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The wage-earner's opinion of the Social Security Act and the relationship of the Act to his saving habits and investment policies

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THE WAGE-EARNER'S OPINION OP THE SOCIAL SECURITY ACT
AND THE RELATIONSHIP OP THE ACT TO HIS SAVING
HABITS AND INVESTMENT POLICIES
A Thesis
Presented to
The Faculty of the School of Commerce
The University of Southern California
In Partial Fulfillment
of the Requirements for the Degree
Master of Business Administration.
by
Dwight H. Dilley
July 1941
UMI Number: EP43160
All rights reserved
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Dissertation PtfblisMng
UMI EP43160
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O
T h i s thesis, w r i t t e n by
DWIGHT H. DILLEY
u n d e r the d i r e c t i o n o f h X § . F a c u l t y C o m m it te e ,
a n d a p p r o v e d by a l l its m e m b e r s , has been
presented to a n d accepted by the C o u n c i l on
G r a d u a t e S t u d y a n d Research in p a r t i a l f u l f i l l ­
m e n t o f the re q u ire m e n ts f o r the degree of
MASTER OF BUSINESS ADMINISTRATION.
Dean
.
D ate..
Secretary
A u g u s t *1941
F a c u lty Com m ittee
C hairm an
TABLE OF CONTENTS
CHAPTER
I*
PAGE
THE PROBLEM AND THE PROCEDURE . . . . . . . .
The problem . . ..........................
1
Statement of the problem
2
Importance of the problem . . . . . . . .
2
Limitations of the problem
5
. . . . . . .
Method of procedure ...........
Organization of report
II.
1
5
. . . . . . . . . .
6
THE INFLUENCE OF THE BUSINESS
CYCLE ON PUBLIC OPINION AND
FEDERAL LEGISLATION FOR THE AGED
. . * . .
7
Institutional care of the a g e d .........
7
Old-age assistance from the state . . . . .
8
Prosperity and legislation for the aged . .
9
Depression and need for old-age
assistance
12
Activity of State Legislatures,
1951-1933.
. . . . . .
i ..............
13
State assistance difficulties . . . . . . .
15
Committee on Economic Security
created ........
. . . . . . . . . . . .
16
Old-age assistance versus Old-age
insurance
.......... . <
National setup necessary
.........
17
. . . . . . . . .
20
iii
CHAPTER
PAGE
Social Security Act passed by Congress . . .
III.
21
OPINIONS ON VARIOUS PROVISIONS OF
THE SOCIAL SECURITY ACT
Forced saving
.
23
................24-*a
Adequacy of present benefits . . . . . .
IV.
i .
24-b'
Payroll taxes approved . . . . . . . . . . .
51
Should payroll taxes be increased? . . . . .
36
Retirement age
41
.......... .
THE SOCIAL SECURITY ACT AND SAVING
HABITS . . . . . . . . . . . . . . . . . . .
52
Social security benefits and
supplementary income
........ .
52
............
53
Methods of supplementing Social
Security income
Life insurance..........
..............
56
increases in amount of life
insurance carried
. . . . . .
i...
Trend toward retirement policies
.
. . . . .
57
66
New types of buyers in insurance
market
...................
69
Women buyers of life insurance . . * . . .
70
Former stock buyers now in
insurance market . . . . . .
i
Wealthy buyers of life insurance
.
.......
71
71
iv
CHAPTER
PASS
Group annuities........................
72
Government Bonds as source of
supplementary income
Income from property
. . . . . . . . .
76
* . * ........ . .
78
Income from stocks and bonds . .........
78
Other means of supplementing
Social Security income
. . . . . . . .
80
Social Security and immediate
r e s e r v e s ............ * . . * . . . .
Y.
FUTURE PROBLEMS OF SOCIAL SECURITY
80
. . . . .
85
Does Social Security promote thrift
and individual initiative?
87
Population problems and cost
difficulties
Loss of rights
.. .. .
..............
. . . . . . . . . . . . . .
.
89
92
Amount of monthly income
indeterminable
. . . . . . . . . . . . .
93
Millions not covered by the sot . . . . . .
94
Benefits inadequate for proper
FI.
subsistence . . . . . . . . . . . . . . .
96
CONCLUSIONS AND RECOMMENDATIONS . . . . . . .
100
Conclusions . . . . . . . . . . . . . . . .
100
Recommendations . . .
.........
Additional studies that mightbe made . .
’ 103
104
v
CHAPTER
PAGE
BIBLIGGRAPHY.........................
107
APPENDIX . . . . . . . . . . ......................
Ill
A: Copy of the Old-Age and Survivors*
Benefits Section of the Social
............
Security Act
Ill
R: An interpretation of the Federal
Old-Age and Survivors* Benefits
Section of the Amended Social
Security Act . . . . . . . . . . . .
* .
C: Questionnaire and Table X I I I ............
oOo
140
153
LIST OF TABLES
TABLE
PAG®
I. Answers (as of the year 1940) of Los Angeles
County Wage-earners According to Age to the
•Question: Are Present.Monthly Social
Security Benefits Adequate . . . . . . . . .
2?
II. Answers (as of the year 1940) of Los Angeles
County Wage-earners According to Salary to
the Question: Are Present Monthly Social
Security Benefits Adequate? ..............
29
III. Answers (as of the year 1940) of Los Angeles
County Wage-earners According to Age to the
Question: Would you reject the Social
Security tax and therefore the benefits if
given the choice? . . . . . . . . . . . . .
53
IT. Answers (as of the year 1940} of Los Angeles
County Wage-earners According to Salary to
the Question: Would you reject the Social
Security tax and therefore the benefits if
given the choice? . . . . . . . . . . . . .
55
Y. Answers (as of the' year 1940} of Los Angeles
County Wage-earners According to Age to the
Question: Would you favor an increase in the
tax rate so as to increase benefits at 65? .
38
vii
TABLE
PAGE
¥1. Answers fas of the year 1940} of Los Angeles
County Wage-earners According to Salary to
the Question: Would you favor an. increase
in the tax rate so as to increase benefits
at 6 5 ? ..................... 45
711. Los Angeles County Wage-earners According to
Age who, as of 1940, would place Retirement
Age earlier than 6 5 ...........
. t » .
.
46
VIII. Los Angeles County Wage-earners1 Choices (Ac­
cording to Salary) of Income to Supplement
benefits from Social
Security, asof 1940
.
55
IX. Los Angeles County Wage-earners According to
Age who favor life insurance as a method of
saving
...................
. . .
59
X. Los Angeles County Wage-earners According to
Age who have increased, decreased, or made
no change in their amount of life insurance
between 1935 and 1940
63
XI. Los Angeles County Wage-earners According to
Salary who have increased, decreased, or
made no change in their amount of life
insurance between 1935 and 1940 .........
65
XII. Types of Insurance Policies owned and types
that would be purchased now (1940) by Los
Angeles County Wage-earners
67
viii
TABLE
XIII.
PAGE
Status, Age, and Salary of Los Angeles
County Wage-earners Interviewed, 1940 . . *
155
LIST OF CHARTS
CHARTS
PAGE
1. Answers (as of the year 1940) of Lbs Angeles
County Wage-earners According to Age to the
Question:
Are Present Monthly Social
Security Benefits Adequate? . . . . . . . .
26
2. Answers (as of the year 1940} of Los Angeles
County Wage-earners According to Salary to
the Question: Are Present Monthly Social
Security Benefits Adequate? . . . . . . . . .
28
3. Answers (as of the year 1940) of Los Angeles
County Wage-earners According to Age to the
Question: Would you reject the Social
Security tax and therefore the benefits If
given the choice?...............
52
4. Answers (as of the year 1940} of Los Angeles
County Wage-earners According to Salary to
the Question: Would you reject the Social
Security tax and therefore the benefits if
given the choice? . . . . . . . . . . . . .
34
5. Answers (as of the year 1940} of Los Angeles
County Wage-earners According to Age to the
Question: Would you favor an increase in the
tax rate so as to increase benefits at 65? .
37
X
CHARTS
PAGE
6. Answers (as of the year 1940) of Los Angeles
County Wage-earners According to Salary to
the Question: Would you favor an increase
in the tax rate so as to increase benefits
at 65? . .
...........................
.
42
?. Los Angeles County Wage-earners According to
Age who, as of 1940, would place Retirement
Age earlier than 65
. .. . ..............
45
8. Los Angeles County Wage-earners* choices (Ac­
cording to Salary} of Income to Supplement
benefits from Social Security,
as of 1940 *
54
9. Los Angeles County Wage-earners According to
Age who favor life insurance as a method
of saving
.............
58
10. Los Angeles County Wage-earners According to
Age who have increased, decreased, or made
no change in their amount of life insurance
between 1935 and 1940
^
.
62
11. Los Angeles County Wage-earners According to
Salary who have increased, decreased, of
made no change in their amount of life
insurance between 1935 and 194Q . . . . . .
64
12. Types of Insurance Policies owned and types
that would be purchased now (1940} by Los
Angeles County Wage-earners . . . . . . . .
66
CHAPTEK I
THE PROBLEM AHD THE PROCEDURE
The Social Security Act was passed by both Houses of
Congress and signed by the President in 1935.
Later, it was
amended by an Act cited as the "Social Security Act Amend­
ments of 1939 .**
The purpose of the Act was to provide for the general
welfare by establishing a system of Federal old-age benefits,
and by enabling the States to make more adequate provision for
the aged and the blind, dependent and crippled children,
maternal and child welfare, public health, and the adminis­
tration of their unemployment compensation laws; also, to
establish a Social Security Board; to raise revenue; and for
other necessary purposes.’*'
I.
THE PROBLEM
As a greater percentage of the people in this country
reach old age and the proportion of the aged to the total
population continues to increase as years go by, it is both
interesting and enlightening to note the legislative steps
■*• Roberts and Kamph, Social Security Accounting.
(Los Angeles: C. R. Hadley Company, 1938), p. 263.
2
that have been taken to aid them financially and to evaluate
the influence of this legislation on private thrift programs
that are being maintained by the young and old alike.
Statement of the problem.
The purpose of this inves­
tigation and study has been (1) to determine the opinion of
wage-earners concerning the effectiveness, the righteousness,
and the durability of the Social Security Act and to show the
influence of his opinions; (2} to show the relationship of
Social Security legislation to private individual thrift
programs and investment policies; and (3) to present some of
the problems still facing social legislation for the aged—
problems that may be solved through the influence of public
opinion.
Importance of the problem. At the zenith of the 1929
boom, wager-earners who had increased their borrowing power
because of a rise in earnings, were never before so heavily
in debt.
Little thought had been given to the future, es­
pecially during those prosperous times!
As a result, the
depression was severe upon this particular elass.
Social Security legislation forces the' wage-earner to
& nTomorrow,n an editorial in the Saturday Evening
Post by Wesley Winans ,Stout.
Vol. 213, ltd.' 36.' March1"8,
IMT.
save. However, it is the province of the wage-earner to
further eushion the shock proceeding from old-age dependency,
future depressions or from such other social and economic
difficulties as may occur in times of war and stress, by a
thrift program all his own*
What is the wage-earner*s opinion on Social Security
legislation and thrift in general?
His opinions are import­
ant and influential because the wage-earner is one of the
most numerous and important vertebrae in the backbone of
American society.
Furthermore, the Social Security Act af­
fects, with but few exceptions, every wage-earner in the
United States.
His opinions concerning the Act, and the re­
lation it bears to him, carry considerable weight in the
formulation of social programs for thrift.
Any survey or
report that emphasizes his opinions along this line may
influence future legislative action.
Thus, the importance of studies and investigations
that may serve as a basis for desired changes in social
legislation for the aged; that emphasize the importance of
thrift programs for the young— instigated and continued by
the individual himself; or help to promote a trend towards
safe and secure investments, is becoming of greater value
each passing day.
Part of this survey is based on wage-earners* opin­
ions obtained through a questiopnaire.
Various factors are
always present to influence an individual*s opinion on a
subject.
As a result, opinions expressed through the answers
to a questionnaire are not always the unbiased, true, and un­
influenced opinions of the individual.
The specific way in
which a question is worded, the time element involved in
answering a questionnaire, the physical and emotional con­
dition of the person at the time he receives the question­
naire, the importance of correct answers in the mind of the
individual— these are all factors which may distort the val­
idity of answers.
Furthermore, there is always the probabil­
ity that advertising and salesmanship techniques have placed
in the mind of the reader ideas that are not his own.
In
this investigation care was taken to avoid some of these in­
fluencing conditions.
An attempt was made to state the
questions in simplified, self-explanatory form but at the
same time in a way that“would not -cue specific answers; the
questionnaire was devised so that a minimum of time was re­
quired for Answering; the questions did not infringe upon
the personal life of the recipient— they were not signed or
identified with the individual in any way.
However, it was
impossible to avoid all the circumstances that affect the truth
of opinions.
For this reason, some discount should be ap­
plied to those conclusions reached through the medium of the
questionnaire used in this investigation, as should be ap­
plied to the results of any questionnaire on public opinion.
Limitations of the problem.
Only by reason of months
of study and investigation, which involve tremendous costs,
would it be possible to secure opinions from wage-earners
throughout the United States.
Such an effort would be the
work necessarily of an organization rather than by an in­
dividual.
Consequently, this investigation has been re­
stricted in scope.
The writer has confined his studies to
wage-earners in the Los Angeles County area but which em­
braces all ages, a variety of occupations, and those earning
various salaries.
One should, of course, keep uppermost in mind the fact
that the following opinions of wage-earners concerning the
Social Security Act are not to be confused with those which
might be advanced by other groups— for instance, the employ­
er of labor or the self-employed person.
It may be stated,
then, that conclusions reached in this survey apply only to
wage-earners.
Method of procedure.
The following procedure was
adopted:
1. In the summer of 1940, 550 questionnaires were
sent to a like number of wage-earners in the Los Angeles
County area.
Four hundred, or 72.5 per cent of them were
returned by January, 1941.
(See Appendix G for a copy of
the que st ionnaire.}
2. The data contained in the 400 questionnaires was
tabulated according to the salary and the age of the wageearner,
(Ages and salaries of the group may be found in
Table XIII, Appendix G.)
3, The data from these tabulations and from other
statistical reports were Combined to form the basis of
material used in this survey,
II.
ORGANIZATION OP REPORT
The influence of depressions and periods of prosper­
ity on public opinion and Federal legislation for the aged
is presented first, in Chapter II, to indicate how past
events have molded public opinion, thereby promoting or
retarding Federal aid to the needy aged.
Chapter III deals with the popularity of various
provisions of the Act, endeavoring to show the consensus
of public opinion as to these provisions.
Chapter IV presents the influence of Social Security
legislation on private thrift programs and investment
policies of the individual.
Chapter Y points out some of the weaknesses that
exist in the present Social Security setup, and the need
for various reforms.
Chapter VI presents a summary of the survey with con­
clusions arrived at by reason of the investigation.
CHAPTER IX
THE INFLUENCE OF THE BUSINESS
CYCLE ON PUBLIC OPINION AND
FEDERAL LEGISLATION FOR THE AGED
A review of the steps leading to Federal legislation
for the aged bears a definite relationship to the problem
at hand, for business cycles— prosperity and depressions—
seem inescapable*
As they have affected public thought in
the past, so will they affect it in the future.
Subsequent
Federal action will be influenced by the experiences of the
past and by the necessity for aid to the needy in the future.
The historical background showing the experiences of
the aged during the decades that have gone by may be a con­
tributing factor toward promoting thrift In the future;
knowledge of past events may prove a stimulus toward the
creation of new types of thrift programs and more thrift
programs by the wage-earner himself, thus alleviating the
necessity for additional governmental legislation.
Inst itut ional care of the aged.
The socalled "alms­
house" or "poor farm" was, until fifteen years ago, the
only medium by which the needy aged was provided with per­
manent provision in the United States.
The conditions
which existed in the majority of these institutions were
most unsatisfactory,— most of them being characterized by
insufficient food, filth, and unhealthful discomforts.
Even in those institutions which had sanitary and physically
suitable buildings, it was discovered that feeble-minded,
diseased and defective inmates were not infrequently housed
3
with the dependent aged.
The cost of maintaining old
people in these institutions, as was revealed by a finan­
cial survey of almshouses made by the Federal Department of
Labor in 1925, was high, principally because of inefficient
4
“overhead."
Old-Age assistance from the State. Stimulated by
i
the facts revealed in the Federal and other surveys* and
by public criticism in general, the drive for regular non­
inst itutional aid for needy old people made progress.
A
series of measures variously described as "old-age pen­
sions," "oldr-age assistance," "old-age relief," and "oldage security," were passed by state after state, begin5
ning with Montana in 1923.
At the end of 1928, after six years of agitation,
there were only six states and one territory which had made
Harry C. Evans, The American Poor Farm and Its
Inmates. (Des Moines, lOwa, 1926.) Cited by Social Security
in America (U.S.Government Printing Office, 1937), p. 156.
4
Cost of American Almshouses, Bulletin of the
U. S. Bureau of LaFor"Statistics, Fo. 386. (U.S. Govt.
Printing Office, 1925.) Cited by Social Security Board, Loc.
Cit., p. 156.
5 Social Security In America. (Washington, D.C*:
U.S.GOvt. Printing Office, 1937.), p. 156.
9
provision for their aged citizens.
All of the state laws
were of the optional type; that is, they left the adoption
or rejection of an old-age assistance system to the dis­
cretion of the counties.
very limited effect.
For this reason these laws had
In these six states there were slight
ly more than 1,000 recipients of old-age assistance grants.
The total amount spent by the six states in 1928 was
#200,000 in round numbers.®
From 1929 on, the trend in legislation was toward
malting the adoption of the old-age assistance system manda­
tory 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.
Prosperity and legislation for the aged. During the
six years preceding 1930, the people of the United States
were enjoying a period of great prosperity.
Unemployment
was not then one of our great national problems.
Wages
were high and people were investing and spending their
money.
Nearly everyone had the idea that such prosperous
Operation of Old-Age Pension Systems in the United
States in 1931, Monthly Labor Review, Vol. 34, No.' 6, June
1932, Table 5, p. 1260.
Cited by Social Security Board,
Op. c i t p. 161.
10
conditions would continue forever, hence, little thought
was given to the subject of aid-age dependency*
Concern­
ing this attitude by the public, Douglas had this to say,
"Prior to the great depression, the consensus of public
opinion was that American citizens could in the main pro*7
vide for their own old age by individual savings.”
The fact is that a large portion of the American
people were firmly convinced that persons who had been hard­
working and frugal all their lives, would not become desti­
tute and dependent in their old age; that only shiftless and
lazy people would be faced with dependency in their later
years.
To such a class of thinkers this meant that to
grant relief through State agencies was really rewarding
some individual who had not done his duty to society.
In
addition to this philosophy of thrift and self-reliance,
there was extant in the United States a conviction that it
Is the duty of the children, and not of the state, to take
care of their old people.
It was assumed that if the chil­
dren were relieved of this responsibility by the state,
family ties would become loosened, and this danger was to
be avoided by every means possible, since the family is
regarded as one of our most highly valued Institutions.
7
Paul H. Douglas, Social Security in the United
States. (New York: Whittlesey House, 1936.T~p. 3.
11
This individualistic attitude toward the meeting of great
social risks was, of course, characteristic of the twen­
ties.
Douglas comments on this attitude as follows:
. . . The belief in rugged individualism, first
created by the frontier and finding emotional sup­
port by the upward surge of the stock market, was
a powerful force holding back all protective leg­
islation, while the rise in real wages lulled the
majority of the working class into a condition of
more or less acquiescent satisfaction.0
In addition, each of the forty-eight states were
supposedly sovereign In labor and industrial matters.
This
made it difficult to get action on social legislation even
in those states where there was a desire to do so, for com­
merce was in large part Interstate and, if any one state
imposed a tax or laid down a set of conditions which, raised
labor costs, it thereby placed many of the employers with­
in that state at a competitive disadvantage.
Such pressure
naturally restrained the more progressive states from de­
veloping legislative measures towards social betterment as
they would have preferred, and tended to keep the country
as a whole closer to the legal conditions in the less
prosperous states.
Douglas comments thus:
, . . It is small wonder that this country compla­
cently, drifted through the twenties with little effort
to provide pooled protection against the great risks
8
Douglas, Ibid., p. 4.
IS
of indigent old age, unemployment and sickness, which
even in the boom years were playing havoc with the
lives of so many*9
Depression and need for old-age assistance. The in­
creasing proportion of old people in the total population,
and the increasing inability of these old people to obtain
gainful employment, resulted in a trend in the public mind
favorable to old-age pensions even before the depression.
There was also a growing dislike of county wpoor farms* as
proper institutions to care for the aged; this also con­
tributed favorably to the sentiment concerning old-age
pensions*
However, the depression served to make this some­
what submerged sentiment a more dominant one.
The failure of
banks, the great decline in the value of real estate as well
as of stocks and bonds, completely swept away the savings of
many persons and brought insecurity and danger to the re­
serve funds of even more; the incidence of unemployment was
especially severe ppon the aged.
By the end of 1934 there
were approximately three-quarters of a million aged persons
who were on direct relief from the Federal government, in*
addition to those receiving maintenance from other sources.
9 Douglas, Ibid., p. 5.
-t*° Douglas, Ibid., p . 7.
13
The majority of the American population were convinced, by
the foree of all these conditions, that individuals could
not by themselves provide adequately for their old age and
that some form of greater security should be provided by
society.
Investigations on the extent of old-age depend­
ency made by a number of state commissions in the
twenties and early thirties disrupted once and for
all the comfortable belief that "deserving” citi­
zens do not become dependent in their old age.11
There are no figures available to Indicate the ex­
tent of old-age dependency in the United States as a whole.
There are some state surveys, however, which classify old
people according to property and income.
These surveys
give a fairly accurate picture of the extent of old-age
dependency.
Connecticut’s survey in 1932, and Wisconsin’s
in 1915, both showed that slightly fewer than 50 per cent
of those aged sixty-five and over are dependent.12
Activity of State legislatures, 1951-1935. In 1951
and 1933 state legislatures were very active in the field
of old-age assistance.
It is estimated that one hundred,
bills were introduced in the legislatures of 38 states in
^ Social Security in America. (Washington, D. 0.:
U. S. Government Printing OFfice, 193?), p. 159.
12
Social Security in America, Ibid., p. 149.
14
1931.
Of these, all except one state law were,of the manda­
tory type, but only two provided for state funds.
Ten more
laws were added in 1935, all but one being mandatory upon
the counties, and all but two providing for state funds.
