applied (and in some cases when benefits are restricted) to workers with earnings above the social security taxable wage base. The former method is especially disadvantageous to disability retirees because they generally have lower earnings and less service than normal retirees. In fact, the offsets sometimes reduce the plan benefits to zero. Therefore, some plans have reduced the amount of their offset or have substituted alternate benefit formulas not subject to deductions for statutory benefits. Workmen's compensation benefits, when paid, are also often deducted in whole or, occasionally, in part from the amount determined by the benefit formula. The benefits provided by slightly more than two-fifths of the plans with disability retirement benefits (covering over half of the workers) were directly integrated with social security benefits, workmen's compensation, or both, by the offset method. About half these plans deducted only workmen's compensation and about a fourth deducted only social security benefits. The remain 11 Although benefit levels for both normal and disability retirement have increased since the date of this survey, the relationship between the two, as discussed in this report, is still valid. 12 The actuarial equivalent of the accrued normal benefit is a benefit whose ultimate cost is expected to be equal to that of the normal benefit. ing fourth deducted both. The 1965 amendments to the Social Security Act have limited the concurrent receipt of social security disability benefits and workmen's compensation to 80 percent of a worker's average monthly earnings credited to his social security account before he became disabled. Levels of Benefits Workers forced into retirement because of total disability who qualified for social security benefits usually receive the same amount of benefits as they would be entitled to at normal retirement ages. However, because some plans reduced benefits on account of age (i.e., provided the actuarial equivalent 12 of the accrued normal benefit), benefits for all covered workers were somewhat lower than the corresponding average normal retirement benefits. On the other hand, workers who qualified for disability benefits under a private plan but not under social security would receive substantially higher plan benefits, on the average, than those provided for under normal retirement provisions. The large benefits payable under such circumstances by many negotiated single employer plans in the automobile, steel, and rubber industries largely account for the difference. Chart. 1. Distribution of Monthly Disability Pension Benefits for Workers Earning $4,800 Annually, at Selected Service Levels, by Eligibility for Social Security To compare disability retirement benefit levels among plans and to relate the levels of benefits to predisablement earnings, illustrative benefits were computed (under the same conditions as those for normal retirement except that disability retirement was assumed to be at age 60) 13 for annual earnings of $3,600, $4,800, $6,000, and $8,400 14 at service intervals of 10, 15, 20, 25, and 30 years. Monthly social security benefits were assumed to be $105 for average earnings of $3,600 and $127 for average earnings of $4,800 or more. 15 Because many private plans keyed the benefit to the receipt of social security benefits, the computations were made under two alternative assumptions: (1) The worker receives both plan benefits and social security benefits, and (2) the worker receives only plan benefits. However, because many workers accumulated pension credits under both past service and current service formulas, these computations do not represent the amount of benefits workers would have received had they retired at the time of this study. Medians and quartiles are based on the array of worker coverage rather than the number of plans because of the large size differences among plans. For workers qualified for private plan benefits as well as social security benefits, the distributions of disability benefits exhibited the same characteristics as those for normal retirement, e.g., benefits shifted upward when both earnings and service increased (chart 1). Like increases in normal benefits, increases in disability benefits were, on the average, less than proportionate to increases in earnings and service, with the consequence that the lower paid and short-service workers fared relatively better than higher paid and long-service workers. Although disability benefit formulas were usually the same as those for normal benefits, they provided, on the average, about $5 to $10 a month less, chiefly because some plans provided the actuarial equivalent of their normal benefits for disability retirement at age 60.16 Median monthly benefits under the assumed conditions ranged from $28 17 at the $3,600, 10-year level to $125 at the $8,400, 30-year level (table 1). The uniformity of median benefits at the lower earnings and service levels results from uniform minimum benefits payable at those levels. The proportion of earnings replaced by private plans generally declined as earnings increased. For workers at the 25-year service level, for example, median benefits would replace about a fifth of previous earnings at the $3,600-a-year earnings level and about a seventh at earnings levels of $6,000 a year and above. Assumed maximum social security disability benefits would amount to 35, 31.8, 25.4, and 18.1 percent of the average annual earnings of $3,600, $4,800, $6,000, and $8,400, respectively. Chart 2 shows that benefits were both greater and more widely dispersed at the higher earnings and service levels. For example, the benefit for the 13 Retirement at age 60 was selected so that a maximum number of plans would be included in the computation; few plans were excluded because they had a higher requirement. Furthermore, Arthur E. Hess, in "Five Years of Disability Insurance Benefits; A Progress Report," Social Security Bulletin, July 1962, pp. 3-14, found that, prior to the 1960 amendments, more than 80 percent of the workers receiving social security disability payments were over age 50 when the onset of disability occurred (median age of 59). Later studies showed a decrease in the median age of applicants at the onset of disability. See Disability Applicants, 1962: Selected Data (U.S. Social Security Administration, Division of the Actuary, 1964) and Actuarial note 18. 