SOCIAL POLICIES AND THE NEW REALITIES OF WORK AND FAMILY

USW 31, November 3, 2014

Theda Skocpol

SOCIAL SECURITY ACT of 1935

• National system of Old Age Insurance (“Social Security”) funded by payroll tax on employers and employees.

• Federally required, yet state-administered unemployment insurance programs, funded by taxes on employers. States determined taxes and benefit rules and levels.

• Federally subsidized, state-determined and administered public assistance (“welfare”) programs for the needy elderly, for the blind, and for very poor children. States could set benefit levels and many rules for eligibility.

For two-thirds of a century after adoption of the SOCIAL SECURITY ACT of 1935, debates about public social programs remained largely within its framework:

arguments about “welfare” programs for the very poor – especially families with children.

arguments about expanding, then “privatizing” “Social Security” insurance programs for retirees and the disabled.

Racial politics was always central.

Mid-twentieth century U.S. social insurance programs were based on ideas about families and work that no longer fit American realities.

Race and U.S. Social Programs

Social Security Act programs initially excluded most African Americans.• Old age insurance did not include agricultural or service occupations.• Welfare and unemployment insurance allowed states to exclude many

groups from benefits – including blacks in South and Latinos in Soutwest.

Potential for later inclusion:• Soc Security insurance expanded to cover service and agricultural

occupations after 1956 – as most blacks left the South.• Aid to Dependent Children under Social Security potentially included single

mothers

Black inclusion in social insurance occurred uncontroversially, but the Civil Rights revolution coincided with the collapse of good industrial jobs in the North – leaving many black single parents dependent on welfare.

Political debates about welfare in the 1980s and beyond were fraught with racial overtones – and reflected a new societal consensus that even mothers of young children should work for wages.

Source: David Ellwood

In 1996, AFDC was replaced by Temporary Assistance for Needy Families – limiting cash assistance. Non-cash federal benefits expanded, especially the Earned Income Tax Credit (EITC).

This was especially true during the Clinton administration --which vowed to “Make Work Pay.”

Welfare/support for poor continues to be debated:

• Most Republicans call for tougher work requirements (40 hours a week, instead of 30, with no minimum wage for public service jobs); and they promote increased federal subsidies for “marriage counseling” plus drug testing for welfare recipients.

• Democrats want participation in educational programs to count -- and argue that federal and state expenditures for child care and health care must be sharply increased to support poor “working families.” Paid Family and Medical Leave is also a goal for many liberal advocates.

• Many poor on TANF face the five-year limit for federally subsidized cash benefits. Poverty has increased, especially in economic recessions and among poor women and men unable to work or find private employment.

“Social Security” debates, in contrast to “welfare” debates – stressed expansions in coverage and benefits through the 1970s – but since the 1980s, debates have focused on what to do with an expensive and successful set of social insurance programs for an aging population.

Social Security Wage Replacement Rates for Workers Age 65, January 2004

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Low-wage earner Average-wage earner Maximum-wage earner

Pe

rcen

t o

f w

ag

es r

epla

ced

Source: The Century Foundation, Social Security Reform (2005), Figure H, page 14, statistics from Social Security Administration.

84.8%

62.9%

44.6%

Social Security and Elderly Poverty, 1999

8%3%

15%7%

21%

40%

37%

42%

40%

40%

0%

10%

20%

30%

40%

50%

60%

70%

TotalBeneficiaries

Married Nonmarried White Black

Per

cen

t o

f el

der

ly

Poor even with Social Security Kept out of poverty with Social Security

Source: The Century Foundation, Social Security Reform (2005), Figure F, p. 11.

The hearts and minds of younger Americans are the battleground for those trying to shape public opinion -- and votes -- about the future of Social Security.

Debates over Social Security’s future – and Medicare’s future -- tend to highlight possible divergences of interest between generationally defined slices of the American population.

Since the late 1980s, many publications have featured stories about the increasing burden Social Security and Medicare will supposedly place on the young.

Critics stress that fewer workers will be available to support a projected growing population of retirees. (Better counting of illegal immigrants, or shifts in immigrant flows, could change these ratios, however.)

