1948 Advisory Council Report--
Introductory Material

80TH CONGRESS 2^nd Session SENATE Document NO. 208

RECOMMENDATIONS FOR SOCIAL SECURITY LEGISLATION
THE REPORTS OF THE ADVISORY COUNCIL ON SOCIAL SECURITY
TO THE SENATE COMMITTEE ON FINANCE

UNITED STATES GOVERNMENT PRINTING OFFICE
83404
WASHINGTON 1949

[Submitted by Mr. MILLIKIN]

IN THE SENATE OF THE UNITED STATES,

June 19 (legislative day, June 15),1948.

Ordered, That reports of the Advisory Council on Social Security to the Committee on Finance, when submitted to the Secretary of the Senate subsequent to the proposed adjournment of the Senate, be printed as Senate documents with illustrations, and that thereafter a compilation of the various reports by such Advisory Council, with other relevant materials on the subject, be printed as a Senate document with illustrations.

Attest:
CARL A. LOEFFLER, Secretary.

List of charts and tables
Letter of transmittal
Senate Resolutions 141 (80th Cong., 1st sess., July 23, 1947) and 202 (80th Cong., 2d sees., February 20, 1948)
Foreword
Membership of the Advisory Council

PART I. OLD-AGE AND SURVIVORS INSURANCE

Introduction and summary:
The method of social insurance
Summary of recommendations
Technical and minor amendments
Interdependence of recommendations
Plan of the report
Goal of universal coverage
Limitations of voluntary methods
More liberal eligibility requirements for older workers
More adequate benefits now
Test of retirement
Financing
Contribution rate
Government participation
Purchasing power of benefits
Importance of a broad informational program

Recommendations on coverage:
1. Self-employment
2. Farm workers
3. Household workers
4. Employees of nonprofit institutions
5. Federal civilian employees
6. Railroad employees
7. Members of the armed forces
8. Employees of State and local governments
9. A study of social-security protection for the possessions of the United States
10. Inclusion of tips in the definition of wages

Recommendations on eligibility:
11. Insured status

Recommendations on benefits:
12. Maximum base for contributions and benefits
13. Average monthly wage
14. Benefit formula
15. Increased survivor benefits
16. Dependents of insured women
17. Maximum benefits
18. Minimum benefits
19. Retirement test
20. Qualifying age for women
21. Lump-sum benefits

Recommendations on financing:
22. Contribution schedule and Government participation

Appendixes--Old-age and survivors insurance:
I-A. The old-age and survivors insurance trust fund
I-B. Actuarial cost estimates for old-age and survivors insurance recommendations
I-C. Number of aged persons receiving benefits under old-age and survivors insurance and number receiving old-age assistance per l,000 persons aged 65 years and over, by State June 1948
I-D. Family benefits under present program, December 1947
I-E. Memorandum by two members dissenting from the majority report with respect to mandatory coverage of the traditionally tax-exempt institutions
I-F. Resume of minority opinions on changes in benefit and contribution base
I-G. Staff for old-age and survivors insurance

PART II. PERMANENT AND TOTAL DISABILITY INSURANCE

Introduction and summary
Summary of major recommendations
The method of social insurance

Recommendations:
1. Eligibility requirements
2. Definition of permanent and total disability
3. Amount of benefits
4. Disqualifications
5. Adjustment to workmen's compensation
6. Adjustment to other Federal disability programs
7. Integration with old-age and survivors insurance
8. Effective date
9. Rehabilitation services

Administration of permanent and total disability insurance

Appendixes--Permanent and total disability insurance:
II-A. Actuarial cost estimates for permanent and total disability
II-B. Memorandum of dissent by two members
II-C. Staff for permanent and total disability insurance

PART III. PUBLIC ASSISTANCE

Introduction and summary
Public assistance and social insurance
The nature of the program
Major defects in the system of Federal grants-in-aid for public assistance
Summary of recommendations
The cost of the Council's recommendations
Financing the public-assistance programs
Federal, State, and local responsibility

Recommendations:
1. Increased payments for aid to dependent children
2. Federal grants for general assistance
3. Medical care for recipients
4. Care of the aged in medical institutions
5. Residence requirements
6. Study of child health and welfare services

Appendixes--Public assistance:
III-A. Statistics related to public assistance
III-B. Memorandum of dissent by four members from the majority report with respect to Federal participation in general assistance
III-C. Staff for public assistance

