Social Insurance

My central suggestion here is to expand the social hazard coverage of the social security program to provide short-term income-maintenance benefits in the event of disabling illness and injury, childbirth, absence of the primary household breadwinner due to desertion or divorce, and unemployment. In order to fund these new benefits with minimal increases in payroll taxes, I offer three proposals to reduce social security outlays for retirement benefits.

Retirement

The current income-maintenance provisions for retirees and their surviving spouses are adequate. My proposals are directed at controlling the cost of these benefits.

First, I propose selectively raising retirement ages so that people in relatively sedentary jobs will retire later than people in jobs that are physically demanding. The range for eligibility to receive full social security benefits might extend from sixty-two to seventy. Such a system of scaled retirement ages would offset to some degree the bias of the current system in favor of white-collar workers, who begin work later in life and generally live longer. As a safeguard, career tracks could be defined such that people could not qualify for early retirement by shifting occupations late in life.

Second, I propose linking benefit levels to increases in the consumer price index after retirement, rather than the current system of continuous benefit indexing during future beneficiaries' working years. This change would have the practical effect of making social security less like a defined-benefit plan and more like a defined-contribution plan.^[6] Increases in initial benefit levels for succeeding cohorts of retirees would be left to the discretion of the political process. As they do now, benefit cash values would vary directly with earnings, and replacement rates would vary inversely with earnings.

Third, I propose taxing a progressively larger portion of retirees' benefits as household income rises. For example, a portion of

benefits would become taxable when a household's total income reaches one-half of the national median income. The portion of benefits subject to tax would increase with income, and all benefits would be taxable for households at or above the median income. Such an approach would assure benefits for those who have paid into the social security system but also reduce the net cost of public social provision for households with relatively comfortable incomes.^[7] This approach also reflects the basic purpose of social insurance, to mitigate social hazards. If little hazard appears, only minimal insurance needs to be applied.

Other proposals might be made to address such issues as the equitable treatment of couples as opposed to single persons, but these are beyond the scope of my intentions here.

Disability

The social security system now provides income-maintenance benefits for qualified workers who suffer a long-term total disability. I propose extending this program to cover short-term disability due to illness or injury. This coverage would supplant the income-maintenance aspects of workers' compensation and would extend protection to non–job-related illness or injury. Benefit levels would be determined under formulas similar to those now used by social security as amended by my proposals above.

With respect to long-term disability, I propose that we reexamine the concept of total disability, particularly for younger workers. It seems reasonable to retrain younger workers for whatever occupations their disabilities allow and to assist them with job placement.^[8]

Childbirth

I propose providing women workers with income-maintenance benefits for a brief period (say, three months) before or after childbirth. Restrictions could be placed on the number of times (twice?) a woman could use these benefits. Again, benefit levels would be linked to earnings histories.

Survivorship

Social security now provides survivorship benefits for dependents of qualified workers. These benefits seem appropriate for retirement-aged surviving spouses, but I propose restricting survivorship benefits for working-aged adults. Working-aged spouses would be allowed to collect benefits for no more than, say, five years, and children could collect benefits until age eighteen (age twenty-two for full-time students). These provisions would restore college benefits for children but require that spouses adjust to their new circumstances within a fixed period.

Desertion and Divorce

I propose that working-aged adults and children separated from their family's primary breadwinner by divorce or desertion receive short-term (perhaps one month) income-maintenance benefits at levels comparable to other social insurance coverage. (Longer-term provision is discussed in the following section on social merging.) As with childbirth benefits, eligibility could be restricted to two or three times in an individual's life.

Unemployment

I propose that short-term (perhaps one month) unemployment insurance benefits be offered through social security. (Again, long-term provision is discussed in the following section on social merging.) Limits on eligibility could be set at once every two or three years. This proposal would replace the current system of unemployment insurance.

Administrative safeguards

Some safeguards will be needed to prevent workers who have achieved initial eligibility for extended benefits from abusing the system by creating a series of illnesses, injuries, childbirths, family dissolutions, or unemployment episodes to avoid the workplace. One such set of safeguards includes my proposed limits on the duration of benefits and the number of times a worker could collect certain benefits.

In addition, a blanket rule could restrict the overall use of benefits to a specified portion of a person's working life (from the end of his or her formal education to retirement). This proportion could be expressed on a sliding scale, with younger workers eligible to receive benefits for a fairly high proportion (say, 30 percent) of their working life thus far, and older workers limited to a much lower percentage (say, 5 percent) over a roughly forty-year working life. This scale would accommodate the high incidence of legitimate hazards appearing early in life, while clearly implying that sustained periods of participation in the labor force are required to earn benefits.

Costs

I have suggested several ways to cut the current costs of social security benefits for retirement, long-term disability, and survivorship as well as outlays for current workers' compensation and unemployment provisions. Though no one can accurately predict the results, I suspect that these savings will be more than offset by the costs of my proposals to extend social security coverage to short-term disability, childbirth, and household dissolution.

Should it be necessary to further increase revenues, my preference is for a progressive social security tax on all wages. The

rate for a worker's first $10,000 of annual income could be held at the current rate (7.51 percent) or even reduced a bit, with slightly higher rates for each tier of income, defined in increments of $10,000. In conjunction with the progressive taxation of social security benefits, this proposal would require ever closer coordination between the Social Security Administration and the Internal Revenue Service.