By the end of 1934, 28 states and 2 territories had passed
old-age assistance laws.^
In addition to a movement towards mandatory legisla­
tion, the eligibility rules governing pensions were also
liberalized— United States citizenship for many years be­
fore a person could become eligible for aid was cancelled
quite generally by state legislatures; residence require­
ments were liberalized; age requirements were lowered from
70 to 65; ownership of property did not destroy eligibil­
ity; and a number of other changes were made in the laws
within the period from 1931 to 1934.
Concerning these laws,
Douglas states:
While the earlier laws had in general fixed sev­
enty years as the pensionable age, the later acts
tended to use sixty-five years. There was also a
tendency to permit pensioners to own several thou­
sands of dollars of private property and to permit
them to receive some personal income which would
not be deducted dollar for dollar from the public
pensions. Naturally, also, the mandatory pension
laws almost invariably carried with them either
exclusive financial support by the states or gave
at least some state aid to the local governments
in meeting them.-^
13 Social Security in jjnerica, Ibid., p. 161.
14 Douglas, 0£. cit., p. 8.
15
State assistance difficulties.
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 three states the act
was entirely inoperative because of lack of funds.
15
10 states was the system state-wide.
In only
The above facts were verified by Douglas as follows:
The old-age pension movement was handicapped by
two factors. (1) There were still 20 states with­
out any pension laws, while if the effective op­
tional laws were included, this total amounted to
nearly 25. (2) The burdens of the depression and
the growing financial difficulties of state and
local governments prevented most of the states
which had laws from paying adequate benefits. The
average monthly pension for the earlier part of
1934 was about $19 or $20, but by December of that
year it had fallen to as low as $16.■®
The difficulties of the states in financing old-age
assistance programs and in paying adequate benefits, the
growth in the number of unemployed, together with the
growth in the proportion of the aged to the total popula­
tion, resulted in public demand and need for some national
program of old-age assistance.
Concerning this trend,
Boberts comments:
In 1933 there were 15 millions unemployed.
Federal, state, and local governments were forced
to assume an enormous burden of relief which cost
15 Social Security in America, Loc. cit., p* 163.
Douglas. PP. 8-9
16
billions of dollars* This loss of employment and
earning capacity* its unsettling effect upon busi­
ness, the resulting huge publie debt burdens, and
the mounting taxes caused by direct relief and
public works projects served to create public de­
mand for some national program of unemployment
insurance, old-age benefits, and general welfare. 7
Committee on Economic Security Created. At this
time, 1934, the President of the United States created the
Committee on Economic Security to study methods and to
offer recommendations for improving social and economic
conditions.
The Committee, in its investigations, found
that the ratio of aged persons to the total population has
18
shown a continuous increase since 1820.
This increase
is the result of a declining birth rate in this country
which is expected to persist and which will, of course,
produce an increasingly sharp increase in the ratio of the
aged to the population as a whole.
The restriction of im­
migration, curtailing as it has the influx of younger per­
sons to this country, likewise tends to increase the pro­
portion of older groups in the population.
While the per­
centage of persons over 65 rose from 2.7 to 4.7 per cent
of the total population in the sixty years from 1860 to
17
P. V. Roberts, Social Security Accounting.
(Los Angeles: C. R. Hadley Company, 1938), p. 3.
18
Social Security in America,
pp. 134-139.
17
1920, it is expected to rise to 11.3 per cent in the 6Q-year
period following 1920.
As the number of aged in the United States propor­
tionately increases, as unemployment continues even in the
best of times, and as taxes, both private and corporate,
mount, thereby throwing more burden on the young and lowsalaried groups, there arises an.increasing demand for as­
sistance to those aged people who are destitute or who will
become destitute when industry no longer can use their
services.
It seemed evident to the Committee on Economic
Security that a new type of assistance was needed, since
the assistance given in the past has proved to be inade­
quate to supply the need.
Old-age assistance versus Old-age insurance.
In a
popular discussion of the proper plans to be used for the
aged in an economic security program, the issue: .was raised
of choosing between an old-age assistance plan, whereby
the recipient of assistance makes no contribution towards
his own security, and a system of old-age insurance to
which the recipient pays ^premiums.". It seemed apparent
that an effective old-age security program for this coun­
try involved not a choice between assistance and insurance
but a combination of the two.
Assistance programs can
serve to meet the problems of the millions of persons who
are or are about to become superannuated and dependent.
18
An insurance program coming into operation
some yearshence
•offers no solution for the problems of the
near future. On
the other hand, it can afford younger workers the opportun­
ity to build up a certain protection against dependency in
their old age.
The Committee on Economic Security voices
the following opinions:
Regular benefits are unquestionably to be pre­
ferred to assistance grants* They come to the
workers as a right, whereas assistance is condi­
tioned upon a “means" test. . . .
An old-age
insurance program could be expected in time to
carry the major, but never the entire load. . . .
Assistance programs have a definite place, even.
in the long-time planning for old-age security. 9
Therefore, the Committee concludes that:
1.
A system of contributory 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 co­
operative thrift can the cost of relief be kept down.
Old-age insurance, financed in large measure from
the contributions of workers and their employers
would serve to protect an increasing proportion
of our citizens from the hazard of old-age depend­
ency and at the same time retard the mounting trend
of assistance expenditures. Since assistance is
granted on the basis of need, it tends to discour­
age thrift, which would render assistance unneces­
sary. Under a system of old-age insurance, indiv­
idual need would not be a determinant. Since in­
surance benefits would be received 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 would in no way reduce
19
Social Security in America, p. 190.
19
the amount of benefits received but would provide a
means of augmenting income in the later years of
life. The certainty and regularity of insurance
benefit payments would greatly enhance the sense of
security of the superannuated person.
2. The conditions surrounding the payment of
benefits under an old-age insurance system would
enhance the economic effects of an old-age secur­
ity program. Under the method of old-age assist­
ance, superannuated persons are encouraged to com­
pete 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 power wages than
younger workers in competition for jobs. Adminis­
trative authorities seeking to hold down assistance
expenditures, may stimulate such competition as a
means of reducing grants in individual cases. The
effect upon the employment opportunities of younger
men and upon wage rates might prove most unfortu­
nate* Under a system of old-age insurance, the
opposite effect would ensue* Since retirement from
regular employment could be made a condition for
receipt of benefits, the displacement of superan­
nuated workers from the labor market would be ac­
celerated*
3. The certainty and regularity of benefit pay­
ments under an old-age insurance program would
serve to stabilize in some degree the flow of con­
sumption expenditures on the part of our superan­
nuated population* With a definite retirement in­
come assured, superannuated persons would be more
likely to maintain a normal rate of expenditure
in good times and bad. As benefit payments rose
and more persons became eligible to receive them,
it might safely be prophesied that this added ele­
ment of stability in our economic system would
have considerable influence.
4* 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 .
advantages of an old-age insurance program* The
more adequate pension programs have served to
protect those eligible for benefits from distress
in old age and thus have afforded some sense of
security both before and after retirement*
20
Related to employment and wages, such programs have
tended to encourage rather than discourage contin­
ued initiative on the part of the prospective re­
cipient.20
It may therefore he deducted that the foregoing
reasons advanced by the Committee on Economic Security were
for the purpose of instigating a program of contributory
insurance from which benefits would later be paid to the
worker rather than a program of assistance by direct relief.
National setup necessary. In its report to the
President the Committee further advanced the idea that a
natipnal setup was obligatory for the successful adminis21
tration of such an insurance program.
The reasons lead­
ing to this decision for national administration were sum­
marized as:
1. The mobility of population across state lines
would make the use of the actuarial procedures neces­
sary in any workable plan impossible. The operation
of 48 separate systems of old-age insurance would in­
volve virtually insuperable administrative difficul­
ties, excessive costs, and almost certain failure in
many states.
2. 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 adequate provision.
20 Social Security in America, Ibid., pp. 197-99
21
Social Security in America, pp. 200-201.
21
3.
The accumulation of reserves under old-age
insurance programs by 48 states would involve both
investment and administrative problems of serious
proportions*
4.
Varying rates of contributions under state
insurance, programs might affect seriously the com­
petitive costs of doing business in the several states.
5*
The routine character of the administration
of old-age insurance would make it more adapted to
large-scale operation.
Social Security Act passed by Congress*
(hi the 15th
of January, 1935, the Committee on Economic Security made
its report.
On the 17th of January, 1935, the bill was in22
troduced into Congress by Senator Wagner.
The bill was
passed by both Houses of Congress during the week of August
5, 1935, and was signed by the President on August 18.
It
is known as the Social Security Act.
In August, 1939, the Social Security Act was amended to
include broader coverage, dispense with the large reserve,
and start benefits earlier.
The Social Security Act now
stands on the books as amended in 1939.
Summary. History shows that in the evolution of
Federal social legislation for the needy aged many diffi­
culties and obstacles were encountered; federal legislation
toward this end was slow in taking form..
Times of prosperity
22 Paul H. Douglas, Social Security in the United
States. (New York: Whittlesey House, 1936.T"" p. 84.
and periods of depression* as has been seen, have had sepa­
rate and distinct effects upon such federal action; public
attitude toward old-age assistance by the government, has
changed along with changes in the business cycle.
It has
also been pointed out that only through a national system
of assistance could an adequate and effective program be
affected.
CHAPTER I I I
OPINIONS ON VARIOUS PROVISIONS OF THE SOCIAL SECURITY ACT
Any article of food or clothing, or any mode of
transportation, is approved hy the masses just so long as
its price stays within a certain range and just so long as
that particular food or clothing, or mode of transporta­
tion, fills a definite need.
Whenever the item fails to
fill adequately the need of the individual, or whenever its
cost becomes exorbitant in comparison with other similar
Items, then it is discarded.
legislation.
The same thing may be said for
A legislative measure, such as the Social
Security Act, is approved by the masses just so long as its
cost is not too high, and just so long as the benefits de­
rived from that legislation are meeting adequately the
public demand and need.
The Social Security Act now provides, for example,
that the man who earns a salary averaging $1,800 a year
between the ages of 50 and 65 will be eligible for an OldAge Monthly Benefit amounting to $40.50 a month from the
age of 65 until death.
If this is adequate Income to meet
the needs of the average man of 65, or if he.thinks this
amount is adequate, then that part of the Social Security
Act is and will remain popular.
If $40.50 Is not enough _
income, then one of the main purposes of the Act is defeated
24
public sentiment and criticism will eventually bring changes
in the Act or result in its final repeal.
Some of the ques­
tions now at hand, then, are:
1.
Are the benefits provided by the Social Security
Act sufficient in the opinion of the wage-earners, or would
the majority reject the Old-Age Tax and its benefits if
they had the choice?
2.
What proportionate part of the wage-earners, as
a whole, would be in favor of even increasing the Old-Age
Tax rate so as to increase the amount of their monthly
benefit at the age of sixty-five?
3.
Or do the majority feel that the tax rate is high
enough in comparison with the benefits derived?
4*
Would the majority of the wage-earners be in
favor of setting the retirement age earlier than sixty-five?
If so, where?
5.
Or do most wage-earners believe that sixty-five
is the popular age for retirement?
6.
Do most wage-earners have to be forced to save,
and are they willing to be forced to save through legisla­
tive action?
The answers to the above questions would provide a
fairly accurate picture of the extent of the wage-earner*s
approval of the provisions of the Social Security Act*
The
extent to which the provisions of the Act are approved gives
24 (a)
an indication as to how long this type of legislation will
survive in its present form; for public opinion is powerful.
Forced saving. Some people seem to be naturally
thrifty; they get more enjoyment out of saving money and
watching it accumulate to sizeable proportions than they get
out of spending money.
This same group seems to be far­
sighted enough and to possess enough will-power to provide,
through saving, for their old age by their own efforts.
Other people, regardless of the salary they make, or the
increase in salary they receive from time to time, find it
beyond their power to save anything. They get more enjoy­
ment from spending; they let the future take care of it­
self!
Subsistence during their old age is apparently the
least of their worries.
This group can not and will not
saved unless forced to do so.
The present survey of 40Q wage-earners in the Los
Angeles County area reflects that this latter group is in
the majority, since 298 or 74.5 per cent of the number
expressed the belief that an individual "must be forced” to
save.
Only 25.5 per cent did not hold this belief.
How­
ever, of these. 400 wage-earners, 220 or 55 per cent main­
tain a formal budget whereby they endeavor to save so mueh
each month.
A comparison of these percentages reveals that
the endeavor to save is not analgous to the ability to
save— does not result in actual saving.
Since the Social
24 (b)
Security Act is a means of forcing the individual to save
for his old age, and inasmuch as the majority believe in a
program of forced saving, it may be concluded from this
(
standpoint the-Act does meet with general approval.
The
only effective means of forced saving today is comprised
within the provisions of the Social Security Act, that of
returning taxes to the individual at sixty-five in the form
of an annuity.
Adequacy of present benefits.
Whether the Social
Security Act is adequately providing a means of saving is
another question.
It may be that the amount of the annuity
at sixty-five is inadequate for the average man of sixtyfive who may or may not have other sources of income at
that time.
Only 127 individuals, or 31.75 per cent, of
the 400 interviewed, through the questionnaire, expressed
the belief that $40,50 a month, the Federal Old-Age Bene­
fit secured by an $1,800 average salary over a period of
35 earning years, is adequate income.
This indicates a
general belief that, although the fundamental purpose of
the Act is approved, this benefit alone is Insufficient
for the needs of the aged.
This does not mean that this
program of saving would be rejected if a choice were given.
It means only that some source of supplementary income
must be obtained, in the opinion of approximately 70 per
cent of the wage-earners.
Of those interviewed, 167 were
under 50 years of age.
Of this group, 4S.51 per cent were
of the opinion that #40.50 a month is sufficient income at
sixty-five, whereas only 16.66 per cent of those sixty and
over held this same opinion.
This indicates that, as one*s
age increases, there is less sense of security and feeling
of adequacy of the Federal Old-Age Benefit.
From the salary
standpoint there is a definite indication that as the salary
scale increases so does the demand for a larger Federal OldAge Benefit.
Of those making under #1,000 a year in salary,
38.7 per cent indicated that #40.50 a month supplies enough
annual income for the average man of sixty-five.
However,
of those making an annual salary of over #5,000, only 18.75
per cent thought this monthly income was sufficient.
Among the young and low-salaried, then, there is the
general opinion that the Social Security Act adequately
meets the demand and need for a monthly income at the re­
tirement age.
Those who are older, and those whose salary
is in the higher brackets, however, believe that the Federi
al Old-Age Benefit should be greater, or that it must be
supplemented by other sources of income.
Perhaps the ex­
periences of the older groups with living conditions and
costs over a longer period of time, and the higher stand­
ard of living experienced by the higher-salaried groups,
convince them of the inadequacy of the present Federal OldAge Benefit.
Then, too, the older groups have probably
yes
RG£
a/o
UNDER
30
3 0 - 3 f
m
m
m
m
.
¥0 - ¥f
£0
-
«
4>a
FIND
OVER.
O
/O
2o
P
Jo
fo
e
r
CHART X
So
c
7o
4,0
e
n
80
t
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO AGE, TO
THE QUESTION: ARE PRESENT MONTHLY
SOCIAL SECURITY BENEFITS ADEQUATE?
?°
'00
27
TABLE I
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO AGE, TO THE
QUESTION: ARE PRESENT MONTHLY SOCIAL
SECURITY BENEFITS ADEQUATE?
No
Yes
Age
Number
Percentage
Number
Percentage
Under
30
7
42.5
96
57.5
30-39
23
24.5
71
75.5
40*^49
22
2 5 .8
63
74.2
50-59
7
19.0
30
8 1 .0
2
16.6
10
83.4
60
and
over
S ttL R R /
y
a/ o
f s
$}G O O
on,
LESS
$ /o o f
To
Z o o o
$ Z o o i
To
3 ooo
$
3
o o l
To
S 'a o o
wmtmm.
O v e f>
^ -
5o
o
o
— <■--‘i—*
O
/o
P
' *— f —
3O
zo
e
CHART
V
o
r
c
— r — — r— 4— f— ^— r—4—
4,0
&o
e
7o
n
r o
t
2
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO SALARY,
TO THE QUESTION: ARE PRESENT MONTHLY
SOCIAL SECURITY BENEFITS ADEQUATE?
? o
/ o o
29
TABLE II
ANSWERS (AS OF THE YEAR 1940) CfF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO SALARY,
TO THE QUESTION : ARE PRESENT MONTHLY
SOCIAL SECURITY BENEFITS ADEQUATE?
Yes
Salary
No
Number
Percentage
Number
Percentage
24
38.7
38
61.3
69
37.1
117
62.9
#2001
#3080
24
25.5
70
74.5
#3001
3
9.4
29
90.6
3
18.7
13
8 1 .3
#1000
or
Less
#1.001
#2000
#5880
Over
#5000
30
seen better times, whereas the younger have never earned,
during good times; they can not remember when there wasn*t
a depression or hard times; consequently, they believe they
would be more content with a smaller monthly income when aged.
Although the results of this investigation show that
the majority feel that the monthly benefits provided by the
Social Security Act are inadequate, it does not follow that
increases in the size of the benefit could be easily ar­
ranged through changes in the law brought about by the
pressure of public opinion.
The size of our national in­
come is probably the one great factor determining the size
of old-age benefits.
Maxwell S. Stewart states the situ­
ation clearly:
Most persons would probably agree that from #35
to #45 a month, although far from satisfactory, is
about all that the government can pay at present.
When it is recognized that half of the families in
the United States received less than #90 a month in
1936, a #40 pension seems high rather than low for
a single individual. Xn time, the old-age and sur­
vivors* insurance program of the Social Security
Act will be paying annuities averaging from #35 to
#40 a month.
The size of our old-age pensions must rest on the
larger question of how great a share of our national
income we dare set aside for the aged and aging. At
present the federal and state governments are not
spending much more than half a billion a year for
the aged* This is less than 1 per cent of the total
income of the country. . . .
And any plan is bound
to become relatively more costly as the proportion
of older folk in the population grows. By 1965 there
will be about twice as many persons over sixty as
there are now, although the population will not be
so very much greater. We must take these facts into
consideration in determining what size of pension we
can afford to pay.
51
The final answer will depend, of course, on the
degree of our prosperity. A prosperous America can
afford to turn aside a substantial share of its in­
come to the protection of the older generation.^5
Payroll taxes approved.
It may be said in general,
then, that even though the present provisions of the Social
Security Act do not, in the opinion of many, provide ade­
quate monthly income for the aged, the cost of providing
increased benefits is almost prohibitive.
The question was asked, "Would you reject the Feder­
al Qld-Age Tax, and therefore the benefits, if you had the
choice?"
It is believed that the answer to this question
carries considerable weight in determining the extent to
which the Social Security Act is approved.
Only 16.12 per
cent of the 400 were in favor of discontinuing the tax and
therefore the benefits.
As indicated by Chart No. 3, this
percentage Is well distributed among the various age groups,
thus indicating that present age has no influence on these
opinions.
As indicated on Chart No. 4, and in Table IV,
the percentage of those who would retain the Social Secur­
ity Tax Is evenly distributed among the various salary
groups with the exception of that group of individuals
whose annual salary is above the §5,000 mark.
A large per-
23 Maxwell S. Stewart, Pensions After Sixty? (New
York: Public Affairs Committee, 1940}, pp. 20-21. -
y
RGE
s /o
es
UNDER
3 0
m
30
-
m
m
m
3*7
) m
m
]w
w
m
M
.w
/z
m
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b
i
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Hfs)C>
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i
l
i
i
i
i
*
^ iiin
/€»
Zo
3o
7*
n
CHART
t
3
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO AGE, TO
THE QUESTION: WOULD YOU REJECT THE
SOCIAL SECURITY TAX AND THEREFORE
THE BENEFITS IF GIVEN THE CHOICE?
/oo
TABLE III
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO AGE, TO
THE QUESTION : WOULD YOU REJECT THE
SOCIAL SECURITY TAX AND THEREFORE
THE BENEFITS IF GIVEN THE CHOICE?
Yes
No
Age
Number
Percentage
Number
Percentage
Under
30
31
18.8
134
81.2
30-39
13
13*9
80
8 6 .1
40-49
14
1 6 .6
70
83.4
50-59
3
8 .3
33
91.7
3
1 7 .6
14
82.4
60
and
over
34
SRLRRy
$ /OOO
OR
Lt SS
4
To
ocx?
4 Zoo!
To
3 ooo
43oo/
To
■£~oo o
yes
No
wrnmrn
fmmmm
^mmrnrn.
mmrnmm
i
QVEK
$Sooo
e
r
CHART
e
e
n
4
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO SALARY,
TO THE QUESTION: WOULD YOU REJECT THE
SOCIAL SECURITY TAX. AND THEREFORE
THE BENEFITS.IF GIVEN THE CHOICE?
35
TABLE IV
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO SALARY,
TO THE QUESTION: WOULD YOU REJECT THE
SOCIAL SECURITY TAX AND THEREFORE
THE BENEFITS IF GIVEN THE CHOICE?
Yes
Salary
Number
No
Percentage
Number
Percentage
$1000
.or
Less
8
12.7
55
87.3
$1001
30
1 6 .2
155
8 3 .8
10
10.6
84
89.4
5
16.1
26
8 3 .9
6
40.0
9
60.0
$2&&>
w
$3000
$5080
($585
36
centage of those in this group would favor discontinuing
the tax, although even 6Q per cent of them are in favor of
its retention*
It is logical to assume that those making a
salary of this kind can provide for their own security
through their own private investments and, therefore, a
larger percentage of them favor taking care of themselves
by these private methods rather than by a government pro­
gram of forced saving.
With 84 per cent of the opinions in favor of retain­
ing the tax, it is evident that a step has been taken in the
right direction; that with the majority this legislation is
popular to the extent, at least, that they would not turn it
down if put to a referendum vote.
Should payroll taxes be increased?
Though the major­
ity favor the Federal Old-Age Tax and the benefits, the num­
ber of those favoring an increase in the tax rate so as to
increase the benefit at sixty-five is not so pronounced.
Of
the 400 mentioned, 48.7 per cent would favor the increase.
At least 50.8 per cent were not in favor of an increase.
The question was not answered by .5 per cent.
Opinion on
this point is therefore divided about half and half.
Of
those under 50 years of age, 37.95 per cent would favor an
increase.
Chart Ho. 5, and Table Y, indicate that as age
increases, there is a definite trend toward favoring an in­
crease In the tax rate.
This same trend is not indicated
ffGE
y
•
£
No
S
under
30
J o - J<f
warn
y-o-
So -Sf
ffwo
OV£ f%
/O
Zo
70
So
C
p
CHART
So
?o
e
5
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO AGE, TO
THE QUESTION: WOULD YOU FAVOR AN
INCREASE IN THE TAX RATE SO AS
TO INCREASE BENEFITS AT 6 5 ?
