parity leverage is limited by the maximum taxable and creditable earnings limit which is 711⁄2 times the base amount. It ceases to operate altogether from the award of benefits, after which time adjustments in benefit amount are made only with reference to changes in the cost of living rather than earnings levels.5 Methods very similar to the Swedish one are used in the West German general pension scheme and, within certain financial and other constraints, in some of France's special (supplementary) pension programs for persons in public and private employment." B. SOCIAL ASSISTANCE A RIGHT TO BENEFIT, BUT CONDITIONAL ON PROOF OF NEED In countries where social assistance constitutes the first line of defense against the common contingencies, its aim is to provide benefits broadly comparable to those furnished under first-line programs of social insurance to any and all residents for whom the contingency in question (old-age retirement, invalidity, and so forth) has materialized and whose incomes or means fall below certain stated amounts. 1. PROGRAM CHARACTERISTICS AND APPLICATIONS Like social insurance, social assistance programs are so conceived as to give rise to a legal entitlement. In contrast to social insurance, however, this right is in no way related to specific contributions or taxes paid by, or on behalf of, the claimant in past periods. As in older forms of public assistance, a proof of need is stipulated in each case. Unlike these older versions of "public aid", "relief" or "assistance", however, the social assistance method reduces to a minimum the extent of administrative discretion by local (or national) officials and, by also making it independent of the fortuities of local financial conditions, seeks to free the entitlement to benefit from the uncertainties commonly associated with other public assistance programs. Social assistance benefits are intended to be devoid of any taint of charity. Consequently, the test of means or need conforms, as much as possible, to objective and uniform criteria pertaining to the applicant's situation, without regard to that of other family members except the spouse. Even though eligibility depends on individual need, shortcuts are used by resorting to standard measures where this can be done with impunity. One national program of old-age security that rests squarely on social-assistance principles is that of Australia. There, all men 65 or over, and women age 60 and up, of limited incomes and means who have resided in the country continuously 10 years or longer are eligible for a flat-rate pension (or for a reduced pension if either their income or property exceeds certain limits). The effect is to guarantee them a minimum income either from the pension alone or from other sources combined with a pension. 5 For more details see op. cit., National Reports: Sweden (4). For more detail see op. cit., ibid. France (III) and vol. I, pp. 57-58, and Paul Fisher, "Old-Age and Sickness Insurance in West Germany in 1965." U.S. Government Printing Office, Washington, D.C., 1966, pp. 6-9 and 13-21. The West German system of benefit adjustment after retirement is geared to wage levels. However, index-linked adjustment is not automatic but depends on legislative approval and is subject to modification in each instance. A similar system is in effect in New Zealand for aged persons 60 or over (age 55 for unmarried women unable to work) and resident for the 10 years preceding. In New Zealand, however, this program is overlaid by a universal old-age pension program (see below), whereby attainment of age 65 and fulfillment of the same residence requirement gives rise to an unconditional right to a flat pension equivalent to the maximum amount payable under the social assistance (pension) program. 2. CONDITIONING FACTORS In attempting to assess the potential role of the social assistance method as an income guaranty for old-age security, one must have regard not only to the program design but also to the setting in which it operates. Thus it would appear that in Australia, where this approach has a long history as the sole means of providing old-age security (as well as financial protection in the event of invalidity, survivorship and unemployment) the means-test approach is widely accepted." In Britain, by contrast, where National Assistance (a program of social assistance) was widely used after the war to supplement social insurance benefits, the memory of antecedent programs descended from the "Poor Law" and of the "less-eligibility" that stigmatized their beneficiaries appears never to have vanished completely. Thus, social assistance has not everywhere gained acceptance on a par with that accorded to social insurance. There is, no doubt, a common aversion on the part of any group of people-but perhaps especially the aged-to see themselves singled out as "in need" of benefits, especially when comparable benefits are available unconditionally to others. Nevertheless, a comprehensive social assistance scheme does afford the certainty of benefit once need is shown and can thus play an immensely