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(The basic provisions of the Social Security retirement and survivorsinsurance program have been in place for more than a half-century;the disability program is now over three decades old; and the Medi-care program is rapidly approaching its 25th anniversary. It is not sur-prising that many of today’s SSA employees, while very familiar withthe title II provisions, know relatively little about the history and ra-tionale behind these programs. This series of articles will, therefore,examine the roots of the Social Security program in America.)

It was not that long ago, back toAmerica between the First and Se-cond World Wars. It was a time wi-thin memory for most of ourbeneficiaries, a time when a num-ber of our coworkers-those nowin their 50s and 60s-were them-selves born.

But, in looking back, the eraseems farther away than twogenerations. The photos of the fa-mous from that period seem datedand quaint-Charles Lindbergh,Babe Ruth, Herbert Hoover, MaeWest, Bobby Jones, John Dil-linger, Charlie Chaplin-and themajor events of the time evokeonly memories from old historytexts-the Teapot Dome Scandal,the Bonus Army, the Crash of ‘29.

Even many of the commonplaceevents of life then would be consi-dered unbelievable today. Infantmortality was high-with 67deaths per 1,000 live births. Near-ly as many people died of tubercu-losis as of cancer. The averageworking wage in 1930 was only 56cents an hour. The ImmigrationAct of 1924 banned entry into thecountry by persons of “non-Caucasian stock.”

Of more germane importance tous at SSA was the state of socialinsurance at that time. The needsand care of the elderly, of widowsand their children, of the blind anddisabled were largely left to chari-ties or to local governments-usually counties. And there wasnot enough money to do much atall.

Old-age insuranceMen did not retire. They worked

until they were fired, died, or gottoo sick to show up for work. Fewowned homes. Fewer still had lifeinsurance policies. Most lived withchildren.

In fact, a lack of family distin-guished the old people who endedup in poor houses from those who14 OASIS/SEPTEMBER 1988

escaped the poorhouse.The word “poorhouse” itself has

now passed from the vocabulary ofmost Americans. It is a wordwithout context for us and con-jures up no fears. But is was notalways so. And it is only necessaryto know what the poorhouse waslike to understand why.

Harry Evans wrote in 1926 that“the poor farm is our humandumping ground into which go ourderelicts of every description. Liv-ing in this mess of insanity anddepravity, this prison place forcriminals and the insane, areseveral thousand children andrespectable, intelligent old folks,whose only offense is that they arepoor.”

What had been the FederalGovernment’s response to theplight of the elderly?

It was by and large a policy ofbenign neglect. The number ofelderly Americans was compara-tively small-about 5 million outof a population of about 110 mil-lion in 1920-and most weretaken care of by their families.Too, the under-5 year old popula-tion of the country was twice thesize of the over-65 population, andthe efforts of most social reform-ers were directed first toward or-phans laws, child-labor laws, andimproved schooling opportunities.

At the local levels, governmentwas beginning to take someresponsibility for insuring ade-quate provisions for the aged.

Arizona and Alaska passed thefirst aid to the aged laws in 1915(but the Arizona State SupremeCourt then declared its law uncon-stitutional).

Frances Perkins is widely credit-ed with development of the origi-nal proposals for old-age andunemployment insurance in thiscountry. She spoke at SSA in1962 and talked about the impetus

for creation of the original SocialSecurity program.

“I’ve always said, and I still thinkwe have to admit, that no matterhow much fine reasoning therewas about the old-age insurancesystem and the unemployment in-surance prospects-no matter howmany people were studying it, orhow many committees had ideason the subject, or how many col-lege professors had written theseson the subject- and there were anawful lot of them-the real rootsof the Social Security Act were inthe Great Depression of 1929.Nothing else would have bumpedthe American people into a socialsecurity system except somethingso shocking, so terrifying, as thatDepression.”

By 1932, 40 percent of thecountry lived in poverty. Ms. Per-kins said that “Nobody could get ajob. The grocer didn’t employyoung boys to deliver goods any-more. He couldn’t afford to. Thegrocer himself finally wentbankrupt and closed up. It went onlike that ail the time. One thingled to another. . . .”

