209. THE PRINCIPLE OF SOCIAL INSURANCE.--As a general rule, laborers do not voluntarily insure themselves against illness, unemployment, accident, or old age. This is partly because they lack the necessary funds, and partly because they lack the foresight necessary for such action. If, therefore, the risks of industry are adequately to be insured against, the initiative must be taken by some one other than the laborer. As a result of this situation, there has developed the principle of social insurance. Social insurance, as distinguished from insurance by trade unions or private agencies, is compulsory, and is administered, or at least supervised, by the state or Federal authorities.

From the standpoint of the community, social insurance may be justified on four grounds. First, the risks of industry are largely beyond the control of the individual workman, and hence he ought not to be held wholly responsible for the penalties which industry may inflict upon him. Second, the community gets the benefit of the laborer's efforts, and thus ought to feel morally obligated to safeguard his employment. Third, an injury to the laborer restricts the productivity of the community by crippling or removing one of its productive agents. Fourth, compulsory insurance is a social necessity, for where nothing has been laid aside for a rainy day, the interruption of earnings subjects the laborer and his family to hardship and disaster. Wisely administered social insurance prevents a great deal of poverty and distress which would otherwise const.i.tute an added burden upon charitable organizations.

210. INSURANCE AGAINST ACCIDENT.--Accident insurance has been a feature of social insurance programs in Germany, France, and Great Britain for almost a half century, but in this country it was not until 1910 that compulsory insurance against industrial accidents began to be effective. Since 1910, however, the movement has grown rapidly, and at the present time the majority of the states provide for compensation to workmen for accidents sustained in connection with their work. Formerly our courts quite generally held that when a workman could be shown to have suffered an accident because of "personal negligence," the injured person was not ent.i.tled to compensation. Under the accident insurance laws of most states it is now held, however, that the personal negligence of the injured workman does not forfeit his right to receive compensation.

In most states the cost of accident insurance is borne primarily by the employer.

211. INSURANCE AGAINST SICKNESS. [Footnote: Sometimes known as health insurance.]--Compulsory sickness insurance has been highly developed in several European countries, but so far we have left insurance of this type to private effort. The question is attracting considerable attention in this country, however, and it is believed that this form of social insurance will soon be provided for by state law. In 1914 the American a.s.sociation for Labor Legislation outlined a model sickness insurance law. Such a law would provide a sickness benefit for a number of weeks, arrange for medical care, and, in case of death, pay a funeral benefit. The cost of such insurance would be divided equally between workmen and employer, while the state would bear the cost of administering the law. This cost would be considerable, because illness may be feigned, and hence there would have to be more careful supervision than in the case of accident insurance.

212. INSURANCE AGAINST OLD AGE.--Compulsory insurance against old age is an important feature of social insurance systems in European countries, but it is very little known in the United States. We are familiar with the Federal pensioning of military veterans, and with local pensions for firemen and policemen, as well as with state and local pensions for teachers. Such insurance does not, however, touch the question of aged employees in industrial pursuits. Trade unions sometimes provide a measure of old age insurance for their members, but the proportion of workmen affected by this practice is very small.

In 1920, a beginning toward compulsory old age insurance was made, when a Federal law provided for compulsory old age insurance for the civil service employees of the Federal government. The question of compulsory old age insurance is also being agitated in a number of states.

213. SHOULD SOCIAL INSURANCE EXTEND TO UNEMPLOYMENT?--It is contended by many that to insure workmen against the loss of their jobs would encourage shiftlessness, and that for this reason the principle of social insurance ought not to apply to unemployment.

It is obvious that a considerable share of unemployment is traceable to personal negligence, and it is probably true that insurance against unemployment would discourage thrift and foresight on the part of many workmen. On the other hand, it has been shown statistically that a large share of unemployment is due to crop failures, market fluctuations, and other conditions beyond the control of the workmen.

In so far as this is true, there would be a great deal of unemployment whether it were insured against or not. Because, therefore, some unemployment is inevitable, and because unemployment is in many cases beyond the control of the individual, it becomes necessary, or at least desirable, for the state to insure workmen against this unavoidable risk.

