Social Security Disability: a social insurance program, not welfare ...

Last month, Alicia Munnell of the Center for Retirement Research at Boston College wrote an interesting piece on an issue that always seems to be lurking around discussions of social security, both as a retirement benefit and disability benefit program. That discussion involves the debate over whether too many people have come to rely on social security as a means of alternative income. Does the system promote a welfare state, as some allege, and can SSDI benefits be thought of as handouts?

The clarification Munnell makes is a good one for our purposes on this blog. What she says is that there is a distinction between social insurance and means-tested benefits. The latter indicates government provision of money, food and housing to those who cannot afford it, whereas the latter indicates a government operated insurance system to which citizens have contributed on a regular basis over the years in order to protect themselves against loss of earnings.

Along with Social Security retirement and disability benefits, social insurance programs include state unemployment insurance and workers' compensation programs. It is important to realize that benefits received under these programs are fundamentally distinct from those received under means-tested benefits programs. As such, they cannot be thought of as handouts or welfare.

In the case of Social Security Disability Insurance, workers contribute 0.9 percent of their earnings to the program, and they are entitled to the program's benefits when they become permanently and totally disabled. The fact that the check comes from the government does not automatically make it welfare, however.

Our readers should keep this in mind as they consider the debate on how to handle the financial troubles faced by our nation's Social Security programs.

Source: Smart Money, "They're Not Moochers and It's Not Welfare," Alicia Munnell, March 8, 2012.

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