Toward a Welfare State

Toward a Welfare State

FDR’s New Deal established a number of influential welfare programs, the first of their kind in the United States.

Learning Objectives

Explain what the Social Security Act established in 1935

Key Takeaways

Key Points

  • Prior to the Social Security Act of 1935, the United States was the only major industrial nation that lacked a national social security program.
  • The 1935 Works Progress Administration provided unemployment relief to millions of workers, employing them on a number of large-scale construction projects. Its advocates argued that government-created jobs served the role of social security provisions for the unemployed that were more effective than provisions in cash or in kind. The Social Security Act (SSA), drafted by Francis Perkins, introduced retirement pensions, unemployment insurance, and benefits for handicapped and single mothers (children in families with no present father).
  • Although the SSA excluded certain groups and deepened existing racial and gender inequalities, it was the first U.S. national law that offered social security provisions. The act is the foundational document of the U.S. welfare system.
  • In search of revenues that would fund social security programs, Roosevelt pushed for tax reforms that targeted corporations and the rich.

Key Terms

  • Social Security Act: A 1935 legislative act that created the Social Security system in the United States. It was drafted during Roosevelt’s first term by the President’s Committee on Economic Security, under Frances Perkins, and passed by Congress as part of the New Deal.
  • Works Progress Administration: Established in 1935, the largest New Deal program that provided unemployment relief to millions of workers, employing them on a number of large-scale construction projects.
  • Federal Project Number One: A program created under the 1935 Works Progress Administration that created jobs for writers, musicians, artists, and theater personnel.
  • National Youth Administration: A program created under the 1935 Works Progress Administration that focused on providing education and work for Americans between the ages of 16 and 25.

Background

Before 1935, old age insurance laws existed on the books only in several states. In reality, however, those laws provided hardly any support for the elderly. The virtual absence of a system that would provide financial support for the elderly forced men and women to either work until they died or rely on families and charities. The same was largely true for other vulnerable populations that today may rely on some state support, including the disabled, single mothers, and the unemployed.

In the 1930s, the idea of state support for those in need was by no means revolutionary. It became popular in Western Europe in the second half of the 19th century and gained significant traction in the U.S. towards the end of the 19th century. However, the United States was the only major industrial country where people faced the Great Depression without any national system of social security. Many of the First New Deal programs (1933–34/5), particularly those focused on creating jobs, offered immediate relief rather than long-term reforms. The Second New Deal (1935–38) continued the First New Deal but its programs were less a result of the earlier sense of emergency and more a reflection of bolder attitudes. After the Supreme Court declared some of the First New Deal programs unconstitutional, Roosevelt followed with an agenda that emphasized the redistribution of national wealth and the notion of social justice. In terms of what would fall under the umbrella of a welfare state (in the 1930s, a more popular way to describe the phenomenon was simply “social security”), Roosevelt proposed two major ideas. First were public works programs that would offer jobs, as opposed to charity, to the unemployed, and second, direct financial support programs targeted at the most vulnerable populations.

Works Progress Administration

While the First New Deal included programs that created employment in the government and through public works projects (e.g. the Tennessee Valley Authority, the Civilian Conservation Corps, and the Federal  Emergency Relief Administration), none of them were as large and ambitious as the 1935 Works Progress Administration (WPA). By the time WPA was disbanded in 1943, over 8.5 million people found employment at public work projects conducted under its umbrella. Roosevelt had insisted that the projects had to be costly in terms of labor, produce long-term benefit, and WPA was forbidden to compete with private enterprises, therefore the workers had to be paid smaller wages. Critics of the program noted that many jobs created under WPA were not essential or even necessary, but its supporters consistently emphasized that creating opportunities for the unemployed as opposed to providing for them in cash or in kind was invaluable.

As a result of WPA, 650,000 miles of highways and roads, 125,000 public buildings (hospitals, schools, etc.), bridges, reservoirs, irrigation systems, parks, and playgrounds were built. Prominent projects included the Lincoln Tunnel, the Robert F. Kennedy Bridge, LaGuardia Airport, the Overseas Highway, and the San Francisco/Oakland Bay Bridge.

