Chicago. Mayor's Commission on Unemployment.

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public exchange is gradually showing its superiority to those privately conducted
in the interest of a party. The organization in Switzerland is worth study.


The most complete system yet constructed is that of Great Britain, which
began its activity February, 1910, under the "Labor Exchange Act" of 1909. This
law has few sections and merely gives the Board of Trade power to establish or
take over Labor Exchanges, to assist Labor Exchanges maintained by other
authorities, to collect and furnish information as to employers requiring work-
people and workpeople seeking employment, to establish Advisory Committees for
the purpose of giving the Board of Trade advice and assistance, and to make
regulations as to the management of Labor Exchanges with special reference to
the question of advancing fares as a loan to workmen proceeding to employment.

The United Kingdom was divided into divisions, for convenience in adminis-
tration, with an office for each division, and all being connected with the central
office in London. There are 8 divisions, with 430 exchanges. These exchanges
are also organs of the new Unemployment Insurance, in which policy Great Britain
boldly leads the world.

Women are dealt with so far as possible by women officers, and a special staff
takes care of juveniles. The buildings used provide for classification: insurable
and uninsurable, artisans and laborers, women, girls, boys having separate accom-
modations when desirable.

Applicants for situations fill in suitable forms, which are indexed, and they
are notified when places are found for which they are adapted. Applications for
workpeople are received by telephone, telegram, letter, or personal call.

"The duty of the manager of the exchange is first of all to endeavor to fill
such vacancies as may be notified to him from his current or live register. Should
however, he be unable to do so, he communicates by means of special forms or
cards with the Divisional Center to which that exchange is attached, which in its
turn circulates the unfilled vacancies notified from the various exchanges under
its control to the other exchanges in its district where applicants of the class
required are likely to be found. Should it not be possible to fill the vacancv
within the division the Divisional Office circulates it to the other divisions, where
a similar procedure is followed. Thus an application for employment or a
vacancy notified entirely loses its local character and becomes available throughout
the whole country."

In case of strike or lockout the association of employers or workmen may
give a confidential notice of the fact to the exchange, and applicants are notified
of the dispute and act accordingly. This procedure, it is claimed, has been satis-
factory to both sides.

It is cruel mockery to offer a man a job at a distance when his shoe soles
are already worn out, his stomach growling for food, his energy depleted bv
starvation, and his pocketbook long since empty. An essential feature of the English
system is the provision for advancing railway fare to the place where work is
found. In the year 1912, 96,189 persons took advantage of this measure, 12.3
per cent of all vacancies filled. Of the sum advanced 94.4 per cent was repaid,
and all but a trifle (1.6 per cent) would be paid in time. This advantageous
measure is subject to the following conditions:

(1) That the privilege is limited to workmen for whom vacancies have been
found through a labor exchange.

(2) That the advance is a loan and in no way a gift or act of charity, and
that it must be repaid, by installments if necessary, which may be deducted from
the workman's wages by the employer in convenient amounts.

(3) That fares may not be advanced in cases of workmen proceeding to
vacancies caused by a trade dispute affecting their trade, or to vacancies where
the wages offered are lower than those current in the trade in the district where
the employment is found.



1. The necessity of establishing a central, national organization is generally
recognized by expert opinion ; it is realized only in Great Britain.

In the United States the constitutional limitations upon the authority of
Congress would probably make the British system impossible; but it might be
possible to maintain a bureau at Washington whose function would be :

(1) To collect and circulate information about the labor market in all the
important centers of the Union ;

(2) To extend and improve the present facilities for guiding and pro-
tecting immigrants in search of places to work ;

(3) To secure legislative and administrative control of movements of
labor between the states and in interstate commerce.

2. The several states should each have a central organization, a network of
free employment exchanges, all combined in a co-operative system, and equipped
with means and authority for effective service.

3. The municipalities should have their own local exchanges, but these should
be under control and direction of the state system, with such local functions as
would adapt them to peculiar needs of communities.

