1939: Social Security

The year 1939 brought great and fundamental changes in the American social security program. The amendments of the Social Security Act, adopted by Congress in 1939, marked not only the first changes in the Act since it was adopted in 1935 but also introduced a most significant new approach to the entire problem of old age insurance. Indeed, the changes introduced in the old age insurance program of the Act have not only reversed the principles upon which the earlier program was founded, but are of supreme social importance. (See also LABOR LEGISLATION; SOCIAL SERVICE, PUBLIC.)

Old Age and Survivors Insurance.

The 1935 Act limited the monthly old age insurance benefits to covered workers themselves. It took no consideration of either wives, widows or other dependents of the insured. The amount was based upon the total wages previously earned, and monthly payments were not to begin before 1942. Until then only lump-sum benefits were to be paid to persons who attained the age of 65 or to estates of deceased insured. The new old age and survivors insurance plan, however, extends protection not only to the covered workers themselves but also to their aged wives, aged widows, younger widows who have minor children to support, and in some cases to their dependent parents. Instead of 1942 all benefits fell due Jan. 1, 1940.

The new benefit formula properly favors the oldest and the lowest paid workers. Instead of being based on a percentage of the total wages earned, the monthly benefit to a retired worker is now computed as follows: For the first $30 of average wages earned since the beginning of the system the monthly annuity is equal to 40 per cent. For the balance of average wages up to $250 monthly the benefit is equal to 10 per cent. One per cent of the sum of these two amounts is added for each year elapsing since the beginning of 1937 in which earnings totaled at least $200.

For example, a worker retiring at age 65 in 1940 who averaged $100 monthly in the three years ended Jan. 1, 1940, is entitled to 40 per cent, or $20, on the first $30 of his earnings and to 10 per cent, or $5, on the balance, making a total benefit of $25 monthly. To this sum is added one per cent for each of the three years of coverage, or 75 cents. His monthly annuity, to be paid for the rest of his life, is thus $25.75.

Wives', Widows' and Orphans' Benefits.

The above sum, known as a 'primary' annuity, is increased by 50 per cent, or to $38.63 monthly in the case cited, if the insured worker has a wife 65 years of age and over living with him. In addition, 50 per cent of the primary benefit is allowed for a dependent child under 16, or 18 if attending school. Should he die first, his widow, if she is 65 and over, is entitled to three-fourths of his primary annuity, or to a monthly sum of $19.31. Widows under age 65 are not entitled to have any benefits until they reach 65 unless they have dependent children to care for. In that case they are entitled to the following benefits: three-fourths of the primary annuity for themselves and 50 per cent of the primary benefit for each minor dependent child. In other words, regardless of her age, the widow whose husband averaged 100 monthly up to 1940 is entitled to a monthly annuity of $32.19 if she has one minor dependent child and to an annuity of $45.06 if she has two minor dependent children.

Other Benefits.

When there are no other survivors, benefits are allowed to dependent parents 65 years of age and over who had been wholly dependent upon the deceased insured. These benefits amount to 50 per cent of the primary benefit for each aged parent. When no dependents or survivors are eligible for benefits a lump-sum benefit of six times the primary annuity is paid to certain claimants.

The minimum benefit is $10 monthly while the maximum is limited to either double the primary insurance benefit, 80 per cent of average wages, or $85, whichever is the lowest.

Eligibility.

All the primary, supplementary and survivors benefits are paid to, or on behalf of, any insured worker who earned at least $50 in each of one-half of the calendar quarters elapsing between the end of 1936 and the time of his death or retirement, or at least in six such quarters. Benefits to orphans and widows are also paid on behalf of any individual who earned wages of $50 in six of the twelve quarters immediately preceding his death. Earnings of $15 or more per month automatically stop the benefits.

The new law extended the system to employees of banks, savings and loan associations and other institutions not fully owned by the government, to certain classes of maritime labor and to persons working after the age of 65. Certain small groups have been excluded by the new law.

By September 1939, lump-sum payments certified under the 1935 provisions numbered 408,362 and amounted to $22,505,990. The average lump-sum benefit certified in August 1939, amounted to $87.04 while the average paid since 1937 amounted to $55.11. The total assets of the old age insurance fund amounted to $1,727,591,400 by September 1939.

Public Assistance Grants.

In the old age assistance program the most important amendment made in 1939 raised the maximum grant on which the Federal Government will pay its 50 per cent share from $30 to $40 monthly. Congress also raised the federal subsidy for aid to dependent children from one-third to one-half of the grants up to definite maxima, as in the case of the aged and the blind. The age limit for children attending school was raised from 16 to 18. In August 1939, 1,874,651 aged persons received old age assistance amounting to $36,415,257 for the month, or an average of $19.43. During the same month, 721,232 dependent children received Federal-state assistance costing $9,337,801, while 45,214 blind persons received $1,040,180.

Unemployment Insurance.

The most significant changes in unemployment insurance made by Congress in 1939 limited the taxable wages to the first $3,000 earned by an individual in a year and required the merit system for selecting state employees under these laws. The groups included and excluded here are practically the same as in the old age survivors insurance system.

During 1938, the third year of tax collections for unemployment insurance, the 27 states and the District of Columbia which paid benefits under these laws for six months and more disbursed $393,701,657 to unemployed workers. The 2,157,522 beneficiaries of the 17 plans which paid benefits throughout 1938 received an average of $83.89 each. In August 1939, 4,170,406 benefit payments, amounting to $44,491,421 were made in all the states and territories. The amount distributed dropped in the next few months, declining to $26,700,000 in October. The state reserves held by the Federal Government at the end of August, 1939, amounted to $1,410,448,000. See also TAXATION; UNITED STATES: Relief and Security; WORKMEN'S COMPENSATION.