Social Security System in the Beveridge Report - Essay Example

The Social Security System today is one that Beveridge would recognise Social security system is a social insurance system aimed to support elderly, low social classes and unemployed citizens. Social Security reaches many people and costs much money overwhelming all other domestic priorities. The importance of social security in Britain can scarcely be overstated. The budget devoted to it represents the largest single departmental program, and accounts for nearly one-third of all public expenditure. Over four million households rely on income support and a similar number receive housing benefit (Aaron 1982). The state retirement pension is paid to approximately ten million people and child benefit is paid to nearly seven million families. Modern social security system is the Great Britain differs from its programs and implementations proposed during 1930s-1940s (Alcock & Craig, 2001). William Beveridge, an economist and social reformer, was one of those politicians who proposed a comprehensive social system aimed to support British population and improve conditions of life for millions of people. It is possible to say that Beveridge would resognise modern social security system because it meets the main principles and values proposed by Beveridge 70 years ago. Critics (Alcock & Craig, 2001) admit that the modern benefit system is still based on the Beveridge Report of 1942 (Siegfried 1963). Beveridge's model for a new system of social security envisaged a central role for universal and comprehensive social insurance, building on the national insurance scheme established by the 1911 Liberal Government (Aaron 1982). His intention was that the new system of insurance benefits would guarantee a subsistence level of income to cover the major causes of income loss, through unemployment, sickness, and old age, whilst individuals would be encouraged to provide a higher standard of living for their families by voluntary savings (Morgan, 1994). Beveridge hoped that such a scheme would satisfy the needs of most of the population, but accepted that a safety net of residual assistance would have to be available for those who failed to qualify under the contributory scheme (Alcock & Craig, 2001). According to the Beveridge Plan, such a social security system could not be implemented in isolation; the government also had to be committed to introducing family allowances and a national health service, and to maintaining full employment. In this way, Beveridge, like subsequent policy makers, recognized the interrelationship between social security and other areas of government policy. Today, to promote security, and particularly economic security, the Great Britain developed a variety of social security programs. Some have taken the form of "social insurance whereby contributions are made to a fund by workers, employers, self-employed persons, and governments, and payments are made to persons whose income has stopped for such reasons as old age, disability, unemployment, or death of the wage earner (Siegfried 1963). Other programs have taken the form of "social assistance" whereby persons in need receive public relief or pensions by virtue of age or for other reasons (Morgan, 1994). Still other social assistance programs have taken the form of "social benefits" whereby all persons meeting certain qualifications such as attainment of a prescribed age and having a certain period of citizenship or residence receive benefits, without regard to any previous contributions or taxes paid or demonstration of individual need (Alcock & Craig, 2001). In contrast to previous models and programs proposed by the government, modern social security meets the basic principles and philosophy of Beveridge. As the most important, modern security system covers not only elderly people but unemployed, poor, old age, disabled and other categories. Each of the Government spends more than 1 billion on benefits and their administration (McKay & Rowlingson, 1999). Today social security benefits in Britain, as in most other developed countries, fall into two broad categories. The first consists of means-tested benefits designed to relieve poverty, the primary form being income support, a lineal descendant of the old Poor Law (Aaron 1982). The second category is comprised of benefits which are designed to meet particular risks or needs irrespective of income levels. This group includes the national insurance benefits, which aim to guarantee a minimum level of income over the life cycle by the collective spreading of risks. This is typified by unemployment benefit, entitlement to which requires a certain level of contributions to have been paid on past earnings (McKay & Rowlingson, 1999; Siegfried 1963). Beveridge would recognize the modern system of social security because his model of social security has been portrayed as universalizing 'middle-class values', and at the same time as turning the people of Britain into a 'subliterate, unskilled, unhealthy and institutionalized proletariat hanging on the nipple of state maternalism'. Beveridge's 'universal' subsistence-level benefits have been attacked both as a blank cheque for profligate extravagance, and as resting upon a definition of 'subsistence' so mean and so cost-conscious as to amount to 'mendacity' (Siegfried 1963). His 'social security budget' has been blamed both for using away scarce resources from post-war industrial investment, and as a spineless submission to tight-fisted Treasury control (McKay & Rowlingson, 1999). Thus, modern social security system proves that the government should be oriented on the 'middle-class values' supporting all people in need. Selective benefits offer a number of advantages for any government. In particular, the take-up rates for such benefits