CORNELL UNIVERSITY LIBRARY NEW YORK STATE SCHOOL OF INDUSTRIAL AND LABOR RELATIONS THE GIFT OF The Family of Dr. I M. RuBiNow 1875-1936 The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924002585523 DEBATERS' HANDBOOK SERIES COMPULSORY INSURANCE DEBATERS' HANDBOOK SERIES Enlargement of the United States Navy (3d ed. rev. and enl.) Direct Primaries (3d ed. rev. and enl.) Capital Punishment Commission Plan of Municipal Govern- ment (3d ed. rev. and enl.) Election of United States Senators (2d ed. rev.) Income Tajc 2d ed. rev. and enl. ) Initiative and Referendum (2d ed. rev. and enl.) . Central Bank of the United States Woman Suffrage (2d ed. rev.) Municipal Ownership Child Labor Open versus Closed Shop Employment of Women Federal Control of Interstate Corporations Parcels Post Compulsory Arbitration of Industrial Dis- putes Compulsory Insurance Conservation of Natural Resources Free Trade vs. Protection Government Ownership of Railroads Reciprocity Trade Unions Other titles in preparation Each volume, one dollar net Debaters' Handbook Series SELECTED ARTICLES ON COMPULSORY INSURANCE COMPILED BY EDNA D. BULLOCK MINNEAPOLIS THE H. W. WILSON COMPANY 1912 EXPLANATORY NOTE The selections in this handbook are designed to include infojrmation and argument on some of the questions arising out of what is generally called "social insurance". This may be defined as the formal provision made by or for work- ing people against the vicissitudes of life — including sick- ness, industrial accident, invalidity, unemployment, old age and dependency. The attention of thinking people all over the civilized world is being focused on this subject. Varied forms of legislative experiment are in progress — many new and in- teresting ones are being proposed. Many of the problems involve intricate legal technicalities that have no place in a compilation intended for popular use. These are included in the bibliography, which is wider in scope. The rapid march of events in the field of social insurance leads to constant re- view of the whole subject in the books and magazines. This renders much of the older literature of no particular value for the student — hence the exclusion from the bibliography of much excellent literature that has been superseded by more available material. The general trend of legislation is toward compulsory insurance, and the title chosen for this volume is a recogni- tion of this tendency. No one question for debate has been considered in the selections, but the following topics are suggested as among those most widely discussed in the United States: — Is the German system of social insurance adapted to con- ditions in the United States? Is compulsory state insurance the best form of insurance for working people? What is the best provision against unemployment? vi EXPLANATORY NOTE Should compulsory state insurance of workmen's compen- sation for industrial accidents be substituted for the exist- ing forms of employers' liability laws in the United States? Should a system of old age pensions be adopted? In lieu of a brief, a resume, of the principal arguments on the general subject is included. ' August, 1912. CONTENTS Argument Bibliography Bibliographies xvii General References a. Social Insurance xviii b. Systems of Insurance Adopted in Various Coun- tries xxi Germany xxi Great Britain and Dependencies xxii Industrial Accidents and Workmen's Compensation .... xxiii a. Eaws and Court Decisions xxvii Insurance Plans of Individual Corporations xxxii Old-Age Pensions xxxiii Unemployment Insurance xxxiv Introduction Henderson, Charles Richmond. Logic of Social Insur- ance Annals of the American Academy S Boyd, James Harrington. Some Features of Obligatory In- dustrial Insurance . . . Annals of the American Academy 19 Rubinow, I. M'. Compulsory Insurance Chautauquan 27 Brandeis, Louis D. Greatest Life Insurance Wrong Independent 42 Lewis, Frank W. State Insurance So Hastings, Hugh. Dangers of State Insurance North American Review 60 Sherman, P. T. Compensation Law and Private Justice. Annals of the American Academy 72 Nichols, Walter S. Argument Against Liability Annals of the American Academy 81 Dawson, Miles M. System Best Adapted to the United States Annals of the American Academy 88 viii CONTENTS Dawson, Miles M. Cost of Insurance Annals of the American Academy 97 Cheney, Howell. Employers and Compensation Systems... Annals of the American Academy lOi Irwin, Will. Industrial Indemnity Century 104 Dawson, Miles M. Employers' Liability Insurance Industrial Engineering and the Engineering Digest 112 Hard, William. Pensioners of Peace Everybody's 118 Hard, William. Injured in the Course of Duty; Conclusion. 141 Hatch, L. W. Employers' Liability or Workmen's Compen- . sation? ... New York. Labor, Department of. Bulletin 147 Dawson, Miles M. Workmen's Compensation Survey 162 Washington's . "Yes" to New York's "No" Survey 173 Moot, Adelbert. Reasons for Trying Workmen's Compen- satifon Survey 17S Seager, Henry Rogers. Workmen's Compensation for the United States Survey 177 Slobodin, Henry L. Dr. Friedensburg's Arraignment of the German Workingmen's Insurance System Survey 180 Schwedtman, F. C. Difference Between the English and German Systems of Workmen's Compensation . . Survey 181 Zacher, Georg. German Workingmen's Insurance and For- eign Countries American Journal of Sociology 184 Howe, Frederic C. How Germany Cares for her Working People Outlook 194 Lennox, P. J. Insuring a Nation. .North American Review 197 Brodsky, Randolph J. Struggle for the British Health Bill. Survey 205 Accident Relief of the U. S. Steel Corporation .... Survey 215 Baldwin, F. Spencer. Old Age Pension Schemes Quarterly Journal of Economics 218 Israels, Belle Lindner. Poverty and Insurance for the Un- employed Charities and the Commons 242 Insurance Against Unemployment Living Age 251 Compulsory Insurance Against Unemployment . . Spectator 255 Roberts, Elmer. Experiments in Germany with Unemploy- ment Insurance Scribner's Magazine 256 ARGUMENT FOR COMPULSORY SOCIAL INSURANCE The advocate of compulsory social insurance is met at the outset by the inherent human disinclination for compul- sion of any kind. Resentment at the intrusion of the state upon what has long been considered private ground is an every day incident. The game warden who confiscates the contents of the hunter's bag — perhaps on the hunter's own land; the fire warden who drops into a shop and orders the sawdust removed from the floor; the food inspector Wiho prosecutes, in the name of the state, the vendor of ancient eggs or short weight loaves; the health officer who calls at the door and demands the immediate installation of $200 worth of sanitary plumbing when the family bank account is at the vanishing point; the attendance officer who hales the parents of a persistent truant before the juvenile court — all these, and many others, are frequently regarded by the recipients of their attentions as being engaged in unwarrant- ed meddling with the personal liberties of human beings. To the average, self-centered human mind, the effect of a law or an ordinance on himself is the first and only consid- eration. Until he has acquired the social consciousness, he resists all sorts of what he considers encroachments on his personal liberties. The compulsory insurance advocate has to meet this idea from three sources — the beneficiary, if he is forced to con- tribute from his wages for insurance, and the employer and taxpayer, if any portion of the incidence of insurance is thrown upon them. The wage earner will say that he is unwilling to have any part of his wages withheld, that he needs it and is entitled to dispose of every penny of it as he X ARGUMENT sees fit, that he will make his own insurance arrangements. The taxpayer will argue that he should not be taxed to ben- efit improvidence, idleness and ineificiency. The employer feels that his profits should not be forcibly reduced by con- tributions that, he avers, will only encourage thriftlessness. Then comes the alarmist and cries "Socialism". This frightful bugaboo is all the more difficult to slay because of the ignorance of the average American concerning the underlying principles of socialism, and his wilful blindness to the American modification and application of socialistic ideas. The 'specter of a paternal government reaching out for individual liberties ia a stock argument of conservatives, individualists, and social pirates against any change that will alter the equilibrium of the world "of dollars, and loosen their own grasp of power. In harmony with all-these is the constitutional objector, who doubts the power of the central government to inaugu- rate such legislation, and has not the .interest or the courage to push it to adoption, state by state. It is urged that any effort to do for working people what they ought to do for themselves will result in a loss of self respect on their part, will encourage improvidence,. and warp the moral nature of the masses by constant temptation to idleness and deceit. All existing systems of compulsory state insurance have been subject to criticism because of the weaknesses of pub- lic administration. Opponents of the introduction of ?uch a system in the United States point to the evidences of in- efficiency in the public service, and the maladministration of public funds so deplorably common. With such a formidable array of indictments against it, the compulsory state insurance idea has triumphed in the progressive countries of Europe, and has gained a foothold in the United States. The argument in favor of the adoption of some system of compulsory insurance for people who work for wages must rest on a knowledge of the conditions under which such people live. If it can be established that a considerable ARGUMENT xi part of our people work for wages that cannot be made to provide them with decency, comfort and opportunity, much less enable them to be prepared for emergencies and mis- fortunes, then it would be obvious that so much of our in- dustrial system is parasitic, and requires revision. An excursion into the cost of living problem made for the Rus- sell Sage Foundation has established that the least income upon which a family with three children under fourteen years of age can have decency and sufficient comfort to maintain bodily and mental health is $900 a year in New York City, and $600 to $700 in smaller places. When the thousands who do not have this minimum standard income are considered, a noticeable portion of our industrial system must be branded as parasitic. Suppose the union scale for carpenters in a given city to be 35 cents an hour, and the union day to be eight hours. A daily wage of $2.80, pro- viding that work was to be had every day except Sundays and six legal holidays annually, would mean an income of $839.50, upon which, it is admitted, the family of five could maintain a mimim-um American standard of living in all but the larger cities. It is improbable that carpenters, generally, have so high a scale of pay or are able to work 307 days a year. This trade, being one that affords fairly constant work and at .Jeast 25 cents an hour wage scale in average cities, represents an index of the upper edge of the scale of compensation of working people. Vast numbers of families, even where women and children are also wage earners, do not attain the minimum of $600 or $700 in the smaller towns. Recent government investigations into wages and living con- ditions in Lawrence, Massachusetts reveal a wage scale that does not admit of decency, comfort or opportunity. So deplorable, indeed, were the revelations that many of the details are believed to have been suppressed. The industries investigated were clearly parasitic. Some of them paid handsome dividends — putting into the pockets of non-partici- pants in the activities of the business the profit that should have been partially distributed among the workers as wages honestly earned. It would be a most obtuse moral sense, xii ARGUMENT socially speaking, that would recognize the justice of a dec- laration of dividends in a parasitic industry. It is not overstating conditions to say that hundreds of thousands of wage earners in the United States do not re' ceive sufficient compensation to support life in the most, meager fashion, without the aid of friends or charity, or ■worse— loss of what is called virtue. It is estimated that a working girl in a large city should have a wage of at least $8 a week in order to keep herself well and respectable. Great numbers of girls whose pay. for long and wearisome hours of toil is far below $8 a week are to be found in any city. The constantly rising cost of Kving with no correspond- ing rise in wages and small salaries has placed thousands of American working people on the border line of poverty. On this plane of living there is nO margin for insurance. Nor is there much margin for the much better paid wage earner. The cost of insurance in private companies, fraternal orders and labor unions is so high that life, accident and annuity insurance are with difficulty carried by one member of the average family of five with an income of $i,200. A family of the same size with an income of $600, obviously, could carry only a little industrial life insurance, at most. Neither do these incomes admit of any other provision against the costly vicissitudes of life. How then, are these emergencies to be met? Is the present system of resting the burden on the shoulders least able to bear it, and then, when they sink under the load, transferring it to public and private charity, to be continued indefinitely? Or, is the sense of social justice strong enough to demand a living wage, and suitable provision for accident, sickness, unemployment, old age and dependency? If so, what is the ideal method of attaining the desired end? European countries have partially answered these questions by the adoption of systems of compulsory state insurance. The unwillingness of nearly all human beings to submit to compulsion need scarcely be reckoned as a serious ob- jection to any measure for social betterment, since compul- ARGUMENT xiii sion may not be escaped by any one — not even Crusoe on his island. The employer and employee who resent com- pulsory insurance, the taxpayer who opposes the payment of public funds for social insurance purposes, must, in turn, submit to compulsory taxes to support public charities. Be- tween compelling a man to give up some of his earnings to support public charities, and requiring him to lay by in a safe place, part of his earnings to meet the almost certain financial emergencies of his own life, there is little comfort for the advocate of personal liberty. The employer's objection to compulsion in the enforced contributions to state insurance for working people is no more valid than that of the employee. Industry will have to bear the burden of wear and tear on all the material and machines required to maintain it — including human ma- chines. When it does not. do that it becomes parasitic. The taxpayer's objection to compulsory insurance to which the state contributes is short sighted, as an equivalent amount would be concealed in the tax levy under the in- creased taxes for public charities and corrections. It ought not to require statistics to convince the average intelligence that inability to meet the normal emergencies of life breeds paupers and criminals, and that these must be cared for b^ the taxpayer. Nor are people of even average intelligence longer to be frightened by the cry of "Socialism" whenever special privil- ege is threatened by any proposition for collective effort. Socialism in the United States has resolved itself into munic- ipal, state, and national enterprises for the furtherance of the general welfare. Whenever this can be attained more effectively and economically by collective effort than by private enterprise, the name given to the particular mani- festation of civic enterprise is immaterial. The general government has seldom attempted "general welfare" legislation — but it is well within the possibilities. The constitutional objector is faint hearted. The constitu- tion may not be made for man — but any day that man dis- xiv ARGUMENT covers that he prefers to have it so constructed, he can have things started in that direction. Meantime, constitu- tional compulsory insurance has been established in Wash- ington — and if in Washington, why not in other states? It is possible that the knowledge that adequate sick and unemployment " benefits, workmen's compensation and old age pensions have been provided would deter some consti- tutionally inert people from being industrious, economical and thrifty. In most countries where compulsory insurance is in effect the benefits are purposely meager in order that every incentive to saving and providence shall remain. In Great Britain the maximum old age pension is five shillings ($I.2S) a week. Obviously the candidate for a pension must have other sources of income if he avoids going on the poor rates. Most national systems of insurance are contributory on the part of both employers and employees — sometimes also, the state subsidizing in addition. In such systems malinger- ing is discouraged by the personal interest that all work- men have in reducing payments. Nor is it reasonable to ask working people to provide for the emergencies of life out of the wages that a majority qi them receive. With higher wages, the state could very appropriately and justly say:, "You must save against emergencies. Government will care for your payments and guarantee the specified benefits." Such a system is com- pulsory only for the improvident, in reality, since the provi- dent are under no compulsion when required by law to do what they would have done in any event. The experience of Germany is evidence enough that the social insurance system there in operation does not pauperize the workers or induce loss of self respect. The system is so adjusted as to throw the incidence of burden where it belongs — on the individual, on the industry and on the state. The work- man receiving benefit feels that he receives simply deferred installments of his just dues for services rendered. Misuse of public funds must be admitted as an objection to any plan involving more public officials to handle more ARGUMENT xv money; but before regarding this as an important objection, it must be made clear that private insurance enterprises would be free from graft, and mismanagement easy to ad- just. Public officials are more and more required to be honest. There is abundant reason to believe that state in- surance funds could be economically and safely managed. The state cannot go out of business because a .few grafters exist. With a skilfully drawn law, there is no reason why any state in the, union should not have an adequate social in- surance system. The trend towards social justice is broadening. The producer of wealth will one day have his fair share of the fruits of his labor. EDNA D. BULLOCK. BIBLIOGRAPHY. A star (•) preceding a reference indicates that the entire ar- ticle or a part o( it has been reprinted in this volume. Bibliographies Chautauquan. 41: 78-9. Mr. '05. Civic Progress Program: "^ Compulsory Insurance. ' Foerster, Robert F. Social Insurance. (Harvard University. Guide to Reading in Social Ethics and Allied Subjects. 1910). Indiana. State Library, Legislative Reference Department. Select Bibliography on Employers' Liability. 191 1. (State Bar Association of Indiana). Journal of Political Economy. Bibliography of Economics for 1909. University of Chicago Press. Robbins, E. Clyde. High School Debate Book. pp. 33-43. Age Pensions. McClurg. Chicago. 191 1. A brief is also included. United States. Library of Congress — Division of Bibliog- raphy. Select List of References on Employers' Liability and Workmen's Compensation. 191 1. For sale by the Superintendent of Public Documents, "Wash- ington, D. C. 20 cents. United States. Library of Congress — Division of Bibliog- raphy. Select List of References on Old Age and Civil Service Pensions. 1903. For Sale by the Superintendent of Public Documents, Wash- ington, D. C. 10 cents. United States. Library of Congress — Division of Bibliog- raphy. Select List of References on Workingmen's In- surance. 1908. For sale by the Superintendent of Public Documents, Wash- ington, D. C. 10 cents. Virginia. State Library. Legislative Reference Lists. 1912. xviii BIBLIOGRAPHY I. General References a. Social Insurance. Books, Pamphlets and Documents Adams, Thomas S. and Sumner, Helen L. Labor Problems. 1905. Compulsory Insurance, pp. 488-93. Alden, Percy. Democratic England. 1912. Macmillan. Bliss, William D. P. New Encyclopedia of Social Reform, under Industrial Insurance, Old-age Pensions, Unemploy- ment. Bolen, George Lewis. Getting a Living. 1903. Macmillan. Chapter 21. Workingmen's Insurance and Pensions. Carr, A. V. and Others. National Insurance. 1912. Macmillan. Dryden, John F. Industrial Insurance; Its History in Eng- land and America. (Yale Insurance Lectures. 1904. pp. 184-99). Frankel, Lee K. and Dawson, Miles M. Workingmen's In- surance in Europe. 1910. Russell Sage Foundation. Bibliography pp. 437-42. Haines, Thornwell. Insurance for Workmen in Foreign Countries. U. S. Consular Reports. No. 295. Ap. '05. Henderson, Charles Richmond. Industrial Insurance in the United States. 1909. University of Chicago Press. Bibliography pp. 323-6. International Congress on Social Insurance. Reports. 1889- 1908. *Lewis, Frank Wesley. State Insurance, a Social and In- dustrial Need. 1909. Houghton. National Civic Federation. Proceedings, v. 10, 1909. 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Clark, Lindley D. Law of the Employment of Labor. 191 1. Macmillan. Eastman, Crystal. Work-Accidents and the Law. 1910. 'Rus- sell Sage Foundation. Ekern, H. L. Organization of Mutual Employers' Liability Insurance Companies. 191 1. Wisconsin Industrial Com- mission. *Hard. William and Others. Injured in the Course of Duty. 1910. Ridgway. Reprinted from Everybody's Magazine. Illinois. Employers' Liability Commission. Report. 1910. Law, Frank E. State Insurance of Workmen's Compensation for Accidents. 191 1. Fidelity and Casualty Company of New York. Lescohier, Don D. Industrial Accidents and Employers' Lia- bility in Minnesota. 1910. Minnesota. Labor, Industries and Commerce, Bureau of. Biennial Report, v. 12, pt. 2. McKittrick, Reuben. Accident Insurance for Workingmen.. 1909. Wisconsin. Free Library Commission. Comparative Legislation Bulletin, No. 20. Massachusetts. Compensation for Industrial Accidents, Com- mission on. Report. 1911. Minnesota. Employers' Compensation Commission. 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Free Library Commission. Comparative Legisla- tion Bulletin, No. i. Schwedtman, Ferdinand Charles, and Emery, J. A. Accident Prevention and Relief; an Investigation of the Subject in Europe. 191 1. United States. Employers' Liability and Workmen's Com- pensation Commission. Report. 1912. Hearings, May 10, 1911 to December, 1911. United States. Labor, Bureau of. Bulletin. 21: 749-831. S. '10. Cost of Employers' Liability and Workmen's Compensa- tion Insurance. Miles M. Dawson. United. States. Labor, Bureau of. Bulletin. 22: 1-96. Ja. '11. Industrial Accidents and Loss of Earning Power: Ger- man Experience in 1897 and 1907. Henry J. Harris. Weber, Adna F. Employers' Liability and Accident Insur- ance. (In Commons, J. R. Ed. Trade Unionism and Labor Problems. 1905. Chapter 25). Published also in Political Science Quarterly. 17: 256-83. Je. '02. Wisconsin. Labor, Bureau of. Biennial Report, v. 13-14. 1907- 9. Magazine Articles American Industries. 12: 25. O. '11. What Can Employers Do? F. C. Schwedtman. American Magazine. 68: 260-2. Jl. '09. Buying a Man's Arm. Annals of the American Academy. 26: 499-574. S. '05. Lia- bility Insurance. W. F. Moore. Annals of the American Academy. 38: 1-317. Jl. '11^ Risks in Modern Industry. Annals of the American Academy. 38: 15-22. Jl. '11. Casualty Insurance Companies and Employers' Liability Legisla- tion. Edwin W. DeLeon. xxvi BIBLIOGRAPHY Annals of the American Academy. 38: 78-82. Jl. '11. Bur- den of Industrial Accidents. John Mitchell. ♦Annals of the American Academy. 38: 159-65. J'- 'H- Argu- ment against Liability. Walter S. Nichols. Annals of the American Academy. 38: 238-40-. Jl. '11. Work- men's Compensation and the Industries of Massachusetts. James A. Lowell. Annals of the American Academy. 38: 241-5. Jl. '11. Attitude of Foreign Countries toward Liability and Compensa- tion. Lee K. Frankel. *Annals of the American Academy. 38: 271-3. Jl. '11. Em- ployers and Compensation Systems. Howell Cheney. ♦Annals of the American Academy. 38: 263-5. Jl- 'n- Cost of Insurance. Miles M. Dawson. Atlantic. 103: 57-65. Ja. '09. Employers' Liability. Frank W. Lewis. ♦Century. 82: 118-22. My. '11. Industrial Indemnity. Will Irwin. Charities and the Commons. 19: 1671-82. Mr. 7, '08. Em- ployers' Liability in Pennsylvania. Crystal Eastman. Charities and the Commons. 21: 1143-74. Mr. 6, '09. Year's Work Accidents and Their Cost. Crystal Eastman. Congressional Record. 42: 7877-94. Je. 8, '08. Industry Ought to Bear the Cost of All Accidents. George A. Bartlett. Economic Review. 5: 297-318. Jl. '95. Accident Insurance. Henry W. Wolff. ♦Everybody's. 19: 522-33. O. '08. Pensioners of Peace. Wil- liam T. Hard. Harpers' Weekly. 51: 1132. Ag. 3, '07. England's Domestic Upheaval and Its Effects. Sidney Brooks. Independent. 64: 1340-4- Je. 11, '08. Penalty of Progress. Edward A. Moseley. Independent. 70: 1417-20. Je. 29, '11. Employers' Liability. Chauncey B. Brewster. ♦Industrial Engineering and the Engineering Digest. 7: 449- 52. Je. '10. Employers' Liability Insurance. Miles M. Daw- BIBLIOGRAPHY xxvii /Journal of Political Economy. 12: 362-81. Je. '04. Labor In- surance. I. M. Rubinow. Journal of Political Economy. 16: 157-9. Mr. '08. Employers' Liability in Insurance Theory. H. J. Davenport. North American Review. 185: 651-60. Jl. '07. Shifting the Burden; Compensation for Injuries. A. Maurice Low. Outlook. 85: S08-11. Mr. 2, '07. Is Workmen's Compensation Practicable? Arthur B. Reeve. Outlook. 92: 319-22. Je. '09. Hazards of Industry. Launcelot Packer. Scientific American Supplement. 53: 22015. My. 3, '02. Sci- entific Study of. Accidents. J. Howe Adams. Reprinted from the Medical Fortnightly. Survey. 22: 228. My. 8, '09. Cost of German Accident Insur- ance. Lee K. Frankel. Survey. 22: 820-1. S. 18, '09. Competition or Co-operation in Workmen's Compensation. George M. Gillette. Survey. 23: 336-40. Dec. 4, '09. Capital and Labor Agree on Workmen's Compensation. Arthur B. Reeve. Survey. 24: 788-94. S. 3, '10. Work-Accidents and Employers' Liability. Crystal Eastman. Reprinted from National Conference of Charities and Corrections. Proceedings, 1910: 414-24. Survey. 26: 631-3. Ag. 5, '11. National Insurance versus Com- pensation. Survey. 26: 767-8. S. 2, '11. Federal Taxation for Industrial Injuries. *Survey. 28: 239-49. My. 4, '12. After the Common Law — What? Symposium. a. Laws and Court Decisions For the texts of the laws of individual states, use the statutes and latest session laws. Many states have the labor laws, or employers' liability laws printed separately. These may be ob- tained by addressing Secretaries of state. Books, Pamphlets and Documents American Economic Association. Bulletin. 4th Series, i : 276-81. Ap. '11. Compulsory Compensation for Injured Workmen. Daniel L. Cease. Printed also in American Labor Legislation Review. 1: 49-54. Ja. '11. xxviii BIBLIOGRAPHY American Economic Association Bulletin. 4th Series, i: 282- 95. Ap. '11. Problems of Workmen's Compensation Legis- lation. Thomas I. Parkinson. Printed also in American Labor Legislation Review. 1: 55-71. Ap. '11. American Economic Association. Bulletin. 4th Series, i : 296- 301. Ap. '11. Voluntary Indemnity for Injured Workmen. F. C. Schwedtman. Printed also in American Labor Legislation Review. 1: 49-54. Ja. '11. Aronson, V. R. Workmen's Compensation Act of 1906. 1909. Unwin. Carleton, Frank Tracy. History and Problems of Organized Labor, c. 1911. Heath. Chapter 10. Pirotective Legisla- tion for Employees. Dawson, William Harbutt. German Workman. 1906. Scrib- ner. Chapter XV. Industrial Insurance Laws. Elliott, A. Workmen's Compensation Act of igo6. Garfield, James R. Employers' Liability and the Compen- sation Laws and the Difference Between Them. Ohio Bar Association. Proceedings, 1909. Germany. Workmen's Insurance Code of July, 191 1 ; text translated by H. J. Harris. United States. Labor, Bureau of. ■ Bulletin. 23: 501-774. S. '11. Goodnow, Frank Johnson. Social Reform and the Consti- tution. 191 1. Macmillan. Constitutionality of Government Aid for Pensions in Case of Old Age, Accident or Sick- ness, pp. 300-17. International Labor Office. Basel, Switzerland. Bulletin. See this series for legislation on employers' liability and com- pulsory insurance. Lescohier, Don D. Employers' Liability Cases Reported in Volumes 103-109 of the Reports of the Minnesota Su- preme Court. (In Industrial Accidents and Employers' Liability in Minnesota, pp. 190-7.) Lorenz, M. O. What Form of Workingmen's Accident In- surance Should Our States Adopt? (In American Asso- ciation for Labor Legislation. Proceedings, 1908: 59-75.) Montana. Insurance Department. Coal Miners' Accident and BIBLIOGRAPHY xxix Total Disability Insurance Law Held Unconstitutional, igii. Bulletin, No. lo. National Civic Federation. Views of the Legal Committee concerning the Effect of the Decision of the Court of Appeals in the State of New York upon the Compulsory Compensation Principle in its Relation to Uniform State Legislation. 191 1. New York. Court of Appeals. Decision in the Case of Earl Ives vs. the South Buffalo Railway Company. 191 1. New York. Labor, Department of. Bulletin. 12: 57-80. Mr. '11. Compulsory Workmen's Compensation Act Uncon- stitutional. Reeves, William Pember. State Experiments in Australia and New Zealand. 2v. 1902. Richards. Workmen's Com- pensation Laws in New Zealand and South Australia, v. 2, pp. 21 1-6. Rhode Island. State Library Legislative Reference Bureau. Employers' Liability and Workmen's Compensation Acts, 1912. Bulletin, No. 5. United States. Industrial Commission. Report on the Con- dition of Foreign Legislation upon Matters Affecting General Labor. (Report, v. 16, 1901.) United States. Labor, Bureau of. Labor Laws of the United States with Decisions of Courts Relating Thereto. 1907. Annual Report, v. 22. United States. Labor, Bureau of. Laws Regulating Liability of Employers for Injuries to Employees; Compilation of the Laws of the States, Territories and United States. 1908. (6oth Cong. 1st. Sess. Senate Doc. 207.) United States. Labor, Bureau of. Bulletin. See Numbers as Issued for Decisions of Courts Affecting Labor. United States. Labor, Bureau of. Bulletin. 10: 645-8. Mr. '05. State Cooperative Accident Insurance Fund of Maryland. United States. Labor, Bureau of. Bulletin. 14: 574-652. My. '07. British Workmen's Compensation Acts. United States. Labor, Bureau of. Bulletin. 16: 1-120. Ja. '08. Legal Liability of Employers for Injuries to their Em- ployees in the United States. Lindley D. Clark, XXX BIBLIOGRAPHY United States. Labor, Bureau of. Bulletin. 21: 719-48- S. '10. Summary of Foreign Workmen's Compensation Acts. United States. Labor, Bureau of. Bulletin. 22: 97-181. Ja. '11. Workmen's Compensation and Insurance: Laws and Bills. United States. Supreme Court. Opinion and Dissenting Opin- ions on the Constitutionality of the Employers' Liability Law. 1908. (60th Cong, ist Sess. House Doc. 501.) Magazine Articles *Annals of the American Academy. 38: 23-30. Jl. '11. Some Features of Obligatory Industrial Insurance. James Har- rington Boyd. Annals of the American Academy. 38: 119-27. Jl. '11. Consti- tutional Problem of Workmen's Compensation. William Draper Lewis. Annals of the American Academy. 38: 128-43. Jl- 'H- Present Status of Workmen's Compensation Laws. Walter George Smith. *Annals of the American Academy. 38: 151-8. Jl. '11. Com- pensation Law and Private Justice. P. Tecumseh Sherman. *Annals of the American Academy. 38: 175-83. Jl. '11. Sys- tem Best Adapted to the United States. Miles M. Dawson. Annals of the American Academy. 38: 184-201. Jl. '11. Points to be Considered in Workmen's Compensation Legisla- tion. Launcelot Packer. Annals of the American Academ/. 38: 225-9. Jl- 'n- New Jersey Employers' Liability Act. Walter E. Edge. Charities and the Commons. 19: 1191-1203. D. 7, '07. Sum- mary of European Laws on Industrial Insurance. Charles Richmond Henderson. Charities and the Commons. 19: 1402-3. Ja. 18, '08. Liability Law Void. Charities and the Commons. 19: 1662-4; 20: 127-8. Mr. 7, Ap. 25, '08. Federal Employers' Liability Act. Ernst Freund. Chautauquan. 65: 305-7. F. '12. British National Insurance Act. Congressional Record. 42: 7922-33. Je. 8, '08. Speech on the Workmen's Compensation Act. Adolph J. Sabath. BIBLIOGRAPHY xxxi Everybody's. 19: 361-71. S. '08. Law of the Killed and Wounded. William Hard. Journal of Political Economy. 16: log-io. F. '08. Settihg Aside the Employers' Liability Act. Journal of Political Economy. 19: 694-700. O. '11. New York Workmen's Compensation Act Decisions. James Parker Hall. Outlook. 97: 9SS-6o. Ap. 29, '11. Can a Free People be Free? Outlook. 98: 709-11. Jl. 28, '11. Workmen's Compensation Act: Its Constitutionality Affirmed. Outlook. 99: 146-7. S. 23, '11. Wisconsin's Industrial Insur- ance Act to be Tested. Quarterly Journal of Economics. 19: 320-2. F. '05. End of the Maryland Workmen's Compensation Act. George E. Barnett. Quarterly Journal of Economics. 26: 275-312. F. '12. British National Insurance Act. R. F. Foerster. Survey. 23: 966-9. Mr. 26, '10. Work- Accidents and the Law; Report of the New York Commission on Industrial Ac- cidents. Survey. 24: 277-8. My. 14, '10. Liability vs. Compensation as Applied to Actual Cases. Survey. 25: 423-4. D. 10, '10. Uniform Law on Accident Com- pensation. Survey. 25: 949-62. Mr. 4, '11. Compensation Commissions; a Review of Legislation Proposed in Seven States with Re- spect to Work Accidents. P. Tecurnseh Sherman. Survey. 26: gi-3. Ap. 8, '11. Next Step in Workmen's Com- pensation. Miles M. Dawson. Survey. 26: 185-96. Ap. 29, '11. Court of Appeals Decision; Symposium. *Survey. 26: 671-6. Ag. 5, '11. Workmen's Compensation. Would the Best System for the General Welfare be Con- stitutional? Miles M. Dawson. ♦Survey. 27: 1015-6. O. 21, '11. Washington's "Yes'' to New York's "No." Survey. 27: 1091-2. N. 4, '11. Olympian Law vs. Albany Law. xxxii BIBLIOGRAPHY Survey. 27: 1306-12. D. 2, '11. Struggle for the British Health Bill. Randolph J. Brodsky. III. Insurance Plans of Individual Corporations Books Phelps, Edward Bunnell. Summary of the Possibilities and Probable Cost of the Proposed Plan for Workmen's Com- pensation and Old-Age Pensions for American Brewery Workmen. 191 1. Magazine Articles American Journal of Sociology. 13: 584-616. Mr. '08. Insur- ance Plans of Railroad Corporations. Charles Richmond Henderson. Annals of the American Academy. 38: 35-44. Jl. '11. Results of the Voluntary Relief Plan of the United States Steel Corporation. Raynal C. Boiling. Annals of the American Academy. 38: 45-56. Jl. '11. Disability and Death Compensation for Railway Employees. Daniel L. Cease. Charities and the Commons. 19: 1213-7. D. 7, '07. Problem of Self Insurance Against Industrial Accidents. Edgar Maitland Atkin. McClure. 35: 151-68. Je. '10. Cruelties of Our Courts. John M. Gitterman. *Survey. 24: 136-9. Ap. 23, '10. Accident Relief of the United States Steel Corporation. Survey. 26: 87-9. Ap. 8, '11. Brewery Workmen's Compensa- tion Fund. World's Work. 14: 945-8. O. '07. New Kind of Insurance; How One Company Insures Its Men Against Accidents. Arthur B. Reeve. J BIBLIOGRAPHY xxxiii IV. Old Age Pensions Books and Pamphlets Booth, Charles. Old-Age Pensions. 1899. Chancellor, William E. Argument for Disability Pensions for Employees Invalided by Old Age and Other Causes, ed. 2. 191 1. Fairfield. Gainsborough Committee. Life and Labour in Germany, with an Appendix: Infirmity and Old-Age. Pensions in Germany. London. 1907. Lecky, William Edward Hartpole. Old Age Pensions. 1908. Longmans. Massachusetts. Commission of Old-Age Pensions, Annuities and Insurance. Report, igio. (House doc. 1400.) Contains an excellent descriptive account of existing systems. National Conference of Charities and Corrections. 1905: 445- 57; 1906: 452-70. Reports of Special Committee on Work- ingmen's Insurance and Old-Ag^e Pensions. Old Age Pensions; a Collection of Short Papers. 1903. Mac- millan. Seager, Henry Rogers. Social Insurance. 1910. Chapter 5. Provision for Old Age. Squier, Lee Welling. Old Age Dependency in the United States. 1912. Macmillan. Sutherland, William. Old Age Pensions. 1907. Methuen. United States. Labor, Bureau of. Bulletin. 21: 965-1033. N. '10. Old-Age and Invalidity Pension Laws of Germany, France, and Australia; Text and Comments. Vanderlip, Frank. Business and Education. 1907. Old-Age Pensions for Workingmen. pp. 224-52. Magazine Articles Chautauquan. 61: 391-4. F. '11. Helping People in Their Homes. S. K. Bolton. Political Science Quarterly. 26: 500-29. S. '11. Compulsory Old-Age Insurance in France. I. M. Rubinow. Quarterly Journal of Economics. 24: 714-42. Ag. '10. Old xxxiv BIBLIOGRAPHY Age Pension Schemes: a Criticisim and a Program. F. Spencer Baldwin. Review of Reviews. 38: 746. State-aided Old- Age and Dis- ability Insurance in Italy. V. Unemployment Insurance Books Chapman, S. J. and Hallsworth, H. M. Unemployment, the Results of an Investigation made in Lancashire. 1909. Manchester University Press. Chapter 8. Seasonality and Insurance. Dawson, William Harbutt. German Workman. 1906. Scrib- ner's. Chapter 3. Insurance Against Worklessness. Willoughby, William Franklin. Insurance Against Unem- ployment. (In Commons, J. R. ed. Trade Unionism and Labor Problems. Chapter 27.) Magazine Articles American Journal of Sociology. 2: S01-14. Ja. '97. Insurance Against Non-Employment. Paul Monroe. *Charities and the Commons. 20: 343-7. Je. 6, '08. Poverty and Insurance for the Unemployed. Belle Lindner Israels. Independent. 64: 647. Mr. 19, 'oS. Insurance Against Unem- ployment. Independent. 6y: 267-8. Jl. 29, '09. Unemployment Insurance. *Living Age. 268: 443-5. F. 18, '11. Insurance Against Un- employment. New York. Labor, Department of. Bulletin. 40: 69-70. Mr. '09. Unemployment Insurance in Denmark. Nineteenth Century. 64: 763-76. N. '08. How Switzerland Deals with her Unemployed. Edith Sellers. Nineteenth Century. 65: 272-82. F. '09. Insurance Against Unemployment Scheme. Edith Sellers. *Scribner's Magazine. 49: 116-20. Ja. '11. Experiments in Ger- many with Unemployment Insurance. Elmer Roberts. Scientific American Supplement. 72: 394-6. D. 16, '11. Insur- ance Against Unemployment in France. BIBLIOGRAPHY xxxv Spectator. 102: 172-3. Ja. 30, '09. Insurance Against Unem- ployment. Spectator. 102: 806-7. My. 22, 'og. Compulsory Insurance Against Unemployment. Westminster Review. 171: 544-51. My. '09. Unemployment, Insurance and Labour Exchanges. T. Good. SELECTED ARTICLES ON COMPULSORY INSURANCE INTRODUCTION The student of human problems finds this subject of the protection of the working classes from the misfortunes of life the most human of all problems. So large a prx)portion of the people belong to the working classes that the promo- tion of their well being is one of the most imperative so- cial needs. A country's greatest source of wealth lies in its workers. Upon the maintenance of the working people in decency, health, comfort and self respect hangs the efficiency and prosperity of a nation. As the social consciousness gathers coherence, nations begin to ask themselves whether the wage earners are being accorded their rightful share of the material riches resulting from their labors. The social demand is for healthful and comfortable homes, nourishing food, suitable clothing, adequate educational and recreational opportunities, steady employment, safe and healthful places in which to work, and wages that permit provision for the emergencies of life. Are these requirements being met? Naturally, the . student looks to the Old World for the earliest efforts to arrive at social justice to the silent masses of the people. Overcrowding of population and consequent disestablishment of economic equilibrium forced recognition of the condition of the working people. To allay the dis- content growing out of these conditions as indexed by the 2 , SELECTED ARTICLES rising -tide of socialism, Germany, spurred on by Bismarck, adopted a sweeping scheme of social insurance. This has been extended until the Code of July 19, 191 1 applies to the greater part of the working population of the Empire. Ample testimony to the general satisfaction over the effects of the system is available. Criticisms are not wanting, but they refer to details of administration rather than to the es- sential idea. After more than twenty-five years of trial the German system is almost universally conceded by impartial students to have been the leading factor in the establishment of the admitted industrial supremacy of Germany. Briefly, this system includes compulsory insurance against industrial accident, sickness, invalidity, old age and death of a wage earner with dependents. When the demands upon the poor rates become so heavy as to indicate a reducing of a shocking proportion of the working people to pauperism, taxpayers can generally be counted on to make some investigations into causes. Great Britain has been slowly and painfully working out some form of amelioration for the deplorable conditions existing among her working people. The scheme has recently (May, 1912) been widened to include invalidity and unemployment insurance. Earlier legislation had provided for workmen's compensation, sickness insurance and old age pensions. Many European countries have adopted some of the fea- tures of the German system. An earnest effort to improve conditions is manifest. The laggard in this type of reform is the United States. This is due, principally, to the handicap to all social legisla- tion embedded in the Constitution. Such legislation, except for industries engaged in interstate commerce, must be ob- tained locally by states. A number of states have modified the common law, which has heretofore determined employ- ers' liability, and one state (Washington) has adopted com- pulsory state insurance for industrial accidents. Provision for some of the contingencies of life is made by some corporations in the United States for their per- COMPULSORY INSURANCE 3 maiient employees — some of the systems being non-contribu- tory, others being contributory and voluntary. The great majority of American workmen must shift for themselves in the matter of insurance. Some more equitable method must be devised. It is for the student to consider the systems in operation, and discover, if may be, what sys- tem is best adapted to conditions in the United States. SELECTED ARTICLES Annals of the American Academy. 