory Old- Age Pensions Acts, 1908-24. Of those over 70 years old receiving noncon- tributory pensions, 662,638 were receiving their pensions by virtue of the special relaxations in qualifications for noncontributory pensions extended to those who had been in receipt of a contributory pension between the ages of 65 and 70.^ NONCONTRIBUTORY PENSIONS Under the existing provisions of the noncontributory Old-Age Pensions Acts, 1908-24, Great Britain grants a gratuitous old-age pension of 10s. a week at age 70 to those with annual incomes of less than £49 17s. 6d., exclusive of sick benefits for not more than 3 months and exclusive of unearned annual incomes up to £39. The rate of the pension is graded with the rate of income : The full rate of pension of 10s. a week is granted to those with an annual income of less than £26 5s., and the pension diminishes to a minimum of Is. a week as annual income increases to a maximum of £47 5s. but less than £49 17s. 6d.^ In practice, nearly all the pensions are paid at the maximum rate; i. e., in Great Britain and Northern Ireland in 1932 only 26,288 pensions out of the total of 1,531,163 noncontributory pensions paid in that year were at the reduced rate.* To be eligible for a pension, the applicant must have been a British citizen for at least the last 10 years and must have resided in the United King- dom a minimum period — if a natural-born citizen, not less than 12 years since attaining age of 50 and if a naturalized citizen, not less than 20 years.^ In addition, the applicant is disqualified from a pension under the following con- ditions : When detained in an insane asylum ; while imprisoned without option of fine ; while maintained in a poor-law institution for other than medical aid ; and upon conviction for intoxication, under special circumstances.® The Min- ister of Health is the appeal authority; through the Ministry, the act is actually administered by the pension officers of the board of customs and ^ This report was written by Olga S. Halsey. ' Compiled from : Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-33) (H. M. Stationery Office, London, 1934), Cmd. 4625, pp. 170-173. ' Hohman, Helen, The Development of Social Insurance and Minimum Wage Legislation in Qreat Britain (Houghton Mifflin, Boston, 1933), p. 44. * Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-33), p. 173. 0 Cohen, Percy, The British System of Social Insurance (Phillip Allan, London, 1932), pp. 108, 110. "Great Britain. Old-Age Pensions Act, 1908 (7 Edw. 7, c. 40), as amended, sec. 2. 449 450 APPENDIXES excise (under the exchequer), who act as pension officers for representative local pension committees appointed by the local county and borough councils. The pension officers conduct the necessary investigations, while decisions as to whether statutory conditions are fulfilled rest with the pension committees.' The pensions are paid through the local post office — the pensioner is furnished with a book of pension orders, which are cashed at the post office as they become due.* During 25 years' administration the number of pensioners and the annual ex- penditure have both increased. The number of pensioners has increased in the United Kingdom from 647,494 in 1908 * to 1,579,938 in 1933 for Great Britain and Northern Ireland (i. e., the same area minus the Irish Free State). ^° During the same years the expenditure for the same geographical units has increased from £2,026,000 to £41,047,000." The existing provisions are the result of a number of amending acts which have substantially liberalized the original act of 1908. The rate of pension has been raised from the original maximum of 5s. a week to its present maximum of 10s. a week ; the maximum income which a person may have and qualify for a pension under the noncontributory act has been increased from £31 10s. to a maximum of £49 17s. 6d. ; the method of computing income has been liberalized ; the qualifica- tions regarding British citizenship and length of residence in Great Britain have been made less stringent and the original character qualifications have been made much less severe." In addition, the means test and qualifications as to citizen- ship and residence have been abolished entirely for those in receipt of an old-age pension under the Contributory Pensions Acts, 1925-32, who transfer to a non- contributory pension at age 70." The removal of these conditions applies to more than 40 percent of the total pensions granted in 1932 in Great Britain and North- ern Ireland under the old-age pensions acts, 1908-24, i. e., to 662,638 out of a total of 1,531,163 pensions." CONTRIBUTORY PENSIONS The agitation to lower the pensionable age to 65 and to provide a universal pension had its fruition in the old-age pension granted to those between 65 and 70 years of age under the provisions of the Widows', Orphans', and Old-Age Contrib- utory Pensions Act of 1925 ; at the same time the means test was abolished, to- gether with requirements of nationality and residence for those receiving a non- contributory pension at age 70 after having been in receipt of a contributory pension between ages 65 and 70. The Widows', Orphans', and Old-Age Contributory Pensions Act of 1925, came into operation in 1926, with contributory old-age pensions payable January 2, 1928." This act combines pensions to widows and orphans with an old-age pen- ' Great Britain, Old-Age Pensions Act, 1908, sec. 7. » Cohen, Percy, loc. cit., p. 108. » Great Britain, Ministry of Labour, Eighteenth Abstract of Labour Statistics of the United Kingdom (H. M. Stationery Office, London, 1926), Cmd. 2740, p. 212. *• Great Britain, Ministry of Labour, Tioenty-ftrst Abstract of Labour Statistics of the United Kingdom (1919-33), p. 173. ^Ibid. 12 Holiman, Helen, op. cit., pp. 36-44. "Great Britain, Seventh Annual Report of the Ministry of Health, 19S5-26 (H. M. Stationery Office, London, 1920), Cmd. 2724, p. 125. " Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-33), Cmd. 4625, p. 173. 1" Great Britain, Seventh Annual Report of the Ministry of Health, 19S5-S6, Cmd. 2724. pp. 123, 127; Colien, Percy, op. cit., p. 71. OLD-AGE INSURANCE IN GREAT BRITAIN 451 sion for those between 65 and 70. It utilizes tlie contributory principle, pre- viously adopted for health and unemployment insurance, and continues to distribute the cost between workers, employers, and the national treasury. The contributory pension act interlocks with health insurance; that is, the scope of the two acts is almost the same, and the contributions for the two forms of insurance are combined in a single stamp. Thus the total number of persons insured in 1933 in England under the contributory pensions acts or for whom contributions were payable totaled 15,876,000 as compared with 15,598,000 insured under health insurance." The funds for pensions and for health insurance are entirely separate, although the administration is unified." A flat-rate contribution for the combined widows', orphans', and old-age insurance, uniform for all wage and age groups was provided; in the case of men the employer pays 4i/^d. weekly, while the worker also pays 4i/^d., or a total of 9d. ; for women employees the employer pays 2i/^d. and the worker herself 2d., or a total of 4%d. The combined weekly contribution of men for both health insurance and pensions is Is. 6d. and for women Is. Id." Upon the introduction of the pension plan, contributions under both health and unem- ployment insurance were lowered. The net increase in contributions for those coming under all three schemes was 4d, for men and 2d. for women, divided equally between the employer and the worker." The national exchequer assumed the financial responsibility of pensions at 70 for those qualifying under the relaxed provisions of the contributory pen- sions act and in addition, for the first 10 years, it made an annual contribution of £4,000,000 to contributory pensions.^" Exchequer contributions were in- creased under the 1929 act which liberalized benefit provisions. Under this amending act the exchequer grant begins at £9,000,000 for the year 1930-81 and increases by £1,000,000 a year until 1945-46, when the exchequer grant will total £21,000,000 a year.^ During the second 10 years of the plan men's contributions are to be increased by 2d. and women's by Id., divided equally between employer and worker, with correspondmg additional increases during the succeeding 10-year periods beginning January 1, 1946, and January 1, 1956.^" The act provides a contributory pension of 10s. a week to insured men and women between the ages of 65 and 70 and to wives between 65 and 70 when their husbands are entitled to a contributory pension. Or, if a wife or widow is over 70 when her husband is entitled to a contributory pension, she becomes eligible for a noncontributory pension, without the application of the tests re- garding means, nationality, or residence. The right to sickness and disable- ment benefits under the health-insurance act and to unemployment benefits cease at age 65 ; under these acts workers' contributions terminate at age 65. Upon reaching 70 all persons in receipt of a contributory pension become eligible for a noncontributory pension, without the application of the means test or that of nationality or of residence.^^ To be eligible for a pension at 65 the insured must have had a certain minimum amount of insurance to his credit ; first, 5 " Great Britain, Fifteenth Annual Report of the Ministrij of Health, 1933-3i (H. M. Stationery Office, London, 1934), Cmd. 4664, pp. 358, 363. " Cohen, Percy, loc. cit., p. 91. 1" Cohen, Percy, loc. cit., p. 60. " Great Britain, Seventh Annual Report of the Ministry of Health, 1925-26, Cmd. 2724, p. 124. =» Cohen, Percy, loc. cit., p. 93. "^IMd., p. 94. '"nid., pp. 92-93. ^ Great Britain, Seventh Annual Report of the Ministry of Health, 192S-26, Cmd. 2742, p. 125 ; Cohen, Percy, op. cit., p. 75. 452 APPENDIXES years' continuous insurance prior to reaching age 65 ; second, 104 contributions must liave been paid since bis last reentry into insurance; and finally, an average of 39 contributions in eacb of 3 years prior to the sixty-fifth birthday. Under amending acts this last condition is waived in the case of those who have had a record of 10 years' continuous insurance prior to attaining the age of 58^ years. In effect, persons with 10 years' continuous insurance before they reach 5Si4 years are continued in insurance, even though they may be continuously unemployed until reaching the age of 65.** The insurance is administered through a central administration of the Min- istry of Health, with some assistance from the local authorities, while pen- sions are paid through the local post office. All claims for pensions are made in the first instance to the Ministry of Health.^ The amending act of 1929 further liberalized the provisions : Wives between 65 and 70 whose husbands had passed 70 when pensions were first payable under the act became entitled to a pension between 65 and 70; residence qualifications were repealed and pensions were made payable in any part of the British Empire and workers might retain their insurance in any part of the empire. ^° Steps have been taken to keep unemployed workers in- sured or to facilitate their return to insurance.^^ During the few years' operation the number of pensioners has increased ; pensioners in Great Britain and Northern Ireland between 65 and 70 have in- creased from 544,242 in 1928 to 699,853 in 1932 ; those in receipt of a pension at 70, free from all restrictions as to means, nationality, etc., have increased from 298,161 in 1928 to 662,638 in 1932 and to 765,246 in 1933.=^ This increase in per- sons over 70 receiving pensions under the special provisions of the Widows', Orphans', and Old-Age Contributory Pensions Act has been accompanied by a decrease in the numbers receiving a pension under the normal provisions of the noncontributory Old-Age Pensions Act ; i. e., a decline from 1,112,869 in 1926 and 868,525 in 1932 to 814,692 in 1933. The net effect, however, has been to increase by approximately 40 percent those receiving noncontributory pen- sions; i. e., an increase from 1,112,869 in 1926 to 1,531,163 in 1932' and to 1,579,938 in 1933.^* Expenditures for pensions of those between 65 and 70 have increased in England from £2,703,000 in 1928 (the first year effective) to £15,547,000 in 1932 and to £16,381,000 in 1934.^ 2* Great Britain, Widows', Orphans', and Old-Age Contributory Pensions Act, 1925. sec. 8 ; Eleventh Annual Report of the Ministry of Health, 1929-SO, Cmd. 3667, p. 188 ; Fourteenth Annual Report of the Ministry of Health, 1932-33, Cmd. 4372, p. 208 ; Cohen, Percy, loc. cit., pp. 72, 75. 25 Great Britain, Seventh Annual Report of the Ministry of Health, 1925-26, Cmd. 274, p. 127. ^"^ Great Britain, Eleventh Annual Report of the Ministry of Health, 1929-SO (H. M. Stationery Office, London, 1930), Cmd. 3667, pp. 187, 188; Cohen, Percy, loc. cit., pp. 55, 89, 90. ^ Great Britain, Fourteenth Annual Report of the Ministry of Health, 193-2— SS (H. M. Stationery Office, London, 1933). Cmd. 4372, pp. 208, 217. ^ Great Britain, Ministry of Labour, Twenty-first Abstract of Latour Statistics of the United Kingdom (1919-33), Cmd. 4625, pp. 171, 173. ^"Ibid., p. 173. ="• Great Britain, Fifteenth Annual Report of the Ministry of Health, 19SS-Si (H. M. Stationery Office, London, 1934), Cmd. 4664, p. 353. Appendix VIII THE CANADIAN PENSION SYSTEMS ' Legislation in Canada provides for a Dominion-Provincial system of non- contributory old-age pensions in provinces where old-age pensions legislation has been enacted,^ as well as a system of voluntary annuities. NONCONTRIBUTORY PENSIONS Under the terms of the Dominion statute old-age pensions administration is vested in a Provincial pension authority established by each Province, while the Department of Labour administers the statute for the Northwest Terri- tories. The statute provides for payment by the Dominion Government to each Province of an amount equal to 75 percent of Provincial disbursements for old-age pensions. Section 8 of the Old-Age Pensions Act, which defines the qualifying provisions for eligibility to pensions, reads as follows: Provision shall be made for the payment of a pension to every person who, at the date of the proposed commencement of the pension — (1) Is a British subject, or, being a widow who is not a British subject, was such before her marriage ; (2) Has attained tlie age of 70 years ; (3) Has resided in Canada for the 20 years immediately preceding the date aforesaid; (4) Has resided in the Province in which the application for pension is made for the 5 years immediately preceding the said date ; (5) Is not an Indian as defined by the Indian Act ; (6) Is not in receipt of an income of as much as three hundred and sixty-five dollars ($365) a year; and (7) Has not made any voluntary assignment or transfer of property for the purpose of qualifying for a pension. Under a separate parents' maintenance act financially competent children are made responsible for the support of their parents in all Provinces which have old-age pension statutes. The maximum amount of pension payable is $240 per annum, subject to a reduction of the amount of pensioner's income in excess of $125 yearly, and, in cases where a pensioner has during part of the 20 years immediately pre- ceding the date of the proposed commencement of pension resided in a Province where the act is not in force, the pension payable is reduced by the same proportion as the duration of the pensioner's residence in these Provinces bears to 20 years. Table VIII-1 gives a summary of the date of enactment of noncontributory old-age pensions in each Province of the Dominion, the number and percent of the pensioners as of December 31, 1934, the average monthly pensions, and the total payments by the Provinces and the Dominion. Table VIII-2 shows the increase in pensioners, both in actual numbers and as a percentage of the population over 70 years of age from 1931 to 1934. 1 This report was prepared by Walter F. Bade under the direction of Edwin E. Witte. 3 The Old-Age Pensions Act, R. S. C. 1927, ch. 156, as amended by ch. 42 of the Statutes of Canada, 1931. 453 454 APPENDIXES Table VIII-1. — Noncontrihutory old-age pensions in Canada Pensioners as of Dec. 31, 1934 Average monthly pensions Total payments since be- ginning of act to Dec. 31, 1934 Province ment of law Num- ber Percent of popu- lation over 70 ' Province Dominion Alberta Aug. 1, 1929 Sept. 1,1927 Sept. 1, 1928 Mar. 1, 1934 Nov. 1, 1929 July 1, 1933 May 1, 1928 Jan. 25,1929 6,947 8,893 9,995 11,970 48,899 1,496 9,904 7 41.80 36.43 48.52 45.29 31.78 26.34 48. 71 7.86 $17. 69 19.29 18.61 14.40 18.42 9.91 16.30 18.98 $5, 259, 775. 27 9, 469, 553. 70 10, 044, 150. 35 1, 538, 865. 09 45, 363, 651. 95 225, 181. 39 9, 195, 300. 25 7, 774. 58 $3,581,400.52 British Columbia 6, 071, 793. 14 Manitoba 6, 559, 037. 81 Nova Scotia 1, 154, 148. 81 Ontario - 30, 061, 366. 10 Prince Edward Island Saskatchewan Northwest Territories 168, 886. 04 6, 020, 614. 45 7, 774. 58 Total 98, 111 81, 104, 252. 58 53, 625, 027. 45 1 Based on the estimates of population for 1934, by Dominion Bureau of Statistics. Source: The Labour Gazette, Department of Labour, Canada, vol. XXXV, no. 2, February 1935, p. 142. TABLE VII 1-2. -Distribution of noncontributorij old-age pensioners hy Provinces in Canada ' Number Percent of total population over 70 Province Dec. 31, 19311 Dec. 31, 1932 1 Dec. 31, 1933 1 Dec. 31, 1934 2 1931 1932 3 1933 3 1934 < Alberta 4,191 6,298 6,840 5,105 6,945 8,032 5,244 7,128 8,280 6,947 8,893 9,995 11, 970 48, 899 1,496 9,904 7 29.65 30.27 37.99 34.95 32.55 43.86 34.80 32.58 44.49 41.80 British Columbia . 36.43 Manitoba -._ Nova Scotia 48.52 45.29 Ontario --- Prince Edward Island 41, 228 42, 315 42, 853 29.16 29.47 29.40 31.78 26.34 Saskatchewan, _ Northwest Territories -- -. 7,389 5 8,113 6 8,195 5 41.92 .74 45.04 .89 44.55 .74 48.71 7.86 Total 65, 951 70, 516 71, 707 98, 111 1 Canada Year Book 1933. Data for 1931, 1932, 1933. 2 The Labour Gazette, Department of Labour, Canada, vol. XXXV, no. 2, February 1935, p. 142. ' Population estimated for 1932 and 1933 by extrapolating 1931 census data. < Based on estimates of population for 1934, by Dominion Bureau of Statistics. VOLUNTARY ANNUITIES In addition to gratuitous pensions for the aged, Canada provides a voluntary system of contributory old-age pensions. Because of the similarity between the United States and Canada in monetary unit and costs and standards of living, it w^ill be of interest to consider the Canadian Government annuity plan in some detail. The plan is purely voluntary and is operated on a nonprofit basis. The maximum limit of the annuity is now $1,200, an amendment in 1931 having reduced the maximum from $5,000. The contracts pay 4-percent interest, com- pounded annually, the interest and administrative cost being paid by the Government. The plan of Government annuities can, of course, reach only those who are able and willing to save a portion of their earnings under Government super- vision. The small size of the annuities sold in 1930 is indicated in table VIII-3. Nearly 84 percent of the contracts written in that year were for less than $600. CANADIAN PENSION SYSTEMS 455 The 1931 amendment to the Annuities Act, whicli fixed the upper limit at $1,200 a year, was influenced by the fact that only 4.4 percent of the contracts in force were for more than $1,200. There appears to be no direct basis on which the Canadian annuity plan can be compared with other types of old-age pension systems. Assuming, however, that all annuity contracts were made to provide an old-age pension to the annuitant at the age of 70, some idea of the coverage can be obtained. During the year ending March 31, 1931, there were 1,772 contracts written in all Provinces combined. Figures based on that portion of the population who were over 70 years of age in 1931 show that only one-half of 1 percent were covered. During the same period in six of the Provinces alone there were 65,951 noncontributory pensioners on the list, representing about 19 percent of the population over 70 years in all Provinces. Tabib VIII-3. — Distribution of Canadian Government annuity contracts vyritten m 19S0 * Total... Less than $600. $600-$1,200 $l,20O-$l,500... Contracts Number Percent of total 1,772 100.00 1,482 212 38 83.73 11.97 2.14 Range $1,500-$2,000. $2,000-$2,500. $2,500-$5,000. Contracts Number Percent of total 0.85 .90 .51 1 " Government Annuities Act ", The Labour Gazette, Department of Labour, Canada, vol. XXXI, no. 7, July 1931, p. 764. The Government Annuities Act has been in operation in Canada since Sep- tember 1, 1908. Since its inception and up to March 1983, the number of annuity contracts written amount to only 16,394 with a total annuity valuation of $36,214,050. Of this number of contracts written, 1,994, or 12.2 percent, have been canceled, leaving only 14,400 contracts still in force. The annuities are divided into two classes — deferred annuities and immediate annuities — and may be purchased to mature at 50, 55, 60, 65, and 70 years at the option of the annuitant. There are four plans upon which deferred annuities may be purchased. Plan "A" is the most popular and provides for the payment of the amounts contributed plus 4 percent compound interest to the annuitant's family upon death before the time annuity commences, or should the annuitant reach the retirement age, he or she will receive the annuity in quarterly payments there- after until death. Plan "B" is suitable for those who have no dependents, and provides the largest annuity for the least money. This plan permits no refund should the annuitant die before annuity begins but provides for quarterly payments to the annuitant for the rest of his or her life. Premiums, of course, vary according to the age of retirement selected. Usually the annuities are pur- chased to mature at 55, 60, or 65 years. The third plan is called the "guaranteed deferred annuity." This plan is exactly like plan "A" but further provides, should the annuitant die after the annuity time occurs, for payment to the deceased's family for a fixed period of 10, 15, or 20 years. Should the annuitant live beyond the guaranteed period, the annuity will be paid for life. The cost of this plan is slightly higher than plan "A." 456 Ap]?E]srDixEs The fourth plan is termed "deferred last survivor annuity." Under this plan, two people, such as husband and wife, take out an annuity with condi- tions similar to the other plans ; the annuity is paid as long as both live, and the full amount is paid to the survivor as long as he or she lives. Deferred annuities may be purchased by a lump-sum payment in advance, or by small monthly, quarterly, semiyearly, or yearly payments. There is no forfeiture if payments are not kept up. They may be made later, or the annuity to be paid will be adjusted accordingly. Immediate annuities are designed for older people who have passed the working age and who have savings to invest. These savings are invested with the Government in the form of an annuity, and quarterly payments are made to the individual commencing 3 months after purchase of the plan, as long as the annuitant lives. In the class of immediate annuities there are three plans — ordinary life, guaranteed annuity, and the last survivor annuity. The ordinary life plan is the cheapest form and requires that all the money be paid in one lump sum. Annuity commences 3 months thereafter and termi- nates with the last payment before death. The guaranteed annuity plan is purchased by a cash payment, and com- mences 3 months from purchase date, but by this plan the annuitant is guaran- teed payment of the annuity for a fixed number of years — 10, 15, or 20. Other- wise, this plan is the same as the "guaranteed deferred annuity." The immediate last survivor annuity is identical to the "deferred last sur- vivor annuity", except that the purchase price is paid in full at the outset. The advantages set forth by the Canadian Government annuities are: Their security ; their exemption from taxation ; that they are payable for life ; that they are nontransferable ; that they cannot be lost or stolen, forfeited, or seized or garnisheed by law or courts ; that they require no medical examination ; and that the age eligibility ranges from 5 to 85 years. The number of annuities in force on March 31, 1933, was as follows : Imme- diate, 5,824 ; deferred, 8,576 ; a total of 14,400. The total amount of immediate annuities purchased was $2,435,272, an average of $418 per contract. The financial statement for 1932-33 and the valuation as of March 31, 1933, are as follows : ' Government annuities fund statement, 1932-33 ASSETS Fund on Mar. 31, 1932 ?26, 582, 543. 61 Receipts 1932-33 less payments 2, 581, 359. 41 Fund on Mar. 31, 1933 ?29, 163, 903. 02 Amount to be transferred to maintain reserve 184, 237. 98 RECEIPTS Immediate annuities $2, 473, 634. 56 Deferred annuities 1, 106, 541. 65 Refunds 803. 95 Interest on fund at 4 percent 1, 062, 640. 61 Amount transferred to maintain reserve 289, 435. 39 Total 4, 933, 056. 16 ' Dominion of Canada, Report of the Department of Labour for the Fiscal Year Ending Mar. SI, 1933 (J. O. Patenaude, Ottawa, 1933), p. 39. CANADIAN PENSION SYSTEMS 457 Government annuities fund statement, 1932-33 — Continued PAYMENTS Payments under immediate contracts $2, 301, 109. 93 Return of premiums with interest 17, 755. 64 Return of premiums without interest 32, 831. 18 Balance, Mar. 31, 1933 2,581,359.41 Total $4, 933, 956. 16 Valuation Mar. SI, 1933, of annuity contracts issued pursuant to the Oovernment Annuities Act Classiflcation Immediate annuities, ordinary Immediate annuities, guaranteed.. Immediate annuities, last survivor Total -. Deferred annuities... Total Num- ber 3,468 1,507 5,824 8,576 Amount of annuity $1, 491, 401 514, 106 429, 765 2, 435, 272 Total value of annui- ties pur- chased $11,943,335 5, 204, 759 4, 819, 126 21, 967, 220 7, 380, 921 29, 348, 141 Appendix IX SURVIVOES' INSURANCE IN FOREIGN COUNTRIES ' Insurance for tbe survivors of wage earners is a form of protection against old-age dependency, together witli provision for younger widows witti dependent children. This protection is afforded by death benefits in the form of lump- sum payments or joint-survivor annuities, as well as by straight pensions to dependent survivors. A provision for death benefits linked to a contributory old-age insurance system has the advantage of assuring a wage earner that he is not purchasing his old-age protection at the expense of his family in the event of his death. In all the foreign countries which have survivors' insurance there is provision made for the children of the insured until they reach an employable age. Whether or not the widows or widowers of the insured persons receive benefits depends in most foreign laws on whether they are free and able to earn their living. Thus, in the following countries a pension is paid to the widow if she has dependent children: Austria, Czechoslovakia, Luxemburg, and Russia. Some countries pay pensions to widows who have reached an age where they can no longer find employment. They are : Austria, Belgium, Czechoslovakia, Germany, Hungary, Luxemburg, Netherlands, Poland, and Russia. The follow- ing countries make provision for all widows regardless of age: Bulgaria, France, Great Britain, Greece, and Yugoslavia. Provision for survivors made by foreign governments takes two forms, pensions and insurance. Pensions to widows and orphans are found in the British Dominions, i. e., New Zealand, New South Wales, and seven Canadian Provinces; and in Denmark.^ Insurance benefits to widows (as distinguished from other classes of needy mothers) and to orphans for large groups of the population are found in 13 European countries (including Great Britain), while a few South American countries require this type of insurance for special groups of employees — those in public utilities, in banks, on railroads, etc.^ The oldest legislation of this type made provision for workers with special risks — seamen and miners; the first general provision for insurance benefits to widows and orphans is found in the German act of 1911, which was an exten- sion of the invalidity and old-age insurance for persons employed in industry, commerce, and agriculture.* The majority of insurance and pension legislation has been passed in the post-war period. The first general compulsory insurance legislation for widows and orphans (i. e., for other than special industrial groups, such as miners and seamen) was adopted in 1911 by Germany and was followed in 1913 by 1 This report was prepared by Olga S. Halsey. •Armstrong, Barbara Nachtrieb, Insuring the Essentials (Macmillan Co., New York, 1932), pp. 446-461; International Labour Office, Studies and Reports, series M, no. 9, Non-contril}utory Pensions (Geneva, 1933), p. 135. 3 International Labour Office, Studies and Reports, series M, no. 10, Compulsory Pension Insurance (Geneva, 1933), pp. 6-10. * International Labour Office, International Survey of Social Services (Geneva, 1933). p. 279. 459 460 APPENDIXES legislation in the Netherlands. The first pension legislation was adopted in 1911 by New Zealand and by the State of Illinois, followed in 1913 by Den- mark and 16 American States." The European post-war insurance movement dates from 1922, when Russia, Yugoslavia, and Greece enacted insurance legislation providing widows' and orphans' pensions for employed persons, although the Greek legislation was enforced to a very limited extent, and that in Yugoslavia has not yet been placed in operation ; in 1924 Czechoslovakia and Belgium followed ; in 1925, Great Britain; in 1927, Austria (although the provision in this law for widows' and orphans' pensions has never been enforced) ; and in 1928, France and Hungary concluded the list of nations providing widows' and orphans' pensions through insurance for other than small, special industrial groups. Before summarizing the insurance provisions, certain broad distinctions between benefits under insurance and pensions systems should be pointed out. Pensions systems commonly grant a pension subject to a means test or other proof of need and subject to conditions of residence, moral character, etc., to widows with children and often to other categories of mothers with de- pendent children, such as mothers divorced or separated from, or deserted by, their husbands, or to mothers with husbands permanently invalided or in prison. European widows' and orphans' insurance systems commonly grant a pension to children and to widows, as distinguished from other classes of dependent mothers, provided, however, that the insurance record of the de- ceased meets certain specified standards as to length of insurance, number of weekly contributions, etc. The pension granted to widows of wage earners is further limited in most European systems : These usually provide a pension to her only when she is an invalid, when she is over a specified age, or when she has a specified number of children. Great Britain, France, and Belgium are among the few nations which do not impose these restrictions upon pen- sions of widows of wage earners. Notwithstanding these limitations, the widows in receipt of pensions outnumber the children receiving pensions in most of the European systems of widows' and orphans' insurance. This is a distinctly different emphasis from that of the American laws for aid to de- pendent children in which the children are the chief concern. In the United States a mother is granted a pension for the purpose of enabling her to care for her own children. European provision for survivors' insurance is commonly combined with insurance against invalidity and old age, and thus forms one of several benefits in a single compulsory system. The scope of the legislation necessarily varies from one country to another. In general, insurance is compulsory for per- sons employed under a contract of hire or for wages, in industry, commerce, and agriculture, with specified exceptions. Frequently, however, different classes of workers are insured in different and independent insurance systems within the same country. Thus, under one law, Germany provides pensions to widows and children of miners ; under another, pensions to workers en- gaged in industry, commerce, and agriculture ; and under a third, to salaried employees.^ This separate provision for special classes of workers, notably miners and seamen, is frequent on the continent,' with separate legislation for _ s Intprnational Labour Office. Compulsory Pension Tnsvrancc. op cit., pp. 6-9; Interna- tional Labour Office, Non-contrihutory Pensions, op cit., pp. 137-140 ; International Labour Office, International Survey of Social Services, op. cit., p. 494 ; Armstrong, op. cit., pp. 446-449; and United States Children's Bureau, Mothers' Aid in 1931, Bureau Publica- tion No. 220 (Government Printing Office, Washington, D. C, 1933). ° International Labour Office, Inteniational Survey of Social Services, op. cit., pp. 279-2SS. ''Ibid., and International Labour Office, Co7npulsO)-y Pension Insin-ancc, op. cit., pp. 80-118. SURVIVORS' INSURANCE IN FOREIGN COUNTRIES 461 the two major groups : Persons employed under a contract of hire in industry, in commerce, and in agriculture ; and persons employed on a salary. In general, agricultural workers are included in the same legislation as that for industrial and commercial workers. Austria, however, provides a special law for agri- cultural workers, passed in 1928, but not in operation as regards provision for widows and orphans. Hungary, however, specifically exempts agricultural workers.