produce savings in public expenditure, and the perpetuation of the ideological distinction between the 'deserving' and 'undeserving' poor creates a political climate in which restrictions on the scope of such assistance can be implemented with minimal opposition (McKay & Rowlingson, 1999). The incremental cuts in housing benefit since its introduction in 1983 are a recent illustration of this phenomenon. Similar ideas re developed by Beveridge who underlined the importance of flat-rate contributory insurance, for trying to achieve a series of impossible marriages between 'contract' and 'citizenship', cheapness and comprehensiveness, liberty and community, and as wholly inadequate for generating the fiscal resources needed for combatting the problems of poverty (Alcock & Craig, 2001). Beveridge would reconise modern social security system because it is based on his ideal and functions as an insurance program that provides money for people with a particular problem (sickness) or condition (old age) arise. Hence, one can speak of social insurance as a contingency payment against the financial or medical risks associated with the realities of modern life (McKay & Rowlingson, 1999). At the same time, social insurance programs operate as social benefit systems in which the government transfers money from one group, the working able-bodied, for example, to another, such as the retired. Social insurance, in other words, has some of the features of a public assistance program ("welfare"). It is neither exactly like private insurance, which operates on the principle that a person is getting either a monetary return or a service in direct proportion to his investment or fee, or welfare, which operates on the notion that the government should tax those with income or property to support the poor (Millar, 2003; Aaron 1982). Despite his efforts to endow housewives with 'economic citizenship', his proposals for the insurance of women have been attacked in recent feminist thought as stereotyping a 'male breadwinner' model of family life and as reinforcing the confinement of women to motherhood and the home (Aaron 1982). Despite his insistence that social insurance should be seen merely as a minor feature of a much larger reformist programme, numerous commentators have complained that Beveridge largely ignored the impact of underlying structural inequality, and in particular the operation of 'fiscal' as opposed to 'social' welfare, in determining hidden patterns of poverty and unemployment (Millar, 2003). The total philosophy behind his ideas has been vied by some as an invocation of a social 'New Jerusalem', and by others as a carefully calculated strategy for repairing traditional class privilege, defending middle-class individualism, and deflecting the threat of more radical and redistributive economic and social change (McKay & Rowlingson, 1999). Social security in Britain would be appreciated by Beveridge because these programs are large, expensive, and complicated touching the lives of every citizen. No other programs provide more extensive protection, and no other domestic programs cost more. In the development of these programs, certain themes have endured as persistent policy issues and driven the political discussion. In particular, four general themes or issues illustrate the choices implicit in Social Security (Aaron 1982). The first issue concerns whether the benefits offered by the programs match contemporary perceptions of social need (McKay & Rowlingson, 1999). The perception of Social Security's adequacy has varied over time. It has depended on the accepted limits to the government's behavior, on economic change, on other government benefits available, on the availability and generosity of private benefits, and on whether people regarded something like a stay in a hospital as desirable. Even as the range of benefits has broadened, the program still contains what some see as gaps and others regard as areas in which private and state programs need to be strengthened. Either way, most people agree that long-term care represents a contingency for which most are psychologically and financially unprepared. Some suggest that the list of benefits should be expanded to include payments for nursing homes and other long-term care services. Similar ideas re raised by Beveridge who underlined that social insurance should be extended to cover the whole population, regardless of income (thus bringing to an end one of the major underlying assumptions of Liberal reforms of the 1900s, that insurance contributors and income taxpayers constituted two mutually exclusive classes) (Millar, 2003). Social security system meets the Beveridge's principles that old-age pensions should be conditional on retirement, and would be paid at a higher level to those who deferred retirement beyond the minimum age, a rule which Beveridge hoped would encourage elderly people to go on working as long as they re physically fit (McKay & Rowlingson, 1999). Although Social Security is financially stable for many years to come, population are concerned that yearly reports of long-term deficits will likely erode public confidence in the program. If this occurs, it may then impel politicians to act sooner rather than later. Future gains in public confidence may be worth the political pain of instituting tax increases or benefit reductions sooner than may seem necessary from an analytic point of view. These changes could be structured to trigger in as the program's financing begins to decline (Millar, 2003). Beveridge would recognize social security system because it covers different social classes and strata. Beveridge from this time onwards was widely regarded as an expert not merely on unemployment insurance but on all aspects of social security (Siegfried 1963). He was invited to take