A Remedy For Unemployment
nphatic plea for the adoption by Canadian industry of employment insurance
DR. J. W. MACMILLAN
THE Employment Service of Canada in an average month finds work for 714 out of each 1,000 who apply. That is, about seventy per cent will be taken and thirty per cent will be left. In the best month, which is September, 140 of the thousand are turned away. In the worst month, which is January, 461, which is nearly half, go jobless and wageless.
True, the class of labor dealt with by the public employment exchanges contains a large proportion of casual and unskilled workers, whose unemployment ratio is always higher than others. Not many executives, foremen or superintendents are among them, but axemen, pick and shovel men, farm hands, laborers in the building trades and the like, with a considerable sprinkling of skilled men, white-collar men, and men whose hair is greying at the temples. They constitute one of the main detachments of our national industrial army. Without their help we could not be fed, housed and clothed, or transported by land and water. They help to erect our skyscrapers, colleges, churches. Their work is the hardest, their pay the lowest, and their jobs the first to fail as unemployment grows. They are not vagrants or revolutionists, but honest people able and anxious to work, and asking only for a chance to work. Yet three in ten, you may say, are refused work.
Take another picture, more reassuring, for it is of a class of workers more steadily employed. The Dominion statistician compiles figures from 6,400 manufacturing establishments, each of whom employs fifteen or more workers. Together they employ one million, or about a third of the entire working force of Canada. Their employment is apt to be exceptionally steady, for they are not in the highly seasonal trades such as navigation, agriculture or lumbering. Moreover, they work in the larger factories, where employment as a rule is more continuous than in the smaller plants. They are a more favored group than the patrons of the employment exchanges, though, of course, there is some overlapping. Yet for every hundred of them at work in August there are eighteen idle in January. No account is here taken of the unemployed in August, for it is merely a comparison of the busiest and slackest periods of the year. Moreover, it is the picture of 1928, a year when employment conditions were unusuully good.
These two pictures, then, may serve to illumine the Canadian problem of unemployment. Much more might have been added as to the variations between the several trades, the swing of the pendulum between booms and slumps, and such general matters as the more recent trends in industrial progress which intensify the evil. But no man can tell in precise figures how many are unemployed in Canada on any particular day, for there is no way of counting them. Britain counts them, and we are disturbed to read the dispatches which tell of a million or more idle. If we and our neighbors to the south counted as carefully as Britain does, we should probably be surprised at the bulk of our own problem, which, at times, is certainly comparable, both in the United States and Canada, with that of the Motherland.
Industry’s Worst Ailment
UNEMPLOYMENT isthesorest problem in industry.
There is a bitter quality in the feelings it provokes. When a man asks for work in order to live and is refused; when behind him are ranged his wife and children whom it is his pride to support by the strength and skill of his honest toil, and he is driven back in hunger and defeat, he would be less than a man if he did not feel himself unjustly treated. No wonder that all revolutionist factions have tried to mobilize the unemployed in order to provoke them to revolt.
Unemployment is a by-product of industrial progress. When the Indians roamed the forests and paddled the waterways of Canada they knew no unemployment. An Indian could always hunt and fish. He might get no game, and there was certainly scarcity and starvation from time to time, but this particular malady was absent. And later, when our grandparents settled in the bush and on the prairie, there was no unemployment. A man could always find plenty of chores to do. The return might be small, but he was allowed to work. It is with the complexity of industry that unemployment comes, and things get more complex as they advance.
A sundial does not get out of order as a watch does. It is so simple that it is practically ensured against disaster. But it is a wretched sort of a timepiece, fastened to one spot, operating only in hours of sunshine, and quite inaccurately at that. If you are satisfied with a sundial you save bills for repairs, and the trouble of winding it up. But our fathers wanted something better than a sundial and immediately launched themselves into trouble. A volume might be written of the history of man’s attempts to provide himself with an efficient timepiece. He tried burning candles marked off in inches. He made the clepsydra, a water clock. After centuries he hit upon the pendulum. Later he got a watch as big as a turnip. Only recently has his invention achieved a dependable, conveniently sized watch.
Something of that kind is happening with the big machine we call the industrial order. Try to picture an enormous mechanism, a gigantic, lumbering, ponderous affair; yet with parts extraordinarily ingenious and delicate, sprawling over Europe and America, with outposts in certain areas of Asia, Africa, and the islands of the sea, and sending out tentacle-like arms to almost every habitable part of the earth, blending in one vast throbbing co-operation ships and banks, colleges and mines, railways and factories, farms and oil-wells, airships and newspapers, together with all the people who operate them, in one titanic, ceaseless enterprise of supplying the wants of men. There never was anything like this mechanism in the past. It pours out a profusion of all sorts of goods for the welfare and comfort of mankind.
