o l/'X^^ ^3 SOUTHERN BRANCH. UNIVERSITY OF CALIFORmA, LIBRARY, iLOS ANGELES. CALIF. / { DEBATERS' HANDBOOK SERIES COMPULSORY INSURANCE Debaters' Handbook Series American Merchant Marine Debaters' Manual (2d ed. enl.) Capital Punishment (3d ed. rev.) Central Bank of the United States Child Labor (2d ed. rev. and enl.) City Manager Plan Commission Plan of Municipal Govern- ment (3d ed. rev. and enl.) Compulsory Arbitration of Industrial Disputes (Supp. to 2d ed.) 50c Compulsory Insurance Compulsory Military Training Conservation of Natural Resources Direct Primaries (4th ed. rev. and enl.) Election of U. S. Senators (2d ed.) Employment of Women Federal Control of Interstate Corpora- tions (2d ed. rev. and enl.) Free Trade vs. Protection Government Ownership of Railroads (3d ed. rev. and enl.) Government Ownership of Telegraph and Telephone Immigration (2d ed.) Income Tax (3d ed. rev. and enl.) Initiative and Referendum (3d ed. rev.) Minimum Wage Monroe Doctrine (2d ed. rev. and enl.) Mothers' Pensions Municipal Ownership (3d ed.) $1.50 National Defense Vol. I National Defense. Vol. II Open versus Closed Shop (2d ed.) Parcels Post (2d ed. rev. and enl.) Prohibition (2d ed.) Recall (2d ed. rev. and enl.) Reciprocity Single Tax (2d ed.) Trade Unions (2d ed. enl.) Unemployment Woman Sufifrage (3d ed. rev.) World Peace (2d ed. rev. and enl.) Other titles in preparation Each volume, unless otherwise noted, $1.25 net Debaters' Handbook Series SELECTED ARTICLES ON COMPULSORY INSURANCE COMPILED BY EDNA D. BULLOCK •■,' o'^,J » o*.j '333 333 3 'j - 3 > 46183 NEW YORK THE H. W. WILSON COMPANY 1918 • « • • • .<• , « 9 • • * • ^ 4 EXPLANATORY NOTE The selections in this handbook are designed to include information and argument on some of the questions arising out of what is generally called "social insurance". This may be defined as the formal provision made by or for work- ing people against the vicissitudes of life — including sick- ness, industrial accident, invalidity, unemployment, old age and dependency. The attention of thinking people all over the civilized world is being focused on this subject. Varied forms of legislative experiment are in progress — many new and in- "' teresting ones are being proposed. Many of the problems involve intricate legal technicalities that have no place in a compilation intended for popular use. These are included in the bibliography, which is wider in scope. The rapid march of events in the field of social insurance leads to constant re- view of the whole subject in the books and magazines. This \. renders much of the older literature of no particular value V for the student — hence the exclusion from the bibliography of much excellent literature that has been superseded by * more available material. _^ The general trend of legislation is toward compulsory insurance, and the title chosen for this volume is a recogni- tion of this tendency. No one question for debate has been considered in the selections, but the following topics are suggested as among those most widely discussed in the United States: — Is the German system of social insurance adapted to con- ditions in the United States? Is compulsory state insurance the best form of insurance for working people? What is the best provision against unemployment? vi EXPLANATORY NOTE Should compulsory state insurance of workmen's compen- sation for industrial accidents be substituted for the exist- ing forms of employers' liability laws in the United States? ■ Should a system of old age pensions be adopted? In lieu of a brief, a resume of the principal arguments on the general subject is included. August, 1912. CONTENTS Argument ix Bibliography Bibliographies xvii General References a. Social Insurance xviii b. Systems of Insurance Adopted in Various Coun- tries xxi Germany xxi Great Britain and Dependencies xxii Industrial Accidents and Workmen's Compensation .... xxiii a. Laws and Court Decisions xxvii Insurance Plans of Individual Corporations xxxii Old-Age Pensions •. . . . xxxiii Unemployment Insurance xxxiv Introduction Henderson, Charles Richmond. Logic of Social Insur- ance Annals of the American Academy 5 Boyd, James Harrington. Some Features of Obligatory In- dustrial Insurance . . . Annals of the American Academy 19 Rubinow, I. M. Compulsory Insurance Chautauquan 27 Brandeis, Louis D. Greatest Life Insurance Wrong Independent 42 Lewis, Frank W. State Insurance 50 Hastings, Hugh. Dangers of State Insurance North American Review 60 Sherman, P. T. Co mpensation Law and Private—^^^^s^ tfe- Annals of the American Academy 72 Nichols, Walter S. ArguiTienL Against Liability^TTTT. Annals of the American Academy 81 Dawson, ^Miles M. System Best Adapted to the United States Annals of the American Academy 88 viii CONTENTS Dawson, IMiles AI. Cost of Insurance Annals of the American Academy 97 Cheney, Howell. Employers and Compensation Systems... Annals of the American Academy lOi Irwin, Will. Industrial Indemnity Century 104 Dawson, Miles M. Employers' Liability Insurance Industrial Engineering and the Engineering Digest 112 Hard, William. Pensioners of Peace Everybody's 118 Hard, William. Injured in the Course of Duty; Conclusion. 141 Hatch, L. W. Employers' Liability or Workmen's Compen- sation ? . . . New York. Labor, Department of. Bulletin 147 Dawson, Miles M. Workmen's Compensation Survey 162 Washington's "Yes" to New York's "No" Survey 173 Moot, Adelbert. Reasons for Trying Workmen's Com.pen- sation Survey 175 Seager, Henry Rogers. Workmen's Compensation for the United States Survey 177 Slobodin, Henry L. Dr. Friedensburg's Arraignment of the German Workingmen's Insurance System Survey 180 Schwedtman, F. C. Difference Between the English and German Systems of Workmen's Compensation . . Survey 181 Zacher, Georg. German Workingmen's Insurance and For- eign Countries American Journal of Sociology 184 Howe, Frederic C. Flow Germany Cares for her Working People Outlook 194 Lennox, P. J. Insuring a Nation. .North American Reviev/ 197 Brodsky, Randolph J. Struggle for the British Health Bill. Survey 205 Accident Relief of the U. S. Steel Corporation .... Survey 215 Baldwin, F. Spencer. Old Age Pension Schemes Quarterly Journal of Economics 218 Israels, Belle Lindner. Poverty and Insurance for the Un- employed Charities and the Commons 242 Insurance Against Unemployment Living Age 251 Compulsory Insurance Against Unemployment . . Spectator 255 Roberts, Elmer. Experiments in Germany with Unemploy- ment Insurance Scribner's Magazine 256 ARGUMENT FOR COMPULSORY SOCIAL INSURANCE The advocate of compulsory social insurance is met at the outset by the inherent human disinclination for compul- sion of any kind. Resentment at the intrusion of the state upon what has long been considered private ground is an every day incident. The game warden who confiscates the contents of the hunter's bag — perhaps on the hunter's own land; the fire warden who drops into a shop and orders the sawdust removed from the floor; the food inspector who prosecutes, in the name of the state, the vendor of ancient eggs or short weight loaves; the health officer who calls at the door and demands the immediate installation of $200 worth of sanitary plumbing when the family bank account is at the vanishing point; the attendance officer who hales the parents of a persistent truant before the juvenile court — all these, and many others, are frequently regarded by the recipients of their attentions as being engaged in unwarrant- ed meddling with the personal liberties of human beings. To the average, self-centered human mind, the effect of a law or an ordinance on himself is the first and only consid- eration. Until he has acquired the social consciousness, he resists all sorts of what he considers encroachments on his personal liberties. The compulsory insurance advocate has to meet this idea from three sources — the beneficiary, if he is forced to con- tribute from his wages for insurance, and the employer and taxpayer, if any portion of the incidence of insurance is thrown upon them. The wage earner will say that he is unwilling to have any part of his wages withheld, that he needs it and is entitled to dispose of every penny of it as he X ARGUMENT sees fit, that he will make his own insurance arrangements. The taxpayer will argue that he should not be taxed to ben- efit improvidence, idleness and inefficiency. The employer feels that his profits should not be forcibly reduced by con- tributions that, he avera, will only encourage thriftlessness. Then comes the alarmist and cries "Socialism". This frightful bugaboo is all the more difficult to slay because of the ignorance of the average American concerning the underlying principles of socialism, and his wilful blindness to the American modification and application of socialistic ideas. The specter of a paternal government reaching out for individual liberties is a stock argument of conservatives, individualists and social pirates against any change that will alter the equilibrium of the world of dollars, and loosen their own grasp of power. In harmony with all these is the constitutional objector, who doubts the power of the central government to inaugu- rate such legislation, and has not the interest or the courage to push it to adoption, state by state. It is urged that any effort to do for working people what they ought to do for themselves will result in a loss of self respect on their part, will encourage improvidence, and warp the moral nature of the masses by constant temptation to idleness and deceit. All existing systems of compulsory state insurance have been subject to criticism because of the weaknesses of pub- lic administration. Opponents of the introduction of such a sj'Stem in the United States point to the evidences of in- efficiency in the public service, and the maladministration of public funds so deplorabl}' common. With such a formidable array of indictments against it, the compulsory state insurance idea has triumphed in the progressive countries of Europe, and has gained a foothold in the United States. The argument in favor of the adoption of some system of compulsory insurance for people who work for wages must rest on a knowledge of the conditions under which such people live. If it can be established that a considerable ARGUMENT xi part of our people work for wages that cannot be made to provide them with decenc}^ comfort and opportunity, much less enable them to be. prepared for emergencies and mis- fortunes, then it would be obvious that so much of our in- dustrial system is parasitic, and requires revision. An excursion into the cost of living problem made for the Rus- sell Sage Foundation has established that the least income upon which a family with three children under fourteen years of age can have decency and sufficient comfort to maintain bodily and mental health is $900 a year in New York City, and $600 to $700 in smaller places. When the thousands who do not have this minimum standard income are considered, a noticeable portion of our industrial system must be branded as parasitic. Suppose the union scale for carpenters in a given city to be 35 cents an hour, and the union day to be eight hours. A daily wage of $2.80, pro- viding that work was to be had every day except Sundays and six legal holidays annually, would mean an income of $859.50, upon which, it is admitted, the family of five could maintain a mimimum American standard of living in all but the larger cities. It is improbable that carpenters, generally, have so high a scale of pay or are able to work 307 days a year. This trade, being one that affords fairly constant work and at least 25 cents an hour wage scale in average cities, represents an index of the upper edge of the scale of compensation of working people. Vast numbers of families, even where women and children are also wage earners, do not attain the minimum of $600 or $700 in the smaller towns. Recent government investigations into wages and living con- ditions in Lawrence, Massachusetts reveal a wage scale that does not admit of decency, comfort or opportunity. So deplorable, indeed, were the revelations that many of the details are believed to have been suppressed. The industries investigated were clearly parasitic. Some of them paid handsome dividends — putting into the pockets of non-partici- pants in the activities of the business the profit that should have been partially distributed among the workers as wages honestly earned. It would be a most obtuse moral sense, xii ARGUMENT socially speaking, that would recognize the justice of a dec- laration of dividends in a parasitic industry. It is not overstating conditions to say that hundreds of thousands of wage earners in the United States do not re- ceive sufficient compensation to support life in the most meager fashion, without the aid of friends or charity, or worse — loss of what is called virtue. It is estimated that a working girl in a large city should have a wage of at least $8 a week in order to keep herself well and respectable. Great numbers of girls whose pay for long and wearisome hours of toil is far below $8 a week are to be found in any city. ^Fbe_canstantly rising cost of living with no correspond- ing rise in wages and small salaries has placed thousands of American working people on the border line of poverty. On this plane of living there is no margin for insurance. Nor is there much margin for the much better paid wage earner. The cost of insurance in private companies, fraternal orders and labor unions is so high that life, accident and annuity insurance are with difficulty carried by one member of the average family of live with an income of $1,200. A family of the same size with an income of $600, obviously, could carry only a little industrial life insurance, at most. Neither do these incomes admit of any other provision against the costly vicissitudes of life. How then, are these emergencies to be met? Is the present system of resting the burden on the shoulders least able to bear it, and then, when they sink under the load, transferring it to public and private charity, to be continued indefinitely? Or, is the sense of social justice strong enough to demand a living wage, and suitable provision for accident, sickness, unemployment, old age and dependency? If so, what is the ideal method of attaining the desired end? European countries have partially answered these questions by the adoption of systems of compulsory state insurance. The unwillingness of nearly all human beings to submit to compulsion need scarcely be reckoned as a serious ob- jection to any measure for social betterment, since compul- ARGUMENT xiii sion maj^ not be escaped by any one — not even Crusoe on his island. The employer and employee who resent com- pulsory insurance, the taxpayer who opposes the payment of public funds for social insurance purposes, must, in turn, submit to compulsory taxes to support pub'lic charities. Be- tween compelling a man to give up some of his earnings to support public charities, and requiring him to lay by in a safe place, part of his earnings to meet the almost certain financial emergencies of his own life, there is little comfort for the advocate of personal liberty. The employer's objection to compulsion in the enforced contributions to state insurance for working people is no more valid than that of the employee. Industry will have to bear the burden of wear and tear on all the material and machines required to maintain it — including human ma- chines. When it does not do that it becomes parasitic. The taxpayer's objection to compulsory insurance to which the state contributes is short sighted, as an equivalent amount would be concealed in the tax levy under the in- creased taxes for public charities and corrections. It ought not to require statistics to convince the average intelligence that inability to meet the normal emergencies of life breeds paupers and criminals, and that these must be cared for by the taxpayer. Nor are people of even average intelligence longer to be frightened by the cry of "Socialism" whenever special privil- ege is threatened by any proposition for collective efifort. Socialism in the United States has resolved itself into munic- ipal, state, and national enterprises for the furtherance of the general welfare. Whenever this can be attained more effectively and economically by collective effort than by private enterprise, the name given to the particular mani- festation of civic enterprise is immaterial. The general government has seldom attempted "general welfare" legislation — but it is well within the possibilities. The constitutional objector is faint hearted. The constitu- tion may not be made for man — but any day that man dis- xiv ARGUMENT covers that he prefers to have it so constructed, he can have things started in that direction. Meantime, constitu- tional compulsory insurance has been established in Wash- ington — and if in Washington, why not in other states? It is possible that the knowledge that adequate sick and unemployment benetits, workmen's compensation and old age pensions have been provided would deter some consti- tutionally inert people from being industrious, economical and thrifty. In most countries where compulsory insurance is in effect the benefits are purposely meager in order that every incentive to saving and providence shall remain. In Great Britain the maximum old age pension is five shillings ($1.25) a week. Obviously the candidate for a pension must have other sources of income if he avoids going on the poor rates. Most national systems of insurance are contributory on the part of both employers and employees — sometimes also, the state subsidizing in addition. In such systems malinger- ing is discouraged by the personal interest that all work- men have in reducing payments. Nor is it reasonable to ask working people to provide for the emergencies of life out of the wages that a majority of them receive. With higher wages, the state could very appropriately and justly say: "You must save against emergencies. Government will care for your payments and guarantee the specified benefits." Such a system is com- pulsory only for the improvident, in reality, since the provi- dent are under no compulsion when required by law to do what they would have done in any event. The experience of Germany is evidence enough that the social insurance system there in operation does not pauperize the workers or induce loss of self respect. The system is so adjusted as to throw the incidence of burden where it belongs — on the individual, on the industry and on the state. The work- man receiving benefit feels that he receives simply deferred installments of his just dues for services rendered. Misuse of public funds must be admitted as an objection to any plan involving more public officials to handle more ARGUMENT xv money; but before regarding this as an important objection, it must be made clear that private insurance enterprises would be free from graft, and mismanagement easy to ad- just. Public officials are more and more required to be hoji^st. There is abundant reason to believe that state in- surance funds could be economically and safely managed. The state cannot go out of business because a few grafters exist. With a skilfully drawn law, there is no reason why any state in the union should not have an adequate social in- surance system. The trend towards social justice is broadening. The producer of wealth will one day have his fair share of the fruits of his labor. EDNA D. BULLOCK. BIBLIOGRAPHY A star (*) preceding a reference indicates that the entire ar- ticle or a part of it has been reprinted in this volume. Bibliographies Chautauquan. 41: 78-9. Mr. '05. Civic Progress Program: Compulsory Insurance. Foerster, Robert F. Social Insurance. (Harvard University. Guide to Reading in Social Ethics and Allied Subjects. 1910). Indiana. State Library. Legislative Reference Department. Select Bibliography on Employers' Liability. 191 1. (State Bar Association of Indiana). Journal of Political Economy. Bibliography of Economics for 1909. University of Chicago Press. Robbins, E. Clyde. High School Debate Book. pp. 33-43. Age Pensions. McClurg. Chicago. 191 1. A brief is also included. United States. Library of Congress — Division of Bibliog- raphy. Select List of References on Employers' Liability and Workmen's Compensation. 1911. For sale by the Superintendent of Public Documents, Wash- ington, D. C. 20 cents. United States. Library of Congress — Division of Bibliog- raphy. Select List of References on Old Age and Civil Service Pensions. 1903. For Sale by the Superintendent of Public Documents, Wash- ington, D. C. 10 cents. United States. Library of Congress — Division of Bibliog- raphy. Select List of References on Workingmen's In- surance. 1908. For sale by the Superintendent of Public Documents, Wash- ington, D. C. 10 cents. Virginia. State Library. Legislative Reference Lists. 1912. xviii BIBLIOGRAPHY ' I. General References a. Social Insurance Books, Pamphlets and Docuiiients Adams, Thomas S. and Sumner, Helen L. Labor Problems. 1905. Compulsory Insurance, pp. 488-93. Alden, Percy. Democratic England. 1912. Macmillan. Bliss, William D. P. New Encyclopedia of Social Reform, under Industrial Insurance, Old-age Pensions, Unemploy- ment. Bolen, George Lewis. Getting a Living. 1903. Macmillan. Chapter 21. Workingmen's Insurance and Pensions. Carr, A. V. and Others. National Insurance. 1912. Macmillan. Dryden, John F. Industrial Insurance; Its History in Eng- land and America. (Yale Insurance Lectures. 1904. pp. 184-99)- Frankel, Lee K. and Dawson, Miles M. Workingmen's In- surance in Europe. 1910. Russell Sage Foundation. Bibliography pp. 437-42. Haines, Thornwell. Insurance for Workmen in Foreign Countries. U. S. Consular Reports. No. 295. Ap. '05. Henderson, Charles Richmond. Industrial Insurance in the United States. 1909. University of Chicago Press. Bibliography pp. 323-6. International Congress on Social Insurance. Reports. 1889- 1908. *Lewis, Frank Wesley. State Insurance, a Social and In- dustrial Need. 1909. Houghton. National Civic Federation. Proceedings, v. 10, 1909. National Conference of Charities and Correction. Proceed- ings, 1905-6. Reports of Committee on Workingmen's Insurance. National Conference on the Prevention of Destitution. Re- port of Proceedings, 191 1. London. P. S. King and Son. Sickness and Invalidity Insurance, pp. 102-25. Radley, C. J. Self Help versus State Pensions. 3d. Ed. Seager, Henry Rogers. Social Insurance. 1910. BIBLIOGRAPHY xix Shadwell, Arthur. Industrial Efficiency, a Comparative Study of Industrial Life in England, Germany and America. 2v. 1909. Longmans. , Streightoff, Frank Hatch. Standard of Living Among the Industrial People of America. 191 1. Houghton. United States. Labor, Bureau of. Workmen's Insurance and Benefit Funds in the United States. 1908. Annual Report of the Commissioner of Labor, v. 23. Chapter VII. State and Savings Bank Insurance. United States. Labor, Bureau of. Workmen's Insurance and Compensation Systems in Europe. 2v. 1909. Annual Report of the Commissioner of Labor, v. 24. 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Neces- sity for Social Insurance. John Graham Brooks. Case and Comment. 18: 201-6; 260-2. S.-O. '11. Obligatory Industrial Insurance. James Harrington Boyd. XX BIBLIOGRAPHY Charities and the Commons. 21: 473-6. D. 26, '08. Important Discussions of Workmen's Insurance. Charities and the Commons. 21 : 956-60. F. 13, '09. Revohi- tion in Industrial Insurance. E: T: Devine. Charities and the Commons. 21: 1203-4. Mr. 13, '09. Social Insurance. Charles Richmond Henderson. *Chautauquan. 41: 48-59. Mr. '05. Comijulsory Insurance. I. M. Rubinow. Delineator. ^Z'- 692. My. '09. What Industrial Insurance Means. Lee K. Frankel. Educational Review. 23: 152-7. F. '02. Compulsory Insurance for Teachers. Edward Manley. *Independent. 61: 1475-80. D. 20, '06. Greatest Life Insurance Wrong. Louis D. Brandeis. North American Review. 181: 921-32. D. '05. Insurance for Workingmen. Frank A. Vanderlip. North American Review. 185: 63-8. Ja. '06. State Insurance. 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Wis- consin. Free Library Commission. Comparative Legisla- tion Bulletin, No. i. Schwedtman, Ferdinand Charles, and Emery, J. A. Accident Prevention and Relief; an Investigation of the Subject in Europe. 191 1. United States. Employers' Liability and Workmen's Com- pensation Commission. Report. 1912. Hearings, May 10, 191 1 to December, 1911. United States. Labor, Bureau of. Bulletin. 21: 749-831. S. '10. Cost of Employers' Liability and Workmen's Compensa- tion Insurance. Miles M. Dawson. United States. Labor, Bureau of. Bulletin. 22: 1-96. Ja. '11. Industrial Accidents and Loss of Earning Power: Ger- man Experience in 1897 and 1907. Henry J. Harris. Weber, Adna F. Employers' Liability and Accident Insur- ance. (In Commons, J. R. Ed. Trade Unionism and Labor Problems. 1905. Chapter 25). Published also in Political Science Quarterly. 17: 256-83. Je. '02. Wisconsin. Labor, Bureau of. Biennial Report, v. 13-14. 1907- 9. Ma gad lie Articles American Industries. 12: 25. O. '11. What Can Employers Do? F. C. Schwedtman. American Magazine. 68: 260-2. Jl. '09. Buying a Man's Arm. Annals of the American Academy. 26: 499-574. S. '05. Lia- bility Insurance. W. F. Moore. Annals of the American Academy. 38: 1-317. Jl. '11. Risks in IModern Industry. Annals of the American Academy. 38: 15-22. Jl. '11. Casualty Insurance Companies and Employers' Liability Legisla- tion. Edwin W. DeLeon. XXVI BIBLIOGRAPHY Annals of the American Academy. 38: 78-82. JI. '11. Bur- den of Industrial Accidents. John Mitchell. *Annals of the American Academy. 38: 159-65. Jl. '11. Argu- ment against Liability. Walter S. Nichols. Annals of the American Academy. 38: 238-40. Jl. '11. Work- men's Compensation and the Industries of Massachusetts. James A. Lowell. Annals of the American Academy. 38: 241-5. Jl. '11. Attitude of Foreign Countries toward Liability and Compensa- tion. Lee K. Frankel. *Annals of the American Academy. 38: 271-3. Jl. '11. Em- ployers and Compensation Systems. Howell Cheney. *Annals of the American Academy. 38: 263-5. Jl- 'n- Cost of Insurance. Miles M. Dawson. Atlantic. 103: 57-65. Ja. '09. Employers' Liability. Frank W. Lewis. *Century. 82: 118-22. My. '11. Industrial Indemnity. Will Irwin. Charities and the Commons. 19: 1671-82. Mr. 7, '08. Em- ployers' Liability in Pennsylvania. Crystal Eastman. Charities and the Commons. 21: 1143-74. Mr. 6, '09. Year's Work Accidents and Their Cost. Crystal Eastman. Congressional Record. 42: 7877-94. Je. 8, '08. Industry Ought to Bear the Cost of All Accidents. George A. Bartlett. Economic Review. 5: 297-318. Jl. '95. Accident Insurance. Henry W. Wolfif. *Everybody's. 19: 522-33. O. '08. Pensioners of Peace. Wil- liam T. Hard. Harpers' Weekly. 51: 1132. Ag. 3. '07. England's Domestic Upheaval and Its Efifects. Sidney Brooks. Independent. 64: 1340-4. Je. 11, '08. Penalty of Progress. Edward A. Moseley. Independent. 70: 1417-20. Je. 29, '11. Employers' Liability. Chauncey B. Brewster. ^Industrial Engineering and the Engineering Digest. 7: 449- 52. Je. '10. Employers' Liability Insurance. Miles M. Daw- son. BIBLIOGRAPHY xxvii Journal of Political Economy. 12: 362-81. Jc. '04. Labor In- surance. I. M. Rubinow. Journal of Political Economy. 16: 157-9. Mr. '08. Employers' Liability in Insurance Theory. H. J. Davenport. North American Review. 185: 651-60. Jl. '07. Shifting the Burden; Compensation for Injuries. A. Maurice Low. Outlook. 85: 508-11. Mr. 2, '07. Is Workmen's Compensation Practicable? Arthur B. Reeve. Outlook. 92: 319-22. Je. '09. Hazards of Industry. Launcelot Packer. Scientific American Supplement. 53: 22015. My. 3, '02. Sci- entific Study of Accidents. J. Howe Adams. Reprinted from the Medical Fortnightly. Survey. 22: 228. My. 8, '09. Cost of German Accident Insur- ance. Lee K, Frankel. Survey. 22: 820-1. S. 18, '09. Competition or Co-operation in Workmen's Compensation. George M. Gillette. Survey. 23: 336-40. Dec. 4, '09. Capital and Labor Agree on Workmen's Compensation. Arthur B. Reeve. Survey. 24: 788-94. S. 3, '10. Work-Accidents and Employers' Liability. Crystal Eastman. Reprinted from National Conference of Charities and Corrections. Proceedings, 1910: 414-24. Survey. 26: 631-3. Ag. 5, '11. National Insurance versus Com- pensation. Survey. 26: 767-8. S. 2, '11. Federal Taxation for Industrial Injuries. *Survey. 28: 239-49. My. 4, '12. After the Common Law — What? Symposium. a. Laws and Court Decisions For the texts of the laws of individual states, use the statutes and latest session laws. Many states have the labor laws, or employers' liability laws printed separately. These may be ob- tained by addressing Secretaries of state. Books, Pamphlets and Documents American Economic Association. Bulletin. 4th Series, i: 276-81. Ap. '11. Compulsory Compensation for Injured Workmen. Daniel L. Cease. Printed also in American Labor Legislation Review. 1: 49-54. Ja. '11. xxviii BIBLIOGRAPHY American Economic Association Bulletin. 4th Series, i: 282- 95. Ap. '11. Problems of Workmen's Compensation Legis- lation. Thomas L Parkinson. Printed also in American Labor Legislation Review. 1: 55-71. Ap. '11. American Economic Association. Bulletin. 4th Series, i : 296- 301. Ap. '11. Voluntary Indemnity for Injured Workmen. F. C. Schwedtman. Printed also in American Labor Legislation Review. 1: 49-54. Ja. '11. Aronson, V. R. Workmen's Compensation Act of 1906. 1909. Unwin. Carleton, Frank Tracy. History and Problems of Organized Labor, c. 191 1. Heath. Chapter 10. Protective Legisla- tion for Employees. Dawson, W'illiam Harbutt. German Workman. 1906. Scrib- ner. Chapter XV. Industrial Insurance Laws. Elliott, A. Workmen's Compensation Act of 1906. Garfield, James R. Employers' Liability and the Compen- sation Laws and the Difference Between Them. Ohio Bar Association. Proceedings, 1909. Germany. Workmen's Insurance Code of July, 191 1; text translated by H. J. Harris. United States. Labor, Bureau of. Bulletin. 23: 501-774. S. '11. Goodnow, Frank Johnson. Social Reform and the Consti- tution. 191 1. Macmillan. Constitutionality of Government Aid for Pensions in Case of Old Age, Accident or Sick- ness, pp. 300-17. International Labor Office. Basel, Switzerland. Bulletin. See this series for legislation on employers' liability and com- pulsory insurance. Lescohier, Don D. Employers' Liability Cases Reported in Volumes 103-109 of the Reports of the Minnesota Su- preme Court. (In Industrial Accidents and Employers' Liability in Minnesota, pp. 190-7.) Lorenz, M. O. What Form of Workingmen's Accident In- surance Should Our States Adopt? (In American Asso- ciation for Labor Legislation. Proceedings, 1908: 59-75.) Montana. Insurance Department. Coal Miners' Accident and BIBLIOGRAPHY xxix Total Disability Insurance Law Held Unconstitutional, lyii. Bulletin, No. lo. National Civic Federation. Views of the Legal Committee concerning the Effect of the Decision of the Court of Appeals in the State of New York upon the Compulsory Compensation Principle in its Relation to Uniform State Legislation. 1911. New York. Court of Appeals. Decision in the Case of Earl Ives vs. the South Buffalo Railway Company, igii. New York. Labor, Department of. Bulletin. 12: 57-80. Mr. '11. Compulsory Workmen's Compensation Act Uncon- stitutional. Reeves, William Pember. State Experiments in Australia and New Zealand. 2v. 1902." Richards. Workmen's Com- pensation Laws in New Zealand and South Australia, V. 2, pp. 21 1-6. Rhode Island. State Library Legislative Reference Bureau. Employers' Liability and Workmen's Compensation Acts, 1912. Bulletin, No. 5. United States. Industrial Commission. Report on the Con- dition of Foreign Legislation upon Matters Affecting General Labor. (Report, v. 16, 1901.) United States. Labor, Bureau of. Labor Laws of the United States with Decisions of Courts Relating Thereto. 1907. Annual Report, v. 22. United States. Labor, Bureau of. Laws Regulating Liability of Employers for Injuries to Employees; Compilation of the Laws of the States, Territories and United States. 1908. (6oth Cong. 1st. Sess. Senate Doc. 207.) United States. Labor, Bureau of. Bulletin. See Numbers as Issued for Decisions of Courts Affecting Labor. United States. Labor, Bureau of. Bulletin. 10: 645-8. Mr. '05. State Cooperative Accident Insurance Fund of Maryland. United States. Labor, Bureau of. Bulletin. 14: 574-652. My. '07. British Workmen's Compensation Acts. United States. Labor, Bureau of. Bulletin. 16: 1-120. Ja. '08. Legal Liability of Employers for Injuries to their Em- ployees in the United States. Lindley D. Clark. XXX BIBLIOGRAPHY United States. Labor, Bureau of. Bulletin. 21: 719-48. S. '10. Summary of Foreign Workmen's Compensation Acts. United States. Labor, Bureau of. Bulletin. 22: 97-181. Ja. '11. Workmen's Compensation and Insurance: Laws and Bills. United States. Supreme Court. Opinion and Dissenting Opin- ions on the Constitutionality of the Employers' Liability Law. 1908. (60th Cong, ist Sess. House Doc. 501.) Magazine Articles *Annals of the American Academy. 38: 23-30. Jl. '11. Some Features of Obligatory Industrial Insurance. James Har- rington Boyd. Annals of the American Academy. 38: 119-27. Jl. '11. Consti- tutional Problem of Workmen's Compensation. William Draper Lewis. Annals of the American Academy. 38: 128-43. Jl. '11. Present Status of Workmen's Compensation Laws. Walter George Smith. *Annals of the American Academy. 38: 151-8. Jl. '11. Com- pensation Law and Private Justice. P. Tecumseh Sherman. *Annals of the American Academy. 38: 175-83. Jl. '11. Sys- tem Best Adapted to the United States. Miles M. Dawson. Annals of the American Acadenl3^ 38: 184-201. Jl. '11. Points to be Considered in Workmen's Compensation Legisla- tion. Launcelot Packer. Annals of the American Academy. 38: 225-9. Jl- 'n- New Jersey Employers' Liability Act. Walter E. Edge. Charities and the Commons. 19: 1191-1203. D. 7, '07. Sum- mary of European Laws on Industrial Insurance. Charles Richmond Henderson. Charities and the Commons. 19: 1402-3. Ja. 18, '08. Liability Law Void. Charities and the Commons. 19: 1662-4; 20: 127-8. ]Mr. 7, Ap. 25, '08. Federal Employers' Liability Act. Ernst Freund. Chautauquan. 65: 305-7. F. '12. British National Insurance Act. Congressional Record. 42: 7922-33. Je. 8, '08. Speech on the Workmen's Compensation Act. Adolph J. Sabath. BIBLIOGRAPHY xxxi Everybody's. 19: 361-71. S. '08. Law of the Killed and Wounded. William Hard. Journal of Political Economy. 16: 109-10. F. '08. Setting Aside the Employers' Liability Act. Journal of Political Economy. 19: 694-700. O. '11. New York Workmen's Compensation Act Decisions. James Parker Hall. Outlook. 97: 955-60. Ap. 29, '11. Can a Free People be Free? Outlook. 98: 709-11. Jl. 28, '11. Workmen's Compensation Act: Its Constitutionality Affirmed. Outlook. 99: 146-7. S. 23, '11. Wisconsin's Industrial Insur- ance Act to be Tested. Quarterly Journal of Economics. 19: 320-2. F. '05. End of the Maryland Workmen's Compensation Act. George E. Barnett. •Quarterly Journal of Economics. 26: 275-312. F. '12. British National Insurance Act. R. F. Foerster. Survey. 23: 966-9. Mr. 26, '10. Work-Accidents and the Law; Report of the New York Commission on Industrial Ac- cidents. Survey. 24: 277-8. My. 14, '10. Liability vs. Compensation as Applied to Actual Cases. Survey. 25: 423-4. D. 10, '10. Uniform Law on Accident Com- pensation. Survey. 25: 949-62. Mr. 4, '11. Compensation Commissions; a Review of Legislation Proposed in Seven States with Re- spect to Work Accidents. P. Tecumseh Sherman. Survey. 26: 91-3. Ap. 8, '11. Next Step in Workmen's Com- pensation. Miles M. Dawson. Survey. 26: 185-96. Ap. 29, '11, Court of Appeals Decision; Symposium. *Survey. 26: 671-6. Ag. 5, '11. Workmen's Compensation. Would the Best System for the General Welfare be Con- stitutional? Miles M. Dawson. ^Survey. 27: 1015-6. O. 21, '11. Washington's "Yes" to New Y'ork's "No." Survey. 27: 1091-2. N. 4, '11. Olympian Law vs. Albany Law. xxxii BIBLIOGRAPHY Survey. 27: 1306-12. D. 2, '11. Struggle for the British Health Bill. Randolph J. Brodsky. III. Insurance Plans of Individual Corporations Books Phelps, Edward Bunnell. Summary of the Possibilities and Probable Cost of the Proposed Plan for Workmen's Com- pensation and Old-Age Pensions for American Brewery Workmen. 191 1. Magazine Articles American Journal of Sociology. 13: 584-616. Mr. '08. Insur- ance Plans of Railroad Corporations. Charles Richmond Henderson. Annals of the American Academy. 38: 35-44. Jl. '11. Results of the Voluntary Relief Plan of the United States Steel Corporation. Raynal C. Boiling. Annals of the American Academy. 38: 45-56. Jl. '11. Disability and Death Compensation for Railway Employees. Daniel L. Cease. Charities and the Commons. 19: 1213-7. D. 7, '07. Problem of Self Insurance Against Industrial Accidents. Edgar IMaitland Atkin. McClure. 35: 151-68. Je. '10. Cruelties of Our Courts. John M. Gitterman. *Survey. 24: 136-9. Ap. 23, '10. Accident Relief of the United States Steel Corporation. Survey. 26: 87-9. Ap. 8, '11. Brewery Workmen's Compensa- tion Fund. World's Work. 14: 945-8. O. '07. New Kind of Insurance; How One Company Insures Its Men Against Accidents. Arthur B. Reeve. BIBLIOGRAPHY xxxiii IV. Old Age Pensions Books and Pamphlets Booth, Charles. Old-Age Pensions. 1899. Chancellor, William E. Argument for Disability Pensions for Employees Invalided by Old Age and Other Causes, ed. 2. 191 1. Fairfield. Gainsborough Committee. Life and Labour in Germany, with an Appendix: Infirmity and Old-Age. Pensions in Germany. London. 1907. Lecky, William Edward Hartpole. Old Age Pensions. 1908. Longmans. Massachusetts. Commission of Old-Age Pensions, Annuities and Insurance. Report. 1910. (House doc. 1400.) Contains an excellent descriptive account of existing systems. National Conference of Charities and Corrections. 1905: 445- 57; 1906: 452-70. Reports of Special Committee on Work- ingmen's Insurance and Old-Age Pensions. Old Age Pensions; a Collection of Short Papers. 1903. Mac- millan. Seager, Henry Rogers. Social Insurance. 1910. Chapter 5. Provision for Old Age. Squier, Lee Welling. Old Age Dependency in the United States. 1912. Macmillan. Sutherland, William. Old Age Pensions. 1907. ]\Iethuen. United States. Labor, Bureau of. Bulletin. 21: 965-1033. N. '10. Old-Age and Invalidity Pension Laws of Germany, France, and Australia; Text and Comments. Vanderlip, Frank. Business and Education. 1907. Old-Age Pensions for Workingmen. pp. 224-52. Magazine Articles . Chautauquan. 61: 391-4. F. '11. Helping People in Their Homes. S. K. Bolton. Political Science Quarterly. 26: 500-29. S. '11. Compulsory Old-Age Insurance m France. I. M. Rubinow. *Quarterly Journal of Economics. 24: 714-42. Ag. '10. Old xxxiv BIBLIOGRAPHY Age Pension Schemes: a Criticisim and a Program. F. Spencer Baldwin. Review of Reviews. 38: 746. State-aided Old- Age and Dis- ability Insurance in Italy. V. Unemployment Insurance Books Chapman, S. J. and Hallsworth, H. M. Unemployment, the Results of an Investigation made in Lancashire. 1909. Manchester University Press. Chapter 8. Seasonality and Insurance. Dawson, William Harbutt. German Workman. 1906. Scrib- ner's. Chapter 3. Insurance Against Worklessness. Willoughby, William Franklin. Insurance Against Unem- ployment. (In Commons, J. R. ed. Trade Unionism and Labor Problems. Chapter 27.) Magazine Articles American Journal of Sociology. 2: 501-14. Ja. '97. Insurance Against Non-Employment. Paul Monroe. *Charities and the Commons. 20: 343-7- Je. 6, '08. Poverty and Insurance for the Unemployed. Belle Lindner Israels. Independent. 64: 647. ]\Ir. 19, '08. Insurance Against Unem- ployment. Independent. 67: 267-8. Jl. 29, "09. Unemployment Insurance. *Living Age. 268: 443-5. F. 18, '11. Insurance Against Un- employment. New York. Labor, Department of. Bulletin. 40: 69-70. Mr. '09. Unemployment Insurance in Denmark. Nineteenth Century. 64: 763-76. N. '08. How Switzerland Deals with her Unemployed. Edith Sellers. Nineteenth Century. 65: 272-82. F. '09. Insurance Against Unemployment Scheme. Edith Sellers. *Scribner's Magazine. 49: 116-20. Ja. '11. Experiments in Ger- many with Unemployment Insurance. Elmer Roberts. Scientific American Supplement. 72: 394-6. D. 16, '11. Insur- ance Against Unemployment in France. BIBLIOGRAPHY xxxv Spectator. 102: 172-3. Ja. 30, '09. Insurance Against Unem- ployment. Spectator. 102: 806-7. My. 22, '09. Compulsory Insurance Against Unemployment. Westminster Review. 171: 544-51. My. '09. Unemployment, Insurance and Labour Exchanges. T. Good. SELECTED ARTICLES ON COMPULSORY INSURANCE INTRODUCTION The student of human problems Ihuls this subject of the protection of the working classes from the misfortunes of life the most human of all problems. So large a proportion of the people belong to the working classes that the promo- tion of their well being is one of the most imperative so- cial needs. A country's greatest source of wealth lies in its workers. Upon the maintenance of the working people in decency, health, comfort and self respect hangs the efficiency and prosperity of a nation. As the social consciousness gathers coherence, nations begin to ask themselves whether the wage earners are being accorded their rightful share of the material riches resulting from their labors. The social demand is for healthful and comfortable homes, nourishing food, suitable clothing, adequate educational and recreational opportunities, steady employment, safe and healthful places in which to work, and wages that permit provision for the emergencies of life. Are these requirements being met? Naturally, the student looks to the Old World for the earliest efforts to arrive at social justice to the silent masses of the people. Overcrowding of population and consequent disestablishment of economic equilibrium forced recognition of the condition of the working people. To allay the dis- content growing out of these conditions as indexed by the 2 SELECTED ARTICLES rising tide of socialism, Germany, spurred on by Bismarck,, adopted a sweeping scheme of social insurance. This has been extended until the Code of July 19, 191 1 applies to the greater part of the working population of the Empire. Ample testimony to the general satisfaction over the effects of the system is available. Criticisms are not wanting, but they refer to details of administration rather than to the es- sential idea. After more than twenty-five years of trial the German system is almost universally conceded by impartial students to have been the leading factor in the establishment of the admitted industrial supremacy of Germany. Briefly, this system includes compulsory insurance against industrial accident, sickness, invalidity, old age and death of a wage earner with dependents. When the demands upon the poor rates become so heavy as to indicate a reducing of a shocking proportion of the working people to pauperism, taxpayers can generally be counted on to make some investigations into causes. Great Britain has been slowly and painfully v.'orking out some form of amelioration for the deplorable conditions existing among her working people. The scheme has recently (May, 1912) been widened to include invalidity and unemployment insurance. Earlier legislation had provided for workmen's compensation, sickness insurance and old age pensions. Many European countries have adopted soine of the fea- tures of the German system. An earnest effort to improve conditions is manifest. The laggard in this type of reform is the United States. This is due, principally, to the handicap to all social legisla- tion embedded in the Constitution. Such legislation, except for industries engaged in interstate commerce, must be ob- tained locally by states. A number of states have modified the common law, which has heretofore determined employ- ers' liability, and one state (Washington) has adopted com- pulsory state insurance for industrial accidents. Provision for some of the contingencies of life is made by some corporations in the United States for their per- COMPULSORY INSURANCE 3 maneiit employees — some of the systems l^eing non-contribu- tory, others being contributory and voluntary. The great majority of American workmen must shift for themselves in the matter of insurance. Some more equitable method must be devised. It is for the student to consider the systems in operation, and discover, if may be, what sys- tem is best adapted to conditions in the United States. SELECTED ARTICLES Annals of the American Academy. 33: 265-77. March, 1909. Logic of Social Insurance. Charles Richmond Henderson. Hitherto the title "industrial insurance" in this country has been monopolized by private companies, and meant chiefly provision for funeral expenses at high cost. It is time to extend the significance of the words, or to adopt some such description as "social insurance" to cover the methods of guaranteeing income to wage earners and their families in case of sickness, accident, invalidism, feebleness of old age, death of the breadwinner and unemployment. The people are beginning to take an interest in the suli- ject. A few years ago all suggestions were hushed by the sneering epithets, "socialism," "sentimentalism," "paternal- ism," and a hint that one was corrupted by German "absolu- tism." Of course, there never was any real weight in such empty and provincial phrases, and they merely indicated the fact that the American mind was empty of knowledge of a world movement. They revealed an indifference to human suffering which did no credit to our civilization, and a con- tempt for social science, which was not honorable to our universities, editors and lawyers. Very hopeful are the signs of interest. Magazine articles on industrial accidents sell the numbers; legislative committees are busy framing bills; the Russell Sage Foundation and the Carnegie Institution are collecting information; trade unions have retained legal tal- ent to help them formulate laws which will have a living chance with conservative courts bound under constitutions written by men of minds alien to our age and for radically different economic conditions and ethical ideals. European nations have solved the actuarial and economic problems. 6 SELECTED ARTICLES while America, proud of its inventiveness and initiative, lags in the rear and rails at the "effete monarchies" of the Old World, and foretells all sorts of evils like those senile per- sons who praise the times that are dead. Perhaps the newspapers, even though hostile, have helped to awaken attention by grudging references to the European laws, while a corps of young writers of talent and persons with experience in charity work have stirred the sluggish conscience of the nation by their stories of misery caused by our human neglect, and have reminded men of the dis- closures of the German workingmen's insurance plans at the St. Louis Exposition. One cause of the awakening is a discovery of the enor- mous cost of litigation which has become a burden upon the resources of the nation and a disgrace to the legal profession, as well as a source of corruption. A recent article in the Chicago "Tribune" on "The Cost of Legal Circumlocution," furnishes an illustration: All the civil litigation of England and Wales, population about thirty-two millions, is taken care of by thirty-four judges in the supreme court of judicature and fifty-eight county judges, or ninety-two judges in all. The population of Illinois was, by the census of 1900, approxi- mately 4,800,000. Its courts employ seventy-eight circuit judges and 101 county judges exclusive of Cook County. Cook County has twenty-flve circuit and superior court judges, a county judge, a probate judge, and a municipal court of very general jurisdiction employing twenty-eight judges. There is a supreme court of seven judges. In all these judges number 216. Besides, we have justices of the peace and the federal judges. The "Tribune" does not offer this rough comparison as con- clusive. But it suggests that after making all due allowances the discrepancy revealed is shocking. Omitting the work of our coun- ty judges and taking into account only that of our circuit, superior and supreme courts, we have an establishment of eighty-five judges taking care of the civil and criminal cases of a population of less than five millions, while in England and "Wales ninety-two judges dispose of all the litigation of more than six times our population. The vast property and business conditions of England must also be thrown into the scale against us. Unless ovu' judges and our lawyers are incompetent or worse there is something wrong in our administration of the courts. The first hypothesis is, of course, not to be considered. The alternative should be faced by the profession and by the public and reform achieved. The waste and burden of our over-technical procedure must cease. It has endured too long. Studies of the causes of wasteful expenditures in courts reveal the slow and serpentine course of personal damage COMPULSORY INSURANCE 7 suits which fill the dockets and blockade the roads of justice. Important commercial business must wait while, during long years some mutilated workman, led by an ambulance-chasing lawyer, who is fed on hopes of immense contingent fees, fights his employer or a soulless casualty insurance company through court after court, in the end to accept the pittance which the attorneys are willing to leave him from the award. The ideal of justice is a prompt, certain and unbought indemnity; the actual fact is that under our employers' lia- bility laws the indemnity for injury in occupation is subject to all the uncertainties of gambling, it comes, if ever, after long and painful waiting, and it is robbed of its value by the necessary costs of collection through the courts. There is no greater source of hatred for law and judicial process than this travesty and mockery of justice. The abuses of injunc- tions in case of strikes and boycotts are comparatively rare and easily remedied; the wrongs legally perpetrated in dam- age suits are a matter of universal and daily experience. As soon as a workman is injured and claims his indemnity in courts his employer may put him on a black list and perse- cute Tiim to death; and the very nature of the law produces this artificial and monstrous antagonism. Lawlessness and class hatred are the legitimate progeny of a procedure which has been rejected by every other great and civilized people. Curious and discouraging is the consequence of living for generations under such an unfit law; it has shaped our modes of reasoning until we cannot think rationally on the actual demands of the situation. We follow precedents of the past for a guide in a new and different economic world, and every step takes us further from our goal. Not only lawyers and judges, but aggressive business men and shrewd trade union- ists think in terms set by antiquated regulations. Trade unions are spending their energy on making the employers' liability law still more drastic and until recently, they have not faced the fact that progress in this direction is impos- sible. What they need is insurance of income in all cases of accident, whether from negligence of employer or from risk of the trade. What thev want and ask is the chance 8. SELECTED ARTICLES to punish their employers in case of negligence only, and the}' are seeking to interpret "negligence" in a sense which it never had before, which is unjust now, and which will pro- voke still more conflict in the courts. Meantime, more by a reflex movement of discomfort than from scientific guidance, employers and employees are per- forming all sorts of experiments with insurance. Blind and faulty as those gropings are, the}- must be made the starting point for a scientific and complete system in the future, as acorns produce oaks. The principle of association for mutual protection in the emergencies of existence manifest itself in the clubs and lo- cal benefit societies which are formed everywhere in the country. The negroes of the South have been led by the in- stinct of aggregation and the example of their white neigh- bors to pool their dues against the time of the funeral. Sometimes the undertaker is also secretary-treasurer of the pool, with results very similar to those known in the case of burial insurance benefits. The statistics of funds collected b}^ these friendly groups on the basis of common occupation, race or religious ties, or mere neighborhood, will never be gathered; but even partial surveys show vast sums and reveal heroic sacrifice and deeds of friendly service. The German imperial legislators have been wise enough to retain these features of local and per- sonal moral bonds in their sickness insurance laws. In con- nection with illness something more is needed than mere money benefits; a human touch of sympathy must be added bj^ fraternal visitors; and intimate acquaintance diminishes the temptation to malingering almost as thoroughly as med- ical examinations. The fraternal societies, of national scope and with local lodges, all federated in the common interest, have, with slow and irregular march, educated millions of people in the ele- mentar}'^ principles of social insurance. It is true these so- cieties include many representatives of the commercial and professional classes, but thc}' are also popular with many groups of workingmen. They have demonstrated the possi- COMPULSORY INSURANCE 9 bilities of economy of administration where the ties of per- sonal association are strong through neighborly feeling, mystic symbols and religious faith. The Mutualists of France have shown that not only sickness insurance and death benefits but also old age pensions can be provided by this method — with proper governmental supervision and aid. Some of the trade unions have added insurance features of various kinds, and when members have good wages these have succeeded fairly well with sickness and burial benefit. The trade unions alone have achieved even a moderate suc- cess with unemployment benefits. They have failed to in- sure the workmen who are on low and uncertain income. When a system of compulsory accident insurance ha? been organized the trade unions will be free to provide sickness and invalid insurance and additional income beyond the min- imum which can be secured bj^ law; but they can never fur- nish adequate accident insurance, and society has no right to require them to carry a risk which is part of the real cost of production and should be borne wholly as part of the ex- penditures of production. One principle has been taught to millions of persons by all these schemes of insurance — the principle of insurance as opposed to savings. The obsolescent doctrines of individual- ism and laissezfaire idolized the savings bank and the multi- tudes actual!