By C. R. Henderson, Paper Prepared for the American Association for

Labor Legislation, 1913.
I. The Necessity of Unemployment Insurance.

While the method of unemployment insurance is yet to be worked out, there
is general agreement that the subject is already within the range of practical pol-
itics. No one acquainted with the evils to workmen and to society which arise
from involuntary idleness can be blind to the need of prevention and indemnity ;
no one who has studied the general social causes of unemployment beyond the
control of individual wage earners can doubt social responsibility; while the vast
schemes of insurance in India and Great Britain compel at least respectful consid-
eration of the magnificent venture of our Mother Country. We can already begin
to discover in ragged outline the presence of a law of periodicity, secularity, reg-
ular repetition and averages of great numbers, which brings the phenomenon of
unemployment within the range of actuarial science, although we are not yet in
sight of solution of all the problems. Indeed, we must even risk something in
practical effort before we can furnish statisticians and actuaries with facts to
count. The most cunning mathematician must wait on the march of experiment
for the raw materials of his calculations. As some one has said, we cannot wait
for evolution, we must make evolution, as Burbank develops new varieties of
plants by trial.

It is already evident : that unemployment is a regular phenomenon of modern
industry ; that each trade has its own coefficient of enforced idleness ; that the risk
may be measured, foreseen and provided for on actuarial principles ; that such a
risk which falls with ruinous flood on the weakest individuals may be divided into
spray and not seriously felt when the whole nation shares the responsibility ; that
it is socially desirable to prevent or indemnify unemployment, so as to avert the
economic and moral destruction of working people, the necessity for wholesale
poor relief, and the desperation which mocks social order when life is not worth
the effort it costs to sustain it.

The assertion is that unemployment insurance has become a necessity, that is
for a people which proposes to be civilized. It is a moral, not a physical, neces-
sity ; we cannot retain our ethical standards and refuse to face our task.
II. The Statistical Basis for Unemployment Insurance.

Thus far the German Empire has refused to launch upon this untried sea.
The explanations given in that country point to a disagreement between local and
federal administration as to which should bear the responsibility. The experts
have not yet come together on this point. Another explanation of the delay is
that even after an exhaustive investigation of the whole subject, their specialists
do not feel that their basis of fact is broad enough to support an imperial system.
There are other causes of delay, but the necessity of having actuarial data is


Mr. Frank B. Sargent has summarized for us the results of a study of the
statistics of unemployment in the United States 1 : The sources of statistics used
by the Bureau of Labor are: (1) The United States Census reports. (2) A
report on the cost of living contained in the Eighteenth Annual Report of the
Commissions of Labor. (3) Reports of unemployment among organized work-
men in New York and Massachusetts, issued by the department of labor in New
York and the bureau of statistics in Massachusetts. (4) Reports of unemploy-
ment among organized workmen, by the American Federationist. (5) State
census of the unemployed in Rhode Island in 1908. (6) Reports of the Geological
Survey, showing the days of enforced idleness in coal mines in the United States.
The report analyzes the materials presented in these sources and estimates their
value. It shows very clearly that the fluctuations in unemployment cannot be
explained on the exploded theory that the workmen are generally indolent shirks,
that they are as a rule individually to blame. The chief cause of unemployment
is that at times which regularly recur men who desire to work cannot find gainful
occupation. It is not true that an industrious man in America can always find
employment. It is true there are many vagrants and tramps ; but they do not in
any proper sense represent the rank and file of American wage earners.

The value of these statistics as a basis for actuarial calculation is low. There
is much evidence for believing that an essential prerequisite for insurance is the
effective organization of a national labor exchange with state and local branches.
It will probably be found that regulation of international immigration will be
necessary before we can be sure of maintaining solvent insurance funds. Only
federal authority is wide enough and strong enough to provide records which will
represent the conditions and fluctuations of wage earners who move back and
forth across our country, as lured by hope of employment, without the least
regard for municipal and state lines. It may even be found necessary to apply
federal regulation of immigration in order to save our own wage earners from
the disastrous fluctuations due to unregulated floods of laborers.

