INTERNATIONAL LABOUR OFFICE

UNEMPLOYMENT
INSURANCE
SCHEMES

GENEVA
1955

STUDIES AND REPORTS
New Series, No. 42

PUBLISHED

BY THE INTERNATIONAL
GENEVA,

LABOUR

OFFICE

SWITZERLAND

Published in the United Kingdom for the INTERNATIONAL LABOUR OFFICE

by Staples Press Limited,

ondon

PRINTED BY IMPRIMERIE ORANCHAMP, ANNEMASSE (HAUTE-SAVOIE)

FRANCE

CONTENTS
Page
INTRODUCTION

1

CHAPTER I : Development of Unemployment

Insurance

Experience Prior to Adoption of National Schemes . . . .
National Schemes Started before 1920
National Schemes Started in the 1920s
National Schemes Started in the 1930s
National Schemes Started after 1940
Summary

10
10
18
26
36
41
44

CHAPTER II : Scope of Protection

47

General Principles
Scope of Existing Schemes

47
56

CHAPTER I I I : Coverage of Special Groups
Industry Groups
Types of Undertakings
Categories of Jobs
Kinds of Persons
Regions
CHAPTER IV : Eligibility

71
71
80
81
90
96

for Benefits

97

Qualifying Conditions
Qualifying Period
Eligibility of Seasonal Workers

98
110
114

CHAPTER V : Disqualification

for Benefit

120

Voluntary Leaving
Discharge for Misconduct
Labour Disputes
Refusal of Suitable Job Offer
Receipt of Other Types of Income
Other Disqualifications

121
124
126
131
140
145

CHAPTER VI : Rate and Duration of Benefits

149

Benefit Rates
Waiting Period
Duration of Benefits

149
166
171

IV

CONTENTS
Page

CHAPTER

VII : Methods of Financing

Sources of Revenue
Form of Contributions
Reserve Fund
Rates of Contribution
CHAPTER

VIII : Administrative Organisation and Processes. . .

Administrative Agency
Collection of Contributions
Record Keeping
Receiving of Claims
Adjudication of Claims
Payment of Benefits

185
186
194
203
205
218
218
227
232
237
242
251

LIST OF TABLES
I.

Unemployment Benefit Schemes (1955) with the Year of
Enactment of the Legislation in Force
II. Scope of Compulsory Unemployment Insurance Schemes,
1955
III. Scope of Voluntary Unemployment Insurance Schemes,
1955
IV. Scope of Non-Insurance Unemployment Allowance
Schemes, 1955
V. Qualifying Periods for Unemployment Benefits, 1955
VI. Provisions concerning Unemployment Benefit Rates,
1955
VII. Maximum Duration of Unemployment Benefits, 1955
VIII. Contribution Rates for Unemployment Insurance, 1955
IX. Contributions and Benefits under Unemployment Insurance (Fiscal Year 1951)
X. Agencies Administering Unemployment Insurance, 1955

45
58
66
69
115
163
181
216
217
220

INTRODUCTION
Social security measures for the prevention of want have
come to occupy an important place in the social legislation of
modern times. Measures of this type are now used to mitigate
the effects of numerous risks that imperil the livelihood of
workers. The Social Security (Minimum Standards) Convention, 1952, adopted by the International Labour Conference
at its 35th Session, includes the following contingencies as
appropriate objects of social security action : sickness,
maternity, employment injury, old age, invalidity and death. 1
Along with these the Convention lists unemployment as one
of the major risks with which modern social security legislation should deal. This action is in keeping with the practice
already followed in a number of countries.
Social security programmes directed against the risk of
unemployment have been functioning in some countries for
many years. However, the use of social security methods in
providing protection against unemployment has undergone a
slower development than in the case of other risks, and the
process has not yet gone as far. Unemployment has usually
tended, in fact, to be among the last of the important social
hazards to be dealt with through social security. There are
various reasons why this is so, and some of these will become
evident from the discussion in subsequent chapters.
In 1955 about one-fourth of the countries of the world had
adopted legislation providing for some kind of social security
scheme to deal with unemployment. As might be expected,
1
See I.L.O. : Official Bulletin, Vol. XXXV, No. 2, 15 Aug. 1952,
pp. 45-71. It may further be mentioned that the problem of unemployment had previously been dealt with on several occasions by the International Labour Conference, which had adopted the following instruments : the Unemployment Convention and Recommendation, 1919 ;
the Unemployment Indemnity (Shipwreck) Convention, 1920; the
Unemployment Insurance (Seamen) Recommendation, 1920; the
Unemployment (Agriculture) Recommendation, 1921 ; the Unemployment Provision Convention and Recommendation, 1934 ; the Unemployment (Young Persons) Recommendation, 1935 ; and the Income
Security Recommendation, 1944.

2

UNEMPLOYMENT INSURANCE SCHEMES

substantial differences could be observed among the several
schemes as regards their adequacy and comprehensiveness.
The remaining nations of the world, in contrast, had not yet
introduced any social security measures affording their workers
protection against the consequences of unemployment.
One of the chief purposes, if not the principal objective,
of the present study is to make available information of use to
countries that wish to introduce social security against unemployment for the first time ; it is also intended, of course, to be
of help to other countries wishing to modify and improve their
existing schemes. If it succeeds in contributing even in a
small measure to these ends, it will have been worth while.
Before going into the details of the subject, however, and
in order to define clearly the scope of the present work, it may
be advisable to examine briefly why workers so urgently require
protection against the risk of unemployment and to describe
in a few words the different types of unemployment. It will
also be useful to consider at the outset what is the appropriate
place of unemployment insurance, in relation to preventive
measures and to allied systems of assistance, in any programme
designed to combat the effects of unemployment.
*

*

*

The human consequences of unemployment are perhaps
self-evident, and yet they can scarcely be over-emphasised.
They can be catastrophic for the individual workers and families
affected, even though at the time there may be relatively
little unemployment throughout the country as a whole. Families that have been successful in accumulating some savings
against a rainy day may draw on these for some time after the
employment of their breadwinner ends. Statistics tend to
indicate, however, that for the great mass of wage earners the
margin between income and outgo is not steady and large
enough for them to amass enough savings to protect themselves
for any length of time against the contingency of unemployment.
In the absence of social or public aid, therefore, the unemployed
worker and his family face the alternatives of going increasingly
into debt, becoming a charge on relatives or friends, or lowering
their standard of living drastically.
For a worker and his dependants the immediate consequences

INTRODUCTION

3

of a reduction in living standards occasioned by unemployment
may be a decrease in the amount of food consumed, postponement of the purchase of numerous other necessary items, and
perhaps less adequate housing. The longer-run consequences
if unemployment persists may be impaired morale, deteriorating
health, loss of skills, perhaps the break-up of the family, and
in some cases immorality and crime. Hence, over a period of
time it is not only the unemployed worker himself and his
family who suffer by reason of the loss of income resulting from
unemployment : the harmful effects may also extend to the
community or society of which they are members.
No society that includes a substantial number of jobless
persons can be a truly healthy society. On the economic side
the idle manpower involved represents a distinct waste of the
productive resources of the country. Moreover, the loss of
purchasing power suffered by the unemployed may seriously
diminish the internal demand for the products of the country,
and thereby generate further curtailment of production and
employment. On the social side the decline in morale, the
ill-health, and the general deterioration in living standards
suffered by the families of the unemployed cannot fail to have
an influence on those around them as well. If unemployment
is sufficiently widespread, it may thus threaten the entire
social fabric of a country.
It is outside the scope of this study to analyse the various
phenomena that appear to be responsible for, or lead to, unemployment. These have been examined in some detail in an
earlier publication of the International Labour Office.1
It is germane to a discussion of the need for ameliorative
measures, however, to consider the various forms that unemployment takes.
First, and perhaps foremost, there is what is usually referred
to as mass or general unemployment. This may be said to
exist in a country when, say, 5 per cent, or more of its labour
force is without work. The seriousness of this type of unemployment from the standpoint of individual workers lies not only
in its widespread incidence but particularly in the grave danger
that they may remain out of work for a long time. Mass
unemployment of this kind tends to result from a deficiency
1
Action against Unemployment, Studies and Reports, New Series,
No. 20 (Geneva, I.L.O., 1950).

4

UNEMPLOYMENT INSURANCE

SCHEMES

Or instability in the level of aggregate demand for goods on the
part of domestic consumers, foreign buyers, investors, or the
government. 1 There has been a tendency in the past for this
type of unemployment to appear and become acute at somewhat
cyclical intervals.
A second form of unemployment is that often described as
frictional. It is generally an accompaniment either of technological changes in the structure of production, which cause
workers in particular occupations to lose their jobs, or of somewhat sudden shifts in the demand for certain types of goods
or services. It thus usually reflects a disequilibrium between
the demand for and the supply of particular skills. This
condition is usually a temporary one, so far as a particular
industry is concerned, and the resulting unemployment is not
normally of long duration. On the other hand, in a dynamic
and expanding economy the process of change is continuous.
Thus, there tends to be a certain amount of frictional unemployment at all times, though in different industries.
Thirdly, seasonal unemployment, as its name implies,
tends to recur periodically in particular months of each year.
In the same way, it also normally tends to disappear with the
advance of the seasons. It is usually the result either of a
seasonal pattern inherent in the production processes of certain industries, or of seasonal variation in the demand for
certain goods. It is especially characteristic of agricultural
production. Thus, unlike the two forms of unemployment
already mentioned, it is usually most prevalent, or at least
most troublesome, in countries that have not undergone much
industrialisation.
The last form of unemployment, which tends to appear
mainly in non-industrialised countries, is that known as underemployment. This often manifests itself in regions where the
size of the population in relation to the supply of cultivable
land is excessive and where the supply of capital is also limited.
The majority of workers in countries suffering from underemployment may be gainfully occupied, but a substantial
proportion of them are in effect able to find work only on a
part-time basis. Their output and the return from their work
is thus usually far lower, per head, than it would be if they
1

Action against Unemployment, op. cit., Chapter IV.

INTRODUCTION

5

were able to work full-time. While there is sometimes an
element of seasonality in such underemployment, it tends on the
whole to be chronic.
A worker who has been deprived of his ordinary income
through loss of his job naturally has the same need for a substitute source of income, irrespective of the economic classification into which his unemployment falls. But the potential
duration of his jobless status is materially influenced by the
economic nature of its origin. Likewise, the feasibility, cost and
administrative practicability, as well as the form, of the social
security protection that can be made available to workers
depend, in the last analysis, on the fundamental nature of the
unemployment from which they are suffering.
By and large there has been relatively little mass unemployment in the world during the past decade and a half. Or, at
least, there has been none similar in scale to that which afflicted
almost the whole world during the thirties. This favourable
situation may be attributed in part to the direct and indirect
effects upon economic activity of the Second World War and its
aftermath. It has resulted in part, also, from policies adopted
and measures deliberately taken by governments in recent years
to foster full, or at least a high level of, employment. The
falling-off in the volume of mass unemployment inevitably
decreased the need for social security protection against unemployment during the period concerned.
It is to be hoped that the declared determination of many
national governments to prevent mass unemployment will
continue in the future, and that their efforts will be crowned
with success. But this is not to say that the need for social
security measures in the field of unemployment has largely
disappeared.
In the first place, even if it were possible to do away with
all mass unemployment in the future, there would still remain
a considerable amount of frictional and seasonal unemployment. There is also the special problem of depressed areas
in particular regions of a country, where unemployment may
often be difficult to eradicate. Moreover, the problem of
underemployment may be expected to persist for a long time
in nations that have not yet undergone industrialisation.
Finally, the policies and programmes so far developed to maintain high levels of employment are still somewhat experimental.

6

UNEMPLOYMENT INSURANCE SCHEMES

They have not as yet been fully tested or proved to be infallible.
Unemployment insurance is therefore still necessary if for no
other reason than as a reserve measure to deal with the consequences of mass unemployment, should it ever reappear in
virulent form.
The provision of a substitute source of income to unemployed workers naturally should not, and indeed cannot,
constitute the sole or even the principal weapon against the
evils of unemployment. Unemployment insurance is in general
only a palliative. It is true that the distribution of unemployment benefits during a depression can make a significant
contribution to the maintenance of purchasing power and
thus to checking a persistent decline in production and employment levels. Nevertheless, unemployment insurance can contribute relatively little to the basic cure of the ailment, that
is to the reduction or abolition of unemployment. This
must be clearly understood so that unemployment insurance
or a similar programme will not be regarded, in and of itself,
as a panacea for the problem of unemployment in any given
country.
It is beyond the scope of this study to consider the various
measures that countries might adopt as part of a comprehensive
programme for dealing with unemployment. Suffice it to
mention that such measures may include fiscal policies and
programmes, capital and investment policies, the development
and expansion of placement and training programmes, and
migration and population policies.1 The provision of benefits
in case of unemployment, which forms the basic preoccupation
of the present study, is in a sense an activity that merely
complements the broader aspects of a national unemployment
programme. The best thing that society can do for an unemployed worker is to provide him with a remunerative job, not
to pay him an unemployment benefit. Idleness can become
demoralising even when a substitute source of income is available.
In this context it must also be pointed out that an unemployment benefit scheme can scarcely function in isolation.
It must instead be operated in conjunction with other programmes aimed directly at reducing unemployment. Certain
1

See Action against Unemployment, op. cit.

INTRODUCTION

7

technical aspects of this inter-relationship are dealt with in
subsequent chapters. It need only be stated here that, from the
standpoint of both its administration and its financing, an
unemployment benefit scheme requires positive economic
deterrents to mass unemployment as well as efficiently operating placement machinery if it is to work successfully.
The principal concern of an unemployment benefit scheme,
in short, is the personal and human consequences of unemployment. It should not be thought of as primarily a preventive
measure for dealing with the causes of unemployment or for
reducing its volume. Despite these limitations on the range
of its effectiveness, however, an unemployment benefit scheme
is clearly a desirable element in the social programme of any
country because of the way in which it can ease the burden of
unemployed citizens of the country. It should be regarded,
in fact, as an indispensable part of the social programme of
all countries where it has a reasonable chance of being applied
successfully.
It may be noted, however, that attempts have been made
to design the internal structure of unemployment insurance
in such a way that it will contribute, at least indirectly, to
the reduction of unemployment. The United States, for
example, has adopted provisions for varying the contribution rates of each individual employer under unemployment
insurance in accordance with the unemployment experience
of his ex-employees.1 The purpose of this is to provide
employers with a direct financial incentive to stabilise and
regularise employment in their own undertakings. The United
Kingdom law authorises contribution rates to be increased or
decreased from the regular statutory rates by regulation, if it
appears expedient to do so, for the purpose of " maintaining
a stable level of employment ".2 Moreover, the requirement in
most countries that unemployment benefits must be paid
through the medium of employment exchanges considerably
strengthens the position of the latter, and thereby enhances their
effectiveness in dealing with unemployment.
It is also necessary to point out that other measures have
been or are being used to provide maintenance to unemployed
1

See Chapter VII.
National Insurance Act, 1946, section 3. See I.L.O. : Legislative
Series, 1946—U.K. 3.
2

8

UNEMPLOYMENT INSURANCE SCHEMES

persons, in addition to those forming the primary object of
the present study. The present study is concerned principally
with unemployment insurance. As a form of social insurance,
unemployment insurance may usually be distinguished from
other measures for aiding the unemployed by the following
characteristics among others : its pooling of risk ; the fact that
at least a part of the funds needed for its financing is derived
from employers or employees, or both ; the clearly defined
but also somewhat limited obligations that it assumes ; the
definiteness of the benefit rights it confers on prospective
beneficiaries ; the fact that it is not limited in principle to
persons of small or no means ; and its permanence. This
study seeks to deal with all types of unemployment insurance
having a statutory basis, whether or not they are compulsory.
Another type of programme for the unemployed found in
some countries is what may be described as unemployment
assistance. Under programmes of this type regular cash payments are made to the unemployed under conditions that often
resemble in various respects those applicable in case of unemployment insurance. These assistance schemes also are usually permanent and confer certain rights on prospective recipients. On
the other hand, they are usually financed exclusively by the
State or its subdivisions, and payments under them, rather than
being subject to a contribution test, are normally subject to
some kind of income or means test.
Because of the similarities between unemployment assistance
and unemployment insurance, and since they tend to perform
somewhat the same general function, national schemes that are
based exclusively on assistance are also dealt with in this study.
Brief reference only is made to certain other unemployment
assistance schemes found in countries that also have unemployment insurance schemes in operation. In these latter
countries the basic function of the assistance scheme is to
complement unemployment insurance by providing cash assistance to workers who have exhausted their rights to insurance
benefits or who have failed to qualify for them.
Apart from the above-mentioned measures, a variety of
forms of relief have been used at one time or another in different
countries to provide the unemployed with a means of subsistence.
These have included work relief, under which the government
provides special jobs on public projects, at prevailing rates

INTRODUCTION

9

of wages or otherwise, to unemployed workers ; special cash
relief for the unemployed ; and general poor relief. These
measures have often been instituted only on an emergency,
temporary, improvised or ad hoc basis. Rights to receive the
different types of relief have not usually been well defined,
and the amounts payable have tended to be within the discretion of the administrative authorities.
Use of relief measures of this sort may become unavoidable
during periods of widespread mass unemployment. For this
reason, they would deserve special study in any comprehensive
inquiry into unemployment policy as a whole. Since relief
measures are not usually regarded as a form of social security
in its narrower sense, however, and inasmuch as they involve
principles considerably different from those underlying unemployment insurance, they are not dealt with in the present
work.
Another method which is sometimes used to alleviate the
effects of unemployment is the grant of a dismissal or leaving
indemnity. This is a payment, most commonly in the form
of a lump sum, that employers are required by the laws of some
countries to make to a worker whose contract of employment
has been terminated. A somewhat similar provision is occasionally found in pension or provident fund schemes, under
which workers who become unemployed before reaching retirement age become entitled to an immediate payment. This is
charged against their eventual retirement or other pension.
Brief reference is made to such measures in Chapter I, but in
general they are not dealt with in this study.

CHAPTER I

DEVELOPMENT OF UNEMPLOYMENT INSURANCE
Unemployment insurance like many other social institutions, has undergone a long evolution. Space does not permit
detailed examination of this development, interesting as it
has been. An attempt is made in the present chapter, however,
to review the broad lines of growth. Though some of the
problems and issues that arose in the past are now settled, or
are no longer relevant, it is still possible to derive lessons from
the earlier experience.
EXPERIENCE PRIOR TO ADOPTION OF
NATIONAL SCHEMES

National governments did not enter the field of systematic
provision for the unemployed until after the start of the present
century. Prior to their intervention, however, various interesting developments occurred that are worth summarising
briefly. To no small extent these first developments provided
the origins of and served as a guide to much of the national
legislation that followed.
The early history of unemployment insurance may
conveniently be divided into three different phases. The first
phase was marked by the absence of any public or employer
participation, and continued until approximately the last decade
of the nineteenth century. The second consisted in the appearance of employer benefit schemes during the first few decades
of the twentieth century. The third was marked by the initiation of municipal subsidies for voluntary schemes, and extended
from roughly the last decade of the nineteenth century to the
second decade of the present century.
Voluntary Trade Union Schemes
The forerunners of modern programmes for insuring against
unemployment appear to be the schemes developed by

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

15

the Swiss canton of St. Gall to adopt a plan in 1894 authorising its municipalities to create funds to which all workers
earning less than a stated amount would be required to affiliate
and contribute. The municipality of St. Gall founded such a
fund in 1895, representing the first compulsory unemployment
insurance scheme established by public authority. Workers
enjoying regular employment were reluctant to take part even
in this compulsory scheme, however, and it was discontinued
in 1897.
Concurrently with the Swiss experiments with municipal
unemployment funds, public.authorities in certain other countries started to grant subsidies to private funds. The municipalities of Dijon and Limoges in France began this practice in
1896 and 1897, and the province of Liège in Belgium undertook
payment of subsidies in 1899. The most notable scheme,
however, was that established by the town of Ghent,
Belgium, in 1901. Its plan came to be widely known as the
" Ghent System " and was eventually copied in a number of
places.
The Ghent System consisted basically in the provision of
a municipal subsidy to private unemployment funds for the
purpose of increasing the benefits paid to unemployed members
of the fund. Subsidies were paid to the fund annually on the
basis of the benefits they had awarded during the preceding
year. Subsidies provided under the Ghent System went
chiefly to trade union funds, which handled all aspects of the
administration of benefits, including verification of the genuineness of unemployment.
The Ghent System met with immediate success and in the
course of time provided many workers with insurance protection against unemployment. It may justifiably be regarded
as the real originator of unemployment insurance in view of the
interest it aroused among proponents of social reform in all
countries and the stimulus it gave to the creation of similar
plans elsewhere. The concept underlying the Ghent System
spread with considerable rapidity and it was emulated, with
some modifications, not only in other Belgian municipalities but
also in France, Germany, Switzerland, Italy, the Netherlands,
Norway, Denmark, Finland and Great Britain. 1
1
See Joseph L. COHEN : Insurance againstlUnemployment (London, P. S. King and Son Ltd., 1921), Part II.

16

UNEMPLOYMENT INSURANCE SCHEMES

Provincial subsidies came gradually to be added in some
countries to those provided by municipalities. Finally, starting with France in 1905, the Ghent System began in some
countries to be applied on a national basis. Thus began the
action of national governments to relieve the distress caused by
unemployment.
Significance of Early Experience
It is useful to attempt a brief evaluation of the experience with voluntary unemployment benefit schemes prior
to the rise of national legislation. This experience, among
other things, may be of interest for countries which have not
yet introduced unemployment insurance. The early voluntary
schemes achieved a certain degree of success for a period of time
and, taken together, managed to protect many thousands of
workers against the risk of unemployment. They demonstrated that pooling this risk was greatly preferable to letting
each individual worker try to save for a possible " rainy day ".
A comparison of experience before and after the rise of the
Ghent System also shows that the financing of unemployment
insurance was too heavy a burden for the workers to bear
alone, even when banded together, and that a social contribution of some sort was necessary, whether provided by the public
authorities or by employers.
It was also found that voluntary insurance would work
only if handled through trade unions or well-established mutual
benefit societies. In this case, at least the full membership of
the union or society could be required to participate in the
insurance scheme. Thus, it would scarcely seem possible for
much use to be made of voluntary unemployment insurance in
countries which do not have a strong trade union movement or
a strong tradition of mutual-benefit societies, failing which the
difficulties of securing adequate participation in the scheme
would be too great.
However, in spite of the highly developed trade union
movement in Europe at the time, it never proved possible to
attain anything approaching satisfactory coverage even under
locally subsidised schemes. No country succeeded in covering even as many as half of its industrial workers. Most nonunion workers, for whom the risk of unemployment was often
the greatest, were left completely unprotected and the same

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

17

was true of many union members as well. From this it may
perhaps be concluded that unemployment insurance, with its
serious danger of adverse selection, can never be operated
on a fully voluntary basis at all. Either recourse must be had
to a compulsory scheme under which it is legally obligatory
for all workers to be covered, or indirect pressures must be
applied with somewhat the same effect.
Two other features of the early experience may be noted.
Both concern the breadth of the base over which the risk of
unemployment was spread. The financial difficulties encountered by municipally subsidised funds, and the gradually
emerging need for provincial and later national subsidies,
appear to indicate that the municipality was too small a political unit on which to base an unemployment insurance scheme.
The production and market phenomena that produced unemployment were very often national in scope and accordingly
the risk had finally to be spread over the whole nation.
In the second place, the membership of the trade union
schemes as well as of the employer schemes usually consisted
of employees in a single industry or trade. The incidence of
unemployment, however, differs considerably from one industry
to another. A slump in one industry may soon bankrupt a
scheme confined to that industry alone, while schemes in other
industries are unaffected. This is another reason why a much
sounder base for unemployment insurance was obtained when
the risk was finally spread over a number of industries. But
it was hardly possible to do this through voluntary trade union
or employer schemes.
National governments began to recognise early in the
twentieth century that neither voluntary schemes nor smaller
units of government could deal successfully by themselves with
the problem of unemployment. They accordingly began gradually to adopt measures bringing the more powerful support of
the entire nation to the problem. A brief survey of the rise of
national unemployment insurance legislation, covering a span
of 50 years, is presented below.