}' believed that bj^ deposits of an average of one hundred dollars a year at 3 per cent they could all become capitalist managers and gain a share in the profit funds. This illusion was cultivated for a long time by advocates of many ill-defined "profit-sharing" schemes. Of course, there was a large measure of truth in both these ideas, and much will still be made of them in the future. But hope of "rising"' into the diminishing capitalist-manager class has been definitely abandoned by workingmen and people on salaries. Attention is turned to the value of association and insurance. The minute a man joins an insurance society he gains a claim on a fund which he could not "save" in twenty j^ears. Furthermore, men are discovering that co-operation lo SELECTED ARTICLES with others opens a liner way of life than depositing pre- miums to an individual account. From the point of view of social insurance the tendency to concentrate manufactures, commerce and transportation in permanent corporations is an advantage; partly because the responsible managers of large enterprises must be far- seeing men, and partly because solid corporations can safely venture on schemes which require a long view and the ac- cumulation of funds. It is precisely with the railway com- panies and the other huge corporations that we find the most rapid development of workingmen's benefit and pension plans. It seems probable that these bodies will entrench themselves in their financial position by these means, because they will draw away from the less important managers their best workmen and hold them in their service with the pros- pect of serene and independent old age. These plans are developing so rapidlj- that statistics are soon obsolete, and there is scarcely a good manufacturing or transportation company- which is not employing legal and actuarial talent to recommend methods and legislation. To this course they are driven all the more bj^ the tendency of legislatures to lay upon corporations, creations of the state, burdens of lia- bility which they do not think of imposing on private em- ployers. The consequence is that the directors of large en- terprises are looking about for a method which will at once conciliate employees and avoid the waste of litigation in damage suits. As progress comes by common imitation of examples set by princes and men in high place, we may rea- sonably look for a movement of smaller employers to se- cure the advantages of assembled capital through national insurance associations which will either furnish workmen's collective policies or arrange for better terms with casualtj^ companies. No voluntary system of social insurance can be economi- cally administered, save upon a foundation of compulsory in- surance. The reason is obvious and all the schemes men- tioned illustrate the law. So long as accident insurance con- tinues to be optional, manj^ employers and employees will COMPULSORY INSURANCE jj neglect organization and they will lianipor or even defeat those who are willing to organize. Part of the difficulty in the United States is created by the existing law. Employers feel that they cannot afford to support accident insurance at their own cost so long as they are liable to pay heavy damages to injured workmen or light them in the courts; and the law keeps them always in fight- ing mood. So long as part of the employers refuse to carry these extra premiums their competitors are economically compelled to follow their example. A compulsorj' insurance law would at one stroke of the pen remove the burden created by the present liability for negligence and the appalling wastes in casualty company fees and litigation; and at the same time the amount now wasted or misdirected would be available for an accident and sickness insurance fund of vast magnitude. At present an enormous sum is spent for soliciting business and settling- claims by agents of casualty companies. This is all waste, because under compulsory insurance employers would seek the means of meeting their responsibilities and their protec- tion could be "sold over the counter." The managers of in- dustries could then choose between the bids of casualty com- panies for workmen's collective policies, or organize their own mutual insurance associations. The premiums would fall to a legitimate rate and stockholders in casualty com- panies would no longer draw dividends from extortion, strife and blood money. That which is economically necessary and otherwise so- cially imperative will ultimately be found constitutional. In all our history there has been no exception to this rule; al- though at every step into a brighter world judges have solemnly denied the possibility and great lawyers have turned back to their case books with a smile of pity for the phi- lanthropists or bitter sarcasm for the agitators who ruffled the calm sea of their complacent confidence in "natural law,"' Coke, Blackstone and Company. Within the past year the federal government itself has broken up the "crust of custom" by enacting a law which 12 SELECTED ARTICLES provides compensation for certain classes of its own em- ployees injured in the service; and the pitifully inadequate compensation will be increased and extended. It is a splen- did and persuasive example of justice which the general gov- ernment has set before the several states and all employers of labor. The document is a light tower showing the future high- way for all those who control the services of men who must live daj' by daj' on daily income. The assertion, based on nothing, that compulsory social insurance is "not American" is contrary to the most obvious facts of our history. We are a law-abiding people and love to make laws, and ever)'^ statute and court ruling is compul- sorj'. We are so used to compulsion in the common interest that we forget it, as we are unconscious of the at- mosphere. It is the vital element in which we enjoy freedom, security, order and opportunity. By compulsory laws we build and maintain roads and bridges, against the mean pro- tests of the minority who would be content to stick in the mud. By compulsory laws we secure parks and pleasure grounds and secure the revenue by diverting money from the liquor traffic. Within the memory of the writer in the Mid- dle West a large if not respectable minority railed at the public school laws as robbery, and insisted that any man had the right to bring up his offspring in brutish ignorance if he wished to do so. Compulsory taxation to relieve the poor, the insane, the idiotic, the demented, the indigent old people is in the poor law of Great Britain, and the nations descended from it; while republican France has recently adopted the principle and Italy is moving in the same direction. This means that the conscience of a modern nation will not permit a citizen, however inefficient or unworthj% to perish without an offer of at least a minimum supply of the necessities of life. We shall be logical. We shall discover that it is morallj^ infamous to offer temporary asylum and a secure old age to wornout criminals, prostitutes, ignorant ne'er-do-wells, and degenerates, and deny shelter to honest workmen, ex- cept on terms revolting and debasing. COMPULSORY INSURANCE 13 The popular campaign against tuberculosis has revealed to the common mind the meaning of the "police power" of the state, and the significance of public health administration. No man can be sick unto himself, especially in a crowded factory or tenement house. Those who are too ignorant, poor or negligent to keep well are taken in hands by the commissioner of health. Those who suffer from infectious diseases are isolated in special hospitals or warning bulletins are posted'at the front door. It is notorious that people on low incomes go to physicians and dispensaries only in the last resort, from fear of expenses their income cannot meet. Society is discovering that neglected disease or wounds in- volve public loss and danger. How caii we secure prompt and economic application to the medical profession without pauper relief? The answer comes from Germany: by com- pulsory and universal sickness insurance. There is no other answer. This is part of our reply to those who declaim against workingmen's insurance as "class legislation." It is not class legislation; it is "social insurance," because all members of society reap its advantages, just as rich men who send their children to private schools derive benefits from the public schools which educate the poorer neighbor. If an insured workman is injured he places himself instantly under expert medical advice, and is more surely and speedily restored to industrial efficiency, and so becomes again a producer of so- cial wealth. Some of the individualists oppose compulsory insurance because it will "pauperize" wage earners. But neglected sick- ness is the broad and easy descent to pauperism, and it is by this route most paupers travel to their doom. Compulsory insurance is the best public health measure yet organized. Has anyone investigated the cost and moral degradation caused by the non-payment of medical service? It is no- torious that physicians annually contribute millions nf dollars to patients who will not or cannot pay; but this is a com- pulsory tax on physicians, not always a cheerful philanthropy. Physicians cannot refuse the call of a wounded or sick citi- 14 SELECTED ARTICLES zen and cannot require advanced paj'ments, as landlords and grocers can. Public opinion and the ethics of their pro- fession require them to rise in the night and go through storms to help those who suffer, and this without hope of payment. This is unscientific and barl^arous. j\Iost of it is wholly unnecessary. Physicians should have a social guarantee of payment, and honest men should not be obliged to pay for the dead beats. Under a compulsory insurance law a fund for paying physicians and supporting hospitals would be provided in advance and the cost would be equitably distrib- uted. Several methods of providing the funds of social in- surance are now under discussion and all of them have a chance of being put to the test of experiment, the final arbiter. We have already paid our compliments to the ex- isting liability law based on the principle of tort, and we have found it condemned by every modern nation except our own, and even here admitted to be full of cruelty and waste. Massachusetts has passed a law (May, 1908) permitting employers to escape from the existing liability on condition that they adequately insure their employees — the principle embodied in the bill offered for educational purposes in 1907 by the Illinois Industrial Insurance Commission and op- posed by the trade unions. L'p to the time of writing this article, not a single employer in Massachusetts had thought it worth while to avail himself of this permissive law, and there is no reason in the nature of the case for hoping for any general acceptance of the idea. The delegates to the International Congress on Social In- surance in 1908 were unanimously agreed that a minimum insurance can never in any country be secured to workmen without legal compulsion. This conclusion is the result of more than a century of trial of all forms of voluntarj^ in- surance. Two schemes of compulsory law are now del:)ated in this country, the British compensation law, and compul- sory insurance. The compensation method is urged for the L^nited States because it is English. But the British act is itself a pioneer experiment; and. heretofore, as in the case of COMPULSORY INSURANCE 15 the poor laws and employers' liabilitj^ laws, we have imi- tated England after that nation had abandoned an untenable position. The compensation law has difliculties which do not inhere in insurance plants. Thus, if all employers are made liable to pay compensation in any case of injury, the pay- ment would be ruinous to farmers and small manufacturers. It is reported that in England this is so true that the com- pensation act is a dead letter among the petty manufacturers and farmers. But if the employees are required to pay a periodical premium of a small percentage of the wage rate, this would be made a part of the ordinary expense of business, and could be met by any householder, or any employer of work- men in shop or field. Our people are already familiar with the insurance principle, they have had the patient and genial instruction of life insurance agents, the most skilful and effective teachers of a great social principle whose services are not always treated with the reverence and gratitude they deserve in view of the results. With the principle of com- pensation we have no acquaintance unless the obnoxious law of liability for negligence ma)- be so regarded, and that is now so associated with fraud, injustice and waste that it repels. Compensation laws are an indirect method of compelling employees to insure, when the direct way would be more simple, open, fair and economical. Compensation laws leave the thriftless and irresponsible employers uninsured to com- pete with employers who do insure, to the disadvantage of the more competent, at the same time leaving their own employees without protection. Under a straight and direct insurance law all employers are on a level and all employees are secure of protection. Furthermore, under a compulsory compensation law. if it stand alone, the 'state leaves the employers, especially the small employers, at the mercy of casualty companies without an alternative. It does not seem to the writer fair or safe to compel many thousands of employers to carry a liability to pay heavy indemnities in case of accident or other injury l6 SELECTED ARTICLES without ample and well organized methods of distributing and providing for the risk by some insurance method. The state itself need not go into the insurance business. It should leave a perfectly free field for casualty companies. But the state should provide for the organization of mutual insurance associations of employers and for a certain fund of deposit which would relieve the individual employer from enormous liabilities, protect the employees beyond a doubt, and provide wholesome competition with private insurance companies conducting business for profit. Advocates of the British compensation law are under moral obligations to remember its limitations. It bears the historic marks of its recent birth from the principle of tort on which the employ- ers' liability law is based; it provides indemnity for injuries from accident and disease, only so far as these arise directly out of the employment. But many injuries to health and soundness of body arise out of conditions quite apart from the occupation and place of employment, and for these al- so workmen need such protection as they can fmd only under a compulsory insurance system. The fear is often expressed that if workmen are insured against accidents malingering will be introduced; men will claim benefits on slight pretexts in order to enjoy a vaca- tion. The apparent increase of slight injuries in Germany is cited in proof. The argument has little weight. Men instinctively avoid pain and mutilation; benefits never equal wages; medical certificates can reduce the evil; and, real as the danger is, it is not to be weighed against the well- known miseries of the present situation. Besides, malinger- ing is already a familiar fact in this country; the trade unions and fraternal societies have plans for overcoming it. Under our employers' liability laws the workmen very frequently threaten damage suits without legal ground in order to extort payments for injuries not due to employers' negligence. If a careful investigation were made and sta- tistics secured it would show that Germany has no monop- oly of malingering. The uncertainty of risk under our law is not merelv the occasion of enormous costs for casualty COMPULSORY INSURANCE 17 insurance premiums, but, since the limit of practicable in- surance is $5,000, and damages of $20,000 to $30,000 are not unknown, the entire risk is not covered by insurance policies. This compels certain employers to pay higher interest for capital required in their business to cover the extra risk, and this is in addition to the loss occasioned by attendance on lawsuits and payments to workmen outside the award. Doctor Zacher, in a review of the discussions of the In- ternational Workingmen's Congress at Rome, in October, 1908, has selected the chief points on which after years of heated discussion all parties seemed to be united. The delegates to this congress from England and France have stood for the principle of freedom and for voluntary organ- izations. Especially in P'rance the "Mutualists" have long contested the tendency to break up their fraternal organiza- tions and give to the state a monopoly in this sphere. Nat- urally, the casualty companies have been unwilling to be driven out of the field of accident and health insurance by the compulsory laws of the state. At Rome all these parties united upon the principle that compulsory insurance is abso- lutely necessary to secure a minimum income for working men in case of accident, sickness and invalidism. Luzzatti, formerly Italian Minister of Finance, con- fessed himself a convert to the principle of compulsion be- cause he had found that the most earnest efforts of the Italians to secure the great multitude of workers from pauperism on the voluntary principle had failed. Even with the help of a state subsidy the voluntary associations had been able to insure only 200,000 persons, and most of those connected with the state employments, out of 12,000,000 per- sons who under a compulsory law would have been insured. Therefore, he was of the conviction that without legislative compulsion the purpose of insurance cannot be reached. As compulsory school education was a necessity for the intel- lectual education of the masses, so compulsory insurance was necessary for their economic education. The fear that compulsory insurance would hinder the development of the free activities of associations had been allayed by the aston- i8 SELECTED ARTICLES ishing successes of Germany. And in France, Mabilleau, the leader of the French Mutualists, had reached the conclusion that without legal compulsion the societies of mutual benefit could not be successful in the field of sickness and invalid in- surance. Luzzatti made a suggestion which seemed to be accepted by all, that comj^ulsory insurance offers only the indispensable minimum income; while in order to advance to the maximum voluntary insurance must be brought to bear. Between these two poles the free initiative of the individual and the autonomy of voluntary organizations had a wide field for action. The congress at Rome discussed also the important mat- ter of education and training of expert officers for insurance organizations. This is a matter which must receive attention in the universities of the United States. We have naturally given more attention to life and fire insurance because thought on these matters was better systematized and because material for study was near at hand. But already our great corporations have begun to introduce the voluntary associa- tions of insurance and legislatures are asking for information, and very soon there will be a considerable demand for per- sons thoroughly trained in the scientific aspects of working- men's insurance in all its branches. In this connection too great emphasis cannot be laid upon the importance of teach- ing the medical students their duties in relation to the differ- ent schemes of insurance. The medical profession will be called upon more and more to administer the various schemes of accident and invalid insurance, and there are many techni- cal questions of great interest with which they ought to be familiar in addition to their purely professional duties. Courses of instruction in social insurance should, therefore, speedily be added to the curriculum of our medical students. The field of industrial diseases alone demands much larger attention than it has hitherto received from the medical pro- fession in this country, and only the physicians have the knowledge which will enable them to act as inspectors for insurance agencies. The staff of factory inspectors should include men and women of suitable medical training. COMPULSORY IXSURANCK 19 The international congress has given considerable discus- sion to the insurance of mothers, and it is apparent that in our industrial cities provision must be made for those women who have the double care of infant life and of earning means to support the family. It is not too much to say that de- generation in large groups of modern city dwellers is one of the serious problems of our time. Unemployment insurance will not be touched upon here. Hitherto the United States have been very scantily represented in this international movement, but measures were taken at the last congress for organizing an American committee. Compulsory compensation or insurance is an inevitable and certain result of measures already taken by leading em- ployers. The greatest managers have already entered seri- ously upon a policy of insurance in some form, though ever so inadequate and crude; and every manager who assumes financial burdens in this direction finds his pecuniary interest threatened by those less intelligent, progressive and humane. What must be the effect? The only means of equalizing the burden is by legislation compelling all employers to bear the same load, and preventing the meanest and most narrow- minded from deriving an advantage over the best employees. Therefore, every voluntary scheme which is introduced brings one more powerful ally to the cause of compulsory in- surance. Annals of the American Academy. 38: 23-30. July, 191 1. Some Features of Obligatory Industrial Insurance. James Harrington Boyd. The legislatures of fourteen states have passed statutes abolishing the fellow-servant rule.^ Seven or more of the states have modified one or more of the common law de- fenses, either by statute or by decision of their courts, 'Arkansas, Colorado, Florida, Georgia (1885), Iowa, Kansas, Min- nesota, Montana, Nebraska, Nevada, Nortli Carolina, Oklahoma, South Dakota and Missouri. 20 SELECTED ARTICLES along the following lines:" (i) Adopting the doctrine of comparative negligence, which has always been the rule and common law in certain states, like Georgia and in admiralty causes in the federal courts; (2) changing the burden of proof of contributory negligence from the plaintiff to the de- fendant (as has always been the rule in the federal court and some states), as for example, in Ohio and Oregon; (3) taking awa}^ the defense of assumption of risk when the risk assumed was caused by the fault or negligence of the employer. The tendency of the development of the statutory' law during the last few years, relative to the recovery of com- pensation for injuries to workingmen which arise out of their employment, is to wipe out the common law defenses, leaving the action based solely upon the fault of the em- ployer. The chief sources of the friction between employer and emplo3'e, the rapid increase in the demands for charitable relief and care for delinquent children, and the correspond- ing demand for compensation for all personal injuries which workingmen receive in the due course of their employment, continue to exist largely because compensation for injuries can only be obtained when the employe can prove fault on the part of his employer. Fault or negligence of the employer can be proven in much less than 20 per cent, of the cases, and, what is most startling, no matter how careful the employe and the em- ployer are, or how high the efficiency of the state may rise in the prevention of accidents, the cause of 50 to 55 per cent, of all accidents to employes is solely due to the natural hazard or dangers of the business — the combined negligence of the employe and the employer. On the other hand, the cause of 16.8 per cent, of all accidents are traceable to the negligence of the employers, and the cause of 28.9 per cent of all acci- dents is attributable to the negligence of the emploj-es. Under the practical operations of the common law remedy, based ^California, Mississippi, Oliio, Oregon, South Carolina, Utah, Vir- ginia. COMPULSORY INSURANCE 21 upon fault, it is impossible to prove the employers negligent in anything like 16.8 per cent, of the cases of injuries to em- ployes. For that reason, the old theory of making fault the basis for an action to compensation for injured workmen has been abandoned. The only available statistics in the United States show- ing how much compensation the dependents of workmen killed or workmen injured receive under the present laws in the United States are in the reports of the investigations made by the Russell Sage Foundation in Allegheny County, Pa., 1906 and 1907; the investigations of the Employers' Lia- bility Commission of New York State, and those of the Liability Commission of Illinois, during the years 1909-1910, and the investigations, now about complete, which have been made by the experts of the Employers' Liability Commission of Ohio in Cuyahoga County (Cleveland), during the months of November and December, 1910, and January and Feb- ruary, 191 1, covering fatal and non-fatal accidents for the period of 1905-1910. On account of the great importance of the results of these investigations in framing laws providing for industrial insurance to workmen, a resume of their re- sults is given. Neiv York Statistics During the years 1907-1908, ten insurance companies, which keep employers' liability records, doing business in the state of New York, received in premiums from employ- ers, $23,524,000; they paid to injured employes, $8,560,000; waste, $14,964,000. It should further be added that ten liability insurance companies settled 414,000 cases in the three years prior to 1910 in New York by making payments in any sum at the rate of one payment in eight cases or in i2;/< per cent of the cases. — (N. Y. Report p. 25.) Nothing could more strikingly set forth the waste of the present system than the fact that only 36.34 per cent, of what employers pay in premiums for liability insurance is paid in settlement of claims and suits. Thus, for every $100 paid out 22 SELECTED ARTICLES by employers for protection against liability to their injured workmen, less than ^S7 is paid to those workmen; $63 goes to pay the salaries of attorneys and claim agents, whose business it is to defeat the claims of the injured, to the cost of soliciting business, to the cost of administration, to court costs and to profit. Out of this 36.34 per cent, the injured employe must pay his attorney. The same report shows that the attornej^s get 36.3 per cent, of what is paid to the injured employes. This investigation covers forty-six cases, where the recov- ery was about $1500 each. In small recoveries the attorney fees take a larger proportion. This report shows that some- where between 20 and 25 per cent, of the nionej^ paid by the employing class, actually passes to the injured workingmen for their dependent families in death cases. The proportions of the loss borne by employers in injury cases does not dififer greatly from that in death cases. Thus, out of 388 injury cases of the married men alone, 56 per cent, receive no compensation; of single men contributing to the support of others, 69 per cent, receive no compensation; single men, without dependents, 80 per cent, receive no com- pensation. Russell Sage Foundation Investigations in Allegheny County, Pennsylvania The investigations recently conducted in Allegheny Coun- ty, Pa., under the direction of the Pittsburgh Survey, showed that out of 355 cases of men killed in industrial accidents, all of whom were contributing to the support of others, and two-thirds of whom were married, 8g of the families left re- ceived not a dollar of compensation from the employer, 113 families received not more than $100, 61 families received something more than this $100, but not more than $500. In other words, 57 per cent, of these families were left by their employers to bear the entire burden of the income loss, and, granting that all unknown amounts would be decided for the plaintiff, onl}^ 27 per cent, received in compensation for the COMPULSORY INSURANCE 23 death of a regular income provider more than $500, a sum which would approximate one year's income of the lowest paid of the workmen killed. 1 Viscous ill Statistics The Wisconsin Bureau of Labor and Industrial Statistics reports that in 306 non-fatal cases in which reports were re- ceived by mail from workmen while at work the compensa- tion was as follows: Cases. Per Cent. Received nothing from employers 72 23.5 Received amount of doctor's bills only 99 32.4 Received amount of part of doctor's bills 15 4.9 Received something in addition to doctor's bills 91 29.7 Received something, but not doctor's bills 29 9.5 Total 306 100.00 In two-thirds of the cases, part or all of the doctor's bills Avere paid; in less than a third was anything more paid, and in about one-fourth of the cases nothing whatever was paid. In 131 non-fatal cases in Wisconsin, concerning which reports were secured by factory inspectors, the following dis- position was made: Cases. Per Cent. Received nothing fiom employer 28 21.37 Received doctor's bills only 56 42.75 Received something in addition to doctor's bills 10 7.63 Received something, but not doctor's bills 34 25.96 Not settled 3 2.29 Total 131 100.00 Illinois Statistics The Emploj-ers' Liability Commission of the State of Illi- nois has recently made a report on its investigation of in- dustrial accidents and employers' liability. More than 5000 individual accidents were investigated and recorded, together with comparative figures and analysis. The result of the investigations of the Illinois Commission are given by Ed- win R. Wright, secretary of the Commission, and president of the Illinois Federation of Labor. Six hundred and fourteen fatal accidents were recorded. The families of 214 of these workers received nothing in re- 24 SELECTED ARTICLES turn for the loss of the breadwinner. One hundred and eleven damage suits are pending in court. Twenty-four cases have been settled through court proceedings. Two hundred and eighty-one families settled directly with the employer. Skilled railroad employes, in settlement for death claims, averaged about $1,000.00 Steel workers 874.00 Railroad laborers 617.00 Skilled building tradesmen .- 348.00 Skilled electric railway employes 310.00 Unclassified workingmen 311.00 Miscellaneous trades 292.00 Packing house employes 234.00 General laborers 154.00 Mine workers 155.00 Electric railway laborers 75.00 Of every lOO industrial accidents, 15 go to court, 7 are lost and 8 are won. Ninety-two injuries out of every 100 re- ceive no compensation. (This includes both fatal and non- fatal accidents.) There have been 53 fatal cases of recent date. In fatal cases, the usual defenses of the emploj^ers — the fellow-serv- ant doctrine, assumption of risks, etc. — did not apply, or there would have been no recovery at all. For these — the very pick of industrial cases — the average recovery for death was only $1877.36, of this an average amount of $740.95 was paid to attorneys or expended on court fees, etc., leaving an actual payment of $1126.41 to the family of the dead worker; 34 widows were compelled to seek employment and 65 children left school to help keep the wolf from the door. Germany and England The German state insurance during the twenty years end- ing in 1905 required payments amounting to $802,000,000. Of this sum, $555>750,ooo were paid on account of sickness insurance; $232,750,000 were paid on account of accidents, and $13,500,000 paid on account of invalidism and old age. To the fund necessary to make these payments, the employer con- tributed $424,500,000. The employes contributed $377,000,000, and the Imperial Government paid the cost of administration and a small portion of the funds necessary to take care of invalidism and old-age pensions (50 marks in each case in- sured). COMPULSORY INSURANCE 25 The general rules in respect to the raising of the insurance fund are that the employes should pay two-thirds of the fund necessary to take care of sick insurance, which lasts for thir- teen weeks, and the employers pay one-third. In the case of accident insurance, the employers pay 85 per cent, and the employes 15 per cent. In the case of invalidism and old- age insurance, the Imperial Government pays $12.50 for each person injured, and the remainder of the fund is paid half and half by the employers and employes. The German plan in 1907 had 27,172,000 workingmen insured against sick- ness, accidents and old age, out of a population of 62,000,000 people. The English plan in 1908, provided for the insurance of 13,000,000 workingmen. In case of death, the compensation paid is, at most, three 3-ears' wages, £300 or $1460, with a minimum payment of three years' wages at £150 or $730. In case of disability lasting longer than one week, the com- pensation paid is one-half week's average wage, not to ex- ceed $4.87, as long as the disability lasts. Responsibility for the payment of the compensation rests solely on the employer, and employes are not required to insure. In both the German and English plans the rules of con- tributory negligence, assumption of risk, and the fellow-serv- ant rules are abolished, and the only kind of negligence recognized is that of malicious negligence on the part of the employer or emploj-e. The statistics of the United States show that over 50 per cent, of all industrial accidents are due to the inherent dangers and risks of the industrial business, that not to exceed 20 per cent, of all these accidents are due to or attributable entirely to, the negligence of the emploj-er, and that, at most, 25;^ per cent, are attributable solely to the negligence of the employe. The common lazu furnishes no plan of relief, except ivhere it can he proven that the defendant is at fault. Therefore, the common law affords no relief for something like 80 per cent, of all workingmen injured and killed in the United States. The lozvest estimate of the number of persons injured and killed in industrial accidents in 1909 is 536,000 people. 26 SELECTED AR TICLES Montana, in 1910, put in operation a mutual plan of in- surance for coal miners. The compensation paid the wife and children or dependents of a miner killed in the due course of his employment is $3000. In case the miner is totally dis- abled by an injury, he is paid $1 for each working day during disability. The loss of an eye, or liml), caused by accident to a miner while employed in or about a mine is compensated for in the sum of $1000. The compensations are paid from a fund which is administered by the auditor of state. The operators contribute to this fund according to the quan- tity of coal mined, and are authorized by law to deduct I per cent, from the wages due the miners. The New York act of 1910 provided for a compensation to workmen ranging from $1500 to $3000 in case of death. Other injuries were proportionately compensated. These payments were to be borne by the employer whether he was or was not at fault. The injured workman had the choice of suing at law or of taking the compensation. The Appel- late Court of New York has held this law unconstitutional. The employers' liability commissions of Washington, Min- nesota, Wisconsin and Ohio have reported acts to their re- spective legislatures recommending plans for compensation of workingmen for injuries without regard to fault. The Washington act provides a plan of obligatory mutual insur- ance, the state being the custodian of the fund. Compensa- tion varies from $1500 to $4000 in case of death or total dis- ability. This law has been enacted. Non-fatal injuries are compensated for at about 60 per cent, of the impairment of wages of the workingmen injured. The act defines a large class of dangerous employments. The employe waives the right to sue, and is compelled to accept the compensation provided by the act in lieu of all other remedies. The Wash- ington plan also stipulates that the employer shall contribute to the first-aid fund 4 cents for each workday that an employe worked, which takes care of the injured workingman for the first three weeks following the injury. The law authorizes the employer to deduct 2 cents each workday from the wages of his employe. COMPULSORY INSURANCE 27 The Minnesota plan is based upon state insurance and is applicable to all dangerous employments. The compensa- tions arc liberal, ranging from $1500 to $3000, in case of death. The compensation for vvorkingmen partially disabled is 50 per cent, of the impairment of their earning power. The Wisconsin act is optional and follows the New York act in its principles and amounts of compensation. New Jersey, in 191 1, enacted a comprehensive employers' liability and workingmen's compensation law. Massachusetts, Connecticut. Missouri and Texas have commissions studying the problem. Man)' of the other state legislatures are considering bills to abolish or largely modify the common law defenses. The International Harvester Company has put into opera- tion a voluntary plan of industrial insurance which provides compensation varying in amount from doctor's bills to $4000. the employes are not obliged to contribute anything to the fund, and compensations are paid without regard to fault. The acceptance of the compensation releases the company from a suit at law. These numerous state commissions are endeavoring to answer the question. What plan of compensation shall be substituted for the old common law action based upon the fault of the employer? The evidence indicates that the most just and efficient remedy is obligatory industrial insurance, such as prevails in Germany. Chautauquan. 41 : 8-59. March, 190.5. Compulsory Insurance. I. M. Rubinow. Under pressure of economic necessity a s^'stem of mutual aid sprang up in the main industrial countries, whose function it was to render assistance to the destitute workingman and so help him tide over the critical moment. What private or public charity was forced to do for many centuries, the sick benefit societies (Krankenkassen) of Germany or the trade unions of England have tried to accomplisli by co- 28 SELECTED ARTICLES operative effort. Yet this necessary work was done very unsatisfactorily indeed when about the year 1880 the Ger- man government came out with its project of compulsory in- surance. It is not necessary to go into a searching inquiry as to the motives which influenced Bismarck to undertake what has been frequently called a system of state socialism. It has been established with a sufficient degree of certainty, that Bismarck was more anxious to counteract the rising wave of socialism than to improve the condition of the work- ing masses. Yet it is acknowledged that Bismarck's method of fighting the spread of socialism was througli the improve- ment of the condition of the workingmen; and that the grand structure of compulsory state insurance of workingmen de- noted such improvement, cannot at present be denied. Insurance against sickness was the first, in point of time, to grow up in Germany. After several years of considerable discussion and agitation, a bill was introduced in the Ger- man parliament in 1881 and with many modifications finally became a law in 1883. Several important changes were sub- sequently made, and the law as it exists today dates from the loth of June, 1892. The changes consisted mainly in the ex- tension of its force over classes of wage earners omitted in the original law, until today domestic servants are the only large class of wage earners for whom sickness insurance is not compulsor}', though they may avail themselves of its benefits. The popularity of sick benefit funds among the German workingmen for many decades before a system of state in- surance was thought of, has provided Germany with a type of institution capable of handling the technical aspects of the problem; the state has therefore been relieved from under- taking the actual work of insurance; its action is limited to compulsion, regulation, and control. Because of this compul- sion almost each and every German workingman is insured against sickness, or rather the economic burdens of it, in some organization; be it a "local fund" to which all working- men of a small locality belong, or a "factory fund" where COMPULSORY INSURANCE 29 all the employees of a great industrial establishment are in- sured, or again a "trade fund" uniting all workingmen of a certain trade in a great industrial center. These funds iKasseii) are managed partly by the employers, partly by the employees. The state then sees to it that whoever comes under the provisions of the law^, should be insured, that the payment should be made, that no abuse be possible and that a certain minimum of assistance be granted by the fund; but many funds in the larger industrial centers grant a greal deal more than the minimum required. Of the necessary premiums the workingman pays tw^o-thirds and the em- ployer contributes one-third. The legislator has evidently acknowledged that no matter how difficult it may be to estab- lish the direct cause of each individual case of sickness, em- ployment as such is an important factor in the causation of disease. The employer, /. e., the business, must contribute to the expenses of the cure and care of the sick and their financial support, just as business is supposed to cover the expenses of fire insurance and wear and tear of the inanimate machine. The expenses of insurance to the worker are ex- ceedingly small; they vary according to the organization and locality between i^ per cent and 4 per cent of the working- man's wages and very rarely exceed 3 per cent; and with a rate of wages of 3 to 4 marks (60 to 80 cents) per day, the premium varies between i and 3.2 cents a day, or 6 and 20 cents a week, only two-thirds of which are paid by the em- ployee, or rather bj^ the employer for him. Now let us see what the workingman gets for his "one cent a day." The benefits of the "sickness funds" include, as a minimum, (i) free medical and surgical treatment, as long as necessary, up to twenty-six weeks; medicines and any special treatment that may be found necessary, operations, obstetrical attendance, massage, electricity, baths, as well as medical apparatus, glasses, crutches, and even artificial limbs in some Kassen; (2) financial assistance to the patient or his family, equal to 50 per cent of his wages at least, and in some Kassen as much as 75 per cent. Insured working- women are entitled, besides, to a subsidy in case of childbirth, 30 SELECTED ARTICLES so as to enable them to discontinue work both before and after the consummation of the act of maternity. Burial money is also given by these institutions, equal to from twenty to forty times the daily wage of the deceased. While these benefits are obligator}^ and universal, the activity of the large "sickness funds" in the many industrial centers has been very much widened, and here we see the beneficent results of cooperative activity under the encouragement of the state or the society at large. Not only have the benefits been made much more liberal, but the advantages of free medical treatment have been extended over the wage work- er's families; hospital treatment and even a prolonged sojourn in sanatoria and institutions for convalescents have been provided by some of the Kassen. Consider for a moment what this simple legislative act — which took into cognizance all existing institutions for self-help, and simply extended and regulated their activity — what it meant for the laboring population of Germany. It did away with the necessity of degrading medical charity which introduces so much demoralization into the homes of the American wage worker. The physician who treats the German worker free is paid by the Krankenkassen; all the benefits that are given to the sick are given because they are due to him, because it is his right to demand and receive them. When struck down with a serious illness, and unable to continue his regular work, the German workingman does not immediately fall into the atmosphere of condescension and pity, mingled with contempt. The material, hygienic and economic results are still more palpable, than the psycho- logic ones. The fear of a large professional bill does not deter the German worker from receiving necessary medical advice and assistance; one case of illness with its enormous expenses and concomitant loss of income does not destroy forever the economic independence of a self-sustaining fam- ily. As the French investigator, Edouard Fuster has well said, "The German system of sickness insurance saves the German worker his health and the German nation its vital powers." COMPULSORY INSURA^'CE 31 Bodil}' ailments are scourges of all humanity wilhout consideration of class or creed, but modern industrial life has subjected the worker to a long list of accidents to limb and life, which are specifically his own. The enormous development of machinery and the utilization of mechanical power, the swiftness of transportation methods, the dizzy height of building operations, and above all the nervous tension and hurrj- of a strenuous life, all these causes have contributed to increase the frequency of accidents and in- juries to an alarming degree. Here we have a sum total of effects whose causation by industry cannot be doubted. For a long time European legislation had been, and Ameri- can legislation even now is, much more preoccupied with the interesting problem of placing the blame of each individual accident, than the economically important effort at minimiz- ing the injurious effects of them all. The Anglo-Saxon sys- tem of individual responsibility for an accident has been a signal failure as far as the reimbursement of the victim has been concerned. A whole series of common law doc- trines grew up to limit the chances of obtaining such reim- bursement. The "fellow servant" doctrine denies the work- er the right to recover damages, if injured through careless- ness of any co-emploj'ee. The doctrine of contril^utory neg- ligence relieves the employer even in cases of acknowledged culpability, if it can be shown that the injured worker has also been somewhat negligent; thus the worker, who is only partly responsible, bears all the consequences and the em- ployer, also partly responsible, bears none. The doctrine of assumed risk teaches that the workingman who has know- ingly accepted dangerous emplojmient shall stand all the consequences. And there are many others, no less far-reach- ing in their influence. The effect of all this is to make the cases of reimbursement of the poor wretches who have lost limb or health, and the widows and children, a very rare and problematic possibilit3^ Nor does a system like this tend to promote the introduction of preventative measures. The German system of accident insurance was a radical departure from this old method. Assistance to the sufferer 32 SELECTED ARTICLES is made the very important problem. It is also acknowl- edged that whether the individual worker be negligent or not (and some acts of carelessness are committed by every human being) the industry as a whole is responsible for the frequency of accidents, and that the industry, J. e., the em- ployers, should pay all the expenses connected with acci- dent insurance. The first law establishing compulsory ac- cident insurance was passed on June 6, 1884, approximately one year after the experiment of sickness insurance was made. At first it applied to industrial workers only; in 1886 the law was extended to cover those employed in forestry and agriculture, and in 1887 the building trades and seamen. The entire accident insurance legislation as it exists today is a result of complete revision and codification in 1900. Unions of employers in each important branch of industry were created and the funds made up by contributions from the individual employers, the amounts being levied by as- sessment according to the size of the enterprise, number of workers, and also frequency of accidents. The organization by industries was thought essential because of the great difference in frequency of accidents in various industries. On the other hand the system of assessments shifts upon the careless employer the burden of an excesive frequency of accidents in his establishment. The benefits paid to the insured are quite liberal and thorough. The minor accidents which do not require at- tendance beyond the first thirteen weeks, are taken care of by the sick insurance funds. From the fourteenth week on, the injured receives medical attendance, medicines, etc., as long as necessary, and financial assistance as long as his disability lasts, even for the rest of his life, if the disability be permanent. The injured workman is entitled to two- thirds of his wages for total disability to engage in any gainful employment, and a proportionate amount of the two- thirds if his disability be only partial, the facts in the case and the degree of disability being decided by a medical board. In case of death of the injured person, whether it be the immediate result of the accident or not, the widow COMPULSORY INSURANCE 33 and orphans below fifteen years of age, each receive an an- nuity equal to 20 per cent of the earnings of the lost bread- winner; the maximum annuity is, however, limited to 60 per cent. The relatives in the ascending line are entitled to an annuity equal to 20 per cent of the wages and grand- children have the same rights if they had been depending on the deceased for their support. In case of remarriage, the widow (but not the children) loses her right to the an- nuity, but receives the final payment of 60 per cent as a dowry. A special payment is also made to cover the funeral expenses in case of death, which equals one-sixteenth of the annual wages, but cannot be less than fifty marks ($12). There are numerous minor benefits as well as provisions to safeguard the interests of the victims of the accident as well as those dependent upon him. Too much stress can not be laid upon the fact that the causation of the individ- ual accident and the degree of carelessness of the injured are totally disregarded in deciding the amount of the an- nuity, except in so far as to exclude injuries wilfully and maliciously self-inflicted. All these payments cannot recompense the injured work- man for a lost limb, or ruined health, cannot console the widow and orphans for the loss of a dear life. But no human power has succeeded in accomplishing all that. What the system of accident insurance has succeeded in bringing about, is an avoidance of all costly and tedious litigation, which promised little and taxed the workingman much, and made him wait long even in those cases where the employ- er's gross neglect was perfectly self-evident. It established the principle that an industrial worker, who had spent his health and life in the production of goods socially useful, is entitled to a better fate than starvation and misery, if in- capacitated while in performance of useful work — a principle universally admitted with regard to the soldier by the whole American people. It has given the German workingman a sense of security for the future which his American comrade, notwithstanding his higher rate of wa-ges, certainl}- does not possess. 