* Great Britain, France, and Eussia are exceptions to the continental practice and provide for all types of workers in a single act. In Great Britain The Widows', Orphans', and Old-Age Contributory Pensions Act of 1925 insures all persons working under a contract of hire, including seamen, miners, agri- cultural workers, and nonmanual workers earning less than an annual specified rate, with specified exceptions.' The various foreign countries which have provided insurance for widows and orphans, the classes of workers insured, the numbers insured, and the number of beneficiaries are given in table IX-1. The first obvious fact disclosed by this table is that, except in Germany and Great Britain, where totals of 22,197,000 and 17,000,000 workers, respectively, are insured, and in Russia and France, for which the figures are not avail- able, the absolute numbers insured under any one scheme are relatively small. Of the smaller nations for which figures are available, Czechoslovakia and the Netherlands alone insure more than 2,000,000 workers. In those nations which make separate provision for wage earners, for salaried employees, and for miners, the wage earners are the largest group of insured workers. Compari- son of the percentage of the total population insured (in those countries for which data are easily available) reveals some interesting differences: Great Britain insures 38.4 percent of her total population ; Germany, 34.5 percent ; the Netherlands, 34.3 percent ; and Czechoslovakia, 14.9 percent. Although fig- ures for other small nations are lacking, available data suggest the probability that the industrialized nations are those which insure the largest portion of their total populations. The ratios which the numbers of widows and of orphans receiving pensions in each country form of the total population of the country concerned are also of interest. In countries for which complete data are available, the numbers of widows receiving pensions per 10,000 of total population vary from 21.62 in the Netherlands, through 30.7 in Czechoslovakia, 118.82 in Great Britain, up to a maximiim of 126.3 in Germany. The ratios of children receiving pensions per 10,000 of total population run distinctly lower ; beginning with a minimum of 14.2 in Czechoslovakia, the ratios run through 16.6 in the Netherlands to 68.5 in Great Britain, up to a maximum of 116.2 in Germany, or a little more than eight times the minimum rate in Czechoslovakia. Under the insurance systems, as under pensions, the ratios of those assisted vary widely, depending, of course, upon such prerequisites as the proportion of the population insured, the length of the required period of insurance, the required number of previous contributions, and the limitations imposed upon beneficiaries. Comparison of the ratios of children pensioned under the insurance legisla- tion with those assisted under legislation for aid to dependent children in those areas of the United States administering the law is suggestive. For the United 8 International Labour Office, Compulsory Pension Insurance, op. cit., pp. 7, 80-118. * Great Britain, Widows', Orphans', and Old- Age Contributory Pensions Act, 1925 (15 and 16 Geo. 5, c. 70), as reprinted by: International Labour Office, Legislative Series, 1925, G. B. 7, pp. 723-758 ; and Great Britain, National Insurance Act, 1911, sees. 1, 2, first schedule ; as reprinted by : U. S. Bureau of Labor, Bulletin No. 102, "British National Insurance Act, 1911" (U. S. Government Printing Office, Washington, D. C, 1912) ; and International Labour Office, Compulsory Pension Insurance, op. cit., p. 93. 78470—37 31 462 APPENDIXES a a a a 03 ft ^s- .3 . t4 i^ii J :6 3 ^« t^ ft O lO m CO 00 CO (55 r/jt^^~< coco lO^-S '^ -:}< ^-1 1 ~f^^ ■3 lO w 00 C5 t^- 3 1 .'^^ ! 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On the other hand, if all the areas in the United States administering aid to dependent children should come up to the standard attained in Wisconsin of assisting 24 families or 76.2 children per 10,000 of total population, the ratio in the United States would be exceeded only by the much higher ratio of 116.2 in Germany. In other words, comparison of these ratios reveals that insurance pei' se is not necessarily the means of assisting a larger proportion of orphaned children than the United States is already aiding or could aid under laws for aid to dependent children, if the legislation and administration were brought up to the best existing American practice. Foreign countries as well as the United States, however, fell short of an ideal which would be that of providing generous survivors' pensions for all persons included in a contributory old-age insurance system. Comparison of the number of widows and children pensioned imder the various systems per 10,000 insured in each system also reveals significant varia- tions. Germany and Great Britain again show the highest ratios. Within each country the ratios vary for each individual group of workers covered : The miners, where insured in special funds, show higher rates than other workers insured in other funds, as in Germany, Czechoslovakia, and the Netherlands. In Germany widows and orphans of wage earners have higher ratios than those for survivors of salaried employees ; in Czechoslovakia the positions are reversed. A comparison of the ratios of widows pensioned with those of children in each of the various insurance systems reveals that in general the number of widows pensioned per 10,000 insured is higher than that for the children in all but four instances — ajnong workers in Czechoslovakia, Germany, and Luxem- burg and among miners in the Netherlands. In these countries, however, the widow is eligible for a pension only if she is an invalid ; otherwise she must be 65 years of age or over, as in Czechoslovakia and Germany ; or have two or more dependent children, as in Czechoslovakia ; or in Luxemburg, be 55 or over or have three or more dependent children." In other instances the children constitute from 17.65 percent up to 72.9 per- cent of the widows aided. In Great Britain, where a pension is granted widows, regardless of incapacity or age, the children are but 57.7 percent of the widows pensioned. This preponderance of widows over orphans might be explained if pensions to children terminated at a very young age ; but, as it has been pointed out, children are eligible for pensions in the different countries at ages ranging from 13 to 18 years. The benefits provided under survivors' insurance consist of pensions to widows and to children, and in some countries an additional temporary pension, or. as in Russia, a funeral benefit is provided. Such benefits are granted only to survivors of insured persons whose insurance records meet certain standard specifications, such as length of insurance, number of insurance contributions, age at entry into insurance, length of period married. In addition, pensions usually are provided only to those widows who meet certain specifications." Under insurance plans for wage earners, as distinguished from those for salaried employees, a pension is often payable only if the widow is incapaci- 10 Armstrong, op. cit., ch. X, pp. 629-632. "76id.; International Labour Office, Compulsory Pension Insurance, op. cit., pp. 227- 362. SURVIVORS' INSURANCE IN FOREIGN COUNTRIES 465 tated; or, if she is not incapacitated, only if she has reached a specified age; or, as in Austria, Czechoslovakia, and Luxemburg, if she has a specified number of dependent children (two or more in Austria and Czechoslovakia and three in Luxemburg). In only a few countries are widows of wage earners granted a pension regardless of incapacity or age — for example, as in Belgium, Great Britain, and France. In the Netherlands a widow may draw a pension only if the husband was not in receipt of an invalidity pension at the time of his death. In some countries conditions under which widows of salaried employees may draw pensions are more liberal than those for widows of wage earners. For example, the German insurance for wage earners grants a pension to their widows only if they are more than 65 years old or are incapacitated to the extent that they are unable to earn one-third of the amount usually earned by able-bodied women ; widows of salaried workers are entitled to a pension regard- less of physical incapacity or age." Pensions are payable to children only while they are under a specified age, varying from a minimum of 13 years in France to a maximum of IS in Luxemburg and Austria, although the last law is not enforced." The pension granted is usually a proportion of the invalid pension to which the deceased would have been entitled. In the case of half orphans, the pension ranges from 15 to 25 percent of the pension of the insured ; whole orphans receive higher per-capita amounts, from 30 to 40 percent. In France a pension is payable to half orphans only when there are three or more children, and to whole orphans regardless of the number. Other countries make no distinction between children with one or both parents dead. Thus, in Yugoslavia, where the law is not yet enforced, children are entitled to one-fourth of the pension of the deceased parent ; and in Germany to two-fifths. The total pension to all survivors is usually limited to the amount of the invalidity pension to which the deceased would have been entitled ; in Germany it is further limited by the provision that it may not exceed SO percent of the earnings of an able- bodied worker in the occupation of the deceased." Great Britain, on the other hand, provides a fixed pension of 5s. a week for the first half orphan ; 3s. weekly for each additional half orphan, and 7s. 6d. weekly for each whole orphan. For widows the pension also is usually a portion of the pension to which the deceased would have been entitled. In a few countries it is a fixed amount," as the 10s. weekly pension to widows in Great Britain. It is impossible to give any definite sums as the pensions payable to widows and orphans because these usually are but fractions of the invalid pension to which the deceased would have been entitled on the basis of his insurance record, which necessarily varies from individual to individual. However, an effort has been made in table IX-1 to give an approximate idea of the size of the pensions by calculating the average pensions received. These figures have the usual weak- ness of averages and have the additional shortcoming that they do not include certain lump-sum payments applicable to invalidity and old-age pensions as well as to survivors' pensions, other lump-sum payments at death, and returns of contributions. "Armstrong, op. cit., p. 454. "Armstrong, op. cit., chart X, pp. 629-632; International Labour Office, International Survey of Social Services, op. cit., p. 496. "Armstrong, op. cit., chart X, pp. 629-632; International Labour Office, Compulsory Pension Insurance, op. cit., p. 293. " International Labour Office, Compulsory Pension Insurance, op. cit., p. 306. 466 APPENDIXES The expenditure for widows' pensions in foreign systems is in excess of that for children. The total amounts expended for children's pensions are smaller percentages of the sums granted widows than the percentages which the numbers of children pensioned are of the widows. This difference is reflected in the aver- age size of the pension granted ; the pension for children is uniformly less than that for widows. To some extent, of course, there may be overlapping — a widow and her children may both be in receipt of pensions. But in the majority of systems this overlapping is probably small, except in those few instances in which pensions are granted widows with two or more, or three or more de- pendent children, regardless of the age or physical condition of the widow. On the whole, it may be said that the European systems of widows' and or- phans' insurance emphasize protection for the widows. In most instances the widows pensioned outnumber the children, while the expenditure for widows is disproportionately greater — a disproportion which is reduced to some extent by Table IX-2. — Comparison of average survivors' pensions with weekly wages for unskilled labor in engineering trades Country and insured group Austria, salaried employees Belgium, miners - - Czeclioslovakia, worlters in industry, commerce, agriculture. Czechoslovakia, miners France, miners Germany, workers in industry, com- merce, agriculture. Germany, salaried employees Germany, miners (workers) Germany, miners (salaried employees). Hungary, miners Netherlands, workers and salaried em- ployees. Netherlands, miners Weekly wages of Monetary unskilled unit engmeer- ing la- borers 1 Schillings... 38.89 Francs. 145.80 Crowns 170. 26 Crowns 170. 26 Francs 153. 21 Marks 34.89 Marks 34.89 Marks. 34.89 Marks 34.89 Pengos 23.52 Florins 25.31 Florins 25.31 Average weekly pensions > Widows Amount 22.46 25.35 10.83 23.94 39.69 5.15 9.40 6.52 18.75 3.42 2.94 1.96 Percent of unskilled engineer- ing wage 57.8 17.4 6.4 14.1 25.9 14.8 26.9 18.7 53.7 14.5 11.6 7.7 Orphans Amount 10.06 7.98 8.79 8.29 7.02 3.79 9.27 .90 7.92 1.13 3.13 1.60 Percent of unskilled engineer- ing wage 25.9 5.5 5.2 4.9 4.6 10.9 26.6 2.6 22.7 4.8 12.4 6.3 1 From Armstrong, op. cit., p. 417. Calculated on the basis of 48 hours' work at ordinary time rates, compiled from averages for Jan. 1 of each year for the periods] 1926-30. When no figure was available for January, the one for the nearest month was taken. 2 Average annual pension given in table^ lX-1 prorated.onia weekly basis. the possibility of overlapping and the payment of both widows' and children's pensions in the same household. In analyzing the operation of European pension systems, one other question remains — that of the adequacy of the pension grants. Notwithstanding the in- adequacy of the average to measure the size of pension grants, the average pen- sion as given in table IX-1 indicates that the pensions are pitifully small. How small they may be in terms of purchasing power in the various countries, it is impossible to gauge in the absence of an international index of the cost of living for the various countries. In table IX-2 the average widows' and orphans' pen- sions in countries for which data are available are compared with the average weekly wage of unskilled labor in engineering. The widows" pensions range from nearly 6 to 58 percent of the weekly wage for unskilled labor, with the highest SURVIVORS' INSURANCE IN FOREIGN COUNTRIES 467 ratio in the system for salaried workers in Austria and tlie lowest for industrial workers in Czechoslovakia. The figures do not suggest that widows and children in foreign countries are more generously provided for than mothers in the United States, where in 1931 a State average of $21.78 a month was the median grant to mothers among the States providing aid to dependent children.'® " U. S. Children's Bureau, op. cit., p. 17. Appendix X FINANCIAL HISTORY OF THE WORKERS' INVALIDITY, OLD-AGE, AND SURVIVORS' INSURANCE OF GER- MANY^ Since the United States is taking its first steps toward a Nation-wide system of old-age benefits and since forecasts are made, actuarial and otherwise, as to what will happen to such a system within the next half century, it appears of value to investigate the experience of a couptry which has had such a system in operation for the past 44 years. Germany adopted contributory invalidity and old-age insurance covering its entire working population in 1891 and has retained this system up to the present time. The system was in existence for more than 20 years before the World War, survived the war, which made an end to many another institution, recovered from an inflation which ruined the financial structure of many other enterprises, withstood the stress of the severe depression of the last few years, and is now being continued under a national policy which has altered some of the most fundamental establishments of German economic life. The German system has thus withstood nearly every conceivable hazard which a social insurance system might meet, but, of necessity, it has survived these hazards only by being modified and changed many times. This report presents a history of these changes, chiefly from the financial point of view. For this reason large sections of the history are omitted. For example, ad- ministrative procedure and enforcement provisions were studied only insofar as they exerted an influence on the finances of the insurance system. The political background is given only in passing. It might have been of value to study the forces which framed the original law and modified it in the course of its existence. However, it was felt that such an attempt would lead too far afield. Hence, the scope of the study is limited to a short survey of the dis- tribution of costs, the financial condition of the fund, the investment of tlie reserve, the cost of administering the law, the rate of contribution, the benefits paid, and the number of persons in receipt of benefits throughout the years. In addition the history of the law itself is briefly summarized to provide a background. A SHORT HISTORY OF THE LAW The invalidity and old-age insurance law was part of the program which Bismarck offered to the German working population after having suppressed the labor movement by a stringent law. His hope was that by giving the workers a share of the Government's money in times of need and giving it to them as a matter of right, he could change the aims of the labor movement directed toward the overthrow of the Government, even though that share ^ This report was prepared by Marianne Sakmann under the direction of Edwin E. Witte. 469 470 APPENDIXES was a small one. The law was conceived from the point of view of conserva- tive, enlightened benevolence rather than from the point of view of the workers. The law was introduced in 1889 and was adopted by Parliament with a small majority of 20 votes against the opposition of the labor party and the left-wing groups. It was amended in IS'99 and again in 1911, and both times the amendments were adopted by a vast majority of Parliament. These amendments carried with them a considerable expansion of the original pro- visions, the 1911 amendment adding survivors' insurance to the insurance against invalidity and old age incorporated in the original law. Bismarck's hope for "buying out" the labor movement by giving them a stake in the existing government was fulfilled only in part. As a matter of fact, the establishment of social insurance gave considerable impetus to the labor movement. The Social Democratic Party opened offices all over the country in which organized and unorganized workers might obtain legal advice on how to make good their claims for pensions. The small amount of the pensions gave the party an opportunity to campaign against the "hunger pen- sions", to point to the large reserve which might well be used for increasing benefits, and to blame the employers for their opposition against such a pro- cedure. In these campaigns they reached each worker, because they all had a stake in the system. The conservatives viewed this development with particu- lar concern, since the membership of the Social Democratic Party and its proportion of votes increased from year to year. However, looking back over this development and over the history of the Social Democratic Party since the war, one may well ask oneself whether Bis- marck did not achieve his original aim. Gradually the German labor movement lost its revolutionary character, and the elements in it which advocated con- centration on immediate aims won out over the radical elements which be- lieved in an overthrow of the Government and of the entire capitalistic system. The course followed by the Social Democratic Party under the republic bears out this statement. This party took an active share in the Government all through the twenties, but its efforts appear to have been bent rather toward receiving a greater share in wages and insurance benefits under the existing system than toward any fundamental revision of the system. This attitude is reflected in the many amendments to the invalidity insurance law adopted after the war. They were all directed toward liberalizing existing provisions. At no time was the suggestion made to abandon the system and substitute another. Some writers have said that the present National- Socialist Government has abolished the German social insurance system or has modified it to such an extent that it can no longer be recognized. This is not true so far as invalidity insurance is concerned. Since the advent of the present party to power, the many decrees issued dealing with the subject all express the intention of re- taining the system in its original form. The significant and perhaps the most important change — from the point of view of the workers at least — is that benefits have been drastically cut. DISTRIBUTION OF COSTS The Share of the Federal Government. — When the plan for invalidity and old-age insurance was first discussed, the possibility of distributing the cost equally between employers, employees, and the Federal Government was seri- ously taken into consideration. However, this plan was abandoned for the rea- son that if the Federal Government assumed one-third of the cost of each pen- GERMANY INVALIDITY, OLD AGE, SURVIVOES 471 sion, the higher-paid worker would be favored over the low-paid worker. lu order to remove this injustice, it was decided that the Federal subsidy be a fixed supplement to each pension granted. This amount was set at 50 marks a year for invalidity, old-age, and widows' pensions and remained at that figure up to the time of the war. After the war it was changed several times, but has remained at 72 marks since 1925. The Federal subsidy to orphans' pensions is half that amount. (See table X-1.) Table X-2 shows the actual amount which the Federal Government contrib- uted toward the pension payments throughout the years and the proportion this amount bears to the total pension payments. It will be seen that, on the whole, the Federal Government has paid approximately one-third of the cost of the pensions. This share was as high as 40 percent in the beginning of the scheme, when the earned portion of the pensions was comparatively low. The contribution of the Federal Government also includes a payment toward the pensions for the time which the insured spent in compulsory military service. In addition, the Federal Government originally bore the cost of selling insur- ance stamps and the payment of pensions through the post offices as well as the cost of administration of the Federal insurance office. But as a result of the great financial difficulties resulting from the present depression, the regional offices were required to reimburse the post office for its services beginning with 1930. Before the war the Federal Government did not share in the cost of medical treatment and of family allowances for the dependents of persons undergoing such treatment. However, after the war a certain proportion of the custom receipts was allocated to the regional insurance offices for medical purposes. This amounted to 40 million marks a year from 1925 to 1929, inclusive. In the following years it was gradually cut down. When the wage tax was levied under the Briining government in 1929, it was determined that if the income from that tax exceeded a certain amount, the excess would be given to the insurance system. Such an excess was collected only in 1 year, namely, 1929. Since the insurance offices found themselves in financial straits during the last years of the depression, the Government replaced these uncertain receipts in 1932 by a fixed yearly amount of 163 million marks. This was raised to 200 million marks in 1933. Several times in the history of the German insurance scheme the Federal Government granted it certain special subsidies in addition to the regular allow- ance. This occurred first during the inflation from 1920 to 1924, when the pen- sions were no longer sufficient to take care of the pensioners. A subsidy was given to the regional offices to be distributed by them on a relief basis. Again, whenever the pensions were increased during the twenties, the Federal Government bore a part of the increase. Thus, when in 1927 survivors' pensions were extended to all widows over 65 years of age, regardless of whether or not they were invalids, and to survivors of insured persons who had died before 1912, the Government assumed the entire responsibility for this increase. When additional credit was given for the contributions paid before 1921 and since 1924, the Government again paid the increase in the pensions already in force. Common Reserve Fund and Individual Funds. — When the law was adopted in 1891 it provided that each regional office should pay its share of the benefits out of the contributions it collected. The only provision for pooling any part of the contributions stipulated that each regional office transmit to a common reserve fund a certain proportion of the reserve it had accumulated. This com- mon reserve fund was to be touched only in cases of extreme necessity and only with the sanction of the Federal insurance office. 472 APPENDIXES s? '4, »» O Os S :z; >^ o H ?j 1— t Q 5 iJ < S > o % h a o o a o o o ll CD-t^ 3.2 c s o« 0.«J o IM (M lO loo 0000 00 wo 10 > |3 2 a i-g 1 03 1 CD c3 1 o < d 2 o S3 a o 2; 1^ d d 1-. 0 0 A! CD a o cfl o c 'O'O a ■c^-a^ s o o , O ffl uj^ O 0 ^ z ICD g O) CD CO 1-3 |t3 I a a 0 0 f5 13 .i "Sis ad 0 i2-- i'3i3 I P.d } 0 M 00 2-c-'=o' p. a 2" 0 g«r a« i a i S d 0 0 M" go 0 M 1 3 0 0 of S 0 -s. d o?» ^ d is '6 '.2 03 0 P. CO > _ojaco > > OJ3c<3 rs 0 > > OJ3CO •r '- 0 - a ! ^ 1 a ;8 . '•'B 1 0 ' c3 3: £ -T d!^ 8 . ■3^ MM £!i "S. - 1 ^ Id 0 0 S is °CQIZ| df=< M 0 g " -OMd o ^B >>s S 1 i-ss 1 0 2 HH XI -H ! '^ 35 .s ^" S|2^Mg M 3„- 3„- ^ I 1 ** • 1 *^ rH '3 en . -*-=» » X) CO * "3 W a "^ „-3 g £ cn~ 03^ d 1 a U) CDU-. T-H : d > .d mta m ■O § S 0 a d ui CO ! .2 05 o ta o M 1 f-i • 1^" a .X! > CD 03 1 a i a 03 0|_^ 3 do "So 0 1 .2 ' 1 ^*1. o.^'"' o ^S 1 .Q 3 m -^3 hH .. 3 ' 1 00 CD d d ; O O 1 ^3 J fM 03 a O-Tt ooo o o _o O as ^ ll 0 0 •ax) a 00 0 0 73X3 0 ■a e^ SiS & C^ o o § <1 < C3 CO , a — C3 So o iZi — to 00 c^ C> i «X3 B 0 la C5^ .d u 0 ta c §^ a U 1-1 is =» -4^ p. Q ai CO o o o T3 O as o5 ^2 3:3 0 52 is tn 2 C3J ._( s « s 3 u) >.^ •J^ 2 r^ a Qi 9 5^ P. S 2 o 05 « •* < GERMANY — INVALIDITY, OLD AGE, SURVIVORS 473 3.9 o o cog ;c»^ O . « m 0 So -q "M a So 0.2 ^ c a bJD D fl ^ era >»2 O P £3 fio °: ^43 Si:; ^o o ^ °^ 32 -S CO .S - a- a-g OS'S- - .2 m £.2 3^ . I>.XJ I "i^ 3 £35 .3 ®.9j2'^ ^ !SS "'S5.S.a.^ 3ri □ 3j-|'OTm.i^ g-3gg-§s^§ ojagoSBg^ §&.So^gao ^- ^"^ DQ K «3 ca bCrJt aa " 3 sa 3i2 16 3 ° a 2 . W .J - " ' ca . ©CO — too o ' 3 bo 0'*-3^ 2 iz; N 3 S5 fto 474 APPENDIXES ,5 J3 taoa ■Sip^S i^ i i i^ i "p-s^ :S 1 ; is ; ^^-|.a i-s^ i : i-o^ "-^r-Ptq ;pg P.o , p s p ^~* «l!l i.a.§ ! i i.l| i 0^ at^ ; oa ,' ; : oft i V.C1 ' sc- 1 t t V ' p -S-S§.2^2 . i ; i2d 1 p C3 «.cs:^gg2 : I ;^2 i .P & 0 p 3 0 a V? JgSo^ i i i°S ;p "^•asas-gg ; ; ip"^ \B 0 •§ |sga^ Ip g c3 «-2Soft^i ' ' ■'sS'Sl -2Sa§3°^^^.^.°^p2 0 03 031-' -tJ o.t: ■ ■ 1 c- c3 ft ;?i g- i i i?: Op P 'm C3 ?^ 10 ,— , ^ -^CDCOCD CO ^ ■«C^ cfll^ c^cococo cog 1 ° ft fe " " ' ' ' . l"^ ■73 .-d , 1 Its i-P ■« l"c3 1 ! l'3 1 £; > ; > ; 1 1 > i.a p 1 P ■ p 1 P i „ p 0 1 0 1110 \S3 a P IP 1 1 1 P 1 fe as igp 1 ; :ag I'm p "m 1 t^w 1 1 1 S'w l-P §g l§g j 1 jpg j_g ,« ft l,„ftooo„^fto- 0 >, t^ 0 p^-d ■« T3 0 >.■« « P O.tn rill O.ti 1 1 1 O.t^ 1+^ P P 1 ■ ■ ■ CD n p gp : i ig i-i s III 1 p ^ p 0 2 ° 1 1 1 =■ 'ft 3 p '^^ i i :S 1I2 0 ^ a .0 C3rl W03r1i,,c3ri,M CD "^ OD I 1 ' ^ gdN 1 1 ;§>>-l'2 cu .a v-2 f»v-2 0 0 o-S'SS fi( s; gs; 1 1 is: 00 1^^ f^ .a 1^ § 1 ;S 1 t„ ' "^ '"' 0 1 IM 1 0 3 <^ oj'^ P 1 03 P •n '^ § p 2 g 1 2CS .c !>> .ucngjco >> P'-'rn^^^ '-' pp Pg g-,'-'-^ 2 s 2 s a Ei'd >> (» a £- s§ ^^s;3 § p a s > 0 0 ■a « •a a 0 As per- cent of pension pay- ments 39.5 40.4 40.6 40.4 40.3 As per- cent of total benefit ments 39.5 40.4 40.5 40.0 39.7 Amount (in thou- sands of marks) 6, 050 9,041 11,337 13, 924 16.933 1 p 0 'Ei £ a 0 As per- cent of pension pay- ments 00.5 59.7 59.8 60.0 61.2 CO 0 S As per- cent of total benefit pay- ments 60.5 59. 6 59. 5 60.0 60.3 p 3 0 a < 9, 249 13, 355 10, 084 20, 893 25, 748 Total benefit pay- ments 15,299 22, 390 28,021 34,817 42, 681 S e CO Expend- itures for curing in- validity cooccco ,— < CO CO e r^ P o3 0 a marks) 15, 299 22, 364 27,913 34, 452 42, 049 s g 1. 1 X Pay- ments to salaried em- ployees' fund 0 1 ; 1 1 ', "3 111',' p g 1 ; ; 1 : 3 11... Kefunds and single cash pay- ments to widows and orphans 0 1111 J3 , , , iC! p i i i :'' < n P 2-2 ap as Widows' pensions, includ- ing widows' sickness pensions ta.2 2p oa 15, 299 21,025 22, 700 24,420 26, 497 Invalid- ity pen- sions, in- cluding sickness pensions and sup- plemen- tary pensions (') 1,339 5,207 10, 032 15, 333 cS >< 00 00 oc 00 00 GERMANY INVALIDITY, OLD AGE, SURVIVORS 475 TjiCOGOCCCO COi-ICDi-HCO C^ t^ ■ CO i Ou^ tH -^ (M u:) c3 CO CO CO CO CO CO CO CO CO CO TJH-^COCOC^ - COCOCO WCOCOCOCO COCO■ i-H OO 00 »o »o oi 00 1-^ t-^ CO ^ «? y? ^ tr i> CO CO oi ce COCOCOCOCO COCOCOCO(N CS- 00 Oi O --H C^ ^MC^c^co coco-^-^-* -<^ ■Tt^ lO »0 lO CO O OO C OS o o O CO CI 1-1 « OS-^00'*'^ lOOOC TjJ lo t-^ OS >-H c^ Tj< -Ti* »o CD r^ 00 c t-- CD CO CO t- t>- 1^ t-- r- r* !>• t>- c 00 00 00 00 00 OO I CO CO CO Tt^ aJ Ci OS CD (N (33 - 00 OS f^ o COCOSDCDcO CDCDCOCOl CD CO CNl OOCO O ^ CN C^' CO 1-H O t^ •-< 03 .^ O t* OS 00 t-^ T-H -^ OS O OS OS lO CO "^ CO O CD OS 00 CD O O O lO OS rf" to CS O 00 . ^ ^ T-( iMCOCO O COCO-^^CD I^OOOsO'-< .-H C^ C 1-t O O OS 00 00 r^ »o c^ 00 CI ) t^t^WCOt^ t^co«DCD -OS t-H co- »0 00 lO lO lO I-^ CO ■-f CD O CO CO (>> <— 1 »ocor>-ooo ooot-'t^ OSCOO'**'--! -^oocoo CfSi-lt^OOCO ^ CD O CO O 00 '^ O 00 OO'-HCOOGO OS lO CD CD r-t OS 03 Ttn --i OS 00 -^ O 00 00 00 ■* CO iM t-^ w 7i fo irt I-H OS 00 00 C- OO 00 Oi O O 1— I CO O OS 1—1 O CO t- ^^^ ^^^^^ c^csc^c^cM (Nco-^u:ioo »-c 00 OsiMOC^O OS CO -—I OS t-- 00 lo r- !>• o o CO >— ' c^ "O CO lo r^ooO(N*s* Tji c^ r-( .-( CO CO O CO -^ OS O O Oi M* t>- OQ CO 1— I CO O OS lO -rtH -^ t-H 00 CO O CO CO CO -^ CD -—I .-H rH C^ ■<*< lO t^OSO' OCO 00 cooo CO Tt^ Tt' ■■ — CO'^ O ^jTcooTi-rco" 0 01 —ICO »o T^ Tt' ■rt< O ^ CO lO Tt< CO '■ ■■ CO O 00 CO CD oooi^oo *:t^ CO OS CO 00 OS lO C^ uO c CO 03 ^a CO I^OOfN iO ^COOO OSOOOC^>-< r;HOC0-^ CO .-H ooodt-^os' OO OS OS 00 r-H OCO -^ OOS I-H OS oTgT io"o ^ w — I »-( 1-1 1-1 (M CS (MCNC4C0CO CO CO --J^ O O '* O PJ CN ''J^ lO O t^ OS OS O -^ CO "^ t^QOOOiO ^ O 1-1 "^ CO 1-H O CO O O ooo coTj^r^ CO 00 Tt* t^ lO OS 00 00 CO CO OS O C^ C^ CJ5 CD CO lO 00 o OS O t^ t^ O "OSO-^ (NOTtiCOOI I^ O 01 O -^ t^ .-t TjH O lO ^O— .^-00O'-< H CN M .iOO^OI -^ 00 1-H CO COI>COI>0 NC^iOO oToTiNr-r cocot^^or — I CN C^CO 1M- OS OS ^ I— t c^ CO »o ic r- CO lO CO c^i CO "^ i>- cs oo cn no T-H r^ o !>. !>. OS OS '<:I< i-t OS CO Tf TfH CO r-TcO rjn'lO CO 5 O) 1-H O >-l . - - - - , - - - - _, .■* 1-1 CO O OS OS 1-H lo CO 1-H Tt* 00 c^ ■-^ -^ oi OS o r-- t^ o c- ^o o o co cot^t-Tt-^co odoooTcTTos' o— T oi" ofof cscii-T i-h" lOscOOSiO r-iOSiOTt^iO •*J*(NDHt^— ( OSl>-00OSiO I>-C^COt-^ iC^t-iOO "^OOOIO OO—OSCO OOOC^COO Ot-i-HCO lOO-^Tf OOSOSCOOS OO^OCO C^OS-^tOi-H ■^lOOl'^ (N-^i-T coi-H uoco oT 00 r^*5! rn os" t-^t-^i-HTP 00 t^oo odt^ I— I OICOCO-^iO ^fH^OOO (Ni-HCOCOC^ i— iiO'^''^ 1-HO ^ rH ,-( rH 1-H r-H ,-1 ,-1 ^ . — t -rtH 1— t — < OS o CO Tt^ cq iM I CO t-- o o oj 1-H CO OS lO cq rt< tOOC^iO OOfNOOCOCO |>.t-^CO(^,_, 0|tO»OC0 01 C-IOSOOOS I »-H 00 lO CO CO Tji O O O Ol "O ^ CO 00 CS OS t^ -^ CO lO CO 1>- o i-Tof co'i^od'of cs" t^od"'"' o CO odt^t^-^oJ co"i-ho"co I-H CN <^g2 "M CO -^OOS(NI>. OOTtHCQCO i>-o~o-^ or^coooo loc^coO' Ol lO ut Ol Cq JOi— . O O Tt* c C^ O OS CO t^ O lO O -^ rP C O — I 'rt^ w 00 t^ ''^ O 00 (M OS CN 1-1 r- — t CD O CO OS O lO Ol OO GO CO lO TT 00 CN O "O T— I 00 "<*i CO CO CO lO O Tt^ O t-- CO O 00 OS rf< MCNCN CNr-H ,-H — t O ^ 00 --< o 1,-Hr-lT-H— I Ol-^COt^r t- CO CO ^ t- ■^ t-^ 00 <— I O CO lO 1— I c^co odc4" cNi-Tt-hoos ccTcooos" CD Tt< — I (M (M C^ Cq C^ i-( i-( — 1 r-t «Oi-HOior~- Oil— I'^'oco t^co coo h-o-^co'^ O 1-1 to lO O -^ O 01 c coco CXI GO CO O CO CO F no -—I CO 00 "^ 01 r- lO .-H !>. 00 r-( 00 c Tt t-, t- CI S MP 5.2 a C8 ho o .S "3 a ft 3 a- a .a "3 o a ■3 0 f^ M o &H m tf W o e P ir< 1891 5 14 22 25 26 22 35 47 55 64 29 49 71 99 129 14 37 60 84 102 3 6 12 23 42 (3) (3) (3) (3) (3) 2 5 8 9 9 1 5 6 9 8 76 151 226 304 380 ../..- 76 1892 151 1893 226 1894 304 1895 380 1896 25 25 71 73 167 198 119 146 61 79 (3) (3) 9 11 5 459 537 459 1897 537 1S98.. 25 25 29 32 32 34 34 36 72 77 109 111 120 126 131 134 217 231 280 298 316 336 354 367 186 219 238 264 288 306 326 351 100 120 152 175 196 218 240 262 (3) (3) 2 3 4 5 5 6 11 15 22 31 38 44 49 65 _ 7 13 14 14 13 15 21 26 618 700 846 928 1,007 1,084 1, 160 1,237 618 1899 700 1900 846 1901 92S 1902 1 007 1903 1 084 1904 1 160 1905- 1,237 1906. 36 35 137 139 379 384 386 435 287 314 7 8 61 69 24 21 1,317 1, 405 1 317 1907...- 1,405 1908. 36 144 384 473 344 10 21 1,489 1,489 1909. 38 148 384 505 382 11 82 23 1,573 1,573 1910. 42 157 382 540 416 12 85 28 1 662 1 662 1911 52 174 381 564 455 13 89 31 1, 759 1,759 1912 67 225 380 604 499 15 92 ■7 41 1,930 1,930 1913 77 286 382 651 560 16 97 8 31 o 108 2 108 1914 225 322 383 709 600 17 101 s 2 392 HI 2 251 1915 478 322 375 754 615 18 106 9 27 2! 704 350 2,354 See footnotes at end of table. GERMANY— INVALIDITY, OLD AGE, SURVIVOES 479 Table X-4. — Investment of reserve, 1891 to 1933^ — Continued (Figures represent purchase price of securities in millions of marks) Securities Loans •3 3 "3 > o o ,Q a a a '3 -3 iA 50 g -3 a "S _g ,c o > £ o BO "3 o P Year •3 a o 2 is ■si -a o XJoa m CO oft O 0 '^ 5-9 a o a as §^ o CD 1 o o a tu 13 a > hi 1 "3 o 1916 745 1,009 1,204 1,203 1,172 (0 (*) 318 310 290 289 288 362 351 317 297 291 749 736 670 623 590 (♦) 0) 616 617 602 565 536 0) 16 16 15 15 13 (<) (0 108 108 108 108 135 (0 (0 104 105 111 118 126 143 163 183 190 189 185 9 9 9 12 21 (*) (*) 10 11 12 14 16 19 22 24 26 24 21 12 26 41 18 39 iS) {') 15 61 130 163 211 220 239 167 112 112 135 2,935 3,182 3,256 3,130 3,085 3,616 (0 254 330 475 641 935 1,335 1,643 1,697 1,524 1,351 1,307 507 663 807 796 994 592 (*) 1 1 44 54 54 58 60 60 72 84 79 2,428 2,519 1917 1918 2,449 1919 2,334 2,091 3,024 1920 1921 1922 (0 1923 125 153 253 1924 329 18 54 67 88 216 225 200 2 6 17 40 41 46 38 326 310 127 158 200 315 393 451 445 700 656 7 9 14 34 32 27 10 1925 38 74 166 237 248 284 245 30 45 118 239 289 290 258 431 1926 -.. 587 1927 881 1928 1,277 1929 1,583 1930 1,637 1931 1,452 1932 1,267 1933 1,228 1934 1,409 ' The figures for the special funds are included only from 1900 on. ' The equipment was listed as property only from 1912 on. 3 Less than 500,000 marks. < No data. Tbe question may be raised why tlie accumulated capital was not larger. Com- paring it with estimates of the reserve that will be built up under the proposed United States wage and pay-roll taxes, it appears small indeed. There are sev- eral reasons for this. In the first place, wages are lower in Germany than in this country. In the second place, contributions before the war did not amount to much more than 2 percent of these wages, the benefits being correspondingly low. In the third place, the insured population is only about half the size it will be here. Then, stress has been laid in Germany on the curing of invalidity from the beginning, and this has meant that a large portion of the expenditures has been spent for rehabilitation of invalid workers rather than for the payment of pensions. Finally, and most important of all, full old-age benefits were given to workers who reached retirement age without requiring that they qualify for pensions by a long contributory period. Table X-5 indicates the percentage distribution of the various kinds of invest- ments of insurance reserve funds. This table shows what a large percentage of the capital has been invested in securities and loans to local governments. This was to be expected, since the law left the investment of the funds to the discre- tion of the regional oflSces, and each locality obviously wished to keep the funds which it raised. During the war the proportion of the reserve invested in Federal bonds increased greatly because of the fact that the insurance offices helped to finance the war by subscribing to war loans. The total invested by them in such loans in the course of the war amounted to almost one and one-half billion marks, or to more than half the total reserve. The investments in Federal Government bonds increased again from 1929 on, because the Government paid its share of the cost of pensions by bonds rather than in cash. 480 APPENDIXES Table X-5. — Investment of reserve Tyy type of investment Percentage of total investment Year Securities Loans Real estate Equip- ment 1 Fed- eral bonds State bonds Other bonds To com- munes and parishes Mort- gages Savings bank de- posits Cash 1891 7.0 9.0 9.7 8.3 6.8 5.4 4.7 4.1 3.6 3.4 3.5 3.2 3.1 2.9 2.9 2.7 2.5 2.4 2.4 2.5 3.0 3.4 3.6 9.4 17.7 25.4 31.7 37.0 38.4 38.0 28.5 23.2 20.9 18.1 16.8 15.4 13.6 11.6 11.0 12.9 12.0 11.9 11.6 11.2 10.8 10.4 9.9 9.7 9.4 9.4 9.9 11.7 13.6 13.5 11.9 10.8 9.8 8.9 9.2 9.3 37.3 32.7 31.5 32.6 33.9 36.4 36.8 35.1 33.0 33.1 32.1 31.4 31.0 30.5 29.7 28.8 27.3 25.8 24.4 23.0 21.6 19.7 18.1 16.0 13.9 12.3 11.0 9.7 9.5 9.4 19.0 24.7 26.6 27.5 26.9 25.9 27.2 30.1 31.2 28.1 28.4 28.6 28.3 28.1 28.4 29.3 31.0 31.8 32.1 32.5 32.1 31.3 30.9 29.6 27.9 25.5 23.1 20.5 19.9 19.1 4.1 3.8 5.3 7.5 11.0 13.3 14.7 16.2 17.2 18.0 18.8 19.4 20.1 20.7 21.2 21.8 22.3 23.1 24.3 25.0 25.9 25.9 26.6 25.1 22.7 21.0 19.4 18.5 18.1 17.4 0.1 Q) (}) (») (?) .3 .3 .4 .4 .5 .5 .6 .6 .7 .7 .8 .7 .7 .7 .7 .7 .6 .5 .5 .5 .4 2.6 3.5 3.4 2.8 2.4 2.1 2.0 1.8 2.1 2.6 3.4 3.8 4.1 4.3 4.4 4.6 4.9 5.1 5.2 5.1 5.1 4.8 4.6 4.2 3.9 3.7 3.4 3.3 3.4 4.4 40.9 31.9 23.3 18.4 13.5 10.7 9.9 10.8 12.5 14.0 14.2 """o.l" .4 .4 .3 .3 .3 .3 .4 4.1 3.2 2.5 2.2 1.7 1.4 1.3 1.4 1.7 1.8 1.6 1.4 1892 3.0 1893 . 