18

UNEMPLOYMENT INSURANCE SCHEMES

NATIONAL SCHEMES STARTED BEFORE

1920

Early Voluntary Schemes
The first national laws on unemployment insurance
were adopted by France, Norway and Denmark during the
first decade of the century. Each of these countries embodied
the principle of national subsidisation of voluntary funds in
its original laws. France and Denmark have not adopted
compulsory unemployment insurance up to the present day.
France.
The first appropriation for state subsidies to private
unemployment insurance funds was included in the French
Finance Act of 22 April 1905. These funds were usually set
up by trade unions or mutual-benefit societies. They were
required to meet certain conditions laid down in the law and
to derive a part of their moneys from their members' contributions. By 1915 about 135 trade union unemployment insurance societies were being subsidised in France.
In addition, the French Government established an unemployment assistance scheme in 1914, through a credit known as
the " national unemployment fund ". This scheme called for
the payment of allowances by state-subsidised public unemployment funds to unemployed workers meeting certain qualifications. Workers were not required to contribute to this
scheme, the entire cost of which was to be borne by the State,
départements and communes. The unemployment funds concerned were to be established and operated by communes or
départements. The allowances payable to individual workers
were subject to a means test.
The provisions of the original legislation have been amended
many times in respect of their administrative and other aspects.
The enactments concerning unemployment assistance and subsidies to unemployment insurance funds were consolidated in
a decree of 6 May 1939.1 This remained in force until it was
repealed and replaced by a new consolidation of wartime and
post-war changes in Decree 51-319 of 12 March 1951 2, subsequently amended by Decrees 54-175 and 54-355 of 18 Febru1
2

I.L.O. : Legislative Series, 1939—Fr. 8.
Ibid., 1951—Fr. 3.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

19

ary and 29 March 1954 respectively. The basic concepts
underlying the original legislation are still retained in the provisions now in force, but the principal scheme now consists of the
system of non-contributory allowances financed entirely by the
public authorities and payable to unemployed workers whose
income together with that of their household does not exceed specified levels. A state subsidy of 40 per cent, is still payable to
unemployment insurance funds operated by trade unions, trade
associations, mutual-benefit societies, and occupational and
interoccupational associations. The number of such funds,
however, dwindled from over 200 in 1938 to only one in 1951.
France ratified the Unemployment Provision Convention,
1934, on 21 February 1949. In 1951 the French Government stated in a report to the I.L.O. on the action taken in
respect of the Unemployment Provision Recommendation, 1934,
that it had not been considered advisable to establish compulsory unemployment insurance in France for economic reasons.
Norway.
Trade unions in Norway had already begun in the 1880s
to set up unemployment benefit funds. In 1906 a law was
adopted in which the national Government promised a subsidy
equal to one-quarter of the benefits paid by voluntary funds.
The subsidy was increased to one-third in 1908, and to onehalf by the Act of 6 August 1915 1 ; the latter Act made twothirds of the subsidy chargeable to communes and one-third
to the national Government. The coverage of this voluntary
system increased steadily until in 1920 there were 27 funds
with 116,000 members. The depression years caused the
disappearance of some of the funds, however, and in 1936 only
22 funds were operating with about 70,000 members.
Problems encountered in the application of the voluntary
system during the depression, and the limited number of employees covered, eventually led to a decision to introduce compulsory insurance in Norway. This was done by the Unemployment
Insurance Act of 24 June 1938. 2 This Act continued the subsidy
provisions of the earlier legislation but provided that benefits
paid through voluntary insurance should only supplement
rather than replace compulsory insurance benefits. The private
1
2

I.L.O. : Legislative Series, 1922—Nor. 2, and 1932—Nor. 2.
Ibid., 1938—Nor. 3,1946—Nor. 3,1947—Nor. 2, and 1949—Nor. 6.

20

UNEMPLOYMENT INSURANCE

SCHEMES

funds were obliged to cease their activities during the occupation,
however, and they were not revived after the war. The subsidy
for such funds was finally abolished in 1946.
Some provisions of the 1938 Act were modified by decrees
issued during the occupation period but were reinstated after
the war. The Act was amended several times between 1946
and 1955, but the basic structure of the compulsory scheme
created in 1938 has been retained. Thus Norway was not only
the first but has been the only Scandinavian country to adopt
compulsory unemployment insurance. On 29 September 1954
it ratified the Social Security (Minimum Standards) Convention,
1952, in respect of unemployment benefit.
Denmark.
The operation of voluntary unemployment insurance as
well as sickness insurance schemes was a popular activity of
trade unions in Denmark for many years. The Danish Government eventually decided to give financial support to the unemployment schemes and in 1907 adopted a law providing for
regular subsidies to those meeting specified conditions. This law
was patterned closely after an 1892 law providing for subsidisation and regulation of voluntary sick clubs. Existing unemployment clubs were converted into independent associations
whose funds were segregated from those of the trade union.
While membership in an unemployment club was nominally
voluntary, the trade unions usually required all members to
join the club organised for the particular trade. A higher proportion of workers in Denmark were members of trade unions
at that time than in perhaps any other country of the world.
The clubs were organised largely on a craft basis, with usually
only one club throughout the country for each trade. Members
were required to contribute to the clubs in addition to the
subsidy provided by the State, their rate of contribution being
determined by the expenditures of the club concerned.
While a number of amendments have been made to the
original 1907 provisions, the broad outlines of the system of
state-subsidised voluntary unemployment insurance it established have remained unchanged to the present day. 1 Most
1
For successive consolidations of the legislation see I.L.O. :
Legislative Series, 1921—Den. 1, 1927—Den. 3, 1933—Den. 7, and
1947—Den. 1. For the most recent amendments see ibid., 1950—Den. 3.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

21

of the amendments have in fact been concerned with clarifying or extending the concepts which underlay the original
legislation. The size of the state subsidy in relation to total
costs has gradually been increased during its nearly 50-year
history.
The Danish unemployment insurance system in some respects differs markedly from those now found in most other countries. From a historical standpoint this system is based on several traditions of long standing that are not found in combination
in most other countries. These include a long experience on the
part of Danish trade unions in providing voluntary unemployment insurance prior to enactment of the national law, use of a
quite similar pattern of subsidised voluntary insurance in providing sickness benefits, and a highly developed trade union movement.
British Compulsory Scheme
The first national law instituting compulsory unemployment
insurance was enacted by Great Britain in 1911. Before this
Act about 700,000 trade union members had been covered by
trade union benefit schemes. In 1909 a Boyal Commission
recommended the introduction of a system of labour exchanges
and unemployment insurance to deal with the problem of unemployment. A labour exchange law was enacted during the
same year, and the National Insurance Act, 1911, finally laid
the statutory basis for a compulsory contributory scheme of
unemployment insurance. This scheme was to be national in
scope administered principally by the State.
The original Act of 1911 was in fact both experimental
and limited in character. Insurance was made compulsory for
only about two-and-a-quarter million manual employees in
seven skilled trades that suffered from marked instability in
employment A tripartite system of contribution was provided,
but employers could receive a refund of one-third of their contributions in respect of workers employed continuously by them
for 12 months ; the attempt through the latter provision to
encourage employers to regularise their employment was later
dropped. The Act also authorised payment of subsidies, equal
to one-sixth of the benefits paid, to non-profit associations
operating voluntary insurance schemes. This last provision
produced in effect a mixture of compulsory and voluntary

22

UNEMPLOYMENT INSURANCE SCHEMES

insurance ; but it disappeared by 1920 when the scope of compulsory coverage was extended. 1
Economic developments and the recommendations of
several Royal Commissions caused the original scheme to be
modified many times during the first four decades of its existence. 2 The changes have been concerned with numerous features of the scheme including its scope, qualifications for and
rates of benefit, and contribution conditions. In 1916 oneand-a-half million munitions workers were covered. In 1920
all manual workers excepting domestic servants and agricultural employees and all non-manual workers earning £250 per
year or less were brought in. A special scheme for agricultural
employees was started in 1936, and in 1940 the wage ceiling
for non-manual workers was raised to £420 per year.
The depression between the two world wars placed many
financial and other strains on the scheme. The maximum
duration of benefits had to be extended in 1921 and dependants'
allowances were introduced. The most fundamental changes
were made, however, during the early 1930s. In 1931 responsibility for financing aid to the long-term unemployed was
placed directly on the State itself and such aid was made subject
to a means test. The Unemployment Act of 1934 specifically
limited the responsibility of the insurance scheme to shortterm unemployment 3, and created a separate unemployment
assistance scheme for long-term unemployment. Payments
under the latter were made subject to a household means test
until 1941 and thereafter to a personal means test. In April
1936 the United Kingdom became the first country to ratify
the Unemployment Provision Convention, 1934.
A sweeping revision and extension of British social security
legislation was undertaken after the Second World War. In
this process unemployment insurance was made an integral
part of the new unified and comprehensive national insurance
scheme established by the National Insurance Act, 1946. *
The previous measures of unemployment assistance were
similarly absorbed into a new national assistance programme
1

I.L.O. : Legislative Series, 1920—G.B. 3.
See Sir Frank TILLYARD : Unemployment Insurance in Great
Britain, 1911-48 (Leigh-on-Sea, The Thames Bank Publishing Company
Ltd., 1949).
3
I.L.O. : Legislative Series, 1935—G.B. 1.
* Ibid., 1946—U.K. 3, and 1951—U.K. 3.
2

DEVELOPMENT OF U N E M P L O Y M E N T INSURANCE

23

set up by the National Assistance Act, 1948.1 These integrated measures are the ones in force today. On 27 April
1954 the United Kingdom ratified the Social Security (Minimim
Standards) Convention, 1952, in respect of unemployment
benefit.
Other Voluntary Schemes
Despite the British decision of 1911 to embark on compulsory insurance, the next three countries to introduce national
participation in unemployment insurance limited their initial
intervention to subsidising and regulating voluntary funds.
The countries concerned, which enacted their first laws during
the period 1916-19, were the Netherlands, Finland and Spain.
Netherlands.
About 30 communal unemployment funds were receiving
municipal subsidies in the Netherlands at the start of the First
World War. Nearly 300 trade unions were affiliated to these
funds. An order of 2 December 1916 authorised the State to
start subsidising insurance funds established by associations
of workers. The subsidy was normally to match contributions paid by the members of each fund, with the national
Government and communes each providing one-half of the
subsidy. Most of the funds that became entitled to subsidies
under this order were set up by trade unions and covered the
entire country.
After the First World War a new system came into existence under which individual employers paid what were called
"waiting allowances" to unemployed workers. Against these
payments, which were made at the discretion of the employer,
the national Government, starting in 1919, paid a subsidy
that eventually rose to 50 per cent. The subsidies were
granted only to employers having five or more employees and
an unemployment rate of at least 15 per cent. Regulations
issued on 29 December 1948 also established a temporary scheme
of unemployment assistance, financed by the State, for workers
who were not, or were no longer, eligible for waiting allowances.
An Act of 9 September 1949, which came into effect on
1 July 1952, finally established a compulsory system of unem1

I.L.O. : Legislative Series, 1948—U.K. 1, and 1951—U.K. 5.

24

UNEMPLOYMENT INSURANCE

SCHEMES

ployment insurance in the Netherlands. 1 This law retains the
previous system of waiting allowances on an industry basis
but superimposes on it a compulsory unemployment insurance
scheme proper. The latter applies both to workers who are
not covered by waiting allowance plans and also to those who
have received waiting allowances for the maximum duration
permitted by such plans.
Finland.
An order of 2 November 1917 instituted a system of state
subsidies to voluntarily organised unemployment insurance
funds in Finland. The subsidies equalled one-half of the
benefits paid to single members of a fund, and two-thirds of
the sums paid to members with dependants. The remaining
revenues of each fund were to be derived from members' contributions. A new Act was promulgated on 23 March 1934 2
which differed in some respects from the original law but did
not modify its basic character. This Act, as later amended,
remains in force today.
In actual practice only a few funds have ever been established under the Finnish scheme. In 1953 there were nine
unemployment funds, all set up by trade unions. No municipal
or local funds have been founded. It may be noted that the
economy of Finland is considerably more agricultural than that
of most European countries, and that much use is made of
public works to assist unemployed Finnish workers.
Spain.
A decree of 19 March 1919 initiated a state subsidy in
Spain for mutual-aid societies providing insurance against
unemployment. These societies could be of various types
including employers', workers' or joint organisations. Provisions governing the subsidy and those concerned with regulation of voluntary societies were amended by decrees issued in
1923, 1928 and 1931. 3 An insurance fund to provide assistance
to workers affected by technological unemployment was set
up in the National Welfare Institution in 1954 ; undertakings
pay a contribution of 0.35 per cent, of wages to this fund.
1
2
8

I.L.O. : Legislative Series, 1949—Neth. 2, and 1953—Neth. 1.
Ibid., 1934—Fin. 3, 1936—Fin. 3, and 1948—Fin. 1.
Ibid., 1923—Sp. 1, and 1931—Sp. 5.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

25

Italian Compulsory Scheme
Italy became the second country in the world to adopt a
system of compulsory unemployment insurance by virtue of
a decree issued on 19 October 1919. 1 There had previously
been a few local unemployment funds in Italy but the voluntary
movement had never spread very far. The 1919 legislation
reorganised the system of employment exchanges, and at the
same time made unemployment insurance compulsory for most
manual workers under a state-administered scheme. The
scheme established was modelled after the British scheme
including a tripartite basis of contribution.
The provisions of the 1919 decree were subsequently replaced
by a decree of 30 December 1923, and again by Decree No.
1827 of 4 October 1935. The latter decree, as amended in
1939 and again in 1949, is still in force. 2 Various special
steps were taken after the end of the Second World War to
increase the rate of unemployment benefits, the value of which
had shrunk considerably by reason of currency depreciation.
Provision was made for unemployed workers to receive, in
addition to ordinary benefits, a special flat daily allowance
and also an additional cost-of-living allowance. Extraordinary
daily allowances were also made payable to special categories
of unemployed workers not entitled to receive ordinary unemployment benefits. These measures were codified in the Act of
29 April 1949. The same legislation extended unemployment
insurance to agricultural workers and salaried employees.
Italy has been devoting much study in recent years to
the problem of reforming its legislation dealing with unemployment. An intensive inquiry was undertaken by a parliamentary commission in 1952, the results of which were presented in a report completed in March 1953. The report recommends extension and simplification of the existing unemployment
insurance scheme, increased benefit amounts, and a longer
maximum duration of benefits. Italy ratified the Unemployment Provision Convention, 1934, in October 1952.
*

*

*

i I.L.O. : Legislative Series, 1920—It. 2.
Ibid., 1935—It. 2, 1939—It. 1 and 2, and 1949—It. 2.

a

26

UNEMPLOYMENT INSURANCE SCHEMES

Thus, by the end of the second decade of the century, the
national governments of eight countries had enacted laws
concerning unemployment insurance. Only two of these
provided for compulsory insurance, the other six preferring to
begin with subventions to voluntary unemployment insurance
funds. In this connection it may be noted that the International Labour Conference at its First Session in 1919 adopted
the Unemployment Recommendation, 1919, which urged all
countries to establish " an effective system of unemployment
insurance, either through a Government system or through a
system of Government subventions to associations whose rules
provide for the payment of benefits to their unemployed
members ".
NATIONAL SCHEMES STARTED IN THE 1920S

The widespread unemployment that appeared after the
First World War prompted a number of additional national
governments to take their first steps in the field of unemployment insurance. A few during the early 1920s enacted laws
providing state subsidies to voluntary schemes, but a larger
number embarked during the decade on compulsory insurance.
Voluntary Insurance Schemes
Belgium.
The development of trade union unemployment funds in
Belgium and the rise there of municipally subsidised schemes
of the Ghent type have been referred to above. The weaknesses of these, when confronted by heavy wartime and post-war
unemployment, led the national Government to come to their
assistance. Royal orders issued in December 1920 undertook
to revive the bankrupt funds, regulated their operation and
set up a national emergency fund for the purpose of providing
a national subsidy to approved funds. The approved funds,
which were nearly all trade union funds, were to be supervised
by communal funds established by communal governments ;
the latter distributed the subsidies and were given a large
degree of autonomy.
Few basic changes were made in this scheme until 1933,
by which time the full impact of the depression of the early

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

27

thirties made itself felt. The high degree of decentralisation led
in this crisis to virtual administrative chaos, and the need for
more centralised control became apparent. This was achieved
by an order of 31 May 1933, which gave the national Government much greater authority to lay down uniform coverage,
contribution and benefit requirements for unemployment
funds. * The previous machinery of voluntary funds and
communal subsidies was retained, but it was made subject to
strong central supervision.
In the general reform of Belgian social security legislation
after the Second World War, the previous system of subsidsed
voluntary insurance was replaced by a compulsory scheme
under direct state control. This was effected by a Regent's
order of 26 May 1945 which set up a central fund for the maintenance of involuntarily unemployed persons. This order as
subsequently amended now governs unemployment insurance
in Belgium.2 There are no longer any voluntary unemployment
funds as such, but recognised workers' organisations may still
serve as paying agents on behalf of and under supervision of
the central state fund.
Czechoslovakia.
The Czechoslovak Government by an Act of 19 July 1921
undertook to provide subsidies to voluntary unemployment
funds. 3 This scheme came into effect, however, only on 1
April 1925. The subsidised funds were usually operated by
trade unions, and the size of the subsidy was related to benefits
paid to members. The state grant was increased substantially in 1930, because of difficulties that trade unions had experienced in coping with a greatly increased volume of unemployment.
The problem of unemployment became less acute in the
latter part of the thirties. During the German occupation
the occupying authorities abolished the scheme built up under
the 1921 law with its trade union basis and, by a decree issued
in March 1940, replaced it with a new scheme of unemployment
allowances. These allowances were payable on a means-test
1
2

I.L.O. : Legislative Series, 1933—Bel. 4.

Ibid., 1945—Bel. 1, 1946—Bel. 11, 1947—Bel. 7, 1948—Bel. 1,
1949—Bel. 3, and 1951—Bel. 4.
3
Ibid., 1921—Cz. 5.

28

UNEMPLOYMENT INSURANCE

SCHEMES

basis to persons available for work, and were financed by a
tripartite system of contribution. An order of 27 August 1943
repealed most of the provisions concerning unemployment
allowances but retained the contribution provisions. Thereafter the principal function of the scheme became one of enabling workers to find employment. Financial aid was provided
for vocational training, purchase of tools, travelling expenses
to a new job, and family benefits when the worker's job took
him away from home.
The provisions enacted during the war have largely remained in effect. The risk of unemployment was not dealt
with in the comprehensive new national insurance Act adopted
in 1948. Czechoslovakia ratified the Unemployment Provision Convention, 1934, in June 1950. The state contribution
to the unemployment scheme was abolished as from 1 January
1951, and that of employers and employees was eliminated
as from 1 January 1953.
Switzerland.
The inability of private and communal funds in Switzerland to deal by themselves with growing unemployment led
the federal Government, by an Act of 17 October 1924, to
institute a permanent subsidy for recognised public and private funds. 1 The federal Government at that time lacked
constitutional authority to legislate directly concerning unemployment insurance or to require its application throughout
the country since, under the federal structure, such authority
resided only with the cantons. The 1924 law- laid down various conditions, however, that the funds had to satisfy to
qualify for the federal subsidy. Orders issued by the federal
Government in 1925 and 1929 amended and extended the 1924
law in various ways.
In harmony with the intent of the national legislation to
encourage the growth of unemployment insurance, the cantons
began immediately in 1925 to adopt legislation in this field.
Some cantons at once made insurance compulsory for specified
classes of workers and set up cantonal funds for its administration. Others authorised their communes to make insurance
compulsory and provided subsidies to the local funds thus
1

I.L.O. : Legislative Series, 1924—Switz. 3.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

29

established. Still others provided for cantonal subsidies to
voluntary schemes. All but one of the cantons had issued
regulations by 1933 concerning unemployment insurance.
Insurance was then provided through public cantonal or communal funds, occupational or trade union funds, and joint
funds for individual industries administered by workers and
employers in combination.
Unemployment problems accompanying the 1930 depression and the Second World War and its aftermath led the federal Government to adopt new legislation or regulations from
time to time to strengthen or standardise the scheme set up
in 1924. Switzerland ratified the Unemployment Provision Convention, 1934, in June 1939. Important changes were made in
the administration of the scheme by a decree of 14 July 1942,
to meet emergency conditions occasioned by the war. On 4
April 1946 a federal decree was issued amending the Constitution so as to empower the federal Government, among other
matters, to legislate on unemployment insurance and assistance. This decree was approved by referendum on 6 July
1947.
In accordance with its new legislative power, the federal
Government enacted a revised law on 22 June 1951 which
forms the present basis of unemployment insurance in Switzerland. 1 Authority to establish public unemployment insurance
funds and to make insurance compulsory is vested in the cantons ; the funds, however, are subject to federal approval and
supervision. The federal subsidy is continued although the
1951 law reduced its size. Detailed federal requirements are
now laid down concerning persons to be admitted to insurance,
qualifying conditions and benefit rates, finance, and administration. Unemployment insurance is now compulsory in
almost all cantons. In 1953 there was a total of 182 unemployment insurance funds in Switzerland including 15 public
cantonal funds, 42 public communal funds, 34 private trade
union funds, and 91 private joint employer-employee funds ;
the smallest fund had only 86 members while the largest had
81,148 members. 2
1
2

I.L.O. : Legislative Series, 1951—Switz. 1.

For an official description of the evolution of unemployment
insurance in Switzerland, see La Vie Economique (Berne, Federal Department of Public Economy), Dec. 1954, pp. 452-463.
3

30

UNEMPLOYMENT INSURANCE

SCHEMES

Unemployment Assistance in Luxembourg
A scheme of unemployment assistance was established in
Luxembourg by a law approved on 6 August 1921. This law
authorised payment of allowances to unemployed workers
whose other means during unemployment did not exceed specified limits. It was originally contemplated that employers
and workers would contribute one-half of the revenues of the
scheme, with public authorities providing the remainder. In
the course of time the State undertook to provide all of the
funds required for allowances and it recovered only one-fourth
of these from the communes. The main outlines of the original
scheme were retained in the Grand-Ducal order of 24 May
1945 which, as subsequently amended on several occasions,
regulates the payment of allowances today.
Compulsory Insurance Schemes
Austria.
The third country to enact compulsory unemployment
insurance legislation was Austria, whose first basic law was
adopted on 24 March 1920. x This Act called for a stateadministered scheme to be financed on a tripartite basis. The
scope and collection of contributions for unemployment insurance was linked with sickness insurance. Although the Act
had the characteristics of an insurance scheme in other respects,
a needs test was introduced by specifying that unemployed
contributors could receive benefit only if their means of subsistence were endangered. A supplementary scheme of unemployment assistance was established in 1922 for workers who
exhausted their rights to insurance benefits and were in straitened circumstances.
The 1920 law was amended on numerous occasions prior
to the Anschluss in 1938. Provisions of the German insurance
code were introduced at that time, and continued to govern
unemployment benefits in Austria until after the end of the
war. An order of 16 December 1942 regarding compensation
for working time lost as a result of shortages remained in effect
until 30 June 1950. After the war provisional measures were
introduced by a law of 15 May 1946, pending more comprehensive reform of unemployment insurance legislation. The
1

I.L.O. : Legislative Series, 1920—Aus. 1 to 7.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

31

latter was achieved in Act No. 184 of 22 June 1949 \ which
in effect created a new scheme of compulsory unemployment
insurance in Austria, and also provided for the payment of
unemployment assistance.
Ireland.
Unemployment insurance in Ireland dates in reality from
1911, since the original British Act of that year applied to Ireland as well. The revised British law of 1920, which extended
compulsory coverage to most manual employees and to lowerpaid salaried employees, was taken over by the Irish State
set up in 1922.
This law continued in force until its repeal in 1952, although
it was amended on a number of occasions to modify rates of
contribution and benefit, conditions for benefit, and other
provisions. A complementary scheme of unemployment assistance for persons not covered by insurance, or not entitled to
benefits thereunder, was established by a law of 16 November
1933. Rates of assistance fixed in this law were also modified
by later amendments. The Unemployment Provision Convention, 1934, was ratified by Ireland in June 1937.
Preceding unemployment insurance legislation in Ireland
was repealed by the Social Welfare Act (No. 11) of 14 June
1952. 2 This law made unemployment insurance an integral
part of a new co-ordinated system of social insurance covering
several different risks. It also simplified and liberalised the
previous provisions concerning unemployment assistance.
U.S.S.R.
A system of compulsory unemployment insurance was
established in the Union of Soviet Socialist Republics by
provisions of the Labour Code of 1922.3 The scheme was
financed entirely by contributions from employers. Payment
of benefits under this scheme was permanently suspended,
however, by a decree of 9 October 1930.
Poland.
The next scheme of compulsory insurance established was
that set up for manual workers in Poland by a law of 18 July
1
2
3

I.L.O. : Legislative Series, 1949—Aus. 4, and 1950—Aus. 2.
Ibid., 1952—Ire. 1.
Ibid., 1922—Russ. 1.