34 SELECTED ARTICLES Sickness or accidents are the emergencies of a working- man's life, frequent, and to be expected, yet not inevitable and often temporary. They do not by far complete the list of all the vicissitudes of a wage-w^orker's existence. Without any special, definite, easily-to-be-noticed case of violence, the health and strength of the worker may be so reduced, as to make him unlit to obtain profitable employment. Such cases must necessarily grow with the general tendency of speeding up the processes of manufactures. Ten to twelve hours of continuous work at the high rate of tension which prevails in the modern factor}^ frequently produce that pre- mature old age, which is a typical and distressing feature of modern civilization. Again, quite apart from any of these cases of invalidity and premature old age, there is for the workingman that inevitable prospect of an old age perhaps quite normal and physically unavoidable, during which a quest for a job would meet no encouragement. Perhaps nothing is more distressing in the conditions of modern life, than the sight of an old and decrepit man forced to eke out his existence by the work of old shaky hands, bj^ means of weakened, half-blind eyes. What becomes of all these men who get nothing to eat unless they work? What becomes of them when they are too old to work? They fill the hospitals, the poor- and work-houses, are often sup- ported by their children, and some of course, "retire," /. e., they live on the proceeds of their savings. But how many can save? It seems to be the widelj' ac- cepted theory in this country, that all who wish can save, and that, too, sufiiciently to last them through their declining- days. Our overseers of the poor, and chiefs of departments of charities and corrections may possiblj^ hold a different opinion. A German official investigator, Professor Bielefeldt, states the case very succinctly when he says, that '"wages as a rule, are about sufficient to satisfy the ordinary demands of every-day existence, and totally fail at the time of extra- ordinary disturbances of the working labor power of the bread-winner of a family." How much more true it is of cases of complete and permanent failure of lal)or power! COMPULSORY INSURANCE 35 The system of invalid and old age insurance naturally came as a fitting sequel to insurance against sickness and acci- dents. The German law making such insurance compulsory was promulgated in June of 1889, and revised in 1899, in which form it is in force at present. In point of latitude the law is more sweeping than the sick insurance law, and it in- cludes besides wage workers, also independent tradesmen and even petty employers of labor. At the time when the plans for old age insurance were- elaborated in Germany two tendencies asserted themselves. Some aimed to make it a system of pensions and proposed to put the whole burden on the state treasury, others thought that insurance should only be modified saving and that the state should do no more than encourage and even compel, if necessary, each workingman to save. The system, as it was actually carried through, was a combination of both principles. Every person of the classes designated must be insured if over sixteen years of age. The insurance demands a weekly payment of from 14 to 36 pfennigs (from 3 to 8 cents) a week, according to the amount of wages received; this payment is divided equally between the employers and the employees, so that the workingman contributes only from 1 3/4 to 4 cents a week. The state's share consists in contributing 50 marks ($12) a year to each pension or an- nuity, besides sharing to a large extent in the expenses of administration. In return for his small payments the in- sured is entitled to an invalid pension in case of a general failure of health or a prolonged sickness (if it lasts over twenty-six weeks during which the sick benefit funds render the necessary assistance). The annual amount consists of the fifty marks supplied by the government and an annual sum determined in a rather complicated way by the amount of the weekly payment and a third sum dependent upon the number of payments actually made. Thus there are com- bined in this system the three elements of pension, insurance and savings. The actual sum varies from 116 to 450 marks a year. 36 SELECTED ARTICLES A similar annuit}' is paid to each insured who has reached the age of seventy, provided he has paid in at least 1,200 weekly premiums (that is for about 25 years) ; the amount of the old age annuity is much smaller, varying between no and 230 marks. There are also various provisions for medi- cal treatment of the invalids, return of monies to working- women at the time of their marriage, etc. The sums paid are not any too extravagant, it is true, and the age of seventy years so high, that the workingmen have justly refused to become very enthusiastic over the prospect of $26 to $54 a 3^ear at an age which a hard working man reaches very rare- ly, though it must not be forgotten that this sum means a great deal more in Germany than in the United States. Yet the invalid insurance is more promising, and, what is much more important, the German insurance legislation is not at a standstill. The first wedge has been entered, the prin- ciple has been established, and further efforts will undoubted- ly bring about the desired results, that the self-respecting- wage worker need not fear becoming a pauper or a public charge at an age that should command respect, and should be entitled to the comforts of quiet home life. For some years Germany stood alone in her bold under- taking. The industrial world watched with horror these en- croachments upon the time-honored political philosophy of "laissez faire." But the beneficial results of this scheme became so palpa- ble, that its influence did not fail to extend far beyond the borders of the German Empire. At first the opposition to "this craze of compulsion," as it was called by an Italian economist, was violent and bitter. But opposition soon gave way to imitation. The semi-German neighbor of Germany, Austria, was the first to follow. The Austrian system of sick insurance, introduced in 1888, was an improved copy of the German Legislation. The minimum of sick money has been made 60 per cent instead of 50, and the agitation has finally resulted in a sickness insurance law which was made applicable to all industrial and agricultural workers' with a maximum wage of 1,200 gulden (about $480). In the matter COMPULSORY INSURANCE 37 of accident insurance, German influence was still more po- tent, even if most other countries have somewhat modified the German system. The Austrian law of 1887 has closely followed the German pattern, though the organization of the funds is not hy industries, but by territorial divisions. An- other distinct feature of the Austrian system is that the work- men are made to participate in the expenses of accident in- surance to the extent of 10 per cent. Until 1895 Germany and Austria kept this isolated posi- tion. Then almost all the other European nations rapidly fell in line. Norway, Finland, Italy and Holland have by this time systems of obligatory accident insurance. All these countries have organized central governmental banks to carry on the insurance business, but kept the provision forc- ing the employer to paj' all the charges. The last three states named also permit insurance in private insurance com- panies. In a number of European countries a somewhat modified system has been introduced, which goes by the name of compulsory compensation for accidents. No special organ- izations are created, but the individual employer is financially responsible for the payment of indemnities and annuities without the slow process of litigation. Great Britain, since 1898. Denmark and France since 1899, Sweden since 1901, have been among these countries. Even backward Russia was forced to yield to the demands of the workers and pubr lie opinion, and has had a similar law since January i, 1904. Belgium passed its law before the close of 1903, to take effect during the current year. In so far as it guarantees the workingman the benefits of compensation when an ac- cident does occur, it is a system of insurance in principle, if not in name. Unfortunately it works very imperfectly. The recalcitrant and irresponsible employer must frequently be sued against, and in cases of the small and financially weak employer of labor, a prolonged payment of an annuity be- comes somewhat uncertain in these days of insecurity for even considerable enterprises. When the employer has failed, 46183 38 SELECTED ARTICLES the claim of the invalid, though usually given a preferred standing, may or may not be made good. These harmful features are somewhat limited by the per- mission granted to the employer to reinsure himself against these claims in some private company, and it is a powerful argument in favor of insurance that the better class of em- ployers usually prefer to do so. However, the protests against this half measure are loud in France, Belgium and Russia, and a closer modeling after the German pattern is, in these countries, probably a matter of time. But in no industrial country of Europe has the old system survived, with litigation for a bulk sum, the larger part of which falls into the hands of the rapacious attorney, while in most cases no damages can be recovered at all. No other European country has as yet followed Germany's example in the matter of a thorough and universal system of old age and invalid insurance; but scarcely a civilized coun- try can be named in Europe where the scheme has not been agitated during the last ten years, and has not been discussed and presented to the legislative bodies. In fact so rapidly does the influence of the German institutions spread, that any statement made is liable to be out of date the next day. Since 1891 no single year has passed but has brought some important measure in the domain of labor insurance in some European country. Above all it must be pointed out, that the influence of German example is much broader than the few quoted examples of compulsory insurance would in- dicate. It is absolutely impossible in this paper to give even a brief survey of the many and varied systems of voluntary in- surance existing in France, Italy, Belgium, England, Switzer- land — in fact in almost all European countries. The exist- ence of these voluntary and private organizations aiming at assistance in case of sickness, and of various private and governmental savings banks, to encourage savings and pro- • vision for the future, is often pointed at as an argument against the necessity of compulsory insurance systems. Yet the development of even these institutions, under governmental COMPULSORY INSURANCE 39 control and often with governmental assistance, was clue to the stimulus of the German example; notably so in France, Belgium and the Scandinavian countries. But notwithstand- ing this considerable governmental aid, the number of in- sured remains as small and the struggle for a comprehensive compulsory system continues. Statistical figures usually make very dry reading, and it is not the purpose of this short study to frighten away the reader from a subject exceedingly serious and complicated, and therefore necessarily difficult, by delving in unnecessary technicalities and details. Yet a few statistical data are quite necessary to convey a proper conception of the important result alread}^ achieved within the short period of twenty years. In 1902 the German Empire had a population of 57,700,000 and the number of wage workers was approximately above 10,500,000. In that year there were 10,500,000 persons insured against sickness, 17,600,000 against accident, and 13,400,000 names were enrolled for old age and invalid insurance. The differences are due to the fact that the different laws do not all embrace exactly the same classes, and as voluntary insur- ance is permitted to large groups of persons for whom it is not made obligatory, the three insurance systems do not prove an equal attraction. In the case of accident insurance the number of insured actually surpasses the number of wage workers; it evidently includes many hundreds of thousands from other economic classes. The figures certainly show that the German system of insurance is a universal system of insurance. During these seventeen years almost 48,000,000 cases of illness with more than 809,000,000 sick days have come under the care of the sick benefit funds and over 1,000,000 victims of accidents assisted. For the period of seventeen years the total income of the sick insurance funds reached the enor- mous sum of $504,100,000 of which $144,500,000 was contrib- uted by the employers and $335,200,000 by the employees and $23,400,000 was received as interest and other income. The expenses for the same period were $464,200,000, leaving 40 SELECTED ARTICLES with the sick benefit funds, a reserve of $43,700,000. Of this enormous sum only $27,000,000 or 5.8 per cent was spent for purposes of administration, and all the rest went directly to help the insured. Moreover these expenses show a marked tendency to decrease. In 1885 they were 6.31 per cent of the total expenses, and in 1901 only 5.61 per cent. Certainly no private insurance company in the world was able to make such a showing, and with some of the American in- surance companies who make a specialty of insuring people of moderate means, the expenses of administration were four or five times as high. The results of accident insurance, though told in some- what smaller numbers, are in their way no less imposing. For the same period the income was $230,800,000, all of which with the exception of $28,400,000 of miscellaneous in- come, was paid by the employers. Here the expenses have been $198,100,000, leaving a reserve of $42,700,000. Old age and invalid insurance has been in existence a much shorter time, but its operations from the very begin- ning have been on a much larger scale; for the eleven years 1891-1901 altogether $376,100,000 has been collected of which $285,500,000 has been contributed bj- employers and em- ployees in approximately even shares; the share of the state constituted $50,200,000 and $40,500,000 came from miscellane- ous sources. The payments here were necessarily much smaller, the larger part going into a reserve fund for future pensions. The total expenditures were $161,000,000 of which only $18,300,000 or 11.4 per cent was for purposes of adminis- tration. From 1891 to 1901 the expenses of administration had fallen from 20.3 per cent to 9.3 per cent. The reserve fund of the old age insurance system has reached within eleven years the enormous amount of $217,400,000. For all forms of insurance together, $1,121,000,000 was received, of which $500,000,000 was contributed bj^ the em- ployers, $469,000,000 by the workers, $50,200,000 by the state, and $92,000,000 from other sources, mainlj' interest. The ex- penditures were $821,000,000 of which $78,600,000 were for administration purposes, or 9.6 per cent. An enormous re- L COMPULSORY INSURANCE 41 serve capital of $303,800,000 was collected, to be devoted to the welfare of the workers in the future. We have used these large totals for seventeen years for the purpose of emphasizing the enormous dimensions of German insurance activity. It must not for a moment be thought, however, that a range of one year's activity can be obtained through a simple division of the totals by seventeen. The influence of labor insurance has rapidly grown in quantity as well as quality, and in 1901 alone the payments received were $123,200,000 and the expenditures $99,300,000. Of all the sources of income the contributions of the employers have been growing most rapidly, from 28 per cent of the income in 1885 to 45 per cent in 1901, while the workingman's share has decreased from 72 per cent to 38 per cent. Thus the employers, and to a much smaller extent the state, were forced by Germanj^'s legislation to contribute large sums to the comfort and happiness of the whole work- ing people. A wanton and arbitrary process of confiscation it has been called by some, while others are more inclined to look upon it in the nature of a payment of an old and just debt. It must be noticed that the objections are much louder outside of Germany than among the German employ- ers, the majority of whom have gradually come to see the justice of this institution. The limited space of this short study absolutely prohibits any extensive comparisons with other countries. The ex- ample of Belgium may be quoted briefly to show the superior- ity of compulsory as against a voluntary system of insur- ance. Sickness insurance is carried on by friendly societies which are encouraged and assisted by the government. Not- withstanding this, and the highly developed spirit of coopera- tion, the membership scarcely reaches 600,000 or less than 9 per cent of the population, while in Germany the insured equal 18 per cent; and though Belgium expends several mil- lion dollars each year in bonuses for small savings bank ac- counts, only about 100,000 workmen are members of the superannuation fund. In view of these conditions the Belgian government was forced to grant temporarily (until 191 1) the 42 SELECTED ARTICLES annual sum of 65 francs ($13) to all the workmen over the age of 65 who are in need, and the number of pensioners has passed 200,000. One must, however, guard against the mistake of idealizing conditions. Criticisms of the compulsorj' insurance system in Germany are not wanting; but they are directed against cer- tain provisions and the working of the system and much less against the principle itself, as even the employers have acquiesced in it, though they carry the heaviest burden. Some of those faults were pointed out above, nainely the high age limit of old age insurance and the very limited com- pensation. A feeling is also growing up that a wage worker who loses his health or limb through no fault of his own, should not be made to lose even one-third of his income. Further efforts will undoubtedly be made to remedy this and other shortcomings. Compulsory insurance has not brought the millennium to the German people. Nor was it expected. It has not even altogether destroyed poverty, for it has not even touched upon one of the main causes, which is not sick- ness, nor accident, but unemployment. Several experiments with insurance against unemployment have been made in Swiss towns, but have met with failure. And a compulsory system of state insurance against unemployment has never as yet been tried. But it would hardly be fair to condemn a social institution for not having succeeded in accomplishing something which it never intended to undertake. In its own field the system of compulsory sick, accident, old age and invalid insurance has proved more efiicient and satisfactory than any other practical measures directed toward the same ends that has ever existed. No greater praise can be given to an existing human institution. Independent. 61: 1475-80. December 20, 1906. Greatest Life Insurance Wrong. Louis D. Brandeis. For the greatest of life insurance wrongs — the so-called industrial insurance — the Armstrong Committee failed to COMPULSORY INSURANCE 43 offer any remedy. And yet nearly three-fourths of all level premium life insurance policies issued are of this character. On December 31, 1905, the day after the committee closed its hearings, there were 16,872,583 industrial policies out- standing in the United States. In New York alone their number was then 3,898,810, and while the committee was sitting, an average of 67,200 such policies were being issued in that state every month. Industrial insurance, the workingman's life insurance, is simply life insurance in small amounts, on which the pre- miums are collected weekly at the homes of the insured. It includes both adult and child insurance. The regular premium charge for such insurance is about double that charged by the Equitable, the New York Life, or the Mutual Life of New York, for ordinary life insurance. In the initial period of the industrial policy, the premium rate rises to eight times that paid for ordinary insurance, since, by a clause which will be found in most industrial policies, it is provided that if death occurs within the first six months after the date of the policy, only one-fourth of the face of the policy will be paid, and if death occurs within the second six months, payment will be made of only one-half. So heavy are the burdens cast upon those least able to bear them. The disastrous result to the policyholder of this system of life insurance may be illustrated from the following data, drawn from Massachusetts ofificial reports: In the fifteen years ending December 31, 1905, the work- ingmen of Massachusetts paid to the so-called industrial life insurance companies an aggregate of $61,294,887 in premi- ums, and received back in death benefits, endowments or surrender values an aggregate of only $21,819,606. The in- surance reserve arising from these premiums still held by the insurance companies does not exceed $9,838,000. It thus appears that, in addition to interest on invested funds, about one-half of the amounts paid by the workingmen in premiums has been absorbed in the expense of conducting 44 SELECTED ARTICLES the business and in dividends to the stockholders of the in- surance companies. If this $61,294,887, instead of being paid to the insurance companies, had been deposited in ^Massachusetts savings banks, and the depositors had withdrawn from the banks an amount equal to the aggregate of $21,819,606 which they received from the insurance companies during the fifteen years, the balance remaining in the savings banks December 31, 1905, with the accumulated interest, would have amounted to $49,931,548.35 — and this, altho the savings banks would have been obliged to pay upon these increased deposits in taxes to the Commonwealth more than four times the amount which was actually paid by the insurance companies on account of the insurance. Perhaps the appalling sacrifice of workingmen's savings thru this system of insurance can be made more clear by the following" illustration: The average expectancy of life in the United States of a man 21 years old is, according to Aleech's Table of Mortal- ity, 40.25. In other words, take any large number of men who are 21 years old, and the average age which they will reach is 61^ years. If a man, beginning with his 21st birthday, pays thruout life 50 cents a week into Massachusetts savings banks, and allows these deposits to accumulate for his family, the sur- vivors will, in case of his death at this average age of 61% years, inherit $2,265.90 if an interest of 3^ per cent, a year is maintained. If this same man should, beginning at age 21, pay thru- out his life 50 cents a week to the Prudential Insurance Company as premiums on a so-called "industrial" life policy for the beneht of his family, the survivors would be legally entitled to receive, upon his death at the age of 6134 years, only $820. If this same man, having made his weekly deposit in a savings bank for 20 years, should then conclude to discontin- ue his weekly payments and withdraw the money for his own benefit, he would receive $746.20. If. on the other hand, COMPULSORY INSURANCE 45 having made for 20 j'ears such weekly paj^ments to the Pru- dential Insurance Company, he should then conclude to dis- continued payments and surrender his policy, he would be legally entitled to receive only $165. So widely different is the probable result to the working- man if he selects the one or the other of the two classes of savings investment which are open to him; and yet life insurance is but a method of saving. The savings banks manage the aggregate funds made up of man}' small deposits until such time as they shall be demanded by the depositor; the insurance company manages them ordinarily until the depositor's death. The savings bank pays back to the de- positor his deposit with interest less the necessary expense of management. The insurance company in theory does the same, the difference being merely that the savings bank undertakes to repay to each individual depositor the whole of his deposit with interest; while the insurance company undertakes to pay to each member of a class the average amount (regarding the chances of life and death), so that those who do not reach the average age get more than they have deposited (including interest) and those who exceed the average age less than thej' have deposited (including interest). It is obvious that the community should not and will not long tolerate such a sacrifice of the workingmen's savings as the present system of industrial insurance entails; for the causes of this sacrifice are easily determined and a remedy lies near. The extraordinary wastefulness of the present system of industrial insurance is due in large part to the fact that the business, whether conducted by stock or by mutual com- panies, is carried on for the benefit of others than the policy- holders. The needs and financial inexperience of the wage- earner are exploited for the benefit of stockholders or offi- cials. The Prudential (which was the first American com- pany to engage in the business) pays annual dividends to its stockholders equivalent to more than 219 per cent, upon the capital actually paid in; the Metropolitan dividends are 46 SELECTED ARTICLES equivalent to 28 per cent, of such capital; and stock in the Columbian National Life Insurance Company, a corporation which commenced business but four years ago, has risen from par to $296. But the excessive amounts paid in dividends or in salaries to the favored officials account directly for only a small part of the terrible shrinkage of the workingmen's savings. The main cause of waste lies in the huge expense of solicit- ing insurance, taken in connection with the large percentage of lapses, and in the heavy expenses incident to a weekly collection of premiums at the homes of the insured. The commission of the insurance solicitor is from ten to twenty times the amount of the first premium. The cost of collect- ing the premiums varies from one-fifth to one-sixth of the amount collected. And yet commissions for soliciting and collection are only a part of the expenses. The physician's fee, the cost of supervision, of accounting and of advertising must all be added; with the result that no industrial policy "pays its way" until it has been in force about three years. In other words, if the policy lapses before it has been in force three years, not only does the policy-holder lose (ex- cept the temporary protection) all that he has paid in, but the company (that is the persisting policy-holders) bears a part — generally the larger part — of the cost of the lapsed policy. And only a small percentage of industrial policies survive the third year. A majority of the policies lapse within the first year. In 1905, the average payments on a policy in the Metropolitan so lapsing continued little more than six weeks. The aggregate number of such lapses in a single year reaches huge figures. In 190S, 1,253,635 Metropolitan and 951,704 Prudential policies lapsed. The experience of their young and energetic rival, the Columbia National Life Insurance Compan}% is even more striking. On January i, 1905, that company had outstanding 40,397 industrial policies. It wrote, during the year, 103,466. At the end of the year it had outstanding onlj^ 63,497; and yet, of the 143,863 policy- COMPULSORY INSURANCE 47 holders, only 699 had died, while 79,677 policies— that is, one hundred and fourteen times as many — had lapsed. The results of this system of insurance establish conclu- sively that, in the conduct of the business, the interests of the insured are ignored. A life insurance company for working-men should, as to each policy-holder, be conducted, like a savings bank, as a benevolent institution. No one should be induced to take out a policy unless it is advisable for him to do so in the interests of those whom he wishes to protect by it. No one should be lured into becoming a policy-holder. No one should take a policy unless he will probably be able and willing to continue it in force. Further- more, economy in the management of the insurance savings is as essential to satisfactory results as the economy on the part of the workingmen, which alone makes it possible to pay premiums. The supporters of the present system of industrial insur- ance declare that a reduction of expenses and of lapses is impossible. They insist that the loss to the insured and the heavy burden borne by the persisting policy-holders from lapses, as well as from the huge cost of premium collection, must all be patiently borne as being the inevitable incidents of the beneficent institution of life insurance, when applied to the working-man. It is obvious that a remedy cannot come from men holding such views — from men who refuse to recognize that the best method of increasing the demand for life insurance is not eloquent persistent persuasion, but to furnish a good article at a low price. A remedy can be provided only by some institution which will proceed upon the principle that its function is to supply insurance upon proper terms to those who want it and can carry it, and not to induce working people to take insurance regardless of their real interests. To attain satisfactory results the change of system must be radical. The savings banks established on the plan prevailing in New York and generally thru the New England States are managed upon principles and under conditions upon which alone a satisfactory system of life insurance for working- 48 SELECTED ARTICLES men can be established. These savings banks have no stockholders, being operated solely for the benefit of the depositors. They are managed by trustees, usually men of large business experience and high character, who serve without pay, recognizing that the business of collecting and investing the savings of persons of small means is a quasi- public trust, which should be conducted as a beneficent, and not as a money-making institution. The trustees, the officers and the employees of the savings banks have been trained in the administration of these savings to the practice of the strictest economy. While the expenses of managing the industrial departments of the Metropolitan, the Prudential and the John Hancock companies have, excluding taxes, ex- ceeded 40 per cent, of the year's premiums, the expense of management in 1905 (exclusive of taxes on surplus) of the 130 New York savings banks, holding $1,292,358,866 of de- posits, was only 0.28 of i per cent, of the average assets, or I per cent, of the year's deposits; and the $662,000,000 of deposits held in 1905 in the 189 Massachusetts savings banks were managed at an expense of 0.23 of i per cent, of the average assets, or 1.36 per cent, of the year's deposits. Savings institutions so managed offer adequate means of providing insurance to the workingman. With a slight en- largement of their powers, these savings banks can, at a minimum of expense, fill the great need of cheaper life in- surance in small amounts. The only proper elements of the industrial insurance business not common to the savings bank business are simple, and can be supplied at a minimum of expense in connection with such existing savings banks. They are: First — Fixing the terms on which insurance shall be given. Second — The initial medical examination. Third — Verifying the proof of death. The first is the work of an insurance actuary; and the present cost of actuarial service can be greatly reduced "both by limiting the forms of insurance policies to two or three standard forms of policy to be uniform thruout the state, and by providing for the appointment of a state COMPULSORY INSURANCE 49 actuary, who, in connection with the insurance commissioner, shall serve all the savings insurance banks. The initial medical examination and the verification of proof of death are services that may be readily performed for the savings banks at no greater pro rata expense than for the existing insurance companies. The insurance department of the savings banks would, of course, be kept entirely distinct as a matter of accounting from the savings department; but it would be conducted with the same plant and the same officials, without any large in- crease of clerical force or incidental expense except such as would be required if the deposits of the bank were increased. On the other hand, the insurance department of savings banks would open with an extensive and potent goodwill, and under the most favorable conditions for teaching the value of life insurance — a lesson easily learned when insur- ance is ofifered at about half the premium now exacted bj' the industrial companies. With an insurance clientele com- posed largely of thrifty savings banks depositors, the ex- pensive house to house collection of premiums could be dis- pensed with, and more economical pajmicnts of premiums could probably be substituted for weekh' payments. Indeed, it is probable that the following simple, convenient and in- expensive method of paying premiums would, to a large extent, be adopted, nameljs making deposits in the savings department from time to time, and giving, when the policy is issued, a standing order to draw on the savings fund in favor of the insurance fund to meet the premium payments as they accrue. The safety of savings banks would, of course, l)e in no way imperiled by extending their functions to life insurance. Life insurance rests upon substantial certainty, differing in this respect radically from fire, accident and other kinds of insurance. Since practical experience has given to the world the mortality tables upon which life insurance premiums rest and the reserves for future needs are calculated, no life in- surance company has ever failed which complied with the law governing the calculation, maintenance and investment so SELECTED ARTICLES of the legal reserve. The causes of failure of life insurance companies have been excessive expense, unsound investment or dishonest management. From these abuses our savings banks have been practically free, and that freedom affords strong reason for utilizing them as the urgent need arises to supply the kindred service of life insurance. In Massachusetts, the proposition of permitting savings banks to establish insurance departments has already taken definite shape. The plan has been recently submitted to the Recess Insurance Committee of its Legislature, and many of its eminent and public-spirited citizens have associated them- selves under the name of Massachusetts Savings-Insurance League, for the purpose of securing the passage of a per- missive act. Massachusetts laid the foundation of America's admirable system of savings banks by chartering in 1816 the Provi- dent Institutions for Savings in the Town of Boston. Massa- chusetts established for the world the scientific practice of life insurance by the work of its great insurance commis- sioner, Elizur Wright. It seems fitting that Massachusetts should lead in another great advance in the development thru thrift of general prosperity by extending the functions of savings banks to the issuing of workingmen's life insur- ance. State Insurance.* 1909. Chapter 3. Frank W. Lewis. We are to consider whether state insurance — the insur- ance especially of workmen, against accidents, sickness, in- validity and death — are within the proper and legitimate sphere of the general attitude of the state toward social legislation. Some of the tests of the obligation of the state in this direction are simple: Would such insurance tend to mitigate industrial injustice? to distribute more justly and automati- *This chapter from Frank W. Lewis's book on State Insurance is reprinted by permission of tiie publishers, Houghton, Mifflin and Company, Boston and New Yorlv. COMPULSORY INSURANCE 51 cally, in a sense, the product of lal)oi-? to contribute toward contentment among the industrially or economically weak by making more nearly equal industrial opportunity between classes? Would it tend to diminish pauperism and extreme poverty? Is it practicable or possible to accomplish fully the benefits of insurance by any individual effort? Does so- ciety need some such measure for its own well-being? Is it preeminently a suitable and legitimate subject for collect- ive action? The suggestion of government insurance against the vicis- situdes of life is not a new one; it has been agitated for the past fifty years in Germany, England and France. The iinperfection and inadequacy of all existing systems and plans has been recognized. It has become evident to thoughtful men that the matter should not be left entirely to private initiative and management. It has become the accepted doctrine that such insurance should be under the control of the state, as is shown by the appointment of legislative and parliamentary commissions and by the ample powers conferred upon state insurance departments. If, then, it is objected that state insurance would be paternalistic and socialistic, it must be kept in mind that the paternal attitude toward insurance has already been taken by every civilized state in its assumption of supervision and control. And it may be fairlj- claimed that all insurance is in its very nature socialistic. Society, or a definite section or stratum of society, carries a burden in behalf of its mem- bers which the individual components cannot carry. The peril which menaces an individual fills him with apprehen- sion as an individual, but he can look forward to meeting his share of the danger as a member of society with com- placency. He does not seek to evade a burden but to re- adjust it. Before men thought of making provision for such events by contract it was deemed a sacred obligation among them to provide for the victims of sudden calamities, of accident, sickness, or death, as a matter of humanitv or Christian 52 SELECTED ARTICLES charity. Whether in the form of written law or otherwise, there has been this universal sense of social obligation. There is another feature of the matter which must be considered when we talk of the paternal aspect of govern- ment insurance. A large portion of the poverty and pauper- ism which prevails is traceable to the misfortunes which overtake workmen, for which they have made no provision. Precisely how large a percentage of the whole may be charged to these causes it is not material at this stage to discuss. A highly competent authority, quoted elsewhere, would attribute at least a major portion of all poverty and pauperism to the misfortunes' which overtake the poor rather than to fault. But can any kind of law be more distinctly and inore odiously paternalistic than one which levies upon the property of A to support B as a pauper? which violently takes from the prosperous to support the destitute? from the thrifty for the thriftless? from the temperate and provi- dent to the intemperate and improvident? Now if a sj'stem can be devised under which the work- man, as a rule, makes provision for all the ordinary con- tingencies of the future, and whereby society is relieved of a large part of the burden of pauperism we accomplish a certain end by a method quite dissimilar, while each method is distinctly paternal. It Vv^ould hardly be contended that a law which conipels one man to support another is to be preferred over one which compels a man to support him- self. The incidence of charges under a system of government insurance will be treated of elsewhere, but if we assume, for the moment, that all such charges are to be borne by the state, it will readily be seen that there is not any additional burden carried — only a burden in another form, whether more or less odious or irksome. As it is now, without the finest discrimination, we pension one dependent and send another to the poorhouse; we give a badge of honor to a soldier who has served or suffered on his country's battle- fields, but we brand with the stigma of disgrace the soldier of industrv who has suffered in hcaltli or in limb in the COMPULSORY INSURANCE 53 industrial life of his generation. Through a system of state insurance it is proposed that certain methods of dealing with a certain social problem be replaced by something not more paternalistic but far more just; to readjust certain re- lations between classes on more scientific and more ethical foundations. Whether in the aggregate, the burdens now carried by so- ciety on account of its unfortunate, helpless members would be diminished under the scheme proposed must be a matter of speculation. It certainly would seem reasonable to hope that under a systematic scheme of insurance against acci- dents, sickness, and invalidity there would be great economy compared with present methods, admitted to be wasteful and unscientific. It would not be optimistic to hope for the gradual eradication of pauperism and poverty under a method which leaves nothing to haphazard, but scientifically anticipates the future; to look for a more hopeful feeling among the classes that find themselves hopelessly drifting towards poverty and dependence; to look for a great in- crease of thrift when men themselves see that nothing is left to chance, but that they, under the encouragement of a definite plan, are themselves -making provision for all the vicissitudes of the future; to look for a distinct access in true manhood when the humblest and poorest workman realizes that he is receiving a reserve of wages earned and not the odious dole of charity when vicissitudes come. It is a trite sa3-ing that the state cannot through legis- lation compel thrift; to which the statement should be added that the state ought to encourage thrift and should put no obstacles in its way. It must be admitted by all who study the subject that the state does often encourage thriftlessness, and nowhere more manifestl)' than by its poor laws and their administration. A system which would tend to inspire hope rather than despair; which would guarantee that the hard earned wages of the thrifty would not be levied upon to support the im- provident; which would compel every industry to bear its own burdens; which would demonstrate to some degree by 54 SELECTED ARTICLES infallible tests something as to the true share of labor in a given product; which would reveal in all its nakedness and hideousness that i)redatory feature of manj^ industries which permits capital to rob men of life, limb or health in unhealthy and dangerous employments and turn over the wrecks to the care of societjs — a system which would promise to accom- plish these ends or a part of them is worthy' the careful attention of philanthropists and statesmen. Judgment might be challenged quite confidently upon the proposition that insurance such as is proposed is preemi- nently within the proper functions of a state. Let tis sup- pose, if we can, a civilized state whose policies have been individualistic in the extreme — a state without public edu- cation, public highways, public control or supervision of waterways, of health, of sanitation; having no care for the insane or the pauper; without a system of state insurance for workmen. Imagine this state awakening to a sense of its social responsibilities and to the need of social legislation, laying aside its conventional prejudices against collectivism and paternalism, realizing that there are many ends to be accomplished which can be reached only by collective effort. Imagine it slowly, tentativel}', but with intelligent discrimination, starting upon its course, taking the step which seems of all the most urgent. Might not this state conclude that there was no object more imperative than the insurance of workmen; none appealing more strongly to the paternal solicitude which the state should have for its weaker mem- bers; none where the best efforts of the individual would be so impotent and inefifectual; that there was nothing else within the sphere of the material needs of men, affecting their protection, comfort, peace of mind and well being, for collective means through law promised more beneficial re- sults, — results, however, which have never been fully achieved without the intervention of the state. Assuming, then, what all are inclined to admit, that in- surance for workmen through some agency, private or public, is highly desirable, the grounds for state insurance would seem to be very strong. COMPULSORY INSURANCE 55 As has been suggested, the end can be achieved only by some sort of collective effort; the propertyless individual may, by slow accumulation of savings, if his wages admit of it, make provision for old age, but he cannot prepare for the accident, sickness, or incapacity that may come without warning tomorrow. He looks for some method or plan that will combine scientific accuracy, economy of management, absolute safety and security, and practical universality. The individual knows and can know practically nothing as to the actual risks which menace him, judged by the law of averages, or what it ought to cost him to insure against any hazard or class of hazards. The actuarial questions in- volved are difficult and intricate, requiring the most careful weighing of complicated statistics. The state is best quali- fied to procure such statistics with economy and accuracy and to prepare reliable tables of morbidity and mortality; it may also construct minute tariffs of risks, as has been done under German laws. The state is already partially equipped for such work, and procures for other purposes a considerable portion of the data required. No other agency or source of information would command as great confidence as the bureau of a well regulated state. It may, too, be fairly claimed that the state is peculiarly adapted to the administra- tion of insurance and the calculations required, as they are largely matters of mere mechanical routine. The workman needs to have the cost of insurance, in its various forms, authoritatively stated, and to procure it at the minimum of cost. Thousands are today dissuaded from taking insurance because they realize that' they must pay for it excessive rates. A competitive system with its enormous reduplication of solicitation, exists at the expense of the insured and bears most heavily on those most needing insurance and least able to bear any unnecessary burdens. The state can provide for insurance at the very minimum of cost. Much of the work required could be brought under existing insurance departments and municipal machinery. There would be no hordes of solicitors, all of whom must earn a living; no extravagantly paid officials; no palatial offices or costly S6 SELECTED ARTICLES buildings; no corruption funds to control elections or legisla- tures. There is no subject that engages the thoughts of men, involving the payment of money or the investment of funds, over which there is greater solicitude as to safety and se- curity than that of insurance against the vicissitudes of life. For this feeling there are powerful reasons. Insurance against accidents, sickness, invalidity and death concerns the most serious and important aspects of human affairs. If the insurer fails to perform