Also under WPA, a number of additional programs offered opportunities targeted at specific populations. The National Youth Administration focused on providing education and work for Americans between the ages of 16 and 25. Its Texas director, Lyndon B. Johnson, later used NYA as a model for some of his Great Society programs in the 1960s. The Federal Project Number One created jobs for writers, musicians, artists, and theater personnel. Under the Federal Writer’s Project, writers cataloged archives, documented folklore, and collected what today would be labeled as oral histories.

In what remains one of the most controversial projects of the time, former slaves were interviewed and their stories were recorded. Under the Federal Theater Project, actresses and actors, technicians, writers, and directors were able to produce plays. Inexpensive or free tickets made theater available to the masses, including audiences that usually would not attend stage productions. Female artists were asked to paint murals or create statues for newly built post offices and courthouses. Many of these works of art can still be seen in public buildings around the country, along with murals sponsored by the Treasury Relief Art Project of the Treasury Department.

The public utility of projects carried under WPA cannot be overestimated. Essential infrastructure grew in urban and rural areas that were also revitalized and beautified. However, the program did not fix or even address the causes of the devastating unemployment that was such a huge aspect of the Great Depression. Neither did it provide an answer on how to secure economic stability and prevent similar disasters in the future. Finally, WPA embraced and deepened existing gender inequalities by offering very limited opportunities to women. As the program stipulated that only one family member could benefit from public employment, the jobs would usually go to men who traditionally served the role of breadwinners. Moreover, men were seen as a more “natural” fit for WPA jobs since most of them were conventionally associated with the male labor force (most notably, in the construction sector).

Social Security Act

Perhaps the most important and influential program of the New Deal was the 1935 Social Security Act (SSA). It was drafted by Francis Perkins, the Secretary of Labor in the Roosevelt administration and the first woman serving in the U.S. cabinet. The act established a permanent system of retirement pensions (Social Security), unemployment insurance, and welfare benefits for the handicapped and needy children in families without a father present (the latter under the program known as the Aid to Dependent Children, (ADC)). Although it is important to keep in mind that SSA benefits did not cover all Americans falling into the categories included in the document, it was the first time that the federal government took responsibility for the economic security of the aged, the temporarily unemployed, dependent children, and the handicapped.

image

Frances Perkins, fourth U.S. Secretary of Labor: Frances Perkins drafted the Social Security Act.

Compared with the social security systems in western European countries, SSA was rather conservative. Its original version (amended later) also endorsed and deepened racial and gender inequalities in the United States. Perkins’ original draft was much more ambitious than the eventual document passed in Congress as she intended to include nearly all workers in the old-age pension benefits. However, the balance of power in Congress resulted in a compromised version that excluded rural and domestic workers. This stipulation affected many Americans but no other group more than African Americans and particularly African American women. Out of the latter group, the overwhelming majority of those who met the age requirement (65 or older), did not qualify for the pension because of their earlier employment in agriculture or domestic service. Also under ADC, it was primarily white mothers who received support as historically, black mothers were usually part of the labor force and were deemed ineligible for ADC benefits. However, under the same program, many poor white mothers faced the moral judgement of their middle and upper class compatriots who decided that while some women deserved the support, others did not.

Tax Reform

Roosevelt insisted that SSA should be funded by payroll taxes, rather than from the general fund “so as to give the contributors a legal and political right to collect their pensions and unemployment benefits.” He added, “With those taxes in there, no damn politician can ever scrap my social security program.” This idea was what at the time distinguished the old-age pension program from similar programs offered in western Europe.

In 1935, Roosevelt developed a tax program called the Wealth Tax Act (Revenue Act of 1935) to redistribute wealth. The bill imposed a progressive income tax (the higher the income, the higher the tax rate) on corporations and rich individuals, with a rate as high as 75% on individual incomes over $5 million. This highest tax rate covered just one individual, John D. Rockefeller. The bill was expected to raise only about $250 million in additional funds, so revenue was not the primary goal. It raised the bitterness of the rich, who called Roosevelt “a traitor to his class.”

