Contemporary Crises 5 (1981) 139-154 139 Elsevier Scientific Publishing Company, Amsterdam - Printed in The Netherlands

CORPORATE SOCIAL BENEFITS AND THE UNDERDEVELOPMENT OF TIdE AMERICAN WELFARE STATE

HUGH MOSLEY

This article focuses on social welfare programs for wage and salary workers. Such welfare programs which directly affect the employment system are organized in the United States as social insurance systems. I have stressed, in particular, the significance of the dual public-private social welfare system in the United States as an undeclared social policy and its consequences for internal stratification among American workers. Part 1 surveys briefly the underdevelopment of the American welfare state by means of a comparison with German (Federal Republic) welfare state institu- tions. Part 2 examines the significance of the private welfare system in the U.S. in terms of trends in public and private social welfare expenditures. Part 3 presents an account of the General Motors/United Automobile Workers employee benefits program in the auto industry as an advanced example of the corporate alternative to the welfare state. Part 4 discusses the stratified distribution of the benefits of the public-private system among American workers. Finally, in Part 5 I argue, in somewhat more general terms, that the stratified distribution of benefits in the private welfare system is a consequence of its social form as a (vis-c~-vis the economic structure) non-distanced allocative structure.

The Underdevelopment of the American Welfare State: The United States and Germany

Welfare state institutions are an important structural feature of capitalism, so much so that the term "welfare state" has become a common designation for the contemporary capitalist state. In contrast to earlier laissez-faire principles, the welfare state protects dependent wage and salary workers, now the overwhelming majority, against the financial consequences of age, illness, accidents, and unemployment. Individual workers are no longer de- pendent on personal and family resources and/or charity as the only alter- native to paid employment, and essential services, most importantly medical care, are no longer provided exclusively on the basis of ability to pay. There is great variety in the particular organizational structures of such welfare

Traunsteinerstrasse 7, Berlin, West Germany; now at UN Center for Disarmament, Ne w York.

0378-1100/81/0000-0000/$02.50 © 1981 Elsevier Scientific Publishing Company

140

state institutions. Nevertheless, they do display two basic historical forms, which are typically institutionally and ideologically sharply distinguished: 1) Social insurance programs in which entit lement to benefits is earned as a matter of right through successful participation in covered employment; 2) Public assistance programs in which entit lement to benefits is means tested and granted on the basis of qualified need. The latter type of welfare state institutions has the ideological coloring and discretionary administrative practices of public charity [ 1 ]. We will focus in this paper on the former, insurance-like programs as by far the most important and, in terms of financial resources and impact, most characteristic of contemporary welfare state institutions [2].

Although welfare state institutions are a common structural feature of modern capitalist societies, the historical pace at which such institutions have been introduced as well as their present degree of development varies markedly. The United States is usually considered a "welfare-state laggard" [3] in comparison with other similar capitalist societies. This is true not only of the dates at which basic welfare state programs were introduced (or their absence, e.g. health insurance), but of the quality of existing welfare state programs. Comparison with Germany, the historical welfare state 'leader', shows this clearly.

The following table (see Table I) compares national social insurance programs for wage and salary workers in the United States and Germany (Federal Republic of Germany). The year in which the first national program was instituted and the present basic level of benefits (as of 1975) is indicated. German old age, survivors, disability, sickness and accident insurance programs originate in the 1880s. The basic system was completed with the introduction of unemployment insurance and maternity benefits in 1927. By contrast the United States system originates with the Social Security Act of 1935 (although no benefits were actually paid until 1940) [4]. Work injury insurance (workmen's compensation) for medical benefits and loss of income is based on state rather than on national legislation passed in most states between 1908 and 1920 [5]. General disability insurance for other than work-related causes was first introduced in the United States in 1956 for workers fifty to sixty-five years of age, and gradually extended downward in subsequent years [6]. There is, as of yet, no sickness and maternity social insurance programs for loss of income or medical benefits in the United States [7]. Unemployment insurance was first introduced nationally in the United States in the wake of the economic depression of the 1930s. Several state programs predate the national program, based on federal legislation but state administered [8]. Thus, except for the introduction of unemployment insurance which was roughly contemporaneous, American welfare state

141

TABLE I

State Social Insurane Programs for Employed Persons: The United States and Germany (Federal Republic). 1975

Old Age Pension Work Injury Unemployment Sickness

The United States

(1935) Tax: 9.8% (4.9% + 4.9%) Replacement rate: 34.3% (51 A% for married couple)

(1889) Germany Tax: 18% (Federal (9% + 9%) Republic) Replacement Rate:

49.4%

(1911-1920) (1935) Cash Benefits: 50% of average I) Temporary Disability: earnings for

60-66 2/3% of earnings, 26 weeks, with one week waiting period, one week waiting

2) Permanent Disability: period 662/3% of earnings.