his part of the contract, the loss may be irreparable or worse than irreparable, — the in- jured may not only have lost the funds invested, but through advancing age or diminished earning capacity he may have become unable to reinsure; the contract, if for an old-age pension, is to be carried out often at a far distant day, per- haps after an interval of fifty years; if the contract is for life insurance it is indefinite in its duration, but its adjust- ment, after the death of the insured must be effected by others. But the contract of the state offers absolute safety and security; no incompetency, extravagance, or dishonesty of officials can impair the solemnity of its guaranty; through all ordinary mutations in financial and political affairs the state must endure; if it makes a contract today to be ful- filled in the indefinite or far distant future, the party inter- ested relies upon its promises with serene confidence. The state may offer this absolute security without the accumula- tion of any reserve; with the introduction of compulsion all necessity for a reserve disappears. The prudent man who makes provision for the future by accumulations of savings or by insurance, and the taxpayer, have a distinct interest in the thrift of others. They want some assurance that the state will not take from them by force a portion of their savings or property for the support of the improvident. No insurance can be deemed satis- factory or successful which is not general in its application, viewed either from the standpoint of the individual or of society. There is contagion in thrift as well as in thriftless- ness, and no system of insurance can be highly successful or COMPULSORY INSURANCE 57 beneficent in its results which does not command the con- currence of all. The fatal weakness of every system which has ever been devised without the intervention of the state consists in its failure to reach those for whom it would be especially prescribed, those who constantly threaten to be- come a public charge or to pass a portion of their lives in extreme penury and wretchedness. Some of the objections that are urged against govern- ment insurance have been anticipated. It is sometimes urged as an important objection that state insurance would injure or, if made exclusive, ruin existing companies. This arises from a misapprehension. Existing insurance companies or institutions do not exist for their own sake, but for the sake of the policy-holder. No policy-holder would suffer harm if no further policies should be issued. Perhaps he might even be benefitted because his accumulations could not be used — as they often have been — to secure new business. The solvent company can meet all its obligations to its policy- holder; beyond that he has no interest unless of a purely sentimental nature. It has been urged, even, that state insurance should be opposed because it would interfere with the employment of insurance solicitors. On one occasion, when the Canadian Government had the subject under seri- ous consideration, it was indignantly asked: "Why should Government take the bread from the mouths of the people who are earning their living by life insurance?" This is quoted with approval as a strong argument against govern- ment insurance, but it is too puerile to waste time over. All of the legitimate work of insurance will remain to be done under any system. Whatever is beyond that is superfluous and simply parasitic. Society cannot be asked to support a body of men whose Itibors have no real efficiency and do not add to a desirable product. To state the question is to answer it. If state insurance is desirable, should it be voluntary or compulsory? Compulsory insurance is sometimes denounced as though the proposition were exceptional in the considera- tion of proper functions oi government. The word compul- 58 SELECTED ARTICLES sion, as applied to legislation is an odious one. Why should the state invade the domain of the individual's choice and peremptorily decide how he shall meet his own responsi- bilities? It is to be premised that there is no compulsion upon the willing. The law-abiding citizen is not conscious of any restraint under laws against disorder or crime; the thoughtful citizen does not resent the laws or regulations which require him to do that which they should cheerfully unite in doing for the common good. We are accustomed by the long- practice of civilized nations to a great variety of laws which are made obligatory for the benefit of all. We have com- pulsory education, compulsory sanitary and quarantine regu- lations, compulsory requirenients respecting the spread of noxious insects and plants, compulsory contributions for the support of the poor. These all rest lightly on the orderly and patriotic citizen; rather he looks upon the state as highly beneficent which secures to him all of the privileges which can be secured only by establishing uniformitj' of action by law for the general weal. He does not feel the tyranny of law, but realizes his ideals of liberty which can be gained only under law. He complies with laws in the consciousness that all of his neighbors, including the exceptional one who is unwilling", are doing the same in the interests of orderly government. He knows how impotent he would be alone or even with the unorganized concurrence of his fellows in gaining these results. We think of compulsion as a sort of tyranny, but it can only be the tyranny of a majority in a republic. This may be odious, but less so than the tyrann}^ of a minority. A minority despicable in point of numbers, five per cent or two per cent of a community, may by mere inertia impose its will upon the majority as long as the will of the majority is not enacted into law. The state should not invoke compulsion for trivial reasons; but when large interests are involved, concerning the welfare of the greater portion of its inhabitants, and a desired end can be accomplished onlj' through compulsion, it ought not to hesi- tate. COMPULSORY INSURANCE 59 Is the insurance of workmen of such importance and urgency as to justify compulsion on the part of tlie state to secure it effectivel}'? Such insurance cannot be made general in its application without compulsion. No form of persuasion could be effectively employed by the state which would not involve features far more objectional>le than com- pulsion. As long as any scheme is entirely voluntary it will be evaded by the person and the class who most need in- surance; the evasion of one would weaken those nearest him socially and the contagion of improvidence would spread to the thrifty. Any plan for state insurance, purely voluntary, would show in its operation the same defects which make all existing insurance institutions unsatisfactory. But it might be confidently expected, even if there had been no demonstration of the fact elsewhere, that compulsory in- surance, when fully understood and appreciated, would re- sult in the ready acquiescence of those concentrated, as has been the case of many other obligatory laws. Only the ex- ceptional man would chafe under the compulsory feature. It would hardly be compulsory except in name. It is impracti- cable for the state in its legislation to consider the one man who is abnormal and must be forced to do that which the other ninety-nine do gladly. If he were to be heard we should have no public education worth the name. His inertia would always retard human progress. It has been suggested that a system of compulsory in- surance would and ought to incur the opposition of work- men. To some extent this was the attitude of German work- men twenty-five years ago towards the scheme of Bismarck, especially of those who were under the influence of the extreme socialists. The most plausible ground for such opposition is that it would tend to introduce a line of social demarcation. But this position will not bear scrutiny, either as a matter of sound theorj^ or as an appeal to experience. Lines of social demarcation are most efifectively established by conditions of industrial inequality between classes. As long as there is economic dependence, there must be a lack of mutuality in industrial relations; there will be a tendency 6o SELECTED ARTICLES towards arrogance on one side, and undue humility, even servility, on the other. Whatever ministers to equality of opportunity tends to efface social distinctions. To secure the higher independence of the individual through social legis- lation is to make a stride towards genuine democracy. The lack of mutuality is a productive cause of friction be- tween classes. As might have been expected, the German system of insurance has contributed to a better feeling. The workman, as well as the state to which he belongs, is deeply interested in his own efficiency, not only considered in the abstract but as related to the efficiency of competing nations. If a system of universal insurance by creating or intensifying solicitude for the life, the health, and the physi- cal well-being of the workman thereby increases his in- dustrial efficiency, it is a personal as well as a social eco- nomic gain, and gives assurance that he is not to be at a dis- advantage in an industrial competition which is world-wide. "No one can doubt that the general well-being of the work- ing classes in Germany, which is strikingly visible to the eye and confirmed bj- statistics in spite of man}- unfavorable circumstances, is in a large measure due to the insurance system." Further proof of the beneficence of the German work- men's insurance is furnished in the fact that it today com- mands the almost universal acquiescence of workmen. There are criticisms, but they look for amendment, enlargement and improvement, not repeal. North American Review. 195: 630-40. May, 1912. Dangers of State Insurance. Hugh Hastings. As a student for years of labor the writer recognizes the tendency of the times to compel the master by law to com- pensate an injured employee for loss of time and to pay an adequate sum to those dependent upon such employee whose death has been caused through accident, whether by negligence chargeable to his employer or not. COMPULSORY INSURANCE 6i Until within a few years it has been an almost universal custom among employers to do what each one considered equitable in such cases, with preference shown to employees long in service over those of more recent date. In fact, each accident was adjudged by the employer according to surrounding conditions and to the individual idea of what was proper and just. The comparatively small number of legal actions brought by injured employees against employers to recover damages, as shown by court records of twenty years ago, speaks well for the employer of those days. But times and methods have changed. Business enterprises have grown so vast that no longer the employer can maintain the personal relationship with all his employees that was practicable forty or even twenty years ago, nor can he by any possibility, because of the constant shifting requirements of business, find it feas- ible to undertake that direct personal interest in every man and woman that is injured in his employ. It w-as, there- fore, eminently proper and right that the law should step in and define the relationship between master and servant. No fair-minded elnploj^er objects to a negligence law that is just to both parties. The employee naturally demands the law that contains provisions most favorable to his interests. The emploj'er, however, must sedulouslj^ consider the law from another standpoint. It is he who must arrange that the burden of compensation or damage paid to employees for injuries sustained shall not exceed the profits of the business, but still leave a fair remuneration for either stock- holder or individual whose money is invested. From the moment the employer is inspired to investigate the subject in order to determine for himself wdiat law, either past, present, or contemplated, is the best suited for his particular kind of employment and undertakes to absorb all the literature and bibliography accessible, he is hopelessly lost. He finds that to attempt to interpret the Sherman anti- trust law and to instruct the United States Supreme Court to define that simple document is child's play compared with trying to construct in his own mind a compensation 62 SELECTED ARTICLES law that is equitable and fair and will give satisfaction to all parties concerned. Let us take one look at what has already- been accom- plished in the way of law-making on this subject and ex- amine the laws that the following countries are now enforc- ing, called in general terms beneficial laws for occupational injuries: England, France, Germany, Austria, Belgium, Den- mark, Norwaj', Italy, Finland, Holland. Sweden, and New Zealand. In the L'nited States very recent legislation on the sub- ject has been adopted in New York, New Jersey, Vermont, New Hampshire, Massachusetts, Ohio, Illinois, Wisconsin, Indiana. Kansas, and Washington. Between foreign coun- tries and the enactments in our own states it is presumptive that every form of law may be found, good, bad, and in- different, that the human mind is capable of framing, no two of them alike, each containing merit or demerit equallj-, each appealing one moment and repelling the next, until the task of separating the wheat from the chaf¥ and formulating a law that will partially solve the problem seems almost hopeless. The best that can be done will hardly pass muster, but if with the material at hand an expedient can be ar- ranged temporarily to bridge the gulf between employer and employee with a minTmum of harm to both, until time has elapsed to perfect a completed experience over a five 3'ears' period basis, a long step toward solving this intricate problem will have been accomplished. The laws governing compensation to injured employees in foreign countries may be separated into two classes; "simple compensation," the English form, and "compulsory insurance" either by state or mutual associations. Care- ful stud}' and mature deliberation eliminate comment upon foreign laws with the exception of those in force in Eng- land, German}', and Norway, which are considered by pro- found students as the best of their kind in force. More has been written of the German method than that of any other country, and it is the general impression of employers of labor and of thorough students of this subject COMPULSORY INSURANCE 63 that the German method has proved an unqualified success and would work equally well if transplanted to our shores. But a literal analysis of that law and exhaustive study of the statistics prepared by the Government by no means justifj' the contention of its success in or adaptability for this country. The main objection to the system is based upon the fact that it is compulsory insurance in mutual as- sociations composed of all the employers in any given line of trade and vested with power to regulate and control their members. Through this system of control it is possible in Germany to make a flat rate of premium applicable to all employers in any given line of trade, for it must not be forgotten that this compulsory insurance serves two ob- jects: first, to prevent accidents, and, second, to compensate for accidents that are inevitable. The control of manufacturing plants by trade associations has brought about a high level of safetj' in all establish- ments. But while trade regulations and the laws providing safety for employees are rigidly enforced, fines were im- posed and collected by trades associations in 1908 amount- ing to 412,608.51 marks to compel delinquent members to perform their legal duties. In spite of this regulation and inspection, the statistical details prepared by Actuary Miles M. Dawson show that between 1886 and 1908 it was found necessary to raise the rates of premium in certain cases five hundred per cent, over the rate for 1886. And the end is not yet, according to the testimonj^ of Actuary Dawson before the Congressional Emploj^ers' Liability and Work- men's Compensation Commission. It is quite likely, Mr. Dawson declares, rates would continue to be increased for a period of fifty years from 1886, when the law first went into effect, before a level would be established. In other words, a new enterprise started in Germany during the year igii would be forced to pay its pro rata share in the class to which it belonged for all accidents happening be- tween 1886 and 1912 that remained to be adjusted or upon which payments are still to be made over a period of years for those dependent on employees killed in service and those 64 SELECTED ARTICLES totally incapacitated who are pensioners of this fund until death. As an example of increase in rates: the rate on machine and repair shops was thirty-two cents per $ioo of pay-roll in 1886 and $1.69 per $100 of pay-roll in 1908. Steel castings from forty cents to $2.03, and blast-furnaces from forty cents to $2.64, and so on through the list. We must also bear in mind that these rates only provide for serious accidents, as minor accidents, when loss of time does not exceed thirteen weeks, are taken care of from a sick fund. In this country there are no trade associations that pos- sess the power to enforce safety regulations throughout any given trade, nor to my knowledge is there any state in the Union where the laws that provide safety appliances for workmen are rigidly enforced, for the reason that the state has failed to provide the machinery to enforce its laws. Admitting that this is so, the baneful hand of the politician would soon appear in evidence for the comfort and profit of the man with a pull who would be relieved of the re- sponsibility that would be imposed upon the man without a pull. A flat rate of premium through any given line of in- dustry could only result in monetary punishment to the well-ordered establishment and a bonus allowed to the run- down, obsolete, and badly managed establishment. No less an authority than Privy-Councilor Ferdinand Friedensburg, late president of the senate of the German Imperial In- surance Oftice that enforces the law, declares the system is a "costly, inefficient, and demoralizing failure." Another grave defect in the law is that no provision is made by the Trades Association for taking from the insured a pension obtained fraudulently or unjustly granted, although a rehearing is conceded when the claimant becomes dissatis- fied. In consequence, such rehearings arc increasing and frequently result in an inflated pension. A system of insurance regulated not only by the govern- ment, but by the trades themselves, that has proved a hot- bed of corruption, malingering, and fraud requiring a tre- mendous and expensive organization to handle, involving an increase in rates in some instances of five hundred per COMPULSORY INSURANCE 65 cent, in twenty years, would not, from the standpoint of an American manufacturer, be considered a success or meet with the endorsement of either worknien or employers. Therefore, the German system should he dismissed without further consideration. Let us now consider briefly compulsory state insurance as illustrated by Norway and the state of Washington in the United States, the latter operating under a law largely copied from that of Norway. It is generally conceded that the management of the Nor- wegian Insurance Office is exceptionally good and that the experience under the Norwegian system, so far as known, has been generally favorable. It must be borne in mind, however, that the conditions in Norway may justify a trial of state insurance because of the peculiar advantages of- fered. Only a small percentage of Norway's two million two hundred thousand persons are engaged in industries covered by this insurance, and most of these are of the same nationality, while the changes of employees in the different establishments represent a very small percentage of the number employed. Unrest and dissatisfaction with conditions of employment result not only in accidents, but in strikes. But no more remarkable illustration of the Norwegian's apparent con- tentment and satisfaction can be cited than the strike of the iron and metal workers in 1903, the greatest labor con- flict on record till 1910, and yet this strike involved only 1,052 employees. Politics appear to have little or no in- fluence over the conduct of the Insurance Office. Even with these ideal conditions surrounding this scheme of insurance and under efficient, capable, and experienced management, with rates approximately the same as those charged in Eng- land, a few years' experience has shown that they had not reserved sufficiently to cover accrued liabilities and were obliged to make good a deficiency of $100,000 that had to be paid as a general tax upon the government. If New York state were operating under the laws of Norway this de- ficiency would have been not $100,000, but several millions 66 SELECTED ARTICLES of dollars, owing to the greater population and the increased number of emploj-ees insured, and this additional burden of several millions of dollars would have to be paid by a direct tax upon the state of Xew York as a whole. In order to be successful, compulsorj' state insurance must be a monopoly — that is, all insurance of this nature must be transacted through one source. The state of Wash- ington has cleverly recognized this feature, and consequently monopolizes workmen's compensation insurance to itself. The authors of the Washington law delight to call it com- pensation, but it 4s far from that. Because of its meager benefits it appears more in the light of an amplified poor law with its object to prevent absolute pauperism. It is impossible to believe the labor unions of the state of Wash- ington approved this law, unless they contemplated to en- list political influence in order to magnify the benefits. As a matter of fact, it is unfair to consider the Washington law as a compensation law. The law fails to provide for accru- ing liabilities, for the proper machinery to enforce it, or for a prompt and efficient means of compelling a recalcitrant employer to insure his men. The method of establishing rates is crude in the extreme, and their method of apportion- ing the pay-roll through a given class at a flat rate is still worse. The absurdity of the whole scheme is exemplified by the statement of Air. George A. Lee, Chairman of the Industrial Commission of the state of W^ashington, relative to the claims for the death of eight girls in a powder-mill explosion at Chehalis, Washington. Chairman Lee states that the amount of claims for these eight girls must, under the law, be paid by assessment levied on the powder manufacturers of the state. It seems there are but three powder manu- facturers in Washington. Of these, two paid the assessment levied upon them by the Insurance Commission in accord- ance with their estimated pay-roll and turned over to the state the sum of $270 as their insurance premium for one }-ear. The third manufacturer refused to pay, maintaining that the rate charged was excessive and that the conditions I COMPULSORY INSURANCE O7 safeguarding his plant were so far superior that it was un- fair to assess him the same rate charged against the other two. The maximum amount which should be collected from the state for this accident, according to law, is $32,000, but the Attorney-General has raised the question that the law does not require the payment of $4,000 for the death of a minor, and it is now for the Attorney-General to prove, if he can, the economic value of a minor as compared with an adult. Before the law had been in efifect sixty days the Washington State Insurance Commission found itself face to face with the extraordinary problem of paying a maximum loss of $32,000 out of the sum of $270 on hand. Litigation between the Insurance Commission and the Attorney-Gen- eral, with the sum of $270 premiums already collected to draw upon, will doubtless ensue to determine the economic value of a child. A careful perusal of the published rates for this insurance, with the grouping of trades without any rela- tion one to the other into classes subject to a flat rate of premium, discloses such a lack of knowledge of the difficul- ties, embarrassment, and expense necessary to operate a law of this kind as to make the system open to ridicule. Until the litigation is settled and the damages resulting from the Chehalis explosion are paid the state of Washing- ton certainly can offer no attractions to capital desirous of settling within its boundaries, with the prospect of contrib- uting pro rata into the insurance fund for payment of claims arising out of a powder-mill explosion before it entered the state to transact business. In view of all these facts, it would seem as if it were only a question of time when the state of Washington's insurance law must be radically amended or abandoned. Germany complains that in the last year 800,000 marks were taken to Italy bj' injured Italian workmen, never to return, and that German workmen injured in Italy brought back to the Fatherland only what was left of themselves to become an added burden to the state. How would the Ger- man law work out in the United States regarding Italians? Not marks, but dollars — not marks by the thousand, but 68 SELECTED ARTICLES dollars by the million — in exchange for toes, arms, legs, and eyes — to pension the transient Italian workman at the expense of the federal or state governments? The English law or Simple Compensation, which, accord- ing to Mr. Hugh H. Lusk, former Premier of New Zealand, was taken almost bodily from the New Zealand statute after it had been in force in that country for live years, must next be considered. With the changes and additions required to meet con- stitutional questions the English law is more adaptable to industrial conditions in the United States than any other law now in effect. Actuary Dawson, who unquestionably has spent more time boring into the question of the various kinds of work- men's compensation laws, with more or less prejudice as- sails the English law because it was started on what he calls a maximum rate rather than a minimum rate as was the law of Germany. No one will question Germany's credit for starting at a minimum rate. Even Actuary Dawson ac- knowledges that after a quarter of a century the German rates have not yet reached a maximum. Employers in England generally carry their workmen's compensation in- surance in stock insurance companies, and while Mr. Daw- son's remarks would give the impression that the insurance companies have bled the poor, trusting English manufac- turer to the last drop of his financial blood, and that the companies had feasted and grown plethoric with the great excess of financial blood unnecessarily squeezed from the innocent employer, insurance statistics and the record of companies forced into the hands of receivers, on account of underestimating the premiums required to carry the hazard of workmen's compensation, utterly fail to bear out the im- pressions of Mr. Dawson. He decries the great evil of com- muting the amount to become due to permanently injured employees, on the ground that the payment of a lump sum rather than payment at stated intervals over a protracted period of time quickly results in the beneficiary soon squan- dering or badly investing his money to find himself in a COMPULSORY INSURANCE 69 short time in a position of absolnte pauperism instead of maintaining an income, no matter how small, that is perma- nent. Such a result is, of course, unfortunate, but the law that allows commutation has nothing to do with it, for annu- ities can be purchased and the courts that allow commuta- tion can easily direct a way in which the lump sum should be protected. Prodigals have existed certainly since Biblical times, and no law has yet been devised by man, civil or criminal, that could absolutely obliterate prodigality. The employer's side to this question of commutation is overlooked by Mr. Dawson; the obligation that compels all business men to conduct their affairs upon the basis of giving and taking credit, and with a large number of small manufacturers good credit is their principal asset. It is not only quite possible, but quite probable, that in the course of a few years an employer might be overwhelmed with a number of uncommuted indeterminate claims from injured employees as seriously to imperil his credit with an un- known liability existing that certainly would be remorse- lessly scrutinized at his bank when application was made for the necessary credit and funds to continue his business operations. Therefore, as a business necessity and for personal protection, it is obligatory upon the employer to clear his books and settle his accounts with injured em- ployees at the earliest possible moment. Speaking of the German law, the same authority asserts that the physical condition of the German workmen has been immensely improved by the operations of the work- men's compensation \a-w, that the Germans have grown taller and stronger during the period in which this law has been in effect, and that during the same period the Eng- lish have grown shorter and weaker. Is it possible that Mr. Dawson has not been informed of the improved- physical condition of the German male through enforced militarj- service? It is also claimed by several writers that the German compensation system has brought with it peace and con- tentment in industrial conditions as against unrest in Eng- ;o SELECTED ARTICLES land, but as there were in 1907, 2,266 strikes in Germany affecting 13,092 establishments and 445,165 employees, as against 601 strikes and 100,728 strikers and locked-out em- ployees in England for the same year, this claim cannot be allowed. For the state of New York or any other state in the United States the only law that seems applicable for the moment is one of simple compensation as a substitute for all other remedies except the common-law right to recover, through the civil courts, just damages for the consequences of wilful and unpardonable negligence. To make this law a compulsorj^ one is as repugnant to the idea of the free-born American citizen as federal ownership of the railroads; therefore, while this law should be compulsory in effect, it should be elective in fact, and each employer, while required to insure, should be given the choice of doing it in the way most adaptable to his surroundings. He should be allowed to insure in either a stock or mutual insurance company duly qualified by the State Insurance Department to do business in his state, or to put into effect within his own organization a workmen's compensation plan that should be not less beneficial to injured claimants than the law pro- vides, or he should be allowed to carrj' his own insurance if he so elects. The law, however, should provide that, if an employer should elect either of the two last-mentioned plans, he be compelled to furnish either to the Insurance Department of his state or to some other department or designated ofificer of the state a bond sufficient in amount to cover the obligations imposed upon him b}' law as regards injured employees. It has become a habit apparentlj' of those writing about the rates charged for employers' liability and workmen's compensation insurance by stock companies to denounce the companies from start to finish and to hold them up before the public for not only robbing the employer on rates charged, but for cheating the injured workmen out of their just dues by every known means, driving him through in- tricate tangles of litigation until he is willing to accept little COMPULSORY INSURANCE 71 or nothing for his release. Even Professor Henry R. Seager, of Columbia University, according to the daily press, stated at a recent lecture "that under the present system there is a lot of unnecessary litigation and that fifty per cent, of the money received is expended by the employers' liabil- ity companies in efforts to keep from paying claims." Pro- fessor Seager is correct in stating that there is an unneces- sary amount of litigation, but so long as shyster lawyers and ambulance-chasers are allowed to charge fifty per cent, of the amount of every recovery made through such litiga- tion for their fee, just so long will it continue. One of the salient points of the report to Congress by the Committee on Employers' Liability and Workmen's Compensation reads as follows: "Of the $10,000,000 annually paid by the rail- roads of the country presumably to workmen and their bene- ficiaries in death and injury claims, $5,000,000, or one-half, has been stolen b^^ personal-injury lawyers." Professor Seager's statement that the companies spend fifty per cent, of their money to resist just payments is not borne out by the facts. Superintendent Hotchkiss of the Insurance De- partment of the State of New York states that, while the liability companies have made no money in the past three or four years, they have been guilty of unnecessary expense owing to the severe competition for business among them- selves; that it is quite doubtful if the present Reserve Law of fifty per cent, of the premiums is sufficient, as the In- surance Department figures show that the loss ratio on com- pleted experience is nearly, if not quite, sixty per cent, of the amount of the premiums, and he further calls attention to the extravagant rate of commission paid to those who bring the business to the companies' counters. From an absolutely authentic source the writer can vouch for the statement that the fifty per cent, referred to by Professor Seager is made up approximately as follows: ten per cent, legal expenses, ten per cent, home and branch office expenses, five per cent, pay-roll audit and inspection departments, and the balance of twenty-five per cent, to brokers placing the business. 72 SELECTED ARTICLES With a workmen's compensation law restricting the fees of attorneys, thus cutting out seventy-five per cent, of the litigation, every one of the above mentioned percentages should be scaled down materially by the liabilit}^ companies themselves. Legal, home office, and miscellaneous expenses should be cut seven and one-half per cent., and with every employer carrying workmen's compensation insurance in one form or another twelve and one-half per cent, com- mission is fully enough to pay to brokers or agents placing the business. This twenty per cent, saving can well be used by the employer to help him to carry the additional burden of workmen's compensation insurance that provides for weekly payments whether the employer is guiltj' of negli- gence or not. Annals of the American Academy. 38: 151-8. July, 191 1. Compensation Law and Private Justice. P. Tecumseh Sherman. In the states of the civilized world there are two systems of employers' liability for accidental injuries. The first, which formerly prevailed in all, but which now survives only in the United States and, in a transition stage, in Switzerland is that of tort, or more particularly the master and servant branch of the law of negligence. The second is that of "compensation," which embraces both "simple compensation" and also its more complex form of "compulsory insurance" — for "compulsory insurance,'' where and in so far as it is at the expense of employers, is in effect simply a liability to pay compensation for accidental injuries to employees, with a legal obligation added to insure its payment. The majority of the advocates of "compensation" base their arguments entirely upon reasons of social welfare. Un- der that line of argument, in order to sustain a compensation law under our constitutions, it is necessarj^ to rely exclusive- ly upon the "police power" — a power possessed by the state which permits it to inflict individual hardship and injustice COMPULSORY IXSURAXXE 73 where necessary for the public welfare. Hut the law should seek, wherever possil)le, to effect private justice; and the case for "compensation" would be infinitely strengthened and the probability of repetitions of the reverse suffered in the recent decision of the New York Court of Appeals would be di- minished if it can be demonstrated that the liability, as be- tween master and servant, which the compensation law im- poses, is just, in my opinion that liability is just, not abso- lutely, just in theor}', because it abandons the unattainable ideal of affecting exact justice in each particular case, but as just as is possible in practice and relatively most just in com- parison with the existing liability for negligence. In this paper I shall endeavor to explain my reasons for that opinion; but in order to be brief and for that purpose to avoid complexities from varying conditions I will limit my arguments to those which apply with full force only to employment in the more hazardous organized industries, to which, in my judgment, our first experiments in the law of compensation should be limited in their application. In my opinion the two systems of employers' liability law are not totally different in their fundamental principles of private right, but the principles of the compensation law are developments from the principles of the negligence law, cor- rected to conform to the lessons of experience and to mod- ern scientific knowledge and modified with a view to con- crete as distinguished from abstract justice. While the foreign compensation laws are all shaped in many of their details, and in some cases in their entire forms, with a view solely to the general social welfare, nevertheless as a sys- tem it will be found that the principles of private justice underlie them all. If this view is sound and if those princi- ples of private justice become generall}^ accepted here, then the substitution of the liability for compensation in the place of the existing liability for negligence would be in accord with, instead of being a departure from, the spirit of our common law and of the principles of the Bill of Rights in our constitutions. The compensation law, as a rule of private justice, differs 74 SELECTED ARTICLES from the law of negligence in principle in that it changes the rules of "contributory negligence," of "assumption of risks" and of "fellow servant," the criterion of "negligence" and the rules governing the burden of proof — and in that it fixes a definite and limited measure of the amount of the liability. Our rule of "contributory negligence" is peculiar to the common law, and there are now few who believe in its justice. But although the rule may be unjust, yet simply to abolish it and to make the employer liable for full dam- ages, as if there had been no contributory negligence, would be equally unjust, because that would merely shift the in- justice from the workman to the employer. The proper correction is to divide the damages. That is what the Ad- miralty and the civil laws have always done, and what the compensation law in effect does. The justice of the "assumption of risks" rule is predicated upon the premises that workmen are free to assume or reject hazardous employmnt, and, consequently, that when they accept such employment, they should be deemed to contract freely to assume its risks; and that wages in hazardous em- ployments are higher in proportion to the hazard so as to compensate for such risks. But facts demonstrate that working people in the mass are not economically free to accept or reject hazardous employment, and that wages are not at all in proportion to risks. Therefore, the premises upon which the rule of assumption of risks is based are gen- erally false, and the rule itself is not a true rule of justice. But if justice requires the abandonment of the assumption of risks rule, its corollary, the fellow servant rule, should also be abandoned; for danger from the faults of intimately associated fellow servants is one of the occupational risks, all of which, as a general rule, a workman either should or should not be deemed to assume. And so far as the fellow servant rule is supported by reasons of public policy, it has no true application to the organized industries, wherein the individual workman cannot, by any degree of care, protect himself from the fatilts of his fellows. But here again the proper correction is not simply to COMPULSORY INSURANCE 75 abolish the defences of "'assumption of risks" and of "fellow servant'' so as to leave the employer liable fur full damages, for that would merely shift the injustice and make the em- ployer liable for a wrong, where he has been guilty of no wrong. The compensation law solves this problem of justice by treating all the necessary risks of employment as joint risks, of which the consequences should be shared between the employer and his injured workmen; and it accordingly imposes upon the employer a legal liability, similar to that of an insurer, to pay to his injured workmen, or their depend- ents, his share (generally one-half) of their wage losses resulting from such risks. This conception of a joint occu- pational risk, of a mutual responsibility for accidents from occupational risks, of a moral partnership in the resulting losses, is the great basis of the compensation liability. As a conception of justice it is primary and must either be ac- cepted as an axiom or be rejected. But the idea of its justice is fortified by the fact that as a rule of public policy it has practical merits and advantages above all others. It, therefore, appears to be the best rule for the social welfare and, at the same time conforms to a widely accepted idea of justice. The next point of difiference between the two systems of law is the criterion which determines when, on the one side, the employer shall be sul:)jected to liability for full damages, and when, on the other side, the injured workman shall be deprived of the right of any redress. Under our master and servant law that criterion is "negligence as a proximate cause" — a criterion which in practical application is so in- definite and uncertain in meaning as to be most unsuitable for that purpose, as is evidenced by the thousands of litigated cases to which its definition has given rise. It has the further demerit of being scientifically superficial. Under the compensation law that criterion is "moral fault," variously defined, but always so defined and limited as to include only such a degree of certain moral fault as justifies, beyond doubt or reasonable difference of opinion, the infliction of a penalty upon the defaulting party. From the application of 76 SELECTED ARTICLES this latter criterion it results that that large proportion of accidents, which are due proximately to lack of ability, mis- judgment, lack of skill, ignorance, physical or mental lassi- tude, mere inadvertence or that kind or degree of negligence which, humanly speaking, is at times inevitable even with careful men, and which, under our negligence law, result in a mass of litigation and entirely fortuitous determinations, are, under a compensation law, not attributed to fault but rather to the necessary risks of employment; and, consequently, for injuries resulting therefrom the employer is made liable to pay his share of the injured workmen's wage losses in the form of compensation. The next difference between the laws of "negligence" and of "compensation" is that under the compensation law there is a presumption of fact that every accident results from a necessary risk of the employment or from some cause or causes for which employer and injured employee are jointly responsible, and is, therefore, a subject of compensation, un- less fault is proved; and the burden of proving fault is upon the party asserting it. Is that presumption just? My answer to' that question is that an intensive study of the causes of accidents in New York factories and a critical analysis of the European accident statistics convinces me beyond all doubt that, at least under conditions which prevail in the organized and hazardous industries, that presumption is true, and there- fore just. The final difference between the two laws is that under the compensation law the amount of compensation is meas- ured by the law instead of by the almost ultimate discretion of the jury, and is made dependent upon certain definite facts, which are generally easily and certainly provable. Whether this method of fixing the amount of the liability is just or not should be determined by its results. The object of the law is to do justice. It should, therefore, be framed to effect average concrete justice, rather than to declare abstract rules of exact justice which cannot be car- ried out in practice; and this rule of the compensation law has these qualities of concrete justice, which are entirely COMPULSORY INSURANCE tj lacking in the negligence law, that it is generally prompt, certain and uniform in its operation. Finally, the compensation law possesses that highest at- tribute of a just law, that it satisfies the natural sense of justice of the parties atfected by its application; for it is the general testimony of both employers and employees in the majority of the compensation law countries that the law in the main is just and satisfactory. In contrast with the compensation law, our negligence law gives universal dissatisfaction. Not only is it in many re- spects absolutely unjust, but even so far as its theories are just it fails to carry out those theories in practice, but results instead in a medley of cruel wrong, oppressive waste and delayed or compromised justice. Moveover, its theories are such that they cannot be carried out in practice, because that would require an impossibility, namely: that accidents be correctly traced to their respective causes and the respon- sibility for those causes correctly weighed and determined by judges and juries. Abroad, even experts, making many of their investigations on the spot and unhampered by the motives for concealment which prevail here, cannot with any certainty determine the true causes of and responsibility for a large proportion of the accidents which they investigate, and, as to the mass of industrial accidents, can only arrive at rough opinion estimates of average causes and responsibili- ties. It is obvious that judges and juries, especially under our methods of procedure, are infinitely less able to arrive at that exact determination of the causes of and responsi- bility for each accident which a correct application of our law requires. Therefore our law, even in so far as it is good in theory, is absurdly bad in practice. The fault lies not so much w^ith the machinery of our courts as with the law itself. For the law starts from an un- fair basis, by imposing the burden of proof entirely upon the injured workmen, and thereby insures injustice to them where, as happens, in a large proportion of cases, from the very nature of the accidents, there can be no real proof. And, where there is a scintilla of proof, our law is wrong. 78 SELECTED ARTICLES not so much in making jurors judges of the facts, as in mak- ing them judges of a broad field of inferences from distorted versions of a part of the facts, without scientific rule or reason to guide them. The result not only is, but must be a pure gamble, more expensiAe, wasteful, distressing and cor- rupting than any form of gambling prohibited by the penal law. In mj^ opinion it is altogether a mistake to seek to rem- edy the existing evils along the lines of our "employers' lia- bility" statutes. Those laws are in too many respects grossly unjust to employers, increase litigation, are expensive and wasteful, are slow and uncertain in results, and furnish small additional relief to the victims of industrial accidents in the mass. And they have a disastrous effect upon the public welfare, for they foster class antagonism between employers and employees, and they interfere with proper methods for the prevention of accidents by establishing through the de- cisions of our courts harmful rules and precedents on ques- tions affecting safety. An illustration of this last proposition may be enlighten- ing. We have in our New York Labor Law a provision that certain machinery shall be "properly guarded." The factory inspectors, in their enforcement of that law, construe that provision to mean that such machinery must be so arranged, placed, boxed, railed off, or provided with safety appliances as to be made as safe as practicable. But our courts con- strue it more literallj' to mean that such machinery must have applied to or about it something extra as and for a guard, without particular regard to whether or not that will make the machinery more safe or more dangerous. Of course, the courts have not categorically said that, but that is the effect of what they have decided. There are many cases in New York where juries have awarded and our higher courts have sustained verdicts for punitive damages against employers for not guarding their machinery in a way which, according to the overwhelming preponderance of expert opinion, would make it more dangerous. Such decisions are the opposite of or conducive to the general adoption of cor- COMPULSORY INSURANCE 79 rect methods for the prevention of accidents. And this is but one of many points about which the reasonings and decisions of our courts on questions affecting safety are as foreign to scientific truth as are the ideas of an Indian medicine man about the causes and prevention of disease. It is a principal merit of the compensation law that under it questions of industrial safety M-ould cease almost alto- gether to be a subject for judicial determination, and that the intelligence and efforts of employers would then be di- rected towards the prevention of accidents instead of towards the maintenance of arbitrary conditions and practices which will merely prevent liability for accidents. While it is not demonstrable that the compensation laws have effected any reduction in the proportion of accidents, because there is not the requisite data for purposes of com- parison; }'et it is certain that the imposition of the com- pensation liability in lieu of all others (save in exceptional cases), would remove many difficulties in the way of studying the causes of accidents and the methods of their prevention, and would aid in the enforcement of safety regulations and be conducive to their voluntary adoption. And it is equally certain that our law has just the opposite effect, because it gives rise to an impellent motive for both the employer and the workman who is injured in an accident to suppress or falsify all the facts relative to that accident which might ad- versely affect their respective legal rights or liabilities. Con- sequentlj', in our country, this subject is to a degree hidden from expert investigation by a fog of suppression, misrepre- sentation and positive falsehood. In conclusion I wish to emphasize three propositions, namely: that in the highly organized and hazardous in- dustries the real causes of accidents are generally so complex and in addition often so remote, that as to a material propor- tion of the accidents it is impossible, by any methods or means, correctly to ascertain the facts necessary to form a correct judgment of their particular causes; that as to a yet larger proportion it is practically impossible to do so with- out such expense and delay as will defeat justice; and that 8o SELECTED ARTICLES as lo those accidents, as to which the necessary facts are practicably ascertainable, there is no simple abstract term, such as "negligence," "carelessness," "fault," "gross negli- gence," etc., which, if used as a criterion of legal liability, will not result in frequent and gross injustice and inequality, whether administered and applied by courts and juries or by more competent experts. At first impression the exactness with which industrial accidents are classified in the German and Austrian statistical tables, under the headings of "due to fault," "unavoidable," "due to lack of skill and careless- ness," etc., may seem to contradict these propositions. But in so far as those tables produce that impression they are misleading; for as to a major proportion of the accidents classified therein, the facts have not been thoroughly investi- gated, but rough statements have been relied on, and there is therefore in them a wide margin of probable error, due to that one cause; and the terms used in those tables are so far from being definite and are employed in each table with a meaning so uncertain in application and so peculiarly per- sonal to its compilers that a re-classification of the acci- dents covered by that table, under the same terms, by a dif- ferent set of experts, would inevitably produce widely differ- ent results. The conclusion to be drawn from these premises is, that the idea of ascertaining the facts as to each particu- lar industrial accident and then determining liability accord- ing to the application to those facts of some simple abstract rule cannot be carried out in practice; but that, in order to obtain a rule of law Which will be at all fair and uniform in practice, it is absolutely necessary to resort to the doctrine of averages. That is what the compensation law does by presuming in effect, save in exceptional cases where the contrary is proved, that every accident is due to a neces- sary' risk of employment or to some other cause or causes for which employer and injured employee are jointly re- sponsible; and it divides the damages accordinglj'. In arguing for the justice of a compensation liability in the organized hazardous employments, I am not arguing against its justice in the unorganized or safer employments, COMPULSORY INSURANCE 8i because I believe that, with some important exceptions and subject to certain conditions, it would also, in practice, be more just therein than the existing liabilitj' for negligence. And I am not arguing that reasons of justice alone should determine the form which a compensation law should take; for I believe that reasons of social welfare and many other reasons should in many respects determine both the form and the extension of such a law. But I insist that such a law as that of master and servant should be based upon conceptions of private justice; and that the compensation laws are so based, and are not unprincipled measures of mere political expedienc^^ Annals of the American Academy. 