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INSURANCE

AGAINST

UNEMPLOYMENT

WITH SPECIAL REFERENCE TO BRITISH
AND AMERICAN CONDITIONS

JOSEPH L. COHEN

B.A. (Cantab), M.A. (Columbia, U.S.A.)
Richard Watson Gilder Fellow in Economics (Columbia)

LONDON

P. S. KING & SON LTD.

ORCHARD HOUSE, WESTMINSTER

1921

7 ^
C.6

DEDICATED TO

RT. HON. ARTHUR HENDERSON, P.C., M.P.

SECRETARY TO THE BRITISH LABOUR PARTY

PREFACE

THE latest comprehensive study * of Insurance against
Unemployment was written before the British National
Scheme of Unemployment Insurance of 1912 had been
put into effect. At that time it was commonly regarded
as impossible to apply the principles of insurance on a
national scale because the nature of the risk of unem-
ployment could not be calculated, and it was believed
that no effective device for meeting the likelihood of
malingering could be devised. The extension of the
British scheme from about two million employees in
seven insured trades to twelve million in all industrial
occupations, and the adoption of comprehensive national
schemes in Austria and Italy demonstrates that the
main difficulties have been overcome. Indeed, per-
haps the chief effect of voluntary schemes of unemploy-
ment insurance has been to prepare the way for national
compulsory schemes. Certain it is that where trade
unionism is weak, as in France, the grant of a subsidy
has not been sufficient to induce a majority of employees
to join organizations which provided unemployment
benefits, and where it is strong, as in Germany, the em-
ployees feel that those responsible for the management
and organization of industry, the employers, ought to

* I. G. Gibbon, Unemployment Insurance, 1911.

8 INSURANCE AGAINST UNEMPLOYMENT

bear the burden of unemployment, rather than its victims
the unemployed workers. Therefore in both types of
countries there is a growing movement in favour of com-
prehensive national schemes. The main conclusion that
emerges from the study of the schemes attempted is
that compulsory unemployment insurance is a well-nigh
universal movement in the industrial world to-day.

The acute depression of 1920-1 is everywhere leading
to the institution of relief schemes which are made to
resemble unemployment insurance schemes. The move-
ment in favour of insurance, too, has been greatly
strengthened.

The main questions relating to unemployment insur-
ance are best considered in the discussion of the British
scheme. These include such debated subjects as the
merits of non-contributory as against contributory
schemes, the rates of benefits, and whether trades
rather than the State should be made to bear the burden
of their own unemployed.

An effort has been made to collect the most inter-
esting schemes of unemployment insurance in individual
plants. Their existence should finally dissipate the
fear of old-fashioned employers that unemployment
insurance must result in their bankruptcy, and that it
is class legislation and " veiled robbery."

This study has been made with special reference to
conditions in Great Britain and the United States. The
author spent three and a half years in the United States,
and has ventured, on the advice of American econo-
mists, employers, and Labour officials, to make a number
of proposals for consideration.

INSURANCE AGAINST UNEMPLOYMENT 9

This study was begun as a thesis for the Ph.D. degree
in Economics at Columbia University, New York, and
was approved by the faculty. The author feels under
a deep and abiding sense of obligation to that University
not only for its M.A. degree and its award of the Richard
Watson Gilder Fellowship, one of its most cherished
prizes, but also for the advantages it afforded him of
studying under some of the leaders of economic thought
in America, and for the opportunities it gave him of
coming into contact with prominent men and women
in the Labour world, with the directors of large plants,
and with leading social workers. He is grateful
especially to Professor Henry R. Seager, under whom the
thesis was prepared and who advised the author, revised
his MSS., and made the path of the stranger easy and
pleasant, and to Professor Edwin R. Seligman, the
Chairman of the Economics Faculty of the University.
He takes this opportunity of thanking also Miss
Lilian D. Wald, Dr. H. G. Enelow, Mr. Bruno
Lasker, and Dr. Philip Sargant Florence, for their aid
whilst in the States. In England he is indebted to,
amongst others, Sir William Beveridge, K.B.E., B. M.
Headicar, Esq., G. R. Clutterbuck, Esq., to the Ministry
of Labour, and to the Labour Research Department.

CONTENTS

PAGE

DEDICATION . . . . . . • 5

PREFACE . 7

PART I

THE PROBLEM OF UNEMPLOYMENT
INSURANCE

CHAPTER

I. THE PREVENTION OF UNEMPLOYMENT . 17

II. MITIGATING THE EFFECTS OF UNEMPLOYMENT . 54

III. DEFINITION OF UNEMPLOYMENT INSURANCE . 67

PART II

THE GHENT SYSTEM OF UNEMPLOY-
MENT INSURANCE

, IV. TRADE UNION UNEMPLOYMENT INSURANCE . 75

^ V. THE " GHENT SCHEME " . . .84

• VI. UNEMPLOYMENT INSURANCE IN FRANCE . . 92

f VII. SWITZERLAND . . . . .105

v VIII. NORWAY . . . . . . 115

[/ IX. HOLLAND . . . . . .121

^ X. DENMARK . . . . . .124

XI. GERMANY . . . . . . 140

XII. NOTES ON CANADA, JAPAN, SPAIN, CZECHO-
SLOVAKIA . . . . -153

12 INSURANCE AGAINST UNEMPLOYMENT

PART III

THE BRITISH SYSTEM OF UNEMPLOY-
MENT INSURANCE

CHAPTER PAGK

XIII. EMPLOYMENT EXCHANGES AND UNEMPLOYMENT

INSURANCE .....

XIV. OUTLINES OF THE BRITISH UNEMPLOYMENT IN-

SURANCE SCHEME ....

XV. THE PRINCIPLE OF COMPULSION .
XVI. THE SCOPE OF UNEMPLOYMENT INSURANCE
XVII. CONTRIBUTIONS AND BENEFITS
' XVIII. THE INFLUENCE OF THE UNEMPLOYMENT IN-
SURANCE SCHEME ON TRADE UNIONS .
XIX. UNEMPLOYMENT INSURANCE AS A DEVICE FOR

REDUCING UNEMPLOYMENT

XX. THE SCHEME AT WORK ....
XXI. NEXT STEPS IN UNEMPLOYMENT INSURANCE
XXII. ITALY

XXIII. AUSTRIA, WITH A NOTE ON RUSSIA

XXIV. ESTABLISHMENT UNEMPLOYMENT INSURANCE

FUNDS ...... 366

'59

200
2l8

235
250

270

292
3I2

333

347

358

PART IV

THE UNEMPLOYMENT PROBLEM IN
THE UNITED STATES

XXV. THE ESTABLISHMENT OF TRADE UNION OUT-OF-
WORK BENEFITS IN THE UNITED STATES . 391
XXVI. THE INFLUENCE OF OUT-OF-WORK BENEFITS ON

TRADE UNIONS ..... 408
XXVII. OUTLINES OF A NATIONAL PROGRAMME FOR

UNEMPLOYMENT ..... 430

INSURANCE AGAINST UNEMPLOYMENT 13

CHAPTER PAGE

XXVIII. STANDARDS OF UNEMPLOYMENT INSURANCE . 445
XXIX. THE MASSACHUSETTS BILL ON UNEMPLOYMENT

INSURANCE , 465

APPENDIX I. — UNEMPLOYMENT INSURANCE (GREAT BRITAIN),

SPECIAL SCHEME .... 495

APPENDIX II. — UNEMPLOYMENT INSURANCE IN AGRICULTURE 519
APPENDIX III.— THE SCALE OF BENEFITS . . .521

APPENDIX IV. — THE 1921 CRISIS: — UNEMPLOYMENT: A

NATIONAL OR LOCAL PROBLEM . . .522

CHIEF BOOKS AND PAPERS USED .... 525

OFFICIAL PAPERS ...... 530

INDEX . . . . . . . ,533

PART I

THE PROBLEM OF UNEMPLOYMENT
INSURANCE

•

CHAPTER I
THE PREVENTION OF UNEMPLOYMENT

UNEMPLOYMENT has been well termed the shadow-side
of progress. It is essentially a by-product and char-
acteristic of this, the latest stage, the capitalist stage,
of production.*

Material development has gone on at an ever-increas-
ing pace since the beginning of the Industrial Revolu-
tion. Human output has increased many-fold, and
mankind as a whole has been greatly enriched by the
opening out of large tracts of land, the discovery of new
fields of enterprise, the invention of new machinery,
and the introduction of new methods. But pari passu
with the increasing productivity of the people of this
country and of the rising wages of labour, unemploy-
ment,! uncertainty, and destitution have not grown less
acute. These constitute chronic evils ever menacing,
the workman's security and comfort. How to retain
the benefits accruing from the growth of the national
dividend and yet do away with the evils consequent
on unemployment is a problem which still confronts
us. Increased production is not necessarily a solution.

To the labourer unemployment is his gravest and
most appalling problem. It is the paramount evil in
his life. His livelihood, his savings, his belongings,
the happiness of his household and all he cherishes are
continually threatened by this Damocles' sword. At

* For a critical analysis of Capitalism, see The Sickness of an Acquisitive
Society, by R. H. Tawney.

f Unemployment is really not a single problem. It is a mosaic, a com-
posite of problems, inherent in our present industrial organization.

2 »

18 INSURANCE AGAINST UNEMPLOYMENT

any moment, and for reasons over which he has no con-
trol, it may fall and reduce him to penury.

It would, however, be dangerous to regard unemploy-
ment merely as a problem affecting the individual. In
certain of its aspects it is one of the most disquieting and
difficult of Asocial .problems. The sufferings of millions of
citizens in which it results, the threatening complaints
of hundreds of thousands, the appeals for public aid
from whole armies of people, the crop of social evils that it
aggravates — of child-labour, woman-labour, low wages,
prostitution and drink — constitute a malady which no
enlightened democratic country can ignore. It is, more-
over, one of those major evils which prevent or hinder
the development of that " national efficiency " which
is no longer an ideal but an essential pre-requisite to the
continued existence of the Western nations. Louis D.
Brandeis, now Justice of the Supreme Court of the
United States, has, therefore, justly termed unemploy-
ment the " worst and most extended of the industrial
evils of to-day."

Whenever the healthy willing worker is unable to
find work at the prevalent rates of pay an atmosphere
is created in which every extreme, hasty and unbalanced
political and industrial proposal gains support. The
dangers thus created are increased now that those from
whom the State has asked the highest sacrifice are
allowed to eke out an existence with grants and
allowances.

The suffering caused by unemployment has been recog-
nized in most European countries, and is beginning to
be appreciated in the United States. But its reactions
on production have been ignored. The labouring classes
oppose every device for increasing output lest it should
cause unemployment. Improvements in machinery are
resisted. The reorganization of labour in the factory
so as to use skilled grades more effectively by means
of dilution is opposed. The methods of scientific
management are fought. Trade unions wage a war
against payment by results. In every case fear of

INSURANCE AGAINST UNEMPLOYMENT 19

unemployment is largely responsible for this opposition,
and no one has been able to convince the rank and file
of workmen that the proposed productive improvement
may be to their ultimate interest. It is evident that
without a complete removal of the menace of unem-
ployment an immense potential increase in the pro-
ductivity of industry cannot be released.

«fc. —n ^- J^a^aaMfciMay^^^MiMa^M^^^^MMa^MMM^M^M-M^MiMi

Unemployment — An Old Problem in England and the
United States.

Contrary to general opinion, evidence of the existence
of unemployment in England and in America goes back
to an early date.

Unemployment in England is at least as old as the
days of Queen Elizabeth, as is seen from the Poor Law
of 1601. Cunningham refers to the unemployed — who
became tramps and obtained licences to beg, as a result
of the enclosure movement in the fifteenth and sixteenth
centuries. In the eighteenth century every financial
crisis was accompanied by a certain amount of unem-
ployment. But as a social problem, distinct from other
problems of poverty, it does not seem to have been
recognized for much more than a quarter of a century.
Mr. Edward R. Pease writes in reference to the term
"unemployment" that the editors of the Oxford English
Dictionary informed him that the earliest quotation
they have yet found is dated December 1894.*

It is even less known that unemployment has been
recorded in the United States for the last hundred
and fifty years. As in this country, whenever the
old farm life was replaced by industrial occupations,
the change was accompanied by the emergence of
unemployment. Indeed, whenever the pecuniary gains
of business men became the motivating forces and
supplanted the old .order based on tradition in industry,
it became a serious problem. Thus with the intro-
duction of the factory system in New England at the

* History of the Fabian Society, p. 217.

20 INSURANCE AGAINST UNEMPLOYMENT

close of the eighteenth century, the conditions for its
occurrence arose.*

During Mathew Carey's " Crusade against Low Wages,"
we learn from a speech delivered in Philadelphia in 1829
that

" even when the seamstresses have constant work their earnings
are inadequate for their support, whereas the work is so pre-
carious that they are often unemployed — sometimes for a whole
week together, and very frequently one or two days in each
week. In any case, no small portion of their time is spent in
seeking and waiting for work, and in taking it home when done."

Unemployment seems to have been as great an evil
in Boston as in Philadelphia.

One large tailoring establishment which has not infrequently
given employment to eight or nine hundred women, and during
the business year of 1828 . . . employed on an average . . . 300
females every day, now, and for some months past, has not had
work for more than an average of lyo.j"

In August 1819 Niles' Register stated that

There are 20,000 persons daily seeking work in Philadelphia ;
in New York 10,000 able-bodied men are said to be wandering
the streets looking for it, and if we add to them the women who
desire something to do, the amount cannot be less than 20,000 ;
in Baltimore there may be about 10,000 persons in unsteady
employment, or actually suffering because they cannot get into
business. J

Ignorance as to the existence of this problem was
due to the fact that in England and America, before the

* (a) Report on Conditions of Women and Child Wage-earners in United
States, vol. Ix, p. 43. Helen L. Summer, History of Women in Industry
in the United States.

(b) "In 1812 Mr. Batchelor, of Walton, New Hampshire, had about
one hundred weavers in his employ, not constantly at work, but as they
had leisure from their other household employment." — Ibid., p. 38.

The Virginia Act of 1 755 provided for the building of a workhouse
for the " unemployed poor." — Report, Commission on Unemployment
(Chicago), 1914, p. 99.

| Ibid., p. 126. See also p. 89, vol. vii, and Simons' Social Forces
in American History, p. 172, and Hourwich's Immigration and Labour,
pp. 114-15.

J Quoted from Simons, p. 166.

INSURANCE AGAINST UNEMPLOYMENT 21

end of the nineteenth century, the unemployed were
not encouraged to advertise their state. Indeed, they
would then be regarded as little less criminal than a
thief. Thus in Maryland in 1776 a thief was branded
with a T on his left hand, and the rogue or vagabond
—the unemployed man — with an R on his shoulder.

There is similar evidence which amply proves the
existence of unemployment right through the nineteenth
century, whilst with the growth of factory life it de-
veloped into an increasingly serious problem. The growing
urbanization of the population of the United States and of
Great Britain resulted in concentrating the unemployed into
small areas where they could be organized with ease. They
were then able to arrange dramatic meetings, to hold
picturesque processions, and to issue the appeals which
seem to have been necessary to educate the public mind
as to its seriousness. If, however, it is still necessary
to insist that the risk of unemployment is nothing new,
it must be conceded that the conditions surrounding
it have changed. A generation ago growing industries,
the wide West, and new countries were open to those
who were prepared to work. A reserve fund for the
labourers in large cities lay in the continual demand
for workmen in the fields and mines. Under such cir-
cumstances most people came to believe that every man
that wanted work could always obtain it or could at
least bear the strain of rare and short periods of unem-
ployment. The unemployed workman was therefore
suspect. He was treated as a wastrel, a " won't work,"
as well as a burden on society. Although this view
is still met with and applied to the unemployed work-
man of to-day, it is not held by thoughtful members
of the community. Skilled, conscientious workers com-
pose a large percentage of those who stand in bread
lines or march in unemployment processions. But those
who publicly display their misery are only a small
number compared with the sullen thousands who, because
of it, nurse a silent grudge against society.

Even during the busiest periods in normal times, there

22 INSURANCE AGAINST UNEMPLOYMENT

is a fringe of unemployed workmen constituting in all
in this country an army of hundreds of thousands.
During cyclical depressions their numbers swell to such
proportions that society at large grows nervous as to
their temper and purpose. And every year we have
come to expect a sharp outcry from large numbers of
those for whom temporarily industry makes no effective
demand. With the end of the war unemployment is
the lot of millions of discharged soldiers and of those
who were engaged in war industries.

Scarcely a winter goes by during normal years with-
out seeing men marching in procession up the streets
of the large cities of Great Britain and of the United
States, with banners unfurled, demanding the " right
to work/' the " right to live/' " the right to obtain a
day's food for a day's work." In such times of acute
distress citizens call upon Government authorities and
upon the charity organizations to provide work or relief
for the unemployed. They invariably fail, however,
in the attempt. The machinery for coping with the
situation is hastily erected and inefficient ; there is no
comprehensive, carefully thought-out plan which can
be acted upon, and the funds for relief are generally
quite inadequate for the purpose of relieving all those
who are in distress. Destitution and misery then fall
to the lot of a vast body of labourers, and " crime " and
"vice" noticeably increase.

Unemployment Statistics in Great Britain.

In Great Britain The Labour Gazette, puolished monthly
by the Ministry of Labour, contains all the available
statistics on unemployment. These include : —

1. Monthly returns from trade unions covering about
1,500,000 workpeople who have made provision for
unemployment.

2. Returns from employers in the most important
trades, giving the numbers employed and the" total
wages paid at different dates.

INSURANCE AGAINST UNEMPLOYMENT 23

3. Returns from local and trade correspondents covering
these and other trades.

4. Returns of the employment offices showing the
number applying for work, the number finding work,
and the number remaining unemployed at the end of
each month.

5. Returns from the National Insurance Act adminis-
trators showing the number of insured workers who have
lodged their unemployment books on becoming unem-
ployed, the amount paid in benefits and the duration

of unemployment. Since the number of persons insured \
under the Act was 12,000,000 on February 25, 1921,
it is evident that this is the best source of information.
The charts and analyses made by the Ministry of
Labour give a clear indication of the trend of the em-
ployment market, and a ready comparison with other
periods is possible. It is not necessary to demonstrate,
therefore, with respect to Great Britain, that unemploy-
ment is a problem constantly menacing the workman.
This conclusion is not challenged. It will suffice to
quote only a few recent figures.

UNEMPLOYMENT IN INSURED TRADES COVERING ABOUT
TWELVE MILLION EMPLOYEES. •

Number Unemployed.

Number Working on
Systematic Short
Time.*

December 31, 1920..
January 31, 1920
February 25, 1921
March 24, 1921
April 29, 1921 .^.

691,103
977.296
1,145,710
1,335.206
1,799,242

446,486
637,688

743.538
838,662

I.077.3I7

In April 1921, about 15-0 per cent, of those insured
were totally unemployed and about 9 per cent, on short
time.

* The persons included in column 2 are employed in establishments
where, owing to the depression in trade, the number of working days
has been reduced on a systematic basis in such a manner as to entitle
claimants to benefit under the Unemployment Insurance Act. Persons
working one day short time per week, or reduced hours each day or on
certain days, are not eligible for benefit and are not included.

24 INSURANCE AGAINST UNEMPLOYMENT

The percentage of totally unemployed is higher than
at any previous date. In 1908-9, it reached a maximum
of 9-5 per cent.

Extent of the Evil in the United States.

The statistics dealing with the amount of unemployment
in the United States are extremely unsatisfactory. As a
result the very existence of the problem is still denied by
many. There is no national system of employment
exchanges providing a continuous body of information on
this subject, nor are the figures of the trade unions dealing
with unemployment amongst organized labourers as
complete as they are in England and other European
countries where out-of-work benefits are more common.
Adequate official statistics on the problem are thus
lacking — a fact which is all the more deplorable when
it is recalled that the fine official publications of the
Government are the envy of European students. Most
of the available statistics have been collected through
occasional Governmental questionnaires or by special
investigators. It is desirable to present these together.

In 1900 the census returns showed that 6,468,964
people over ten years of age, i.e. nearly 25 per cent,
of all those engaged in gainful occupations, had been
unemployed for periods varying from one to twelve
months each during the year 1899. Very nearly half of
this number were unemployed for a period of more than
three months. 3,177,753 had lost from one to three months'
work each, 2,554,925 lost from four to six months each.

The absence of more complete later figures has re-
sulted in a number of investigations amongst repre-
sentative groups by the Federal Bureau of Labour
Statistics and by a number of State labour and sta-
tistical departments, as well as by private agencies.*

A careful canvass undertaken independently by the

Metropolitan Life Insurance Company and the United

States Bureau of Labour Statistics indicated that in

January and February of 1915 the unemployment rate

* U.S. Bureau of Labour Statistics, Bulletin No. 172, 1915.

INSURANCE AGAINST UNEMPLOYMENT 25

was 1 8 per cent., and on this basis the total number
of unemployed in the City of New York alone was esti-
mated at 434,080. In September of that year it had
fallen to approximately 145,000. In March and April
an investigation of some 400,000 families covering 644,000
wage-earners indicated that 11-5 per cent, of the wage-
earners were totally unemployed, and that 16-6 per
cent, were working only part time. In June and July
a similar investigation of twelve cities in the Rocky
Mountains and the Pacific Coast States showed that a
survey covering 36,537 families in which were found 49,333
wage-earners revealed that 12-9 per cent, were totally
unemployed and 20-2 per cent, were working short time.
The Department of Commerce has compared the
month of least employment with the month of greatest
employment in selected industries in 1912.

EMPLOYMENT IN THE MONTH OF LEAST EMPLOYMENT CALCULATED
AS A PERCENTAGE OF EMPLOYMENT IN THE MONTH OF
GREATEST EMPLOYMENT IN SELECTED INDUSTRIES.*

Per cent.

Agricultural implements .. .. 81-0

Artificial stone .. .. .. .. .. 37 "7

Boots and shoes (rubber) . . . . . . . . 89 • 3

Bread and other bakery products . . . . . . 94-0

Canning and preserving .. .. .. .. 12*9

Clothing (women's) . . . . . . . . 80 • 6

Glass .. 49-3

Leather goods . . . . . . . . . . . . 91 -o

Paper and wood pulps . . . . , . 96 • 2

Printing and publishing . . . . . . . . 93 • 3

Woollen and worsted and felt goods and wool hats 91-0

Average number employed in manufactures during year 1909,
6,615,046.

If it is recalled that during the month of greatest em-
ployment only about 95 per cent, of all the workmen
associated with each trade are employed, and this as-
sumption is warranted by the fact that trade union
figures record a fringe of about 5 per cent, of unemployed

* U.S. Bureau Labour, Bulletin Whole No. 109, p. 128. Statistical
Abstract of the United States, p. 237, No. 159. (Source : Reports of the
Bureau of the Census Department of Commerce.)

26 INSURANCE AGAINST UNEMPLOYMENT

during all periods of the year, then it becomes evident
from this table what a large percentage of those attached
to these trades are unemployed during the month of
least employment.

The following table summarizes the statistics of the
report of the New York State Department of Labour show-
ing the percentage of idle wage-earners in representative
trade unions for each month, 1902 to 1914 inclusive.*

Year.

January.

February.

March.

April.

May. June.

1902

20-9

18-7

17*3

15-3

14-0

14-5

1903

20-5

17-8

17-3

2O '2

23-1

1904

21-6

27-1

17-0

15-9

I3'7

1905

22'5

19-4

19-2

n-8

8-3

9-1

1906

15-0

15-3

u-6

7'3

7-0

6-3

1907

21-5

20- 1

18-3

IO-I

10-5

8-1

1908

36-9

37'5

33'9

32-2

30-2

1909

29-3

26-5

23-0

20 '3

17-1

17-4

1910

24-5

22-4

22-6

16-0

I4*5

15-4

I9II

24.8

25*6

21-3

27-2

22-9

1912

25-8

17-6

18-8

I3'3

20'I

22-8

1913

38-2

33*4

21-8

21-7

22-9

22-2

1914

32-3

30-7

28-3

23-6

22-7

25-5

Mean, 1902-13

25-6

22'9

21-7

17-1

17-5

I7-I

Year.

July.

August.

September.

October.

November.

December,

1902

15-6

7-1

6'3

II-2

14-3

22-2

1903

17-8

15-4

9-4

II-7

16-4

23-1

1904

14-8

13-7

12*0

10-8

II • I

19-6

1905

8-0

7-2

5'9

5-6

6-1

II'I

1906

7-6

5'8

6-3

6-9

7-6

!5'4

1907

8-5

I2-I

12-3

18-5

22*0

32-7

1908

26-8

24-6

23-1

21-5

28-0

1909

I3'9

u-9

14-5

13-7

13-3

20 -6

1910

19-4

22-3

12-5

15-0

17-5

27-3

I9II

15-5

n-7

II-2

n-6

20 -o

34'2

1912

21 • I

9-1

5'9

7'4

15-3

30-1

1913

20-8

19-6

16-2

I9'3

27.8

40-0

1914

32-5

30-3

24'3

24-9

35'8

35-7

Mean, 1902-13

I5'8

13-4

n-4

12-9

16-1

25-4

* New York Department of Labour, Bulletin No. 69, Idleness of
Organized Wage-earners in 1914.

INSURANCE AGAINST UNEMPLOYMENT 27

The report, in summarizing, states : That the increased
idleness was due entirely to a lessened demand for
labour. The unemployment for the year 1914 as a
whole nearly equalled that for 1908, which was the
highest in recent years.*

Unemployment in the United States, January 1921.

The result of the Unemployment Survey conducted
by the Employment Service of the United States De-
partment of Labour, shows that in January 1921, in
48 States and the district of Columbia, there were
3,473,446 less workers employed in industry than in
January 1320 — a reduction of 36-9 per cent. Assuming
that this number is not much less than the total of unem-
ployed for the whole country, and that there was a fringe
of 5 per cent, of unemployed in January 1921, one may
fairly estimate the present number of unemployed to be
four million, f The American Federation of Labour has
estimated the number of unemployed at that time at
four and a half million, and Congressman Meyer London
at five and a half million.

It is estimated that since January there has been a
steady increase of unemployment, so that by September
there was one million and a half more unemployed.

Unemployment manifests itself with varying degrees
of intensity in the industrial countries of the world.
Most of these publish figures at regular intervals show-
ing the state of unemployment. J

* A Government Commission which investigated the amount of un-
employment reported that in 1911 organized workers lost on the average
20 per cent, of their possible income through unemployment. The
amount of enforced idleness amongst coal miners has varied from 20
to 50 per cent, between 1890 and 1910. During 1914, 41 per cent, of
those engaged in the men's clothing industry worked less than 100 per
cent, of full time and 13 per cent, under 75 per cent, of full time.

For curve representing the fluctuation in the deviation from the maxi-
mum in manufacturing industries during January igoy-December 1913,
see Chart 10 in the Massachusetts Bureau of Statistics, 1868-1915, Sketch
of its History, Organization, and Functions, p. 83.

t Industrial Employment Survey, Bulletin No. i, January 1921,
Washington.

J The Report on Unemployment, published by the League of Nations

28 INSURANCE AGAINST UNEMPLOYMENT

Definition of Unemployment — Unemployment Due to Lack

of Work.

Following the example of the British National Insur-
ance Act, unemployment is best denned indirectly.

Sickness, invalidity, old age, and accidents are effec-
tive causes keeping workmen away from work. Against
these emergencies and conditions, therefore, trade unions
have often provided through special funds.

Even more important in the history of workmen's
organizations have been strike funds. The lock-out
is the employer's weapon corresponding to the strike,
and it is used by him to further his ends in trade dis-
putes. The loss of time involved is generally treated
by trade unions on the same footing as that arising
from strikes. Strike pay is given to those locked out,
because employers generally resort to it when a strike
is threatened or is actually in progress.

In addition to unemployment due to these causes,
against which it is possible to provide special insurance
funds, there is unemployment due to other causes
against which it is impossible to insure. There is the
wilful idleness of the cantankerous individual, who is
a source of trouble to his fellow-workers and to his em-
ployers ; the individual who cannot hold his j ob for more
than a few days ; and the individual who would not
work at all if a minimum of existence were guaranteed
him. These suffer, of course, from unemployment,
but not from involuntary unemployment.* They pro-

and prepared by the organizing committee for the International Labour
Conference, Washington, 1919, contains a brief comprehensive statement
of the problem as it presents itself in a large number of countries.

* Excepting in so far as their attitude is the result of heredity or of
early education. John Burns, whilst still a prominent and active English
Labour Leader, said that : "In spite of what some advocates of work
for the unemployed may say, I contend, as a socialist . . . that until
the differentiation of the labourer from the loafer takes place, the un-
employed question can never be properly discussed and dealt with. Till
the tramp, thief, the ne'er-do-well, however pitiable he may be, is dealt
with distinctly from the genuine worker, no permanent benefit will result
to any of them. The gentleman who gets up to look for work at midday,
and prays that he may not find it, is undeserving of pity." As a Cabinet

INSURANCE AGAINST UNEMPLOYMENT 29

duce the real but by no means insuperable obstacles
which make unemployment a contingency against which
it is difficult to insure. Lack of employment due, as
is the case with such individuals, to their own acts
or defaults, is not referred to here by the term unem-
ployment.

Other difficulties in the way of a definition of unem-
ployment arise from trade union policy. Unemploy-
ment may be due to a refusal to work at a wage lower
than the trade union rate, or under conditions regarded
as being below standard. Considerable friction has
hitherto resulted also from the contention of trade union
organizations that a person engaged in one trade, e.g.
as an engineer, should not accept employment in another
trade, e.g. as stevedore, at a rate of wages, hours, or
conditions below those current in his trade and district.*
This attitude is due, of course, to the determination
of workmen to prevent the lowering of the standard
rates and terms which they have attained at such great
effort.!

We are now in a position to attempt a definition of
unemployment. A workman is unemployed when he
is able-bodied, efficient, and, though willing to work in his
own trade at the current rates of pay, is unable to find
employment because of lack of work.%

Minister for nine years, Mr. Burns held this view with great pertinacity,
in spite of Conservatives and his erstwhile colleagues.

In the long run the fact that unemployment insurance will be the
means of severing the inefficient and the ne'er-do-well from the willing,
capable workman will commend it to the working classes more than any
other of its beneficial features.

* For it is evident that when a workman trained in one trade takes up
work in a trade for which he has not been trained, he would be willing
to take a smaller wage than the man engaged in the second trade con-
tinuously.

f But many trade unionists argue that it is permissible in times of
slackness to allow lower rates if work that would not otherwise be
undertaken is begun. The writer has found many trade unionists
who have taken this view, especially amongst the builders' unions of
Massachusetts.

\ But in Germany many trade unionists have urged that all involuntary
unemployment of able-bodied persons, and this would cover unemploy-
ment due to a lock-out, ought to be provided for by unemployment in-
surance.— See Chapman, Wages and Employment, p. 333.

SO INSURANCE AGAINST UNEMPLOYMENT

Causes of Unemployment.

Sir W. H. Beveridge has analysed the three prin-
• cipal economic factors in unemployment as changes

INDUSTRIAL CAUSES OF UNEMPLOYMENT.

Regular Causes
of Unemployment

Casual nature of certain trades.
Repair of works.
Climatic changes.
Habitual changes of fashion.

Reserves of labour round industrial establishments.
Lack of proper organization in factories resulting
in anarchic methods of hiring and firing workmen.

Uncertainties

Political
Life

Variations

in
Nature

War.

Changes in Legislation bearing on
economic activities.

Irregularity of big public works.

Famines : Agricultural or other
disasters.

Earthquakes.

Storms at sea (affecting dock labour).

Invention of new machinery.

Improvement in industrial organiza-
tion.

Removal or displacement of an
industry.

Change of routes, of means of com-
munication, and of tariffs.

Alteration of waterways to the
interior.

Long time changes of fashion.

Sudden immigration of workmen : a
temporary flow of workmen towards
a given industry or towards a
given centre.

Involuntary closing of factories.

Changes in money value. Price
fluctuations.

Abuses of competition and specula-
tion.

Sweating system and abuse of em-
ployment of women and children.

Excessive prolongation of the hours
of labour.

A crisis abroad or a change in the
markets of some other country.

Changes in foreign competition and
production.

Compare with tin's outline of the causes of unemployment the views
of Croisson de Cormier, Le Chtimage, and Wealth and Welfare, Part IV,
by A. C. Pigou.

Irregular
Causes

Unemploy-
ment

Variations
in the

Comparative

Attractiveness *

Investments

of industrial structure, fluctuations of industrial activity,
and the reserve of labour. Under each of these

RAXCE AGAINST UNEMPLOYMENT 31

~_L ~L~ Uli-LJL ">

of
to keep

i- ittr-;: it tie t::te: r.-iy :: tie

_ •_ • _ _ •_ , _ urn, " ,•• f m ,"• wi^^—J^i*-^ «^

'fg^^'^!liB 'DlO'DH£II.l r na.rt rrU* UllHICcvi *^i i ri y >iTr"\.L y Of

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not

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tie i~:i^t ::

i^:~z-:^ inilyrii :: :le :i_rr~ riviz ;- r _:•: :.f

T'--.n.ti tl

I'-ri" *i__ .""-... -i

and to the seasonal character of certain otiueis*

etc., and to cyclical fluctuations of indnstij, Le. to tke
great vaiiations in tnc activity of trade as a wiwfc. The
urter ire nu::: zirre :~:r':rtint thin tie ;th-r ;^^cs
Indeed. Jevons, who hehe ved that they were doe to the
variations of die bounty of nature, could write before
the Great War, of course, that "the toss of capital in
one year caused by natural rabnritirs and even by
great wars is small in comparison with the
of nature's bounty/'* His view that cyclical
tions of industry are due to climatic conditions is
endorsed by the high authonty of Professor A. C P^gou,
of Cambridge Unirasity, Sir W. Beveridge, and Pro>
lessor H. L. Moore, of Columbia University.

Trade FV

A. C HIMU W*m mm* **$•*. ^^t IT

Yate

82 INSURANCE AGAINST UNEMPLOYMENT

" After-the-War " Unemployment.

This analysis of the causes of unemployment needs
to be supplemented by reference to the special causes
operating in the period immediately after the war.

The causes of unemployment in Great Britain in the
winter 1920-1 were directly traceable, at least in part,
to the policy pursued by the Allied Powers in relation
to Germany, to the countries of South-East Europe,
and to Soviet Russia. The execution of deferred orders
from the home market and from foreign markets, which
British industries had been unable to satisfy during the
war, produced a boom shortly after the armistice, but
this soon came to an end, and the fundamental facts
of the situation began to produce their effect. The
impoverishment of Central and Eastern Europe, as
well as the reduction in the real capital of this country,
has diminished the capacity of Europe to produce.
This has been aggravated by allied policy. British
exports to Soviet Russia, Germany, Austria and
Hungary have fallen to something between a seventh
and a tenth of what they were in 1913-14. This fact
in itself would be sufficient to account for most of the
present unemployment. The uncertainty and waste pro-
duced by large armies actually at war, or at least mobil-
ized, in Poland, Hungary, Rumania and Mesopotamia,
are a contributing factor, whilst the payment of the
indemnity may continue to produce fluctuations in
industry long after this present crisis is passed. Unless
the European market can be re-established or replaced
by new markets overseas, and it is difficult to foresee
where these will be found, it is not unlikely that
Great Britain will have a surplus of labour. This
threatens a more or less permanent and large number
of unemployed, unless emigration on a large scale takes
place.

" Hiring and Firing."

The fluctuating nature of most of modern industry
is one of the main causes of unemployment, but this

INSURANCE AGAINST UNEMPLOYMENT 33

manifests itself frequently, and indeed is aggravated
by the anarchic methods of " hiring *and firing " work-
men which still prevails in many establishments.*

Thus one automobile factory in the United States was
reported in 1912 to have hired 21,000 employees in
order to maintain an operating force of 10,000.

In some lumber camps and saw-mills on the Pacific
Coast all men are discharged twice a year, in July and
December, and completely new forces are hired when
work is resumed. In the logging camps it is customary
to hire five men during the season to keep one job filled.
A large steel plant, during the years when it wanted
to increase its forces, hired three and a half times as
many as were actually needed to make up the increase.
Mr. Magnus W. Alexander found that twelve elec-
trical works " above the average in economical con-
duct," in order to increase their working force by 6,697
employees, hired 42,571 people and dropped 35,874.
In other words, about six and one-third times as many
people were engaged during the year as constituted the
permanent increase in the force at the end of that period.
The situation was similar in eleven large department
stores in New York City. In order to maintain an
average force of 27,264, they took on 44,308 additional
employees and dismissed 42,000.

The drift amounted to 160 per cent, of the positions
to be filled.

But some establishments in this group have a larger
turnover than others. One New York department store
with an average pay-roll of 3,750 employees actually
engaged 12,759 people and dropped 10,382. Its labour
turnover was 340 per cent, of the existing positions.

Similarly, in nine paper box factories ordinarily em-
ploying 792 hands, 2,295 different persons were on the
pay-roll in a year. The labour turnover was 289 per
cent.

Again, in the box and candy factories we find that

* Report to Legislature of N.Y. State, Unemployment and Lack of
Farm Labour, Third Report, p. 54.

34 INSURANCE AGAINST UNEMPLOYMENT

nineteen plants employed 3,400 persons within a year
to maintain a working force of 1,700. Further inquiry
into this group showed that less than one-half of those
who passed in and out of positions within the twelve
months stayed as long as four months. A very large
number were kept but a few weeks.*

The Government of the United States was making
an investigation into the whole problem of labour turn-
over in industry before it entered the war. Our present
knowledge of the wastes produced by careless methods
of engaging workmen comes from fragmentary sources.
When all the evidence is collected, it is safe to assume
that the estimate of the national losses due to this cause
will prove to be enormous. f

Such huge labour turnover as the available facts do
indicate is only possible because each factory tends to
be an almost independent market for the " hiring and
firing " of workmen. Many employment centres have

* " In a packing house in Kansas City work would progress with full
force until the warehouses and cold storage were filled to the rafters,
and then the plant would shut down except killing two hours a day, until
the supply formerly laid up was getting low, when full gangs would again
be put on, and the plant would rush full blast until again filled up as before,
and so on. By this method the employees of the company got steady work
only about half the time, and during the other half only enough to keep
them waiting around for full time again."

I also found, wrote Mr. Graham, that the same course was pursued
by the same company at Chicago, South Omaha, St. Joseph, and Fort
Worth. — A. A. Graham, " The Problem of the Unemployed," Machinists'
Monthly Journal, May 1914, vol. 26, No. 5, p. 443.

It is not suggested that those workmen who are dismissed necessarily
remain unemployed for any great length of time. But these figures
suffice to show that the unsocial, irresponsible, anarchic manner of
"hiring and firing" workmen must result in a terrible sense of un-
certainty as to future employment. Furthermore, the fundamental
causes of unemployment are largely aggravated by them. Workmen,
it is well known, lose a number of days in changing from one job to
another, and therefore, as a rule, a large turnover must result in a
large amount of unemployment for the individuals dismissed.

•f- The figures quoted here are taken from authoritative reports such
as the Factory Investigation Commission of New York State, and of
the Industrial Relation Commission. Similar figures have been gathered
by the author from a number of important establishments. The Ford
Motor Car Company, The Plimpton Press of Massachusetts, and the Cloth-
craft Shops of Cleveland, and other scientifically run establishments
have shown what a striking curtailment of labour turnover can be brought
about when attention is devoted to this problem by the management
ef the personnel department,

INSURANCE AGAINST UNEMPLOYMENT 35

groups of individuals who call daily on the off chance
of getting a job. " Each factory gate and industrial
district of a city tends to become a market. Each
draws a reserve of labour ready to meet the fluctuating
demands of employers. This reserve is increased by
the multiplication of markets and a maladjustment
is caused between supply and demand."*

Effects of Unemployment.

The one thing certain to the workman about his employ-
ment is its uncertainty. When employed he is subject
to dismissal for any onQ of flTnumbQr ot csiusos ovQUAKliich,
he has not the least control. The cyclical fluctuations
of national trade, the yearly succession of the seasons,
the imperious changes in fashion, the invention of new
machines, the discovery of new materials, the closing
of old, or even the opening of new markets, the shifting
of individuals or the migrations of peoples, the change
in political relations with other countries, the intro-
duction of new laws, the bankruptcy of his employer
or the decay of his trade — any of these causes may result
in his losing his precarious means of earning his livelihood.

But whatever be the industrial cause of his unem-
ployment, the workman always finds himself in a similar
position. For a number of weeks or months he is
deprived of the opportunity of remunerative employ-
ment. At any moment he may be cast down into the
abyss of destitution or left hanging on to the precipitous
ledge of casual employment above it. It tends among
other effects to produce a psychological servility alto-
gether disastrous in a democratic community, and par-
ticularly dangerous to the healthy development of
trade unions.

The effects of unemployment are of two kinds. There
is first the ever present fear and dread of the workman
that he may become unemployed. The paralysing effect
of this insecurity leads to results profound and mani-

* Leiserson, American Labour Legislation Review, vol. iv, No. 2, p. 318.

36 INSURANCE AGAINST UNEMPLOYMENT

fold but incapable of economic measurement. Secondly,
there are the losses of the labourer and the economic
loss to the nation, both of which can be estimated
roughly.

The Drain of Unemployment on the National Wealth in
the United States.

The figures relating to the amount of unemployment
already quoted suffice to show that unemployment is
a constant feature of modern industry which results
in heavy losses to wage-earners. Let us attempt some
estimate of the aggregate loss to the United States.

The figures of the Federal Census for 1900 showed
that there were nearly 6,500,000 unemployed during
the year 1899.* Assuming that the average weekly
wage of these people was £2 los. od., it is estimated on
the assumption that they were unemployed for an
average of sixteen weeks that the total loss in wages for
that year alone was about £260,000,000. f

There was also the loss of about £800,000,000 to the
community, the census figures showing that an output
of £3 in new products is realized with every pound paid
in wages.

The 260 million pounds were covered in part from
the savings of the unemployed by trade union grants,
by the relatives and friends of workmen (whose standard
of life was thus lowered), by organized public and
private relief; and in so far as it was not covered by
these means it resulted in a lessening of vitality and
a deterioration of physique and in consequence a
total or partial disability to re-enter competitive industry.
A part of this wage deficit was made up by crime.

We thus find that in the year 1899, the last year
for which we have national census figures, the wage-
earners of the United States lost over £260,000,000

* The figures for 1910 were not published by the Census Bureau,
f See also The Survey, January 23, 1915, for an estimate of the los§
due to unemployment by Dr. N. T. Stone,

INSURANCE AGAINST UNEMPLOYMENT 3?

($1,250,000,000), whilst the wealth of the community
was diminished by nearly four times that sum.

The amount wasted in this manner was much greater
in 1914 owing to the depression produced by the war.
This may be gathered from the later and supplementary
evidence of unemployment in New Jersey. Figures
collected from 2,556 firms showed the actual output
for the year 1912. They also give the output for those
plants if " all the existing facilities were brought into
use."* They show that for the normal industrial year
of 1912 these plants were running only to 74 per cent, of
their capacity. This meant a loss in possible output
°f £73,000,000. In a year of depression it is certain
that the loss for this one State alone was over
£100,000,000 (about half a billion dollars). From the
figures of unemployment in Great Britain and in the
United States in 1920-1 it is easy to calculate
the enormous economic loss to those countries.

But this loss was obvious and tangible. There are
other losses no less serious and in the aggregate perhaps
more important, the demoralization or organization
and the heavy waste involved in "hiring and firing"
men.f

Nor is this loss confined to employers and their
workmen. The public is made to bear part of it.
It provides hospitals, lodging houses, emergency work-
shops, penitentiaries and lunatic asylums through the
usual process of taxation, and bears the cost of special
relief measures through charity organizations.!

In addition to these costs, which are directly trace-
able to unemployment, there are others which are mani-
fested through a lowering of physique and morale. This
point is well made by Mr. John A. Hobson. He writes :

By the workers themselves, and even by social reformers, the
injury inflicted upon wages and the standard of living by irregu-

* These figures were estimated by the firms themselves. See The Un-
employed in Philadelphia, p. 57.

f This is estimated at amounts varying from 50 cents to hundreds of
dollars for each workman.

J See American Labour Legislation Review, vol. v, No. 3, p. 505 et pas.

38 INSURANCE AGAINST UNEMPLOYMENT

larity of employment is appreciated far more adequately than
the related injury inflicted on the physique and morale of the
workers by sandwiching periods of over-exertion between intervals
of idleness.*

The Cumulative Effects of Unemployment.

Irregularity of employment is an aspect of the wages
problem, and is therefore at the very basis of the modern
labour contract. The standard of living of the work-
ing man — the quantity and quality of his food, shelter
and clothing — is controlled by his average earnings,
i.e. for periods covering terms of employment and un-
employment, and not merely by his wage during some
short busy period. This standard of living, in turn,
affects his efficiency and the possibilities of his advance-
ment. It also decides for large numbers whether the
wife shall add to her other duties that of supplementing
her husband's wages. Even more significant, in the
long run, is the sort of upbringing which it will enable
the working man to give to his children. On it depends
whether they are to go through school insufficiently
nourished, and to be forced into some unskilled trade
at an early age.

Unemployment results in lowering the quality of the
workers. The worse fed are the children of the unem-
ployed the less will they earn when they eventually en-
gage in some occupation themselves, and the less able will
they be in turn to provide for the needs of their children,
and so on. Again, the less trained they are the less
will they realize the importance of giving their children
a good training and the less able will they be to provide
adequately for so doing. These evils are cumulative.

Another group of evils and deep influences which
are produced by unemployment result from its effect
on trade unions. Periods of unemployment constitute
a menace to trade unions ; they result in a lowering
of membership, a drain on the funds, and a weakening
of their morale. Their power to bargain effectively

* Work and Wealth, p. 80.

INSURANCE AGAINST UNEMPLOYMENT 39

is thus lessened. This disadvantage is cumulative in
two ways : It lowers workmen's wages ; this lowers
their efficiency as workers and consequently the normal
value of their labour. And in addition it diminishes
their efficiency as bargainers still more, and thus makes
it more likely that they will sell their labour for even less
than the employer could afford to pay them.

The Unemployed Workmen and Destitution.

A study of the reports during normal times of such
societies as the Charity Organization Society and the
United Hebrew Charities of New York show that
from 25 to 35 per cent, of those who apply to them
for relief every year have been brought to their
destitute condition primarily through lack of work, and
this cause, investigation proves, is responsible also for
frequent recourse to virtual loans from the corner
grocery store and to pawnshops.* Investigations in the
large cities of Great Britain show similar results.

^
Fallacious Explanations of Unemployment.

Unemployment is mainly due to the maladjustment
between the price at which labour is demanded and
the price at which workmen are willing and able to
accept employment. During periods when thousands
are clamouring for work it would probably prove profit-
able for many employers to engage more workmen if
they could lower the wage level. f Unemployment is
not due to an excess of labour in general nor to a lack
of capital. It is due to the reduction by entrepreneurs
of the number of people whom they employ because
they cannot employ them all at the rate of profit they

* Cf. Reports of New York Mayor's Committee on Unemployment, 1915,
1916.

f This applies to normal periods only. In 1921, owing to the crippling
of economic life in Central and Eastern Europe and the unfavourable
exchanges, it is very doubtful whether even a wage reduction of 25 to
50 per cent, of the 1914 level would enable employers gainfully to employ
all the workpeople.

40 INSURANCE AGAINST UNEMPLOYMENT

^desire and at the same time pay the wage demanded

! by the workmen.

That unemployment is not due to an excess of labour
in general is shown by the steady increase in every
decade of the number of people who find employment
in practically all countries. Nor is it due to lack of
capital in general. In Great Britain and in the United
States the wealth of the country and the income of the
average family has steadily increased, and yet the amount
of unemployment has probably not been reduced.*

THE GROWTH OF THE INCOME OF THE PEOPLE OF THE
UNITED STATES.

Year.

Total Money Income in Millions
of Dollars.

Average Family Money
Income, Dollars.!

1870

6,270

889

1880

7,391

753

1890

12,082

941

1900

17,965

1,109

1910

30,530

1,494

Whilst the average family money income has shown
a great increase, there are still millions of families whose
incomes are insufficient to buy them that amount of
food, clothing, and shelter necessary for health and
efficient labour.

Even when employed, there are millions of wage-
earners in the United States who are unable to earn a
standard of living which is regarded as " normal " or

* Data for computing wage statistics and the standard of living are
widely scattered through the State and Federal Reports. As a rule they
supply information relating to members of labour unions only, or to
specific industries investigated at the order of the Government, such as
the telephone industry and the steel industry. The estimates of average
wages made by Professor Streigthoff, Professor John A. Ryan, Professor
Scott Nearing and Professor King are based on these official figures. The
Standards of Living were investigated by Professor Chaplin, Mrs. Louise
More and the United States Bureau. The conclusions reached by these
authorities as a result of independent studies are substantially similar,
and show that for large numbers the wages are inadequate to maintain
health or retain efficiency.

f In view of the great fluctuations of foreign money in relation to the
British pound it is thought desirable not to convert foreign moneys into
British values. In 1914 the dollar equalled 43. ijd. normally.

INSURANCE AGAINST UNEMPLOYMENT 41

" adequate." It is clear therefore why unemployment
soon forces them into destitution by way of the pawn-
shop and the charity agency. In Great Britain and
other European countries where the income of work-
people is not as high as it is in the United States, unem-
ployment soon has even more dire results.

Existing Methods for Dealing with Unemployment.

The great human suffering in which unemployment
results has been alleviated in some measure, at public
expense, both by permanent institutions for relief and
by temporary provision. Penitentiaries, public lodging
houses and hospitals represent the former ; unemploy-
ment relief workshops, loan funds and emergency charity
funds, the latter. Probably much greater in the aggre-
gate is the amount spent by the fellow workmen and
relatives of those who are unemployed.

The problem of mitigating the effects resulting from
this evil is not one which will necessarily result in in-
creasing these expenditures, but is rather one of directing
them, and, more important still, the whole organization
of industry, along the most socially desirable channels.
It is part of the great problem of poverty which at last
is beginning to have centred upon it that organized
thought which promises to abolish it, and, in so doing,
to decrease the human costs of modern industrial life
and to increase both the opportunities and means of
gaining welfare.

Few to-day believe that unemployment is due to
personal depravity, and that therefore society is power-
less to cope with it. The views on this matter of Pro-
fessor E. T. Devine, of the New York Charity Organi-
zation Society, are shared by enlightened Liberals and
Conservatives alike.

I hold that personal depravity is as foreign to any sound theory
of the hardships of our modern poor as witchcraft or demoniacal
possession ; that these hardships are economic, social, transitional,
measurable, manageable. Misery (or destitution), as we say of

42 INSURANCE AGAINST UNEMPLOYMENT

tuberculosis, is communicable, curable and preventable. It lies
not in the unalterable nature of things, but in our particular human
institutions, our social arrangements, our tenements and streets
and subways, our laws and courts and jails, our religion, our
education, our philanthropy, our politics, our industry and our
business.*

Similarly, Mr. and Mrs. Webb have urged that desti-
tution due to other causes as well as to unemployment
can be eradicated.

We have both the power and the knowledge to cope with desti-
tution, as we have coped with cholera and typhus, highway robbery,
and the slave trade, if only we have the will.f

Not only do we now recognize that destitution and
unemployment are not due to personal causes, but we
know also what remedies to apply to these evils. We
can not only diagnose these diseases, but we can prescribe
for them. Within five years the average amount of
unemployment could be halved, and the suffering result-
ing from it could be reduced to one-quarter of what it
is to-day, if only social legislators had the will and the
necessary training for tackling the problem.

Measures in the future for dealing with the evil of
unemployment should not, however, be undertaken as
the result of a panic. Society must not wait until it
is galvanized into sudden and feverish activity as the
result of another serious crisis.

Many remedies have, of course, been suggested to cure
society of this disease. But some of them, if tried,
would result in more disastrous results than the ill itself.
Others, again, look to a complete reorganization of
society on a more equitable basis.

Proposed Remedies for Unemployment.

One of the remedies most generally advocated for
unemployment, especially by less informed trade union-
ists, is the reduction of the hours of labour. This pro-

* Professor E. T. Devine : Misery and Its Causes, p. n.

f Sidney and Beatrice Webb: The Prevention of Destitution, p. 5.

INSURANCE AGAINST UNEMPLOYMENT 43

posal has appeared repeatedly since the armistice in
England. Similarly, with a view to finding work for
the unemployed, the American Federation of Labour
at its conference at Seattle in 1913 recommended its
executive to present a series of bills to Congress embody-
ing a provision that "by so shortening the hours of
those employed no one should be employed more than
eight hours per day." * In this way it is surmised that
workmen unemployed during periods of depression would
be retained in industry. The fallacy lying behind this
view is the assumption that there is an oversupply of
labour in general. It is a matter of common know-
ledge, however, that in most industries there are
periods when needed labourers cannot be obtained. For
even assuming that by reducing the hours of labour all
the workmen attached to an industry were employed
during the slack period, there would be such a demand
for labour during the busy period that others would
join the industry ; the number of people attached to
it would be increased. But as soon as the slack period
came on again many would be dismissed and unem-
ployment would again result. It is, of course, a well-
established fact that unemployment continues when
the hours of labour in any trade are shortened. Fluc-
tuations of industrial life, fluctuations due to the
growth and decay of trades due to climate and
social habits, and to the existence of reserves of
labour — these are causes of unemployment which a
general reduction of the hours of labour cannot
;materially affect. f Unemployment is due to the mal-

* See the Report of the Thirty- third Annual Convention of the
American Federation of Labour.

f " The shortening of hours was no remedy at all for the disease of
unemployment : not even in those cases where they could prove that
owing to the shortening of hours, extra men had been taken on." — Sidney
Webb : National Conference on Prevention of Destitution, Report of the
Proceedings of the Unemployment and Industrial Regulation Section, p. 140.

But it should be noted, " wherever the hours of labour have been
shortened employment tends to become more regular. In place of
alternating periods of intense overwork and periods of idleness, employers
have found it possible to distribute work more evenly throughout the
year." — Quoted from the brief presented before the Supreme Court of

44 INSURANCE AGAINST UNEMPLOYMENT

adjustments at any particular moment between the
supply of and demand for labour, and it is only in so
far as lowering the hours of labour will result in im-
proved organization that these maladjustments are
likely to be lessened. Even then the influence due
to this cause alone is likely to be small,* and in any case
is of little significance as a solution of the great problem
of unemployment.

A clear distinction must be drawn between the pro-
posal of a general reduction in the hours of labour and
between the proposal that during periods of depression
organized short time should be resorted to as an expe-
dient. It is evident that it is more desirable that where
possible all the workmen in a factory should be employed,
say, for four days in the week rather than that about
one-third of the staff should be dismissed and the rest
work at full time.

Much may be hoped for also during the immediate
future from such proposals as the regularization of
industry through the carrying out of public works during
periods of depression. In the 1920-1 unemployment
crisis the British Government placed a few thousand
workmen, of the millions unemployed, on the task of
constructing arterial roads, and a grant in aid was made
to local authorities to encourage them to undertake
public works. This is but a mean beginning.

the United States in the case of Franklin O. Bunting v. the State of
Oregon. This brief, prepared by Mr. Louis D. Brandeis, Professor
Felix Frankfurter, and Josephine Goldmark, devotes considerable
attention to the " relation of short hours to regularity of employ-
ment" (see pp. 876-92).

* Shorter hours likewise tend to steady employment. When no re-
strictions are placed on hours of work in a seasonal industry, the tendency
is to concentrate the work in a brief busy season with long hours of over-
time. Hour regulations, except in the case of perishable products and
those subject to changes in fashion, forces a more even distribution of
the work over a longer period. When the Women's Eight-hour Law
was enforced in Illinois, factory inspectors noted " a greater uniformity
of work and rest " as one of its results. — Commons and Andrews : Prin-
ciples of Labour Legislation, pp. 203-4. The report of the Chief Inspector
for Great Britain of Factories and Workshops, for 1920 (Cmd. 1403), dis-
cusses this question and arrives at the conclusion that the diminution of
hours in the special seasonal trades has led " to improved organization of
work and better means of transport."

INSURANCE AGAINST UNEMPLOYMENT 45

Regularization of Industry— A Universal Problem.

When the war broke out a committee, including Sir
W. H. Beveridge, who was then Director of the Labour
Exchanges, had been appointed to investigate the question
of how to regularize industry in Great Britain in such a
way as to prevent unemployment. Unfortunately this
committee had to be dissolved owing to the claims
of more pressing problems. When the war ended the
Labour Party introduced a " Prevention of Unemploy-
ment Bill/* * which proposed that such arrangements
should be made as would enable local and national
authorities to provide work when unemployment was
slack. The Bill endeavoured to put into legislative
effect the following clause of the Labour Party's pro-
gramme :—

The duty of organizing the national labour market so as to
prevent or minimize unemployment should be laid on a special
Ministry of Labour, which should arrange a ten-years programme
of Government work, to cost ^4,000,000 a year, but to be under-
taken only in "the lean years of the trade cycle*' and carried out
by ordinary labour paid at ordinary local rates, j

From the discussion on the Bill it transpired that "the
Ministry of Labour had for months past been instruct-
ing the different Government departments to distribute
their work and contracts among those trades which
showed the greatest number of unemployed." The
Minister of Labour added, that " under the Ministry
of Supply, when the provision of the needs of all the
departments was in the hands of one minister, it would
be possible to arrange contracts in such a way as to pro-
vide work in what were known as the slack seasons."

In the United States, with its vast resources still un-
tapped, the possibilities along these lines seem much
better than they are in Great Britain, but it is high time

* The Second Reading took place on March 21, 1919. See also the
Labour Party Report on Unemployment, 1921.
t Hayes : British Social Politics, pp. 185 et seq.

46 INSURANCE AGAINST UNEMPLOYMENT

that all worthless speculation be ended and the facts
collected and presented to us.*

Two State legislatures establishing State employment
bureaux in Illinois and Pennsylvania in 1915 instructed
the administrative authorities to take steps toward regu-
larizing employment through a careful distribution of
public works. The Illinois statute provided that : —

The said general advisory board in co-operation with the
secretary of the Bureau of Labour Statistics and the local advisory
boards shall place themselves in communication with large
employers of labour, including municipal and other authorities,
and attempt to bring about such co-operation and co-ordination
between them by the dovetailing of industries, by long contracts,
or otherwise, as will most effectively distribute and utilize the
available supply of labour and keep it employed with the greatest
possible constancy and regularity. They shall devise plans of
co-operation with this object in view, and shall seek to induce the
organization of concerted movements in this direction. They
shall also endeavour to enlist the aid of the Federal Government
in extending these movements beyond the State, f

It will be noted that federal action is contemplated
to supplement State action. J Whilst experiments along
these lines will have great value it may be doubted
whether much towards the regularization of industry
will be achieved unless a national scheme planned by
a central bureau is developed. The need for attempting
the regularization of industry has been felt in other
countries too, but as yet few have instituted any definite

* The view that works of public utility might be undertaken during
periods of unemployment is found in the economic writings of at least
the last two centuries. J. B. Say admitted in 1814 that it was a proper
governmental function to employ those men who are thrown out of em-
ployment on account of the introduction of machinery. The real problem,
however, has been how to prevent such undertakings from becoming
mere relief works.

t Illinois, Laws, 1915, S/B. 24. sec. ic.

j An initiated measure of the State of Arizona authorizes the State
to engage in any work of manufacture or public utility. The business
of banking may be engaged in, and a State printing establishment may be
set up for the printing of school books and the State's work. A general
appropriation of the necessary funds is made. See Bureau of Labour
Statistics, Bulletin, Whole No. 186, p. 19. Such powers will enable States
to regularize industry,

INSURANCE AGAINST UNEMPLOYMENT 47

plan. Proposals have been made to this effect in Italy,
Great Britain, the United States, Germany, India,*
Canada, and other countries.

A very interesting example of the " dovetailing "
of ordinary agricultural employment with work pro-
vided by " remunerative State enterprise " is to be found
in the arrangements for the reclamation of the marshy
lands of the Po Valley carried out by the Italian
Government.! A circular concerning the organization
of the Provision of Employment was issued by the
Prussian Minister of Commerce in 1904.

We further request you to have the goodness to direct your atten-
tion to those measures, which are calculated to prevent the
occurrence of want of work on a wide scale, or to mitigate its
effects when it is unavoidable. Not only the State, but also the
provinces, districts, and communes, in their capacity as employers,
are bound to do their utmost to counteract the evil in question
by paying general and methodical attention to the suitable dis-
tribution and regulation of the works to be carried out for their
account. In almost every industrial establishment of importance
there are tasks which do not absolutely need to be performed at
a fixed time ; just so in every State and communal administration
there are works, for the allotment of which the time may, within
certain limits, be freely chosen according to circumstances. If
all public administrations, in making their arrangements, would
in due time provide that such works should be carried out when
want of employment is to be expected ; if especially works in which
unemployed people of all kinds, including especially unskilled
labourers, can be made use of, were reserved for times when there
is a threat of want of employment, and such times have almost
recurred of late in winter in the large towns and industrial centres,
the real occurrence of widespread want of employment could
certainly be prevented in many cases, and serious distress warded off . J

* The Government of British India includes in the budget a sum of
10 J million rupees annually for the relief of famine, although it occurs
only intermittently in different parts of the country. In the case of
famine in India and unemployment in England and the United States,
the unexpected never fails to happen.

f Cf. Rapport de M. W. F. Treub, " L'influence que peut exercer sur
le chomage la mode d 'execution des travaux publics, " International Bulletin
Against Unemployment, Second Year, No. 4, p. 785.

t Report on Agencies and Methods of Dealing with the Unemployed in
Foreign Countries, p, 18, D. F. ScWoss*

48 INSURANCE AGAINST UNEMPLOYMENT

For similar reasons, the Massachusetts Bill on Unem-
ployment Insurance provides that

it shall be the duty of the Chief Commissioner of Unemployment
Insurance to recommend to the legislature any changes which may
be deemed advisable, and shall suggest schemes to employers,
employees and to the legislature for diminishing unemployment
in the state generally, and for diminishing the demands on the
fund which arise in the insured industries.*

The experience of India with public works shows that
if they are to be of highest advantage they must be
decided upon well ahead of the occurrence of the
emergency.

The Indian Government has, probably, the most
highly organized system of administration known. Yet
even with the advantage of these rare administrative
powers, experience has taught the Government that
public works for the relief of distress cannot be im-
provised, that unless an emergency is anticipated by
a careful preparation of schemes in advance, waste and
demoralization are certain to ensue when the em-
gency arises. The duty is, therefore, imposed upon
every province and district to have schemes of this
character thought out and periodically revised, and ready
to be put at once into operation when the emergency
arises ; and all the engineering departments of the dif-
ferent provinces are so instructed and so act. The
Poor Law Commission therefore suggested that " the
schemes for special works be prepared and drawn up
by the local authorities in co-operation with other
authorities and be revised from time to time." f

The Ontario Commission on Unemployment, 1916,
found that

expenditure by the Federal authorities on public works amount
to a very large sum, so great, indeed, that if they were planned

* 1916, House, No. 825, Part XII, Section 16, Monthly Review of the
Bureau of Labour Statistics, vol. i, July 1915, p. 16.

f Majority Report of the Royal Commission on the Poor Laws, Part 6^
chap, iv, p. 411,

INSURANCE AGAINST UNEMPLOYMENT 49

with this in view, they would help materially to counterbalance
the falling-off in the demand for labour when ordinary business
declines.*

Most students of the problem of unemployment are
agreed that the Government, national and local, could
so organize the total demand for labour as to make it
fairly level over a period of, say, ten years, provision being
made, of course, for the natural growth of industry.
Government employment would, of course, grow most
active when capitalist employment slackened.

There seems little doubt but that rarely, if ever, will
there be such another opportunity for employing this
device than during this period after the armistice, when
capitalists are nervous and industry is suffering from
a great depression. Government housing schemes, con-
struction works, and afforestation proposals should be
pressed forward now. If, however, the Government
should be found to be unable sufficiently to affect the
labour market in the desired manner, then it is argu-
able that a bounty might be provided to employers during
the slack season which will enable them to carry on with
the processes of production. This has indeed been
attempted in the British Government's housing scheme.
Mr. Arthur Balfour, ex-Prime Minister of England,
evolved the idea that during depressions of industry
" a bounty might be given to firms making for foreign
orders, in such wise as to enable them to accept con-
tracts." Professor A. C. Pigou, in commenting on it,
adds that " Some persons might, perhaps, prefer to see
the bounty given to firms making for British orders,
so that the proceeds of it should go to British rather
than to foreign consumers." f The execution of such
offers could be made to " vary inversely with the demand
in the open market." The usual objections to bounties,
it must of course be remembered, would also apply here.

* Report of the Ontario Commission on Unemployment, 1916, p. 135.
See also the Bill before the Legislature of Winconsin advocated by Pro-
fessor R. E. Commons in 1921.
Wealth and Welfare, p. 481.

50 INSURANCE AGAINST UNEMPLOYMENT

Yet there are times when these objections are out-
weighed by the urgency of immediate needs. Thus
to-day the Government might by this, as well as by
other means, stimulate the development of new indus-
tries and thus increase the demand for labour. The
present period of slackness provides an excellent oppor-
tunity for introducing schemes and bounties that are
likely to have this effect.*

Can Periods of Unemployment be Transformed into Periods
of Vacation ?

To workmen generally a period of unemployment is
to-day a heavy burden on their earnings, past or future.
But perhaps worse than that is the anxiety due to un-
certainty of the morrow. Serious deterioration of
physique and morale soon affects the workman who has
nothing to do but to walk the streets in search of work,
or to a lesser extent when he sits in the office of an
employment exchange waiting for a job to turn up.
It is frequently asserted that the strain and wear
of being unemployed is more severe than that of
being employed.

That this period of non-employment should have this
effect constitutes not merely a waste but a needless
waste.

Employers of labour can with the assistance of the
employment exchange arrange, in advance, that where
workmen are likely to be without work for a definite
period they should then take their vacation. f

* The difficulties involved in undertaking public works during periods
of depression are not sufficiently realized. Thus, towards the end of the
year 1920, it was evident that very heavy unemployment was certain.
There was at the same time a very great need for housing and business
premises. But the price of building material was so high that muni-
cipalities, like private firms, preferred to wait with their schemes. The
house which would have cost £1,250 to erect in August 1920 could be
erected in May 1921 for less than 1 1,000. When it is planned to spend
millions of pounds the price of materials is a very significant factor to
be taken into account.

f This custom prevails already in Lancashire, where hundreds of thou-
sands of workmen go to the seaside during " wakes " week.

INSURANCE AGAINST UNEMPLOYMENT 51

Through the leadership of well-informed employers, and
the co-operation of the employment exchange, periods of
unavoidable unemployment might, at least in certain trades,
become customary holidays.* Instead of unemployment
being regarded as a time of suffering and of distress it
can be made into a period of change and recreation.

Experiments with small holdings, especially where
industrial working men live in the country, although
continuing to work in the town, might make it even
easier to ensure that a period of unemployment should
be used as a healthful change from normal labour. It
would also have the merit of creating for such a work-
man a financial reserve which would enable him, in con-
junction with his benefit from the unemployment fund,
to tide over periods of unemployment

Such a policy is widely adopted in Belgium, where it is found
that the crops grown on the land attached to the houses, along
with the produce from live stock, just supply that reserve of
wealth necessary to prevent men from becoming destitute directly
they are unemployed. In this way the independence, self-respect
and efficiency of the unemployed will be preserved, j

Treatment of Unemployment During Normal Periods.

In his presidential speech at the First American
National Conference on Unemployment, held in New
York, Professor Henry R. Seager stated the conclusions
justified by British experience of the employment
exchanges and unemployment insurance in 1914.

Now, has the United Kingdom solved the problem of unem-
ployment ? We are very much inclined to see with rose-coloured
glasses things that are happening a long way off. Our information
about them really comes from enthusiastic advocates, and we are
very easily misled. We do not wish to make any extravagant
claim for this policy, but I do wish to say that it seems to me the
United Kingdom is on the road to a solution of the problem of
unemployment . J

* Cf. Seager : Social Insurance, pp. 107-8.
t Rowntree and Lasker : Unemployment, pp. 144, 262-89.
J Professor Henry R. Seager: American Labour Legislation Review,
p. 292, vol. iv, No. 2.

52 INSURANCE AGAINST UNEMPLOYMENT

The successful working of the scheme of unemploy-
ment insurance until August 1914, the ease with which
the unemployment fund bore the drain on it during the
early months of the war, and the extension of the scheme
during war-time justify the view that the United King-
dom now possesses the necessary machinery for dealing
with this great evil and is now well on the road to its
solution.

Employment Exchanges.

More has been done in England and America for
dealing with the unemployment problem by means of
employment exchanges than by any other means.
England has a national scheme. In the United States
half the states now have such clearing houses for labour
whereby workmen and employers may come together
with least delay. In this manner the time lost by the
workman between one job and another, and by the em-
ployer between engaging one workman and his substitute,
is reduced. It also accomplishes the work not only
of bringing a workman to a vacancy, but, what is more
important, helps to bring the best workman to the given
position. In this way, as we shall see, employment
exchanges may be used for reducing an excessive surplus
of workmen in any district, or attached to a given trade.
Although not yet sufficiently developed, nor rightly under-
stood, some of the better State schemes of employment
exchanges already demonstrate that it will be possible
to reduce the reserves of labour which tend to gather
round every centre where labour is engaged, when a
well-knit system connects these isolated units. But
even if employment exchanges were more efficient than
they are, trade fluctuations, it must be remembered,
Iwould still continue and unemployment and its con-
sequences would result.* An added reason, for the ex-

" There is one interesting question with regard to unemployment
which Socialists have hitherto shirked, and which demands an answer
from the Socialist students of the problem, viz. do they conceive that under
a state of socialism there will be no unemployment ? If they believe
that there will be unemployment, then it would be interesting to hear

INSURANCE AGAINST UNEMPLOYMENT 53

tension of employment exchanges, is that they consti-
tute the indispensable machinery for a system of unem-
ployment insurance.

Insurance against Unemployment.

The leading authorities on the subject of unemploy-
ment have been of the opinion for about a decade that
in addition to regularizing labour through a thoughtful
distribution of public works, and reducing the reserves
of labour which attach themselves to certain trades
and factories, by means of employment exchanges,
special insurance funds against unemployment ought
to be collected. The latter, unlike the two former pro-
posals, is not intended to reduce the quantity of unem-
ployment directly.

Schemes of insurance are based on the assumption
that whilst the risk might be and indeed should be pre-
vented as far as possible, it is not likely, for many years
to come, to be entirely eliminated. Unemployment
insurance is aimed primarily at reducing the evil effects
resulting from a given percentage of unemployment.
Its nature will be examined in the next two chapters.

how they intend to treat the problem of fluctuation due to abnormal
causes, such as fires, floods and earthquakes, of seasonal variation in
climate and the disturbing influences of inventions, the development of
new commodities, and the introduction of new organization in industry."
— Quoted from an article by the present writer which appeared in the New
York Evening Post of September 4, 1915.

See also report of a. speech by Dr. I. M. Rubinow in the New York
Evening Post, September 8, 1915.

CHAPTER II
MITIGATING THE EFFECTS OF UNEMPLOYMENT

Insurance and the Prevention of Risk.

IT is not the primary aim of any insurance scheme to
prevent the specified contingency from occurring.
Neither death, accident, invalidity, sickness, old age,
fire, nor any other contingency against which people
or property can now be insured, is entirely eliminated
as a result of an insurance policy taken out against it.
And similarly, unemployment will not be prevented
from remaining a serious problem of industry even if
adequate insurance against it be universally effected.
But since the introduction of the existing schemes of
insurance encouraged the invention of preventive
methods, so unemployment insurance is likely to lead
to the perfection of devices that will reduce the amount
of unemployment.

" Mutual fire insurance has appealed to certain manu-
facturers because in twenty years it has resulted in
measures that have prevented more than two-thirds
of the expected losses by fire."

Similarly (wrote Mr. Brandeis) if society and industry and the
individual were made to pay from day to day the actual cost of
sickness, accident, invalidity, premature death or premature old
age, consequent upon excessive hours of labour, of unhygienic
conditions of work, of unnecessary risk, and of irregularity of
employment, these evils would be rapidly reduced.*

This view is justified also by the experience of Germany
and Great Britain, where the method of meeting certain

* Louis D. Brandeis in The Outlook, June 1911,
54

INSURANCE AGAINST UNEMPLOYMENT 55

industrial losses through insurance has been widely
developed.

In Germany it has long been shown, under sickness
and accident insurance, that it pays to have the best
appliances for the sick and the injured, the best medi-
cines, the best physicians and the best nurses. Great
Britain, benefiting by this experience, endeavoured
to arrange for the most up-to-date sanatoria and for
good medical attendance under her health insurance
arrangement. Measures were taken to reduce the amount
of sickness as well as to cure the sick. Parsimony
would in these matters have proven the most wasteful
extravagance. When, in like manner, Great Britain
introduced a scheme of unemployment insurance, devices
calculated to reduce the amount of unemployment were
made an intrinsic part of it.

Yet, even if insurance against a given contingency
does not necessarily result in any substantial reduction
in its occurrence, it always acts as a palliative. The
life of the breadwinner who dies from an industrial acci-
dent cannot be recalled, but his widow and children
might be saved from pauperism if he is insured. The
carpenter and the machinist may not be engaged in
gainful pursuit owing to unemployment, but if they are
insured they need not be reduced to penury.
/^The main object of schemes of unemployment insur-
/ ance must be regarded then as being, not the entire
abolition of unemployment, but the lessening of the
evil effects that result from it.

Unemployment and Individual Savings.

The common assumption of many " self-made men "
who look backwards to their own experience is that
unemployment is a matter which concerns the indi-
vidual and is to be provided for by individual means.
Self-help through individual savings seems to them to
be the obvious method of meeting periods of unem-
ployment. If, therefore, workmen do cry out during

56 INSURANCE AGAINST UNEMPLOYMENT

those periods for relief it is due, it is alleged, to their
lack of providence and forethought. To remedy this
moral delinquency they urge the teaching and practice
of these virtues. Unfortunately, this view fails to recog-
nize the changed order of society in which the workman
now moves. It disregards the hard facts of the wage-
earner's existence. We have already seen that with
respect to most workmen to-day it would be even
more beneficial to society for them to spend all their
income in maintaining their health and vigour and that
of their dependents rather than attempt to save against
emergencies.*

There is also the consideration that wage-earners are
not, as a matter of fact, becoming more provident, but
are indeed probably growing less provident in their
habits. f When the United States, for example, were
predominantly agricultural in character and there were
huge tracts of land open to the toiling, sparing worker,
there was a great motive for saving. To own a well-
run farm with a home made a great appeal to the
agricultural worker.

It is now so difficult for the farm hand to become a
landowner that in very few cases does he even make
the attempt. The best land in that country is in the
hands of private owners, and a permanent and growing
body of agricultural wage-earners is to-day a charac-
teristic of the United States as of many European
countries.

Similarly, in the United States as well as in the indus-

* It is true in the early decades of the twentieth century as it was
in the early decades of the nineteenth that " for many homes, both in town
and country, life is one privation," and that thrift " implies, not the
curtailment of useless commodities, such as expediency and humanity
would welcome, but a diminution of the real needs of life, which is a
standing condemnation of the economic system of many governments."
— J. B. Say, Traiti, 6th edition, p. 116.

f It is impossible to discover what percentage of the $4,000,000,000
of deposits in savings banks in the United States in 1910, and of the
$12,513,000,000 invested in ordinary life insurance policies in 1909, and
of the $2,967,000,000 in industrial insurance in 1908, or of the sums
invested in building and loan associations, was subscribed by those
earning less than $1,000 a year. It is, however, certain to have been
very small,

INSURANCE AGAINST UNEMPLOYMENT 57

trial countries of Europe the town dweller also once
had a strong incentive to saving in the desire to own
a house and the tools and implements necessary to his
craft. But among wage-earners in the cities these old
motives for saving have weakened even more. Not only
is it rarely possible for a wage-earner to own his house,
but it is no longer desirable for him to do so. Its high
cost and the comparative smallness of his wages have
made him regard himself as destined to be a tenant all
his life, whilst the idea of owning his own tools under
the factory system would appear to the average work-
man like a nightmare. Moreover, the workman who
is easily able to shift from place to place is at an
advantage as compared with one who is so situated that
movement is more difficult. The former can move to
any part where his economic value to society is highest.
We can therefore understand why, in the words of
Professor Seager : *

The call of the savings bank and of the insurance companies is
weak in comparison with the old-time call of free land and a home
of one's own.

Another leader of economic thought even argues that
modern industry develops a spirit inimical to saving.
Professor Veblen writes :

The conditions of life imposed upon the population by the
machine industry discourage thrift. But after allowances have
been made for this almost physical restraint upon the acquisition
of property by the working classes something is apparently left
over, to be ascribed to the moral effect of the machine technology.
The industrial classes appear to be losing the instinct of individual
ownership. The acquisition of property is ceasing to appeal to
them as a natural, self-evident source of comfort and strength.
The natural right of property no longer means as much to them
as it did.f

Since workmen, both in the city and on the farms, have
lost the habit of saving, it has been suggested that they

* Seager: Social Insurance, p. 118.

| Veblea : The Theory of Business Enterprise, pp. 326-7,

58 INSURANCE AGAINST UNEMPLOYMENT

should be compelled to save. Although it sounds rather
odd to those brought up in democratic countries, let
us examine this proposal.

Compulsory Savings.

Professor Schanz has long advocated a system of com-
pulsory savings. According to him the practical diffi-
culties in the way of introducing a scheme of insurance
are so great, and even when overcome a system of insur-
ance must necessarily be so complex, that a popular
scheme of saving is to be preferred. Recognizing that
even to-day there is nothing to hinder the workman
from making any provision he can afford or may desire
with which to face unemployment, and that in spite
of this fact comparatively few workers make such pro-
vision, Professor Schanz boldly proposes that work-
men shall be compelled to save.* His scheme, he urges,
is simplicity itself. Each workman shall be forced to
contribute weekly to a special fund. His contributions,
as in the existing Post Office Savings Bank, will be
regarded as his own personal resources. The money
in the fund will be invested and interest will be added.
But his savings are to be used by the workman only
during periods of unemployment. Since each workman
must bear his own risk of unemployment, and since
his own savings come directly into play, he will be
interested, even though there is no special control to
effect it, not to provoke nor to prolong unemployment.
There are great advantages in such a scheme. ' The
individualization of risks " will permit the workman
to employ at any time, or to leave to his children, the
fruits of his accumulated contributions ; there will be
little danger of malingering, since if the unemployed
workman merely pretends to be unemployed he alone
suffers. There would thus be less reason to inquire
into the cause of unemployment. Above all, the scheme
has the negative virtue of avoiding all need for a com-
* Schanz: Beitrag zur Fragen der Arbeitslosen-Versicherung.

INSURANCE AGAINST UNEMPLOYMENT 59

plex organization and the unfairness involved in some
schemes of insurance in the treatment of the more
regularly employed workman '.

Professor Schanz's proposal would make the work-
ing classes bear the burden of unemployment alone,
although they are not responsible for the maladjust-
ments of industry. It does not introduce any forces
making for the reduction of the amount of unemploy-
ment, and ignores the particularly serious problem of
the lower strata of workmen who can hardly ever afford
to save from their current earnings. There is reason
also to believe that the apparent simplicity of this
scheme is illusory. How much should a man be com-
pelled to save ? How can he be prevented from drawing
his savings even when employed ? As soon as a solution
is attempted to these and kindred problems it will be
found that compulsory saving involves the introduction
of as complex a machinery as does compulsory unem-
ployment insurance. The average wage of large bodies
of manual labourers is so low that as a matter of fact
many workmen cannot afford, and therefore should
not attempt, to save against the emergencies which
affect them. Assuming even that wages were suffi-
ciently high for the workman to be able to save to meet
a given emergency, it would still be more advantageous
for him to resort to the method of insurance. This is
clearly demonstrated by the fact that it is precisely the
men of the successful classes who realize the wisdom
of distributing risks and of providing against incapacity
for labour or against death by the method of insurance,
rather than by depending entirely upon savings.

Saving versus Insurance.

Moreover, the method of saving, used as a means of
securing the workman against unemployment, is not
only costly but wasteful. It implies that each person
must retain on the average a reserve large enough to
make good the variations that occur in his individual

60 INSURANCE AGAINST UNEMPLOYMENT

income owing to that contingency. Thus, assuming
that he wishes to have £2 IDS. a week during periods
of unemployment and wants to guarantee himself against
a maximum period of 15 weeks, he is forced to save a
reserve of £37 los.

At the rate of 2s. a week it will take him over
seven years to save this amount. Assuming now that
there are 120 such workmen, then £4,500 must be
saved to guarantee them against a maximum period
of 15 weeks of unemployment. But when a group
of persons wish to secure themselves against the given
emergency, it is virtually certain that it will include
some workmen less liable and others more liable to
unemployment, and that when some are unemployed
others will be employed. Instead of withholding
£37 los. in respect of each workman, this sum can be
taken from the current deposits of those still at work.

Thus, still assuming that there is a group of 120 work-
men, not more than five of whom are unemployed at one
time, and needing £2 los. a week, then a weekly levy
of something over 2s. on those that work will provide
each unemployed workman with the required income.
No reserve at all would then be necessary. Hence, by
saving collectively instead of individually, a group of
people can greatly lessen the amount of saving that is
required to guarantee them against a given emergency.
This is known as the advantage of mutuality. In the
case chosen for illustration the investment of £4,500
in the bank instead of in education, recreation or food,
would be avoided, and the uncertainty of receiving
benefits during the seven initial years would be
eliminated.

We have already seen that there are influences which
tend to weaken the workman's motives for saving, but
opposite tendencies can be introduced. These must,
however, be based on the recognition that the unaided
efforts of large numbers of workmen will be insufficient
to guarantee them against the great emergencies in
their lives. To meet such emergencies it is urged that

INSURANCE AGAINST UNEMPLOYMENT 61

resort ought to be had to insurance. Once, however,
a State scheme were established, it would indirectly tend
to encourage thrift and saving to supplement the benefit.
In actual practice schemes of social insurance provide
only for a minimum of benefits. They constitute only
a small portion of average wages, generally much less
than half, and are limited to a certain number of weeks
Additional saving will be encouraged when the work-
man is assured of the minimum amount, because his
fight to save his self-respect would then not be a hope-
less one. There is a further direction in which unem-
ployment benefits would encourage individual effort.
The prevailing method of helping the unemployed is
through the support of relatives and friends. Only
too frequently these same relatives and friends are very
poor and the burden is too great, so that they are dis-
couraged from even attempting it. Why help when
charity societies can do as "much or more ? Even when
help is extended it is often given grudgingly, for it merely
saves the funds of the charity organizations. But if
a relative's help or a friend's gift meant the addition
of tobacco or coffee to the bare subsistence that would
be provided for by the State scheme, assistance is a
great deal more likely to be given than when it means
merely the reduction of their friends' cost to the charity
organization. We deliberately dry up and starve at
present one of the most promising means of enabling
the lower-paid workmen to help one another in distress.*

Instead, therefore, of insurance resulting in the de-
moralization of character, it will, on the contrary, act as
an impetus to self-reliance. The method of insurance
thus has the advantage that it can be supplemented
by savings.

It may be argued that higher wages and better con-
ditions of labour would remove the necessity for schemes
of social insurance altogether. The urgent need for
both these improvements cannot be denied, but that

* Contemporary Review, 1890, p. 107, "The Reform of the Poor Law,"
Sidney Webb.

62 INSURANCE AGAINST UNEMPLOYMENT

objection against these schemes results from a miscon-
ception of their purpose. As Dr. Rubinow writes : *

" It does not deal with the normal standard of working men's life,
except indirectly, and in so far as the normal standard of wages
and as the standard of living depending on wages are unsatisfactory.
The corrective measures are much broader than anything social
insurance can offer. It is the direct object of social insurance to
protect this standard of life from the onslaught upon it by various
physical and economic changes, though it goes without saying
that by this amount of protection the general standard is upheld
and its improvement facilitated."

Where the conditions of life are already below the
standard of physiological necessity and economic effi-
ciency— unfortunately no higher standard than this is
yet demanded by Labour leaders — it is evident that the
wage-earner is in a hopeless position to meet any
emergency which might attack him. Such a situation
demands both increased wages and the protection of
the standard of life through some scheme of insurance.

Insuring against Unemployment.

Three preliminary questions of fundamental im-
portance present themselves on the threshold of our

subject :

C*\
(a) Is unemployment a contingency against which
it is possible to insure ?
r (b) And if it is, is it a contingency against which it

is advisable to insure ?

(c) And even if it is advisable to insure against unem- >
ployment, is it a rightful function of the modern
State, by encouraging this activity, to make
itself responsible for evils which are in the
main the result of the relationship between
employer and employees ?

(a) Until recently it was commonly held that unem-
ployment was not an insurable risk.

* Dr. I. M. Rubinow : Social Insurance, p. 45.

INSURANCE AGAINST UNEMPLOYMENT 63

The more we examine the schemes that have been worked (wrote
Professor Chapman), the ques^on of the insurability of the risks
dealt with and the possibility of isolating them, the more surely
we find ourselves driven to the conviction that ordinary insurance
against unemployment is impracticable.

Unemployment Satisfies the Requisites of an
Insurable Risk.

There are four requisites which a contingency must
satisfy before insurance principles can be applied to it.

(1) There must be a risk whose nature must be clearly

specified.

(2) To this risk large numbers must be exposed.

(3) It must be a risk which appeals to those on whom

it is likely to fall, as a menace against which
they would, if they could, provide.
( (4) The risk must be capable of being calculated
with some degree of certainty.

If by unemployment insurance we mean insurance
/of able-bodied men out of work for a definitely limited
period, and a test of willingness to work is provided,
then the risk may be regarded as clear. The second
and third of these requisites clearly apply to unem-
ployment, since large numbers are subject to it and many
would be glad to provide against it.

The statistics necessary to satisfy the fourth condition,
it has been argued, cannot be regarded as satisfactory
for the introduction of a scheme of unemployment
insurance in many countries. In a measure this
is true. There is not sufficient and satisfactory data
of unemployment on which to base a fixed, scientific
insurance. But it may be doubted whether there often
has existed quite sufficient data dealing with the occur-
rence of any contingency until after the inception of
a scheme of insurance against it. Opponents of social
insurance of all kinds have always been able to argue
that there were not sufficient data on which to base any
scientific scheme of insurance. And the vicious circle

64 INSURANCE AGAINST UNEMPLOYMENT

was completed by the fact that until there was a scheme
of insurance instituted there would never be satisfactory
figures.

It is, however, quite evident that on the basis of
statistics available in most Western countries the esti-
mates of a competent actuary would supply us with a
sufficiently stable scheme with which to begin. This
was so in England, where the available data were better,
though not, as is frequently affirmed, immeasurably
better than the data that could be obtained in, say,
Massachusetts, New York, and Wisconsin.

There is convincing evidence already available of a
concrete kind which makes it no longer necessary to
insist on the possibility of insuring against unemploy-
ment. There is the actual experience of trade unions
in Great Britain, France, Germany, Belgium, Holland,
and the United States.

Mr. Gephart urges that

whatever plans are in practice among trade unions and other
organizations are not based on any scientific insurance principles.
They are but mutual agreements to pay certain sums in cases of
unemployment without any reference to the particular source of
the funds or their recipients.*

Although this may be true of some of the weaker
trade unions, this criticism is certainly invalid when
applied to the bigger and better organized labour
organizations. Even when all their benefits are pooled
into one fund the dues collected in respect of out-of-
work insurance are calculated to cover its cost to the
organization. But when each benefit is paid from a
different fund it is more clearly seen that such schemes
are much more than merely " mutual agreements to
pay certain sums in cases of unemployment without
any reference to the particular source of the funds or
their recipients." They are, more or less, scientifically
calculated schemes of insurance against unemployment.

Moreover, we have now some nine years' successful

* Gephart : Principles of Insurance. New York, 1915.

INSURANCE AGAINST UNEMPLOYMENT 65

experience of the British National Unemployment Insur-
•ance Act. Thus unemployment insurance is not merely
a possibility; it is a fact.*

It was due to experience already gained that the
" International Association against Unemployment "
declared even before the war that unemployment was
a risk against which it was possible to insure.

(b) Is unemployment a risk against which it is advis-
able to insure ? We have seen that most workmen,
are unable to make adequate provision when unaided-
against unemployment. It has also been seen that
saving is technically inferior in achieving the end oil
guaranteeing workmen, subject to this emergency,
a certain sum of money. f Two false judgments have
hitherto discouraged workmen from making provision
against unemployment. First, most workmen do not,
as a matter of fact, estimate their earnings at their true
value. They fail to appreciate how large an amount
needs to be discounted owing to the unhealthy or fluc-
tuating nature of their work. Second, most workmen
optimistically assume that whatever may happen as a
rule or on the average to workmen, they as individuals
will escape from harm.

But once a workman is insured, the true risk comes
to be more clearly conceived and better appreciated.

Not only is the loss of wages due to the regularly
recurring periods of unemployment a matter of great
concern in that it results in forcing many people below
the necessary minimum of existence, but also the fact
of fluctuation of earnings is highly objectionable in
itself.

An average wage of, say, £3 a week leads to greater
welfare than a wage of, say, £5 a week for six months
in the year and £i a week for the other six months in
the year. If the workman's foresight were perfect and
his will adamant, he would arrange for an expenditure

* The whole subject of unemployment insurance was investigated
by the German Imperial Statistical Department, which published one
of the best reports on the subject in 1906. It of course needs revising.

f See A. C. Pigou : Unemployment, chap. xiii.

66 INSURANCE AGAINST UNEMPLOYMENT

of £3 a week. But as he is not in this respect superior
to other human beings, he enjoys his "bust up" during
busy periods and suffers from the effects of insufficient
nutrition during slack periods.

Any _ arrangements tending to reduce this unevenness
in his wages, and consequently in consumption, such
as is produced by a scheme of insurance, therefore tend
to increase the welfare of the workman. These con- -
ditions justifying insurance against the emergency of
unemployment have been so common that workmen
in many parts of the world have arranged schemes for
this purpose. We shall see in Chapter IV what the
trade unions in the leading industrial countries have
effected in the way of unemployment insurance.

We have now answered two of the preliminary ques-
tions, and we may conclude that unemployment is
a contingency against which it is both possible and
advisable to insure. The third question as to the
advisability of the State encouraging this form of
activity will be taken up later.1 We must here analyse
the types of " unemployment insurance " schemes.

' See p. 81.

CHAPTER III
DEFINITION OF UNEMPLOYMENT INSURANCE

INSURANCE implies an agreement to pay a certain sum \;
of money as compensation against a loss which may or
may not occur. Fire, physical accident, sickness, unem-
ployment are such contingencies, and their occurrence is
likely to result in great loss to those whose property or
person is attacked by them. To protect individuals
from overwhelming suffering the device of insurance
has been perfected, so that the losses sustained by the
few may be distributed over the many and thus great
risks eliminated. Those who desire to be insured, or
others on their behalf, pay regular small contributions
towards a fund from which any insured member will be
reimbursed should the emergency happen against which
insurance is sought. Unemployment is only one of the
many types of risk against which individuals may now
insure.

Unemployment insurance may therefore be denned as
an agreement, which is legally enforceable, to pay a certain
sum of money as compensation against the loss of
wages resulting from involuntary unemployment due to
lack of work.* It therefore constitutes a buffer against
one of the most dangerous emergencies to which the
wage-earner is subject. Marine and fire losses are only
two of the many kinds of emergencies against which
property owners may insure their property. Schemes of . /
social insurance are advocated on the ground that itv

* Politicians who constantly refer to unemployment insurance " bene-
fits " as " doles " or chanty gifts thus not only betray their bias but their
ignorance.

68 INSURANCE AGAINST UNEMPLOYMENT

will pay workmen, even more than property owners)J
' to have their property insured too, their property being,
of course, their health and capacity to earn a livelihood.
To save them and their families from exceptional eco-
nomic risks they will need insurance against the effects
resulting from accidents, sickness, invalidity, premature
old age, and unemployment. To-day, when the work-
ing man no longer owns the materials and instruments
of production, and where the conditions of life in the
factory are imposed upon him, his normal earnings are,
as a rule, not sufficient to provide more than the mini-
mum standard of health and efficiency, and since he has
no reserve of wealth to fall back upon, it is particularly
urgent that he be protected from exceptional economic
risks.

Types of Unemployment Insurance Schemes.

Insurance against unemployment has hitherto been
provided through one of four different -kinds of organiza-
tions : (i) through trade unions, (2) through associations
recognized and subsidized by public bodies, (3) through
establishment funds, and (4) through national compulsory
schemes.*

(1) For some two hundred years trade unions have
insured their workmen against unemployment in the
United Kingdom, and until recently they distributed
in the industrially developed countries of the world in
the form of unemployment insurance nearly as much as
all the other organizations providing such insurance
put together.

(2) During the last two decades a movement for
subsidizing trade ufiion insurance has gained momentum.
Under the name of the Ghent scheme this plan has
been adopted by eight countries and is likely to be
introduced in others.

* An entirely new type of social insurance was contemplated by the
Seamen's Conference held at Genoa in June 1920. An international i
system of insurance for seamen was contemplated. — See League of\\
Nations, Report II, on Unemployment, p. 50.

INSURANCE AGAINST UNEMPLOYMENT 69

(3) Hitherto schemes of establishment funds, i.e. \j,
schemes conducted by individual firms for insuring
workmen against unemployment, have received their
greatest development in Great Britain, Germany, and
Austria, though some few firms in France and even in
America have instituted similar provisions for periods
when their employees are laid off.

(4) Great Britain was the first country with a national
comprehensive compulsory scheme of unemployment
insurance. It has been followed by Austria, Italy,
and Soviet Russia.

The first and third of these organizations for insurance
are voluntarily introduced by the people affected, whilst
the second and fourth types of insurance result from A^
legislative enactment.

Mr. Gibbon's analysis of all schemes of assisted insur-
ance into provided voluntary schemes and autonomous
trade insurance is neither clear nor helpful.*

Certainly the term "autonomous trade insurance " is
misleading. By ft the ordinary reader would under-
stand the general form of insurance carried on by unions
without any public intervention. He, however, learns
that it means " a scheme of insurance established and
maintained by themselves/' but which nevertheless
receives public support. He is again at sea when he
learns that such unions must always satisfy certain
requirements and submit to supervision. The two im-
portant distinctions which have been drawn between
provided voluntary schemes and autonomous trade
insurance do not in fact have much force.

In a provided scheme (we are told) insurance as a rule is open
to workers generally, and is not confined to any particular trade or
trades. In an autonomous scheme insurartte is generally confined
to a particular trade or to a number of allied trades ; such insurance
is almost exclusively effected through trade unions.

As a matter of fact, however, most provided schemes
do assist trade unions and have very few members from

* See I. G. Gibbon's Unemployment Insurance, pp. 44, 45-

70 INSURANCE AGAINST UNEMPLOYMENT

different trades belonging to their funds, whilst the
autonomous schemes frequently provide for the assistance
of non-unionized members. It is more helpful to regard
both these forms of assistance to unemployment insur-
ance schemes as species of the Ghent scheme. This
certainly is the view now current amongst students of
the problem.*

In the world of social institutions, as in that of the
animal kingdom, the idea that progress takes place
mainly, if not exclusively, by the process of variation
and selection holds good. Without variation there can
be no selection, and without variation and selection
there is no progress. This process is proceeding apace .
in the field of unemployment insurance. Experiments
of the most varied kinds have been made with each of
the four types of schemes.

We shall see that whilst many countries in Europe
have begun with voluntary organizations of workers and
a few with private employers' funds, a number have
developed subsidized unemployment insurance schemes,
v and one country has actually successfully operated a
national compulsory scheme of unemployment insur-
ance for almost a decade, which other countries are now
copying.

Unemployment insurance as an organized venture is,
however, yet too new for it to be said that the recent
spread of the idea of the national compulsory form of
insurance is an unmistakable and incontrovertible proof
of the survival of the fittest form. Insurance by trades
is a new form that has to-day very many powerful
supporters.

Summary.

Let us now summarize the argument developed in the
first three chapters. It is evident that whilst for many
millions of workers it is impossible unaided to make
adequate provision against unemployment, for others

* See, for example, Professor Giovanni Montemartini in The International
Bulletin against Unemployment, Fourth Year, No. i, pp. 189-92.

INSURANCE AGAINST UNEMPLOYMENT 71

their wages are large enough to enable them to do so.
Not all of these latter, however, do at present save
against a period of unemployment. A comprehensive
programme of reform will therefore provide that an im-
petus be given to voluntary saving and that some special
method be developed for those who need aid during
periods of unemployment. Through savings banks and
trade unions, funds are collected by workmen which
they can use when out of work. Facilities for saving
should be increased for some, a very small minority,
who to-day could afford it but who through laziness
and the lack of habit fail to make provision against
, unemployment. More trade unions should introduce
schemes of out-of-work benefits ; establishment saving
funds might be increased. Co-operative undertakings
might be able to take the place of the old motives for
thrift, as they have done in such large measure in Great
Britain and Denmark. Again, it is an established fact
that saving is most characteristic of well-paid, well-
organized workmen whose labour requires skill and
reliance. Forces making towards the upbuilding of
such groups of labourers should therefore be encouraged.

Still, it is impossible to wait until the vast body of
labourers have attained such conditions. Distress due to
involuntary unemployment is an insistent problem and
brooks no delay. The intermittent but frequent clamours
that arise that unemployment should be faced by the
community cannot be answered by reference to aspi-
rations for the future concerning personal providence and
thrift. When large numbers of workmen are paid at
such a low scale that saving is not merely inadvisable
but criminal, when expenditure on food and clothing for
themselves and their families is the best possible way
of disposing of any savings, then some other means for
f icing unemployment must be discovered.

Professor Schanz's proposal of compulsory savings is
on examination found to be unsatisfactory as a means
of providing against unemployment. It ignores the
considerations that by the acceptance of mutual obli-

72 INSURANCE AGAINST UNEMPLOYMENT

gallons and the pooling of risks and distributing them
evenly the cost of defence against unsteadiness of
income is greatly reduced. We may therefore push
ahead with our inquiry and proceed to investigate the
schemes of insurance against unemployment which have
proven beneficial.

PART II

THE GHENT SYSTEM
OF UNEMPLOYMENT INSURANCE

CHAPTER IV
TRADE UNION UNEMPLOYMENT INSURANCE

INSURANCE companies operating for profit do not institute
schemes of insurance against unemployment, because it
would not prove a profitable activity. There is a great
likelihood that only those workmen would be disposed to
insure with them who were most subject to the risk of
unemployment. Moreover, the expense involved in in-
vestigating every claim in order to reduce the likelihood
of malingering to a minimum would be very heavy. The
premium for insurance under these circumstances would
be so high that, even if an insurance company were pre-
pared to make out a policy against unemployment, very
few workmen could afford to take one.

Friendly Societies and Consumers' Associations.

Since workmen's organizations can, as a rule, provide
an adequate check on malingering and can devise means
for limiting the claims to benefit of those workmen who
are likely to be frequently unemployed, the cost of insur-
ance can be kept comparatively low. Thousands of
workmen in all highly industrialized countries have been
able through their own organizations to insure against
unemployment. These organizations have, as a rule, been
trade unions. But occasionally friendly societies and
consumers' associations provide schemes of out-of-work
insurance. Unfortunately no attempt has yet been made
to ascertain the amount which is distributed towards the
relief of the unemployed through these sources.

The Chief Registrar of Friendly Societies of the United

76 INSURANCE AGAINST UNEMPLOYMENT

Kingdom does not publish in his annual report a state-
ment of the sums expended on unemployment and travel-
ling benefit by the friendly societies. This information
is given only infrequently and at long intervals. In 1908
thirty-four registered friendly societies in England and
Wales distributed about £12,000 to unemployed members.
Provision for such benefits was made only by the smaller
societies. Some of the larger societies, however, including
the Independent Order of Oddfellows (Manchester Unity)
provided travelling benefits.

These societies distributed, in addition, substantial
sums in relief grants to those in distress through un-
employment and other causes. In 1907, £80,000 were
distributed by them. The disbursement of this sum is
comparable with the emergency relief granted by trade
unions in the United States. They represent the good-
will of workmen towards their fellows in distress. The
chief objections to them are that they are uncertain, and
unemployed workmen cannot claim them as a right.
This criticism applies also, as a rule, to the relief provided
by consumers' associations.

Particularly interesting is the work of the Hamburg
association of consumers, which in 1909 had 41,875 mem-
bers. This fund differs from others in that at the end
of the year dividends are not paid out in cash but are
transferred to relief funds belonging to individual mem-
bers ; unemployment is one of the evils to be provided
against by such funds. In 1909, 15,456 members had
such deposits with an aggregate amount of 514,177 marks.*
In the same year 6,642 members withdrew 179,943 M. ;
especially large amounts were withdrawn after the lock-
out of building workers took place.

Friendly societies and consumers' associations, both of
them, in fact, selling to workmen certain of their require-
ments on a co-operative basis, have not made much
progress in insuring workmen against unemployment.
It is evident why this was inevitable. Both these types

* Owing to the great fluctuations in the value of foreign money in terms
of English money no attempt is made to give their English equivalent.

INSURANCE AGAINST UNEMPLOYMENT 77

of workmen's selling agencies are forced by their very
nature to allow workmen from all trades to become
members. They cannot confine themselves merely to
printers, weavers, clerks, or to the members of a single
trade. Workmen subject to varying risks of unemploy-
ment due to the nature of their trade are thus all heaped
together, and it is of course highly unlikely that com-
paratively regularly employed workmen will voluntarily
join an unemployment society of such a kind. They would
in effect be called upon to subsidize those workmen who
are subject to a much greater risk of unemployment.
In the case of trade union out-of-work benefit schemes,
on the other hand, each separate organization works out
its own rates of contributions and benefits on the assump-
tion that all its members are subject practically to the
same risk.

" Special " Trade Unions for Unemployment Insurance.

The signers of the Majority Report of the Poor Law
Commission of Great Britain contemplated the growth of a
special type of friendly society to insure workmen against
unemployment. To encourage its organization they pro-
posed that a special governmental subsidy be distributed.

If, however, the subsidy were to be offered to any provident
organization which would make unemployment insurance a leading
feature of its business, we should look for the advent of a new
type of friendly society composed of men of similar or allied trades,
who would have the necessary trade solidarity and knowledge of
each other's circumstances, and whose interests would be sufficiently
similar to prevent the " bad risks " crowding out the good. It would,
in fact, be a trade union organized for provident benefits alone.
If such societies came into existence under the encouragement
of a subsidy, we might hope for insurance against unemployment
becoming general over the field of labour. Such a result, we would
venture to say, would far more than counterbalance the expense
of the subsidy.

Mr. Gibbon gives half-hearted support to this proposal.
He wrote that

It is not improbable that, with the incentive of a subsidy, some
societies would be formed expressly for providing insurance against

78 INSURANCE AGAINST UNEMPLOYMENT

unemployment, especially among the steadier and more enlightened
members of occupations which are not yet organized in trade
unions ; and every encouragement should be given to the formation
of societies of this kind.*

We shall see that these expectations are quite unwarranted
in the light of the results obtained in the past through
Government subsidies to "associations" providing out-
of-work benefits. Even where strong trade unions have
been ready to take advantage of these subsidies it cannot
be said that any very marked proportion of the work-
people who were able to do so took advantage of them
by joining the unions and thus insuring themselves against
unemployment. Moreover, this suggestion of the Poor
Law Commissioners is objectionable to-day because it
focuses attention on the granting of subsidies when the
leading authorities on the subject have lost faith in their
efficacy and are now advocating compulsory national
schemes of unemployment insurance.

Trade Union Unemployment Benefits.

