One of the first, and most persistent, controversies over the Social Security system is that contention that it costs America jobs. Variations of this argument were first articulated before the signing of the Social Security Act in 1935 and have remained active ever since.social security office zanesville ohio Even today some opponents consider Social security to be one factor encouraging the outsourcing of jobs abroad, essentially repeating the same mantra. The opposition arguments in 1935, discussed below, are actively employed to this day.
Due to the overwhelming public demand for relief in 1935, many large businesses tended to publicly support the idea of Social Security. The promise was that a national-level social welfare scheme would result market stability and would provide a shared expense applicable to all employers. Support also came from small businesses in states that had decided to implement social welfare programs independently, such as Wisconsin. In places like this, small business was hurt by the state regulation because their competitors in neighboring states did not have this added expense. They justly felt that a nation-wide program would even the playing field for them.
Despite this, there was still plenty of opposition from business. Among big business, the opposition was spearheaded by the “Liberty League.” This radical right-wing formation was created to oppose all forms of “radicalism” and included the heads of General Motors, General Foods, and members of the DuPont family. Small businesses, especially those in the South, were also strongly opposed and were effectively represented by the National Association of Manufacturers (NAM) in Washington.
James A. Emery, chief counsel for NAM, articulated the views of the opposition business well when in 1935 he declared: “General recovery depends on our ability to enlarge our production, to employ more people, and to cut down and not raise up the price of goods. Every time we increase the price of goods in a diminishing market, we are diminishing the possibility of employing other men, because we are making it more difficult, not less, to sell goods. Until we can market goods, we cannot employ men.”
After the Social Security Act passed, more businesses began echoing this argument, especially as the payroll taxes and added administrative costs were implemented without any immediate benefits. As it turned out though, this argument was discredited due to circumstances having nothing to do with Social Security at all. Specifically, the industrial boom that began with the Second World War and continued thereafter utterly belied this argument. In the face of the nation’s largest and lengthiest period of job creation spurred initially by the war, the idea that Social Security retarded job creation fell quite flat.
Although business opposition to Social Security continued to use this argument regularly, it really carried little weight until the 1980’s, when the era of free trade really took off. The revitalization of this argument in the context of corporate outsourcing will be reviewed in a different article in this same series.