38: 159-65. July, 1911. Argument Against Liability. Walter .S. Nichols. To me there is a graver issue involved in the enactment of liability laws in this country than the mere compensation of an injured employee. Our recent conceptions of an em- ployers' liability are of foreign birth, the outgrowth of so- cialistic theories, which for years have been gradually' per- meating the states of Europe. There are two phases of this question which do not seem to be receiving the consid- eration which they deserve. I hold that under the spirit, if not the letter of our constitution, no ordinarj- employer of labor can justly be made liable for an injury for which he was not actually or constructively at fault, and that every attempt to impose such a liability is an attack on the man- hood of employees as American citizens. Subject to the legitimate police power of the state, every American free- man has the constitutional right to contract for his services. Under all ordinary circumstances, this contract assumes fhat he is capable and willing to perform the work which he undertakes. Such service in free America, at least, is not different in its fundamental character from other business contracts; it is simply an exchange of personal labor for money compensation. Both parties are independent con- 82 SELECTED ARTICLES tractors. There is no more reason in the nature of things why a freeman who contracts for his manual labor should iinpose on the party with whom he contracts responsibility for injuries which are due to no fault of the latter than why a like responsibility should not attach to other forms of con- tract. As well might the architect or the builder who con- tracts for the erection of a dwelling allege the same re- sponsibility. The fact that the ordinary servant is under a stricter and more detailed control goes no further than to enlarge the duty of the employer to see that his own acts are free from blame. The only ground on which such legal responsibility can be claimed is the exercise of the police power of the state based on public policy. Is there any public policy which .would sustain such police power in the case of ordinary em- ployments? Here, a false theory seems to have been uni- versally accepted. It is assumed that employees would escape injury except for the special work in which they may be employed; that the responsibility for the injury attaches to the particular work being done. On the contrary, it may well be questioned whether in the ordinary occupations of life the risk of accident is not even less among those actively engaged in the service of others than if not so engaged. The employee is not a mere piece of mechanism, carefully housed and sheltered from danger except when actively in service. He is a man and a member of society, with all the obliga- tions imposed on him by such membership. First and fore- most of these obligations is that he shall do his legitimate share of the world's work. To earn his bread by the sweat of his brow is the law of nature imposed on man in his very evolution from a lower vertebrate. It is a law whose princi- ple lies at the very foundation of all life, even that of the lowest monera or of the vegetable cell. Conscious or un- conscious activity is the very essence of life. The evolution of society has simply moulded the lines along which this activity must be directed. It has simply organized the mem- bers into a social system under which their labor is differen- tiated and its fruits exchanged instead of, as among their sav- COMPULSORY INSURANCE 83 age ancestors, every man working for himself. We have simply exchanged slavery to nntanicd natnre for a lesser servitude to society at large. Whether employed in the serv- ice of another or not, every man is exposed to the risk of accidental injury. There is nothing in all this which sug- gests a natural claim of one member against another for injuries due to his own fault or misfortune. On the contrary, the whole development of society has been along the line of protection to the worker. It is as true to-day as it was a thousand years ago that in the ordinary occupations of life the worker is in reality in a measure safeguarded through his very employment. Not until now has the truth of this great principle been seriously questioned. From the buried cities of Mesopotamia are unearthed the records of contracts made six thousand years ago, and in the laws of the Roman Empire, we maj- read the story of their transmission in spirit to the nations of modern Europe and to America. But no- where heretofore, so far as I know, has the right and ability of a freeman to assume the risk of his employment been questioned. What are the grounds of that public policy which it is claimed has changed the nature of this contract relation that has existed from time immemorial? We are told they are to be found in the complex conditions of modern industrial life,, under which the employee is subject to risks more hazardous than ever before, and to that greater economic differentiation which has widened the gulf between the workman and his -employer, which has weakened the personal relations once existing between the two, and has reduced the former to little more than a machine to be exploited under a new system of employment, representing not men but soulless corporations; that giant monopolies of capital have practi- cally reduced the workmen to a condition of indusfial servi- tude. For these reasons, it is urged that public policy calls for the intervention of the police power of the state to compel either the individual employer or the state itself to assume that responsibility for injuries to the workers which they themselves formerlv bore. 84 SELECTED ARTICLES Whatever may be said~ for this argument under the monarchical systems of the old world, it fails in its applica- tion here, unless our whole theory of government is to be abandoned for another on essentially socialistic lines. The broadest liberty of the individual consistent with his obliga- tions to society was a corner-stone, on which our whole national fabric was reared, and closely allied to it was an- other, protection of individual property rights against aggres- sion even by the state. When Webster won that immortal decision concerning the sacred rights of property and of contract in the Dartmouth College case, which has ever since been the law of the land, he welded a construction into state and federal constitutions only less important than that in- volved in the conclusion of his famous debate with Hayne, a construction wdiich has cost the best blood of the land to maintain "the Union now and forever, one and inseparable." Under our constitution, as it now stands, no plea of police power can well divest an employer of his property on the ground that he is liable for an injury where he was without fault. The application of this principle has been sought to be avoided by using the police power of the state to abridge the right of contract and compel the employer to incorporate the tacit assumption of a liability for injuries in his agree- ments with his workmen. How far the police power of a state may thus abridge the right of contract yet remains to be seen. In right reason, it would seem that no such power should exist in ordinary contracts of employment in which, as already explained, the hazards of occupation are not es- sentially different from those of ordinary life. The work- man here is asked to assume no increase of risk which can fairly be charged against the property of his employer, or be made a basis for public compensation, unless socialism is to be substituted for individualism in the spirit of our con- stitution. To employ and to be employed is a fundamental right of everj' citizen of the Republic, the very essence of our economic existence, even more — of our very civilization. No police power can properly abridge it more than the pub- lic welfare absolutely demands. It may well be doubted COMPULSORY INSURANCE 85 whether any plea of public policy can impose on every man who ventures to contract for the service of another an un- known liability for injuries due to the fault or misfortune of the latter with all its attendant train of fraud and black- mail, and it may be at the risk of his own fmancial ruin. No policy would seem more destructive to the actual welfare of the state. While in the case of certain corporate carriers, creatures of the state and impressed with duties to the pub- lic, such police power has been at times sustained, the Court of Appeals of New York in its recent decision has, by a unanimous vote, emphasized the principle that no public policy can be invoked to sustain a law which thus divests an employer of his property without his own fault, even though his liability may be limited to exceptionally dangerous risks. Our neighboring state of New Jersey in attempting to evade this decision by depriving the employer of his present pro- tection by the court in case of his refusal to accept an un- constitutional law, strongly suggests an attempt to whip the devil round the stump. The defenses which it would deny him are grounded not on mere expediencj% but are rooted in those principles of natural justice which underlie our economic sj'stem and have been well established in all our jurisprudence. As a dictum unnecessary for the decision of the case, the New Y'ork Court of Appeals has declared that both the fellow servant and the contributory negligence clause as de- fenses are within the scope of legislative control. But it as strongly affirms that neither can be so modified as to impute to the employer a fault due to the employee. Both these clauses relate to the legal cause of the accident. The ques- tion of responsibility depends on this legal cause. Whether a fellow servant or an assumed negligence of the employee is in the legal sense the efficient cause or a mere link in the chain of casualty, which no court will consider, must still re- main, it would seem, a valid question of law regardless of such enactments as that of New Jersey. The act or neglect of the employer must still be the efficient cause of the in- jury in order to constitutionally im.pose on him the liability. 86 SELECTED ARTICLES But gravest, perhaps, of all objections is the effect of such legislation both on the working men themselves and on the commonwealth at large. By such laws those who contract for their personal services are placed in a class by them- selves politically subordinate to the rest of their fellows. They are no longer to be dealt with as freeborn citizens competent like others to care for their own affairs, and cap- able like others of engaging in all the activities of busi- ness life unfettered by political restraints. To them the words of the great declaration promulgated in this city a hundred and thirty-five years ago that all men are born free and equal and entitled to life, liberty and the pursuit of happiness must have a changed meaning. They are to be dealt with as incompetent wards of the state who must be protected against themselves, incapable of freely contracting for their services and subject like the medieval serfs to assumed task- masters, who must answer for their safety and be resportsible for their mishaps. Is that to be the future spirit of our constitution and of our economic system? Is it the spirit of Americanism under which our country has achieved its greatness? The employee of yesterday will be the employer of to-morrow. Our future captains of industry will be re- cruited not from the ranks of wealth, but from the descend- ants of the horny-handed sons of toil. Politically, America knows no servile class. Is all this, to be changed and a spirit of state socialism to be inculcated in our rising generation through the operation of laws which make the employer the keeper of those whom he employs? To-day one of the grav- est financial problems which confronts our local systems of rapid transit is the damage suit for real or alleged in- juries to those in transit. Fraud and blackmail play a leading part. In New York, the passage of the recent Employers' Liability Law was the signal for a heavy increase in the claim ratios of the insurers. From England, and even Ger- many, come the same story of the weakening of the moral fibre of the classes whom such laws aim to protect. We are treading on dangerous ground in seeking to fol- low the footsteps of Europe regarding emplo3'ers' liability. COMPULSORY INSURANCE 87 We are in danger of sacriticing the nation's liirthright; the independent manhood and political equalitj' of the individ- ual citizen won by the founders of the Republic through the sufferings at Morristown and Valley Forge. Can the American people afford to surrender it for any gains that may come through the better protection of the working classes against the risks attendant on our complex industrial conditions? Is it not better that another solution of this g-rave industrial problem be sought? To me the true solu- tion lies along the line of insurance, not compulsory but voluntary, on the part of the workman himself as an intelli- gent self-respecting citizen to whom has been committed his full share in the government of his country. Aided and encouraged he may well be by any legislation which will not sacrifice his manhood or violate the constitutional rights ■of his fellow members of society. It is right that he should be protected and he should be educated to it as to every other civic duty. It is right that the cost of his protection should be an element of his compensation for his labor. But I believe that in doing so no jot or tittle of the spirit of the American Constitution should be surrendered. Not long ago, the business activity of all France was suddenly checked bj' a gigantic strike of employees to ameliorate their social con- ditions. The hand of the government itself was threatened with paralysis. It was successfullj' met and its backbone was broken by a call to the colors. The strikers were called on to choose between their obligations to their countrj- and the betterments for themselves which they sought by over- turning its social order. The spirit of patriotism prevailed and thej^ rallied round the flag. The same fundamental is- sue underlies this question of liability legislation. Shall it be dealt with in a spirit which recognizes the paramount claims of the constitutional principles on which our govern- ment was established, those of political equality and in- dividualism, or shall these be sacrificed for socialistic princi- ples which will divide society into two classes: one of industrial serfs, wards of the state incapable of self-protec- tion, the other of overlords commissioned to be their legal 88 SELECTED ARTICLES guardians? It is natural to move along the line of least resistance and to seek the remedies which offer the speediest relief regardless of the future. But I take it that the man- hood of the future American citizen and the political equal- ity which is his birthright may be worth even more than the material advantages of socialistic laws. When the proud Roman matron declared of her sons, haec vica ornamenta (these are my jewels), she uttered a truth which equally applies to every commonwealth. The real strength of a nation lies in its citizens, not in its material possessions. The downfall of the mightiest empire of antiquity was heralded by its accumulating wealth attended by the breaking down of the moral fibre of its people. I would have every worker standing side by side with his employer as a political sov- ereign trained to insure his own protection and aided, if need be, by the state within constitutional lines to exact the compensation for his services necessarj^ for the purpose. Annals of the American Academy. 38: 175-83. July, 1911. System Best Adapted to the United States. Miles ]\r. Dawson. The best system would obviously be best adapted to the best nation. Though not intending" to indulge in boasting, we would be very loath to admit that the United States was not easily first among nations. If there are reasons why the system is objected to, these reasons then must obviously be based upon mere prejudice. Such ought not to stand in the way of its adoption when the facts are fully known; and will not stand in the way if our nation really is the best and its people worthy of it. Workmen's compensation is at present being presented to the American people in three forms, viz.: First: In a form merely optional, i. e., contemplating that employers and employees should bring themselves under its provisions (which, except in the Ohio bill, provides for direct COMPULSORY INSURANCE 89 liability of the employer, instead of insurance) by their own action, or quasi-optional, i. e., requiring them, if not desiring to be bound by its provisions, to take affirmative action in- dicating their election. A law of the former character was enacted in New York last year, and took effect on September ist last. It is reported that but one employer has brought himself and his em- ployees within its purview. This, notwithstanding the fact that the defenses against employers' liability have been con- siderably modified, a fact which is elsewhere expected to cause all employers to seek refuge under the provisions of such an act. Possibly a law like that which is proposed in Ohio, re- moving the defences against an action for negligence, but offering a safe haven in state insurance of the compensa- tion type, might bring more employers under the compen- sation provisions. Undoubtedly, under a quasi-optional system, requiring written notice to certain officials to avoid coming under its provisions, a very large proportion would find themselves in- cluded within them; but the same reasoning which caused the Court of Appeals of the State of New York to hold that a so- called "compulsory compensation act" is unconstitutional, as taking private property without due process of law, would perhaps applj' to any such form, not wholly and in fact op- tional. Moreover, it cannot be denied that either an optional or a quasi-optional workmen's compensation system is but a partial and incomplete solution of the serious problems at which such legislation is directed. Notwithstanding all this. New Jersey has just had re- course to legislation of this type, and such legislation is in process of enactment in Ohio, with every chance of success and dififering from the other only in that state insurance is the option offered. It is also expected that the Wisconsin legislation will take the same form.^ 'It has, as have also the new laws in New Hampshire and Cali- fornia. 90 SELECTED ARTICLES Second: A law substituting for the present employers' lia- bility law, a system of workmen's compensation, the employ- er to be liable for the payment of the compensations and the same to be applicable to all employments. With the exception that it was not made applicable to all employments, but only to certain of them which were se- lected by reason of the extraordinary peril attending them, and by reason of their not being in competition with similar industries of other states, this is the form which was taken by the so-called "compulsory" workmen's compensation act of New York. It is now a matter of history that this has been declared unconstitutional by the unanimous opinion of the Court of Appeals. It is declared unconstitutional both under the pro- visions of the state constitution, and under the provisions of the federal constitution. Against the former determination there is no appeal; and, consequently, so far as New York is concerned, the question is finally disposed of, unless the constitution be amended." Should such a system be upheld, it would produce as good results as would an optional system such as the New York or the New Jersey type, if the latter were to be universally accepted. But this system, even if available, is certainly not the best. In the first place, it involves many uncertainties, both for the employer and for the employees. Thus, had there been such a statute in force and applicable to the manufacturing company upon whose premises the frightful holocaust oc- curred in New York on the very day the decision of the Court of Appeals was announced, it would have resulted, as doubtlessly suits for negligence under the existing law will result, in the ruin of the employer while little, if anything would have been realized for the families of the deceased or for those who were injured. This illustrates two things, viz.: (a) that it is by no means certain that, under the system of holding the employer di- 'This has since been recommended by the Commission and a bill has been introduced to submit an amendment to the voters. COMPULSORY INSURANCE 91 rectly liable, the burden will be distributed, and thus appear in the price of the products or services to be paid conse- quently by the consumer; and (b) that it is bj- no means certain that the compensation will be paid at all. In neither case is the community well served. In the next place, it is a wasteful system. The only means by which a proper distribution of the costs can be made under it is by private, voluntary insurance. In Great Britain, where such a law is in force without modification, and where the best stock companies in Europe that insure against such risks, are to be found, it costs, roughly, a shill- ing for expenses to get a shilling of benefits to the depend- ents of the deceased workmen and to those who are injured. It costs no less than 30 per cent of the entire sum disbursed in benefits merely to pay agents for soliciting the patronage of employers; and this does not include the costs of superin- tendence. If an adequate system of this type were introduced throughout the United States, giving benefits as large as, for instance, in Germany. I estimate that it would cost, net, about $400,000,000 per annum, to pay the compensation after the plan was in full swing. If the expense were 100 per cent, as in Great Britain, this -would mean $400,000,000 added to the net cost. Of this vast sum at least $120,000,000 would be paid for the services of solicitors — an armj"- of agents, yet to be drawn from other occupations and put into this. These figures may look large; but it was estimated several years ago from the ofticial returns, that the commissions to fire insurance agents in the United States were no less than $115,000,000; and it is safe to say that under an adequate system of workmen's compensation, covered only by private insurance, the premiums would aggregate a greater sum than is paid for fire insurance. The amount paid in commissions would be at least as large, and the amount paid in total ex- penses would be considerably larger. Moreover, there is virtually an irresistible tendency, 92 SELECTED ARTICLES when the employer is held directly liable, to impair the effec- tiveness and value of the compensation system itself. Thus all such bills offered in the United States so far, have provided for limiting the payment of benefits to cases of total disability, or to widows and orphans, for a certain number of years, thus leaving all those who live beyond that period unprovided for. In no other country, not even in those which have adopted legislation of this type, has such cowardice been exhibited. In our own, it has not been exhibited as will be seen, in the state insurance law, just enacted in the state of Washington. There are two things which have caused this action to be taken, viz.: The objection that an employer does not wish to be placed in a position where he will be liable to furnish a permanent income to the injured individual or his dependents. It is put thus: "It must stop, somewhere." In the next place, the private insurance companies have, to my knowledge, urged that they could not well figure what it would .cost on this basis. This is true in a sense, although such costs may be estimated from foreign statistics, within a reasonable range. Even when, as in Great Britain, there is a provision that at least the benefits for permanent disability must be paid during the continuance of the disability, it is found in practice that every loophole in the statute which will permit compro- mise is promptly availed of. This is well illustrated by the very small reserve which British companies are required to hold in order to take care of such deferred liabilities and perhaps even better by this criticism which recently appeared in a prominent British insurance paper, operated also as a journal in the interest of the companies: We mu.st say, that if anything is likely to provoke the state to start compensation Insurance, it is the action of many offices in "bluffing" claimants into unjust settlements. Almost every day we notice in some part of the country the intervention of the County Court to prevent the registration of some agreement which is manifestly unfair * * * To-day they often trade upon the ignorance of claimants when they should be collecting higher premium rates. This naturally arouses the anger of all right mmded persons and it certainly gives those members of the com- munity who are inclined towards socialism an opportunity to plead for the nationalization of all the means of production, distribution COMPULSORY INSURANCE 93 and exchange. If the insurance offices serve the public well they have nothing to fear, but shaving claims to swell dividend returns is not good service. This editorial was based upon the following statement concerning the decision of a British judge: Judge Emden said that he did not approve at all of those lump sums. They were getting far too frequent. He believed that he was correct in saying that now the larger portion of the work un- der the Workingnien's Compensation Act was being transacted un- der agreements of that character and the object of the act was be- ing defeated. If the case before him was, as was alleged, tin im- proper case to bring, it was not a case for an agreement at all, and ought to be dismissed. If it was a proper case, then an agree- ment was not the right way to dispose of it, and he did not think the workman would be properly protected unless the matter came before the court. He had been watching those cases for some time, and his conclusion, based upon investigation, was that the whole beneficial effect of the act was being defeated. Mr. Hurd said if the payment of lump sums under agreements were abolished there ouglit to be some central authority to say when a man should return to work. Judge Emden — That is equivalent to saying the act cannot be worked in its present way satisfactorily. His Honor declined to accede to the application, remarking that agreements of that kind were increasing to such an extent that he must do all he could to stop him. When the payments are commuted in this manner, the ultimate result must be that one of the chief purposes of such legislation, viz.: that these unfortunates be provided an in- come, will be defeated; and it is to be expected in conse- quence that they will soon be dependent on public or private charity, precisely as if no such plan had been introduced. As much is indicated, likewise, by the reports of the com- mittee sent by the Trades Congress of Great Britain to study the German situation, which said, among other things, that it was observable that in Germany there were literally no slums — a fact sharply in contrast with the conditions in Great Britain under its exceptionally liberal compensation act. Third: A system of compulsory insurance in which the state lends its sovereign power to afiford at least the compul- sion and in which it either may or may not also assume the management and conduct of the business. Many critics have regarded this as peculiarly un-Ameri- can; but the interesting thing about it is that it was regarded as quite as peculiarly un-German, un-Norwegian, un-Gallican, and, so late as three years ago, un-British, and on precisely 4 per cent for prevention activities, etc. Such efficiency is entirely unknown in the United States or in England, and especially are the legal expenditures of 1% per cent remarkably low. I saw accident prevention practiced more generally and systematically under the German scheme than under the English law. An English commission, consisting of members of the Labor Partj^ and trade union commission, says, after a visit to Germany, in its official report: "One effect of all this . . . organization is to prevent the hideous open social sores, with which we in Great Britain are so familiar. There are certainly poor in Germanj^ . . . but there are few so utterly broken on the wheel of niisfortune as those who are allowed with us to wander about, parading their sores and propagating their kind. . . . Germany, individually and collectivel}', is realizing itself and organizing itself. . . . We are convinced that it is having considerable effect at present in increasing the productive efficiency of the nation." Professor Edouard Fuster of Paris, one of the greatest international experts upon this suliject, says: "The money CO.MPULSORV INSURANCE 183 which Germany is devoting to social insurance reappears in a thousand forms. It promotes happiness of the family, health, and self-respect. It makes for a strong, enduring nation and for international supremac}-." Dr. Paul Kaufman, president of the German Imperial Insurance Department, writes me as follows: "It is not an accident that the unprecedented expansion of German commerce and industr}' has happened concurrent- ly with thorough-going improvement in the condition of workers. There is a close connection between the two events. The successful handling of the labor problem b^- means of social insurance is one of the strongest factors in Germany's constantly growing industrial progress." Dr. Spiecker, president of the Siemens and Halske Com- pany of Berlin, writes me as follows: "It is perfectly evident today that we have secured higher efficiency in our industries due to increased workers' efficien- cy, all brought about by relieving our workers from worry and distress, due to sickness, injurj-, and superannuation." Dr. Zacher, director of the Imperial Statistical Depart- ment, who is honored and respected internationally as prob- ably no other German expert, wrote me nearly a year ago: "His [Dr. Friedensburg's] statements must not be taken too serioush'. He has been generally known, even during his active connections with the Imperial Insurance Depart- ment, as the solitar}' advocate of extreme tendencies. His articles show an unwarranted tendency to condemn a great national social insurance system on account of a few trifling shortcomings in some of its details." A clipping from a recent issue of Xeuc Polifisrhc Correspon- denz Berlin reads, translated, as follows: "It is proper to call attention to the fact that Friedens- burg's statements are in manj^ directions incorrect and make individual shortcomings appear general to an unwarranted degree. As a whole Dr. Friedensburg's statements give a wrong picture of the results of German workers' insurance and are, therefore, unfitted to inform foreign countries ac- i84 SELECTED ARTICLES curately and conclusiveh' concerning German workers' in- surance system." Let me say in conclusion that we cannot and will not transplant either the English or the German scheme as a whole, but we must study all foreign systems and translate their best features into American ways of thinking and doing things. This alone will give us a system in keeping with the institutions and the traditions of the United States. American Journal of Sociology. 17: 177-87. September, 1911. German Workingmen's Insurance and Foreign Countries. Georg Zacher. Looking over the previous development of German work- ingmen's insurance, it is desirably to present in this journal the international standpoint, and to sketch the manifold relations between the German workingmen's insurance and foreign countries. First of all the question is urged, How far have the ob- jections which other countries, both formerly and at present, have brought against the bold enterprise of Germany been removed or confirmed by the actual development? If we follow, in the previous discussions in journals, and in the acts of the international workingmen's insurance con- gresses, the history of the foreign workingmen's insurance legislation, it appears that a principal hindrance to imitating the German example consistently is almost everywhere the fear of a financial burden; that is, a strain tipon the indus- trial capacity of the various occupations, and consequently a disadvantage in international competition between nations. This fear has been skilfully used by the opponents on prin- ciple of every form of social legislation, even apart from compulsory insurance. The wider the circles of German workingmen's insurance extended and the greater the an- nual expense of millions for indemnities and capital reserves increased, the more these opponents referred to the danger COMPULSORY INSURANCE 185 of the assessment methods of the German accident insur- ance, and the billions required by invalid and old-age, not to mention orphan and widow, insurance in their own coun- tries. The parliamentary reports of all European states which have considered such projects of law contain only too much material on the subject. What is the teaching of actual trial? In the field of accident insurance, not in Germany, but in those countries which did not follow the German examples, financial and technical insurance problems have arisen, and this because they were compelled to throw overboard premium rates and calculations of payments which had no adequate basis, and which, therefore, proved false in the tests of practice. In this connection reference may be made to the failure of the technical insurance figures of the Aus- trian. Norwegian, and Holland accident insurance, of the experimental premium tables of the French, Belgian, and Eiiglish private insurance societies, and others. On the contrary, the German accident insurance was free from these mistakes; has developed normally, and enjoys increas- ing recognition abroad.' The best proof of this is that the insurance plans copied after those of the German trade- insurance associations, as of late in England and France, have manifestly worked with advantage; and that in the United States of America, which now is thoroughly inter- ested in these questions, the approval of the German example seems to be gaining ground, not merely on account of the simplicity and economy of the whole system, but also be- cause of its superiority in the important field of accident prevention. In reference to the invalid and old-age insurance we may learn from the proceedings of the last International Social Insurance Congress at Rome, in igo8, especially in the con- fessions of Luzzatti and Mabilleau, and from the thirty years of previous history of the French law of April 10,, igio. that in this field thorough success without compulsions to insure cannot be assured. On the other hand, German experience shows that the fantastic milliard calculations of i86 SELECTED ARTICLES opponents could practically be met, and that the capital col- lected to pay claims as they fall due was not only not ,a danger for the public welfare, but in reality an unending blessing; as has been shown by persons free from bias. Has this entire burden of the German people, by its social insurance, become a hindrance to national progress, and to the capacity for competition in international trade — as has been asserted in the past and is still sometimes claimed? Here also the facts may speak for themselves. It is precisely in the last quarter of a century, under the regime of social legislation, that Germany has increased its population from fortj'-six to sixty-five millions, now about at the rate of one million each year; and has advanced from the fourth to the second place in the world's trade; and now, with its seventeen billion marks of foreign trade, is behind the British Empire by only a few billions. The property of the people at the same time has doubled in value, and at present is reasonably estimated to be about two hundred and fifty billions. The annual income of the people is about thirty billions of marks. There are about eighteen million savings-bank accounts with annual deposits of three-fourths of a billion, and property which has risen in value from two billions in 1875 to fourteen billions. In this improvement the workingmen, the majority of the na- tion, have an increasing share. The wages, as proved by social-insurance statistics and expert investigations (for ex- ample, Schmoller, Dade, Calwer, Kuczynski, Ashley, etc.), since the introduction of the imperial workingmen's insur- ance laws, have risen, on the average, for unskilled workmen about 25 per cent., and for skilled workmen about 50 per cent, and in certain trades even 100 per cent. And this in- crease of wages, which, according to Professor Ashley, has not been attained in any other country, has by no means been counteracted by the increase of cost of means of subsistence, even according to the judgment of social-democratic leaders and scientific journals. According to household budgets and statistics, the expenditures for the means of subsistence, on the average, require only half the income. The con- COMPULSORY INSURANCE 187 sumption of the necessary means of subsistence has steadily increased, the use of meat remaining only a little below that of the English population; so that the living conditions of German workmen, as an English commission has abundantly proved, have improved in all directions. Furthermore, the s'tatistics of taxes show that the number of persons with taxable property has increased; and that, in agreement with this fact, the wage statistics of this great sickness-insurance funds, and the accounts of the sale of stamps for the invalid- insurance funds show an ascent of insured persons up from the group of low-paid workers to that of the more highly paid wage-earners (cf. Reichs-Arbeitsblatt). To all this we must add that the figures relating to unemployment are low- est in Germany; that emigration, which was so great in the decade 1880-90, has almost ceased; that, on the other hand, Germany of late needs almost a million foreign workmen in order to cover the needs of manufactures and agriculture (cf. Dade). But it is not merely in material advance that the majority of the people have shared. According to the most recent publications the apparent longevity rose from 38.1 to 48.85 years for males and from 42.5 to 54.9 years for women; the general rate of mortality has diminished consid- erably; mortality from tuberculosis has fallen nearly one- half, so that there is ground for hope that this dangerous plague, within a reasonable time, will come under control — a hope whose fulfilment could hardly be expected without the powerful organization of social insurance. To all this we add the consideration, that social insurance, with i!ts curative and preventive measures, offers advantages annual- ly to millions of workmen and their families. Thereby not only the vast number of workers of the nation is maintained, but their vital energy is also greatly augmented by popular hygienic education. Thus we can explain why, in spite of the rapid development of German manufactures, both the number and physical condition of recruits show an upward tendency. If we put together all these considerations, we can claim, in opposition to the assertion mentioned above, that social i88 SELECTED ARTICLES insurance has been a co-operating cause of the unexampled advance of German3^ In the increasing recognition of these economic effects we may discover the explanation of the more rapid progress in similar legislation in other countries. Another point at w^hich foreigners have hesitated is the organization. They have criticized the enormous apparatus w^hich requires a legion of officials, so complicated that it could not be kept in motion except in a country under a strictly military control like Germany. We have already explained how the threefold division of the German social insurance laws (sickness, accident, and invalid insurance), and the complex forms of organization, arose naturally out of the historical development. It has been possible to open new ways, while joining the new to existing arrange- ments, and utilizing them for the general purpose; and im- provements are introduced in consequence of practical ex- periments. This has happened in the reform laws of the decade 1890 to 1900 (K. V. G. 1892. J. V. G. 1899, U. V. G. 1900), and will be further manifest in the new imperial in- surance regulations. Both reforms have left the foundations of the system unchanged. We have declined to admit any blending, or uniformity of organization; and this is the best proof that the German social insurance, in spite of the variety of forms, was built on sound principles, and that the various forms of organization had good reason for being, in the difiference of the risks to be insured. Yet not a few of those who have had practical experience in administering the legislative measures believe that the purpose of these reforms would have been more easily and surely attained, if. even in the year 1895, the well-known reform propositions of Bodiker and his brilliant talent of organization of such insurance plans had been given a freer chance. But every reform of organization and administration finds all the stronger op- position where the particular organizations have been thor- oughly established. This has been well shown in relation to the simplification and increased centralization of sickness in- surance, and the two projects for the German Imperial In- COMPULSORY INSURANCE 189 surance Regulations (April, 1909, and March, 1910) and of the reform propositions in Austria (December, 1904. and November 3, 1908). Foreign countries may well be grateful to Germany for its many-sided pioneer labors. It has been made possible, without costly experiments, to utilize the practical applica- tions; and they would do well to take into account, at the beginning, the ultimate good of the development and pro- vide in good time for the reforms and extensions which will later be required. Perhaps the most important objections against the "Ger- man system" abroad have been made on moral grounds. The charge was made that it weakens the sense of individ- ual responsibility; that it intensifies the cupidity of the masses; that it demoralizes the working-people. Those ob- jections were supported by reference to the continually ris- ing costs of sickness insurance and of the sick-benefit funds, which have been exploited by the unemployed members who are in good health, and by reference to the increasing desire for pensions and the larger number of lawsuits for pensions. The first reproach, that compulsory insurance undermines the sense of responsibility, the inclination to save, and the industrial efficiency and capacity for development of workers, can hardly be longer supported. The facts presented at the Congress at Rome (1908), and in statistical publications, do not favor this view. In any case it is better for the common welfare that the masses be educated by legal obligation to the fulfilment of their social duties than that they be left in lethargy and helplessness. The long experience of Ger- many, as compared with other countries, teaches that, on the average, the wage-earners are not able, without aid, to procure an adequate and sure support in cases of sickness, accident, invalidism, and old age; they need such a system as that of the German social-insurance laws, as well as the intellectual and financial co-operation of employers. If we desire to diminish and gradually to overcome the present social antagonism, we may look with hope to common effort on the humanitarian basis of social legislation, and to the lOO SELECTED ARTICLES works of voluntary welfare-schemes which are closely con- nected with such legislation. With good reason, the new imperial insurance ordinance, following the example of the invalid insurance and the Hun- garian reform legislation, looks forward to an equal divi- sion of contributions and administrative rights of employees and employers in sickness insurance. Other considerations of economy and justice favor this measure. The division of premiums in the original law of 1883, according to which the employees paid two-thirds and the employers one-third, may have been appropriate to the simple industrial relations of that period, when the danger from general causes of illness seemed more important than the specific "occupational dis- eases" which have lately received more attention. At the present time, on the contrary, especially in conseciuence of the varied methods of chemical production, the development is in a dififerent direction. Therefore, it would be unfair to lay the principal burden on the wage-earners, since the risks of these increasingly dangerous "occupational diseases" should be logically regarded as risks of the trade, like acci- dents. The indemnities should be regarded in the same light as those for accidents, as is already done in the Swiss and English legislation, and in the projects of law in France and Russia. This holds good, even although, after the period of sickness indemnity, the invalid insurance, if only inadequately, ofifers some relief. To this must be added the consideration that, with the equal division of sickness-in- surance premiums, it is proposed in the imperial ordinance of insurance to extend the sickness insurance to all agricul- tural and household industries, etc., and provide insurance for widows and orphans of wage-earners without increasing the payments of workmen. The conflict over the question of insurance doctors might, perhaps, have been avoided, or have taken a milder form, if from the beginning there had been complete equality of representation of employers and employees in the committees on sickness insurance. It has been apparent that the "free choice of doctors" demanded by physicians might introduce serious difficulties in social COMPULSORY INSURANCE iqt insurance in great cities and industrial centers, especially so long as preparation for this kind of medical service is not required by law. How little the legal introduction of '■free choice of doctors" would relieve the economic need where the medical profession is crowded may be seen from the evidence presented at the congress at Rome and in the last international conference at The Hague (September, 1910). ■ In the field of accident insurance, the principle of equal- ity, contrary to the view of Bismarck, has been broken down, to the extent that the wage-earners, in cases of deci- sions at the first hearing, as contrasted with both hearings in the higher courts, are excluded. This has produced two evils: on the one side the workingmen show great distrust of the employers' associations, in spite of the larger indemni- ties; and, on the other, the imperial insurance office, in con- trast with the invalid-insurance office, for which it has mere- ly powers of revision, having to decide appeals, is burdened with the re-examination of facts in disputes of little impor- tance, and is unable to give full attention to its tasks as a supreme court. The imperial insurance ordinance seeks to overcome this error of the earlier legislation by making the first court (as an "insurance office") equally representa- tive of both parties, as has already been done from the be- ginning by Austrian, Hungarian, and Luxemburg legislation; by clothing the intermediate court with greater powers of final decision as to facts, as a "superior insurance office," and by treating the imperial insurance office as the court of final revision for all branches of social insurance, including sickness insurance, which has not hitherto been in its juris- diction. This overburdening of th'e imperial insurance office with annually increasing appeals in a gratuitous procedure, and the fact that, in spite of the benevolent legal decisions of the imperial insurance office, scarcely i per cent of the al- most one-half million annual decisions of appeals from the employers' associations have been reversed — in itself a strik- ing proof of their justice — are regarded abroad as certain evidence of the weakness of the German insurance system; 192 SELECTED ARTICLES evidence, that is, of the disappearance of a sense of rc- sponsibiHty and justice of those who are obliged by law to insure, of the increasing unrest and eagerness to receive pensions on the part of those injured by accidents, of the abuse of the gratuitous procedure, and of the demoralization of the workingmen by unscrupulous shyster lawj^ers. The fact is often overlooked that a compulsory insurance, with nearly twenty-four million insured persons, must include many from tlie lower social classes; that, considering this vast number, the abuses mentioned are entirely exceptional; and that they might, perhaps, have been avoided if such regulations as the imperial ordinances of insurance now con- tain, and which would supply gratuitous official legal coun- sel for the benefit of the wage-earners, had been included in the original laws. In any case these evils can without dif- ficulty be cured by better instruction of the persons interest- ed, by elevating their plane of culture, by giving a hearing to the workmen in the court of first instance, by stricter management of the costs in case of appeals to litigation without cause, and by avoiding too generous awards by courts. Incomparably greater dangers of a moral and financial kind may arise where neither compulsory insurance nor gratuitous judicial settlement exist; as may be seen in the experience with the English accident insurance. There the employers, from fear of the terrible costs of litigation, bring hardly I per cent of cases of industrial accidents before the courts. In most cases of litigation, when the activity of unscrupulous advocates and complaisant physicians is certain, they prefer to pay an injust compensation rather than run the risk of a suit. In general, the acts of the international social insurance congresses, especially that of Rome in 1908, in connection with the twenty-five years of experience in Germany, have shown conclusively that without legal compulsion the social and economic purpose of a thorough social insurance can- not be attained; and that individual cases of abuses should not be given too great weight; they are simply passing and COMPULSORY INSURANCE 193 by means unavoidabl-e accompaniments of the great scheme. Such general human weakness may be observed also in the case of voluntary and all other kinds of insurance. The German principle, furthermore, is superior to the liberte subsidice in this, that it involves both parties, workmen and employers, in the cost of premiums, and so places the entire insurance system on a firmer, clearer, and juster basis, and makes it evident to the workmen that the contribution of the employer is not a "subvention" but something which they have themselves earned. A glance over the survey proves, however, that the legislation of scarcely one of the countries there treated shows an exclusively obligatory or voluntary insurance; rather both kinds of insurance run side by side in independent laws for each branch of insurance and trade, or they supplement each other in the same laws. In recent development of social insurance, in the German proj- ects and in the plans for insuring private ofificials, the ten- dency is observed to follow the lines of agreement at the congress in Rome; that is, to provide the miniinum required by necessity in the way of compulsory insurance and open the way of voluntary insurance for a via.vinniiii which may be accessible and desirable to some individuals and callings. In fact, in this way, by opening up to the more intelli- gent and strong a more complete means of caring for them- selves, in addition to the necessarily obligatory method with the weaker members of society, the defects in the pres- ent system may most securely be overcome. That all modern civilized states are striving toward this common goal is shown in the general survey already men- tioned, and that, in consequence of international migration of laborers, the points of contact multiply, is proved by the increasing number of treaties on the principles which were first recognized by the Franco-Italian labor agreement of April 15, 1904, and there developed into a program. 