valuable role as a "last line of defense" in assuring a modicum of security to those aged (and all others) who for one reason or another fall through the mesh of social insurance or those-hopefully exceptional cases-who require supplementation of their social insurance benefits. C. UNIVERSAL PENSIONS-AN UNCONDITIONAL MINIMUM INCOME GUARANTEE UPON ATTAINMENT OF AGE The universal old-age pensions approach seeks to free the right to benefit from any and all qualifying conditions other than proof of age and verification that the claimant has been a longtime resident. (In some countries where the residence requirement is relatively short, he must be a citizen; for example, in Denmark, Iceland.) Where social assistance confines eligibility for benefits to those who prove actual need, and social insurance usually ties payment of benefits to presumptive need (as in the case where an aged person is substantially retired from work), the universal pension approach simply extends the presumption of need to all those who have attained the age of eligibility. (Several social insurance programs do the same when the 7 Not only is there no hesitancy to resort to the program, there is pressure from the taxpayers to liberalize the means test so as to allow larger numbers of them to take advantage of it. See T. H. Kewley, "Social Security in Australia: The Development of Social Security and Health Benefits from 1900 to the Present." Sydney, Sydney University Press, 1965, pp. 293-301. See above, Sec. A, c. pensioner reaches some higher age.) Thus, eligibility for a universal pension benefit presupposes neither the cessation of gainful employment nor proof of insufficient income. 1. PROGRAM CHARACTERISTICS AND APPLICATIONS The universal old-age pension is one of several types of "demogrant", that is, an across-the-board categorical subsidy. (Children's or family allowances and general maternity grants are other examples.) These programs constitute a counterpart, in the area of cash benefits, to the general public service schemes (that is, the British National Health Service, referred to above) in the area of service benefits. In some countries universal pension programs have evolved from or have succeeded to social assistance schemes (that is, in Norway and, most recently, Canada.) Universal pension benefits normally constitute flat amounts per aged person (Canada) or couple (New Zealand), or a flat amount with supplement for the wife (Norway) or for the wife and child (Sweden). The age of eligibility is frequently higher than under most social insurance and social assistance schemes, for example, age 70 in Norway, age 67 in Denmark (but 62 for women), Iceland and Sweden. Canada used to start payment of universal old-age pensions at age 70 but would, on proof of need, pay social assistance benefits from age 65. With the adoption of an earnings-related old-age insurance pension in 1965, and the phasing out of the social assistance program, the eligibility age for the universal pension has been lowered annually so as to attain age 65 in 1970. Several universal pension schemes are linked to a cost-of-living (or similar) index whereby benefits are adjusted, usually automatically, to price changes (for example, in Canada, Denmark, Finland, Iceland, Sweden). Thus an effort is made to keep the guaranteed income adequate for minimum needs. (In Canada a transitional income-tested supplement is to achieve this goal until the new earnings-related pension can do it.) 2. UNIVERSAL PENSIONS WITHIN THE CONTEXT OF THE SOCIAL SECURITY FABRIC From the aged person's point of view, unconditional entitlement on attainment of age may well be the most desirable form of old-age security. In terms of the level and adequacy of this unconditional guarantee, however, overall financial considerations are likely to have a bearing. Clearly, total costs of such a program are bound to be higher than if those with substantial earnings were disqualified from benefits (as under most social insurances), and much higher than under an income-tested benefit scheme. Universal pension amounts may, and frequently do, compare favorably with minimum and, sometimes, average social insurance benefits; also with social assistance benefits. They are not likely to attain the upper ranges of the benefit scale which are provided for in incomerelated social insurance schemes. Moreover, some countries require that, where benefits from other noncontributory (that is, taxfinanced) programs are also available, the person entitled to both benefits be given a choice whereby he may pick the higher but must forgo the other benefit (New Zealand) or that the other benefit be reduced (Norway). Increasingly, however, countries with a flat benefit universal pension scheme have superimposed upon it a graduated, income-related contributory (social-insurance type) pension program (Canada, Norway, Sweden), with the explicit aim of providing better than minimum retirement standards by means of cumulating benefits from both programs. III. FURTHER ALTERNATIVES, WITH SPECIAL It would be neither justified nor realistic to gage