Facing old age

The first State efforts to relieve the problems of old age were generally made by means of some form of voluntary or subsidized savings insurance. The adoption of the compulsory principle of insurance against old age was unthought of at first. The States’ assistance was limited to encouraging and helping the wage-earning classes to accumulate savings which would protect them against old age. The Teutonic nations were the first to inaugurate the compulsory principle of social insurance. In the early days Latin speaking countries were proud of the fact that they did not adopt the German principle of compulsion and, instead, established voluntary systems of savings insurance. English-speaking peoples, on the other hand, have generally followed the non-contributory or straight government pension plans.

Voluntary and Subsidized Old Age Savings Systems were established as early as the middle of the last century. Although practically all countries started out with voluntary insurance plans the latter are in operation now in comparatively few countries. Most nations were compelled to abandon them as ineffective and substitute either compulsory insurance or straight pensions. France was the first to follow Germany’s example in adopting a compulsory old age insurance system in 1810. Since the signing of the Armistice, Italy and Spain have also changed from voluntary to compulsory insurance, while a few other countries have either adopted compulsory insurance plans or have been considering the adoption of such recently. The merits of these plans and the reasons for their abandonment have been discussed in an earlier chapter and need not be repeated here. In the chapters that follow an account of the old age pension systems as they exist abroad is presented. An effort has been made to bring them up to date. However, on account of the war, and the general difficulties of securing European data which resulted from it, this aim has been only partly realized.

BELGIUM

The Belgian “General Savings and Retirement Fund” was originally founded in 1850. As in the case of all voluntary insurance plans, it was created for the purpose of inducing wage-earners to provide for their old age, by affording them opportunities to save under the protection of the government. During the fifty years that followed the establishment of this fund many devices were employed to attract a greater number of persons to make deposits. This was done by reducing still further the minimum of deposits, by influencing children from six to fourteen years of age to join the fund and by appropriations for annual subsidies made by the national and provincial governments to mutual aid societies and similar organizations which induce their numbers to join the fund. In spite of all these encouragements, however, there was little success made in securing any considerable number of wage-earners to make deposits and provide for their old age.

In 1800, a law was enacted which sought further to encourage wage-earners to provide annuities for their old age by adding state subsidies to their own deposits and by giving special grants to the needy aged. The law permitted any person over 18 years of age to pay into the fund for himself or for another person. The depositors were not required even to make regular payments either at fixed periods or of a fixed amount. The minimum of deposit was one franc (normally 18 cents). The principal aim of this fund was to attract the poorer classes, as the law excluded from benefits those classes who paid above a certain maximum amount in taxes or licenses, as well as state officials who were entitled to old age pensions by virtue of previous laws. The annuities were paid at the age of 65 and could not exceed 1,200 francs ($231.60). In addition to the regular annuity the government made a contribution in the form of a premium which was added to the sums paid by the insured. The government subsidies ceased when the total credited to the insured person was sufficient to secure him an annuity of 360 francs ($72.00).

The government subsidies granted under the law of 1800 were small and did not prove sufficiently attractive to the old people. The amounts were therefore increased by an amendment passed in 1803. The latter provided a government allowance of one hundred per cent. on the first six francs ($1.16) deposited by a person who on January 1st, 1803, was between the ages of 40 to 45; the subsidy increased to 150 per cent. for those who were between the ages of 45 to 50 on that date, and amounted to 200 per cent. on the first six francs for those persons who were 50 years old at the time the law was enacted. These extraordinary subsidies naturally increased the number of depositors tremendously. According to Dr. Rubinow:^[261] “In 1880 the number of insured was only 12,000 and under the influence of the subsidies began to grow, though slowly, and by 1888 it amounted to 168,000. The systematic granting of subsidies ordered by the act of 1800, in one year doubled the number of depositors. In 1802 it reached half a million. The increase in the rate of subsidies in 1803 brought the number to 636,000 and by 1810 it was well over 1,000,000.” There are no figures available in this country to show the tendency of the savings fund since the conclusion of the war. Savings in general, however, have greatly increased in Belgium. During the last eleven months of the year 1818, the Belgian postoffice savings banks received deposits amounting to 368,000,000 francs as against 262,000,000 francs in 1818.^[262]

The savings fund could not meet the immediate problem of old age. The Belgian government, therefore, in addition to subsidizing savings, practically established a system of temporary old age pension grants. These pensions were given to all persons 65 years of age and over, provided they were Belgian subjects and had been residing in Belgium at least one year prior to their application for relief. These straight pension grants were given only to workmen, i. e. “men and women actually working with their hands for an employer, in consideration of a wage, whether such work be performed on time wage or piece wage, at home or away from home, and whether it be domestic, agricultural, industrial or handicraft work.” The claimant, the law also specified, must be in want, which was defined as “a state in which the resources of the person are insufficient to enable him to support himself and his family in accordance with the standard of comfort prevailing among workmen of his trade in the district in which he resided.”

The amount of the straight pension given was very small, namely 65 francs ($12.55) per year. The pensions were originally intended to cease in 1811 and government subsidies were to be given only to those who had made deposits in the savings fund. However, in May, 1811, the law was further extended to continue till 1814.

The experiences of the Belgian fund are sometimes pointed to as indicating the success of voluntary insurance. However, while it is true that the Belgian experience has proved quite successful, it must be accounted for by the extreme measures undertaken to attract depositors. It is obvious that subsidies of 150 to 200 per cent. would attract a great number of persons. But these are hardly different from straight pensions. Prior to the war, it was also claimed by students of social insurance that in spite of all efforts, the average annual payment per deposit in Belgium was steadily declining.^[263]

CANADA

The Canadian Parliament, in 1808, passed an act authorizing the issuing of government annuities for old age. This act was amended in 1808, in 1810, in June, 1813, and in 1820. The law originally authorized the Minister of Trade and Commerce to make contracts with any person domiciled in Canada for the sale of an immediate deferred annuity, as follows: “(1) for the life of the annuitant, (2) for a term of years certain, not exceeding 20 years, provided the annuitant shall so long live, (3) for a term of years certain, not exceeding 20 years, or for the life of the annuitant, which ever period shall be the longer. Also for an immediate or deferred annuity to any two persons domiciled in Canada during their joint lives and with or without continuation to the survivor.”

