Social Security Bulletin

Private social welfare expenditures, 1972-1988.

Private Social Welfare Expenditures, 1972-88

The private sector plays a significant role in financing social welfare programs in the United States. The growth of expenditures has steadily increased during the past two decades, influenced by a sharp increase in private pension payments. From 1972 through 1988, private social welfare expenditures climbed from $93.2 billion to $601.2 billion, an increase of 545 percent. Viewed as a proportion of the gross national product (GNP), overall private expenditures rose from 7.7 percent in 1972 to 12.3 percent in 1988. During the same period, public social welfare expenditures grew from 16.6 percent of GNP to 18.5 percent.

For purposes of this analysis, four major program categories of private sector expenditures are presented: Health, welfare and related services, education, and income maintenance (includes private pensions, sickness and disability benefits, and group life insurance). All four program categories experienced growth; as a proportion of GNP, income maintenance accounted for the most change, increasing from 1.3 percent to 3.9 percent from 1972 through 1988.

When 1988 expenditures in each category are compared with 1972 expenditures, income-maintenance spending experienced the largest increase - 1,087 percent - caused by a rise in private pension payments. Education expenditures showed the smallest increase - 317 percent. Private spending for health increased by 446 percent, and private spending for social welfare services increased by 532 percent. This article presents private sector expenditures by major category beginning in 1972 and relates these amounts to public social welfare expenditures and to GNP.

Private social welfare expenditures were $601.2 billion in calendar year 1988, representing 40.4 percent of the Nation's total social welfare expenditures, both public and private. Viewed as a share of gross national product (GNP), private expenditures were 12.3 percent and public expenditures amounted to 18.5 percent (table 1). Overall spending growth in the private sector is occurring at a faster rate than growth of GNP. [Tabular Data Omitted]

The private social welfare expenditure series was developed by the Social Security Administration (SSA) in 1955. Program data were published continuously through calendar year 1978, when the series was discontinued because of difficulties related to data collection and estimation.(1) In 1987, after a redesign of the methodology for estimating several of the components in the series, publication was resumed.(2) The purpose of the series is to provide estimates of private expenditures for social welfare programs in the United States and to make possible a comparison between public and private spending. The data indicates that the private sector plays an important part in financing the Nation's social welfare programs. The private sector is responsible for a large portion of health and medical care expenditures, as well as income-maintenance benefits in the form of employment-related pensions, group life insurance, and sickness payments. Financing educational and social services is also an important aspect of the private sector's role in supporting social welfare programs.

Information on public social welfare spending has been available since 1954, and continues to be published as a series in the Social Security Bulletin on a regular basis.(3) Data on private social welfare expenditures have been more difficult to gather over time than information on public expenditures. However, information on expenditures in the private sector is essential for a comprehensive understanding of spending trends in social welfare.

Private expenditures are grouped in four categories: Health and medical care, welfare and other services, education, and income maintenance. In 1988, the health and medical care expenditures category accounted for the highest portion - 52 percent, or $312.4 billion - of the overall total. Private health and medical care expenditures during the 1972-88 period increased 446 percent, compared with an increase of 545 percent for total private social welfare expenditures.

The welfare and other services category includes individual and family social services, residential care, child day care, recreation and group work, and job training and vocational rehabilitation services. …

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