2.5 1894 3.1 1895 2.1 1896 - 1.5 1897 1.0 1898 1.1 1899.- 1.9 1900 - — 1.6 1901 1.5 1902 1.3 1903 1.4 1904 1.8 1905 . 2.1 1906 . 1.8 1907 1.5 1908 1.4 1909 1.5 1910 1.7 1911 1.7 1912 2.1 1913 1.5 1.1 1915 . 1.0 .4 1917 .8 1918 1.3 1919 .6 1920 1.3 1923 .. - 49.0 46.3 6.0 1924 -. 18.6 1925 3.9 8.5 7.2 6.6 13.2 13.3 13.1 .5 1.0 1.9 3.0 2.5 2.7 2.5 8.0 11.5 17.7 17.8 15.1 16.8 16.1 6.3 7.0 12.6 17.9 17.6 17.1 17.0 26.7 24.6 21.4 23.6 23.9 26.5 29.2 1.4 1.4 1.5 2.5 1.9 1.6 .6 27.4 1926 - - - 25.4 22.5 1928 16.6 1929 14.6 1930 9.8 1931.— 7.3 1933 24.1 23.7 51.8 50.2 8.3 10.3 • The value of the equipment was entered as part of the reserve only from 1912 on. ' Less than Ho of 1 percent. Investments Promoting the General Welfare. — A very large proportion of the reserve has always been used for the purpose of promoting the general welfare. Before the war about one-half of the accumulated capital — or the share repre- senting the workers' own contributions — was employed in many varied enter- prises which would all eventually benefit the insured class. Funds were lent to communities for the purpose of building workers' dwellings, hospitals, con- valescent homes, public-health centers, labor colonies, public baths, homes for the blind, kindergartens, water works, and sewerage systems. Insurance funds were also used to finance consumers' cooperatives and to promote public instruc- tion. The regional offices themselves built hospitals and sanatoria in which invalid workers were treated. A smaller portion of the funds was used for extending credit to agricultural sections of the country. The funds served the GERMANY INVALIDITY, OLD AGE, SURVIVORS 481 purpose of financing mortgages, light railways to outlying districts, improvement of land and roads, stock breeding, alleviation of shortage of feed, drainage and irrigation, cultivation of moorland, reforestation, and similar enterprises. Table X-6 gives the history of these investments. Tabu: X-6.— Investments promoting the general welf ire Work- men's dwell- ings! Agri- cultural credit 2 Con- struction of hos- pitals » Insti- tutions built by regional offices * Investments promoting the general welfare Total reserve Percent of Year Total made Paid back to end of year Total at end of year reserve used for general welfare (In millions of marks) 1896 12 21 35 52 78 88 103 118 133 151 173 196 239 281 320 362 418 483 533 559 567 572 678 576 590 659 13 17 36 45 55 65 67 70 73 76 79 90 96 103 110 114 114 120 129 134 135 135 135 135 135 135 6 10 14 36 54 108 128 149 178 211 246 293 340 389 447 482 517 562 605 631 642 698 701 683 686 704 31 48 85 133 199 279 322 366 417 474 539 626 729 829 937 1,022 1,117 1,245 1,352 1,413 1,436 1,499 1,511 1,491 1,532 1,647 31 48 85 133 199 279 322 366 417 474 539 626 643 721 813 881 956 1,065 1,146 1,189 1,194 1,225 1,183 1,098 1,081 1,117 460 538 617 700 846 929 1,007 1,084 1,160 1,238 1,319 1,404 1,490 1,574 1,662 1,759 1,929 2,105 2,252 2,355 2,428 2,519 2,451 2,334 2,091 3,023 6.7 8.9 13.8 19.0 23.5 30.0 32.0 33.8 35.9 38.3 40.9 44.6 43.2 45.8 48.9 50.1 49.6 50.6 50.9 50.5 49.2 48.6 48.3 47.0 51.7 37.0 1897.-. 1898 1899 1900 12 18 24 29 33 36 41 47 54 56 60 64 68 80 85 89 92 94 97 97 121 149 1901 1902 1903 1904... 1905... 1906 1907 1908 86 108 124 141 161 180 206 224 242 274 328 393 451 630 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922» 1923S 1924» 1925 34 57 110 213 316 375 373 364 7 14 37 84 113 20 43 42 46 67 90 95 102 61 114 189 343 496 595 596 588 61 114 189 343 496 595 596 588 431 589 882 1,278 1,582 1,637 1,451 1,267 14.2 19.4 21.4 26.8 31.4 1926 1927 1928... 1929.. 1930... 24 24 22 106 104 100 36.3 41.1 46.4 1931 1932 . Including hostels for single persons, etc. ' Including mortgages, light railways, improvement of land and roads, stock breeding, alleviation of snonage of feed, dramage of land and irrigation, cultivation of moorland, reforestation. / includmg convalescent homes, public-health centers, labor colonies, public baths, homes for the blind, Kmaergartens, slaughterhouses, waterworks and sewerage systems, consumers' cooperatives, public in- struction, and other similar public-service institutions. 'Hospitals, sanatoria, tuberculosis sanatoria, convalescent homes, institutions for disabled workers, etc. No data. The public-service institutions established or financed by insurance funds were not distributed equally throughout the country, but the question as to which regional offices did most in this respect has not been studied. It is believed that the industrial regions, such as Berlin and the port cities which had a strong labor movement, had a greater share in these activities than did the rural and small-town sections. 482 APPENDIXES Interest on Investments. — The prophesies that a large reserve would lead to a lowering of the interest rate proved fallacious. Before 1914 the average interest rate hardly ever fell below 3.5 percent, the rate which had been used in making the first actuarial forecasts. It was slightly above that in most of the years. When large investments were made in war loans at an interest rate of 5 percent, the average rate for all investments went up to over 4 percent. Since 1928 the rate has been about 5 percent. It may be seen from table X-7, which shows the receipts and expenditures of the regional offices from 1891 to 1934, that the income from investments was sufficient to cover more than one-half of the cash benefit payments in the years immediately preceding the war. ADMINISTRATION Up to the time of the present National-Socialist regime, the administration of the insurance law was characterized by a large degree of local autonomy. Before the war there were 31 regional insurance institutes, plus 10 special funds for railroad workers, miners, and seamen, all responsible for making the collections, investing the funds, and fixing the benefits. These 41 funds were administered according to rules laid down by a statute adopted by the locality, the province, or the state, which to be valid had to be submitted to the Federal insurance institute for approval in order to make sure that it was in accord- ance with the provisions of the Federal law. The Versailles Treaty reduced the number of regions by 2 to a total of 29. In addition, some of the special funds were consolidated so that only 6 existed at the time when the present party came to power. These regional offices and special funds had a large degree of autonomy. They administered the law, kept the funds which they collected, and invested them. In these investments they were limited by certain rules contained in the Federal law, for example, that a certain proportion of the total had to be invested in Federal and state securities. But on the whole the funds remained in the section of the country in which they were raised and were used for whatever pui-pose the regional office thought fit. Only in the matter of appeal proceedings was the Federal insurance office supreme. The final court of appeal in all insurance matters has consisted of judges who are a part of the Federal insurance office. The post office sells the contribution stamps to employers, and also makes the monthly benefit payments in accordance with instructions received from regional offices. Under the present government, the local autonomy of the regional offices was curtailed by a law adopted July 15, 1934. This law contemplates a much greater centralization of the administration, and it also empowers the Minister of Labor to request the regional offices to invest a greater share of their funds in Federal securities than had been the case up to that time. Another recent change consisted in the introduction of the "leadership" principle. Up to 1933 a board consisting of representatives of employers and employees performed supervisory functions over the officials administering the law. This board is replaced by a "leader" by the law of July 15, 1934. The Federal Insurance Institute was an independent Government office up to 1922. In that year it was put under the Ministry of Labor and has remained there up to the present time. It will be seen from table X-7, showing the receipts and expenditures from 1891 to 1934, that the cost of administering the insurance system rose steadily up to the time of the present depression. The functions of administration remained very much the same throughout the years, except that from 1930 on. GERMANY — INVALIDITY, OLD AGE, SURVIVORS 483 Table X-7. — Receipts and expenddtipres, 1891-19SJt [In thousands of marks] Receipts 93, 972 95,643 96, 909 100, 036 102, 721 109, 136 112,812 117, 952 127, 26,- 128, 770 134, 814 138, 986 146, 276 154, 088 161, 292 170, 126 178, 643 184, 422 188, 438 197, 354 209, 806 273, 419 289, 952 267. 209 224, 021 222, 430 251, 167 261, 183 312, 077 562, 919 2, 793, 823 {') (^) 362, 525 548, 934 659, 600 875, 217 1, 075, 846 1, 092, 047 986, 368 819, 197 642. 210 678,680 757 3,746 6,585 9,503 12, 402 15, 319 18, 005 20, 815 23,704 27, 271 30, 481 33,441 36, 257 38, 778 41,314 44, 140 47, 160 50, 598 53, 631 56, 736 60, 014 63, 947 70, 465 75, 834 84,820 86, 651 93, 444 96, 780 97, 191 100, 850 Q) (2) (2) 5,845 13, 228 19, 878 29, 635 54,714 78, 270 87, 836 88, 822 70, 733 57, 804 39 164 185 640 1,002 538 387 396 297 267 359 400 334 359 355 317 368 340 324 364 335 7,503 402 348 440 361 473 573 787 (}) (2) (') 7,545 4,988 96, 034 95, 690 71, 195 65, 093 51, 638 16, 054 12, 786 8,146 94, 768 99, 553 103, 679 110, 179 116, 125 124, 993 131, 204 139, 163 151, 264 156, 308 165, 654 172,827 182, 867 193, 225 202, 961 214, 583 226, 171 235, 360 242, 393 254, 454 270, 155 344, 869 360, 819 343, 391 309, 281 309, 442 345, 084 358, 536 410, 055 664, 718 2, 891, 692 (2) 375, 915 567, 150 775, 512 1, 000, 542 1, 201, 756 1, 236, 410 1, 125, 742 924, 073 725, 728 744, 630 Expenditures 9,250 13, 323 16, 576 20, 528 24, 897 28,939 32, 781 37, 413 42, 086 219 1,975 3,390 4,497 5,446 6,616 6,924 7,133 7,555 7,858 8, 171 8,436 8,854 9,287 9,420 9,430 10, 246 1,773 210 280 997 1,114 1,063 961 369,372 1,059 608, 276 57. 107 66, 035 75, 294 83, 574 89, 554 94, 215 97, 973 102, 170 106, 765 111,449 115,691 121, 788 129, 746 138, 066 143, 708 169, 195 186, 540 272, 143 S d 1, 452, 367 252, 157 386, 126 524, 941 601, 721 671, 594 769, 956 905, 818 969, 854 794, 177 690, 035 5o§ « ^ V.a\ 32 108 365 632 1,176 1, 2,630 4,016 5,664 7,369 9,396 10, 450 11, 649 13, 144 14, 630 16, 443 19, 548 21, 344 23, 408 24, 646 26, 562 29, 851 33, 643 38, 636 39, 228 36, 820 42, 950 65, 630 673 163, 730 {') i}) Q) 23,336 41, 287 50, 496 60, 106 78, 188 97, 622 99, 315 69, 018 40, 969 35, 139 3,838 4,776 4,952 5,267 5, "~" 6,420 6,879 7,672 8,580 10, 029 10, 676 11,694 12, 552 13, 745 14, 700 15, 864 16, 901 18, 254 19, 661 21, 367 21, 854 23, 481 24, 408 24, 156 23, 225 25, 435 29, 205 38, 056 58. 028 133, 566 195, 174 (2) 24,171 32, 974 37, 600 43, 413 52, 203 55. 029 61, 884 65, 116 57, 266 53, 802 61 59 92 120 174 344 353 239 298 ,215 176 254 213 275 257 463 458 608 703 753 265 649 668 1,373 3,533 54 (2) (') 554 5,407 4,859 2,082 3,890 8,360 4,085 5,542 17, 975 3,107 13, 149 18, 190 21, 728 26,280 31,811 38, 854 45, 289 52, 451 60, 426 73, 212 82, 251 94, 512 106, 064 117, 101 125, 826 133, 598 140, 629 149, 817 157, 893 166, 407 172,951 175, 090 184, 423 196, 410 207, 214 235, 640 264, 001 357, 643 494, 143 907, 231 1, 947, 029 (.') 300, 208 465, 794 617, 896 707, 322 805, 875 930, 967 1, 071, 102 1, 109, 530 910, 387 782, 083 81, 619 81, 363 81,951 83, 899 84. 314 86, 139 85, 915 86, 712 90, 838 83, 096 83, 403 78. 315 76, 803 76, 124 77, 135 80, 985 85, 542 86, 543 84, 500 88, 047 97, 204 169, 779 176, 396 146, 981 102, 067 73, 802 91, 083 893 -84, 088 -242, 613 944, 663 Q) (2) 75, 707 101, 356 167, 616 293, 220 395, 880 304, 443 54, 640 -185,457 -184,669 -37, 453 180, 000 » The rent on property owned by the regional offices was entered on the books beginning with Dec. 1, 1899, and the rate at which it was computed was changed several times subsequently. It does not constitute actual receipts, but is merely a book entry. 2 Unknown. » RM. 12,000,000,000 (twelve billion). « RM. 16,000,000,000,000,000,000 (sixteen quintillion). 484 APPENDIXES as a result of the financial diflficulties of the Federal Government, the regional ofiices had to reimburse the post offices for their services in selling stamps and paying cash benefits. Up to 1930 this service on the part of the post ofiices constituted a part of the Federal subsidy to the insurance scheme. The reim- bursement to the post oflSce now constitutes approximately 20 to 25 percent of the total cost of administration. That the rise in the cost of administration results from the general expansion of the scheme, rather than ineflBciency, may be seen from table X-8, which relates the cost of administration to the total expenditures and the total receipts. Table X-8. — Proportion of cost of administration to total expenditures and total receipts Percentage of— Year Percentage of— Year Total expendi- tures Total receipts Total expendi- tures Total receipts 1891 29.2 26.3 22.8 20.0 18.5 16.5 15.2 14.6 14.2 13.7 13.0 12.4 11.8 11.7 11.7 11.9 12.0 12.2 12.5 12.8 12.6 13.4 4.0 4.8 4.8 4.8 5.1 5.1 5.2 5.5 5.7 6.4 6.4 6.8 6.9 7.1 7.2 7.4 7.5 7.8 8.1 8.4 8.1 6.8 1913 13.2 12.3 11.2 10.8 11.5 10.6 11.7 14.7 6.8 1892 - - - 1914 7.0 1893 1915 7.5 1894 1916 1895 - 8.2 1917 8.5 1896 - 1918 10.6 1897 1919 _ - 14.2 1898 - - 1920 20.1 1899 . 1921 1900 1 1922 ... > Not available 1901 1923 J 1902 1924 8.1 7.1 6.1 6.1 6.5 5.9 5.8 5.9 6.3 6.9 6.4 1903 . 1925 5.8 1904 . - - 1926 1905 4.8 1927 4.3 1908 . 1928 4.3 1907 1929 4.5 1908 - 1930 5.5 1909.. 1931 1910 . - 7.0 1932 .... ... 7.9 1911 1933- 7.2 1912 . The trend in the proportion of the cost of administration to the total ex- penditures is downward except for the years immediately preceding the war. One of the reasons for the increase in administrative cost in the years from 1906 to 1914 was that the distribution of the cost between tlie common pooled fund, the individual regional funds, and the Government according to a very complicated formula involved considerable work. Later on when costs were allocated to the regional ofiices in direct proportion to their receipts, much of this administrative detail work was eliminated. Another reason for the in- crease in the administrative cost before the war may be found in the increasing importance placed upon the curing of invalidity. The benefits paid for this purpose increased at a more rapid rate in those years than did the payment of pensions. Another possible reason may well be found in the work connected with investing the considerable reserve which had been accumulated by that time. The proportion which the cost of administration bears to the total receipts shows no trend either upward or downward. These percentages reflect largely the employment conditions of the country, the percentage being high when employment is low, and low when employment is high. GERMANY^ — ^INVALIDITY, OLD AGE, SURVIVORS 485 COVERAGE From the very beginning the German social insurance law lias covered by compulsory insurance almost all persons vporking for a wage. The reason for bringing under the law the entire working population from the start may be found in the fact that Germany had general sickness and accident insurance laws before insuring its workers against invalidity and old age. The original law of 1889 included workers in agriculture and forestry as well as domestic service. Salaried employees were covered if their salaries did not exceed 2,000 marks a year. In 1912 this group of employees was insured under a separate law. Only one group of workers was included later which had not been covered at first. They were the home workers. The home workers in the textile, tobacco, and cigar industries were included by the amendment of 1899, and the remainder of this group by an amendment passed in 1923. Casual workers still remain excluded, but must obtain a special permit if they want to be relieved from the obligation of paying contributions. The number of persons covered is shown in the following tabulation. The decline after the war resulted from the fact that Germany lost some territory through the Treaty of Versailles; the decline in 1934 was the result of unemployment. Num'ber of persons covered 6y invaliditp insurance 1893-193^ 1893 10, 700, 000 1898 11, 600, 000 1903 13, 600, 000 1907 14, 600, 000 1913 18, 100, 000 1924 17, 000, 000 1928 18, 000, 000 1934 17, 000, 000 The law provides that persons leaving an insurable occupation may continue their insurance voluntarily if they desire to do so. In that case, they are re- quired to pay the employer's share of the contribution as well as their own. The needs of independent craftsmen, small employers, and farmers are taken into consideration by providing that they may come under the scheme by paying the full contribution rate and a share of the administrative cost, provided they are not over 40 years of age at the time they become insured. This privilege is limited to people who do not employ more than two persons at any time of the year. CONTRIBUTIONS Contributions have been shared equally by employers and workers from the beginning of the scheme. Workers have always received credit for periods of illness, and for periods of compulsory military service and more recently also for periods of unemployment. For the purpose of making the collections as simple as possible and still graduating the contribution in accordance with the wage of the worker, wage classes were initially established, the same contribution being required of all workers belonging to the same wage class. The rates of contribution as well as the wage classes themselves have been changed frequently, as may be seen from table X-9. In order to be able to make some comparison with the proposed American law, these rates are ex- pressed as percentages of the lower and upper limit of each wage class in table X-10. The period of inflation is omitted from the latter table for the reason that wage classes and contribution rates had to be changed frequently to keep step with the rapid decline in the value of the money. 486 APPENDIXES Table X-9. — Wage classes and contribution rates, 1891-193Jf [In marks] Yearly income Weekly contributions from— Wage classes Jan. 1, 1891, to Dec. 31, 1899 Jan. 1, 1900, to Dec. 31, 1911 Jan. 1, 1912, to Dec. 31, 1916 Jan. 1, 1917, to July 31, 1920 Aug. 1, 1920, to Dec. 19 1920 Dec. 20, 1920, to Dec. 31, 1923 I To 350 0.14 .20 .24 .30 0.14 .20 .24 .30 .36 0.16 .24 .32 .40 .48 0.18 .26 .34 .42 .50 0.90 1.00 1.10 1.20 1.40 During the inflation II More than 350 to 550.. More than 550 to 850.. More than 850 to 1,150. More than 1,150 period wage classes Ill and contribution IV . rates were changed V frequently to keep # step with the decline in the value of money. At the end of 1923 the weekly contribution in the highest wage class (V) was 1,160 billion marks. Weekly wages Week- ly con- tribu- tion from Jan. 1, 1924, to Sept. 27, 1925 Weekly wages W eekly contributions from— Wage classes Sept. 28, 1925, to June 26, 1927 June 27, 1927, to Dec. 31, 1927 Jan. 1, 1928, to Dec. 31, 1933 0.30 .60 .90 1.20 1.50 1.80 2.00 From Jan. 1, 1934, on I To 10 0.20 .40 .60 .80 1.00 To 6 0.25 .50 .70 1.00 1.20 1.40 0.30 .60 .90 1.20 1.50 1.80 0.30 II More than 10 to 15 More than 15 to 20 More than 20 to 25 More than 25 More than 6 to 12 More than 12 to 18 More than 18 to 24 More than 24 to 30 More than 30 to 36 .60 Ill - .90 IV—. 1.20 V 1.50 VI 1.80 VII More than 36 to 42 2.10 VIII More t Volunt han 42.. 2.40 IX arv class 2.70 X do 3.00 1 Table X-10. — Rate of contribution as percent of lower and upper limit of each ivuge class Wage class Jan. 1, 1891, to Dec. 31, 1899 Jan. 1, 1900, to Dec. 31, 1911 Jan. 1, 1912, to Dec. 31, 1916 Jan. 1, 1917, to July 31, 1920 Aug. 1, 1920, to Dec. 19, 1920 I . To 1.9 . To 1.9 To 2.1.. To 2.4 To 12.0. II... 2.7 to 1.7 2.1 to 1.3 1.7 to 1.2 2.7 to 1.7 2.1 to 1.3 1.7 to 1.2 1.5 to 3.2to2.0.. 2.8 to 1.7 2.3 to 1.6 2.0 to 3.5 to 2.2 3.0 to 1.8 2.4 to 1.7 2.1 to 13.4 to 8.5. Ill -. 9.4 to 6.1. IV 6.6 to 4.9. V 5.7 to. Wage class Jan. 1, 1924, to Sept. 27, 1925 Sept. 28, 1925, to June 26, 1927 June 27, 1927, to Dec. 31, 1927 Jan. 1, 1928. to Dec. 31, 1933 From Jan. 1, 1934, on I To 2.0. To 4.2 . ... .. To 5.0 To 5.0 To 5.0. II . 4.0 to 2.7 4.0to3.0 4.0to3.2 4.0 to . . 8.3 to 4.2 5.8 to 3.9.. 5.6 to 4.2 5.0 to 4.0 4.7 to 3 9 10.0 to 5.0 7.5 to 5.0 6.7 to 5.0 6.3 to 5.0 6.0to5.0 10.0 to 5.0 7.5 to 5.0 6.7 to 5.0 6.3 to 5.0 6.0 to 5.0... 5.6 to 10.0 to 5.0. Ill 7.."^ to 5.0. IV 6.7 to 5.0. v.... 6.3 to 5.0. VI 6.0 to 5.0. VII 5.S to 5.0. VIII 5.7 to. GEKMANY INVALIDITY, OLD AGE, SURVIVORS 487 The contribution rate increased from approximately 2 percent of tlie wages in 1891 to 5-6 percent in 1934. The present government has announced that it is to be raised further by about 1.5 percent as soon as general business conditions have improved, and by a further 1.5 percent in 1950. When the law was first introduced it was predicted that the original rates would have to be doubled within 80 years. Subsequently the law was liberalized in a number of important respects, so that the original forecasts would not have ■^eld good under any circumstances. On the whole, the low-paid worker pays the higher percentage of the wage. This apparent discrimination against persons belonging to a low-wage class was justified by the drafters of the original law by the statement that the adminis- trative expenses for all workers were the same and that the low-paid workers should pay their share. From 1927 on, this injustice was rectified to some extent by having a uniform rate of 5 percent for the upper wage limit of each class. BENEFITS The original law covered the risks of invalidity and old age. Of these two risks that of invalidity was considered the more important from a social point of view. Not only was much stress laid on medical attention and treatment, but very soon after the law was put into effect, the expenditures for invalidity pensions exceeded many times those for old-age pensions. This was the case in spite of the fact that the old-age insurance was fully retroactive : the contribu- tion period was shortened for the persons who were over 40 years old at the time they entered insurance by the number of years that they exceeded that age. For this reason the maximum old-age pension load was reached very soon after the law was adopted. Survivors' pensions were added in 1912 and took the place of the cash refunds which up to that time had been granted in cases of marriage, accident, and death. Old-Age Pensions. — The original law provided that old-age pensions be paid from age 70 on after a contributory period of 1,200 weeks. This contributory period was shortened by 47 weeks for each year the worker was beyond 40 years of age, if the insured could prove that for 3 years preceding the effective date of the law he had been employed in an insurable occupation. If he could prove that, he was entitled to the full old-age pension after 1 week's contribu- tion only. This is no doubt one of the main reasons why the reserve did not reach the proportionate size which is forecast for the proposed United States old-age benefit system. The conditions for receiving an old-age pension were liberalized in the law of 1900, and the provision for shortening the qualifying period was retained not only for the initial generation but for all persons who entered compulsory insurance after they were 40 years of age. Later this was changed to 35 years of age. From the beginning there had been a considerable movement toward lowering the age limit for the receipt of pensions, but it re- mained 70 until 1916. In that year it was lowered to 65. The framers of the original law considered the old-age annuity merely a sup- plement to the earnings of the worker. It was not conceived as a retirement allowance. When the old person became incapable of working he could ask to have his old-age pension changed to an invalidity pension. The latter was higher, and under it the insured was given full credit for all contributions made. One of the changes made in 1922 under the Republic was to grant the person who had reached retirement age the full amount of the invalidity pen- sion whether or not he was an invalid. This same law lowered the qualifying 488 APPENDIXES period from 1,200 to 200 weeks. Under the pressure of the depression the qualifying period for an old-age pension was increased to 750 weeks in 1929. Table X-1 gives a summary of the legal provisions according to which the amount of the old-age pensions has been computed at various times in the his- tory of the law. It will be seen from this table that until 1922 the old-age pension consisted of the fixed Federal subsidy of 50 marks a year plus an incre- ment varying with the wage class to which the insured belonged. After 1922 the old-age pension was computed in the same manner as the invalidity pension. It consisted of the fixed Federal subsidy, a fixed basic amount, plus an incre- ment varying with the number and amount of contributions paid by the insured for the entire period during which he was covered. The amount payable in the several wage classes after a contributory period of 2,000 weeks from the date of each change in the law may be seen from table X-11. Tablej X-11.^ — Yearly amount of old-age pension [Contributory period of 2,000 weeks from date of each change in the law] Period Amount of pension in marks for specified wage classes II III IV V VI VII vni 1891 to 1899 1900 to 1922 -- January 1924 to July 1924. . August 1924 to March 1925. April 1925 to July 1925 August 1925 to March 1927. April 1927 to March 1928... April 1928 to June 1932 July 1932 to December 1933 January 1934 to 106 110 196 208 232 340 360 360 276 192 135 140 236 248 272 440 480 480 396 312 103 170 276 288 312 520 600 600 516 432 191 200 316 328 352 640 720 720 636 552 230 356 368 392 720 840 840 756 672 800 960 960 876 792 1,040 956 912 1.032 The amount of the old-age pension remained fairly stationary in the 24 years before the war. During the inflation period the pensioners found themselves in very great financial difiiculties, as did everyone else who depended on a fixed income. From 1918 on it was necessary to grant the pensioners addi- tional allowances, which soon were many times the amount of the pension itself. These supplementary allowances amounted to 8 marks a month in 1918 for all old-age and invalidity pensions, 20 marks in 1919, 30 marks in 1920, 70 marks in 1921, and from 1922 on, the pensioners were put on a needs test and received payments on a relief basis. The Federal Government shared with the states and localities the expense of the relief of the pensioners during this period. When the currency was stabilized in 1924, flat pensions were first paid to all persons entitled to them, and no credit was given for any contributions paid before the war. Soon, however, this system was abandoned, and from April 1925 on, pensions were increased in proportion to the number and the amount of the contributions paid before as well as after the war. (See table X-1.) From that time on the labor movement exerted political pressure, as a result of which the amount of the pension wasi more than trebled in all wage classes compared with pre-war benefits. The financial difficulties caused by the present depression made it necessary not only to compute the new pensions on a different basis but to cut all current pensions by 72 marks a year. In 1932 the Von Papen government cut the fixed basic amount by 50 percent, and the present government canceled this portion of the pension altogether. (See table X-1.) According to the law now in effect, the pensions in the lowest GERMANY — INVALIDITY, OLD AGE, SUEVIVORS 489 wage class amount to only slightly over 50 percent of the pensions paid under the republic. The higher-paid workers fare somewhat better. As has been shown in the section on the rate of contribution, contributions were increased in the period after the war in approximately the same propor- tion as benefits. The present government, moreover, does not propose to lower contribution rates. On the contrary, it is hoped that rates may be in- creased when employment has picked up suflaciently to lower the unemployment insurance contributions. The actual average amount of the new pensions granted each year since 1891 is shown in table X-12. This table indicates the very gradual increase in the amount of the pensions before the war, the jump to two and then to three times the pre-war amount under the Republic, and the drastic cut under the Von Papen and present governments. Table X-12. — Average yearly amount of old-age pension grants Year Marks Year Marks Year Marks 1891 124 128 130 126 133 134 137 139 143 146 150 153 155 157 159 1906 161 162 163 164 164 165 166 167 168 170 179 173 175 181 183 1921 1892 1907 - 1922 1923 1924 1925 1926 1927- 1893 1908 1894 1909 1895 - 1910 (') 1896 1911 1897 1912 -. 1898 . - 1913 1928 1929 1930 1931 . . - 1899 1914 1900 1915 . . 487 1901 1916 504 1902 . 1917-.- 1932 1933 1934 516 1903 1918 426 1904 1919 390 1905 1920 1 Not available. These figures do not mean very much unless they be related to the wages which the individual received before drawing a pension. Unfortunately it is as diflBcult to procure information on the average wage in Germany as it is in the United States. An attempt has been made to arrive at an estimate of the average yearly wage from the amount of contributions paid in each wage class. This is not a very satisfactory method of making an estimate, because it does not take into account the degree of unemployment. The ofiicial publica- tion of the Federal insurance oSice refuses to draw any conclusions as to a general average wage of the insured population from the available figures. Keeping in mind these limitations, one may make the statement that the average old-age pension was approximately 28 percent of the average wage in the first 10 years of the insurance scheme. This percentage declined slightly in the years from 1900 to 1914 for the reason that wages increased considerably during this period. After the war the percentage increased, but no figures are available until 1930, when the proportion was about 35 percent. Because of the severe unemployment and the wage cuts after that time, the estimates are too uncertain to be of value. Invalidity Pensions. — Invalidity was defined as loss of two-thirds of the nor- mal earning capacity under the law of 1889, and this definition has been retained up to the present time. Since sickness insurance takes care of periods of illness of less than 26 weeks' duration, it was found desirable to have the invalidity benefit begin as soon as the sickness benefit ceased. No such pro- vision was included in the original law, but the change was made in 1900. For 490 APPENDIXES a number of years special sickness pensions were granted, but as time went on, these were combined with the invalidity pensions. At the present time a person who has exhausted his sickness benefits becomes eligible for the invalidity pension automatically and is entitled to it until his earning capacity is restored. The qualifying period for the invalidity pensions was fixed at 235 weekly contributions in the original law. It was lowered to 20O weeks iu 1900 and raised to 250 weeks in. October 1929. Table X-1 lists the provisions according to which the amount of the invalidity pension has been computed throughout the years. The invalidity pension consists of three parts : (1) A fixed Federal subsidy, amounting to 50 marks a year before the war. After the war it was 36 marks for the first half of 1924, was raised to 48 marks In August of 1924, and finally to 72 marks in 1925. It has remained at that figure since then. (2) A fixed basic amount. This was a flat 60 marks for each pension paid from 1891 to 1900. It was raised for wage classes II to V in 1900 by 10, 20, 30, and 40 marks, respectively. No further change was made until after the war. In 1924 it was raised to 120 marks for all wage classes, then to 168 marks in 1925, cut to 84 marks in 1932, and canceled altogether in 1934. (3) An increment varying with the number and amount of contributions paid on behalf of each individual worker. Numerous changes were made in the computation of this increment. The details may be found in table X-1. When survivors' insurance was added to the system of invalidity and old-age insurance in 1912, provision was made for children's bonuses for pensioners who had children under 15 years of age. In the beginning the children's bonus for each child was fixed at one-tenth of the invalidity pension. In 1924 it became a fixed amount of S6 marks for each child. In 1925 this was raised to 90 marks and in 1928 to 120 marks. In 1932 it was again reduced to 90 marks. From 1924 to 1926 the age limit was 18 instead of 15. However, this proved too expensive, and the age limit was again lowered to 15. Children who went to school remained entitled to a bonus up to the age of 21, and those who were incapable of earning a living because of infirmity received a bonus without an age limit. In 1931 these latter provisions were canceled by executive order, and now no bonus is paid for children who are over 15 years of age. Table X-13 shows the amount of the invalidity pension in the various wage classes after a contributory period of 250, 500, 1,000, and 2,000 weeks from the time of each change in the law. The actual average invalidity pension granted in each year is shown in table X-14. These two tables show that, as in the case of the old-age pension, invalidity benefits rose only slightly before the war, were increased in the twenties to approximately two to three times their pre- war amount, and were cut drastically, especially in the lower wage classes, under the Von Papen and present governments. Not only were the new pen- sions computed on a lower basis from 1932 on, but all current pensions were cut by 72 marks a year. This drop is likely to continue if the policies of the present government are not modified. If these average pension grants are related to the estimated average wage of the insured population, it appears that the pensions constituted approxi- mately 25 percent of the wage before the war and that this proportion had risen to 35 percent by 1930. What the proportion has been since 1930 is diflScult to estimate because of severe unemployment and the decline in wages. Tliese percentages are estimated only, because no figures on the average wage of the insured population are available. Survivors' Pensions. — Survivors' insurance was not a part of the original law, but was added in 1912 and extended later on. Before it was included in the law, refunds amounting to oue-lialf of tlie contributions paid were given to GERMANY — INVALIDITY, OLD AGE, SURVIVORS 491 the dependents of insured persons who died or suffered an accident, and to women who married, provided they had been insured for not less than 200 weeks. These refunds had always been comparatively small. By 1912 they averaged slightly over 100 marks ($25) in cases of death and accident, while they were only about 40 marks ($10) in cases of marriage. After the intro- duction of survivors' insurance, the provision for refunds was canceled. Table X-13. — Yearly amount of mvalidity peiuion [In marks] Period Wage classes II III IV V VI VII VIII 1891 to 1899 1900 to 1921 January 1924 to July 1924.. August 1924 to March 1925. April 1925 to July 1925 August 1925 to March 1927. April 1927 to March 1928— April 1928 to June 1932 July 1932 to December 1933 January 1934 to 1891 to 1899.. 