THE RIGHT RELATIONSHIP BETWEEN EMPLOYERS AND EMPLOYED
1. CONTENTMENT IN INDUSTRY
(_a_) Provision against Unemployment—Equalization of
Demand for Labour—Insurance against Unemployment—Need of a
Job-Finding Organization—Insurance by State or Industry—State
Insurance—Insurance by Industry or Industries—Reform of Present
Out-Door Relief System—Unemployment Insurance by Firms.
Reform of the relationship in industry between employers and employed
involves three things: securing contentment, achieving co-operation,
increasing production; these constitute the dynamic trinity. Only when
contentment can be secured is co-operation made possible; without
co-operation there never can be efficient production; production alone
can create the prosperity which is the sole source of the financial
ability of any industry to pay high wages and maintain good conditions of
employment. Contentment does not mean stagnation; it means willingness to
progress under an accepted system—in other words, evolution.
(_a_) Provision against Unemployment
If we are to secure contentment in industry, unquestionably the first
matter to be dealt with is unemployment. A distinction must be drawn
between normal unemployment—the result of seasonal or cyclic depressions
in trade, which arise from circumstances well-known in industry, either
affecting the world at large or peculiar to some country in particular,
or special to some national industry—and the abnormal unemployment
which has resulted from the Great War. We are now considering normal
unemployment. What Government should do to deal with the abnormal
unemployment occasioned by the war we have already discussed in Chapter
XXII.
Equalization of Demand for Labour
In regard to normal unemployment there are two things only which can
be done:—first, to reduce, so far as possible, fluctuations in the
demand for labour between one year and another, and one season of the
year with another season of the same year, and, secondly, to make the
best provision economically practicable for the maintenance during times
of trade depression of persons who are unemployed or under-employed.
It is most difficult to “equalize the demand for labour.” In ordinary
commercial business that is a matter largely outside the power of
Government, employers, or Trade Unions. It is one of the privileges which
is reserved for the consumer. The only directions in which fruitful
action can be taken are to provide a system such as exists under the
Labour Exchange organization, or that of certain Trade Unions, whereby
the workman out of a job can be put in touch with the employer who wants
labour of his particular description, and to arrange the execution of
public works by Government Departments or local authorities, and the
manufacture of stores or equipment for public purposes, the amount of
which is more or less standard, so that by postponing some and expediting
others some advance is possible towards making more uniform the demand
for labour as between good times and bad. But the limits within which
this is a practicable policy are much narrower than is generally
realized, and immensely more restricted than is suggested by the Labour
Party.
Insurance against Unemployment
Although to prevent unemployment is impossible, happily a great deal
can be done to mitigate the evils of unemployment when it does occur.
Under no system of organizing industry—in spite of the contentions of
the Labour Party that under its socialistic reconstruction of industry
there would be no unemployment—can any person be guaranteed continuous
work. It is possible, however, to spread the income of the industry
in good times over bad times, so that when the latter supervene there
will be something coming in to the worker for him to live on. This is
not a dole as some people call it, but rather in the nature of deferred
pay. With that in operation there would be an end to what is called by
Labour the “wages system.” The worker would no longer be paid wages for
such time only as he is employed, but would receive pay for the time he
works and also pay during the time he is unable to work because of trade
depression. There must be in all industries, both on the side of labour
and of the employer, a reserve of productive capacity to meet the peak
demands, and all employers with few exceptions recognize that it is their
duty to apply some of the profits of good times for the maintenance of
this reserve of labour in their industry when unemployed at times other
than peak times, and of the general body of labour when unemployed or
under-employed at times of trade depression. But the provision against
unemployment must be a joint fund to which both the employer and the
worker contribute during good times.
Need of a Job-Finding Organization
As ancillary to any scheme for provision against unemployment, there
must be some effective organization in existence whose duty it is to
endeavour to ascertain where there are any vacancies for workmen in which
men who are unemployed can be started. Obviously this is necessary both
in the interests of the industry and of the actuarial solvency of the
fund provided against unemployment. Unfortunately a substantial number of
persons will always exist who prefer not to do work but yet be paid for
it.
Insurance by State or Industry
The next question is by whom shall the provision for unemployment be
made? Shall it be by the State or by industry, that is to say, all
industries acting collectively, or by each industry for itself, or shall
it be by individual firms? We shall consider these cases separately.
