Provision against Unemployment—Equalization of Demand for Labour—Insurance against Unemployment—Need of a Job-Finding Organization—Insurance by State or Industry—State Insurance—Insurance by Industry or Industries—Reform of Present Out-Door Relief System—Unemployment Insurance by Firms.
Reform of the relationship in industry between employers and employed involves three things: securing contentment, achieving co-operation, increasing production; these constitute the dynamic trinity. Only when contentment can be secured is co-operation made possible; without co-operation there never can be efficient production; production alone can create the prosperity which is the sole source of the financial ability of any industry to pay high wages and maintain good conditions of employment. Contentment does not mean stagnation; it means willingness to progress under an accepted system—in other words, evolution.
If we are to secure contentment in industry, unquestionably the first matter to be dealt with is unemployment. A distinction must be drawn between normal unemployment—the result of seasonal or cyclic depressions in trade, which arise from circumstances well-known in industry, either affecting the world at large or peculiar to some country in particular, or special to some national industry—and the abnormal unemployment which has resulted from the Great War. We are now considering normal unemployment. What Government should do to deal with the abnormal unemployment occasioned by the war we have already discussed in Chapter XXII.
In regard to normal unemployment there are two things only which can be done:—first, to reduce, so far as possible, fluctuations in the demand for labour between one year and another, and one season of the year with another season of the same year, and, secondly, to make the best provision economically practicable for the maintenance during times of trade depression of persons who are unemployed or under-employed. It is most difficult to “equalize the demand for labour.” In ordinary commercial business that is a matter largely outside the power of Government, employers, or Trade Unions. It is one of the privileges which is reserved for the consumer. The only directions in which fruitful action can be taken are to provide a system such as exists under the Labour Exchange organization, or that of certain Trade Unions, whereby the workman out of a job can be put in touch with the employer who wants labour of his particular description, and to arrange the execution of public works by Government Departments or local authorities, and the manufacture of stores or equipment for public purposes, the amount of which is more or less standard, so that by postponing some and expediting others some advance is possible towards making more uniform the demand for labour as between good times and bad. But the limits within which this is a practicable policy are much narrower than is generally realized, and immensely more restricted than is suggested by the Labour Party.
Although to prevent unemployment is impossible, happily a great deal can be done to mitigate the evils of unemployment when it does occur. Under no system of organizing industry—in spite of the contentions of the Labour Party that under its socialistic reconstruction of industry there would be no unemployment—can any person be guaranteed continuous work. It is possible, however, to spread the income of the industry in good times over bad times, so that when the latter supervene there will be something coming in to the worker for him to live on. This is not a dole as some people call it, but rather in the nature of deferred pay. With that in operation there would be an end to what is called by Labour the “wages system.” The worker would no longer be paid wages for such time only as he is employed, but would receive pay for the time he works and also pay during the time he is unable to work because of trade depression. There must be in all industries, both on the side of labour and of the employer, a reserve of productive capacity to meet the peak demands, and all employers with few exceptions recognize that it is their duty to apply some of the profits of good times for the maintenance of this reserve of labour in their industry when unemployed at times other than peak times, and of the general body of labour when unemployed or under-employed at times of trade depression. But the provision against unemployment must be a joint fund to which both the employer and the worker contribute during good times.
As ancillary to any scheme for provision against unemployment, there must be some effective organization in existence whose duty it is to endeavour to ascertain where there are any vacancies for workmen in which men who are unemployed can be started. Obviously this is necessary both in the interests of the industry and of the actuarial solvency of the fund provided against unemployment. Unfortunately a substantial number of persons will always exist who prefer not to do work but yet be paid for it.
The next question is by whom shall the provision for unemployment be made? Shall it be by the State or by industry, that is to say, all industries acting collectively, or by each industry for itself, or shall it be by individual firms? We shall consider these cases separately.