1900 to 1921 January 1924 to July 1924.. August 1924 to March 1925. April 1925 to July 1925 August 1925 to March 1927. April 1927 to March 1928.-. April 1928 to June 1932 July 1932 to December 1933 January 1934 to 1891 to 1899 1900 to 1921 January 1924 to July 1924.. August 1924 to March 1925. April 1925 to July 1925 August 1925 to March 1927. April 1927 to March 1928... April 1928 to June 1932 July 1932 to December 1933 January 1934 to 1891 to 1899 1900 to 1921 January 1924 to July 1924 « August 1924 to March 1925. April 1925 to July 1925 August 1925 to March 1927. April 1927 to March 1928... April 1928 to June 1932 July 1932 to December 1933 January 1934 to 161 173 197 253 255 255 171 144 120 125 166 178 202 265 270 270 186 144 130 140 176 188 212 290 300 300 216 152 150 170 196 208 232 340 360 360 276 192 Contributory period of 250 weeks 125 100 166 178 202 265 270 270 186 144 133 110 171 183 207 275 285 285 201 144 143 120 176 188 212 290 300 300 216 144 130 181 193 217 300 315 315 231 152 310 330 330 246 167 340 256 182 197 Contributory period of 500 weeks 140 150 176 188 212 290 300 300 216 144 155 170 186 198 222 310 330 330 246 172 175 190 196 208 232 340 360 360 276 202 210 206 218 242 360 390 390 306 232 380 420 420 336 262 440 356 292 322 Contributory period of 1,000 weeks 170 180 196 208 232 340 360 360 276 212 200 210 216 228 252 380 420 420 336 272 240 240 236 248 272 440 480 480 396 332 270 256 268 292 480 540 540 456 392 520 600 600 516 452 640 556 512 572 Contributory period of 2,000 weeks 230 240 236 248 272 440 480 480 396 312 290 290 276 288 312 520 600 600 516 432 370 340 316 328 352 640 720 720 636 552 390 356 368 392 720 840 840 756 672 800 960 876 792 1,040 956 912 1,032 492 APPENDIXES Table X-14. — Average yearly amount of the invalidity pension grants Year Marks Year Marks Year Marks 1891 113 115 118 122 125 127 130 132 132 142 146 150 152 155 159 1906 163 166 170 175 177 180 187 195 201 202 199 202 207 211 208 1921 1892 1907 1922 1893 1908 1923 1894 1909 1924 - - 1895 1910 1925 (') 1896 1911 1926 1897 1912 1927 1898 1913 1928 1899 1914 1929 1900 --. -. 1915 1930 487 1901 1916 1931. 504 1902 -- . - . 1917 1932 516 1903 1918 1933 - . - 426 1904 1919 1934 390 1905 1920 'Not available. However, the idea of a cash lump-sum payment was retained for some time for widows wlio had acquired the right to an invalidity pension by contribu- tions of their owti. The children of such women also received a lump-sum payment on reaching age 15. These provisions were given up in 1921. At the present time all cash payments are in the form of pensions. It had always been thought desirable to limit the amount which might be drawn by any one family. In 1912 this maximum for all survivors was put at one and one-half times the amount of the invalidity pension ; the allowance for the orphans in one family was not to exceed the amount of the invalidity pen- sion. In 1916 it was decided that there be no maximum to the amount a family of a deceased insured person might receive. This was no doubt because of the great distress in families which had lost their chief breadwinner in the war. In the section dealing with the number of pensioners (p. 494), it will be shown how rapidly the widows' and orphans' pensions increased from 1914 to 1918. The war placed a heavy burden on the social-insurance scheme of Germany, and it may well be asked whether this burden should not rather have been borne by funds derived from general taxation. After the effect of the war had worn off somewhat and the war orphans had reached the age where they could earn their own living, a maximum was again set to the benefits to be drawn by any one family. In 1927 it was decided the total amount was not to exceed 80 per- cent of the yearly wage of the insured ; in 1934 it was further limited to the amount of the invalidity pension plus the children's bonus. Widows' Pensions.- — In the beginning only invalid widows, i. e., widows who had lost two-thirds of their normal earning capacity, were eligible to receive a widow's pension. Widowers of insured women received a pension under the same conditions provided they were needy. Widows who had exhausted their sickness benefits without regaining their earning capacity became eligible to pensions in 1923. From 1927 on, all widows over 65 years of age became eligible to the widows' pension. The widows' pension is made up of the same components as the invalidity pension. It consists of a Federal subsidy, which is the same for each pension, a fixed basic amount, which is a certain proportion of the fixed basic amount of the invalidity pension, and an increment, which is a fraction of the increment of the invalidity pension. (See table X-1.) The increase and decrease in the amount of this pension follow the same pattern as do the old-age and invalidity pensions : a considerable liberalization of benefits in the twenties and a subse- GERMANY INVAIJDITY, OLD AGE, SURVIVORS 493 quent cut as a result of the depression and the change in government. This movement may be seen from table X-15, which indicates the average yearly grants for widows' pensions since 1912. Tlie average pension was trebled in the twenties, and the cut in recent years does not seem to have been as drastic as that for invalidity and old-age pensions. Table X-15.- — Average yearly amount of widows' pension grants Year Marks Year Marks Year Marks 1912 77 78 79 80 81 83 84 85 1920 86 1928 1929 1930 1931 } ^•) 1913 1921 1914 1915 1922 1923 244 269 1916 1924 1932 296 1917 1925 1926 1927 1933 246 1918 1934 232 1919 1 Not available. If these amounts are related to the estimated average wage of the insured population, it appears that widows' pensions constituted approximately 10 per- cent of the wage before the war, and that this percentage had risen to 18 percent by 1930. The tigures after that date are too much influenced by the extent of unemployment and the decrease in the wage level to be reliable. Orphans' Pensions. — By an amendment to the law of 1912, legitimate children of insured men and fatherless and illegitimate children of insured women became eligible to an orphans' pension up to the age of 15. Children of an insured woman were likewise eligible to a pension after her death if the father was incapable of earning a living and if they were in need. Grandchildren of the deceased insured were also eligible if the parents had died, if the insured had provided for them during his lifetime, and if they were in need. In 1923 adopted children and stepchildi'en and grandchildren for whom the insured had provided before his death were put on the same basis as legitimate children. At the same time the age limit was raised to IS years. As a result of these provi- sions the expenditures for orphans' pensions increased rapidly, and it was thought necessary to change some of them. In 1926 the age limit was lowered again to 15 years. However, children who went to school received a pension up to age 21, and invalid children were pensioned until they were capable of earning a living. In 1931 the law was further limited so that no child over 15 years old was entitled to a pension. At the same time the pensions of stepchildren were canceled. Those of grandchildren had been given up a few years earlier. Table X-1 shows the legal provisions for computing orphans' pensions. It will be seen that they are made up in the same manner as the widows' pensions — they consist of a fixed Federal subsidy for each child plus a fixed basic amount and an increment, which are a fraction of the basic amount and the increment of the invalidity pension. The trend in the size of the pension follows that of the widows' pension, as may be seen from table X-16, which indicates the aver- age yearly amount of new pensions granted in each year. The figures of the table represent the amount given per child, and not per family. The increase in the orphans' pensions during the twenties is greater than for any other type of pension. Before the war the average orphans' pension was only about 4 percent of the estimated average wage. By 1930 this percentage had increased to approximately 15 percent. 78470—37 33 494 APPENDIXES Table X-16. — Average yearly amotmt of orphans' pension grants Year 1912, 1913, 1914 1915, 1916 1917 1918 1919 Marks Year 1920 1921 1922 1923 1924 1925 1926 1927 Marks 43 (1) Year 1929 1930 1931 1932 1933 1934 Marks (') 200 205 201 144 124 1 Not available. THE NUMBER OP PENSIONERS Perhaps the most impressive picture of the increasing importance of a social insurance scheme in Germany is that of the pension load. Table X-17 gives the number of pensioners from 1891 to 1934. Starting with slightly over 100,000, the number increased quite rapidly until the beginning of the war, when it was a little over 1,000,000. Since then the increase has been very rapid. The number of persons in receipt of pensions at this time is almost 3% million. It is esti- mated that the maximum load will not be reached until some time between 1960 and 1970, though it is expected that the rate of increase will gradually decline until then. Table X-17. — Ntiml)er of persons in receipt of pensions, 1891-1934 Type of pension End of yea! Invalidity Sickness Old age Widows Widows' sickness Orphans i Total 1891 118, 997 150, 403 166, 976 183, 168 195, 723 203, 955 203, 644 201, 329 195, 133 188, 472 179, 450 168, 550 156, 618 145,466 134, 080 125, 603 116,887 108, 637 102, 362 98, 335 93, 369 90, 071 87, 261 84, 015 82, 914 166, 416 215, 077 230, 902 242,015 248, 678 269, 379 287, 887 136, 855 108, 071 89, 400 118,997 1892 11,999 37,815 71, 755 110,377 161, 670 210, 859 264, 899 324, 319 405, 337 486, 945 574, 833 663, 140 734, 985 780,762 814, 575 841,992 868, 086 893, 585 918, 760 940, 875 965, 624 998, 339 1, 029, 802 1,029,049 1,030,959 1,001,330 986, 352 985, 336 988, 837 1,028,493 1, 045, 654 1,231,144 1, 372, 172 1, 529, 100 162.402 1893 204. 791 1894 254. 923 1895 306, 100 1896 2 365, 625 1897 414, 503 1898 466, 22S 1899 519, 452 1900 5, lis 8,700 12, 146 14,188 16, 977 20, 141 22, 099 20, 081 19, 087 18, 502 16, 965 15, 768 15,905 16, 555 19, 191 27, 706 64, 858 74, 353 79,290 102, 386 83, 222 67, 333 52, 356 41, 325 34, 152 29,500 59S, 927 1901 675,095 1902 755, 529 1903 833, 944 1904 897, 428 1905 934, 983 1900 962, 277 1907 978,960 1908 995,810 1909 1,014,449 1910 1,034,060 1911 1.050.012 1912 1, 071, 600 1913.... 1914 11,743 20, 675 30,615 41.835 54, 360 68,097 84, 397 97, 465 115.386 138, 229 157, 3) 1 187, 805 233, 400 323 558 994 1,616 2,049 2.571 3, 634 4,084 4,458 4,507 4,227 3,770 3,400 94,435 161,863 402, 605 655, 385 825. S.3,8 995, 794 1, 086. 809 1,063,518 1,035,836 1, 000. 531 997, 010 1,071.359 1, 135. 609 1, 208, 658 1, 316, 104 1915 - -.- 1, 573, SS3 1916 1917 1.961,069 2. 173. 007 1918 2. 363, 066 1919 -. - 2. ,504. 577 1920 2, 485. 804 1921 2, 520. 885 1922 2, 529. 164 1923 2. 567. 872 1924 2, 777. 329 1925 3. 020. 409 ' From 1913 to 1923, inclusive, these figures are estimated only. 2 Beginning with 1896 the figures include data for the special funds. GERMANY INVALIDITY, OLD AGE, SURVIVORS 495 Table X-17. — Numbe)- of persons in receipt of pensions, 1891-1934 — Continued Type of pension End of year Invalidity Sickness Old age Widows Widows' sickness Orphans Total 1926 1, 660, 652 1, 766, 881 1, 888, 136 1, 998, 610 2, 162, 711 2, 285, 923 2, 296, 920 2, 393, 977 2, 439, 872 25, 440 23, 104 21, 662 20, 264 19, 374 18, 483 14, 132 16, 719 15, 652 75, 320 65, 903 58, 551 50, 620 45, 379 40,239 35, 362 30, 853 27, 155 277, 619 334, 280 389, 299 486, 644 639, 856 651, 776 559, 592 580, 478 598, 652 2,915 2,646 2,485 2,304 2,209 2,115 1,932 1,876 1,781 828, 619 779. 384 735. 884 690, 965 648,866 545, 637 349, 345 350. 112 359, 448 2, 870, 565 1927 . . 2, 972, 198 1928 . 3, 096, 017 1929 3, 249, 407 1930 3, 518, 395 1931. 3, 544, 173 1932... 3, 257, 283 1933.. .. 3, 374, 015 1934 3,422,560 The outstanding facts in table X-17 are as follows : (1) The highest number of old-age pensioners was reached soon after the introduction of the scheme, because the qualifying period was shortened for the older worker in direct proportion to the number of years he was over 40. The number jumped con- siderably in 1916, when the age requirement was lowered from 70 to 65. From 1922 on it has declined gradually, because after that time old persons were given invalidity pensions. (2) The greatest increase in the number of persons receiving survivors' pensions is found in the time of the war. As stated before, the invalidity insurance system carried a part of the burden of the war by providing for the widows and orphans of the insured workers who were killed in the war. The number of widows' pensions paid increased again considerably in 1927, when all widows over 65 became eligible for a pension. During recent years there has been a decline in the number of persons receiv- ing survivors' pensions, and especially in the number of pensioned orphans. On the one hand, this results from the general policy of retrenchment. On the other hand, most of the war orphans have passed the age limit for pensions and in addition the average size of family has gradually declined. Unfortunately no figures are available regarding the age of the pensioners before 1924. Table X-18 lists the number of pensioners in each category who liave reached the age of 65. By comparing these figures with those giving the total number of pensioners, it would appear that an increasing proportion of old people is being provided for under the workers' insurance scheme. Table X-IS.- — Number of pensioners 65 years of age or over Type of pension End of year Old age Invalidity Si.^kness Widows Widows' sickness Total 1924 1925 . . 108, 071 89, 400 75, 320 65, 903 58, 551 50, 620 45, 379 40, 239 35, 362 30, 853 920,885 999, 777 1,060,101 1,117,231 1, 183, 826 1, 240, 128 1,317,962 1, 390, 849 1,443,631 1, 498, 936 1,486 1,803 2,067 2,391 2,717 2,960 3, 270 3, 569 3,743 3,920 100, 345 125,136 152, 387 193, 296 232, 144 307, 900 425, 076 437, 746 376, 904 399, 428 168 206 262 314 392 444 501 585 615 663 1, 130, 955 1, 216, 322 1926 1927 1928 1929 1,290,137 1,379,135 1,477,630 1,602,052 1930 1931 1, 792, 194 1,872,988 1932 1933 . . 1, 860, 255 1, 933. 800 496 APPENDIXES SUMMARY In the following paragraphs an attempt is made to summarize the most important conclusions that may be drawn from the history of the German social insurance system. The first outstanding fact is the ever-increasing size of the business itself, which neither war nor inflation nor a severe depression could check. One of the causes of this tremendous growth is to be found in the increase of the population itself and the expansion of industry during the last half century. Another cause lies in the extension of the insurance to cover new groups of beneficiaries. Since almost all insurable workers were covered by the insurance system from the beginning, the expansion has not resulted from extending the coverage to any large, new occupational group. The second most outstanding fact in this history is the inadequacy of the forecasts which were made for it in the beginning. This was not the fault of those who made the forecasts, but rather their inability to prophesy the general future development of a country. They had to assume that the general economic trend would continue in more or less the same manner as they had known it, and they could not possibly foresee the war, the inflation, and the subsequent changes in government and governmental policy. The forecasts were very good, if somewhat too conservative, for the period from 1891 to 1914, but they broke down completely from that time on. This leads to the third point which needs to be brought out. A social insur- ance scheme is not a separate entity ; it is an integral part of the economic life of a nation, and the forces which influence other enterprises shape its course as well. It changes its character with a change in government, be- comes more liberal when labor has political power, and is limited in scope when labor is suppressed. It is not a scheme that is adopted once and for all ; rather it is in a constant state of flux reflecting all changes in the economic life of a country. It was "under control" under the monarchy of pre-war Germany, and benefits were increased only if a careful investigation of the finances seemed to justify such a change. Never was labor allowed to exert political pressure for higher benefits. This situation was changed entirely under the Republic. There we find frequent increases in benefits, extension of benefits to new groups of workers, and this in spite of the doleful prophesies of the actuaries that a deficit was impending. It became evident very soon after reserves began to be accumulated that ordinary investment opportunities would soon be exhausted. For this reason the insurance oflSces had to look around for new types of investments. They found that the employers and the workers, who financed the insurance scheme, would derive the greatest benefit by investments which would promote the general welfare of the workers. Hence they embarked on an extended program of construction of workers' apartments, hospitals, sanatoria, and similar insti- tutions. The insurance oflSces themselves profited by these activities, since these institutions all helped to prevent and to cui'e invalidity and tended to lower the expenditures for invalidity benefits. The period of inflation wiped out the accumulated capital and destroyed the financial basis on which the insurance scheme was built. In spite of the fact that infiation in Germany assumed unprecedented proportions, it did not make an end to the insurance system as such. The system has been put on a different basis and has had great financial difiiculties since that time, but the expansion of the insurance was not checked thereby. Germany started on its social insurance scheme giving the localities and special groups of workers a large degree of autonomy. The trend in its history GERMAKY — INVALIDITY, OLD AGE, SURVIVORS 497 has been toward a greater and greater centralization, pooling of risks, and depriving the regional offices of more and more of their powers. This trend has been the same under all successive systems of government, and it has been accelerated under the present regime. The question of whether or not the Federal Government should share iu the cost of the insurance scheme was answered in the affirmative by the sponsors of the original law. However, in times of financial difficulties the share of the Federal Government has been increased greatly beyond that originally pro- posed. During the inflation period the Government helped the regional offices in relieving the distress of the pensioners. After that time many special appro- priations were made so as to enable the insurance offices to fulfill their obliga- tions. This policy is still carried on under the present Government. BIBfJOGRAPHY Gebhard, Herman und Geibel, Paul, Fiihrer durch das Qesetz, betieffend die Invaliditdts und Altersversicherung vom 22. Juni, 1S89, Zweite, um ein ausfiihiliches Sachregister vermebrte und verbesserte Auflage (Stepban Geibel, Altenburg, 1890). Reichsversicherungsordnung nebst Einfiihrungsgesets;, Textausgabe mit Einleitung und Sachregister (Carl Heymanns Vei'lag, Berlin, 1911). Reichsversicherungsordnung nach dem Stande vom 20. April, 1926 mit alien Aus- fiihrungsvorschriften, Bearbeitet von J. Eckert, Sauerborn, Dr. Zscbimmer, Dr. Bauer, 2. Auflage (Reimar Hobbing, Berlin, 1926). Reichsversicherungsordnung mit alien Ausfiihrungsvorschriften, Nachtrag zur 1. und 2. Auflage, Abgeseblossen mit dem 15. Mai, 1927 (Reimar Hobbing, Berlin, 1927). Amtliche Nachrichten des Reiclisversicherungsamts, 1891-1927, (Berlin). Amtliche Nachrichten fiir Reichsversicherung, Neue Folge der Amtlicben Nachrichten des Reichsver.sicherungsamts, 1928-1935 (Berlin). Reichs-Versicherungsamt, Einrichtung und Wirkung der Dcutschen Arieiterversiche- rufig, Dritte unveranderte Ausgabe. Fiir die Weltausstellung in St. Louis 1904 im Aut'trage des Reichs-Versicherungsamts bearbeitet von Prof. Dr. Ludwig Lass und Prof. Dr. Friedrich Zahn (A. Asher & Co., Berlin, 1904). Reichs-Versicherungsamt, Statistik der Arbeiterversicherung des Dcutschen Rcichs fiir die Jahre 1885—1906, Im Auftrage des Reichs-Versicherungsamts fiir den VIII. Inter- nationalen Arbeiterversicherungs-Kongress in Rom, 1908, bearbeitet vou Dr. iur. G. A. Klein (Behrend & Co., Berlin, 1908). Ehrlich, Sigmund, Arbeiter-Pensionen mit Staatshilfe (Manz'sche K. u. K. Hof Verlags- und Universitats-Buchhandlung, Wien, 1901). International Labour Conference, 16th Session, 1932. Invalidity, Old-Age and Widows' and Orphans' Insurance (International Labour Oflice, Geneva, 1932). Kleeis, Friedrich, Die Geschichte der Sozialen Versicherung in Deutschland (Verlag der "Arbeiter-Versorgung", Berlin-Lichterfelde, 1928). Lefort, Joseph Jean, Les Caisses ,de Retraites Ouvrieres, Albert Fontemoiug, Editeur, (Ancienne Librairie Thorin et Fils, Paris, 1906). Young, T. E., The German Law of Insurance Against Invalidity and Old Age, "Journal of the Institute of Actuaries", vol. XXIX, part IV (no. CLXII, July 1891), p. 269. Zacher, Dr. G., Die Deutsche Arbeiterversicherung 190^-1908, "Actes du VIII Congres International des Assurances Sociales, Rome, 12-16 octobre 1908" (Imprimerie Nationale de J. 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I I C3o3rti^:«?^c3a3«c3:^octic3^cea3— s3.-ac3jj:25:?c3 c2:3 rt --^ rv* ^'-^ ,-.-• >S --^ jV '^ "-^ -^ r1 '-^ V •— -^ -^ O --V ,V *J --^ .^ r" — ^ .V ^ "—i V oitDrt aD«SD«.2;D« aDtf p:"D« |D«j=:3?i gDs-j:Di; gDQj^Dps Co; S o a 3 '3 is 5 " " ■" -' INFANT AND MATERNAL MORTALITY 511 -^ (M 'r> CO CO O •^ '^ ^ CO t^ o ■ O-^t— iONM'C^I>-I>.h->-'CCt~-OaiiCOOOO'— <'— 'OOTt<.— iiOt^COt^'-^C^CO'— iTfOO lO CO *o u^ »o c >— icoiOtOCOt^ool>-'JOiOcococcCDtOcDTt<'^TtOC^tOCO'— itNO-— '(NCOOOO-— tOOCOOC^-— 'COOli— iiO CCC0*0U0iOO"^C^"^i0i0i0I>-a5t^c0iCC0CDC0i0CDa0i0*0-^»0CDC0l>'C0C0u^00'— '00 r^ -rf o »o 00 ■* kO iC lO CD CO CO 000000OO^OC-CDt~-l>-I>'l>-01'— ICX) Oi u^ IM CO lO Oi lO lO CO CO ^ CD 05 '■^ -"^ lO CD CO CD t>. 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CD I>- t^ O C^ CO 00 OO iC CO I— I 00 00 t^ 00 1—1 X 1— I Oi (N CO' b- cq t^ CD t- OS -H OS 'r:}^ lO t^ ^ Tji (N 00 00 1>- OO CN 00 ^OsOsOOs^ COOSi-H ; CD lo o OS o-^^^i— I CO 1— ' t^r-CDOO- 00 CO (N 00 00 OSOS OSO coos OS O 00 CO b- 00 (M CO (M (M (N <-i Tt* CO CO CO OS 00 CO CO CO OS i-H 00 r-H CO lO O OS CD ososoo O OOS 1— ' CO OS CO OS t-H w,-HOOOO OS CO ■— < ^ 00 1-H coco t^ OOO 00 ^ ^^ ^^ coco OOOOOOOS ^' a* fl ^ 'r^ a cai"cac3Q303cci;c3 03 g ■ '3 . ^ ,-H t- «5p 0^ 05 0-; C3 03 Q ^ 03 &« ^ :z; :? 03aca03 ■CaO3«^C3C3"JC3CC'-^CT03j:7O3Ca^O3O3 ,TOC3 I rt-gf rt a&rt c;=«'ot)rt5iDtf £!=)« Sptf St-tf j=t 3£g5ggg£5 512 APPENDIXES &2 C/2 X Oil— 'OOOiCD'^OO'— '"^OTiCOOJiOOitOt^ l--OCD»OCCO:iiO(NC^OOiC^r^COCOCO t>.oot^"^'^^ccoir^ioioiocDcc'r^t^ csc^»oOiTt• »0 lO CD '<^ 00 O t^ rH (N 00 Oi OO lO lO CO l^ '<+' (N (N 00 lO I> Ol t^ CO WD CO Ol lO tJ< UO lO CO I>. Ci t- >0 lO lO 00 O !>- CD CO CO 1— I CO t— CO Oi 1-^ Oi O 00 CO lO CD CO lO CO Oi !>■ <—( O -^ Oi CO CO l>- OO OS T-H Oi w o 05C^ Ol COCD^- uO I-- CO -^ CO (M CO CD CO CO CO r- CO t^ O l> lO O CN CO CM l>- t-- CO 00 O t>- C3i i-t 00 I:^ Oi '^ CO lO t>- t^ CD l> O I>- 00 o c3c3tLcc3a3J-jc3c3*;:;c3a3r-roo3^ > ^ ^ ^ ^ 5 INFAISTT AND MATERNAL MORTALITY 513 Table XI-8. — Infant mortality rates (deaths under 1 year -per 1,000 live births), by specified groups of causes, in the United States birth-registration area of 1921,^ exclusive of South Carolina, 1921-34 Cause of death 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 55.8 31.2 5.2 9.9 2.7 0.9 4.1 1.9 1933 1934 All causes - .. 75.0 75.7 76.2 70.3 71.8 73.6 64.0 67.0 33.9 7.9 12.9 3.6 0.9 5.4 2.4 65.7 62.4 32.7 7.9 10.7 3.1 1.0 4.7 2.4 60.0 54.3 31.3 5.0 9.0 2.3 0.9 4.0 1.8 55 8 Natal and prenatal causes 2. Gastrointestinal diseases 3._ Respiratory diseases ■> Epidemic and communi- cable diseases s -- 36.0 14.8 10.3 4.6 1.0 8.3 35.9 12.6 13.7 4.0 0.9 5.9 2.6 35.6 12.3 13.8 5.4 1.0 5.8 2.5 35.0 10.0 11.9 4.4 1.0 5.7 2.4 34.9 11.9 12.2 3.7 1.0 5.9 2.3 34.9 10.2 14.3 5.0 1.1 5.7 2.4 33.5 8.0 10.3 3.5 0.9 5.3 2.3 33.5 7.4 12.8 3.5 0.9 5.3 2.4 32.2 6.6 11.0 2.7 0.9 4.5 2.1 31.4 5.5 9.3 3 0 External causes.. ..-._ All other causes 6 Unknown or ill-defined diseases 1.0 4.0 1.7 1 Includes California, Connecticut, Delaware, Indiana, Kansas, Kentucky, Maine, Maryland, Massa- chusetts, Michigan, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Utah, Vermont, Virginia, Washington, Wisconsin, and the District of Columbia. These are the States that were in the birth-registration area every year from 1921 to 1934. 2 Includes premature birth, congenital debility (called congenital debility, icterus, sclerema in 1930 list), injuries at birth, other diseases of early infancy, congenital malformations, syphilis, and tetanus. 3 Includes diseases of stomach, diarrhea and enteritis, dysentery. < Includes bronchitis, bronchopneumonia, pneumonia (divided into lobar and unspecified in 1930 list), infiuenza. J Includes measles, scarlet fever, whooping cough, diphtheria, erysipelas, meningococcus meningitis (called epidemic cerebrospinal meningitis in 1930 list), tuberculosis of the respiratory system, tuberculosis of meninges, other forms of tuberculosis. 6 Includes convulsions and other causes of death (intestinal obstruction shown separately in 1930 list was included in other causes of death prior to that date). Source; U. S. Department of Commerce, Bureau of the Census. Grants -13051 nade for •ecifled in 3 for coop- , nursing, and with tional re- idieapped I allotted distribut- 3 of need, J number I of such payment. crippled ring from ipling. *i;/;3S a:U r lo'i ftfiboJsao ; brough the Dl ;rctary of 3 comply all notify too,: Appendix XII SUMMARY OF PROVISIONS OF THE SOCIAL SECURITY ACT RELATING TO FEDERAL GRANTS TO STATES FOR PUBLIC-WELFARE PURPOSES * (Ch. 631, 49 Stat. 620; 42 U. S. C. (1935 Supp.), §§ 301-1305) Coz>dit:oQS for spproval Aid to tho blind ' Aid to dependant children * Maternal and child health ' Crippled children ' 1. A State plan (for each type of assistance, i and if administered by political 2. Financial participation by the State n A State o!d-^e assistance plan I need not provide State financial par- ticipation before July 1, 1937, where the Board finds the Statfl is so pre- QQandatory upon thei e State plan ((or each type of aid, or service)-. single State afiency must be established or designated to administer the State plan or established or designated to supervise the admir^stration or the State plan. maternal and child-health si ices the State health agency musi have been denied must be permitted an opportunity for a fair hearing before the 7. State resideoce requirement may not exceed 5 years within last 9 i ' ■ ■ ediately preceding application may be require 8- A State plan cannot impose any citizenship requirement which excludes my United States citizen. 9. After January 1, 1&40, State plan Host provide an age limit of nol over iS years, but until then a 70-year limit 0 be paid to the United S under a Federally 7. State residence requirement must not disqualify a child who has resided in the State for a year immediately preceding application, or who was born in the State during the preceding year, if its mother has resided in the State for l year immediately pre- and improvement of local maternal and child-health services ad- ministered by local child-health units. welfare groups and organizations. t of demonstration servici eas and among groups i must be made for carrying out the purposes specified in . Provision must be made for coop- agencies charged with " habilitation of physically hai The conditions are those involved in purposes of the section: To enable United States to cooperate with the St in establishing, e.'ftending, and strengi ening, in predominantly rural areas, chi welfare services for the protection and care of homeless, dependent, and neg- veloped jointly by the Children's Bureau and State public-welfare agencies and be expended for payment of part of the cost rural, and for developing State si the eneouraeement a ' " ' ' s predominantly rural to assist States ' _„ maintaining adequate public-health services, including the training of per- sonnel for State and loeil health work." The moneys paid to any State must be used solely in carrying health authority t Vocational rehabilitation < . A State plan must be submitted to the Federal agency approval, . The State must accept the provisions of the act entitled 1920, as amended. 3 civil employment," approved June 2, rehabilitation of eligible individuals as determined by t plans showing method and policies of administration and qualifications of personnel. t annually report to the Federal a. receipts and e.'cpenditures of money. I the work dona e . Federal funds n t be expended tor lands or build- itation administered by the i B, under regulation of the Fei _ civil employees of the United States disabled ii )rmanc6 of duty. Cooperation in the adrainistratio Federal -„ , ,,,_V6e3 of the Unitfld States disj ■ - - ■ perlomiance of duty. and the State law for ^ len's compensation if such exists, 9. Provisions for support and supervision of the State 10. Appointment of tho State treasurer as custodian for Anxxmt of Fede One-balf of State expenditures for s of $30 a month t under each plan; but such part t matched by I 5 percent of Federal aid to State for administral One-third of State expenditures; butsuch part of payment as is lo excess * "" ■ month for iirst child' and For each ilscal year $ State; and $1,800,000 disti States in proportion to live births; and $980,000 distributed on basis of need, taking Into consideration number of 9 St-ates on the basis of n of crippled children in need of such For each fiscal year SIO.OOO allotted to each of tho States and $990,000 distributed to the States not to exceed proportion of State to United States rural population. For each fiscal year $8,000,0 tributed to the States on the t (1) population, (2) special healtl lems, (3) financial needs. 