Social Security - Research Paper Example

? Social Security Social Security Introduction President Roosevelt created a committee for the purpose of Economic Security during the period of 1930s, this committee coined an act recognized as the Social Security Act and during the era of 1935, this act became part of US constitution. Several programs were created under the shelter of this act; the purpose of these programs was to provide financial assistance to the needy people of US. Several programs functional in the US such as the social security and assistance for disable people are all based on the program of old age developed under the umbrella of Social Security Act. The program created to aid those who are unemployed in US is still functional and the program that was created to assist the families that have dependant children has been transformed into a program created to aid the needy ones. The era of the Great Depression led to the creation of Social Security Act but the same idea existed even before this time period. For example: during the 1880s a program to aid the old aged people, pregnant women and ill people was functional in Germany. These programs are said to be developed due to the urbanization of Germany. Similarly, the program of social insurance is said to have developed due to the urbanization in US. During the period of 1880s the number of people working in industries and number of people working in farms and agricultural arena were equal. By the 1930s, the number of people working in farms decreased to 21% of the total workforce and people started gaining wage based employment in the industrial sector. Further states that the wages earned by people working in industrialized areas were variable in nature even before the Great Depression. Before the Great Depression, the unemployment rate between the eras of 1905 to 109 fluctuated from as low as 3.9% to 16.4% and the unemployment rate during the era of 1920 to 1924 fluctuated from 4.1% to 19.5% (Kennedy, 1999). When ever economic downtrend took place in US, the category of people who took most of the burden were the old aged people, other side effects of downtrend included loss of income due to impairments and death. These effects gained the attention of the policy makers and during the Great Depression these issues gained more strength as during this era the unemployment rate in non agricultural sectors elevated to 34%. Increase in the degree of these issues made the policy makers create the Social security program (Green, 2003). The early developed program of Social Security was not designed in a way to provide fast relief from the effects of the Great depression. The early program was somewhat like the Townsend plan according to which individuals aging 60 and above were provided with an old age pension of $200. This amount was only provided to those individuals who were not employed or could not work and they had to spend the entire amount in one particular months time period. This program never became a part of the US constitution but gained tremendous popularity because it focused on wiping of poverty and to obtain economic success. Body Several features of the Social Security Act of 1935 are still available in the current Social security system, over the years the system has experienced various changes. The changes made to the act during the era of 1939 have now become a part of debate. The Act in its true shape was created with the purpose of providing retirement funds to those who were no longer employed and were aging over 65 years. The formulation of the benefits that were to be offered to old aged people under this act was based on the income earned by these old aged people since 1937 and the benefits were offered to people coming from limited kinds of jobs. The first formulation of benefits offered very low benefits to the old aged people as compared to the wages earned by an average worker during that time period (Livingston, 2008). These benefits were never applied to the Social Security Act; the only features applied from this Social Security Act were the feature of paying retirement funds to limited number of types of jobs and to pay higher amount of benefits to those who earned low. During 1939, the formulation of offering retirement benefits were altered and not benefits were calculated on the basis of average income rather than cumulative income. The benefits offered under the second formulation were higher than the first formulation but only for those who were retiring in the early ages of the plan and those who were to retire after several years of the initiation of the act were receiving lower benefits. Another adjustment made in the formulation of 1939 was that those who were earning more than $15/month were not entitled for retirement benefits. Under the original act, those individuals who could not participate in the program were paid an amount of 3.5% of their cumulative wage and those who qualified for the program were provided with 3.5% of their cumulative wage after deducting the amount of money that was paid as retirement benefits throughout the period of time they lived. The Social Security Act even addressed groups such as the dependants of those who have retired and those were survivors. Spouses aging 65 and above of those individuals who were retired were eligible for 50% of the retirement benefits and those spouses who were taking care of children of the retired individual were entitled for 75% of the benefits. Children of those individuals who were retired or were no longer alive were paid 50% of the benefits (Glenn, 2009). All these payments were made on the calculation based on cumulative income in the act of 1935, but in the act of 1939, these benefits were offered on average wages. The benefits paid to the retired individuals were obtained by taxing the income of the employees as well as the employers, this was done to equalize the burden on both the employers