33: 265-77. March, 1909. Logic of Social Insurance. Charles Richmond Henderson. Hitherto the title "industrial insurance" in this country- has been monopolized by private companies, and meant chiefly provision for funeral expenses at high cost. It is time to extend the significance of the words,, or t o adop_t _son.ie such de scription as "social insurance" to cover the methods of guaranteeing income to_wag.e_earners and_th eir families in~~case of sickness7 accident, invalidism, JeeiiLeness___of__ol(L age, death ot the breadwinner and unemployment. Ihe people are beginhTHgTo take ari~iiiteresFm the sub- ject. A few years ago all suggestions were hushed by the sneering epithets, "socialism," "sentimentalism," "paternal- ism," and a hint that one was corrupted by German "absolu- tism." Of course, there never was any real weight in such empty and provincial phrases, and they merely indicated the fact that the American mind was empty of knowledge of a world movement. They revealed an indifference to human suffering which did no credit to our civilization, and a con- tempt for social science, which was not honorable to our universities, editors and lawyers. Very hopeful are the signs of interest. Magazine articles on industrial accidents sell the numbers; legislative committees are busy framing bills; the Russell Sage Foundation and the Carnegie Institution are collecting information; trade unions have retained legal tal- ent to help them formulate laws which will have a living chance with conservative courts bound under constitutions written by men of minds alien to our age and for radically ■different economic conditions and ethical ideals. European nations have solved the actuarial and economic problems, 6 SELECTED ARTICLES while America, proud of its inventiveness and initiative, lags in the rear and rails at the "effete monarchies" of the Old World, and foretells all sorts of evils like those senile per- sons who praise the times that are dead. Perhaps the newspapers, even though hostile, have helped to awaken attention by grudging references to the European laws, while a corps of young writers of talent and persons with experience in charity work have stirred the sluggish conscience 9f the nation by their stories of misery caused by our human neglect, and have reminded men of the dis- closures of the German workingmen's insurance plans at the St. Louis Exposition. One cause of the awakening is a discovery of the enor- mous cost of litigation which has become a burden upon the resources of the nation and a disgrace to the legal profession, as well as a source of corruption. A recent article in the Chicago "Tribune" on "The Cost of Legal Circumlocution," furnishes an illustration: All the civil litigation of England and Wales, population about thirty-two millions, is taken care of by thirty-four judges in the supreme court of judicature and fifty-eight county judges, or ninety-two judges in all. The population of Illinois was, by the census of 1900, approxi- matfely 4,800,000. Its courts employ seventy-eight circuit judges and 101 county judges exclusive of Cook County. Cook County has twenty-five circuit and superior court judges, a county judge, a probate Judge, and a municipal court of very general jurisdiction employing twenty-eight judges. There is a supreme court of seven judges. In all these judges number 216. Besides, we have justices of the peace and the federal judges. The "Tribune" does not offer this rough comparison as con- clusive. But it suggests that after making all due allowances the discrepancy revealed is shocking. Omitting the work of our coun- ty judges and taking into account only that of our circuit, superior and supreme courts, we have an establishment of eighty-five judges taking care of the civil and criminal cases of a population of less than five millions, while in England and Wales ninety-two judges dispose of all the litigation of more than six times our population. The vast property and business conditions of England must also be thrown into the scale against us. Unless our judges and our lawyers are incompetent or worse there is something wrong in our admiYiistration of the courts. The first hypothesis is, of course, not to be considered. The alternative should be faced by the profession and by the public and reform achieved. The waste and burden of our over-technical procedure must cease: It has endured too long. Studies of the causes of wasteful expenditures in courts reveal the slow and serpentine course of personal damage COMPULSORY INSURANCE 7 suits which fill the dockets and blockade the roads of justice. Important commercial business must wait while, during long years some mutilated workman, led by an ambulance-chasing lawyer, who is fed on hopes of immense contingent fees, fights his employer or a soulless casualty insurance company through court after court, in the end to accept the pittance which the attorneys are willing to leave him from the award. The ideal of justice is a prompt, certain and unbought indemnity; the actual fact is that under our employers' lia- bility laws the indemnity for injury in occupation is subject to all the uncertainties of gambling, it comes, if ever, after long and painful waiting, and it is robbed of its value by the necessary costs of collection through the courts. .There is no greater source of hatred for law and judicial process than this travesty and mockery of justice. The abuses of injunc- tions in case of strikes and boycotts are comparatively rare and easily remedied; the wrongs legally perpetrated in dam- age suits are a matter of universal and daily experience. As' soon as a workman is injured and claims his indemnity in courts his employer may put him on a black list and perse- cute him to death; and the very nature of the law produces this artificial and monstrous antagonism. Lawlessness and class hatred are the legitimate progeny of a procedure which has been rejected by every other great and civilized people. Curious and discouraging is the consequence of living for generations under such an unfit law; it has shaped our modes of reasoning until we cannot think rationally on the actual demands of the situation. We follow precedents of the past for a guide in a new and different economic world, and every step takes us further from our goal. Not only lawyers and judges, but aggressive business men and shrewd trade union- ists think in terms set by antiquated regulations. Trade unions are spending their energy on making the employers' liability law still more drastic and until recently, they have not faced the fact that progress in this direction is impos- sible. What they need is insurance of income in all cases of accident, whether from negligence of employer or from risk of the trade. What they want and ask is the chance 8 SELECTED ARTICLES to punish their employers in case of negligence only, and they are seeking to interpret "negligence" in a sense which it never had before, which is unjust now, and which will pro- voke still more conflict in the courts. Meantime, more by a reflex movement of discomfort than from scientific guidance, employers and employees are per- forming all sorts of experiments wifh insurance. Blind and faulty as those gropings are, they must be made the starting point for a scientific and complete system in the future, as acorns produce oaks. The principle of association for mutual protection in the emergencies of existence manifest itself in the clubs and lo- cal benefit societies which are formed everywhere in the country. The negroes of the South have been led by the in- stinct of aggregation and the example of their white neigh- bors to pool their dues against the time of the funeral. Sometimes the undertaker is also secretary-treasurer of the pool, with results very similar to those known in the case of burial insurance benefits. The statistics of funds collected by these friendly groups on the basis of common occupation, race or religious ties, or mere neighborhood, will never be gathered; but even partial surveys show vast sums and reveal heroic sacrifice and deeds of friendly service. The German imperial legislators have been wise enough to retain these features of local and per- sonal moral bonds in their sickness insurance laws. In con- nection with illness something more is needed than mere money benefits; a human touch of sympathy must be added by fraternal visitors; and intimate, acquaintance diminishes the temptation to malingering almost as thoroughly as med- ical examinations. .The fraternal societies, of national scope and with local lodges, all federated in the common interest, have, with slow and irregular march, educated millions of people in the ele- mentary principles of social insurance. It is true these so- cieties include many representatives of the commercial and professional classes, but they are also popular with many groups of workingmen. They have demonstrated the possi- COMPULSORY INSURANCE g bilities of economy of administration where the ties of per- sonal association are strong through neighborly feeling, mystic symbols and religious faith. The Mutualists of France have shown that not only sickness insurance and death benefits but also old age pensions can be provided by this method — with proper governmental supervision and aid. Some of the trade unions have added insurance features of various kinds, and when members have good wages these have succeeded fairly well with sickness and burial benefit. The trade unions alone have achieved even a moderate suc- cess with unemployment benefits. They have failed to in- sure the workmen who are on low and uncertain income. When a system of compulsory accident insurance has been organized the trade unions will be free to provide sickness and invalid insurance and additional income beyond the min- imum which can be secured by law; but they can never fur- nish adequate accident insurance, and society has no right to require, them to carry a risk which is part of the real cost of production and should be borne wholly as part of the ex- penditures of production. One principle has been taught to millions of persons by all these schemes of insurance — the principle • of insurance as opposed to savings. The obsolescent doctrines of individual- ism and laissezfaire ido'lized the savings bank and the multi- tudes actually believed that by deposits of an average of one hundred dollars a year at 3 per cent they could all become capitalist managers and gain a share in the profit funds. This illusion was cultivated for a long time by advocates of many ill-defined "profit-sharing" schemes. Of course, there was a large measure of truth in both these ideas, and much will still be made of them in the future. But hope of "rising" into the diminishing capitalist-manager class has been definitely abandoned by workingmen and people on salaries. Attention is turned to the value of association and insurance. The minute a man joins an insurance society he gains a claim on a fund which he could not "save'' in twenty years. Furthermore, men are discovering that co-operation 10 SELECTED ARTICLES with others opens a finer way of life than depositing pre- miums to an individual account. From the point of view of social insurance the tendency to concentrate manufactures, commerce and transportation in permanent corporations is an advantage; partly because the responsible managers of large enterprises must be far- seeing men, and partly because solid corporations can safely venture on schemes which require a long view and the ac- cumulation of funds. It is precisely with the railway com- panies and the other huge corporations that we find the most rapid development of workingmen's benefit and pension plans. It seems probable that these bodies will entrench themselves in their financial position by these means, because they will draw away from the less important managers their best workmen and hold them in their service with the pros- pect of serene and independent old age. These plans are developing so rapidly that statistics are soon obsolete, and there' is scarcely a good manufacturing or transportation company which is not employing legal and actuarial talent to recommend methods and legislation. To this course they are driven all the more by the tendency of legislatures to lay upon corporations, creations of the state, burdens of lia- bility which they do not' think of imposing on private em- ployers. The consequence is that the directors of large en- terprises are looking about for a method which will at once conciliate employees and avoid the waste of litigation in damage suits. As progress comes by common imitation of examples set by princes and men in high place, we may rea- sonably look for a movement of smaller employers to se- cure the advantages of assembled capital through national insurance associations which will either furnish workmen's collective policies or arrange for better terms with casualty companies. No voluntary system of social insurance can be economi- cally administered, save upon a foundation of compulsory in- surance. The reason is obvious and all the schemes men- tioned illustrate the law. So long as accident insurance con- tinues to be optional, many employers and employees will COMPULSORY INSURANCE u neglect organization and they will hamper or even defeat those who are willing to organize. * Part of the difficulty in the United States is created by the existing law. Employers feel that they cannot afford to support accident insurance at their own cost so long as they are liable to pay heavy damages to injured workmen or fight them in the courts; and the law keeps them always in fight- ing mood. So long as part of the employers refuse to carry these extra premiums their competitors are economically compelled to follow their example. A compulsory insurance law would at one stroke of the pen remove the burden created by the present liability for negligence and the appalling wastes in casualty company fees and litigation; and at the same time the amount now wasted or misdirected would be available for an accident and sickness insurance fund of vast magnitude. At present an enormous sum is spent for soliciting business and settling claims by agents of casualty companies. This is all waste, because under compulsory insurance employers would seek the means of meeting their responsibilities and their protec- tion could be "sold over the counter." The managers of in- dustries could then choose between the bids of casualty com- panies for workmen's collective policies, or organize their own mutual insurance associations. The premiums would fall to a legitimate rate and stockholders in casualty com- panies would no longer draw dividends from extortion, strife and blood money. That which is economically necessary and otherwise so- cially imperative will ultimately be found constitutional. In all our history there has been no exception to this rule; al- though at every step into a brighter world judges have solemnly denied the possibility and great lawyers have turned back to their case books with a smile of pity for the phi- lanthropists or bitter sarcasm for the agitators who ruffled the calm sea of their complacent confidence in "natural law," Coke, Blackstone and Company. Within the past year the federal government itself has broken up the "crust of custom" by enacting a law which 12 SELECTED ARTICLES provides compensation for certain classes of its own em- ployees injured in the service; and the pitifully inadequate compensation will be increased and extended. It is a splen- did and persuasive example of justice which the general gov- ernment has set before the several states and all employers of labor. The document is a light tower showing the future high- way for all those who control the services of men who must live day by day on daily income. The assertion, based on nothing, that compulsory social insurance is "not American" is contrary to the most obvious facts of our history. We are a law-abiding people and love to make laws, and every statute and court ruling is compul- sory. We are so used to compulsion in the common interest that we forget it, as we are unconscious of the at- mosphere. It is the vital element in which we enjoy freedom, security, order and opportunity. By compulsory laws we build and maintain roads and bridges, against the mean pro- tests of the minority who would be content to stick in the mud. By compulsory laws we secure parks and pleasure grounds and secure the revenue by diverting money from the liquor traffic. Within the memory of the writer in the Mid- dle West a large if not respectable minority railed at the public school laws as robbery, and insisted that any man had the right to bring up .his offspring in brutish ignorance if he wished to do so. Compulsory taxation to relieve the poor, the insane, the idiotic, the demented, the indigent old people is in the poor law of Great Britain, and the nations descended from it; while republican France has recently adopted the principle and Italy is moving in the same direction. This means that the conscience of a modern nation will not permit a citizen, however inefficient or unworthy, to perish without an offer of at least a minimum supply of the necessities of life. We shall be logical. We shall discover that it is morally infamous to offer temporary asylum and a secure old age to wornout criminals, prostitutes, ignorant ne'er-do-wells, and degenerates, and deny shelter to honest workmen, ex- cept on terms revolting and debasing. COMPULSORY INSURANCE 13 The popular campaign against tuberculosis has reveialed to the common mind the meaning of the "police power" of the state, and the signific'ance of public health administration. No man can be sick unto himself, especially in a crowded factory or tenement house. Those who are too ignorant, poor or negligent to keep well are taken in hands by the commissioner of health. Those who suffer from infectious diseases are isolated in special hospitals or warning bulletins are posted at the front door. It is notorious that people on low incomes go to physicians and dispensaries only in the last resort, from fear of expenses their income cannot meet. Society is discovering that neglected disease or wounds in- volve public loss and danger. How can we secure prompt and economic application to the medical profession without pauper relief? The answer comes from Germany: by com- pulsory and universal sickness insurance. There is no other answer. This is part of our reply to those who declaim against workingmen's insurance as "class legislation." It is not class legislation; it is "social insurance," because all members of society reap its advantages, just as rich men who send their children to private schools derive benefits from the public schools which educate the poorer neighbor. If an insured workman is injured he places himself instantly' under expert medical advice, and is more surely and speedily restored to industrial efficiency, and so becomes again a producer of so- cial wealth. Some- of the individualists oppose compulsory insurance because it will "pauperize" wage earners. But neglected sick- ness is the broad and easy descent to pauperism, and it is by this route most paupers travel to their doom. Compulsory insurance is the best public health measure yet organized. Has anyone investigated the cost and moral degradation caused by the non-payment of medical service? It is no- torious that physicians annually contribute millions of dollars to patients who will not or cannot pay; but this is a com- pulsory tax on physicians, not always a cheerful philanthropy. Physicians cannot refuse the call of a wounded or sick citi- 14 SELECTED ARTICLES zeii and cannot require advanced payments, as landlords and grocers can. Public opinion and the ethics of their pro- fession require them to rise in thfe night and go through storms to help those who suffer, and this without hope of payment. This is unscientific and barbarous. Most of it is wholly unnecessary. Physicians should have a social guarantee of payment, and honest men should not be obliged to pay for the dead beats. Under a compulsory insurance law .a fund for paying physicians and supporting hospitals would be provided in advance and the cost would be equitably distrib- uted. Several methods of providing the funds of social in- surance are now under discussion and all of them have a chance of being put to the test of experiment, the final arbiter. We have already paid our compliments to the ex- isting liability. law based on the principle of tort, and we have found it condemned by every modern nation except our own, and even here admitted to be full of cruelty and waste. Massachusetts has passed a law (May, 1908) permitting employers to escape from the existing liability on condition that they adequately insure their employees — the principle embodied in the bill offered for educational purposes in 1907 by the Illinois Industrial Insurance Commission and op- posed by the trade unions. Up to the time of writing this article, not a single employer in Massachusetts had thought it worth while to avail himself of this permissive law, and there is no reason in the nature of the case for hoping for any general acceptance of the idea. The delegates to the International Congress on Social In- surance in igo8 were unanimously agreed that a minimum insurance can never in any country be secured to workmen without legal compulsion. This conclusion is the result of more than a century of trial of all forms of voluntary in- surance. Two schemes of compulsory law are now debated in this country, the British compensation law, and compul- sory insurance. The compensation method is urged for the United States because it is English. But the British act is itself a pioneer experiment; and, heretofore, as in the case of COMPULSORY INSURANCE 15 the poor laws and employers' liability laws, we have imi- tated England after that nation had abandoned an untenable position. The compensation law has difficulties which do not inhere in insurance plants. Thus, if all employers are made liable to pay compensation in any case of injury, the pay- ment would be ruinous to farmers and small manufacturers. It is reported that in England this is so true that the com- pensation act is a dead letter among the petty manufacturers and farmers. But if the employees are required to pay a periodical premium of a small percentage of the wage rate, this would be made a part of the ordinary expense of business, and could be met by any householder, or any employer of work- men in shop or field. Our people ate already familiar with the insurance principle, they have had the patient and genial instruction of life insurance agents, the most skilful and effective teachers of a great social principle whose services are not always treated with the reverence and gratitude they deserve in view of the results. With the principle of com- pensation we have no acquaintance unless the obnoxious law of liability for negligence may be so regarded, and that is now so associated with fraud, injustice and waste that it repels. Compensation laws are an indirect method of compelling employees to insure, when the direct way would be more simple, open, fair and economical. Compensation laws leave the thriftless and irresponsible employers uninsured to com- pete with employers who do insure, to the disadvantage of the more competent, at the same time leaving their own employees without protection. Under a straight and direct insurance law all employers are on a level and all em_ployees are secure of protection. Furthermore,' under a compulsory compensation law, if it stand alone, the state leaves the employers, especially the small employers, at the mercy of casualty companies without an alternative. It does not seem to the writer fair or safe to compel many thousands of employers to carry a liability to pay heavy indemnities in case of accident or other injury l6 SELECTED ARTICLES without ample and well organized methods of distributing and providing for the risk by some insurance method. The state itself need not go into the insurance business. It should leave a perfectly free field for casualty companies. But the state should provide for the organization of mutual insurance associations , of employers and for a certain fund of deposit which would relieve the individual employer from enormous liabilities, protect the employees beyond a doubt, and provide wholesome competition with private insurance companies conducting business for profit. Advocates of the British compensation law are under moral obligations to remember its limitations. It bears the historic marks of its recent birth from the principle of tort on which the employ- ers' liability law is based; it provides indemnity for injuries from accident and disease only so far as these arise directly out of the employment. But many injuries to health and soundness of body arise out of conditions quite apart from the occupation and place of employment, and for these al- so workmen need such protection as they can find only under a compulsory insurance system. The fear is often expressed that if workmen are insured against accidents malipgering will be introduced; men will claim benefits on slight pretexts in order to enjoy a vaca- tion. The apparent increase of slight injuries in Germany is cited in proof. The argument has little weight. Men instinctively avoid pain and mutilation; benefits never equal wages; medical certificates can reduce the evil; and, real as the danger is, it is not to be weighed against the well- known miseries of the present situation. Besides, malinger- ing is already a familiar fact in this country; the trade unions and fraternal societies have plans for overcoming it. Under our employers' liability laws the workmen very frequently threaten damage suits without legal ground in order to extort payments for injuries not due to employers' negligence. If a careful investigation were made and sta- tistics secured it would show that Germany has no monop- oly of malingering. The uncertainty of risk under our law is not merely the occasion of enormous costs for casualty COMPULSORY INSURANCE ■ 17 insurance premiums, but, since the limit of practicable in- surance is $5,000, and damages of $20,000 to $30,000 are not unknown, the entire risk is not covered by insurance policies. This compels certain employers to pay higher interest for capital required in their business to cover the extra risk, and this is" in addition to the loss occasioned by attendance on lawsuits and payments to workmen outside the award. Doctor Zacher, in a review of the discussions of the In- ternational Workingmen's Congress at Rome, in October, 1908, has selected the chief points on which after years of heated discussion all parties seemed to be united. The delegates to this congress from England and France have stood for the principle of freedom and for voluntary organ- izations. Especially in France the "Mutualists"' have long contested the tendency to break up their fraternal organiza- tions and give to the state a monopoly in this sphere. Nat- urally, the casualty companies have been unwilling to be driven out of the field of accident and health insurance by the compulsory laws of the state. At Rome all these parties united upon the principle that compulsory insurance is abso- lutely necessary to secure a minimum income for working men in case of accident, sickness and invalidism. Luzzatti, formerly Italian Minister of Finance, con- fessed himself a convert to the principle of compulsion be- cause he had found that the most earnest efiforts of the Italians to secure the great multitude of workers from pauperism on the voluntary principle had failed. Even with the help of a state subsidy the voluntary associations had been able to insure only 200,000 persons, and most of those connected with the state employments, out of 12,000,00b per- sons who under a compulsory law would have been insured. Therefore, he was of the conviction that without legislative compulsion the purpose of insurance cannot be reached. As compulsory school education was a necessity for the intel- lectual education of the masses, so compulsory insurance was necessary for their economic education. The fear that compulsory insurance would hinder the development of the free activities of associations had been allayed by the aston- i8 SELECTED ARTICLES ishing successes of Germany. And in France, Mabilleau, the leader of the French Mutualists, had reached the conclusion that without legal compulsion -the societies of mutual benefit could not be successful in the field of sickness and invalid in- surance. Luzzalti made a suggestion which seemed to be accepted by all, that compulsory insurance offers only the indispensable minimum income; while in order to advance to the maximum voluntary insurance must be brought to bear. Between these two poles the free initiative of the individual and the autonomy of voluntary organizations had a wide field for action. The congress at Rome discussed also the important mat- ter of education and training of expert officers for insurance organizations. This is a matter which must receive attention in the universities of the United States. We have naturally given more attention to life and fire insurance because thought on these matters was better systematized and because material for study was near at hand. But already our great corporations have begun to introduce the voluntary associa- tions of insurance and legislatures are asking for information, and very soon there will be a considerable demand for per- soijs thoroughly trained in the scientific aspects of working- men's insurance in all its branches. In this connection too great emphasis cannot be laid upon the importance of teach- ing the medical students their duties in relation to the differ- ent schemes of insurance. The medical profession will be called upon more and more to administer the various schemes of accident and invalid insurance, and there are many techni- cal questions of great interest with which they ought to be familiar in addition to their purely professional duties. Courses of instruction in social insurance should, therefore, speedily be added to the curriculum of our medical students. The field of industrial diseases alone demands much larger attention than it has hitherto received from the medical pro- fession in this country, and only the physicians have the knowledge which will enable them to act as inspectors for insurance agencies. The staff of factory inspectors should include men and women of suitable medical training. COMPULSORY INSURANCE 19 The international congress has given considerable discus- sion to the insurance of mothers, and it is apparent that in our industrial cities provision must be made for those women who have the double care of infant life and of earning means to support the family. It is not too much to say that de- generation in large groups of modern city dwellers is one of the serious problems of our time. Unemployment insurance will not be touched upon here. Hitherto the United States have been very scantily represented in this international movement, but measures were taken at the last congress for organizing an American committee. Compulsory compensation or insurance is an inevitable and certain result of measures already taken by leading em- ployers. The greatest managers have already entered seri- ously upon a policy of insurance in some form, though ever so inadequate and crude; and every manager who assumes financial burdens in this direction finds his pecuniary interest threatened by those less intelligent, progressive and humane. What must be the effect? The only means of equalizing the burden is by legislation compelling all employers to bear the same load, and preventing the meanest and most narrow- minded from deriving an advantage over the best employees. Therefore, every voluntary scheme which is introduced brings one more powerful ally to the cause of compulsory in- surance. Annals of the American Academy. 38: 23-30. July, 1911. Some Features of Obligatory Industrial Insurance. James Harrington Boyd. The legislatures of fourteen states have passed statutes abolishing the fellow-servant rule.' Seven or more of the states have modified one or more of the common law de- fenses, either by statute or by decision of their courts, 'Arkansas, Colorado, Florida, Georgia (1885), Iowa, Kansas, Min- nesota, Montana, Nebraska, Nevada, Nortli Carolina, Oklahoma, South Dakota and Missouri. 20 SELECTED ARTICLES along the following lines :^ (i) Adopting the doctrine of comparative negligence, which has always been the rule and common law in certain states, like Georgia and in admiralty causes in the federal courts; (2) changing the burden of proof of contributo'ry negligence from the plaintiff to the de- fendant (as has always been the rule in the federal court and some states), as for example, in Ohio and Oregon; (3) taking away the defense of assumption of risk when the risk assumed was caused by the fault or negligence of the employer. The tendency of the development of the statutory law during the last few years, relative to the recovery of com- pensation for injuries to workingmen which arise out of their employment, is to wipe out the common law defenses, leaving the action based solely upon the fault of the em- ployer. The chief sources of the friction between employer and employe, the rapid increase in the demands for charitable relief and care for delinquent children, and the correspond- ing demand for compensation for all personal injuries which workingmen receive in the due course of their employment, continue to exist largely because compensation for injuries can only be obtained when the employe can prove fault on the part of his employer. Fault or negligence of the employer can be proven in much less than 20 per cent, of the cases, and, what is most startling, no matter how careful the employe and the em- ployer are, or how high the efficiency of the state may rise in the prevention of accidents, the cause of 50 to 55 per cent, of all accidents to employes is solely due to the natural hazard or dangers of the business— the combined negligence of the employe and the employer. On the other hand, the cause of 16.8 per cent, of all accidents are traceable to the negligence of the employers, and the cause of 28.9 per cent of all acci- dents is attributable to the negligence of the employes. Under the practical operations of the common law' remedy, based gini?"'"'^"'^' ^'®^^^^'PP'' Ohio, Oregon, South Carolina, Utah, Vir- COMPULSORY INSURANCE 21 upon fault, it is impossible to prove the employers negligent in anything like 16.8 per cent, of the cases of injuries to em- ployes. For that reason, the old theory of making fault the ■basis for an action to compensation for injured workmen has been abandoned. The only available statistics in the United States show- ing how much compensation the dependents of workmen killed or workmen injured receive under the present laws in the United States are in the reports of the investigations made by the Russell Sage Foundation in Allegheny County, Pa., igo6 and 1907; the investigations of the Employers' Lia- bility Commission of New York State, and those of the Liability Commission of Illinois, during the years 1909-1910, and the investigations, now about complete, which have been made by the experts of the Employers' Liability Commission of Ohio in Cuyahoga County (Cleveland), during the months of November and December, 1910, and January and Feb- ruary, 191 1, .covering fatal and non-fatal accidents for the period of 1905-1910. On account of the great importance of the results of these investigations in framing laws providing for industrial insurance to workmen, a resume of their re- sults is given. New York Statistics During the years 1907-1908, ten insurance companies, which keep employers' liability records, doing business in the state of New York, received in premiums from employ- ers, $23,524,000; they paid to injured employes, $8,560,000; waste, $14,964,000. It should" further be added that ten liability insurance companies settled 414,000 cases in the three years prior to 1910 in New York by making payments in any sum at the rate of one payment in eight cases or in 12% per cent of the cases. — (N. Y. Report p. 25.) Nothing could more strikingly set forth the waste of the present system than the fact that only 36.34 per cent, of what employers pay in premiums for liability insurance is paid in settlement of claims and suits. Thus, for every $100 paid out 22 SELECTED ARTICLES by employers for protection against liability to their injured workmen, less than $37 is paid to those workmen; $63 goes to pay the salaries of attorneys and claim agents, whose business it is to defeat the claims of the injured, to the cost of soliciting business, to the cost of administration, to court costs and to profit. Out of this 36.34 per cent, the injured employe must pay his attorney. The same report shows that the attorneys get 36.3 per cent, of what is paid to the injured employes. This investigation covers forty-six cases, where the recov- ery was about $1500 each. In small recoveries the attorney fees take a larger proportion. This report shows that some- where between 20 and 25 per cent, of the money paid by the employing class, actually passes to the injured workingmen for their dependent families in death cases. The proportions of the loss borne by employers in injury cases does not differ greatly from that in death cases. Thus, out of 388 injury cases of the married men alone, 56 per cent, receive no compensation; of single men contributing to the support of others, 69 per cent, receive no compensation; single men, without dependents, 80 per cent, receive no com- pensation. Russell Sage Foundation Investigations in Allegheny County, Pennsylvania The investigations recently conducted in Allegheny Coun- ty, Pa., under the direction of the Pittsburgh Survey, showed that out of -355 cases of men killed in industrial accidents, all of whom were contributing to the support of others, and two-thirds of whom were married, 89 of the families left re- ceived not a dollar of compensation from the employer, 113 families received not more than $100, 61 families received something more than this $100, but not more than $500. In other words, 57 per cent, of these families were left by their employers to bear the entire burden of the income loss, and, granting that all unknown amounts would be decided for the plaintiff, only 27 per cent, received in compensation for the COMPULSORY INSURANCE 23 death of a regular income provider more than $500, a sum which would approximate one year's income of the lowest paid of the workmen killed. Wisconsin Statistics The Wisconsin Bureau of Labor and Industrial Statistics reports that in 306 non-fatal cases in which reports were re- ceived by mail from workmen while at work the compensa- tion was as follows: C<3,S6s Pfii* Cent Received nothing from employers 72 23.5 Received amount of doctor's bills only 99 32.4 Received amount of part of doctor's bills IB 4.9 Received something in addition to doctor's bills 91 29.7 Received something, but not doctor's bills 29 9.5 Total 306 100.00 In two-thirds of the cases, part or all of the doctor's bills were paid; in less than a third was anything more paid, and in about one-fourth of the cases nothing whatever was paid. In 131 non-fatal cases in Wisconsin, concerning which reports were secured by factory inspectors, the following dis- position was made: Cases. Per Cent. Received nothing from employer 28 21.37 Received doctor's bills only 56 42.75 Received something in addition to doctor's bills 10 7.63 Received something, but not doctor's bills 34 25.96 Not settled 3 2.29 Total 131 100.00 Illinois Statistics The Employers' Liability Commission of the State of Illi- nois has recently made a report on its investigation of in- dustrial accidents and employers' liability. More than 5000 individual accidents were investigated and recorded, together with comparative figures and analysis. The result of the investigations of the Illinois Commission are given by Ed- win R. Wright, secretary of the Commission, and president of the Illinois Federation of Labor. Six hundred and fourteen fatal accidents w#re recorded. The families of 214 of these workers received nothing in re- 24 SELECTED ARTICLES turn for the loss of the breadwinner. One hundred and eleven damage suits are pending in court. Twenty-four cases have been settled through court proceedings. Two hundred and eighty-one families settled directly with the employer. Skilled railroad employes, in settlement for death claims, averaged about Jl.OOO.OO Steel workers 874.00 Railroad laborers 617.00 Skilled building tradesmen 348.00 Skilled electric railway employes 310.00 Unclassified workingmen 311.00 Miscellaneous trades 292.00 Packing house employes 234.00 General laborers 154.00 Mine workers 155.00 Electric railway laborers 75.00 Of every lOo industrial accidents, 15 go to court, 7 are lost and 8 are won. Ninety-two injuries out of every 100 re- ceive no compensation. (This includes both fatal and non- fatal accidents.) There have been S3 fatal cases of recent date. In fatal cases, the usual defenses of the employers — the fellow-serv- ant doctrine, assumption of risks, etc. — did not apply, or there would have been no recovery at all. For these — the very pick of industrial cases — the average recovery for death was only $1877.36, of this an average amount of. $740.95 was paid to attorneys or expended on court fees, etc., leaving an actual payment of $1126.41 to the family of the dead worker; 34 widows were compelled to seek employment and 65 children left school to help keep the wolf from the door. Germany and England The German state insurance during the twenty years end- ing in 190S required payments amounting to $802,000,000. Of this sum, $SSS,7So,ooo were paid on account of sickness insurance; $232,750,000 were paid on account of accidents, and $13,500,000 paid on account of invalidism and old age. To the fund necessary to make these payments, the employer con- tributed $424,500,000. The employes contributed $377,000,000, and the Imperial Governmyit paid the cost of administration and a small portion of the funds necessary to take care of invalidism and old-age pensions (50 marks in each case in- sured). COMPULSORY INSURANCE 25 The general rules in respect to the raising of the insurance fund are that the employes should pay two-thirds of the fund necessary to take care of sick insurance, which lasts for thir- teen weeks; and the employers pay one-third. In the case of accident insurance, the employers pay 85 per cent, and the employes 15 per cent. In the case of invalidism and old- age insurance, the Imperial Government pays $12.50 for each person injured, and the remainder of the fund is paid half and half by the employers and employes. The German plan in 1907 had 27,172,000 workingmen insured against sick- ness, accidents and old age, out of a population of 62,000,000 people. The English plan in 1908, provided for the insurance of 13,000,000 workingmen. In case of death, the compensation paid is, at most, three years' wages, £300 or $1460, with a minimum payment of three years' wages at £150 or $730. In case of disability lasting longer than one week, the com- pensation paid is one-half week's average wage, not to ex- ceed $4.87, as long as the disability lasts. Responsibility for the payment of the compensation rests solely on the employer, and employes are not required to insure. In both the German and English plans the rules of con- tributory negligence, assumption of risk, and the fellow-serv- ant rules are abolished, and the only kind of negligence recognized is that of malicious negligence on the part of the employer or employe. The statistics of the United States show that over 50 per cent, of all industrial accidents are due to the inherent dangers and risks of the industrial business, that not to exceed 20 per cent, of all these accidents are due to or attributable entirely to, the negligence of the employer, and that, at most, 255^ per cent, are attributable' solely to the negligence of the employe. The common law furnishes no plan of relief, except where it can he proven that the defendant is at fault. Therefore, the common law affords no relief for something like 80 per cent, of all workingmen injured and killed in the United States. The lowest estimate of the number of persons injured and killed in industrial accidents in 1909 is 536,000 people. 26 SELECTED ARTICLES Montana, in 1910, put in operation a mutual plan of in- surance for coal miners. The compensation paid the wife and children or dependents of a miner killed in the due course of his employment is $3000. In case the miner is totally dis- abled by an injury, he is paid $1 for each working day during disability. The loss of an eye, or limb, caused by accident to a miner while employed in or about a mine is compensated for in the sum of $1000. The compensations are paid from a fund which is administered by the auditor of state. The operators contribute to this fund according to the quan- tity of coal mined, and are authorized by law to deduct I per cent, from the wages due the miners. The New York act of 1910 provided for a compensation to workmen ranging from $1500 to $3000 in case of death. Other injuries were proportionately compensated. These payments were to be borne by the employer whether he was or was not at fault. The injured workman had the choice of suing at law or of taking the compensation. The Appel- late Court of New York has held this law unconstitutional. The employers' liability commissions of Washington, Min- nesota, Wisconsin and Ohio have reported acts to their re- spective legislatures recommending plans for compensation of worldngmen for injuries without regard to fault. The Washington act provides a plan of obligatory mutual insur- ance, the state being the custodian of the fund. Compensa- tion varies from $1500 to $4000 in case of death or total dis- ability. This law has been exacted. Non-fatal injuries are compensated for at about 60 per cent, of the impairment of wages of the workingmen injured. The act defines a large class of dangerous employments. The employe waives the right to sue, and is compelled to accept the compensation provided by the act in lieu of all other remedies. The Wash- ington plan also stipulates that the employer shall contribute to the first-aid fund 4 cents for each workday that an employe worked, which takes care of the injured workingman for the first three weeks following the injury. The law authorizes the employer to deduct 2 cents each workday from the wages of his employe. COMPULSORY INSURANCE 27 The Minnesota plan is based upon state insurance and is applicable to all dangerous employments. The compensa- tions are liberal, ranging from $1500 to $3000, in case of death. The compensation for workingmen partially disabled is 50 per cent, of the impairment of their earning power. The Wisconsin act is optional and follows the New York act in its principles and amounts of compensation. New Jersey, in igii, enacted a comprehensive employers' liability and workingmen's compensation law. Massachusetts, Connecticut, Missouri and Texas have commissions studying the problem. Many of the other state legislatures are considering bills to abolish or largely modify the common law defenses. The International Harvester Company has put into opera- tion a voluntary plan of industrial insurance which provides compensation varying in amount from doctor's bills to $4000. the employes are not obliged to contribute anything to the fund, and compensations are paid without regard to fault. The acceptance of the compensation releases the company from a suit at law. These numerous state commissions are endeavoring to answer the question, What plan of compensation shall be substituted for the old common law action based upon the fault of the employer? The evidence indicates that the most just and efficient remedy is obligatory industrial insurance, such as prevails in Germany. Chautauquan. 