Medical Benefits: Comprehensive

(1884) (1927) Cash Benefits: 68% of net 1) Temporary Disability: earnings for

100% of earnings for 6 52 weeks weeks; thereafter 80%.

2) Permanent Disability: 662/3% of earnings.

Medical Benefits: Comprehensive

No Program

(1883) Cash Benefits: 100% of earn- nings for 6 weeks; there- after 80% Medical Bene- fits: Comprehensive

Sources: U.S. Dept of Health, Education & Welfare, Social Security Administration, Social Security Programs Throughout the World, 1975. (Washington: 1975). Replacement rates = average benefit payment divided by average net income for wage and salary workers. Dates are for first national law.

developments have lagged 40 to 50 years behind those of the welfare state leader, Germany. Moreover, a basic component of the welfare state social insurance system, employee medical and cash sickness and maternity benefits, does not yet exist.

The German social security system is not only older and more fully developed, the level of benefits for comparable programs is also generally higher in the West German than in the American welfare state. Unemploy- ment benefits average about 68 percent of previous net earnings in the FRG, 60 percent in the United States [9]. The normal duration of unemployment benefits is 52 weeks in the FRG and 26 weeks in the United States, with a one week waiting period. The West German system also includes a means tested unemployment assistance program which pays 58 percent of previous wages for an indefinite period after the exhaustion of normal unemployment insurance benefits. Benefit levels for old age, survivors and disability insurance, determined by complicated formulas based on the work history of the insured, cannot be so easily compared. Nevertheless, despite significant improvements in benfit levels in the American system in the last

142

decade, the level of development of the West German system has not yet been reached [10]. In 1975 the average monthly benefit for 16.6 million retired workers in the U.S. was 207.00 U.S. dollars. In 2.9 million cases (17.3%) benefits were also paid to a spouse and the average total monthly family benefit in such cases was 310.00 dollars [ 11 ]. The average pension for retired wage and salary workers in the FRG was 667.50 DM in 1975, [12] 269.00 DM at the exchange rate of January 1, 1975. Benefit levels for work injury are similar in the case of permanent disability: 60 to 66 2/3 percent in the U.S. (depending on state law) and 66 2/3 percent in the FRG with com- prehensive medical benefits. However, in the U.S. the same benefit level is paid for temporary disability [ 13 ], usually after a one week waiting period, while in the FRG temporary disability is covered by normal sickness insurance, paying 100 percent of covered earnings for the first six weeks and thereafter 80 percent of earnings up to 78 weeks in three years. The United States, of course still lacks such a general insurance program for sickness and accidents that are not work related.

Private and Public Social Welfare Expenditures in the United States

Such a comparative focus on state social welfare institutions is, however, misleading. It does not take cognizance of the underlying duality of public and private spheres, government and economy, basic to capitalist society. More precisely it fails to consider the historically specific role of the state and of state social legislation in different capitalisms. Characteristically, American capitalism, in contrast to that in Germany and other continental nations, has relied much less on statist methods in coping with similar problems. The American state, for example, has developed the model of "regulated industries" in industrial sectors such as transportation and communications where the pattern of state ownership has prevailed in the German Federal Republic. Similarly, in the field of social welfare institutions there has developed a significant private, particularly corporate, welfare system.

Data on expenditures levels for public and private social welfare purposes provide an index of the size and significance of private nongovernmental welfare programs in the United States. The overall patterns (see Table II) show the welfare state to be the chief provider of social welfare programs, as one would expect, accounting in 1975 for 72.7 percent of all social welfare expenditures. However, nongovernmental welfare programs remain a very significant element of all social welfare expenditure categories and continue to predominate in the health care sector.

If we look more specifically at work related social insurance programs for health care and income maintenance, the role of the private welfare system is

TABLE II

Public and Private Expenditures for Social Welfare Purposes. Selected Fiscal Years, 1950-1975.

