gross national product was 4.2 in 1966. To this could also be added expenditures for welfare services for the aged, 244 mill Danish Kroner in 1966. To this must be added health costs and so forth.

As to governmental actions to protect the elderly against financial problems caused by health costs, the Danish system of health insurance covers the entire population. Old persons receiving only their pension, do not themselves pay premiums to health insurance. Hospital care, medical care, dental care and medicine is free of payment. Home help and home nursing is free of payment for aged receiving only their pension. Pensioners staying in old age or nursing homes do not get their pension, instead they get board and lodging free plus a small monthly amount for their personal needs.

Funeral expenses are paid up to a certain amount.

And now to the last point on the agenda. I started saying that all political parties in Denmark today are very sensitive to claims from the aged.

In our country persons aged 65 and over constitute about 17 percent of all voters. If we also include persons nearing pensionable age, for example persons 55 years and over they constitute 34 percent of all voters.

As we have in Denmark a very narrow margin in seats in Parliament between Government and opposition no major political party will act contrary to the wishes of such a large group of voters.

Furthermore, there exists in Denmark a strong association of old age and disability pensioners. This association is very competently led and it has created its own secretariat which puts forth proposals for improvement of conditions of the aged, and furnishes the press and members of parliament with propaganda material, for example, excellent statistical material, biased of course, but only slightly biased. The association has in a natural way grown up from smaller member societies, societies of the blind, tuberculosis patients, the crippled and different societies of old age pensioners. These societies are united in the association of old age and disability pensioners.

Now, sir, my last point, I think it necessary in the near future in a country such as ours to try to determine how high a fair old age pension should be.

To do that one must evaluate the needs in old age compared to needs in earlier periods of life considering different expenditures for children, for consumer durables, and differing health costs and differences in attitudes toward newer commodities.

It would also be necessary to compare level of living of old age pensioners and other needy groups as for instance widows or family of an unskilled worker.

The CHAIRMAN. Thank you very much.

Mr. DOTAN.

STATEMENT OF URI DOTAN, NATIONAL INSTITUTE,

JERUSALEM, ISRAEL

Mr. DOTAN. Mr. Chairman, thank you for inviting a representative of a small country to appear as a witness before your distinguished

committee.

As an old nation, in a young state based on immigration, Israel had the advantage to start with a comparatively low percentage of residents aged 65 and over.

This percentage was less than 4 percent in 1948 (the year our State was established) is approaching at present to 7 percent and will reach 8 percent in another 10 years.

In absolute figures we will then have about 300,000 old people. I understand that this very number represents the net increase in your country now in a single year.

This small aged population consisted mainly of newcomers to our country and was steadily increased by additional immigration. Financial reserves, such as savings or nongovernmental group pensions were almost nonexistent.

Therefore for the purpose of income maintenance it became essential for the government to provide basic means of subsistence to the overwhelming majority of the old.

So in establishing a pension system the policy was to give pensions to as many people as feasible and as quickly as possible.

During the transitory period people as old as 67 were included in the insured population and the qualifying period was as low as 3 years.

During the 12 years which have passed since the first payment of old age pensions, efforts have been made to achieve the universality of

coverage.

The scope of insurability has been extended, most of restrictions. for eligibility have been abolished and recently special pensions have been added.

These special pensions, equal in amount to ordinary pensions are paid by the National Insurance Institute to non-insurable residents, but not out of insurance funds.

At present they form about 18 percent of the total old-age pensions. It seems that during the next 2 years we should be able to reach the ultimate goal, which is to provide the entire old age population with pensions. At the start of the scheme coverage was only 42 percent.

Regardless of the fact that contributions are fixed as a percentage of wages or taxable income, the pensions are on a flat rate basis, varying in accordance with the number of dependents. The ratio between minimum and maximum contributions is 1.23 and so the system achieves a high degree of redistribution.

LINKED TO COST OF LIVING

Pensions are automatically linked to a cost of living index but may also be specially raised by governmental decision. During the last 12 years there were 11 automatic increases (some as small as 0.7 percent) and 3 special increases of pensions. But in no way did those increases reflect the rising standard of living. At the time of planning the value of a flat rate pension for a single person was 22 percent of the average wage in Israel.

This percentage has declined to 10.8 percent in 1965 and has only recently gone up again to 13 percent.

32-346 70 pt. 73

The absolute purchasing power of our pensions is so low that a supplementary flat rate pension had to be added in 1965. This supplement, raising the pension's value by about a third, is granted only to persons who have passed a rather liberal means test.

It is paid to 40 percent of the ordinary pensioners and to 82 percent of those in receipt of special pensions. Expenditure on basic insurance pensions is 0.7 percent of the gross national product and 1 percent-if special pensions and supplements are included.

Another goal of our Government was to provide work for those elderly who were not yet or who were not at all eligible for pensions. For this purpose a special Government sponsored and subsidized agency was established, which provides employment for those who cannot be placed in the open market.

The uniform monthly wages for a single man are 150 percent of the average supplementary pension and approximately 3 percent of the elderly are employed by this special agency.

Old age benefits had to be built up from scratch, but there was no urgent need for the establishment of special governmental health services for the elderly. There exists in my country a comprehensive voluntary health insurance system covering about 85 percent of the population.

ONLY 55 PERCENT INSURED

However, only about 55 percent of the population of the elderly are fully voluntarily insured. Those who are not and who are entitled to supplementary pensions as needy persons, become partly insured as soon as they start to draw their pensions. Partial insurance entitles one to physician's and other professional services and free supply of drugs but does not include hospital care.

