Historical and Political Essays

by William Edward Hartpole Lecky

Mr. Chamberlain and the other more considerable advocates of old-age pensions clearly see that if such pensions are to be of real value they must discriminate between the deserving and the undeserving; and they believe that they may have the effect of stimulating, instead of weakening, thrift. For this purpose several schemes have been devised.

The most popular Continental method of achieving this end is by a law obliging the working man in early life to insure against old age, and by supplementing the income derived from this insurance by a State subsidy. In Germany, where this system is actually carried out, the old-age pension is derived from three sources—viz. compulsory insurance by the workers, compulsory contribution by the employer, and a State subsidy. Compulsory insurance found for many years a powerful English advocate in Canon Blackley; and it has been recommended by a recent inquiry in Holland, which, however, refused to propose any system of old-age pensions. According to the best accounts, the German system has been far from successful either economically or politically; and it has certainly not prevented Socialism from becoming one of the great dangers of the State. Into this question, however, it is needless to enter, as it is now universally admitted in England that compulsory insurance for old age is an impossibility; for it would certainly be repudiated by the working classes.

A large group of proposals are to the effect that old-age pensions should be granted to all poor persons over the age of sixty-five whose total income is less than 10s. a week, provided that a certain portion of that income consists of a fixed annuity acquired by their own industry and thrift. It is urged that in most of the great branches of industry a deserving man in his earlier and stronger years could easily earn such an annuity; and it is suggested that the State should double it, or add to it sufficient to make it up to 10s. a week, or supplement it by a fixed grant of 2s. 6d., or 5s., or even 7s. a week.

The objections to such schemes are very serious. It is obvious that if they encourage a workman to save up to the amount required to secure a pension, they would have a directly opposite effect as soon as that amount had been attained. The first result of any addition to his income would then be to disqualify him for a pension. It is also obvious that the pensioner of sixty-five would have a strong inducement to abstain from the work he could easily do, and that if he continued to do it he would compete on exceptionally favourable terms with the workman who, though he had passed the prime of life, was not yet entitled to a pension, restricting his means of employment and beating down his wages. Many of the most necessitous and deserving poor would also be left unrelieved.

Although it is true that in the more flourishing trades men could easily in early life save out of their wages a sufficient sum to acquire this annuity, there are large fields of industry in which such a saving would be almost or absolutely impossible. We have had melancholy evidence of how utterly insufficient most forms of women's wages are to provide the needed margin. The same thing is true of the agricultural labourer in the more depressed districts in England and in large tracts of Ireland and Scotland. Even in the more remunerative employments innumerable special circumstances would prevent a thrifty and deserving man from obtaining this annuity. Certainly no one is more deserving of compassion and State aid than the widow and young orphans of a working man; but the scheme we are considering would not only not help them, but would most seriously injure them. It is a direct incentive to the workman to sink his savings in an annuity which would terminate with his own life.

The whole policy, indeed, of attempting to turn all working-class savings into this one channel is a false one; and it has been shown that no kind of saving is in fact less popular among working men than the purchase of a deferred annuity. I may here be allowed to quote a few lines from my own report:

'In the infinitely various conditions of a working-man's life thrift will take many forms, and an attempt to prescribe a single form is eminently injudicious. The whole life-plan of a farmer whose farm will remain with him to the end will be different from that of an artisan or a domestic servant whose power of earning a livelihood depends entirely upon his physical strength. The former will probably find it most profitable to expend his savings on the improvement of his farm. Where the system of peasant proprietorship prevails most agricultural thrift is directed to the purchase and enlargement of farms. In Ireland it is largely directed to the purchase of tenant right, or to enabling the younger members of the family to emigrate.

'Nor is it true that even the artisan will find the purchase of an annuity the best thing to be aimed at. To buy a house or some furniture; to start a small business; to expend his savings in tiding over periods of slack or failing work; to avail himself of the advantage which some fluctuation in the market gives to the man who can transport himself promptly to a new locality or a new business is often far more to his advantage. Above all, money expended in settling his family is often his best policy as well as the course which is most beneficial to the community. At present a large proportion of working men look forward to their children to help them in their old age, and make it a main object of their lives to place them in a position to do so. It does not seem to me a wise thing for the State either to emancipate children from this duty or to induce every married working man to sink his savings in an annuity which will end with his life and from which his widow and children can derive no benefit. It is certainly not for the advantage of the country that in selecting between alternative ways of providing for old age he should be induced to choose that which throws the greatest burden on the State. With the vast increase of population, with the great fluctuations of modern industry, and with the rapid development of the colonies, it is extremely desirable both in the interest of the working men and of the State that they should be induced to transfer themselves from congested towns and from exhausted industries to new fields. A general pension system would certainly contribute most powerfully to prevent them from doing so.'

It has been proposed by others that the pension fund should be placed in the hands of Friendly or Benefit Societies, and that they should be intrusted with its administration, or that subscription to such societies for a certain number of years should be taken by the State as the thrift test. On the first proposal it is sufficient to say, that these great voluntary societies are themselves opposed to it; for if they were directly subsidised by the State, they would be obliged to submit to a State control of their management and their finances which they do not desire. It is observed that only a very small proportion of the subscribers to these societies ever find it necessary to come upon the poor rates; and if a system of old-age pensions were confined to these limits, it would act in the most unequal manner. Their members are drawn in a far larger proportion from the lucrative and flourishing trades than from those which are struggling and underpaid. Few women belong to them. In Ireland, which is the poorest part of the Empire, Friendly Societies scarcely exist; and the same thing is true of large districts in Wales and Scotland. The main result of such proposals would be to concentrate the new State fund for the relief of poverty on the richest parts of the Empire, and on the trades that need it the least.

The extreme difficulty of finding any efficient test of thrift is very evident; and those proposed by a large number of the advocates of old-age pensions are so easy as to be almost worthless. Some consider it sufficient that a man has for a certain number of years not been in receipt of poor-law relief, except medical relief or relief granted under 'exceptional circumstances.' Others would accept the mere fact that a man has lived to be sixty-five, as the drunken and disreputable workman seldom lives so long. A large number of resolutions have condemned Mr. Chaplin's report on the grounds that old-age pensions ought not to be confined to the 'deserving' poor; that they ought to begin at an earlier age than sixty-five; that they ought to be administered by a body totally unconnected with the poor law, so as to carry with them no taint of pauperism or eleemosynary relief. They ought, it is said, to be universal; to be looked on as a matter of strict right; to be considered as of the same nature as the pension given to the soldier or the Civil Servant.