It is characteristic of the times that when persons have omitted to do what they should have done and then find themselves in difficulties by reason of their omission, they call upon the State to remedy their deficiency. Eliminating the question whether the State out of its own financial resources should make any addition to the fund contributed by employers and employed for provision against unemployment, Government administration of the fund is necessarily less efficient and more expensive than administration by industries or by firms. Some striking figures have been published in The Times of January 25, 1922. It was stated at the National Federation of Employees Approved Societies by a gentleman representing the British Xylonite Company that his firm’s scheme of unemployment insurance cost only £334 per £10,000 to administer as against the Government’s £1,000 per £10,000. It must be remembered, however, that the Government scheme has to cover multifarious trades—organized, semi-organized and those not organized at all. But still, after making all due allowance for that fact, there appears to be no question that a Government scheme does necessarily, from the inability to maintain close supervision, afford opportunities for waste and abuse which would not arise under a system of closer control.
The details of the Government scheme have been described. The Labour Exchanges have, in the face of great difficulties, performed the administration with efficiency, but no one with experience of industrial conditions during the last two years could fail to realize that the administration of unemployment insurance is not proper work to be undertaken by any Government Department. The proper function for the State is to see that all possible provision is made against unemployment but not to undertake the work itself. In 1920 a Committee of Inquiry was appointed by the Minister of Labour to inquire into and report upon the Labour Exchanges. The majority of that Committee reported that “the administration of unemployment insurance by industries on behalf of their own members was the most desirable system in the end, particularly from the point of view of obtaining technical knowledge in the placing of workmen, the creation of a corporate pride in each industry, and a sense of responsibility for unemployment in the industry.” The Geddes Committee has recommended that this question should be further explored, and the Minister of Labour is taking steps to do so.
That industry should provide for its unemployment is obviously reasonable. The taxpayer has no control over industrial conditions, or over the wages which are paid, or the conditions of employment in operation, and in respect of such matters industry is under no responsibility to the taxpayer. Should this provision be made by each industry in particular or by industry as a whole? It would be impossible to form a scheme under which each industry would provide against its own unemployment. There are many industries, ranging from those most highly organized with employers and Trade Unions acting, and accustomed to act, collectively and with some experience of the ratio of their unemployment, down to industries which have no organization whatever nor any collective machinery available for the operation of an insurance fund nor any knowledge of their own unemployment. It is only a highly organized industry that could undertake to provide for its own unemployed, and not all highly organized industries, but merely a selected few—those which are clearly separated off from other industries. To all but the initiated it is surprising how industries are interlocked. If we take, for example, the engineering industry, and industries like iron and steel, nuts and bolts, bicycle parts and innumerable others, there is great interchange of labour, especially unskilled. A large West-end store will be engaged in fifty to sixty different industries. How would its interests in each industry be separated? There is no doubt that it is to the financial advantage of a highly organized clearly demarcated industry to provide for its own unemployment insurance as compared with participation in a State Scheme.
Sir Alfred Watson, the Government Actuary, before the Committee of Inquiry on the Labour Exchanges, pointed out the great financial benefit it would be to the principal industries to provide their own unemployment insurance, and referred to the large margin there would be available for the actual costs of the benefits. In a most interesting pamphlet published on “Unemployment Insurance,” Mr. Henry Lesser, the President of the National Federation of Employees Approved Societies, states that in one industrial undertaking employers and employed pay in respect of the National Unemployment Insurance Scheme over £22,000 per year, but that in normal times the persons employed in that particular firm do not receive in the aggregate in unemployment pay more than £800 a year, a case, he says, which may be taken as typical of the whole of the industry in question.
