The American Social Contract

Michael LindNew America Foundation

October 2010

The American Social Contract

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I. Adequate income for workers

II. Economic security for non-workers

Two elements:

Policies Promoting Adequate Income for Workers

• Land for Homesteads (1800s)

• Abolition of Slavery (1860s)

• Immigration Restriction (1880s- 1920s)

• Female Protective Legislation (1900s)

• Outlawing of Child Labor (1900s)

• Minimum Wage and Hours Laws (1930s)

• Full Employment (Monetary and Fiscal) (1940s- )

• Wage Subsidy to Low-Income Workers (i.e. EITC) (1970s-

)2

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Low Market Fundamentalis

m

New Deal(Living Wage)

High Neoliberalism(EITC)

Nordic Social Democracy

Subsidy

Wage

Low High

Economic Security for Non-Workers

“Accident, illness, old age, loss of a job. These are the Four Horsemen that ride roughshod over lives and fortunes of millions of wage workers of every modern industrial community…”

I. M. Rubinow, 1934

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The History of Economic Security in America

•Means-Tested Public Warfare (1700s- )

•Employee Benefits (1900s- )

•Contributory Social Insurance (1930s- )

•Tax-Favored Private Accounts (1970s- )

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Alternative Methods of Providing Economic Security

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Employee Benefits

Social Insurance

Private Accounts

Health Care

Employer-Provided Health

Insurance

Medicare, Medicaid

Medical Savings Account

Retirement Security

Employee Pensions

Social Security

IRA’s, 401(k)’s

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The Problem with Private Accounts

The Limits to Redistribution

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• Political- Racial and Ethnic Diversity v. Solidarity

• Economic- Danger of Relying on Volatile Incomes of the Rich for Revenue

A Solvent and Politically Sustainable Social Contract

Adequate Income for Workers:The High-Wage, Low-Subsidy ModelA Living Wage

Economic Security for Non-WorkersUniversal, Contributory Social Insurance

The Link Between the TwoHigh Median Wages Sustain Universal Social InsuranceBased on Payroll Taxes

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