/00
38
TABLE V
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO AGE, TO
THE QUESTION: WOULD YOU FAVOR AN
INCREASE IN THE TAX RATE SO AS
TO INCREASE BENEFITS AT 65?
No
Yes
Age
Number
Percentage
Number
Percent ag<
Under
30
63
37.9
103
6 2 .1
30-39
48
5 1 .6
46
48.4
40-49
46
54*1
39
45.9
50-59
27
75*0
9
2 5 *0
9
75*0
3
2 5 *0
over
41
within the various salary scales.
VI.)
(See Chart No. 6 and Table
Those in the lower-income group (less than $1,000) were
almost equally divided in opinion— 42.85 per cent favoring
an increase in the tax rate and 57.15 per cent not favoring
an increase.
In the middle-salary group ($2-3,000), the
percentage in favor of an increase was slightly higher—
58.51 per cent In favor, 41.49 per cent not in favor of a
tax-rate increase.
Going on up to the higher-income group
(plus $5,000), the figures again reveal an equal distribu­
tion of opinion— 50 per cent in favor, 50 per cent not in
favor.
It may therefore be concluded that the annual sal­
ary of an Individual is not an influential factor In deter­
mining the extent to which the present Federal Old-Age Tax
rate Is approved (see Chart).
Higher-salaried groups do
hot acquiesce to higher taxes any more than the lowersalaried groups.
One-half of the entire 400 would not
favor an increase; the same percentage exists within the
various salary groups.
Retirement age.
Among the 400 individuals inter­
viewed concerning the age of retirement as set forth in the
Social Security Act, 264, or 66.3 per cent, were of the
opinion that the retirement age should be earlier than
sixty-five; 134, or 33.2 per cent believe that the age of
sixty-five is the appropriate one for retirement.
The
question received no answer from five-tenths per cent.
The
SBLffRy
4>
yes
a /o
/o o o
OR
LESS
4 / oo /
To
2 OOO
$ 2 o o /
To
3 a o o
$ 3 o o t
To
S 'o o o
.O V E R
S o o o
O
/O
Xo
P
3b
e
Vo
r
CHART
So
c
e
4a
?o
n
t
go
fo
6
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO SALARY,
TO THE QUESTION: WOULD YOU FAVOR AN
INCREASE IN THE TAX RATE SO AS TO
INCREASE BENEFITS AT 65?
/oo
43
TABLE VI
ANSWERS (AS OF THE YEAR 1940) OF LOS ANGELES
COUNTY WAGE-EARNERS, ACCORDING TO SALARY,
TO THE QUESTION: WOULD YOU FAVOR AN
INCREASE IN THE TAX RATE SO AS TO
INCREASE BENEFITS AT 6 5 ?
No
Salary
Number
Percentage
Number
Percentage
#1000
or
Less
#1001
to
#2000
#2001
to
27
42.8
36
57.2
S3
44.9
102
55.1
55
5 8 .5
39
41.5
O H
Yes
16
5 1 .6
15
48.4
„Over
8
5 0 .0
8
5 0 .0
000
#3000
#5000
44
consensus of opinion among all age and salary groups is,*
then, that the retirement age should be set up to an earlier
age than the sixty-five now provided for in the Act.
Four
of those answering in the affirmative, did not state where
they would place the retirement age, leaving 260 giving a
selection on age of retirement other than sixty-five.
Of
these, 109 individuals, or 41.92 per cent, would place the
retirement age at sixty; 90, or 34.61 per cent, would place
it at fifty-five; 56, or 21.53 per cent, would place it at
fifty; 5, or 1.92 per cent would place it at forty-five.
(See Chart No. ?, and Table ¥11, for distribution according
to present ages.}
Some two-thirds of the answering audience would place
the retirement age earlier than sixty-five.
This group
probably feels that the possibility of reaching the age of
sixty-five, with survivorship to and benefits from the So­
cial Security Act, are too remote for consideration, hence
the retirement age should be earlier.
Those favoring an
earlier age of retirement may also justify their conten­
tions by pointing to the number of men and women in their
fifties and early sixties who are unemployed.
Although
these contentions may be in part based upon fact, there are
also several factual reasons for not setting the retire­
ment at an earlier age.
In the words of Maxwell S. Stewart:
Should old-age payments begin at sixty or sixtyfive? The Social Security Act says sixty-five; most
m e
UNDER
30
30- 3?
W-4-f
r^b— jr?
do
QND
OVef%
e
CHART
7
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING TO
AGE WHO, AS OF 1940, WOULD PLACE RETIREMENT
AGE EARLIER THAN 65
/oo
46
TABLE VII
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING TO
AGE WHO, AS OF 1940, WOULD PLACE RETIREMENT
AGE EARLIER THAN 65
Retirement age should be earlier?
Age
Yes
Number
Percentage
No
Number
Percent age
Under
101
6 1 .6
63
38.4
3 0 -3 9
69
74.2
24
2 5 .8
40-49
64
79.1
17
20.9
50-59
21
6 0 .0
14
40.0
7
70.0
3
3 0 .0
30
60
and
over
other plans provide payments at sixty. . ► . Those
favoring the lower age limits point to the large
proportion of men and women in their fifties and
sixties who are unemployed. Many of these could
not work if jobs were offered them. We think of
men becoming ,voldn between sixty-five and seventy
in the sense that they have not the physical strength
to carry a full load of work. That is true of a
large number of persons. But, just as some are fit
at seventy, and even seventy-five, others are old
physically at fifty-five and sixty. A considerable
number of persons in their fifties and sixties are
disabled by chronic diseases. Such persons are often
desperately in need of air. On the other hand, we
find over four million persons over sixty, and about two million over sixty-five, still gainfully
employed.
It makes a great deal of difference, of course,
when it comes to cost, whether a pension is given
at sixty, or at sixty-five, as provided in the
Social Security Act. As we have seen, there are
13 million persons in the country over sixty, and
only 8-1/2 million over sixty-five. Paying bene­
fits at sixty, then, would probably gQst at least
half again as much as at sixty-five.fr*
Just as the cost of Social Security, as compared
with our prosperity and national income, is perhaps the
greatest factor which keeps down the size of old-age pen­
sions, so is it also one of the most important influences
that prevents the lowering of the,age of retirement.
As far as the probability of survivorship to and
benefits from the Social Security Act are concerned, the
25
1937 Standard Annuity Table
shows that one’s chance of
24 Stewart, Ibid., pp. 22-23.
2 5
Thorp and Jaqua, Social Security and Life Insur­
ance, p. 28.
48
reaching the age of sixty-five and of receiving benefits for
a number of years after that time, depends upon one,s pres­
ent age and sex.
Of those males now 20 years of age, 69.81
per cent will reach the age of sixty-five and receive bene­
fits for 10.05 years.
Of those females now SO years of age,
77.96 per cent will reach the age of sixty-five and receive
benefits for 13.68 years.
Of those males now sixty years of
age, 88.98 per cent will reach the age of sixty-five and re­
ceive benefits for IS.82 years;' while of those females who
are now sixty years of age, 92.32 per cent will receive
benefits for 16.2 years.
Assuming that a man was forty-five when the Social
Security Act went into effect, and that his average annual
salary for the following 20 years was $1,800, his monthly
benefit from Social Security would be $36 at the age of
sixty-five.
This assumes that he is alone in the world.
According to the 1937 Standard Annuity Table, he would re­
ceive this $36 a month income for ten years, or a total of
$4,320.
To obtain this ten-year income he paid into the
government in the way of Social Security taxes a total of
$783 during his::20-year working period, and his employer
paid in a like amount, making a total paid in of $1,566 to
obtain & total remuneration of $4,520.
Of course, the cost
of these benefits to the wage-earner actually exceeds $783,
for one must take into consideration the wage-earnerrs loss
49
of compound interest on this money had it been invested
elsewhere, as in an annuity.
Summary.
One-half of the wage-earners maintain a
formal budget whereby they endeavor to save a certain amount
each month; yet 75 per cent of the same group admitted that
some form of forced saving is neeessary to result in actual
saving.
The Social Security Act is a legislative measure
intended to promote a program of forcing the wage-earner to
save for his old age; thus relieving society of'the immense
burden of caring for the aged through the costly and proven
inadequate maintenance of "poor farms" and almshouses, or
through direct relief in the form of a "dole.”
Withholding
from the wage-earnerrs paycheck a certain percentage of his
salary* and seeting it aside for him in a trust fund to be
returned to him at the age of sixty-five, is the method of
forced saving now in effect as one of the laws of the land.
This investigation indicates that three-fourths of
the wage-earners conform to the idea that an.individual must
be "forced” to save if he is to saveI
A survey conducted
by the American Magazine in 1938 reveals the fact that there
is an equal division of opinion among men and women through
the country on the question of whether it pays to save to­
day.
Half of them expressed the idea that it is a good
idea to "put away a little"; half held to the "spend while
50
gg
you can" attitude.
With 75 per cent of the people believ­
ing that one may be forced to save, and with 50 per cent be­
lieving it pays to save, it may be concluded that from the
standpoint of promoting a saving program for the individual,
the Social Security Act is the popular means with more than
50 per cent of the people.
The Social Security Act does not provide an adequate
retirement income.
Some form of supplementary income must
be forthcoming for the individual if he is to be provided
with an adequately comfortable existence during his nonworking, old-age period.
This is the opinion of some 70 per
cent of the wage-earners, and this expression is particular­
ly dominant among the older individuals and the highersalaried workers.
However, a very small percentage of the
people would reject or abandon the social Security Tax, and
therefore the benefits, if they were given the choice.
Xn
fact, 50 per cent of the people would even favor an increase
in the tax rate so as to increase the monthly benefit at
sixty-five.
These figures indicate that, although a large
majority frown upon the adequacy of present benefits, they
are in agreement with the fundamental principle underlying
old-age benefit payments.
The Social Security Tax is approved
p fl
"Does It Pay to be Thrifty?", The American Maga­
zine. Vol._126, September 1938, p. 152.
51
by 70 per cent, and 50 per cent, would even sanction an in­
crease in the tax rate.
The age of retirement and payment of Social Security
benefits should be lowered, in the opiiiion of two-thirds of
the wage-earners.
The majority of these would place the
retirement age at fifty-five or sixty rather than sixty-five.
Although there are particular parts of the Social
Security Act that need adjustment and change in the opinion
of the majority of those covered by this survey, the main
purposes and policies of the present program are approved.
It is therefore probable that public opinion will command
the retention of Federal legislation for the aged.
Some of
the changes advocated by wage-earners, however, would be
impracticable at the present time, so it is doubtful whether
subsequent legislation will inculcate those recommended
adjustments through eventual amendments to the Act.
CHAPTER I T
THE SOCIAL SECURITY ACT AND SAVING HABITS
Social Security benefits and supplementary income.
According to a national survey, more than half the wageearners In the United States spend all of their pay checks
within twenty-four hours after receiving them— to settle
with the grocer, the butcher, and other stores.
97
The Bureau of Statistics, United States Department
of Labor, in a study made of wage-earners during a twelve­
month period in 1934-1936, stated that three-fifths of the
14,469 families reported a surplus or net saving which
averaged almost $150 over that twelve-month period.
Almost
two-fifths of the families, however, had a deficit.
28
average income of these families was $1,524.
The
These facts bring the conclusion that from 40 to 50
per eent of the wage-earners in the United States are either
making only enough to provide themselves and their families
with the necessities of life, or else they "spend as they
go" for the things that they want, whether it be necessi­
ties or luxuries.
This ties in with the fact revealed in
27 Howard Maier, "The Banker Doffs His High Hat," in
Reader*s Digest, -September 1940, p. 21.
28 "Savings of Wage-Earners and Clerical Workers," In
Monthly Labor Review, July 1940, pp. 119-139.
the present investigation, that 75 per cent of those inter­
viewed believe that an individual must be forced to save
through some such program as Social Security, which takes
from their pay check a certain percentage of their salary.
At least 70 per cent of these wage-earners admitted that
the amount set aside through Social Security payments is not
sufficient to take care of them during a non-working period
from the age of sixty-five on, and contended that some source
of supplementary income must be obtained or, as in the opin­
ion of approximately 50 per cent, the Social Security tax
rate must be raised to increase the amount of the monthly
benefit at sixty-five.
METHODS OF SUPPLEMENTING SOCIAL SECURITY INCOME
What means of supplementary income is popular with
this 70 per cent of wage-earners who recognize its neces­
sity whether or not all of them have the ability to pro­
vide it?
(See Chart No. 8, and Table VIII, showing choices.)
It Is evident from this investigation that the majority
of those Interviewed are making enough salary to provide
some kind of supplementary income, for 78.25 per cent of the
400 definitely carry life insurance.
This percentage may
be even greater for it excludes the 5.75 per cent who did
not answer the question as to whether they Garry life in­
surance .
54
75
J
So
zs
75
L
I
F
E
INSURANCE
PROPERTY
So
zs
I
o
■
I
■
■
75
So
GOVERNMENT
25
BONDS
■
I
I
I
■
76
So
STOCKS
25
o
75
BONDS
So
25
O
7*
So
OTHER
25
o
sm/wy
$fooo
Less
SfiLfifty
SALBrty
saififty
Stoao
6 /0 0 / ~2ooo i(2ool-3000 WJOQl-tlo
CHART
smutty
oven *Sooo
8
LOS ANGELES COUNTY WAGE-EARNERS' CHOICES (ACCORDING
TO SALARY) OF SUPPLEMENTARY INCOME, 1940
55
TABUS VIII
LOS ANGELES COUNTY WAGE-EARNERS * CHOICES (ACCORDING
TO SALARY) OF INCOME TO SUPPLEMENT BENEFITS FROM
SOCIAL SECURITY, AS OF 1940
Choice of Supplementary Income
Life
Ins*
Salary
#
f
Gov*t«
Bonds
Proper­
ty
#
%
§
%
Bonds
SI>©cks
#
%
Other
#
%
7 18.4
2
6.2
2.5
8
6 .8
#
f
#1000
or
less
24 63*1
17 44*7
17 44.7
8 2 1 '.0
#1001
70 59.8
41 35.0
46 39^3
15 1 2 .8
3
43 61.4
29 41*4
24 34.2
16 2 2 .8
7 1 0 .0
8 11^*4
18 6 2 *0
17 5 8 i6
9 3 1 .0
8 27.5
3 1 0 *3
2
9 69.2
7 53.8
5 38.4
3 2 3 .0
1
3 2 3 .O
to
#2000
#2001
#3 o8 b
#3001
#5880
m
7.6
NOTEs Two or three wage-earners In some of the
salary groups did not indicate choices*
6 .8
56
Life insurance.
Income from life insurance, in the
form of dividends or monthly returns, is the most popular
method of supplementing Social Security income.
of all salary groups.
This is true
The percentage range varies among the
wage groups only ten per cent.
Income from life insurance
is also popular as a method of supplement with all age
groups— 316, or 79 per cent, in favor of it; 73, or 18.85
per cent, not in favor of it*
Wo answer was made to this
question by 11, or 2.75 per cent.
Later in the questionnaire the question was asked,
”Bo you favor life insurance as a method of saving?”
The
answers to this question reveal that the various age groups
hold life insurance, as a method of saving, in high favor.
Of those who answered the question 316, or 81.2 per cent,
considered life insurance as an excellent way to save.
No
doubt the protection feature, combined with the saving
feature, make this type of investment popular*
Insurance
premiums make a significant claim upon the ineome of the
average family; in fact, the most significant claim upon
funds spent for items other than current family consumption.
Nine out of ten of the families surveyes by the United
States Department of Labor, in compiling a report covering
a 12-month period in 1934-1936, reported life insurance
payments, and the average yearly payment per family pur­
chasing was f93 during the 12-month period covered by the
57
s u r v e y . T h i s same report shows that the percentage of
families reporting premium payments is almost as great at
the lowest income level as at the highest.
As Chart No. 9, and Table IX, life insurance and age,
prepared in the present investigation, reveals, the popu­
larity of life insurance as a means of saving increases
with oners age.
Of those under 30 years of age, 77.9 per
cent favor life insurance; this percentage, however, in­
creases along with age until the over-60 group is reached,
where it is found that 93.7 per cent of these hold life
insurance In high repute.
-Increases 'in amounts of life insurance carried. An
attempt was made to determine the proportion of wage-earners
who have increased, since 1935, the amount of life insurance
that they possess.
It will be remembered that the Social
Security Act was passed in 1935.
Since the Act itself is a
form of compulsory insurance, it was thought that perhaps
its inception as a program for the American people would
result in an increase in the amount of other types of life
insurance.
Of course, there are many reasons prompting an
individual to increase the amount of his life insurance—
29
"Savings of Wage Earners and Clerical Workers,"
in Monthly .labor Review, July 1940, p. 132.
58
RGt
UNDER
3o
30- 3?
Jo -J ?
FIND
oveR
7o
r
CHART
c
a
So
fo
t
9
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING- TO
AGE WHO, AS OF 1940, FAVOR LIFE INSURANCE
AS A METHOD OF SAVING
/ o o
59
TABLE IX
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING TO
AGE WHO, AS OF 1940, FAVOR LIFE INSURANCE
AS A METHOD OF SAVING
Favor life insurance for saving?
Age
Yes
Number
Percentage
No
Number
Percentage
Under
30
127
77.9
36
2 2 .1
30-39
71
81.6
16
18.4
40-49
73
87.9
10
1 2 .1
50-59
33
89.2
4
1 0 .8
6§
and
over
15
93.7
1
6.3
60
increased salary, increase in the number of dependents,
etc., so it is impossible to say that the Social Security
Act is the one reason for increases in the amount of life
insurance held by individuals, although it is one certain
fact or.
Edward M. Chase, Annuity Counselor, New York City,
and formerly manager of the Foreign Department, Bank of
New York, makes the following statement:
Sensing the hunger of man for old-age protection,
the Federal Government enacted a Social Security Act.
By an income tax levied upon the pay envelope of the
worker and a like amount of income tax for each such
worker levied upon his employer, thms Aet empowers
the Treasury to amass certain large sums toward oldage pensions. The maximum pension is, however, very
small. It is to be as much as |85 a month only in
very rare cases. Nevertheless, as applied to wage
workers whose savings are often occasional, the Act
has started an enforced and continuous saving for
and on behalf of the wage worker.30
Social Security has, no doubt, made people more in­
surance-minded.
Of the answering group, 62 per cent hold
the same amount of life insurance now as they held in 1935.
However, 32 per cent increased the amount during this fiveyear period and 6 per cent suffered a decrease in the
amount of life insurance holdings.
Breaking down the results of this question among the
Edward M. Chase, "New Uses of Life Insurance," in
The Business Education World, June 1939, p. 837.
61
various age groups, it was found that those below the age
of 40, and those sixty and over, increased the amount of
insurance carried in greater percentage than the other age
groups.
Chart No. 10, and fable X, also show that the per­
centage decreasing the amount of insurance shows a gradual
increase with age to the ove-r-60 group, at which point it
falls to zero.
In the various salary groups the percentage increas­
ing the amount of life insurance over the five-year period
shows a gradual increase along with salary increases.
The
variation in the percentage of those possessing the same
amount of insurance now as they did in 1935, and the varia­
tion in those decreasing the amount is a slight one.
(See
Chart No. 11, and Table XI.)
Although the purchase of additional life insurance
cannot be traced to Social Security legislation alone, it
has probably been a factor in promoting rather than re­
tarding insurance sales.
In addition to making people more
insurance-minded, it has created a "nest-egg* for the pur­
chase of more life insurance among those already insured
and those who held no life insurance at all.
The monthly
benefits from the Social Security program, not being ade­
quate for supporting a comfortable old age in which some
of the luxuries of life as well as the necessities may be
enjoyed, would provide the standard of living desired if
62
No
CHfime
UNDER
30
Ah
DW|?£flse
Ctfb
Rfrotee
OfcReflSfc
/Vo
CHftfi/6£
2WfKEfl*f
bO
AfO
CHHN6&
H/VO
OVfrf^
too
CHART
10
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING TO AGE
WHO HAVE INCREASED, DECREASED, OR MADE NO
CHANGE IN THEIR AMOUNT CP LIFE INSURANCE
BETWEEN 1935 AND 1940
TABLE X
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING TO AGE
WHO HAVE INCREASED, DECREASED, OR MADE NO
CHANGE IN THEIR AMOUNT OF LIFE INSURANCE
BETWEEN 1935 AND 1940
No Change
Increased
Deereased
Age
#
%
#
%
#
%
Under
30
98
60.1
61
37.4
4
2.5
30-39
50
54.9
34
37.3
7
7.8
40-49
58
72.5
14
17.5
8
10.0
50-59
21
60.0
9
25.7
5
14.3
8
6&*6
4
33.4
0
0.0
60
and
over
64
SflLRRy
/Vo
CMMtX.
otcfteffse
Afa
CMN&e
IfilCRtfiSg
oecRfftst
/vo
CHftNoe
A/o
CHAMM?
TtfCfiEffSE
to o
CHART
11
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING TO SALARY
WHO HAVE INCREASED, DECREASED, OR MADE NO
CHANGE IN THEIR AMOUNT OF LIFE INSURANCE
BETWEEN 1935 AND 1940
65
TABLE XI
LOS ANGELES COUNTY WAGE-EARNERS ACCORDING TO SALARY
"WHO HAVE INCREASED, DECREASED, OR MADE NO
CHANGE IN THEIR AMOUNT OF LIFE INSURANCE
BETWEEN 1935 AND 1940
No Change
Increased
#
#
#
%
#
%
or
Leas
45
73.7
13
2 1 .1
3
449
#1001
110
60.7
57
31.4
14
7.7
$2000
$2001
56
6 0 .2
32
34.4
5
5.4
16
5 0 .0
14
43.7
2
6 .2
Decreased
Salary
#1000
to
#3SSo
#3001
to
#5000
66
combined with a monthly income from a retirement or annuity
policy.
In consequence* the anticipated benefits from
Social Security have proved, undoubtedly, to be a "teaser"
for the purchase of other types of retirement income.
This
statement Is supported by the facts revealed in this survey
relative to the types of life insurance which would be
bought today were an insurance program to be commenced at
this time.
Trend toward retirement policies.
This investiga­
tion reveals a definite trend toward the purchase by wageearners of two types of policies— the endowment policy and
the socalled retirement policy.
(See Chart No. 12, and
Table XII.} . Of those now owning life insurance, 25.7 per
cent hold an endowment policy, but of all those now carrying
life insurance 43.7 per cent would buy an endowment policy
if they had it to do over again.