In 1936, Roosevelt also pushed for a tax on undistributed corporate profits. This time, the primary purpose was revenue, since Congress had enacted the Adjusted Compensation Payment Act, calling for payments to World War I veterans of $2 billion. The bill established the persisting principle that retained corporate earnings could be taxed. Paid dividends were tax deductible by corporations. The purpose was to stimulate corporations to distribute earnings and thus put more cash and spending power in the hands of individuals. The business community fervently criticized the proposal. In the end, Congress responded to the criticism by setting the tax rates at 7 to 27% and largely exempting small enterprises.

Empowering Labor

The New Deal succeeded in introducing a number of laws that empowered labor.

Learning Objectives

Explain how the New Deal labor legislation empowered laborers

Key Takeaways

Key Points

  • The First New Deal had limited success in empowering labor.
  • The National Labor Relations Board was created to enforce workers’ rights under the NLRA.
  • The 1938 Fair Labor Standards Act was a landmark federal law that  established minimum wage, maximum weekly working hours, overtime pay, and restrictions on child labor in certain industries.

Key Terms

  • Fair Labor Standards Act: A 1938 federal statute of the United States that established a national minimum wage, maximum weekly working hours, set overtime standards, and prohibited employment of minors in “oppressive child labor.” The law applied to certain industries only.
  • National Industrial Recovery Act: A 1933 federal law that outlined guidelines for the creation of the so-called “codes of fair competition” (rules according to which industries were supposed to operate), guaranteed trade union rights, and permitted the regulation of working standards (e.g., minimum wages, maximum working hours, etc.). It was the first major New Deal legislation that attempted to empower labor.
  • National Labor Relations Board: Established in 1935, an independent agency of the United States government responsible for conducting elections for labor union representation and investigating and remedying unfair labor practices (as defined by the National Labor Relations Act).
  • National Labor Relations Act: A 1935 United States federal law that provided basic rights of private sector employees to organize trade unions, engage in collective bargaining for better terms and conditions at work, and take collective action, including strike.

Labor and the First New Deal

During the First New Deal (1933–34/5), reforms that aimed to empower labor were limited. One important attempt was labor protection and regulation provisions included in the National Industrial Recovery Act (NIRA, June 1933). Title I of NIRA outlined guidelines for the creation of the so-called “codes of fair competition” (rules according to which industries were supposed to operate), guaranteed trade union rights, and permitted the regulation of working standards (e.g., minimum wages, maximum working hours, etc.). Although business leaders and conservative politicians were critical of the power that NIRA invested in the organized labor and workers generally, NIRA’s labor protection provisions turned out to be very difficult to implement. Industry leaders continued to have a large impact on the final shape of the codes and since NIRA lacked guidelines on how to handle negotiations between labor and employers, labor unrest and increased tensions between employers and workers ensued. Although the National Labor Board was established to handle labor-employers conflicts, NIRA failed to secure long-term workers’ rights. In 1935, in Schechter Poultry Corp. v. United States, the Supreme Court declared Title I (devoted to industrial recovery) of NIRA unconstitutional. That decision removed whatever limited rights labor had gained through NIRA.

National Labor Relations Act

In the aftermath of NIRA’s failure, the 1935 National Labor Relations Act (also known as the Wagner Act) was passed. It offered many of the labor protection and regulation provisions that were earlier included in NIRA. NLRA provided basic rights of private sector employees to organize into trade unions, engage in collective bargaining for better terms and conditions at work, and take collective action, including strike. Unlike NIRA, which tied the same rights to industrial codes, NLRA guaranteed labor rights through the federal government. The act also created the National Labor Relations Board, which was to guarantee the rights included in NLRA (as opposed to merely negotiating labor disputes) and organized labor unions representation elections. NLRA, which remains the landmark legislation of federal labor law, does not apply to workers who are covered by the Railway Labor Act; agricultural laborers; domestic workers (employed in private homes); supervisors; federal, state, or local government workers; independent contractors; and workers employed by a parent or spouse. Historically, the exclusion of agricultural and domestic workers from the provisions of NLRA had a disproportionately negative impact on working African Americans, a substantial number of whom fell into one of those two categories.

