The document outlines the differences between social insurance and public assistance programs, highlighting that social insurance requires beneficiary contributions and provides legal entitlements regardless of personal wealth, while public assistance is financed through general taxes and requires proof of poverty. It also details various social insurance programs like Social Security, Medicare, and unemployment insurance, as well as the history and structure of these programs, their funding mechanisms, and the challenges faced by beneficiaries. Additionally, it touches on unintended consequences related to demographics, employment, and the broader economic impact of these systems.

1. Chapter10.
Social Insurance Programs

2. Social
Insurance
versus
Public
Assistance
 Social Insurance:
 Beneficiaries are required to make contributions to it
before claiming any of its benefits
 Their employers pay into the program on behalf of
their workers
 Benefits are paid out as legal entitlements regardless
of the beneficiaries’ personal wealth

3. Social
Insurance
versus
Public
Assistance
 Social Insurance:
 Major goal is to maintain income by replacing a portion
of lost earnings
 Helps insure against the loss of income due to the
economic changes of retirement, the loss of a job, the
death of a family breadwinner, or physical disability
 Benefits from the program cannot be denied**
 Benefits are legal entitlements regardless of personal
wealth

4. Social
Insurance
versus
Public
Assistance
 Public Assistance:
 Program is financed out of general tax revenues
(money collected by Federal government)
 The recipients are required to show that they are poor
in order to claim benefits
 Means test. Income and asset tests designed to
determine whether an individual or household meets
the economic criteria necessary for receiving
governmental cash transfers or in-kind services

5. Social
Insurance
versus
Public
Assistance
 Social insurance programs are social security, SSDI,
Medicare, Unemployment, Workers’ Compensation
 Public assistance programs are Medicaid, SSI,TANF,
WIC, SNAP
 Social insurance programs encompassed a greater part
of the federal budget

6. Excise taxes – taxes on specific goods (i.e. gas, cigarettes, airline tix, etc.) often included in the
price
Other taxes include estate, gifts, customs, etc.

7. History of
SocialSecurity
 Initially suggested by California dentist, Francis E.Townsend, who
lobbied for a $200/month pension for elderly persons to be paid
out of the National sales tax.
 Franklin D. Roosevelt campaigned on a government plan to
protect the unemployed and older people.
 After being elected to office, the plan was presented to Congress
as possible alternative to public assistance
 Social Security Act of 1935 contained more than just the social
insurance plan, it addressed other public needs including:
 Old-age and survivors insurance (OASI)
 Disability insurance (DI)
 Health insurance (HI, eventually called Medicare)
 Unemployment insurance

8. Today’sSocial
SecurityAct
 Provides for:
 OASDI
 Unemployment programs under joint federal and state
partnership
 Federal assistance to aged, blind, and disabled under
Supplemental Security Income (SSI)
 Public assistance to families with dependent children (TANF)
 Federal health insurance for the aged (Medicare)
 Federal and State health insurance for the low income
(Medicaid)

9. Old-Age,
Survivors, and
Disability
Insurance
(OASDI)
 Social Security = OASDI
 Social Security including Medicare = OASDIHI
 It is administered by the Social Security Administration
 However, Medicare is administered by CMS or Centers for Medicare
and Medicaid Services, under the Department of Health and Human
Services
 Income is taxed to support the program; second largest source of
revenue for Federal government
 FICA = Federal Insurance Contributions Act – when deducted by the
employer = 7.65% tax rate (2017)
 6.20% of that amount is SS; 1.45% to Medicare
 SECA = Self-Employment Contributions Act = 15.30% tax rate (2017)

10. Old-Age,
Survivors, and
Disability
Insurance
(OASDI)
 Social Security is a regressive tax
 Regressive tax causes lower-income people to pay a larger share
of their income than the wealthy
 http://www.investopedia.com/video/play/regressive-tax/
 Levied against income only, not against other types of incomes
like dividends, interest, and rents

11. Types of
beneficiaries

12. Unintended
Consequences
ofSocial
Security Policy
 Average life span of African American is shorter than whites
which means they will collect less SS
 Because of that, the regressive nature of SS necessarily
means it is a higher burden on people who live shorter lives
 AA and Hispanics often work more physical jobs that require
them to retire at a younger age; a higher retirement age
impedes them from qualifying for full SS
 Lower levels of education, marriage and higher
unemployment rates result in lower SS benefits forAA,
Hispanics and other groups

13. Unintended
Consequences
ofSocial
Security Policy
 Women’s wages tend to be lower than men’s which means
less benefits paid out to women at retirement or for a
disability
 Women spend less time working because they stay home to
raise the family; some never work
 10 year protection (collect spouse’s SS) only available if
woman is married 10 years
 Widowed spouses do not qualify for SS until age 60
 Married workers benefit more from SS; affects both genders
but many women never marry and tend to be poorer than
men

14. Unemployment
Insurance
 Provides temporary income to workers who have lost their jobs
through no fault of their own
 Cannot collect unemployment if you quit
 However, payment cannot be denied to:
 Workers refusing to work in substandard work conditions
 Workers refusing to work jobs that require union membership
 Pregnant workers
 Federal UnemploymentTax Act (FUTA) – employers pay taxes on
behalf of each of their employees. Money placed in a trust fund
account for each state to pay out claims of unemployment when
filed.
 Benefits normally limited, on average about 26 weeks (TX).
Extensions can be requested for another 13 – 20 weeks (funded by
Federal and State government)
 Unemployment benefits inTX

15. Workers’
Compensation
 Provides medical benefits and often cash payments to workers
who are injured on the job or develop job-related diseases.
 Provides benefits to survivors of workers killed on the job during
job-related accidents
 Department of Labor administers the program at Federal level.VA
administers program for disabled veterans. States administer
everyone else. Self-employed workers do not qualify forWC.
 Program is intended to provide wages lost to injury or disease and
to make sure job caused injuries do not become catastrophic to
workers.
 Wages are calculated at 2/3 of the wage the worker was earning
when the injury happened

16. Workers’
Compensation
 It is not about compensating for pain and suffering
 Employees (for the most part) cannot sue their employees if they
are receivingWC
 Employees cannot collectWC if they were injured due to their own
willful misconduct or intoxication
 Texas does not require employers to participate inWC programs.
For that reasons, employees are allowed to sue their employers.
 Texas employers who do not carry workers' compensation
insurance coverage are required to report their non-coverage
status and work-related injuries and occupational diseases to the
Division ofWorkers' Compensation (DWC).

17. Issue with
Workers’
Compensation
 Length of the claims process. Investigations can be lengthy
 Illnesses versus physical injury claims – Illnesses take longer to
manifest
 Wages paid under WC are designed to encourage employees to
get back to work as soon as possible – not necessarily the best
plan for someone who is injured or sick
 Employers duck the program and find ways not to join it (i.e., they
hire contracted employees, casual workers)
 Employers must employ at least 15 employers before having to
offerWC
 Fear of job loss, retaliation, stigma of being onWC, peer pressure
to return to work, employer push back, uncooperative insurance
companies, cost of healthcare

18. SocialSecurity
Disability
Insurance
 SSDI provides benefits to disabled or blind persons who are
“insured” by workers’ contributions to the Social Security
trustfund.
 Contributions are based on earnings (or those of your spouse
orparents) as required by the Federal InsuranceContributions
Act(FICA).Title II of the Social Security Act authorizes SSDI
benefits.
 Your dependents may also be eligible for benefits from
yourearnings record.
 Comparing SSDI and SSI