Of those now owning life
insurance, 15.5 per cent hold a retirement policy, but of
all those now carrying life insurance 23.6 per cent would
buy a retirement policy if they had it to do over again.
Of those interviewed, 23.6 per cent would buy a
limited-pay life policy although 33.02 per cent hold that
type now.
A straight-life policy would be purchased by
17.4 per cent, although 49.8 per cent hold that type now.
It is thus indicated that the straight-life and the limitedpay policies have lost favor with wiage-earners, whereas the
66
rypE
of
poLicy
B ought
rN
Starks#t
L I F E
PR ST
PRCFERR t o
Toony
Bought
limited - Pfly
t»Fe
IN
PR ST
PREFERRED!
ToORy
0OUGHT
IN
P R ST
ENDOWMENT
P^EffWED
T*opy
Bought
fN
PR S T
RETIREMENT
PREFERREO
To crn y
CHART
12
TYPES OF INSURANCE POLICIES OWNED AND TYPES
THAT WOULD BE PURCHASED TODAY BY
LOS ANGELES COUNTY WAGE -EARNERS,
67
TABLE XII
TYPES OF INSURANCE POLICIES OWNED AND TYPES
THAT WOULD BE PURCHASED TODAY BY
LOS ANGELES COUNTY WACE-EARNERS,
1940
Type
of
Policy
Past Buyers
Number
Today’s Preference
Percentage
Number
Percentage
Straight
Life
163
4948
59
17-4
Limited-Pay
Life
108
33.0
80
2 3 .6
Endowment
84
25.7
149
43.7
Retirement
51
15.5
81
2 3 .6
69
endowment and the retirement policies have gained popularity
in recent years.
The monthly proceeds from a few thousand
dollars worth of life insurance would, at the age of sixtyfive, provide a comfortable monthly income for the average
wage-earner with Social Security benefits.
This, apparent­
ly, is the opinion of those individuals who, if they were
to start an insurance program now, would purchase a policy
that would endow or pay a retirement income at or near the
age of sixty-five*
The trend away from straight life pol­
icies and toward endowment policies, as indicated by the
opinions of wage-earners, may not be true general trends in
that the opinions of wage-earners concerning what they
would do today may have been molded or influenced by those
in the insurance selling business.
-"push" certain types of policies.
Insurance men, no doubt,
The constant advertising
of any produce usually breeds its popularity even in the
minds of those who have never actually owned it.
Further­
more, these types of policies may be favored or disfavored
by wage-earners in higher-salary brackets than those brack­
ets included in this survey.
New types of buyers in insurance market.
Life in­
surance as a means of saving, has brought into its folds
new types or groups of buyers within the past five years;
— -the woman buyer; the wealthy buyer; the former stock
buyer and the employer of labor.
70
Undoubtedly, the unsettled social and economic
conditions of the past ten years, plus the attempt of the
Government to alleviate such a repetition in the future by
enacting Social Security legislation, have been influential
factors in bringing these new buyers to the insurance mar­
ket— a market which in the past has proved to be as stable
and secure as the Government itself.
Women buyers of life insurance.
Concerning women
buyers of life insurance, Chase has this to say: “While the
interest in Social Security did not start the business woman
to buying life insurance, it has undoubtedly doubled and
trebled the number of women buyers of late.® *
in an article appearing in Good Housekeeping,
Elizabeth Frazer states that twenty-five out of every hun­
dred women throughout the country are gainfully employed;
that forty per cent of this vast army have dependents; and
that out of every four who work, at least one is a married
32
woman.
This partially accounts for the large increase in
the number of women buyers of life insurance.
She further
states:
Edward M. Chase, "Hew Uses of Life Insurance,"
The Business Education World, June 1939, p. 838.
^ Elizabeth Frazer, "Women Who Work," Good House­
keeping, May 1937, p. 34.
*
71
The old-fashioned girl had a hope chest and put
her earnings into linen and embroideries. But times
change, and the modern girl*s hope chest is her in­
sured savings account. ....
That women who work have become more and more
aware of the practical necessity of a definite
savings program is shown by the marked increase in
the number of insurance and annuity policies is­
sued to them in the last three years— a number
which has steadily risen in spite of the acute
depression. The vice-president of a great national
insurance company, whom I interviewed on this sub­
ject,, told me that in 1934 approximately one-fifth
of all the life insurance policies sold by that
company, and at least one-half of all the annui­
ties, had been purchased by women,®3
Former, stock buyers now in insurance market.
Contin­
uing with the ideas expressed by Edward M. Chase on the
subject of life insurance, he further states:
Another newcomer in the life insurance market is
the former stock buyer. Due to the experiences of
1929 and due to the sluggish and uncertain stock
markets of the last years, many investors have
turned from stocks to life insurance as a means of
capital increase. Whether this movement is large
enough in scope and whether it has enough perman­
ence to become an investment trend is still a mat­
ter for discussion. As yet, it has hardly develop­
ed into an American habit; it has hardly become a
new economic trend, Nevertheless, the buying of
various forms of endowment insurance and endow­
ment annuities, has grown in volume decidedly and
definitely in the last five years.34
Wealthy buyers of life insurance.
as follows:
Frazer, Ibid., p . 35.
^
Chase, Ibid.^ pp. 838-39
Chase comments
72
For the past decade there has been a growing
interest among life-insurance buyers as to what
would happen should they live. The social-security discussion has strengthened and emphasized
this interest. During the past ten years, too
many successful men have seen their social and
business intimates reduced to poverty and the park
bench, not to be keenly interested in old-age
security for themselves. Many of them have bought
and are still buying annuities and endowment in­
surance to guarantee their own monthly needs when
they reach sixty or sixty-five years of age. ... 55
group annuities.
As to the subject of group annui­
ties, Chase has this to say:
. . . Not only have the wealthy man and the man
of moderate means been influenced in their invest­
ment thought by the Social Security agitation of
the last four years, but many employers of labor
have been attracted to this idea for their employees.
A great many corporations, both large and small, have
established ..group annuities through life insurance
companies.
The establishment of group annuities by employers,
for their employees, grows in popularity with each month
that goes by*
Group life insurance is:
. . . that form of life insurance covering no
fewer than fifty employees, with or without medical
examination, written under a policy issued to the
employer, the premium on which is to be paid by
the employer, or by the employer and employees
jointly, and insuring only all of his employees
or all of any class thereof, determined by condi­
tions pertaining to the employment, for amounts
of insurance based upon some plan which will pre­
clude individual selection, for the benefit of
persons other than the employer; provided, however,
35 chase, Ibid., p. 839.
Chase, Ibid., p. 838.
73
that when the premium is to he paid by the employer
and the employee jointly, and the benefits of the
policy are offered to all eligible employees, not
less than seventy-five per cent of such employees
„„
may be so ensured. (From the law of several states.)
The purpose of this type of insurance is explained in
excerpts taken from a few of the plans as outlined to the
employees*
The McCray Refrigerator Company of Kendallville,
Indiana, states in their outline:
The Federal Social Security Act provides a minimum
retirement income, but since the Act does not take
into consideration any employment prior to January 1,
1937, and since the benefits are very limited in
scope, McCray Refrigerator Company is inaugurating
a plan to supplement these benefits so that a more
liberal retirement income may be available to each
employee* . . .
It is the purpose of this Plan to coordinate its
future service benefits with the old-age benefits
contemplated under the.Federal Social Security Act
so that an employee joining the Plan will receive an
annual retirement income from both sources equal to
approximately two per .cent of his total earnings
during the period in which he has been a contributor
to the Plan, and, in addition, to provide past serv­
ice benefits for employees eligible for them.38
Campbell*s Soups Retirement and Pension Plan states:
Campbellts Soups Retirement and Pension Plan de­
scribed in this booklet has been drafted to supplement
the Federal old-age benefits by providing, under
certain conditions outlined in these pages, Retire­
ment Income which takes into account continuous
service prior to January 1, 1937.3$
37 The Group Insurance Manual of The Prudential In­
surance C ompany of America, Edit ion of May 1938, p. 6. .
^ Outline of the Memorial Pension Plan, McCray Re­
frigerator Company, Kendallville, Indiana, n.d. pp.5— 6.
^ Retirement and Pension Plan, Campbell Soup Com­
pany, 1938, p. 3*
74
Scott, Foresman and Company, in the Outline of
their Plan, has this to say:
The income provided, by it will be entirely in­
dependent of, and in addition to, any payments
which you will receive under the Federal Social
Security Act*40
It is apparent that Social Security legislation has
been effective in bringing about the instigation of priv­
ate pension plans by numerous companies*
In many instances,
therefore, Social Security benefits will be supplemented
by income from other types of retirement plans.
These
private pension plans will be particularly beneficial to
those who have already reached middle life after working
for a particular business for many years, whereas the oldage benefits under the Social Security Act will provide
more for those men and women now beginning to work*
A few of the large corporations who have put into
effect private pension plans are: McCray Refrigerator
Company, Kendallville, Indiana; 1938; Campbell Soup Com­
pany, Camden, Few Jersey, 1938; Scott, Foresman and Com­
pany, Chicago, Illinois, 1939; Kuhn, Loeb and Company, Few
York, City, 1958; Monsanto Chemical of St. Louis, 194Q;
United Air Lines, 1940; and American Maize-Products, 1940.
4:0 Retirement Annuity Plan, Scott, Foresman and
Company, 1939, p. 3."
The characteristics of some of these private pension
plans, which came into being in 1940, are of interest and
at the same time reflect the willingness of business to care
for its employees, thus showing the importance which busi­
ness attaches to personnel problems*
The Monsanto Chemical
of St. Louis program, provides benefits without employee
contributions for workers receiving less than f250 a month.
The Plan enables women to retire at the age of sixty; the
men at sixty-five.
However, to qualify for pensions at the
retirement age, Monsanto employees must have been ten or more
years in the company*s service.
A novel provision increases
the company*s contribution in case existing old-age benefits
are decreased or eliminated for any reason.
Likewise,
should there be an increase in government pensions, the com­
pany pension will be decreased accordingly.4'*'
United Air Lines* pension plan, besides being the
first for any air line, marks the initiation of a retire­
ment plan to be set up involving pilots or other flying
personnel.
It provides for an employee contribution equal
to 3 per cent of annual earnings up to |3,000.
Pilots,
however, because they will retire five years earlier than
other employees, contribute 4-1/2 to 9 per cent.42
4^ "Pension Programs," Business Week, January 4, 1941,
p. 25.
42 Ibid., pp. 25-28.
76
American Maize-Froducts designed its pension scheme
to provide retirement incomes equivalent to half of regular
45
pay. Employees match dollar for dollar with the company.
government bonds as source of supplementary income.
In the low-income group (fl,000), 44.75 per cent favor
interest and income from government bonds as a means of
supplementing their Social Security annuity.
As the salary
scale ihcreases, this percentage decreases gradually until
the large income group (plus |5,000) is reached, when the
percentage in favor of this type of income again rises.
The
variation among different salary groups is slight, however,a range of only 15 per cent over all groups.
Sales of
United States Savings Bonds have steadily increased since
1935, the year that they went on sale.
Since they are of­
ten the nucleus of funds set aside for the education of
children, for the purpose of homes, for "rainy day" re­
serves, and for old-age security, the increase in sales
volume may be partially due to Social Security legislation
and other influences underscoring the necessity for reserve
funds in old age.
According to the Treasury Department of
the United States, during the ten months of 1935 Savings
45
"Pension Programs," p. 25.
77
Bonds sales amounted to $259,000,825 (maturity value); for
the entire calendar year 1956, $473,515,150 (maturity val­
ue), for the calendar year 1937, #636,419,175 (maturity
value), for the calendar year 1938, $707,291,650 (maturity
value), for.the calendar year 1939, $104,060,000 (maturity
value), for the first ten months of 1940, $1,256,233,750
4
(maturity value), or a total of $4,435,520,550 (maturity value).
Their report further states:
United States Savings Bonds are intended primar­
ily to furnish a type of Government security which
will be attractive to any citizen desiring to lay
aside funds for future use. They are particularly
intended as an investment for savings in relative­
ly small amounts. To safeguard them for that use,
the amount of bonds which any one person may own,
issued in any one calendar year, is restricted to
$10,000 (maturity value). It is hoped thus to en­
courage more widespread holding of Government secur­
ities, and by this means to stimulate a greater
interest in public affairs.
...
The results have been gratifying. An average in
excess of 200,000 investors are buying these bonds
each month.^
It is probable that the secure character of this
type of investment is highly responsible for its popular­
ity, particularly, since the world has been experiencing
a ten-year period of more or less economic confusion.
*4 4
United States Savings Bonds. (Washington, D. C.:
Treasury Department".) p 10.
^
Itid., p. 4.
78
Income from property.
Income from property Is more
popular with the higher-salaried: groups than with the lower.
In the plus-$5,000 group, 53.84 per cent favor it, and in
the |5-5,00Q group 58.62 per cent favor It.
Real estate as an
investment, either as a home or as a source of income, should
be considered as a means of saving.
No attempt was made in
this investigation to determine the percentage of those who
were making payments on a home.
However, a large percentage
no doubt are making such payments.
The Bureau of Statis­
tics, United States Department of Labor, found in its survey
of 14,469 families that 12 per cent of them were making pay­
ments on principal of mortgage on owned home.4'6
Income from stocks and bonds.
Dividends and inter­
est from corporate stocks and bonds were not favored by a
very large percentage of the audience as a method of sup­
plementing Social Security benefits.
From 3 per cent to 27
per cent of the group favored these types of Investment,
stocks being in slightly greater favor than bonds.
Stocks
as a type.of investment, however, are shunned and avoided
by a large percentage of the population, either because of
the degree of risk involved or because of ignorance about
stocks and the stock market.
^6 ^savings of Wage Earners and Clerical Workers,n
Monthly Labor Review, July 1940, p. 135.
79
In July of 1939, Elmo Roper, a marketing and research
expert, was appointed to make a survey of public opinion
about the New York Stock Exchange In order to determine the
ideas held by the public about the functions of the Stock
'
■
‘Exchange.
After polling 5,000 persons in all walks of life
throughout the nation, Roper found that there were many
"'misunderstandings” in the public mind about these functions.
Among them are the following:
Erroneous beliefs: 1.9 per cent of those questioned
thought that' stocks and bonds are not traded on the
Stock Exchange; 30.5 per cent that Government Bonds
are not traded there; 24.2 per cent that grain is
traded there; and 8.7 per cent that livestock Is
traded.
Public interest: 49.7 per cent follow stock market
activities, but 66 per cent said.they and their fam­
ilies have never owned stocks. Of the 1,713 who had
owned stocks, 55.9 per cent still have them but only
29 per cent had bought any within the past few years.
Experience with stocks: Of those who had owned stocks,
2"7.5 per cent' said they had made profits In their
dealings; 44.4 per cent that they had lost; 24.6 per
cent that they had broken even; and 3.5 per cent that
they ”didn*t know.”
Yiews on investments: 23,6 per cent favor real es­
tate; 177.9 per cent G-overnment Bonds; 11.6 per cent
stocks; 10.8 per cent savihgs banks; 9.7 per cent
life insurance; and 1.5 per cent non-government bonds.
Opinions of the Exchange *s economic value: 53.6 p e r '
cent thought "It a necessary institution; 4.8 per cent
a useless institution which should be done away with
entirely. The balance, 41.6 per cent, had no opinion
or didn*t care what was done with the Exchange.*?
"Exchange Survey,” The Pathfinder Magazine. The
above clipping contained, no,information as to date, page,
etc., of the magazine.
80
Other means of supplementing Social Security income.
In the highest salary group alone (plus $5,000), there was
the expression that other means than those suggested in the
questionnaire would he in favor.
Although only 1.54 per cent
of the entire group of those making a selection mentioned
miscellaneous means of supplement, 23 per cent of this high­
est salary group mentioned them.
Among these means are
found real estate mortgages, the investment trust, other
pensions, continued work, and individual saving.
Most of
these means can he used only by those who can accumulate,
or have accumulated, considerable capital.
Savings hanks were mentioned by only 1.54 per cent of
the entire answering group.
Social Security and immediate reserves. Bo you feel
that the old-age Benefit feature of the Social Security Act
has lessened the necessity for other forms of saving?
This
question was asked directly to determine the ideas of the
wage-earners toward private thrift programs.
Of the 400 in­
terviewed 291, or 72.75 per cent, believe that the possi­
bility of sometime receiving Social Security benefits has
not lessened the necessity for other forms of saving.
The -
opinion was expressed by 26.25 per cent that it has somewhat
lessened the necessity for other forms of saving, while 1
per cent of the number did not answer the question.
"Rainy day” reserves are still as important to possess
81
as they were before the days of unemployment insurance, was
the opinion of 79 per cent of the 400 interviewed; not quite
as important in the opinion of 18*75 per cent; while 2.25
per cent of the 400 made no answer to the question.
Summary*
The statement made by Edward M. Chase,
Annuity Counselor, in his article, "The Benefits of Annui­
ties," sums up the situation thus: "We live in a world that
is changing so rapidly that menTs hearts are troubled,for the
A Q
future, and they seek security more than quick gain."^
The United States Government has launched a program
designed to promote security through the individual saving
channel, by safeguarding against possible future losses—
loss of jobs, savings, and homes.
The amounts saved by the
individual are accumulated in a government reserve from which
that person is paid a pension in later life.
This Federal
plan is not meant to check or retard any private savings
program which the individual might start and operate to pro­
vide security for himself and his dependents.
It is not in­
tended as a substitute for private thrift plans.
As Elizabeth Frazer says in a published article, the
Federal Old-Age Tax is placed upon employers and employees
4:8 Edward M. Chase, "The Benefits of Annuities," The
Business Education World,. January 1935, p. 837.
82
for one purpose— to provide workers with an income at sixtyfive and thus create a bulwark against complete destitution.
She further states:
Of necessity these pensions are minimum subsist­
ence incomes, and they should be supplemented when­
ever possible by private thrift programs. The pen­
sion provisions of the Social Security Act, throwing
the needs of old age into bold perspective, should
prove a stimulus to all men and women to take careful
thought for the future and to build for tomorrow as
well as for today.
The compulsory nature of the provisions emphasizes
the widespread need for voluntary habits of thrift.
For it is eternally true beyond all peradventure,
that what we do for ourselves we value more than
what is done for us.49
It has been the purpose of this chapter to determine
the trend of the wage-earner*s th&ught toward thrift habits
and to ascertain what types of private thrift programs are
in favor or are being used today— five years after the pass­
age of Social Security legislation.
In submitting the Amended Social Security Act to
Congress, the Ways and Means Committee reported that "with
limited funds available for this type of insurance protec­
tion, individual savings and other resources must continue
to be the chief reliance for security."
This investigation reveals that life insurance occu­
pies first place among these "individual savings and other
resources.”
Insurance was named by 79 per cent of the
audience of 400 as their choice of method for supplementing
Social Security income; 82 per cent of the answering audi­
49
Elizabeth Frazer, "Women Who Work," Good House­
keeping, May 1937. p. 108.
83
ence name insurance.
There is a definite trend toward the
purchase of retirement and endowment policies; by wageearners in the salary brackets surveyed, a trend away from
straight-life and limited-pay life policies.
There are new
types of buyers in the life insurance market-^buyers who
have come to life insurance in the past five years.
These
new groups of buyers consist of the wealthy, the former
stock buyer, the woman buyer, and the corporation buying
group annuities for its employees.
Real estate occupies second place as a choice of in­
vestment, the income from which would supplement Social
Security benefits.
Of those answering the questionnaire,
30.6 per cent prefer this type of investment.
Government Bonds represent the third choice of the
group interviewed,
27 per cent favoring the bonds.
Income from stocks and bonds are less in favor than
any other type of investment.
Of those answering, 13.62
per cent would use the income from them to supplement their
pension; 5.9 per cent would use corporate bonds.
Only 1.54 per cent mentioned a savings bank account
and the same percentage named'other means than those enum­
erated in the questionnaire.
Among the last mentioned ap­
pear the investment trust, work, and real estate mortgages.
Of the group, 70 per cent admitted the necessity
for an income in addition to that provided by the Social
84
Security Act.
However, it is apparent that many are not
making a salary that would allow much investment; 78 per cent
of them, though, are paying premiums on life insurance.
Social Security legislation has been a constant influ­
ence toward- the inception and promulgation of private thrift
programs.
It has promoted the buying of life insurance; it
has influenced the employer of labor to provide supplementary
pension plans for his family of employees; it has strengthened
the idea of security and safety in investments; and, above
all, it has emphasized the advantages, privileges, and neces­
sity of independence in old age for all individuals.
CHAPTER Y
FUTURE PROBLEMS OF.SOCIAL SECURITY
With, many federal legislative measures there usually
arises a time when weaknesses are discovered, when amend­
ments are deemed necessary, and when even their constitu­
tionality is challenged.
This is true, especially, with
social legislation such as the Social Security Act, which
affects millions of individuals and thousands of business
units; legislation which requires an intricate and compli­
cated system of record, keeping and a large personnel to
enforce, check, and keep in motion.
problems come up for solution.
As time passes, various
Public opinion and criticism
usually brings these problems to the fore.
One of the first
problems that the Social Security Act had to face was a test
of Its constitutionality, which was attacked on the follow­
ing four points:
1.
The federal aid provisions of the Act. By grant­
ing federal aid to the states, some contended that the
government was spending money for purposes other than those
permitted in the Constitution, taking the money of tax­
payers and spending it on objects not constitutionally per­
mitted to it, and coercing the states on penalty of suffer­
ing a financial loss if they did not conform to a set of
rules and regulations laid down by the federal government
in matters which were not a part of its legitimate concern.
2.
Tax powers are here not being used to obtain
revenue but to compel the states to enact unemployment in51
surance laws.
3.
Unemployment insurance contributions required
from employers and employees constitute the taking of prop52
erty without "due process of lav;.”
4.
The payment of old-age pensions launches the
federal government into the performance of functions not
specifically delegated to it by the Constitution.^
However, the taxing provisions of the Federal Secur­
ity Act were held constitutional by the United States Su­
preme Court on May 24, 1937.
In August, 1939, five years after the passage of the
Social Security Act, the President signed amendments which
liberalized the social security program initiated by the
original Act.
Concerning this procedure, Roberts states:
Congress, realizing that the family is an economic
unit, and that security for the family means pro­
vision not only for the wage-earner but also for his
dependents, provided supplementary benefits for wives,•
children, and survivors of subject e m p l o y e e s . 54
Prior to these amendments, the wage-earner himself
Paul H. Douglas, Social Security in the United
States.pp. 310-321.
54
Roberts and Kamph, Social Security Accounting,
1939, Supplement, p. 1.
■was the only one who could receive monthly benefits; there
was no provision made for the rest of his family upon his
death.