The system of government annuities is at present in charge of a Superintendent of government annuities in the Post Office department. Payments are made in three forms: weekly payment, yearly payment, and single payment. The rates for females are somewhat higher than those for males. Premiums may be paid to the department directly or to any postmaster. Any person resident or domiciled in Canada may now purchase an annuity. Plans are also provided by which employers may co-operate with their employés in the purchase of annuities.

No annuity can be granted on the life of any person other than that of the actual annuitant. It cannot be less than $50 a year and the total amount payable by way of an annuity cannot exceed $5,000 a year. The age limit of 55 years formerly required at which an annuity could begin was abolished in 1820. If the annuitant dies before the expiration of the specified number of years, the annuity must be paid to his legal representatives for the remaining number of years, unless agreements to the contrary have been made between the State and the annuitant. The rate of interest on moneys returnable was increased from three to four per cent. by the 1820 amendment.

Up to Dec., 1820, there were a total of 4,857 annuities issued in Canada. The total receipts up to the same date were $4,751,677.17. The average amount of annuity purchased was about $250.^[264] This small number of annuitants is exceedingly significant in view of the fact that the Annuities Act “was passed in order to promote habits of thrift, and to afford facilities whereby the people of Canada might be aided and encouraged to make provision for old age by the purchase of Annuities” and by the department’s advertising the fact that under the recent amendment if “a man who began at the age of 20, to buy an annuity of $500 to commence at 60—which he could do at a cost of but little more than one dollar per week—were to die just before the first payment of annuity was due, his heirs would receive the tidy sum of $5,181.83.”

In addition to the voluntary system of insurance against old age, the government has also provided, for the benefit of the employés of the Intercolonial Railways and Prince Edward Island Railways, a separate fund which was established by an act of March 27, 1807, and which was later amended in 1808, and in June, 1813. Under this fund, the insured persons and the state contribute equal shares; the latter’s contribution, however, cannot exceed $100,000 per annum. The employé’s first monthly contribution is fixed at three per cent. of the monthly wages and the remainder at one and one-half per cent. Pensions are given, (1) to those who have attained the age of 70; (2) to those who have become physically or mentally incapacitated; (3) to persons who have attained the age of 60 and wish to be retired from service (after 15 years of service in all three cases); (4) to persons permanently disabled, as a result of injuries while at work; and (5) to persons who at the time when the act was passed have already reached the age of 70 and who have been at least ten years in the service. The amount of the pension is based on one and one-half per cent. of the average monthly pay received during the eight years immediately preceding the granting of the allowance, multiplied by the number of years of service. The maximum pension is limited to $20 per month, and cannot be more than two-thirds of the average monthly wage. It is also provided that before an employé can become entitled to participate in any of the benefits he must serve six months on probation, during which period he must contribute to the fund.

The Canadian Royal Commission on Industrial Relations in its report of 1818 declared:

“We recommend the question of making some provisions by a system of State Social Insurance for those who through no fault of their own are unable to work, whether the inability arises from lack of opportunity, sickness, invalidity, or old age. Such insurance would remove a spectre of fear which now haunts the wage-earner and make him a more contented and better citizen.”

JAPAN

A postoffice life insurance system was adopted by the Diet of Japan in the 1815–16 Session and went into operation in October, 1816. The business is under the Minister of Communications. Each of the 7,000 postoffices in Japan acts as an agency for the receiving of contract applications and the collecting of premiums for life insurance policies. All persons between the ages of 12 and 60 inclusive, are eligible for insurance.

Policies are of two kinds, whole life and endowment. The latter are divided into 10, 15, 20, 25, 30, 35 and 40 year endowment policies. Medical examination is not required but in all cases individual applicants must have a personal interview with a postoffice official. Provisions are also made for group insurance.

On March 31, 1820, there were a total of 1,588,715 insurance contracts in operation. The total premiums amounted to $347,085 and the contracts in force to $76,355,222. Over 58 per cent. of the policies were whole life policies and 41.6 per cent. were endowment policies.^[265]

In October, 1820, the government established a bureau in the department of Communications to deal with the question of State life insurance. Hitherto only a small section had been engaged in this work. The new bureau with its increased staff is expected to take up the matter of State life insurance on much broader lines.^[266]

SWITZERLAND

There is no federal insurance law in Switzerland at the present time. Each Canton makes its own insurance provisions. As a result both the voluntary and compulsory-contributory insurance plans can be found there. The two voluntary cantonal insurance organizations are the Social Insurance Fund of Canton Neuchatel and the Old Age Insurance Fund of Canton Vaud. The former is a mutual organization with optional membership which was established by the cantonal law of May 15, 1806, and which enjoys a cantonal subsidy. It provides straight life insurance policies as well as combination and annuity policies.

Of the total number of policies in Canton Neuchatel during the year 1813, 6,620 policies, representing insurance to the amount of $1,242,820, were straight life insurance policies, and 7,707 policies representing $2,653,750, were mixed policies and 545 policies, representing $50,180, were annuity policies.

