You Probably Had No Idea How Majorly Social Security Has Changed
While we are thankful for the largest Social Security increase under President Trump, we thought it important to look how it has changed over the years. After all, it is an inevitable fact of life that humans will endure hardships. Illness, injury, unemployment, and even just growing old can impact a family’s economic stability. Therefore, Social Security was created to provide financial security to individuals dealing with some of these problems. However, with 65 million Americans relying on SS today, a change was inevitable. When you view it through the lens of history and politics behind the scenes, you see the remarkable evolution of social security.
From 1935 to 2017, there have been many changes- some were good, and some were bad, but all of them were fundamental in shaping the program.
Civil War Pensions
As you know, the Social Security was created by President Franklin Roosevelt, but its roots date back to the 1860s. Civil War pensions were an important precursor to social security. After the war ended a much higher proportion of the population was disabled or survivors of deceased breadwinners than at any time in America’s history.
Seeing an immediate need to provide wounded soldiers and their widows, with some income, the government created a generous pension fund. It was the first full-fledged program of its kind in the U.S. In 1906 the rules of the program were revised, to include awarding benefits to soldiers reaching “old age.” But, it would still take years to create a fund for society in general.
In between Civil War Pensions and Social Security, there were other short-term solutions. The first corporate retirement plan in modern America was created by a piano builder, Alfred Dolge. Dolge’s company would withhold 1 percent of workers’ pay and add to a pension fund. Then, the company would subsequently add 6 percent interest at the end of the fiscal year.
In 1900, there were only five companies that offered employees a retirement plan. By 1932, that number increased to a meager 15 percent. However, because pensions could be withheld by the employer, only 5 percent of retirees were receiving money from these plans. This led to the need to create program that would benefit more workers when they retired.
State Old-Age Pensions
After the Great Depression, poverty among elderly citizens grew exponentially. Best estimates conclude that in 1934, 50 percent of this group were unable to support themselves financially. To address the problem, 30 states created some form of old age pension plan for their residents. Unfortunately, most of them were unsuccessful in solving the crisis.
Low participation due to many seeing this as a form of welfare, rendered state-run programs ineffective. Also, strict eligibility regulations meant many elderlies didn’t qualify for aid. In the end, only 3 percent of the elderly were receiving benefits under these states plans. The average benefit amount was a minuscule 65 cents a day.
But, in 1935 everything would change.