194 SELECTED ARTICLES Outlook. 94: 939-46. April 23, 1910. How German}' Cares for Her Working People. Frederic C. Howe. One can .speak with far more enthusiasm of the protec- tion assured the worker from accident, sickness, and the misery of a workless old age. Even tlie Socialist admits that these are steps in the right direction. Insurance against sickness has been provided since 1884. It is provided for those employed in factories, mines, work- shops, quarries, transportation, and other industries. Em- ployees of public enterprises are also covered. The provi- sions of the law are limited to those whose wages are below $500 a year. The sickness insurance funds are of various kinds. There are local funds provided by the parishes for all of the trades within their limits. Some of the large in- dustries have funds of their own, as do the mine-owners and the contractors in the building trades. All of the funds provide for free medical attendance and supplies as well as sick pay from the third day of sickness. The benefits amount to one-half of the daily wages received by the beneficiary or the amount upon which his assess- ment is based. Benefits are continued for not more than twenty-six weeks, after which time, if the illness still con- tinues, the burden is transferred to the Accident Insurance Fund. The insurance fund is sustained bj' the workingmen, the employers, and to some extent by the commimit}'. Gen- erally the employee pays two-thirds of the premium and the employer one-third, the lial)ility of both being ascertained by periodic reports from the employer as to the number of employees liable to insurance. The premiums are collected by stoppage, the employer deducting the assessments of the employees when wages are paid, which, along with his own share, are then transmitted to the fund. The administration of the funds is largely in the hands of the working people themselves, through a board chosen COMPULSORY INSURANCE 195 by the employers and the employees. General meetings are held at which all persons who contribute to the fund may come, at which meetings the delegates who have charge of the insurance are elected. About 12,000,000 persons are insured against sickness in the Empire. A second insurance fund is provided against accident. The provisions of the law cover substantially the same class- es as the sickness insurance, and the method of administra- tion is substantially the same. The employer is bound to provide insurance against accident, as in the case of sick- ness. Upon opening a factory he automatically becomes a member of the trade association covering his business, and is bound to contribute to the insurance fund. This fund is managed by the executive board of the trades, which has power to classify trades and fix the danger schedule. But, better than this, the board has power to enforce rules and appliances for the prevention of accident. If a member re- fuses to abide by the ruling of the board, he may be fined for his neglect, or his danger rating is increased. By this means the employers are stimulated to an interest in safety devices, while the special knowledge on the part of the individual trade association leads to a better adminis- tration of the rules than would be possible on the part of the State. In all of these matters the employees are con- sulted. They are also allowed representation on the execu- tive board. Benefits under the accident insurance law are not left to judicial inquiry. The employee is not put to the expense and delay of a long litigation. Even though the employee is negligent, he is entitled to compensation, unless there should be evidence that he intentionally brought the accident upon himself. Here, as in sickness, the cost of human wreckage in industry is shifted in part on to the cost of production. It is passed on to the community where it belongs. The amount of the compensation paid depends upon the wages of the employee and the extent of the injury. If the accident wholly incapacitates the worker, he receives a full pension, which amounts to two-thirds of his yearly wage. 196 SELECTED ARTICLES If he is still able to work, the pension is adjusted to his earning abilit3^ In case of accident resulting in death, an immediate payment of about one-sixth of the yearly wage is paid. In addition to this, the widow and dependent chil- dren are pensioned, the widow until her death or remarriage and the dependent children up to their fifteenth year. In this event the annual pension does not exceed sixty per cent of the annual wage. Not only is the German workman thus insured against sickness, which marks the beginning of much of the poverty of our cities, as well as against the accidents of industrial establishments, which fill the hospitals with the bulk of their patients, but practically all German workmen are insured against old age. Those whose earnings exceed $500 are not covered by old age insurance, nor are the higher class of employees and servants. The administration of this branch is carried on by insurance societies, which cover certain sections, or by the State at large. All of them are under the supervision of the State and are controlled by the em- ployers and the employees. The old age funds are supplied by the employers and the employees, who contribute in equal shares to the fund. To this the Empire adds $12.50 towards every pension. The amount of the benefit received, it is true, is not very large. It is not sufficient in itself to* support the recipient. It amounts to from $27.50 to $60 a year,, according to the wages enjoyed or the premiums paid by the beneficiary. The success of these insurance schemes is seen by the number of members enrolled. There were 18,000,000 insured against accident in 1903 and 13,500,000 against old age. The total expenditures of the various funds amounted to over $100,000,000, while the funds accumulated as a reserve ex- ceeded $350,000,000. Aside from the positive accomplishments of the German Empire in this line of social reform, one is impressed with the seriousness with which the cities as well as the nation are considering the whole question. There are frequent con- ferences attended by representatives from the Empire and COMPULSORY IXSURANCE 197 the various States, from the cities, the universities and the philanthropic societies. There is nothing hit or miss about it. The best thought of the university and the most ener- getic of city officials are constantly studying ways and means for the relief of the numerous problems which arise in con- nection with unemployment, with the hazards of industrj^ with the poor and destitute members of the community. Poverty has not been abolished in Germany. Nor has the housing question been solved. Industrial depression takes its tribute there just as it does with us. But the impressive thing about it all is that the nation views these questions in something of the same light that it does the building of Dreadnoughts, of railways, of canals, the adjustment of taxes, and the building of cities. Germanj' more than any other country in Europe has entered on a comprehensive programme of human salvage. She is devoting her thought and her energy to the making of people as well as of things. North American Review. 195: 108-19. January, 1912. Insuring a Nation. P. J. Lennox. The bill, in the words of the explanatory memorandum which accompanied it. is intended to efifect as wide an in- surance as possible of the working population. It contains two separate and distinct schemes. The first not only pro- vides insurance against total loss of income through sick- ness, but also seeks both to prevent sickness and to cure it when it cannot be prevented. The second provides insur- ance against total loss of income through unemployment. The portion of the bill which provides against total loss of income through sickness is also divided into two parts: one making such insurance compulsory, the other providing a voluntary method. Under the first part provision is made, except in certain specified cases, for a compulsory weekly deduction from the earnings of every employee between the ages of fifteen and sixty-five whose income falls below the ige SELECTED ARTICLES Income Tax limit of £i6o ($800) per annum, and in every such case there will also be a compulsory contribution from the employer, with a further contribution from the state. The amount to be deducted every week from the wages or salary of every non-excepted employee who earns more than £39 ($195) a year is 4d. (8c.) for men, and 3d. (6c.) for women; the weekly amount to be contributed by the em- ployer for each man and woman employee is 3d.; and the weekly amount to be contributed by the state for each is 2d. (4c.) a week. In cases where the earnings of the em- ployee are less than £39 a year, the amount to be deducted from the wages or salary will be correspondingly less, rang- ing from 3d. down to id. (2c.) per week, while the contri- bution from the employer will be correspondingly greater, in order to keep the total amount at 9d. (i8c.) a week for men and 8d. (i6c.) a week for women, for the contribution of the state still remains at the constant figure of 2d., un- less in cases m which the weekly wage falls below 9s. ($2.16). In that case the employee's proportion will be borne by the state. Under the voluntary portion of the scheme, which is meant to apply to those who earn their own living, but who work mainly on their own account and are not regularly employed by others, the person entitled to insure will, if under forty-five years of age, contribute to the fund the full amount which, if they were employees, would be p^id by the employee and the employer combined, and the state will contribute as in the former case. If over forty-five vol- untary contributors will pay in proportion to their age, such rate to be set forth in a table which the Insurance Commis- sioners will prepare. The voluntary scheme appears to be open to every one irrespective of the amount of income. In return for these contributions, which may be looked upon as insurance premiums, the benefits secured to the beneficiaries, after contributions extending over a period of not less than six months, are los. ($2.40) a week for men, and 7s. 6d. ($1.80) a week for women for the first thirteen weeks of sickness; Ss. ($1.20) a week for men and women COAIPULSORY INSURANCE 199 alike for the second thirteen weeks; and 5s. a week for men and women who are permanently or temporarily dis- abled during the whole period of such disablement, with the proviso that disablement allowance will not be made unless and until the beneficiary has been a contributor for at least two years. There are slightly different rates for young unmarried persons under 21 years of age, and for persons who are over 50 and over 60 respectively. Persons over 65 are excluded from the scope of the bill. The payments specified will be made in full without deduction on account of contribution, nor will the non-payment of contribution during sickness or disableriient count against the beneficiary. In addition to the money payments, there is provided free for the persons insured, a system of medical treatment and attendance in their own homes, or. in cases of certain dis- eases, in special institutions. Medicines and drugs are also free. There are special liberal grants in maternity cases. Finally there are prospective free medical treatment, at- tendance and medicines for those dependent on insurers. It is intended to set aside a sum of £1,500,000 ($7,500,000) to aid local charities and local authorities to build and equip sanatoria for dealing with what the Chancellor called the terrible scourge of consumption, and £1.000,000 {$5,000,000) a year for their staffing and upkeep. The need for this pro- vision is found in the fact that in the United Kingdom there are between 400.000 and 500,000 persons affected with tuber- culosis, and 75,000 deaths a year from that cause. Among males between the ages of 14 and 55 one out of every three dies of tuberculosis, and, to make matters worse, as soon as a man is attacked by it he becomes a recruit in the army of destruction and scatters infection and death in his own household. To stamp out this white plague all the re- sources of science will be brought into play backed for the first time by a nation-wide measure of financial support. It is calculated that there will be 13.100,000 compulsory contributors. 800,000 voluntary contributors, and 800,000 young persons under 16 affected by the bill, making a grand total of 14,700,000 to be included in the scheme of insurance against 200 SELECTED ARTICLES sickness and invalidity. In the first year, 1912-13, the in- come from the contributions of employees and einployers together will, according to estimate, amount to about £20,- 000,000. of which £11,000,000 will come from the workers and £9,000,000 from the employers, while the expenditure on benefits and administration will in the same year, in con- sequence of the waiting periods prescribed by the bill, be only £7,000,000, rising to £20,000,000 in 1915-16, the first full year. One feature of the bill is that the rate of contri- bution is uniform for all compulsorily insured employees of all ages within the limits named, and on this account a heavy loss is at first anticipated, because sickness doubles, trebles, and even quadruples as people advance in life; but by a special provision in the bill it is inteded to wipe out that loss in 15,14 years. At the end of that period there will be a considerable sum. probably £9,000.000, released for the pur- pose of increasing the benefits. One shape that such in- creased benefits may take is the lowering of the age for the receipt of old-age pensions from the present limit of 70 to 65. Regarding the contribution to be made by the state, it is figured at £1,742,000 for 1912-13, rising to £3,359,000 in 1913-14, tq £4,563,000 in 1915-16, and to £6,000,000 at the end of the 151-2 years' period. The machinery for the administration of this gigantic scheme of national insurance is on the whole of a fairly simple character. The funds accruing from the various class- es of contributors will be collected by means of stamps. In the compulsory case, a card will be given to each employee, who will in turn take it to his or her employer, and at the end of each week the employer will affix to it stamps equiva- lent in value to the employee's 4d., or other amount ac- cording to the nature of the case, and his own 3d., or what- ever the correct amount may be. The employer will of course reimburse himself for the employee's contribution by a deduction from the wages or salary. The card stamped as indicated will be handed to the employee, who will in turn take it to the local post-ofifice. The postmaster will on coM^ULSOR^• [xsuraxcf. 201 his i)art transmit llio card thtis stamped to the Central Of- lice. There the anidunt so forwarded in stamps will he placed to the credit of the beneficiary. In the case of con- tributors, voluntary or compulsory, who are not members of a recognized Friendly Society, the insurer pays what we may call his premium directly to the post-ofifice and gets credit for it in a special book, which of course, he retains. All amounts so paid are, as in the former case, transmitted to the Central Office by the postal official. The distribution of the fund will be accomplished in a corresponding twofold manner. To the great Friendly So- cieties which are already established or may hereafter be founded in accordance with the provisions of the bill will be assigned the distribution of benefit funds to their members. All insurers will be encouraged to join such societies. For contributors, whether voluntary or compulsory, who are not members of such a society the Government will set up a post-office system of distribution somewhat similar to the system at present used for the payment of pensions under the Old Age Pensions Act of 1909. Every precaution will be taken to have the distribution societies perform this por- tion of their work in a proper manner. Among the safe- guards provided are large membership (10,000 for Great Britain, 5.000 for Ireland), non-division of funds except for benefits, keeping of books and accounts. Government audit and valuation, the giving of adequate security against mal- versation or misappropriation of funds and provision of ar- bitrators in case of dispute. Special precautions are taken against malingering. To aid distribution both through the Friendly Societies and the post-office. Local Health com- mittees will be established, and these committees will have charge of making the medical arrangements for all beneficiar- ies, and of carrying on educational and propaganda work looking toward the general health of the community. That part of the bill which deals with insurance against unemployment is limited for the present, as far as its com- pulsory force is concerned, to those trades in which the most serious fluctuations occur — namely, the engineering trade and 202 SELECTED ARTICLES the building trade; but in order to encourage voluntary in- surance against unemployment the Board of Trade is em- powered to pay to any association giving unemployment benefits a subsidy of one sixth of the amount, up to 12s. a week per individual, expended on such benefit, and this regu- lation applies to all trades and all employees. The reasoning by which the Chancellor of the Exchequer justified the principle of compulsory unemployment insur- ance is that, whoever is to blame for the great cyclical, seasonal, or other fluctuations of trade, the workman is the least to blame, for he does not guide or gear the machine of commerce and industry, the direction and the speed being left almost entirely to others. The Chancellor limits the operation of his plan for the time being to the two selected trades, because he recognizes that, for want of actuarial data, his proposal is more in the nature of an experiment than is his plan for sickness insurance. No real effort has been made in this matter of unemployment insurance here- tofore in the United Kingdom except by the trade unions, and in their case it applies to only 1,400,000 workers, who form but a fraction of the industrial population. Other workers cannot, unaided, afford such insurance; and even in the case of the trade-unions the burden sometimes falls so heavily upon them that it is almost impossible for them to bear it. This is one of the justifications put forward for the above-mentioned subsidy to assist voluntary insurance. The basis upon which the compulsory scheme of this part of the bill rests is, as stated, a trade basis. The Chancellor was deterred from using a municipal basis or a national basis by a consideration of the many failures along those lines which had occurred on the Continent. By compulsion, therefore, within the trades selected, a fund is to be raised for the purpose of relieving distress due to unemployment. The levy on the workman will be 23^d. (sc.) a week, on the employer 25^d. a week also, and i^d. (2]^c.) will be the weekly contribution from the State. If an employer chooses to compound and pay his own contribution and the contri- bution of each of his workmen by the quarter, he will in COMPULSORY 1XSURA^XE 203 that case effect a considerable saving per annum, the saving representing 6s. 8d. ($1.60) per man, or the difference be- tween los. 6d. ($2.60) and 4s. 2d. ($1), and being effected by the employer's appropriating the 2i/^d. weekly for each of his workmen. In big concerns, where several hundred men are employed, this is an important feature. It is, of course, an inducement to the employer to keep all his men working all the time. The plan, as at present outlined, will apply to 2,421,000 workmen, 1,100,000 from the building trade and 1,321,000 from the engineering trade. Their contributions as esti- mated will come to £1,100,000 per annum, and those of the employers to £900,000, while the State for contributions and administration will be liable to about £750,000 per an- num. The benefits to an unemployed workman during his period of unemployment of not more than fifteen weeks will be a weekly payment varying from 6s. to 7s. No payment will be made to a workman who is dismissed for misconduct or who is out of employment through a strike or a lockout. Relief will be given only for unemployment due to fluctua- tions of trade. The machinery for the distribution of these benefits will be the existing Labor Exchanges and the existing trade- unions. The trade-union will pay to its members the un- employed benefit, but the Labor Exchange will have first to report on the case. The workman who is unemployed will have first to notify a Labor Exchange, whose officials will investigate the genuineness of his claim, and prevent him from getting unemployed pay if he is not entitled to it, and further will try to secure him employment as soon as may be. If he refuses a job offered to him, an impartial court of reference will decide whether he is justified in doing so, or not. and if he is found not to be so justified, he will be ineligible for unemployment pay. There is no pay for the first week's unemployment, nor for more than fifteen weeks in the year, and no man can draw more than one week's pay for five weeks' contribution, so that the loafer will soon drop •out. 204 SELECTED ARTICLES It will at once be seen that the traditional British respect for the liberty of the subject to do what he likes with his own property is here openly and avowedly violated. There is in a sense a return to paternalism, or at least to benevolent despotism: as you punish a child for its own ultimate good, so you tax certain people for their own contingent benefit. Mr. Lloyd-George's defense is that what he does he does in the public interest. It is a good thing, lie argues, for the workman to b,e insured against sickness or unemployment: therefore let him pay. It is a good thing for an employer to have to deal with a hardy and healthy race of efficient workers instead of with inefficient weaklings: therefore let him pay, too. It is a good thing for everybody to have a healthy and contented population: therefore let everybody pay, directly or indirectly for so great a boon. In essence, the Chancellor doubtless further argues, it is just as defens- ible to put on taxes to secure a well-doctored, properly med- icined nation, and by prevention or cure of sickness to re- duce the bills of mortality and cut down the ills which fiesh is heir to. as to raise by taxation a fund to build and equip Dreadnoughts for the protection of British trade. His proposals are at the same time a tribute and an important addition to the new humanist view of the obligations of gov- ernment. It will be noticed how important are the functions to be exercised under this bill by the post-office, the Friendly So- cities, the trade-unions, the Labor Exchanges, and the Health Committees. The post-office has gradually grown to be the great general utility department in British execu- tive government. It is the one department that is worked at a profit. Its activities extend not only to the mails, but also to the telegraphs, telephones, savings-banks, life-insur- ance, annuities, and stock-broking transactions; its aid has also been invoked and obtained for the Labor Exchanges; and now its elasticity is to be demonstrated by its method of handling the new responsibilities with which it is to be intrusted. For the first time the Friendly Societies and the trade-unions are to be called in as allies of the Government. COMPULSORY IXSURAXCr: 205 Many dread the results for the smaller Friendly Societies. With regard to the trade-unions it is remarkable that, while some labor leaders fear their efficiency as protectors of their members will be impaired, some capitalists dread that the public funds they administer may, in some bafflingly elu- sive manner, be made to supply contributions to the war- chest in the battle between capital and labor. Neither con- tingency, it should be added, is'apprehended by Mr. Lloyd George. Survey. 27: 1306-12. December 2, 191 1. Struggle for the British Health Bill. Randolph J. Brodsky. Aside from its scope, embracing the vast majority of the working population of the British Isles, and taking in not only the care but the prevention of disease, the bill is pe- culiarly interesting in that it makes skillful use of existing English agencies together with new administrative institu- tions patterned on the German experience; and that it comes at a time when the problems of poverty and industrial stag- nation have become acute. When the bill was introduced in Parliament last May by Lloyd George, chancellor of the exchequer, it met with spontaneous approval, the Opposi- tion uniting with the Government in its support. Gradually, however, the full significance of each provision became clear to the various interests that would be afifected, and difficul- ties arose for adjustment. Friendly societies which main- tained cooperative drug stores came into conflict with the pharmacists who, under the bill, were given the right to dispense all medicines. The hospitals claimed that the bill would increase their cases and that the insurance rates would deprive them of many voluntary contributions from working people and employers; therefore they demanded state payment for in-patients, as well as exemption from payment for their own employes. Householders and farm- ers also demanded exemption. Suffragettes and represen- tatives of working women complained of the inferior terms under which the benefit would be paid to women — in return, 2o6 SELECTED ARTICLES ^ it is true, for a lower contribution. Insurance companies operating among industrial populations and fearing that the bill might cut down their business asked to participate in the insurance system. Small societies objected to the 10,000 membership limit set in the first draft of the bill. Employers felt that the whole community should share the burden. Though the Labor party as a whole supported it, a minority in that body, as well as the Dockers' Union, the Social Democratic Federation, and the Anti-Sweating League, opposed the contributory features and the treat- ment of poorer insurers vigorously. The Irish labor unions contended, as a matter of course, for home rule. The chancellor, for many years president of the Board of Trade and a skilled arbitrator, mollified these and many other opponents. A greater difficulty was, however, en- countered in satisfying the claims of doctors and friendly societies. A preliminary review of the Insurance Bill is essential to a discussion of the claims of the critics, particu- larly of these two groups. Lloyd George's health scheme, which was framed with the co-operation of the friendly societies, covers sickness, invalidity, and maternity. Out of a total wage-earning popu- lation of 19.000,000, 14,000,000 persons are to receive its health benefits as compulsory insurers. These fourteen mil- lions include all working persons under sixty-five years who are in receipt of an income not exceeding $800 a year, with the exception of those working on their own account, wives working for their husbands, casual domestics and workers, commission agents working for more than one employer, and pensionable government employes. Sailors and soldiers are to be covered by a special fund. In addition to the com- pulsory insurers, special provision is made for voluntary insurance, which will probably take in some 850,000 persons, the majority being wives of compulsory insurers. On her marriage a woman's contributions while compulsory insurer are returned to her. Those insured under the compulsory scheme are divided into two groups, members of approved societies and post COMPULSORY INSURANCE 207 office or deposit contributors. Under the term "approved society" come trade unions, clubs formed of policy-holders of industrial insurance corporations, and friendly societies. These approved societies must be self-governing organiza- tions, not on a profit-making basis, w^ith membership large enough to secure against risk, and must provide medical treatment and money benefits. Employers' benefit funds are allowed in this group under certain conditions. They must, however, be in a position to grant the minimum benefit for the statutory contribution. Any member is, however, given the right to transfer his subscription and his employer's share with it to any ordinary society, if he desires to do so. The principle of self-govern- ment remains, but the employer is allowed one-fourth rep- resentation in the management of the society, if he makes himself responsible for the solvency of the fund. The re- quirement as* to a minimum number of members is not ap- plied to employers' funds. It has been estimated that 12,000,000 persons, or 86 per cent of the insured, would be members of approved societies existing or created. Those who do not wish to join benefit societies or who are disqualified for membership by physical, mental, or moral defects constitute the post office or deposit contributors. This class, which will number some 900,000 persons — -14 per cent of the insured — represents low risks, that is, high morbidity and mortality rates. Special precau- tions have therefore been taken against possible depletion of the treasury. The post office depositor is deprived of in- validity insurance. His waiting period for the sick and medi- cal benefit is prolonged and under ordinary conditions the sick benefit he is allowed to draw must not exceed the amount of his deposits. Under certain conditions, however, the local health committees who administer the benefits of this group of insured may, with the consent of the treasury or the local authority, enlarge the benefits of post office de- positors by spending more money than the actual amount of the contributor's deposit upon medical treatment, the treasury and local authorities each defraying one-half the 2oS SELECTED ARTICLES additional expenditure. The arrangements for post office contributors are tentative for three years. The minimum sickness benefit obtained for these contri- butions is los. a week for men and /S. 6d. for women, to begin after the fourth day of illness and continue for thir- teen weeks. Those paying lower than 4d. contributions re- ceive correspondingly lower benefits. If illness continues after this time 5s. is provided for the following thirteen weeks. Invalidit}' benefit begins at the twenty-seventh week and continues at the rate of 5s. until the patient is eligible for an old-age pension. A maternity benefit of 30s. is to Ije paid to the wives of insured men or to unmarried mothers who are insured. This latter benefit will be paid to some- thing like a million mothers annuall}'. Besides money pay- ments the insured will receive free medical attendance and medicine, and sanatorium care in cases of tuberculosis or certain other specified diseases. A comparison of the English with the German system shows the English bill to be more advantageous to the insured in that the workman bears a smaller proportion of the expense and has the entire administration of the funds. The employer bears a larger share of the financial burden and the government contributes not merely as in Germany to the invalidity fund but to that for sickness as well. The maternity benefit is on a basis far wider than that of Ger- many, where it is so hedged about with restrictions as to reach comparatively few. The estimated annual cost of this maternit}^ benefit in the British Isles will be £1.500,000; in Germany, with a population almost half again as large, it is onlj' £300,000. The cost of management will be reduced to a minimum by the method of collection through existing approved organi- zations. The method of collecting contributions, the most vital part of a compulsory plan, is simple. The workman obtains from his friendly society or the post office a card issued by the Insurance Commissioner. To this his em- ployer attaches each week stamps to the amount of the workman's and his own contribution, the former being held COMPULSORY INSURANCE 209 back from wages. At intervals these cards are cashed-in to the insurance office l)y the societies. The sums paid for stamps, together with the contribution of the government, form the national health insure fund. The greater part of this fund will, on the plan of the German Sick Funds, which have in this way cut down their sickness rate, be invested by the National Debt Commisioner in loans for sanitary hous- ing. The friendly societies retain the right to invest the workmen's own contributions. Sanitary housing is one side of the health campaign; the general work of preventing and caring for disease is the other. This is entrusted to local health committees, bodies which will supplement the work of already existing health authorities. Their special functions will be the administra- tion of the funds for medical care and sanitation and the conducting of an educational campaign. More important still, they will have the power to demand a public inquiry in cases of excessive local sickness due to neglect of public health, factory, or housing acts. If the case is proved against a local authority, that authority will have to reimburse the insurance fund through the societies or, in the case of post office contributors, through the health committee, for any expenses it has incurred — reimbursing itself in turn from the local property owner at fault, if the fault is a private rather than a public one. This system will mean also the accumu- lation of invaluable records of public health and the auto- matic revelation of "black spots" to be cleaned out. The sphere of action, the powers, and the influence of the local health committees being from the beginning so large, and subject to such indefinite extension, their personnel will be of immense importance. The friendly societies and the medical profession are to be included, besides representa- tives of county or borough councils and the post office contributors. General supervision of the insurance system will be entrusted to a Board of Insurance Commissioners — with a central office in London and branches throughout the country — aided by an advisory committee of representatives of employers' associations, approved societies — including 210 SELECTED ARTICLES trades unions as a balance to the employers' representatives — physicians, and other experts chosen by the commission. Women are eligible for membership in all committees. The expenses of the Board of Commissioners will be met out of the national exchequer. Such is the National Insurance Bill. Some idea of the number of its critics has already been given. It has been strongly objected to both in principle and in detail. The basic contributory plan has been attacked by the group of representatives spoken of above, who, using the metaphor of the dog who fed upon its own tail, claim that the worker pays both his own and (in enhanced price as consumer) the employer's contribution. They say further that the contrib- utory system renders the insurance almost useless to the poorest class of workers, who need it most, and who receive back only what they give. The full benefits of the system go, they hold, only to the well-paid workers, who need them least. Other critics object to the total exclusion of the mar- ried woman from the compulsory plan. Others again object to the age limit of sixty-five for admission to the system, which leaves an interval of five years during which an aged person is eligible to no state assistance. This latter dif- ficulty, it is expected, will be met by lowering the inferior limit for old age pensions by five years. Lack of funds and difficulties of administration will make it necessary to deal with the other problems by later legislation. The believers in the bill point out that when the accrued liabilit}^ due to the flat rate system of contribution is met, large sums will be released for extending and perfecting the system. After this period of debt is passed the plan is to increase maternity, sickness, and invalidity benefits. Besides this in- crease in existing benefits, the government contemplates add- ing new ones, such as free medicine for dependents and a benevolent fund for members in economic distress, and ex- tending and improving the whole public health system, so as to make it an integral part of the Liberal scheme of social legislation, which is planned to cover all contingencies, from accident to old age, that befall the working man. COMPULSORY INSURANCE 211 Two serious protestants the government had to deal with. Both are essential parts of the mechanism of the national insurance system: the friendly society because the whole work of organization and management of sick benefit is left in its hands; the medical profession because it is called upon as part of a public scheme to administer medical treatment to some 14,000,000 people. How important complete har- mony and close co-operation between these two elements is, is shown by the German experience, where their quarrels have seriously handicapped the system. From the very in- troduction of the English bill fears were entertained of a possible collision, and, when the clash actually occurred, the excitement was communicated to the general public, which watched with curiosity the struggle between common friend- ly society man and "gentleman" doctor. Under the bill the friendly society or trade union is promised state aid, is guaranteed a steady and increased business through a com- pulsory plan that will give it stability and permanence. It is presented with a reserve fund and, if it already possesses reserves of its own, it will be enabled to reduce contributions for the same benefits or increase benefits for the same sub- scriptions. It will prosper, but at the price of partial re- nunciation of the self-government principle and certain other privileges. From now on the government will stand between the friendly society and the individual member; from now on the friendly society becomes an "approved" society; it sub- mits itself to the supervision, regulation, restriction, and reorganization desired by the government. From now on it will be obliged to make regular valuation of its assets and liabilities and will be restricted in its right of investing its sickness benefit funds. None of the friendly society activi- ties except these sickness funds will, however, be affected. In respect to one form of society, the trade unions, it is estimated that the insurance will mean a donation of some $12,000,000. At the publication of the bill the friendly socie- ties showed a rather sympathetic attitude toward it. They became, however, more reserved when Parliament, under the pressure of the insurance interests represented by the eighty 212 SELECTED ARTICLES directors of insurance companies who sit in the lower house, extended the definition of approved society so as to include in the scheme the industrial insurance companies and col- lecting societies, and permitted them to form sick clubs of their policy-holders. These profit-making institutions the friendly societies viewed as dangerous and unfair competi- tors. They feared that industrial corporations, with their hordes of paid agents and solicitors, would soon crowd them out; that high officials and agents, and not the policy-hold- ers, would administer the business; that there would be an end of the self-government principle guaranteed by the bill. Finally, when Parliament, persuaded by the interests rep- resented by the British Medical Association, made changes in the bill that deprived the friendly societies by the stroke of a line of the power of making their own arrangements to secure efficient medical treatment and transferred this power to the local health committee, they began to manifest a feeling of hostility toward the bill and of distrust towards its framer. They saw themselves with their traditions of self-government, mutual help, and social intercourse in un- equal competition with the insurance companies' sick clubs, in no sense democratic but governed by the company of- ficials; and they saw their whole medical system passing out of their hands into those of the doctors and the health com- mittees. The additional money advantage to their members did not balance the danger to their social and democratic traditions. At a special convention of the National Confer- ence of Friendlj" Societies, they formulated a series of mini- mum demands and sent an ultimatum to the chancellor to the effect that unless their demands were granted they would repudiate the bill and refuse the administration of the act. Among these demands, the restitution of their control over the medical treatment of their members occupies the most prominent place; and on this issue — "the free choice of a doctor" — the battle was concentrated for several months. So m.uch for the Friendly Societies' side. In transferring the administration of medical l^enefit from the approved socict}' to local healtli committees. Parliament COMPULSORY INSURANCE 213 expressed its belief in the principle of individual choice of a doctor. It decided that, in the interest of the individual member who may become ill, from considerations of efficient and economical administration and general health, it is de- sirable that the whole question of medical benefit should be turned over to local health committees. The later will main- tain an approved local list of doctors whom the local con- tributors may freely choose instead of being forced to use the "club" doctor employed on contract by the friendlj' so- ciety or pay, in addition to their dues, for a physician of their own choice. The class of "soft" doctors, wjio are will- ing to give certificates to malingers and cause the depletion of the society treasury, can be held in check, the adherents of this plan maintain, by their own profession, which will pro- tect itself and the scheme bj' organizing watch committees. The daily experience of club treatment shows that the mem- bers often do not take advantage of the right to the attend- ance of the club doctor, but prefer to pay for a doctor of their own choice. The doctors' side of the question remains to be consid- ered. Doctors have hitherto accepted contract practice, with friendly and other societies, partly in order to get a start in life, partly to obtain experience, and often because, although in good practice, they were willing to do the work from al- truistic motives. In many places, indeed there has been no "doctor difficulty." the friendly societies treating the doctors reasonably and considerately. But under a scheme nation- wide in application the doctors were faced with the proposi- tion that an engrossing share of their practice would become contract practice at a rate of pay which they held would be unremunerative. If the greater part of a physician's prac- tice was to be turned into club practice, they claimed that a much higher rate per head would have to be charged. The chancellor agreed to fix this rate at 6s. per capita, without the medicine, as against the 5s., 4s.. and even 3s. contract doctors have been accustomed to receive from friendly so- cieties. The final question at issue between doctors and friendly 214 SELECTED ARTICLES societies was the control of the local health committees, and to their demand for a majority on these bodies the societies were determined not to yield. In this fight the Opposition, the Conservative party, took the part of the societies. Afraid, to the minds of the Liberals, to attack the bill openly, and at the same time fully conscious of the fact that, if passed, it would establish a monument to the present Government, the Conservatives deemed this the proper moment to retard the progress of the bill. "Willing to wound, but afraid to strike," they, in the words of Lloyd George, "gave a yap and then said to friendly societies and trade unions, 'You go at it.' " Their press recorded painstakingly the slightest manifesta- tions of dissatisfaction — "revolt." they called it — from friend- ly society, labor man, socialist, suffragette, hospital officer, or private individual. They dwelt upon the unpopularity of the bill, the complexity of the situation, the inadequacy and un- ripeness of the bill, and finally went so far as to urge its withdrawal. Disappointed that the old-age pension bill stood to the credit of the Liberal government, they sought to block further social legislation by the party in power. For a time, this taking the bill into politics seriously endan- gered it, but gradually the situation cleared. The election results in Kilmarnock, where the campaign was conducted and won on the issue of the insurance bill, brought some re- lief and encouragement in Government circles, as did the effect on the public of Lloyd George's speech on the bill at Whitefield's Tabernacle on October 14. In this address Mr. Lloyd George presented the strong features of the bill, re- vealed the intrigues and the misrepresentations of the Oppo- sition, and carried with him the audience and the general public by the declaration, "I will fight through or fall." To clinch this victory there appeared at this time a Report on Trade Unions Under the Scheme, prepared by an actuary of national standing, on behalf of organized labor, which point- ed out, to the surprise of the labor unions themselves, that they would derive great advantages from the act. Soon after Ramsay MacDonald, M. P., chairman of the Labor party, made a public statement to the effect that the Labor COMPULSORY INSURANCE 215 party had passed a resolution in support of the insurance bill. He promised that all his intiuence would be used to aid its passage and stated that opinions contrary to the bill were held by but two or three members of the party. In the meantime the chancellor was using his influence to bring the two chief conflicting interests to terms. He brought the friendly societies to the point of attending joint meetings with representatives of the medical profession, at which both sides made some concessions. On October 19 a great meet- ing of all friendly societies was held, at which the leaders surprised the audience by announcing tliat the chancellor of the exchequer had conceded nine out of their original eleven demands, and by moving a resolution in support of the bill, which was carried. The important concessions were: the right of investing their own funds; the right of self-govern- ment for the sick clubs of insurance companies; and, most important of all, the right to appoint the majority of repre- sentatives on local health committees. Survey. 