32

UNEMPLOYMENT INSURANCE

SCHEMES

1924.* This scheme applied originally to wage earners in
six main industries who were employed in establishments having
five or more workers. It was administered by the State with
a tripartite system of financing. A separate scheme was set
up for intellectual workers by an Act of 28 October 1925, which
was further elaborated by an order of 24 November 1927.
Both schemes were amended on various occasions prior to the
Second World War.
A decree of 29 September 1945 called for shifting of the
whole of the employees' contribution to the employers. An
order of 8 March 1949 fixed the employers' contribution rate
in the case of private firms at 2 per cent, of their payroll. 2
Pre-war unemployment insurance legislation has not been
formally abolished in Poland, but no longer appears to be
applied in practice. The reason given for this is that full employment exists in the country.
Bulgaria.
The Employment Exchanges and Unemployment Insurance Act of 12 April 1925 created a state-administered scheme
of compulsory unemployment insurance in Bulgaria. 3 The
scheme was financed from flat weekly contributions paid by
employers, employees and the State. Changes in various
details of the scheme were made by amendments of the law
adopted prior to and during the war.
The Social Insurance Act of 28 December 1948 established
a new integrated social insurance scheme and incorporated
unemployment insurance in this scheme. 4 In December
1949 Bulgaria ratified the Unemployment Provision Convention, 1934. The new labour code promulgated on 13 November
1951, however, repealed earlier provisions respecting unemployment insurance. 5
Germany.
Germany did not introduce unemployment insurance
until adoption of the law of 16 July 19276, although it had
1

I.L.O. : Legislative Series, 1924—Pol. 3.
2 Ibid., 1949—Pol. 1C.
8
Ibid., 1925—Bulg. 2.
* Ibid., 1949—Bulg. 1.
B
Ibid., 1951—Bulg. 2.
8
Ibid., 1927—Ger. 5.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

33

pioneered in setting up other forms of social.insurance. Heavy
unemployment following the First World War had obliged
it to set up elaborate programmes of unemployment relief,
and this was made contributory in 1923. The new 1927 unemployment insurance Act superseded the relief programme.
The 1927 Act made insurance compulsory for all wage
earners and for lower-paid salaried workers. Ordinary unemployment benefits were to be financed by contributions from
employers and employees. Provision was made, at the same
time, for extended or emergency unemployment assistance to
indigent workers during depressions, financed from funds of the
national and local governments.
However, the rather clear-cut distinction made by the
original law between insurance and assistance came gradually
to be blurred between 1928 and 1932 by reason of changes
made to cope with the heavy unemployment of that period.
By the time the Second World War broke out unemployment
insurance had been entirely replaced by a system of unemployment relief, although contributions totalling 6.5 per cent.
of wages were still being collected from employers and workers.
No fundamental modifications were made in the unemployment
provisions during the war itself, there being virtually no unemployment except for some part-time unemployment occasioned
by interruptions of production.
The collection of unemployment contributions was continued after the occupation. An ordinance of 28 March 1947
provided for the regulation of unemployment insurance in
Eastern Germany. In October 1947 an amended version of
the 1927 law was restored in the various zones of Western Germany and war-time changes were abrogated. The later action
re-established a genuine system of insurance benefits and
unemployment assistance and provided for use of contributions
accumulated in previous years. A law passed by the Federal
Republic of Germany on 10 March 1952 set up a new federal
placement and unemployment insurance institution to administer unemployment insurance. 1 Income limits applied in the
assessment of contributions and benefits were raised by a law
adopted on 13 August 1952, while benefit rates were increased
by a law of 24 August 1953.
1

I.L.O. : Legislative

Series, 1952—Ger.F.R. 3.

34

UNEMPLOYMENT INSURANCE

SCHEMES

Yugoslavia.
A scheme for making payments to unemployed workers
and a system of employment exchanges were established in
Yugoslavia by an order of 26 November 1927.x These measures
were to be financed from contributions shared equally between
employers and workers. The cash benefits were payable to
qualified unemployed workers who were not in receipt of other
income sufficient for subsistence. Provision was also made
for furnishing travelling allowances, emergency grants, and
assistance in kind. The 1927 provisions were amended and
supplemented by an order dated 19 April 1932.
By a decree of 18 April 1946 the administration of employment exchanges in Yugoslavia, including receipt of contributions levied therefor and payment of subsistence and travelling allowances to unemployed workers, was entrusted to a
central trade union committee. A decree of 31 December
1948 abolished employees' contributions to the employment
service system but retained those of employers, which were to
equal 0.5 per cent, of wages. The new general social insurance
law adopted in 1950 did not provide for unemployment insurance. However, a new system of unemployment benefits for
all employees to be financed from social insurance funds of
the State was established by a decree issued on 29 March
1952.2 Yugoslavia ratified the Social Security (Minimum
Standards) Convention, 1952, in respect of unemployment
benefit in November 1954.
Dismissal Benefits in Latin America
A provident fund for private salaried employees was
established in Chile by a law enacted in 1924. To the pensions
payable by this fund were subsequently added contributory
unemployment benefits payable for up to 90 or 180 days to
salaried employees dismissed for reasons beyond their control
after at least one year of membership in the fund. Because
of the limited scope of the scheme and since no comparable
benefits are provided for the much larger number of wageearning workers, however, the Chilean provisions are not covered
in subsequent chapters of this study.
1
2

I.L.O. : Legislative Series, 1927—S.C.S. 2.
Ibid., 1952—Yug. 3.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

35

A law of 16 August 1928 brought employees in industry
and commerce in Uruguay under a pension scheme previously
applying only to employees of public utility undertakings.
While dealing principally with long-term risks, this scheme
also provided certain benefits to workers dismissed for reasons
other than misconduct. The basic provisions now in force
were set forth in an amended law of 11 January 1934.x
The scheme provides that workers dismissed before the
age of 40 who have had at least 10 years of employment shall
receive a benefit during their first year of unemployment.
This benefit is equal to 2 per cent, of the old-age pension due
to them after 30 years of employment, multiplied by the actual
number of years of employment. Workers dismissed after
the age of 40 receive from 2 to 3 per cent, of the pension due
for 30 years' employment, multiplied by the actual number of
years of employment, so long as unemployment continues. A
somewhat similar benefit is paid for up to six months under the
pension scheme for rural workers, after at least five years of
coverage. In addition, special unemployment benefit provisions were introduced for workers in the cold-storage industry
and wool and leather trades in 1944 and 1945 ; benefits are
paid under these provisions if less than a guaranteed number
of hours of employment are worked in a month.
While the dismissal benefits for industrial and commercial
workers in Uruguay.are on a contributory basis and provide
some protection against unemployment, they more nearly
resemble a reduced pension in respect of involuntary premature
retirement than a form of unemployment insurance proper.
This resemblance is enhanced by the long qualifying periods
involved. Accordingly, the provisions in question are not
dealt with further here. A plan for introducing a general
unemployment insurance scheme was submitted to the parliament of Uruguay in September 1949, but was not adopted.
*

4c

*

The 1920s thus saw the addition of eleven new national
unemployment schemes to the eight which existed at its start.
The trend toward compulsory insurance and away from voluntary insurance is apparent from the fact that seven of the new
1

I.L.O. : Legislative Series, 1934—Ur. 1.

36

UNEMPLOYMENT INSURANCE SCHEMES

laws were of the former type while only two were of the latter.
This raised the number of compulsory laws in 1930 to nine
as compared with seven voluntary laws. The Swiss cantonal
laws were of both types, while France and Luxembourg were
providing non-contributory unemployment assistance.

NATIONAL SCHEMES STARTED IN THE 1930S

No new national scheme of unemployment insurance was
thereafter introduced until 1934. However, the severe unemployment resulting from the depression of the early thirties
forced a number of countries hitherto relying principally upon
relief to look for a more systematic way of caring for the unemployed. Beginning in 1934, five countries enacted unemployment benefit laws within the next few years. One of them
established a voluntary insurance scheme, three a compulsory
insurance scheme, and one an assistance scheme.
It was in the same year that the International Labour
Conference adopted the Unemployment Provision Convention
and Recommendation, 1934. The Convention required countries which ratified it to maintain a compulsory or voluntary
scheme of contributory benefits or allowances for the involuntarily unemployed. It also set forth minimum standards
concerning the scope of such a scheme, qualifying conditions
for benefits and their duration, and related provisions. The
Convention, having been ratified by the United Kingdom in
1936 and by Ireland in 1937, came into force on 10 June 1938.
Other countries ratifying it during the thirties were New
Zealand in 1938 and Switzerland in 1939.
The Unemployment Provision Recommendation, 1934,
urged the creation of compulsory unemployment insurance
systems in countries not having them, maintenance of complementary assistance schemes, and the broadest possible coverage
of employees. It also contained suggestions regarding desirable elements of unemployment insurance laws.
Voluntary Insurance Schemes
Sweden.
National legislation on unemployment insurance in Sweden

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

37

dates from a Royal order of 15 June 1934.x This dealt with
the approval of recognised unemployment funds by the State,
standards regarding the membership of and benefits to be paid
by such funds, and the payment to them of state subsidies.
The funds were to be administered by insured workers themselves, as legally established mutual-benefit societies, but under
supervision of the State. Although set up chiefly by trade
unions, the societies were required to be legally independent
of the unions and to be open to all in a particular trade.
The scheme met with trade union opposition when first
introduced. This had disappeared well before 1941, however,
when amendments providing dependants' supplements and
other improvements were adopted. The coverage of the
scheme grew steadily until in 1955 there were a total of 44
unemployment funds. The most recent of a series of amendments to the order were adopted on 8 May 1953. Sweden
ratified the Social Security (Minimum Standards) Convention,
1952, in respect of unemployment benefit on 12 August 1953.
A Social Welfare Committee studying revision of Swedish
social welfare measures presented proposals in 1937 for new
legislation on unemployment insurance and social assistance.
In 1949 a draft Bill was introduced which proposed the settingup of a compulsory system of unemployment insurance. No
action was taken on either of these proposals. General unemployment relief in Sweden is governed by a Royal decree of
27 May 1949 concerning certain public measures relating to
unemployment.
Iceland.
Provisions relating to unemployment insurance in Iceland
were contained in the 1936 social insurance law. These provisions authorised labour organisations, subject to specified
conditions, to set up unemployment funds to be financed from
members' contributions and public subsidies. No fund was
ever established under this law, however, and the provisions
were eventually omitted from the new social insurance Act of
1946. The Althing has subsequently had several proposals
before it on unemployment insurance but has not adopted
any of them.
1
I.L.O. : Legislative Series, 1934—Swe. 2, 1936—Swe. 1, 1937—
Swe. 2, 1941—Swe. 1, 1943—Swe. 1, 1944—Swe. 3C, 1946—Swe. 3,
and 1947—Swe. 3.

38

UNEMPLOYMENT INSURANCE

SCHEMES

Compulsory Insurance Schemes
Canada.
The first unemployment insurance legislation to be enacted
in Canada was the Employment and Social Insurance Act of
28 June 1935. This provided for the establishment of a compulsory national system of unemployment insurance. However, the constitutional right of the national Government to
enact such legislation was almost immediately challenged and
in January 1937 the Privy Council declared the Act invalid.
Consent of the provinces was sought to an amendment of the
British North America Act to empower the national Parliament to legislate on unemployment insurance. This consent
was obtained, the amendment was made in July 1940, and on
7 August 1940 a new Unemployment Insurance Act was passed.
The Act came into effect on 1 July 1941 and has since been
amended on several occasions.1 On 11 July 1955 a new Unemployment Insurance Act was adopted to replace it as from
2 October 1955.
The Canadian law provides for compulsory coverage of
most non-agricultural employees under an insurance programme administered by the national Government. Financing
is on a tripartite basis.
United States.
Trade union benefit plans never developed extensively in
the United States because of the slow growth of the trade
union movement and the persistence of the demand for labour.
Voluntary employer plans and joint union-employer plans
flourished for a time, but they never covered many workers. It
was the depression of the 1930s that first aroused widespread
interest in public measures for dealing with unemployment.
The first statutory scheme of unemployment benefits in
the United States was enacted by the state of Wisconsin on
29 January 1932. As workmen's compensation was the only
form of social security legislation then in effect in the country,
the Wisconsin law was to some extent patterned after that type
of protection. The entire cost was placed on the employer, contribution rates were varied with the unemployment record of
1

I.L.O. : Legislative Series, 1940—Can. 2, 1943—Can. 3, 1946—
Can. 1, 1948—Can. 2, 1950—Can. 1, and 1952—Can. 2.

DEVELOPMENT OF U N E M P L O Y M E N T INSURANCE

39

each individual employer, and it was hoped that the method of
financing used would provide an incentive to employers to reduce
unemployment.
On 14 August 1935 the federal Government adopted a
Social Security Act whose unemployment insurance provisions laid the groundwork for a nation-wide programme. 1
This Act did not set up a national unemployment insurance
system but, instead, levied an unemployment tax on all but the
smallest employers. Employers paying contributions to state
schemes were then permitted to receive a 90 per cent, credit
against the federal tax in respect of such contributions. The
net effect was to induce all states to pass compulsory unemployment insurance laws, without fear of placing employers
in one state at a competitive disadvantage with those in other
states. The federal law laid down only a few conditions
concerning qualification of state schemes for the tax credit.
Thus, it was left entirely to each state to determine not only
whether it would actually adopt a law but also the type of
law to be adopted, the groups to be covered, the amount and
duration of benefits, etc.
All 48 states had adopted unemployment insurance laws
by 1937, and these laws as subsequently amended are still in
force at the present time. 2 All laws establish compulsory
schemes and each scheme is administered by a department of
the state government. A separate national unemployment
insurance scheme covering all railway employees was set up
under a federal law of 25 June 1938.
Union of South Africa.
A law was adopted by the Union of South Africa on
24 April 1937 permitting the establishment of compulsory
unemployment benefit funds in individual industries. 3 These
funds could be set up on application by workers' or employers'
organisations or on the initiative of the national Government.
Various changes were made in the original law by an Act of
1
I.L.O. : Legislative Series, 1935—U.S.A. 2, 1939—U.S.A. 2,
1946—U.S.A. 3, 1950—U.S.A. 2, and 1952—U.S.A. L See also idem :
Systems of Social Security : United Slates (Geneva, 1954).
2
For a summary of the provisions of the various state laws see
U.S. Department of Labor : Comparison of Slate Unemployment Insurance Laws as of August 1954 (Washington, U.S. Government Printing
Office, 1954).
8
I.L.O. : Legislative Series, 1937—S.A. 1, and 1942—S.A. 1.

40

UNEMPLOYMENT INSURANCE

SCHEMES

23 March 1942. Funds had been set up by 1943 for the motor,
furniture, mining, building, leather, and engineering industries.
The 1937 law was repealed by the Unemployment Insurance Act, 1946, which substituted a compulsory national
scheme of unemployment insurance for the previous schemes
for separate industries. 1 The 1946 Act was amended by Act
No. 41 of 1949, Act No. 48 of 1952, and Act No. 10 of 1954.
The present scheme is administered by the State and is financed
on a tripartite basis.
New Zealand Assistance Scheme
A system of contributory unemployment relief was created
in New Zealand by an Act of 11 October 1930. This called
for a combined flat and graduated charge paid by all adults
into an unemployment fund, which also received a state subsidy. The main form of relief consisted of part-time employment on relief works of various sorts.
New Zealand ratified the Unemployment Provision Convention, 1934, in March 1938. A permanent system of unemployment benefits was established by the comprehensive Social
Security Act adopted on 14 September 1938. This is the
system now in force although the original provisions have
frequently been amended. 2 Unemployment benefits, together
with other social security benefits, are paid out of a central
social security fund, which receives its income from a flat-rate
tax on all personal and company incomes and from a subsidy
paid by the State. The right to benefit does not arise out of,
nor is it dependent upon, contributions, benefits being payable
to any unemployed person meeting specified qualifications.
But benefits are subject to discretionary reduction by the
administrative agency in respect of income from other sources
or property.
*

*

As a result of legislation during the 1930s, therefore, a
total of 22 countries had national unemployment schemes in
1

I.L.O. : Legislative Series, 1946—S.A. 1, 1949—S.A. 2, and
1952—S.A. 1.
2
Ibid., 1938—N.Z. 1, 1942—N.Z. 1, 1943—N.Z. 1, 1945—N.Z. 2,
1946—N.Z. 3, 1947—N.Z. 2, 1948—N.Z. 3, 1949—N.Z. 3, 1950—N.Z. 5,
and 1951—N.Z. 3. See also I.L.O. : Systems of Social Security:
New
Zealand (Geneva, 1949).

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

41

operation by 1940. Twelve of these schemes consisted of
compulsory unemployment insurance, Switzerland had a mixture of compulsory and voluntary insurance, six countries had
voluntary insurance schemes, and three countries had unemployment assistance schemes. The decade also saw important
extensions of some of the older schemes.
NATIONAL SCHEMES STARTED AFTER

1940

No new unemployment insurance schemes were inaugurated during the first part of the 1940s because of the war
and the almost universal preoccupation with manpower shortages rather than surpluses. As the war progressed, however,
much planning was done in anticipation of possible heavy
unemployment at the end of the war. This led, among other
things, as has been seen above, to the reform of a number of
the older schemes after the war. The 26th Session of the International Labour Conference meeting at Philadelphia in 1944
adopted a comprehensive Recommendation concerning income
security for use as a guide for post-war legislation in this field.
This Recommendation listed inability to obtain remunerative
work as one of the principal contingencies with which income
security schemes should deal. It also advanced a number of
suggestions regarding the application of social insurance to
the risk of unemployment.
Apart from changes made in existing schemes, four more
national unemployment benefit schemes were established after
1940. Three of these consisted of compulsory insurance.
Australian Assistance Scheme
The state of Queensland in Australia had established
a compulsory unemployment insurance scheme as early as
1922. This scheme remained in operation for a number of
years. A national law promulgated on 5 April 1944 provided
for the payment of unemployment benefits, subject to an
income test, to any unemployed person meeting specified age,
residence and other qualifications.1 Such benefits together
with sickness benefits were to be paid from the proceeds of a
specially earmarked, graduated tax on all incomes, but eligibi1

I.L.O. : Legislative Series, 1944—Austral. 2.

42

UNEMPLOYMENT INSURANCE

SCHEMES

lity to benefit was not linked to the payment of contributions.
The scheme came into operation on 1 July 1945.
The Social Services Consolidation Act of 11 June 1947,
which established a comprehensive social security scheme in
Australia, repealed the 1944 law but embodied many of its
unemployment benefit features in the new unified social security system. 1 Thus, the basic type of unemployment protection introduced in 1944 is still in effect, though as part of a
scheme covering nearly all major risks. The 1947 law has
been amended in various details in each year since its adoption.
Compulsory Insurance Schemes
Greece.
Prior to 1945 only a few categories of workers, including
tobacco workers, millers, and newspaper employees, were
insured against unemployment in Greece. A system of compulsory unemployment insurance and an unemployment fund
were set up for the province of Attica by Act No. 118 of 13 February 1945.2 The scheme was state-administered and its extension to other geographical areas was to be provided by regulation. A legislative decree in 1946 authorised transfer to the
new fund of unemployment funds previously operating in
various individual industries. Another decree in 1949 extended
the scheme to all regions in which the general social insurance
scheme was operating, and also permitted its extension in
certain circumstances to still other regions. Thus, unemployment insurance was gradually extended to cover most important industrial districts in Greece.
The separate unemployment scheme was abolished by
Act No. 1846 of 14 June 1951 3 and its functions, including
administration of employment exchanges, were transferred to
the new general social insurance scheme set up by the same
law. Legislative Decree No. 2961 of 25 August 1954 re-established a separate scheme of unemployment insurance and
created a new agency to administer it, together with various
types of employment services.
1
I.L.O. : Legislative Series, 1947—Austral. 3, 1948—Aust. 1,
1950—Aust. 1, and 1951—Aust. 2.
2
Ibid., 1945—Gr. 1, and 1949—Gr. 1.
3
Ibid., 1951—Gr. 4.

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

43

Japan.
A new compulsory unemployment insurance programme
was established in Japan by Law No. 146 of 1 December 1947.
The initial scheme applied compulsorily to employers in nine
specified industries, but also permitted voluntary coverage of
other enterprises. Another law on the same date created a
temporary system of unemployment allowances for unemployed persons unable to qualify for insurance benefits at the
outset. The insurance scheme was to be administered by the
State and was financed on a tripartite basis.
A law of 20 May 1949 broadened the scope of the 1947
measure, by extending compulsory coverage to all undertakings except those in specifically exempted categories, and also
elaborated the scheme in other ways. At the same time it
abolished the temporary system of unemployment allowances.
The basic 1947 provisions were further amended by a law of
31 July 1950.1
Iran.
The scope of the social insurance system of Iran was considerably broadened and its administration and finances were
reorganised by an Act adopted on 21 January 1953. This
Act also sets up an unemployment insurance fund and provides
for the payment of contributory unemployment insurance
benefits. The unemployment insurance provisions, however,
have not yet been put into force.
Dismissal

Indemnities

A number of countries that had no unemployment insurance schemes adopted legislation during the 1940s requiring
employers to pay dismissal indemnities to workers discharged
for reasons other than misconduct. The indemnities involved
must usually be paid in a lump sum and are normally scaled
in amount according to the number of years of service. They
involve no pooling of risk since the entire burden of payment
rests on each individual employer. While in no sense a substitute for unemployment insurance, the existence of these
measures is noted here in view of the protection, albeit limited
1
I.L.O. : Legislative Series, 1947—Jap. 1, 1949—Jap. 1, and 1950—
Jap. 1.

44

UNEMPLOYMENT INSURANCE SCHEMES

and somewhat haphazard, that they afford to unemployed
workers in countries that still have no unemployment insurance
scheme.
Turkey, in its Labour Act of 8 June 1936, required employers to pay compensation to discharged employees equal to half
a month's wages for each year of employment in excess of five
years. 1 By a law of 10 May 1944 Egypt required most larger
non-agricultural employers to pay dismissal indemnities ; for
wage earners these were to equal ten days of wages per year
of service, with a maximum of six months' wages.2 The
Syrian Labour Code of 11 June 1946 calls for indemnities
amounting, except for day-workers, to one month's wages for
each year of service for all employees who have worked for
one employer for at least three months. 3 The Labour Code
of Lebanon adopted on 23 September 1946 requires industrial
and commercial employers to grant dismissed employees an
indemnity ordinarily equivalent to one month's pay for each
year of service, up to a maximum of 20 months. 4
While dismissal indemnity provisions are most prevalent
in the Middle East, they are also found in the legislation of
some Latin American countries. For example the Labour
Code of Guatemala promulgated on 8 February 1947 requires
certain categories of dismissed employees to be paid compensation at the rate of one month's wages for every year of uninterrupted employment. 5 Somewhat similar provisions are also
found in a Bolivian Act of 8 December 1942. 6
SUMMARY

As a result of new schemes introduced after the Second
World War, the conversion of several schemes, and the termination of cash benefit payments under some schemes, a total
of 22 national schemes could be counted in 1955 under which
unemployment benefits or allowances were actually being paid.
Fifteen of these schemes took the form of compulsory unem1

I.L.O. : Legislative Series, 1936—Turk. 2.
Ibid., 1944—Egypt 1.
8
Ibid., 1946—Syr. 1.
* Ibid., 1946—Leb. 1.
6
Ibid., 1947—Guat. 1.
8
Ibid., 1942—Bol. 1.
2

DEVELOPMENT OF UNEMPLOYMENT INSURANCE

45

ployment insurance, three consisted of voluntary insurance,
and four provided for payment of assistance allowances. The
most marked feature apparent in this general classification,
as compared with summaries for earlier periods, is the gradual
trend away from subsidised voluntary insurance and towards
compulsory insurance.
Table I shows the countries falling into the different categories in 1955, together with the year in which the legislation
now in force was originally enacted.
TABLE I.

UNEMPLOYMENT BENEFIT SCHEMES ( 1 9 5 5 ) WITH THE

YEAR OF ENACTMENT OF THE LEGISLATION IN FORCE

Compulsory insurance
schemes
Austria . .
Belgium. .
Canada . .
Federal
Republic o f
Germany
Greece . .
Ireland . .
Italy . . .
Japan. . .
Netherlands
Norway. .
Switzerland
Union of
South Africf 1
United
Kingdom
United State s
Yugoslavia .

1949
1945
1955

Voluntary insurance
schemes
Denmark . .
Finland. . .
Sweden . . .

1933
1934
1934

Non-insurance
schemes
Australia . .
France . . .
Luxembourg.
New Zealand

1947
1951
1945
1938

1927
1954
1952
1935
1947
1949
1938
19511
1946
1946
1935 2
1952

1
Date oí federal law. Seventeen cantons have compulsory insurance covering their
whole territory, ten have compulsory insurance covering only their communes, and two
(Appenzell Innen-Rhoden and Aargau) have only voluntary insurance.
• Date of federal law.

To complete this historical resumé of the development of
unemployment insurance, brief mention should be made of
the Social Security (Minimum Standards) Convention, 1952,
adopted by the International Labour Conference in 1952. This
Convention lays down minimum standards in respect of nine
principal forms of social security and deals in one of its parts
with unemployment benefit. Countries ratifying the Convention must undertake to provide at least three types of social
4

46

UNEMPLOYMENT INSURANCE

SCHEMES

security benefits, of which unemployment benefit may be one.
The Convention defines the contingency for which unemployment
benefit should be provided, indicates the minimum proportion of
persons to be protected, and prescribes minimum benefit levels
and minimum potential duration periods. The Convention
came into force on 27 April 1955, and by the middle of 1955
had been ratified in respect of unemployment benefit by Sweden,
the United Kingdom, Norway, Yugoslavia and Denmark.

CHAPTER II
SCOPE OF PROTECTION
The categories of persons to be covered under an unemployment benefit scheme is a major question of policy to be
decided in framing such a scheme. Almost any type of scheme
adopted will have to exclude at least some workers. This is
necessary if for no other reason than to set up a border line
to exclude persons whose inactivity has nothing to do with
unemployment.
The chief factors to be taken into account in deciding
what persons should be protected against unemployment are
the relative needs of various groups for protection, financial
considerations, and administrative considerations. This chapter first examines the influence of these general factors on
the scope of protection and then summarises in broad lines
the coverage of existing unemployment benefit schemes.
Chapter III takes up individually a number of groups that
are frequently excluded, indicating both the problems involved
and national practice in the case of each.
GENERAL

PRINCIPLES

The significance of factors influencing coverage varies
according to whether the scheme is one of compulsory insurance or voluntary insurance, or a non-insurance plan under
which benefit eligibility is not dependent upon contribution.
Compulsory insurance involves the question of what categories
of workers shall be required to come under insurance. Voluntary
insurance raises the question of the types of workers for
whom insurance coverage shall be open. Schemes not subjecting benefits to a contributory test raise only the question of
what types of persons shall be potentially eligible for benefits
at the time of unemployment. Hence, principles regarding
coverage under the three kinds of schemes must be considered
separately.