The picture is different if children are also considered…

Projected Total and Elderly Dependency Ratios across Industrialized Nations, 2035

0

10

20

30

40

50

60

70

80

90

UnitedStates

Japan Germany France Italy UnitedKingdom

Canada

Dep

end

ents

per

100

ind

ivid

ual

s o

f w

ork

ing

ag

e

Elderly Child

Source: The Century Foundation, Social Security Reform (2005), Figure M, page 26, based on U.N. statistics.

REFORM OPTIONS FOR SOCIAL SECURITY

• Adjust system by finding new sources of revenue, or trimming promised benefits, or a bit of both.

• Privatize the system by moving toward primarily or entirely government-regulated individual Wall Street accounts.

• Enhance benefits in Social Security to let it do more to help working-aged families – for example with caregiver benefits charged against retirement age.

Additional Years of Life Expectancy for American Men at Age 65

15.016.116.5

21.5

0.0

5.0

10.0

15.0

20.0

25.0

1982 2006

Exp

ecte

d y

ears

bey

on

d a

ge

65

Bottom half earnings

Top half earnings

Source: Economic Policy Institute, Briefing Paper #273.

What about raising the retirement age?

79%

75%

79%

78%

72%

84%

77%

69%

67%

77%

5%

11%

7%

13%

18%

4%

11%

17%

20%

10%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

$0-30K

$30-50K

$50-75K

$75-100K

$100K+

Democrat

Independent

Republican

Tea Party ID

All

Cut benefits

Raise payrolltax (lift cap)

"Currently, workers pay social security payroll taxes on up to $106,800 of their salary. To ensure the long-term viability of Social Security, would you rather have people pay social security taxes on salaries above $106,800, or would you rather see benefits cut and the retirement age increased to 69?"

Source:Public Policy Policy for Kos, conducted January 20-23, 2011.

Cuts in guaranteed Social Security would almost certainly INCREASE INEQUALITY in the United States -- for both economic and political reasons:

• Lower- and middle-income Americans would lose relatively generous guaranteed, lifetime Social Security payments -- and they are more dependent on those payments.

• Under partial privatization, privileged Americans would pressure Congress to expand tax diversions to private accounts -- then their taxes would no longer go to subsidize pensions for the less-well-to-do.

• Privatization would unleash constant political quarrels over how to regulate the Wall Street accounts -- which would increase business lobbying pressure on Congress.

• Individual political participation by the elderly would become more class-unequal, because Social Security struggles now induce more participation from the less-privileged elderly.

Biggest issue: realities of family and work no longer fit New Deal Era assumptions…

If U.S. social provision is uneven across generations, it could become more balanced either by cutting Social Security or by enhancing public supports for working-aged families – and revising them to fit the new realities of work and family.

•EXPAND SOCIAL SECURITY to include additional risks that working-aged families routinely face.

•SUBSIDIZE CHILD CARE for all working families -- through payments to providers, or refundable tax credits to parents.

•ENACT PAID FAMILY AND MEDICAL LEAVE (building on 1993 U.S. unpaid leave; or enact new programs in the states).

•BOOST LOW WAGES – expand the Earned Income Tax Credit and/or raise minimum wage.

•Require employers to give proportional BENEFITS TO PART-TIME WORKERS.

•Conservatives still prefer TAX CUTS – to let families “keep their own earnings.”

U.S. health insurance system has also been central to family security and inequalities in modern U.S. social provision. Next lecture will look at the goals, politics, and potential impact of the Affordable Care Act of 2010.

Relevant Scholars Strategy Network Briefs

“What American Think About the Future of Social Security,” by Fay Lomax Cook and Rachel L. Moskowitz, Northwestern University.

“Remaking Social Security as a Compact Across Generations to Support Family Care as well as Retirement,” by Myra Marx Ferree, University of Wisconsin at Madison

“Race. Immigration, and the American Welfare State,” by Cybelle Fox, University of California at Berkeley.

“How Social Insurance Protects Americans from Growing Economic Risks,” Theodore R. Marmor, Yale University.

SSN Forum on Support for America’s Working Families (Spotlight currently on the site, with nine contributions).