Social security: not yet social or secure

Alexandra Spieldoch, Lane Vanderslice, Aldo Caliari and Matt Linton, Tanya Dawkins, Karen Hansen Kuhn
Institute for Agriculture and Trade Policy, Hunger Notes, Center of Concern, Global-Local Links Project, Action Aid USA

Many of the key social protection programs set up over the years in the US are being undermined today. The number of people with no health insurance has soared from 10 million to 48 million (a seventh of the population) since 1989, and public ‘Social Security’ pensions provide a poverty-level income for the elderly. However, despite the failure of the federal government to ensure social security for all, citizen-led organizing and resistance has led to innovative approaches at the state level.Thereare two different, but related, concepts of social security in the US. The firstand most common reference is ‘Social Security’, which is written in capitalletters and is a specific federal plan that provides small pensions for UScitizens when they retire from work. More broadly defined and applied, ‘socialsecurity’ speaks to the question of what it means to provide the kinds ofsocial and economic supports that members of society require: health care,income support, employment, unemployment insurance, access to education, childand eldercare, retirement and other safety net and anti-poverty measures. Thischapter looks at several of these aspects of social security and provides aglimpse of how far the US, despite its wealth and power, has strayed from anational policy agenda that promotes true social security and the impacts ofthis troubling trend.

Brief historical background

The Social Security Act was passed in 1935 as part of President FranklinRoosevelt’s New Deal. It was the first national social security programestablished in the country, and included federal unemployment compensation,retirement insurance, and federal grants for children, the elderly (over 65) andthe disabled to receive health services and vocational training. Since then, theSocial Security Act has been amended to provide expanded benefits for workersand retirees. In 1965, Medicare and Medicaid were established to provide healthcare for those over the age of 65 and the poor, respectively. These programshave provided important social protections in the US. However, many of these keyprograms that were set up over the years are being undermined today.

One seventh of the population has no health insurance

As one of the richest countries in the world, it is difficult to understand whyhealth care and other social services are not available to the entirepopulation. In fact, the number of uninsured is shockingly large and hassubstantially increased over the last two decades, going from 10 million to 48million (a seventh of the current population) between 1989 and the present (
Battista and McCabe, 1999; Weisberg, 2007). Concomitantly, government-led attempts to fillthe gaps in access, such as Medicaid and Medicare programs from the 1960s, havebeen consistently eroded, even as indicators of infant mortality and lifeexpectancy have deteriorated, as compared with those in other industrializedeconomies.

The lack of health care provision is perhaps the most contentious public policyissue beside the war on Iraq. Presidential candidates for the 2008 nationalelection are currently putting forth their proposals to reform health care inlight of a furious US public. They are furious because health care servicesconsume 16% of GDP, the highest proportion in the world (WHO, 2006), yet much ofthe money spent does not reach the people who need it most: the elderly, thepoor and minorities. For example, seniors on Medicare who spend USD 3,160 yearlyon prescription drugs end up covering 66% of the costs themselves (PublicCitizen, 2004).

So where is the money going? A large chunk of it goes to the Health MaintenanceOrganizations (HMOs), the pharmaceutical and insurance companies that nowcontrol the health industry. A series of mergers and acquisitions have led tounprecedented concentrations of power and influence. Companies are spendingrecord resources to influence policy in favor of their business interests. TheHMOs and pharmaceutical companies are actively engaged in lobbying politicalleaders. For instance, the Center for Public Integrity found that thepharmaceutical and health products industry spent more than USD 800 million infederal lobbying and campaign donations at the federal and state levels tosupport industry-friendly regulatory policies from 1998-2005 (
Ismail, 2005).

Many HMOs are selective of who they will insure and often reject those who needcoverage, as a means of reducing costs and increasing profits. Moreover, certaingroups are hit much harder than others when it comes to lack of health carecoverage. African Americans, Hispanics, the poor and women sufferdisproportionate impacts under the current health care system. It is a challengeto find up-to-date statistics on minority groups. However, in 2004, statisticsindicated that African Americans were 35% more likely to die of cancer thanCaucasians, due in no small part to the fact that 20.1% of African Americanswere uninsured compared to just 10.7% of Caucasians. Lower income levels amongstminority groups (47% of working adult Hispanics and 44% of working adult AfricanAmericans were living below the poverty line when the study was carried out)make them less likely to receive employee health care and less likely to be ableto afford it on their own (HPIO, 2004).