PART IV. UNEMPLOYMENT INSURANCE

Introduction and summary
Characteristics of State-Federal unemployment insurance
Deficiencies in the present program
Recommendations for improvement of the program
Plan of the report
Goal of universal coverage
Benefit financing designed to encourage the adoption of adequate benefit provisions
Developing a more rational relationship between contribution rates and cyclical movements of business
Setting the minimum contribution rate
Promoting greater employee and citizen participation
Promoting improved administration
Disqualifications
Study of supplementary plans
Temporary disability insurance
Importance of a broad informational program

Recommendations on coverage:
1. Employees of small firms
2. Employees of nonprofit organizations
3. Federal civilian employees
4. Members of the armed forces
5. Borderline agricultural workers
6. Inclusion of tips in the definition of wages

Recommendations on benefit financing:
7. Contributory principle
8. Maximum wage base
9. Minimum contribution rate
10. Loan fund
11. Standards on experience rating

Recommendations on administration:
12. Combining wage credits earned in more than one State and processing interstate claims
13. Financing administrative costs
14. Clarification of Federal interest in the proper payment of claims

Recommendation on disqualifications:
15. Standards for disqualifications

Recommendation on plans supplementary to unemployment insurance:
16. Study of supplementary plans

Temporary disability insurance

Appendixes--Unemployment insurance:
IV-A. Cost estimates
IV-B. Payments on erroneous and fraudulent claims
IV-C. Memorandum by five members dissenting from the majority report with respect to continuation of unemployment insurance and the employment service on a State basis--Concurring dissent by Mr. Rieve in support of a national system of unemployment insurance and in opposition to the recommendations of the majority of the Council with respect to continuation of unemployment insurance on a State basis
IV-D. Provisions of temporary disability insurance laws and data concerning their operation
IV-E. Statistics related to unemployment insurance
IV-F. Staff for unemployment insurance

CHARTS AND TABLES

PART I. OLD-AGE AND SURVIVORS INSURANCE

Charts:
A. Estimated cost of expanded program recommended by Advisory Council, in terms of percentage of pay roll
B. Number of aged persons receiving benefits under old-age and survivors insurance and number receiving old-age assistance per 1,000 persons aged 65 years and over, by State, June 1948

Tables:
1. Primary insurance benefit and its ratio (percent) to specified average monthly wages under the Advisory Council's proposals and under the present law
2. Illustrative old-age benefits under present formula and that proposed by Advisory Council
3. Maximum amounts of benefits payable under the present law and under Advisory Council's proposal, at various levels of average monthly wage, to survivor families consisting of a widow and one or more child beneficiaries
4. Estimated annual cost of expanded program recommended by Advisory Council, for specified years, by major changes in terms of percentage of pay roll
5. Estimated annual cost of expanded program recommended by Advisory Council, for specified years, by major changes (in millions of dollars)
6. Estimated annual cost of expanded program recommended by Advisory Council, for specified years, by type of benefit, in terms of percentage of pay roll
7. Estimated annual cost of expanded program recommended by Advisory Council, for specified years, by type of benefit (in millions of dollars)
8. Estimated taxable pay rolls under present coverage and under expanded coverage (in billions of dollars)
9. Estimated percentage of persons attaining age 65 in various future years who will be fully insured, if high employment conditions prevail
10. Estimated percentage of persons aged 65 and over in the population of various future years who will be fully insured, if high employment conditions prevail
11. Estimates relating to size of trust fund under expanded program recommended by Advisory Council (in millions of dollars)
12. Estimated beneficiaries and disbursements in 1948 under expanded program recommended by Advisory Council, if the plan had been in effect for a century, under two assumptions
13. Percentage distribution of beneficiary families by monthly amount of family benefits in current-payment status at end of 1947, for each specified family group in receipt of benefits

PART II. PERMANENT AND TOTAL DISABILITY INSURANCE

Tables
1. Disability insurance benefit and its ratio (percent) to specified average monthly wages under the Advisory Council's proposals
2. Estimated permanent and total disability beneficiaries and benefit disbursements under Advisory Council proposal

PART III. PUBLIC ASSISTANCE

Charts:
A. Old-age assistance and aid to dependent children: Average monthly payment per recipient from Federal, and State and local funds, calendar year 1947
B. General assistance: Distribution of expenditures for assistance by source of funds, fiscal year 1946-47
1. Number of aged persons receiving benefits under old-age and survivors insurance and number receiving old-age assistance per 1,000 persons aged 65 years and over, by State, June 1948
2. Public assistance: Average monthly payment, December 1947
3. Public assistance: Recipient rates in continental United States, December 1947

