The Social Welfare Act of 1935 Research Paper

Introduction

The Social Welfare Act of 1935 was signed by American President Roosevelt on August 14, 1935, to ease the suffering and misery that millions of Americans suffered during the Great Depression. The act was meant to set in place a system that would take care of the old, the sick, blind and handicapped persons, dependants of such people, children, women expecting children, the unemployed, and another type of people who could not earn a living or take up a job. The act was created to afford some type of financial remuneration for people to alleviate their misery and suffering and allow them to meet their basic needs. The act was the first of its kind and had wide implications and opposition. The act has undergone many amendments and modifications, but it essentially levied a percentage of tax on people who are employed and their employers and used this money to pay certain amounts to eligible people.

This paper analyses various aspects of the activities, such as the history and forces that brought the act, how it has benefited people, what it stands for today and who are the beneficiaries. For the year ending 2004, the US Social Security System has given out payments of around USD 500 billion.

Historical Perspective of the act

Diana (Diana, 2006) has suggested that the present concepts of the Social Security Act came from the Christian concepts of charity and cared for the poor. It must be noted that most of the Americans in the early 1800s were descendants from England, Ireland, and other European countries. They were steeped in the religion and practices from the homelands and prescribed to the Elizabethan poor laws of England. Diana has argued that the social welfare act is actually a culmination of the social work activities carried out by early settlers.

Naumann (Naumann et al. l, 2002) has argued that in 1601, Elizabeth, the Queen of England, had passed the 1601 Act that was meant to provide relief to the poor people. Prior to this act, the poor were cared for by their parish and the local people, but with the breakdown of the monasteries and the social structure following the bubonic plague epidemic, the Queen introduced the act. There was a general breakdown in the social structure, and robbery was the order of the day since poor people had to use whatever means they could to survive. The act covered three types of people: almshouses and poorhouses were created for the impotent poor, the blind, lame, and the old people. The fit or able-bodied poor were confined to workhouses and were given raw materials so that they could work. The vagrants, thieves, and the poor were forced into prisons and correction houses while orphans were placed as apprentices. The act required local homeowners and businesses to pay an income tax. The system soon degenerated and placed absolute power in the hands of the overseer or in charge of the people who would often decide the deserving poor. There were no established policies and standards, and many of the decisions and actions were left to the sole discretion of the parishes.

Huff (Huff, 2002) has provided a detailed analysis of the social welfare movement in America that led to the social welfare act of 1935. The American colonies were established at this time in the early part of the 17^th century, and while the Americans fought and obtained their independence, the governance and systems were offshoots of the policies of England. The early part of the 18^th century was filled with turmoil and a large influx of immigrants from Europe. The end of the civil war, the abolition of the slavery system, and the end of the California gold rush saw a large number of poor people, freed slaves, crippled soldiers, native Indians, and unemployed miners. A number of public charities, asylums, state board charities, and others were established, and they took up social service with an evangelical spirit. They, in effect, tried to replicate the infrastructure and system built in Elizabethan England and erected a number of poor houses, reformatories, orphanages, prisons, and so on. The efforts soon turned into a nightmare since there were no centrally administered systems to manage these institutions. A need was felt to develop a scientific charity that would be based on rational, empirical, and secular principles and was not to be regarded as sentimental, dogmatic, and sectarian.

Axinn (Axinn 2004) has pointed out that the 1870s saw a large number of desperate and starving poor that had no means to meet their basic needs. This resulted in the agricultural and economic depression of 1870, where large sections of the population rioted and went on strike, especially in the eastern states. A new school of thought appeared called social Darwinism, and this suggested that relief and disbursing of money harmed the poor since it increased their dependency and took away the motivation to work. This movement believed that poverty could be removed by uplifting the moral character of the poor. They used ‘friendly visitors’ who were often white protestant faith ladies from the upper class and who served as volunteers. They would visit the poor families, observe what was happening, note the actual conditions and decide if the families were fit to receive relief. If nothing else, the details they noted down formed the basis for scientific studies on poor people. These visitors soon realized that the reasons for poverty were not due to any lack of morals but due to exploitive employers, crippling injuries, and lack of education and job opportunities.