part in numerous inquiries on social insurance questions, and was frequently consulted by representatives of foreign governments (McKay & Rowlingson, 1999). As he himself acknowledged, his reputation in this area was not really justified. He had little time to keep abreast of changing ideas in social security or to master the increasing intricacy of social insurance programmes. He declined to take part in the 1925 Royal Commission on National Health Insurance, on the ground that he had 'no direct knowledge' of this area of social administration. At one stage he was pressed by a group of Liberals to support a proposal from Seebohm Rowntree for earnings-related insurance; but he replied that he was 'too busy' to consider Rowntree's scheme (Millar, 2003; Aaron 1982). Moreover, as the depression lengthened Beveridge was increasingly concerned less with the extension of social insurance than with resisting the erosion of the basic insurance principles that he had helped to lay down in 1911 (Siegfried 1963). Those principles had prescribed that a man's entitlement to benefit should be arithmetically linked to the number of his contributions. Benefits re to be paid for a strictly limited period, and they re always to be preceded by a test of willingness to work. Today, workers contribute not to the general revenues of the government, but to three separate but interrelated trust funds. The government also regularly adjusts the balance in all trust funds to reflect the interest the government pays to the trust funds for money borrowed from the Social Security and Hospital Insurance trust funds (Aaron 1982). Most often, receipt of a Social Security pension is triggered by a worker reaching what is considered retirement age under Social Security. The death of a worker and long-term disability can also precipitate benefit flows. How much people actually receive each month depends on the type of benefit, prior earnings in jobs covered by Social Security, and sometimes the age at which a beneficiary first receives benefits. The amount of the benefits generally depends on an insurance amount (Alcock & Craig, 2001). One can think of the insurance amount as the monthly benefit to which a worker is entitled if he accepts retirement benefits at the age he is first eligible to receive full retirement benefits. Social Security has a benefit formula that translates each worker's lifetime earnings in jobs covered by Social Security into a primary insurance amount (McKay & Rowlingson, 1999). Benefit levels then get expressed as percentages of insurance amount. Although these rules seem simple to understand, if rather arbitrary, they are riddled with exceptions that add to the system's complexity. As a general rule, higher earnings result in larger benefits, but, as have emphasized, the program attempts to balance adequacy and equity (Millar, 2003; Siegfried 1963). Social Security assists individuals and their families to maintain adequate living standards. The system seeks to meet this objective through three distinct devices. First, it provides survivors' and family benefits. Second, it maintains a benefit formula that provides proportionately higher benefits to workers who have worked consistently at high-paying jobs (Alcock & Craig, 2001). Third, it contains an annual cost-of-living adjustment that adjusts benefits to the rate of inflation. Family members of retired and disabled workers may be eligible for an entirely different set of benefits, known as auxiliary benefits, although there is a ceiling, called the family maximum, on the amount of benefits that can be paid on a worker's earning record. By keeping a family's retirement income below the income it received before retirement, this family maximum provision eliminates a disincentive that may cause productive people to retire instead (Alcock & Craig, 2001). Beyond these basic retirement benefits, the program maintains a full range of survivors' benefits that come complete with their own auxiliary benefits. Survivors' benefits refer to the set of benefits that the program pays to the family of workers who die before or after retirement age (Millar, 2003). In sum, Beveridge would recognize social security system because it reflects his ideals and philosophy of social welfare. Social Security plays a major role in reducing and preventing poverty. Social Security, the most pervasive source of cash income, goes to roughly 95 percent of the households headed by elderly people. Its importance varies substantially by income group. Younger and middle-aged workers also gain immediate protection for their families through survivors' and disability insurance. Even if the risks being protected against do not occur, disability insurance and survivors' insurance have tangible worth. As a mechanism for retirement savings, Social Security holds advantages for younger and middle-aged workers. Unlike private pensions, Social Security is highly portable. Workers can earn credit toward their Social Security retirement pension on nearly every job. Unlike nearly all private pensions, Social Security fully adjusts for changes in the standard of living prior to receipt of benefits and for inflation after receipt of benefits. Bibliography 1. Aaron Henry J. 1982, Economic Effects of Social Security. Washington, D.C.: Bookings Institution. 2. Alcock, P., Craig, G. 2001, International Social Policy: lfare Regimes in the Developed World. Palgrave Macmillan. 3. McKay, S., Rowlingson, K. 1999, Social Security in Britain. Palgrave Macmillan. 4. Millar, J. 2003, Understanding Social Security: Issues for Policy and Practice. Policy Press. 5. Morgan (ed.), W.J. 1994, The Beveridge Plan 1942-1992: Fifty Years On. University of Nottingham. 6. Siegfried M. A 1963, Pioneer of Social Advance: William Henry Beveridge 1879-1963 Durham University. Read More