This post is the third in a five part series that tries to put our notions of retirement in an historical perspective. Part One may be found here. Links to the other parts are at the bottom of the page.
1930 to 1940: The Great Depression Turns Retirement Into A Civic Duty
Before 1930, the forced retirement of older workers was driven primarily by industrialists seeking greater efficiency in their factories and warehouses. After the stock market crash of 1929 and the beginning of the Great Depression, the federal government came to see retirement of older workers as its best tool for economic stimulus and social stability.
Economic Collapse Changes The World
The Great Depression caused severe disruptions in the social fabric of the United States. The 1930s were a period of widespread political and social disenchantment. Few of us today grasp the scope of this disillusionment. The large numbers of unemployed young people fed fears of chaos and revolution. The future of the country seemed at risk. Solutions demanded sacrifice. Getting angry, disillusioned young people back to work took precedence over nearly everything.
To create jobs for the young, older people were encouraged, even compelled to get out of the way.
The Federal Government Gets Involved
The first major piece of federal retirement legislation eventually became known as the Railroad Retirement Act of 1935. The Act was a testing ground for later, more general retirement legislation. Its evolution and eventual passage offers a fascinating glimpse into the thinking of policymakers.
The Railroad Retirement Act was “sick industry” legislation. There had been little new construction in the railroad industry since 1910. The number of railroad jobs had leveled off in 1920 then began to decline. By 1928, 250,000 railroad workers had lost their jobs. But unemployment accelerated in 1931 when 16% of all railroad employees in the nation were laid off.
The situation was an ungodly mess. Since the railroads operated under collective bargaining agreements, seniority determined layoffs. An older worker who was threatened with a layoff could bump a younger worker from a lower level job and take his place. As younger workers lost their jobs, the average age of railroad employees skyrocketed. Railroad owners complained that productivity fell as their workforce aged.
But older railroad employees suffered too. The railroads had been pioneers in the development of pension plans for older or disabled workers. In the early 1920s, 84% of railroad workers were covered by pensions. But the pensions were entirely voluntary on the employers’ part. During the depression, companies cut benefits drastically or discontinued programs entirely. Retired workers had no recourse. Young and old starved together.
The Railroad Retirement Act attempted to deal with all these issues.
When congress finally passed a bill and sent it to President Roosevelt for his signature, the President strongly considered vetoing it because it would not do enough to reduce unemployment. He ultimately signed the legislation, but the railroad companies challenged the law in court.
The sticking point for the railroads was the Act’s requirement that employers guarantee workers’ pension rights. Employers were only willing to fund pensions on their own terms. They wanted to retain the right to change the plans at will.
The railroads challenged the law by claiming that the Government had overstepped its right to regulate interstate commerce. The Government countered that the law was justified in the interests of reducing unemployment and promoting efficiency.
The Supreme Court agreed with the railroads and overturned the law. This became a turning point in New Deal retirement legislation.
Because of the technicalities of the Supreme Court ruling, proponents of other New Deal retirement legislation had to change their tactics. They had to talk less about efficiency and unemployment relief and focus instead on social security and the needs of older workers.
But this was nothing more than a political maneuver. Efficiency and unemployment relief remained the primary goals.
Lawmakers Ponder “Permanent” Unemployment
It is important to understand that many of the policymakers of the day believed depression era unemployment problems were chronic and intractable. They felt that industrialization and technological advances had created permanently high levels of unemployment. There was no longer enough work to go around. The country needed to develop a fair, effective program for work sharing.
Employers, employees, and the Government had been trying to work through this issue for decades with work sharing agreements involving shorter work days or fewer work days per week. The 40-hour workweek was not enough. There was talk of going to 30 hours per week with severe restrictions on overtime. But these work sharing arrangements threatened to pauperize everyone. Every plan forced certain classes of workers to bear an unfair share of the burden.
Let The Old Guys Take The Fall
A decade before, during the roaring twenties, the foundation of America’s “youth culture” had begun to develop in earnest.
Ageism began to permeate American society. Old people were increasingly viewed as tired, out-of-touch, feeble-minded. The world was changing fast, and older people did nothing but complain about it. The future belonged to the young. The old were seen as a burden.
In the end, the easiest solution to chronic unemployment in the economy seemed to be the retirement of all the older workers who could not keep up anyway. It was their civic duty to get out of the way.
The only problem with this whole plan was making sure that pensions would be available. If you force someone to retire at an earlier age, then you had better guarantee he is taken care of.
Employers had already shown, through their resistance to the Railroad Retirement Act, that they wanted to offer pensions only on their own terms. In the end, The Social Security Act of 1935 provided the necessary guarantees. But it was still primarily economic stimulus legislation. Its main goal was to reduce unemployment by permanently removing the majority of older people from the workforce. And it succeeded.
Middle-aged Workers Get Left In The Cold
Initial legislative proposals suggested that the retirement age be set as high as 70, but New Deal policymakers resisted. They feared congressional and public opposition to such a late retirement age. Serious consideration was even given to setting the cut-off below 65. These proposals were rejected only because of cost concerns.
Many policymakers expected that in the future workers over 55 or 60 would have to be progressively removed from the labor market too. Because the Roosevelt administration was convinced that it could not afford to accomplish this objective immediately, those between 55 and 65 were relegated to obscurity: too old to work and too young to retire. In their struggles against age discrimination, middle aged workers received minimal support.
After the passage of the Social Security Act, older Americans were expected to transition from a productive role in society to a strictly consumer-focused role. They were expected to retire (cease being productive) and to spend their newly acquired retirement benefits to increase consumption in the economy from which they had been dismissed. This new role reinforced the increasingly negative perceptions of older people in America, perpetuated the injustice of forced retirement, and contributed to the growing separation of older Americans from society at large.
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.