PUTTING AN END TO UNEMPLOYMENT
Commons, Prof. John R.
Putting An End to Unemployment Legislation Can Check This Evil, as It Now Compensates Men for Accidents in Industry, Says Economist By PROF. JOHN R. COMMONS (University of Wisconsin) In the...
...and their salesmen are instructed to take orders for delivery in such a way that the product can be manufactured throughout the year...
...It means that you must begin two or three years in advance and build up your reserve while times are good and thus have a reserve not only for paying dividends but also for paying wages during a period of depression...
...The employer does not escape his liability when he lays him off...
...Weeks, a graduate of Annapolis, is reported as opposing Secretary Denby at the first exchange of the Harding cab-inet upon this naval program...
...I presume that the workers as well as the capitalist will see the point and that the workers will probably be willing to take less wages...
...The first great depression was in the period of 1893 to 1897, When the amount of unemployment for factories got as large as 15 to 30 per cent...
...In other industries, like building trades, it may be larger...
...that the same employers' mutual insurance companies that carry the insurance of the compensation law carry the insurance in this Jaw...
...In warm weather it spreads far north of its habitat, as far as Montreal, and, if infected, carries yellow fever with it...
...The state government and state legislature do not look upon it that way...
...So you can figure out on the average about how much it will be...
...So they too tied up their sales and production departments...
...While the accident compensation laws carry a provision for accident prevention, this carries a complete provision for unemployment prevention...
...Their salesmen were instructed not to take rush orders if the shop was already crowded, but to get their customers to spread out the work over the year and to get them to order early before the rush season come on, i visited a year and a half ago, with some six of my graduate students, some thirty factories in the United States looking for the best practice in labor management...
...When it comes to making bargains for wages, $2 to $4 a week is not a very large item...
...If you substitute in the workmen's compensation law workmen's "unemployment" for workmen's "accidents'' you would have precisely the draft of this bill...
...Assuming then that there was no unemployment prevention, assuming all of these averages for the manufacturing industries, we find that an insurance premium of about $1 a week for each employee would build up a fund of $45 for an average of five weeks at $9 a week...
...SENATOR KING and Senator Borah are entitled to the greatest credit for the skill with which they have handled the naval appropriation bill in the Senate and their success, in putting it over until the next session of Congress...
...They found that 60 percent of them started in as farm laborers who were pulled into the city and then laid off and went back to the farm again, and then finally getting uncertain and unsettled they got the hobo habit...
...That company started out with a seasonal trade...
...The last stronghold of this plague was Guayaquil, Ecuador...
...We are not going to pay men in our state positions because if our state does not conduct its business successfully, why we just call upon the tax payers to make up the deficit...
...Say they can shift it on to the consumer...
...By HERBERT QUICK...
...Experience of Redfield I CAN perfectly appreciate the attitude of em- ployers who at the present time look upon this proposition of unemployment prevention in the same way as they look upon accident compensation...
...It is a raco with death...
...It is probable that in industries which compete with other states that do not have an unemployment insurance system, they would not shift it over to the consumer...
...The only figures I have that show how much is the cost are from the state of Massachusetts from 1889 to 1913—twenty-four years...
...We started out with the accident compensation law on this theory...
...The principal reason they cannot do it is because all of them do not do it together...
...For the doctor who cures accidents under the compensation law, it substitutes free employment offices which shall find jobs for the unemployed...
...So that we may say that over a period of years this cycle of employment and unemployment goes up and down every seven, eight or ten years...
...We have only about one-third of our population as wage earners...
...I know of a number of firms that have this unemployment fund...
...Their competitors in the busy season are taking all the orders they can get and manufacturing rapidly...
...We found perhaps a half dozen firms that by a process of this kind had prevented unemployment...
...THIS bill is modeled exactly after the workmen's accident compensation law of Wisconsin which has been on the statute books for now ten years...
...Harding and Secretary Denby with protests against the naval building program, if only on the ground that it will inevitably lead to war with England if it is persisted in—as The Nation thinks it would...
...It might seem that if the thing was unpreventable then it would be proper for the workingman to contribute...
...There are a number of industries which dovetail into each other, such as the lumber industry and the farming industry...
...Redfield, Secretary of Commerce of the United States, who was on the program at that time, said that it could be accomplished and that he had done it in his own factory for the last thirty years...
...I am quite sure that the criticisms that come will be such that it will be greatly improved...
...These men who are not spreading out their work get all the orders...
...But if you figure out the average over that entire time, the amount for those twenty-four years is about 10 per cent...
...So they set up an unemployment reserve so that they can continue to pay wages during a period of depression, or to use it in stocking up goods instead of shutting down...
