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labor-saving machinery in type-setting and printing has been followed by so large an expansion of business as to employ increased numbers of workers, recent improvements in most British textile mills, cotton, woolen, hemp mills, have been followed by an absolute reduction of employment. Statistics point to the conclusion that the further a nation advances in the application of labor-saving machinery to the production of goods which satisfy the primary needs of the population, the smaller the proportion of the total employed class engaged in these productive processes. The best available statistics indicate that the proportion of employment afforded by the staple manufacturers as a whole diminishes after modern machine methods are well established, and that the tendency is strongest in those manufacturers engaged in supplying ordinary classes of textile, metal, and other goods in the home markets.

In order to judge the net effect of labor-saving machinery upon the volume of employment, a wider view is necessary. If the first effect is to cheapen goods, we need not look to the expansion of demand for this class of goods to absorb the labor which it is the object of the machine to displace. We must look to the expansion of demand for other sorts of goods due to the application of the elements of income saved by the fall of prices in the first class of goods. For instance, if cotton goods are cheaper owing to improved methods of production, the chief result may be to increase the demand for furniture.

This wider outlook enables us to conclude that though the effect of machinery may be a reduction of employment in a special trade or group of trades, the general result must be to maintain the same aggregate volume of employment as before, provided the income liberated from a particular demand is applied to other demands for commodities. If, as may be objected, there is a simultaneous tendency to reduce the prices of most articles of ordinary consumption, by applying machine methods of production, the normal result would be to stimulate new wants, and so to create new channels of production yielding employment to displaced labor. That this is the fact in the world of industry no one can seriously doubt.

If the improvements of machine-methods were regular, gradual, and continuous in the several industries, no considerable effect in reducing the volume of employment would occur. But where industrial improvements are sudden, irregular, and incalculable, natural adjustment is not possible. It is this irregular action which has proved so injurious to large bodies of laborers whose employment is subjected to a sudden and large shrinkage. From time to

time great numbers of skilled workers find the value of their personal skill cancelled, and are driven either to acquire a new skill or to compete in the unskilled market. Yet history certainly shows that the fuller application of great inventions has been slow, allowing ample time for adjustment. In most cases where distress has been caused, the directly operative influence has not been introduction of machinery, but sudden change of fashion. The suddenly executed freaks of protective tariffs have also been a source of disturbance. So far as the displacement has been due to machinery sufficient warning has been given to check the further flow of labor into such industries and to divert it into other businesses. Moreover the changes which are taking place in certain machine industries favor the increasing adaptability of labor. Many machine processes are either common to many industries, or are so narrowly distinguished that a fairly intelligent workman accustomed to one can soon learn another.

Whether machinery, apart from the changes due to its introduction, favors regularity or irregularity of employment, is a question to which a tolerably definite answer can be given. When the employer has charge of enormous quantities of fixed capital, his individual interest is strongly in favor of full and regular employment of labor. On the other hand great fluctuations in price occur in those commodities which require for their production a large proportion of fixed capital. These fluctuations in prices are accompanied by corresponding fluctuations in wages and irregularity of employment. Why this contradiction? It is that in the several units of machine-production we have admirable order and adjustment of parts. In the aggregate of machine production we have less organization and more speculation. Industry has not yet adapted itself to the changes in the environment produced by machinery. That is all. Modern machinery has enormously expanded the size. of markets, the scale of competition, the complexity of demand, and production is no longer for a small, local, present demand, but for a large, world, future demand. Hence machinery is the direct cause of the fluctuations which bring irregularity of employment.

But there is another force which makes for an increase of speculative production. It has been seen that the proportion of the workers engaged in producing comforts and luxuries is growing, while the proportion of those producing the prime necessities of life is declining. Hence the effect of machinery is to drive ever and ever larger numbers of workers from the less to the more unsteady employments. Moreover, there is a marked tendency for the demand for luxuries to become more irregular and less amenable to

calculation, and a corresponding irregularity is imposed upon the trades producing them. This is true of many season and fashion trades. The irregularity of these trades prevents them from reaping the full advantages of the economies of machinery. A larger proportion of town workers is constantly passing into trades in which changes in taste and fashion are largely operative.

Thus there are three modes in which modern capitalist methods. of production cause temporary employment:

I. Continual increments of labor-saving machinery displace laborers, compelling them to remain unemployed until they have adapted themselves to the new situation.

2. Miscalculation, to which machine-industries with a wide unstable market are particularly prone, bring about periodic depressions of trade, throwing out of employment large bodies of work

ers.

3. Economies of machine production drive an increasing proportion of laborers into trades supplying commodities, the demand for which is more irregular, and in which the fluctuation in the demand for labor must be greater.

