Earlier we talked about the history of Social Security and how it grew out of the Great Depression and the New Deal policies of Franklin Roosevelt’s administration. It’s time to put this in a broader context, to consider how the concept of life after work developed. It is a pretty recent phenomenon that itself is closely linked to the move from an agrarian to an industrial society, paired with the tremendous strides in healthcare over the past century and a half.
As mentioned earlier, many people credit Otto von Bismarck, as chancellor of Germany in the late nineteenth century, with laying the groundwork for Social Security. In fact, Bismarck should be credited with developing the concept of retirement itself by establishing a pension for military personnel. He was no fool, recklessly frittering away government funds. He set the age at which a soldier could begin collecting his pension at sixty-five. That would be like setting the retirement age for today at 125 because, in that era, the average life expectancy for Germans was the mid-thirties. The actuarial number-crunchers of that era would have had no problem with a pension as a concept under this age restriction because, statistically, who would live to collect?
Don’t think the bean counters in the United States had a much bigger heart when Social Security legislation was first passed in 1935. At the beginning of this hallmark entitlement program for Americans, the age for receiving benefits was set at sixty-five, which sounds great, even normal by today’s standards. But what you might not know is that American life expectancy at that time was only sixty-two, meaning that the government had limited financial exposure with this sweeping program. Further, as the legislation was originally written only about 60 percent of the working population, those in commerce and industry, qualified for Social Security. In fact, the first checks did not begin to flow until 1940.
Thanks to tremendous decreases in infant and child mortality through the first half of the twentieth century, the number of people alive today that are at least sixty-five years old is equal to half of all the people who have ever lived to age sixty-five in the course of written history.
In the 1950s, benefits were added to Social Security and the overall umbrella expanded to cover government employees, farmers, domestic help, and the self-employed. An added feature to the legislation was that workers could begin receiving reduced benefits at age sixty-two if they chose. Women became eligible for benefits in their own right in 1961. In 1965 hospital benefits were added, which became the basis for the Medicare and Medicaid coverage that today’s seniors are fighting tooth and nail to protect. Social Security marched right along through the early 1970s, adding built-in cost-of-living adjustments (COLA). It wasn’t until the late 1970s that the brakes started to be applied. During the decades following World War II, while Social Security was ramping up, private pension plans designed to mesh with government programs were expanding. Even with the private pensions, however, it was Social Security that provided the financial bedrock for aging Americans.
There may not have been enough money through these programs to provide retirees with the dolce vita, but it was enough that, for the first time, legions of older workers could leave their jobs on their terms, not when they were ready to practically fall into an early grave.