Ms. Perkins credits the easy pas-sage of the original Social SecurityAct to the politicians’ fear ofother, competing radical “plans”to aid the unemployed, elderly,and other unfortunates. “When Igot to my office as Secretary ofLabor in 1933,” she said, “I founon my desk over 2,000 plans. . .for curing the Depression.”

Most prominent among theplans advanced at the time wasthe Townsend Plan. The plan wasdeveloped by an out-of-work66-year-old medical examiner inCalifornia. It called for every re-tired man and woman over 60years of age to get $200 a mofor the rest of their lives. (Thisjust slightly below the averagelary of a man working a 50-hourweek in manufacturing and mo

than double the weekly wage forunskilled labor.) There was noneeds or property limitations re-quirement in order to receivethese payments. The beneficiariesof the money would be required tospend every dime within 30 days.This would then create jobs.

Ms. Perkins said that Townsend“was sorry for himself and theother old people, so he thought ofhis plan and started us allthinking.

“In particular, he startled theCongress of the United States, be-cause the aged have votes. Evictedwomen and their children had very

The reason why

In the course of going about ourdaily work, it’s sometimes easy toforget the “why” of things-thereasons for the many provisions ofthe Social Security law. Yet thisunderstanding is important to oureffectiveness as employees. in thisseries, OASIS provides answers tosome basic questions about SocialSecurity.

Q. Why is a compulsory, con-tributory Social Security systemneeded?A. A system of contributory SocialSecurity ensures orderly provisionfor the hazards of old age, disabili-ty and death. By making it com-pulsory and by spreading the riskamong millions of people, thosewho do qualify are able to obtainmuch higher benefits than wouldbe possible if the system werevoluntary. The experience ofvoluntary systems-in other coun-tries and in the private sector-shows that many people who needthe protection do not enter suchplans voluntarily.

few votes. If the unemployed didn’tstay long enough in any one place,they didn’t have a vote. But theaged people lived in one place andthey had votes, so every Congress-man had heard from the TownsendPlan people.”

Ms. Perkins said that againstthis background the Roosevelt Ad-ministration was able to fashion aSocial Security Act that garneredwide support. Two of the majorprovisions of the original SocialSecurity Act dealt with the aged-Old-Age Assistance (needs-based),and Old-Age Insurance (the con-tributory pension system.)

Q. Why not pay everybody a flatbenefit instead of varying thebenefits with the amount ofwages and self-employmentincome?A. In keeping with the social insur-ance aspects of the program, thelow-paid worker receives a higherbenefit proportionate to the taxeshe or she paid. To achieve somedegree of individual equity,however, the program does payhigher benefits to those who havepaid more taxes into the system.

Q. Does the young worker get hismoney’s worth from SocialSecurity?A. To assess the overall value ofSocial Security, one must remem-ber there is significant disabilityand survivors protection, as well asretirement benefits at age 62. Ayoung worker’s family has valuableprotection in the event of the wor-ker’s disability or death. Even asingle worker has disability protec-tion, which would be very costly ifpurchased through a private insur-ance company. In many cases ayoung disabled worker receives ina few months more in benefitsthan he or she paid in taxes overthe course of several years. Simi-

The Old-Age Insurance provi-sions represented a moderate andvery long-range solution to theproblems of destitution among theaged. Firstly, no monthly benefitswere to be paid until 1942 (6 1/2years after passage) with the mini-mum benefit being $10 permonth. To qualify for as much as$44 monthly a worker would haveto earn $3,000 per year for at least10 years. Monthly benefits wereonly to be payable to the retiredworker aged 65 or more-none toany dependents of a living or de-ceased worker.

Also, workers aged 65 or older

larly, the value of survivors protec-tion may be well over $100,000 inthe case of a deceased worker withyoung surviving children.

And, it must be rememberedthat the retirement protection pro-vides a firm income base uponwhich the young worker can beginto build a retirement income plan.