The Old Age Insurance Fund of Canton Vaud was established by a law enacted in March, 1807. This fund combines old age insurance with the various forms of savings deposits. The premiums or deposits may be either definite or provisional. In the latter case deposits may be withdrawn within ten years after payment. The principal purpose of this fund is to enable employers to provide for old age insurance for their workmen without being compelled to risk losing such payments, in case of the premature death or disability of the insured. The insurance fund also makes special efforts to encourage deposits by women and children, especially school children. In addition the cantonal government makes very liberal contributions to the premiums or deposits of citizens of the Canton, who are industrial tradesmen or workmen, whose annuities do not fall due before their 55th year, and whose annual premiums or deposits range from six francs ($1.16) and do not exceed 60 francs ($11.58).

The total number insured persons in this fund during the years 1812 and 1813 were 13,823 definite and 14,886 provisional. The total premiums received during the same year were $30,141 and $33,531 respectively, to which there was added $15,052 and $16,664 cantonal contributions. The total payments to the insured amounted to only $470 and $724 respectively. The comparatively low payments are explained by the fact that the fund has been in existence a short time.

A commission of experts appointed by the Swiss Federal Assembly to study the problem of social insurance brought in a comprehensive report^[267] in regard to the problem in June 1818. The Commission recommended the adoption of a Federal compulsory insurance system against old age and invalidity. The insurance, it suggested, should be made compulsory either for certain classes of workers or for the entire Swiss population. The Commission recommended that the pensionable age be set at either 60 or 65 years. The contributions, the experts suggested, are to be made by the insured persons, the employers, the confederation, the Cantons and the Communes. It made no definite recommendations in regard to either the amounts of contributions or the pensions payable. It left to the law givers to decide whether they shall be uniform as in France, or shall vary in accordance with earnings, contributions and age as in Germany and in a few other countries. The Commission favoured a uniform rate of pension, however, although it did not preclude a modest graduation according to the length of time insured, or the taking out of supplementary insurance.

To meet the immediate needs of the aged, the Commission recommended the granting of straight annuities to those who have passed the age limit at the time the law is enacted. This to apply only during the period of transition, until this class gradually disappears. The Commission also recommended the continuation of the voluntary insurance plans now in existence for purposes of supplementary insurance.

MASSACHUSETTS

The Massachusetts system of Savings Bank Life Insurance and Old Age Annuities was devised and sponsored largely by Supreme Court Justice Louis D. Brandeis and the Massachusetts Savings Insurance League which Justice Brandeis organized. The plan first went into operation in June, 1808. Under the State law, savings banks were authorized to establish insurance departments, and to issue policies upon the lives of persons, as well as to sell annuities in accordance with the regulations provided by the State Insurance Commissioner. These savings banks insurance departments have no stockholders and are established solely for the benefit of the depositors.

The Massachusetts system of Savings Bank Insurance is a State aided plan in so far as the State largely bears the expenses involved in the administration of the system, and aims to give to Massachusetts wage-earners and their families all that their money can possibly buy of real insurance. Justice Brandeis stated that the purpose of the act was (1) “To give Massachusetts wage-earners an opportunity to secure safe life insurance at the lowest possible cost, as a substitute for industrial life insurance; (2) To give to Massachusetts wage-earners an opportunity to make provisions for their old age by the purchase, out of current earnings, of annuities at the lowest possible cost. (3) It is also designed to furnish a partial solution of the problem of providing for the superannuated workingman, by making the opportunities for saving the workingman’s money as numerous as the opportunities for wasting it.”^[268]

In addition to purchasing straight life insurance policies, residents of Massachusetts may, under the State’s Savings Banks Insurance System, secure also (1) Twenty Payment Life Insurance; (2) Twenty year Endowment Insurance; (3) Old Age Annuities; (4) Combination Insurance and Annuities; and (5) Immediate Annuities. The maximum annuity is limited to $1,000. Agencies for collecting premiums have been established by the Insurance Banks in large manufacturing and commercial establishments, peoples’ institutes, social settlements, and trade unions. In 1820 there were more than 300 such agencies scattered throughout the State. The amounts of the monthly payments for the different policies are given in a table on the following page.

For the eleven years the system has been in operation there were, early in 1820, over 20,000 policies written of all kinds. The number of old age annuities was less than 300. The small number of old age annuitants may be taken as a fair indication of the possibilities of voluntary insurance in this country. With a population of nearly four million and after eleven years’ experience, less than 300 persons are taking advantage of this form of old age insurance in Massachusetts. Miss Alice H. Grady, Secretary of the Savings Bank Life Insurance, while admitting that the Massachusetts experience would seem to show that the people are either unwilling or unable to purchase old age annuities, contends, however, that: “this inference is not entirely correct, the simple fact being that the people do not know about them. For lack of funds we have not yet been able to demonstrate what could be done by means of an educational campaign to teach the people what deferred annuities are and the advantage of this form of savings against old age.

“We believe,” continues Miss Grady, “that if the time shall come when we are able to bring home to our people, by means of a systematic educational campaign, the knowledge and benefits of this system, we shall find them both intelligent and responsive to this form of appeal, and ready to make voluntary savings against old age, as they are now learning to do against sickness and death.”