President Roosevelt signed the legislation into law on July 5, 1935. The concluding paragraph of section 1 states the act’s goal as “to eliminate the causes of certain substantial obstructions to the free flow of commerce and to mitigate and eliminate these obstructions when they have occurred by encouraging the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection.”

Under critical section 8(a), NLRA defines unfair labor practices by employers. These are:

  • Interfering with, restraining, or coercing employees in the exercise of their rights under section 7. These rights include freedom of association, mutual aid, or protection, self-organization, to form, join, or assist labor organizations, to bargain collectively for wages and working conditions through representatives of their own choosing, and to engage in other protected concerted activities with or without a union. Section 8(a)(1)
  • Dominating or interfering with the formation or administration of any labor organization or contributing financial or other support to it. Section 8(a)(2)
  • Discriminating against employees to encourage or discourage membership in any labor organization. 8(a)(3)
  • Discriminating against employees who file charges or testify under NLRA. 8(a)(4)
  • Refusing to bargain collectively with the representatives of the employer’s employees. 8(a)(5)

Opponents of NLRA introduced several hundred bills to amend or repeal the law in the decade after its passage. All of them failed or were vetoed until the passage of the 1947 Taft-Hartley Act, which introduced and specified unfair labor practices for labor organizations (in addition to those introduced in 1935 for employers).

Fair Labor Standards Act

The 1938 Fair Labor Standards Act (FLSA) is another critical piece of labor legislation passed under the New Deal. To a large extent, FLSA set labor standards that NIRA failed to accomplish. It established a national minimum wage (25 cents per hour in the first year after the act was passed), overtime standards, and prohibited most employment of minors (individuals under the age 16 or 18, depending on the nature of work) in “oppressive child labor.” It also limited the work week to 44 hours (in 1940, amended to 40 hours a week). FLSA did not apply to all industries. Historians estimate that the act’s provisions covered not more than 20% of labor force. Also, the ban on child labor introduced in FLSA did not cover agriculture where child labor was rampant.

FLSA was critical to establishing labor standards that remain the foundation of labor law in the United States. Although the initial draft was more ambitious than the document finally passed by Congress after a long legal battle, federal law that established minimum wages, maximum working hours, and a ban on child labor set a standard for how U.S. labor would negotiate future working conditions. Although FLSA was originally applicable to a limited number of workers, it paved the way for later, more inclusive legislation. In the decades since FLSA was originally signed into law, numerous amendments have been introduced, many of which increased the originally proposed minimum wage.

image

Roosevelt signs the National Labor Relations Act: Francis Perkins, the Secretary of Labor in the Roosevelt administration, looks on as Franklin Roosevelt signs the National Labor Relations Act.

Neglected Americans and the New Deal

The New Deal embraced the existing racial and gender inequalities and offered limited opportunities to African Americans and women.

Learning Objectives

Evaluate to what extent African Americans and women benefited from New Deal policies

Key Takeaways

Key Points

  • Despite an unprecedented number of African Americans in government positions and some efforts to limit employment discrimination, the Roosevelt administration did not plan to end segregation or extend civil rights to black Americans.
  • Some New Deal programs discriminated against or even harmed African Americans while others, most notably employment programs, benefited a significant rate of black workers.
  • The existing New Deal programs targeting discrimination were rarely enforced in the South.
  • Most New Deal programs focused on men and were designed with the assumption that women would benefit implicitly, mostly as wives, mothers, sisters, and daughters of men who were target beneficiaries.
  • The fact that nearly all the major New Deal labor-related programs and reforms excluded agricultural and domestic labor greatly affected women as these two sectors relied heavily on the female labor force. No other group was more affected by this stipulation than black women.

Key Terms

  • Black Cabinet: An informal group of African American public policy advisers to President Franklin D. Roosevelt, first known as the Federal Council of Negro Affairs.
  • Works Progress Administration: The largest and most ambitious New Deal agency (established in 1935), employing millions of unskilled workers to carry out public works projects, including the construction of public buildings and roads. It also operated large arts, drama, media, and literacy projects.

