SOCIAL SECURITY IN AMERICA
The Factual Background of the Social Security Act
as Summarized from Staff Reports to the
Committee on Economic Security
Social Security Board Washington, D. C.
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SOCIAL SECURITY IN AMERICA
The Factual Background of the Social Security Act
as Summarized from. Staff Reports to the
Comm,ittee on Economic Security
Published, for the
Committee on Economic Security
by the
Social Security Board Washington, D. C.
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Social Security Board Publication No. 20
PREFACE
The Social Security Act became law on August 14, 1935. This act was a final development from the work of the Committee on Economic Security, the report of which the President transmitted to Congress in a special message on January 17, 1935, with recommendations for the passage of legislation to carry out the Committee's suggestions. This message and report represented the fulfillment of a promise made by the President in a special message on June 8, 1934, to the effect that he expected to make recommendations at the beginning of the next session of Congress for additional measures of protection against the major vicissitudes of life which result in destitution and dependency for many individuals.
The Committee on Economic Security was a temporary agency created by the President in Executive Order No. 6757, on June 29, 1934, as a first step in the fulfillment of this promise. This Com- mittee consisted of the Secretary of Labor as chairman, the Secretary of the Treasury, the Attorney General, the Secretary of Agriculture, and the Federal Emergency Belief Administrator. Its function was to study the problems relating to economic security and to make recommendations, both for a long-time and an immediate program of legislation which would promote economic security for the individual. This Committee completed the major part of its task when it filed its report with the President, which he transmitted to Congress in the special message of January 17, 1935. It was continued in existence, however, with a small staff throughout the consideration of the social security bill in Congress, to give such assistance to the congressional committees as they might request. Its existence terminated October 1, 1935, when the Social Security Board came into operation as the permanent agency to administer this legislation.
In Executive Order No. 6757, creating the Committee on Economic Security, three subordinate agencies were created to assist the Com- mittee in the discharge of its assigned duties. One of these was the Advisory Council on Economic Security, consisting of citizens out- side of the Government, whose function was that of giving advice on the legislation to be recommended. Another was the Technical Board on Economic Security, composed of individuals within the Government service, selected by the Committee on Economic Security, who had special knowledge of the problems to be dealt with. This Board was given general direction of the studies and investigations
IV PREFACE
to be undertaken by the Committee, and throughout the entire period in which the Committee's recommendations were formulated func- tioned in closest cooperation with the Committee and its staff. Fi- nally, the Executive Order provided for the appointment by the Com- mittee of an Executive Director, who was placed in immediate charge of the studies and investigations and served also as secretary of the Committee, the Technical Board, and the Advisory Council. The Director was authorized to and did employ a staff of specialists who undertook numerous studies concerned with problems of social secu- rity, which were made available to the members of the Connnittee as completed.
A list of the members of the Advisory Council and of the Tech- nical Board, as well as of the eight additional advisory committees which were subsequently created on special phases of the problems of social security is published in appendix XIII. A complete list of the members of the staff appears in appendix XIV. The Report of the Committee on Economic Security to the President was published by the Committee and also as a congressional document. The recom- mendations of the Advisory Council to the Committee on Economic Security, with all supplemental statements which were submitted by individual members, was published in both the House and Senate hearings on the economic (social) security bill. The Technical Board made no final report and the staff studies have not heretofore been published in any collected form. A complete list of these staff studies is published in appendix XV.
The present report is a summary of some of the most important information in the staff studies. Completely omitted from considera- tion in this summary were numerous studies which concerned prob- lems not dealt with in the Social Security Act or which have been published privately. In many instances the specific recommendations included in the voluminous staff reports have been omitted, as these are now largely only of historical interest. In this summary informa- tional data in the staff reports have also been greatly reduced in vol- ume, but it is believed that the most essential facts have been included.
The preparation and publication of this summary have been deemed advisable, first to make available to interested persons the most im- portant part of the data gathered by the staff of the Committee on Economic Security ; second, as a partial statement of the factual back- ground underlying the Social Security Act itself. This measure, as it became law, differed in many details, and in some essential respects from the legislation which was recommended by the Conmiittee on Economic Security. The factual material in the staff reports, how- ever, applies to the final measure no less than to the original bill, except for such portions of the Social Security Act as differ from the legislation recommended by the Conmiittee. Moreover, in addition
PBEFACE V
to the factual material gathered prior to the enactment of the Social Security Act there has been included an analysis of the provisions of that act.
This summary was prepared principally by Miss Martha D. Ring under the direction of Dr. Joseph P. Harris, Assistant Director, and, in the last months of its existence, Acting Director of the Committee on Economic Security. The unemiDloyment compensation section was prepared by Merrill G. Murray, also connected with the Committee on Economic Security and now Associate Director of the Bureau of Unemployment Compensation of the Social Security Board.
At the beginning of each section of this report are listed the authors of the major staff reports from which the data summarized were taken. All credit for the data presented should go to the specialists who made these reports, but they are not held responsible for the summary here presented. While every effort was made to summarize fairly and accurately all factual data in the longer staff reports, this summary necessarily suffers from omissions. The Social Security Board assumes no responsibility for any of the statements in the staff reports to the Committee on Economic Security herein summarized.
The publication of this summary of the staff reports of the Com- mittee on Economic Security has been made possible by the Social Security Board. The Board assumed the cost of publication and of completing the preparation of the summary, which was unfinished when the Committee on Economic Security went out of existence. It is hoped that this summary may have practical value justifying this effort and expenditure.
Edwin E. Witte, Executive Director, The Presidenfs Committee on Econonvic Security, 193Ji.-35.
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TABLE OF CONTENTS
PART I. UNEMPLOYMENT COMPENSATION
Page
Chapter I. Introduction 3
The Evolution of Unemployment Insurance 1
Insurance Principles in Unemployment Compensation 8
Relation of Unemployment Insurance to Other Protective Measures 13
Chapter II. A Summary of Foreign Experience With Unemployment
Insurance 17
Great Britain 17
Administration 18
Coverage 20
Contributions 21
Benefits 23
Amount of Benefits 24
Duration of Benefits 25
Statutory Conditions for the Receipt of Benefits 26
Waiting Period 26
Disqualification From Benefits 26
Germany 27
Administration 30
Coverage 31
Contributions 32
Benefits 32
Amount of Benefits 32
Duration of Benefits 33
Statutory Conditions for the Receipt of Benefits 33
Waiting Period 33
Disqualification From Benefits 33
Belgium 33
Administration 37
Coverage 38
Contributions 39
Benefits 39
Amount of Benefits 39
Duration of Benefits 41
Waiting Period 41
Statutory Conditions for the Receipt of Benefits 41
Method of Payment 42
Switzerland 1 43
The Federal Law of 1924 44
The Federal Orders of 1925 and 1929 46
Unemployment Insurance During the Depression 48
Administration 50
Coverage 50
Contributions.-^. ^ ^_^^^^_^ ^ 52
VIII CONTENTS
PART I. UNEMPLOYMENT COMPENSATION — Continued
Chapter II. A Summaey of Foreign Experience With Unemployment Insurance — Continued.
Switzerland — Continued. Page
Benefits 53
Duration of Benefits 53
Waiting Period 54
Qualifications for Receipt of Benefits 54
Disqualification From Benefits 54
Chapter III. Estimates of Unemployment in the United States 55
Total Volume of Unemployment 55
Variations by Industries 57
Variations by States 58
Long-Time Trends in Employment 62
Part-Time Employment 64
Periodic and Seasonal Fluctuations in Unemployment 69
Duration of Unemployment 70
Chapter IV. The Actuarial Basis for Unemployment Compensation. 73
Maintenance of an Actuarial Basis 75
Actuarial Estimates of an Unemployment Compensation Plan 76
Coverage 77
Contributions 80
Benefits - 81
Chapter V. The Role of the Federal Government in Unemploy- ment Compensation 91
Alternatives in Unemployment Compensation Legislation 92
Unemployment Compensation Provisions in the Federal Social Security
Act 95
Federal Tax on Employers 95
Coverage 96
Interstate Commerce 96
Collection of Tax 97
General Credit Against the Federal Tax 97
Additional Credit 97
Conditions of Federal Approval 98
Certification of State Plans 99
Federal Unemployment Trust Fund 99
Grants to States for Unemployment Compensation Administration __ 102
Payments to States 103
Suspension of Grants 104
Federal Cooperation With States 104
Chapter VI. Standards of Unemployment Compensation: Struc- tural Provisions 105
Coverage 106
Unemployment Compensation Fund 109
Types of State Funds 110
Contributions 113
Benefits 118
Rate of Benefits 118
Dependents' Allowances 119
Partial Unemployment 120
Seasonal Unemployment 120
CONTENTS IX
PART I. UNEMPLOYMENT COMPENSATION— Continued
Chaptee VI. Standards of Unemployment Compensation : Structueal Pkovisions — Continued.
Benefits— Continued. Paee
Ratio of Benefits to Employment 121
Maximum Weeks of Benefits in Any Year 122
Additional Benefits 122
Eligibility for Benefits 123
Qualifying Period 123
Availability and Registration for Work 123
Waiting Period 124
Labor Disputes 125
Voluntary Unemployment 125
Discharge for Misconduct 126
Refusal of Suitable Employment 126
Protection of Labor Standards 126
Wage Disqualifications 127
Claim and Appeals Procedure 127
Administration and Finance 128
Administrative Agency 128
General Rules 128
Personnel 129
Advisory Councils 129
Employment Stabilization 130
Records and Reports 130
Representation in Court 130
State-Federal Cooperation 130
Employment Offices 131
Protection of Rights and Benefits 132
Collection of Delinquent Contributions 132
Penalties 132
Administration Fund 132
Saving Clause 133
PART II. OLD-AGE SECURITY
Chapter VII. The Economic Problems of Old Age 137
Increase of Aged Persons in the United States 139
Employment Difficulties of the Older Worker 143
Extent of Old -Age Dependency in the United States 149
Chapter VIII. Provisions for the Aged in the United States 155
Development of State Old- Age Assistance Laws 156
Summary of the Provisions in Effect, January 1, 1935 161
Operation of State Laws 163
Activities of State Legislatures From January 1, 1935, to October
15, 1935 166
Industrial Pension Systems - — 167
Railroad Retirement Act 178
Retirement Systems for Public Employees 179
Chapter IX. Old-Age Security Abroad 181
Chapter X. Formulation of Recommendations for an Old-Age
Security Program for the United States 189
Old-Age Assistance 191
Basic Considerations 191
X CONTENTS
PART II. OLD-AGE SECURITY— Continued
Chapter X. Formulation of Recommendations foe an Old-Age Security Program for the United States — Continued.
Old-Age Assistance — Continued. Page
Proposals to the Congress 195
Legislative Modifications of the Proposals 196
A System of Old-Age Annuities 197
The Advantages of the Insurance Method 198
The Necessity of a Single Federal System 200
Basic Principles of an Old-Age Annuity System 202
The Character and Amount of Insurance Benefits 202
The Source and Amount of Contributions 204
The Accumulation and Maintenance of a Reserve 207
Coverage 207
Administration 209
Legislative Proposals 210
Congressional Reconstruction of the Program 212
Voluntary Old-Age Annuities 214
Voluntary Continuance in the Old-Age Annuity System 214
Annuity Certificates 215
Chapter XI. Old-Age Provisions of the Federal Social Security
Act 217
Old-Age Assistance 217
Administration of Federal and State Plans 218
Maximum Eligibility Requirements for Old-Age Assistance 218
Financial Participation by the State 220
Methods of Computing and Paying Federal Grants 220
Amounts Payable to the States 221
Suspension of Grants 221
The Federal Old-Age Benefits System 222
Coverage 222
Monthly Benefits 222
Eligibility for Benefits 225
Payments Upon Death 225
Method of Making Payments 225
Protection of Benefit Rights 225
Old-Age Reserve Account 225
PART III. SECURITY FOR CHILDREN
Chapter XII. Child Welfare in a General Program of Economic
Security 229
Chapter XIII. Aid to Dependent Children :_- 233
Purpose and Extent of Legislation for Aid to Dependent Children 233
Families and Children Benefited 237
Families of Dependent Mothers Receiving Emergency Relief 239
Estimated Expenditures for Aid to Dependent Children 244
Adequacy of Grants 246
Need for State and Federal Subsidy 246
Estimated Amount Needed for Aid to Dependent Mothers and Chil- dren 248
CONTENTS XI
PART III. SECURITY FOR CHILDREN— Continued
Page
Chapter XIV. Welfare Services for Children Needing Special
Care 251
Present Provisions for Care of Children 252
Social Services in Rural Areas 255
Need for Federal Assistance 257
Chapter XV. Maternal and Child-Health Services 259
Maternal and Infant Mortality 260
Health of Preschool, School, and Adolescent Children 267
Development and Present Status of Provisions for Maternal and
Child Health 269
Plan for Expansion of Maternal and Child-Health Program 277
Local Programs for Maternal and Child Health 279
Local Medical, Dental, and Nursing Service 279
Provision for Medical Care in Connection with Maternal and Child- Health Program 281
Educational Program 281
State-Wide Program 281
Care for Crippled Children 283
Chapter XVI. A Program of Special Security Measures for
Children 287
The Program Proposed 287
Aid to Dependent Children 288
Welfare Services for Children Needing Special Care 289
Maternal and Child-Health Program 290
Provisions of the Social Security Act. 291
Aid to Dependent Children 292
Maternal and Child-Health Services 295
Services for Crippled Children. 296
Child- Welfare Services 297
PART IV. PROVISIONS FOR THE BLIND
Chapter XVII. Provisions for the Blind 301
State Legislation for the Blind 301
Provisions for the Blind in the Federal Social Security Act 309
PART V. THE EXTENSION OF PUBLIC-HEALTH SERVICES
Chapter XVIII. The Extension op Public-Health Services 315
Prevention of Illness 316
Preventable Diseases and Mortality . 320
Past and Present Developments of the Federal Public Health Service.. 323
Responsibility for Public Health 327
Basic Requirements of Local Public-Health Services 328
Nature of Local Organization 328
Local Health Services 328
Cost of Local Service 329
The Functions of State Health Departments 332
Organization of State Health Departments 332
Aid to Local Health Services 333
Cost of State Health Work 334
XII CONTENTS
PART V. THE EXTENSION OF PUBLIC-HEALTH SERVICES— Continued
Chapter XVIII. The Extension of Public-Health Services — Continued. Page
Federal Responsibilities for the Public Health 335
The Cost of a National Program 337
Public-Health Provisions of the Social Security Act 338
PART VI. THE NEED FOR FEDERAL SUPPORT OF SOCIAL SECURITY PROGRAMS
Chapter XIX. The Need for Federal Support of Social Security
Programs 345
Expenditures for Public Welfare 345
The Financial Condition of Local Units of Government 348
Tax Revenues and Assessed Valuations 351
Tax Delinquency 354
Tax Limitations 355
Public Debt of Local Governments 357
Trend of Local Governmental Expenditures 358
The Need for State and Federal Aid 360
The Financial Condition of State Governments 360
Recent Trends 361
Indexes of Wealth and Income 363
State and Local Tax Receipts 366
State and Local Indebtedness 368
The Need for Federal-State Cooperation 369
Costs of the Federal Program 373
Ne-w Sources of Federal Revenue 373
The New Federal Responsibility 378
APPENDIXES
Appendix I. Procedures Followed in Estimating Unemployment
Compensation Coverage in the United States, 1922-33. _ 385
Total Compensable Labor Force, April 1930 386
Mines and Quarries 387
Manufacturing 388
Distribution Industries 388
Wholesale Distribution 388
Retail Distribution 390
Other Industries 391
The Employment Status of the Compensable Labor Force, April 1930. _ 392
Employment Status of the Compensable Labor Force, 1922-33 394
Compensable Labor Force and Its Employment Status, 1922-28 397
Compensable Labor Force and Its Employment Status, 1929-33 397
The Compensable Labor Force by States 399
Appendix IL Procedures Followed in Estimating Duration of
Unemployment in the United States, 1922-33 403
Sources and Inadequacies of Available Data 403
Studies Used and Information Taken From Them 404
Adjustment of Data to a Comparable Basis 405
Combining the 92 Frequency Distributions and Applying the Resulting
Composite Curves 408
Estimating Time Lost by the Unemployed 412
CONTENTS XIII
APPENDIXE S— Continued
Page
Appendix III. Pkocedures Followed in Estimating the Maximum
Duration of Benefits 415
Contributions 415
Compensable Wage Loss 416
Adjustments 417
Final Estimates of Duration 421
Appendix IV. The History and Development op the United States
Employment Service 423
The Pre-War Period 423
Activities During the World War 425
The Post-War Period 428
The Contribution of the Demonstration Centers 429
The Reorganization of 1931 430
The Principles of the Wagner- Peyser Act 431
Operation Under the Wagner- Peyser Act 432
Emergency Needs and the National Reemployment Service 434
The Progress Record in Employment Work 436
Appendix V. Summary of State Unemployment Compensation Laws,
January 1,1936 facing page 440
Appendix VI. Unemployment Insurance Provisions of the Cana- dian Employment and Social Insurance Act 441
Appendix VII. Old-Age Insurance in Great Britain 449
Noncontributory Pensions 449
Contributory Pensions 450
Appendix VIII. The Canadian Pension Systems 453
Noncontributory Pensions 453
Voluntary Annuities 454
Appendix IX. Survivors' Insurance in Foreign Countries 459
Appendix X. Financial History op the Workers' Invalidity, Old-
Age, and Survivors' Insurance of Germany 469
A Short History of the Law 469
Distribution of Costs 470
The Share of the Federal Government 470
Common Reserve Fund and Individual Funds 471
Reserve System Versus Pay-As-You-Go System 476
The Investment of the Reserve 477
General Investments 477
Investments Promoting the General Welfare 480
Interest on Investments 482
Administration 482
Coverage 485
Contributions , 485
Benefits 487
Old- Age Pensions 487
Invalidity Pensions 489
Survivors' Pensions 490
Widows' Pensions 492
Orphans' Pensions 493
The Number of Pensioners 494
Summary ' . 496
Bibliography 497
XIV CONTENTS
APPENDIXES— Continued
Page
Appendix XI. Birth Rate and Infant and Maternal Mortality
Tables 499
Appendix XII. Summary of Provisions of the Social Security Act Relating to Federal Grants to States for Public-Wel- fare Purposes facing page 514
Appendix XIII. Creation and Membership of the Committee on
Economic Security and Affiliated Groups 515
Appendix XIV. Staff of the Committee on Economic Security 521
Appendix XV. List of Staff Reports 525
Appendix XVI. The Social Security Act 531
Index 561
LIST OF TABLES
PART I. UNEMPLOYMENT COMPENSATION
No.