143

Type of Expenditu~ 1950 1955 1960 1965 1970 1972 1973 1974 1975

Public expenditures as percent of expenditures for specified purposes Total 1 = . . . . . . . . . . . . 65.9 64.5 65.3 64.3 68.2 69.8 70.1 70.8 72.7

Income m a i n t e n a n c e . . . 9 1 . 0 89.0 88.1 86.0 84.0 85.0 85.2 85.4 86.5 Health . . . . . . . . . . . 25.5 25.5 24.7 24.5 36.5 38.4 38.1 39.3 42.1 Education . . . . . . . . . 85.8 83.5 83.0 8 2 . 2 8 3 . 3 83.4 83.7 83.7 84.2 Welfare & other services .65.8 52.7 59.1 68.0 78.0 84.7 84.6 86.1 87.8

All expenditures as percent of gross national product TotaP = . . . . . . . . . . . . 13.4 13.2 15.9 18.0 22.1 24.6 24.6 24.7 27.3

Income maintenance . . . 4.1 4.6 6.0 6.5 7.6 9.0 9.2 9.4 10.7 Health . . . . . . . . . . . 4.6 4.6 5.2 5.9 7.2 7.9 7.8 7.7 8.3 Education . . . . . . . . . 4.1 3.7 4.4 5.2 6.5 6.7 6.6 6.5 6.9 Welfare & other services . 0.8 0.5 0.5 0.7 1.0 1.4 1.4 1.5 1.7

Source: Alfred Skolnik and Sopie Dales, "Social Welfare Expenditures, 1950-75", Social Security Bulletin 39 (1) (January, 1976): 19.

1 Before adjustment for elimination fo duplication. Total expendtitures adjusted to eliminate duplication resulting from use of cash payments received

under public and private social welfare programs to purchase medical care and educational services.

even more impressive. The growth in public expenditures from 25.5 percent to 42.1 percent of health and medical care expenditures between 1950 and 1975 is largely accounted for by two programs introduced after 1965, Medicare for the aged and Medicaid for the indigent. These two programs accounted for 29.6 percent and 26 percent respectively of state health and medical expenditures [ 14]. Medicaid i s n o t a social insurance program but a means tested public assistance program. Only persons 65 years of age and older are eligible for Medicare, only a small percentage of which (about 14%) are still working. Thus, except for compulsory state administered workmen's compensation insurance and other special programs for job related accident and injury (e.g. black lung), the bulk of the ordinary medical expenses of American workers are paid for out of private funds. However, an important shift has taken place within the category of private health and medical ex- penditures. Payment for health and medical services by insurance benefits has increased as a percentage of total private payments from 10.7 percent in 1950 to 31.2 percent in 1965 and to 43.9 percent in 1975. This indicates the expansion of the private social welfare system in this time period during which employment related health insurance, of varying quality, became widespread. If we combine state welfare expenditures for "personal health and medical care" with the private welfare system of "insurance benefits", "in plant medical services" and "philanthropy", then the combined public-

144

private welfare system accounted for 67.4 percent of payments for such personal care expenditures, rather than the much lower figure of 39.7 percent of payments attributable to state welfare programs alone. The socia- lization of health care costs in the United States is thus significantly under- stated by an exclusive focus on state welfare expenditures [ 15 ].

For income maintenance (cash transfer payments) programs (see Table III), the public governmental share stood at 90.5 percent in 1950 and since 1965 has remained steady at about 85 percent of total expenditures. These data, however, considerably underestimate the relative importance of private employment-related retirement, disability and unemployment programs, principally because they include in the total for public expenditures veterans benefits, public employee retirement programs and nonemployment related public aid payments ("public assistance" and "sup- plemental security income"). If we calculate more discriminatingly the public social insurance and comparable employee benefit programs for wage and salary workers in the private sector, we get a much more relevant comparison of the relative impact of public and pri~'ate welfare programs on the private employment system. Such private income maintenance programs provide benefits in the neighborhood of 20 percent of total expenditures and thus at a rate of 25 percent of the benefits paid by comparable public progams [ 16].

TABLE III

GM/UAW Social Insurance Programs for Hourly Employees, 1976

Pension Work Injury Unemployment Sickness

Replacement rate 1 : Same as state 95% of net earn- state (38%) + corn- program = ings for up to pany (40%) pen- (60-66 2/3% 52 weeks (state sion = 78% (94% of earnings) benefit plus GM for Couple) plus insurance supplement)

annuity

Cash benefit: 60% of earnings for up to 52 weeks 3 thereafter 50-55% for total period equal to length of employment. Medical benefit: comprehensive

Source: "Agreement between General Motors Corporation and the UAQ, "Supplemental Agreements A, B and C. November 22 1976.

1 Assumptions same as in Table 2, 30 years seniority, age 65. Or GM disability pension plus supplement if greater, or if ineligible for state benefit.