Like no government initiative before, the New Deal agenda highlighted the issue of the unequal distribution of wealth in the United States. All major New Deal programs were designed to benefit those in need, including the unemployed, the elderly, the poor, the disabled, or those who kept their jobs yet still struggled to survive (e.g., farmers). However, the New Deal hardly addressed the divisions that had existed in the American society long before the Great Depression. Racial, ethnic, class, and gender inequalities only deepened at the time of the greatest economic crisis of the 20th century and the New Deal did little to address or counteract it. Most New Deal programs targeted generally at Americans, as opposed to those few established to address the needs of specific minority groups, were in fact designed to benefit predominantly white males. While this focus resulted in substantial and welcomed gains for many poor white workers, it produced a mixed outcome for African Americans and working class women. Those who belonged to both of these categories–working class black women–remained the most neglected group of Americans under the New Deal.

African Americans and the New Deal

The Great Depression only worsened the already abysmal situation of African Americans. At a time when many white Americans struggled for survival, the struggle of black Americans only intensified. Segregation was rampant, racial violence common (particularly in the South), and the economic ills that affected white communities hit black communities with an even more devastating force.

While overall unemployment reached approximately a quarter of the labor force, for black workers, the rate was well over 50%. Those who were able to find employment were excluded from better paying and more stable professions and usually held menial jobs, for which they were paid lower wages than their white fellow workers. The crisis in agriculture that began long before the onset of the Great Depression also greatly affected African Americans, many of whom still lived off the land, more often as sharecroppers and other tenants than landowners.

The legacy of the Roosevelt administration in respect to black Americans remains ambiguous at best. As the 1932 presidential candidate, Franklin Delano Roosevelt embraced the segregationist stand of the Democratic Party. Already as the president, he made many critical decisions driven by the need to please white Southerners, who held substantial power in Congress. He repeatedly refused to support anti-lynching legislation and ignored the black civil rights struggle.

Neither Roosevelt nor the New Deal agenda attempted to battle segregation, particularly in the South. Simultaneously, no other president before appointed as many black officials to his administration. Many of them belonged to what would be known as the Black Cabinet —a group of black experts and professionals who, analogically to Roosevelt’s white advisers who formed his Brain Trust—gathered to advise the president on matters relevant to black communities. The Black Cabinet, as a body segregated from their white counterparts, demonstrates a tragic ambiguity in Roosevelt’s approach to African Americans—he did make some effort to improve their situation but the effort was hardly radical and always curbed by racism existing in American society.

Some of the First New Deal flagship programs either excluded or even hurt African Americans. For example, the 1933 Agricultural Adjustment Act (AAA) drove many black farmers from the land. As subsidies were paid to (usually white) landlords for not growing certain crops on a part of their land, black (and white) sharecroppers and other tenants were the first victims of the new policy. The 1933 National Recovery Administration, the main First New Deal agency responsible for industrial recovery, had hardly anything to offer to African Americans as the National Industrial Recovery Act’s (NIRA) provisions covered the industries from which black workers were usually excluded. Neither farm nor domestic labor, two sectors where African Americans constituted substantial labor force, were covered under NIRA. Where black workers qualified for NIRA’s provisions, white employers would often apply strategies that would still exclude them (e.g., changing the name of the position). Similarly, the original version (later amended) of the 1935 Social Security Act did not provide old-age pensions for farm and domestic workers.

This stipulation affected many Americans but no other group more than African Americans and particularly African American women. Out of the latter group, the overwhelming majority of those who met the age requirement (65 or older), did not qualify for the pension because of their earlier employment in agriculture or domestic service. Analogously, the 1938 Fair Labor Standards Act, which established federal minimum wage and maximum working hours, excluded agricultural and domestic labor.

However, other New Deal programs produced much more positive outcomes for African Americans. The New Deal agenda stipulated that up to 10% of all the programs’ beneficiaries must be African Americans (approximately equal to the rate of black population in the U.S.). Black workers participated in all the major programs that created employment, including the Federal Emergency Relief Administration, the Civilian Conservation Corps, the Public Works Administration, and the Works Progress Administration. Under the provisions of the latter, the youth coming from the families that had at least one member working for WPA also received support that allowed them to continue high school or college education (program known as the National Youth Administration). Around 10% of youth program beneficiaries were black.

