This is the seventh installment in our Social Security Works series. So far, we have seen how Social Security works for America, how Social Security works for women, how Social Security works for people of color, how Social Security works for people with disabilities, how Social Security works for veterans, how Social Security works for children, and today we will show how Social Security works for families.
Social Security has eradicated what once was a primary anxiety of the vast majority of workers: the terror of growing old with no support.
• When Social Security became law, every state but New Mexico had poorhouses (sometimes called almshouses or poor farms).
• The vast majority of the poorhouse residents were elderly. In 1910 only 1 percent of the residents had entered the almshouse before the age of 40, and as reported, 92 percent entered after age 60.
• Before Social Security, people worked as long as they could hold jobs, but this was an insecure state of affairs.
• Destitute senior citizens were a fact of life. Fear of the poorhouse was always lurking in the background, haunting people as they aged.
• Once older workers lost their jobs, they could seldom find new ones, and they rarely had sufficient savings to last until death.
• Those unable to work routinely moved in with their children.
• Those who had no children or whose children were unable or unwilling to support them typically wound up in the poorhouse.
Like private insurance, social insurance provides a mechanism that allows individuals and families to pool their resources, thereby sharing their risks.
Social Security was created to provide a foundation of economic support to help workers maintain their standards of living and prevent them from falling into poverty once they ceased work. The program is more effective than feasible alternatives in preventing poverty and maintaining a floor of protection for today and tomorrow’s elders.
• Social Security combines widespread protection across the income classes with provisions particularly beneficial to lower-income groups.
• Leaving aside Social Security income, nearly one of every two elderly people––46.8%––has income below the poverty line.
• By lifting 13 million seniors above the poverty line, Social Security reduces the elder poverty rate to 9.7%.
Concern for providing basic protection across the entire citizenry lies at the heart of Social Security and all social insurance programs.
• Thus government mandates employers and employees to make the equivalent of premium payments through payroll tax contributions.
• More than anything else, the universal nature of Social Security distinguishes it from other vehicles for enhancing the well-being of older persons.
In exchange for making these premium payments over a long period of time, workers earn the right to public retirement, disability and life insurance protections for themselves and their families.
• Social Security is the primary source of life insurance and disability insurance protection for workers and their families.
• Without Social Security, more children would be living in poverty and the depth of their poverty would be much greater; of the children in families that receive Social Security, 42 percent would be poor based only on income other than Social Security.
• Social Security income raises 1.3 million children out of poverty and reduces the poverty rate to 23 percent.
• Without Social Security, 55 percent of the disabled and their families would live in poverty.
• Social Security payments, which are distributed to 9.3 million people with disabilities, their spouses and children, reduce the poverty rate to 18.5%.
• The provision of these benefits has alleviated workers’ fears of leaving themselves and their families destitute in the event of disability.
The economic meltdown that we have just experienced has underscored the importance and soundness of Social Security. While the nation lost trillions of dollars of private pension wealth and home equity, Social Security has retained its value, because its benefits are guaranteed. Even before the recent meltdown, however, private pensions and private savings never provided adequate supplementation for most retirees.
Social Security is particularly important to groups who have low lifetime incomes, fewer opportunities to earn pensions, and lower personal savings.
• Social Security provides 100% of income for 4 out of 10 African Americans and four out of 10 Latinos aged 65 and older.
• Among beneficiaries aged 65 and older, Social Security is 90 percent or more of income for the majority of unmarried elders of color, including 54 percent of African Americans; 55 percent of Asian Americans; 61 percent of American Indians and Alaskan Natives, and 62 percent of Latinos.
Social Security is also important to middle-class retirees and families. Social Security benefits allow active seniors to remain independent according to their health and according to their choices. Beneficiaries maintain their lifestyles, aging in place and living wherever they want. In promoting their own autonomy, Social Security beneficiaries enjoy their ties to their families, such as relationships with their children and grandchildren, on terms most beneficial to all generations.
Social Security works for families, Social Security works for America.
This blog series is a joint project of America’s Future and Social Security Works.