3 One week waiting period, unless hospitalized.

Private Social Welfare System: The General Motors/United Auto Workers Model

Company level social welfare programs are the backbone of the private welfare system in the U.S. and the chief alternative to the welfare system in

145

the U.S. and the chief altemative to the welfare state. Although the first sig- nificant corporate/union pension and health care plans were negotiated by the United Mine Workers, the UAW negotiated social insurance plans in the auto industry have become the pace setter and an influential model for other unions and corporations [ 17]. The GM/UAW social security system is thus not an average corporate program but one of the most, if not the most devel- oped large corporate program. It merits particular attention as an advanced corporate alternative to the welfare state. The Pension Plan (retirement, dis- ability and survivors benefits) is the oldest and most developed segment of the General Motors/UAW social security program, providing very substantial supplements to the public social security benefits [18]. Under the 1976-1979 Pension Plan, "normal retirement" is at age 65 and monthly pension payments are largely based on years of service and vary little with wages (maximum differential is 0.75 cents per month per year of service). Thus an employee retiring in 1975 at 65 years of age (when full social security benefits can also be claimed) with 30 years of service would receive a monthly benefit from the GM pension fund of $358.90-$381.30 per month; approximately 40 percent of basic hourly wages. Upon retirement such workers undergo little or no loss of net income if their spouse has reached age 62, and thus the couple are eligible for the larger social security family benefit. General Motors and the UAW have also pioneered an emphasis on early retirement. The best known of these programs is the "thirty and out" special early retirement supplement, which enables employees with thirty years service to retire at any age.

The General Motors/UAW employee benefits program also provides health care and sick pay benefits not generally available through state welfare programs. Sick and accident pay benefits are set at approximately 60 percent of basic hourly pay for up to 52 weeks with a waiting period of one week unless hospitalized. According to the current agreement negotiated in 1976, up to six weeks maternity benefits can be paid for work disability resulting from pregnancy or childbirth. There is an alternative extended disability benefit insurance program which guarantees cash benefits equivalent to 50 percent (56% for those with more than 10 years seniority) of their basic hourly rate for a period equal to their length of seniority, less the time in which temporary sick and accident pay was drawn, e.g. $580.00 a month for an employee earning $6.00 per hour in 1976 with 10 years seniority. The company/union plan also provides comprehensive health insurance benefits for employees, returned employees and their families, including eye glasses and dental care.

The General Motors/UAW Supplementary Unemployment Benefits Plan provides a worker who is laid off with a supplement to his/her state unem- ployment benefit such that total income will equal 95 percent of weekly

146

take home (net after taxes) pay, instead of the 60 to 65 percent of net pay typically replaced by state unemployment insurance [191. One year of seniority is required for eligibility for SUB. Duration of benefits is for a period up to 52 weeks, depending on the seniority of the layed-off employee and the assets of the special fund set up to finance the program. The same program guarantees workers 80 percent of their base hourly rate for weeks in which they are scheduled to work less than usual 40 hours. The American state social insurance program does not yet provide unemploymen t com- pensation for workers involuntarily on short time. Thus workers under the GM/UAW negotiated private social welfare system enjoy a joint public- private welfare system which brings them far above that of American workers dependent on the public system and which gives them a level of benefits comparable, or superior, to that in an advanced state welfare system such as the Federal Republic of Germany (see Table III).

The Private Social Welfare System and the Stratification Within the American Working Class

The underdevelopment of the welfare state and the heavy reliance on private sector social welfare programs is perhaps an alternative to, but not simply a substitute for a state welfare system such as that in the German Federal Republic. The most conspicuous difference in the American private welfare system is its uneven distribution of benefits.

In 1950 for all wage and salary workers 48.6 percent were covered by any hospitalization insurance, 35.4 percent and 16.4 percent by surgical and regular medical insurance. By 1974 the corresponding figures were 69.6 percent, 68.1 percent, 66.5 percent, and in addition 34.3 percent were covered by major medical insurance. The percentage covered for the various health benefits shows a tendency to stabilize at about 2/3 of the wage and salary work force and to show no further growth [20].

Thus several million relatively privileged workers, such as those under the GM/UAW employee benefits program described above, are covered by social welfare programs on the whole superior to those of advanced European wel- fare states such as West Germany. A large number, 3 5 - 4 0 percent enjoy somewhat comparable benefits through the .combination of existing public and such supplementary private welfare programs. However, the majority of private wage and salary workers are excluded from sick pay, comprehensive medical care and more adequate pensions provided by the private welfare system and are dependent on personal or family resources, and on the more meager or means tested state welfare benefits. The relative- ly high ratio of private to state social welfare expenditures for workers' health care and income maintenance described above is in fact highly