Experience shows that in order to have a promising
ground for the encouragement of unemployment insurance
workmen must not merely be organized, but they must
be organized for the specific purpose of securing better
economic conditions. To do so they must be organized
along trade or industrial lines. The trade union is not
only able to provide such insurance at a comparatively
low rate to members desiring it, but its experience
of the demoralizing effects of unemployment on its
membership and its morale impel it to introduce this
benefit feature. It is therefore through trade unions
that workmen have as a rule sought insurance against
unemployment .

Trade unions provide the oldest form of out-of-work
insurance. Most industralized countries have developed
these organizations of workmen, and these have, as a
rule, regarded mutual insurance against the emergencies
common to workmen, as one of their chief functions.

* I. G. Gibbon: Unemployment Insurance.

INSURANCE AGAINST UNEMPLOYMENT 79

International Trade Union Statistics.

The United States Bureau of Labour Statistics * has
prepared tables from the latest official sources avail-
able, showing the membership in trade unions in the
years 1912, 1913 and 1914 in each of fourteen prin-
cipal countries, including the United States. It should
be said that these figures are by no means complete, and,
furthermore, that they are not comparable, as between the
different countries, except in the most general way. They
serve, however, as an indication of the development of
the trade union movement within the respective countries.

MEMBERSHIP OF TRADE UNIONS IN VARIOUS COUNTRIES FOR THE YEARS
1912, 1913 AND 1914.

Membership.

1912.

1913.

1914.

Country.

Number

Total.

Women.

Australia (Commonwealth)

497,925

20,204

Austria

692,681

69,340

748,760

65,652

—

Belgium
Denmark

231,835
139,012

15,896

202,746
152,787

155,783

—

France

1,027,059

96,008

1,026,302

89,346

—

Germany
Great Britain

3,753,807
3,281,003

318,868
318,443

3,835,660
3,928,191

332,567
357,783

3,959,863

352,944

Italy

971,667

—

•

Netherlands (Dec. sist)

189,030

8,394

220,275

8,809

New Zealand

60,622

7i,544

— —

Norway

60,975

64,108

4,156

67,235

4,809

Sweden (Dec. sist)

87,024

97,252

—

101,207

—

Switzerland

131,380

I6,487

—

United States

2,389,723

2,60.1,701

The official publications from which figures were taken are as follows: Australia. — Com-
monwealth Bureau of Census and Statistics, Labour and Industrial Branch, Report No. 5, p. ?,
Austria. — Die ArbeUseinstellungen und Aussperrungen in Oesterreich wahrend des Jahres, 1912.
Herausgegeben vom k. k. Arbeitsstatis ischen Amte im Handelsministerium. Appendix, pp. 102 ff. ;
1913, pp. 80 ff. Belgium.— Revue du Travail, 1914, P- 754- Denmark.— Statistisk Aarbog,
1913, p. 130 : 1914, p. 132 ; 1915, p. 140. France. — Bulletin du Ministere du Travail et de la
Prevoyance Sociale, 1913, p. 1173; 1915, P- 29. Germany.— Statistisches Jahrbuch fiir das
Deutsche Reich, 1915, p. 79 t; annual average. Great Britain.— The Board of Trade Labour
Gazette, 1914, p. 123 ; 1915, p. 318. Italy. — Bollettino dell' Ufficio del Lavoro, 1914, p. 71.
Netherlands.— Bijdragen tot de Statistiek van Nederland, Nieuwe volgreeks, Beknopt overzicht
van den omvang der Vakbeweging op i Januari, 1914, p. 7- New Zealand. — Twenty -thtrd Annual
Report of the Department of Labour, 1914, p. 7. Norway.— Arbeidernes faglige Landsorganisation
Bereitung, 19:3, 1914. Sweden.— Sociala Meddelanden, 1913, p. 74* J *9H, P- ™49 ; 1915,
p. 1254. Switzerland.— Schweizenscher Gewerkschaftsbund, Jahresbericht, 1912. United States.—
Bulletin of the Department of Labour, State of New York, 1913, No. 56, p. 407; exclusive of
membership in Canada and including only those unions from which actual returns were received ;
No. 67, p. i.

* Vol. ii, May 1916, No. 5, pp. 82-3.

f For the latest figures of trade union membership, see The Labour
International Handbook, 1921.

80 INSURANCE AGAINST UNEMPLOYMENT

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INSURANCE AGAINST UNEMPLOYMENT 81

The preceding table, relating to the distribution of the
annual disbursements of trade unions in various countries,
relates to the year 1912, the latest for which information
with any degree of completeness was available.

British Trade Unions.

In 1910 the British trade unions spent nearly 30 per
cent, of their total expenditure on out-of-work pay.
In that year the annual returns furnished to the Central
Office by unions represented 1,884,281 out of a total of
1,957,903, or 96 per cent, of the whole membership of
registered trade unions.* Contributions of members during
1909 amounted in the aggregate to £2,671,087, while the
income derived from other sources amounted to £253,921,
giving a total revenue of £2,925,008.

The expenditure amounted to £3,027,522, and was
applied in the following manner : —

Out-of-work pay
Sickness pay
Superannuation
Other Provided Benefits
Dispute Pay
Management Expenses

Total expenditure England and Wales . . £3,027,522 100-0

More information is available as to the selected trades
which were included in the Government scheme of un-
employment. It is interesting here to note the average
benefits provided by their own trade unions.

MEAN COST OF UNEMPLOYED BENEFITS, 1900-9, OF ALL
TRADE UNIONS IN INSURED TRADES.

Percentage.

904,104

29*9 -

420,362

13-9

349,397

11-5

526,043

17-4

242,411

8-0

585,205

I9'3

No. of Unions.

Membership.

30 shillings and over . .

36,540

25 and under 30 shillings

56,302

20 and under 25 shillings

150,188

15 and under 20 shillings

27,366

10 and under 15 shillings

47,131

5 and under 10 shillings

7,072

2S. 6d. and under 5 shillings .

21,991

Under 2s. 6d. . .

57,500

* Report of Chief Registrar Friendly Societies, 1911, Part A, p. 33.

82 INSURANCE AGAINST UNEMPLOYMENT

The total number of workmen in the insured trades
who were able to claim unemployed benefits before the
Government Insurance Scheme was introduced in 1912
was 404,090.*

This table on page 80 shows that the Danish trade unions
spent a much higher percentage of their income on unem-
ployment and travelling benefits than those of any other
country in the world. The American trade unions, on
the other hand, spent less than any other industrial
country. This is a result of the different policies pur-
sued by the two groups of bodies. In socialized Denmark
the benefit features of the unions are their prime purpose ;
in trustified America their prime object is to strengthen
their strike funds. In the former country organized
labour demands better conditions of labour through the
legislature. In the latter it fights the employers for
them directly.

These figures relate to conditions in 1912. Since then
the British Unemployment Insurance Scheme has resulted
in greatly stimulating the amount which unions devote
to unemployment insurance in that country.

State Intervention in Unemployment Insurance.

We are now in a position to consider the advisability
of State interference with unemployment insurance. Such
interference in the past has been of two kinds : that of
subsidizing existing schemes and of compelling workmen
to insure in a Governmental scheme. All civilized states
to-day recognize the duty of helping those who are reduced
to destitution through lack of work or through other
causes. It will be seen later that^in order to carry out
their function effectively various plans for money relief
and relief works have been attempted. These have, how-
ever, proven so unsatisfactory that in most industrialized
countries it has been found better to provide against the

* See Tables showing the Rules and Expenditure of Trade Unions
in respect of Unemployed Benefits, and also showing earnings in the
Insured Trades, 1911, Cd 5703, p. 16.

INSURANCE AGAINST UNEMPLOYMENT 83

effects of unemployment by helping individuals to insure
against them. The justification of State intervention,
therefore, rests on (i) the inability of workmen to bear
unaided the effects of unemployment and (2) the accept-
ance by modern society of the humanitarian duty of
preventing starvation through want.

CHAPTER V
THE "GHENT SCHEME"

Unemployment Insurance in Belgium.

IN order to encourage insurance against unemployment
in Belgium,* grants are made from the communal unem-
ployment funds to unemployed members of trade^unjons
affiliated to the communal fund and tcTmembers of
provident societies. This system of subsidies from public
funds towards provision made by workmen against unem-
ployment is known as the " Ghent Scheme," from the
name of the town where it was first successfully operated
in 190 1. 1 This scheme has been adopted with slight
modifications throughout the country and in various
other countries.

In 1902 there were eight communes which assisted
schemes of insurance against unemployment. In 1914
there were in existence 29 municipal or inter-municipal
funds representing 101 municipalities. Most of these
operations were suspended during the war, but since
the armistice the number of unemployment insurance
societies and municipal insurance funds have greatly
increased. There are now 84 municipal funds repre-
senting 627 municipalities. The membership of the
unemployment insurance societies at the end of December
1920, was over 800,000, as compared with 126,278 in

19*34

Since 1907 the national Government, through the

* For further information on general labour conditions The Labour
International Handbook, 1921, is recommended.

| Such an arrangement existed in the province of Liege in 1898, but it
was not until Ghent adopted it in 1901 that the idea began to spread.

J Moniteur Beige, January i, 1921.

INSURANCE AGAINST UNEMPLOYMENT 85

Minister of Industry and Labour, has granted a sub-
sidy in addition to that granted by the Communes
towards funds of insurance against involuntary unem-
ployment. In that year only communal funds were
subsidized ; but since then direct encouragement has
been accorded also by the State to funds affiliated to
communal funds, and even to certain non-affiliated funds
provided that they belonged to a recognized * profes-
sional union.

Measures for Treating Unemployment before 1901.

Until the introduction of the Ghent system of unem-
ployment insurance the only signs of a recognition of
public responsibility for the unemployed in Belgium were
the existence of a number of free municipal, co-opera-
tive, and philanthropic employment bureaus in almost
every city, and of labour colonies, depots de mendicants
of Merxplas, and the Maisons de Refuge of Wortels
and of Hoogstraeten, which are in fact punitive
institutions for beggars and vagrants. In addition, the
Belgian Labour Office published in the Revue du Travail
annual reports of unemployment. Until fifteen years
ago the number of trade unionists in Belgium was on
the whole very insignificant, and these aimed chiefly
at mutual aid during trade disputes. Moreover, these
labour organizations were in a precarious condition, and
thus no permanent unemployment insurance scheme could
be organized.

Trade Union Activities.

Yet out of the 145 unions existing in 1901, 50 had
organized unemployment insurance. In Ghent, out of

* The unions which desire legal recognition are as a general rule the
Catholic unions. Unions affiliated to the party of working class socialists
and independent unions, such as the Typographers' Union, are loath to
submit to the conditions necessary to gain the benefits of recognition,
especially to the obligation to give the administration detailed accounts
of receipts and expenditures of the union, as well as an undertaking in
advance to try and settle all disputes concerning the conditions of labour
by conciliation and arbitration. — Bulletin de I' Association pour la lutte
contre le chdmage, No. i, pp. 67, 68.

86 INSURANCE AGAINST UNEMPLOYMENT

the total working-men population of 36,500, about 20,000
belonged to trade unions.

A few characteristics of Belgian trade unions are
worth noting. The practice of granting higher or lower
benefits according to the length of time during which
a member has belonged to the union, so common in the
British and German labour organizations, is not fol-
lowed in Belgium. Nor does length of membership in
the union affect the period for which benefits are provided.
The unions usually lay down uniform rules relating to
all members, with no regard to the length of time for
which they have been connected with the organization.

The Belgian unions recognize two kinds of unemploy-
ment. One is ordinary unemployment caused by lack
of work, and the other is temporary unemployment
caused, e.g., by a breakdown of a chimney or by a fire.
There exist two different rates of assistance for these
two species of unemployment. But in some unions
the compensation in case of unemployment of the first
class is higher than that of the second, whilst in others
exactly contrary rules prevail.

Many Belgian unions grant benefits also in case of
partial unemployment.

Towards the close of the nineteenth century the
question of unemployment in Belgium became urgent.
In 1894 the city officials of Brussels and of its six
suburbs ordered an inquiry into the problem, the results
of which were to serve as a basis for the organization
of a mutual insurance fund against the risks of unem-
ployment within the territory represented, such fund to
be aided out of the public treasury.

A similar investigation was made in Mons in 1896.
In 1898 the City Council of Ghent appointed a Commis-
sion to devise some effective agency for unemployment
relief.

The Ghent Commission on Unemployment.

The Commission recognized the difficulty of estab-
lishing a stable basis for unemployment insurance on

INSURANCE AGAINST UNEMPLOYMENT 87

account of the lack of sufficient data on which to formu-
late probability tables, the lack of uniformity in risks,
and the difficulty of distinguishing between simulated
and real involuntary unemployment. It disapproved of
both voluntary and compulsory unemployment insur-
ance schemes/ It was then proposed that the city dis-
tribute annually among workmen who, previous to their
unemployment, had made some effort to provide for such
a contingency, an amount proportional to their savings.
This distribution, it was suggested, should be made
through trade union unemployment insurance funds as
well as through a savings fund to be established especially
for that purpose. In this way it was hoped not only to
increase the number of working men who would insure
themselves against unemployment through their trade
unions, but also to net into the scheme those workmen
who did not already belong to and who were not
willing to join trade unions.

The Law of June 3, 1901.

The recommendations of the Commission were em-
bodied in a law which came into operation on August i,
1901. In 1903 the three suburbs of Ghent — Ledeberg,
with a population of 14,226, Mont Saint Armand, with
a population of about the same number, and Gendbrugge,
with a population of 11,743 — joined the Ghent fund,
thus forming the so-called Ghent Intercommunal Fund.
(The communes of Waerschoot, Wettenen, and Hensden
have since been admitted to membership in the fund.)

The trial period of three years showed that the scheme
was successful in stimulating self-help, and so the City
Council voted unanimously to continue the system and
to make it a permanent institution.

Workmen involuntarily unemployed, living in Ghent
and in the communes which are participating in the
scheme, are entitled to subsidy by making provision
against unemployment either through organizations or
through individual savings. .The only organizations

88 INSURANCE AGAINST UNEMPLOYMENT

which in fact make such provision are the trade
unions, and the success of the Ghent scheme has
been attributed to their freedom in administering their
own funds. On the other hand, the provision of subsidy
to individual savings, whether through savings banks or
provident societies, has hitherto met with little success.
Claims have been very few, though all that was neces-
sary to receive the subsidy was to show that the with-
drawal of funds was due to unemployment. This seems
all the more remarkable when it is recalled that the
rate of subsidy provided to workmen claiming trade
union unemployment insurance and to those withdrawing
private savings is the same.

The State Grant.

The State grants to approved societies a subsidy
equal to 50 per cent, of the contributions paid by mem-
bers, subject, however, to the restriction that contri-
butions in excess of 75 centimes * a week in industries
with seasonal unemployment, and 50 centimes a week
in others, were not to make exhaustive claims on the
fund. This provision was necessary both as a pro-
tection to the funds and to prevent members of unions
paying high benefits for long periods from receiving
in addition most aid from communal funds. It was
meant to prevent the poorer trade unions from being
discriminated against.

The general conditions in trade unions for the receipt
of unemployment benefit are recognized by the State
as acceptable. These provide that the unemployed
member shall have paid an unemployment contribution
for a defined period and of an amount which is more
or less arbitrary. Benefits are not paid until the reci-
pient has been out of work for a certain number of days,
usually three to eight. Limits are, as a rule, laid down
for the period during which the benefit will be paid. The
State, in providing grants, allows members who have

* In 1914 there were 25*2 francs (loo cents = I franc) to £i.

INSURANCE AGAINST UNEMPLOYMENT 89

not completed the qualifying period to draw the same
benefit as full members up to a maximum of three francs
a day.

It should be noted that the State subsidy is in addi-
tion to the communal subsidy, but previous to the war
it was generally regarded by State officials to be unde-
sirable for the total subsidy from public funds to be
greater than the trade union benefits.

The Government pays, in addition, 50 per cent, of
the administrative expenses of the municipal unem-
ployment fund.

Advantages and Disadvantages of the Ghent Plan.

The Ghent plan was thought to have many advan-
tageous features. First, there was the ease with which it
could be started and at once operated on a large scale.
As over 50 per cent, of the workmen were organized in
trade unions, the expenses of organization and propa-
ganda could be saved. Second, it was thought that this
system would induce workmen to make greater efforts in
providing against the possibility of unemployment, since
subsidies were to be given in proportion to personal thrift.
Third, the administration of the system would be very
simple and inexpensive. It left the whole management
to the trade unions, organizations well adapted to judge
whether a man is really involuntarily unemployed or
not. It was then to the interest of every member of
the union to see that no abuse was tolerated. Every
month each trade union desiring to share in the
municipal subsidy was to submit to the special Controller
designated by the municipality an account of the state
of employment and of the benefits paid to the un-
employed members. The Controller was pledged not to
divulge any personal information to anyone but to
members of the administrative committee of the municipal
fund. The operation of a scheme of unemployment
insurance through trade unions thus tended to reduce
both the cost of the scheme and the danger of malinger-

90 INSURANCE AGAINST UNEMPLOYMENT

ing to a minimum. Fourth, in Belgium trade unions are
regarded as having an indisputable social value and are
treated as powerful engines for forcing up the standard
of life of the working class. Their indirect encourage-
ment through the disbursement of public subsidies was
therefore used as an argument in favour of the Ghent
plan in many quarters.

But the optimism of the early supporters of the scheme
has now given way to the view that it is inadequate
as a solution of a pressing national problem, and indeed
the growth of opinion in Belgium, the country where
the scheme of subsidizing voluntary arrangements against
unemployment was first introduced, in favour of a com-
pulsory scheme of unemployment insurance is character-
istic of the change which has taken place on this
subject in most industrialized countries within recent
years.

The Belgian section of the International Association
on Unemployment adopted the following principles as
regards insurance against unemployment: —

(1) Insurance against unemployment ought to be

compulsorily extended by degrees to all who
are subject to the risk of unemployment.

(2) It ought to be organized on a trade basis and

in close connection with the employment ex-
changes.

(3) The existing institutions ought to be utilized and

developed.

(4) An insured person ought to be free to choose his

unemployment society.

(5) The efforts of the workers ought to be supple-

mented by the support of employers and public
authorities.

In effect, the body consisting of experts in unemploy-
ment questions and of experienced administrators has
definitely thrown over all confidence in the possibility
of extending the Ghent scheme sufficiently to meet the
evils of unemployment and has declared in favour of a

INSURANCE AGAINST UNEMPLOYMENT 91

scheme on the lines of the one in Great Britain. When,
however, we learn that in spite of the considerable
increase in the number of trade unions probably only
one-half of the industrial population of Belgium has
yet been reached, and that the workmen who have
been subsidized are, as a rule, the better paid workmen,
then it is not difficult to appreciate the reason for the
growth of opinion favourable to a compulsory com-
prehensive scheme.*

* "Growth of the Compulsory Principle," p. 422, Avril-Juin 1914,

Bulletin Trimestriel pour la luttve contre le chdtnage.

CHAPTER VI
UNEMPLOYMENT INSURANCE IN FRANCE

THE peculiar interest which attaches to the institution of
unemployment insurance in France arises first from the
fact that, unlike the English and German and very much
like those of the United States, French trade unions
have not yet developed to any degree schemes of unem-
ployment benefit, and secondly, from the consideration
that it was the first country to adopt as a national
system the Ghent plan of subsidizing voluntary funds of
insurance against unemployment.

National encouragement to voluntary associations did
not come into effect until 1905, although repeated efforts
had been made since 1893 to carry a Bill in the National
Assembly for this purpose. Between 1893 and 1905
there were no less than thirteen Bills introduced on
the subject of unemployment insurance.

The investigations of the French Labour Office in
1896 showed that a large number of cities and com-
munes provided an annual budget of more than 100,000
francs for relief works to support unemployed persons.
Many of these provided only work in removing snow
and ice, while others engaged in such work as improv-
ing local parks, draining and grading the common land,
work on sewers, and a variety of outdoor construction
works.*

In addition there were the philanthropic organizations
similar to those in Great Britain and the United States
which provided work or relief for the unemployed.

* Workmen's Insurance in Europe, vol. i, Twenty-fourth Annual Report,

p- 946-

INSURANCE AGAINST UNEMPLOYMENT 93

These two classes of relief measures, public and private,
and the annual attempts to introduce a Bill dealing
with unemployment insurance show the measure of
appreciation of the importance of and interest in the
problem of alleviating distress due to unemployment.
This interest was at once an effect and a cause of the
growth of a vast body of literature dealing with various
aspects of the unemployment problem, much of which
was of the highest scientific value.

Trade union unemployment benefit funds were, and
still are, of minor significance in France. Created at a
later date than in England or Germany, they have never
enjoyed wide popularity.

In 1894 there were 87 trade unions with 16,250 mem-
bers which regularly provided out-of-work benefits to
their unemployed members. In 1902 there were 310
unemployment funds organized by trade unions. About
one-half of this number were local organizations of the
Typographical Union. They had about 30,000 members
and an expenditure of about 200,000 francs. Less than
5 per cent, of the workmen in all the trade organizations
were entitled to unemployment benefits. The Typo-
graphical Union was the only nationally organized union
which provided this feature. With the exception of
that union, little progress had been made in trade
union insurance against unemployment before 1902. In
that year the Permanent Committee of the Conseil
Superieur du Travail investigated the whole problem,
and in 1903 its views, somewhat modified by the
general body, were accepted. It recommended : —

(1) That the creation and development of institutions

for insurance against unemployment should be
facilitated.

(2) That all the local funds for providing relief against

unemployment should be subsidized by muni-
cipalities to the extent of a share of the normal
annual subvention smaller in amount than the
dues paid by the members participating.

94 INSURANCE AGAINST UNEMPLOYMENT

(3) That local funds should receive subventions from

such bodies as chambers of commerce and
employers' associations, and that it is the duty
of employers to aid unemployment funds.

(4) That recognition shall be given such trade union

unemployment funds or other funds engaged
in finding employment for persons involuntarily
out of work, whose organization is susceptible
of an effective control. The subventions of the
State should be especially intended to assist in
defraying the expense of transferring unem-
ployed persons, and should not exceed 50 per
cent, of the expenditures for removal paid out
in the course of the year by each fund.

(5) That the State should intervene in behalf of the

creation and development of institutions for the
relief of unemployment either by means of sub-
vention or by other methods.

(6) That unemployment benefits should not exceed

one-half of the workman's usual wage.

(7) That the State shall subsidize working men's

funds which are not local but which give unem-
ployment insurance to whole regions or districts
or to the country as a whole.

The Council thus proposed that strictly local societies
should be subsidized by the local authorities and that
national societies or institutions which cover wider
areas should be subsidized by the National Government.
It also urged that bodies directly responsible for and
interested in unemployment, such as employers' associ-
ations, chambers of commerce, etc., should contribute to
the support of unemployment societies.

We shall see how the State has subsidized the funds
of national organizations and how in Lyons and Paris
the city authorities have subsidized local funds, while
in Roubaix the employers co-operating with the city
have encouraged organized provision against unem-
ployment.

INSURANCE AGAINST UNEMPLOYMENT 95

The National Scheme (amended in 1906, 1908, and 1912).

The finance law of April 22, 1905, provided an
appropriation of 110,000 francs for " subventions for the
purpose of relieving unemployment." Subsidy was granted
by the State :—

(1) To funds composed of members engaged in the

same occupation, in the same trades, or in
allied occupations belonging to establishments
turning out a specified product, on condition
that there were at least 100 members in
them.

(2) In communes of less than 20,000 inhabitants, to

local funds composed of members belonging to
different occupations on condition that they
received subventions from the communes and had
at least 50 members.

(3) To funds organized by federations of unions to

provide relief in the form of travelling benefits
which were supported by lump-sum contributions
from each affiliated union, on condition that
the normal resources of these unions were derived
from dues of their members.

Subsidy was granted in proportion to the benefit paid
in respect of involuntary unemployment due strictly to
want of work. The rates of subsidy were at the outset
20 per cent, to funds extending to at least three depart-
ments, i.e. to general associations, and 16 per cent, to
local associations. In 1908 these rates were raised to
30 per cent, and 20 per cent, respectively. The reasons
for this differentiation are obvious. The intercommunal
or interdepartmental character of the districts or national
funds diminish their chances of receiving local subven-
tions, and they have, therefore, a claim to higher sub-
ventions from the State. Moreover, they were regarded
as more effective agencies for dealing with the un-
employment problem. It is, moreover, unlikely that

96 INSURANCE AGANIST UNEMPLOYMENT

its members will all suffer from unemployment at the
same time or in the same degree.

In order to be entitled to claim the State subsidy, a
fund must have been in operation for at least six months,
and the total amount received by it as members' con-
tributions in respect of unemployment insurance must
at least equal one-third of the total amount paid as
unemployed benefit to members out of employment.

Subsidy is paid half-yearly to the associations, most
of which are trade unions. A proportion of the unem-
ployment benefit paid out by them from their own
resources is then refunded to them. Subsidy is not
paid on more than two francs per day of benefit or in
respect of more than sixty days in any one year ; the
maximum amount of subsidy for each insured workman
in any one year amounts to 27 francs.

A separate record has to be kept of the benefits paid
to each member. But in the case of trade unions it is
sufficient to earmark part of their total contribution
for unemployment benefit purposes, and thus to cal-
culate the amount of subsidy that can be claimed for
members.

Check on Unemployment.

The fund must supply the free service of an employ-
exchange to unemployed persons. This require-
ment produces no difficulties, since most unions already
have an organization of this nature. In 1913 there were
140 employment exchanges administered by trade unions.
Indeed, Professor Sombart writes that " French trade
unions have one special characteristic in that they have
brought labour exchanges to a high state of develop-
ment/' *

The unemployed person is required to accept employ-
ment in his occupation when it is offered him by the
fund. He must sign the register kept at headquarters
or in special offices of the fund at least three times each
week during the hours of labour. The Unemployment

* Sombart : Socialism and the Social Movement, p. 236.

INSURANCE AGAINST UNEMPLOYMENT 97

Commission can, however, accept the entire method
of control specified in a constitution which offers an
equivalent guarantee.

Provision was made for the formation, in connection
with this scheme, of an Unemployment Insurance Fund
Commission, whose duty it is to supervise the proper
execution of the decrees. This Commission is annually
appointed, and consists of one Senator, one Deputy,
one Director of Labour, the Director of Insurance and
Social Providence or his delegate, the Director-General
of Public Accounts or his delegate, and the Inspector
of Finances, the Assistant Director of Labour and four
representatives of the Unemployment Insurance Fund
representing the insured members. These latter are
chosen by the Minister of Labour.

STATISTICS SHOWING THE GROWTH OF INSURANCE AGAINST
UNEMPLOYMENT, 1910-12.

1910.

1911.

1912.

Subsidized funds

106

114

Membership

42.305

48,089

49,595

Cases of unemployment . .

8,493

8,609

8,429

Days for which benefits were paid

104,040

n6,373 t

209,564 J

Total benefits (francs)

205,159

224,151

209,564

Subsidies granted (francs)

42,869

50,726

47.542

Most of the State grant went in subsidies to the funds
of five national trade unions. These had 275 local
branches. They covered, however, those of only two
industries, of typography and engineering.

The State has also subsidized fourteen funds which
were not attached to trade unions ; eight of these
belonged to benefit societies and six were independent
organizations inaugurated for this purpose.

It is instructive to find that the general funds for
workmen of many professions have made no progress in
cities of over 50,000 inhabitants. In 1912 there were
four such funds having a membership of 502.

98 INSURANCE AGAINST UNEMPLOYMENT

SUBSIDIES VOTED AND GRANTED DURING 1910-12 TO
DEPARTMENTS AND CITIES.

191

1912.

Designation.

Subsidy
voted.

Subsidy
granted.

Subsidy
voted.

Subsidy
granted.

Subsidy
voted.

21 towns obeying regulations

100,600

67,232

103,988

80,404

104,400

30 towns without special by-laws . .

6,1 60

6,020
8 205

8,435

7,395

9,770

18 650

OPERATIONS OF THE STATE SUBVENTION IN 1913.
Number of funds subsidized . . . . . . 117

Aggregate membership .. .. .. .. 50,815

Expenditure of funds on unemployment benefits 233,482 francs
Amount of State subvention . . . . . . 55,445 francs

Municipal Schemes.

The two towns in which the subsidy against unem-
ployment is of most importance are Paris and Lyons.
The city of Roubaix has a scheme which differs some-
what from that in the larger cities.

PARIS.

In 1902 the Municipal Council of Paris received the
proposal to assist insurance against unemployment. In
1904 a credit of 25,000 francs was voted for this purpose,
but a scheme was not developed and distribution of
subsidies did not begin until 1909. In that year 21,821
francs were distributed amongst 22 unemployment
insurance funds. 20 per cent, of the benefit paid out
by them was provided by the municipality on the same
conditions as had been adopted by the State since
1905.

In 1911 the subsidy was raised to 25 per cent. Mean-
while the number of funds had increased to 29, the credit
voted was now 106,255 francs, and the amount distri-
buted 26,555 francs. The typographical and engineering
unions received the highest subsidies.

INSURANCE AGAINST UNEMPLOYMENT 99

Lyons has made greater progress with respect to the
increase of insurance funds claiming subsidies than any
other town in France. This is because the subsidy to
workmen is extraordinarily high — higher, in fact, than
is allowed them under any other system.

When the subsidies were introduced in 1905 there
were 25 funds supported by 2,868 members. In 1912
there were 48 funds and 3,834 members.

The following figures show the situation during the
last three years for which we have statistics : —

SUBSIDIZED FUNDS IN LYONS, 1910-12.

1910.

1911.

1912.

Subsidized funds

Membership . . . . . . . ,

3,933

4,021

3,834

Days for which insurance was allowed

24,276

23,068

16,000

Sums granted (francs)

39,103

34,874

25,748

Total of contributions (francs)

23,991

22,229

17,789

Benefits granted (francs)

23,991

22,229

17,789

Balance in hand December 3 ist

72,247

8.5,511

102,033

1,003 silk weavers distributed 11,360 francs in un-
employment insurance and received a subsidy of
6,736 francs. There were 740 members of the printing
trades who distributed 9,642 francs and received 4,565
francs in subsidy. 516 woodworkers expended 1,567
francs and received 2,784 francs, i.e. nearly double their
expenditure.

As a result the city subsidies formed more than half
the amounts distributed : 61 per cent, in 1910, 63 per
cent, in 1911, and 69-5 per cent, in 1912. In addition
the State subsidy of 20 per cent, or 30 per cent, must
be added. Thus over 80 per cent., and in some cases
90 per cent., of the expenses of unemployment insurance
was provided by public bodies, whilst in individual cases
funds received more than the total amount of their
expenditure on this object.

100 INSURANCE AGAINST UNEMPLOYMENT

It would be absurd to argue that the experience of
Lyons shows that the idea of subsidizing insurance funds
against unemployment has proven at all successful
there. What is surprising is that the whole scheme
has not been taken much greater advantage of, and that
the evils of demoralization in an aggravated form that
might have been anticipated have so far not disclosed
themselves.

ROUBAIX.

The scheme at Roubaix (a centre of the textile
industry, with a population of 120,000) has a number
of distinguishing features.

The present scheme was launched in December 1907,
and was supported by the municipality and a group of
employers. The municipality does not control it, and,
as a result, a serious distrust of the whole scheme was
manifested by the workmen concerned. Subsidy is paid
by an association to funds for insurance against un-
employment effected through such organizations as
friendly societies or trade unions, and privately, either
through the Roubaix savings banks or the postal savings
banks. The same rate of subsidy is paid on insurance
and savings.

When the scheme was inaugurated there were only
two associations which provided unemployment insur-
ance. In 1912 there were eleven.

STATISTICS SHOWING GROWTH OF ROUBAIX SCHEME,

1910-12.

1910.

1911.

1912.

Subsidized funds

Membership

2,408

Number of unemployed

205

317

383

Days of unemployment

3,075

6,100

7,351

Benefits distributed (francs)

4.791

8,957

Subsidies granted (francs)

1.537

3,816

5,521

INSURANCE AGAINST UNEMPLOYMENT 101

Although the results indicate a steady growth of
members of unions claiming a subsidy, they are on the
whole disappointing. This is accounted for by the
facts that when the scheme was inaugurated in Roubaix,
only two associations provided unemployment insurance,
and because the unions were suspicious of the motives
which impelled employers to contribute to the scheme.
The unions were opposed to the receipt of charity and
feared that the employers wanted to use the scheme
for their own purposes. In order to disarm any further
hostility on the part of trade unions, arrangements
were made by the administrators of the scheme which
would protect their members' interests. Industrial dis-
putes are not interfered with, and workmen are not
obliged to accept a post offered them which is vacant
because of a strike. Now, each member of an affiliated
society has a number, and when the committee passes
on a case concerning the right to receive a benefit it
cannot know whose case is being decided. The State
Inspector of Labour exercises the necessary check on the
cases in respect of which subsidy is claimed. But even
if this suspicion be slowly removed, it is now realized
that the granting of a subsidy to those already making
provision against unemployment cannot be expected to
lessen materially the evil consequences of unemployment
in Roubaix.

The insurance organization in the silk-spinning industry
merits at least a reference. An Act of June n, 1909,
provided for a mutual insurance society in the industry.
Six per cent, of the bonuses paid to the spinners is sub-
tracted and is placed in a fund which insures members
against sickness and unemployment. Everyone employed
in the industry, and a big majority are women, has the
right to enter the society. In 1912, 8,238 workers,
nearly half of whom lived in the Gard district, were
thus insured. It is a significant fact that this insurance
organization has a membership which is dwindling from
year to year.

- AGAINST UNEMPLOYMENT

Recent Developments.

In 1915 there were about 135 trade union unem-
ployment insurance funds with a membership of about
18,000. The State subsidies granted in that year had
diminished to 30,022 francs.

During the war the activities of the existing unem-
ployment insurance funds greatly decreased. Special
unemployment relief funds were instituted by the
Government to deal with the unemployment problem.
Since the armistice, however, the trade unions and the
State have operated the 1905 Decree.

According to the Journal Officiel* three departmental
and forty-five municipal unemployment funds were in
operation, the total number of persons in receipt of out-
of-work benefits being 30,608 (28,696 men and 1,912
women) .

The maximum number of unemployed in receipt of
benefit, viz. 116,000, was reached in April 1919. Of
these 77,514 were in Paris and 17,300 in other com-
munes of the Seine Department.

Special measures were adopted for meeting the
problem of unemployment during the war. Early in
the war each department or town with more than 5,000
inhabitants was asked to set up an unemployment fund,
to which the State repaid a third of the relief distributed.
These funds were administered in conjunction with the
employment exchanges by commissions representing em-
ployers and workers in equal numbers.

The dislocation created by the war produced a con-
siderable volume of unemployment, but the demands
for munitions and war industries soon reduced the calls
on the unemployment funds. Thus in October 1914
the unemployment fund of Paris distributed relief to
about 300,000 persons, but the numbers of recipients
gradually decreased, and at the end of 1918 was less
than 10,000. In 1918 the increasing difficulty of pro-

* January 8, 1921.

INSURANCE AGAINST UNEMPLOYMENT 103

visioning and the increased cost of living resulted
in a decree promoting the creation of funds to pro-
vide against partial unemployment. Employers were
obliged to contribute at least one-third of the expenses
and a State subsidy of one-third was granted. The
Government grant was raised after the armistice to
60 per cent., then to 75 per cent, of the expenditure,
until November 15, 1919. In addition, women on their
discharge from Government factories or factories engaged
on Government work were granted a gratuity equal to
one month's pay.

An interesting measure adopted by the Minister of
Munitions refers to " temporary," or rather " partial,"
unemployment. A minimum wage is provided, even
in the event of workmen becoming partially or totally
unemployed for want of work, without rescinding the
contract of service. They are maintained in employ-
ment, notwithstanding cessation of work due to lack of
coal or raw materials, except in the case of dismissal
authorized by the Minister of Munitions. The unemploy-
ment allowance provided by this means is equal to the
difference between the wages actually earned and the
minimum wage. It is borne partly by the State and
partly by the employer in a proportion fixed by the
contract.

Summary.

It is clear that whilst the growth of insurance against
unemployment has not been very marked, it has been
influenced by the incentive of the subsidy offered by
the State, Department, and Commune. This progress,
however, has not justified the sanguine hopes of those
who were instrumental in introducing the scheme. This
result is of particular significance to the United States
where the number of unions providing out-of-work
benefits is even smaller than it was in France when that
country decided to endeavour to stimulate insurance
against unemployment.

There is little evidence to show that the very serious

104 INSURANCE AGAINST UNEMPLOYMENT

amount of unemployment in France is likely to result
in a compulsory scheme of unemployment insurance on
the British model.*

For a description of the schemes of Armentieres, Troyes, Lille,
Limoges, Rheims, Dijon, Loire, see I. G. Gibbon, Unemployment
Insurance, and the International Bulletin against Unemployment,
Fourth Year, No. i, pp. 120-1.

* The Organization of Unemployment Insurance and Employment Ex-
changes in France, International Labour Office, Geneva. Studies and
Reports, Series C, No. 5.

CHAPTER VII

SWITZERLAND

SWITZERLAND has played a great part in the develop-
ment of the world movement for unemployment insur-
ance. She boldly experimented with a compulsory
scheme more than two decades ago, and although this
proved a failure, is now, with her added experience,
undertaking another scheme of insurance embodying
the principle of compulsion. Trade union unemploy-
ment insurance is highly developed. Employers have
subsidized schemes of workmen's funds. Most com-
munes provide grants to voluntary systems of unem-
ployment insurance.

Here, as in most other countries in Europe, trade union
unemployment insurance is by far the most import a*nt
method of protecting workers against unemployment.

In 1914 the Trade Union Federation of Switzerland
had seventeen federations of trades or industries which
organized unemployment insurance funds for about 50,000
members. Sixteen trade unions paid travelling benefit,
ten " removal benefit " and three " leaving " benefit.
The total expenditure for the year 1911-12 was 140,440
francs, of which 90,851 were paid in unemployment
benefits, the remainder going as travelling benefit and
in the exemption of payment of dues to unemployed
members.

As in Germany and Belgium, large bodies of Catholics
have organized into Christian trade unions. Ten of
these unions, comprising a membership of about 11,000,
provided unemployment insurance in 1914. The
Printers' Federation of French-speaking Swiss, and the

105

106 INSURANCE AGAINST UNEMPLOYMENT

Federation of Draughtsmen of Eastern Switzerland,
also have unemployment funds. There are now twenty-
seven associations of workers which insure their mem-
bers against unemployment, with a total membership
of about 140,000.

Subsidized Trade Unions.

The law of 1894, passed in the canton of St. Gall,
authorizing it to set up a compulsory scheme of unem-
ployment insurance, also empowered it to subsidize
insurance against unemployment provided by voluntary
associations. In 1905 the payment of subsidies began.
In 1913 the amount of subsidy voted was 50 per cent,
of the benefits paid out of trade union funds as against
35 per cent, during the three previous years. The
number of subsidized funds rose from four in 1910 to
eight in 1913, and the grants, which in 1910 amounted
to 735 francs, figure in the budget for 1913 at 2,669
francs.

The grants in the canton Appenzel-auser-Rhoden
amount to 2,000 francs a year. In the canton of
Geneva the subsidy amounts to 60 per cent, of the trade
union benefits. The number of subsidized funds has
increased. In 1911, 1,953 francs were distributed as
subsidy.

In the canton of Basle town the subsidy amounts to
40-50 per cent, of the benefits paid to trade unions
by the canton. In 1911, the first year of the scheme's
operation, the funds of five trade unions were subsidized
to the amount of 3,195 francs; in 1912 subsidies were
distributed amounting to 3,412 francs.

On November 8, 1913, the Municipal Bureau of Zurich
proposed a scheme to the Municipal Council providing
for the organization of unemployment insurance on the
doubJe basis : (i) of a voluntary unemployment insur-
ance scheme and (2) of communal subsidies to private
funds. It was estimated that the scheme would cost
40,000 to 45,000 francs a year.

INSURANCE AGAINST UNEMPLOYMENT 107

Subsidy to workmen making provision against unem-
ployment has been provided through special grants to
trade unions and through the institution of special
funds which receive public subventions and are inau-
gurated by some public authority. These voluntary
public funds exist only in the town of Berne and in the
canton of Basle town.

The former scheme, the first municipal undertaking
of this kind, came into operation in 1893, but has not
at any time in its history had as many as 700 members.

The scheme is limited to able-bodied Swiss citizens
who are not over sixty years of age and who reside at
Berne. Though in theory, at least, workpeople of all
industries are allowed to insure themselves, the Muni-
cipal Committee has in practice declined to insure such
highly casual workpeople as woodchoppers.

Skilled and unskilled workmen pay the same rate of
contribution, i.e. about 15 centimes a week. The canton
subsidy amounts to more than the contributions of
insured members, and until recently the employers in
the building trades subscribed an annual voluntary sum
of 100 francs. Benefit is provided only in respect of
unemployment during a maximum period of seventy
days between December and March. It is confined to
those who have paid their contributions regularly for
eight months and who have been remuneratively em-
ployed for at least six months in the preceding year.
It is paid on a different scale for single men and for men
with families — 1-45 francs for men without, 1-92 for men
with, dependents. This fact, taken together with the
very high subsidy, amounting in some years to over four
times as much as is received in contributions from all
the insured members, gives the scheme the appearance
of a relief measure.

In 1911 the number of insured members was 638.
It rose to 675 in 1912, but fell again to 636 in 1913.
Most of the members are workmen in the building
trades, who are specially subject to unemployment.
Thus, during the three winters before the war, 57 per

108 INSURANCE AGAINST UNEMPLOYMENT

cent., 51 per cent., and 50 per cent, of its members
suffered from unemployment. The sums expended in
benefits amounted to respectively 26,611, 17,388, and
19,130 francs.

At Berne the donations and subscriptions from em-
ployers and the public at large have greatly diminished
during the last few years.

The marked absence of success of this scheme is
highly significant, because not only has it been revised
again and again with a view to increasing its efficiency,
but because it has avoided almost all the obstacles
which have led to the failure of similar schemes.
First, the management committee consists of repre-
sentatives of the town council, of employers and of
workmen, and is moreover a really satisfactory body.
Second, the committee is also in charge of the employ-
ment exchange, and so it has the proper administrative
machinery with which to carry out its policies.
Third, it has wisely required the verification of the
fact of unemployment by insisting that the unemployed
workman attend at the municipal employment exchange
twice a day. It has even gone further in providing a
check to malingering. Public work is specially reserved
to be done in the winter by insured persons who are
unemployed.

The failure of this scheme is due to the inherent
weakness of the principle which it embodies. Voluntary
public insurance funds have nowhere been a great suc-
cess. A movement is now on foot to abandon the present
scheme of subsidies, where different occupations are
lumped together, in favour of subsidies to each distinct
fund of unemployment insurance in the city of Berne.*

The voluntary fund of Basle town, opened in 1910,
has been more successful than that of Berne. The
scheme of unemployment insurance in the former town
differs from that in the latter in three important respects :

Insurance may be effected in Basle town either

* For rules and administrative regulations of the Berne Scheme, see
Insurance against Unemployment, by F. D. Schloss, Appendix I.

INSURANCE AGAINST UNEMPLOYMENT 109

through trade organizations or through a city scheme,
but in either case a considerable subsidy is granted.

In the filling of vacancies through the municipal
employment exchanges preference is given to persons
who are insured against unemployment in either type
of institution. Contributions and benefits are different
in each of the three wage groups into which workmen
are divided.

The voluntary fund of Basle town had 503 members
at the end of 1910. In 1912 it had 1,108. As in Berne,
workmen in the building trades form a majority of the
insured members.*

The rates of contribution for those who join the
voluntary fund are : —

For persons earning not more than 4-32 francs a day, 0-57

franc a month.
Persons earning between 4-32 francs and 5-75 francs a day,

0-77 franc a month.
Persons earning over 5-75 francs a day, 0-93 franc a month.

The rates of benefit for the first thirty-five days in the
three wage groups are 95 centimes, 1-15 francs, and
1-35 francs per workday for insured persons without
dependents, and 1-52 francs, 1-72 francs, and 1-92
francs per workday for members with dependents. For
the remaining thirty-five days for which benefits are
provided they are reduced to half these rates.

The benefits paid in 1911-13 amounted to 1,065 francs,
15,070 francs, and 34,510 francs. The cantonal sub-
vention was about 15,000 francs in 1911 and 27,000
francs in 1912.

The Basle scheme is one of the latest and best thought
out schemes based on the principle of subsidization to
voluntary schemes of insurance against unemployment.

Crisis Funds.

The most important example of a scheme of unem-
ployment insurance which is organized and supported

* See I. G. Gibbon : Unemployment Insurance, pp. 136-7-

110 INSURANCE AGAINST UNEMPLOYMENT

by employers and workmen without State intervention
is the Crisis Fund in the embroidery trade of St. Gall.
An association of employers was organized to render
financial assistance to provision made against unem-
ployment occurring during years of industrial depres-
sion. This assistance was meant at first to equal about
50 per cent, of the total benefit paid to the unemployed
members. The subsidy has now been raised to about
60 per cent, of the benefits provided, up to a maximum
of i -45 francs per person per day.

By December 1908 some fifty special crisis funds were
formed by trade unions with a membership of 2,000.
In 1911 the membership of these funds was about 3,000.
Their accumulated funds amounted to 138,940 francs.

The benefits are at the rate of 1-92 francs a day for
men and 1*15 francs a day for women.* The usual
rates of contribution are 0-47 franc a month for men
and 0-30 franc for women. Benefits are paid only to
members of six months' standing, and are provided
from the second day of unemployment for a maximum
period of fifty days in the year.

The comparative success of this scheme is well attested
by the fact that those interested in the clockmaking
trade in the Jura Mountains of Berne have decided to
institute a similar scheme. The income for financing it
is to come from workmen's contributions, a cantonal
grant of 5,000 francs a year and from the interest on a
capital sum of 100,000 francs to be provided by those
interested in the industry. Three-quarters of this amount
was subscribed by 1913.

Compulsory Insurance against Unemployment.

In 1894 a scheme of compulsory insurance against
unemployment of all workmen earning less than five

* The tendency of unemployment insurance to prevent the continuance
of abnormally low wages has been clearly demonstrated in the case of
the very badly paid homeworkers who are insured by the " crisis funds."
They have refused to work for prices which give them a net wage less
than the amount they can receive as benefit, and so the standard con-
ditions in the industry have been improved.

INSURANCE AGAINST UNEMPLOYMENT 111

francs a da}' was passed in the canton of St. Gall. All
insured members were to pay contributions, and the
unemployment fund was to be further increased by
subsidies from the local commune, the canton, and, if
possible, from the national Government, as well as from
gifts.

The administration of the scheme was bad from the
very outset. Many a workman did not register under
the scheme. Others did not pay their contributions.
Some even migrated out of the cantonal area. The
check on unemployment, now the central part of any
scheme for unemployment insurance, was not adequate.
Benefits were paid to those who had no right to them,
and a few of the members received unduly large amounts
from the fund. Malingering was thus encouraged.
Indeed, some workmen who usually sought country work
when work in the town was lacking now remained there
and received benefits. The scheme was administered by
the poor law department, and so the better class work-
men opposed it from the start.

After two years the palpable defects of the scheme led
to its abandonment. At least two questions of interest
were presented as a result of the experience of St. Gall.

Can a compulsory scheme of unemployment insur-
ance on a small, circumscribed area of the size of a town
or a canton be successful ? Should not provision be made
in every scheme to encourage rather than to discourage
unemployed workmen to adopt an alternative occupation ?

In 1898 a scheme of compulsory insurance was
brought forward in the town council of Zurich and
another in 1899 actually passed through the great
council, but the former proposal was not ratified and
the latter was rejected by a referendum.

For a time the general attitude towards obligatory
unemployment insurance, both in Switzerland and
abroad, was well represented by the following view.*

* M. Touron: Rapporteur-General before the Conseil Superieure du
Travail, November 10, 1913.

112 INSURANCE AGAINST UNEMPLOYMENT

' The St. Gall scheme was the only attempt at com-
pulsory insurance made by the State. I believe that
it may be said that this example is sufficiently con-
clusive to put us on our guard against the temptation
of renewing that experience. The failure of this
compulsory scheme was indeed piteous." * But, as Mr.
Gibbon points out, it was particularly unfortunate that
it should have been necessary to discard this scheme of
compulsory insurance against unemployment " largely
because of palpable defects of administration without a
fair test of the principles on which it was based. "f

A scheme which avoids some of the more flagrant
opportunities for abuse was proposed on October 12,
1913, in the city of Neuenberg in the canton of Neuchatel.
It is confined to men and women employees in the clock-
making and other small mechanical trades, between the
ages of eighteen and sixty-five years, whose annual income
does not exceed 4,000 francs. Insured workmen are to
pay contributions at the rate of 75 centimes a month.
As in the British scheme, the employer is to contribute
an amount equal to that of each workman in respect
of each workman. The State is also to contribute an
amount equal to that of each workman.

The benefits provided under the scheme are to vary
according to sex and size of family. Unemployed work-
men are to receive 2 francs 50 centimes for each day
of unemployment, and insured women members i franc
50 centimes a day. An additional 25 centimes is given
for every child under seventeen years of age.

The maximum term for the payment of benefits is
fixed, as a general rule, at sixty days. As a check on
malingering, benefits were to be paid only in cases of need
and after being duly investigated by the administration.
It was estimated that about 10,000 persons would be
insured under the scheme, including 7,800 men and
2,200 women.

* The employees of the municipality of Berne were compelled to insure
in the municipal scheme. The compulsion was removed in 1903, and as
soon as this was done they ceased to insure.

•f I. G. Gibbon : Unemployment Insurance, p. 35.

INSURANCE AGAINST UNEMPLOYMENT 113

The main criticism of the proposal must be that unem-
ployment insurance is not sufficiently clearly separated
from poor relief. By providing benefits " only in cases
of need " and by giving additional benefits to those who
have children dependent upon them, the necessitous
workman is to receive privileged treatment. A sort of
pauper branding will tend to attach to those who obtain
benefits, and criticism of the whole scheme will probably
result from the better class of workman.

It will be interesting to see whether obligatory insur-
ance against unemployment can be limited to one town,
as is proposed.

The long-continued interest in the problem of unem-
ployment insurance in Switzerland culminated in the
resolutions asking for national intervention in this
matter which were passed on June 3, 1913.

A Federal Subsidy to Unemployment Insurance Funds.

By a decree dated March 24, 1917, an additional tax
on war profits is to be levied equal to 20 per cent, of
that already payable under the decree of September 18,
1916. The proceeds of this tax, together with three
million francs of the proceeds of the war profits tax in
1915, are to be devoted to the formation of a Federal
unemployment fund. The fund is to be used to sub-
sidize efforts made by cantons, communes or public
utility enterprises for the purpose of relieving unem-
ployment and distress.

The fund subsidizes unemployment insurance funds
to one-third of the extent of their expenditure on unem-
ployment benefit in 1917 and 1918. It is now proposed
to bring forward legislation to make the co-operation
of the Federal Government in unemployment insurance
permanent.

Parallel with this development, progress can be re-
corded in the establishment of a centralized system of
employment offices. The Federal Decree of October 29,
1909, provided for Federal subsidies to existing employ-

114 INSURANCE AGAINST UNEMPLOYMENT

ment agencies. A decree of the Federal Council of
March 21, 1919, created a Federal Office of Assistance
against Unemployment, in connection with the Departe-
ment de 1'Economie publique. This office is to develop
public employment offices and to act as a central office
for both public and private employment offices.

CHAPTER VIII
NORWAY

THE countries in which the Ghent system has hitherto
had marked success are Denmark and Belgium. In
France and Norway the results have been disappointing.
In the former countries a large proportion of the men
and women wage-earners were organized in trade unions
before subsidies were provided. In the latter a consider-
ably smaller proportion were organized. Not only does
the smallness of the number of union members in these
countries affect the possibility of developing a national
system of unemployment insurance on the basis of the
Ghent scheme, but it has the psychological influence of
making unionists suspicious of it. Only where unions'"
are strong, as in Denmark and Belgium, Great Britain
and Germany, have they welcomed State subsidization
of unemployment insurance. Where they have been
weak, as in France and in Norway, they have been
disposed to look at it with suspicion and even with
hostility.

Unfortunately for the success of the Norwegian scheme,
the unions were, in addition, definitely provoked by a
provision requiring them to admit non-union members
into their organizations for the purpose of unemployment
insurance.

In 1905 the Norwegian Government undertook to
subsidize associations providing insurance against unem-
ployment to the extent of one-quarter of the amount
distributed by them in unemployment insurance to their
members. But members in respect of whom subsidy
was claimed must be Norwegian subjects, who had resided

115

116 INSURANCE AGAINST UNEMPLOYMENT

in the country for five years. The conditions for the
receipt of subsidy were :

(1) That benefit be paid only in respect of unemploy-

ment due to lack of work, and not paid when
unemployment is due to sickness, a strike, a
lock-out, or to any person who is a member of
more than one association.

(2) That a member has no right to benefit unless he

has been a member of the fund for at least
six months and has paid his dues for at
least twenty-six weeks since last becoming a
member.

(3) That benefits (other than travelling benefit) were

not payable in respect of unemployment lasting
less than three days.

(4) That the amount of the unemployment benefit

(including travelling pay) should not exceed one-
half of the average daily wages of the occupation
which the recipient of such pay follows.

(5) That no one is entitled to receive more than ninety

days' benefit in the year.

(6) That members of the society are obliged, in case

of unemployment, to accept the work which the
directors of the society regard as suitable for
them.

(7) That if the ordinary dues prove insufficient, extra

dues may be levied, and if it becomes neces-
sary, a reduction may be made in the amount
daily provided as benefits.

The law also requires that in places where a public
employment exchange exists, the receipt of unemployment
benefits shall be conditional upon the unemployed having
registered themselves there as applicants for employment.
It is significant here to note that " An Act for the
Establishment of Public Labour Exchanges in Norway "
was passed on the same day as the Unemployment
Insurance Act.

There are other conditions which an unemployment

INSURANCE AGAINST UNEMPLOYMENT 117

insurance fund must fulfil if it is to enjoy the advantages
of a public subsidy. At least one-half of the funds
must come from the members' contributions. Its accounts
relating to unemployment insurance must be kept distinct
from its other funds, and its assets must be kept clear
from its other assets.

As in Ghent, an attempt was made to extend the benefit
of the scheme to unorganized sections of the working
classes. With this end in view, the Act required every
unemployment society connected with a union, prior to
receiving any refund, to give all persons in the same occu-
pation as members of the society access to insurance on
the same terms, even though they were not members of
the union. But such members were not to possess the
right of voting concerning the by-laws of the society,
or of taking part in the administration of its property,
unless the association itself decided otherwise. In addi-
tion, where the association defrayed the necessary expenses
of administration in relation to unemployment insurance,
it might require from non-members an increase of 10 per
cent, to the ordinary contributions, and, with the approval
of the Ministry, even a 15 per cent, increase.

Trade union members objected, however, to having
non-members entering " their " insurance scheme. The
Social Democrat Members of Parliament tried to have the
clause sanctioning it repealed. For a time it seemed as
if a deadlock had been reached. Finally, the unions agreed
to take advantage of the scheme if the subsidy were raised
from one-quarter to one-third of the amount distributed.
This was agreed to, and provided for in the Act of July 25,
1908. This quarrel was fought almost exclusively over
a question of principle and was therefore dear to the
combatants. As a matter of fact only one non-
unionist actually demanded admission to a trade union
fund in 1912.

Up to 1908 only one insurance fund claimed the benefits
of the Act. But in 1912, largely as a result of the increased
subventions offered by the Act of 1908, there were left
only five associations, with a total membership of 1,681,

118 INSURANCE AGAINST UNEMPLOYMENT

which were not subsidized by the State. Nineteen
associations, having a membership of 27,000, received
subsidies. In that year the benefits paid to members
of the funds amounted to 144,781 Kr.* and the subsidies
provided by the State to 38,309 Kr. Less than 5 per
cent, of Norwegian wage-earners enjoy the benefits of
this subsidy. Indeed, one of the most marked, feat u:- ,
with respect to the development of this scheme on the
Ghent plan has been the unwarranted confidence of the
authorities in its powers of growth. f

The subsidy to unemployment associations, though paid
by the State, falls also in part upon the local authorities
(municipal or communal) within whose areas the insured
persons that receive subsidies have resided for a continuous
period of six months in the previous five years. The local
authority, the law provides, must reimburse to the Treasury
two-thirds of the amount paid by the State in respect
of these subsidies.

The Government controls the scheme, but gives the
local authorities an inducement for exercising an effective
control over the unemployment situation. Of course, the
analogy of poor law relief was constantly before the framers
of the Act. Poor law relief was a charge on the communes,
and so they were expected to bear the lion's share of the
burden of a scheme which was likely to reduce the demands
on it.

The control of the payment of subsidies is thus exercised
by four distinct authorities, i.e. by the trade unions,
the public employment exchanges, the local authorities and,
lastly, the State.

The law which has been described was in force up to
the end of 1914. A new law, framed by a special depart-

* In Norway and Denmark the standard coin is the krone, subdivided
into 100 ore. In 1914 it was worth about is, ijd.

f In July 1908 the Rticht-Arbeittblatl, p. 673, wrote of the probable
extension of the scheme to 42,000 organized workpeople. In 1911
Mr. L G. Gibbon wrote that at the end of that year 55,000 industrial
workers and commercial employees would be insured. As a matter of
fact, in 1912 27,000 workmen, or half the estimated number, really were
insured against unemployment.

INSURANCE AGAINST UNEMPLOYMENT 119

nunUl committee after conducting investigations, was
put into operation in 1915.

Among the changes suggested in the then existing law

were the following :

(1) An increase in the subsidies offered by the State

and municipalities from one-third to one-half
of the benefits to be paid.

(2) The shortening of the period of residence for foreigners

who may wish to benefit by the law from five
years to one year.

(3) The payment of unemployment benefits from the

second day of the period of unemployment
(hitherto unemployment benefits had been paid
after the third day of unemployment), and if
several periods of unemployment occur within
the period of six weeks then the waiting period
of two days is counted only once.

(4) Con tinning the maximum period of ninety days for

which unemployment support might be paid, but
permitting a longer period as long as the war
continued.

The committee stressed the necessity of a close co-
operation between both public and private employment
offices and between all unemployment insurance funds.
To empluisi/o their interdependence it recommended the
appointment of the same inspector to be head of the
combined systems. The committee called attention to
the fact that this is the method employed in Denmark
and urged that this was the secret of the success of its
system of unemployment insurance. In 1919, it should
be noted, there were public employment offices in forty-
one towns and five communes.

It is impossible to foresee what will be the effect of these
innovations, and especially of raising the subsidy. Ex-
perience certainly teaches us not to expect a very great
increase of those insured.

In 1930 there were twenty-nine associations with a

120 INSURANCE AGAINST UNEMPLOYMENT

total membership of about 90,000, practically all of whom
benefited by the subsidy.

The acute unemployment suffered in the early part
of 1921 has again led to the discussion of the necessity
of introducing a national comprehensive scheme of un-
employment insurance for all wage-earners.

CHAPTER IX
HOLLAND

THERE was no national system of State Insurance in
Holland in 1914, although repeated attempts had been
made to induce the Dutch national Government to under-
take the payment of a subsidy to workmen making
provision against unemployment. On the other hand,
insurance by municipalities was progressing steadily.
The number of municipalities providing subsidy, the
number of unions affiliated to funds and the number of
individuals insured were increasing.

In February 1910 there were altogether twenty-four
communal employment funds. Four more funds were
established in Velzen, Flushing, Zwolle, and Baern before
the outbreak of the war.

Subsidy is generally granted in proportion to the benefit
received by unemployed workmen in respect of unemploy-
ment due to lack of work. In most municipalities it is
distributed to associations providing unemployment in-
surance ; in a few others it is provided only to insurance
effected through associations whose membership is restricted
to one trade or to allied trades. In Velzen associations
affiliated to the funds must impose upon members the
obligation of being also direct members of the unemploy-
ment fund. In Flushing and Zwolle subsidy is given
only to associations formed for the prime purpose of
providing insurance against unemployment.

In order to be affiliated to a fund in The Hague trade
unions must provide that all their members are members
also of their unemployment insurance scheme. Following

the Norwegian system, unions affiliated to the fund are

121

122 INSURANCE AGAINST UNEMPLOYMENT

obliged, with certain exceptions, to admit also non-unionists
of the same trade to their unemployment fund. Non-
unionists may be barred entrance into a fund, but not
merely because they are non-unionists. The union may
charge non-unionists, i.e. those who have joined only for
the purpose of insurance against unemployment, 10 to
15 per cent, more as their contribution towards the
administrative expenses of the scheme.

The number of trade unions affiliated to the unemploy-
ment insurance funds increased from 209 in 1911 to 281 in
1913 and their membership from 18,226 to 29,313. In
1911 the unions paid 45,968 gulden in unemployment
benefits; in 1912 this amount rose to 50,190 gulden.*

The subsidy to the unemployment funds was 37,906
gulden in 1911, and 42,070 gulden in 1912.

There were in addition to these unions affiliated to the
unemployment funds others that were not affiliated.
They developed steadily between 1911 and 1913. In
the diamond industry, where there has been the greatest
growth, the amount distributed in benefits increased from
2,804 gulden in 1911 to 51,806 gulden in 1913. The
growth is well shown by the following table :

January i, 1911 : 295 associations, 25,375 insured members.
January i, 1912 : 287 associations, 24,214 insured members.
January i, 1913 : 374 associations, 29,563 insured members.

Some check is as a rule exercised to prevent malingering.
In Haarlem, Deventer and Leyden the unemployed must
report themselves daily to the employment exchange, and in
Ninwegen they must do so twice a week. In Schiedam
a committee investigates each case.

In 1914 a special questionnaire was submitted to the
administrators of the municipal funds to elicit opinions on
the British Insurance Act. It was found that opinion was
evenly divided on the principle of compulsory insurance,
and that objections were usually raised to the uniformity
of the contributions, regardless of the varying unemploy-
ment risk in the different trades. Most of the answers

* The gulden or florin (= 100 cents) was worth about is. 8J. in 1914.

INSURANCE AGAINST UNEMPLOYMENT 123

approved of the division of the contribution into three
parts, payable by employer, workman and the State.
They approved of the scheme being administered through
the employment exchanges and the recognition of and
co-operation with trade unions.

The Unemployment Decree of 1917.

This decree provided for the subsidizing of unemploy-
ment funds by the State. The subsidy is equal to that
granted by the commune. The total amount of the sub-
sidy, which is fixed in relation to the amount of members'
contributions, may not, however, ordinarily exceed 100
per cent, of these contributions. The effect of this addi-
tional subsidy has been to increase the number of trade
unions affiliated to the State Unemployment Insurance
Fund.

About ninety-five associations, comprising a quarter
of a million members, grant unemployment benefit to
their members. Benefits are paid for a period of twenty-
four to ninety-one days after a waiting period of a few
days. Not all these associations, however, are taking
advantage of the subsidies.

In the early part of 1921 the drain on the State Un-
employment Insurance Funds and on the communal
funds was particularly heavy. Thus in Amsterdam
24-5 per cent, of the members of trade unions affiliated
to the State fund in that city were out of work in January
1921, as compared with 19-2 per cent, in the preceding
month. These figures include diamond workers, of
whom 86-3 per cent, were unemployed in January 1921,
and 70 per cent, in December 1920.

CHAPTER X
DENMARK

UNTIL the beginning of this century legislative efforts
to deal with the problem of unemployment in Denmark
were confined to the provision of " exceptional aid "
to those who were in need during " dull " times. But
this aid was not regarded as poor relief. By the law of
March 10, 1879, providing for arrangements to relieve
distress occasioned by unemployment and the severity
of the winter, the authorities of rural communes were
authorized to make contributions from the communal
funds, without requiring the consent of the county councils,
to the local funds for the relief of the poor. At the same
time there was given to the parish communes, to Copen-
hagen and to the provincial towns, full freedom to collect
without ministerial consent the funds necessary for this
assistance.*

In addition a non-interest bearing loan of one-half
million kronen was put at the disposition of the communes
by the State. f

On April 9, 1907, a law was passed whereby it was
enacted that a commune which had during the fiscal
year made direct cash contributions from its general
funds to a fund for insurance against unemployment in
the commune (in Copenhagen, to an aid society recog-
nized as such by the Minister of the Interior) might claim

* Twenty-fourth Annual Report of the Commission of Labour, Work-
men's Insurance in Europe, p. 649.

f During the opening years of this century the Labour Party agitated
in favour of a State-aided subsidy to trade union unemployment funds.
The Conservative parties opposed the proposal, especially on the ground
that these unions were strongly political in character.

121

INSURANCE AGAINST UNEMPLOYMENT 125

a refund of one-third of this grant from the State treasury,
" but the State grant was not to exceed 10 ore per
inhabitant of the commune according to the last general
census." This was the first plan by which actual sub-
vention from the treasury of the Government was provided
for in Denmark.

Trade Union Insurance against Unemployment.

Before 1907, the most effective instrument for dealing
with unemployment was the trade union. A large number
of unions, especially those of the bakers, bookbinders,
joiners, coopers, vat men in paper factories, typographers,
smiths, and machinists, made arrangements for aiding
their unemployed, and year by year the unions spent an
increasing amount on this object.

The following statement is taken from the year-book
of the Bureau of Statistics of Denmark, giving the esti-
mated amount of money expended in benefits to the
unemployed (including travelling benefit) by trade unions,
each year, from 1899 to 1907, the year when the new
law came into operation.

TRADE UNION UNEMPLOYMENT BENEFITS, 1899-1907.*

Year. Ore. Year. Ore.

1899 .. .. 20,238,000 1904 .. .. 44,162,400

1900 . . . . 25,446,400 1905 . . . . 49,445,200

1901 . . . . 37,196,000 1906 . . . . 32,895,600

1902 .. .. 44,195,600 1907 .. .. 30,254,800

1903 . . . . 39,240,800

These amounts were used exclusively for real unemploy-
ment benefit, that is, as aid to those who, although fully
able to work, were without employment because there
was no work to be had in their occupations.

Unemployment benefit has long been a popular feature
of trade union activity in Denmark. In 1904 there
were ninety-four federations and individual societies,
with a membership of 90,111 organized workmen, and of

* Quoted from the Twenty-fourth Annual Report of the Commission of
Labour. Loc. cit.

126 INSURANCE AGAINST UNEMPLOYMENT

these, eighty-three unions with a total membership of
80,205, i-e- 89 per cent, of the total number, pro-
vided some form of unemployment insurance. But
the different unions and federations followed their own
plans. Some had distinct unemployment funds, whilst
others carried unemployment as one of the risks which
the general benefit fund had to bear. Some gave aid
according to definite rules and others according to no
definite rules. Most frequently the fund was controlled
by the federation, and on occasion by the separate sections
or local unions.

Some funds provided only for travelling aid, whilst
others provided also for a maintenance fund. Some
funds arranged for benefits under 5 kronen, whilst
others again provided for benefits over 15 kronen a week.

But, despite the many legislative efforts along other
lines and the voluntary activities of the trade unions,
it was generally felt that the evils of unemployment could
be more adequately combated only by means of some
form of insurance supervised and aided by the State.

It is well to note clearly that the State had already
assumed the duty of meeting unemployment, had already
contributed largely in an endeavour to combat its evil
results, and was therefore concerned merely with the
problem of how to make its efforts most effective.

The strength of trade unionism and the prevalence of
unemployment insurance suggested the plan.

Provision of Law of April 9, 1907.

Societies of Unemployment or "' Unemployment In-
surance Funds " (Arbejdsloshedskasse) are defined as
societies of workmen in one or more specified occupations
(such as commerce, office work, industry, handicraft,
agriculture, hotel work, transport or mining, common
labourers included) who have combined to provide, by
means of the payment of a specified contribution, mutual
assistance in case of unemployment of the kind coming
under the law. Such societies existing for this sole purpose

INSURANCE AGAINST UNEMPLOYMENT 127

have a right to receive public recognition and conse-
quently public aid on certain conditions.

To obtain public recognition a society must as a rule
have at least fifty members. It might be connected with
one or several trades, and might comprise more than one
province or else be limited to a given locality.

Statutory Conditions of Admission to Membership.

Only workmen whose circumstances were such as to
entitle them to State aid from an officially recognized
sick fund were qualified to claim unemployment benefit.
The age-limit for admission to membership in a recognized
society was fixed by its by-laws, but no person under
eighteen or over sixty years of age might be admitted.

Membership of a society might not be refused to any-
one who fulfilled the above conditions and who belonged
to the trade or trades or resided within the locality for
which the society was established. Societies whose
operations were confined to specified occupations were
required to be subdivided into local branches.

The amount of the annual membership dues was fixed
by the by-laws of each society.

The sick fund committee (mentioned in par. 7 of Act 87,
April 12, 1892) decides whether a person fulfils the pre-
scribed conditions of membership and whether he may
become a participating member or merely a contributing
member. With respect to other qualifications the decision
rests with the Inspector of Unemployment. An appeal
against any particular decision may be lodged with the
Minister of the Interior, who may decide the matter
after securing an opinion from the jury of unemployment.
There is no appeal against this decision.

A provision may be inserted in the rules of a recognized
society which shall give it power to refuse admission to
anyone who appears to be physically or morally incapable
of supporting himself or of working on good terms with
his foremen or fellow- workmen.

An appeal against any decision of this nature may be

128 INSURANCE AGAINST UNEMPLOYMENT

lodged with the Unemployment Insurance Committee.
A further appeal against a decision of this committee
may be lodged, of course, with the Minister of the Interior.

No person is allowed to be at the same time a member
of more than one officially recognized Unemployment
Society, nor assure himself in case of unemployment of
benefits amounting in the aggregate to more than two-
thirds of the average wage in the trade or trades in the
locality concerned.

The contravention of any of the foregoing provisions,
as well as dishonest conduct towards the society, is pun-
ishable by expulsion from the fund.

Income of Societies.

The annual income of a recognized society, including
the public subsidy, must be fixed at an amount which is
regarded in the light of experience as sufficient to pay
the benefits prescribed in the by-laws. Such benefits
must be large enough to be of some real service to them.
In case of need an extra contribution may be required
of members.

The income and property of the society must be kept
intact and separate from other funds and must not be
loaned or used for any unauthorized purpose. State
grants, contributions from communes, and gifts from
honorary members are the main sources of income.
The honorary members who pay contributions may be
admitted into an unemployment society but are not
entitled to claim benefits.

Recognized societies receive from the Exchequer an
annual grant equal to one-third of the total amount of
the society's income, fixed as above prescribed. The
State grant does not, however, exceed 250,000 kronen.
It is divided among the societies in proportion to their
incomes.

The commune in which a member lives or in which he
is entitled to poor relief is authorized without the consent
of a higher authority to contribute not more than one-

INSURANCE AGAINST UNEMPLOYMENT 129

sixth of the amount to the payment of his membership
dues for the current year. Communes in which recog-
nized unemployment societies have headquarters or
sections are entitled to contribute annually to the society
or societies an amount not to exceed, for any one society,
one-sixth the amount of the membership dues of those
of the society's members who were residents of the commune
on the preceding March 3ist.

The Bill presented to the Landsthing on November 14,
1913, provided that the communal grants, which were
then optional, should be made compulsory under certain
conditions.

Benefits.

The board of managers of recognized societies decide
in each individual case the extent and character of the
benefit. The following kinds of benefits may be provided,
(i) Travelling benefit ; (2) assistance in paying rent ;
(3) daily allowance ; (4) assistance in kind. The sum
total of all daily allowances, excluding travelling benefit,
must not exceed in the case of trade insurance funds two-
thirds of the average wage current in the particular
trade, or in the case of local insurance funds two-thirds of
the common daily wages of labour current in the locality
for which the society is established : but in either case
the amount of such benefits must not be less than 50 ore
or more than 2 kronen per day.

If a member of a society who is entitled to receive
unemployment benefit has work offered to him by the
board of managers of the society or procures it by his
own efforts, and his wage for it is less than the maximum
relief already mentioned, then the society may make up
the difference. As a rule, however, trade unionists
oppose such a provision, because it implies that standard
rates of wages are not being paid.*

* The student of the English Poor Law system will recall the similarity
between this device and that effected through the Speenhamland Act
of 1795. The latter aggravated the evils it was meant to allay. See
First Annual Report of Poor Law Commissioners, 1835, p. 207.

130 INSURANCE AGAINST UNEMPLOYMENT

Conditions for Receipt of Benefits.

Benefits are not paid to anyone until he has been a
member of the society for at least a year and has paid
his dues for that period.

Benefits are not paid in any case before the expiration
of six days of unemployment, and this " waiting time/'
by changing the rules of any society, may be made longer,
but not exceeding a maximum of fifteen days. This
provision does not apply when travelling benefit only is
given. After consultation with the Unemployment In-
surance Committee the Minister of the Interior may direct
that in certain specified seasons no relief shall be granted
by the societies which include seasonal workers unless
their unemployment lasts longer than fifteen days, and
in that case what the exact number of days shall be for
which benefits are to be provided.

Cases in which Benefits must not be Given.

Benefits must not be given to (i) persons taking part
in strikes and lock-outs ; (2) members whose unemploy-
ment is due to illness or infirmity, for as long as such ill-
ness or infirmity lasts ; (3) members whose unemployment
is due to their having left their situations on insufficient
grounds, or whose unemployment is caused by quarrel-
someness towards their employers or fellow-workers ;

(4) members undergoing judicial detention after conviction ;

(5) members who are in prison pending trial ; (6) members
who are in receipt of poor law relief ; (7) members who refuse
to accept work suited to their capacities which may
have been offered to them by the society, and (8) members
who are performing military service.

If the board of managers of a society refuses benefit
to an unemployed member under any of the provisions
(i), (3), (6), and (7), their decision may within a month be
appealed against and brought before the Unemployment
Insurance Committee, which shall give its decision after
due consideration of the facts of the particular case. A

INSURANCE AGAINST UNEMPLOYMENT 131

further appeal may be lodged with the Minister of the
Interior against the decision of the Committee.

Investigation of Cases.

On considering the results of the inspection of cases
the Committee came to the conclusion in 1913 that
the verification of the cause of unemployment, in order
that it may be effective, ought to be carried out, not
only in cases where an abuse is suspected, but in all
cases, and that it should not be confined only to the
interrogation of the party concerned. Also, in inspection
of unemployed persons in receipt of benefit, account should
be taken not only of the possibilities of employment in
their respective occupations but also of the possibility
of employment in any other remunerative work.

Amount of Aid during the Year.

The Act of 1907 provided that the by-laws of a society
shall fix the maximum limit of aid to be rendered in twelve
successive months at not less than seventy times the
daily allowance payable in respect of unemployed benefit,
i.e. benefits may be paid for a maximum period of about
twelve weeks. By way of exception, the Minister may
authorize a society to fix this maximum at fifty times
the daily allowance only, but if so, that allowance must
not be less than 75 ore per day.

If a member draws the maximum benefits for three years
in succession, then he is entitled to no further benefit until
he has paid up his contribution to the fund for a full
financial year.

Administration.

The supervision of the working of the insurance scheme
as a whole is entrusted to the Inspector of Unemployment.
Certain powers are entrusted to the annual meeting of
representatives of the various societies, the Inspector
of Unemployment presiding over its deliberations. This

132 INSURANCE AGAINST UNEMPLOYMENT

meeting elects the Unemployment Insurance Committee,
this body also being presided over by the Inspector of
Unemployment. This Committee has very important
functions. First, it is its task to form a connecting link
between the individual societies, to make rules for their
co-operation, including those for transference of members
from one society to another, and, so far as possible, to
secure uniformity in the rules of the different societies
for providing benefits. Secondly, if this committee is
of opinion that any recognized society, without actually
infringing any of the provisions of the law, nevertheless
acts in such a manner as to cause prejudice against the
unemployment insurance system as a whole, then it is
the duty of the Inspector of Unemployment to make a
report on the subject to the Minister of the Interior, in
which he must advise whether it is desirable that the
official recognition accorded to the society in question
shall be cancelled. Thirdly, this Committee acts as a
Court of Appeal in regard to decisions of the governors
of any society which disqualifies persons from membership
or refuses to pay benefits because of alleged strikes or
lock-outs.

The Inspector of Unemplo}mient inspects the reports
and supervises the activities of the various societies.
No very important step can be taken by any society
without his consent. He is responsible to the Minister
of the Interior for the proper working of the whole scheme.

The Working of the Act— Numbers.

The Danish Unemployment Insurance Law came into
operation in August 1907, and the recognition of societies
of unemployment under this law has gone on more rapidly
than even ardent advocates of the law anticipated.

During the first administrative year, thirty-four societies
received official recognition. In October 1908, Mr.
Soerenson, the Inspector of Unemployment, presented
to the International Congress on Workmen's Insurance
at Rome a report stating that by that date thirty-seven

INSURANCE AGAINST UNEMPLOYMENT 133

societies had been organized. Out of these thirty-seven
societies thirty-six were trade unions (their membership
being confined to particular trades) and one only was a
local society (comprising various occupations within a
specified area). The law requires that societies seeking
recognition shall be specially formed for insurance against
unemployment. All but one, however, were practically
trade unions organized for general purposes which were
prepared to satisfy the conditions provided by the Inspector
of Unemployment with respect to this one branch of
their work.

There has been a great increase both in the number of
societies and the number of individuals affected by the
scheme since its inauguration in 1907 to the year 1914,
the latest year for which we have figures.

The number of societies increased from thirty-four
in 1907-8 to fifty-five in 1914, the number of insured
persons from 70,449 to 120,289.

At the close of the fiscal year March 31, 1914,* as
reported by the Unemployment Inspector, there were
in existence fifty-five recognized voluntary unemployment
insurance funds, with a membership of 120,289 ; there
was no increase in the number of funds over the preceding
fiscal year. Of the total number fifty-one were organized
for individual trades and are national in their scope,
three were limited to certain trades within a district, and
one was a purely local fund. The membership was so
proportioned that 45*5 per cent, were found in Copen-
hagen and Fredericksberg, 37-8 per cent, in the towns
of the provinces, and 15*9 per cent, in rural localities.
The total receipts of the fifty-five funds in the year
1913-14 were 2,973,294 kronen ; f the total expenses were

* Monthly Review of the Bureau of Labour Statistics, vol. i, No. 4.

•f Administration expenses form 8 per cent, of the total receipts.

In 1907 members' subscriptions amounted to 307,592 kronen, State
subventions to 150,083 kronen, and those of the communes to 84,546, a
total of 542,221 kronen.

The benefits paid in that year amounted to 215,794 kronen.

During 1908-9 to 1911-12 the average contribution per member steadily
decreased from 14-07 to 12 • 18 kronen. At the end of that period the
funds held a reserve of 2,363,046 kronen.— Internation al Bulletin Against
Unemployment, Fourth Year, No. i, p. 75.

134 INSURANCE AGAINST UNEMPLOYMENT

2,218,542 * 48 kronen. Statistics for the fiscal year 1912-13
show that of the total receipts for that year, or 2,725,063- 17
kronen, 52 per cent, was contributed by the members,
33 per cent, was provided by State subvention, and 15
per cent, by municipal subsidies. The statistics of the
fund show the number of members for the year and
for the preceding year, number reported unemployed
and in receipt of benefits, number of days for which
benefits were paid, total number of days lost by unemploy-
ment, and the relative number of days lost for which
unemployment benefits were paid, all classified by trades
and principal industry groups. The number of unem-
ployed to whom assistance was rendered is also shown
by occupation for a period of four fiscal years, according
to classified number of weeks during which such members
were unemployed. There is here presented a summary
table of data for the year 1913-14.

NUMBER OF MEMBERS OF UNEMPLOYMENT INSURANCE
FUNDS, UNEMPLOYED PERSONS RECEIVING BENEFITS,
DAYS OF BENEFITS PAID, AND WORKING DAYS LOST,
1913-14-

Persons
receiving
Benefits.

Days' Benefits
paid.

Working Days
lost.

Per cent,
of Work-

ber of

ing Days

Funds.

Mem-

bers of
Funds.

Total.

Per

IOO

Total.

Per
Mem-

Total.

Per
Mem-

which
Compen-
sation

bers.

ber.

was paid.

Building trades and

furniture making
Day labourers . .
Food products . .
Textile and clothing
Lumber and woodwork

25,232
45,38o
16,248
12,698

12,218
14,586
2,737
2,940

50
34
18
24

437,569
518,501
94,020
90,559

6
7

848,109
977,087
151,672

158,452

34
23
10

49
46

54
51

mg
Metal working . .
Printing and bookbind

5,431
16,889

1,227

4,732

23
29

36,784
123,861

72,192
222,517

14
14

44?

ing

i 036

50,602

70 258

Others

4,005

666

21,049

59,7i6

All funds . .

«w

40,142

1,372,945

2,560,003

Since the Act of 1907 came into operation the total
expenditures, which include grants from the State and

INSURANCE AGAINST UNEMPLOYMENT 135

communes, were,
investigator :

1907-8
1908-9
1909-10

according to a reliable American

66,009 . 2
388,208.2
444,360.6
518,053.4
516,944.4

730,316.9
796,842.8

1911-12

1912-13
1913-14

The total of benefits paid during the --
seven years 1907-14 was .. $3,460,735.5

A sum of about £700,000 was thus distributed in addition
to that expended by the recognized funds.

The law of 1907 admits as a matter of principle the
granting of State subventions only to those funds whose
members belong to the same occupation or similar trades.

It appeared that this type of fund would present the
maximum of success and of guarantee of control. The
risks of unemployment vary greatly in different occupa-
tions : in certain occupations the workmen are occupied
regularly from one end of the year to the other and are
out of work only occasionally ; in others the workmen are
periodically exposed to long dull seasons : wages also
vary from occupation to occupation. In funds composed
of persons belonging to different occupations it is difficult
to establish the dues required of each one of the members
and the amount of relief to which he would have a right
in an equitable manner. Each union is therefore best
adapted for working out scales of contributions and
benefits. Furthermore, the occupational funds are in a
better position than other types to control unemployed
persons and to ensure finding places for them.

The problem of including in the Danish Unemployment
Insurance scheme the unorganized workman was by
no means as difficult as it is in other countries. In no
nation in the world is the proportion of the working classes
who are members of trade unions so large as in Den-
mark, where it is estimated to be about 55 per cent.
By providing that admission into a recognized society

136 INSURANCE AGAINST UNEMPLOYMENT

cannot be refused to any person if he fulfils the conditions
specified in the law and by arranging for the establishment
of local societies as well as of trade societies, unskilled
workers find little difficulty in gaining entrance into
some society. On the other hand, the fact that laws
granting special assistance had to be enacted during the
very severe period of unemployment in 1908 and 1909
shows that even in socialized Denmark the mass of work-
men do not make sufficient provision to enable them to
meet severe industrial crises without special aid.

Special Assistance.

It is interesting to note that a year after the Government
had successfully operated this scheme, on May 27, 1908,
two further laws were passed to deal with the unusually
large amount of unemployment of the winter of 1907-8.
One of them, the law concerning aid during a period of
exceptional unemployment, left it to the discretion of
communal authorities to give aid to societies (Hjaelpekasser)
and benevolent associations so as to enable them to
grant benefits in excess of the maximum fixed by the law
of 1907. It also permitted the unemployment societies,
recognized in the fiscal year 1907-8, which at the time the
law went into effect had existed less than a year, to give
aid to their members who were in the society at the time
of its recognition, provided it was proved to the inspector
that the society had the necessary funds. The communal
authorities were authorized, without the consent of a
higher authority, to make such societies an unusual
grant in excess of the maximum fixed by law, and the
Minister of the Interior was empowered to make an
advance on the State grant to such societies. The other
law empowered the Minister of Finance to make a loan
of not exceeding 4,000,000 kronen to communal authorities
who started works of construction, in Copenhagen or
in other towns. The need for these two laws and their
passage in Parliament shows a clear appreciation of the
inadequacy of the Unemployment Insurance Act of 1907

INSURANCE AGAINST UNEMPLOYMENT

as the sole instrument for dealing with unemployment,
and explains the proposal to establish a special fund to
be used in time of crises.

There were in 1912, 139,012 workmen belonging to
trade unions. No less than 120,291 of these were mem-
bers of the insurance funds, and the explanation for the
abstention of 28,000 from the workings of the scheme
lay partly in the nature of the trades in which they were
engaged and partly in the rules of the organizations.*

The main features embodied in the Act may be sum-
marized as follows : —

(1) Insurance is voluntary.

(2) By means of fixed maximum and minimum amounts

benefits are kept within reasonable but, it is
believed, sufficient limits.

(3) The scheme works through independent unemploy-

ment societies existing for this purpose only.

(4) State public aid is obligatory and city subsidies to

the Insurance Fund are encouraged.

(5) Control over the societies is exercised by the In-

spector of Unemployment, who is responsible to
the Minister of the Interior.

(6) A large measure of uniformity in the work of the

societies has been obtained.

A series of Model Rules for Unemployment Insurance
Societies was drawn up by the Minister of the Interior,
and the Inspector of Unemployment, in consultation with
a Committee appointed by the Control Federation of
Danish Trade Unions, and Mr. Soerenson, the Inspector
of Unemployment, reports that the results of this colla-
boration has been that all the officially recognized Unem-
ployment Insurance Funds have adopted almost in their
entirety the provisions contained in these Model Rules,
with such modifications as were rendered necessary by
the different forms of benefit paid by the different funds
and the method obtaining in their administration.

* " Unemployment Insurance in Social Denmark," Quarterly Journal
of Economics, pp. 60-3.

138 INSURANCE AGAINST UNEMPLOYMENT

Employment Offices.

Denmark has been comparatively backward in the
development of a system of employment exchanges. On
April 29, 1913, an employment exchange law* was enacted
which authorized the Minister of the Interior to create
employment exchanges in those localities where no satis-
factory ones existed two years after the law came into
force. Thus not until 1915 could a good system — a
network of exchanges covering the whole country and
strongly centralized — begin to be realized.

In 1911, Denmark had, in addition to the municipal
exchange at Copenhagen, two exchanges run by associa-
tions of employers and seventeen trade union exchanges.
The latter gradually passed over to the unemployment
funds, and the Inspector of Unemployment was thus able
to exert considerable influence over them. At first
the committee of management continued the policy of
allowing special employment exchanges to be managed by
the several trades themselves. At this time employers of
labour regarded these employment exchanges as part of the
ordinary trade union activities carried on in the interests
of their members. Their disfavour was not greatly lessened
when the Inspector of Unemployment began exercising
control over them. It was argued in favour of transferring
the location of employment exchanges to different premises
from those of the union ofhces, of staffing them with
different officers and of bringing them under the State
system, that by so doing and by following a policy of
absolute impartiality as between employers and work-
men they might be successful in winning the sympathy
of the large employers.

When the law relating to employment exchanges,
passed in 1913, came into effect this problem lost its
significance. To-day there are about seventy communal
employment offices controlled by the Central Employment
Exchange at Copenhagen. They work in connection

* " Loi Sur le Placement du 29 Avril, 1913, International Bulletin
Against Unemployment, Third Year, No. 3, p. 729.

INSURANCE AGAINST UNEMPLOYMENT 139

with the offices of the unemployment funds. There are
three thousand of these branch offices which act also
as employment offices.

The State makes a grant of one-third of their total
expense towards the upkeep of employment offices.
Together with the Danish Statistical Department they
publish all information regarding the state of employ-
ment. They pay half travelling expenses to workmen
travelling to definite jobs at a distance from their homes.

It required only a short experience with the unemploy-
ment insurance law to prove the inadequacy of a scheme
embodying the Ghent principles. During the last ten
years sentiment has increasingly favoured the establish-
ment of a national compulsory scheme on lines similar
to the one in operation in Great Britain and those now
attempted in Italy and Austria. The Government has,
however, merely reorganized the old law in its recent Act.
The Socialists have led in this demand for a comprehensive
scheme whilst the administrators of the law realize more
and more that such a change is almost inevitable, in
spite of the fact that the voluntary principle has met with
more success in Denmark than in any other country. The
inauguration of a national system of employment exchanges
was of course necessary before a comprehensive national
system of unemployment insurance could be introduced.
It remains to be seen whether now that the former has
been established the latter will follow.

CHAPTER XI
GERMANY

ALTHOUGH under Bismarck Germany took the lead in
inaugurating a national scheme of sickness insurance as
early as in 1883, she is still very backward in the matter
of public encouragement of unemployment insurance.
This is all the more remarkable when it is learnt that all
the different types of working men's unions are in favour
of such a measure and demand that the Government
introduce a law providing for the subsidizing of unemploy-
ment insurance.

The third Congress of German workers, held in December
1913, representing nearly a million and a half of wage-
earners, pronounced in favour of unemployment insurance
by Imperial law. During the interval which must neces-
sarily elapse before its passing into effect it demanded
that the Ghent system be applied, with financial support
from cities and States. It also recommended the passing
of national law on employment exchanges.*

The " Imperial Union of Liberal Workmen and Em-
ployers," with a view to lessening the consequences of
unemployment, formulated in its programme a demand
for a national law on unemployment insurance which
provided for participation by the States, the municipalities,
employers and workmen. It asked that unemployment
insurance should be bound up with a general organization
of employment exchanges, and for public subsidies to
union unemployment insurance funds.

* Although Germany has not yet developed a national system of
employment exchanges, there is evidence to show that it cannot now
long be delayed. On July i, 1915, all free employment offices were obliged
to make reports of their activities to the Imperial statistical offices.
— Monthly Review of the Bureau of Labour Statistics, vol.^ii, p. 53.

140

INSURANCE AGAINST UNEMPLOYMENT 141

A special congress of the union of technical and industrial
workmen in the Berlin district, held in October 1913,
declared that the organization of unemployment insurance
by an imperial law was the only effective way of meeting
the problem and that unemployment insurance ought to
be associated with a centralized organization of public em-
ployment exchanges. It called on the union of Communes
of Greater Berlin to endeavour to form an intercommunal
organization for unemployment insurance and at the
same time to induce the Imperial Government to authorize
the municipalities to provide insurance compulsorily.

In December 1913, the " Christian " unions addressed
a petition to the Diet of Baden demanding an Imperial
law on unemployment insurance, and, until it was enacted,
the creation of communal funds of unemployment
insurance. The State was asked to contribute not more
than 50 per cent, of the amount spent by unions on un-
employment insurance as a subsidy to their funds.

The Gewerkschaften (social democratic trade unions)
have declared themselves in favour of the Ghent system
frequently since first doing so in 1902. They felt that
the refusal of the Imperial Government to pass such
legislation was due to its antagonism to the radical working
men's organizations.

The German Socialist Congress which met at Jena
in September 1913, adopted a resolution which, after
having pointed out the necessity for urgent measures
to remedy the unemployment situation, and specifically
advocating the undertaking of schemes of public works,
continued as follows : .

Permanent (chronic) unemployment and periodic unemployment
crises are phenomena inseparable from the capitalist mode of pro-
duction and its inevitable consequences : they will disappear only
when production is organized on a socialist basis. Nevertheless,
it is necessary to attempt at once the diminution of the harmful
consequences of unemployment by an appropriate development
of social insurance.

Unemployment insurance is a device to be introduced as a matter
of public right for the benefit of all labourers, and it can only be

142 INSURANCE AGAINST UNEMPLOYMENT

realized by legislation for the whole Empire. ... In looking for-
ward to the realization of a universal and compulsory scheme of
unemployment insurance as a public right there is room for a
demand for a system of municipal subventions to trade union un-
employment insurance funds.

For this purpose it is necessary to insist, above all, in the partici-
pation of the Confederated States in these subventions.

In addition to these labour organizations a number
of civic bodies have declared themselves in favour of a
national scheme.

In 1911 the Congress of German municipalities pro-
nounced for an Imperial or State insurance law on
unemployment .

The Bavarian congress of public employment exchange
officers resolved in May 1913 that the Confederated
States, or the Empire, could alone find a definite solution
of the problem of unemployment.

On the other hand, even at the height of the unemploy-
ment crisis in the winter of 1913, groups of employers
and the Government leaders showed themselves frankly
hostile to national encouragement of unemployment
insurance.

A very important body of placement officers of the
Union of German Employers' Organizations, at its con-
ference in Hanover, in November 1913, rejected in
principle every form of unemployment insurance organized
or subsidized by public bodies, " not only those created
by an Imperial law of the State, but also every insurance
institution which calls for collective support." The
reasons given for this opposition were that : unemploy-
ment was never a general phenomenon in Germany ;
it was not so widespread as was generally believed;
the proof of involuntary unemployment could not be
satisfactorily obtained, and consequently that the very
basis of all insurance, reliable statistics, was lacking.

In answer to the interpellation of M. Silberschmidt,
President of the Federated Union of Masons, in the
Reichstag on the 5th and 6th of December, 1913, M.
Delbruck, State Secretary of the Interior, retorted that

INSURANCE AGAINST UNEMPLOYMENT 143

the question of a national system of unemployment
insurance was not yet ripe, not more so than the idea
of a law authorizing cities to introduce compulsory un-
employment insurance. The great objection to a scheme
on the Ghent lines was that it subsidized organizations
entered into for economic combat, whilst a scheme on
the British plan would result in great charges on employers.
He also pointed out that the country still lacked satisfac-
tory statistics and a well-organized, centralized system
of employment exchanges.

Thus, whilst it is an undoubted fact that the labouring
and progressive elements were ready for some national
scheme of unemployment insurance, the Government
and the manufacturing associations showed themselves
strongly opposed to it. Opposition to the scheme also
comes from the agricultural interests, both from landowners
and workmen, on the grounds that it would add to the
burden of taxation on the land, whilst it is not likely to
benefit the rural labourer.*

Although the Imperial and State Governments have
hitherto shown little sympathy with the idea of assisting
insurance against unemployment, the municipalities, which
in the last resort are forced to deal with the evil, have
shown a much greater willingness to gain from the ex-
perience of other countries.

Fortunately the cities on the Continent have larger
powers, and show a greater faculty for initiative than
either the American or British cities. Thus, although
some of the largest cities, Berlin, Munich, Diisseldorf
and Nuremberg were still discussing the idea in 1914,
other cities, like Cologne, Leipsic, Strassburg, Mulhausen,
Erlangen, Mannheim, Schoneberg, Freiburg in Baden,
Stuttgart and Offenbach on .the Maine, had successfully
inaugurated schemes of assisted insurance. We will
here examine only a few of the more interesting schemes.

* Relief works have been encouraged by the Government as the best
means for meeting unemployment. By undertaking them, the Govern-
ment did not antagonize employers of labour, and they constituted part
of the programme which has made modern Germany into a feudal
State with the view-point of benevolent paternalism."

144 INSURANCE AGAINST UNEMPLOYMENT

The scheme in operation in Strassburg is the oldest German
scheme, that in Miilhausen provided a higher percentage
subsidy on the trade union benefit than any other
municipality. The Cologne scheme limits subsidies to
the winter.

Strassburg.

The first municipality in Germany which introduced
and conducted a scheme of insurance against unemploy-
ment with success was Strassburg. Other German towns
have followed its lead by adopting somewhat similar
schemes.

The operation of the Strassburg scheme commenced
on January i, 1907. It was based on the Ghent model.
Like the former, it provides a subsidy not only to trade
associations (in practice, trade unions) who pay unemploy-
ment insurance benefit to their members, but also offers it
in addition to insurance organized either by provident
societies or through individual savings.

The subsidy voted by the municipality is 50 per cent,
of the unemployment benefit paid to members by trade
unions : but the amount of subsidy paid to any one
person does not exceed one mark a day. This is payable
only to persons who have resided in Strassburg or the
neighbouring communes for at least one year. Subsidy
is paid for the same period as benefit is provided by the
affiliated trade association. Unions desiring to receive
such subsidy are required to administer their unemploy-
ment funds separately from their other funds.

The check on unemployment has been carefully worked
out. All insured persons involuntarily unemployed
through lack of employment are required to report them-
selves daily to the municipal employment exchange. The
" unemployed were ordered to report themselves at the
labour exchanges, not at the same hour each day, but
at a time frequently varied, and not always in working
hours, in order to prevent them from being at work
while claiming to be unemployed," In some cases men

INSURANCE AGAINST UNEMPLOYMENT 145

were required to report themselves as often as three times
a day.*

If an unemployed person is referred to suitable work
in his own trade, which he refuses, he forfeits the municipal
subsidy. Unmarried persons are required to take work
offered to them whether in Strassburg or away from the
city, unless they are placed in exceptional circumstances.

Much of the success of the scheme has resulted from
the acceptance by trade unions of the control of the
employment exchanges. This is largely due to the fact
that it is under the management of a committee com-
posed of equal numbers of representatives of employers
and workmen and of an impartial chairman.

During the first three years of the scheme's operation
the municipality voted an annual sum of 5,500 marks.f
This amount was not distributed in subsidy during the
first two years, and so the surplus went as a reserve fund
to provide against a period of depression. It was drawn
upon in 1909.

Practically all of the insured workmen are skilled. It
is still believed that for unskilled workmen provision
against unemployment is best made through relief work.

STRASSBURG: MUNICIPAL SUBSIDY TO INSURANCE AGAINST
UNEMPLOYMENT, 1907-12.

1907.

1908.

1909.

1910-11$

1911-12.

Affiliated associations

Membership

3,867

4,872

5,155

5,856

7,444

Number of members receiving benefit
Days for which municipal subsidy provided . .
Amount distributed (marks)

J3H

1,889

247
4,989
3,507

335
8,095
5,998

338
7,362
5,695

288
7,499
6,086

Amount distributed by association
Amount of municipal subsidy per day per person

7,726
0-27

14,327
0-70

22,901
o-74

27,132
0-77

19,951
0-81

The number of affiliated trade unions increased from
twenty in 1907 to thirty-six in 1912. The number
of members in respect of whom subsidy was provided
nearly doubled during the same period, the increase

* See Schloss : Insurance Against Unemployment, p. 37.
t In 1914 the German mark (= 100 pfennigs) and was worth about ujd.
j From January i to March 31, 1911.

146 INSURANCE AGAINST UNEMPLOYMENT

being from 3,867 to 7,444. One of the effects of the
scheme was to encourage insurance against unemploy-
ment amongst classes of workmen such as associations
of painters, saddlers and office employees, who formerly
made no organized provision.

In 1911^-12, 288 members received benefit in respect
of 7490 days of unemployment, an average of twenty-six
days each. The municipal subsidy amounted to 6,100
marks, and this was equal to an addition to each person's
union benefit of 90 pfennigs a day during unemployment.
The amount distributed by unions was three or four times
as great as that distributed as subsidy.

The Strassburg scheme was rightly regarded as one
of the most successful schemes embodying the idea of
subsidizing voluntary unemployment insurance. Since,
however, it comprises only a fraction of the skilled,
organized workers and hardly affects the casual, unskilled,
unorganized workmen, it cannot be regarded as at all
adequate for dealing with the evils of unemployment.

Mulhausen.

The Mulhausen scheme for assisting insurance is
modelled on that at Strassburg. It came into force on
December i, 1909, for a period of three years, at the end
of which time the labour bureau was instructed to propose
amendments to the Municipal Council. The Council
voted a credit of 2,160 marks for the purpose. The
subsidy was fixed at the rate of 80 per cent, of the benefit
paid by the trade unions for persons with dependents,
and 70 per cent, for persons without dependents. The
subsidy was thus considerably higher than that provided
by Strassburg, which was 50 per cent, of the union benefit.

The highest amount which might be granted from the
municipal subsidy was one mark per day for every un-
employed workman. The subsidy is given only to persons
who have resided without interruption for at least one
year in Mulhausen, and have been employed in the city
during that time. Unemployed persons wishing to claim

INSURANCE AGAINST UNEMPLOYMENT 147

benefit must report themselves at the municipal employ-
ment office on the first day after unemployment begins
and must register themselves daily whilst out of work.

The Act provides that " unmarried persons must accept
employment outside the town, if offered them, unless
they can show that special circumstances prevail in their
case."

Associations having other objects besides that of un-
employment insurance must administer the unemploy-
ment funds entirely separately from the funds used for
those other purposes.

There is a special arbitration board for the settling of
disputes, arising under the scheme, consisting of the
Director (dezernenten) of the municipal office of employ-
ment, and of an employer and an employee appointed
by the municipal council.

The subsidy is distributed through the trade unions,
who reclaim part of the amount expended as subsidy
from the municipal fund.

It will be noted that this scheme makes no provision
for unorganized workmen, but the council directed that
steps should be taken to introduce a municipal scheme
of insurance for them.

The scheme inaugurated in 1909 was continued for
another three years, beginning November 30, 1912,
with three important modifications, and the annual
credit was raised to 2,790 marks per annum.

The municipal subsidy was changed from a percentage
based on the trade union benefit to a fixed money amount.
This alteration was meant to simplify the distribution of
benefits. In future the subsidy to members with depen-
dents was to be one mark a day, and to members without
dependents 80 pfennigs a day. It was also arranged that
there should be a waiting week before benefits could be
obtained, and the maximum period for their distribution,
which hitherto had varied with the custom of each union,
was fixed for all unions at eighty days in the year.
These changes were aimed at equalizing the distribution of
benefits.

148 INSURANCE AGAINST UNEMPLOYMENT

That these changes were necessary, is clearly seen
when it is noted what special privileges the typographical
union enjoyed by virtue of its long - established rules.
These did not provide for any waiting period and extended
the duration of benefits to 280 days in the year, with the
result that in 1909, three unemployed typographers out
of sixty unemployed workmen received 131 marks out
of the total of 850 distributed by the municipality ; that
in 1910, nineteen typographers out of 92 unemployed
members received 693 marks out of the 1,506 marks which
were distributed, and in 1911 an even greater disproportion
took place when fourteen typographers out of 93 un-
employed in all trades divided among themselves 1,132
marks out of a total subvention of 2,316 marks.

In consequence, the typographical union was instructed,
under pain of being excluded from the Municipal Unem-
ployment Fund, to endeavour to provide work, through
its employment bureau, to unemployed members domiciled
at Miilhausen.

Cologne.

The City of Cologne's Insurance Fund against Unem-
ployment in Winter, which was called into being in 1896,
provides, as its name indicates, insurance against unem-
ployment which occurs only in the winter, between the
first of December and the first of March. The rates of
contribution are 45 pfennigs a week for skilled workmen
and 35 pfennigs a week for unskilled workmen. Although
they pay different rates of contributions the benefits are
the same. This is due to the fact that it is easier to secure
work for unskilled workmen during the winter months,
when benefits are payable, and in consequence their
demands on the fund are smaller.

Revenues for the insurance fund are derived from
five sources, from workmen's contributions, from donations
by patrons, i.e. persons who have made donations of at
least 337 marks, from subscriptions of honorary members,
persons who annually subscribe not less than 4 . 50 marks,
from grants of the municipality, and from other gifts offered,

INSURANCE AGAINST UNEMPLOYMENT 149

in addition to the payments of patrons and honorary
members. Thus the Cologne scheme, founded by
private charity, is now largely supported by private
charity.

Members must pay contributions for thirty-four weeks
in the year to be entitled to benefit during that year.
If unemployed, the employment exchange may find them
work, and if it cannot do so, benefits are then payable at the
rate of two marks a day for the first twenty days of un-
employment, whilst for the rest of the forty-eight days,
during which benefits are paid, at the rate of only one
mark a day.

Unemployed workmen must wait three days after
reporting unemployment before being eligible for benefit.
In order to show that they are bona fide unemployed,
workmen must report twice a day at the employment
exchange. If they fail to do so on insufficient grounds
they forfeit their right to benefit.

The scheme is now administered in a manner calculated
to gain the support of trade unions. The work offered by
employment exchanges to workmen must be reasonable in
kind, i.e. suitable to their training and experience, and
in wage, i.e. not likely to lower their standard of wages.
Members cannot be compelled to accept vacancies which
are due to a strike or lock-out.