III. Methods of Unemployment Insurance.

"The essence of every kind of insurance is that it guarantees both legal and
economic security of income in case of accident. The legal right gives the insured
a claim in court apart from benevolence and kindness. Economic security assumes
that the insurer is able to meet the risk, and this implies that the risk is calcu-
lable." (Jastrow, Sozialpolitik, I. 249.)

Mr. I. G. Gibbon in 1911 published a valuable study of the European schemes
and experiments which presents in convenient form the various aspects of the
subject*. Mr. Gibbon groups the various plans under three main heads (Int.
P. IV) :

"Compulsory insurance, the insurance being compulsory on certain classes of
workers ;

"Provided voluntary insurance, the insurance being provided by a public
authority or some body other than the insured persons and being usually open to
workers in general ;

"Autonomous voluntary insurance, the insurance being organized and admin-
istered by the insured themselves, each insurance association being generally
restricted to persons following the same or allied trades."

Mr. Gibbon's book furnishes adequate information about the various European
schemes up to 1911. But since then his own country has ventured on a colossal

1. The most complete scheme of unemployment insurance is the "British
National Insurance Act, 1911. (Bui. U. S. Bureau of Labor, 102, July 15, 1912.)
An analysis of this act brings us to the present frontier of our subject.

Section 84. Right of workmen in insured trades to unemployment benefit.

Every workman who, having been employed in a trade mentioned in the list,
is unemployed, and who meets certain conditions, shall be entitled to unemploy-
ment benefits at rates and intervals prescribed in the law.

The list (Sixth Schedule) of trades insured includes: Building, construction
of works, ship-building, mechanical engineering, iron founding, construction of
vehicles and saw milling.

'"Statistics of Unemployment and the Work of Employment Offices." Bulletin 109, U. S. Bureau of
Labor, October 15, 1912.

'Unemployment Insurance, London; P. S. King and Son, 1911.


Section 85. Contributions by workmen, employers, and the Treasury.

The contributions are fixed at 5 cents a week from each workman, and 5 cents
from the employer; lower rates being paid for young persons under 18 years
of age.

These contributions are legally obligatory in the trades named.

The employer pays the dues of workmen and deducts the amount from the

Parliament provides each year for a public contribution equal to one-third of
the total contributions received from employers and workmen during that year.

Section 86. Statutory conditions for receipt of unemployment benefit.

1. The workman must prove that he has been employed as a workman in an
insured trade in each of not less than 26 separate calendar weeks in the preceding
five years ;

2. That he has made application for unemployment benefit in the prescribed
manner, and prove that since the date of the application he has been continuously
unemployed ;

3. That he is capable of work but unable to obtain suitable employment ;

4. That he has not exhausted his right to unemployment benefit under this
part of this act.

The workman is not obliged to accept work in a place vacant by reason of a
trade dispute, nor on conditions lower than rates fixed by contracts or custom.

Section 87. Disqualification for unemployment benefit.

During a trade dispute the workmen on strike or locked out have no unem-
ployment benefit. One discharged for misconduct receives nothing for six weeks.

Section 88. Determination of claims. This is provided for by the decisions
of "insurance officers" and referees.

Section 89. Appointment of umpire, insurance officers, inspectors, etc. The
umpire may be appointed by the Home office and the Board of Trade can fill other
offices as required.

Section 90. Courts of referees are provided for.

Section 91. Regulations may be made by the Board of Trade.

Section 92. Unemployment fund is under the control and management of
the Board of Trade, and out of this benefits are paid. A' system of accounting
is provided.

Section 93. Treasury advances. Provision is made for temporary increase of
dues or decrease of benefits to keep the fund solvent.

Section 94. Refund of part of contributions paid by employer in the case of
workmen continuously employed.

This section aims to encourage employers to keep their works running by
paying back one-third of their contributions in case they have employed their
force the whole year.