Forces that led to the development of the Social Security Act 1935

Burkitt (Burkitt 1994) has highlighted the forces that were at work during the early part of the 19^th century. America was just emerging from the depression of the 1890s, and the class struggle was intense. The depression of the 1890s was much more severe and witnessed the collapse of banks and industries, rendering millions of people jobless, and social unrest, violent strikes and uprisings, and anarchy were the order of the day. Farmers had undergone severe losses partly due to the floods and droughts and partly due to the low rates that were offered for their produce. Racism was at its peak, and frustrated whites lynched more than 1000 poor African Americans, whom they perceived as the cause of their troubles. To top it all, thousands of immigrants had come to America with their families in search of a better future. Charitable organizations could not cope up with the huge number of people who sought help and succor. The mental frame of the charity organizations underwent a change, and the high society proponents of earlier theory began a systematic study of what caused poverty and the means to understand the treatment. More systematic studies were taken, and the full-time, trained professional social worker arose. Burkitt has suggested that the end of the First World War saw a new force emerging, and this was the women’s Suffrage movement. Women demanded that social welfare and the state should look at them separately and should not presume that if men were benefited, women stood naturally to benefit. Greater emphasis was placed on providing care for single women, widows, women whose husbands had deserted them, and in the care of such children, and in 1919, the Widow’s bill was enacted.. The welfare measures stopped taking children away from single and widowed mothers and stopped placing them in orphanages. There was also an increase in the number of private charities that provided relief.

Axinn (Axinn, 2004) has suggested that the greatest force that brought in the social welfare act was the great depression that started in 1929 and lasted till 1939. The stock market crashed, thousands of banks closed down, and millions of people were rendered jobless. All these years, taking social welfare benefits was regarded as something derogatory that only the socially deprived poor who lived in slums took. But the great depression brought a new meaning to poverty. Overnight, relatively affluent people or people that had steady jobs were rendered jobless. Their savings were wiped out when banks collapsed, and millions were rendered destitute.

Axinn has pointed out that the new poor and the great levels of poverty required some urgent measures from the government. The whole system of welfare and relief became complex, and it required a system to be set up in place. In 1933 Franklin Roosevelt became the president of the USA, and he immediately set about to provide relief. A number of bills and acts were introduced that were collectively termed as the New Deal to provide jobs for the jobless; hundreds of construction projects were started to build roads, buildings, courthouses, and so on. Along with jobs for men, teens were also given a number of jobs. These measures helped the economy to slowly pull back from the depths it had fallen into. But the road to recovery was still some years away. The above acts and work provided some help to the able-bodied people who could work. But it left thousands of old and crippled people without any income. To provide relief to the old, the crippled, and to the able-bodied but jobless people, the Social Security Act of 1935 was signed. The act had two components: Social Insurance and the Public Assistance Program.

Social Insurance and Public Assistance Provisions of the Act

The Social Security Act provided social insurance as per two issues, and they were unemployment insurance and workers’ compensation. These programs gave workers limited insurance in their old age. This program was called the old-age survivors and disability insurance. These programs provided some type of guarantee for workers who were too old to work, were crippled due to accidents, or who could not find jobs. There are some differences in the two components in that the social insurance plan is meant to provide relief to old people, children and widows, and people who cannot take up work. The public assistance provision ensures that able-bodied people who cannot find a job would be paid an amount till they are able to find a job. Once such people find a job and start earning, then the payouts will cease (Diana, 2006).

Provisions in the Social Welfare Act

The Social Security Act has been amended a few times, and in its current structure, it supports the following initiatives:

• Federal Old-Age, Survivors, and Disability Insurance
• Unemployment Insurance
• Temporary Assistance to Needy Families
• Health Insurance for Aged and Disabled (Medicare)
• Grants to States for Medical Assistance Programs (Medicaid)
• State Children’s Health Insurance Program (SCHIP)

These are explained in the following sections.

Federal Old-Age, Survivors, and Disability Insurance (OASDI)

The Federal Old-Age, Survivors, and Disability Insurance (OHSDI). It was enacted to provide benefits for retired workers, individuals with disabilities, surviving spouses, people who are sick and cannot take up work, dependents of retirees, and others. To be eligible for the benefits, certain criteria need to be met, such as minimum period of employment, and the workers should have made contributions to the social security system when employed. The fund gives out monthly payments, and there is a requirement that the person should have a financial need, The funding is done by taxing the salary of the contributor, and in 1996, an amount of 6.2 percent of the salary was deducted. In the old age benefit scheme, a maximum retirement age of 65 or 67 years was placed, and the worker should have worked for a certain minimum number of calendar quarters, such as 40. If the worker dies, then the spouse who may not have contributed to the fund can still get 50 percent of the benefit. In case the worker dies, then the survivor and minor children can obtain monthly payments and a one-time lump sum payment. If a worker is disabled and is not expected to work for at least 12 months or if expected to die from any illness, then such worker can receive the payment even before the retirement age is reached. Certain checks and verifications are required before the payment begins (OASDI, 2003).

