An evil almost as serious to the wage earner's family as sickness or industrial accident is unemployment, with the cessation of wages that it entails. In either case the family income is cut off and where there are no savings to fall back upon recourse must be had to charity. In the past there has been a tendency in many quarters to consider unemployment a fault of the worker. Men were out of work, it was thought, because they were lazy or incompetent or preferred not to work. It is true that a certain part of the unemployed are also unemployable. They are persons who cannot secure and hold positions because of physical or mental or moral defects. But the great mass of the unemployed are persons who are employable. It is in many cases their misfortune and not their fault that they cannot get work. The causes of unemployment are to be sought for in the nature of industry rather than in the character of the workers.

One cause of unemployment is to be found in the fluctuation in the demands for labor rather than in the absolute lack of demand. Industry is so organized and conducted that years of plenty are followed by years of depression. Industry revolves in cycles. During the years of prosperity in the industrial cycle there is a strong demand for labor. When the years of depression approach production is curtailed and men are thrown out of employment. It is not that men are unable or unwilling to work. The simple fact is that their services are no longer needed by the industrial machine. In addition to this cyclical unemployment there is a seasonal unemployment which is due to alternating good and bad seasons for different industries within the year.

Among the causes of this alternating demand for labor are climatic conditions, social customs and traditions, and the seasonal demand from other industries. Finally, there is the employment due to fluctuations in the casual trades where there is an alternating rapidly increasing and decreasing volume of demand for labor; as, for example, in the case of the longshoremen, who are employed in large numbers upon jobs lasting for a few hours or a few days and who are discharged as soon as the jobs are completed.

A number of proposals have been made to relieve the unemployment situation. In the first place, it is proposed to regularize industry by shifting work from the years and seasons of prosperity to years and seasons of depression. This could be done to a certain extent in private industry if a sufficient effort were made, and in the case of public works it could be done to a considerable extent without the exertion of much effort.

A second proposal is to develop and improve our system of labor exchanges or employment agencies and especially public labor exchanges. The more efficient these labor exchanges the more quickly will employer and employee find each other and the less time will be wasted by the employee in looking for work. Much good will come out of the present agitation for better labor exchanges but it must be remembered that, at best, the labor exchange can only find opportunities for work. It does not make these opportunities where they do not already exist.

A third proposal is to develop a system of continuation schools where boys and girls who now leave school after finishing the eighth grade would learn skilled trades at which they could earn their livelihood. By attending such schools during the months of greatest unemployment these young persons would be kept out of competition for the positions held by older persons, and at the same time they would be making themselves more useful citizens. At the present time there is a widespread demand that the army of the United States be very materially increased. If the army were to be increased to three hundred thousand or five hundred thousand men to be kept permanently in training as soldiers, it would tend to relieve the unemployment situation temporarily but in the long run unemployment would be just as bad as before, because fluctuations in industry would continue as before. If, however, instead of keeping the same men permanently under arms, the army were to be greatly increased during periods of much unemployment and diminished during times of great demand for labor much would be done towards solving the problem of unemployment. That such a plan could be carried out without detriment to the efficiency of the army does not admit of a doubt.

Since practically every worker runs the risk of being unemployed, and since at any given time only a small part of the total number of workers are actually unemployed, the case would seem to offer a good field for insurance; that is, for distributing the risks in such a way that the burden would be borne by all who were exposed to the risk. The worker who was out of employment would receive unemployment benefits from the insurance fund to support him until he found work. There is, however, a serious difficulty in the application of this kind of insurance. It is extremely difficult to tell to what extent the victim of unemployment has contributed and continues to contribute to his being unemployed. Many trade unions in this and in other countries have this form of insurance; that is, they pay benefits to members who are out of work, but the trade unions are in an exceptionally good position to be able to judge of the genuineness of the unemployment of their members. For this reason foreign countries which have adopted the policy of granting subsidies to the unemployed have usually done so through the medium of trade unions.

The first nation to adopt a system of compulsory unemployment insurance was Great Britain, which in 1911 provided for the compulsory insurance of about two and a half millions of workers in a number of trades which were peculiarly subject to periods of unemployment. Under the British system one-fourth of the cost of the insurance is paid by the state and the other three-fourths is paid in equal parts by employers and employees. The cost to the worker is two and a half pence per week and the benefit in case of unemployment is seven shillings per week. This benefit is to be paid from the second to the fifteenth week of unemployment in each year provided that the insured has worked at least twenty-six weeks in the year for the last three years, in an occupation subject to compulsory insurance; that he has not become unemployed through strike or through his own fault; and that he does not receive from the labor bureau information of work of equal value.

242. Conclusion

It is easy to object to compulsory social insurance, as to state activity in any form, that it interferes with the self-activity and the self-development of the citizens of the state. But where the citizens are not doing and apparently will not do the necessary thing for themselves the objection loses its force. The reason that the state should not engage extensively in economic production is that the state is relatively inefficient in this field as compared with private producers. But in those fields in which state activity is much superior to individual effort state activity is to be desired. This does not mean that even here the state should crush out the spirit of self-help among its citizens. It can be active and at the same time develop the spirit of self-help rather than hinder it. This is seen, for example, in the British insurance act of 1911, which operates through trades unions, fraternal societies, and other local bodies.

Questions

1. Has the state a right to interfere with the free play of competition in economic affairs?

2. What are pools? What was the original form of the trust? What is a holding corporation?

3. What are the principal causes of trusts?

4. What evils are caused by the trusts?

5. What is the present plan of remedying the trust evils?

6. Why is there need of child labor legislation? What are the standards of legislation for children in some of the more advanced states?

7. What objection is made to legislation regulating the hours of work for men? What restrictions have been made as to the hours of labor for women in some of the states?

8. What form has minimum wage legislation taken in this country?

9. Why is it difficult to have legislation for the protection of the life and health of workers enforced?

10. What is meant by social insurance?

11. Explain the general plan of workmen's compensation laws.

12. Speak of the European experience with compulsory sickness insurance. With insurance against old age, invalidity, and death.

13. What are the industrial causes of unemployment? What remedies are proposed?

Supplementary Reading

Seager, Principles, Chaps. xxv., xxx., and xxxii. Seligman, Principles, Chaps. xxxvi.-xxxviii. Taussig, Principles, Chaps. lvi., lviii., and lxiii. Clark, Control of Trusts. Stevens, Industrial Combinations and Trusts. Commons and Andrews, Principles of Labor Legislation. O'Hara, E., A Living Wage by Legislation: The Oregon Experience. Rubinow, Social Insurance. Seager, Social Insurance.

American Labor Legislation Review, Current Numbers. American Economic Review, Current Numbers. Bulletins of the U. S. Bureau of Labor Statistics.