Updating Social Insurance

This is a plan to update social insurance to reflect changes that have occurred since the inception of social insurance programs in the 1930s:

Families Valued Creating a twenty-first-century social insurance system for today's "juggler families.", Karen Kornbluh, Democracy Journal: ...[O]ver the past generation the American family has changed dramatically, but the policies designed to mitigate the risks it faces have remained frozen in time, many of them operating on rules developed in the midst of the Great Depression. As a result, the most vulnerable families in the new economy all too often wind up with limited protection in times of need. ...

The FMLA, though overlooked by many opinion-makers, was a breakthrough in updating the American social contract for today’s families. It amended the Fair Labor Standards Act of 1938 to allow workers to take time off to care for a new child or a sick relative without losing their jobs. ... But the ability to take time away from one’s job ... is not comprehensive. To give families the security they need to raise healthy, productive members of society, we need also to address the financial risks parents incur just for being good parents–when they take time out of the workplace, require a flexible schedule to raise children, or get hit with high health care or child care expenses.

For this, progressives should turn to one of the most important innovations of the last century: social insurance. In the 1930s, progressives established a suite of social insurance schemes to help families share the risks of the industrial economy: the risks associated with the inability of the breadwinner to earn the family income because of old age, death, a temporary layoff, or disability. These social insurance programs continue to provide families essential support. But today we need to create new elements in the social insurance system–as well as reform the protections now in place–to confront the new risks families face...

Today, 70 percent of all families with children are headed by either two working parents or a single parent who works–the reverse of 1960, when 70 percent of all families had a breadwinner and a full-time homemaker. Fifty percent of marriages end in divorce, and one-third of children are living in single-parent families at any given time. Parents in these new "juggler families" are working more and more hours, but earnings have stagnated...

From 1979 to 2000, mothers in median-income, married families increased their hours on the job by half, while mothers in lower-income families increased their hours by between 60 and 70 percent. These families are dependent on the mother’s earnings: Without them, family income would have virtually held steady in the median-income families, and they would actually have fallen in the lower-income families.

Credit card debt has increased for the average family by more than 50 percent over the last decade, while low-income families saw a 184 percent increase in their debt. As ... a result of rising costs of health care, child care, education, and housing, economic insecurity and ... bankruptcy rates have increased for these families, despite the fact that the mother is in the workforce.

For these families, juggling to make ends meet and so dependent on the mother’s income, time off to care for a sick child or a new baby can result in devastating income interruptions and even job loss. In addition, these workers are often denied the flexibility they need to get home in time for dinner or take off on a sick day. According to a report by the Urban Institute, over half of all workers report having no control over scheduling alternative start and end times at work; half of all workers have no access to paid sick days; and parents with young children ... who need flexibility the most are the least likely to have these benefits. As a result, juggler parents often wind up paying a hefty penalty just to be good parents. They lose jobs as a result of a child’s illness; they take part-time, contingent, or other nonstandard jobs; and they sacrifice wages, benefits, and job security if they can’t do shift work.

The job interruptions and part-time penalty affect all juggler families, but they put the most pressure on mothers and their kids. Mothers still bear the overwhelming responsibility for childrearing, and as a result they are more likely to wind up in nonstandard jobs or to lose their jobs completely when they stay home with a sick child or refuse overtime to pick up a child at day care. ... Other disadvantages abound: Women are about 15 percent less likely than men to be offered health insurance directly through their employer, and they constitute a full two-thirds of those who lost health insurance coverage last year. The problem compounds for single mothers–either divorced or never married–as they bear both the high economic risks of an inflexible job market and the high cost of supporting a family alone. ...

[T]he United States has made few concessions to juggler families. To be sure, since 1993 the FMLA has provided job protection for employees of companies with 50 or more employees who take leave to care for a new child or an ill relative. President Clinton also expanded the Earned Income Tax Credit ... and won new child care and after-school funding. ... But the United States offers no right to even refuse overtime–let alone work a flexible schedule–and only limited, means-tested child care assistance and a small, regressive child care tax credit.

Seventy years ago, the Roosevelt Administration designed its social insurance system to address the real needs of families at a critical time. But the national policies designed to meet the needs of breadwinner-homemaker families in the 1930s are woefully inadequate for contemporary households. America needs to take concerted action to update its policies for a new century and new families. This most definitely does not mean privatizing our existing social insurance system, as the Bush Administration proposed. Instead, we must fix the holes in the existing programs... And we must put in place insurance against new risks that will help today’s families thrive in the century ahead. ...

Adapting existing programs would help families better navigate retirement, unemployment, and disability, but it is also time we took seriously the new economic challenges that loom in the lives of today’s families. ...

What is needed, though, is a national commitment to mitigating the new risks to the economic well-being of families. Social Security took on the problem of financial vulnerability in old age and won. We have no equivalent commitment to addressing the financial vulnerability of Americans earlier in their lives, before they have had time to save, when they are hit with the exorbitant costs of raising a child at the very same time as they find their earnings and benefits slipping because of their childrearing responsibilities.

We need a new, universal Family Insurance system in America. It would not eliminate the costs of having and rearing children–parents who cut back on work would still receive less in wages, and they would still have to pay for housing, clothes, and education–but it would prevent the more common catastrophic economic disruptions that too often send today’s families to bankruptcy court.

Family Insurance would address the very real possibility that income will decline when one parent–or the only parent–stays home with a new child, takes a part-time job to be home after school with a kindergartener, or is forced into a temp job to gain the flexibility to care for a parent with Alzheimer’s. Families would be able to draw down benefits to replace earnings lost as a result of taking family and medical leave up to a capped amount... The benefits could replace partial earnings if a worker goes part-time instead of taking full-time leave–including if he or she decides to take part of his or her child leave as reduced leave.

Family Insurance also would encompass the common risk that a family loses health insurance, which is all too often the casualty of a flexible job. In order to allow parents ... access to the same tax-subsidized group health insurance available to full-time workers with employer-provided insurance, Family Insurance would provide a progressive credit to help families buy into the federal employees’ group health plan.

Finally, ... Family Insurance would include an add-on account, like the accounts some have proposed for supplementing Social Security. These new Parent Accounts would be a substitute for today’s little-known flexible spending accounts, which allow employees to put aside $5,000, pre-tax, for health care expenses and another $5,000 for childcare expenses. Flexible spending accounts are available only to employees of participating firms and regressive to boot, whereas all workers could establish new Parent Accounts for the health-, child care-, and education-related expenses of raising a child. The government would match a family’s pre-tax contributions to the account on a progressive basis (giving a higher match to low-income families and none to high-income families).

These steps–replacing a portion of wages when families take time away from work with a child or an ill relative, providing access to subsidized health insurance for part-time workers, and creating an add-on account to help with the major expenses of raising a child–would provide families the security they need to carry on the critical job of raising our next generation. They could be financed through a combination of a more progressive payroll tax (starting at a higher wage rate and not capped by income) and general revenue to reflect the fact that everyone in society, not just wage-earners, benefits from the work parents do raising the next generation of citizens.

Of course, reforming social insurance cannot be a substitute for continuing the effort to reform employment laws. All workers in the United States should be able to return to their jobs after caring for a new child or a sick relative, take a few days of sick leave, and have the ability to negotiate a flexible schedule. But, after all, FDR did not choose between giving the industrial family new labor protections and providing them the ability to share risks. He did both. In a new century, today’s families deserve no less.

I don't think a big, colossal program designed to help working parents, however well-designed and well-intended, would be politically wise. But incremental changes that move in the direction of providing increased protection against economic risk or losing a job because of necessary time off to care for a child or spouse are worth pursuing.