256. Economic Insecurity and Insurance3

BY WILLIAM F. WILLOUGHBY

In a broad sense all forms of insurance may be described as social insurance, since social ends are attained by them. As the term is now employed, however, it is usually restricted to those forms of insurance having to do with contingencies affecting individuals as opposed to those affecting property. It looks to the conferring of pecuniary benefits in all those cases where for any reason the capacity of the individual to provide for the support of himself and those dependent upon him is lessened or destroyed. Stated in another way, social insurance sets to itself the task of meeting the problem of the economic insecurity of labor.

Now what are the contingencies causing this economic insecurity against which provision must be made in some way? On examination we find that a man's ability to support himself, and to make due provision for those dependent upon him, is lessened or cut off: (1) by his meeting with an accident incapacitating him, temporarily or permanently, partially or completely, from labor; (2) by his falling sick; (3) by his becoming permanently disabled for labor

Adapted from "The Problem of Social Insurance: An Analysis," in the American Labor Legislation Review, III, 159–160 (1913).

as the result of old age or failing powers; (4) by his death, leaving a widow, children, or others without adequate means for their support; and (5) by his inability to secure remunerative work.

To meet each of these contingencies resort has been had to the principles of insurance. Social insurance is thus a term that has been coined to serve as a collective designation of: (1) Insurance against accidents; (2) insurance against sickness; (3) insurance against old age and invalidity; (4) insurance against death, or, as it is more usually called, life insurance; and (5) insurance against unemployment.

Could a just and workable plan of insurance covering these several points be worked out, the problem of the economic security of labor, one of the greatest with which society now has to deal, would be solved. Is there any social problem more fundamental or more deserving of unremitting effort?

Our first analysis thus resolves the problem of social insurance into these five branches. This division is made not merely in order to bring out the content or orbit of social insurance. It is fundamental, since each of these branches of insurance has its own special features and problems. Insurance, notwithstanding the simplicity of the ideas underlying it as a device, is an exceedingly technical science. Particularly is this true where the human factor has to be dealt with. Still more is it complicated where a departure is contemplated from the system of purely voluntary, unencouraged, unaided use of the device on the part of individuals, and resort is proposed to the force of social encouragement, control and conpulsion. Each of these five branches of social insurance thus has its own special problems and considerations; they are united only in respect to their ultimate social end.

These special problems can, in each case, be distinguished, for purposes of consideration, into three distinct classes: (a) the social, (b) the administrative, and (c) the technical. Of these the first is the most fundamental. Under this head falls the great question of upon whom shall fall the burden of making the contributions required for the support of the system. No real progress can be made until we, the public, have reached a conclusion regarding the problem of justice that is here involved. As a matter purely of right, of justice, of bringing about the widest possible distribution of welfare, how shall the financial burden entailed by the system be distributed? In seeking to reach an answer to this question we find that the choice lies between placing the burden in whole or in part upon either: (1) the beneficiary, or workman, (2) the employer, (3) the industry in which the workman is employed, or (4) the state.

B. UNEMPLOYMENT

257. Character and Types of Unemployment'

BY W. H. BEVERIDGE

To grasp the problem of unemployment and free ourselves from popular but erroneous notions on the subject, we must first get a clear impression of the nature of the industrial system.

The popular conception is of industry as rigidly limited-a sphere of cast iron in which men struggle for living room; in which the greater the room taken by any one man the less must there be for others; in which the greater the number of men the worse must be the case for all. The true conception is a sphere made of elastic material, capable of expansion and being in fact continually forced to expand by the struggling of those within. Each individual appears to be and, no doubt, to some extent is, pressing upon the room of his neighbors; the whole mass presses upward upon the limits within which it is for the moment confined; the result of a particularly violent struggle of one man for the room of others may be to enlarge appreciably the room for all.

This expansion of industry cannot readily be made visible, and is nowhere recorded in direct and comprehensive figures. It is and must always remain something of a mystery. It does not take place evenly. It is perhaps not a thing to be counted on forever. The sphere may at last lose its elasticity and cease to respond further to the increasing pressure from within. That, if it ever happens, will mean over-population, a diminishing return to labor, a falling standard of life, and, unless the growth of numbers be arrested, a gradual but certain return to barbarism for the immense majority of people. For the present it is sufficient to say that the time has not come; it is not within sight; it can barely be imagined. For the present the sphere of industry retains its elasticity. It expands, not indeed steadily, but still sufficiently for the people. It absorbs the generations as they come. It yields each fresh man on the whole more living and working room than fell to the lot of those who went before.

Yet with all this comes the perpetual cry of some who find no living and working room at all. The number of the unemployed never falls to zero. Many who recognize the indisputable facts of the expansion of industry and the rising standard of life are prone to deny directly or implicitly the existence of an unemployment Adapted from Unemployment: A Problem of Industry, 11-14. Published by Longmans, Green & Co. (1908).

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