The American Model: Basic State Provision in a market-based context

Prior to the Social Security Act, social insurance in the USA was rudimentary. The situation back then was similar to that in Switzerland. In response to the Great Depression, the US Congress passed a modest old age pension bill in 1935, which left sufficient room for the development of private forms of coverage.

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In 1935, the US Congress passed the Social Security Act (SSA), which marked the beginning of social security in the USA. Public welfare in the USA was considered to be rather rudimentary in the early 1930s. Apart from provisions for war veterans, only few states provided unemployment or old age insurance. A mere 15 percent of workers were insured by private pension funds. The SSA formed part of the New Deal with which President Franklin D. Roosevelt intended to tackle the consequences of the Great Depression (rising unemployment and mass poverty) and stimulate the economy and reform social order. In addition, he took a number of measures to counteract unemployment, stabilize the banking sector, and control prices and working conditions.

In 1935, the SSA encompassed old age insurance as well as allowances for federal aid programs; survivors’ insurance was added in 1939 and disability insurance in 1955. Old Age Insurance (OAI) was based on a system of contributions, rendering funded reserves unnecessary. Following the Second World War, many pension schemes in numerous other countries followed this example. The OAI was financed by wage deductions, half of which were paid by employees and employers respectively. This was also intended to lead to the reconciliation of social classes. The SSA was implemented step by step: by 1937, insurance cards were issued and the administrative structure set up; the first pensions were distributed in 1940. However, the process of consolidation lasted up until 1949. Coverage was gradually expanded to include more contributors. The SSA had no negative influence on the development of supplementary pension plans (occupational provision) as its benefits offered only covered basic needs – as was the case with the subsequent Swiss AHV.

Literatur / Bibliographie / Bibliografia / References: Leimgruber Matthieu (2008), Solidarity without the state? Business and the shaping of the Swiss welfare state, 1890–2000, Cambridge; Website Social Security Administration, Social Security History: www.ssa.gov/history.