It is characteristic of the times that when persons have omitted to do
what they should have done and then find themselves in difficulties
by reason of their omission, they call upon the State to remedy their
deficiency. Eliminating the question whether the State out of its own
financial resources should make any addition to the fund contributed by
employers and employed for provision against unemployment, Government
administration of the fund is necessarily less efficient and more
expensive than administration by industries or by firms. Some striking
figures have been published in _The Times_ of January 25, 1922. It
was stated at the National Federation of Employees Approved Societies
by a gentleman representing the British Xylonite Company that his
firm’s scheme of unemployment insurance cost only £334 per £10,000 to
administer as against the Government’s £1,000 per £10,000. It must be
remembered, however, that the Government scheme has to cover multifarious
trades—organized, semi-organized and those not organized at all. But
still, after making all due allowance for that fact, there appears to be
no question that a Government scheme does necessarily, from the inability
to maintain close supervision, afford opportunities for waste and abuse
which would not arise under a system of closer control.
State Insurance
The details of the Government scheme have been described. The Labour
Exchanges have, in the face of great difficulties, performed the
administration with efficiency, but no one with experience of industrial
conditions during the last two years could fail to realize that the
administration of unemployment insurance is not proper work to be
undertaken by any Government Department. The proper function for the
State is to see that all possible provision is made against unemployment
but not to undertake the work itself. In 1920 a Committee of Inquiry
was appointed by the Minister of Labour to inquire into and report upon
the Labour Exchanges. The majority of that Committee reported that “the
administration of unemployment insurance by industries on behalf of their
own members was the most desirable system in the end, particularly from
the point of view of obtaining technical knowledge in the placing of
workmen, the creation of a corporate pride in each industry, and a sense
of responsibility for unemployment in the industry.” The Geddes Committee
has recommended that this question should be further explored, and the
Minister of Labour is taking steps to do so.
Insurance by Industry or Industries
That industry should provide for its unemployment is obviously
reasonable. The taxpayer has no control over industrial conditions,
or over the wages which are paid, or the conditions of employment
in operation, and in respect of such matters industry is under no
responsibility to the taxpayer. Should this provision be made by each
industry in particular or by industry as a whole? It would be impossible
to form a scheme under which each industry would provide against its own
unemployment. There are many industries, ranging from those most highly
organized with employers and Trade Unions acting, and accustomed to act,
collectively and with some experience of the ratio of their unemployment,
down to industries which have no organization whatever nor any collective
machinery available for the operation of an insurance fund nor any
knowledge of their own unemployment. It is only a highly organized
industry that could undertake to provide for its own unemployed, and not
all highly organized industries, but merely a selected few—those which
are clearly separated off from other industries. To all but the initiated
it is surprising how industries are interlocked. If we take, for example,
the engineering industry, and industries like iron and steel, nuts and
bolts, bicycle parts and innumerable others, there is great interchange
of labour, especially unskilled. A large West-end store will be engaged
in fifty to sixty different industries. How would its interests in each
industry be separated? There is no doubt that it is to the financial
advantage of a highly organized clearly demarcated industry to provide
for its own unemployment insurance as compared with participation in a
State Scheme.
Sir Alfred Watson, the Government Actuary, before the Committee of
Inquiry on the Labour Exchanges, pointed out the great financial benefit
it would be to the principal industries to provide their own unemployment
insurance, and referred to the large margin there would be available
for the actual costs of the benefits. In a most interesting pamphlet
published on “Unemployment Insurance,” Mr. Henry Lesser, the President of
the National Federation of Employees Approved Societies, states that in
one industrial undertaking employers and employed pay in respect of the
National Unemployment Insurance Scheme over £22,000 per year, but that in
normal times the persons employed in that particular firm do not receive
in the aggregate in unemployment pay more than £800 a year, a case, he
says, which may be taken as typical of the whole of the industry in
question.