That the Massachusetts experience with voluntary insurance has proved unsuccessful seems obvious. To explain the general apathy on the ground of mere ignorance is to ignore the basic problems discussed in the preceding pages. The difficulties of saving for old age are unquestionably more fundamental and are indicative of the success voluntary old age insurance systems may have in this country. Unfortunately, the persons who need this insurance most cannot take advantage of it. However, there are other advantages which, it is claimed, have come about as the result of the adoption of the Bay State plan. Miss Grady contends that: “Coincident with the establishment of savings bank life insurance in Massachusetts, the big industrial companies not only improved the conditions of their policies but also reduced the cost of their weekly premium insurance about 20 per cent. The great significance of this reduction has become increasingly apparent as the years have come and gone. For instance, during the year 1815, the wage-earners of Massachusetts alone paid to the industrial insurance companies on weekly premium policies the astonishing sum of $12,000,000. Had it not been for the reduction in cost above referred to, it is a fair assumption that the amount paid to the industrial companies last year (1816) by our Massachusetts people would have been not $12,000,000 but $15,000,000. Those $3,000,000 remain in the pockets of the Massachusetts wage-earners or have been used by them to purchase other necessities of life. Bearing this in mind it is not difficult to understand why the State is willing to contribute the modest sum of $20,000 a year toward the support of an institution which has been instrumental in bringing about this immense saving to our people. One might even go so far as to hazard the suggestion that the people of Massachusetts are getting an extraordinary good return on an exceedingly small investment.”^[269]

WISCONSIN

In 1811 the Legislature of Wisconsin authorized the issuing of policies of life insurance and annuity contracts by the State. This was done by establishing a “Life Fund,” “to be administered by the State without liability on the part of the State, beyond the amount of the fund, for the purpose of granting life insurance and annuities, to persons who at the time of the granting of such insurance and annuities, are within the State or residents thereof.”

Applicants must be between the ages of twenty and fifty inclusive. These may purchase the following policies: (1) Ordinary life; (2) Twenty payment life; (3) Ten year endowment; (4) Endowment at age sixty-five; or (5) Term to age sixty-five. The advantages of this state fund are: (1) Its soundness; (2) Its low cost of operation, as profits are eliminated and no agents’ commissions to be paid; (3) No great overhead expense, as it is under the State Insurance Commissioner and only clerical help are being paid from the Life Fund.

When the Wisconsin Life Fund was established its promoters, among the many other advantages claimed for it, declared that: “it is the stepping stone to annuities to protect old age and perhaps to solving other economic and industrial problems.” Unfortunately, the life fund in Wisconsin has been a political pawn. It was sponsored and established during a LaFollette State administration and the Fund was fairly successful in its first few years. Then an opposing State administration came in and efforts to develop the life fund have slackened until it has become practically unknown in the State. Today, it is said that the only persons who are maintaining their insurance policies are the university professors at Madison.

AUSTRIA

A system of old age insurance for salaried persons and several other classes, was advocated in Austria as early as 1888, about the time the German Old Age Insurance plan was adopted. The first bill providing for such insurance, however, was not introduced until 1801. The first law enacted went into effect on January 1st, 1808. This act provided a limited system of contributory old age and invalidity insurance, restricted to certain classes of salaried employés. On June 25, 1814, the law was’ amended in essential respects by an Imperial decree, which was to become effective on the first of October, 1814. On account of the declaration of war, an order dated August 24, 1814, provided that the benefits should be retroactive as from the first of August, 1814.

Although the object of this insurance also was to build up a right to an invalidity or old age pension for the insured persons, the Austrian system differed from most other compulsory schemes. For instead of being a system of working-class insurance, it was established for the middle-classes and the salaried employés. Under this plan only the following classes were compelled to insure: (1) Employés working in Austria, who have the character of officials by virtue of their position; (2) Those engaged in duties of a preponderately intellectual character, both of which groups must have at least a total annual income under one and the same employer of 600 kr., (normally $121.80); (3) Those engaged in the managements of works or departments of works; (4) Supervisors over the work of other persons; and (5) Those serving on the staffs of offices and counting-houses. Salesmen and other clerks were included under the compulsory insurance only if they have received the required higher education. The law did not compel those engaged in domestic service, to insure, or as workers and apprentices in the production of goods, in industry, mining, agriculture and forestry. Exempted from the compulsory insurance were also persons who did not enter an employment to which the insurance applies until they were 55 years of age; employés of the state, communes, etc., for whom other provisions have already been made, but only in case their pension is higher than the lowest provided by the law. A number of other classes of employés were also exempted.

The obligation to insure under the Austrian law begins at the end of the 18th year. The insured are divided into six classes, according to their annual salaries which range from 600 kr. ($121.80), for the lowest class, to over 3,000 kr. ($608) for the highest class. Allowances, gratuities, etc., are included in the total income. The premium paid monthly for the six classes, prior to the war, ranged from six kr. ($1.22) to 30 kr. ($6.08), and by the 1820 amendment was increased in the same proportion for the various classes. The employer was made to pay two-thirds of the premium in the four lower classes and one-half of the premium in the two higher classes. An amendment adopted July 23, 1820 increased the classes to 16, ranging from 600 kr. as originally required in the lowest class to those earning salaries of 18,000 kr. in the highest class. In case of an annual income over 7,200 kr. ($1,461.60), the insured person was to pay the whole premium himself.

An old age pension was to be paid, in the case of insured men, either after 40 years of contribution at any age, or it was to be paid after five years of contribution on reaching the age of 70. In case of women, only 35 years of contributions were required, when the age of 55 had been reached, or after five years of contribution after reaching the age of 65. This was changed by the 1820 amendment to 60 for men and 55 for women. The amount of the pension varied with the salaried classes and the number of contributions made. The pension ranged from 180 kr. ($36.54) for the lowest class to 270 kr. ($54.81) the second class; 360 kr. ($73.08) the third class; 540 kr. ($108.62) the fourth class; 720 kr. ($146.16) the fifth class, and 800 kr. ($182.70) for the sixth class. The new amendment increased this pension to 645 kr. for the first class and 5400 kr. for the sixth class. Pensions of half the amounts were also paid to the widows of insured persons, who drew an invalidity or old age pension during their lives or had acquired a right to such a pension.

The administration of the insurance plan is under a central pension institution and its local offices. In 1811 there were 108,311 persons insured in Austria. Due to the Allies’ partition of Austria and its general state of bankruptcy, comparative statistics at the present writing, even if they are possible, would be of little value.