1. Countries in which compulsory unemployment insurance or compen-
sation laws have been enacted and number of workers covered in
each, 1935 6
2. Countries in which laws have been enacted subsidizing voluntary
insurance systems and the number of workers covered in each, 1935_ 7
3. Maximum weekly incomes below which a state of need exists, Belgium. 41
4. Unemployment in manufacturing, transportation, building trades,
and mining, 1897-1926, as estimated by Paul H. Douglas 56
5. Estimates of average nonagricultural employment and unemployment,
by States. 1930-33 facing page- 58
6. States arrayed by average percentage of unemployment within the
compensable labor force, April 1930; 1933 average; and 1930-33 average 60
7. Estimated numbers of employees attached to the various industries,
1920-27 62
8. Average annual indexes of employment in selected manufacturing
industries, 1923-28 63
9. Estimated numbers of employees attached to transportation and
communication industries, 1920-27 64
10. Proportion of fuU time worked by all employed workers in 29 indus-
tries. United States, 1922-33 65
11. Employment status of gainful workers enumerated in four areas 67
12. Employment status of employed workers in three areas 68
13. Indexes of seasonal variations in factory pay rolls in the United States,
1923-31 70
14. Estimated compensable labor force in the United States, April 1930 78
15. Estimated compensable labor force, United States, 1922-33 79
16. State cumulated contributions available for benefits at 3-, 4-, and 5-
percent contribution rates. United States, 1922-33 81
17. Estimates of the compensable wage loss of the covered unemploj'ed
in the United States, 1923-33 82
18. Percentage and cumulative percentage distribution of the unemploj'ed
able and willing to work, by duration of unemployment at date of census or survey, according to various magnitudes of unemployment.. 84
19. Cumulative distribution of the total compensable wage loss, 1923-33- 86
20. Adjusted cumulative distribution of the total compensable wage loss,
-:.. 1923-33-.--.-------..-- ___.._.._.._.-_,---,.-- 87
LIST OF TABLES XV
PART I. UNEMPLOYMENT COMPENSATION— Continued No. Page
2L Adjusted cumulative distribution of the total compensable wage loss,
1923-30 88
22. State grants for unemployment compensation administration and
conditions for credit allowance against tax on employers of eight
or more facing page 96
23. Estimated coverage of assumed unemployment compensation system,
by States, average for 1930 108
24. Estimated number of employed workers covered, by States, 1933 109
25. Estimated wages and salaries of compensable labor force and income
from a 3-percent contribution, by States, 1 933 117
PART IL OLD-AGE SECURITY
26. Actual and estimated number of persons aged 65 and over compared
to total population, 1860-2000 141
27. Rate of increase of population by age groups for the United States,
1870-1930 141
28. Age distribution of the total, urban, and rural population of the
United States, 1920 and 1930 142
29. Percentage of persons 45 years of age and over among gainfully occu-
pied, by sex, for the United States, 1890-1930 143
30. Percentage of unemployment (14 weeks and over) among males and
females in each age group for the United States, 1930 146
31. Persons with previous work experience at nonrelief employment
seeking work, classified by length of time since last nonrelief employ- ment of 4 weeks or more and by age 148
32. Percentage of persons 65 and over having property less than $5,000
and income less than $300 annually 151
33. Old-age dependency in the State of New York, July 1, 1929 152
34. Economic status of aged studied in the District of Columbia, 1934 152
35. Years of residence in State of persons 65 and over on relief 157
36. Principal features of the old-age assistance laws of the United States
(as of Jan. 1, 1935) facing page 160
37. Operation of State old-age assistance acts during 1934 164
38. Provisions of the old-age assistance laws in the United States (as of
Oct. 15, 1935) 168
39. Old-age assistance and insurance legislation in foreign countries
through 1933 182
40. Principal provisions of foreign noncontributory old-age assistance laws
through 1933 facing page 184
41. Weekly contributory old-age pensions for various countries in relation
to weekly wages in those countries 186
42. Number of recipients of old-age assistance (noncontributory) and
contributory pensions in foreign countries and number of people of eligible age 186
43. Foreign noncontributory old-age assistance systems (changes in pro-
portion of recipients to population of eligible age since effective
date of law) 187
44. Estimates of the number of old-age assistance recipients and the
amount of Federal subsidy to State old-age assistance programs 194
45. Progress of tax and benefit payments under proposed old-age annuity
plan 212
XVI LIST OF TABLES
PART II. OLD-AGE SECURITY— Continued No. Page
46. Summary of provisions for Federal grants to States for old-age assist-
ance 219
47. Summary of principal provisions of the Federal Social Security Act
relating to Federal old-age benefits 223
48. Monthly benefits payable for specified total wages as defined for the
purposes of title II of the Social Security Act 224
PART III. SECURITY FOR CHILDREN
49. Conditions under which aid to dependent children may be granted and
limitations on amount of aid (1934) 235
50. Extent to which aid to dependent children is provided: Annual per-
capita expenditure and percentage of counties granting aid, 1934. _ 237
51. Estimated number of families and children receiving aid to dependent
children (based on figures available Nov. 15, 1934) 238
52. Marital status of families with female heads and number of children
under 21 years and under 10 years: United States population census, 1930 (unpublished figures) 240
53. Distribution of widowed and separated or divorced women heads of
relief families in urban areas with children under the age of 16 years, based on 5-percent sample study of occupational character- istics of relief families in 79 cities, May 1934 243
54. Characteristics of households with widowed and separated or divorced
women heads of relief families in urban aieas with children under the age of 16 years, based on 5-percent sample study of occupa- tional characteristics of relief families in 79 cities. May 1934 244
55. Estimated annual expenditures for aid to dependent children (based
on figures available Nov. 15, 1934) 245
56. Average monthly grant per family for aid to dependent children 247
57. Funds for State maternal and child-health work, 1928 and 1934 272
58. State funds for maternal and child-health work, 1934 273
59. Permanent public-health nursing service in the counties of 24 States,
1934 275
60. Permanent prenatal and child-health centers in the counties of 18
States, 1934 275
61. Physical defects or conditions needing attention as reported by mother
to visiting nurse among 9,472 children included in 3,500 families under the care of public-health nursing agencies in 25 .cities, Novem- ber 1934 277
62. Adequacy of family milk supply in 3,500 families under the care of
public-health nursing agencies in 25 cities, November 1934 278
63. State and county public funds for care of crippled children 285
64. Summary of provisions for Federal grants to States for aid to depen-
dent children (mothers' aid) 293
PART IV. PROVISIONS FOR THE BLIND
65. Data on the operation of systems for aid to the blind in the United
States, 1934 303
66. Principal provisions of State laws providing for allowances for the
blind (as of Aug. 1, 1935) 306
67. Summary of provisions for Federal grants to States for aid to the blind. 311
LIST OF TABLES XVII
PART VI. THE NEED FOR FEDERAL SUPPORT OF SOCIAL SECURITY PROGRAMS No. Page
68. Statutory placement of financial responsibility for various welfare
activities in the several States, Aug. 1, 1935 349
69. Distribution of financial responsibility, August 1935 350
70. Assessed valuations and general property-tax receipts of local units of
government, 1922 and 1932 353
71. Trend of population, assessed valuation, and tax levy, city of Detroit,
1915-34 353
72. Receipts by local authorities of England and Wales 357
73. Trend of net indebtedness of local units of government, 1902-32 357
74. Net bonded debt of cities of over 500,000 population (excluding self-
supporting indebtedness), Jan. 1, 1929, and 1934 358
75. Revenues, expenditures, and indebtedness of cities (with 1924 popula-
tion of 300,000 or more), 1924-32 359
76. Trend of relief expenditures 359
77. Trend of State government tax receipts, 48 States, 1925-32 361
78. Trend of State expenditures for government, 48 States, 1925-32 362
79. Indexes of State wealth and income 364
80. State and local tax receipts, 1932, and ratios of tax receipts to indexes
of State wealth and income 367
81. Ratio of State and local tax receipts, 1932, (a) to income, 1929; (b) to
retail sales, 1933; and (c) to taxable wealth, 1931 368
82. State and local net indebtedness, 1912-32 368
83. Per-capita State and local net debt, 1922 and 1932, and ratio of 1932
net debt to income and wealth 370
84. Grants to States for social security 372
85. The cost of a 1-, 3-, and 6-percent tax on pay rolls of wage earners and
salaried workers for selected industries in terms of value added by manufacture and total value of products 376
APPENDIXES
I-l. Occupations excluded from the unemployment compensation
plan, United States, April 1930 386
1-2. Occupational exclusions of gainful workers from the unemploy- ment compensation plan by industries. United States, April 1930 387
1-3. Number and percent of coal-mining establishments and wage earners, by number of wage earners per establishment, United States, 1929 388
1-4. Number and percent of mining and quarrying establishments and wage earners, by number of wage earners per establishment, United States, 1929 388
1-5. Number and percent of manufacturing establishments and wage earners, by number of wage earners per establishment, United States, 1929 389
1-6. Estimated distribution of "wholesalers only" establishments and employees, by average number of employees per establish- ment. United States, 1929 390
1-7. Estimated distribution of establishments and employees in wholesale trade, by average number of employees per estab- lishment. United States, 1929 390
78470—37 2
XVIII LIST OF TABLES
APPENDIXES— Continued
No. Page
1-8. Estimated distribution of retail stores, employees, and average number of employees per store, by volume of sales per store,
United States, 1929 391
1-9. Estimated distribution of establishments and employees in retail trade, by number of employees per average establish- ment, United States, 1929 391
I-IO. "Size-of-firm" exclusion of gainful workers by industries, United
States, April 1930 393
I-ll. Distribution of total gainful workers and unemployed workers
by socio-economic groups in the United States, April 1930 394
1-12. Employed compensable labor force by industry and by type of
exclusion, United States, April 1930 395
1-13. Employed compensable labor force by industries. United States,
April 1930 396
1-14. Unemployed compensable labor force. United States, April 1930_ 396 1-15. Estimated compensable labor force in the United States, April
1930 397
1-16. Estimated compensable labor force, United States, 1922-33 398
1-17. Estimates of the compensable labor force, 1930-33, by States 400
II-l. Distribution of the unemployed by duration of unemployment,
Los Angeles, California, April 1930 and January 1931 405
II-2. Duration of unemployment by weeks, Los Angeles, California,
April 1930 and January 1931 407
II-3. Average unemployment rate in compensable labor force, for years represented by each composite curve, and in cities in
corresponding years 412
III-l. Assessable wages and salaries of employed compensable labor
force. United States, 1922-33 416
IV-1. Personnel of public employment offices by States, 1935, com- pared with estimated number needed for unemployment com- pensation activities 438
VIII-1. Noncontributory old-age pensions in Canada 454
VIII-2. Distribution of noncontributory old-age pensioners by Provinces
in Canada 454
VIII-3. Distribution of Canadian Government annuity contracts written
in 1930 455
IX-1. The insured population and beneficiaries of foreign survivors'
insurance laws 462
IX-2. Comparison of average survivors' pensions with weekly wages
for unskilled labor in engineering trades 466
X-1. Legal provisions for computing invalidity, old-age, and surviv- ors' pensions 472
X-2. Total benefit payments and distribution of cost 474
X-3. Percentage distribution of cost of pensions between the individ- ual funds, the common fund, and the Federal Government.. 476
X-4. Investment of reserve, 1891-1933 478
X-5. Investment of reserve by type of investment 480
X-6. Investments promoting the general welfare 481
X-7. Receipts and expenditures, 1891-1934 483
X-8. Proportion of cost of administration to total expenditures and
total receipts 485
LIST OF TABLES XIX
APPENDIXES— Continued No. Page
X-9. Wage classes and contribution rates, 1891-1934 486
X-10. Rate of contribution as percent of lower and upper limit of each
wage class 486
X-11. Yearly amount of old-age pension 488
X-12. Average yearly amount of old-age pension grants 489
X-13. Yearly amount of invalidity pension 491
X-14. Average yearly amount of the invalidity pension grants 492
X-15. Average yearly amount of widows' pension grants 493
X-16. Average yearly amount of orphans' pension grants 494
X-17. Number of persons in receipt of pensions, 1891-1934 494
X-18. Number of pensioners 65 years of age or over 495
XI- 1. Trend of birth rates in the United States expanding birth- registration area by States, 1915-34 499
XI-2. Trend of maternal mortality in the United States birth-registra- tion area by States, 1915-34 500
XI-3. Trend of maternal mortality by color in the United States birth- registration area and in States having 1,500 or more Negro
births in 1934; 1915-34 502
XI-4. Trend of maternal mortality in the United States and certain
foreign countries, 1915-34 504
XI-5. Trend of infant mortality in the United States birth-registration
area by States, 1915-34 505
XI-6. Trend of infant mortality by color in the United States birth- registration area and in States having 1,500 or more Negro
births in 1934; 1915-34 506
XI-7. Trend of infant mortality in urban and rural districts of the
United States birth-registration area by States, 1915-34 509
XI-8. Infant mortality rates (deaths under 1 year per 1,000 live births), by specified groups of causes, in the United States birth- registration area of 1921, exclusive of South Carolina, 1921-34_ 513
LIST OF FIGURES
1. Actual and estimated number of persons aged 65 and over com-
pared to total population, 1860-2000 140
2. Employed male population 40 years and over compared to total
male population 40 years and over 147
3. Maternal mortality in the United States, 1933 262
4. Infant mortality in the United States, 1933 264
5. Mortality in the first month and the first year of life, United
States, 1934, from specified groups of causes. . 266
6. Trend of infant mortality in urban and rural districts of the
United States 268
II- 1. Curves showing cumulative distribution of the unemployed by
duration of unemployment, Los Angeles, Calif 406
II-2. Typical curves showing hypothetical distributions of the unem- ployed by duration of unemployment 409
II-3. Curves showing composite cumulative duration distributions of
the unemployed -..,. .-,-, ,-. 411
s u
Parti UNEMPLOYMENT COMPENSATION
The basic data for part I are drawn
from staff reports on unemployment compensation
by Bryce M. Stewart, Merrill G. Murray,
W. R. Williamson, actuary, and
Fred Jahn, statistician
Chapter I INTRODUCTION
THE HAZARD of involuntary unemployment is one of the most serious and disastrous of the many risks which confront wage earners in an industrial society. Industry moves through al- ternating periods of prosperity and depression which introduce seri- ous employment risks ; workers, because of conditions entirely beyond their control and largely beyond the control of the men and insti- tutions which employ them, are from time to time deprived of all sources of income. Under normal conditions the period of unem- ployment is rarely of long duration for those workers who are not handicapped by old age or ill health. But even for relatively short periods the results of unemployment can be devastating. Savings, if any have been accumulated, are exhausted; living standards sink to a lower level ; and the nutritional and health needs of the family are neglected. Ever since the industrial revolution in the early eighteen hundreds, large-scale efforts toward public relief have been periodically necessary to provide for thousands of wage earners who have become involuntarily unemployed.
The unprecedented extent and duration of unemployment in the United States since 1930 has left no one wdio is dependent upon a wage or salary untouched by the dread of loss of w^ork. Unemploy- ment relief distributed as a form of public charity, though necessary to prevent starvation, is not a solution of the problem. It is expen- sive to distribute and demoralizing to both donor and recipient. A device is needed which will assure those wdio are involuntarily un- employed a small steady income for a limited period. Such income, received as a right, is provided by an unemployment insurance or un- employment compensation system. Even though it cannot offer complete protection of the wage earner's income during periods of severe industrial retrenchment, and even though it cannot maintain benefits which will equal normal wages in amount or duration, un- employment compensation serves to lessen the immediate effects of a major depression and to prevent its cumulative results.
Unemployment insurance has already been tested abroad and found a valuable aid to the industrial system. It will be of interest to trace its evolution and development over nearly a century and a half.
3
4 UNEMPLOYMENT COMPENSATION
THE EVOLUTION OF UNEMPLOYMENT INSUKANCE
Like many other forms of social insurance, unemployment com- pensation had its origins in trade-unions and mutual-benefit societies, where pooled periodic contributions of members were used to pay out-of-work benefits to those who were unemployed. Group action to protect workers against the new hazards of industrial life began as early as 1789 when Basel Town in Switzerland established an imemployment insurance plan which lasted for several years before it went out of existence. In England in 1824 the Journeymen Steam Engine Workers' Society distributed out-of-work benefits to its unemployed members, and in Brussels the Printers' Union adopted a system of traveling benefits for members in 1846. In all countries government legislation on unemployment compensation has followed experimentation by trade-unions. Union experience with unemploy- ment funds, though limited in scope and effectiveness, developed a code of practice which was largely adopted later when public authorities established unemployment insurance schemes.
The union schemes failed to reach the large portion of unorganized workers of the lower-paid and unskilled type, who, in periods of unemployment, were forced to depend on the charity dispensed by public poor relief and private organizations. Therefore the next step in the evolution of unemployment insurance was the establish- ment of municipal, provincial, and national government subsidies to voluntary benefit plans organized for nonunion workers. Berne, Switzerland, was the first city to inaugurate this plan which was started in 1893. Basel and Zurich followed suit, and similar munici- pal funds were created in Cologne, Germany, in 1896, in Leipzig in 1903, and in Bologna, Italy, in 1896. These funds had the dis- advantage of attracting primarily workers engaged in occupations which were subject to irregular employment. The funds became unduly loaded with bad risks and most of the schemes were shortly abandoned.
Several cities tried the experiment of subsidizing unemployment funds of trade-unions. Dijon and Limoges, France, in 1896 and 1897, respectively, were the pioneer cities in this approach, and in 1901 Ghent, Belgium, established a system of direct subsidies to trade-union members under the administration of a communal un- employment fund. The Ghent system was adopted by several cities in Germany (Strasburg in 1907; Miihlhausen, Erlangen, and Mainz in 1909) and in two Italian cities (Milan in 1905; Brescia in 1909). It was widely adopted in those countries wliich developed voluntary systems and still forms the basis of these systems.
The Ghent system provided a fixed amount of benefit to each un- employed worker in addition to the amount which he received from
INTRODUCTION 5
the union. The subsidies were granted annually and were computed on the basis of benefits paid in the previous year. No provision was made for the accumulation of reserves, and in depression years the union funds were forced to bear a larger proportion of expenditures for benefits than in other years. Liege, Belgium, in 1909 established a different basis of subsidy, with a subvention which was related to the amount of member contributions to the union as well as to bene- fits paid. This municipal subsidy was paid to the unions rather than to the unemployed workers. The Liege plan was not so widely adopted as the Ghent system.
Several of the provinces in Belgium and a number of the Swiss cantons began to add their subsidies to those of the municipalities. The first participation by a national government was in 1905 when France passed a law providing for a national subsidy to voluntary unemployment funds. With the outbreak of the World War these various European voluntary systems had considerable coverage but probably failed to apply to half the industrial wage earners in any of the countries where they were in operation. Since they were purely voluntary schemes and since they were limited to union mem- bers, they left large numbers of nonunion workers unprotected.
With the failure of the voluntary plans for nonunion workers established during the period 1890-1905, compulsory insurance against unemployment was attempted. The first compulsory plan on record is one established in St. Gall, a Swiss canton, as early as 1894. By a cantonal order municipalities were empowered to es- tablish compulsory insurance for workers receiving less than a stipulated wage. The municipality of St. Gall, acting on this authority, established a fund in the following year. Workers were required to pay contributions in proportion to wages and their benefits were graduated in proportion to contributions. After 2 years of operation the fund ceased to function, largely because of the unwillingness of the more regularly employed workers to contribute.
The idea of compulsory insurance acfter this brief experience seems to have been abandoned until it was revived in Great Britain a decade later in discussions of the inadequacy of the poor laws. The administrative machinery of a national system of employment exchanges was set up in 1909 and the first national compulsory un- employment scheme was established in 1911. It applied to six industries and covered about 2,500,000 workers. The scheme was extended in 1916 and again in 1920, when it covered practically the entire wage-earning population of the country except farm workers and domestic servants.
Following the example of Great Britain, seven European countries established nation-wide compulsory unemployment insurance. These
6
UNEMPLOYMENT COMPENSATION
countries and the dates of enactment of their laws are as follows : Austria, March 24, 1920; Bulgaria, April 12, 1925; Germany, July 16, 1927; Irish Free State, August 9, 1920; Italy, October 19, 1919; Poland, July 18, 1924; Yugoslavia, December 15, 1935. In addition. Queensland, Australia, enacted a compulsory insurance law on Oc- tober 18, 1922. Thirteen cantons of Switzerland also have such legislation, the first of which was passed in 1925. (See table 1.) Canada on June 28, 1935, enacted a compulsory unemployment insurance law to cover the entire dominion (see appendix VI).
Table 1. — Countries in which compulsory unemployment insurmice or compensa- tion laws have been enacted, and number of tcorkers covered in each, 1935
Country •
Date of law 2
Number insured ^
Australia (Queensland)
Austria 4
Bulgaria
Canada
Germany
Great Britain and Northern Ireland.
Irish Free State
Italy
Poland
Switzerland (13 cantons)
United States:
Alabama
California
District of Columbia
Massachusetts
New Hampshire
New York
Oregon
Utah
Washington
Wisconsin
Oct. 18, 1922_. Mar. 24, 1920. Apr. 12, 1925. June 28, 1935. July 16, 1927- . Dec. 16, 1911. Aug. 9, ]920_. Oct. 19, 1919.. July 18, 1924.. (')— — -
Sept. 14, 1935. June 25, 1935. Aug. 28, 1935. Aug. 12, 1935. May 29, 1935. Apr. 25, 1935.. Nov. 15, 1935. Mar. 25, 1935. Mar. 21, 1935. Jan. 29, 1932..
175, 000 1,012,000
280, 000 1, 784, 000
13. 472, 000
14, 003, 000 380, 000
4, 500, 000 957, 000 245, 000
256,000 1,587,000
75, 000
937, 000
107, 000
3, 000, 000
200, 000
50, 000 250, 000 400, 000
Total, 10 jurisdictions- Yugoslavia
Total number insured .
6, 862, 000
Dec. 15, 1935 '.
m
43, 670, 000
' A compulsory law was passed in Russia in 1922, but benefit payments were suspended in 1930.
2 These are the dates upon which the laws were enacted, not the dates upon which they went into effect.
2 These are the most recent figures available,
* Although the Austrian system is in many respects similar to unemployment insurance systems of other European countries, it is distinguished from them by requiring a means test of applicants for benefits.
' The sharp decline from earlier years is due to the elimination of unemployed workers who ha^e ex- hausted their rights to benefits and to new restrictions in coverage.
6 The first of the cantonal measures was passed in 1925.
' Date of regulations issued by Yugoslav Minister of Social Policy and Public Health.
8 Data not yet available.
In the United States, Wisconsin enacted a law for compulsory un- employment compensation on January 29, 1932, which began to oper- ate on July 1, 1934. Utah, Washington, New York, New Hamp- shire, California, Massachusetts, the District of Columbia, Alabama, and Oregon enacted compulsory legislation during 1935. Eighteen States had similar bills before their legislatures during that period.
Eleven European countries have unemployment insurance systems in operation under which government subsidies are paid to volun- tary plans. These countries and the dates of enactment of their laws are: Belgium, December 30, 1920; Czechoslovakia, July 19,
INTRODUCTION 7
1921; Denmark, April 9, 1907; Finland, November 2, 1917, repealed in 1934 and substitute legislation enacted in 1934 ; France, September 9, 1905; Greece (date not available); the Netherlands, December 2. 1916; Norway, August 6, 1915; Spain, May 25, 1931; Sweden, June 15, 1934; and 12 cantons of Switzerland, October 17, 1924. (See table 2.)
Accurate estimates of the total number of workers covered by the various compulsory and voluntary unemployment insurance laws are impossible to assemble since during the prolonged unemployment of recent years many persons have exhausted their rights to unemploy- ment benefits. The estimates for 1935 shown in tables 1 and 2 place the number insured under compulsory systems at 43,670,000 and the number insured under voluntary schemes at 4,161,000.
Table 2. — Countries im, ivhioh laws have been enacted subsidizing volmntary insurance systems and the number of loorkers covered in each, 1935
Country-
Date of law '
Number in- sured 2
Belgium
Czechoslovakia
Deimiark
Finland
France
Greece
Netherlands
Norway
Spain
Sweden
Switzerland (12 cantons)'.
Total
Dec. July Apr. Nov. Sept. («) — Dec. Aug. May June Oct
30, 1920 _. 19, 1921 3. 9, 1907...
2, 1917...
9, 1905...
2, 1916... 6, 1915... 25, 1931.. 15, 1934.. 17, 1924 8.