8tete_ pTWTtf^s] partici- Amount eqoal to Federal pa>-ment to State exclusive of Federal 5 percent. it double Federal payment t Amount oqunl to Federal payment 0 State exclusive of allotment on basis Amount equal to Federal payment. t specifically provided ii Not specifically provided in act. t equal to expenditure from Federal funds. Money payments to needy individ- Money payments to needy blind t child or children under 1 i residence maintained 8 Services for promoting the health o mothers and children. Services and facilities (or crippled children or for children sudering from conditions which lead to crippling. Vocational rehabilitation of persons who, by reasc physical defect or infirmity, whether congenital or act by accident, injury, or disease, are incapacitated tor n erative occupation; rendering such persons fit for n erative occupation; and other services. WKhirf of rT-,--!r-rr:g ^Hot- made for each quartet on the basis of estimated State expenditures and appropriations, and investigations by the appropriate Federal a Not specifically provided ii Allotments made for each quarter in accordance with regulations pre- viously prescribed after conference Payments are made to the State upon the certification of the designated Federal agency (at t s fixed by such agency) by the Secretary of the Treasury {through the Division of Disbursement of tl So^jec^co rf Federal When, after reasonable notice and opportunity for hearing, the Board finds that an approved plan has been changed to impose a prohibited requirement, or in the administration imposes a prohibited requirement with the knowledge of the Stale agency In a substantial number of eases, or fails to comply substantially with provisions required in the plan, the Board shall notify the State agency that further payments will not be made. When, after reasonable notice and opportunity for hearing, the Secretary of Labor finds that in the administration of the plan there is failure to comply substantially with the provisions required in the plan, the Secretary shall notify tbe State agency that further payments will not be made. Not specifically provided in act. Not specifically provided in act. When it is found that moneys allotted are not being a-xpended for the purposes and conditions of the act of June 2, 1920, as amended, payments shall be withheld. Fedail sgaicy. Social Security Board Social Security Board Social Security Board Children's Bureau Children's Bureau Children's Bureau Public Health Service Oflace of Education year after Jose V}, l»6. Sum sufficient to carry out the purposes of these titles of the act $3,800,000 52,850,000 $1,500,000 $8,000,000 SI, 933,000 ^»l^S^ Seecrfty Aet also aothorizes in title in an appropriafioi « «9*orrv r^igrk ; department of government, Barnard College, Columbia Hans von Dreyliausen; Brookings Institution, Washington, D. C. Olga S. Halsey ; International Labor Office, Washington, D. C. Ralph B. Harris ; professor of business administration. University of Richmond, Richmond, Va. O. S. Powell ; statistician. Federal Reserve Bank of Minneapolis. George A. Shipman ; professor, department of political science, University of West Virginia. PUBLIC RELATIONS AND GENERAL KESEARCH Joan R. Cushman. - James C. Bowen. Helen Greenblatt. Jack Brandt, Jr. Theodore Jung. Walter F. Fade. Mrs. Violet K. Libby. Fritz Ermarth. • Marshall Schaeffer. James Mackey. Morris B. Schnapper. Helen Moats. Appendix XV LIST OF STAFF REPORTS UNEMPI,OYMENT COMPENSATION FINAL REPORTS Staff Report on Unemployment Insurance, by Dr. Bryce M. Stewart and Staff. Unemployment Insurance Cost Estimates, by Actuarial and Statistical Staffs. Administration of Unemployment Insurance Reserve Funds, by O. S. Powell and Alan R. Sweezy. OTHEU STAFF REPORTS General Discussions. Major Issues in Unemployment Compensation, by Edwin E. Witte. Limitations and Value of Unemployment Insurance, by Edwin E. Witte. Some Popular Misconceptions Regarding Unemployment Insurance, by Alex- ander Holtzoff. Report of the Technical Board on the Major Alternative Plans for the Administration of Unemployment Insurance, by Edwin E. Witte. Reserve Funds. Investment of Reserve Funds, by Ralph B. Harris. Use of Unemployment Insurance Reserves in Combating Deflation, by A. R. Sweezy. State Constitutional Limitations Upon the Custody and Deposit of Public Funds, by George A. Shipman. The Legal Problem of Bringing Unemployment Compensation Funds of Certain States into the Federal Treasury, by Joseph P. Harris. Foreign Experience. Unemployment Insurance in Foreign Countries, by James Harrington Boyd. The German Plan of Compulsory Unemployment Insurance, by James Har- rington Boyd. Unemployment Insurance in Germany, by Jeanne C. Barber. Great Britain Unemployment Insurance Plan, by James Harrington Boyd. Administration of Unemployment Insurance in Great Britain, by Mrs. Maud B. Patten. Unemployment Insurance in Switzerland, by Wilbur J. Cohen. The Canadian Unemployment and Social Insurance Act, by Wilbur J. Cohen. Recognized Unemployment Funds in Sweden, Translation of Royal Decree. Industrial and Trade-Union Plans. The Stabilization of Employment and Unemployment Compensation, by Con- stance A. Kiehel. Development, Coverage, and Costs of Voluntary Unemployment Compensation in the United States, by Constance A. Kiehel. The Dismissal Wage, by G. Reginald Crosb.y. 535 78470—37 35 526 APPENDIXES Unemployment Benefit Flans in Operation in the United States, by James Harrington Boyd. Discussions of Technical Details. Suitability of Employment Involving Long Separation from Home and Heavy Traveling Expenses, by Olga S. Halsey. Appeal Procedure in the British Act and in American Proposals, by Olga S. Halsey. Trade-Union Rules, Alternative Provisions and "Concessions" Which May Be Used in Trading, by Olga S. Halsey. Suggested Definition of Suitable Employment, Conditions for and Disqualifica- tions from Benefit, by Olga S. Halsey. Definitions of Seasonal Industries, by Olga S. Halsey. Additional Standards Which Might be Provided in a National Act for State Unemployment Insurance, by Joseph P. Harris. Papers Written in Support of Unemployment Compensation Plan Included in the Social Security Bill. Brief in Defense of the Unemployment Compensation Provisions of the Social Security Bill, by Joseph P. Harris. Postponement for a Year of the Beginning Date in Title IX, by Edwin E. Witte. OLD-AGE SECURITY FINAL REPORTS Old-Age Security Staff Report, by Barbara Nachtrieb Armstrong and Staff. Comments on the Recommendations for Old-Age Security, by Committee of Actuarial Consultants. OTHKB STAFF REPORTS General Discussions. America's Old-Age Problem, by Edwin E. Witte. Old-Age Pensions, by Edwin E. Witte. Foreign Systems. British Old-Age Pensions and Old-Age Insurance, by Olga S. Halsey. Financial History of the Workers' Invalidity, Old-Age and Survivors' In- surance of Germany, by Marianne Sakmann. The Functioning of the Government Annuity Act of Canada, by Walter F. Eade. Central Departments Supervising the Administration of Foreign Compulsory Old-Age Insurance Laws, by Martha D. Ring. Old-Age Pension Statistics, compiled by Wilbur J. Cohen. Industrial and Trade-Union Systems. Industrial Pension Systems, by Murray W. Latimer. Industrial and Trade-Union Pension Systems, by Wilbur J. Cohen. Factual Reports. Estimated Costs of Old-Age Pensions to the States, by Edwin E. Witte. Comparison of the I. L. O. Draft Convention on Compulsory Old-Age Insurance with the Committee's Recommendations, by Olga S. Halsey. Papers Written in Support of Old-Age Security Provisions of the Social Security Bill After the Introduction of the Bill into Congress. Statement on Old-Age Insurance Provisions, by Murray W. Latimer. Memorandum on Proposed Amendments to Economic Security Bill Permitting Employers with Private Pension Plans to Contract Out of the Government System, by Murray W. Latimer. STAFF KEPORTS 527 Brief in Defense of Old-Age Benefits, by Joseph P. Harris. Explanation of the Old-Age Pension Provisions in the Social Security Bill, by Joseph P. Harris and staff. Summary of the Principal Arguments Against Permitting Industrial Retire- ment Systems to Contract Out of the System of State Old-Age Benefits, by Joseph P. Harris. Statement of the Probable Costs of Gratuitous Old-Age Pensions With and Without the Establishment of a System of Federal Old-Age Benefits, by Joseph P. Karris. Townsend Old-Age Pension Plan. An Analysis of the McGroarty Bill, by Edwin E. Witte. Factual Data Relating to the Townsend Old-Age Revolving Pension Plan, by Edwin E. Witte. Why the Townsend Old-Age Revolving Pension Plan is Impossible, by Edwin E. Witte. CHILD WELFARE FINAL REPORT Security for Children, by Katharine F. Lenroot and Dr. Martha M. Eliot in consultation with the Advisory Committee on Child Welfare. BRIEF SUMMARIES OF FINAL REPORT Security for Children (Summary of Recommendations), by the Children's Bureau. Security for Children ( Summary of Recommendations and Provisions of Bill ) , by the Children's Bureau. PUBLIC EMPLOYMENT AND RELIEF FINAL REPORT A Permanent Program of Public Employment and Relief, by Emerson Ross. OTHER REPORTS Factual Reports. General Facts Regarding the Measures Taken During the Present Depression to Provide Employment, by Emerson Ross. The Unemployment and Relief Problem in the Depression Period, by Paul Webbink. Discussions and Recommendations. The Unemployed in the Social Security Program, by Edwin E. Witte. Possible Expansion and Limiting Factors of a Work Program, by Emerson Ross. Permanent Organization of Relief, by Paul Webbink. Special Studies. The Employment Offices and the Emergency Works Program, by Gladys L. I*almer. A Brief Review of the Operations of the Public Works Administration, by Harold B. Mistr. The Major Occupational Characteristics of the Unemployed in Three Penn- sylvania Counties, October 31, 1934, by Gladys L. Palmer. Theories With Regard to Unemployment Relief Now or Formerly Held in England, by Edwin E. Witte. 528 APPENDIXES EMPLOYMENT OPPORTUNITIES FINAL REPORT Planned Organization for the Extension of Employment Opportunity and Economic Security, by Meredith B. Givens. SPECIAL EE2>OETS Who are the Unemployed? A Statistical Analysis of Employment Office Records, by Gladys L. Palmer. Employment Opportunity for the Middle-Aged and Older Worker : A Statistical Summary, by Wilbur J. Cohen and I. Rittenhouse. The United States Employment Service : History and Development, by Gladys L. Palmer. A Survey of Occupational Studies, by O. Milton Hall. A Program of Government Work for the Unemployed : An Appraisal of Philadelphia Experience, by Ewan Clague. The Integrated Treatment of Unemployment Insurance, Cash Relief, and Emergency Work, by Eveline M. Burns. Significant Phases of Foreign Experience, by Eveline M. Burns. OTHEE REPORTS The von Papen Subsidy to Industry, by Olga S. Halsey. The Creation of Employment, by Frank D. Graham. The Federal Regulation of Fee-Charging Employment Agencies Doing Business in Interstate and Foreign Commerce, by John B. Andrews. Draft Convention and Recommendation Concerning Fee-Charging Employment Agencies Adopted June 8, 1933, by Olga S. Halsey. HEALTH IN RELATION TO ECONOMIC SECURITY FINAL REPORT Risks to Economic Security Arising from 111 Health, by the Staff Assigned to Health and Sickness Studies. OTHEK REPORTS Estimates of the Wage Loss and Medical Costs of Illness, by Martha D. Ring. Medical Service in Europe, by Michael M. Davis. Public-Health Activities of the Federal Government, by G. St. J. Perrott SOCIAL INSURANCE General. Preliminary Report of the StafC of the Committee on Economic Security, by Edwin E. Witte and Staff. Suggestions for a Long-Time and an Immediate Program for Economic Se- curity Submitted for Consideration to the Advisory Council, by Edwin E. Witte. Const Itiitiotial Issue. Discussion of Constitutionality of Possible Federal-State Plans for Unem- ployment Insurance and Old-Age Pensions, by Thomas H. Eliot. Constitutional Aspects of Social Insurance, by Alexander Holtzoff. Memorandum on Constitutionality of a Straight National Old-Age Insurance and Unemployment Insurance Scheme, by Barbara Nachtrieb Ai-mstrong. STAFF REPORTS 529 Legal Basis of Compulsory Unemployment Insurance, by James Harrington Boyd. Financial Aspects. The Financing of tlie Economic Security Program, by Joseph P. Harris, Federa l-State Relationships. Federal-State Relationships, by Jane Perry Clark. Insurance, Savings, and Income. Report on Life Insurance With Special Reference to Industrial Insurance, by Edward Berman. To What Extent Does Life Insurance Function as a Savings Institution to Meet Need for Security?, by Ralph B. Harris. Summary of the Trend of Savings Through Life Insurance, 1929-1933, by Ralph B. Harris. The Volume of Savings in the United States, 1926-1933, by Martha D. Ring. The Average Weekly Incomes of American Wage Earners, by Martha D. Ring. Survivors' Insurance. American and European Provision for Survivors ; The Pensions and Bene- ficiaries, by Olga S. Halsey. Invalidity Insurance. Analysis of American Data Showing Invalidity Below 65, by Olga S. Halsey. Invalidity Insurance: American and British Experience, With Recommenda- tions, by Olga S. Halsey. Workmen's Compensation. Workmen's Compensation, by S. Kjaer. The Need for and the Existing Situation Regarding Workmen's Compensa- tion for Employees of Common Carriers Engaged in Interstate Commerce, by Olga S. Halsey. Security for Agricultural Woi'kers. The Economic Security Progam in Relation to Farm Operators and Em- ployees, by Dr. Louis H. Bean. Economic Security of Farmers and Agricultural Workers, by Josiah C. Folsom. The Bearing of the Program of the Committee on Economic Security Upon Farmers and Farm Laborers, by William T. Ham. Agricultural Workers and Farmers in Foreign Social Insurance Systems, by Constance A. Kiehel. Standards for Old-Age Insurance, Invalidity Insurance, Widows' and Or- phans' Insurance, and Sickness Insurance for Agricultural Workers Contained in the Draft Conventions of the International Labour Office. Agricultural Workers in Foreign Unemployment Insurance Schemes, by Natalie F. Jaros. Social Insurance Al)road. Social Insurance Authorities Abroad, by Martha D. Ring. Social Insurance in France, by Martha D. Ring. Social Insurance in Italy, by Wilbur J. Cohen. Social Insurance System in Soviet Russia, by Wilbur J. Cohen. Legislation in New Zealand Directed Toward Economic Security, by Marianne Sakmann. Legislation in Australia Directed Toward Economic Security, by Marianne Sakmann. 530 APPENDIXES Economic Reform and Security Proposals. The Deane Plan, by Wilbur J. Cohen. Background of the Deane Plan, by G. Reginald Crosby. The Deane Plan, by G. Reginald Crosby. Miscellaneous Studies. Possibilities of a Unified System of Insurance Against Loss of Earnings, by Barbara Nachtrieb Armstrong. Social Insurance: Its Place in a Program of Economic Security, by Barbara Nachtrieb Armstrong. Possible General Approaches to the Problem of Economic Security, by Edwin E. Witte. The Meaning of the Term "Social Insurance", by Wilbur J. Cohen. Security for the Blind, by Wilbur J. Cohen. Considerations on Social Insurance, by William R. Williamson. ■Legislative History of the Social Security Act, by Wilbur J. Cohen. Statement Concerning the Effect of the Social Security Bill Upon States' Rights, by Joseph P. Harris. Memorandum Concerning the Total Cost of the Social Security Bill, by Com- mittee on Economic Security Staff. The Social Security Act and Sales Taxes, by Edwin E. Witte. Why the Social Security Board Should be in the Labor Department, by Edwin E. Witte. PUBLICATIONS DISTRIBUTED BY THE COMMITTEE ON ECONOMIC SECURITY. Report to the President of the Committee on Economic Security. Toward Economic Security (Radio Addresses), by members of the Committee on Economic Security and its staff. Security (Principal Papers at the National Conference on Economic Secur- ity), by President Roosevelt and others. The Need for Economic Security in the United States. Unemployment Insurance in the Economic Security Program, by the Com- mittee on Economic Security. Old-Age Security in the Economic Security Program, by the Committee on Economic Security. Child Welfare in the Economic Security Program, by the Committee on Economic Security. Features of the Economic Security Program, by Edwin E. Witte. Social Security at Home and Abroad, by the Committee on Economic Security. The Program for Economic Security, by the Committee on Economic Security. What is Social Insurance? by the Committee on Economic Security. Appendix XVI THE SOCIAL SECUKITY ACT (Ch. 531, 49 Stat. 620) AN ACT To provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemploy- ment compensation laws ; to establish a Social Security Board ; to raise revenue; and for other purposes. Be it enaoted ty the Senate and House of Rejrresentatives of the United States of America in Congress assembled, TITLE I— GRANTS TO STATES FOR OLD-AGE ASSISTANCE APPROPRIATION Section 1. For the purpose of enabling each State to furnish financial assist- ance, as far as practicable under the conditions in such State, to aged needy individuals, there is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $49,750,000, and there is hei-eby authorized to be appropriated for each fiscal year thereafter a sum suflicient to carry out the purposes of this title. The sums made available under this section shall be used for making payments to States which have submitted, and had ap- proved by the Social Security Board) established by Title VII (hereinafter referred to as the "Board"), State plans for old-age assistance. STATE OLD-AGE ASSISTANCE PLANS Seo. 2. (a) A state plan for old-age assistance must (1) provide that it shall be in effect in all political subdivisions of the State, and, if administered by them, be mandatory upon them ; (2) provide for financial participation by the State; (3) either provide for the establishment or designation of a single State agency to administer the plan, or provide for the establishment or des- ignation of a single State agency to supervise the administration of the plan ; (4) provide for granting to any individual, whose claim for old-age assistance is denied, an opportunity for a fair hearing before such State agency; (5) pro- vide such methods of administration (other than those relating to selection, tenure of ofiice, and compensation of personnel) as are found by the Board to be necessary for the efficient operation of the plan; (6) provide that the State agency will make such reports, in such form and containing such informa- tion, as the Board may from time to time require, and comply with such provisions as the Board may from time to time find necessary to assure the correctness and verification of such i-eports ; and (7) provide that, if the State 531 532 APPENDIXES or any of its political subdivisions collects from the estate of any recipient of old-age assistance any amount with respect to old-age assistance furnished him under the plan, one-half of the net amount so collected shall be promptly paid to the United States. Any payment so made shall be deposited in the Treasury to the credit of the appropriation for the purposes of this title. (b) The Board shall approve any plan which fulfills the conditions specified in subsection (a), except that it shall not approve any plan which imposes as a condition of eligibility for old-age assistance under the plan — (1) An age requirement of more than sixty-five years, except that the plan may impose, effective until January 1, 1940, an age requirement of as much as seventy years ; or (2) Any residence requirement which excludes any resident of the State who has resided therein five years during the nine years immediately preceding the application for old-age assistance and has resided therein continuously for one year immediately preceding the application ; or (3) Any citizenship requirement which excludes any citizen of the United States. PAYMENT TO STATES Seo. 3. (a) From the sums appropriated therefor, the Secretary of the Treas- ury shall pay to each State which has an approved plan for old-age assistance, for each quarter, beginning with the quarter commencing July 1, 1935, (1) an amount, which shall be used exclusively as old-age assistance, equal to one- half of the total of the sums expended during such quarter as old-age assistance under the State plan with respect to each individual who at the time of such expenditure is sixty-five years of age or older and is not an inmate of a public institution, not counting so much of such expenditure with respect to any in- dividual for any month as exceeds $30, and (2) 5 per centum of such amount, which shall be used for paying the costs of administering the State plan or for old-age assistance, or both, and for no other purpose : Provided, That the State plan, in order to be approved by the Board, need not provide for financial participation before July 1, 1937, by the State, in the case of any State which the Board, upon application by the State and after reasonable notice and oppor- tunity for hearing to the State, finds is prevented by its constitution from pro- viding such financial participation. (b) The method of computing and paying such amounts shall be as follows: (1) The Board shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of clause (1) of subsection (a), such estimate to be based on (A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such clause, and stating the amount appro- priated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than one-half of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived, (B) records showing the niimber of aged individuals in the State, and (C) such other investigation as the Board may find necessary. (2) The Board shall then certify to the Secretary of the Treasury the amount so estimated by the Board, 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 under clause (1) of subsection (a) 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. SOCIAL SECURITY ACT 533 (3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Board, the amount so certified, increased by 5 per centum. OPERATION OF STATE PLANS Sec. 4. In the case of any State plan for old-age assistance which has been approved by the Board, if the Board, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan, finds — (1) that the plan has been so changed as to impose any age, residence, or citizenship requirement prohibited by section 2 (b), or that in the administra- tion of the plan any such prohibited requirement is imposed, with the knowl- edge of such State agency, in a substantial number of cases ; or (2) that in the administration of the plan there is a failure to comply sub- stantially with any provision required by section 2 (a) to be included in the plan ; the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that such prohibited requirement is no longer so imposed, and that there is no longer any such failure to comply. Until it is so satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State. ADMINISTEATION 8ec. 5. There is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $250,000, for all necessary expenses of the Board in administering the provisions of this title. DEFINITION Sec. 6. When used in this title the tenu "old-age assistance" means money payments to aged individuals. TITLE II— FEDERAL OLD-AGE BENEFITS OLD-AGE RESERVE ACCOUNT Section 201. (a) There is hereby created an account in the Treasury of the United States to be known as the "Old-Age Reserve Account" hereinafter in this title called the "Account." There is hereby authorized to be appropriated to the Account for each fiscal year, beginning with the fiscal year ending June 30, 1937, an amount sufficient as an annual premium to provide for the pay- ments required under this title, such amount to be determined on a reserve basis in accordance with accepted actuarial principles, and based upon such tables of mortality as the Secretary of the Treasury shall from time to time adopt, and upon an interest rate of 3 per centum per annum compounded annually. The Secretary of the Treasury shall submit annually to the Bureau of the Budget an estimate of the appropriations to be made to the Account. (b) It shall be the duty of the Secretary of the Treasury to invest such por- tion of the amounts credited to the Account as is not, in his judgment, required to meet current withdrawals. Such investment may be made only in interest- bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States. For such purpose such obligations may be acquired (1) on original issue at par, or (2) by purchase of outstanding obligations at the market price. The purposes for which obligations of the 534 APPENDIXES United States may be issued under the Second Liberty Bond Act, as amended, are hereby extended to authorize the issuance at par of special obligations exclu- sively to the Account. Such special obligations shall bear interest at the rate of 3 per centum per annum. Obligations other than such special obligations may be acquired for the Account only on such terms as to provide an investment yield of not less than 3 per centum per annum. (c) Any obligations acquired by the Account (except special obligations issued exclusively to the Account) may be sold at the market price, and such special obligations may be redeemed at par plus accrued interest. (d) The interest on, and the proceeds from the sale or redemption of, any obligations held in the Account shall be credited to and form a part of the Account. (e) All amounts credited to the Account shall be available for making payments required under this title. (f) The Secretary of the Treasury shall include in his annual report the actuarial status of the Account. OLD-AGE BENEI"IT PAYMENTS Sec. 202. (a) Every qualified individual (as defined in section 210) shall be entitled to receive, with respect to the period beginning on the date he attains the age of sixty-five, or on January 1, 1942, whichever is the later, and ending on the date of his death, an old-age benefit (payable as nearly as practicable in equal monthly installments) as f oUows : (1) If the total wages (as defined in section 210) determined by the Board to have been paid to him, with respect to employment (as defined in section 210) after December 31, 1936, and before he attained the age of sixty-five, were not more than $3,000, the old-age benefit shall be at a monthly rate of one-half of 1 per centum of such total wages ; (2) If such total wages were more than $3,000, the old-age benefit shall be at a monthly rate equal to the sum of the following : (A) One-half of 1 per centum of $3,000; plus (B) One-twelfth of 1 per centum of the amount by which such total wages exceeded $3,000 and did not exceed $45,000 ; plus (C) One-twenty-fourth of 1 per centum of the amount by which such total wages exceeded $45,000. (b) In no case shall the monthly rate computed under subsection (a) exceed $85. (c) If the Board finds at any time that more or less than the correct amount has theretofore been paid to any individual under this section, then, under regulations made by the Board, proper adjustments shall be made in connection with subsequent payments under this section to the same individual. (d) Whenever the Board finds that any qualified individual has received wages with respect to regular employment after he attained the age of sixty-five, the old-age benefit payable to such individual shall be reduced, for each calendar month in any part of which such i-egular employment occurred, by an amount equal to one month's benefit. Such reduction shall be made, under regulations prescribed by the Board, by deductions from one or more payments of old-age benefit to such individual. PAYMENTS UPON DEATH Seo. 203. (a) If any individual dies before attaining the age of sixty-five, there shall be paid to his estate an amount equal to 3^2 per centum of the total SOCIAL, SECURITY ACT 535 wages determined by the Board to have been paid to him, with respect to employment after December 31, 1936. (b) If the Board finds that the correct amount of the old-age benefit pay- able to a qualified individual during his life under section 202 was less than 3% per centum of the total wages by which such old-age benefit was measurable, then there shall be paid to his estate a sum equal to the amount, if any, by which such SYz per centum exceeds the amount (whether more or less than the correct amount) paid to him during his life as old-age benefit. (c) If the Board finds that the total amount paid to a qualified individual under an old-age benefit during his life was less than the correct amount to which he was entitled under section 202, and that the correct amount of such old-age benefit was 3^^ per centum or more of the total wages by which such old-age benefit was measurable, then there shall be paid to his estate a sum equal to the amount, if any, by which the correct amount of the old-age benefit exceeds the amount which vpas so paid to him during his life. PAYMENTS to AGED INDIVIDUALS NOT QUALIFIED FOR BENEFITS Shc. 204. (a) There shall be paid in a lump sum to any individual who, upon attaining the age of sixty-five, is not a qualified individual, an amount equal to SYz per centum of the total wages determined by the Board to have been paid to him, with respect to employment after December 31, 1936, and before he attained the age of sixty-five. (b) After any individual becomes entitled to any payment under subsection (a), no other payment shall be made under this title in any manner measured by wages paid to him, except that^ any part of any payment under subsection (a) which is not paid to him before his death shall be paid to his estate. AMOUNTS OF $5 00 OK LESS PAYABLE TO ESTATES Seo. 205. If any amount payable to an estate under section 203 or 204 is $500 or less, such amount may, under regulations prescribed by the Board, be paid to the persons found by the Board to be entitled thereto under the law of the State in which the deceased was domiciled, without the necessity of compliance with the requirements of law with respect to the administration of such estate. OVERPAYMENTS DURING UFE Sec. 206. If the Board finds that the total amount paid to a qualified individual under an old-age benefit during his life was more than the correct amount to which he was entitled under section 202 and was 3l^ per centum or more of the total wages by which such old-age benefit was measurable, then upon his death there shall be repaid to the United States by his estate the amount, if any, by which such total amount paid to him during his life exceeds whichever of the following is the greater: (1) Such 3l^ per centum, or (2) the correct amount to which he was entitled under section 202. METHOD OF MAKING PAYMENTS Sec. 207. The Board shall from time to time certify to the Secretary of the Treasury the name and address of each person entitled to receive a payment under this title, the amount of such payment, and the time at which it should be made, and the Secretary of the Treasury through the Division of Disbursement of the Treasury Department, and prior to audit or settlement by the General Accounting Office, shall make payment in accordance with the certification by the Board, 536 APPENDIXES ASSIGNMENT Sec. 208. The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. PENALTIES Sec. 209. Whoever in any application for any payment under this title makes any false statement as to any material fact, knowing such statement to be false, shall be fined not more than $1,000 or imprisoned for not more than one year, or both. DEFINITIONS Sec. 210. When used in this title — (a) The term "wages" means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash ; except that such term shall not include that part of the remuneration which, after remunera- tion equal to $3,000 has been paid to an individual by an employer with respect to employment during any calendar year, is paid to such individual by such employer with respect to employment during such calendar year. (b) The term "employment" means 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) Casual labor not in the course of the employer's trade or business ; (4) Service performed as an olEcer or member of the crew of a vessel docu- mented 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, chari- table, scientific, literary, or educational 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. (c) The term "qualified individual" means any individual with respect to whom it appears to the satisfaction of the Board that— (1) He is at least sixty-five years of age; and (2) The total amount of wages paid to him, with respect to employment after December 31, 1986, and before he attained the age of sixty-five, was not less than $2,000; and (3) Wages were paid to him, with respect to employment on some five days after December 31, 1936, and before he attained the age of sixty-five, each day being in a different calendar year. TITLE HI— GRANTS TO STATES FOR UNEMPLOYMENT COMPENSA- TION ADMINISTRATION APPBOPRIATION Section 301. For the purpose of assisting the States in the administration of their unemployment compensation laws, there is hereby authorized to be SOCIAL SECURITY ACT 537 appropriated, for the fiscal year ending June 30, 1936, ttie sum of $4,00|0,000, and for each fiscal year thereafter the sum of $49,000,000, to be used as here- inafter provided. PAYMENTS TO STATES Sec. 302 (a) The Board shall from time to time certify to the Secretary of the Treasury for payment to each State which has an unemployment compensa- tion law approved by the Board under Title IX, such amounts as the Board determines to be necessary for the proper administration of such law during the fiscal year in which such payment is to be made. The Board's determination shall 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 admin- istration of such law; and (3) such other factors as the Board finds relevant. The Board s.hall not certify for payment under this section in any fiscal year a total amount in excess of the amount appropriated therefor for such fiscal year. (b) Out of the sums appropriated therefor, the Secretary of the Treasury shall, upon receiving a certification under subsection (a), pay, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Oflice, to the State agency charged with the administration of such law the amount so certified. PROVISIONS OF STATE LAWS Sec. 303. (a) The Board shall make no certification for payment to any State unless it finds that the law of such State, approved by the Board under Title IX, includes provisions for — (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 employ- ment offices in the State or such other agencies as the Board may approve ; and (3) Opportunity for a fair hearing, before an impartial tribunal, for all individuals whose claims for unemployment compensation are denied ; and (4) The payment of all money received in the unemployment fund of such State, immediately upon such receipt, 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, exclusive of expenses of administration ; and (6) The making of such reports, in such form and containing such informa- tion, as the Board 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. (b) Whenever the Board, after reasonable notice and opportunity for hear- ing to the State agency charged with the administration of the State law, finds that in the administration of the law there is— 538 APPENDIXES (1) a denial, in a substantial number of cases, of unemployment compensa- tion to individuals entitled thereto under such law ; or (2) a failure to comply substantially with any provision specified in sub- section (a) ; the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that there is no longer any such denial or failure to comply. Until it is so satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State. TITLE IV— GRANTS TO STATES FOR AID TO DEPENDENT CHILDREN APPEOPRIATTON Section 401. For the purpose of enabling each State to furnish financial as- sistance, as far as practicable under the conditions in such State, to needy dependent children, there is hereby authorized to be appropriated for the fiscal year ending Jime 30, 1936, the sum of $24,750,000, and there is hereby authorized to be appropriated for each fiscal year thereafter a sum sufficient to carry out the purposes of this title. The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Board, State plans for aid to dependent children. STATE PLANS FOR AID TO DEPENDENT CHILDREN Sec. 402. (a) A State plan for aid to dependent children must (1) provide that it shall be in effect in all political subdivisions of the State, and, if admin- istered by them, be mandatory upon them; (2) provide for financial participa tion by the State; (3) either provide for the establishment or designation of a single State agency to administer the plan, or provide for the establishment or designation of a single State agency to supervise the administration of the plan ; (4) provide for granting to any individual, whose claim with respect to aid to a dependent child is denied, an opportunity for a fair hearing before such State agency; (5) provide such methods of administration (other than those relating to selection, tenure of oflBce, and compensation of personnel) as are found by the Board to be necessary for the efficient operation of the plan; and (6) pro- vide that the State agency will make such reports, in such form and containing such information, as the Board may from time to time require, and comply with such provisions as the Board may from time to time find necessary to assure the correctness and verification of such reports. (b) The Board shall approve any plan which fulfills the conditions specified in subsection (a), except that it shall not approve any plan which imposes as a condition of eligibility for aid to dependent children a residence requirement which denies aid with respect to any child residing in the State (1) who has resided in the State for one year immediately preceding the application for such aid, or (2) who was born within the State within one year immediately preceding the application, if its mother has resided in the State for one year immediately preceding the birth. PAYMENT TO STATES Sec, 403. (a) From the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has an approved plan for aid to de- pendent children, for each quarter, beginning with the quarter commencing July 1, 1935, 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 SOCIAL SECURITY ACT 539 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 dependent 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. (b) The method of computing and paying such amounts shall be as follows : (1) The Board shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of sub- section (a), such estimate to be based on (A) a report filed by the State con- taining its estimate of the total sum to be expended in such quarter in accord- ance with the provisions of such subsection, and stating the amount appro- priated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than two-thirds of the total sum of such estimated expenditures, the source or sources from which, the difference is expected to be derived, (B) records showing the number of depend- ent children in the State, and (C) such other investigation as the Board may find necessary. (2) The Board shall then certify to the Secretary of the Treasury the amount so estimated by the Board, 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. (3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department, and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Board, the amount so certified. OPEEATION OF STATE PLANS Seo, 404. In the case of any State plan for aid to dependent children which has been approved by the Board, if the Board, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan, finds — (1) that the plan has been so changed as to impose any residence requirement prohibited by section 402 (b), or that in the administration of the plan any such prohibited requirement is imposed, with the knowledge of such State agency, in a substantial number of cases ; or (2) that in the administration of the plan there is a failure to comply sub- stantially with any provision required by section 402 (a) to be included in the plan; the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that such prohibited requirement is no longer so imposed^", and that there is no longer any such failure to comply. Until it is so satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State. ADMINISTRATION Seo. 405. There is hereby authorized to be appropriated for the fiscal year ending June 30, 1986, the sum of $250,000 for all necessary expenses of the Board in administering the provisions of this title. 