Single men without dependents may be required to
take jobs outside the city. In this case railway fare
is provided. Although supported by private charity
the scheme now lies wholly in the hands of the city, and
is administered by an executive committee on which
the labour organizations are represented. The committee
consists of the mayor, the chairman of the municipal
employment exchange, and twenty-four elected members,
of which one-half are insured working men and one-half
honorary members, six of whom are employers and six
representatives of the general public.

Special measures are necessary and are put into force
to guarantee the solvency of the fund. These were
invoked in 1901-2 and in 1902-3. They provide that

150 INSURANCE AGAINST UNEMPLOYMENT

under certain circumstances more members should not
be admitted to the benefits of insurance.

STATISTICS OF THE UNEMPLOYMENT FUND IN COLOGNE, 1896-1911.

Number

of Days

Unemployed

for which

Total

Number

Entitled' to

Unem-

Number

Contri-

Per-

Amount

Year.

of
Insured

Benefits.

ployed
were

of Days'
Benefit

butions of
Insured

centage
to Total

Distri-
buted in

Workers

Found

Paid.

(Marks).

Benefits

Work by

(Marks).

Labour

Number

Per Cent

Exchange.

1896-97

220

72-7

2,184

1,408

1,000

42-5

2,355

1897-98

324

151

64-0

2,646

2,197

2,213

63-5

3,485

1898-99

347

144

5i-i

2,857

2,025

2,444

73-i

3,343

1899-1900

256

154

68-1

3,7o8

2,772

2,009

42-7

4,708

1900-1

57i

441

82-3

6,478

12,658

4,56i

23-6

19,337

1901-2

,205

842

76-2

15,853

18,258

12,434

41-4

30,046

1902-3

,355

1, 008

79-7

28,946

16,045

14,388

49'7

28,807

1903-4

,624

11,64

77-5

26,715

22,910

19,772

49'5

39,915

1904-5

,717

1,271

79-6

29,648

25,034

20,782

48-5

42,832

1905-6

,610

1,087

74'3

28,714

13,414

21,681

91-7

23,645

1906-7

,255

980

84-8

18,238

24,086

I7,i94

43-o

40,014

1907-8

,505

1.127

81-5

20,042

29,899

20,662

42-5

48,669

1908-9

1,957

1,481

82-9

24,896

37,971

26,439

42-7

6i,934

1909-10

1,938

1,295

7i-5

24,297

25,283

26,542

62-5

42,473

1910-11

1,787

1,237

76-3

23,814

25,94i

23,866

54'9

43,545

In 1896-7 there were 220 insured members, and in 1910-11
some 1,787 members. There has been a steady rise in
the number of people who took advantage of the scheme.
It would seem, however, that the scheme has already
attracted all those likely to be interested in joining it.
Indeed, between 1909 and 1911 there was a decline in
membership of over 200.

Amount of Unemployment.

The scheme is meant to attract workmen likely to
suffer unemployment during the winter months. As
might be expected, over 70 per cent, of the members
belong to the building trades. The percentage of members
who become unemployed is very high. In 1906-7 it was
84-8 per cent.; in 1907-8, 81-5 per cent.; in 1908-9,
82-9 per cent.; in 1909-10, 71-5 per cent.; 1910-11,
76-3 per cent.

In 1909-10 the average number of days for which

INSURANCE AGAINST UNEMPLOYMENT 151

unemployed members received benefits was nineteen ; in
1910-11, it was twenty-one.

The experience of the new unemployment fund at
Cologne shows that insurance does not weaken the efforts
of unemployed workmen to find work and that workmen
are not prevented from changing their residence in order
to find work because by so doing they might eventually
lose their right to unemployment benefit.*

Perhaps in no country in the world has so much been
written on the subject of unemployment insurance as in
Germany. Careful thought and scholarly reports reveal
great interest in the subject. Nor has this been confined
to the few cities whose schemes are described here. In
a number of cities plans have been studied, but not intro-
duced. These include Berlin, Colmar, Dresden, Cassel,
Diisseldorf, Essen, Emden, Frankfort on Main, Gerbec,
Heidelberg, Mayence, Munich, New Cologne, Neumunster,
Nuremberg, Pforzheim, Weissensee. Amongst the cities
which have rejected proposals for insurance are Berlin,
Witmersdorf, Braunschweig, Danzig, Dessau, Elberfeld,
Halle a/S., Hamburg, Hof, Kopernick, Kulmback, Regens-
burg, Spandau, Wiesbaden, Wurzburg. Actual failure of
plans is reported in four cities, in Augsburg, Charlotten-
burg, Duisburg and Solingen.f

A Compulsory Scheme Proposed.

The German Government introduced a Bill for Com-
pulsory Unemployment Insurance in 19204 It provided
that all manual and non-manual workers in industry
and commerce should pay a compulsory contribution
for unemployment insurance to the compulsory health
insurance funds.

The insurance fund was to be made up of contributions
by workmen, by employers, and by the Government.

* International Bulletin Against Unemployment, Fourth Year, No. 2,

P't 7Reichs Arbeitsblatt, March 1913, P- 188. Cf. 1910, 53«. PP- 102. 2?8 ',
1911, 538, p. 181. See also Report of Mayor's Commission on Unemploy-
ment, Chicago, 1914, p. 90.

J International Labour Office, Daily Intelligence, February 1921.

152 INSURANCE AGAINST UNEMPLOYMENT

This Bill was, however, withdrawn and another introduced
to meet temporary needs.

The workers were opposed to the unemployment Insur-
ance Bill on the ground that no differentiation of trades
according to the degree of risk was attempted. But
the most serious criticism came from those who insisted
that the administrators of the health insurance funds were
unable to administer unemployment benefits, since they
could not develop a test as to whether workmen are
really involuntarily unemployed and unable to find suit-
able employment.

The Berlin Chamber of Commerce wishes to have un-
employment insurance administered by the employment
offices. It is calculated that for 10,000,000 insured per-
sons the contribution of the employers and the workers
would be 40 marks per year per insured person, whilst
the Reich and the commune should pay 20 marks each
to provide an adequate system of benefits.

The Committee of the General Federation of German
Trade Unions has addressed a series of demands to the
Government for meeting the growing volume of unem-
ployment. They ask that in cases where no other means
of providing work for the unemployed can be found the
working hours of those fully employed should be curtailed
and alternate shifts should, as far as possible, be intro-
duced. This loss of wages due to the curtailed working
hours of the short-time workers should be made up to
the extent of two-thirds by the employers. The Empire
and the Federal States should, from the unemployment
relief funds, reimburse the employers to the extent of
half the increased expenses thus incurred.*

The decree for meeting temporary needs empowers
communes to organize schemes of relief. The expenses
are divided between the Empire which provides one-
half, the State one-third, and the municipality one-sixth.
In Berlin men are given a donation of 4 marks per day,
and women a donation of 3 marks per day. The subsidy
is not, as a rule, to be continued beyond six months.

* Korrespondenzblatt, March 5, 1921,

CHAPTER XII
CANADA

THE Ontario Commission on Unemployment reported in
1916. This report states that " for unemployment resulting
from trade depressions or the temporary dislocation of
business, working men are not responsible/' To meet
such conditions the report states: " Your Commissioners
are of opinion that some form of unemployment insurance
is desirable, in the interest alike of the working men and
of the municipalities affected." Representations have
been made to the commission in favour of compulsory
Government insurance. It is unfortunate that there
are no reliable statistics from which to calculate the
risk of unemployment.

The Ontario Commission recommended in its report :

1. That financial assistance be given by the Govern-

ment of Ontario to those voluntary associations
of working men which undertake to provide
unemployment benefits for their members.

2. That the assistance to such associations should

equal 20 per cent, of the sums dispersed by
them in unemployment benefits under regula-
tions approved by the Lieutenant-Governor in
Council.

In a country which is if anything more individualistic
in its outlook than even the United States, great significance
attaches to the appointment of a commission to investigate
the evils of unemployment and even more significance
to its recommendations. Since the armistice a number

153

154 INSURANCE AGAINST UNEMPLOYMENT

of towns, including the City of Hamilton, have taken
steps to put these recommendations into effect.

An unemployment relief fund has been created to
which the Dominion Government contributes one-third,
provided that the Dominion Government Superintendent
issues a certificate that his office has no employment to
offer the applicant. The Government of the Province
of Ontario agreed to contribute one-third of the unem-
ployment fund, and thereupon the City Council passed
a by-law accepting the offer of the Federal Government,
and approved the creation of an unemployment fund on
condition that all recipients of unemployment pay shall
be residents in the City of Hamilton. The by-law has
been in effect since about January 14, 1920, and the amount
paid out by the city to January 21, 1921, was approxi-
mately $12,000,000.*

Trade unions in Canada are influenced by those of the
United States, so that very few make any provision for
insurance against unemployment.

JAPAN

Interest in unemployment is of recent date because of
the comparatively late introduction of the industrial
system. Nor has it hitherto been serious because of the
possibility of alternating between agriculture and industry.
But with the growing development of industrial conditions
unemployment has had to receive considerable attention,
more especially since 1920. Charitable and religious
bodies have hitherto organized employment offices. These
proved inadequate, and now there are three under local
governments and thirty-nine municipal employment
offices as well as eleven under private organizations,
and thirty-seven under other agencies. The scheme at
first applied only to unskilled and now applies also to
skilled labour. There is as yet no scheme of unemploy-
ment insurance.

* New Republic, February 9, 1921.

INSURANCE AGAINST UNEMPLOYMENT 155

SPAIN

A Royal Decree of May 25, 1917, set up a free employ-
ment office in the Ministry of Agriculture and Industry,
for the placing of workers in the Public Works, Mines
and Agricultural Departments. In 1919 twenty- two
employment offices were established in various towns under
joint committees of employers and employees.

A State subsidy to all mutual aid societies, either
employers', workmen's or mixed, which provide insurance
against unemployment, was decreed on March 19, 1919.
The amount of the subsidy is equal to the subscriptions
collected from the members of these societies. The
conditions on which it is granted are that unemployment
benefits do not exceed 60 per cent, of the daily wage, that
they are not paid for more than ninety days in each year,
and that the societies guarantee that the State subsidy
will not be used to accumulate strike funds.

CZECHO-SLOVAKIA

In 1914 there were forty-five out of fifty workmen's
associations which provided benefits for their unemployed
members. Provision was made in this way for 44,159
workmen. A committee decides when benefit is to be
provided and also fixes the amount to be paid. As a
rule benefit is granted only if members are unemployed
through no fault of their own.

The period during which benefits may be drawn varies
with different associations from six to thirteen weeks.

Private employment offices which are run either as
business ventures or as philanthropic organizations also
provide insurance benefits. These are distinct from the
employment offices established in Bohemia and Moravia
which are maintained by the district and State.*

The State grants a subsidy to associations satisfying
its regulations. In 1919, 160,000 crowns were devoted
to the State subsidy in the Budget.

* League of Nations1 Report on Unemployment, p. 47.

PART III

THE BRITISH SYSTEM OF
UNEMPLOYMENT INSURANCE

CHAPTER XIII

EMPLOYMENT EXCHANGES AND
UNEMPLOYMENT INSURANCE

Historical Sketch of the Treatment of Unemployment.

HAVING briefly reviewed the earlier and less comprehensive
schemes of unemployment insurance, we are in a position
to examine the biggest and most successful scheme, that
now in operation in Great Britain. The question has
arisen, both in the daily press and in scientific journals,
whether the United States and other countries could not
learn from its practice and history in this country. It
is therefore necessary to proceed with a very detailed
exposition and discussion of the British scheme. In
order to understand it fully it will be advisable to precede
it by a short outline of the growth of British policy in
the treatment of this evil. This will demonstrate that
Great Britain no longer relies on charity and relief works
as means of meeting it adequately ; it will show that a
national centralized system of employment exchanges is
the machinery with which constructive measures for deal-
ing with unemployment are being attempted ; and lastly,
that employment exchanges and unemployment insurance
are only parts of what may yet be a comprehensive scheme
for overcoming the disastrous effects of unemployment to
the labouring population.

Great Britain has been the experimental station for
measures designed to reduce the suffering resulting from
unemployment. Germany claims the lead in establishing
Health and Accident Insurance, and Great Britain can

159

160 INSURANCE AGAINST UNEMPLOYMENT

similarly claim to have led in the fight against unemploy-
ment. For the multiplicity and variety of schemes and
the long continuation of efforts to solve this problem no
country rivals her, and it may be confidently asserted
that the devotion of careful thought and action has
resulted in grappling with this evil more successfully
than in any other country.* This is due in part to the
fact that Great Britain having grown into a great indus-
trial power before any other country the problem of
unemployment arose here in a more acute form than
elsewhere. But even then the evils of unemployment
in this country are still sufficiently great to make it into
the most serious single problem which challenges the
attention of the State. Indeed, during the next two
years it might cause the very foundations of civilized life
to tremble.

Relief works have a continuous history of failure in
Great Britain, and nowhere have they proved particularly
successful, f Their small measure of success in Great
Britain at the time of the cotton famine during 1862-4
gained some support for them as a method of meeting
unemployment, until the British had a number of years'
experience with the Unemployed Workmen Act. In
France, the disastrous experience of the ateliers nationaux
of 1848 has resulted in few experiments with such works
since then. In Germany, where unemployment has not
received very much legislative attention, relief works
are still quite common. For a number of years they
have been encouraged by the Government in order to

* It is interesting to note the similar views expressed in Conrad's
Handworterbuch dev Staatswisenshaften : " England may rightly claim
to be the model country as regards its legal care of the poor. True, up
to the end of the eighteenth and the beginning of the nineteenth century
her methods exemplified in a typical form all the evils which opponents
of State interference prophesied. But the various improvements intro-
duced since 1834 have most effectually combated those evils." Art. :
Armenwesen.

f It was Bismarck who once declared, when someone apologized for
a mistake by saying that one must learn from experience, that he preferred
to learn from other people's experience. Great Britain has learnt much
from her many mistakes in dealing with unemployment. The United
States may save much by taking the fullest advantage of British
experience.

INSURANCE AGAINST UNEMPLOYMENT 161

avoid the necessity of introducing some large national
measure on unemployment.

The Poor Law.

The circular issued by Mr. Joseph Chamberlain as.
President of the Local Government Board in 1886, en- ,
cotiraging municipal authorities to undertake relief work%
for the unemployed, was the first breach made into the
Poor Law defences of Great Britain.

Until then the assumption had been that individual
fortune depended on individual character and had little
or nothing to do with the structure of the social system.
Thrift and self-reliance were therefore to be stimulated
and relief was to be discouraged. Since, however, humanity
would feel outraged if people in distress were left wholly
without help, a minimum of relief under the most irksome
conditions was to be allowed. Men without employment,
and their families in distress, were therefore provided
for by the Poor Law in the workhouse. Here relief
was granted upon the condition of performance of a task".
The standard of life in the workhouse was high enough
not to outrage public sentiment, and low enough to
interest the individual in avoiding it. Relief to the able-
bodied was made irksome and came to carry with it the
stigma of pauperism and certain legal disadvantages.
But it was discovered that these punishments did not
have a preventive effect. This method of aiding the
unemployed resulted in the degradation of those who
earnestly desired work, and as a matter of practice allowed
the vagrant to live without having to labour very much.
The work of all was adjusted to the low abilities of the
most inefficient and most indolent, and there was a con-
stant diminution in effort by the inmates of the " Poor
House." Soon, in most cases, the work undertaken
required little mental effort or mechanical skill. Under
these conditions the industrious man deteriorated through
lack of useful work and was demoralized by constant
association with the habitues of the " workhouse," whilst

162 INSURANCE AGAINST UNEMPLOYMENT

on the other hand, the vagrant could always enjoy a rest
at the " home " after doing a few weeks' casual work.

It was part of the indictment of the Poor Law Commission
of 1834 tnat tne existing pauperism in the country was
largely the product of the existing Poor Law system, and
there can be little doubt but that the reformed system
introduced after that date had the identical effect on a
large number.

Its discouragement of application for temporary relief by the
able-bodied, the fundamental feature of the reform, was perhaps
more effective with those who were likely to gain by help than
with those who were likely to be pauperized by it.*

The Chamberlain Circular.

" In 1886, when the general unemployed percentage
of all trade unions rose to 10-2 per cent, of the member-
ship," Mr. Chamberlain issued his famous circular which
made incumbent upon local authorities the provision of
work in times of exceptional distress. The Chamberlain
Circular, as it came to be known, marks the change to
the new procedure.!

Two new principles were embodied in it. Those
receiving this work were not disfranchised, and it became
a recognized public duty to assist the unemployed outside
of the poor house. Henceforth, to be in need on account
of unemployment was not necessarily to be branded as a
pauper, or to be a companion of the most degraded members
of society.

During the succeeding depression in 1892, Sir Henry
Fowler, then President of the Local Government Board,
reissued the Chamberlain Circular, and, in 1904, Mr.
Walter Long established semi-official machinery for the
better administration of special relief funds. It became
the recognized task of the President of the Local Govern-
ment Board to invite cities to furnish relief work during
periods of considerable distress.

* Pitman's Economic History of England, by H. O. Meredith, p. 291.
f See Beveridge, pp. 2 and 155, Unemployment : A Problem of Industry'

INSURANCE AGAINST UNEMPLOYMENT 163

But although the principles embodied in the new pro-
posals marked a forward step in the treatment of unem-
ployment, their application was unsatisfactory. Methods
and devices for making them effective remained to be
discovered. Indeed, the whole subsequent history of
governmental activity and much voluntary effort in
meeting unemployment may be said to centre round the
problem of finding proper administrative machinery for
providing relief for the unemployed outside of " the
poor house."

There were a number of objections to the working of
the scheme. Although " the workhouse test " was
dropped, it remained with the " guardians of the poor "
to decide who were to be given jobs and who were to be
refused. Too often they lacked discrimination and
training for selecting workmen for vacancies, an inevitable
result of the confused ideas on unemployment then
prevalent.

Inadequate relief was granted and no differentiation
was made between work seekers and work shirkers. The
method of granting only two or three days' work a week
resulted in suffering to the former and encouraged applica-
tions from the latter, who would not or could not keep
a steady job, even if offered to them. There was conse-
quently the demoralizing influence resulting from forcing
two such groups of people, of honest working men and of
those who through physical or mental infirmities pre-
ferred " eating the bread of indolence," to work together.

In a few of the large towns pressure was brought to
bear by the vote of the unemployed to have the munici-
pality engage in useless undertakings or in work that
would normally have been done by a better class of
workmen. This criticism, however, it should be noted,
is more severe on the municipalities for not preparing
in advance a programme of useful undertakings on which
the unemployed might be engaged, than on the workers
for demanding employment when involuntarily forced
out of work.

Relief works were in practice costly, wasteful, and

164 INSURANCE AGAINST UNEMPLOYMENT

demoralized those whom they were intended to succour.
But in spite of these severe criticisms it must be said in
their favour that they aided in the development of a
recognition by society of its responsibility for lack of
employment.*

The Unemployed Workmen Act, 1905.

The policy of relieving the unemployed without the
disqualifications of the Poor Law, first enjoined by Mr.
Chamberlain, received legislative enactment in the Un-
employed Workmen Act of 1905.

This Act aimed to systematize the municipal relief works
and at remedying the evils connected with that method
of relieving want. Distress Committees composed of
" persons experienced in the relief of distress," consisting,
that is, of representatives of the Poor Law, of the Munici-
palities, and of Charity Organizations, were appointed
to administer the Act for the local authorities.

The framers of the Act had intended to relieve the
unemployed primarily through the provision of relief
work and through finding employment for them by means
of labour bureaux and even by assisting emigration to
districts where labour was in demand.

Emigration, on a large scale, it was soon discovered
was impracticable, whilst the few labour bureaux, hardly
conscious as yet of their potentialities for good, served
predominantly to provide temporary relief work. In
effect, the Unemployed Workmen Act must therefore
stand or fall with the merits or demerits of the work
which was provided.

Under this Act a number of labour bureaux controlled
by local authorities were established for the double purpose
of acting as registration agencies and of relieving distress
arising from unemployment. They failed in both capa-
cities. In 1909, twenty-one of such labour bureaux

* The aid given in the Lancashire districts during the special circum-
stances of the shortage of cotton, and the resulting unemployment during
1862-3 was a very special case where relief funds did not attract to idle-
ness persons who would normally have been engaged in industry. — Pieou.
Wealth and Welfare, p. 391,

INSURANCE AGAINST UNEMPLOYMENT 165

had 103,811 applications for work. They were able to
learn of 34,626 vacancies of which they filled 28,860.
But these vacancies were generally of the nature of relief
work rather than of bona fide competitive employment.
In addition, the London County Council controlled
twenty-two other bureaux. They received 179,194
applications for work, while 38,865 vacancies were notified
to them and 30,580 were actually filled. Both sets of
labour bureaux found work almost exclusively for low
skilled workmen.

One effect of this ill-considered, inadequate panic
scheme was to produce an attitude of mind antagonistic
to the new national system of employment exchanges,
which was about to be introduced.* Not only was it
associated with the idea of relief, but also with very
low skilled work. It took some time before employers
could be convinced that all kinds of vacancies could be
filled by the exchanges, and before skilled artisans could
be made to feel that it was not lowering to them to accept
such vacancies, or that the exchanges were not to be
used for supplying " scab " labour and to break down
standard rates of wages, f

The chief objection to relief works is that at best they
are mere palliatives. They in no way aim at preventing
unemployment. The causes of unemployment, the factors
making for industrial disorganization, are left untouched
and only temporary distress is relieved, with the inevitable
result that the problem becomes acute again during the
following winter, and menacing during the succeeding
depression. Relief works deal only with those whom
competitive industry has no use for at that particular
time. It, therefore, follows that managers of relief works
are left to find work for a miscellaneous group of workmen
from a variety of trades, few if any of whom have had
previous experience at any work which can be allotted
to them. Consequently, work that requires very little

* Cf. with situation in United States to-day.

f For a clear criticism of the old Poor Law, see Alden's Democratic
England " The Problem of the Unemployed."

166 INSURANCE AGAINST UNEMPLOYMENT

skill must be undertaken, so that it is usually of little
practical utility and generally proves to be very expensive.

So far, at least as the experience of Great Britain goes,
competent opinion is now fairly well in agreement that
relief work except in very special circumstances is an
unmitigated evil. It is both costly and demoralizing
to the men employed and to the community, which is
apt to resort to it instead of organizing its labour market
in such a way as to reduce the evil of unemployment or
at least of mitigating its effects by some more systematic
method. The Poor Law Commission of 1909 was of
opinion that relief works had served on the whole to
aggravate rather than to relieve the problem of unem-
ployment.

But although the Unemployed Workmen Act proved
a failure, it did good service in collecting a body of informa-
tion which acted as a basis for discussion of the whole
problem. Measures of relief came to be regarded as
inadequate and misdirected means for treating unemploy-
ment, and henceforth the great causes of unemployment,
rather than the human suffering in which it resulted,
were to be attacked. The experiments which the Act
made possible, rate-aided emigration, farm colonies, and
employment exchanges, proved of substantial and lasting
value. Along those lines progress lay in the fight against
some of the causes of unemployment. The State was now
embarked on that task. It had assumed a responsibility
and it was difficult if not impossible to draw back. If
measures of relief were proven to be inadequate or in-
advisable, constructive schemes of meeting unemployment
had to be discovered. *

Period of Investigation and Study.

The progress which a country has made in meeting
unemployment is frequently measurable by inquiring
whether its proposals for treating it followed immediately
on the heels of an industrial depression, or whether it
followed as the result of careful study. During the early

INSURANCE AGAINST UNEMPLOYMENT 167

handling of this problem legislation is apt to be panic
legislation.

Mr. Chamberlain's circular followed a depression. It
was repeated by Sir Henry Fowler during the succeeding
depression, whilst the Unemployed Workmen Act of 1905
was the answer to the depression of 1904. The years
after 1905 were more important for the theoretical study
of the problem of unemployment than for any adminis-
trative reforms. The Poor Law Commission and the
masterly Majority and Minority Reports which were
issued after its protracted sittings stimulated much
vigorous discussion and encouraged a number of timely
original studies and investigations. * Equal in importance
to the work of the Commission was the now classic treatise
of Sir W. H. Beveridge, entitled Unemployment, a
Problem of Industry. 9

As a result of this intellectual ferment, five main pro-
positions stood out with great clearness.

First : — That a different policy must be adopted in
treating unempl9yment amongst employables and
" unemployables."

Second : — That measures must be taken to train the
inefficient labourer, and to raise the standard of
wages in seasonal occupations, so that the
average wage will be high enough to enable
adequate provision to be made against periods of
unemployment.

Third : — That steps should be taken to regularize
industry and to eliminate blind alley occupations.

* We will mention only a few :

Beveridge : Unemployment.

Rowntree and Lasker : Unemployment.

Chapman : Unemployment in Lancashire.

Sidney and Beatrice Webb : Prevention of Destitution.

Pigou : Unemployment and Wealth and Welfare.

D. F. Schloss : Insurance against Unemployment.

I. G. Gibbon : Unemployment Insurance.

Cyril Jackson : Trade Union Benefits.

There have also been a number of valuable studies dealing with the
relation of the British educational system to " blind alley " occupation.

168 INSURANCE AGAINST UNEMPLOYMENT

Fourth : — That certain specified occupations such as
hauling, towing, and carting should be so organized
as to concentrate all the labour to be done, at any
given moment on the most efficient workmen, and
thus to make possible the decasualizing of labour.

Fifth : — That the percentage of unemployment, which
with our present knowledge and administrative
machinery cannot be wholly abolished, should
be provided for either by :

(a) Arranging that all workmen should work short

time in preference to some working full time,
whilst others are dismissed ;

(b) Organizing a scheme of unemployment insurance to

carry workmen over periods of unemployment ; or
by a combination of these two methods.

How far progress has been made along each of these
five lines of approach will become evident from succeed-
ing chapters.

Objects Aimed at by the Establishment of Employment

Exchanges.

The Labour Exchanges Act was passed in September
1909,* and the first Exchange was opened on February i,
1910. The Government of the day, in establishing the
exchange system, based their policy largely upon the
unanimous recommendation of the Royal Commission
on the Poor Laws in favour of such a system, and the
objects with which the Labour Exchanges Act was passed
have been summarized as follows : —

(a) To bring together employers on the one hand,1
in need of workers, and workers on the other hand in need
of employment, so as to fill up vacancies as speedily as
possible and as the result to decrease the periods of waiting
between jobs.

* The scheme for unemployment insurance was prepared at the same
time, but the Government waited for a more opportune moment for
introducing it.

INSURANCE AGAINST UNEMPLOYMENT

(b) To provide the less organized classes of labour
with assistance in seeking employment of the kind given
to their members by the more highly organized trade
unions and as the result to avoid the necessity for work-
people to seek employment without knowledge of where
it may be found.

(c) To enable the Government to measure the extent
of unemployment, so as to be able to provide accordingly
for the period of depression.

(d) To operate a system of compulsory and contributory
unemployment insurance.*

(e) To provide machinery for dealing with casual labour.

Advisory Committees consisting of employers and
workpeople were appointed to assist with the management
of these Exchanges. The Ministry of Labour is authorized
also to make regulations as to their management with
special reference to the question of advancing fares as a
loan to workmen proceeding to employment.

Procedure.

When a man applies for work he is at once registered
in the class to which his trade belongs, and any informa-
tion that he can give as to his trade qualifications is noted,
in order to assist the exchange to find him the most
suitable situation. This information, together with his
name, age, address, previous employers and the periods
he worked for them are noted upon his registration card.
This card is put away for future reference. When wanted
it will be either on the " live list " or the " dead list."
The " live list " stands for the list which clamours for
immediate attention, the list of those needing work.
The " dead list " includes the cards of those who have
already found work or who are no longer pressing the
exchange for work.

Having registered, the man may be informed at once
or at any time that a vacancy occurs. It must be noted,

* A scheme for unemployment insurance was prepared at the same time,
but the Government waited for a more opportune time for introducing it.

170 INSURANCE AGAINST UNEMPLOYMENT

however, that the exchange does not appoint men to
particular jobs or even definitely recommend them.
All it does is to send to employers those men who are in
the judgment of the exchange the best suited for a given
vacancy. The responsibility for the choice of any work-
man always remains with the employer.

The duty of the manager of the exchange is first of
all to endeavour to fill such vacancies as may be notified
to him from his current register. Should he be unable
to do so, he communicates with the divisional centre
to which that exchange is attached, which in its turn
circulates information of the unfilled vacancies notified
from the various exchanges under its control to the other
exchanges in its district, where applicants of the class
required are likely to be found. Should it not be possible
to fill the vacancy within the division, the divisional office
circulates it to the other divisions, where a similar procedure
is followed. In this way an application for employment
or a vacancy notified may be filled by any workman
considered suitable, from any part of the country. No
longer need shipbuilders on the west coast be at a stand-
still for lack of men, while boiler-makers, say, 150 miles
away are idle.

Organized Migration of Workpeople.

In 1910, 24,990 applicants were placed in districts
other than those in which they were registered. They
constituted 5-7 per cent, of the total number of vacancies
filled. In 1911, 66,199 or u-i per cent. ; and in 1912,
96,189 or 12-2 per cent, of the total number of vacancies
were filled in this way. Loans are made to those found
work by the exchanges. Railway fares to the amount of
£2,803 were advanced in the financial year 1912-13,
and to the amount of £3,151 in 1913-14. In 1919 about
65,000 were transferred from one district to another at a
cost of £32,500, which would mean that they were given
work at an average distance of about 100 miles from their
former jobs. Over 98 per cent, of these loans have been
recovered.

INSURANCE AGAINST UNEMPLOYMENT 171

Fully to appreciate how employment exchanges have
facilitated the mobility of labour during war conditions,
it is best to examine the problem in relation to women's
employment where we are free from the disturbing element
of people leaving industrial occupations to join the army.
During 1914 the number of women who obtained employ-
ment through the employment exchanges in districts
other than those in which they registered, was 32,988 ;
in 1915 the number increased to 53,096, and in 1916
to 160,003. In JQ1? the number of women being
transferred away from home to work at a distance
amounted to an average of between 4,000 and 5,000 a
month.

This increasing mobility of women's labour was due
to war conditions and more specifically to three causes.
The high wages paid to women, more especially on Govern-
ment contract work, provided a strong incentive for women
to leave their homes to engage in employment. This
was often supplemented by the economic pressure resulting
from the loss of a father or a husband or by the desire
to release a man for the front. Mobility was facilitated
also by the work of local advisory committees on women's
war employment. These, in conjunction with other
committees of voluntary workers and of the Ministry of
Munitions, made special arrangements for the housing,
recreation, and general welfare of girls employed in Govern-
ment factories.

The figures show that there has been a steady rise in
the number of vacancies filled by workers from other
districts ; and it is to be expected that the number of
vacancies to be pooled in this way amongst a number of
districts will increase. As might be expected builders,
fruit growers, and other types of seasonal workers have
taken special advantage of this provision.

These results achieved are due not only to the improved
sources of information as to where vacancies are available,
but also to the increase of workers' facilities to move to
jobs outside their districts effected by means of the loans
for travelling fares.

INSURANCE AGAINST UNEMPLOYMENT

It is particularly interesting to note that the Employ-
ment Department was responsible for arranging for the
importation of large numbers of workmen from abroad
for war work. Thus 1,710 workmen came from Canada,
211 from South Africa and 5,158 from Australia. Portugal
contributed 4,682 timber workers and Denmark 1,064
workers for timber felling, agriculture, and margarine
works. But the largest number of foreign workmen were
6,500 Belgian refugees. In all, some 80,000 foreign
workmen were given employment during the war without
undue interference with British workmen.

Organization and Staff.

The staff occupied by the Employment Department
of the Ministry of Labour * in June 1920 was 12,631.
This department consists of a headquarters establishment,
Divisional offices in each of the nine areas into which
the country is divided, the employment exchanges and
the branch employment offices.

On March 31, 1910, 214 employment exchanges were
open and the staff employed was 528. In June 1920
there were 395 employment exchanges and 1,049 branch
employment offices situated in less important centres and
manned as a rule by part-time officials. 4

The staff employed by the employment department in
June 1920 was 12,631, of whom 8,484 were employed at
exchanges and branch offices, 1,330 at the divisional offices
and 1,843 at the central " Claims and Records Office
for Unemployment Insurance/' The cause of this great
expansion in staff is to be found partly in the necessary
completion of the exchange organization, partly the
administration of special war-work, and partly the need
to administer the unemployment insurance scheme which
embraces over twelve million workpeople.

The exchanges in each division are co-ordinated with
each other and with a divisional office, or centre, for the

* Report of the Committee of Enquiry into the Work of the Employment
Exchanges, p. 5, Cd. 1054.

INSURANCE AGAINST UNEMPLOYMENT 173

division, each of the divisional centres being co-ordinated
with, and controlled by, a central office in London.*

STATISTICS OF THE MAIN FEATURES OF THE WORK OF
EMPLOYMENT EXCHANGES SINCE 1911.

Department
and Year.

Number of
Registrations.

Number of
Individuals
Registered.

Number of
Vacancies
Notified.

Number of
Vacancies
Filled.

Number of
Individuals
Found Work.

Men 1911
1912
1913
1914
1915
1916
1917
1918
1919

1,271,756
1,525,223
1,997,819
2,221,651
1,425,556
1,107,565
1,083,364
1,274,076
3,417,899

Not available

1,205,777
1,321,188
1,012,088
852,037
873,454
1,044,355
2,738,708

434,341
610,556
692,152
883,263
984,300
893,738
892,625
963,509
878,912

354,543
503,080
551,577
688,427
701,392
624,892
613,946
660,426
641,307

Not available

378,805
493,637
564,958
531,050
530,550
574,758
583,251

Women 1911
1912
1913
1914
1915
1916
1917
1918
1919

400,599
497,880
508,519
681,146
1,198,429
1,846,789
1,831,324
1,774,218
1,860,749

Not available

335,605
460,380
897,746
1,439,444
1,456,358
1,444,100
1,512,018

173,970
218,794
259,966
302,925
484,356
835,690
807,605
799,o88
715,845

133,628
164,229
192,598
226,160
377,838
688,538
700,317
6i7,33i
397,881

Not available

155,868
301,723
610,978
632,226
545,643
334,037

Boys 1911
1912
1913
1914
1915
1916
1917
1918
1919

177,828
190,256
175,294
199,472
182,512
224,010
254,093
287,196
344,i8i

Not available

130,221
149,382
143,038
171,726
196,072
227,288
277,037

104,736
126,591
138,020
151,756
156,022
144,099
I43,oi9
145,470
153,205

76,301
85,075
86,087
98,957
102,269
113,697
«7,93i
119,885
115,107

Not available

71,534
82,032
87,174
97,667
103,503
104,690
101,468

Girls ^911
1912
1913
1914
1915
1916
1917
1918
1919

115,808
148,866
154,734
202,787
240,528
258,041
263,373
258,893
306,118

Not available

112,348
145,237
I79,5I8
197,218
203,410
208,728
246,248

56,614
77,839
93,2i8
98,719
136,412
143,836
I3i,i34
131,864
161,527

44,003
57,169
65,011
73,194
98,419
107,801
104,189
98,132
104 670

Not available

53,46o
6o,497
83,834
95,201
93,425
87,488
93,091

Total 1911
1912
1913
1914
1915
1916
1917
1918
1919

1,965,991
2,362,225
2,836,366
3,305,056
3,047,025
3,436,405
3,432,154
3,594,383
5,928,947

Not available

1,783,951
2,076,187
2,232,390
2,660,425
2,729,285
2,924,471
4,774,011

769,661
1,033,780
1,183,356
1,436,663
1,761,090
2,017,363
1,974,383
2,039,931
1,909,489

608,475
809,553
895,273
1,086,738
1,279,918
1,534,928
1,356,383
1,495,774
1,258,965

Not available

632,666
792,034
1,037,689
1,334,896
1,359,704
1,312,579
i.iii 847

* The First Report of the Proceedings of the Board of Trade under
Part II of the National Insurance Act, 1911, is the only one yet issued
on the working of the British scheme of unemployment insurance. This
report (Cd. 6965) was published in July 1913, but it has been made

174 INSURANCE AGAINST UNEMPLOYMENT

The number of subdivisions of the exchanges varies
with their size. In all the larger exchanges provision
is made for dealing separately with insurable and unin-
surable workmen, and in the largest these categories are
further subdivided between artisans and labourers. Men,
women, boys, and girls are each dealt with in separate
departments, and the more skilled type of women who
apply in the larger exchanges are dealt with apart from
the less skilled, such as charwomen. Moreover, a differen-
tiation by trades is attempted in a considerable number
of exchanges, whilst a beginning has been made in special-
izing certain exchanges to the use of particular industries.

During the period 1911-14 registrations increased by
69 per cent., the number of individuals registered by
43 per cent., the vacancies notified by 88 per cent., the
vacancies filled by 80 per cent., and the number of
individuals found work by 74 per cent.

A better index of the success of employment exchanges
is given by the following table : —

PROPORTION OF INDIVIDUALS FOUND WORK AND OF
VACANCIES FILLED.

Proportion of Individuals
Found Work to Individuals
Registered.

Proportion of Vacancies
Filled to Vacancies
Notified.

1911

Per cent.
31-0

Per cent.
78-8

1912

34'9

77'9

1913

34'9

75'4

1914

37'6

75'5

possible for the author to present information dealing with the adminis-
tration of the scheme up to date. That report is the only official , public,
detailed statement dealing with the inauguration and the working of the
scheme. It consists of five parts : A, Introductory ; B, Administrative
Machinery ; C, Working of Scheme ; Preliminary Operations ; D, Working
of Scheme, Contributions, Claims, Unemployment Benefits ; E, Summary
and Conclusion. It also contains a number of valuable appendices giving
detailed statistical tables and copies of memoranda and schedules used
in the administration of the Act.

It is extremely desirable that another public report should be issued
very sooq,

INSURANCE AGAINST UNEMPLOYMENT 175

In 1911, 31 per cent, of the workpeople who registered
were given work, which increased to 37-6 per cent, in
1914 ; whereas of the number of vacancies notified
78-8 per cent, were filled in 1911 but fell to 75-5 per
cent, in 1914. No general conclusions can be drawn from
this fact since by the Unemployment Insurance Act
registration is made compulsory in the insured trades,
but notification of vacancies is still optional.

The summary of figures for 1914 are shown in the
next table for the four separate " departments " of labour
exchanges, viz. men, women, boys and girls.

SUMMARY OF WORK DONE IN 1914, DISTINGUISHING MEN, WOMEN, BOYS,

AND GIRLS.*

Men.

Women.

Boys.

Girls.

Number of registrations

2,316,042

707,071

211,898

207,441

Number of individuals registered

1,381,694

476,926

157,093

148,310

Number of vacancies notified

909,383

312,344

157,278

100,019

Number of vacancies filled

706,458

232,935

103,280

74,236

Number of individuals given work

507,538

160,145

85,068

61,320

The " juvenile " work of employment exchanges is, on
the whole, more successful than the "adult " side. Of the
individuals registered for employment 36-7 per cent, were
given work in the case of men, 33-6 per cent, in the
case of women, 54-1 per cent, in the case of boys, and
41-4 per cent, in the case of girls.

It is interesting to learn that the returns for the twelve
months ending December 1912 showed that the vacancies
filled were, for the most part, vacancies for skilled labour.
For example, out of 80,619 vacancies in the building
trades, only 19,803 were for labourers.

The Facts about the Exchanges as "Placing" Agencies.
The results for the last normal year before the war,

* Labour Year Book, 1916, pp. 228, 229. See also Labour Gazette,
February 1915. It will be noted that these figures differ slightly from
those on p. 173.

176 INSURANCE AGAINST UNEMPLOYMENT

and for the first six months of 1920, may be summarized
as follows: —

Daily Averages (300
days to a year), 1913.

January-June 1920.

Registrations by workpeople

9,454

10,653

Vacancies notified by employers .

3,944

5,O2I

Placings through exchanges

2,984

3,451

The following table shows for the same periods the
average results per exchange per day, the figures for
branch offices being credited to the employment exchanges
with which they are associated.

1913
(412 Exchanges).

1920
(395 Exchanges).

Registrations by workpeople

Vacancies notified by employers .

Placings through exchanges

These figures indicate that on their present basis the
exchange would receive about three million registrations
by workpeople and one and a half million notifications of
vacancies by employers and would fill a million places
per annum. It will be seen that while about two-thirds
of employers' notifications are filled through the exchanges
only about one-third of the workpeople who register are
placed through the exchanges.

Table I on p. 177 shows for the first six months of
1920 the use made of the exchanges by different industries.

Table II shows that by men the exchanges are
most used by the building industry, by the engineer-
ing and ironfounding industry, by employers of general
labour, and by the transport industries. For women
during this period domestic service accounts for two-

INSURANCE AGAINST UNEMPLOYMENT 177

TABLE I.

VACANCIES FILLED THROUGH THE EMPLOYMENT EX-
CHANGES IN GREAT BRITAIN DURING THE FIRST SIX
MONTHS OF 1920.

Groups of Trades.

Men.

Women.

Monthly
Average of
Vacancies
Filled.

Per-
centage.

Monthly
Average of
Vacancies
Filled.

Per-
centage.

Building
Construction of works
Engineering and ironfounding . .

7,682
2,265
7,702
2,382

18-7

5*5

18-7

5'8
1-6
2-3
3-0
4-0

7*9
3'9
1-8
i'i
0-8
16*0
8-9

757
27

133
536
17,694
991

460

3M
1,246
1,386
706

385
1,720

0- I

2-9

O'l

o'5
2*0
67-2
3'7

1-7

I '2

4*7

5'2

2-7

i*3

6'5

Construction of vehicles
Miscellaneous metals
Domestic service

647
955
1,224

Commercial and clerical
Conveyance of men, goods, and
messages

1,638

3,250
1,604

Textiles
Dress (including boots and shoes)
Food, tobacco, drink, etc.
General labourers
All other trades

741
465
320

6,573
3,642

Total

41,090

100*0

26,383

100 '0

TABLE II.
MEN, WOMEN, BOYS, AND GIRLS.

Groups of Trades.

Monthly Average
of Vacancies Filled.

Percentage.

Building

8,195

9*5

Construction of works

2,269

2-6

Engineering and ironfounding

",I74

13-0

Shipbuilding

2,607

3-0

Construction of vehicles

1,131

i*3

Miscellaneous metals

2,676

3'i

Domestic service

21,286

24*7

Commercial and clerical

4,369

5*1

Conveyance of men, goods, and messages . .

6,845

7.9

Agriculture

2,111

2'4

Textiles

2,815

3*3

Dress (including boots and shoes)

2,982

3*5

Food, tobacco, drinks, etc.

1,568

1-8

General labourers

7,991

9*3

All other trades

8,259

9'5

Total

86,278

100 '0

178 INSURANCE AGAINST UNEMPLOYMENT

thirds of the "Platings," and the industries standing
next in point of numbers placed are dress (including boots
and shoes) and textiles. For all classes of workpeople
after domestic service, which accounts for 24*7 per cent,
of the total placings, the largest proportion of the total
is shown to be in the engineering and ironfounding group
— 13 per cent.

It is interesting here to note the figures of the employ-
ment exchange which specializes in one group of trades.
It is the most successful office in the country.

SPECIAL BUILDING TRADES EXCHANGE (TAVISTOCK
STREET, LONDON). STATISTICS— 1919.

Month.

Registration.

Locals Placed
in other
Districts.

Applicants from
other Districts and
Locals placed
Locally.

Applicants from
other Districts
placed in other
Districts.

January

1,365

838

853

374

February

1,195

600

942

294

March

936

415

1,623

307

April

520

294

672

510

May

501

317

643

579

June

1,040

523

1,277

632

July

630

359

1,479

677

August

587

446

1,041

316

September

713

372

1,282

3i8

October . .

553

389

762

228

November

427

244

793

229

December

423

346

740

277

Total . .

8,890

5.M3

12,107

4>74J

Employment Exchanges and Trade Union Standards.

In fairness to the trade unions, provision was made
that fares may not be advanced in cases of workmen
proceeding to vacancies caused by a trade dispute affecting
their trade, or to vacancies where the wages offered are
lower than those current in the trade in the district where
the employment is found.*

* At first union men had a very real prejudice against the Board of
Trade employment exchanges. One cause of their distrust was their asso-
ciation with the bureaux of the Distress Committees, which dealt -with
the unemployable and which were, in a measure, relief agencies. The
more serious factor was the fear that they would be used for finding
" scab " labour during strikes.

INSURANCE AGAINST UNEMPLOYMENT 179

It was, of course, clear from the outset that there was
grave danger of employment exchanges being wrecked
on the rocks of industrial disputes — strikes and lock-
outs. The Government, therefore, decided to take an
impartial attitude in dealing with cases of this kind and
has achieved this difficult task with remarkable success.
The cardinal principle governing the administration's
attitude with regard to a vacancy or lock-out is to notify
the applicant for a job of the statements made concerning
it by the secretary of the union of that trade and by
the employer. The applicant, having been provided
with a full knowledge of the facts, is then at liberty either
to accept or reject the vacancy, and "it is specifically
laid down in the Labour Exchanges Act that the regula-
tions shall provide that no person shall suffer any dis-
qualification or be otherwise prejudiced on account of
refusing to accept such a vacancy."

Juvenile and Women's Employment Exchanges.

WOMEN.

The important and special character of the field of
worften's employment was realized from the first by those
responsible for the organization of the employment exchange
system. In some districts, exchanges have been opened
which deal exclusively with women and girls, whilst in
most of the larger exchanges separate departments with
separate entrances are run under the charge of special
women officers.

The magnitude of this work is appreciated when it is
recalled that in 1914, 232,935 vacancies for women were
filled and the daily average during the first six months of
1920 was 1,055. Before 1914 the women's branch of the
employment exchanges were particularly useful in dealing
with occupations of a casual or a seasonal nature, such
as charing or fruit picking. In connection with this
work there developed a new and interesting feature in
exchange activities. Whole families were encouraged
to remove from districts where there was little employment

180 INSURANCE AGAINST UNEMPLOYMENT

to districts where the services of many members of the
family, particularly the women and juveniles, were in
demand. This tendency has been greatly increased by
the war with its encouragement to the mobility of women's
labour. Thus in July 1914, 5,020,000 women were engaged
in industry and in April 1916, 5,490,000. Thus in twenty-
one months of war 470,000 women over and above the
normal recruitment went into industry, and there is evidence
showing that since the policy of " combing " men out of
industry into the army began, the number of women
who had gone into competitive labour increased at a
much greater rate. Thus by October 1916 the British
Labour Gazette reported that 988,500 women had been
drawn into remunerative industry. Moreover about one
woman engaged in wage-earning employment in every
seven was replacing a man. Women were occupied as
compositors, sweepers, car cleaners, postmen, and porters.
The exchanges have been used not only to increase
the numbers of women wage-earners but to transfer them
from process to process and industry to industry.* Since
the armistice the condition of women in industry has
been uncertain and their presence is being used by unscrupu-
lous employers to lower the wages of ex-service men.

Juvenile Employment Exchanges.

More important even than assisting adults in finding
the employment which they want, is the treatment of
juveniles, i.e. boys and girls under eighteen years of age.
Their choice of employment can be influenced and the
effect of such choice will be cumulative. Casual labour
can thus be discouraged and the basic industries of the
country can be fed with an adequate quantity of skilled
labour. The training which they gain will influence
their attitude towards trade union policy and may even
affect industrial structure. This would be the case if,

* Labour Finance and War, consisting of a series of reports edited
by R. W. Kirkaldy. See especially report on " The Replacement of
Men by Women in Industry during the War," Board of Trade Labour
Gazette, January 1917.

INSURANCE AGAINST UNEMPLOYMENT 181

for instance, young men and women were taught something
of management as well as their craft. Juveniles are
therefore treated in a different manner from adults.

In Great Britain three principles have guided the
administration's policy.

(1) Not only was information concerning vacancies
necessary, but in addition it was important to collect
information respecting the conditions, and above all the
prospects in the various trades.

(2) It was essential that full particulars should be
available not merely as to the youth's previous industrial
record, but also as to his ability to learn some new trade.

(3) The juvenile also needs someone to keep in touch
with him even after he has found a suitable post, someone
who will see that he retains his employment, if it is satis-
factory, and to counsel him generally.

In brief, vocational guidance, placement, and " special
care " are activities in each of which juvenile employment
exchanges are interested. In Great Britain, these three
functions are regarded as essential parts of one policy.*

There is a special department for dealing with boys
and girls under eighteen years of age at each employment
exchange. There are 245 juvenile employment com-
mittees working with the exchanges. These committees
advise children in the selection of suitable employment
and make efforts to improve the conditions of training
for local industries. They collect information about
the general local conditions of juvenile employment and
about opportunities for employment. Of the 245 commit-
tees which were at work at the end of 1920, 145 were
appointed under the Labour Exchanges Act and 100 under
the Education (Choice of Employment) Act, 1910. It
is evidently undesirable for two Departments of State

* In New York City these three functions when attended to at all by
voluntary organizations are treated as independent. Thus the Scholar-
ship Committee of the Henry Street Settlement helps and advises the
young boy or girl, but the Alliance Employment Bureau actually places
the juvenile. The Big Brother movement aims to provide this " special
care " for the young people who come under their charge. It must,
however, be conceded that the promising experiments which these bodies
are now conducting are as yet in their infancy.

182 INSURANCE AGAINST UNEMPLOYMENT

to be responsible for the supervision of juvenile employ-
ment, and an improved centralized system is needed.

It is particularly important to the efficient handling
of the unemployment problem that the first of these
functions should be properly carried out. In this way
casual labour can be made so costly to employers that its
amount will be reduced to a minimum, and the gross
maladjustments resulting from the existence of too many
workmen in some trades and not enough in other trades
will perhaps entirely be done away with. This considera-
tion was of marked importance during the period of ad-
justments necessitated by war conditions. It was obvious
that the Board of Trade could be well served by taking
advantage of the experience of the educational authorities
with regard to the juveniles that passed through their
charge, and so special committees were appointed by
the Local Education Authorities to co-operate with the
committees appointed by the Ministry of Labour.

The " Special Rules " provide that the committees shall
include " persons possessing experience or knowledge of
education or of other conditions affecting young persons,
appointed after consulting such authorities, bodies, and
persons as the Board thinks best qualified to advise them,
and also persons representing employers and workmen."*
Their functions are to give advice with regard to the
management of any employment exchange in their district
in relation to juvenile applicants for employment, and to
give information, advice, and assistance to boys and girls
and their parents with respect to the choice of employment.
In the majority of the schemes Where the Local Educa-
tional Authorities and the Ministry of Labour are advising
juveniles the following procedure has been developed :

Administrative Procedure.

The work of advising applicants for employment is
reserved to the officer of the Education Authority ; the

* In practice, they consist of nominees of the Local Education Authority
and representatives of employers and workpeople.

INSURANCE AGAINST UNEMPLOYMENT 183

work of registering particulars of vacancies received from
employers and of bringing to the notice of employers the
facilities offered by the scheme is reserved to the officer
of the employment exchange, while the selection of suitable
applicants for a particular vacancy is a matter for con-
sultation between the two officers. The Educational
Authority usually organizes Care Committees for the
purpose of keeping in touch with boys and girls before
and after they leave school.

After the juvenile has been placed, a voluntary worker
is expected to keep in touch with tfie child in order to
counteract any tendency towards the aimless drifting
from job to job, and to help, when necessary, in finding
him a new situation. The helper also advises and assists
the juvenile with regard to his general welfare, continued
education, etc., and reports to the Advisory Committee
every six months as to the child's progress.*

Much knowledge is being gained by the Care Committees
as to the conditions of juvenile labour, and in many places
sub-committees have been formed to deal with special
departments of the work. In one large town, for example,
sub-committees are dealing with :

(1) Domestic service for girls aged fourteen to seventeen.

(2) Van boy employment.

(3) Permanent after care.

(4) Skilled trades and apprenticeship.

In every case much useful information is being collected
and the following points have been brought home to the
Advisory Committees : '

(1) The appalling amount of unskilled or semiskilled

occupations to which boys and girls go straight
from school.

(2) The long hours and heavy work of errand-boys.

(3) The enormous and unsatisfied demand for errand-

boys.

* In the United States the Big Brother Organizations help to achieve
this same object. But there is apparently no channel for pooling the
information and experience gained in this way.

184 INSURANCE AGAINST UNEMPLOYMENT

(4) The tendency of boys to shift from employer to

employer.

(5) The difficulty of getting accurate information about

occupations.

(6) The impossibility of getting boys and girls to attend

evening schools in anything like satisfactory
numbers. *

One of the results which was anticipated from the
formation of these juvenile employment committees, and
which has been realized, was the increased attention
devoted to the local needs of industry and the arrange-
ments for training boys and girls to satisfy them.

It must, however, be noted, not as a criticism of the
work of juvenile employment committees, but rather
as a condition of present day industry, that their power
for good is limited and that they cannot abolish the
existence of occupations of a thoroughly demoralizing
type, which offer high wages and no training. All they
can do is to save particular boys from them, and perhaps
find for a few chosen ones the opportunity of gaining
the advantages of apprenticeship. The good that may
be done will be to get all the best boys into the best situa-
tions. It will not diminish by one the numbers who are
demoralized by the bad situations. Yet it might be
fairly contended that the policy of juvenile employment
exchanges will have a substantial effect in making it
more difficult to fill such situations. In that case, indus-
try may be relied upon to pay heavily for such work or
to abolish it altogether. This change, however, must
necessarily be the result of a slow process.

Employment Exchanges and the Decasualization of

Labour.

The student of unemployment insurance is forced to
study the problem of reducing the amount of casual
labour because of its direct relation to his own problem.

* The Fisher Education Act was aimed to improve this situation.

INSURANCE AGAINST UNEMPLOYMENT 185

First, the whole system at present in vogue for relieving
the " unemployed " is vitiated by the presence_of_ov£r .
whelming numbers of ^nort~enga^ernent meH) in need of
relief. Second, as long as short engagements continue
it will be impossible to measure the extent of the over-
supply of labour in any industry. Third, the existence
of an overstocked labour market almost necessarily implies
a high percentage of unemployment, and this as a
rule renders a scheme of unemployment insurance very
difficult.*

The cardinal principle of employment exchange adminis-
tration in Great Britain is, "The first man for each job,
regardless of other considerations." Unlike the Massa-
chusetts labour employment bureaux, their policy is " first
come, first served." Similarly, the labour bureaux
organized by trade unions in France " allot situations to
their members strictly in order of priority of application."
The labour bureau of Berlin brewers also provides that
" a workman must wait his turn before he is placed; i.e.
on registration he gets a number and must then wait till
all the numbers on the list prior to his own have been
satisfied." This policy has been opposed. It is argued
that only by maintaining a preference list can regular
employment be provided for the best workmen and the
problem of the inefficient workman be brought into high
light. Whilst this has not been the general policy of the
British officials, its working is yet seen most clearly in
certain specific British schemes.

In framing the Bill on National Insurance specific
proposals were embodied in it with a view to reducing
the irregularities in industry. For example, the section
proposing to relieve employers of the custody and stamp-
ing of the health contribution cards and unemployment
books, on condition that the men concerned were to be
engaged by the employer through an exchange, has resulted
in a large number of arrangements of this kind.

One of these arrangements, that affecting ship-repairers

* See Jackson and Pringle : Commission on the Poor Laws, Appendix,
vol. xix, p. 647.

186 INSURANCE AGAINST UNEMPLOYMENT

in South Wales, related to 8,000 men who were largely
employed casually. By coming under the supervision
of the employment exchange officials the process of de-
casualizing labour could be undertaken more easily.
Attempts at reducing the number of casual labourers in
a given occupation, and of concentrating all the work on
the remaining workers, are not new, but the exchanges
and the Unemployment Insurance Scheme have provided
a necessary stimulus to this process.

The Manchester Cloth Porters' Scheme differs from the
above in the fact that cloth porters are liable to insurance
under the Health Insurance Act only. A large number
of employers agreed to use the employment exchanges
for all their labour of this kind. The men actually
wait in the exchange and are sent from there as asked
for by the employers. They are paid wages by the
employers ; the exchange keeps and stamps the con-
tribution cards.

One of the first examples of the unification of demand
for labour which had previously been separate came
about at the London and India Docks after the strike of
1889.

Formerly each of the forty-seven departments of the Company's
work was a separate unit for the engagement of men ; each depart-
ment had its insignificant nucleus of regular hands, and its atten-
dant crowd of more or less loosely attached casuals ; 80 per cent,
of the work was done by irregular labour. Now the whole dock
system is, so far as the Company's work goes, the unit for the
engagement of men ; 80 per cent, of the work is done by a unified
staff of weekly servants directed from one spot to another by a
central office.*

The most highly developed scheme for decasualizing
dock labour and the one most instructive to students in
other countries has been put into operation in Liverpool.

The Liverpool Dock Scheme, which embraces nearly all
the dock labour of the port, is administered by the Ministry
of Labour in co-operation with a Central Joint Committee
of Employers and Workmen. Some 68 employers and

* Beveridge : Economic Journal, 1907, p. 73.

INSURANCE AGAINST UNEMPLOYMENT 187

over 31,000 dock labourers are registered under it. There
are six clearing houses and fourteen surplus stands.
These are situated at convenient points along the eight
miles of docks. Each clearing house is co-ordinated with
and controlled by a central clearing house. All are in
direct telephonic communication with each other and
with the fourteen surplus stands.
The main features of the scheme are :

(a) The registration of all dock labourers, and the

issue of metal tallies to the men registered.

(b) The limitation of employment to men provided with

such tallies.

(d) The custody and stamping of the health insurance

contribution cards of dock labourers.

(e) The payment of wages at six convenient centres to

all dock labourers.

(/) The automatic deduction of the health insurance
contribution at the time of payment of wages.

The clearing houses are used for the following purposes :

(1) Registration of workmen.

(2) Payment of wages.

(3) Fulfilment of employers' obligations under Part I

(i.e. the Health clauses) of the National Insurance
Act.

(4) Weekly meeting of Clearing House Joint Committees.

Each of the local joint committees issues and with-
draws tallies, settles disputes in connection with work
done at the clearing house, considers matters afiecting its
area referred to it by the Central Joint Committee, and
suggests improvements of the arrangements. The central
feature of the scheme is the undertaking by employers
that they will engage only those workmen who are in
possession of tallies. Since fresh tallies can be issued
only with the approval of the employers' and workers'
committee, there is a reasonable prospect that there will

188 INSURANCE AGAINST UNEMPLOYMENT

be a check on that free entry of fresh labourers, irrespec-
tive of the real needs of the port, which forms the main
evil of casual employment.

At the outset of the scheme each employer was allowed
to give a card to every labourer commonly employed by
him, whether regularly or casually, and the man on taking
this card to a clearing house received a tally. The
possession of the tally by the workman is evidence that
the workman's health insurance contribution card is
deposited for stamping purposes at one of the clearing
houses and that he has been registered at the clearing
house or exchange.

The men attend for employment in the first instance
at the ordinary taking-on place of their usual employer.*
If unsuccessful there, they repair at once to one of the
fourteen " surplus stands/' and from them surplus men
are directed to any place where there may be a deficiency
of workmen.

Under the scheme, wages are paid by the Ministry of
Labour on behalf of the employers in a single sum and
in one place to each workman. Great benefits are thus
conferred on the men, who are thus rescued from collecting
their wages in driblets at a number of places, and protected
from the pressure, felt by casual labourers in London and
elsewhere, to stamp their contribution cards themselves
in order to secure employment towards the end of the
week.

It benefits the employers in turn by relieving them of
much trouble in connection with the stamping of these
cards and by apportioning their contributions equitably.
More important is the consideration that they are more
likely to be able to engage the kind of labour which they
need.

The average number of men paid each week during the
period July 13, 1912, to July n, 1913, was 19,887. The
average number of those receiving wages through the

* In Hamburg alone, of all the ports of the world, a complete and rigid
system of engagement exists not merely through, but also at, employment
exchanges. For a lucid description of " The Harbour Workers of
Hamburg," see pp. 210-28, The Longshoremen, by Charles B. Barnes.

INSURANCE AGAINST UNEMPLOYMENT 189

Board of Trade was 17,555, and of those paid directly by
employers was 3,408. Some men in each week are paid
in both ways, so that the sum of these separate figures
exceeds the total given above. The average amount of
wages paid out each week in 1913 through the Ministry
of Labour was £19,818, being £i 2s. 7d. for each man who
received anything in this way.*

The Goole Dock Labour Scheme, covering about 1,500 men,
is somewhat similar to that at Liverpool, embodying the
same features of limitation of work to registered men with
tallies and payment of wages and health insurance con-
tributions by the Ministry of Labour on behalf of the
employers. At Sunderland, where the scheme covers the
whole of the casual dock labourers, numbering about 1,000,
the first of these features is found, but not the second.

Dovetailing Employments.

It has been suggested that in addition to the scheme
aiming at the decasualizing of dock labour that subsidiary
occupations should be provided for them, but this, in so
far as it is practicable, can only be very gradually realized.
Dovetailing of different kinds of employment is practised
now by groups of workmen. Work at the English docks
is usually brisk in December and January, and to a less
degree in July ; it is slack in August and September.
Builders' men, therefore, come to the docks in winter when
their own trade is slack, and gas-workers are available
in July. On the other hand, many dockers go hopping
and harvesting in August and September.

Could not this movement of labour be more scientifi-
cally organized and the difficulties of seasonal fluctuations

* The first year's working of the Liverpool Dock Scheme showed that
many men had become so demoralized by casual labour that although
fairly regular work could be had the men would not seek it, but were con-
tent with work and earnings for part time. In reply to the demand
of employers to increase the number of tallies that were distributed,
the divisional officer has rightly insisted that the apparent lack of labourers
had best be made up by educating the men to regular work. By sub-
stituting a weekly rate for the present hourly wage the men would become
habituated to a more normal method of work. Williams : The First
Years' Working of the Liverpool Dock Scheme.

190 INSURANCE AGAINST UNEMPLOYMENT

be largely met by dovetailing ? It is not the least of the
many merits of schemes of employment exchanges and
unemployment insurance that they lay bare even when
they don't solve urgent problems.

Hitherto little has been done for those labourers who are
squeezed out through the introduction of any scheme
for decasualizing labour. As we have seen, schemes of
this nature imply so altering the conditions of employment
as to give the best men more continuous work, at the cost
of depriving others of what employment they have.
Surely this interference with industrial organization to
the hurt of persons whose only crime is that they are not
quite as efficient workmen as the others is certain to
breed great discontent. To be fair, a scheme of decasuali-
zation ought to be accompanied by some provision for
these men and their families.

A number of proposals have been suggested for the
absorption of the inefficient workers who are squeezed
out of industry because of the decasualization policy which
might be pursued by the exchanges. It is not possible
to discuss these here. It will suffice to point out that
" the absorption of the permanent surplus of efficient,
even though unskilled labour, cannot be an insoluble
problem unless there is a shortage of one or both of the
other two factors in the production of wealth, viz. land
and capital. As there is no such shortage in England
to-day, it must be possible for statesmanship to bring
unemployed labour into union with unemployed land and
capital, and so absorb any surplus which might result from
decasualization.* There is almost general agreement
amongst students of this problem that extremely ineffi-
cient workmen who thus lose their chance of a livelihood
are as a rule lacking in vitality, and ought to be put under
medical treatment and some form of educational discipline
until they are fit for a return to industry. f

Special schemes applying in the main to only one trade,

* See Prevention of Destitution, by Sidney and Beatrice Webb, pp. 133,
et seq.

f See Rowntree and Lasker, op. cit., pp. 141, et seq.

INSURANCE AGAINST UNEMPLOYMENT 191

dock labour, have been attempted. This is due to
the fact that the problem of decasualizing labour at the
docks was most pressing. But it is not unlikely that, with
a growing knowledge of the characteristics of different
trades, special proposals will be developed for dealing
with other kinds of unskilled labourers such as, for example,
bricklayers' labourers. The experience gathered from
the experiment with South Wales ship-repairers and the
Manchester cloth porters should prove valuable.

The British employment exchange policy of providing
that workmen in all trades should register at the same
exchange is justified on grounds of economy. But the
great success of the building trade exchange in London,
which is carried on under the supervision of a committee
of employers and workmen engaged in that trade, and
by a staff which has expert technical knowledge, justifies
the view that similar specialized exchanges for other
industries and in other areas should be developed. These
will aid also in the establishment of " industrial insurance
for the unemployed."

The Criticism o! Employment Exchanges.

The employment exchanges have laboured under the
very greatest difficulties from their introduction in 1909.
They have not had any period of normal experience
in which to perfect their organization. Thus, first,
the Unemployment Insurance Act of 1912 absorbed the
main energies of the headquarters staff. Then came the
numerous functions imposed on the exchanges during
the war. The great tasks of demobilization have been
accompanied by the work of administering the out-of-
work donation to civilians and ex-service men. Now,
all the energies of the employment department are taken
up with the extension of the unemployment insurance
scheme to over twelve million people. There has not
yet been a fair period to judge of the results of the working
of the exchanges. But it cannot be denied that there
has been a steady opposition to employment exchanges

192 INSURANCE AGAINST UNEMPLOYMENT

in Great Britain since their inception. The Press has
enlarged on every legitimate grievance and has circulated
a great number of satements that are untrue.* An
amazing incident of prejudice blinding evidence appeared
before the Committee of Enquiry into the " Work of the
Employment Exchanges." Professor Macgregor, who was
on the Committee, stated that " There was an employer
here last time, and we called for a return immediately
after his evidence. He said he was positive they never
used the exchanges. The return here is 2,000 men."f
Indeed a large number of employers say that they never
use the exchanges, and yet as a matter of fact the exchanges
are doing a very large volume of work filling a large number
of vacancies notified voluntarily by employers. The
situation arises from the fact that most employers do not
know whether they are using the exchanges or not. As
Sir William Beveridge pointed out, " no such statement
made by an employer ought to be taken without verifying
the statement by reference to the exchange records,
because it is not a big employer's business to know how
his labour is taken on." I

There is still the objection to exchanges that they are
a government interference between employers and work-
men. There is also the prejudice of the old-fashioned
foreman accustomed to his old methods of engaging work-
men, who is apt to lose his one-time tyrannical powers.
Most important are the causes of prejudice which attach
to the very nature of the subject of unemployment. Any
organization dealing with it seems doomed to be unpopular.
Something has been achieved, seeing that the same pro-
found unpopularity of the workhouse and relief work does
not attach to exchanges. Also, the State is obliged to
pursue a policy of its own which is often divergent from
that of employers and of the workmen.

Especially in times of industrial disputes the exchanges
seem doomed to be attacked by one or other of the con-

* Cd. 1140. Appendix 12 gives examples of investigations by Local
Employment Committees into charges against the exchanges,
t Cd. 1140, p. 185. t Idemm

INSURANCE AGAINST UNEMPLOYMENT 193

tending parties. Moreover, it is a fact that the exchanges
do deal with the lower class of labour. Since most em-
ployers endeavour to attach their best workmen to them-
selves during good and bad times, the unemployed fringe
is naturally composed on an average of those who are less
efficient than the average employed workman. This
gives them a certain disrepute amongst the better type of
workmen. It should, however, be evident that industry
cannot continue without the less efficient workmen.
They are needed in busy times, in times when industry
is expanding, and provision must be made for them.

It was of course inevitable that the payment of insurance
benefits at the low rate of 75. a week before 1914 should
result in a considerable amount of dissatisfaction with
the exchanges which acted as the paying-out agencies.
Similarly, the agitation against the out-of-work benefit,
which came to be dubbed " the dole/' has also had the
effect of making them share their unpopularity.

Two causes of prejudice may, however, be removed.
These relate primarily to the personnel of those adminis-
tering the exchanges. On their initiation a large body
of officials had to be collected in a short time to undertake
this work, and some of them have not proven suitable
for their positions. Similarly during the war, of the
many temporary officials taken on to the staff a number
lacked the knowledge necessary for their work.

It is also held that a number of employment exchange
officials ought to be trained to have a technical know-
ledge of the trade with which they are dealing, and that
exchanges should specialize in certain trades. But it
is clear that given a period during which the exchanges
could devote themselves to the problems for which they
were created they would soon overcome these difficulties.

Another common charge against the exchanges is
that they deal chiefly with unskilled men. This is not
true. In the insured trades alone about 55 per cent, of
skilled workmen and 45 per cent, of labourers were placed
by them. Then about 7,000 of all the union branches
voluntarily lodge their books with the exchanges and

194 INSURANCE AGAINST UNEMPLOYMENT

their members use them. Of course, under the latest
insurance scheme millions of the most skilled workmen
are registered by the employment exchanges when unem-
ployed. Indeed, on investigation it was found that skilled
labour predominates in the work of the exchanges.

But whilst most of the criticism levelled at exchanges
results from sheer prejudice against a new institution, they
evidently have much to accomplish before giving general
satisfaction. In London alone some six hundred private
employment exchanges are still carrying on their placement
work for which employers and employees are willing to
pay fees.* Moreover, advertisements in the Press are still
very common. Nor has the demoralizing tramping from
factory to factory in search of employment entirely ceased.
These methods are undesirable. But the same objections
do not apply to highly skilled organized workers learning
of vacancies through their trade union " call houses " or
through personal touch with foremen, or through their
comrades in various workshops.

Previous to the war the exchanges were making
slow and steady progress in gaining the confidence of
employers and men. During the war this was shaken
and the uphill work has begun once again. There seems
no reason to believe that given a period in which they can
devote themselves to their main function that they will
not gain the confidence of an overwhelming majority of
employers and workpeople.

Summary : Effects of Employment Exchanges on Workmen
and Employers.

We are now in a position to summarize what influence
in organizing the labour market the employment exchange
can exert.

Employment exchanges do not provide, in a strict sense,
work for the unemployed. They do, however, obviate the
demoralizing tramping system which was humiliating and

15 These, however, include a large number of highly specialized exchanges
like those for concert artistes, cinema actors, etc.

INSURANCE AGAINST UNEMPLOYMENT 195

disheartening to the labourer. Exchanges may make it
easy for operatives seeking work to find it, and those
wanting labour might be helped and hastened in their
search. By shortening the average interval between the
loss of one job by a workman and the finding of another,
the social time-lag can be cut down.*

The exchanges find employment for trade unionists and
unorganized men more efficiently than the workmen
did without their aid. Workmen's organizations could
perhaps rarely obtain for their members so complete a
survey of the prospects of employment in all parts of the
country as the exchanges are able to offer them.

Certain unions have decided to leave their list of unem-
ployed members permanently in the hands of the exchange
officials in order to facilitate their work. In other cases
exchange officials have free entry into the unions' club to
consult membership books with a view to finding suitable
applicants for particular vacancies. Such a development
was bound to take place, since by holding aloof organized
men would only increase the chance of non-unionists
getting employment.

To employers of labour the exchanges offer specialized
service which result in great economies to them. In some
thousands of cases, employers are giving notice that they
will fill vacancies only through the exchanges. Hitherto
most employers have engaged their labour through private
employment agencies or at their own gates. Both these
methods proved expensive, in so far as the employer had
to pay the costs of choosing from the large numbers who
applied for a job. Not even then, however, was he certain
of obtaining the kind of help that he needed. But with
a national system of exchanges which has knowledge
of applicants for work from other parts of the country,
there is a much greater likelihood of finding the suitable
man for the job. Moreover, because of the large number
of men applying to it, constantly, vacancies can be filled
sooner and with greater certainty whilst the cost to the
employers is eliminated. On the other hand, employers

* See p. 123, Casual Labour at the Docks, by H. A. Mess.

INSURANCE AGAINST UNEMPLOYMENT

complain that frequently the most efficient and intelligent
workmen who are in constant employment make use of
exchanges for the purpose of bettering their position
whenever an opportunity offers. It has an unsettling effect
upon a man, they contend, to know of vacancies in his
trade. Furthermore, it has been urged that the institu-
tion of exchanges has encouraged a townward flow. Now
whilst the former view can only be urged by those who
have a selfish, unsocial outlook, it behoves exchanges to
encourage as far as possible a policy likely to prevent
rather than to encourage a flow into the cities.

In any consideration of the long time effect of the
establishment of exchanges, the influence which they can
exert in guiding and placing juveniles is more important
than in finding employment for adults. They can help
to abolish much of the aimless drifting which now charac-
terizes the early years in industry of many undirected and
misdirected young men and women. They can make
casual labour extremely costly and thus help to abolish it.
Above all, working in conjunction with the educational
authorities they can produce fundamental changes in
the industrial structure.

Democratic Committees and the Administration of Unem-
ployment Measures.

One of the grave difficulties in the way of dealing with
unemployment on a national scale is the fact that it
necessitates the establishment of huge and complicated
machinery and the employment of thousands of officials.
Measures have been introduced for preventing the growth
of an army of bureaucrats by attaching a local employ-
ment committee to every exchange.

Three important classes of committees representing
the public have been established in order to help in the
administration of unemployment measures and in order to
give the general public an opportunity of controlling the
various schemes. The first were known as Advisory
Trade Committees, and consisted of an equal number of

INSURANCE AGAINST UNEMPLOYMENT 197

representatives of employers and workmen, appointed by
the Board of Trade after consultation with bodies of
persons affected. The need for effective local committees,
for the normal work of the exchanges, and especially
during the period of demobilization, led to the establish-
ment of a system of local employment committees of which
there are 302. The second are known as Juvenile Advisory
Committees, and are appointed for the purpose of advising
the exchanges, especially as regards juvenile employment.
The third are known as Courts of Referees. They consist
of equal numbers of employers and employees, and have,
as we shall see later, as their chief function the consideration
of appeals from the decision of the insurance officers who
administer the Unemployment Fund.*

The successful working of the different schemes for
grappling with unemployment problems has been due
in large measure to the wide interest created in them
through these committees, representative of all the parties
interested. It is evident also that the Government
recognizes the right and advisability of having trade
unions help in the administration of schemes in which
they have a special interest.

One important subject reserved to them is the question
of granting accommodation in employment exchanges to
outside bodies. Trade unions have made applications to
hold their meetings at the exchanges, and " in the large
majority of cases the committees have agreed to the use of
the exchanges for this purpose, provided that the work of the
exchange and the accommodation therein allow of it." f
When it is recalled that many unions for want of better
accommodation used to meet in beer-houses, and that many
unions contain young women members, it is clear that a
great social good has been accomplished. The committees
have also advised the Ministry of Labour to what extent

* The Statutory War Pensions Committee and the Central Joint Com-
mittee of the Liverpool Dock Scheme also have representatives of
labourers and of employers.

t By September 1913, 500 branches of associations had availed them-
selves of the permission to use the rooms of the exchanges for their even-
ing meetings. A nominal fee only of is. per meeting is charged. To-day
about 1,500 branches of unions meet in employment exchange offices.

198 INSURANCE AGAINST UNEMPLOYMENT

it should encourage the movement of labour from one
district to another, and as to the possibility and best methods
of developing the use of employment exchanges in connec-
tion with casual employment. They have, moreover, given
help in linking up the exchange system with the smaller
towns and with the agricultural districts. In this con-
nection use has been made of the post office and a system
of travelling clerks. Before long it is anticipated that there
will be an agency within reach of every remote village.*

The war has resulted in increasing the number of joint
committees of employers and trade unions in Great
Britain. Let us note the functions of one such committee
appointed by the Statutory War Pensions Committee
in every locality, town and country. It will supplement
the separation allowances and inadequate pensions granted
by other bodies, and look after the medical care, industrial
training, and wage-earning employment of disabled officers
and men, and the education and training of soldiers' widows
and orphans. Disabled soldiers cannot be expected to
gain the standard rate, nor on the other hand would it
be wise to permit unscrupulous employers to exploit
their partial disability. These local committees determine
the rate of wages at which they shall be encouraged or
assisted to accept industrial employment.

It is interesting to note the contrast in treatment of the
unemployed workmen to-day with what it was in the days
of the " Distress Committees." One observant student
writes :

All over the country a new class of worker is being evolved —
a paid Government official who is deeply interested in the steady
stream of unemployed who come into the exchanges, and one who
in most cases is full of sympathy for them. In many exchanges
the men are always addressed as " sir " as they come in, weary
and discouraged, to report their need of work, or to claim the
unemployed insurance benefit, f

* It is important to note also that Local Employment Committees
toegther with certain employment exchanges have been instrumental in
starting new industries and factories, and housing and port development
schemes. Cmd. 1140. Appendix II.

t " The Humanity of Labour Exchanges/' by Constance Spender,
Contemporary Review, May 1914.

INSURANCE AGAINST UNEMPLOYMENT 199

Municipalities and other large employers of labour are
learning to take advantage of the facilities offered by
employment exchanges. Large towns like Birmingham are
engaging all the casual labour needed for the corporation
through the exchanges.*

Advertising for workmen in newspapers, or by signs
on factory gates, and " picking up " jobs are, however,
still very common, but at last a " labour market " is
beginning to have a meaning and functions not unlike
those of the cotton market' the grain market, and the stock
market. | The organization of a national system of employ-
ment exchanges has been so successful that a proposal is
now on foot to establish an Imperial Immigration Bureau
and Imperial Employment Exchanges, whose control should
be shared -bet ween the British and Dominion authorities. J

In urging the establishment of a system of employment
exchanges its advocates have pointed to the three main
functions that it would fill.

First : It would help to place the unemployed work-
man in the vacant job with the greatest speed.

Second : It could be so managed as to help in the
decasualization of labour.

Third : It was the necessary substructure for a
plan of unemployment insurance.

We have considered the first two functions and seen
that the claim was thoroughly justified, and now we can
turn to the relation of employment exchanges to
unemployment insurance.

* The employment exchange has been of greatest service to the small
employer, who did not have men waiting round his premises as many big
firms had. In answer to the opposition of such employers to paying
their share towards the insurance of workmen against unemployment, it
was frequently advisable to remind them of the services thus rendered
them by the State.

f The writer is indebted for some very valuable information dealing
with the administration of the British scheme of unemployment insurance
to an unpublished memorandum on the subject, written by Olga Halsey
of Wellesley College.

J The New Statesman, February 3, 1917. Meanwhile, be it noted
here, that the United States limps behind England in the matter of
exchanges. Many States are still without them. In the others there is
no co-ordinated system for the whole of the State.

OUTLINES

CHAPTER XIV

OF THE BRITISH UNEMPLOYMENT
INSURANCE SCHEME

IT is evident from the outlines of the history of the treat-
ment of unemployment in Great Britain that the Govern-
ment was willing, and that the country was anxious, in 1912,
to attempt some bold measure for grappling with it. It
soon became evident that the most effective step that the
Government was then in a position to take was to establish
some system of insurance against the loss of \vages caused
by unemployment. All the other measures that had been
suggested would achieve their object only after years of
planning and organizing, whilst the effects of insurance
could soon be realized.

Two courses lay open to the Government. It might
encourage the voluntary organization of schemes of
unemployment insurance,* or it might introduce an
obligatory scheme, and though most of the experts advised
it to take the more cautious step by introducing the former,
i.e. the Ghent plan, the Government decided to take the
initiative in putting through the bolder measure, llms
whilst Great Britain now joined the other countries in
actively supporting collective provision against unem-
ployment, it broke away from the policy prevalent in
them.

The Ghent system, as we have seen, had been instituted
in Ghent in 1901, and within seven years was adopted by
all the other towns in Belgium. It was imitated by France

* This policy was suggested by the Commission on the Poor Law and
by such authorities as Sidney and Beatrice Webb, Professors Hobhouse
and W. J. Ashley, D. F. Schloss, I. G. Gibbon, and Cyril Jackson.

INSURANCE AGAINST UNEMPLOYMENT 201

in 1905 ; instituted at St. Gall in Switzerland in 1905 ;
at Strassburg in Germany in 1906 ; in Norway in 1906, and
in Denmark in 1907. In Italy it had been applied by the
Societa Umanitaria of Milan in 1905. But there were
obvious limitations to the Ghent system no less than to
its alternative, " a national system of insurance of a
compulsory .character.

After all, unemployment insurance could not avoid its
Scylla and Charybdis. Either there must evolve a com-
prehensive scheme which would give insurance during
involuntary unemployment to the large mass of workers—
and that way, it was urged, lay compulsion ; or there must
evolve a necessarily slow and inadequate means of saving,
establishment insurance,, "or trade union out-of-work
insurance — and that way lay years of half-measures quite
inadequate to stem the flood of distress. The British
Unemployment Insurance Act. was therefore made to
embody the former principle.

/ Fully to appreciate the boldness of introducing the
VBritish scheme of unemployment insurance in 1911 it is
necessary to recall certain facts : that all the then existing
successful schemes were on a voluntary basis, whilst this
was the first compulsory scheme, national in scope ; the
schemes of Belgium, Holland, France, Germany, Norway all
put together included perhaps only 300,000 people, whilst
this scheme included 2,500,000 people ; that in Great Britain
there had previously been no public encouragement of
unemployment insurance at all ; that there was not yet
developed an adequate machinery whereby the scheme
could be administered and that there was not even a body
of satisfactory statistics for estimating the costs of the
project. Moreover, the real difficulties of unemployment
were not shirked by this scheme. The trades chosen were
those with a high percentage of unemployment, and the
period during which benefits might be paid was longer
than the average period of unemployment suffered by most
workmen in the selected trades. Yet, withal, the English
scheme was cautious and essentially experimental. It was
to be tried only with a few trades. The benefits were to be

202 INSURANCE AGAINST UNEMPLOYMENT

small, the fund was to be protected from the inefficient
by strictly limiting the period during which they might
claim benefit. Above all, the machinery for establishing
whether or not any claimant was unemployed — the very
core of the difficulty in a scheme of insurance — had been
initiated.

Why, it might well be asked, did the British Government,
with its traditional conservatism, undertake such a scheme ?
Why did it venture on such a proposal in the face of the
advice of its leading experts ? Unemployment was not
more rife, nor was the need greater than it had been for
decades. The answer lies rather in the growth of a
sense of public responsibility towards social problems and
in the conviction that the proper machinery for dealing
with unemployment had at last been invented and per-
fected. The possibilities of the employment exchange
having been satisfactorily demonstrated, unemployment
insurance on a national scale at last become possible. This
fact explains also the cause of the " cataclysmic " intro-
duction of the scheme of unemployment insurance.

After four years' experience with the scheme, embod3dng
seven trades, a temporary scheme insuring certain classes
of munition workers was passed in 1916. Under the Act
of 1920 practically the whole industrial population, with
the exception of workpeople employed in agriculture and
private domestic service, were brought within the scope of
compulsory insurance.

Outlines ol the British Scheme.

The National Insurance Act (of which Part II dealing with
Unemployment Insurance will be referred to as the Unem-
ployment Insurance Act) was passed by Parliament on
December 16, 1911, and came into force on July 15, 1912 ;
but benefits under it did not fall due until six months later.

It aimed at two distinct objects : the provision of
compulsory insurance in seven selected trades and the
encouragement by means of governmental subsidies of
voluntary insurance through' associations in all trades.

INSURANCE AGAINST UNEMPLOYMENT 203

In its desire to guarantee that as many labourers as possible
will be insured against unemployment, the Government
embodied two distinct proposals, whose underlying prin-
ciples were different, into one Act.

A temporary scheme was established by the National
Insurance (Part II) Munition Workers Act, 1916. This
Act did not substantially differ from the permanent scheme
excepting that its duration was limited to three years
from the end of the war. The Act of 1920 also follows
generally the lines of the previous Unemployment
Insurance Acts.

Selected Trades.

All the workmen in seven selected industries were
obliged to insure against unemployment under the 1911
Act. These trades were building, construction of works,
shipbuilding, engineering, construction of vehicles, iron-
founding and sawmilling. Altogether, some two and a
half million men and women representing one-sixth of
the adults then engaged in industrial occupations, were
covered by the Act.

" Workman " is denned as " any person of the age of
sixteen or upwards employed wholly or mainly by manual
labour, who has entered into or works under a contract
of service with an employer, whether the contract is ex-
pressed or implied, is oral or in writing." The term is
thus seen to have the very widest connotation. It includes
men and women, seniors and minors.

Trades outside the building and engineering trades
had the " liberty to apply," and if they made out their
case and were prepared to make their contribution it was
possible to include them in the scheme.

In outlining this scheme before the House of Commons
Mr. Churchill asked :

To what trades ought we as a beginning to apply our system
of compulsory contributory unemployment insurance ? There is
a group of trades well marked out for this class of treatment.
They are trades in which unemployment is not only high, but
chronic, for even in the best of times it persists ; where it is not

204 INSURANCE AGAINST UNEMPLOYMENT

only high and chronic, but marked by seasonal and cyclical
fluctuations, and whenever and howsoever it occurs it takes the
form not of short time or of any of those devices for spreading
wages and equalizing or averaging risks, but of a total, absolute,
periodical discharge of a certain proportion of the workers. These
are the trades to which, in the first instance, we think the system
of unemployment insurance ought to be applied.*

The building and engineering trades were thus chosen
at the outset because of the great fluctuations of employ-
ment which characterize them, and, to a lesser extent,
because, whilst the data concerning the amount of
unemployment were inadequate, there was a greater
amount of information for them than for most other
trades.f

Wide powers were granted to the Department in deciding
which trades and occupations were to be included. It
had power to exclude subsidiary occupations, now covered
by the scheme, and to exempt those persons who suffer
very little unemployment. Moreover, with the consent
of the Treasury, but without recourse to Parliament, the
BoaH "of Trade, which then administered the scheme,
might extend the Act to other trades.

The temporary scheme included workpeople employed
on munition work, and workpeople employed in the manu-
facture of (i) ammunition, fireworks, explosives ; (2)
chemicals, oils, soap, candles, etc. ; (3) metals and repair
of metal goods ; (4) rubber and goods made therefrom ;

(5) leather and leather goods (excluding boots and shoes ) ;

(6) bricks, cement and building materials ; (7) sawmilling

* Part I of the National Insurance Act deals with the insurance against
sickness and disablement, and Part II contains a scheme of insurance
against unemployment.

The two evils of sickness and unemployment are in actual life most
frequently inseparable. Unemployment, owing to the lack of necessary
sustenance, is frequently the forerunner of sickness, and sickness almost
invariably results in unemployment.

f The proportion of unionists to non-unionists was one in five in the
selected trades. For the country as a whole it was two in seven. It
has also been estimated that half of the men in the selected trades earned
less than twenty-five shillings a week, a fact quite sufficient to show
that there was no warrant for the view that the trades selected were the
most highly paid for the country as a whole.

INSURANCE AGAINST UNEMPLOYMENT 205

and machine woodwork (other than under the Act of
1911). About 1,500,000 were insured under this Act.
In addition 1,500,000 workpeople were insured by trade
unions in trades not covered by the above Acts, and
therefore, in 1916, unemployment insurance covered about
4,500,000 people.

The 1920 Scheme.

But in 1920 all parties in the State, as well as practically
all employers and employees were ready for a national
scheme covering the whole of the industrial population.
The Act passed in that year provides that all persons of
the age of sixteen and upwards who are employed under
a contract of service of apprenticeship will be compulsorily
insured against unemployment save persons engaged in
excepted employments. Persons employed in agricultural
work, including horticulture and forestry, are excepted
from the scheme,* as well as private domestic servants,
outworkers, Government and public corporation employees
who are employed continuously, and agents paid by com-
mission or fees or a share in the profit. Under the Act
of 1920 about twelve and a quarter million people were
compulsorily insured. The Minister of Labour may
extend the scheme to any of the excepted employments
by issuing an Order to that effect.

ESTIMATED NUMBER OF WORKPEOPLE INSURED AGAINST
UNEMPLOYMENT UNDER THE ACTS OF 1911 AND 1916.

Date.

Act of 1911.

Act of 1916.

Act of 1921.

July 1914

2,325,598

1915

2,077,725

—

1916

2,029,222

—

1917

2,292,292

1,339,971

—

1918

2,504,851

1,417,027

—

1919

2,615,580

1,075,158

—

1920

2,981,876

1,215,142

—

1921

*" ~""

About 12,250,000

* See Appendix II.

206 INSURANCE AGAINST UNEMPLOYMENT

The State contributes annually, from money granted
by Parliament, an amount equal to about one-third of
the total contributions of employers and workmen. The
contributions from employers, the workmen, and the State
together form the Unemployment Fund from which
benefits are paid. This fund is controlled and managed
by the Ministry of Labour.

Contributions.

f Contributions are levied at a uniform rate for all
( workmen. There is an obvious objection to having the
payment of equal contributions by people subject to
different risks. The amount of unemployment varies
with the occupation, the age, and probably with the
wage of workmen. It might well be contended that a
uniform rate which ignores these variations is therefore
unfair. It was actually planned at first to meet this'
variation through differences in the rate of benefits,* but
the lack of adequate statistical data made this difficult.
Mr. Thomas Ackland, the Government Actuary, said :

No data are available which would enable the rate of unemploy-
ment to be deduced on what might be considered an actuarial
basis, and (apart from the desirability) it is not possible at present
to attempt any differentiation of the rates of contribution or of
benefits in respect of (a) the ages, (b) the occupations, and (c) the
rate of wages of the workmen engaged.

It will be seen, however, that there are plain indications,
from such data as are available, that the rate of unem-
ployment in different trades, and in different branches
of the insured and other trades, does, in fact, vary materially
both as to incidence and as to duration. Women and
boys and girls under eighteen pay a different rate of
contributions from men.
I Contributions of employers and workers are paid in

* It was proposed that seven shillings a week be the benefit for those
engaged in engineering, shipbuilding, and in the construction of works,
and six shillings a week for those employed in building

INSURANCE AGAINST UNEMPLOYMENT 207

the first instance by the employers, who are required to
purchase and affix to the workmen's " unemployment
books " unemployment insurance stamps to the value
of the joint contributions of employer and workman.
After having fixed the stamps the employer may deduct
from the workman's wages one-half of the value of such
stamps, but any employer who deducts his own share of
the joint contribution from the workman's wages is liable
to prosecution. No contributions are required while the )
workman is out of work.

The unemployment insurance stamps are obtainable
at post offices. Unemployment insurance books can
be obtained from empk^ment exchanges or other local
offices of the unemployment fund. No employer may
employ a workman in one of the insured trades who does
not have one.

The adoption of this method of collecting the contri-
butions not only saves time, but also dispenses with the
need of an army of agents, or of some alternative
agency which would otherwise be necessary to collect
the contributions of over twelve and a half million
members.

An employer or workman who fails to pay any of his
contributions or refuses to comply with the Act or regula-
tions thereunder is liable for each offence to a fine of £25,
and in addition, where the offence is failure to pay any
contribution he is liable to the unemployment fund for
the amount he has refused to pay.

Since July 4, 1921, the weekly rates of contributions
have been :

Employer.

Employed.

State.

Men

8d.

7d.

3fd.

Women

7d.

6d.

Sid.

Beys

4d.

Sid.

lid.

Girls

3id.

3d.

ifd.

208 INSURANCE AGAINST UNEMPLOYMENT

Benefits.

From March 3, 1921, the weekly rate of unemployment
benefit has been :

Men 153.

Women.. .. .. .. .. .. 123.

Boys (between the ages of 16 and 18) . . 53.

Girls (between the ages of 16 and 18) . . 43.

The maximum periods of benefit that may be drawn
are as follows : —

Weeks.

Between March 3, 1921, and November 2, 1921 (first "special

period ") . . . . . . . . . . . . . . . . 16

Between November 3, 1921, and July 2, 1922 (second " special

period").. .. .. .. ... .. .. 16 j

Thereafter, in each insurance year . . . . . . . . (2|y x

The principal preliminary qualification for benefit in
the period up to July 2, 1922, was the furnishing of
proof of employment in insurable work in at least twenty
weeks since December 31, 1919, and of proof that the
applicant was normally in insurable employment, was
genuinely seeking whole-time employment, and was unable
to obtain it.

The uniform rate of benefit in the 1912 scheme was
73. a week for not more than fifteen weeks in any year,
nor in greater proportion than one week's benefit for
every five weeks' contributions. The benefits under the
1920 Act are 153. a week.

In the case of workmen under eighteen, who pay at
reduced rates, the benefit is half that of the adult work-
man, but no benefit at all is paid to persons below the
age of seventeen.

Benefit is not paid during the first three days of unem-
ployment. Where, however, unemployment occurs again
within six weeks of this " waiting period " of three days'
unemployment for which benefit is not paid, the applicant
does not need to wait again before drawing benefits.

* For scale of benefits, see Appendix III.

INSURANCE AGAINST UNEMPLOYMENT 209

Some such limitation of benefits to a definite period
characterizes, as we have already seen, nearly all schemes
of unemployment insurance.

Whilst this provision will not be felt by men who work
steadily as a rule, and make large claims on the fund only
in times of exceptional trade depression,* it will have the
very salutary effect of excluding from benefit men who
are incompetent or idle and who would therefore be tempted
frequently to fall back upon it for support.

The following statutory conditions for the receipt of
unemployment benefits are imposed : —

(1) The workman claiming benefit must prove that

be has paid not less than twelve contributions
under the Act.f

(2) He must make an application for benefit in the

prescribed manner.

(3) He must prove that since the date of the application

he has been contimtously unemployed.

(4) He must prove that he is capable of work but

unable to obtaifi suitable employment.

(5) He shall not have exhausted his right to unemploy-

ment benefit.

Even though a workman has fulfilled the requirements
of the statutory conditions, a workman is disqualified
for benefit :

(a) If he has lost employment by reason of a stoppage
of work which was due to a trade dispute at the
factory, workshop, or other premises at which
he was employed — for so long as the stoppage
continues or till he gets work again elsewhere
in an insured trade. J

* See Appendix IV.

t At the outset the requirement was that each claimant prove that he
was employed as a workman in an insured trade in each of not less than
twenty-six separate calendar weeks in the preceding five years. This
provision was so difficult of enforcement that it was changed to
proof of gainful employment for a given period in one year.

J Unemployment directly due to a strike or a lock-out is excluded.
Thus it is clear that where a strike or a lock-out of one craft results in

210 INSURANCE AGAINST UNEMPLOYMENT

(b) If he has lost employment through misconduct, or

has voluntarily left employment without just
cause — for six weeks from the date of so losing
employment.

or other institution supported out of the public
funds, or while receiving sickness or disablement
benefits under the Government's Health Insurance
Scheme.

Workmen in receipt of compensation for accidents or
of old age pensions, if insured, are not debarred from
claiming benefit.

The condition that the unemployed workman must
make application for benefit in the prescribed manner is
the very core of the scheme. He is obliged to register at
the employment exchange the fact of his unemployment.
The exchange is in a position to know or discover whether
his unemployment is due to lack of work in the establish-
ment in which he has been engaged. It is able to find
him work at his own employment in other establishments
in the district, if vacancies exist. It might even help him to
obtain employment in some other part of* the country,
frhe employment exchange thus controls the payment of
/.benefit. It affords the test necessary for benefit. The
unemployed workman when he presents himself to the
exchange may thus be offered either employment or un-
employment benefit. It is unfortunately too often assumed
that the employment exchanges only distribute benefits
and that this work can be undertaken by local authorities,
by the Post Office, or by " approved societies other than
trade unions." This idea is entirely erroneous. If the
exchanges did only distribute benefits, then indeed any
paying agency could easily carry through this task.

But their main function is to decide first whether the

the throwing out of employment other crafts in the same works no State
benefit is due. On the other hand, if a dispute in one industry (for in-
stance, coal mining) throws workers in a quite distinct industry (say
engineering) out of employment, it is clear that the latter are entitled to
State benefit. Naturally there are many doubtful marginal cases.

INSURANCE AGAINST UNEMPLOYMENT 211

workman is really unemployed through no fault of his own
and whether he is unable to obtain suitable employment.
To be able to decide these questions a national system
of employment exchanges is indispensable.*

Elasticity of Scheme.

As with all other schemes of insurance whether against
fire, accident or sickness, care must be taken to guarantee
the solvency of the fund, i.e. arrangements must be
made whereby a proper balance between the income
received and the benefits granted can be provided for and
that the benefits will be as large as the contributions will
pay for, and yet will not be larger than the contributions
will warrant.

Special provisions are therefore introduced into the
scheme with a view to making it elastic.

The rates of contribution may be revised, but the equality
of contributions between workman and employer, it is
provided, must remain, and the rate of contribution for
each party may not be increased by more than id. a
week. In addition, the Treasury may direct the Ministry
of Labour, when the Unemployment Fund is insolvent,
to reduce the benefits. Provision is made for temporary
advances to the Unemployment Fund by the Treasury.

Owing to variations in the fluctuations of business and
trades from decade to decade some such provisions would
seem to be an essential part of all obligatory unemployment
insurance measures. These are certainly necessary where
actuarial calculations are based on incomplete statistical
data, as was the case with the British scheme.

Prevention ol Unemployment, f

Devices were introduced into the 1911 scheme which
aimed at the reduction of the amount of unemployment.

* The Ministry of Labour is satisfied that " the available evidence
tends to show that the various checks and conditions, except in isolated
cases, were sufficient to prevent malingering."

f It has been suggested that in the same way as insurance against
sickness is known as Health Insurance so insurance against unemploy-
ment should be known as Employment Insurance. Direction would
thus be drawn to the preventive object of the measure.

212 INSURANCE AGAINST UNEMPLOYMENT

It was hoped that the general principle of the Act requiring
a contribution from the employer and workman would
tend to direct their efforts more than in the past towards
reducing unemployment. More specific were the two
interesting provisions which affected workmen suffering
little unemployment and the employers who reduced the
amount of unemployment in their own establishments.

If a workman attained the age of sixty years, and
if contributions were paid into the unemployment fund
in respect of him for not less than 500 weeks, he was
entitled to receive from the unemployment fund the
sum which had been paid into the fund as contri-
butions from him, less the amount which he had
withdrawn in unemployment benefit, with compound
interest at 2,\ per cent. This concession was of sig-
nificance to the workman who did not suffer much
unemployment, and was used as a compensation to
him for his being thrown together with the less regularly
employed workmen as far as benefits and dues were
concerned.

The employer was encouraged to meet periods of slack
trade by the method of short time for all rather than by
dismissing men. Provision was made in the scheme for
a refund to employers who make such socially desirable
arrangements. This provision did not affect the policy
of employers very much, so that it was not inserted in
the revised Act of 1920.

Other devices in the scheme aimed at the decasualization
of labour and at the proper training and technical instruc-
tion of inefficient workmen. These will be considered
later.

Administration through the Employment Exchanges.

The Unemployment Insurance Act is administered
quite distinctly and apart from Part I of the National
Insurance Act dealing with Health Insurance.

Unemployment Insurance is administered for the whole
of the United Kingdom by the Board of Trade, through a

INSURANCE AGAINST UNEMPLOYMENT 213

single department, combining the control of Employment
Exchanges and of Unemployment Insurance, and is
managed irony a single Central Office in London. The staff
forms a single service for both purposes. For administra-
tive convenience, the United Kingdom is divided into nine
divisions. The offices used are of three kinds, viz. Central,
Divisional, and Local. There is one Central Office in
London. There are nine Divisional Offices, one in each
of the divisions into which the country is divided. These
divisional offices act as centres for and correlate the work
of the employment exchanges and local agencies for the
areas which they cover.

The officer in charge of claims at the exchange or the
local office is known as the " Insurance Officer." In the
case of a direct claim to benefit he decides whether
the claimant satisfies the statutory requirements. In any
case where the benefit is refused or stopped, the workman
has the right of appeal to a Court of Referees, consisting
of an equal number of employers and workmen and of an
impartial chairman appointed by the Ministry of Labour.

The Court of Referees is appointed from panels of re-
presentatives of employers and employees. The names
of employers' representatives are placed on the panel by
the Ministry of Labour after consultation with the
employers' Associations. The names of employees'
representatives are placed on the panel as the result of
elections held by workmen in the insured trades.

In all cases where the insurance officer and the Court
of Referees agree the decision of the court is final. In
cases of disagreement the insurance officer has the right
of appealing to an umpire, who is appointed by the Crown,
and who is not an official of the Employment Department
of the Ministry of Labour.

The Umpire is one of the most important officers in
the administration of the scheme. Test cases are brought
before him, disputes are settled by him, and it is he who
must, by his decisions, provide that the same interpretation
of the law will be current all over the country. He has
also the very delicate task of deciding questions which

214 INSURANCE AGAINST UNEMPLOYMENT

arise between the Ministry of Labour and the unions
claiming refunds or benefits under the Act.

The unemployed workman must claim his benefit at the
local office or exchange. On registering the fact that he
is out of work, his name is at once put on the register of
those looking for work. He must then sign a " vacant
card " at the exchange each day during working hours.
In this way, it is intended, workmen will be unable to
claim benefits whilst actually at work. At the same time
if a vacancy in his trade occurs he can be directed to it
when he calls to sign.

In the case of the unemployed member who is a member
of a union he will sign the union vacant book, which may
be kept at the exchange or in the union office. Or, in
the case of the workman who is travelling in search of
work he may be given a vacant ticket which he carries
with him and it may be stamped at any exchange in the
city. In case he lives more than three -miles from an
exchange or local office, he need come only on alternate
days to sign the vacant book, or less often. In some
cases he is even allowed to send a certificate by post in
order to show that he is still unemployed.

No benefit is paid during the first few days of unem-
ployment, but the workman must prove his bona fides
through one of the methods of signing. If the workman
neglects to sign as soon as he becomes unemployed, he
must wait three days for benefit from the day that he
does sign.

As soon as the claim is received, the local office sends a
form to the last employer asking him to report if the loss
of employment is due to any circumstances that would
disqualify the claimant for benefit. When no such
disqualification is reported, payment is authorized through
the local exchange where the claim was first made. When
the worker is a union member, and proper arrangements
have been entered into by which the union pays its members,
the local exchange authorizes the union to pay on its
behalf the amount that would have been paid if the
claim had been a direct one.

INSURANCE AGAINST UNEMPLOYMENT 215

If, however, the employer reports that loss of employ-
ment was due to some circumstance that would disqualify
him for benefit, or the insurance officer is satisfied that
the claimant has no title to benefit under the provisions
of the Act, the workman has the right to appeal to the
Court of Referees against their decision.

Each workman is required to obtain an unemployment
book from the exchange. This book is left with the
employer during his engagement and is returned to the
employee when he leaves for another position.

The responsibility for the payment of the contributions
of the employee and employer rest with the latter. He
is empowered to deduct a certain sum per week from the
employee's wage and is required to affix special unemploy-
ment insurance stamps representing the joint value of
his own and the workman's contribution to an unemploy-
ment book handed to him by the workman.* It is illegal
for the employer to recover his share of the joint contri-
bution from his employee. It is the function of the Minis-
try of Labour to institute proceedings' against employers
and employees who seek to avoid their dues and against
those who would take illegal advantage of the benefits.
It is its function also to administer the unemployment
fund, and for this purpose is allowed a sum not exceeding
one-tenth of the total receipts of the fund.

Co-operation with Trade Unions.

One of the most important features of the compulsory
part of the scheme is the recognition of the value and
expediency of encouraging and co-operating with the trade
unions.

* But under Sections 101-2, if the workman knowingly allows his
employer to avoid the payment, provided the payment is not actually
made, the workman is ultimately liable. (From Garnet and Taylor.)

This question of ultimate responsibility for payments of dues is of
the very essence of the Act. The decision of the Cour de Cassation,
removing the responsibility from the French employer, has been an im-
portant element in the failure of the French system for compulsory old
age insurance. Where the employer is not legally responsible, it is diffi-
cult for him to demand the necessary reduction in the weekly wage for
the payment of the workmen's contribution.

216 INSURANCE AGAINST UNEMPLOYMENT

The Act provides that any union paying out-of-work
benefits to its members, who are workmen in an insured
trade, may make an arrangement with the Ministry of
Labour to enable it to pay benefits and receive a repay-
ment from the State of three-quarters of the amount which
it expends. In order to regain the full State benefit of say
2os. per week, the union is forced, in this way, to pay a
weekly benefit of at least 263. 8d. The Ministry of
Labour, of course, reserves to itself the right to deter-
mine whether any claimant is qualified for benefit
The same qualifications and conditions apply to union
and non-union workmen. Only those claims for refunds
to unions are honoured which would have been met
had the workman claimed directly through a local office
or exchange.

