Social Security Act of 1935

Overview

The Social Security Act of 1935 was a response to calls for federal old-age insurance that grew after the Great Depression started in 1929. Reformers such as Abraham Epstein and Francis Townsend helped build political pressure for pensions, while the American Federation of Labor backed the concept in 1932. In June 1934, President Franklin D. Roosevelt appointed the Committee on Economic Security, led by Secretary of Labor Frances Perkins, to design a program to meet the demands. Despite opposition from business leaders, many southerners, and rival reform plans, Congress passed the act, which established the Social Security Board and provided unemployment compensation and old-age benefits funded by payroll taxes.

Essential Facts

• Date: August 14, 1935.
• President: Franklin D. Roosevelt.
• Key People: Abraham Epstein, Francis E. Townsend, Frances Perkins, Grace Abbott, Robert F. Wagner, 
• Part of: New Deal Programs.

Key Details

• The Social Security Act was a landmark New Deal law that sought to reduce the impact of future economic depressions.
• It established federal-state unemployment insurance to support workers during periods of unemployment.
• Old-age pensions were provided to retired workers, with payments ranging from $10 to $85 per month (later increased).
• The program was funded through payroll taxes shared by employers and employees.
• Additional support was extended to the blind, physically handicapped, delinquent children, and other dependents.
• President Roosevelt considered the Social Security Act to be the cornerstone of the New Deal.
• The Act is considered part of the “Second New Deal,” which included the New Deal Programs implemented between 1935 and 1939.

History

Early Resistance

Social welfare advocates called for a federal system of old-age insurance in the early 1900s, and compulsory social insurance programs were common in Europe by the 1920s. At the time, many Americans believed that families and local charities, rather than the Federal Government, should care for older adults.

• In the 1920s, Congressman William Connery of Massachusetts and Senator Clarence Dill of Washington introduced social insurance bills, but Congress rejected them.

Shifting Views

• The Great Depression increased demands for federal old-age insurance.
• In 1929, Abraham Epstein established the American Association for Old-Age Security to promote a federal insurance program.
• Francis Townsend established Old-Age Revolving Pensions, Ltd., to campaign for pensions and build political support.
• Pressure for a federal pension system increased as Townsend’s plan gained political support.
• In 1932, the American Federation of Labor endorsed the idea of old-age insurance.

AHC Notes

• Abraham Epstein (1872–1942) — Epstein was a Russian immigrant reformer and leading advocate for old-age security who helped build early Social Security organizations, advised the Committee on Economic Security, and influenced the debate leading to the Social Security Act of 1935. Epstein criticized financing Social Security programs through payroll taxes as regressive and advocated funding through government appropriations.
• Francis E. Townsend (1866–1960) — Francis Everett Townsend was a physician and activist whose “Townsend Plan” called for a $200 monthly federal pension for Americans over age 60, funded by a business tax to boost spending and fight the Great Depression. Starting in 1934, he and Robert Earl Clements built a nationwide movement through Old-Age Revolving Pensions, Ltd., The Townsend National Weekly, and thousands of “Townsend Clubs.” Townsend’s popularity pressured national leaders and helped shape the political climate that culminated in the passage of the Social Security Act of 1935.
• American Federation of Labor (AFL) — Founded during the Progressive Era, the AFL was the dominant labor organization, focusing on skilled trades and collective bargaining. Led by Samuel Gompers, it pursued “pure and simple trade unionism,” emphasizing wages, hours, and working conditions over broad reform. The AFL grew rapidly in the early 20th Century, gained influence during World War I, but declined after failed strikes in 1919 and 1922. 

Committee on Economic Security

In June 1934, Roosevelt established the Committee on Economic Security to study old-age insurance and related issues.

• Secretary of Labor Frances Perkins headed the Committee on Economic Security.
• The committee developed a national federal old-age insurance plan financed by contributions from farm employers and workers.
• The committee also called for a federal-state system of unemployment insurance.
• Grace Abbott, a prominent advocate for social welfare, helped draft the Act, which she considered to be the major achievement of her career.

Senator Robert Wagner of New York and Congressman David Lewis of Maryland introduced the legislation in Congress. Despite opposition, public support for old-age pensions increased during the debate.

• Conservative business leaders opposed the bill, arguing that the taxes would harm businesses and push the nation toward socialism.
• Many southerners opposed the bill because it offered benefits to African Americans.
• Francis Townsend’s supporters opposed the bill because the proposed benefits fell below the $ 200-per-person-per-month threshold.
• Abraham Epstein opposed the financing approach and preferred that benefits be funded from general revenues rather than payroll taxes.
• Isaac Rubinow opposed the financing approach and preferred that benefits be funded from general revenues rather than payroll taxes.