Tables:
A. Comparison of average payments under old-age assistance and for retired workers under old-age and survivors insurance
1. Estimated percentage of persons aged 65 and over in the population of various future years who will be fully insured under old-age and survivors insurance if high employment conditions prevail
2. Special types of public assistance and general assistance: Expenditures for assistance to recipients, by program and source of funds, calendar year ended December 31, 1947
3. Old-age assistance: Expenditures for assistance to recipients, by source of funds and State, calendar year ended December 31,1947
4. Aid to the blind: Expenditures for assistance to recipients, by source of funds and State, calendar year ended December 31,1947
5. Aid to dependent children: Expenditures for assistance to recipients, by source of funds and State, calendar year ended December 31, 1947
6. General assistance: Expenditures for assistance to cases, by source of funds and State, calendar year ended December 31, 1947
7. Old-age assistance: Distribution of payments to recipients, October 1947
8. Aid to the blind: Distribution of payments to recipients, October 1947
9. Aid to dependent children: Distribution of payments to families, October 1947
10. Old-age assistance: Expenditures for assistance payments and administration, fiscal years 1936-47
11. Aid to the blind: Expenditures for assistance payments and administration for State-Federal programs, fiscal years 1936-47
12. Aid to dependent children: Expenditures for assistance payments and administration for State-Federal programs, fiscal years 1936-47
13. General assistance: Expenditures for assistance payments and administration, fiscal years 1936-47
14. General assistance: Percentage of assistance payments met from State funds, fiscal year ended June 30, 1947
15. Statutory residence provisions for public-assistance programs under Social Security Act, February 1948
16. Federal grants for public assistance per capita, by State, 1946-47

PART IV--UNEMPLOYMENT INSURANCE

Tables:
A. Average monthly covered employment, 1938-48
B. Total labor force by coverage status in an average week of year ended June 30, 1948
C. Estimated average annual benefit costs and State unemployment reserves as a percent of taxable wages at the end of a 10-year cycle with a uniform contribution rate of 1.2 percent and a $40 maximum benefit formula
D. Estimated State unemployment contribution rates in high-cost States necessary to maintain reserves of 3 or 5 percent of taxable wages at the end of a 10-year cycle using a $40 maximum benefit formula and assuming 2 to 5 million unemployed
E. Estimated State unemployment contribution rates in high-cost States necessary to maintain reserves of 3 or 5 percent of taxable wages at the end of a 10-year cycle using a $40 maximum benefit formula and assuming 2 to 10 million unemployed
F. Estimated average annual benefit costs and State unemployment reserves as a percent of taxable wages at the end of a 10-year cycle with a uniform contribution rate of 1.2 percent and a $25 maximum benefit formula
G. Estimated State unemployment contribution rates in high-cost States necessary to maintain reserves of 3 or 5 percent of taxable wages at the end of a 10-year cycle using a $25 maximum benefit formula and assuming 2 to 5 million unemployed
H. Estimated State unemployment contribution rates in high-cost States necessary to maintain reserves of 3 or 5 percent of taxable wages at the end of a 10-year cycle using a $25 maximum benefit formula and assuming 2 to 10 million unemployed
I. Comparison of temporary-disability-insurance laws administered in connection with unemployment-insurance laws
J. Operations of three temporary-disability-insurance programs during fiscal year July 1, 1947-June 30, 1948

Tables:
1. National summary of data on unemployment insurance operations, by years, 1938-47
2. Size of firms covered by State laws, Dee. 31, 1948
3. Wage and employment qualifications for benefits under State laws, Dec. 31, 1948
4. Waiting-period requirements under State laws, Dee. 31, 1948
5. Weekly benefits for total unemployment under State laws, Dec. 31,1948
6. Selected data relating to the weekly benefit amount, by State 1938-41, 1944-47
7. Duration of benefits in a benefit year under State laws, Dec. 31,1948
8. Selected data relating to the duration of unemployment benefits, by State
9. Summary of disqualification provisions for three major causes State laws, Dee. 31, 1948
10. Average employer contribution rate, by State, 1941-48
11. Cumulative receipts, benefits paid, and funds available for benefits by State, as of Sept. 30 1948
12. Ratio of benefits to taxable u ayes, by State, 1938-41, 1945-47
13. Funds available for benefits at end of year as percent of taxable wages, by State, 1939 41, 1945-47

SENATE RESOLUTION 141

(80th Cong., 1st sess., July 23, 1947)

Resolved, That the Committee on Finance, or any duly constituted subcommittee thereof, is authorized and directed to make a full and complete investigation of old-age and survivors insurance and all other aspects of the existing social security program, particularly in respect to coverage, benefits, and taxes related thereto, for the purpose of assisting the Senate in dealing with legislation relating to social security hereafter originating in the House of Representatives under the requirement of the Constitution.