But it does not run smoothly. It creaks and bumps. It breaks down and must be repaired. It wears out in spots and must be replaced. Sometimes it runs too slowly, and again it races. The men and women who operate it and depend on it for their livelihood are involved in its vagaries. Upon some of them it pour3 a profusion of its choicest products, while others are stinted to the last degree. Some of them get caught in the wheels and are hurt. And there is always a considerable crowd outside which is denied the opportunity to share in its work and rewards.
Remember, some of the idle ones must be there, waiting to be summoned within. The mechanism must have its reserve of workers available at any moment to to take the places of those who drop out, and to allow of the expansions and extensions which may be required from time to time. You cannot run a factory without a stock room. You cannot build a house without having your piles of sand and lime and wood laid down. You cannot operate an insurance company or bank without reserves of money. Neither can the industrial order of modern civilization operate without a continual reserve of unemployed.
Continued on page 53
A Remedy for Unemployment
Continued from page 12
Every employer of labor knows the advantages of an easy labor market. When labor is plentiful or, in other words, when unemployment is large, it is easy to select a competent working force. There was a brief period just after the war when the labor reserve almost disappeared. It was an anxious time for employers. They had to refuse ordeis, turning business away which went to their rivals. If they succeeded in luring the employees of others to their own plant, they found someone in turn trying to lure them away again. The workers became restless and unproductive, while old friendships with men of their own class were destroyed.
This fact about unemployment that we need the unemployed should not be forgotten. We do not need as many workers as we usually have, but the reserves should be as small as possible because it is expensive to maintain a body of non-producers. It should be subject to the utmost mobility, so that the empty places may be filled with dispatch. In the end, there must and will be unemployment. No scheme that proposed to keep everybody employed all the time could last one week.
Prevention and Cure ,
IT IS a marvellous thing, but it needs much improvement. Let us remember that it is very young, not yet two hundred years old; which is only babyhood for an industrial order. It is vastly superior to anything which preceded it, being the first economic system capable of abundantly supplying the needs of the people who operated it. It is full of promise, but it needs to be greatly improved.
At present there are plainly two things to do; first, to perfect the mechanism; second, to rescue and care for the victims of its imperfections. Of these the second is the more insistent, as human beings are more valuable and precious than machines. Besides, the burden and cost of the salvaging process are an inducement to get rid of destructive inefficiencies.
There are some indeed, who would scrap the machine. It is to them a horror. They inveigh against its clamor, its unwieldy bulk, its wastefulness, its callousness to its victims, its unfairness in the division of the wealth it produces, its pitiless rejection of those who cannot find a place in it. They are roused to such indignation that nothing will satisfy them but to kick it to pieces.
Others, again, will make no effort to improve it. Some of these are its favorites, whom luck or a special skill has enabled to gather an undue share of its products. The timid, also, want to “let well enough alone,” fearing that any tinkering with the intricate mechanism will injure it.
Between these two extremes are to be found those whose intelligence and courage prompt them to the double duty of perfecting the mechanism and salvaging its casualties. They are studying, experimenting, laboring to persuade others to join with them, in the confidence that, as man built this mechanism, he can build it better; that he can make it fulfill its promise to provide a better, freer, happier life for the people of the earth than they have heretofore enjoyed.
Now, there is no easy and simple solution of the problem of unemployment. ! Doubtless one reason why there is such a general disinclination to deal with it is that the good sense of most people rejects the facile panaceas which are sometimes offered. It is a complex, many-sided problem requiring patient and careful analysis, and many things must be done before the vast industrial mechanism will perform its work with perfect smoothness. Unemployment will need to be dissected into its several parts, such as seasonal unemployment which comes regularly at some time of the year; cyclical unemployment which comes every few years with the recurrence of hard times; the unemployment which results from labor turnover, or the hiring and firing of workers; and the latest variety, known as technological unemployment, which is the result of new inventions and mass production. Each of these suggests something which can be applied as a remedy, so that, as the study reveals the ailment, we perceive promising sorts of treatment.
Great Britain’s Experience
"DACK of them all is employment insurance. In the end that must come in order to provide for the necessary reserve. No commander of an army would refuse food to his reserve battalions on the plea that they were idle. On the other hand, he certainly would refuse to support a horde of camp followers however much they clamored for it. He would say to them, “Join up. Get into the army, and you will get your pay wherever you may be stationed.” That is what employment insurance would mean, the support of the reserves and no others.
Unfortunately, some of the systems of employment insurance have become vir: tually schemes for administering relief. They are charity, not insurance; something given in pity and not as a right It was so in its earliest forms when, forty years ago, some of the cantons of Switzerland attempted it on municipal lines. And, to a certain extent, the same thing has happened in post-war Britain during the last few years, with the result that a thoroughly sound and just method of preventing this sore evil is today discredited.
