Social Security

Key to Economic Security

Carroll L. Estes, Catherine Dodd and Eva Williams

“…it is well that we pause to celebrate one of the great peacetime achievements of the American people; namely, the enactment of the Social Security Act.”

—Harry Truman

This chapter 1 describes the economic and social conditions under which Social Security was constructed during the 1930s, equating them with the economic conditions of the first decade of this century. The chapter reaffirms the nursing profession’s ongoing commitment to the eradication of health disparities and establishment of economic security for all people as an essential “determinant” of health and reveals the precarious position of many nurses as women who are most economically vulnerable in old age. Protecting and improving Social Security as it exists today protects the economic security of hundreds of thousands of “baby-boomer generation” nurses who are currently retiring or nearing retirement without adequate sources of other income. Notably, less than half of retirees and of working Americans have private employer-sponsored pensions (which are also increasingly tied to risky defined contribution plans), and women are least likely to have these sources of retirement income (United States Department of Labor [DOL] & U.S. Bureau of Labor Statistics [BLS], 2009; U.S. Social Security Administration [SSA], 2010).

This chapter distinguishes between Social Security policy formulation and Social Security policy enactment, both historically and amidst today’s major battles over the future of this most successful social insurance program in our nation’s history. As exemplified by overviews of the program’s development and basic benefits, Social Security is positioned within the American ideology of self-reliance, since individuals earn Social Security by paying into the program during their working years. Furthermore, Social Security insurance protects individuals and families from economic calamity in old age or in younger age in the event of disability as well as surviving dependents in the case of the death of a parent or a family’s breadwinner. The potential peril in curtailing or privatizing Social Security is set forth as a call to action for the nursing profession to protect all people from economic and health insecurity.

A Brief Overview of the Development of Social Security

The concept of social insurance is not new; it arose with the emergence of industrially based economies and the growing dependence of workers and their families on earnings for economic security should the ability to earn income be curtailed. Simply put, social insurance is a system whereby members of a society collectively contribute payments into the system, thus insuring any member against a number of unforeseen risks that may result in earnings losses. In the U.S., the demand for social insurance peaked during the Great Depression of the last century when large-scale economic forces drove the development of policy formulation and the creation of the most important social program in our country’s history.

Early in his first presidential term, Franklin Delano Roosevelt launched a period of federal government expansion, promising a “New Deal” for the American people in response to increasing rates of poverty and despair. Initially, the design and passage of New Deal legislation provided economic relief by creating temporary and long-term government programs that ensured a minimum standard for quality of life. However, Roosevelt soon realized that bringing about an economic recovery required more than economic relief; thus, the design of subsequent New Deal programs focused on job creation. Jobs and projects created work for the vast number of unemployed, including work in hospitals, schools, and public health departments for thousands of unemployed nurses (Pollitt & Reese, 1997). Nurses not only benefitted by employment but also exerted influence on program implementation through the strength of professional organizations like the National Organization for Public Health Nurses and the American Nurses Association (Kalisch & Kalisch, 1995).

Social Security, the longest-lasting program of Roosevelt’s New Deal with the American people, ensured economic security for those who could not work, such as older adults, blind persons, and single mothers with young children. In a 1934 message to Congress, President Roosevelt announced his intention to create a “social security” program. By executive order, he organized the cabinet-level Committee on Economic Security (CES) to study the problem of economic insecurity and make legislative recommendations. Through appointments of nursing leaders and public health experts to advisory committees, the input of nursing professionals was added to final CES recommendations to Congress that formed the basis for the legislative proposal that ultimately became the Social Security Act of 1935.

Underlying Concepts that Contribute to Social Security’s Success

In this second decade of the twenty-first century, the people of the United States are yet again confronted with unprecedented economic problems. At the time of Social Security’s enactment, only 6 million people (less than 15% of the population) were covered by any kind of retirement income. Since 1977, 93% of all people 65 and older have been eligible for Social Security retirement income. Although many Americans have worked to develop a retirement supported by a combination of Social Security, savings, and private pensions, achievement of that goal is challenged by the economic climate of today. The vital importance of keeping Social Security benefits intact and keeping the program vigorous cannot be overemphasized.

Robert Ball (2009) describes nine principles as pivotal in a framework that keeps Social Security strong. At the framework’s core lie the American ideology of self-reliance and the principle of Social Security as an earned right that entitles workers and their families to Social Security benefits by virtue of their having paid into it and having earned it. As an earned right, Ball maintains that Social Security is a positive experience, underscored by wage-related benefits: A worker can easily visualize the connection between his or her present income and standard of living and the benefit level necessary for future financial security during retirement.