Unemployment Insurance

The Unemployment Insurance Act lets the US government makes payments to eligible unemployed workers. There are certain requirements and conditions to be met before the payments are given. Funding is done through tax cuts that are levied on people who have a job. The amount paid may cover the basic needs or may pay a part of the previous salary, and this depends on the quarterly earnings of the worker. The amount paid again depends on the number of quarters worked, the period of employment, etc. The worker should certify that they are seeking work but have not been able to find a job (Unemployment Insurance Code, 2007).

Temporary Assistance to Needy Families (TANF)

TANF was enacted to cover the problems that arose from the previous AFDC program. In the TANF program, relief is provided to children who need assistance. Children with single parents whose father or mother has deserted them, whose parents are not able to support them, and parents who do not have a job, are supported by this program. In this program, such parents can opt for relief for a maximum of five years. The mother needs to take up training, education and participate in other programs that allow them to be trained so that they can take up jobs later on after the period has expired. The children are expected to attend schools, and certain support measures have also been provided to help children (TANF 2005).

Health Insurance for Aged and Disabled – Medicare

Medicare was a new amendment signed in 1965 to the social security act, and it provided medical care for eligible people who were above 65 years or who met certain other criteria. The benefit has two parts Hospital Insurance and Medical Insurance. In some cases, prescription drugs are also covered. The hospital insurance Act says that government will pay for patients who stay in a hospital for at least three days, and the nursing home must be skilled and meet certain requirements. The medical insurance part covers various treatment processes such as X Rays, diagnostic tests, transfusions, and also durable medical equipment such as wheelchairs, prosthetic devices, eyeglasses, etc. Funding is done through payroll taxes, and it has been estimated that for the year 2002, an amount of more than 256 billion USD was paid for the more than 43 million subscribers (Medicare & You handbook for 2007).

Grants to States for Medical Assistance Programs – Medicaid

Medicaid is a program that was set up in 1965 and provides medical healthcare for eligible low-income families and individuals when they need to undergo treatment, as per specified rules and eligibility criteria. The money is paid directly to the care providers and not to the applicant. The states are allowed to set their own guidelines and principles regarding eligibility criteria and disbursal of funds. Medicaid is allowed after verification regarding the applicant’s income, assets. Age, disabilities, type of ailments, and others. Children are also provided with Medicaid provided they are citizens of the US (Medicaid 2005).

Differences between Medicaid and Medicare

There are certain basic differences between Medicaid and Medicare. Medicare is a federally funded entitlement program for people who are more than 65 years or for people with special considerations such as end-stage renal disease, which are below 65. There are no financial requirements to be eligible for Medicare. Medicaid, on the other hand, is a state-administered program that is meant for eligible low-income groups. Applicants of Medicaid should show that they do not have sufficient assets, savings, or financial means to obtain the funds.

State Children’s Health Insurance Program (SCHIP)

The State Children’s Health Insurance Program was set up in October 1997 and will be effective till 2007. The program is funded by Federal and State bodies and is designed to cover uninsured children. The fund amount is 24 USD billion to children up till the age of 18 (SCHIP 2007).

AFDC and TANF

AFDC (Aid to Families with Dependent Children) act was passed in 1935 and continued to be administered till 1997 when it was replaced by the TANF program (Temporary Assistance for Needy Families). AFDC allowed different states to give welfare and support to needy children. Needy children were those who had lost their parents, or whose mother or father had deserted the family, could not work because of illness or health problems, or who could not work because of any other problems. The act allowed individual states to define and set their own criteria for defining needs and the amount of benefit that would be paid out. In their haste to support needy children, the governments had access to a practically unlimited amount of money that could be given as reimbursements. By 1996 the program had become unmanageable, and the government had paid about USD 26 billion as AFDC benefits. A number of criticisms were raised against the AFDC program from its inception till the time it was annulled. To begin with, there was no time limit for beneficiaries of the program. It was found that this program had encouraged childbirths at an alarming rate, and this was especially true among the poorer sections of the society since women could claim pregnancy and prolong the period for which benefits were reimbursed to them. It was found that many women had got used to this system and were reluctant to rejoin work since they would have to start work as beginners, and in all probability, the number of benefits realized through AFDC was more than what they would make by working. Researchers also claimed many other social consequences. In general, it was suggested that this kind of welfare where people get paid by not doing anything has a dangerous effect, and this increased the number of people who received the benefits. Certain demographic changes had happened in the period from 1935 till 1996. In 1935, most of the beneficiaries were widows, and moreover, in that period, a woman was expected to stay at home and care for her children and not work outside. With the changes brought about by the women’s liberation movement of the 1970s, more and more women started working, and a woman staying at home was regarded more like a privilege. It has also been found that more and more beneficiaries of the act were single mothers or divorcees (AFDC, 2007)..