48

UNEMPLOYMENT INSURANCE SCHEMES

Compulsory Insurance
When an unemployment insurance scheme is made compulsory, it means that the State requires by law that specified
classes of persons shall be enrolled in the scheme and that
contributions must be paid regularly on their behalf. If a
person in one of these classes later becomes unemployed, he
is entitled to benefit by reason of the insured status he was
previously obliged to enter into. Most existing unemployment
benefit schemes, as has been seen in Chapter I, now apply the
principle of state compulsion in prescribing protection for
specified classes of workers. To what particular classes of
persons is it desirable or practicable to apply such obligatory
protection ?
Need for Protection.
The first obvious criterion is the need of the different
groups concerned for protection. On the face of things the
ideal would be to provide protection for all persons subject to
the risk of unemployment. The possibility of becoming
unemployed exists in theory for anyone working for the account
of another, that is for anyone working under a contract of
employment. All contracts of employment can presumably
be terminated sooner or later by either party. If the employing
party chooses to terminate the contract, the employee at
least at that moment is without a job. Hence, an all-inclusive
scheme should, in principle, cover all persons gainfully occupied
under a contract of employment, since by definition every such
person has a potential need for protection.
The intensity of the need for protection is not of course the
same for all workers. Some employments are very stable,
and individuals working in them face only a remote possibility of involuntary loss of their job. In general the employment of salaried employees is inherently more stable than that
of employees receiving wages. Some types of salaried employment, particularly if subject to civil service or seniority rules,
contain virtually no real risk of unemployment. At the other
extreme, wage earners employed in industries subject to wide
fluctuations in demand for their products or to seasonal limitations on production are highly vulnerable. Other wage earners
have a wide gradation in the degree of their exposure to risk,

SCOPE OF PROTECTION

49

ranging from those with quite stable jobs to those who daily
face the possibility of not having work the next day.
If insurance is not made compulsory for all workers, first
priority should in principle be given to occupations in which
employment is least likely to be stable and where workers
accordingly have the greatest need for protection. Likewise,
if groups must be excluded from the scheme, the criterion of
need suggests it should be those whose employment is characterised by an above-average degree of stability.
Application of the principle of need is more complicated
in the case of part-time workers, including seasonal workers,
workers ordinarily employed only a part of each week, intermittent workers, casual workers, etc. At first glance it may
seem that their need for protection is great and that their
coverage is imperative. This, however, is an over-simplified
conclusion.
Unemployment insurance can offer protection only in relation to the previous normal employment of a worker. If such
previous employment was partial or irregular, unemployment
insurance cannot provide compensation as if it had actually
been on a full-time basis. In other words the only need for
protection that can be recognised in the case of workers normally employed on a part-time basis is the diminution in the
amount of such part-time employment, and not the total
difference between their decreased employment and full-time
employment. Part-time employment may often in fact be
quite stable, thus implying a smaller need for protection.
Decisions as to the coverage of part-time workers also involve
financial and administrative considerations, as will be seen later.
The need for protection is also influenced by factors other
than stability of employment, such as age or income level.
Aged workers may not need unemployment protection if there
are other social security measures for protecting aged persons
in general. Young workers without family responsibilities
do not suffer the same catastrophic impact as adults when they
lose a job. Workers receiving above-average incomes can save
more easily than lower-paid workers, and may thus be able by
themselves to build up a certain amount of protection against
unemployment. Savings margins adequate for this may not
exist in reality, however, until quite a high level of earnings is
reached.

50

UNEMPLOYMENT INSURANCE SCHEMES

The above factors concerning the need for protection
should be considered in deciding upon the scope of an unemployment insurance scheme. They are not put forward necessarily to suggest positive exclusions, however, nor can they be
evaluated without taking account of financial and administrative factors as well. They are mentioned here rather as one
part of the rationale involved in determining what, if any,
exclusions from coverage should be made.
It is implicit in the above analysis that self-employed
workers cannot, by definition, become unemployed and that
they therefore have no need for unemployment protection.
They are not bound by a contract of employment with another
and if they terminate their own employment, it would seem to
be a voluntary act.
This theoretical argument possesses much validity but is
not wholly realistic. In the first place some occupations fall
close to the border line between employment and self-employment, and in fact contain elements of both. A common case
of this sort is that of agents working for a commission.
Extreme care must be taken in the classification of these borderline workers, as between employees or independent workers.
Secondly, a shrinking demand for the products or services of
a self-employed worker may often leave him in about as difficult
a position as an unemployed wage earner. A moderate decline
will leave him only partially employed but, if it is drastic, he
will lose his means of subsistence and may need help as much
as a jobless employee. This should be kept in mind in designing an unemployment insurance scheme ; but there nevertheless
remain serious difficulties in the way of covering the selfemployed.
Financial

Considerations.

The scope of an unemployment insurance scheme has
consequences for its financing which must also be weighed in
fixing the former. The greater the number of persons covered,
the larger will be the aggregate disbursements under the scheme.
To the extent, however, that the scheme is contributory, this
does not increase the " cost " for individual contributors, for
the amount paid in respect of each individual worker is not
affected by the size per se of the covered population.
What is important from the standpoint of the cost per

SCOPE OF PROTECTION

51

worker covered is that the scope be such as to produce an
effective pooling of risk. Good risks should be included along
with the bad. If the need-for-protection principle alone were
followed, with traditionally stable occupations excluded and
with all occupations in which employment tends to be unstable
included, the result would be a highly adverse selection of risks.
In this case, an excessively high proportion of all insured
workers might become unemployed, expenditure for benefits
would be very great, and the contribution rate for each worker
covered would have to be quite high. This consequence of
excluding occupations in which unemployment is negligible
means that such exclusions should be granted only after careful study, if at all. The wider the base over which any scheme
spreads the risk, the stronger it will be financially.
To the extent that the cost of unemployment insurance
is paid by the consuming public as a whole, through the shifting
of employers' contributions or otherwise, the burden should
preferably be spread over all consumers rather than merely
consumers of products of the industries in which employment
is particularly unstable. The instability of employment in
individual industries is often not a fault of the industry itself
but is inherent in the entire economy of the country. This
is also true of export industries dependent upon the vagaries
of foreign demand.
Somewhat the same undesirable restriction on a wide
pooling of risk will result if higher-paid workers are excluded
from a scheme. The larger contributions paid in in respect
of them may serve to offset the much lower contributions
paid in in respect of lower-paid workers, who at the same time
may draw heavily from the scheme.
In deciding on the scope of a scheme the significance of
the principle of pooling of risk has a further aspect—that of time.
The insurance concept requires that contributions in respect of
good risks should be paid in good times as well as in bad. Good
risks should not be excluded when their exposure to unemployment is small and then suddenly covered when a change in
economic conditions converts them from good to bad risks. Such
a coverage policy could not fail to have an adverse effect on
finances.
There are also important financial implications in the
coverage of irregularly employed persons. As they work only

52

UNEMPLOYMENT INSURANCE

SCHEMES

intermittently, contributions paid on their behalf will be less
than those paid for full-time workers. On the other hand,
being frequently out of work they will tend more often than
the average worker to claim benefits. Hence, their coverage
must be carefully weighed. If they are covered adequate
safeguards must be provided to relate the amount and duration of their benefits only to the diminution of their previous
irregular employment and not to a theoretical full-time employment. If this is not done payments to such workers may be
a heavy and troublesome drain on the unemployment fund.
It may be noted here that, apart from other reasons for
not covering the self-employed, there can be no contribution
by employers to assist in financing their inclusion. Since the
employer contribution usually plays an important role in the
financing of compulsory unemployment insurance, this fact
presents an additional difficulty in the way of covering independent workers.
Administrative

Considerations.

Decisions concerning the scope of unemployment insurance ought also to take into account the administrative feasibility of applying it to different groups. It is especially difficult
to enrol some groups of workers in insurance schemes and to
collect contributions in respect of them. If the difficulty for
a particular group is too great, or if the cost of administration
per worker covered for such a group is too high, its exclusion
may be necessary on such grounds alone.
The basic point of contact for covering workers under
compulsory unemployment insurance, as under other forms
of social insurance, is the employer. In industries where the
average number of workers per employer is high, coverage is
relatively easy and administrative costs per worker can be
kept low. But wherever the ratio of workers to employers
is small, administration becomes both more difficult and more
expensive. In other words coverage is always difficult when
there are a large number of very small employing units, and
workers are dispersed rather than concentrated. It sometimes
is necessary, therefore, to exclude employees of small employers
from coverage, not because they do not need protection nor
for financial reasons but solely because of administrative
difficulties.

SCOPE OF PROTECTION

53

If employees of small employers are already covered by
another form of social insurance, their coverage by unemployment insurance will be much easier. Use can be made of
experience acquired and machinery already developed under
the other scheme. If such other coverage does not exist
administration of unemployment insurance will be much more
difficult.
In addition to the enrolment of workers in insurance
schemes and the collection of contributions, unemployment
insurance administration also involves the task of verifying
whether a benefit claimant actually is unemployed and unable
to find new work. This is done by requiring him to register
at an employment exchange and by checking there whether
another job is available. There are some categories of workers for whom application of this work test is quite difficult.
The test can hardly be applied at all to workers in regions
where no employment exchange is operating ; and it can be
applied only with difficulty in regions, usually rural, where the
circumstances of employment are such as to hinder normal
placement processes. Often, too, it is difficult at short notice
to locate through the employment service work similar to that
previously performed by irregular, occasional, part-time or
seasonal workers. Finally, it is extremely difficult to apply
a satisfactory work test to self-employed workers.
Thus, on the administrative side, difficulties of verifying
the existence of unemployment, as well as of enrolling workers
in an insurance scheme in the first instance, must be considered
in deciding on the scope of the scheme.
Voluntary Insurance
The whole concept of coverage is basically different in
the case of voluntary unemployment insurance. The fundamental question here is : what persons shall the scheme be open
to ? Under voluntary insurance contributions are collected
and benefits are paid by private funds or societies. If this
method is applied in its pure form the setting up of these funds
is a voluntary act not subject to state compulsion or initiative.
In addition, the decision to join or not to join a fund is made
voluntarily by each individual worker, though the funds themselves may adopt some membership rules. It was learnt very
early, however, that such a pure form of voluntary insurance

54

UNEMPLOYMENT INSURANCE SCHEMES

could neither attract a sufficient number of members nor long
remain solvent without subsidisation by the State.
The granting of public subventions to privately established
bodies inevitably creates a public interest in the scope of such
organisations as well as in other features. The result is that the
State decides to lay down standards regarding the membership
provisions that the funds must satisfy to qualify for the subsidy.
The standards laid down may prescribe, for one thing,
the types of persons who are to be permitted to join a subsidised
fund. By implication they will thus also indicate the groups
to be excluded from membership. The categories of workers
for whom membership is permissible should be established in
consideration of the need for protection of different groups,
some that do not appear to have a pressing need for subsidised
group protection possibly being omitted. Account should
also be taken of financial implications. The heavy aggregate
cost of the state subsidy may itself lead to restrictions on the
membership of funds. The same may also result from a desire
not to overload the scheme with bad risks or to avoid an excessive drain on the fund by irregularly employed workers.
The administrative feasibility of collecting contributions from,
and of paying benefits to, certain classes of workers will also
need to be taken into account.
It is in the nature of voluntary insurance, however, that
the mere specifying of permissible fields of coverage in the law
provides no indication of who will actually be covered. Unless
other direct or indirect pressures are exerted, there can be no
certainty that funds will actually be set up for particular classes
of workers or that any given number of workers will actually
decide to join the funds that are established. Thus, it may
happen that, among the workers permitted by law to enrol,
many with substantial need for protection either will have no
fund to join or will decide not to join. This haphazard process
may or may not, from a financial standpoint, produce an effective selection of risks on which to base an insurance programme.
It may in fact be found, if a voluntary scheme is to operate successfully, that a State has to lay down some mandatory
provisions regarding membership as well as permissive provisions. Thus, a State may actually require creation of unemployment funds in specified industries. It may conceivably

SCOPE OF PROTECTION

55

require that all members of a trade union belong to a fund
sponsored by the union. To ensure that each unemployment
fund is viable and provides for at least a minimum degree of
risk pooling, it may also require each fund to have a specified
minimum number of members. Or certain privileges such as
eligibility for another type of social insurance benefit may be
made conditional on membership in an unemployment fund.
This would provide an indirect type of pressure on workers to
affiliate.
The more extensive the mandatory conditions of this sort
laid down by a State under a voluntary scheme, the more blurred
becomes the dividing line between such a scheme and fully
compulsory insurance. If enough direct or indirect compulsion
is applied, the end effect may be that the voluntary scheme
becomes in actual fact a compulsory scheme, except that certain administrative operations continue to be delegated to
private funds.
Non-Insurance Schemes
Fixing the scope of non-contributory schemes perhaps
financed exclusively by the State, which have no direct or
indirect link between benefit eligibility and contributions,
involves considerations that are yet again different. First of
all, the factor of the need for protection assumes both a different form and considerably more importance. In this case,
moreover, considerations relating to the pooling of the risk
and to the administrative feasibility of enrolling workers in the
scheme and of collecting contributions are irrelevant.
Since the schemes concerned do not operate on an insurance basis, their scope does not have to be fixed in terms of
classes of workers requiring advance protection against a possible need for benefits at some future time. Rather, it can
be fixed exclusively in terms of the need for benefits at the
time when unemployment really occurs. In other words the
scope can be fixed by reference to an actual need for benefits
rather than a potential need for protection.
Workers who possess other means when they become
unemployed clearly have a less acute need for benefits than
those with no outside means. Hence, it is a common practice
of non-contributory schemes to restrict the categories of persons eligible for unemployment allowances to persons with

56

UNEMPLOYMENT INSURANCE SCHEMES

small or no means at the time of their unemployment. But the
use of a means test under non-insurance schemes stems not
only from the principle of relative need. It also has a practical
financial motivation, for it serves to keep down the aggregate
cost of the scheme, which the State itself usually bears in whole
or in substantial part. The fact that such schemes may be
financed entirely from public funds may also lead to the imposition of citizenship or minimum residence restrictions upon
their scope.
The genuineness of the unemployment of claimants must
be tested in the case of unemployment assistance as well as
under insurance schemes. Hence, certain additional restrictions on the scope of the former may be necessary to ensure
that payments are made only to persons ordinarily relying on
employment for their subsistence and who have been involuntarily deprived thereof.
SCOPE OF EXISTING SCHEMES

Table I above (p. 45) showed that, of the 22 countries
with unemployment benefit schemes in operation in 1955,
15 were applying unemployment insurance on a compulsory
basis (including Switzerland, in most cantons of which insurance is compulsory), three were maintaining voluntary insurance schemes, and four were providing unemployment allowances on a non-insurance basis. Since the concept of scope
has a different meaning under each approach, it is desirable to
consider the three groups of countries separately.
Compulsory Insurance
The term " scope " in the case of compulsory unemployment insurance refers in general to the classes of persons required
by law to be enrolled in the scheme, by or for whom insurance
contributions must be paid, and who thus formally acquire
the status of insured or protected persons. Of course the insured
person must have acquired his status as such before any claim
for unemployment benefit can be accepted from him. However,
not all persons covered by insurance may be entitled to a
benefit should they become unemployed, since certain " qualifying conditions " must also be satisfied at the time of filing a

SCOPE OF PROTECTION

57

claim. These conditions form the subject-matter of Chapters IV
and V.
The purpose of this section is to indicate the classes of
persons now covered by unemployment insurance in different countries. The scope of the compulsory schemes now in
operation is in most cases the result of a long process of evolution. Space does not permit tracing this process, but it is clear
from Chapter I that a number of the schemes began with a
much narrower scope than they now possess. Workers in
larger industrial undertakings were usually covered from the
start, but a number of the schemes have only been extended
gradually to groups for which coverage was administratively
or financially difficult, or which were marginal groups in one
or another sense. There has also been a gradual geographic
extension of coverage in some countries, a process that is
still going on in Greece.
A number of countries relate the scope of unemployment
insurance to that of another and perhaps older form of social
insurance, or to that of a comprehensive general social insurance scheme of which unemployment insurance forms only a
part. Thus, Austria, the Federal Republic of Germany,
Greece and Norway link the scope of unemployment insurance
to that of their sickness insurance schemes. The scope of
unemployment insurance is linked in Italy with that of invalidity, old-age, and survivors' insurance. In Ireland, the United
Kingdom and Yugoslavia unemployment insurance forms an
integral part of a larger social insurance structure, and its
scope is determined by the coverage provisions of this larger
structure. These arrangements, however, do not usually
preclude some deviation in unemployment insurance coverage
for particular catagories of workers.
A highly condensed summary of the coverage of compulsory
unemployment insurance schemes in 15 countries is presented
in table II.

58

U N E M P L O Y M E N T INSURANCE SCHEMES

TABLE II. SCOPE OF COMPULSORY U N E M P L O Y M E N T INSURANCE

SCHEMES, 1955
Country

Persons covered

Occupational exclusions

Austria

All employees
except specific
exclusions
Last-year and
paid apprentices
Homeworkers
Special scheme for
construction
employees

Wage earners on
owner-operated
farms
Female domestic
servants
Public employees

Family labour
Insignificant
employment

Belgium

All employees
except specific
exclusions
Homeworkers
Youths completing
vocational training
Special schemes for
miners, seamen,
port workers,
and construction

Railway employees
Domestic servants
Public employees

Family labour
Apprentices

Agricultural
employees
Private domestic
servants
Fishermen
Teachers
Employees of nonprofit institutions
Private duty nurses
Professional
athletes

Salaried employees
earning over
$4,800 per year
Spouses and unpaid
children
Casual employees
Subsidiary
employees

Other exclusions

workers

Canada

Federal
Republic of
Germany

All employees
and apprentices
except specific
exclusions

All employees
except specific
exclusions
Last-year
apprentices
Special scheme
for dockworkers

Agricultural
employees
given lodging
Civil servants
Religious
employees
Seamen
earning
over 9,000 DM
per year

Part-time

employees
Employees in
sparsely populated areas
Commission agents
Corporation directors
Salaried employees
earning over 9,000
DM per year
Employees over 65
Family labour
Temporary
employees
Students

59

SCOPE OF PROTECTION

TABLE I I .

SCOPE OF COMPULSORY UNEMPLOYMENT
SCHEMES

Country

INSURANCE

(cotll.)

Persons covered

Occupational exclusions

Other exclusions

Greece

All employees
except specific
exclusions
Special schemes for
press workers
and seamen

Agricultural
employees
Domestic servants
Government
employees
Religious
employees

Employees earning
over 5,000 drachmas per month
Employees under 20
Employees over 65
Family labour
Employees of temporary employers
Technical
apprentices
Temporary aliens

Ireland

All employees
and apprentices
except specific
exclusions
Special scheme for
building
employees

Female agricultural
employees
Female domestic
servants
Public employees
Teachers
Ministers
Employed doctors
Share-fishermen
Homeworkers

Non-manual
employees earning
over £600 per
year
Employees under 16
Employees over 70
Spouses and family
labour in home
Casual employees
Occasional
employees
Subsidiary
employees

Italy

All employees
except specific
exclusions

Domestic servants
in household
Permanent public
employees
Homeworkers
Artists and theatrical employees
Employees whose
unemployment
cannot be verified

Employees under 14
Employees over 60
(women 55)
Seasonal employees
Occasional
employees
Share-workers
Employees guaranteed stable
employment

Japan

All employees
except specific
exclusions
Special schemes for
seamen and daylabourers

Agricultural
employees
Teachers and
scholars
Employees of nonprofit institutions
Public employees
Employees of
ambulant
enterprises

Employees of firms
with less than
five employees
Seasonal employees
Probationers

60
TABLE I I .

UNEMPLOYMENT INSURANCE

SCHEMES

SCOPE OF COMPULSORY UNEMPLOYMENT
SCHEMES

INSURANCE

(coni.)

Persons covered

Occupational exclusions

Other exclusions

Netherlands

All employees
except specific
exclusions
Commission agents
and jobbers
Homeworkers
Share-fishermen
Public works
employees
Orchestra members

Domestic servants
in household
Public employees
Teachers with equivalent protection

Employees earning
over 6,000 gulden
per year
Employees over 65
Occasional
employees
Subsidiary
employees
Employees
with equivalent
protection

Norway

All employees
and apprentices
except specific
exclusions
Special scheme for
seamen

Family employees
in agriculture
Domestic servants
except in hotels
Civil servants
Fishermen
Reindeer breeders
Homeworkers

Employees earning
under 1,000 kroner per year
Employees over 70
Seasonal employees
Occasional
employees
Subsidiary
employees
Employees receiving no cash wages
Commission agents

Switzerland

All employees
except specific
exclusions
Apprentices, during
last 6 months

Agricultural
employees
Federal employees

Employees under 16
Employees over 60
Family labour
Persons employed
less than 150
days per year
Subsidiary
employees
Disabled employees

Union of
South
Africa

All employees
and apprentices
except specific
exclusions

Agricultural employees except in
forestry
Household domestic servants
Railway employees
Public employees
Native mining
employees given
room and board
Homeworkers

Employees earning
over £750 per
year
Natives earning
under £182 per
year
Spouses
Seasonal employees
Occasional
employees
Casual employees
Native employees
in rural areas
Share and commission workers
Provident fund
members

Country

61

SCOPE OF PROTECTION

TABLE I I .

SCOPE OF COMPULSORY UNEMPLOYMENT
SCHEMES

Country

United
Kingdom

Persons covered

Occupational exclusions

Other exclusions

—

Employees under 15
Employees over 65
(women 60)
Spouses and family
labour in home
Part-time
employees
Casual employees
Subsidiary
employees
Commission agents

All employees
and apprentices
except specific
exclusions

United Slates

All employees
except specific
exclusions
Special scheme for
railway
employees

Yugoslavia

All employees and
apprentices
Members of
handicraft
co-operatives

INSURANCE

(conci.)

Agricultural
employees
Household domestic servants
Employees of nonprofit institutions
Student nurses and
interns
Newsboys
Fishermen

Employees of firms
with one to three
employees
Family labour
Casual employees
Commission agents

—

—

It will be noted from the second column of table II that
the general tendency of nearly all compulsory unemployment
insurance laws at the present time is to cover in principle
most persons employed under a contract of service. Certain
specific exclusions are then applied to this general rule. This
is in contradistinction to the procedure sometimes used under
social insurance and which consists in enumerating specific
industries or occupations to which insurance applies. This
procedure was used by a number of countries during the early
days of unemployment insurance ; but it has gradually disappeared, probably because of the difficulties of definition that
arose when the scope was expressed in terms of specific industries, and the growing recognition that it is both socially desir5

62

UNEMPLOYMENT INSURANCE

SCHEMES

able and sounder from an insurance standpoint to have as broad
a coverage as possible.
The entries for some countries in the " persons covered "
column of table II include certain additional classes of workers
besides the category of " all employees ". This is sometimes
the case, for example, in respect of apprentices, homeworkers,
commission agents, etc. A common feature of such specially
listed groups is that they tend to fall close to the border line
between an " employed person " or " employee " and one
who cannot be so considered. Some countries specifically
exclude one or more of these border line categories from coverage. Still others include or exclude them through interpretation of the term " employee " rather than by expressly providing for their inclusion or exclusion in the law itself. The lists
in table II are based in the main on explicit provisions of
the basic statutes. They do not take account of interpretations of what is to be considered implicit in the phrases
" employed person " or " employee ".
The table also shows that some countries cover certain
classes of employees under special unemployment insurance
schemes rather than the general scheme itself. Thus, Belgium
has special schemes for miners, merchant seamen, dockers, and
workers in the building trades. The Federal Republic of
Germany has a special scheme for casually employed dockworkers. Ireland has a special scheme for workers in building
trades, and Norway one for seamen. Japan has separate
schemes for day-labourers and seamen. The United States
maintains a special national scheme for railway employees.
Greece has special funds for press workers and seamen.
It is possible to classify most of the 15 countries in table II
into two main groups according to the breadth of their schemes.
The first group consists of those whose schemes tend to cover
the great mass of or virtually all employees, or at least most
private employees. The second includes those whose schemes
are mainly confined to employees in industry and commerce
and which exclude all or much of agriculture. Among the
countries providing for relatively comprehensive coverage are
Austria, Belgium, Italy *, Norway, the United Kingdom and
1
Although compulsory insurance has been extended by law in
Italy to agricultural employees on the basis of a special scheme, the
implementing regulations and details of application of this legal obligation were still under examination in the first part of 1955.

SCOPE OF PROTECTION

63

Yugoslavia. Broad occupational coverage, with exclusion of
some workers whose wages exceed a specified ceiling, is also
provided by the Federal Republic of Germany, Ireland and
the Netherlands. In contrast, the countries where the scope
of the schemes tends to be limited chiefly to workers in industrial
and commercial employment include Canada, Greece, Japan,
Switzerland, the Union of South Africa, and the United States.
The nations that have already established unemployment
insurance schemes are, for the most part, those with the greatest
degree of economic development and industrialisation. Hence
it is appropriate that they should seek to bring the great mass of
their employed workers within the scope of unemployment
insurance, or at least all workers in industry and commerce,
who in these countries usually form a substantial part of all
employees. In countries where industrialisation and economic
development have proceeded less far, unemployment insurance cannot achieve so ambitious a scope, at least when first
introduced. Coverage in such cases may need to be confined
initially to employees of the larger industrial establishments,
with only gradual extension thereafter. The wide scope of a
number of existing schemes has only been achieved through
such a gradual process.
The specific types of occupational and other exclusions
listed in the third and fourth columns of table II are discussed
individually in Chapter III below.
The following tabulation shows the number of employees
covered by compulsory unemployment insurance in all but two
of the countries shown in table II during a recent period x :
Austria
1,386,000 Japan
7,197,000
Belgium
2,075,000 Norway
740,000
Canada
3,278,000 Switzerland
613,000
Federal Republic of
Union of South Africa
585,000
Germany
11,535,000 United Kingdom . . 19,400,000
Ireland
512,000 United States. . . . 38,200,000
Italy
3,251,000 Yugoslavia
2,034,000
Differences among countries in the number of employees
covered by insurance reflect in part the dissimilar coverage
provisions summarised in table II. It must also be kept in
mind,
in this connection, that a given type of exclusion has
1
From I.L.O. : Year Book of Labour Statistics 1954 (Geneva, 1954),
table 31. Data are for 1953 except for Italy and the United Kingdom
(1952). Data are estimated or partly estimated for some countries.

