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Social Security - History

workers wage benefit plan

As a general term, social security refers to any plan designed to protect society from the instability that is caused by individual catastrophes, such as unemployment or the death of a wage earner. It is impossible to predict which families will have to endure these burdens in a given year, but disaster can be expected to strike a certain number of households each year. A government-sponsored plan of social insurance spreads the risk among all members of society so that no single family is completely ruined by an interruption of, or end to, incoming wages.

Germany was the first industrial nation to adopt a program of social security. In the 1880s Chancellor Otto von Bismarck instituted a plan of compulsory sickness and old age insurance to protect wage earners and their dependents. Over the next 30 years, other European and Latin American countries created similar plans with various features to benefit different categories of workers.

In the United States, the federal government accepted the responsibility of providing pensions to disabled veterans of the Revolutionary War. Pensions were later paid to disabled and elderly veterans of the Civil War. The first federal old age pension bill was not introduced until 1909, however. To fill this void, many workers joined together to form beneficial associations, which offered sickness, old age, and funeral benefit insurance. The federal government encouraged people to set aside money for future emergencies with a popular postal savings plan. People who could not manage were helped, if at all, by private charity because it was generally believed that those who wanted to help themselves would.

Congress enacted the Social Security Act of 1935 as part of the economic and social reforms that made up President FRANKLIN D. ROOSEVELT's NEW DEAL. The act provided for the payment of monthly benefits to qualified wage earners who were at least 65 years old or payment of a lump-sum death benefit to the estate of a wage earner who died before reaching age 65.

In 1939 Congress created a separate benefit for secondary beneficiaries—the dependent spouses, children, widows, widowers, and parents of wage earners—to soften the economic hardship created when they lost a wage earner's support. Such beneficiaries are entitled to benefits because the wage earner made contributions to the plan. Beneficiaries can receive their payments directly upon the retirement or death of the worker.

Social Security originally protected only workers in industry and commerce. It excluded many classes of workers because collecting their contributions was considered too expensive or inconvenient. Congress exempted household workers, farmers, and workers in family businesses, for example, because it believed that they were unlikely to maintain adequate employment records. In the 1950s, however, Congress extended Social Security protection to most self-employed individuals, most state and local government employees, household and farm workers, members of the armed forces, and members of the clergy. Federal employees, who previously had their own retirement and benefit system, were given Social Security coverage in 1983.

Social Security - Old Age, Survivors, And Disability Insurance [next]

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