Social Security at its Beginning

Social Security at its Beginning

Let’s go back in time to a 10-year period in our country most of us heard of but we don’t know much about. During this time, the impact on our families was tremendous.

It was

The Great Depression.

The Great Depression lasted for 10 years from 1929 to 1939 and caused a tremendous upheaval in the lives of most Americans.

  • 25% of adults were unemployed.
  • Those who were lucky enough to work had their hours reduced and their pay cut.
  • Women started to enter the workforce to help their families get by.
  • Children quit school and went to work to help their families survive.
  • In urban areas, people started growing small gardens to provide vegetables and food for their families.
  • Many marriages were strained because of financial crises.
  • The suicide rate among men climbed dramatically.

In 1935 the annual median income in the United States was $1,368.  Just think about that. It’s. . .

. . . A Whopping $26.31 a Week and $0.66 an Hour.

How long could you survive on $26.31 today? The sad part is $1,368 was the annual median income. Many people earned less than that.

One group severely affected by the Great Depression were older citizens – those who no longer were able to work.  Most had no pensions. Social Security did not exist.  Their savings suddenly disappeared and they had no way to provide for themselves and their spouses.

In most times, children jump in and help their older parents out. That wasn’t the case back then. Adult children were struggling to provide for their own families and had no way to help mom and dad out.

These Older People Could Not Go Back to Work

Who would hire an older person when there were so many younger people to choose from? If they did get a job, they would be depriving younger men of money they needed for their families.

The poverty rate among older people quickly soared to 50%. They definitely needed help.

Local organizations tried to help out.  However, very few were able to support them and the help they could give was limited.  Local and state governments could not help because they had limited funds.

Something had to be done and no one else was able to do it.

The Federal Government Had to Step In

In 1935, congress passed the Social Security Act. This Act provided for the payment of old age benefits to older people. It has continued until today.

During their working years, each person was required to pay money into Social Security. The amount they paid was matched by their employers. If they were self- employed, the amount they paid was higher because there were no employer contributions.

To qualify for Social Security benefits, each person had to work a certain specified period of time.

In 1935, people could not receive Social Security benefits until they were 65 years old.   Benefits were paid to each person until they died.

From the start of the program in the 1930’s until 1940, Social Security Benefits were paid in a lump sum once a year.  In 1940, that changed. Social Security started to pay benefits monthly. The first check was sent in January of 1940. That was for $22.54 and was paid to a woman living in Vermont.

Interesting Things You Need to Know

Here are some interesting things you need to be aware of.

First, life expectancy was not as long in 1935.  A white male could expect to live 61 years.  A white woman could expect to live to 65. African Americans had shorter lives.   For an African American male, the average life expectancy was 51.1 years and for an African American woman it was 55.5.

Let’s compare that to life expectancy today.  The last year there are statistics on this is 2010. In 2010, the average life expectancy for a white male was 76.5 years.  For a white woman, it was 81.3. For an African American male, the average life expectancy dropped to 71.8 years. It was 78.0 for an African American woman.

Why Was Life Expectancy So Important Back in 1935?

The minimum age a person had to be to start to receive Social Security benefits was 65.   The only large number of people expected to reach that age back then were white women. Very few others were ever going to reach it and receive benefits.

Another interesting thing is only about 50% of people reaching 65 back then were entitled to receive benefits. Those who were not covered were:

  • Agricultural and domestic service workers
  • Teachers, librarians and people working for state and local governments
  • People working for non-profit organizations
  • People working for the Federal Government, and
  • Those who didn’t work full time or only worked sporadically.

The reason those working on farms or in domestic services were not covered was simply that the people who wrote the law felt it would be too difficult for the Social Security Administration to track how much money these people made.

Although it is not documented, another reason agricultural workers may have been excluded initially is that in the 1930’s, over 40% of Americans still lived on farms.  The people drafting the law may have felt those over 65 may have been able to support themselves with what they raised on the farms.

If you go back and research the start of Social Security, you will find articles that say the reason agricultural and domestic workers were excluded initially was that in the South, most of these workers were African Americans.

To get them to vote for the Social Security Act, those who wrote the law had to make these concessions to congressmen and senators from the Southern states.

One concession was to bar African Americans living in the South from receiving Social Security benefits.  Since most worked on farms, farm workers were excluded.

This was not correct.  If you look more closely into this, you will find that many of the congressmen and senators from Southern States in the 1930’s were more liberal than those from other areas of the country. The real reason agricultural and domestic workers were excluded was because some people felt that it would have been very difficult to determine how much Social Security tax was due from each worker and collect it from them and their employers.

Teachers, librarians and people working for state and local governments were excluded because it could not be determined if the federal government had the power to tax state and local governments.

People working for Non-Profit organizations were excluded because it was felt it would be difficult to determine the amount of tax due and to actually collect it.

People working for the Federal Government had their own pension plan, the Civil Service Retirement system, which was created in 1920.

Changes to the Social Security Law in the 1950s

Many changes were made to the Social Security Law in the 1950’s. Social Security coverage was extended to agricultural and domestic workers, teachers, librarians, people working for state governments and people working for non-profit organizations.

Many People in the 1930’s Didn’t Like Social Security

When the law went into effect, the federal government started to collect the tax immediately.  That was only 1% of the person’s wages. It was some time before the first benefits were paid.

Remember – this was in the midst of the depression. Money was tight. Most families were struggling to survive. Even though a worker only had to pay 1%, that was money being taken away from them – money which they could use for food.

Many resented this, especially since they had no guarantee the Federal Government would follow through and pay them the money they said they would when they turned 65.

Since 1935, various revisions have been made to the Social Security law – most for the better.  We frequently hear threats that Social Security benefits may be reduced. We also hear that our children or grandchildren may never have the opportunity to collect a dime in Social Security benefits.

Hopefully that will never happen.

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If you have any comments on what you have read in this post, please email them to me. Also – if you have any ideas about subjects you would like to see discussed in future posts, please send me an email and let me know. My email address is bob.ooablog@gmail.com.