41: 8-59. March, 1905. Compulsory Insurance. I. M. Rubinow. Under pressure of economic necessity a system of mutual aid sprang up in the main industrial countries, whose function it was to render assistance to the destitute workingman and so help him tide over the critical moment. What private' or public charity was forced to do for many centuries, the sick benefit societies {Krankenkassen) of Germany or the trade unions of England have tried to accomplish by co- 28 SELECTED ARTICLES operative effort. Yet this necessary work was done very unsatisfactorily indeed when about the year 1880 the Ger- man government came out with its project of compulsory in- surance. It is not necessary to go into a searching inquiry as to the motives which influenced Bismarck to undertake what has been frequently called a system of state socialism. It has been established with a suificient degree of certainty, that Bismarck was more anxious to counteract the rising wave of socialism than to improve the condition of the work- ing masses. Yet it is acknowledged that Bismarck's method of fighting the spread of socialism was through the improve- ment of the condition of the workingmen; and that the grand structure of compulsory state insurance of workingmen de- noted such improvement, cannot at present be denied. Insurance against sickness was the first, in point of time, to grow up in Germany. After several years of considerable discussion and agitation, a bill was introduced in the Ger- man parliament in l88i and with inany modifications finally became a law in 1883. Several important changes were sub- sequently made, and the law as it exists today dates from the loth of June, 1892. The changes consisted mainly in the ex- tension of its force over classes of wage earners omitted in the original law, until today domestic servants are the only large class of wage earners for whom sickness insurance is not compulsory, though they may avail themselves of its benefits. The popularity of sick benefit funds among the German workingmen for many decades before a system of state in- surance was thought of, has provided Germany with a type of institution capable of handling the technical aspects of the problem; the state has therefore been relieved from under- taking the actual work of insurance; its action is limited to compulsion, regulation, and control. Because of this compul- sion almost each and every German, workingman is insured against sickness, or rather the economic burdens of it, in some organization; be it a "local fund" to which all working- men of a small locality belong, or a "factory fund" where COMPULSORY INSURANCE 29 all the employees of a great industrial establishment are in- sured, or again a "trade fund" uniting all workingmen of a certain trade in a great industrial center. These funds {Kassen) are managed partly by the employers, partly by the employees. The state then sees to it that whoever comes under the provisions of the law, should be insured, that the payment should be made, that no abuse be possible and that , a certain minimum of assistance be granted by the fund; but many funds in the larger industrial centers grant a great deal more than the minimum required. Of the necessary premiums the workingman pays two-thirds and the em- ployer contributes one-third. The legislator has evidently acknowledged that no .matter how difficult it may be to estab- lish the direct cause of each individual case of sickness, em- ployment as such is an important factor in the causation of disease. The employer, i. e., the business, must contribute to the expenses of the cure and care of the sick and their financial support, just as business is supposed to cover the expenses of fire insurance and wear and tear of the inanimate machine. The expenses of insurance to the worker are ex- ceedingly small; they vary according to the organization and locality between lY-i per cent and 4 per cent of the working- man's wages and very rarely exceed 3 per cent; and with a rate of wages of 3 to 4 marks (60 to 80 cent's) per day, the premium varies between i and 3.2 cents a day, or 6 and 20 cents a week, only two-thirds of which are paid by the em- ployee, or rather by the employer for him. Now let us see what the workingman gets for his "one cent a day." The benefits of the "sickness funds" include, as a minimum, (i) free medical and surgical treatrnent, as long as necessary, up to twenty-six weeks; medicines and any special treatment that may be found necessary, operations, obstetrical attendance, massage, electricity, baths, as well as medical apparatus, glasses, crutches, and even artificial limbs in some Kassen; (2) financial assistance to the patient or his family, equal to So per cent of his wages at least, and in some Kassen as much as 75 per cent. Insured working- women are entitled, besides, to a subsidy in case of childbirth. 30 SELECTED ARTICLES so as to enable them to discontinue work both before and after the consummation of the act of maternity. Burial money is also given by these institutions, equal to from twenty to forty times the daily wage of the deceased. While these, benefits are obligatory and universal, the activity of the large "sickness funds" in the many industrial centers has been very much widened, and here we see the beneficent results of cooperative activity under the encouragement of the state or the society at large. Not only have the benefits been made much more liberal, but the advantages of free medical treatment have been extended over the wage work- er's families; hospital treatment and even a prolonged sojourn in sanatoria and institutions for convalescents have been provided by some of the Kassen. Consider for a moment what this simple legislative act — which took into cognizance all existing institutions for self-help, and simply extended and regulated their activity — what it meant for the laboring population of Germany. It did away with the necessity of degrading medical charity which introduces so much, demoralization into the homes of the American wage worker. The physician who treats the German worker free is paid by the Krankenkassen; all the benefits that are given to the sick are given because they are due to him, because it is his right to demand and receive them. When struck down with a serious illness, and unable to continue his regular work, the German workingman does not immediately fall into the atmosphere of condescension and pity, mingled with contempt. The material, hygienic and economic results are still more palpable, than the psycho- logic ones. The fear of a large professional bill does not deter the German worker from receiving necessary medical advice and assistance; one case of illness with its enormous expenses and concomitant loss of income does not destroy forever the economic independence of a self-sustaining fam- ily. As the French investigator, Edouard Fuster has well said, "The German system of sickness insurance saves the German worker his health and the German nation its vital powers." COMPULSORY INSURANCE 31 Bodily ailments are scourges of all humanity without consideration of class or creed, but modern industrial life has subjected the worker to a long list of accidents to limb and life, which are specifically his own. The enormous development of machinery and the utilization of mechanical ^ower, the swiftness of transportation methods, the dizzy height of building operations, and above all the nervous tension and hurry of a strenuous life, all these causes have contributed to increase the frequency of accidents and in- juries to an alarming degree. Here we have a sum total of effects whose causation by industry cannot be doubted. For a long time European legislation had been, and Ameri- can legislation even now is, much more preoccupied with the interesting problem of placing the blame of each individual accident, than the economically important effort at minimiz- ing the injurious effects of them all. The Anglo-Saxon sys- tem of individual responsibility for an accident has been a signal failure* as far as the reimbursement of the victim has been concerned. A whole series of common law doc- trines grew up to limit the chances of obtaining such reim- bursement. The "fellow servant" doctrine denies the work- er the right to recover damages, if injured through careless- ness of any co-employee. The doctrine of contributory neg- ligence relieves the employer even in cases of acknowledged culpability, if it can be shown that the injured worker has also been somewhat negligent; thus the worker, who is only partly responsible, bears all the consequences and the em- ployer, also partly responsible, bears none. The doctrine of assumed risk teaches that the workingman who has know- ingly accepted dangerous employment shall stand all the consequences. And there are many others, no less far-reach- ing in their influence. The effect of all this is to make the cases of reimbursement of the poor wretches who have lost limb or health, and the widows and children, a very rare and problematic possibility. Nor does a system like this tend to promote the introduction of preventative measures. The German system of accident insurance was a radical departure from this old method. Assistance to the sufferer 32 SELECTED ARTICLES is made the very important problem. It is also acknowl- edged that whether the individual worker be negligent or not (and some acts of carelessness are committed by every human being) the industry as a whole is responsible for the frequency of accidents, and that the industry, i. e., the em- ployers, should pay all the expenses connected with acci- dent insurance. The first law establishing compulsory ac- cident insurance was passed on June 6, 1884, approximately one year after the experiment of sickness insurance was made. At first it applied to industrial workers only; in 1886 the law was extended to cover those employed in forestry and agriculture, and in 1887 the building trades and seamen. The entire accident insurance legislation as it exists today is a result of complete revision and codification in 1900. Unions of employers in each important branch of industry were created and the funds made up by contributions from the individual employers, the amounts being levied by as- sessment according to the size of the enterprise, number of workers, and also frequency of accidents. The organization by industries was thought essential because of the great difference in frequency of accidents in various industries. On the other hand the system of assessments shifts upon the careless employer the burden of an excesive frequency of accidents in his establishment. The benefits paid to the insured are quite liberal and thorough. The minor accidents which do not require at- tendance beyond the first thirteen weeks, are taken care of by the sick insurance funds. From the fourteenth week on, the injured receives medical attendance, medicines, etc., as long as necessary, and financial assistance as long as his disability lasts, even for the rest of his life, if the disability be permanent. The injured workman is entitled to two- thirds of his wages for total disability to engage in any gainful employment, and a proportionate amount of the two- thirds if his disability be only partial, the facts in the case and the degree of disability being decided by a medical board. In case of death of the injured person, whether it be the immediate result of the accident or not, the widow COMPULSORY INSURANCE 33 and orphans below fifteen years of age, each receive an an- nuity equal to 20 per cent of the earnings of the lost bread- winner; the maximum annuity is, however, limited to 60 per cent. The relatives in the ascending line are entitled to an annuity equal to 20 per cent of the wages and grand- children have the same rights if they had been depending on the deceased for their support. In case of remarriage, the widow (but not the children) loses her right to the an- nuity, but receives the final payment of 60 per cent as a dowry. A special payment is also made to cover the funeral expenses in case of death, which equals one-sixteenth of the annual wages, but cannot be less than fifty marks ($12). There are numerous minor benefits as well as provisions to safeguard the interests of the victims of the accident as well as those dependent upon him. Too much stress can not be laid upon the, fact that the causation of the individ- ual accident and the' degree of carelessness of the injured are totally disregarded in deciding the amount of the an- nuity, except in so far as to exclude injuries wilfully, and maliciously self-inflicted. All these payments cannot recompense the injured work- man for a lost limb, or ruined health, cannot console the widow and orphans for the loss of a dear life. But no human power has succeeded in accomplishing all that. What the system of accident insurance has succeeded in bringing about, is an avoidance of all costly and tedious litigation, which promised little and taxed the workingman much, and made him wait long even in those cases where the employ- er's gross neglect was perfectly self-evident. It established the principle that an industrial worker, who had spent his health and life in the production of goods socially useful, is entitled to a better fate than starvation and misery, if in- capacitated while in performance of useful work — a principle universally admitted with regard to the soldier by the whole American people. It has given the German workingman a sense of security for the future which his American comrade, notwithstanding his higher rate of wages, certainly does not possess. 34 SELECTED ARTICLES Sickness or accidents are the emergencies of a working- man's life, frequent, and to be expected, yet not inevitable and often temporary. They do not by far complete the list of all the vicissitudes of a wage-worker's existence. Without any special, definite, easily-to-be-noticed case of violence, the health and strength of the worker may be so reduced, as to make him unfit to obtain profitable employment. Such cases must necessarily grow with the general tendency of speeding up the processes of manufactures. Ten to twelve hours of continuous work at the high rate of tension which prevails in the modern factory, frequently produce that pre- mature old age, which is a typical and distressing feature of modern civilization. Again, quite apart from any of these cases of invalidity and premature old age, there is for the workingman that inevitable prospect of an old age perhaps quite normal and physically unavoidable, during which a quest for a job would meet no encouragement. Perhaps nothing is more distressing in the conditions of modern life, than the sight of an old and decrepit man forced to eke out his existence by the work of old shaky hands, by means of weakened, half-blind eyes. What becomes of all these men who get nothing to eat unless they work? What becomes of them when they are too old to work? They fill the hospitals, the poor- and work-houses, are often sup- ported by their children, and some of course, "retire," j. e., they live on the proceeds of their savings. But how many can save? It seems to be the widely ac- cepted theory in this country, that all who wish can save, and that, too, suificiently to last them through their declining days. Our overseers of the poor, and chiefs of departments of charities and corrections may possibly hold a different opinion. A German official investigator, Professor Bielefeldt, states the case very succinctly when he says, that "wages as a rule, are about sufficient to satisfy the ordinary demands of every-day existence, and totally fail at the time of extra- ordinary disturbances of the working labor power of the bread-winner of a family." How much more true it is of cases of complete and permanent failure of labor power! COMPULSORY INSURANCE 35 The system of invalid and old age insurance naturally came as a fitting sequel to insurance against sickness and acci- dents. The German law making such insurance compulsory was promulgated in June of 1889, and revised in 1899, in which form it is in force at present. In point of latitude the law is more sweeping than the sick insurance law, and it in- cludes besides wage workers, also independent tradesmen and even petty employers of labor. At the time when the plans for old age insurance were elaborated in Germany two tendencies asserted themselves. Some aimed to make it a system of pensions and proposed to put the whole burden on the state treasury, others thought that insurance should only be modified saving and that the state should do no more than encourage and even compel, if necessary, each workingman to save. The system, as it was actually carried through, was a combination of both principles. Every person of the classes designated must be insured if over sixteen years of age. The insurance demands a weekly payment of from 14 to 36 pfennigs (from 3 to 8 cents) a week, according to the amount of wages received; this payment is divided equally between the employers and the employees, so that the workingman contributes only from 15^ to 4 cents a week. The state's share consists in contributing 50 marks ($12) a year to each pension or an- nuity, besides sharing to a large extent in the expenses of administration. In return for his small payments the in- sured is entitled to an invalid pension in case of a general failure of health or a prolonged sickness (if it lasts over twenty-six weeks during which the sick benefit funds render the necessary assistance). The annual amount consists of the fifty marks supplied by the government and an annual sum determined in a rather complicated way by the amount of the weekly payment and a third sum dependent upon the number of payments actually made. Thus there are com- bined jn this system the three elements of pension, insurance and savings. The actual' sum varies from 116 to 450 marks a year. 36 SELECTED ARTICLES A similar annuity is paid to each insured who has reached the age of seventy, provided he has paid in at least 1,200 weekly premiums (that is for about 25 years) ; the amount of the old age annuity is much smaller, varying between no and 230 marks. There are also various provisions for medi- cal treatment of the invalids, return of monies to working- women at the time of their marriage, etc. The sums paid are not any too extravagant, it is true, and the age of seventy years so high, that the workingmen have justly refused to become very enthusiastic over the prospect of $26 to $54 a year at an age which a hard working man reaches very rare- ly, though it must not be forgotten that this sum means a great deal more in Germany than in the United States. Yet the invalid insurance is more promising, and, what is much more important, the German insurance legislation is not at a standstill. The first wedge has been entered, the prin- ciple has been established, and further efforts will undoubted- ly bring about the desired results, that the self-respecting wage worker need not fear becoming a pauper or a public charge at an age that should command respect, and should be entitled to the comforts of quiet home life. For some years Germany stood alone in her bold under- taking. The industrial world watched with horror these en- croachments upon the time-honored political philosophy of "laissez faire." But the beneficial results of this scheme became so palpa- ble, that its influence did not fail to extend far beyond the borders of the German Empire. At first the opposition to "this craze of compulsion," as it was called by an Italian economist, was violent and bitter. But opposition soon gave way to imitation. The semi-German neighbor of Germany, Austria, was the first to follow. The Austrian system of sick insurance, introduced in 1888, was an improved copy of the German Legislation. The minimum of sick money has been made 60 per cent instead of 50, and the agitation has finally resulted in a sickness insurance law which was made applicable to all industrial and agricultural workers with a maximum wage of 1,200 gulden (about $480). In the matter COMPULSORY INSURANCE 37 of accident insurance, German influence was still more po- tent, even if most other countries have somewhat modified the German system. The Austrian law of 1887 has closely followed the German pattern, though the organization of the funds is not by industries, but by territorial divisions. An- other distinct feature of the Austrian system is that the work- men are made to participate in the expenses of accident in- surance to the extent of 10 per cent. Until 1895 Germany and Austria kept this isolated posi- tion. Then almost all the other European nations rapidly fell in line. Norway, Finland, Italy and Holland have by this time systems of obligatory accident insurance. All these countries have organized central governmental banks to carry on the insurance business, but kept the provision forc- ing the employer to pay all the charges. The last three states named also permit insurance in private insurance com- panies. In a number of European countries a somewhat modified system has been introduced, which goes by the name of compulsory compensation for accidents. No special organ- izations are created, but the individual employer is financially responsible for the payment of indemnities and annuities without the slow process of litigation. Great Britain, since 1898, Denmark and France since 1899, Sweden since 1901, have been among these countries. Even backward Russia was forced to yield to the demands of the workers and pub- lic opinion, and has had a similar law since January i, 1904. Belgium passed its law before the close of 1903, to take effect during the current year. In so far as it guarantees the workingman the benefits of compensation when an ac- cident does occur, it is a system of insurance in principle, if not in name. Unfortunately it works very imperfectly. The recalcitrant and irresponsible employer must frequently be sued against, and in cases of the small and financially weak employer of labor, a prolonged payment of an annuity be- comes somewhat uncertain in these days of insecurity for even considerable enterprises. When the employer has failed, 38 SELECTED ARTICLES the claim of the invalid, though usually given a preferred standing, may or may not be made good. These harmful features are somewhat limited by the per- mission granted to the employer to reinsure himself against these claims in some private company, and it is a powerful argument in favor of insurance that the better class of em- ployers usually prefer to do so. However, the protests against this half measure are loud in France, Belgium and Russia, and a closer modeling after the German pattern is, in these countries, probably a matter of time. But in no industrial country of Europe has the old system survived, with litigation fof a bulk sum, the larger part of which falls into the hands of the rapacious attorney, while in most cases no damages can be recovered at all. No other European country has as yet followed Germany's example in the matter of a thorough and universal system of old age and invalid insurance; but scarcely a civilized coun- try can be named in Europe where the scheme has not been agitated during the last ten years, and has not been discussed and presented to the legislative bodies. In fact so rapidly does the influence of the German institutions spread, that any statement made is liable to be out of date the next day. Since 1891 no single year has passed but has brought some important measure in the domain of labor insurance in some European country. Above all it must be pointed out, that the influence of German example is much broader than the few quoted examples of compulsory insurance would in- dicate. It is absolutely impossible in this paper to give even a brief survey of the many and varied systems of voluntary in- surance existing in France, Italy, Belgium, England, Switzer- land — in. fact in almost all European countries. The exist- ence of these voluntary and private organizations aiming at assistance in case of sickness, and of various private and governmental savings banks, to encourage savings and pro- vision for the future, is often pointed at as an argument against the necessity of compulsory insurance systems. Yet the development of even these institutions, under governmental COMPULSORY INSURANCE 39 contri)! and often with governmental assistance, was due to the stimulus of the German example; notably so in France, Belgium and the Scandinavian countries. But notwithstand- ing this considerable governmental aid, the number of in- sured remains as small and the struggle for a comprehensive compulsory system continues. Statistical figures usually make very dry reading, and it is not the purpose of this short study to frighten away the reader from a subject exceedingly serious and complicated, and therefore necessarily difficult, by delving in unnecessary technicalities and details. Yet a few statistical data are quite necessary to convey a proper conception of the important result already achieved within the short period of twenty years. In 1902 the German Empire had a population of 57,700,000 and the number of wage workers was approximately above 10,500,000. In that year there were 10,500,000 persons insured against sickness, 17,600,000 against accident, and 13,400,000 names were enrolled for old age and invalid insurance. The dififerences are due to the fact that the different laws do not all embrace exactly the same classes, and as voluntary insur- ance is permitted to large groups of persons for whom it is not made obligatory, the three insurance systems do not prove an equal attraction. In the case of accident insurance the number of insured actually surpasses the number of wage workers; it evidently includes many hundreds of thousands from other economic classes. The figures certainly show that the German system of insurance is a universal system of insurance. During these seventeen years almost 48,000,000 cases of illness with more than 809,000,000 sick days have come under the care of the sick benefit funds and over 1,000,000 victims of accidents assisted. For the period of seventeen years the total fncome of the sick insurance funds reached the enor- mous sum of $504,100,000 of which $144,500,000 was contrib- uted by the employers and $335,200,000 by the employees and $23,400,000 was received as interest and other income. The expenses for the same period were $464,200,000, leaving 40 SELECTED ARTICLES with the sick-benefit funds a reserve of $43,700,000. Of this enormous sum only $27,000,000 or 5.8 per cent was spent for purposes of administration, and all the rest went directly to help the insured. Moreover these expenses show a marked tendency to decrease. In 1885 they^ were 6.31 per cent of the total expenses, and in 1901 only 5.61 per cent. Certainly no private insurance company in the world was able to make such a showing, and with some of the American in- surance companies who make a specialty of insuring people of moderate means, the expenses of administration were four or five times as high. The results of accident insurance, though told in some- what smaller numbers, are in their way no less imposing. For the same period the income wa^ $230,800,000, all of which with the exception of $28,400,000 of miscellaneous in- come, was paid by the employei's. Here the expenses have been $198,100,000, leaving a reserve of $42,700,000. Old age and invalid insurance has been in existence a much shorter time, but its operations from the very begin- ning have been on a much larger scale; for the eleven years 1891-1901 altogether $376,100,000 has. been collected of which $285,500,000 has been contributed by employers and em- ployees in approximately even shares; the share of the state constituted $50,200,000 and $40,500,000 came from miscellane- ous sources. The payments here were necessarily much smaller, the larger part going into a reserve fund for future, pensions. The total expenditures were $161,000,000 of which only $18,300,000 or 11.4 per cent was for purposes of adminis- tration. From 1891 to 1901 the expenses of administration had fallen from 20.3 per cent to 9.3 per cent. The reserve fund of the old age insurance system has reached within eleven years the enormous amount of $217,400,000. For all forms of insurance together, $1,121,000,000 was received, of which $500,000,000 was contributed by the em- ployers, $469,000,000 by the workers, $50,200,000 by the state, and $92,000,000 from other sources, mainly interest. The ex- penditures were $821,000,000 of which $78,600,000 were for administration purposes, or 9.6 per cent. An enormous re- COMPULSORY INSURANCE 41 serve capital of $303,800,000 was collected, to be devoted to the welfare of the workers in the future. We have used these large totals for seventeen years for the purpose of emphasizing the enormous dimensions of German insurance activity. It must not for a moment be thought, however, that a range of one year's activity can be obtained through a simple division of the totals by sevente'en. The influence of labor insurance has rapidly grown in quantity as well as quality, and in 1901 alone the payments received were $123,200,000 and the expenditures $99,300,000. Of all the sources of income the contributions of the employers, have been growing most rapidly, from 28 per cent of the income in 1885 to 45 per cent in igoi, while the workingman's share has decreased from 72 per cent to 38 per cent. Thus the employers, and to a much smaller extent the state, were forced by Germany's legislation to contribute large sums to the comfort and happiness of the whole work- ing people. A wanton and arbitrary process of confiscation it has been called by some, while others are more inclined to look upon it in the nature of a payment of an old and just debt. It must be noticed that the objections are much louder outside of Germany than among the German employ- ers, the majority of whom have gradually come to see the justice of this institution. The limited space of this short study absolutely prohibits any extensive comparisons with other countries. The ex- ample of Belgium may be quoted briefly to show the superior- ity of compulsory as against a voluntary system of insur- ance. Sickness insurance is carried on by friendly societies which are encouraged and assisted by the government. Not- withstanding this, and the highly developed spirit of coopera- tion, the membership scarcely reaches 600,000 or less than 9 per cent of the population, while in Germany the insured equal 18 per cent; and though Belgium expends several mil- lion dollars each year in bonuses for small savings bank ac- counts, only about 100,000 workmen are members of the superannuation fund. In view of these conditions the Belgian government was forced to grant temporarily (until 191 1) the 42 SELECTED ARTICLES annual sum of 65 francs ($13) to all the workmen over the age of 6s who are in need, and the number of pensioners has passed 200,000. One must, however, guard against the mistake of idealizing conditions. Criticisms of the compulsory insurance system in Germany are not wanting; but they are directed against cer- tain provisions and the working of the system and much less against the principle itself, as even the employers have acquiesced in it, though they carry the heaviest burden. Some of those faults were pointed out above, namely the high age limit of old age insurance and the very limited com- pensation. A feeling is also growing up that a wage worker who loses his health or limb through no fault of his own, should not be made to lose even one-third of his income. Further efforts will undoubtedly be made to remedy this and other shortcomings. Compulsory insurance has not brought the millennium to the German people. Nor was it expected. It has not even altogether destroyed poverty, for it has not even touched upon one of the main causes, which is not sick- ness, nor accident, but unemployment. Several experiments with insurance against unemployment have been made in Swiss towns, but have met with failure. And a compulsory system of state insurance against unemployment has never as yet been tried. But it would hardly be fair to condemn a social institution for not having succeeded in accomplishing something which it never intended to undertake. In its own field the system of compulsory sick, accident, old age and invalid insurance has proved more efficient and satisfactory than any other practical measures directed toward the same ends that has ever existed. No greater praise can be given to an existing human institution. Independent. 61: 1475-80. December 20, 1906. Greatest Life Insurance Wrong. Louis D. Brandeis. For the greatest of life insurance wrongs — the so-called industrial insurance — the Armstrong Committee failed to COMPULSORY INSURANCE 43 offer any remedy. And yet nearly three-fourths of all level premium life insurance policies issued are of this character. On December 31, 1905, the day after the committee closed its hearings, there were 16,872,583 industrial policies out- standing in the United States. Iji New York alone their number was then 3,898,810, and while the committee was sitting, an average of 67,200 such policies were being issued in that state every month. Industrial insurance, the workingman's life insurance, is simply life insurance in small amounts, on which the pre- miums are collected weekly at the homes of the insured. It includes both adult and child insurance. The regular premium charge for such insurance is about double that charged by the Equitable, the New York Life, or the Mutual Life of New York, for ordinary life insurance. In the initial period of the industrial policy, the premium rate rises to eight times that paid for ordinary insurance, since, by a clause which will be found in most industrial policies, it is provided that if death occurs within the first six months after the date of the policy, only one-fourth of the face of the policy will be paid, and if death occurs within the second six months, payment will be made of only one-half. So heavy are the burdens cast upon those least able to bear them. The disastrous result to the policyholder of this system of life insurance may be illustrated from the following data, drawn from Massachusetts official reports: In the fifteen years ending December 31, 1905, the work- ingmen of Massachusetts paid to the so-called industrial life insurance companies an aggregate of $61,294,887 in premi- ums, and received back in death benefits, endowments or surrender values an aggregate of only $21,819,606. The in- surance reserve arising from these premiums still held by the insurance companies does not exceed $9,838,000. It thus appears that, in addition to interest on invested funds, about one-half of the amounts paid by the workingmen in premiums has been absorbed in the expense of conducting 44 SELECTED ARTICLES the business and in dividends to the stockholders of the in- surance companies. If this $61,294,887, instead of being paid to the insurance companies, had been deposited in Massachusetts savings banks, and the depositors had withdrawn from the banks an amount equal to the aggregate of $21,819,606 which they received from the insurance companies during the fifteen years, the balance remaining in the savings banks December 31, 190S, with the accumulated interest, would have amounted to $49,931,548.35 — and this, altho the savings banks would have been obliged to pay upon these increased deposits in taxes to the Commonwealth more than four times the amount which was actually paid by the insurance companies on account of the insurance. Perhaps the appalling sacrifice of workingmen's savings thru this system of insurance can be made more clear by the following illustration: The average expectancy of life in the United States of a man 21 years old is, according to Meech's Table of Mortal- ity, 40.25. In other words, take any large number of men who are 21 years old, and the average age which they will reach is 61 J4 years. If a man, beginning with his 21st birthday, pays thruout life 50 cents a week into Massachusetts savings banks, and allows these deposits to accumulate for his family, the sur- vivors will, in case of his death at this average age of 61^ years, inherit $2,265.90 if an interest of 3J4 per cent, a year is maintained. If this same man should, beginning at age 21, pay thru- out his life 50 cents a week to the Prudential Insurance Company as premiums on a so-called "industrial" life policy for the benefit of his family, the survivors would be legally entitled to receive, upon his death at the age of 6iJ4 years, only $820. If this same man, having made his weekly deposit in a savings bank for 20 years, should then conclude to discontin- ue his weekly payments and withdraw the money for his own benefit, he would receive $746.20. If, on the other hand,. COMPULSORY INSURANCE 45 having made for 20 years such weekly payments to the Pru- dential Insurance Company, he should then conclude to dis- continued payments and surrender his policy, he would be legally entitled to receive only $165. So widely different is the probable result to the working- man if he selects the one or the other of the two classes of savings investment which are open to him; and yet life insurance is but a method of saving. The savings banks manage the aggregate funds made up of many small deposits until such time as they shall be demanded by the depositor; the insurance company manages them ordinarily until the depositor's death. The savings bank pays back to the de- positor his deposit with interest less the necessary expense of management. The insurance company in theory does the same, the difference being merely that the savings bank undertakes to repay to each individual depositor the whole of his deposit with interest; while the insurance company undertakes to pay to each member of a class the average amount (regarding the chances of life and death), so that those who do not reach the average age get more than they have deposited (including interest) and those who exceed the average age less than they have deposited (including interest). It is obvious that the community should not and will not long tolerate such a sacrifice of the workingmen's savings as the present system of industrial insurance entails; for the causes of this sacrifice are easily determined and a remedy lies near. The extraordinary wastefulness of the present system of industrial insurance is due in large part to the fact that the business, whether conducted by stock or by mutual com- panies, is carried on for the benefit of others than the policy- holders. The needs and financial inexperience of the wage- earner are exploited for the beneiit of stockholders or offi- cials. The Prudential (which was the first American com- pany to engage in the bilsiness) pays annual dividends to its stockholders equivalent to more than 219 per cent, upon the capital actually paid in; the Metropolitan dividends are 46 SELECTED ARTICLES equivalent to 28 per cent, of such capital; and stock in the Columbian National Life Insurance Company, a corporation which commenced business but four years ago, has risen from par to $296. But the excessive amounts paid in dividends or in salaries to the favored officials account directly for only a small part of the terrible shrinkage of the workingmen's savings. The main cause of waste lies in the huge expense of solicit- ing insurance, taken in connection with the large percentage of lapses, and in the heavy expenses incident to a weekly collection of premiums at the homes of the insured. The commission of the insurance solicitor is from ten to twenty times the amount of the first premium. The cost of collect- ing the premiums varies from one-fifth to one-sixth of the amount collected. And yet commissions for soliciting and collection are only a part of the expenses. The physician's fee, the cost of supervision, of accounting and of advertising must all be added; with the result that no industrial policy "pays its way" until it has been in force about three years. In other words, if the policy lapses before it has been in force three years, not only does the policy-holder lose (ex- cept the temporary protection) all that he has paid in, but the company (that is the persisting policy-holders) bears a part — generally the larger part — of the cost of the lapsed policy. And only a small percentage of industrial policies survive the third year. A majority oi the policies lapse within the first year. In 1905, the averag'e payments on a policy in the Metropolitan so lapsing continued little more than six weeks. The aggregate number of such lapses in a single year reaches huge figures. In 1905, 1,233,635 Metropolitan and 951,704 Prudential policies lapsed. The experience of their young and energetic rival, the Columbia National Life Insurance Company, is even more striking. On January i, 1905, that company had outstanding 40,397 industrial policies. It wrote, during the year, 103,466. At the end of the year it had outstanding only 63,497; and yet, of the 143,863 policy- COMPULSORY INSURANCE . 