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British Unemployment-Insurance Fund in 1942

RECEIPTS of £80,625,324 were reported by the British Unemployment Insurance Statutory Committee for 1942, as against expenditures of only £6,922,014. The debt of the fund was wiped out in 1941 by a payment from the surplus of the fund, leaving a balance in the fund of about £16,500,000 as of March 31, 1941.

The British Unemployment Insurance Statutory Committee, together with the Minister of Labor and National Service, and subject to consultation with the Treasury and the approval of Parliament, were empowered by the Unemployment Insurance Act, 1936, to bring about changes in the contributions and benefits of unemployment insurance; but under the Unemployment Insurance (Emergency Powers) (Amendment) Regulations, 1943, the contributions and benefits can be changed only by legislation so long as these regulations remain in force, that is, during the war period. Accordingly, the report' of the Committee for 1942 is confined to the financial report of the fund, and no recommendations regarding the operation of the fund are made.

General Account

Receipts of the general account during 1942 amounted to £79,027,670, of which all but £2,080,293 represented contributions by employers, employed persons, and the State. There was a total

expenditure of £6,567,876, of which £3,708,000 was expended for unemployment benefit and £2,859,876 for administration and minor items. The excess of income over expenditure therefore, was £72,459,794. The balance on December 31, 1941, was £79,805,751 so that the net balance at the end of 1942 was £152,265,545.

Contributions from employers and employed persons increased by £885,128 over contributions in 1941. This figure was affected by the withdrawal of men into the fighting forces (which tended to decrease contributions) and by new entrants into industry and the decrease in unemployment (which tended to increase contributions). No contributions were received from the Defense Departments, as payments in respect of men discharged from the armed forces have been suspended since the outbreak of war until an assessment can be made. An increase in the Exchequer contribution, amounting to £447,530, was proportionate to the net contributions from other sources.

Expenditure for unemployment benefit in 1942 was £5,166,000 less than in 1941, and administration costs were reduced £447,645, mainly as a result of the reduction in unemployment. The income from investments for the general and agricultural accounts totaled £2,194,371, an increase of £1,141,323 over the preceding year. This increase was due to the further purchase of national war bonds to keep pace with the mounting balance of the fund. The average rate of interest on investments was 2% percent.

1 Reports on the Financial Condition of the Unemployment Fund (General and Agricultural Accounts) as of December 31, 1942. London, Unemployment Insurance Statutory Committee, 1943,

Agricultural Account

The agricultural account receipts in 1942 amounted to £1,597,654, of which all but £117,019 represented contributions by employers, employed persons and the State.

Contributions by employers and workers showed an increase of £26,021 as compared with 1941. This increase was due to the greater number of insured persons and to the lower rate of unemployment throughout 1942. The expenditure on benefit fell by £128,000. mainly as a result of the lower rate of unemployment during the year. The charge for administration, which is fixed at one-eighth of the net income from contributions, automatically increased to £185,075 in view of the higher income from contributions.

The following table shows the approximate receipts and payments of the general and agricultural accounts of the unemployment-insurance fund for the years 1941 and 1942. The statement includes figures taken from accounting and other records which had not yet been subjected to examination and audit.

Receipts and Expenditures of British Unemployment-Insurance Fund, Years Ending December 31, 1941 and 1942

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1 No allowance has been made in respect of interest accrued but not received on December 1, 1942.

50, 413, 547

51,298, 675

961, 080

25, 201, 172

25 648, 702

480, 530

980.840
5,410

1 2,077, 429

72, 208

12. 742, 788

8,874, 000

2,864 6,567, 876 3,708, 000

88

477,748
294,000

11, 204

320, 500

1,271 267,000

19

3,500

14,970

3,024, 280 497, 834 63,858, 181 79, 805, 751

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Regulation of Profit Sharing and Dismissal
Compensation in Peru, 19431

THE Peruvian law known as the "Employees' Compensation Law" provided for the payment of dismissal compensation for commercial employees discharged from their positions. This law (No. 4916 of February 7, 1924) was regulated by a supreme resolution of June 22,

1 From report of Julian Greenup, counselor for economic affairs, United States Embassy, Lima, Peru. Peruvian legislation on the subject of dismissal compensation for commercial employees through November 12, 1933, is reprinted with copious annotation, in Legislación del Trabajo, by Manuel A. Vigil, Chief of the Labor Section, Lima, Peru, 1937,

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1928, which released from the payment of dismissal compensation employers who agreed to share profits under a contract with their employees. Articles Nos. 40 and 68 of that resolution were recently given legal force by law No. 9809, promulgated January 5, 1943. Article No. 40 provides that under any contract establishing profit sharing (and therefore excluding the employees from the dismissal benefits of the law of 1924), the employees' share of the net profits shall not be less than 5 percent. Under article No. 68, employers are required to take out additional insurance (covering dismissal compensation) every 4 years, in proportion to salary increases granted after the first insurance policy was issued.