899, 000
, 407, 000
375, 000
* 15, 000
192, 000
46, 000
564, 000
54, 000
62, 000
' 240, 000
307,000
4, 161, 000
> These are the dates for the enactment of the national laws, not the dates upon which they took effect.
2 These are the most recent figures available.
3 This act came into effect on Apr. 1, 1925.
4 The 1917 law was repealed and replaced by a new law on Mar. 23. 1934. Number insured under the new law is not available.
5 There is no information avaOable on the date of the law. Data from Industrial and Labour Information, Nov. 18, 1935, vol. 56, no. 7, indicates that insurance funds were in existence in the tobacco, milling, and baking industries and the Athens newspaper staffs.
6 Includes 190,000 persons under laws not yet approved.
' Nine of these cantons specify that communes may enforce compulsory insurance ^within their borders. s This is the date of the national measure. The first of the cantonal acts was passed in 1925.
Only one country which has enacted nation-wide compulsory in- surance against the hazards of unemployment has ever revoked the act. Rather, the tendency has been to extend the coverage of com- pulsory systems to larger groups of workers. Russia, the one country which has repealed unemployment insurance legislation, is reported to have taken this step because unemployment no longer existed-
The present depression has proved a severe test of unemployment insurance systems. The chief difficulty has been that, as unemploy- ment became more and more extensive, workers exhausted their rights to benefits and were obliged to seek public relief. The mag- nitude of the relief problem has demanded funds beyond the re- sources of local governments. As a result, national governments
8 UNEMPLOYMENT COMPENSATION
have, of necessity, assumed responsibility for the provision of work relief and direct relief. Reliance on insurance principles has in consequence been shaken ; workers who had contributed to the insur- ance fund were allowed to draw on the fund beyond the time limit set in the original law if they had no means of subsistence. Thus an intermediary stage between insurance benefits and poor relief was introduced, the insurance fund financing benefits on a needs basis.
During this emergency period little attention has been given to the possibility of using the insurance system as a vehicle for pre- vention of unemployment, since this problem was overshadowed by the need for providing relief for those who were out of work. The necessity for large government subsidies to the insurance system has had the following results: the control of unemployment insurance and relief measures has been centralized; systems of public em- ployment offices have been developed, strengthened, and centralized ; and the tendency toward nation-wide compulsory legislation rather than local voluntary measures for unemployment insurance has received considerable impetus.
The optimism of a growing country, the long predominance of agriculture, and the relative breadth of employment opportunity have been factors in the slow development of an attack on unem- ployment in the United States. Here until 1932 all plans were entirely voluntary and, as in other countries, trade-unions were the initiators of the movement. Although the first union plan was established as early as 1831, less than 100,000 union members were covered by unemployment insurance reserves in 1934, some of which were supported by employers or jointly by employers and union members. Recurrent depressions in the last 20 years stimulated a few companies to initiate schemes which together affected about 88,000 employees, approximately two-thirds of which were in a single company.
INSURANCE PRINCIPLES IN UNEMPLOYMENT COMPEN- SATION
All forms of insurance represent attempts to evaluate the extent of loss incurred through commonly recognized contingencies (death, accident, fire, illness, invalidity, or unemployment) and to devise a scale of compensatory payments which shall be at least a partial restitution of the loss. Successful application of the insurance principle necessitates a fairly accurate measurement of the risk to be incurred, a pooling of reserves to meet the risks, and a scale of benefits which are calculated to maintain the solvency of the funds. The risk concept of insurance involves the coverage of many persons
INTRODUCTION 9
under a single plan in order to reduce the cost of meeting the risk. Small periodic payments on behalf of a large number of persons, many of whom will not experience the catastrophe for which insur- ance is carried, are necessary to provide adequate financial resources which will afford compensation for the persons who suffer the catas- trophe. Certain people will be. less subject to the contingency than others, but the mechanism of shared risk is necessary to carry out the purposes of insurance. There is less variance from expected experience in a large exposure than in a small group.
Certain basic concepts determine whether the unemployed are to be provided for under an insurance system or a plan of public aid or out-of-work donation. An application of the insurance principle in unemployment compensation means that an employee who fulfills certain qualifying conditions becomes eligible for inalienable con- tractual rights. These rights are measured by computations of the incidence and duration of unemployment over a secular period, and over this period a balance is maintained between the income and expenditures of the fund. Large reserves must consequently be ac- cumulated in good years if the anticipated drains of poor years are to be met.
In one sense unemployment "insurance" might be considered as devoid of humanitarian motives. Its structure would merely repre- sent statistical answers to such a question as "given an expectancy of X periods of unemployment and of y weeks' duration during a specified period, how much will it cost to provide z weeks of benefit at so many dollars per week?" This cost, when computed, is merely figured in terms of weekly assessments upon the contracting indi- vidual.
Data are not available in this or any other country to compute accurately any of the factors in the equation. Even life tables of insurance companies are revised periodically to allow for differences in population characteristics and health conditions, as well as the progress of medical science. A purely insurance principle as a basis of an unemployment system would need constant revision with the accumulation of experience. These revisions would, however, be legally applicable only to new contracts.
The policy underlying an unemployment compensation plan de- termines to what extent insurance principles will be maintained. If the policy is to emphasize protection against seasonal and tech- nological unemployment, with little attempt to accumulate reserves for periods of extended unemployment, insolvency of the fund is inevitable when a major depression occurs. This course may be deliberately chosen in the interests of providing more adequate pro- tection in normal times. The maximum duration of benefits pro-
10 UNEMPLOYMENT COMPENSATION
Voided is in this case adjusted to short periods of experience (2 or 3 years), the exigencies of a major depression are left out of reckon- ing, and a pay-as-you-go principle adopted. When a fund of this character is faced by a period of severe unemployment, contribution and benefit rates must be adjusted, or the government must provide a subsidy or loan to meet the deficit incurred by maintaining higher benefit rates than the income of the fund would warrant. Reduc- tion of benefits and increase of contributions meet with great oppo- sition in periods of depression, hence resort to loans or government subsidy is the usual result of a compensation system of this kind.
A closer approximation to genuine insurance is possible if an un- employment compensation plan can be computed statistically on the basis of the experience of a business cycle, and as such cover a major depression as well as the minor fluctuations of employment. This basis establishes lower benefit rates and less liberal provisions with respect to qualifications than are possible when the experience of a major depression is ignored. Yet, basically, even this type of unem- ployment compensation plan cannot be termed pure "insurance", since its benefits are not granted on a mathematical basis as to amount and duration. Social good is placed above individual right, so that some classes of workers may be favored. For example, seasonal workers may be allowed to draw disproportionately on the fund, or a minimum benefit may be provided for the lower-paid worker and a maximum benefit for the higher-paid worker. Similarly workers with very long records of employment may not receive the full pro- portion of the contributions accumulated on their behalf even if ad- ditional credit is given them for long periods of steady employment under this system. Furthermore, the impossibility of accurately predicting rates of unemployment, particularly in severe depressions, may make it impossible to maintain indefinitely even this type of plan on a solvent basis without adjustment of benefit rates and con- tributions or by government loans or grants.
Most European countries, concerned with protection against unem- ployment rather than prevention, have provided for a wide pooling of risks. When in 1920 Great Britain extended unemployment in- surance to practically the entire industrial population, the system adopted was a national pool. All contributions, whether received from England, Wales, Scotland, or Northern Ireland, were placed in one fund. It was provided, however, that industries submitting approved schemes might be permitted to operate them independently of the main system, and it was contemplated that perhaps one-third of the insured population might ultimately be covered by such plans. After the banking and insurance industries had established their own unemployment insurance systems, or "contracted out", the privi-
INTRODUCTION 11
lege was withdrawn because of the high post-war unemployment rate, the persistence of which prevented any restoration of the origi- nal provision.
In contrast to the broad national pooling of risks in Great Britain, Germany in 1927 adopted a system which allowed the pooling of widely divergent risks by regions which cut across state lines. It was thought that this procedure would stimulate competition among the regional areas for reduction of the extent of unemployment with consequent lowering of contributions. The continuous high unem- ployment rate necessitated withdrawal of this provision, however, and Germany has actually pooled her resources in a manner similar to that of Great Britain,
In Belgium, because of its strong trade-union organization, un- employment insurance was initiated mainly by funds of small local unions. In part, the need for pooling of risk forced amalgamation of many of these funds into national organizations, and in 1920 the post-war unemployment situation prompted the Government to weld these units into the semblance of a national system with pro- vision of national subsidies for further assistance during depres- sions. The assistance from the Federal treasury has recently been increased and control of all money centralized.
The experience of these three countries shows the necessity of wide application of the pooling principle, especially in periods of serious unemployment. In the absence of any form of adequate re- serves the British and German limitations on pooling had to be withdrawn, and in Belgium the granting of subsidies from an emer- gency fund largely amounts to national pooling.
The social value and the practical simplicity of pooling the risk points to this method as the most desirable. At present adequate data are not available for differentiation among risks. Any at- tempt at establishing preferential rates for groups with the most favorable experience, or "merit rating", will create problems. The major danger will be that too great credence may be given to inade- quate experience. Furthermore, the use of smaller units of cover- age will tend to immobilize considerable portions of the general funds so that, while not needed by some of the units, they will not be available to other units with an adverse experience. To give adequacy of provision in separate funds, therefore, higher rates of contribution are required than if a comprehensive pool is provided. Certainly any limitation on the pooling principle must be carefully considered.
Unemployment compensation cannot protect the insured popula- tion against the entire risk of unemployment. It must be considered only as the first line of defense. Recognition of the need for social
12 UNEMPLOYMENT COMPENSATION
insurance in the United States and other countries had its origin in a desire to segregate the risks of dependency from poor relief in general and to provide separate treatment for special problems. The risk of unemployment must similarly be broken down and its different parts must be given specialized treatment. Unemployment compensation must then be limited by strict definition to those per- sons who are ordinarily employed with a fair degree of regularity. Efforts to extend an unemployment insurance scheme beyond these proper limits have invariably converted it into a relief measure and brought it into disrepute.
Eecognition of the limited function of unemployment compensa- tion and the desirability of providing — outside of the insurance sys- tem— for those on the borderline of insurance and relief is the basis of the British Unemployment Act of 1934. Under this legislation un- employment insurance was restored to the original conception under- lying the acts of 1911 and 1920, and transitional payments — the last of a long series of post-war provisions for benefits to those on the borderline of insurance and relief — were definitely severed from un- employment insurance. Transitional payments, linked to the insur- ance system, were replaced by a system of unemployment allowances administered by a new national agency on a basis slightly different from that of the former transitional payments. This change was effected by restricting unemployment benefits to a limited period and to those with a specified minimum of previous insured employment; at the same time, an independent system of unemployment allow- ances was provided for those who lacked the requisite amount of previous insured employment to qualify for benefits, for those who had drawn the maximum number of weeks of unemployment benefits permitted, and for a limited group of persons not covered by unem- ployment insurance. Unemployment allowances differ fundamen- tally from unemployment benefits in that they are not available as a contractual right but are given only on the basis of need to appli- cants who have passed a "means test." The disqualifications also dif- fer somewhat, but in the case of both unemployment allowances and unemployment benefits applicants must be registered for work at pub- lic employment offices and are disqualified when unemployment is due to a trade dispute. Financing also differs; unemployment benefits are jointly financed by the worker, the employer, and the National Government; unemployment allowances are entirely financed from public funds.
Unemployment allowances are administered by a new national au- thority— the Unemployment Assistance Board — which has largely taken over the functions performed by the local poor-law authorities in assessing need in connection with the earlier, temporary plan of
INTRODUCTION 13
transitional payments. The relief aspect of unemployment allow- ances is evident in the detailed formulas for assessing need and in the disciplinary powers given the board for certain "difficult" cases, dis- ciplinary powers which approach those exercised by the poor-law authorities in granting "out-door" relief to the able-bodied unem- ployed.
The Germans, too, felt that unemployment insurance could not cover the entire problem of unemployment. Setting up their scheme from the vantage point of more than a decade and a half of British unemployment insurance experience and after 9 years' experience with national unemployment relief, their approach consisted of a coordinated system including three kinds of protection: (1) unem- ployment insurance, financed from joint contributions of employers and employees, with limited benefits on a contractual basis for a specified period ; (2) an emergency benefit scheme, providing benefits, financed four-fifths by the Federal and one-fifth by the local govern- ments and applicable to those insured persons who had either ex- hausted their rights to insurance benefits or who had not yet qualified for them and who were in need; (3) beyond these two, a local relief system, first established in 1924, which assured maintenance to all needy persons who were willing to work. This relief system was designed for the care of the unemployables rather than the able- bodied unemployed.
After more than two decades of experience with unemployment insurance, the fact has finally been established, as the new British law recognizes, that a sound system must have strictly defined limits ; that an insurance scheme must serve merely as the first line of de- fense, to be supplemented by other measures for able-bodied unem- ployed ineligible for statutory benefits.
KELATION OF UNEMPLOYMENT INSURANCE TO OTHER PROTECTIVE MEASURES
The various expedients to provide security against the hazards of unemployment, accidents, illness, and old age are interrelated from the standpoint of the employer, the employee, and society itself. So far as costs are imposed upon the employer, they all represent to him an increase of the labor cost of production. From the standpoint of the employee, each form of protection adds to his total measure of security. From the standpoint of society, they have an essential unity in that they sustain purchasing power, afford protection against destitution, and so promote economic and social stability.
It is inevitable that if protection is not afforded for all the indus- trial hazards, any one specific system will be made to carry some
78470—37 3
14 UNEMPLOYMENT COMPENSATION
of the burden of the other risks unprovided for. This is especially true during a period of industrial depression when the fact of unemployment impels many workers to make undue claims on other insurance funds if no unemployment insurance benefits exist. This principle is evident even in the limited American experience ; Murray W. Latimer found in his study of industrial old-age pensions that the number of pensioners in some American companies rose almost 50 percent in the single year 1931, and in all companies by probably 14 percent. In short, with unemployment increasing during the depression, many workers were pensioned who would have been entitled to unemployment benefits if such a system had been in existence. Experience with the Ohio workmen's compensation fund in the depression j^ears 1931-33 bears out this point. Increased unemployment brought increased claims on the fund and a greater number of revived compensation claims. During the year 1931-32 the cost of compensation exceeded that of any previous year. The catastrophe and general surplus fund which amounted to about $3,250,000 in 1931 fell to approximately $115,000 in August 1933. It was shown that in a prolonged compensation case the medical cost per claim during the second year of treatment was 67 percent higher in 1931 than in 1925, about 50 percent higher during the third year of treatment, and 150 percent higher in the fourth. With a system of unemployment insurance in operation, some of the risks now falling on workmen's compensation and industrial pensions in the United States would be removed, and the real cost of each of these types of compensation would be more properly allocated.
In the absence of a health-insurance system which provides bene- fits to compensate for a portion of the income loss resulting from illness, a worker who has been out of work because of illness may consider himself unemployed and claim benefits from the unem- ployment compensation system. Similarly, protection against old- age dependency is needed to prevent an unemployment compensa- tion system from compensating for old-age risks which are outside its compass.
In Europe the different types of social insurance have developed separately and have only recently begun to be considered in their interrelationships. Under the German system, the unemployment insurance fund maintains the status of an unemployed person in the old-age, invalidity, and health-insurance systems. An unem- ployed worker receives in sick benefits the same amount that he would receive in unemployment benefits, so that he may not have a special advantage in either. When the system of siclmess insurance in Germany was paralleled by a plan of unemployment insurance, expenditure on sick benefits was considerably reduced. In France,
INTRODUCTIOlSr 15
too, the recent social insurance scheme made integrated provision for all the economic risks, except that of unemployment, but special provision was made to keep employees in good standing in the other social insurance systems when unemployed.
Quite recently thought has been directed in this country to the integration of all these measures into a broad program for economic security. The widespread unemployment that has characterized this country during the depression has prompted the view that direct assistance for the unemployed must become a part of a general program of protection in the interest of the individual as well as of the stability of business and the whole economic structure. This conception of integration is hampered by traditional thinking and the practical problems that must attend any effort to merge the separate administrations that have been built up. Since our own experience in the field of social insurance is almost entirely confined to accident compensation, the United States is in a strategic position to establish well-integrated social insurance programs.
As a supplementary measure in times of widespread and pro- longed depression some form of emergency relief or transitional benefit has been deemed necessary in all foreign countries with unemployment insurance systems. In its report to the President, the Committee on Economic Security recommended that persons who remain unemployed after their benefit rights are exhausted be given w^ork — an opportunity to support themselves and their fami- lies at work provided by the Government — rather than a cash benefit.
Chapter II
A SUMMARY OF FOREIGN EXPERIENCE WITH UNEMPLOYMENT INSURANCE
NINETEEN European countries, Canada, and Queensland, Aus- tralia, now have nation-wide unemployment insurance legis- lation adopted on either a compulsory or a voluntary basis. Since the compulsory systems of unemployment insurance in Great Britain and Germany are of particular interest because of their wide coverage and highly industrialized conditions, their provisions will be discussed in the present chapter. The voluntary systems of Bel- gium and Switzerland are also considered in some detail because of the interesting parallel between the local political autonomy of these countries and the Federal-State relations of the United States.
GREAT BRITAIN ^
In its National Insurance Act passed by Parliament in 1911, Great Britain was the first country in the world to establish national com- pulsory unemployment insurance. The provisions of the insurance act were frankly experimental in nature. Political demands subse- quently resulted in many amendments and, as a result of the recom- mendations of three commissions appointed to study the system, the act has been frequently and extensively revised in the years since the initiation of the plan. The latest modifications of the sys- tem were embodied in an act of June 28, 1934, later incorporated in a consolidated unemployment insurance act which was passed on February 26, 1935. The various revisions and amendments have had reference to coverage; amounts and rates of contribution;
^ The principal sources of information on the provisions in Great Britain are as follows : Industrial Relations Counselors, Inc., An Histoi~ical Basis for Unemployment Insurance (The University of Minnesota Press, Minneapolis, 1934) ; "Unemployment-Benefit Plans in the United States and Unemployment Insurance in Foreign Countries", Bulletin of the U. 8. Bureau of Labor Statistics No. 5U (U. S. Government Printing Office, Washington, D. C, 1931) ; "Operation of Unemployment Insurance Systems in the United States and Foreign Countries", Monthly Labor Review, June, July, August, and September 1934 ; Hill, A. C. C, Jr., and Lubin, Isador, The British Attack on Unemployment (The Brook- ings Institution, Washington, D. C, 1934) ; Final Report of the Royal Commission on Unemployment Insurance (H. M. Stationery Office, London, 1932), Cmd. 4185.
17
18 UNEMPLOYME^^T COMPENSATION"
amounts, rates, and duration of benefits; qualifications for benefits; length of waiting period ; correction of anomalies and abuses ; and coordination with other measures for the assistance of the unem- ployed during the critical post-war and depression periods. The provisions of the law cover England, Northern Ireland, Scotland, and Wales. The territory now comprising the Irish Free State, before its establishment in 1922, was also covered by the British act. but now has its own system of insurance.
Administration. — The British system of unemployment insurance was first administered by the board of trade through a series of em- ployment exchanges established by the Labour Exchanges Act of 1909. Later, with the formation of a Ministry of Labour in 1917, the functions of both labor exchanges and unemployment insurance were transferred to the new government department. At present the Ministry of Labour is assisted by an unemployment insurance statu- tory committee, which has supervision over the financial aspects of the unemployment insurance scheme and acts in an advisory capacity on questions relating to the operation of the act. The statutory committee consists of a chairman and from four to six members ap- pointed for periods of 5 years. At least one member must be a woman. The foremost duty of this committee is to assure the sol- vency of the scheme. It examines the finances at the end of each calendar year and proposes amendments to the act to restore and maintain a balance between contributions and expenditures.
The Ministry of Labour maintained, on January 1, 1933, 420 local employment offices or exchanges and 747 smaller branches through- out the area of its jurisdiction. For administrative purposes the local offices are grouped in seven territorial divisions, each with a divisional office intermediate, between the other local offices of the district and a central record office for the whole system in the Minis- try of Labour at Kew. The central office at Kew is under a chief insurance officer and each of the local offices is directed by a local insurance officer. All these officers are appointees of the Minister of Labour, and other personnel appointments are under the civil service. In branch offices the personnel are frequently on a part- time basis and are not civil-service appointees.
The local and branch employment offices are the administrative units of the system with responsibility for the registration of the unemployed and examination of their work qualifications; the maintenance of lists of industrial and other labor requirements and vacancies; job placements; investigation of eligibility for benefits; and payment of benefits.
The local employment office gives each insured worker an em- ployment book which serves the threefold purpose of identification,
SUMMARY OF FOREIGN EXPERIENCE 19
record of contributions, and employment history. The book is valid for 1 3^ear and when it has expired is sent to the central office in Kew where it is filed for permanent record. While the book is current, it is kept by the employer as long as the worker is employed, and each week the employer affixes and date-cancels stamps to the value of the requisite contribution. When a worker loses his job he receives his insurance book from his employer and immediately takes it to his employment office where he leaves it until he is reemployed. The local office checks his contribution record, regis- ters him as available for work, attempts to place him in suitable employment, inquires as to whether there are any disqualifying conditions, establishes the waiting period necessary to qualify him for unemployment benefits, requires him to report, usually once a day, to sign an unemployment register, and, when statutory con- ditions are fulfilled, pays the covenanted benefits.
