Throughout history, societies have grappled with ensuring economic security for their people. From ancient stockpiles of olive oil to medieval feudal systems, communities have devised various methods to buffer against life’s uncertainties: unemployment, illness, disability, old age, and death. These challenges to economic stability have been universal, prompting diverse solutions across cultures and eras. But how did these informal and localized systems evolve into the formal, nationwide safety net we know today as Social Security? And crucially, When And Why Was Social Security Started in the United States? This article delves into the historical context, exploring the traditional sources of economic security, the societal shifts that necessitated change, and the pivotal moments leading to the establishment of Social Security in 1935. Understanding the journey to Social Security reveals not just the program’s origins, but also the evolving relationship between individuals, communities, and the government in addressing fundamental human needs.
Traditional Roots of Economic Security: Pre-Social Security
For millennia, economic security was a deeply personal and localized affair, relying on resources readily available within immediate communities and families. Ancient Greeks, for example, recognized the enduring value of olive oil – a nutritious and storable commodity. Amphorae filled with olive oil served as a personal reserve, a buffer against hardship and scarcity. This asset-based approach, stockpiling resources for lean times, represents a foundational strategy for economic security across many early societies.
In medieval Europe, the feudal system offered a different, albeit hierarchical, structure of economic support. Feudal lords held responsibility for the economic well-being of the serfs who toiled on their estates. This system, while offering a degree of security to serfs, was contingent on their ability to work and the lord’s continued power. Alongside feudalism, the concept of formal charity began to emerge, marking an early step towards institutionalized aid for the vulnerable.
Family and kinship ties have always been a cornerstone of economic security. Mutual responsibility among family members, particularly for the aged and infirm, provided a crucial safety net. Land ownership, too, offered a tangible form of security, especially in agrarian societies, providing sustenance and a means of livelihood.
These traditional pillars – assets, labor, family, and charity – formed the bedrock of economic security for centuries. However, as societies grew more complex and industrialized, these informal systems began to show their limitations, paving the way for more formal, organized approaches.
The Rise of Formal Systems: Guilds and Friendly Societies
The transition from agrarian, localized communities to more complex, urbanized societies in Europe spurred the development of formal organizations designed to enhance economic security. Guilds, emerging in the Middle Ages, stand as perhaps the earliest examples of such formal systems. These associations, formed by merchants and craftsmen of common trades, acted as mutual aid societies. Guilds regulated production and employment, but also extended a safety net to their members, offering financial assistance during times of hardship, illness, or upon death.
Building upon the guild tradition, “friendly societies” arose in 16th-century England. Similar to guilds, they were often organized around trades or businesses, evolving into fraternal organizations and precursors to modern trade unions. These societies broadened the scope of economic security, introducing actuarially-based life insurance for their members. The Industrial Revolution witnessed a surge in the growth of friendly and fraternal organizations. By the 19th century, a significant portion of the English population – roughly one in nine – belonged to such a society, highlighting their importance in providing economic security during a period of rapid social and economic transformation. Notable early U.S. fraternal organizations, many still active today, include the Freemasons, Odd Fellows, Benevolent and Protective Order of Elks, Loyal Order of Moose, and Fraternal Order of Eagles, illustrating the transatlantic spread and enduring appeal of these mutual aid structures.
England’s “Poor Laws”: State Intervention Begins
As societies evolved, the state began to assume a more direct role in economic security, particularly for the most vulnerable. England’s “Poor Laws” represent a significant early example of state-led intervention. These laws, developed over centuries, were primarily focused on addressing poverty, which was increasingly recognized as a major threat to economic security.
The English Poor Law of 1601 marked a pivotal moment, codifying the state’s responsibility for citizen welfare in a systematic manner. It mandated taxation to fund relief efforts, differentiated between the “deserving” and “undeserving” poor, established local and community-controlled relief systems, and eventually led to the creation of almshouses for those receiving aid. This law, while groundbreaking in its acknowledgement of governmental duty, also reflected prevailing societal attitudes towards poverty, often viewing the poor with suspicion and implementing harsh measures alongside assistance. Despite subsequent modifications and “reforms,” the core structure of the Poor Laws, with their blend of assistance and control, was carried to the New World by English colonists.
Economic Security in Colonial America: Local Responsibility
Early English colonists in America brought with them the traditions and legal frameworks of their homeland, including the “Poor Laws.” The first colonial poor laws mirrored the English model of 1601, emphasizing local taxation to support the destitute, distinguishing between “worthy” and “unworthy” recipients, and maintaining local control over relief distribution. For nearly a century, standardized eligibility criteria and public institutions for the poor were absent. Local town elders held the authority to determine who deserved support and how it would be provided, reflecting a highly localized and discretionary system of welfare.