Voluntary Unemployment Insurance.

It is convenient here to treat of the encouragement
to schemes of voluntary insurance offered by the 1911 Act

All " associations not trading for profit/' whether or
not their members were engaged in an insured trade,
might claim a repayment of one-sixth of the out-of-work
benefits which they paid. This refund was paid only in
respect of benefits up to I2s. a week ; i.e. the maximum
amount which might be claimed under this head was 2s.
a week, even though the union paid a benefit exceeding
this amount.*

It is manifest that this subsidy to union out-of-work
benefits was smaller than was usually provided under the
various types of the Ghent plan. But it is necessary
to grasp the fact that this I2S. might already have included
73. of State subsidy provided under the other sections of
the Act.f

This refund was paid from special moneys voted by
Parliament, and did not come from the Unemployment
Fund mentioned above. It was a subsidy to unions volun-

* The Amending Bill, 1914, raised the limit to 173. a week. (National
Insurance (Part II, Amendment) Act, 1914, ss. 146.)
f White Paper, No. 192, p. 3.

INSURANCE AGAINST UNEMPLOYMENT 217

tarily paying out-of-work benefit, and therefore differed
from the repayment to unions of workmen who were
compulsorily insured under the Act.

As an emergency war measure this refund to trade unions
was practically withdrawn. Nor is it included in the
1920 scheme of unemployment insurance, since almost all
organized workpeople are insured under it.

CHAPTER XV
THE PRINCIPLE OF COMPULSION

HAVING briefly outlined the main features of the British
schemes of unemployment insurance, we may now attempt
an analysis of the scheme and a discussion in greater detail
of the principles underlying it and the aims of its promoters.
The next five sections are therefore devoted to a discussion
of the " Principle of Compulsion/' " The Scope of Unem-
ployment Insurance," " Contributions and Benefits/'
' The Influence of Unemployment Insurance on Trade
Unions/' and " Unemployment Insurance as a Device
for Reducing Unemployment/'

The last two sections are devoted to a discussion of
the " Scheme at Work " and " Next Steps in Unemploy-
ment Insurance."

A Large Number are Insured by Means of a Compulsory

Scheme.

The Compulsory Principle. — The British Government
was driven rather than chose to introduce insurance
against unemployment on a large scale. ' To have sub-
sidized existing voluntary unemployment insurance schemes
in 1912 would have meant influencing only about one
million workmen. Even then, it is instructive to note
that three times as many would have enjoyed such a State
subsidy from the outset as were enjoying State, provincial,
or city subsidies in all the other countries of Europe put
together, for in Norway, Denmark, Luxemburg, France,
Holland, Belgium, Switzerland, Italy, and Germany there
were only about 350,000 workmen enjoying public subsidies
in 1913. But unless some such compulsory plan were

218

INSURANCE AGAINST UNEMPLOYMENT 219

introduced about seven-eighths of the working people in
the trades chosen for insurance would have remained
without protection.

Great Britain was in a mood to undertake a bolder
scheme.* It was prepared to take a leap in the dark.
A new plan of insurance covering a considerable proportion
of all employees in the country was devised by the
Government and enacted. | All the workers in seven
selected trades were obliged to insure against unemploy-
ment.

The Case for Compulsory Insurance.

The British system did not, however, make other
forms of provision against unemployment superfluous,
even for those who were included in the scheme, since it
hardly provided for their necessities ; it did not therefore
remove the motive for organizing trade union insurance,
nor for investing in extra provision through savings.
In fact, a special effort was made under the Act to en-
courage trade union out-of-work insurance by offering
a governmental subsidy of one-sixth of the trade union
benefit to unemployed members so insured.

The Ghent scheme, or, to be more accurate, the principle
of subsidies to trade unions, was in this way adopted in
that part of the_ scheme concerned with voluntary insur-
ance ; but as the sole contribution to the great problem
of unemployment it was regarded as wholly inadequate.

This characteristic British method of embodying two
principles in one scheme had the effect of increasing
the number of those directly benefited by the Government

* Speaking of the Health and Unemployment Insurance Act, the
Rt. Hon. T. J. Macnamara said : " It is far and away the greatest scheme
of State intervention into the condition of the people ever attempted in
this country — probably greater than any essayed in any other." " It is
startling in its compulsion, sweeping in its inclusion, perplexing in its
intricacy, disturbing in its novelty."- — Liberal Pamphlets, London, 1913.

f It was of course true that the introduction of Government subsidies
would have encouraged trade unions to extend their activities along the
line of unemployment insurance. But as we have already seen, only in
one or two countries have such subsidies resulted in increasing the numbers
so insured by more than 20 per cent.

220 INSURANCE AGAINST UNEMPLOYMENT

measure ; it included not only all the workmen in the insured
trades, but also increased the benefits of those who volun-
tarily came under it through their unions, and thus
indirectly helped the growth of their out-of-work benefit
feature.

Compulsory insurance applied in 1912 to about two
and a quarter million workpeople.

The " good times " during the war when unemployment
was scarce offered an excellent opportunity for extending
the British scheme and for accumulating large reserves
in the insurance fund. The neglect of the Government at
that time obliged it to insure over twelve million work-
people against unemployment towards the end of 1920,
just antecedent to a period of extreme and continuing
unemployment. It is noteworthy that not one significant
protest against the compulsory insurance of about nine
million additional employees was raised.

It was urged in 1912 that if a scheme of subsidizing
existing unemployment insurance funds were attempted,
then aid would be given only to those who had been most
able and willing to enter into their own organizations for
insurance against unemployment, and that the very
persons for whom provision was most necessary were
least able and willing to avail themselves of the oppor-
tunity of gaining the increased benefits due to the
State subsidy. Casual and poorly paid labourers, it was
pointed out, were not often found in trade unions providing
unemployment benefits.

There was in addition the consideration that individuals
with conscientious scruples against joining trade unions,
or at least the influential supporters of this class of
workmen, now as rare as the dodo, would have endeav-
oured to establish provident societies in which members
made provision by individual savings against unem-
ployment— a scheme working with very little success in
Ghent. Workmen joining such societies who had not
satisfied the union apprenticeship regulations or other
methods of guaranteeing their efficiency, would have con-
stituted, it would be safe to assume from the experience of

INSURANCE AGAINST UNEMPLOYMENT 221

other countries, a very bad risk. Those individuals who
insured voluntarily were likely, other things being equal,
to suffer most unemployment. Only by means of a com-
pulsory scheme could good and bad risks be netted and an
undue preponderance of the latter rendered impossible.

Professor Edward Fuster was therefore justified in
the view that

in spite of the admirable efforts of the organizers and propagandists
of the Ghent system, and in spite of the great experimental and
educative value of this endeavour, it was now beginning to be
affirmed on all sides that the unions considered only as organiza-
tions for recruiting insured members (with all reservations as to
their utility as agents for administrative purposes) did not bring
together all those menaced by unemployment, and above all those
who were most menaced.

In a word, there remained, in addition to those who might enjoy
subsidized voluntary insurance, an uninsurable residue, a con-
glomeration of improvidents, who were often the most menaced,
the most unhappy, the most dangerous from the point of view of
a sound social order and a good organization of the labour market.*

Another argument urged in favour of a compulsory
scheme of unemployment insurance was that the adminis-
trative costs might be kept lower than they would be in
a voluntary scheme. Contributions might be collected,
for instance, through employers, who could be held
responsible for the payments of all their workmen, whilst
employment exchanges were likely to be able to superintend
the scheme for the district more cheaply than the various
union offices of the different trades.

Again, by means of a system of compulsory insurance
the State could easily keep its finger on the pulse of industry,
at least on that part of it over which the scheme had effect.
For the first time it would gather complete unemployment
statistics. It would learn what percentage of unemploy-
ment there was among different wage groups and among
different age groups. And, in addition, it would be able
to gather information as to the effects of unemployment
insurance as well as of other measures on the possible

* Bulletin Trimestriel pour la Lutte Contre le Chdmage, p. 387, April-
June 1914.

222 INSURANCE AGAINST UNEMPLOYMENT

reduction of unemployment. It would certainly be
possible to discover what influence a period of unemploy-
ment had on those subject to it. Moreover, it was evident
that to organize the labour market, a pressing reform in
itself apart from all considerations of unemployment
insurance, it was necessary to institute a system of employ-
ment exchanges. Yet for this purpose alone the expendi-
ture on them would be too great. Unemployment
insurance was therefore both a cause and an effect of the
newly introduced employment exchange system. Incident-
ally, by administering unemployment insurance exchanges
were saved from their besetting sin. It had been feared
that " employment exchanges would relapse and fall
back into the purely distress machinery, not economic
machinery, if not associated with a scheme of unemploy-
ment insurance." *

Voluntary Insurance and Saving may Supplement Com-
pulsory Insurance.

Now, although it appears from this discussion that
there were many reasons to justify the decision to introduce
the principle of compulsion in a national scheme of in-
surance against unemployment, the British Government
encouraged, in addition, as we have seen, voluntary
insurance.

It is a characteristic of a compulsory scheme of unem-
ployment insurance that only a minimum of benefits
are provided and only a minimum of people are insured :
that is to say, numbers of people who do not fall into
the groups designated will still need voluntary organiza-

* See Winston Churchill's speech in the House of Commons. Hayes :
British Social Politics.

It is instructive to remember also that the British National Insurance
Act provided for a scheme of compulsory sickness insurance as well as
for unemployment insurance. The inclusion of both measures in one
Act of Parliament was not accidental. Not only are the principles
involved very similar, and not only do the arguments for both
largely overlap one another, but the administration of each is aided by
the existence of the other. They aid one another in overcoming the
greatest difficulty in the way .of schemes of social insurance — the
danger of malingering.

INSURANCE AGAINST UNEMPLOYMENT 223

tions, or will be obliged to make other provision for
insurance against unemployment, whilst even those who
do come under the scheme are not precluded from making
their own arrangements for supplementing their benefits
from other sources. Thus, in the British scheme, on
its inception, only a few trades were selected whose
members were to be insured against unemployment,
whilst the insurance benefit in 1912 was placed as low
as 73. per week for a maximum period of fifteen weeks
in any one year. In 1921, with the cost of living index
having reached 161 per cent, above that of 1914, the 153.
a week's benefit bought even less, and later 20s. a week's
benefit, not much more than the admittedly very low
benefit of 1913.

Objections to a Compulsory Scheme.

In the discussion of the first Bill for insuring certain
groups of workmen against unemployment two funda-
mental objections were raised. Their importance is rein-
forced by the fact that wherever as in Germany or in the
United States, a proposal for a compulsory scheme along
the lines of the British scheme has been made, it has always
been staved off by a reiteration of these arguments.

First, it was alleged that the statistics of unemployment
on which to base an actuarial calculation of the risk
of unemployment were insufficient, and consequently the
cost of any proposed scheme could not be foretold.

Second, it was urged that the Government ought not
to make it obligatory on people to insure on the ground
that it involved an infringement of individual liberty.

The former argument, whilst it has some little basis
in fact, has not proven to be very important. Most
industrial countries have certain official statistics on
unemployment which, whilst not entirely satisfactory,
are sufficient for an estimate of the percentage of unem-
ployment in most trades. Moreover, if this criticism
were entirely honest, the attempt would have been made
by those urging it to investigate the records of individual

224 INSURANCE AGAINST UNEMPLOYMENT

plants, and the machinery set up for collecting more ade-
quate statistics. This has not been done ; nor did they make
any serious attempt to calculate the margin of error in
the existing statistics. But, as a matter of fact, it is not
necessary that the figures should be absolutely exact. It is
even doubtful whether, if there were admittedly satisfac-
tory statistics for, say, the last twenty years, that any
estimate of unemployment for the coming decade based
upon them would give more than a working hypothesis.
It follows that every scheme of unemployment insurance
should therefore be elastic and arrangements provided
whereby contributions and benefits may be altered in
order to ensure the liquidation of the fund. It is because
some such arrangement will be necessary for schemes
of unemployment insurance, whether calculated on the
basis of very satisfactory or less satisfactory statistics,
that it is safe to say that Germany, France, and many
American States can introduce schemes, without danger
of their breaking down. Be that as it may, the not
altogether satisfactory British figures were used and
arrangements in the nature of a safety valve to provide
against miscalculations were embodied in the Govern-
ment's measure.

Perhaps the most important consideration in refutation
of this argument is the fact that the mere postponement
of a Bill of unemployment insurance would not result
in the collection of further information which would
make it more practicable later. Those who nevertheless
employ this argument land themselves in a vicious circle.
Since we have no satisfactory statistics, they say that
it is impossible to attempt any scheme. But until we
have some such scheme, it is safe to say that we shall
not have satisfactory statistics. The circle must be
broken somewhere.

The more serious and more significant objection to the
British scheme resulted from the necessity of compelling
workmen to insure against unemployment.* The strong

* The Labour Party of Great Britain, at its Annual Conference in Feb-
ruary 1911, discussed a resolution calling on the Parliamentary Labour

INSURANCE AGAINST UNEMPLOYMENT 225

opposition to compulsion of a small minority made its
acceptance by a majority ail the more important, and
indicated the more clearly a definite recognition of the
growing functions of the State.

The Conservative Party, the party in opposition during
the passing of the Bill, was divided on this issue. Thus
Mr. F. E. Smith,* now Lord Chancellor, speaking with
authority on behalf of the Opposition, said : " We were
told that there was something un-English in such a
proposal, that is, the proposal of compulsory contri-
bution. I was never convinced by that argument."
On the other hand, Lord R. Cecil was the repre-
sentative of the quickly dying remnant of the laissez-
faire school when he opposed it on thorough-going
individualistic grounds. He argued that " If you once
make the State a partner in private enterprise, it means
the absorption of that private enterprise by the State,"
and further that it would register the death warrant of
voluntary organizations.")"

The opposition to the Bill, based as it was on the ground
that it was dangerous to liberty and independence, and
that it would result in an increasing control of the State
over the lives of its citizens, raised a number of important
questions as to the relation of the individual to the State
and of the proper functions of the State. These are funda-
mental problems of statecraft, which each generation
and country must set itself and for which it must find its

representatives to have deleted all that part of the projected law on un-
employment insurance which was bureaucratic in character. This would
have necessitated the elimination of the major part of the scheme, i.e.
the part making it obligatory on employees in two large groups of in-
dustries to insure. The resolution was rejected by 167 votes to 19.

The views of Mr. Samuel Gompers, President of the American Federa-
tion of Labour, on compulsory insurance would therefore seem startling
to British Labour representatives. He said to the House Committee
on Labour, "As I live, upon the honour of a man, and realizing the re-
sponsibility of my words, I would rather help in the inauguration of a
revolution against compulsory insurance and the regulation than submit."
See also Hearings before the Committee on Labour, H. Res, No. 159.

* May 19, 1911, House of Commons. See also "National Insurance
and National Character," by J. E. G. de Montmorency, The Edinburgh
Review, July 1913.

f December 6, igri. See Haiisard.

226 INSURANCE AGAINST UNEMPLOYMENT

own answer. Always the quest is for the maximum
liberty of the individual and for the highest efficiency of the
State. At one time liberty will be sought in some form
of polity, at another time in emancipation from the
fetters of archaic regulations, and at yet another time in
an extension of the forms of governmental control.* We
shall see that the efficiency and the probity of Government
as well as the workman's wage-level are factors that need
to be taken into consideration.! Individuals will therefore
often be found whose views on a subject like compulsory
contributions will undergo great changes.

Mr. H. H. Asquith, the^Prime Minister, said on Decem-
ber 6, 1911.

As regards the principle of compulsory contribution for the
purposes which are contemplated under this Bill, I am not the
least ashamed to confess that I was a somewhat reluctant, although
I am now a completely convinced convert. I do not think that
there is any other way in which we can provide for the risks and
hazards of industrial life.

This confession of the then Prime Minister of Great
Britain is characteristic of the change in public opinion
which has left its impress on British social politics in
recent years.

This change of heart has been experienced by some^i^
the leading authorities in insurance. They see the weak-
ness of voluntary insurance in that the masses are not
reached by it, and are thus obliged to favour the compulsory
principle. Thus Mr. Dawson writes : J

The Congress at Rome will be memorable in the annals of working
men's insurance. One session in particular was dramatic in its

* The Underlying Principles of Modern Legislation, p. 40, Professor
W. Jethro Brown.

f Professor Maurice Bel lorn has been called by the Belgian Repre-
sentative, M. Troclet, " one of the last supporters of the principle of
voluntary insurance." Belgium, he pointed out, which had long ex-
perimented with voluntary schemes, had through the Belgian Parlia-
ment almost unanimously approved of compulsory insurance against
sickness, invalidity and old age, whilst its experience with voluntary
unemployment insurance was leading it to favour compulsion. See p. 422,
April-June 1914, International Bulletin for Unemployment.

J Frankel and Dawson : Working Men's Insurance in Europe, pp. 404,
405-

INSURANCE AGAINST UNEMPLOYMENT 227

intensity. In some respects it resembled an old-fashioned religious
revival meeting. Doughty campaigners like Luzzatti of Italy,
and Mabilleau, Millerand, and Paulet of France, who at previous
congresses had fought persistently for the principle of voluntary
insurance as applied to sickness, old age and invalidity, admitted
their conversion to the doctrine of compulsion or obligation.

The British Workman is not Opposed to Schemes of
Compulsory Insurance.

Since the early days of the factory system and the
growth and permeation of the idea of laissez-faire there
grew up a conviction in the minds of British statesmen
and publicists that the British working man would never
submit to compulsion. Germans, natives of a land where
conscription prevailed even in peace times and who sub-
mitted to an autocratic form of government, might adopt
compulsory social insurance, but Britons, it was said, would
never tolerate such an infringement of their inherent rights.
This view has proven quite unfounded. In fact, Mr.
L. G. Chiozza Money, wrote :

I suppose that it never occurred to many persons amongst
those leisured classes who in the past have had the entire monopoly
of the effective public expression of opinion that compulsion is
a common everyday matter to those who work for their living.
The great masses of our people labour under a degree of economic
compulsion so intense, so effective, and so inexorable, that it would
be^incredible if it were not an accomplished fact.*

Moreover, in addition to the compulsion of industrial
business life, the ordinary working man has long been
used to voluntary institutions as a member of which he
was bound to observe certain rules and practices. Trade
unions, friendly societies, and political organizations have
long claimed their millions of workers as members, and
the principle of compulsion to certain accepted rules and
regulations have" been laid down and complied with as a
matter of course. It is not therefore a cause for surprise to

* If there still remained any shadow of doubt on this matter, the intro-
duction of conscription and the huge development in Government regula-
tion and ownership during the war must have dispelled it.

228 INSURANCE AGAINST UNEMPLOYMENT

find that as soon as these same workers became conscious
of their political rights and elected their own representa-
tives to Parliament that they should submit to its decisions.
There is little difference to the average workman in
following the mandate of a Trade Union Congress or the Act
of a Parliament. This result has followed from the growth
of social legislation. The new attitude towards Government
measures is due to the fact that " there is stirring amongst
the masses of the people a new interest in politics and a new
faith in democratic government." * The keener and more
general interest in social politics, i.e. in problems that
affect the workman very intimately, the control of industry,
his conditions and hours of labour, his housing, his wages
and his health, has resulted in the workman regarding
Parliament as an institution which may help to lighten
his economic burdens. He can understand and in a
manner take part in its deliberations and feel that with
its help there is a means of rising superior to " the
majesty of the employer." Instead, therefore, of feeling
compelled to accept Old Age Pensions, Workmen's Com-
pensation, Sickness Insurance or Unemployment Insurance,
as something forced upon him by some force majeure, they
become to his mind objects for which he has himself been
striving.

By establishing these positive laws, and by establishing
a minimum of social well-being, common rules to which
a large number of workmen are quite used, workmen feel
that they are increasing rather than lessening their positive
freedom. f Indeed, the patience of workmen since 1919
is being tried by the Government because it is thinking
more of economy of a narrow, limited kind than of estab-
lishing that larger liberty which will secure at least a
minimum of well-being for all. It is the lack of the use of
compulsion for this purpose that is rousing the opposition
of the great and powerful British Labour organizations.

* Insurance versus Poverty, L. G. Chiozza Money, p. 456. This
was, however, written before the war.

f " The discipline which it enjoins is conducive to a larger liberty,
viz. that of willing co-operation with his fellows in the production of
social welfare." — J. A. Hobson, Work and Wealth, p. 88.

INSURANCE AGAINST UNEMPLOYMENT 229

The term " compulsory " insurance is therefore mislead-
ing ; " National Insurance " is better. As Professor
Henderson says :

No insurance law can be enacted by the legislation of a free people
and successfully enforced against the selfishness of exceptional
individuals until it has first been accepted by the reason, the con-
science and the choice of that people, whether of a commonwealth
or a nation. When a law is thus the expression of a deliberate
social policy, accepted after investigation and discussion, it is an
act of social co-operation on the part of the entire community.
It becomes legally obligatory on all in order that the small minority
of egoists may not defeat the will of the people, in order that all
competitors may be placed on a common level, in order that duties
and benefits may be accurately defined, in order that costs of per-
formance of duties may be calculated in advance and adequately
provided for in budgets of individuals, corporations, and political
organizations.

Our system of " free " schools is felt to be " compulsory " only
when the taxpayer is exceptionally stupid or selfish. Our taxation
for roads, bridges, lighting of streets, waterworks, police, public
sanitation is not felt as compulsory by the ordinary normal citizen,
who knows that for every dollar he contributes according to law
and in the ratio of his ability the community of which he forms a
part will enjoy a corresponding advantage.*

Mr. I. G. Gibbon wrote in opposition to a compulsory

scheme of unemployment insurance that there was

•»

the broad objection, of fundamental importance, that it is not
generally desirable to exercise coercion in social matters unless
there is obvious necessity or very clear and great advantages.
Such coercion does not make for ultimate progress, does not make
for the growth of that sturdy initiative and self-reliance which
are essential if social vigour and democratic control are to flourish
together.

There can of course be little doubt that it would be
a better state of affairs to have all workmen earning a
sufficient wage to enable them to make provision against
unemployment without governmental intervention, and
to possess the foresight and will necessary actually to make
such provision. But failing the possibility of soon realizing

* Professor C. R. Henderson : Industrial Insurance in the United States.

230 INSURANCE AGAINST UNEMPLOYMENT

such a state of affairs, it is submitted that there is " obvious
necessity and very clear and great advantages " in taking
compulsory measures for the removal of some of the
hideous social evils and chaos resulting in hundreds of
thousands of blighted lives. Moreover, there can be
little doubt but that insurance will prevent the loss of
sturdy initiative and self-reliance on the part of those who
might otherwise descend into a lower social group. During
the stress and strain of unemployment the independence,
self-respect, and efficiency of those subjected to it will
be preserved. The spirit of mutual helpfulness and mutual
confidence is fostered by the undertaking of such a great
social measure by the State.

Instead of being regarded as an organization merely
for policing the country, the State thus comes to be
regarded as the greatest organ for protecting the lives
and fortunes of its citizens and for increasing the
welfare of the community. Its functions are widened
and the active pursuit of social righteousness becomes
one of its dominant aims.*

It has been argued against schemes of social insurance
that they give control to the State and seem to imply
paternal government, but in so far as State help is the
result of wide popular desire, and not imposed from above,
it is as democratic in spirit as any other State activity.
Where the State can do for the workman what he cannot
well do for himself, there is prima facie reason for believing
that the State should assume that activity. When
in addition a majority of those affected demand that it
shall be undertaken, there can be little fear of bureaucratic
government.

But, after all, most people are nowadays prepared to
test schemes for social improvement pragmatically. Do
they work well ? is the decisive question which needs
answering.

The conclusive proof of the popularity of insurance
against unemployment, therefore, is the willingness with
which the insured members accepted the obligations

* Government and Industry, by C. Delisle Burns,

INSURANCE AGAINST UNEMPLOYMENT 231

imposed upon them. For nine years compulsory contribu-
tions have been levied upon employees and employers
alike, and no great difficultes have arisen out of the com-
pulsory nature of the law. It is safe to say that, pro-
vided there is added a State subsidy, the working classes
of Great Britain are not averse to paying compulsory dues
and receiving benefits.

This, it might be added, has also proven to be the ex-
perience of Germany and France. As Professor Pigou
writes : *

The device of combining with compulsion a certain element
of State aid, which has been adopted in the legislation of Germany
and France, has apparently sufficed to make the " principle " of
compulsion palatable.

There are no valid reasons for believing that the experi-
ence of the United States would be different.

Assuming, however, that the " bogey " of compulsion
has been laid, we are still confronted with the question
as to whether it is possible, and if possible, desirable, for
the Government to undertake some scheme of unemploy-
ment insurance.

In other words, granted that the objections to coercion
are not valid, the question still remains, can the State
undertake and successfully carry out a given proposal ?
Tt is manifest that it is doomed to fail, however willing
we might be to submit to compulsion, if it endeavoured
to-day to carry through a scheme for the complete abolition
of unemployment or to guarantee that we all earned an
average minimum wage of £5 a week. There are many
valuable reforms, it is necessary to insist, which the State
of to-day cannot achieve even if it used all its powers to
make them effective.

" Laissez-Faire."

(Reinterpreted by Dr. Alfred Marshall.}
The optimistic philosophy of Benjamin Franklin and
Samuel Smiles, which is, " Be thrifty, and you will be

* Pigou : Wealth and Welfare, p. 419.

232 INSURANCE AGAINST UNEMPLOYMENT

happy," does not apply to the millions living below the
minimum of existence. Nor would a laissez-faire policy
help to solve their problem of unemployment.

The individualistic economist says : " Let the individual
alone ; in serving his own interest he will be furthering
the interests of society."

The socialist retorts : " Let society protect itself against
the powerful few ; in serving its own interests it will be
furthering the interests of the individual." Both these
views are now struggling for mastery. Some say : " Let
Government keep up its police, but in other matters fold
its hands and go to sleep." Others say : " Let Government
get us out of the morass in which millions of our fellow
citizens are now immersed ; let its functions be increased,
let it operate industries, and regulate those activities which
it does not control." *

Professor Alfred Marshall has given a new emphasis
to the term laissez faire which carries with it a policy
midway between the above two courses, and which is
for the present practicable and helpful and acceptable
to a large majority of people.

Let everyone work with all his might ; and most of all let the
Government arouse itself to do that work which is vital, and which
none but Government can do efficiently.

It has thus been converted into a constructive doctrine,
one which is elastic and progressive. " Milk inspection
may need to be replaced by a communal supply. Medical
service may need to become a State function." It is
well established that the work which a Government may
attempt will vary from time to time.

The probity, the efficiency, and the wealth of a given
community will determine what work should be under-
taken by the citizens and what services rendered by the

* The war has strengthened the position of the socialists, but it is too
soon as yet to foresee how deep and lasting will be its effects. Of course,
it is not impossible for a reaction towards individualism to set in, however
dangerous this may ultimately prove.

INSURANCE AGAINST UNEMPLOYMENT 233

Government. Thus when Professor Pigou inquired
" What line should be drawn between private and public
enterprise ? " he answered that " The relative efficiency
of public enterprise at any time or place is an im-
portant factor in determining where that line should be
drawn."

Is insurance against unemployment an enterprise in
which the Government should engage ?

It is certain that even in Great Britain only a few, about
10 per cent., of the working classes were affected by this
private enterprise, and it is a fact that the poverty of very
large numbers of workmen would have made it impossible
for them to secure protection against the injury of unem-
ployment.* Unemployment insurance thus falls under
the group of activities which " none but Government can
do efficiently." Now, one of the main factors in deter-
mining whether or not a Government should undertake
certain activities is its probity at that particular period.
It does not follow that because a private organization
cannot organize some necessary venture that the Govern-
ment can do so or should do so. It is, however, highly
sigrrtficant that during the years in which unemployment
insurance was discussed the objection to it that the
officials administering the Act might be dishonest, or that
the Government would make " political " appointments,
was hardly raised. The general excellence of the British
Civil Service and of the methods of making appointments
almost precludes the possibility of abuse of this nature,
excepting during abnormal conditions such as prevailed
during the war. The honesty, and of late years the
efficiency, of British administrators has hardly been
questioned.!

Moreover, there could be little cloubt that Great Britain
was wealthy enough to venture on a scheme of unem-

* Common action could only be encouraged through the intervention
of the State. — Alfred Marshall : Economic Chivalry.

f It is the student's function to note that in 1921 the "economy"
campaign was accompanied by gross abuse of the Civil Service. This
campaign had political ends and its supporters were entirely misinformed
about "Whitehall."

234 INSURANCE AGAINST UNEMPLOYMENT

ployment insurance which would cost at most only a few
million a year, in addition to her other schemes of social
reform. The increased efficiency in the workmen which
might be expected to result from it, and the decreased
cost of relief of various kinds, would at least equal the
Government expenditure.*

* A very small group now charge the Government with having en-
deavoured to win the support of trade unions by appointing trade union
leaders to important posts in the administration of the scheme. Although
this charge might have been substantiated before the "Committee of
Enquiry into the Work of the Employment Exchanges," which sat in
1920, no attempt was made to do so.

CHAPTER XVI
THE SCOPE OF UNEMPLOYMENT INSURANCE

THE central difficulty in inaugurating any national
scheme of insurance has been how to establish the fact
of the claimant's unemployment. This was avoided by
the smaller and more homogeneous group, the trade
union, because the members knew the actual trade con-
ditions, and also, as a rule, the situation of their fellow
member who claimed unemployment benefit. It was
therefore to be expected that several trade union leaders
would urge that the position of the unions with regard
to^ unemployment ought to be that of the approved
societies for health insurance. The unions urged that
the men were less likely to " bleed " the union funds
than the State funds. It was urged that * it would be
a great advantage if the insurance fund could be admin-
istered by organizations of workers grouped according
to trade, which, while their general sympathies would
be with the employees, should have given to them a
definite inducement to restrict as far as possible the
claims upon the fund. Why were not these proposals
adopted ? First, there was the consideration that since
the scheme involved compulsory contributions from the
employers and employees and the State, it was not
possible that the unions should have the sole power of
disposing of the unemployment fund. Employers would
object. Second, there were actuarial difficulties in
the way of having separate funds and different benefits

* By B. Seebohm Rowntree and Bruno Lasker, p. 148, No. i, Revue
Internationale du ChGmage.

235

236 INSURANCE AGAINST UNEMPLOYMENT

in different trades. These difficulties are greater in the
case of unemployment in different trades than in the
case of sickness, because of the greater variation in risk.
Actuarial experts decided that in this initial experiment
in obligatory unemployment insurance, where the statis-
tical material dealing with different trades was inade-
quate, it was advisable to pool the risks in all the
trades.*

The Government therefore chose to administer the

scheme itself, and established the employment exchange

and the local office as the unit of administration. Every

workman when unemployed, so the scheme provided,

must report his lack of work at once to the exchange

or officer to show that the claim is bona fide. The

claimant must, of course, satisfy all the conditions and

regulations laid down by the Act. It is exceedingly

difficult in a large number of cases to say whether a

man is unemployed through his own fault or not. Since,

however, the eligibility for benefits is conditional on

the fact of involuntary unemployment due to lack of

work being proven, it would seem to many that the

superstructure of unemployment insurance schemes, not

administered by unions, must rest on an unstable

foundation. The British scheme has sought to avoid

this difficulty by establishing certain objective tests of

involuntary unemployment. Questions as to the man's

need or the intentions of the unemployed workman are

of secondary importance. What is significant is why he

has left his last job and whether he will accept another job

offered him by the employment exchange. But before

proceeding to discuss what conditions qualify a claimant

for benefit, let us firstly remove from the total field of

unemployment those periods of unemployment due to

such causes which the British scheme assumes had best

be met through other means.

* The British Government did, however, avail itself of the existence
of labour organizations, and gave them great power and many duties
under the scheme. See below, Chapter XVIII.

INSURANCE AGAINST UNEMPLOYMENT 237

Causes of Unemployment not Insurable under the British
Scheme of Unemployment Insurance.

No scheme of unemployment insurance undertakes to
ensure workmen against unemployment from all causes.
The risk of unemployment against which insurance is
offered is always marked out strictly, and in none more
so than in the British scheme.* In the inauguration of
the scheme of unemployment insurance, insured members
were called upon to pay contributions for six months
before being eligible for benefit. During these six
months the Unemployment Fund was able to accumulate
a balance of £1,115,000. This commencement period
had the further advantage of giving the administrators
time to decide who were and who were not insurable.
It is interesting to note that such a period would be
necessary in any scheme which did not apply to the
whole of a country.

It is clear that unemployment insurance benefits
should not be paid during sickness or invalidity.

is an overwhelming reason of practical convenience why
unemployment insurance and sickness insurance should, if possible,
come into force at the same time. It is a necessary condition for
receiving unemployment benefit that the unemployed man should
be " capable of work " ; on the other hand, it is a necessary con-
dition of the receipt of sickness benefit that the sick man should
be " incapable of work." If therefore one-half of the scheme came
into force without the other, there would be a strong temptation
for unjustified claims to be made upon the fund first set up. If
sickness insurance is set up in priority to unemployment insurance,
the man who is out of work from purely economic causes will be
under an inducement to represent himself as ill. If, on the other
hand, unemployment insurance is to be set up in advance of sickness
insurance, then the man who loses work through ill health will find
it to his advantage to declare that he is perfectly well. The two
halves of the scheme ought to work side by side.f

* After discussing the conditions under which unemployment benefits
are granted, we shall be in a better position to give a definition of unemploy-
ment for the purposes of the Act.

t Sir John Simon, Solicitor-General, pp. xvi-xvii, The Law of National
Insurance, by Orme Clark,

238 INSURANCE AGAINST UNEMPLOYMENT

At the very outset, therefore, two causes of unem-
ployment can be removed from consideration for pur-
poses of benefit, cases of illness and invalidity. Unless
there already exists a system of sickness and invalidity
insurance, difficult cases of semi-invalids, people who
are not altogether unable to work, yet whose earning
power is greatly diminished, will confront the insurance
officer. It is the opinion of some authorities that the
British method of supplementing unemployment insur-
ance by sickness insurance is essential for the successful
working of the former.

On the other hand, insured persons drawing old-age
pensions or accident compensation, who are normally
employed, are treated as ordinary claimants under the
scheme subject to all the same conditions and
regulations.*

The Act provides that workmen who have lost em-
ployment through misconduct or have voluntarily left
employment without just cause shall be debarred from
benefits for six weeks from the date of so losing em-
ployment. It is important to note that both these ideas
are not precise, and that only as the Umpire's decisions
are laid down will a precise enumeration of the con-
ditions and facts which constitute " misconduct " and
" just cause " be possible.

It has already been observed that after the claim for
benefit is made at the employment exchange notice of
it is sent to the last employer, with the request that he
should return the required form if he has any comment
to make in regard to facts which might disqualify the
applicant for relief.

During the first year about one in six of the em-
ployers did return the form, mainly in the belief that it
helped them in maintaining the discipline of the shop.

* An interesting case of a blacksmith of 70 giving up his job in order
to claim his old age pension of 55. a week, who also claimed unemploy-
ment benefit, is reported in Case 123, pp. 61, 62, Decisions of Umpire,
vol. i. He was earning i8s. 5jd. per week, and since he would not be
allowed to retain a statutory old age pension of 53. a week, he gave up his
job. In the judgment of the Umpire he voluntarily left employment
without sufficient cause.

INSURANCE AGAINST UNEMPLOYMENT 239

In some instances the employers have even used that
as a hold upon the man, saying that if the job were
thrown up the man would be disqualified for benefit
because they would send in an unfavourable report.
Unions object to this weapon being put into the hands
of prejudiced foremen. They argue that even though
there is the power of appeal against the decision of the
insurance officer, the man is forced to wait for his benefit.
They complain that no penalty attached to employers
who make misstatements. Apart, however, from abuses,
this clause results in disqualifying those from benefit
who are either cantankerous by nature or lazy, or are
shirkers.

Certain employers feel that since they are paying
their share towards the Unemployment Fund they should
exercise their power to disqualify workmen who leave
work without satisfactory reason, in order to safeguard
the funds.

Mr. W. A. Bailward, of the Charity Organization
Society, urges the tightening up of this provision. He
writes that

it would appear that some sort of report should as far as possible
be obtained from employers in every case, and that the adminis-
trator should not always rest satisfied with documentary evidence.

A question continually to be faced by the Umpire is
whether the employment exchange shall expect the unem-
ployed workman to accept work far away from his home
or to take up work in some other trade ? When the dis-
tance from his home is short, then, as a rule, workmen
are expected to undertake the work offered them. But,
on the other hand, when the distance is far or the rail-
way connection bad, then workmen may refuse work in
those places.*

The other question, as to whether a workman should
take up work in some other trade, is one of the gravest
problems that must be faced in dealing with the unem-

* Other grounds for refusal of work have been the less favourable con-
ditions of employment, domestic circumstances, and health.

240 INSURANCE AGAINST UNEMPLOYMENT

ploy men t problem.* Where the workman himself
wishes to learn a new trade, then there is little difficulty
and no objection to his doing so. Furthermore, the
provision in the Act for giving technical training to
inefficient workmen, which unfortunately has not yet
been put into effect, is also acceptable to all parties. In
like manner, in cases where as a result of technical
inventions a trade is ruined, or where as a result of a
serious crisis factories are closed down, there seems to
be very excellent reasons why workmen who have
been affected should be encouraged to adopt a new
trade or learn a supplementary one.f

But trade unions are strongly opposed to workmen
having two trades, i.e. to changing from one trade to
another trade as a normal feature of their industrial
life. They argue that most workmen will stand out for
union conditions in the trade in which they feel them-
selves to be most efficient, and will be prepared to
accept lower wages, longer hours, and non-union condi-
tions of labour in their " secondary " trade. Such a
state of affairs would be, they contend very properly,
very perilous to trade union standards.

Trade Disputes.

It is, of course, essential that the administrators of
the British scheme of unemployment insurance shall be
impartial in cases of strikes and lock-outs. Employers,
as well as employees, contribute towards the Unem-
ployment Fund, and therefore would object to their
contributions being used against them in industrial dis-
putes. It is therefore unanimously held by students of
the problem that benefits shall not be paid during labour
conflicts.

* See p. 305 of vol. i Decisions Given by the Umpire Respecting Claims
to Benefits for "List of Cases on Refusal of Suitable Employment."

f These workers are somewhat in the position of invalid workmen who
may be asked to readapt themselves to the requirements of industry.
Monsieur Edouard Fuster rightly asks, Ought not the system of
employment exchanges because of such consideration to be supple-
mented by a system of education and a professional change ? — Bulletin
pour la Lutte Contre le Ch6mage> 4 annSe, No, 2, p. 397.

INSURANCE AGAINST UNEMPLOYMENT 241

The most delicate task which the Umpire is called
upon to decide is whether unemployment is due to some
cause which does not debar those unemployed from
receiving benefit or is due to a trade dispute which does
debar from benefits. The Act qualifies " trade dis-
pute " as a stoppage of work which was due to a trade
dispute at the factory, workshop, or other premises at
which he was employed, i.e. it makes no real attempt
to define a trade dispute, nor has the Umpire provided
any definition. To every request for a definition of a
trade dispute he has replied that each case must be
decided on the facts that present themselves. Occa-
sionally the interpretation of these facts leads to dis-
putes between the unions and the Umpire.*

In the dispute in the building trades in London, for
example, in the winter of 1913-14, the men held that
they were dismissed by the employers, and therefore
had a riglit to claim benefits. On the other hand, the
employers contended that a threatened strike terminated
in a lock-out before the strike could occur. The Umpire
upheld the employers' contention, and no benefits were
paid. His decision had the further effect of disqualifying
from benefit those who were unemployed before the
trade dispute in the building trade occurred. A similar
decision was given in the 1921 lock-out of the miners.

Now it is well established that lock-outs tend to take
place during a slack period when men are likely to be
little employed or unemployed. At such times em-
ployers seek to reduce wages and threaten dismissal
if their terms are not acceded to. The opportunity is
thus offered to the employers to break down resistance
to their demand for a reduction of wages, by threaten-
ing or by declaring a lock-out and thus debarring their
workmen from benefits. More irritating even to workers
is the consideration that sympathetic lock-outs are apt
to take place, and at such times it is exceedingly difficult
to discover whether unemployment is due to a trade

* Many have tried to induce the Umpire to define a trade dispute,
and notably the Amalgamated Society of Engineers, but without avail.

242 INSURANCE AGAINST UNEMPLOYMENT

dispute or to the individual's inability to find employ-
ment because of lack of work. This raises the further
administrative problem whether all men in the trade
are to be disqualified in alleged cases of trade dis-
putes, or whether each individual case is to be decided
upon separately. Although there are certain merits in the
suggestion that a trade dispute should be clearly defined
and some general administrative rules be laid down for
the determination of such questions, wisdom will dictate
that these cases be left to the decision of a just, impartial
umpire. Confidence in the Umpire's fairness is the very
corner-stone of the success of the British scheme.*

From the very nature of the case some very hard
decisions seem unavoidable. Thus the Amalgamated
Society of Engineers report one instance where the
engineers went on strike and their labourers were dis-
qualified from benefit. Similarly, where one depart-
ment in a factory strikes other departments, who may
have had nothing at all to do with the dispute, may
find themselves unemployed and so disqualified from
benefit.

Unfortunately, the atmosphere in which decisions are
given on conditions entitling to benefit is apt to lead to
biased judgments. Thus Section 7 (V) b of the 1920
Act reads :

Provided that a person shall not be deemed to have failed to
fulfil the statutory conditions for receipt of unemployment benefit
by reason only that he has declined an offer of employment in the
district where he was last ordinarily employed at a rate of wages
lower, or on conditions less favourable, than those which he
habitually obtained in his usual employment in that district, or
would have obtained had he continued so employed.

Women who had left war work arid were in receipt of
out-of-work donation because of unemployment have had
their donation stopped upon their refusal of employ-
ment as domestic servants. In a similar manner a

* For the variety, complexity, and subtlety of the cases to be decided
upon, see Decisions Given by the Umpire Respecting Claims to Benefit,
vol. i, Nos. 1-500, together with more recent decisions.

INSURANCE AGAINST UNEMPLOYMENT 243

large section of the Press, stimulated by those who need
domestic servants, are urging the view that it is more
desirable to employ women at domestic work, since it
is suitable for any woman, whatever her previous train-
ing or lack of training, rather than pay her unemploy-
ment benefit. In spite, therefore, of the definite statutory
provision against the disqualification for the receipt of
unemployment benefit on the ground of refusal of work
which does not offer conditions so good as those to which
the applicant is accustomed, a constant pressure is being
exerted on all those administering the scheme to bias
its working in a certain direction. The Courts of
Referees and the Umpire (who is not a Ministry
of Labour official) are unable to decide these questions
in an atmosphere making for a strict and impartial
interpretation of the law.

Although the clause disqualifying from benefit because
of a trade -dispute affected but 5 per cent, of the men
disqualified during the first six months' operation of
the Act, and this percentage is likely to decrease, the
problem of distinguishing between involuntary unem-
ployment due to lack of work and involuntary unem-
ployment due to a trade dispute remains of the utmost
importance. In this penumbra lies the danger-field of
industrial life in a capitalist society. Roused passions,
questions of honour, a desire for trials of strength, and
a host of other difficulties colour the atmosphere when
the Umpire must make his decision. Courage, honesty,
and a full knowledge of the facts are essential to any
fair decision.

The administration of this part of the Act has
worked with the utmost smoothness, although a number
of disputes have left a passing sense of grievance.
Hundreds of claimants have appealed against the deci-
sions of the insurance officers ; they have appealed in
turn against the Court of Referees and sought decisions
from the Umpire. This has been encouraged by the
fact that no part of the cost of appeals is paid by the
workman, and even when required to attend before a

244 INSURANCE AGAINST UNEMPLOYMENT

Court of Referees workmen may be paid travelling
expenses.

It is thus manifest that the problem of developing
insurance leads to this : how to check wrongful claims by
the unemployed ; that is to say, how to avoid frauds, and
how to define unemployment subject to insurance. New
theoretical definitions, however ingenious they may be,
are of no avail. The practical way of detecting
involuntary unemployment is to create alongside of
unemployment insurance funds, funds insuring also
against the neighbouring risks of strikes, lock-outs,
sickness, accidents, etc. This is what happened in the
case of the more powerful unions, and the claimant of
unemployment benefit was known not to be unem-
ployed for any other reason than for lack of work, since
for losses sustained through any other emergency he
could also claim benefit.

Any workman not unemployed owing to a trade dis-
pute, sickness or accident, who registers at the employ-
ment exchange is regarded, therefore, as prima facie
a bona-fide unemployed workman for purposes of the
British scheme.

Conditions for Receipt of Benefits.

Having reviewed the types of unemployment that
are not insurable, we may now discuss the kind of unem-
ployment that is insurable.

Fortunately the British scheme lays down very defi-
nitely the conditions that must be fulfilled for the
receipt of benefit. The workman must prove that he
has been employed as a workman in an insured trade
and that he has paid twelve weeks' contributions. If he
has been a member of a union during that period, that
fact is sufficient to establish this requirement. He must
also prove that he is capable of work but unable to find
suitable employment. This apparently embarrassing con-
dition works fairly easily in practice and will work even
more easily when objective tests of suitable employ-

INSURANCE AGAINST UNEMPLOYMENT 245

ment are fully worked out. The unemployed workman
must prove his willingness to work as soon as the
employment exchange offers him " suitable " employ-
ment. But what, for purposes of the law, constitutes
suitable employment ? * In Britain the law does not
encourage workmen to accept any work which would
tend to weaken the union or the standards of fellow-
workmen.

The Act provides that no man shall be compelled to
accept work below the rate at which he is accustomed
to work in his own district, or below the standard rate
in another district. In districts where unions are well
organized the union rate is the recognized one; in
others the wages paid by the better firms is the accepted
standard. This provision, which is satisfactory to the
unions, has led to very little friction. The good faith
of the officials is relied on both by employers and
workmen.

Other conditions for the receipt of unemployment
benefit provide that the workman must make his appli-
cation in the prescribed manner, and must prove that
since the date of his application for benefit he has been
continuously unemployed. On becoming unemployed the
workman is required to report the fact to the employ-
ment exchange or he must sign the union vacant book
He is then allowed to prove that he is continuously
unemployed merely by registering once every day
during work hours at the exchange or in the union
vacant book. It is assumed that persons who satisfy
this requirement are unlikely to be engaged at other
work whilst seeking benefit.

Having seen the various conditions and regulations
for the receipt of unemployment benefit, let us examine
the published table of claims to benefit which were
refused.

The principal ground of disallowance in the first
scheme was failure to satisfy the first statutory condition
in Section 86, i.e. failure to prove employment in an
* Cf. H. J. Res, No. 159, pp. 133, 134.]

246 INSURANCE AGAINST UNEMPLOYMENT

insured trade in each of 26 calendar weeks during the
last five years. At the outset union members of long
standing were at an advantage in being able to provide
this proof. But the difficulties which this requirement
created were so great that it was soon amended. The
Amending Bill made the statutory qualification for
benefit 20 weeks' contributions. In the latest Act this
has been diminished to 12 weeks.

The next most important ground of disallowance was

DISALLOWANCE OF CLAIMS TO BENEFIT UP TO
MAY 31, 1913.

United

Percentage of

Kingdom.

Total Dis-
allowances.

i . Not worked 26 calendar weeks in insured trade

I7.5J5

46-8

2. Not capable of work . . ...
3. Trade dispute . .

150

1,680

0-4
4'5

4. (a) Misconduct . . ...

4,668

12-4

(b) Voluntarily leaving employment without

just cause . . ...

9,799

26-2

5. Benefit exhausted . . ...

O* 2

6. Other reasons —

(a) Under 17 years of age

170

0'5

(b) Refused suitable employment
(c.) Following remunerative occupation . .

739
69

2'O
O' 2

(d) Other reasons

2,560

6-8

Total number of claims disallowed

37,424

lOO'O

Total number of claims made in period

420,802

Percentage of claims disallowed

8-9

that under Section 87 (2) — that the workman has lost
employment through misconduct or left it voluntarily
without just cause, e.g. insubordination, wasting time,
or negligence. This accounts for 38-6 per cent, of all
the disallowances ; the percentages attributable to mis-
conduct and to voluntarily leaving employment without
just cause are 12*4 and 26*2 respectively.

The trade dispute disqualification accounts for less
than 5 per cent, of the whole number of disallowances.

As a rule insurance schemes provide that benefits

INSURANCE AGAINST UNEMPLOYMENT 247

shall be strictly limited either as to their amount or to
their duration. The British scheme of unemployment
insurance provides that i week's benefit shall be pay-
able for every 5 weeks' contributions paid, and that
the maximum period during which benefits may be re-
ceived shall be limited to 15 weeks. This limitation
is necessary if the fund is to be protected from ineffi-
cient or very irregularly employed workmen. The
workman who is tempted to malinger, as well as the
higher type of workman who would much rather be at
work, both know that it is to their interest not to claim
benefits until they have a real need for it. The number
of those who are likely to exhaust the total benefit
allowed them is thus likely to be lessened.

Of course, once a workman has exhausted his right
to benefit, any claim cannot be considered until he has
paid dues for a period at least sufficiently long to give
him the right to renew his claim. As before, he may
receive a week's benefit for every five weeks' contribution.

It is a cardinal principle of the scheme that, if whilst
any workman is in receipt of benefits, employment is
offered him which the Umpire regards as suitable, then
the workman must accept the proffered work. If he does
not, he loses the right to benefit.*

The figures dealing with disallowance of claims to
benefit have been published for the first six months of
the workings of the Act and are given on p. 246.
There is reason to believe that with the various changes
in the scheme and with the greater experience of work-
people the percentage of disallowance under the different
headings will change. Thus during a later period in
43 per cent, of the cases of disallowance of benefit the
decision was given on the ground of refusal of suitable
work as against 2 per cent, in the first half-year. |

Thus singled out from unemployment due to other

* Mr. John Burns, then President of the Local Government Board,
estimated that 3 per cent, only of the total recorded unemployment
was uncovered because of exhausted benefit. — The Times, March 4, 1914.

f Cd. 1054, p. 10.

248 INSURANCE AGAINST UNEMPLOYMENT

causes than lack of work, and with the machinery of
the employment exchanges thoroughly organized, unem-
ployment insurance has proven itself to be " adminis-
tratively possible/'

Definition of Unemployment Insurance.

As a result of this discussion we are now in a position
to venture on a definition of unemployment insurance.
/~The British scheme of unemployment insurance is a\
device for making provision against the economic loss \
f to wage-earners resulting fi*pm involuntary unemploy-
/ ment due to lack of work in the district where they
/ were last ordinarily employed, and where work was not
/ obtainable otherwise than at a rate lower or on con-
/ ditions less favourable than those habitually obtained in
their usual employment in the district, by means of
funds made up of regular compulsory contributions from
the insured workmen, their employers, and the State,

\out of which indemnities for such losses are paid. In
this way losses are distributed throughout the entire
community instead of being allowed to crush the
unfortunate individuals who are unemployed.

There is one further consideration which modifies the
view that the British scheme of insurance offers indem-
nity for the losses sustained through involuntary unem-
ployment due to lack of work. As a matter of fact it
offers only a partial indemnity. There was a period in
the inauguration of the scheme during which unem-
ployed workmen could not receive benefits at all, and
similarly workmen joining the scheme later cannot
obtain benefits for a defined period. There was the
first week of unemployment during which no benefit
was allowed, a limitation which has now been reduced
to three days. There is still, however, the limitation
of one week of benefits to every six weeks of the
payment of dues, and benefits are limited within a
certain maximum period. In this the British scheme
is following most trade union systems of out-of-work

INSURANCE AGAINST UNEMPLOYMENT 249

benefits. It is the rule that insurance schemes offer
only a minimum of benefits.*

/ Two main reasons are offered for keeping the scale \
of benefits low. First, it is argued, if they are consider- \
ably lower than their normal wage, workmen have an
added interest in remaining at work as steadily as /
possible and in avoiding unemployment as much as
possible. Secondly, the limitation of benefits, as well
as their comparative smallness, keeps down the cost of
the scheme, and consequently the burden on employers
and workmen is more easily carried.

* It must, however, be insisted upon that if benefits are unduly restricted,
then the very serious impact of unemployment still falls on the workman.
He can, as a rule, bear it only by lowering his standard of living. If he
shifts it on to the charity organizations, then his self-respect, as a rule,
suffers. He is still obliged to make provision for additional benefits
through some form"* of saving See Appendix IV for a discussion of
" Unemployment Insurance and the Rates."

CHAPTER XVII

CONTRIBUTIONS AND BENEFITS

MODERN industrial conditions are under the triple control
of the three parties to the labour contract — the public,
the employers, and the workers. This consideration is
specially important in its application to the problem of
unemployment. The public, the employers, and workmen
are deeply concerned in the effects of unemployment.
They are also in many ways responsible for it. Should
not, therefore, the measures taken to reduce the amount
of unemployment, and to provide for those who are likely
to suffer from it, be met through the co-operative efforts
of these three groups ?

Who should contribute to the unemployment fund and
to what extent ought each to contribute towards any
proposed scheme of unemployment insurance ? Three
distinct views have crystallized out on this subject. The
British scheme is based on the view of the equal responsi-
bility of all parties. A second group has urged that,
as in the case of Workmen's Compensation, the industry
alone ought to be made to bear the burden. Still a third
group urges that the great bulk of unemployment is due
to social causes, and ought therefore to be met by the
State. No considerable body, be it noted, contends that
workmen should bear the burdens of unemployment
unaided.

Let us briefly examine the contentions of the second
and third groups referred to before discussing the method
employed in the British scheme.

The growth of the idea that losses through personal
injuries in hazardous occupations should be borne by the

250

INSURANCE AGAINST UNEMPLOYMENT 251

industry occasioning the hazard has given rise to the
parallel idea that personal losses due to involuntary
idleness should be borne by the industry occasioning the
unemployment. The difficulties of realizing this in some
practical policy are perhaps greater, but it is urged as a
standard towards which our efforts ought to be bent.

When it is recalled that at present the burden of un-
employment is borne either by the workman himself or
by his relatives and friends, who thus must lower their
standard of life, or by the public through State or private
charity, it is manifest that this burden is falling on the
wrong shoulders.

Again, if the industry were forced to bear the burden
of its own unemployment, it would, it is urged, take
immediate measures to reduce the amount of unem-
ployment, in the same way as workmen's compensation
schemes resulted in a reduction of accidents. Then the
cost of unavoidable unemployment would come to be
regarded as a normal expense of production.

The new theory with regard to the burden of unem-
ployment, it has been proposed, should be : That where
a workman who was not at fault is dismissed because of
lack of work, then he should be compensated in a reason-
able amount for the consequence of unemployment ; not
in order that the employer should be mulcted because
he was at fault, " but in order that this portion of the
cost of product or services shall not be transferred from
the employer and the ultimate consumer to the working
man and his family, crushing them in many cases, and
eventually shifting the burden to the community in the
most undesirable form of charity." *

The main objection to this proposal is that its enact-
ment would revolutionize many branches of industry.
Think of what it would mean if an attempt were made
to compel builders and dock managers to keep their
workmen in work or wages during periods of unemploy-
ment ! The existing rights of the employer to hire and
fire workmen would have to be immediately curtailed,

* See Frankel and Dawson : Workmen's Compensation in Europe,

252 INSURANCE AGAINST UNEMPLOYMENT

the wages level would have to be altered, and the cost
of necessary industry to the consumers would be changed.
Some transitional stage seems necessary, so it has been
argued, during which these industries should pay for
part of the burden of unemployment for which they are
responsible.

The third group is best represented by the Fabian
Society. In criticizing the contributory aspects of the
British scheme this Society stated that

most of the burden falls on the individual employer and workman.
This is unsound because the great bulk of unemployment is due
to causes outside the control of individuals altogether. The
fluctuations of trade are considerably influenced by the policy of
the State ; it is the State which should bear the main responsibility
for unemployment. When unemployment is greater than usual,
it is not the workman's fault ; moreover, he is in greater need. If,
on the other hand, it were only the State whose contribution
were increased, there would be a tendency for the State to inquire
into the causes of unemployment, and use its influence to root
them out.*

The objection to this view results- from the failure to
appreciate how much the policy of the individual employer
affects the quantity and nature of unemployment. It
also betrays an expected bias in favour of the expert,
and fails to gain the wider interest of employers and
employees, which could be secured by allowing them to
share in the responsibility both for the cost and for the
administration of any proposed plan for treating the evil.

Should the State Contribute?

The British scheme of unemployment insurance pro-
vides that the State, the employer, and the workman
shall contribute about equal amounts towards the Unem-
ployment Fund. On what grounds can this be justified ?

The State during the last century has assumed a general
responsibility for the well-being of its citizens, and more
specifically has shared much of the burden resulting

* The Insurance Bill and the Workers, London, 1915

INSURANCE AGAINST UNEMPLOYMENT 253

from unemployment. Poor Law organization, relief works,
farm colonies, labour bureaux, are but a few of the
evidences which demonstrate that the State, as such,
did not allow its citizens to suffer the full burdens of a
period of unemployment.* The community has long
recognized that unless it takes measures for preventing
social evils from multiplying, the number of helpless and
destitute will grow, enfeeble social life, and poison its
future.

This duty has been recognized also in those European
schemes where State subsidies supplement voluntary
effort at providing unemployment insurance.

An interesting question needs to be treated within any
discussion of the advisability of giving public subventions
to unemployment insurance. It concerns the public unit
which shall provide this subvention. Shall it be the
city, the county, or the whole country ? The British
scheme, when introduced, was superior to most other
schemes of unemployment insurance, excepting in this
respect Denmark and Norway, in that it regarded the
country as a whole as a unit for this purpose. Unem-
ployment is, in certain of its aspects, a national problem
affected by foreign relations, by national legislation, by
national traditions and peculiarities. It would result in
glaring anomalies which would be likely to lead to serious
friction if neighbouring cities and counties developed
different policies in such matters. Workers in the same
trade would perhaps have to pay very different contribu-
tions and receive immensely different benefits. Further-
more, a local fund in a city could be completely swamped

* The State is going to receive enormous benefits from this Bill,
rates are going to be lowered, taxes are going to be made less, all sorts
of public changes, necessary on account of unemployment, the low state
of vitality and bad state of health, the claims on charity organizations,
the increase in crimes, are going to be eased if this Bill is going to do what
it is expected it will do. For such a sacrifice — and it is not, I think,
an exorbitant one, which, fairly adjusted, will not hamper industry nor
burden labour, nor cause undue strain upon the public finances — we
believe it possible to relieve a portion of the industrial population of these
islands from the haunting dread and constant terror which gnaws out
the very heart of their prosperity and content. — Winston Churchill in
the House of Commons, May 1911. See, however, Appendix IV.

254 INSURANCE AGAINST UNEMPLOYMENT

by local conditions. It could not, for example, when
suffering a high degree of unemployment, gain any relief
from the fact that other cities were not suffering to
the same extent.*

But the most important reason for having a national
scheme of unemployment insurance is that it enables the
Government to discover and treat the causes of unemploy-
ment. It is impossible to discover those that are wide-
spread throughout a country by merely instituting local
funds. To eliminate them, or even to minimize them, it
is essential to adopt a national scheme, f

Assuming, then, that the State shall administer the
scheme, why should the State contribute towards the
Unemployment Fund ?

In the last analysis large cyclical changes, one of the
chief causes of unemployment, are due primarily to the
fundamental aim of all business activity — the desire for
profits. The competitive system of industry and the
resulting industrial organization — not the caprice of indi-
vidual action — is responsible for unemployment. More-
over, the community plays a more direct part in the
ordinary causes of unemployment. Seasonal unemploy-
ment is largely due to the habits of the community,
whilst changes of fashion, the result of idiosyncrasies,
produce great uncertainty and resulting lack of employ-
ment. It seems unjust that individual employers, let
alone workmen, should be made to bear the burdens of
cyclical or seasonal unemployment.

Again, inventions and improved methods of industrial
organization, which result in great benefits to the public
by markedly reducing the cost of production, are as a
rule accompanied by the displacement of workmen who

* The crisis in the administration of the unemployment insurance
scheme was reached in August 1921, because the Government contribution
of 153. a week was inadequate, and recourse was had to the Guardians,
who gave relief to an amount four and even five times as large as the
Government benefit. The central Government, by refusing to deal with
the problem adequately on national lines, forced the problem on to the
local authorities.

t See evidence of Mr. Miles M. Dawson at Hearings before the Committee
on Labour. — H. J. Res, No. 159, p. n.

INSURANCE AGAINST UNEMPLOYMENT 255

formerly produced the article. Surely the community
owes them some debt !

In addition, however, to its contributing towards the
causes of unemployment, there is the further consideration
that only when the community is made to realize that
responsibility by paying part of the loss to the workman
in which unemployment results are steps likely to be taken
to mitigate the causes of unemployment. More thought
will then be given to the problem, and schemes leading
to its solution may be expected to follow.

The contribution of the State also entitles it to see
that the money ^s spent on the objects mentioned in the
scheme and that it is solvent. The Government justifies
its right to intervention by contributing towards the
unemployment fund. The grant-in-aid, of which the
State's contribution under the Unemployment Insurance
Act may be regarded as one form, is a powerful engine for
maintaining the honesty and efficiency of public under-
takings. Another important effect, however, is to make
it worth while for a group of men subject to a low degree
of unemployment to pool their luck with the group of
men subject to a high degree of unemployment.* In
this way the benefits which the former may receive are at
least equal to the amount which their unassisted contri-
butions could buy for themselves ; while the latter gain in
their benefits the full measure of the Government subsidy.!

It is highly significant that the British schemes of
unemployment insurance and health insurance were

*, A compulsory system of insurance, which did not add to the con-
tribution of the workers a substantial contribution from outside, has also
broken down, because of the refusal of the higher class of worker to assume
unsupported a share of the burden of the weaker members of the com-
munity.— Winston Churchill, President Board of Trade, May 19, 1909.

See also Grants in Aid, by Sidney Webb.

Undue emphasis has been laid by many writers on the alleged unfair-
ness of pooling the risks of good and bad trades. It is true that the
parasitic trades, as regards unemployment, may be supported by the
more regular trades. But when trades are selected in which the per-
centage of unemployment does not vary much, this consideration is not
very material. It is sometimes also forgotten that the pooling of good
and bad risks is of the very essence of insurance.

f See Deputation of Social Democratic Party to Mr. Lloyd George,
June 1911, Cd. 5869.

256 INSURANCE AGAINST UNEMPLOYMENT

both integral parts of the group of social reform mea-
sures which were advocated in Great Britain during the
decade preceding the war. To be fully appreciated they
must be seen as parts of a comprehensive programme,
covering education, health, safety, and insurance against
emergencies such as old age, sickness, invalidity, and
unemployment. What was the aim in forming the pro-
gramme and the ideal which gave it momentum ? It
was to raise the standard of national efficiency and indus-
trial quality. The conception grew more and more
prevalent that the chief business asset of the nation was
the individual workman, and in order to bring about the
maximum of efficiency in production a wholesale public
expenditure was entered into to develop his value. It
was a far-sighted view of the gains that would result
from a national investment of this kind rather than the
sweep of a wave of philanthropy which produced this
series of reform measures. The overwhelming number
of reformers were anxious to increase and strengthen the
source of the nation's wealth — the mental and physical
fitness of the individual workman. This desire to increase
national efficiency was a weighty argument in urging
the State's contribution to a scheme of unemployment
insurance.

Should the Employer Contribute ?

There were many precedents for requiring the employer
to contribute to the insurance of his workmen, notably
the insurance schemes of Germany against sickness and
invalidity. By imposing this obligation on employers,
employees, and the State, and by bringing these three
partners in the modern industrial contract together for
administrative purposes, their sense of solidarity, it was
argued, must grow keener. By working together for a
common purpose, viz. for discovering the most satisfactory
way of lessening the evil effects of unemployment, con-
siderable social advantage might then be expected to
result. Another consideration of a more general kind
was that unemployment was a social disease generated by

INSURANCE AGAINST UNEMPLOYMENT 257

modern industry, so that it was proper that the employer
should be asked to contribute towards its cost and co-
operate in efforts to reduce its evil effects.

But the most convincing reason for asking employers
to contribute to the scheme was their responsibility for
certain kinds of unemployment. Not only did this result
from their present methods of organization, but frequently
through a lack of systematic methods of engaging and
discharging workmen.

The plentifulness and flexibility of the labour supply
is most important for industrial development. This is
of particular moment in establishments whose work is
subject to rapid fluctuations. These conditions necessarily
result in the demand for a reserve army of labour. Then,
if business presses, workmen are at hand ; when it slackens,
they can be turned off.

The contribution of the employer rests upon the assump-
tion that if a reserve of labour is required by the industry
to the disadvantage of workmen, the employer ought to
help support this reserve. Even before Government
legislation was enacted, many employers supported their
workmen during periods of unemployment, thus showing
that they recognized an obligation towards those who
had been in their employ during the major portion of the
year. The practice of chivalrous employers has, through
the mandate of the Government, become the general
law. It is fair that each industry should bear the full
burdens of the industry, and these, experience shows, are
most easily introduced when employers share them with
workmen. By this means also the likelihood that em-
ployers will adopt measures for preventing or mitigating
unemployment is greatly increased. In the discussion on
unemployment insurance in the House of Commons
before the Bill was enacted, Mr. Ramsay Macdonald
urged that employers are the managers of industry, and
thus are responsible for unemployment :

If the employer pays proper wages, or, in other words, if the
workers' share of the national income is adequate, then we do not
want charity, and we do not want assistance at all.*
* House of Commons, May 29, 1911.
17

258 INSURANCE AGAINST UNEMPLOYMENT

But wages to-day are not " proper," it was implied
nor do they, as a rule, include provision for periods o:
unemployment.

It is also anticipated that the employer's contribution
will be a good investment. If the scheme produces the
expected results, it will undoubtedly mean that it wit
give to the employer a more and more efficient body
of workers than he has now, and it will enable him to
run his machinery more efficiently than it is being run
to-day.*

Another important reason for obliging employers to
contribute is that by so doing the scheme may be adminis-
tered with greater ease. The employer may be made
responsible for his own and his workman's contribution
This has another merit. It is much simpler to collect
the dues of the workmen from their employers, who
perhaps employ hundreds of workmen, than to collect
them from individual workmen.!

Should Workmen Contribute ?

On the whole, it can be asserted that little objection
was raised to the contributions of the State and of
employers to the Unemployment Fund. Similarly, little
objection came from workmen. Yet there has been
some questioning as to the justice and desirability of
workmen contributing. The arguments urged in favour
of their so doing are many and weighty. Since they are
the beneficiaries of the scheme, it was contended that

* See Chapter XXIV, below.

f Employers are beginning to see that the social problems of industry
must be solved, and that they must contribute to the solution — that
unemployment insurance in a state of private industry is one of the neces-
sary guarantees against the extermination of private industry. — Mr
Robert G. Valentine, American Labour Legislation Review, June 1915,
vol. ii, pp. 623-8.

It has been argued that making the employers the channel for the work-
man's contributions tends to encourage industrial feudalism. The only
instance adduced in favour of this view is the case of the workman who is
a conscientious objector and refuses to come under the scheme altogether
For him to persist in this course will result in his losing his occupation
But even in this case, it must be noted, that not merely the workman,
but both he and his employer are under compulsion.

INSURANCE AGAINST UNEMPLOYMENT 259

they ought to contribute. Again, the law seemed to
apply widely what was previously confined to the " aris-
tocrats of labour," who could afford to pay for insurance
against unemployment in their trade unions. More
important, however, was the view that only by making
the workmen themselves contribute would they gain
that interest in the administration of the scheme that
would lead to its effective enforcement and to the
elimination of the abuse of malingering. They gained
a legitimate claim to representation in its adminis-
tration on local employment committees, and their
right to labour delegates on the Courts of Referees was
guaranteed.*

Organized labour in England has been divided on the
question as to who should contribute towards the scheme.
The conservative section, consisting of the vast majority,
has held that workmen ought to contribute their share
towards the Unemployment Fund. That fund is dis-
tributed amongst unemployed workmen, and it is essential
to their self-respect not to receive something to which
they contribute nothing. A State bounty to labour would
tend to degrade it. At a conference held on June 20,
1911, in which delegates of the Parliamentary Committee
of the Trade Union Congress, of the General Federation
of Trade Unions, and of the Labour Party took part,
the principle of workmen's contributions was accepted
by 223 votes against 44.

Another widely held view in the ranks of organized
labour was, that since workmen were not responsible, and
since the industry was responsible for unemployment,
that the employer, or, less logically, the employer aided
by the State, ought to bear the whole expense. The
Labour Party passed a resolution to this effect at its
Conference in 1914.

Mr. Lloyd George, then Chancellor of the Exchequer,

* It has also been suggested that as consumers they, like all other
sections of the community, are responsible for fluctuations in the demand
for consumers' commodities, and ought therefore to be obliged to con-
tribute towards the upkeep of those who suffer in consequence.

260 INSURANCE AGAINST UNEMPLOYMENT

gave indirect support to this contention when he urged

that

whoever is to blame for these great fluctuations in trade, the

workman is the least to blame. He does not guide or gear the

machine of commerce and industry ; the direction and speed are

left almost entirely to others. Therefore he is not responsible,

although he bears almost all the real privation.*

Similarly, Mr. Chiozza Money urged that there is " a
strong case for making the employers' contribution
larger/' He wrote that

it is the margin of unemployed labour, and the power to employ
and dismiss at a moment's notice which goes with it, that is used
by the capitalist as the buffer between him and bad times. It is
a sort of human reserve fund, far more effective than any financial
reserve fund, which helps to adjust the employers' finances as
between good and bad years. f

Objection to workmen contributing to the unemploy-
ment fund rests upon the solid basis that, since they are
not responsible for unemployment, they should not be
made to suffer for it. Taken in its logical completeness,
this would imply that the involuntarily unemployed
workman should obtain a wage during periods of unem-
ployment equal to that obtained during periods of full
employment. The advocates of this doctrine recognize
that, however much may be said for it as a theoretical
proposition, it is altogether impracticable for the time
being because of the grave danger it would have in
increasing malingering. They insist, however, that work-
men should not be asked to contribute towards a fund
which they would not need, nor use, if they were fully
employed. The change from the existing situation,
where the workmen bear the burdens of unemployment
almost alone, to the situation which these sympathizers
with labour advocate in which they would not share in
its burden at all, is very extreme. Certainly in Great
Britain to have proposed a scheme on such a non-con-
tributory basis would have led it to ruin, and have brought

* May 4, IQI i, House of Commons.

f Chiozza Money : The Insurance Act, p. 330.

INSURANCE AGAINST UNEMPLOYMENT 261

the idea of State unemployment insurance into disrepute.
The English practical sense bowed before the claims of
expediency, and a compromise resulted between the then
existing state of affairs and the new theory.

It is precisely in this administration that the working men feel
themselves to be free agents and intelligent participants in the affairs
of their country. There is no taint of charity from first to last ;
each man pays his share of the cost, has a voice in the control, and
can set up a legal claim when he needs his benefits.*

It is therefore incorrect to say that this scheme pro-
vides free relief to the unemployed who are in need.
One might as well say that if one insures one's house
and it burns down and a claim is put in against the
insurance society to which one belongs, that the insurance
society is making a free gift. There are no free benefits
given under this Act at all. It is simply the application
of the principle and method of insurance against a con-
tingency— in this case unemployment — which overtakes
most workmen during life. " All this removes the
insurance system by the diameter of the moral world
from poor relief and private charity/' Newspapers and
politicians who refer to unemployment insurance for
which the workman has paid as " doles " or " charity "
are ignorant or consciously misleading.

Conceding, however, that all three parties to the labour
contract : employers, employees, and the State — which
sanctions and if necessary enforces it — are to contribute
to the unemployment fund, we are still confronted with
the question as to what share they each ought to con-
tribute. The British scheme, as we have seen, imposes
on the Government one-third of the total contributions
of employer and workman. This sum has been chosen
arbitrarily. The balance of advantage seems rather to lie
in equal contribution by employer, employee, and State. f

* Charles R. Henderson : Industrial Insurance in the United States.

f This was advocated by the conference representing different labour
organizations on June 20, 1911. "When you come to apportionment,
it is quite impossible to translate into mathematical relationship and ratio
the various benefits to the workman, the employer, and the State respec-
tively."— Winston Churchill in the House of Commons, May 1911.

262 INSURANCE AGAINST UNEMPLOYMENT

There has been a fair degree of unanimity that the
workman's weekly contribution is a serious burden to
the lower and more irregular grades of workers. The
compulsory stoppage of part of his wage weekly for
unemployment benefit, coming at the top of a stoppage
for sick and invalid benefit, is a grave burden, and in
not a few instances has operated injuriously on the family
food supply.*

This is another of the many cases in which the working
of the Act has called attention to existing serious defects
in the conditions of industry — in this case to the extremely
low wages of hundreds of thousands of workers. It is
not a blemish in the Act, but rather in the existing con-
ditions that is thus held up to the light.

It would be misleading, however, to argue that because
in 1911 it was thought desirable that the State, the
employers, and the employees should divide the costs of
unemployment insurance, that this applies also in 1921,
or is likely to apply in 1931. After all the arguments
have been developed by the parties concerned, there can
be little doubt that there is a steady growth of the view
that the employer must treat unemployment as a charge
on industry, and that workmen should not be obliged to
pay anything towards the costs of insurance.!

Do these Contributions Constitute a New Burden
on Society ?

It must be clearly grasped that these new dues or
charges are more apparent than real. They indicate
rather a reshuffling of existing charges or losses amongst
the three parties to the labour contract with a view to
making them conform to modern notions of responsibility
or to some view as to their capacity to bear them. Unem-
ployment always produces a burden on some one ; it
represents a considerable deprivation of income to the
disadvantage of the individual or of public charity or

* See J. A. Hobson, Bulletin pour la Lutte Contre le Chtimage, vol. i.
t See Chapter XXI.

INSURANCE AGAINST UNEMPLOYMENT 263

private beneficence. Social insurance results in redressing
these charges by regularizing the effort to meet these risks.
" Instead of paying for unemployment in the lump/'
one member of the Labour Party in Parliament rightly
said, " we are asked to pay it in instalments." This is
also the view of the National Civic Federation,* which,
in its Report on Social Insurance in Great Britain, writes,
that

in the last analysis, the burden of non-employment, poverty,
destitution and degradation falls upon society, which is inclusive
of all classes of society. Adequate insurance against these condi-
tions will greatly lessen the chances of their existence. In the
long run the burden upon society will be less, though temporarily
the financial burden may be more.

Of the three methods proposed for providing an unem-
ployment fund the British scheme has two convincing
arguments in its favour. It makes it obviously advan-
tageous to all the three parties — to the State, the em-
ployers, and the employees — to reduce the amount of
unemployment. It will also be a great factor in breaking
down the indiscipline and the state-blindness in which
millions of people are still permitted to grow up, thinking
only of themselves, never being taught that they are a
part of a whole, and ignorant of a better conception of
citizenship. Through the experiments of unemployment
insurance and other measures aiming at the solution of
the pressing problems of social disorganization their best
discipline will come.

The Incidence of Unemployment Insurance Contributions.

The Act makes it illegal for the employer to deduct
from wages his (the employer's) contribution, but empowers
him to deduct the workman's contribution. But in the
long run no such legal provisions will affect the incidence
of the new tax. In some cases the double contribution

* A body representing employers and certain trade union officials in
the United States, whose influence is generally exerted against measures
of social insurance.

261 INSURANCE AGAINST UNEMPLOYMENT

will be borne ultimately entirely by employers' profits,
in other cases entirely by wages, and in any case no power
that law can exercise will keep the real proportions which
the scheme provides. Already a certain amount of friction
has been produced, and certain employers have even
spoken of shifting their payments on to the workmen
by postponing salary increases and stopping payments
during holidays.* In actual fact, however, there have
been only isolated instances where employers have en-
deavoured to fasten the double burden on organized
workmen.!

The fear has been expressed that unorganized workmen
may have to bear the whole burden of the contribution,
since the employer is in a better position for readjusting
the wage scale. J " But if the unorganized workers realize
this, it should increase trade union membership."

These considerations were, however, of significance only
during the early days of the enactment of insurance.
These causes of " friction " were soon reduced, and the

* Contractors who had undertaken a large contract, requiring some
four or five years for completion of the work, must have been hard hit
by the increase of 2 or 2 £ per cent, tax upon their wages bill which the
sickness and unemployment contributions, it is estimated, amounted
to in some trades.

f One case is reported where the employers allege that a strike was due
to the worker's contention that the employer should pay the whole
of the unemployment and insurance contributions. It is impossible
to get at the true facts, because at the same time a rise of wages was
demanded. — The Engineer, August 23, 1912.

Another case of this kind is reported by The Building News of August 2,
1912.

The Engineer argues that when insurance becomes compulsory it fur-
nishes a lever for an increase of wages, so that the ultimate burden will
rest upon the employer and the State. — The Engineer, May 26, 1911.

The Builder cites the Labour Party's contention that the workers will
agitate for a rise in wages to cover the insurance contributions, and adds,
" This is precisely the attitude that we predicted would be assumed
by the working classes towards the Act."

Mere desire for a rise of wages will not, however, necessarily result
in its achievement. But what some of the manufacturers failed to see
was the fact that modern society in general approves of the workman's
claim for a rising lot in life. In their continual struggle with employers
to improve their position, workmen must demand higher real earnings.

J Report of Special Committee containing representatives of the Labour
Party, the General Federation of Trade Unions, and the Parliamentary
Committee of the Trade Union Congress. This fear diminishes with the
extension of the Trades Boards Act.

INSURANCE AGAINST UNEMPLOYMENT 265

question who actually pays becomes of little importance.
The industry adjusts itself to the new conditions.

As to the ultimate incidence of the pecuniary cost, it
is doubtful whether there is a single economist who would
care to repeat the mistake which Senior made over the
Ten Hours Bill, and pronounce dogmatically upon whom
the charge will ultimately fall. Insurance may bring
about so much greater efficiency of labour that the cost
can come out of the increased product without burdening
anyone. It may, on the other hand, fall, in whole or in
part, upon employers' profits, or upon workmen's wages,
or upon the prices paid by consumers. This will depend
upon the varying conditions of the several industries and
of the business concerns within them.

Professor A. C. Pigou takes this view. He writes :

Whether the funds required to meet compensation or insurance
claims are collected from the employers in proportion to the wages
they pay, or whether workpeople pay a part and employers another
part, is, from a long-period point of view, a matter of small im-
portance, just as it is a matter of small importance whether local
rates are collected from landlords or from tenants.*

Many will agree with Professor W. S. Ashley when he
urges

that the benefits of insurance are so great that it will be wise to
secure them, if it can be done, whoever may have to pay for them
ultimately — even the working classes themselves, f

Certainly the representatives of labour share this view.
In the Labour Year Book of 1916 we read :

In so far as the cost has been levied, directly or indirectly, on
the wage-earner's income, it has meant, we may believe, on the
whole, a specific allocation of his resources advantageous to himself
and his family as well as to the community. And even allowing
for the contributions thus exacted from the class to be benefited,
it is probable that most of the developments of social insurance
have represented a real addition to the gains of Labour .J

* Wealth and Welfare, p. 276.

f In Everybody's Guide to the Law, the author writes : " As to who will
eventually pay the levy, or whether it will remain equally divided between
both parties, will ultimately depend on which side is the stronger and
which has the better argument."

J Labour Year Book, 1916, p. 643.

266 INSURANCE AGAINST UNEMPLOYMENT

Low Rate of Benefits.

The writers in the United States who have reviewed
the English Unemployment Insurance Scheme of 1911
have criticized the very low standard of benefits given
under it. Seven shillings a week seemed to them so low
that even considering the fact that the whole scheme was
avowedly experimental, that it covered at the outset
trades in which the average percentage of unemployment
was comparatively high, that the workman's contributions
were small, and that the cost of living was probably
lower than in the United States, the scheme was unduly
cautious.

It must, however, be remembered that it is essential
to a uniform rate to be so low as to reduce to a minimum
the possibility of malingering on the part of any of the
beneficiaries of the scheme. It must be so low that even
the worst paid labourers will not be greatly tempted to
induce their employers to dismiss them, or, being unem-
ployed, from looking for a job.

It is difficult to say what percentage of wages when
furnished as a benefit will act as a deterrent to work.
To some 90 per cent, of wages would not be desired in
lieu of the work and full wages. To others perhaps 50 per
cent, of normal wages, especially if it constituted an
" existence minimum," might be welcomed if they were
then allowed to loaf about without being under the dis-
cipline of regular employment. As a result of experience,
therefore, rather than of careful forethought, trade unions,
municipalities, states, and nations have fixed their benefits
as a rule at about 50 per cent, of the normal wages of those
insured. With the greatly increased cost of living 155.
a week is worth less than 75. in 1914.

Uniform or Graded Rate?

Because benefits must be low the well-paid work-
man will be forced to make extra provision against
unemployment. But, it is argued, if saving is still

INSURANCE AGAINST UNEMPLOYMENT 26?

necessary, why bother with an insurance scheme at all ?
Would it not, therefore, be better to have a graded system
so that workmen would obtain benefits in some relation
to their standard of living ? The working classes do not
constitute, it is urged, a homogeneous mass, and neither
their needs nor their paying capacity are the same.

Two radically different plans for the payment of benefits
have therefore been suggested — the graded system, as in
the German Old Age Insurance Scheme, and the uniform
plan, as in the French Old Age Insurance scheme. The
comparative advantages of both plans constitute one of
the debated questions of the theory of social insurance.*

An ideal scheme of unemployment insurance would
have a rate graded in relation to (i) the nature of the
workman's trade, (2) his skill and likelihood of being
unemployed, (3) his age, and (4) his wage. It is manifest
that if his trade has a high percentage of unemployment
the dues would have to be high in comparison with the
weekly benefit. Again, if he is skilled and a workman
with " the right spirit," he is less likely to lose a job
than a less skilled workman. It is not yet certain whether
age is really a factor in making for unemployment in the
individual workman. If it is a factor — and many so
regard it — then the aged workman would have to con-
tribute a higher rate than the younger workman ; f whilst,
if we are to have any approach to a fully satisfactory
scheme, a workman with a high wage needs to receive
more, even though he has to pay more than one with a
low wage.

To grade a scheme which would take account of any
one of these considerations would be difficult owing to
our existing very limited statistics. But to arrange a
scheme which would take account of all four would to-day
be impossible.

We are therefore obliged to follow the dictates of
expediency. It is impossible to construct scientific

* See Rubinow, Social Insurance, p. 352.

I See questions of Professor H. R. Seager to Frank J Warne, Hearing
on Unemployment, p. 181. Third Report, Unemployment and Lack of
Farm Labour in New York State, 1911.

268 INSURANCE AGAINST UNEMPLOYMENT

schemes of unemployment insurance on an actuarial
basis, since we cannot discover the unemployment risk.

This difficulty runs through all branches of social
insurance. In sickness insurance, for example, it is
usual to establish different rates for men and women
because they differ as to their sick rate. But still greater
is the difference in the sick rate at different ages, yet an
adjustment of dues to ages is rarely attempted. Nor
are dues adjusted to different occupations where members
of several occupations are found in the sick benefit society.*
It is only with growing knowledge of the facts and with
increased efficiency of and increased confidence in the
Government that finer and more delicate schemes of
insurance will be possible.

For many years we shall have to prepare slowly. At
first the rate will be graded according to wage — a tran-
sitional period where benefits will vary according to
levels of wage groups. When sufficient data are accumu-
lated and the administrative machinery is perfected,
benefits may take the form of a definite percentage rate
of wages. This development will be in harmony with
the varying rates of benefits of certain trade unions.
One danger will then have to be guarded against, viz.
not to accept need as a basis for grading rates of
benefits.

In Berne benefits are graded also according as a work-
man has or has not dependents. The rates of benefits
are fixed monthly, but they are not to exceed is. 2|d.
a day per person without dependents and is. 7|d. for
persons with dependents. Since they both pay the same
rate of contributions, it is clear that a differentiation is
made in favour of those more likely to be in need. This
principle, whilst it is an essential guide in the distribution
of relief, is opposed to the principle of insurance, and

* In Leipsic, for members insured individually in the fund there are
four rates of contribution, graded according to the risk of unemployment
in the occupation followed. Benefit is at the same rate for all" these
members. Persons who have been members for a long time without
claiming benefit may be allowed lower rates of premium, or higher rates
and longer periods of benefits— a further inducement to " good risks."

INSURANCE AGAINST UNEMPLOYMENT 269

ought not therefore to be invoked in a system of unem-
ployment insurance. \
/ Meanwhile it must be insisted upon that the British * \
/Government was justified in initiating a uniform rate
/ system with its comparative simplicity of administration /

and its avoidance of many technical problems which
1 the grading of contributions and of benefits creates.

To-day the "contracting out" clause offers the best
means of grading benefits, since each trade can adapt
itself to the needs of its members.

CHAPTER XVIII

THE INFLUENCE OF THE UNEMPLOYMENT
INSURANCE SCHEME ON TRADE UNIONS

IN a democratic country a fundamental consideration
with respect to every legislative proposal must be what
effect it is likely to have on those spontaneous voluntary
associations of free individuals which are the truest
expression of personal liberty. Any measure aiming
directly at interfering with them, or likely to result
indirectly in demoralizing them, is, prima facie, to be
accepted, if at all, cautiously. It might result in re-
pressing what has hitherto been regarded as the vital
force indispensable to all progress, the impulse of free
men to combine for economic and social purposes. There
is, therefore, sufficient justification for a careful examina-
tion of the probable influence of a scheme of unemploy-
ment insurance on trade union activity.

In addition to this general reason, there is the very
special consideration of the probable effects of a scheme
of compulsory unemployment insurance on the highly
developed and long-established schemes of out-of-work
benefits carried by a large number of unions.

Sir H. Llewellyn Smith, G.C.B., Economic Adviser to
H.M. Government, therefore laid down the condition that

the scheme (of unemployment insurance) must not act as a dis-
couragement to voluntary provision for unemployment, and for
that purpose some well-devised plan of co-operation is essential
between the State organization and the voluntary associations which
at present provide unemployment benefit for their members.*

* Economic Journal, December 1910.
270

INSURANCE AGAINST UNEMPLOYMENT 271

This was given legislative embodiment in the clause in
the Insurance Act providing for a subsidy to voluntary
insurance. It provided for a grant in aid which was not
to exceed one-sixth of the benefit and was not to be paid
on more than I2S. a week. It was to be granted towards the
unemployment benefit paid by any organization of work-
men, whether within the compulsory scheme or not.

Yet even more difficult than the problem of stimulating
voluntary insurance was the development of a scheme
of obligatory insurance of such a kind that it would
not compete with and adversely affect voluntary associa-
tions that provided unemployment insurance. Perhaps
the most difficult administrative problem was so to adjust
the scheme that while its benefits were not confined to
workmen for whom provision was already made by
voluntary associations, it would yet operate to encourage
the work of these associations and not undermine and
destroy them, either by competition or detailed control.*

By inquiring into the attitude of the Labour Party
and of the various trade unions towards the scheme, we
shall best be able to discover how it has affected these
spontaneous associations of workmen.

Trade Union Out-of-work Policies.

There is considerable variation in the conditions under
which unemployment benefit is payable by trade unions,
varying, as is to be expected, according to the circumstances
of different industries. For instance, as we have already
observed in the textile industry and in coal-mining,
depression of trade is usually met by working short time,
and in these industries many of the unions insure their
members not against every form of unemployment but
only against mill stoppages, pit stoppages, and the like.

* Monsieur J. Lefort goes further when he writes that " The creation
of a State Unemployment Fund, even one working in harmony with
other unemployment insurance funds, would result in the apparent dis-
appearance of the latter, and then in their replacement by the former.
But he adds an insurance monopoly is bad " (L' Assurance Centre le Chdmage
d I'Etranger et en France, vol. ii, p, 163). This view is, however, proved
to be mistaken.

272 INSURANCE AGAINST UNEMPLOYMENT

As is therefore to be expected, the trade unions which make
least provision against unemployment are those in the
mining and textile industries. Owing to the comparative
regularity of employment in the transport industries they
also rarely administer out-of-work benefit schemes.

In other industries benefit usually covers all forms of
involuntary unemployment.

The period for which benefits are provided and the
amounts paid vary with different unions. In some cases
they continue for an unlimited period, but there is, as a
rule, a limit of between twelve and twenty-six weeks, and
there are cases in which benefit is paid only for four
weeks. The amount of benefit varied in 1914 between
about 45. and 175., and often a higher rate was paid
during the first week of unemployment than in sub-
sequent weeks. Since the war the benefits have been
increased in amount. It is noteworthy that only in
some cases does out-of-work pay extend to those who
are thrown out of work by disputes in another branch
of the trade or in another industry.

The following official figures give a total of the amount
spent on unemployment insurance by the one hundred
principal unions providing unemployment benefit.

OUT-OF-WORK BENEFITS PAID BY SELECTED PRIN-
CIPAL UNIONS, 1904-13.

1904 . . . . 600,000

1905 . . . . 530,000

1906 . . . . 430,000

1907 . . . . 470,000

1908 . . . . 1,004,685

f,
I9°9 ' • • • 945,000

1910 . . . . 695,000

1911 •• .. 465,000

1912 . . . . 600,000

1913 •• .•• 495,000

During the three years 1908-10 a total of £2,645,000
was expended by the hundred principal unions on unem-
ployment benefits. In the year 1908, the year following
the crisis of 1907, £1,004,685 was distributed by these
-same unions in the form of unemployment benefits.*

* Whilst in Great Britain about one-half of the trade unionists have this
unemployment benefit to fall back upon, in the United States, as we shall
see later, probably not more than i per cent, of the workmen have any
arrangements whereby they can claim unemployment benefit.-^-Cd. 6109.

INSURANCE AGAINST UNEMPLOYMENT 273

State Subsidy to Voluntary Schemes of Unemployment

Insurance.

The Majority and Minority Reports of the Ro^al
Commission on the Poor Laws and the Relief of Distress
were in substantial agreement in recommending that
insurance should be assisted on the Ghent lines. In
this they were supported by all the British authorities
on the subject of unemployment insurance.

The majority commissioners considered that assistance
should be given to insurance effected through voluntary
associations.

If, then, the leading idea be the encouragement of voluntary
organizations, it would follow that insurance against unemploy-
ment should be developed and encouraged by assisting existing
organizations in much the same way as one might develop a system
of invalidity pensions through friendly and other kindred societies.
This view is supported by trade unionists, by economists, repre-
sentatives of friendly societies, and other eminent witnesses. The
trade unionists consider that they should be the recognized
agency to deal with that class of workers described by Mr. Long
as respectable men temporarily in distress owing to their inability
to obtain employment.*

This recommendation was embodied in Section 106
of the Unemployment Insurance Act, 1911.

Unions paying out-of-work benefits may, as we have
already noted, under given conditions claim a reimburse-
ment of one-sixth of the amount so expended, provided
that where more than I2s. a week is spent the
reimbursement can be claimed only in respect of the
123. It must be clearly grasped that this encouragement
to make voluntary provision against unemployment
more common was not restricted to any trades. It
covered all trades, and it was significant that a special
grant provided by the State and not taken from the
Unemployment Fund was voted annually for the making
of these repayments. In the year 1913-14, Parliament
voted £70,000 for this purpose.

* Report, Part VI, chap, iv, para, 582.
18

274 INSURANCE AGAINST UNEMPLOYMENT

During the first six months' operation of the Act about
one-quarter of all the workmen enjoying union out-of-
work benefits were admitted by the Board of Trade as
satisfying the conditions for a repayment. Since then
a considerable proportion of the remaining associations
have been admitted.*

The conditions for repayment aimed at guaranteeing
that those unions should obtain a refund which could be
relied upon to distribute out-of-work benefits only in
case of involuntary unemployment, who would require from
unemployed members that they sign a vacant book in
working hours, and thus give evidence that they were
unemployed either daily or at other intervals, and that
they notified to their unemployed members opportunities
for employment.

The failure, wherever it has been tried, as in Cologne
and Berne, of direct voluntary insurance, did not justify
its encouragement in Great Britain, and so assistance was
extended only to insurance through associations.!

The total number of associations recognized under
Section 106 of the 1912 Insurance Act were 483 with a
membership of 1,180,000, of which 321 men's unions had
a membership of 900,000 and 162 women's unions had
a membership of 280,000.

The payments made were as follows : —

£
1913-14 . . . . 15,100

1914-15 . . . . 114,600
1915-16 . . . . 50,700

1916-17 . . . . 13,700
1917-18 . . . . 18,300
1918-19 . . . . 7,600

Under pressure from the Committee on Retrenchment,
appointed during the war for the purpose of reducing
national expenditure wherever possible, the Government
contribution of one-sixth of trade union outlay on un-
employment benefits, which it had been making under
Part II of the Insurance Act, was reduced to one-twelfth.

* This (clause) has enabled some trade unions which did not previously
give out-of-work pay to institute it, and others to raise their rates of
benefit without raising contributions. — Labour Year Book, 1916, p. 678.

f I. G. Gibbon : Unemployment Insurance, pp. 44 et seq.

INSURANCE AGAINST UNEMPLOYMENT 275

The New Statesman accused the Government of a breach
of faith towards the unions.

The contribution to trade unions was merely the equivalent of
" the Government penny " contributed to the compulsorily insured
trades. It was part of the bargain under which trade unions and
the Labour Party accepted the scheme and helped in its adminis-
tration. Of course, this retrenchment is meant to be temporary,
and is excusable only as a war emergency measure undertaken
when unemployment was at a minimum.*

The extension of unemployment insurance to practically
all industries has resulted in the withdrawal of special
subsidies from members of voluntary associations.

Members in Insured Trades may Claim Benefits through
their Unions.

The second provision of the 1911 Act dealing with
voluntary associations has been continued in the 1920 Act.
Under it arrangements are permitted whereby members
of unions providing out-of-work benefits, instead of drawing
benefit from a local office under the rules of the Unemploy-
ment Fund, may draw benefit from the union and the
union is afterwards able to recover from that fund the
amount which the workmen would have been entitled to
draw had they claimed direct.

In order not to wean away members from their unions
or to interfere unduly with their usual policy unions are
at liberty to give such benefits, for such periods and on
such terms and conditions as they desire. Having paid
out benefits under their own rules, the unions then claim
from the Unemployment Fund a repayment of the amount
which members had a right to claim under the rules of
the fund. This procedure saves the insured members
the trouble of attending both the local oifice of the unem-

* The Labour Party felt very strongly on this subject. In Labour and
the New Social Order the Executive wrote : " The arbitrary withdrawal
by the Government in 1915 of this statutory right of the trade unions
was one of the least excusable of the war economies ; and the Labour
Party must insist on the resumption of the subvention immediately the
war ceases, and on its increase to at least half the amount spent in out-
of-work benefit."

276 INSURANCE AGAINST UNEMPLOYMENT

ployment fund to draw State benefit and the union office
for trade union out-of-work benefit. It is important,
however, to note that every insured workman, belonging
to an association or not, retains the right of drawing such
benefit as he is entitled to from the Unemployment Fund
direct through a local office.

As in the case of the provisions encouraging voluntary
insurance, so here there are conditions precedent to
the obtaining of a repayment by the unions. They can
claim only for well-proven involuntary unemployment ;
unemployed members must sign the vacant book, and
the unions must have a reasonably effective system for
the purpose of notifying unemployed members of oppor-
tunities for employment.*

Unions could not recover more than three-quarters of
what they themselves paid out in out-of-work benefit.
In this way they were interested in keeping the
claims for benefit low, and consequently were concerned
in keeping the unemployment of their members as low
as possible. The Amending Bill of 1914 provided that
workmen claiming seven shillings benefit through labour
unions must receive at least 95. 4d. per week. (It was
estimated that in the majority of cases the total benefit,
inclusive of the State benefit, was then below I2s.)
Under the 1920 Act, the union must provide not less
than one-third of the State benefit extra if members are
to claim through its offices.

The State thus, in effect, allows trade unions to spend
the amount which, had the workmen gone direct to the
employment exchanges, they would have been entitled
to draw, and at the same time it protects itself against
the unfairness of subsidizing what after all is admittedly
a war-chest, the trade union's general fund.

It is, of course, optional for union members in the in-
sured trades to claim their benefits direct from the employ-
ment exchange or to claim them through their unions.
Most unionists in the insured trades have elected to claim

* For full statement of conditions under which unions may claim
refunds, see Appendix E, First Annual Report.

INSURANCE AGAINST UNEMPLOYMENT 277

their benefits through the institutions with which they
were familiar, which had hitherto given them unemploy-
ment benefits and towards which they felt a sense of
loyalty. Up to July 1913, 105 associations with a mem-
bership of 539,775 in the insured trades made arrange-
ments whereby their members could claim benefits through
the unions and they would be refunded from the State
Unemployment Fund. Eighty-six thousand members
of unions working in the insured trades who had not
hitherto enjoyed union benefit had made arrangements
to come under the Act. There were in 1914 considerably
over 200 vacant books of associations, having arrangements,
lodged at employment exchanges for signature by unem-
ployed members, whilst in 1920 there were some 7,000 books
lodged of all union branches. 776 associations with a
membership of approximately 2,400,000 provided for un-
employment among their members. The membership of
all trade unions at the same date was about 5,250,000.

TRADE UNIONS MAKING VOLUNTARY PROVISION AGAINST
UNEMPLOYMENT.

Males.

Females.

No. of

Associa-

Membership.

Associa.

Membership.

tions.

Workpeople in compulsorily in-

sured trades (Sees. 105 and 106

of National Insurance Act)

736,107

157

Workpeople not in insured trades

(Sec. 106 of National Insurance

Act)

321

900,386

102

279,642

Other associations

223

401,522

3°>596

Total

636

2,038,015

I40

310,368

The Entente between Trade Union and Employment
Exchange Officials.

The excellent relations subsisting between the officials
of the exchanges and of trade unions is shown by the

278 INSURANCE AGAINST UNEMPLOYMENT

fact that many unions have agreed to adopt the use of
the exchanges for purposes of notification of vacancies
for unemployment. 6,732 branches of trade unions
having a benefit fund of their own, keep their " vacant
book," as the unemployment register is known, at the
employment exchange. Many of these used to be kept at
public houses, a state of affairs which led to much drinking.
Again, this system lent itself to great abuse, especially
where officials could only inspect the book at intervals
of a few days or perhaps of a week. In such cases men
would sign two or three days late, and perhaps qualify
unfairly for their union unemployment benefit. This
abuse is now avoided, since the exchange officials supervise
"registrations in the vacant book.

These officials prefer to have the union vacant books
kept at the exchange, because unemployed workmen
may be easily reached in the event of information of a
vacancy coming in which they are capable of filling. They
are thus more likely to be placed quickly, for the exchange
knows from day to day whether or not they have got work
independently of the exchange, and not merely from week
to week, when the union makes its weekly return.

The stricter control over the vacant books kept by the
exchanges is recognized as an advantage to trade unions.
This plan ensures that the book is kept more accurately.
Union officials for their part recognize the saving in
administrative expense by the gratuitous service of the
exchanges and the advantage of the Government guarantee
that the man signed within working hours and the conse-
quent resulting savings in their own funds. The frequent
intercourse between exchange officials and trade unionists,
and the strict impartiality which the former have con-
sistently shown when called upon for help by contending
parties, have promoted good feeling towards the exchanges
and confidence in their policy. It is noteworthy also
that about 1,500 branches of trade unions use employ-
ment exchanges for the purposes of meetings, etc. *

* A very grave charge has been frequently levelled against the
Unemployment Insurance Department during 1921. Unions complain

INSURANCE AGAINST UNEMPLOYMENT 279

Membership.

This provision has resulted in increasing the number
of workmen voluntarily insuring against unemployment.
This is the view of Mr. Arthur Henderson, who said :

To me one of the most satisfactory results from the introduction
of the scheme has been that it has induced many of the unskilled
organizations to take up the question of unemployment benefit
as they never did before.

It is, however, almost impossible to foresee what direct
effects the Insurance Act will have on trade unionism,
since bigger forces resulting from the war are likely to
swamp them. But it is already certain that an increase
in membership in the unions coincided with the introduc-
tion of the Government's scheme of sickness and unem-
ployment insurance.* Mr. Thomas Ackland, however,
believes that this increase has been most marked in those
unions that gave none or very little unemployment benefit. f

At the end of 1910 the trade union membership of
Great Britain was 2,446,342, and at the end of 1913 it
was 3,987,115, i.e. within three years there was a growth
in membership of 63 per cent. This enormous increase
was due in great measure to the industrial revival from
1910 onwards, of which a marked feature was the prevalence
of disputes, the occurrence of great national strikes and
the steady growth of the amalgamation movement amongst
unions. The Insurance Act, both the Health and the

that having voluntarily agreed to bear the costs of administration, and
having expended money on benefits, as authorized, the dilatory methods
of the Department results in withholding large sums from them for con-
siderable periods. Indeed, the National Sailors and Firemen claim £20,000
and the Ships Stewards' Union £30,000. They have both given notice
to withdraw from their special arrangement with the Department.
Amongst other unions who are complaining are the United Vehicle
Workers and the General Workers' Union. See Labour Research Depart-
ment, Monthly Circular, September i, 1921, p. 35.

* The Workers' Union increased from 25,000 to 100,000 in about a
year's time. The membership of the National Union of Gasworkers
has trebled in three years. The Amalgamated Society of Engineers,
growth of membership increased after the Insurance Act came into effect.
Unions of clerks and iron founders grew more rapidly than previously.

j White Paper, No. 192, p. 4.

280 INSURANCE AGAINST UNEMPLOYMENT

Unemployment Insurance sections, have had some influence
in the increase.* The Minister of Labour states f that

about twenty associations, with a then membership of 101,148,
which paid no unemployment benefit before the passing of the Act
of 1911, commenced to pay such benefit in order to qualify under
Section 105 of the Act. In addition a few associations brought
in under the Act of 1916 commenced to pay unemployment benefit
for the first time in that year.

It may be added that since the coming into operation of the
Unemployed Insurance Act of 1920, 21 additional unions, with
a total membership of 518,000, have made rules for the payment
of unemployment benefit in order to satisfy the conditions of
Section 17 of the last-named Act.

Although some non-union men now in receipt of a
benefit during unemployment will have less reason than
before for joining unions, on the whole the tendency will
be in the opposite direction. A desire to supplement
this benefit because of its inadequacy will lead many
to join unions. It is also a well-established fact that once
workmen have learnt organization for one purpose, they
more easily lend themselves to organization for other
purposes. Obligatory State unemployment insurance will
lead to voluntary trade union insurance. A new want,
as it were, is being created through the State's encourage-
ment, and soon what was a conventional luxury for the
aristocracy of labour will become a necessity for the
industrial army. It is also urged that unions will be
indirectly encouraged in their efforts to raise wages. Non-
union as well as union men, it is pointed out, now enjoying
a benefit during unemployment are more likely to refuse
a job at low wages which the unemployed man would
accept.

Anticipated Effects not Realized.

In practice, the working of this section of the Act has
been different from what was expected. It was intended

* In certain special trades there can be no doubt that the Insurance
Act was a factor in the increase (Labour Year Book, 1916, p. 105). It
is impossible to discover how far the large increase in trade union member-
ship in more recent years is due to this factor. It is estimated that the
unions now have a membership of five million.

•\ In a private memorandum prepared for the author.

INSURANCE AGAINST UNEMPLOYMENT 281

that members of the unions should be spared the trouble
of carrying in their minds two groups of rules, and of the
amounts and periods specified in these rules. Unions,
it was contemplated, would pay according to their own
rules and recover from the Unemployment Fund the
amount which their members could claim from it. It
was expected, therefore, that unions would use the repay-
ment, which they could claim from the fund, in raising
the general level of their benefits or in reducing their
contributions.*

As a matter of fact, however, the general practice of
the unions has so far been to continue their existing scales
of contribution and benefit without change, and even to
increase them, and to undertake in addition to pay over
the whole State benefit, in the same way as the State
itself would do.