Social Security is also predicated on a framework that acknowledges intergenerational chains of exchange and shared societal risks across generations (Williamson & Watts-Roy, 1999). Contributions from all workers and employers are the most efficient and affordable way to insure coverage for all families and generations across the entire population. Such shared coverage is necessary because of many vicissitudes for which no individual can appropriately plan or insure against. Major societal risks (and the death and disability among younger or older adult workers) for which no individual can adequately prepare are wars (Iraq and Afghanistan), terrorist attacks (9/11), natural disasters (Hurricane Katrina), and chronic or catastrophic health events. By spreading the risk over a large pool of people, social insurance offers protection against devastating loss of income through the death of a parent or spouse, the acquisition of a disability, or the simple act of retirement. The uncertainty and presence of such adverse life events illustrates the importance of the program to all Americans. The nation requires the universal social insurance system of Social Security, a system that ensures our responsibility to ourselves, to our families, and to one another, and that ensures social and economic stability.

The Benefits of Social Security 2

The success of Social Security is attributed to its significant positive effect in reducing poverty in old age. The facts speak for themselves, as shown in Figure 37-1: Without Social Security, 46% of Americans age 65 and older would be poor, including an astonishing 61% of African-American women and 54% of Hispanic women.

FIGURE 37-1 Percent of female beneficiaries (ages 65 and older) saved from impoverishment by Social Security in 2005, by race. (Adapted from Wu, K. B. [2007, November]. Sources of income for women age 65 and older. *Data Digest, 161*, 2. Washington, D.C.: AARP Public Policy Institute.)

The monthly benefit for Social Security is modest (an average of $1153 in 2008), with 40% of African Americans, 43% of Hispanics, 33% of Asian beneficiaries, and 19% of whites aged 65 and older receiving all of their income from Social Security. Nearly two-thirds (63%) of whites receive one-half of their income from Social Security (Table 37-1).

TABLE 37-1

Importance of Social Security: Percentage of Income from Social Security for Population Age 65(+) by Race

Race	At least 50% of Income from Social Security	100% of Income from Social Security
White	63%	19%
Asian	65%	33%
Black	73%	40%
Hispanic	77%	43%

Adapted from U.S. Social Security Administration. (2009). Income of the population 55 or older, 2006 (SSA Publication No. 13-11871), p. 300.

Social Security is a family program based on the simple concept that if you work, you pay taxes into the system. When you retire, or if you become disabled or die, then you, your spouse, your dependent children, or your survivors receive monthly benefits that are based on your earnings. Most people think of Social Security as a retirement program only, but of the 50.9 million people who received benefits from Social Security in 2008, 35 million are retired workers and family members, 6.5 million are survivors, and 7.4 million are disabled persons. Most notably, owing to retirement, survivor, and disability benefits earmarked for children of American workers, more children (nearly 3.3 million in 2008) are covered by benefits from Social Security than by any other government program except the earned income tax credit.

The Social Security program is financed by a “pay as you go” system, with present-day workers paying for present-day beneficiaries. Each worker pays Social Security taxes of 7.65% (6.2% for Social Security and 1.45% for Medicare) on gross salary (up to $106,800 gross salary in 2009).² Employers pay a matching 7.65% amount. Both parts of the payroll tax are paid by self-employed workers, and half is a tax-deductible business expense. By law, these taxes are paid into the Social Security Trust Fund.³ Excess funds not needed for immediate payment to beneficiaries or administrative expenses are invested with interest in U.S. government bonds.

The Social Security Act limits trust fund expenditures to benefits and administrative costs.

Eligibility for Social Security coverage is acquired by earning credits for working and paying into the system. The dollar amount of earnings required per credit is established annually (since 2008, 1 credit per quarter for $1090 earned, up to 4 credits per year of $4360). Most workers need 40 quarters to qualify for benefits. Fewer credits are needed for younger people to qualify for disability or for family members to be eligible for survivor benefits.

How much workers pay into the system and how long they work determines benefit amounts. While high-wage earners may receive higher benefits than low-wage earners, the benefit formula is weighted in favor of the low-wage earner by providing about 57% of preretirement earnings compared with replacement of 43% for average earners and 35% for high-income earners.

Since 1975, Social Security benefit amounts have been adjusted annually for inflation, based on cost-of-living adjustments (COLAs) linked to the Consumer Price Index (CPI). COLAs do not occur if the CPI falls, as was the case in 2008 to 2009; so while the COLA for 2009 was 5.8%, the COLA in 2010 will be zero by virtue of the CPI’s drop.

Retirement Benefits

Social Security Amendments of 1983 contained a provision that gradually (over a 22-year period) changed the full retirement age from 65 to 67 for those born in 1938 and later. For people retiring in 2009, the full retirement age was 66 and the average monthly benefit a modest $1153. Early retirement at age 62 remains an option, but with a slight permanent reduction in monthly benefits to provide for a longer period of lifetime benefits. Conversely, working beyond full retirement age adds earnings to the worker’s record, increasing the eventual monthly benefit.

During the time a worker receives retirement benefits, a spouse can receive benefits on the worker’s record if the spouse is 62 years of age or older and can subsequently receive benefits at retirement age on his or her own work record. A spouse who never worked can receive up to one-half of the retired worker’s full benefit. Other benefits may be paid to family members who meet certain requirements, as in Box 37-1.

BOX 37-1

Retirement Benefits for Other Family Members Who Meet Certain Requirements