As colonial America grew, becoming more complex, diverse, and geographically mobile, the limitations of these localized systems became apparent. Increasing strain led to some movement towards state-level financing and the establishment of almshouses and poorhouses as a means of managing poverty. Throughout much of the 18th and 19th centuries, these institutions served as the primary providers of poverty relief. Conditions within poorhouses were deliberately made harsh to deter “dependency,” with recipients often facing loss of property, voting rights, freedom of movement, and even being forced to wear identifying markers of their status.
“Outdoor relief,” assistance provided outside of institutions, was viewed with distrust and skepticism, considered by many to be too lenient and potentially encouraging poverty. Despite this prevailing attitude, the cost of building and operating poorhouses, combined with the relative ease of distributing cash or in-kind aid, led to the gradual emergence of outdoor relief. Nevertheless, American attitudes towards poverty relief remained largely skeptical, and the role of government was kept minimal. Public funds accounted for a small fraction of total outdoor relief spending, even as late as 1915, underscoring the limited governmental safety net at the time.
Old Age in Colonial America: Seeds of Retirement Security
While economic security concerns individuals of all ages, old age and retirement presented a particularly acute challenge. Retirement, now often taken for granted, was not always a readily available concept, and establishing adequate systems for retirement security was a long and complex process.
Thomas Paine, a prominent figure of the Revolutionary War, stands out as an early advocate for retirement security. In his 1795 pamphlet, Agrarian Justice, Paine controversially proposed a public system of economic security for the nascent nation. His plan called for a 10% inheritance tax to create a fund that would provide a one-time stipend of 15 pounds sterling to each citizen at age 21 (to aid their start in life) and annual benefits of 10 pounds sterling to every person aged 50 and older, aiming to prevent old-age poverty. Paine’s vision, though ahead of its time, foreshadowed the principles of social insurance that would later underpin Social Security.
Civil War Pensions: America’s First Federal Social Security Program
Although the comprehensive Social Security system wouldn’t arrive until 1935, a significant precursor emerged in the aftermath of the Civil War. The immense number of widows, orphans, and disabled veterans created by the war necessitated a large-scale response. In fact, the proportion of the population facing disability or survivorhood was higher immediately after the Civil War than at any other point in American history. This crisis spurred the development of a generous pension program for Civil War veterans and their families, exhibiting notable similarities to later Social Security programs. (It’s worth noting that a national pension program for soldiers existed as early as 1776, even before the Declaration of Independence, and limited veterans’ pensions continued throughout the antebellum period. However, the Civil War pensions marked the first full-fledged pension system in the United States.)
The Civil War Pension program began soon after the war’s onset, with initial legislation in 1862 providing benefits for disabilities directly resulting from military duty. Widows and orphans were eligible for pensions equivalent to what their deceased soldier would have received if disabled. In 1890, the requirement of service-connected disability was removed, making any disabled Civil War veteran eligible. By 1906, old age itself became sufficient grounds for receiving benefits. By 1910, Civil War veterans and their survivors enjoyed a system of disability, survivor, and old-age benefits that, in some respects, mirrored the future Social Security program. Over 90% of surviving Civil War veterans were receiving benefits by 1910, although they represented a small fraction of the total US population. Civil War pensions even became a form of asset, attracting younger women to marry elderly veterans for the potential inheritance of widow’s pensions, some of which were still being paid as late as 1999!
Military pensions became a substantial source of economic security in the nation’s early decades. In 1893, military pension expenditures surpassed all other federal government spending at $165 million, accounting for 37% of the entire federal budget in 1894. However, these figures, while significant in terms of the federal budget of the time, overstate the program’s overall economic security impact, as the federal government’s economic role was then much smaller. Furthermore, Confederate soldiers and their families were excluded from Civil War pensions, leading to significant regional disparities in pension payouts. Despite the existence of this “social security” program for Civil War veterans since 1862, it did not extend to the general population. Broader social and historical developments were needed to pave the way for universal social security.
Company Pensions: A Limited Safety Net
Before the widespread adoption of company pension plans, some paternalistic companies offered older workers token jobs at reduced pay as a form of gradual retirement. A few provided retirement stipends, but these were discretionary, not guaranteed rights. Most older workers faced outright dismissal once their productivity declined.