The popular judgment in Canada is very unfair to the British Unemployment Insurance Scheme of 1912, which it uniformly calls “the dole.” The average Canadian thinks that over a million able-bodied men in Britain are lazily and comfortably living upon public charity, preferring to be public paupers rather than do an honest day’s work. If he had his way he would force these lazy vagabonds to get out and hunt a job or let them starve. Let us make a brief survey of the facts.
As a setting to our story, let us remember that eighty per cent of the people of Britain live in cities, that few of them can possibly own their own homes, or get work unless someone opens a factory door to them. Very many of them are permanently attached to some mine, factory or shipyard, held to that place and that job by the pressure of a dense population and the necessity of getting one’s daily bread. There is no room for wandering, no choice of occupations, no hope of novelty and luck such as encourages and sometimes ensnares our Canadian workers. The worker fits into a certain place and, for the most part, must stay there and make the best of it.
In 1912, the fluctuations of unemployment during fifty years were pretty well known. There had always been some unemployment. It had never risen above a modest level. So a limit was set and expert actuaries calculated what premiums should be collected and what benefits could be paid. The burden was laid upon the industries, and collected equally from employer and employee. The government added one quarter of this payment, or one fifth of the whole, which was the proportion to come out of the general taxation.
The scheme was a success. It paid its way and laid up reserves, as a solvent insurance company should. During the war years, when employment was very general, it greatly increased its reserves; so that when the war ended and millions of fighters came back from the trenches, this scheme smoothed their way into the labors of peace.
Then came the economic slump which hit the whole world hard. Britain was peculiarly vulnerable. Having lived by foreign trade, the world war had paralyzed her markets. One of her chief products had been coal, which was being replaced by oil, and she had no oil to sell. A blight fell on the textile industry everywhere, Britain’s chief manufacture. To this was added the enormous debt which she at once began to pay. So the unemployment grew. The reserves were swallowed up. The insurance scheme could no longer pay its way.
What was to be done? What would the average Canadian, with his hasty condemnation of the “dole,” have done?
You cannot let men starve, especially men who have given magnificent proof of their heroism in the terrific ordeal of war. They could not possibly find work. And perhaps they would not have been willing to starve quietly to death. The best plan apparently was to increase the government subsidy in the hope that conditions would improve.
Conditions did improve. There are more men at work in Britain today than ever before. But population also increased. The great textile and coal industries did not revive, either in Britain or anywhere else. And thus, during the last five or six years the insurance scheme has been partially a sound business arrangement and partially a species of charity. It is hard to see what else could have happened. Certainly Britain is far better off with such a scheme than she would be without it. Not even the most uninformed and passionate Canadian critic could have done better.
That, in brief, is the story from Britain. Patently, it furnishes no reason for the utter rejection of employment insurance of every sort and at any time. It does show that the whole burden of this problem should not be heaped upon the shoulders of this one device. There are a number of other things to be done both by employers and the state to decrease the number of the out-of-works, but these merit a separate discussion. One of the most valuable results of a sound employment insurance policy is that it puts pressure upon employers neither to overemploy nor to underemploy, for these two evils belong together. It would penalize the man who ran his business irregularly, with hectic seasons of overtime alternating with slack periods, and rest lightly upon the man who kept his business on an even keel.
One thing seems sure; it is coming. It is already, in some form—for it takes a number of forms—in the most progressive countries of the world, including the United States. It is a logical necessity in modem industry.
A Sound Remedy
"CMPLOYMENT insurance is not a 4-' novelty. In some form or other it dates back nearly a hundred years, since the friendly societies and trades unions tried it among their own members. It has taken various shapes in different countries. Its failures have been mostly due to its not having been held to sound ; insurance methods. It has frequently been used to bolster or disguise some form of charity. Now, the essential thing is that it be genuine insurance, living loyally up to the standards which every honest kind of insurance, whether life, fire, marine, casualty or what not, must adhere to. These are well known, and the temptation which arises from the nature of the hazard involved must be resolutely resisted. It must be insurance and nothing else.
Thus the unemployable must be excluded. The sick, the aged, the mentally defective, the character-failure cases do not belong. They require other treatment. It is no kindness either to them or to the capable and willing workers to lump them together.
The uninsurable must also be ruled out. For some the hazard is so irregular that no precise calculations can be made. The actuarial measurements which underlie all insurance cannot be made for migratory and casual workers. For others the hazard is so great as to make insurance commercially impracticable. Such are the trades of lumbering, navigation, agriculture and the like. Perhaps their turn may come later, but it would be unwise to start the scheme with them. The beginning should be made with those trades where a considerable body of workers is fairly steadily employed, yet suffers regularly an amount of unemployment which entails hardship and want. Railway operation, the clothing trades, the textile trades, the paper trades, the food trades and others afford a fair field for the inauguration of employment insurance. They have at once sufficient regularity to support the cost and sufficient irregularity to require help.