Certain groups outside the official insurance scheme are estab- lished locally to carry on phases of administration. Local em- ployment committees organized in 1917 in various districts, and composed of workers' and employers' representatives, and other in- terested individuals, cover the whole country. These committees advise the Minister of Labour on problems in connection with the administration of the insurance system and of the employment offices and assist the exchanges in maintaining contacts with em- ployers, trade-unions, and local industry. Between 1921 and 1926 these committees also acted on behalf of the Minister of Labour in determining eligibility^ under the special conditions attached fo the receipt of benefits for which the worker was not qualified on the basis of his record of previous contributions. Local courts of referees, consisting of a chairman appointed by the Minister of Labour and a workers' and an employers' representative, hear cases of dispute regarding ordinary benefits. If this local court decides against the claimant, an appeal may be made to the umpire who is appointed by the Crown with jurisdiction over the whole country.
Administration of unemployment insurance and placement for juveniles is the function of two separate bodies, (1) the juvenile advisory committees of the employment offices and (2) special juvenile bureaus which perform all the functions of employment exchanges.
When the national insurance act was made effective a number of trade-unions and other workers' associations were operating unem- ployment benefit schemes of their own. Under the original and subsequent acts these organizations were permitted to continue their insurance functions and to distribute the benefits to which their members were eligible under the national unemployment insurance system, provided that the unions or associations fulfilled certain re-
20 UNEMPLOYMENT COMPENSATION
quirements. These requirements have been changed at frequent intervals but in the main consist of four general rules: (1) The union must have the machinery to keep constantly informed con- cerning wages and working conditions on jobs held by its members;
(2) it must use an effective method for securing notices of vacancies from employers and for placing its unemployed members, including a register in each district under the charge of a, qualified officer;
(3) it must have a system, satisfactory to the Minister of Labour, for recording the unemployment of its members, by requiring mem- bers to register at an employment exchange or at the local union office and by providing a full-time official of the union for registra- tion work; (4) it must pay benefits from its own funds in addi- tion to state benefits. Since 1930 the minimum supplementary union benefits required have been at least 75s. for 25 weeks of unem- ployment to be paid over a period of not less than 10 weeks.
The rigid requirements imposed upon trade-union unemployment insurance plans, the involved technique of their administration of benefits, and the drain of the depression upon trade-union funds have tended to reduce the number of unions availing themselves of the permissive provisions of the law. Over 100 unions took ad- vantage of the opportunity to act as agents for the insurance system in 1911, when the law became effective, and by 1915-16 nearly half of all state benefits were paid out tlirough unions. Between 1920 and 1930, however, this percentage had dropped to less than 8 percent. In practice the unions which take advantage of the opportunity to distribute state unemployment benefits contain only one-third of the total union membership of the country.^
Coverage. — As first established, the British unemployment insur- ance system provided coverage for only 2,500,000 workers in a few selected manual trades (mechanical engineering, building, iron founding, shipbuilding, construction of vehicles, saw milling, and machine work) having a high and similar incidence of unemploy- ment. In 1916 workers engaged on or in connection with muni- tions work in any trade, as well as workers in the metal, chemical, leather, rubber, and brick trades — a total of about 1,250,000 people — were added to the system. The following year, 1917, it was recom- mended that the insurance scheme be extended to all workers, and on November 8, 1920, the scheme became practically universal. All manual workers and all nonmanual workers earning less than at the rate of £250 a year were brought within the sj'stem, except agricultural workers, domestic servants, permanent employees on the railroads, certain employees of local authorities and of the
Hill, A. C. C. Jr., and Lubin, Isador, op. cit., pp. 204-299.
SUMMARY OF FOREIGN EXPERIENCE 21
poor-law and asylum authorities, and certain employees in public- utility companies. Under amending legislation, the minimum age was set at the school-leaving age and the maximum at 64.
In July 1935, 14,003,000 persons 16 to 64 years of age, inclusive, were covered by unemployment insurance in Great Britain and Northern Ireland. On November 25, 1935, 1,788,182 insured persons were registered as unemployed in Great Britain. Of the insured unemployed in Great Britain 851,694, or slightly less than one-half, were claiming insurance benefits. The number of claims for unem- ployment allowances was 732,338 on November 25. Of these claims 34,572 were disallowed.^
The unemployment insurance statutory committee, in accordance with the provisions of the act of 1934, has studied the problem of agricultural coverage.* A report issued by this statutory committee in January 1935 recommended the establishment of unemployment insurance for agricultural workers with lower rates of contribution and benefit than those which obtain for the general unemployment insurance system. The committee recommended further that un- paid family labor, special seasonal workers (unless the worker so employed is already covered by insurance), and private gardeners should be excluded from coverage. In the opinion of the committee special provisions exempting employees but not employers from contributions will be necessary for piece-work contracts and for Irish migratory labor.
The main reasons for the recommendation of a separate account for agricultural workers are the following: (1) The general level of money wages is lower than in other industries; (2) unemploy- ment in agriculture, though substantial, is less than in the insured in- dustries taken as a whole; (3) agriculture should not be made liable to the debt incurred by the unemployment insurance fund during the past 14 years.
On April 9, 1936, the unemployment insurance act for agricultural workers was enacted into law (26 Geo. 5. and 1 Edw. 8. Ch. 13). Contributions first became payable beginning May 4, 1936, and bene- fits will be paid beginning November 5, 1936. It is estimated that 750,000 agricultural workers will be covered by the act.
Contributions. — Three sources of contribution finance the unem- ployment insurance system ; the National Government, the employer, and the employee are required to pay equal amounts to the insurance fund. The contributions are flat rates based on sex and age differen-
3 The Ministry of Laloiir Gazette, vol. XLIII, no. 12, December 1935, p. 481.
* Report of the Unemployment Insurance Statutory Committee, in accordance with sec. 20 of the Unemployment Insurance Act, 1934, on the question of the insurance against unemployment of persons engaged in employment in agriculture (Cmd. 4786), January 1935.
22 UNEMPLOYMENT COMPENSATION
tials rather than on wages. The following weekly amounts are paid by employers under the most recent act :
Males Females Age d. d.
Above 20 10 9
18 to 20 9 8
16 to 17 5 4^2
Under 16 2 2
The employees pay the same amount as weekly contributions, em- ployees 65 years of age or over being exempt, and the exchequer makes an equal payment to the insurance fund on behalf of each insured person.
The employer is made responsible for the employee's share of the contribution. He purchases stamps from the post offices and each weekly pay day affixes an unemployment insurance stamp to the employee's insurance book which has appropriate spaces for each calendar week from July 1 to June 30. The stamps are date- canceled by the employer when they are affixed. One-half the face value of each stamp is thereupon deducted from the weekly pay of each employee under 65 years of age for whom the contribution has been made.
This method of collecting income at source has many advantages, since the number of employers is small in comparison with the number of insured individuals. The money obtained by the post office from the sale of unemployment insurance stamps is turned over to the insurance fund.
The rates established for contributions and the resources avail- able for payment of benefits have varied during the 24 years that the system has operated. In the main, contributions have increased, not only in amounts but also in proportion to wages. In 1931, when the rates now in effect were established, the total weekly con- tribution of worker, employer, and state for a man over 21 repre- sented 4.6 percent of average weekly earnings.
Under the agricultural system contributions are to be paid in equal shares by employer, employee, and exchequer, each to pay weekly 4i/2d. for males 21 years of age and over and 4d. for females of the same age. The contributions for this age group are one-half of those under the general system. Younger age groups pay lower contributions. Eebates are to be given to employers and employees for agricultural labor hired on a yearly or half-yearW basis.
The 1911 Unemployment Insurance Act was based on actuarial calculations on the assumption that, on the average, 8.6 percent of the workers in the industries covered would be unemployed during a trade cycle of 10 to 15 years. During the first 9 years of the sys- tem, unemployment was less than the estimated average and reserves
SUMMARY OF FOREIGlSr EXPERIENCE 23
were accumulated. In 1920, when 11,000,000 additional workers were covered by the Unemployment Insurance Act, th^ actuarial basis was lowered to 5.32 percent as an average rate of unemploy- ment to represent more accurately the larger groups insured. Ac- tually, since 1921, the average annual percentage of unemployment has only once fallen below the 10-percent average occurring in 1924 and has ranged from 10 to over 20 percent in the intervening years. Benefits were increased under the 1920 law to allow for higher costs of living, and contributions, though also increased, were not raised in proportion to benefits. Furthermore no provision was made for the accumulation of reserves for the newly admitted groups covered. Within a month the fund faced a depression, and by the middle of 1921 the surplus accumulated in the first 9 years had been exhausted. It was also found that the statutory benefit, available to those with a specified minimum of previous employment and payable in propor- tion to the amount of insured employment, was insufficient for the needs of many insured workers. For such workers benefits were extended to those who lacked the requisite contributions or who had exhausted their statutory benefit, provided that they fulfilled certain other special conditions. These additional benefits were known by various names at different times, "uncovenanted", "extended'', and "transitional" benefits and "transitional payments." The history of the fund from 1921 to 1931 was characterized by increasing def- icits except for the year ending July 1924. Finally, the cost of "transitional" benefits was thrown upon the exchequer, and begin- ning with the act of February 6, 1930, the insurance system was relieved of the responsibility for providing payments to insured persons who had exhausted their rights to statutory benefits or lacked sufficient contributions to qualify for these benefits. Under the 1934 act the borrowing power of the fund was repealed, although temporary advances were permitted, and the existing debt is to be repaid with interest to the exchequer, at the rate of £5,000,000 a year during a period of 37 years.''
Benefits.— The benefits paid to unemployed workers covered by unemployment insurance are, lij^e contributions, flat rates based on sex and age differentials rather than on wages. Workers who qual- ify for statutory benefits must meet requirements related to defini- tions of unemployment, duration of contribution period, total amount of contributions, and duration of unemployment. The amounts and duration of benefits, the waiting period, and the statutory quali-
^ Hill and Lubin, op. cit., chap. XIII, "The Story of the Unemployment Fund" ; U. S. Department of Labor, "Unemployment-Benefit Plans in the United States and Unemploy- ment Insurance in Foreign, Countries," Bulletin of the V. 8. Bureau of Labor Statistics No. 5U (U. S. Government Printing Office, Washington, D. C, 1931), p. 288.
24 UNEMPLOYMENT COMPENSATION
jfications for the receipt of benefits are described in the paragraphs which follow.
Amotmt of Benefits. — As pointed out in the discussion of con- tributions, the amount of benefits to which a qualified unemployed worker has been entitled has fluctuated in accordance with the pro- visions of various legislative amendments to the insurance acts.
Under the 1911 act benefit rates were low, being based upon trade- union out-of-work benefit practice. They were designed merely to bridge short gaps between jobs and to offer minimum subsistence rather than to afford compensation which would approximate or- dinary wages except for low-paid unskilled laborers. In a period of high costs of living the benefits were increased, but were subse- quently decreased partly as an economy measure and partly to per- mit extended benefits for unemployment of long duration. The most recent revision of the benefit schedule was the act of June 28, 1934, incorporated into the consolidated act of 1935. The new rates are
20 and 25 percent higher for men and for women, respectively, than were the provisions of the original act of 1911. The weekly rates for ordinary benefits are now as follows :
Males Females
Age s. s. d.
21 to 64 (inclusive) 17 15
18 to 20 14 12
17 to 18 9 7 6
Under 17 6 5
When an insured contributor, male or female, has a dependent child or dependent children, the weekly rate of benefits is increased by 2 shillings with respect to each child. A dependent child for the purpose of this act is defined as younger brother or sister, half brother or half sister, stepbrother or stepsister, stepchild, or off- spring under 14 years of age. The age limit for a dependent child is raised to 16 years (oi) if the child is receiving full-time school instruction, (&) if he is unable to find work after leaving school, or (c) if he is physically or mentally unable to receive school in- struction.
Benefits are likewise increased by. 9s. in respect of not more than one adult dependent. Female adult dependents are defined as: (1) a wife who resides with the insured contributor or is wholly or mainly supported by him; (2) a widowed mother, widowed step- mother, mother who has never been married, or mother whose husband is permanently disabled and unable to work, or person who has the care of the insured contributor's dependent children, where these persons reside with the insured contributor and are wholly or mainly supported by him; (3) a person employed at the
SUMMARY OF FOREIGN EXPERIENCE 25
rate of not less than 9s. a week who assists in the care of the insured contributor's dependent children provided such person was engaged in these duties before the insured contributor became unemployed.
Adult male dependents are defined as follows: (1) a husband who is prevented by physical or mental infirmity from supporting himself and is wholly or mainly maintained by his wife; (2) a physically or mentally incapacitated father or stepfather who resides with the insured contributor and is wholly or mainly sup- ported by him.
Benefits for agricultural workers are somewhat lower than those for industrial workers. The amount of benefits for agricultural workers is 14s. a week for a man aged 21 to 65 and 12s. 6d. for a woman between these ages. Allowances for dependents are Ts. a week for a dependent adult and 3s. a week for each dependent child. The maximum benefit is 30s. a week.
Duration of Benefits. — After statutory requirements have been ful- filled and the required waiting period has elapsed, an insured con- tributor is entitled to receive weekly cash benefits, the amount of which is determined by his age and sex. Under the Unemployment Act of 1934, these benefits are payable for 26 weeks (156 days) in the 12 months following the date of application. Special provi- sions relating additional benefits to contributions enable persons with good employment records in insured occupations to obtain benefits for the full 52 weeks in a 12-month period. Thus, if the contributor has been insured for 5 years previous to the date of application for bene- fits, he is allowed 3 additional days of benefits for each 5 weekly contributions made in his behalf during the 5-year period. From these additional days allowed is subti'acted 1 day for every 5 days of benefits which he may have received during the 5 years. When a claimant has exhausted his right to benefits, ten contributions on his behalf are necessary before he may obtain benefits for another period of unemployment.
Since the insurance system has been in operation, the standard duration of benefits, like rates of contribution and of benefits, has- been frequently revised. Ever since 1921 it has been felt necessary to make some special provision for persons who lost their jobs before they had the statutory number of contributions to their credit and for those who had exhausted their rights to benefits. Systems of "uncovenanted", "extended", and "transitional" benefits were es- tablished in the hope that during a temporary emergency the insur- ance fund would be able to pay benefits in advance of contributions. At one time uncovenanted and extended benefits were granted at the discretion of the Minister of Labour ; at other times, they were granted as a right to all unemployed persons covered by insurance. As a
26 UNEMPLOYMENT COMPENSATION
result of the National Economy Act of 1931 transitional payments were restricted to claimants who could prove their need.
The act of June 28, 1934, abolished transitional payments and made a complete separation of the insurance system and unemploy- ment relief through the establishment of an unemployment assistance fund. However, the continuation of transitional payments through the labor exchanges was provided for until January 7, 1935, the date set by the Ministry of Labour for the transfer of these cases to the newly established unemployment assistance system. The cost of unemplojanent assistance is met almost entirely by the national treasury, though a small portion will be financed by local tax funds. The employment exchanges will continue to act as the paying agents.
Under the system for agricultural workers, contributions are col- lected for 6 months before payment of benefits, and each individual must have paid 20 contributions within 2 years before qualifying for benefits. In order to begin a benefit year, the contributor must have not less than 10 unexhausted contributions. The benefit period in a benefit year is defined as 2 weeks of benefits for the first 10 unexhausted contributions and 1 further week of benefits for each 2 unexhausted contributions beyond 10, subject to a maximum of 50 weeks of benefits in any benefit year.
Statutory Conditions for the Receipt of Benefits. — Four statutory conditions must be fulfilled before an insured contributor may be- come entitled to unemployment benefits: (1) Not less than 30 con- tributions must have been made to his credit during the 2 years previous to the date of claim for benefits; (2) his application for benefits must be made in the prescribed manner and he must have been continuously unemployed since the date of application; (3) he must satisfy the authorities that he is capable of and available for work; (4) he must, if a juvenile under 18 years of age, either attend or show good cause for not attending authorized courses of instruction designed to facilitate his chances for reemploj^ment.
Waithig Period. — Six days must elapse between the date of applica- tion for unemployment insurance benefits and the date when the applicant first becomes eligible for benefit. An}^ 3 days of unem- ployment in 6 consecutive working days are considered as con- tinuous 3-day periods of unemployment. Two such periods of unem- ployment satisfy the waiting-period requirement, provided the}" are not separated by more than 10 weeks.
Disquali^cation From Benefits. — Grounds for disqualification from benefits are failure or refusal to apply for a suitable job called to the attention of the unemployed contributor by the employment exchange or failure or refusal to carry out written instructions given him by an employment exchange officer Avith a view to assisting
SUMMARY OF FOREIGN EXPERIENCE 27
him in finding suitable employment; misconduct; voluntarily leav- ing work without just cause; unemployment resulting from a trade dispute. The maximum period of disqualification is 6 weeks except that for trade disputes the applicant for benefits is disqualified for the duration of the dispute. Inmates of a prison or workhouse, per- sons residing outside the United Kingdom, and those who are in receipt of sickness-insurance benefits, invalidity benefits, or pensions for blindness are not eligible for unemployment benefits.
GERMANY «
Although a pioneer in other forms of nation-wnde, compulsory social insurance, Germany did not enact unemployment insurance legislation until July 1927, when an insurance system was developed as a substitute for and an adjunct to national emergency relief for the unemployed.
Post-war unemployment had far exceeded the financial resources of local public authorities. In November 1918 a national relief system was established and financed from communal, state, and Fed- eral funds to assist all persons able and willing to work but in need because of unemployment resulting from the war. The system was an emergency measure intended for only 1 year of operation, but it remained in force, with minor revisions, until 1923, when a per- manent system was set up.
The first step in the transformation of emergency relief into un- employment insurance was taken on October 15, 1923, when em- ployers and employees were required to contribute toward the cost of relief. Their contributions, based on wages, were to provide four-fifths of the total unemployment relief expenditures and the remaining one-fifth was to be derived from communal appropria- tions, with supplementary aid from state and Federal Governments if these sources of income proved inadequate. At first communal authorities administered the relief fund, but control was gradually shifted to employment exchanges wdiich had been consolidated
* Sources : "Gesetz iiber Arbeitsvermittlung- und Arbeitslosenversicherung vom 16. Juli 1927," Reichsgesetzblattj Teil I, Jahrgang 1927 (Verlag des Gesetzsammlungsamts, Berlin, 1927), p. 187; Gesetz ilber Arheitsverniittlung und Arbeitslosenversicherung, In der Fassung des Ciesetzes vom 12. Oktober 1929 (Reichsgesetzblatt I, S. 162) und der Verord- nungen dts Reichspriisidenten vom 26. Juli und 1. Dezember 1930 (Reichsgesetzblatt I, S. 318 und S. 520) nebst der Verordnung des Reicbsarbeitsministers iiber die Krisen- fiirsorge fiir Arheitslose vom 11. Oktober 1930 (Reichsgesetzblatt I, Nr. 42) ; Reichsarbeits- blatt, Amtsblatt des Reichsarbeitsministeriums, Teil I, Amtlicher Teil, Jahrgang 1928- Jahrgang 1935 (incl.) ; Industrial Relations Counselors, Inc., An Historical Basis for Unemployment Insurance (The University of Minnesota Press, Minneapolis, 1934) ; "Op- eration of Unemployment Insurance Systems in the United States and in Foreign Coun- tries, 1031 to i9.34."' Monthly Labor Review, vol. 39, no. 2, August ]934, pp, 273-307; Weigert, Oscar. Administration of Placetnent and Unemployment Insurance in Germany (Industrial Relations Counselors, Inc., New York, 1934) ; studies of the staff of the Committee on Economic Security.
28 UNEMPLOYMENT COMPENSATION
into a national system in July 1922. In 1926 a severe crisis prompted an extension of the system beyond the time of previous regulations, with funds supplied by the Federal Government and communes in proportions of three-fourths and one-fourth, respectively.
The entire relief system was superseded by the Employment Ex- change and Unemployment Insurance Act of July 16, 1927, to take effect on October 1. In framing this act German authorities fore- saw that the payment of ordinary benefits would not afford the workers covered adequate protection during severe depressions. At the very outset, therefore, the system was a combination of insurance and relief, with provision for extended out-of-work benefits to in- sured persons whose unemployment was of longer duration than the period of covenanted benefits. Applicants for emergeiicy bene- fits were required to pass a needs test, but this test was to be less strict than that applied for local public assistance.
Ordinary benefits were to be financed hj contributions of em- ployers and workers. The Federal and local governments were responsible for furnishing the funds for emergency benefits, given to workers who were not yet, or were no longer, qualified for ordi- nary benefits. The Federal Government w^as to pay four-fifths of such benefits, the local governments paying the remaining one-fifth. If the worker remained unemployed after having drawn the maxi- mum amount of ordinary and emergency benefits allowed him under the law, he was then taken care of by the local poor-relief authori- ties. Thus there were three distinct steps in the help given an unemployed worker: First, he received insurance benefits. These were given to him as a matter of right, since he (or his employer) had paid for them by contributions to the insurance fund. Second, during severe depressions the Federal Government, in cooperation with the local governments, promised to continue making payments for a limited period of time to a worker after he passed a means test administered by the employment exchanges. Third, the local poor-relief authorities took care of all persons who were ineligible for both insurance and emergency benefits.
Industrial and employment conditions were rather favorable at the beginning of unemployment insurance operations, but in 192S and 1929 Germany suffered a severe depression and a crisis in govern- ment finance. To relieve some of the strain upon the insurance sys- tem which resulted from widespread unemployment, the Federal Government made large loans to the insurance fund. A commis- sion was appointed during the summer of 1929 to recommend re- forms in the system. As a result, various measures to limit coverage, to prolong the waiting period, to prevent abuses, and to tighten restrictions were enacted. A month later (December 1929) the con- tribution rate was increased for a 4-month period in the hope of
SUMMARY OF FOREIGN EXPERIENCE 29
removing the budget deficit. In the spring of 1930 the Reichstag was dissolved because of its rejection of a bill to increase contribu- tions by an additional 1 percent and to decrease benefits. The measure became effective, however, by presidential decree. In Octo- ber 1930 the contribution rate was again increased to a total of 6.5 percent of wages, shared equally by employer and employee.
