It was the largest accounting initiative in the nation’s history: The pioneering technology collaboration between the Social Security Administration and IBM has changed the lives of hundreds of millions of retired American workers and their families since its inception in 1937. Every employer and employee was assigned an identification (ID) number that would be used for collecting and tracking the funds on a regular basis. (IBM100)
IBM’s essential role in the creation of the United States Social Security Program in 1937 – the largest accounting job in history to that point – has long been celebrated. But few know that the technology solution that was collaboratively developed by the Social Security Administration and IBM traced its roots back to 1920. That was when the United States Department of Agriculture (USDA) and IBM first began creating punched card accounting systems for agricultural research. Elwood Way, then a USDA employee with just two years of service, suggested using punched card equipment to coordinate data. This suggestion, Way later recalled, was based on once seeing IBM equipment in action at the Pillsbury Milling Company in Minneapolis. He had no real experience with punched card equipment per say, but since it was his idea, he got “stuck with the job.” Way quickly became a punched card systems expert, and during his decade with what became known as the Machine Tabulating and Computing Section of the Bureau of Markets, he oversaw more than 100 tabulating projects.
The government’s use of IBM equipment accelerated during the early days of Roosevelt’s New Deal, which saw the creation of a series of accounting system projects, each larger and more far reaching than its predecessor. In June, 1933, the government’s tabulating experts – including Way – joined with IBM to take on the task of creating a punched card accounting system for the Agricultural Adjustment Administration’s (AAA) Cotton Control Contract, which would manage contracts with more than 1.6 million cotton farmers. But at the time, the quick installation of IBM’s punched card system had more immediate benefits, according to Dr. Rexford Tugwell, Under Secretary for Department of Agriculture. “This machine that we are now using has prevented a revolution in this country, especially in the Mississippi Valley …. It’s a wonder. We got out these checks with it, and if we hadn’t gotten them out on time we would have had a revolution. Farmers were calling for those checks and there was no way in the world to get them out except by such devices as this company produces and furnishes to the country.”
The next big New Deal project for Way and IBM, in October 1934, was the Railroad Retirement Board (RRB). The RRB intended to create an accounting system to track the retirement funds for some 3.5 million employees whose deductions would be taken from their wages and posted to an interest-bearing account. But before the Board could order the workhorse IBM equipment for the program, the RRB was declared unconstitutional, and the program skidded to a halt. However, the work of Way and his colleagues on the RRB was not wasted, since the plan that was developed for that program would later greatly inform the system designed for Social Security. The punched card concept that was worked out for the Railroad Retirement Board – employee account numbers, wage reports, ledgers, forms and processes – served as the basis for that which would be successfully applied in 1937 with the creation more than 26 million accounts for the Social Security program, one of earliest and most successful Big Data initiatives in the industry.