24: 136-9. April 23, 1910. Accident Relief of the U. S. Steel Corporation. The United States Steel Corporation has announced a plan for relief of men injured and the families of men killed in work accidents. The plan is a distinct advance over any existing system of relief carried out under any of the consti- tuent companies; it puts all the employes of the biggest pay- roll in America — 225,000 men — on the same footing, and it establishes a system which can be adjusted to the new legis- lation that will probably be enacted in the next ten years in the different states in which the corporation operates. In more wa}'S than one, then, the new plan, which will go into effect May i for an experimental year, is a step in ad- vance. The exact provisions are published below. While some of them do not measure up to the proposals made by the various state commissions which have been considering the subject, many of them are a radical departure from con- 2i6 ' SELECTED ARTICLES temporary practice, and as a voluntary act show both fore- sight and liberality. The plan disregards the idea of negli- gence entirely and may be said to recognize that a share of the income loss due to work accidents should be a charge on the industry; it covers hazardous and non dangerous em- ployments alike; it puts the entire cost of the plan on the business without any contribution whatsoever from the men. No relief will be paid if suit is brought. It naturally re- quires a release from legal liability upon payment of the re- lief, but it avoids the involved and questionable relationships created by such relief associations as, for instance, the Penn- sylvania Railroad Relief Department to which, like a mutual insurance association, the employes pay dues, and from which they can receive no benefits from their dues until the}- sign a paper releasing the company from any legal liability. The Steel Corporation makes a point in its announcement that the payments it proposes are '"for relief and not as compensation." "There can be no real compensation for permanent injuries, and the notion of compensation is neces- sarily based on legal liability which is entirely disregarded in this plan as all men are to receive the relief, even though there be no legal liability to pay them anything. . . ."' In line with this position, there are no death benefits for single men and extremely low disability benefits for them. Large numbers of immigrant laborers fall in this class. Moreover, in death cases the wording of paragraph 24 specifies that relief will be granted "married men living with their fami- lies." This would exclude the non-resident families of aliens, unless the manager of the relief sees fit to exercise his discretionary power in their favor. But it is under- stood that wide latitude has been left the company managers in cases where single men have old people or others demonstrably dependent upon them. The death bene- fit for a married man is eighteen months' wages and this is increased ten per cent for every child under sixteen; an adjustment of relief to need which is noteworthy. The plan includes medical and hospital treatment. It is a statement of a consistent policy which will give the man who goes to COMPULSORY INSURANCE 217 his work in the morning a fair knowledge as to what will happen in case he is killed. Much of tlie ill name of claim departments in all industries in years past has been due to the incentive to claim agents to "make a good showing" by keeping down awards. Here definite standards are set. The most serious question raised by a first reading of the prospectus of the plan is as to the sufficiency of the benefits provided. In comparison with the three years' wages, which is the death benefit under the English system, and the four years' wages proposed by the New York State Commission, the Steel Corporation announces eighteen months' wages for a married man in case of- death. By a sliding scale this is increased with an increased number of children and with length of service in the company. Yet the family of an employe of ten years' standing with five children would still get but two and one-half years' wages. If such a man were temporarily disabled, however, he would get eighty-five per cent of his weekly wages as against the flat rate of fifty per cent for all disabled men under the New York bill. The highest injury benefit specified in the Steel Corporation's announcement is for the loss of an arm — eigh- teen months' wages. The highest benefit for permanent dis- ibility under the proposed New York state law is half wages for eight years; that under the English law is half wages for life. But here again the discretion of the company managers enters in, and in the case of loss of both limbs or other more complete permanent disability, larger amounts would doubtless be paid. At several important points, therefore, the plan is flexible and results will be dependent upon the spirit in which the company managers carry out its provi- sions. It would be impossible to forecast these practical workings of the plan until after it has had at least the year's trial and until detailed statements are available as to the nature of injuries and actual benefits paid. The minimum provisions for death in the case of married men are in them- selves higher than were the average benefits paid by any large employer in the steel district the year of the Pitts- burgh Survey. 2i8 SELECTED AkxiCLES Nor is it likely that the Steel Corporation will know either the cost of the new policy or its acceptability to its employes earlier than after such a probationary year. The corporation has been able in the past to settle most cases out of court, yet the new plan may effect economies in gathering legal evidence, etc. Such a large plan of relief would scarcely have been attempted were it not for the energetic measures to lessen accidents which have been car- ried out in the plants of the constituent companies during the last two years. From the managers' standpoint, the plan has merit in its probable attraction to the men — a consider- able point in keeping intact a non-union working force. From the public standpoint it is widely significant that the operat- ing corporation, which has probably the largest accident ex- perience in America upon which to base its plan, and which has spent a million dollars a year on accident payments in the past, should adopt a plan which it describes as "similar in principle to the German and other foreign laws and to recommendations which have been made by employers' lia- bility commissions in New York and other states since our work upon this plan was begun (December, 1908)." Quarterly Journal of Economics. 24: 714-42. August, 1910. Old Age Pension Schemes : a Criticism and a Program. F. Spencer Baldwin. The establishment of old age pension systems in many states is a striking phase of the growth of social legisla- tion during the last two decades. Germany led the way in 1889, with the first old age and invalidity insurance law. Denmark instituted a system of old age out-door relief in 1891. Next, three of the Australasian colonies of Great Britain established old age pension systems, — New Zea- land in 1898, New South Wales in 1900, and Victoria in 1901. Meanwhile Belgium had adopted a system of old age insurance and pensions in igoo. France and Italy also later introduced special measures of old age relief, modeled COMPULSORY INSURANCE 219 after the Belgian system. In 1908 the Commonwealth of Australia enacted an invalidity and old age pension measure to go into effect July i, 1909; the Canadian parliament passed a law providing for the issue of government annui- ties ; and England adopted the old age pension act to go into efifect January i, 1909. The French senate has re- cently passed a measure of obligatory and contributory old age insurance. Projects of legislation with reference to this question have been under parliamentary consideration in Austria, Norway, and other European states. This widespread movement has been prompted by mixed motives; humanitarian and economic -considerations have worked together in its support. The former were upper- most in the minds of the pioneers of the movement. The men who first directed public attention to the problem of old age provision in England, about a generation ago, were philanthropists who desired to reduce the volume of human misery. They were shocked by the extent of old age pauperism. They proposed that a pension system be estab- lished as a means of taking aged workers out of the alms- houses and enabling them to spend their last years in self-respecting comfort. Later, the humanitarian motive was reinforced by economic considerations. The changing conditions of economic life forced the problem of indus- trial superannuation upon the attention of employers. The increasing use of machinery and the growing stress of competition demanded the retirement of workers at an earlier age. Employers have come to recognize that the aged worker is a burden on industry; his retention in active employment after he has passed the limit of his efficiency means economic waste. The establishment of pension sys- tems has, therefore, been proposed as a means of retiring employees at a reasonably early age and removing this handicap on industry. The various plans for the solution of the problem of old age support which have been tried or proposed involve widely different principles and methods. The first issue that arises in passing upon principles and methods of solu- 220 SELECTED ARTICLES tion is, should the plan be contributory or non-contributory? That is should the expense be borne in whole or in part by the beneficiaries, in the form of contributions to pension or insurance funds, or should the cost be defrayed entire!}^ by the State, through general taxation? If the contributory principle be chosen, then the further question arises, should participation in the plan be compulsory or voluntary? That is, should individuals be left entirely free to take advantage of the system of pensions or insurance provided, or should they be compiled to participate in the scheme? If, how- ever, the non-contributory principle be chosen, the matter of compulsion becomes irrelevant, because it is evident that every one who really needed such aid would apply for a pension under any non-contributory system. Finally, whether the plan l)e contributory or non-contributory, this further question comes up for consideration, should the in- surance or pension scheme be universal or partial? That is, should the benefits be extended to all without restric- tion, or should they be confined to those who meet specified conditions of eligibility? Proceeding further with the analysis — from principles to measures — we may group the various plans of old age pensions, insurance, or annuities under six main types: (i) Universal A^ on-contributory Pension Schemes. This type of scheme is associated with the names of Charles Booth of London and the late Edward Everett Hale of Boston — the most prominent advocates of universal non- contributory pensions. The scheme of Mr. Booth calls for the grant of a pension of 7s. a week to every person 70 years of age and over. Mr. Booth would exclude aliens, and possibly other ineligibles, from the benefits of the pension system, but remarks that it is unnecessary to bur- den the statement of his scheme with these details. Practi- cally, the plan is universal in its application, and is wholly non-contributory. Any person claiming to be 70 years of age and entitled to a pension would take out an appli- cation. If the application were allowed, the pensioner would then be .provided with a certificate of identity and a pen- COMPULSORY INSURANCE 221 sion book, whicli would enable him to draw his allowance weekly at a local post office. The plan proposed by the late Edward Everett Hale was similar to that of Mr. Booth. Every citizen, man and woman, over 69 years of age was to be paid a pension of $100 a year. The cost of this scheme was to be met out of the proceeds of a State poll tax. It was Dr. Hale's opinion that, if the expense of a pension scheme were provided for in this way, the citizens who paid a poll tax would feel no discredit attaching to the receipt of a pension, since they would themselves provide the funds out of which the pensions would be paid. (2) Partial A^ on-contributory Schemes. This type of scheme is embodied in the old age pension acts of Great Britain and Australia. The application of the British and Australian systems of old age pensions is restricted to the deserving aged poor. The British act provides for the payment of pensions, not exceeding 5s. weekly, to persons 70 j'ears of age and over, but excludes from the benefits of the scheme the following classes: persons who have lived in the United Kingdom less than 25 years; persons whose yearly incomes exceed £31 los. ; persons in receipt of poor relief; persons who have failed to work accord- ing to their ability to maintain themselves and their de- pendents; inmates of lunatic asylums; and persons con- victed of a prison offence. The scheme is wholly non- contributory, the expenses being paid out of "money pro- vided by Parliament." The Australian system is similar in principle to the British plan, the main differences being that the pensionable age is lower, namely, 65 years, and that the amount of the pension is larger, namely, los. per week. (3) Caupers. It is not difficult to understand why poor relief ex- penditure fails to be diminished by the establishment of a pension system. In the first place, a pension system hardly touches the mass of the almshouse population. The ma- jority of inmates of pauper institutions are there not be- cause of poverty alone, but because of disease, infirmity, or affliction, which necessitates institutional residence. The grant of a pension will not take such persons out of the institutions. It appears, for example, that about 92 per cent of the aged almshouse population in Massachusetts are incapacitated in whole or in part. This incapacity is found to be result of sickness in 71 per cent of the cases, of accident in 15 per cent, and of old age in 32 per cent. Futhermore, it appears that less than 8 per cent of the aged almshouse inmates have relatives living who are able or willing to help support them. In the second place, the more liberal policy of dealing with the aged under a gen- 226 SELECTED ARTICLES eral pension system reacts also on the methods of pauper relief. The effect is to promote larger expenditure for charitable purposes. The pension system sets the pace for a more generous administration of the poor laws. Finall}% the tendency of a pension system is to cultivate in the population at large a disposition to rely upon the State, and to take advantage of opportunities of public assistance to the utmost degree. The individual relaxes his effort to make independent provision for himself. The spirit of self- reliance, self-support, and self-respect tends to decline. Mr. C. S. Loch, secretary of the London Charity Organiza- tion Society, in commenting upon the recent tendency of pauperism to increase in Great Britain, remarks: "The evidence is ample that it is due to that public opinion which of late years has minimized the evils of State dependence and the responsibilities of family obligation, and has ad- vocated schemes for old age pensions and other measures that cannot but tend to weaken the sense of social duty and lower the standard of personal independence in the com- munity." With respect to the efifects of partial non-contributory schemes on wages, on character and efficiency, and on family, in the absence of conclusive evidence it is possible only to lay down certain a priori generalizations. It seems clear that the grant of pensions by the State, without contributory payments on the part of the bene- ficiaries, must tend in the long run to lower the rate of wages. In the first place, the effect of pension subsidies granted by any state must be to attract wage-earners from outside, and thus to crowd the labor market, at least for a time. Even if a period of residence were required as a condition of participation in the pension system, its existence would, nevertheless, operate to some extent as an inducement to workers to take up their residence in the pensioning state. This could hardly fail to react unfavorably upon the wage rate. It is true, to be sure, that this artificial stimulus to immigration would in time be diminished in proportion to any reduction of the wage rate which attended the operation of the pension system; but in the beginning there would un- COMPULSORY INSURANCE 227 questionably be an inducement to influx of workers into the pensioning state. Furthermore, the direct competition of the pensioned aged workers would tend somewhat to depress wages. Clearly, if a part of the workers in any employment are pensioned by the State, they can, if they choose, underbid competitors who are not in receipt of such aid. The force of this influence depends largely upon the age at which pensions are granted, and the amount of the pension given. In the case of a pension system that provided liberal pen- sions at an early age, the effect on wages would be marked. Obviously, a pension of $500 a year to all workers over 50 years of age would affect the rate of wages most unfav- orably in the manner described. If, however, the pension- able age were fixed at 70, the liability of depression of the wage rate through the competition of pensioned workers would not be considerable, especially if the amount of the pension were small, as in the existing pension schemes of European countries. This direct competition of the pen- sioned workers is probably a negligible factor so far as the existing systems of old age pensions are concerned. Far more serious in its effect on wages would be the re- flex competition, as it may be termed, created by the pen- sion system. This is the influence of the prospect of a State subsidy in old age in relation to the wage require- ments of adult workers in general. If the State granted gratuitous pensions for old age, this fact would doubt- less be taken into account by workers, and the rate of wages that they would demand or require would be reduced correspondingly. That is to say, the prospect of a State subsidy would reduce the need of individual saving; wage- earners, not being under the necessity of making full pro- vision for old age, could afford to work for lower wages. In short, the amount of the pension would be discounted in advance by the workers in their competition for employ- ment. Finally, the effect on wages of the tax burden imposed by a pension system, must be taken into account. The 228 SELECTED ARTICLES taxes to defray the expenses of a non-contributory pension system, or of a subsidized pension or insurance scheme, would, in the first instance, fall largely upon the industries of any State adopting such a plan. It is clear that the manufacturers would make an effort to shift this burden, so far as possible, upon consumers or upon employees, in the form of higher prices or lower wages. The former course would be practically impossible in the case of industries subject to interstate competition. The general tendency, then, would be to lower wages. The liability of a depression of wages through indirect competition, as it has been termed, appears to be the chief consideration here. Of course, .the extent of the re- duction of wages that might be brought about through this influence woxild depend upon the provisions of the pension sj^stem, especially upon the amount of the pension and the conditions of eligibility. It is clear, for example, that if large pensions were provided for all aged persons, without any restriction whatever as to eligibility, the ef- fect must be to lower wages to a marked degree. With pensions of small amount and with stringent conditions of administration, the effect upon the wages would be less marked; but even then the prospect of pensions would doubtless operate as a barrier to advances of wages which otherwise the working class might obtain. It is to be feared, therefore, that the establishment of a subsidized pen- sion or insurance system would stand in the way of realiza- tion of the ideal of an adequate living wage. If the State undertakes to support aged workers in whole or in part, the effect must be to lower proportionately the actual or potential rate of wages in the pensioning State. The influence of a non-contributory pension scheme up- on character and efticiencj' would undoubtedly be as un- favorable as the effect upon wages. The motives and en- ergies of self-help would be weakened by this form of state help. The assurance of public support in old age unattended by any degree of discredit attached to its ac- ceptance would lead wage-earners to relax their efforts to COMPULSORY INSURANCE 229 make independent provision for their declining years. It would weaken the incentives to individual saving. This seems so obvious that it is surprising to find amoung pro- fessional economists anj- dissent on this question. Professor Henry R. Seager, however, not only denies that a non- contributory pension scheme will discourage saving, but goes even further and contends that it will have the posi- tive effect of quickening the development of that spirit of independence and self-help, which lies at the basis of all true progress. "The new policy," he believes, "far from dis- couraging thrift and foresight, will tend on the whole to encourage them." This prediction seems opposed to the common habits and usual tendencies of human nature. The thrift habit is not instinctive and universal; it is the rare product of care- ful training. It is extremely hard to build up and very easy to break down. The aim of modern poor law reform has been to cultivate this habit by penalizing unthrift and stigmatizing dependency. The enactment of the British old age pension act of 1908 means abandonment of this ap- proved policy of conserving thrift, and reversion to the dis- credited methods of general out-door relief. The gravest consequences are to be apprehended from the change. It threatens disaster to voluntary agencies for the encourage- ment of saving, such as the friendly societies. The un- fortunate influence of the pension system upon these or- ganizations was the subject of serious discussion at the recent annual meeting of the friendly societies. The gen- eral expectation that the old age pension system will soon be supplemented by state insurance against sickness and accident has -operated to the further disadvantage of the friendly societies. It needs no argument to show that this check to the growth of voluntary thrift agencies is a most serious evil, moral as well as economic. In general, moreover, the new pension policy must exert an enervating and demoralizing influence upon character, lessening the sense of personal responsibilitj' and self-reliance, and sap- ping the foundations of individual initiative and ambition. 230 SELECTED ARTICLES A non-contributory pension is simply poor relief in disguised form. The acceptance of such a dole is hardly compatible with a vigorous spirit of self-supporting and self-respecting independence. In a similar way, the non-contributory pension policy would weaken the bonds of family solidarity. It would take away, in part, the filial obligation for the support of aged parents, which is one of the main ties that hold the family together. The supporters of this policy deny that this result would follow. They contend that, on the con- trary, their plan would strengthen the family institution; they reason that the payment of small pensions to old per- sons would help to keep families together by making it possible for the children to retain the aged parent in the household in view of the addition that his pension would bring to the family income. While this might be true in individual cases, it can hardly be doubted that the gen- eral effect on the family would be disintegrating. The as- sumption by the State of the obligations to support the aged in their homes would undermine filial responsibility, precisely as the guarantee of public maintenance of children would destroy parental responsibility. The impairment of family integrity is, in fact, one of the most serious dangers threatened by recent experiments with non-contributory pensions. (2) The comjjulsory insurance system of Germany pre- sents a direct contrast to the non-contributory pension schemes of Great Britain and her colonies. The latter are based on the principle that the obligation to support the aged rests upon the state, and that the superannuated worker may claim a pension of the State as a right, not as a charity. The German plan is founded on the opposite principle that the obligation to provide for old age rests upon the indi- vidual, and that the State should enforce the performance of this duty and at the same time facilitate the required provision for old age through the compulsory co-operation of employers and the payment of state subsidies to the in- sured. COMPULSORY INSURANCE 231 The German system of compulsory insurance has been in operation long enough to demonstrate to some extent its social effects. In the main, the results must be pronounced satisfactory. The plan is unquestionably the most effec- tive and successful scheme of old age support now in exis- tence. The attitude of public opinion in. Germany toward the compulsory insurance laws is generally favorable. Recent testimony as to the successful working of the sys- tem is furnished by Mr. Frederick L. Hoffman, statistician of the Prudential Insurance Company, who in the summer of 1909 visited Germany and studied the operation of the compulsory insurance laws. Mr. Hoffman states; "There is much discontent with the administration of the in- surance laws, but tlie system itself is so well thought of that repeal of the law is out of the question. There is no dissenting opinion, even on the part of life insurance managers, that government insur- ance has resulted in far-reaching reforms, that it has been of vast benefit to the people and to the nation at large, and that it has come to stay. . . . The interests of capital and labor have certainly been harmonized remarkably in Germany, and, speaking from personal observation extending over a generation, the con- trast of to-day with the past is truly marvelous. How far gov- ernment insurance has had a share in this progress it is of course impossible to say; but all with whom I have discussed the subject are but of one mind. — that the effect, on the whole, has been decidely for good. It is admitted that the system has not l)rought industrial peace, and that the socialists were never so powerful as they are to-day; it is conceded that there is much complaint and much discontent; but the evidence otherwise is superabundant that the skilled German workman in the large cities is decidedly well off in a material way, that he , is well housed, well fed, and on the whole well paid." A ftirther extension of old age and invalidity insurance to include adeqtiate provision for dependent survivors in case of the death of the insured, is proposed in the draft of a new law submitted by the Chancellor to the Bundes- rath, in April, 1909. This law also co-ordinates the various branches of the insurance into a complete system that will furnish protection to the working-man in all the emergencies of life, except unemployment. This contemplated extension of the system is in itself evidence of its generally satisfac- torj' results. The effect of compulsory insurance on the extent of pauperism and the expenditure for poor relief in Germany can not be statistically determined. Whether the establish- ment of the system has resulted in diminution of pauper- 232 SELECTED ARTICLES ism and reduction of the financial burden of poor relief, or the reverse, has been much discussed. Professor Henry W. Farnam, who has made an examination of statistical data and other information bearing on this question is of the opinion that the burden of poor relief has not been dimin- ished in consequence of the insurance laws. Recent data relating to the effect of compulsory insurance on poor relief expenditure were obtained by Mr. Hoffman in the course of his recent investigation of the insurance laws. He made inquiries on this subject in Berlin, Cologne, and other Ger- man cities. The burgomaster of Cologne was emphatic in the opinion that the insurance system had materially re- duced the poor law expenses of that city. But the figures of per capita cost of out-door poor support in recent 3'ears do not sustain this contention that government insurance has reduced pauperism in Cologne. The per capita cost increased from 5.07 marks in 1897 to 5.56 marks in 1902 and to 6.38 marks in 1907. The net cost to the city, exclusive of income from funds invested for charitable purposes, was 3.42 marks per capita in 1897, 4.32 marks in 1902, and 5.29 marks in 1907. Again, the President of the Imperial Insur- ance Office in Berlin is quoted by Mr. Hoffman as express- ing the opinion that a decided and general reduction of poor relief resulting from government insurance cannot be statis- tically established. Finally, Dr. Emil Miinsterberg, the most eminent European authority on poor law administration, is cited by ]Mr. Hoffman as expressing agreement with this opinion. It is argued, however, that the primary intent of the insurance system is not to reach the pauper class, but rather to conserve the economic resources of the real wage-earning population, and to keep its members from becoming a burden upon chanty in sickness, accident or old age. This object the insurance laws have unquestionably accomplished. Regarding the effect of compulsory insurance upon wages, it is more difficult to generalize with confidence than in the case of non-contributory pensions. So far as the State pays subsidies to the insured, the tendency is doubtless to COMPULSORY IXSURANCE 2^:^ cause a proportionate reduction of wages; these subsidies are discounted in the competition of the labor market, just as would be non-contributory pensions. To a certain ex- tent, also, the compulsory contributions of employers are shifted upon the workers in the form of lowered wages. The view that the employers' contributions must in the long run be paid by the working man is accepted by President Hadley who reasons thus: "The payments to the insurance funds must chiefly, if not wholly, come out of wages. Even tho they be nominally levied on the employer, he is com- pelled, by competition with other employers not subject to this levy, to reduce in corresponding degree the wages he pays." This argument is based on the assumption that the em- ployers who have to pay insurance contributions are in all cases subject to competition with other employers not thus burdened. This would probably hold true, in general, of any American state adopting an insurance system like the German; the tendency would be to a reduction of wages as argued by President Hadley. In Germany, however, the rate of wages has actually risen, instead of fallen, since the introduction of compulsory old age insurance. It is con- ceivable that the effect has been to prevent so great an advance in wages as otherwise might have taken place, but it is clear that the laws have not imposed any impassible barrier to the advance of wages. The cost of German old age insurance has certainlj- not come out of wages in any large part. The burden of supporting the system has been divided between the State, the employer, and the employed, — in what proportion it is impossible to determine. In estimating the likelihood of a reduction of wages un- der the operation of a compulsory insurance system sup- ported partly by contributions from employers, account must be taken of the social condition of the wage-earners, par- ticularly the education and the organization of the working class, and of the attitude of public opinion as affecting the ability of the class to resist pressure on the wage rate. It must further be considered whether any increase of efficien- 234 SELECTED ARTICLES cy on the part of labor is brought about by the insurance system as an offset to the tendency toward reduction of wages. In general, however, it must be recognized that the effect on wages of an insurance system supported part- ly by assessments on employers would probably be unfavor- able, especially if the system were established in a single American state, since most branches of industry are subject to inter-state competition. The influence of compulsory insurance on character and efficiency, as well as on family life, would manifestly be far less injurious than that of non-contributory pensions. It is evident, however, that any compulsory system must to a certain degree exercise an enervating influence on wage- earners. Compulsion is not favorable to the highest de- velopment of individual initiative, independence, responsibil- ity, and self-reliance. Full individual responsibility as re- gards provision for old age exerts a healthful stimulative and educative effect on the individual. From the point of view of social effects, a voluntary system is certainly prefer- able to a compulsory. There is an inevitable weakening of vigor and resourcefulness under any compulsory scheme of social reform. (3) The voluntary annuity schemes recently instituted in Canada and Massachusetts are not open to the objections which have been pointed out in the case of non-contributory pensions and compulsory insurance plans. The former ex- ercise no unfavorable influence on wages, on character and efficiency, or on the family. The social effects of voluntary insurance, so far as it can be made practically effective, are clearly beneficial. The only objection that can be urged against the annuity systems relates to their practicability as a general solution of the problem of providing for old age support. It is maintained that no voluntary system of in- surance can reach the class of low-paid laborers most in need of special provision for old age. Any voluntary scheme must, it is argued, be extremely limited in its appli- cation; it can never become general, including all members of the wage-earning population. The late Professor A. COMPULSORY INSURANCE 235 Sheafflc has put tliis argument affectively: "Experience has everywhere demonstrated that the great mass of those work- ing men who are poorly off will not voluntarily insure them- selves. Furthermore, the great majority of those who would like to do so cannot, on account of the smallness of their earnings. In other words, it is exactly that class which is most in need of insurance that either will not or cannot avail themselves of this device. This is the fundamental weak- ness of voluntary insurance. It fails to reach the class most in need of it." The annuity systems of Canada and Massachusetts have been too short a time in operation to demonstrate their pos- sibilities. The Massachusetts Savings Bank Insurance plan v.'ent into operation in June, igo8, and the Canadian Govern- ment Annuities System in January, 1909. The reports of the operation of the two laws show, however, that thus far only slight use has been made of the provisions for the purchase of annuities. During the first year of the operation of the Massachusetts Savings Bank Insurance Act, ending October 31, 1909, only 32 annuity contracts were issued, representing an annual payment in premiums of $5408. The Canadian system naturally makes a somewhat better showing in this respect, as it deals exclusively in annuities, selling no insur- ance. During the first seven months of operation, ending July 31, 1909, 288 annuity contracts were issued, including 44 immediate annuities and 244 deferred annuities, representing pajanents in purchase money and premiums of $206,410.15. The Commissioner of Government Annuities is making vig- orous efforts to bring the system to the general attention of vv^orking people and employers, but with only moderate suc- cess. The longer experience of the British Postal Annui- ties System, established in 1864, is significant in this con- nection as showing the difficulty of bringing a plan of voluntary insurance into effective general use. The number of annuities issued through the post offices is very small. During the last ten years the average number of new an- nuity contracts issued annually has been about 150, and the total amount of insurance represented has averaged only 236 SELECTED ARTICLES $15,000 per year. As compared with the business done by the private insurance companies the results of the post office insurance system must be termed insignificant. In forty years the government issued through the post offices only about the same number of policies that the London Pruden- tial writes in ten days. It must seriously be questioned whether the Massachusetts system of savings bank insurance or the Canadian plan of government annuities can be so ex- tended as to constitute a satisfactory solution of the problem of old age pensions. Each of the three plans of old age provision which have been considered — non-contributory pensions, compulsorj' in- surance, and voluntarj' annuity schemes — has been found to be objectionable or inadequate in certain respects. The non-contributory system was adopted by Great Bri- tain as a measure of last resort under the pressure of irresis- tible demand for a sweeping measure of old age relief. This demand arose from certain social conditions which fortunate- ly have no parallel in any American state. Pauperism in general and old age pauperism in particular are far more prevalent in England than in the United States. The recent investigation by the ^Massachusetts Commission on Old Age Pensions shows that there is no alarming amount of old age destitution in this state. The comparative statistics of pauperism in Great Britain and Massachusetts show a strikingly small proportion of old age dependency in the latter Commonwealth, as contrasted with Great Britain. The number of paupers of all ages per one thousand of the population is only 8.5 in Massachusetts, as contrasted with 24.2 in the United Kingdom; the number of paupers 65 years of age and over per one thousand of the population of the same age, is only 3i-7 in ^lassachusetts, as against 172 in the United Kingdom; and finally the percentage of paupers 65 years of age and over, in the total pauper population, is only 20.3 in Massachusetts as compared with 35 in the United Kingdom. Fortunately there is in ^lassachusetts, and pre- sumably in other American states, no such mass of poverty and distress as would call irresistibly for the institution of COMPULSORY INSURANCE 237 sweeping pension schemes. An old age pension system of a non-contributory character is a counsel of despair. Great Britain was driven to adopt this policy by the popular de- mand growing out of intolerable social conditions. This ex- cuse for pension legislation does not exist in any American state. The establishment of a non-contributory pension system in this country would lack even the slight measure of justification which may be urged in defence of the British legislation. The adoption of any scheme of compulsory insurance, furthermore, appears to be inexpedient in this country at the present time. The practical, constitutional, and ethical objections to such action are weighty. The idea of compul- sion is essentially distasteful to Americans. It was the na- tural dislike of Englishmen for compulsion of any sort which led to the rejection of compulsory insurance plans proposed in that country. The proposal of compulsory insurance is, furthermore, of doubtful constitutionality. It raises the question- of the constitutionality of a law obliging wage- earners to set aside a certain percentage of their earnings to provide annuities for themselves in old age. If it could be shown that the effect of the compulsion would be to dim- inish pauperism and protect the State against the burden of old age dependency, such exercise of compulsion might con- ceivably be justified as a preventive measure of poor relief. This consideration, however, seems to be the only one that could be consistently urged in support of the constitution- ality of compulsory insurance. There is grave doubt wheth- er this consideration would be held by the courts to justify a compulsory insurance law. Finally, there is the objection on the ground of the paternalizing and enervating influence of compulsion upon character. In view of these objections it would be unwise to resort to compulsion in dealing with the problem of old age in- surance at the present time. It is conceivable, however, that the ultimate solution of this problem may be found in some system of obligatory state insurance. The principle of compulsory education has been adopted and widely extend- 238 SELECTED ARTICLES ed; the principle of compulsory sanitation has been applied in various directions. Compulsory insurance has been de- fended as a needful measure of further state interference for the protection of society against the burden of old age pauperism, precisely as compulsory education and sanita- tion have been adopted to protect society against ignorance and disease. The final solution here suggested, however, lies so far in the future that it would be idle to consider it at this time. The proper course of action for the immediate future in dealing with the pension problem in American states con- sists in the development and extension of various agencies of voluntar}^ saving. Whatever is done in this field should be in harmony with the principle that provision for old age should be a charge upon wages to be borne by the wage- earner. The ideal of a living wage, which should govern all that may be done in this field, demands a wage adequate not only for the support of the average family in reasonable comfort, but also for provision through saving, against all the emergencies of life, sickness, accident, and old age. No measure of old age relief should be adopted which would reduce wages or stand in the way of the future advance of wages to an adequate living basis. This fundamental consid- eration must be kept steadily in view. A program in harmony Avith this consideration may be constructed as follows: I. The establishment of retirement systems for public employees based on the contributory principle. The expens- es of such pension schemes should be divided between the employees and the state, county, city or town. It is logical that the public corporation as an employer of labor should contribute something to the funds out of which allowances to superannuated employees are paid. Such contributions may be regarded as of the nature of extra compensation for long, faithful, and efficient service. That is to say, in addi- tion to payment of current wages the public employer may properly ofifer a special additional allowance in the form of contributions to retirement funds for workers who remain COMPULSORY INSURANCE 239 in the service a certain period of years and reach a specified age, meanwhile contributing from their wages to provide insurance for their old age. Thus far in the United States only a small beginning has been made in the licld of pen- sions for public employees. There is no general legislation on this subject, either national or state. No American city has yet established a general pension system for all em- ployees. The existing provisions for municipal pensions are confined to certain classes of employees, notably policemen, firemen, and teachers. The general establishment of retire- ment systems for the employees of national, state, and local governments would provide old age insurance for one large class of the wage-earning population. 2. The institution of contributory retirement systems b}' corporations and large employers of labor. Public service corporations especially can safely and profitably undertake this form of welfare enterprise. The recent rapid extension of pension and insurance systems among public service cor- porations in this country is an important movement toward the solution of the old age pension problem. The Massa- chusetts Commission obtained information concerning fifty of these schemes, twenty-eight of which are maintained by railway companies and twenty-two by industrial, commercial, or banking establishments. It is unfortunate, however, that the majority of these schemes are wholly non-contributory. Whatever is done in the future in the way of extending re- tirement systems for employees of corporations should be based upon the contributory principle; the expense should 1)e borne jointly by employer and employed, as in the case of public pension systems. The general establishment of retirement systems for employees of corporations would make provision for another large group of the workipg class. 3. The extension of the agencies that afford opportunity for old age insurance, including private associations, such as trade unions, beneficiary societies, and the like, and public schemes of voluntary insurance, such as the Canadian and Massachusetts annuity systems. This class of insurance can hardly be expected to reach the great mass of unskilled and 240 SELECTED ARTICLES low-paid labor, for the reasons already set forth. The high- er ranks of skilled labor and of salaried emploi'ment can, however, be adequately provided with old age insurance through these agencies. It is desirable that any obstacles which may now lie in the way of the extension of voluntary thrift institutions be removed. To this end the laws govern- ing the operation of fraternal, beneficiary corporations, which in many states now prevent the payment of old age benefits, should be amended so as to enable these societies to provide old age insurance for their members under supervision by the state insurance department. Another measure designed to promote individual saving and strengthen voluntary thrift agencies, which was recommended by the Massachusetts Commission and adopted by the last legislature, is compul- sory instruction in thrift in the public schools. This project is not purely theoretical or fanciful, for the subject of thrift is taught effectively in the public schools of European countries, notably in France and Germany. 4. The adoption of preventive measures designed to re- duce the volume of old age dependency. Adequate provi- sions for industrial education will eventually accomplish substantial results toward this end. Measures calculated to diminish the amount of sickness and accident and to provide satisfactory compensation for industrial injuries are also of vital importance in this connection. Whatever can be done to check economic waste from this source, which is now a large factor in producing old age pauperism, will contribute directly to the solution of the pension problem. 5. The creation of a permanent state commission or com- missions of old age insurance. The chief function of such a department would be to act as a bureau of information and assistance to employers and employees and particularly to aid and advise them regarding the establishment of retire- ment systems. The extension of retirement systems in the field of corporate and public employment could be promoted and directed by such a bureau. The bureau could also ren- der important service by studying the operation of various agencies, public or private, that have been created for deal- CO^IPULSORV IXSURAXXE 241 ing with the problem of old age pensions and guiding future legislation on this subject by exact knowledge of facts. The fundamental object of the policies here outlined is to conserve and strengthen habits of voluntary saving and to create and extend agencies providing for its exercise. There will doubtless remain a certain residuum of low-paid labor which cannot be provided for in respect to old age insurance through measures of this character. It is difficult, indeed, to see how this unfortunate group could be dealt with effectively even under a compulsory insurance system. Irregular emploj-ment and insufficient wages place a certain percentage of the w^orking class bej-ond the reach of any in- surance system. The present poor laws are designed, how- ever, to meet precisely this need of provision for a class that cannot be trained to economic competency and self- supporting independence throughout all the period of life. It w^ould be a disastrous policy to institute any system of gratuitous pensions for the particular benefit of this unfortun- ate class. The number in the class is not large in the American states. By establishing a pension system for the benefit of the small minority of wage-earners who may pos- sibly need such aid the State would strike a blow at the resources of voluntary thrift, individual responsibility, and familj' integrity which have enabled the great majority of the population to maintain themselves in self-supporting in- dependence. In the impatient effort to help things forward at a faster pace we should, by attempting an experiment of this kind, imm.ediately retard and ultimately reverse the normal process of social betterment. 242 SELECTED ARTICLES Charities and the Commons. 