Meanwhile the number of persons who had exhausted their rights to emergency as well as statutory benefits and who had claimed local poor relief had reduced many of the local governments to the verge of bankruptcy. The year 1931 brought an even more serious financial crisis, in withdrawal of foreign credit, large reparations payments, and reduced export trade. Uncertainty concerning the political sta- bility and financial solvency of the country created a panic.
A- commission appointed in January 1931 was called to recommend measures of economy. They unreservedly supported the continuance of the insurance principle for the relief of unemployment and re- jected the application of a needs test to recipients of ordinary bene- fits; but, in order to balance the budget, they advocated a longer waiting period, reduction of benefit rates, stricter application of eligibility requirements, and greater Federal powers. They also rec- ommended the continuance of emergency benefits as an intermediate stage between insurance and poor relief. The recommendations of the commission were incorporated in a presidential order and, to meet the cost of extended benefits, an emergency tax was levied on wages, salaries, and other income for a 2-year period. The various economy measures introduced in 1931 resulted in a surplus in the Federal insurance fund for the fiscal year ending March 31, 1933. But the financial burden of emergency benefits continued to increase beyond the financial capacity of local and National Governments. In 1932 the Federal Government was therefore empowered to revise benefit rates and to apply any surplus in the ordinary benefit account to other expenditures for unemployment relief. These meas- ures destroyed many of the insurance features of the original act. An attempt was made to adjust benefits in accordance with the cost of living in communities of various size. Ordinary benefits were paid for only 36 days without proof of need, and a rigorous needs test was applied to claimants after they had received benefits for 6 weeks. The means test was similar to the test for recipients of poor relief. The tax on all wages and salaries was continued to help pay for emergency benefits.
Since the National-Socialist revolution other restrictions with re- spect to financing the system have been introduced. Emergency benefits are now entirely paid for by contributions from employers and employees. The new Government in Germany has addressed its major efforts to the prevention of unemployment through regulation
78470—37 4 _ _
30 UNEMPLOYMENT COMPENSATION
of employment, bonuses to the employers for hiring persons over 40 years of age, and work programs.
Administration. — The Federal Institute for Employment Ex- changes and Unemployment Insurance (Reichsanstalt fiir Arbeitsver- mittlung und Arbeitslosenversicherung) , an autonomous organization supervised by the Ministry of Labor, is the central administrative au- thority for the unemployment insurance system, as well as for em- ployment exchanges. Before 1933 the powers of the president of the institute were circumscribed in accordance with democratic prin- ciples of administration. The president carried out the decisions of the board in charge of administering the law (Verwaltungsrat), on which employers, employees, and the public were represented. In 1933, in keeping with the introduction of the "leadership prin- ciple" in other branches of the Government, the president took over the functions of the governing board and became solely responsible for the decisions made by him. The same fundamental change was made in the state and district employment exchange and unem- ployment insurance offices (Landesarbeitsamter und Arbeitsamter). The committees on which the interested parties were represented transferred their powers to the heads of the state and district offices, who were responsible only to the president of the Federal institute.
Thirteen district employment exchanges supervise the activities of the local offices, of which there are more than 360, direct the transfer of workers from one district to another, act as the deposi- tory of the moneys collected as contributions in their district, and, by making loans or granting subsidies from the funds of the Federal institution, promote relief work calculated to reduce unemployment.
Local health-insurance offices (10,000 in number) receive the employer-employee contributions for unemployment insurance at the same time that health-insurance contributions are collected. The sickness-insurance societies then transmit the insurance contributions to the district employment exchanges which, in turn, send part of the surplus to the central office and keep the remainder for disbursement to local employment exchanges of their jurisdictions in accordance with the local requirements for benefit payments.
The intermediary collection and transfer of contributions by the health-insurance funds is supervised by the Federal institution. The health-insurance societies retain as a collection fee a small percentage of the unemployment contributions which they collect. From the unemployment insurance contributions are also paid the costs of placement, vocational guidance, and administration of the local, district, and central offices of the Federal institution.
When unemployed, a worker registers at once at the placement department of his local employment exchange, where he receives a
SUMMARY OF FOREIGN EXPERIENCE 31
control or report card. The qualifying period, waiting period, and duration of benefit all date from the time of this registration.
If the worker cannot be placed immediately in new employment, his case is at once transferred to the insurance department where he files his application for benefits. This application is accom- panied by evidence that he has been in insured employment, to- gether with statements of the duration of his last employment, his earnings during the preceding 6 months, and the reasons for ter- minating employment. He must also state the number of his de- pendents and the amount of money he has received as a discharge bonus or other benefits. His claim to benefits is investigated and his eligibility requirements are frequently checked during the course of his unemployment. Since the 1932 amendment went into effect, the applicant also has to furnish information on his resources. While the possession of income does not bar him from benefits for the first 6 weeks, continuance of payments is made contingent upon his need after that time. The local relief offices begin investigating the financial status of the unemployed and of his relatives shortly after the application is filed in order to determine whether bene- fits should be paid beyond the first 6 weeks. During the prescribed waiting period and while he is in receipt of benefits, the unemployed worker must report three times a week at the placement office to register his availability for work. Benefits are paid at the employ- ment exchanges once a week in accordance with the wage class of the insured worker.
The appeals procedure was worked out on democratic principles in the original law. There were attached to the local employment offices committees which decided disputed points. Representatives of employers and employees had a voice in the decision. The appeals commissions attached to the district and state offices were organized in a similar manner, and so was the commission of last resort, which formed a part of the Federal insurance office (Reichsversiche- rungsamt).'^ Under the National-Socialist Government, these com- mittees and commissions went out of existence, and the decisions are now made by the heads of the local district and Federal offices in accordance with the "leadership principle."
Coverage. — The German compulsory system of unemployment in- '^urance covers all manual workers between the school-leaving age and 65 and all salaried persons receiving no more than 8,400 marks a year, except that agricultural workers and domestic servants are excluded from the system.
The population of the country in June 1933 was 65,336,000, of whom 32,300,000 were gainful workers. The total number of those
"' This office also administers all forms of social insurance except unemployment insurance.
32 UNEMPLOYMENT COMPENSATION
insured against unemployment was 13,472,000 in November 1935. During that month the Federal institution reported 1,984,452 as un- employed. Of these, 386,684 were receiving ordinary benefits, 666,466 were in receipt of emergency benefits, and 340,017 were receiving relief from local welfare authorities. The remaining 591,285 un- employed persons were receiving no form of unemployment benefits or assistance from public authorities.^
Contributions. — The insurance system is designed to operate solely with employer and employee contributions. A total payment of 6.5 percent of the first 300 marks per month in wages and salaries is shared equally by employer and employee. The insurance system has from time to time availed itself of its power to borrow from the Federal Government, but contributions and benefits are now adjusted to permit the funds to carry the entire load of ordinary and emer- gency benefits.
The insurance fund is completely pooled for all industries and all districts except that the Carl Zeiss Optical Works has been per- mitted to maintain its own system of unemployment insurance with participation in the administrative expenses of the national system. From time to time it has been recommended that contribution rates should be varied for districts and industries in accordance with their unemployment hazards, but it has been felt that departure from the uniform basis would tend to restrict the mobility of labor, as well as to handicap industries with high risks.
Benefits. — Ordinary benefits, like contributions, are graduated by the income class of the insured contributor and, in addition, are varied in accordance with the size of the community. The benefits paid are a higher percentage of the basic wage in the lower income groups than in the higher. Additional "family allowances" in re- spect of each dependent of the insured person are also paid. These benefits are subject to deduction for a portion of the income derived from temporary employment.
The emergency benefits and family allowances are the same as ordinary benefits but are payable only to those who pass a rigid means test and are reduced in proportion to any income which the worker may possess.
Atnownt of Benefits. — The following tabulation gives the range of maximum weekly benefits payable to various wage classes in three different types of communities :
Range of maximum Group ienefits (Reichsmarks)
No dependents 4.50 to 11.50
1 to 6 dependents 5.70 to 27.90
Partially unemployed (more than 3 days a week) 0.90 to 21.00
' Statistische Beilage sum Reichsarieitshlatt, 1936, Nr. 1, pp. 5-6.
SUMMARY OF FOREIGN EXPERIENCE 33
Duration of Benefits. — Ordinary benefits are paid to a qualified person for a period of 20 weeks, except that after 6 weeks they are contingent upon a needs test. Emergency benefits, after exhaustion of the right to ordinary benefits, are payable up to a period of 38 weeks or, in exceptional cases for persons over 40 years old, for a period of 51 weeks.
Statutory Conditions for the Receipt of Benefits. — In order to qualify for the first benefit an insured person must have been em- ployed and have paid his contributions for a period of 52 weeks in the 2 years preceding his benefit claim. For subsequent periods of unemployment he must have been employed and have paid con- tributions for 26 weeks in the 12 months preceding the filing of the new claim. Further statutory conditions for benefits are reporting for registration at the employment exchange, ability and willing- ness to accept work, performance of work or training, and in the case of persons under 21 years of age, married women, and workers who have received six weekly benefits, evidence of need. Addi- tional eligibility requirements are imposed upon part-time workers.
Waiting Period. — After the claim for ordinary benefits has been filed, a waiting period must elapse before the first benefit is payable. The duration of this period is set at 14 days for persons with no dependents, at 7 days for persons with one to three dependents, and at 3 days for persons with four or more dependents. These wait- ing periods are reduced for persons who were employed only part time prior to their total unemployment and for those who found work after a period of unemployment but lost it before the end of 13 weeks.
Disqualification From Benefits. — If unemployment is the result of leaving work without just cause or of dismissal for just cause, the right to benefits is withheld for 6 weeks ; if the benefit claimant re- fuses to submit to vocational training or retraining, he is disqualified for a period of 4 weeks; if unemployment is a direct result of a strike or a lockout, benefits are withheld for the duration of the labor dispute.
BELGIUM ^
A voluntary system of unemployment insurance, except for a period of financial collapse during the World War, has been func- tioning in Belgium for nearly 35 years. This system had its origin
" Data on the Belgian insurance system have been taken from : Industrial Relations Counselors, Inc., An Historical Basis for Unemployment Insurance, op. cit.; Kiehel, Con- stance A., Unemployment Insurance in Belgium (Industrial Relations Counselors, Inc., New York, 1932) ; "Operation of Unemployment Insurance Systems in the United States and in Foreign Countries, 1931 to 1934", Monthly Labor Review, vol. 39, no. 2, August 1934, pp. 273-307 ; Friedman, Gladys R., "Recent Developments in Unemployment Insur- ance in Belgium", Personnel, vol. 11, no. 2, November 1934, p. 51.
34 UNEMPLOYMENT COMPENSATION
in the Liege (1897) and Ghent (1901) plans of communal subsidy to purely voluntary unemployment insurance established by trade- unions for their own members. As a subsequent development to the communal subsidy, the provincial and eventually the National Government contributed toward the benefits paid to the unemployed members of trade-union funds which met certain requirements with regard to methods of accounting. Communal funds under local political control with a minimum of Federal regulation were set up to distribute these Government subsidies and to extend insurance to nonunion members.
The population density of Belgium, the high degree of industriali- zation, the strong local autonomy of the communes, and the politi- cally conscious character of trade-unionism have all conduced to the preservation of voluntary features in the insurance plan even with the participation of the National Government in the finances of the system. Recent developments have, however, tended to strengthen central as opposed to local control. Eventually, with Government participation and subsidy the need arose for uniformity of procedure and benefits throughout the country, but not until the e\als of local political control had forced basic reorganization of the system were these results even approximated.
Just before the outbreak of the World War, 101 communes, or 4 percent of the total in the country, were affiliated with 39 communal funds. Approximately 130,000 workers were insured by trade-union and similar plans, representing an insurance coverage of about 10 percent of the working population. During this pre-war period indus- trial conditions were favorable and unemployment rarely exceeded 4 percent. The low rates of benefit paid for short periods were well within the financial limits of the systems. Almost 60 percent of the total amount of benefits paid was financed from member contributions, communal subsidies represented a little more than 25 percent, and national and provincial subsidies were responsible for about 15 percent.
Unemployment assumed staggering proportions with the outbreak of the war. Many trade-unions and communal governments were bankrupt and all attempts to pay benefits were abandoned. The National Government felt compelled to offer some form of relief to the unemployed, and in 1915 organized and financed the national relief committee to provide for all unemployed wage earners with- out regard to their participation in insurance plans. This responsi- bility, though assumed only as an emergency measure, brought to light many inadequacies of the trade-union insurance plans as meas- ures designed to meet the hazards of unemployment. A Eoyal Decree of December 1920, while reviving the bankrupt insurance societies, amplified and unified to some extent the provisions for contributions
SUMMARY OF FOREIGN EXPERIENCE 35
and benefits. At the same time a national emergency fund, similar in organization to the national relief committee, was established to distribute a Federal subsidy to societies that met Government re- quirements.
In general the trade-union insurance societies were permitted to conduct their affairs as they chose, provided they kept their unem- ployment insurance accounts separate from other finances. Un- employed members were required on the first day of unemployment to register for work at the employment exchanges which had been coordinated with emergency relief distribution. But, in the ab- sence of detailed Federal regulations, societies varied greatly in their insurance provisions. The national emergency fund supple- mented the grants of insurance societies by paying basic grants and family allowances to needy unemployed persons who had ex- hausted their rights to insurance benefits from the societies of which they were members, as well as to workers who belonged to societies that had exhausted their resources. The national emer- gency fund was supported (a) by a grant from the National Govern- ment; (b) by reimbursement, from societies which were not finan- cially exhausted, of 15 percent of its payments to members in receipt of benefits; and (c) by reimbursement, from the communes, of 10 percent of its payments to beneficiaries residing in those communes. The communal funds distributed the basic grants and family allow- ances. These communal funds were controlled by communal governments.
In the decade from 1920 to 1930 the unemployment insurance sys- tem was changed only slightly. Benefit provisions, requirements, and records of the various societies and communal funds tended toward greater uniformity, and membership in societies was restricted to persons under 65 years of age. By 1929, 70 communal funds had been established; and although only about half of the Belgian com- munes were affiliated with these funds, the communes so affiliated contained four-fifths of the entire population of the country. In 1929 Federal expenditures for unemployment insurance and relief represented more than 40 percent of the total expenditures for benefits.
With the beginning of the depression in 1930 unemployment rap- idly mounted until, by December, it reached 26 percent of the total insured population. A law was passed requiring all communes of the country to affiliate with a communal fund and to reimburse the na- tional emergency fund for 10 percent of its grants to their residents. This law introduced the first element of nation-wide compulsion in the hitherto entirely voluntary insurance system. Communal and provincial governments, however, soon were in financial straits, and the National Government through loans and advances to local govern-
36 UI^EMPLOYMENT COMPENSATION
merits was carrying practically the entire load of unemployment insurance benefits and relief. In 1934 nearly all the insurance so- cieties also became bankrupt, and the national emergency fund assumed their obligations.
Thoroughgoing reform of the insurance system was necessary. Even though the entire system was practically supported by Federal money, communal funds under local political control had the sole authority for benefit payments. Supervision of the unemployed was practically abandoned; no coordination existed between insurance and placement; and the protection afforded an insured person de- pended more upon the accident of his residence and the liberality of his commune than upon the severity of his employment risk. No attempt was made to safeguard funds by adherence to eligibility requirements, since the money was all furnished by the national treasury. Societies, for political reasons, preferred to retain the good will of the unemployed rather than to abide by administrative regu- lations, since they knew that their obligations would be assumed by the national emergency fund if their funds became insolvent.
As a result of this chaotic situation basic reorganization of the insurance and relief systems was undertaken. The National Govern- ment issued two decrees on May 31, 1933, amending and extending unemployment insurance, providing for rigorous control of the un- emplo3^ed, defining membership, contributions, and benefit require- ments on a uniform basis. The authority of the Central Government was greatly increased and local governments, though required to con- tribute a larger proportion of expenditures, were deprived of their long-cherished autonomy in the distribution of benefits. Although the present system of insurance in Belgium utilizes the old machinery of trade-unions and communal subsidy, the administrative functions of the Ministry of Labor and Social Welfare through reporting, supervisory, inspecting, and control procedures are as centralized as in countries where purely national agencies administer the system. The National Government has even deprived communes and provinces of their right to decide whether or not they are financially able to pay their share of relief and benefit expenditures. Assessments for the national emergency fund are deducted from the taxes collected by the Federal Government before the sums due to the provinces and communes are allocated to them.
More than a year after the basic reorganization of the insurance system, steps were taken to remedy two other outstanding defects, the lack of coordination with public employment offices and the multiplicity of communal funds. Accordingly, on July 27, 1934:, an order to take effect within 6 months abolished communal funds and substituted in their stead nationally controlled placement and unem- ployment offices which, in addition to placement activities, super-
SUMMARY OF FOREIGN EXPERIENCE 37
vise unemployment insurance societies and distribute to them sums placed at their disposal by the national emergency fund.
The history of the Belgian unemployment insurance system well illustrates the anomalies and inequalities which may exist in a country without the compulsion of a strong central control. The war and the depression there, as in England and on the rest of the European continent, created unemployment on a scale which swamped the existing insurance machinery. The need for emergency relief administered on a nation-wide basis as a means of preventing starva- tion and demoralization of its unemployed citizens inevitably strengthened central authority.
Administration. — The governing body of the national emergency fund and the labor office, two divisions of the Ministry of Labor and Social Welfare, are charged with the central administration of the unemployment insurance system in Belgium. The governing body of the national emergency fund is a permanent board which examines the statutes of unemployment insurance societies and rec- ommends the societies for approval by the Minister. A director, a clerical staff, and an inspector comprise the personnel of the organiza- tion.
The labor office supervises and directs the work of labor exchanges and of the new placement and unemployment offices which, by a Royal Order of July 27, 1934, were to replace within 6 months the 72 local communal funds of the country. Each of the nine provinces of Belgium is required to have at least one and not more than three of these provincial employment offices with not more than six branches, except that the provinces of Luxembourg and Namur may share one provincial office. These offices are designed to take over the former functions of communal funds and to expand the work of the inadequate employment exchanges in order that the system may be unified and integrated with placement and emergency relief of unemployed workers.
The duties of the placement and unemployment offices are as fol- lows : Determining eligibility for insurance of members of approved unemployment insurance societies; verifying the unemployment of workers who are receiving benefits; ascertaining the state of need; stamping unemployment cards; investigating the nonacceptance of work offered to unemployed persons; auditing the accounts of ap- proved unemployment societies; distributing the funds allocated by the national emergency fund as subsidies to approved societies and their local branches ; obtaining ref imds from societies for unauthor- ized benefits paid to imemployed members; finding employment for idle labor, either directly or through the medium of employment ex- changes established or approved by the Government. The 12 ex- isting employment exchanges are placed under the authority of the
38 UNEMPLOYMENT COMPENSATION
placement and unemployment offices in the district in which they are established. The administrative cost of these placement and unem- ployment offices was first to be borne by the national treasur3^ An order of September 12, 1934, however, decreed that provincial and communal authorities should contribute toward the administrative expenses of the offices in their jurisdictions.
Each placement and unemployment office and suboffice is to have an appeals board with chairman, members, and secretary consti- tuting a committee to supervise its activities. Three members repre- sent workers' organizations and three represent employers, all ap- pointed by the Minister of Labor and Social Welfare. The seventh member is appointed by the Minister as chairman and must be a person who has never been an employer or a worker. This board must meet regularly at least once a month to settle disputes regard- ing eligibility for insurance or the right to benefits.^"
The insurance societies themselves are of four types, central, au- tonomous, auxiliary, and official societies. The central societies are organized by central trade-unions with local unemployment insurance societies corresponding to local branches of the union. Autonomous societies are those of unions without local branches or subdivisions and societies established by individual companies or groups of com- panies. Auxiliary societies are branches of either central or au- tonomous societies formed for the distribution of additional bene- fits, usually upon the payment of additional contributions. Official societies are those organized for workers who are not members of any other societies.
Coverage." — Even though unemployment insurance in Belgium is a voluntary system, it has achieved coverage and uniform protection for practically the entire wage-earning population exposed to similar unemployment risks. The persons excluded are agricultural work- ers, domestic servants, musicians, dramatic and variety artists, inde- pendent w^orkers, commercial travelers and insurance agents in the service of several employers, and part-time and seasonal workers. The age limits for insurance are set at 15 to 65 years. Belgium in December 1931 had a total population of 8,159,000. The number of gainfully occupied persons in December 1920 was 3.205.000. In September 1935 approved unemployment insurance funds had a total membership of 913,277 persons, of whom 1-4.9 percent were totally unemployed and 11.9 percent were intermittently unemployed.^^
10 "Organization of Unemployment Insurance in Belgium." Industrial and Labour Infor- mation, International Labour Office, vol. LI, no. 9, Aug. 27, 1934. p. 276.
^^ Industrial and Labour Information, International Labour Office, vol. LIU, no. 7, Feb. 18, 1935, pp. 206-207.
