The Birth Of Social Security


Clearly, if the old-age problem were to come even close to a solution, a new, better-organized approach was needed. And by 1929 such an approach was being made through the American Association for Old Age Security (AAOAS), which had been launched two years before by Abraham Epstein. Like Rubinow, Epstein was a Russian Jew who immigrated to New York City when he was eighteen (in 1910). Like Rubinow he was intellectually brilliant, identified himself with the economically disadvantaged, and became passionately committed to social insurance. He differed from Rubinow in the greater emphasis he placed upon income redistribution as an aim of social insurance, insisting more strenuously that government must contribute to insurance funds. He differed, too, from Rubinow in temperament, being more impatient, abrasive, touchy; his career was marred by bitter quarrels with professional colleagues, including Andrews, whose policy lines he of course deplored, and with Hering, whose assistant he briefly was when the Eagles’ campaign was launched. Yet more than any other one man, Epstein was responsible for the fact that, by decade’s end, social insurance was again a live idea in America, with its central focus on old-age security—even after the deepening Depression made mass unemployment the nation’s crucial immediate concern.

In 1932, while Herbert Hoover was yet in the White House, Senator Clarence C. Dill of Washington and Representative William P. Connery, Jr., of Massachusetts introduced in Congress an old-age bill, prepared and sponsored by Epstein and AAOAS, calling for federal grants-in-aid, totaling onethird of the costs of old-age pensions, to states adopting acceptable old-age laws. Inherited by the New Deal Congress, the Dill-Connery bill was reported favorably out of the Labor Committee of the House and the Pensions Committee of the Senate in early 1934. It would then certainly have passed Congress with a large majority if the President had specifically endorsed it or even indicated he had no objection to it. Roosevelt declined to do so—and that was the beginning of the way, the decisive way, in which FDR’s mentality, long-term purposes, and political techniques influenced the final development of American social security.

Roosevelt himself was influenced in some degree by Rubinow and Epstein, or by their ideas, largely through Frances Perkins, whom he appointed state industrial commissioner when he became governor of New York in 1929. She it was who, at his request, wrote the words he addressed to the conference of governors at Salt Lake City in July, 1930, which made him the first major national political figure to come out for mandatory unemployment insurance, and stamped his image upon the public mind as that of a bold, forceful, enlightened liberal. The address also called (this went less noticed) for old-age benefits to be paid out of joint contributions by employers, employees, and government. The influence of Rubinow and Epstein is clear. Six months later, Frances Perkins encouraged Roosevelt to summon a governors’ conference of his own—the chief executives of the Middle Atlantic and New England states—to discuss the possibility of concerted action against a then swiftly rising tide of unemployment. To help prepare for this conference, she called to Albany young Paul H. Douglas, a brilliant University of Chicago economist, whom FDR at once “liked … and trusted,” as Madam Perkins later wrote. Douglas was a friend and disciple of both Rubinow and Epstein.

But this Rubinow-Epstein-Douglas influence was not the only one brought to bear upon Roosevelt’s thinking about social welfare. There was also the influence of the Wisconsin Idea, manifested by the Commons-Andrews leadership of AALL—an influence greatly strengthened in January, 1932, when Wisconsin governor Phil La Follette (son of “Bob”) signed into law an unemployment compensation bill that the state legislature had passed in December.

Drafted by Wisconsin University economics professor Harold R. Groves, who was a legislator, and Paul Raushenbush, whose wife Elizabeth (she collaborated in the drafting ) was a daughter of U.S. Supreme Court Justice Brandeis, the Wisconsin law had unemployment prevention as its central theme. It required each firm employing ten or more persons to establish a reserve fund out of which any employee earning less than fifteen hundred dollars annually would, if thrown out of work, be paid half his weekly wage (up to ten dollars a week) for ten weeks. Farm workers, loggers, and employees making more than fifteen hundred dollars were not covered. The rate of required contribution and the size of the individual firm’s reserve varied with the firm’s employment record: if it had a stable record, its reserve could be relatively small; if its record showed wide fluctuations in the number employed, its reserves must be larger. This was called “merit rating.” The law was not to go into effect until July 1,1933, to give employers opportunity to institute “voluntary plans” along the indicated lines.