47 holders, only 699 had died, while 79,677 policies — that is, one hundred and fourteen times as many — had lapsed. The results of this system of insurance establish conclu- sively that, in the conduct of the business, the interests of the insured are ignored. A life insurance company for workingmen should, as to each policy-holder, be conducted, like a savings bank, as a benevolent institution. No one should be induced to .take out a policy unless it is advisable for him to do so in the interests of those whom he wishes to protect by it. No one should be lured into becoming a policy-holder. No one should take a policy unless he will probably be able and willing to continue it in force. Further- more, economy in the management of the insurance savings is as essential to satisfactory results as the economy on the part of the workingmen, which alone makes it possible to pay premiums. , The supporters of the present system of industrial insur- ance declare that a reduction of expenses and of lapses is impossible. They insist that the loss to the insured and the heavy burden borne by the persisting policy-holders from lapses, as well as from the huge cost of premium collection, must all be patiently borne as being the inevitable incidents of the beneficent institution of life insurance, when applied to the workingman. It is obvious that a remedy cannot come from men holding such views — from men who refuse to recognize that the best method of increasing the demand for life insurance is not eloquent persistent persuasion, but to furnish a good article at a low price. A remedy can be provided only by some ins.titution which will proceed upon the principle that its function is to supply insurance upon proper terms to those who want it and can carry it, and not to induce working people to take insurance regardless of their real interests. To attain satisfactory results the change of system must be radical. The savings banks established on the plan prevailing in New York and generally thru the New England States are managed upon principles and under conditions upon which alone a satisfactory system of life insurance for working- 48 SELECTED ARTICLES f men can be established. These savings banks have no stockholders, being operated solely for the benefit of the depositors, f hey are managed by trustees, usually men of large business experience and high character, who serve without pay, recognizing that the business of collecting and investing the savings of persons of small means is a quasi- public trust, which should be conducted as a beneficent, and not as a money-making institution. The trustees, the officers and the employees of the savings banks have been trained in the administration of these savings to the practice of the strictest economy. While the expenses of managing the industrial departments of the Metropolitan, the Prudential and the John Hancock companies have, excluding taxes, ex- ceeded 40 per cent, of the year's premiums, the expense of management in 1905 (exclusive of taxes on surplus) of the 130 New York savings banks, holding $1,292,358,866 of de- posits, was only 0.28 of i per cent, of the average assets, or I per cent, of the year's deposits; and the $662,000,000 of deposits held in 1905 in the 189 Massachusetts savings banks were managed at an expense of 0.23 of i per cent, of the average assets, or 1.36 per cent, of the year's deposits. Savings institutions so managed offer adequate means of providing insurance to the workingman. With a slight en- largement of their powers, these savings banks can, at a minimum of expense, fill the great need of cheaper life in- surance in small amounts. The only proper elements of the industrial insurance business not common to the savings bank business are simple, and can be supplied at a minimum of expense in connection with such existing savings banks. They are: First — Fixing the terms on which insurance shall be given. Second — The initial medical examination. Third — Verifying the proof of death. The first is the work of an insurance actuary; and the present cost of actuarial service can be greatly reduced" both by limiting the forms of insurance policies to two or three standard forms of policy to be uniform thruout the state, and by providing for the appointment of a state COMPULSORY INSURANCE 49 actuary, who, in connection with the insurance commissioner, shall serve all the savings insurance banks, The initial medical examination and the verification of proof of death are services that may be readily performed for the savings banks at no greater pro rata expense than for the existing insurance companies. The insurance department of the savings banks would, of course, be kept entirely distinct as a matter of accounting from the savings department; but it would be conducted with the same plant and the same officials, without any large in- crease of clerical force or incidental expense except such as would be required if the deposits of the bank were increased. On the other hand, the insurance department of savings banks would open with an extensive and potent goodwill, and under the most favorable conditions for teaching the value of life insurance — a lesson easily learned when insur- ance is offered at about half the premium now exacted by the industrial companies. With an insurance clientele com- posed largely of thrifty savings banks depositors, the ex- pensive house to house collection of premiums could be dis- pensed, with, and more economical payments of premiums could probably be substituted for weekly payments. Indeed, it is probable that the following simple, convenient and in- expensive method of paying premiums would, to a large extent, be adopted, namely, making deposits in the savings department from time to time, and giving, when the policy is issued, a standing order to draw on the savings fund in favor of the insurance fund to meet the premium payments as they accrue. The safety of savings banks would, of course, be in no way imperiled by extending their functions to life insurance. Life insurance rests upon substantial certainty, differing in this respect radically from fire, accident and other kinds of insurance. Since practical experience has given to the world the mortality tables upon which life insurance premiums rest and the reserves for future needs are calculated, no life in- surance company has ever failed which complied with the law governing the calculation, maintenance and investment 50 SELECTED ARTICLES of the legal reserve. The causes of failure of life insurance companies have been excessive expense, unsound investment or dishonest management. From these abuses Qur savings banks have been practically free, and that freedom affords strong reason for utilizing them as the urgent need arises to supply the kindred service of life insurance. In Massachusetts, the proposition of permitting savings banks to establish insurance departments has already taken definite shape. The plan has been recently submitted to the Recess Insurance Committee of its Legislature, and many of its eminent and public-spirited citizens have associated them- selves under the name of Massachusetts Savings-Insurance League, for the purpose of securing the passage of a per- missive act. Massachusetts laid the foundation of America's admirable system of savings banks by chartering in 1816 the Provi- dent Institutions for Savings in the Town of Boston. Massa- chusetts established for the world the scientific practice of life insurance by the work of its great insurance commis- sioner, Elizur Wright. It seems fitting that Massachusetts should lead in another great advance in the development thru thrift of general prosperity by extending the functions of savings banks to the issuing of workingmen's life insur- ance. State Insurance.* 1909. Chapter 3. Frank W. Lewis. We are to consider whether state insurance — the insur- ance especially of workmen, against accidents, sickness, in- validity and death — are within the proper and legitimate sphere of the general attitude of the state toward social legislation. Some of the tests of the obligation of the state in this direction are simple: Would such insurance tend to mitigate industrial injustice? to distribute more justly and automati- *This chapter from Prank W. Lewis's book on State Insurance |«; reprinted by permission ot the publishers, Houghton, MifElin and Company, Boston and New York. COMPULSORY INSURANCE si cally, in a sense, the product of labor? to contribute toward contentment among the industrially or economically weak by making more nearly equal industrial opportunity between classes? Would it tend to diminish pauperism and extreme poverty? Is it practicable or possible to accomplish fully the benefits of insurance by any individual effort? Does so- ciety need some such measure for its own well-being? Is it preeminently a suitable and legitimate subject for collect- ive action? The suggestion of government insurance against the vicis- situdes of life is not a new one; it has been agitated for the past fifty years in -Germany, England and France. The imperfection and inadequacy of all existing systems and plans has been recognized. It has become evident to thoughtful men that the matter should not be left entirely to private initiative and management. It has become the accepted doctrine that such insurance should be under the control of the state, as is shown by the appointment of legislative and parliamentary commissions and by the ample powers conferred upon state insurance departments. If, then, it is objected that state insurance would be paternalistic and socialistic, it must be kept in mind that the paternal attitude toward insurance has already been taken by every civilized state in its assumption of supervision and control. And it may be fairly claimed that all insurance is in its very nature socialistic. Society, or a definite section or stratum of society, carries a burden in behalf of its mem- bers which the individual components cannot carry. The peril which menaces an individual fills him with apprehen- sion as an individual, but he can look forward to meeting his share of the danger as a member of society with com- placency. He does not seek to evade a burden but to re- adjust it. Before men thought of making provision for such events by contract it was deemed a sacred obligation among them to provide for the victims of sudden calamities, of accident, sickness, or death, as a matter of humanity or Christian S2 SELECTED ARTICLES charity. Whether in the form of vyritten law or otherwise, there has been this universal sense of social obligation. There is another feature of the matter which must be considered when we talk of the paternal aspect of govern- ment insurance. A large portion of the poverty and pauper- ism which prevails is traceable to the misfortunes which overtake workmen, for which they have made no provision. Precisely how large a percentage of the whole may be charged to these causes it is not material at this stage to discuss. A highly competent authority, quoted elsewhere, would attribute at least a major portion of all poverty and pauperism to the misfortunes which overtake the poor rather than to fault. But can any kind of law be more distinctly and more odiously paternalistic than one which levies upon the property of A to support B as a pauper? which violently takes from the prosperous to support the destitute? from the thrifty for the thriftless? from the temperate and provi- dent to the intemperate and improvident? Novv if a system can be devised under which the work- man, as a rule, makes provision for all the ordinary con- tingencies of the future, and whereby society is relieved of a large part of the burden of pauperism we accornplish a certain end by a method quite dissimilar, while each method is distinctly paternal. It would hardly be contended that a law which compels one man to support another is to be preferred over one which compels a man to support him- self. The incidence of charges under a system of government insurance will be treated of elsewhere, but if we assume, for the moment, that all such charges are to be borne by the state, it will readily be seen that there is not any additional burden carried^only a burden in another form, whether more o^r less odious or irksome. As it is now, without the finest discrimination, we pension one dependent and send another to the poorhouse; we give a badge of honor to a soldier who has served or suffered on his country's battle- fields, but we brand with the stigma of disgrace the soldier of industry who has suffered in health or in limb in the COMPULSORY INSURANCE 53 industrial life of his generation. Through a system of state insurance it is proposed that certain methods of dealing with a certain social problem be replaced by something not more paternalistic but far more just; to' readjust certain re- lations between classes on more scientific and more ethical foundations. Whether in the aggregate, the burdens now carried by so- ciety on account of its unfortunate, helpless members would be diminished under the scheme proposed must be a matter of speculation. It certainly would seem reasonable to hope that under a systematic scheme of insurance against acci- dents, sickpess, and invalidity there would be great economy compared with present methods, admitted to be wasteful and unscientific. It would not be optimistic to hope for the gradual eradication of pauperism and poverty under a method which leaves nothing to haphazard, but scientifically anticipates the future; to look for a more hopeful feeling among the classes that find themselves hopelessly drifting towards poverty and dependence; to look for a great in- crease of thrift when men themselves see that nothing is left to chance, but that they, under the encouragement of a definite plan, are themselves making provision for all the vicissitudes of the future; to look for a distin-ct access in true manhood when the humblest and poorest workman realizes that he is receiving a reserve of wages earned and not the odious dole of charity when vicissitudes come. It is a trite saying that the state cannot through legis- lation compel thrift; to which the statement should be added that the state ought to encourage thrift and should put no obstacles in its way. It must be admitted by all who study the subject that the state does often encourage thriftlessness, and nowhere more manifestly than by its poor laws and their administration. A system which would tend to inspire hope rather than despair; which would guarantee that the hard earned wages of the thrifty would not be levied upon to support the im- provident; which would compel every industry to bear its own burdens; which would demonstrate to some degree by 54 SELECTED ARTICLES infallible tests something as to the true share of labor in a given product; which would reveal in all its nakedness and hideousness that predatory feature of many industries which permits capital to rob men of life, limb or health in unhealthy and dangerous employments and turn over the wrecks to the care of society, — a system which would promise to accom- plish these ends or a part of them is worthy the careful attention of philanthropists and statesmen. Judgment might be challenged quite confidently upon the proposition that insurance such as is proposed is preemi- nently within the proper functions of a state.. Let us sup- pose, if we can, a civilized state whose policies have been individualistic in the extreme — a state without public edu- cation, public highways, public control or supervision 'of waterways, of health, of sanitation; having no care for the insane or the pauper; without a system of state insurance for workmen. Imagine this state awakening to a sense of its social responsibilities and to the need of social legislation, laying aside its conventional prejudices, against collectivism and paternalism, realizing that there are many ends to be accomplished which can be reached only by collective effort. Imagine it slowly, tentatively, but with intelligent discrimination, starting upon its course, taking the step which seems of all the most urgent. Might not this state conclude that there was no object more imperative than the insurance of workmen; none appealing more strongly to the paternal solicitude which the state should have for its weaker mem- bers; none where the best efforts of the individual would be so impotent and ineffectual; that there was nothing else within the sphere of the material needs of men, affecting their protection, comfort, peace of mind and well being, for collective means through law promised more beneficial re- sults, — results, however, which have never been fully achieved without the intervention of the state. Assuming, then, what all are inclined to admit, that in- surance for workmen through some agency, private or public, is highly desirable, the grounds for state insurance would seem to be very strong. COMPULSORY INSURANCE 55 As has been suggested, the end can be achieved only by some sort of collective effort; the propertyless individual may, by slow accumulation of savings, if his wages admit of it, make provision for old age, but he cannot prepare for the accident, sickness, or incapacity that may come without warning tomorrow. He looks for some method or plan that will combine scientific accuracy, economy of management, absolute safety and security, and practical universality. The individual knows and can know practically nothing as to the actual risks which menace him, judged by the law of averages, or what it ought to cost him to insure against any hazard or class of hazards. The actuarial questions in- volved are difficult and intricate, requiring the most careful weighing of complicated statistics. The state is best quali- fied to procure such statistics with economy and accuracy and to prepare reliable tables of morbidity and mortality; it may also construct minute tariffs of risks, as has been done under German laws. The state is already partially equipped for such work, and procures for other purposes a considerable portion of the data required. No other agency or source of information would command as great confidence as the bureau of a well regulated state. It may, too, be fairly claimed that the state is peculiarly adapted to the administra- tion of insurance and the calculations required, as. they are largely matters of mere mechanical routine. The workman needs to have the cost of insurance, in its various forms, authoritatively stated, and to procure it at the minimum of cost. Thousands are today dissuaded from taking insurance because they realize that they must pay for it excessive rates. A competitive system w,ith its enormous reduplication of solicitation, exists at the expense of the insured and bears most heavily on those most needing insurance and least able to bear any unnecessary burdens. The state can provide for insurance at the very •minimum of cost. Much of the work required could be brought under existing insurance departments and municipal machinery. There would be no hordes of solicitors, all of whom must earn a living; no extravagantly paid officials; no palatial offices or costly 56 SELECTED ARTICLES buildings; no corruption funds to control elections or legisla- tures. There is no subject that engages the thoughts of men, involving the payment of money or the investment of funds, over which there is greater solicitude as to safety and se- curity than that of insurance against the vicissitudes of life. For this feeling there are powerful reasons. Insurance against accidents, sickness, invalidity and death concerns the most serious and important aspects of human affairs. If the insurer fails to perform his part of the contract, the loss may be irreparable or worse than irreparable, — the in- jured may not only have lost the funds invested, but through advancing age or diminished earning capacity he may have become unable to reinsure; the contract, if for an old-age pension, is to be carried out often at a far distant day, per- haps after an interval of- fifty years; if the contract is for life insurance it is indefinite in its duration,, but its adjust- ment, after the death of the insured must be effected by others. But the contract of the state offers absolute safety and security; no incompetency, extravagance, or dishonesty of officials can impair the solemnity of its guaranty; through all ordinary mutations in financial and political affairs the state must endure; if it makes a contract today to be ful- filled in the indefinite or far distant future, the party inter- ested relies upon its promises with serene confidence. The state may offer this absolute security without the accumula- tion of any reserve; with the introduction of compulsion all necessity for a reserve disappears. The prudent man who makes provision for the future by accumulations of savings or by insurance, and the taxpayer, have a distinct interest in the thrift of others. They want some assurance that the state will not take from them by force a portion of their savings or property for the support of the improvident. No insurance can be deemed satis- factory or successful which is not general in its application, viewed either from the standpoint of the individual or of society. There is contagion in thrift as well as in thriftless- ness, and no system of -insurance can be highly successful or COMPULSORY INSURANCE 57 beneficent in its results which does not command the con- currence of all. The fatal weakness of every system which has ever been devised without the intervention of the state consists in its failure to reach those for whdm it would be especially prescribed, those who constantly threaten to be- come a public charge or to pass a portion of their lives in extreme penury and wretchedness. Some of the objections that are urged against govern- ment insurance have been anticipated. It is sometimes urged as an important objection that state insurance would injure or, if made exclusive, ruin existing companies. This arises from a misapprehension. Existing insurance companies or institutions do not exist for their own sak,e, but for the sake of the policy-holder. No policy-holder would sufifer harm if no further policies should be issued. Perhaps he might even be benefitted because his accumulations could not be used — as they often have been — to secure new business. The solvent company can meet all its obligations to .its policy- holder; beyond that he has no interest unless of a purely sentimental nature. It has been urged, even, that state insurance should be opposed because it would interfere with the employment of insurance solicitors. On one occasion, when the Canadian Government had the subject under seri- ous consideration, it was indignantly asked; "Why should Government take the bread from the mouths of the people who are earning their living by life insurance?" This is quoted with approval as a strong argument against govern- ment insurance, but it is too puerile to waste time over. All of the legitimate work of insurance will remain to be done under any system. Whatever is beyond that is superfluous and simply parasitic. Society cannot be asked to support a body of men whose labors have no real efficiency and do not add to a desirable product. To state the question is ta answer it. If state insurance is desirable, should it be voluntary or compulsory? Compulsory insurance is sometimes denounced as though the proposition were exceptional in the considera- tion of proper functions of government. The word compul- S8 SELECTED ARTICLES sion, as applied to legislation is an odious one. Why should the state invade the domain of the individual's choice and peremptorily decide how he shall meet his own responsi- bilities? It is to be premised that there is no compulsion upon the willing. The law-abiding citizen is not conscious of any restraint under laws against disorder or crime; the thoughtful citizen does not resent the laws or regulations which require him to do that which they should cheerfully unite in doing for the common good. We are accustomed by the long practice of civilized nations to a great variety of laws which are made obligatory for the benefit of all. We have com- pulsory education, compulsory sanitary and quarantine regu- lations, compulsory requirements respecting the spread of noxious insects and plants, compulsory contributions for the support of the poor. These all rest lightly on the orderly and patriotic citizen; rather he looks upon the state as highly beneficent which secures to him all of the privileges which can be secured only by establishing uniformity of action by law for the general weal. He does not feel the tyranny of law, but realizes his ideals of liberty which can be gained only under law. He complies with laws in the consciousness that all of his neighbors, including the exceptional one who is unwilling, are doing the same in the interests of orderly government. He knows how impotent he would be alone or even with the unorganized concurrence of his fellows in gaining these results. We think of compulsion as a sort of tyranny, but it can only be the tyranny of a majority in a republic. This may be odious, but less so than the tyranny of a minority. A minority despicable in point of numbers, five per cent or two per cent of a community, may by mere inertia impose its will upon the majority as long as the will of the majority is not enacted into law. The state should not invoke compulsion for trivial reasons; but when large interests are involved, concerning the welfare of the greater portion of its inhabitants, and a desired end can be accomplished only through compulsion, it ought not to hesi- tate. COMPULSORY INSURANCE 59 Is the insurance of workmen of such importance and urgency as to justify compulsion on the part of the state to secure it effectively? Such insurance cannot be made general in its application without compulsion. No form of persuasion could be effectively employed by the state which would not involve features far more objectionable than com- pulsion. As long as any scheme is entirely voluntary it will be evaded by the person and the class who most need in- surance; the evasion of one would weaken those nearest him socially and the contagion of improvidence would spread to the thrifty. Any plan for state insurance, purely voluntary, would show in its operation the same defects which make all existing insurance institutions unsatisfactory. But it might be confidently expected, even if there had been no demonstration of the fact elsewhere, that compulsory in- surance, when fully understood and appreciated, would re- sult in the ready acquiescence of those concentrated, as has been the case of many other obligatory laws. Only the ex- ceptional man would chafe under the compulsory feature. It would hardly be compulsory except in name. It is impracti- cable for the state in its legislation to consider the one man who is abnormal and must be forced to do that which the other ninety-nine do gladly. If he were to be heard we should have no public education worth the name. His inertia would always retard human progress. It has been suggested that a system of compulsory .in- surance would and ought to incur the opposition of work- men. To some extent this was the attitude of German' work- men twenty-five years ago towards the scheme of Bismarck, especially of those who were under the influence of the extreme socialists. The most plausible ground for such opposition is that it would tend to introduce a line of social demarcation. But this position will not bear scrutiny, either as a matter of sound theory or as an appeal to experience. Lines of social demarcation are most effectively established by conditions of industrial inequality between classes. As long as there is economic dependence, there must be a lack of mutuality in industrial relations; there will be a tendency 6o SELECTED ARTICLES towards arrogance on one side, and undue humility, even servility, on the other. Whatever ministers to equality of opportunity tends to efface social distinctions. To secure the higher independence of the individual through social legis- lation is to make a stride towards genuine democracy. The lack of mutuality is ^ productive cause of friction be- tween classes. As might have been expected, the German system of insurance has contributed to a better feeling. The workman, as well as the state to which he belongs, is deeply interested in his own efficiency, not only considered in the abstract but as related to the efficiency of competing nations. If a system of universal insurance by creating or intensifying solicitude for the life, the health, and the physi- cal well-being of the workman thereby increases his in- dustrial efficiency, it is a personal as well as a social eco- nomic gain, and gives assurance that he is not to be at a dis- advantage in an industrial competition which is world-wide. "No one can doubt that the general well-being of the work- ing 'classes in Germany, which is strikingly visible to the eye and confirmed by statistics in spite of many unfavorable circumstances, is in a large measure due to the insurance system." Further proof of the beneficence of the German work- men's insurance is furnished in the fact that it today com- mands the almost universal acquiescence of workmen. There are criticisms, but they look for amendment, enlargement and improvement, not repeal. North American Review. 195: 630-40. May, 1912. Dangers of State Insurance'. Hugh Hastings. As a student for years of labor the writer recognizes the tendency of the times to compel the master by law to com- pensate an injured employee for loss of time and to pay an adequate sum to those dependent upon such employee whose death has been caused through accident, whether by negligence chargeable to his employer or not. COMPULSORY INSURANCE 6i Until within a few years it has been an almost universal custom among employers to do what each one considered equitable in such cases, with preference shown to employees long in service over those of more recent date. In fact, each accident was adjudged by the employer according to surrounding conditions and to the individual idea of what was proper and j,ust. The comparatively small number of legal actions brought , by injured employees against employers to recover damages, as shown by court records of twenty years ago, speaks well for the employer of those days. But times and methods have changed. Business enterprises have grown so vast that no longer the employer can maintain the personal relationship with all his employees that was practicable forty or even twenty years ago, nor can he by any possibility, because of the constant shifting requirements of business, find it feas- ible to undertake that direct personal interest in every man and woman that is injured in his employ. It was, there- fore, eminently proper and right that the law should step in and define the relationship between master and servant. No fair-minded employer objects to a negligence law that is just to both parties. The employee naturally demands the law that contains provisions most favorable to his interests. The employer, however, must sedulously consider the law from another standpoint. It is he who must arrange that the burden of compensation or damage paid to employees for injuries sustained shall not exceed the profits of the business, but still leave a fair remuneration for either, stock- holder or individual whose money is invested. From the moment the employer is inspired to investigate the subject in order to' determine for himself what law, either past, present, or contemplated, is the best suited for his particular kind of employment and undertakes to absorb all the literature and bibliography accessible, he is hopelessly lost. He finds that to attempt to interpret the Sherman anti- trust law and to instruct the United States Supreme Court to define that simple document is child's play compared with trying to construct in his own mind a compensation 62 SELECTED ARTICLES law that is equitable and fair and will give satisfaction to all parties concerned. Let us take one look at what has already been accom- plished in the way of law-making on this subject and ex- amine the laws that the following countries are now enforc- ing, called in general terms beneficial laws for occupational injuries: England, France, Germany, Austria, Belgium, Den- mark, Norway, Italy, Finland, Holland, Sweden, and New Zealand. In the United States very recent legislation on the sub- ject has been adopted in New York, New Jersey, Vermont, New Hampshire, Massachusetts, Ohio, Illinois, Wisconsin, Indiana, Kansas, and Washington. Between foreign coun- tries and the enactments in our own states it is. presumptive that every form of law may be found, good, bad, and in- different, that the human mind is capable of framing, no two of them alikcj each containing merit or demerit equally, each appealing one moment and repelling the next, until the task of separating the wheat from the chaff and formulating a law that will partially solve the problem seems almost hopeless. The best that can be done will hardly pass muster, but if with the material at hand an expedient can be ar- ' ranged temporarily to bridge the gulf between employer and employee with a mimmum of harm to both, until time has elapsed to perfect a completed experience over a five years' period basis, a long step toward solving this intricate problem will have been accomplished. The laws governing compensation to injured employees in foreign countries may be separated into two classes; "simple compensation," the English form, and "compulsory insurance" either by state or mutual associations. Care- ful study and mature deliberation eliminate comment upon foreign laws with the exception of those in force in Eng- land, Germany, and Norway, which are considered by pro- found students as the best of their kind in force. More has been written of the German method than that of any other country, and it is the general impression of employers of labor and of thorougji students of this subject COMPULSORY INSURANCE 63 that the German method has proved an unqualified success and would work equally well if transplanted to our shores. But a literal analysis of that law and exhaustive study of the statistics prepared by the Government by no means justify the contention of its success in or adaptability for this country. The main objection to the system is based upon the fact that it is compulsory insurance in mutual as- sociations composed of all the employers in any given line of trade and vested with power to regulate and control their members. Through this system of control it is possible in Germany to make a flat rate of premium applicable to all employers in any given line of trade, for it must not be forgotten that this compulsory insurance serves two ob- jects: iirst, to prevent accidents, and, second, to compensate for accidents that are inevitable. The control of manufacturing plants by trade associations has brought about a high level of safety in all establish- ments. But while trade regulations and the laws providing . safety for employees are rigidly enforced, fines were im- posed and collected by trades associations in igo8 amount- ing to 412,608.51 marks to compel delinquent members to perform their legal duties. In spite of this regulation and inspection, the statistical details prepared by Actuary Miles M. Dawson show that between 1886 and 1908 it was found necessary to raise the rates of premium in certain cases five hundred per cent, over the rate for 1886. And the end is not yet, according to the testimony of Actuary Dawson before the Congressional Employers' Liability and Work- men's Compensation Commission. It is quite likely, Mr. Dawson declares, rates would continue to be increased for a period of fifty years from 1886, when the law first went into efifect, before a level would be established. In other words, a new enterprise started in Germany during the year 1911 would be forced to pay its pro rata share in the class to which it belonged for all accidents happening be- tween 1886 and 1912 that remained to be adjusted or upon which payments are still to be made over a period of years for those dependent on employees killed in service and those % SELECTED ARTICLES totally incapacitated who are pensioners of this fund until death. As an example of increase in rates: the rate on machine and repair shops was thirty-two cents per $ioo of pay-roll in 1886 and $1.69 per $100 of pay-roll in 1908. Steel castings from forty cents to $2.03, and blast-furnaces from forty cents to $2.64, and so on through the list. We must also bear in mind that these rates only provide for serious accidents, as minor accidents, when loss of tim-e does not exceed thirteen weeks, are taken care of from a sick fund. In this country there are no trade associations that pos- sess the power to enforce safety regulations throughout any given trade, nor to my knowledge is there any state in the Union where the laws that provide safety appliances for workmen are rigidly enforced, for the reason that the state has failed to provide the machinery to enforce its laws. Admitting that this is so, the baneful hand of the politician would soon appear in evidence for the comfort and profit of the man with a pull who would be relieved of the re- sponsibility that would be imposed upon the man without a pull. A flat rate of premium through any given line of in- dustry could only result in monetary punishment to the well-ordered establishment and a bonus allowed to the run- down, obsolete, and badly managed establishment. No less an authority than Privy-Councilor Ferdinand Friedensburg, late president of the senate of the German Imperial In- surance Office that enforces the law, declares the system is a "costly, inefficient, and demoralizing failure." Another grave defect in the law is that no provision is made by 'the Trades Association for taking from the insured a pension obtained fraudulently or unjustly granted, although a rehearing is conceded when the claimant becomes dissatis- fied. In consequence, such rehearings are increasing and frequently result in an inflated pension. A system of insurance regulated not only by the govern- ment, but by the trades themselves, that has proved a hot- bed of corruption, malingering, and fraud requiring a tre- mendous and expensive organization to handle, involving an increase in rates in some instances of five hundred per COMPULSORY INSURANCE 65 cent, in twenty years, would not, from the standpoint of an American manufacturer, be considered a success or meet with the endorsement of either workmen or employers. Therefore, the German system should be dismissed without further consideration. Let us now consider briefly compulsory state insurance as illustrated by Norway and the state of Washington in the United States, the latter operating under a law largely copied from that of Norway. It is generally conceded that the management of the Nor- wegian Insurance Office is exceptionally good and that the experience under the Norwegian system, so far as known, has been generally favorable. It must be borne in mind, however, that the conditions in Norway may justify a trial of state insurance because of the peculiar advantages of- fered. Only a small percentage of Norway's two million two hundred thousand persons are engaged in industries covered by this insurance, and most of these are of the same nationality, while the changes of employees in the different establishments represent a very small percentage of the number employed. Unrest and dissatisfaction with conditions of employment result not only in accidents, but in strikes. But no more remarkable illustration of the Norwegian's apparent con- tentment and satisfaction can be cited than the strike of the iron and metal workers in 1903, the greatest labor con- flict on record till 1910, and yet this strike involved only 1,052 employees. Politics appear to have little or no in- fluence over the conduct of the Insurance Office. Even with these ideal conditions surrounding this scheme of insurance and under efficient, capable, and experienced management, with rates approximately the same as those charged in Eng- land, a few years' experience has shown that they had not reserved sufficiently to cover accrued liabilities and were obliged to make good a deficiency of $100,000 that had to be paid as a general tax upon the government. If New York state were operating under the laws of Norway this de- ficiency would have been not $100,000, but several millions 66 SELECTED ARTICLES of dollars, owing to the greater population and the increased number of employees insured, and this additional burden of several millions of dollars would have to be paid by a direct tax upon the state of New York as a whole. In order to be successful, compulsory state insurance must be a monopoly — that is, all insurance of this nature must be transacted through one source. The state of Wash- ington has cleverly recognized this feature, and consequently monopolizes workmen's compensation insurance to itself. The authors of the Washington law delight to call it com- pensation, but it is far from that. Because of its meager benefits it appears more in the light of an amplified poor law with its object to prevent absolute pauperism. It is impossible to believe the labor unions of the state of Wash- ington approved this law, unless they contemplated to en- list political influence in order to magnify the benefits. As a matter of fact, it is unfair to consider the Washington law as a compensation law. The law fails to provide for accru- ing liabilities, for the proper machinery to enforce it, or for a prompt and efficient means of compelling a recalcitrant employer to insure his men. The method of establishing rates is crude in the extreme, and their method of apportion- ing the pay-roll through a given class at a flat rate is still worse. The absurdity of the whole scheme is exemplified by the stai:ement of Mr. George A. Lee, Chairman of the Industrial Commission of the state of Washington, relative to the claims for the death of eight girls in a powder-mill explosion at Chehalis, Washington. Chairman Lee states that the amount of claims for these eight girls must, under the law, be paid by assessment levied on the powder manufacturers of, the state^ It seems there are but three powder manu- facturers in Washington. Of these, two paid the assessment levied upon them by the Insurance Commission in accord- ance with their estimated pay-roll and turned over to the state the sum of $270 as their insurance premium for one year. The third manufacturer refused to pay, maintaining that the rate charged was excessive and that the conditions COMPULSORY INSURANCE 67 safeguarding his plant were so far superior that it was un- fair to assess him the same rate charged against the other two. The maximum amount which should be collected from the state for this accident, according to law, is $32,000, but the Attorney-General has raised the question that the law does not require the payment of $4,000 for the death of a minor, and it is now for the Attorney-General to prove, if he can, the economic value of a. minor as compared with an adult. Before the law had been in effect 'sixty days the Washington State Insurance Commission found itself face to face with the extraordinary problem of paying a maximum loss of $32,000 out of the sum of $270 on hand. Litigation between the Insurance Commission and the Attorney-Gen- eral, with the sum of $270 premiums already collected to draw upon, will doubtless ensue to determine the Economic value of a child. A careful perusal of the published rates for this insurance, with the grouping of trades without any rela- tion one to the other into classes subject to a flat rate of premium, discloses such a lack of knowledge of the difficul- ties, embarrassment, and expense necessary to operate a law of this kind as to make the system open to ridicule. Until the litigation is settled and the damages resulting from the Chehalis explosion are paid the state of Washing- ton certainly can offer no attractions to capital desirous of settling within its boundaries, with the prospect of Contrib- uting pro rata into the insurance fund for payment of claims arising out of a powder-mill explosion before it entered the state to transact business. In view of all these facts, it would seem as if it were only a question of time when the state of Washington's insurance law must be radically amended or abandoned. Germany complains that in the last year 800,000 marks were taken to Italy by injured Italian workmen, never to return, and that German workmen injured in Italy brought back to the Fatherland only what was left -of themselves to become an added burden to the state. How would the Ger- man law work out in the United States regarding Italians? Not marks, but dollars — not marks by the thousand, but 68 SELECTED ARTICLES dollars by the million — in exchange for toes, arms, legs, and eyes — to pension the transient Italian workman at the expense of the federal or' state governments? The English law or Simple Compensation, which, accord- ing to Mr. Hugh H. Lusk, former Premier of New Zealand, was taken almost bodily from the New Zealand statute after it had been in force in that country for five years, must next be considered. With the changes and additions required to meet con- stitutional .questions the English law is more adaptable to industrial conditions in the United States than any other law now in effect. Actuary Dawson, who unquestionably has spent more time boring into the question of the various kinds of work- men's compensation laws, with more or less prejudice as- sails the English law because it was started on what he calls a maximum rate rather than a minimum rate as was the law of Germany. No one will question Germany's credit for starting at a_ minimum rate. Even Actuary Dawson ac- knowledges that after a quarter of a century the German rates have not yet reached a maximum. Employers in England generally carry their workmen's compensation in- surance in stock insurance companies, and while Mr. Daw- son's remarks would give the impression that the insurance companies have bled the poor, trusting English manufac- turer to the last drop of his financial blood, and that the companies had feasted and grown plethoric with the great excess of financial blood unnecessarily squeezed from the innocent employer, insurance statistics and the record of companies forced into the hands of receivers, on account of underestimating the premiums required to carry the hazard of workmen's compensation, utterly fail to bear out the im- pressions of Mr. Dawson. He decries the great evil of com- muting the amount to become due to permanently injured employees, on the ground that the payment of a lump sum rather than payment at stated intervals over a protracted period of time quickly results in the beneficiary soon squan- dering or badly investing his money to find himself in a COMPULSORY INSURANCE 69 short time in a position of absolute pauperism instead of maintaining an income, no matter how small, that is perma- nent. Such a result is, of course, unfortunate, but the law that allows commutation has nothing to do with it, for annu- ities can be purchased and the courts that allow commuta- tion can easily direct a way in which the lump sum should be protected. Prodigals have existed certainly since Biblical times, and no law has ^et been devised by man, civil or ■criminal, that could absolutely obliterate prodigality. The employer's side to this question of commutation is overlooked by Mr. Dawson; the obligation that compels all business men to conduct their affairs upon the basis of giving and taking credit, and with a large number of small manufacturers good credit is their principal asset. It is not only quite possible, but quite probable, that in the course of a few years an employer might be overwhelmed with a number of uncommuted indeterminate claims from injured employees as seriously to imperil his credit with an un- known liability existing that certainly would be remorse- lessly scrutinized at his bank when application was made for the necessary credit and funds to continue his business operations. Therefore, as a business necessity and for personal protection, it is obligatory upon the employer to clear his books and settle his accounts with injured em- ployees at the earliest possible moment. Speaking of the German law, the same authority asserts that the physical condition of the German workmen has been immensely improved by the operations of the work- men's compensation law, that the Germans have grown taller and stronger during the period in which this law has been in effect, and that during the same period the Eng- lish have grown shorter and weaker. Is it possible that Mr. Dawson has not been informed of the improved physical condition of the German male through enforced military service? It is also claimed by several writers that the German compensation system has brought with it peace and con- tentment in industrial conditions as against unrest in Eng- 70 SELECTED ARTICLES land, but as there were in 1907, 2,266 strikes in Germany affecting 13,092 establishments and 445,165 employees, as against 601 strikes and 100,728 strikers and locked-out em- ployees in England for the same yeai*, this claim cannot be allowed. For the state of New York or any other state in the United States the only law that seems applicable for the moment is one of simple compensation as a substitute for all other remedies except the common-law right to recover, through the civil courts, just damages for the consequences of wilful and unpardonable negligence. To make this law a compulsory one is as repugnant to the idea of the free-born American citizen as federal ownership of the railroads; therefore, while this law should be compulsory in effect, it should be elective in fact, and each employer, while required to insure, should be given the choice of doing it in the way most adaptable to his surroundings. He should be allowed to insure in either a stock or mutual insurance company duly qualified by the State Insurance Department to do business in his state, or to put into effect within his own organization a workmen's compensation plan that should be not less beneficial to injured claimants than the law pro- vides, or he should be allowed to carry his own insurance if he so elects. The law, however, should provide that, if an employer should' elect either of the two last-mentioned plans, he be compelled to furnish either to the Insurance D.epartment of his state or to some other department or designated officer of the state a bond sufficient in amount to cover the obligations imposed upon him by law as regards injured employees. It has become a habit apparently of those writing about the rates charged for employers' liability and workmen's compensation insurance by stock companies to denounce the companies from start to finish and to hold them up before the public for not only robbing the employer on rates charged, but for cheating the injured workmen out of their just dues by every known means, driving him 'through in- tricate tangles of litigation until he is willing to accept little COMPULSORY INSURANCE 71 or nothing for his release. Even Professor Henry R. Seager, of Columbia University, according to the daily press, stated ' at a recent lecture "that under the present system there is a lot of unnecessary litigation and that fifty per cent, of the money received is expended by the employers' liabil- ity companies in efforts to keep from paying claims." Pro- fessor Seager is correct in stating that there is an unneces- sary amount of litigation, but so long as shyster lawyers and ambulance-chasers are allowed to charge fifty per cent, of the amount of every recovery made through such litiga- tion for their fee, just so long will it continue. One of the salient points of the report to Congress by the Committee on Employers' Liability and Workmen's Compensation reads as follows: "Of the $10,000,000 annually paid by the rail- roads of the country presumably to workmen and their bene- ficiaries in death and injury claims, $5,000,000, or one-half, has been stolen by personal-injury lawyers." Professor Seager's statement that the companies spend fifty per cent, of their money to resist just payments is not borne out by the facts. Superintendent Hotchkiss of the Insurance De- partment of the State of New York states that, while the liability companies have made no money in the past three or four years, they have been guilty of unnecessary expense owing to the severe competition for business among them- selves; that it is quite doubtful if the present Reserve L^w of fifty per cent, of the premiums is sufficient, as the In- surance Department figures show that the loss ratio on com- pleted experience is nearly, if not quite, sixty per cent, of the amount of the premiunjs, and he further calls attention to the extravagant rate of commission paid to those who bring the business to the companies' counters. From an absolutely authentic source the writer can vouch for the statement that the fifty per cent, referred to by Professor Seager is made up approximately as follows: ten pej: cent. legal expenses, teii per cent, home and branch office expenses, five per cent, pay-roll audit and inspection departments, and the balance of twenty-five per cent, to brokers placing the business. 