One of the earliest formal company pension plans for industrial workers was established in 1882 by the Alfred Dolge Company, a piano and organ manufacturer. Dolge deducted 1% of worker pay, placing it in a pension fund, and added 6% annual interest. He viewed providing for older workers as a standard business cost, akin to accounting for machinery depreciation, arguing for “depreciation of his employees.” Despite Dolge’s progressive ideas, the plan proved largely unsuccessful due to its requirement of long, continuous employment with a single company, which was uncommon given labor mobility. The Dolge Plan, while pioneering, also became one of the first company pensions to vanish when the company failed a few years later.
The primary limitation of company-provided pensions was their scarcity. In 1900, only five US companies (including Dolge) offered pensions to industrial workers. Even by 1932, only about 15% of the workforce had potential employment-related pensions, and because these were often employer-discretionary, few workers actually received them. In 1932, a mere 5% of the elderly population were receiving retirement pensions, highlighting the inadequacy of company pensions as a widespread solution to old-age economic security before Social Security.
Coxey’s Army: Protesting Economic Insecurity
The Great Depression of the 1930s was not an isolated event. America had experienced depressions in the 1840s and 1890s. The depression of the 1890s, in particular, brought widespread unemployment, leading many Americans to realize that job loss, and its threat to economic security, could affect anyone in an industrialized society, regardless of their willingness to work. This realization fueled protest movements, the most notable being “Coxey’s Army.”
Jacob Coxey, an Ohio politician and industrialist, called for unemployed Americans to join him in a march on Washington in 1894. Tens of thousands began marching, but only about 500 reached Washington with Coxey. Coxey was promptly arrested for trespassing on Capitol grounds, and the protest dissipated. However, Coxey’s Army, though ultimately unsuccessful, symbolized the growing public awareness of unemployment as a systemic issue requiring government attention, foreshadowing the unemployment insurance component of the future Social Security Act. (Ohio, notably, would later play a key role in unemployment insurance development, with its state program serving as a model for the federal program, alongside Wisconsin’s.)
State Old-Age Pensions: Inadequate and Limited
The Great Depression dramatically worsened poverty among the elderly. By 1934, it’s estimated that over half of older Americans lacked sufficient income for self-sufficiency. Despite this widespread need, state welfare pensions for the elderly were almost non-existent before 1930. In the years immediately preceding the Social Security Act, a flurry of state pension legislation emerged, with 30 states having some form of old-age pension program by 1935. However, these programs were generally inadequate and ineffective. Only about 3% of the elderly actually received benefits, and the average benefit was a meager 65 cents per day.
Low participation rates stemmed from various factors. Many elderly were reluctant to accept “welfare.” Restrictive eligibility criteria excluded many needy seniors. Some states, despite having programs on paper, failed to implement them effectively. Many state laws allowed counties to opt out of pension programs. As a result, in 1929, of the six states with pension laws, only a fraction of eligible counties participated. While states began enacting laws without county options after 1929, by 1932, only seventeen states had old-age pension laws, none in the South, and the vast majority of funds were concentrated in just three states: California, Massachusetts, and New York. State-level efforts, while representing a step forward, proved insufficient to address the growing crisis of old-age economic insecurity.
America Changes: Demographic Shifts Undermine Traditional Security
Despite early attempts to address economic security, profound societal shifts beginning in the late 19th century fundamentally weakened traditional security systems in America. Four key demographic changes converged to create a new landscape of economic vulnerability:
- The Industrial Revolution: Transformed the workforce from primarily self-employed agricultural workers to wage earners employed by large industries. In an agrarian society, labor directly translated to subsistence. In an industrial economy, income became wage-dependent, making economic security vulnerable to external factors like recessions and layoffs, beyond individual control.
- Urbanization: Mass migration from rural farms to urban centers in search of industrial jobs. In 1890, only 28% of Americans lived in cities; by 1930, this doubled to 56%. 1920 marked a historic turning point: for the first time, more Americans lived in cities than on farms.
- Disappearance of the “Extended” Family: Urbanization contributed to the decline of extended families and the rise of nuclear families (parents and children). Extended families, encompassing multiple generations, provided inherent economic support for older or infirm members. Urban migration often separated families, leaving elderly parents or grandparents behind, weakening this traditional safety net.
- Increased Life Expectancy: Advances in healthcare, sanitation, and public health dramatically increased lifespans. Between 1900 and 1930, average lifespans increased by ten years – the most rapid increase in recorded history. This resulted in a rapid growth in the elderly population, reaching 7.8 million by 1935.
These converging demographic and social changes – industrialization, urbanization, nuclear families, and increased longevity – created an America that was older, more urban, and more industrial, with fewer people living on farms in extended families. Traditional economic security strategies were increasingly inadequate to meet the needs of this transformed society.
