will not be able to hold jobs in peacetime would get insurance benefits, which would help them get along without other financial aid. Unemployment compensation, even without change, will provide. substantial income for millions of unemployed workers for longer or shorter periods. But to get such benefits a man must be able to work. If in any week he is unable to work, he can draw no benefits. On any day in the year there are 700,000 or 800,000 persons who would otherwise be in the labor force who have not worked for a year or more because they can't work. A social-insurance system should provide income for those who can't work, as well as for those who can't find work.

In its eighth annual report to the Congress, the Board has summarized its recommendations with respect to changes in both the social insurance and the public assistance provisions of the Social Security Act which the Board thinks are necessary to enable the program to make its full contribution in the period of readjustment after the war. I am submitting for the information of the committee a summary of the Board's recommendations taken from the eighth annual report.

(The summary referred to follows:)

[Recommendations from Eighth Annual Report, 1943, of the Social Security Board, Federal Security Agency pp. 31-45]

A BASIC MINIMUM PROGRAM OF SOCIAL SECURITY

The purpose of a comprehensive program of social security is simple. Basically, it is to enable the working population to maintain economic independence throughout the cycle of family life by distributing the return from labor over the periods in which breadwinners can earn and those in which they cannot; at any one time, contributions made by the many who are subject to the risk are available to compensate the relatively few who at that time are suffering its impact. In addition, there must be systematic measures to assure the subsistence of persons who have not been able to share in social security provisions based on work or who have met with extraordinary individual catastrophes.

It is not the aim of social security to provide a lifetime bonus. Social insurance represents, rather, a safeguard against economic hazards besetting the long road of self-support and family support, which is arduous and risky for most in any working generation. Among workers, as among a party of mountain climbers, some at any moment will have a secure foothold, while others, except for the safety rope, would slip to disaster. Some persons in each generation are not able to share in gainful work while some others at any given time will not have acquired an insurance stake commensurate with their individual needs. For these, public assistance, representing the effort of the entire population, provides a secondary safeguard to the maintenance of personal and social integrity. The major functions of a program of social security are therefore to cope with wage losses arising from the interruption or cessation of earnings and to remedy deficiencies in the personal resources of individuals who lack the means of subsistence. Rights to insurance stem from the individual's previous participation in work; rights to assistance, from his current need. Since capacity and opportunity to work are the foundation of both individual and national security, public measures to prevent and care for sickness and to assure access to jobs are essential to organized programs of social security.

The existence of opportunities for work is governed, of course, by basic economic factors beyond the scope and control of the social security system. Insurance and assistance payments facilitate the smooth and orderly operation of economic forces by augmenting purchasing power when and where it is most needed, A comprehensive and flexible system of social security thus enables individuals, and aids communities and the Nation as a whole, to adjust to the changes and dislocations which are inherent even in progress. When disaster threatens, the system is all the more necessary.

Progress under the Social Security Act has been more substantial than its proponents would have dared to predict 8 years ago. The provisions of law and the process of administration have been tested through an arc of widely differing economic conditions in years of depression, recovery, and war. The objectives of the program have been found in accord with the traditions and desires of the American people. Nearly all the principles incorporated in the original law and the 1939 amendments have proved sound and workable. On the other hand, certain minor provisions have been found cumbersome or defective, and experience has demonstrated one major fault in the design of the program. Certain gaps in its provisions, recognized and postponed for later action by those who were responsible for the formulation of the program, have become increasingly evident as it has developed.

No one can doubt that victory will bring sharp and sudden changes in all the factors in American life with which the social security program is concerned. Whether that time comes sooner or later, it is now none too soon to design and implement the social security provisions which will be needed during the demobilization of war industry and the armed forces, later readjustments to peacetime conditions, and the more remote future. If the program is to fulfill the anticipations and expressed desires of those who look to it-on battle fronts abroad and in homes and factories within our own borders-such consideration is needed now. The following pages outline in brief and general terms the areas in which, in the opinion of the Board, the program must be extended, changed, or implemented if it is to play its part now and in the years just ahead.