^- Ministry of Labour Gazette (Great Britain), vol, XLIII. no. 12, December 1935, p. 483,
SUMMARY OF F0R2IGN EXPERIENCE 39
Contributions. — Contribution rates throughout the early history of the insurance system have varied with individual societies and witli age and occupation witliin a given society. A Royal Decree of May 31, 1933, doubled the rates then in existence and provided that contributions should be so calculated as to cover the risk of unem- ployment in normal times. The minimum rate was set at 2.50 francs per week. Early in 1935 the rates were again increased by a decree that existing rates were to be raised by 1 franc per week for all con- tributors except (a) those under 18 years of age and (b) those em- ployed in public service and Government monopoly undertakings, where the rates were to be increased by 1 franc per month for man- ual workers, 1.25 francs for salaried employees, and 50 centimes for persons under 18 years of age. In other undertakings the rates for workers under 18 were to be increased by 50 centimes a week. The maximum contribution per member was limited to 3 francs a week. The increases, however, were not to be required of members of so- cieties which w^ere in a position to meet their liabilities for a year to come. The national treasury deposits with the national emergency fund an amount equal to two-thirds of the annual contributions of members of each approved unemployment insurance society, as the Government's financial share in contributions.
The unemployment insurance societies collect contributions from their members weekly, fortnightly, or monthly, according to the rules of the particular group. In some instances society agents col- lect at the homes or work places of their members ; sometimes a cen- tral location is selected by a representative of the society for the re- ceipt of contributions; but more often the member pays his insur- ance contribution weekly at the society headquarters together with his union dues. A stamp method is rather generally used as a re- ceipt for payment.
Benefits.— Individual societies in Belgium are permitted to estab- lish their own rates of benefit for unemployment. The National Gov- ernment has, however, set a maximum to the amount and duration of benefits which a society may grant.
Amount of Bene-fits. — During periods of unemployment for a maximum period of 60 days in a year an eligible insured contribu- tor is entitled to statutory benefits from his insurance society. Under certain conditions he is also entitled to family and supplementary allowances from the national emergency fund. The total of his benefits may not exceed two-thirds of his normal wages unless he has three children or more, in which case the maximum is set at three- fourths of the basic wages. If an insurance society is insolvent, the national emergency fund undertakes the responsibility of paying its covenanted benefits.
40 UNEMPLOYMENT COMPENSATION
The statutory benefits of unemployment insurance societies vary with the societies themselves, but in no case may such benefits plus the benefits derived from membership in an auxiliary society exceed the basic grants of the national emergency fund which are established at different rates according to age and family responsi- bility, as shown in the following tabulation :
Daily rate, Groups panes
Unemployed maiTied person, head of family 9.00
Unemployed married woman, not bead of family " 7. 00
Unemployed person, single, divorced, or widowed without children :
25 years of age or over 9. 00
18-24 years 7. 00
16-17 years 6. 00
14-15 years 3. 00
Supplementary allowances are granted by the national emer- gency fund to persons in receipt of statutory benefits in accordance with age, family responsibility, and size of community. These benefits are the following :
Oroup
Unemployed persons over 18 years :
Industrial and commercial localities : ^ ., .
Daily rate, Population 50,000 and over: francs
Brussels, Antwerp, and their environs 4. 50
Other localities 4. 00
Population under 50,000 3. 00
Semi-industrial and commercial localities 2. 00
Agricultural communes 1. 00
Unemployed persons 16 to 18 years:
Industrial and commercial communes 2. 00
Semi-industrial and commercial communes 1. 00
The national emergency fund also grants family allowances to unemployed persons in need, even though they are in receipt of statutory benefits. The rates for these family allowances as estab- lished on May 31, 1933, are payable in respect of an unemployed per- son's dependent children and of his wife if, without other work, she manages his household. The rates are as follows :
Daily rate, fra >i cs
Wife 9.00
Children under 15 years" 3.00
Children 15 " to 16 years attending school or physically incapable of work_ 3. 00
A person is considered in a state of need if his maximum weekly income is below stated amounts which vary according to age, family
" This rate applies to partially unemployed married women ; totally unemployod married women are excluded from benefits.
"The minimum age was raised from 14 to 15 years on July 14, 1933.
SUMMARY OF FOREIGN EXPERIENCE
41
responsibility, and size of community in which the person resides. These are given in table 3.
Duration of Benefits. — The length of time during which benefits are payable varies with individual societies. The maximum stipu- lated duration of statutory benefits is 60 days a year divided equally between two 6-month periods.
Post-statutory benefits are payable normally for 30 days in a year but may be extended to a total of 300 days in a year for the combined statutory and post-statutory benefit period.
Waiting Period. — A waiting period of 3 days is required at the beginning of each 6-month benefit period, and, in addition, a regular
Table 3. — Maximum weekli/ incomes heloiD tvhich a state of need exists,
Selgium
|
Weekly income in francs |
|||||
|
Industrial and commercial communes |
Semi-indus- trial and commercial communes |
||||
|
Groups |
50,000 inhabitants or over |
Less than 50,000 in- habitants |
Agricul- tural com- |
||
|
Brussels, Antwerp, and their environs |
other com- munes |
munes |
|||
|
Persons living alone: 25 years of age or over |
150 110 210 6 9 |
135 105 190 6 9 |
120 95 170 6 9 |
105 85 150 5 |
100 |
|
Under 25 years of age |
80 |
||||
|
Household of two or more persons: Two persons |
140 |
||||
|
Each additional child under 15 years ofage.. |
5 |
||||
|
Each additional person over 15 years of age |
7 |
||||
Source: Friedman, Gladys R., "Recent Developments in Unemployment Insurance in Belgium", Personnel, vol. 11, no. 2, November 1934, p. 62.
waiting period of 2 days a month is required for the receipt of benefits. The month is calculated as beginning with its first Monday and ending with the last Saturday preceding the first Monday of the next month. Sundays and legal and local holidays are not reckoned as days of benefits and are not counted in the waiting period.
An advance equal to statutory benefits for the 3-day waiting period or fraction thereof may be paid to persons who have been com- pletely unemployed for at least 2 weeks. The advance must be repaid in full or in part when the beneficiary is again employed.
Statutory G onditio7is for the Receipt of Benefits. — Insured persons who are capable of work, who are under 65 years of age, and who have been employed for at least 6 months in the preceding calendar year are eligible for benefits in case of involuntary unemployment
42 UNEMPLOYMENT COMPENSATION
if they have been regularl}' enrolled members of unemployment insurance societies for at least a year. If, however, the unemploy- ment is the direct result of a strike or lockout, or of dismissal from employment with subsequent refusal to accept new work under con- ditions customary in the region, the insured person is not qualified to receive benefits until a month has elapsed since he showed willing- ness to resume work. Belgian nationals who accept emploj^ment abroad are also ineligible for benefits until a month after their return.
Transfer of membership from one society to another after the completion of 1 year's membership does not entail a further qualify- ing period unless the laws of the society to which the transfer is made require an additional period. But the transferred member is not entitled to receive benefits in excess of those authorized by the society with which he was formerly affiliated until 6 months of membership in the new society have elapsed.
A person who fails to pay contributions to the unemployment society for 13 weeks is struck from the membership rolls unless his delinquency of payment is the result of incapacity for work. Persons so incapacitated are bound to pay their arrears in full, except that their arrears shall not accrue for repayment beyond a period of 6 months.
In general, for eligibility to benefits an insured contributor is required to register for work at an employment office twice each day, but he is permitted to absent himself from this registration on not more than 3 half days a week if he utilizes this absence to seek work. Proof of the search for work must be offered in the appli- cation for such leave of absence.
When employment exchanges are notified of vacancies for un- skilled labor, if the conditions of work and wages offered correspond to the conditions customary in the district, these positions are offered first to insured persons who have been unoccupied for the longest time and who do not appear to have made sufficient effort to obtain employment. If such offers are refused, the person may be deprived of benefits for at least a month even if the position offered is not in the insured person's usual occupation and is at a distance from his ordinary place of work.
Method of Payment. — Benefits are usually paid weekly by the society agent who collects contributions. The procedure is in gen- eral as follows: (1) The unemploj^ed member presents a certificate from his employer as evidence that his unemployment is involun- tary; (2) he presents his payment card for record of the date, period, amount, and character of all the benefits he has received and for certification of the fact that he has registered at an employ- ment exchange; (3) he presents his membership card as a record
SUMMARY OF FOREIGN EXPERIENCE 43
of his contributions; (4) he produces certification from the em- ployment exchange that no suitable work is available.
The payment of benefits through the society includes in almost all instances the subsidy from the national emergency fund and its family and supplementary allowances.
SWITZERLAND ''^
The first attempt at unemployment insurance in Switzerland was made in Basel Town in 1T89. All workers in the lace and ribbon factories contributed 2 percent of their wages, wdiich was turned over to officials chosen by the town council. Before any benefits could be distributed, however, the revolution of 1789 halted the operation of the fund, and the contributions were returned to the contributors.
Switzerland is also credited with the first attempt to introduce a compulsory unemployment insurance law. The Canton of St. Gall enacted a law in 1894 permitting communes in its territory to ])rovide compulsory unemployment insurance for certain workers. The commune of St. Gall was the only one to establish a fund under this act. It began in 1895 and ceased to function in 1897 because workers with rather stable employment moved to neighbor- ing towns to avoid joining the fund. Left with the bad risks the fund soon showed a considerable deficit.
At the opening of the twentieth century Switzerland had made but little progress in dealing with the recurrent problem of unem- ployment, although experimentation with public employment ex- changes and private unemployment insurance funds provided the basis for further developments. The experience with relief measures during the war and post-war periods showed conclusively that some permanent method of dealing with unemployment was necessary. The voluntary unemployment insurance funds did not offer a suffi- ciently broad and stable basis to cope with the problem. The vari- ous unemployment insurance funds had functioned during the war period and had been informally and irregularly subsidized by public authorities. The Confederation, after consideration of the question, decided to formalize and place the subsidies on a permanent basis and thus encourage the development of funds.
Switzerland is a democratic country with a Federal constitution like that of the United States, in that the central authority is limited to delegated powers. The 25 cantons of the Confederation are en-
15 Data on the Swiss unemployment insurance system tiave been taken from Spates, T. C, and Rabinovitch, G. S., Unemployment Insurance in Sioltzerland (Industrial Rela- tions Counselors, Inc., New York, 1931) ; Industrial Relations Counselors, Inc., An His- torical Basis for Unemployment Insurance, op. cit.; "Unemployment Insurance in Switzer- land". MQnthly Lahqr Review, vol. 40, no. 5, May 1935, pp. 1203-1207.
44 UNEMPLOYMENT COMPENSATION
tirely autonomous except with respect to powers delegated to the Fed- eral Government. No provision in the constitution authorizes the Confederation to enact unemployment insurance legislation, much less to make it compulsory for the cantons, or even to subsidize unem- ployment insurance funds voluntarily created by the cantons. Any of these steps would require an amendment to the constitution by a vote of a majority of the Swiss electors and of the cantons.
The Confederation likewise had no power to set up a system of employment exchanges but in 1909 had subsidized exchanges as a method of stimulating the placement of the unemployed workers.^^ This same principle was utilized, in view of the constitutional diffi- culties involved, to promote and assist the development of insurance funds.
The Federal Law of 1924. — The Federal act for the payment of subsidies to unemployment insurance funds was enacted by the Fed- eral Assembly on October 17, 1924. The law provides that Federal subsidies are to be granted to funds based on the principles of in- surance which comply with conditions specified in the act. These conditions relate to (1) the objectives, administration, and member- ship of the funds; (2) the benefits payable to members; (3) the conditions entitling members to benefits; (4) the repayment of any subsidies from unused balances upon the dissolution of any fund; and (5) the conditions under which partial unemployment benefits may be included in the insurance system. In addition to these pro- visions, the law specifies the amount of Federal subsidies to be granted to funds and the general provisions for Federal recognition and supervision of the funds.
Under the section of the act dealing with the conditions relating to the objectives, administration, and membership of the funds are found the following four conditions: (a) The fund shall not be car- ried on for profit or for any purpose other than the relief of un- employment; (5) it shall have its own books and accounts and shall give guaranties for the proper administration of its moneys; (c) it shall have precise regulations respecting the contributions of members, the benefits payable, and the utilization of the assets and surplus balance; and (d) no member of one fund shall be at the same time a member of another fund.
The act stipulates that the funds shall not pa}^ more than a maximum of 50 percent of normal earnings to members who have no legal dependents and a maximum of 60 percent to members with legal dependents.
" By virtue of the ratification of the first resolution adopted at the International Labor Conference at Washington in 1919 for the establishment of a system of free employment exchanges, Switzerland assumed an internntional obligation which became the authority for issuing in 1924 an order requiring each canton to sot up the number of exchanges sufflcienl for the need and coordinated with a central exchange.
SUMMARY OF FOREIGN EXPERIENCE 45
The 1924 act provides that the funds shall not pay benefits unless the insured person becomes unemployed through no fault of his own, registers at an employment exchange, is unable to find suitable em- ployment, and produces a certificate from his last employer stating the reason for his unemployment. Subject to the approval of the Federal labor office registration at trade employment exchanges may be substituted for registration at public employment exchanges. The funds are eligible for subsidies only if they provide that mem- bers are not entitled to benefits unless they have belonged to the fund and paid contributions for at least 180 days and have served a waiting period of at least 3 days after registration. The maximum period of benefits allowable is 90 days in a period of 360 days, but by resolution of the Federal Council, the executive authority of the Government, the benefit period may be extended beyond 90 days during times of continued depression. The funds are required to provide that unemployment as a result of a collective labor dispute disqualifies the member for the period of the dispute and for 30 days thereafter; that incapacity for work disqualifies the member for the duration of the incapacity ; and that members who refuse to accept suitable employment, who make insufficient effort to find employment, who fail to comply with regulations, who supply incomplete information, or who attempt to obtain benefits unlawfully shall not be entitled to benefits.
The act of 1924 contains a provision covering the conditions under which the funds may pay compensation for partial unemployment. In such cases, the combined income from unemployment compensa- tion and the actual earnings of the insured person shall not exceed 80 percent of the normal earnings for those with dependents and 70 percent in the case of all others. The right to compensation shall cease when, during a period of 360 days, the combined com- pensation is equal to full benefit for 90 days.
The Federal subsidy to public funds organized by the cantons and communes, and to private funds administered jointly by employers and employees, is set at 40 percent of the benefits paid in conformity with the rules. The subsidy to trade-union funds is 30 percent. The variation in the amount of the subsidies was made on the as- sumption that public and joint funds would have poorer risks. The Federal Assembly specifically reserved the right to increase the subsidies temporarily by not more than 10 percent.
The legislation has additional provisions regarding the conditions under which Federal subsidies are to be obtained. The Federal labor office is given the right to inspect at any time the business opera- tions of a fund subsidized by the Confederation and to receive statis- tical data. The Federal Council is empowered to make the rules and regulations necessary to administer the act and to designate
78470—37 5
46 UNEMPLOYMENT COMPElSrSATION
the authority competent to decide matters relating to subsidies. The act provides that the Federal Council may prescribe the min- imum number of members which will entitle a fund to receive subsidies and that the subsidy may be reduced if it, together with other subsidies from public funds, would exceed a certain percentage of the benefits paid. The Federal Council may, in view of special circumstances, lay down further conditions for the payment of Federal subsidies or may grant certain relaxations temporarily. Advances from the Federal subsidy may be granted to the fund if necessity is shown. The payment of the Federal subsidy may be made conditional on its being used to increase the benefits or to prolong the period during which benefits are payable or to constitute a reserve fund. The Federal subsidy is not to cause any reduction in benefits or in contributions of the insured persons.
The Federal Orders of 1925 and 1929. — Federal orders, from time ro time, have extended, modified, and more explicitly defined the provisions of the act of 1924. Order I of the Swiss Federal Council, issued April 9, 1925, became effective on April 15, 1925, and stipu- lated' in greater detail the procedure by which recognition of funds was to be made by the Federal labor office. It provided that where recognition by the labor office is refused or withdrawn, by virtue of some alteration in the provisions of the fund, appeal may be made, within 14 days, to the Federal Council. Any decision of the labor office regarding subsidies and conditions upon which they are to be granted may be appealed, within 14 days, to the Federal Department of Public Economy, whose decision is final. The Federal labor office is given authority to lay down certain forms and principles of pro- cedure relating to notification of unemployment, employer's certifi- cate of dismissal, and statistical reports, which must be approved by the Federal Department of Public Economy.
The act of 1924 merely states that an insured person should receive benefits if unemployed through "no fault of his own" and if he is "unable to find suitable employment." Section IV of the first order defines in greater detail the scope of these two terms. Dismissal on account of gross or deliberate negligence, refusal to work, disregard of rules or a contract, and voluntarily leaving without good cause (except when continued employment would be contrary to a collec- tive agreement or to the usual wages or conditions of work in the trade) are to be regarded as faults of the insured. Suitable employ- ment is defined so that the capacity of the insured, the future exer- cise of his trade, and his health and morals are safeguarded. It is provided that exceptions may be made with regard to accepting either employment made available through a strike or employment under conditions contrary to a collective agreement covering the insured, as well as employment which is inacceptable in view of the conditions
SUMMARY OF FOREIGN EXPERIENCE 47'
and wages iii the trade. In cases of reduced working capacity, em- ployment at a; correspondingly reduced wage may be regarded as suitable. In allotting employment away from home, insured persons with dependents must be given special consideration. The Federal Department of Political Economy is authorized to prescribe further provisions for the definition of the two terms.
The order provides that the rules governing partial unemployment should be applied to any insured person who becomes temporarily unemployed without terminating his employment contract and there- fore suffers a loss of earnings.
Notification to and supervision by the employment exchange is necessary for partial unemployment only when there is a loss of full working days, w^hen the loss of earnings is more than half the normal wage, and when no other adequate system of supervision exists. These provisions also apply to homeworkers. If an un- employed worker accepts relief work or other employment outside his trade, he may be compensated for the loss of earnings according to the provisions for partial unemployment. He must nevertheless register at the employment exchange and accept any suitable em- ployment in his trade.
The order provides that public funds must accept members of other recognized funds who have voluntarily resigned or have been released through no fault of their own, provided they have fulfilled their obligations to the fund and are not unemployed at the time of transfer. Such members must be granted the same rights as other members after they have paid contributions for 4 weeks. The quali- fying period to elapse before a member is entitled to benefits in such a case is to be reduced according to the period during which the in- sured has paid contributions in the former fund.
Order II, dated December 20, 1929, came into force January 1, 1930. Among other things it provides that Federal subsidies shall not be granted to funds with a membership of less than 200, except in special cases and that recognition may be withdrawn from funds whose financial position does not guarantee the payment of benefits. The amount of the Federal subsidy is to be reduced in proportion if the total subsidies granted by public authorities exceed 80 percent of the benefits paid. Exceptions may be made to permit the crea- tion of an adequate reserve fund.
In addition to the provisions in the previous law and regulations, unemployment caused by holidays, loss of earnings resulting from regularly recurrent work, such as stock-taking, cleaning or repairs to the plant, or unemployability, is not compensable. Where unem- ployment results from a slight fault of the insured, benefits may be paid him after the expiration of not less than 4 weeks. Where the insured has received the maximum benefits for 3 consecutive
"48 UNEMPLOYMENT COMPENSATION
years, the maxinmin shall be reduced by at least one-half in the fourth year, excepting in times of depression or other special cir- cumstances.
The Federal Department of Public Economy is authorized to enact special provisions for members belonging to seasonal occu- pations and shall provide for a special waiting period, reduction in the period of benefits during seasons when there are good possi- bilities of getting employment, and establishment of special rates of contributions.
Unemployment Insurance During the Depression. — The depres- sion necessitated significant changes in the unemployment insurance laws and regulations in Switzerland. It was soon found necessary to increase the amount of Federal subsidies. On September 23, 1931, the Federal Assembly authorized the Federal Council to in- crease the subsidies 10 percent in certain specified industries for the calendar year 1931 and for any other industries seriously affected by the crisis for the period October 1 to December 31, 1931. The next year, on September 29, 1932, the Assembly authorized the Coun- cil to pay subsidies to seriously affected industries for 1932 of not more than 45 percent of benefits paid to public and joint funds and 40 percent to trade-union funds. A law enacted October 5, 1933, authorized the Federal Council to subsidize funds in certain in- dustries for the year 1933 and in other seriously affected industries for the months between October 1 and December 31, 1933. This subsidy to public and joint funds was not to exceed 43 percent, and to trade-union funds 38 percent of benefits paid. The increases in the subsidies were made on the condition that cantonal and communal subsidies were not to be decreased and that when the subsidies paid by Federal, cantonal, and communal authorities exceeded 90 percent of benefits, the Federal subsidy would be reduced in proportion.
In addition to these changes, the continuation of unemployment necessitated both the extension of the statutory period of benefits as well as the introduction of crisis relief to those individuals who had exhausted their rights to benefits. Beginning in 1930, temporary measures increased the statutory duration of benefits from time to time. An order of November 4, 1933, authorized the Federal author- ities to extend the benefit period from 90 to 120 days during the year 1933 to certain classes of workers, on condition that, during the period of extension, benefits did not exceed certain rates varying between 4 francs a day for unmarried pei-sons under 22 years of age living at home, and 8.10 francs a day for married persons with dependent children.^''
Besides the extension of the statutory period of benefits, the Fed- eral Assembly found it necessary, by a law of December 31, 1933,
>' Industrial and Labour Information, vol. L, no. 7, May 14, 1934, pp. 242-243.
SUMMARY OF FOREIGN EXPERIENCE 49
to set Up a relief scheme to supplement tlie insurance system by offering a special subsidy for tlie cantons and for intercantonal asso- ciations of workers in certain occupations paying emergency allow- ances to the unemployed. Workers who had exhausted their statu- tory right to benefits and who were in need might receive such allowances, although exceptions were made to these rules for those individuals who had not completed the required qualifying period or who were not insured for other formal reasons. The duration of the relief was fixed at 150 days a year. The subsidy was set at one-third the amount of crisis relief given but could be increased, under certain circumstances, to three-fifths of the expenditures.