The Stock Market Crash & The Great Depression: Catalysts for Social Security
The fragility of the existing economic security systems was brutally exposed by the Stock Market Crash of 1929 and the ensuing Great Depression. On October 24, 1929, the New York Stock Exchange plummeted, triggering a financial panic. An initial attempt by bankers to stabilize the market temporarily failed, and the market crashed again the following Tuesday.
Within three months, the stock market lost 40% of its value, wiping out $26 billion in wealth. Major corporations suffered immense losses. The American economy spiraled into depression. Unemployment soared to over 25%. Approximately 10,000 banks failed. Gross National Product plummeted from $105 billion in 1929 to $55 billion in 1932. Business investment collapsed, and wages declined drastically.
The 1930s became a decade of unprecedented economic hardship. Millions were unemployed, homelessness surged, businesses and banks collapsed, and a majority of elderly Americans lived in poverty. This crisis fueled widespread demands for radical change and government intervention.
Radical Calls to Action: Alternative Visions for Economic Security
The desperation of the Great Depression era spawned numerous radical movements and proposals aimed at fundamentally restructuring economic security. These movements, often led by charismatic figures, offered diverse solutions ranging from wealth redistribution to alternative currencies and utopian pension schemes.
Huey Long and “Share Our Wealth”: Huey Long, Governor of Louisiana and later a US Senator, was a populist firebrand who advocated for radical wealth redistribution. His “Share Our Wealth” program proposed confiscating the wealth of the rich to guarantee every American family an annual income of $5,000, along with necessities like a home, job, radio, and car. He also called for limiting personal fortunes and annual incomes, and providing old-age pensions for everyone over 60. “Every Man a King” was his slogan, and his movement gained immense popularity, claiming millions of members across the nation by 1935.
The Townsend Movement: Dr. Francis E. Townsend, an unemployed 66-year-old physician, became a champion for the elderly. His Townsend Plan proposed a $200 monthly pension for every citizen over 60, funded by a 2% national sales tax. Recipients had to be retired, have no criminal history, and spend the pension within 30 days in the US. The Townsend Plan resonated deeply, and within two years, Townsend Clubs proliferated, advocating for its adoption as the national old-age pension system. Despite the passage of Social Security, the Townsend movement persisted for years, even influencing congressional votes as late as 1949.
Father Charles Coughlin and the Union for Social Justice: Father Charles Coughlin, a radio priest with a massive weekly audience, mixed religious rhetoric with political commentary. His Union for Social Justice movement blamed Roosevelt, international bankers, communists, and labor unions for the Depression. Coughlin advocated for currency inflation and nationalization of banks. His extreme views, including anti-Semitism and isolationism, eventually led to his censure by the Catholic Church. In 1936, Coughlin joined forces with Townsend and remnants of Huey Long’s movement to form a third party to challenge Roosevelt’s re-election.
Upton Sinclair and EPIC: Upton Sinclair, a renowned novelist and socialist, launched the End Poverty in California (EPIC) plan in 1933. His 12-point program aimed to overhaul the California economy, including issuing scrip currency, state-run barter enterprises, and taxing idle land. Point 10 proposed $50 monthly pensions for needy Californians over 60. Sinclair’s pension proposal was particularly popular, lowering the pension age, increasing benefit amounts, and easing eligibility requirements. The EPIC movement gained significant traction, and Sinclair became the Democratic nominee for governor in 1934. While he ultimately lost the election, his strong showing demonstrated the public’s desire for radical solutions to economic insecurity.
“Ham & Eggs”: One of the most unusual pension schemes was “Ham & Eggs,” promoted by Robert Noble. It proposed issuing special state currency (“scrip”) to pay $30 every Thursday to unemployed Californians over 50. Despite dubious economics and scandals involving its leaders, the movement gained a large following. In 1938, a Ham & Eggs proposition was narrowly defeated in a state-wide vote, showing the widespread public hunger for income security solutions, even for flawed plans.
Bigelow Plan: In Ohio, Reverend Herbert S. Bigelow proposed a state amendment guaranteeing $50 monthly income ($80 for couples) to unemployed individuals over 60. Funded by increased property and income taxes, the Bigelow plan garnered significant voter support before being defeated, highlighting the public’s desire for state-level pension solutions.
General Welfare Federation of America: Arthur L. Johnson founded the General Welfare Federation of America, criticizing the newly established Social Security Act as a “great American fraud” and other pension schemes as “crackpot.” Johnson’s plan proposed pensions for all citizens over 60 who were not gainfully employed, funded by a 2% gross income tax. While introduced in the House, it failed to gain traction, demonstrating the diverse range of proposed solutions and criticisms of existing programs.