The insured contribute toward health insurance about 3.7 percent of their pensions somewhat less for couples-which represents one third of the total insurance payment and the balance is covered by Government treasury and municipalities.

About 25 percent of the pensioners are getting medical aid through this insurance.

Public assistance covers hospitalization costs, as well as dental and other special health services for the needy. It also supplies home-help services, meal on wheels, subsidizes home repairs and participates in the upkeep of day-care centers for the elderly.

Although we have succeeded in building a framework in which something is being given to all the elderly and may be even in guarding the stability of benefits in terms of purchasing power, we have failed in granting them their proper share in the rising standard of living in our community.

When we introduced the national insurance pensions for the aged, no other comprehensive scheme existed. Now however, about two thirds of the working population can look forward to graduated retirement benefits under Trade Union Pension Schemes.

These benefits are on a much higher level and make our small State pensions look inadequate and unappropriate. An ad hoc committee had been appointed recently to work out proposals for graduated pensions based on income before retirement.

It is my personal hope that a two-story system will best serve this aim. The basement of it will consist of our fixed uniform pension ensuring a minimum subsistence whatever that may mean.

On top of it will be built a wage related supplement and all pensions will be sealed by a maximum percentage of wages decided upon. As the wage related pension will approach this maximum the uniform pension will decrease. By this method we shall be able to retain the redistributive element which characterizes our present system.

Thank you.

The CHAIRMAN. Mrs. Bixby?

STATEMENT OF MRS. LENORE E. BIXBY, DIRECTOR, DIVISION OF RETIREMENT AND SURVIVOR STUDIES, SOCIAL SECURITY ADMINISTRATION, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

Mrs. BIXBY. Mr. Chairman, I appreciate very much this opportunity to participate in a hearing giving an international perspective on the economics of aging. It is a privilege, indeed. Your letter suggested that I comment on the policies of the U.S. Government in this field.

I am sure you know that my own responsibilities are in the research area. I think that I can perhaps be most useful by pointing out the implications of some recent research findings, but let me first try to respond, very briefly, to the questions in your letter because of their relationship to the comments of our distinguished visitors from abroad.

We have an Older Americans Act, very familiar to this committee, which expresses grave concern about the well-being of the elderly. The Federal program of Old Age Survivors and Disability Insurance attempts to express this concern in more concrete form by providing an economic underpinning for the aged population.

More than nine out of 10 workers in the United States are now covered under this system. There is a supplementary public assistance system which may provide support for persons whose income does not meet their needs.

At the present time, about 17 million out of 20 million persons 65 and over in the United States do receive a social security benefit and approximately 1.4 million others could receive a benefit if they retired or, in the case of women who do not themselves work, if the husband retires.

Together this makes more than nine out of 10 of the aged population. However, in testimony presented to this committee, the Commissioner of Social Security made it very clear that many older persons do not have the income necessary to support an acceptable standard of living.

He emphasized also that in spite of the provisions we now have for health insurance for older people, rising prices and medical care costs bear particularly hard on persons no longer able to earn.

As Mr. Östergard of Denmark pointed out, there are older people under age 65 who, I am sure, are also of concern to your committee.

At the present time about 2.2 million people age 62 to 64 draw benefits either as retired workers, disabled workers, or dependents.

I think we should recognize that young dependents of retired workers also have entitlement to benefits in many cases, and that this too is important for older people, even though their benefits may not be large enough.

A recent study completed by the Survey Research Center at the University of Michigan, focused on the reasons for retirement, found that most persons choose to retire early only if they anticipate a retirement income of at least $4,000. This sum far exceeds the income of most older people now retired and probably what most persons to retire in the near future can expect.

The problem is what do we do about it? That $4,000 figure is very close to the estimate of the need for a moderate budget for an elderly couple. Apparently the statistics that are compiled by the Bureau of Labor Statistics to measure need are close to the amount that people look forward to for themselves.

The second important factor in considering retirement income is the replacement of earnings, the relationship of income after retirement to income before retirement. And that, too, is too low by most measures for most retirees.

EFFECTS OF EARLY RETIREMENT

When analyzing recently the preretirement earnings of a group that came on our benefit rolls in 1966, I found that more than a third of the people who took benefits at age 62, which means that they had to accept a reduction of 20 percent, had very poor employment records. They worked sporadically and they had low earnings most of their working life.

They were in sharp contrast to the group who waited until age 65 to claim a cash benefit and in even sharper contrast to those who came within our ken where they enrolled for Medicare, even though they did not wish cash benefits immediately.

On the other hand, I want to make one last point, and that is that many persons who took early benefits did have a relatively good work history. This group, presumably because they had earnings at the taxable maximum and in most cases were working until the year before entitlement, were likely to have a private pension. They could look forward to leisure in reasonable comfort. We have to make a decision as to how we allocate resources between those who can work and those who are unable to work either because of ill health or because of obsolescence of skill or other economic problems.

I don't have ready answers, but it seems to me we have much data to support the comments that have been made by people from abroad this morning. We need to consider seriously what they have told us. You asked our visitors to comment on the proportion of the gross national product going for the aged. I have some figures for 19671968, which is the last year for which we estimated total social welfare expenditures under public programs in this country.

At that time, out of a gross national product of $822 billion, $112 billion went for programs of income maintenance, health, education. veterans, social services, and a bit for public housing. Out of the $112