Social Insurance and Public Assistance

SOCIAL WELFARE PROGRAMS Series Bf377–394 765
TABLE Bf377–394 Old-Age, Survivors, Disability, and Health Insurance – covered workers, earnings, employers,
and tax rates: 1937–1999 Continued
doctors of medicine were covered, and in 1967 the previous elective coverage
of ministers became compulsory unless exemption was claimed on grounds
of conscience or religious principle.
When the OASDHI program began in 1937, fewer than 60 percent of
all persons who worked in paid employment during an average week were
covered. Following the 1950 amendments, the proportion rose to 75 percent
and by 1970 was more than 90 percent. In the mid-1990s about 96 percent
of all jobs in the United States were covered. Workers excluded from coverage
fall into five major categories: (1) federal civilian employees hired before
January 1, 1984, (2) railroad workers, (3) certain employees of state and local
governments who are covered under a retirement system, (4) household
workers and farm workers whose earnings do not meet certain minimum requirements,
and (5) persons with very low net earnings from self-employment
(generally less than $400 annually). Federal civil servants hired prior to 1984
and railroad employees are covered, separately, by compulsory, contributory
retirement systems of their own. The railroad system is closely coordinated
with OASDHI.
To qualify for cash benefits, a worker must have worked a sufficient time
in covered employment to have acquired an insured status (see series Bf377–
379). Workers are considered “fully insured” when they meet the minimum
requirements for insurance; they become “permanently insured” when they
become eligible for a required-worker benefit. Workers are insured in the
event of disability if they are considered fully insured and have contributed
a sufficient amount to receive disability insurance. Under the 1939 amendments,
workers were generally “fully insured” for benefits if they had worked
in covered employment half the time after 1936 and before age 65 and had
a minimum of six calendar quarters of coverage. Subsequent liberalizations
permitted a person to become fully insured if he had been in covered work
roughly equal to one fourth of the time between 1950 (or age 21, if later)
and retirement age or death. Based on the rules in 1970, if a worker died
before acquiring a fully insured status but was “currently insured” 1.5 years
of employment out of the 3 preceding years, death-survivor benefits may be
paid to his young widow with children. To be insured for disability benefits,
circa 1970, a worker must generally have worked for at least five out of the
ten years before onset of disability. The 1965 amendments eased the eligibility
requirements for persons 72 years old and older who were not eligible
for cash benefits by introducing a transitional insured status under which a
special flat monthly benefit may be paid to persons with three to five quarters
of coverage. A 1966 amendment extended these special monthly benefits to
certain persons 72 years old and older who could not meet even these minimal
requirements. Lump-sum payments became payable in 1937; monthly
benefits, in 1940. The original Social Security Act provided for monthly oldage
benefits only. Amendments adopted in 1939 added benefits for dependents
and survivors of the insured worker. Benefits for disabled persons were
added in 1956, and benefits for the dependents of disabled persons, in 1958.
Beginning in 1966, the cost of rehabilitation services furnished to disability
beneficiaries was also paid by the program. A complete discussion of insured
status can be found in the Social Security Bulletin: Annual Statistical Supplement,
1997, p. 372.
Since 1940, the OASDHI program has been a pay-as-you-go system
funded by taxes on earnings for wage and salary workers and the selfemployed.
An employer deducts Social Security contributions from a worker’s
pay and adds an equal amount for his tax as employer. The money is forwarded
to the Internal Revenue Service and deposited into federal trust funds
from which the benefits and administrative expenses are paid. Self-employed
persons pay their Social Security contributions with their federal income
tax. For example, the information in series Bf386–394 shows that in 1990
a typical worker would pay a tax on earnings up to a maximum of $51,300
of 5.6 percent for Old-Age, Survivors Insurance (OASI), start 0.6 percent
for Disability Insurance (DI), and 1.4 percent for Medicare. The employer
would pay the matching amount. The self-employed would pay both the
worker and employer share, or 11.2 percent for OASI, 1.2 percent for DI, and
2.8 percent for Medicare. The Omnibus Budget Reconciliation Act of 1993
repealed the Medicare maximum so that now all earnings are subject to the
Medicare tax. In 1984 the total contribution rate for OASDHI for employers
and employees each (the sum of series Bf389–391) includes an automatic tax
credit of 0.3 percent for remuneration paid in the calendar year 1984 under
the Federal Insurance Contributions Act. During the period 1984 to 1989,
the total contribution rate for OASDHI for self-employed (the sum of series
Bf392–394) includes an automatic tax credit of 2.7 percent of earnings for
self-employed income for taxable years beginning in 1984, 2.3 percent for
taxable years beginning in 1985, and 2.0 percent for taxable years beginning
in 1986, 1987, 1988, and 1989. During this period, scheduled taxes were
credited to the Social Security Trust funds, monies for tax credits were paid
from the Treasury, and the reduced tax rates were paid by employees and the
self-employed. For more information, see Social Security Bulletin, Annual Statistical
Supplement, 1997,Table 2.A4, p. 35. Unlike the income tax, the OASDHI
taxes are drawn on the first dollar of earnings; however, the working poor receive
some relief from the OASDHI payroll taxes through the earned income
tax credit.
Series Bf380. The estimated total number of living workers is the estimated
number of persons who had covered employment any time during the period
from 1937 to the year shown. It is not adjusted to reflect the effect of
provisions that coordinate the OASDHI and Railroad Retirement programs
and wage credits for military service. It is only partially adjusted to eliminate
duplicate counts of persons with taxable earnings reported on more than
one Social Security number.
Series Bf381–385. Relate only to wage and salary workers for the period
1937–1950. Beginning in 1951, the data include self-employed workers and
earnings.
Series Bf383. New entrants into covered employment are workers reported
with first taxable earnings under the program in a specified year. During
the period 1937–1994, 276.2 million different persons were reported with
taxable earnings.
Series Bf382–383 and Bf385. Preliminary estimates are based on data from
the Bureau of Labor Statistics and the National Income and Product Accounts.
Series Bf381–383, Bf385, and Bf387. Data for 1996 are preliminary estimates
based on data from the Bureau of Labor Statistics and the National
Income and Product Accounts.
Series Bf386–387. Data for 1975–1978, 1982–1989, and 1993–1996 are
based on automatic adjustment under 1972a Act (as modified by 1973a
and 1973b Acts), in proportion to increases in the average wage level. The
maximum earnings taxable for HI in 1991 is based on 1990 legislation.
Series Bf388. No longer reported in statistical supplement after 1977.