SEC. 2. For the purpose of this resolution, the Committee on Finance, or any duly constituted subcommittee thereof, is authorized to sit and act at such places and times during the sessions, recesses, and adjourned periods of the Eightieth Congress, to require by subpoena or otherwise the attendance of such witnesses and the production of such books, papers, and documents, to administer such oaths to take such testimony, to procure such printing and binding, and to make such expenditures as it deems advisable.

SEC. 3. The committee is authorized to designate and appoint an Advisory Council to study, assist, consult with, and advise the Committee on Finance or its duly authorized subcommittee, and the committee is further authorized to designate and appoint such other officers, experts, or assistants as it deems necessary for the performance of the investigation directed by this resolution.

SEC. 4. The compensation of persons assisting the committee in the investigation directed by this resolution shall be fixed by the committee at such amounts or rates as the committee deems appropriate, but such amounts or rates shall not exceed the amounts or rates payable for comparable duties prescribed by the Classification Act of 1923, as amended.

SEC. 5. The committee, or its duly constituted subcommittee, is authorized, with the approval of the Committee on Rules and Administration, to request the use of the services, information, facilities, and personnel of the departments and agencies in the executive branch of the Government in the performance of its duties under this resolution.

SEC. 6. The expenses of the committee under this resolution, which shall not exceed $25,000, shall be paid out of the contingent fund of the Senate upon vouchers signed by the chairman.

(80th Cong., 2d sess., February 20, 1948)

Resolved, That the limit of expenditures authorized under Senate Resolution 141, Eightieth Congress, agreed to July 23, 1947 (authorizing an investigation by the Committee on Finance of old-age and survivors insurance and other aspects of the social security program), is hereby increased by $25,000.

FOREWORD

The Advisory Council on Social Security was appointed by the Committee on Finance of the United States Senate under authority of Senate Resolution 141. Members of the Council, citizens from various walks of life and representing different parts of the country, were appointed on September 17, 1947. Preliminary meetings to plan the work of the Council were held in October and November and, at the first meeting of the full Council held in Washington on December 4-5, 1947, an interim committee was designated to make a continuing study of the problems before the Council and to develop proposals to be considered by the Council as a whole. The full Council has held a total of seven 2-day meetings and the interim committee has had eight 1-day meetings.

The Council's four reports appear in this compilation in the order that they were prepared and transmitted to the Senate Committee on Finance. Part I covers old-age and survivors insurance; part II recommends the establishment of a permanent and total disability insurance program; part III relates to public assistance and maternal and child health and welfare services; and part IV relates to unemployment insurance and temporary disability insurance.

PART I. OLD-AGE AND SURVIVORS INSURANCE

In some areas the present provisions of the old-age and survivors insurance program fail to provide basic security. The weaknesses of the existing program have been taken into consideration, and recommendations are made for ways to close the gaps in the protection now offered. Account has been taken also of changes that have occurred in our economy since 1939, when the general structure of the present program was adopted. Particular attention has been given to the problem of financing the program. The recommendations regarding the contribution rates recognize the need for a rate which is high enough to establish a reasonable relationship between contributions and benefits and which will increase gradually to the full amount necessary to support the future program, but not so large as to build up excessive amounts in the trust fund in the early years.

The recommendations on old-age and survivors insurance are designed to provide a program that will meet the present needs of the people without imposing too heavy a burden on the taxpayers of the future. The Council anticipates that still further revisions in the program will be needed as future events affect family life, the labor force, and the general conditions under which people live.

PART II. PERMANENT AND TOTAL DISABILITY INSURANCE

The recommendations on disability insurance are designed to provide benefits for permanently and totally disabled workers through the extension of the present system of old-age and survivors insurance to cover the risk of disability. The Advisory Council has found that one of the few major areas in which the Nation lacks social-insurance protection is the area of need and dependency arising out of permanent and total disability. The possibility of total income loss and eventual exhaustion of all personal resources because of such disability is of grave concern to every individual, his family, and the community.

Two members of the Council oppose the inclusion of the risk of total and permanent disability under social insurance but favor providing disability protection through the addition of a new category to the present State-Federal assistance program. (See appendix II-B.)

