The US social welfare system emerged from the extensive reforms of the mid-1930s. The unprecedented economic crisis – the “Great Depression” of the 1930s, which caused incredibly high unemployment, showed that neither the federal government nor local governments could take care of the US citizens in need. The situation required a fundamental solution to the problem of social security at the federal government level. Starting in 1932, the federal government began to provide first loans and then grants to state governments to provide direct and labor benefits to citizens. Later, in 1935, US President Franklin Delano Roosevelt proposed social security legislation to the US Congress. The Social Security Act was officially established soon and took effect in August 1935. The Act concluded the creation of two nationwide programs for the welfare of the elderly and the unemployed. The first program laid the foundation for a federal system for providing benefits to the elderly and the retirees in the industrial and commercial sectors. The second program provided for the creation of a social insurance system for the unemployed.
In the next years, the social security system in the United States became so broad that in the early and mid-1960s, almost half of all federal spending went into social needs. The decrease in class tension has become possible in many regards due to the development of social assistance and social insurance. Along with general trends in socio-economic development, this welfare concept contributed to the outbalancing of the contrasts of social stratification. In the case of social insurance, a fragmented system of public, private, and nonprofit sectors operates at the expense of insurance companies that mediate between patients and health care providers, monitor the appropriateness of prescriptions, and pay for treatment. Moreover, tax incentives contribute to the active involvement of businesses in the implementation of social insurance. Social insurance provides protection from different economic risks the individuals might encounter and ensures that resources and benefits are distributed equally to the social groups in criteria of age or employment status. At the same time, public assistance is funded primarily by the federal government, with the local governments directing the funds. The eligibility for the public assistance programs is mostly based on the income and means rate.
The main and the most important difference between these two welfare systems are the payment requirements. Marmor et al. (1995) state that “the central image of social insurance is the earned entitlement, publicly administered benefits for which all similarly situated persons are eligible by virtue of their financial contributions to the system or the taxes they pay” (p. 27). The major programs have entered a phase of restrictive development, followed by a relative and an absolute decrease in the scale of state aid, which forces American workers to resort to the services of a private insurance system. Those aspects of social insurance might be considered crucial at the moment because they heavily affect not only the recipients of the help but the whole system as well. Following Marmor et al. (1995), “the American insurance-opportunity state contains built-in limitations that dramatically distinguish its potential future elaboration from the almost limitless boundaries implied by the more general term “welfare state”” (p. 46). Within these limits, the system struggles to provide adequate help for the endangered groups of society.
Unlike social insurance, no special upfront contributions are required to receive assistance in the public assistance system. The criteria for the provision of assistance is precisely the need. To determine the degree of need, the system uses the concept of “poverty line” – the cost of a minimal diet for a family of 4 people. Due to inflation associated with rising prices, the poverty rate is adjusted annually. However, many people are frightened by issuing the public assistance benefits – it is very long and requires a large number of different papers. Moreover, for some people, it seems humiliating. In addition, after a short time, the benefits can be “lost” as a result of conditions adjust for receiving assistance or due to lack of funds. Campbell (2014) adds that “recipients have to fight to establish eligibility and to get what they need; they can’t accept assistance from family members and must remain poor to remain in the programs” (p. 50). All of this contributes to the fact that social assistance programs are highly vulnerable to criticism from their opponents and are primarily subject to cutbacks during periods of economic downturns.
The federal social security system as a whole, for all its imperfections, is undoubtedly an achievement gained through tremendous effort. In my opinion, social insurance is a more favorable approach to the nation’s welfare provision, as it is much more secure than public assistance. Social insurance programs have a high status of social respectability, as all wage earners regularly pay taxes to their respective funds. They can be sure the money will return to them in the form of social benefits. However, the main feature of the social insurance system is the constant tendency to increase the tax due to both economic and demographic reasons. Further growth prospects for this tax look even more threatening, in particular, due to demographic shifts towards an aging population. In that case, public assistance might be of help because it is unified nationwide. This kind of social support is funded and administered by the federal government based on uniform standards and criteria established by Congress. I think it might be safely said that an effective social welfare system is a combination of social insurance and public assistance compensating for each other’s flaws and vulnerabilities.
References
Campbell, A. L. (2014). Trapped in America’s safety net: one family’s struggle. University of Chicago Press.
Marmor, T. R., Harvey, P. L., & Mashaw, J. L. (1995). America’s misunderstood welfare state: persistent myths, enduring realities. Basic Books.