Otto von Bismarck

Otto von Bismarck
German Chancellor 1862-1890

Bismarck engraving
SSA History Archives.

Germany became the first nation in the world to adopt an old-age social insurance program in 1889, designed by Germany's Chancellor, Otto von Bismarck. The idea was first put forward, at Bismarck's behest, in 1881 by Germany's Emperor, William the First, in a ground-breaking letter to the German Parliament. William wrote: ". . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state."

Bismarck was motivated to introduce social insurance in Germany both in order to promote the well-being of workers in order to keep the German economy operating at maximum efficiency, and to stave-off calls for more radical socialist alternatives. Despite his impeccable right-wing credentials, Bismarck would be called a socialist for introducing these programs, as would President Roosevelt 70 years later. In his own speech to the Reichstag during the 1881 debates, Bismarck would reply: "Call it socialism or whatever you like. It is the same to me."

The German system provided contributory retirement benefits and disability benefits as well. Participation was mandatory and contributions were taken from the employee, the employer and the government. Coupled with the workers' compensation program established in 1884 and the "sickness" insurance enacted the year before, this gave the Germans a comprehensive system of income security based on social insurance principles. (They would add unemployment insurance in 1927, making their system complete.)

One persistent myth about the German program is that it adopted age 65 as the standard retirement age because that was Bismarck's age. This myth is important because Germany was one of the models America looked to in designing its own Social Security plan; and the myth is that America adopted age 65 as the age for retirement benefits because this was the age adopted by Germany when they created their program. In fact, Germany initially set age 70 as the retirement age (and Bismarck himself was 74 at the time) and it was not until 27 years later (in 1916) that the age was lowered to 65. By that time, Bismarck had been dead for 18 years.