64

UNEMPLOYMENT INSURANCE

SCHEMES

a proportionately greater significance in some countries t h a n
in others, because of basic differences in their economic
structure.
The Social Security (Minimum Standards) Convention,
1952, specifies (Article 21) t h a t unemployment benefit schemes
not having a means test shall apply to " prescribed classes of
employees, constituting not less t h a n 50 per cent, of all employees ". This Convention, it should be noted, deals expressly
with minimum standards and not with objectives or ideal
standards. It also provides, as a temporary exception, t h a t
unemployment benefit schemes in countries whose economies
are insufficiently developed shall apply to " prescribed classes
of employees, constituting n o t less t h a n 50 per cent, of all
employees in industrial workplaces employing 20 persons or
more ".
The practice of expressing standards regarding the scope
of unemployment benefit schemes in statistical terms, as
followed in the 1952 Convention, is markedly different from
provisions concerning scope contained in the Unemployment
Provision Convention, 1934. Article 2 of this earlier Convention reads as follows :
1. This Convention applies to all persons habitually employed
for wages or salary.
2. Provided that any Member may in its national laws or
regulations make such exceptions as it deems necessary in respect of—
(a)
(b)
(c)
(d)
(e)

(f)
(g)
(h)
(i)

persons employed in domestic service ;
homeworkers ;
workers whose employment is of a permanent character in the
service of the government, a local authority or a public utility
undertaking ;
non-manual workers whose earnings are considered by the
competent authority to be sufficiently high for them to ensure
their own protection against the risk of unemployment ;
workers whose employment is of a seasonal character, if the
season is normally of less than six months' duration and they
are not ordinarily employed during the remainder of the year
in other employment covered by this Convention ;
young workers under a prescribed age ;
workers who exceed a prescribed age and are in receipt of a
retiring or old-age pension ;
persons engaged only occasionally or subsidiarily in employment covered by this Convention ;
members of the employer's family ;

SCOPE OF PROTECTION

65

(i)

exceptional classes of workers in whose cases there are special
features which make it unnecessary or impracticable to apply
to them the provisions of this Convention.
3. [Concerns annual reports.]
4. This Convention does not apply to seamen, sea fishermen,
or agricultural workers as these categories may be defined by national
laws or regulations.
A comparison of the exclusions summarised in table II
with the above wording indicates that many of the provisions
relating to scope in existing legislation on unemployment
insurance follow the 1934 Convention closely.
Voluntary Insurance
It is in some ways more difficult to obtain a complete
picture of the scope of voluntary unemployment insurance
schemes than of compulsory schemes, where the only question
concerns the types of workers required to be insured. At
least four different questions arise in the case of voluntary insurance. Under what conditions may a voluntary unemployment insurance fund be established ? What types of persons
are permitted to join such a fund and what types are not ?
What funds have actually been established in practice ? How
many workers have actually chosen to join the funds that have
been established ?
Provisions governing the types of persons who are, and
who are not, permitted to insure themselves in the three countries that now have voluntary schemes are summarised in table
III.
The Danish law differs from those of Finland and Sweden
in that an unemployment fund may be established only in
industries that are specifically listed. This law also restricts
coverage to employees without private means, whereas no
such limitation is present in the laws of Finland and Sweden.
In a certain sense, therefore, the Danish provisions seem the
more restrictive so far as the question of legal scope alone is
concerned.
Whether a particular employee who is not barred from
coverage by the exclusions summarised in table III actually
has an opportunity of becoming insured against unemployment
depends on whether an approved unemployment fund is actually established for the occupation and in the locality in which

66

UNEMPLOYMENT INSURANCE

TABLE I I I .

SCOPE OF VOLUNTARY
SCHEMES,

SCHEMES

UNEMPLOYMENT

Persons permitted to insure

Occupational
exclusions

Denmark

Paid employees in
industry, commerce,
agriculture, clerical
work, handicrafts,
catering, transport
and excavation, except specific exclusions
Conditional on existence of fund in occupation and locality

Employees
in other
industries

Finland

All wage earners except specific exclusions
Conditional on existence of fund in occupation and locality

Country

Sweden

All employees except
specific exclusions
Conditional on existence of fund in occupation and locality

INSURANCE

1955

Other exclusions

Employees with
private means
Employees under 18
or over 60
Temporary employees
Persons unfit for regular employment
Unpaid employees
Subsidiary employees

—

Salaried employees
Employees under 15
or over 60
Employees not of Finnish citizenship

—

Employees under 16
Employees over age
fixed by fund
Family employees
Physically or morally
unfit employees

he works. Unemployment funds may obtain recognition and
qualify for public subsidy in Denmark if they have not less
than 100 members, are connected with one or more occupations
in the eight industries listed in table III and cover at least one
province. In exceptional cases they may have less than 100
members or cover one locality only. The Danish funds are
also required to meet state standards in respect of contributions, benefits, administration, etc. Once established and
recognised, a fund is not permitted to refuse membership to
any person who fulfills the conditions required for insurance,
belongs to an occupation for which the fund is established,
and is resident or works in the area where the fund is operating.
Unemployment funds or clubs have by now been established in Denmark for virtually all classes of urban workers

SCOPE OF PROTECTION

67

eligible for insurance. There are some 65 different unemployment clubs organised into nearly 4,000 branches, each
with its local area. The largest club is that for unskilled workers, which contains more than a third of all employees covered
and has over 1,200 branches. There are also clubs for numerous
separate trades as well as one for foremen and another for
technicians. The clubs usually cover the whole country in
respect of the occupation or trade concerned. It has been
said that Denmark has now " practically reached the point
of saturation with unemployment clubs " for urban workers.
The minimum membership of a recognised unemployment
fund in Sweden is fixed at 500 members, though fewer members
are permitted in special circumstances. Though the Swedish
funds are established by trade unions, they are required to
admit any person employed in an occupation covered by the
fund. In most cases the by-laws of the trade unions concerned
require t h a t their members join the fund.

The conditions

governing establishment of funds in Finland are generally
similar to those in Denmark and Sweden, though a smaller
minimum membership is prescribed.
The number of voluntary unemployment funds established in Sweden has been somewhat smaller than in Denmark,
and in Finland the number is smaller still. In 1955 there
was a total of 44 approved funds in Sweden. All of these
were established by trade unions and had the whole country
as their field ; they had about 9,000 local branches. Only 16
funds serving different trades were in operation in Finland,
their membership consisting largely of pulp, metal, and building workers in the larger cities.
The estimated total number of employees in each of the
three countries with voluntary unemployment insurance who
were members of unemployment funds in 1952 was as follows :
Denmark
651,000
Finland
129,000
Sweden
1,143,000
These figures show that a substantial fraction of workers
in Denmark and Sweden—close to one-half, perhaps—are at
present covered by unemployment insurance, despite the
voluntary character of the measures applied. The scope of
the two schemes in their actual application does not compare
unfavourably, therefore, with that of some of the compulsory

68

UNEMPLOYMENT INSURANCE

SCHEMES

schemes. It cannot be concluded from the Danish or Swedish
experience, however, that voluntary insurance would necessarily achieve an equally broad scope in another country,
particularly one in which unemployment protection was being
introduced for the first time. The long tradition of voluntary
action in Denmark and Sweden, not only in unemployment
insurance but in various other fields, as well as the strength of
their trade union movements, would have to be taken into
account in judging how wide a coverage could be effectively
achieved through voluntary insurance in other countries.
It may be noted that the Social Security (Minimum Standards) Convention, 1952, stipulates that, for the purpose of
compliance with its unemployment benefit provisions, account
may be taken of—
protection effected by means of insurance which, although not made
compulsory by national laws or regulations for the persons to be
protected, (a) is supervised by the public authorities or administered,
in accordance with prescribed standards, by joint operation of employers and workers ; (b) covers a substantial part of the persons
whose earnings do not exceed those of the skilled manual male employee ; and (c) complies, in conjunction with other forms of protection, where appropriate, with the relevant provisions of the Convention.
Clause (c) in effect requires that the scope of voluntary insurance
schemes should be such as to cover " prescribed classes of employees, constituting not less than 50 per cent, of all employees "
as provided by Article 21 (a) of the Convention. It may also
be noted that the Unemployment Provision Convention, 1934,
provided that its requirements might be complied with either
through voluntary or through compulsory unemployment
insurance.
Non-Insurance Schemes
In the case of schemes providing unemployment allowances
not based on insurance, the provisions dealing with scope are
not concerned with categories of workers who should be enrolled
under insurance, pay contributions, and acquire an insured
status. Instead, they need only define what persons are
potentially eligible for allowances in the event that unemployment actually occurs. Provisions regarding the categories
of persons potentially eligible for allowances under the four
existing non-insurance schemes are summarised in table IV.

69

SCOPE OF PROTECTION

Such persons must of course satisfy certain other qualifying
conditions, including a means test, at the time of unemployment
itself. In reality, compliance with the provisions relating both
to scope and to qualifying conditions under these schemes is

TABLE

IV.

SCOPE

OF

NON-INSURANCE

UNEMPLOYMENT

ALLOWANCE SCHEMES, 1 9 5 5
Country

Australia

Persons potentially
eligible ior allowances *

Occupational
exclusions

Other exclusions

—

Persons under 16
Persons over 65
(women 60)
Temporary residents
(less than one year)
Seasonal workers with
sufficient income
Intermittent workers
with sufficient
income
Aboriginal Natives

All persons except
specific exclusions

France

All employees except
specific exclusions
Self-employed writers,
artists, actors, musicians
Graduates of schools
Special insurance
schemes for dockers
and building
employees

Sharefishermen

Employees under 21
Employees over 65
Persons not normally
employed
Seasonal employees
Subsidiary employees
Physically unfit
persons
Wives of employees

Luxembourg

All employees except
specific exclusions
Graduates of schools

Agricultural
employees
Domestic
servants

Employees under 16
Persons not usually
employed
Seasonal employees
Commission agents
Wives of regular
employees

New.Zealand

All persons except
specific exclusions
—

1

Persons under 16
Persons qualified
for old-age benefit
Residents of less than
one year's standing
Wives of husbands
able to support them

Payment of allowances subject, in each country, to income test at time ol claim.

70

UNEMPLOYMENT INSURANCE

SCHEMES

verified for an individual worker only if, and at the time when,
he files a claim for an unemployment benefit.
It is perhaps somewhat artificial in the case of such schemes
to classify some of the provisions governing qualification for
allowance as scope provisions, and others as qualifying conditions. But the former tend to be expressed more in terms of
broad and general categories of persons, while the latter are
concerned with the individual circumstances of each claimant
at the time of unemployment. The subject of qualifying
conditions for benefit and disqualifications therefrom is dealt
with in Chapters IV and V.
The Australian and New Zealand schemes, in principle)
offer potential protection to all regular residents of working
age. France offers protection to all persons usually employed,
to certain workers not ordinarily classified as employees, such
as musicians and artists, and to recent graduates of schools who
may never have been employed. Luxembourg limits the
scope of its scheme principally to persons usually employed
in industry and commerce.
Since under these schemes there is no enrolment in advance
of the claim for an allowance, no count is automatically made
of the number of persons protected by them. The number
of persons potentially eligible for unemployment allowances
in each country is, in fact, theoretically identical with the
total population included within the framework of the provisions summarised in table IV.
The Social Security (Minimum Standards) Convention,
1952, provides that schemes granting unemployment allowances
subject to a means test should cover all residents.

CHAPTER III
COVERAGE OF SPECIAL GROUPS
Experience has shown that some types of employment
present special problems when included under unemployment
insurance. It is often necessary, therefore, to give special
consideration to the treatment of these in deciding upon the
scope of a particular scheme. Some of the employments in
question are dealt with in much the same way under the majority
of existing schemes. Practice with regard to the others varies
widely, however, as some countries include them and others
exclude them from coverage.
Some of the factors that complicate decisions concerning
the inclusion or exclusion of certain types of employment are
encountered under almost any form of social insurance. As
these are already extensively discussed in general social insurance literature, they are not treated in detail here. There
are also other factors more closely connected with the special
characteristics of unemployment insurance. The weight to
be given to these various factors in determining the scope of
a scheme must be settled by reference to the principles set
forth in the first part of Chapter II. That is to say a balance
must be struck among often conflicting factors—the principle
of need for protection, administrative considerations, and
financial considerations.
The various groups of workers whose coverage by unemployment insurance is sometimes open to question may be
examined under the following main headings : industry groups,
types of undertakings, categories of jobs, kinds of persons,
and regions.
INDUSTRY GROUPS

As under other forms of social insurance, employees in
the basic industries of manufacturing, mining and commerce
are nearly always covered under unemployment insurance.

72

UNEMPLOYMENT INSURANCE

SCHEMES

Taken as a whole and apart from particular segments, their
coverage does not normally present any unusual problems.
Belgium, it may be noted, has singled out miners for coverage
under a special scheme rather than under its general scheme.
The situation is somewhat different, however, as regards employees in the major industry groups commonly described as
agriculture, transport and services.
Agriculture
The largest economic group for which special difficulties
are met in applying unemployment insurance is constituted,
in most countries, by the workers engaged in agriculture. To
this group must be added workers in the closely related fields
of forestry, livestock raising, hunting, trapping and fishing.
The problems to be overcome in insuring rural workers against
unemployment are both administrative and financial in
character.
Difficulties of Coverage.
The predominance of small employing units and the dispersion of these units have always made it more difficult to
apply any form of social insurance to agriculture than to urban
employments. The ordinary social insurance processes of
registration, collection of contributions, inspection, etc., cannot be performed as efficiently, and are more costly per worker
covered, in agriculture than in industries where employing units
are usually larger and more concentrated geographically.
The prevalence of part-time work, including seasonal employment and often continuous underemployment, in various
branches of agriculture causes still further difficulties in the
application of unemployment insurance. Verification of unemployment and loss of wages in the case of rural workers employed less than full time is often administratively quite difficult.
On the financial side the significant characteristic of much
agricultural employment is the smallness of the cash income
received by both employees and employers. Much of agricultural income is in kind. This does not provide a ready
basis for payment of cash contributions by either the employee
or the employer. In some cases, also, the worker is remunerated
on the basis of a share or seasonally, an arrangement which

COVERAGE OF SPECIAL

GROUPS

73

does not easily lend itself to the payment of a small regular
contribution.
The above difficulties are serious ones. They may make
it necessary to exclude agricultural employees completely, at
least at the outset of a new scheme. Or, if such employees are
covered, special attention must be given to means of overcoming the difficulties cited. There can be no question, however, regarding the need of agricultural employees for unemployment protection. Agricultural employment is often very
unstable. It is vulnerable to numerous factors including
climate, market conditions and price fluctuations. Income
levels are so low that workers can do little through saving
to build up their own protection against the loss of their jobs.
Present Coverage.
Over half of the existing unemployment benefit schemes
have now succeeded in covering most or all agricultural employees. This is true, for example, of the schemes of Austria,
Belgium, the Netherlands, Norway, Yugoslavia, and the United
Kingdom. Ireland covers male but not female agricultural
employees. Agricultural employees are also potentially eligible for insurance under the voluntary schemes of Denmark,
Finland and Sweden, and for allowances under the non-insurance schemes of Australia, France and New Zealand. Agricultural employees were not originally covered in some of
these countries, but were brought in after the original scheme
had been in operation for some time.
In contrast to the above countries Canada excludes employment in agriculture, horticulture, forestry, fishing, hunting,
and trapping. The Federal Republic of Germany excepts
workers employed in agriculture and forestry if they live with
the employer and receive mainly wages in kind. Japan excludes
all employment in agriculture, forestry, livestock raising, and
fishing. Norway excludes relatives employed in an agricultural undertaking, and all employees engaged in the breeding of reindeer, fishing, whaling and sealing. The Union of
South Africa excludes persons employed in agriculture but
covers those engaged exclusively or mainly in forestry. Switzerland and all of the 48 states in the United States exclude
agricultural labour. The non-contributory allowances provided in Luxembourg are not available to agricultural workers.

74

UNEMPLOYMENT INSURANCE SCHEMES

As a matter of general policy it would seem that, in view
of their urgent need for protection, agricultural employees
should be excluded from unemployment insurance only if their
coverage appears virtually impossible.
If full coverage
of agricultural employment is not considered practicable, it
may nevertheless be found possible to cover at least some
marginal and other categories of agricultural workers, such as
those employed in processing or administrative operations or
by larger farm units which employ at least several workers.
If it is decided to cover agricultural employees in general,
special care must be taken to ensure that the contribution,
benefit and administrative arrangements worked out for urban
employees will apply equally well to those in agriculture.
Transport
Railway

Transport.

Special coverage provisions are sometimes applied to
railway employees and have the effect of exempting them from
coverage at least under the general scheme. These provisions
may be the result of the greater stability inherent in some
types of railway employment, the existence of other measures for
protecting railway workers against unemployment, or other factors. Where the railways are owned by the State, the considerations governing inclusion or exclusion of permanent railway employees may differ little from those applicable to civil servants.
In most countries railway employees are now covered
together with other employees under the general scheme. In
Belgium, however, employees of the National Belgian Railway
Company are excepted, provided that they receive from the
Company advantages at least equal to those extended by the
general scheme. The Union of South Africa excludes permanent employees of its railway administration and employees
in the regular non-European staff establishment of that administration. In the United States railway employees are excluded
from the general state schemes but are covered by a special
insurance scheme for railway workers administered by the
national Government.
Sea Transport.
The coverage of seamen often presents special problems
for unemployment insurance. Their absence at sea for long

COVERAGE OF SPECIAL

GROUPS

75

periods, the special nature of their contracts of employment,
and problems involved in testing their unemployment account
for the occasional use of special provisions in dealing with
them. Most countries now cover seamen under their unemployment insurance provisions. In some cases the law expressly
provides for their coverage under the general scheme, while
in others special schemes are established for dealing with them.
The Netherlands, the United Kingdom and Ireland, for example,
provide specifically for coverage under their general schemes
of the master and members of the crew of ships registered in
the country. In contrast, unemployment benefits are paid to
merchant seamen under special schemes in Belgium, Greece,
Japan and Norway. France expressly provides for the payment of allowances to unemployed seamen under special conditions, and also has separate provisions governing the payment of allowances to casual dockworkers ; regular dockers
are covered under a special scheme.
Government Service
Another major group for whom coverage may sometimes
be questionable are public employees. Administration is
relatively easy in their case, but their need for protection is
often small and problems of financial policy may also be
involved.
Problems.
Many public employees work under long-term or permanent contracts with a civil service status. This assures a
high degree of stability in their employment, which is enhanced
by the fact that government employment is not subject to
economic fluctuations to the same extent as private employment. The risk of unemployment for public employees, in
short, may often be quite small. Moreover, dismissal gratuities
are sometimes provided for civil servants whose contracts are
terminated. The availability of such indemnities further
lessens the need for unemployment insurance coverage.
The situation is complicated by the fact that many government employees are not members of the civil service and do
not have permanent contracts. This is often true of manual
employees and persons employed by the government in its
proprietary capacity. It may also be true of workers hired

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UNEMPLOYMENT INSURANCE

SCHEMES

during periods of emergency expansion of government activities.
Government employees who do not enjoy civil service status
may in some countries actually outnumber those employed
under permanent contracts. The exposure of the former to
the risk of unemployment may differ little from that of
workers in private industry, and they have the same need for
protection.
Another possible motive of a State in excepting its own
employees from unemployment insurance may be a financial
one. The State may feel unable on fiscal grounds to contribute to the scheme at the same rate as private employers, or
it may regard it as inappropriate to contribute with private
employers to a joint pool from which benefits are paid to both
public and private employees. These questions involve matters
of state fiscal policy and sovereign prerogatives which each
State has to resolve for itself.
National Practice.
Diverse policies are followed under existing schemes. The
United Kingdom and Yugoslavia expressly cover all civilian
public employees regardless of status. In contrast the following exclusions may be noted. Austria excludes persons employed by a government unit under a public-law contract of
service, and those employed by such units under a non-terminable
private-law contract of service if it gives right to superannuation benefits. Belgium and Italy exclude permanent government employees, while Ireland excludes those who are permanent and pensionable. The Federal Republic of Germany
and Norway exclude civil servants. Greece, the Netherlands,
and the Union of South Africa exclude all public employees.
In Switzerland employees of the federal Government may not
be covered under cantonal schemes. The United States covers
employees of the national Government, but about three-fourths
of the states exclude state and local governmental employees ;
the other one-fourth of them cover some categories of such
employees either on a compulsory or on a permissive basis.
Certain classes of persons working for the government
are sometimes the subject of special provisions. Canada,
Ireland and South Africa expressly exclude persons in the
defence forces. In a number of other countries military personnel are implicitly excluded by the definition of employment.

COVERAGE OF SPECIAL

GROUPS

77

Canada also excludes policemen. Special regulations are
sometimes issued to fix the status of part-time elected and
appointed officials of local units of government. The Netherlands expressly includes workers employed on relief jobs.
Canada excludes all teachers, South Africa excludes publicly
employed teachers and Ireland and the Netherlands exclude
all teachers entitled to protection under other laws.
The State and other units of government clearly constitute
a special class of employer for whom many ordinary rules do
not apply. But, on balance, it would seem a sound element
of public personnel policy that all public employees who do
not receive substantially equivalent protection in other ways
should be covered by unemployment insurance despite any
financial difficulties involved. Reductions in staff are often
necessary even in public employment. The risk of unemployment for various categories of workers in private industry
is often no greater than that for public employees. Finally,
exclusion of the good risks represented by public employees
may be regrettable from the standpoint of the financial equilibrium of an unemployment insurance scheme.
Other Services
Community Services.
The coverage of employees of private charitable, educational, religious and similar organisations sometimes involves
special considerations. Such organisations are usually operated
on a non-profit-making basis and derive much of their income
from voluntary donations. They are frequently exempted
from the payment of ordinary taxes. In addition, some of
the persons working for these organisations, particularly for
religious organisations, are remunerated chiefly in kind rather
than by cash wages. But many of the other employees of
these organisations have basically the same need for unemployment protection as if they were working for a profit-making
employer.
Only a few of the existing schemes explicitly exclude
such employees on any extensive scale. Canada excludes
employees of non-profit-making hospital and charitable institutions, professional private-duty nurses, and teachers employed by educational institutions or otherwise. The Federal
6

78

UNEMPLOYMENT INSURANCE

SCHEMES

Republic of Germany excludes members of religious associations, deaconesses, Red Cross sisters and similar persons, if
they engage in health or educational services primarily from
religious motives and receive free maintenance with relatively
little cash remuneration. Greece and Ireland exempt ministers
of religion and members of religious communities ; Japan
excludes employees of enterprises engaged in the care of the
sick and related activities, education, social work, and other
non-profit activities. All the state schemes in the United
States exclude employees of undertakings organised exclusively
for religious, charitable, scientific, literary or educational purposes and not operated for gain.
In summary, while some categories of persons working
for non-profit-making organisations can hardly be regarded as
gainfully employed persons in the ordinary sense, there are
many others for whom employment by such organisations
constitutes a source of livelihood no different from employment
by a commercial undertaking. Any decision regarding the
coverage of the latter category of employees, however, should
presumably depend upon the legal position that non-profitmaking institutions already occupy under tax, labour or other
legislation in each separate country.
Domestic Service.
Domestic servants present the greatest problems of coverage so far as the field of personal services is concerned. Both
administrative and financial difficulties are involved. Such
workers are employed mainly in households that are not in
themselves commercial enterprises. The typical employer
consists of a family with only one employee. The same employee
may often work for more than one household in the same week,
thus working only part-time for each employer. These facts
complicate the tasks of enrolling domestic servants in insurance
schemes, collecting contributions in respect of them, and determining when unemployment actually begins. Moreover, much
of the income of domestic servants is often in kind, in the form
of board and lodging which serve much less readily than
cash wages as a basis for contributions.
The need of domestic servants for protection againt unemployment, on the other hand, is as pressing as that of the majority of other workers. Their employment is somewhat less

COVERAGE OF SPECIAL

GROUPS

79

stable than that of numerous workers and, in fact, is often
terminated more abruptly and with less formality than in the
case of employees generally. Their rates of earnings are usually low and their ability to save against possible unemployment
is small.
Some categories of domestic servants are more easily
covered than household employees. Such is the case for those
employed by enterprises operated for a profit, e.g. hotels.
Other domestic servants are employed by organisations which,
while not operated for gain, are of sufficient size to make coverage administratively practicable ; clubs and hospitals are illustrations of such organisations.
Most of the countries that now exclude domestic servants
from unemployment insurance make a distinction of the kind
noted above. Thus, Canada excludes employment in domestic
service unless for a business carried on for gain or for a club.
Italy, the Netherlands, and the Union of South Africa except
only domestic servants employed in private households, while
Norway excludes domestic work in private houses, institutions, hospitals, and hostels not licensed as hotels. The state
of New York is the only state in the United States that covers
domestic servants in private homes, and its law applies only
to households with four or more employees. In contrast to
these countries, Austria and Ireland exempt from coverage all
females employed as private domestic servants, while Belgium
excepts all domestic servants. Unemployed domestics are
not entitled to the non-contributory allowances payable in
Luxembourg.
It is clearly socially desirable to cover domestic servants
under unemployment insurance if that is administratively
and financially feasible. The difficulties of covering them
have been overcome in countries other than those mentioned
above. In the case of a new scheme, however, it may be necessary to defer their coverage until the scheme has been successfully launched, but in this case they should if possible be brought
in at a later date. There remain certain other suppliers
of personal services, such as bootblacks, whose income is
usually quite low. Many of these more nearly resemble selfemployed persons, however, and for this reason unemployment
protection can be provided to them only with great
difficulty.