The State also has had a compulsory old age pension fund for the government mining employés which was established as early as 1854. The State paid one-half of the contributions to that fund.

CZECHO-SLOVAKIA

Compulsory insurance against invalidity and old age for salaried employés was established in what is now Czecho-Slovakia, as the result of a law of 1806, which was amended in 1814. The following forms of insurance are offered: (1) Invalidity pensions in case of incapacity for work; (2) Old age pensions to men after 40 years of membership, and to women after 35 years of membership; (3) Pensions corresponding to one-half of that granted the insured to the widow of the insured; (4) Grants for the education of children until they reach 18; and (5) A grant from the total indemnity in case the insured dies within the first five years. In the case of invalidity pensions medical care is provided in addition.

As is the case with the Austrian system the insurance is compulsory for those who are 18 years of age and upward whose income exceeds 600 crowns but not over 3,000 crowns. The contributions from both employer and employé as well as the pensions are similar to those described in the Austrian system.

In 1818 the following amendments to the law were to be submitted to the National Assembly: (1) The age for admission to be decreased from 18 to 16 years; (2) The minimum salary conditions to be abolished and new salary levels to be included in the compulsory law; (3) The invalidity and old age pensions to be supplemented by grants for education of children; (4) The provision of a burial benefit; and (5) That the pension be increased up to the amount of 50 per cent. if the health of the beneficiary requires the constant care of outsiders.^[270]

CHILE

In February 1811, a law was enacted in Chile requiring state railroads to establish an insurance fund for the retirement of incapacitated salaried employés and workmen and for the compensation of persons injured in the service.

The fund is made up from the following sources: (1) By deducting five per cent. from the employés’ wages; (2) By the retention of the first monthly increase in pay; (3) By the accumulation of fines and penalties, unclaimed pay, etc., and (4) By adding 54.8 cents to every $365 receipts.

Office employés who have been in the service for ten years and who are completely incapacitated for work, may be retired with as many fortieths of 75 per cent. of earnings as their years in service. Day labourers employed in the maintenance of ways, etc., having ten years of service and totally incapacitated for work may be retired with 50 per cent. of wages. Persons engaged in the upkeep of rolling stock, 65 years of age, 30 years in the service and incapacitated for work, retire with 50 per cent. of wages. The year’s work must be of not less than 250 days.

Persons permanently incapacitated because of accident are compensated by the payment of full wages.

FRANCE

For more than half a century France has experimented with voluntary and subsidized old age insurance, but without success. Finally in 1810 France was the first country to follow Germany’s example, and adopted a national compulsory system of old age insurance. The original act has since been amended several times, especially by the acts of September 20, 1812; August 17, and December 25, 1815.

The present act provides that all workers and peasants (salaried or wage-earners) earning less than 3,000 francs (normally $578) must take out old age insurance. State employés who do not come under the regulations of civil and military pensions are also required to insure themselves. The law exempts several large industrial groups who were already protected by more liberal compulsory provisions. The insuring of a person may begin from the age of 12.

The contributions to the insurance fund are of three kinds, depending upon the age and sex of the insured person. Adult males pay nine francs ($1.34) per year; adult females six francs ($1.16) per year; and minors under 18 years of age pay four and one-half francs ($0.87). The employer is required to duplicate this contribution and is also made responsible for the entire payment of the premiums. He is permitted to deduct the worker’s share from his wages, and receipts it by a system of special stamps which are affixed to the employé’s card.

The age when one may be pensioned is 60. Pensions may be drawn, however, at 55 with a proportionate deduction in both the amount of pension and the state subsidy. The amount of a pension is based upon the number of contributions made and the age of the insured. In order to obtain a regular pension, 30 payments are required. This is reduced to 28 for all who have performed at least two years of military service; and in the case of women, one annual payment for the birth of each child is deducted from the required thirty years. The State adds to each regular pension 100 francs ($18.30). This is still more increased by one-tenth to those persons, of either sex, who shall have brought up at least three children to the age of 16. For those who have made less than thirty payments, but more than fifteen, the state subsidy is computed on a basis of 3.33 francs ($0.64) for each year of contribution. No state subsidy is given in cases of less than fifteen annual payments.

To meet the immediate problem of relief for the aged, the law of 1810 also provided that all persons who were already 35 years of age at the time the law was passed, must insure. To those between the ages of 35 and 40, regular state subsidy was given. If 46 years old, in 1810, the subsidy was raised two francs and thereafter it was raised two francs for every additional year at which insurance began. Those over 65 years of age at the time the law went into effect, were continued to be given pensions in accordance with previous laws.

On January 1, 1814, the number of insured persons was 7,710,380, of which number 686,821 were voluntarily insured. The figures given for 1815 were 6,722,332 compulsory insured and 584,511 voluntarily insured. The year following, 1816, the numbers were 7,078,726 and 510,734 respectively. The smaller numbers in the war years are not due however to an actual decline, as two or three provinces which were included in 1814, were not included in the two following years, due to the German invasion.^[271]

That the declaration of war affected materially the receipts of the fund is evident from the fact that while for the first half of 1814 the receipts amounted to $3,665,833, the second half of the year yielded only $1,588,135. Indeed a comparison of the receipts for the pre-war and war years shows that more than one-half of the persons insured have been unable to continue their payments into the fund during the state of war.