A number of measures dealing with crisis relief were enacted thereafter. An order of the Federal Council of October 23, 1933, went into effect December 1, 1933,^® and stipulated that the maxi- mum period for which emergency benefits were to be payable in the course of a year be raised to 190 working days. This period might be extended, however, to 310 working days for unemployed persons who, through no fault of their own, were not entitled to benefits from any insurance fund.
Emergency benefits may be paid only to unemployed persons in need, in an amount not to exceed 50 percent of the earnings of per- sons without dependents, or 60 percent for those with dependents, provided that such benefits do not exceed certain maximums estab- lished on the basis of locality, age, number of dependents, and the time of year. Emergency benefits may be replaced wholly or in part by benefits in kind. The payment of benefits is conditional upon legislation by the cantons, 18 of which had taken action, dealing principally with the unemployed in those industries most seriously affected by the depression.^^
A more basic revision of the Swiss system was put into effect for the duration of the depression by Order IV of the Federal Council, enacted February 27, 1934, and effective April 1, 1934.-°
The act of 1924 provides that funds should not pay benefits to ex- ceed 50 percent of earnings for wholly unemployed persons without dependents, and 60 percent for those with dependents; 70 and 80 percent of earnings, respectively, were set as the maximum benefits for persons partially employed. The actual amount of benefits granted was paid according to the provisions of the fund of which the insured was a member. Order IV, however, fixes the maximum amount of wages to be taken into consideration for the purpose of
^ Recueil offlciel des lois et ordonnances de la confM6ration Suisse, nouvelle sSrie, Tome
49, annge 1933 (Impiimerie des Hoirs K. — J. Wyss, S. A., Berne, 1934), p. 873. i» Industrial and Labour Information, vol. L, no. 7, May 14, 1934, pp. 244-245.
2« Recueil offlciel des lois et ordonnances de la confederation Suisse, nouvelle s^rie, Tome
50, annee 1934 (Imprimerie des Hoirs K. — J. Wyss, S. A., Berne, 1934), p. 191; cf. Industrial and Labour Information, vol. L, no. 7, May 14, 1934, p. 243.
50 UNEMPLOYMENT COMPENSATION
calculating total and partial unemployment benefits. Thus, unem- ployed persons with more than one dependent are to be considered as receiving a maximum wage of 16 francs a day; those with one dependent, 12 francs; and those with no dependents, according to whether they are over or under 22 years of age, 10 or 8 francs, respectively. Any earnings in excess of these limits give rise to a supplementary benefit calculated at a reduced rate of 30 percent. Modifications of the waiting period and disqualification provisions of the previous law made by this order are discussed below.
Administration. — Administrative coordination exists in Switzer- land only insofar as the public authorities specify forms and pro- cedures, audit accounts, and collect information from the various funds. Simplification and uniformity are obtained through stand- ards established by the legislation providing for the granting of sub- sidies. The public funds, of course, are administered directly by the public authorities creating them. Each public authority treats separately with each fund. Since the public employment exchanges function for both the insured and noninsured portions of the popu- lation, no data are available on the real administrative cost of the Swiss insurance system. It is the endeavor of all funds to limit the costs of administration to not more than 15 percent of receipts, but during the depression this proportion has probably been exceeded.-^ Administrative costs have been generally low but are highest in the public funds which require the organization of a special staff.
There is no provision in the Federal law regarding procedure for the settlement of grievances or disputes which may arise from con- flicting interpretations of the law regarding claims to benefits. Disputes and appeals are settled in different ways by the different funds and by cantonal or communal regulations. In some funds, disputes are heard by the cantonal courts, whose decision is recog- nized as final by the Federal labor office.
Coverage. — At the end of September 1934 there were, in addition to the Federal law, orders, and regulations respecting unemploy- ment insurance, the laws of 24 cantons on the subject, the regular subsidies of 1,620 communes, and the rules and regulations of 197 funds. These laws and these relationships constitute the unemploy- ment insurance system of Switzerland.^-
Since the enactment of the Federal law all the 25 Swiss cantons have enacted legislation based upon and supplementing the Fed- eral law. Thirteen cantons now have compulsory unemploj'ment insuranc.e legislation, for specified classes of persons; eight cantons grant to the communes the right to decree compulsory insurance;
^ "Unemployment Insurance in Switzerland", Monthly Lalor Review, vol. 33, no. 1,
July 1931. p. 28.
^'^ "Dix ans d'assurance — ChOmage en Suisse", La vie iconomiquej septifeme aun6e, no. 11, novembre 1934. p. 507.
SUMMAKY OF FOREIGN EXPERIENCE 51
and four cantons have voluntary insurance. All cantons except one grant regular subsidies to recognized funds,^^ in addition to the Federal and any communal subsidies.
All the cantons which have adopted compulsory insurance have found it necessary to create public funds as the only possible method of covering all the eligible persons. The public fund is essential to permit all workers not already members of a trade-union or a joint fund to become insured as demanded under the terms of the cantonal law. The compulsory laws specify the extent of coverage, exempting certain groups from compulsory insurance for such reasons as age, occupation, income, apprenticeship, and employment tenure.
It should be noted that even in the cantons and communes which have extended the compulsory features of the law beyond the workers subject to the factory laws the act does not apply to professional workers. Many wage earners or salaried workers whose situation is too difficult of coverage by the normal insurance or- ganization are excluded. This group includes those whose situation leaves them more or less on the verge of unemployment or in need of assistance. Homeworkers are nearly everywhere excluded as well as persons working by the day in the employer's home, peddlers, commercial travelers, members of the liberal or intellectual profes- sions, employees in the administrative and public services, and employees with incomes above a certain limit.
The development of unemployment insurance in Switzerland has resulted in large part from the initiative of trade-unions and as- sociations of employers. Some of the central employers' associations founded joint funds open to the personnel of certain branches of activity over all Swiss territory. In addition, numerous regional employers' associations established joint associations open to many establishments having the same type of activity or located in the same region.
There were 149,650 insured members of 60 funds at the end of September 1925. This number increased to 539,830 in 197 funds in 1934.24
At the end of September 1934 the Federal Office of Industry, Arts and Crafts, and Labor estimated that 62.6 percent of the wage earners in the most important occupational classes usually covered by unemployment insurance were members of unemployment insur- ance funds, as compared with only 28.6 percent at the end of Sep- tember 1927.25
^ "Le dSveloppement de Tassurance — Chomage dans les cantons", La vie economique, 8« ann^e, no. 1, Janvier 1935, pp. 36-37.
2* nid., p. 36.
'^ "Les chSmeurs assures centre le ch5mage", La vie Economique, 8" annee, no. 2, f6vrier 1935, p. 95.
62 UNEMPLOYMENT COMPENSATION
A majority of the persons covered by unemployment insurance in Switzerland are covered through membership in trade-union funds. At the end of September 1934, 51 percent of the total number of persons insured in Switzerland were enrolled in trade-union funds, 30.6 percent in public funds, and 18.4 percent in joint employer- employee funds, as compared with 64.2, 17.7, and 18.1 percent, re- spectively, in 1927.^*^ Membership in all types of funds has steadily increased, but the rate of increase for public funds has been faster than that for trade-unions.
The depression no doubt led many previously uninterested per- sons to join insurance funds. Probably in most cases they have joined municipal funds, since the joint and trade-union funds would be less inclined to accept new members at such a time, and in can- tons with compulsory insurance all workers covered by the laws would already be members of some fund. The joint funds have experienced the most rapid rise during the depression both in num- ber of funds and membership. There are three main reasons for this. Federal subsidy to these funds is higher than to trade-union funds; employers' contributions lead to a reduction in the con- tributions of the insured; and the workers have learned that em- ployees who are not members of the joint fund are dismissed first.
The fund which has the largest number of members is the Swiss Federation of Metal Workers and Watch Workers, a trade-union fund, consisting of 65,699 members at the end of December 1934. The largest public fund had a membership of 40,999 — the Zurich communal fund, in which insurance is compulsory by communal law. The largest joint fund is the Basel general joint fund con- sisting of 6,970 members. In December 1934 there were only 77 funds out of the 199 existing which had 1,000 members or more, but these 77 funds (representing 37 percent of the number of funds existing) include nearly 85 percent of all members insured in Switzerland.^^
Contributions. — Although most of the funds have increased their members' rates of contribution greatly during the depression, the average of the members' contributions has declined until in 1933 it was 23.1 percent of benefits paid out, somewhat below the 30 percent required by law. Certain funds in which members are in activities suffering from little unemployment still contribute amounts equal to 50 percent and more of benefits.^^
^^ "Le developpemcnt de I'assurance — ChSmage dans les cantons", La vie I'conomique, 8« ann^e, no. 1, janvler 1935, pp. 39-40.
^ "Les chomeurs assures centre le cbfimage", La vie iconomiqiie, 8® ann^e, no. 2, f^vrier 1935, p. 97.
^"Dix ans d'assurance — ChSmage en Suisse", La vie (conomique, septiSme annSe, no. 11, novembre 1934, p. 506.
SUMMARY OF FOREIGN EXPERIENCE 63
The ratio of members' contributions to their wages, however, is extremely small, representing only from one-tenth to three-tenths of 1 percent of wages in many funds.-^ The average annual con- tribution of the worker was 10.59 francs in 1929. In that year employees' contributions amounted to more than 50 percent of bene- fits paid out. In 1933, when the average annual contribution per worker was 27.6 francs — or over two and one-half times more than the average for 1929 — employees' contributions totaled only 23 per- cent of benefits, or less than one-half as much as in 1929.^^ These figures testify to the expenditures during the depression.
The subsidies of the various public authorities now amount to more than 80 percent of all benefits paid out.^^ During the years 1925-29 the average proportion of public subsidies to benefits paid was slightly more than 65 percent.^' The increase during the de- pression resulted, of course, from the increase in subsidies during this time, both Federal and local. The percentage of subsidies paid by the cantons and communes averaged 42 percent for 1933 as against 35.5 percent for 1929.^^
Bei^efits. — Although the actual amount of benefits paid to an un- employed individual is determined by the provisions of the fund of which he is a member, a limit is set by the Federal law. As pre- viously stated the maximum payable may not be in excess of 60 and 50 percent of normal earnings for persons with and without legal dependents, respectively. The average amount of benefits paid in 1933 was 5.34 francs per day.^* The average amount of benefits was much higher during the depression years 1930-33 than during the previous years.
Over 215,000 individuals were compensated for loss of earnings through the Swiss unemployment insurance system during 1933, This number represented 40.5 percent of the total number insured. In 1930, 25.7 percent of the total number insured received compensa- tion during the year.
Duration of Benefits. — The Federal law provides that the maxi- mum period for which benefits are payable is 90 days within 360 days, but the Federal Council is given authority to extend this period
^ Cf. Spates and Rabinovitch, op. cit., pp. 224-260.
'" "Dix ans d'assurance — Chomage en Suisse", La vie ^conomique, septlfeme annSe, no. 11, novembre 1934. p. 506.
** The amount of the subsidies plus the amount of members' contributions need not total an even 100 percent. If more money goes into the fund in a certain year than is paid out in benefits, this merely means that a portion is set aside as reserve for the following year.
^Metropolitan Life Insurance Co., Unemployment In»urance, Monograph one (revised edition) (New York, February 1935), p. 59.
^ "Dix ans d'assurance — ChOniage en Suisse", La vie icononiiqiie, septifenie annge no. 11, novembre 1934, p. 505.
»* IMd.. p. 507.
54 UNEMPLOYMENT COMPENSATION
in times of depression. During the year 1933 the statutory period of benefits to certain groups of workers was extended to 120 days under certain conditions. The average duration of benefits per beneficiary per year was 59 days for the year 1933. While the aver- age duration of benefits has increased steadily during the operation of the system, the largest increase took place in 1932 when the average duration increased from 48.1 days in 1931 to 61.2 in 1932. The average duration of benefits per member was 23.9 days in 1933 as against only 4.8 in 1929 and 9.7 days in 1930.^^
Waiting Period. — The minimum waiting period required by the Federal Law of 1924 was 3 days after registration, although some of the various funds specified longer periods under certain conditions. Order IV in 1934 liberalized this regulation by providing that the insured person need not serve another waiting period if he has not had full-time employment for at least 3 consecutive months. The waiting period for partial unemployment is only 24 hours with the same condition that if the insured has not had 3 consecutive months of full-time employment an additional waiting period is not to be required.
Qualifications for Receipt of Benefits. — The 1924 act provided that the funds should not pay benefits unless the insured person became unemployed through no fault of his own, had registered at an em- ployment office, was unable to find suitable employment, produced a certificate from his last employer stating the reason for his unemploy- ment, and paid contributions for at least 180 days. Order II of 1929 required individuals to be employed 150 days during the year preced- ing application for benefits in order to qualify under the definition of a person "normally employed in regular work." Special circum- stances such as depression, sickness, or military service serve to mod- ify the 150-day requirements.
Disqualification From Benefits. — Order IV of 1934 modified the provisions of previously existing laws by providing that any person who becomes unemployed through his own fault or does not take advantage of suitable employment is excluded from benefits for at least 4 weeks in minor cases and 12 weeks in serious cases, and, in addition, the maximum duration of benefits for the individual is reduced at least 20 days for the benefit year or following year.
The definitions of "fault" and "suitable employment" were con- tained in Order I of 1925 discussed above.
35 n\&.
Chapter III
ESTIMATES OF UNEMPLOYMENT IN THE UNITED STATES
A DEQUATE statistics of unemployment can be obtained only by l\ complete censuses or a compulsory system of registration in -^ -^ connection with an unemployment compensation system cover- ing the entire industrial population. Present data on the extent of unemployment in this country are so incomplete that it is necessary to resort to estimates of the number out of work. Such figures as are available indicate the existence of a large volume of unemployment in both good years and bad, with a concentration of unemployment in the years of cyclical depression. The estimates of unemploy- ment set forth in this chapter indicate that about 70 percent of the unemployment from 1922 to 1933, inclusive, occurred in the years 1930 to 1933.
TOTAL VOLUME OF UNEMPLOYMENT
Adequate statistics of unemployment are lacking in the United States for a number of reasons. The trade-union movement has not maintained satisfactory records of unemployment among its mem- bers ; a Nation-wide public employment service is only now in process of development; and unemployment compensation with its corollary of registration of unemployed persons has not been in existence except on a limited basis. Even employment figures, which, until recently, have been collected much more widely than unemployment figures, are chiefly in the field of manufacturing as reported to the United States Bureau of Labor Statistics and to some State labor departments by representative firms. The national census of un- employment in April 1930 and occasional censuses in a few localities constitute practically the only other sources of information.
The lack of accurate data has necessitated recourse to estimates, among which are the studies of William A. Berridge in Cycles of Unemployment in the United States, 1903-1922, and of Hornell Hart in Fluctuations in Employment in Cities of the United States, 1902- 1917, the estimate of Leo Wolman and Meredith B, Givens of imem-
55
56
UNEMPLOYMENT COMPENSATION
ployment among nonagricultural labor from 1920 to 1927 in Recent Economic Changes^ and Paul H. Douglas' estimate of unemployment in manufacturing, transportation, building trades, and mining from 1897 to 1926 in Real Wages in the United States^ 1890-1926. Doug- las' estimate, which covers the longest period of years, is given in table 4. Unfortunately, it does not include the most recent years and is limited in industrial scope. The estimate of Wolman and Givens is wider in coverage, including all employees except those attached to agricultural pursuits, but does not go beyond 1927. Com- prehensive estimates of the unemployment in the United States from 1929 through 1933 have been published by Kobert R. Nathan.^ His
Table 4. — Unemployment in manufacturing, transportation, building trades, and mining, 1897-1026, as estimated "by Paul E. Douglas
Year
|
1897 - |
18.0 |
|
1898 |
16.9 |
|
1899 - |
10.5 |
|
1900 - |
10.0 |
|
1901 |
7.5 |
|
1902 |
6.8 |
|
1903 |
7.0 |
|
1904 |
10.1 |
|
1905 - |
6.7 |
|
1906 |
5.9 |
Percent unem- ployed
Year
|
1907 |
6.9 |
|
1908 |
16.4 |
|
1909 |
8.9 |
|
1910 |
7.2 |
|
1911 |
9.4 |
|
1912 |
7.0 |
|
1913 |
8.2 |
|
1914 -- |
16.4 |
|
1915 - |
15.5 |
|
1916 |
6.3 |
Percent unem- ployed
Year
1917. 1918. 1919. 1920. 1921. 1922. 1923. 1924. 1925. 1926.
Percent unem- ployed
6.0
5.5
6.9
7.2
23.1
18.3
7.9
12.0
8.9
7.5
Source: Douglas, Paul H., and Director, Aaron, The Problem of Unemployment (Macmillan Company, New York, 1931), p. 28.
estimates, together with those of Wolman and Givens, are shown in the following tabulation:
Estimated volume of unemployment 1922-1933
[In thousands]
1922 Minimum volume^ 3,441
1923 Minimum volume" 1,532
1924 Minimum volume" 2,315
1925 Minimum volume"- 1,775
1926 Minimum volume" 1,669
1927 Minimum volume" 2,055
1928 (')
1929 Average volume ^ 1, 813
1930 Average volume* 4,921
1931 Average volume* 8,634
1932 Average volume* 12,803
1933 Average volume* 13,176
1 Nathan, Robert R., "Estimates of Unemployment in the United Stages, 1929-1935", International Labour Review, vol. XXXIII, no. 1, January 1936, p. 49.
2 Committee of the President's Conference on Unemployment, Recent Econotnic Changes (McGraw-Hill Book Co., New York, 1929), vol. II, p. 478. Excludes employees engaged In agricultural pursuits.
• No estimate available. Nathan, Robert R., op. cit., table 1. .
UNEMPLOYMENT IN THE UNITED STATES 57
In addition to the above estimates of the average annual volume 'of unemployment, month-to-month estimates are now issued regu- larly by the American Federation of Labor and the National In- dustrial Conference Board. The monthly estimates of the former date back to January 1930; those of the latter to January 1933. Both are based on the census of unemployment of 1930, but have deviated considerably, primarily because of diifering estimates as to the number of new workers who have entered industry since this census was taken and because of differences in the definition of un- employment. The American Federation of Labor estimates are published regularly in its official monthly magazine, The Americam Federationist\ those of the National Industrial Conference Board have appeared in newspaper releases issued from its offices in New York.
VARIATIONS BY INDUSTRIES
The extent of unemployment varies greatly among different in- dustrial groups. Wolman and Givens in Recent Economic Changes estimated that unemployment in 1921 was 23.7 percent in manufac- turing; 26.6 percent in construction; 14.4 percent in transportation and communication; 88.1 percent in mines, quarries, and oil wells; and only 3.7 percent in public service, mercantile, and miscel- laneous industries. In July 1934, on the basis of the American Federation of Labor estimates, 64.9 percent of all persons engaged in construction industries were unemployed, 38.1 percent in service industries, 37.4 percent in mining, 36.2 percent in railroads, 27.4 percent in manufacturing, 19.5 percent in trade, 5.1 percent in public service, and 1.1 percent in agriculture.
Within the manufacturing group a wide dissimilarity is also found among the different branches. An analysis of the fluctua- tions in the employment indexes of the Bureau of Labor Statistics, taking the 1929 and the 1933 averages, indicates decreases in em- ployment since 1929 ranging from 53.7 percent in the lumber indus- try, 53.2 percent in the machinery industries, and 52 percent in the stone, clay, and glass products industries to 15.4 percent in the leather industries, 16.1 percent in textiles, and 16.3 percent in food manufacturing. Higher unemployment rates are found for indus- tries manufacturing durable goods and lower rates for those manu- facturing nondurable goods. For these groups as a whole the de- cline in employment between 1929 and 1933 was 48.4 percent in the durable goods industries and only 19.4 percent in the nondurable goods industries. Over a period of years, however, the relative divergences between these industries would not be so great.
Individual establishments within a branch of any industry also vary widely in their employment experience. Some companies in
58 UNEMPLOYMENT COMPENSATION
any given year are expanding and consequently increasing their working force, whereas others are losing business or possibly extend- ing mechanization and cutting down employment.
VAKIATIONS BY STATES
Virtually no data on unemployment by States are available except those in the April 1930 census of unemployment and some occasional State or city unemployment censuses or surveys. Prior to 1930 the compilation of employment statistics was very limited. Several States published employment indicators of factory employees, repre- sentative of manufacturing industries only, but most of these do not go back beyond the 1920's.
During the last 4 or 5 years more complete and reliable employ- ment statistics have been gathered. Not only have States recognized the need for such data, but the United States Bureau of Labor Statis- tics has been compiling national employment indexes month by month, since 1929, for the following industrial groups : Manufactur- ing, wholesale trade, retail trade, mining, transportation, telephone and telegraph, light and power, and hotels. In 1933 the scope of the field covered was enlarged by the addition of real estate, banking, insurance, and canning and preserving industries. Since 1932 these indexes have been broken down by States, resulting in the first comprehensive monthly State employment indexes.
Utilizing the Bureau of Labor Statistics indexes, the United States census of occupations, and the census of unemployment of April 1930, the yearly average .employment and unemployment by States was estimated for each year, 1930 through 1933, the results of which are shown in table 5. The dependability of these estimates is subject to question, at least for part of the period, because of the inadequacy of the data upon which they were based and also because of the crude statistical methods by which they were necessarily treated in the limited time available. Several checks with other information indicate,' however, that these estimates are at least fair approximations. They, therefore, may be used as a guide in the absence of better data. More accurate indicators could probably be obtained from the statistical treatment of city surveys of unemployment where such are available or from an examination of actual employment records within a State.