147

concentrated in one segment of the American work force. The relationship between privileged and underprivileged workers in the

heavily privatized American social welfare system corresponds to definite structures in American political economy. Employer expenditures for such programs are positively correlated with average hourly earnings, establish- ment size and union status [21] and are thus particularly characteristic of large, high-wage unionized corporations typical of the "giant f inn" Baran

a n d Sweezy associated with monopoly capital. Department of Labor establishment data on the distribution of employee pension plans illustrate this pattern clearly. In smaller low-paying, non-union establishments, there is a low frequency and presumably a lower level of such employee benefits where they exist. In large, high paying and unionized establishments (though here unionization is less significant) there is almost universal existence of such programs. The same data broken down by industry show the highest incidence of retirement plans in mining and manufacturing, particularly in large and higher paying finns. On the other hand, trade, services and construction, especially smaller nonunion finns, showed the lowest incidence of such private programs [22]. Empirically the differential distribution of private social welfare benefits parallels the distinction between "primary" and "secondary" labor market sectors. The primary sector "offers jobs with relatively high wages, good working conditions, chances of advancement, equity and due process in the administration of work rules and, above all, employment stability". By contrast jobs in the secondary sector "tend to be low paying, with poorer working conditions, little chance of advancement; a highly personalized relationship between workers and supervisors which leaves wide latitude for favoritism and is conducive to harsh discipline; and with considerable instability in jobs and a high turnover among the labor force" [23]. Although the "dual labor market" was originally advanced as an explanation of poverty in terms of the confinement of the poor to the secondary labor market sector, we can employ this distinction as an ideal typical characterization of the stratification of job characteristics in the American economy as a whole, rather than as a designation of a particular sub-proletarian job market "sector". In terms of the data we have examined the distribution of the private welfare system benefits reflects and reinforces this underlying pattern of stratification among American workers.

For wage and salary workers in primary sector jobs, there is a further internal differentiation in access to such benefits based on degree of job security. Typically employee benefits in the private sector are terminated by lay-off or dismissal. Durable goods manufacturing and mining are particularly susceptible to fluctuations in the business cycle and the stability of large firms as corporate entities is not incompatible with a high degree of instability in particular production processes, plants, and hence individual

148

jobs. In both union and non-union employment, job seniority is the chief rule of personnel practice in the U.S. with respect to job security, and hence accesss to the private welfare system. Typically the level of employee benefits is also tied to length of seniority. In the GM/UAW social welfare programs described above, for example, eligibility for and the level of bene- fits received in temporary and permanent disability, life insurance, and retirement programs depends upon seniority. There are thus both core and peripheral workers within the primary employment sector, and the latter are highly vulnerable to being expelled by layoff or retirement into the secondary employment sector. In the case of structural crises in older indus- tries, such as the American steel industry, even long seniority core workers can suffer such marginalization within the American hierarchically stratified system of social benefits, job rights and pay.

Distanced and Non-distanced Allocative Structures for Social Welfare Benefits

This highly unequal distribution of social welfare benefits among American workers is inherent in the organizational form of the private, pre- dominantly company-level social welfare system under the structural conditions of the American economy. Here the key element is not whether social insurance programs are publicly or privately administered. Work- men's Compensation Insurance, for example, takes many administrative forms in the United States: self-insurance by individual firms, insurance through private carriers and state insurance funds. Rather o f central importance is whether the existence and level of benefits in such insurance programs are made a general legal requirement binding on all employers, as is the case with Workmen's Compensation, or whether such programs are based on the privately determined, 'voluntary' disposition of individual capital units. The American private social welfare system discussed here falls into the latter category. The dat--a-we have examined suggests two general determinants of the existence and level of benefits of such privately organized corporate welfare systems. First, the financial strength of some firms and industries, which enables them to pay premium wages and employee benefits. It was the national corporate economy which pioneered the private welfare system and still is its core component [24]. The existence of and feasibility of such programs depends not only on the tendentially monopolistic economic position of such firms, but also on the particular attractiveness of such forms of compensation to secure stability, motivation and control in a large bureaucratically administered work force. Secondly, the presence and strength of labor unions in a firm or industry is clearly an important factor in the development of such private social welfare

149

benefits. In 1974 26.6 percent of nonagricultural employees were union members, the impact of unions in influencing usual terms and conditions of employment is, however, far greater. General Motors, for example, like other large corporations typically extends union won benefits for hourly workers to its non-union office workers. Through the private welfare system of the United States labor unions have been important shapers of social policy. For various reasons American labor unions have in the period since World War II laid great stress on corporate social benefits.

In establishments with 500 or more employees such programs exist almost universally, whether or not there is a union. In smaller and lower paying establishments unions are markedly less successful in winning such social benefits, and presumably similar program in such establishments, where they exist, have correspondingly lower benefit levels [25]. Thus, for example, in contrast to the generous provisions of the GM/UAW pension plan, the Inter- national Ladies Garment Workers Union pension plan, in an industry where the union has organized only a fraction of the workers in a highly competi- tive industry, provided its members only with a flat rate pension of 65.00 in 1972. Even the powerful UAW could not have gotten much more out of firms in the garment industry.