US President Bill Clinton in 1996 brought some reforms to this act. He approved the TANF act, which was time, bound and introduced some checks into the AFDC program. The US administration brought into effect the Welfare Reform Act to replace AFDC with TANF. The TANF provided the means to address many problems that the previous act had bred. The act gives financial support to people who are qualified as per different requirements such as desertion or continued absence of the father or mother, death of the father, if the parent is unable to support the children and if the parent is not able to find a job. The benefits could be availed for a maximum of five years. Factors such as the assets of the family, age of the children, the income of the family, and other factors were considered before the grant was given. If the child was more than 1 year of age, then the parent had to participate in training, work, or take up further education programs that would help to rehabilitate the parent and give them experience to find them jobs, once the time for the grant was over. The TANF program was further strengthened by giving support to the children. Such children were provided with childcare measures that were subsidized and provide transportation facilities. Incentives and bonuses were offered to states that showed decreased instances of unmarried women giving birth, those that encouraged the two-parent family concept, ones that showed higher job entry figures, increased drug rehabilitation services, providing child support enforcement, and so on. People were encouraged to be self-sufficient. Eligible children were expected to go to the schools. The act also provided for a one-time payment of benefits of 120 days to meet any emergency problems, and this was decided on a case-to-case basis (TANF, 2005).

Threats to Social Security Act

The Social Security Act is under the threat of collapsing from its own burden. The life expectancy of retired Americans had increased to about 72.1 years from the 60.1 years that was present when the act came into force. With the increase in the number of retired people, there is a real fiscal danger of the fund being drowned in deficit. There are currently more than 39 million senior citizens who avail of the benefits, and it is estimated that the total shortfall in Social Security and Medicare is about USD 18 Trillion. Employed workers are taxed to the extent of 12.4 % for social security and 2.8 % for Medicare, and studies show that the inflow amount from taxes is not sufficient to balance the payments. The payments are made by heavy subsidies from the government, and it is projected that by 2017, the huge burden of social security and other programs will become unmanageable, or put in simple terms, the government will not be able to pay out the money. Attempts have been made by some administrators and presidents to tax the benefits or reduce the outflow of money, but this has been resisted by people (OMB, 2007).

References

1. AFDC (2007), ‘Transitions from AFDC to SSI Before Welfare Reform‘ Web.
2. Axinn June, Stern Mark J. (2004), ‘Social Welfare: A History of the American Response to Need‘, 6th Edition, Allyn & Bacon, ISBN-10: 0205386865
3. Burkitt Brian & Frances Hutchinson (1994), ‘Major Douglas’ Proposals for a National Dividend A Logical Successor to the Wage, International Journal of Social Economics, Vol. 21, No. 1, pp: 19-28
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5. Huff Dan (2002), Progress & Reform A Cyberhistory of Social Work’s Formative Years: Boise State University
6. Hsing Yu (2004), Socioeconomic analysis of the determinants of TANF recipients in the USA and policy implications, International Journal of Social Economics, Vol 31, No. 11/12, pp: 1005-1013
7. Medicaid (2005), ‘Medicaid At A Glance 2005‘, Web.
8. Medicare & You handbook for 2007 (2007). ‘Information on current Medicare policies’, Web.
9. Naumann. Stefanie. E, Minsky Barbara, D, & Sturman Michael C. (2002). ‘A historical examination of employee entitlement’, Journal of Management History, Vol 40, No. 1, pp: 89-94
10. OMB (2007), ‘Entitlements on the Brink: Office of Management and Budget’
11. SCHIP 2007, ‘National SCHIP Policy: Overview‘
12. Unemployment Insurance Code (2007), ‘Unemployment Insurance Code Section 1-21‘, Web.
13. OASDI (2003),’ Old Age, Survivors, and Disability Insurance: Social Security Online’, Web.
14. TANF (2005), ‘Temporary Assistance for Needy Families’, Web.