72 SELECTED ARTICLES With a workmen's compensation law restricting the fees of attorneys, thus cutting out seventy-five per cent, of the litigation, every one of the above mentioned percentages should be scaled down materially by the liability companies themselves. Legal, home office, and miscellaneous expenses should be cut seven and one-half per cent., and with every employer carrying workmen's compensation insurance in one form or another twelve and one-half per cent, com- mission is fully enough to pay to brokers or agents placing the business. This twenty per cent, saving can well be used by the employer to help him to carry the additional burden of workmen's compensation insurance that provides for weekly payments whether the employer is guilty of negli- gence or not. Annals of the American Academy. 38: 151-8. July, 1911. Compensation Law and Private Justice. P. Tecumseh Sherman. In the states of the civilized world there are two systems of employers' liability for accidental injuries. The first, which formerly prevailed in all, but which now survives only in the United States and, in a transition stage, in Switzerland is that of tort, or more particularly the master and servant branch of the law of negligence. The second is that of "compensation," which embraces both "simple compensation" and also its more complex form of "compulsory insurance" — for "compulsory insurance," where and in so far as it is at the expense of employers, is in effect simply a liability to pay compensation for accidental injuries to employees, with a legal obligation added to insure its payment. The majority of the advocates of "compensation" base their arguments entirely upon reasons of social welfare. Un- der that line of argument, in order to sustain a compensation law under our constitutions, it is necessary to rely exclusive- ly upon the "police power" — a power possessed by the state which permits it to inflict individual hardship and injustice COMPULSORY INSURANCE 72, where necessary for the public welfare. But the law should seek, wherever possible, to effect private justice; and the case for "compensation" would be infinitely strengthened and the probability of repetitions of the reverse suffered in the recent decision of the New York Court of Appeals would be di- minished if it can be demonstrated that the liability, as be- tween master and servant, which the compensation law im- poses, is just. In my opinion that liability is just, not abso- lutely, just in theory, because it abandons the unattainable ideal of affecting exact justice in each particular case, but as just as is possible in practice and relatively most just in com- parison with the existing liability for negligence. In this paper I shall endeavor to explain my reasons for that opinion; but in order to be brief and for that purpose to avoid complexities from varying conditions I will limit my arguments to those which apply with full force only to employment in the more hazardous organized industries, to which, in my judgment, our first experiments in the law of compensation should be limited in their application. In my opinion the two .systems of employers' liability law are not totally different in their fundamental principles of private right, but the principles of the compensation law are developments from the principles of the negligence law, cor- rected to conform to the lessons of experience and to mod- ern scientific knowledge and modified with a view to con- crete as distinguished from abstract justice. While the foreign compensation laws are all shaped in many of their details, and in some cases in their entire forms, with a view solely to the general social welfare, nevertheless as a sys- tem it will be found that the principles of private justice underlie them all. If this view is sound and if those princi- ples of private justice become generally accepted here, then the substitution of the liability for compensation in the place of the existing liability for negligence would be in accord with, instead of being a departure from, the spirit of our comiilion law and of the principles of the Bill of Rights in our constitutions. The compensation law, as a rule of private justice, differs 74 SELECTED ARTICLES from the law of negligence in principle in that it changes the rules of "contributory negligence," of "assumption of risks" and of "fellow servant," the criterion of "negligence" and the rules governing the burden of proof — and in that it fixes a definite and limited measure of the amount of the liability. Our rule of "contributory negligence" is peculiar to the common law, and there are now few who believe in its justice. But although the rule may be unjust, yet simply to abolish it and to make the employer liable for full dam- ages, as if there had been no contributory negligence, would be equally unjust, because that would merely shift the in- justice from the workman to the employer. The proper correction is to divide the damages. That is what the Ad- miralty and the civil laws have always done, and what the compensation law in effect does. The justice of the "assumption of risks'' rule is predicated upon the premises that workmen are free to assume or reject hazardous employmnt, and, consequently, that when they accept such employment, they should be deemed to contract freely to assume its risks; and tha.t wages in hazardous em- ployments are higher in proportion to the hazard so as to compensate for such risks. But facts demonstrate that working people in the mass are not economically free to accept or reject hazardous employment, and that wages are not at all in proportion to risks. Therefore, the premises upon which the rule of assumption of risks is based are gen- erally false, and the rule itself is not a true rule of justice. But if justice requires the abandonment of the assumption of risks rule, its corollary, the fellow servant rule, should also be abandoned; for danger from the faults of intimately associated fellow servants is one of the occupational risks, all of which, as a general rule, a workman either should or should not be deemed to assume. And so far as the fellow servant rule is supported by reasons of public policy, it has no true application to the organized industries, wherein the individual workman cannot, by any degree of care, protect himself from the faults of his fellows. But here again the proper correction is not simply to COMPULSORY INSURANCE 75 abolish the defences of "assumption of risks" and of "fellow servant" so as to leave the employer liable for full damages, for that would merely shift the injustice and make the em- ployer liable for a wrong, where he has been guilty of no wrong. The compensation law solves this problem of justice by treating all the necessary risks of employment as joint risks, of which the consequences should be shared between the employer and his injured workmen; and it accordingly imposes upon the employer a legal liability, similar to that of an insurer, to pay to his injured workmen, or their depend- ents, his share (generally one-half) of their wage losses resulting from such risks. This conception of a joint occu- pational risk, of a mutual responsibility for accidents from occupational risks, of a moral partnership in the resulting losses, is the great basis of the compensation liability. As a conception of justice it is primary and must either be ac- cepted as an axiom or be rejected. But the idea of its justice is fortified by the fact that as a rule of public policy it has practical merits and advantages above all others. It, therefore, appears to be the best rule for the social welfare and, at the same time conforms to a widely accepted idea of justice. The next point of difference between the two systems of law is the criterion which determines when, on the one side, the employer shall be subjected to liability for full damages, and when, on the other side, the injured workman shall be deprived of the right of any redress. Under our master and servant law that criterion is ''negligence as a proximate cause" — a criterion which in practical application is so in- definite and uncertain in meaning as to be most unsuitable for that purpose, as is evidenced by the thousands of litigated cases to which its' definition has given rise. It has the further demerit of being scientifically superficial. Under the compensation law that criterion is "taoral fault," variously defined, but always so defined and limited as to include only such a degree of certain moral fault as justifies, beyond doubt or reasonable difference of opinion, the infliction of a penalty upon the defaulting party. From the application of 76 SELECTED ARTICLES this latter criterion it results that that large proportion of accidents, which are due proximately to lack of ability, mis- judgment, lack of skill, ignorance, physical or mental lassi- tude, mere inadvertence or that kind or degree of negligence which, humanly speaking, is at times inevitable even with careful men, and which, under our negligence law, result in a mass of litigation and entirely fortuitous determinations, are, und^r a compensation law, not attributed to fault but rather to the necessary risks of employment; and, consequently, for injuries resulting therefrom the employer is made liable to pay his share of the injured workmen's wage losses in the form of compensation. The next difference between the laws of "negligence" and of "compensation" is that under the compensation law there is a presumption of fact that every accident results from a necessary risk of the employment or from some cause or causes for which employer and injured employee are jointly responsible, and is, therefore, a subject of compensation, un- less fault is proved; and the burden of proving fault is upon the party asserting it. Is that presumption just? My answer to that question is that an intensive study of the causes of accidents .in New York factories and a critical analysis of the , European accident statistics convinces me beyond all doubt that, at least under conditions which prevail in the organized and hazardous industries, that presumption is true, and there- fore just. The final difference between the two laws is that under the compensation law the amount of compensation is meas- ured by the law instead of by the almost ultimate discretion of the jury, and is made dependent upon certain definite facts, which are generally easily and certainly provable. Whether this method of fixing the amount of the liability is just or not should be determined by its results. The object of the law is ta do justice. It should, therefore, be framed to effect average concrete justice, rather than to declare abstract rules of exact justice which cannot be car- ried out in practice; and this rule of the compensation law has these qualities of concrete justice, which are entirely COMPULSORY INSURANCE "jj lacking in the negligence law, that it is generally prompt, certain and uniform in its operation. Finally, the compensation law possesses that highest at- tribute of a just law, that it satisfies the natural sense of justice of the parties affected by its application; for it is the general testimony of both employers and employees in the majority of the compensation law countries that the law in the main is just and satisfactory. In contrast with the compensation law, our negligence law gives universal dissatisfaction. Not only is it in many re- spects absolutely unjust, but even so far as its theories are just it fails to carry out those theories in practice, but results instead in a medley of cruel wrong, oppressive waste and delayed or compromised justice. Moveover, its theories are such that they cannot be carried out in practice, because that would require an impossibility, namely: that accidents be correctly traced to their respective causes and the respon- sibility for those causes correctly weighed and determined by judges and juries. Abroad, even experts, making many of their investigations on the spot and unhampered by the motives for concealment which prevail here, cannot with any certainty determine the true causes of and responsibility for a large proportion of the accidents which they investigate, and, as to the mass of industrial accidents, can only arrive at rough opinion estimates of average causes and responsibili- ties. It is obvious that judges and juries, especially under our methods of procedure, are infinitely less able to arrive at that "exact determination of the causes of and responsi- bility for each accident which a correct, application of our law requires. Therefore our law, even in so far as it is good in theory, is absurdly bad in practice. The fault lies not so much with the machinery of our courts as with the law itself. For the law starts from an un- fair basis, by imposing the burden of proof entirely upon the injured workmen, and thereby insures injustice to them where, as happens, in a large proportion of cases, from the very nature of the accidents, there can be no real proof. And, where there is a scintilla of proof, our law is wrong. 78 SELECTED ARTICLES not so much in making jurors judges of the facts, as in mak- ing them judges of a broad field of inferences from distorted versions of a part of the facts, without scientific rule or reason to guide them. The result not only is, but must be a pure gamble, more expensive, wasteful, distressing and cor- rupting than any form of gambling prohibited by the penal law. In my opinion it is altogether a mistake to seek to rem- edy the existing evils along the lines of our "employers' lia- bility" statutes. Those laws are in too many respects grossly unjust to employers, increase litigation, are expensive and wasteful, are slow and uncertain in results, and furnish small additional relief to the victims of industrial accidents in the mass. And they have a disastrous effect upon the public welfare, for they foster class antagonism between employers and employees, and they interfere with proper methods for the prevention of accidents by establishing through the de- cisions of our courts harmful rules and precedents on ques- tions affecting safety. An illustration of this last proposition may be enlighten- ing. We have in our New York Labor Law a provision that certain machinery shall be ''properly guarded." The factory inspectors, in their enforcement of that law, construe that provision to mean that such machinery must be so arranged, placed, boxed, railed off, or provided with safety appliances as to be made as safe as practicable. But our courts con- strue it more literally to mean that such machinery must have applied to or about it something extra as and for a guard, without particular regard to whether or not that will make the machinery more safe or more dangerous. Of course, the courts have not categorically said that, but that is the effect of what they have decided. There are many cases in New York where juries have awarded and our higher courts have sustained verdicts for punitive damages against employers for not guarding their machinery in a way which, according to the overwhelming preponderance of expert opinion, would make it more dangerous. Such decisions are the opposite of or conducive to the general adoption of cor- COMPULSORY INSURANCE 79 rect methods for the prevention of accidents. And this is but one of many points about which the reasonings and decisions of our courts on questions affecting safety are as foreign to scientific truth as are the ideas of an Indian medicine man about the causes and prevention of disease. It is a principal merit of the compensation law that under it questions of industrial safety would cease almost alto- gether to be a subject for judicial determination, and that the intelligence and efforts of employers would then be di- rected towards the prevention of accidents instead of towards the maintenance of arbitrary conditions and practices which will merely prevent liability for accidents. While it is not demonstrable that the compensation laws have effected any reduction in the proportion of accidents, because there is not the requisite data for purposes of com- parison; yet it is certain that the imposition of the com- pensation liability in lieu of all others (save in exceptional cases), would remove many difficulties in the way of studying the causes of accidents and the methods of their prevention, and would aid in the enforcement of safety regulations and be conducive to their voluntary adoption. And it is equally certain that our law has just the opposite efifect, because it gives rise to an impellent motive for both the employer and the workman who is injured in an accident to suppress or falsify all the facts relative to that accident which might ad- versely affect their respective legal rights or liabilities. Con- sequently, in our country, this subject is to a degr.ee hidden from expert investigation by a fog of suppression, misrepre- sentation and positive falsehood. In conclusion I wish to emphasize three propositions, namely: that in the highly organized and hazardous in- dustries the real causes of accidents are generally so complex and in addition often so remote, that as to a material propor- tion of the accidents it is impossible, by any methods or means, correctly to ascertain the facts necessary to form a correct judgment of their particular causes; that as to a yet larger proportion it is practically impossible to do so with- out such expense and delay as will defeat justice; and that 8o SELECTED ARTICLES as to those accidents, as to which the necessary facts are practicably ascertainable, there is no simple abstract term, such as "negligence," "parelessness," "fault," "gross negli- gence," etc., which, if used as a criterion of legal liability, will not result in frequent and gross injustice and inequality, whether administered and applied by courts and juries or by more competent experts. At first impression the exactness with which industrial accidents are classified in the German and Austrian statistical tables, under the headings of "due to fault," "unavoidable," "due to lack of skill and careless- ness," etc., may seem to contradict these propositions. But in so far as those tables produce that impression they are misleading; for as to a major proportion of the accidents classified therein, the facts have not been thoroughly investi- gated, but rough statements have been relied on, and there is therefore in them a wide margin of probable error, due to that one cause; and the terms used in those tables are so far from being definite and are employed in each table with a meaning so uncertain in application and so peculiarly per- sonal to its compilers that a re-classification of the acci- dents covered by that table, under the same terms, by a dif- ferent set of experts, would inevitably produce widely differ- ent results. The conclusion to be drawn from these premises is, that the idea of ascertaining the facts as to each particu- lar industrial accident and then determining liability accord- ing to the application to those facts of some simple abstract rule cannot be carried out in practice; but that, in order to obtain a rule of law which will be at all fair and uniform in practice, it is absolutely necessary to resort to the doctrine of averages. That is what the compensation law does by presuming in eflfect, save in exceptional cases where the contrary is proved, that every accident is due to a neces- sary risk of employment or to some other cause or causes for which employer and injured employee are jointly re- sponsible; and it divides the damages accordingly. In arguing for the justice of a compensation liability in the organized hazardous employments, I am not arguing against its justice in the unorganized or safer employments, COMPULSORY INSURANCE 81 because I believe that, with some important exceptions and subject to certain conditions, it would also, in practice, be more just therein than the existing liability for negligence. And I am not arguing that reasons of justice alone should determine the form which a compensation law should take; for I believe that reasons of social welfare and many other reasons should in many respects determine both the form and the extension of such a law. But I insist that such a law as that of master and servant should be based upon conceptions of private justice; and that the compensation laws are so based, and are not unprincipled measures of mere political expediency. Annalsvof the American Academy. 38: 159-65.' July, 1911. Argument Against Liability. Walter S. Nichols. To me there is a graver issue involved in the enactment of liability laws in this country than the mere compensation of an injured employee. Our recent conceptions of an em- ployers' liability are of foreign birth, the outgrowth of so- cialistic theories, which for years have been gradually per- meating the states of Europe. There are two phases of this question which do not seem to be receiving the consid- eration which they deserve. I hold that under the spirit, if not the letter of our constitution, no ordinary employer of labor can justly be made liable for an injury for which he was not actually or constructively at fault, and that every attempt to impose such a liability is an attack on the man- hood of employees as American citizens. Subject to the legitimate police power of the state, every American free- man has the constitutional right to contract for his services. Under all ordinary circumstances, this contract assumes that he is capable and willing to perform the work which he undertakes. Such service in free America, at least, is not different in its fundamental character from other business contracts; it is simply an exchange of personal labor for money compensation. Both parties are independent con- 82 SELECTED ARTICLES tractors. There is no more reason in the nature of things why a freeman who contracts for his manual labor should impose on the party with whom he contracts responsibility for injuries which are due to no fault of the latter than why a like responsibility should not attach to other forrps of con- tract. As well might the architect or the builder who con- tracts for the erection of a dwelling allege the same re- sponsibility. The fact that the ordinary servant is under a stricter and more detailed control goes no further than to enlarge the duty of the employer to see that his own acts are free from blame. The only ground on which such legal responsibility can be claimed is the exercise of the police power of the state based on public policy. Is there any public policy which would sustain such police power in the case of ordinary em- ployments? Here, a false theory seems to have been uni- versally accepted. It is assumed that employees would escape injury except for the special work in which they may be employed; that the responsibility for the injury attaches to the particular work being done. On the contrary, it may well be questioned whether in the ordinary occupations of lifethe risk of accident is not even less among those actively engaged in the service of others than if not so engaged. The employee is not a mere piece of mechanism, carefully housed and sheltered from danger except when actively in service. He is a man and a member of society, with all the obliga- tions imposed on him by such membership. First and fore- most of these obligations is that he shall do his legitimate share of the world's work. To earn his bread by the sweat of his brow is the law of nature imposed on man in his very evolution from a lower vertebrate. It is a law whose princi- ple lies at the very foundation of all life,- even that of the lowest monera or of the vegetable cell. Conscious or un- conscious activity is the very essence of life. The evolution of society has simply moulded the lines along which this activity must be directed. It has simply organized the mem- bers into a social system under which their labor is differen- tiated and its fruits exchanged instead of, as among their sav- COMPULSORY INSURANCE 83 age ancestors, every man working for himself. We have simply exchanged slavery to untamed nature for a lesser servitude to society at large. Whether employed in the serv- ice of another or not, every man is exposed to the risk of accidental injury. There is nothing in all this which sug- gests a natural claim of one member against another for injuries due to his own fault or misfortune. On the contrary, the whole development of society has been along the line of protection to the worker. It is as true to-day as it was a thousand years ago that in the ordinary occupations of life the worker is in reality in a measure safeguarded through his very employment. Not until now has the truth of this great principle been seriously questioned. From the buried cities of Mesopotamia are unearthed the records of contracts made six thousand years ago, and in the laws of the Roman Empire, we may read the story of their transmission in spirit to the nations of modern Europe and to America. But no- where heretofore, so far as I know, has the right and ability of a freeman to assume the risk of his employment been questioned. What are the grounds of that public policy which it is claimed has changed the nature of this contract relation that has existed from time immemorial? We are told they are to be found in the complex conditions of modern industrial life, under which the employee is subject to risks more hazardous than ever before, and to that greater economic differentiation which has widened the gulf between the workman and his employer, which has weakened the personal relations once existing between the two, and has reduced the former to little more than a machine to be exploited under a new system of employment, representing not men but soulless corporations; that giant monopolies of capital have practi- cally reduced the workmen to a condition of industrial servi- tude. For these reasons, it is urged that public policy calls for the intervention of the police power of the state to compel either the individual employer or the state itself to assume that responsibility for injuries to the workers which they themselves formerly bore. 84 SELECTED ARTICLES Whatever may be said for this argument under the monarchical systems of the old world, it fails in its applica- tion here, unless our whole theory of government is to be abandoned for another on essentially socialistic lines. The broadest liberty of the individual consistent with his obliga- tions to society was a corner-stone, o.n which our whole national fabric was reared, and closely allied to it was an- other, protection of individual property rights against aggres- sion even by the state. When Webster won that immortal decision concerning the sacred rights of property and of contract in the Dartmouth College case, which has ever since been the law of the land, he welded a construction into state and federal constitutions only less important than that in- volved in the conclusion of his famous debate with Hayhe, a construction which has cost the best blood of the land to maintain "the Union now and forever, one and inseparable." Under our constitution, as it now stands, no plea of police power can well divest an employer of his property on the ground that he is liable for an injury where he was without fault. The application of this principle has been sought to be avoided by using the police power of the state to abridge the right of contract and compel the employer to incorporate the tacit assumption of a liability for injuries in his agree- ments with his workmen. How far the police power of a state may thus abridge the right of contract yet remains to be seen. In right reason, it would seem that no such power should exist in ordinary contracts of employment in which, as already explained, the hazards of occupation are not es- sentially different from those of ordinary life. The work- man here is asked to assume no increase of risk which can fairly be charged against the property of his employer, or be made a basis for public compensation, unless socialism is to be substituted for individualism in the spirit of our con- stitution. To employ and to be employed is a fundamental right of every citizen of the Republic, the very essence of our economic! existence, even more — of our very civilization. No police power can properly abridge it more than the pub- lic welfare absolutely demands. It may well be doubted COMPULSORY INSURANCE 8S whether any plea of public policy can impose on every man who ventures to contract for the service of another an un- known liability for injuries due to the fault or misfortune of the latter with all its attendant train of fraud and black- mail, and it may be at the risk of his own financial ruin. No policy would seem more destructive to the actual welfare of the state. While in the case of certain corporate carriers, creatures of the state and impressed with duties to the pub- lic, such police power has been at times sustained, the Court of Appeals of New York in its recent decision has, by a unanimous vote, emphasized the principle that no public policy can be invoked to sustain a law which thus divests an employer of his property without his own fault, even though his liability may be limited to exceptionally dangerbus risks. Our neighboring state of New Jersey in attempting to evade this decision by depriving the employer of his present pro- tection by the court in case of his refusal to accept an un- constitutional law, strongly suggests an attempt to whip the devil round the stump. The defenses which it would deny him are grounded not on mere expediency, but are rooted in those principles of natural justice which underlie our economic system and have been well established in all our jurisprudence. As a dictum unnecessary for the decision of the case, the New York Court of Appeals has declared that both the fellow servant and the contributory negligence clause as de- fenses are within the scope of legislative control. But it as strongly affirms that neither can be so modified as to impute to the employer a fault due to the employee. Both these clauses relate to the legal cause of the accident. The ques- tion of responsibility depends on this legal cause. Whether a fellow servant or an assumed negligence of the employee is in the legal sense the efficient cause or a mere link in the chain of casualty, which no court will consider, must still re- main, it would seem, a valid question of law regardless of such enactments as that of New Jersey. The act or neglect of the employer must still be the efficient cause of the in- jury in order to constitutionally impose on him the liability. 86 SELECTED ARTICLES I But gravest, perhaps, of all objections is the effect of such legislation both on the working men themselves and on the commonwealth at large. By such laws those who contract for their personal services are placed in a class by them- selves politically subordinate to the rest of their fellows. They are no longer to be dealt with as freeborn citizens competent like others to care for their own affairs, and cap- able like others of engaging in all the activities of busi- ness life unfettered by political restraints. To them the words of the great declaration promulgated in this city a hundred and thirty-five years ago that all men are born free and equal and entitled to life, liberty and the pursuit of happiness must have a changed meaning. They are to be dealt with as incompetent wards of the state who must be protected against themselves, incapable of freely contracting for their services and subject like the medieval serfs to assumed task- masters, who must answer for their safety and be responsible for their mishaps. Is that to be the future spirit of our constitution and of our economic system? Is it the spirit of Americanism under which our country has achieved its greatness? The employee of yesterday will be the employer of to-morrow. Our future captains of industry will be re- cruited not from the ranks of wealth, but from the descend- ants of the horny-handed sons of toil. Politically, America knows no servile class. Is all this to be changed and a spirit of state socialism to be inculcated in our rising generation through the operation of laws which make the employer the keeper of those whom he employs? To-day one of the grav- est financial problems which confronts our local systems of rapid transit is the damage suit for real or alleged in- juries to those in transit. Fraud and blackmail play a leading part. In New York, the passage of the recent Employers' Liability Law was the signal for a heavy increase in the claim ratios of the insurers. From England, and even Ger- many, come the same story of the weakening of the moral fibre of the classes whom such laws aim to protect. We are treading on dangerous ground in seeking to fol- low the footsteps of Europe regarding employers' liability. COMPULSORY INSURANCE 87 We are in danger of sacrificing the nation's birthright; the independent manhood and political equality of the individ- ual citizen won by the founders of the Republic through the sufferings at Morristown and Valley Forge. Can the American people afford to surrender it for any gains that may come through the better protection of the working classes against the risks attendant on our complex industrial conditions? Is it not better that another solution of this grave industrial problem be sought? To me the true solu- tion lies along the line of insurance, not compulsory but voluntary, on the part of the workman himself as an intelli- gent self-respecting citizen to whom has been committed his full share in the government of his country. Aided and encouraged he may well be by any legislation which will not sacrifice his manhood or violate the constitutional rights of his fellow members of society. It is right that he should be protected and he should be educated to it as to every other civic duty. It is right that the cost of his protection should be an element of his compensation for his labor. But I believe that in doing so no jot or tittle of the spirit of the American Constitution should be surrendered. Not long ago, the business activity of all France was suddenly checked by a gigantic strike of employees to ameliorate their social con- ditions. The hand of the government itself was threatened with paralysis. It was successfully met and its backbone was broken by a call to the colors. The strikers were called on to choose between their obligations to their country and the betterments for themselves which they sought by over- turning its social order. The spirit of patriotism prevailed and they rallied round the flag. The same fundamental is- sue underlies this question of liability legislation. Shall it be dealt with in a spirit which recognizes the paramount claims of the constitutional principles on which our govern- ment was established, those of political equality and in- dividualism, or shall these be sacrificed for socialistic princi- ples which will divide society into two classes: one of industrial serfs, wards of the state incapable of self-protec- tion, the other of overlords commissioned to be their legal 88 SELECTED ARTICLES guardians? It is natural to move along the line of least resistance and to seek the remedies which offer the speediest relief regardless of the future.' But I take it that the man- hood of the future American citizen and the political equal- ity which is his birthright may be worth even more than the material advantages of socialistic laws. When the proud Roman matron declared of her sons, haec niea ornamenta (these are my jewels), she uttered a truth which equally applies to every commonwealth. The real strength of a nation lies in its citizens, not in its material possessioiis. The downfall of the mightiest empire of antiquity was heralded by its accumulating wealth attended by the breaking down of the moral fibre of its people. I would have every worker standing side by side with his employer as a political sov- ereign trained to insure his own protection and aided, if need be, by the state within constitutional lines to exact the compensation for his services necessary for the purpose. Annals of the American Academy. 38: 175-83. July, 1911. System Best Adapted to the United States. Miles M. Dawson. The best system would obviously be best adapted to the best nation. Though not intending to indulge in boasting, we would be very loath to admit that the United States was not easily first among nations. If there are reasons why the system is objected to, these reasons then must obviously be based upon mere prejudice. Such ought not to stand in the way of its adoption when the facts are fully known; and will not stand in the way if bur nation really is the best and its people worthy of it. Workmen's compensation is at present being presented to the American people in three forms, viz.: First: In a form merely optional, i. e., contemplating that employers and employees should bring themselves under its provisions (which, except in the Ohio bill, provides for direct COMPULSORY INSURANCE 89 liability of the| employer, instead of insurance) by their own action, or quasi-optional, i. c, requiring them, if not desiring to be bound by its provisions, to take aiifirraative action in- dicating their election. A law of the former character was enacted in New York last year, and took effect on September ist last. It is reported that but one employer has brought himself and his em- ployees within its purview. This, notwithstanding the fact that the defenses against employers' liability have been con- siderably modified, a fact which is elsewhere expected to cause all employers to seek refuge under the provisions of such an act. Possibly a, law like that which is proposed in Ohio, re- moving the defences against an action for negligence, but offering a safe haven in state insurance of the compensa- tion type, might bring more employers under the compen- sation provisions. Undoubtedly, under a quasi-optional system, requiring written notice to certain officials to avoid coming under its provisions, a very large proportion would find themselves in- cluded within them; but the same reasoning which caused the Court of Appeals of the State of New York to hold that a so- called "compulsory compensation act" is unconstitutional, as taking private property without due process of law, would perhaps apply to any such form, not wholly and in fact op- tional. Moreover, it cannot be denied that either an optional or a quasi-optional workmen's compensation system is but a partial and incomplete solution of the serious problems at which such legislation is directed. Notwithstanding all this, New Jersey has just had re- course to legislation of this type, and such legislation is in process of enactment in Ohio, with every chance of success and differing from the other only in that state insurance is the option offered. It is also expected that the Wisconsin legislation will take the same form.' •It has, as have also the new laws in New Hampshire and Cali- fornia. go SELECTED ARTICLES Second: A law substituting for the present employers' lia- bility law, a system of workmen's compensation, the employ- er to be liable for the payment of the compensations and the same to be applicable to all employments. With the exception that it was not made applicable to all employments, but only to certain of them which were se- lected by reason of the extraordinary peril attending them, and by reason of their not being in competition with similar industries of other states, this is the form which was taken by the so-called '"compulsory" workmen's compensation act of New York. It is now a matter of history that this has been declared unconstitutional by the unanimous opinion of, the Court of Appeals. It is declared unconstitutional both under the pro- visions of the state constitution, and under the provisions of the federal constitution. Against the former determination there is no appeal; and, consequently, so far as New York is concerned, the question is finally disposed of, unless the constitution be afnended.