It is at least immediately clear from the estimates that there has been a wide variation in the degree of unemployment in individual States during a cyclical decline. To illustrate this, the States were arrayed according to the rate of unemployment in April 1930, the average for 1933, and the average for 1930-33. (See table 6.) Com- paring the extremes of the array, the rate in Michigan was more
Percent of gainful workers
Stl^mployed
United Sfe
Alabama g
Arizona. ..3
Arkansas 5
California 3
Colorado 3
Connecticut.. _j
Delaware 7
District of CoIl^
Florida ^
Georgia j
Idaho. -- Illinois-. Indiana.
Iowa
Kansas.,
Kentucky .j
Louisiana ^
Maine .)
Maryland {
Massachusetts.^
Michigan 4
Minnesota 4
Mississippi j
Missouri j
Montana 4
Nebraska j
Nevada. ..I
New Hampshir]
New Jersey 4
New Mexico... 4
New York 4
North Carolina^ North Dakota. 4
Ohio .r
Oklahoma j
Oregon 4
Pennsylvania.-) Rhode Island..,' South Carolina4 South Dakota. 4
Tennessee.
Texas
Utah
Vermont. . Virginia.. -
Washington )
West Virginia..)
Wisconsin [
Wyoming r
1931
76.8
79.8 75.8 81.5 76.1 79.3
75.7 79.1 87.3 77.0 81.7
|
■5 |
81.0 |
|
^ |
75.2 |
|
7 |
76.4 |
|
■) |
81.5 |
|
7 |
80.1 |
79.2 77.7 76.6 78.6 75.3
70.3 77.9 83.5 78.2 77.0
81.3 73.8 76.0 74.5 79.3
65.2 77.4 82.2 75.2 76.7
75.7 76.5 73.0 81.7 83.4
80.3 78.6 77.3 77.0 80.6
76.9 78.7 77.1 80.9
1932
65.5
66.1 64.3 63.1 71.1
67.2
62.5 73.7 80.9 63.6 71.9
70.7 62.5 62.7 70.5 72.0
71.6 67.5 68.4 78.6 65.0
56.9 70.2 72.3 67.5 59.3
71.5 64.3
70.2 62.9 65.2
63.6 67.7 78.2 62.7 66.8
72.2 62.7 60.6 70.7 76.1
70.2 67.2 66.1
68.7 69.3
68.6 68.0 67.8 65.6
66.
70.9 61.4 60.8 70.8 64.7
68.3 83.3 85.0 63.4 87.4
71.5 64.3 66.6 69.0 73.1
77.3 69.4 79.7 70.6 65.2
54.1 69.7 74.9 68.5 63.6
64.6 78.7 61.2 61.7
61.9 81.6 72.7
67.8 70.8
78.7 59.8 63.4 87.1 77.3
77.4 68.4 65.7 69.1 74.4
69.3 70.6 71.2 66.1
Unemployed
1930-33 average
25.8
23.2 27.7 25.6 24.0 25.1
26.4 18.3 13.2 27.1 17.0
21.8 28.0 26.6 21.8 21.0
20.8 24.1 21.8 23.4 27.0
34.3 23.4 19.4 24.2
28.4
21.5 27.8 21.8 28.8 26.2
27.8 21.3 18.9 26.9 24.2
21.7
28.3 29.7 17.2 17.5
20.4 24.0 25.7 24.1 21.1
24.4 23.2 23.8 24.2
1930
12.1
10.4 11.7 9.5 12.7 11.7
12.0 9.3 5.8
12.2 9.0
10.5 13.8 12.3 8.5 9.3
11.7 11.2 12.0 9.6 13.2
18.0 11.5 10.0 11. 1 13.7
13.5 12.0 13.2 10.7
12.4 11.8 9.4 13.3 11.2
13.5 11.8 15.3 8.6 7.0
10.2 11.8 11.2 9.2
12.1 10.1 11.6 9.3
23.2
20.2 24.2 18.5 23.9 20.7
24.3 20.9 12.7 23.0 18.3
19.0 24.8 23.6 18.5 19.9
20.8 22.3 23.4 21.4 24.7
29.7 22.1 16.5 21.8
1932
34.5
33.9 35.7 36.9 29.9 32.8
37.5 26.3 19.1 36.4 28.1
29.3 37.5 37.3 29.5 28.0
28.4 32.5 31.6 33.0 35.0
43.1 29.8 27.7 32.5
|
23.0 18.7 |
40.7 28.5 |
|
26.2 |
35.7 |
|
24.0 |
29.8 |
|
25.5 |
37.1 |
|
20.7 |
34.8 |
|
24.0 |
36.4 |
|
22.6 |
32.3 |
|
17.8 |
21.8 |
|
24.8 |
37.3 |
|
23.3 |
33.2 |
|
24.3 |
27.8 |
|
23.5 |
37.3 |
|
27.0 |
39.4 |
|
18.3 |
29.3 |
|
16.6 |
23.9 |
|
19.7 |
29.8 |
|
21.4 |
32.8 |
|
22.7 |
33.9 |
|
23.0 |
31.3 |
|
19.4 |
30.7 |
|
23.1 |
31.4 |
|
21.3 |
32,0 |
|
22.9 |
32.2 |
|
19.1 |
34.4 |
1933
33.2
29.1 38.6 39.2 29.2 35.3
31.7 16.7 15.0 36.6 12.6
28.5 35.7 3.3.4 31.0 26.9
22.7 30.6 20.3 29.4 34.8
45.9 30.3 25.1 31.5 36.4
30.2 35.4 21.3 38.8 38.3
38.1 18.4 27.3 32.2 29.2
21.3 40.2 36.6 12.9 22.7
22.6 31.6 34.3 30.9 25.6
30.7 29.4 28.8 33.9
78470—37 (Face p. 58)
58 UNEMPLOYMENT COMPENSATION
any given year are expanding and consequently increasing their working force, whereas others are losing business or possibly extend- ing mechanization and cutting down employment.
VAKIATIONS BY STATES
Virtually no data on unemployment by States are available except those in the April 1930 census of unemployment and some occasional State or city unemployment censuses or surveys. Prior to 1930 the compilation of employment statistics was very limited. Several States published employment indicators of factory employees, repre- sentative of manufacturing industries only, but most of these do not go back beyond the 1920's.
During the last 4 or 5 years more complete and reliable employ- ment statistics have been gathered. Not only have States recognized the need for such data, but the United States Bureau of Labor Statis- tics has been compiling national employment indexes month by month, since 1929, for the following industrial groups : Manufactur- ing, wholesale trade, retail trade, mining, transportation, telephone and telegraph, light and power, and hotels. In 1933 the scope of the field covered was enlarged by the addition of real estate, banking, insurance, and canning and preserving industries. Since 1932 these indexes have be.en broken down by States, resulting in the first comprehensive monthly State employment indexes.
Utilizing the Bureau of Labor Statistics indexes, the United States census of occupations, and the census of unemployment of April 1930, the yearly average .employment and unemployment by States was estimated for each year, 1930 through 1933, the results of which are shown in table 5. The dependability of these estimates is subject to question, at least for part of the period, because of the inadequacy of the data upon which they were based and also because of the crude statistical methods by which they were necessarily treated in the limited time available. Several checks with other information indicate,' however, that these estimates are at least fair approximations. They, therefore, may be used as a guide in the absence of better data. More accurate indicators could probably be obtained from the statistical treatment of city surveys of unemployment where such are available or from an examination of actual employment records within a State.
It is at least immediately clear from the estimates that there has been a wide variation in the degree of unemployment in individual States during a cyclical decline. To illustrate this, the States were arrayed according to the rate of unemployment in April 1930, the average for 1933, and the average for 1930-33. (See table 6.) Com- paring the extremes of the array, the rate in Iklichigan was more
|
Table 6. — Bsiimates of average nonagricuUurai empioyment and unemployment, by States, 19S6-SS |
||||||||||||||||||||||
|
Average number at gainful workers |
Average nnm |
ber employed |
Average number unemployed |
Percent of gainful workers |
||||||||||||||||||
|
state |
1030 |
1031 |
1932 |
1933 |
1930 |
1931 |
1932 |
1933 |
1030 |
1931 |
1932 |
1933 |
Employed |
Unemployed |
||||||||
|
1930-33 |
1930 |
1931 |
1932 |
1933 |
1930-33 |
1930 |
1031 |
1032 |
1033 |
|||||||||||||
|
United States |
38, 505, 000 |
38,675,000 |
38, 670, 000 |
38, 735, 000 |
33. 842, 000 |
29,617,000 |
25, 253, 000 |
25,894,000 |
4.663,000 |
8, 958, 000 |
13, 317, 000 |
12,841,000 |
74.2 |
87.9 |
76.8 |
66.6 |
60.8 01! 4 60.8 70.8 64.7 68.3 83.3 86.0 63.4 87.4 71.5 66! 0 69.0 73.1 77.3 69.4 79.7 70.6 65.2 69! 7 74.9 63! 0 04! 0 78 7 01.2 61.7 61.9 81.6 70! 8 78.7 59.8 03.4 87.1 77.3 77.4 68.4 09! 1 69.3 71! 2 66.1 |
26.8 27!? 26.6 24.0 25.1 26.4 18.3 13.2 27.1 17.0 21.8 28.0 20.0 21.8 21.0 20.8 24.1 21.8 23.4 27.0 34.3 23.4 19.4 28! 4 21.5 27.8 21.8 26! 2 27.8 21.3 20! 0 24.2 21.7 28.3 17! 2 17.5 20.4 25! 7 24.1 21.1 23! 2 23.8 |
12.1 11! 7 12! 7 11.7 12.0 9.3 5.8 12.2 9.0 10.5 113 8.5 12! 0 9.0 13.2 11! 6 10.0 117 13! 5 12.0 13.2 10.7 12.4 11.8 13! 3 11.2 13.5 11.8 8! 6 7.0 9.8 10.2 11.8 11.2 9.2 ii!o |
23.2 20.2 24.2 18.6 23.9 20.7 24.3 20.9 12.7 23.0 18.3 19.0 23! 0 18.6 20.8 22.3 23.4 21! 7 29.7 22.1 10.6 21.8 23.0 18.7 20,2 26! 6 20.7 24.0 24! 8 24.3 27! 0 18.3 10.0 f-- 19.7 217 23.0 19.4 23.1 21.3 |
34.6 |
33.2 |
|
640, 000 127,000 283, 000 2, 189, 000 207,000 043,000 81,000 243,000 469, 000 060,000 06, 000 2,843,000 1,003,000 6S3, 000 466,000 653,000 621,000 258,000 690,000 1, 091, 000 294^000 1, 089, 000 310, 000 34, 000 171,000 1,057,000 85, 000 5,279,000 042,000 107, 000 2,311,000 329,000 3,479,000 2S9, 000 341, 000 587,000 1, 374, 000 129, 000 103,000 008,000 502,000 4M,000 841,000 62,000 |
127' 000 270, 000 2, 210, 000 293,000 648,000 81, 000 245, 000 472, 000 642, 000 93,000 2, 802, 000 1,004,000 679,000 464, 000 543,000 520,000 258,000 1, 773! 000 1,710,000 690, 000 1,089! 000 132, 000 309, 000 34, 000 172, 000 ' 83>00 6,328,000 037,000 105,000 2,324,000 524,000 3, 495[ 000 202, 000 no! 000 577, 000 1,379,000 128,000 599; 000 565, 000 454.000 841,000 61,000 |
519, 000 129.000 265, 000 2, 226, 000 296, 000 652,000 80,000 246,000 473,000 032,000 2, 87li 000 998, 000 46li000 633,000 516,000 258,000 592, 000, 1, 780, 000 1, 722, 000 086,000 .205,000 1,083,000 133.000 309.000 34.000 172.000 1, 093, 000 85.000 5.366.000 633.000 102.000 2.327.000 518.000 332, 000 3, 505, 000 293, 000 323, 000 114,000 568.000 1.371.000 130.000 102, 000 592, 000 566.000 455. 000 836. 000 62.000 |
610, 000 258>00 2, 252. 000 657.000 247! 000 478. 000 615. 000 2,880! 000 997.000 508, 000 525, 000 615, 000 257, 000 695,000 1,787.000 1.730,000 686,000 254,000 1,083,000 132, 000 304, 000 34, 000 172,000 1,711,000 84.000 5, 412, 000 632, 000 102, 000 2,336,000 617,000 334,000 3.697.000 295.000 316. 000 113. 000 660, 000 1, 376, 000 130,000 102,000 580,000 508, 000 450,000 833, 000 62,000 |
484, 000 112,000 250, 000 1,912,000 202.000 66.5. 000 74. 000 229.000 412. 000 601.000 86.000 2. 450, 000 879, 000 533, 000 422, 000 488, 000 462,000 227,000 533.000 1.530,000 1,386,000 011,000 265.000 968.000 118.000 2S3.000 29.000 151.000 1, 438. 000 76.000 4. 023. 000 666, 000 97, 000 2, 004, 000 •166.000 286.000 3. 068. 000 245.000 312.000 109. 000 530. 000 1, 230, 000 114,000 91,000 562.000 494.000 408. 000 744. 000 66, COO |
422,000 96, 000 225, 000 1, 683, 000 232, 000 491, 000 64, 000 214, 000 363, 000 625, 000 75, 000 2,152,000 767, 000 472, 000 372,000 430,000 404, 000 198, 000 564,000 1,334.000 1.202.000 537.000 233.000 852.000 102.000 251.000 25. 000 130. 000 1. 249. 000 66, 000 4,052,000 493, 000 l,74s!000 402,000 251,000 2,673.000 213.000 270. 000 97.000 464, 000 1.084.000 09,000 79,000 483,000 434, 000 357,000 648,000 49, 000 |
343, 000 83, 000 167, 000 1, 560, 000 199, 000 408.000 59.000 199. 000 301. 000 461. 000 60.000 1. 705, 000 026. 000 404, 000 332,000 381,000 348,000 176,000 397,000 1.158.000 980.000 481.000 192.000 731.000 79.000 221. OOO 22.000 121.000 1.006.000 65.000 3. 414. 000 428, 000 SO, 000 1, 458, 000 346, OOO 240.000 2. 198, 000 178, 000 228,000 87,000 399,000 922,000 86, OOO 70, 000 410, 000 388,000 309,000 567,000 41,000 |
362.000 81.000 157.000 1.594.000 193, 000 440,000 67,000 210, 000 303, 000 637, 000 67, 000 1,866,000 064,000 392,000 336, 000 406, 000 357, 000 206, 000 420, 000 1,165.000 941.000 477.000 190. 000 742.000 84. 000 213. 000 22. 000 135. 000 ' 52! 000 3. 351, 000 516, 000 74,000 1, 583, 000 366, 000 263.000 2.152,000 187, 000 275,000 87,000 433,000 941,000 85, 000 71, 000 430,000 393,000 322,000 594, 000 41,000 |
56, 000 15,000 27, 000 277,000 36,000 78, 000 14! 000 67.000 10, 000 393. 000 124. 000 50. 000 44. 000 65.000 31! 000 57. 000 232. 000 305, 000 80, 000 29,000 121. 000 19,000 27,000 5,000 20,000 219,000 9,000 656,000 70,000 10,000 307,000 59,000 44, 000 411, 000 44,000 29,000 8,000 67,000 138.000 15, 000 12, 000 56, 000 68,000 46, 000 97, 000 6,000 |
107,000 31, 000 61, 000 527,000 61, 000 157, 000 17, 000 109! 000 117,000 18, 000 710, 000 237, 000 107, 000 92,000 113,000 116,000 60,000 126,000 439, 000 508,000 163,000 46.000 so! 000 9io00 41,000 428, 000 1, 277, 000 144, 000 19, 000 676, 000 122,000 SO, 000 822, 000 79, 000 61, 000 19, 000 113,000 295,000 29,000 24,000 116,000 131, 000 193! 000 12,000 |
176. 000 46,000 98, 000 606, 000 97, 000 244, 000 21,000 47,000 172, 000 178, 000 28,000 1, 076, 000 372, 000 169,000 120, 000 152,000 167,000 82,000 195, 000 622,000 742, 000 206,000 73,000 352,000 54,000 88,000 5i;000 627,000 30,000 1, 952, 000 22! 000 869, 000 172, 000 92, 000 1, 307, 000 116,000 95, 000 169, 000 - 440, 000 HOOO 32, 000 182,000 178, 000 146, 000 269, 000 21,000 |
148, 000 50,000 101,000 058, 000 105, 000 208, 000 13,000 37,000 175, 000 78. 000 27. 000 1.030.000 333, 000 176,000 123,000 168! 000 52. 000 175,000 022,000 708, 000 208,000 64,000 341,000 48,000 92,000 12, 000 37,000 664,000 32,000 2,061,000 116,000 28,000 753,000 151,000 71,000 1. 445, 000 108,000 41,000 26,000 127,000 435, 000 45, 000 31,000 150, 000 175, 000 134,000 239,000 21,000 |
713 74.4 74^9 73.6 81.7 80.8 72.9 83.0 78.2 72.0 78 2 79.0 79.2 76.9 78.2 73:0 66.7 76.6 80.0 76.8 71.0 78,5 72.2 78.2 71.2 73.8 72.2 78.7 81. 1 73.1 75.8 78.3 71.7 70.3 82.8 82.6 79.6 76.0 74.3 78! 0 70! 8 76.2 75.8 |
89.6 88.3 90.6 87.3 88.3 88.0 94! 2 87.8 89.5 80.2 87.7 91.5 90.7 88.3 88! 0 90 4 80.8 82.0 88.6 8S!9 86.3 91.2 86.5 86'. S 89.3 87.6 88.2 90.0 88!? 86.6 88.2 84.7 93! 0 so! 8 88.2 88.8 90.8 87.9 88:4 90.7 |
79.8 76.8 81.5 79:3 76.7 79.1 87.3 77.0 81.7 81.0 75.2 8L6 80.1 79.2 77.7 78! 6 75.3 70.3 77.9 78! 2 77.0 81.3 73,8 76.0 79! 3 6.5.2 77.4 75! 2 76.7 76.7 76.5 8l!7 83.4 80 3 78.6 77.3 77.0 80.6 76.9 78.7 77.1 80.9 |
66.1 63! 1 71.1 62.6 73.7 80.9 63.0 71.9 62 6 62.7 72! 0 67! 5 68.4 65! 0 66.9 70.2 72.3 67.5 69.3 71.5 64.3 62 9 65.2 63.0 67.7 62 7 66.8 72.2 62.7 70! 7 76.1 70.2 66! 1 68.7 68.0 68.0 65! 0 |
33.9 35.7 30.9 318 37.6 26.3 36! 4 28.1 20.3 37! 3 29.6 28.0 28.4 315 31.0 33.0 35.0 43.1 29.8 27.7 40!7 28.6 35.7 29.8 37.1 34.8 30.4 313 21.8 37.3 33.2 27.8 39! 4 29.3 23.9 20.8 33! 0 31.3 30.7 31.4 310 34! 4 |
||||||
|
Massaobusetta |
34.8 |
|||||||||||||||||||||
|
21.3 |
||||||||||||||||||||||
|
Now York |
38.1 |
|||||||||||||||||||||
|
27.3 |
||||||||||||||||||||||
|
Pennsylvania |
40,2 |
|||||||||||||||||||||
78470—37 (Face p. 58)
UNEMPLOYMENT IN THE UNITED STATES 59
than twice as high as in South Dakota in 1930, and more than three times as high as in Georgia in 1933.
Over a period of years, of course, the deviation from average un- employment tends to diminish. For example, Michigan, with the highest rate of unemployment in the 4-year period, was 39.2 percent above the country as a whole in April 1930, but its average unem- ployment for the 4 years (1930-33) was only 30.5 percent greater than that of the country. South Dakota's unemployment, at the other extreme in the array, rose from 38.5 percent below the average in April 1930 to within 30.2 percent of the average for the 4 years. If data for a complete cycle could be included, it is evident that the variation would be reduced still further. However, it is equally ap- parent that even over a long period, the individual States will ex- perience fairly large differences in unemployment rates, because of the individuality of their industrial structures.
In general, the more highly industrialized States experienced the worst unemployment over the period. Unemployment was most severe in 1933 in Michigan, which also stands at the head of the array of the 1930-33 average with a rate of 35.9 percent. Michigan, Rhode Island, New Jersey, Illinois, Pennsylvania, New York, Mas- sachusetts, and Ohio are among the States with the highest per- centage of unemployment, ranging from 28.7 to 35.9. Unemploy- ment in Georgia, South Dakota, and South Carolina, at the lowest end of the array, averaged about 19 percent from 1930 to 1933. Delaware is probably most highly industrialized of the States found at the lower end of the array. Mississippi, Kansas, North Dakota, Tennessee, and Virginia also had low percentages of unemployment, A part of the tendency toward less unemployment in agricultural States is probably explained by the fact that these States pre- sented better opportunities for unemployed city workers to move to farms and out of the industrial labor market. In part, of course, the tendency in some States results from relatively smaller de- creases in employment.
It should be remembered, then, that these estimates are most reliable as indicators of the relative intensity of unemployment in the States over the 4-year period. The estimates of the actual vol- ume of unemployment are subject to the limitations outlined above and are presented here as crude approximations to the actual fig- ures, which may serve as a basis for some of the "informed guess work" necessarily attendant on planning for unemployment com- pensation. The unemployment variable is a function of two other estimated variables, the average number of gainful workers and the average number of employed workers. The estimates of employ- ment, which are essential to unemployment compensation legisla- tion, are probably the most reliable of the three variables.
60
UNEMPLOYMENT COMPENSATION
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