The 1939 amendments also provided for a Federal Old-
Age Tax on an employee over the age of sixty-five who con­
tinues to work in subject employment after reaching sixtyfive; made changes in the monthly benefit base and pushed
forward from 1942 to 1940 the payment of monthly benefits; and
changed the Old-Age Insurance Tax Rate, fixing it for the
years 1940-1941-1942 at 1 per cent Instead of the rate which
would have applied under the former law, namely 1-1/2 per
cent.
These amendments also dispensed with such a large
reserve and placed the program on a more "pay as you go”
basis.
The changes so far mentioned were brought about after
the law had been In operation several years and after a
thorough study had been made of the law in actual operation.
There are, no doubt, many weaknesses yet existing in the
program and therefore many changes yet to be made.
Public
criticism of these weaknesses will undoubtedly result in
their elimination.
Does social security promote thrift and individual
Initiative?
Some authorities go so far as to express the
opinion that the whole basic principle of forced saving by
payroll taxation is wrong.
They feel that such a program
discourages real thrift and stifles initiative in the in-
88
dividual; that the government is attempting to go into the
life insurance business without giving the individual all the
benefits of life insurance, and that since the reserve is
invested only in government bonds the plan does not perform
a proper investment function in providing funds for invest­
ment in needed enterprise.
Robert A. Taft, United States Senator from Ohio, has
stated that:
. . . The New Deal has started a socalled insurance
plan of Its own in the old-age pension title of the
Social Security Act. The only trouble is that it
doesn*t perform any of.the best functions of life
Insurance. The premiums are obtained through a pay­
roll tax, a compulsory saving. There Is no such
thing. Thrift must be voluntary.or it is not thrift.
Compulsory deductions from payroll are taxes, not
savings. The man who suffers that deduction is in­
clined to save nothing else because the government
is going to look after his old age and his family.
Real thrift is discouraged.
The wise man, however, will do his own saving.
The government plan is not sound as an Insurance
plan. To provide old age pensions in the future,
taxes will have to be raised to supplement the in­
come from the reserve. The expense is so great
that old-age pensions will never be more than enough
for a bare living because of the taxpayers* objec­
tion to supporting other people. The plan does not
perform the investment function of life insurance.
The reserve is invested only in government bonds.
That is, the government loans itself the money col­
lected, and spends the money to pay current deficits.
We might as well recognize that the only people who
can support those who live without working are the
people who are working at or about the same time.
. . . But let us keep the government out of the
89
insurance business. It does not promote thrift, and
it provides no funds for investment in needed enter­
prise.00
Whether the Social Security program does discourage
voluntary savings and thrift is a matter for argument.
It
- may be that most people figure that if they get their benefits
at sixty-five, all right, but for the present are disregard­
ing such saving and are proceeding toward a security program
of their own Just as though there were no Social Security Act
in existence.
This statement is supported by the fact that
75 per cent of the 400 wage-earners interviewed through this
survey, expressed the belief that the possibility of some­
time securing Social Security benefits has not lessened the
necessity for other forms of saving, and even a greater per­
centage— 79 per cent— say that it is Just as important to
save for a "rainy day" as it was before the days of Social
Security old-age and unemployment insurance.
Population problems and cost difficulties.
The prob­
lem of maintaining the aged may become more difficult and
serious as time goes on because of the increase in the num­
ber andproportion of aged due to a declining birth rate and
a declining mortality rate.
Naturally, the more aged In
55
Robert A. Taft, "A Great American Institution," in
Yital Speeches of the Day,.May 1940, p. 443..
90
comparison with the number of workers, the more difficulty
those younger workers will have in providing for the older
groups* retirement and care.
As each decade goes by, we
find a greater number of people reaching old age and living
through a longer period of retirement from work.
Science
and medicine, by providing longevity, are at the same time
inadvertently placing a heavier burden on the younger work­
ing group.
The following opinions on this point are ex­
pressed by Margaret Grant Schneider:
...
Public opinion is and will continue to be
more and more concerned with the question of secur­
ity for the aged. Declining birth and mortality
rates are resulting in a rapid increase in the num­
ber and proportion of old people in the population.
Consequently, the fact that the problem of maintain­
ing the aged will be more serious and difficult in
the future than it has in the past is now every­
where recognized.
Improvements in hygienic measures and in methods
of prevention and treatment of disease have unques­
tionably increased the average length of life, it
is true that this is largely due to Improved mor­
tality rates in the younger age groups. This means
that a larger number and proportion of persons reach
old age; then, too, the life expectancy of the middle-and older-age groups have been somewhat length­
ened. However, this longer life has not apparently
lengthened the period of a working career. It may
be true that many old people are more vigorous at
sixty or sixty-five than formerly, but, on the
other hand, the possibility of obtaining employment
in later years is more and more difficult. This
means a greater number of persons reaching old age
have to be supported during a longer period of years.
Still more important, however, is the marked de­
cline in birth rates which means a smaller proportion
of people in the younger working-age groups.
• The progressive increase in the proportion of old
to young and middle-aged persons, and the granting of
91
old-age pensions at a given age, imposes a heavier and
heavier burden upon the working population. Of special
importance, therefore, is the relation between the num­
ber and proportion of old persons as compared with per­
sons in the active working years. In a certain group
of countries the number of people over sixty-five in
1890 was 10 per cent as many as between fifteen and
sixty-five., By 1930 this proportion had increased to
14 per cent. It may reach 25 per cent by 1975.
(In­
ternational Labor Office, Compulsory Pension Insur­
ance, Geneva, 1933, page 138.) In.other words, it is
possible that there will be one aged person to every
four in the active working-age group. This factor
alone will undoubtedly profoundly affect the public•
thought on such subjects as the retirement of all
over sixty-five. A plan of this kind would mean that
by 1975 the cost of supporting each old person would
be borne by only four younger workers.
It is clear that future plans for providing security
for the aged and for distributing the burden will be
influenced by changes in population distribution.
Old-age security will become but a part of population
problems which in themselves will have great and farreaching importance.
Changes in population distribution will no doubt have
a great influence on future plans for providing security for
the aged.
The burden may have to be distributed in an en­
tirely different manner and by different means.
Population
problems have been numerous in the past; probably social
security will become one of them in the future.
With changes
in population distribution are bound to come changes in the
Social Security program— changes in benefits, in payroll
tax rates, and in employment coverage.
Margaret Grant Schneider, . . . More Security for
Old Age. (New York: Twentieth Century Fund, Inc., 1937),
Part I, Chapter 1, pp. 15-17.
9£
Loss of rights.
Under the present Social Security
program, an employee must have worked a certain number of
years in order to build up a reserve that will provide him
with monthly benefits at sixty-five.
A man forty-five may
have worked eight or nine years, paying social security taxes .
all of this time, and then he becomes ill or disabled.
He is
not fully insured because he does not have the forty quar­
ters of coverage necessary for full coverage, or he has less
than one quarter of coverage for each two quarters elapsing
after 1936 and up to the time he became sixty-five.
He is
not currently insured because he has been ill and has not
been paid wages during six of the twelve quarters preceding
the quarter in which he died (assuming death at sixty-five).
Therefore, he is not insured at all, and neither he nor his
survivors ever receive anything in return for his social
security tax payments.
True, his survivors would have re­
ceived survivorsT benefits had he died within eight or nine
years after ceasing to work; survivors are insured for the
time covered by the ¥/age-earner’s taxable employment in cases
where less than forty quarters have been secured.
Here, it
would seem there is another weakness in the present program—
the risk of medical costs and wage loss during illness or
during temporary or permanent disability is not covered.
Insurance rights and provision for the survivors may be lost
even after a long period of social security tax payments
93
by the employee.
The following excerpt, taken from the Fifth Annual
Report of- the Social Security Board, states:
. . . There is one major risk to economic security
for which there is yet no provision in the Social
Security program, and only inadequate provision under
other legislation— the risk of medical costs and of
wage loss during illness or during temporary or per­
manent disability. . . .
provisions to prevent sickness and maintain health
and earning power and to offset the wage losses occa­
sioned by disability are of direct moment to the pro­
grams already in operation. The present unemployment
compensatioh laws and the funds they provide are de­
signed to safeguard unemployed wage-earners who are
available for jobs. Yet there is obvious injustice
in giving benefits to such workers and denying them
to a worker who is out of a job because he is sick,
even though he may have an identical record of past
covered employment and may be suffering the same wage
loss. Xt is impossible to face with equanimity the
situation in the hoMe of a worker who is insured
under the Federal old-age and survivorsr insurance
system when he becomes sick or disabled.but dies after
a period of disability during which his insured status
has lapsed. . . .
With long-continued illness, how­
ever, in which costs-of medical care are commonly be­
yond the resources of families of small means, there
will often be a loss of these insurance rights, and,
in most eases, a total loss of provision for the
survivors.
Amount of monthly income indeterminable.
It is im­
possible for an individual to insure what his or her Social
Security benefit will be at sixty-five.
The amount of the
benefit depends upon too many conditions over which the in-
Annual Report of the Social Security Board,
1940.
Page l5.
94
dividual has no control; earnings, years worked, type of em­
ployment, and later legislation.
There is no assurance that
the Social Security Act will not he repealed; there is no
assurance that the benefits will not be decreased; the in­
dividual has nothing to show for his social security pay­
ments except a receipt from his employer; there is nothing
to keep various subsequent administrations from nplaying”
with the Act.
Also, in a sense, there is a certain **in-
security" in the Social Security program.
As to this,
Thorp and Taqua state:
Congress may make further amendments, changes or
revisions. With present liberal survivor-benefits to
widows, children, and parents, Congress may have to
cut some other benefits. In such cases, an insured
individual has no recourse. He has no contract.
He cannot sue the Government. . . .
There is nothing to prevent later Administrations
from raising Social Security taxes, or reducing
Social Security benefits. Congress may, as it has
just done, increase benefits for those near retire­
ment age and decrease benefits for those of younger
years. . . .
Ho individual can know what his or her Social
Security pension will be at sixty-five. The pension
will depend upon earnings, upon years worked, upon
later laws.^8
Millions not covered by the Act. Another of the much
discussed present weaknesses of the Social Security Act is
the inadequacy of coverage; many types of employment are not
ance .
Thorp and Jaqua, Social Security and Life Insur­
pp. 26-87.
95
covered by the Act and, therefore, those employed under such
conditions are nleft out in the cold” so far as monthly
benefits at sixty-five are concerned.
One of the largest •
groups for which no provision has been made, is the selfemployed; the people who own and operate businesses of their
own.
They are not subject to the tax and therefore will not
qualify for benefits when they become aged.
Other classes
and groups who are in the same situation are those in agri­
cultural employment, in domestic service in a private home,
engaged in non-profit educational and charitable institu­
tions, and public employees.
Concerning this, the Social
Security Board comments:
The greatest single area for future development
of the program of old-age and survivors* insurance
lies in the extension of its protection_to employ­
ments now excluded from coverage and its relation
to other programs such as veterans* legislation,
the railroad retirement system, and other Federal
retirement systems.
. . .
The present exclusions have been due largely to
administrative and other difficulties arising from
the social, economic, and legal characteristics of
the major excepted pursuits. Coverage of farm
workers and domestic workers in private homes pre­
sents special administrative problems, for example,•
because the groups are large and scattered and, in
general, are not paid through the devices common to industrial and commercial payrolls. Self-em­
ployed persons are a heterogeneous group of some
11-12 million persons in a wide range of occupations
and circumstances.
1940.
59 Fiftfr Annual Report of the Social SecuritylBoard,
Page' 53.
96
Benefits inadequate for proper subsistence. Are the
monthly benefits payable under the Social Security Act ade­
quate for the support of an aged individual.?
If not, this
legislation has failed dismally in its avowed purpose,
Hargaret Grant Schneider has this to say on the subject:
If a retirement or old-age pension system is to
accomplish its purpose it must provide for the
maintenance of minimum standards of health and
decency for the insured. Otherwise, many of the
pensioners will still be partially dependent upon
relief or the charity of friends and relatives.
Pensions should, therefore, offer something more
than bare emergency relief, even though our national
income and resources may not be ample enough to
afford real comfort. The determination of what
amount of money will purchase "decency" or "com­
fort" is difficult if not impossible in a country
with such diversity of conditions as the United
States. ■Wide variations exist in both standards
of living and in the cost of maintaining these
standards among racial and economic groups, geo­
graphic regions and cities of various sizes, and
especially between urban and rural communities. . . .
Reliable studies on minimum costs of living
for aged persons under these varying conditions
are almost non-existent. A few case studies made
by various social agencies, of |50 to $40 a month
for aged single persons, and of $50 to $60 for
married couples is barely enough .to maintain an
acceptable standard of life.50
Summary. There is the possibility that the present
Social Security program may create the idea among the
Margaret Grant Schneider, . . . More Security for
Old Age. (New York: Twentieth Century Fund» Inc".",' 1§'3"7),
Part II, Chapter 4, pp. 123-124.
97
majority of the wage-earners that when they are aged, they
will have nothing to worry about— the government will take
care of them!
Should this be the ^sase, there would natur­
ally exist the tendency to "spend as you go," and there
would be little saving effected through individual initia­
tive.
Xn order for this idea to become exceptionally preva­
lent, however, there would have to exist in the minds of the
people an absolute faith in the present government social
security program, and full conviction that adequate payments
would be forthcoming to each individual as he became aged.
However, such faith in the continuity and adequacy of the
present program does not exist at the present time.
People
are somewhat skeptical of the present program and are there­
fore proceeding to develop private investment programs of
their own.
Declining birth and mortality rates, resulting in a
larger proportion of older people in the population, bring
forth the problem of lightening the immense burden facing
the^ young working population in caring for the aged in the
future.
These factors also create the problem of handling
the increased costs of caring for the aged; such costs hav­
ing to be borne by a comparatively small group of young
working people.
The fact that a wage-earner may make Social Security
tax payments for a period of nine years, and then get nothing
98
in return, either in the way of monthly income for himself
at sixty-five or in income for his survivors, certainly pre­
sents a weakness in the existing Social Security program
that must be remedied some time.
Such a situation is neither
fair to the wage-earner nor to the society in which he lives.
The large groups of wage-earners who are outside the
program due to the type of employment they are engaged in,
present a field for improvement in the present program of
social security.
Many of these wage-earners, such as farm­
ers, domestic servants in private homes, and the self-employ­
ed, will be as much in need of an income at sixty-five as
those who are covered by the present program.
This makes it
imperative to broaden this program to include the groups who
are now "left on their own.”
Some of the "insecurity” should be eliminated from
the Social Security program, such as the following unde­
sirable conditions:
(aj
Various factors determining the amount
of the monthly benefit make it impos­
sible for an individual to determine
what his benefit will be at the age
of sixty-five;
(b)
There is no assurance that the Act will
not be repealed or that it will not be
torn apart by future Administrations';
(c)
The individual has nothing to show for
his Social Security payments and,
therefore, no recourse if future
administrations decrease benefits or
eliminate certain groups from benefit
payments*
99
There is likewise a possibility that the benefits pay­
able under the present Act will be insufficient and that a
certain amount of "direct relief" will have to be paid by
means of general taxes even though a Social Security Act is
in operation.
If the benefits paid are not enough to enable
an individual to maintain a comfortable standard of health
and decency, then payments to him from other sources will
have to be forthcoming.
Thus, the Social Security Act will
have failed in its mission,- that of caring for the aged
through a legislative program designed to reduce the burden
of children and relatives, and designed to reduce taxes by
elimination of direct relief.
CHAPTER VI
CONCLUSIONS AND BECOMMENDATIONS
Conclusions,
A survey of 400 wage-earners in the Los
Angeles County area permits one to arrive at some definite
conclusions relative to their opinions as to the adequacy,
fairness, and probable retention of various provisions set
forth in the social Security Act.
It Is possible to draw
conclusions as to the relationship of the Act to individual
thrift programs, and to state some of the weaknesses that
appear in the present Social Security system.
The following
conclusions resulted from this study:
1.
Federal legislation for the aged has been promoted
and retarded by changes in the business cycle and public
opinion.
2.
Federal legislation for the aged was given impetus
by public criticism and through various surveys of institu­
tional care for the aged; through the slowness and inability
of the forty-eight states to adequately provide for the aged;
and because direct relief was resulting in enormous costs.
3*
The wage-earner, in particular, has benefited from
this Federal legislation.
4.
must be forced.
The wage-earner believes that saving for old-age
101
5.
A payroll tax is favored by half of the wage-
earners as a method of forced saving.
6.
The Social Security Act does not provide an adequate
retirement income; nevertheless, the program should not be
abandoned.
7.
Wage-earners are of the opinion that the retirement
age of sixty-five should be lowered.
8.
The increasing of benefits and the lowering of the
retirement age would be impracticable at the present time
because of the cost element involved.
9.
quite as many wage-earners would object to an in­
creased Soeial Security tax to provide greater benefits as
would favor it.
10.
Wage-earners are somewhat skeptical of the present
Social Security program and are therefore proceeding on
private investment programs of their own.
11.
Social Security legislation has emphasized thrift and
brought the realization that benefits should be supplemented
by other sources of income, namely:
Life insurance .
Real estate . .
Government Bonds
Stocks . . . , .
Bonds ........
Other means . .
12.
.
.
.
.
.
favored by 82 per cent
favored by 3Q per cent
favored by 27 per cent
favored by 13 per cent
favored by © per cent
favored by 1 per cent
Social Security legislation has been instrumental in
creating a definite trend toward the purchase of endowment and
1G2
retirement policies by wage-earners in certain salary brack­
ets, and away from straight-life and limited-pay life insur­
ance,
13.
Social legislation for the aged has had a share
in bringing new classes of buyers to the insurance market,
namely: the wealthy buyer; the former stock-buyer; the woman
buyer; and the corporations that buy group-annuities for
their employees*
14.
Decreasing birth and mortality rates will even­
tually place a heavy burden on the young working class in
caring for the greater proportion of the aged; and will cre­
ate enormous cost problems*
15.
Under the present Social Security setup a worker
may lose his insured status and benefits for his dependents
even after years of Social Security tax payments,
16.
The Social Security program excludes many groups
of workers*
17.
There is some "insecurity" in the Social Security
program; benefits not determinable in advance; repeal possi­
ble; decreases in benefits possible through later legisla­
tion; and the individual has nothing to show for his Social
Security payments*
18.
Direct relief may still have to be given if
benefits under the Social Security Act are insufficient to
carry out the purposes of the Act.
103
Re commendations.
In formulating legislation that pro­
vides an income for the aged, the opinions of wage-earners
should be considered - yet those in closer touch with the
administrative side of such a social program must also con­
sider administrative problems such as cost.
The wage-earner
is willing to take a monthly income from Social Security
consisting of as much as he can get and as early in life as
he can obtain it; he may be negligent in not considering
that the money must come from some source.
The wage-earners
in the salary brackets surveyed, are of the opinion that the
retirement age should be lowered and the monthly benefits
increased.
To do this would result In a tremendous increase
in the cost of the program* such cost having to be borne
either by general taxes or an increased payroll tax on both
employer and employee.
Since business is already burdened
with enormous taxes* this would not seem advisable.
Unless there Is some method found tp support a Social
Security program that provides greater monthly benefits
earlier without increasing taxes on business, it is recom­
mended that the retirement age of sixty-five and the amount
of monthly benefits be left unchanged*
At such time as busi­
ness is relieved of other taxes, payroll taxes might be in­
creased to comply with the wishes of the wage-earner concern­
ing age and amount of benefit,
Again, when the employer, who
pays Social Security taxes but receives no monthly Social
104
Security benefit, is brought within the influence of the Act,
his objection to payroll taxes may be less pronounced.
At
present, business objects to absorbing more taxes in favor of
the wage-earner*s old age.
Forced saving through a Social Security program should
be retained, but broadened to include other groups and changed
to eliminate possibility of the loss of one’s insured status.
The government should periodically issue a "receipt** to
the wage-earner so that he will have something legally valid
to show for his Social Security payments.
Wage-earners should not rely on Social Security bene­
fits to support them in their old age but should continue on
thrift programs of their own to supplement partially inade­
quate Social Security benefits.
Additional studies that might be made.
As this inves­
tigation progressed, several questions came to mind that would
serve as problems for future investigation.
It would be inter­
esting and valuable, for instance, to compare with the opinions
of wage-earners the opinions of employers on the various pro­
visions of the Social Security Act.
Also, what would be the
opinions of those now excluded from the Act; would they pre­
fer to come within the Act?
The incidence of Social Secur­
ity payroll taxes would serve as another problem for investi­
gation.
What is happening to the money paid in as Social
105
Security taxes?
To what extent, if any, is the money being
used to pay usual government expenses?
Has Social Security
legislation afforded any decrease in taxes that provide
direct relief for the aged and needy?
These investigations
would provide valuable information for anticipated legis­
lative measures.
BIBLIOGRAPHY
BIBLIOGRAPHY
A.
BOOKS
Douglas, Paul H., Social Security in the Baited States.
First edition. Hew York: Whittle sey House,' 1936.
384 pp.
Roberts, Francis V., and H* H. Kamph, Social Security
Accounting. Los Angeles: Charles R.' Hadley Company,
IS38. 294 pp.
_______, 1939 Supplement, Social Security Accounting.
74 pp.
Schneider, Margaret Grant, and the Committee on Old-Age
Security of The Twentieth century Fund, Inc., More
Security for Old Age. Hew York: Twentieth century
Funl", ' 3 h c~l957. ^ 9 1 pp.
B.
PERIODICAL ARTICLES
Chase, Edward M . , "The Benefits of Annuities," The Business
Education World, _____ :360, January 1935 .. .
_______ , "Hew Uses of Life Insurance," The Business Education
World,
:857-9, June 1939.
"Does it Pay to be Thrifty?" The American Magazine. 126:152,
September 1938.
.
Frazer. Elizabeth. "Women Who Work." Good Housekeeping,
104:34-107, M a y ,1937.
,
.
Maier, Howard, "The Banker Doffs His High Hat," Reader’s
Digest, 37:21, Ho. 221, .September 1940.
"Operation of Old Age Pension Systems In the United States
in 1931. Monthly Labor Review, vol. 34, Ho. 6, Table 5,
page 1266, June 1932.
"Pension Programs," Business Week (Ho. 592): 25 and 28,
January 4, 1941.
"Savings of Wage Earners and Clerical Workers," Monthly
Labor Review, 51:119-139, July 1940.
-
108
Stout, Wesley Winans, editor, "Tomorrow, * Saturday Evening
Post, 215:24, March. 8, 1941.
Taft, Robert A., "A Great American Institution," Vital
Speeches of the Day. 6:443, May.1940,
. "Exchange Survey," a clipping from The Pathfinder Magazine.
