REASONS FOR SOCIAL INSURANCE

The existence and scope of social insurance programs are the result of several factors, probably the most significant of which is the need to solve the major social problems that affect a large portion of society. The industrialization of American society and the decreasing self-sufficiency of families resulted in a greater dependence on monetary income to provide economic security. The widespread lack of such income during the Great Depression led to the passage of the Social Security Act as an attempt to provide economic security by attacking the sources of economic insecurity, including old age and unemployment.

A second reason for the existence of social insurance programs is the difficulty of privately insuring against certain types of losses. For example, the inability to predict future unemployment rates and the potential for catastrophic losses make the peril of unemployment virtually uninsurable in the private sector. In addition, broad medical expense coverage for the aged can be marketed commercially only at a price beyond the financial means of many retirees.

Finally, many Americans have come to expect the government to provide at least a degree of economic security against the consequences of premature death, old age, disability, and unemployment. As a result, social insurance programs enjoy widespread public acceptance.