Historic Events for Students: The Great Depression

Social Security 1935-1941

Social Security 1935-1941

Introduction
Issue Summary
Contributing Forces
Perspectives
Impact
Notable People
Primary Sources
Suggested Research Topics
Bibliography

Introduction

Historians consider the Social Security Act of 1935 one of the most revolutionary pieces of social legislation ever passed by Congress. The Social Security program was one of many pieces of legislation passed as part of President Franklin D. Roosevelt's (served 1933–1945) New Deal. The New Deal was a sweeping series of federal relief and recovery measures passed between 1933 and 1938 designed to bring prosperity back to the United States. The measures greatly increased the role of government in the daily lives of citizens and in the private marketplace of the economy. The Social Security program speaks to a universal human need—the need to face the future with some measure of economic security. All people at one time or another face uncertainties brought on by job loss, illness, disability, or old age.

Prior to the twentieth century, most people in the United States relied on the family farm and their extended family for economic security. The industrial revolution brought fundamental and permanent changes. By the early twentieth century being old, disabled, or jobless too often meant being penniless and helpless. The Great Depression triggered a crisis in the nation's economic life more severe than ever before. Twenty-five percent of workers could not find employment, and poverty among the elderly grew dramatically. By 1934 over half the elderly in America lacked sufficient income to support themselves.

By 1934 President Roosevelt was convinced the nation needed some sort of long-term social insurance program. Social insurance is a broad term referring to government sponsored social programs such as old age retirement programs, unemployment insurance, support for workers injured on the job, and healthcare programs. Social insurance programs had been prevalent in European countries since the late nineteenth century.

President Roosevelt assembled a team in the summer of 1934 to hammer out details of an American social insurance program, called a "cradle to grave" plan. Thirteen and a half months later President Roosevelt signed the Social Security Act of 1935. Americans eagerly climbed on the bandwagon of Social Security and have proved fiercely protective of the program ever since.

The original Social Security Act of 1935 reached out to Americans under four broad categories: (1) monetary assistance for needy elderly persons, children, and blind individuals; (2) a federal old-age retirement plan; (3) unemployment compensation; and, (4) extension of public health services. For the first time the American public came to expect that the federal government would be involved in its social welfare.

In the years following 1935 the Social Security program broadened to include survivors' benefits when a family's wage earner dies, disability benefits, health care benefits, and automatic cost of living increases. The program has remained flexible and changed over time to meet changing circumstances. The twenty-first century brings new challenges with an aging population and a continuing need to provide security for workers and their families.

Chronology:

June 8, 1934:
President Franklin D. Roosevelt notifies Congress that he will seek federal legislation to promote economic security.
June 29, 1934:
President Roosevelt creates the Committee on Economic Security to study problems related to economic security and to make recommendations for legislation.
January 17, 1935:
The Committee on Economic Security introduces its recommendations to the 74th Congress.
August 14, 1935:
President Roosevelt signs into law the Social Security Act.
August 23, 1935:
The Senate confirms the President's nomination of the first members of the Social Security Board: John G. Winant, chairman; Arthur J. Altmeyer, and Vincent M. Miles.
November 24, 1936:
The U.S. Post Office distributes applications to the public for Social Security account numbers.
January 1, 1937:
Workers begin earning credits toward old-age insurance benefits.
February 19, 1937:
Arthur J. Altmeyer is named as new chairman of the Social Security Board.
March 11, 1937:
The first old-age insurance benefit is paid (one time payment only).
May 24, 1937:
The U.S. Supreme Court upholds the constitutionality of the old-age and unemployment insurance provisions of the Social Security Act.
June 30, 1937:
All states approve laws making available unemployment compensation under Title III of the Social Security Act making it a nationwide program.
September 1938:
All states, the District of Columbia, and the territories of Alaska and Hawaii begin making old-age assistance payments under Title I of the Social Security Act.
August 3, 1939:
Arthur J. Altmeyer is reappointed for a six-year term as the chairman of the Social Security Board.
August 10, 1939:
Social Security Act Amendments of 1939 provide old age and survivors' insurance benefits for dependents and survivors.