540 APPENDIXES DEFINITIONS Sec. 406. When used in this title — (a) The term "dependent child" means a child under the age of sixteen who has been deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent, and who is living with his father, mother, grandfather, grandmother, brother, sister, step- father, 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 ; (b) The term "aid to dependent children" means money payments with respect to a dependent child or dependent children. TITLE V— GRANTS TO STATES FOR MATERNAL AND CHILD WELFARE Part 1 — Maternal and Child Health Sekvices appropriation Section 501. For the purpose of enabling each State to extend and improve, as far as practicable under the conditions in such State, services for promoting the health of mothers and children, especially in rural areas and in areas suffer- ing from severe economic distress, there is hereby authorized to be appropriated for each fiscal year, beginning with the fiscal year ending June 30, 1936, the sum of $3,800,000. 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. ALLOTMENTS TO' STATES Sec. 502. (a) Out of the sums appropriated pursuant to section 501 for each fiscal year the Secretary of Labor shall allot to each State $20,000, and such part of $1,800,000 as he finds that the number of live births in such State bore to the total number of live births in the United States, in the latest calendar year for which the Bureau of the Census has available statistics. (b) Out of the sums appropriated pursuant to section 501 for each fiscal year the Secretary of Labor shall allot to the States $980,000 (in addition to the allotments made under subsection (a)), according to the financial need of each State for assistance in carrying out its State plan, as determined by him after taking into consideration the number of live births in such State. (c) The amount of any allotment to a State under subsection (a) for any fiscal year remaining unpaid to such State at the end of such fiscal year shall be available for payment to such State under section 504 until the end of the second succeeding fiscal year. No payment to a State under section 504 shall be made out of its allotment for any fiscal year until its allotment for the preceding fiscal year has been exhausted or has ceased to be available. APPROVAL OF STATE PLANS Sec. 503. (a) A State plan for maternal and child-health services must (1) provide for financial participation by the State; (2) provide for the administra- tion of the plan by the State health agency or the supervision of the administra- tion of the plan by the State health agency ; (3) provide such methods of admin- istration (other than those relating to selection, tenure of oflice, and compensa- tion of personnel) as are necessary for the efficient operation of the plan; (4) provide that the State health agency will make such reports, in such form and SOCIAL SECURITY ACT 541 containing such information, as the Secretary of Labor may from time to time require, and comply with sucli provisions as he may from time to time find necessary to assure the correctness and verification of such reports; (5) provide for the extension and improvement of local maternal and child-health services administered by local child-health units; (6) provide for cooperation vp^ith medical, nursing, and welfare groups and organizations; and (7) provide for the development of demonstration services in needy areas and among groups in special need. (b) The Chief of the Children's Bureau shall approve any plan which fulfills the conditions specified in subsection (a) and shall thereupon notify the Secre- tary of Labor and the State health agency of his approval. PAYMENT TO STATES Sec. 504. (a) From the sums appropriated therefor and the allotments avail- able under section 502 (a), the Secretary of the Treasury shall pay to each State which has an approved plan for maternal and child-health services, for each quarter, beginning with the quarter commencing July 1, 1935, an amount, which shall be used exclusively for carrying out the State plan, equal to one-half of the total sum expended during such quarter for carrying out such plan. (b) The method of computing and paying such amounts shall be as follows : (1) The Secretary of Labor shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provi- sions of subsection (a), such estimate to be based on (A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such subsection and stating the amount appro- priated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than one-half of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived, and (B) such investigation as he may find necessary. (2) The Secretary of Labor shall then certify the amount so estimated by him to the Secretary of the Treasury, reduced or increased, as the case may be, by any sum by which the Secretary of Labor finds that his 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 n-:ake the amount certified for any prior quarter greater or less than the amount estimated by the Secretary of Labor for such prior quarter. (3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Secretary of Labor, the amount so certified. (c) The Secretary of Labor shall from time to time certify to the Secretary of the Treasury the amounts to be paid to the States from the allotments available under section 502 (b), and the Secretary of the Treasury shall, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, make payments of such amounts from such allotments at the time or times specified by the Secretary of Labor. OPEUATION OF STATE PLANS Sec. 505. In the case of any State plan for maternal and child-health services which has been approved by the Chief of the Children's Bureau, if the Secretary of Labor, after reasonable notice and opportunity for hearing to the State 78470 — 37 36 542 APPENDIXES agency administering or supervising the administration of such plan, finds that in the administration of the plan there is a failure to comply substan- tially with any provision required by section 503 to be included in the plan, he shall notify such State agency that further payments will not be made to the State until he is satisfied that there is no longer any such failure to comply. Until he is so satisfied he shall make no further certification to the Secretary of the Treasury with respect to such State. Part 2 — Sebvices for Ceippled Childken appbopeiation Sec. 511. For the purpose of enabling each State to extend and improve (especially in rural areas and in areas suffering from severe economic dis- tress), 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 after- care, for children who are crippled or who are suffering from conditions which lead to crippling, there is hereby authorized to be appropriated for each fiscal year, beginning with the fiscal year ending June 30, 1936, the sum of $2,850,000. 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 Chil- dren's Bureau, State plans for such services. ALLOTMENTS TO STATES Seo. 512. (a) Out of the sums appropriated pursuant to section 511 for each fiscal year the Secretary of Labor shall allot to each State $20,000, and the remainder to the States according to the need of each State as determined by him after taking into consideration the number of crippled children in such State in need of the services referred to in section 511 and the cost of furnish- ing such services to them. (b) The amount of any allotment to a State under subsection (a) for any fiscal year remaining unpaid to such State at the end of such fiscal year shall be available for payment to such State under section 514 until the end of the second succeeding fiscal year. No payment to a State under section 514 shall be made out of its allotment for any fiscal year until its allotment for the preceding fiscal year has been exhausted or has ceased to be available. APPROVAL OF STATE PLANS Sec. 513. (a) A State plan for services for crippled children must (1) pro- vide for financial participation by the State; (2) provide for the administration of the plan by a State agency or the supervision of the administration of the plan by a State agency; (3) provide such methods of administration (other than those relating to selection, tenure of oflice, and compensation of per- sonnel) as are necessary for the efficient operation of the plan; (4) provide that the State 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 he may from time to time find necessary to assure the correctness and verification of such reports; (5) provide for carry- ing out the purposes specified in section 511; and (6) provide for coopera- tion with medical, health, nursing, and welfare gi'oups and organizations and with any agency in such State charged with administering State laws pro- viding for vocational rehabilitation of physically handicapped children. SOCIAL SECURITY ACT 543 (b) The Chief of the Children's Bureau shall approve any plan which ful- fills the conditions specified in subsection (a) and shall thereupon notify the Secretary of Labor and the State agency of his approval. PAYMENT TO STATES Sbo. 514. (a) From the sums appropriated therefor and the allotments avail- able under section 512, the Secretary of the Treasury shall pay to each State which has an approved plan for services for crippled children, for each quarter, beginning with the quarter commencing July 1, 1935, an amount, which shall be used exclusively for cai'rying out the State plan, equal to one-half of the total sum expended during such quarter for carrying out such plan. (b) The method of computing and paying such amounts shall be as follows: (1) The Secretary of Labor shall, prior to the beginning of each, quarter, estimate tlie amount to be paid to the State for such quarter under the pro- visions of subsection (a), such estimate to be based on (A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such subsection and stating the amount appropriated or made available by the State and its political subdi- visions for such expenditures in such quarter, and if such amount is less than one-half of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived, and (B) such investigation as he may find necessary. (2) The Secretary of Labor shall then certify the amount so estimated by him to the Secretary of the Treasury, reduced or increased, as the case may be, by any sum by which the Secretary of Labor finds that his 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 Secretary of Labor for such prior quarter. (3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Secretary of Labor, the amount so certified. OPEItATION OF STATE PLANS Sec. 515. In the case of any State plan for services for crippled children which has been approved by the Chief of the Children's Bureau, if the Secretary of Labor, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan, finds that in the administration of the plan there is a failure to comply substantially with any provision required by section 513 to be included in the plan, he shall notify such State agency that further payments will not be made to the State until he is satisfied that there is no longer any such failure to comply. Until he is so satisfied he shall make no further certification to the Secretary of the Treasury with respect to such State. Part 3 — Child-Welfaee Services Sec. 521. (a) For the purpose of enabling the United States, through the Children's Bureau, to cooperate with State public- welfare agencies in establish- ing, 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 544 APPENDIXES Children, and children in danger of becoming delinquent, there is hereby author ized to be appropriated for each fiscal year, beginning with the fiscal year ending June 30, 1936, the sum of $1,500,000. Such amount shall 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, to each State, $10,000, and the remainder to each State on the basis of such plans, not to exceed such part of the remainder as the rural population of such State bears to the total rural population of the United States. The amount so allotted shall be expended for payment of part 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 predominantly rural and other areas of special need. The amount of any allotment to a State under this section for any fiscal year remaining unpaid to such State at the end of such fiscal year shall be available for payment to such State under this section until the end of the second succeeding fiscal year. No payment to a State under this section shall be made out of its allotment for any fiscal year until its allotment for the preceding fiscal year has been exhausted or has ceased to be available. (b) From the sums appropriated therefor and the allotments available under subsection (a) the Secretary of Labor shall from time to time certify to the Secretary of the Treasury the amounts to be paid to the States and the Secretary of the Treasury shall, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting OflBce, make payments of such amounts from such allotments at the time or times specified by the Secretary of Labor. Part 4 — Vocational Rehabilitation Sec. 531. (a) In order to enable the United States to cooperate with the States and Hawaii in extending and strengthening their programs of vocational rehabilitation of the physically disabled, and to continue to carry out the provisions and purposes of the Act entitled "An Act to provide for the pro- motion of vocational rehabilitation of persons disabled in industry or other- wise and their return to civil employment", approved June 2, 1920, as amended (U. S. C, title 29, ch. 4; U. S. C, Supp. VII, title 29, sees. 31, 32, 34, 35, 37, 39, and 40), there is hereby authorized to be appropriated for the fiscal years ending June 30, 1936, and June 30, 1937, the sum of $841,000 for each such fiscal year in addition to the amount of the existing authorization, and for each fiscal year thereafter the sum of $1,938,000. Of the sums appropriated pursuant to such authorization for each fiscal year, $5,000 shall be apportioned to the Territory of Hawaii and the remainder shall be apportioned among the several States in the manner provided in such Act of June 2, 1920, as amended. (b) For the administration of such Act of June 2, 1920, as amended, by the Federal agency authorized to administer it, there is hereby authorized to be appropriated for the fiscal years ending June 30, 1936, and June 30, 1937, the sum of $22,000 for each such fiscal year in addition to the amount of the existing authorization, and for each fiscal year thereafter the sum of $102,000. Part 5 — Administration Sec. 541. (a) There is hereby authorized to be appropriated for the fiscal year ending June 30, 1986, the sum of $425,000, for all necessary expenses SOCIAL SECURITY ACT 545 of the Children's Bureau in administering the provisions of this title, except section 531. (b) The Children's Bureau shall make such studies and investigations as will promote the efficient administration of this title, except section 531. (c) The Secretary of Labor shall include in his annual report to Congress a full account of the administration of this title, except section 531. TITLE VI— PUBLIC HEALTH WORK APPROPRIATION Section 601. For the purpose of assisting States, counties, health districts, and other political subdivisions of the States in establishing and maintaining adequate public-health services, including the training of personnel for State and local health work, there is hereby authorized to be appropriated for each fiscal year, beginnning with the fiscal year ending June 30, 1986, the sum of $8,000,000 to be used as hereinafter provided. STATE AND LOCAL PUBLIC HEALTH SERVICES Sec. 602. (a) The Surgeon General -of the Public Health Service, with the approval of the Secretary of the Treasury, shall, at the beginning of each fiscal year, allot to the States the total of (1) the amount appropriated for such year pursuant to section 601; and (2) the amounts of the allotments under this section for the preceding fiscal year remaining unpaid to the States at the end of such fiscal year. The amounts of such allotments shall be deter- mined on the basis of (1) the population; (2) the special health problems; and (3) the financial needs; of the respective States. Upon making such allotments the Surgeon General of the Public Health Service shall certify the amounts thereojf to the Secretary of the Treasury. (b) The amount of an allotment to any State under subsection (a) for any fiscal year, remaining unpaid at the end of such fiscal year, shall be available for allotment to States under subsection (a) for the succeeding fiscal year, in addition to the amount appropriated for such year. (c) Prior to the beginning of each quarter of the fiscal year, the Surgeon General of the Public Health Service shall, with the approval of the Secretary of the Treasury, determine in accordance with rules and regulations previously prescribed by such Surgeon General after consultation with a conference of the State and Territorial health authorities, the amount to be paid to each State for such quarter from the allotment to such State, and shall certify the amount so determined to the Secretary of the Treasury. Upon receipt of such certification, the Secretary of the Treasury shall, through the Division of Dis- bursement of the Treasury Department and prior to audit or settlement by the General Accounting Oflice, pay in accordance with such certification. (d) The moneys so paid to any State shall be expended solely in carrying out the purposes specified in section 601, and in accordance with plans pre- sented by the health authority of such State and approved by the Surgeon General of the Public Health Service. INVESTIGATIONS Sec. 603. (a) There is hereby authorized to be appropriated for each fiscal year, beginning with the fiscal year ending June 30, 1936, the sum of $2,000,000 for expenditure by the Public Health Service for investigation of disease and problems of sanitation (iucluding the printing and binding of the findings of 546 APPENDIXES guch investigations), and for the pay and allowances and traveling expenses of personnel of the Public Health Service, including commissioned oflficers, engaged in such investigations or detailed to cooperate with the health au- thorities of any State in carrying out the purposes specified in section 601: Provided, That no personnel of the Public Health Service shall be detailed to cooperate with the health authorities of any State except at the request of the proper authorities of such State. (b) The personnel of the Public Health Service paid from any appropriation not made pursuant to subsection (a) may be detailed to assist in carrying out tlie purposes of this title. The appropriation from which they are paid shall be reimbursed from the appropriation made pursuant to subsection (a) to the extent of their salaries and allowances for services performed while so detailed. (e) The Secretary of the Treasury shall include in his annual report to Congress a full account of the administration of this title. TITLE VII— SOCIAL SECURITY BOARD ESTABLISHMENT SrxTioN 701. There is hereby established a Social Security Board (in this Act referred to as the "Board") to be composed of three members to be ap- pointed by the President, by and with the advice and consent of the Senate. During his term of membership on the Board, no member shall engage in any other business, vocation, or employment. Not more than two of the members of the Board shall be members of the same political party. Each member shall receive a salary at the rate of $10,000 a year and shall hold office for a term of six years, except that (1) any member appointed to fill a vacancy oc- curring prior to the expiration of the term for which his predecessor was a])pointed, shall be appointed for the remainder of such term; and (2) the terms of office of the members first taking office after the date of the enact- ment of this Act shall expire, as designated by the President at the time of appointment, one at the end of two years, one at the end of four years, and one at the end of six years, after the date of the enactment of this Act. The President shall designate one of the members as the chairman of the Board. DUTIES OF SOCIAL SECtTRITY BOAKD Sec. 702. The Board shall perform the duties imposed upon it by this Act and shall also have the duty of studying and making recommendations as to the most effective methods of providing economic security through social in- surance, and as to legislation and matters of administrative policy concerning old-age pensions, unemployment compensation, accident compensation, and related subjects. EXPENSES OF THE BOAKI) Sec. 703. The Board is authorized to appoint and fix the compensation of such officers and employees, and to make such expenditures, as may be neces- sary for carrying out its functions under this Act. Appointments of attorneys and experts may be made without regard to the civil-service laws. BEPORTS Sec. 704. The Board shall make a full report to Congress, at the beginning of each regular session, of the administration of the functions with which it is charged. SOCIAL, SECUKITY ACT 547 TITLE VIII— TAXES WITH RESPECT TO EMPLOYMENT INCOME TAX O'N EMPLOYEES Section 801. In addition to ottier taxes, there sliall be levied, collected, and paid upon the income of every individual a tax equal to the following per- centages of the wages (as defined in section 811) received by him after December 31, 1936, with respect to employment (as defined in section 811) after such date: (1) With respect to employment during the calendar years 1937, 1938, 1939, the rate shall be 1 per centum. (2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall be 1^/^ per centum. (3) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum. (4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2i/^ per centum. (5) With respect to employment after December 31, 1948, the rate shall be 3 per centum. DEDUCTION OF TAX FROM WAGES Sec. 802 (a) The tax imposed by section 801 shall be collected by the em- ployer of the taxpayer, by deducting the amount of the tax from the wages as and when paid. Every employer required so to deduct the tax is hereby made liable for the payment of such tax, and is hereby indemnified against the claims and demands of any person for the amount of any such payment made by such employer. (b) If more or less than the correct amount of tax imposed by section 801 is paid with respect to any wage payment, then, under regulations made under this title, proper adjustments, with respect both to the tax and the amount to be deducted, shall be made, without interest, in connection with subsequent wage payments to the same individual by the same employer. DEDUCTIBILITY FROM INCOME TAX Sec. 803. For the purposes of the income tax imposed by Title I of the Revenue Act of 1934 or by any Act of Congress in substitution therefor, the tax im- posed by section 801 shall not be allowed as a deduction to the taxpayer in computing his net income for the year in which such tax is deducted from his wages. excise tax on employees Sec. 804. In addition to other taxes, every employer shall pay an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 811) paid by him after Decem- ber 31, 1936, with respect to employment (as defined in section 811) after such date: (1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum. (2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall be 1% per centum. (8) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum. (4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2i/^ per centum. 548 APPENDIXES (5) With respect to employment after December 31, 1948, the rate shall be 3 per centum. ADJUSTMENT OF EMPLOYERS' TAX Sec. 805. If more or less than the correct amount of tax imposed by section 804 is paid with respect to any wage payment, then, under regulations made under this title, proper adjustments with respect to the tax shall be made, without interest, in connection with subsequent wage payments to the same individual by the same employer. REFUNDS AND DEFICIENCIES Sec. 806. If more or less than the correct amount of tax imposed by section 801 or 804 is paid or deducted with respect to any wage payment and the over- payment or underpayment of tax cannot be adjusted under section 802 (b) or 805 the amount of the overpayment shall be refunded and the amount of the underpayment shall be collected, in such manner and at such times (subject to the statutes of limitations properly applicable thereto) as may be prescribed by regulations made under this title. COLLECTION AND PAYMENT OF TAXES Sec 807. (a) The taxes imposed by this title shall be collected by the Bureau of Internal Revenue under the direction of the Secretary of the Treasury and shall be paid into the Treasury of the United States as internal-revenue collec- tions. If the tax is not paid when due, there shall be added as part of the tax interest (except in the case of adjustments made in accordance with the pro- visions of sections 802 (b) and 805) at the rate of one-half of 1 per centum per month from the date the tax became due until paid. (b) Such taxes shall be collected and paid in such manner, at such times, and under such conditions, not inconsistent with this title (either by making and filing returns, or by stamps, coupons, tickets, books, or other reasonable devices or methods necessary or helpful in securing a complete and proper col- lection and payment of the tax or in securing proper identification of the tax- payer), as may be prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury. (c) All provisions of law, including penalties, applicable with respect to any tax imposed by section 600 or section 800 of the Revenue Act of 1926. and the provisions of section 607 of the Revenue Act of 1934, shall, insofar as appli- cable and not inconsistent with the provisions of this title, be applicable with respect to the taxes imposed by this title. (d) In the payment of any tax under this title a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to 1 cent. RULES AND REGULATIONS Seo. 808. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall make and publish rules and regulations for the enforcement of this title. SALE OF STAJIPS BY POSTMASTERS Sec 809. The Commissioner of Internal Revenue shall furnish to the Post- master General without prepayment a suitable quantity of stamps, coupons, SOCIAL SECURITY ACT 549 'tickets, books, or other devices prescribed by tlie Commissioner under section 807 for the collection or payment of any tax imposed by this title, to be distributed to, and kept on sale by, all post offices of the first and second classes, and such post offices of the third and fourth classes as (1) are located in county seats, or (2) are certified by the Secretary of the Treasury to the Postmaster General as necessary to the proper administration of this title. The Postmaster General may require each such postmaster to furnish bond in such increased amount as he may from time to time determine, and each such postmaster shall deposit the receipts from the sale of such stamps, coupons, tickets, books, or other devices, to the credit of, and render accounts to, the Postmaster General at such times and in such form as the Postmaster General may by regulations prescribe. The Postmaster General shall at least once a month transfer to the Treasury as internal-revenue collections all receipts so deposited together with a statement of the additional expenditures in the District of Columbia and elsewhere incurred by the Post Office Depart- ment in performing the duties imposed upon said Department by this Act, and the Secretary of the Treasury is hereby authorized and directed to ad- vance from time to time to the credit of the Post Office Department from appropriations made for the collection of the taxes imposed by this title, such sums as may be required for such additional expenditures incurred by the Post Office Department. PENALTIES Sec. 810. (a) Whoever buys, sells, offers for sale, uses, transfers, takes or gives in exchange, or pledges or gives in pledge, except as authorized in this title or in regulations made pursuant thereto, any stamp, coupon, ticket, book, or other device, prescribed by the Commissioner of Internal Revenue under section 807 for the collection or payment of any tax imposed by this title, shall be fined not more than $1,000 or imprisoned for not more than six months, or both. (b) Whoever, with intent to defraud, alters, forges, makes, or counterfeits any stamp, coupon, ticket, book, or other device prescribed by the Commissioner of Internal Revenue under section 807 for the collection or payment of any tax imposed by this title, or uses, sells, lends, or has in his possession any such altered, forged, or counterfeited stamp, coupon, ticket, book or other device, or makes, uses, sells, or has in his possession any material in imitation of the material used in the manufacture of such stamp, coupon, ticket, book, or other device, shall be fined not more than $5,000 or imprisoned not more than five years, or both. definitions Sec. 811. When used in this title — (a) The term "wages" means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash ; except that such term shall not include that part of the remuneration which, after remuneration equal to $3,000 has been paid to an individual by an employer with respect to employment during any calendar year, is paid to such individual by such employer with respect to employment during such calendar year. (b) The term "employment" means any service, of whatever nature, per- formed within the United States by an employee for his employer, except — (1) Agricultural labor; (2) Domestic service in a private home; (3) Casual labor not in the course of the employer's trade or business; (4) Service performed by an individual who has attained the age of sixty- five; 550 APPENDIXES (5) Service performed as an officer or member of the crew of a vessel documented under the law^s of the United States or of any foreign country ; (6) Service performed in the employ of the United States Government or of an instrumentality of the United States ; (7) Service performed in the employ of a State, a political subdivision thereof, or an instrumentality of one or more States or political subdivisions ; (8) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational 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. TITLE IX— TAX ON EMPLOYERS OF EIGHT OR MORE IMPOSITION OF TAX Section 901. On and after January 1, 1936, every employer (as defined in section 907) shall pay for each calendar year an excise tax, with respect to having individuals in his employ, equal to the following percentages of the total wages (as defined in section 907) payable by him (regardless of the time of payment) with respect to employment (as defined in section 907) during such calendar year: (1) With respect to employment during the calendar year 1936 the rate shall be 1 per centum; (2) With respect to employment during the calendar year 1987 the rate shall be 2 per centum ; (3) With respect to employment after December 31, 1937, the rate shall be 3 per centum. CREDIT AGAINST TAX Sec. 902. The taxpayer may credit against the tax imposed by section 901 the amount qf contributions, with respect to employment during the taxable year, paid by him (before the date of filing his return for the taxable year) into an unemployment fund under a State law. The total credit allowed to a taxpayer under this section for all contributions paid into unemployment funds with respect to employment during such taxable year shall not exceed 90 per centum of the tax against which it is credited, and credit shall be allowed only for contributions made under the laws of States certified for the taxable year as provided in section 903. CERTIFICATION OF STATE LAWS Sec. 903. (a) The Social Security Board shall approve any State law sub- mitted to it, within thirty days of such submission, which it finds provides that— (1) All compensation is to be paid through public employment ofl^ces in the State or such other agencies as the Board may approve ; (2) No compensation shall be payable with respect to any day of unem- ployment occurring within two years after the first day of the first period with respect to which contributions are required ; (3) All money received in the unemployment fund shall immediately upon such receipt be paid over to the Secretary of the Treasury to the credit of the Unemployment Trust Fund established by section 904 ; SOCIAL SECURITY ACT 551 (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 refusing to accept new work under any of the following con- ditions: (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 refrain from 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 legisla- ture to amend or repeal such law at any time. The Board shall, upon approving such law, notify the Governor of the State of its approval. (b) On December 31 in eacli taxable year the Board shall certify to the Secretary of the Treasury each State whose law it has previously approved, except that it shall not certify any State which, after reasonable notice and opportunity for hearing to the State agency, the Board finds has changed its law so that it no longer contains the provisions specified in subsection (a) or has with respect to such taxable year failed to comply substantially with any such provision. (c) If, at any time during the taxable year, the Board has reason to be- lieve that a State whose law it has previously approved, may not be certified under subsection (b), it shall promptly so notify the Governor of such State. UNEMPLOYMENT TRUST FUND Sec. 904. (a) There is hereby established in the Treasury of the United States a trust fund to be known as the "Unemployment Trust Fund", herein- after in this title called the "Fund." The Secretary of the Treasury is author- ized and directed to receive and hold in the Fund all moneys deposited therein by a State agency from a State unemployment fund. Such deposit may be made directly with the Secretary of the Treasury or with any Federal reserve bank or member bank of the Federal Reserve System designated by him for such purpose. (b) It shall be the duty of the Secretary of the Treasury to invest such portion of the Fund as is not, in his judgment, required to meet current with- drawals. Such investment may be made only in interest bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States. For such purpose such obligations may be acquired (1) on original issue at par, or (2) by purchase of outstanding obli- gations at the market price. The purposes for which obligations of the United States may be issued under the Second Liberty Bond Act, as amended, are hereby extended to authorize the issuance at par