Technocracy: Emerging from America’s fascination with technology, Technocracy was a movement advocating for engineers and technology experts to govern society based on engineering principles, replacing traditional politics and economics. Technocrats believed in “production for use” rather than profit and envisioned retirement at age 45 due to technological advancements. The movement, while intellectually influential, remained somewhat eccentric, even adopting numbered designations for members and rejecting standard maps, but surprisingly, Technocracy still exists in some form today.
These radical movements, while diverse in their specifics, shared a common thread: a deep dissatisfaction with existing economic security arrangements and a widespread desire for bold, government-led solutions to address the widespread insecurity of the Great Depression.
The Establishment Response: Alternatives to Radicalism
Faced with the rising tide of radical proposals, established political leaders recognized the need to offer viable alternatives to address the economic crisis and maintain social stability. Three general approaches emerged within the establishment: inaction, reliance on voluntary charity, and expanded welfare benefits.
The “Do Nothing” Response: Initially, many politicians and public figures believed the Depression was a temporary economic downturn that would self-correct. They advocated for minimal or no government intervention, believing in the economy’s inherent resilience. This view, prevalent in the immediate aftermath of the stock market crash, gradually waned as the Depression deepened, but it initially shaped the response to the crisis.
President Hoover’s “Volunteerism”: President Herbert Hoover, known for his pre-presidency success in international relief efforts based on voluntary partnerships, championed “volunteerism” as the primary solution to the Depression. He advocated for voluntary cooperation between government, business, and private giving, believing it could effectively address the crisis. While he implemented some limited federal relief measures, his core strategy relied on voluntary efforts, which ultimately proved insufficient. The fundamental flaw was that unlike post-WWI Europe reconstruction where the US economy was sound, the Depression had decimated American wealth, making voluntary charity an inadequate response to the scale of the crisis.
Expand Welfare: Even before the Depression, states had begun to grapple with economic security in an industrial economy, establishing workers’ compensation and state-level welfare programs, including old-age “pensions.” These state pensions, however, were welfare-based, requiring proof of need and often proving inadequate. The prevailing consensus in Congress favored expanding state-level old-age assistance programs, reflecting a continuation of existing welfare approaches.
The “New” Alternative: Social Insurance: The election of President Franklin D. Roosevelt in 1932 and his proposal for economic security based on social insurance marked a significant shift in the debate. Social insurance offered a “new” alternative, distinct from both radical overhauls and ineffective old approaches. Already established in Europe, social insurance promised a work-related, contributory system where workers would contribute to their own future security through taxes, offering a moderate yet active government response to the Depression. This approach contrasted sharply with both welfare dependency and radical systemic changes, positioning itself as a pragmatic and sustainable solution.
The Social Insurance Movement: A European Model for America
The Social Security program ultimately adopted in 1935 was rooted in the principles of “social insurance.” This intellectual tradition, originating in 19th-century Europe, represented a distinct approach to social welfare. Germany, under Chancellor Otto von Bismarck, pioneered social insurance in 1889. By 1935, when the US adopted Social Security, 34 nations had already implemented some form of social insurance, about 20 of which were contributory programs similar to Social Security. Social insurance emphasized government-sponsored efforts to ensure citizens’ economic security, becoming a politically viable alternative to radical solutions.
Social insurance, broadly defined, combines the “insurance principle” – pooling risk across a group – with a “social element” – shaping programs to meet broader societal goals, not just individual self-interest. It can cover various risks, from disability and death to old age and unemployment. While death, disability, and unemployment are readily understood as income-loss risks, the concept of old age or retirement as a similar risk was central to early social insurance theory. Retirement, in this view, creates income loss due to cessation of work.
Henry Seager, a Columbia University economics professor, was an early American proponent of social insurance. In his 1910 book, “Social Insurance, A Program of Social Reform”, Seager explained the principle of old-age security through social insurance: He argued that changing economic conditions were making reliance on family support for the elderly increasingly precarious, while voluntary saving faced new obstacles. He posited that “the proper method of safeguarding old age is clearly through some plan of insurance… for every wage earner to attempt to save enough by himself to provide for his old age is needlessly costly. The intelligent course is for him to combine with other wage earners to accumulate a common fund out of which old-age annuities may be paid to those who live long enough to need it.”