The Amalgamated Society of Engineers, one of the
strongest and best administered unions, which usually
paid a benefit of IDS. a week for any period of unemploy-
ment more than three days' duration, has added to the
sum the State benefit of 75. a week. Similarly, the British
Steel Smelters' Union, which paid benefits according to
a graded scale, provided a maximum benefit of I2s. a week
for thirteen weeks, to which it has now added the State
benefit.

These two cases may be taken as typical of what occurred
in most of the older unions with well-established systems
of benefits. The Government benefit was used not to
enable the unions to increase their strike funds, or to
lower their dues, but to increasing the benefits provided
during periods of unemployment. On the other hand,
a few unions did reorganize and lower their scale of un-
employment benefits, but the joint benefit from the union
and the State is, of course, higher than that previously-
granted through the unaided efforts of the union. For
example, the Society of Coachmakers formerly gave
los. a week for twenty-six weeks. It now gives 12s.
for the first week, the " waiting week," when the State

* Cd. 6965.

282 INSURANCE AGAINST UNEMPLOYMENT

gives nothing, 8s. for fifteen weeks, and 5s. for nine weeks.
Now that the State benefit is added, it is seen that the
benefit during the first fifteen weeks is very much larger
than previously, whilst the amount of total benefits has
also increased.* The unions have acted essentially as
conduits for the payment of the State benefit to their
members. Another reason why most unions merely
added the State benefit to their normal benefits, instead
of reorganizing the whole of the financial basis of their
benefit schemes, was found in the fundamental difference
between the conditions on which benefits are granted
by the State and by unions. The Government might
disqualify from benefit any workman who threw up his
job voluntarily, even though his foreman was tyrannous
or endeavoured unduly to speed up the particular job.
But in a case of that kind the unions would provide
benefits. It would therefore seem that there is a " leak-
age " here which will result in a number of claims being
paid by the union which the officials will refuse to refund.

It is because the unions have not hitherto felt able
to take any risk of difference between the benefits provided
by the State and those provided under their own rules
that the full advantages of the scheme have not yet been
realized. Instead of arranging that their members will
be subject to one set of rules and will be certain of one
scale of benefits the unions have allowed them to remain
under two sets of rules, those of the union and those of
the State.

We have already seen that another result expected
to follow from the granting of a subsidy has not been
realized. The majority of the Commission on the Poor
Laws thought it possible that a new type of friendly
society might grow up with the encouragement received

* Another illuminating example of how the Act stimulated insurance
among low paid irregular workers was provided by the National Union
of Gas Workers and General Labourers. The union's dues in 1914 were
3d. a week for non-insured men and 4d. a week for those in the scheduled
trades. The extra id. provided the means of furnishing 33. a week addi-
tional benefit to the State 73.

Under Section 106, is. 6d. of this extra 33. was refunded to the union.

INSURANCE AGAINST UNEMPLOYMENT 283

from a State subsidy, a type of trade friendly society for
insurance against unemployment, confined to persons
belonging to the same or to kindred trades.

It is, of course, arguable that this expectation was not
realized because the scheme adopted was in the main of
an obligatory nature. But there was little warrant for
this anticipation, judging from the experience of other
countries. The Commission was betraying more of a
hope rather than foresaw an actual likelihood.

Causes of Friction.

(a) Inadequacy of the Benefit.

When the smallness of the benefit provided under the
scheme was first criticized, it was well pointed out that
the 75. a week was " just 75. a week better than nothing."
It is noteworthy, however, that critics of this amount
of benefit have always insisted on its being raised, and
not because of its inadequacy, on its being entirely
abolished.

As long as the British Government retains its existing
scheme of uniform rates of contribution, the benefit cannot
be appreciably raised. It must be fixed at such a level
that no grade of workmen will be unduly tempted to
malinger. Thus it results that the level of benefits in
such a scheme must be governed by the group of worst
paid labourers.

Compulsory insurance can be intended, therefore, to
provide only a minimum benefit. Small as it is compared
with what the workman needs to keep in good health,
it does not seem small when compared with what even
the stronger unions provided. The British Steel Smelters
provided I2s. a week for their first class and los. a week
for their second class members for a maximum period
of thirteen weeks, whilst the Amalgamated Society of
Engineers provided zos. a week in 1914. To-day, the
155. a week benefit buys even less food than 75. bought
in 1912.

284 INSURANCE AGAINST UNEMPLOYMENT

(b) Limitation of Trades.

Since the seven selected trades, really covering only two
industries, were chosen with a view to experimenting as
to the practicability of a national obligatory system of
insurance, it was obvious that room was left for criticism
whilst the experiment was proceeding. No really signifi-
cant reason could be assigned for choosing any specific
trades, whilst ignoring others — at least no reason able
to convince workmen in the non-selected trades. In
addition, there was the friction and impatience resulting
from the inevitable anomalies in the decision of the
Umpire as to which groups of workmen were engaged in
the selected trades. In the 1920 comprehensive scheme
most of these difficulties are avoided.

There was also in the early days of the Act a certain
amount of dissatisfaction produced through the ignorance
or opposition of trade union officials to the regulations on
which the Board of Trade insisted.*

Before the union officials really understood the conditions
under which refunds would be made they paid benefits
in many cases which would have been refused at the
local office. Difficulties, largely of a temporary nature,
arose as a result of the discrepancies between the inter-
pretation of the scheme on the part of the union officials
and of the State officials. It is well attested by many
unions that these constituted a real problem in the early
days of the working of the Act. It proved to be one of
the most serious sources of friction and irritation. During
July to December 1913 the Society of Coachmakers, for
example, expended £1,914 on unemployment benefit,
but only £791 was repaid by the Board of Trade, which
then administered the scheme.

The Gasworkers complained that they recovered less
than 10 per cent, of their expenditure on out-of-work

* Report of the Committee on Preliminary Foreign Enquiry Social In-
surance Department, p. 78. The National Civic Federation.

INSURANCE AGAINST UNEMPLOYMENT 285

benefits. There were three causes in operation which
tended to produce these " hard cases/'

First : As soon as the payment of benefits came into
operation under the Act, many union secretaries
failed to pay the necessary attention to the condi-
tions under which associations might pay benefits,
with the certainty of being able to reclaim them
from the unemployment fund. Many a secretary
did not wait for the necessary authorization.
Indeed, it was often difficult for them to do so.
The personal relationship between himself and
the claimant, his knowledge of the man's needs
during unemployment, and his natural optimism
resulting in the belief that his action would be
ratified, explain why many unions when the Act
first came into effect disbursed money which they
were unable to recover from the State.

Second : Officials were not careful to record the pay-
ments made with accuracy and in proper fashion.

Third : Before the administrative machinery worked
easily, a week was insufficient time in which to
arrange whether a workman had a legal claim to
benefit and where he would choose to make his
claim.

In 1912-13 there were 1,260 appeals by associations
to the Courts of Referees in which the decision was
in their favour, and 1,225 decisions against them. In
1913-14, 4,687 decisions were given in their favour, and
7,836 against them.

Most unions found it advisable to issue a general order
to their secretaries not to pay benefits without authoriza-
tion, and insistence on accurate returns from the secretaries
of the branch offices to headquarters had a salutary effect.*

(d) Cost of Administration to Unions.
Secretarial work has always been one of the least

* In addition new forms which facilitated accounting were issued. See
for example A.S.E. Monthly Journal, January 1914, p. 59.

286 INSURANCE AGAINST UNEMPLOYMENT

important of the many functions which the union secretary
has to carry on, with the result that some are not " good
writers," whilst few have such a knowledge of ac-
counting as to be able to make all the necessary returns
to ensure this refund. The additional clerical work
introduced by this scheme has therefore been a source of
irritation to many. The extra cost, as well as the difficulty
involved in keeping their accounts in such a way that
they would pass the Government's auditors, so provoked
some unions as to make them talk of throwing up the
agreement altogether. But they forgot that every con-
tract implies a consideration in return. This was another
of the difficulties which time has removed. Great re-
sponsibility rests upon the union officials in meeting
the requirements of Government auditors. This pre-
vents any laxness, and indeed sets a high standard of
administration likely to affect the unions in other
ways.*

Another difficulty during the early days of the scheme
was removed by the Amending Act of 1914. It concerned
the union branch secretary, who frequently combined
his paid office as secretary with his usual employment.
The question arose as to whether when he was an unem-
ployed member of one of the " insured trades " he was to

* Memorandum, Unemployment Insurance, by Olga Halsey. The
Society of Coachmakers paid out in 1913, July, August, and September,
£1,200. In October, November, and December, £714. Repayments
by the Government were £423 and ^368. Report, Society of Coachmakers,
October 1913, January 1914.

The Gasworkers place this extra administration expense so high that
they have spoken of throwing up their agreement with the Government
under Section 105 of the Unemployment Insurance Act. These, however,
are the exceptions.

" Let those who are inclined to place difficulties in the way by not
filling in the necessary forms for the general office and the Board of Trade
remember that if our society had not entered into an arrangement with
the Board of Trade, our members would have been left to draw benefits
direct through the labour exchanges. That I am certain would not
have been satisfactory to our protestors or advantageous to our members."
— A.S.E. Monthly Journal and Report, January 1914.

Moreover, many believers in the insurance activities of trade unions
contend that the more benefits that a member gains from his union the
firmer is its hold upon him. For this reason many unions, such as the
General Labourers' Union, welcome the opportunity to administer both
health and unemployment insurance for their members.

INSURANCE AGAINST UNEMPLOYMENT 287

receive the 75. benefit, seeing that he still had his income
as secretary. The 1914 Act provides that a workman
is not disqualified from receiving unemployment benefit
by reason only of his being still employed at some work
which he ordinarily followed outside the working hours
of his trade, in addition to his employment in an insured
trade, provided that his income from such work did not
exceed £i a week.

(e) A Possible Danger.

There is one danger in a scheme of national insurance
which as a rule is overlooked. It will require a vigilant
democracy to make certain that a scheme aiming purely
at social betterment be not used for increasing the burdens
upon the shoulders of labour.*

An editorial of the Manchester Guardian of July 24,
1915, is highly significant. " In reply to a deputation
which asked him for more taxes, Mr. Asquith, then Prime
Minister, hinted amongst other things at an acceptance of
a plan for utilizing the national insurance machinery
for the purpose. ' This point,' adds the Manchester
Guardian, ' need be mentioned only to be dismissed.'
The insurance machinery covers by no means the whole
of the poorer classes. To make it a medium of taxation
would be to inflict a definite burden on the insured person
as an insured person, and this would generally mean on
the employed person as compared with one who works
for himself or does not work at all. Taxation through
the employer would be with reason disliked, and taxation
through an Act professedly passed to confer benefits
would be compared with the seething of the kid in the
mother's milk. It can only have been through momentary
inadvertence that Mr. Asquith half appeared to give a
kind of shadow of not wholly unfavourable consideration
to this proposal."

* If the unorganized workers realize that their employers may readjust
their wages so as to place the whole burden of the contribution on the
backs of the workers, an increase in trade union membership may result.
— Revue Internationale du Chdmage, vol. i, pp. 134, 140.

288 INSURANCE AGAINST UNEMPLOYMENT

The Labour Party and Unemployment Insurance.

As was to be expected, the British Government paid
special attention to the views of the Labour Party in
shaping its scheme of unemployment insurance as well as
in its administration. The long experience which the
members of that body enjoyed in carrying on trade union
out-of-work benefits, its right as the strongest labour
organization in the world to speak on behalf of the
labouring classes, and its considerable political power,
gave the views of its representatives in the House of
Commons great weight. The basic principle of unemploy-
ment insurance was so readily accepted on all hands that
discussion of the Government's scheme has generally been
of a constructive nature.

Criticism has been of two kinds. Mr. Arthur Hender-
son, chairman of the Labour Party, well expressed
one type of opposition when he said, " the principle of
unemployment insurance is far too limited in its applica-
tion to the various trades of the country." There has
also been a constant stream of fire directed against various
details in the scheme and to its administration.

Again and again the attempt has been made to have
the scheme extended to other trades.

The following were representative views of Labour
Leaders expressed when the Government proposal was
first submitted to the country.

Mr. W. A. Appleton, Secretary of the General Federation of
Trade Unions, regarded the scheme as unduly limited. " Why,"
he asked, " were the mining and textile industries, which would
have presented no difficulties, excluded ? Why were women's
trades excluded from the scheme ? "

Mr. W. C. Anderson, then President of the Labour Party, was of
the opinion that the scheme in general constituted a great step
forward, in spite of its weak points.

The late Mr. Keir Hardie, the Nestor of the Labour Party, con-
gratulated the author of the scheme on having avoided State
intervention in the financial administration of trade unions. He,
as well as others, however, criticized the limitation of obligatory
insurance to two groups of industries. He did not at all see why
it was not also extended to all the other industries.

INSURANCE AGAINST UNEMPLOYMENT 289

The objection to the scheme of unemployment insurance most
often heard amongst labourers and their representatives was the
one made by Mr. Appleton and Mr. Keir Hardie — its limitation
to two groups of trades. Perhaps, however, Mr. Ramsay Mac-
Donald, one of the leaders of the Independent Labour Party, best
expressed " Labour's " sentiment when he said that he would
rather vote for the scheme of unemployment insurance as it was,
in spite of its faults, rather than ask at once for a bigger measure
which would run the risk of being condemned by experience.*

After nearly two years of experience, on March 3, 1914,
Mr. Arthur Henderson, on behalf of the Independent Labour
Party, moved : " That in the opinion of this House, the provisions
of Part II of the National Insurance Bill, 1911, should be extended
to workmen in certain other trades in order that the scheme of
unemployment insurance might more adequately cope with any
increase in unemployment ; that the scheme should be amended
so as to remove existing anomalies and give associations of workmen
administering it more financial assistance ; and that an inquiry
should be held into the general administration of Part II of the
Act, particularly of the provision disqualifying from benefit workmen
thrown out of employment by reason of a trade dispute."

He said : " We hope that the Government may be able at once
to announce their determination to use their power — for happily
the Act was so framed that they have not to have an amended
Act in order to extend the trades in the schedules — for a con-
siderable extension to bring in the inclusion of new trades. Then,
I think, on the general question they ought to give very careful
consideration to the question of casual and women workers. I
think that the cases of the casual worker with a low rate of pay,
and the frequency with which he is forced into idleness, and the
women worker with the very small pittance which she so often
receives, are very hard if they are at any time the victims of
unemployment. These great bodies of workers, to say nothing of
trades like the textile, furnishing, and other vast bodies of work-
men who have been left entirely outside the Act, ought to receive
immediate consideration. I know that the answer would probably
be that unemployment insurance, unlike health insurance, was
an experiment. We are prepared to admit that it was in the
nature of an experiment, but we had the experience of other places
where insurance had been tried. It is a good many years since
the Ghent system was adopted, and other countries followed that
system, and we have now had the experience of the last eighteen
months or two years to guide us, and it seems to me that at any
rate the Director of Labour Exchanges makes it clear to the House
that he is satisfied that the experiment has been a success. That

* These opinions were taken from the Labour Leader, 1911.
19

290 INSURANCE AGAINST UNEMPLOYMENT

being so, I think that the claims of those bodies of workers whom
I have already named ought to receive immediate consideration." *

These views show very clearly that the representatives
of Labour in Great Britain not only accept the scheme
of unemployment insurance, but that it was due very
largely to their influence that it was extended to include
over twelve million workpeople.

The criticisms of the Labour Party have been directed
against the low benefits provided. The 155. per week is
insufficient for the proper maintenance of the family. It
will not save the unemployed workman from the deteriora-
tion that prolonged unemployment almost inevitably
produces. It is suggested that during periods of un-
employment the manual worker should have the option
of putting in his time at self-improvement, and that he
should be able to attend, free of charge, the trade schools,
and day technical, and other classes that the local
education authority should provide.

In summarizing it may be said that in the launching
of the scheme of insurance against unemployment a
number of difficulties of a temporary nature were en-
countered and overcome. Trade unions have grown in
numbers and have not diminished in morale as a result
of it. Their administrative efficiency has improved and
their services to their members have increased. The
friction resulting at the outset from the inability of
unions to recover all the payments f made in respect of
unemployment and those resulting from the extra adminis-
trative expenses, as well as through the increased work
imposed upon officials, has slowly given way to a hearty
co-operation between them and the labour exchanges. J

* See p. 680, The Labour Year Book, 1916. See also Report of Labour
Party on Unemployment, 1921.

t This source of friction, as we have noted, is still potent.

j Even before the end of the first year's payment of contributions
under the Act, Mr. W. A. Bailward, a delegate of the London Charity
Organization to the International Conference on Unemployment, and
one qf the most trenchant critics of the scheme, said : " I have only to
add that at all these exchanges (which he visited) I found both managers
and staff enthusiastic and confident. 1 heard on all sides that things
were working smoothly with a minimum of complaints, whether by em-
ployers or workmen."

INSURANCE AGAINST UNEMPLOYMENT 291

The Labour Party of Great Britain is enthusiastically
in favour of the national scheme of unemployment
insurance, and has successfully exerted its influence to
have it extended to all the lower paid occupations and
to have the benefits increased. Thus the body more able
to speak on this subject with authority than any other
in the land testifies to the success of the scheme in its
effects on the workmen and on their organizations.

The enthusiastic support given to this scheme by all
sections of organized labour in Great Britain is quite
easily understandable. Not only does the benefit help
the working man materially during periods of unemploy-
ment, but it has an indirect influence for good on trade
union organization.

Unions suffer severely during times of trade depression
because of the inability of members to pay dues and because
of the disposition of working men to underbid one another
then. In addition, it is a period of constant friction
between working men and union officials. Often, the
expected support from the unions is not forthcoming,
whilst in other cases, where it is forthcoming, its very
uncertainty is a source of trouble. The Government
benefit will help to keep the union membership more
stable, to prevent the lowering of the morale of the work-
men and their acceptance of lower standards, and to
eliminate a cause of friction between workmen and their
organizations.

Some unions will feel the responsibility of taking care
of their members during periods of unemployment less
urgent. It might even enable them to raise funds for
the support of their members while on strikes or during
lock-outs. This consideration is only slightly offset
by the argument that unemployment insurance will
tend to exert a subtle influence to divert militant trade
unionism, fighting for the rights of wage-earners, so as to
become merely " a fraternal organization principally
concerned with drawing small and safe semi-paternal
benefits/'

CHAPTER XIX

UNEMPLOYMENT INSURANCE AS A DEVICE FOR
REDUCING UNEMPLOYMENT

UNEMPLOYMENT, as we have already seen, presents two
problems to the legislator. First and foremost, he has
the difficult task of reducing the amount of unemploy-
ment. Secondly, he must endeavour to lessen the suffer-
ing resulting from a period of unemployment through
some such device as insurance. We have hitherto been
chiefly concerned with the second problem. But these
.two problems are not entirely distinct from one another.

scheme of unemployment insurance may have a very
important influence either in increasing the amount of /
unemployment or in decreasing it.

When first introduced, schejnes of insurance against
industrial accidents and of insurance against sickness
were meant to soften the effects of industrial life and to
keep the labourers above the poor law or charity line,
and, later, resulted in an endeavour to raise the national
health by immediate prophylactic measures. Thus, whilst
they began with an endeavour to treat effects, they resulted
largely in treating causes. They not only lessened the
suffering resulting from the occurrence of the emergency,
but also resulted in a reduction in its occurrence. How
far will the British unemployment insurance scheme
tend, in a similar manner, to reduce the amount of
unemployment ?

Workers subject to unemployment may be divided into '
two groups : unemployables, i.e. those who through lack
of training or loss of efficiency find employment during
\ normal times only on rare occasions, but who are fre^

292

INSURANCE AGAINST UNEMPLOYMENT 293

quently unemployed or casually employed at a great
variety of unskilled jobs; and employables,* i.e. those who \
are normally employed, but who, owing to fluctuations of
industry, are forced from time to time to remain unpro- j
ductive.

What effect will the British scheme have, firstly, on
the problem of the unemployables ?

I. Unemployment Insurance and the Diminution of
Unemployables. f

It is a well-established fact that many, if not most,
unemployables have become so through having suffered
from recurrent periods of unemployment. The lack of
proper nourishment, the anguish of uncertainty, and the
slow ebbing away of his self-respect, tend to lessen the
unemployed workman's ability, and then his desire for
work. By providing him with certain benefits during
periods of unemployment the workman is very often
saved from having to have recourse to public or private
charity, and his efficiency is less likely to deteriorate.
Moreover, the fact that he must keep in touch with the

* During the war, however, when the demand for labour was very
great, all except those who were seriously ill could and did find employ-
ment. No unemployables existed then.

f Mr. H. A. Mess, in his recent study on Casual Labour at the Docks,
makes some significant comments with respect to unemployable work-
men. He writes : " Speaking broadly, one of the most remarkable and
encouraging features of the industrial position during the war has been
the disappearance of the so-called ' unemployable.' Men have for the
most part shown themselves pathetically eager to obtain work. Old
men have come out of the workhouse and sick men have come out of the
infirmary, and in the latter case there have been remarkable recoveries
of health under the influence of the most potent of drugs, new hope.
Men felt that there was a chance for them at last, that employers would
look at them now. Many miserable homes have been transformed by
the war — a strange commentary on our social arrangements in time of
peace."

The writer is, however, forced to modify the impression produced by
these facts. He adds : " But some men had gone too far in degradation,
physical or moral, to recover, and there were many such in the great
fringe of labour at the docks." — Casual Labour at the Docks, 1916, p. 137.

A similar tendency to provide employment to the unemployables
was soon evident in the United States when it entered the war. The
suction of the negroes northwards and their absorption into trades pre-
viously denied them was part of the same tendency.

294 INSURANCE AGAINST UNEMPLOYMENT

employment exchange, which acts as an intelligence
department, endeavouring to find him employment and
sparing him as a rule the pain of wandering from foreman
to foreman, will save him from the despair that once
characterized those in his predicament. By lessening the
need of appealing to charity, by saving his self-respect,
by helping him to retain his efficiency and his status, the
unemployed workman is less likely to develop into an
unemployable.

The long and successful experience of trade unions
with out-of-work benefits has clearly demonstrated the
fact that they act as a real preventive against the pauper-
ization and deterioration of workpeople. The well-estab-
lished claim that few trade unionists have recourse to
charity, even during extended periods of unemployment,
goes to show that unemployment insurance has been of
great assistance to workmen in their efforts to maintain
their standard of living. It is, therefore, highly probable
that the British scheme, which has now insured most
workmen, will result in preventing a very large number
from sinking into the class of unemployables.

In addition to preventing the creation of unemployables,
the 1912 scheme made specific provision for lifting certain
people out of the class of unemployables into the class
of employables. It provided that where unemployment
was due to lack of skill or defective ability, and it
appeared that training was likely to remedy the defect,
and that the burden on the unemployment fund would
thereby be diminished, then the insurance officer might
make the necessary expenditure for the purpose from
the unemployment fund. Unfortunately, practically no /
attempt was made to give effect to this provision.

By itself such an arrangement, if attempted, could not
be expected to achieve much. But if it is only a part
of a constructive scheme for dealing with the inefficient
workman and it is really operated with a desire to train
him under proper conditions, its influence will be great.
It is interesting here to recall the provision in the Em-
ployment Exchange Act, permitting the exchange to

INSURANCE AGAINST UNEMPLOYMENT 295

provide the necessary cost of transshipment of a worker
to any place where work is available. This " encourage-
ment " is likely to be of greatest value to the less efficient
workmen, since employers endeavour to attach the best
workmen to them in good and bad times. Together, these
provisions will not only help to prevent workmen from
sinking into the class of unemployables, but will help to
make labour more efficient and more mobile and, conse-
quently, help the unemployed workman to gain his
competitive wage-rate.

Even more important than both these considerations
is the fact that a system of unemployment insurance must
bring into high relief the problem of the inefficient and
of the unemployable workman. In order to keep the
fund solvent the benefits provided must, necessarily, be
restricted to a specific number of weeks ; in the case
of the British scheme this is 155. a week up to
a maximum of 26 weeks of benefit in any 12 months.
It has already been found that certain labourers are apt
to claim benefits repeatedly, and others to exhaust all
their rights to benefit. Thus the report issued on the
first six months' working of the Act states, when 15 weeks'
benefit only was allowed,

nearly 30 per cent, of those claiming had already claimed twice
or oftener, while some were claiming for the ninth, tenth, or eleventh
time . . . repeated claims by the same individual are one of
the marked features of the experience up to the present time.

It is, of course, clear that a class of inefficient work-
men are likely to become unemployable and that in
any case they constitute a bad risk. In sheer defence
of the scheme its administrators will be compelled to
adopt further measures which aim at preventing the
manufacture of unemployables. The inefficient and the
unemployable will be clearly differentiated, and society
will thus be able to treat them along lines likely to prove
most effective in rehabilitating them. By separating
them from the employables and by regarding them as fit

296 INSURANCE AGAINST UNEMPLOYMENT

candidates for medical and educational treatment the
problem of the unemployed will be greatly clarified.

We may, therefore, conclude that the British scheme
of unemployment insurance will have the effect of focus-
ing public attention on the problem of the unemployable,
that it will tend to prevent the absorption of workmen
into that class during periods of unemployment, and that
many inefficient workmen in danger of sinking lower will
be trained and raised to a higher industrial level.

II. Unemployment Insurance and the Regularization of

Industry.

The major problem, however, is not the unemployable
workman, but it is the employable workman temporarily
unemployed. He is representative of the large body of
workers. He is the normal type of unemployed work-
man to-day, and it is, therefore, necessary to inquire
what effect in reducing unemployment a scheme of
unemployment insurance will have on him and his group.

Pour Groups of Tendencies make for the Diminution of
Unemployment.

Among the influences introduced by the Unemployment
Act for the diminution of unemployment it is convenient
to distinguish five principal groups :

1. Those arising from the administration of the Act
through the employment exchanges.

2. Those due to the fact that the burden of providing
benefit is thrown upon workmen, employers, and the
State in such a way as to give all concerned an interest
in diminishing unemployment.

3. Those which necessarily follow from the greater
regularization in the expenditure of the community.

4. Those following from a number of specific pro-
visions directly aimed at encouraging regularity of
employment.

On the other hand, there is the apparently inevitable

INSURANCE AGAINST UNEMPLOYMENT 297

tendency of insurance against an emergency which is not
altogether accidental and involuntary to increase the
occurrence of that emergency. It is, therefore, necessary
to consider :

5. Tendencies in the opposite direction making for an
increase of unemployment.

Unemployment Insurance may encourage Unemployment.

As regards the last of this group of considerations,
which will be taken up first, since it constitutes one of
the gravest arguments against unemployment insurance,
it may be urged that insurance may quite conceivably
increase the irregularity of employment by weakening the
motives which do at present influence employers to some
extent to find their men continuous work.

There are two such groups of motives in operation,
one economic, the other human. The economic motive
impels employers to take some trouble and incur some
risk to keep their labour force together. The advantages
of being instantly ready for returning prosperity, the
improvement in factory spirit that comes from having
a permanent staff, the lessening of cost in running the
employment department, the costs involved in training
new men unused to the establishment, the diminution in
the output and the increase of commodities spoiled through
inexperience, are all important considerations to the
employer who is anxious to run his plant efficiently.

The human motive frequently forces an employer to
pay workmen part wages when not working at all or to
manufacture for stock even when it is quite hazardous
for him to do so. Sheer humanity will make him desire
to prevent his workmen from being destitute and becom-
ing a public burden. But when the employer knows thai:
the workman has an insurance fund to fall back upon
he is hardly likely to feel the same responsibility towards
him. Especially is this likely to be the case when the
employer is himself forced to contribute towards the
fund. He may then feel that not only has he the right

298 INSURANCE AGAINST UNEMPLOYMENT

to engage his workmen just as discontinuously as he sees
fit, but that he has actually paid in advance conscience
money to soothe him for his misdeeds.

It is quite easy to overrate the importance of these
considerations, yet the believers in the absolute selfish-
ness of all employers would be surprised to find the
existence of these motives at least occasionally in making
any investigations.

To overcome these dangers it has been suggested that
employers of irregular labour should be penalized. The
minority members of the Poor Law Commission did not
go so far, but urged that " no person shall engage any
man for less than a month/' excepting through the
unemployment exchanges. Perhaps now that over
twelve million workpeople are obliged to register in
the exchanges these special measures will not prove
necessary.

In addition to lessening in the motives of employers
to keep their men regularly at work opponents of unem-
ployment insurance point out that such a scheme may
actually increase unemployment through its influence on
workmen. They may be tempted, it is urged, to be
unemployed and receive unemployment benefits when
wages are low, or to make unemployment last longer
than would otherwise have been the case. Even though
the most stringent efforts be made to prevent malingering
it is asked whether the tragedy of all great reform move-
ments that the unforeseen results will be greater than
the foreseen, may not apply also to insurance against
unemployment .

The force of this consideration is, however, greatly
lessened now that the exchanges may refuse to pay
benefits to workmen who, they can prove, are guilty of
malingering. A test has been established. Do they
refuse suitable employment in the meaning of the Act ?

i. Unemployment Insurance and Employment Exchanges.
As regards the first of these five groups of influences
we may conclude broadly that the linking up of unemploy-

INSURANCE AGAINST UNEMPLOYMENT 299

ment insurance with the machinery of the employment
exchanges will help to make them more effective for
diminishing unemployment. Over twelve million workers
who might not otherwise have registered at the exchanges
have been obliged to do so, and, consequently, employers
are induced to send to them for the employees who are
necessarily registered there, and indirectly exchanges
have gained somewhat in popular approval as institutions
engaged not merely in gathering statistics of unemploy-
ment or in finding employment for a limited number of
workmen, but also as the agencies for distributing cash
benefits.

It has been rightly pointed out that if employment
exchanges depend for their effective initiation or in-
auguration upon unemployment insurance being associ-
ated with them, it is equally true to say that no schemes
of unemployment insurance can be worked except in
conjunction with some apparatus for finding work and
testing willingness to work such as is provided by the
exchanges. The two systems are complementary.

One of the immediate results of the Act was to make
it obligatory on all insured members to communicate
with the employment exchanges as soon as they became
unemployed. It thus brought together the workman in
search of work and the employer in search of a work-
man. If in this way suitable work could be found for
the unemployed workmen, they were required to take
the work offered them and could not then draw benefits.
If, however, such work could not be provided, they were
held to be unable to obtain suitable employment and
benefits were allowed.

The duty of exchange officials to endeavour to find
jobs for the unemployed is reinforced by the considera-
tion that the less efficient they are, the larger will be the
claims on the fund. It is, indeed, one of the merits of
the contributory method of financing the scheme that
it makes it the obvious interest of employer, employees
and the State to keep unemployment as low as possible,
and the State working through employment exchange

300 INSURANCE AGAINST UNEMPLOYMENT

officials has the machinery as well as the motive for
trying to reduce unemployment.

The establishment of the British chain of employment
exchanges has resulted in two fundamentally important
changes in the unemployment situation. First, adminis-
trative machinery for dealing with unemployment is being
organized and a body of effective data collected. The
President of the Board of Trade thus described the re-
adjustment in governmental machinery which the new
policy towards unemployment had necessitated. " In
the prospect and pressure of the very considerable duties
involved in the administration of the exchanges and the
scheme of unemployment insurance, the Government
reorganized the Labour Department of the Board of
Trade so that there should be a distinct section devoted
to that work and to kindred subjects. One of the
functions of that section is to act as a kind of intelligence
bureau, watching the continual changes of the labour
market here and abroad, and suggesting any measure
which may be practicable, such as co-ordination and dis-
tribution of Government contracts and municipal work,
so as to act as a counterpoise to the unemployment of
the labour market, and it will also, we trust, be able to
conduct examinations of schemes of public utility, so that
such schemes, if decided upon by the Government and
the Treasury, can be set on foot at any time with know-
ledge and consideration beforehand, instead of the hap-
hazard, hand-to-mouth manner with which we try to
deal with these emergencies at the present time." *

The success achieved by the employment exchanges
system and of the bold scheme of unemployment insur-
ance has been largely due to the smooth working of this
new machinery. It is noteworthy that a committee of
experts, including Sir W. H. Beveridge, were at work on
the problem of co-ordinating and distributing Government
contracts and municipal work, "so as to act as a count er-

* Winston Churchill, President of the Board of Trade, May 19, 1909.

The Labour Department of the Board of Trade has since been organized
into an independent Ministry. The first Minister of Labour was appointed
in 1917.

INSURANCE AGAINST UNEMPLOYMENT 301

poise to the unemployment of the labour market," some
time before the war broke out.*

Secondly, the working of the unemployment insurance
system will provide, and has already begun to provide,
such information as it has never before possessed. The
report of the Royal Commission on the Poor Laws in
1909 said :

We have found ourselves unable to answer two elementary
questions. There are no statistics available which enable us to
compute, even within hundreds of thousands, how many persons
are at any one time simultaneously in distress from unemploy-
ment ; or whether this number is or is not greater, relatively or
absolutely, than the corresponding numbers for other countries,
or for our own country at previous times.

Since the introduction of insurance a source of the
most valuable information has been opened out. The
first report on the workings of the Unemployment Insur-
ance Act has been hailed as second in importance only
to the epoch-making reports on the Poor Law. It is
universally conceded that on the basis of established
facts alone can an intelligent and radical handling of
every part of the most serious social evil of the day be
attempted. Now we are collecting the facts relating to
employment and unemployment for over twelve million
employees.

2. All Parties are concerned in reducing the Amount of
Unemployment.

As regards the second group of influences affecting the
amount of unemployment the attempt is made to prevent
unnecessary idleness, by making it more burdensome to
each of the parties interested, if they fail to do so. Work-
men and employers pay directly for the benefits given to
those who are unemployed. In this way it is clearly to
their interest to keep the total amount distributed in
benefits as low as possible.

* This committee ceased its deliberations on the outbreak of the war.
It is to be hoped that a commission to investigate the whole of this problem
will be appointed by the Government very soon,

302 INSURANCE AGAINST UNEMPLOYMENT

There is special provision in the Act enabling the
authorities to raise the rates of contribution, and of
lessening the period of benefit if it is found that the drain
on the fund is so large as to threaten to exhaust it tem-
porarily. If, however, it is found over a period of years
that the rates of contribution are either too low or too
high in view of the established scale of benefits, it is con-
templated that there should be a revision of these rates,
and that in the revision it was provided in the early Act,
though not in the revised scheme, there might be a
differentiation between trades and branches of trades
according to the amount of unemployment recorded in
them. It of course follows that only by reducing un-
employment can the contributors to the fund hope to
escape with small payments.

The 1920 Act contains a clause enabling trades to
contract out of the compulsory schemes. It is believed
that the joint industrial councils which have been estab-
lished in a number of trades will desire to develop their
own arrangements for meeting unemployment. When
those who are best informed about an industry have the
management of the unemployment insurance scheme for
that industry the likelihood of the best measures being
taken for reducing unemployment is perhaps greatest.
Certainly the inducement to do so will be greater than
it is when the costs of unemployment are pooled between
all industries. Also, the costs of administration are
expected to be less. A fuller discussion of this question
is taken up in the next chapter, but it should be pointed
out that perhaps the main purpose of the contracting-
out clause of the Act is to reduce the amount of unem-
ployment in the trades which take advantage of it.

3. Regularization of Expenditure will help the Regularization

of Industry.

The third cause tending to reduce unemployment
arises from the indirect effect of the regularization of the
expenditure of the insured workers. Their benefits,
supplemented by their savings and borrowings, would

INSURANCE AGAINST UNEMPLOYMENT 303

help to equalize the amount which they spend during
dull times, and in active times. This would necessarily
tend to regularize their demand for certain commodities,
and consequently to regularize the production of those
commodities. The irregularity and consequent elements
of uncertainty in the manufacture of commodities con-
sumed by the workers would tend to be diminished.

This consideration would be of greater significance if
the scale of benefits was higher. More ingenious, perhaps,
is the fourth group of causes consisting of specific pro-
visions directly aimed at encouraging regularity of
employments.

4. Specific Provisions aimed at Regularizing Industry,
(a) A Refund to Employers.

The provision of the National Insurance Act of 1912, to
the effect that " When an employer has employed a man
continuously throughout a period of at least 45 weeks
in the year he may recover one-third of the contributions
paid for that man," would undoubtedly strengthen the
desire of employers to keep posts occupied as far as
possible by the same men. In this way the employer
was stimulated to adopt " the concentration method of
engagement " to keep a fairly fixed staff regularly em-
ployed, and thus to avoid the wastes and uncertainties
which result from having a huge labour turnover.* But
this part of the Act has not been taken advantage of by
employers as much as was expected. f Mr. Lloyd George
in his budget provided for a rebate to employers of
£200,000 a year. 3: Actually, very much less has been
claimed.

* See speech in House of Commons, May 4, 1911.

f White Paper No. 192, p. i.

j The Amending Act of 1914 required that employers shall pay 45 weekly
contributions in the year in respect of any workmen, which need not
be for 45 weeks of continuous " employment." It fixed a flat-rate rebate
of 35. for every such employee. This eliminated the need for all calcula-
tions of the actual amount which the employer had paid and the pro-
portion of the refund.

An ingenious method for discouraging casual labour was suggested
by the Pgqr I«aw Commissioners of Great Britain., By levying an " em?

304 INSURANCE AGAINST UNEMPLOYMENT

The number of applications entertained by the Board
of Trade in respect of the year 1912-13 was about 26,500,
covering 708,500 workmen, in respect of whom a refund
of £124,000 was claimed. The amount actually refunded
was £114,980 in respect of 656,577 workmen, or an average
of 35. 6d. per head. The refund made constituted 13*6
per cent, of the estimated total contributions of employers.
The administration of this section involved considerable
labour, and an attempt was made in the National Insur-
ance (Part II Amendment) Act of 1914 to simplify it.
This provision does not appear in the 1920 Act.

One of the motives for including this provision in the
original scheme was to lessen the opposition from em-
ployers that was expected. As a matter of fact, those
responsible for steering the measure through Parliament
were astonished to find so little opposition to it.

(b) Encouragement of Short Time.

The plan of working short time in times of depression,
instead of dismissing some men and keeping the rest on full
time, was encouraged by the 1912 Act by offering induce-
ments to employers to adopt it. In the case of workmen
put on systematic short time during a period of depression,
the contributions both of employers and of workmen
might be remitted altogether. This provision also
aimed at reducing the labour turnover and at keeping
the workman attached to his establishment. Inci-

ployment termination due " on employer and employee at the termination
of an engagement it was urged that a threefold advantage would result.
First, it would discourage termination of employment on either side
without good reason. Secondly, employers would have an inducement
to regularize their employment and to lessen the quantity of casual
employment as far as possible. The more casual their methods of engage-
ment of labour, the greater would be the amount of " employment ter-
mination due " which they would have to pay. A very small expense
of this kind at a time when employers are paying careful attention to
the problem of eliminating all wastes is calculated to have a greater
influence than is at once apparent. And thirdly, in so far as the levying
of this due did not have the desired effect in reducing casual labour, it
would afford a source of revenue, which might defray the cost of some
other proposal aimed at achieving the same result or for paying for the
keep of the unemployed. This proposal has not received legislative em-
bodiment,—-Report of the Royal Commission on the Poor Lawst pp. 410-11.

INSURANCE AGAINST UNEMPLOYMENT 305

dentally it might be noted that to work a man at
short time during a period of depression was by far the
most effective and socially advisable method of meeting
unemployment that has yet been devised. Casual work
was also discouraged to some extent automatically by
making casual workmen and their employers pay com-
paratively heavier contributions than those engaged in
more regularized work. This was, of course, justified on
the actuarial principle that the greater the risk the higher
should be the premium.

An employer before proceeding to put his workmen on
short time might make an application to the Department
for a ruling that the circumstances are such, and the
proposed method of working short time is such, as to
make a refund to him possible under the section. Owing
to the good state of trade relatively little advantage was
taken of this section during the first year's operation of
the scheme.

In 1911-12 30 applications, covering 3,190 work-
people, were granted, and in 1913-14 41 applications,
covering 15,009 workpeople, were granted. In the former
year refunds were made in 10 cases amounting to a total
of £112 and relating to 491 workpeople, and in the next
year the refunds amounted to a total of £400 in 19 cases,
covering 18 different employers and relating to 2,574
workmen.

This provision does not appear in the 1920 Act.

The 1912 Act provided that a contribution of 2jd.
each was required from employer and workman for
every separate period of employment of a week or less,
except where the period of employment was two days or
less. Thus a workman who had two separate periods
of employment of three days each in a week paid two con-
tributions, i.e. 5d. altogether, and his employers also pay
5d. ; whereas had he been employed throughout a week
continuously by one employer, he and his employer would
each have paid 2jd. only. If the workman obtained

306 INSURANCE AGAINST UNEMPLOYMENT

employment for two days or less the rate of contribution
was id. for each day or less. Ordinarily, employers and
employees paid at the rate of £d. in respect of a day's
employment, and so it resulted that even the reduced
daily contribution worked out at a rate considerably
above the ordinary weekly rate.* But this clause was
not included in the new Act.

Now, in respect of casual work a most ingenious pro-
vision was made which shows how carefully thought out
this Bill was before being enacted. It is a well-known
fact that unemployment is most acute amongst casual
labourers, and it is generally accepted that the institution
of the employment exchange can be more efficacious in
helping them than any other group of labourers. Special
provision was, therefore, made not merely for unemployed
labourers to register there and for employers to avail
themselves of its services whenever they felt disposed to
do so, but to make it advantageous to the latter to engage
all their workmen through that channel. In this way it
was hoped to be able to establish a unified labour market
and the means of decasualizing labour.

The provision in question enabled an employer who
engaged men through the employment exchange to treat
all the periods of employment of the same or different
workmen, as though a single continuous period of employ-
ment of one workman. It further provided that in
respect of men engaged by him through an employment
exchange that arrangements may be made whereby it
will undertake for him the keeping and stamping of
insurance cards and unemployment books. In other
words, an employer who used the employment exchange
might pay according to the amount of labour he has used,
even though the employment has been discontinuous, and
though he has not always had the same man, and in

* " The Government now has the power under the amended Insurance
Act to offer the London docker, through a scheme of registration, sub-
stantial advantages in the shape of absolute security against the possi-
bility of having to stamp his own card in order to obtain work, and the
shifting of all except id. of the yd. insurance contributions to the employer
in cases where the man only works one day in the week."

INSURANCE AGAINST UNEMPLOYMENT 307

addition the exchange will save him trouble and con-
siderable incidental expenses. Labourers, too, although
they have no power to influence employers to avail them-
selves of these special provisions, are given corresponding
rights. Labourers engaged through the exchange by one
or more employers with whom an arrangement has been
made are allowed to pay at the rate of a single contri-
bution per week, however many separate engagements
they may have had. Employers who thus arrange for
an exchange to keep and stamp the unemployment books
are required to deposit with the Department a sum
sufficient to cover the estimated contributions of both
employers and workmen for three months, or such lesser
period as might be agreed upon between them and the
Department.

That this arrangement has been acceptable is proven
by the fact that about 300 employers, with over 95,000
workmen, took advantage of it during the first six months
of the Act's operation.

As was to be expected, employers of highly casual
labour were induced to make arrangements with ex-
changes.

Some of these schemes * (says the official report) relate to
large bodies of casual labour employed in the insured trades, e.g.
that of the South Wales ship -repairers, covering altogether about
34 employers and 9,000 men ; others, as at Leicester, cover all
the building trade employers and workmen of a district, f

It is patent that with workmen registering, immediately
on becoming unemployed, with employers voluntarily
engaging workmen from the exchange, and with provision
for insurance during unemployment, that for that group,
at least, unemployment as a practical problem is in hand
and well on the way to a solution.

* First Report on the Proceedings of the Board of Trade under Part II
of the National Insurance Act, 1911, Cd. 6965.

t It has been suggested that still another rebate might be allowed to
employers in return for an agreement to take from the exchange during
the year a definite quantum of labour force, with a certain average dis-
tribution week by week. — The Prevention of Destitution, pp. 200, 201.

308 INSURANCE AGAINST UNEMPLOYMENT

(d) Rebate to Efficient Workmen.

The Unemployment Insurance Act aims at fairness as
between employers and employees. As we have seen,
in respect of the refund for short time and in arrange-
ments with exchanges respecting casual work, employees
share with employers the advantages of the special pro-
visions. It was, therefore, to be expected that the benefit
of the special refund to employers keeping their workmen
regularly employed, who thus prevent a drain on the
insurance fund, would be balanced by some special refund
to regular workmen who do not have recourse to its aid.
This was provided in the clause which allows any work-
man in respect of whom at least 500 contributions have
been paid, at or after the age of sixty, to recover from
the unemployment fund the amount, if any, by which
his own contributions, exclusive of those of the employers
and the State, exceed the amount of benefits drawn by
him from the fund with compound interest at 2j per
cent. If the workman dies after reaching the age of
sixty, but before claiming a refund, that amount may
be paid over to his personal representatives.*

It has been urged that as employees are themselves
unable substantially to influence whether or not they
shall be regularly employed, it is inadvisable to make
this provision. But it is conceded that within limits
employees can and do have some influence to the extent,
at least, that the more efficient the workman the less
likely he is to be unemployed.

More important is the consideration that unless some
special provision is made to placate the employee who is
regularly employed, he may object to a scheme of unem-
ployment insurance as being a method of subsidizing the
inefficient workman at his expense.

As we have seen, a number of these clauses have been

* Having regard to the provision of this section of the Act, a workman
who js entitled to withdraw a part of his contributions should consider
very carefully whether it is advisable for him to do so, unless he has
finally ceased to follow an insured trade. For every 293. drawn by him
at the age of sixty he loses the right to unemployment benefit to the extent
°f ;£3 33- od. — See National Insurance, by Carr, Garnett, and Taylor, p. 369.

INSURANCE AGAINST UNEMPLOYMENT 309

withdrawn as involving too much labour for the results
achieved. But it must not be forgotten that they are
not inherent in any scheme of general unemployment
insurance. Though they might have resulted indirectly
in affecting the number of claims on the insurance fund,
they were, strictly speaking, concerned with a totally
different problem.

Insurance is a form of saving in advance against a given
exigency. These clauses aimed at preventing the exigency
from arising. Insurance applies to large numbers and
aims at the sharing of risks. These clauses affect only
individual employers and employees. The British unem-
ployment insurance scheme is compulsory now on prac-
tically all employers and employees, whilst these provisions
affected only those who elected to take advantage of them.

These considerations are all the more important when
it is considered that the idea of compulsory unemploy-
ment insurance, free from all trappings, cannot yet be
said to have emerged from the experimental stage, and
to have shown itself convincingly successful. Pessimists,
at least, are waiting to see how the fund will weather
a protracted period of depression. In order to make
certain that the insurance function of the Bill, which is,
of course, its primary object, should prove successful, it
was suggested that these extraneous matters should be
thrown overboard. Certainly, the difficulty of adminis-
tering some of the clauses aiming at the diminution of
unemployment encouraged such an attitude and finally
succeeded in its object.

On the other hand, it must be clearly grasped that the
provision of insurance does not detract from the urgency
of the problem of reducing unemployment to its lowest
possible limit. On the contrary, it, as it were, holds up
the problem to the white light. The size of the problem,
the acceptance of public responsibility for it, the cost
to the employer, the cost to the employee, the allotment
of State funds and the consequent periodic discussions
encourage attention to the problem of eliminating un-
employment.

310 INSURANCE AGAINST UNEMPLOYMENT

Now, the importance of these special clauses lies not
so much in the fact of what they achieved or failed to
achieve, but rather in that they serve as a jumping-off
board for a new activity of the State in grappling with
certain prospects of the problem. Casual labour, a huge
labour turnover, methods of engagement of labour de-
structive to the workmen, these are the problems which
unemployment insurance proper cannot attr^k. But the
British scheme foreshadows the directions in which
their solution will be found.*

REFUNDS UNDER THE ACTS OF 1911 AND 1916.

Year.

Refunds in Respect of
Workpeople Continu-
ously Employed.

Refunds in Respect of
Short Time Workers.

Refunds of Contribu-
tions to Workpeople
aged 60 and over.

1913

—

112

—

1914

113.107

204

—

1915

120,475

2,578

245

1916

94.035

410

532

1917

107,405

773

1918

"7.035

3,082

1919

i37.242

— —

",253

Sir H. Llewellyn Smith claimed that

the combined effect of these provisions is to give substantial
advantage both to the employer and to the workmen in respect
of regular and continuous employment as compared with casual
engagements. This discrimination is justified both equitably and
actuarially by the saving to the Unemployment Fund which results
from the diminution of claims for unemployment benefit.

But their administration has proven to be expensive and
temporarily at least they have been thrown over.f

* One of the reasons for introducing special provisions for refunds in
the 1911 Act was to make it more acceptable to representatives of em,
plovers' organizations. Now that they are educated as to the need of
unemployment insurance these provisions have been withdrawn.

f Return to the House of Commons, containing explanatory memoran-
dum with regard to the scheme for insurance against unemployment,
May 1911, by H. Llewellyn Smith.

INSURANCE AGAINST UNEMPLOYMENT 311

IV. Conclusion.

We may conclude that the British scheme of unem-
ployment insurance introduces factors which tend to
increase the amount of unemployment and others which
tend to diminish it.* The latter are more important than
the former. The most important effects such a scheme
can be made ^ have on the problem of reducing unem-
ployment are fourfold. The unemployables may be
weeded out and their problem thus made more easy of
handling. All parties to the wage contract are given an
interest in reducing unemployment. Expenditure will be
regularized. We shall experiment with and ultimately
gain more ability to deal with the problem of regularizing
whole industries as well as the output of individual fac-
tories. In consequence, the efficiency of the individual
plant will be increased, and the national wealth will be
increased.

* For a brief and lucid statement of regularity of employment and
wages, see chap, ii, Wages and Prices, by Philip Snowden.

CHAPTER XX
THE SCHEME AT WORK

The Selection of Trades.

ONE of the most difficult, as well as the most important,
of the tasks which fell to the lot of the Umpire was to
decide exactly which groups of workmen came under the
1912 Act. This particular difficulty would not have
arisen if all workmen in all trades earning less than a
certain wage had been insured. But since " the Govern-
ment could not be responsible for a universal scheme of
unemployment insurance " * at that time, the necessity
for the demarcation of selected trades arose. The com-
plexity of modern industrial conditions made this process
extremely difficult, and so an Umpire was appointed in
order to give employers and workmen a cheap and expe-
ditious mode of obtaining authoritative rulings as to
which trades were included in the scheme.

With regard to the application of the scheme of unem-
ployment insurance to " certain trades," Mr. W. A.
Bailward wrote :

Our English experience shows one thing pretty clearly, and
that is that there is no halfway house. If the principle of compul-
sion is once accepted in certain trades, it must eventually be extended
to all. The anomalies which have already manifested themselves
under a partial scheme make its extension practically inevitable.
The decisions of the Umpire as to what is an insured trade and
what is not are altogether bewildering both to those who have to
administer the Act and to the men themselves. The illustrations
given to me by various officers were as follows : A man is working
at one end of a drain. He is insured because he is doing new
construction work. Meanwhile the man at the other end of the
drain is relaying old work. He is not insured.

* Churchill in the House of Commons, May 1911,
312

INSURANCE AGAINST UNEMPLOYMENT 313

A French polisher polishing a window frame is insured. The
same man polishing a wardrobe is not insured. A large firm of
tank-makers in East London are excluded simply because of the
thickness of their plates and the length of their rivets. And there
are many other similar anomalies arising from day to day. The
only possible solution appears to be the extension of the Act to all
trades, and that is a very big business.

It has been suggested that the difficulties of legal
definition might have been lessened had the business
of the employer and not the nature of the work in which
the workman is engaged been the criterion upon which
the decision of the Umpire turned. This method was,
however, inadmissible for at least two reasons. First, it
would operate unfairly as between one employer and
another ; e.g. if a colliery company repaired its own build-
ings, insurance contributions would not be payable,
whereas they would be payable if the company employed
a contractor. Secondly, new difficulties would be created.
The difficulties of deciding whether a particular business
came under the definition and which of the workmen were
included, would probably be in many cases insuperable, e.g.
to give a common example, is a " builder, paper-hanger,
and undertaker " engaged in the building trade or not ?

Despite the great difficulties involved in the proper
demarcation of trades at the very inception of the
scheme,* it was found that the number of cases which
came up for the decision of the Umpire began to diminish
after its first year's operation. The cautious views of
the administrators of the scheme were summed up as
follows : " Compulsory insurance against unemployment
in scheduled trades appears to be administratively prac-
ticable. Some sort of demarcation of the insured trades
has been effected."

* The First Annual Report stated that with regard to mill sawyers
and joiners : "It has been hard to draw a line between the furnishing and
the building trades, particularly in regard to fittings of wood." " In
the case of blacksmiths, the difficulty has been how to differentiate between
the smith who is employed in mechanical engineering and the foreman
engaged in the manufacture of heavy forgings, the latter trade having
been held by the Umpire to be outside the scope of the Act," — First Annual
Report, pp. u, 12, 46.

314 INSURANCE AGAINST UNEMPLOYMENT

There is, however, some danger in attempting an
estimate of a scheme in seeing only the difficult cases
on the margin and in over- emphasizing the very real
and complex questions that constantly occur there.
But whilst these doubts arise in hundreds of cases, millions
of individuals from the inauguration of the scheme have
known very definitely what were their new obligations
and benefits.

At the end of the first year's operation of the scheme
about two and a half million workmen in the scheduled
trades were insured.

Extending the Scheme.

But it was evident, as Mr. Bail ward rightly pointed
out, that once the principle of compulsion was accepted
in certain trades, it must eventually be extended to all.
About one and a quarter million workpeople were insured
under the Amending Act of 1916. Of the total of about
four millions then insured, some half a million were women.

It is noticeable that on the outbreak of the war in
August 1914 the claims for unemployment benefit jumped
up and remained high for about four months. This
corresponded with the period of uncertainty, when the
moratorium was first put into operation, when capital
was nervous, and depression was the consequent result.
As soon as the demands of war were felt unemployment
fell continually, until in the insured trades it was reduced
far below the normal in peace time.

The period 1915 to 1920 afforded a good opportunity
for passing a measure of universal unemployment insur-
ance. Had this been done, .then the fund would have
collected very large reserves with which to meet the
period of depression that was expected. This was actually
recommended by the Reconstruction Sub-Committee at
the beginning of 1918. Unfortunately, however, this
advice was not acted upon by the Government until
towards the end of 1920. Over twelve million work-
people were insured under this new Act, i.e. some

INSURANCE AGAINST UNEMPLOYMENT 315

eight million who were not previously insured against
unemployment now have provision made for them.
Some three million women are included in the
scheme.

The scheme of compulsory insurance embodied in the
Unemployment Insurance Act, 1920, applied to sub-
stantially all the employed persons for whom contri-
butions are payable under the National Health Insurance
Acts, except persons employed in agriculture or private
domestic service and outworkers. Under this scheme, as
from the 8th November, 1920, every employer of persons
above the age of sixteen who are employed under a contract
of service of apprenticeship, whether payment is by piece
or by time, who are not in one of the excepted employ-
ments, is liable to pay contributions on his own behalf,
and (unless that person holds a certificate of exemption)
on behalf of the employed persons.

Detailed figures are given for two periods of payments
made. Table I, p. 316, applies to about two and three-
quarter million people, and Table II, p. 317, from the year
1916, to about four million insured workpeople. Table
III gives the number of payments made and the amounts
paid during each week of the period Jan. 2 to June 4,
1920, a period of very active employment.

Malingering— Repetition of Claims.

Sir W. H. Beveridge collected some instructive figures
respecting repeated claims in trade unions before the
national unemployment insurance scheme was intro-
duced. Their experience with unemployment benefits
shows that in most trades there is a small proportion of
workmen who through inefficiency or personal habits
have unemployment concentrated upon them.

The London Society of Compositors found that about
seven-eighths of the total payments in 1904 (£14,000
out of £16,000) went to men who had to claim again in
1905. It had amongst its members a " small but appre-
ciative body of men who are, to all intents and purposes,

316 INSURANCE AGAINST UNEMPLOYMENT

TABLE I.

PERSONS INSURED AGAINST UNEMPLOYMENT. CLAIMS MADE.
AND BENEFITS PAID UNDER PART II OF THE BRITISH
NATIONAL INSURANCE ACT OF 1911 AT SPECIFIED
PERIODS, JANUARY 31. 1913. TO FEBRUARY 1916.

Number Insured

flaimc Mwlr

Benefits

Mi,

Specified Month).

Number.

Amount

1913

January 3i
February 28

•2,297.326
2.338.699

165,642
87,646

64,522
185,222

24,200
57.700

March28 ..

3.373.273

65.577

Iil,i6l

34.700

April 25 ..

2.413.528

63.477

68.043

21.100

2.461.018

74,186

63,639

19,200

June 27

2,501,492

68.058

47.379

14.300

July 25

2.508,939

68.806

57.372

17.100

August 29 ..

—

78.229

70.081

20,900

September 26

—

77.266

85.897

25,100

October 31

—

110,242

145.856

41,300

November 28

—

92,106

154.079

44,200

December 26

—

90.215

168.551

49,100

1914

January 30

—

163,300

317.704

93.ooo

February 27

—

86.465

211.654

60,400

March 27 .

—

75.183

147.225

40,400

April 24 .

—

63.794

120.535

33.500

May 29 -

2.276,258

83.884

127.925

34.900

June 26
July 31 .

2,304.889
2.325.598

73.743
103,730

3L300
42,800

August 28 .

2.34L508

180,233

—

45,900

September 25 • •

2.367,821

133.692

—

76,900

October 30

2,388.821

124,730

—

69,100

November 27

2.219.980

76,656

—

39.300

December 24

2.115,536

56,049

—

30,200

1915

January 29
February 26

2.115,536
2.115,536

73.395
43.«3

—

40,150
21,400

March 26

2,136,027

32,916

—

12,300

April 30

2,136.027

33.538

—

9,800

May 28

2.077.725

23.434

—

6,200

2,077.725

22,867

5.400

2,019,683

31.179

—

6,800

September 24 • •

2,019,683
2,019,683

21,663
22,329

—

ji.NX)

5.400

October 29
November 26
December 31

2.019,683
1,952,060
1,952,060

27.195
21,316

27.765

—

6,600
5.800
9,460

1916

January 28
February 25

I.95I.8I7
I.95I.8I7

20,359
16,959

10,200
6,900

* Including both claims for direct benefits and claims for
through associations which have made arrangements with the
Trade under Section 105 of the National Insurance Act. 1911.

INSURANCE AGAIN.ST UNEMPLOYMENT 317
TABLE EL

INCOME AND EXPENDITURE OF THE UNEMPLOYMENT
FUND, 1913-19.*

YMW YmA+tl owt~

'-•-•-£-

g_a__0__

Bakmexot

C2T £JKKO •Bft* •

J^r.

*«« —

*-ts~

£ i

1913

1.622.038

378,000

208,318

1,648.907

1914

1.802.940

002.000

530,593

3,211.401

1915

1,649,641

546.666

418,701

4,724,124

1916

1.694,115

538.863

78.985

6.711,504

1917

2.699.932

746.372

34-312

10,075,467

1918

3.277,123

I.007.54I

86,159

14,222.112

1919

2.871.640

994.402 152.721

18.030.356

Prepared by the Ministry of Labour.

TABLE HI.

UNEMPLOYMENT BENEFIT.

Pmymemts Made and Amounts Paid during Each Week of ike
Period January 2, 1920. to Juue 4, 1920.

Di:*

. Week

•»*i

«—-*•*—*

A^i: ~: .-i..;.

annary 2

52.904

25.563

anuary 9

55.203

28.149

annary 16

55.838

29.145

annary 23

58.451

29,419

annary 30

58.047

28,943

^ebruary 6

53.379

27.060

February 13

47.812

25.512

February 20

49.699

29.286

February 2-
March 5

46.642
45.508

23.668
23.000

March 12

44.330

22.977

March 19

38.786

19.184

March 26

36.765

18,210

\?nl 2

3L969

1^739

April 9

29.506

15^89

April 16

28.925

15.287

ipril23

27.941

14.424

26.6S6

13.782

Hay 7

25.447

12.961

May 14

25.379T

I2.798f

Mav 2i

25.3H

12.636

Mav 25

25.369

12,976

June.

24.725

12.584

Total .

•

914,622

^469.592

f Estimated.

318 INSURANCE AGAINST UNEMPLOYMENT

chronically unemployed, and draw full or nearly full
benefits every year." *

81 members received in 1905 within 2s. 6d. of the
maximum benefit (£26 for 38 weeks out of 52).

58 of these men drew the maximum also in one or more
of the years 1903, 1904, 1906, 1907, and 17 others of
these men received £18 (equal to 26 weeks' benefit) during
at least one of these other years. Everyone of the remain-
ing 6 drew substantial though smaller sums.

Of the 58 members who received the maximum benefit
in one of the years 1903, 1904, 1905, 1906:

21 received the maximum amount in 2 years out of the 5 years 1903-7.
25 received the maximum amount in 3 years out of the 5 years 1903-7.

7 received the maximum amount in 4 years out of the 5 years 1903-7.

5 received the maximum amount in 5 years out of the 5 years 1903-7.

Every one of the five received in addition non-provident
benefits, special grants from funds raised by voluntary
subscriptions ranging from £4 to £14. The aggregate cost
of these five men to the society during five years was
£667, or at the rate of los. a week each for the whole
period. The aggregate cost of the 81 men in the five
years, excluding non-provident benefits, was over £5,500.

In 1903 the London Consolidated Society of Journeymen
Bookbinders had 1,342 members.

572 signed for unemployment benefit in 1903.

Of these 572, 377 (65 per cent.) signed for it in 1904.

Of these 572, 279 (45 per cent.) signed for it in 1905.

Of these 572, 298 (52 per cent.) signed for it in 1906.

160 (nearly 12 per cent, of the average membership)
signed each of the four years 1903-6. This 12 per cent.
of the members sustained 36 per cent, of the recorded
unemployment.

Facts such as these indicate a small group of men in regard to
whom the function of unemployed benefit is rather to keep them
out of the market altogether, lest they cut the rate of wages, than
to tide over the seasons.

* See Unemployment : A Problem of Industry, by W. H. Beveridge,
1909, pp. 140, 141, 142,

INSURANCE AGAINST UNEMPLOYMENT 319

There can be little doubt that other unions in other
trades would also show a fringe of casual workmen
attached to them. It is clear that the experience of the
national unemployment insurance scheme has not been
unlike that of unions providing benefits for unemploy-
ment. But the provisions limiting benefits has been a
check — a justifiable check — against a repetition of a very
large drain on the fund by inefficient workmen.

REPEATED CLAIMS IN WEEK ENDING SATURDAY,
JUNE 28, 1913, FOR THE UNITED KINGDOM.

Per Cent.
6,901
4.4°5

ist Claim
2nd Claim
3rd Claim
4th Claim
5th Claim
6th Claim
7th Claim
8th Claim
9th Claim
loth Claim
nth Claim

2,494

535
265

43'2
27-6
15-6
7'7
3'3
1-7
0-6

0-2
0-1

o-o

O'O
lOO'O

This table shows that, within six months of the com-
mencement of benefits, nearly 30 per cent, of those claiming
had already claimed twice or oftener before, while some
men were actually claiming for the ninth, tenth, or
eleventh time.

There is evidence that repeated claims were most
characteristic of the London Division. This was due to
the prevalence there of the building trade, and the gene-
rally greater instability of London employment.

This interesting sidelight on the industrial quality of
the applicants is supplemented by the significant fact
of the unexpectedly small average amount of the benefits
granted, viz. 8s. 6cl., or a little over a week's benefit per
claim. Since some drew benefit for as many as 37 days,
it is clear that a large number of applicants must have
drawn very small sums.*

• In a number of French trade unions the average benefit was even less
than it was in England. In 1911 it was 7! days, and in 1912 only 4 days.

320 INSURANCE AGAINST UNEMPLOYMENT

It must, however, be recalled that these figures apply
to a period when trade was exceptionally good and un-
employment low, also, that the applicants were unem-
ployed for a week before benefits were distributed, and,
lastly, that the employment exchange made special efforts
to find work for those whose unemployment meant a
drain on the unemployment fund.

The whole picture presented by the statistics of men
falling out of employment and men remaining unemployed
is that of " a constant irregularity of employment even
when employment is, at its best, a ceaseless shifting from
job to job," a recurrent loss of productive power and
of wages in the interval between one job and the next.
It seems clear that much could be done, and needs to
be done, towards reducing unemployment by shortening
these unproductive intervals by hastening through labour
exchange organization the passage from employment to
employment and by reducing the amount of " labour
turnover." Transference from one employment to another
would in very many cases be quite unnecessary if employers
adopted a more thoughtful policy in their methods of
hiring and firing workmen.*

But even though we know that nearly 30 per cent, of
those claiming had already claimed twice or oftener
before, it is still impossible to give detailed statistics of
the number of individual workmen who claimed benefits.
We may, however, estimate that only one-tenth of the
insured members claimed benefits during the first six
months' operation of the benefit features of the scheme.
Nine-tenths of all insured workmen claimed no benefit. f

Previous to any discussion of the importance of malin-

• From these facts Mr. W. A. Bailward concludes, perhaps hastily,
that it is becoming the custom to apply to the fund for benefit even in
the shortest periods of unemployment which men would formerly have
tided over for themselves without difficulty. See also Revue Internationale,
p. 496, April- June 1914.

f There were 559,021 claims made during the first six months of the
payment of benefits ; 2,508,939 unemployment books were distributed
by the end of that period. There was thus roughly one workman who
claimed benefit for every five workmen. Since, however, some workmen
made repeated claims, it is likely that only about one-tenth of the insured
workmen claimed unemployment benefit during this period.

INSURANCE AGAINST UNEMPLOYMENT 321

gering we are therefore forced to delimit the question to
one-tenth of the insured workmen actually claiming
benefit. Nor can it be maintained for one moment that
more than a small proportion of this 10 per cent, is volun-
tarily unemployed. As we have already seen, the labour
exchanges in their double capacity of finding employ-
ment for the insured unemployed and of preventing
fraud on the funds tend to keep malingering low. More
important even is the fact that no workman may receive
more than one week's benefit for every five weeks of
contributions. His temptation to claim is thus offset by
his fear of exhausting his right to benefit. Lastly, those who
are subject to a very high percentage of unemployment
are squeezed out, and lose membership. But even though
the importance of malingering has been over-emphasized
by the opponents of State insurance, its possibility must
always be considered and efforts made to prevent its
growth. This problem will become more serious as the
scale of benefits is increased, as it so clearly is likely to be.

It is, of course, true that even if comparatively few
workmen in their desire to gain unemployment benefits
are successful in malingering or cheating, their success is
sufficient to produce an acute problem because of its
seductive effect on others.

On the other hand, fraud and malingering can be pre-
vented if there is adequate and effective machinery for
so doing. " It is a definite administrative problem which
must be met by appropriate methods of administrative
control." *

* See Candid Review, 1914, pp. 77-108, and also Rubinow, Social In-
surance, pp. 496, 497.

Dr. Friedensburg, writing with sickness insurance in mind, says that
" Insurance has been the very factor which has led to universal de-
generation and demoralization."

In a long pamphlet on the " Undesired Consequences of German Social
Policy," Professor Ludwig Bernard, of the University of Berlin, fears
that the effect of the sickness insurance scheme is to instil into the insured
a nervous hunt for pensions, a consciousness of bodily ills that leads
to unconscious or often conscious exaggeration in the hope of higher
pensions. " The workers instruct each other in methods of simulation."
— Review in Quarterly Journal of Economics, pp. 561-78, of Ludwig
Bernard's Unerwiinschte Folger der deutschen Sozialpolitik. See also
Malingering and Feigned Sickness, by Sir John Collie, assisted by Arthur

322 INSURANCE AGAINST UNEMPLOYMENT

During the period of intense depression of 1921 a very
large number of workpeople exhausted their right to
benefit. By August I3th over 127,000 unemployed
workpeople had exhausted their benefits.*

How Employers' Contributions have Worked in Practice.

From the introduction of the scheme up to July 1913,
onty twenty-four cases of prosecution of employers for not
paying dues were reported. One case occurred where the
employer deducted his own share from the workman's wages
and another that of obstructing an inspector. In the other
twenty-two cases the offence charged was failure to pay
contributions due. The skilful educative policy of the
Board of Trade and the popularity of the scheme accounts
for the fact that only one workman was prosecuted and
fined for refusing to apply for an unemployment book.f

But a proposal so novel in Great Britain as the pay-
ment by employers of contributions towards their work-
men's unemployment benefit could not be expected to
pass without considerable objection. The argument that
the extra tax would ruin industry was produced as a
matter of course. J

H. Spicer Arnold, 1913, and Oder der Einfluss der Sozialen Gesetze auf den
charakter, by Professor H. Quincke, 1905.

* By September i2th over 290,000 had exhausted their benefits, and it
is anticipated that about 100,000 workpeople will fall out of the scheme
weekly, until November 3rd, when they might again claim benefits. See
p. 208. The fund of some £20,000,000 accumulated during the war has
been exhausted. Benefits are now being paid in part from loans obtained
from the Treasury.

f Cd. 6965, p. 13. This does not, however, mean that all those who
should have been insured became so in fact.

t Unequal taxation of employers for health and unemployment in-
surance is illustrated as follows : —

(a) Firm employing 100 hands with a profit of £10,000.

Employers' levy : sickness, £65 ; unemployment, £58. Total, £119,

or i -19 per cent, of profit.
(6) Firm employing 2,000 hands with a profit of £10,000.

Sickness, £1,300; unemployment, £1,083. Total, £2,383, or

23'83 per cent, of profit.

See A Tax on Industry, a pamphlet showing the inequality of the
employers' contributions to the Health Insurance Act, W. Pretty.

Note also view of Employers' Parliamentary Association. " If em-
ployers as such must be taxed for sickness insurance, it should be upon
a profit basis, and not upon the number of employees." — Redman
Omerod.

Similar views with respect to unemployment insurance are frequently
met with.

INSURANCE AGAINST UNEMPLOYMENT 323

Like the employers who opposed the Ten Hours Day
Bill on the ground that the profit was made during the
last, half-hour of the day, and therefore the working-day
could not be shortened, so their prototypes of to-day
argued that it was precisely the payment of 2|d.
which employers contributed under this scheme which
meant the elimination of all profits. A very interesting
study published in the Economic Journal shows that this
contribution of 2jd. a week for every worker amounted
to about i per cent, of the amount expended in wages.*

SHOWING RELATION BETWEEN CONTRIBUTIONS
AND WAGES.

Industry.

Average
Weekly
Wage, 1906.

Employers' Contribution as
Percentage of Wage.

Sickness.

Unem-
ployment.

Total.

Sawmilling and machine-joining

s. .d.
22 7

Per cent.
I' I

Per cent.
0-9

Per cent.
2-0

Engineering and boilermaking

27 3

0'9

0'7

1-6

Ship and boat-building and repairing

28 II

0-8

0'7

i'5

Building

28 6

0-8

0-7

1-6

Perhaps the most persistent complaint against this
feature of the Act, the employers' contributions, is due
to the fact that they are calculated on the basis, not of
the risk of unemployment involved in each shop, as of
the risk of accidents under the Workmen's Compensation
Act, nor with reference to the profit of the firm, nor of
its ability to pay the tax, but merely with reference to
the number of workers employed. It is therefore alleged
that the existing method of computing the tax is unjust
to industry.

The practical difficulty, however, is to provide other
methods which will prove more satisfactory. When
employers of labour urged Mr. Lloyd George to calculate

* James Cummison, Economic Journal, September 1913, p. 371.

324 INSURANCE AGAINST UNEMPLOYMENT

contributions on the basis of profits, he answered that
he had been advised that there were great practical diffi-
culties in the enactment of such a proposal. If an income
tax is difficult to collect, a tax to be used for the unem-
ployment insurance fund based upon profits would be
equally difficult. Such a means of paying the employers'
contributions might, in addition, raise objections among
the workers. They would see their contribution deducted
from their wages, with no stamp for the employer's share,
and could be persuaded only with some difficulty that he
was making his contributions by cheque.

Another complaint against the Act frequently made
by employers results from their objection to the large
amount of clerical work which is involved in the proper
administration of the scheme. This, it must be recalled,
is due in part to the added burden of the health insurance
scheme. It is particularly irritating to them and waste-
ful of their time to have two different sets of inspectors
examining their books for purposes of sickness and un-
employment insurance respectively, even though there are
obvious administrative difficulties in the way of combining
the functions of inspection in one official.

But we have, however, seen that employers who under-
take to engage all their workmen through employment
exchanges are spared this extra clerical work.

Owing to the expenses involved — the extra labour in
keeping the books, the indirect charges and the actual
payment for stamps — a weak effort was made by em-
ployers to prevent the unemployment insurance scheme
from coming into effect. Since most of the fire of the
opponents of social insurance was, however, directed
against the health insurance proposals of the Govern-
ment, those dealing with unemployment went by without
much attack.

This was due in part to the fact that the unemploy-
ment insurance scheme was much better thought out.
Even opponents of the scheme write that

the atmosphere surrounding the law, so to speak, is different
from that of the health insurance action. The scheme was care-

INSURANCE AGAINST UNEMPLOYMENT 325

fully worked out, was based upon reasonably accurate data, and
probable difficulties were foreseen and provided for.*

The most serious argument used against it was perhaps
the contention that the increased wages roll which would
result from the employer having to pay 2|d. a week
extra for every workman in his employ would be shifted
on to the community in the form of increased prices.
It is a matter of fact that no such rise of prices took
place directly traceable to the employers' contributions.

On the whole, however, the traditional reverence for
law resulted, first, in the manufacturer's acceptance of the
scheme, then in his giving it a fair trial, and finally in
his treating it as a part of modern industrial conditions.
His attitude was best illustrated by the director of one
of the leading machine shops when he said that he con-
sidered the Act a necessary evil, and that he thought that
most manufacturers shared his opinion. The day has
not yet arrived when employers will welcome social
measures that impose burdens upon them without at
least some complaint. But many employers now recog-
nize the advantages which the scheme yields them.

First, the close contact between employers and the
employment exchanges saves them, if they so desire, the
expense of advertising for new workmen, and, since
the employment exchange can draw workmen from other
parts of the country, this important function of industry
is accomplished better and without direct expense to
themselves.

Second, the record of service and constancy of employ-
ment which is furnished them by the unemployment
card aids in their choice when hiring workmen. This
helps the employer to sift out the good workmen from
those whom he regards as shifty, cantankerous, and in-
efficient men who apply for work. The scheme thus
gives him the opportunity of eliminating a serious source
of waste. The substantial reduction of the burdens of
the Act resulting from the policy of exchanges in stamping

* Report of the Social Insurance Department, National Civic Federation,
p. 67.

326 INSURANCE AGAINST UNEMPLOYMENT

cards for employers has also aided in the smooth working
of the scheme.

Although it was assumed that the cost of adminis-
tration of the scheme would not be more than 10 per
cent, of the receipts, during its first two years it was
about double of that estimate. Mr. Herbert Samuel, Home
Secretary, stated that the cost of administration had
been about 20 per cent, of the receipts, but that the ex-
penses in future years might be reduced, as the machinery
now developed should be able to deal with a larger number
of insured persons.

The British Government was wise in beginning its
scheme of unemployment insurance during a period of
rising prosperity. The demands on the fund were com-
paratively few, and the contributions regular, so that
a reserve was collected which was distributed in times of
depression. Indeed, it is now believed by all competent
observers that the success of a plan of compulsory insur-
ance against unemployment will depend chiefly upon
two things : first, whether or not during times of pros-
perity contributions will keep up, and large accumulations
of funds be thus secured, in order that the heavy pressure
during times of depression may be met ; second, whether
or not boards charged with the administration of the law
will encourage special studies and investigations to be
made of the causes of unemployment with a view to
prevention.

If these things are neglected, it is generally anticipated
that the schemes will in the end be disastrous, involving
enormous pressure upon the central Government for
large funds at a time when business depression is greatest,
and contributing little or nothing to the determination
of causes or to their removal.

After nine years' experience it is possible to state that
compulsory State insurance has proven to be adminis-
tratively practicable. " No insoluble difficulties have
presented themselves as regards the definition and the
test of unemployment."

The Unemployment Fund was able to meet the some-

INSURANCE AGAINST UNEMPLOYMENT 327

what heavy call on it during the early days of the war
with ease, and the scheme has proven elastic enough to
be easily modified to meet conditions which were hardly
anticipated when it was instituted.*

The success of the scheme has gained for it the support
of all sections in the community. No party or group of
individuals exists in Great Britain who want to see its
withdrawal. It has with the goodwill of all and with the
enthusiasm of many become part of the very texture
of industrial life.

At the termination of hostilities in November 1918
the State scheme of unemployment insurance applied
only to a limited number of trades and provided benefits
which were entirely inadequate having regard to the
increasing cost of living. This provision was evidently
insufficient in view of the dislocation of industry and
consequent unemployment. The " Out-of-Work Dona-
tion " Scheme was passed to meet the special emergency.

Out-of-work Donation Scheme.

Free unemployment allowance was provided under the
scheme of out-of-work donation which was brought into
operation on November 25, 1918, to non-commissioned
members of H.M. Forces and to civilian workers.

The " Original Scheme " for members of H.M. Forces
applied for twelve months following their demobilization.
Special extension schemes were applied to later periods.
Under the " original scheme " the ex-service man who
was unemployed within the twelve months following his
personal demobilization was able to draw donation up
to the following maxima : —

(a) 26 weeks at 295. a week, with allowances for depen-
dent children at the rate of 6s. for the first child
and 35. for each additional child under the age
of 15.

* The abnormal and feverish activity which has resulted from war
conditions had the same effect on the fund as a period of normal trade
activity and prosperity, but the continuing depression of 1921 must be
met by other means. See Appendix IV.

328 INSURANCE AGAINST UNEMPLOYMENT

(b) For a subsequent 13 weeks (or in the case of dis-
abled men 20 weeks) at the rate of 2os. a week,
with the same allowances for dependent children.

The out-of-work donation scheme applied to civilian
workers between November 25, 1918, and November 24,
1919. The first grant of donation to civilian workers
was for a maximum period of 13 weeks in respect of
unemployment occurring during the six months ending
May 24, 1919. The grant was at the same rate as that
provided for H.M. Forces. Applicants between the ages
of 16 and 70 were required to show that they had
become employed contributors under the National
Health Scheme at least three months prior to November
25, 1918.

The local Employment Committees adjudicated on the
grant of donation.

Although the Insurance Acts remained in force and
contributions were compulsorily payable by employers
and workpeople, payment of benefits was in effect sus-
pended, since the rate of donation was much higher than
the rate of benefit and since workpeople could draw
donation without exhausting their rights to benefit under
the Unemployment Insurance scheme.

Ex-Service Men.

Special arrangements have been made and are in opera-
tion to-day to assist ex-service men to obtain suitable
employment; the local employment committees have
interviewed the men and have interested employers in
the question. Each exchange has a special branch to
deal with disabled ex-service men working closely with
the Local War Pensions Committee and the Training
Branch of the Ministry of Labour. There is a special
exchange for disabled men in London. The national
scheme for the employment of disabled ex-service men is
also administered through the exchanges.

INSURANCE AGAINST UNEMPLOYMENT 329

The War Period Generally.

The exchanges were an indispensable part of the
machinery required for the mobilization of the national
resources for the purposes of the war ; had they not
existed, it would have been necessary to improvise some
less adequate machinery for the purpose. It was fortunate
for the most effective prosecution of war that they
were in existence and that the managers and staffs had
acquired some experience of the transfer of labour.
' The Committee of Enquiry into the Work of the
Employment Exchanges/' which reported in 1920, states
that the war work and the work connected with demobili-
zation was well done under adverse circumstances, such
as unsuitable buildings and improvised staffs, and that
it must have involved immense strain on the managers
and other responsible officials.

Administrative Costs of Exchanges and Unemployment

Insurance.

The five main functions of employment exchanges are
usually ignored when criticism of their cost is made.
Attention is drawn as a rule only to their placement
function, and the whole cost of the exchanges divided
by the number of " placings." This is entirely misleading.
When, therefore, it is stated that for the year 1913 the
total cost of the department divided by the number of
placings gives a quotient of about 175., and for the year
1919-20, under the exceptional conditions then prevailing,
the figure is just under £3, it is essential to ask what
other activities were attempted by the Department. The
accompanying table gives the total cost of the employ-
ment exchanges from 1909 to 1920.

Two suggestions for lowering the cost of " placings "
are made. It is found that the Tavistock Street Ex-
change, which is almost purely a building trade exchange
for London, estimates the cost at slightly over 6s. per
case. Further specialization of exchanges is likely to

330 INSURANCE AGAINST UNEMPLOYMENT

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successful are expected to result in a great economic saving, partly in

INSURANCE AGAINST UNEMPLOYMENT 331

show a similar reduced cost for " placings." Secondly,
the trade unions are the most economic agency for dealing
with trade unionists. Special recognition of their work
of placement should be made and encouraged.

The total cost of administration of the employment
exchange system and unemployment insurance for the
financial year 1913-14 was £769,036, of which £545,593
was attributed to unemployment insurance and £219,443
to employment exchanges. An appropriation in aid not
exceeding 10 per cent, of the income of the unemployment
fund was made from the fund to the Board of Trade
towards the cost of administration.* The State, over
and above its contribution of £602,000 to the Unemploy-
ment Fund, paid £303,183 towards the cost of adminis-
tration, or £905,000 altogether. The gross contributions
of employers and workmen in that year amounted to
about £900,000 in each case. Thus the three parties
contributed roughly the same proportions to the cost of
unemployment insurance.

The contributions of employers, workmen, and the
State to the Unemployment Fund in the year 1913-14
amounted to £2,408,000. In addition, £303,000 of the
costs of administration was defrayed by the State over
and above the 10 per cent, received from the Unemploy-
ment Fund, and the sum of £15,167 was expended in
grants to associations under Section 106. The total
income of the Unemployment Scheme in 1913-14 was

time otherwise lost in search of work and partly through the more perfect
adaptation of the workman to the job. It is not sufficiently realized that
a system on similar lines of a national property (reality) exchange could
fulfil similar functions for those who wish to sell or buy property. Indeed,
the same underlying idea could be embodied for satisfying a number of
general needs.

It will be noted that this system of exchanges offers the means of
organizing the labour market by employing the two devices of measure-
ment and publicity. It might very well be that in any attempt to convert
a competitive State into a Socialist Commonwealth that machinery
similar to that of employment exchanges will be very largely developed
and extended.

See A Socialist Commonwealth for Great Britain, by S. and B. Webb.

* In 1917 the Ministry of Labour was founded and took over certain
departments, including the Employment Department of the Board of
Trade.

332 INSURANCE AGAINST UNEMPLOYMENT

£2,726,000, and the total cost of administration in the
same year was £549,593, i.e. 20 per cent, of the income.
It is interesting to compare with these figures the admin-
istration expenses of six of the largest fire insurance
companies for the year 1912. They show the costs of
management to average 20-2 per cent., and on commissions
15-8 per cent.

The total number of claims to benefit was much larger
than was anticipated. They are particularly significant
as coming in a year of good employment. For the financial
year 1913-14 the total number of claims to benefit was
1,092,288, being about 50 per cent, of the estimated number
of workpeople holding unemployment books. Of course,
not one in two actually claimed benefit. Some workmen,
however, claimed three, four, and even more times in
the year.

Can the costs of administration be lowered ? It is
believed that under the 1920 Unemployment Insurance
Scheme the costs of administration will be substantially
reduced for two main reasons. The 153. a week benefit
is as easily distributed as the 73. per week benefit, and
this change may be expected to reduce the administrative
expenditure in proportion to the benefits.

The large increase in the number of trades covered by
compulsory insurance will result only in a relatively
small increase of the administrative expenditure. It
remains to be seen, however, how large this reduction
will be. Certain it is that not until the exchanges are
allowed to devote themselves to their own specific prob-
lems and not used by other State departments for all
manner of other tasks shall we obtain the figures for
administrative expenses that are really significant.
But 10 per cent, of the Unemployment Fund will probably
suffice to cover the whole of the administrative costs of
the scheme.

CHAPTER XXI
NEXT STEPS IN UNEMPLOYMENT INSURANCE

THE Unemployment Insurance Act of 1920 is the result
of experience with and criticism of the working of the
earlier Acts. Detailed discussion of the older Acts is
therefore no longer necessary, whilst it is as yet too early
to criticize the workings of the new scheme. But two
main problems must be considered, because they fore-
shadow the most likely developments in unemployment
insurance. It is proposed that unemployment benefits
should take the form not of a fixed amount, but of a
proportion of the worker's regular wage, which should be
adjusted to the number of dependents. This benefit, it
is suggested, shall in no case be less than half the worker's
wage, whilst in the case of married men with children it
should rise to a maximum of 75 per cent, of their
average earnings. The second proposal is that each
industry should be obliged to bear the burden of its own
unemployment. The 1920 Act permits trades to con-
tract out under certain conditions, and it is urged that
the Government should support the establishment of
special schemes.

The Meaning of Maintenance.

One of the most frequent criticisms of the Unemploy-
ment Insurance Scheme, has centred on the small benefits
which it provides. Fifteen shillings a week benefit is
certainly inadequate for the maintenance of the unem-
ployed workman, whilst if he is married and has children
it is insufficient to prevent a very grave deterioration of
physique and morale.

333

334 INSURANCE AGAINST UNEMPLOYMENT

It is manifest that to the skilled workman earning an
average £4 a week this benefit is likely to be not only low
but subversive of his standard of living, and yet a com-
paratively low rate seems unavoidable if malingering on the
part of low paid workers is not to be encouraged. Thus,
to-day the wages of the worst paid workmen are made to
control the rate of benefits of the best paid workmen.
The question has therefore been raised whether the British
Scheme ought not to introduce a rate of benefits graded
in relation to the average wage of different groups.
Skilled high paid workmen might then have one rate
of benefit and low paid unskilled workers another. It
would necessarily be more complicated than the existing
scheme, but it would more than compensate for that
by allowing benefits to have some direct relation to the
normal standard of life of those who are insured.

Two methods for achieving this object have been sug-
gested. All insured workmen might be divided into
three grades according to their earnings, and a special
scale of contributions and benefits calculated for each
wage class.* It is evident that difficulties would arise
in the case of workmen who shift from one wage group
to another. The employer with workmen of different
wage groups would have to keep complicated accounts.
The classification of workmen into three rigid groups
would make a large number of cases seem arbitrary.
A man earning, say, £2 i8s. would be in one wage group,
and another earning £3 might be in a different group.

The second proposal is that "the rate of benefit should
be 50 per cent, of the average earnings of the insured
person, with 10 per cent, additional for a dependent
wife and 5 per cent, for each dependent child under
sixteen, provided that the total benefit should not exceed
75 per cent, of the average earnings, nor should it in
any case exceed £5 a week." Here, too, the adminis-
tration is much more complicated than in the case of
a flat-rate benefit, but the arbitrary character of the
proposal to classify three wage groups is avoided.

* See the Massachusetts Bill, chap. xxix.

INSURANCE AGAINST UNEMPLOYMENT 335

It may be at once conceded that this proposal does
not satisfy the strict theory of insurance. Differentiation
on the basis of marriage and of the size of the family
savours rather of schemes of relief. It should, however,
be noted that on the assumption that all men will marry
and have children this proposal can be justified on the
principles of insurance. But few will be concerned to
defend it on that ground. Its advocates would urge
rather that such a rate of benefits would do as much as
is administratively possible to lessen the fear of unem-
ployment.

It is pointed out also that we have a considerably
increased and improved body of statistical information
to enable the risk of unemployment to be calculated.
It is, therefore, wholly unjustifiable that the rate of
benefit paid to-day should be, in view of the changed level
of prices, about the same as, or even less than, it was
when the scheme was introduced. Fifteen shillings in 1921
bought the unemployed workman less grocery than did
seven shillings in 1912. In order that unemployment
insurance shall have its maximum influence for good,
benefits must be as high as is possible without unduly
stimulating mali gering.*

The Labour Party Proposal.

The Labour Party, insistent that the present depression was far too
serious to be met by drawing on the unemployment insurance fund and
its probable loans from the Treasury, proposed, early in 1921, (i) that a
person for whom no work was available at the employment exchanges,
or through his or her trade union, should be entitled to maintenance ;
and (2) that the rate of maintenance (including benefits under the Un-
employment Insurance Act) should be at least 403. per week for each
householder, and 253. per week for each single man or woman above the
age of 1 8, with an additional allowances for dependents.

The payment of benefit, it urged, should be continued so long as a per-
son remains unemployed. The additional benefit ought to be a direct
charge upon the national revenue.

It will be noted that the Labour Party proposed lower benefits than
did the group of employers and employed responsible for the proposal
discussed of benefits in proportion to wages. But both insist that the
State should admit the claim of all adult wage-earners who are willing
to work and capable of working to either suitable employment or
adequate maintenance throughout their working lives, and that it should
satisfy that claim by legislation. They both agree also in the view that
the existing unemployment insurance benefits are not in themselves

336 INSURANCE AGAINST UNEMPLOYMENT

Industrial Maintenance of the Unemployed.

Criticism of the British scheme of unemployment
insurance has not been confined to suggested improve-
ments in detail. Since the war there has been a steadily
growing amount of support for the proposal that each
industry should bear the * burden of its own unemploy-
ment. It has received support from many employers
and large bodies of employees. As will be seen later,
certain employers of labour in Great Britain have already
introduced schemes of unemployment insurance inde-
pendent of the compulsory scheme. They are founded
on the view that it is the function of the employer to
provide continuous employment or maintenance. The
Rowntree scheme, the Cadbury scheme, and the Bradford
Dyers' scheme represent only the first results of this idea
on the employers' side. The Building Guilds' scheme of
industrial maintenance, the programme of a committee
representing employers and workmen in the building
industry, the scheme for those engaged in the insurance
industry, and the proposals of the Transport Workers'
Federation, to name but a few of these schemes, are
indicative of the direction in which thought on this subject
is now turning amongst employees as well as employers.

The " Rota " System ol Industrial Maintenance.

Experience with the " Rota " system of unemployment
and maintenance during the war is a precedent influencing
those who are proposing the adoption of this principle.
It is offered as a justification of the two contentions of
its advocates, that each industry is properly liable for
the maintenance of its own unemployed and that respon-

sufficient to prevent the household in receipt of them from deteriorating
week by week in both physique and morale.

In September, 1921, the Labour Party issued a manifesto on the Un-
employment Crisis. The last paragraph read: "Our whole emphasis is
placed upon the provision of work, either of a kind engaged in the pro-
duction of commodities for exchange or directed to ends of social utility.
If, however, employment is still not forthcoming for all workers, pro-
vision for maintenance must be made by means of unemployment insur-
ance benefits on an adequate scale. See Appendix IV.

INSURANCE AGAINST UNEMPLOYMENT 337

sibility for the administration of schemes should be
placed on union officials.

Owing to the shortage of raw cotton, the " Rota "
system of unemployment was organized in the textile
trades. The Cotton Control Board rationed the mills
and licensed the percentage of spindles worked week by
week. The spindles were, as a rule, licensed to work
between 50 per cent, and 80 per cent, of their normal time.
Spinners and weavers were " played off " as circumstances
dictated, and an arrangement was contrived by which
spinners and weavers took turns of unemployment in
rotation. From dues levied upon running spindles and
looms a fund of over £2,000,000 was raised and distributed
amongst the unemployed. In September 1917 the rates
of unemployment pay amongst spinners and weavers
were : Adult men, 255. ; adult women, 155. ; young people,
full time, I2s. ; young people, half-time, 6s.

In August 1918 the pay for adults was increased from
255. to 3os., and the others raised in the same proportion.

The rotation system came to an end contrary to the
wishes of the union in July 1919.

Payments to unionists and non-unionists were made
wherever possible at trade union offices.*

Special Schemes.

If it appears to the Minister of Labour that provisions
for insurance against unemployment in any industry
could be better secured by a special scheme for that
industry than by the general scheme, the Minister may
approve of a special scheme, which will then have statu-
tory force. It is contemplated that such schemes will
ordinarily be drawn up in the first instance by the Joint
Industrial Council, or other Association representing a
substantial majority of the employed persons in the
industry concerned and of their employers, and will be
approved, with or without amendment, by the Minister.
The Minister also has power to set up a special scheme on
his own initiative.

* See National Guilds and the State, S. G. Hobson, pp. 263-71.

338 INSURANCE AGAINST UNEMPLOYMENT

The main conditions governing the constitution of
special schemes are that :

(1) The schemes must cover all persons employed in

the industry either throughout the country or
over some denned area.

(2) The benefits, which may include payment for short

time as well as unemployment benefit must be
on the whole not less favourable than those pro-
vided under the general scheme.

(3) The State contribution to a special scheme will be

limited to an amount not exceeding three-tenths
of the contribution that the State would have
made if the members had remained under the
general scheme.

(4) The scheme will be administered, not by the Minis-

try of Labour, but by a joint body of employers
and employed in the industry specially set up
for this purpose.

(5) In the case of transfers from the General Scheme

to a Special Scheme (or vice versa) or from one
Special Scheme to another, the scheme from
which the transfer takes place will be required
to keep the member in benefit for a prescribed
period.

The far-reaching possibilities of these provisions in
strengthening the sense of solidarity and interest amongst
all those employed in a given trade, in enabling each
trade to treat its own problems of unemployment, and
in increasing the technical knowledge in placing workmen,
must not be allowed to hide the fact that they are aimed
primarily at improving the administration of the scheme.
It is, therefore, very properly provided that the Govern-
ment shall contribute towards a special scheme about
the same amount that would have been paid under the
general provisions of the Act.

The wide powers given to the Minister have already
resulted in the charge that he is placing undue difficulties
in the way of proposed schemes.

INSURANCE AGAINST UNEMPLOYMENT 339

Let us note the outlines of the Printers' Industrial
Maintenance Scheme, which is now being considered, as
well as the proposal for the building trade.*

The Joint Industrial Council for the Printing Industry
has drawn up a scheme to " contract out " of the Unem-
ployment Insurance Act. It is proposed to retain the
contributions as at present under the Act and to pay
a benefit of 30 per cent, of their average wage to men.
When the scheme was drawn up the State benefit was
155. The scheme is to be worked by a Joint Board of
Management, consisting of twelve representatives of
employers and twelve of the workers, together with a
chairman, vice-chairman, a secretary-accountant, and
staff. For unemployment registration it is proposed that
the country shall be divided into districts as defined by
the existing alliances, the employment exchange for
each district to be administered by joint secretaries repre-
senting employers and employed. The chief difficulty
anticipated is that of obtaining the approval of the
Ministry of Labour. f A doubt is expressed by the pro-
moters of the scheme that the Ministry may take exception
to the high benefits proposed for a suggested low contri-
bution, but it is hoped that the few months' experience
which the trade unions have had under the new insurance
scheme will provide sufficient data to overcome the
Ministry's objections J

As a matter of fact, a number of trade unions have
been too optimistic in their calculations as to the inci-
dence of unemployment. They have failed to make
sufficient allowance for periods of depression, and the
Ministry of Labour has been attacked for insisting that
the unemployment percentage must be based on a calcu-
lation of the rate of unemployment over a period extending
at least one complete trade cycle. In this and in most
industrial schemes it is proposed that each industry shall
have its own employment exchanges. But it is evident

» See Appendix I. See also Prudential Staff Gazette, March 21, 1921.

| See Appendix I.

J Labour News Service-, No. 123, March 12, 1921.

340 INSURANCE AGAINST UNEMPLOYMENT

that if a large number of special schemes were instituted
it would prove uneconomical and perhaps inefficient for
each trade to have a separate office and separate staff
in every centre where it exists.

The interim report of the Committee on Scientific
Management and Reduction of Costs appointed by the
Industrial Council for the Building Industry is a clear
statement embodying the idea that each industry should
bear the burden of its own unemployment.

We recommend that in cases of unavoidable unemployment
the maintenance of its unemployed members shall be undertaken
by the industry through its Employment Committees, and that
the necessary revenue should be raised by means of a fixed per-
centage on the wages bills and paid weekly to the Employment
Committee by each employer on the joint certificate of himself
and a shop steward or other accredited trade union representative.

The amount of the percentage charge necessary to raise funds
for the maintenance of members unavoidably unemployed will
naturally depend upon the amount of the State subsidy for the
purpose, and also upon the efficiency of the Employment Com-
mittees in the matter of

(a) Regularization of demand, and

(b) Decasualization of labour ;

but it is already evident from past experience that the percentage
will certainly be small, and that a charge of 5 per cent, would prob-
ably be more than ample. An estimate of the revenue required
for the coming year should be laid before the Industrial Council
annually and the rate of percentage fixed accordingly.

While the collection of this revenue should be carried out by
the Employment Committees, the payments should be made by
periodical refund to the trade unions, who would thus become an
important integral part of the official machinery, and would dis-
tribute the unemployment pay in accordance with the regulations
prescribed by the Industrial Council and its Committees.

Every duly registered member, when prevented — for a period to
be fixed — from working at the proper craft at the full standard
rates of the district, should be entitled to unemployment pay,
whether the cause be sickness, accident, shortage of work, or stress
of weather. In all cases the amount would be inclusive of any
benefit under the State and trade unions schemes.

We recommend that every registered member should be entitled
to one week's summer holiday per annum, and at the same scale
and from the same fund as the unemployment pay.

For purpose of this scheme " Members of the Industry " would

INSURANCE AGAINST UNEMPLOYMENT 341

be trade unionists engaged therein, including the clerical, technical,
and managerial staffs, who register with the Employment Com-
mittees for participation.

During unemployment all men should receive half their full
wages, supplemented in the case of a married man by one-tenth
of his full wage for his wife and each of his children up to four
children, under sixteen years of age. When the industry becomes
responsible in this way for unemployment pay, apart from the
contributions which it already has to pay under the State unem-
ployment schemes, then two essential conditions must be fulfilled :
(i) The workers by more concentrated effort must increase efficiency
beyond the present standard ; and (2) management and capital
must consent to a limitation being imposed upon their earnings,
and should be prepared to adopt methods on their side which will
lead to greater output.

We have attempted thoroughly to explore all possible objection
to the scheme which we are advocating, but the difficulties are
not sufficiently serious to shake our conviction that with increasing
goodwill will come higher production, and with better management
increasing surplus will be available.

The unemployment scheme recommended will perform two
functions at least. It will go far to secure the complete goodwill
of the operative, and make unnecessary certain restrictions which
exist, either tacitly or otherwise, on output ; and secondly, by
absorbing a certain amount of the surplus earnings of the industry,
it should tend to meet the disinclination on the part of the opera-
tives to make unrestricted profit for private employers.

It has already been recommended that during bad seasons opera-
tives should be encouraged to accept work in other occupations
rather than unemployment pay. The question of remuneration
under such arrangements require further consideration, and we
hope to deal with this in a later report. It is hoped that this
scheme will be so satisfactory that it will be finally possible to
relieve employers of their liability under the Workmen's Compen-
sation and the Employers' Liability Acts, and to supersede all
trade union sickness and unemployment benefits, and that the
industry will obtain powers to contract out of the State scheme.
The danger of fraudulent claims upon the Unemployment Fund has
not been overlooked, but we believe that ample safeguards will
be found in the utilization of the trade union organization for the
payment of the money and of the existing employment exchange
facilities for registration of the unemployed. Moreover, fraudulent
claims cannot easily be put forward, because unemployment will
only result when the scheme for the regularization of employment
has failed to absorb any more labour.

The principle of joint Committees to act as trustees for such
a fund does not appear to need any defence.

342 INSURANCE AGAINST UNEMPLOYMENT

We frankly recognize here that we are again faced with the
fundamental difficulty that there still exist in the industry large
numbers of small non-federated employers, and on the other hand
operatives who are not trade unionists. Nevertheless, we feel
that the benefits of such a scheme will have a very material effect
in inducing employers and operatives to come into their respective
associations.

The Scope of Special Schemes.

The principle of continuous wages and industrial main-
tenance over periods of employment and unemployment,
a principle which has hitherto applied to the armed forces,
to the police and, indeed, to all branches of the Civil
Service, is being laid down by an increasing number of
trades as the basis of remuneration for all their members.
The maintenance of the worker is to be a first charge
upon the industry to which he belongs, so that weather
conditions and financial conditions are not to be imme-
diately flung upon him to bear the full brunt of their
burden. The problem of industrial maintenance has been
raised in an urgent and practical form, and its success in
one trade cannot but result in its establishment in other
trades.

It is contended that if each industry is obliged to bear
the burden of its own unemployed, the costs are likely
to be sufficiently heavy and evident for them to constitute
an additional and very potent factor in influencing em-
ployers of labour to find means and to invent devices
for reducing unemployment in their industry. In this
way, it is argued, insurance could be made to react on
the causes instead of merely relieving the symptoms
of unemployment.

The idea that each industry should be made responsible
for its own unemployment may be given effect to in
various ways, but hitherto the form most generally advo-
cated provides that workmen and the State shall con-
tribute a fixed sum, and that the employer should
contribute whatever is necessary in addition to pay
the statutory benefit. His contribution should take the
form of a percentage on his wage bill, varying with the

INSURANCE AGAINST UNEMPLOYMENT 343

amount of unemployment. It would thus be very directly
to the interest of employers in a given trade to find means
of reducing the amount of unemployment.

The chief difficulty with respect to the proposal is
the demarcation of trades. Thus, in the case of a scheme
for the cotton industry, what will be the position of the
engineers and clerks attached to the trade ? Will their
unions approve of them participating in such a scheme ?
The General Workers' Union, whose very existence is
threatened by the development of this idea, has there-
fore declared its opposition to such schemes. But as
against a few unions which may suffer, the majority of
the large unions, of the coal, the cotton, the woollen,
and the leather trades, are enthusiastically in favour of
it. They point out that a similar problem of demarcation
of trades arose with respect to the first Unemployment
Insurance Act and the definition of the seven insured
trades. Similarly, demarcation has been achieved for
the purpose of Trade Boards, by the Ministry of Labour
in conference with employers and trade unions. It is
suggested that those unregistered in any industry, casual
workers, general labourers, and seasonal workers, could
be insured in a general scheme. Employers engaging this
kind of labour should pay a levy towards their insurance,
consisting of a percentage on the wages paid by them.
As the percentage of unemployment amongst such workers
is high, the levy would be high ; the employers would
therefore have a strong inducement to employ as large
a proportion of regularly employed labour as possible and
as small a proportion of irregularly employed as possible.

The Government actuary has based his calculations
on the assumption thai industries with a maximum of
4 millions out of a total 12 J million insured persons will
be covered by special schemes. These 4 million people
would have an average rate of unemployment of 4*5
per cent, or less, and would be organized. It would, he
calculated, be to the advantage of these people to contract
out. It is, however, arguable that he seems to have
under-estimated the number of trades that would desire

344 INSURANCE AGAINST UNEMPLOYMENT

to contract out in time. But he is safe in calculating on
that number for a number of years. Indeed, owing to
the serious state of unemployment in 1921, most of the
schemes developed during the period of intense activity
of the early part of 1920 are being held up for a time.
It is evidently unwise to initiate a scheme during a period
when the claims on the unemployment fund are likely
to be very heavy. Assuming, however, that trade im-
proves, there will remain two large groups of workpeople
who for a considerable period will be uncovered by special
schemes. These will be engaged in trades which are
badly organized or have a high percentage of unemploy-
ment, and that large body of workers who cannot be
earmarked as belonging to any specified industry. The
8 million who will not contract out will, it is calculated,
have an average of unemployment of 5*3 per cent.*

Difficulties would arise in the decay of old trades. It
is also likely that trade unions would tend to close their
doors more against newcomers, and that transference
from one trade to another, already rare, would become
even rarer. The arguments on both sides are now being
pressed with great vigour. It would, therefore, be helpful
if two or three industries could be induced to contract
out under the existing Unemployment Insurance Act,
so as to yield some practical results which may guide
future action.