According to theKaiser Women’s Health Survey taken in 2005, 23% of women on Medicaid (almostone in four) have been turned away by physicians as opposed to 13% of insuredwomen. Hispanic women have threetimes the uninsured rate of white women (38% vs. 13%) (KFF, 2005).

Thecommon connection between all of these groups is their economic status: bothminorities and women make less money than Caucasian men and are therefore lesslikely to receive employee health insurance or be able to cover the cost ofinsurance by their own means.

Growth in GDP and productivity notmatched by wages

Income and employment are fundamental determinants of people’s social securityas well. While GDP has risen steadily in the recent past, and overall income isup correspondingly, the distribution of income has also worsened in recentyears. In 2002, the top 20% of US income recipients received 49.6% of US income(average USD 160,000), while the bottom 20% received 3.4% (average USD 11,000) (
Denavas-Walt etal., 2002).This means that the top 20% on average had 15 times the income of the bottom20%. Meanwhile, 37 million people or 12.6% of the US population live in poverty(US Census Bureau, 2005).

Over the 1995-2005 period, the output of goods and services per hour of work(productivity) grew at a remarkable rate of 33.4%. However, there has beenbasically no wage improvement for typical workers since 2001, even though halfthe productivity growth from 1995 to 2005 occurred since then.

The current unemployment rate is 4.5%. The Hispanic unemployment rate is 40%higher than that of whites, the African American unemployment rate is twice thatof whites, and the female unemployment rate is very slightly below the maleunemployment rate. Adding in ‘discouraged workers’ (those who are notactively seeking employment but who are willing to work full time) and those whoare working part time but would like to work full time raises the un- (andunder-) employment rate to 8.2% (
US Department of Labor,2007).Unemployment compensation continues to provide maximum 39-week benefits forworkers who are unemployed. While longer term unemployment is not covered, inperiods of high unemployment, the benefit period has been extended.

Employees bear burden of securing retirement income

A key element of social security is providing for retirement and old age. Today,Social Security[1]retirement benefits – though much greater for high income people than low –provide only a basic contribution to retirement income and must be substantiallyaugmented from other sources, principally personal savings. For the workingpoor, Social Security does provide an income, but one which, in the absence ofpensions or savings, can reinforce poverty and even deepen it. For example,someone who earned USD 20,000 a year immediately before retiring would receiveSocial Security benefits of about USD 9,000 per year.

Because of the shift toward private pensions in recent years, middle tolow-income employees have an increased burden to secure their retirement.Formerly, employees received pension income based on a certain number of yearsof work and based on a certain salary (
‘definedbenefit’ system).Today, employers make a contribution (usually small, such as 3% of anemployee’s wages) and employees are responsible for investing the rest (‘defined contribution’ system). Since many workers often do not earn enough topay their bills, and thus have no savings and no money left over to invest inpensions, this system hurts the employee in the long run. The fact thatcorporations are often able to elude their pension obligations when theyrestructure or go into bankruptcy further undermines the employee’s security.

Insufficient efforts to provide for thepoor

The US enacts a minimum wage (as do individual states) that tries to establish afloor for what can be paid as a wage by firms. Until this year, the minimum wagefor the past 10 years has been USD 5.15 an hour (in contrast, the wage paid tofederal workers has been raised every year over that period). With inflation,this has meant a 26% decline in the real minimum wage over the period. In 2006,the (official US) poverty level for a family of four was USD 20,000 a year. Witha 40-hour work week, a family of four with one minimum wage earner would earnUSD 10,300, only half of the poverty level.

In 2007, the US Congress voted to raise the federal minimum wage in steps overthe next three years, from the current USD 5.15 to USD 7.25 in 2009, givinglow-wage workers their first boost in a decade. Although thevictory will give 13 million workers a USD 2.10 hourly raise, itis not indexed to inflation, which has historically risen at a much faster rate(ACORN, 2007). Moreover, the new minimum wage will result in earnings of USD14,500 annually for one wage earner – still far below the poverty level.