^ Should such a system be upheld, it would produce as good results as would an optional system such as the New York or the New Jersey type, if the latter were to be universally accepted. But this system, even if available, is certainly not the best. In the first place, it involves many uncertainties, both for the employer and for the employees. Thus, had there been such a statute in force and applicable to the manufacturing company upon whose premises the frightful holocaust oc- curred in New York on the very day the decision of the Court of Appeals was announced, it would have resulted, as doubtlessly suits for negligence under the existing law will result, in the ruin of the employer while little, if anything would have been realized for the families of the deceased or for those who were injured. This illustrates two things, viz.: (a) that it is by no means certain that, under the system of holding the employer di- =Thls has since been recommended by the Commission and a bill has been introduced to submit an amendment to the voters. COMPULSORY INSURANCE 91 rectly liable, the burden will be distributed, and thus appear in the price of the products or services to be paid conse- quently by the consumer; and (b) that it is by no means certain that the compensation will be paid at all. In neither case is the community well served. In the next place, it is a wasteful system. The only means by which a proper distribution of the costs can be made under it is by private, voluntary insurance. In Great Britain, where such a law is in force without modification, and where the best stock companies in Europe that insure against such risks, are to be found, it costs, roughly, a shill- ing for expenses to get a shilling of benefits to the depend- ents of the deceased workmen and to those who are injured. It costs no less than 30 per cent of the entire sum disbursed in benefits merely to pay agents for soliciting the patronage of employers; and this does not include the costs of superin- tendence. If an adequate system of this type were introduced throughout the United States, giving benefits as large as, for instance, in Germany, I estimate that it would cost, net, about $400,000,000 per annum, to pay the compensation after the plan was in full swing. If the expense were 100 per cent, as in Great Britain, this would mean $400,000,000 added to the net cost. Of this vast sum at least $120,000,000 would be paid for the services of solicitors — an army of agents, yet to be drawn from other occupations and put into this. These figures may look large; but it was estimated several years ago from the official returns, that the commissions to fire insurance agents in the United States were no less than $115,000,000; and it is safe to say that under an adequate system of workmen's compensation, covered only by private insurance, the premiums would aggregate a greater sum than is paid for fire insurance. The amount paid in commissions would be at least as large, and the amount paid in total ex- penses would be considerably larger. Moreover, there is virtually an irresistible tendency. 92 SELECTED ARTICLES when the employer is held directly liable, to impair the effec- tiveness and value of the compensation system itself. Thus all such bills offered in the United States so far, have provided for limiting the payment of benefits to cases of total disability, or to widow^s and orphans, for a certain number of years, thus leaving all those who live beyond that period unprovided for. In no other country, not even in those which have adopted legislation of this type, has such cowardice been exhibited. In our own, it has not been exhibited as will be seen, in the state insurance law, just enacted in the state of Washington. There are two things which have caused this action to be taken, viz.: The objection that an employer does not wish to be placed in a position where he will be liable to furnish a permanent income to the injured individual or his dependents. It is put thus: "It must stop, somewhere.'' In the next place, the private insurance companies have, to my knowledge, urged that th^y could not well figure what it would cost on this basis. This is true in a sense, although such costs may be estimated from foreign statistics, within a reasonable range. Even when, as in Great Britain, there is a provision that at least the benefits for permanent disability must be paid during the continuance of the disability, it is found in practice that every loophole in the statute which will permit compro- mise is promptly availed of. This is well illustrated by the very small reserve which British companies are required to hold in order to take care of such deferred liabilities and perhaps even better by this criticism which recently appeared in a prominent British insurance paper, operated also as a journal in the interest of the companies: We must say, that if anything is lilcely to provolce the state to start compensation insurance, It is the action of many ofHees in "blufflng" claimants into unjust settlements. Almost every day we notice in some part of the country the intervention of the County Court to prevent the registration of some agreement which is manifestly unfair • • « To-day they often trade upon the Ignorance of claimants when they should be collecting higher premium rates. This naturally arouses the anger of all right minded persons and it certainly gives those members of the com- munity who are inclined towards socialism an opportunity to plead for the nationalization of all the means of production, distribution COMPULSORY INSURANCE 93 and exchange. If the insurance offices serve the public well they have nothing to fear, but shaving claims to swell dividend returns is not good service. This editorial was based upon the following statement concerning the decision of a British judge: Judge Bmden said that he did not approve at all of those lump sums. They were getting far too frequent. He believed that he ■was correct in saying that now the larger portion of the work un- der the Workingmen's Compensation Act was being transacted un- der agreements of that character and the object of the act was be- ing defeated. If the case before him was, as was alleged, an im- proper case to bring, it was not a case for an agreement at all, and ought to be dismissed. If it was a proper case, then an agree- ment was not the right way to dispose of it, and he did not think the workman would be properly protected unless the matter came before the court. He had been watching those cases for some time, and his conclusion, based upon investigation, was that the whole beneficial effect of the act was being defeated. Mr. Hurd said if the payment of lump sums under agreements were abolished there ought to be some central authority to say when a man should return to work. Judge Emden — That is equivalent to saying the act cannot be worked in its present way satisfactorily. His Honor declined to accede to the application, remarking that agreements of that kind were increasing to such an extent that he must do all he could to stop him. When the payments are commuted in this manner, the ultimate result must be that one of the chief purposes of such legislation, viz.: that these unfortunates be provided an in- come, will be defeated; and it is to be expected in conse- quence that they will soon be dependent on public or private charity, precisely as if no such plan had been introduced. As much is indicated, likewise, by the reports of the com- mittee sent by the Trades Congress of Great Britain to study the German situation, which said, among other things, that it was observable that in Germany there were literally no slums — a fact sharply in contrast with the conditions in Great Britain under its exceptionally liberal compensation act. Third: A system of compulsory insurance in which the state lends its sovereign power to afford at least the compul- sion and in which it either may or may not also assume the management and conduct of the business. Many critics have regarded this as peculiarly un-Ameri- can; but the interesting thing about it is that it was regarded as quite as peculiarly un-German, un-Norwegian, un-Gallican, and, so late as three years ago, un-British, and on precisely 94 SELECTED ARTICLES the same ground, viz. : that "ours is a free people and will not endure compulsion." Yet the system has now been in use in Germany for twenty-five years, and is so thoroughly satisfactory, both to employers and employees, that nothing would induce them to change. It has also been in force in Austria for nearly as long a period, a country where they have the mixed population problem as in the United States, and in a more aggravated form. The satisfaction with the system has been such that the joint kingdom of Hungary has, after waiting over twenty years also introduced compulsory insurance. In Norway, which has the reputation of being, next to Switzer- land, the most democratic country in Europe, it has been so popular likewise that compulsory sickness insurance, recent- ly introduced, is now also generally acceptable. In France, after two decades of resistance and over ten years' experi- ence with a_ law holding the employer directly responsible, compulsion has been accepted in connection with an invalid- ity and pension fund plan. And in Great Britain, there is virtually no outcry on the part of either employers or em- ployees, against the proposals of the present government to introduce compulsory insurance against invalidity and also against unemployment. In our own country, even before the present agitation got under way, the employers and employees who were en- gaged in coal mining in certain counties in Maryland, were so much in earnest about the matter that after passing one compulsory insurance act, which was declared unconstitu- tional, they secured ano-ther to obviate the constitutional difficulties; and the legislature of Montana, with the approval of the owners of coal mines there as well as of the miners, adopted a similar plan for that state. At the present time, plans of state insurance, either com- pulsory or optional or quasi-compulsory, are before the legis- latures of several states, including Michigan, Ohio and Texas, and already a compulsory state insurance plan, applying to nearly all employments, has been enacted into law in the utate of Washington. COMPULSORY INSURANCE 05 It does not appear, therefore, that when the subject is fully understood, there is any insuperable prejudice against state insurance, if it will produce the best result for the least expenditure of money. It, must be admitted that state in- surance is effectual. It really does accomplish what it sets out to accomplish. It has everywhere been conducted eco- nomically, whether the management be kept in the hands of the state or in the hands of the employers or of employers and employees together. Thus, the expense in Norway, Austria and Germany is in no case more than l6 per cent of the net costs, as compared with lOO per cent in stock com- panies in Great Britain. In Germany, the management as to permanent disability, widows' and children's benefits is in the hands of mutual associations of employers and the benefits of the first thirteen weeks, in the hands of sickness insurance associations in which the employees elect two-thirds of the trustees and the employers one-third, and it has been found that the cost of management is even a little less than elsewhere, the em- ployers' associations being at about the same rate as else- where, but the sickness insurance associations at a cost of about 8 per cent. In the matter of prevention it is everywhere acknowl- edged that the system in use in Germany is by far the most effectual, the employers imposing upon themselves rules for avoiding accidents to which they would probably never submit, were they imposed by the government or by a pri- vate insurance company. That this is true, and that it may greatly reduce the hazard is sufficiently shown by the experience of the factory mutu- als in the United States in fire insurance, which have so greatly reduced the hazards that the cost of insurance is frequently one-tenth of one per cent per annum or less, whereas it used to be from 2 per cent to as high as 5 per cent or higher. There is also no objection under such a system to aflford- ing permanent benefits; and the state is interested, not in having compromises made, which will save a dollar here or 96 SELECTED ARTICLES there for the funds, but in having the benefits so paid as to support all dependents. The Washington law so provides, both as to disability benefits and benefits to widows and orphans. Another very great advantage, especially in introducing such a plan, may also be realized by adopting the assessment system as in Germany, and more recently in Hungary, under which no more is collected currently than is currently re- quired to meet claims. This would not be safe under a , voluntary system, but under a compulsory system there is, of course, no more rea- son that the government should collect more of these taxes than are currently required, than that it should collect more taxes for any other purpose than are currently required. Under such a system, therefore, the cost at the outset would not be more than the premiums employers are paying at present; and the increase would be so gradual that atleast twenty-five years would elapse before anything like a maxi- mum would be reached, which maximum, likewise, would obviously still be very much less than under any system of private insurance. Under such a system, also, of course, no employer could be ruined, and thereby no dependents deprived of their ben- efits. The question is raised immediately as to whether such legislation will be constitutional. Sufficient time is not al- lotted me to undertake a discussion of this question. It has, however, from the beginning seemed to me that laws of fhis character have a much better chance of being declared con- stitutional than any other laws, excepting possibly those which are purely optional, and among such I hesitate to include the quasi-optional, which require choice to be made in order to remain under the negligence laws. This view I had formed prior to icjog, after consulting all the decisions available. It has recently been strongly con- firmed by the reasoning of the Court of Appeals of New York in declaring the workmen's compensation act uncon- stitutional, and by the decision of the Supreme Court of the United States in the Oklahoma bank guaranty cases. COMPULSORY INSURANCE 97 One result, also, of tKe limited research which I have been able to make in the matter .is to 'indicate that there is even greater probability that a proper national act of this form would be declared constitutional than there is that sim- ilar acts of the legislatures of the different states would be so declared. The national constitution is in this respect broader as to the taxing power than the constitutions of most of the states. It is peculiarly desirable, likewise, in view of the abso- lutely free trade among the statesithat, if possible, this legis- lation be national, in order that there may be no discrimina- tion against the industries of one state in favor of those in another. The variation in rates for employer's- liability in- surance is now three to one or even four to one, as between industries otherwise alike but in different states. This should be remedied, not aggravated. If, therefore, the question, "What system of workmen's compensation is best adapted to the United States?" is to be answered, as if it read, "What system is best for the people of the United States?" there is but one answer pos- sible. If, on the contrary, it is, "What system of workmen's compensation is most likely to be adopted, taking into ac- count certain prejudices alleged to exist in the United States?" it may be that the answer would be different. Even of that, I am not convinced; for I do not believe that Ameri- can employers, employees or our citizens in general, are in favor of doing this thing in a way which is certain to be the least effectual and at the same time the most expensive. Annals of the American Academy. 38: 263-6. July, 191 1. Cost of Insurance. Miles M. Dawson. The expense of insurance under state compulsion is about the same in Norway (straight out state insurance), in Austria (with employers and employees and the state participating), and in Germany (where the system is two-fold; one part run 98 SELECTED ARTICLES entirely by employers with supervision by the state furnish- ing benefits beyond the first thirteen weeks, and one cover- ing under thirteen weeks run by the employers and em- ployees). The expense is about 12 per cent of the gross col- lections which in Germany are really about the net amount currently paid out. In Norway it is an amount sufficient also to set by a reserve to take care of the future, and in Austria was intended to be sufficient, but never has been. In Ger- many the carrying on of sickness insurance by the work- men's societies costs about 8 per cent only. Private insurance under workmen's compensation laws, has, in Great Britain, cost about 50 per cent of the entire col- lections, including the amounts required to be put by as re- serves; which is fully 100 per cent added to the net cost. In other words, it is about eight times as expensive, from the management and expense standpoint. In England, where commissions are lower than here, the commissions are equal to 30 per cent of the net amount required to furnish insur- ance. In figures, I take it that in the United States we shall have about as many dollars to pay for our insurance, when it is in force, as marks in Germany. This is due to the higher purchasing power of money. If that should prove to be true, the net disbursements should not be less than 400 million dollars, when it is in full swing throughout the United States; and if you add 100 per cent for private in- surance expenses you will add another 400 million dollars to it. If it is carried on under a similar system to that in Germany, and other countries, it can be carried on for about fifty millions of dollars. I need not say to you that, no mat- ter what system you may use, there are, in fact, $350,000,000 taxes paid unnecessarily for a service not required. In New York, in the building trades complaint was made after the workmen's compensation act was passed, because it was not state insurance. When they found the rates, made by adding the new charge to the former employers' liability rate, increased to as high as 20 per cent on the payroll — when they faced that, and realized that under state insurance it COMPULSORY INSURANCE 99 probably would not have been over 7 per cent or 8 per cent, their prejudices fell away promptly. I may say that the Labor Department at Washington has published tables of the rates under all the different systems in Europe and in this country for a large number of repre- sentative employments in its September, 1910, Bulletin. Another matter I wish to call attention to is relative to a statement by Dr. Talcott Williams. He compared the cost under the German system for insurance of employees in coal mines in the last year of the twenty-four, with the cost the first year, and he thought it represented an eight times in- crease in the cost. This is true only in a certain sense. The German system pays all its benefits in annuities or pensions. The result is that the first year there was only an average of six months' payment of the annuities incurred by reason of one year's accidents. In the 24th year, there were annui- ties to people who were injured the first year, the second year, and every year up to the twenty-fourth. The actuarial system called for a steady increase of outlay, not due to an increase in the risk at all, but due to the actuarial structure of the plan, which started with only what was necessary to pay the current benefits and has increased as the number of annuitants from the previous .years has increased. It is estimated that the ideals when that law went into effect have been realized. The- suggestion has been made of compulsory insurance with free choice of companies. No one who does not study the subject from a technical standpoint, can say what the ob- jections to introducing that system would be. In the first place, it is the experience of all European countries, -yvhere they have introduced it, with state insurance in competition with private insurance companies, that state insurance has not been conducted as economically as when given a monop- oly. It has been found advisable, also, as in Sweden, to em- ploy agents for the state companies. The moment, likewise, that you give free choice of companies, you must set up a voluntary reserve system, a system of reserve sufficient to maintain all the benefits that you promise to pay. This, as 100 SELECTED ARTICLES actuaries will certify, is unnecessary under the compulsory system, but it must be done under a voluntary system, in- cluding any system of free choice of companies. This in- volves a great and sudden increase in rates instead of a gradual one, taking no more money than is currently re- quired. Reference has also been made to explosives. In countries like Great Britain, vifhere there is a purely voluntary system, the regular companies absolutely refuse to insure, and con- sequently the only way is for the employer to bear it himself, or for the employers to group and carry on a mutual system. In countries where there is compulsion, but with free choice of companies, the state must cover these risks. Indeed, under such a system the state company must take all the risks that other companies refuse. Yet, under such a system, which is in operation in Sweden and in Holland, the state company is destroying the private companies utterly. The system merely prolongs the agony and increases the expense. A suggestion has been made from the platform that per- haps workmen would not be willing to contribute, and that they should not be required to do so. In Europe, it has been found unwise to require them to contribute to defray the cost of industrial accidents. In no case, except in Austria, where their contribution is fixed at lo per cent, have the men been required to contribute to a fund which pays for accidents occurring while at work. In most comprehensive systems, such as that of Germany, which covers disability due to any cause, there are contributions from workmen. They have been willing to contribute in such case, also, wherever they had the opportiinity. I may add that many, my clients and others, who are adopting mutual systems in this country, have faced this same objection, and, provided workmen were given broad protec- tion, they recognized it as just and have been willing to con- tribute fairly. It all depends upon whether they are oflfered a good bargain. Another statement that I think proper to make, is that the COMPULSORY INSURANCE loi gentleman who urged amendment of the constitution as the next step, should take into account that in order to generally introduce laws in that way, we must have forty-six separate states take action upon amendments to their several consti- tutions, and also upon amendments to the national constitu- tion. It would, therefore, be many years before we would have achieved what we set out to accomplish. One further remark, also, concerning a matter of fact. It is that this suggestion concerning national action calls forth my recollection of an interview with the vice-presi- dent of the German insurance department, having charge of the supe-rvision of their system. That gentleman, having watched very carefully the conditions the world over, ex- pressed his belief that the one country in the world where the German system could be used without destructive modi- fication, was the United States. One reason why he was of that op'inion, is because we have these separate states and territories. Germany, as you all know, is composed of separate kingdoms, each with sovereignty over local affairs and under its own hereditary monarch. A like situation con- fronts us in this respect, that there must be free trade be- tween our various states. Therefore, we should have a uni- form system throughout the country. What looked at first most difficult there, has now proved the very easiest thing to do; and I am not without hope that such may also be true here. Annals of the American Academy. 38: 271-3. July, 1911. Employers and Compensation Systems. Howell Cheney. I believe that a compensation system is perfectly feasible for the small employer, as well as for the large one, if it is treated as any other item of the cost of production and con- ducted with strict attention to prevention. I can speak from the continuous experience of a large business which started as a very small one and which has continuously compensated accidents arising out of employment without regard to fault; 102 SELECTED ARTICLES that such a practice has proven it possible to go for sixty- five years withoiit an accident suit, and even without paying a lawyer's fee because of personal injuries arising out of em- ployment. Injuries received in the course of employment have been compensated for without question as to the negligence of a fellow servant, or the trade risk, or the contributory negligence of the injured person unless it were of a serious and wilful nature. This system was carried out both as a small firm and as a large one. It was carried out in the be- lief that strict adherence to the doctrine of personal fault could arrive neither at justice nor prevention. We have all come to recognize generally that a large part of the industrial accidents are not due to fault in the sense that it is humanly avoidable or preventable, and that the rigid adherence to such a mistaken principle has made neither for efficient prevention nor compensation. But the public realization of the injustice of our old theory of personal fault has lead not unnaturally to the trying out of another fallacy; that since it was not the fault of the injured person it must be the fault of his employer; and hence, it was the duty of the state to step in and demand compensation, because of such assumed or imputed fault on the employer's part. Un- doubtedly, gravely dangerous conditions have existed which justify this policy as a matter of equity, if not as a matter of law. But, if the New York decision has freed our minds of the idea that we can arrive at a satisfactory measure of justice by imputing a fault generally, when none may have existed, it may perhaps lead to pointing towards a truer so- lution of the difficulty. Since the courts have told us that we cannot invoke the police power for the protection of workers, unless fault exists either actually or constructively, we may finally abandon the idea of basing our remedy upon any idea of fault and seek, not negatively, but constructively to legislate for the protection of the workingman by the lay- ing of a tax upon all industries to compensate for the injuries due to the inherent risk in industry as a whole, and justify such tax as necessary for the general welfare. An appeal to the enlightened self-interests of the com- COMPULSORY INSURANCE 103 munity, especially to employers, has justified taxes for in- dustrial education, for the physical care and feeding of school children, for the suppression of tuberculosis, for the support of the poor and destitute, and for the maintenance of hospi- tals for insane, drunkards and other mental and moral wrecks of our industrial system. We are no longer justifying our expensive school system solely on the idea that the protec- tion of a citizenship of a democracy demands the cultivation of a higher general intelligence. We are frankly affirming that the protection of our citizenship depends upon the efficiency of its workers, and are making lar^e public ex- penditures for the cultivation of a higher efficiency. Such expenditures neyer could have been justified by an appeal to the state to protect its workers from the direful effects of ignorance and inefficiency by an arbitrary taking of money from a limited class of employments in which the conditions might amply justify such a course. The fact that the courts have held that we cannot impute or create a fault where none has existed, nor deprive a man of his property without due process of law would not, at least to the lay mind, neces- sarily deny the right of imposing a tax upon all of the in- dustries of the state for the protection of the welfare of all of its workers. And if you will appeal to the enlightened self-interest of employers on the grounds of the increased efficiency of their workers, which will result from such adequate compensation and the real prevention which such a tax will induce, you will make far more rapid progress than by grieving over your failure to invoke the police power as regards a limited class of industries by imputing a fault where none may have existed. It was generally recognized that even if it were possible to base compensation upon the police power it could not have been made automatic as being based upon fault every man must have his day in court to defend himself. It would have thus been subject to one of the worst evils of present conditions, the law's excessive expenses and delays. The creation of a state tax to support industrial insurance does not necessitate such a failure in methods. 104 SELECTED ARTICLES Century. 82: 118-22. May, 1911. Industrial Indemnity. Will Irwin. We are struggling along on a' system of compensation for industrial accidents which is a relic of the old hand-labor days, and which has worked out into a tangle of law, highly expensive, incredibly complicated, and decidedly unjust. All the so-called progressive nations entered the era of special- ized labor and machine production "with legal principles sim- ilar to ours; all but the United States have either amended them or chariged them utterly to fit the necessities of the new age. Ten years ago, the demand for a basic change in the spirit of our law of accident compensation proceeded solely from the more enlightened labor leaders and "charity work- ers." The business community, if it noticed the problem at all, was deadset in opposition. Five years ago, a few busi- ness men awoke to the fact that a scientific system of work- ing-men's compensation must come in this country, as it has come in Germany, England, and France. Now, employers as well as employees are working to hasten the new era; a stable and just form of industrial indemnity is coming with a rush. Three great corporations — The United States Steel Corporation, the International Harvester Company, and the Cheney Silk Mills — have instituted voluntary systems of working-men's compensation. Oregon, Montana, and New York, with the cooperation of the more enlightened- among their employers, have passed more or less complete laws em- bodying the principles which Germany and England have in- corporated into their codes. Nine other states have statutes on the new plan before their legislatures. At least twenty more are studying the matter through commissions or com- mittees. The National Association of Manufacturers, the implacable enemy of Union labor, has passed resolutions in- dorsing in a general way the principle which Union labor was iirst to advocate. And at pfesent the only active op- ponents of a modern employer's liability law are a few old- time manufacturers, who can see nothing but next year's COMPULSORY INSURANCE los dollar, and the more fanatical or unscrupulous labor leaders, who wish to retain the old code of laws with all protection for the employer removed. On this wing of the firing-line, the battle between the capitalist and the laborer has nar- rowed down to a contest over the terms of the agreement.- What is the basis, and what are the terms, of the present law of employer's liability which- afflicts American industry so grievously? This we must understand before we can under- stand the new plan and the new era in the relations between the toiler and the employer. Expressed in terms of a lay- man, our laws, based on the English Common Law, generally declare that the victim of an injury may receive compensa- tion through the courts from any person whose carelessness or criminal intent has caused his injury. The employer and the employee stand on equal footing before this law; in the •sight of the State they are separate individuals. Another act of common law declares that the principal is responsible for the act of his agent. A railroad switchman, for example, is an agent of the railroad company. So far, if any one, either passenger or breakman, is killed or injured by the neg- ligence of a switchman, the company should be liable. This basic law recognizes, however, the principle of "con- tributory negligence." The fact that the victim, by careless- ness, by the lack of proper precaution, contributed to his own injury, may be used to deny him damages or to mitigate them. This is the first instrument employed by lawyers to pervert law to injustice; it is still the stock defense of cor- poration claim departments against personal injury suits. In itself, however, it is just. In the dawn of specialized industry, a Lord Chief Justice of England laid down a principle in the law of personal damage 'suits which may be called definitely an injustice. Known as the "fellow-servant act," it became part of the English law at the very time when industry was becoming specialized. The employer remained responsible for the act oi the agent, except in cases where the agent was a fellow- servant of the injured person. That is: if an employer of a gang of shovelers left a manhole open, and one of his labor- io6 SELECTED ARTICLES. ers fell through it to his injury, the laborer could recover damages. But if another laborer in the same employ left the manhole open, the injured man had no action in law — for the offender and the victim were fellow-servants. If an outsider fell into that manhole, however, he could recover damages no matter who left it open; for in that case the offender was an agent of the employer, not a fellow-servant. That decision, so carelessly conceived that Lord Abinger called the butcher and the baker fellow-servants with the butler and the cook, came over into American law. At one time or another the fellow-servant principle prevailed in all our states. To this day, it remains in most of them. Our State Supreme Courts have differed widely in their definition of this doctrine. In one state, a flagman is a fel- low-servant with an engineer. In another, he is a part of the management. In the first case, an engineer injured because the flagman is "asleep at the switch," cannot recover, though his passenger can; in the other, his suit against the company is as good as the passenger's. There is little doubt that Lord Chief Justice Abinger had domestic service mainly in mind when he laid down his cele- brated principle; and applied to domestic or simple agricul- tural service, there is justice in it. Where the processes are few and simple, where every man knows his fellow-servants, their faults and peculiarities, the workman may bfe expected to look out for himself. And, indeed, in that period industry had not gone very far beyond hand labor. But the era of specialized labor, of extreme complex machinery, was arriv- ing even then. Industrial society became highly interdepend- ent. The safety of John Dvorak, miner, lay in the hands of a dozen men whom he did not know, as, for example, the engineer who hoisted and lowered his cage. Men had to accept employments which placed them at the mercy of fel- low-servants in the next township or county. The electrical worker could not know for himself whether the engineer in the plant away up in the mountains was likely to get drunk and send a fatal current down a wire supposed to be dead. The' engineer of a through New York Central train could not COMPULSORY mSURANCE 107 know, upon leaving Chicago, that a fellow engineer at Syra- cuse had sat up two nights with a sick wife and was in no condition to read the signals. The growth of modern in- dustry made this law an injustice almost before it was iirmly set in the statute books. This same complexity of modern industry wrought another law, originally fairly just, into still another injustice. I re- fer to "assumption of risk." By this basic principle an em- ployee cannot be held liable for injury received from a danger with which he is perfectly well acquainted. He has the immemorial right to "quit." That principle worked well under hand labor and individual industry. For instance Farmer Jones keeps a dangerous bull in his pasture. John Smith, farm hand, knows that the bull is dangerous. If he is ordered to enter the pasture, he can refuse; if necessary, he can give up his job; if he takes the chances, he does it at his own fair risk. But industry grew into warfare, returning its inevitable list of killed and wounded every year. In many common trades, it became necessary to assume risks that lay in the nature of the calling, and he who was always watch- ing for his safety was an impossible workman. "Railroading" is perhaps our one greatest specialized industry; and a cau- tious railroad man is a contradiction in terms. The prevail- ing type of city building is erected on a steel framework; and the "bridgemen" who do this work must take all the chances of a soldier. That is in the nature of the craft; a coward cannot become a bridgeman. The grim giants of steel which are the tools of our little bodies in this age, pre- sent so many complex possibilities of going wrong that no workman may foresee their dangers. Behold the law, as we carried it over into an age for which it was never conceived. Behold now what a mess we made of its application: The injured workman had only one recourse beyond the possible charity of his employer — the courts. Obviously, since generally the employer was rich and the employee poor, the former had all the advantage in "good legal talent." The attorneys of the company, the claims department of the io8 SELECTED ARTICLES corporation, took advantage of this complex, ill-conceived tangle of laws to throw every obstacle in the way of even the most just claims. On the principle that the poor are woefully given to the purchase of shoddy goods, the work- ing-man — in spite of legal aid societies formed for his bene- fit — characteristically ran to "shyster" lawyers, who often invented for their clients cases having no basis either in truth or in justice. If the employer, with his claims department, had nearly all the resources and the talent, the employee, with his shyster, had at least one strong hold — the sympathy of juries. "I'll get it before the jury," said the shyster in be- ginning a case. "Very well, I'll appeal," responded the claims agent. So the suits, gathering expense as they went, dragged over two, four, even five or six years, while a crippled la- borer. waited unproductive. And when a case was so clear and obvious that quibbles and appeals could not beat it, when the verdict of the jury was finally i7ailed down hard and fast, then appeared another injustice, this time against the em- ployer. Juries, when they could register their opinions, had a way of giving ridiculously large verdicts. Awards of ten or fifteen thousand dollars for the disabled limb of a two- dollar-a-day laborer have not been uncommon. Then appeared the indemnity insurance companies, taking the matter further away from a simple relation between em- ployer and employee. These companies were machines. It became their business to pay the indemnity claims of the insured, and to keep these claims down by every fair method known to law. It was part of their policy to discourage the habit of bringing suits for industrial accidents, to make the way to verdicts seem as rough as possible. And they destroyed all feeling of personal responsibility between the employer and employee. "I'm sorry you got hurt, Jim," said the superintendent. "You're a good fellow and a good workman. I can't do anything for you, though. We're in- sured, and we have to agree not to give any special compen- sation. You'll have to sue; and I hope you'll get something.'' How this part of the system operated a modern instance will show. A pressman, a good workman, much liked and COMPULSORY INSURANCE 109 ^rusted by the management, went back to his shop on his Saturday half-holiday to repair a troublesome bit of his press. Part of his machine fell on him and killed him. It was rather a dangerous operation to perform alone; he must have known the risk he took. Contributory negligence and assumption of risk probably entered into the case. The management wanted to do something for his destitute wife and family. They were warned by the insurance company against giving a dollar, lest it have an efifect upon the pend- ing suit. This system became a veritable damper on human sympathy, certain and pitiless. We are "talking business," however; let us forget sym- pathy. The point here is the wastefulness of the system. The money paid by employers for industrial accidents drib- bled away all along the line before a modicum of it reached the injured working-man. When it did arrive, the beneficiary paid a greater or smaller part of the proceeds for his own legal expenses. Then, too, it was as uncertain as a lottery, three men justly entitled to compensation receiving noth- ing, while another drew a capital prize. The record in New York state, where the Employers' Lia- bility Commission has made a pretty thorough investigation, is significant. In three years ten insurance companies, au- thorized to write employer's liability insurance, received pre- miums of $23,523,585. They expended in actual payment to employees $8,559,795. In other words, the employees — and their lawyers — received only 36.34 per cent, of the sum of the premiums. Deducting the probable amount of the fees and costs paid by the employees, the percentage falls as low as twenty-eight or thirty. Insurance is, of course, the most "economical" way for the employer to meet the problem under present conditions; and when we take into calculation the firms not insured, the figures are a little less startling. But in 1907 327 employers in New York State, operating under all kinds of plans, paid approximately for industrial compensation $192,000; of which injured employees or their families received only $80,000. no SELECTED ARTICLES Probably the proportion is generally lower in the South ami Middle West. Nor from the general view of society is this the whole waste. We have to reckon in the energies of our somewhat expensive courts — and in this year of grace 191 1, such cases will occupy one fifth of the time of the New York courts. We have to reckon in the orphan children thrown prematurely into industry, with their uneducated minds and stunted bod- ies, a drag on the production of the next generation. We have to reckon in the cost of friction between employer and employee. And still I am ignoring the unnecessary suffer- ing of it all. However, as I said in beginning, the new idea has ar- rived; and only the old fogies of the corporations and the labor unions are opposing industrial idemnity,. except in its small details. Whether a just and general system of automatic compensation for all injuries would cost the em- ployer more or less than the present system is a disputed point. There are figures to prove the case both ways; it is something which we shall never know until we have tried it. Several employers who have adopted a voluntary system based on the European plan, stated to the National Civic Federation that they pay no more, by and large, than they did when they left the matter to law. Others, on figures alone, disagree; they declare that an automatic system of employ- er's liability, based on the German plan would so increase "overhead charges" that the payment would have to be taken from the public in higher prices. That, however, is just what the methodical and close-liv- ing Germans, with their talent for social machinery, have long ago admitted — that compensation for the killed and injured should be a tax on the industry itself, collected with as little expense and friction as possible. By this principle they have turned back to production the parasites on indus- trial idemnity; and they have preserved to the body com- mercial of this and the next generation tens of thousands of units lost under our system — or' lack of system. They regard it from the standpoint of the State, realizing, as we COMPULSORY INSURANCE in must realize, now that we have broken nearly all our virgin soil, that competition between nations is becoming keener and closer, and that the state which would win must subordinate certain private interests to the interests of the whole body commercial. The German system, however, is at present an impos- sible model for Americans. We have not, possibly we never shall have, their minute registration of births, deaths, resi- dences and removals; and their bureaucratic government ren- ders many things possible to them which would be impos- sible to us. The question before legislatures and civic bod- ies is how best to adopt their plan to our less settled conditions. Employers' liability in Germany is so inter- twined and interwoven with sick benefits and old-age pen- sions that one finds it difficult to isolate it for a simple statement. Enough to say that every employer and every em- ployee must insure against accident in a state-conducted in- surance company, the employers carrying more of the bur- den than the employees; and that the victim of an industrial accident, whether it result in temporary disability, perma- nent disability or death, receives compensation on a fixed scale, immediately and automatically. The payments are considered a tax on the industry. The cost of adrhinistra- tion is not more than five per cent, of the whole sum; and from that cost Germany pays for the supervision of safety appliances. For industrial idemnity and industrial safety go hand in hand; and when employers are required to pay for every accident in their shops, no matter by whom caused, they will see, as a matter of self-protection, that the safety de- vices for which reformers have striven so long and usually so vainly, are placed and kept on their machines. In the past twenty years the raised ''set screw'' has caused hun- dreds of deaths and tens of thousands of accidents. "Set screws" can be set flush and thereby made harmless at a cost of thirty-five cents a piece; yet labor unions, charity organ- izations, and employers' associations have fought them in vain. With the accidents certainly and irrevocably charged 112 SELECTED ARTICLES against the industry, the raised set screw and all other un- necessarily dangerous devices would disappear. In the peril- ous trades, like railroading and steel construction, the em- ployers for their own interests, would curb the reckless trade customs of their young employees. So we should gain in lives, and lose in miseries, as Germany and England and France and Austria have 6q>ne. Meantime we are the only civilized people in the world who continue to administer this important department of industry on the rules of the old hand-labor days. Industrial Engineering and the Engineering Digest. 