On the other hand, it would be extremely unwise to
compel all industries to have their own schemes of in-
surance, as has been suggested. In a number of trades
the rate of unemployment is not known with sufficient
accuracy to provide a strong enough basis for a scheme,
and in consequence if attempted might fail. In a national
scheme the errors in calculation with respect to different
trades may be relied upon to cancel one another. More-
over, if a voluntary scheme should fail, its members
could readily be absorbed back into the national scheme,
but the chances of a voluntary scheme failing are small.
It can be applied in the first instance to trades where

* Cmd. 1140, p. 405.

INSURANCE AGAINST UNEMPLOYMENT 345

the rate of unemployment is known or where it is small.
It can be chosen under conditions most likely to make
for success.

It must be conceded, also, that joint councils of em-
ployers and employees are themselves still on their trial,
and it would be folly to throw over the old machinery
before the new machinery has proven reliable. Granted,
however, the difficulties in the way of slowly developing
schemes for separate industries, there are strong reasons
for forging ahead and overcoming obstacles. First, these
special schemes rightly lay emphasis on the industry as
the unit to be recognized in the economic problems affect-
ing modern society. Second, they enable the workman
to gain a certain amount of control over one of the factors
affecting his economic life. Third, the inadequate rate
of benefit unavoidable in a scheme which does not differ-
entiate between different trades may be replaced by a
rate of benefits not much less than the normal wage of
the workman.

Conclusions.

Specific proposals for dealing with unemployment were
discussed in Chapter XIII. Insurance is concerned
primarily with distributing the burden of unemployment,
not in abolishing or reducing it.

Four main conclusions emerge from this discussion
of the scheme of unemployment insurance in Great
Britain. First, it is established that the costs of the
scheme are more than justified by the suffering which
it alleviates.

Second, there is general gratification that the work-
houses are falling into disuse, and other antiquated means
of caring for the unemployed and needy are practically
disappearing. Third, unemployment insurance acts as
an incentive to employers to eliminate every removable
cause of unemployment as far as in them lies the power
to do so.

Fourth, the Unemployment Insurance Fund may be
regarded as a wages equalization fund. The variation in

346 INSURANCE AGAINST UNEMPLOYMENT

income between periods of active employment and of
unemployment is considerably lessened. It has been
compared with a dividends equalization fund, which in
a similar manner lessens the variations in the earning
capacity of a firm, and which has proven to be a sound
financial device. With an increase in the scale of benefits
this aspect will grow more important. No body of any
consequence is to be found in Great Britain desiring the
abolition of the scheme as a whole. Indeed, whilst on the
one hand it has been the greatest bulwark against revo-
lution, its withdrawal could not be attempted without
precipitating a great crisis.

CHAPTER XXII

ITALY

ITALY has introduced a scheme on the British plan, pro-
viding for the compulsory insurance against unemploy-
ment of large bodies of workers. It is administered
through a co-ordinated system of employment exchanges.

Before 1914.

In Italy the steps taken to palliate the evils of unem-
ployment through insurance before 1914 were of little
importance. Few trade unions had unemployment in-
surance funds. The significant developments along this
line were the measure, in imitation of the French law,
which enabled the Government to assist voluntary un-
employment insurance, and the scheme of the Humani-
tarian Society.

M. Luzzati, President of the Council of Ministers,
introduced a Bill in July 1910, empowering the national
Government to set aside 100,000 lire for subsidizing
associations which provided insurance against unem-
ployment. Having passed the Italian Chamber, it was
presented to the Senate, but M. E. Conte, of the Central
Office of the Upper Assembly, reported unfavourably on
this proposal.

The main provisions of M. Luzzati's scheme were :

(i) Associations desiring a subsidy must have at
least fifty members, and must be confined to
persons following the same or similar occu-
pations.

348 INSURANCE AGAINST UNEMPLOYMENT

(2) The insurance funds of any association desiring to

claim benefit must be kept separate from other
funds.

(3) Subsidy was riot to be paid in respect of seasonal

unemployment.

(4) Subsidy was to be paid only to unemployment

insurance funds providing benefits during periods
of involuntary unemployment due to lack of
work.

(5) The maximum period for payment of benefits to

be sixty days in the year.

(6) When a workman was only partially employed

and his remuneration did not exceed one-half
of his usual wage, subsidy was to be provided
according to a scale to be determined.

(7) The association was to pay the amount of the State

subsidy to the unemployed person and to be
reimbursed by the State. This subsidy was not
to exceed 50 per cent, of the benefits paid, but
the rate would be higher for national federations
than for local organizations. It was not, as a
j^ rule, to exceed 1.25 lire daily per member.

But the movement in favour of granting a State sub-
sidy to unemployment insurance grew steadily. At the
Italian Congress of Social Insurance, in October 1912,
a declaration was made that the care of organizing social
insurance should be committed to professional associations
of workmen.

' Their unemployment insurance should be, in need,
subsidized by the public powers." *

Here, as elsewhere, Socialists and Labour leaders took
an active part in encouraging schemes of social insurance.

In December 1912 the Socialist Reform Party, at its
first Congress in Rome, recommended the distribution
of subventions to union insurance funds after the Liege
system, until the results of British experience with com-
pulsory unemployment insurance were available.

* Bulletin pour la Lutte Contre le Chdmage, p. 895, vol. ii.

INSURANCE AGAINST UNEMPLOYMENT 349

No such subsidy is yet provided for unions paying
out-of-work benefits.

Nor does any governmental institution as yet exist
for the insurance of wage-earners against unemployment.

Hitherto, there have been interesting movements for'
granting relief rather than for organizing insurance, and
even this relief has been limited largely to co-operative
or humanitarian endeavour. By far the most important
effort of this kind is that made by the Humanitarian
Society, founded by a bequest of some 10,000,000 lire,
left by Prospero Loria, a public-spirited citizen of Milan.
This foundation aims at improving the condition of the
working classes and, as we shall see, goes further in
certain respects in assisting workmen than do most
schemes, which, like it, are modelled on the Ghent plan.

Most of the familiar provisions of the Ghent system
are met with in the Milan scheme. Subsidy was paid
only to associations restricted to persons following the
same or similar trades, which were wholly administered by
their members. These associations must not be political
or religious in character.

Subsidy was provided at the rate of 50 per cent, of
the benefit paid by the associations, but must not exceed
0.47 lira per day. When the benefit paid by the associa-
tion was more than 2.4 lire a day, no subsidy was given.
The maximum period for which subsidies could be claimed
in any one year was 60 days, but this could be received
even when the unemployed person had exhausted his
right to benefit from his association.

A very interesting and novel feature of the scheme was
the treatment accorded to workmen during periods of
trade disputes. Most schemes imposed on the adminis-
trators of the schemes strict neutrality during such periods.
Together with the scheme of Liege, which granted sub-
sidy in respect of payments made for unemployment due
to a lock-out, the Milan scheme formed an exception to
the general practice. Because a lock-out was due to the
initiative of the employer, subsidy was paid during the
period of unemployment in which it resulted.

350 INSURANCE AGAINST UNEMPLOYMENT

A Committee of Four, under the direction of the Presi-
dent of the Humanitarian Society, supervised the schemes :
two members represent the society and two the affiliated
associations. There has been a steady growth of in-
surance against unemployment since the scheme was
inaugurated in 1905. The members cover a large variety
of trades, and here, as elsewhere, it was found that the
printers' unions were the best organized, and sufficiently
alert, to take advantage of this encouragement to an
important benefit feature.

During 1906, 8,913 workmen were insured. They
received benefit for 12,242 days of unemployment. The
subsidy paid by the Humanitarian Society was 5,828
lire.

During the first ten months of 1913, 1,320 workmen
received benefit for a total of 41,411 days of unemploy-
ment. The subsidy paid was 20,617 lire.

Of the total benefits distributed to unemployed work-
men the society refunded to the associations about
30 per cent., an amount substantially less than was pro-
vided by most public funds.

In Bologna an attempt was made to encourage indi-
vidual savings as a provision against unemployment.
Though in operation since 1896, the scheme has met
with little success. In 1910 there were 795 people who
received as subsidy part of the interest due on 300,000
lire. In 1909 there were 542 unemployed persons who
received a subsidy of 4,500 lire on 4,977 days of unem-
ployment, 564 out of the 795 members being masons.
The scheme has thus been of some little value to the
building trade.

There are also unemployment insurance funds in
Brescia, Padua and Udine.

In 1913 the fund in Brescia distributed 224 lire, to
16 workmen of the Typographical Union, covering
448 days of unemployment. Similarly, the fund in
Padua was limited to typographers.

On the whole, no substantial relief from the conse-
quences of unemplovment was effected in 1914, the result

INSURANCE AGAINST UNEMPLOYMENT 351

of efforts being confined to developing unemployment
insurance along the Ghent lines through private or public
organizations. Both at the International Congress against
Unemployment, held in Milan in October 1906, and at
the International Congress for Social Insurance held in
Rome in October 1908, the drawbacks of a voluntary
scheme of unemployment insurance were pointed out,
and the view urged that future progress lay along the
path of compulsory schemes.

After-War Developments.

The transitional period from war to peace necessi-
tated special out-of-work provision. Decrees were passed
on April 29, 1917, November 17, 1918, and January 5,
1919. A sum of 98 million lire was voted for the purpose.

The conditions on which donations were granted were
that claimants should be able and willing to work, but
unemployed through a shortage of work. Payment was
made through special unemployment offices, workers' unem-
ployment insurance offices, communal and provincial
unemployment insurance offices, communal commissions
for finding work, and other organizations authorized by the
Minister of Commerce. The amount of the dole varied
from 2 to 3 lire a day for a man and 1.50 to 2.50 lire for
a woman. Additional allowance was given for dependents.
It was provided also in respect of illegitimate children
under certain conditions.

These doles ceased from January i, 1921, and the
effect was to deprive a considerable number of the un-
employed of monetary assistance. The Italian journal,
Stampa, of 5th January, stated that it would have this
effect on 90 per cent, of the unemployed.*

The Royal Decree of igth October, 1919, provided,
for the compulsory insurance of all workers, and
in order to provide for the large number of unem-
ployed deprived of assistance, a supplementary decree

* Daily Intelligence, January 25, 1921. International Labour Office,
Geneva.

352 INSURANCE AGAINST UNEMPLOYMENT

was issued on January 30, 1921, which provided that
unemployed persons liable to compulsory insurance, and
in respect of whom the twenty-four fortnightly contri-
butions entitling them to out-of-work assistance have
not been paid, through no fault or negligence of their
own, may receive out-of-work donation for a period not
exceeding 45 days between February i and June 30
of the present year. In order to be entitled to this
donation workmen and employees must show proof that
unemployment insurance contributions have been paid
in respect of periods of employment after June i, 1920,
or, in the case of agricultural workers, after July i, 1920.

Compulsory Insurance against Unemployment.*

This decree was modelled after the British scheme.
It requires contributions from employers, workers and
the State, and out of the resulting fund it provides
cash benefits for the workers whilst they are unemployed.
It is wider in its scope than the British scheme in so far
as it includes agricultural workers, and narrower in so
far as it expressly excludes home workers. Unlike the
British scheme, rates of contributions and rates of benefits
are graded in relation to the wages of the insured persons.

The persons insured include all manual workers of
both sexes who are in the employ of another and are
paid either a regular wage or piecework wages, as well
as all non-manual workers in private undertakings whose
wage monthly does not exceed 350 lire. Certain groups
of workpeople are specifically exempted. These include
persons below the age of fifteen years or above the age of
sixty-five years, home workers and domestic servants,
workers employed by State, provincial, and communal
authorities on regular employment. Casual workers may
be exempted from compulsory insurance, but the
Minister of Labour, after consultation with the Central
Executive Council, may lay down rules for the issue of

* The principle of compulsory insurance had not been adopted in Italy
previously to its enactment in this measure.

INSURANCE AGAINST UNEMPLOYMENT 353

State subventions and grants to voluntary insurance funds
which are formed to provide against involuntary unem-
ployment among workers not compulsorily insured.

Contributions.

The contributions to be paid into funds for com-
pulsory unemployment insurance are fixed provisionally
as follows : —

xratributions

Wage Groups (by the Day or on a Daily Average).

Fort-
nightly.

Weekly.

Daily.

lire,
o. 70

lire,
o. 3 5

lire.
O.o6

2. Exceeding 4 lire, but not exceeding 8 lire
3 Exceeding 8 lire

1.40

2 . IO

0.70

I .OS

0.12

o. 18

Half the contribution is paid by the employer and
half by the worker or employee ; but the employer is
responsible for making the actual payment, which must
be discharged at latest on the day on which wages are
paid.

The proportion for which the worker is liable may
be deducted from the wages to which the contribution
relates. Contributions are as a rule paid by means of
stamps.

Benefits.

The Unemployment Fund pays unemployment benefit
at a daily rate proportionate to the contributions paid,
in accordance with the following scale : —

Rate of Contributions.

II
III

Daily Rate of Benefits,
i . 25 lire
2 . 50 lire
3 • 75 lire

The benefit is not in any case to exceed one-half of
the worker's daily wages.

354 INSURANCE AGAINST UNEMPLOYMENT

Unemployment benefit is paid on and after the eighth
day of unemployment, for a period not exceeding 120
days in each calendar year.

An employee of a private undertaking is entitled to
benefit on and after the eighth day following the expiry
of a period corresponding to the amount received by
way of compensation for dismissal.* This is proportionate
to length of service.

After an insured person has received unemployment
benefit for the period specified, he may not receive further
benefit until a period of not less than six months has
elapsed since the last day of unemployment in respect
of which he has previously received benefit.

A worker is not entitled to benefit except when his
unemployment is involuntary and due to lack of work.

Seasonal workers are not entitled to benefit in respect
of unemployment during the " dead " seasons, unless
a special supplementary contribution, at a rate fixed
in the rules of each fund, has been paid in respect of
them. Schedules of industries and occupations in which
seasonal unemployment occurs are issued by decree of
the Minister of Labour, after consulting the Central
Executive Committee.

Unemployment arising from a dispute between workers
and employers does not give workers a right to benefit.

The Insurance Fund.

A national fund for involuntary unemployment was
established in connection with the National Employment
Exchanges and Unemployment Department.

It has three sources of income. It absorbed the sums
which remained to be disposed of out of the emergency
unemployment funds ; it will receive a fixed proportion
of the contributions for compulsory insurance against
unemployment received by joint provincial funds and

* Special compensation for dismissal, proportionate to length of service,
is provided for in the decree respecting contracts of employment, Feb-
ruary 9, 1919, pp. 2-4. — International Labour Office, Legislative Series
for 1919, No. 3.

INSURANCE AGAINST UNEMPLOYMENT 355

trade funds ; it has obtained an annual credit, which is
fixed for the first three financial years at 40 million lire.
It is provided that this annual credit shall be included
in the accounts of the Minister of Labour. It must not
exceed one-third of the average amount of subsidies
paid during the three preceding years.

Trade Funds.

Two types of trade funds are provided for under the
scheme, those in which special conditions as to locality
or risk induce the Minister of Labour to introduce special
schemes for specific trades, and those trade funds, already
in existence, desiring special recognition.

In any case in which special conditions as to locality
or risk, or other circumstances, make such an arrange-
ment necessary or convenient, the Minister of Labour,
after consulting the Central Executive Council for em-
ployment exchanges and unemployment, may issue a
decree providing for the compulsory insurance of par-
ticular groups in one or more provinces, in special com-
pulsory trade funds which are to be administered by
representatives of the groups concerned and of the State.*

The Minister is obliged to issue, by decree, model rules
for such compulsory insurance funds.

The organization of special trade sections of provincial
joint funds may be authorized in the same manner in
any case in which important groups of workers of a
particular trade exist within a province. These are to
be administered by the provincial council for employment
exchanges and unemployment.

Trade funds established by workers' organizations, or
under agreements between employers and workers, may
be authorized to undertake insurance against unemploy-
ment.

A trade fund for which such authority is desired must
forward an application to the National Department,

• Cf. with the special schemes in the British Act. See Chapter XXI and
Appendix I.

356 INSURANCE AGAINST UNEMPLOYMENT

accompanied by the rules, by a prospectus showing the
number of workers registered with the fund classified by
occupations, and the accounts for the preceding years,
if the fund has previously been in operation. The rules
must conform to the provisions of this Royal Decree, and
must provide that both the State and employer, who are
required to contribute to the unemployment fund, shall
have the same number of representatives as the insured
persons on the administrative council of the trade fund.
The authorization is granted by a decree of the Minister
of Labour after consulting the Central Executive Council
for employment exchanges and unemployment, and the
Permanent Committee of the Provident and Social In-
surance Council.

A trade fund desiring authorization to maintain its
independent existence must admit to registration un-
organized workers who apply, provided that they belong
to the occupational classes with which the fund deals.

Administration.

The Central Commission and Executive Council con-
stituted to administer the employment exchanges exer-
cise the power also of managing the unemployment
insurance service. They exercise this power through
provincial councils and local superintending commissaries.
It is provided that these provincial councils shall consist
of about twelve members, three of whom are appointed
by the employers and three by employees. The duties
of the provincial council are the following : —

(1) To supervise the administration of local employ-

ment exchanges and local commissions for organ-
izing employment.

(2) To act as a clearing house for employment for all

workers in the province through an executive
office.

(3) To administer the joint unemployment fund for

the province and its trade sections, and to control

INSURANCE AGAINST UNEMPLOYMENT 357

and supervise the payment of benefits both by
this fund and by the trade funds within the
province.

(4) To grant to recognized organizations the requisite

authority for the payment of unemployment
benefits.

(5) To make proposals and give opinions as to the

granting of advances for the execution of public
works, and superintend the use and repayment
of the sums advanced.

(6) To make proposals and give opinions as to the

advancing of capital to co-operative groups and
superintend the use and repayment of the sums
thus advanced.

(7) To discharge all other tasks and duties specified

in the provisions in force or assigned to it by
the Minister of Labour (Department of Employ-
ment Exchanges and Unemployment) and make
proposals to the said Minister which it considers
likely to prevent unemployment in the province.

CHAPTER XXIII
AUSTRIA

THE problem of demobilization forced on the author-
ities the necessity of establishing a co-ordinated and
expanded system of employment exchanges. It was
decided to provide (i) employment exchanges under the
control of employers and workers ; (2) transport of
workers to fresh employment ; (3) supply of food to
places where new work was started.

The law for the relief of unemployment which came
into force on November 18, 1918, as well as the law of
March 24, 1920, establishing a compulsory system of
insurance against unemployment, contain special arrange-
ments for providing doles for the period of the economic
disturbance due to the war.

Every worker, whether of Austrian nationality or an
alien, who comes within the scope of the sickness or old
age insurance schemes, was entitled to unemployment
pay equal to the sickness benefit up to a period of three
months.

The Compulsory Scheme of Unemployment Insurance.

The compulsory system of unemployment insurance
came into operation on May 9, 1920. It includes all
persons included under the existing systems of sickness
and old age insurance. Workers in the following groups
of industries are included : Mining, shipyards, quarries,
factory and smelting industries, industries using or manu-
facturing explosives, the building trades, railway, trans-
port, and inland navigation. For those engaged in home

INSURANCE AGAINST UNEMPLOYMENT 359

trades, and in agriculture and forestry, insurance is
optional, it being dependent on the joint will of
employers and employees. The benefits take the form
of a percentage (80 per cent, if he is responsible for the
maintenance of a family, and 60 per cent, if he is single)
of the sickness benefit to which the unemployed person
would be entitled if he were sick.

A worker or employee of Austrian nationality is
entitled to unemployment benefit in accordance with the
provisions of this Act if

(1) During the last twelve months before his claim
becomes effective he has been employed for not less than
twenty weeks in all, under a contract of work which
renders him liable to compulsory sickness insurance or
to pension insurance, or when he is a miner if he is a
member of a mutual benefit society ; and

(2) He is capable of work, but can find no suitable
employment.

This Act is made to apply to aliens from July i, 1921.

Conditions of Benefit.

The right to unemployment benefit commences on
the eighth day after the beginning of unemployment.

An unemployed person is not entitled to unemploy-
ment benefit so long as he is in receipt of any statutory
sickness insurance benefit.

Unemployment benefit is not to be paid for more than
twelve weeks within twelve consecutive months. If, how-
ever, he is in receipt of any other payment from public
funds, the amount of the benefit is to be reduced by one-
half the amount of the payment, and if he has received
compensation* for the dissolution of the contract of
work, he is not entitled to benefit until the expiry of a
period corresponding to the amount of compensation
fixed by agreement.

A person who is unemployed in consequence of a

* By an Administrative Instruction, issued on September 15, 1919,
and amended on March 20, 1920, special compensation for dissolution
of contract is fixed in accordance with length of service

300 INSURANCE AGAINST UNEMPLOYMENT

stoppage of work due to a strike or lock-out is not
entitled to benefit during the stoppage.

If an unemployed person has been dismissed from
his last employment on account of his own misconduct,
or if he has voluntarily left his last employment without
just cause, he is not entitled to unemployment benefit
until the expiry of a period of four weeks reckoned from
the date when he was dismissed or left his employment.

If an unemployed person refuses suitable employ-
ment notified to him by the unemployment office, he
loses his right to benefit for a period of eight weeks. If
he refuses to undergo a medical examination to verify
his capability of work, he loses his right to benefit for
so long as he persists in such refusal.

An unemployed person is bound to accept any suit-
able employment notified to him by the unemployment
office. Any employment is considered suitable which is
appropriate to the physical capacity of the unemployed
person, does not endanger his health or morals, is
properly paid, and does not materially hinder his future
return to his own occupation.

He is bound to accept suitable employment notified
to him elsewhere than in his former district of employ-
ment or residence provided that it is possible for him
to procure proper accommodation and food in the
proposed place of employment, and that the welfare of
the members of the family for whose maintenance he
is responsible is not endangered by the acceptance of
this employment.

If it appears that an unemployed person cannot be
found suitable employment because he lacks sufficient
knowledge and skill for work in his own or another
similar trade, the unemployment office may, with the
consent of the District Industrial Commission, send him
to a trade school, or some other suitable institution for
continued education, and pay him unemployment benefit
whilst he is training, for not more than twelve weeks.

Unemployed persons notified of suitable employment
in works affected by a strike or lock-out may refuse it.

INSURANCE AGAINST UNEMPLOYMENT 361

The Unemployment Fund.

The State advances the sum necessary for the pay-
ment of the first year's benefits. But at the end of the
administrative year the total costs for benefits and
administration are to be borne equally by the State,
the employers, and the workers. Provision is made for
the collection of not less than 40 million kronen
during the first financial year.

The repayable amount is to be raised during the
following administrative year by means of contributions.
These are calculated as a percentage of the average
daily earnings.

Measures for Protecting the Fund.

The percentage amount of the contributions may be
correspondingly increased by administrative instructions
for any group of workers which regularly makes claims
for unemployment benefit in excess of the general
average, and correspondingly reduced for branches of
industry in which unemployment is below the average.

After several years' experience of unemployment
benefit, the amount of contributions may be fixed for a
series of years on the basis of the experience of the
previous financial years.

Contributions for unemployment benefit are collected
at the same time as contributions for sickness insurance
and miners' mutual benefit dues. Employers are entitled
to deduct one-half of the amount of contributions from
the wages or salary of the employee.

The District Industrial Commission may be empowered
to specify industrial groups in its area or workers in
special districts, the members of which are not to be
granted benefit on account of the favourable condition
of the labour market.

Administrative instructions may be issued raising the
amount of benefit to the full amount of sickness benefit
in the case of workers or employees who are responsible

862 INSURANCE AGAINST UNEMPLOYMENT

for the maintenance of a family, and to 75 per cent, of
the daily sickness benefit in other cases, for the dura-
tion of the period of economic disturbance due to the
war and its after effects.

In like manner an unemployed person may, under
administrative instructions, be excluded from benefit if
his means of subsistence are not endangered by unem-
ployment.

If an employer, in order to prevent considerable unem-
ployment, refrains from terminating contracts of work
though entitled to do so during a period of complete or
partial closing down due to lack of raw material or
apparatus, he may be guaranteed repayment of part of
the charges imposed on him under these contracts of
work. The amount repaid must not exceed the total
amount of the statutory unemployment benefit which
would have been due to the workers affected. In a
similar manner the Unemployment Fund may be used to
encourage institutions aiming at the reduction of the
amount of unemployment. Special mention is made of
the education and training of the unemployed.

Making of Claims — Procedure.

In order to make an effective claim, an unemployed
person must report himself at the employment office
for his residential district and must notify his right to
benefit.

Every employer who terminates a contract of work
which involves liability to compulsory sickness or pension
insurance is bound to furnish a statement on the request
of the worker or employee concerned, in the form
prescribed by administrative instructions, regarding the
period and nature of the contract of work, the amount
of remuneration, and the cause of the termination of
the contract.

If an employment office is unable to provide a
person entitled to benefit with any suitable employment,
it fixes the amount of unemployment benefit due to

INSURANCE AGAINST UNEMPLOYMENT 363

him, and issues him a certificate for the payment of the
benefit.

If the unemployed person was last employed in a place
outside the area of the employment office, this office
may refuse to admit him to benefit if the condition of
the labour market is such that suitable employment
cannot be provided for him within a definite period.
He may then claim benefit in the district in which he
was last employed.

An unemployed person must report in person at least
twice a week at the employment office as a candidate
for employment, and must present his certificate in
order to establish his right to payment of benefit. If
he fails to report himself as directed without sufficient
reason, he is suspended from benefit for a fortnight.

If an unemployed person considers himself aggrieved
by a decision of the employment office, and in par-
ticular by a refusal or withdrawal of benefit, or the
determination of its amount, or any other order of the
office, he may within eight days after the notification of
the decision or order lay a complaint before the Arbitra-
tion Commission connected with the office. This Com-
mission consists of an equal number of representatives
of employers and of workmen.

Within eight days of the notification of the resolution
of the Arbitration Commission, the unemployed person
or the manager of the employment office may appeal
against it to the District Industrial Commission, whose
decision is, as a rule, final.

If the District Industrial Commission regards a deci-
sion or order of an employment office or a resolution of
an Arbitration Commission as not being in accordance
with the law, it may, on its own official initiative, cancel
or vary the decision at any time.

An objection may be lodged with the State Depart-
ment for Social Welfare against such action within
fourteen days after its notification, by either the unem-
ployed person, the manager of the employment office,
or the chairman of the arbitration commission.

£64 INSURANCE AGAINST UNEMPLOYMENT

Authorities.

District Industrial Commissions consisting of an equal
number of employers and employees have been estab-
lished for the purpose of controlling institutions dealing
with unemployment benefit, and the State Department
for Social Welfare determines their areas and seats, after
consultation with the Provincial Governments. Their
main function is the supervision of the work of the
public employment offices. Payment of benefits is
made through offices designated by the Department of
Social Welfare and approved of by the Finance Depart-
ment. These industrial commissions appoint arbitration
committees, consisting also of an equal number of em-
ployers and employees.

The Secretary of State for Social Welfare appoints
members of the District Industrial Commission, or other
suitable persons, to act as chairman and deputy chair-
man of the District Industrial Commission. If the chair-
man is an employer, then the deputy-chairman must
not belong to the same class, and vice versa.

Representatives designated by the Provincial Govern-
ment and Finance Department, and also the industrial
inspector and the district mining official, are invited to
attend meetings in an advisory capacity. The repre-
sentatives of the Provincial Government and of the
finance department are entitled to lodge an objection
against any resolution of the District Industrial Com-
mission, which must then suspend operation on the
matter until the State Department for Social Welfare
has decided upon it.

NOTE ON RUSSIA.

The veil has not yet been lifted from Russia, but
sufficient is known to make it certain that unemploy-
ment is a problem that would be one of the first to
obtain the attention of a Socialist republic.

Soon after the Soviet Government took over the

INSURANCE AGAINST UNEMPLOYMENT 365

administration, a law was passed as to insurance against
unemployment. All workers, including agricultural
workers, were included. The law came into operation
on March i, 1918. Every employer pays a contribution
of 4 per cent, of his total wages bill, or 5 per cent, for
seasonal workers. The worker pays nothing. When
unemployed, the latter receives from the fourth day an
amount representing the average usual wage paid in
that occupation, but such amount is not to exceed four-
fifths of the wages actually received by him previously
to becoming unemployed.

It has not been possible as yet to ascertain how this
law is working.*

* See League of Nations' Report on Unemployment, p. 132.

CHAPTER XXIV

ESTABLISHMENT UNEMPLOYMENT INSURANCE

FUNDS

LEADING employers appreciate the advantage of keeping
a fixed staff regularly employed. They recognize that
it is profitable to adopt a policy which will attract the
most able and the most ambitious men, and receive
from them the greatest output of their productive years.
A man does his best work, it is realized, wrhen he can
be relied upon to remain at his work and not be tempted
to go to some other employer ; when he has the neces-
sary skill and strength ; when he fits into the organi-
zation of the works and knows the methods employed
in it ; when his goodwill helps the smooth running of
the establishment. It is, however, evident that unem-
ployment militates against the development of these
qualifications. It leads to frequent changes of em-
ployers ; it hinders the worker's skill and often results
in a reduction of his strength ; above all, nothing can
make a workman so discontented as a long spell of
unemployment, whilst the thought of its possibility is
to him so terrifying that it is a continuous irritant,
retarding the spirit of mutual trust and confidence at
which modern employers are aiming.

Knowledge of these facts has led a number of em-
ployers in all parts of the world to endeavour to organize
their factories in such a way as to reduce unemploy-
ment to a minimum. Nowadays the average well-run
factory dismisses part of its staff during the slack season.
Assume, however, that the policy of keeping a fixed
staff regularly employed is desired. Devices for giving
it effect must be perfected. Perhaps the management

INSURANCE AGAINST UNEMPLOYMENT 367

will arrange to work for slock during the slack season.
Attention might be devoted to finding markets in
different parts of the world, so that when the demands
of one market are at a minimum the demands of another
are highest. A factory might be able to develop some
special line which will give employment during the
normal slack season.

These devices are not uncommon amongst the scien-
tifically managed factories of the United States and
Great Britain. Reduction of unemployment naturally
shows itself in them in a reduction of the labour turn-
over. Employers really anxious to face and grapple
with this problem have the inspiring work and success
of others to encourage them. The figures of three
establishments are quoted.

LABOUR TURNOVER, 1910-14, OF THE CLOTHCRAFT SHOPS OF
JOSEPH FEISS, CLEVELAND.

Year.

Stand Pay-roll.

New Hands.

Per Cent. Labour
Turnover.

1910

1,044

1.570

I50'3

I9II

951

807

84-8

1912

887

663

74'7

1913

854

569

66-6

1914

865

290

33'5

Mr. Feiss writes that in 1914, with 865 on the pay-
roll, the total number of quitters was 432. Of " un-
avoidable " quitters, which included discharges, death,
sickness, accident, marriage, retirement, etc., there were
298, and of avoidable quitters there were 134.

The Ford Company has achieved some remarkable
results along the same lines.

Discharged.

Quitting.

Five-day Men.

In March 1913

1,276

860

5.156

In March 1914

1 66,

1 66

368 INSURANCE AGAINST UNEMPLOYMENT

TURNOVER OF LABOUR FORCE IN THE PLIMPTON PRESS.

Number on
Pay-roll.

Number Hired.

Discharged.

Quitting.

Per Cent.
Labour Turn-
over.

1912

701

151

2I4

1913

562

140

137

1914

533

I27

1915

496

The employment manager wrote in 1916 :

Conditions in this plant have not been normal during the last
nine months, and our labour turnover has been only 8 per cent.
I feel, however, that under ordinary conditions it will probably
average somewhere from 20 to 25 per cent, per year.

Unfortunately, the interests of employers in lessening
the irregularity of employment in their establishments
has hitherto been largely overlooked. This is mainly due
to the fact that it does seem as if there are distinct tactical
advantages in having a large number of unemployed in
industry. Employers might expand or contract their
demand for labour without any loss to themselves ; it
enables them to keep wages low and in general aids
them to make better terms when bargaining with them
collectively or individually.

These advantages are frequently illusory. In many
trades it is more profitable to have a stable, fully em-
ployed staff of workmen. The cost of hiring and
breaking in an employee is in many cases as high as £10
or £20. Besides, employers cannot be certain that
they will get workmen when they need them. It is
therefore as much to their own advantage as to that of
their workmen to establish some scheme which will help
them to have a stable personnel.*

Enlightened self-interest which appreciates what might
be gained by abolishing this source of waste to the

• See Hiving and Firing, p. 8, by Magnus W. Alexander, New York,

INSURANCE AGAINST UNEMPLOYMENT 369

factory and to the nation might be supported by
the growing desire to solve problems and to attain to
industrial leadership, as well as by the impulse of
economic chivalry which characterizes a very few of
the leading employers of America and to a lesser extent
of Great Britain.*

Some of these organize their factories in such a way
as to enable their employees to take their holidays
during the slack period. Others again give their workers
an unemployment bonus, but it is given at the pleasure
of the employer, and the workers cannot claim it as a
right. This is so unsatisfactory that the beginnings
have been made in applying the device of unemploy-
ment insurance to individual factories.

There is already a body of experience in the successful
working of private insurance funds in Europe, the
latest scheme introduced in 1921 being a project for
insuring two thousand employees at the cocoa works of
Messrs. Rowntree in York. There are also other plans
in France, Germany and Austria, whilst it is being con-
templated in the United States by a number of managers
who see in unemployment a challenge to their claim
that they manage their businesses scientifically.

United States Establishment Funds.

The outline of schemes undertaken in the United
States proves that this proposal is still in its infancy in
that country. One of the largest hat manufacturing
establishments in New York City has arranged with
the employees' works council to make a 2 per cent, levy
on the wages of each employee for a period of ten /
weeks. The funds so collected are to be loaned to
employees who are laid off by reason of the depression.

A large textile establishment in New York Sta'e has

* It is regrettable that no method has yet been devised for gaining public
recognition for those employers who run their factories efficiently and
with a sense of social responsibility and for expressing public disapproval
of those who are guilty in the conduct of their business of inefficiency,
and who have an unduly high accident list or large labour turnover, who
work their employees unduly long hours or pay them low wages.

370 INSURANCE AGAINST UNEMPLOYMENT

instituted an unemployment fund which is built up by
a levy of 15 per cent, upon the net profits of the com-
pany for the year. An employee laid off because of
slack work is to receive half-time pay as long as the
fund lasts. Only those who are considered " loyal and
permanent " employees are entitled to benefits under
this plan.

A large paper manufacturing concern in Massachu-
setts has set up an unemployment insurance system
which is to take care of employees who have been with
the company for more than five years. The agreement
between the company and the employees provides that
when work is sufficient to enable the employee to earn
the normal wage he will be paid at the regular wage
rate. If by reason of slack work his earnings should
fall below the regular normal earnings, he is to receive
a salary to be determined in each particular case.

Another company has established an unemployment
insurance arrangement under which during the past
year approximately $40,000 have been distributed. The
unemployment funds are built up by setting aside 15 per
cent, of net earnings.

The growth of this idea amongst employees is clearly
reflected by Mr. Sidney Hillman, President of the
Amalgamated Clothing Workers of America, who laid
before the Board of Arbitrators, the highest tribunal in
the industry, a demand for unemployment insurance on
the plea that unemployment should be charged against the
industry in the same way as wages, as overhead and
other charges.

German Establishment Funds.

Most schemes of unemployment insurance created by
employers for their own establishments are to be found
in Germany. This type of paternalism was most
characteristic of that country before the war.* More
than thirty firms have made arrangements of this kind

* On the other hand, it is a truism to say that paternalism of one kind
or another is now characteristic of all industrialized countries.

INSURANCE AGAINST UNEMPLOYMENT 371

to provide benefits for workmen whenever their estab-
lishments shut down or employees are dropped from
the pay-roll because of lack of work. These firms are
engaged in productive and in distributive trades, and
their methods of organization are characterized by the
greatest variety. It is indeed to be expected that
elasticity and adaptability will be found to be the sine
qua non of any type of scheme which is to be suc-
cessfully applied to different trades operating under
different conditions.

The scheme operated by Karl Zeiss, of Jena, is very
liberal ; if any employee is employed regularly for three
years and is then dismissed for lack of work, he is
given, by the terms of the contract, a legal claim to
full wages for the succeeding six months. Here the
employer provides the benefits without the employee
contributing directly towards it.

The amounts paid out to dismissed workers were
as follows : —

1902-3

I 903-4
1904-5
1905-6

1906-7
1907-8
1908-9

28,675 marks, i.e. about ^1,246
6,700 £291

4,000

13,7°°

13,900

2,150

6,000

;£597
^604

£93
£261

The Association of Metal Manufacturers of Berlin
has a list of unorganized workers who are given assist-
ance in case of unemployment. Nothing definite is
known about the actual working of this scheme. The
report of the association for 1908 states that bad busi-
ness resulted in a discharge of some workers and many
claims were made for unemployment assistance.

Similarly, the firm of Heinrich Lanz at Lindenhof,
near Mannheim, machinery manufacturers, has pro-
vided unemployment insurance for its workmen, but
benefits are paid, as in the city of Cologne's insurance
fund, only between December ist and the end of
February. The scheme provides that whenever a
married person employed by the firm for at least one

372 INSURANCE AGAINST UNEMPLOYMENT

year is dismissed because of lack of work and is unable
to find other employment, he receive benefits beginning
fourteen days after the date of dismissal.

On the other hand, the firm of A. L. Mohr, of Altona,
Behrenfeld, oleo-margarine manufacturers, has a scheme
to which employees and employers both contribute,
the former contributing 60 per cent, of the resources
of the fund. It is collected in the form of weekly dues,
10 pfennigs (id.) for men and 5 pfennigs (Jd.) for
women. The benefits are 1-60 marks (is. 4d.) per day
for not more than thirteen weeks after the date of
dismissal.

The arrangement in the leather works of Cornelius
Heyl is as follows. When, on account of slack business,
a part of the staff must be temporarily suspended,

3.50 marks per week are paid to married men ;
3.00 marks per week are paid to single men over 23 years of age.
2.50 marks per week are paid to single men 18-23 years of age.
1.50 marks per week are paid to women over 18 years of age.
i. oo mark per week is paid to women under 18 years of age.

The following information is furnished by the firm
with regard to sums previously paid out : —

SUMS DISBURSED DURING PERIODS OF UNEMPLOYMENT
BY THE FIRM OF CORNELIUS HEYL, 1891-1909.

Years.

Marks.

£.

Years.

Marks.

£.

1891-2

16,016

696

1900-1

7,530

343

1892-3

241

1901-2

5.893

268

1893-4

2,560

1902-3

1,758

1894-5

2,690

117

1903-4

7,212

328

1895-6

11,220

488

1904-5

5,736

260

1896-7

5.428

236

1905-6

ii,955

543

1897-8

2,184

1906-7

12,310

560

1898-9

2,949

128

1907-8

18,698

868

1899-1900

481

1908-9

2,680

122

At the firm of Karl Freudenberg, in Weinheim, a.
workman's insurance fund * has been formed. An
employee becomes a member only if he desires to do so.

* Insurance in case of illness, death or unemployment : we speak here
of the last only.

INSURANCE AGAINST UNEMPLOYMENT 373

Membership is open to those officials and workers who
were with the firm on January i, 1906 ; from those
who enter the firm's service later, two years of em-
ployment is required. Dismissal for disciplinary reasons
or voluntary resignation results in the loss of member-
ship, but absence on leave, illness or interruption of
work on account of wreckage of machinery does not
entail loss of membership.

As compensation in case of total or even partial
unemployment, one-half of the average daily wages for
the last quarter of a year are paid to the unemployed
for each working day lost, counting a day of ten hours.
If a worker is occasionally suspended from work for
less than six hours a week, he is not compensated, but
if such suspensions occur several weeks in succession,
the worker is compensated for each ten hours lost.
This benefit is paid only for a maximum period of
twenty-four full working days during one calendar year.

No benefit is paid if work is stopped on account of
war, " revolt, or other higher forces," or, of course, on
account of strike or lock-out.

Members elsewhere insured against unemployment have
no claims to benefit here. They are expected to notify
their membership in other funds. The benefits are
paid by the firm ; no dues are paid by the workers,
who are the members of the fund. The firm con-
siders the fund as a necessity. According to the state-
ment of officials, it has helped in the preservation
of friendly relations between employer and employee.
This scheme was clearly meant to aim a blow at trade
unionism.

The following benefits have been distributed : In
I9°7* i>758 m. (£76) ; in 1908, 7,921 m. (£344) ; in
1909, 7,119 m. (£309).

A number of firms have organized saving and mutual
assistance funds, one of the most interesting of which
is that operated by the RinghofEer machine and wagon
factory at Schmechow, near Prague, in Austria.

This scheme combines the methods of insurance and

374 INSURANCE AGAINST UNEMPLOYMENT

of saving in such manner that if after a period of unem-
ployment a workman returns to the Ringhoffer factory,
then only one-third of the sum which he has received
in weekly instalments must be repaid, but if he does
not return then the employer may reclaim the sum dis-
tributed to him as an ordinary loan.

This fund was founded in 1886 with a capital of
10,000 florins, from which loans are made without
interest to workmen tentatively dismissed through lack
of work. When these workmen do not find any other
employment and do not present an express demand to
be definitely dismissed, they are regarded as unem-
ployed for a maximum period of three months. Bene-
fits are distributed during that period, according to
seniority of service, to those who bear a satisfactory
record. Two-thirds of the amount distributed is at
the expense of the fund, the other third must be reim-
bursed by the borrowers. The loans granted during
the first four years amounted to 343,517 francs (£14,935).

A paternalistic scheme of savings against unem-
ployment is carried on also in the establishment of
Tellman & Co., at Barmen. Here the workers, on
their entry into the house, are forced to accept the
fund. Those who already constituted the personnel
when the scheme was introduced voluntarily adhered
to it until the end of the first year of its operation,
when it became obligatory on all.

The lowest deposits are 25 pfennigs a week. They
are withheld from the workmen's wages. The interest
on these weekly deposits rises until at the end of the
first year they are 6 per cent., and the rate of interest
after that is fixed as follows : —

Up to 2,000 marks, 5 per cent. ; from 2,000 to 4,000
marks, 4^ per cent. ; above 4,000 marks, 4 per cent.

The withdrawal of deposits during unemployment is
permitted only to the amount of 9 marks (8s.) at a
time, and only with the authority of the house. On
the first of July, 1900, the 113 depositors owned a fund
of 81,164 marks (£3,529).

INSURANCE AGAINST UNEMPLOYMENT 375

French Establishment Funds.

There are only three schemes of establishment insur-
ance in France. One is at the Havre docks, the other
is at the establishment of M. Cottereau, mechanical
engineer, at Dijon, and the third at the printing estab-
lishment of Herissey, at Evreux.

The atmosphere of France has not been very favour-
able to the development of such schemes.

It is very probable (wrote M. Fagnot) that if employers en-
deavoured to make this institution universal, as has been done
in the case of mutual societies, they would meet with the
opposition of the workers. (He adds) : Without contesting their
philanthropic character, they have nevertheless the advantage of
keeping the individual on the spot in the case of an establishment
far from any industrial centre until the day when he can be
reabsorbed into the industry.

British Establishment Funds.

A number of British firms are contemplating the
introduction of establishment unemployment funds, and
by far the best thought-out scheme has already been
introduced by Messrs. Rowntree & Co., Ltd., cocoa
manufacturers, York. It may well be regarded as the
model scheme on which new schemes can be based. It
avoids most of the dangers of this type of welfare
device by making it evident that it is not meant to
weaken trade unions. On the contrary, it would
strengthen them. Nor would it prevent workmen from
leaving the establishment. Necessary arrangements are,
of course, introduced for making the fund solvent.

Two points in the scheme, which is self-explanatory,
should be noted. The Company has set aside £10,000
to found the unemployment fund. It will also set aside
sums equal to i per cent, of its wages bill until the
fund reaches £50,000. The employees pay no contri-
butions. In a well-organized factory the costs of a
scheme of unemployment insurance, more generous than
those of the Government, is expected to be only about
I per cent, of the wages bill.

376 INSURANCE AGAINST UNEMPLOYMENT

Most members employed in the works obtain benefits
under the Government scheme. When it was inau-
gurated the men obtained benefit at the rate of 155.
a week and the women I2S. a week. In addition the
trade union with the greatest membership in the works
provided 6s. a week extra benefit for men and women
for a contribution' of 2d. a week. The 2is; or i8s., as
the case may be, is therefore deducted from the scale
of benefits laid down, which varies from 50 per cent,
to 75 per cent, of the employee's average wage.

The Rowntree Scheme.

The object of the unemployment insurance scheme
of Messrs. Rowntree & Co. is stated to be the
removal as completely as possible from the minds of
the Company's workers of any anxiety which they may
feel through the possibility of unemployment because
of the trade depression.

The scheme came into force on January i, 1921, and
applied to all persons (male and female) between the
ages of twenty and sixty-five employed by the Company
on whole time service within the United Kingdom,
who, immediately prior to their unemployment, had
been in the employ of the Company for a continuous
period of six months, or in the case of the building staff
for a period of three years either continuously or broken
by periods amounting in the aggregate to not more
than two months.

Unemployment Fund.

The Company set aside on the institution of the
scheme a lump sum of £10,000 to found the unemploy-
ment fund. It also in each year, commencing with the
year 1921, set aside sums equal to I per cent, of its
wages bill during such year, until the unemployment
fund reaches £50,000, or reaches 5 per cent, of the wages
bill for the time being (whichever is the greater).

INSURANCE AGAINST UNEMPLOYMENT 377

Thereafter the Company will set aside annually such
sums (not exceeding i per cent, of the wages bill) as
are necessary to keep the fund up to £50,000.

Full Unemployment Benefit.

Subject to the following conditions, full unemploy-
ment benefit will be at the rate of :

(a) 50 per cent, of the average earnings of the unem-
ployed person ; and

(b) 10 per cent, additional for a dependent wife ; and

(c) 5 per cent, additional for each dependent child
who is under sixteen years of age or is receiving full-
time instruction at a school, university, college or other
educational establishment, with a maximum of 75 per
cent, of the average earnings or £5 a week, whichever
is the smaller, and a minimum of £i 55. a week.

The full unemployment benefit will be reduced by a
sum, in the case of men, of 2 is. a week, and in the case
of women of i8s. a week, these amounts being con-
sidered to represent the sum to which in most cases
trade unionists enjoying the State benefit would be
entitled. The amount deducted under this head may
be made to vary with the benefits provided by the
State scheme.

The conditions for receipt of full unemployment
benefit are :

(1) That the unemployed person has made applica-
tion for benefit in the prescribed manner and proves
that since the date of the application he has been con-
tinuously unemployed, and

(2) That he is capable of, and available for, work,
but unable to obtain suitable employment provided
that a person shall not be deemed to have failed to
fulfil these conditions by .reason only that he has
declined :

(a) An offer of employment in a situation vacant
in consequence of a stoppage of work due to a trade
dispute ; or

(b) An offer of employment at a rate of wage lower,

378 INSURANCE AGAINST UNEMPLOYMENT

or on conditions less favourable, than those generally
obtained or observed in the district of such employment
by agreement between associations of employers and
of employees in employments of the same nature as
that of his usual employment, or, failing any such
agreement, than those generally recognized in that
district by good employers.

A person will not be deemed to be fully unemployed
on any day on which he is following any occupation
from which he derives remuneration or profit, unless
that occupation has ordinarily been followed by him
in addition to his employment by the Company and
outside the ordinary working hours of that employment.

Full unemployment benefit will not be payable in
respect of any period of less than one week, nor for
longer than a period or periods amounting in the aggre-
gate in the case of each employed person to :

(1) One week for each two months up to two and a
half years for which such person has been continuously
employed by the Company immediately before his
unemployment and after attaining twenty years of
age, and

(2) One week for each complete year, beyond two
and a half years, for which such person has been so
employed ; but

(a) Full unemployment benefit will only be payable
during such time as the unemployed person is actually
receiving unemployment benefit under the Unemploy-
ment Insurance Act, or would have been actually
receiving such benefit if the maximum period of benefit
under that Act had not expired. This paragraph will
not apply, however, to any person included in the
" excepted employments " mentioned in Part II of the
First Schedule to the Unemployment Insurance Act,
1920.*

(b) Any time during which a person is under this

* These include such occupations as agriculture, domestic service, and
:mployment by the local and central governments and in public utility
corporations of a nature where insurance against unemployment is re-
garded as unnecessary.

INSURANCE AGAINST UNEMPLOYMENT 379

scheme disqualified for receiving full unemployment
benefit shall be excluded in the computation of periods
of unemployment, and

(c) A period of full unemployment shall not be deemed
to commence until the unemployed person has made
application for unemployment benefit in the prescribed
manner, and

(d) Any person who, after leaving the employment
of the Company, obtains other employment, shall not
be entitled to any unemployment benefit after the
expiration of a period from so leaving the employment
of the Company calculated in accordance with para-
graphs (i) and (2) of this clause.

(e) In the case of a person who, during the European
War, joined His Majesty's Forces from the employ-
ment of the Company, and returned direct from such
Forces to such employment, service in such Forces shall
be included in calculating his period of employment.

Partial Unemployment Benefit.

Partial unemployment benefit will be payable in respect
of any period during which, owing to shortage of work
through depression of trade, a piece worker actually
works for less than 85 per cent, of normal full time or
any other worker actually works and is paid for less
than 90 per cent, of normal full time calculated in each
case over such period as may be prescribed by the
Company. Time so lost in excess of 10 per cent, or
15 per cent, respectively will be paid for at a rate pro-
portionate to full unemployment benefit.

Partial unemployment benefit will not be payable in
respect of any part of a week in which the employed
person has, without leave, failed to work for the full
time for which work was provided for him.

Existing Unemployment Benefit Fund.

Employees who, as being only on the auxiliary staff,
are members of the existing Unemployment Benefit

380 INSURANCE AGAINST UNEMPLOYMENT

Fund,* will have the option of continuing that benefit
and being excluded from this scheme. If, however
they decide to take advantage of this scheme, the
existing Unemployment Benefit Fund (which will hence-
forth be called " The Auxiliary Retirement Fund "
will in their case apply only to retirement on reaching
sixty-five.

Disqualifications for Benefit.

A person is disqualified for the receipt of unem-
ployment benefit : —

(1) If he has lost his employment through his mis-
conduct or misbehaviour, or has voluntarily left the
employment of the Company or any other employment
which he has obtained after leaving the employment
of the Company.

(2) If he fails to prove to the satisfaction of the
Unemployment Committee that he has for a period of
six months immediately prior to the commencement of
his full or partial unemployment, or for the whole
period between the expiration of one calendar month
from the commencement of the scheme and the com-
mencement of his full or partial unemployment (which-
ever is the shorter), contributed to a trade union or
other society a sum or premium of not less than 2d.
per week for the purpose of assuring a weekly or other
periodical payment during his unemployment, or such
other sum or premium as shall be sufficient to assure a
weekly or other periodical payment equivalent to 6s.
per week.

(3) If he fails to prove to the satisfaction of the
Unemployment Committee that he has effected and
kept effective a suitable registration at the proper
employment exchange and has used his best endeavours
to obtain suitable employment.

* " The existing Unemployment Benefit Fund " consisted of an arrange-
ment whereby, in consideration of the contribution of weekly sums, the
Company undertook to pay them a bonus not exceeding £5 a year on
their being discharged for shortage of work or on attaining sixty-five.

INSURANCE AGAINST UNEMPLOYMENT 381

(4) If he is in receipt of or entitled to any sickness
or disablement benefit or disablement allowance under
the National Health Insurance Acts, 1911 to 1920, or
any compensation under the Workmen's Compensation
Acts.

(5) If his unemployment is owing to a stoppage of
work directly due to a trade dispute, whether at the
Company's works or elsewhere, but such disqualification
shall only apply so long as the trade dispute continues.

(6) If he has exhausted his right to unemployment
benefit under this scheme.

(7) Whilst he is an inmate of any institution sup-
ported wholly or partially out of public funds or is resi-
dent, whether temporarily or permanently, outside the
United Kingdom.

General.

The Company may make and amend regulations,
increasing or decreasing the amount of or varying the
conditions as to unemployment benefit or for the
administration of the scheme, but any regulations
decreasing the amount or period of unemployment
benefit or increasing the deductions or the period
qualifying for unemployment benefit, shall only be made
with the consent of the Central Council or after three
months' notice by the Company of the intention to
make the same.

Unemployment benefit cannot be assigned or charged,
and on the bankruptcy of the unemployed person the
benefit would not pass to the trustee or other person
acting on behalf of his creditors.

Unemployment benefits will be administered by a
committee called " the Unemployment Committee,"
appointed by the Central Council and consisting of
nine persons (of whom at least two shall be women and
one shall represent the outside advertising and depot
staff), whose decision will be final.

No person will be eligible for appointment on the
Unemployment Committee unless actively engaged within

382 INSURANCE AGAINST UNEMPLOYMENT

the United Kingdom in connection with the business of
the Company, and if any member of the committee
ceases to be so engaged his office will be vacated.
Casual vacancies on the committee will be filled by the
Central Council.

The Company will be entitled to discontinue the
scheme if an adequate scheme of industrial or national
unemployment insurance comes into force, or may, on
giving three months' notice, reduce or discontinue its
contributions to or terminate the fund, but such notice
will not relieve the Company from contributing to the
scheme up to the termination of such notice.

The Cadbury Scheme at Bournville.

The Company forms its own unemployment fund by
a self-imposed tax on every ton of goods passing out
of the firm, and the workpeople are not called upon to
pay any contribution out of their wages. Out of the
fund obtained from this source benefits are to be paid
to married men at the rate of 22s. for 6 weeks and of
us. for a further 6 weeks, and to single men and women
at the rate of i6s. per week and of 8s. for a further 6
weeks.

These benefits are, of course, in addition to those
obtainable under the Government's compulsory scheme.*

The Bradford Dyers' Association, Ltd.

The Bradford Dyers' Association, Ltd., has offered
to provide its employees with benefits additional to
those obtained under the Government scheme. It has
10,700 employees, of whom nearly 90 per cent, are
males. When in 1907 the works of the Association
were being reorganized and there was a likelihood of
men being thrown out of work, the Association agreed
to pay an amount equal to and in addition to that paid
under their out-of-work benefit by the trade union. This

* Woman Worker, p. 5, February 1921.

INSURANCE AGAINST UNEMPLOYMENT 383

arrangement continued in force with respect to unem-
ployment until 1913, when it was abandoned. But
specific cases of unemployed workmen have been treated
in this way since then, always on the joint contributory
basis.

In 1919 the Association urged upon the unions the
necessity of more generous provision being made against
unemployment. They advocated that the joint benefits
resulting from the union, the State, and the employees
should amount to 435., or nearly two-thirds of the
standard wages for a full week.

It is evident that in spite of the efforts of the Asso-
ciation the employees have hitherto suspected their
intentions in urging these schemes.

The Social Value of Establishment Funds.

That many establishment funds created by em-
ployers in the supposed interests of their workmen have
hitherto had anti-social effects cannot be denied. Only
too frequently they have aimed at preventing the com-
plete unionization of the workmen, at weakening their
power to strike and at defeating the hope of substantial
improvement of their position. But it would be wrong
to oppose them without inquiring whether these evils
are incidental to or inherent in the schemes.*

Indeed, their discussion might help to answer the
question which is being set by employers themselves
and now demands a definite solution. How can pro-
gressive employers, anxious to solve the problems of
unemployment, act fairly towards their workmen during
periods of unavoidable unemployment ? Absolute dis-
missal they realize is both unfair and uneconomical.
Bonuses or doles, which are in effect forms of charity,
are degrading to both employer and workman. State
schemes are generally inadequate. They are therefore
faced with the question whether some form of estab-

* Reference to work of M. Fagnot, Conseil Suptrieur du Travail, 1903,
p. 5, November 10, 1903.

384 INSURANCE AGAINST UNEMPLOYMENT

lishment fund of insurance, savings or loans ought not
to be developed.*

We have already considered reasons for preferring a
scheme of unemployment insurance to one of com-
pulsory or voluntary savings. Unless the workman saves
a much larger amount than he can usually afford to do,
the fear of unemployment will still haunt him, and as
a rule workmen can save for the future only by giving
themselves and their children insufficient nourishment.
Moreover, as they are not responsible for unemploy-
ment, it is wrong to make them bear all the burden and
to exonerate employers from all responsibility.

It may be urged that unemployment insurance schemes
would be introduced by the employer at the expense of
wages, and that if the employer were without this par-
ticular fad the sum expended on it would be added to
wages. A priori argument as well as authority is
against this view. It is patent that on the assumption
of competition any establishment introducing such a
scheme and endeavouring to pay lower wages would
be unable to compete in the labour market with the
ordinary establishment not operating such a scheme.

Levasseur, an eminent French authority, has recorded
of France that it has never been shown that the average
wages in welfare establishments are lower than in others. t
In the cotton industry in the Southern States of
America, quotes another authority, the presence or
absence of welfare work bears no relation to wages. J

On the contrary, it may be argued that assuming the

* " Many employers of labour have arranged schemes whereby unem-
ployed workmen may receive loans. One firm, for example, a Philadelphia
firm that manufactures shirt-waists, has for ten years loaned money
without interest or collateral to its employees. Assurance is asked that
the money is not to be spent viciously : other than that the company
does not meddle in the employees' use of the loans. It is a significant
commentary that this firm has never lost a dollar during the entire ten
years through failure of employees to return what was borrowed — and
the firm employs several hundred workers." — Report on Unemployment
in Philadelphia, 1917.

f Levasseur : Questions ouvri&res et industriellcs en France, 1907, p. 808.

j United States Bureau of Labour Statistics, Bulletin 123, by Eliza-
beth Lewis Otey, Ph.D.

INSURANCE AGAINST UNEMPLOYMENT 385

existence of a vigilant trade unionism, only progressive
and enlightened employers are likely to introduce such
schemes. Such employers are likely to be the industrial
captains and leaders, bold business men of real ability.
In their establishments schemes of sickness or of unem-
ployment insurance are likely to be accompanied by
high rather than by low wages.

It is manifestly absurd to claim that establishment
schemes of unemployment insurance will necessarily lead
to industrial feudalism. The great mobility of labour,
essential to modern industrial conditions, the system of
general education, the prevalence of political democracy,
even with all its deficiencies, and the growth of industrial
democracy may be relied upon to prevent a lasting
paternalism.

Establishment Funds or Labour Laws ?

Professor John Graham Brooks has rightly pointed
out that

benevolent schemes that bear the slightest taint of charity have
at last got the contempt of intelligent wage-earners. Importunate,
and never again to be silenced, is their demand that they get their
benefits, not as gifts or favours, but as recognized rights. Philan-
thropies are a dangerous substitute for honest wage payment, shorter
working time, and increased influence over the conditions of the
labour contract. What may be called the great Bluff of our time
is to put gratuities and benefactions in the place of Justice. There
is no donation, however gaudy, that can fill the place of Justice.*

Attempts to foster paternalistic schemes which offer
favours and deny standard conditions of labour are
doomed to failure, but the chief merit of some of the
schemes outlined is that they recognize the duty of the
employer towards his workmen for unemployment. Here
the most ardent Socialist and the keenest employer of
labour may agree. Both regard unemployment as the
result of bad organization. The former thinks it is
due to the present capitalistic system, and though the

* Social Unrest, p. 20?.

386 INSURANCE AGAINST UNEMPLOYMENT

latter is not necessarily concerned with its wider aspects,
he regards it as a source of waste which he ought to
eliminate by regularizing employment in his factory.

The introduction of establishment unemployment
insurance funds would result in lowering the percentage
of unemployment. A second claim is made in favour
of such schemes. It is a matter of experience common
to most European countries that in all branches of
social insurance, in accident, sickness, and maternity
insurance, all kinds of experiments, by municipalities,
employers' associations, working men's societies, mutual
societies, privately run insurance companies, have as a
rule preceded the national schemes which absorbed them.

At first the more progressive private establishments
introduced the scheme of compensation to workmen
maimed or injured in the course of their employment.
The principle was recognized .that compensation was
due to the workman and that the costs of accidents
ought to be regarded as a normal cost of production.
In this way a certain amount of experience was gained
in the administration of compensation schemes before the
State was ready for a universal scheme. When society
became convinced that justice and equity demanded
these schemes for the protection of the workman, it
naturally legislated that what was done by the leaders in
this field of industry should become the normal practice.

The proposal of establishment unemployment funds
must not therefore be meant to retard wise labour
laws. If it should have this effect and make the regu-
larization of industry or the insurance of workmen
against unemployment more dependent on the employer's
kindliness or sympathy, its effects would be deleterious
instead of beneficial. Indeed, they would then be a
menace to social progress. But it is advantageous,
where possible, to have private experiment precede
Government undertaking and voluntary effort to guide
legislation which must, by its nature, ultimately become
obligatory on all.

It does not, however, follow that a country like the

INSURANCE AGAINST UNEMPLOYMENT 387

United States must wait before it can introduce a
national scheme until it has had years of experimentation
on a small scale. On the contrary, the very fact that
the field is clear, comparatively speaking, certainly has
many compensating advantages. The friction will be
absent which inevitably ensues when vested interests
must be placated. Besides, the chief value of such
previous activity is its proof that the time has arrived
for a radical treatment of the problem. If, however,
it is universally conceded that the unemployment
problem does demand a solution, then unemploy-
ment insurance may be started on a virgin soil.
As a matter of fact, there is the experience of other
countries by which it can profit. It would be vain to
ignore this important fact in any comparison of the
introductory stages of a Bill on unemployment insur-
ance in the United States and in other countries. When
virgin soil was broken up in the Middle West in the
'8o's, the primitive instruments of the followers of
Hengist and Horsa, or even for that matter of the
Pilgrim Fathers, were not employed. The new settlers
benefited by the accumulated experience of farming in
this and in other countries.

But, taking into account the peculiarities of economic
conditions in the United States, it does seem that on
the whole the consideration that employers in the country
had found unemployment insurance practicable, that it
had not resulted in their bankruptcy, that it did not have
the terrifying effects prophesied of so-called class legis-
lation, make it valuable to have private schemes of un-
employment insurance introduced immediately.

Once inaugurated, such schemes would not need to
disappear on the institution of a public system of unem-
ployment insurance. Such a system would necessarily
provide only a minimum of benefits which could be
supplemented by other means, or, better still, the State
could recognize such establishment funds and offer them
a subsidy.*

* See Appendix I.

388 INSURANCE AGAINST UNEMPLOYMENT

But as an alternative to State schemes of unemployment
insurance, establishment funds are unsatisfactory, because
they are possible only in large factories not subject to
great fluctuations ; they come, as a rule, from above
and might be withdrawn ; active union members might
be, and often have been, treated unfairly ; they are likely
to be regarded as having something in the nature of
charity about them ; there are great difficulties of
administration in times of strikes, and only few em-
ployers at best could be expected to adopt such a
proposal.

PART IV

i
THE UNEMPLOYMENT PROBLEM IN

THE UNITED STATES

CHAPTER XXV

OUT-OF-WORK BENEFITS IN AMERICAN TRADE

UNIONS *

The Growth of Insurance in the United States.

THE last quarter of a century has seen a marked growth
in the application of the principles of insurance in the
United States. Among the types that have reached
considerable scope and magnitude is that of " work-
men's insurance," by which is meant the insurance of
workmen as a distinctive class against sickness, acci-
dents, old age or other adversity.f

This insurance has been operated by four kinds of
institutions.

First, there are the privately conducted, regular in-
surance companies which have created special industrial /
insurance departments.

Secondly, there are the national and local trade _
unions, which have organized insurance schemes against J —
many of the emergencies which threaten their members.

Thirdly, there are establishment insurance funds, ^5
membership in which is limited to the employees of a
particular firm.

Fourthly, there are the industrial benefit societies. ijfi
These are conducted by groups of workmen for their

• An inquiry into union out-of-work benefits was made necessary
in 1915 to discover whether the Ghent system was applicable to the
United States.

It will become evident from the next two chapters how primitive
American trade unions are compared with British unions, and from the
two following chapters how backward the United States is in social
legislation.

\ Twenty-third. Annual Report of the Commissioner of Labour, p. 15.

392 INSURANCE AGAINST UNEMPLOYMENT

mutual benefit without regard either to membership in
a particular union or to employment in a given estab-
lishment.

Hitherto the two principal classes of benefit have
been those provided in case of death and of temporary
disabilities, such as accidents or illness ; out-of-work
benefits have been provided least of all.

Slow Growth of Trade Union Out-of-work Benefits.

Indeed, it is a regrettable fact that American trade
unions are the most backward of those of all Western
countries in organizing unemployment or out-of-work
benefits, as they are generally known. Moreover, there
is little sign that this form of benefit has been gaining
much ground of late. " In 1905 the amount expended
for out-of-work benefits could not well have exceeded
eighty thousand dollars, and of this sum a considerable
part was spent by the Amalgamated Society of Carpenters,
a British trade union, with branches in the United
States."* In 1914, when unemployment was rife, it is
safe to say that not more than one hundred thousand
dollars were spent on out-of-work benefits, of which a
quarter was spent by the Amalgamated Society of
Carpenters and about $31,000, i.e. much more than
one-quarter, by one union alone, viz. the Cigar Makers'
Union.

Less than 3 per cent, of the comparatively small
\ total expenditure of American unions on insurance
benefit features is spent on unemployment insurance.

The fact of the small increase, if any, of out-of-work
benefits is all the more striking when it is appreciated

* Kennedy, J. B. : Beneficiary Features in American Trade Unions,
p. 85.

See also Unemployment and American Trade Unions, by D. P. Smelser,
Johns Hopkins Press, Baltimore, 1919, and League of Nations Report on
Unemployment, p. 81.

"Of the in national unions affiliated with the American Federation
of Labour in 1916, 69 reported paying benefits amounting to $3,545,823.
Only 3 per cent, of this amount, $120,770, went for the relief of the
unemployed. But even this sum came largely from special assessments,
and from the exemption of payment of dues by those out of work."

INSURANCE AGAINST UNEMPLOYMENT 393

that other forms of insurance, mortuary, sickness, etc.,
have increased a great deal during recent years. There
has also been an even greater increase in the number
of special levies or special assessments raised for a given
definite purpose, but a detailed consideration of such
levies for emergency purposes, although by this means
more is raised to relieve unemployed workmen than
by the method of insurance, does not properly belong
to this inquiry.

Unemployment Benefits in America.

Unemployment benefits in American unions have
assumed the three forms which are common in Europe.
First, there is the out-of-work benefit of a fixed amount
per week for a certain number of weeks. Secondly,
some unions arrange for a travelling benefit sufficient in
amount to transport the unemployed workman to some
place where he is likely to find work. Other unions
allow only a loan for this purpose. Thirdly, some unions
grant merely an exemption of payment of dues for
a definite period to unemployed members. This and
the first are generally known as unemployment benefits,
the second as a travelling benefit.

The unions that pay money out-of-work benefits are
the Cigar Makers, the Deutsch Amerikanischen Typo-
graphia, the Iron Moulders' Union, the Amalgamated
Society of Carpenters (a British union with branches
and a membership of about 4,000 in the United States),
the Amalgamated Society of Engineers, the Brewers'
Union Local No. i, and the Boston Wood Carvers'
Association.

The Cigar Makers' Union is still the only American
trade union of national size which pays a weekly money
benefit to unemployed members, the others being local
unions.

The Cigar Makers' Union.

Indeed, with respect to the variety, the total expendi-
ture, and the long consecutive histor}^ of its benefits, it

394 INSURANCE AGAINST UNEMPLOYMENT

BENEFITS PAID BY THE CIGAR MAKERS' INTERNATIONAL

Year.

Lo&ns to
Travelling
Members.

Strike .Benefit.

Cost per
Member
per
Year.

Sick Benefit.

Cost per
Member

«.

Death and
Total Disability
Benefit.

1878*

—

1879

—

3,668.23

1-34

—

1880

2,808.15

4,950.36

i. ii

—

T-

—

i88if

12,747.09

21,797.68

1.49

3,987.73

0.27

75.oo

i882j

20,386.64

44,850.41

3.92

17,145.28

1.50

1,674.25

1883

37,135.20

27,812.13

2.IO

22,250.56

1.68

2,690.00

1884

39,632.08

143,547.36

12.62

3i,55i.5o

2-77

3,920.00

1885

26,683.54

61,087.28

5.09

29,397.89

2.44

4,214.00

1886

31,837.51

54,402.61

2. 2O

42,225.59

1.71

4,820.00

1887

49,281.04

13,871.62

6.74

63,900.88

3-10

8,850.00

1888

42,894.75

45,303.62

2.66

58,824.19

3.40

2i,3i9./5

1889

43,540.44

5,202.52

0.29

59,519.94

3.29

I9,i75oo

1890$

37,914.72

18,414.27

0.74

64,660.47

2.55

26,043.00

1891

53,535-73

33,531.78

.38

87,472.97

3.40

38,068.35

1892

47,732.47

37,477.6o

.40

89,906.30

3-22

44,701.97

i893

60,475.11

18,228.15

0.68

104,391.83

3.68

49,458.33

1894

42,154.17

44,966.76

.61

106,758.37

3-64

62,158.77

1895

41,657.16

44,039.06

.58

112,567.06

3.82

66,725.98

1896

33,076.22

27,446.46

.00

109,208.62

3-74

78,768.09

1897!

29,067.04

12,175.09

0.46

112,774.63

3-99

69,186.67

1898

25,237.43

25,118.59

0.94

111,283.60

3.90

94,939.83

1899

24,234.33

12,331.63

0.42

107,785.07

3.44

98,993.83

1900

33,238.13

137,823.23

3.98

H7,455.84

3-21

98,291 .00

1901

44,652.73

105,215.71

3-02

134,614.11

3.65

138,456.38

1902

45,3I4.05

85,274.14

2.23

137,403.45

3.47

128,447.63

1903

52,521.41

20,858.15

0.51

" 147,054.56

3.42

138,975.91

1904

58,728.71

32,888.88

0.76

163,226.18

3-59

151,752.93

1905

55,293-93

9,820.83

0.23

165,917.80

3-73

162,818.82

1906

50,650.21

44,735-43

I. 10

162,905.82

3-69

185,514.17

1907

50,063.86

22,644.68

0.52

173,505.67

3-72

207,558.87

1908

46,613.44

32,423-39

0.77

184,755.69

4.02

220,979.71

1909

41,589.34

19,999.58

0.43

186,983.28

3.71

238,284.47

1910

39,828.77

221,044.70

4.90

189,438.59

3-77

226,717.53

1911

38,543.47

47,671.20

I .10

201,296.03

4-13

251,677.41

1912

33,113.10

12,646.87

0.30

204,775.61

4.33

261,910.21

1913

45,264.82

8,877.02

0.21

196,853-58

4.15

280,555.62

1914

5i,077.i5

50,898.50

1.23

207,579.62

4.38

279,746.15

1915

42,266.70

9,947.56

0.25

210,427.87

4.60

278,509.64

Total

1,430,788.84

1,562,993.08

4,119,806.18

—

3,945,979.77

* The weekly dues were 10 cents.

The weekly dues were 15 cents.

J The weekly dues were 20 cents.

INSURANCE AGAINST UNEMPLOYMENT 395

UNION OF AMERICA IN THIRTY-SIX YEARS AND TWO MONTHS.

Cost

Mem-
ber
per
Year.

Out-of-work
Benefit.

Cost
per
Mem-
ber per
Year.

Total
Cost per
Member
per Year
for all
Benefits.

Members
Contri-
buting
30 Cents.

zo-cent
Bene-
ficiary
Retired
Mem-
bers.

Mem-
bers
Paying
Dues
of 10
and 15
Cents.

Balance at
Close of Fiscal
Year.

—

124.55

—

1-34

2,729

—

5,066.22

• —

—

1 .11

4,440

—

11,155.62

o.oo

—

1.77

14,604

—

37,740.79

0.14

—

5.56

",430

—

77,506.29

O.2O

—

3-99

13,214

—

126,783.30

0.34

—

15-74

n,37i

—

70,078.73

0.35

—

7.88

12,000

—

85,511.46

0.19

—

4.10

24,672

—

172,813.25

0.43

—

4.21

20,560

—

. —

227,228.24

•23

—

7.29

17,133

1 68

—

239,190.53

.06

—

4.65

17,555

496

—

285,136.54

.02

22,760.50

0.92

5-25

24,624

713

—

383,072.87

•51

21,223.50

0.87

7-17

24,221

957

—

421,950.06

.60

I7,46o.75

0.65

6.88

26,678

1,229

—

503,829.20

•74

89,402.75

3-33

9-45

26,788

i,5i8

—

456,732.13

2. XI

174,517.25

6.27

13.64

27,828

i,497

—

340,788.66

2.27

166,377.25

5-99

13.67

27,760

1,644

—

236,213.05

2.69

175,767.25

6.43

13-87

27,318

1,873

—

177,033.12

2.44

117,471.40

4.46

11.36

26,347

1,859

118

194,240.30

3-30

70,197.70

2.65

10.80

26,460

2,049

203

227,597.01

3.13

38,037.00

I-3I

8.31

28,994

2,252

341

292,407.95

2.64

23,897.00

0.70

10.54

33,955

2,584

652

314,806.24

3.67

27,083.76

0.79

11.14

33,974

2,863

860

321,124.33

3. ii

21,071 .00

0.56

9-39

37,023

3,105

,103

361,811.29

3.14

15,558.00

0.39

7-47

39,301

3,605

,343

495,117.91

3-24

29,872 .50

0.71

8.31

4i,536

3,904

,380

589,234-20

3.56

35,168.50

0.87

8.41

40,075

4,297

,312

688,679.13

4.08

23,911 .00

0.60

9.49

39,250

4,828

,340

714,506.14

4-32

19,497.50

0.47

9.05

4i,337

5,266

,350

775,305.85

4.68

101,483.50

2.51

12. OO

40,354

5,535

,231

705,960.75

4.62

76,107.25

1.71

10.49

44,414

5,908

,155

672,184.39

4.40

39,917.00

0.91

13.99

43,837

6,314

,291

489,426.98

5-03

36,942.50

0.87

11.14

42,107

6,608

,257

443,384.62

5.40

42,911.05

i. 06

II .10

40,373

6,846

,238

399,474-52

5-77

31,898.71

0.79

10.93

40,180

7,167

,273

414,037.45

5.76

68,198.00

1.70

13.08

40,001

7,344

,205

319,804.75

5-94

122,954.00

3.23

14.02

38,044

7,692

,150

240,791.97

—

1,609,686.62

—

§ The weekly dues were 25 cents.
j| The weekly dues were 30 cents.

396 INSURANCE AGAINST UNEMPLOYMENT*

is both the model beneficiary organization of the United
States and the pioneer in this field of union activity.
It has also fathered a resolution urging the American
Federation of Labour to prepare a scheme of social
insurance for the whole of organized labour in the
country, and its own methods are the most likely to be
copied.

It has deliberately adopted the principle of high dues
and an elaborate chain of benefits. For over twenty-
five years it has provided out-of-work, travelling, strike,
sick, death, and disability benefits. The weekly con-
tribution for most members therefore had to be 25 cents
a week until 1897, and since then it has been 30 cents
a week.

The union has grown steadily, its increase in member-
ship being characterized by a steady and continued,
though comparatively small, growth. This is in marked
contrast with most unions not paying " out-of-work "
benefits. These tend to have sporadic increases and
decreases of membership.

From the outset, the first benefit being paid on
January 22, 1890, the out-of-work benefit feature has
been successful in operation and very popular amongst
the members.

The constitution of the International Cigar Makers'
Union provides that unemployed members who have
paid weekly dues for a period of two years shall be
entitled to $3 per week and 50 cents for each addi-
tional day, that after receiving six weeks' aid the
member shall not be entitled to further benefits for
seven weeks, and that no member shall be granted
more than $54 during any one year.

Members of one year standing are entitled to a loan
for transportation to the nearest union in whatever
direction they desire to travel, but loans may not
exceed $20 in the aggregate.

The Amalgamated Society of Carpenters is a British
union, providing out-of-work benefits since 1860.

In 1913 this society had over 4,000 members in

INSURANCE AGAINST UNEMPLOYMENT 397

the United States. More than $24,600 was distributed
in out-of-work benefits.

Benefits are paid for not more than 18 weeks in a
year. During the first 9 weeks benefits are provided
at the rate of $3.50 per week, and during the second
9 weeks at the rate of $2.50 per week.

Out-of-work Benefits provided by Locals.

In addition to these two national unions which pay
out-of-work benefits, there are a number of locals who
make provision of this kind for their members. The
total amount, however, which is spent for this purpose
is very small.

The Amalgamated Society of Engineers was founded in
1861. Shortly after that date out-of-work benefits began
to be paid by some of the locals. During 1913 there
were some 2,700 members insured against unemploy-
ment, and they were granted $9,063 in out-of-work
benefits. There are five classes of membership, only
the highest class, consisting of members in good stand-
ing for ten years, receive $3 per week for 14 weeks,
$2.10 for 30 weeks, $1.80 as long as they are out of
work. The other classes of members receive lower
benefits. The lowest receives a benefit of 75 cents a
week for 14 weeks.

The Brewers' Union Local No. I has 1,150 members.
In 1913 it distributed $1,100 in out-of-work benefits,
and in 1914 $1,800.

Unemployed members receive $4 per week for a
maximum period of 12 weeks, but no member may
receive more than $48 in two years. If a member ex-
hausts the maximum amount of benefits, he must pay
dues for a full year before he will be entitled to benefits
again. Whilst in receipt of unemployment benefit the
member must report daily at the secretary's office.

The Boston Wood Carvers' Association has 136 mem-
bers who are insured against unemployment. In 1914
$784 were distributed in benefits under this head,,

398 INSURANCE AGAINST UNEMPLOYMENT

Unemployed members receive $4.50 per week for a
maximum period of 12 weeks in a year.

Unlike most unions, the Boston Wood Carvers do not
pay a weekly fixed due. The dues are raised by col-
lecting 3 per cent, of members' weekly wages, 2 per
cent, of which go to the Unemployment Fund.

Typographical Union No. 7, a union of 300 German
type-setters, has the most perfect and one of the oldest
schemes of unemployment benefit in the country.*

These men pay high union dues, 90 cents a week for
members working, and one-half that amount for members
not employed. In addition there is an assessment of
i per cent, of wages to be contributed to the national
organization with which the local is affiliated.f

Men who have belonged to the union for 104 weeks
are entitled to 16 weeks' benefit, those belonging for
200 weeks or over are entitled to benefit for an inde-
finite period, i.e. until they again find work.

The benefit is $1.25 a day. At first the unemployed
workfnan receives his benefit from the treasury of the
national union. Then, for a period of three weeks, he
receives his benefit from the treasury of the local. After
that period he again receives his benefit from the
treasury of the national union. In this way the burden
is shared between the national union and its local, and
the respective funds are protected from too speedy
exhaustion.

/ There is a strict test as to whether an unemployed

/ workman is malingering. First, the union secretary is

!^>/ well acquainted with the daily life of the unemployed

/ member, and knows whether he is honestly seeking

work. Secondly, the unemployed workman must report

daily at the union headquarters or forfeit his claim to

* See The Survey, February 20, 1916.

f In 1913 the average annual contribution per member in British trade
unions was $6-60, and the average expenditure $4.56, but the printing
trade group of unions collected $19,20 and spent $21.24.

Unemployment, travelling, and emigration benefit accounted for 13.3
per cent, of the expenditure of all unions in the States, and for one-third
pf the income of the printing group,

INSURANCE AGAINST UNEMPLOYMENT 399

benefits. Thirdly, the union acts as an employment
bureau. Any workman refusing a steady position is
fined very heavily, four weeks' benefit. If he does this
again he is punished more severely or even suspended.

It is because of the good wages of these men, $5 a day
for a five-day week (pre-war rate), that the high dues can
be paid. But that fact alone would not enable the
union to pay such high benefits.

The union has developed a policy whereby unem-
ployment in respect of each workman is lessened, even
though the percentage of unemployment for the whole
trade is the same. During periods of depression a man
after three weeks' employment gives away his place to
one of the other unionists who is unemployed. A list
of all the unemployed members is kept. By means of
a system of rotation the work is divided amongst them.
This system applies, however, only to the temporary work.

The five-day week, the high wages, and the fact that
employers make no objection to this scheme of sharing
the work around amongst the members, are conclusive
proof of the peculiar conditions in the trade and of the
strength of Typographical Union No. 7, rather than
of the possibility of extending such a policy very widely
in different trades.

It is at first a baffling problem to understand why the
German printers local, Typographical Union Local No. 7,
has been able to develop such a thorough organization
and to carry out successfully a scheme of unemploy-
ment benefit. Nor is it very evident when we learn
that printers are a very intelligent and superior class
of workmen, since other skilled workmen have not
organized for this purpose. The real explanation lies in
the fact that this local has inherited an experience and
is carrying on a tradition which has fallen to the lot of
few other organizations.

In Germany the compositors' craft has been carried
on from a remote period, and has almost from the
beginning had some form of organization. Moreover,
in that country the compositor's craft has been brought

400 INSURANCE AGAINST UNEMPLOYMENT

to a degree of perfection which could hardly be matched
by any other trade, and as a result has attracted to
itself exceptionally skilled and educated men. It was
aristocratic, exclusive, and self-reliant, and its trade
union, the Printers' and Typefounders' Union, was in
marked contrast with the " free or social democratic
Gewerkschaft " that were organized later and were
associated with the political movement. The present
National Union was formed in 1867, the attempted
National Union of 1848 having proved abortive.*

Its aims and methods resemble those of English
trade unions, inasmuch as disputes and wages are
settled by mutual agreements with employers. Local
No. 7 is the direct offspring of the most independent,
the oldest and the best organized and strongest of the
German unions.

Our understanding of trade unionism in the United
States will not be complete without further knowledge
of the trade associations and customs of the immi-
grants f of the last fifty years.

New York Typographical Union No. 6. — Established
under its modern form in 1852, Typographical Union
No. 6 was forced during the depression of 1857-8 to
try to find work for its unemployed members and to
distribute out-of-work relief to those who needed it.J

It was after the prolonged and distressful depression
following the industrial panic of 1873 that Big Six
spent over £500 ($2,500) in relieving want and in paying
for the removal of members to other cities, and, rinding
that the disbursement of that sum was insufficient,
appealed to chapels to make arrangements whereby
some portion of the work could be shared with the
unemployed.

* See Shadwell's Industrial Efficiency, vol. ii, p. 330.

f The History of the Jewish Labour Movement (published in Yiddish),
Nevv York, 1915, is one necessary study which traces the history of work-
men's organizations and their leaders back to Russo-Jewish conditions.

J The Fundamental Law of the Typographical Association of New
York, which was revised in 1833, " provided for the payment of specified
benefits to members on strike, besides pecuniary relief for the unemployed
and the sick,"

INSURANCE AGAINST UNEMPLOYMENT 401

Recognizing the fact that hundreds of our members are unable
to secure employment sufficient to maintain them and their families
and have every prospect of a hard winter before them, while others
are working full time, and in some cases overtime, and are there-
fore unaffected by the general stagnation in business (ran the plea
of the association), and believing it will be to the best interest
of our union to assist the unemployed members by distributing
the surplus work as evenly as possible, we request the different
chapels to take such action in this matter as will in some measure
assist these men endeavouring to maintain union principles.

It is impossible to know to what extent this was
carried out, but instances were numerous. This practice,
together with the unemployment benefits, proved suffi-
cient to prevent even one member of Union No. 6 from
having recourse to public charity during the period of
transition when the linotype machine was replacing
hand workers and the depression was greatest.

In explaining its recommendation the committee stated
that it had " endeavoured to eliminate all semblance of
charity from the fund and make the payment of relief
a constitutional right, to which each member is entitled."

The following additions to the constitution were
approved by a referendum and went into effect on
April 5, 1896.

Section i. — The out-of-work fund shall be main-
tained by an assessment of i per cent, on the earn-
ings of all members, to be collected weekly, the assess-
ment to be considered a part of a member's dues. The
officers of the union shall suspend the assessment
when the surplus in the fund shall amount to $2,500,
and shall renew it when said surplus shall have been
reduced to $500.

Section 2.— Any unemployed member of the union in
good standing who has been a member for at least one
year previous to his application shall be entitled to
relief. No applicant shall receive more than $4 per
week, nor more than four payments in any six weeks,
nor more than fifteen payments in a year. Only those
out of employment for an entire week shall be entitled
to benefit.

402 INSURANCE AGAINST UNEMPLOYMENT

" Big Six/' the American type-setters' local, has had
a more eventful career than the German printers' local.
In 1907 it was forced to discontinue its benefits.

The stumbling-block in the way of the union unem-
ployment insurance was the fact that some men became
parasites and made little pretence to seeking employ-
ment when they were assured even so small an allow-
ance as an out-of-work fund could afford. The union
found that a number of men drew in each year the
full amount that was permitted under the laws regulating
the fund. The abuse which resulted from the " Pan-
handlers " in the society became so flagrant that it led
to the abolition of the unemployment fund. The
majority of the beneficiaries it was found belonged to
this class.*

UNEMPLOYMENT BENEFITS DISBURSED FROM OCTOBER
1893 TO AUGUST 13, 1907, BY NEW YORK TYPOGRAPHICAL
UNION NUMBER SIX.

Year ended

September aoth. Amount.

1894 §18,259

1895 17.779

1896 25,365

1897 .. .. .. .. .. .. 30,212

1898 35,169

l899 37.274

1900 . . . . . . . . . . . . 40,324

1901 •• •• •• -. .. .. 40,451

1902 .. .. .. .. .. .. 40,716

1903 44.5H

'904 45,458

1905 50,386

1906 . . . . . . . . . . . . 54,706

1907 (ten months ended August 13) . . 40,039

$520,645

In spite of this experience this union was obliged to
take special measures to meet the unemployment crisis
of 1914-15.

In 1914 benefits were paid during unemployment by
" Big Six," not from members' contributions to a fund,
but from a very heavy assessment of 5 per cent, on all
wages over $10. This raised a revenue of $20,000,

* Portenar: Problems of Organized Labour.

INSURANCE AGAINST UNEMPLOYMENT 403

which was distributed according to individual need in
amounts varying from $5 to $15 a week. This cannot,
of course, be regarded as a true unemployment insur-
ance scheme, because the fund was financed by means of
a special levy and not through regular contributions,
because benefits were provided more in accordance with
needs than with a sense of the actuarial value of the
contributions of members, and because benefits were
paid for an indefinite period, as long as the funds held
out. It was merely a panic measure for meeting a
period of unemployment.

In 1915 a number of national organizations and a
number of locals provided travelling benefits. The Cigar
Makers' Union allowed loans amounting to $56,000 for
this purpose. The Glass Bottle Blowers distributed
$9,000, the Pattern Makers $1,275, and the Tunnel and
Subway Constructors' Union $2,000.

A number of unions allow an exemption of dues
during periods of unemployment. The United Shoe
Workers of America allows every member in good
standing who is unemployed thirteen out-of-work
stamps each year.

The Pattern Makers' League of North America exempts
unemployed members from paying dues for a maximum
period of thirteen weeks in a year. The Piano and
Organ Workers' International Union of America exempts
members from dues during their whole period of unem-
ployment. This rule is to be found also amongst
blacksmiths, boiler-makers, brewery workers, glass
workers, granite cutters, iron moulders, leather workers
on horse goods, lithographers, locomotive firemen,
machinists, metal polishers, united mine workers, photo-
engravers, pulp, sulphite and paper-mill operatives,
stove mounters and the Western Federation of Music.

The building trade unions of New York have no
regular established system of unemployment benefits,
but assistance is rendered in all cases of distress either
by loans or donations. " No worthy applicant is turned
away." The building trades unions are estimated to have

404 INSURANCE AGAINST UNEMPLOYMENT

spent over $250,000 of union funds (during the crisis
1914-15), " some lending their mortuary benefit surplus
to the general fund for this purpose."

The so-called unemployment benefits paid by the
Glass Bottle Blowers' Association were of this kind. In
1908, $325,000 was distributed to meet the expenses
of many members, and in 1914 $70,000. Similarly,
the $6 weekly benefit paid by the Photo-engravers
during the 1914-15 depression out of a fund raised by
a special weekly tax of 50 cents for 18 weeks from
employed members and the benefits provided from
special funds by the Blacksmiths' Helpers Local No. i
cannot be strictly regarded as out-of-work insurance.

The loss to the union resulting from such an exemp-
tion of dues is considerable. This is seen from the
figures relating to the Iron Moulders' Union.

EXEMPTION FROM DUES TO UNEMPLOYED MEMBERS BY
THE IRON MOULDERS' UNION.

1900 $5.859

1901 6,587

1902 2,597

1903 6,518

1904 23,171

1905 6,226

1906 4,169
1907

1908

1909 $17.444

1910

1911

1912

1913

1914 131.877

1915 46,960

The International Moulders' Union of North America
claims to have lost $348,198 from out-of-work dues
since its inception up to December 31, 1915. During the
year 1915 alone, $46,960 was lost in this manner. Even
this form of out-of-work benefit, the exemption of
unemployed workmen from paying union fees, is not,
in fact, very common in the United States.

During the unemployment crisis of 1914, it was sug-
gested that the out-of-work stamp should be employed
by all unions to prevent members from losing their
membership. It was argued that if a member is one
or two months in arrears when becoming unemployed
and cannot afford to pay up his back dues, it should
be the duty of the financial secretary to give him an

INSURANCE AGAINST UNEMPLOYMENT 405

unemployed stamp during the period of unemployment,
applying the same on the first month of his arrears in
order to keep him from being dropped.

" We are losing hundreds of members who are out
of work/' said Vice-President Ames of the International
Association of Mechanics, " who can't pay their dues
and are one and two months behind in their dues, and
the third month catches them quick, where if an out-
of-work stamp could be placed in their book during the
time and month they are out of work, then it would
be an easier task to get them to pay up for the one or
two months they were behind after they get a job
than it would be to get their reinstatement fee." *

Problems of Trade Union Out-of-work Benefits.

Two questions now confront the practical admini-
strator of trade union out-of-work benefits. Should
all members pay a fixed weekly due for this purpose
or should it vary with their wages ? Should national
unions or locals administer these funds ?

It has been suggested that the percentage plan is the
only truly fraternal plan and for that reason best for
organizing purposes. The insurance fund would then
be collected upon the basis of a percentage of earnings. ,
The man who earns most, it is urged, should pay
most. If this method of taxation is not employed,
then, it is argued that the less efficient who may be
aged, infirm, and those likely to be unemployed often
might find the assessment a real burden, and not only
their insurance but their membership would be im-
perilled by inability to pay it.

The percentage plan, it is claimed, is a practical
application of the doctrine, " Each for all, and all for
each."

Experience is against this view. Most unions suc-
cessfully operating out-of-work benefit schemes provide

* The objection to this proposal is that it puts a premium on arrears.
— Machinist's Monthly Journal, May 1914, vol. xxvi, No. 5, pp. 477,
478. This need not lead to abuse if the administration is sound.

406 INSURANCE AGAINST UNEMPLOYMENT

that all members shall pay the same weekly due.
Besides, the payment of dues on a percentage of wages
basis would necessarily complicate the administration of
the scheme. The view that the support of the most
needy members of the union is the duty of the most
capable contains elements dangerous to trade unionism.
It implies functions that rightly belong to national and
employers' organizations. The usual view is that unions
consist of members not very much unlike one another
in ability and all subject to the same risks. It is there-
fore proper that in insuring against any given emergency
they should bear equal burdens. Some members will
of course gain more than others by organizing them-
selves in this way, but it is of the essence of insurance
that it should be uncertain as to which individuals are
going to benefit most.

Now who should administer out-of-work benefits ?
Shall it be a national or local organization ?

The question is of extreme importance. While there
is much to be said for a body like the German Type-
setters' Local No. 7 administering its own funds, yet in
the main the view of James M. Lynch, former President
of the International Typographical Union,* with regard
to sick benefit, applies with even greater force to out-
of-work benefit.

" My own impression," he writes, " is that inter-
national benefits are in every way more desirable, have
a greater guarantee of permanency and are more effi-
ciently administered than local benefits."

One of the main causes for the comparatively small
attention devoted to benefit features by the United
States trade unions has hitherto been the inability of
the international unions to acquire jurisdiction over
the establishment and extension of such features. It
is difficult to bring locals that have to support their
benefit funds to consent to increase the tax to such an

* Trade unions with members in different States are generally known
as International Unions. Justification may be sought for the title in the
fact that certain locals of these unions are to be found also in Canada.

INSURANCE AGAINST UNEMPLOYMENT 407

amount as would enable the International to secure the
means for taking control. It is extremely doubtful
whether any great increase in such activities is likely
until the national unions gain this function as their own.

The introduction of a national out-of-work benefit
has been much discussed in many important unions.
Every industrial depression has resulted in deliberation
over this matter. But hitherto they have resulted in
little more that was concrete than the working out of
immediate schemes of relief, the funds for which were
collected by raising special assessments.

The International Typographical Union,* the Boot and
Shoe Workers' Union, and the Brotherhood of Car-
penters have often discussed the question seriously.
In 1902, for example, at their annual convention the
Boot and Shoe Workers' Union recommended that all
local unions raise funds for the payment of dues of out-
of-work members " to the end that from the experi-
ence so gained a national plan for relief of unemployed
members may be developed/'

* Typographical Journal, vol. 46, No. i, p. 47.

CHAPTER XXVI

TRADE UNION POLICY AND OUT-OF-WORK
BENEFITS

TRADE unions undoubtedly have certain advantages in
operating schemes of unemployment insurance. First,
they may realize within their domain " the ideal of
universality through compulsion." It becomes obligatory
on all members to pay dues and help administer the
union scheme. Secondly, by allowing only steady work
men to join the union the danger of a certain group of
members frequently claiming benefits or of " falling out "
^ of benefits is greatly lessened. Thirdly, the uniformity
in exposure to unemployment which must result from all
members of the fund belonging to the same trade
diminishes, if it does not entirely remove, the likelihood
that one group of workmen will in effect be subsidizing
another group. Fourthly, and most important, is the
fact that many unions act as an employment exchange
for their unemployed members, whilst fellow-members
assist by informing the union office when vacancies
occur. The union member, therefore, other things being
equal, has a better chance of finding employment than
a non-union workman, and thus, on the whole, is less
likely to make as many claims on his insurance fund.*
Malingering, too, always a serious matter with respect
to private insurance companies, is reduced to a
minimum when fellow-workers who know a man
intimately have an interest in reporting any lapse
from strict honesty.

* Cf., however, First Annual Report on Unemployment Insurance in
Great Britain, Cd. 6965.

408

INSURANCE AGAINST UNEMPLOYMENT 409

Trade unions also possess an advantage in being
able, by means of assessments levied upon members or
otherwise, to adjust the income of the union to the
demands made upon it by its insurance policy. Such
assessments would not need to be levied at all, of
course, if actuarially sound schemes were introduced
from the very outset. But where this is difficult, and
even impossible, the consideration that trade unions
can arrange schemes which have a degree of elasticity
gives them a great advantage.

Lastly, it must be noted with regard to unemploy-
ment in the United States, that the workman has
no other means of insuring against it than is offered
by his union. Saving is almost impossible to a large
percentage of workmen. Even if, therefore, it could
be proved that other organizations can provide life or
sickness insurance cheaper it might still be better for the
workman to obtain trade union insurance, even against
these emergencies, since it alone can furnish him also
with unemployment insurance.

Insurance is not merely a Method, but the Fundamental
Idea Underlying all Trade Union Activity.

Mr. and Mrs. Sidney Webb have well pointed out
that

in a certain sense it would not be difficult to regard all the
activities of trade unionism as forms of mutual insurance.
Whether the purpose be the fixing of a list of piecework prices,
the promotion of a new factory bill, or the defence of a member
against a prosecution for picketing, we see the contributions,
subscribed equally in the past by all the members, applied in ways
which benefit unequally particular individuals or particular sections
among them, independently of the amount which these individuals
or sections may themselves have contributed.

This same characteristic of trade union activity is
manifested whenever special assessments are raised.
These take the form of levies based on a percentage of
wages, or of lump sum assessments, or of the with-

410 INSURANCE AGAINST UNEMPLOYMENT

drawal of an amount from the union's accumulated
funds. In America the method of assessment is resorted
to very often, certainly much more often than in Great
Britain. It is easy to see why. The high contribu-
tions and their regularity furnish the British unions with
sufficient resources to meet all the expected emergencies
of their members. In fact, contributions are calculated
on that basis. In America, trade unions endeavour to
keep their contributions as low as possible, merely
sufficient to carry them over industrial disputes, and
thus cannot afford to arrange for a benefit system.

The more trade unions ignore the principle of mutual
insurance, however, the more often are they forced to
make arrangements embodying its fundamental idea.
During periods of unemployment, or when members
suffer accidents, or during strikes, in short, whenever
the union feels that it is necessary to protect itself or
the long-time interests of its members, a post facto dis-
tribution of risks actually takes place.

Trade unions do not' in practice ignore the emer-
gencies that befall workmen. They cannot, and indeed
dare not, do so if they are to remain in existence. The
issue is therefore clear between special assessment and
mutual insurance as the best means for meeting these
emergencies. Shall such emergencies be met through
sporadic and intermittent activities or shall they be
treated with foresight, and preparations be made before
they occur ?

Assessments versus Mutual Insurance.

There can be little doubt that the method of special
assessment tends to reduce the stability of trade union
organization by subjecting it frequently to severe strains,
and it accomplishes its special function, the immediate
provision of a minimum of funds to its members, with
harmful results to those assessed and to those who
receive benefits. First, the assessment is generally
levied on workmen who are themselves badly hit by

INSURANCE AGAINST UNEMPLOYMENT 411

the same causes that have produced the given emer-
gency. Thus if out of a local with 1,000 members
100 are out of work, the likelihood is that the other
900 on whom the assessment is levied are themselves
working part time. Second, the raising of such levies
causes members to leave their unions. Third, it is
humiliating to the members temporarily in need to
have to be dependent on the goodwill of those who
provide the assessment. Fourth, they cannot be sure
that the assessment will be raised and the benefits
provided, and even if raised once whether it will be
raised again sufficiently often to provide for them until
they resume normal conditions.

Objections to Mutual Insurance.

Occasionally, however, it has been urged, more often,
be it noted, in the United States than in the western
countries . of Europe, that collective bargaining for higher
wages, lesser hours, and better trade conditions is the
sole legitimate method for trade unions to adopt. But
surely to ignore the methods of mutual insurance and
of legal enactment, and to restrict organized labour in
this way, is needlessly to hamper its activity. This
policy, if adopted, would tend to stultify trade union
growth and make permanent an activity found most
suitable at one particular period. All methods are
legitimate by which labour can gain " an ever-improv-
ing lot," and the method of mutual insurance has long
justified itself by experience as one of the most effective
weapons for attaining it.

Objections to Union Out-of-work Schemes.

The usefulness of out-of-work insurance to trade
union organization is attested to by its age. " The
simplest and universal function of trades societies/'
it was reported by a British scientific association in
1860, " is enabling the workman to maintain himself

412 INSURANCE AGAINST UNEMPLOYMENT

while casually out of employment or travelling in
search of it." In Great Britain out-of-work benefits
have been provided for some two centuries. In America,
too, the one great union that has experimented with
out-of-work benefits has now over thirty years of
successful experience.

Yet there are some very strong objections from the
workman's point of view towards schemes of union
out-of-work benefits, regarded merely as a business
venture.

He has no legal claim to his benefit, and he is not
certain that the policy of the trade union will not neces-
sitate the expenditure of the funds for purposes other
than those for which they were raised. Unlike friendly
societies and the private insurance companies, trade
unions do not enter into any legally binding contract
with their members. It follows, therefore, that a
member of a union who has paid his dues for years
may at any moment be expelled from it, and his rights
to insurance benefits may thus be forfeited. Or again,
his assessments may be increased against his wishes.
On the other hand, his benefits may at any time be
altered, even to the extent of their abolition. This
actually occurred with the out-of-work benefit scheme
of Typographical Union " Six " in 1907.

It is also a great drawback to the member's sense
of security that the funds to which he contributed may
be used for entirely different purposes. " Funds devoted
to life insurance and the money which may have been
contributed for the purpose of insuring against sickness
or old age may be used in a great strike or expended
in out-of-work benefits during a prolonged commercial
depression."* In trade unions there is no guarantee
that any of the funds will be reserved for the purposes
for which they were accumulated. During the winter
of 1914-15, for example, the Builders' Union took two
hundred and fifty thousand dollars from its mortuary
fund for the benefit of unemployed members.

* John Mitchell : Organized Labour,

INSURANCE AGAINST UNEMPLOYMENT 413

Perhaps, however, one of the most severe objections
to trade union benefit schemes is the one already noted,
that in periods of trade depression, when members are
in sore straits themselves, they are often forced to pay
an increase on their usual dues, or extra levies, on
pain of being expelled from the union and thus debarred
from benefits.

These theoretical disadvantages, however, do not in
actual practice have very much weight. As a rule
trade unions have been able to meet the obligations
which they have incurred toward their members at
least as well as private organizations. They do, how-
ever, demonstrate the advisability of unions running
separate and distinct funds actuarially sound against
different emergencies and of keeping large reserves in
order to avoid having recourse to other funds and to
the levying of special assessments.

It has been said by opponents of trade union schemes
of out-of-work benefits that while sick and death pay-
ments bear certain approximate proportions to the
membership of the union, the number of unemployed
members is dependent solely upon trade conditions
which in case of industrial depressions might increase so
rapidly as to swamp the union funds. To this there
is the ready answer that, taking a long sweep of years,
an industrial depression does not appear as an incal-
culable " act of God." Trade unions can build up
reserves to meet these emergencies. It is one of the
merits of long-lived organizations such as trade unions
that they have a corporate memory and corporate
experience, so that the policy of large reserves with
which to face trade depressions can easily be transmitted.

There is some force in the argument that high dues
tend to lower the membership of unions. But when
it is recalled that on the whole the American workman
earns about 50 per cent, more than the British work-
man and that his scale of contributions to his trade
union is probably lower, it is seen that this consideration
is not important. The experience of the Cigar Makers'

414 INSURANCE AGAINST UNEMPLOYMENT

Union and of Typographical Union Locals No. 6 and
No. 7 show that it is not the scale of contributions that
matters so much to the member, but rather what is done
with them. The advantages offered to members are
so very great when the union pursues a sound policy
that the absolute amount of contributions matters
but little. Indeed, it is a safe conclusion that the
advantages resulting from high payments, the creation
of a strong organization and the provision of a chain
of benefits, tend, on the whole, to attract new members.

Advantages of Out-of-work Benefits.

The most obvious reason for introducing schemes
of out-of-work benefits is to relieve the distress of
unemployed members. Benefits granted during an
emergency are the most direct benefit derived by
workmen from their unions. To prevent members from
having to become dependent on charity has long been
an aim of workmen's associations, and it is still a fre-
quent claim of trade unions that their members very
rarely have recourse to public aid.

It has always been clear that benefits have also a
great influence in furthering the main object of the
union, viz. the improvement of trade conditions. At
the Convention of the Cigar Makers' Union in 1885,
President Strasser argued that the success of strikes
was jeopardized by the existence of unemployed:*

A member of the union (he said), who is out of work for a long
period, is in danger of soon being out of the union. If the number
of the unemployed is large, demoralization steps in, and it becomes
difficult to maintain the rate of wages.

In 1887 he urged the paying of benefits to the unem-
ployed members.

By supporting our members in such emergency they will have
no excuse for working below the regular scale ; nor will they have
an excuse for accepting conditions of employment which are

* Supplement to the Cigar Makers' Official Journal, September 18, 1883.

