social security

State provision of financial aid to reduce poverty. The term ‘social security’ was first applied officially in the USA, in the Social Security Act of 1935. In Britain it was first used officially in 1944, and following the Beveridge Report of 1942 a series of acts was passed from 1945 to widen the scope of social security. Basic entitlements of those paying National Insurance contributions in Britain include an old-age pension, unemployment benefit (known as jobseeker's allowance from October 1996), widow's pension, incapacity benefit, and payment during a period of sickness in one's working life (Statutory Sick Pay). Other benefits, which are non-contributory, include family credit, income support, child benefit, and attendance allowance for those looking after sick or disabled people. It was announced in the March 1998 budget that family credit and the disabled working allowance would be replaced from October 1999 by a working families tax credit and disabled persons tax credit, to be administered by the Inland Revenue.

Entitlements under National Insurance, such as unemployment benefit, are paid at flat rates regardless of need; other benefits, such as income support, are ‘means-tested’, that is, the income of those who claim must be below a certain level. Payments are made by the Benefit Agency and the Contributions Agency, which were formed in 1991 and are accountable to the Department for Work and Pensions (until 2001 the Department of Social Security).

The concept of such payments developed in the later 19th century in Europe. In the 1880s Germany introduced compulsory accident and sickness insurance as well as old-age pensions. Britain introduced non-contributory old-age pensions from 1909; and compulsory health and unemployment insurance from 1911. The US social-security legislation was passed to enable the federal government to cope with the effects of the Depression of 1929.

In the UK, the income-support scheme, known originally as national assistance, was called supplementary benefit 1966–88. Family credit was known as family income supplement, and child benefit was known until 1977 as family allowance. During 1987 and 1988 further changes in the social-security system included the abolition of death and maternity grants, to be replaced by means-tested payments from a new Social Fund; and the replacement of maternity allowances by statutory maternity pay, paid by employers, not the state. From October 1999, as part of the ‘Welfare to Work’ initiative, Family Credit and the Disabled Working Allowance were replaced by a Working Family Tax Credit and Disabled Person's Tax Credit, administered by the Inland Revenue and paid directly by employers from April 2000.

In the USA the term ‘social security’ usually refers specifically to old-age pensions, which have a contributory element, unlike ‘welfare’. Currently, Social Security retirement benefits are funded by a 12.4% payroll tax in the USA. The federal government is responsible for social security (Medicare, retirement, survivors', and disability insurance); unemployment insurance is covered by a joint federal-state system for industrial workers, but few in agriculture are covered; and welfare benefits are the responsibility of individual states, with some federal assistance.