Issue Summary

Introduction of Social Insurance

The campaign for a general security program had to be conducted on a broad front involving the viewpoints and experiences of many. Central to this fight would be Frances Perkins. Four years into the Great Depression in 1933, the 53 year-old Perkins came to Washington. Reared in Massachusetts and educated at Mount Holyoke College, Perkins had earlier traded a privileged life for the slums of Chicago. There she lived with Jane Addams, a prominent social worker, at Hull House. She vigorously supported social justice causes in Chicago, then in New York City where she became fast friends with progressive Democrats like Franklin D. Roosevelt and U.S. Senator Robert F. Wagner of New York. Perkins served as director of investigations for the New York State Factory Commission, and as chairman of the State Industrial Board. In 1919 Governor Alfred E. Smith appointed her to the office of Industrial Commission of the State of New York. When Franklin D. Roosevelt became governor of New York in 1928, he appointed her industrial commissioner to head New York state's labor department. The enormously effective Perkins persuaded Governor Roosevelt to aggressively fight the Great Depression in New York by supporting state and regional unemployment insurance and relief projects. In 1930 Governor Roosevelt, highly interested in all aspects of social insurance, signed New York State's old-age pension legislation. Within a few years about 35 states had passed old-age pension plans in various forms.

Following his election as U.S. president in 1932, President-elect Roosevelt chose Perkins to head the Department of Labor, a department she later recalled to be full of large, cigar-smoking men. Prior to accepting the appointment, Perkins laid out extensive goals. These included unemployment and old-age insurance, and setting minimum wage and maximum hours standards. President-elect Roosevelt, the single national political leader to identify himself with the social insurance cause, agreed that he and Perkins would explore unemployment and old-age insurance as soon as he assumed office. Hence in March 1933 Perkins agreed to become the first woman cabinet member in U.S. history. Concerning social legislation, Perkins was to be the most knowledgeable, dominant voice in the ear of President Roosevelt. For Perkins, known as "Madam Secretary" to her subordinates, once the immediate problems of hunger and poverty had been addressed, the foremost goal was to create a permanent system of social insurance to aid the personal security of the people of the United States.

Biography: Frances Perkins

1880–1965 Always proud of her New England common sense and generally wearing a felt triangular hat, Perkins became the first woman ever appointed to a cabinet post. Franklin D. Roosevelt appointed her as Secretary of the Department of Labor in 1933.

Perkins left the privileged life of her birthplace, Boston, Massachusetts, to become a vigorous advocate for social justice in Chicago and New York. She became secretary of the New York Consumers' League (1910–1912) and of the Committee on Safety of the City of New York (1912–1915), where she was exposed to the horrors of sweatshops. Perkins was named to the New York State Industrial Board where she handled workmen's compensation cases. She took over the chairmanship in 1926 and Roosevelt reappointed her when he became governor of New York in 1929. Perkins lobbied for stricter factory safety laws, protective labor laws for women and children, and an eight-hour workday.

When Roosevelt was elected president in 1932, he chose the articulate Perkins as his Secretary of Labor where she was known as "Madam Secretary." They shared similar views on the need for social insurance including unemployment and old age pensions. Named chairman of Roosevelt's Committee on Economic Security in 1934, she guided the crafting of the Social Security Act of 1935. At the act's signing, Roosevelt gave much of the credit for its passage to Perkins.

Wagner-Lewis Bill—An Unemployment Insurance Plan

The distress of the country was great at the time of President Roosevelt's 1933 inauguration and the unemployment numbers alarming. In response the president speedily began to investigate unemployment and old-age insurance. Of these two forms of social insurance, unemployment insurance seemed the most urgent. The only plan in existence in the United States was the Wisconsin plan adopted in 1932 with which both the President and Perkins were thoroughly familiar. The plan, originally worked out by Professor John R. Commons of the University of Wisconsin, required corporations to set aside unemployment funds to care for their own employees. The amount of money the Wisconsin plan required each employer to set aside was based on a "merit rating." Each corporation was rated on how successful it was in maintaining employment. Those companies who frequently laid off workers had to put away the most money in an unemployment fund. On the other hand, employers who provided their workers with steady employment had low rates of contributions to their unemployment fund. The plan, therefore, encouraged corporations to keep employment steady.

