Committee on Economic Security (CES)

Volume I. Unemployment Compensation
Other Staff Reports
Foreign Experience



Wilbur J. Cohen

October 2, 1934

The Federal Unemployment Insurance Act of October 17, 1924, extended and placed on a permanent basis the war time system of fed­eral subsidies to unemployment insurance funds set up by public authorities, workers’ associations, or jointly by employers and workers. The Confederation agreed to pay from to  thirty to forty percent of the cost of any fund recognized as complying with the prescribed conditions. Within these limits, the cantons could also adopt regulations for their territory and even establish compulsory insurance.

The federal act did not establish uniform regulations concerning the employer’s share of the cost, but it required a contribu­tion from the insured person and declared that the unemployed had a definite right to benefit.  The law did not impose the burden of a central administration and by avoiding the compulsory principle it allowed for the differing stages in the evolution of unemployment insurance throughout the country. The Confederation reserved the right of supervision over the funds to withhold subsidies from funds that violated its regulations. {2}

{1} A summary of T. G. Spates and S. Rabinovitch, Unemployment Insurance in Switzerland, Industrial Relations Counselors, 1931.

{2} For detailed analysis of the law, Ibid. Chapters IX and X.

Nature of System  Conditions for Recognition of Funds Scope  Financial Organization.   Conditions for Benefits Benefits Granted
Optional, based on subsidies to public and private funds. Not run for gain or any purpose other than insurance.  Based on contributions by insured person.  Keep separate accounts and and accept supervision by competent federal authorities. Federal subsidy applies to insured persons: 1) over 16 years of age; 2) capable of working; 3) regularly working; 4) domiciled in Switzerland; 5) in principle irrespective of nationality. 1) Contribution of federal authorities: to trade union funds paid; to public and joint funds 40 per cent of these benefits. 2) Contribution of insured person: varies in each fund, but may not be less than 30 per cent of benefits paid. 3)Contribution of Employers: according to the act, compulsory only in joint funds. 1) Absence of fault. 2) Desire to work and registration with public employment exchange. 3) Lack of suitable employment for reason other than collective dispute. 4) Ability to work.  5) Qualifying to period of 180 days. 6) Waiting period of 3 days. 7) Equality of treatment for national and foreign workers. 1) Amount: 50 or 60 percent of the loss of normal earnings,according to absence of legal obligation for maintenance of others. 2) Duration: 90 days in period of 360 days.

                                                THE CONSTITUTIONAL PROBLEM

Switzerland has a democratic form of government with a fed­eral constitution limiting central authority to delegated powers. The twenty five cantons of the Confederation are entirely sovereign in so far as they have not specifically given up any of their powers by virtue of the federal constitution.  No article of the constitution authorizes the federal authorities to introduce employment insurance legislation or to make it compulsory for the cantons and the council has no right to adopt an insurance act, even an optional one, which could apply to the whole country.  Such a step would require an amendment to the constitution by vote of a majority of the

Swiss electors and of the cantons. It was this factor which made for difficulty in determining  how unemployment insurance could be established in Switzerland.

As early as 1893, the Federal Chancellor received a re­quest to include the principle of the right to work in the federal constitution with a section to be included insuring the workers ef­fectively against the consequences of lack of employment, either by public insurance or by the establishment of private funds, to be subsidized by the public authorities. This request was rejected by a large majority by popular vote in 1895.

Because of the constitutional difficulties a permanent system of federal subsidies to public and private funds was advocated in 1917 rather than the creation of a federal compulsory unemployment insurance fund. The Act of 1924 is the result of this decision.

In addition to the sovereignty of the cantons, the es­tablished traditions, and the varied industrial structure of the country, necessitated legislation that would be flexible and at the same time broad in its application, in order to guarantee protection to as great a proportion of the population as possible. The re­sults of the legislation have been observed by the authors of Unemployment Insurance in Switzerland. They have included in their work a number of points for consideration in the discussion of legislation in America which Switzerland's brief period under national legislation suggests.