SOCIAL INSURANCE

A comprehensive system of social insurance would include provisions to compensate part of the involuntary loss of earnings experienced by the working population for any common reason beyond the control of individual workers. Such reasons may be grouped into those which cause prolonged or permanent loss of earnings-old age, death, and permanent disability of the wage earner, and those which cause more or less temporary interruption of earnings-unemployment and sickness. An approach to both types of risks is made under the Social Security Act through the provisions for old-age and survivors insurance and for unemployment compensation. In the opinion of the Board, the existing measures need revision and extension. The act contains no provision for offsetting wage losses due to sickness and disability except those incurred in old age.

Old-age and survivors insurance. -The fundamental limitation of this Federal insurance program is its restriction of coverage, the extent and character of which have been outlined in earlier pages. The Board believes that the wartime situation gives particular urgency to its recommendation that coverage be extended to agricultural workers, domestic workers in private homes, employees of nonprofit organizations, and self-employed persons. The high levels of current employment and earnings now would make it possible for many workers to pay contributions and thus gain insurance rights which they may not be able to acquire in future years, in particular the older workers who may be in need of retirement provision when the war ends and younger men return to civilian life. Extension of coverage would not entail serious administrative difficulties. For appropriate groups, it might be effective to use a stamp system, under which employers purchase stamps at post offices or from rural mail carriers to place in a book which evidences the contributions made by workers and employers. Extension of the basic protection of old-age and survivors insurance to public employees-Federal, State, and local-would also be feasible and would round out insurance protection of survivors, now lacking to nearly all these employees, and provisions for old-age retirement, now unavailable to many, and would assure continuity of rights. Extension should be made in such a way as not to endanger any rights of these workers under existing special systems and to increase, not lessen, the total insurance protection available to them.

An immediate problem related to coverage arises from the situation of the millions of persons now in the armed forces. Because of the eligibility provisions and the method of computing benefits under the program, the insurance protection which service men and women may have acquired before their induction will be partly or wholly used up, and the amount of potential benefits payable to them or to their survivors will diminish. Service men and women have protection against death while in service, or after service from service-connected causes, in the form of benefits provided under veterans' legislation; in some cases, survivors of veterans who die while in service will be eligible for both veterans'

benefits and old-age and survivors insurance benefits. After discharge from service, however, many veterans will be without any survivorship protection in the event of death from non-service-connected causes. The problem with respect to veterans who live to retirement age is less acute, since very few who leave military service after the war will be ineligible for old-age and survivors insurance benefits because of their military service, and, though benefit amounts will be somewhat reduced in all cases, the amount of the reduction will be small. Moreover, the great majority of the present members of the armed forces will not reach retirement age for many years. As a solution to the problems with respect to the armed forces, the Board recommends the adoption of provisions which will equitably protect potential insurance rights developed before entrance into the armed forces and which will give equitable wage credits based on periods of national service in lieu of private employment. Such provisions should be accompanied by appropriate arrangements to reimburse the insurance system out of general funds of the Treasury.

The Board is also prepared to offer recommendations with respect to changes in the present program which would strengthen its protection and remove certain anomalies, inequities, and administrative complexities. Among changes to improve adequacy are those which relate to the age at which benefits become payable to women, the amount and conditions for payment of parent's benefits, the conditions for payment of lump-sum death benefits, the maximum amount of all benefits payable with respect to the wages of an insured worker, and the recomputation of benefit amounts after an application for primary benefits has been filed. Since wives are ordinarily younger than their husbands, the qualifying age of 65 for receipt of a wife's benefit often works hardship on aged couples when the husband must or wishes to give up work on reaching retirement age, while the benefit for his wife is not payable until several years later. There is little doubt that the proportion of women who are unable to engage in regular employment at age 60 is larger than the proportion of men at age 65. A minimum qualifying age

of 60 years, rather than the present 65, would therefore be desirable for wives of primary beneficiaries, for women workers who claim benefits in their own right, and for widows of insured workers.

At present, benefits to children aged 16 and 17 must be suspended if the child fails to attend school regularly and attendance is feasible. Since ordinarily it is found that school attendance is not feasible for the older children who are not in school, the Board recommends deletion of this requirement, which results in a large number of fruitless investigations.