No information as to date, etc.
C.
BULLETINS AND REPORTS
Fifth Annual Report of the social Security Board. 1940.
Washington, D. C.: tf. S. Government Printing office,
1941. 208 pp.
Group and Wholesale Insurance Manual. May 1938 edition.
Published by The.Prudential insurance Company of
America. 0rd.7910, 1958, 64pp.
Outline of The Memorial Pension Plan for Employees of
McCray Refrigerator company, Kendallville, Indiana, n.d.
Retirement Annuity Plan. Outline for Employees of Scott,
Foresman and Company, 1939.
Retirement and Pension Plan, Applying to Monthly Earnings
up to |2b0.00 for Employees of Campbell Soup Company,
(Central Division} 1938,
Retirement Plan for Employees of Kuhn, Loeb and Company,
T 9M
T
---
Security Income. Published by The Northwestern Mutual
life Insurance Company.
Social Security in America. Published for The Committee
on Economic Security, by The Social Security Board.
Washington, D. G.: U. S. Government Printing Office,
1937. 592 pp.
Stewart, Maxwell S., editor, Pensions After sixty?
Public Affairs Pamphlets, Ho. 46. New York: r
Public Affairs Committee, 1940. 32 pp.
109
"The Cost of American Almshouses.n Bulletin of the XT. S.
Bureau of Labor Statistics, ETo. 386. Washington, ,
D. C.: XX. S. Government Printing Office, 19B5.
Thorp, Jr., Abner, and Albert R. Jaqua, Social Security
and Life Insurance. Cincinnati, Ohio: The Diamond
I^e1uTlet1ni7'T939. . 59 pp.
United States Savings Bonds. Washington, D. C.: Division
of Savings Bonds, Treasury Department. 10 pp.
APPENDIX
A
COPY OF THE OLD AGE AND
SURVIVORSf.BENEFITS SECTION
OF THE SOCIAL SECURITY ACT
PUBLIC— No. 379— 76TH CONGRESS
CHAPTER 666— 1ST SESSION
H. R. 6635
AN ACT
To amend the Social Security Act, and for
other purposes.
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled, That
tliis Act may be cited as the "SocTalSecurity Act Amendments
of 1939".
jft
age
TITLE II— AMENDMENT TO TITLE II OF THE SOCIAL SECURITY ACT
Sec. SOI. Effective January 1, 1940, title II of such
Act is amended to read as follows:
"TITLE II— FEDERAL- OLD-AGE AND
SURVIVORS INSURANCE BENEFITS
"FEDERAL OLD AGE AND SURVIVORS
INSURANCE TRUST FUND
"Sec. 201. (a) There is hereby created on the books of
the Treasury of the United States a trust fund to be known
as the ‘Federal Old-Age and Survivors Insurance Trust Fund‘
(hereinafter in this title called the ‘Trust Fund*).
The
Trust Fund shall consist of the securities held by the .
Secretary of the Treasury for the Old Age Reserve Account
and the amount standing to the credit of the Old Age Reserve
Account on the books of the Treasury on January 1, 1940,
which securities and amount the Secretary of the Treasury
is authorized and directed to transfer to the Trust Fund,
and, in addition, such amounts as may be appropriated to
the Trust Fund as hereinafter provided. There is hereby
appropriated to the Trust Fund for the fiscal year ending
June 30, 1941, and for each fiscal year thereafter, out of
any moneys in the Treasury not otherwise appropriated,
amounts equivalent to 100 per centum of the taxes (includ­
ing interest, penalties, and additions to the taxes) re-
112
ceived tinder the Federal Insurance Contributions Act
and covered into the Treasury.
" (b) There is hereby created a body to be known
as the Board of Trustees of the Federal Old-Age and
Survivors Insurance Trust Fund (hereinafter in this
title called the 'Board of Trustees1} which Board of
Trustees shall be composed of the Secretary of the
Treasury, the Secretary of Labor, and the Chairman
of the Social Security Board, all ex officio.
The
Secretary of the Treasury shall be the Managing
Trustee of the Board of Trustees (hereinafter in this
title called the 'Managing Trustee*}. It shall be
the duty of the Board of Trustees to—
n (l) Hold the Trust Fund;
"(2} Report to the Congress on the first day
of each regular session of the Congress on the
operation and status of the Trust Fund during
•the preceding fiscal year and on its expected
operation and status during the next ensuing
- five fiscal years;
”(3) Report immediately to the Congress when­
ever the Board of Trustees is of the opinion
that during the ensuing five fiscal years the
Trust Fund will exceed three times the highest
annual expenditures anticipated during that fivefiscal-year period, and whenever the Board of
Trustees is of the opinion that the amount of
the Trust Fund is unduly small.
The report provided for in paragraph (S) above shall
include a statement of the assets of, and the dis­
bursements made from, the Trust Fund during the
preceding fiscal year, an estimate of the expected
future income to, and disbursements to be made from,
the Trust Fund during each of the next ensuing five
fiscal years, and a statement of the actuarial
status of the Trust Fund.
"(c) It shall be the duty of the Managing Trustee
to invest such portion of the Trust Fund as is not,
in his judgment, required to meet current withdrawals.
Such investments 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
113
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
United States may be issued under the Second Liberty
Bond Act, as amended, are hereby extended to author­
ize the issuance at par of special obligations ex­
clusively to the Trust Fund.
Such special obliga- •
tions shall bear interest at a rate equal to the
average rate of interest, computed as to 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 a 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. Such special obligations
shall be issued only if the Managing Trustees de­
termines that the purchase of other interest-bearing
obligations of the United States, or of obligations
guaranteed as to both principal and interest by the
United States on original issue or at the market
price, is not in the public interest.
"(d) Any obligations acquired by the Trust Fund
(except special obligations issued exclusively to
the Trust Fund) may be sold by the Managing Trustee
at the market price, and such special obligations
may be redeemed at par plus accrued interest.
"■{e} The interest on, and the proceeds from the
sale or redemption of, any obligations held in the
Trust Fund shall be credited to and form a part of
the Trust Fund.
n (f) The Managing Trustee is directed to pay from
the.Trust Fund into the Treasury the amount estimated
by him and the Chairman of the Social Security Board
which will be expended during a three month period
by the Social Security Board and the Treasury^Depart­
ment for the administration of Title II and Title 7TII
of this Act, and the Federal Insurance Contributions
Act. Such payments shall be covered into the Treas­
ury as repayments to the account for reimbursement
of expenses incurred in connection with the adminis­
tration of Titles II and VIII of this Act and the
Federal Insurance Contributions Act. Such repay­
ments shall not be available for expenditures but
shall be carried to the surplus fund of the Treasury.
U4
If it subsequently appear that the estimate In any
particular three month period were too high or too
low, appropriate adjustments shall be made by the
Managing Trustee in future payments.
"(g) All amounts credited to the Trust Fund
shall be available for making payments required
under this title.
ftOLD-AGE AND SURVIVORS INSURANCE
BENEFIT PAYMENTS
nPrimary Insurance Benefits
wSec. 202. (a) Every individual, who (1) is a
fully insured Individual (as defined in section
209 (g) after December 31, 1939, (2) has attained
the age of sixty-five, and (3) has filed applica­
tion for primary insurance benefits, shall be en­
titled to receive a primary insurance benefit (as
defined In 209 (e) for each month, beginning with
the month in which such individual becomes so en­
titled to such insurance benefits and ending with
the month preceding the month In which he dies.
"Wife's Insurance Benefits
"(b) (1) Every wife (as defined in section 209
(i) of an individual entitled to primary insurance
benefits, If such wife (A) has attained the age of
sixty-five, (B) has filed application for wife's
insurance benefits, (0) was living with such in­
dividual at the time such application was filed,
and (D) is not entitled to receive primary insur­
ance benefits, or is entitled to receive primary
insurance benefits each of which is less than onehalf of a primary insurance benefit of her hus­
band, shall be entitled to receive a wife's in­
surance benefit for each month, beginning.with
the month in which she becomes so entitled to
such insurance benefits, and ending with the month
immediately preceding the first month in which
any of the following occurs: she dies, her husband
dies, they are divorced a vinculo matrimonii, or
she becomes entitled to receive a primary insur­
ance benefit equal to or exceeding one-half of a
primary insurance benefit of her husband.
115
*'{2} Such wife's insurance benefit for each month
shall be equal to one-half of a primary insurance
benefit of her husband, except that, if she is entitled
to receive a primary insurance benefit for any month,
such wife's insurance benefit for such month shall b e .
reduced by an amount equal to a primary insurance
benefit of such sc wife*
"Child's Insurance Benefits
*'(c} (1} Every child (as defined in section 209 (k)
of an Individual entitled to primary insurance ben­
efits, or of an individual who died a fully or cur­
rently Insured individual (as defined in section 209
(g) and (h) after December 51, 1939, If such child (A)
has filed application for child's Insurance benefits,
(B) at the time such application was filed was un­
married and had not attained the age of 18, and (C)
was dependent upon such individual at the time such
application was filed, or, if such individual has
died, was dependent upon such individual at the time
of such individual's death, shall be entitled to re­
ceive a child's Insurance benefit for each month,
beginning with the month in which such child becomes
so entitled to such insurance benefits, and ending
with the month immediately preceding the first month
in which any of the following occurs: such child dies,
marries, is adopted, or attains the age of eighteen.
"(2) Such child's insurance benefit for each month
shall be equal to one-half of a primary insurance
benefit of the individual with respect to whose wages
the child is entitled to receive such benefit, ex­
cept that, when there is more than one such individual
such benefit shall be equal to one-half of whichever
primary Insurance befitefit is greatest.
"(3) A child shall be deemed dependent upon a
father or adopting father,' or to have been dependent
upon such individual at the time of the death of
such individual, unless, at the time of such death,
or, if such Individual was living, at the time such
child's application for child’s Insurance benefits
was filed, such individual was not living with or
contributing to the support of such child and—
"(A) such child Is neither the legitimate nor
adopted child of such individual, or
” (B) such child had been adopted by some other
individual, or
n (C) such child, at the time of such individual
death, was living with and supported by such child
stepfather*
n(4) A child shall be deemed dependent upon a
mother, adopting mother, or stepparent, or to have
been dependent upon such individual at the time of
the death of such individual, only if, at the time
of such death, or, if such individual was living,
at the time such child*s application for child‘s
insurance benefits was-filed, no parent other than
such individual was contributing to the support of
such child and such child was not living with its
father or adopting, father.
"Widow* s Insurance Benefits
"(d) (1] Every widow (as defined 3oi section £09
(j) of an individual who ..died a fully insured in­
dividual. after December 31, 1939, if such widow
(A} has not remarried, (B) has attained the age of
sixty-five, (0) has filed application for widow1s
insurance benefits, (D) was living with such in­
dividual at the time of his death, and (E) is not
entitled to receive primary insurance benefits, or
is entitled to receive primary insurance benefits
each of which is less than three-fourths of a pri­
mary insurance benefit of her husband, shall be
entitled to receive a widow's insurance benefit for
each month, beginning with the month in which she
becomes so entitled to such insurance benefits and
ending with the month immediately preceding the first
month in which any of the following occurs: she re­
marries, dies, or becomes entitled to receive a
primary insurance benefit equal to or exceeding
three-fourths of a primary insurance benefit of her
husband,
"(2) Such widow*s insurance benefit for each month
shall be equal to three-fourths of a primary insur­
ance benefit of her deceased husband, except that,
if she is entitled to receive a primary insurance
for any month, such widow* s insurance benefit for
such month shall be reduced by an amount equal to a
primary insurance benefit of such widow*
117
Widow's Current Insurance Benefits
" (e) (1) Every widow (as defined in section 209
(j) of an individual who died a fully or currently .
insured individual after December 31, 1939, if such
widow (A) has not remarried, (B) is not entitled to
receive a widow's insurance benefit, and is not en­
titled to receive primary insurance benefits, or is
entitled to receive primary insurance benefits each
of which is less than three-fourths of a primary
insurance benefit of her husband, (C) was living
with such individual at the time of his death, (B)
has filed application for widow's current insurance
benefits, and (E) at the time of filing such appli­
cation has in her care a child of such deceased in­
dividual entitled to receive a child's insurance
benefit, shall be entitled to receive a widow's cur­
rent insurance benefit for each month, beginning
with the month in which she becomes so entitled to
such current insurance benefits and ending with the
month immediately preceding the first month in which
any of the following occurs: no child of such de­
ceased individual is entitled to receive a child's
insurance benefit, she becomes entitled to receive a
primary insurance benefit equal to or exceeding
three-fourths of a primary insurance benefit of her
deceased husband, she becomes entitled to receive
a widow's insurance benefit, she remarries, she dies,
"(2) Such widow's current insurance benefit for
each month shall be equal to three-fourths of a
primary insurance benefit of her deceased husband,
except that, if she is entitled to receive a pri­
mary insurance for any month, such widow’s current
insurance benefit for such month shall be reduced
by an amount equal to a primary insurance benefit
of such widow,
"Parent's Insurance Benefit
"(f) (1} Every parent (as defined in this sub­
section) of an individual .who died a fully insured
Individual after December 31, 1939, leaving no
widow and no unmarried surviving child under the
age of eighteen, if such parent (A) has attained
the age of sixty-five, (B) was wholly dependent
upon and supported by such individual at the time
of such individual's death and filed proof of such
dependency and support within two years of such
date of death, (C) has not married since such indiv­
idual's death, (D) is not entitled to receive any
other.insurance benefits under this section, or is
entitled to receive one or more of such benefits for
a month, but the total for such month is less than
one-half of a primary insurance benefit of such de­
ceased individual, and (E) has filed application for
parent's insurance benefits, shall be entitled to
receive a parent's insurance benefit for each month,
beginning with the month in which such parent be­
comes so entitled to such parent's insurance bene­
fits and ending with the month immediately preceding
the first month in which any of the following occurs
such parent dies, marries, or becomes entitled to
receive for any month an insurance benefit or bene­
fits Cother than a benefit under this subsection) in
a total amount equal to or exceeding one-half of a
primary insurance benefit of such deceased indiv­
idual,
•
"(2) Such parent's insurance benefit for each
month shall be equal to one-half of a primary in­
surance benefit of such deceased individual, except
that, is such parent is entitled to receive an in­
surance benefit or benefits for any month (other
than a benefit under this subsection), such par­
ent's insurance benefit for such month shall be
reduced by an amount equal to the total of such
other benefit or benefits for such month. When
there is more than one such individual with res­
pect to whose wages the parent is entitled to re­
ceive a parent's insurance benefit for a month,
such benefit shall be equal to one-half of which­
ever primary insurance benefit is greatest.
"(5} As used in this subsection, the term
'parent* means the mother or father of an indiv­
idual, a stepparent of an individual by a marriage
contracted before such individual attained the age
of sixteen, or an adopting parent by whom an in­
dividual was adopted before he attained the age
of sixteen.
"LumpSum Death Payments
n(g) Upon the death, after December 31, 1939,
of an individual who died a fully or currently
insured individual leaving no surviving widow,
child, or parent who would, on' filing application
X19
in the month in which such individual died, be en­
titled to a benefit for such month under subsection
Cc}, (d), (e), or (f) of this section, an amount
equal to six times a primary insurance benefit of
such individual shall be paid in a lump-sum to the
following person (or if more than one, shall be
distributed among them) whose relationship to the
deceased is determined by the Board, and who is
living on the date of such determination: To the.
widow or widower of the deceased; or, if no.such
widow or widower be then living, to any child or
children of the deceased and to any other person
or persons who are, under the intestacy law of the
State where the deceased was domiciled’," entitled
to share as distributees with such children of the
deceased, in such proportions as is provided by
such law; or, if no widow or widower and no such
child and no such other person be then living, to
the parent or to the parents of the deceased, in
equal shares. A person who is entitled to share
as distributee with an above-named relative of the
deceased shall not be precluded from receiving a
payment under this subsection by reasop of the
fact that no such named relative survived the de­
ceased or of the fact that no such named relative
of the deceased was living on the date of such
determination. If none of the persons described in
this subsection be living on the date of such de­
termination, such amount shall be paid to any per­
son or persons, equitably entitled thereto, to the
extent and in the proportions that he or they shall
have paid the expenses of burial of the deceased.
No payment shall be made to any person under this
subsection, unless application therefor shall have
been filed, by or on behalf of any such person
(whether or not legally competent), prior to the
expiration of two years after the death of such
individual.
"APPLICATION
"(h) An Individual who would have been entitled
to a benefit under subsection (b), (c), (d), (e),
or (f) for any month had he filed application,
therefor prior to the end of such month, shall be
entitled to such benefit for such month if he files
application therefor prior to the end of the third
month immediately succeeding such month.
120
"REDUCTION AND INCREASE OF INSURANCE
..BENEFITS
"SEC, 203, (a) Whenever the total of benefits under
section 202, payable for a month with respect to an
individuals wages, is more than $20 and exceeds (1)
$85, or (2) an amount equal to twice a primary in­
surance benefit of such individual, or ('3} an amount
equal to 80 per centum of his average monthly wage
(as defined in section 209 (f), whichever of such
three amounts is least, such total of benefits shall,
prior to any deductions under subsections (d), (e),
or (h), be reduced to such least amount or to $20,
whichever is greater*
"(b) ¥/henever the benefit or total of benefits
under section 202, payable for a month with respect
to an individualfs wages, is less than $10, such,
benefit or total.of benefits shall, prior to any
deductions under subsections (d), (e), or (h}, be.
increased to $10.
"(c) Whenever a decrease or increase of the total
of benefits for a month is made under subsection
(a) or (b) of this section, each benefit, except
the primary benefit, shall be proportionately de­
creased or increased, as the case may be,
"(d) Deductions, in such amounts and at such time
or times as the Board shall determine, shall be made
,from any payment or payments under this title to
which an individual is entitled, until the total of
such deductions equal such individualTs benefit or
benefits for any month in which such individual:
"(1) rendered services for wages of not less
than $15; or
"(2) if a child under eighteen and over six­
teen years of age, failed to attend school
regularly and the Board finds that attendance
was feasible; or
"(3} if a widow entitled to a widow's cur­
rent insurance benefit, did not have in her care
a child of her deceased husband entitled to re­
ceive a child's insurance benefit,
"(e) Deductions shall be made from any wife's or
child's insurance benefit to which a wife or child
121
Is entitled, until the total of such deductions
equals such wife's or child's insurance benefit- or
benefits for any.month in which the individual,
with respect to whose wages such benefit was payable,
rendered services for wages of not less than f>15,
"(f) If more than one event occurs in any one
month which would occasion deductions equal to a
benefit for such month, only an amount equal to such
benefit shall be deducted.
"(g) Any individual In receipt of benefits sub­
ject to deduction under subsection (d) or (e) (or
who is in receipt of such benefits on behalf of
another individual), because of the occurrence of
an event enumerated therein, shall report such oc­
currence to the Board prior to the receipt and ac­
ceptance of an insurance benefit for the second
month following the month in which such event oc­
curred. Any such individual having knowledge
thereof, who fails to report any such occurrence,
shall suffer an additional deduction equal to that
imposed under subsection (d) or (e).
"(h) Deductions shall also be made from any pri­
mary insurance benefit to which an individual is
entitled, or from any other insurance benefit pay­
able with respect to such individual's wages, until
such deductions total- the amount o f any lump sum
paid to such individual under section 204 of the
Social Security Act in force prior to the date of
enactment of the Social Security Act Amendments of
1939.
"OVERPAYMENTS AND UNDERPAYMENTS
"SEC. 204. (a) Whenever an error has been made
with respect to payments to an individual under
this title (including payments made prior to January
1, 1940), proper adjustments shall be made, under
regulations prescribed by the Board, by increasing
or decreasing subsequent payments to which such in­
dividual is entitled. If such Individual dies be­
fore such adjustment has been completed, adjust­
ment shall be made by increasing or decreasing sub­
sequent benefits payable with respect to the wages
which were the basis of benefits of such deceased
individual.
n(b) There shall be no adjustment or recovery by
the United. States in any case where incorrect pay­
ment has been made to an individual who is without
fault (including payments made prior to January 1,
1940), and where adjustment or recovery would defeat
the purpose of this title or would be against equity
and good conscience.
"(c) No certifying or disbursing officer shall be
held liable for any amount certified or paid by him
to any person where the adjustment or recovery of
such amount is waived under subsection (b), or
where adjustment under subsection (a) is not com­
pleted prior to the death of all persons against
whose benefits deductions are authorized.
'’EVIDENCE, PROCEDURE, AND CERTIFICATION
FOR RAIMENT
ttSEC. 205. (a) The Board shall have full power
and authority to make rules and regulations and to
establish procedures, not inconsistent with the
provisions of this title, which are necessary or
appropriate to carry out such provisions, and shall
adopt reasonable and proper rules and regulations
to regulate and provide for the nature and extent
of the proofs and evidence and the method of taking
and furnishing the same in order to establish the
right to benefits hereunder.
n(b) The Board is directed to make findings of
fact, and decisions as to the rights of any indiv­
idual applying for a payment under this title.
Whenever requested by any such individual or when­
ever requested by a wife, widow, child, or parent
who makes a showing in writing that his or her
rights may be prejudiced by any decision the Board
has rendered, it shall give such applicant and such
other individual reasonable notice and opportunity
for a hearing with respect to such decision, and,
.if a hearing is held, shall, on the basis of evi­
dence adduced at the hearing, affirm, modify, or
reverse its findings of fact and such decision.
The Board is further authorized, on its own motion,
to hold such hearings and to conduct such investi­
gations and other proceedings as it may deem neces­
sary or proper for the administration of this title.
In the course of any hearing, investigation, or
other proceeding, it may administer oaths and af-
123
firmatlons, examine witnesses, and receive evidence.
Evidence may be received at any hearing before the
Board even though inadmissible under rules of evi­
dence applicable to court procedure.
"(c) (1} On the basis of information obtained by
or submitted to the Board, and after such verifica­
tion thereof as it deems necessary, the Board shall
establish and maintain records of the amounts of
wages paid to each individual and of the periods in
which such wages were paid and, upon request, shall
inform any individual, or after his death shall in­
form the wife, child, or parent of such individual,
of the amounts of wages of such individual and the
periods of payments shows by such records at the time
of such request.
Such records shall be evidence,
for the purpose of proceedings before the Board or any
court, of the amount of such wages and the periods in
which they were paid, and the absence of an entry as
to an individual’s wages in such records for any
period shall be evidence that no wages were paid
such individual in such period.
rt(2) After the expiration of the fourth calendar
year following any year in which wages were paid or
are alleged to have been paid an individual, the
records of the Board as to the wages of such indiv­
idual for such year and the periods of payment shall
be conclusive for the purposes of this title, except
as hereafter provided.