20: 343-7. June 6, 1908, Poverty and Insurance for the Unemployed. Belle Lindner Israels. Insurance for the unemployed is a comparatively new- question. During the last decade it has attracted much at- tention in Germany and in nearly all of the more progres- sive countries it has received consideration. Investigation of the question as it affects Germany was conquest upon a resolution passed in the ReicJistag in January 31, 1902, by which the chancellor of the empire was requested to appoint a special commission to conduct a care- ful inquiry into the systems of insurance of this character in existence up to this time, and to formulate a plan for their efficient development. This resolution was finally referred to the Imperial Bureau of Statistics in November of the same year and, in complying with its provisions, the Department of Labor Statistics made an investigation of the systems in vogue in Germany and in foreign countries, with a thorough- ness never attempted prior to that time. The results of this investigation were published in three volumes in igo6 under the title: The Present Arrangements for Insurance Against the Lack of Employment in Foreign Countries and in the German Empire. Part I, Insurance Against the Results of Lack of Employment. Part II, The Status of Co-operative Employment Bureaus in the German Empire (Public and Private). Part III, Appendix to Part I; Statistics. Laws, Ordinances and Statutes compiled by the Imperial Statistical Bureau, Department of Labor Statistics, Karl Heymans, Publisher, Berlin, 1906. Charitable relief is the oldest form of care of the unem- ployed. To a certain extent it was the mother of all care especially at a time when labor organizations were but little developed and not in a position to help their members over a season of idleness. Most laboring people are without ap- preciable means and dependent upon their work, and a con- siderable number are not in a position to save such amounts COMPULSORY INSURANCE 243 as will suffice to support a family for any length of time. Consequently the tendency of any long period of idleness is toward poverty; even though in actual practice the credit of the storekeeper, the consumer's society or the landlord en- ables many individuals to avoid this condition. Poverty easily drags the poor man down, weakens him physically, diminishes his moral resistance, makes him less valuable as a working force, and frequently leads to lack of employment, as at every crisis or industrial depression the mediocre working men and women are the first to be dis- missed. In individual cases it is often difficult to determine if poverty is the result of idleness, or idleness the result of poverty. In this connection the portion of the report of the commission of inquiry dealing with the condition of the un- employed in Basle is specially instructive. In the Canton of Basle the work for the amelioration of the condition of the unemployed assumed, to a large extent, the character of charitable relief, "as among those registered there were many cases in which it was difficult to determine if the straits in which the workers found themselves should be attributed to lack of employment or general poverty caused by a large number of children, intemperate habits, laziness or unfitness for work." This interdependence of lack of work and pov- erty is empha'sized by the facts contained in the Basle re- port: "that among the unemployed there is a regular clien- tele without work a greater part of the time as well as a large number who, while receiving the help on account of such condition, are also the recipients of charitable relief through the ordinary channels." Insurance for the unemployed is about fifteen years old. Up to that time the interdependence of poverty and lack of work was considered axiomatic as a condition which could not be avoided by any assistance towards self-help. Private charity supplemented public relief and where these ended the church and the province bore the burden, or various re- ligious organizations created work for the unemploj^ed dur- ing times of greatest depression. In a number of German states the acceptance of public relief made the situation even 244 SELECTED ARTICLES more oppressive as the forfeiture of certain political rights was one of the conditions imposed. Co-incident with the beginnings of the labor organizations about 1890, the views of the workingmen on these questions underwent a change. In the struggle for political rights they felt these conditions particularly oppressive, which caused them to lose part of such rights, if by reason of undeserved loss or lack of em- ployment they became dependents on charity or if they were compelled to join the ranks of the poor for whose sup- port tlie public made itself responsible. From the point of view of the workingmen, it was the duty of the state to pro- vide work in case of enforced lack of employment or to support the unemployed. In Switzerland they even made a formal but unsuccessful demand upon the government for the recognition of this principle. The formation of a system for securing employment was, therefore, the first move of organizations beyond the mere giving of relief. During the past fifteen years Germany has witnessed a development in this direction which, though in- complete and insufficient still, goes much further than it was thought possible at the beginning of the movement; as on one side through the public agencies the conditions of en- forced idleness are being met by organized systems of se- curing work, so on the other hand the system of self-help has been inaugurated by the labor organizations through which the workingmen support such of their own number as are unemployed. Although at its inception this work was started from a purely charitable point of view, it gradually became evident that the support of the men out of work not only helped the unemployed but also reacted to the advan- tage of others who had employment, as the unemployed men no longer underbid the actual workers in the labor market. It was also demonstrated that it was a valuable instrument in furthering the workingman's policy of maintaining the standard of living. This form of self-help owes its develop- ment during the last ten years to the recognition of its value as an economic factor, which is evidenced by the fact that in , 1904 the English labor unions spent three and one-half mil- COMPULSORV INSURANCE ' 245 lion dollars and the German labor organizations about half a million dollars for the support of the unemployed. The workingmcn and the public agencies simultaneously attacked the problem of separation between help for the un- employed and the care of the poor. Assistance given as charity was refused by the workingmen in cases of enforced idleness, and a strict separation was demanded between assis- tance required bj' reason of lack of means and such support of the unemployed as would prevent poverty taking root. The giving of alms was rejected as a solution of the prob- lem and, in consequence, ideas crystallized themselves in a demand for a system of public insurance for the unemployed which would, in conception and in fact, most strictly sepa- rate itself from the common forms of charitable relief. In recognition of this fact all further development re- jected an}- semblance of relief and to-day in practice the two divisions are very sharply differentiated. On the one side there are the unorganized workmen who possess neither the initiative nor the capability to subscribe to the treasuries for the unemployed, and who are therefore the first to become the victims of charity in case the effort to secure work for them, or to put them in the way of finding it proves unsuc- cessful. On the other side are the organized workmen who help themselves either through their unions or as subscribers to funds for the unemployed, and who strictly avoid com- munication with ordinary relief agencies. Mixed forms of relief-giving as practiced by the Basle Commission for the Unemployed are regarded as an unfor- tunate solution of the difficulty even by those participating, and the report of this commission makes it plain that abso- lute separation is now demanded so that insurance for the unemployed and the giving of charity shall have no connect- ing link. In contra-distinction to public relief-giving in Germany, we can cite but one positive factor giving the figures for the relief of the unemployed as distributed by the labor organi- zations which in 1904 disbursed about half a million dollars and during 1905 these figures, together with travelling ex- 246 SELECTED ARTICLES peiises, reached $750,000.00. It is true, however, that this comparison is not altogether reliable. The care of the poor and the expenditure required for the purpose necessarily deal largely with the solution of the problem which must remain within the province of relief-giving, even in the complete at- tainment of a satisfactory system of insurance for the unem- ployed. The sick poor, families of habitual drunkards or those with an unusually large number of children, homes left destitute by the death of the bread winner, the burial of the dead, and similar cases are all problenis that go much further than the confines of relief for the unemployed even when drawn as wide as possible. It is useful, however, to know how large a field must remain in any case for charity and poor-relief, so that the knowledge of these difticulties will assist in bounding any scheme for carrying out a system of insurance for the unemployed. In the presentation of the conclusions reached b}' the official report in the National Labor Journal, the solutions hitherto tried in the field of insurance for the unemployed are divided into four groups; self-help, obligatory insurance, facultative insurance, and assistance to self-help from public funds under conditions requiring the forfeiture of private msurance. These divisions as made in the official report, are also useful as a guide to their final consideration. Obligatory insurance is the only one which does away with initiative and replaces it by compulsion. It premises experience to show that the workman does not provide for times of enforced idleness, either because he is not in a posi- tion to do so or because of. neglect. Compulsion in this direction is the foundation of the other great German labor insurance organizations, and it is therefore probable that all projects through which an attempt is being made to solve the question are more or less committed to the idea of obligatory insurance. The difficulties which face an obliga- tory solution through the labor organizations are onlj^ com- paratively larger than those to be found in other forms of insurance. It requires a considerable measure of foresight to partici- COMPULSORY INSURANCE 247 pate in a facultative workingman's fund requiring regular payment of dues for the support of the organization in addi- tion to the payments necessary to carry out the work of self-help. This measure of efficiency, foresight and initia- tive will always be present, at least to a limited extent, even though no difficulties face the organizations in securing the opportunities for self-help. It is to be presumed that every indication of growth on the part of the organization will show a corresponding growth in the development of the methods of self-help. The growth of the organization will be governed to only a small extent bj- the giving of public subsidies. In the main it is dependent upon other factors but with no closer con- nection with the question of insurance for the unemployed, thereby indicating the narrow limitations of a system which would attempt to solve this question by subsidizing the methods of self-help, inaugurated by the working classes. Under these systems of self-help aid is given only to those who by participation are already helping themselves, and not to those who do not help themselves and- who have no power to do so. All of these solutions leave these classes to be dealt with tirst and last by systems of charity and poor re- lief. The greatest efficiency is therefore reached by obliga- tory insurance, as it is far more reaching in its efifect, al- though its execution presents the most difficulties, due to the fact that the determination of the worthy unemployed is particularly difficult, as in practice it is complicated by the fact that the deserving man not being indicated by any out- ward sign, requires special investigation. Public insurance for the unemployed shoitld and would generalh' insure only against involuntary and undeserved lack of emploj^ment on the part of efficient men caused by ab- sence of work. This system would by no means insure against every lack of employment. It would only protect against that which is dependent upon industrial conditions and not upon personal disposition, dealings or expression of opinion on the part of the individual who is unemployed. Upon the proportion to which this may be proven depends the risrht to assistance. 248 SELECTED ARTICLES The aim of this insurance is accomplished when the in- dividual is directed towards suitable employment, and the proof of undeserved lack of employment on the part of the man who is worthj^ of assistance is his acceptance of this work. As standards are in a large measure a matter of dispute,, a consistent determination ■ of the beginning, duration and end of a period of lack of employment, having a depressing efifect upon industrial conditions, is difficult in the case of each workman, as these standards are not always outward- ly recognizable, and although the control which obligatory insurance gives operates through general conditions, it still exercises an unusually large influence in the individual cases. Insurance for the unemployed is diflerentiated from other forms of insurance in that it would not operate in occasional instances but only to meet an industrial condition affecting the mass, and although this makes it easier to determine the exact time when actual lack of work begins, it makes the control of its duration and its end more difficult as the im- portant thing to be_guarded against in obligatory insurance is that it shall not become an incentive to simulation and de- ceit on the part of the lazy and inefficient at the expense of the industrious and efficient. This suggests what it might mean in Berlin when, even at a moderate estimate (using but one-half of the figures of 1902, taken under an unfortunate combination of circum- stances) it would be necessary to exercise daily control over 30,000 unemployed, to know their identity and their second- ary occupations and, in addition, whether suitable work could or could not be found for each one of them. If in your con- ception of workingmen's insurance you take in the entire laboring population so as to include women and those who work at home, the problem of control increases in the same ratio. The control is unequal to the burdens to be put upon it. Even if it can be exercised over the enormous area reached by the employment bureau, which is not at all cer- tain, it still does not indicate anything which could be taken as definitely indicating the real existence of a condition of \ COMPULSORY INSURANCE 249 lack of work. To be complete this control would have to be exercised through supervision outside the usual channels and in the home, which could hardly be carried out practically and against which the workmen themselves would protest. Where there is no bureau for finding work this supervision soon reaches its limit. For the same reasons supervision of workmen in the same trade is inefficient in places where there are no organi- zations whatever, and in the case of unorganized men who are here to-day and gone to-morrow. This solution, which in itself seems to be the most effi- cient, has therefore to overcome many internal difficulties in the matter of supervision, in compelling the acceptance of work and in deciding upon requests for assistance. It has only been tried once in St. Gall, and there it failed probably through insufficient organization, but certainly because of the innate difficulties bound up with its operation and indicat- ed in this statement. This situation appears to show that the carrying out of a sj'stem of obligatory insurance is accompanied by the maxi- mum number of difficulties, and that other solutions are only possible where self-help has already assisted or has at least made a beginning in that direction, and we are still faced by the problem: How is it possible to replace the giving of charity and poor relief where the individual initiative neces- sary to make provision for the future is wanting? An illustration of the significant results obtained bj^ the employment bureau is furnished by the Cologne Unemployed Insurance Fund, whose bureau has succeeded in providing almost every member who got out of work with permanent or temporary employment. In the year 1905-6, 1,087 mem- bers of this fund, 74 3/10 per cent of the membership, were out of work. Of these 123 received permanent work during waiting time and 902 received temporary occupation, so that only 41 of those insured remained without work during the entire time under discussion, and the fund was compelled to pay for only 13,414 unemployed days, whereas the claims of the insured, had the employment bureau not secured work 250 SELECTED ARTICLES for them, would have covered 42.128^ days. The results of . the work of this employment bureau lightened the burden of the fund by two-thirds, a proof that insurance for the un- employed cannot be separated from. the finding of employ- ment, and that the building up of the employment bureau is of the utmost importance not only in any system of insur- ance but in dealing with the entire question of the unem- ployed. The programs that have been worked out for the German empire by the scientists and other interested students almost all include either self-help and its subsidization or obligatory insurance. Facultative insurance for the unemployed is not considered as a universal solution of the problem. The schemes of Elm and the Corrcspoudenc-blaft der Gezverk- schaftcii include the first principle, while those of Lischen- doerfer, Herkner, Zacher, Buschmann, Molkenbuhr and Son- nermann accept the obligatory principle. Doctor Freund, Fanny Imle and Berndt recommend a middle course. Insurance for the sick is necessarily local in its applica- tion. In Germany it is made up in round numbers of 23,000 separate funds and this minute sub-division causes it to ap- pear unsuitable for service in the field required by the unem- ployed. Likewise, although accident insurance, as a special quali- fication, has association with the workmen whom it covers, it nevertheless is organized upon a local foundation, and, with the method governing the composition of its directorate, it could not be easily handled so as to form a useful addition to a system of insurance for the unemployed. Invalid and old age insurance misses every intrinsic relation to the work- man without which any insurance for the unemployed seems very difficult of accomplishment. The result does not seem any more hopeful in this direc- tion, if we take into consideration the fact that these sys- tems were called into being in their time for the purpose of satisfying totally different needs, and that their use in the insurance under consideration would be like grafting a new flower on an old tree. Apparently the question of insurance COAIPULSORV IXSURAN'CE 251 for the unemployed will be handled internationally in the most diverse ways. France and Norway have taken the lead, and in Denmark definitely formulated propositions are under consideration. On the other hand Belgium and Swit- zerland have held themselves aloof, while in England the procedure is in another direction. Holland is trying some forms. The question will apparently be a live one during the next decade and every contribution to its classification will make its solution easier. Living Age. 268: 443-5. February 18, 191 1. Insurance Against Unemployment. Of all the diseases that are being slowly but surely iso- lated, treated and stamped out there is none so infectious as the evil of unemployment that falls like a plague upon the nation once in six or seven years. In one trade work is slack, a few men are turned off; forthwith another trade follows, and then begins a period of short time, distress, unemploy- ment mounting up to 8 or 9 per cent.; an epidemic truly, whereof gaunt cheeks, dull eyes, and shattered humanity in- festing every street are the visible results. Now a recurrent epidemic infecting 9 per cent, of the population is one that cries aloud for treatment, drastic treatment inspired by com- i^on sense. The thing is infectious, in very truth; the source of one case of imemployment can be found in the distress of others as certainly as measles can be traced to contamination from a neighbor's disease. An obvious instance is that of the small shopkeeper in a neighborhood where employment is bad, but the evil cannot stop with him. The tradesman who supplies him, the manufacturer of his wares, it may be at the other end of England, and the operatives employed by all of them suffer in greater or less degree because trade is bad in the shipyards of Sunderland or the coal mines of Wales. The bootmaker who is unemployed ceases to buy clothes needed by his family, and the clothier next door is out of 252 SELECTED ARTICLES work in consequence. The baker, who serves both, suffers in pocket and in larder; indeed the shoeing of his children must be postponed, and the boot trade suffers again by their distress. So the thing grows and spreads in ever-widening circles, till from some countervailing cause the plague is stayed. The problem of economic health is to isolate and deal with the earliest case, with a view not only or even mainly to mitigate the sufferings of the individuals affected, but to circumscribe and stamp out the evils from which they suffer. A properly devised scheme of compulsory insurance against unemployment should be a means to both ends, meriting support for reasons by no means sentimental. It is no more sentimental to seek an efficient remedy for unemployment than it is to build a fever hospital, and it is just as necessary. Unemployment is infectious. Compulsory insurance can obviously do something to alleviate the hardships from which invididuals suffer. We believe that it can do much more, and be a most active agent in the prevention of unemployment itself. If the bene- fits suffice to enable the man who has lost his job to keep his place in the ranks of the consumers, to pay his daily visit to the corner shop, to add his quota to the demand for labor, the factor that makes for the spread of unemployment is eliminated; the unemployed is no longer a danger to his neighbor. But it is useless to blink the fact that an ill-con- ceived insurance scheme may be as potent for evil as a well- drawn one for good. If it should get about that a man*s subsistence is guaranteed whether he works or no — that it is as profitable to sit at home in enjoyment of a public dole as to tramp the streets in search of work — then the numbers of the unemployed will grow not less but more as the condi- tions of unemployment become less arduous and painful. Failing sufficient safeguards, the wastrel can wreck an in- surance scheme as he has wrecked most of the projects de- vised by the wit of man for the benefit of honest workers. The true test by which the proposals of the Government must be judged is whether they bid fair on the whole to COMPULSORY INSURANCE 253 reduce unemployment. If they contain no protection against tlie wastrel, if they offer temptations to the shirker, they will do more harm than good. Unfortunately there will be many influence.s brought to bear upon the Government to demoral- ize the Bill, influences of peculiar weight with a politician who claims to be the child and darling of the people. The question of contribution by the workman and the question of discrimination between applicants for benefit are those on which the merits of the Bill will turn. It is of vital importance that the worker should himself contribute to the insurance fund, partly because unemploy- ment loses its most demoralizing effect upon the man who drawing his benefit can say "I've always paid my money honest." He handles his tools the better when fortune calls on him to take them up. Contribution will also create and maintain a strong public opinion against shirking and draw- ing benefits without good cause. The worker will feel the loafer on his back, a different thing from knowing him to live upon the spoils of the Egyptians; he may even come to realize that his own faculty of sticking to his last means in the end a reduction in his premiums. Yet, if there is any- thing certain in politics, it is certain that no Insurance Bill will go through Parliament without some protest against the contributory system, and every man or Minister who votes in favor of contribution by the workers will know that he must suffer for it at the polls; the opinions of the electorate are more sentimental than sound. But the duty of the Unionist party is plain. We believe in compulsory insurance against unemployment; we believe that it may prove much more far-reaching in its good effect than is generally sup- posed; but we hold it essential that it should be enforced by a measure framed on right lines, and maintained on those lines in spite of all the forces that unreasoning sentimental- ism can bring to bear on it. The gravest danger is lest a Government insurance policy should prove an endowment policy for the wastrel. It must be secured that benefits shall be paid only to the man who is willing to work. So long as the labor exchanges are in a 254 SELECTED ARTICLES position to offer a man work at his own trade and at standing wages the solution is simple: he will get no benefit by re- fusal. Xor is the problem more subtle when the labor ex- change has no work to offer: prima facie every insured person out of work is entitled to benefit. In either case benefits should be paid at the labor exchange, and stopped so soon as proper work is offered. The critical point is reached when the labor exchange can offer work, but of a grade inferior to that for which the applicant is qualified. Is a skilled me- chanic to be entitled to benefit after refusing the office of a laborer? If nay, he becomes a laborer, and probably re- mains one; if yea, where is the line to be drawn? Down how many steps in the subtle gradation of the labor hierarchy shall a man be required to move? Can a cabinet-maker re- fuse joiner's work, or a joiner draw benefits while carpenters are in demand? Either these questions must be settled by the Act, or courts like the Gewerbegericht of Germany must be appointed to assess the dignities of craftsmen. One evil is beyond the reach of any insurance scheme; the old, overwhelming one of casual labor, of the men who are never fulh' employed and seldom quite without employ- ment. Men on the "B" lists at the wharves and docks, who work with a kind of regularity for one or two employers, may probably be reached; men on the "C" lists are more difficult; and the man who carries your bag for sixpence is impossible. The problem bristles with difficulties, and the Government if it shows any mind to deal with them seriously will have no difficulty with the Opposition. Is it Quixotic to hope for something better from Mr. Lloyd George than a demonstration of the art of vote-catching? He can so frame his scheme that the Opposition, if honest, must criti- cize it and try to amend it. Then it will be possible to pa- rade at the next election all these votes or amendments or both against the Bill. The Old-age Pension Bill has shown how it can be done. The Opposition will want evidence as well as honesty. They need not play into the enemy's hands. COMPULSORY INSURANCE 255 Spectator, 102: 807. May 22, 1909, Compulsory Insurance Against Unemployment. The most important dangers against which the Govern- ment will have to take thought are those of human nature. There is a type of man who would rather be out of work with a small sum to live on than in work with considerably more. He himself, in his too ample leisure, may pick up enough to eat, drink, and smoke to satisfy himself; but his wife and children at home are in a very different case, and if the State made it easier for that type of man to follow his inclinations it would in effect be facilitating cruelty to chil- dren and wives. The more a man is guaranteed in the event of vmemployment. the more he is tempted to drop out ot work. All temptation to do so is absent when the alterna- tive is between comfort and nothing. These are the reasons why we have urged before now that the benefits from any unemployment insurance scheme should be small, and that they should be combined with insurance against sickness, old age, and death. A man thinks twice before laying up for him- self a pauper's old age by drawing on his savings. We recog- nise fully the hard lot of the man who is thrown out of work through no fault of his own, and we would do everything humanly possible to help him. Even where a man has been too careless to save, although he is a good and regular work- man, it is possible that the punishment of the workhouse for him and his family is too severe for the fault. But the fatal objection to most insurance schemes — certainly to every So- cialistic scheme that ever we heard of — is that they tax the prudent for the advantage of the imprudent. That is abom- inably wrong, and we could never willingly consent to it. We agree to the principle of compulsion in insurance so that men may be saved in spite of themselves; but how are we to prevent the thriftless from battening on the careful in the process. W^e must remember that even in Trade- Unions men sometimes draw out-of-work pay unfairly. If this is possible in Unions where the men's circumstances are fairly well known, what would happen when they had to deal 256 SELECTED ARTICLES with the quite impersonal organisations of the State? The test of unemployment will be very difficult to apply. The remedy we propose is, as we have just said, not only that the payments should be small, but that they should be com- bined with insurance against sickness, old age, and death. We are glad to see that the Government mean to organise the insurance by trades. This ought to mean that the in- surance will be an extension, not a reversal, of the excellent arrangements already made by the Unions. If the payments under compulsory insurance are moderate, men will be en- couraged to remain members of their Unions. This is in every way to be desired. The new scheme would be con- demned if it proved to be a vampire to the Trade-Unions, — institutions the country may be proud of, and which ought to be kept in unimpaired vitality. Under a good scheme there would be no need for a State subsidy whatever. Each trade would be responsible for its own insurance fund. Fin- ally, we hope that Parliament will never consent to vest such State-delegated authority in the hands of the Unions, indirectly or directly, that workmen will find it humanly im- possible to live or flourish outside the Unions. Personally, we think a man is probably unwise who can belong to a Union and does not do so. But here, as in all circumstances, tyranny is intolerable. Men must neither be bribed nor browbeaten into joining the Trade Societies. Scribner's Magazine. 49: 116-20. January, 1911. Experiments in Germany with Unemployment Insurance. Elmer Roberts. Political thinking in Germany, beginning with the later Bismarckian days, abandoned the idea that the individual alone is responsible for his situation in life, his employment or unemployment, and that somehow inwoven with indi- vidual responsibility is the responsibility of society, of the whole state. This way of thinking may now be called the minimum German state socialism, the kind of think- ing that is still called radical in Great Britain or in America, COMPULSORY INSURANCE 257 but in Germany is conservative. It became evident to ob- servers that the loss of employment in industrial crises was brought about by events over whicli tlie w^orkman could have no control. Besides periodical depressions, the develop- ment of immense organizations, formerly unknown, in the management of which the individual workman docs not par- ticipate and in which there can be no direct bargain between the managing employer and the employed, has brought economists and the paternal governments of German states to the conviction that the state or the local government must justly share responsibily for unemployment and must devise measures for the creation of a fund out of which the unemployed may of right take assistance. The government has therefore in the course of the last twenty-five years abandoned the stand-point of the imperial industrial laws guaranteeing complete liberty of action between the giver of labor and the applicant, and has undertaken to intervene by a polic\' of protection. This policy of protection for the employee runs parallel with protection of agriculture, of internal trade, of foreign commerce, and through an intri- cate S3-stem of adjustments, between all individuals whether great capitalists or small workmen, and the economic whole. It has been therefore an easy question to dispose of, wheth- er public funds should be used in insurance against the re- sults of unemployment. The majority of those deliberating upon the question in municipal councils or in state commis- sions have decided that such application of government funds is correct in principle. The trying to think out and experiment with insurance against the results of intermittent employment is a continu- ance by German cities and the governments of German states of the striving to squeeze dependent pauperism out of the social system, to round out the imperial insurances begun in the eighties for the widow, the ill, the aged, the orphan, and the disabled. Since the state enforces compul- sory education, military service, and precautions for the health of the workman, it is regarded as a proper extension of the powers of government to prevent the labor unit from 258 SELECTED ARTICLES degenerating while temporarily out of use. He must be cared for and kept in a state of efficiency for re-employ- ment, for the army, and for his general functions as a living and contributing organism of the state. Neither circum- stances nor the individual's own inadequate powers of resist- ance must be allowed to transform him into a parasite. The main element of the problem is regarded as psychological, to maintain the human unit iru good condition by keeping his spirit in a healthy state of self-respect and courage. After the old. the sick, and the defective have been sifted from the unemployed and cared for each under his classification, and after the police and the magistrates have driven to forced labor those otherwise able yet without the will to work, there remain the capable 'and the willing for whom there is no work. Official and semi-official labor exchanges make it easy for the person who desires work to be brought into relation with the person or company having work to give. But after all has been done, a surplus remains of workers over the amount of work to do. The solicitude of the state for the unemployed in Germany is greater perhaps than in most other countries, because the imperial policy is to make life at home easy enough and endurable enough to continue to keep Germans in Germany, to give them em- ployment and a sense of security for the future. The Ger- man workman does seem to have the feeling that he is up- held by the whole of the splendid and powerful society of which he is an obscure member. Life is dingy, but he feels that he will not be allowed to become submerged utterly, no matter what calamities may happen to him individually or to his trade. Munich. Dresden, Cologne, Diisseldorf, Mayence. Strass- burg, Luebeck, Rostock, Karlsruhe, Elberfeld, Magdeburg, Cassel, Altenburg, Quedlinburg. Erlangen, and Wernigerode are the principal industrial municipalities that are operating some form of so-called insurance for unemployed. The municipality of Cologne has had since the autumn of 1896, an insurance against hardships from loss of work. The administration is in the hands of a committee created COMPULSORY INSURANCE 259 by the municipal council, consisting of the mayor, the presi^ dent of the laboi- exchange, twelve insured workingmen elected by the insured, and twelve honorary members chosen from the long list of prominent citizens who are honorary contributors. The governor of the district, who is an ap- pointee of the Prussian crown, has a supervisory relation to the committee. The fund out of which the insurances are paid was begun by voluntary contributions, amounting to ioo,coo marks, of manufacturers, other employers of labor, and honorary members. The city appropriated 25,000 marks. The remainder of the funds during a period of thirteen years since the foundation has been raised by the assess- ments on insured workingmen; the total from this source, however, amounting to a little more than one-third. The conditions giving a workman the right to participate in the insurance are that he shall be eighteen years of age, have resided at least a year in the Cologne district, that he shall have a regular calling, and that he must have paid a weekly contribution of from thirty to forty pfennigs — that is, seven and a half to ten cents — weekly for a period of thirty-four weeks. He then becomes entitled, should he be out of em- ployment during the winter, from December i to March i, to be paid after the third day of unemployment two marks a day for the first twenty days and one inark a day thereafter until the winter season shall be at an end. As the imperial govern- ment's laws concerning insurance against illness or accident provide for these categories, the workman can only continue to receive insurance if he is in sound health and fit for work. He may not benefit if he is on strike or if he has been dis- missed through an obvious fault of his own, if he refuses work or has given false information regarding himself. The insurance office is run in intimate connection with the official labor exchange, whose duty it is to know where labor is wanted in any division of effort in the Cologne district and to draw from the body of unemployed enrolled at the ex- change those suited to the vacancies that exist. The insured are largely members of the building trades, such as masons, stone-cutters, plasterers, papercrs, and carpenters. The re- 26o SELECTED ARTICLES suits, therefore, are not regarded as representing what they would be were the insurance to extend over the entire working year and to include every variety of workers. The scheme, however, operated sufficiently well to insure its con- tinuance. The plan has been modified in details from year to year, and has become adjusted to local conditions. Last winter the number of the insured was 1,957. Of this number seventy-six per cent, became entitled to insurance to the extent of 61,934 marks. The insured themselves had con- tributed 23,439 marks. The remainder of the requirements were paid out of the permanent fund, which, with the excep- tion of 6,000 marks, was restored by a grant of 20,000 marks from the city of Cologne and by contributions from other bodies and persons. Private persons in Leipsic seven years ago founded a non-dividend-paying company with a reserve of 100,000 marks with the object of insuring against unemployment. The municipality declined to contribute because of socialist op- position, based upon the belief that insurance enterprises of this sort tend to compete with similar provisions of the trades-unions, which pay out yearly in Germany about 5,- 000,000 marks on account of intermittent employment of their members. The trades-union insurance schemes are usually solvent and well managed. The Leipsic concern di- vides its risks into four classes. The members pay the equivalent weekly of seven and one-half, ten, twelve and one-half, and fifteen cents throughout the year, the insur- ance under this arrangement covering the entire year. A special class has also been erected for members of societies, or for entire bodies of workmen in factories, to be insured. The member is qualified for receiving 1.20 marks insurance per day after he has contributed forty-two weeks. The usual conditions of non-payment in case of strike or refusal to accept work or for incapacity for work are attached. The conflict with the trades-unions has been overcome in the city of Strassburg, by the municipal government co- operating with the trades-unions, and adding one mark per day to the subscription of two marks for each member made COMPULSORY INSURANCE 261 by the trades-unions; or in instances where the payments of the trades-unions were less than two marks, the city shares proportionately. This co-operation has been found to work well. The city insurance office settles monthly with the trades-unions. Only one instance has been discovered of deception on the part of a member of a trades-union who was receiving insurance. One consequence naturally has been that the position of trades-unions has been strength- ened. The unorganized labor is taken care of by relief works. In Strassburg as well as in other cities, a close work- ing arrangement exists between the insurance office and the labor exchanges. The co-operation between the trades- unions and the insurance office in Strassburg, has had the advantage of providing the insurance office with accurate in- formation regarding eve-ry person in receipt of insurance, and a system of control against deception. The municipality of Munich has a bill under consideration for paying three marks a day for married men and two m.arks a day for unmarried, during a period in each year not exceeding eight weeks, to those irregularly employed. The magistrates decide who are to come within the benefits of the municipal insurance fund, which is created by appropria- tion from the city treasury, by contributions from employers, . and by the subscriptions of public-spirited individuals. Diis- seldorf has spent during each of two winters half a million marks in public relief works. The twenty or more other German cities that are experimenting with insurance against the loss of work, are doing so upon one or other of the lines already mentioned. The subject has, however, taken a larger form in German thought than the experiments of municipalities, though these experiments form an interesting body of results. The broad aim toward which. German statesmen are thinking is the building of a governmental machinery that shall bring about compulsory thrift on the part of those liable to unemploy- ment, and the compulsory contribution of the employer of labor, with an addition by society, as a whole, to the fund thus created. Employers are not generally opposed to such 262 SELECTED ARTICLES a law. Several of the great employing companies of Ger- many have private systems of insurance; as for instance, the Lanz Machinery Company of Mannheim, which has a capital set apart for the maintenance of skilled workmen for whom the company has provisionally no employment on ac- count of industrial exigencies. The principle upon which the Lanz Company and other companies doing the same thing act is that, when a body of skilled workmen has been brought together and organized with a highly specialized division of labor, the company would suffer a greater loss by allowing the workmen who form trained parts of their indus- trial machine to migrate to other places in search of work than by paying to keep them ready for re-employment. The Lanz Company also considers that, as it employs men to the full capacity of the works only during brisk times, it is simple justice to give these workmen a share of the ac- cumulated profits during slack times. German companies acting thus toward their workmen have found that an econ- omy was effected by having efficient men ready to fill vacan- cies or to take up work during periods of expanding business, so that the full profits of expansion could be realized im- mediately without the delays that might otherwise be caused by training inexperienced men or by getting trained men from other localities — always a difficult thing to do during a period of prosperity. The Reichstag in 1902 adopted a resolution asking the imperial government to examine into the possibility of in- surance against unemployment. The government charged the imperial bureau of statistics to inquire into the subject, and after three years an extensive report was presented to Parliament based upon the beginnings of the experience by German municipalities and in Switzerland and Belgium. Al- though this volume was published only four years ago, it :s out of date because insurance for unemployment has made such rapid progress that data has, from year to year since 1906, been so expanded that anything written one year has become antiquated the next. Count von Posadowsky, while he was imperial minister of the interior and vice-chancellor, COMPULSORY INSURANCE 263 undertook to work out a comprehensive plan for the main- tenance of those able to work but for whom no work could be found. He gave the subject much personal attention, and the statisticians to whom he committed divisions of the work brought together a large body of facts and conclusions based upon them. The material, however, could not be brought into a form satisfactory to the analytical and comprehensive mind of Count von Posadowsky. He never submitted the results to the chancellor or to the emperor. The main out- lines within which Count von Posadowsky undertook to en- close his scheme are understood to have been compulsory ■contributions by workmen during the periods of employment, enforced contributions by employers graduated according to wages and the character of the employment, and proportion- ate contributions from the imperial finances. A considera- tion that has apparently delayed the imperial government in pushing forward provisions for the idle employable has been the position of the national finances. The annual deficits, covered by annual borrowings on account of large expenses in other directions, caused the feeling that fresh obligations indefinitely large ought not to be undertaken until the im- perial expenditures were balanced by revenue. The idea of an insurance against unemployment on a scale comprehend- ing the empire is for the present in suspense, but it is likely to be taken up as soon as financial embarrassments are out of the way. In the meantime, the problem is being worked out by the governments of German states and by municipali- ties. The imperial government continues to take censuses of unemployed and to make theoretic studies with the ulti- mate object of devising a national scheme. The government of Bavaria appointed a commission in November, 1908, to discuss public insurance against results of loss of work. The conference met the following March, and the principal branches of industry, agriculture, the Chambers of Commerce, and the departments of the govern- ment were represented. The propertied interests were skep- tical regarding the possibility of an equitable distribution of the burdens of such insurance, v/hilc economists and the 264 SELECTED ARTICLES gdK'ernment representatives took the view for the most part that insurance of this sort was desirable, and that the difficul- ties could be overcome. The statistical results of German experiments form al- ready a literature of about eighty pamphlets and books — most of them prepared officially by city statistical offices, or by economists and statisticians employed by municipalities for the purpose. Nearly all the material is accompanied by discussions that in themselves indicate how new the subject is. Herr Dr. Jastrow, who has prepared one of the most lucid commentaries for the city council of Charlottenburg, a suburb of Berlin with 300,000 population, considers that the discussion has advanced far enough for it to be regarded as non-political and that the question need no longer be dis- cussed as it was some years ago by labelling all those who hold ancient views as reactionaries, and those who believe in such insurance as radicals. The main preliminaries which have been decided by municipalities that have already put into operation some form of unemployment insurance, are that the use of public money for this purpose is admissible, that the results of unemployment are to be considered in principle as a public matter, and that it is technically possible to provide such assurance. Insurance is based upon statistics that determine the fre- quency with which a risk would be likely to avail itself of the guarantee. No adequate statistics concerning unemploy- ment, nor long-established systems for premiums and indem- nities, exist. It has been affirmed that the need for insur- ance might depend upon the insured person himself, and that the employed workman could easily cause himself to be dis- missed, so that he could receive money without work. The objection has also been made that in other forms of insur- ance there can be a restoration of the damage sustained, and that the remedy for unemployment ought to be work offered, instead of payments for not working, and that the question would still be open as to whether the insured should accept work that might be distasteful to him. These objec- COMPULSORY INSURANCE 265 tions are considered to-day as having been disposed of by reflections along this line: Modern statistics of unemployment are imperfect, but life, fire, transport, and casualty insurances were begun without statistics, and created them only in the course of time. Even the imperfect statistics of unemployed to-day are more adequate as a basis from which to work, Herr Dr. Jastrow says, than the statistics were at the time of organiz- ing most of the branches of existing insurance. The objec- tion that the beginning of the benefits of insurance depends upon the will of the insured person himself, has been an- swered by pointing out that this applies likewise to liability insurance, where bad faith in the person insured is possible. An objection more often raised than others is that of un- employed strikers. This has been treated by separating un- employed strikers from the unemployed from other causes. In some discussions of this phase of the' subject it is con- sidered that even strikers, when an arbitration court organ- ized under the supervision of the government should have decided that the strike was a just one, could avail them- selves of the insurance just as though they had become un- employed through the operation of involuntary causes. This phase of the subject indicates the serious obstacles that are yet in the way of a comprehensive insurance system which shall compulsorily embrace all able to work, yet unemployed. The losses that have to be replaced in every kind of insur- ance do not exist as an effect of detached events, but are a permanent condition daily created under the workings of society and daily effaced, with intervals of greater or less severity. As in other kinds of insurance, it is economically more reasonable to prevent losses than to pay them. Guarantees against unemployment tend, it is observed, to render com- munities that are paying unemployment insurance at present more careful of the rights and wrongs of the employer and of the employee, to stimulate measures that prevent unem- ployment just as fire insurance companies assist in the or- ganizing of fire brigades in places where they do not exist 266 COMPULSORY INSURANCE and as the invalid insurance department of the government spends considerable sums for the care of tuberculous patients in order to prevent the spread of a disease that will add to the losses. The difference between insurance against unem- ploj-ment and other branches of insurance is that the policy of prevention lies open in a specially high degree. New questions of dispute have arisen, as, for example, what kind of work can be reasonably provided for the unemployed. Is not a watchmaker justified in refusing to take temporary work shovelling snow, because hard manual labor will thick- en the cuticle of his hands so that he is disabled from work- ing at his delicate trade should he have an opportunity to do so? Arbitration courts have been organized in cities experimenting with unemployment entrusted with the deci- sion of such cases, and their verdicts are usually recognized as fair. The German delegates to the International Congress called to meet in Paris, in September, to consider means for combating unemployment, were prepared to submit to the Congress full narratives of German experience with contin- gent payments to unemployed. The delegates include Herr von dem Borght, president of the Imperial Statistical Office, Government Councillor Bittmann of Karlsruhe, Dr. Freund, the chairman of the Association of German Labor Ex- changes, Prof. Dr. Francke, and Dr. Zacher, a director of the Imperial Statistical Office. UNIVERSITY OF CALIFORNIA AT LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below EEC 3 ^947 OCT 2 2 1956 mv 2 1 t9^' Form L-9 20m.-l,*42(8519) IMBSs Bullock - articles on -compulsory- insurance. I C SOUTHERN REGIONAL LIBRARY FACILITY AA 000 549 925 6 H69 I59B8S ^iA,