14 While benefit levels could be computed for all earnings levels, under some plans the possibility of workers averaging $8,400 a year, or even $6,000, was remote. Since such plans often provided benefits that were unusually small in relation to those salaries, a certain degree of underestimation of benefits at the higher wage levels was inevitable. 15 These amounts were the maximums payable at the indicated earnings levels at the time of the study; they were increased by the Social Security Amendments of 1965. 18 At age 60, the actuarial equivalent of a benefit payable at 65 is about 66 percent. Because few workers belong to plans that provide disability benefits for 10 years or less of service, median benefits for workers earning $6,000 a year or less reflected the amounts provided by the Automobile Workers' plans, which, at the time of this study, was $2.80 per month times years of service. 210-767 0-66-3 middle 50 percent of the workers with average annual earnings of $4,800 and 25 years of service ranged from $46 to $75 a month. On the other hand, the range was $63 to $141 a month for a worker with annual earnings of $8,400 and the same amount of service. Combined benefits the sum of median private plan disability benefits and social security disability benefits-ranged from $133 to $252 or between 36 and 45 percent of predisablement earnings, about the same range as normal retirement benefits. Of this proportion, social security benefits accounted for from one-half to four-fifths of the combined retirement income, with retirement income at the low earnings levels mostly social security benefits. Workers Ineligible for OASDI Since not all workers qualified for disability retirement under a private pension plan will receive OASDI disability benefits, computations were made for the same plans assuming the worker would not qualify for social security benefits.18 As previously noted, some of the larger plans provided special disability plan benefits for workers not receiving social security benefits. It must be emphasized that these special disability pensions were usually temporary, and that the pension reverted to the regular disability formula computation if eligibility for social security benefits was established. These plans were, however, exceptional; most plans used the same disability formula, regardless of the worker's social security status. Under these assumptions, the distributions of monthly plan benefits (as shown in chart 1) were substantially higher and more widely dispersed than those for the same plans for workers eligible for social security benefits. For example, the benefit for the middle 50 percent of the workers ineligible for social security and having 25 years of service at retirement ranged from $63 to $125 for those earning $4,800 a year and $75 to $175 for those earning $8,400 a year (chart 2). In contrast, the range of benefits for workers qualified for social security disability benefits was, under similar circumstances, substantially less ($46 to $75 and $63 to $141, respectively). Median benefits for ineligible workers usually were about $30 a month higher, ranging from $56 to $150 a month as contrasted to a range of $28 to $125 for workers who qualified for social security disability benefits (table 2). Although representing a higher percentage of predisablement earnings (18 to 22 percent as compared with 9 to 18 percent), they were not high enough to offset the absence of maximum social security benefits. As a result, median benefits representeddepending upon length of service-only 35 to 60 percent (most often about 50 percent) of the combined amount provided by private plans and social security. In the absence of social security benefits, only long-service, lower paid workers could 18 A study of disability retirees in the automobile companies showed that a fifth of those qualified for the private pension did not qualify for social security. The recent liberalization of the disability definition in the automobile company plans should cause this fraction to increase. See Jerome Pollack, "Disability Insurance Under Social Security," in Earl F. Cheit and Margaret S. Gordon, Occupational Disability and Public Policy (New York, John Wiley & Sons, 1963), p. 75. receive as much as one-fourth or more of their predisablement earnings under the assumed conditions. On the other hand, a total retirement benefit (private plan plus social security benefit) provides from 22 to almost 60 percent of predisablement earnings to workers eligible for social security. As with normal retirement benefits, variations in benefits were attributable to differences in major plan characteristics. The method of financing continued to be the most important variable, as contributory plans, on the whole, provided higher pensions than noncontributory plans. The differential in benefits at each earnings level was also greater in contributory plans than in noncontributory plans, especially at the higher earnings levels. However, because of the prevalence of special disability benefits for workers ineligible for social security in the Automobile Workers' and Steelworkers' plans, the dispersion of benefits for ineligible workers