of special obligations ex- clusively to the Fund. Such special obligations shall bear interest at a rate equal to the average rate of interest, computed as of the end of the calendar month next preceding the date of such issue, borne by all interest-bearing obligations of the United States then forming part of the public debt; except that where such average rate is not a multiple of one-eighth of 1 per centum, the rate of interest of such special obligations shall be the multiple of one- eighth of 1 per centum next lower than such average rate. Obligations other than such special obligations may be acquired for the Fund only on such 552 APPENDIXES terms as to provide an investment yield not less than the yield which would be required in the case of special obligations if issued to the Fund upon the date of such acquisition. (c) Any obligations acquired by the Fund (except special obligations issued exclusively to the Fund) may be sold at the market price, and such special obligations may be redeemed at par plus accrued interest. (d) The interest on, and the proceeds from the sale or redemption of, any obligations held in the Fund shall be credited to and form a part of the Fund. (e) The Fund shall be invested as a single fund, but the Secretary of the Treasury shall maintain a separate book account for each State agency and shall credit quarterly on March 31, June 30, September 80, and December 81, of each year, to each account, on the basis of the average daily balance of such account, a proportionate part of the earnings of the Fund for the quarter ending on such date. (f) The Secretary of the Treasury is authorized and directed to pay out of the Fund to any State agency such amount as it may duly requisition, not exceeding the amount standing to the account of such State agency at the time of such payment. ADMINISTRATION, KEFUNDS, AND PENALTIES Sec. 905. (a) The tax imposed by this title shall be collected by the Bureau of Internal Revenue under the direction of the Secretary of the Treasury and shall be paid into the Treasury of the United States as internal-revenue collections. If the tax is not paid when due, there shall be added as part of the tax interest at the rate of one-half of 1 per centum per month from the date the tax became due until paid. (b) Not later than January 31, next following the close of the taxable year, each employer shall make a return of the tax under this title for such taxable year. Each such return shall be made under oath, shall be filed with the collector of internal revenue for the district in which is located the principal place of business of the employer, or, if he has no principal place of business in the United States, then with the collector at Baltimore, Maryland, and shall contain such information and be made in such manner as the Commis- sioner of Internal Revenue, with the approval of the Secretary of the Treasury, may by regulations prescribe. All provisions of law (including penalties) applicable in respect of the taxes imposed by section 600 of the Revenue Act of 1926, shall, insofar as not inconsistent with this title, be applicable in respect of the tax imposed by this title. The Commissioner may extend the time for filing the return of the tax imposed by this title, under such rules and regulations as he may prescribe with the approval of the Secretary of the Treasury, but no such extension shall be for more than sixty daj'S. (c) Returns filed under this title shall be open to inspection in the same manner, to the same extent, and subject to the same provisions of law, includ- ing penalties, as returns made under Title II of the Revenue Act of 1926. (d) The taxpayer may elect to pay the tax in four equal installments instead of in a single payment, in which case the first installment shall be paid not later than tlie last day prescribed for the filing of returns, the second install- ment shall be paid on or before the last day of the third month, the third installment on or before the last day of the sixth month, and the fourth installment on or before the last day of the ninth month, after such last day. If the tax or any installment thereof is not paid on or before the last day of the period fixed for its payment, the whole amount of the tax unpaid shall be paid upon notice and demand from the collector. SOCIAL SECURITY ACT 553 (e) At the request of the taxpayer the time for payment of the tax or any installment thereof may be extended under regulations prescribed by the Commissioner with the approval of the Secretary of the Treasury, for a period not to exceed 6 months from the last day of the period prescribed for the payment of the tax or any installment thereof. The amount of the tax in respect of which any extension is granted shall be paid (with interest at the rate of one-half of 1 per centum per month) on or before the date of the expiration of the period of the extension. (f) In the payment of any tax under this title a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to 1 cent. INTERSTATE COMMEKCE Seo. 906. No person required under a State law to make payments to an unemployment fund shall 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. DEFINITIONS Sec. 907. When used in this title — (a) The term "employer" does not include any persion unless on each of some twenty days during the taxable year, each day being in a different calendar week, the total number of individuals who were in his employ for some portion of the day (whether or not at the same moment of time) was eight or more. (b) The term "wages" means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash. (c) The term "employment" means any service, of whatever nature, per- formed 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 oflScer 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 twenty-one 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, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational 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 S'hareholder or individual. (d) The term "State agency" means any State officer, board, or other au- thority, designated under a State law to administer the unemployment fund in such State. (e) The term "unemployment fund" means a special fund, established under a State law and administered by a State agency, for the payment of com- pensation. 554 APPENDIXES (f) The term "contributions" means payments required by a State law to be made by an employer into an unemployment fund, to the extent that such payments are made by him without any part thereof being deducted or deductible from the wages of individuals in his employ. (g) The term "compensation" means cash benefits payable to individuals with respect to their unemployment. EIXLES AND RBGtrLATIONS Seo. 908. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall make and publish rules and regulations for the enforcement of this title, except sections 903, 904, and 910. ALLOWANCE OF ADDITIONAL CREDIT Seo. 909. (a) In addition to the credit allowed under section 902, a taxpayer may, subject to the conditions imposed by section 910, credit against the tax imposed by section 901 for any taxable year after the taxable year 1937, an amount, with respect to each State law, equal to the amount, if any, by which the contributions, with respect to employment in such taxable year, actually paid by the taxpayer under such law before the date of filing his return for such taxable year, is exceedeid by whichever of the following is the lesser — (1) The amount of contributions which he would have been required to pay under such, law for such taxable year if he had been subject to the highest rate applicable from time to time throughout such year to any employer under such law ; or (2) Two and seven-tenths per centum of the wages payable by him with respect to employment with respect to which contributions for such year were required under such law, (b) If the amount of the contributions actually so paid by the taxpayer is less than the amount which he should have paid under the State law, the addi- tional credit under subsection (a) shall be reduced proportionately. (c) The total credits allowed to a taxpayer under this title shall not exceed 90 per centum of the tax against which such credits are taken. CONDITIONS OF ADDITIONAL CREDIT ALLOWANCE Seo. 910. (a) A taxpayer shall be allowed the additional credit under section 909, with respect to his contribution rate under a State law being lower, for any taxable year, than that of another employer subject to such law, only if the Board finds that under such law — (1) Such lower rate, with respect to contributions to a pooled fund, is per- mitted on the basis of not less than three years of compensation experience ; (2) Such lower rate, with respect to contributions to a guaranteed employ- ment account, 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 7^2 per centum of the total wages payable by him, in accordance with such guaranty, with respect to employment in such State in the preceding calendar year; (3) Such lower rate, with respect to contributions to a separate reserve ac- count, is permitted only when (A) compensation has been payable from such account throughout the preceding calendar year, and (B) such account amounts to not less than five times the largest amount of compensation paid from such account within any one of the three preceding calendar years, and (C) such SOCIAL SECURITY ACT 555 account amounts to not less than 71/2 per centum of the total wages payable by him (plus the total wages payable by any other employers who may be con- tributing to such account) with respect to employment in such State in the pre- ceding calendar year. (b) Such additional credit shall be reduced, if any contributions under such law are made by such taxpayer at a lower rate under conditions not fulfilling the requirements of subsection (a), by the amount bearing the same ratio to such additional credit as the amount of contributions made at such lower rate bears to the total of his contributions paid for such year under such law. (c) As used in this section — (1) The term "reserve account" means a separate account in an unemploy- ment fund, with respect to an employer or group of employers, from which compensation is payable only witli respect to the unemployment of individuals who were in the employ of such employer, or of one of the employers compris- ing the group. (2) The term "pooled fund" means an unemployment fund or any part thereof in which all contributions are mingled and undivided, and from which com- pensation is payable to all eligible individuals, except that to individuals last employed by employers with respect to whom reserve accounts are main- tained by the State agency, it is payable only when such accounts are exhausted. (3) The term "guaranteed employment account" means a separate account, in an unemployment fund, of contributions paid by an employer (or group of employers) who (A) guarantees in advance thirty hours of wages for each of forty calendar weeks (or more, with one weekly hour deducted for each added week guaran- teed) in twelve months, to all the individuals in his employ in one or more distinct establishments, except that any such individual's guaranty may com- mence after a probationary period (included within twelve or less consecutive calendar weeks), and (B) gives security or assurance, satisfactory to the State agency, for the fulfillment of such guaranties, from which account compensation shall be payable with respect to the unem- ployment of any such individual whose guaranty is not fulfilled or renewed and who is otherwise eligible for compensation under the State law. (4) The term "year of compensation experience", as applied to an employer, means any calendar year throughout which compensation was payable with respect to any individual in his employ who became unemployed and was eligible for compensation. TITLE X— GRANTS TO STATES FOR AID TO THE BLIND APPEOPRIATION Section 1001. For the purpose of enabling each State to furnish financial assistance, as far as practicable under the conditions in such State, to needy individuals who are blind, there is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $3,000,000, and there is hereby authorized to be appropriated for each fiscal year thereafter a sum suflficient to carry out the purposes of this title. The sums made available under this section shall 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. 556 APPENDIXES state; plans for aid to the blind Sec. 1002. (a) A State plan for aid to the blind must (1) provide that it shall be in effect in all political subdivisions of the State, and, if administered by them, be mandatory upon them; (2) provide for financial participation by the State; (3) either provide for the establishment or designation of a single State agency to administer the plan, or provide for the establishment or designation of a single State agency to supervise the administration of the plan; (4) provide for granting to any individual, whose claim for aid is denied, an opportunity for a fair hearing before such State agency; (5) provide such methods of adminis- tration (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 opera- tion of the plan; (6) provide that the State agency will make such reports, in such form and containing such information, as the Board may from time to time require, and comply with such provisions as the Board may from time to time find necessary to assure the correctness and verification of such reports ; and (7) provide that no aid will be furnished any individual under the plan with respect to any period with respect to which he is receiving old-age assistance under the State plan approved under section 2 of this Act. (b) The Board shall approve any plan which fulfills the conditions specified in subsection (a), except that it shall not approve any plan which imposes, as a condition of eligibility for aid to the blind under the plan — • (1) Any residence requirement which excludes any resident of the State who has resided therein five years during the nine years immediately preceding the application for aid and has resided therein continuously for one year immedi- ately preceding the application ; or (2) Any citizenship requirement which excludes any citizen of the United States. PAYMENT TO STATES Sec. 1003. (a) From the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has an approved plan for aid to the blind, for each quarter, beginning with the quarter commencing July 1, 1935, (1) an amount, which shall be used exclusively as aid to the blind, equal to one- lialf of the total of the sums expended during such quarter as aid to the blind under the State plan with respect to each individual who is blind and is not an inmate of a public institution, not counting so much of such expenditure with respect to any individual for any month as exceeds $30, and (2)5 per centum of such amount, which shall be used for paying the costs of administering the State plan or for aid to the blind, or both, and for no other purpose. (b) The method of computing and paying such amounts shall be as follows : (1) The Board shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of clause (1) of subsection (a), such estimate to be based on (A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such clause, and stating the amount appro- priated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than one-half of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived, (B) records showing the number of blind individuals in the State, and (C) such other investigation as the Board may find necessary. SOCIAL SECURITY ACT 557 (2) The Board shall then certify to the Secretary of the Treasury the amount so estimated by the Board, reduced or increased, as the case may be, by any sum by which it finds its estimate for any prior quarter was greater or less than the amount which should have been paid to the State under clause (1) of subsection (a) 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 sucli prior quarter. (3) The Secretary of the Treasury shall thereupon, through the Division of Disbursement of the Treasury Department and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Board, the amount so certified, increased by 5 per centum. OPKEATION OF STATE PLANS Seo. 1004. In the ease of any State plan for aid to the blind which has been approved by the Board, if the Board, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such, plan, finds — (1) that the plan has been so changed as to impose any residence or citizen- ship requirement prohibited by section 1002 (b), or that in the administration of the plan any such prohibited requirement is imposed, with the knowledge of such State agency, in a substantial number of cases ; or (2) that in the administration of the plan there is a failure to comply sub- stantially with any provision required by section 1002 (a) to be included in the plan ; the Board shall notify such State agency that further payments will not be made to the State until the Board is satisfied that such prohibited requirement is no longer so imposed, and that there is no longer any such failure to comply. Until it is so satisfied it shall make no further certification to the Secretary of the Treasury with respect to such State. ADMINISTRATION Sec. 1005. There is hereby authorized to be appropriated for the fiscal year ending June 30, 1936, the sum of $30,000, for all necessary expenses of the Board in administering the provisions of this title. DEFINITION Sec. 1006. When used in this title the term "aid to the blind" means money payments to blind individuals. TITLE XI— GENERAL PROVISIONS DEFINITIONS Section 1101. (a) When used in this Act — (1) The term "State" (except when used in section 531) includes Alaska, Hawaii, and the District of Columbia. (2) The term "United States" when used in a geographical sense means tht States, Alaska, Hawaii, and the District of Columbia. (3) The term "person" means an individual, a trust or estate, a partnership, or a corporation. (4) The term "corporation" includes associations, joint-stock companies, and insurance companies. 78470—37 37 558 APPENDIXES (5) The term "shareholder" includes a member in an association, joint-stock company, or insurance company. (6) The term "employee" includes an officer of a corporation. (b) The terms "includes" and "including" when used in a definition contained in this Act shall not be deemed to exclude other things otherwise within the meaning of the term defined. (c) Whenever under this Act or any Act of Congress, or under the law of any State, an employer is required or permitted to deduct any amount from the remuneration of an employee and to pay the amount deducted to the United States, a State, or any political subdivision thereof, then for the purposes of this Act the amount so deducted shall be considered to have been paid to the employee at the time of such deduction. (d) Nothing in this Act shall be construed as authorizing any Federal offi- cial, agent, or representative, in carrying out any of the provisions of this Act, to take charge of any child over the objection of either of the parents of such child, or of the person standing in loco parentis to such child. EITLES AND EEGUIATIONS Sec. 1102. The Secretary of the Treasury, the Secretary of Labor, and the Social Security Board, respectively, shall make and publish such rules and regu- lations, not inconsistent with this Act, as may be necessary to the efficient administration of the functions with which each is charged under this Act. SEPAEABILITY Sec. 1103. If any provision of this Act, or the application thereof to any per- son or circumstance, is held invalid, the remainder of the Act, and the applica- tion of such provision to other persons or circumstances shall not be affected thereby. eeservation of power Sec. 1104. The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress. SHORT TITLE Sec. 1105. This Act may be cited as the "Social Security Act". Approved, August 14, 1935. INDEX INDEX A Page Accident compensation. See Workmen's compensation. Administration. See under Old-age annuities, compulsory; Unemploy- ment compensation. Advisory Council on Economic Security. See Economic Security, Ad- visory Council on. Aged 139-142, 155-180 Proportion in total population 139-142 Provisions for, in the United States 155-180 Agricultural labor 21, 26, face p. 96, 96, 107, 208, 210, 218, 214, 222, 223, 373, 374, 386-387, 394, 536, 553 Alabama : Birth rate 499 Blind, aid to 302 Child-welfare services 255, 257, 349 Children, crippled, services for 285 Children, dependent, aid to 235-238 passim, 245, 247 Employment estimates face p. 58,400 Employment service, State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 500-513 Old-age assistance . 166-168 Tax receipts 366, 367 Unemployment compensation 6, 108, 109, 117, 400, face p. 440 Unemployment estimates face p. 58, 60, 400 Wealth and income 364,370 Alaska : Children, dependent, aid to 235-237 passim, 247 Old-age assistance face p. 160, 160-168 passim Almshouses 154, 156, 251 American Federation of Labor 57 Animal Industry, Bureau of 336 Argentina, old-age annuities, compulsory 184 Arizona : Birth rate 499 Blind, aid to 302 Children, dependent, aid to 235,237,238,244,245,247,349 Employment estimates face p. 58, 400 Employment service. State , 432, 438 Personnel 438 United States Employment Service, aflBliation with 432 Maternal and child-health services 272,273 Mortality, infant and maternal 500-513 Old-age assistance 159-168 passim Tax receipts 367 561 562 INDEX Arizona — Coutiuued. Page Uuemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates . face p. 58, 60, 400 Wealth and income , 364, 370 Arkansas : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235-238 passim, 245, 247, 349 Employment estimates face p. 58, 400 Employment service. State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 500-513 Old-age assistance 161, 166, 168, 349 Tax receipts 366, 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60-61, 400 Wealth and income 364, 365, 370 Armstrong, Barbara Nachtrieb 135 Australia : Old-age assistance 158, 181-187 passim Survivors' insurance (Nev? South Wales) 459 Unemployment compensation (Queensland) 6,17 Austria : Old-age annuities, compulsory 183, 186 Old-age annuities, voluntary 188 Survivors' insurance 459, 460, 461 Unemployment compensation 6 B Belgium : Old-age annuities, compulsory 183,186 Old-age annuities, voluntary 188 Survivors' insurance 459, 460 Unemployment compensation 4, 5, 7, 11, 17, 33-43 Administration 37-38 Benefits 39-43 Contributions ^ 39 Coverage 38 Ghent system 4, 34 Historical development 33-37 Li6ge plan 5, 34 Trade-union plans 11, 34-35 Benefits. See under Old-age annuities, compulsory, Germany ; Old-age annuities, compulsory. United States (proposed plan) ; Old-age bene- fits, United States; Unemployment compensation. Blind, aid to 301-311, 372, 555-557 Federal subsidy 309-311, 372 Social Security Act, provisions 309-311, 372, 555-557 State laws 301-309 Brazil : Old-age annuities, compulsory 184 Old-age annuities, voluntary 188 Brown, J. Douglas 135 INDEX 563 Bulgaria : Page Old-age annuities, compulsory 183 Old-age annuities, voluntary 188 Survivors' insurance 459 Unemployment compensation 6 C California : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,244,245,247,349 Employment estimates face p. 58, 400 Employment service, State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 261, 500-513 Old-age assistance 160-168 passim^ 349 Public-welfare expenditures 347 Tax receipts 366, 367 Unemployment compensation 6, 108, 109, 110, 117, 400, face p. 440 Unemployment estimates face p. 58, 60, 400 Wealth and income 363, 364, 370 Canada : Old-age annuities, voluntary 188, 454-457 Old-age assistance 181-188 passim, 453^54 Survivors' insurance 459 Unemployment compensation 6, 17,441-447 Casual labor 222, 223, 373, 536 Child-health services. See Maternal and child-health services. Child-welfare services 231, 251-258, 288-290, 297-298, 372, 543-544 Federal subsidy 257-258, 288-290, 372 Legislation, proposed 289-290 Social Security Act 231, 297-298, 372, 543-544 Child Welfare League of America 252, 253 Children, crippled, services for 231, 283-286, 296-297, 372, 542-543 Federal subsidy 296-297, 372 Social Security Act 231, 296-297, 372, 542-543 State provisions . 283-286 Children, dependent aid to 231, 233-249, 288-289, 292-295, 372, 53&-540 Expenditures, estimated 244-245 Extent of aid 237 Federal subsidy 247-249, 288-289, 292-295,372 Legislation, proposed 288-289 Recipients, estimates of 237-244, 248 Social Security Act ; 231, 29^-295, 372, 538-540 State laws 233-239, 24^247 Grants 235-236, 246, 247 Adequacy of 246 Average monthly 247 Maximum 235-236 Operation of 236-239, 244-245 Subsidy, need for State and Federal 246-248 Survey 239, 242, 244, 246 564 INDEX Page Children, handicapped 253 Children in relief families 230,239-244,248 Children, neglected and delinquent. See Child-welfare services. Children, security for 229-231, 287-288, 519 Child Welfare, Committee on 230,519 Need for 229-231 Federal participation 287-288 Integration with other programs 229 Legislation, proposed 287-291 Children's Bureau 154, 230-298 passim, 318, 336, 337, 379 Almshouse survey 154 Children, dependent, aid to, survey 239-246 passim Public-health services _' 336-337 Children's Year 270 Chile : Old-age annuities, compulsory 183, 185 Old-age annuities, voluntary . 188 Colorado : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates face p. 58,400 Employment service, State 432,438 Personnel , 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272, 273 Mortality, infant and maternal 500-513 Old-age assistance 160-168 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60, 400 Wealth and income 364,370 Committee on Economic Security. See Economic Security, Committee on. Commons, John R 91 Compensable labor force. See Coverage under Unemployment compensa- tion. United States. Connecticut : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 244, 245, 247, 849 Employment estimates face p. 58, 400 Employment service. State — 432, 436, 438 National Reemployment Service, amalgamation with 436 Personnel 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272, 273 Mortality, infant and maternal 500-513 Old-age assistance 166, 168, 349 Old-age dependency 149-151, 154 Tax receipts 366, 367 INDEX 565 Connecticut — Continued. Page Unemployment compensation, basic estimates 108,109,117,400 Unemployment estimates face p. 58,60,400 Wealth and income 363,364.370 Contributions. See under Old-age annuities, compulsory, Germany ; Old- age annuities, compulsory, United States (proposed plan) ; Unemploy- ment compensation. Couzens, Senator James 91 Coverage. See under Old-age annuities, compulsory, Germany ; Old-age annuities, compulsory, United States (proposed plan) ; Unemployment compensation. Cuba, old-age annuities, compulsory 184 Czechoslovakia : Old-age annuities, compulsory 183,185,186 Old-age annuities, voluntary j. 188 Survivors' insurance , 459, 460, 461 Unemployment compensation 6, 7 D Delaware : Birth rate 499 Blind, aid to 802 Children, dependent, aid to 235, 237, 238, 244, 245, 247, 349 Employment estimates face p. 58,400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 500-513 Old-age assistance face p. 160, 161-168 passim, 349 Tax receipts 366, 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58,59,61,400 Wealth and income 363,364,370 Denmark : Old-age assistance 181-187 passim Survivors' insurance 459, 460 Unemployment compensation 7 Diseases, preventable 320, 323 District of Columbia : Birth rate 499 Children, dependent, aid to 235,237,238,245,246,247 Employment estimates fa.'e p. 58, 400 Employment service, personnel , 438 Mortality, infant and maternal 501-513 Old-age assistance 166, 168 Old-age dependency 152 Tax receipts 367 Unemployment compensation 6, 108, 109, 115, 117, 119, 400, face p. 440 Unemployment estimates face p. 58,61,400 Wealth and income 363,364,365,370 Domestic service face p. 96, 96, 107, 208-209, 210, 213-214, 222, 223, 373, 374, 386-387, 394, 536, 553 566 INDEX F. Page Eade, "Walter F 453 Economic Security, Advisory Council on III, IV, 516 Economic Security, Committee on III, 15, 92-95, 114, 120, 131, 195-196, 210-216, 230, 277-279, 288-291, 515-530 Actuarial consultants 517 Child Welfare, Committee on 230, 519 Creation III, 515 Dental Advisory Committee 518 Hospital Advisory Board 518 Medical Advisory Committee 517 Members 516 Nursing Advisory Committee 519 Public Employment and Public Assistance, Advisory Committee on__ 519 Public-Health Advisory Committee: 518 Recommendations to Congress. 92^95, 131, 195-196, 210-216, 277-279, 288-291 Child welfare 289-290 Children, dependent, aid to 288-289 Maternal and child health 277-279, 290-291 Old-age annuities, compulsory 210-212 Old-age annuities, voluntary — , 214r-216 Old-age assistance 195-196 Taxes 94-95, 210-212 Unemployment compensation 92-95, 131 Report to President III, 15 Staff . 521-523 Staff reports, list of 525-530 Unemployment compensation, "model" bill 120 Economic Security, Technical Board on III, 516-517 Ecuador : Old-age annuities, compulsory 184 Old-age annuities, voluntary 188 Education, Office of 336 Eliot, Martha M 227 Emergency relief. Federal, dependent children in relief families 230, 239-244, 248 Employer reserves. See under Unemployment compensation. United States. Employment exclusions. United States face p. 96, 96, 107, 208, 213-214, 222, 223, 373-374, 385-394, 536, 553 Employment opportunities, staff, Committee on Economic Security 522 Employment service, States 131, 133, 428-^39 Cost of 133 Demonstration centers 429-430 National Reemployment Service, amalgamation with 436 Unemployment compensation, relation to 131, 437-439 United States Employment Service, affiliation with 432 Employment Service, United States 130-131,133,423-439 History and development 131, 423-i39 Wagner-Peyser Act 130-131, 133, 423, 430, 431-437 Employment, United States, estimates face p. 58, 62-70, 130, 400-401, 522 Compensable labor force, by States 400-401 Industries, by 63-64 Nonagricultural, by States face p. 58 INDEX 567 Employment, United States, estimates — Continued. Page Partial 64-69 Seasonal 6&-70 Stabilization of 130 States, by , face p. 58 Trend in 62-63 England. See Great Britain. Expenditures : Local governments 358-360 State governments 362-363 F Federal grants. 8ee Federal subsidy. Federal subsidy 102-104, 132-133, 190^197, 220-222, 247-249, 257-258, 288-297, 309-311, 338-342, 345-381 Blind, aid to 309-311,372 Child-welfare services 257-258, 288-290, 372 Children, crippled, services for 296-297,372 Children, dependent, aid to 247-249, 288-289, 292-295, 372 Historical precedent for 372, 431, 432 Maternal and child-health services 288,290-291,372 Need for , 345-381 Old-age assistance 190-197, 220^222, 372 Public-health services 338-342, 372 Unemployment compensation administration 102-104, 132-133, 372 Vocational rehabilitation 372 Finland, unemployment compensation 7 Florida : Birth rate 499 Blind, aid to 302,349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 242, 245, 247, 349 Employment estimates face p. 58, 400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 500^513 Old-age assistance 166, 168,349 Taxes _ 354-356 passim, 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60, 400 Wealth and income 364,365,370 Food and Drug Administration 336 France : Old-age assistance 181-188 passim Old-age annuities, compulsory 181, 183-188 passim Old-age annuities, voluntary . 188 Survivors' insurance 459, 460, 461 Unemployment compensation 4, 5, 7, 14-15 6 Gainful workers 78, 79, 107-109, 117, 387-399 Employed 78, 79, 107-109, 117, 389-399 Unemployed „_,_ 78, 79, 39a-.399 568 INDEX Georgia : Pag* Birth rate 499 Blind, aid to 302 Employment estimates face p. 58, 400 Employment service, State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 500-513 Tax receipts 367, 368 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 59, 61, 63, 400 Wealth and income 364,370 Germany : Invalidity insurance. See Old-age annuities, compulsory. Old-age annuities, compulsory 181,183,186,469-497 Old-age annuities, voluntary 188 Survivors' insurance 459-461, 474, 490-495 See also Old-age annuities, compulsory. Unemployment compensation 4, 6, 11, 13-14, 27-33, 74, 93 Administration 30-31 Benefits 32-33, 118, 119 Contracting out by private firms 32 Contributions 30, 32 Coverage 31-32 Development 27-30 Government subsidy 27-29 Health insurance, relation to 30 Ghent system 4, 34 Government expenditures — 358-363 Local 358-360 State 362-363 Great Britain: Old-age annuities, compulsory 181, 183-188 passim, 449-452 Old-age annuities, voluntary 188 Old-age assistance 181-188 passim, 449-450, 452 Public-w^elfare expenditures 347 Survivors' insurance 449-452, 459-465 Tax revenues, local 356-357 Unemployment compensation 4-6, 10, 12, 17-27, 74-76, 93, 114, 118, 121 Act of 1911 22 Administration 18-20 Benefits 23-27, 118 Contracting out 10-11 Contributions 21-23,114 Coverage 20-21 Government subsidy 21-23 National Insurance Act 17 Seasonal unemployment 121 Trade-union plans 19-20 Unemployment Assistance Board 12 Greece : Old-age annuities, compulsory 183 Old-age annuities, voluntary 188 Survivors' insurance 459-460 INDEX 569 Greece — Continued. Page Unemployment compensation 7 Greenland, old-age assistance 181, 182, face p. 184, 186 Guaranteed employment. See under Unemployment compensation. United States. Halsey, Olga S 449,459 Harris, Joseph P V, 343 Hawaii : Children, dependent, aid to 235, 236, 237 Maternal and child-health services 270,272,273 Old-age assistance 159-168 passim Health 267-269,317 Children, in relation to economic status 267-269 Depression, effect of , 317 Health insurance 13, 14, 30, 451, 522 Economic Security, Committee on, staff 522 Germany, unemployment compensation, relation to 30 Great Britain 451 Health services, school 280 Hiscock, Ira V , 313 Huber bill 91 Hungary : Old-age annuities, compulsory 183, 186 Old-age annuities, voluntary 188 Survivors' insurance 459, 460, 461 I Iceland, old-age assistance 181-187 passim Idaho : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates face p. 58, 400 Employment service, State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 500-513 Old-age assistance, face p. 160, 161-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58,60,400 Wealth and income 364,370 Illinois : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 244-247 passim, 349, 460 Employment estimates face p. 58, 400 Employment service. State 432, 438 Personnel 438 United States Employment Service,* aMiation with 432 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance 166, 169,349 570 INDEX Illinois — Continued. Page Taxes 354, 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 59, 60, 400 Wealth and income 363, 364, 370 Illness 315, 316, 317 Income, per capita. States 363-366 Indiana : Birth rate 499 Blind, aid to 302-308 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates face p. 58, 400 Employment service. State 432, 438 Personnel , 438 United States Employment Service, aMiation with— 432 Maternal and child-health services 472, 473 Mortality, infant and maternal 501-513 Old-age assistance 160-169 passim, 349 Taxes 354, 355, 367 Unemployment compensation, basic estimates 108,109,117,400 Unemployment estimates face p. 58, 60, 400 Wealth and income 364, 370 Industrial pension systems. See Retirement systems, private. Insurance principles. See Insurance method under Old-age annuities, compulsory. United States (proposed plan) ; and Insurance principles in under Unemployment compensation. Invalidity insurance : Foreign countries 182-184 Germany. See Old-age annuities, compulsory, under Germany. Iowa : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58,400 Employment service. State , — 432, 438 Personnel 438 United States Employment Service, affiliation with 432 Maternal and child-health services 472,473 Mortality, infant and maternal 501-513 Old-age assistance face p. 160, 161-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates, 108, 109, 117, 400 Unemployment estimates face p. 58, 60-61, 400 Wealth and income 364, 370 Ireland, Northern : Old-age annuities, compulsory 181, 183-188 passim, 449-i52 Old-age assistance 181-188 passim, 449-450, 452 Unemployment compensation — 1 6, IS Irish Free State: Old-age assistance 182, face p. 1S4, 186 Unemployment compensation 6, IS INDEX 571 Italy : Page Old-age annuities, compulsory 181,183,186 Old-age annuities, voluntary 188 Unemployment compensation 4, 6 J Jahn, Fred 1 Japan, old-age annuities, voluntary 188 K Kansas : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58, 400 Employment service. State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance, bill introduced 160 Tax receipts 367 Unemployment compensation, basic estimates 108,109,117,400 Unemployment estimates face p. 58, 59, 61, 400 Wealth and income 364,370 Kentucky : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58, 400 Employment service. State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance 160-169 passim, 349 Tax receipts 367, 368 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60-61, 400 Wealth and income 364,370 Kenyon-Nolan biU 430 L Labor Statistics, U. S. Bureau of 55,57-58,64-65,403,404,405 Latimer, Murray W 135 Lenroot, Katharine F. 227 Li6ge plan , 5, 34 London, Meyer 91 Louisiana : Birth rate 499 Blind, aid to 302^309 passim, 349 Children, dependent, aid to 235, 237, 238, 244-247 passim, 349 Employment estimates face p. 58, 40O Employment service. State ,— 432,438 Personnel 438 572 INDEX Louisiana — Continued. Employment service, State — Continued. Page United States Employment Service, affiliation with 432 Maternal and child-health services 270,272,273 Mortality, infant and maternal 501-513 Taxes 354,367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60, 400 Wealth and income--- 364,370 Luxemburg : Old-age annuities, compulsory 181,183,186 Old-age annuities, voluntary 188 Survivors' insurance 459 M Maine : Birth rate 499 Blind, aid to 303-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235-239 passim, 244, 245, 247, 849 Employment estimates face p. 58,400 Employment service, State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance 160-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108,109,117,400 Unemployment estimates face p. 58, 60-61, 400 Wealth and income 364,370 Maryland : Birth rate 499 Blind, aid to 303-309 passim Children, crippled, services for 285 Children, dependent, aid to 235-239 passim, 245, 247, 349 Employment estimates face p. 58,400 Employment service. State, personnel 438 Maternal and child-health sei'vices 272,273 Mortality, infant and maternal 501-513 Old-age assistance 160-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58,60-61,400 Wealth and income 364,370 Massachusetts : Birth rate ^ 499 Blind, aid to 302 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,244-247 passim, 349 Employment estimates face p. 58, 400 Employment service, State 432, 438 Personnel 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272.273 INDEX 573 Massachusetts — Continued. Page Mortality, infant and maternal 501-513 Old-age assistance 157-169 passim, 349 Old-age dependency 150, 153. 