§ 1. Purpose and meaning of social insurance. § 2. Increasing need of social insurance. § 3. The new era of social insurance. § 4. Features of social insurance. § 5. Historical roots of accident insurance. § 6 Development of compensation for accidents. § 7. The compensation plan in America. § 8. Standards for a compensation law. § 9. Old-age and invalidity pensions. § 10. Life insurance for wage-earners. § 11. Historical roots of health insurance. § 12. Need of health insurance in America. § 13. Unemployment insurance. § 14. Need of ideals in social insurance. § 15. Insurance rather than penalty. § 16. The compulsory principle. § 17. State insurance and a unified system. §18. The contributory principle.

§ 1. Purpose and meaning of social insurance. In importance surpassing at present any one of the various measures on behalf of the wage-earning class that have thus far been considered is the remarkable development now under way of plans and agencies to provide insurance for the " common man." Insurance means making some kind of provision out of present means, so as to reduce the injury and suffering that would result from a future mishap. Usually, likewise, it implies uniting with others to distribute the expense fairly over all in the group. Social insurance is the term most frequently applied to the various institutions and plans provided, more or less under the regulation of law, for the protection of the lower paid workers in most modern countries. The terms industrial insurance and workingmen's insurance are likewise used. The principal types of events for which social insurance in its various branches provides are (1) accident; (2) incapacitation (either by old age or by permanent failure of health within the normal working years); (3) death; (4) sickness; and (5) unemployment. The five types of insurance to provide indemnity in these cases are usually known as (1) accident insurance, (2) old-age and invalidity pensions, (3) life insurance, (4) health insurance, and (5) unemployment insurance or out-of-work benefits.

The direct aim of social insurance is not to prevent these mishaps (though that may be an indirect result), but it is to provide some financial indemnity for the economic loss and expense involved in the mishap. The principal kinds of losses are two: first, medical expense, occasioned directly in caring for the sick or injured person, the expense of medical attention, nursing, hospital care, drugs, and special apparatus such as crutches and glasses, and burial expenses; second, wages, the loss of income because of inability to work as a result of injury, of illness, or of permanent disability, or (in the case of life insurance) of the death of the bread-winner, or of want of employment.

§ 2. Increasing need of social insurance. In various connections we have observed how the changes that have been occurring in modern times have increased the uncertainties of the industrial life and of the earning power of the mass of the workers.1 It should be further observed that in city conditions a working family does not have, as in agricultural conditions, the supplementary sources of income from garden, field, forest, and stream, and it is not so possible to use the earning power of children, of old people, and of the partially disabled. The faster working pace of factories, the increase of power-driven machinery, the rapid fluctuations of employment with changing fashions, inventions, shifts of population, and waves of industrial prosperity and depression, all have introduced new risks and problems into the worker's life. The increasing payment of wages in money, and the more temporary nature of employment of men in many kinds of factory work, have added to the problem. With these changes have come belatedly a growing interest in the welfare of the mass of the workers and a growing sense of responsibility on the part of the public.

1 See ch. 10, § 7; ch. 21, § 1; ch. 23, §§ 10-19; and ch. 33, § 14.

There is an appalling mass of misfortune in the United States requiring social insurance for its relief, although satisfactory statistics of the various types of misfortune are still lacking. On the basis of the experience of private industrial insurance companies, it appears that there are not less than 25,000 fatal industrial accidents yearly, and 700,000 injuries causing disability for more than four weeks, besides an enormous number of slighter injuries, many of them very painful, disabling for a period from one day to four weeks. This means that the loss in life and bodily injuries in industry in the United States while the country was at war in 1917 and 1918 was about equal to the like losses of our soldiers on the battle-field.

As to loss of time due to illness, the experience of Germany shows an average of eight or nine days a year per worker, and investigations in America point to a very similar figure. This, applied to those gainfully employed in America, would mean nearly 300,000,000 days of illness, or 1,000,000 one-man working years, causing a loss estimated at $750,000,000 annually (but at present wage rates fully $1,000,000,000).

It is estimated that one in eighteen of American wage workers attains the age of sixty-five with no financial provision for old age, and that about 1,250,000 persons above the age of sixty-five are dependent on their families or on charity, public or private, receiving $250,000,000 yearly. The losses and suffering to dependents due to the death of the bread-winner are partially accounted for by accidents, but no estimate of much value can now be made of the other cases. Some notion of the losses from unemployment has been given in discussing that subject in the preceding chapter.

§ 3. The new era of social insurance. Some not insignificant attempts to deal with these problems were made in the nineteenth century, but the new era of social insurance may be said to date from the message of the Emperor William to the German Reichstag in 1881, in which he said:

We consider it our imperial duty to impress upon the Reichstag the necessity of furthering the welfare of the working-people. In order to realize these views, a bill for the insurance of workmen against industrial accidents will first of all be laid before you; after which a supplementary measure will be submitted, providing for a general organization of industrial sick-relief insurance. Likewise, those who are disabled in consequence of old age or invalidity possess a well-founded claim to more relief on the part of the state than they have hitherto enjoyed.

The program here outlined was carried out by the enactment between 1883 and 1889 of a series of laws which, taken together, constituted a pretty effective system of social insurance for the mass of wage workers in the German Empire. Later amendments extended and improved the various features of the plan, which served as an example to other countries. America has been the tardiest among all the industrial nations to undertake this kind of social reform.