One outstanding advantage which would result from each industry effecting
its own unemployment insurance would be the feeling it must undoubtedly
engender in the minds of both employers and Trade Unions of their
responsibility for the combined working of the industry, and the effect
it is bound to have in producing a better spirit between the two parties
and amongst the men, who will no longer feel that they are taken on and
discharged merely as it suits the interests of the firm. A thorough
investigation should be made as to what industries could undertake their
own unemployment insurance, and whether it is better that they should do
so, or come into a general scheme of insurance by all industries. The
ordinary objection of employers and Trade Unions representing “good”
industries, i.e. those with a low rate of unemployment, is that they
are paying for the “bad” industries with a high rate, but is not that
rather the essence of insurance? It may well be that only insurance by
all industries acting collectively is possible. If such turns out to be
the case, that plan should be adopted ready for carrying into practical
operation on the approach of more normal times. Industries which rely
mainly on casual labour are a more difficult proposition. Decasualization
is essential, and that must be effected by some means of restricting the
free influx of labour into the industry, as has been done in the Dock
Labour Scheme in Liverpool. The efficiency of the Liverpool method is
undoubtedly due to the co-operation between the dock labour employers and
the Unions; it has been most strikingly successful. It affords a basis
for procedure in very many industries. There must, however, I am afraid,
remain a residuum of unemployment insurance to be handled by the State,
in the absence of any other authority, on the lines presumably of the
present National Unemployment Insurance Scheme, but it would be reduced
to small proportions if all the great industries of the country were
providing for their own unemployment.
Reform of Present Out-Door Relief System
In connection with unemployment, the present system of Poor Law relief
wants overhauling. The provision of relief by the Guardians (in addition
to, or substitution for, unemployment insurance benefit) on varying
standards in different places throughout the country is extremely
wasteful and disturbing to social harmony. If this is taken out of the
hands of the Guardians, as has already been recommended by both the
majority and minority reports of the Poor-Law Commission, and committed
into the hands of some local authority—because local responsibility is
essential for the spending of money raised by local rates—it would mark
progress of no uncertain kind. Absolute standardization is impossible,
because of the varying social circumstances and indeed social outlook
in different parts of the country, but, after allowing for this, much
greater approximation to uniformity could be secured.
Unemployment Insurance by Firms
Without any doubt the best approach to insurance by industries or by
industry as a whole is to start with insurance by firms. An admirable
beginning has been made in this direction by the National Federation of
Employees Approved Societies—particulars of this scheme can be obtained
from the Secretary to the Federation, c/o British Thomson-Houston Co.,
Ltd., Rugby—it is also described with great clearness by Mr. Lesser in
the pamphlet referred to on p. 260. The experience of the Federation
is most instructive. In many works, before the days of National Health
Insurance, there were sick clubs which provided for members unemployed
through illness, benefits from a fund to which employers and employed
alike contributed. Both employers and employed viewed, with considerable
regret, the proposed absorption of these clubs into the new Approved
Societies established under the Health Insurance Act, and to obviate
that fate reconstituted their clubs with the approval of the Insurance
Commissioners into “Works Societies,” and obtained official sanction
for these Societies to administer the State scheme. Later these Works
Societies decided to undertake the administration of unemployment benefit
at their respective works under Section 17 of the Unemployment Insurance
Act, 1920. There were three conditions precedent: first, that the Society
must provide for payment out of its own voluntary funds of an additional
unemployment benefit equal to one-third of that payable under the
Act—that is to say, if the State benefit was 15_s._ the Society must add
to that at least another 5_s._ out of its private fund and so pay a total
benefit of 20_s._ The second stipulation was that the Society must have
a system for ascertaining the rates of wages and the general conditions
of employment prevailing in all occupations in which its members were
engaged; these particulars were always well-known, and there was not much
difficulty about that. The third requirement was that the Society should
have an effective system of ascertaining vacancies for employment—this
meant some organization distinct from the Labour Exchanges. Such an
organization was finally obtained through the co-operation of the local
Chambers of Commerce, who receive from their associated firms particulars
of vacancies which the Chambers send on to the different Works Societies.
The scheme works exceedingly well. It was first adopted by the South
Metropolitan Gas Co., and later by the Gas Light and Coke Co., Messrs.
Debenhams, the British Thomson-Houston Co., Ltd., Taylor Bros. & Co., J.
T. & J. Taylor, Ltd., and a number of other firms. The Society acts as
the State’s agent with regard to paying out the State benefits, and in
addition pays at the same time a supplementary benefit of one-third of
the State benefit, for which an extra contribution is generally levied
on the workers at the rate of 2_d._ per week, and most of the employers
contribute to the supplementary benefit fund. One cannot fail to be
struck in reading Mr. Lesser’s pamphlet by the extraordinary success
of the Federation’s scheme in producing co-operation and good feeling
between masters and men. With the experience which firms get through
putting into operation a method of unemployment insurance of this kind,
the way is opened for the institution of a wider scheme of grouped firms,
and ultimately for insurance by industry or industries.