A supreme resolution of February 15, 1929, provided that the provisions of law No. 4916 should apply regardless of nationality of employees.

Living Costs Since Beginning of Retail Price Control1

IN MAY 1942 the General Maximum Price Regulation issued by the Office of Price Administration "froze" at March 1942 levels nearly all living costs and wholesale prices except those of certain foods, unprocessed farm products, and some services. This regulation was designed to stop a rise in the cost of living which had progressed steadily since early in 1941. It came at a time when growing scarcity of civilian goods had just begun to force down the American plane of living from what was probably its highest point in history. Since that date the pressure upon the level of prices and living costs has grown more intense. Additional strides of great importance have been made in converting the American economy to a full war footing, narrowing more and more to bare essentials the goods and services available to consumers as accumulated inventories are exhausted. Meanwhile, money incomes have continued to mount, contrasting an appearance of plenty with the facts of a diminishing supply.

Until September 1942 the General Maximum Price Regulation succeeded in holding price increases at the retail level to relatively narrow limits. During these 4 months the cost of living rose 1.6 percent, or 0.4 percent per month. Even in this earlier period, however, there appeared the first signs of the major difficulties which were to develop later. In primary markets, almost all unprocessed farm products and many processed foods were not subject to OPA control, primarily because of the restrictions on their regulation included in the Emergency Price Control Act. Prices of these commodities continued upward, rising, as groups, from May to September between 21⁄2 and 4 percent. Coupled with previous sharp advances, their increase served to complicate the already serious problem of maintaining stability at later levels of distribution. Between May and September retail food prices rose 4.1 percent, and, although this rise was somewhat less than in the first 4 months of 1942, in September it appeared that the rate of advance was increasing. Accordingly, under new authority granted by Congress, the President issued directives for the extension of control over farm products and foods and for the stabilization of wages and salaries. The Office of Economic Stabilization was created to help implement these orders.

The accelerated rise in the cost of living, which was feared in the fall of 1942, materialized in the winter and spring of 1943, despite the additional controls adopted. Prices of certain unprocessed farm products, such as livestock and some of the grains, remained uncontrolled and continued to rise at an even faster pace than previously.

1 Prepared in the Bureau's Prices and Cost of Living Branch, by Melville J. Ulmer. Amendment to the Emergency Price Control Act of 1942, October 2, 1942.

For farm prices as a group, between September 1942 and May 1943 the rise was 17 percent and, for foods in primary markets, 8 percent. The difficulty of enforcing OPA regulations intensified as scarcity increased and the extent of black markets widened. The more exhaustive use of resources of all kinds resulted in cost increases, many of which were unavoidable. Between September 1942 and May 1943 retail food prices rose 13 percent, to an average level more than 50 percent above that prevailing just before the outbreak of war in Europe in August 1939. Prices of certain services exempt from control, such as medical care and motion-picture admissions, also began to rise appreciably. There were smaller increases in some other retail prices. As a whole, the cost of living advanced 6 percent between September and May, or nearly 0.8 percent per month, to reach a level 24 percent above January 1941, the base date used in the "Little Steel" formula of the War Labor Board. From mid-February to mid-April 1943 alone-when the advance was at its heightliving costs rose 2.6 percent, the sharpest increase in any 2-month period since the autumn of 1941. This acceleration in the rate of increase resulted in issuance by the President of a "hold the line" order on April 8, instructing administrative agencies to extend price controls wherever necessary and to avoid any actions with respect to prices or wages which might contribute to a further rise in the cost of living.

Supply and Demand

Fundamental to the difficulties underlying the control of prices has been the widening disparity between the quantity of goods and services available to consumers at present values, and the flow of money available for their purchase. The total value of all goods and services produced in the United States, according to U. S. Department of Commerce estimates, rose from 89 billion dollars in 1939 to 152 billion dollars in 1942, and has been continuing upward since. Whereas expenditures for war were negligible in 1939, in the first quarter of 1942 they amounted to more than 20 percent of the gross national product, and in the fourth quarter to more than 40 percent. Preliminary data indicate that in 1943 this proportion will grow to considerably more than 50 percent. It is estimated by the Federal Reserve Board that at present two-thirds of all industrial production is being diverted to war purposes. The proportion of agricultural production going to military forces or to other countries under the Lend-Lease program in 1943 varies widely, ranging from negligible proportions of the total for grains to an estimated 30 to 35 percent of all meats and 50 percent of all canned fruits and vegetables."

While manpower and capital resources are being diverted more and more, directly or indirectly, to the war effort, the large stocks of consumer goods which once existed are being rapidly depleted. The dollar value of wholesale inventories in the spring of 1943 was about 20 percent below the peak reached shortly after the General Maximum Price Regulation was issued; in view of price advances the decline in the physical volume of goods on hand is even greater. The dollar

Survey of Curent Business (U. S. Department of Commerce), March 1943,
Federal Reserve Bulletin (Washington), April 1943.

National Food Situation (U. S. Department of Agriculture), January 1943.

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