Theodore Roosevelt was another early American advocate for social insurance. In a 1912 speech to the Progressive Party convention, Roosevelt strongly endorsed social insurance, stating: “We must protect the crushable elements at the base of our present industrial structure…it is abnormal for any industry to throw back upon the community the human wreckage due to its wear and tear, and the hazards of sickness, accident, invalidism, involuntary unemployment, and old age should be provided for through insurance.” He successfully included a plank in the Progressive Party platform pledging to work for “The protection of home life against the hazards of sickness, irregular employment, and old age through the adoption of a system of social insurance adapted to American use.” These early voices helped lay the intellectual groundwork for the eventual adoption of Social Security in the US.
The Threshold of Change: 1934 and the Path to Social Security
By 1934, America was deeply entrenched in the Great Depression. Confidence in traditional institutions had eroded. The social and economic transformations initiated by the Industrial Revolution were irreversible. Traditional sources of economic security – assets, labor, family, and charity – had proven inadequate. Radical proposals for change proliferated. President Franklin Roosevelt, recognizing the urgency of the crisis and the need for a sustainable solution, embraced social insurance as the “cornerstone” of his response to economic insecurity. This set the stage for the creation of the Social Security Act and the reshaping of America’s social safety net.
The Social Security Act: Passage and Development (1935 Onward)
The Committee on Economic Security (CES): On June 8, 1934, President Franklin D. Roosevelt, in a message to Congress, announced his intention to create a Social Security program. He established the Committee on Economic Security (CES) via Executive Order, composed of five cabinet-level officials, tasking them with studying economic insecurity and developing legislative recommendations. The CES assembled a staff of experts and launched a comprehensive study of economic security in America, examining European social insurance models. In November 1934, the CES hosted the first national town hall forum on Social Security. Within six months, the CES produced a report and drafted a detailed legislative proposal. President Roosevelt emphasized the need for national action, stating in his message to Congress, “Security was attained in the earlier days through the interdependence of members of families upon each other and of the families within a small community upon each other. The complexities of great communities and of organized industry make less real these simple means of security. Therefore, we are compelled to employ the active interest of the Nation as a whole through government in order to encourage a greater security for each individual who composes it… This seeking for a greater measure of welfare and happiness does not indicate a change in values. It is rather a return to values lost in the course of our economic development and expansion…”
Passage of the Social Security Act: In January 1935, the CES submitted its report to the President, who introduced it to Congress on January 17. Hearings were held in the House Ways & Means Committee and the Senate Finance Committee. Despite some close votes in committees, the bill passed overwhelmingly in both houses. After a conference throughout July, the Social Security Act was finalized and sent to President Roosevelt, who signed it into law on August 14, 1935. In his signing statement, President Roosevelt acknowledged the Act’s limitations while emphasizing its significance: “We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
Major Provisions of the Act: The Social Security Act of 1935, while not a complete solution to all aspects of economic insecurity (disability and medical benefits would come later), established a wide range of programs. Beyond what we now know as Social Security (old-age insurance), it included unemployment insurance, old-age assistance (welfare for the aged), aid to dependent children, and grants to states for medical care. For the elderly, the Act had two key titles: Title I – Old-Age Assistance (state welfare programs for the aged) and Title II – Federal Old-Age Benefits (the new social insurance program). Title II, the core of Social Security, provided retirement income to workers aged 65 and older, based on payroll tax contributions during their working lives. Taxes were to begin in 1937, and monthly benefits in 1942 (later moved to 1940 by amendments). The social insurance program was designed as a long-term, contributory system, distinct from welfare, with Title I intended as a temporary relief measure that would eventually diminish as Social Security matured. It was also a moderate alternative to the radical proposals of the era.
The Social Security Board (SSB): The Act established the Social Security Board (SSB) to administer the new programs. The three-member board, appointed by the President, was initially composed of John G. Winant (Chairman), Arthur J. Altmeyer, and Vincent M. Miles. The SSB faced the monumental task of setting up the program, informing employers and workers, establishing field offices, and hiring staff. The first meeting of the Social Security Board took place on September 14, 1935.
Initial operations were hampered when the budget bill for the Act was blocked by a Senate filibuster in August 1935. The SSB had to borrow funds until Congress passed an appropriation in January 1936. The SSB began as an independent agency, later becoming part of the Federal Security Agency in 1939, and eventually evolving into the Social Security Administration in 1946.
Early Work: Social Security Numbers (SSNs): A crucial early task was registering employers and workers by January 1, 1937, for tax collection and benefit accrual. The SSB contracted with the Post Office Department to distribute application forms in late November 1936. Numbers were assigned at local post offices and processed in Baltimore, Maryland. John David Sweeney, Jr. of New Rochelle, New York, received the first SSN account number record. Grace Dorothy Owen of New Hampshire received the lowest number issued: 001-01-0001. Over 30 million SSN cards were issued through this initial process. The first Social Security field office opened in Austin, Texas, on October 14, 1936.
