The public was confused about who OAA payments were intended for, partly because they were called "pensions" and partly because the Social Security welfare plan was introduced simultaneously with the Social Security insurance plan. Many people did not understand that OAA was only intended to provide cash payments to the needy, not to everyone age 65 or older.
The law required states to ensure that payments only went to those who were truly indigent, so they had to investigate all other sources of income and deduct them from the maximum monthly allotment. "All sources of support had to be explored - even small stipends that children provided to help their parents and the potential yield of a vegetable garden belonging to applicants. Sometimes children were asked whether they could help their parents - even if they currently were not providing assistance." This meant that many beneficiaries got much less than the $30 a month payment they had initially heard about. In Texas, for instance, the average allotment was only $15 a month. (Texas DHS, 1991) This left some people feeling they had been misled or taken advantage of. Others resented the indignity of the probing questions they had to endure in order to receive benefits.
Even the social workers employed by the states to determine eligibility were confused about whether they were supposed to protect the public purse by denying benefits or relieve the pain that they saw by helping people qualify for benefits. As one man said, "I have been advised to give my farm and everything away so I could draw the old age pension. If I was to do that I would be crazy--I'd wake up some morning and find myself in the asylum." Another man reported, "I could git me in old age pension, if I wanted to sign my life insurance away. Woman from the state come here some time ago I says, 'Nothin' doin'', I says. 'Think I'm goin' to sign away my chance for a decent burial?' I says 'That's all I got to look forward to.'" (Federal Writer's Project, 1939)
Although the number of people receiving OAA stayed fairly stable during the 1940's, benefits increased precipitously, even after accounting for inflation. Average benefits restated in 1940 dollars increased by nearly 20% from 1940 to 1950. (Friedberg, 1998) Gross OAA expenditures doubled from $474 million in 1940 to $960 million by 1947. (Advisory Council Report, 1948)
| Percent of 65+ Receiving Benefit | Average Annual Benefit | Average Monthly Benefit | Gross Expenditures | |
|---|---|---|---|---|
| 1934 | 3% | $174 | $14.50 | $31,200,000 |
| 1940 | 22% | $241 | $20.01 | $474,000,000 |
| 1947 | 22% | $420 | $35.04 | $960,000,000 |
The percentage of people age 65 and older receiving OAA would be high if most people in this age group were retired, as is true today. However, about half of all men age 65-74 were still working throughout this time period. (Friedberg, 1998) Either those who were employed earned so little that many still qualified for welfare benefits, or a very large percentage of those who were not working were receiving benefits. Whatever the reason, the percentage of the elderly who were receiving welfare benefits during the 1940's was extremely high.
The federal and state governments reacted in different ways to the exploding costs of the program. Some states just cut their appropriations. For example, Texas Department of Public Welfare Executive Director Adam J. Johnson sent the following letter to all program recipients in October 1939:
"Because there is not enough money coming into the Old Age Assistance Fund in Texas to pay all the old age assistance grants in full, we are forced to cut $6.00 off the grant of everybody on the rolls. This is to notify you that, beginning with this warrant, your grant must be cut by $6.00 below what the Investigator recommends for you and you have been receiving. We regret having to do this, but are powerless to prevent it. Please understand this is due entirely to lack of funds and is not our fault nor the fault of the Investigator, and that the Investigator cannot increase your grant just to take care of the cut. The revenue coming in is not sufficient to do this. Grants to those who are eligible will be increased again as soon as funds are provided." (Texas DHS, 1991)
The benefit levels had risen so much that by 1948 the average OAA benefit ($38.18 per month) greatly exceeded the average Social Security benefit ($25.13 per month), providing a perverse disincentive for people to provide for their own old age by working and saving. (Advisory Council Report, 1948) Amendments were proposed for the Social Security Old Age Insurance program to increase payment levels and expand coverage to more people. In 1939, Social Security OAI was amended to pay benefits to widows, widowers, and dependent children of workers who died, primarily to start moving this population off of the welfare rolls, but the most significant changes weren't made until 1950.