by the familiar adage "the past is merely prologue" the considerable array of measures developed to date and applied in different countries to the end of assuring the essentials of life in the common contingencies, including (but not confined to) old age. On the other hand, the search for new and possibly better ways of achieving legitimate socioeconomic objectives must never cease. Among some of the many current proposals for new approaches, at least two would appear to have a special relevance for the older worker: one is the possible (indirect) subsidization of low-wage earners, the other the much debated all-inclusive minimum income guaranty. Generally speaking, older persons have already made most of their contributions to the common weal, and the moral or economic expectation that they engage in gainful employment applies much less to them than to any other group of working age, except the disabled. Any true choice between continued work and retirement can be said to present itself, however, only when both opportunities are in fact given the older worker to permit him the exercise of his or her choice free from one-sided constraints. Thus, while the older person approaching-though not having attained-retirement age (sometimes referred to as the "prematurely aged person") should not necessarily be expected to work, by the same token, society should not deny the opportunity for gainful employment to those among them who are able to work and who desire to do so. On either count, it would seem, a reasonable case can be made for the inclusion of such older workers, say those aged 55 and up, among the very first segments of society to whom minimum income guarantees and in respect of whom employment or wage subsidies are to be extended simultaneously; the latter because of the known difficulties many older workers experience in obtaining employment, the former because of the virtual absence of a "moral hazard" (since any possible work dis-incentive effect is not too relevant in their case). To allay possible fears of the effect of this on full employment or wage levels, the subsidy might be made subject to automatic suspension whenever unemployment rises and remains for a stated period above a stated percentage. At such times older workers might be pushed out of the labor market to the advantage of the younger members of the work force, but without serious hardship to themselves as they would be eligible for the GMI. If the interest of society requires both maximum participation in the labor force and economic security for those not working, this combination of work-incentive and economic-security measures could be applied to no other group with more social justice, or at a lesser economic risk. Appendix 2 Subsequent to the hearing, Senator Williams, in a letter to the Social Security Administration, requested additional information on social security programs throughout the world. The following reply was received: DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, SOCIAL SECURITY ADMINISTRATION, DEAR SENATOR WILLIAMS: I am glad to send the new material on certain social security programs in other countries which you requested for the proposed publication of the Senate Special Committee on Aging. I hope it meets your needs for the document, "International Perspectives on the Economics of Aging." Such updating of provisions in other nations' systems sometimes moves very slowly as you can imagine. Fortunately we have done the work for the 1969 revision of Social Security Programs Throughout the World, which is almost ready for publication. The revised material enclosed, covering the programs you identified in specified countries, is from an advance draft of the book. Lenore Bixby of our staff was happy to participate with the illustrious social security experts you assembled from other nations for the special public hearing August 25. Please let me know at any time if we can be of further assistance. Sincerely yours, IDA C. MERRIAM, Assistant Commissioner for Research and Statistics. [Enclosure] DENMARK DATES OF BASIO LAWS AND TYPES OF PROGRAMS OLD AGE, INVALIDITY, DEATH First law: 1891. Current laws: 1959 (widow's pensions), 1960 (national and invalidity pensions), and 1964 (supplementary pensions). Multiple assistance, universal, and social insurance systems: (1 crown equals 14.5 U.S. cents). Coverage Assistance and universal pensions: Resident citizens and aliens covered by reciprocity agreements. Supplementary pensions: Employees, except certain part-time employees and apprentices. Special system for public employees. Source of Funds Insured person: For national old-age and invalidity pensions, approximately 3.0% of income subject to income tax payable by all taxpayers except low-income persons. For supplementary pensions, 1.80 crowns a week. Employer: For invalidity pensions, 21.00 crowns per employee a year. For supplementary pensions, 3.60 crowns per employee a week. Government: About 5/6 of cost of assistance and universal pensions borne by national and local governments. No contribution for supplementary pensions. |