The Social Compact in the Twenty-First Century

No worker could ever be protected against all risks, but millions of workers in the first few decades after World War II could count on jobs paying decent wages and providing health insurance and defined pension plan coverage. As long as workers could hang onto their jobs until retirement age, a comfortably secure old age was in the cards. Relatively fewer workers have such assurances today. Through a review of the literature, this report takes a look at the social compact as it has existed, what it looks like at present, and the consequences of changes over time. It then analyzes employers’ and employees’ perspectives on the social compact and related issues based on data from two separate surveys.  

Employers and workers seemed to agree on certain elements of a social compact, but those had to do mostly with the basics of doing a good job and receiving an adequate salary. The American public, including employers, strongly agrees that employers and employees have certain responsibilities to and expectations of one another, and employers and employees tend to be in agreement about what the expectations are. Employees are expected to do a good job and give an honest day’s work, while employers are expected to provide their employees fair compensation and benefits and treat them justly.

One thing that is clear from the study is that both employers and employees had some very definite ideas about the importance of various employee benefits. Employees saw health insurance benefits as the most important benefit that employers can provide. Employers were more divided between health insurance and keeping skills current when it came to identifying the most important benefit.  

One of the more unexpected findings in the study involved the perceptions of who should have the largest role in paying for health insurance. The extent to which government, employers, or workers should play the largest role in paying for a benefit varied by benefit, but when it came to health insurance, both employers and employees overwhelmingly stated that it should be the employer. With the exception of health insurance for retirees, government was seldom seen as having the largest role in paying for the variety of benefits examined in the study.

If research on the social compact highlights anything, it is the continued importance of Social Security in promoting income security in the United States. Social Security is and will likely remain the mainstay of retirement-income support for most Americans. Given stagnation in private pension coverage, the shift from DB to DC plans, and a general lack of savings on the part of the American public, it is critical that Social Security be maintained as a stable DB program that provides guaranteed benefits for life to all who have contributed to the system and meet the qualifications for benefits.

Full Document (PDF)