Labour policy—false and true

by Lynden Livingston Macassey

While all claims to benefit have, in the first instance, to be made at an Employment Exchange—where benefit is in general paid—power is given to the Minister under Section 17 of the Act of 1920 to enter into arrangements with associations of contributors (practically all Trade Unions) under which members of such associations may prove their unemployment and receive their benefit through the machinery of the association. Before such an arrangement can be made, the Minister has to be satisfied that the rules of the association provide for payment out of its own funds of unemployment benefit to its members, and that the association has in operation a system for obtaining notification of opportunities of employment and of placing its members in employment. State benefit paid out by associations under this arrangement is subsequently repaid to the association from the Unemployment Fund. The associations are further entitled to a grant-in-aid of their administrative expenses not exceeding 1s. for every week of State benefit paid to their members under the arrangement. Shortly before the decline in trade, which began in the autumn of 1920, arrangements were completed or were in course of completion under Section 17 with nearly 200 associations having a membership of nearly 4,000,000 persons. Owing, however, to the increase of industrial depression and the consequent strain on the financial resources of the associations, a number of these arrangements were either terminated or not completed. The number of arrangements in operation on July 31, 1922, was 145, covering a membership of rather more than 1,000,000.

A new and important provision of the Act of 1920 was the right given to industries to contract out of the State scheme and institute special schemes of compulsory insurance for their own workers. Before a special scheme can be approved it has to be submitted by a Joint Industrial Council or an association fully representative of the majority of employers and employed in the industry. The Minister has to be satisfied that insurance against unemployment in the industry can be more satisfactorily provided by a special scheme than under the general scheme of the Act. The special scheme must cover all the employed persons in the industry, and the benefits must be not less favourable on the whole than the benefits provided by the Act. The industries which might naturally be disposed to contract out of the general scheme are those in which unemployment is less than the average rate of unemployment in all the industries included in the general scheme. In other words, only those industries might be expected to contract out which could, by reason of their lower rate of unemployment, provide greater benefits for the same rate of contribution as under the general scheme, or the same or a slightly better rate of benefit for a lower contribution. As against this, the rate of State contribution payable to a special scheme is reduced to a sum not exceeding three-tenths of the contribution which would otherwise be paid by the State in respect of contributions from the industry if the employers and employed persons in the industry remained in the general scheme. Only one special scheme has, so far, been approved, viz. that for the Insurance business, which covers about 80,000 persons. In view of the temporary emergency provisions made in the Unemployment Insurance Act, 1921, and the Unemployment Insurance (No. 2) Act, 1921, to meet the abnormal amount of unemployment, it became necessary to suspend the right of additional industries to contract out until the Unemployment Fund again attains a position of solvency.

A feature of the State scheme which is open to criticism is the right of insured persons to receive a refund in respect of their contributions. This provision follows generally the lines of Section 95 of the Act of 1911. The refund made is the excess of the employed person’s share of the contributions paid in respect of him, less any benefit he has received. Refunds are not payable unless the employed person has reached the age of 60 and has paid in the aggregate a specified number of contributions.

Emergency Provisions

Owing to the acute industrial depression, it has been necessary to add to the permanent scheme a number of temporary provisions. It was realized, when the Act of 1920 was being framed, that special provision was required to meet unemployment occurring immediately after the passing of the Act amongst persons who were being brought into compulsory insurance for the first time. Accordingly, Section 44 of the Act of 1920 provided that, for twelve months after the commencement of the Act, i.e. up to November 8, 1921, eight weeks’ benefit might be drawn if four contributions had been paid. Between the passing of the Act on August 9, 1920, and its commencement on November 8, 1920, the industrial situation materially worsened, and when the Act came into operation considerable numbers of workpeople were unemployed who had not paid even four contributions. The Unemployment Insurance (Temporary Provisions Amendment) Act, 1920, was accordingly passed in December 1920, providing that if an unemployed person could show that, although no contributions had been paid in respect of him under the Acts, yet he had in fact been employed in an insurable occupation in each of ten weeks since December 31, 1919, or of four weeks since July 4, 1920, that would count as equivalent to payment of four contributions under Section 44 of the Act of 1920, and eight weeks’ benefit might be paid to him.

Temporary Act of March, 1921

Unemployment continued to grow, and early in 1921 it was apparent that many persons, who would normally have paid contributions and so qualified for benefits under the Act of 1920, were disqualified because, owing to the exceptional industrial position, they had not been in a position to pay contributions. The Unemployment Insurance Act, 1921, was therefore passed in March, 1921, which came into force immediately, and made special provision for the payment of unemployment benefit to persons who were not qualified for benefit by reason of not having paid contributions. Under the Act of March, 1921, it was provided that during each of two special periods, the first from March 3, 1921, to November 2, 1921, the second from November 3, 1921, to July 2, 1922, unemployed persons might draw up to a maximum of sixteen weeks’ benefit provided they showed:

(1) That they had been employed in each of not less than twenty weeks since December 31, 1919 (ten weeks for ex-members of H.M. Forces).

(2) That they were normally employed in an insurable occupation.

(3) That they were genuinely seeking whole-time employment but unable to obtain it.