”(3) If, prior to the expiration of such fourth
year, it is brought to the attention of the Board
that any entry of such wages in such records is
erroneous, or that any item of such wages has been
omitted from the records, the Board may correct such
entry or include such omitted item in its records, as
the case may be. Written notice of any revision of
any such entry, which is adverse to the interests of
any individual, in any case where such individual
has previously been notified by the Board of the
amount of wages and of the period of payments shown
by such entry. Upon request in writing made prior to
the expiration of such fourth year, or within sixty
days thereafter, the Board shall afford any individ­
ual, or after his death shall afford the wife, child,
or parent of such individual, reasonable notice and
opportunity for hearing with respect to any entry or
alleged omission of wages of such individual in such
184
records, or any revision of any such entry. If a
hearing is held, the Board shall make findings of
fact and a decision based upon the evidence adduced
at such hearing and shall revise its records as may
be required by such findings and decision.
**(4) After the expiration of such fourth year,
the Board may revise any entry or include In its
records any omitted Item of wages to conform its
records with tax returns or portions of tax returns
(including information returns and other written
statements) filed with the Commissioner of Internal
Revenue under title VIII of the Social Security Act
or the Federal Insurance Contributions Act or under
regulations made under authority thereof. Rotice
shall be given of such revision under such conditions
and to such individuals as is provided for revisions
under paragraph (3) of this subsection. Upon request,
notice and opportunity for hearing with respect to
any such entry, omission, or revision, shall be af­
forded under such conditions and to such individuals
as is provided in paragraph (3) hereof, but no evi­
dence shall be introduced at any such hearing except
with respect to conformity of such records with such
tax returns and such other data submitted under such
title VITI or the Federal Insurance Contributions
Act or under such regulations.
n (5) Decisions of the Board Tinder this subsection
shall be reviewable by commencing a civil action in
the district court of the United States as provided
in subsection (g) hereof.
tt(d) For the purpose of any hearing, investigation,
or other proceeding authorized or directed under this
title, or relative to any other matter within its
jurisdiction hereunder, the Board shall have power
to issue subpenas requiring the attendance and testi­
mony of witnesses and the production of any evidence
that relates to any matter under investigation or in
question before the Board. Such attendance of wit­
nesses and production of evidence at the designated
place of such hearing, investigation, or other pro­
ceeding may be required from any place in the United
States or in any territory or possession thereof.
Subpenas of the Board shall be served by anyone
authorized by It (1) by delivering a copy thereof
to the individual named therein, or (8) by registered
mail addressed to such individual at his last dwell­
125
ing place or principal place of business, A verified
return by the individual so serving the subpena set­
ting forth the manner of service, or, in the case of
service by registered mail, the returned post-office
receipt therefor signed by the individual so served,
shall be proof of service. Witnesses so subpenaed
shall be paid the same fees and mileage as are paid
witnesses in the district courts of the United States.
w (e) In case of contumacy by, or refusal to obey a.
subpena duly served upon, any person, any district
court of the United States for the judicial district
in which said person charged with contumacy or.refusal
to obey is found or resides or transacts business,
upon application by the Board, shall have jurisdiction
to issue an order requiring such person to appear and
give testimony, or to appear and produce evidence, or
both; any failure to obey such order of the court may
be punished by said court as contempt thereof,
n (f) KTo person so subpenaed or ordered shall be
excused from attending and testifying or from pro­
ducing |»ooks, records, correspondence, documents, or
other evidence on the ground that the -testimony or
evidence required of him may tend to incriminate him
or subject him to a penalty or forfeiture; but no
person shall be prosecuted or subjected to any pen­
alty or forfeiture for, or on account of, any tran­
saction, matter, or thing concerning which he is
compelled, after having claimed his privilege against
self-incrimination, to testify or produce evidence,
except that such persop. so testifying shall not be
exempt from prosecution and punishment for perjury
committed in so testifying,
n(g) Any Individual, after any final decision of
the Board made after a hearing to which he was a
party, irrespective of the amount in contr.oversey,
may obtain a review of such decision by a civil
action commenced within sixty days after the mail­
ing to him of notice of such decision or within
such further time as the Board may allow. Such ac­
tion shall be brought in the district court of the
United States for the judicial district in which
the plaintiff resides, or has his principal place
of business, or, if he does not reside or have his
principal place of business within any such judicial
district, in the District Court of the United States
for the District of Columbia. As part of Its answer
126
the Board shall file a certified copy of the trans­
cript- of the record including the evidence upon
which the findings and decision complained of are
"based. The court shall have power to enter, upon
the pleadings and transcript of the record, a judg­
ment affirming, modifying, or reversing the deci­
sion of the Board, with or without remanding: the
cause for a rehearing. The findings of the Board
as to any fact, if supported by substantial evi­
dence, shall be conclusive, and where a claim has
been denied by the Board or a decision is rendered
under subsection (b) hereof which is adverse to an
individual who was a party to the hearing before the
Board, because of failure of the claimant or such
individual to submit proof in conformity with any
regulation prescribed under subsection fa) hereof,
the court shall review only the question of con­
formity with such regulations and the validity of
such regulations. The court shall, on motion of the
Board made before it files its answer, remand the
case to the Board for further action by the Board,
and may, at any time, on good cause shown, order
additional evidence to be taken before the Board,
and the Board shall, after the case is remanded,
and after hearing such additional evidence if so
ordered, modify or affirm its findings of fact or
its decision, or both, and shall file with the court
any such additional and modified findings of fact
and decision, and a transcript of the additional
record and testimony upon which its action in modi­
fying or affirming was based. Such additional or
modified findings of fact and decision shall be reviewable only to the extent provided for review of
the original findings of fact and decision. The
judgment of the court shall be final except that it
shall be subject to review in the same manner as a judg­
ment in other civil actions.
rt(h) The findings and decision of the Board after
a hearing shall be binding upon all individuals who
were parties to such hearing. No findings of fact
or decision of the Board shall be reviewed by any
person, tribunal, or governmental agency except as
herein provided. No action against the United States,
the Board, or any officer or employee thereof shall
be brought under section 2d of the Judicial Code of
the United States to recover on any claim arising
under this title.
n (i) Upon final decision of the Board, or upon final
127
Judgment of any court of competent jurisdiction, that
any person is entitled to any payment or payments .
under this title, the Board shall certify to the
Managing Trustee the name and address of the person
so entitled to receive such payment or payments, and
the time at which such payment or payments, should be
made, and the Managing Trustee, through the Division
of Disbursement of the Treasury Department, and prior
to any action thereon by the General Accounting Office,
shall make payment in accordance with the certifica­
tion of the Board: Provided, That where a review of
the Board's decision is or may be sought under sub­
section (g) the Board may withhold certification of
payment pending such review* The Managing Trustee
shall not be held personally liable for any payment
or payments made in accordance with a certification
by the Board*
n (j) When it appears to the Board that the inter­
est of an applicant entitled to a payment,would be
served thereby, certification of payment may be made,
regardless of the legal competency or incompetency
of the individual entitled thereto, either for direct
payment to such applicant, or for his use and benefit
to a relative or some other person.
n(l<} Any payment made after December 31, 1939,
under conditions set forth in subsection (j), any
payment made before January 1, 19&0, to, or on behalf
of, a legally competent individual, and any payment
made after December 31, 1939, to a legally incompe­
tent individual without knowledge by the Board of
incompetency prior to certification of payment, if
otherwise valid under this title, shall be a complete
settlement and satisfaction of any claim, right, or
interest in and to such payment.
"(1) The Board is authorized to delegate to any
member, officer or employee of the Board designated
by it any of the powers conferred upon it by this
section, and is authorized to be represented by its
own attorneys in any court in any case or proceed­
ing arising under the provisions of subsection (e).
” (m) No application for any benefit under this
title filed prior to three months before the first
month for which the applicant becomes entitled to
receive such benefit shall be accepted as an appli­
cation for the purposes of this title.
128
"(n) The Board may, in its discretion, certify to
the Managing Trustee any two or more individuals of
the same family for joint payment of the total "bene­
fits payable to such individuals.
"REPRESENTATION OF CLAIMANTS BEFORE
THE BOARD
"SEC. 206. The Board may prescribe rules and
regulations governing the recognition of agents or
other persons, other than attorneys as hereinafter
provided, representing claimants before the Board,
and may. require of such agents or other persons,
before being recognized as representatives of
claimants that they shall show that they are of
good character and in good repute, possessed of
the necessary qualifications to enable them to ren­
der such claimants valuable service, and otherwise
competent to advise and assist such claimants in
the presentation of their cases. An attorney in
good standing who is admitted to practice before
the highest court of the State, Territory, Dis­
trict, or insular possession of his residence or
before the Supreme Court of the United States or
the inferior Federal courts, shall be entitled to
represent claimants before the Board upon filing
with the Board a certificate of his right to so
practice from the presiding judge or clerk of any
such court. The Board may, after due notice and
opportunity for hearing, suspend or prohibit from
further practice before it any such person, agent,
or attorney who refuses to comply with the Board*s
rules and regulations or who violates any provision
of this section for which a penalty is prescribed.
The Board may, by rule and regulation,, prescribe
the maximum fees which may be charged for services
•performed in connection with any claim before the
Board under this title, and any agreement In viola­
tion of such rules and regulations shall be void.
Any person who shall, with intent to defraud, in
any manner wilfully and knowingly deceive, mislead,
or threaten any claimant or prospective claimant
or beneficiary under this title by word, circular,
letter or advertisement, or who shall knowingly
charge or collect directly or indirectly any fee
in excess of the maximum fee, or make any agree­
ment directly or indirectly to charge or collect
any fee in excess of the maximum fee, prescribed
by the Board shall be deemed guilty of a misde­
129
meanor and, upon conviction thereof, shall for each
offense he punished hy a fine not exceeding #500 or
by imprisonment not exceeding one year, or both.
"ASSIGNMENT
"SEC. 207. 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, attach­
ment, garnishment, or other legal process, or to the
operation of any bankruptcy or insolvency law.
"PENALTIES
"SEC. 208. ;Whoever, for the purpose of causing an
increase in any payment authorized to be made under
this title, or for the purpose of causing any paymentrto be made where no payment is authorized under
this title, shall make or cause to be made any false
statement or representation (including any false
statement or representation in connection with any
matter arising under the Federal Insurance Contribu­
tions Act) as to the amount of any wages paid or re­
ceived or the period during which earned or paid,
or whoever makes or causes to be made any false
statement of a material fact in any application for
any payment under this title, or whoever makes or
causes to be made any false statement, representa­
tion, affidavit, or document in connection with such
an application, shall be guilty of a misdemeanor and
upon conviction thereof shall be fined not more than
#1,000 or imprisoned for not more than one year,
or both.
'"DEFINITIONS
"SEC. 209.
When used in this title—
"(a) The term Twagesr means all remuneration for
employment, including the cash value of all remun­
eration paid in any medium other than cash; except
that such term shall not include—
"(1) That part of the remuneration which,
after remuneration equal to #3,000 has been
paid to an individual by an employer with res­
pect to employment during any calendar year
150
prior to 1940, is paid to such, individual by such
employer with respect to employment during such
calendar year;
"(2) That part of the remuneration which,
after remuneration equal to f>3,000 has been paid
to an individual with respect to employment dur­
ing any calendar year after 1939, is paid to such
individual with respect to employment during such
calendar year;
”(3) The amount of any payment made to, or on
behalf of, an employee under a plan or system es­
tablished by an employer which makes provision
for his employees generally or for a class or
classes of his employees (including any amount
paid by an employer for insurance or annuities,
or into a fund, to provide for any such payment),
on account of (A) retirement, or (B) sickness or
accident disability, or (C) medical and hospitali­
zation expenses in connection with sickness or
accident disability, or (D) death, provided the
employee (i) has not the option to receive, in­
stead of provision for such death benefit, any
part of such payment, or if such death benefit is
insured, any part of the premiums (or contributions
to premiums) paid by his employer, and (ii) has
not the right, under the provisions of the plan
or system or policy of insurance providing for
such death benefit, to assign such benefit, or to
receive a cash consideration in lieu of such bene­
fit either upon his withdrawal from the plan or
system providing for such benefit or upon termina­
tion of such plan or system or policy of insurance
or of his employment with such employer;
w(4) The payment by an employer (without deduc­
tion from the remuneration of the employee? (A) of
the tax imposed upon an employee under section
1400 of the Intenhal Revenue Code or (B) of any
payment required from an employee under a State
unemployment compensation lav/;
w (5) Dismissal payments which the employer is
not legally required to make; or
n (6} Any remuneration paid to an individual
prior to January 1, 1937,
131
w (b) The term ‘employment* means any service per­
formed after December 31, 1936, and prior to January
1, 1940, which was employment as defined in section
BIO (b) of the Social Security Act prior to January 1,
1940 (except service performed by an individual after
he attained the age of sixty-five if performed prior to
January 1, 1939), and any service, of whatever nature,
performed after December 31, 1939, by an employee for
the person employing him, irrespective of the citizen­
ship or residence of either, (A) within the United
States, or (B) on or in connection with an American
vessel under a contract of service which is entered
into within the United States or during the perform­
ance of which the vessel touches at a port in the United
States, if the employee is employed on and in connec­
tion with such vessel when outside the United States,
except—
n (l) Agricultural labor (as defined in subsec­
tion (1) of this section);
**(£} Domestic service in a private home, local
college club, or local chapter of a college fra­
ternity or sorority;
”(3) Casual labor not in the course of the em­
ployer^ trade or business;
n(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 or in connection with a
vessel not an American vessel by an employee if the
employee is employed on an in connection with such
vessel when outside the United States;
tt(6} Service performed in the employ of the
United States Government, or of an instrumentality
of the United States which is (A) wholly owned by
the United States, or (B) exempt from the tax im­
posed by section 1410 of the Internal Bevenue Code
by virtue of any other provision of law;
n{l) Service performed in the employ of a State,
or any political subdivision thereof, or any instru­
mentality of any one or more of the foregoing which
is wholly owned by one or more States or political
subdivisions; and any service performed in the employ
of any instrumentality of one or more States or polit­
ical subdivisions to the extent that the instrumental­
ity is, with respect to such service, immune under the
Constitution of the United States from the tax imposed
by section 1410 of the Internal Revenue Code;
**(8) Service performed In the employ of a corpora­
tion, 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 bene­
fit of any private shareholder or individual, and no
substantial part of the activities of which is carry­
ing on propaganda, or otherwise attempting to influ­
ence legislation;
“ (9) Service performed by an individual as an em­
ployee or employee representative as defined in sec­
tion 1532 of the Internal Revenue Code;
tt(l) (A) Service performed in any calendar quarter
in the employ of any organization exempt from income
tax under section 101 of the Internal Revenue Code,
if—
tt(i) the remuneration for such services does
not exceed $45y, or
n (ii) such service is in connection with the
collection of dues or premiums for a fraternal
beneficiary society, order, or association, and
is performed away from the home, office, or is
ritualistic service in connection with any such
society, order, or association, or
tt(iii) such service Is performed by a student
who is enrolled and is regularly attending classes
at a school, college, or university;
W (B) Service performed in the employ of an agri­
cultural or horticultural organization exempt from
income tax under section 101 (1} of the Internal
Revenue Code;
” (C) Service performed in the employ of a volun­
tary employeesr beneficiary association providing
for the payment of life, sick, accident, or other
153
benefits to the members of such association or their
dependents, if (i) no part of its net earnings inures
(other than through such payments) to the benefit of
any private shareholder or individual, and (ii) 85
per centum or more of the income consists of amounts
collected from members for the sole purpose of making
such payments and meeting expenses;
n (D) Service performed in the employ of a volun­
tary employees* beneficiary association providing
for the payment of life, sick, accident, or other
benefits to the members of such association or their
dependents or their designated beneficiaries, if (i)
admission to membership in such association is limit­
ed to individuals who are officers or employees of
the United States Government, and (ii) no part of the
net earnings of such association inures (other than
through such payments) to the benefit of any private
shareholder or individual;
^(E) Service performed in any calendar quarter in
the employ of a school, college, or university, riot
exempt from income tax under section 101 of the In­
ternal Revenue Gode, if such service is performed by
a student who is enrolled and is regularly attending
classes at such school, college, or university, and
the remuneration for such service does not exceed $45
(exclusive of room, board, and tuition);
n (ll) Service performed in the employ of a foreign
government (including service as a consular or other
officer or employee or a non-diplomatic representative);
**(12) Service performed in the employ of an instru­
mentality wholly owned by a foreign government—
"(A) If. the service is of a character similar
to that performed in foreign countries by em­
ployees of the United States Government or of an
instrumentality thereof; and
**(B) If the Secretary of State shall certify
to the Secretary of the Treasury that the foreign
government, with respect to whose instrumentality
and employees thereof exemption is claimed, grants
an equivalent -exemption with respect to similar
service performed in the foreign country by em­
ployees of the United States Government and of
instrumentalities thereof;
134
n(13} Service performed as a student nurse in the
employ of a hospital or a nurses* training school by
an individual who is enrolled and is regularly attend­
ing classes in a nurses* training school chartered or
approved pursuant to State law; and service performed
as an interne in the employ of a hospital by an in­
dividual who has completed a four years* course in a
medical school chartered or approved pursuant to State
law;
**(14} Service performed by an individual in (or as
an officer or member of the crew of a vessel while it
is engaged in) the catching, taking, harvesting, cul­
tivating, or farming of any kind of fish, shellfish,
crustacea, sponges, seaweeds, or other aquatic forms
of animal and vegetable life (including service per­
formed by any such individual as an ordinary incident
to any such activity}, except (a ) service performed
in connection with the catching or taking of salmon
or halibut, for commercial purposes, and (B} service
performed on or in connection with a vessel of more
than ten net tons (determined in the manner provided
for determining the register tonnage of merchant ves­
sels under the laws of the United States); or
**(15) Service performed by an individual under the
age of eighteen in the delivery or distribution of
newspapers or shopping news, not including delivery
or distribution to any point for subsequent delivery
or distribution.
**(c) If the services performed during one-half or
more of any pay period by an employee for the person
employing him constitute employment, all the services
of such employee for such period shall be deemed to
be employment; but if the services performed during
more than one-half of any such pay period by an em­
ployee for the person employing him do not constitute
employment, then none of the services of such em­
ployee for. such period shall be deemed to be employ­
ment. As used in this subsection the term ’pay
period* means a period (of not more than thirty-one
consecutive days) for which a payment of remuneration
is ordinarily made to the employee by the person em­
ploying him. This subsection shall not be applicable
with respect to services performed in a pay period
by an employee for the person employing him, where
any of such service is excepted by paragraph (9) of
subsection (b).
135
**(d) The term *American vessel* means any vessel
documented or numbered under the laws of the United
States; and includes any vessel which is neither
documented or numbered under the laws of the United
States nor documented under the laws of any foreign
country, if its crew is employed solely by one or
more citizens or residents of the United States or
corporations organized under the laws of the United
States or of any State.
” (e) The term rprimary insurance benefit* means an
amount equal to the sum of the following—
’*(1) (A) 40 per centum of the amount of an
individual*s average monthly wage if such average
monthly wage does not exceed $50, or (B) if such
average monthly wage exceeds $50, 40 per centum of
$50, plus 10 per centum of the amount by which
such average monthly wage exceeds $50 and does
not exceed $250, and
"(2) an amount equal to 1 per centum of the
amount computed under paragraph (1) multiplied
by the number of years in which $200 or more of
wages were paid to such individual. Where the
primary insurance benefit thus computed is less
than $10, such benefit shall be $10.
w (f) The term *average monthly wage * means the
quotient obtained by dividing the total wages paid
an individual before the quarter in which he died or
became entitled to receive primary insurance bene­
fits, whichever first occurred, by three times the
number of quarters elapsing after 1936 and before
such quarter in which he died or became so entitled,
excluding any quarter prior to the quarter in which
he attained the age of twenty-two during which he
was paid less than $50 of wages and any quarter,
after the quarter in which he attained age sixtyfive, occurring prior to 1939.
"(g) The term rfully insured individual* means
a n y .individual with respect to whom it appears to
the satisfaction of the Board that—
’*(1) He had not less than one quarter of
coverage forxeach two of the quarters elapsing
after 1936, or after the quarter in which he
attained the age of twenty-one, whichever quarter
136
is later, and up to but excluding the quarter in
which he attained the age of sixty-five, or died,
whichever first occurred, and in no case less than
six quarters of coverage; or
"(2} He had at least forty quarters of coverage.
"As used in this subsection, and in subsection (h)
of this section, the term 1quarter1 and the term
♦calendar quarter1 mean a period of three calendar
months ending on March 31, June 30, September 30, or
December 31; and the term fquarter of coverage1 means
a calendar quarter in which the individual has been
paid not less than $50 in wages. When the number of
quarters specified in paragraph (1) of this subsection
is an odd number, for purposes of such paragraph such
number shall be reduced by one. In any case where an
individual has been paid in a calendar year $3,000 or
more in wages, eaeh quarter of such year following
his first quarter of coverage shall be deemed a quar­
ter of coverage, excepting any quarter in such year
in which such individual dies or becomes entitled to
a primary insurance benefit and any quarter succeed­
ing such quarter In which he died or became so en­
titled.
” (h} The term Currently insured individual1 means
any individual with respect to whom it appears to the
satisfaction of the Board that he has been paid wages
of not less than $50 for each of not less than six of
the twelve calendar quarters, immediately preceding
the quarter in which he died.
”'(i) The term 1wife1 means the wife of an individual
who either (1) is the mother of such individuals son
or daughter, or (2) was married to him prior to Janu­
ary 1, 1939, or if later, prior to the date upon which
he attained the age of sixty.
