The Social Security System
The uncertainties brought about by factors, such as unemployment, old age, illnesses, death, and disability necessitated the establishment of a social security system. These factors affect the welfare of the society because they are a threat to the economic security of the individuals. Traditionally, the economic security of the society took different forms, such as olive oil but with the growth and development of the economy, the security is measured in terms of money. When people lose jobs due to illness, disability or retirement, their earnings diminish but in the modern era, they are supported by the social security systems. During the colonial era in America, there were laws that helped the poor people in the society but they did not like the methods used to support them. The needy people were mistreated when receiving the relief and could even lose their personal properties and voting rights. The government used the harsh measures when providing relief as a way of encouraging self- independence in the society. In the 1920s, the economic prosperity in America was high due to invention and innovation that made work easier. The number of individuals who owned homes increased because the access to home loans was easy.
However, the country could still not achieve economic and social welfare for all the citizens (Lahav, 2003). There was still a vulnerable population in the society whose welfare was poor. The vulnerable population included the children, families headed by females, the disabled and the aged. The social security system was later established as a mechanism of eradicating poverty in the nation. With the great depression, the welfare of the citizens worsened due to the loss of employment in the economy. Enhancing the social welfare of the people was among the top priorities of the government led by Roosevelt, who mobilized the public and private institutions to eradicate poverty in the country. The involvement of these sectors is evident even in the modern society through the various mechanisms used to promote social security of the citizen.
The scope of government regulation in the social security systems is defined by the enactment of various laws that are aimed at enhancing the social and economic welfare of the people. The government aimed at enhancing the social security of the people through providing temporary relief to the families that were affected by the rise in unemployment during the great depression. The Federal Emergency Relief Act supported the government’s efforts to distribute relief money to the states in aid of needy families. To enhance the level of employment especially among the youth, the Congress passed the Wagner-Peyser Act in 1933 that allowed the states to open up employment offices (Alesina, Glaeser & Sacerdote, 2001). During the same year, the government enacted the Farm Relief Act and the Emergency Farm Mortgage Act. The government collaborated with the financial institutions to avoid the adverse impacts of families that were threatened by foreclosure because they could not be able to finance the mortgages. The National Housing Act was later established to provide home loans to the needy people at lower interest rates. Two years after the enactment of the Emergency Farm Mortgage Act, the Social Security Act was enacted to further address the economic insecurity of the people. The program constituted the insurance relief and the public welfare that assisted the poor. The insurance package was concerned with enhancing the financial status of the unemployed and the old people in the society. The Act also considered the disabled individuals in the society through programs such as the Aid to the Blind and Old Age Assistance. The poor children, especially those whose families were headed by their mothers were also assisted through the Aid to Dependent Children program.
The Social Security Act provided the states with the authority to determine the eligibility and level of assistance provided to the needy populations. The federal government supplemented the funds sued in the relief but it did not regulate the use of the resources. The Act also included health care programs such as the child welfare and maternal health. The issue of unemployment in the country was the major contributor of social and economic insecurity in the country. In 1936, the Wagner Act was passed to help address the labor relation issues that were common in the country (Pashchenko & Porapakkarm, 2013). Some of the employed individuals were still unable to meet the basic needs of the families due to the low pay and long working hours. To improve the welfare of these individuals, the government enacted the Fair Labor Standards Act in 1938. Title 42 of the Social Security Act provides guidelines on the persons who are eligible for benefits and insurance provided to the disabled and the amount they are entitled to receive. The insurance program applies to the adults who became disabled for a period of not less than one year such that they cannot work as before. The individuals who have contributed sufficient amounts to the social security system are eligible for the supplemental security income benefits. The social security for the disabled is regulated by the social security disability law.
The social security system in the United States is not regulated by the federal government but an independent agency. The agency is responsible for the social insurance program that comprise of benefits provided to the aged, the disabled and survivors of insured employees. To qualify for the benefits in most cases, the individuals are required to pay taxes that constitute their savings for the uncertain economic times in future (Alesina, Glaeser & Sacerdote, 2001). The Social Security Administration is the agency through which the social security of the people in the United States is enhanced. The agency began in 1935 as a social security board formed through the social security legislation. It began as a board on social security whose mandate was to oversee the administration of the insurance and the other social welfare programs. This was part of the fulfillment of the propositions of the New Deal. The president appointed the executives who operated without a budget and additional staff in the beginning but later as the functions of the board grew wider there were more employees. The board facilitated the collection of taxes for the first time one year after its establishment and the needy people started receiving the benefits the same year. In 1939, the agency merged with other agencies such as the public health service as a way of enhancing service delivery. It is then that the board changed its name to Social Security Administration (SSA) in 1946. The agency had its headquarters in Baltimore.