The three principal programs that provide income for poor people are the EarnedIncome Tax Credit, the Temporary Assistance to Needy Families program, and theFood Stamps program.

The Earned Income Tax Credit is the mechanism through which, by filing a taxreturn, low income people and families can receive an income supplement. For afamily of four – husband and wife and two children – with only one parentearning the current minimum wage of USD 5.15 an hour, the annual family incomewould be USD 10,712, which would qualify the family for a USD 4,290 earnedincome tax credit. This is not enough, unfortunately, to lift the family of fourabove the poverty line (Holt, 2006).

In 1996, the Temporary Assistance toNeedy Families (TANF) program replaced the Aid to Families with DependentChildren program, which had been in existence since 1935. The TANF programprovides block grants to states to provide assistance to needy families. Stateshave discretion on how to use the funds. The number of TANF recipients fellsubstantially in the first five years of the program, in part due to asignificant increase in the number of single parents who work, but also due toother factors, such as an inability of families to meet the regulations. Studiesof families that stop receiving TANF assistance show that 60% of formerrecipients are employed – typically at poverty-level salaries between USD 6and USD 8.50 an hour – while 40% are not employed. Lack of available childcare can often keep single mothers from working, which is required to receiveTANF benefits, for example. Other factors that undermine TANF’s contributionto people’s security include a five-year time limitation on benefits;permitting benefits to immigrants only five years after establishing legalimmigration status; and a declining level of real funding for the program(Coven, 2005).

Meanwhile, to receive ‘food stamps’ – vouchers that can be exchanged forfood – people’s net income must be below the poverty line (although thereare some exceptions). The average benefit per person is USD 21 per week, or USD1 a meal, an amount which is extremely difficult to live on. Families routinelyfind themselves with “more month than money.” Approximately 21 millionpeople receive food stamp benefits, about 57% of the 37 million people who livein poverty. Unfortunately, the food stamps do not have much buying power. Poorfamilies in urban areas struggle to find healthy food because supermarkets arefew and far between. In addition, ‘junk’ food is often cheaper and moreaccessible than fresh fruits and vegetables. Those without transport must findways to get to the larger markets and return home with their groceries. Foodjustice, i.e. access to healthy and affordable food, is a continuing challengefor minority and low-income people in the US (US Department of Agriculture,n.d.).

In recent years, previously successful initiatives like the Special SupplementalNutrition Program for Women, Infants, and Children, which provides free orsubsidized breakfasts and lunches for school-aged children, have come underincreased budget pressure. This program has significant impacts in the areas ofhealth, education and family well-being, since the meals it provides oftenrepresent the only meal of the day that some students receive.

Re-establishing a social agenda for the US

The good news is that despite the failure of the federal government to provideleadership, many states, in response to citizen-led organizing and resistance,are experimenting with innovative approaches at the state level. For example,the state of Massachusetts recently passed what some say is the first universalhealth care bill (Lee, 2007). California also passed a bill that is estimated toextend insurance to 6.5 million people (out of a total estimated population of36.5 million). Many states have implemented successful Children’s HealthInsurance Programs.

Even as the George W. Bush administration has pushed for the privatization offederal retirement pensions based on the argument that money will dry up in thenext 20 years, the US public, including congressional representatives from bothmajor political parties, have rejected these efforts outright. In light ofongoing scandals where employees have lost their benefits as corporations seekto cut costs and boost profits, while at the same time, executive pay andbenefits have reached historic and obscene levels, there is growing pressure toregulate corporations, enforce anti-trust law and create mechanisms that allowsmall and medium-sized businesses to be able to provide health and otherbenefits, while remaining competitive.

All of the examples of initiatives undertaken in individual states have thepotential to be brought to scale nationally and are positive signs that raisingthe bar on social security, broadly defined, is an idea whose time has come.Addressing social security in the US offers great potential to address the race,class and gender disparities this report outlines and which continue to persistin every aspect of US life.


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[1] ‘SocialSecurity’ is capitalized in this section as it refers to the retirementpensions and is traditionally written as such.

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