Question

In North America and Europe, as countries developed from the late 19th to the late 20th century, social insurance (public pension) schemes, unemployment benefits, and publicly provided health care and welfare schemes became more pervasive. Over that period, the extended family was replaced by the nuclear family. Use the concepts of economies of scope and path dependency to explain why this happened and why the transformation took several generations.

Answer 1

THE CONCEPTS OF ECONOMICS OF SCOPE AND PATH OF DEPENDENCY:

EUROPE:

As societies grew in economic and social complexity, and as isolated farms gave way to cities and villages, Europe witnessed the development of formal organizations of various types that sought to protect the economic security of their members. Probably the earliest of these organizations were guilds formed during the Middle Ages by merchants or craftsmen. Individuals who had a common trade or business banded together into mutual aid societies, or guilds.
Out of the tradition of the guilds emerged the friendly societies. These organizations began appearing in England in the 16th century. Again organized around a common trade or business, the friendly societies would evolve into what we now call fraternal organizations and were the forerunners of modern trade unions.
In addition to the types of economic security provided by the guilds, the fraternal organizations and some trade unions would begin the practice of providing actuarially-based life insurance to their members. The friendly societies and the fraternal organizations would grow dramatically following the Industrial Revolution. By the beginning of the 19th century one of out every nine Englishmen belonged to one of these organizations.

NORTH AMERICA:

As colonial America grew more complex, diverse and mobile, the localized systems of poor relief were strained. The result was some limited movement to state financing and the creation of almshouses and poorhouses to "contain" the problem. For much of the 18th and 19th centuries most poverty relief was provided in the almshouses and poorhouses. Relief was made as unpleasant as possible in order to "discourage" dependency.
Support outside the institutions was called "outdoor relief" and was looked upon with distrust by most citizens. It was felt that "outdoor relief" made things too easy on the poor who should be discouraged from the habit of poverty in every way possible. Nevertheless, since it was expensive to build and operate the poorhouses, and since it was relatively easy to dispense cash or in-kind support, some outdoor relief did emerge. Even so, prevailing American attitudes toward poverty relief were always skeptical and the role of government was kept to the minimum. So much so that by as late as 1915 at most only 25% of the money spent on outdoor relief was from public funds.

THE SOCIAL INSURANCE MOVEMENT :

The Social Security program that would eventually be adopted in late 1935 relied for its core principles on the concept of "social insurance." Social insurance was a respectable and serious intellectual tradition that began in Europe in the 19th century and was an expression of a European social welfare tradition. It was first adopted in Germany in 1889 at the urging of the famous Chancellor, Otto von Bismarck. Indeed, by the time America adopted social insurance in 1935, there were 34 nations already operating some form of social insurance program.social insurance emphasized government-sponsored efforts to provide for the economic security of its citizens. The tradition of social insurance would come to be seen as the reasonable, practical alternative to the radical calls to action represented by Townsend, Long, Sinclair and the others.

ALTHOUGH THE DEFINITION OF SOCIAL INSURANCE CAN VARY CONSIDERABLY IN ITS PARTICULARS:

BASIC FEATURES ARE :

• The insurance principle under which a group of persons are "insured" in some way against a defined risk, and a social element which usually means that the program is shaped in part by broader social objectives, rather than being shaped solely by the self-interest of the individual participants.
• Social insurance coverage can be provided for a number of different types of insured conditions, from disability and death to old-age or unemployment. We may find it obvious to think of death, disability or unemployment as conditions causing loss of income and which can be ameliorated by pooling of risk.
• It is at first a little odd to think of old-age or retirement in these same terms. But that is precisely how the early social insurance theorists conceived of retirement, as producing a loss of income due to cessation of work activity.

HEALTH CARE :
The decade of the 1960s brought major changes to the Social Security program. Under the Amendments of 1961, the age at which men are first eligible for old-age insurance was lowered to 62, with benefits actuarially reduced. This created an additional workload for the Agency as more beneficiaries entered the rolls. The number of people receiving disability benefits more than doubled from 1961 to 1969, increasing from 742,000 to 1.7 million.
The most significant administrative change involved the signing of the Medicare bill on July 30, 1965, by President Lyndon Johnson In the presence of former President Truman.With the signing of this bill, SSA became responsible for administering a new social insurance program that extended health coverage to almost all Americans aged 65 or older.

UNEMPLOYMENT :

On December 17, 1999 the President signed the "Ticket to Work and Work Incentives Improvement Act of 1999 one of the most significant changes in disability policy in the last 20 years.This law creates a Ticket to Work and Self-Sufficiency Program which will provide disability beneficiaries with a ticket they may use to obtain vocational rehabilitation services, employment services, and other support services from an employment network of their choice. In addition to allowing beneficiaries to purchase vocational services, the law provides incentive payments to providers for successful rehabilitation in which the beneficiary returns to work.