*This is a selection from the book by John K. DiMugno, Stephen Plitt, and Dennis J. Wall, titled "Catastrophe Claims: Insurance Coverage for Natural and Man-Made Disasters," Chapter 18A by Dennis J. Wall (©May 2017, Thomson Reuters). This selection is reprinted with permission of Thomson Reuters. Any further reproduction without the consent of the publisher is expressly prohibited.
Old age. The evidence supports the prevailing view that the people who wrote Social Security into existence were focused on the elderly.[1] The evidence includes not only the historical sources, but the fact of the framework of the Social Security Act itself. There is no means test in it, for example, by which a person could qualify for some form of "assistance" under the Social Security Act by being poor even if they were also young. The reason is that the people of the time demanded insurance, not another dole:
Now, it would be satisfying, looking back in history, if one could say-especially an economist-that it was the academic economist, the specialist group in the universities or Government, that brought about the change. But it wasn't. It was the people. It was the people who rebelled in the time of the Great Depression and who felt that individual personal dignity was not being taken care of under the concept of means-test relief; that rights were involved; that a man had a right not to have to be in that situation; and that with the universal franchise, he had a right to do something about it. It was the belated recognition that this was a poor way of taking care of individual dignity, and especially when one had a vote to bring it about.
* * *
It was, then, this resurgence of recognition of individual rights that sparked the American approach to social insurance. That's where it got its start.[2]
Social Security has always been a system for the elderly, although elderly workers began contributing to it when they were younger workers themselves. Nonetheless, Social Security was and remains at all times a system focused on workers who have reached old age. "In 1934, the American people greatly needed a constructive program for the prevention of poverty in old age. The experience of the depression prepared the way for a drastic new step."[3]
There is a contrary view, that the "real," the "hidden" purpose of Social Security was to remove older persons from the workforce who might be inclined to continue working if they had no alternative to an income in their old age than from their jobs. This view seems to be the product of a small record of evidence. It does not represent the truth, and in particular it does not accurately represent the conditions which actually existed when the Social Security program was designed in 1934-1935:
The problem of the "superannuated worker" is a traditional one in industrial policy and pension theory. Since the onset of the Industrial Age, older workers began to find themselves at the end of their productive working lives, often without means of support. Such older workers often tried to remain employed and employers sometimes tried to find ways to move them out of the workforce. So the idea that this industrial policy objective underlies the RET [Retirement Earnings Test], has an initial plausibility. But it is, as we will see, largely a historical myth which has grown over time and assumed the status of "common knowledge."
* * *
In the first place, the aged had already been forced out of the workforce in disproportionate numbers by the economics of the Depression. Since older workers are generally the highest-paid workers in a business and often are thought to be less productive than younger workers, in many industries they were the first ones laid-off in the Depression. They were also the least likely to be re-hired for the same reasons. As a consequence, workforce participation for older workers was much lower than for younger workers.
* * *
So older workers were not a major factor in blocking opportunities for younger workers or in competing with them for the job openings which did occur. So while we can perhaps conceive of circumstances in which large numbers of entrenched older workers are blocking workforce entry to younger workers, this was not in fact the situation in the 1930s, as far as the data available to program planners in 1935 indicated.[4]
Another contrary view is closely connected with the "superannuated worker urban myth." It is something of a red herring, it turns out: "In other words, Social Security, was not a system founded upon humanitarian principles or feelings of beneficence toward the elderly."[5] There is little evidence that Social Security was "founded upon humanitarian principles or feelings of beneficence toward the elderly," for the simple reason that it wasn't.
The people who were writing and enacting a framework of social insurance during the Great Depression had as their purpose the protection of workers without income who were aged at that time and for the protection of workers who would become elderly in the future.[6] Like the actress Mae West intoned, also during the Great Depression, "Goodness had nothing to do with it."
Contributory. It was never a coincidence that Social Security has required contributions from workers since the beginning. Contribution was planned. It was planned for the purpose of evidencing a right. The architects and authors of the Social Security old-age insurance program, and the Members of Congress who voted it into existence, knew this from the inception.[7] "Benefits are a matter of right."[8] I will return to this subject later.
