Most people think that the Social Security Administration was formed in 1935 however there was a serious precursor to the Social Security Act that many do not consider.
Immediately after the Civil War, a massive number of the American population was either a survivor, disabled or a widow of a dead soldier. In fact, the numbers far outweighed that of the previous wars fought on American soil and this led to the thinking that the country needed a pension program. In all actuality, the nation’s first pension program was passed back in 1776 before the Declaration of Independence was even signed.
Between 1889 and 1920, the US experienced changes in its very social fabric. In 1890, 28% of the country’s population lived within city limits. However, by the time 1930 rolled around, that percentage had doubled. The Industrial Revolution had given America a reason to move away from the farm and to the city.
This shift changed the aspect of what the American family was. Rural families became generally extended and that meant multiple generations might have started living together. Collectively, if a family member was disabled, elderly or ill, the family was able to come together more easily to care for the person. Thanks to better sanitation, health care and the effective health programs established by the government, Americans began to live longer. From 1900 to 1930, the average life span of an American grew by a decade. It became the largest and most rapid increase in recorded history. The result of this growth was the creation of the actual Social Security Administration and Social Security Act in August of 1935 by President Roosevelt.
Those who initially benefited first were not minorities and women. Since the 1930’s were still a trying time for America concerning some issues, minorities and women were not allowed the benefits of Social Security, no matter how long the people worked or what jobs they had. Also, if a worker was employed in the area of nursing, teaching, agriculture, library services, social work, government work, domestic service and hospital workers, social security would probably be denied as well. If a worker did not work full time or they worked intermittently, they were excluded as well. All in all, this meant that nearly half of all working Americans did not qualify for Social Security benefits.
For the first five years of the program (until 1940), the government paid Americans their benefits in one lump-sum payment. These payments were meant to help people by giving back some of the money they put into the system. Most of the people who received lump-sum payments were ones who would not be contributing long enough due to age or work reasons. The first ever check that was cut was for $0.17.
President Roosevelt designed the CES, or Committee on Economic Security, which was designed of four parts. These four parts held together the entire SSA Social Security Administration . They consisted of a Technical Board; an Advisory Council; an executive leadership council; and the Executive Director.
It’s clear that CES’ intended purpose was to provide the U.S. with a complete system of some sort of social insurance, and that is putting it broadly. The government wanted to include old-age benefits, maternity and family benefits, survivors’ benefits, worker’s compensation, disability insurance, health insurance and unemployment compensation. Needless to say, this was an elusive challenge for many years. After the dust finally settled, disability insurance, survivors’ benefits and health insurance would be stricken from the Social Security Act until the 1950’s, when they became permanent parts.
On the last day of January in 1940, the very first retirement check was issued to a lady in Vermont for $22.54. In 1950, the COLA, or Cost of Living Allowance, had been added to the Social Security plan. Before this, all of the distributions were the same. Rates will change every year and will depend on where you live. Overseas people will earn high COLA than someone living in the states.
In the 1930’s, the government had to find a way to pay for the newly-instituted Social Security plan and the FICA, or Federal Insurance Contributions Act, provided a perfect way to do just that. Before the Great Depression, the country had no regulated way for people to save their money for retirement and this posed a problem for America. There was no disability income insurance and no government-mandated health insurance. The government was leaving the country to fend for itself. And the citizens weren’t doing a very good job of it. That is where FICA came in. The government saw this avenue as a great way to take a little money out of every citizen’s paycheck and put toward Social Security and Medicare.