159 Taxes 354, 366, 367 Unemployment compensation 6,91,107,108,109,117,400, face p. 440 Unemployment estimates face p. 58, 59, 60, 399, 400 Wealth and income 363,364,370 Maternal and child-health services 231, 259-286, 295-296, 372, 540-542 Development 269-277 Federal Maternity and Infancy Act 269^273 passim Federal participation, proposed 277-279 Federal subsidy 288, 290, 291 Infant and preschool services 280 Legislation proposed 290-291 Local programs, development 279-281 Maternity nursing 275,280 Need for 259-260 Prenatal and child-health centers 275,280 Social Security Act 231,295-296,372,540-542 State expenditures for 272-274 State funds for 271-277 State programs, development 281-283 Means test, old-age assistance 184 Michigan : Birth rate 499 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58,400 Employment service. State 432, 438 Personnel , 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance 160-169 passim, 349 Taxes 354, 355, 367 Unemployment compensation, basic estimates 108, 109, 110, 117, 400 Unemployment estimates face p. 58, 58-59, 60, 400 Wealth and income 364, 370 Minnesota : Birth rate 499 Blind, aid to 802-309' passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58, 400 Employment service, State 432,438 Personnel 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance 160-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 78470—37 38 574 INDEX Minnesota— Continued. Page Unemployment estimates face p. 58, 60, 400 Wealth and income 364,370 Mississippi : Birth rate 499 Blind, aid to 302 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,349 Employment estimates face p. 58,400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Tax receipts 367, 368 Unemployment compensation, basic estimates 107,108,109,117,400 Unemployment estimates face p. 58,59,61,400 Wealth and income 364,365,370 Missouri : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates face p. 58, 400 Employment service. State , 432,438 Personnel , 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Old-age assistance 166, 169, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60, 400 Wealth and income 364, 370 Montana : Birth rate 499 Blind, aid to 302 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates .^ face p. 58, 400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Old-age assistance 156-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60, 400 Wealth and income 364, 370 Mortality, infant, United States 260-268, 505-513 Mortality, maternal. United States 260-263, 500-504 Mothers' aid. United States. See Children, dependent, aid to. Mothers' assistance. United States. See Children, dependent, aid to. Mothers' pensions. United States. See Children, dependent, aid to. Murray, Merrill G V, 1 INDEX ^ ^ 575 N Page Nathan, Robert R 56,385,395 National Civic Federation, old-age dependency survey 150-151 National Industrial Conference Board 57 National Reemployment Service 434-436 Nebraska : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58,400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 265, 501-513 Old-age assistance face p. 160, 161-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60-61, 400 Wealth and income 364,370 Netherlands : Old-age annuities, compulsory , 181-186 passim Old-age annuities, voluntary 188 Survivors' insurance 459-461 passim Unemployment compensation 7 Nevada : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58, 400 Employment service. State 432, 438 Personnel , 438 United States Employment Service, affliation with 432 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance face p. 160, 160-169 passim, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60, 400 Wealth and income 363, 364, 370 Newfoundland, old-age assistance 181, 182, face p. 184 New Hampshire : Birth rate 499 Blind, aid to 302-309 passim, 349 Child-welfare services 253, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,244,245,247,349 Employment estimates face p. 58, 400 Employment service. State , 432, 438 Personnel 438 United States Employment Service, aflaiiation with 432 Maternal and child-health services 272,273 Mortality, infant and maternaL„,^^^,^,„ 501-51E 576 INDEX New Hampshire — Continued. Page Old-age assistance face p. 160, 160-170 passim, 349 Tax receipts 366, 367 Unemployment compensation 6, 108, 109, 117, 400, face p. 440 Unemployment estimates face p. 58, 60-61, 400 Wealth and income 364,370 New Jersey : Birth rate 499 Blind, aid to 303-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,244,245,247,349 Employment estimates face p. 58, 400 Employment service, State 432,436,438 National Reemployment Service, amalgamation with 436 Personnel . 438 United States Employment Service, aflSliation with 432 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Old-age assistance 160-170 passim, 349 Old-age dependency , 154 Tax receipts 367 Unemployment compensation, basic estimates , 108, 109, 117, 400 Unemployment estimates face p. 58, 59, 60, 400 Wealth and income 363,364,370 New Mexico : Birth rate 499 Blind, aid to 302, 349 Child-welfare services 257, 349 Children, dependent, aid to 235-238 passim, 244, 245, 247, 349 V Employment estimates facep. 58, 400 Employment service, State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 265, 501-513 Taxes 355,367 Unemployment compensation, basic estimates , 108,109,117,400 Unemployment estimates face p. 58, 60, 400 Wealth and income 364, 365, 370 New York: Birth rate 499 Blind, aid to 302-309 passim, 349 Child-welfare services 256, 349 Children, crippled, services for 284, 285 Children, dependent, aid to 235, 237, 238, 244, 245, 247, 349 Employment estimates facep. 58,400 Employment service. State 430-438 passim ' Clearance system 433 Demonstration centers . 430 National Reemployment Service, amalgamation with 436 Personnel , 438 United States Employment Service, affiliation with 432 Maternal and child-health services __! 272, 273 Mortality, infant and maternal 501-513 Old-age assistance 156-157, face p. 160, 161-170 passim. 349 Old-age dependency , ,^____,_, , 151-153, 154 INDEX 577 New York — Continued. Page Tax receipts 366, 367 Unemployment compensation 6, 91, 108-110, 117, 400, face p. 440 Unemployment estimates face p. 58, 59, 60, 400 Wealth and income 363,364,370 New York Commission on Old-Age Security 153 New Zealand : Old-age assistance 158, 181-187 passim Survivors' insurance 459, 460 North Carolina : Birth rate 490 Blind, aid to 302 Child-welfare services , 257, 349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 244, 245, 247, 349 Employment estimates face p. 58,400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Tax receipts 367 Unemployment compensation, basic estimates , 108, 109, 117, 400 Unemployment estimates face p. 58, 60-61, 63, 400 Wealth and income 364, 370 North Dakota : Birth rate 499 Blind, aid to 302 Children, crippled, services for 283 note Children, dependent, aid to 235,237,238,245,247,349 Employment estimates . face p. 58, 400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal : 501-513 Old-age assistance face p. 160, 161-170 passim, 349 Taxes 354, 367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 59, 61, 400 Wealth and income 364, 370 Norway : Old-age assistance 181, 182, face p. 184 Unemployment compensation 7 O Ohio: Birth rate 499 Blind, aid to 303-309 passim, 349 Children, crippled, services for 284, 285 Children, dependent, aid to 235,237,238,242,245,246,247,349 Employment estimates face p. 58,400 Employment service. State 428-429,432,438 Establishment 428-429 Personnel 438 United States Employment Service, aflBliation with 432 Maternal and child-health services 272, 273 578 INDEX Ohio — Continued. Page Mortality, infant and maternal 263, 501-513 Old-age assistance face p. 160, 160-170 passim, 349 Taxes 354, 355, 367 Unemployment compensation, basic estimates , 108, 109, 117, 400 Unemployment estimates face p. 58, 59, 60, 400 Wealth and income 364, 370 Oklahoma : Birth rate 499 Blind, aid to 302-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates face p. 58, 400 Employment service. State 432, 438 Personnel 438 United States Employment Service, affiliation with , 432 Maternal and child-health services 272, 273 Mortality, infant and maternal '. 501-513 Old-age assistance 166, 170 Taxes 355-367 Unemployment compensation, basic estimates 108, 109, 117, 400 Unemployment estimates face p. 58, 60, 400 Wealth and income 364, 365, 370 Old-age annuities, compulsory 138, 181-188, 197-212, 449-452, 469-497 Administration 209-210,482-484 Germany 482-484 United States (proposed plan) 209-210 Argentina 184 Austria 183,186 Belgium 183,186 Brazil 184 Bulgaria , 183 Chile 183,185 Cuba 184 Czechoslovakia 183, 185, 186 Ecuador 1S4 Foreign countries 138, 181-188 France - 181, 183-188 passim Germany 181, 183, 1S6, 469-497 Administration 482-184 Benefits . 472-475,487-494 Contributions 485-487 Cost, distribution of 470-471, 474-475 Coverage 485 History 469-470 Recipients, number of 494-495 Reserve funds 476-482 Great Britain 181, 183-188 passim, 449-452 Greece 183 Hungary 183, 186 Ireland, Northern 181, 183-188 passim, 449-452 Italy 181, 183, 186 Luxemburg 181, 183, 186 Netherlands 181, 183-186 passim INDEX 579 Old-age annuities, compulsory — Continued. Page Poland -- li^S Portugal 183 Rumania 181,183 Spain 183,185 Sweden 181, 183-188 passim Switzerland 184 Union of Soviet Socialist Republics 183, 185 United States (proposed plan) — 197-212 Administration 20^210 Basic considerations 202-210 Benefits 202-204,211-212 Congressional modification — 212-216 Contributions 204-207,210 Coverage 207-209,210-211 Federal system, need for 200-202 Insurance method, advantages of 198-200 Legislation, proposed . 197-212 Reserve , 207-212 See also Old-age benefits. United States. Uruguay 184 Yugoslavia 183 Old-age annuities, private system. See Retirement systems, private. Old-age annuities, public systems. See Retirement systems, public. Old-age annuities, voluntary 188, 21^216, 454-457 Foreign countries 188, 454-^57 United States (proposed plan) 214r-216 Old-age assistance 154, 156-171, 181-188, 191-197, 217-222, 372, 449-454, 531-533 Australia 158, 181-187 passim Canada 181-188 passim, 453-454 Denmark 181-187 passim Foreign countries 181-188 Laws, provisions face p. 184 Recipients 186, 187 France 181-188 passim Great Britain 181-188 passim, 449-450, 452 Greenland 181, 182, face p. 184, 186 Iceland , 181-187 passim Ireland, Northern 181-188 passim, 449-450, 452 Irish Free State 182, face p. 184, 186 Newfoundland 181, 182, face p. 184 New Zealand 158, 181-187 passim Norway 181, 182, face p. 184 South Africa, Union of 181-187 passim United States 154, 156-171, 190-197, 217-222, 372, 531-533 Aged, percentage of, eligible for 154 Applications for aid 165 Federal subsidy 190-197, 220-222, 372 Legislation proposed 191-197 Recipients, estimated number of 194 Social Security Act 196-197, 217-222, 372, 531-533 State laws 154, 156-171 Development 156-171 580 INDEX Old-age assistance — Continued. United States — Continued. State Laws — Continued. Page Operation 163-166 Provisions 161-163, 166-171 Residence requirements 157 Uruguay 181, 182, face p. 184 Old-age benefits, United States , 137, 212-216, 222-226, 533-536 Congressional modification of proposed plan 212-216 Recommendations for. See Old-age annuities, compulsory, United States (proposed plan). Social Security Act 213-214, 222-226, 533, 536 See also Old-age annuities, compulsory, United States (proposed plan). Old-age dependency. United States 137-154,159 Old-age insurance. See Old-age annuities, compulsory ; Old-age annuities, voluntary. Old-age pensions. See Old-age annuities ; Old-age assistance ; Old-age • benefits. Old-age pensions, contributory. See Old-age annuities, compulsory ; Old- age annuities, voluntary. Old-age pensions, noncontributory. See Old-age assistance. Old-age security 137-226, 521 Economic Security, Committee on, staff 521 Foreign countries 181-188 United States, legislation proposed 189-216 Older worker, employment diflSculties 143-148 Oregon : Birth rate 500 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates face p. 58, 400 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 265, 501-513 Old-age assistance face p. 160, 161-170 passim, 349 Tax receipts 367 Unemployment compensation 6, 108, 109, 117, 400, face p. 440 Unemployment estimates face p. 58, 60-61, 400 Wealth and income 364, 370 P Palmer, Gladys L 423 Pennsylvania : Birth rate 500 Blind, aid to 303-309 passim, 349 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 244, 245, 247, 349 Employment estimates face p. 58, 401 Employment service. State 432,433,438 Clearance system 433 Personnel 438 United States Employment Service, affiliation with 432 INDEX 581 Pennsylvania — Continued. Page Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance face p. 160, 160-170 passim, 849 Old-age dependency, study of 159 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 401 Unemployment estimates face p. r<8, 59, 60, 401 Wealth and income 364.370 Pension systems. See Retirement systems, private ; Retirement systems, public. Poland : Old-age annuities, compulsory 183 Old-age annuities, voluntary 188 Survivors' insurance 459 Unemployment compensation 6 Pooled fund, unemployment compensation 10-11,111-112,115,116 Population, aged, proportion of 139-142 Portugal, old-age annuities, compulsory 183 Public debt, State and local 357-359, 368-371 Public-health nursing services 274-277, 280 Public Health S'ervice, United States 270, 321-327 Public-health services 315-342, 372, 545-546 Federal 316-320, 32.3- 327, 335-338 Costs of national program 337-338 Organization of 335-338 Responsibility for 316-320, 327 Subsidy to States , 338-342 United States Public Health Service 323-327 Local 317-320,327-332 Costs 329-332 Organization of 328-332 Responsibility for 317-320, 327 Voluntary services 331-332 Social Security Act 338-342, 372, 545-546 State _ 317-320, 327, 332-335, 339 Costs'- 334-335 Health Departments: Organization 332-333 Local services, aid to 333-334 Plans, development 339 Responsibility for 317-320, 327 Public- welfare expenditures 345-381 Depression, effect of 346-347 Federal-State cooperation, need for 369-372 Federal subsidy, need for 360 Financial responsibility, State and local 348-351 Great Britain 347 Ratio to national income 346 Puerto Rico, children, dependent, aid to 235,237 Q Queensland. See Australia. 582 INDEX R Page Railroad Retirement Act 173, 178-179 Relief, direct 7-8 Relief, emergency. See Emergency relief. Relief, unemployment, staff. Committee on Economic Security 522 Relief, work 7-8, 15 Reserves, old-age annuities, compulsory, Germany, investment of 477-^82 Retail distribution 390-391 Retail sales, per capita. States 363-366 Retirement systems, private 167, 172-178 Retirement systems, public 179-180 Civil service 179-180 Teachers 180 Rhode Island : Birth rate 500 Children, dependent, aid to 235, 237, 238, 244, 245, 247, 349 Employment estimates face p. 58,401 Employment service. State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance 166, 170, 349 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 401 Unemployment estimates face p. 58, 59, 60, 401 Wealth and income 364,370 Richter, Otto C 135 Roche, Josephine 313 Rumania : Old-age annuities, compulsory 181,183 Old-age annuities, voluntary 188 Russia. See Union of Soviet Socialist Republics. S Sakmann, Marianne 469 Scotland. See Great Britain. Sheppard-Towner Act. See Federal Maternity and Infancy Act under Maternal and child-health services. Sickness. See Illness. Sickness insurance. See Health insurance. Social security. Federal participation, need for 345-381 Social Security Act III, 95-117, 126, 131-133, 196-197, 213^-214, 217-226, 231, 292-298, 309-311, 338^42, 372-381, 437-439, face p. 514, 531-558 Appropriations authorized 372 Blind, aid to 309-311,372,555-557 Child-welfare services 231, 297-298, 372, 543-544 Children, crippled, services for 231,290-297,372,542-543 Children, dependent, aid to 231, 292-295, 372, 538-540 Costs, Federal 373-377 Legislative history III Maternal and child-health services 231,295-296,372,540-542 Old-age assistance 196-197, 217-222, 372, 531-533 Old-age benefits. Federal 213-214,222-226,533-536 Public-health services 338-342, 372, 545-546 INDEX 583 Social Security Act — Continued. Social Security Board. See Main head. page Summary of 378-381, face p. 514 Taxes : Title VIII (with respect to employment) 213-214,373-377,547-550 Title IX (on employers of 8 or more) 78, 95-117, 373-377, 550-555 Unemployment compensation laws, conditions for approval 95-117, 126, 537-538, 550-551 Unemployment compensation administration 102-106, 110, 131-133, 372, 437-439, 536-538 Unemployment trust fund face p. 96, 99-102 Vocational rehabilitation 372, 544 Social Security Board III, V, 81, 97-105 passim, 113, 128, 131, 210-225 passim, 292-295 passim, 309-311 passim, 375-879 passim, 437, 546 South Africa, Union of, old-age assistance 181-187 passim South Carolina t Birth rate 500 Blind, aid to 302 Children, crippled, services for 285 Children, dependent, aid to 235-^8 passim, 245, 247 Employment estimates face p. 58, 401 Employment service, State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 261, 501-513 Tax receipts 367, 368 Unemployment compensation, basic estimates 108, 109, 117, 401 Unemployment estimates face p. 58, 59^63 passim, 401 Wealth and income 364, 365, 370 South Dakota : Birth rate 500 Blind, aid to 302 Child-welfare services . 1'53 Children, crippled, services for 285 Children, dependent, aid to 235,237,238,245,247,349 Employment estimates face p. 58, 401 Employment service, State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 401 Unemployment estimates face p. 58, 59, 61, 401 Wealth and income 364, 370 Spain : Old-age annuities, compulsory 183, 185 Old-age annuities, voluntary 188 Unemployment compensation 7 State governments, financial condition of 360-369 State and municipal employees' retirement funds 180 See also Occupational exclusions under Unemployment compensation, United States, Coverage. Stewart, Bryce M . 1 Survivors' insurance 182-184, 188, 449-452, 459^67, 474, 490-495 Australia (New South Wales) 459 584 INDEX Survivors' Insurance— Continued. page Austria ^ 459-^61 passim Belgium 459, 460 Bulgaria 459 Canada 459 Czechoslovakia 459-461 passim Denmark 459, 460 Foreign countries 182-184, 188, 459-467 France 459-461 passim Germany 459-461, 474, 490-495 Benefits 474,490-494 Recipients, number of 494—495 See also Old-age annuities, compulsory, Germany, Great Britain 449-452, 459-465 Greece 459, 460 Hungary 459-461 passim Luxemburg 459 Netherlands 459-461 passim New Zealand 459, 460 Poland 459 Union of Soviet Socialist Republics 459-461 passim Yugoslavia 459,460 Sweden : Old-age annuities, compulsory 181, 183-188 passim Old-age annuities, voluntary 188 Switzerland : Old-age annuities, compulsory 184 Appenzell 184 Basel Town 184 Glarus 184 Unemployment compensation 4, 5, 6, 7, 17, 43-54, 74 Administration 50 Benefits 53--54 Contributions 52-53 Coverage 50-52 Depression, effect of 48-50 Government subsidy 43^9 Trade-union plans . 51-52 Sydenstricker, Edgar.^ 313, 320 Taxes 78, 94-117, 213-214, 351-368, 373-377, 416, 547-555 Great Britain, revenues, local ^ 356-357 United States: Assessed valuation, local 351-354 Delinquent, local 854-355 Limitations on, local 355-356 Pay-roll 94-95, 376-377, 416 Assessable pay-roll 416 Incidence for selected industries 376-377 Off-set plan 94-95 Revenues, local and State 351-368 INDEX 585 Taxes — Continued. United States — Continued. Social Security Act: Page Title VIII 213-214,373-377,547-550 Title IX , 78, 95-117, 373-377, 550-555 Technical Board on Economic Security. See Economic Security, Technical Board on. Tennessee : Birth rate 50O Blind, aid to 302 Children, crippled, services for 285 Children, dependent, aid to 235, 237, 238, 245, 247, 349 Employment estimates face p. 58, 401 Employment service, State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Tax receipts 367, 368 Unemployment compensation, basic estimates 108,109,117,401 Unemployment estimates face p. 58, 59-63 passim, 401 Wealth and income 364, 370 Texas : Birth rate 500 Blind, aid to 302 Children, crippled, services for , 285 Children, dependent, aid to 236,237,238,245,247,349 Employment estimates face p. 58, 401 Employment service, State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance 160 Tax receipts 367 Unemployment compensation, basic estimates 108, 109, 117, 401 Unemployment estimates face p. 58, 60, 401 Wealth and income 364, 370 Trade-unions, unemployment compensation plans 4, 8, 11, 19-20, 34-35, 51-52 Treasury, Secretary of the 111,97-103 passim, 218^226 passim, 294, 310, 311, 338, 339, 374, 515 u Unemployment compensation 3-133, 372-377, 385-401, 415-421, 437-439, face p. 440, 441^47, 521, 536-538, 550-555 Actuarial basis for 73-89, 415^21 Administration 18-20, 30-31, 37-38, 50, 102^104, 128-133, 372 Belgium 37-38 Germany 30-31 Great Britain 18-20 Switzerland 50 United States 12S-133 Cost 128 Federal grants for 102-104, 132-133, 372 Personnel 129 Records 130 Assessable pay roll. United States 416 Australia (Queensland) 6,17 586 INDEX Unemployment compensation — Continued. Page Austria , 6 Belgium 4, 5, 7, 11, 17, 33^3 Administration 37-88 Benefits 39-43 Contributions 39 Coverage 38 Ghent system 4, 34 Government subsidy 34r-87, 39 Historical development 33-37 Liege plan 5, 34 Trade-union plans 11, 34r-35 Benefits 23-27, 32-33, 39^3, 81-89, 118-128, 132, 415-^21 Adjustment factors 417-421 Belgium 39-43 Dependents' allowances 119 Germany 32-33, 118, 119 Great Britain . 23-27, 118 Switzerland 53-54 United States 81-89, 118-128, 132, 415-421 Bulgaria 6 Canada 6, 17, 441-^47 Government subsidy 442, 445 Contracting out by private firms 10-11,32 Germany 32 Great Britain 10-11 See also Employer reserves under United States. Contributions 21-28, 30, 32, 39, 52-53, 80-81, 113-117, 132, 415-416 Belgium 39 Germany 80,82 Great Britain 21-23, 114 Switzerland 52-53 United States 80-81, 118-117, 132, 415-416 Coverage 20-21, 81-82, 88, 50-52, 77-80, 106-109, 885-^01 Belgium 88 Germany 81-32 Great Britain 20-21 Switzerland 50-52 United States— 77-80, 106-109, 385-401 Czechoslovakia 6, 7 Denmark 7 Evolution of 4-8, 74-76 Financing, United States 94-95 Finland 7 France 4, 5, 7, 14-15 Germany 4, 6, 11, 13-14, 27-33, 74, 93 Administration 30-31 Benefits 82-33, 118, 119 Contracting out by private firms 32 Contributions 30, 32 Coverage 31-32 Development 27-30 Government subsidy 27-29 Health insurance, relation to , 80 INDEX 587 Unemployment Compensation — Continued. Page Gtient system 4, 34 Government subsidy 21-23, 27-29, 34-37, 39, 43^9, 102-104, 132-133, 372, 442, 445 Belgium 34-^7, 39 Canada 442, 445 Germany 27-29 Great Britain 21-23 Switzerland--.. 43-49 United States 102-104, 132-133,372 Great Britain 4-6, 10, 12, 17-27, 74-76, 93 Act of 1911 22 Administration 18-20 Benefits 23-27,118 Contracting out 10-11 Contributions 21-23, 114 Coverage 20-21 Government subsidy 21-23 National Insurance Act 17 Seasonal unemployment 121 Trade-union plans 19-20 Unemployment Assistance Board 12 Greece 7 Health insurance, relation to 30 Insurance principles in 8-13 Ireland, Northern 6, 18 Irish Free State 6.18 Italy 4,6 Li6ge plan 5, 34 Netherlands 7 Norway 7 Partial unemploj^ment 120-121 Poland 6 Relation to other social security measures 13-15 Russia. See Union of Soviet Socialist Republics. Seasonal unemployment , 120-121 Spain 7 Switzerland 4, 5, 6, 7, 17, 43-54, 74 Administration 50 Benefits 53-54 Contributions 52-53 Coverage 50-52 Depression, effect of 48-50 Government subsidy 43-49 Trade-union plans 51-52 Trade-union plans 4, 8, 11, 20, 34^-35, 51-52 Belgium 11,34-35 Great Britain 19-20 Switzerland 51-52 United States 8 Union of Soviet Socialist Republics 6-7 588 INDEX Unemployment compensation — CJontinued. Page United States^ 6, 8, 15, 73-89, 91-133, 372-377, 385-401, 415-421, 437-439, face p. 440, 521, 536-538, 550-555 Actuarial basis for 73-89, 415-421 Administration 128-133 Cost 128 Federal grants for 102-104,132-133,372 Personnel 129 Records 130 Benefits 81-89, 118-128, 132, 415-^1 Actuarial basis for 81-89,415-421 Additional 122-123 Amount 118-119 Claims and appeals procedure 127-128 Dependents' allowances 119 Disqualification from 125-127 Duration 121-122, 415-421 Eligibility for 123-127 Protection of 132 Qualifying period 123 Ratio to employment 121-122 "Waiting period 124-125 Compensable wage loss 416-417 Contributions 80-81, 113-117, 132, 415-416 Actuarial basis for 80-81 Collection of 132 Employee 114^115 Employer , 113-117 Government 115 Cost, estimated. See Actuarial basis for. Coverage 77-80, 106-109, 385-401 Coal-mining, 1929 388 Industrial distribution 392, 393, 395, 396 Manufacturing 389 Mines and quarries 388 Occupational exclusions 386-387 Retail trade 391 Size-of-firm exclusions 106, 387-397 States, by- 108-109 Wholesalers 389-390 Economic Security, Committee on, staff 521 Employee representation 129-130 Employer representation 129-130 Employer reserves 111-113, 115-116 Employment service. States: Cost of 133 Relation to 131, 437-430 Evolution of 6, S Federal participation 91-104, 130-131 Federal vs. State plan 93-95 Financing, method of 94-95 Guaranteed employment 112-113, 116 Huber bill 91 Labor force, compensable ^ 395-401 INDEX 589 Unemployment compensation — Continued. United States — Continued. Page Legislation 6, 91-133, face p. 440, 550-551 Federal 91-104 Standards for 105-133 State 6, 91, 112, face p. 440 Federal approval 95-117, 126, 550-5.51 Partial unemployment 120 Pooled funds 111-112, 115, IIG Seasonal unemployment 120-121 Social Security Act 78, 95-117, 126, 131-133, 372-377, 437-439, 536-538, 550-555 Stabilization of employment 130 State funds 109^113 State vs. Federal plan 93-95 Tax-offset plan 94-95 Trade-union plans 8 See also Taxes, Title IX under Social Security Act. Voluntary benefit plans. See Trade-union plans. Yugoslavia 6 Unemployment insurance. See Unemployment compensation. Unemployment relief staff, Committee on Economic Security 522 Unemployment trust fund. See Taxes, Title IX under Social Security Act; State funds under Unemployment compensation, United States. Unemployment, United States , 55-71, 82-89, 394-413 Compensable labor force, by States — 58-61,400-401 Duration of 70-71, 82-85, 408-413 Los Angeles 405-408 Procedures in estimating 403-413 Industries, by 57-58 Nonagricultural, by States face p. 58 Partial 64-69 Percentage in compensable labor force 412 Rate in cities 412 Seasonal 69-70 Socio-economic groups 394 Technological 62 Textile industry 63 Variations, by States 58-61 Wage loss, estimates 82, 86, 87, 89 Union of Soviet Socialist Republics : Old-age annuities, compulsory 183, 185 Survivors' insurance 459-461 passim Unemployment compensation 6, 7 United States Bureau of Labor Statistics. See Labor Statistics, United States Bureau of. United State Children's Bureau. See Children's Bureau. United States Employment Service. See Employment Service, United States. United States Public Health Service. See Public Health Service, United States. Uruguay : Old-age assistance 181, 182, face p. 184 Old-age annuities, compulsory 184 Utah 117, 160 Birth rate 500 78470 — 37 39 590 INDEX Utah — Continued. ■ Page Blind, aid to 303-309 passim, 349 Cliildren, dependent, aid to 236, 237, 238, 245, 247, 349 Employment estimates face p. 58, 401 Employment service. State, personnel 438 Maternal and child-health services 272, 273 Mortality, infant and maternal.^ 501-513 Old-age assistance face p. 160, 160-170 passim, 349 Tax receipts : 367 Unemployment compensation 6, 108, 109, 401, face p. 440 Unemployment estimates face p. 58, 60, 401 Wealth and income 364, 370 V Vermont : Birth rate 500 Children, crippled, services for : . 285 Children, dependent, aid to 236,237,238,244,245,247,349 Employment estimates face p. 58, 401 Employment service. State, personnel 438 Maternal and child-health services 272,273 Mortality, infant and maternal 261,501-513 Old-age assistance 166, 171, 349 Tax receipts 367 Unemployment compensation, basic estimates 108,109,117,401 Unemployment estimates face p. 58, 60, 401 Wealth and income 364, 370 Virginia : Birth rate 500 Children, crippled, services for 2S5 Children, dependent, aid to 236,237,238,244,245.247,349 Employment estimates : face p. 58. 401 , Employment service, State 432,438 Pei'sonnel 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272.273 Mortality, infant and maternal 501-513 Tax receipts 367 Unemployment compensation, basic estimates 108,109,117,401 Unemployment estimates face p. 58, 59. 61. 401 Wealth and income 364. 370 Vocational rehabilitation, Social Security Act 372, 544 Voluntary benefit plans. See Trade-unions, unemployment compensation plans. Voluntary old-age insurance. Sec Old-age annuities, voluntary. W Wagner-Lewis bill 92 Wagner-Peyser Act 130-131, 133, 423. 430. 431-437 See also Employment Service, United States. Wagner, Senator Robert 92 Waiting period. See Benefits under Unemployment compensation. Wales. See Great Britain. Walker, W. F 313 INDEX 591 Washington ; Page Birth rate 50O Blind, aid to 302-309 passim, 349 Children, dependent, aid to 236,237,238,245,247,349 Employment estimates face p. 58, 401 Employment service, State, personnel — , 438 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance face p. IGO, 160^171 passim, 349 Public-welfare expenditures 347 Taxes 355,367 Unemployment compensation 6, 108, 109, 117, 401, face p. 440 Unemployment estimates face p. 58, 60, 401 Wealth and income 364,370 Wealth and income of States 363-366, 370 West Virginia : Birth rate 500 Blind, aid to 302 Children, crippled, services for 284, 285 Children, dependent, aid to 236,237,238,245,247,349 Employment estimates face p. 58, 401 Employment service. State , 432, 438 Personnel 438 United States Employment Service, affliation with 432 Maternal and child-health services 272, 273 Mortality, infant and maternal 501-513 Old-age assistance face p. 160, 161, 164, 171, 349 Taxes 355,367 Unemployment compensation, basic estimates 108, 109, 117, 401 Unemployment estimates face p. 58, 60, 401 Wealth and income 364, 370 White House Conference on Child Health and Protection, committees 247- 269 passim Williamson, W. R 1, 83, 418 Wisconsin : Birth rate 500 Blind, aid to 303-309 passim, 349 Children, crippled, services for 284—285 Children, dependent, aid to 236, 237, 238, 244, 245, 247, 349 Employment estimates face p. 58, 401 Employment service. State 430, 432, 433, 438 Clearance system -133 Demonsti'ation centers ^ 430 Personnel , 43S United States Employment Service, affiliation with 432 Maternal and child-health services 272,273 Mortality, infant and maternal 261, 263, 501-513 Old-age assistance 160^171 passim, 349 Old-age dependency- 149-150 Taxes 354,367 Unemployment compensation 6, 91, 108, 109, 112, 117, 401, face p. 440 Unemployment estimates , face p. 58, 60, 401 Wealth and income 364.370 Witte, Edwin E V. 453, 469 592 INDEX Workers, gainful, See Gainful workers. Page Workmen's compensation 14, 15, 128 Wyoming : Birth rate 500 Blind, aid to 303-309 passim, 349 Children, crippled, services for 283 note Children, dependent, aid to 236, 237, 238, 245, 247, 349 Employment estimates face p. 58,401 Employment service. State 432,438 Personnel . 438 United States Employment Service, affiliation with 432 Maternal and child-health services 272,273 Mortality, infant and maternal 501-513 Old-age assistance face p. 160, 161-171 passim, 349 Taxes 354, 367 Unemployment compensation, basic estimates 108-110, 117, 401 Unemployment estimates face p. 58, 60-61, 401 Wealth and income 364, 370 Y Yugoslavia : Old-age annuities, compulsory 183 Old-age annuities, voluntary 188 Survivors' insurance 459, 460 Unemployment compensation 6 o C. I HD7091 U. S. Committee on Economic Un3 Security. Social security in America. Date Due c. 2 ™3°'i. s. committee on Economic