...There are three days given during which no compensation is paid, a period sufficient for the workingman to change from one shop to another...
...In the cities one industry has its busy season in summer and the other in winter...
...But for these men this inexcusable bill with a hundred million dollars added after it came from the House, would have gone through, Now there is at least a breathing spell, and in that time public opinion ought to arouse itself if the bill is to be finally defeated...
...They pull laborers in from the farm and then after the job is finished they lay them off...
...The similarities consist in this: that the same Industrial Commission and the same Commissioner of Insurance who enforce the accident compensation law enforce this law...
...In other words, the average man was unemployed five weeks and employed forty-seven weeks...
...It is none too scon...
...That is to say, in an average year, if the figures will hold generally, the average amount of unemployment is about 10 per cent, and runs from about 3 per cent in hard times...
...The company then conceived the idea that both for the good of the plant in not having idle machinery and for the goodwill and loyalty of their workmen they should never lay off a man...
...It substitutes the word "unemployment" for "accident" and changes the terms of compensation...
...You had better go to your customers and ask them to spread out the work over the year and delay orders...
...We should not wait too long in this country...
...Suppose it runs from $2 to $4 a week for each employee while employed, according to the business of the employer...
...In the proposed measure for Wisconsin the employees are not asked to contribute anything, the employers carrying the whole burden through their insurance companies...
...All of you know the shipping tags and tickets you get on the railroad...
...As I take it the idea in Wisconsin, as shown by our accident compensation law, is the prevention instead of the relief of unemployment...
...Then they go out to look for labor...
...But the street railway company, which gave them steady work throughout the year, was paying them 26c an hour for the same kind of employment...
...Now why is it that all employers cannot follow this practice...
...Yet the men who were working at 26c an hour were making as much money in twelve months as those working in the building trades in eight months at 44c an hour...
...JOHN R. COMMONS (University of Wisconsin) In the belief that much of the unemployment in manufacturing establishments could be prevented by a correct system of legislative supervision, Professor John R. Commons, head of economics department of the University of Wisconsin, has drafted a tentative bill which has been presented in several legislatures...
...The Insurance Commissioner of the state and the Compensation Iusurance Bureau preside over that feature...
...In the best times there were only about 8 or 4 per cent unemployed...
...These are the differences...
...But on the other hand, and this is the reason why it seems to me the employees should not contribute to the tax, the employer is in a position to shift that tax over on to the wage earner...
...They took on all the help they could get for two or three months and they laid them off as soon as Christmas came...
...It used to be that no retailer would order Christmas cards until September or October and then the company was crowded with work...
...He is one of the big employers in the city of Brooklyn, N. Y., a firm in the machinery and metal trades, and since 1890 had not laid off any hands...
...It certainly is a talking point with the employer to say that if I can give you steady work the year around you will make some reduction in your wages...
...Employers Are Worried I AM not surprised that employers are wor- ried about this proposition at this time and I am not willing to say that the bill as at present drafted is a well worked out bill...
...I was speaking to a meeting along this line three or four years ago and contended that employers could prevent unemployment if there was enough money in it...
...Then the -arious mutual insurance companies organize themselves, as is already done in the accident compensation law, into a bureau which shall determine the premiums and the rates so as to provide fair dealings amongst different ones...
...Because of the great interest which is being manifested in the subject at the present time LAFOLLETTE'S MAGAZINE has secured the remarks of Professor Commons as delivered in support of this measure before the Wisconsin legislature on February 15, 1921...
...Furthermore, that the state shall conduct the insurance business...
...that business ability can overcome a large part of the unemployment, just as it has overcome a large part of the accidents, by devoting its attention to it as it has done in the other case...
...One of the great examples in the United States is the Dennison Tag Manufacturing Company...
...There are two things I have to say about that...
...Con-sequently we may expect that the banker will more carefully scrutinize the man who comes to him for credit...
...I do not know whether they can or not...
...He runs under the probability of being compelled to pay that man $9 a week for thirteen weeks...
...At the present time the Christmas cards that you will buy next Christmas have already begun to be manufactured...
...Those with whom I have talked recognize its importance but they say it is impossible...
...The Industrial Commission draws up forms for reports...
...They say you cannot do It...
...The bill simply uses the existing commissions, without additional taxes on the state, and these are given the authority to work out the rules and the regulations and to see that the measure is carried into effect, while the employers themselves, conduct the business of insurance and prevention...
...It is "wiping it out" again...
...Several years ago I looked- up this matter in the city of Milwaukee and I found that carpenters in the building trades were getting 44c an hour for eight months work...
...They will deliver during the busy times, they are not spreading out the work...
...I claim that it is neither paternalistic nor socialistic...