PART III. PUBLIC ASSISTANCE

This section of the compilation includes recommendations for modifying the existing State-Federal programs--old-age assistance, aid to dependent children, and aid to the blind--and for the establishment of a State-Federal general assistance program for needy persons not currently covered by any State-Federal public assistance program. No recommendations are made for changes in the provisions of title V of the Social Security Act relating to maternal and child health, services for crippled children, and child welfare services; the Council recommends, however, that a special commission be appointed to study and report on these programs.

The recommendations on public assistance are limited to the changes in the Federal law that the Council considers necessary to help the States correct the weaknesses in their programs. The Council does not propose basic changes in the present State-Federal division of responsibility under which the administration of the program is entirely in the hands of the States and Territories, subject to certain minimum Federal standards relating to the definition of need and other conditions of eligibility and to certain aspects of administration. Beyond these minimum standards, the States have wide discretion in determining who is eligible for assistance and in administering the programs.

The Council has not made a detailed study of the policies and administrative practices of the various States and Territories but rather, accepting the desirability of considerable State discretion in determining standards and policies, has confined itself to a consideration of the Federal role. The wide differences among the States in the proportion of population receiving public assistance and in the amount of their payments indicate not only great differences in the need to be met but differences in the definition of need and in the administration of the programs. The Congress may wish to inform itself further concerning the effects of Federal grants-in-aid upon the policy decisions and administrative practices of the States. The Council, in studying the Federal part of the program, has found indications of a number of inadequacies and of several opportunities to improve and strengthen the Federal role in this State-Federal program.

In making its recommendations, the Council has been guided by the conviction that social security should be provided insofar as possible through insurance rather than through assistance. Its recommendations with respect to public assistance, therefore, presuppose that the essential recommendations contained in parts I, II, and IV,of this compilation on old-age and survivors insurance, permanent and total disability insurance, and unemployment insurance will be enacted into law.

PART IV. UNEMPLOYMENT INSURANCE

The recommendations in this section of the compilation are designed to improve the existing State-Federal system of unemployment insurance by (1) extension of coverage, (2) removing some of the present barriers to more adequate benefit provisions and providing for adequate benefit financing, (3) making more rational the relationship of the rate of contribution to the cyclical movements of business, (4) improving the methods and financial basis of administration, and (5) increasing employee and citizen participation in the program.

Five members of the Council favor the establishment of a single national system of unemployment insurance (see appendix IV-C). It should be noted, however, that four of these members would join with the majority in supporting the recommendations in this report for the improvement of the State-Federal system should the Congress decide against the establishment of a national program.

ACKNOWLEDGMENTS

The Council was greatly facilitated in its work by the generous assistance given by many public and private agencies and interested individuals. Information received from Members of Congress and in letters from the general public was particularly helpful.

Organizations and individuals most familiar with each specific area of the Council's investigation furnished technical service and advice. Among those giving such aid were the Social Security Administration and its Bureaus of Old-Age and Survivors Insurance, Employment Security, Public Assistance, and Children's Bureau; the Treasury Department; the American Public Welfare Association; the Interstate Conference of Employment Security Agencies; the Council of State Governments; the American Association for the Blind and the National Federation of the Blind; representatives of commercial insurance companies; the Russell Sage Foundation; and a number of State and local public welfare and unemployment insurance administrators. The Council and its staff would have been greatly hampered in its work had it not been for the valuable assistance rendered by these groups and individuals.

MEMBERSHIP OF THE ADVISORY COUNCIL

Edward R. Stettinius, Jr., rector, University of Virginia, chairman.
Sumner H. Slichter, Lamont University professor, Harvard University, associate chairman.
Frank Bane, executive director, Council of State Governments.
J. Douglas Brown, dean of the faculty, Princeton University.
Malcolm Bryan, vice chairman of board, Trust Co. of Georgia.
Nelson H. Cruikshank, director of social-insurance activities, American Federation of Labor.
Mary H. Donlon, chairman, New York State Workmen's Compensation Board.
Adrien J. Falk, president, S. & W. Fine Foods, Inc.
Marion B. Folsom, treasurer, Eastman Kodak Co.
M. Albert Linton, president, Provident Mutual Life Insurance Co.
John Miller, assistant director, National Planning Association.
William I. Myers, dean, New York State College of Agriculture.
Emil Rieve, president, Textile Workers' Union and vice president, Congress of Industrial Organizations.
Florence R. Sabin, scientist.
S. Abbot Smith, president, Thomas Strahan Co.
Delos Walker, vice president, R. H. Macy & Co.
Ernest C. Young, dean of the graduate school, Purdue University.

STAFF DIRECTOR
Robert M. Ball, assistant director of the Committee on Education and Social Security, American Council on Education.