INSURANCE AGAINST UNEMPLOYMENT 415

injurious to the interests of their fellow-workmen. It will instil
into them more manhood and independence to resist encroachments
of employers in time of depression. It will be the strongest feature
to maintain the rate of wages which has been secured during the
favourable seasons of trade.*

Although the cost of providing this benefit is high
and although unions providing it generally have an
employment office which endeavours to find the unem-
ployed member work and all its members are enjoined
to find and have an interest in finding him work, and
he is forbidden to refuse a situation when offered to
him on pain of very heavy penalties, yet he is warned
against accepting it unless it is at the union rate aad
under union conditions. The chief object of out-of-work
benefits in the mind of the most thoughtful trade
unionists is to prevent the " nibbling away " of their
standard conditions during periods of depression, through
the competition of unemployed members.

Mr. John Mitchell also urges that benefits are sub-
ordinate to the trade policy of the unions. The work-
man may derive an advantage from the support of his
family and himself when is he out of work ; but the
aim of the union is not merely to arrange for this
benefit, but to protect the wage of the men actually
at work.

Thus, if wages in an occupation are twelve dollars a week, the
union prefers that an unemployed man receive from union funds an
out-of-work benefit of four or five dollars a week rather than accept
employment at ten dollars a week, or at any other rate below the
union scale, j

Another reason for introducing a chain of benefits
which commends itself to the trade union mind is the
fact that it tends to have a steadying effect on the
growth of the union introducing it. The steady increase
in membership of the English organizations contrasts
with the fluctuations in the size of the American labour

* Proceedings of the Seventeenth Annual Session of the International
Cigar Makers' Union ,

f John Mitchell : Organized Labour, p. 105.

416 INSURANCE AGAINST UNEMPLOYMENT

bodies and the difference may be assigned in a large
measure to this cause. This view has been borne out
by the slow but certain growth of the Cigar Makers'
Union since its formation some thirty-six years ago.

This is seen in a more marked manner when the
effects of the industrial depression of 1914-15 on the
Cigar Makers' Union are compared with their effects
on the rest of organized labour. The former suffered
the loss of one member out of every three hundred in
the union, the latter of eleven out of every three
hundred.*

International President Perkins was therefore justified
in his view that " The effect upon the loyalty of the
members is remarkable, inasmuch as it lessens the sus-
pensions and has a tendency to make the organization
more permanent."

Benefits in General.

It is manifest that " every additional benefit con-
tingent upon membership in a union is an additional
tie to be broken before a man can bring himself to the
point where he is willing to throw away all that
membership means." The existence of benefits is par-
ticularly important to a union during long periods of
industrial peace. It is then when membership tends to
fall off that the presence of tangible common interests
keeps members together.

There is also a type of workman who is attracted to
a union by benefit features. It is for him the readiest
way of insuring against contingencies against which he
and his family need protection. He is anxious to
avail himself of the benefits offered, and his enthusiasm
is maintained by the thought of securing relief in times

" Despite the terrific adverse conditions in so far as employment
is concerned, we lost during the year only 179 members" (Cigar Makers'
Journal, vol. xxxix, No. 4, p. 2). The total membership during the
year was 48,500.

The Organized Labour Movement lost 75,000 out of a total membership
of 2,000,000. — American Federation Annual Report, 1915.

INSURANCE AGAINST UNEMPLOYMENT 417

of unemployment, of sickness or accident, or provision
for his family in case of death.

Furthermore, the discipline of the union is helped by
the existence of a scheme of benefits. Obviously, the
power of expulsion, always a very significant instru-
ment possessed by unions, becomes much more im-
portant when expulsion of the cantankerous member
involves for him the loss of insurance benefits. As
President Perkins says :

They usually make better fighters during times of strike, and,
as they become imbued with the spirit that loss of membership
means a serious financial loss both to themselves and their families,
they are more loyal.

Benefit schemes thus help the unions to preserve their
internal discipline and their ability to face conflicts
with greater chance of success.

That trade unions which possess large funds tend to
become conservative has often been observed. The
hope of securing insurance benefits, it is said, renders
members more cautious and less willing to jeopardize
the union's funds in useless or unwarranted labour con-
flicts. On the other hand, when they do engage in any
conflict, they are more likely to win than if they were
without funds. Their attitude is expressed in the
popular song familiar to England during the Russo-
Turkish War :

We don't want to fight, but by Jingo if we do,
We've got the ships, we've got the men, we've got the money
too!

In addition to the strength resulting from the exist-
ence of such funds on which the trade unions may
draw, there is the more important consideration that
their members tend to have a keen sense of loyalty.

In general, there can be little doubt that in the
interests of the unions strikes should be entered into
only after all the resources of peaceful persuasion have
been exhausted, after they are reasonably certain to
have the general public with them and their funds are

418 INSURANCE AGAINST UNEMPLOYMENT

large enough to hold out for at least as long as the strike
is reasonably likely to last.

But it must not be forgotten that it is not a sign of
strength, but rather a sign of weakness, for a union to
have to declare strikes constantly. "Moral suasion,"
and the threat of a strike, are, as a rule, capable of
achieving as much as an open declaration of hostility,
and the presence of a wealthy well-organized union is
one of the workman's best arguments.

As the President of the International Moulders'
Union of America wrote :

The moral effect of a substantial reserve in the trade union
treasury is a powerful one upon the workmen and employers alike.
The very fact that the workmen will contribute year after year
for the purpose of self-protection conveys the impression that there
is something substantial about the men and their organization. *

We can, therefore, understand why, " looking the
field over as it is to-day, we find that the international
unions, without exception, whose members pay the
highest dues and accumulate adequate defence funds,
are making the most progress, while the organizations
with the poorest financial systems or basis lag farthest
behind in the march towards improved terms of em-
ployment."

Thus the very conservatism engendered by the pos-
session of funds, and the resources at their disposal,
increase the chances of unions with benefit features
winning in their struggle with employers.

We now see how what at first sight seems to be
nothing more than merely mutual provision of support
when out of work, or against some other emergency,
is actually one of the most important instruments at
the disposal of workmen for maintaining and improving
their conditions, f

* Joseph F. Valentine: American Federationist, April 1915, "Make
Unionism Effective."

t It is because organized labour as a whole has been slow to appre-
ciate this that out-of-work and other benefits have hitherto played so little
part in the growth of trade unionism in the U.S.A.

INSURANCE AGAINST UNEMPLOYMENT 419

As far back as 1887 the President of the Cigar
Makers' Union said :

The protective and benevolent features are the corner-stone
upon which the structure of our organization rests. They are a
means of cementing the feelings of brotherhood throughout the
union, and help to encourage every member in the good work of
supporting the best interests of the trade.

Mutual insurance as well as collective bargaining
have been found to be powerful devices for achieving
an improvement in the conditions of labour.*

It should, however, be noted that the actuarial basis
of the insurance benefits of certain unions is not sound.
Often sickness, accident, old age, and unemployment
insurance are indiscriminately treated through one fund.f
But with the wisdom that comes from daily experience
there comes increasing differentiation. The general fund
is divided into different funds for different purposes,
until each of the contingencies against which workmen
insure is organized on a scientific actuarial basis.

We therefore conclude that trade unions are well
advised to employ the method of mutual insurance
against unemployment, because by its means the con-
ditions of labour may be improved, and that the
organization of the unions is well adapted towards
achieving that improvement.

The Future of Mutual Insurance.

But will American trade unions employ the method
of mutual insurance even though it is advantageous for
them to do so ?

That trade unions have in recent years come to
appreciate how important benefit features are is clearly
demonstrated by the fact that in the majority of the
early national trade unions these features were not
instituted until many years after such national unions

* President A. Strasser.

f Whilst criticizing existing schemes of trade union benefit features, it is
only proper to keep in mind that private insurance companies too have
their faults and drawbacks.

420 INSURANCE AGAINST UNEMPLOYMENT

were organized, while in many of the national unions
organized since 1880 benefit features were instituted
either at the time of organization or shortly after-
wards. Moreover, the industrial depressions in 1914-15
and 1920-21 have made many unions inquire more
particularly into the possibility of instituting out-of-
work benefits.*

At the Annual Convention of the American Federation
of Labour held at Seattle in November 1913 the
problem of social insurance was for the first time in
the history of that body approached in a manner which
indicated a full appreciation of its significance. It was
resolved :

That the Executive Council of the American Federation of Labour
be and is hereby authorized and instructed to make an exhaustive
investigation and study of this whole matter and report to the
next convention : First, the cost of the payment of each of these
benefits (strike, unemployment, old age, partial disability, sick
and death benefit and other benefits) to the union now paying them ;
second, a skeleton law covering and applicable to all unions ; third,
a report on the laws of other countries and cost of insurance to
those insured by private companies ; fourth, the advisability of the
American Federation of Labour establishing an insurance depart-
ment for the purpose set forth in the foregoing, such department
to run without profit, and in which membership in or affiliation to
shall be absolutely voluntary.

The executive, in its report on this subject, shows that
it paid considerable attention to the problem of social
insurance, and that its attitude was not merely that of
a group of interested people, but rather of a group
growing aware of the difficulties and prepared to face
them.

As to the advisability of an insurance department

* It seems that a period of extreme unemployment is necessary before
the unions come to appreciate the need of insuring against it. But there
can be little doubt that the objections to special assessments, their un-
certainty, their inadequacy, and their destructive effect on trade union
policy, will compel unions paying them to institute stable schemes of
unemployment insurance. Unions forced to raise special assessments
or special weekly taxes or to draw on other funds in order to provide
relief to unemployed members are well on the way to instituting schemes
of unemployment insurance.

INSURANCE AGAINST UNEMPLOYMENT 421

for the American Federation of Labour, the Philadelphia
report of 1914 stated :

We endorse the proposal to the extent of approving of a serious
study of the first steps of organization and administration. (It
adds) : Insurance should be inaugurated with the straight life, and
then extended to other forms of benefits as experience and resources
warrant.

Here we have clear evidence of a change of policy or
rather of a growth of functions of trade unions, and the
fact that there are no signs of objection shows the
favourable auspices under which the new departure is
taking place.

Of course the customary, and in this case justified,
caution of the American Federation of Labour makes
it unlikely that unemployment insurance will be in-
cluded as one of the emergencies against which the
new society will insure workmen, at least at the very
outset. Yet the growing interest in the unemployment
problem, and even its determination to effect some remedy
or method of relief, shows that it is merely a matter
of time and the finding of available resources before
unemployment insurance will be regarded as a normal
trade union activity.*

It is evident from what has been said that (i) the
amount annually distributed in out-of-work benefits by
trade unions is very small ; that (2) trade unions are

* It is interesting to recall that Mr. Samuel Gompers, who spent his
early years as a workman in London, where he learnt the value of trade
union insurance features, and now President of the American Federation
of Labour, framed the measure of unemployment insurance for the Cigar
Makers' Union which was adopted in 1889. Until 1915 he did not,
apparently, think that the time had come for embarking upon this new
activity. But in April 1916 Mr. Gompers presented a " Bill to create a
commission to inquire into the subject of unemployment, of disability
and of sickness of wage-earners of the United States, and to what extent
the Government of the United States can aid, financially and otherwise,
in the mitigation thereof by voluntary social insurance," before the Com-
mittee on Labour (see H. J. Res, No. 159, p. 122). We have already
seen that although Mr. Gompers is a warm advocate of voluntary insur-
ance schemes he will have nothing to do with compulsory insurance schemes.
Indeed, Professor H. R. Seager, in his presidential address to the American
Labour Legislation Association in 1916, referred to the policy of that wing
of the American Federation of Labour whom Mr. Gompers represents
as one of the three great forces hindering progressive labour legislation.

422 INSURANCE AGAINST UNEMPLOYMENT

likely to extend their benefit functions, including out-
of-work benefits, in the near future ; and that (3)
trade unions are well adapted for carrying out that
activity.

Should Trade Union Out-of-work Funds be Subsidized?

It has been suggested that since it is a matter of
general interest and for the general good that trade
unions should carry out insurance activities, therefore
public recognition of this fact should take the form of
a subsidy to trade unions paying out-of-work benefits.
In this way, it is opined, trade unions will extend this
feature of their work and thus help in a very large
measure to overcome the evils of unemployment, at
least for their own members.

There can be little doubt that a scheme which has
already proved beneficial in at least nine countries is
likely to prove serviceable in the States. Can it, how-
ever, be expected that a national system, or even a
State system, based on this principle of subsidizing
trade unions, will alone achieve substantial results
during the next few years ? Will this be a measure
calculated to enable the community to cope adequately
with " the greatest and most extended of social evils ? "

Dr. Lee K. Frankel, Vice-President of the Metro-
politan Life Insurance Company, has advocated that
the Ghent plan of subsidizing trade union out-of-work
benefits be adopted in this country. He said : "If
unemployment insurance is really considered favourably,
the labour unions are the organizations through which
it should be conducted, and the Danish scheme, of all
that I have had any opportunity of studying, does
seem to have given, so far at least, the best results." *
It seems clear that Dr. Frankel anticipates that the
granting of such subsidies is all that need be done in
the U.S.A. in the way of providing unemployment
insurance.

* American Labour Legislation Review, vol. iv, Sec. 2, p. 337.

INSURANCE AGAINST UNEMPLOYMENT 423

There are a number of valid objections to this pro-
posal. At the outset it must be insisted upon that
there is little comparison in this connection between
America and Denmark, for American workmen have
hitherto lacked " the high social development of Danish
workmen and their comprehension of the importance of
unemployment insurance." * In no country in the
world is the proportion of the working class that
belongs to trade unions so high as in Denmark. There
it is estimated to be over 55 per cent, of the wage-
earning classes. More than half of the trade unions
provided out-of-work benefits when the law of 1907
was passed. At the close of that year there were
64,789 members so insured. In the United States
it is safe to say that not many more than that
number out of a total of some twenty million employees
are to-day members of unions granting money out-of-work
benefits. Moreover, because of the fact that such
benefits are rare it cannot be expected that the mere
grant of a State subsidy will have great influence in
increasing the number of unions paying benefits for
some years to come.

It is a characteristic of trade unions that they rely
very much on their own experience and are naturally
enough suspicious of outside advice and help. Trade
unions will educate one another as to the need for any
advantages of unemployment insurance, and until that
education is more widely spread subsidies will have
comparatively little influence.

Assuming even that within the next few years the
trade unions paying death and sickness benefit — generally
the first benefit features — extend their benefits to cover
out of work, and assuming further that all trade unions
will come to develop a complete chain of benefits, we
shall then only have subsidized the best organized
workmen who are least in need of insurance benefits,
since it is universally conceded that trade unions

* Twenty-fourth Annual Report of the Commission of Labour : Work-
men's Insurance and Compensation System in Europe, vol. i, p. 666.

424 INSURANCE AGAINST UNEMPLOYMENT

generally contain the skilled workers earning com-
paratively high wages.

It is the unskilled casual workers who have little or
no organization that constitute the most serious and
considerable section of the unemployed. It is they
who suffer most in periods of depression, and it is they
who have the greatest claim to the legislators' attention.
These workers are, as a rule, too badly and irregularly
paid to be able to afford labour unions with benefit
features. Wherever attempts are being made to intro-
duce organization among unskilled labourers — and this
task has been undertaken with great enthusiasm in
France, Great Britain, and America in recent years — it
has been found necessary to brush aside all thought of
plans of insurance against sickness, accident, old age
or unemployment. It would be impossible, therefore, to
include these organizations or others like them that
may grow up under the stimulus of the new unionism
in the system of trade union subsidies.

Let us assume that even this difficulty did not exist,
we should then have the task of convincing the tax-
payer that this subsidy ought to be made to trade
unions, i.e. that trade unions ought to be recognized
and supported by the State.

Although this has been effected, as already stated,
in nine countries in Europe, it is evident that it will
necessitate a great deal of education before the change
in public opinion towards trade unions which it implies
will take place in the United States.

The recent happenings at Bayonne, the Colorado
riots, the railroad riots in New York, and the unscru-
pulous attitude of certain groups of employers, show
that trade unions are not likely to be recognized as
the best organizations for carrying out certain necessary
functions for both the workers and the State for some (
time.

The final objections to Dr. Frankel's proposal follows
from the consideration that even those countries which
are to-day subsidizing trade unions paying out-of-work

INSURANCE AGAINST UNEMPLOYMENT 425

benefits are contemplating the advisability of intro-
ducing national compulsory schemes. The successful
working of the British National Insurance Act proved
conclusively the practicability of compulsory unem-
ployment insurance, and other countries, in addition
to Italy and Austria, conscious through experience of
the limitations of the Ghent system, are likely to
resort to the compulsory principle. Indeed, the general
tendency in Europe is towards compulsory schemes not
only of unemployment insurance but of all branches of
social insurance.

It is in harmony with this tendency that the Inter-
national Association on Unemployment " took note " of
the following conclusions presented by Professor Fuster
at its conference held in Ghent in September 1913.

The statements made by the authorities who reported
on the problem, based as they were on the experience
gained in the United Kingdom and elsewhere, lead to
the conclusion that there is a general trend of opinion :

1. Towards compulsory insurance at least for certain

trades with contributions from the employers,
the employees, and the public authorities respec-
tively, supplemented by measures to encourage
voluntary insurance.

2. Towards the view that the principal function of a

system of insurance against unemployment should
be to find work for insured persons, and that
the organization of employment exchanges is
essential for such insurance.

3. Towards the organization of insurance in co-op-

eration with trade associations.

Factory life and competitive industry forces the
workman to submit to conditions in which he is subject
to many contingencies. His poverty or indifference
have hitherto made him unprepared to meet the burdens
of industrial accidents, sickness and unemployment,
and so governments have been forced to resort to

426 INSURANCE AGAINST UNEMPLOYMENT

compulsory national schemes as the most effective
means of meeting them.

At most Dr. Frankel's proposal, if applied, would
help only a very few of the aristocracy of labour within
the course of many years. But the need of the United
States to-day is for a scheme which will enable it to
grapple with the problem of unemployment at once.

Our conclusion must therefore be that while trade
unions will gain from engaging in this activity and
public encouragement might in time be given them in
order to increase it, yet very little can be attained along
these lines for reducing the effects of unemployment.

As to the attitude of the trade unionists towards
some form of Government scheme of unemployment
insurance, the American Federation of Labour, at its
convention in Seattle in 1913, recommended that the
executive committee " take up the question of Govern-
ment pension in some form for those unable to secure
employment."

The situation to-day is this : Few trade unionists
make any provision against unemployment ; they are
growing increasingly interested in some Government
plan of unemployment insurance.

Let us note the more obvious signs of the growth of
a " movement " in favour of unemployment insurance.

Growth of the Movement in Favour of Unemployment
Insurance in the United States.

The successful inauguration of the British scheme of
unemployment insurance, as well as the serious unem-
ployment crisis of 1914-15 and 1920-1, are responsible
for the growth of a movement in favour of a scheme
of unemployment insurance. Not only were private
studies and discussions begun, but even State and
national legislatures held hearings on the subject with
a view to the appointment of commissions and the sug-
gestion of legislation. We have seen evidence of the
growing interest in this problem by the American

INSURANCE AGAINST UNEMPLOYMENT 427

Federation of Labour. The Socialist Party, on its national
and State platforms, has declared in favour of national
schemes of social insurance, which would, of course,
include insurance against unemployment.*

The Oregon Committee on Seasonal Employment
recommends both unemployment insurance and com-
pulsory savings as means for lessening the evil effects
of unemployment. f A study of The Unemployed in
Philadelphia, carried on by the Department of Public
Works of that city, concludes that the city government
shall " eventually administer unemployment insurance
when that plan shall have become practicable." J

The American Federation of Labour, in its recom-
mendations to the New York State Constitutional Con-
vention of 1915, proposed that unemployment insurance
be held constitutional^

Both the New England and the International Typo-
graphical Unions have recently resolved that they are
" heartily in favour of the principles of unemployment
insurance which gives out-of-work benefits to working
men legitimately unemployed, and it is earnestly urged
that legislation along these lines may be speedily sub-
mitted to the general courts of the different States."
A similar expression was adopted at the 1915 convention
of the Massachusetts State Federation of Labour. ||

A State Commission of New York which studied the
unemployment problem, whilst commending the prin-
ciples of subventions to the unions, concluded that the
application of the Ghent system would be premature
in the United States because of the absence of exact

* The Socialist leader, Mr. Algernon Lee, states: " What the Socialist
Party proposes is State insurance of unemployment, the cost to be paid
by the industries, without any tax on the workers, a non-contributing
system just as we have insurance against accidents." This is the recog-
nized policy of the Socialist Party of America.

t See Survey, October 17, 1916.

J See The Unemployed in Philadelphia, p. 9.

§ From this it must not be taken to mean that a scheme of unem-
ployment insurance if proposed in New York State would necessarily
be unconstitutional. There is great weight for the contrary view.

|| See Massachusetts Committee on Unemployment, Bulletin No. 2,
pp. 9, 10, January 1916.

428 INSURANCE AGAINST UNEMPLOYMENT

information on the average duration of unemployment
in different industries.*

On the other hand, most commissions have been
very favourable toward the idea of unemployment
insurance.

In Chicago three commissions were appointed to deal
with the unemployment situation of 1915. All three,
the Mayor's Commission on Unemployment, the City
Markets Commission, and the City Council Advisory
Commission, came to the conclusion that unemploy-
ment insurance ought to be introduced at the earliest
possible moment, " So that when the next great crisis
comes in the life of the unemployed and their families
a fund will be available to meet the more urgent demands
of existence." f

The report on unemployment issued by the Com-
mission of Immigration and Housing of California in
December 1914 recommended to the Governor the
appointment of a special committee or designation of
some existing commission to conduct an extended
investigation into " the wisdom of devising some scheme
for out-of-work insurance that will not have the effect
of drawing into our State the unemployed of the
nation."

Whilst, however, it might be said that great interest
was evinced in this proposal, Massachusetts was the
only State in which a Bill on the subject was pro-
posed to the legislature. The Massachusetts Committee
on Unemployment, in co-operation with the American
Association for Labour Legislation, proposed a scheme
of unemployment insurance for that State.

National bodies have not ignored this problem. The
Industrial Relations Commission reported on it and a
Congress Committee held hearings on it in 1916.

* See p. 115. New York State Commission on Unemployment, 1911,
p. 13, Third Report.

t The State of Michigan passed a law in 1915 authorizing not less than
five railway conductors, engineers, and officials to form mutual companies
for the purpose of insuring themselves against loss of position by discharge
or retirement.— United States Bureau of Labour Statistics, Bulletin, Whole
No. 186.

INSURANCE AGAINST UNEMPLOYMENT 429

The final report of the Commission on Industrial
Relations recommended the investigation and prepara-
tion of plans for insurance against unemployment " in
such trades and industries as may seem desirable." *

Congressman Meyer London introduced the following
joint resolution in the House of Representatives in
February 1916 : " For the appointment of a commission
to prepare and recommend a plan for the establishment
of a national insurance fund and for the mitigation of
the evil of unemployment/' This resolution was referred
to the Committee on Labour, and hearings were held
in April of that year.f This was the first hearing
on social insurance ever held by a Congressional Com-
mittee.

It is certain that the great depression of 1920-1,
with the very large amount of unemployment in which
it has resulted, will also result in a considerable amount
of discussion. Legislation, unless it be provision for
relief along the traditional lines, is not to be expected.
But it is already evident that unemployment of four
to five and a half millions cannot be provided for through
such effete machinery.

The schemes that follow for dealing with unemploy-
ment are based on a study of the problem in the United
States. Two main considerations will influence all pro-
posals for dealing with it. First, there is a bitter
hostility between employers and trade unions. The
former miss no opportunity of destroying existing trade
unions and in preventing the inception of new ones.
The trade union officials do not yet put forward the
claims that each industry shall bear the burden of its
unemployed, and that the trade union is the proper
organization through which effect can be given to it.
Second, a State scheme of unemployment insurance with
contributions from the State, the employers, and the
employees is to-day the only feasible one.

* See p. 115. t Set; H. J. Res, No. 159.

CHAPTER XXVII

OUTLINES OF A NATIONAL UNEMPLOYMENT
PROGRAMME FOR THE UNITED STATES

THE somewhat lengthy discussions of the efforts to
treat the unemployment problem in the United Kingdom
and the survey of the experiments of other European
countries may help in the development of a programme
for the United States. In the United Kingdom, as we
saw, there was a general plan with special machinery
for treating unemployment in its various manifestations.
Then we examined in detail the working of part of that
scheme, viz. the unemployment insurance section.* Let
us also first endeavour to outline a national programme
on the question of unemployment for the United States
and take up in a later chapter some consideration of
the proposal of unemployment insurance.

The inadequate statistics, the lack of a national
centralized system of public employment exchanges,
the abuses of private employment exchanges, the still
persisting nai've faith in the efficacy of relief works, the
theoretical nature of most discussions of unemploy-
ment in the States, are due to these two fundamental
needs, a national programme and one governmental
body whose function it is to deal with the evil. At
present the national, State, and municipal authorities
all pursue their own activities during periods of unem-
ployment, but they do not have a programme which
they each can carry out effectively. There must neces-

* Special interest attaches to the Labour Party's Prevention of Un-
employment Bill, which obtained a second reading on March 21, 1919.
See also Unemployment : A Labour Policy, London 1921.

430

INSURANCE AGAINST UNEMPLOYMENT 431

sarily be continuous close co-operation between these
bodies if satisfactory action is to be taken. In addition
a scheme ought to be worked out whereby some one
department in the Federal Government will be held
responsible for treating with unemployment. Until
now little better than a state of chaos may be said
to have existed. Thus, for example, the Bureau of
Immigration, the Post Office Department and the
Department of Labour all have different and changing
functions in treating the unemployment problem,
whilst the Departments of Commerce, Agriculture, and
the Interior, which are very definitely concerned in it,
do not co-operate sufficiently in its solution.

All the responsibility of the Federal Government for
the problem of unemployment should therefore be
centred in a Bureau of Employment. The commissioner
of the bureau should be responsible for the four
departments into which it should be divided at the
outset.*

I. Information Department.

II. Employment Exchange Department, with a divi-
sion to administer unemployment insurance.

* The Ontario Commission on Unemployment, in its report (1916, p. 12),
recommended the organization of a permanent Provincial Labour Com-
mission—

(1) To administer a system of free public employment bureaux ;

(2) To control private employment offices ;

(3) To co-operate with rural and urban committees in regard to voca-
tional guidance, extension of the school age, development of local rural
interests and the extension of technical, trade, agricultural and domestic
training ;

(4) To develop an adequate system of statistics ;

(5) To interpret these statistics so that the causes of unemployment
and other features of labour problems may be more generally understood,
and that constructive measures of prevention may be brought to the
attention of workmen, employers and public authorities ;

(6) To bring the knowledge and experience of other countries to bear
upon Canadian labour problems ;

(7) To further the organization of provincial employment bureaux
throughout Canada with a view to their ultimate linking together in an
effective national system.

Doubtless this Commission would also administer any scheme of un-
employment insurance that may be adopted. It is also to study seasonal
occupations, " with a view to their greater regularization, and to the better
adjustment of the supply of and the demand for labour."

432 INSURANCE AGAINST UNEMPLOYMENT

III. Vocational Guidance Department.

IV. Distribution of Public Works Department.

The work of the proposed Bureau of Employment
will be greatly facilitated if those directly interested
in it be invited to co-operate. Indeed, the system of
democratic committees, which, as we have seen, has
worked successfully in the United Kingdom, ought to
be adopted and even extended and incorporated into
any proposal for establishing such a centralized
organization.

Thus a special Federal Employment Board made up
of representatives of the Departments of Agriculture,
Commerce, Labour, Interior, the Board of Army Engi-
neers, the Immigration Bureau, Census Bureaux, and
any other Federal office that distributes substantial orders
for work or has means of knowing the state of em-
ployment in different parts of the country, should
be created to co-operate with the Commissioner of
Employment.

The aim of the Board of Employment should be to
work out a national scheme for treating unemployment,
to develop a programme outlining what the Federal
Government should do, and to help States plan their
schemes for meeting the problem ; to provide a con-
tinuous body of information on the condition of em-
ployment in the United States and in other countries,
and to offer forecasts of trade conditions so that the
proper authorities can take suitable measures to avoid
unnecessary loss and suffering. The backbone of a
national scheme for treating unemployment must be a
national centralized system of employment exchanges
working in co-operation with State, municipal, and regional
groups of employment exchanges. Without such a
system, information dealing with unemployment must
necessarily be inadequate, vocational guidance, if at-
tempted, largely a matter of chance, the direction and
distribution of public works fraught with the danger of
aggravating the evils they are meant to diminish, the

INSURANCE AGAINST UNEMPLOYMENT 433

decasualization of labour an unrealized hope, and the
separation of employable from unemployable workmen
impossible. Nor will it be able to control effectively
private employment agencies * until public employment
exchanges set them an example of higher standards of
efficiency.

Information Department.

The present lack of statistics dealing with unem-
ployment could be remedied by an information depart-
ment. In co-operation with the Census Bureau, the
Federal Employment Service, the Bureau of Labour
Statistics and other interested departments, it could
arrange for frequent surveys. Through co-operation
with employment exchanges, trade unions, and manu-
facturers, adequate monthly information dealing with
the state of employment could in time be obtained.
Perhaps in co-operation with universities in industrial
cities studies of special trades could be begun and
a satisfactory analysis of the causes of local unem-
ployment obtained. Some of the most valuable infor-
mation dealing with unemployment has come from the
British Employment Exchange Department since its
inauguration.

Advice to manufacturers,! public service corporations,
cities, and States could be given with respect to dove-
tailing work. Information as to the experience of other
countries could be gathered and distributed.

* Many of the private employment agencies are nothing more nor less
than " blackleg " centres, used for breaking strikes ; others are part
of the machinery of white-slave traffickers ; a large number charge high
fees for their services. These facts have brought all employment agencies
in the United States run for private profit into ill repute.

f Dr. J. W. Schareschewsky, of the United States Marine Hospital
Service in Pittsburgh, told the American Chemical Society (September 28,
1916) of one large chemical company which had invited the Federal health
authorities to make a survey of their plants with the idea of installing
any devices or making any changes which were likely to reduce the losses
due to accidents and occupational diseases. This is one example of the
effects of the Workmen's Compensation Acts. There is ground for the
view that national measures on unemployment insurance could be made
to result in a similar desire for information as to devices for the reduction
of unemployment.

434 INSURANCE AGAINST UNEMPLOYMENT

The Employment Exchange Department.

English experience should encourage the United States
to organize a comprehensive centralized system of em-
ployment exchanges. Much might, of course, be done
in developing existing State schemes, but these must be
supplemented and so adapted to one another as to be
able to marshal all the labour forces in the country.
States without any employment exchanges would have to
introduce them.

In 1918 the United States Employment Service had
about 850 offices. The Federal employment offices de-
veloped under the Immigration Acts, 1907-17, were taken
over by the United States Employment Service of the
Department of Labour when the country entered into
the war. Special offices dealt with professional men,
older men and women in a " handicap bureau," etc.
The vacancies notified in 1918 were 8,799,798, and the
number placed was 3,099,295.

There were only 96 State and city employment
offices in 1916 ; in the case of 60 the controlling
authority was the State and in 15 cases the city.

Efforts were made by officials to find places for
workers, and advertisements were used very widely.
They did not merely wait for workers and employers
to apply. When it is recalled that a small country
like Great Britain has twice as many employment
offices as the United States had during the war, it is
evident that there was still room for great extension
of this activity. Unfortunately the whole system of
exchanges was dismantled, largely owing to political
considerations.

Activities of Employment Exchanges, 1918 to 1920.

^ Annual Report of the United States Federal

Employment Service gives the following summary of
its activities since its organization in January 1918 : —

INSURANCE AGAINST UNEMPLOYMENT 435

Year.

Registrations.

Vacancies
Notified.

Number
Submitted
for Jobs.

Number
Placed.

Total per
cent, of
Registra-
tion.

1918 ..

4.225.45i

8,929,005

3»969,579

3,091,821

73'2

IQI9 -.

4.367.190

4,857,264

3,807,448

2,920,839

66-9

1920 (6 months)

1.338,773

1,496,819

1,152,162

833.368

73-i

The understating and other evidence of inadequate
supplies under which the existing public employment
exchanges of the country are suffering would, of course,
have to be remedied. It is absurd to allow the appoint-
ment of employment exchange officials even now to be
part of the system of political spoils. The conditions
of service ought to be like those of civil service appoint-
ments— adequate salaries to attract competent men,
permanency of service during good behaviour, and fair
opportunities of advancement.

We have seen that the British employment exchange
system is on the whole successful because it is ad-
ministered by men who are endeavouring to gain a
thorough understanding of the needs of industry and
who can therefore carefully select applicants and thus
satisfy employers' requirements. Their present concen-
tration on administering insurance features may be
regarded as temporary, and their service to skilled
labourers will increase with the extension of unemploy-
ment insurance,

In future, it is highly probable, the employment ex-
changes will be able to make a complete scientific
analysis of the work of labourers in the different fields
of industry, if the growth of " scientific management "
should warrant it. Indeed, it has already been sug-
gested that " The whole conception of the public em-
ployment exchange would be useless unless it were
steadily more and more in possession of work analysis."*

* See article by Robert G. Valentine in The Survey, September 9, 1916,
and also see British Association Committee, 1915 Report. The Question
of Fatigue from the Economic Standpoint (British Ass. Report), Dr. P.
Sargent Florence, pp. 7-10.

4S6 INSURANCE AGAINST UNEMPLOYMENT

That task, if ever undertaken, cannot and should not
be made save by the joint association of labour, the
employer, and the public. The employment exchange of
the future will be under the supervision of these interests.
It will supply labour on the basis of a scientific know-
ledge of demand and supply. It is manifest that even
the best systems of employment exchanges, since they
are employed almost exclusively with the placement
of workmen, are as yet only in their infancy.

But in addition to this efficient service, neutrality
between employers and workmen is essential. Con-
fidence in the absolute impartiality of employment ex-
change officials, especially during the periods preceding
and succeeding strikes, are the corner-stone of the
British system.

The importance and prevalence of private employ-
ment agencies in the United States makes it essential that
they should at the outset be part of the national system
of employment exchanges. Their licensing, regulation,
and supervision seems inevitable if unemployment is to
be faced. Private employment agencies confining their
activity to one State should come under State control,
whilst those engaging in inter-State business should come
under Federal control. It does not seem just to hound
those who are engaged in this business out of their
occupation, as is occasionally suggested, but all guilty
of unfair methods should have their licences withdrawn.
Their standards must be raised. If the public em-
ployment exchanges with their very great advantages
cannot then offer a better service, it will be proof that the
private agencies are fulfilling necessary social functions.*

In addition to finding work for unemployed work-
men and workmen for vacancies, employment exchanges
may aid in the decasualization of labour and thus aid
in separating efficient from inefficient workmen. The
cardinal principle in the placement of workmen should
be " the best man for each job," so as to concentrate

* This argument is based on a realization of what is practicable in the
United States to-day.

INSURANCE AGAINST UNEMPLOYMENT 437

employment on the most able workmen. Such a policy
of decasualizing labour should be carried out in all
parts of the United States.*

When the town of Bayonne (New Jersey) a few years ago went
to the managers of the coalyards and asked that, instead of keeping
twice the number of men actually needed on an average through
the year in the constant expectation of occasional work, they
should give notice definitely that they would give preference to
married heads of families, and would, to the utmost of their ability,
distribute their work in such a way that these permanent resident
heads of families should be able to do it, and when the managers
of the coalyards gave a favourable response to this suggestion
and made it clear to a lot of men whom they had irregularly em-
ployed as casual labourers that there would be no work at all for
them and that it would be well for them immediately to look else-
where, there was, although on a small scale, a prophetic advance
in the direction of a very essential readjustment.!

We have also learnt from the experience of Great
Britain that whilst employment exchanges ought as a
rule to be open to applicants from all trades, special
schemes confined to one class of labourers, such as
longshoremen, have justified their inception. Such a
scheme, if fully developed, will enable the policy advo-
cated by Mathew Carey J in his crusade in 1829 t° be
nearer to fruition. " Those wealthy ladies who employ
seamstresses or washerwomen " were especially urged
by him to give such wages as would not only yield " a
present support " but also provision for times of sick-
ness or scarcity of employment. In England, it has
been advocated that

a ring should be drawn round each casual labour market by
an efficient system of registration and a control of the entrance

* In carrying out a policy of decasualizing labour it is advisable to
concentrate work on the best workmen, so that those who are "squeezed
out" of industry might then be given special training or special nourish-
ment to make them more efficient. But in order to lessen the number
surrounding a factory or dependent on a given industry, it matters not
whether the best or the worst, married or single, tall or short men are
given work, as long as the group chosen is not changed.

t See Misery and its Causes, p. 132, Professor E. T. Devine.

j Report on Condition of Women and Child Wage-earners in United
States, vol. ix, pp. 123, 124.

438 INSURANCE AGAINST UNEMPLOYMENT

to the occupation. In this way the number engaged may be
adjusted to its needs, and if necessary it might be restricted. When
this ring is drawn around each casual labour market, the employers
should be obliged to make the best of the stagnant pools of labour
which they have themselves created. The Government might then
contrive that every man within the ring should be able to earn
an annual living wage, distributed in approximately equal weekly
payments.*

As applied to the best known type of casual labour,
viz. dock labour, there are two rights which the
dockers could and should demand from the Government.
First, the right to limit the number of their com-
petitors, and second, the right to be paid for service
in the reserve as well as for service in the active rank.f
These rights apply also, of course, to other highly casual
employments.

We may summarize our conclusions on employment
exchanges for the United States.

The supreme function of employment exchanges is to
forestall unemployment as far as possible by a con-
tinuous observation and a methodical organization of
the labour market.

The employment exchange must have the following
principles and objects : —

1. The systematic organization of public employ-

ment exchanges according to territorial divi-
sions (local bureaux, State and national), and
they must take account of the interests of
different trades and professional groups.

2. The unification of administrative technique, with

the employment of modern means of communi-
cation, telephones, telegraphs, posts, railways.

3. The maintenance of absolute neutrality between

contending claims of employers and workmen.

4. The provision of free service to those who seek

employment at the public exchanges.

1 New Statesman, January 3, 1914, p. 393, col. 2.

t We are, of course, obliged to feed, clothe and give wages to soldiers
during periods of peace as well as during periods of war.

INSURANCE AGAINST UNEMPLOYMENT 439

5. The methodical organization of the labour market,

i.e. by the placement and movement of workers
according to uniform principles and under the
direction of a central office supplying continuous
statistics of the labour market.*

6. The expenses should be provided at communal

charge (for local exchanges), by the State (for
the State exchanges), and by the nation for the
central office.

7. Private employment offices ought to be licensed

and controlled.

8. Employment exchange authorities should endea-

vour to decasualize labour.

9. Employment exchanges should be organized to be

able to administer schemes of unemployment
insurance.

Juvenile Employment Department.

We have seen that in Great Britain special employ-
ment exchanges for women and for juveniles have been
inaugurated and are being operated successfully. Not
only can boys and girls be warned against entering the
blind-alley trades, but with a satisfactory knowledge of
the state of the market and the growing needs of
industry young people can be trained for those trades
where their services are likely to be of the highest value.
The overcrowding of certain trades and the insufficient
number of workmen in others could thus be avoided.
By inviting teachers, business men, and parents to help
in administering these exchanges the best interests of
industry would be served. The vocational guidance

* During the harvest period of 1917 many State labour departments
and bureaux, State agricultural departments and many State Councils
of Defence, in conjunction with the Federal Labour and Agricultural
Departments, arranged for a better shifting of agricultural labourers
in the Western States. From Texas to North Dakota a number of States
are dependent upon large bodies of migratory labourers, and a unified
comprehensive system for correlating demand and supply has long been
necessary.

440 INSURANCE AGAINST UNEMPLOYMENT

agencies which are instituted in most of the large towns
of the United States are concerned primarily with the
children who leave school under sixteen.

The Federal Employment Service has developed a
Junior Guidance and Placement Division. It is only,
however, in New York City that special departments for
dealing with juveniles are actually at work. A suc-
cessful scheme of " after care " and " choice of em-
ployment " is being adopted in a number of centres.
But the extension of these schemes throughout the
country still needs to be pressed.

Immigrant Employment Bureaux.

Hitherto the United States has had the problem of
placing the immigrant when he lands. Only too fre-
quently he is permitted to remain in the city, even though
he is desirous of going on to the land, and his past train-
ing is, therefore, often wasted. The needs of the
farmer are not satisfied and the immigrant's stored-up
capital in the form of his trade is neglected, so that
he drifts into unskilled, ill-paid occupations.* Proper
placement and a loan for shipment to a definite job,
with perhaps a small amount invested on some appro-
priate training, would make the immigrant of much
greater economic value to the community. The Act of
February 20, 1907, established a Division of Information
under the Bureau of Immigration " to promote a
beneficial distribution of aliens," but little action seems
to have resulted.

Distribution of Public Works Department.

It has frequently been suggested that public works,

* It has been urged that the inauguration of the Imperial insurance
scheme in Germany " contributed largely towards the exodus of the
rural population into the industrial centres." Unless checked by counter-
tendencies, this might also be the effect of a scheme of unemployment
insurance. See The Causes and Consequences of the War p. nS, by Yves
Guyot.

INSURANCE AGAINST UNEMPLOYMENT 441

the construction of roads, footpaths, electric and steam
railways, of buildings, schools, colleges and hospitals,
the improvement of harbours, the development of canals,
the undertaking of schemes of afforestation and recla-
mation, all these could be carried out during periods of
depression in private industry. Such undertakings are,
of course, now begun at irregular intervals, usually
when there is an immediate need for them. Some of
these could be postponed without hurt. The problem of
the distribution of public works with a view to regu-
larizing industry is, however, complicated by the pre-
valence of annual budgets for public expenditure. Little
could be done apparently along these lines until arrange-
ments for, say, ten-year periods were made in the same
way as orders for three-year periods are frequently
made for army and navy expenditures.

Democratic Advisory Committees.

In the administration of the various proposals outlined
for dealing with unemployment it is recommended that
democratic committees representative of the workmen,
the employers, and perhaps of the public be formed
to aid the officials.

Four such groups of committees have suggested them-
selves in the course of the chapter.

Advisory trade committees should advise employment
exchange officials. Work analysis committees might
describe the requirements for various jobs in the factory.
Juvenile advisory committees should help as regards
juvenile employment. Unemployment insurance com-
mittees should assist in the administration of a scheme
of unemployment insurance.*

By these means it will be possible to increase the
democratic control of the governmental institutions of
the country. Hitherto the workers have gained admin-

* The Industrial Courts, the Whitley Councils, and the Trade Boards
show the great extension of this device within recent years in Great
Britain.

442 INSURANCE AGAINST UNEMPLOYMENT

istrative education and experience only in trade unions.
New opportunities in other directions need to be
encouraged in the factory as well as in the municipality
and State. In this way we shall be reconstructing
" our administrative machinery so as to give power
and real expression to the developing collective mind
of the community." *

These committees will represent the extension of
self-government from the political to the industrial sphere.
There are many signs that the recommendation made
here with respect to employment problems is gaining
ground in other fields, but more especially where the
labourers' interests are directly involved. Two instances
must suffice. In a memorandum issued by the New
York Association for Labour Legislation on " The
Reorganization of the Labour Department " it is pro-
posed that this department should be given express
authority to create, as deemed desirable by it, volunteer
special boards, composed of employers, employed, and
others having exceptional knowledge or interest in
particular industries ; at other times the advisory
board should be enabled to call to its aid boards of
the best training and skill obtainable in particular
matters.!

In a similar manner the borough of Manhattan, New
York City, has organized a borough advisory commis-
sion, consisting of citizens whose function it is to assist
and advise the borough officials both in administering
existing regulations and in devising new ones.

In Germany the practice of inviting those who are
specially interested in, or have special knowledge of, any
problem to help in its administration is widely extended.
The State-owned railways are largely influenced in their
policy by district advisory councils representing the
economic interests affected. The scheme of sickness

* See H. G. Wells, New Worlds for Old, and Baker, Political Thought
from Spencer to To-day.

t Second Report of the Factory Investigation Commission of State of
New York, 1913, vol. ii, p. 1304.

INSURANCE AGAINST UNEMPLOYMENT 443

insurance is largely controlled by committees elected
by employers and employees.*

But the need must be emphasized of reconciling
democratic control with expert guidance. A " democ-
racy tempered by respect for the expert " is the ideal
at which to aim.

It is well to insist here that there are two safeguards
with respect to the administration of the measures out-
lined in this chapter which are necessary if they are
to be of the highest possible utility. It is essential
that the responsibility for carrying them out shall
be fixed and not shifting, and that appointment,
tenure, and promotion of clerks and administrators
shall be decided on grounds of merit alone.

For many years to come, however, even if a highly
efficient Employment Bureau were created, it is certain
that the unemployment problem will remain serious.
The fluctuations of industry are long likely to continue
as a result of the after-war eruptions, the variations of
weather and the demands of fickle dame Fashion. Under
such circumstances unemployment insurance is likely to
be the best means of overcoming in part the suffering
which results to the workman from stoppage and
irregularity of income.

In most countries of Europe, f as we have seen, the
working classes most subject to unemployment have made
substantial though inadequate efforts to deal with it.
Through their trade unions they organized out-of-work
benefits in order to lessen the evil effects likely to result
from loss of earnings. These -have led to State sub-
sidies and to comprehensive national schemes. We
have seen that comparatively few American working
men have made similar arrangements. We have also
seen reasons for believing that State subsidies were not
suitable to American conditions, and so we are justified
in pushing our inquiry further. Should the Govern-

* Howe: Socialized Germany, pp. 117 and 195.

f Cf. with the conclusions reached in this chapter, the conclusions
of the Commission on Industrial Relations, Final Report, pp. 114, 115.

444 INSURANCE AGAINST UNEMPLOYMENT

ment introduce a comprehensive scheme of obligatory
insurance ? *

* Although the present writer supports the proposal that whole trades
in Great Britain should contract out of the Act, that the Ministry of Labour
should initiate special schemes, and that an adequate number of employ-
ment exchanges should be assigned to the administration of such schemes,
he realizes that it would be futile to make a similar group of proposals for
the very different conditions prevailing in the United States. Not until a
few State schemes of unemployment insurance have been established, in
which public funds are employed, will it be possible to impose on each
industry the burden of its own unemployment. It will be made evident in
the next part of this study that whilst there is no reason why industries in
the United States should not organize their own schemes for bringing
together those who want work and those who want workers and for pro-
viding insurance against unemployment, there is in fact very little likeli-
hood of this being attempted. It is undesirable to delay dealing with
unemployment until private industrial organization is more competent
and ready to do so.

CHAPTER XXVIII

STANDARDS OF UNEMPLOYMENT INSURANCE*

PART ONE

A. Compulsion.

WHEN Germany alone had a system of compulsory
insurance it was customary in the United States to
refer to the character and traditions of the Prussians —
the military discipline, the regimentation and the respect
for authority — for an explanation why the German
people did not oppose it. But since the British have
adopted even more comprehensive schemes of com-
pulsory insurance this explanation is transparently inade-
quate. If the working classes in Great Britain felt the
Insurance Act " compulsory " in the sense of oppressive,
injurious or excessively costly, it would not have been
enacted, and even if enacted, would have been abro-
gated within ten years. But, as a matter of fact, the
compulsory unemployment insurance scheme has proved
to be highly popular. Every extension has resulted
from the pressure of the workers' representatives. Nor
should this be surprising. That wage-earners are pre-
pared to submit to compulsion with respect to measures
socially desirable is the very basis of all legislation, and
explains more especially why Germany, Austria, Hungary,
Luxemburg, Norway, Great Britain, Servia, Russia,
Roumania and Holland have schemes of compulsory
health insurance. Dr. Rubinow has rightly described

* The method adopted in this and the following chapter of discussing
the Massachusetts Bill on Unemployment Insurance is common amongst
writers in the United States.

415

446 INSURANCE AGAINST UNEMPLOYMENT

recent developments in the growth of social insurance
schemes as "a wellnigh universal movement of the
industrial era/' * and one of the characteristics of that
movement is the willing acceptance by the working
classes of the principle of compulsion. f

Professor Henderson has well stated the primary
reason for a compulsory scheme of unemployment
insurance.

With compulsory insurance laws (he wrote), the end is reached
in a comparatively short time, while even with State subsidies
voluntary plans have only helped a part of the population imper-
fectly, and those who most need the protection of insurance not
at all.J

There are other weighty reasons for the development of
comprehensive schemes of unemployment insurance.

The inclusion of large numbers results in keeping the
per capita cost of administration low. It prevents an
excess of bad risks. It enables the Government to keep
its finger on the pulse of industry, and through em-
ployment exchanges and certain special devices affords
more scope for the attempt to reduce the amount of
unemployment. Above all, compulsion is indispensable if
employers are to be made to contribute directly towards
the cost of insuring their workmen and to be given an
opportunity to help administer proposals dealing with
employment problems.

The fundamental justification of compulsion lies in
the determination of society to defend itself from the
evil effects of unemployment against which workmen
cannot or will not insure themselves.

* I. M. Rubinow : Standards of Health Insurance, p. 12.

t Mr- Morris Hillquit writes that Socialists see in "working men's
insurance ' a patent lever for the elevation of the physical and moral
standard of the masses. ..." The effect of a comprehensive system of
btate insurance is to remove from the minds of the working men the
haunting dread of uncertainty, and to develop in them a certain sense

jnatenal security and intellectual independence."— Socialism in Theory
and Practice, p. 266.

J Industrial Insurance in the United States, p. 311.

INSURANCE AGAINST UNEMPLOYMENT 447

B. Scope of Insurance.

The trades included in the scheme proposed for
the State of Massachusetts comprised about half the
labourers in that State. Their comparatively large number
makes it possible to avoid the undue preponderance of
essentially hazardous or badly organized trades, and
therefore the area of experiment is more favourable
than that chosen in the 1912 Act of Great Britain.
On the other hand, a still more favourable area for
experiment might have been chosen, since the selected
trades have a higher percentage of unemployment than
the non-selected trades. They were chosen because
they were the most representative and the biggest
trades in the State. It is also noteworthy that the
periods of maximum unemployment vary from trade to
trade, and therefore the reserve in the unemployment
fund need not be so large as in trades which generally
fluctuate together. It will be an easy matter, of
course, to extend the scheme to include other trades,
when it is thought advisable.

The need for the demarcation of trades is greatly
lessened in this scheme because groups of occupations
are included. But in order to avoid the very serious and
complicated problems which arose in the administration
of the first British scheme, a thorough investigation of
what occupations are included in each trade ought to
be undertaken before it is inaugurated. Insurance officers
should know the trades and their processes, and where
possible have labour analyses of each in order to help
them in the adjudication of doubtful points. A concise
definition of each of these trades is desirable.

Power is vested with the chief commissioners of unem-
ployment to extend the scheme in such cases where
it would help in simplifying its administration. Thus
the inclusion of saw-milling with the building trades
might on investigation prove advisable, because it
lessened the difficulties of demarcation.

The selection of a limited number of trades because

448 INSURANCE AGAINST UNEMPLOYMENT

of the desire to carry out an experiment will probably
lead to constitutional difficulties.* It might therefore
prove more satisfactory to include under the scheme
all manual labourers. This consideration is strengthened
in view of the latest British scheme, together with
the Italian and the Austrian schemes, which include the
vast majority of labourers. This is, however, a question
of expediency which does not raise important matters
of principle.

Young men and women under eighteen are excluded
from the scheme because of their frequent shifting
from job to job. To include them would mean the
inclusion of members a large proportion of whom would
fall out again as they left the selected trades. Admin-
istration would thus become more complicated. Besides,
it was argued, they do not as a rule need such pro-
vision. Frequently they are still dependent on relatives
who take care of them when unemployed ; rarely do
they have anybody dependent on them.

Clerks have been exempted from the operation of
this scheme because their work is as a rule not subject
to much unemployment. To have included them would
have resulted in their subsidizing the highly fluctuating
trades.f

* Anything in the nature of class legislation is regarded as anti-constitu-
tional, and some of the judgments on this subject are amazing to Euro-
peans. See the case of People v. Ilavner, 149 New York, 195, 203,
and Booth v. Indiana, 237 United States, 391.

In the former case a New York law prohibiting barbers from working
on Sundays was sustained "as a valid exercise of the police power of
the State for the promotion and piotection of the public health and
welfare." The health of a single class of working people, barbers, was
held to be a public interest.

In the latter case a statute which provided for wash-houses in coal-
mines when requested by twenty or more men was objected to as apply-
ing only to a particular class and not therefore in the interests of public
health. The United States Supreme Court held, however, that its previous
decisions disposed of this point in favour of the constitutionality of the
law " and further comment is unnecessary."

Quoted from The Constitutionality of Health Insurance, by Joseph P.
Chamberlain : Appendix I of Standards of Health Insurance, by I. M.
Rubinow.

t It has been frequently suggested that a scheme of unemployment
insurance might be introduced as a voluntary system, and with State

INSURANCE AGAINST UNEMPLOYMENT 449

The primary object of the scheme is to provide
insurance for workmen against unemployment. When,
therefore, workmen have such insurance provided for
them in establishment schemes, there is no particular
reason why those schemes, if properly administered,
should not be recognized. Two conditions must, how-
ever, be insisted upon by the Insurance Commissioners.
First, the total amounts of benefit provided by such
schemes must be equal to or greater than those provided
by the State scheme. Second, workmen must not pay
higher contributions than they would have to pay under
the State scheme. The purpose of this clause is to
encourage employers who may be contemplating the
introduction of establishment schemes of unemploy-
ment insurance to put them into effect without fear
that the State scheme will necessarily wipe them out.
It is intended to act as an encouragement to the regu-
larization of occupation in certain factories. At the
same time amongst the requirements which the Insurance
Commissioners will have to lay down will be those
guaranteeing the solvency of the scheme and its demo-
cratic administration by the insured, together with the
management.*

supervision might become a universal insurance measure, much as the
Workmen's Compensation Acts have worked out.

But there is a difference in the two situations.

Even before the Workmen's Compensation Acts were passed employers
were generally liable for accidents which occurred in the course of the
workman's trade. The recent laws held a club over the employer's head
by taking away his defences against possible lawsuits, whereas the law
recognizes no responsibility on the part of the employers for the continuous
employment of their staff.

To make the situation strictly analogous to that which existed before
the workmen's compensation legislation was enacted, the employer must
have the responsibility, whether assumed voluntarily or compelled by-
legislation, for the unemployment of his workmen. To wait until
employers themselves assume responsibility for unemployment would
mean to wait indefinitely, whilst the enactment of legislation making
employers fully responsible for the losses resulting from their work-
men's unemployment is not likely to be practicable for years. It is
certainly less practicable than the proposed Massachusetts measure on
unemployment insurance.

* Cf. Rubinow : Standards of Health Insurance, 1916, p. 198, for the
view that establishment funds under certain conditions would be convenient
carriers for health insurance. Note also the special arrangements made in
the Rowntree establishment unemployment insurance fund (chap. xxiv).

450 INSURANCE AGAINST UNEMPLOYMENT

PART Two

Unemployment Fund.

The Unemployment Fund is the central feature of
the scheme. It is the reservoir towards which all the
sources flow and from which the pipes take their supply.
All the contributions flow into the fund, benefits and
expenditures are taken from it.

In order to estimate the contributions that will have
to be paid if a certain scale of benefits is to be possible, a
trade cycle of, say, ten years will have to be contemplated.
A reserve must be accumulated during the prosperous
years, so that during the years of depression which are
likely to ensue the fund will not become bankrupt.

The inadequacy of the unemployment statistics of
Massachusetts have been so often commented upon
that it is necessary to insist that they are probably ade-
quate for a tentative estimate of the cost of the pro-
posed scheme. The available data have been collected
through two sources, from trade unions and from
manufacturers ; they go back for many years and they
can be supplemented by special investigations.

It would be wise for the Insurance Commissioners to
undertake as thorough an investigation as is possible of
the data relating to unemployment in Massachusetts as
soon as the scheme is enacted. Under special powers
given to the Chief Commissioner on Unemployment
Insurance under this Bill (Part XII, Section 16) he will
be able to develop sources of continuous information
dealing with unemployment.

To avoid any danger of the fund being exhausted,
provision is made for the revision of the rates of con-
tribution and of benefits if it is deemed necessary
(Part XII, Section 13). Furthermore, it is provided
that the Treasury of the commonwealth shall guarantee
the solvency of the insurance fund (Part XII, Section 14).

But employers and employees should be made to
realize that if the Unemployment Fund were to become

INSURANCE AGAINST UNEMPLOYMENT 451

insolvent the loan of the State Government would have
to be repaid by means of a revision of the scale of
contributions and benefits.

Contributions and Benefits.*

The differentiation of contributions and benefits pro-
vided in the scheme is the most radical departure from
the British plan.f There the scheme is kept simple
by making all workmen (as distinct from women and
juniors) pay the same weekly contribution. These con-
tributions are accompanied by a system of equal bene-
fits. Even though this was not quite equitable it was
felt to be wiser to experiment with as easily administered
a scheme as possible.

The change is justified on the grounds that benefits
ought to be provided in some proportion to the standard
of living, i.e. for most workmen that provided by their
average wages. There is also reason for differentiating
benefits according to trades, but this would introduce
more administrative difficulties than is wise in the
launching of a scheme. In order to facilitate the
administration provision is made for three wage groups,
and it will be seen from the following table how the
estimated contributions J are related to the benefits and
the benefits to the wages of workmen.

Wage.

Benefit.

Contributions from each Party.J

Class I

$8 or less

$3.50 per week

10-12 cents per week (about)

Class II

$8 to $12

$5.25 per week

20 cents per week

Class III

$12 or more

$7.00 per week

25 cents per week

* Owing to the increased cost of living both the benefits and, in
consequence, the contributions would have to be raised.

f The British Act has a " flat rate " both of contributions and benefits
(except as regards wornm and juveniles under eighteen years of age).
Under the British Health Insurance Act, however, a differentiation by
earning is provided for. See National Insurance Act, Part I,
Schedule II.

J These contributions are a tentative estimate calculated from the
figures of the Massachusetts Bureau of Statistics.

452 INSURANCE AGAINST UNEMPLOYMENT

Will these contributions * be too great to expect
from workmen ? Certainly the 12 cents a week from
Class I will not be regarded as a very serious matter.
Members of some of the unions providing out-of-work
benefits already pay that amount for less benefits
than the Massachusetts scheme promises.

The following suggestion made by Union No. 4 to the
Chicago Commission on Unemployment is interesting in
fixing rates of contributions.

The best way to deal with unemployment would be to assess
every man who is working, and in case he is out of work assist
him for a certain time. Our union applied this plan for twelve
years with the best results. We assess every member 50 cents
a month, and pay to the members who have been out of work
five weeks $4 a week during the winter months, December,
January, February, and March.

The 20 and 25 cents asked from Classes I and II are
considerable amounts for the workmen to pay. Some
comfort may perhaps be derived from the thought that
these estimates — and it must be remembered that they
are nothing more than estimates — err on the side of
caution in calculating the costs of the proposed scheme.
But in any case the alternatives which must be con-
sidered are whether the workman shall have this
definite, regular, bearable burden, or an indefinite,
irregular, unbearable burden.

These contributions could be lowered if the benefits
were reduced. But the standards of living of the
working class being higher in the United States than in
Europe, a substantially higher scale of benefits is regarded
as advisable. There is also the consideration that the
results of the experience and experiments of other
countries warrant the undertaking of a bolder scheme
of unemployment insurance. This encouraged the
framers of the Massachusetts Bill to provide a higher
scale of benefits.

This scale of contribution may be properly criticized

* In the United States a non-contributory scheme is not likely to be
practicable for many years.

INSURANCE AGAINST UNEMPLOYMENT 453

on the ground that the State will subsidize the highly
paid workman more than the low-waged one. Thus
the one earning more than $12 a week will have a
State contribution of 25 cents added to provide him with
insurance benefits, whilst the one earning less than $8
per week will receive only 12 cents a week towards
his benefit from the State treasury. It would there-
fore seem to be wiser for the State to provide a uniform
subsidy of 20 cents to workmen in each of the three
classes.*

Employment Exchanges.

In Cologne and Berne the Insurance Fund and the
public employment exchange are practically amalgamated.
In Strassburg, Milan, and Antwerp, receipt of sub-
vention by an unemployed person under the " Ghent
system " is conditional upon his registration at the
employment exchange. . . . The State subvention to
unemployed benefit in France can only be claimed
by unions having an organized method of finding
employment for their members, f

The success — indeed, the very possibility — of unem-
ployment insurance on a large scale, depends upon the
existence of a comprehensive, centralized, well-organized
network of public employment exchanges. As in the
British scheme, workmen in the insured trades will
register that they are unemployed. Thus tens of
thousands of workmen who might not otherwise have
taken advantage of the employment exchanges will be
obliged to do so.

A centralized scheme is necessary in order that
workmen may be advised to transfer to places where
work can be found for them and in this manner save
unnecessary claims upon the fund. Each employment
exchange will be able to apply the test of unemploy-

* It should, of course, be one of the earliest tasks of the Insurance
Commissioners to provide regulations governing the case of workmen
who change from one wage group to another or from insured to non-
insured trades or vice versa.

| Cd. 5068, p. 737.

454 INSURANCE AGAINST UNEMPLOYMENT

ment by offering workmen suitable employment. It will
be able to prevent malingering, and to discover when
undue claims are being made.

Unemployment insurance is impossible without a
system of employment exchanges, but a complete system
of exchanges, it might be added, is impossible without
unemployment insurance. If employment exchanges are
confined merely to placement work, they are not likely
to attract the higher grades of workmen, and in any
case the cost of the necessary number of offices will be
too great for the limited work which they will do. In
Great Britain employment exchanges and unemployment
insurance were meant to complement one another. In
Massachusetts the Bill on Unemployment Insurance
was presented to the legislature at the same time that
a Bill for the development of a satisfactory State system
of employment exchanges was presented.

Determination of Claims.

The machinery is proposed in the Bill for the estab-
lishment of an impartial tribunal from which prompt,
inexpensive, final decisions may be obtained on all
doubtful questions.

It is provided that a referee shall be appointed by the
governor, and not by the board of Unemployment
Insurance Commissioners (Part XII, Section IV). Em-
ployers or workmen may appeal to the referee for a
decision, no fees are to be charged, and he is to give
his decision as promptly as possible. Unless he should
himself revise that opinion, that decision is final and
conclusive for the whole State.

The procedure with respect to the determination of
claims is as follows. The workman has an appeal from
the insurance officers to the district arbitration com-
mittee. If dissatisfied with their decision, the Insur-
ance Officer may appeal to the State referee. This
follows the British practice. But a further appeal,
following from the similar provisions in the Massachusetts

INSURANCE AGAINST UNEMPLOYMENT 455

Workmen's Compensation Act, may be made from the
referee within ten days to the Superior Court " on
written request by the referee or by the chairman of
an arbitration committee."

Conditions for Receipt of Unemployment Benefit.

The detailed enumeration of the conditions necessary
for the receipt of unemployment are designed to have
two effects : to prevent malingering, and to prevent
the use of employment exchanges as a means of
reducing the standard conditions of workers.

The temptation to malinger is reduced through four
groups of provisions in the Bill.

First : Workmen suffering from unemployment due
to sickness, accidents, invalidity, old age, are speci-
fically disqualified from receiving unemployment benefits.
For these causes of unemployment other methods and
schemes of insurance may be devised. The temptation
to malinger would, of course, be greatly lessened if the
other emergencies in the workman's life were adequately
provided for by the Government.

Second : During periods of unemployment, benefits
are to be substantially less than the normal wage of
workmen ; they are limited to a short period and
benefits are not to be paid during the first week.

Third : The employment exchanges may offer work to
insured workmen.

Fourth : Workmen who have not received more from
their unemployment fund than they have paid in as
contributions may, on leaving their State, or on reaching
the age of sixty, claim a refund equal in amount to the
difference between the sum of their contributions and
the sum of their benefits. Insured members are thus
encouraged to regard the Unemployment Fund as a
savings bank, so that the less they withdraw as benefits
the more there remains to their account.

The framers of the Bill have outlined the scheme in
such a way as to prevent the administrators from

456 INSURANCE AGAINST UNEMPLOYMENT

taking sides during industrial disputes or on questions
relating to wages and conditions of labour. They are
to remain strictly neutral in such matters.

Workmen are not excluded from receiving benefits if
they refuse to accept work which has resulted from
labour disputes, or where wages are lower, or condi-
tions less favourable than they are in the district.

The Regularization of Industry. Parts VII, VIII, X, XI.*

Special devices have been introduced into the scheme
aiming at the reduction of the amount of unemploy-
ment. The Bill as now worded does not include all
suggestions that have been gained from experience
with the British scheme. It does, however, include
some.

The refund offered to employers has been raised to
one-half of all their contributions paid in respect of the
workmen whom they engage regularly. Employers are
also encouraged to work all their workmen short time
rather than work some of them full time and dismiss
the others. f The refund to employers who do so
equals the full amount of their contributions during
the period when there would normally have been unem-
ployment. We have already observed that employers
with satisfactory establishment unemployment insurance
funds may contract out of the scheme.

Refunds offered to workmen are of three kinds : —

(1) Money refund to regularly employed workmen

who have reached the age of sixty.

(2) Travelling expenses to migratory workers.

(3) Training to workmen who are inefficient.

* This Bill was framed whilst the experience with the British scheme
was limited. Some of its provisions might be amended in view of the
conclusions to be drawn from the parent scheme. This applies more
especially to the devices suggested for the regularization of industry.

t The wording of Part VII, Section 2, is involved, and its meaning is
rather cloudy. The intention of its framers, judging by the corresponding
clause in the British Act, was to encourage the working of short time
without reference to whether the employers did or did not pay their work-
men's contributions.

INSURANCE AGAINST UNEMPLOYMENT 457

They are all aimed at reducing the amount of unem-
ployment. In the previous section we noted the clause
providing for repayment to workmen who have reached
the age of sixty.

This aims at reducing the danger of malingering.
The regularly employed worker would thus receive his
insurance free of charge, and his contributions constitute
the principal on which he receives 3 per cent, interest.

Migration of Insured Workers.

It is generally believed that workmen in the United
States are more prone to move from place to place, and
especially to travel in quest of work, than are people in
other Western countries. Though the good and evil
effects of such a state of affairs have not yet been estab-
lished, the framers of the Bill thought it inadvisable to
interfere with the mobility of labour in general. On
the other hand, where the encouragement of such migra-
tion would result in reducing unemployment, it is
encouraged. Thus workmen may apply to the fund for
one-half of their travelling fare to jobs offered them.
Furthermore, by providing that insured workers leaving
the State " for over an insurance year " may obtain
a refund of the sum of their contributions less any
benefits they may have received, migratory workers may
be provided with their savings on leaving the State
in search of employment.

Unemployment due to Defects in Skill or Knowledge.

Most schemes of unemployment which have failed,
whether compulsory such as at St. Gall, or voluntary
such as that of the New York Typographical Union
No. 6, have been wrecked through the unduly large
demands on the unemployment fund of a few workmen.
Such demands have resulted from the inefficiency of
these members. To prevent, or at least to avoid this
obstacle as much as possible, provisions are made in

458 INSURANCE AGAINST UNEMPLOYMENT

the Massachusetts scheme which enable such workmen
to be given technical instruction.

It is obvious that this provision will need to be sup-
plemented by some other proposal if it is to prove of
the highest utility of which it is capable. As a small
part of the scheme of unemployment insurance it pro-
vides an excellent highway into the problem of training
inefficient workers.

Encouragement to Associations.

In no country in the world has the fight against
trade unions been so sustained, so bitter, and so deter-
mined as in the United States.* It may therefore seem
futile to recommend here what has been worked with
such great success in Britain as well as in half a dozen
other European countries, viz. the recognition and
subsidization of trade unions providing out-of-work
benefits. Yet not to have done so would have im-
plied absolute despair of convincing the public of the
wisdom of such a proposal, and the engendering of the
hatred of trade unions towards the scheme.

It was the clear intention of the framers of the Bill
to do nothing to lessen the prestige of trade unions.
On the contrary, by recognizing them as part of the
machinery for distributing benefits to members and by
encouraging them to provide unemployment insurance
schemes, the State will tend to develop in the public
consciousness a recognition of the valuable part which
they might, and indeed do actually, play in modern
society.

In most countries of Europe the public assumes that
it is advisable to encourage the unemployment insur-
ance activities of trade unions. This applies, as we
have seen, to Belgium, Luxemburg, Denmark, Switzer-
land, France, Italy, Holland, Norway, Germany, Austria,
Great Britain ; and even in Spain, Finland, South Africa,

* The Brass Check, by Upton Sinclair, throws a glaring white light
on this subject.

INSURANCE AGAINST UNEMPLOYMENT 459

and Canada such encouragement to unions of workmen
is being considered.

It is necessary to insist here that the undoubtedly
great difficulties involved in convincing public opinion
in the States of the need of a similar proposal will be
overcome only when the urgency of the unemployment
problem is appreciated. When that is done, and
measures and machinery are being devised for meeting
it, then the saving to the community in using the exist-
ing machinery of trade unions will be appreciated and
recognition granted them. Trade unions will then be
given the same status as establishment funds.

Administration. Parts VI, IX, XII.

Perhaps in no other branch of social legislation is
attention to administrative questions more important
than it is with respect to unemployment insurance.
Surely Mr. and Mrs. Sidney Webb are justified when
they declare that

it just .Depends on how it is shaped and administered whether
a Government scheme of universal and compulsory insurance turns
out to be a useful adjunct and complement of a policy of prevention,
or to have the disastrous effects of a gigantic system of indiscrimi-
nate, inadequate, and unconditional " outdoor relief " under
another name.*

We have already seen that the St. Gall scheme failed
because of its badly conceived machinery for admin-
istration. The Massachusetts Bill provides for the
administration of the scheme by a special commission.
Let us inquire into some of the advantages of this type
of machinery.

Board of Unemployment Insurance Commissioners.

The commission form of government, introduced at
the time of the Galveston flood, was found to be such
an improvement in many respects over the special COBI-

* Sidney and Beatrice Webb : Prevention of Destitution, chap. vii.

460 INSURANCE AGAINST UNEMPLOYMENT

mittee form that it swept through the whole country
and was pretty widely adopted. Commissioners may
be specially chosen for their fitness for their particular
task. There was no guarantee that committeemen
had any special aptitude for the tasks to which they
were elected. Commissioners may be appointed for a
long period and thus carry out a consistent continuous
policy. The changes in policy which frequently elected
bodies can indulge in is shown by the eventful tariff
history of the country. Commissioners are free from
electoral pressure, and since they administer and do
not legislate, are more likely to be free from the pressure
of private interests than are committees or legislatures.
Lastly, it has been urged that a board of commissioners
can be given powers over a rationally selected allotted
area rather than over some area like the city or county
which has frequently been demarcated on no rational
basis.

Another recent improvement in the machinery of
government is the creation of a body of civil service
employees who have special aptitude or training for
their work. " The broad result is that modern develop-
ments in the structure and method of governmental
agencies have fitted these agencies for beneficial inter-
vention in industries, under conditions which would not
have justified such intervention in earlier times." *
Hitherto unfortunately the commission form of govern-
ment has frequently been abused. Men have been
appointed to serve whose only claim to office was an un-
thinking political partisanship. But there can be little
doubt that with the increasing probity of government the
time is not far distant when commissioners will be men
owing no allegiance to any special interest, unem-
barrassed by either financial or political obligation, who
will devote themselves with a single purpose to the
protection of the rights of the people.

The Massachusetts Bill provides that a network of
employment exchanges under the control of a board

* A. C. Pigou : Wealth and Welfare, p. 250.

INSURANCE AGAINST UNEMPLOYMENT 461

of unemployment insurance commissioners should act
as the machinery for administering the unemployment
insurance scheme.

Federal or State Legislation.

So much has been written about the constitutional
difficulties in the way of introducing social insurance
legislation in the U.S.A. as compared with other
countries that one great superiority of this country is
wholly forgotten.

Provided that the people of this country are fairly
united in their endeavour to obtain some reform, col-
lectivist or otherwise, there is no one to say them nay.
There is no hereditary Junker class stemming the tide
of democratic needs and no Conservative Party as such
restraining their every effort ; and if they use their
power wisely there is no reason to fear any reaction.
The difficulty of carrying a national scheme into effect
is compensated for to an extent by the fact that any
one of the forty-eight States can be used as an experi-
ment station. The experience in any one can then be
used in applying the scheme in any other State. Thus,
whilst benefiting from the accumulated experience and
wisdom of other countries, a scheme ultimately national
can be worked out which will more adequately satisfy
local conditions and needs. If in addition to experi-
ments in a few States in different sections of the country,
say in the East, the Middle West, the West, and the
South, it would be possible from the very outset to
have neighbouring States engaged in the same trades,
e.g. the New England States, introduce similar schemes
together, the likelihood of such legislation proving suc-
cessful would be greatly increased. It was in this manner
that a criticism levelled against the Massachusetts
scheme of unemployment insurance, viz. that it will
tend to penalize the manufacturers of that State by
imposing taxes upon them from which employees in
neighbouring States will be exempt, has been met.

462 INSURANCE AGAINST UNEMPLOYMENT

When all the New England States are treated as a unit
for purposes of social legislation, the most progressive
State will not be made to suffer for the most retrograde.
Assuming, however, that in parts of the country it will
still be impossible to induce a group of States to intro-
duce a scheme of unemployment insurance at the same
time, it may well be argued that the better organization
of industry to which it will give an impetus both in the
individual factory and in the State, as well as the increased
efficiency of the workmen in which it will result, may more
than compensate for the apparent tax on the employer.

Unemployment Insurance for Other States.

The scheme of unemployment insurance proposed for
Massachussetts would have to be materially changed
to be adaptable to the needs of other States. Not only
would the trades included have to be different and the
scale of contributions and benefits perhaps made to
vary, but even the administrative body in charge of the
scheme would, probably, at least at the outset, be
different in the various States.

On the other hand, the principle of joint compulsory
contributions to the fund, the dependence of a scheme
of unemployment insurance on a comprehensive system
of employment exchanges, the use of the scheme as a
means of preventing the emergency from arising rather
than merely of alleviating the suffering in which it
results, these and other " standards " should apply to
all schemes in all the States.

But this country is not the only one in which different
States, each with its own laws and customs, ultimately
formed a union. In Germany less than a century ago
the different States actually lived under different legal
systems — German law, Roman law, Code Napoleon, and
all kinds of local laws. Yet a commission working for
twenty-five years finally completed a national code of laws.

There can be little doubt that the States too will have
to adopt some unified system of laws for meeting unem-

INSURANCE AGAINST UNEMPLOYMENT 463

ployment. Vexatious problems resulting from the taxa-
tion of employers in neighbouring States at different
rates, or of the same employer at different rates for
workmen of the same trade who happen to be working
in his factories in different States will have to be solved.
The only possible way to prevent the confusion in this
branch of social insurance from equalling that which
exists with respect to the compensation schemes is to
introduce national legislation. The growing homogeneity
arising from the quick development of industries in all
parts of the United States has resulted in making the
problem of unemployment a truly national problem — a
situation which has received practical recognition in
the passage of a federal scheme of vocational training.
Further, national legislation to meet this evil, it is safe
to assume, can not long be delayed. Whether such
legislation will necessitate an amendment to the Federal
Constitution is still open to doubt. But it is certain
that rather than tolerate the confusion of different laws
on this subject an amendment will be passed if that
is found to be necessary. On the other hand, it must
be insisted that any national scheme will have to recog-
nize the vast territorial area of the United States, the
diversity of interests and the different stage of social
developments of the different sections.*

Time of Introduction.

In addition to developing a wise and sound scheme
of unemployment insurance in the light of prevailing
conditions, there is the further task of introducing it
at such a time when it is likely to be free at the outset
from having to weather bad times. It is advisable to

* It is conceivable that if a method could be devised whereby the
national exchequer would provide " grants in aid " to those States that
have different schemes of caring for their unemployed, or for their sick,
their aged, or maimed, the undoubted advantages of State initiative
and State freedom to experiment would not be lost, whilst on the other
hand it would be possible to attain a universal enforcement of the National
Minimum of conditions that society now favours. Such a solution might
indeed even be advisable for the prevailing conditions, since the different
parts of the country are still in different stages of development.

464 INSURANCE AGAINST UNEMPLOYMENT

inaugurate such a scheme before the crest of a rising
wave of prosperity is reached, so that a surplus can be
collected before the storm comes. During that time
the administrators will become used to their work and
be ready to cope with the demands made on them by a
period of industrial depression.

In Great Britain sickness and unemployment insurance
were introduced at the same time, whilst in most
European countries insurance against the former con-
tingency has preceded insurance against the latter.
Assuming that the United States would be well advised
to introduce both schemes of insurance, which should
come first ?

The growth of compensation schemes against accidents
and industrial diseases makes it necessary to provide
insurance against sickness from all causes if certain
obvious injustices are to be overcome. Moreover, the
helplessness of the sick person appeals more easily to
the imagination. Yet the problem of unemployment is
much greater than both industrial accidents and sick-
ness. As we have seen, the unemployed probably number
about six millions in a year of depression, whilst even in
prosperous times there are more than a million annually.
But a large guess at the number injured would not
exceed a million in any one year. " Wage-earners lose
five days on account of inability to get work for every
two lost through sickness." * Perhaps in the United
States, as in Great Britain, the propaganda for both
schemes should be carried on together and the decision
as to which should come first, if they cannot be attained
at the same time, should be left to the chance growth
of public opinion resulting from the occurrence of an
industrial crisis or to the chance spreading of some
disease. In 1921 it has become a matter of paramount
interest to the State to introduce a scheme of insurance
against unemployment, f

* Rubinow : Social Insurance. See pp. 68 and 214.

f In September 1921 Congress was confronted with a number of
proposals, involving over a thousand million dollars, for relief of the
unemployed.

CHAPTER XXIX

THE MASSACHUSETTS BILL ON UNEMPLOYMENT
INSURANCE

THE study of the various European schemes of unem-
ployment insurance is now of direct and immediate
importance to the United States. There is a growing
willingness to gain from the experience of other countries.

We were apt to think that our problems are peculiar to us and
that we must find our own way of solving them. If we had only
realized that American and European history is being written with
the same ink, that man is man, with similar virtues and similar vices,
on both sides of the Atlantic, we might have learned much from
experience and might have been able to avoid much amateurish
and harmful legislation.*

Do the industrial conditions of the United States
warrant the introduction of some scheme of unem-
ployment insurance ? If they do, which system would
be best adapted to its needs ?

Shall a federal measure be attempted or should a
State measure be first experimented with ? Shall it
follow the Ghent model or the British scheme ?

A practical turn has been given to the discussion of
these problems, if for no other reasons, because Mas-
sachusetts has a definite Bill advocating a plan of insur-
ance against unemployment before its legislature and
the Committee of Labour of the House of Repre-
sentatives of the Federal Government has discussed
the appointment of a commission on social insurance.

* Paul M. Warburg : The Currency Problem and the Present Financial
Situation, p. 147.

30 465

466 INSURANCE AGAINST UNEMPLOYMENT

The concluding chapters of this book are devoted to
an analysis of the scheme and to a brief summary of
the main arguments employed by its advocates.

Introduction.

Before stating and analysing the Massachusetts Bill on
Unemployment Insurance it is necessary to justify a
number of preliminary propositions.*

i. It is Advisable that Public Provision should be made in
the States against Unemployment.

We have seen that unemployment is one of the most
menacing situations that confront the workman in the
U.S.A. The most satisfactory way of solving this
problem would therefore be to introduce means to avoid
the irregularities of industry and to provide work at
all times. The systematic distribution of public works,
the scientific organization of the sales end of manage-
ment and the adoption of better thought-out methods
of " hiring and firing " workmen will help substantially
towards this end. But it is doubtful whether for many
years to come means will be found to overcome
seasonality in industry due to variations in Nature's
bounty, and to our methods of industrial organization
and to the habits and customs of modern society.

Assuming then that unemployment should be re-
garded as a constant feature of modern industry, what
methods now in vogue for meeting it should be en-
couraged ? The history of relief works has been that
of a succession of failures. At best they are a very poor
means of giving the unemployed workman relief in a
manner that will save his self-respect. Competent
investigators are almost unanimous in condemnation of
this method of meeting unemployment. On the other
hand, all students of the problem agree that the spread-
ing of unemployment over all workmen in an industry

* To this end some of the arguments already presented in previous
chapters are outlined briefly.

INSURANCE AGAINST UNEMPLOYMENT 467

so that systematic short time will prevail, and the con-
centration of unemployment on any sample group
avoided, is one of the best ways of meeting this evil.
This is the method advocated by trade unions, but it
does not seem to prevail very widely. It is common
in the clothing industry of New York, in a few steel
works, and in the cigar-making industry.* There is
very little likelihood, however, of this practice becoming
common, amongst other reasons, because of the increased
cost of keeping all the machines running on part time.
But even in the industries where it is employed during
normal unemployment large numbers are from time to
time, during serious depressions, thrown wholly out of
employment, and even those partly employed need extra
provision against unemployment.

As industry is organized to-day it would be inex-
pedient to attempt through legal compulsion to extend
this practice, though devices for encouraging it are to
be welcomed.

One State in the union has aimed to alleviate the
problem by making it obligatory on employers to give
workmen two weeks notice before dismissing them. It
is not to be expected that this proposal can accomplish
much. During a period of depression such certainty
that the threatened workman will need work in a fort-
night's time will not materially help him if there is no
vacancy which he can fill.

Public provision of work through the municipalities
and the State and organized action by trade unions is
not likely, therefore, to affect the problem materially

* It is found also in certain coal mines. The view that trade unions
favour this policy was recently expressed by the President of the American
Federation of Labour as follows : " During the periods of industrial
stagnation or reaction it is a common practice among workers, and par-
ticularly among union men and women, to go to an employer and say,
" Rather than you let a quarter or a half of our fellow-workers out, divide
the work up among us." — Mr. Samuel Gompers : Hearings before the Com-
mittee on Labour. H. J. Res, No. 159, re Commission on Social Insurance,

P- 133-

This practice is " not uncommon," and whilst it is certainly growing
more common in factories run scientifically, it is still exceedingly rare.
See also Protocol Agreement in the Cloak and Suit Industry.

468 INSURANCE AGAINST UNEMPLOYMENT

during the coming decade or so, and we are therefore
forced to inquire what provision is made against unem-
ployment by the individual workmen.

2. Insurance is to be Preferred to Savings as a Means of
Providing against Unemployment.

The most obvious way of providing against a given
contingency is for the individual workman to save
sufficiently to carry him through the period of stress.
Since, however, he cannot foresee with any exactness
how long the contingency may last, he is forced to secure
himself against the highest risk. Thus with respect to
unemployment, whilst the average rate in a given
industry may be only five weeks in a year, the work-
man may not feel safe unless he has made provision
for a half-year or more. It is also a fact that few
workmen can afford to make such provision through
their own savings. It would mean very often having
to reduce their standard of living during periods of
active employment. Moreover, saving is a disagreeable
process to most human beings.

By contributing to a common fund it is found that
the maximum of security can be provided at a mini-
mum cost. The individuals insured need not all provide
against the highest risk. It is sufficient if they are
protected against the average risk in the industry.

Co-operative undertakings for insuring workmen against
unemployment are to be preferred to the method of
individual savings, since by employing the former,
devices might be introduced such as we find in the
British scheme which will tend to reduce the amount
of unemployment. Of great significance also is the
general advantage which comes from the organization
of individuals, workmen only, or workers and em-
ployers together, for purposes of social betterment.
The highest importance attaches to such arrangements
when those primarily interested are also empowered to
manage the scheme. The social nature of modern
industry is clearly evinced and a sense of social responsi-

INSURANCE AGAINST UNEMPLOYMENT 469

bility is thus awakened. Self-government in social and
industrial as well as in political matters can be developed
in this way.

The strength inherent in the principle of self-help
and the destructive, softening influence of State help
is the objection often urged against every type of social
insurance. This view contains a very obvious fallacy.
The individual workman is not an isolated unit. He
is a member of a group. We are too apt to forget that
unemployment concerns this group and its solution is
therefore a social matter. In the march of history
mutual aid has been as great a factor in helping man to
conquer his environment as competition. It is obviously
foolish to call continually upon the workman to help
himself when he is divorced from the opportunity of
doing so. A drowning man needs assistance and not the
advice that by swimming ashore he will manifest and
strengthen his independence, self-reliance, and initiative.

3. In the United States Insurance against Unemploy-
ment should be made Compulsory.

The phenomenal growth of the Workmen's Com-
pensation Acts in the United States and the steady
growth of the movement in favour of health insurance
have directed attention to the experience of other
countries with schemes of social insurance. In all Euro-
pean countries, as we have seen, there is a growing
recognition of the inevitability of compulsory schemes
if the vast majority of those usually attacked through
the uncertainties of industries are to be protected. In the
United States, where trade unions have hitherto made
comparatively little systematic provision against unemploy-
ment, it would seem to be almost useless to introduce
the Ghent scheme for assisting unemployment insurance
as the only method of reducing its evil effects. The two
main reasons offered in opposition to the proposal that
unemployment insurance should be made compulsory
are that it is contrary to the American spirit of indi-
vidualism, and that it would result merely in the

470 INSURANCE AGAINST UNEMPLOYMENT

creation of another source of bribery and corruption.
Let us examine both these contentions.

Individualism is not an American Characteristic.

Individualism is regarded as an American charac-
teristic both by many who are proud of it and by many
of those who deplore it. The former believe that it
makes for energy, reliance, inventiveness, independence,
and national strength ; the latter that it often leads to
selfishness, localism, class antagonisms, and national
weakness. But for good or for bad it is treated as an
inherent quality of the American mental make up.
This view, like most dealing with national character-
istics, is only partially true. It fixes on the transitory
and insists that it is permanent. It asserts that they
flow from fixed inherent tendencies.

It is, of course, true that during certain periods
America has been highly individualistic in its conception
of the duties of the State. ' That Government is best
which attempts least " was for many years a maxim
of American statecraft, and, summarized tersely, a
widely held view. But it was sandwiched in between
two periods when this view was not the predominant
one held concerning State functions and activities.

Internal improvements in the form of road building,
making rivers more navigable, the construction of
canals and railways, were regarded as rightful functions
of Government, and between 1816 and 1835 over
$9,000,000 were spent on them. Indeed, Jefferson, in
his second inaugural address in 1805, declared " that
any surplus of revenue might well be applied in time
of peace to rivers, canals, roads, arts, manufactures,
education, and other great objects within each State."
Later he justified even more emphatically a national
system on the ground that the interests of the States
would be identified arid their union cemented by new
and indissoluble ties, suggesting, however, that a con-
stitutional amendment might be necessary.

INSURANCE AGAINST UNEMPLOYMENT 471

In 1807 Gallatin issued a special report in which he
outlined proposals for Government undertakings. Van
Buren, Clay, John Quincy Adams, and Jackson all
favoured expenditures of this kind.* This period of
reliance on government was followed by an era of indi-
vidualism from which the people of the United States
have emerged so recently that they have not yet adjusted
their vocabulary to the new tendencies, f Let us note
the nature and quality of the new strivings and forces
making for individualism.

First and foremost was the existence of huge tracts
of territory rich and varied, together with an abundance
of minerals. Moreover, the railways and the canals
already constructed and the excellent natural high-
ways were at the service of those who were prepared to
pioneer. What else was necessary but ambition, energy
and self-reliance to exploit this " golden country " ?
It was exactly the type of person possessing these
characteristics that the United States has been fortunate
in attracting since the landing of the Mayflower. The
brain and brawn of Europe have been drawn to it. The
vastness of the country, its youth, its inspiring experi-
ment in democracy, the hundred and one misfortunes in
older countries, led to America becoming the land where
all who were discontented and sick at heart could come
and begin life anew. These immigrants were perhaps
rich in idealism, but there was no outlet for it in the
United States as there was in Europe. Political free-
dom was already gained, economic security was open
to all by working for it. It was a situation where the
self-reliant person became more self-reliant. His energy,
instead of being directed against a despotism or against
unjust taxation or in favour of a wider franchise, was
diverted towards attaining a quicker and more thorough
exploitation of the country's natural resources. Wave

* McMaster : History of the People of the United States, vol. vi, pp. 347-50.

f The immediate cause of the reaction against Government enterprise
resulted from the panic of 1837, which brought many of the State and
city projects to the verge of bankruptcy.

472 INSURANCE AGAINST UNEMPLOYMENT

after wave of immigration swept over the land, only to leave
more self-centred, self-reliant characters who strength-
ened the prevailing attitude. The frugality, energy, and
personal independence of the people was not directed
towards selfish ends. The very exploitation of the
potential wealth of the country was to them an ideal
worth striving for and coloured and shaped all their
other activities.

Now it is in the nature of the self-reliant person to
believe that others are also self-reliant unless indeed
the facts to the contrary are very evident. His view
of government is inevitably an individualistic view.
He needs neither support nor protection, and therefore
thinks it safe for the Government not to offer it to others.
In so far as he came into touch with the Government
he knew himself to be more competent, more honest,
and more industrious.

This attitude was reinforced by the necessity of
assimilating the immigrant peoples. The striving after
national unity became the aim of dominant groups in
the country and led to a conscious development of
sentiment towards America. In its crudest form it
was shown in the encouragement of flag-waving to an
extent unknown in European countries. In its highest
form it showed itself in the active adaptation of
American ideals to everyday life. Democracy and
liberty, the ideals of the Fathers of the Constitution,
were highly prized. The institutions which they created
were treasured, while the instrument of government,
the Constitution, was hallowed. It was a symbol of
America, an emblem of American ideals, and all who
tampered with it were to be regarded with suspicion.
The individualistic creed of the reign of George III,
enshrined as it was in the Ark of the Covenant, came
to have an educative influence and paramount im-
portance even after a century of industrial change had
transformed the country out of all recognition. The
self-reliance of the pioneer combined with this senti-
ment of the greatness of America and its ideals to make

INSURANCE AGAINST UNEMPLOYMENT 473

him indifferent to the experience, to the developments,
and the experiments of other countries. He or his
immediate ancestor had been sufficiently dissatisfied
with things in Europe not to want to borrow many ideas
from there. Even the more thoughtful assumed very
lightly that conditions in the New World were so
different that the experience of other countries was no
guide at all. It was the differences from other countries
that always obtruded themselves, a self-governing re-
public, a rigid constitution, a vast unpeopled territory ;
the heterogeneous elements of the inadequate popu-
lation, the continual influx of new peoples and their
westward march. The fundamentally more important
facts, the change from a predominantly agricultural
to a predominantly industrial economy, the evolution
of the great industry, the rise of great cities, the emer-
gence of an industrial proletariat, the growth of the
problems of poverty and uncertainty, in short the
emergence of " the Great Society " — these were largely
ignored and to-day press for solution.

But this individualism was here as elsewhere only
a passing phase. People need different services from
the Government at different times, and as a result the
Government assumes different functions.* These functions
are not fixed and unvarying. The extent to which
public authorities therefore interfere with industry is
not the same at all times and places. It varies with
the efficiency, honesty, and sense of public duty then
prevailing. Professor Marshall pointed out that during
the last century in England there had been

a vast increase in the probity, the strength, and unselfishness and the
resources of Government. . . . And the people are now able to
rule their rulers and to check class abuse of power and privilege
in a way which was impossible before the days of general education
and a general surplus of energy over that required for earning a living. f

* The far-reaching measures of Government management and control
which have been precipitated by the war demonstrate that there is no
reason for believing that Americans will be opposed to the adoption of
social measures which they are convinced are necessary to social well-being.

t " Economic Chivalry," in Economic Journal, March 1907.

474 INSURANCE AGAINST UNEMPLOYMENT

This applies equally well to the United States. Indeed,
even during the last twenty years there has been a
manifest improvement in the whole tone of government.
Corruption, spoils and privileges have been largely
swept away.* It is therefore clearly safer and more
beneficial to entrust the Government with power to-day
than it was in the past. And the work of such organi-
zations as the Municipal Research Bureau, the School
of Social Research, and the Consumers' League is
giving substantial aid to " the general public " to
raise the standards of public life. We may therefore
conclude that neither individualism nor lapses from
honesty are peculiarly American characteristics, that
they are of little force in considering proposed exten-
sions of State government to-day, and that they should
not therefore prevent its people from boldly grappling
with the hideous problems of unemployment.

Having seen some reason for the opinion that it is
advisable to make provision against unemployment,
that saving is inadequate and that a compulsory
scheme as such is not out of harmony with the social
spirit of the country, we are now in a better position
to analyse the proposed Massachusetts scheme. It has
the supreme advantage of being based in very large
measure on the experience of Great Britain, and the
cautious reader will note which parts of the proposed
scheme are new, aiming at its adaptation to local
conditions.

* But in 1914, in his Essays in Social Justice, p. 122, Professor Carver
argued that " Government control merely means playing the vote-getting
monopolist against the money-getting monopolist. The politician, that
is, the vote-getter, cares no more for the people than does the trust mag-
nate. He merely wants their votes as the trust magnate wants their
money. He wants their vote in order that he may further his own in-
terests, just as the trust magnate wants their money in order that he may
further his own interests." It is, however, exceedingly important to
note that the politician derives his power from the public, whilst the mag-
nate derives his from his wealth. The former must cringe to or lie to his
master every few years. His fear of dismissal often impels him to serve
his master well. The latter, on the other hand, is arrogant and fearless.
Whilst according to one theory he is merely a trustee of his wealth, he
knows that as society is now organized he is not asked to give an
accounting.

INSURANCE AGAINST UNEMPLOYMENT 475

A Brief Summary of the Main Features of the Scheme.

The Massachusetts Bill on Unemployment Insurance
provides for :

(1) a. Compulsory insurance in selected trades.

b. Subsidizing of voluntary insurance through associa-
tions in all trades.

(2) All workmen in the insured trades are divided
into three wage groups. Contributions and benefits *
are then calculated for each group on the basis of the
average wage of that group. The estimated costs for
providing such benefits are 36 cents, 60 cents, and 75
cents per week. This is to be divided amongst em-
ployers, workmen, and the State in equal amounts, so
that workmen in group (i) will pay 12 cents, in group
(2) 20 cents, and in group (3) 25 cents. Payments from
all sources flow into the unemployment fund.

(3) The benefits provided by this scheme are : for work-
men in group (i), $3.50 per week ; for group (2), $5.25 per
week ; for group (3), $7.00 per week for each week of
unemployment after the first week up to a maximum
of ten weeks in one insurance year, provided also that
no workman receives more than one week's benefit for
every six weeks' contribution which he pays. No
benefit is paid to persons below the age of eighteen.

(4) The benefits are to be paid out direct through
the local State employment offices or by way of
repayments to associations under Part IX of the

Bill.

(5) The conditions for the receipt of unemployment
benefit by any workmen are that he has been employed
in an insured industry in each of ten weeks in the pre-
ceding three years and has paid 26 weekly contribu-
tions ; that he proves that since his last application
for benefit he has been continuously unemployed ; that
he is capable of work but unable to obtain suitable

* In view of the increased cost of living these contributions and
benefits now seem inadequate.

476 INSURANCE AGAINST UNEMPLOYMENT

employment ; that he has not exhausted his right to
unemployment benefit.

No workman is allowed to receive benefits who is
unemployed because of sickness or disablement, or
because of a trade dispute, whether it be a lock-out or
strike. If he loses employment through his own fault
or voluntarily leaves his employment without reason-
able cause, he is disqualified from benefit for a period
of six weeks from the time that he lost his em-
ployment.

(6) In the case of workmen who claim benefit directly
any question as to their rights to benefit are decided
on first by an insurance officer. The workman then
has the right of appeal to an arbitration committee
(consisting of an employer, a workman and an impartial
chairman). Should the insurance officer and arbitration
committee disagree then a decision rests with the
referee, who is appointed by the governor. Any question
arising with respect to repayments to associations is
to be settled between the board of unemployment
insurance commissioners and the associations.

(7) In order to encourage voluntary insurance through
associations, whether the workmen so insured are em-
ployed in insured trades or not, the commissioners
are to make a repayment of one-fourth the amount
which the association expended on unemployment
benefits.

(8) A board of unemployment insurance commis-
sioners is to be created to administer the scheme. It
is to divide up the commonwealth into suitable admini-
strative divisions in each of which there is to be a
local divisional office. These offices are to be branches
of the State employment office.

This board has the supervision and responsibility
for the administration of both the local employment
offices and unemployment insurance scheme for the
whole of the State.

INSURANCE AGAINST UNEMPLOYMENT 477

HOUSE— No. 825.

BILL ACCOMPANYING THE PETITION OF THE MASSACHUSETTS COM-

MITTEE ON UNEMPLOYMENT FOR A SYSTEM OF INSURANCE
FOR WORKMEN IN CERTAIN INDUSTRIES WHO ARE TEMPORARILY
UNEMPLOYED. SOCIAL WELFARE. JANUARY 14.

THE COMMONWEALTH OF MASSACHUSETTS.
In the Year One Thousand Nine Hundred and Sixteen.

AN ACT TO PROVIDE INSURANCE FOR WORK-
MEN IN CERTAIN INDUSTRIES WHO ARE
TEMPORARILY UNEMPLOYED.

Be it enacted by the Senate and House of Representatives in General
Court assembled, and by the authority of the same, as follows :

PART I.
INSURED PERSONS.

SECTION I. Workmen in insured industries shall be insured
under this Act as hereinafter provided.

SECTION 2. Insured industries within the meaning of this Act
shall comprise the following industries : —

(a) Building trades.

(b) Leather products.

(d) Rubber products.

(e) Tobacco products.

(/) Garment manufacturing.

(g) Paper products.

(h) Printing and publishing.

(i) Granite and stone extraction.

(/) Manufacture of motors, engines, machinery, and metals.

(k) Manufacture and repair of vehicles of whatever mode of
propulsion, including steam and electric cars, locomotives,
automobiles, motor-cycles, carriages, wagons, bicycles.

(/) Construction, reconstruction, or alteration of works, to
include railroads, docks, harbours, canals, embankments,
bridges, piers, or other works of construction.

(m) Teaming and trucking.

Provided, however, that employers in insured industries who
have in operation or who put into operation in their establishments
any plan of benefits for their own employees when unemployed,
which plan is shown to the satisfaction of the unemployment

478 INSURANCE AGAINST UNEMPLOYMENT

insurance commissioners to offer equal benefits in all respects
to those payable under this Act, need not be insured under this
Act. The chief commissioner shall have full power to decide the
exemptions under this section.

SECTION 3. Workmen, within the meaning of this Act, shall
comprise all men and women over eighteen years of age —

(a) If they are engaged in manual labour in the employ of any

person directly operating in an insured industry ; or

(b) If, with the exception of clerks, they are in any way occu-

pied in the employ of such person, and receive a wage
of twenty-five dollars a week or less ; or

scheduled in Section 2, Part I, although they are in
the employ of a person who is not operating primarily
in an insured industry.

SECTION 4. " Person," as used in this Act, shall mean any person,
firm or corporation which employs labour, unless the context
plainly requires another meaning.

PART II.
UNEMPLOYMENT FUND.

SECTION i. There shall be established under the joint control
and management of the Insurance Commissioners hereinafter
provided for, a fund called the unemployment fund, into which
shall be paid all contributions payable under this Act by employers,
workmen, and by the Commonwealth, and out of which shall be
paid all unemployment benefits and other payments and expenses
which under this Act are payable out of such fund.

SECTION 2. The accounts of the unemployment fund shall be
audited in such manner as the Auditor of the Commonwealth may
direct.

PART III.
CONTRIBUTIONS.

SECTION i. Insured workmen shall contribute weekly to the
unemployment fund the amounts hereinafter specified, except as
provided in Section 2, Part VII.

SECTION 2. Employers of insured workmen shall contribute to
the unemployment fund a sum in respect of each workman equal
to the sum contributed by such workman.

SECTION 3. Joint contributions on behalf of employer and
workman shall be paid by the employer, who shall be legally
responsible for such payments.

INSURANCE AGAINST UNEMPLOYMENT 479

SECTION 4. There shall be annually added to the fund out of the
Treasury of the Commonwealth a sum equal to one-half of the
total amounts contributed by employers and workmen.

SECTION 5. Contributions of insured workmen shall be deter-
mined on the following basis : —

Group I. Workmen earning wages at the rate of eight dollars
a week and less, per week.

Group II. Workmen earning wages at the rate of more than
eight dollars and less than twelve dollars a week,
per week.

Group III. Workmen earning wages at the rate of twelve
dollars a week or more per week.

SECTION 6. Where, owing to the fact that the wages of a work-
man are paid at intervals greater than a week, or for any like
reason, joint contributions are paid at intervals greater than a
week, the amount of such contributions shall be calculated according
to the average weekly earnings of such workman during such part
of the preceding six months as he has been employed, and each
such contribution when paid shall be treated as so many contri-
butions as there are weeks in the period for which the contribution
has been paid.

SECTION 7. In respect of workmen employed less than one week,
the rate of contribution shall be as follows : —

For one day's employment.

For two days' employment, a sum equal to twice one day's

contribution.
For three or more days' employment, a sum equal to regular

weekly contribution in Group I in Section 5, Part III.

(a) Provided, that for purposes of reckoning the number

of contributions, each contribution at such rate shall be
treated, as a part of a contribution, such part to be the
same as the ratio between such contribution and the
regular weekly contribution, in Group I in Section 5,
Part III ;

(b) Provided, further, that where workmen are hired by the

day, through the State employment offices of the Common-
wealth, arrangement may be made with the insurance
commissioners that six consecutive days of employment
shall be regarded as a week of steady employment,
and that the workman's contribution shall be paid on
that basis. Where it is impracticable for such con-
tributions to be paid on such basis, the regulations of
the insurance commissioners may provide for a proper
refund to such workmen so hired ;

480 INSURANCE AGAINST UNEMPLOYMENT

arrangements through the State employment offices

of the Commonwealth, consecutive engagements of the

same or different workmen may be treated and paid

for as a continuous employment, but they shall not be

so regarded for purposes of a refund of any part of the

employer's contribution under Part VII of this Act.

SECTION 8. In any case where an insured workman is engaged

in doing piecework and is paid accordingly, or where, for any other

reason not provided for in this Part, an insured workman does

not receive a weekly wage, he shall be regarded as belonging to

that group in Section 5, Part III, which most nearly corresponds

to the average weekly earnings of such workman during such part

of the preceding six months as he has been employed. Questions

as to the determination of wages under this section shall be decided

by the insurance officer according to the regulations of the insurance

commissioners.

SECTION 9. Notwithstanding any contract to the contrary, the
employer shall not be entitled to deduct or otherwise recover his
own contribution from the wages of any workman in his employ
except as provided in Section 2, Part VII.

SECTION 10. An employer in an insured industry may, subject
to the regulations of the insurance commissioners, make arrange-
ment with the State employment offices in respect of workmen
engaged by him through such offices, whereby the State employment
office shall perform all or any of the duties required by this Act
to be performed by the employer with respect of those workmen.

PART IV.

BENEFITS.

SECTION i. Benefits shall be paid to insured workmen as here-
inafter specified.

SECTION 2. No workman shall receive unemployment benefit
for the first week of his unemployment.

SECTION 3. For each week following the first week of unem-
ployment the benefits shall be determined on the following basis : —

Workmen in Group I of Part III shall receive $3.50 per week.
Workmen in Group II of Part III shall receive $5.25 per

week.
Workmen in Group III of Part III shall receive $7 per week.

SECTION 4. No workman shall receive unemployment benefit
for more than ten weeks in one insurance year, nor more than
one week's benefit for every six contributions already paid by him.

INSURANCE AGAINST UNEMPLOYMENT 481

SECTION 5. No benefits shall be paid during the six months
next following the date of passage of this Act.