AHC Notes

• Committee on Economic Security — A committee created by President Franklin D. Roosevelt in June 1934, and chaired by Secretary of Labor Frances Perkins. It was responsible for developing a federal social insurance plan that shaped the New Deal response to the Great Depression. It debated state-based versus federal unemployment compensation, approved payroll-tax funding for old-age pensions, and recommended added aid for poor older people, blind people, and dependent children. The committee delivered its report on January 15, 1935, and its work helped lead to the passage of the Social Security Act on August 14, 1935.
• Frances Perkins (1880–1965) — Perkins was a New Deal reformer and labor leader who was the first woman to hold a U.S. Cabinet position. Initially involved in the Settlement House Movement, she shifted her focus to workplace safety and industrial regulation after the Triangle Shirtwaist Fire (1911). In 1933, President Franklin D. Roosevelt appointed her Secretary of Labor. In this role, Perkins helped shape major labor reforms and the Social Security program.
• Robert F. Wagner (1877–1953) — Robert Ferdinand Wagner was a German immigrant and New York politician and U.S. Senator who rose from Tammany Hall politics to become a leading Democratic lawmaker during the Great Depression and the New Deal. Wagner supported government action to stabilize the economy, advocated federal unemployment relief, and helped shape major reforms, including the National Industrial Recovery Act, the National Labor Relations Act of 1935, and the Social Security Act of 1935.
• Grace Abbott (1878–1939) — Abbott was a leading social worker during the Progressive Era who focused on major urban problems, including poverty, immigration, unsafe housing, and family instability. She worked at Hull House, directed the Children’s Bureau, and supported groups like the Women’s Trade Union League and the National Consumers League. During the New Deal Era, she served on key advisory boards that shaped federal policy and helped draft the Social Security Act of 1935, widely regarded as the hallmark of her career.

Key Provisions and Implementation

Congress passed the law, and President Roosevelt signed it on August 14, 1935. The Social Security Board was established by the Act to oversee the new unemployment compensation and old-age insurance programs.

• The Act provided assistance to Americans who were blind, homeless, crippled, dependent, or delinquent children.

It created a federal-state unemployment compensation system financed by a federal payroll tax. Each state was responsible for administering its own unemployment compensation program.

• The employer payroll tax was 1% in 1936.
• The employer payroll tax increased to 2% in 1937.
• The employer payroll tax increased 3% afterward.

The Act created old-age and survivor’s insurance financed by levying equal taxes on employers and employees.

• The old-age and survivors’ insurance tax was 1% in 1937.
• The old-age and survivors’ insurance tax increased to 3% by 1949.
• The program accumulated funds in a national reserve until January 1, 1942.
• The program started paying pensions on January 1, 1942.
• The act provided pensions to Americans aged 65 and older.

AHC Notes

• Unemployment Insurance — Insurance that provides temporary financial assistance to workers who lose their jobs through no fault of their own. Established under the Social Security Act of 1935, it aims to stabilize income during economic downturns and mitigate the impact of job loss on families and communities.
• Old-Age Insurance — Old-Age Insurance, created under the Social Security Act of 1935, ensures financial support for retired workers through a payroll tax-funded system. It marked a major shift toward federal involvement in protecting elderly Americans from poverty after retirement.
• Old-Age Pensions — The Social Security Act of 1935 introduced Old-Age Pensions, which provided monthly payments to retired workers. Funded by payroll taxes, these pensions were intended to reduce poverty among the elderly and ensure financial security in retirement.
• Payroll Taxes — Payroll taxes are mandatory contributions deducted from employees’ wages and matched by employers to fund government programs. Under the Social Security Act, these taxes support old-age pensions, unemployment insurance, and other social welfare benefits, forming the financial foundation of the Social Security system.

AP US History (APUSH)

Alignment

The Social Security Act of 1935 is part of the following units, topics, and chapters in the AP US History curriculum:

• Great Depression and the New Deal (1933–1939)

Definition

Social Security Act (1935) — The Social Security Act, signed into law during the New Deal, established a federal program to provide financial assistance to vulnerable populations. It created old-age pensions, unemployment insurance, and aid for dependent children and the disabled, funded by payroll taxes. The act marked a significant step in the development of the U.S. welfare system.

• President Roosevelt considered the Social Security Act of 1935 one of the most important pieces of the New Deal.
• The Social Security Act established a comprehensive system of insurance covering the aged, unemployed, and disabled, funded through contributions from both employers and employees.
• While similar programs existed in many other industrialized nations, previous calls for such initiatives in the United States, notably by Progressives in the early 1900s, had been pushed aside.
• Despite opposition from conservatives who viewed the Social Security system as contrary to American traditions, the final program was relatively conservative in its design.
• Social Security relied heavily on taxes levied on the earnings of current workers, with a uniform fixed rate applied to all income levels.
• These features, including funding through worker contributions and a uniform tax rate, were compromises intended to secure passage of the legislation.
• Despite its modest beginnings, Social Security has evolved into one of the largest domestic programs administered by the U.S. government, providing crucial support to millions of Americans.