80

UNEMPLOYMENT INSURANCE SCHEMES

Recreation Services.
Certain workers engaged in recreation services fall near
the border line of the definition of employee because of the
nature of their work. For this reason some countries have
found it necessary to lay down special provisions concerning
the coverage of such workers. Thus, Canada specifically excludes persons who are employed and paid for playing games.
In contrast, Ireland and the United Kingdom cover casual employment if it is for the purposes of a game or recreation where
the persons employed are engaged or paid through a club.
The Netherlands specifically includes members of orchestras.
France also has special provisions authorising the payment
of allowances under certain conditions to unemployed professional artists in the plastic, graphic, dramatic and musical
arts, and to writers and composers. Italy on the other hand
specifically excludes artists and theatrical and film employees.
TYPES OF UNDERTAKINGS

In some cases employees of certain kinds of undertaking may be excluded from coverage by reason of the characteristics of the undertakings themselves. Such exclusions
may cut across all industry lines and are also in no way related
to the nature of particular jobs or to the personal characteristics
of individual workers.
Small Employers
The administrative difficulties and expense involved in
covering a large number of very small employing units occasionally leads to the outright exemption of all small undertakings
from coverage, irrespective of industry. Such exemptions
can scarcely be justified from the standpoint of the need of
the workers concerned for protection. Nevertheless, they may
effect a substantial reduction in the administrative load of
unemployment insurance, without excluding a significantly
large proportion of the total labour force.
An exemption of this sort is of particular significance for
less developed countries, since limiting the initial coverage of
a new scheme to larger undertakings may considerably ease
the difficult task of establishing an entirely new administrative

COVERAGE OF SPECIAL GROUPS

81

structure. It may be noted in this connection that the Social
Security (Minimum Standards) Convention, 1952, allows countries with an insufficiently developed economy to comply temporarily with the Convention, as regards unemployment benefit,
by covering 50 per cent, of all employees in industrial workplaces employing 20 persons or more.
Most existing schemes have no exemption of this kind.
Japan, however, excludes from coverage all workers employed
by employers having less than five employees. About twothirds of the state schemes in the United States also exclude the
smallest employing units. This exclusion is usually expressed
in terms of the number of workers employed and different states exclude firms employing from one to three employees.
A few states express the exclusion in terms of a minimum
monetary payroll rather than a minimum number of workers.
Other Exclusions
Greece excludes persons working for an employer who
is not permanent. Japan excepts those employed by enterprises with no definite location, except construction enterprises. The Union of South Africa excludes employees of
undertakings that maintain a provident fund for their employees. The Netherlands exoludes persons for whom conditions for payment of unemployment benefit are regulated by
other public laws, if such benefits are not less favourable than
those of the general scheme. The Italian law provides for the
possible exemption of employers who have guaranteed stability of employment to their workers.
CATEGORIES OF JOBS

Another important type of limitation on scope consists
in the exclusion of particular types of job from coverage. This
may be done even though all other jobs in the industries or
undertakings concerned are included. Nor are such exclusions
dependent upon the personal characteristics of the particular
person occupying the job. Exclusions of this sort may be
classified into four main groups : higher-paid jobs, jobs near
the border line of the definition of employment, part-time
jobs, and seasonal jobs.

82

UNEMPLOYMENT INSURANCE

SCHEMES

Higher-Paid Jobs
Maximum earnings are sometimes fixed under unemployment insurance schemes with the effect that all jobs for which
the rate of remuneration exceeds a specified level are entirely
excluded from protection. A similar practice is often followed
under other branches of social insurance. These limits not
only disqualify the persons affected from receiving benefits
but exclude them completely from insurance ; that is to say
they are not enrolled in the insurance scheme and no contributions are paid in respect of them. The basic theory underlying
this practice is that persons occupying the jobs concerned,
with the larger incomes they receive, are able by saving to
provide their own protection against the risk involved.
Some of the countries that applied an earnings ceiling in
the past have abandoned it, but a minority of countries still
have such a limit. Thus, Canada excludes salaried jobs for
which the rate of pay exceeds $4,800 per year. The Federal
Republic of Germany excludes non-manual and seafaring jobs
for which annual remuneration exceeds 9,000 DM. Greece
excepts all workers whose remuneration exceeds 5,000 drachmas per month. In Ireland all non-manual employments are
excepted for which the rate of remuneration is more than
£600 per year. The Netherlands excludes persons whose money
wages exceed 6,000 gulden a year. The Union of South Africa
excludes employments in which rates of earnings exceed £750
per year.
It would appear desirable, in principle, that exclusions
of this type should be applied at most only to jobs that are
in fact in the upper ranges of the remuneration scale. Evaluation of how restrictive any particular earnings ceiling is at
the present time would require a detailed study of actual
earnings levels in each country, as well as of living costs. Only
thus could it be determined whether a given ceiling actually
excluded only the " higher-paid " jobs or whether it excluded
some " moderately paid " jobs as well. One bench-mark to
use in such a test would be to compare the earnings ceiling
imposed with the typical wage of a skilled manual male employee.
As a matter of general policy, it may be questioned
whether any exclusion of this kind is justifiable under a contri-

COVERAGE OF SPECIAL

GROUPS

83

butory unemployment insurance scheme. The so-called higherpaid jobs may in fact be no more stable than lower-paid jobs.
It is also questionable whether the majority of workers affected
by such exclusions are actually able to save enough to build
up their own protection against possible loss of their job.
The reduction in administrative costs resulting from these
types of exemption is negligible, and in reality they may complicate rather than simplify administration. Finally, from a
financial standpoint, contributions in respect of higher-paid
jobs may often strengthen the actuarial position of a scheme.
Border line Employment
There are a number of jobs in every country where the
relationship between the worker and the person for whose
account the work is done is not identical with that normally
found between an employee and an employer. The difference may lie in methods of determining the remuneration, in
the degree of supervision exercised by the principal, in the
place where the work is performed, or in still other circumstances.
As unemployment insurance is concerned basically with rupture
of the employment relationship, special attention has to be
given to the classification of jobs falling close to the border line
between employment on the one hand, and self-employment
or non-employment on the other. Troublesome cases not
clearly dealt with in the law may later have to be the subject
of regulation or else of judicial construction.
Apprentices.
The position of apprentices is one case in question. As
learners who are unpaid or receive only a small sum, apprentices cannot be regarded as ordinary employees. Should
they be protected against unemployment when their apprenticeship stops, and will there be a measurable wage loss ? Divergent practices are followed under existing schemes.
Austria excludes apprentices from coverage unless they
are paid as much as the lowest-paid labourer or else are in the
last year of their apprenticeship. Belgium excludes apprentices unless bound by an ordinary contract of employment,
but covers them after completion of their apprenticeship. In
the Federal Republic of Germany, apprentices are covered
only during the last 12 months of their apprenticeship. Greece

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UNEMPLOYMENT INSURANCE

SCHEMES

excepts technical apprentices. Japan excludes workers who
are employed on probation. Switzerland allows apprentices
to be insured only in the last six months of their apprenticeship.
In contrast to these exclusions some countries specifically
provide for coverage of apprentices. Canada, Denmark, Ireland, Norway, the Union of South Africa, the United Kingdom,
and Yugoslavia expressly include persons working under a
contract of apprenticeship.
Share-Workers.
Another type of problem is presented by persons remunerated on a commission or share basis. Their work is often
performed outside the employer's premises and with only
limited supervision. Thus their occupation presents some of
the features of self-employment and some of employment.
The Netherlands expressly includes commission agents
who work exclusively for one party as well as persons who
perform jobbing work. Crews of fishing vessels remunerated
by a share of the catch or profits are normally covered by the
Netherlands and the United Kingdom, even when not employed
under a contract of service.

An opposite practice as regards

commission agents is followed in Canada, Norway, the Union
of South Africa, the United Kingdom, the United States, and
Luxembourg, which usually exclude them from unemployment insurance. Italy and the Union of South Africa also
specifically exclude share-workers, while Ireland and France
do not cover share-fishermen.
It would appear from the conflicting courses followed in
different countries that decisions regarding coverage of commission and share-workers must be guided by local custom
and jurisprudence, in view of the special legal relationship
often existing between such workers and their principals.
Homeworkers.
Still another border line type of work is that in which
articles or materials are given out by the principal to be made
up, cleaned, finished, altered, adapted for sale, or otherwise
worked at the home of the workers or another place not under
the control of the principal. Such workers, usually called
homeworkers, are subject to some supervision by the principal
and in this respect they resemble employees. They also have

COVERAGE OF SPECIAL GROUPS

85

a certain degree of independence such as is enjoyed by selfemployed workers. But they are often quite vulnerable to
the risk of loss of work and thus need unemployment protection. For this reason such protection should probably
be provided whenever the necessary administrative arrangements can be made.
As regards existing schemes, Austria covers homeworkers
under special conditions, while Belgium and the Netherlands
cover them explicitly. In contrast, Ireland, Italy, Norway
and the Union of South Africa exclude them.
Other Categories.
There are still other border line types of jobs which are
sometimes excluded from coverage. Thus, it may be questioned whether corporation directors are employees of the
company they direct. Canada and the United Kingdom
exclude such posts from coverage, though they are usually
covered in the United States if remunerated. Denmark does
not permit the coverage of unpaid employees, while Norway
excludes workers whose remuneration consists solely of board
and lodging. Italy provides for the outright exclusion of
workers for whom verification of unemployment is impossible.
On the other hand, Yugoslavia expressly includes members of
handicraft co-operative societies. Policy as to coverage of
these and similar border line employments must clearly be
based on an evaluation of the factor of need as well as on the
administrative and financial considerations peculiar to each
country.
Part-Time

Employment

Problems.
The basic purpose of unemployment insurance is replacement of part of the wage lost as a result of termination of employment. If a person lacking a job was not previously employed,
there is no lost wage to be replaced. If such a person was not
fully employed prior to the loss of his job, he has suffered
only a partial loss of wages. If the preceding employment was
of relatively small amount or was quite irregular, the loss of
wages is correspondingly small and in addition it may be very
difficult to determine.

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UNEMPLOYMENT INSURANCE

SCHEMES

It is by reason of these considerations that unemployment
insurance schemes often completely exclude various limited
spells or pieces of employment from coverage. The selection of
precise dividing lines is a matter of degree. The underlying
principle, however, is that when the amount of employment
falls below a certain level it is neither socially necessary nor
administratively feasible to provide insurance against the
relatively small loss of wages which will result when the job is
terminated. It may be assumed that below this level the
occupant of the job is not in fact a regular member of the
labour force that is being protected.
As will be seen in Chapter IV the qualifying conditions
for receipt of benefits also have the effect of denying benefits
to persons who normally work less than a certain proportion
of full time. These qualifying conditions apply to persons
who have previously been admitted to insurance. The provisions being considered at this point, however, are those which
exclude part-time workers at the outset from coverage by
insurance. In other words the employments examined here
are those in respect of which registration is not effected and no
contributions are paid.

Casual and Subsidiary

Employment.

One type of part-time employment frequently excluded
from unemployment insurance is employment of a casual nature
carried out otherwise than for the purpose of the employer's
trade or business. Such an exclusion is provided for by the
laws of Canada, Ireland, the Union of South Africa, the United
Kingdom and the United States among others. A somewhat
similar type of employment often excluded is that ordinarily
engaged in as a subsidiary or supplemental and not as a principal
means of livelihood. Such part-time employment is excluded
from coverage, for example, under the schemes of Canada,
Denmark, France, Ireland, Luxembourg, the Netherlands,
Norway, Switzerland and the United Kingdom.
The exclusion of casual and subsidiary employment does
not seem to be in serious conflict with the principle of the need
for protection. It may also help to simplify administration by
eliminating fragmentary " pieces " of employment that are not
often sufficient by themselves to enable a worker to qualify
for benefit.

COVERAGE OF SPECIAL

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87

Occasional Employment.
Apart from the special kinds of limited employment
referred to as casual and subsidiary, there are many other
cases where jobs have only a brief duration. They may be
jobs of a temporary character taken once only or they may
recur irregularly, intermittently, occasionally or otherwise.
Their common feature is that the total employment afforded
by the job, when aggregated for a period of a week, month
or year, represents only a relatively small fraction of full-time
employment. A jobless person who previously occupied only
a job of this sort cannot be regarded as having suffered any
appreciable loss of wages. Hence, it is often of little use to
cover such types of job under unemployment insurance schemes.
They lead to much additional administrative work without,
as an end result, giving any right or any substantial right to
benefit.
A good many of the existing schemes exclude this type
of employment. Thus, Austria excludes persons who, having
regard to their hours of work or level of remuneration, are only
occupied to an insignificant extent. Canada excepts employment that habitually totals less than four hours per day. The
Federal Republic of Germany exempts temporary employees,
and those whose pay is insignificant, from liability for insurance,
as well as students who do some work while attending school.
Ireland provides for the exclusion of employment of inconsiderable extent. Persons who only perform work occasionally in
the service of another are not subject to insurance in Italy.
The Netherlands excludes persons who perform work for wages
only in exceptional cases and for short periods.
Norway exempts employees not otherwise liable to insurance who perform work covered by insurance for only a short
period fixed in advance ; it also exempts persons earning less
than 1,000 kroner per year, on the theory that no person essentially dependent upon his earnings would earn such a low
amount. Switzerland excludes persons employed for less
than 150 days per year. The Union of South Africa does not
cover persons employed for less than eight hours in a week, or
Natives who do not earn more than £182 per year. The
United Kingdom disregards employment in which a person is
engaged only to an inconsiderable extent ; it also excludes

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UNEMPLOYMENT INSURANCE

SCHEMES

employment by one employer of less than four hours per week
(eight hours if domestic service), as well as various forms of parttime employment in specified occupations.
Under the Danish voluntary scheme, unemployment funds
may not admit as members persons employed on work that
is only of a temporary nature. As for the non-insurance
schemes, Australia permits cancellation or postponement of
unemployment allowances if the claimant has been only an
intermittent worker and possesses an income sufficient for
maintenance. France and Luxembourg do not pay allowances to persons not usually employed, except in the case of
recent graduates from universities and technical schools.
No major question of principle appears to be involved in
the problem of whether to include or exclude short-term work
from insurance. A worker who is a part of the labour force
for only a brief period cannot be assumed to sustain any important loss of wages if he finds himself totally without work.
He is thus scarcely insurable against unemployment. If a
benefit is made payable, it must in any case be exceedingly
small. Or, if the worker has had a longer period of employment in another job, the amount of the benefit is usually little
affected by inclusion or exclusion of a brief additional spell of
employment. The administrative implications of including or
excluding short periods of employment will .vary according to
the nature of each scheme. Provisions of this sort must always
be carefully drafted, however, so as not to exclude employments of sufficient duration to be genuinely insurable.
Seasonal

Employment.

Seasonal employment is in some respects a special case
of part-time employment, but also has certain other features
that warrant special consideration. By seasonal employment
is meant work performed each year, during more or less the
same period of the year, but which continues for only a relatively few weeks or months. A worker who engages only in
seasonal employment can be assumed for purposes of unemployment insurance to suffer a measurable loss of wages only if
he becomes jobless in the seasonal period during which he
normally works. His unemployment during other periods
cannot be regarded as representing a loss of wages. This is

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89

the simple basic principle involved, but it is somewhat complicated to put into practice.
The ordinary qualifying conditions operate under some
schemes in such a way as to bar exclusively seasonal workers
from benefit, owing to the fact that they work for too brief a
period. Under other schemes this result does not always
follow and to protect them against a heavy financial drain
from workers who might work each year sufficiently long to
qualify for benefits and then draw benefits for many weeks
during their off-season, it is sometimes found necessary expressly to exclude seasonal workers from coverage. An alternative
approach is to admit seasonal workers to insurance but to lay
down special additional qualifying conditions concerning their
benefits. It should be noted that a worker who engages in a
seasonal occupation for part of the year and a regular occupation during the remainder of the year may be severely penalised
if account is not taken of his employment in the seasonal occupation.
A few of the existing schemes make no special mention
of seasonal workers in their laws. They may therefore be presumed to cover such workers. Some of the schemes concerned
exclude agricultural employment, however, in which seasonal
work is quite prevalent. In at least some of the others it
may be assumed that many seasonal workers are excluded
from benefit by the qualifying conditions, while others may be
excluded through regulations pertaining to part-time employment.
In contrast a certain number of other countries specifically
exclude certain classes of seasonal workers from coverage.
Italy, for example, excludes persons employed exclusively on
work which is performed annually during fixed periods lasting
less than six months. Japan excludes workers employed
in seasonal enterprises for a specific term of employment which
is less than four months, or workers who are employed seasonally.
Norway exempts employees in undertakings that as a rule
carry on their activity for only a short period in the course
of a year. In the United States employees of all employers
who operate less than 20 weeks during a year are excluded
from coverage. The Union of South Africa normally excludes
seasonal workers, who are defined as persons employed on work
that, by reason of seasonal variation in the supply of the raw

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UNEMPLOYMENT INSURANCE SCHEMES

material of an industry, is ordinarily available to such persons
for a continuous period of not more than eight months in any
one year.
Canada in general includes persons employed in seasonal
industries but authorises the imposition by regulation of additional contribution and benefit conditions for such persons.
Moreover, it has adopted special provisions for certain classes
of employees under which seasonal benefits are payable to
workers unemployed during the slack winter period from
1 January to 15 April. The United Kingdom covers seasonal
workers but has added special qualifying conditions that must
be satisfied before such workers can obtain benefits during
their off-season.
It is apparent that, in designing an unemployment insurance scheme in countries where seasonal employment is prevalent, special care must be taken in dealing with this type of
employment. Ideally, seasonal employees should be able to receive benefits if unemployed during their normal season of employment. But special qualifying conditions may be required
to safeguard the payment of such benefits. If such conditions cannot readily be formulated until experience has been
acquired, it may be advisable to exclude seasonal workers
during the early stages of a new scheme until more careful and
realistic drafting of the conditions is possible.
KINDS OF PERSONS

Another category of possible exclusions from coverage
arises out of the personal characteristics of individual workers,
irrespective of the industry, type of undertaking, or job in which
they are employed. Among personal characteristics that may
require consideration are age, relationship to the employer
by blood or marriage, physical condition, and nationality.
Youths and Aged Persons
If the assumption is made that unemployment insurance
is designed basically to protect only regular members of the
labour force against loss of employment, some attention must
be paid to the border line ages at which most persons tend to
enter and leave the labour force.

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91

Youths.
Below a certain age most youths have not yet started
working, and those that have may not be regular full-time
workers. In addition, they ordinarily live in a household of
which they are not the primary breadwinner and, in some countries, a family allowance is still payable in respect of them.
Hence, not only is the unemployment of young persons often an
ambiguous condition to verify but it also may occasion little
real need for protection. There will of course always be some
exceptions to this. Moreover, the rate of pay of young persons
is often quite low, so that the normal employee contribution
may represent a disproportionately heavy charge on such
earnings. For the above reasons consideration has to be
given to the outright exemption of young workers below a
certain age from unemployment insurance. If there is legislation effectively prohibiting child labour below a reasonably
high age, such an exemption is of less importance.

Aged Persons.
At the other end of the scale are elderly workers who
have reached the age at which most persons retire from employment. The decline in working capacity that accompanies
the process of aging makes many aged workers so vulnerable
to unemployment that they constitute a heavy risk for an
unemployment insurance scheme. Without some safeguards a
disproportionate share of total benefits may have to be paid
to aged persons whose physical condition makes it difficult
for them to get and hold a job.
In view of these circumstances, it is sometimes desirable
to exclude persons above a certain age from the coverage of
unemployment insurance. The ideal arrangement, which exists
in numerous countries, is for old-age and invalidity insurance
to deal with the income loss of aging persons. Unemployment
insurance is thus in effect relieved from responsibility for
these somewhat marginal members of the active labour force.
Present Practice.
A number of the existing schemes contain express exclusions from unemployment insurance coverage either of persons
below or above specified ages, or both. Among the compulsory insurance schemes, Ireland and Switzerland exclude

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UNEMPLOYMENT INSURANCE

SCHEMES

workers under the age of 16, the United Kingdom (on the
basis of its school-leaving age) excludes workers under the
age of 15 years and Italy excludes those under 14 years. Many
of the state schemes in the United States exclude youths
under the age of 18 who deliver newspapers, a common form
of juvenile employment in that country. Greece excludes
all youths under 20 years of age. As for aged persons, Ireland
and Norway exclude workers over the age of 70 ; the Federal
Republic of Germany, Greece, and the Netherlands those over
65 ; and Switzerland those over 60. Some countries differentiate between male and female workers as regards the upper
age limit. The upper limits for coverage of such workers are
65 and 60, respectively, in the United Kingdom and 60 and
55, respectively, in Italy. Most if not all social insurance
schemes also contain general restrictions on duplicate or overlapping benefits, and it may be assumed that old-age and
invalidity pensioners virtually everywhere are outside the scope
of unemployment insurance.
In the case of the voluntary insurance schemes, Denmark
has age limits of 18 and 60, Finland of 15 and 60, and
Sweden a lower limit of 16 with its upper limit varying with

individual funds. The non-insurance schemes likewise restrict the
age period during which allowances are payable. Australia does
not pay unemployment allowances to persons under 16, to males
over 65 or to females over 60. France prohibits the payment of
ordinary allowances to unemployed workers under 21 unless
the head of a family and those over 65 ; and Luxembourg
and New Zealand to those under 16.
In planning a new unemployment insurance scheme,
decisions concerning the coverage of youths and aged persons
will need to be based on several factors. These include provisions of child labour and family allowance laws, retirement
and invalidity pension measures, and the precise nature of
the provisions to be applied under the new scheme in respect
of contributions, benefits and qualifying conditions.
Relatives of Employer
Experience has shown that coverage of employees having a
close family relationship with the employer may be undesirable
under unemployment insurance. The transition of such employees from an employed to an unemployed status may be

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93

ambiguous, difficult to verify and open to abuse. Since the
employer and the employed relative are often members of the
same household and income unit, the loss of wages suffered
through unemployment of the relative may not be such as to
require compensatory benefits. The normal processes of
registration and payment of contributions are easily manipulated, abused or evaded in the case of employment of a spouse
or child. For these reasons, it is often found desirable to
exclude all employees of this type outright.
Exclusion of family employees is a common feature of
existing unemployment insurance schemes. To illustrate, Austria enumerates the following exclusions : spouse, children,
adopted children, grandchildren, parents, adoptive parents,
and grandparents of the employer. A similar broad exclusion
of family labour is found in Belgium, the Federal Republic of
Germany, Greece, Switzerland and most states of the United
States. Canada excludes the spouse and also children who
receive no wages or other money payment. The United Kingdom and Ireland except the spouse as well as prescribed relatives
of the employer living in a common home. The Union of
South Africa excludes only the spouse.
Unfit Persons
Active membership in an unemployment fund is prohibited under the Danish voluntary scheme for persons who
are physically or morally unsuited for regular employment
or for working with foremen or fellow-workers. Somewhat
similar restrictions on coverage by reason of physical, moral
or mental qualities are imposed by Sweden and Switzerland.
Restrictions of this type do not seem well adapted for use
in the coverage provisions of compulsory insurances schemes
of wide scope. Under such schemes the question of ability
to work is applied as a qualifying condition for benefit, but
only at the time of unemployment.
Aliens
Problems.
Nothing inherent in compulsory unemployment insurance
requires that employees who are not citizens of the country
they work in should be excluded from coverage. Contributions should be levied in respect of their employment and, if

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UNEMPLOYMENT INSURANCE SCHEMES

they become unemployed, they should receive benefits under
the same conditions as nationals of the country. On the
other hand it is difficult to verify the existence or continuance
of unemployment if an unemployed worker—whether national or alien—leaves the country in which his insurance rights
have been built up. Unless, therefore, adequate reciprocal
arrangements can be worked out with the administrative
authorities of other countries, benefits cannot usually be paid
to unemployed aliens who leave the country in which they
were previously employed.
Present Practice.
Virtually none of the existing compulsory unemployment
insurance laws contains an unqualified provision excluding
workers from coverage by reason of alien nationality. The
Union of South Africa exempts certain alien workers whom
the employer is required by law or agreement to repatriate at
the termination of the contract of service. Greece excepts
aliens whose employment in the country is likely to last for
less than a year. Belgium requires the employment of aliens
to be in accordance with provisions respecting foreign workers. But it can be said that, in general, there is no exclusion
of aliens in so far as coverage under compulsory unemployment
insurance schemes is concerned.
Some of the voluntary insurance and non-insurance schemes,
however, contain exclusions affecting aliens. Membership in
an unemployment fund in Finland is not permitted to workers
who are not Finnish citizens. Australia does not pay allowances
to persons who have resided in the country for less than one
year, unless they intend to reside there permanently. France
excludes alien workers not in possession of a valid foreign
worker's card, unless reciprocal agreements provide otherwise.
New Zealand excludes aliens who have been resident in the
country for less than a year.
Treaties.
A number of social security treaties concluded among
different countries in recent years have dealt with unemployment insurance. Some of these call simply for equality of
treatment of nationals of the contracting countries in application of unemployment insurance. Others go further, however,