The amount of premiums paid into the fund in these years was as follows:^[272]

Since 1811, when the law first went into effect, the number of persons retired each year was as follows:

On December 31, 1816, there were 1,158,325 retired persons under the Labourers’ and Peasants’ Retirement Fund.^[273]

The principle of compulsory insurance against infirmity and old age was applied to French miners long before the adoption of the general compulsory insurance law. The former was established in 1884. An amending act dated February 25th, 1814, repealed the previous legislation and created an Autonomous Pension Fund for miners, to be administered by a council of 18 persons, the employers, employés and the government to be represented by six members each. For the purpose of forming a basic capital for these pensions, the act provided that the mine owners pay every month into the fund four per cent. of the wages of the workers. The regular contribution is borne one-half by the employers and one-half by the workers. The right to a pension begins at 55 years of age. Miners who can prove that they have worked for wages for at least 30 years or at least 7,820 days (absence on account of sickness is not deducted) in French mines have the right, in addition, to a state allowance of 100 francs and a bonus from a special fund. In case of permanent incapacity a miner is entitled to a pension regardless of age. The state was to pay, according to the amended act, 2,000,000 francs annually towards the general administrative expenses and certain other purposes.

On the ninth of March, 1820, the law was amended providing for greater subsidies from the state. The state’s subsidy in the future will be 860 francs per annum for miners, and 430 francs for their widows. The total annual pensions were raised to 1,500 francs and 750 francs respectively. Another feature of the amendment is the inclusion of persons, who, after having worked as miners for ten years, become trade union officials.^[274]

On October 21, 1818, a law was promulgated also providing for a minimum retirement pension of 1,800 francs for each male employé upon reaching the age of 60 years after 30 years in the service of the state and 1,500 francs per each female employé upon the age of 55, after she has been 30 years in the state’s service. The state’s service includes the following industries: Manufacture of tobacco and matches; manufacture of goods in transit; general bureaus of printing and engraving, posts and telegraphs, and of mints and metals; military establishments under the supervision of the ministers of war and industrial reconstruction; and arsenals and naval establishments. The pensions are subject to the regulations concerning premium payments into the national old age retirement fund.

The law also provides that an employé may be retired for total disability after 15 years of service in which case the pension shall be reduced by one twenty-fifth per each year not served to 25. On the other hand, the pension is increased one-thirtieth and one-twenty-fifth for those eligible to retirement after the respective years of service for each year above their limits. A widow’s pension is equal to one-third of that to which the husband was entitled at the time of his death. The pension is increased to one-half of that to which the husband was entitled in case three or more children under 16 are left.^[275]

The comprehensiveness of the French insurance system is still further evidenced by the fact that in addition to the compulsory insurance systems, the French law also provides a system of voluntary insurance which is extended to private persons with small incomes, small employers of labour, peasant proprietors, independent workingmen and wage-earners, with incomes of more than 3,000 francs ($578), but less than 5,000 francs ($865). The Act of December 25th, 1815, also raised the maximum life annuity from 1,200 to 2,400 francs, ($231.60-$463.20).

GERMANY

Germany was the pioneer in the field of social insurance. Insurance against old age was first established in that country in 1888. In 1811 Germany adopted a most comprehensive system of workingmen’s insurance, which included, besides the payment of old age pensions, sickness, accident, invalidity and survivors’ benefits. Under the German law insurance was made compulsory for all manual workers and those other wage and salaried persons whose annual income did not exceed 2,000 marks (normally $476). The obligation to insure begins with the 17th year.

Prior to 1816, the age of eligibility for an old age pension was set at 70 years. An Imperial law of June 12, 1816, reduced this age from 70 to 65 years. This law was made retroactive taking effect as from the first of January, 1816. In addition to the payment of old age pensions the German system also provides for invalidity pensions which are granted in case of permanent disability before the pensionable age. The latter is given to all persons unable to earn one-third of the normal wages in the same occupation and locality. As would be expected, many more persons are receiving invalidity than old age pensions. The former has steadily increased while the latter has steadily declined. In 1814, there were 888,338 invalidity pensions paid, as compared with 87,261 old age pensions. The comparative growth and decline of the two forms of pensions may be seen from the following: In 1881 there were 31 invalidity pensions; this increased to 405,335 in 1800; in 1808 it rose to 868,086, and in 1814 it numbered 888,338. The aggregate expenditures for the old age and invalidity pensions stood as one to two in 1884; it reversed to two to one in 1800, eight to one in 1808, and eleven to one in 1812. The reduction of the pensionable age from 70 to 65 reduced this proportion considerably. The consequences of this reduction for the first complete year, during which it was enforced, may be seen from the following: The number of new pensions granted by the insurance offices of the various States increased from 11,276 in 1815, to 82,120 in 1816. Those granted by other offices of a special nature rose tenfold in the same interval.^[276]

The insurance contributions in Germany are made jointly by the State, the employers and the employés. The State bears part of the expenses of administration by the payment of pensions through the postoffices, and contributes, in addition, a fixed sum each year toward every pension. The amounts of the weekly premiums that are paid by the employers and employés are in equal parts. The employer is made responsible for the insurance of all his employés and for the payment of their premiums. He is permitted to deduct the latter’s contributions from their wages, and receipts it by affixing special stamps to the worker’s receipt card.

The contributions to the fund are not uniform but vary in accordance with the annual earnings of the workers. For this purpose, the insured persons were divided, until recently, into five classes ranging from those earning less than 350 marks ($83.37) per year, in the first class, to those earning more than 1,150 marks ($273.83) per year in the fifth class. Until 1817, the weekly contribution for these classes ranged from 16 pfennige ($0.038) to 48 pfennige ($0.114) per week. On January 1, 1817, however, owing to the extra sums expended as a result of the reduction in the age limit, the contributions were increased to 18 pfennige per week for the first class, and 50 pfennige per week for the highest group. Another amendment was adopted in April, 1820. The new law increased the weekly contributions from 80 to 140 pfennige respectively (normally .2104 and .3303 cents).^[277] This enormous increase in the weekly contributions, since the beginning of the war is, of course, explained by the depreciation of the German money. Participants of the war were exempted from payments during the war.