We can express tentatively in more general terms the contrast we have described between public and private welfare systems and the stark inequali- ties in the distribution of benefits that the latter form of organization of social welfare produces. With respect to the allocation of social welfare bene- fits, it is useful to distinguish between economic structure and allocating structure. By economic structure I refer here to the hierarchical stratification of economic units in a contemporary capitalist economy such as that of the United States. The nature of this stratification can be characterized in general terms by the ideal typical distinction between monopoly capital and competitive capital. In contrast to competitive capital, monopoly capital is characterized by large firms, market concentration, administered prices, capital intensive production and a high degree of unionization. Competitive capital displays the inverse of these characteristics [26]. These are clearly dichotomous ideal types and there is no identifiable "competitive sector" in contrast to a "monopoly sector", rather individual firms, and the industry contexts within which they function, display these model characteristics to varying degrees [27]. By allocating structure I mean the political economic level at which decisions about the institution of employee social welfare benefits are made and the related scope of their application. The allocating level for such employee benefits may vary from centralized and national allocative structures to decentralized and local ones. In the United States the level at which such programs are instituted and their scope may be individual business establishments, local areas (e.g. in the building trades),

150

the multi-plant firm (e.g. General Motors), an industry (e.g. industry-wide collective bargaining in basic steel), a state, or the national government. However, most typically the public social welfare system is based on national govemmental legislation and the private system on individual firms, either company plans or jointly negotiated company/union plans.

The private (decentralized) employee social welfare system constituted largely at the allocative level of the finn necessarily generates gross inequalities in the distribution of such benefits. This is because it is, as a social form for the organization of employee benefits, least distanced from the underlying stratification of the economic structure. The firms capacity and willingness to grant employee social benefits of a given level and union presence and ability to negotiate such benefits are dependent on factors and constraints implicit in t heeconomic situation of the particular firm. Hence, in the U.S. the benefits of the private welfare system are concentrated in the economic institutions of the national corporate economy, in those firms which approximate the ideal type of monopoly capital. The public (centralized) welfare system, on the other hand, is constituted at the allocative level of the national economy and as such is distanced from the particular circumstances of individual firms or industries in the economic structure. It can thus, through centralized funding and the generalized form of law, provide social welfare benefits to all employees independently of the competitive position, relative financial strength and degree of union organi- zation of particular firms and industries [28]. This is, of course, merely a possibility inherent in the more distanced altocative level of the national state. It may also utilize this greater freedom of action to constitute new, politically determined inequalities, for example, the exclusion of farm workers from the coverage of much American social legislation or the special social benefits provided to higher civil servants (Beamte) in the Federal Republic.

The United States and the Federal Republic of Germany are both highly developed capitalist economies and basically similar in their economic struc- tures - in the particular sense of that termed developed above. However, with respect to employment-related social welfare benefits examined in this paper, the two countries are characterized by distinctive allocating structures and correspondingly divergent patterns in the distribution of such benefits. In West Germany a centralized and distanced state social welfare system, e.g. compulsory health insurance, provides substantially equal benefits for all wage and salary workers. Whereas in the American social welfare system with its large decentralized and nondistanced private component, health care insurance, for example, is provided only by some employers and in varying quality. The latter, nondistanced type of allocating structure reproduces in

151

the distribution of social welfare benefits the contingent inequalities of the economic structure. The former, distanced, state social welfare system generalizes such social benefits as conditions of employment negating, in this instance, the determination of the employment system by the inequalities of the economic structure.

In the comparison developed here between the U.S. and West German social welfare systems, I have argued that the large private component of the U.S. system has, in contrast to the West German public system, immense consequences for the distribution of social welfare benefits. While the public system can, and usually does, make employee social benefits general conditions of employmen t , the American private system reflects the inequalities of the economic structure in the distribution of social benefits. This is, of course, only a global comparisons of the West German and U.S. systems. Not only does the U.S. system have a strong public component, but the West German social welfare system also has its smaller but not insig- nificant private company-level programs. There has been, for example, a rapid growth of company pensions for nonmanagerial white and blue collar workers in recent years [29]. Although such company level pensions are much less significant than in the U.S., the pattern of distribution that emerges from such a decentralized, nondistanced allocative structure is much the same as in the U.S.