Trust Funds: FICA taxes began being collected in January 1937, deposited into dedicated Social Security Trust Funds, from which benefits would be paid. To date, trillions have been paid into and out of these trust funds, with reserves held for future benefits.
First Payments: From 1937 to 1940, Social Security paid lump-sum benefits, primarily to those who contributed but wouldn’t qualify for monthly benefits, offering a “payback” of contributions. Monthly benefits were scheduled to begin in 1942 under the original Act. Ernest Ackerman, a retired Cleveland motorman, was reportedly the first lump-sum benefit applicant, receiving 17 cents after contributing a nickel. Average lump-sum payments were around $58. In a 1938 radio address, President Roosevelt reflected on the program’s purpose: “Long before the economic blight of the depression descended on the Nation, millions of our people were living in wastelands of want and fear. Men and women too old and infirm to work either depended on those who had but little to share, or spent their remaining years within the walls of a poorhouse …The Social Security Act offers to all our citizens a workable and working method of meeting urgent present needs and of forestalling future need … One word of warning, however. In our efforts to provide security for all of the American people, let us not allow ourselves to be misled by those who advocate short cuts to Utopia or fantastic financial schemes. We have come a long way. But we still have a long way to go. There is still today a frontier that remains unconquered–an America unclaimed. This is the great, the nationwide frontier of insecurity, of human want and fear. This is the frontier–the America–we have set ourselves to reclaim.”
1939 Amendments: The 1939 Amendments fundamentally reshaped Social Security. They added dependents’ benefits (for spouses and minor children of retirees) and survivors’ benefits (for families of deceased workers), transforming Social Security from a retirement program for workers into a family-based economic security program. The amendments also increased benefit amounts and accelerated the start of monthly payments to 1940. The Social Security Board’s report recommending these changes stated: “It is impossible under any social insurance system to provide ideal security for every individual. The practical objective is to pay benefits that provide a minimum degree of social security—as a basis upon which the worker, through his own efforts, will have a better chance to provide adequately for his individual security.”
Monthly Benefits Begin: Monthly Social Security benefits began in January 1940, payable to retired workers, their spouses, widows, minor children, and surviving aged parents. Ida May Fuller of Ludlow, Vermont, received the first monthly retirement check on January 31, 1940, for $22.54. A legal secretary, she retired in November 1939 at age 65, lived to be 100, and collected a total of $22,888.92 in benefits, far exceeding her lifetime contributions of $24.75.
The Atlantic Charter and Internationalization: In August 1941, President Roosevelt and Winston Churchill issued the Atlantic Charter, a joint declaration of principles for a better future world. Among its eight principles was a call for social insurance. Former SSB Chairman John Winant, then US Ambassador to Great Britain, proposed the social insurance provision, which was readily accepted. While social insurance originated in Germany, the US, following World War II, became a leading model for nations developing social security systems, symbolized by the Atlantic Charter’s inclusion of social insurance.
1950 Amendments and COLAs: From 1940 to 1950, Social Security remained largely unchanged. However, the 1950 Amendments brought significant changes, increasing benefits for existing beneficiaries for the first time and substantially increasing future benefit values. This included the first “cost-of-living” increase. Ida May Fuller’s monthly check, for instance, increased from $22.54 to $41.30. By February 1951, Social Security retirees outnumbered welfare pensioners, and by August, average Social Security retirement benefits surpassed average old-age assistance grants, marking a turning point in the program’s role. These amendments reflected a growing recognition of the need to adjust benefits for inflation. Prior to 1972, benefit increases required special congressional legislation. The 1972 legislation introduced automatic annual Cost-of-Living Adjustments (COLAs) starting in 1975, based on consumer price increases, ensuring benefits kept pace with inflation.
Disability Insurance: The 1954 Amendments added a disability insurance program, further expanding Social Security’s coverage. Initially, a “disability freeze” protected workers’ records during periods of disability. In 1956, benefits were extended to disabled workers aged 50-64 and disabled adult children. In 1960, disability benefits were made available to disabled workers of any age and their dependents. By 1960, over half a million people received disability benefits.