The old age benefits, public assistance and unemployment compensation constitute the initial social security operations. The bureau of old –age benefits was mandated with ensuring that the economic welfare of the employees was enhanced even when they go for retirement (Pashchenko & Porapakkarm, 2013). The purpose of the bureau was to keep records, evaluating and approving the claims of benefits by the retirees, and supervising field offices. The other bureaus that played part in the social security system included accounts and audits that ensured accuracy of the financial records in the agency. The general counsel was the other bureau that ensured formulation of sound strategies to enhance the welfare of the people. Research and statistics is the other bureau mandated with ensuring that the agency’s activities were consistent with the demand of the people in the country.
Presently, the Social Security Administration has embraced technology in its administration where the people can apply for the benefits online. This is one of the tools that the agency has used to enhance its service delivery. The record keeping is also easier through the technology and the efficiency in the service delivery is also enhanced (Orloff, 2005). The agency is among the most efficient organizations in the United States, not only in the service delivery but also in terms of cost. It is estimated that the administrative costs of the agency are less than 1% of the total expenditure. The efficiency is attributed to the ability of the organization to utilize its financial and non-financial resources efficiently. The input of employees in particular contributes significantly to the success of the agency. They respect and uphold the mission of the agency, which acts as a guide to their activities. The agency is also committed to continuous improvement to constantly improve its service delivery to the public and this is partly the reason behind the low cost of administration.
Although the agency has been able to overcome many challenges in the economy over the years, its effectiveness has not been optimal. This does not imply that the agency is inefficient but has the potential to be more effective than it is. Some of the challenges that hinder effectiveness of the agency started during its establishment. One of the major challenges that the agency faced is inadequate funds as it was started without a budget (Genakoplos, Mitchell & Zeldes, 2000). The personnel appointed to begin operations in the board could not operate without finances and this delayed the implementation of its activities. The inadequate personnel also affected the efficiency of the agency, as the three executive members appointed by the president could not handle all the workload in the agency. In 1936, the Agricultural Adjustment Act was declared unlawful and people expected the Social Security Act to be declared unlawful as well. This discouraged the citizens from applying for jobs in the agency thus making it hard to find qualified employees. The agency also faced the challenge of finding an appropriate office space that could accommodate all the paperwork. This adversely affected the efficiency of the agency, as it could not serve as many people as it would have wished. The poor technology affected the effectiveness of the agency as the employees strained to maintain the records of all the employees using the punch card technology. Further, the migration of the employees from one region to another made it hard for the bureau to maintain the records of the employees as the braches were not evenly distributed s the case in the modern day. Some of the employers made the work of the agency ineffective by refusing to report the wages of the employees thus making it hard for the agency to enroll such employees into the social security system. The agency also faced the challenge of implementing the policies and procedures in evaluation of claims. With the development of technology, the agency was among the first institutions to adopt the technology. The use of high-speed electronic calculators did not only make the work faster for the employees but also more efficient. However, the agency had to incur high costs in training the employees on embracing new technology. The World War II contributed to the inefficiency of the agency massively as the work environment was disrupted making. After the war, the agency has a lot of work because the necessity of its services intensified. There were more disabled people, survivors and employees who needed the services of the agency, yet it lacked adequate manpower.
The effectiveness of the agency in the past decades was mainly as a result of poor technology, lack of skilled manpower, poor research and development programs and inadequate finances. Presently, not all these factors are a problem to the agency anymore, yet the provision of social security to the people is still a challenge (Genakoplos, Mitchell & Zeldes, 2000). The factors that hinder the effectiveness of the agency in the modern days are more related to poor administration. In addition, the independence of the agency is compromised by the interference of the federal government. The agency is said to have a complex tax code that reduces the economic welfare of the citizens. The federal government controls numerous factors that affect the efficiency of the agency including tax rates and interest rates.