It must be compulsory; which means that the government must participate This does not mean that the state shall furnish the funds. Unemployment is an ailment of industry and industry should be held to its responsibility. Any contribution from the state should be partial. Premiums should be collected and the benefits disbursed within the industries. If industry would handle this problem without state interference it would be well. But industry won’t, for industry can’t. There are too many individual firms involved, many of whom are small, weak and ill-managed. Voluntary agreement among them could not be secured, and many of them could not finance the support of the unemployment of their own workers. There are in Canada a number of firms who guarantee steady work to their people. These are all large, strong, well-established businesses. The smaller concerns, with less resources and fewer workers, could not do it if they would, and some of them would not do it if they could. The law must co-operate.
It should be nation-wide, because the labor market is as extensive as the Dominion. A worker moves as readily between Hull in Quebec and Ottawa in Ontario as between Port Arthur and Fort William. The provincial boundaries are of no significance. Here is a difficulty, for the legislative authority belongs to the provinces rather than to the Dominion. We may hope that the Dominion government may be willing to adopt a similar plan in regard to the insurance of employment as exists in regard to the distribution of employment. Indeed, these two problems, the marketing of labor and the upkeep of labor, lie so close to each other that the structure of the Employment Service of Canada might almost be regarded as a first installment, and the insurance project be framed as the completion of the existing scheme.
As it is insurance, it must operate on a basis of steady continuity. It is not a medicine for bread lines, a pension fund, an out-of-work donation. It is a permanent institution, not an emergency measure. Fire insurance succeeds because it anticipates a known proportion of fires recurring through a succession of years. When Chicago or Saint John was burned, no one thought of fire insurance as immediately applicable. Life insurance does not aim to meet losses in battle. Insurance will succeed in reducing the evils of enforced idleness by a quiet and constant distribution of the losses among the many who incur the hazard. Thus each is assessed a little, and no one is crushed. All insurance is like that.
The Cost: A Dollar a Week Per Man
HOW much will it cost? Only an estimate can be given. In the report of a British Parliamentary commission in 1927, based on the experience of fifteen years, figures are given which are as authoritative as can be found. The proportion of unemployment over a long period of years is set at four and one-half per cent, and an actuarial basis of six per cent is taken as providing an adequate margin of safety. If this seems low in comparison with the percentages given as to present or recent conditions, remember that it is calculated as an average of a number of years; that the unemployables and the uninsurables are excluded; and that the overemployment of hectic boom periods is also disregarded. If a premium of fifteen pence per week is taken, which may be collected in equal parts from the employer, the employee and the government, an unemployment benefit of seventeen shillings per week can be paid. Translated into Canadian currency the cost would thus be thirty cents a week for each worker. That might be about one per cent of the wages of such classes of workers as I have suggested should be included at the start. The average earnings of railway employees in Canada were $1,411 for the year 1925.
No doubt that figure of one per cent is too low. With Canadian prices and standards of living, the benefit would have to be more than $4.25 per week. In the men’s clothing trade in Chicago three per cent of wages is required to guarantee forty per cent of full-time earnings in a trade with large seasonal fluctuations.
Perhaps, with our present knowledge, it is not wise to say more than that in such trades as are suitable for employment insurance, a payment of about a dollar a week for each worker would rob unemployment of its terrors.
Further, it would be desirable to sort the trades into groups rather than impose blanket rates on them all. The rates then would differ according to the employment hazard. This would fit in with the fact that wages are often higher in the more irregular trades, due to a more or less ineffectual effort to provide for slack seasons. Besides, each group would have an interest in reducing its burden of unemployment, making the insurance a powerful deterrent of shut-downs.
The question arises as to whether any part of the premiums should be paid by the worker. This is not done in workmen’s compensation insurance. But there is a significant distinction between the two. There is little temptation to a worker to maim himself deliberately, while there is always temptation to workers, as well as to other classes, to be improvident in good times. Moreover, there is no test of enforced idleness so clear-cut as in the case of an accident. On the whole, it seems better that the worker should feel that he is paying a premium. And, in the face of the readiness of better paid classes to cry “dole,” it would be wise to make the personal premium conspicuous.
It will thus be seen that employment insurance is a limited and specific thing. Doubtless some of its most eager advocates will be disappointed with this exposition. I have said that it will not cover everything that calls itself unemployment, or even all that may fairly claim that title. Nor should it be relied on as the sole remedy even for those insured. Unemployment arises from many causes and should be prevented by a number of devices. A chief recommendation of insurance is that it will stimulate plans for stabilizing employment. The ideal is steady work for all, except the smallest reserve required to maintain the industrial plant in constant operation.