Medicare and Further Expansion: The 1960s brought more significant changes. The 1961 Amendments lowered the eligibility age for men’s retirement benefits to 62 (matching women’s eligibility), increasing program participation. Disability benefit recipients more than doubled between 1961 and 1969. Most notably, the Medicare bill was signed into law in 1965, creating a health insurance program for Americans 65 and older, administered by the Social Security Administration. Medicare enrolled nearly 20 million beneficiaries in its first three years, significantly expanding SSA’s responsibilities and the scope of social insurance in the US. President Johnson, upon signing Medicare, stated: “Thirty years ago, the American people made a basic decision that the later years of life should not be years of despondency and drift. The result was enactment of our Social Security program. . . . Since World War II, there has been increasing awareness of the fact that the full value of Social Security would not be realized unless provision were made to deal with the problem of costs of illnesses among our older citizens. . . . Compassion and reason dictate that this logical extension of our proven Social Security system will supply the prudent, feasible, and dignified way to free the aged from the fear of financial hardship in the event of illness.”
Supplemental Security Income (SSI): In the 1970s, SSA took on administration of Supplemental Security Income (SSI). SSI federalized existing state-administered welfare programs for the needy aged, blind, and disabled, streamlining and standardizing assistance across the nation. President Nixon, in 1969, called for welfare reform, leading to SSI’s creation in the 1972 Amendments and assigning its administration to SSA due to the agency’s administrative expertise and national infrastructure.
1972 and 1977 Amendments and “The Notch”: The 1972 Amendments created SSI and automatic COLAs. They also increased benefits for certain beneficiaries and included provisions for minimum retirement benefits, Medicare expansion, and delayed retirement credits. However, the automatic COLA and wage adjustment mechanisms contained a flaw, potentially leading to unsustainable benefit levels. The 1977 Amendments addressed financing concerns by raising payroll taxes, increasing the wage base, slightly reducing benefits, and “decoupling” wage and COLA adjustments. These fixes, while restoring long-term balance, created “The Notch,” an unintended disparity in benefits between different birth cohorts, leading to ongoing political debate and protest.
Disability in the 1980s and 1983 Amendments: The 1980 Amendments focused on disability program work incentives and mandated periodic eligibility reviews of disability beneficiaries. These reviews became controversial and were halted by 1983. The 1984 Disability Benefits Reform Act modified disability program aspects. The early 1980s saw a short-term Social Security financing crisis. The Greenspan Commission was appointed to address these issues. The 1983 Amendments, resulting from the commission’s recommendations, included taxing Social Security benefits, covering federal employees, and gradually increasing the retirement age, aiming to restore long-term solvency.
Program Growth and Independence for SSA: From its modest beginnings, Social Security grew into a vital program, covering over 90% of workers and providing benefits to millions. By the early 21st century, over 50 million people received Social Security benefits, and millions more received SSI. Over time, bipartisan support grew for making SSA an independent agency. The Social Security Independence and Program Improvements Act of 1994, signed by President Clinton, finally established SSA as an independent agency.
Legislative Changes in the Late 1990s: The late 1990s saw legislative changes, including the Contract With America Advancement Act of 1996, which limited disability benefits for those whose disability was materially related to drug addiction or alcoholism, and the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (“welfare reform”), which ended AFDC entitlement and restricted SSI eligibility for non-citizens. The Ticket to Work and Work Incentives Improvement Act of 1999 aimed to encourage disability beneficiaries to return to work through vocational rehabilitation and support services. The Senior Citizens’ Freedom to Work Act of 2000 repealed the Retirement Earnings Test for beneficiaries at or above Normal Retirement Age.
Social Security in the 21st Century: President George W. Bush in the early 2000s made Social Security reform a priority, proposing personal savings accounts, but no major changes were enacted. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 added prescription drug benefits to Medicare, a major expansion of the program. The Obama administration’s American Recovery and Reinvestment Act of 2009 provided funds for SSA’s administrative budget and a one-time economic recovery payment to beneficiaries. Subsequent legislation during the Obama years addressed prisoner benefits and extended funding for work incentive programs.
In conclusion, Social Security’s journey from concept to cornerstone of American society is a long and evolving one. Social Security was started in 1935 with the passage of the Social Security Act, born out of the crucible of the Great Depression and decades of societal and economic transformation that rendered traditional forms of economic security inadequate. The “why” behind its creation is multifaceted: to address widespread economic insecurity, particularly among the elderly, in an increasingly industrialized and urbanized nation; to move beyond inadequate and stigmatized welfare systems towards a more dignified, contributory social insurance model; and to provide a safety net against the economic hazards of modern life. From its initial focus on old-age retirement benefits, Social Security has expanded significantly over the decades to encompass disability, survivors, and health insurance (Medicare), adapting to changing societal needs and becoming an indispensable element of American economic security.