7: 449- 52. June, 1910. Employers' Liability Insurance. Miles M. Dawson. As at present supplied in the United States, employers' insurance consists of an insurance company undertaking for a consideration, called a premium, to assume the liability of the employer to his employes who are injured by reason of what the law terms negligence, and to the next of kin of em- ployes who lose their lives through his negligence. In practice it consists in the insurance company making it a business to drive as hard a bargain as it can in the set- tlement of claims or to resist such demands and defend against them in the courts, if necessary, according as one course or the other may seem less expensive, or for any other good business reason more desirable. This system has not proved satisfactory to any of the parties in interest. It is not satisfactory to employers, because, while it appeals to them as a ready means of escap- ing annoyance and occasional excessive verdicts, it involves the payment of large amounts which go for agency, adjust- ment, home office and other expenses, and which must be paid by the employers in addition to the sums that actually reach the injured employes and the next of kin of employes who are killed. It is unsatisfactory to the companies, be- COMPULSORY INSURANCE 113 cause they find that there is constant pressure upon them to be more liberal in their settlements since the employer is not directly affected by each settlement, and at the same time equally constant pressure upon them to furnish the insurance at lower premiums. It is not satisfactory to the workmen arid their next of kin, because they are confronted with a purely business proposition at a time when there may be very great need, and when under the old conditions the em- ployer might, and -very likely would, as a matter of sym- pathy, contribute to their relief, even though not liable under the strict letter of the law. Another objection on their part is that litigation is more expensive to them, longer drawn out, more bitterly fought and the defense conducted by men of special skill in such matters. They also urge that often advantage is taken of their necessities to drive a specially hard bargain without their being made aware of their rights in the matter. No more than twenty-five years ago German workmen were not regarded as efficient, either from the standpoint of quality or quantity of product, as the workmen of several other countries, and particularly Great Britain and the United States; but precisely the contrary is now generally acknowledged to be the case. It will interest my hearers, I am sure, to know that when I was abroad in 1908, to study employers' liability and employers' liability insurance, as well as other schemes for insuring workmen, I found that the superior efficiency of German workmen, on the whole, was very generally ascribed by everybody to the system of employers' liability insurance which had been introduced in Germany. Under the system which obtained there before, and which was about the same as in this country at present, the life of the workmen in many occupations was a gamble, in which the fate of their wives and children, and of others who might be dependent upon them, was at stake. They saw the sever- est misfortune come to families, amounting to complete de- moralization, without any fault on the part of the man him- self. At the present time, precisely the contrary condition 114 SELECTED ARTICLES exists, viz., that the only way in which those dependent upon the workman can be involved in absolutely disastrous misfor- tune is for him to become an idler and fall out of the ranks of regularly employed wage earners. If he is a steady work- man, and if any misfortune comes to him, a sufficient finan- cial support to keep him and his family from the poorhouse or from depending upon public or private charity is assured. The effect of this upon his character is said to have been nothing short of marvelous. Other results are pointed to, namely, that by reason of the new conditions there is very little expensive litigation, that the cost of getting a dollar to the insured workman or to the family of a work- man who is killed is about lo or 12 cents instead of at least another dollar, as in our own country; that the burden on the manufacturers is evenly and uniformly distributed, and that excessive verdicts are not merely transferred from the shoulder of the individual manufacturer to the entire trade, but also do not exist at all. ' The general impression in the United States is that Ger- many has a system of state insurance, where the state col- lects premiums from the employers, administers the funds, pays the claims, and in general manages the whole affair. The fact is precisely the contrary. The system is one under which the trades themselves are organized into mutual trade associations, to which every person or company engaged in that trade is by law required to belong, and which are man- aged by their own members. The liability to employes is transferred from individual employers to these trade associa- tions, and the amount of liability is absolutely fixed by law and is likewise entirely i-ndependent of questions of negli- gence, so that there is no quarrel over whether the employer is liable or not. The only difference of opinion that arises is when there is partial disability, the degree of which has to be determined. While these associations are conducted at an expense of about 10 or iz per cent., it is generally con- ceded that their effectiveness, both in the shrewd and care- ful management of their business and also in bringing about the adoption of safety devices and a reduction in the hazards COMPULSORY INSURANCE ns of industry, far exceeds that of any system which has ever been introduced in any other country. Under the German system the amount of liability in event of total disablement is fixed at a certain proportion of the wages and is payable like wages — that is, by weekly pay- ments. In the event of partial disablement, an amount pro- portionate to the impairment of the earning power is paid. In the event of death a pension is paid to the widow during her widowhood — that is, until her death or re-marriage — and a pension to each child until he reaches sixteen years. These pensions in the aggregate must not exceed the amount that the man would have received himself had he been totally disabled. This system I personally regard as being the most satisfactory one for employers' liability insurance that can be found in any country. It could be introduced here, pre- cisely as it is in Germany, only by means of legislation. If there were such legislation, as our national Constitution now stands, it would apply only to individual states and would take effect in those states only when adopted by their re- spective legislatures. The further question remains: What can be done under our existing laws by the voluntary act of individual employ- ers or trade associations of employers, and what method of insurance is wisest for them? Employers' liability in its usual form, as a mere means of escaping liability, is perhaps as satisfactory as any other method now open to employers. Its disadvantages are obvious, as already stated. There are but four other methods available. One of these is a workmen's collective policy, issued by an employers' lia- bility insurance company for protection of workmen without regard to liability, the employer contributing towards the premium and either thereby becoming entitled to be pro- tected against his liability, or else paying a somewhat re- duced premium for protection against such liability. Theoreticalljy, this kind of insurance is much more de- sirable from many standpoints than employers' liability in- surance alone, but in practice it has not found favor. The most recent form of insurance of this general nature ii6 ■ SELECTED ARTICLES is known as "employers' compensation policy,'' under which the employer is authorized to compensate his employes for injuries sustained without regard to liability, to the amount of one full year's wages for the loss of two limb? or the sight of both eyes, of one-half that sum for the loss of one limb, of one-third the sum for the loss of the sight of one eye, and the amount of a fixed compensation as set forth in a list of the same for minor injuries. There is also compen- sation for temporary disability to the amount of one-half the weekly wages or salary, for a limited period only, and compensation to the n~ext of kin in the event of the death of the employe to the amount of one full year's wages. This sort of insurance also provides for defending the company in event of suit or for adjusting or compromising same; in other words, protects the employer against his liability. Whether the cost of the insurance is to be paid entirely by the employer, or part by him and part by his employes, both contributing thereto, the company leaves open to the em- ployer. The third method is a system of insurance paid by monthly premiums and furnishing sick benefits as well as ac- cident benefits, the employes either contributing the whole, or the employer making such contributions as he may de- sire. Under these policies usually no arrangement is made to relieve the employer from liability, except that in many cases no claim is made, in view of the fact that the employe has been taken care of by the insurance. Of course, where the employer contributes, it would be possible in some cases to get an agreement with the employes, relieving him in whole or in part from his liability, unless the law or declared policy of a state should be found to be against so-called "contracting out." The fourth method is by a mutual insurance fund, created by and among the employes and supported by their contribu- tions, either assisted by contributions on the part of the employer, or entirely independent of such contributions. Under this system, if liberal contribiitions are made by the employer, it is common for him either to have an agreement COMPULSORY INSURANCE n? in advance, that he shall not be held liable under the law, and that the benefits provided by the funds shall be accepted in lieu of the indemnity for which he might be held liable by law, or else that a receipt and release to that effect must be given before any portion of the benefits provided by the insurance fund can be drawn. This latter is deemed the wiser course, both because it is more nearly certain to be sustained in all cases by the courts, and also because it does not frighten away the employes and cannot in any way be criticized as "contracting out." It cannot be said that any of these systems are, except in rare cases, at all to be compared with the system in use in Germany. The difficulty with each of the first three is that the benefits are not large for the contributions made. Relatively large expenses are unavoidable. There must be solicitation by agents, usually not only of the employers, but also of the employes. There must be collection expenses to be paid by commission or otherwise; there must be adjust- ment from some central office — with the sole exception of the new "employers' compensation policy," which provides for direct settlement of claims — and there must be litigation, which is costly on both sides. None of these three ap- proaches the fourth, or mutual method, either in economy or in avoiding litigation. Under mutual schemes' under which employes contribute, and especially if employers also con- tribute, there is usually a complete provision made for the maintenance of the disabled employe and his family. And since this provision is immediately available there is usually no question raised as to accepting it and going forward with- out calling in the lawyers or the courts. The expenses should rarely or never exceed lo per cent of the amount paid out in benefits; whereas it is not probable that any of the others can be operated at an expense of less than from one- third to one-half of the total amount paid — in other words, from so cents to $i for each dollar of benefit. It is interesting, likewise, to observe that schemes of this general nature, which in Great Britain are known as establishment funds, were introduced in all European coun- ii8 SELECTED ARTICLES tries successfully before there was any change in the employ- ers' liability laws, and that the best of these establishment fund schemes were preserved after the laws went into force and are recognized to be on the whole more beneficial than the plans set up by law. Thus, even in Germany, the estab- lishment fund scheme, which was already in operation in the great Krupp works, has been continued and is regarded as more beneficial and more sati^sfactory on the whole than even the perfected plans introduced by the Government. There would be obvious advantages if the manufacturers here could and would combine to cover their liability and to provide for their injured workmen and the families of work- men who are killed, through their mutual trade association or a subsidiary association connected with it; and if this were established upon a sound insurance and actuarial basis, un- questionably a larger measure of relief to the injured and the families of the dead could be given without an increase in expenditure. Indeed, the benefit would be increased nearly, if not quite, fifty per cent as compared with the cost of employers' liability insurance. Yet these benefits could be paid without an increase of cost to the manufacturers, by permitting and encouraging, or, best of all, requiring em- ployes to contribute in order that larger benefits might be paid, and also that all sicknesses and disabilities might be covered without regard to negligence, and also without re- gard to whether they are incurred while the workmen are at work or while they are off the work. There is nothing Utopian or altruistic in such a proposi- tion. It has been proved to be a businesslike thing to do, resulting in great economies directly and indirectly, and also iti creating a body of unusually efficient, reliable and steady workmen. Everybody's. 19: 522-33. October, igo8. Pensioners of Peace. William Hard. A good law is a law that gets men and women into the habit of doing the helpful thing, the noble thing, the right COMPULSORY INSURANCE 119 thing. Nine tenths of every one of us is habit. The Ger- man Compulsory Insurance Law is a good law, not only because it hands out coin and medical supplies at convenient times to injured workmen, but because it sets the face of the whole German 'nation habitually toward preventing the crippling and mangling of human beings, toward healing the wounds of those who, in spite of all precautions, have been overtaken by the bloody misfortunes of peace, toward lessen- ing pain, toward spreading happiness. The difference between the German situation and the American situation is the whole difference between that modern, scientific, peace-making device called "Compulsory Insurance," and that medieval, unscientific, strife-breeding contrivance called "Employer's Liability." Under Compulsory Insurance the remedy for an accident is to get the victim on his feet again as soon as possible, and to think up the best way of preventing all accidents of that particular kind in the future. Under Employer's Lia- bility the remedy for an accident is to start a lawsuit. The weapons of Compulsory Insurance are safety-devices and convalescent homes. The weapons of Employer's Lia- bility are lawyers; judges; instructions to the jury; what- did-BIackstone-say? doctrine of contributory negligence; 17 south-by-east reporter 845; the-Supreme-Court-hasn't-spoken- on-that-point-and-probably-it-won't-speak - for - a - couple - of years-yet; doctrine of fellow servant; error-in-allowing-the- doctor-to-say-how-much-the-man-said-his-head-hurt-him ; volen- ti non fit injuria; I except; fifth amendment; appeal. On the eleventh day of July, in the year 1890, the steam- ship Tioga made port at Chicago and came up the Chicago River as far as its dock at the foot of Randolph Street. It carried 320 barrels of benzine, naphtha, and gasoline in its fantail hold. On top of these barrels it had a lot of bales of cotton-waste. And just near the combing of one of the hatches, leading down into the hold, it had two lamps. There was an explosion, and twenty-five workmen were killed. That was in 1890. Last year, in 1907, seventeen years afterward, Wirt E. 120 SELECTED ARTICLES Humphrey, commissioner for the federal courts in Chicago, handed in a preliminary report on the subject of the Tioga accident. Together with his report, he transmitted to the judges eleven volumes of testimony, six of which had been contributed by witnesses for the dependents of the dead men, and five by witnesses for the steamboat company. The verdict in the lowest federal court has not yet been given. After that there will be an appeal to the Circuit Court of Appeals. And after that there will be an appeal to the Supreme Court of the United States. How have all these years been spent? Not in relieving the distress of the human beings who were impoverished by the accident, but in trying to find out just where the techni- cal legal blame lay for the accident itself. Not in helping the widows and orphans, but in laboriously endeavoring to fix the personal responsibility for the character of the cargo and the location of the lamps. The years when compensation was really needed have now passed. The widows who were forced to beg, they have begged. The children who failed to get an education, they have failed to be educated. The wrong of the case has been done:. The human misery of the case has been endured. Everything is all over. Except in the courts. Everything connected with the case is finished. Except the case itself. The only thing that survives is that thin legal emanation from the dead body of a human problem long since resolved into its elements. The ghost of the Tioga affair still goes soft-footing along the corridors of the Federal Building, but the Tioga affair itself breathed its last- warm, human breath many years ago. Let us now see what Compulsory Insurance would have done with the same set of facts. Let us translate the whole tremendous social vision called "Workingraen's Insurance," first seen by German economists like Winkelblech and Schaeffle, afterward obeyed and written into law by German statesmen like Emperor William the First and Prince Bis- marck, and now rising in light over every European country of any importance; let us take that bold, sweeping concep- COMPULSORY INSURANCE lar tion, in which the misfortunes of men in their millions are averaged to form a composite social policy, and translate it into the every-day details of the little life-drama of some individual workman who happened to be rolling a barrel on the decks of the Tioga on July ii, 1890. We will suppose his name was Smith. And we will sup- pose he wasn't instantly killed. He was only frightfully burned, especfally about the eyes. They weren't so much afraid at first that he would die as they were that he would go blind. The question is: What happened to Smith under a sys- tem of Compulsory Insurance like the system they have in Germany? The first thing that happened was that Smith was at once removed to a hospital by the officers of his local sick-club. Smith belonged to a club of that kind. He had to belong to one. It was the law. His club was called "The Chicago River Sickness Benefit Association." All the men who worked on boats or on docks along the Chicago River belonged to it. And all the employers of those men belonged to it, too. The men paid two thirds of the expenses of the club. The employers paid the other third. The total amount of those expenses de- pended on how many cases of disease and accident happened along the Chicago River. Smith lay in the hospital a day, and then the doctors de- cided that they could cure him just as well at home. So they sent him home and put him to bed there, and came every day and treated his eyes. These doctors were paid. by the Chicago River Sickness Benefit Association. On the morning of the fourth day. Smith began to get not only medical attention, but a regular money compensa- tion. It was called his sick-pay. It amounted to^just one- half his regular wages. It was paid by the Chicago River Sickness Benefit Asssociation. Smith began to be glad that a cruel and oppressive gov- ernment had forced him to pay weekly premiums to a sick- . club. 122 SELECTED ARTICLES For four weeks Smith lay on his bed and writhed, with the pain in his eyes, and his wife took his half-pay and fed him and the children. It wasn't very sumptuous eating. Not much porter-house. Mostly potatoes. But it was their own. They didn't have to slink into the office of the county poor agent. They didn't have to take the price of a week's food for hungry stomachs from the claim agent of the owners of the Tioga and sign a waiver of all legal claims and say; "Thank you. The courts might give us $200 in a year or in five years or in a decade or two, but we need $5 now." They didn't have to live on advances from some ambulance-chasing lawyer who had taken up their case against the Tioga company as a speculative investment in legal futures. They didn't have to send in their name to the editor of a yellow journal in order to be able to eat on Thanl?sgiving. They didn't have to become Case Number ii,8g6 in the records of the bureau of charities. What they had was little. But it was coming to them rightfully, legally, honorably. It saved them from the unforgettable humilia- tion, the ineradicable degradation, of benevolence. If Smith had been suffering with rheumatism or pneu- monia or appendicitis, he would have got his doctors and his sick-pay just the same. In fact, the sick-clubs, as their name implies, exist mainly for the purpose of relieving the distress caused by disease. It is only incidentally that they relieve the distress caused by accidents. They take care of accident cases for only thirteen weeks, at the most. The sick-clubs, therefore, are only a temporary feature in the German scheme of dealing with accidents. But dis- eases are just as much a part of every-day industrial life as accidents. And the sick-clubs of Germany are worthy, ac- cordingly, of a little paragraph of their own in any article devoted to the pensioners of peace. Here is that little paragraph: In Germany in the year 1904 (the last year for which full, accurate figures are available) there were 22,192 sick- clubs. They had nearly 12,000,000 members. And they pro- vided medical care and money compensation for more than 100,000,000 days of sickness! In one year! COMPULSORY INSURANCE 123 What a saving of human misery lies in those figures! And more than that. What a saving of human self-respect! But let us go back to Smith, who is still lying on his back, with his eyes horribly hurting him. He can't even open them. And by this time his wife is crying because she thinks Smith will never see again. There is something no human device can ever cure. For ever and ever workmen will be blinded by the accidents of modern industry, and for ever and ever women will cry for those sightless eyes. We can't stop their crying. But we can prevent them from being hungry and from , begging. And some day we shall do it just as effectively in Pittsburg and in St. Louis as in Ham- burg and in Berlin. Along toward the end of Smith's fourth week in bed he had a visitor. It was the local agent of "The Great Lakes Marine Accident Insurance Association." This association included all the owners of all _the boats plying on Lakes Ontario, Erie, Huron, Superior, and Michigan. It included, therefore, the owners of the Tioga. No workman belonged to the Great Lakes Marine Acci- dent Insurance Association. Only employers. It was en- tirely an employers' organization. The employers paid all the premiums and elected all the directors. The local agent sat down at Smith's bedside and ad- dressed him as follows: "You look pretty bad to me. These doctors that have been coming to you from the Chicago River Sickness Bene- fit Association don't seem to be helping your eyes much. Can't see a bit, can you? Well, it's up to them by law to take care of you for thirteen weeks. But I guess we'll have to step in right now and take you off their hands. We can't afford to let you go blind. If you lose your eyes, we'll have to pay you a pension all the rest of your life. I guess it's you to our hospital." So spoke the agent, after the brutal manner of his kind. And the next morning the ambulance came and took Smith to a big hospital on the West Side. This hospital had been built by a kind of Union of Em- 124 SELECTED ARTICLES ployers' Accident Insurance Associations. "The Western Building Contractors' Accident Insurance Association" was in it. And "The Great Lakes Marine Accident Insurance Association." And "The Illinois Manufacturers' Accident Insurance Association." And a lot of others. These associations were not run from Washington by the government. They were run by their own members. The idea that the German insurance associations are managed by bureaucrats sitting in heavily upholstered and red-tape-em- broidered offices in Berlin is completely wrong. All that the government does under the German system is this (and here is the gist of the whole Compulsory Insurance idea) : The government takes each industry and each trade in the empire and says to the people who own it: "You must form an accident-insurance association which will include all the employers in your industry and in your trade. And you must pay compensation to all your injured workmen according to a fixed scale. We won't stop to try to divide the blame for accidents between you and your workmen. We will assume for practical purposes that you weren't trying to commit murder and that they weren't try- ing to commit suicide. We .will assume that accidents are accidents. And we will make each trade bear the burden of its own accidents. We will make each trade add the cost of its burned-out eye-sockets to the cost of its burned-out coal-grates in computing the market-price of its product.. So you must form your accident-insurance association in your industry and in your trade, and you must pay your injured workmen the compensation fixed by law. But that's where we stop. Everything else rests with you. Go ahead and elect your own officers and fix your own details to suit your- selves. Invent your own safety-devices. Adopt your own shop rules. Employ your own factory inspectors. Engage your own doctors. Build your own hospitals. Do all, or none, of these things, as you please. Profit by your own wisdom and your own humanity in preventing accidents and in curing their consequences. Lose money by your own in- efficiency and your own cruelty in letting accidents happen COMPULSORY INSURANCE 125 and in neglecting injured workmen. AH' that we insist up- on is that your trade shall carry its own load of the wounded and the slain. This is not bureaucracy. This is not pater- nalism. It is trade responsibility. It is trade self-govern- ment." But what about Smith's wife while Smith lay in a dark room in the hospital? Well, Smith didn't need to worry about her. She wasn't as well off, of course, as if he had been at home and at work. But she was at least three-fifths as well off. She was drawing, every week, sixty per cent, of the wages Smith used to earn on the Tioga. This weekly compensation was paid to her by the Great Lakes Marine Accident Insurance Association. It was enough to keep Smith's home intact till Smith could get back to it. Meanwhile the officers of the Great Lakes Marine Acci- dent Insurance Association had been looking into the Tioga accident. And the more they looked, the more irritated they became, Bales of cotton-waste on top of barrels of gaso- line! Amazing! Frightful! A clear violation of the by-laws of the association! And now, in consequence, here were all these workmen, including Smith, who had to be compen- sated. So the Great Lakes Marine Accident Insurance Associa- tion tried the owners of the Tioga and fined them one thou- sand dollars, and said: "We earnestly regret that the law doesn't allow us to fine you any more." And two lamps standing near the combing of the hatch leading down into the hold! Somebody must have put those lamps there. Who was he? The officers of the Great Lakes Association had become so peevish about it by this time that they had their inspector spend a whole week in finding out who that man was. And, fortunately, when they found him, he was a man who had left the boat to go on the dock for a minute or two, just before the- explosion occurred, and so he wasn't dead or in the hospital. He was perfectly elig- ible to be fined, and they fined him a month's pay. Disciplinary measures of this kind are granted by the German law to the trade insurance associations. Each in- 126 SELECTED ARTICLES surance association may make rules and regulations to gov- ern its members and it may discipline its members, or its members' employees, for disobeying those rules and regula- tions. That is to say, under Compulsory Insurance the govern- men makes private individuals do much of its work for it. Which is just the reverse of paternalism. In the year 1904, the German trade insurance associations, in order to make their rules and regulations effective, em- ployed 217 factory inspectors. These private factory inspec- tors did virtually the same kind of work that is normally done by public factory inspectors. They went about from place to place, within their trades, and saw to it that all pos- sible safety-devices were adopted, and that all possible safety regulations were observed. And their salaries were paid out of the insurance funds of private employers. Think of that! Private factory inspectors! It doesn't sound much like paternalism, Soes it? It sounds a good deal like personal responsibility and private initiative. There must be some vigor in a system that sends Germans to a heartless extreme of that kind. After six weeks in the West Side hospital Smith died. His death surprised the doctors, because his eyes were get- ting better; but his constitution had been eaten away by hot days and damp nights on the Chicago River, and he had no vitality. The long confinement and the agony of his burns finished him. His funeral expenses, amounting by law to twenty times his daily wages, were paid by the Great Lakes Marine Acci- dent Insurance Association. And that association also began immediately to pay a pension every week to Smith's family. It was sixty per cent, of the wages Smith used to earn, and it was due to keep on coming as long as the. widow didn't marry somebody else, and as long as the children were too young to earn their own living. ., The Smith family was part of the Great Lakes carrying trade), and its misfortunes, so far as they were caused by the trade, had to be borne, at the least to the extent of sixty COMPULSORY INSURANCE 127 per cent., by the trade itself. Not by the bureau of charities; not by the tax-payers; not by Smith's six-months-old baby. But by the trade. Is there some sense in that idea? But we will suppose Smith didn't die. He simply lost both his eyes. In that case the situation, at first, was worse than if he been carried to the graveyard. Smith, being blind, couldn't earn a living any more than if he were dead, and yet he had to wear clothes and eat food. So, as long as he remained completely helpless and as long as he needed special care, the Great Lakes Marine Accident Insurance Asso- ciation had to pay him full wages. Perhaps after a while, however. Smith, though he was blind, was able to weave baskets. Then his pension was decreased in proportion to his earnings. Again, perhaps Smith neither died nor lost his eyes. Per- haps he came through all right. Perhaps the specialist in that West Side hospital cured him. Perhaps his wife came to the hospital and he saw her for the first time in thtee months, and they both laughed, although they were both pretty thin and pale; and they went home together and Smith started back to work. What then? Why then the Great Lakes Marine Accident Insurance Association was quit of the troubles of the Smith family, not because it had got Smith to scratch his name on a release, not because it had hired a better lawyer than Smith could hire, not because it had proved Smith guilty of being a fel- low servant of the man who had misplaced the lamps, not because it had appealed the case from court to court till Smith could hold out no longer, not because it had defeated Smith in a legal battle, but because it had made Smith well in a medical triumph. Which was the better victory for human beings made in the image of God? And now for a few paragraphs of statistics! — An honor- able writer always gives fair warning on such an occasion. But these statistics won't be hard to read, anyway. They are about people. And besides, they deal with a subject that 128 SELECTED ARTICLES is bound to become a pressing public question in this coun- try within the next few years. "It is a reproach to us as a nation,'' said President Roose- velt in his message of last March, "that in both state and federal legislation we have afforded less protection to both public and private employees than any other industrial coun- try in the world." A situation of that kind cannot long be permitted to con- tinue. It is not only a reproach, but it is also a source of internal social discontent and danger. And when we come to legislate about it, the country that will give us the best lessons will be Germany. In Germany, in the year 1904, there were 114 employers' trade accident-insurance associations built along much the same lines as the association we have imagined existing among the owners of the carrying trade on our Great Lakes. The members of these German employers' trade accident- insurance associations, in the year 1904, employed some 17.500,000 workmen. In other words, 17,500,000 German workmen, in the year in question, were protected (to the extent outlined above in Smith's case) against the conse- quences of industrial accidents. Compensation was awarded, in the year 1904, to some 150,000 employees who had been injured in the course of the year. Compensation was also awarded to some 600,000 em- ployees who had been injured in previous years, and who still remained totally or partially incapacitated. And, finally, compensation was awarded to some 65,000 widows and to some 100,000 children of dead accident vic- tims. All this cost money, although, of cqurse, in multitudes of cases the accident was so slight and the resulting incapacita- tion so trifling that the compensation awarded was almost nominal. However, the total amount of compensation, in the year 1904, reached $30,500,000. So much for accident-insurance. Now to go back for a minute to sickness-insurance. COMPULSORY INSURANCE 129 In 1904 the German sick-clubs (the nature of which has already been illustrated by our imaginary "Chicago River Sickness Benefit Association") awarded compensation to the extent of just about $60,250,000. But the Germans have a third form of Compulsory In- surance, which has not yet been mentioned. It is called in- validity-insurance. It provides small pensions (very small) for workmen who have become permanent invalids through sickness, and for workmen who have reached the age of seventy. The employers pay half the premiums of the inva- lidity-insurance funds, and the employees pay the other half. And the imperial government adds a small bonus. The amount of compensation awarded by the invalidity-clubs in 1904 was, approximately, $35,500,000. The total cost of accident-insurance, sickness-insurance, and invalidity-insurance to the German empire in the year 1904 was, in round numbers, $126,250,000. Half of this cost, roughly speaking, fell on the employers of Germany and the other half fell on the workmen. The proportion of expense assigned to employers and workmen, respectively, varied from one kind of insurance to another, but when all three kinds were added together and averaged, the burden was just about equally divided. Let us now see how the triple insurance idea works out in the case of some particular firm. Let us take the big Krupp Company at Essen. This famous industrial enterprise handles the heaviest and most disastrous kind of iron-and- steel work. Its insurance premiums might be expected to be quite high. And they are. From 1885 to 1902, inclusive, the insurance premiums paid by the Krupp Company amount- ed to more than $2,000,000. It was an enormous sum. But it was an enormous com- pany. The real test is to take the amount paid in any one year and compare it with the total pay-roll of that same year. Applying this test to the Krupp Company, it will be found that in the year 1902 the total insurance premiums paid by the Krupp Company amounted to just 2.7 per cent, of the total wages paid by the Krupp Company to its employees. 130 SELECTED ARTICLES 111 other words, if a Krupp workman was earning ten dollars a week, tlie Krupp Company had to pay twenty-seven cents every week in insurance premiums for him, and he had to pay, roughly speaking, twenty-seven cents for himself. A charge of that kind is not likely to ruin the industries of a nation nor to drive its workmen to armed and desperate revolt. And that twenty-seven cents weekly on every ten dollars of wages included all three kinds of insurance. It paid for sickness, accidents, and invalidity. If the circulation be re- stricted to accidents alone, a precise estimate, with present figures, cannot be furnished, because, as has already been ex- plained, accidents are paid for out of both the sickness funds and the accident funds, and their true cost is difficult to dis- entangle. By no stretch of liberality, however, could it be computed that in the year 1902 the Krupp Company paid as much as two per cent, on total wages for the accident victims who were compensated out of the sickness funds and the acci- dent funds to which the Krupp Company contributed. But let it go at two per cent. That means two dollars on every hundred dollars of wages, for accidents alone out of the funds of the company. Was it a large charge or a small one? Well, call it large. No employer likes to add two per cent, to his pay-roll. It should be remembered, however, that if Compulsory Insurance costs money, Employer's Liability costs money, too. Just look at the records of the American Employer's Lia- bility companies! They insure employers against having to pay damages to injured workmen under our American Em- ployer's Liability laws. The employers pay premiums to the liability companies. The liability companies then de- fend the suits and satisfy the verdicts. The employers them- selves are saved unharmed. Many employers are too big to need to insure themselves in this way. The railroads and most of the "trusts" can look after themselves. They would not be financially crippled by COMPULSORY INSURANCE I3r even the biggest kind of accident, involving hundreds of workmen. Many other employers are too small to be sued success- fully. Or else they are engaged in light work that doesn't cause accidents. Or else they are too stupid to see that they- need insurance. But from the remainder, in the year 1906, the Employer's Liability companies of America collected almost $20,000,000- in premiums. That was not a negligible sum of money. And the rates charged the individual employers were nof negligible, either. A well-known Chicago manufacturer, in response to an inquiry from Everybody's Magazine, gives his rates as fol- lows: For men employed in his machine-shop: 57 cents on every $100 of wages. For millwrights engaged in outside work: $1.25 on every $100 of wages. For teamsters: $2.40 on every $100 of wages. Just observe that last rate. For teamsters, driving horses on the streets, 2.4 per cent, of their total wages! Every time that manufacturer paid a teamster ten dollars he had to pay his liability company twenty-four cents! j4nd that didn't include sickness. It didn't include invalidity. It was just for accidents. Nor was that manufacturer engaged in a particularly hazardous line of business. If you want to see what the really hazardous businesses cost, just get the official "Manual of Liability Insurance." In that interesting book you will find the official rates, and if you knock off 335-^ per cent, (which is the discount allowed in many states), you will be left with the following charges: For men employed in building street railways: $3.00 on every $100 on wages. FoT men employed in quarries: $3.60 on every $ioo of wages. 