Arthur J. Altmeyer


By Arthur J. Altmeyer
Commissioner for Social Security
At 15th Annual Meeting of the
Controllers Institute of America
New York, September 16, 1946

I have been asked to discuss a very large topic, namely, "The Need for Social Security in the Postwar World." It would be a very presumptuous person who would pretend to be able to predict the exact future development of what we in this country have come to call social security. Its development depends first of all upon what kind of a postwar world we shall have.

Of one thing we can be certain. It will be a world of intensive, extensive, and rapid change--not only technological change but political, economic, and social change as well. We are not yet able to grasp even dimly the tremendous implications of the atomic bomb. While its technological implications stagger the imaginations, its political, economic, and social implications are even more tremendous.

But I do not propose to discuss the atomic bomb. Rather, I should like to point out that even though the atomic bomb had never been discovered this war that we have just fought has released psychological forces which, when coupled with widespread human misery and want, have set off "chain reactions" literally world-wide in their extent. I refer to what you probably will say are very old concepts of liberty, democracy, and equal opportunity. It is true that these concepts are not new in the western world, but they have never before been given global currency and application. The peoples in the far corners of the world have now become keenly aware of them and apparently are proposing to act accordingly.

It took hundreds of years for the rise and fall of ancient empires. It has taken only a few decades to encompass the rise and fall of modern empires. As a matter of fact, the mode of existence of the common man was very much the same for thousands of years until a little over 150 years ago, when the technological forces--which we call the industrial revolution--and the political forces--which we call democracy--began to sweep through the western world. The result has been that there has been more change during the last eight generations than there had been during all of previous recorded history. What is important for us is that, so far as any one can see now, the rate of change, rapid as it has been, seems to be accelerating even more, rather than declining.

The reason I emphasize the fact that the postwar world will be a world of change is because change means uncertainty and insecurity for the millions of human beings who will inhabit this postwar world. This, in spite of the fact that a basic human trait, perhaps so we should call it instinct, is the yearning for security. This yearning for security manifests itself in many ways. Likewise, as society becomes more and more interdependent, the necessity of relying upon group action rather than individual action grows greater and greater.

Group action may be either governmental or non-governmental in character. Thus, the businessman may seek a tariff or a railroad or a ship subsidy to protect himself against undue risks, or he may turn to business and trade associations to protect his interests. He may even join trusts or cartels to keep down what he considers undesirable competition. The farmer may seek a tax on oleomargine or an embargo on Argentine meat or a parity price or government loans or government subsidies of one kind or another; or he may join farm organizations and farm cooperatives to assure himself a reasonable and stable income. The worker may seek government legislation prohibiting court injunctions or a Wagner Act preventing employer interference with labor organizations, or legislation placing a floor below wages and a ceiling over hours; or he may resort to his economic power through labor unions to control wages, hours, and working conditions. The consumer usually must rely rather largely on governmental action to protect his interests. Thus, we have a law providing for meat inspection, a Pure Food and Drug Act, laws regulating weights and measures, a Federal Trade Commission to enforce truth in advertising, and of course an Office of Price Administration which undertakes to control prices.

Sometimes the yearning for security on the part of businessmen, farmers, workers, and consumers clash. In fact, sometimes the yearning for security of the very same individual as a businessman or farmer or a worker clashes with his yearning for security as a consumer. Naturally, businessmen and farmers and workers want to get high prices for what they sell as producers and pay low prices for what they have to buy as consumers. Under such conditions, it is of course necessary for the government to undertake to reconcile all of these yearnings for individual security in order to achieve the maximum amount of general security.

The particular form of security with which we are concerned is what has come to be called social security. Hardly a decade ago the very term social security had not come into existence. Now it is in the process of acquiring such an inclusive meaning that its usefulness as a term to describe a specific program of action is in danger of becoming impaired. Thus, we find world statesmen asserting that social security is the main motive of national life. We find it listed as a chief objective in the Atlantic Charter.

In the large sense in which it is used by statesmen, it covers all of the essentials of decent human existence, such as housing, education, health, and full employment--as well as elimination of destitution. However, in the narrower sense, when it is used to describe a specific program of action, it is usually confined to governmental measures designed to eliminate want by preventing the loss of current income.

Many well-meaning and socially-minded people believe that if we can maintain full employment and full production there is no need to set up a specific social security program to prevent loss of current income. However, those people fail to realize that even though we achieve the goal of full employment and full production the working people of this country will still be confronted with the great economic hazards of sickness and physical disability, that all employers should share alike in the financing of basic benefits. Variation above the basic program provisions in employer contributions and in the benefits available to particular groups of workers can mean desirable flexibility and experimentation. I do not believe, however, that we can much longer afford the complete gaps in coverage and in protection which inevitably result from voluntary provisions alone.

A basic public system is necessary also to assure complete coverage over time as well as at any one period. The importance of continuity of coverage is most obvious in the case of retirement benefits. Mobility of labor is a necessary aspect of our economy and our way of life. Only a public program covering all employments can provide the necessary basic protection for workers who move from job to job.

The importance of continuity of coverage is also evident in the case of permanent disability benefits. Relatively few private pension plans provide continuing disability benefits, and those which do necessarily require, as a condition of eligibility, membership in the particular plan (or employment by a particular employer) for substantial periods.