COVERAGE OF SPECIAL GROUPS

95

and provide for combining insurance periods served in different
countries, or for payment of unemployment benefits by one
country as agent for the other. Various examples of such
treaties may be noted.
An agreement concluded between Canada and the United
States in 1942 deals with duplicate coverage of workers employed
in both countries, and contains provisions facilitating the
payment of claims to unemployed persons with benefits rights
in one country who become unemployed in the other. Danish
and Swedish unemployment funds concluded an agreement
in 1946 enabling a member of a fund in one country to transfer
his claim for benefit to a fund in the other country. Somewhat similar agreements were entered into by Sweden and
Norway in 1948, and by Denmark and Norway in 1951. Belgium and the Netherlands signed a convention in 1947 and a
reciprocity agreement in 1950 allowing nationals of one country
to enjoy all the advantages of unemployment insurance when
in the other, and providing that employed workers not resident
in the country where they were employed may receive benefit
at the same rates as prescribed in the legislation of their country
of residence. A Belgo-Italian agreement of 1948 provides
that employees removing from one country to the other should
receive benefit in the latter if they fulfil either its qualifying
conditions or those of the country that they left.
A 1949 agreement between the United Kingdom and
Ireland permits persons who qualify for unemployment benefit
in one country to receive benefit under certain circumstances
while resident in the other ; provision is made for transfer of
sums between the two countries in connection therewith. An
agreement concluded between Australia and New Zealand in
1949 allows nationals moving from one country to the other
to retain their rights to unemployment benefit regardless of
any residential conditions ordinarily imposed. Periods of
employment and residence in one country may be taken into
account for purposes of obtaining unemployment benefit in
the other country under a social security agreement signed by
the United Kingdom and Australia in 1953.
A 1951 convention between the Federal Republic of Germany and Austria provides for periods of insurance served
in one country to be taken into account in determining eligibility for benefit in the other. Somewhat similar conventions

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UNEMPLOYMENT INSURANCE SCHEMES

were concluded between the Federal Republic of Germany
and the Netherlands in 1951, between the Federal Republic
of Germany and Italy in 1953, and between the Netherlands
and the United Kingdom in 1954.
REGIONS

It is sometimes necessary to exclude all workers in an
entire region from coverage. This may be due to certain
inherent regional characteristics that make it difficult to apply
unemployment insurance there at any time. Or, it may be
a consequence of a policy of gradual geographic extension of
a new scheme made necessary by a shortage of administrative
facilities, trained personnel, or employment offices at the time
when the scheme is started.
The cases of exclusion of whole regions or localities are
not numerous under existing schemes, since most of them have
been in operation for a number of years and are located in
countries with well-developed employment services. However,
Greece has not yet extended its scheme to all parts of the country, particularly to a number of rural regions. Japan excludes
day-labourers in regions that are not yet covered by a public
employment exchange. Canada permits exclusion of areas
in which there is relatively little employment of the kinds
covered by its scheme.
A policy of gradual geographical extension on the other
hand may have to be a basic feature of a new unemployment
insurance scheme introduced in a country where there has
been little or no previous experience with social insurance.
The same may be true in countries where an employment
service is only gradually being developed and extended to
different parts of the country.

CHAPTER IV
ELIGIBILITY FOR BENEFITS
The preceding two chapters deal with categories of persons
for whom the protection of unemployment insurance may be
provided. The next questions to be considered concern the circumstances in which persons so protected should receive benefit.
Long years of experience with unemployment insurance
in different countries have shown that precise and sometimes
elaborate rules have to be laid down to define the conditions
under which unemployed workers become eligible for benefit.
In framing these rules account must be taken of the purpose
of insurance, of the specific risk with which it is intended to deal,
and of the basic principles that follow therefrom. The rules
must also have regard for the practicability of developmg
procedures for testing compliance with the provisions adopted.
If the rules are not well designed they may inadvertently admit
to benefit numerous cases that should properly be excluded,
and may also exclude cases that on all grounds of equity should
be admitted. They may lead to widespread abuse. And
finally they may be difficult to administer if the border lines
they establish are obscure or ambiguous.
The term unemployment in its simplest form implies
little more than the condition of being without a job. A
person who has never worked may be said to be without a
job. A person who has had a job but who has given it up
voluntarily is also out of a job. A person may be ill and without a job for that reason. Or, he may be without a job solely
because he makes no effort to obtain one. Clearly unemployment insurance benefits could never be paid to every person
who has no job, without further conditions of eligibility. For
one thing this would be a financial impossibility for any country.
Moreover, there would be a risk of destroying the incentive
to work of many persons, thereby seriously hampering the
functioning of the economy.

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UNEMPLOYMENT INSURANCE SCHEMES

The broad principle should clearly be that workers covered
by unemployment insurance should be entitled to receive
benefits only when they become involuntarily unemployed.
All present laws either use this phrase in specifying the contingency for which benefits are payable, or refer to unemployment
while making clear in the context that involuntary unemployment is meant. Careful examination of the expression " involuntary unemployment " reveals, however, that it, too, is a
far from simple concept. It has various facets and it is not
always easy to draw a clear line of demarcation between them.
The phrase presumably refers to a situation in which a worker
is without a job as a result of circumstances beyond his control.
It also embraces the notion both of involuntary loss of a previous
job and inability to find a new one. The detailed provisions
required to elucidate this concept, to permit it to be tested
in individual cases, and to indicate its limits, are examined
in this and the following chapter under three main headings :
qualifying conditions, qualifying period and disqualifications.
QUALIFYING CONDITIONS

Each claimant for unemployment benefit should be required
to satisfy certain positive conditions before he is declared
eligible for benefit. He should also usually be required to
continue to meet the same conditions throughout the period
during which he receives benefit. Imposition of such conditions helps to confine the payment of benefits to persons suffering from unemployment of a type that is actually insurable.
Ability to Work
Unemployment insurance should ordinarily deal with the
risk of joblessness principally as it results from factors external to the individual worker such as the failure of the economy
to provide sufficient jobs. It should not have to deal with
joblessness produced by the personal circumstances of individual workers such as their incapability of working. Many workers lack remunerative employment because they are incapacitated by sickness, maternity, accident, invalidity or old age.
Benefits may be provided for these workers under other branches
of social security dealing specifically with such risks ; but, while

ELIGIBILITY FOR BENEFITS

99

they are in a sense " jobless ", they should not be considered
eligible for unemployment benefits.
The positive expression of this reasoning is that one basic
condition for receipt of unemployment benefit should be that
claimants are " able to work " or " capable of work ". A
requirement of this sort is an appropriate qualifying condition
under an unemployment insurance scheme. Such a condition
is expressly laid down in practically all existing compulsory
and voluntary insurance laws, as well as in the non-insurance
laws, and is also specifically recognised as acceptable by both
the Unemployment Provision Convention, 1934, and the
Social Security (Minimum Standards) Convention, 1952. The
general consequence of imposing this condition is that if an
employee is without work because of sickness or another form
of incapacity, or if he is sick or otherwise incapacitated at the
time of filing his claim, he is ineligible for unemployment benefit.
Verification.

The ability of most claimants to work can be adequately
verified if they are required to register and report regularly at an
employment exchange. However, persons confined to bed by
illness or accident will be unable to come to the exchange at
all. In the case of claimants who do appear in person at the
exchange, the officials there can usually determine readily
whether they are physically capable of working.
A certain number of cases will always arise, however, in
which ability to work must be determined medically. For
this reason the administrative agency may be empowered to
prescribe a medical examination in doubtful cases. Powers
of this sort are given to the administrative authorities by the
laws of Australia, Austria, France, Italy, the Netherlands
and Yugoslavia, among others.
Definition.
Border line cases of partial incapacity are bound to occur
that fall somewhere between total incapacity and full ability
to work. It may therefore be necessary to include a definition of " ability to work " in the law or regulations. Among
definitions found in existing laws the Federal Republic of
Germany deems a claimant able to work if he is capable of
earning, in an employment that is suited to his strength and

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UNEMPLOYMENT INSURANCE

SCHEMES

ability and which can be reasonably assigned to him in view of
his training and previous occupation, at least one-third of the
sum usually earned by physically and mentally sound persons
of the same kind with similar training in the same neighbourhood. Austria and Greece have a somewhat similar definition. Belgium deems physically unfit for employment any
claimant possessing a general earning capacity equal to only
one-third of what a person in the same conditions and with
the same training can earn by his own work in the same region.
Switzerland in contrast provides that workers whose capacity
to work is less th'an 70 per cent, shall not be considered capable
of working, unless they have been employed at least 12 days
since their sickness or accident.
Some of the state laws in the United States also expressly
link the requirement that a claimant must be able to work
to his particular occupation. Thus, Michigan requires only that
the claimant be able to perform full-time work of a character
that he is qualified to perform by past experience or training,
and of a character generally similar to work for which he previously received wages. It may also be noted in this connection
that a considerable number ' of the state laws specifically
deem women unable to work if they leave employment because
of pregnancy.
Relation to Sickness Insurance.
If other types of social insurance benefits are payable in
respect of incapacity for work, the definition of ability to work
under unemployment insurance should be dovetailed to the
maximum extent possible with that of incapacity under sickness insurance, employment injury insurance, invalidity insurance, etc. This will ensure that all deserving cases of wage
loss give rise to some form of benefit irrespective of its cause.
The Federal Republic of Germany expressly provides, for
example, that persons not recognised as incapable of work for
purposes of sickness insurance shall never be held incapable of
work for purposes of unemployment insurance.
It not infrequently happens that unemployment beneficiaries fall ill after payment of their benefit has started. If
there is a sickness insurance scheme, the worker may in this
case become eligible for sickness instead of unemployment
benefits. If there is no provision for sickness benefits, however,

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BENEFITS

101

the worker's position is more serious. In the latter case it
would appear not unjustifiable to continue the unemployment
benefit for at least so long as a suitable new job is not available
tor the worker.
This principle has been recognised to a limited extent in
it least three countries that have no general sickness insurance
scheme. The Union of South Africa continues under certain
conditions to pay unemployment benefits to a beneficiary when
le becomes ill or to a female beneficiary while she is pregnant.
f\.bout half a dozen state schemes in the United States, including
:hose of Idaho, Maryland, Montana, Nevada, Tennessee and
Vermont, provide that claimants who become ill while unemDloyed shall not be considered ineligible for benefit, so long
is no suitable work is offered to and refused by them. Canada
Drovides that a worker who becomes incapable of work after
laving become entitled to unemployment benefit shall not be
lisqualified therefor solely by reason of such incapacity.
Availability for Work
The concept of involuntary unemployment as a compensable
'isk presupposes that an unemployed worker has not found
ì new job for external reasons connected with the labour market,
md not for reasons arising out of his personal circumstances.
This is true whether or not such circumstances are within his
;ontrol. In other words it is assumed that he is in all respects
eady for work and that the only factor that keeps him from
vorking is the absence of a suitable vacancy. So long as this
s so he is assumed to be genuinely and currently attached to
.he labour force and to be entitled to benefits until a vacant
ob becomes available for him.
It follows from this line of argument that, if elements are
)resent in the personal circumstances of the worker that would
)revent him from accepting a suitable vacancy if such were
iffered to him, he cannot be considered as being currently
ittached to the labour force. In this case his unemployment
nay be ascribed to his personal circumstances and not to an
ibsence of suitable vacancies in industry. But it is not usually
onsidered a function of unemployment insurance to protect
[gainst the risk of being prevented from engaging in remunrative employment by personal circumstances. To deal with
he above a second positive condition often imposed for eligibi-

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UNEMPLOYMENT INSURANCE SCHEMES

lity for unemployment benefit is that the claimant must be
" available for work ".
Meaning of Availability.
Availability for work is a broad term that is rarely defined
in detail in legislation. Its interpretation plays an important
role, however, in many administrative and judicial decisions
concerning the right to benefit. One way of indicating its
meaning is to say that a claimant may be considered as available
for work when his personal circumstances are such that he is
in a position to accept without delay the offer of a suitable job.
There are numerous situations in which a claimant who
is able to work, and in all other respects qualified for benefit,
may be unavailable for work. Without attempting to classify
these systematically, they may be illustrated. The claimant
may have entered self-employment, enrolled in school, decided
to stop gainful work temporarily, retired, moved to a distant
region, gone on a vacation, or (in case of women workers)
married. These actions normally mean that the claimant is
not at least currently in his usual labour market and is thus
not currently available for employment.
The concept of availability for work obviously overlaps to
some extent with that of ability to work. An individual who
cannot work because of his physical condition is both unavailable and unable to work. In fact the two conditions are often
linked in the single expression " capable of and available for
work ". In addition, as in the case of ability to work, the concept
of availability must in practice ordinarily be considered in
relation to the particular occupation (or closely related occupations), skills, and region with which the individual claimant is
associated. In other words it does not mean availability for
any type of work, at any place, under any conditions.
Prevalence of the Requirement.
About half of the present compulsory insurance laws
expressly lay down " availability for work " as one of their
qualifying conditions for benefits. This is true, for example,
of the laws of Canada, Ireland, Italy, the Union of South
Africa and the United Kingdom, and all the state laws in the
United States. Beneficiaries qualifying under the Swedish
voluntary scheme must, in addition to being capable of work,

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103

not be otherwise prevented from undertaking work. France
subjects its non-contributory allowances to the condition that
the recipient is free to accept employment. It may also be
noted that both the Unemployment Provision Convention, 1934,
and the Social Security (Minimum Standards) Convention, 1952,
recognise availability for work as an appropriate qualifying
condition for unemployment benefit.
Testing Availability.
Availability for work can normally be tested by requiring
claimants to register and report at an employment exchange.
In a number of cases where the claimant is not available it
would be physically impossible for him to register and report
regularly ; in others, however, he could register and report
regularly if he chose. A definite finding of non-availability may
be difficult to establish, in cases of this latter type, until a job
is actually offered to the claimant. In short, while registration
for employment may usually be considered as prima facie evidence that an unemployed person is available for work, countervailing evidence may sometimes exist that makes denial of
benefit necessary even though the claimant is duly registered.
Willingness to Work
Another aspect of the problem of eligibility for benefit
concerns the willingness of unemployed persons to work. A
claimant may be able to work and available for work, and may
also register for work, but he may in fact be unwilling to
re-engage in employment. In this case, while the loss of his
old job may have been involuntary, continuance of his state
of unemployment would appear to be in keeping with his own
desires. For this reason some countries have made it an
express condition for benefits that the claimant must be " willing to work " or " willing to undertake suitable work ". Such
a phrase is found in the laws of Austria, Australia, France,
the Federal Republic of Germany, Greece, Japan and New
Zealand. Belgium similarly requires that the claimant must
be ready to accept any suitable employment.
The administrative task of testing compliance with a condition of willingness to work raises certain problems. The only
real test that can be made is to offer a suitable job. If the
applicant accepts it he proves his willingness to work ; if he

104

UNEMPLOYMENT INSURANCE

SCHEMES

rejects it he may be regarded as unwilling to work. But
penalties for refusal of a suitable job offer can be applied
directly, by providing for disqualification in case of such a
refusal. This type of disqualification is discussed in the following chapter. 1 In advance of or in the absence of a job offer
however, the matter of willingness must in the last analysis
be a psychological question of the state of the claimant's mind.
And no conclusive procedure can be devised that will
adequately test a claimant's mental attitude.
The difficulty is increased in periods when employment
opportunities are scarce. In this case a long time may have
to elapse before a suitable job can be offered to the claimant.
Meanwhile, it may be very difficult to determine whether or
not he is willing to work.
Because of the difficulty of determining in advance of a
job offer whether a claimant is willing to work, and in view
of the possibility of providing directly for disqualification if
a job offer is refused, it is somewhat debatable whether imposition of a separate and distinct " willingness to work " condition
serves any useful purpose. In any case it is asking a great
deal to expect claimants to present tangible and positive proof

that they satisfy such a condition, prior to making a job offer
to them. Neither the Unemployment Provision Convention,
1934, nor the Social Security (Minimum Standards) Convention, 1952, refer to such a condition.
Seeking Work
The notion of involuntary unemployment may in addition
be regarded as embodying a presupposition that unemployed
workers make a certain effort to secure new work. If they
simply sit passively by and wait until a new job seeks them
out, without doing anything to find such a job, they in a sense
contribute to the continuance of their unemployment. Accordingly, it is appropriate to consider whether an additional condition of benefit eligibility should be added requiring claimants
to be " seeking work ".
A minority of the present laws contain some condition of
this sort. Ireland requires claimants to avail themselves of
any reasonable opportunity for obtaining suitable employment,
1

See p. 131.

ELIGIBILITY FOR BENEFITS

105

subject to a maximum six-week disqualification in case of failure
or neglect to do so. Greece and the Netherlands require workers
to make a sufficient effort to obtain employment. Norway
denies benefits if claimants do not do their best to find suitable work by themselves.
Switzerland requires claimants to do everything in their
power to find suitable work. Some countries like the Union of
South Africa deny benefit if the worker fails to comply with
specific reasonable directions given by an employment official
with a view to helping him get work. About half of the state
schemes in the United States expressly require claimants to be
actively seeking work or making a reasonable effort to obtain
it. Allowances are paid in Australia and New Zealand only
if the claimant has taken reasonable steps to obtain suitable
employment. On the other hand the United Kingdom, which
once required claimants to be " genuinely seeking work ",
eventually repealed this provision because of difficulties met
in applying it.
The most effective way for the majority of workers to seek
work is by registering at an employment exchange. The more
efficient and comprehensive the placement services of a country,
the more nearly will this be the predominant method of seeking
work. But the requirement of registration at an exchange is
always an independent condition for receipt of benefit, so that
it is unnecessary to require workers to seek work simply to
ensure such registration. Thus the real question is whether
every claimant should be required to take additional steps to find
employment apart from registering with the employment
service.
It is difficult to generalise about this matter as circumstances differ from country to country, occupation to occupation, district to district, and even from worker to worker.
Doubtless there are numerous cases where workers can do much
on their own to find new employment, outside the framework
of the employment service. There are also many other situations where there is little that a worker himself can do, once
he has registered at his local exchange. It does not appear
unduly burdensome to expect an unemployed worker to exert
reasonable effort on his own to find work, having regard for
customary hiring practices in his occupation and region and for
the current status of the particular labour market to which

106

UNEMPLOYMENT INSURANCE

SCHEMES

he belongs. But such a condition, if imposed as a formal
requirement regarding which each claimant must adduce positive and tangible proof, may be very difficult to administer and
lead to many disputed cases. Determination of whether the
effort of each claimant to find work has, or has not, been
reasonable may be administratively very cumbersome.
In the last analysis, any decision regarding inclusion of
" seeking work " as an additional and independent condition
for benefits must depend on the particular circumstances prevailing in each country. The most important factor to be
taken into account in this decision is the state of the country's
placement services.
Registration at Employment

Exchange

The most desirable thing that can be provided to an
unemployed worker, as well as his greatest need, is a new job.
Cash benefits replacing some of the income he has lost through
unemployment represent only a second-best solution of his
difficulty, and their payment should always be subordinated
to the finding of another job. For this reason it is in the interest
of the worker himself, as well as of his fellow citizens, that he
be required as a condition for receiving benefit to place himself
in the most favourable position possible to find a new job.
Under modern methods of organising the labour market this
is accomplished by requiring him to register at an employment
exchange.
The whole field of placement is intimately connected with
the subject of unemployment insurance. A comprehensive
treatment of the latter should perhaps deal at length with the
organisation and functioning of placement services. Since an
extensive literature already exists on this subject 1 , however,
it is not treated in detail in the present study except in so far
as unemployment insurance operations impinge directly on the
function of placement. This is done as a matter of convenience,
1

See in particular the four reports entitled Employment Service
Organisation submitted to the International Labour Conference at its
30th Session, Geneva, 1947—Report V (1) (Montreal, I.L.O., 1946)
and Report V (2) and Supplement (Geneva, I.L.O., 1947)—and at its
31st Session, San Francisco, 1948—Report IV (1) (Geneva, I.L.O.,
1947) and Report IV (2) and Supplement (Geneva, I.L.O., 1948). On
the basis of these reports the International Labour Conference adopted
the Employment Service Convention and Recommendation, 1948.

ELIGIBILITY FOR BENEFITS

107

and does not represent an unintentional glossing over of the
importance of employment services for the successful application of unemployment insurance.
Purpose of Registration.
It is essential to the notion of involuntary unemployment
that an unemployed worker cannot find a new job despite the
fact that he is able, available, and ready and willing to work.
This condition can hardly be considered definitely to exist,
however, until the worker's unemployment has been systematically compared with the jobs vacant at the time. In a well
organised labour market vacant jobs are notified to the employment exchange as a matter of course, even if such notification is
voluntary. The exchange can then determine whether any of
the vacancies reported to it match the skills of workers who
are without jobs. The employment service must perform this
basic operation for each claimant before the involuntary
character of his unemployment can be confirmed. Unless this
can be done, through the mandatory registration of the worker,
he cannot be truly considered to be involuntarily unemployed.
It is for the above reasons that registration at an employment exchange must be a specific and positive condition for
the receipt of unemployment benefit. It is principally through
this act that a jobless worker can be " exposed " to employment,
which is the chief and easiest way of testing his ability to work,
availability for work, and willingness to work. Registration
is analogous to the verification and certification of incapacity
under sickness insurance. Whereas the latter must be done
by a professional medical officer, the verification of unemployment must be carried out by the employment exchange,
by examining its incoming requests for workers to see whether
a vacancy exists for which the claimant is qualified.
Importance of the Requirement.
All the countries that now have unemployment benefit
schemes, including those with voluntary and non-insurance
programmes, in one way or another make registration for work
a prior condition for receipt of benefit. This is usually prescribed explicitly, but in some cases it is implicit in the procedures laid down for claiming and receiving benefits. The
Unemployment Provision Convention, 1934, also allows the

108

UNEMPLOYMENT INSURANCE SCHEMES

right to receive benefit to be made subject to registration at a
public employment exchange or other approved office. The
Social Security (Minimum Standards) Convention, 1952, allows
suspension of benefits if workers fail to make use of employment services placed at their disposal.
The importance of registration at an employment office
in the application of unemployment insurance, both in.theory
and as evidenced by provisions of existing schemes, points to
the difficulties that a country would face in introducing unemployment insurance if it did not yet have a well organised
placement service. It is not too much to say that, unless a
country already has a successfully functioning placement service for matching idle workers and vacant jobs and for determining whether unemployment is in fact involuntary, it simply
is not in a position to introduce unemployment insurance.
It will be sure to encounter grave problems if it does so. This
same observation applies with equal force to particular regions
of a country. If employment services have been established
for some regions of a country but not for others, unemployment insurance may work in the former but should not be
applied to the latter.
Continuing

Registration.

