Committee on Economic Security (CES)

Volume I. Unemployment Compensation
Other Staff Reports
General Discussions


Some Popular Misconceptions Regarding Unemployment Insurance

Alexander Holtzoff

September 10, 1934

Few subjects of major economic or social importance have suffered as much from popular misconceptions as the vital topic of Unemployment Insurance.

First, it has been frequently assumed in the past that the idea of unemployment insurance originated in the middle of radicals, socialists or visionaries.  This impression has been created in complete disregard of the fact the first country to introduce compulsory unemployment insurance on a nation-wide scale was England, where this was done in 1911 as the result of a proposal made by Winston Churchill, a leading member of the Liberal Party, which was in power at the time.  In 1926 a Committee appointed in England by the Conservative Government for the purpose of investigating unemployment insurance, stated:

“Nobody has suggested to us that the principle of unemployment insurance should be abandoned.  It has been recognized by all who have appeared before us, and we ourselves share the view that an unemployment insurance scheme must now be regarded as a permanent feature of our code of social legislation”

As just stated, this was an expression of the Conservative Party.

When we go back to the early beginnings of unemployment insurance, we find that it had its origin in Switzerland and Belgium in the last decade of the nineteenth century.  Surely no one can properly call the government of either of those countries radical as of that time.

Another serious misconception under which unemployment insurance labored, was due to the fact that at one time it was customary for its adversaries to attach to it the opprobrious label “dole”.  In fact, the dole system is the one that has always prevailed in this country, for that term is far more applicable to the system of public and private charity for the relief of the destitute, than to an organized scheme of unemployment insurance such as prevails in England, especially as in that country the employees contribute to the fund while they are at work, their contributions being added to those of the employer.  Due to the prolonged  and severe period of distress in England, unemployment benefits have been paid to the unemployed even after the expiration of the period during which insurance proper was payable.  In other words, instead of throwing the unemployed on the relief rolls to be administered by a different group of officials, the English Government, in the interest of efficiency and economy, provided that the same officials as had charge of the insurance fund, should likewise have jurisdiction of the payment of the so-called extended benefits.  Its is possible that some confusion of thoughts as to the true nature of the British system of unemployment insurance has arisen from this fact.

It is a peculiar paradox that while the United States has always maintained the highest standards of living in the world for its laboring population, it did less for those that are out of work than other countries, and has left the unemployed to shift for themselves, or to be dependent on charity.

It is not generally realized that of all great powers, the United States is the most backward in the field of social insurance.  Eighteen countries have adopted some form of unemployment insurance.  Of these nine have adopted some form of nation-wide compulsory insurance, while others have voluntary systems of various kinds.  Unemployment insurance is found in every country in Western Europe, with the exception of Portugal and Yugoslavia.

The most successful and the most complete is that found in Great Britain.  There it was first adopted in 1911 in respect of certain specified industries.  It was gradually extended until it enveloped the entire laboring population, with the exception of agricultural laborers and domestic servants.

Unemployment insurance is economically sound.  The distribution of unemployment benefits creates a purchasing power at the time that it is most needed, and thereby aids general business conditions.  Its proponents do not claim that it is a complete cure for major depressions.  It is not asserting too much to suggest that it may completely overcome a minor depression to a considerable degree.  Moreover, it relieves organized public and private charity of a considerable proportion of the burden that it would otherwise carry.  Thus, one of the tax items is reduced, and the demands for voluntary contributions are also minimized.

Socially, unemployment insurance is likewise both sound and just.  Obviously, form the standpoint of society, the pauperization and demoralization of a large proportion of the population resulting from their being dependent on charity, frequently inadequate, is highly undesirable.  Equally it is unjust to the individuals concerned.  There is something basically and fundamentally unjust and unfair to say to a person ready, able and willing to earn his living by the sweat of his brow, that there is no work for him to do, and he must stand in the bread-line in order to keep from starvation, or at best undergo the humiliation of going on the relief rolls.                                                                               

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