SECTION 6. No agreement by an employee to waive his rights
to benefits under this Act shall be valid, and no benefit under this
Act shall be assignable, or subject to attachment, or be liable in
any way for any employee's debts.

PART V.
CONDITIONS FOR RECEIPT OF UNEMPLOYMENT BENEFIT.

SECTION i. The conditions for the receipt of unemployment
benefit by any workman are : —

(a) That one week of unemployment has elapsed, for which,

under Part IV, no benefit has been paid ;

(b) That he has been employed in an insured industry in each

of ten weeks in the preceding three years and has paid
twenty-six weekly contributions ;

in the prescribed manner, and it is proved that since
the date of his last application he has been continuously
unemployed ;

(d) That he is capable of work but unable to obtain suitable

employment ;

(e) That he has not exhausted his right to unemployment

benefit.

SECTION 2. A workman shall not be deemed to have failed to
fulfil the conditions because he has declined —

(a) An offer of employment in a situation vacant in conse-

quence of a stoppage of work chs^-fcor and forming part
of, a labour dispute ; or

(b) An offer of employment in the district where he was last

ordinarily employed, such offer being at the rate of
wage lower, or on conditions less favourable, than those
which he habitually obtained in his usual employment
in that district ; or

of wages lower, or on conditions less favourable, than
those generally observed in such district in the industry
to which such offer relates.

SECTION 3. A workman shall be disqualified for receiving unem-
ployment benefit under any of the following conditions : —

(a) While he is an inmate of any prison or almshouse, or other
institution supported wholly or partly out of public-
funds ;

482 INSURANCE AGAINST UNEMPLOYMENT

(fe) While he is resident temporarily or permanently outside
the Commonwealth ;

(d) If he has lost employment through his own fault or volun-

tarily leaves his employment without reasonable cause,
and in such event disqualification shall last for a period
of six weeks from the date when he so lost employment ;

(e) If he has lost employment by reason of a stoppage of

work which was due to, and part of, a labour dispute at
the factory, workshop, or other premises at which he
was employed, and in such event disqualification shall
last as long as such stoppage continues as a part of
such dispute, except in a case where he has, during the
stoppage of work, become bona fide employed elsewhere
in an insured trade for at least three weeks.

Such disqualification shall not extend to workmen engaged
wholly in an occupation different from the one in which the dispute
occurred, whether carried on in a separate building or not, provided
that the workmen in such different occupation have not become
a party to the labour dispute either directly or sympathetically.

The expression " labour dispute " shall mean any dispute between
employers and workmen or between workmen and workmen from
whatever cause originating, which is connected with the employ-
ment, or the terms of employment, or with the conditions of labour,
of any workman whether in the employment of the employer with
whom the dispute arises or not.

PART VI.

DETERMINATION OF CLAIMS.

SECTION i. All claims for unemployment benefit shall be filed
with, and all questions as to such claims shall be determined by,
one of the insurance officers appointed under this Act.

SECTION 2. In any case where unemployment benefit is refused
or is stopped, or where the amount allowed is not in accordance
with the claim, the workman may require the insurance officer
to report the case to an arbitration committee constituted in
accordance with this Act. The arbitration committee shall make
such investigation as it shall deem necessary, and the decision of
the committee, together with a statement of the evidence submitted,
its finding of fact, rulings of law, and any other matters pertinent
to questions arising before it, shall be filed with the referee
appointed under this Act. The finding of the arbitration committee
shall be final and conclusive, unless a claim for review is filed by
the insurance officer with the referee not later than seven davs

INSURANCE AGAINST UNEMPLOYMENT 483

after such finding is so filed. But no party may require the
insurance officer to file such claim for review.

SECTION 3. If a claim for review is filed as provided in Section 2,
Part VI, the matter shall come before the referee, whose order
or decision shall be final and conclusive (except as provided in
Section 4, Part VI), and the referee shall file such order or decision
with the records of the proceedings and notify the parties of record
thereto. The referee may hear the parties and may take evidence
in regard to any and all matters pertaining thereto, and may alter
the decision of the committee on arbitration in whole or in part,
or may refer the matter back to the arbitration committee for
further findings of fact.

SECTION 4. The insurance officer, the workman, or the employer
in whose employment the disputed matter arose, if he is aggrieved
by an order or decision of the referee, may present a certified copy
thereof, and all papers in connection therewith, to the superior
court for the county in which the disputed matter arose, or for the
county of Suffolk, whereupon said court shall render a decree in
accordance therewith. Such decree shall have the same effect,
and all proceedings in relation thereto shall thereafter be the same
as though rendered in a suit duly heard and determined by said
court, except that there shall be no appeal therefrom upon ques-
tions of fact, nor if the order or decision of the referee upon which
such decree was based was not presented to the court within ten
days after the notice of the filing thereof by the referee and except
as provided for in Section 5, Part VI. Upon presentation to it
of a certified copy of a decision of the referee ending the unem-
ployment benefit, or in any way changing the amount thereof, the
court shall revoke or modify the decree to conform to such decision.
SECTION 5. An order or decision of the referee shall have effect,
notwithstanding an appeal, until it is otherwise ordered by a justice
of the supreme judicial court who may, in any county, suspend
or modify such order or decision during the pendency of the appeal.
A justice of the supreme judicial court shall also have power, on
the application of any interested party, to issue a writ of mandamus
to compel the performance of any of the ministerial acts herein
provided.

SECTION 6. The referee and chairman of the arbitration commit-
tees shall have the power to subpoena witnesses, to administer
oaths and to examine such books and records of the parties to a
proceeding as relate to questions in dispute. Commissions to
take depositions and letters rogatory shall be issued by a clerk
of the superior court for any county of this Commonwealth on
written request by the referee or chairman of an arbitration com-
mittee. No entry fee shall be charged in such cases. The insurance
commissioners shall have power to make regulations necessary
for a proper investigation of all claims.

484 INSURANCE AGAINST UNEMPLOYMENT

SECTION 7. The unemployment insurance commissioners shall
determine the remuneration to be paid to the chairmen of the
arbitration committees, the members of such committees, and such
travelling and other allowances, including compensation for loss
of time, to persons required to attend before an arbitration com-
mittee or the referee, and all other expenses incidental to hearings
before arbitration committees or the referee. All such payments
shall be treated as expenses incurred by the insurance commis-
sioners in carrying this Act into effect.

PART VII.
REFUND OF PART OF CONTRIBUTION TO EMPLOYERS.

SECTION i. The commissioners shall, on the application of any
employer made within one month after the termination of any
insurance year, refund to such employer out of the unemployment
fund a sum equal to one-half of the contributions (exclusive of
any contributions refunded to him under any other provisions
of this Act) paid by him on his own behalf during that period in
respect of any workman who has been in his service during the
period, and in respect of which workman not less than forty-eight
contributions have been paid during that period.

The commissioners may make regulations for giving effect to,
and shall determine all questions arising under this section.

SECTION 2. If any employer satisfies the commissioners that
during any period of depression in his business workmen employed
by him have been working short time, and that during such period
their contributions under this Act have not been deducted from
wages, but have been paid by the employer in addition to those
paid by him on his own behalf, there shall be refunded to him out
of the unemployment fund, in accordance with regulations made
by the commissioners, the contributions so paid by him in respect
of those workmen (including those paid on behalf of the workmen
as well as those paid on his own behalf) for the period of such part
thereof as the aforesaid regulations may stipulate. Any employer
who desires to take advantage of this section shall make application
to the insurance commissioners to determine whether the require-
ments of this section are satisfied by the circumstances under
which, and the means by which, he proposes to effect a reduction
of work hours.

PART VIII.

REPAYMENT OF PART OF CONTRIBUTIONS TO WORKMEN IN

CERTAIN CASES.

SECTION i. If it is shown to the satisfaction of the insurance
officer by any workman or his personal representatives that the

INSURANCE AGAINST UNEMPLOYMENT 485

workman has paid contributions in accordance with the provisions
of this Act for five hundred weeks or upwards, and that the workman
has reached the age of sixty, or before his death had reached the
age of sixty, the workman or his said representatives shall be
entitled to be repaid the amount, if any, by which the total amount
of such contributions have exceeded the total amount received
by him out of the unemployment fund under this Act, together
with compound interest upon such excess at the rate of 3 per
cent, per annum calculated in the prescribed manner.

SECTION 2. In the case of workmen over fifty years of age at
the time when this Act goes into effect the insurance commissioners
may make provision for repayment as provided in Section i of
Part VIII, although less than five hundred weeks' contribution
have been paid.

SECTION 3. Repayment to a workman under Part VIII shall
not affect his liability to make future contributions. If, after
any such repayment, he becomes entitled to unemployment benefit,
he shall be considered for purposes of such benefit as having made
for the period for which the repayment has been made the number
of contributions which is most nearly equal to two-thirds of the
full number of contributions paid during that period.

PART IX.
REPAYMENTS TO ASSOCIATIONS.

SECTION i. The commissioners shall on application of any
association of workmen in an insured trade which provides payment
to unemployed members, arrange, instead of paying benefits as
provided in Part IV of this Act, to pay into the treasury of said
association periodically out of the unemployment fund such sum
as shall be equivalent to the aggregate amount which such workmen
would have received in the way of benefit under this Act during
periods of unemployment. But in no case shall this amount exceed
three-fourths of the amount of the payments made by that asso-
ciation during that period to its unemployed members resident
in this Commonwealth.

SECTION 2. To any association of workmen not trading for profit
the rules of which provide for payments to members while unem-
ployed, whether workmen in an insured trade or not, the com-
missioners shall, upon application of such association, pay out of
moneys provided by the treasurer on such conditions, and either
annually or at such other intervals as the commissioners may
prescribe, an amount not exceeding one-fourth of the aggregate
amount which the association has expended on such payments
during the preceding year or other prescribed period. No such

486 INSURANCE AGAINST UNEMPLOYMENT

payments shall be made where the benefits were for voluntary
unemployment or for unemployment occasioned by a stoppage
of work for which benefits would not have been paid directly to
insured workmen under Section 3 (d), Part V.

PART X.

MIGRATION OF INSURED WORKMEN.

SECTION i. If any workman insured hereunder who has not
exhausted his benefits has a definite offer of work in any other
place in the Commonwealth, he may apply to the fund for half
his railway fare to that place, and this amount shall be paid to
him forthwith and be deducted from the maximum amount payable
to him in respect of unemployment benefit. This section shall
apply only to workmen insured hereunder for not less than two
years.

SECTION 2. In any case if it is shown to the satisfaction of the
insurance officer that a workman insured hereunder has work
offered him in another part of the Commonwealth, his name and
record may be transferred to that district.

SECTION 3. Any workman insured hereunder who leaves the
Commonwealth for a period of not more than one insurance year
shall be entitled to full benefits after he has become employed
again in this Commonwealth in any insured industry for a period
of four weeks.

SECTION 4. Any workman insured hereunder who leaves the
Commonwealth for a period of over one insurance year shall be
entitled to a refund of all his contributions, less any benefits he may
have received, provided that contributions have been made for
not less than twenty-six weeks.

SECTION 5. An " insurance year " shall mean the yearly period
dating from the day when benefits are first payable under this Act.

PART XI.
UNEMPLOYMENT DUE TO DEFECTS IN SKILL OR KNOWLEDGE.

SECTION i. If the repeated failure of any workman insured
hereunder to obtain or retain employment appears to the insurance
officer to be wholly or partly due to defects in skill or knowledge,
the insurance officer may, for the purpose of testing the skill or
knowledge of the workman, arrange for the attendance of the
workman at a suitable place for the purpose, and may, out of the
unemployment fund, pay all expenses incidental to such attendance.

SECTION 2. If the workman fails or refuses to attend or to
produce satisfactory evidence of his competence, or if as a result

INSURANCE AGAINST UNEMPLOYMENT 487

of the test the insurance officer considers that the skill or know-
ledge of the workman is defective and that there is no reasonable
prospect of the defects being remedied, such facts shall be taken
into consideration in determining under Part V what is suitable
employment for the workman.

SECTION 3. If in any case as a result of the test the insurance
officer considers that the skill or knowledge is defective, but that
there is a reasonable prospect of the defects being remedied by
technical instruction, the insurance officer may, subject to the
regulations of the insurance commissioners, pay out of the unem-
ployment fund all or any of the expenses incidental to the pro-
vision of the instruction, if he is of the opinion that the charge
on the unemployment fund in respect of such workman is likely
to be decreased by the provision of the instruction.

PART XII.

ADMINISTRATION.

SECTION i . There shall be established as hereinafter provided
a board of unemployment insurance commissioners, which shall
consist of a chief commissioner, a financial secretary, and the
treasurer of the Commonwealth. It shall be the duty of the
unemployment insurance commissioners to supervise the adminis-
tration of this Act.

SECTION 2. For purposes of this Act the insurance commis-
sioners shall divide the Commonwealth into suitable administrative
divisions. The insurance commissioners shall establish in each
such division a local divisional officer to administer this Act in
connection with the local State employment office.

SECTION 3. The chief commissioner shall be appointed and
removed by the governor.

SECTION 4. The referee shall be appointed and removed by the
governor. He shall hold office during good behaviour. In the
event of his removal the governor shall submit a written statement
of reasons for so removing him.

SECTION 5. The chief commissioner shall appoint a financial
secretary.

SECTION 6. He shall also appoint such insurance officers,
inspectors and employees for the proper administration of this
Act as he may deem necessary, in accordance with provisions of
chapter nineteen of the Revised Laws of nineteen hundred and two
and Acts in amendment thereof and in addition thereto, and rules
adopted thereunder.

SECTION 7. The chief commissioner shall appoint an arbitration
committee for each divisional office, as hereinafter provided. An
arbitration committee shall consist of representatives of workmen,

488 INSURANCE AGAINST UNEMPLOYMENT

an equal number of representatives of employers, and a chairman.
The chief commissioner shall select representatives of workmen
from lists submitted by organizations of workmen an equal number
of representatives of employers from lists submitted by organiza-
tions of employeis, and the representatives so selected shall choose
a chairman. In any case where the workmen or the employers
have failed to submit lists on the date set by the chief commissioner
for the submission of such lists, the chief commissioner shall select
such representatives. In any case where the representatives have
been unable in a given length of time to choose a chairman the
chief commissioner shall choose such chairman.

SECTION 8. Salaries and expenses under this Act shall be paid
out of the treasury of the Commonwealth for a period of five years
after its passage. At the end of such period all such salaries and
expenses shall be borne by the unemployment fund except the
salary of the referee and the repayment to certain associations
as provided in Section 2, Part IX, both of which shall continue
to be paid by the Commonwealth.

SECTION 9. The salary of the chief commissioner shall be

; that of the financial secretary,

that of the referee, . All other salaries shall be

determined by the insurance commissioners.

SECTION 10. The insurance commissioners shall have power to
issue orders and regulations for any purposes deemed necessary
for the proper administration of this Act, and such orders and
regulations shall have the force of legal enactment.

SECTION n. The insurance commissioners shall make regulations
for refunds to employers and employees of contributions paid
under a mistake ; they may make arrangements for the printing
and issuing of special stamps or other evidences of payment as they
may require, which shall be used by employers for their own and
the workmen's contributions ; and they may make arrangements for
supplying workmen with cards or books as may be deemed necessary.

SECTION 12. The insurance commissioners shall have power to
extend the operation of this Act to workmen in any industry. But
no such extension shall be proposed until two years after the
passage of this Act. Moreover, no such extension shall become
effective until six months after due notice has been given, and
an opportunity for a hearing has been given to interested parties
or their representatives.

SECTION 13. The insurance commissioners shall have power
to revise rates of benefits and contributions at intervals of five
years, on the basis of change of wages or on the basis of an
increased permanent expense connected with the administration
of this Act, or on the basis of a change in the standards or cost
of living of insured workmen : provided, however, no such revision
shall become effective until due notice has been given or until an

INSURANCE AGAINST UNEMPLOYMENT 489

opportunity for a hearing has been given to interested parties or
their representatives ; provided, further, that no order under this
section shall increase the rates of contribution from employers or
workmen by more than five cents per workman per week above
the rates specified in this Act, or reduce the rates of benefit below
ninety per cent, of the rates established under this Act, or shall
vary such rates unequally as between employers and workmen.

SECTION 14. The treasury of the Commonwealth shall guarantee
the solvency of the insurance fund, but any sum advanced from
said treasury under this section shall be repaid by the insurance
commissioners out of the insurance fund, who shall have power
to safeguard the solvency of the fund by curtailing benefits or
increasing contributions. But no order of the commissioners under
this section shall reduce the weekly rate of benefit below 90 per
cent, of the rate established by this Act, or shall increase the
rate of contribution by more than five cents per workman per
week, or vary rates unequally as between employer and workmen,
and no such order shall remain in force more than three months
after all advances and interest thereon have been repaid to the
treasury of the Commonwealth.

SECTION 15. The insurance commissioners shall make arrange-
ments with the treasury of the Commonwealth for the repayment of
the grant to voluntary associations as provided in Section 2, Part IX.

SECTION 16. It shall be the duty of the chief commissioner of
unemployment insurance to supervise the administration of this
Act. He may issue reports and bulletins on the working of this
Act and recommend to the legislature any changes which may
be deemed advisable and shall suggest schemes to employers,
employees and to the legislature for diminishing unemployment
in the State generally, and for diminishing the demands on the
fund which arise in the insured industries.

SECTION 17. It shall be the duty of the referee to consider and
determine questions as to whether contributions are payable under
this Act in respect of any workmen and to which group such work-
man or class of workmen belongs ; to decide on direct claims for
unemployment benefits referred to him by an insurance officer
on disagreement with an arbitration committee ; to decide all
questions concerning the demarcation of industries.

SECTION 18. It shall be the duty of the financial secretary to :
(a) arrange for the collection and distribution of all funds as
prescribed by this Act according to regulations made by the com-
missioners ; (b) do any other work in connection with the adminis-
tration of this Act as the chief commissioner may require.

SECTION 19. It shall be the duty of the arbitration committees
to adjudicate all questions of claims for unemployment benefits
and refunds which are appealed from the insurance officer of any
divisional office.

490 INSURANCE AGAINST UNEMPLOYMENT

SECTION 20. It shall be the duty of the insuiance officers to
carry out the regulations of the insurance commissioners for the
administration of this Act ; to adjudicate in the first instance all
claims for unemployment benefits and refunds ; and in their dis-
cretion to file with the refreee claims for review of decisions and
orders of the arbitration committee with which such insurance
officers do not agree.

SECTION 21. The insurance officers shall have all powers dele-
gated to them by the insurance commissioners for the proper
administration of this Act.

SECTION 22. Inspectors shall have power to —

(a) Enter at all reasonable times any premises or place, other

than a private dwelling-house not a workshop, where
he has reasonable grounds for supposing that insured
workmen are employed.

(b) Make such examinations and inquiry as may be necessary

to ascertain whether the provisions of this Act are
complied with.

missioners may prescribe.

SECTION 23. An inspector may require any workman or employer
subject to this Act to produce all records, books, and other docu-
ments which may reasonably be required for the purposes of the
office of such inspector.

SECTION 24. It shall be the duty of inspectors to investigate the
causes of the refusal of any workman to accept work offered to
him by one of the State employment offices or otherwise ; and to
report their findings to the insurance officer of that divisional
office.

SECTION 25. Where any premises or places liable to be inspected
by inspectors or other officers are under the control of some other
State department, the insurance commissioners may make arrange-
ments with that other State department whereby the officers of such
other department shall perform the duties of inspectors under
this Act.

SECTION 26. Every inspector shall be furnished with the pre-
scribed certificate of his appointment, and on applying for admission
to any premises for the purposes of this Act shall, if so required,
produce the said certificate for examination by the occupier.

PART XIII.

OFFENCES AND PROCEEDINGS TO ENFORCE PAYMENT OF

CONTRIBUTIONS.

SECTION i. If, for the purpose of obtaining any benefit or
payment under this Act, either for himself or for any other person,

INSURANCE AGAINST UNEMPLOYMENT 491

or for the purpose of avoiding any payment to be made by himself,
or enabling any other person to avoid such payment, any person
knowingly makes any false statement or false representation, he
shall be liable to imprisonment for not more than three months,
or to a fine of one hundred dollars, or to both.

SECTION 2. If any employer has failed to pay any contributions
for which he is liable under this Act, or if he neglects or refuses to
comply with any of the requirements of this Act or of the regula-
tions thereunder, he shall for each offence in respect to each
workman be liable to a fine of not more than one hundred dollars :
and also where the offence is failure or neglect to make contribu-
tions under this Act, he shall be liable to pay to the unemployment
fund a sum equal to three times the sum which he has refused or
neglected to pay, which sum when paid shall be treated as a
payment in satisfaction of the contributions which he has so refused
or neglected to pay.

SECTION 3. Any employer who deducts his own contributions
with respect to his workmen from the wages of such workmen,
shall for each offence be liable to a fine of not more than one
hundred dollars, and shall, in addition, forfeit his right to a refund
of contributions under any part of this Act until the end of the
next insurance year.

SECTION 4. If any workman has failed to make contributions
for which he is liable under this Act, or if he or any other person
neglects or refuses to comply with any of the requirements of this
Act or of the regulations thereunder, he shall for each separate
offence forfeit any right to claim or receive benefit during the first
week thereafter when he would ordinarily be entitled to claim
benefit.

SECTION 5. Proceedings under the foregoing sections of this
part may be instituted only by the insurance commissioners and
not later than three months after the offence has been committed.
SECTION 6. Nothing in this part shall prevent the insurance
commissioners from recovering any sums due to the unemployment
fund by means of civil proceedings, and all such sums shall be
recoverable in such proceedings, as debts due to the Commonwealth.
SECTION 7. Any workman who has received unemployment
benefit under this Act while the statutory conditions were not
fulfilled in his case, or while he was disqualified for receiving unem-
ployment benefit, shall be liable to repay to the unemployment
fund any sums so received by him, and the amount may be
recovered as a debt due to the Commonwealth.

SECTION 8. If, in any proceeding under the foregoing sections
ot this part an issue arises with respect to whether the trade in
which the workman is or has been employed is an insured trade,
the decision of the referee appointed under this Act shall be con-
clusive, and if there has been no such decision the question, if

492 INSURANCE AGAINST UNEMPLOYMENT

necessary to the determination of such proceeding, shall be referred
to the referee for the purpose of obtaining a decision.

SECTION 9. If any person wilfully delays or obstructs an
inspector in the exercise of any power granted under this Act, or
fails to give such information or to produce such documents as the
inspector may lawfully require, or conceals, or prevents, or attempts
to prevent any person from appearing before or being examined
by an inspector, he shall, on complaint of inspector, be liable to a
fine not exceeding fifty dollars.

PART XIV.

CONSTITUTIONALITY.

SECTION i. Should any portion of this Act be adjudged uncon-
stitutional, the remaining portions shall, nevertheless, be valid
and of full effect.

SECTION 2. This Act shall take effect upon its passage.*

The Wisconsin Scheme of Unemployment Insurance.

Professor John R. Commons has been largely respon-
sible for the Unemployment Prevention Bill now before
the Wisconsin State Legislature.

It differs fundamentally in its machinery, though
not its underlying idea, from the Bill before the Mas-
sachusetts Legislature.

* The Massachusetts Bill on Unemployment Insurance is the joint
product of the Social Insurance Committee of the American Association
for Labour Legislation and of the Unemployment Insurance Committee
of the Massachusetts Committee on Unemployment. The Social Insur-
ance Committee, consisting of Professor Edward T. Devine, Professor
Henry R. Seager, Dr. I. M. Rubinow, Mr. M. M. Dawson, Mr. J. P. Cham-
berlain, Professor Carrol W. Doten, Dr. S. S. Goldwater, Dr. Henry J.
Harris, Dr. Alexander Lambert, Lilian D. Wald and Dr. John B. Andrews,
developed the tentative draft of a Bill on Unemployment Insurance on
the basis of memoranda prepared by the author of this volume. The
Bill then acted as the basis for discussion for the Massachusetts Committee,
the members of which included the late Mr. Robert G. Valentine, Mr.
Arthur D. Hill, Mr. Huddell, Professor Felix D. Frankfurter, Mr. Ordway
Tead and Miss Olga Halsey, the writer acting as the representative of
tii3 Social Insurance Committee at the meetings of the Massachusetts
Committee. Although the Bill was prepared at the invitation of that
Committee during the crisis of 1914-15, it cannot be regarded in any way
as a panic " measure. Yet there can be little doubt but that in the
course of the discussion to which the proposal ought to be subjected,
not a few amendments will be found to be necessary. Recent British
experience would justify a higher level of benefits.

INSURANCE AGAINST UNEMPLOYMENT 493

The Wisconsin Bill provides that industry must com-
pensate workmen temporarily unemployed, and every
employer must insure the liability for payment of benefits
during unemployment in a mutual insurance company.

The rates of unemployment compensation provided
in the Bill are $1.50 for each working day for males and
females over 18 years and 75 cents for those between
16 and 18 years. The scheme stipulates that not more
than one week's unemployment compensation would
be paid for every four weeks of work, and not more than
thirteen weeks would be payable in any calendar year.

The Bill aims to encourage regularity of employment.
The agencies for carrying the scheme into effect are to
be mutual insurance companies run on a non-profit
basis. These will devise methods for reducing unnecessary
labour turnover. Spasmodic employment of workmen
will be discouraged by a system of premium rates which
will be based upon and vary with the stability of em-
ployment for each establishment.

The author of this Bill has endeavoured to avoid the
objections against a measure on the British model by
exploiting two ideas with which Wisconsin is very
familiar. Compensation for accidents has been long
established and is based on common law rights of the
workman. The inefficiencies of a heavy labour turn-
over are also well known. It is argued that unemploy-
ment will be reduced if the expense of unemployment
insurance be charged against industry just as industrial
incidents have been reduced through the " safety first "
campaigns following the general adoption of workmen's
accident insurance. The Bill embodying these two ideas
is unique, and its progress will be watched with interest.

APPENDIX I

UNEMPLOYMENT INSURANCE
GREAT BRITAIN

SPECIAL SCHEME

THE UNEMPLOYMENT INSURANCE (INSURANCE INDUSTRY SPECIAL
SCHEME) * ORDER, 1921. DRAFT SPECIAL ORDER DATED
, 1921, MADE BY THE MINISTER OF LABOUR
UNDER THE UNEMPLOYMENT INSURANCE ACT, 1920 (lO AND
ii GEO. 5, c. 30).

WHEREAS the Minister of Labour (hereinafter referred to as " the
Minister ") has determined the classes of undertakings specified

n sub-clause (2) of clause three of the Special Scheme set forth

n the Schedule hereto to be the Insurance Industry for the purposes
of section eighteen of the Unemployment Insurance Act, 1920

hereinafter referred to as " the Act ") ;

And Whereas the said Special Scheme has been made by an
Association of employers and employees so constituted that the
members of the Association who are employers consist of persons
employing a substantial majority of the employees in the said

ndustry and the members who are employees consist of persons
representing a substantial majority of the employees in the said
Industry ;

And Whereas the said Special Scheme provides for the insurance
against unemployment of all the employed persons in the Industry
other than the classes specified in the said Special Scheme and the
benefits under the said Special Scheme are in the opinion of the
Minister not less favourable on the whole than the benefits provided
by the Act;

* As this is the first scheme under Section 18, it is likely to become the
model for future schemes, and is therefore published in detail. Unfortu-
nately, power to make special schemes has been suspended during " the
deficiency period." It is not clear from Section 5, Unemployment Insur-
ance No. 2 Act, 1921, whether this scheme for the Insurance Industry will
be put into operation for some time. Sanction for the Printers' Industrial
Maintenance Scheme has been refused.

495

496 INSURANCE AGAINST UNEMPLOYMENT

And Whereas it appears to the Minister that insurance against
unemployment in the said Industry can be more satisfactorily
provided for by a scheme under section eighteen of the Act than
by the general provisions of the Act ;

Now Therefore the Minister by virtue of the powers conferred
on him by section eighteen of the Act and of all other powers
enabling him in that behalf hereby makes the following Special
Order :—

(1) The Minister hereby approves the Special Scheme set

forth in the Schedule hereto.

(2) This Order may be cited as the Unemployment Insurance

(Insurance Industry Special Scheme) Order, 1921.

Signed by Order of the Minister of Labour this
day of , 1921.

Secretary of the Ministry of Labour.

SCHEDULE.

THE INSURANCE INDUSTRY UNEMPLOYMENT
INSURANCE SCHEME.

NAME.

1. This Special Scheme (hereinafter referred to as " the Scheme ")
shall be called " The Insurance Industry Unemployment Insurance
Scheme."

OFFICE.

2. The principal office of the body charged with the administra-
tion of the Scheme shall be situate in London or at such other
place in the United Kingdom as such body shall from time to time
determine.

SCOPE OF SCHEME.

3. (i) Subject to the provisions of the Scheme and to any
regulations made by the Minister under section 19 of the Unem-
ployment Insurance Act, 1920 (hereinafter referred to as " the Act ")
the Scheme shall apply in manner provided by section 18 of the
Act to all employed persons engaged in the insurance industry
and such persons shall be insured against unemployment in manner
hereby provided.

(2) For the purposes of the Scheme the expression " employed
persons " shall have the same meaning as in the Act as amended

INSURANCE AGAINST UNEMPLOYMENT 497

by any subsequent enactment and the following classes of under-
takings shall constitute the insurance industry (that is to say) : —

(a) The insurance undertakings of all persons or bodies of

persons whether corporate or unincorporate and whether
established within or without the United Kingdom
engaged in the United Kingdom in the granting of
insurances under contract.

(b) The insurance undertakings of all persons or bodies of

persons whether corporate or unincorporate engaged in
the United Kingdom in the administration of any system
of insurance established by Act of Parliament.

(3) Provided that the Scheme shall not apply to the following
classes of persons (that is to say) : —

(a) Persons exclusively engaged in the cleansing repairing or

maintenance of premises or buildings or as messengers
or as housekeepers or as members of housekeepers'
staffs or otherwise in manual labour unless such persons
are in the exclusive employment of an employer carrying
on an undertaking comprised in the insurance industry
and are employed for the purposes of such undertaking ;

(b) Persons in the employment of any person or body of persons

carrying on in addition to an undertaking comprised
in the insurance industry some other undertaking unless
such employment is exclusively for the purposes of the
first mentioned undertaking ;

(d} Persons in the employment of Insurance Committees
established under the National Insurance Acts 1911
to 1920.

(4) Where any employed person to whom the Scheme applies
is the holder of a certificate of exemption granted under section 3
of the Act or of a certificate which under the provisions of sub-
section (2) of that section and any regulations made thereunder
for the time being in force is equivalent to such certificate of
exemption such person (hereinafter referred to as " an exempt
person ") shall not while such certificate of exemption or equivalent
certificate is in force be insured under the Scheme.

BODY CHARGED WITH THE ADMINISTRATION OF THE SCHEME.

4. (i) The body charged with the administration of the Scheme
shall be a Joint Board of Management (hereinafter referred to as
" the Joint Board ").

(2) The Joint Board shall consist of ten members five of whom
shall be representatives of the employed persons to whom the

498 INSURANCE AGAINST UNEMPLOYMENT

Scheme applies and five of whom shall be representatives of the
employers in the insurance industry.

(3) The members for the time being of the Joint Board shall
be a body corporate by the name of The Incorporated Insurance
Industry Unemployment Insurance Board and shall have perpetual
succession and a common seal and may hold land for the purposes
of their powers and duties without any licence in mortmain.

(4) The original members of the Joint Board shall be the persons
who at any time prior to the date on which the Scheme comes into
force shall have been elected to such membership as to five of
such original members by the employers' representatives upon
the Joint Committee of Employers and Employees for the Insurance
Industry by whom the Scheme has been made and as to the
remainder of such original members by the employees' representa-
tives upon such Joint Committee.

(5) Members of the Joint Board shall hold office for two years
except that three original employers' representatives and two
original employees' representatives shall respectively be selected
by lot to vacate office on the thirtieth day of June 1922 and the
remainder of the original members of the Joint Board shall vacate
office on the thirtieth day of June 1923.

(6) The places of all retiring members of the Joint Board shall
be filled by appointments made before the first day of July in each
year in accordance with arrangements to be made by the Joint
Board and approved by the Minister of Labour (hereinafter called
" the Minister ") and failing appointment in such manner as
aforesaid by the Minister.

(7) Retiring members of the Joint Board shall be eligible for
reappointment.

(8) Casual vacancies on the Joint Board shall be filled in the
same manner as the places of retiring members and any person
appointed to fill a casual vacancy shall serve for the unexpired
period which would have been served by the member replaced.

(9) A member of the Joint Board shall vacate office if such
member —

(a) becomes bankrupt,

(b) is found lunatic or becomes of unsound mind,

(d) is removed by the Minister pursuant to the request in

writing of all the other members of the Joint Board
for the time being.

(10) The Joint Board shall elect their own Chairman and Deputy
Chairman.

(n) The quorum necessary for the transaction of the business
of the Joint Board shall be five.

INSURANCE AGAINST UNEMPLOYMENT 499

(12) The common seal of the Joint Board shall not be affixed
to any instrument except by the authority of a resolution of the
Joint Board and in the presence of at least three members and of
the secretary or such other person as the Joint Board may appoint
for the purpose and the members present and the secretary or
other person as aforesaid shall sign every instrument to which
the common seal is so affixed in their presence.

(13) The pov/ers and duties of the Joint Board shall be : —

(a) To control and administer the affairs of the Scheme.

(b) To make provision for the working expenses of the Scheme.

their business.

(d) To keep proper records of their proceedings.

(e) To appoint an actuary, secretary, and such other officers

and servants as may be necessary to carry out the
provisions of the Scheme, to prescribe their duties, and
fix their remuneration.

(/) To appoint such committees consisting of members of
their own body as they may consider desirable and subject
to the provisions of the Scheme and to any directions
from time to time given by the Minister to delegate to
such committees any powers and duties they may
think fit.

(g) Subject to the approval of the Minister to make rules for
any of the purposes for which rules may be made under
the Scheme for prescribing anything which under the
Scheme is to be prescribed and generally for carrying
the Scheme into effect.

(14) Rules made by the Joint Board under the Scheme shall if
approved by the Minister have effect as if enacted in the Scheme
and may apply with or without modification any of the regulations
made by the Minister under the general provisions of the Act.

(15) Impressions of the common seal of the Joint Board shall
be judicially noticed and admitted in evidence.

(16) Primd facie evidence of any rule made by the Joint Board
under the Scheme and of the Minister's approval thereof may be
given by the production of a copy or copies of the rule and of the

nstrument or writing containing the Minister's approval purporting
to be sealed with the common seal of the Joint Board.

(17) The Joint Board shall in exercising their powers and in
carrying out their duties under the Scheme give effect to any
general directions which from time to time may be given by the
Minister after consultation with the Joint Board.

(18) A yearly sum not exceeding six hundred pounds or such
other sum as the Minister may from time to time allow shall

500 INSURANCE AGAINST UNEMPLOYMENT

be provided as part of the working expenses of the Scheme for
the purpose of paying the reasonable expenses of members of the
Joint Board incurred in attending its meetings, the balance of the
said sum after providing for the said expenses being divisible among
the members in such manner and in such proportions as the Joint
Board shall from time to time determine.

(19) If the Minister shall at any time be satisfied that it has
become impracticable for the affairs of the Scheme to continue to
be administered by the Joint Board or that the affairs of the Scheme
are being administered in a manner prejudicial to the interests
of persons engaged in the insurance industry the Minister may
provide in such manner as he shall think fit for the temporary
administration of the affairs of the Scheme, and may for that
purpose empower any person or persons selected by him to exercise
any of the powers or carry out any of the duties of the Joint Board
hereunder.

CONTRIBUTIONS.

5. (i) The funds required for providing the out-of-work benefit
payable under the Scheme and for making any other payments
which under the Scheme are to be made out of the joint insurance
fund established under the Scheme shall be derived partly from
contributions by the employers of the employed persons to whom
the Scheme applies (hereinafter referred to as " the included
employers ") partly from the grant payable to the Joint Board
out of moneys provided by Parliament under the provisions of
sub-section (7) of section 18 of the Act as amended by any sub-
sequent enactment and the regulations made under such sub-section
and any moneys payable to the Joint Board under sub-section (10)
of such last mentioned section as amended as aforesaid and subject
to the provisions of the Scheme partly from contributions by
employed persons to whom the Scheme applies.

(2) Subject to the provisions of the Scheme every included
employer shall be liable to pay contributions at the rates specified
in Part I of the First Schedule hereto.

(3) No contributions shall be payable by employed persons to
whom the Scheme applies unless the payment of such contributions
and the rates at which such payment is to be made shall be pre-
scribed in manner hereinafter provided.

(4) The provisions of sub-sections (4), (5) and (6) and the first
paragraph of sub-section (7) of section 5 of the Act and the rules
set out in the Fourth Schedule thereto shall apply for the purposes
of the Scheme but the operation of such of the same provisions
and rules as relate to contributions by employed persons and the
recovery of contributions paid by employers on behalf of employed
persons shall be suspended until the payment of such contributions
is prescribed under the Scheme.

INSURANCE AGAINST UNEMPLOYMENT 501

(5) The rules set out in Part II of the First Schedule hereto
and any further rules in the same behalf from time to time made
by the Joint Board either in addition to or in substitution for
such first mentioned rules shall have effect with regard to the
payment of contributions the rendering of returns and the other
matters therein provided for.

OUT-OF-WORK BENEFIT.

6. Every person who being insured under the Scheme is unem-
ployed and who satisfies the conditions and is free from the disquali-
fications hereinafter laid down shall be entitled subject to the
provisions of the Scheme to benefit (hereinafter referred to as
" out-of-work benefit ") at weekly or other prescribed intervals
at such rates and for such periods as are authorized under the
Second Schedule hereto.

7. (i) The conditions for the receipt of out-of-work benefit by
a person insured under the Scheme shall be the conditions mentioned
in relation to unemployment benefit in section 7 of the Act which
section shall apply for the purposes of the Scheme.

(2) The disqualifications for the receipt of out-of-work benefit
shall be the disqualifications mentioned in section 8 of the Act,
which section shall apply for the purposes of the Scheme.

(3) In calculating the twelve contributions mentioned in sub-
section (i) (i) of section 7 of the Act and in sub-section (4) of
section 8 of the Act a person insured under the Scheme shall be
entitled to take into account contributions with which he is entitled
to be credited under the rules contained in Part II of the First
Schedule hereto.

(4) The provisions of section 9 of the Act shall apply for the
purposes of the Scheme.

(5) Provided that during the special periods mentioned in the
Unemployment Insurance Act, 1921, a person insured under the
Scheme who (a) is normally in employment such as would make
him an employed person to whom the Scheme applies ; (b) is
genuinely seeking whole time employment but unable to obtain
such employment ; (c) has been engaged at any time in each of
not less than twenty separate calendar weeks since the thirty-first
day of December 1919 in any employment which made him or
which would if the Scheme had been in force since that day have
made him an employed person to whom the Scheme applies, and
(d) has not at any time held a certificate of exemption under
section 3 of the Act shall notwithstanding the condition mentioned
in sub-section (i) (i) of section 7 of the Act as applied for the
purposes of the Scheme has not been fulfilled in his case and not-
withstanding sub-section (4) of section 8 of the Act and the pro-
visions of the Second Schedule hereto as to proportion of benefit

502 INSURANCE AGAINST UNEMPLOYMENT

to contributions but subject to the other provisions of the Scheme
be entitled to receive in each of the said special periods out-of-work
benefit for periods not exceeding in the aggregate in each of such
special periods sixteen weeks and for the purpose of qualifying
any person to receive benefit up to the aggregate amounts aforesaid
within each of the said special periods but for no other purpose
there shall be treated as having been paid in respect of him such
number of contributions as are sufficient to qualify him as
aforesaid.

(6) In the application of the last preceding sub-clause to persons
formerly engaged in war service within the meaning of the Unem-
ployment Insurance Act, 1921, a period of not less than ten separate
calendar weeks shall be substituted for a period of twenty such
weeks and if in any particular case a person who has been engaged
in war service satisfies the Joint Board that his failure to be
employed for the period required by this sub-clause was in con-
sequence of the present war and due to circumstances not within
his own control or in the case of a disabled person within the
meaning of the last-mentioned Act was due to his disablement
that person may if the Joint Board so determine be treated for
the purposes of this sub-clause as though he had been engaged
for the period aforesaid in such employment as aforesaid notwith-
standing he has not in fact been so engaged.

(7) If any question arises under either of the two preceding
sub-clauses such question shall be determined by the Minister
whose decision shall be final.

DETERMINATION OF QUESTIONS, CLAIMS, ETC.

8. The provisions of section 10 of the Act shall apply for the
purposes of the Scheme.

9. (i) Every employer of an employed person including an
exempt person to whom the Scheme applies shall upon the ter-
mination of his employment deliver to him a certificate (hereinafter
called a " prescribed certificate ") in such form as shall be pre-
scribed signed by or on behalf of the employer and stating : —

(i) The name age and sex of such employed person
(ii) the dates of the commencement and termination of his

employment
(iii) whether he is or is not an exempt person, and

such other particulars as shall be prescribed.

(2) Every unemployed person insured under the Scheme who
shall upon his applying for out-of-work benefit

(i) present to the Joint Board or their duly authorized repre-
sentative one or more prescribed certificates

INSURANCE AGAINST UNEMPLOYMENT 503

(ii) make a declaration in the prescribed form that he is
unemployed and that he satisfies the conditions and is
free from the disqualifications hereby laid down for
the receipt of out-of-work benefit

(iii) repeat such declaration whenever called upon so to do
by the Joint Board or their duly authorized repre-
sentative and

(iv) comply with such rules made by the Joint Board relating
to applications for out-of-work benefit as are for the
time being in force

shall subject to any question arising to suspend the payment of
benefit receive out-of-work benefit out of the joint insurance fund
hereby constituted to such extent as he shall according to such
certificate or certificates and the records and accounts of the Joint
Board appear to be entitled.

(3) If any question arises whether the said conditions are ful-
filled in the case of any person claiming benefit or whether such
conditions continue to be fulfilled in the case of a person in receipt
of benefit or whether a person is disqualified for receiving or con-
tinuing to receive such benefit or whether the period for which
a person insured under the Scheme who has lost his employment
through his misconduct or has voluntarily left his employment
without just cause is to be disqualified should be some period less
than six weeks or as to the correctness of any prescribed certificate
(including any question as to whether the person claiming benefit
is or is not entitled to benefit to a greater extent than he appears
to be according to any certificate) or as to any matter of account
or otherwise in connection with a claim to benefit such question
shall be determined by the Joint Board and pending such deter-
mination benefit shall not be paid except to such an extent (if any)
as the claim to the same is undisputed.

(4) The Joint Board shall forthwith take into consideration
any claim or question submitted for their determination under
the preceding sub-clause and shall so far as practicable give their
decision thereon within fourteen days from the date on which the
claim or question was so submitted and upon such decision being
given payment of benefit shall be made or disallowed in accordance
therewith.

(5) The Joint Board may in any case where in their opinion
the circumstances so require direct payment of out-of-work benefit
without any prescribed certificate having been delivered to them
or their representative and upon such other evidence of the claimant's
rights as they may deem sufficient.

(6) Any prescribed certificate presented under the foregoing
provisions shall be retained by the Joint Board or their duly
authorized representatives until the person presenting the same

504 INSURANCE AGAINST UNEMPLOYMENT

has for the time being ceased to receive out-of-work benefit when
it shall be returned to such person with an endorsement in the
prescribed form of particulars of all payments of out-of-work benefit
that have been made to him.

(7) In any case where the person claiming out-of-work benefit
or any association of employed persons of which he is a member
is dissatisfied with any decision of the Joint Board given under
the provisions of this clause such person or association may at
any time within twenty-one days from the day on which such
decision is communicated to such person or within such further time
as the Minister may in any particular case for special reasons allow
and the Minister if in any case he shall be of opinion that any
such decision of the Joint Board as aforesaid involves some point
of general importance may at any time require the Joint Board
to refer the question in dispute to the umpire or deputy umpire
appointed under the Act whose decision in the matter shall be
final and conclusive.

(8) The Joint Board and notwithstanding the provisions of the
last preceding sub-clause the umpire or deputy umpire appointed
under the Act may on new facts being brought to their or his
knowledge revise a decision given in any particular case and where
any such revision is made the revised decision shall have effect
as if it had been an original decision and as such subject to revision
under this sub-clause but without prejudice to the retention of
any benefit which may have been received under the decision
which has been revised.

(9) The Minister may give such directions as he shall think fit
with regard to the conduct of references to the umpire or deputy
umpire under the provisions of this clause.

(10) Rules shall be made by the Joint Board

(i) for prescribing the evidence to be required in addition
to such declarations as are provided for under this
clause as to the fulfilment of the conditions and the
absence of the disqualifications for receiving or con-
tinuing to receive out-of-work benefit, and for that
purpose requiring the attendance of persons insured
under the Scheme at such offices or places and at such
times as may be required and, so far as may be neces-
sary, requiring employers to answer inquiries relating
to any matters on which the fulfilment of the conditions
or the absence of the disqualifications depends ;

(ii) for prescribing the manner in which claims lor out-of-
work benefit may be made and the procedure to be
followed on the consideration and examination of
claims and questions to be considered and determined
by the Joint Board, and the mode in which any question

INSURANCE AGAINST UNEMPLOYMENT 505

may be raised as to the continuance, in the case of a
person in receipt of out-of-work benefit, of the benefit;
and

(iii) with respect to the payment of contributions and benefits
during any period intervening between any application
for the determination of any question or any claim
for benefit and the final determination of the question
or claim.

(IT) The provisions of sub-sections (9) and (10) of section n of
the Act shall apply to proceedings under the Scheme.

NOTIFICATION OF VACANCIES, ETC.

10. (i) The Joint Board shall establish such a system of obtaining
from employers carrying on undertakings comprised in the insurance
industry notification of vacancies for employment and giving notice
thereof to employed persons to whom the Scheme applies when
unemployed as is in the opinion of the Minister reasonably effective
for securing that unemployed persons competent to undertake
the particular class of work required shall with all practicable
speed be brought into communication with employers having
vacancies to fill.

(2) The Joint Board shall make such rules as may be necessary
for the purpose of giving effect to the provisions of the last pre-
ceding sub-clause and such rules may provide that employers
carrying on undertakings comprised in the insurance industry
shall notify in the prescribed manner all suitable vacancies upon
the staffs of their respective undertakings.

(3) The Joint Board may enter into any mutual or other arrange-
ment with any person body of persons or Government department
whose business functions or powers admit of such an arrangement
with a view to the prompt re-employment of unemployed persons
insured under the Act.

FINANCIAL PROVISIONS.

11. (i) For the purposes of the Scheme there shall be established
under the control and management of the Joint Board a fund
called the joint insurance fund into which shall be paid all con-
tributions payable under the Scheme by employers (including
contributions for the purpose of restoring the solvency of the
fund) and employed persons the grant payable out of moneys
provided by Parliament and any moneys payable to the Joint
Board under the provisions of sub-section (10) of section 18 of
the Act as amended by any subsequent enactment and out of
which shall be made all payments in respect of out-of-work benefit
and subject to the provisions of the Scheme in respect of the
working expenses of the Scheme and any other payments which

506 INSURANCE AGAINST UNEMPLOYMENT

under the Scheme or the rules made thereunder are to be made
out of the fund.

(2) The Joint Board shall pay out of the joint insurance fund to the
aforesaid Joint Committee by whom the Scheme is made such a
sum as the Minister may allow in respect of the costs and expenses
of such Joint Committee of and incidental to the preparation and
making of the Scheme and of the submission thereof to the Minister
for his approval.

(3) If the Minister shall with reference to any period direct
that the working expenses of the Scheme during such period shall
not be in excess of a sum which is a particular proportion of the
aggregate of the sums which during the same period are payable
into the joint insurance fund in respect of contributions by
employers and employed persons (exclusive of any contributions
by employers for restoring the solvency of the fund) it shall not
be lawful during such period to make any payment out of the
joint insurance fund in respect of working expenses which shall be
in excess of such first mentioned sum.

(4) The Joint Board may by rules under the Scheme provide
for the payment out of the joint insurance fund as part of the
working expenses of the Scheme of the travelling and other expenses
(including loss of remunerative time) of any person attending the
Joint Board or umpire or deputy umpire appointed under the Act
upon the consideration of any question which under the provisions
of the Scheme is to be determined by them or him.

(5) The Joint Board may from time to time open banking
accounts with such bank or banks as they may select and such
accounts shall be operated on by such members and officers of the
Joint Board authorized in that behalf by the Joint Board and
under such conditions as the Joint Board shall from time to time
prescribe.

(6) Any moneys forming part of the joint insurance fund may
from time to time be invested in the name of the Joint Board
upon and in any securities and investments for the time being
authorized by law for the investment of trust funds.

(7) The Joint Board may for the purpose of meeting temporary
deficiencies or otherwise for the purposes of the Scheme with the
consent of the Minister borrow money on such terms and from
such persons or banks as they may think fit and may with the
like consent secure money borrowed upon the joint insurance fund
or any of its assets in such manner as they may deem expedient.

(8) (a) The Joint Board shall cause full and accurate accounts

to be kept in such form as the Minister shall approve
of all moneys paid into and out of the joint insurance
fund of the matters to which the receipts and expen-
diture relate and of the assets and liabilities of the

INSURANCE AGAINST UNEMPLOYMENT 507

joint insurance fund and such accounts shall be audited
by an auditor appointed by the Joint Board and
approved by the Minister.

(b) The accounts of the Joint Board shall show separately

the respective amounts of contributions paid under
the Scheme in respect of men, women, boys, and girls
respectively.

in such form and at such times as he may require.

(d) The Joint Board shall comply with any directions from

time to time given to them by the Minister as to the
publication of their accounts and auditors' reports
thereon.

(e) The Minister may at any time direct such further or

special examination of the accounts of the Joint Board
to be held as he may think necessary.

12. (i) If at any time and from time to time before the
xpiration of seven years from the date on which the Scheme
comes into force the joint insurance fund shall become insolvent
the employers of all persons who at the time of the happening
of any such insolvency or at any time previously are or have been
nsured under the Scheme shall be liable to make good to the
oint insurance fund such a sum as will restore its solvency upon
the basis of each of such employers contributing for that purpose
rateably according to the aggregate amount of the contributions
paid by him under the Scheme whether on his own behalf or on
behalf of employed persons during the period which has elapsed
n the case of a first insolvency between the date when the Scheme
3ame into force and such insolvency and in case of a subsequent
insolvency between the date of the last preceding insolvency and
such subsequent insolvency.

(2) (a) The amount of the contribution due from each employer

liable to contribute for the purpose of restoring the
solvency of the joint insurance fund shall be determined
by the Joint Board and shall be paid by such employer
to the Joint Board at their principal office at such time
as they may direct.

(b) An assessment made in the prescribed manner upon
any employer liable to contribute as aforesaid shall
be primd facie evidence that the sum assessed is due
and owing from such employer.

(3) If any question arises as to whether the joint insurance
und is solvent or insolvent or as to the amount required to restore
ts solvency or as to the proportion of such amount which any
mployer is liable to contribute or as to the date or dates on

508 INSURANCE AGAINST UNEMPLOYMENT

which the joint insurance fund has become insolvent or otherwise
in relation to the matters provided for by the preceding sub-clauses
of this clause such question shall be determined by the Minister
whose decision shall be final and conclusive.

(4) The Joint Board shall cause such special accounts audits
and valuations to be taken held and made for the purposes of
this clause as they may deem expedient or as the Minister may
direct.

13. (i) If it appears to the Minister at any time and from time
to time after the expiration of seven years from the date on which
the Scheme comes into force that the joint insurance fund is in
all the circumstances of the case in danger of becoming insolvent
the Joint Board shall if the Minister so directs prescribe such one
or more of the following things as will in the opinion of the Minister
after consultation with the Joint Board be sufficient on the whole
to secure the solvency of the joint insurance fund (that is to say) : —

(a) The payment of contributions under the Scheme by
employed persons to whom the Scheme applies at such
rates as shall be determined by the Joint Board with
the approval of the Minister ;

(6) The temporary modification to such extent as the Joint
Board shall with the approval of the Minister deem
expedient of any of the rates of contribution for the
time being in force under the Scheme ;

(c) The temporary modification to the like extent and with
the like approval of any of the provisions contained in
the second Schedule hereto.

(2) Provided that nothing shall be prescribed under the pro-
visions of this clause which will

(a) Impose or increase contributions or diminish benefit except

to such extent as will in the opinion of the Minister
after consultation with the Joint Board be sufficient
on the whole to secure the solvency of the joint insurance
fund ;

(b) Reduce any weekly rate of out-of-work benefit below a sum

exceeding by two shillings in the case of men and
women and by one shilling in the case of boys and girls
the corresponding weekly rate of unemployment benefit
for the time being in force under the general provisions
of the Act as amended by any subsequent enactment ;

at a weekly rate exceeding one half of the corresponding
rate for the time being in force under the general pro-
visions of the Act as amended as aforesaid ; or

(d) Impose contributions upon any exempt person,

INSURANCE AGAINST UNEMPLOYMENT 509

(3) For the purposes of the last preceding sub-clause rates of
jnefit and contribution under the general provisions of the Act
amended as aforesaid and the Scheme respectively shall be
leemed corresponding rates when applicable in the case of persons
|of the same age and sex.

14. (i) At the expiration of seven years from the date on
[which the Scheme comes into force and at the expiration also of
every subsequent period of seven years or at such other times
as the Joint Board may prescribe or the Minister direct the Joint
Board shall cause a valuation of the assets and liabilities of the
joint insurance fund to be made by an actuary approved by the
! Minister.

(2) If it appears to the Joint Board or to the Minister upon
any such valuation that the joint insurance fund is insufficient
or more than sufficient after providing for such reserves as the
Joint Board after consultation with the actuary making such
valuation shall think proper to discharge the liabilities imposed
thereon the Joint Board may with the consent of the Minister
and shall if the Minister so requires prescribe such of the following
things as circumstances may require (that is to say) : —

(a) In the event of there appearing to be a surplus on such

valuation after providing for such reserves as aforesaid
the application in any manner of such surplus or of
any part thereof for the benefit of persons insured or
to become insured under the Scheme and either by
way of increase of out-of-work benefit either in duration
or amount or of reduction of contributions payable by
employed persons or otherwise.

(b) In the event of there appearing to be a deficiency on such

valuation and for the purpose of making provision for
such deficiency

(i) the revision of the rates of contribution by
employers and employed persons for the time
being in force under the Scheme;

(ii) the revision of any of the provisions contained
in the Second Schedule hereto including any
modifications of such provisions for the time
being in force ;

(iii) the payment of contributions under the Scheme
by employed persons to whom the Scheme
applies at such rates as shall be determined
by the Joint Board.

Provided that

(a) the provisions of sub-clauses (2) and (3) of clause 13
shall apply to anything prescribed under the

510 INSURANCE AGAINST UNEMPLOYMENT

provisions of this clause with the substitution
of the words " provide for such deficiency " for
the words " secure the solvency of the joint
insurance fund."

(b) Subject to such last-mentioned provisions the
revision of contributions and the imposition
of contributions upon employed persons under
the provisions of this clause shall proceed upon
the basis and shall be so connected that after
deducting from the amount at the revised rate
of any employer's weekly contribution in respect
of any employed person the sum of 4d. in the
case of men and boys and the sum of 3^d.
in the case of women and girls the remainder
shall be a sum equal to the amount of such
employed person's weekly contribution at the
revised or newly imposed rate.

DETERMINATION OF SCHEME.

15. (i) II at any time the Joint Board shall for any reason
with the consent of the Minister pass a resolution for the winding
up of the Scheme the Scheme shall be wound up in such manner
as the Minister may direct.

(2) When the affairs of the Scheme have been completely
wound up the Minister shall make an order that the Scheme be
determined and the Scheme shall be determined accordingly.

(3) A resolution to wind up the Scheme shall not be valid unless
one calendar month's notice of the meeting of the Joint Board
at which the winding up resolution is passed and of the terms of
such resolution has been given to the Minister by the Joint
Board.

(4) The Minister may if in his opinion circumstances so require
provide by special order for the determination of the Scheme and
any matters incidental thereto.

(5) The expression " special order " shall have the same meaning
as in section 36 of the Act and that section, section 37 of the Act,
and the provisions of the Sixth Schedule thereto shall apply for
the purposes of the Scheme.

STATISTICS OF UNEMPLOYMENT.

1 6. The Joint Board shall cause statistics of unemployment
arising among employed persons to whom the Scheme applies to
be kept in such manner as the Minister may require and shall
furnish to the Minister periodical returns relating to such unem-
ployment in accordance with any regulations made under section 2 1
of the Act for the time being in force.

INSURANCE AGAINST UNEMPLOYMENT 511

LEGAL PROCEEDINGS.

17. The provisions of section 22 of the Act shall apply for the
purposes of the Scheme except sub-section (6) thereof for which
sub-section the following provisions shall be substituted :

" Nothing in this section shall be construed as preventing
" the recovery of any sum due to the joint insurance fund
" by means of civil proceedings and any such sum shall be
" a debt due to the Joint Board and without prejudice to
" any other remedy recoverable summarily as a civil debt."

1 8. (i) Proceedings for an offence under the Scheme shall not
be instituted except by or with the consent of the Minister or by
an inspector or other officer of the Joint Board authorized in that
behalf by the Joint Board or in Scotland except by the Minister or
the procurator-fiscal.

(2) The provisions of sub-sections (2) and (3) of section 23 of the
Act shall apply for the purposes of the Scheme.

19. The provisions of section 24 of the Act shall apply for the
purposes of the Scheme.

MISCELLANEOUS.

20. The provisions of section 26 of the Act shall apply for the
purposes of the Scheme.

21. The provisions of sub-section (i) of section 28 of the Act
shall apply for the purposes of the Scheme.

22. Inspectors for the purposes of the Scheme may be appointed
by the Joint Board and the provisions of section 29 of the Act
shall apply to such Inspectors.

Provided that nothing contained in such section shall authorize
any inspector appointed under the Scheme to enter any premises
or places other than any premises or places in the occupation of
employers carrying on undertakings comprised in the insurance
industry.

23. (i) Where any person to whom an advance on account of
the expenses of travelling to a place where employment has been
found for him has been made under sub-section (i) of section 2
of the Labour Exchanges Act 1909 is a person insured under the
Scheme who would in the opinion of the Joint Board be entitled
to receive or to continue to receive out-of-work benefit if he became
or remained unemployed the Joint Board may repay out of the
joint insurance fund to the fund out of which the advance was
made such part of the advance as may with the consent of the
Minister be prescribed but if the person to whom the advance was
made fails without reasonable excuse to enter on the employment
found for him the sum so repaid out of the joint insurance fund
may be recovered from him or deducted from any out-of-work

512 INSURANCE AGAINST UNEMPLOYMENT

benefit which may thereafter become payable to him and if so
recovered shall be paid into the joint insurance fund.

(2) The Joint Board may provide by rules made by them for the
payment out of the joint insurance fund of a prescribed proportion
of the expenses of travelling to a place where employment has been
found for him of any person insured under the Scheme.

24. The provisions of section 32 of the Act shall apply for the
purposes of the Scheme.

INTERPRETATION, ETC.

25. (i) The provisions of sub-section (i) of section 47 of the Act
as amended by the Unemployment Insurance Act 1921 shall apply
for the purposes of the Scheme.

(2) The Interpretation Act 1889 shall apply in the construction
of the Scheme in like manner as it applies in the construction of Acts
of Parliament.

26. (i) In construing the general provisions of the Act which
under the foregoing clauses hereof are to apply for the purposes
of the Scheme references to (a) regulations under the Act except
in sub-section (i) (v) of section 7 (b) contributions rates of con-
tribution and payments under the Act (c) a person or persons
insured or liable to be insured under the Act (d) unemployment
benefit or benefits conferred by the Act (e) proceedings under the
Act (/) requirements of the Act (g) the unemployment fund
(h) offences under the Act and (i) special orders under the Act shall
be read and construed as referring to (a) rules under the Scheme
(b) contributions rates of contribution and payments under the
Scheme (c) a person or persons insured or liable to be insured
under the Scheme (d) out-of-work benefit or benefits conferred
by the Scheme (e) proceedings under the Scheme (/) requirements
of the Scheme (g) the joint insurance fund (h) offences under the
Scheme and (i) special orders under the Scheme respectively.

(2) In addition to such modifications of the aforesaid general
provisions as are provided for by the foregoing clauses of the Scheme
the modifications of the same provisions specified in the Third
Schedule hereto shall have effect.

27. Where by any special order varying or amending the pro-
visions of the Scheme any clauses sub-clauses paragraphs or words
are directed to be added to or omitted from the Scheme or to be
substituted for any other clauses sub-clauses paragraphs or words
therein, then copies of the Scheme printed under the authority
of His Majesty's Stationery Office after such direction takes effect
shall be printed with the clauses sub-clauses paragraphs or words
so added omitted or substituted and the clauses sub-clauses and
paragraphs thereof numbered in accordance with such direction,
and the Scheme shall be construed as if it had at the time at which

INSURANCE AGAINST UNEMPLOYMENT 51 a

such direction takes effect or at such other time as may be directed
by the special order been made with such addition omission or
substitution.

28. The Scheme shall come into force on the fourth day of
July 1921.

FIRST SCHEDULE.

PART I.
RATES OF CONTRIBUTION BY EMPLOYERS.

For each week : —

In the case of men and boys — 4d. or such other weekly rate of
contribution by employers as shall for the time being be in force
under the general provisions of the Act as amended by any sub-
sequent enactment in the case of men.

In the case of women and girls — 3|d. or such other weekly rate
of contribution by employers as shall for the time being be in force
under the general provisions of the Act as amended by any
subsequent enactment in the case of women.

PART II.
RULES.

1. All contributions payable by employers under the Scheme
whether on their own behalf or on behalf of employed persons
including contributions payable in respect of exempt persons shall
be paid to the Joint Board at their principal office by quarterly
payments in advance upon the usual quarter days.

2. The amount of each quarterly payment to be made by any
employer shall be a sum equal to the aggregate of the amounts
which such employer would be liable to pay under the Scheme in
respect of the quarter commencing on the day on which payment
is due if such quarter consisted of a number of complete calendar
weeks (which expression shall in this Schedule have the same
meaning as in the Fourth Schedule to the Act) equal to the number
of Sundays occurring therein and if all employed persons to whom
the Scheme applies including exempt persons in the employment
of such employer at any time on the day on which payment is
due continued in the same employment and under the same
liability to be or with the like exemption against being insured
against unemployment during the whole of the ensuing quarter.

3. A quarterly payment made in accordance with the foregoing
rules shall satisfy the liability under the Scheme of the employer
making the same in respect of the quarter commencing on the
day on which payment is due notwithstanding changes during

514 INSURANCE AGAINST UNEMPLOYMENT

such quarter in the number or personnel of such employer's staff
or in the status of any member thereof as regards insurance against
unemployment.

4. Every employer liable to pay contributions under the Scheme
shall from time to time render to the Joint Board returns of all
employed persons to whom the Scheme applies including exempt
persons in the service of such employer on any day which may
be prescribed generally for the insurance industry or for any
particular employer or class of employers carrying on an undertaking
or undertakings comprised in the insurance industry.

5. Returns rendered under the preceding rule shall state

(i) the name age and sex of each employed person included

therein and whether he is or is not an exempt person

(ii) the date of the commencement of his service where

such service commenced after the commencement

of the Act

and such further particulars as the Joint Board shall prescribe.

6. Every employer liable to pay contributions under the Scheme
shall upon the occasion of any employed person to whom the
Scheme applies including an exempt person entering or leaving
the service of such employer or while in the service of such employer
dying or ceasing to be a person to whom the Scheme applies or
becoming an exempt person and upon the occasion also of any
person in the service of such employer becoming liable to be
insured against unemployment under the Scheme either by reason
of his ceasing to be an exempt person or otherwise notify the
occurrence to the Joint Board at their principal office in such
manner as they shall require.

7. No employer shall in any event become entitled to the return
of any part of any quarterly payment made by such employer
under the foregoing rules.

8. An employed person to whom the Scheme applies including
an exempt person continuing in the service of the same employer
throughout an entire quarter shall be entitled to have all con-
tributions actually paid in respect of him included in his employer's
quarterly payment for that quarter taken into account for the
purposes of the Scheme.

9. An employed person to whom the Scheme applies including
an exempt person entering the service of an employer upon some
day between the two quarter days shall in respect of the period
between the day of the commencement of his employment and
the day preceding the next quarter day (both of such days inclusive)
be entitled to have such number of contributions as is equal to the
number of Sundays in such period upon which he continues in
the same employment credited as having been paid in respect of
him under the Scheme.

INSURANCE AGAINST UNEMPLOYMENT 515

10. For the purposes of the last preceding rule a person already
in the service of an employer who becomes liable to be insured
against unemployment under the Scheme otherwise than by
reason of his ceasing to be an exempt person or who would become
so liable were he not an exempt person shall be deemed to enter
such employer's service on the day on which such liability arises
or would arise but for the exemption of the person concerned.

11. An employed person to whom the Scheme applies including
an exempt person leaving the service of an employer at any time
except at the termination of a quarter shall in 'respect of the
period between the quarter day immediately preceding the ter-
mination of his employment and the date of such termination
inclusive of such quarter day and date of termination be entitled
to have such number of contributions only as is equal to the
number of Sundays in the said period treated as having been paid
in respect of him under the Scheme and shall not be entitled to
have any further contributions which may in fact have been paid
in advance in respect of him taken into account or notwithstanding
the provisions of the Fourth Schedule to the Act be under any
liability in respect of such of the same as may have been paid on
his behalf.

12. Contributions credited to be taken into account or treated as
having been paid in respect of exempt persons under the foregoing
rules shall have effect as contributions paid under sub-section (7)
of section 5 of the Act as applied for the purposes of the Scheme.

13. For the purposes of this Schedule the day on which the
Scheme comes into force shall be substituted as a quarter day
for the twenty-fourth day of June 1921 and the third quarter of
the year 1921 shall be deemed to be the period commencing on
the day on which the Scheme comes into force and ending at
midnight on the day preceding the next ensuing quarter day.

14. The first of the rules contained in the Fourth Schedule to
the Act as applied for the purposes of the Scheme shall so long
as the foregoing rules of this Schedule continue in force take
effect subject to the provisions thereof.

SECOND SCHEDULE.

RATES AND PERIODS OF OUT-OF-WORK BENEFIT.

i. Out-of-work benefit shall be payable in respect of each week
of any continuous period of unemployment after the first three
days of unemployment and shall be at the weekly rates following :— >

Ordinary Rates.

For Men 17 shillings.

For Women . . . . , . 14 shillings.

516 INSURANCE AGAINST UNEMPLOYMENT

Rates in Cases of Persons under Eighteen.

For Boys . . . . . . 8 shillings and 6 pence

For Girls 7 shillings.

2. No person shall receive out-of-work benefit for more than
sixteen weeks in either of the special periods mentioned in the
Unemployment Insurance Act 1921 and thereafter for more than
twenty-six or such other number of weeks as may be prescribed
by any rule made by the Joint Board (either generally for the
insurance industry or for any particular branch thereof) within
any insurance year or in respect of any period less than one
day.

Provided that in any case where out-of-work benefit is payable
for a period of less than a week it shall be paid at a daily rate equal
to one-sixth of the weekly rate applicable to the person receiving
the benefit.

3. No person shall receive more out-of-work benefit than in
the proportion of one week's benefit for every six contributions
paid or credited as paid in respect of him under the Scheme.

Provided that for the purpose of determining the amount of
out-of-work benefit to which having regard to the aforesaid propor-
tion any person is entitled after the second day of July 1922 no
account shall be taken of any benefit which may have been received
by that person at any time in respect of the period between the
date upon which the Scheme comes into force and the third day
of July 1922 or of any unemployment benefit received by him
under the general provisions of the Act and there shall be deemed
to have been paid previously to that date in the case of every
person who is insured under the Scheme at that date twenty-five
contributions in addition to the contributions actually paid or
credited as paid in respect of him under the Scheme and in
addition also to the contributions paid in respect of him under the
general provisions of the Act between the eighth day of November
1920 and the day on which the Scheme comes into force but such
twenty-five contributions shall not be taken into account for the
purpose of determining whether any person satisfies the first of
the conditions mentioned in sub-section (i) of section 7 of the Act
as applied for the purposes of the Scheme.

4. Any time during which a person is under the Scheme dis-
qualified from receiving out-of-work benefit shall be excluded
in the computation of periods of unemployment under this
Schedule.

5. A period of unemployment shall not be deemed to commence
until the unemployed person has made application for out-of-work
benefit in the manner provided by the Scheme.

6. Notwithstanding anything contained in the foregoing para-

INSURANCE AGAINST UNEMPLOYMENT 51?

graphs of this Schedule out-of-work benefit shall until the ist day
of July 1923 be at the weekly rates following : —

For Men
For Women

Ordinary Rates.

20 shillings.
1 6 shillings.

Rates in the Case of Persons under Eighteen.

For Boys 10 shillings.

For Girls 8 shillings.

THFRD SCHEDULE.

MINOR MODIFICATIONS OF PROVISIONS OF THE UNEMPLOYMENT
INSURANCE ACT APPLIED FOR THE PURPOSES OF THE SCHEME.

Section 5 (7)

Section 7 (i) (ii)
Section 8 (2)

Section 8 (3)
Section 9
Section 22 (4)

Section 22 (5)
Section 23 (2)

Section 24 (i)

Section 28 (i)

Section 29

Section 29 (4)

Section 32

Omit the word " full."

For " the other provisions of this Act " sub-
stitute " the other provisions of the Scheme."

For " prescribed manner " substitute " manner
provided by the Scheme."

For " under the provisions of this Act " sub-
stitute " under the provisions of the Scheme."

Omit '' subject to the provisions of this Act."

Omit " subject to the provisions of this Act."

For " unemployment card " substitute " pre-
scribed certificate."

Omit " unemployment book or used unemploy-
ment insurance stamp " and all words after
" twenty pounds."

For " statutory conditions " substitute " con-
ditions laid down by the Scheme."

In the first paragraph for " Minister " and
" his " substitute " Joint Board " and " their "
and in the second paragraph for " by the
Minister " and " his " substitute " on behalf
of the Joint Board " and " their."

For " any regulations " substitute " the Scheme
or any rules made thereunder."

For " the general provisions of this Act " sub-
stitute " the provisions of the Scheme."

For " this Act " wherever occurring substitute
" the Scheme."

Omit " other " before " Government depart-
ment " wherever occurring and for " Minister "
substitute " Joint Board."

For " the purposes of this Act " substitute the
purposes of the Scheme/'

518 INSURANCE AGAINST UNEMPLOYMENT

Section 37 Omit " order or " where these words first occur

and for " an order or " substitute "a."

Section 47 (i) (e) Omit the first and second provisos and in the
third proviso for " Minister " and " him "
substitute " Joint Board " and " them."
(g) For " Minister " substitute " Joint Board."

Fourth Schedule

Paragraph (i) Omit the proviso to such paragraph.
Paragraph (5) For " this Act " substitute " the Scheme."
Paragraph (6) For " provisions of this Act " substitute
" provisions of the Scheme."

APPENDIX II

UNEMPLOYMENT INSURANCE IN
AGRICULTURE *

A COMMITTEE representing employers and workers in agriculture
was appointed by the Agricultural Wages Board on December 2,
1920, " To inquire into and report upon the extent to which
the Unemployment Insurance Act might be made applicable and
beneficial to agricultural workers."

There are three methods by which insurance against unemploy-
ment may be possible : —

(1) By the inclusion of the industry of agriculture in the general

scheme provided by the Unemployment Insurance Act,
1920, on the initiative of the Minister of Labour.

(2) By the adoption of a special scheme for agriculture under

Section 18 of the Act ; or

(3) By a purely voluntary scheme outside the Act.

The Committee concluded that employers and workpeople were
not sufficiently in accord to make any one of these methods practic-
able. It is noteworthy that the statistics dealing with unemploy-
ment in agriculture were found to be very deficient. Employment
exchanges are scarcely used either by those seeking work or by
those needing help. The main difficulty in drafting a Special
Scheme would be the submission of actuarial calculations as to
the rate of contributions, the amount of unemployment, etc.

On inquiry, the Committee discovered that Italy is the only
country which compulsorily insures agricultural workers. The
Royal Decree of October 19, 1919, provided for the compulsory
insurance of all workers, and those engaged in agriculture number
more than half the total working-class population. On the other
hand, those " working at home " are specifically excluded from

* Report of the Committee on Unemployment Insurance in Agriculture.
Cmd. 1344.

510

520 INSURANCE AGAINST UNEMPLOYMENT

the scheme, and there is not yet sufficient experience to judge to
how many this will apply in a country of smallholders.

It is noteworthy that the Italian scheme, which is framed after
the British model, provides no special machinery for dealing with
agricultural unemployment, but deals with it in the same way as
unemployment in other trades.

APPENDIX III

THE SCALE OF BENEFITS

THERE have been a number of changes in the rates of benefits
allowed under the British scheme.

During March 3rd-July ist the weekly rate of unemployment
benefit has been : —

Men 2os.

Women i6s.

Boys (between the ages of 16 and 18) . los.

Girls (between the ages of 16 and 18) . 8s.

This scale was reduced from July ist, see Chapter XIV.

It is now clear that the scheme of unemployment insurance needs
to be supplemented by some measure of unemployment relief.
Mere reduction of the rates of benefits will neither make the
unemployment fund solvent nor meet the needs and demands of
the unemployed.

APPENDIX IV

THE 1921 CRISIS

UNEMPLOYMENT. A NATIONAL OR LOCAL PROBLEM.

UNEMPLOYMENT insurance is a device for meeting the loss in wage
during normal periods of unemployment. None amongst even
its most enthusiastic advocates have urged that it is either possible
or desirable to meet a period of heavy and continuous unemploy-
ment by this means.

Special measures must be taken to restart the wheels of commerce
and industry, and, it is possible that, in addition, emigration on
a large scale will sooner or later be found to be necessary. But
whilst these measures are being sought and are being put into
operation, unemployed workmen and their families must be main-
tained. Wild attacks in the name of " anti-waste " notwithstanding,
the community will not allow workmen to starve, nor will workmen
who recently risked so much quietly yield themselves, their wives
and children, upon the altar of economy. An "anti-waste" policy,
interpreted in the spirit of the day, threatens to create a situation
menacing to ordered government. An unemployment crisis of
exceptional gravity was reached in September 1921 .* In that month
there were two million workmen wholly unemployed in Great
Britain, over two hundred thousand of these had exhausted their
right to benefit under the unemployment insurance scheme, Poor
Law Guardians were besieged with demands for adequate main-
tenance, which were to be on a scale between ^3 and £5 a week,
i.e. equal in amount to the wages paid to fully employed workmen,
over twenty members of the Poplar Borough Council were sent to
gaol for giving relief to the workless and then for refusing to levy
the rates demanded by the central local authorities, rent strikes
were being prepared and processions and demonstrations every-
where being organized by the unemployed. Rioting by the men,
and baton charges by the police, occurred in a number of cities.
Workmen who have exhausted their right to benefit under the
* President Harding appointed a committee to investigate the amount
-of unemployment and to propose measures for dealing with it.

INSURANCE AGAINST UNEMPLOYMENT 523

unemployment insurance scheme, and even many who still have
that inadequate income, are obliged to turn to the local Guardians
of the Poor for relief. What has rightly come to be regarded as
a national problem is thus left to local authorities, when it is well
established by the experience of Lord St. David's Committee that
the latter cannot make any appreciable contribution for dealing
with it. Notwithstanding this consideration, the Guardians in
a number of London boroughs decided to make allowances from
the funds, obtained by increasing the rates. It seems likely that
certain boroughs in other parts of the country will also adopt
this policy. The Islington Board of Guardians decided to allow
each unemployed workman I2S. 6d. per week in addition to an
allowance for rent and coal. If the unemployed workman is married
he is to obtain 253. a week in respect of himself and his wife, his
rent (which must not exceed 153. per week), and i cwt. of coal
free, which in September 1921 cost about 35. 6d. An additional
53. is to be allowed in respect of each child under 16.

It is provided .that these grants are to be made irrespective
of any benefits the unemployed workman may draw under the
Unemployment Insurance Act.

The estimated allowance for each unemployed workman who
has a wife and three children is £2 i6s. per week.

An outcry was raised by a certain section of the Press against
these allowances as being too liberal. On the other hand, in some
boroughs, such as Woolwich, the unemployed have demanded a
higher scale of relief than that allowed at Islington. The Ministry
of Health has, however, disallowed the Islington scale of relief.

POWER OF THE GUARDIANS TO RELIEVE THE POOR.

The Guardians of the Poor are the elected representatives of the
ratepayers, and the law empowers them to give adequate relief to
the unemployed. The Guardians must notify the Ministry of
Health within twenty-one days of any very unusual expenditure.
It has power to suggest an interpretation of the term " adequate "
to the Guardians. Where, however, they grant liberal relief the
local auditor may disallow the amount and surcharge the guardians,
making them personally liable for the excessive expenditure.
The Guardians may then appeal to the Ministry of Health, and,
if it thinks they acted in ignorance or without blame in the
matter, it may decide that the Guardians shall not be compelled
to meet the surcharge. If the Ministry decides that the Guardians
deliberately acted wrongly it can then permit the auditor to sue
the Guardians personally as for a civil debt.

It should be noted, however, that if there is a disposition to
challenge the decision of the Ministry, the allowances will be paid

524 INSURANCE AGAINST UNEMPLOYMENT

and the rates will be levied, and then when legal proceedings be
taken against the Guardians, and the surcharge be imposed on
them, they may be found to be themselves men who have little
with which to meet the verdict.

Already, it is being proposed that the powers of Guardians to
levy rates for the relief of the unemployed and for granting " liberal "
allowances be restricted by Parliament.

UNEMPLOYMENT: A NATIONAL RESPONSIBILITY.

The local authorities are incompetent to deal with the situation
satisfactorily because they are destitute of resources, and because
they lack the necessary machinery for ascertaining whether the
man who claims relief is bona fide unemployed. To build up such
machinery during the crisis, as is proposed, would be costly and
it is certain to prove inefficient. Moreover, the causes making
for our present unemployment are national, and its effects should
therefore be borne by the central Government.*

The Government might elect to provide relief to all who are
registered under the unemployment insurance scheme, and provide
maintenance for them on a scale higher than the present insurance
benefits but substantially lower than the average wage of employed
workmen. Whilst such a scheme of relief would best be adminis-
tered by the employment exchanges, its costs would be enormous.
Thus, assuming that the average number of unemployed for the
next twelve months will be one million, and the weekly allowance
as low as 305. per week, the cost will be ^78,000,000.

If, as is more likely, the Government will attempt to develop
a scheme of relief works so as to give effect to the principle of main-
tenance through work the costs involved may be even greater.
But if these works make for the permanent enrichment of the
country, they will be more desirable than either, work for main-
tenance, or relief without work.

* Note manifesto of Labour Party issued September 21, 1921.

CHIEF BOOKS AND PAPERS USED

Where not given, the place of publication is London.

ALDEN, P. Democratic England. New York, 1912.

The Unemployed : a National Question. Second edition,

1905.
ALDEN, PERCY, and HAYWARD, E. E. The Unemployable and

Unemployed. 1908.
ALEXANDER, MAGNUS W. Hiring and Firing. New York, 1914.

BARKER, ERNEST. Political Thought in England from H. Spencer

to the Present Day. 1916.

BARNES, CHARLES B. The Longshoremen . New York, 1915.
BECKER and BERNHARDT. Die gesetzliche Regelung der Arbeit -

svermittlung in den wichtigsten Landen der Erde.
BEVERIDGE, Sir W. Unemployment : a Problem of Industry.

Third edition, 1912.

BRANDEIS, Louis D. The Outlook. New York, 1911.
BRANDEIS, Louis D., and Prof. FELIX FRANKFURTER and JOSE-
PHINE GOLDMARK. Brief of Franklin O. Bunting v.

State of Oregon. Washington, 1916.
BROWN, Prof. W. JETHROW. The Underlying Principles of Modern

Legislation. 1915.

BROOKS, JOHN GRAHAM. Social Unrest. New York, 1912.
ButLDiNG TRADES INDUSTRIAL COUNCIL. Interim Report of the

Committee on Scientific Management and Reduction

of Costs. 1920.

BURNS, C. DELISLE. Government and Industry. 1921.
BURTON, T. E. Financial Crises and Periods of Industrial and

Commercial Depression. New York, 1902.

CARR, A. S. C., GARNETT, W. H. S., and TAYLOR, J. H. National

Insurance. 1912.
CHAPMAN, Sir S. J., and HALLSWORTH, H. M. Unemployment.

The results of an investigation made in Lancashire.

1909.
CLARKE, ORME. The Law of National Insurance. 1912.

526 INSURANCE AGAINST UNEMPLOYMENT

COHEN, JOSEPH L. New York Evening Post. September 4 and
September 9, 1915. Socialism and Unemployment.
Scientific Management and Unemployment. Bulletin of
the Society for the Promotion of the Science of Busi-
ness Management. Massachusetts, 1915.

COMMONS, Prof. J. R., and ANDREWS, J. B. Principles of Labour
Legislation. New York, 1920.

COLE, G. D. H. Unemployment and Industrial Maintenance. 1921.

DAWSON, W. H. The Vagrancy Problem. 1910.

DEARLE, N. B. Unemployment in the Building Trades. 1909.

DEVINE, Prof. E. T. Misery and its Causes. New York, 1909.

FRANKEL, L. K., and DAWSON, M. M. Working Men's Insurance
in Europe. New York, 1910.

GEPHART, W. F. Principles of Insurance. New York, 1917.
/ GABBON, I. G. Unemployment Insurance. 1911.

GREENWOOD, ARTHUR. Juvenile Labour Exchanges and After

Care. 1911.
GRENFELL, A. P. Afforestation and Unemployment. Fabian

Tract No. 161. 1912.
GUYOT, Prof. YVES. Causes and Consequences of the War. 19*5-

HART, HAMILTON. Fluctuations in Unemployment in Cities of

the United States. 1902-17. Cincinatti, 1918.
HAYES, Prof. C. J. British Social Politics. 1914.
HENDERSON, Prof. C. R. Industrial Insurance in the United

States. Chicago, 1911.
HENRY STREET SETTLEMENT, NEW YORK. Reports of Committee

for Vocational Scholarships.
HILLQUIT, MORRIS. Socialism in Theory and Practice. New

York, 1909.
HOBSON, JOHN A. Work and Wealth. 1914.

The Problem of the Unemployed. 1908.
HOBSON, S. G. National Guilds and the State. 1920.
HOURWICH, Prof. I. A. Immigration and Labour. New York,

1912.

HOWE, F. G. Socialised Germany. 1915.
HULL, GEORGE H. Industrial Depressions, 1911. New York.

JACKSON, CYRIL. Unemployment and Trade Unions. 1910.

JEVONS, H. S. Trade Union Policy and Unemployment. Con-
temporary Review. July 1909.

Trade Fluctuations and Solar Activity. Contemporary
Review, August 1909.

INSURANCE AGAINST UNEMPLOYMENT 527

KELLER, H. Out of Work. New York, 1915.

KENNEDY, J. B. Beneficiary Features in American Trade Unions,

(John Hopkins University Studies.) Baltimore, 1908.
KIRKALDY, A. W. British Labour Replacement and Reconstruc-

tion, 1914-21. British Association.
KITSON, ARTHUR. Unemployment. 1921.
KUMPFMANN, PAUL. Die Arbeitslosenversicherung. Tubingen,

LABOUR PARTY, THE. British Trades Union Review (Monthly).

Labour Year Book, 1916.

Labour and the New Social Order. 1917.

The War for Coal and Iron, by Dorothy Francis Buxton.
1921.

Unemployment: The Peace and the fndemnity. 1921.

Unemployment : A Labour Policy. 1921.

Labour International Handbook, 1921.

Labour Research Department, Monthly Circular. 1921.

Labour Monthly. 1921.

LEFORT, J. L' Assurance centre le Chomage en France et a 1'etranger.
2 vols. Paris, 1913.

McMASTER, J. History of the People of the United States.

Vol. vi.
MARSHALL, ALFRED. Economic Chivalry. Economic Journal,

March 1909.
MEREDITH, H. O. Outlines of the Economic History of England.

1913-

MESS, H. A. Casual Labour at the Docks. 1916.
MILLS, F. C. Contemporary Theories of Unemployment and

Unemployment Relief. Columbia University, New

York, 1917. Columbia Studies.

MITCHELL, JOHN. Organized Labour. Philadelphia, 1903.
MITCHELL, WESLEY CLAIR. Business Cycles, 1913. Berkeley.
MONEY, L. G. CHIOZZA. Insurance versus Poverty. 1912.
MONTMORENCY, J. E. G. DE. National Insurance and National

Character. The Edinburgh Review. July 1913.
MOORE, Prof. H. L. Business Cycles. New York, 1915.

PEASE, EDWARD R. History of the Fabian Society. 1916.
PIGOU, Prof. A. C. The Economics of Welfare. 1920.

Unemployment. 1914.

Wealth and Welfare. 1912.
PORTENAR. Organized Labour : Its Problems and How to Meet

Them. New York, 1912.
PRETTY, A. W. A Tax on Industry. 1913.

528 INSURANCE AGAINST UNEMPLOYMENT

ROBERTSON, DENNIS H. A Study of Industrial Fluctuations. 1915.
ROWNTREE, B. SEEBOHM. The Way to Industrial Peace and the

Problem of Unemployment. 1913.
ROWNTREE, B. S., and LASKER, B. Unemployment : a Social

Study. 1911.
ROWNTREE & Co., LTD., YORK. Unemployment Benefit Scheme,

Explanatory Memorandum. 1920.

, RUBINOW, Dr. I. M. Social Insurance. New York, 1914.
Standards of Health Insurance. New York, 1916.

SARGENT FLORENCE, Dr. P. The Question of Fatigue from the

Economic Standpoint. British Association Report,

1916.
SCHANZ, Prof. Dritter Beitrag zur Frage der Arbeitslosenver-

sicherung.

j SCHLOSS, D. F. Insurance against Unemployment. 1909.
SEAGER, Prof. H. R. Social Insurance. New York, 1914.
SIMONS. Social Forces in American History.
SMELSER, D. P. Unemployment and American Trade Unions.

Baltimore, 1919.

SMITH, Sir H. LLEWELLYN. Economic Journal. December 1910.
SNOWDEN, PHILIP. Wages and Prices. 1920.
SPENDER, CONSTANCE. The Humanity of Labour Exchanges.

Contemporary Review. 1912.
STONE, Dr. N. I. The Costs of Unemployment. The Survey,

New York, January 23, 1915.
SUMMER, HELEN L. History of Women in Industry : Report on

Conditions of Women and Child Wage-earners in

the United States.

TAWNEY, R. H. The Sickness of an Acquisitive Society, 1920.

VEBLEN, Prof. THORSTEIN; The Theory of Business Enterprise.
New York, 1915.

WARBURG, PAUL M. The Currency Problem and the Present

Financial Situation. New York, 1920.
WEBB, SIDNEY. Grants in Aid. New Edition, 1920.

Reform of the Poor Law. Contemporary Review,

1890.

The War and the Workers. Fabian Tract No. 176. 1914

^ WEBB, SIDNEY, Mr. and Mrs. The Prevention of Destitution. 1911.

A Constitution for the Socialist Commonwealth of Great

Britain. 1920.

Report of National Conference for the Prevention of
Destitution. 1911.

INSURANCE AGAINST UNEMPLOYMENT 529

WEBB, S., and FREEMAN, A., and JULIET STUART POYNTZ. Seasonal

Trades. 1912.

WELLS, H. G. New Worlds for Old. 1908.
WILLIAMS, R. The First Year's Working of the Liverpool Dock

Scheme. 1914.
The Liverpool Docks Problem. Liverpool Economic and

Statistical Society. 1912.
WILLITS, J. H. Steadying Employment — with a Section devoted

to some Facts on Unemployment in Philadelphia.

(Annals of American Academy of Political and Social

Science.) Philadelphia, 1916.

OFFICIAL PAPERS

GREAT BRITAIN.

Unemployed Workmen Act, 1905.

Labour Exchanges Act, 1909.

National Insurance Act, 1911, Part II.

National Insurance (Part II Amendment) Act, 1914.

National Insurance (Part II) (Munition Workers) Act, 1916.

Unemployment Insurance Act, 1920.

Unemployment Insurance Act, 1921.

Unemployment Insurance (No. 2) Act, 1921.

Report to the Board of Trade on Agencies and Methods for Dealing

with the Unemployed in Certain Foreign Countries, by

D. F. Schloss, 1904. Cmd. 2304.
Royal Commission on the Poor Laws, Part II, and Minority Report,

1909.
Deputation of Social Democratic Party to Mr. D. Lloyd George,

1911. Cmd. 5869.
Repayment to Associations under Section 106 of the National

Insurance Act, 1911. H.C. 191 of 1913.
First Report of the Proceedings of the Board of Trade under Part II

of the National Insurance Act, 1913. Cmd. 6965.
Report with Regard to National Insurance Act, 1911 (Part II

Amendment Bill), by T. G. Ackland. H.C. 192 of 1914.
Report of the Committee of Enquiry into the Work of the Employ-
ment Exchanges, 1920. Cmd. 1054.
Minutes of Evidence taken before the Committee of Enquiry into

the Work of the Employment Exchanges, 1920. Cmd. 1140.
Report by the Government Actuary on the Financial Provisions

of the Unemployment Insurance Bill, 1921. Cmd. 1336.
Report of the Committee on Unemployment Insurance in Agricul-
ture, 1921, Cmd. 1344.
Decisions of Umpire under the National Insurance Act, Part II.

Vol. i, 1914 ; vol. ii, 1915 ; vol. iii, 1919.
British and Foreign Trade and Industrial Conditions, i9°5>

Cmd. 2337.
Board of Trade Report on Cost of Living of Working Classes, 1908.

CmcL 3864.

INSURANCE AGAINST UNEMPLOYMENT 531

Reports of the Chief Registrar of Friendly Societies.

Report of the Chief Inspector for Great Britain of Factories and

Workshops for 1920. Cmd. 1403.
The Labour Gazette is published weekly, and gives a detailed analysis

of the employment situation in Great Britain with a short

statement as to the situation abroad.
Labour Overseas, published quarterly, devotes more attention to

the employment situation abroad.

UNITED STATES OF AMERICA.

Twenty-third Annual Report of the Commission of Labour,
Workmen's Insurance and Benefit Funds in United States
(one volume). Washington, 1908.

Twenty-fourth Annual Report of the Commission of Labour :
Workmen's Insurance and Compensation Systems in Europe
(two volumes). Washington, 1909.

Vol. I. Austria, Belgium, Denmark, France, Germany.
Vol. II. Great Britain, Italy, Norway, Russia, Spain,

Sweden.

The Federal Census, 1900. Washington, 1901.
The United States Bureau of Labour Statistics —

No. 76. What is Done for the Unemployed in European

Countries, by W. D. P. Bliss, Washington, 1908.
No. 109. Statistics of Unemployment and the Work of
Employment Offices in the United States. Washing-
ton, 1912.
No. 172. Unemployment in New York City. Washington,

1915-

No. 186. Labour Legislation of 1915. Washington, 1916.
No. 195. Unemployment in the United States. Washington,

1916.

No. 212. National Conference on Social Insurance Pro-
ceedings. Washington, 1917.

Hearings before the Committee on Labour of the House of Repre-
sentatives on Social Insurance. H. J. Res, No. 159. Wash-
ington, 1916.

Industrial Employment Survey, Bulletin No. i. Washington,
1921.

Chicago : Report of Mayor's Committee on Unemployment.
Chicago, 1915.

Massachusetts Bill on Unemployment Insurance, 1916.

New York Department of Labour, Bulletin No. 69: Idleness of
Organized Wage Earners in 1914. New York, 1915.

New York Mayor's Committee on Unemployment, Report, 1915-16.

532 INSURANCE AGAINST UNEMPLOYMENT

New York Mayor's Committee on Unemployment, Adapted Report,
" How to Meet Hard Times." The Survey, New York, 1917.

Report to Legislature of New York State on Unemployment and the
Lack of Farm Labour, 1912. Third Report.

The Unemployed in Philadelphia, 1915.

Wisconsin Bill on Reducing Unemployment, 1921.

The American Labour Legislation Review, which is issued monthly,
is the best publication in the country devoted to the study
of the unemployment problem. Special issues are devoted
to it from time to time. See May number, 1914, and June
number, 1915.

The Survey, The American Federationist, the Reports of the Annual
Convention of the American Federation of Labour, also
record what progress is being made in that country in dealing'
with the problem.

INTERNATIONAL.

Until the outbreak of the War the Proceedings and Bulletin of
the International Association for Combating Unemployment con-
tained the most scientific studies of unemployment problems,
and remain our best source of information for the period covered.

The International Labour Office of the League of Nations has
taken over its functions. Hitherto, however, it has been most
serviceable to students by collecting, translating, and publishing
laws and decrees dealing with the subject. By means of its regular
publications, the International Labour Review, the Official Bulletin,
and the Daily Intelligence, it promises to inform all students,
administrators, and statesmen interested in this problem of the
latest thought and achievement. The following, from irregular
periodical publications issued in 1919-21, have been of special service
in the preparation of this study : —

Report on Unemployment, 1919. (Prepared for the Washington

Conference.)

Report II on Unemployment, 1921.

Austria. — Loi et Reglements. Assurance centre le Ch6mage.
Denmark. — Unemployment Funds.
Finland. — Unemployment Funds.
France. — The Organization of Unemployment Insurance and

Employment Exchanges in France, 1921.
Germany. — Arbeitslosenversicherungsgesetz.

Federal Employment Board.
Italy. — Royal Decree on Unemployment Insurance.

The Government Action in Dealing with Unemployment.

INDEX

Ackland, Thomas, 279
Andrews, John B., 44
Ashley, Professor W. S., 265
Asquith, H. H., 226, 287
Assessments, Trade Union, 410
Association Internationale pour la
lutte contre le chdmage, Bulletin
of, 47, 85, 91, 138, 151, 221,
235, 320
Austria, 358

Bailward, W. A., 239, 290, 312, 320

Balfour, Arthur James, 49

Basle, 1 06

Belgium, 51, 84

Benefits, 129

Berne, 108

Beveridge, Sir W. H., 30, 45, 192,

300

Bounty, 49
Bradford Dyers' Association, Ltd.,

382

Brandeis, Louis D., 18, 54
British Establishment Funds, 375
Brooks, Professor John Graham,

3.85
Building Industry in Great Britain,

339

Burns, C. Delisle, 230
Burns, John, 28, 247

Cadbury Bros., 382

Canada, 153

Ontario Commission on Unem-
ployment, 48

Carver, Professor, 474

Casual Labour, 293, 305

Cecil, Lord Robert, 225

Chamberlain, Joseph, 161

Chamberlain Circular, 162

Chapman, Professor, 29

Charity, 39, 40

Churchill, W. L. S., 203, 253, 255,
261, 312

Cigar Makers, Union of, America,
393 et seq.

Civil Service, 233

Cologne, 148

Commons, Professor John R., 492

Compulsory Insurance against Un-
employment, no, 151, 218,
352, 358, 445

Contracts, Government, 45

Court of Referees, 213, 244

Crisis Funds, 109

Cunningham, 19

Cyclical depressions, 22

Czecho-Slovakia, 155

Definition of Unemployment, 28

of Unemployment Insurance, 67
Denmark, 124
Depravity, 41
Depressions, 44, 49
Destitution, 41, 42
Devine, Professor E. T., 41, 437
Doles, 67, 261

Dovetailing employments, 189
Drain on National Wealth, 36

Economy campaign, 233

Emigration, 164

Employers' Contribution towards

Insurance, 256

Employment Offices, Bureaux and
Exchanges; —

and ex-service men, 327

and the decasualizing of labour,
184

and Trade Union Standards, 178

and Trade Union officials, 277

basis for organizing industrial
market, 46

costs of, 329

criticism of, 52, 191

establishment of, 46, 116, 138

for Juveniles, 180

for Women, 1 79

in Austria, 358

in Belgium, 90

in Czecho-Slovakia, 155

in Denmark, 138

533

534 INSURANCE AGAINST UNEMPLOYMENT

Employment Offices, Bureaux and
Exchanges —

in France, 96

in Germany, 142

in Great Britain, 168

in Italy, 347

in Norway, 118

in United States, 453

Objects, 1 68

Organization and Staff, 172

Placing Agencies, 175

specialized, 178, 342
Establishment Funds, 366

Fabian Society, 252

Feiss, Joseph, 367

Fluctuations, 43

Ford Company, 367

France, 92

Establishment funds, 375
National Scheme of subventions
for relieving unemployment, 95

Frankel, Dr. L. K., 422

Freudenberg, Karl, 372

Friendly Societies, 75

Fuster, Professor Edward, 221, 425

Gephart, 64

German establishment funds, 371

Germany, 140

Ghent Commission on Unemploy-
ment, 86

Ghent Scheme, 68, 84 et seq.

Advantages and Disadvantages,
89

Gibbon, I. G., 69, 77, 229

Gompers, S., 225, 421

Hamburg Association of Con-
sumers, 76

Henderson, Arthur, 279, 289
Henderson, Professor C. R., 229, 261
Henry Street Settlement, 181
Heyl, Cornelius, 372
Hillman, Sidney, 370
Hillquit, Morris, 446
Hiring and Firing, 32, 320
Hobson, John A., 37, 262
Hobson, S. G., 337
Holland, 121
Hours, reduction of, 42
Hardie, Keir, 288

Illinois, 46

Immigration Employment Bureaux,

440
Imperial Employment Exchanges,

199

Imperial Immigration Bureau, 199
India Relief Works, 48
Industrial Insurance —
Building Industry, 339
Insurance by industries, 333

et seq.
Insurance Trade Scheme (draft),

496

Maintenance, 333
Printers' Scheme, 338
" The Rota System," 336
Special Schemes under the
National Unemployment In-
surance Act, 337
Industry, regularization of, 45,

292
Insurance and the prevention of

risk, 55

advantages of, 61
International Association against

Unemployment, 65, 425
International Trade Union Statis-
tics, 79
Italy, 201, 347

Japan, 154

Jevons, H. S., 31

Juvenile Employment Offices, 439

Kinds of Unemployment, 30

Labour Party, 45, 259, 263, 290,

335

Labour turnover, 34
Labour Year Book, 265
Lanzt, Heinrich, 371
Lefort, S., 271

Liverpool Dock Scheme, 186
Llewellyn Smith, Sir H., 270, 310
Lloyd George, 259, 303, 323
London and India Docks, 186
London, Congressman Meyer, 27,

429

Luzzati, M., 347
Lyons, 99

Macdonald, Ramsay, 257, 289

Macgregor, Professor D. H., 192

Maintenance (see Industrial Insur-
ance)

Malingering, m, 315

Management Department, 367

Manchester Cloth Porters, 186

Marshall, Alfred, 231, 473

Massachusetts Bill on Unemploy-
ment Insurance, 477

Mess, H. A., 293

Metropolitan Life Insurance Co., 24

INSURANCE AGAINST UNEMPLOYMENT 535

Migration of workers, 170, 457

Milan, 349

Ministry of Labour, 169, 280, 300

Mitchell, John, 412

Mohr, A. L., 372

Money, L. G. Chiozza, 227, 260

Moore, H. L.,3i

Miilhausen, 146

National Civic Federation America,
Social Insurance Enquiry, 263,
284

Norway, 115

Ontario Commission on Unemploy-
ment, 1916, Report of, 153
Out of Work Donation Scheme, 327
Out Relief, 162

Panic, 42

Paris, 98

Pennsylvania, 46

Pigou, Professor A. C., 31, 49, 231,

265

Poor Law Relief, 118, 161
Poor Law Report, 77, 273, 301, 303
Prevention of Unemployment Bill,

45
Private Employment Registries,

439
Programme of Works, long period,

45, 49
Prussia, 47

Reconstruction Sub-Committee, 314
Relief Works, 44

France, 92

Great Britain, 160

India, 48

Reserve of Labour, 189 et seq.
Right to work, 22
Ringhoffer, 373
Rota System, 336
Roubaix, 100
Rowntree, 375
Rubinow, Dr. I. M., 62, 448
Russia, 364

St. Gall, in
Saving, 55, 59, 468

Compulsory, 58, 469

Motives for, 56, 57, 71
Schanz, Professor, 58, 71
Schloss, D. F., 108, 167
Scientific Management, 367
Seager, Professor Henry R., 51, 57,

267

Seamen, International System of
Insurance for. 68

Seasonal Unemployment, 45
Short time, 44, 304
Small Holdings, 51
Smith, F, E., 225
Socialism, 42
Societa Umanitaria, 349
Sombart, Professor W., 96
Soviet Russia, 364
Spain, 155

Standard of Living, 40
State contributions, 88
Statistics concerning unemploy-
ment, criticism of, in U.S.,

433

Strassburg, 144
Subsidies, 88, 106, 113, 129, 135,

J45

Summer, Helen L., 20
Switzerland, 105

Trade funds, 355

Trade Union, 68, 75, 78, 85, 93, 105,

117, 122, 125, 141
Effect of unemployment on,

Training of juveniles, 180, 439
Types of Unemployment Insurance,

Unemployables, 21, 293
Unemployed Workmen Act, 160,

164
Unemployment —

a problem of capitalism, 17

after the war, 32

an insurable risk, 63

and democratic committees, 196,
441

and regularization of expenditure,
302

causes of, 22, 30, 32

cumulative effect, 38

definition, 28

destitution, 39

economic cost, 36

effect on Trade Unions, 38

effects, 35, 37

fallacies repecting, 39, 43

historical, 19

human cost, 37

methods for dealing with, 40, 45,
50

national or local problem, Appen-
dix IV, 522

prevention, 17 et seq., 211

reduction of, 292

statistics, 22

United States, 24

536 INSURANCE AGAINST UNEMPLOYMENT

Unemployment Insurance —
and the regularization of industry,

45, 292

and trade disputes, 240
compulsory, 68, no, 151, 218
constitutionality of, in U.S., 448
contributions of employers, 256
contributions of workmen, 258
co-operation with Trade Unions,

215

criticism of, 53
definition of, 67, 248
exhaustion of claims, 315
Federal on State legislation in

U.S., 461
Ghent, 68
graded rate, 266
in agriculture, 519
incidence of, 263
Massachusetts Bill, 48, 465
rates of benefit, 266
State grant, 88, 97, 113, 136, 145
State intervention in, 81
the incidence of the burden of,

262 et seq.

the Labour Party and, 288
Trade Union, 68, 75
types of, 68
voluntary, 216, 222
Umpire, 241 et seq.
United Kingdom —

allocation of public contracts, 45

donation scheme, 327

employment offices, 168

extent of unemployment in, 23

juvenile training in, 179

policy, 51

proposed legislation, 42

statistics in, 22

study of unemployment in, 166

United States of America —

American Federation of Labour,.

27, 420
American Association for Labour

Legislation, 442, 492
Employment Exchanges, 46, 434,

443

extent of unemployment, 24, 27
income of people, 40
Insurance against Unemploy-
ment—

Massachusetts Bill, 477

Wisconsin Bill, 492
juvenile training in, 439
movement for unemployment in-
surance in, 426
Programme on Unemployment,

430

Public Works, 440
statistics in, 24

Vacation periods, 50
Valentine, Robert G., 258
Veblen, Professor Thorstein, 57
Vocational guidance, 181
Voluntary employment offices, 436

Wages equalization fund, 345

War, 32

War Pensions Committee, 198

Webb, Sydney, Mr. and Mrs., 42, 409

Wisconsin Scheme, 492

Works, Public—

in Canada, 48

in Great Britain, 49

in India, 48

in United States, 440

Zeiss, Karl, 371
Zurich, in

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UNIVERSITY OF CAUFORNIA LIBRARY

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