Q. Is the goal of social insuranceonly to combat poverty, or is itintended to provide insurance in-come for workers at all incomelevels?A. Social Security has always beenmore than a program directed atthe problem of poverty. It servesnot only low-income people, butalso provides a base on whichmiddle-income and higher-incomeworkers can build protection forthemselves and their families. It isimportant that people be helped tolive at levels above a minimumsubsistence. Our social insurancesystem helps people do this bypaying a benefit on past earningsand by providing a base uponwhich to build additional protec-tion with savings and other in-vestments. 0

16 OASIS/SEPTEMBER 1988

were not covered by the SocialSecurity Act. Those over 65 whenit became effective for taxation in1937 were excluded. Those under65 on January 1, 1937 but who at-tained 65 before January, 1942were covered but could not be-come entitled to monthly benefits.Instead, upon attainment of age65, they received only a lump-sumpayment equal to 31/2 percent oftheir covered earnings. Thus, themillions of aged poor at that time,plus all those aged 58-64, couldreceive no benefit from the Old-Age Insurance provisions.

The Old-Age Assistance pro-gram was considered as an inter-mediate solution to economicneed but with immediate impact.Benefits were payable to needypersons aged 65 or older uponpassage of the Act. Initial monthlypayments per individual rangedfrom a pittance of $3.58 in Missis-sippi to $31.29 in California. Theprogram was expected to phaseout as the Old-Age Insurance pro-gram matured.

The vote was 371 to 33 in theHouse and 77 to 6 in the Senate.“One could hardly believe that(such a large margin) was possi-ble,” Ms. Perkins said.

Of course, before the first SocialSecurity benefits were paid in1940, the Social Security Act wasamended to included retirementbenefits for the worker’s spouse,child’s benefits, widow’s benefits,and benefits for widowed mothers.Also, workers over age 65 were nolonger excluded from covered em-ployment; this provision was effec-tive retroactive to January 1,1939.

In the next OASIS article in thisseries, we will look at the need for,and the history behind, survivorsbenefits. El

Joe’s a jack-of-all-trades

“Your dedication to serving yourcommunity and your fellow manhas helped to revitalize the spiritof voluntarism in our Nation. Icommend the way you haveshared your time and talents,” saidPresident Reagan in congratulatingJOE MARCI for winning the 1987President’s Volunteer ActionAward.

Joe, Insurance Programs BranchChief, Denver Regional Office,spends 15-20 hours a week involunteer activities aimed towardthe community’s youth. As afather of four-three girls, ages21, 17, and 11; and one boy, age15-Joe says that “I became avolunteer because my children par-ticipated in so many projects that Iwanted to give the sponsoring or-ganizations a helping hand.

“I remember that when I was ayoungster, I played little leaguebaseball and many people gavetheir time to help me. Giving mytime and assistance today is myway of repaying them.”

Joe added that his wife Kathy isalso active in youth projects. ‘Sheis president of the elementaryschool’s PTA and the ‘chief fun-draiser’ for the local high school.We usually work on fundraisingprojects together.”

Joe applies his talents to a vari-ety of organizations. His activitiesinclude coaching youth softball,directing youth baseballsoftballleagues, serving as an officer witha Denver Optimist Club, and help-ing with the Special Olympics.“My work with the Optimists in-cluded managing and coordinatingthe sale of Christmas trees. Overthe years we’ve raised hundreds ofthousands of dollars, which wecontributed to community serv-ices.”

One of Joe’s favorite volunteeractivities is the “Senior CitizenPaint-a-Thon Program.” Joe ex-plains: “Once a year between 80

and 100 business and other or-ganizations each select a low-income senior citizen whose homeis in need of painting and smallrepairs.

“On a designated day, membersfrom each participating organiza-tion report for work at the homeselected. They paint the house, dominor repairs, perform yardwork-whatever is needed. It’s afun day, and it gives me a greatsense of accomplishment.”

Joe serves on the boards ofdirectors for the Denver BowlingAssociation, the Young AmericanBowling Alliance, and the CatholicYouth Recreation Associations.“These groups sponsor events forover 10,000 youngsters eachyear,” he said.

Of his work with Special Olym-pics, Joe says, “When I see theyoungsters doing their best tocomplete a race and the smile thatcrosses their faces when they suc-ceed, I feel great.”

The Denver Region presentedJoe with a Certificate of Apprecia-tion for his service to the commu-n i t y -which Regional CommissionerLeza Gooden (pictured above )called“a model for all Federal em-ployees. I can point to your servicewith pride as an example of theleadership Social Security em-ployees take in helping to maketheir communities a better placeto live.” n

OASIS/SEPTEMBER 1988 17