In July 23, 1821, a new law was adopted increasing the classes to eight and the weekly payments from 3.50 marks for the lowest class to 12 marks for the highest. It is further provided that this law continue in effect until December, 1826.

The German law provides that in order to be eligible for an old age pension, one must have at least 1,200 weekly contributions. To meet the immediate problem of old age relief the required number of contributions was reduced by 40 weeks for each year of age over 40 at the time the law became operative. Persons over 70 years of age at the time of the passage of the law were thus pensioned outright, but they had to show that they had worked in a trade coming under the insurance law for three years.

The amount of the old age pension prior to the war ranged from 110 marks ($26.20) per year to 230 ($54.78) per year, according to the wage class the insured person was in. The government’s contribution consisted of a uniform state subsidy of 50 marks ($11.81) to all pensioners. The minimum annuity was set at 60 marks ($14.28) for the first wage class. The annuity was then increased by 30 marks ($7.15) for each succeeding class until it reached 230 marks ($54.78). On account of the increased cost of living during the war, a Federal decree of January 3, 1818, introduced pension bonuses which provided flat increases in the pensions in order to meet the high cost of living. The amended law of April 28, 1820, established the following bonus rates which are granted to recipients of invalidity, old age, and survivors’ pensions. A monthly bonus of 30 marks ($7.14) is added to invalidity and old age pensions, while a monthly bonus of 10 marks ($2.38) is added to orphans’ pensions. By the end of 1820 there was a great demand for a further increase in the pension rates, on account of the continued increase in the cost of living.

The German invalidity and old age insurance system is administered by approximately 50 territorial and special “institutes” under the general supervision of the central insurance office. The administration is in the hands of highly trained experts. To each insurance office are attached several boards of arbitration which adjudicate cases in dispute. These consist of an impartial chairman, a secretary and two representatives of both employers and employés. In 1814, the total cost of administration of the insurance system was 24,156,658 marks ($5,754,116). The government’s contributions to old age, invalidity and survivors’ pensions amounted to 84,500,000 marks ($20,111,000), in 1816.

The German system, in addition to paying pensions, makes also an effort to prevent invalidity whenever possible. The invalidity institute has the power to provide a course of medical treatment, such as would reduce or prevent the loss of earning power. For this purpose, a chain of 65 or more sanitoria are maintained, which before the war, treated annually about 70,000 persons. The war has naturally increased the work of these preventive institutions. It is claimed that 80 per cent. of the cases treated are discharged as cured. The institutes are also authorized to invest part of their reserve in such manner as will promote the social welfare of the working classes. In order to improve the health and well-being of the insured persons, the social insurance institutes prior to the declaration of war, erected model dwellings for workmen, as well as convalescent homes, people’s baths, labour colonies, etc. The insurance institutes claim that this has resulted in a considerable reduction in the death rate and sickness rate in Germany.

Since the inauguration of the war, the German insurance carriers have invested a great deal of their money in government war bonds. Of the 120,000,000 marks net assets of the Berlin Institution in 1818, nearly 70,000,000 marks were invested in war bonds. As a result of this, and the continued depreciation of the German mark since the signing of peace, the insurance institutes have been in a desperate condition. In 1818 the Berlin State Insurance Institute had to borrow about 58,000,000 marks (normally $14,000,000). In the same year the Institutes suffered a deficit of approximately 4,000,000 marks. The deficit for 1820 amounted to about 20,000,000 marks.^[278]

The average amount of an old age pension in 1814 was 167.88 marks ($40.02) or about $3.33 per month. Because of the steady rise in wages which decreased the number of persons in the lower wage groups, the average pension paid has risen steadily. In 1881 it amounted to 124 marks ($28.54). In 1800 it was $34.67, and in 1808 it was $38.58. The average amount of the invalidity pension, increased from $41.60 in 1808 to $46.51 in 1813. In 1817 the average pension was about $45.24 per year. In 1813 the number of persons insured under the invalidity and old age insurance act was 16,323,800. This represented 24.4 per cent. of the total population. From 1881 to 1813 the distribution of the contributions toward the invalidity and old age pensions was as follows: The employers contributed $418,026,865, representing 40.7 per cent. of the total contributions. The insured persons contributed a similar sum. The aggregate state subsidy during this period amounted to $181,881,177, which represented 18.6 per cent. of the total contributions. The total contributions for the 22 years amounted to $1,028,034,807.

In 1818, a German writer declared that it would cost much more than 1,000,000,000 marks ($238,000,000) annually to discharge all of Germany’s social insurance subsidies.^[279] Representatives of the German State invalidity insurance institutes, at a conference in Berlin in May, 1818, declared that, in order that the heavy burdens may be borne more easily the solvency and efficiency of the insurance institutes must be assured by the introduction of higher wage classes for insured persons with earnings in excess of 1,500 marks ($357.00). It was also urged that insurance be extended to persons 15 years of age and to small business men as well as railroad employés with incomes of 2,000 to 5,000 marks ($476 to $1,180).^[280] In July, 1821, this was increased to invalid persons earning up to 15,000 marks annually.

On January 1st, 1813, the act creating the salaried employés’ insurance system went into operation. This was primarily for the payment of old age invalidity, and survivors’ pensions. A waiting period of ten and five years respectively, for the payment of such benefits, is provided, but this period may be shortened by the payment of extra premiums. Under this insurance provision, pensions are paid if the earning capacity of the insured has been lessened by 50 per cent. instead of two-thirds, as required under the general insurance system. The contributions here are made by the employers and employés with no state subsidy. During the year 1816, the total amount of contributions paid to the institute by the employers and employés was, in round figures, 113,000,000 marks ($26,884,000). This insurance system was very unpopular, and the obligation to insure was contested by many people during the same year. While only few of these special pensions were given during the year 1816, the insurance institute for salaried employés granted such other benefits as provided by law. First of these was the granting of medical and curative treatments. This insurance is objected to by many, as it is claimed that its creation was mainly for political reasons, in order to separate the salaried employés from wage-workers, as a special class.