Section 95. Repayment of part of contribution by workmen in certain cases.

If a workman has paid contributions 500 weeks, at the age of 60 he may have
repaid him the amount by which his contributions have exceeded his benefits

Section 96. Refund of contributions paid in respect of workmen working
short time.

Section 97. Exceptions for occasional employment in rural neighborhoods.
Exceptions may be made and a rural worker who only occasionally works in an
insured trade may not be required to pay contributions.

Section 98. Payment of contributions in case of reserves or territorials during

Section 99. Provisions with respect to workmen engaged through labor ex-
changes. Arrangements are made for treating men who are sent out to various
employers at different periods as if they were in continuous employment.

Section 100. Provisions are made for testing the skill and knowledge of a
workman supposed to be defective, and to provide for his technical instruction if
this promises to diminish the charges on the unemployment fund.

Section 101. Offenses and proceedings for recovery of contributions, etc.

Section 102. Periodical revision of rates of contribution. To keep the fund
solvent and to reduce cost in case the fund is too large, the Board of Trade is
authorized after seven years to increase or diminish the contributions within cer-
tain limits.


Section 103. Power to extend to other trades. The Board of Trade is legally
authorized to extend the benefits of the act to trades not mentioned in the sched-
ule within specified limits.

Section 104. Exclusion of subsidiary occupations. The Board of Trade is
authorized to exclude occupations which are auxiliary to the trades listed but not
essentially a part of them.

Section 105. Arrangements with associations of workmen in insured trades
who make payments to members whilst unemployed.

This section is designed to encourage benefit societies to insure their mem-
bers ; in lieu of paying benefits to individual members, the association is repaid
up to 34 of the amount of payments made during the period by the association to
its unemployed members.

Section 106. Repayments to associations who make payments to persons
whether workmen in insured trade or not, whilst unemployed. This section ex-
tends to state and to other forms of organization.

Section 107. Interpretation and application. Definition of "workman."

"Unemployment" : Two periods of unemployment of not less than two days
each, separated by a period of not more than two days, during which the workman
has not been employed for more than 24 hours or two periods of unemployment
of not less than one week each, separated by an interval of not more than six
weeks, shall be treated as a continuous period of unemployment.


While it is true that the German Empire, whose leadership in social insurance
is recognized by all, has not yet undertaken to organize unemployment insurance,
this is not because their workingmen and their statesmen are indifferent to the
problem. The huge volumes of reports 1 of experts reveal the vast amount of
careful and expert labor which has been given to the subject. The chief reasons
for hesitation have already been indicated.

While the imperial authorities delay the cities have entered the field of experi-
ment ; it remains to be seen whether governments whose territory is limited to
municipal boundaries are strong enough to control the situation. Many doubt this
policy, even in Germany.

Meantime, we may study the results of an inquiry into the progress of the
local efforts.

Recent Progress in German Cities. 2

1. Agencies exist for unemployment insurance as follows :

In Berlin-Schoneberg, 1910; subsidies to associations and to those who have
savings accounts.

Cologne (1896, transformed in 1911), voluntary insurance funds.

Erlangen (1909), subsidies to associations and aid to the unemployed.

Freiburg in Baden (1910), subsidies to associations and to those having sav-
ings accounts.

Schwabische Municipality (1911, 1912), subsidies to associations and voluntary
insurance funds.

Mannheim (1911, transformed in 1913), subsidies to associations and pure
relief to the workless.

Miilhausen i. E. (1909), subsidies to associations.

Strassburg i. E. (1906, 1907), subsidies to associations.

Stuttgart (1912), subsidies to associations and those having savings accounts.

2. In the following cities plans have been studied but not introduced : Berlin,
Cassel, Colmar i. E., Dresden, Diisseldorf, Essen, Emden, Frankfort a. M., Gerben,
Heidelberg, Mayence, Munich, New Cologne, Neumiinster, Nuremberg, Pforzheim,

3. The following cities have rejected proposals for insurance: Berlin-Wit-
mersdorf, Braunschweig. Danzic, Dessau, Elberfeld, Halle a. S., Hamburg, Hof,
Kopernick, Kulmbach, Regensburg, Spandau, Wiesbaden, Wiirzburg.