132 SELECTED ARTICLES For men employed in cellar-excavation: $4.00 on every $100 of wages. For men employed in steel-work on high buildings: $9.00 on every $100 of wages. These four illustrations will be enough. The rest can be found in the book, and they are worth reading as a highly emotional picture, done in statistics, of the relative danger of modern occupations. Nine dollars on every $100 of wages! It is a terrific charge. And yet the industry isn't ruined. The high build- ings keep on going up.' And they would keep on going up just the same if the money were spent in compensating the injured workmen instead of in trying to prevent them from securing compensation. For why does Employer's Liability cost so much? There are many reasons, but the main one is that we make every accident a legal fight. In the eleven years from 1894 to 1905, inclusive, the Em- ployer's Liability companies of America took in $99,959,076 in premiums from American employers. How much did they pay out in compensation to injured workmen? Just $43,599,498. Just 43.6 per cent, of what they took in. And they^ didn't make excessive profits, at that. Their business is highly competitive. The money was spent in getting the business and in fighting pitched legal battles ' against the injured workmen's lawyers. The injured workmen's lawyers! Don't forget them. They have to be paid. Sometimes they get ten per cent, of the proceeds. Sometimes they get twenty-five per cent. Some- times fifty per cent. Sometimes seventy-five per cent. If, on the average, they leave the injured workman two thirds of the final verdict, they are leaving him more than most practical students of the subjects think they are. And they aren't making excessive profits, either. They have to fight long fights to get those verdicts. Nobody is personally to blame. They are all creatures COMPULSORY INSURANCE 133 of the system. But the sad fact remains that out of almost $100,000,000 paid by the employers of America to protect themselves against the consequences of accidents in the eleven years from 1894 to 1905, not more than $30,000,000, after the injured workmen had paid their lawyers, reached the pockets of the injured workmen themselves. Seventy per cent, for expenses! Thirty per cent, for com- pensation! It would take an ingenious man to devise a more wasteful system. Compare it with the cost of administering the German system. Mr. Frank A. Vanderlip, the New York banker, after studying Compulsory Insurance as practised in Ger- many, says that the expenses of administration over there amount to less than ten per cent. The German system of Compulsory Insurance spends ten per cent, on expenses and ninety per cent, on compensation! It gets ninety out of every hundred dollars spent in insurance premiums right to the place where it is needed. We are lucky if out of every hundred dollars we spend in liability premiums we get thirty dollars to the men who' endured the accidents in their flesh and bone. The substitution of the idea of insurance for the idea of liability, of the idea of cooperation for the idea of litigation, has been most completely effected in Germany. But it has been at least partially effected in many countries. Austria, Italy, Spain, France, Belgium, Holland, Den- mark, Norway, Sweden, Finland, all have insurance systems, some of them compulsory, others voluntary, full-grown and well-developed in some cases, in other cases merely embry- onic, but always and everywhere officially recognized and earnstly encouraged by. the national law. The idea of Employer's Liability is a dying idea in Eu- rope. In some countries its obsequies have already been performed, and in all the others the pains of dissolution have begun. In Great Britain the situation is somewhat different. The English haven't taken up Compulsory Insurance. Their 134 SELECTED ARTICLES method is what they call Compulsory Compensation. And their experience is particularly interesting because of the general similarity between their legal institutions and ours. They used to have the same kind of Employer's Liability that we have now. In fact, they invented it. We simply imported it. There is nothing dazzlingly original, there is nothing endearingly native, about our present system. An American who suggests changing it is not guilty of an un- patriotic preference for foreign institutions. It was the Eng- lish who thought up the doctrines of assumed risk, contribu- tory negligence, fellow servant, and all the rest of it. What we have now is simply a legal fashion that they originated and that they thought was very beautiful until 1897, when they put it up on the top back shelf because it was passe, and something more modern in effect was needed. It was in 1897 that the first British Workmen's Compen- sation act was passed. This act (subsequently confirmed and expanded by the acts of 1900 and 1906) established a principle that at first sight seems to be harder on the employ- er than the Compulsory Insurance system of Germany. The German sick-clubs, it will be remembered, are obliged to take care of accident victims for a period varying from four to thirteen weeks. Now, these sick-clubs, since two thirds of their expenses are borne by the workmen themselves, act as a kind of temporary cushion between the employer and the ultimate cost of the accident. Two-thirds of the cost of each accident, for from four to thirteen weeks after it happens, is borne by organizations to which the employer contributes only one third of the premiums. In England, the law does not save the employer to this extent. It requires no contributions of any kind on the part of the workmen. It makes the employer pay the whole bill. It gives him, at most, a week of grace. If an accident re- sults in an incapacitation of less than a week there is no compensation to be granted; but as soon as the second week begins, compensation must begin, too, and if the incapacita- tion lasts for two weeks or more, then the compensation be- comes retroactive and must be paid for the first week as well. COMPULSORY INSURANCE 135 The scale of compensation is that as long as a workman is kept away from work by the consequences of an accident, he shall get halfpay, and if he dies his dependents, shall get a sum amounting to three times his annual earnings. And compensation must be paid no matter how the acci- dent was caused. All accidents must be paid for. And they must be paid for by the individual employer himself. He is personally responsible for all accidents that happen to his men. This hideous assault on property was accomplished in the Parliament of 1897 by a trio of political adventurers, consisting of that unbridled visionary. Joseph Chamberlain, that ruthless revolutionist, Arthur Balfour, and that red- handed proletarian, the Marquess of Salisbury. Mr. Chamberlain was the author of ^he bill. He spoke of the icgal situation then existing (namely, the same situa- tion that now exists in the United States), and called it a "great scandal." Mr. Balfour observed that in his opinion the only way to "diffuse the shock" of accidents, which fell with crushing weight on the poorest and weakest part of the community, was to put it bodily on the employer and let him add it to the cost of his commodities, and so pass it on to consumers at large. But it was left, as usual, to Lord Salisbury to infuse solid argument with a light of satire. Most English manufactur- ers, said Lord Salisbury, were calling the bill socialistic. They seemed to him to be mistaken in their use of terms. Clearly it was the present system that was socialistic. Under the present system, when a railroad killed one of its engi- neers it passed his children over to the community to be supported in a poorhouse by the tax-payers. That seemed to him to weaken the sense of personal, private responsibility that a railroad company ought to have. It seemed to him to cultivate too great a readiness to fall back on the state. He was in favor of a change that would call on the state to do less, and on private employers to do more. The government of 1897, which passed the first Work- men's Compensation act, was a Conservative government. 136 SELECTED ARTICLES The government of 1906, which passed the third and final act on the subject, was a Liberal government, strongly sup- ported by a large Labor group in the House of Commons. It may safely be said that the policy of Workmen's Com- pensation has been definitely and finally accepted by both the great English parties. English workmen, like German workmen, are now able to get precisely calculated and immediately available com- pensation for their injuries as long as those injuries deprive them of their earning power. Unlike German workmen, however, they are not yet protected, as a body, against sick- ness. But even in this matter a start has been made. Connected with the Workmen's Compensation act of 1906, there is a "Schedule of Occupational Disease." The work- man who is incapacitated by any of the diseases in that schedule has the same right to compensation that he would have had if he had met with an accident. But the man's disease, under the English law, must be one that is^ directly caused by his trade. A caisson-worker who just happened to get typhoid fever wouldn't be entitled to compensation. He could get typhoid fever in any trade. It must be a disease for which the trade itself can be held responsible. And it must be a disease mentioned in the "Schedule of Occupational Diseases." There are now twenty-four entries in that schedule. British workmen are now entitled to compensation for cais- son disease, for lead poisoning, for mercury poisoning, for arsenical poisoning, for phosphorous poisoning, for nystag- mus (a disease of the eyes caused by work in mines), for poisoning by anilin in dyeing establishments, and so on through a list of twenty-four specific bodily ailments caused specificially by certain modern industrial occupations. The English trade-disease compensation scheme manifest- ly accounts for only a small corner of the whole broad field of sickness in general, so comprehensively covered by the German sickness-insurance system. But even under the English scheme no such case could COMPULSORY INSURANCE 137 happen as recently came under the observation of the New York Charity Organization Society. That society was appealed to for help by a family for which, in place of the charity-society card-catalogue num- ber, we will imagine the equally effective disguise of the name of Jones. Mr. Jones was dead and the Jones family was destitute. How did it happen? It is a short story, very simple, very ordinary, very commonplace, and therefore very instructive. Mr. Jones had been, first, a printer. In the printing-shop where he vvorked for a big publishing firm an accident hap- pened to him, and he lost a hand. It was an ordinary, com- monplace accident, and there was no legal claim to com- pensation. Jones simply walked out, less one hand. He had to stop being a printer, but finally he got odd- job work as a painter. His one-handedness made it very difficult for him to keep himself clean of the white-lead painl. He got lead poisoning and died. How was he killed? The process was begun by the print- ing trade and finished by the painting trade. And hov/ was his destitute family supported? By the contributors to a charity society. It seems like a weird piece of logic, doesn't it, when you look at it with eyes not of established convention but of dis- encumbered common sense? Jone's children are pauperized at the very outset of their lives because the printing trade crippled their father and the painting trade poisoned him. The cost of that accident has not been escaped simply because neither the printing trade nor the painting trade was under any legal liability for it. The cost is borne by a number of people who, most of them, have nothing to do with either trade. What a poor way- of bearing it! What a foolish, indirect, unjust, expensive, humiliating, degrading way! Under any rational system the Jones family would con- tinue to be an independent, self-respecting family, and their legal, honorable indemnity would be paid to them by the trades that had caused their misfortunes. 138 SELECTED ARTICLES It is time, in America, for the community to stretch out a strong right arm and readjust the American Law of the Killed and Wounded. There is some reason to believe that America is begin- ning to realize. There are many evidences that the con- science of the nation is already stirred. One of the most striking of these evidences is to be found in the numerous sickness-benefit clubs and accident benefit clubs promoted by individual American employers among their employees. A whole article could be filled with an account of clubs of this kind. But they suffer from many radical defects. They will not solve the question. T-hey depend on the individual good- will of an individual employer. Or else, sometimes, on his desire to advertise himself. Or else, occasionally, on an unscrupulous, underhanded hope that by means of contribu- tions by employees to a mutual insurance fund, the em- ployer himself may be relieved of a large part of his legal obligations for all accidents that may happen. Most private accident-insurance schemes are regarded with deep distrust by the employees who are ordered, by a rule of the firm, to contribute to them. Those schemes are not a part of the law of the land. They are not officially sanctioned by public policy. They smack of philanthropy, at the best; and of sneaking self-seeking, at the worst. And even if the best possible interpretation be placed on all of them, they remain, in their total, nothing but an unusually small drop in an unusually large bucket. The main mass of American workmen, whose employers are just average employers, remain totally unaffected. The only avenue through which a broadly satisfactory reformation can be accomplished is the community itself; that is, the federal government and the state governments. The timorous reluctance with which most American em- ployers still regard the enactment of a public law on this subject is in itself a confession of weaikness. And like most weakness, like most cowardice, it comes off worse among human beings than strength and courage would come off. COMPULSORY INSURANCE 13'j An abominable system of accident compensation is only- one of many causes of social discontent in this country, but that discontent waxes apace. And, mostly, it is blind, angry, resentful, unconstructive. It is just discontent. And there- fore doubly dangerous'! A nerveless, palsied, fear-stricken refusal on the part of any national community to put its hand to the root of social disorders and absolutely remove the ground from which they grow will always bring with it its own punishment in the way of unintelligent, though understandable, violent, and perhaps successful revolutionary agitation. This cowardice, this fear, is what Emerson was talking about in his essay on "Compensation" when he said: "One thing Fear teaches, that there is rottenness where he appears. He is a carrion crow, and though you see not well what he hovers for, there is death somewhere. Our property is timid, our laws are timid, our cultivated classes are timid. Fear for ages has boded and mowed and gibbered over Government and Property. That obscene bird is not there for nothing. He indicates great vvrongs that must be revised." And among the wrongs that must be revised there are few that go more deeply into the marrow of industrial life than the method now existing in America for compensating the men and women taken out of industrial life and stretched on beds of pain and poverty by the antics of the physical, material' machinery through which modern civilization is perpetuated. When that wrong is revised, a long step will have been taken toward social peace and mutual social unembarrassed fearlessness (which is the greatest gift modern national life can hold) between those that own and operate property and those that own and sell labor. Here and there, among American employers, there arises one who sees through the complicated color-plates of the present along the converging lines of the picture cast by social forces on the screen of the future. Among such employers Mr. T. K. Webster, of the 140 SELECTED ARTICLES Webster Manufacturing Company, spoke perhaps the noblest, as well as the simplest and most unstudied and unaffected, words ever spoken on the subject of industrial accidents by any American employer when, in a little impromptu speech late one afternoon, before the City Club of Chicago, after the regularly appointed speakers of the day had taken their seats, he rose impulsively and said: "It is a matter of depreciation in men, just like deprecia- tion in machinery. I presume, there is not a manufacturer in Chicago but what, when he figures up his condition at the end of the year, charges off a certain amount for deprecia- tion. It is the most natural thing in the world that he should do so. His tools wear out in from ten to twenty years, and if he keeps them on the books all that time he is simply fooling himself. "Last year, I remember, our balance-sheet showed that we charged off something like $20,000. Do I go grumbling around and saying that it is an awful thing to thus charge off $20,000? Why, no! It is thg depreciation. Now, friends, in God's name, why should we not allow for the depreciation in men? "We know that every thousand pounds of lead we manu- facture costs somebody something. The man who is breath, ing that poison into his lungs, it costs him something. Now, should he and his children bear that burden or should we charge it up against the industry? Let us add an eighth of a cent a pound. Let us distribute it. Who will know it? "When it is presented to the American people, I believe they will say it is just as fair to charge up every year the depreciation in men as it is to charge up the deprecia- tion in machinery and buildings. And when we have done that, we will not only have done our duty to the great body of laborers, but we will not pay, in my judgment, a single cent more than we are paying now. "We pay it all now just the same. Don't think for a minute we aren't paying it. We are paying it in the hos- pitals, in the poorhouses, in the degradation, in the pulling down of all these people, where they are swept under and COMPULSORY INSURANCE 141 become the submerged tenth simply because we aren't doing justice to them. Let us put upon every industry the cost of the depreciation of its own men. And let us pay it as we would any other honest bill." This speech, like General Grant's memoirs, has the inimi- table simplicity of the man. As for its style, let it stand. It presents, beyond improvement, the full power of the argument for compensation for the misfortunes of industrial life. And as for its logic, are there any challengers? Injured in the Course of Duty. Conclusion, pp. 172-9. William Hard. The question of compulsory automatic compensation for all industrial accidents is no longer a question. It is an answer. And it is shouted from every corner of the world. For the assuagement of a universal social ailment' there is now a universally recognized social principle, proved by all past experiment, accepted for all future action, unqtiestioned forevermore by any scholar, by any statesman, of any repu- tation, in any country. It is a principle which has found its way even into the field of international diplomacy, a field in which no principle is suffered to appear till it has survived its period of hungry, daring, speculative adolescence and has matured into the condition of an amiable, plump platitude. Sir F. Bertie, from Paris, sends a communication to Sir Edward Grey, in London. It is "A Dispatch from His Ma- jesty's Ambassador, forwarding a convention between Great Britain and France, signed at Paris, in regard to Workmen's Compensation for Accidents." This principle of automatic compensatioS, at home now in the correspondence of ancient nations, is equally a familiar figure in the statutes of regions which lately were wilder- nesses. In the Canadian Northwest His Majesty, by and with the advice and consent of the Legislative Assembly of the Prov- 142 SELECTED ARTICLES ince of Alberta, enacts a Workmen's Compensation Law, a law cast in a standardized mold from an international pattern, a law which in the remoteness of Edmonton could be dis- cussed in terms of old understanding by a sojourning stran- ger from Zurich, a law which in efifect says to the Work- man: "You earn your living not only by the sweat of your brow, but in the blood of your heart; you shall be paid out of hand for both!" From Alberta the principle of automatic compensation traverses the international boundary line to the south and i-eappears in Montana. The Montana legislature establishes a State Accident Insurance Fund. It is on behalf of the 'coal industry. The employers put in one cent for each ton of coal mined. The employees put in one cent for each dollar of wages earned. The money is received, invested and disbursed by the state auditor and the state treasurer. The disabled miner gets a stipend proportioned to his pre- vious income. The dependents of the killed miner receive a lump sum of $3,000. It may be a skillful application of the principle of automatic compensation. It may be a bungling application of it. But there it is, that principle! It is in- evitable, because both intellectually and morally right. In Illinois it continues to advance unretarded by the weight of the disapproval of the legislature of 1907. Gover- nor Deneen has determined to appoint a second industrial insurance commission. He has listed the principle of auto- matic compensation among his settled policies. And in his "administration" bill for the construction of the twenty-mil- lion-dollar Deep Waterway he carries that principle forward by indirection, insinuating it into the march of a great public project. The bill provides that the Board of Deep Water- way Commissioners shall fix a scale of benefits to be paid for injuries and deaths happening in the course of the work of construction, that if the work is done by the state the benefits shall be paid by the Board, that if the work is done by contract every contractor shall carry sufficient insurance to guarantee the payment of the benefits, and that all pay- COMPULSORY INSURANCE 143 ments shall be made, not for the legal merit of the death or injury but for the fact of it, without litigation. These incidents, from Paris, from London, from Alberta, from Montana, from Illinois, are nothing but little chips of news which have chanced to come ashore on the editorial desk on the morning on which this pamphlet is being con- cluded. Reader of this pamphlet, stand for just a moment beside the deep stream of development on which such chips of news in swelling multitudes are borne. Examine just a few of the books and articles to which allusion has been made in the foregoing pages. Consult just a few of the persons and organizations mentioned. Follow the course of the stream, just hastily, just summarily, from the time when it issued from the hard soil of economic study in the books of the German scholar Schaeflfle to the time when it rolled in a cataract through the popular speeches of Theodore Roose- velt. Observe in the interim how it flowed through the best minds in all countries. And you may trace its history be- fore Schaeffle, if you please, its underground history, back into the deep-down, world's thought-supporting works of Johann Gottlieb Fichte, now a century below us. It is an old stream now, with reminiscent scenery on its banks, re- cording the labors of great men long dead; labors, however, which have not died with them, for if you will pick up any bulletin of the International Labor Association you will see there, as your eye marks the close-set references to reports and laws from all five continents, the innumerable mouths through which the broadening torrent of their thought is dis- charging itself into the sea of world action. You will perceive, after even casual study, that this is no sudden freshet, no creature of a spring rain. You will per- ceive that its origin is deep in soundly labored theory, that its course has been dug for it by informed statesmanship, that in its surface history of forty years it has wound its way through mountains of selfish opposition and across life- sucking sands of popular inertia, and that nevertheless it has gained volume with every decade till now it cannot pos- 144 SELECTED ARTICLES sibly be dammed, or even diverted. It has reached the ocean. Its waters wash all human shores. And they satu- rate all human opinion not only on the subject of Industrial Accidents, but also on the subject of Sickness and also on the subject of Old Age, and also on the subject, finally, of Unemployment. For what does automatic compensation for accidents pro- pose? It proposes that out of our present income we shall lay aside a fund to meet coming mishaps. No matter what line of attack an automatic compensation law may follow, no matter whether it purports to draw the fund entirely from the employer or even entirely from the employee, the issue is that it becomes a charge upon industry as a whole, that we all contribute to it in the cost of every commodity we pro- duce and in the price of every commodity we buy, that we are all associated in a common prevision and anticipation of our future. So far from attacking the present relationship between employer and employee, automatic compensation specifically recognizes it. The backbone of present so-called "Capital- ism" (namely, the hiring of the unpropertied class by the propertied class to do work for wages) does not, because of automatic compensation, lose a single vertebra. Automatic Compensation has nothing whatever to do with Socialism, ex- cept that it is accomplished under the supervision of the state. So is war. And a state supervisor of an automatic compensation plan would have to be just about as much of a socialist as Secretary Dickinson is. Dr. Schaeffle (known as "the father of industrial insur- ance"), in writing about the principle of automatic compen- sation, gave it its true name. He called it "Selbstfuersorge" (self-care). It is the antithesis of charity. It is the antithesis of what is commonly understood by "Paternalism." For this reason: Automatic compensation, in any form, means that the participants in every business enterprise have to make pro- vision in the present for the future; that they have to look forward and prepare themselves to meet the financial shock COMPULSORY INSURANCE 145 of mishaps which are uncertain as to date but absolutely certain as to occurrence; that therefore they have to adopt the device of insurance; that accordingly all the participants in the business, whether employers or employees, are ob- liged, directly or indirectly, to pay the premiums out of which the insurance fund is maintained, and that finally when any of them are injured they are paid not in mercy by a kind lady, not in paternal beneficence by the state, but in the course of business by themselves, in strict justice out of their own money. Which brings us to the climax of the whole discussion. We have talked in this pamphlet almost exclusively about accidents. But if the principle which leads to compulsory insurance against accidents is once started on a free course, it plunges onward irresistibly to compulsory insurance against sickness, to compulsory insurance against old age, and pos- sibly at last to compulsory insurance against certain phases of unemployment. These four great continuous evils — loss of earning power by accident, loss of earning power by sickness, loss of earn- ing power by old age, and loss of earning power by unem- ployment—are the permanent pitfalls which line the path of working life and which show in their depths an enormous proportion of all the poverty and misery in the world. Unemployment, in the mass, is genuine. It is not im- agined by the bookworm or originated by the hookworm. The sluggard's strenuous flight from useful exertion, the tramp's poetic preference for the vernal roadside, the beg- gar's public whine for the price of a bed are subordinate, though eye-catching incidents. They argue a continuous and picturesque rejection of opportunity. But the bulk of un- employment is neither continuous nor picturesque. It hap- pens jerkily and unobstrusively, in periods of a few days or a few weeks at a time, and when not the result of sickness or of bodily accident, is caused mysteriously, with the quick- ness and blindness of a dark-driven stiletto stab, by some sudden fluctuation in the industrial demand for labor — the loss of the German trade, the withdrawal of a contract, the 146 SELECTED ARTICLES success of a rival business firm, the drop in the price of hogs, the glut in the copper market, the invention of a new ^ma- chine, the mere advent of a slack season. The exposition of the facts would require another pamphlet, but there may be found now, on pages 290 to 293 of the Eighteenth Annual Report of the Commissioner of Labor, a composite and conclusive picture of some of the elements in the case. The trade conditions which demand twenty thousand men in the packing industry to-day and only fifteen thousand to- morrow — which are the conditions responsible for the bulk of Unemployment — are no more controllable by the employee than are sickness, old age, or physical injury. The applicability of compulsory insurance, combined with work bureaus, to the simpler forms of genuine unemploy- ment is now being experimentally developed. Its applicability to sickness, old age, and physical injury is known and admitted. For what is the sum of the whole matter but insecurity. And what is the answer to insecurity but insurance? Finally, what is insurance but self-care? The system of self-care, as a whole, however, is for the speculations and debates of coming years. We are here immediately concerned only with that part of self-care which deals with physical injury caused by industrial accidents. What a small part! How radiant with healing light for the misery in the dark places of hazardous daily toil, but still how restricted in scope, how unanswerably triumphant in its past, how unadventurously certain of its future! This pamphlet advocates no impromptu invention of amateur philanthropists. It exploits no freshly patented social-reform novelty. Its unoriginal task has been to em- phasize the facts and to sharpen the arguments in an old field of industrial statesmanship. Its modest purpose is to hasten, by ever so small a margin of time, the day when the states of this Union will of necessity adopt a recog- nized remedy for a recognized wrong. COMPULSORY INSURANCE _I47 New York. Labor, Department of. Bulletin. 39: 442-56, December, 1908. Employers' Liability or. Workmen's Compensation. L. W. Hatch. Twenty thousand factory and shop workers in this Em- pire State injured by accidents in one year! That, observe, is a list of casualties for only two of the great branches of industry, namely, manufacturing and mining, and does not represent complete figures even for those. No one can tell what the grand total of killed and wounded in the whole army of industrial workers in this state in a single year is. To know that, one would have to consider the other great branches of industry, especially transportation and building, not to 'mention agriculture, fisheries and forestry which have their hazards also. For the great transportation industry here are two significant totals from the reports of the Public Service Commission. For the year ended June 30, 1907, there were 2,025 reported injuries to employees (449 fatal) on the steam railroads of the state. In the last six months of 1907 there were 426 casualties to employees (65 fatalities) on street railways reported by telephone to the Commission for the first district, which is practically New York City. For the building and construction industry we know nothing at all as to total figures, but here is a single item that is sug- gestive. The Central Federated Union in New York City reported the other day, after investigation among its mem- bers, that no less than fifty-five men had been killed in the construction of the new Blackwell's Island bridge. Mani- festly the 20,000 accidents in manufacturing and mining would have to be increased by thousands more before one would approach the total of all_ industrial accidents in this state in a single prosperous year. But that 20,000, about which we know something of de- tail, is sufficiently large to give us food for thought. Let that thought be directed for the present to the following points: First, the burden imposed by these accidents; second, 148 SELECTED ARTICLES who now carries that burden; third, is the burden now justly- placed; fourth, if not, where should it be placed, confining ourselves all the time as closely as possible to New York State. - First, the burden entailed by industrial accidents. This comprises two ^^ements: the one, the physical suffering of the injured man and the mental anguish of himself or friends; the other, the economic loss of wages and medical or funeral expenses. To get an idea of the physical suffer- ing and mental anguish, note the extent of injury suffered in the different accidents. The 20,000 accidents quoted above is merely a round number based on the 19,431 accidents in fac- tories, shops, mines and quarries in this state which were reported to the Bureau of Factory Inspection in the year ended September- 30, 1907. So far as could be judged by reports made usually within a very brief period after the accident (the law requires report of accidents within forty- eight hours of occurrence), 14,298 of these injuries were only temporary. But many of these temporary injuries were no light matter as to physical suffering. For example, 665 of them involved fractures of bone. But on the other hand there were 2,733 cases in which the injury was plainly per- manent and in 2,053 others the injury was so serious as to indicate probable permanent results at the time of the report. Of the 2,733 known permanent disablements, in 112 there was a loss of one or both arms, limbs, hands or feet; in go cases the sight of one or both eyes was destroyed; in 1,909 there was a loss of one or more fingers; in 174 cases there were ' permanent internal injuries- Finally there is a grim death roll of 344 or more than one death for every workday in the year. It needs but a very little imagination stirred by memory of sickness or death in one's own home to make of these cold figures an appalling picture of pain and anguish. Were it not the present purpose to be scrupulously unsensational, the above figures could be clothed with detail as horrid in kind, though not in such mass, as any battlefield description could offer, by simple quotation from the detailed statement of fatal accident cases in the last report of the Bureau of Fac- tory Inspection. COMPULSORY INSURANCE 149 But turn now to the economic burden entailed .by acci- dents. First of all, of course, is the loss 'of wages. The range of this loss in different cases is simply unlimited. It extends all the way from the man who loses but fifteen minutes of working time for bandaging of a bruise to the workman whose life is cut off and in whose case the wage loss could be figured only in the capitalized earnings of a lifetime. Information happens to be at hand as to the loss of wages in thirty of the 1907 accidents. These were taken at random. Whether they are typical of all accidents or not is wholly uncertain. On the one hand they probably repre-i sent the more serious of non-fatal accidents, but on the other include no fatal cases. But, however typical, they will serve for concrete illustration of the point in hand. The loss of working time in them varied from one day to seventy-five weeks and in the latter case the man was still idle at the time of report. For the thirty cases the total time lost, so far as could be known at the time of report, was 349 weeks. The total loss in wages of these thirty workers was in that time $4,505. In the case of five the loss was not over $25. Twelve lost from $50 to $100 and thirteen over $100, of whom four lost over $400. The average loss for the thirty was $150. Compare this with the average annual wage of male factory workers over sixteen years of age in this State (all of the thii-ty employees above considered were men over sixteen except one), computed from the figures of the federal census of manufacturers for 1905, which was $579. It will be seen that the average wage loss in these thirty more serious but non-fatal accidents was equal to 26 per cent of the average annual wage in manufacturing industries. But the loss of earnings during the period of the worker's total disability is not always the only wage loss. Of the thirty injured employees above referred to, twelve were re- ported to be unable, after the accidents, to do the same work as before, and five returned to work at lower' wages than they were receiving prior to the accidents. Here is indicated for some cases permanently lowered earning capac- ity with continuous effect on wages thereafter. In the ex- ISO SELECTED ARTICLES treme case of permanent complete disablement such loss rises to .that in fatal accidents when, of course, there is, for the family, a permanent total loss of wages. Loss of wages is the chief element in the financial bur- den of accidental injuries but not the only one. In addition there is the immediate burden of expense for medical care, or burial in fatal cases. Figures for such losses are even more meager than for wage losses. This point was definitely reported in only thirteen of the above thirty cases and in these the medical expenses varied all the way from $i to $175, except irt one very serious case for which that outlay was stated to have been $500. Now the mere size of the economic burden entailed by accidents suggested above is not unimpressive. 'But to realize its true significance it is necessary to consider it in relation to the economic position of the wage earner. Mrs. More, in her study of "Wage Earners' Budgets," found that in 200 wage earners' families in New York City whose average an- nual income ($851) was considerably above that of the aver- age male factory worker over sixteen years of age in that city ($628) the average annual surplus of income over ex- penditures was $15.13. It was noted above that in thirty accidents taken at random the average loss in wages was $150. It was frankly admitted that it was entirely uncer- tain how typical these thirty cases are. But in the inter- ests of statistical caution cut this average wage loss in two, and you still have a loss of income, to say nothing of medi- cal expenses, equal to five times the average surplus found by Mrs. More. Morover, 153 of her 200 families had a deficit or just came out even at the end of the year. In other words the economic burden of industrial accidents often falls where it tends to press down immediately to actual poverty. Mrs. More concluded that one of the chief causes of dependency in the families she investigated was that of. "illness or death of principal wage earner." Among the thirty accident cases here frequently adverted to, and none of them fatal accidents, it actually appears that in nine, other members of the family, wife or children, were com- COMPULSORY INSURANCE 151 pelled to go to work or to work harder as a result of the accident. This was only the first fruit of these catastrophies, such as could be seen within a few months of their occur- rence. It is hardly necessary to point out to an audience ot those more or less expert or specially interested in chari- table work that such economic burdens often work out their full results only in a long course of, time. To quote Amos G. Warner in his "American Charities," "frequently pauper- ism does not result until years afterwards, when a widowed mother has broken down in the attempt to support her family, or when some aged or incapable relative has been turned adrift from the incapacity of the family to maintain him longer." Such, hinted at rather than adequately described, is the burden of human suffering and economic loss connected with industrial accidents. It is sufficiently great to demand as a pressing practical problem of justice and humanity earnest , inquiry as to where it now rests and whether it ought to rest there. One part of the burden does and can rest in only one place. The physical pain and mental anguish, save in so far as the latter may be intensified by the economic burden, can by no means be shifted from the injured worker or his friends. Concerning this burden civilized society can enter- tain but one ideal, namely, all possible prevention of acci- dents, which experience indicates is to be attained primarily by means of vigorously enforced factory laws for the safe- guarding of work places, together with the education af- forded by museums of safety devices. But the economic burden, whose first incidence is also upon the injured workman or his friends, may be shifted. It has already been indicated that not infrequently some part of the bur'den ultimately comes upon society at large in the form of public charity due to the dependence of injured workmen or their families. This, however, amounts rather to an alleviation of the ultimate effects of the burden than to an actual shifting of it and is but a drop in the bucket at th« most. The main question concerns the shifting of the IS2 SELECTED ARTICLES burden from employee to employer. This actually occurs at present in one of two ways; by voluntary assumption of some part of the burden by the employer or by compulsory assessment of it upon him as matter of law. Voluntary assumption of the burden by employers oc- curs in various ways. Frequently it takes the direct forms of payment of wages in full or in part during disability, or payment of some or all of the medical expenses, or simple donation of a lump sum, or some combination of these forms. A not uncommon form of voluntary assistance ap- pears in employees' benefit associations, or relief depart- ments, paying accident benefits to which the employer con- tributes either in cash or by free services of administration. Sometimes an employer will insure his employees collect- ively with a commercial insurance company and pay. some part of the premiums himself. Finally, in a few rare cases, employers maintain a regular system of -compensation of their own without cost to employees. - To what extent the financial burden of accidents is thus transferred from worker to employer by the voluntary in- itiative of the latter in these various ways, we are unfor- tunately without precise information. Some evidence on this point is afiforded, however, by the following figures from the. report of the State Bureau of Labor Statistics for 1899. Therein, for a total of 1.657 cases, it was found that the employer paid wages in full in 14 per cent of the cases, wages in part in 2% per cent, medical expenses in iYj per cent, medical expenses and some other assistance in 54 of I per cent, and all costs of the accident in 2^ per cent. In 8 per cent of the cases it was reported that as- sistance was received from an employers' and employees mutual benefit association, and in 3 i/s per cent from an insurance company. Too much ought not to be assumed as to the general applicability of these proportions. But if it be borne in mind that they represent only non-fatal accidents and that in the case of mutual benefit associations, relief departments and workmen's collective insurance the great bulk of accident relief is, as a matter of fact, paid by COMPULSORY INSURANCE iS3 the employees themselves, and if allowance be made for the use of nominally "voluntary" assistance as a means of escape from legal liability, it seems safe to infer that the portion of the economic burden of industrial accidents now voluntarily assumed by employers in this State is but a small fraction of the whole. But is there not hope that with advancing enlightenment of employers as to their obligation for the welfare of their employees there will be an extension of this voluntary as- sumption of the burden? To this question the best evi- dence available does not afford a hopeful answer. Pass- ing over an inherent defect in much of such voluntary assistance, due to its menace to the workers' independence, a fundamental difficulty in the way of its extension lies in the fact that voluntary assistance, if it is to meet the need at all adequately, must be freed entirely from the element of uncertainty, which now attaches to much of it, and must take the form of a fixed and permanent system for all ac- cidents. The financial risk involved in such a system is too great for any but the very strongest employers to carry individually, so that for employers generally some form of associated insurance would be indispensable. Any move- ment in this direction short of a general one for a given industry would break down before the economic law that the level of competition tends to be controlled by the standard of the least liberal employer. No, admirable as the idea may appear, that employers generally will volun- tarily cooperate and assume the burden of industrial acci- dents, it must be classed as a dream which is nearer the millennium than the present day. _ This brings us to the vital question in the whole matter. How much of the economic burden of accidents does so- ciety, through the voice of law, say the workman may, as of right, shift to the employer, and is society now doing jus- tice in this matter? The law which answers this question in New York State is found in the common law of employers' liability for accidents to employees as it has been slightly modified IS4 SELECTED ARTICLES by two statutes; one, the act of 1902, known as the Em- ployers' Liability Act, the other an act of 1906, usually re- ferred to as the Railway Liability Act. Stripped of legal phrase, and ignoring minor qualifications, the law says to the injured workman essentially this: Your employer must exercise due care for your safety while at work, as to place, materials, appliances, competent fellow workmen, and rules for conduct of the work, the care due being such as a reasonably prudent man would ordinarily exercise. At the same time you and your fellow workmen must exercise due care to avoid danger. If now you can prove that the acci- dent was caused by some negligence of your employer as to the above duty and can also prove, if necessary, that you yourself did not neglect to be careful, in any such way as to lead to the accident, and that none of your fellow workmen (other than superintendents, foremen or those controlling the movement of trains) did, then you may claim as legal right that the economic burden of the accident shall be shifted to the employer. This right you must assert and prove, however, in a civil suit. Let us see now how this works in practice and how much good it does the injured workman. Note first, that the method of determining the workman's right places him and his employer in an antagonistic attitude and that they do not stand on equal terms in the contest. Damage suits ■are never calculated to induce friendly relations between the litigants, and a suit between employer and employee, •quite as likely as not, pits a man earning only a bare sub- sistence, or a widow close to poverty, against an opponent ^