The conference of insurance experts in 1818 already referred to urged that the salaried employés insurance be discontinued as a special institution, and that it be incorporated in the general invalidity insurance plan. The conference declared that: “While the exceedingly expensive salaried employés insurance in its present form could be tolerated as a luxury as long as favourable economic conditions prevailed, this is no longer possible at present, when great economy in all spheres has become an imperative duty. It seems, moreover, not possible to permit this insurance system to accumulate and hoard a billion marks during the next five years, of which not even the interest would be paid in benefits to the insured.”^[281] At the present writing there is a movement supported by the Socialists and the institutes to combine both systems. On May 31, 1820, the income limit of salaried employés who are subject to obligatory insurance was raised to 15,000 marks (normally $3,750) per annum,^[282] and on July 23, 1821, was further increased to 17,000 marks.

GREECE

A compulsory invalidity and old age insurance system for Greek sailors was enacted in 1807. The cost is divided equally between the insured, the employers and the State.^[283]

ICELAND

Iceland established a compulsory system of old age and invalidity insurance in 1880. In accordance with the law, “All servants between the ages of 20 and 60, all day labourers, and persons working with their parents must annually contribute to this fund $0.27 for men, and $0.08 for women. The male head of the household must pay this contribution for every person who resided with him during the year, but he may deduct it from the wages of his employés. For the non-payment of these contributions, property may be attached. The only persons exempt from paying contributions are those without means who are responsible for maintaining one or more dependents who are unable to provide for themselves; those unable to earn wages on account of sickness or other cause; and those who have provided for their old age by purchase of an annuity of at least 150 kroner ($40.20).

“Pensions are granted to persons over 60 years of age who have received no poor relief during a prior period of ten years. The minimum pension is 20 kroner ($5.36) and the maximum pension granted may not exceed 200 kroner ($53.60).

“Funds are administered in cities by the magistrates, in rural communities by the parish-council, and these officials may set aside as their salaries four per cent. of all contributions levied. They must also elect two persons who audit the annual balance sheet of the respective funds.”^[284]

ITALY

Like many other countries, Italy first experimented with voluntary and subsidized old age insurance. The National Institute for Insurance of Workmen against invalidity and old age was merely an institution for voluntary insurance and was established in 1888. Its purpose was to offer protection against old age to all Italian citizens who were engaged in manual labour or who on their own account did not pay a tax exceeding 30 lire (normally $5.78) per annum of any nature. In addition to the regular annuity the government added a contribution not to exceed 10 lire ($1.83) per annum. While other classes also were permitted to insure, the latter were not given the special subsidies.

The Italian voluntary insurance system was no more successful than those of other countries. From 1888 to 1810 the total number of accounts opened was about 300,000, which constituted only two per cent. of the total population gainfully employed in that country. During all this time the government was continuously beset by the demands of organized labour and social workers for the enactment of a compulsory old age and invalidity insurance law. During the war the government was compelled to comply in part with these demands. Thus in April, 1817, a viceregal decree made it compulsory for all auxiliary war establishments to insure their workers in the National Insurance Institute. In accordance with this decree over 600,000 workers were insured in the Institute.

Shortly after the Armistice was signed the government introduced a bill in the Chamber of Deputies, providing for compulsory old age and invalidity insurance. As the bill was hailed unanimously by both employers and employés, and in order to secure speedy action, a decree was issued on April 21, 1818, establishing obligatory old age and invalidity insurance. The act went into effect January 1, 1820.

The Italian Insurance Act against disability and old age is compulsory for (1) All Italian subjects of both sexes, whether at home or in the colonies, between the ages of 15 and 65, who work for an employer in any industry, trade or profession, including “home industries,” agriculture and public service, or who are occupied in domestic service or in any private employment; (2) Aliens working at the same occupations, provided reciprocal treatment is granted to Italians abroad.

The following are exempted from the obligation to insure: (1) Non-manual workers whose average monthly salary exceeds 350 lire ($67.55); (2) all half-share and tenant farmers whose annual income exceeds 3,600 lire ($684.80); (3) Men in the merchant marine service employed on Italian ships who are already insured in the merchant marine’s Invalidity Fund; (4) State and public service employees for whom insurance schemes are already in existence.

The new Italian old age and invalidity insurance law provides for equal contributions from the employer and the insured persons. The contributions are based, as in Germany, upon a sliding scale in accordance with the daily earnings of the insured person. The bi-weekly contributions are as follows:

As in Germany and France, the contributions are collected by the employer, who affixes stamps to special cards provided for that purpose. The employer is held responsible for the collection of both his own and his employé’s shares. He is permitted to deduct the worker’s contribution from his wages and penalties are prescribed for incorrect deductions.

Pensions are granted to (1) persons 65 years of age who have paid at least 240 fortnightly contributions; (2) at any age in case of permanent incapacity to persons who have made at least 120 bi-weekly contributions. A person is considered disabled if his earning ability is reduced to less than one-third of the current earning capacity of persons working in the same occupation in the same locality. The pension may be suspended when the person improves to such an extent as to make the definition no longer applicable.

The pension amount is made up of two parts. (1) The part corresponding to the contributions made by the insured person and his employer, and (2) the part granted by the State. The first amounts to 66 per cent. of the first 120 fortnightly contributions, plus 50 per cent. of the next 120 contributions together with 25 per cent. of the remaining contributions. The second part is made up of 100 lire ($18.30) for each pension each year.