11(3) The term rwidowT (except when used in section
202 (gljmeans the surviving wife of an individual who
either (1) is the mother of such individuals son or
daughter, or (2) was married to him prior to the be­
ginning of the twelfth month before the month in
which he died.
n (k) The term ♦child1 (except when used in section
202 (g)) means the child of an individual by a mar­
riage contracted prior to the date upon which he at­
tained the age of sixty and prior to the beginning
137
of the twelfth month before the month in which he died,
and a child legally adopted by an individual prior to
the date upon which he attained the age of sixty and
prior to the beginning of the twelfth month before the
month in which he died,
."(1) The term Agricultural labor* includes all
service performed—
**(1) On a farm, in the employ of any person, in
connection with cultivating the soil, or*in connec­
tion with raising or harvesting any agricultural
or horticultural commodity, including the raising,
shearing, feeding, caring for, training, and manage­
ment of livestock, bees, poultry, and furbearing
animals and wildlife,
"(2) In the employ of the owner or tenant or other
operator of a farm, in connection with the operation,
management, conservation, improvement, or maintenance
of such farm and its tools and equipment, or in sal­
vaging timber or clearing land of brush and other de­
bris left by a hurricane, if the major part of such
service is performed on a farm,
**(3) In connection with the production or harvest­
ing of maple sirup or maple sugar or any commodity
defined as an agricultural commodity in section 15
(g) of the Agricultural Marketing Act, as amended,
or in connection with the raising or harvesting of
mushrooms, or in connection with the hatching of
poultry, or in connection with the ginning of cotton,
or in connection with the operation or maintenance
of ditches, canals, reservoirs, or waterways used
exclusively for supplying and storing water for
farming purposes.
rt(4} In handling, planting, drying, packing, pack­
aging, processing, freezing, grading, storing, or
delivering to storage or to market or to a carrier
for transportation to market, any agricultural or
horticultural commodity; but only if such service is
performed as an incident to ordinary farming opera­
tions or, in the case of fruits and vegetables, as
an incident to the preparation of such fruits or
vegetables for market. The provisions of this paragraph
shall not be deemed to be applicable with respect to
service performed in connection ¥/ith commercial can­
ning or commercial freezing or in connection with any
agricultural or horticultural commodity after its
delivery to a terminal market for distribution for
consumption.
”As used in this subsection, the term *farmT in­
cludes stock, dairy, poultry, fruit, fur-bearing
animal, and truck farms, plantations, ranches,
nurseries, ranges, greenhouses or other similar
structures used primarily for the raising of agri­
cultural or horticultural commodities, and orchards.
” (m) In determining whether an applicant is the
wife, widow, child, or parent of a fully insured or
■currently insured individual for purposes of this
title, the Board shall apply such law as would be
applied in determining the devolution of intestate
personal property by the courts of the State in which
such insured individual is domiciled at the time such
applicant files application, or, if such insured in­
dividual Is dead, by the courts of the State in which
he was domiciled at the time of his death, or if such
insured individual is or was not so domiciled in any
State, by the courts of the District of Columbia.
Applicants who according to such law would have the
same status relative to taking intestate personal
property as a wife, widow, childj or parent shall
be deemed such.
” (n} A wife shall be deemed to be living with her
husband if they are both members of the same house­
hold, or she is receiving regular contributions from
him toward her support, or he has been ordered by
any court to contribute to her support; and a widow
shall be deemed to have been living with her husband
at the time of his death If they were both members
of the same household on the date of his death, or
she was receiving regular contributions from him
toward her support on such date, or he had been
ordered by any court to contribute to her support.”
APPENDIX B
AN INTERPRETATION OF THE FEDERAL
ODD AGE AND SURVIVORS * .BENEFITS SECTION
OF THE AMENDED SOCIAL SECURITY ACT
AN INTERPRETATION OF THE FEDERAL OLD AGE AND SURVIVORS *
BENEFITS SECTION OF THE AMENDED SOCIAL SECURITY ACT „
Non-covered employment.
Monthly benefits, under the
Old-Age and Survivors* Benefits Section of the Social Secur­
ity Act, are payable to certain classes of workers after they
have reached the age of sixty-five and retired, or to their
survivors in case of death either before or after the age of
sixty-five*
Certain other classes of workers are excluded
from benefits because they are not engaged in the type of
employment which the Act specifies as eligible employment.
These types of ineligible services are:
Agricultural labor
Casual labor
Domestic service
Family employment
Federal Government service
Service on foreign vessels
State and local government service
Service for religious, charitable and similar
organi zat ions
9* Service for rail carriers
10 Service for miscellaneous non-profit organizations
11. Service for a foreign government
12 Service for a foreign government instrumentality
13* Services of student nurses and internes
14* Services of fishermen
15. Service in newspaper distribution2*
1.
2*
3.
A.
5.
6.
7.
8
*
*
.
Anyone who is employed in any of the above types of work is
not subject to the Social Security Federal Old-Age Tax and
is not eligible for monthly benefits.
1 Section 209 (b) of Social security Act (Appendix A).
141
Wages and time worked, bases for amount of monthly
benefit.
Those workers who are covered by this Section of
the Social Security Act, will receive a monthly income from
the age of sixty^five on, based upon the amount of their
average monthly salary and the length of time they have been
working in covered employment.
Any service prior to January
1, 1937, and that part of the salary in excess of $3,000 a
year, are not taken into account when figuring the length of
time the worker has been in covered employment or in figur©
ing his average monthly wage.
How amount of monthly benefit is calculated. Assuming
an employee’s average monthly wage over a period of thirty
covered working years to be $150, and that at the end of the
thirty years he had reached the age of sixty-five, his month­
ly benefit would be ascertained in the following manner;
40$ of the first $50 ............--- $80.00
Plus 10fo of the amount in excess of $50
but not in excess of $250 ....... 10.00
Plus
1$ of the sum of these first two
amounts, for each year of
coverage
........ .
.9. 00
Total
*..... $39.00 3
This employee
death, in
would therefore receive $59 a month, until
the way of a Social security benefit. When he
^ Section 209 (a).
® Section 809 (e).
142
dies, his widow may be eligible to a monthly benefit of her
own.
This will be discussed later.
wife*s and Child *s Benefits combined with workerTs
benefit.
If, at the time this employee becomes eligible .
for his #39 a month Federal Old-Age Benefit, he has a wife
who is also sixty-five or more years of age, she is eligible
for a monthly supplementary benefit equal to one-half of the
benefit of her husband, or $19.50.^
would receive $58.50 a month.
The two together, then,
When he dies, she becomes
eligible for a widow*s benefit only; if she dies, he receives
his regular #39 a month benefit only, from then on.
The two
together cannot reeeive more than $85 a month, the maximum
set by the Act.
ILLUSTRATIVE MONTHLY OLD AGS INSURANCE BENEFITS5
Years
of
Cover­
age
3
-5
10
20
30
40
$50 average #100 average
monthly wage monthly wage
$150 average
monthly wage
Sing.
Mar.'*' Sing.
Mar.*
Sing.
Mar.*
Sing.
Mar.*
20.60
21.00
22.00
24.00
26.00
28.00
30.90
31.50
33.00
36.00
39.00
40.00
38.63
39.38
41.25
45.00
48.75
52.50
30.90
31.50
33.00
36.00
39.00
42.00
46.35
47.25
49.50
54 .00
58.50
63.00
41.20
42.00
44.00
48.00
52.00
56.00
61.80
63.00
66.00
72.00
78.00
84.00
25.75
26.25
27.50
30.00
32.50
35.00
$250 average
monthly wage
^ Section 202 (b}
5 Francis V. Roberts and H. N. Kamph, social Security
Accounting, 1939 Supplement, p. 25.
♦ Benefits for a married couple without children,
where wife Is eligible Tor a supplement.
143
If, at the time this employee becomes eligible for
his $>39 a month Federal Old-Age Benefit, his wife is living
but has not yet reached the age of sixty-five, she is not
entitled to a monthly supplementary benefit until she does
A
reach that age*
Upon reaching the age of sixty-five and becoming
eligible for his $39 a month benefit, this employee may not
only have a wife who Is sixty-five but also some unmarried,
dependent children under eighteen years of age.
If so, each
of them is entitled to a child’s supplementary monthly bene­
fit equal to one-half of the benefit of the parent on which
ff
it is dependent»
Thus, in the case under consideration, one parent
would receive $39, the other parent $19.50, and one child
$19.50, or a total of $78 a month,
iffiaximum benefits payable
to any one person, or group of persons in a family, however,
cannot exceed the least of the following:
1. Twice the monthly benefit of the worker .
2. 80 per cent of the worker’s average
monthly wage
3. $85. 8
s Section 202 (b).
? Section 202 (c).
® Section 203 (a)
144
In this particular case, twice the monthly benefit is $78; 80
per cent of the average monthly wage is §100; the least of
these being #78, which would be the total benefit received
by this group.
Widow’s benefits after 65-year-old worker dies. What
happens when the worker dies after having received his $ 59'a
month income for a year or two?
If, at this time the wife
has reached the age of sixty-five, she is eligible for a
widow’s old-age insurance monthly benefit equal to threefourths of the benefit of her husband or, In this case,
$£9.25 a month.**
If she has not reached the age of sixty-five
at the time of the death of her husband* ahd has no depend­
ent children under eighteen, she is not entitled to any bene­
fit until she does reach that age.*0
Widow*s and child*s benefits when worker dies before
sixty-five.
Thus far we have noted what happens In the way
of benefits under the Social Security Act for the worker who
becomes entitled to them by reaching the age of sixty-five
and retiring as an employee.
Let us now look into the situa­
tion of the worker who dies before he reaches the age of re-
9 Section 202 (dj
10
Section 202 (e)
145
tirement. Assuming that the worker under consideration re­
ceived the same salary and that his average monthly wage,
therefore, figures $150, hut that he received this wage only
for 20 years of coverage, dying at the age of fifty-five.
If he left a wife only, and she was under the age of sixtyfive, she would get nothing in the way of monthly benefits
until she did reach sixty-five."^
Upon reaching this age,
she would be entitled to a widow*s old-age insurance monthly
benefit equal to three-fourths of the benefit of her husband.
12
The husband’s benefit would be figured thus:
........
$20.00
40fa of the first$50
Plus 10^ of the amount in excess of $50
but not inexcess
of$250
........
10.00
Plus Vftt of the sum of the first two
amounts for each year of
coverage
.....
6.00
...... $36.00
Total
Three-fourths of this $36, or $2?, would go to the widow
each month in the way of a Social Security benefit.
If there were also unmarried, dependent children under
18 years of age, each of them would be entitled to a child’s
supplementary benefit equal to one-half of the benefit of the
parent on which they were dependent.
These child’s benefits
would be paid regardless of the woman’s age at the time of
11
12
Section 202 (el
Section 202 (e)
146
the death of the husband.^-3
A widow*s benefit would be paid
to the widow also, regardless of her age, provided she had
dependent children.-^
Parent *s benefits.
A parent of an insured individual
who dies, leaving no widow and no dependent, unmarried chil­
dren, under 18 years of age, is eligible for a monthly bene­
fit equal to one-half of the benefit of the deceased son or
daughter.
To receive this benefit the parent must have
reached the age of sixty-five, must not have married since
the death of the son or daughter, and must have been wholly
15
dependent on the son or daughter.
Fully- insured and currently-insured individuals.
In
the discussion so far, consideration has been given to cases
Involving a fully-insured worker only*
A fully-insured in­
dividual is one who has had at least one-quarter of coverage
for each two of the quarters elapsing after 1956, or after
the quarter in whieh he attained the age of 21, whichever
quarter is later, and up to but excluding the quarter in
which he attained the age of sixty-five, or died, whichever
^
Section 202 (c)
^
Section 202 (e)
IK
Section 202 (f)
147
first occurred.
coverage. 16
Or, one having at least forty quarters of
A currently-insured individual is one who has been
paid wages of not less than f5Q for eaeh of not less than
six of the twelve calendar quarters immediately preceding
the quarter in which he died.^
A fully-insured individual and his family or surviv­
ors are entitled to all benefits under the Social Security
Act. A currently-insured individual is not eligible for a
monthly benefit himself, and only in certain instances do his
survivors become eligible for benefits.
Child's benefits are
payable to children of the currently-insured; widow's bene­
fits are payable to a widow supporting children of the cur­
rently-insured individual; but no other benefits are payable,
except upon the death of a currently-insured Cor fullyinsured} individual leaving no one entitled to a monthly
benefit, a lump-sum death
equal to six times the
IQ
insured's monthly benefit is payable.
This lump-sum pay­
payment
ment is merely to cover the expense of the burial of the
deceased.
16 Section 209 (g)
17 Section 209 (hi
Section 202 (g)
148
Restrictions on receivers of supplementary benefits.
This Section of the Social Security Act, to prevent unde­
serving persons from receiving benefits, names certain quali­
fications and restrictions applicable to the individual
applying:
To be considered a wife eligible for a supplementary
monthly
/benefit, she must either be the mother of the insured man’s
son or daughter; or married to him prior to January 1, 1939,
or, if later, prior to the date on which he attained the age
of sixty.
b a nd. ^
She must be sixty-five and be living with her hus­
A wife's supplementary monthly benefit ends when she
dies, her husband dies, or they are divorced.20
To be considered a child eligible for a monthly sup*
plementary benefit, the child must be either a natural child
a stepchild by a marriage contracted prior to the age of six­
ty and prior to the twelfth month before the death of the
step-parent; or, a child legally adopted by an individual be­
fore attaining the age of sixty and prior to the twelfth
21
month before the death of the adopting parent.
A child’s
benefit ends at the time the child dies, marries, is adopted,
og
or attains the age of eighteen.
Section 809 (i)
Z0 Section 208 (b>
Section 209 (It)
22
Section 202 (c)
149
A widowTs benefit ends at the time she dies, remarries,
or, if under sixty-five, at the time the dependent child is
no longer entitled to a child's benefit.2^
Federal Old-Age taxes.
Old-age benefits payable to
an individual or his survivors are made possible by reserves
built up through a tax on the wages of the employee and a
tax on the employer.
The Federal Old-Age tax on the employee
is called an income tax; the tax on the employer is called
an excise tax.
Although both parties pay these taxes, the
employee and his survivors are the only ones eligible for
24
monthly benefits. The Federal Old-Age tax rates, on both
employee and employer, are as follows:
1937
1943
1946
1949
to
to
to
and
1942, inclusive ....*.......1$
1945, inclusive
2$
1948, inclusive ............. 2-?l/2$
thereafter
., i.
3
#
Wages defined.
Wages, for purposes of tax computation,
include cash and the cash value of all remuneration paid in
the way of goods, lodging, food, and clothing,
Vacation pay,
sick pay, and annual gifts and bonuses, are also included as
taxable wages.
Remuneration for services performed during a
particular calendar year in excess of $3,000 paid by one em­
213 Section 202 (d), (e).
24 Roberts and Kamph, Social Security Accounting, 1939
Supplement, p. 3.
150
ployer to an employee, is excluded from taxation*
If the
employee is obliged to pay a tax on wages in excess of $5,000,
because of bis work for one or more employers in thersame
calendar year, he is privileged to file claim for a refund of
the tax on the amount over the first $3,000.25
Employer defined. An employer is anyone who employs
one or more individuals in covered employment.
He may employ
them regularly, or intermittently, and the time worked may be
one or more hours weekly.26
Employee defined.
An employee is any individual en­
gaged in covered employment.
He may be a minor or an alien.
An offieer of a corporation is an employee of the corporation.
A director in a corporation, who performs no other duties, is
not an employee.
Summary.
Members of a partnership are not employees.
2
Wages received by an employee are subject to
an income tax known as a Federal Old-Age Tax; wages paid by an
employer are subject to an excise tax at the same tax rate.
The moneys from these taxes are held by the united States
Roberts and Kamph, Ibid., pp. 3-4.
26
P7
*
P- 5.
Ibid., pp. 5-6.
7
151
Government for the payment of monthly benefits to employees
who retire from work at sixty-five and otherwise qualify.
Monthly benefits are also payable to the wife and children
of the retired worker under certain conditions.
Survivors
of an employee may receive monthly benefits in case the
worker dies either prior to or after the age of sixty-five.
000
appendix
c
QUESTIONNAIRE AND TABLE XIII
155
Fellow-taxpayer:
The purpose of this questionnaire is to determine your
reaction to various sections of the Social Security Act
and to determine whether or not Social Security legislation
has any relationship to present individual thrift hahits.
The results of this survey are to he compiled in a thesis
for presentation to The University of Southern California
as part of the requirements for a master*s degree.
You are not ashed to sign this questionnaire; consequently,
the information gathered herein is no infringement upon
your personal business. Please answer all the questions
as accurately and fairly as possible. Your cooperation
will be sincerely appreciated.
Dwight H. Dilley
Graduate Student
Your age___._____ . Are you married, or single? (Underline)
If married, is wife working?
Yes
No
(Underline)
Number of children or other dependents____________
.
Your occupation or profession
.
.
...
(W3erXIne)
Do you believe most people must beforced to save? Yes No
Do you maintain a formal budget.wherebyyouendeav­
or to save so much each m o n t h ?
If your salary between the ages of thirty and
sixty-five averages $1800 per year, the amount of
your Old-Age Benefit from the Government (Social
Security) would be f40.50 per month until death.
Do you consider this adequate income for the
average man of sixty-five?....................
If your answer to the above question (5) is **No,n
what means would you use to supplement your
income of $40.50 per month? (Place a check after
one or more of the following?)
(a) Interest from Government Bonds ________
(b) Dividends from Life Insurance
(c) Income from property (rent)
______ i
__.
___________ .
(d) Dividends from corporate stocks ______ _.
(e) Interest from corporate bonds
(f) Other means (Please name)
(Go to Page E)
.
____________.
YesNo
Yes
No
X
5.
6.
?>
8.
9.
10.
11.
fa •
\ yJULUOX
JLJ.I1C5 /
Would you reject the Old-Age Social Security Tax
(now 1% of your wages), and therefore the bene­
fits, if you had the choice?.............
3-54:
YesWo
Would you favor ah increase in the tax rate
(now 1% of your wages) so as to increase the
amount of your monthly benefit at sixty-five?
Yes
Wo
Do you believe the retirement age under the
Social Security Act should be earlier than 65?
Yes
Wo
If your answer to the above question (7) Is
"Yes,n where would you place the retirement age?
.
______ ,
Do you feel that the Old-Age Benefit feature of
the Social Security Act has lessened the neces­
........
sity for other forms of saving?
Yes
Wo
Should you find yourself out of employment to­
morrow, you might be eligible for a maximum
income from the State of $18 a week for a period of twenty weeks. (Unemployment Insurance. )
Do you feel that it is therefore less necessary
for you to save for a **rainy day?** ...... .
Yes
Wo
Do you favor life insurance as a method of
saving?
........... — ,....... — ........
Yes
Wo
12.
How much life insurance did you carry in 1955?
$_______
15.
How much life insurance do you now carry? .....
$
14.
Reasons for the change in the amount of life
insurance carried. (Check one or more of the following:
More dependents
» Fewer dependents
• Change in
income ___. Government guarantee of an income through
Old-Age Benefits
• Other reasons
.
____ .
15.
What plan of life insurance do you now carry? (Check one
or more of the following:
(a) Ordinary or straight life ____ . , .
(b) Limited-Pay Life (20-pay, 15-pay, etc.
.
(e) Endowment (20-year endowment, etc.) _________ _.
(d) Retirement Policy which endows at
sixty, sixty-five, or other age
___________ .
16.
If you had It to do over today, what type of policy
would you favor?
_________ _______ ____
^
17.
How much cash (or cashable reserves) do you figure
you should have immediately available for use in
cases of emergency?
....... $
18.
Approximately what is your annual income? (Check one
of the following}: Below jlD'Q'O
; between
$1000 and $2000
; between $2001 and $5000___
between $5001 and $5000______ ; over #5000
______
_____
TABLE X I I I
STATUS, AGE, AND SALARY OF LOS ANGELES COUNTY WAGE-EARN1RS INTERYIEWED, 1940
Age
18
19
20
El
EE
S3
E4
25
26
27
28
Sub- 29
totals
30
31
32
33
34
35
36
37
38
Sub- 39
totals
.
sr.
0
0
2
0
7
1
3
4
6
11
7
8
49
12
5
5
7
3
11
8
5
7
9
¥2
S
7
8
5
17
11
17
13
10
5
8
10
4
115
5
0
4
1
1
.No status. - 1000
5
1
1
4
2
13
8
13
1
0
0
2
3
2
1
8
4
0
2
3
4
.22
a
1
6
1
1
2
4
1
7
3
45
7
15
7
7
93
6
1
• 16
1
1
0
0
2
0
0
6
3
4
7
1 D.
6
a
1
0
l
Ei
4
4
8
2
. 1-2000
I d. o
1
0
Q
4
. 2-3000
4
2
4
3
44
6
2
2
4
0
3
3
2
1
5
26
. 3-5000
0
0
0
0
0
1
1
0
0
0
1
0
3
1 '
1
0
0
Q
4
3
2
2
1
14
. •* 5000
0
0
0
0
0
1
0
Salary
. Unans­
wered
1
J
1
G
0
1
0
0
2
6
0
0
0
.0
0
0
0
0
1
1
■
■
&'
1 '
1
1
3
155
\
TABLE XIII (Continued, p.2}
STATUS, AGE, AND SALARY OF LOS ANGELES COUNTY WAGE-EARNERS INTERVIEWED, 1940
Age
40
41
42
43
AS-A
T
«C
45
46
47
48
Sub- 49
totals
50
51
52
53
54
55
56
57
58
SUb- 59
totals
M.
12
6
7
3
6
11
8
7
6
5
71
8
5
6
3
1
4
1
1
1
2
32
S#
1
1
0
0
1
3
1
0
1
2
lo
2
0
0
0
G
0
0
1
0
0
3
No status
1
0
1
1
1
4
1 W.
1 w.
2 W.
d
- 1000
i
0
0
0
1
0
0
0
2
0
4
3
0
1
1
0
0
0
1
1
1
s '"
1-2000
4
2
2
3
2 ,
4
5
1
2
4
29
2
2
3
1
1
2
1
0
0
1
13
2-3000
3-5000
5
s
2
0
1
6
4
3
3
0
29
2
2
2
1
0
1
0
1
0
0
9
4
0
1
0
2
1
0
0
0
3
11
1
0
I
0
0
1
0
0
0
0
3
.
* 5000
SalaryUnans­
wered
0
.9
3
1
1
2
0
1
1
0.
9
3
0
O
0
0
0
0
0
0
0
3
1
2
3
1
I
156
TABLE XIII (continued, p.3}
STATUS , AGE, AND SALARY OF LOS AHGHLIS C0UHTY WAGI-SARNERS INTERVIEWED, 1940
60
61
62
63
64
65
66
67
68
69
71
Sub- 79
totals
Ho age
Ho age or
status
Grand
Totals
H.
S.
2
1
2
0
0
2
0
-
0
Ho status
0
0
0
0
—■
1
1
1
10
0
0
0
0
1
2
1
1
2
1-2000
2-3000
3-5000
* 5000
0
1
0
0
—
1
0
0
0
0
2
0
0
0
0
«*►
5
0
0
1
0
1
0
0
1
0
3
1
2
2
0
0
63
186
93
33
16
0
0
0
1
0
0
0
0
.0
1
2
0
1
0
0
1
—
1
0
Salary
Unans­
wered
0
0
<m
+
0
0
1
1
0
2
235
151
5
9
9
ASL
Age
■- 1000
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