and the employees and to decrease the burden on the treasury. The percentage of amount taxed was 1% of both the incomes of employers and employees. The Social Security Act did not focus on benefiting individuals; it rather focused on benefiting the family members of the retired individual. Another point to be noticed is that the structure of the benefits was such that it prevented the creation of a very huge reserve fund. This was because of the delay in increase in taxes and higher benefits for those who retired near to the creation of the act. Senator Arthur Vandenberg was concerned about the huge funds reserve that could have accumulated because he believed that the government will end up spending the reserve funds on other public operations and will not save the money. The focus of the act on benefiting the widows and the dependants was a major concern of the Roosevelt administration and these concerns are even visible in the Social Security Act existing in the constitution of US. This point even came under scrutiny as those individuals who did not pay the taxes and did not provide labor were benefiting from the act. Questions were even raised on how the provisions of the act applied to those females who were already working and the spouses had retired or were no longer living. Those who became a part of the program in early stages of the program were given more benefits because of economic as well as political reasons (Bradshaw, 1986). One of the main economic reasons was that during the period of 1937 and 1938, US was once again experiencing recession and domestic spending did not seem a favorable option. Even the political parties and political actors supported the notion of more benefits for early participants. Although US tried to ensure that a huge reserve of funds from taxes is not created, but due to war a huge reserve of funds was created through these taxes due to which taxes were kept down to 2%. Effort of delaying the increase in scheduled payroll tax was made by the president Roosevelt but these efforts were countered by Congress because they believed that future administration should not be left with limited reserves from payroll taxes (Dobelstein, 2009). During the start of the 1950s it was realized that the number of people benefiting from the act were quite few but later by 1959 the number of beneficiaries increased to 86%. New feature of providing insurance to the disabled was added to the act and the number of beneficiaries and the amount of benefits kept on increasing. The changes to the act started covering those employees who were previously not covered but these employees were not getting benefits for the work they have conducted since 1939 to 1950. This led to a new formulation of the Social Security Act, according to which benefits were to be computed on the basis of monthly average income earned after the period of 1950s. During the period of 1957, percentage of payroll taxes even increased in order to finance the Disabled Insurance Program, this program offered benefits to those who aged between 50 and 64. Another provision added to the act was the women were allowed to avail their retirement funds before the age of 62, today even men are allowed to do the same under the Social Security Act. During the 1960s, the benefits offered through social Security Act almost doubled, the payroll taxes even elevated to 8.4%, the benefits offered to the widower even elevated to 82.5% of the retirement funds and the age of the beneficiary was changed to people below the age of 65 and the 1960s even witnessed the introduction of Medicare program. Benefits were further increased during the start of the 1970s but later concerns developed about the financial status of the program. This led to changes in legislation with the aim of controlling the number of people who could benefit from the program. One of the major changes was freezing of the regular minimum benefit and later this part of the program came to an end and today a very small percentage of the benefits are offered to the beneficiaries of the program (Irwin, 1936). During 1977 two more major changes took place which includes changes in the maximum amount that was payroll taxable and schedule of increase in the percentage of payroll taxes even took place. A major concern that arose during the 1983 and is still debated is that the surplus amount from the investment of the reserve fund is saved or is used for public operations. This concern took place due to substantial increase in the reserve funds and how would the government treat these increases. Conclusion The Social security Act has been functional since the 1930s and has not only benefited those who have retired, but it even benefits the dependants of those who have retired including children and spouses. A major concern rising is that the funds may fall short to provide benefits to those who became the member of the program later in the years of 2000 and onwards as the number of beneficiaries are increasing. References Bradshaw, J. (1986). The impact of the Social Security Act on electricity consumers. London: Electricity Consumers' Council. Dobelstein, A. W. (2009). Understanding the Social Security Act: The foundation of social welfare for America in the twenty-first century. Oxford: Oxford University Press. Glenn, B. J., & Teles, S. M. (2009). Conservatism and American political development. Oxford: Oxford University Press. Green, E. C. (2003). The New Deal and beyond: Social welfare in the South since 1930. Athens: University of Georgia Press. Irwin, Robert B., & McKay, Evelyn C. (1936). The Social Security Act and the Blind. (Law and Contemporary Problems.) Duke University School of Law. Kennedy, D. M. (1999). Freedom from fear: The American people in depression and war, 1929-1945. New York: Oxford University Press. Livingston, S. G. (2008). U.S. social security: A reference handbook. Santa Barbara, Calif: ABC-CLIO. Read More