Unemployment insurance. The course of events since Pearl Harbor has emphasized what had become increasingly evident in prior years that employment and unemployment are no respecters of State lines. When the social security program first came under discussion, it was argued that establishment of State systems for unemployment compensation would afford an opportunity for experimenting in different types of unemployment insurance and for adapting State systems to the widely varying economic conditions of the different States. It was also pointed out that the Federal-State system itself should be regarded as an experiment. Both the present world situation and the results of 4 years' full operation of all State programs now make it urgent to evaluate experience.

Serious administrative complexities are inherent in the present basis of operation because of the duplication of effort on the part of various Federal and State agencies concerned with the collection of contributions and maintenance of wage records for social insurance purposes. The multiple system of tax collection is unduly costly in terms of public expenditures and expenses of employers for tax compliance. Nearly all establishments are subject to Federal contribution for old-age and survivors insurance, the Federal unemployment tax, and contributions under one or more State unemployment compensation laws. On the other hand, some small employers are not subject to the Federal unemployment tax, though liable for Federal old-age and survivors insurance contributions and unemployment contributions under State law. A few are subject only to the last and not to any Federal tax. When an employer is taxable by both Federal and State Governments, the respective coverage does not necessarily relate to the same employees or the same amounts of wages. An interstate employer may be required to make reports to several different States on different forms, under different instructions, and at different rates. He may not be sure in which State a worker is covered. Triplicate tax collections must be made by the Federai Government for the two Federal insurance taxes and by the State unemployment compensation agencies. Duplicating wage records are necessarily maintained by the Federal Government for purposes of old-age and survivors insurance and by the State unemployment compensation agencies.

Difficulties and conflicts in administration also result from the present division of responsibilities for unemployment insurance between the Federal Government and the States. Federal grants to States under the Social Security Act supply the total costs of "proper and efficient administration" of State laws. The State agency is responsible for administering the State law; it spends Federal money without responsibility for providing the funds. The Social Security Board must ascertain that the funds have been used in accordance with the terms of the Federal law, yet it lacks authority to prescribe methods which have proved economical and efficient without infringing on the responsibility of the State. Appropriate discharge of the responsibility of one agency almost inevitably conflicts with the responsibility possessed by the other.

Of greater importance is the increasing evidence that the Federal-State system results in great diversity in the protection afforded against the risk of unemployment. Development of unemployment insurance under the 51 separate laws of the States and Territories has resulted in serious discrepancies in the adequacy of the provisions for unemployed workers in various parts of the country. It has also resulted in a segregation of insurance reserves under which there is a possibility that some States may become insolvent while other States have unnecessarily large reserves. The variations in contribution rates now permissible under the Social Security Act through State provisions for experience rating place disproportionate burdens on employers in interstate competition and set a penalty on the efforts of any particular State to improve its benefit standards and a premium on measures to restrict payments to workers.

In the opinion of the Social Security Board, these and other discrepancies, complexities, and lacks in the existing Federal-State program all lead to a single conclusion that the origin and character of mass unemployment and of measures to combat it are such that reponsibility for unemployment insurance cannot safely be divided among 51 separate systems. Evidence accumulates daily on the extent to which the tides of employment and unemployment are governed by Nation-wide or world-wide conditions. The conditions of employment within the United States are and will be governed largely by circumstances which only the Federal Government can influence-for example, policies concerning the cancelation of war contracts and demobilization of the armed forces. Because of the differences in size and economic structure, the States are not equally sound financial units for unemployment insurance purposes. To ensure payments of benefits to qualified unemployed workers in any part of the country, reserves segregated in 51 funds must be far larger, in the aggregate, than would be necessary if the total were available to pay benefits wherever the claims originated.

The early discussion of adapting unemployment insurance to the particular conditions of a State overlooked the fact that variations in wage scales, types of industry, risks of unemployment, and other important factors are at least as great within States as among the 51 jurisdictions participating in the present program. A national system under which benefits are a proportion of wages, as is the case under the Federal old-age and survivors insurance system, effects an automatic adjustment of benefit payments to differences in pay scales in different areas. Present differences among the States in coverage, benefit provisions, and assets available for benefits bear little consistent relation to underlying economic differences.

The Board therefore is of the opinion that administration of unemployment insurance should be made a Federal responsibility in order to gear unemployment compensation effectively into a comprehensive national system of social security. Only Nationwide measures to counter unemployment can be effective when the need arises for swift and concerted action to harmonize insurance activities with national policy during the change-over of our economic system to peace. At that time, any need for quick and unforeseen changes obviously can be met far more effectively by Nationwide policy and by a single act of Congress than through the action of 51 administrative agencies and the necessarily cumbersome process of amending as many separate laws.

