A Critique of the Old-Age and Survivors Insurance Program of the United States

Abstract

The Old-Age and Survivors Insurance (OASI) program is the most important source of retirement income for the aged and is one of the major institutional developments of the past third of a century. At the end of fiscal year 1970, almost 17 million Americans were receiving retirement benefits and another 6.4 million were receiving survivors benefits under the program with cash benefits to these beneficiaries amounting to $26.3 billion during fiscal year 1970.1 Virtually all Amer? icans are covered by social security and, therefore, will be entitled to some benefits under the program. It is the purpose of this paper to analyze the economic and social impact of the retirement benefits provided by the OASI program. While the Social Security system also encompasses disability and health insur? ance for the aged, only the retirement and survivors programs will be examined. OASI has dual objectives. One objective is to provide a minimum level of income or a of to prevent destitution in old age. This assumes that the OASI benefit will be supplemented by personal assets and private pensions. The other objective of the program is to provide a level of benefits for a retired couple which would replace . . at least 50 percent of his average wages under the social security system.2 Since the wife's benefit is equal to one half of her husband's benefit or primary insurance amount, the replacement goal for an un? attached retiree would be one-third of his average covered earnings. The social security benefit is the foundation upon which the contem? porary American program of income maintenance for the aged has been built. The OASI benefit forms the base of the tripartite system of income maintenance which consists of social security, private pensions and per? sonal assets. Since its inception, it has been generally assumed that the OASI program should provide the floor of protection or income base to be supplemented by personal assets and private pensions. Although this assumption is widely accepted and has often been stated by Congress, the reality of the tripartite system is questionable. However, the continued 39