There are numerous controversies that are associated with the regulation of the social security system with most of individuals viewing the program as a retirement plan as opposed to an insurance scheme. The proposal to privatize the social security funding has brought about a number of controversies. The agency is a private pension fund that is supposed to enhance the economic welfare of the citizens through accumulation of funds. The agency is not allowed to trade in securities that are not backed by the federal government (Pashchenko & Porapakkarm, 2013). This implies that it cannot trade in securities and other assets even if they would have a higher return. The agency is only allowed to trade in special non-negotiable financial instruments thus limiting its ability to grow. The social security is a universal system whose funds collected from the taxes should cover the social benefits of the parties involved. The amount of tax may exceed the benefits at times and this should be invested in treasury securities but this is not the case.
The system operates a defined benefits pension plan where the amount of money the beneficiaries receives based on a pre-determined formula. This implies that it is possible to determine the amount of money payable to the beneficiaries in future, especially for the working population. The current status of the system is an underfunded benefits plan implying that the fund may not cover the beneficiaries well in future (Alesina, Glaeser & Sacerdote, 2001). It is an indication of poor planning and management of public funds and it implies that the taxes that the current generation pays are set to rise to cover their future benefits. Instead of enhancing the welfare of the people, the increase in taxation may make the economic situation of the people worse. Adjusting the social security funds for inflation threatens the economic future of the retirees as they may have little earnings to sustain their needs. There is also a controversy in the way the judicial system interprets the Social Security Act in relation to the benefits claims. The courts hold that the system has a moral purpose thus the calculation of the claims ought to be done in favor of the claimant. On the same note, the court argues that the beneficiaries should be considered. The confusion may deny justice to the parties. The regulation of the agency by the federal government can be attributed to the controversies. This has the potential to reduce the demand of the social security welfare services to the people thus making the agency meaningless.
Although the involvement of the government in the activities of the agency is considered as interference, it is still important that the agency is not self-regulatory. The government presents the wishes of the people since it comprises of members of the congress and other officials elected by the citizens. It is therefore crucial to include the government participation through regulation or deregulation. The government can help solve the challenges faced by the agency through regulation by passing laws that affect the operation of the agency positively. Some of the areas that the regulations should address include transparency of the agency to enhance its accountability. The government could also pass laws that reduce the taxation of the benefits to increase the amount of money that the beneficiaries get, consequently enhancing their economic welfare. The government could also pass laws that allow the social security agencies to invest the excess funds in other ventures apart from the treasury securities. The impact of the regulation is a system that is efficient in serving the public and enhancing the livelihoods of people. The social welfare of the society has a direct link with economic prosperity of the nation thus, it is important for the government pass laws that promote the welfare of the people. Through deregulation, the government can succeed in developing the social security system through removal of some rules that may hinder the flexibility of the agency. For instance, the federal government could allow the agency to trade in a variety of securities to spread risk like the other organizations (Pashchenko & Porapakkarm, 2013). This would be an effective way of assuring the beneficiaries of future economic benefits without requiring them to pay more taxes. The opponents of government involvement in social services argue that the bureaucracies created by the government slow down the process of change and this may affect the effectiveness of institutions especially at this era where technologies changes all aspects of doing business. While this may be true, it is still crucial to have government involvement in the social security system to promote the welfare of the people. The private agencies may not be interested in promoting the welfare of the people thus the need for government regulations and deregulation.
Alesina, A., Glaeser, E., & Sacerdote, B. (2001). Why doesn’t the US have a European-style welfare system? (No. w8524). National bureau of economic research.
Genakoplos, J., Mitchell, O. S., & Zeldes, S. P. (2000). Would a privatized social security system really pay a higher rate of return (No. w6713). National Bureau of Economic Research.
Lahav, G. (2003, October). Migration and Security: The role of non-state actors and civil liberties in liberal democracies. In Second Coordination Meeting on International Migration. New York. United Nations, Department of Economic and Social Affairs, Population Division.
Orloff, A. S. (2005). Social provision and regulation: Theories of states, social policies and modernity. Remaking modernity: politics, history, and sociology, 190-224.
Pashchenko, S., & Porapakkarm, P. (2013). Quantitative analysis of health insurance reform: Separating regulation from redistribution. Review of Economic Dynamics, 16(3), 383- 404.