UNCOMMON SENSE 28 © October 2014
By Helen Ginsburg, Professor of Economics (Emerita), Brooklyn College of the City of New York and Executive Committee, National Jobs for All Coalition
The program popularly known as Social Security is really Old Age, Survivors, Disability, and Health Insurance (OASDHI). Social Security is the largest social program in the United States. In 2013, over $800 billion dollars in benefits were paid to 58 million people.
In 1935, during the Great Depression, Congress passed the Social Security Act which initiated not only Old Age Insurance but Unemployment Insurance and several public assistance programs as well. When he signed the bill for which he and other New Dealers had campaigned vigorously, President Franklin Roosevelt declared that had no other bill been passed by Congress, “this session would be regarded as historic for all time.” Before Social Security, much of the population had neither savings, private insurance nor public provision for old age, unemployment, disability, or the loss of a family breadwinner.
From the beginning Old Age Insurance has been financed by a payroll tax or a percentage of workers’ wages that is shared equally by employers and employees. (The self-employed pay the combined tax.) Financing the program with the contributions of workers and their employers has meant that the beneficiaries of Social Security feel that they or their breadwinners have contributed to their benefits rather than that they are getting charity or welfare. However, because the tax is levied on a portion of workers’ wages, individuals with employment income over the maximum ($117,000 in 2014) pay smaller portions of their earnings than those below the maximum. Whereas the Social Security tax is regressive, the benefit is progressive; that is, the benefits of lower-wage workers, though smaller than higher earners, are a larger proportion of their former earnings. Social Security is a federal program that is uniform throughout the 50 states.
Social Security began modestly with a retirement benefit for workers in some industries. Initially, it excluded such occupations as agriculture and domestic service in which large proportions of African Americans and women were employed. Largely owing to what was essentially a pension movement that kept up its advocacyfor a more extensive program, Social Security began to expand and to cover more of the population within a few years of its passage in 1935.
In 1939, survivors of deceased workers—spouses and orphans—were included, and in the 80 years of its existence Social Security has grown to include disability and health insurance (Medicare) and to provide for additional dependents such as disabled children and divorced spouses. Whereas many workers and their dependents were excluded from the limited, initial benefits, nearly all workers and their dependents are now covered.