Moreover, it should be noted that the distinction between public and private allocative structures does not necessarily correspond to that between distanced and nondistanced allocative structures, i.e. public systems can be relatively decentralized and nondistanced and private systems can be relatively centralized and distanced. Thus, for example, in Sweden, the private pension system is much more generalized than in the U.S., covering 90 percent of employees in private employment. This is a result of the higher degree of unionization and, most importantly, the highly centralized collec- tive bargaining of pensions plans between national unions and employers' organizations [30]. On the other hand, workmen's compensation programs in the U.S. are relatively decentralized, state rather than Federal programs with a wide variation in the level of benefits. The most important practical point here is the more centralized pattern of regional and national collective bargaining in West Germany, Sweden and other European countries which constitutes a much more centralized and distanced private allocative structure for employee social welfare benefits than in the U.S.

The policy implications of the analysis presented here are evident. Such private social welfare programs established by individual firms on the basis of their particular economic situation, personnel compensation policies and labor union pressure will never meet the social welfare needs of all workers and provide an alternative to state social welfare programs. Rather, as an

152

indirect form of social policy subsidized by favorable tax treatment, the private welfare system reinforces existing stratification patterns among American wage and salary workers. Only the expansion of American state social welfare programs and/or state mandated employer social insurance and pension plans will be able to secure adequate employee social benefits as a general condition of employment for all workers.

The political implications of the dual public/private social welfare system are momentous. American unions have largely achieved social welfare bene- fits for their own members through economic struggles at the level of the firm, which they have failed to achieve for all workers through political struggle at the level of the state. Their very success in the area of social policy (as in pay and job rights) seems to have divided American Workers into a hieararchy of relatively privileged and relatively under-privileged, in which organized labor comes to be perceived (and perceives itself) as a special interest group. At the same time it eliminates any pressing practical incentive by organized labor for a determined political struggle for the further development of state welfare programs. This is, of course, an historical failure and impasse of the American labor movement rather than merely a consequence of the shortcomings of individual labor leaders, who through individual unions and the AFL-CIO are the main Washington lobby for better state social welfare programs.

Finally, the American public/private social welfare system, in contrast to the German public system, seems to point toward a quite distinctive type of integration/diffusion of the conflict potential of workers. In contrast to the class political orientation of the German social democratic labor movement, the American pattern is one of economic struggle by unions at the level of the firm or industry for the benefit of their own members. The principle result is a pattern of hierarchical stratification with respect to social welfare measures and job rights, similar to though sharper than that which prevails with respect to wages. Rather than a direct political-class integration of workers and a high level of state social welfare benefits for all, there is not only a lower average level of benefits but more importantly an accumulation of advantages and disadvantages between and within (e.g. seniority system) organized and unorganized segments of the American working class, which helps explain the paradoxical stability of a social system characterized by extremes of deprivation and anomic violence. The rewards and the disad- vantages which the employment system distributes are both intensive and cumulative and thus the integration of some and the marginalization of other workers are complimentary structural features of a distinctive system of employment and labor relations.

153

Notes

1 See Francis Fox Piven and Richard Cloward (1971), Regulating thePoor, New York: Pantheon. 2 For a comparative study of U.S. and West German public assistance programs see Stephan Leib-

fried, "Public assistance in the United States and the Federal Republic of Germany," Compara- tive Politics, October, 1978. For other important works of historical and comparative analysis of social insurance systems seem Monika Fuhrke (1976), Staatliche Sozialpolitik, Offenbach: Sozialistisches Bllro; Tim Guildmann (1976). Die Grenzen des Wohlfahrtsstaates am Beispiel Schwedens und der Bundesrepublilc. Munich: C.H. Beck; Hugh Heclo (1974), Modern Social Politics in Britain and Sweden, New Haven: Yale University Press; Gaston Rimlinger, Welfare Policy and Industrialization in Europe and America, New York: Wiley.

3 Harold Wilensky (1975), The Welfare State and Equality, Berkeley: University of California Press.

4 For an overview of the origins of German and American social insurance see Rimlinger, op. cit. On the U.S.A. see Arthur Altmeyer (1966), The Formative Years of Social Security, Madison: University of Wisconsin Press; Paul Conkin, FDR and the Origins of the Welfare State, New York: CroweU; Edwin Witte (1963), The Development of the Social Security Act, Madison: University of Wisconsin Press.

5 On the origins of state level workmen's compensation programs in the U.S. see in particular James Weinstein (1968), The Corporate Ideal in the Liberal State, Boston: Beacon Press.

6 For a recent genral account and analysis of disability insurance see Monroe Berkowitz, et al. (1976),Public Policy Toward Disability, New York: PraegeL

7 Five states (13% of work force) do have sick pay program for railroad workers. One state, New Jersey, provides maternity benefits. In 1965 a health insurance program, Medicare, was intro- duced for insured persons 65 years of age and older.

