Unemployment Insurance

Out of Work Donations Act and Doles.

The British plan has been basically an insurance plan throughout its history. Em ployers and employees have both paid specified "contributions" for the purchase of definite benefit rights for insured workers. Down to Nov. 1918, it followed this insurance principle strictly. Then, in order to cope with the serious unemployment of ex-service men and ex-war-industries workers, the Out of Work Donations Act was passed, under which over £40,000,000 was paid to ex-service people and over £21,000,000 to civilians. These funds were not raised through insurance. They were provided by vote of Parliament. But they were disbursed through the machinery of the unemploy ment insurance system and for a time the Donations Act virtually superseded the Insurance Act. After that time the policy of using the machinery of the Act to distribute unemployment relief, sup plementary to the insurance, was used almost continuously until the 1934 revision when a separate administrative agency was cre ated, the Unemployment Assistance Board, to handle the "dole," leaving to the Ministry of Labour the administration of unemploy ment insurance. Thus, after 16 years of experimentation with mixed unemployment insurance and unemployment relief, the British separated them and went back to their insurance system. But not to as pure insurance as before 1918, since the dependents' benefits started in 1921 remain a part of the benefits structure.

The Act of 1920.

After the war the subject of unemployment insurance was examined by a number of committees, all of which reported in favour of the extension of the scheme. The problem faced in 192o was that if the contributory features of the Insur ance Act were maintained and enforced, some 500,000 genuine un employed would be forced either to become "paupers" and obtain support from the local poor law authorities or to find some other means of existence, with the added probability that the financial structure of many local governments would break down. The in stitution of the out-of-work donation scheme and the need for awaiting the resettlement of industry into its peace time occupa tions postponed for a time the extension that was generally anticipated and desired, but in Dec. 1919 a bill for this purpose was introduced and was passed into law in Aug. 192o.

The Unemployment Insurance Act, 192o, repealed all earlier en actments and, as revised in 193o and 1934, has been the foundation of the scheme. It came into force on Nov. 8, 1920, and brought into insurance an additional 8,000,000 persons, making, with those insured under the earlier acts, a total of about 11,750,000 per sons insured against the risk of unemployment. The scheme as ex tended by the act of 1920 applied to all persons of 16 years of age and upward employed under a contract of service or appren ticeship (except apprentices without a money payment), save those in certain excepted employments, the chief of which were agricul ture and private domestic service. The permanent employees of

Government departments, local authorities, railways, and general utility companies were also excepted. Non-manual workers in receipt of remuneration exceeding £250 a year were also excepted. Contributions ceased to be payable by the employed person, and he ceased to be entitled to benefit, on reaching the age of 65, but the employer remained liable for his share of the contributions. No material change was made in the scope of the scheme since 192o, save that workers in the Irish Free State and in Northern Ireland are now covered by separate schemes of their own.

About half the unemployed were unable to qualify for benefits under the existing rules, i.e. 1916 Act rules. The new act extended to all covered by it benefit rights on substantially the same terms as to contributors who had been paying for their benefits. In addition, the weekly benefit rate was increased to approximate the cost of livelihood and in 1921 dependents' benefits were added, which incorporated relief allowances into the insurance scheme. This union of insurance and relief continued until the scheme was reorganized in 1934. Moreover, no test of means or needs was set up for the insured class. The waiting period was reduced from six days to three days. This was the most costly alteration made dur ing the passage of the bill through Parliament.

Owing to these changes made during the passage of the bill, changes which increased the cost of the scheme, the contributions of employer and employed were increased and, instead of being, as intended, in the case of adult male contributors, 3d. from em ployer, 3d. from employed, and 2d. from the Exchequer, the amounts became 4d., 4d., and 2d. respectively. Thus, instead of paying one-fourth of the total contribution, the Exchequer paid one-fifth. Benefit was payable in proportion to the number of con tributions previously made and subject to a maximum of 15 weeks benefits in a year as in 1911, but instead of one week of benefit for every five contributions, the rule was one week's benefit for six contributions, hence the "1 in 6 rule." The weekly rate of benefit was increased and the act of 192o, following the precedent of the out-of-work donation scheme, prescribed different rates for men and women, the former being entitled to 15s. and the latter to Boys of 16 to 18 received 7s. 6d. and girls of the same age 6s. a week. The reserves which the Fund had in 192o were quickly dis sipated and the Fund ran far into debt. The whole conception of a contributory insurance scheme bid fair to be extinguished.