Social Security’s 87th Birthday: 6 Things You May Not Know About the Program’s History
On Sunday, August 14, Social Security turned 87 years old. The U.S. government first instituted the program on the same date in 1935 to eventually offer retirement, disability and survivor benefits to Americans who needed help supplementing income when any of these life situations occurred.
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President Franklin D. Roosevelt, who signed it into law, famously stated, “We can never insure 100% of the population against 100% 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.”
Quite progressive in his policies, Roosevelt had long envisioned this kind of “social insurance” and relied on history to show its worth. Today, the program is still thriving and will see a huge boost in the coming months. Here’s more on Social Security’s birth story, from the SSA itself, and why it’s worth celebrating.
It Takes Cues from Past Civilizations
Though Social Security is a relatively modern concept, launched in 20th century America, there are hundreds if not thousands of years of foundation behind it. Relating to a historical term of economic security — in which some kind of earnings are guaranteed — this idea can date all the way back to the Ancient Greeks who stockpiled olive oil for future times of uncertainty or Medieval times when lords and serfs had a symbiotic relationship of providing work and keeping kingdoms thriving.
Farmland was also seen as security, deeded to future generations of families. Even life insurance could be seen as a form of economic security — it was one of the platforms of the friendly societies and fraternal organizations like the Freemasons that rose up after the Industrial Revolution. When the English began to colonize America, they also brought with them their system of Poor Laws that taxed the wealthy to provide for the less fortunate. In fact, Revolutionary War hero Thomas Paine was the first to promote a formal socialized retirement plan in 1795.
Moving Beyond Early Pensions
The first kind of Social Security America had seen came around the time of the Civil War when many soldiers were maimed or disabled, taking away from his family’s ability to earn their keep. The U.S. government instituted a pension to provide funds for the soldier’s family to help bridge the gap. It was such a hugely successful program that, by 1893, $165 million was allocated, and was the largest spending ever made by the federal government up to that point.
To help allow regular citizens to have these types of benefits as well, company pensions also started cropping up — many of which still exist today. When the Great Depression rolled around in the 1930s, individual states also started offering “Old Age Pensions” that provided benefits for seniors who were incapable of taking care of themselves financially.
By the time the Industrial Revolution rolled around, and people were not as much working for themselves on farmland but instead working for larger corporations, the government knew provisions had to be made to ensure economic security for the new paradigm of workers. Not only were people getting outside jobs, but they were also moving to the cities, separating from elders and living longer. And by the time the 1922 stock market crash and Great Depression came to be, America was facing its worst ever economic crisis, which yielded calls for more federal financial protections.
FDR to the Rescue
In 1932, President Franklin D. Roosevelt was inaugurated and with him came some radical new ideas known as his New Deal. One such change was shutting down welfare programs that were running dry, and, instead, proposing a social insurance system that was popular in Europe at the time.
The concept behind the program was that workers would pay taxes into a contributory fund that would benefit them when they retired. By pooling money on a communal scale, it mitigated the risk of catastrophe for individuals, especially after so many lost their life savings during the stock market crash, and provided funding for retirement, disability and even unemployment. Roosevelt had been espousing its benefits since as early as 1912 and when he came into office, he set the wheels in motion for its fruition.
In 1934 he rallied Congress and, by executive order, he created the Committee on Economic Security. After town hall meetings and much research, the Social Security Act was signed into law in 1935. A Social Security Board was also created to provide employers with government assistance on bookkeeping and instruction for launching the program. The board ended in 1946 and became the Social Security Administration we know today.
The Dawn of Social Security Numbers
Getting American workers registered and the program up and running brought forth Social Security Numbers. Today, every American is assigned one when they are born (and those from foreign nations who become citizens apply for one as well). But back in 1937, it was a Herculean effort by the government and U.S. Post Office to send out paperwork and get citizens to register.
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Over 30 million SSNs were distributed in that early time and quickly thereafter 150 Social Security field offices were opened across the country to help workers with any questions or needs, as noted by the SSA.
Social Security Has Changed Over Time
At the very beginning of the program, before tax money was vested into Social Security trust funds, lump sum payments were given out to the very first beneficiaries up until 1940. The first monthly payments went out in 1942.
In 1935, the original Social Security Act only benefited sole workers when they retired. However, amendments to the legislation in 1939 expanded benefits to families, with payments to spouses and minor children of retirees and surviving dependents paid out when a worker prematurely passed away.
In the early days of the program, benefits that were paid out were quite low as the Social Security trust funds were still being built up. By 1950, there were significant increases to payouts and the first COLAs or cost of living adjustments that nullified fixed amounts over the course of a lifetime but provided for regular automatic adjustments based on inflation.
Disability benefits also started to become part of the Social Security program in 1954 though initially there were age caps and terms to abide by. By 1960, President Eisenhower steered the expansion of benefits to disabled individuals of any age as well as to their dependents. Medicare also became part of the program in 1965 under the tenure of President Johnson.
By the 1980s, Social Security was starting to appear not financially sound and President Reagan appointed a panel to look into what revisions could be made for the long-term sustainability of the program. Among the many adjustments, one of the biggest was the increase of eligibility age, eventually phasing in a two-year delay to age 67 to receive full benefits, as opposed to the earlier age limit of 65.
Social Security Today
In modern times, Social Security has become a cornerstone for American workers. According to the SSA, currently, one in seven citizens receives benefits and 90% of workers have jobs covered by the system.
In 2023, recipients will also see the largest COLA increase since 1981, according to the Senior Citizens League. The actual percentage will be formally decided in October based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, and in January 2023 payments will start to reflect the increase. Based on current figures, the SCL estimates the increase could be anywhere from 9.3 to 10.5%, the biggest jump since the 11.2% COLA hike in 1981.
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