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When the Depression put the pension plans to their first great test, many flunked it. As profits vanished, so did the pay-as-you-go pensions. Even the long-standing railroad plans faltered and had to be taken over by the Government.* When thousands of elderly workers finally realized the chilling fact that they would probably never find jobs again, a spate of fuzzy-brained solutions sprang up, e.g., the Townsend Plan, Upton Sinclair's E.P.I.C. (End Poverty in California). It was partially as a counterattack to them that federal Social Security—handled by the Government and paid for by both the employer & employee—was born.
Of the 61.6 million men & women in the U.S. working force today, only 35 million are currently earning credits (i.e., putting more aside) under Social Security. But millions more are covered by other public programs. Some 3,000,000 veterans and their widows and dependents are now covered under tax-supported pension plans. The Federal Government has a complex system for its 2,300,000 employees; special plans also cover members of Congress,* the foreign service, the armed forces, and a sprinkling of minor bureaus from the Tennessee Valley Authority to the Office of the Comptroller of the Currency. State and local governments also provide for 2,100,000 of their workers; most policemen, firemen and teachers have retirement and welfare programs of their own.
How Much a Year?
Once the U.S. had accepted the idea of pensions on a broad scale, private industrial plans spread rapidly, notably during World War II when the sky-high excess-profits tax made it possible for an employer to put $1,000,000 into a pension fund at a net cost of only $150,000. Today U.S. corporations have 13,000 retirement plans covering some 7,000,000 workers. On their own initiative, Americans have individually bought annuities that will pay them at least $750 million annually in their declining years, and are adding to this prospective income at a rate of $25 million each year.
The result of this patch-quilt cushion for old age is that some workers are not covered at all, while some will enjoy as many as three or four pensions. The big reason a worker has to lean on other plans in addition to Social Security is that after 15 years, Social Security benefits are still too small to give security.
Since it began benefits in 1935, Social Security has paid out $3.1 billion in pensions. But the average payment to a man who has reached 65 is only $26 a month. If his wife is also over 65, he gets more; the average payment is $41. Yet Government agencies have reckoned that in 13 major cities an elderly couple needs at least $120 a month to squeak by.
The C.I.O. Auto Workers' President Walter Reuther puts the figure much higher. Said he: a $2,089 annual budget (more than to times the average Social Security old-age payment to married men) is the minimum for an elderly couple who are "too old to work and too young to die."
How Big a Reserve?