4. Failure of plans is reported in Augsburg, Charlottenburg, Duisburg, Solin-

"Die bestehenden Einrichtungen zur Versicherung gegen die Folgen der Arbeitslosigkeit, etc., 1906.
"Reichs-Arbeitsblatt, March, 1913, p. 188. Cf. 1910, S. 38, 102. 278; 1911, S. 38, 181.


IV. Relation of Unemployment Insurance to the Prevention of Unemployment.

1. The primary interest of the individual workman and of society is in the
prevention of accident, disease, premature senility or invalidism, death, unemploy-
ment. Before all questions of indemnity for evil is prevention of evil ; and a
system of insurance, to meet all rational requirements, must show that it contains
methods of reducing the loss. This principle applies to the matter in hand.

The means of diminishing unemployment have been fully discussed by recent
writers'. It is here taken for granted that we are working for the vocational
training and guidance of young persons ; that we have a policy of preventive
medicine which will reduce the amount of idleness due to sickness ; that we favor
the establishment of test and training colonies for dealing with the "unemploy-
ables" of all varieties, and that we urge upon railway companies, cities, states and
the federal government the policy of spreading their contracts over a long term
of years, so as to avoid, as far as possible, the deadly alternating currents of idle-
ness and excessive strain which now characterize our industries. But we also
may insist that the same machinery which effectively provides insurance should
itself automatically and with certainty reduce some of the preventable causes of
unemployment. This we can consider in discussing the relation between well
administered labor exchanges and unemployment insurance.

Other forms of insurance connect indemnity with preventive measures. There
are mutual fire insurance associations where the members are required to have
slow-burning or fire-proof construction in their buildings and to provide effective
means of automatic extinction of incipient fires; and by such measures the pre-
miums have been greatly lowered. Many fire insurance companies organize salvage
corps by which the municipal departments are supplemented and the loss reduced ;
and the cost of this method is defended on the ground that it lowers the premiums
of insurance enough to justify the expenditure. In the German systems of sick-
ness, accident and invalid insurance, the funds are heavily drawn upon to arrest
the advance of disease and secure a rapid convalescence.

.2. The modernized labor exchange is an essential factor in any sound unem-
ployment insurance scheme. On this principle all authorities agree.

Without a thorough test through a good agency, the risk could not be calcu-
lated. If the insured may become voluntarily unemployed in order to enjoy the
indemnities, an element of uncertainty would be introduced which might vitiate all
actuarial estimates. No human wisdom is keen enough to discriminate between
voluntary and involuntary unemployment by any external sign ; and the unsup-
ported claim of the applicant is not a substantial ground for judgment. The labor
exchange alone can offer even a rough working test of sincerity. One of two
situations is before a labor exchange which is complete and adequate : either the
applicant is offered work or it can be known that there is no demand for him.
Even the best labor exchange cannot furnish occupation when no employer is
seeking labor force, but the well equipped employment office can very generally
offer a place. If work is refused by the applicant, his indemnity can be refused,
and the insurance fund is protected. No further compulsion is necessary.

A well conducted labor exchange actually reduces the risk of unemployment
and hence tends to lower the cost of insurance and strengthen the stability of the

When both employers and employes contribute to an insurance fund, they
will be prompted by self-interest to improve their labor exchange and to use it.

This implies that the labor exchange must be national, non-partisan, lifted
above the talons of party politicians, placed under the aegis of the merit system,
administered by trained experts, and so honest and impartial as to command the
confidence of the wage-earners, the employers and the general public.

V. The Trade Union as the Nucleus of Unemployment Insurance.

In all countries with advanced industrial development, at least some of the
trade unions have made experiments with unemployment insurance. In our coun-

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