Another unemployment scheme, proposed in 1932 by the Ohio Commission on Unemployment Insurance but not actually in operation, differed considerably. The Ohio plan proposed that contributions come from both employers and workers. The funds would be pooled in a large single statewide fund rather than having individual corporations maintain their own separate funds. Neither plan envisioned government contributions to the funds.

Some experts believed both plans had serious flaws. One of the most outspoken critics was Abraham Epstein, a key contributor to the creation of early social insurance policies in the states. According to Epstein the Wisconsin plan was doomed because no one business could control overall economic conditions so as to totally control their employment needs. Another criticism of both unemployment plans was that the contributions required of employers would increase the cost of doing business. This would in turn decrease corporate profits and hinder their ability to compete.

In the fall of 1933 a group of liberal businessmen and young New Dealers met in Washington, DC with Paul A. Roushenbush, an early shaper of the Wisconsin plan. His wife, Elizabeth, was the daughter of Supreme Court Justice Louis D. Brandeis. Brandeis had devised a clever plan calling for a payroll tax on employers to be paid into a pooled fund for each state. The amount of the tax could then be deducted from the companies' federal tax bill. With the tax deduction, the plan would cost employers less. This was the plan that the Roushenbushes shared at the meeting.

Thomas H. Eliot, a lawyer in the Department of Labor, attended the Roushenbushes' meeting and relayed the plan to Perkins. Perkins, impressed with the creativity of the plan, instructed Roushenbush and Eliot to draw up a bill using this new idea. They realized the bill was rough but hoped it could provide a sounding board from which more complete legislation would evolve. Enthused, President Roosevelt encouraged immediate introduction of the unemployment insurance bill. So in February 1934 the Wagner-Lewis bill went to Congress. Senator Robert F. Wagner introduced it into the Senate and Representative David J. Lewis of Maryland in the House of Representatives.

Dill-Connery, an Old Age Pension Bill

Meanwhile a bill dealing with old-age pensions was working its way through Congress. The issue of old age pensions actually had a much longer history in the United States than unemployment insurance. The American Association for Labor Legislation (AALL) called for development of old-age pension plans in 1906 and states began to explore the issue. Eight states passed voluntary programs in the 1920s. The Great Depression accentuated the plight of the aged. By the early 1930s, 35 states and many private companies enacted various forms of pension plans. Their payment and coverage varied widely among the states. Epstein, who had founded the Association of Old Age Security, believed a nationwide approach was essential. He proposed a plan where the federal government would give states monetary grants equal to a third of the amount each state spent on pensions. For example, if a state spent $300,000 on pensions, the federal government would give the state $100,000. Senator Clarence C. Dill of Washington and Representative William P. Connery, Jr. introduced a bill to Congress in 1932 incorporating these ideas. By 1934 the House of Representatives had passed the Dill-Connery Bill and the Senate Pensions Committee had given it a favorable report.

Spring 1934—Congressional Hearings; Townsend Stirrings

Hearings before Congress on both bills were in full swing in the spring of 1934. Experts testified as to the effectiveness of the measures. President Roosevelt hoped the congressional committees could fashion acceptable programs.

At a Glance Workers' Compensation—Social Security Related Legislation

The first form of social insurance to develop in Western Europe and the United States was Workmen's Compensation. Workers' Compensation, as it came to be called, exists in all fifty states today. Additionally there were two federal programs: the Longshore and Harbor Workers' Compensation Act and the Federal Employees' Compensation Act. Programs provided cash benefits and medical care to workers who sustained a work related illness or injury. Benefits were also paid to surviving dependents of workers who died as a result of illness or injury.

States enact their own workers' compensation laws. The programs are generally financed by employers with the costs higher in more dangerous industries. …