In 1937, the Roosevelt administration finally addressed some challenges faced by black farmers. The Bankhead-Jones Farm Tenant Act of 1937 provided affordable loans to tenant farmers in order to purchase land, but relatively few African Americans benefited from the Act’s provisions. The Farm Security Administration, the major New Deal agency established to combat rural poverty, reached out to a much more substantial number of black farmers, tens of thousands of whom received agricultural loans.

Despite Roosevelt’s refusal to support the black civil rights struggle and the mixed results that the New Deal programs produced for black Americans, many black voters changed their political loyalty and shifted toward Democrats. Although in 1932, African Americans supported Hoover, by the 1936 election, they overwhelmingly voted in support of Roosevelt. Modest yet tangible changes that the New Deal promised to black Americans, as well as a generational shift, shaped this historical departure from the Republican Party. Historians also note that although Roosevelt embraced the existing racial divisions, he also surrounded himself with white government officials who endorsed interracial civil rights initiatives (e.g., Harold Ickes, Secretary of the Interior, who battled segregation in the areas under his control, previously served as the president of the Chicago NAACP). While their impact was not huge, it was enough to push for some important changes, including a significantly higher number of African Americans in government jobs. Furthermore, Eleanor Roosevelt continued to urge her husband to pay more attention to black leaders and needs of African Americans.

Women and the New Deal

Most New Deal programs did not aim to support women and operated under the assumption that women would be benefited implicitly, mostly as wives, mothers, and daughters of the men who were target beneficiaries. Men were seen as breadwinners and women as “dependents” and the New Deal agenda embraced the belief without any reservations. Moreover, common social norms pushed many women out of the labor market, usually after they got married or started having children. This, however, was a typical scenario for most white married women in cities. As black families were rarely given the economic opportunity that would allow only one member of the family to work, a much larger percentage of black women belonged to the active labor force. Similarly, women in rural areas, both black and white, could rarely afford not to work on the land that their families owned or leased. Finally, in the 1930s, an estimated 10% of American households were headed by women.

Nationally, two sectors relied heavily on the female labor force: agriculture and domestic service. The same two sectors were also consistently excluded from the protective and reform labor legislation of the New Deal. The 1933 National Industrial Recovery Act, the 1935 National Labor Relations Act, and the 1938 Fair Labor Standards Act all excluded agricultural and domestic workers. Even the 1935 Social Security Act (SSA) heavily discriminated against women. Under its provisions, not only were domestic and agricultural workers excluded from the old-age pension benefits but also charity and religious organization employees. The latter were mostly women, both black and white. Furthermore, although SSA provided benefits for children in families without the father present under the program known as the Aid to Dependent Children (ADC), many poor single mothers were excluded from its provisions. ADC did not support black mothers and many white mothers faced the moral judgement of their middle and upper class compatriots who decided that while some women deserved the support (e.g., widows or women abandoned by their husbands), other did not (e.g., unwed mothers).

Although most of the New Deal employment programs offered jobs to some women, they all consistently discriminated against the female labor force. For example, the 1935 Works Progress Administration (WPA) employed mostly women who could not rely on the support of male family members (household heads). As most employment programs, including WPA, stipulated that only one family member could benefit from public employment, the jobs would usually go to males (interestingly, the Civilian Conservation Corps that created jobs for young men only was not limited by this rule). Men were also seen as a more natural fit for WPA jobs since most of them were conventionally associated with the male labor force (most notably, in the construction sector). Those available to women were analogously seen as an obvious fit for women, e.g., sewing or food production. Other common stereotypical female jobs, like teaching or administrative support, were aimed at more educated middle class women and thus remained beyond the reach of the poor working class women. The same was true for the New Deal programs that focused on arts (e.g., Federal Project Number One).

image

African American sharecropper’s cabin: Marshall, Texas, 1939