                                                EXPERIENCE AND CONCLUSION {3}

(1) This federal country restricted national action to subsidizing funds set up by cantonal and municipal governments and private funds. This procedure, dictated mainly by con­stitutional limitations on the central authority, has resulted in a variety of systems and degrees of protection, ranging from compulsory insurance on through subsidized voluntary schemes to no legislative provision.

(2) After a quarter century of experiment with voluntary forms of unemployment insurance, well over one half of the insur­ed population is now covered by compulsory plans.

(3) In general, the federal subsidies to public and pri­vate unemployment insurance funds have greatly accelerated the extension of coverage in the more highly industrialized cantons but have been less effective in cantons where industry is not so important.

(4) As a general rule, in funds of all types contributions have been assessed and benefits paid according to wages earned, a departure from the flat sum method of the British system that has also been followed in the legislation of Germany.

(5) The pooling of he contributions of all industries in one fund according the British procedure has been avoided.

{3} -Ibid., pp 161-164.

The principle of insurance by industry embodied in most of the trade union funds that preceded the federal law, and also largely recognized in the post war relief legislation, has been accepted in the national and cantonal measures. Public funds open to all insurable workers regardless of industry have necessarily been established by cantons and municipalities that have made insurance compulsory in order to afford protection for persons attached to industries in which trade union or joint funds have not been established or who prefer not to join such funds. The experience in cantons and municipalities that have adopted the compulsory principle indicates that with some freedom of choice as between types of funds established within their population are members of funds established within their industries.

(6) The principle of allocation of income to the different employment risks has been recognized to some extent in that the federal act provides for a special subsidy of 10 per cent of the benefit expenditure to meet extraordinary unemployment, a step adopted by many of the cantons in their subsidy procedure. Recent experience has            justified such provision. In the depression year, 1930, the benefit expenditure per insured person for all groups of funds was more than twice that for 1929.

(7) For a few years preceding the depression of 1930, the benefit cost per insured person in the group of public funds was usually more than double that of trade union funds and from four to eight times that of the joint funds.  The experience seems to have confirmed the view that the membership of public funds will include a larger proportion of the poorest risks than that of the industrial funds, an hypotheses on the higher federal subsidy to public funds than to trade union fund was based.

(8) Retardation of labor mobility, a charge often brought against insurance by industry, is guarded against by the provision that public insurance funds receiving federal subsidy shall accept persons from other recognized funds who have been released voluntarily, or through no fault of their own, into the same insurance rights as their own members after they have paid four weeks’ contributions.  Transfers of insured workers into union funds are conditioned on their being accepted as members of the union and into joint funds on their being engaged by an employer contributing to the fund.  Most of the union and joint funds have rules providing that once these initial conditions are satisfied benefit rights shall be granted on easy terms to bona fide cases of transfer.

(9) The whole Procedure which involves no administration by government, except in the case of municipal and cantonal funds, tends to avoid bureaucratic methods and to minimize the danger of political interference with regulations established by experience. As the initiative in legislation rests with the cantons, unless they choose to pass it on to the municipalities, each cantonal government is enabled to adopt within the federal limits the type of legislation demanded by its own public and that seems best suited to its stage of industrial development. Employers and wor­kers are left free to establish and administer their own systems within the prescribed subsidy provisions and so to secure flexibility and adaptation to the conditions of their industries.

(10) A nation wide system of public employment offices developed with the financial aid of the federal government before the enactment of national unemployment insurance legislation has facilitated administration of the insurance funds and guarded against malingering.

Unemployment insurance, however, has achieved protection for less than half of the whole body of insurable workers and only about one fifth of all wage earners. The majority are still dependent upon their own resources or poor relief.  It is note­worthy that in the six years of experience under the federal leg­islation the proportion of the population insured has been growing steadily as more cantons and municipalities have made membership in an insurance fund compulsory and the number of private funds has increased.


1.      Total Resident Population (1930) {a} …….4,667,000

2.      Percentage of insurable population insured:
1927……………………..32.3 {b}

{a}    Percentages: on following tabulations, however, were based on 1920 population figures.
{b}   Cf. Ibid., 133-35.

3.      Percentage of insured persons to total gainfully occupied:

4.      Percentage of insured persons to total number of wage earners:

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