ABSTRACT
The Origin of Social Security The concept of social security refers to a set of government programs providing transfer (i.e. unearned) income to individuals and families subject to pre-specified conditions.1 The introduction of social security programs has been governments’ response to the socio-economic changes accompanying the Industrial Revolution. The transformation of predominantly rural and agrarian societies into urban and industrial societies was in many cases, accompanied by the loosening of family ties. This increased thevulnerability of large parts of the population to economic changes outside their control. These changes manifested themselves in the transformation of the labor force from mainly self-employed farmers and crafts people (and in some more backward countries of feudal systems and serfs) into an industrial labor force of predominantly contractual workers and employees.The perceived diminished control by individuals over their material fate in the industrializing society gave rise to demand for collective responsibility for citizens’ welfare, most forcefully put forward by the moderate currents of socialism developing in Europe in the 19th century.2 Nevertheless, the first great breakthrough in the implementation of state-sponsored social security occurred under the conservative government of Otto von Bismarck in 1883 in the newly founded German Empire. Bismarck’s motivation for introducing a social security system was predominantly political. By providing workers with income guarantees in times of sickness and old age, he hoped to weaken the support for the socialist party and foster the loyalty of the work force to the German state as opposed to the internationalist orientation of the socialist movement.The subsequent introduction of a variety of social security schemes in many countries was often linked to crisis situations in the countries concerned, and in contrast to the German precedent - introduced by left
leaning parties in government (Table 1). Since its modest beginnings in Germany in the last century, social security has gained increasing importance, making it the single most important government expenditure category in most countries (Table 2). While the coverage and extent of social security programs differ widely among different countries, the need for some government involvement providing insurance against sudden income loss or minimum income levels, is now universally recognized. Nevertheless, the rapid extension of these programs in the post-war period has lead to some disillusionment as to their efficacy. More recently, social security systems have come under scrutiny with respect to their effect on government finances, economic incentives and more generally, their ability to achieve declared objectives.