Insurance against unemployment has never been tried out in this country, but it is likely that we shall some day follow the example of the leading European countries, and include this type of protection in our general program of social insurance.

214. OBSTACLES TO LABOR LEGISLATION.--Labor legislation of the type discussed in this chapter is making rapid headway in the United States. Nevertheless, it should be noted that in this field we are behind the more advanced countries of western Europe. The chief explanation of this relative backwardness is that the extension of labor legislation in this country has met with considerable opposition. The reasons for this opposition may be summed up as follows:

First, the spirit of individualism is so strong in this country as effectively to check legislation which appears paternalistic. The weak position of women and children in industry has somewhat lessened the force of this argument in the case of laws designed to safeguard these two groups, but labor legislation in behalf of men is still regarded suspiciously in many quarters.

Second, it is difficult to secure uniform laws among the several states. Labor legislation in this country has been primarily a state concern, but the att.i.tude of the various states toward social insurance, the minimum wage, and other types of labor legislation, has been so divergent that the resulting laws have often been conflicting.

In many cases states fear to enact laws which they believe will hamper local employers and encourage the migration of capital to states which are more lenient in this regard.

Third, an important obstacle to labor legislation in the United States has been the difficulty of enacting laws which the courts will not declare unconst.i.tutional. The const.i.tutional provision [Footnote: See the fifth amendment to the Federal Const.i.tution, Appendix.] that no one shall be deprived of life, liberty, or property without due process of law has often been interpreted by the courts in such a way as to nullify laws designed to safeguard the interests of the working cla.s.ses. For example, a law restricting the employment of women might be declared unconst.i.tutional on the grounds that it interferes with the "liberty" of women to work as many hours, and for as small a wage, as they choose.

Within the last decade, however, the obstacle of const.i.tutionality appears to have declined in importance. Our Supreme Courts often reverse their own decisions, as well as negative the decisions of the lower courts, and it is therefore difficult to ascertain what is truly the trend of judicial decision. Nevertheless, many authorities believe that we are on the verge of an era in which the courts will weigh labor legislation primarily in the light of its social benefit, and only secondarily with respect to how it squares with the technicalities of the Const.i.tution.

QUESTIONS ON THE TEXT

1. What three questions are discussed in this chapter?

2. What is the extent of child labor in the United States?

3. What are some of the causes of child labor?

4. What are the chief results of child labor?

5. Discuss Federal legislation with respect to child labor.

6. Outline the minimum provisions of a good child labor law.

7. Why do women generally get lower wages than men?

8. What is meant by the minimum wage?

9. What are the chief arguments in favor of the minimum wage?

10. Give the chief arguments against it.

11. What is meant by social insurance?

12. Discuss the four forms of social insurance. Which have been applied in this country?

13. What are the three great obstacles to labor legislation in this country? Which of these appears to you to be the most important? Which appears to you to be the easiest to overcome?

REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter xix. Or all of the following:

2. Burch and Patterson, _American Social Problems_, chapter xiv.

3. Ely, _Outlines of Economics_, chapter xxviii.

4. Fetter, _Modern Economic Problems_, chapter xxiii.

5. Taussig, _Principles of Economics_, Vol. ii, chapter viii.

QUESTIONS ON THE REQUIRED READINGS

1. Why is child labor not always the cheapest labor? (Burch and Patterson, page 172.)

2. What is the sweat shop system? (Burch and Patterson, page 174.)

3. What are the chief occupations in which women are found? (Burch and Patterson, page 175.)

4. What is meant by the "dangerous trades"? (Burch and Patterson, pages 176-177.)

5. What is the extent of railway accidents in this country? (Burch and Patterson, pages 178-179.)

6. What are the main causes of irregular earnings? (Taussig, page 323.)

7. What form of social insurance was first developed in this country?

(Ely, page 588.)

8. Outline the British Workmen's Compensation Act. (Taussig, page 325.)

9. What are the main features of the German system of old age insurance? (Taussig, page 331.)

10. What difficulties are encountered in insuring workmen against unemployment? (Taussig, pages 337-340.)

11. What is the "contributory principle" in social insurance? (Fetter, pages 363-364.)