Please Read The Disclaimer. This blog ©2017 by Dennis J. Wall. All Rights Resereved.
[1] In addition to the many other social history sources and the Supreme Court decisions cited in this Chapter, see J. Douglas Brown, "The Genesis of Social Security in America" (1969), available online at https://www.ssa.gov/history/jdb5.html (last accessed on Sunday, January 8, 2017):
[T]he benefits then proposed were far less important strategically, we were convinced, than the establishment of the principle of old age benefits as a matter of right, related to past contributions to a national system.
(Boldface added; italics in original.)
[2] J. Douglas Brown, "The Idea of Social Security," speech at the Meeting of the Bureau of Old-Age and Survivors Insurance in Baltimore, Maryland on November 7, 1957, accessible online as the "original version" of this 1957 speech, at https://www.ssa.gov/history/brown3.html, last accessed on Sunday, January 8, 2017.
[3] J. Douglas Brown, "The Genesis of Social Security in America" (1969), accessible online at https://www.ssa.gov/history/jdb5.html, last accessed on Sunday, January 8, 2017.
[4] Larry DeWitt, SSA [Social Security Administration] Historian, "Special Study #7: The History and Development of the Social Security Retirement Earnings Test" (August 1999), available online at https://www.ssa.gov/history/ret2.html, last accessed on Monday, January 9, 2017. (Emphasis added.)
[5] Matthew M. Hawes, "So No Damn Politician Can Ever Scrap It: The Constitutional Protection of Social Security Benefits," 65 U. Pitt. L. Rev. 865, 875-76 (2004).
[6] William Graebner's contrarian views of the origins and purposes of Social Security have attracted a small following, such as in the article cited immediately above. While provocative, Mr. Graebner's views do not find much support in the history of and about the Social Security old-age insurance program. One article was found by the author of the present Chapter in the course of researching the social history of Social Security, in which Mr. Graebner's research was addressed. In it, Mr. Graebner's citation of what lawyers call legislative history was left open to question by the author of that article, inasmuch as the author of that article "can find no such indications" in the legislative history of Social Security for an "industrial policy thesis," i.e., that the reason that Social Security old-age insurance was enacted was not to provide insurance to the elderly, but was really enacted in order to remove workers from the work force to benefit younger workers seeking jobs.. Larry DeWitt, "Special Study #7: The History and Development of the Social Security Retirement Earnings Test" (August 1999), available online at https://www.ssa.gov/history/ret2.html, last accessed on Sunday, January 8, 2017. The author of that article, Mr. DeWitt, is identified as the SSA [Social Security Administration] Historian at the time he wrote it.
[7] The soundness of the concept of joint contributions in an American system of social insurance does not arise out of economics. It stems from our political and social traditions. Of course, arguments can be made about shifting and incidence, as with all taxes or costs, but the fact remains that the first incidence of any contribution to government or to any other recipient, church, family or trade union, is of great psychological importance. Out of such incidence political influence arises, loyalty and responsibility are encouraged, and personal satisfaction and dignity are gained.
* * *
In America we have a wholesome suspicion of big government. And now we have given government the tremendous task of providing a floor for our individual security. I for one would feel more certain that our leaders in government would continue to respect the sanctity of the trust we have imposed upon them if every potential beneficiary who is gainfully employed were both a voter and a contributor to all social insurance systems.
- Douglas Brown, Sidney Hillman memorial lecture at the University of Wisconsin delivered on November 18, 1955, combined in part with a lecture delivered at Social Security Headquarters in Baltimore, Maryland on November 7, 1957, "published in 1972," titled, "The American Philosophy of Social Insurance," accessible online at https://www.ssa.gov/history/brown2.html, last accessed on Monday, January 9, 2017. (Emphasis added.)
[8] J. Douglas Brown, "The Genesis of Social Security in America" (1969), accessible online at https://www.ssa.gov/history/jdb5.html, last accessed on Sunday, January 8, 2017.