The significance of unemployment insurance in a crisis as severe as the present may be demonstrated, for the purposes of this discussion, by way of a hypothetical case. Let us suppose that there had been in force in this country since 1925 a national system of safeguards against the evils of unemployment similar to the scheme instituted in the men's clothing industry in 1923. The facts of the hypothetical case would be as follows:
The estimated total number of wage earners in the United States is 926,000,000. The estimated total labor bill of the wage-earning class is $926,650,000,000. Workers would have contributed 1 per cent of their wages and employers 3 per cent of, their pay roll to the unemployment insurance fund. The Federal Government, in conjunction with the states, would have provided the administrative costs of the fund, operated employment exchanges,' and taken' care of other relevant services. The total payments to the fund would have amounted to twelve hundred million dollars, which, together with interest on the money, would have brought the total to one and one quarter billion dollars annually. The total floating unemployed population in a year of normal business activity (excepting the sick, the disabled, and the aged, who are entitled to special care) is about two million. On the assumption that the payment of benefits to these two million people is at the rate of about 80 per cent of their wages or half of the time, the annual disbursement would have been $350,000,000, or less than 30 per cent of the fund. In four business years, 19925-19929, the fund would have accumulated more than three billion dollars. By January 1930, at the beginning of the severe part of the present depression, there would have been built up a public reserve for the mitigation of the distress of millions of unemployed Americans. It would have been almost as large as the entire Federal budget and would have just about equaled the proceeds of our whole export of merchandise.
During 1930 and 1931, owing to the decrease in the nation's wage earners' pay roll, which shrank to about two thirds of its normal size, only about three quarters of a billion dollars would have been paid into the fund. Yet this sum would be much larger than the sum that was actually spent by all the private philanthropies, together with Congressional, state, and municipal appropriations for aid to the unemployed. Five million people in 1930 and six million in 1931 would have received a total of over three billion dollars in benefits, while a reserve would have been left in the fund of close to two billion dollars toward the end of 1931.
The advantages of the arrangement would have been twofold:
1. So considerable an increase of purchasing power as three billion dollars in two years placed at the disposal of the most harassed part of our labor population would have had a healthy, stimulating influence on business activity. Since we did not have it, however, the only thing we could do was to resort to the mysterious aid of such devices as 'Buy now!' and 'Think prosperity!'
2. Millions of wage-earning Americans would have been spared the humiliation of cooling their heels in charity offices, of begging in the streets, of marking time in bread lines, and, after all the torture and humiliation, of being for the most part starved, cold, and bare. Lacking such a system of unemployment reserves, millions of people have had no other choice but to beg or to starve, or both.
America, alone of all civilized nations, has failed to set up any organized device for dealing with unemployment. Instead of engaging our energies in evolving the best methods of procedure in the realization of the reform, we have been spending ourselves on arguing the proposition. While in the Old World 48,000,000 wage earners are protected against unemployment in one way or another, the people of our republic have had to fall back on the hazards of luck and charity in this most trying of all emergencies. Yet unemployment is no longer a chance happening. It has become a part of our social experience. It is a chronic disease of our social system.
At all times, in several industries, we have had to cope with seasonal unemployment. That problem has been troublesome and exacting enough. But to that, in recent years, a new type of unemployment has been added, as a result of our highly efficient system of industrial management. It is described as technological unemployment. What we are confronted with in the present phase of our economic development appears as a compound of both of these types of unemployment. Historic, political, and economic factors have combined to make the problem more difficult and its evil effects more vicious. No doubt the emergence of this social disease is primarily chargeable to our planless, hit-or-miss methods of doing business. Economic anarchy is an old evil of the prevailing individualistic régime, but at no earlier stage of its development have its effects and its ramified consequences been as threatening to the safe continuity of the nation's business as they now are. Indeed, the central issue of our time is the progressively widening discrepancy between the productive capacity of the nation's combined man and machine power and the purchasing capacity of the working men and women who constitute the majority of the nation. This discrepancy must be adjusted.
The question of what we can do about chronic unemployment ranks first among those which will not allow the socially sensitive mind to rest. Upon the satisfactory solution of this problem depends our material and intellectual growth. This nation or any nation cannot long endure one-half employed and one-half totally unemployed or half employed. Steady employment of labor energy is the primary condition of economic and social health. But practically nothing has been done to face the problem, either by the people themselves or by their governing staff There has been neither effective action nor thoughtful planning. We cannot shut our eyes to what the coming months seem to threaten. There is no longer any doubt in minds which reason from observable facts rather than from imaginative self-deception that the coming winter will be even a greater challenge to our national ingenuity than was the winter of 1930-31. It is bound to tax to the very limit the capacity of our people for suffering. The limited resources that some people may have had a year ago, whether as savings for a rainy day or as credit, have been completely drained during these twenty months of depression. Where will they get the means on which to live during the winter that lies ahead?