was much smaller. -STANLEY S. SACKS Division of Industrial and Labor Relations The National Insurance (Industrial Injuries) Act allows representatives of workers and of employers in any industry to submit supplementary schemes to the Minister. Coal mining, as one of the most hazardous occupations in Britain, is so far the only industry to avail itself of this facility. A special fund raised by compulsory regular contributions from the National Coal Board as employer and from employees (and administered by their representatives) provides substantial supplementary benefits for coal miners suffering from industrial injuries or prescribed diseases. Adult workers can receive up to 35s. a week as a supplement to injury or disablement benefit. Lower rates, corresponding to the lower rates of benefit under the Industrial Injuries Acts, can be paid to persons under 18 who are without dependents. Payment of the supplement after the first 3 continuous weeks of benefit is subject to an income rule. -British Information Services, Rehabilitation and Care of the Disabled in Britain, Trends in European Apprenticeship THE EMPLOYMENT OF YOUTH is becoming more of a problem in Europe as greater numbers of young people enter the labor force each year. All of the countries recently have increased their emphasis on basic education; some have added 1 year of compulsory schooling. The traditional age for labor force entrance is affected by the rise in the legal school-leaving age and by the increase from 8 to 9 years in the amount of required schooling. But most European young people still leave school before completing their secondary education. A research team from the International Vocational Training Information and Research Center (CIRF) and other sections of the Human Resources Development Department of the International Labor Organization (ILO) 1 investigating practices and trends in European apprenticeship found that the prime aims of the apprenticeship programs are: The protection of youths against substandard training and the disruption of established wage standards through the use of lower paid apprentices; the extension of general and technical education of youth to assure continued advancement; and the provision of vocational training. The newer concepts of apprenticeship call for a training period for a minimum of 3 years to give the youth time to grow from adolescence to adulthood and to bridge the transition from school to working life. The essential nature of European apprenticeship programs is not new and the basic principles have gained overall acceptance. Apprenticeship practices are internationally more standardized than they were 30 years ago. All apprenticeship training, both theoretical and practical, is now given in almost all countries within the hours of a normal work week. The details of the apprenticeship, such as trade regulations, trade descriptions, standards of training, and programs of examinations and methods of control, are spelled out in the written contract. The apprenticeship contracts are regulated by public authorities and employers' and workers' association representatives, as they have been for many years. In many occupations the training programs and their administration have changed little over the years in spite of rapid technical, social, educational, and economic changes. Forces outside the apprenticeship systems are bringing about changes which influence apprenticeships. Because there has been a shortage of young people in all countries until recently, employers have been willing to train apprentices in spite of the high costs. The population explosion has found the middle and secondary schools lacking space for a large proportion of European young people who wish to enter. Thus, a majority of all school-leavers in Europe who can qualify go into apprenticeship; only a relatively small proportion are willing to go straight from school into employment without undergoing some form of recognized training. In Germany, over 89 percent of all school-leavers under 18 years old go into apprenticeships of 1 to 32 years; in Switzerland, it is 68 percent of the boys and nearly onethird of the girls. The dropout rate for apprentices is insignificant in all countries. Within the rigid, traditional framework of the apprenticeship, dynamic and rapid changes in training are taking place to meet technological and other changes in the companies. Small artisan and retail shops are decreasing. Middlesized and large-scale organizations are growing in numbers. Many industrial and commercial establishments with little interest in apprentices before World War II now train the majority of them. Apprenticeships are becoming concentrated in a small number of trades and the training received no longer necessarily determines the future occupation of the apprentice. Changes in Career Structures Because of technological changes, many trades are becoming dead end. Industrial and commercial apprentices have lost their close connection with the trade. Only a small proportion of those who complete apprenticeships remain as skilled 1 The investigation, conducted in 8 European countries (Austria, Czechoslovakia, Denmark, France, the Federal Republic of Germany, the Netherlands, Switzerland, and the United Kingdom), is reported in European Apprenticeship (Geneva. International Labor Organization, International Vocational Training Information and Research Center, 1966), CIRF Monograph, Vol. 1, No. 2, prepared for the U.S. Department of Labor, Manpower Administration. This is 1 of 3 comparative studies of manpower policy administration discussed in the 1966 Report of the Secretary of Labor on Manpower Research and Training Under the MDTA (U.S. Department of Labor, 1966), Pt. IV, Manpower Research Programs, from which this excerpt is taken. |