8 On the early history and development of unemployment insurance see Daniel Nelson (1969), Unemployment Insurance: The American Experience 1915-35, Madison: University of Wisconsin Press.

9 Actual average benefit level is lower in the U.S. because of low maximum benefit ceilings. For example, in 1979 in New York State the benefit formula is 50% of average weekly wage up to a maximum benefit of $125.00.

10 Thus a recent comparative study of replacement rates or social security old age pensions in selected countries for men with average earnings in manufacturing showed significant improve- ment of American benefit levels, rising from a replacement rate of 29% of preretirement earning in 1965 to 38% in 1975. In the same time period the replacement rate for a married couple rose from 44% to 57% of preretirement income. Moreover, the study concluded that, although the replacement rate in the US for a single worker was still considerably below that in West Germany, 38% and 50% respectively, for an aged couple the replacement rate is now higher in the U.S., as a consequence of a special supplement for a spouse in the U.S. This represents, however, a theoretical maximum calculated on the basis of optimum assumptions (continuous employment, retirement at age 65 and/or married with spouse age 65), which is particularly unrepresentative for the United States and not actual benefits paid. In 1975 48% of male and 66% of female beneficiaries were receiving reduced benefits due to early retirement prior to age 65. See Left Haanes-Olsen, "Earnings-Replacement Rate of Old Age Benefits, 1965-75, Selected Countries," Social Security Bulletin, 44 (1) (January, 1978): 4.

11 U.S. Department of Health, Education and Welfare (1975), Social Security Bulletin, Annual Statistical Supplement 1975, Washington: Government Printing Office, Table No. 76, 77.

12 Calculated from Federal Minister for Labor and Social Order (1977), SoziaIe Sicherung, Bonn, pp. 77-78 .

13 "Temporary disability" corresponds to the technical term "arbeitsunf~nig" in the German health insurance system.

14 Alfred Skolnik and Sophie Dales (1976), "Social Welfare Expenditures 1950-75," Social Securi- ty Bulletin, January, p. 15, Table 6.

15 Skolnik and Dales, op. cit.

154

16 Recalculated by excluding public employee retirement, veterans benefits and public aid expen- ditures from Skolnik and Dales, op. cit., p. 6 Table 1 and adjusting private expenditures to exclude employee insurance benefits paid by government employers.

17 For an overview see William Greenough and Francis King (1976), Pension Plans and Public Policy, New York: Columbia University Press.

18 The following account of the GM/UAW employee benefits program is based on "Supplemental Agreement A (Pension Plan), "Supplemental Agreement B (Insurance Program)," and "Supple- mental Agreement C (Supplemental Unemployment Benefit Plan)," to the "Agreement between General Motors Corporation and the UAW," November 22, 1976.

19 Because the GM Supplement is taxable it would actually replace slightly less than 95% of take home pay.

20 Alfred Skolnik (1976), "Twenty-five years of employee benefits," Social Security Bulletin, 39 (9): 6.

21 William Bailey and Albert Schwenk (1972), "Employer expenditures for private retirement and insurance plans," Monthly Labor Review, July, p. 16.

22 Donald Bell (1975), "Prevalence of private retirment plans," Monthly Labor Review, October, p. 18, Table 2.

23 Michael Piore, "Notes for a Theory of Labor Market Segmentation," Working Paper no. 95 (MIT), Cambridge, 1972. For a general account of dual labor market and related theories see David Gordon (1972), Theories o f Poverty and Underdevelopment, New York: D.C. Heath.

24 Greenough and King, op. cir., Ch. 2. 25 Donald Bell, op. tit., p. 19. 26 See Paul Baran and Paul Sweezy (1966), Monopoly Capital, New York: Monthly Review Press;

and James O'Connor (1973), The Fiscal Crisis o f the State, New York: St. Martin. 27 Hugh Mosley (1978), "Is there a fiscal crisis of the state?", Monthly Review, May, 28 For theoretical discussion on the state see Elmar Altvater (1972), "Zu einigen Problemen des

Staatsinterventiortismus," Prokla, rtr. 3, May; and Bernhard Blanke et al. (1975), "Zu neueren Marxistischen Diskussion tlber die Analyse von Form und Function des bUrgerlichen Staats," Prokla, Nr. 14[15.

29 See Hermann Berie (1978), "Betriebliche Altersversorgung: Neue Statistische Ergebnisse," Arbeitsstatistische Mitteilungen, 5•6.

30 See Social Security Bulletin 42 (3) (March, 1979) for a discussion of private pension plans in Europe.