Even if the special stresses of post-war years were not impending, the FederalState basis of the unemployment compensation program would have merited reconsideration and revision at this time. The actual course of its operation during a relatively favorable period of years has given no indication, in the opinion of the Board, that it possesses the advantages which it was hoped thus to achieve; on the contrary, experience has marshaled impressive evidence of its flaws and shortcomings. Incorporation of unemployment insurance in a unified national system of social insurance would result, the Board believes, in a program far safer, stronger, and more nearly adequate from the standpoint of unemployed workers 91183-44-pt. 3- 9

and the Nation, and would permit more economical and effective methods of administration.

Losses and costs of disability.-Loss of earnings from permanent and total disability has been widely accepted in other countries, and under retirement plans in this country, as a risk paralleling loss of earnings in old age. The worker who is permanently disabled in youth or middle age is in very much the same situation as the worker incapacitated by age, except that his need for insurance may be even greater because he has had less time to accumulate savings while his responsibilities for family support are likely to be greater. The Board recommends that insurance against permanent total disability be incorporated in the Federal system of old-age and survivors insurance and extended to all covered by that system under provisions, including benefits to dependents, which would follow the general pattern of this Federal program.

Cash benefits for temporary sickness and the early period of disabilities which may later prove permanent would strike at another serious cause of poverty and dependency. The Board believes that such provision is a feasible and needed adjunct to the social security program. Compensation of disability would be most effective and also most readily administered if provisions for both types of benefits were coordinated, so that the worker who had received the maximum number of weeks of benefits for temporary disability and was still incapacitated could continue to receive compensation, with appropriate adjustment of levels of benefits to the duration of disability. A unified system of disability compensation merits careful consideration.

Costs of medical care, as has been pointed out, are a peculiarly appropriate field for insurance provisions, since the problem does not lie in the average annual cost but in the uneven and unpredictable incidence of a risk to which nearly all the population is subject. These costs, as well as losses of earnings, constitute an important direct factor in causing dependency. Moreover, there is impressive evidence that the barrier of currently meeting costs of medical care keeps many individuals from receiving services which might prevent or cure sickness and disability and postpone death. From the standpoint of the general welfare and of safeguarding public funds for insurance, assistance, and public services provided in dependency, the Board believes that comprehensive measures can and should be undertaken to distribute medical costs and assure access to services of hospitals, physicians, laboratories, and the like to all who have need of them. For all groups ordinarily self-supporting, such a step would mean primarily a redistribution of existing costs through insurance devices. It should be effected in such a way as to preserve free choice of doctor or hospital and personal relationships between physicians and their patients, to maintain professional leadership, to ensure adequate remuneration-very probably, more nearly adequate than that in customary circumstances to all practitioners and institutions furnishing medical and health services, and to guarantee the continued independence of nongovernmental hospitals.

A comprehensive unified system of social insurance. The present recommendations of the Board would result in the establishment of a single comprehensive system of social insurance with provisions for compensating a reasonable portion of wage losses due to unemployment, sickness and disability, old age, and death, and a considerable part of the expense of hospital and medical services. It is believed that all these types of insurance should include specific provisions not only for the insured worker himself but also, as is now the case in old-age and survivors' insurance, for his wife or widow and his dependent children. The system should cover all persons who work for others, including the large groups of agricultural and domestic workers now almost wholly without social insurance protection and, except probably for unemployment compensation and temporary disability insurance, farmers and other self-employed persons. It is difficult to extend insurance against unemployment or temporary disability to self-employed persons, because of the problem of determining whether interruption of work has resulted in loss of income.

A unified system which is comprehensive with respect to both the risks and the population included would close the gaps and obviate the overlaps that result from variations and restrictions in the multiplicity of existing Federal, State, and local provisions for social insurance purposes. This result would be of special importance not only in ensuring protection for workers who now lack any insurance coverage, but also for improving the levels of benefits for those whose employment has been partly outside the coverage of a given system and those whose covered employment has been interrupted by periods of unemployment or disability. It would be feasible to remedy the disparities and inequities in benefits of different