But even for the short-term benefits, cash sickness and accident benefits, or hospital and medical care and related benefits, there is a problem of continuity of protection which can only be met by a public program. I am thinking not so much of the qualifying requirements (frequently 3 or even 6 months) which a worker may have to meet each time he shifts employment and comes under a different plan, but of the failure of most plans to continue the protection during periods of unemployment. A period of prolonged illness may also result in loss of hospitalization and medical care protection not only for the worker, but also for his dependents if they had such protection at all. Yet it is precisely in such periods that the worker and his family may have the greatest need of sickness or medical benefits. An employee benefit plan for a single plant or firm, whether financed by employer contributions or employee pay-roll deductions or both, cannot very well extend the protection of the plan long beyond the time when the employee's connection with the job and pay roll is severed. Some union and union-management plans covering more than one employer have attempted to continue protection during brief periods of unemployment, usually two or three months. Basically, however, the problem can only be met simply and adequately through a public program.

Finally, I would just mention the advantages of economy and simplicity which can be obtained through a comprehensive, basic public program, as in no other way. Assuming that our goal is basic protection for everybody, and not just for a few fortunate or for a few selected and superior risk groups, I do not hesitate to say categorically that the goal of basic protection can be attained at a lower aggregate cost and with fewer administrative complications under a single public program than under many separate voluntary programs.

Having thus testified to my continuing belief in the need for a comprehensive basic social insurance program, let me summarize what seem to me the appropriate functions of voluntary employee benefit plans, both when we have a comprehensive public program and today.

The general relationship of the voluntary plans to the public program, I have already suggested, should be that of supplementing the provisions of the basic program. I might indicate more specifically some of the kinds of supplementation which might be desirable. Even if the old-age and survivors insurance benefits are liberalized in accordance with the recommendations of the Social Security Administration, they will still be small and there would remain ample room for provision of additional benefit amounts through voluntary plans. Such plans might also provide for payment of retirement benefits at a lower age than 65 in some industries or occupations, or provide survivor protection for classes of dependents who are not protected under the public program, such as widowers under retirement age who do not have young children in their care, or by permitting the individual worker to designate any beneficiary he chooses.

It may be assumed that when permanent disability benefits are included in a comprehensive public program they would be of about the same size as age retirement benefits and might also leave ample room for supplementation through payment of additional amounts. The situation is not so clear with respect to temporary disability benefits, which might be at a higher level. There is a limit beyond which total disability benefits, in relation to previous and prospective earnings, cannot go without unduly discouraging a return to work. How much room there would be for supplementation of temporary disability benefits could depend on the adequacy of the basic program.

With respect to medical care plans, the problem is somewhat different. In the first place there would not exist the same difference between basic benefits and adequate benefits as in the case of at least some of the cash wage-loss benefits. A fully-developed health insurance system would provide all essential medical services. In the early years of a health program, when some types of services--principally dental care and home nursing services--would probably have to be limited, there would be broad opportunity for supplementary benefits. There would also be room for some supplementation of hospital benefits for long duration cases and those desiring more expensive hospital accommodations than may be properly covered by a social insurance system. But the more important relations to be anticipated between voluntary medical care plans and a health insurance system are of a different kind. Medical care plans which provide service benefits (rather than cash reimbursement) could continue to provide such services as insurance benefits if the workers choose to continue obtaining medical care from the organization. Whether or not the plan continued as such, there would of course be no question as to the opportunity for its doctors, hospitals, laboratories, etc. to participate in the health insurance system. I think it likely, however, that any voluntary medical service plan which is organized on a sound basis and which is providing high quality care could and would want to continue as a service organization under a health insurance system.

I look upon existing and proposed voluntary employee benefit plans, therefore, as either supplementary to social insurance or temporary substitutes for and forerunners of social insurance. In both roles, they can--if soundly developed--be constructive. Though this aspect of the question is outside the topic I was asked to discuss, may I say that it seems to me the development of industrial benefit plans offers important opportunities for real employer-employee and union-management cooperation. Such plans are providing much needed protection for some workers--protection which is not now available under our social insurance program.

It is fortunate that except in the case of permanent disability the plans which substitute for, rather than supplement, social insurance provide short-term benefits and involve no long-term commitments. Moreover, a number of these plans include explicit provisions for termination or suitable modification of the plan when a public program providing similar benefits is adopted. Whether or not the possibility is spelled out, it seems to me that those who are responsible for the design of any voluntary plan should keep in mind the problem of relations to future public programs.

In addition to giving needed protections, now, to some workers, voluntary plans cannot help but play an important educational role. They can also contribute to our knowledge of the effect on costs, and on the successful operation of a plan, of alternative benefit specifications, alternative methods of handling claims, alternative methods of organizing medical services, and similar matters. While I believe we now have sufficient experience and knowledge to design a sound public program, we should not forego the opportunity of learning more from voluntary programs.

I hope, therefore, that as new voluntary health, welfare and retirement plans are established and existing plans continued, provision will be made for adequate records of operations and of costs, and for careful and unbiased analysis of those records. I would commend the furtherance of such provision as a worthwhile objective for this organization, whatever may be your opinions as to the ultimate relations which should obtain between such voluntary employee benefit plans and our social insurance program.