...In a legislative committee a great deal of work is done in working out the details of the measures, and the most important improvements that can be made in bringing about a workable bill will be to accept all the help the employers can give...
...The workingman cannot prevent it, but the employer or business man and the banking system alone can prevent unemployment...
...Shifting the Burden THE question is then, can the employer shift that tax on to someone else...
...Consequently it would follow that they-shifted somewhere—I do not know...
...That is only for manufacturing industries of Massachusetts...
...So that if an employer employs a man for eight months only he would have thirteen weeks compensation to pay...
...The Nation, YELLOW FEVER PERIL RETURNS...
...It is also said that it is socialistic...
...They can arrange amongst themselves about the passing of the workmen from one shop to another...
...DENBY...
...This practice deprives the farmer of his laborers When he needs them most, then throws them back on him when he can do the least for them...
...Taking the manufacturing industries alone, you will notice that on an average 10 per cent are unemployed throughout the entire period...
...They started out insuring about 2,000.000 men in the building trades and now, since the war ended, they have increased the number to about 10,000,000...
...In the first place it would be socialistic if the state were to go into the insurance business...
...In paternalism, if we followed the copy of England, we would have an entirely different proposition...
...They simply tied up their sales department with their production department...
...If the state goes into the insurance business it is socialistic, but in Wisconsin the state leaves it to the employers and the mutual insurance companies...
...But under this system every man that the employer takes on adds a new liability...
...One reason why the state cannot go into the business is because the state will never pay the high salaries that business men will pay...
...Sixty per cent of our hoboes are not foreign, but Americans who have been taken from the farm to the city and then thrown off without notice...
...But on the other hand, it is provided that if he is discharged on account of his own fault, either through inefficiency, or misconduct or disobedience to orders, then no compensation is payable...
...A few of them may try to do this, try to spread out the work over the year, but their competitors are not doing it...
...So competition prevents those who would like to stabilize employment from doing it...
...Then in addition to that they put in a number of side lines that would dovetail in at different seasons so that when they were not manufacturing one product they would be manufacturing another, and they traine their working force so that they could shift om one occupation to another...
...The employment office keeps a record of each man showing the amount of time unemployed, when he is at work, etc...
...Yellow fever is spread by the bite of a mosquito...
...At the same time we hope that the mail of Senators Borah and King and of the new Secretary of War, Mr, Weeks, will be full of letters of thanks—it is gratifying to find that Mr...
...They set up an employment insurance furd by which they could carry themselves over a period of depression, just as a sound business corporation sets up a business reserve in order that it may continue to pay dividends during the period of depression...
...The accident compensation law provides for compensating 65 per cent of the loss in wages for four or five years...
...This is the time and the chance to keep down our enormous navy "waste, and we hope that every reader of The" Nation who believes that disarmament is the key to peace will take up his pen at once and make his views felt in Washington...
...They think that it is more to the advantage of the employer than to the employee because he can shift the expense on to them...
...The employee cann get compensation except at the rate of $1.50 for thirteen weeks out of the fifty-two...
...The state has now thirteen of these offices and has the machinery for establishing those records...
...But it is largely preventable and there is only one who is in a position to prevent it...
...But now the Rockefeller foundation is fighting it in Vera Cruz, Mexico...
...In my opinion the employers are far more competent to carry on the insurance business than the state...
...It is not probable in all industries that they can do it...
...The banks, under this system, will be the great agency for the prevention of unemployment and they will do it by checking the preceding over-expansion...
...Followed in England IT may be said, and it doubtless will be said, that I am trying to propose something paternalistic or socialistic...
...Professor Commons is one of the recognized economists of the nation.— Editor's Note...
...Some of The Provisions IT is also provided that there shall be a local 1 committee in each office, and the chairman shall be a deputy of the Industrial Commission...
...Consequently, you had better do what the Dennison Tag and the Plimpton Press and others are doing...
...Now it is during those weeks that they are employed that the employer builds up his insurance fund, and it is during those weeks of unemployment that he pays out his insurance fund...
...If he is unemployed more than three days the compensation begins so that during that period of three days the employers, by working out this mutual system, will facilitate the reduction of unemployment and consequently the amount of compensation that they would have to pay...
...They had great difficulty in avoiding it in the hard times from 1893-1897...
...It is a very simple arrangement when you once put your business talent to figure it out...
...The bill also provides that an employer can get rid of paying the compensation as soon as the man gets a job, and furthermore, it is the duty of the man to take and get a job...
...Under that law it is provided that the employer shall pay 40 per cent, the workingmen 40 per cent and the state 20 per cent of the cost...
...If it ever reaches eastern and southern Asia, it will be a conflagration out of hand and beyond control...