One outstanding advantage which would result from each industry effecting its own unemployment insurance would be the feeling it must undoubtedly engender in the minds of both employers and Trade Unions of their responsibility for the combined working of the industry, and the effect it is bound to have in producing a better spirit between the two parties and amongst the men, who will no longer feel that they are taken on and discharged merely as it suits the interests of the firm. A thorough investigation should be made as to what industries could undertake their own unemployment insurance, and whether it is better that they should do so, or come into a general scheme of insurance by all industries. The ordinary objection of employers and Trade Unions representing “good” industries, i.e. those with a low rate of unemployment, is that they are paying for the “bad” industries with a high rate, but is not that rather the essence of insurance? It may well be that only insurance by all industries acting collectively is possible. If such turns out to be the case, that plan should be adopted ready for carrying into practical operation on the approach of more normal times. Industries which rely mainly on casual labour are a more difficult proposition. Decasualization is essential, and that must be effected by some means of restricting the free influx of labour into the industry, as has been done in the Dock Labour Scheme in Liverpool. The efficiency of the Liverpool method is undoubtedly due to the co-operation between the dock labour employers and the Unions; it has been most strikingly successful. It affords a basis for procedure in very many industries. There must, however, I am afraid, remain a residuum of unemployment insurance to be handled by the State, in the absence of any other authority, on the lines presumably of the present National Unemployment Insurance Scheme, but it would be reduced to small proportions if all the great industries of the country were providing for their own unemployment.
In connection with unemployment, the present system of Poor Law relief wants overhauling. The provision of relief by the Guardians (in addition to, or substitution for, unemployment insurance benefit) on varying standards in different places throughout the country is extremely wasteful and disturbing to social harmony. If this is taken out of the hands of the Guardians, as has already been recommended by both the majority and minority reports of the Poor-Law Commission, and committed into the hands of some local authority—because local responsibility is essential for the spending of money raised by local rates—it would mark progress of no uncertain kind. Absolute standardization is impossible, because of the varying social circumstances and indeed social outlook in different parts of the country, but, after allowing for this, much greater approximation to uniformity could be secured.
Without any doubt the best approach to insurance by industries or by industry as a whole is to start with insurance by firms. An admirable beginning has been made in this direction by the National Federation of Employees Approved Societies—particulars of this scheme can be obtained from the Secretary to the Federation, c/o British Thomson-Houston Co., Ltd., Rugby—it is also described with great clearness by Mr. Lesser in the pamphlet referred to on p. 260. The experience of the Federation is most instructive. In many works, before the days of National Health Insurance, there were sick clubs which provided for members unemployed through illness, benefits from a fund to which employers and employed alike contributed. Both employers and employed viewed, with considerable regret, the proposed absorption of these clubs into the new Approved Societies established under the Health Insurance Act, and to obviate that fate reconstituted their clubs with the approval of the Insurance Commissioners into “Works Societies,” and obtained official sanction for these Societies to administer the State scheme. Later these Works Societies decided to undertake the administration of unemployment benefit at their respective works under Section 17 of the Unemployment Insurance Act, 1920. There were three conditions precedent: first, that the Society must provide for payment out of its own voluntary funds of an additional unemployment benefit equal to one-third of that payable under the Act—that is to say, if the State benefit was 15s. the Society must add to that at least another 5s. out of its private fund and so pay a total benefit of 20s. The second stipulation was that the Society must have a system for ascertaining the rates of wages and the general conditions of employment prevailing in all occupations in which its members were engaged; these particulars were always well-known, and there was not much difficulty about that. The third requirement was that the Society should have an effective system of ascertaining vacancies for employment—this meant some organization distinct from the Labour Exchanges. Such an organization was finally obtained through the co-operation of the local Chambers of Commerce, who receive from their associated firms particulars of vacancies which the Chambers send on to the different Works Societies. The scheme works exceedingly well. It was first adopted by the South Metropolitan Gas Co., and later by the Gas Light and Coke Co., Messrs. Debenhams, the British Thomson-Houston Co., Ltd., Taylor Bros. & Co., J. T. & J. Taylor, Ltd., and a number of other firms. The Society acts as the State’s agent with regard to paying out the State benefits, and in addition pays at the same time a supplementary benefit of one-third of the State benefit, for which an extra contribution is generally levied on the workers at the rate of 2d. per week, and most of the employers contribute to the supplementary benefit fund. One cannot fail to be struck in reading Mr. Lesser’s pamphlet by the extraordinary success of the Federation’s scheme in producing co-operation and good feeling between masters and men. With the experience which firms get through putting into operation a method of unemployment insurance of this kind, the way is opened for the institution of a wider scheme of grouped firms, and ultimately for insurance by industry or industries.