A Brief History of Retirement in America (Part 2)

This unbearably long article, broken into five parts, tries to put our notions of retirement in an historical perspective. Part One of the series may be found here. Links to the other parts are at the bottom of the page.

1885 to 1929: Corporate America Demands Efficiency

The industrial revolution began in England in the late 1700s, but its migration to North America was a slow, incremental process. It was not until the 1850s and 1860s that industrialization finally began to gather steam in the United States.

As it did, leaders in business and government discovered they needed a mechanism to stimulate economic growth and facilitate the replacement of older, less efficient workers by younger, cheaper ones. Mandatory retirement for older workers became the preferred mechanism.

The Industrial Revolution entered a second phase in the 1850s with the discovery of new techniques for the mass-production of low cost, high quality steel. The demand for steel products was insatiable. Factories, and the rail networks to connect them, sprang up across the U. S. In 1840 the total length of steam powered railway tracks in the United States stood at 3,326 miles. By 1860, it had risen almost tenfold to 30,600 miles.

The Second Industrial Revolution

Urbanization in America, % of Population in Urban areas (1850 to 1930)

By 1885, the industrial transformation of America was well underway. The small mills, tanneries, and mule-drawn canal barges of the pre-industrial era gave way to ever larger industrial age factories and steam belching railroads. Large, impersonal corporations became the dominate form of business organization. The national character took an increasingly urban air.

Industrialization, of course, required machinery, and the machines required huge capital investments. Before long, the cost of machinery approached and then exceeded the costs of factory labor. Developing ways to maximize the efficient use of all this new equipment became the theme of the day.

The machinery of early industrial revolution was complex, but we are not talking robotics here. The machines still needed people to run them. Unfortunately, factory owners found that they often had to slow down the machines to match the capabilities of their workers.

By 1910, a new business theory of “scientific management” developed and spread, giving rise to professional “efficiency experts”. These efficiency experts, building on a worldview of social Darwinism—survival of the fittest—spread the notion that the most efficient society would ultimately be the most powerful society. Labor productivity became one of their buzzwords.

Employment Changes During the Second Industrial Revolution

Older workers who were no longer fast enough or strong enough to keep up with the machines slowed down production. The efficiency experts and their industrialist employers realized they needed to get older workers out of the way so that they could replace them with a younger, faster workforce. A steady flow of immigrants from America’s farms and Europe meant these younger workers were readily available. But the older workers refused to give up their jobs.

Mandatory Retirement Spreads

Businesses, government, and society in general were obsessed with the cold, hard efficiency. Since older workers were seen as inherently less efficient than younger ones, they had to be removed. This became a business axiom, and to some extent a social axiom as well.

Attitudes toward older people in general became increasingly negative. By the early 1900s, many factory owners were restricting the hiring of older workers and enforcing rigid mandatory retirement policies to get rid of those they had.

Many business leaders were at least a little uncomfortable with the idea of putting loyal older workers into the streets to starve. Some offered older workers pensions or helped build company homes for the aged and infirm.

Other employers reluctant to throw older workers into the street, moved them to less critical functions within the corporate bureaucracy. Often, these bureaucracies became holding institutions—informal retirement mechanisms—for older workers. But this was also glaringly inefficient, and left the efficiency experts fidgeting.

By 1920, mandatory retirement with some small company pension slowly evolved as the preferred method for moving older workers aside. This allowed employers to eliminate their older workers but feel secure in the knowledge that the retired would at least have enough money to survive.

Most Workers Resisted The Notion of Retirement

Of course, this plan met with resistance from older workers. Most mandatory retirement laws during this period focused on factory workers. Factory work in the early industrial age was brutally hard. But not having work was harder. In the impersonal industrialized cities, support resources for older people were often fractured. Family family members were often widely dispersed. Social services were almost non-existent. Retirement meant a significantly lower standard of living.

Men Over 65 in Retirement (1870-1930)

But confronted with increasingly common mandatory retirement rules many workers found themselves forced out of their jobs. By 1920 43% of white males over 60 were no longer in the workforce. Many older workers discovered that receiving a meager and insufficient pension was better than being pushed aside with no pension at all.

An uneasy equilibrium developed. Throughout urban America, older workers grudgingly stepped aside before they were pushed out. Few were happy with the situation. They fought retirement rules when they could, but they usually lost.

Then came the Great Depression to change everything.

Next: Part 3: 1930-1940 — The Great Depression Turns Retirement Into A Civic Duty.

Note: My primary sources for this series of articles are:

W. Graebner. A History Of Retirement: The Meaning And Function Of An American Institution, 1885 to 1978, New Haven, Connecticut, USA:Yale University Press 1980. 293 pp. ISBN 0-300-03300-1

D. Costa. The Evolution of Retirement: An American Economic History, 1880-1990. Chicago, Illinois USA: University of Chicago Press, 1998. 234 pp. ISBN 978-0-226-11608-2.

The Graebner book is a great read and I highly recommend it to anyone wishing to learn more about this subject. It is 30 years old, but it is still the definitive historical account of Retirement in America. It is currently out of print, but used copies are readily available.

The Costa book is also excellent. It is an economic history and takes a more quantitative approach.

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