...The best that the state can do is to hold the level and decide disputes as justly as possible...
...In Great Britain the state does that and there are some of our states in America that do it under the accident compensation law...
...But this should be taken into account, whether or not it is better for the country as a whole, whether or not it is better for the workingmen as a whole, that they shall have steady employment throughout the year even though it should be less per week while they are at work...
...Matter of Adjustment IT is a matter of adjustment throughout the market...
...It cannot live permanently above the frost line...
...WIRE MR...
...If the employer and employee disagree they can appeal to the committee and if not settled satisfactorily they can appeal to the Industrial Commission and may even go above that to the Supreme Court...
...They were skating on thin ice at that time, but notwithstanding, they succeeded...
...that we would spread the tax equally throughout the industry and then the employer would be able to shift the tax over to the public...
...It also provides that the existing rating bureau in this state, called the Compensation Insurance Bureau, shall fix the rates and assist in the enforcement of the law, and it has the same procedure before the Commission, and the same appeals to the Circuit Court and the Supreme Court for review...
...And this I think accounts for the fact that in the British law the employers are required to contribute just as much as the employees...
...I think all employers would be glad to do it...
...They they offer some discount for orders in advance...
...If the business man does not conduct his business successfully he goes into bankruptcy...
...LAST year, just before the death of that great man, Gorgas, he announced that yellow fever was wiped out...
...But England waited too long to bring th s about...
...So business men will always have a greater incentive than any state government because they know that they work under that great penalty of bankruptcy if they do not succeed, whereas the state has no such tremendous incentive to push its officials on towards efficiency...
...The next period of unemployment was in 1907 to 1908, the next beginning about 1913...
...It differs in another respect, as to the machinery...
...In England and Europe they go on this theory, that unemployment cannot be prevented...
...They use it as a reserve to hire laborers and stock up during a period of depression, knowing that later on they can sell the goods...
...This bill provides for unemployment compensation of $1.50 a day for thirteen weeks...
...Hence the only thing to do is the philanthropic or paternalistic thing for the state to furnish aid to the workers while unemployed...
...We may wait like England and then adopt some plan to relieve the suffering of the workers...
...One employer, one employee end the deputy shall decide disputes in the first instance...
...In other words, the measure, so far as the details are concerned, has its machinery for deciding disputes practically taken from the workingmen's unemployment insurance law of Great Britain which has the experience of ten years and was revised in 1920, and those perfected features are incorporated in the Industrial Commission law of Wisconsin and the Workingmen's accident compensation law and insurance law...
...They have spread the manufacture out over the year because they put their business talent to figuring it out...
...One of my colleagues at the University spent last summer with a staff of people working for the Department of Agriculture at Washington, They interviewed some 200 migratory laborers and hoboes in the harvest fields of the wheat belt...
...England has had an unemployment insurance law for ten years...
...They have not yet become acquainted with it...
...It cannot live on our Pacific coast...
...They were manufacturers of Christmas cards...
...I have talked with employers and have found this, that a very large number of them are awake to the question of employment and not only that but they think something can be done...
...The business theory goes on the other proposition that unemployment can be prevented if there is enough profit in doing it...
...All cases of dispute in the first instance go to the local employment office so that the working-man must report to the office each day or each week in order to keep up his record...
...The country should deluge Mr...
...Experience in Massachusetts HOW much is it going to cost the employer...
...Here, we may say, that the bill practically adopts the rules which have been in practice in England for some ten years providing that the employee must accept another job if it is equally good or else do without compensation...
...Italy has copied England...
...That means 10 per cent of fifty-two possible weeks, so that the average period of unemployment is about five weeks in the manufacturing industries of Massachusetts...
...The business man knows that he has maybe $1,000,000 at stake and the paying of $15,000 or $20,000 salary is a small item...
...They waited until four-fifths of their population were wage earners...
...The original bill on this subject was introduced by Senator H. A. Huber of Wisconsin and a copy of the same measure has been offered in the New York legislature...
...Consequently these employers, a few of them, are at a disadvantage...
...He would say, "Your liability will not stop when you finish these orders, it will run on for thirteen weeks...
...They get credit from the banks on future deliveries...
...Question of Credit THE reason why business men can expand and why the banks give them credit is because when they have rush orders, like those of the last few years, they know that when the stoppage comes they can lay off all of their employees suddenly without notice...
...What happens now is something like this...
...The manufacturers in the state have rush orders...
...Is Not Socialistic THAT seems to me to be one reason why wage earners are not in favor of the law, in which I think they are short sighted...
...i believe the employers are making more money with the tax on accidents than they did without...
Vol. 13 • March 1921 • No. 3