The term " registration " as used in this chapter is not
intended to refer only to the single act of registering when a
claim for benefits is first filed. It refers rather to continuous
registration for so long as a worker is unemployed, or at least
for so long as he is receiving unemployment benefit. This
continuing registration is, in fact, more commonly referred to
as the regular reporting of the beneficiary at the exchange.
After a claimant has registered initially he should normally be required to report regularly and periodically to the
exchange in person. The basic purpose of this is the same as
that of the original registration : to test that he continues to
be unable to find a job and to be available for and able to work.
His failure to report at the times specified by the exchange
without good cause is sufficient justification for suspending
his benefit for the period concerned, just as failure to register
initially is sufficient cause for not awarding a benefit. The
employment office should fix the times of reporting in such
a way that the mere appearance of the worker in person at the

ELIGIBILITY FOR BENEFITS

109

exchange is virtually ample evidence in and of itself that he
is actually available for work ; that is, that he is not engaging
in other work, is not incapacitated for work, and has not left
the region.
Nearly all existing unemployment benefit schemes, including the voluntary and non-insurance schemes, expressly
require beneficiaries to report regularly to a local employment
office so long as they receive benefits. While some laws leave
determination of the frequency of reporting to administrative
discretion, others deal specifically with this matter. Thus, the
laws of Austria, Japan and Norway require unemployed beneficiaries to report in person to the employment office at their
place of residence at least twice a week. The Federal Republic
of Germany and Greece require that they normally report at
least three times per week.
Exemptions from the ordinary reporting requirements are
sometimes authorised for workers living at a distance from an
exchange, those in special occupations, partially unemployed
workers, those who are ill for a short period and those undergoing vocational training, or in other special circumstances.
Provision is also made for reporting to some office other than
the exchange itself when designated as an agent of the latter.
Role of the Exchange.
The requirement that beneficiaries must register and report
regularly at an employment office is in reality inextricably
linked with the whole process of administering unemployment
insurance benefits. Administrative questions form the subjectmatter of Chapter VIII, but some of the administrative interrelationships between employment exchanges and unemployment insurance administration may be briefly summarised
here.
The initial claim for unemployment benefit should normally be filed by a worker with the employment office when he
first registers for work. Part of the process of deciding each
claim to determine whether a claimant is eligible for benefit
must be performed by the exchange, i.e. the verification of
whether a job suitable for the claimant is vacant. If a system
of insurance books is used the exchange should usually retain
custody of the book during the period while the worker is
drawing benefit. The actual payment of benefit is also usually
8

110

UNEMPLOYMENT INSURANCE SCHEMES

carried out at the exchange at the time when the worker signs
the unemployment register to attest to his continuing unemployment. These illustrations of the way in which administration of unemployment benefits is related to the placement
service indicate that a considerable degree of unification, or
at least of co-ordination, is desirable between the two types
of administration.
In summary it is an indispensable condition for receipt
of unemployment benefits that claimants be required to register
with and report regularly to an employment exchange.
QUALIFYING PERIOD

Another positive condition which always has to be imposed
for receipt of unemployment insurance benefits is some period
of qualification. The purpose of this is to make certain that
claimants have been engaged in insured employment for at
least a specified minimum period of time prior to becoming
unemployed.
Reason for the Qualifying Period
The basic principle of the qualifying period is the limitation of benefits to regular and bona fide members of the labour
force. It is only such persons who can be regarded as having
suffered a genuine and material wage loss in case of unemployment. A person who was employed for only a very brief
period before becoming unemployed can hardly be assumed
to have sustained a wage loss requiring compensation. The
fact that he has worked very little in insured employment
usually means either that he had other means of support or
that he was incapable of working. In either case he cannot
be considered, for purposes of unemployment insurance, as
normally relying on insured employment as his means of livelihood. This is the underlying rationale of the qualifying periodThe qualifying period also has important financial implications. It guarantees that at least a basic minimum amount
of contributions will have been paid in respect of all beneficiaries.
This assists in maintaining the financial balance of the scheme.
If workers could qualify for benefits after only a relatively
few days of employment, it would hardly be possible to maintain the solvency of any unemployment benefit scheme. Apart

ELIGIBILITY FOR BENEFITS

111

from the possibility that abuse and adverse selection might
result from such an arrangement, its cost would entail an extremely high rate of contribution for all insured workers. This
would be especially troublesome under voluntary schemes
where the individual worker has some freedom to choose whether
or not he will be insured, but it also applies when coverage is
compulsory.
Form of the Qualifying Period
The time aspect of a qualifying period may be expressed
in different ways. Choice among these depends largely on the
technical structure of the scheme rather than on any major
question of principle.
The qualifying period may be expressed, for one thing,
in terms of weeks or days of insurable employment prior to
losing a job. In this case a definition may be required in
the law or in regulations to indicate exactly what constitutes
a week or day of employment. Again, the condition may be
expressed in terms of a minimum number of contributions,
where these are payable in respect of each period of employment. This method is most practical when a flat contribution
is payable for each specified period of time. The qualifying
condition may also be fixed in terms of earnings during a
prescribed previous period, particularly if those above a certain level are excluded from consideration by a wage ceiling.
Whichever basis is used, the same one may also need to be
used in rules concerning the maximum duration of benefits
and perhaps also their rates. In the case of voluntary schemes,
it may also be necessary to require a minimum period of membership in a fund, in addition to a minimum period of employment, as a condition for benefit.
Apart from the nature of the qualifying period of employment or contribution, it is also necessary to consider the factor
of the recency of the period. Clearly employment a number
of years back, even though it was of considerable length, is
not evidence in itself that a worker unemployed today is
currently a part of the labour force or that he is currently
dependent upon insured employment for his livelihood. For
this reason some kind of " reference period ", during which
the qualifying period must have been served, also needs to be
specified.

112

UNEMPLOYMENT INSURANCE SCHEMES

Length of the Qualifying Period
The above discussion concerns the general principles of a
qualifying period. It is patent that some type of qualifying
period must be required. However, the question of how long
the qualifying and reference periods should be raises more
difficult problems. These cannot be resolved as a matter of
principle alone, as there is no principle dictating any exact
period of time. The question is one of degree and involves
deciding just where the border line between failure to qualify
and successful qualification shall be drawn. Consideration
must be given to the practical effects of any period chosen,
and to actual experience with periods of varying length.
If the period required for qualification is unduly long, it
will exclude many unemployed workers who are genuinely a
part of the labour force and whose need for financial aid is
great. This would defeat in part the social objectives of the
plan. On the other hand, if the qualifying period is too short,
benefits may be paid to many workers who are not normally
attached to the labour force on a full-time basis, abuses may
become prevalent, and the cost of the scheme may rise to an
excessive height.
It may be taken as a lesson from past experience that a
qualifying period generally need not be much longer than six
months, in order to serve its purpose. A period longer than this,
except in special circumstances, is a p t to be unduly restrictive.

On the other hand difficulties may tend to be encountered with
increasing frequency if the period is reduced much below
this level. It may be stated as a general rule, therefore, that
the length of the qualifying period for unemployment insurance
benefits should ordinarily be fixed at somewhere in the neighbourhood of six months. There may be some circumstances,
however, in which a qualifying period of this length is not
really necessary. This is particularly true in countries with
well developed labour markets where the employment service
can function effectively to test regularity of membership in the
labour force, the genuineness of unemployment, and the reality
of wage loss. Countries introducing unemployment insurance
for the first time, in contrast, may wish to start with a more
conservative qualifying period and shorten it gradually as actual
experience is acquired with claims rates.

ELIGIBILITY FOR B E N E F I T S

113

While both the Unemployment Provision Convention, 1934,
and the Social Security (Minimum Standards) Convention, 1952,
recognise the need for a qualifying period, neither lays down a
specific length of time as a standard. The first indeed contains
no standard concerning the length of the period ; while the
second provides for a period of such length " as may be considered necessary to preclude abuse ".
Periods of severe and prolonged mass unemployment may
place a great strain on the solvency of an unemployment
insurance scheme and, as a result, may make it necessary to
consider lengthening the normal qualifying period. If, however,
such adjustments are found to be necessary they can perhaps
best be made as part of a broad emergency programme designed
to meet and combat mass unemployment ; but they should
not normally be dealt with in the basic law itself.
Existing Schemes
Qualifying periods as well as reference periods provided
under existing schemes are summarised in table V. It will be
observed that a qualifying period of around six months is
most commonly provided for at the present time. Several
schemes provide for a somewhat shorter period, while a few
others require a longer period.
Length of Reference Period
The restrictiveness of reference periods varies in inverse
proportion to their length or, to be more precise, in proportion
to the ratio between the qualifying and reference periods. A
qualifying period of 26 weeks of employment in a reference
period of the last 52 weeks is much more restrictive, for example,
than one of 26 weeks in the last 208 weeks. It is in keeping
with the theory of unemployment insurance, however, to place
more emphasis on attachment to the labour force in a recent
period than in a more distant period.
The employment status of an unemployed worker three
to five years or more prior to his current unemployment has
little relevance to whether or not he should be entitled to
unemployment benefit today. This suggests that the reference
period should not ordinarily go back more than one or two
years. On the other hand, if the reference period is made too
short, benefits will tend to be limited only to those who have

114

UNEMPLOYMENT INSURANCE SCHEMES

recently enjoyed practically full-time work. On the whole a
reference period of about one year would appear to bring several
somewhat conflicting factors into reasonable balance.
In the case of workers who have been incapacitated for
part of the reference period, or prevented from working by
other factors beyond their control, such as military service, a
relatively short reference period may involve considerable hardship. Such cases may be met not by a general lengthening
of the reference period but by providing for its prolongation
in specified circumstances.
Another problem closely related to the subject of the qualifying period is the length of time within which a worker is permitted to requalify for benefits after having drawn them for
the maximum duration provided by law and thus exhausted
his current rights. As this problem is also linked with the
question of duration of benefits, however, it is treated briefly
in Chapter VI rather than at this point.
ELIGIBILITY OF SEASONAL WORKERS

The special problems posed for unemployment insurance
by workers engaged in seasonal occupations have already been
referred to in Chapter III. As pointed out there such workers
may, in general, be assumed to suffer a compensable wage loss
only if unemployed during their normal working season and
not as a result of lack of work during their off-season.
There are various ways of safeguarding a scheme against
the financial drain that would result if seasonal workers were
able to claim benefits regularly each year as soon as their
off-season begins. One is to exclude them entirely from coverage under insurance and, as pointed out in Chapter III, some
of the existing schemes do this. Another is to design the
ordinary eligibility provisions in such a way that the situation
of seasonal workers presents no special problems. A third is
to cover seasonal workers under insurance but to lay down
special additional eligibility provisions in their case. The
choice among these alternatives in a particular country must
depend upon the prevalence of seasonal work in the country
and in the industries actually covered, and also upon the details
of the ordinary eligibility provisions adopted.
The special provisions regulating the eligibility of seasonal

115

E L I G I B I L I T Y FOR B E N E F I T S

TABLE V. QUALIFYING PERIODS FOR UNEMPLOYMENT B E N E F I T S ,

1955

Reference period

Reference period
prolonged :

—

—

20 weeks of insured
employment

12 months preceding claim

Up to 3 years for
excepted employment, self employment, registered unemployment, sickness,
imprisonment

Belgium

6 months of paid
employment and
contribution 2

10 months preceding claim

Military service

Canada8

30 weeks of contribution

2 years preceding
claim
a nd
8 weeks of contri- 1 year preceding
bution
claim

Denmark

12 months of membership of fund

Country

Australia
Austria

1

Length of qualifying
period

None required

Up to 4 years for
excepted employment, incapacity,
or work stoppages during disputes

12 months preceding
unemployment

ai id

26 weeks of employment

18 months preceding
unemployment

—

atid

39 weeks of employment
Finland

26 weeks of membership of fund

26 weeks preceding
unemployment

—

France

150 days of paid
employment

12 months precedding unemployment.

—

Federal Bepublic of
Germany

26 weeks of insured
employment

12 months preceding
unemployment notification

Up to 2 years for
self employment,
training, receipt
of assistance

For footnotes see p. 117.

116
TABLE V .
Country

UNEMPLOYMENT INSURANCE

SCHEMES

QUALIFYING PERIODS FOR UNEMPLOYMENT B E N E F I T S
Length of qualifying
period

Reference period
prolonged :

Reference period

Greece *

180 days of employment

Ireland 6

26 weeks of paid Since first entry
contributions
into insurance
and
50 weeks of paid or Contribution year
credited6 contripreceding current
butions
benefit year

Italy

52 weeks of contribution '

Preceding
months

(cont.)

14

2 years preceding
unemployment

For self employment, hospitalisation, military
service

Weeks credited for
incapacity and
unemployment
For sickness

at id

Lapse of 2 years

Since first entry
into insurance

Japan

6 months of insurance

1 year preceding
unemployment

—

Luxembourg

200 days of employment

12 months preceding
unemployment

Days credited for
illness, incapacity, military service up to 100
days

Netherlands 8

78 days of insured
employment

12 months preceding
unemployment

Self employment,
incapacity, work
relief,
military
service

New Zealand

None required

—

—

Norway

45 weeks of insured
employment

Sweden

20 weeks of contribution

Switzerland

6 months' membership of fund

4 years

12 months preceding
unemployment
ar d
52 weeks of contri- Since entry into
bution
insurance

For footnotes see p 117.

6 months preceding
claim

—
For sickness, maternity leave, instruction, military service

—

117

ELIGIBILITY FOR BENEFITS
TABLE V.
Country

QUALIFYING PERIODS FOR UNEMPLOYMENT
Length of qualifying
period

Reference period

Union of
South
Africa 9

13 weeks of contribution

United
Kingdom

26 weeks of paid Since first entry
contributions
into insurance
and
50 weeks of paid or Contribution year
credited6 contripreceding current
butions
benefit year

United
States

—

Most states : total
wages equal to
specified multiple
(typically 30) of
weekly benefit, or
specified sum

12 months (commonly first 4 of
5 preceding quarters ; otherwise,
4 quarters or calendar year preceding unemployment)

A few states : specified weeks of
employment
Yugoslavia

2 years of employment

(COtlcl.)

Reference period
prolonged :

—

Weeks credited for
incapacity and
unemployment

—

2 years preceding
claim
or

5 years of employment

BENEFITS

—
Since May 1945

1
May be lengthened to 26 weeks in preceding 24 months, for occupations with particularly unfavourable unemployment, during periods of acute unemployment. 2 For
youths under 18 years of age, three
months. * Fifteen weeks of contribution required for special : ' seasonal benefits" payable from 1 Jan.
to 15 Apr. * In times of crisis more stringent qualifying conditions may be fixed for industries in which
unemployment is excessive, such as 220 days in last 20 months. • A married woman is required to have
paid 26 contributions after her marriage to qualify under the general scheme. Twelve weeks of contribution in preceding insurance year required for benefits under special intermittent unemployment insurance
scheme. " Reduced benefit payable with 26 to 49 weeks of paid or credited contributions. ' Insured
persons not qualifying for regular benefit may receive an extraordinary benefit under specified conditions
if they have paid five weekly contributions or one monthly contribution before 6 June 1949. ' One
hundred and fifty-six days of employment in one occupation in preceding 12 months required to
qualify for " waiting allowances ". * Three years of contribution if unemployment is due to illness.

workers for benefit, in case they are admitted to insurance,
may take different forms. One method is simply to provide
that such workers may receive benefit only if unemployed during
their normal working season. The Italian law states, for
example, that unemployment during the off-season in occupations subject to seasonal unemployment, and unemployment
during periods of suspension in occupations subject to regular
periods of suspension, shall not give right to benefit. Most

118

UNEMPLOYMENT INSURANCE SCHEMES

state laws in the United States that expressly restrict the
benefit rights of seasonal workers provide for payment of
benefits only during the defined period of seasonal operations.
The Greek law also provides that compensation shall be payable to seasonal workers only for days of unemployment during
the working season in seasonal production, and not for such
days during the off-season. To apply provisions of this type
it is necessary for the administrative authority to designate
by regulation the industries or occupations that are seasonal,
and the seasons and off-seasons of each.
Another method of dealing with the problem is to impose
special additional waiting periods for seasonal workers. This
is done in Switzerland, for example, which requires specified
types of seasonal workers with dependants to serve an additional
waiting period of one day for each two weeks during which
they have been employed, subject to a maximum of six waiting
days at the end of a season and a cumulative maximum of
12 days in a calendar year. The corresponding additional
waiting days for seasonal workers without dependants is one
day for each week of employment, with a maximum of 12 days
at the end of a season and of 24 days during a calendar year.
Denmark provides for special waiting periods of 15 to
45 days for seasonal workers. The Swedish law similarly permits the supervising authority to prescribe a longer than
normal waiting period for occupations in which unemployment occurs regularly each year. It also authorises the placing of certain special restrictions on the number of benefit
days payable to workers in occupations affected by seasonal
unemployment. New Zealand permits administrative postponement of up to six weeks or complete termination of benefits
to seasonal workers if their earnings during their season are
sufficient for maintenance.
To take account of the situation of workers who engage in
seasonal occupations but also have some work in other occupations as well, more elaborate provisions may be required. The
United Kingdom, for example, does not disqualify all seasonal
workers during their off-season. Instead, it lays down certain
additional conditions that they must satisfy, apart from the
regular conditions, in order to obtain benefits during their
off-season. To do so they must prove that they have had,
or can reasonably expect to obtain, a substantial amount of

ELIGIBILITY FOR B E N E F I T S

119

employment in their current off-season, and also that they have
been registered at an employment exchange whenever unemployed during the preceding two years.
As for the non-insurance schemes, Australia does not pay
allowances to unemployed seasonal workers whose income is
sufficient for maintenance. France denies allowances to seasonal workers in industry and agriculture unless their unemployment occurs at an unusual time of the year ; thus, to qualify
for benefit at any given time, they must prove that they had a
paid job at regular wages at the same time during the two
preceding years. Luxembourg does not pay allowances to
unemployed persons if their employment is normally limited
to a period of the year other than that in which the claim is
filed.

CHAPTER V
DISQUALIFICATION FOR BENEFIT
Eligibility for benefit under unemployment insurance
should depend not only on positively satisfying the qualifying
conditions and period discussed in Chapter IV but also, on the
negative side, on avoiding certain other circumstances. These
latter circumstances usually consist of slight or important
deviations from a state of complete involuntary unemployment.
When they exist elements of volition are present in the unemployment, or the state of unemployment is something less
than total. The denial of benefits when one of these circumstances exists is ordinarily referred to as a disqualification.
The subject of disqualifications is one of the most controversial in unemployment insurance. As a result they are
often a prolific source of disputes and appeals. It is, undoubtedly, a serious matter to refuse benefits summarily to an
unemployed claimant who has served the necessary qualifying
period and is quite able to work. But it is generally agreed
that some kinds of disqualification are a necessary element of
eligibility for benefit when the risk being insured against is
involuntary unemployment. The acts resulting in disqualification are not usually criminal wrongs, and the disqualifications
should not be thought of as penal in nature. Instead it is a
matter of excluding certain forms of unemployment from the
purview of insurance, for the reason that they do not constitute
involuntary unemployment in a strict sense.
The refusal of benefits involved in a disqualification may
be temporary or permanent : benefit may be withheld only
for the current week in which the disqualifying circumstance
is present ; the payment of benefits may be postponed for
a specified number of weeks after the disqualification is
imposed ; or the claimant's benefit rights may be completely
cancelled for the whole duration of his unemployment. In
principle the length of the disqualification period should be

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adjusted to the seriousness of the circumstance responsible for
it. A permanent or long period of disqualification patently
involves extremely grave consequences for an unemployed
worker and his family, and can only be justified when the
circumstances giving rise to it are of extreme gravity. This
should be kept clearly in mind in drafting disqualification
provisions and in their administration.
The most common grounds for disqualification are voluntary leaving of employment, discharge for misconduct, loss of
job due to a labour dispute, refusal of an offer of suitable
employment, and receipt of other income of various types.
VOLUNTARY LEAVING

Reason for Disqualification
It not infrequently happens that a worker who is otherwise eligible for unemployment benefit is, in fact, without a job
because he quitted his previous employment voluntarily. When
this is admittedly the case and no elements of compulsion were
present in his giving up his previous job, a worker may be
considered to be unemployed by his own wish and not because
of circumstances beyond his control.
If workers were insured against what may be called
voluntary unemployment, every dissatisfied worker could
leave his job whenever he felt an impulse to do so and immediately start to receive unemployment benefits. It would clearly
be both actuarially impracticable and economically undesirable to insure against such a risk. The corollary is that it is
necessary under unemployment insurance to consider the
disqualification of all claimants who leave their previous
employment voluntarily.
Leaving for Good Cause
It must be recognised at the outset, however, that elements
of compulsion may often be present when workers resign their
jobs instead of being discharged. The presence of these somewhat reduces the degree of volition involved in the worker's
act of leaving. If the degree of compulsion is sufficiently great,
the act of quitting may, in reality, have been virtually an unavoidable step for the worker. The loss of his job, therefore,

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UNEMPLOYMENT INSURANCE SCHEMES

may have been in fact, if not in appearance, involuntary. To
take account of this possibility it is necessary to exempt from
the disqualification on the ground of voluntary leaving all
cases where the claimant had a good cause for leaving.
It is not easy to formulate a definition of " good, cause "
to cover all cases that may arise. The exemption, for one
thing, may or may not be confined exclusively to causes connected with the work or attributable to the employer. It
might, for example, also permit some account to be taken of
the personal circumstances of the claimant. Thus, the exemption might be made to cover not only voluntary quitting
because of unsafe or unhealthy working conditions but also,
for example, quitting necessitated by illness in the claimant's
family. There is an extensive body of judicial and administrative precedent in different countries concerning construction
of the term " good cause ", which space does not permit to be
examined here. It can only be re-emphasised that some general
exemption of this kind is desirable.
Existing Practice
Practically all the unemployment benefit schemes now
operating provide for disqualification in the event that a
worker leaves his employment voluntarily. This is equally
true of the compulsory insurance, voluntary insurance, and
non-insurance schemes. The great majority of the schemes
also exempt workers from this disqualification if they have
left their employment for a good or justifiable reason or cause.
The precise language used in the exemption is not always the
same, but the difference in meaning would not appear to be
great.
Both the Unemployment Provision Convention, 1934, and
the Social Security (Minimum Standards) Convention, 1952,
permit disqualification for an appropriate period of claimants
who leave their employment voluntarily without just cause.
Duration of Disqualification
The precise length of the period of disqualification also
raises important questions. It must be sufficiently long to
accomplish its purpose, namely to exclude voluntary quitting
of work from the risk insured against. On the other hand it
must not be unduly long. For one thing the continued unem-

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ployment of a worker after a certain lapse of time tends to
metamorphose from voluntary into involuntary unemployment. Moreover, the effect of the disqualification on the personal welfare of the worker and his family may be very onerous.
It would seem desirable to relate the maximum duration
of the disqualification, in principle, to the length of time during
which the unemployment stemming from voluntary leaving may
be considered to be caused by such leaving. After the lapse
of such time, continuance of the worker's unemployment may
be regarded as a result of the state of the labour market rather
than of his earlier voluntary leaving. At this point he should
become entitled to benefit. The length of the period concerned
should therefore be fixed by reference to the time normally
needed by an able-bodied wage earner to obtain new employment when the labour market is operating normally.
The administrative agency may well be empowered to
adjust the length of the disqualification period to the circumstances of each case. But it is questionable whether, in the
light of the principles mentioned in the previous two paragraphs,
it should ordinarily be permitted to impose a disqualification
of more than from four to six weeks.
The length of the disqualification for voluntary leaving
permitted by existing laws varies considerably. An outright
disqualification of four weeks is provided for by Austria, Norway
and Sweden, though in Norway the administrative authorities
may fix a longer period ; Italy similarly provides for a 30-day
disqualification. Disqualification of not more than six weeks
is permitted by the laws of Canada, Ireland, the Union of
South Africa and the United Kingdom, the administrative
authorities being authorised to fix a briefer period. In the
United States about a third of the states provide for a maximum
period of disqualification of six weeks or less, one-third for more
than six weeks, and one-third for the entire duration of unemployment. France provides for a minimum disqualification of
six weeks, while New Zealand provides for a disqualification of
up to six weeks or permanent termination of benefit. Japan
permits disqualification for one to two months, and the Federal
Republic of Germany for two to eight weeks.
The other countries employ somewhat different approaches.
Thus, Switzerland requires the suspension to be proportioned
to the gravity of the fault, lasting from one to 12 days for a

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minor fault, from 13 to 24 days for a medium fault, and from
25 to 48 days for a serious fault. Belgium specifies four to
13 weeks for the first offence, 13 to 26 weeks for the second,
and 26 to 52 weeks for subsequent offences. Australia and the
Netherlands leave the postponement or complete cancellation
of benefit rights to administrative discretion. Denmark, Finland, Luxembourg and Yugoslavia appear to require an absolute
denial of benefit whenever unemployment is due to voluntary
leaving without good cause.
DISCHARGE FOR MISCONDUCT

When an employee is discharged for proved misconduct,
the overt act of dismissal is performed by the employer. But it
is the preceding behaviour of the worker that makes the discharge
necessary. For this reason the unemployment of a worker
who has been dismissed for misconduct may often be found
to originate in his own volition rather than in forces external
to him. In so far as this is true the unemployment concerned
is not of an insurable nature and should not therefore be allowed
to provide a basis for benefit. In short some disqualification
is necessary where it is established that unemployment has
resulted from certain types of misconduct.
Definition of Misconduct
The difficult problem to settle, however, is what acts
should, in fact, be regarded as misconduct for purposes of
such a disqualification. The views of the employer and the
employee on whether a particular act of commission or omission by the latter constitutes misconduct may be far apart.
Rules developed under the labour codes of different countries
concerning justifiable and unjustifiable dismissals provide some
guidance in the matter. But new and difficult border line
cases inevitably arise under unemployment insurance.
Without entering into detailed analysis of this question,
several observations concerning the definition of misconduct
may be made. Misconduct, to provide a basis for disqualification, should be more or less directly linked with employment as
distinguished from the worker's personal life. It should presumably also be wilful or deliberate rather than accidental,

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129

" participating ", " direct interest ", and " grade or class of
workers ", will of course in practice have to be the subject of
detailed administrative or judicial interpretation. Application
of an additional test, namely whether or not a worker is sharing
in the financing of a dispute, may present difficulties. It might
result, for example, in disqualifying all unemployed members
paying dues to a trade union conducting a dispute, regardless
of the degree of their participation or interest in the latter.
National Provisions.
The diverse types of workers who may be made subject
to disqualification is illustrated by practice under existing laws.
Thus Austria disqualifies only those whose unemployment
is a direct consequence of a strike or defensive lockout. In
Belgium strikers, locked out workers, and other workers whose
unemployment is a direct consequence of a strike and who
either consented to or support it, are disqualified. A worker
is disqualified in Canada if he or any fellow worker of his grade
or class is participating in, financing, or directly interested in
a dispute, so long as he was employed at the premises or in
the department where the work stoppage exists. Ireland withholds benefit from all workers losing their jobs through a dispute
at the premises or in the department where they worked. The
Netherlands disqualifies everyone unemployed as a result of a
strike or lockout unless exempted by the governing body of
the scheme.
Disqualification is imposed in Norway on any worker taking
part directly in a tsrike, anyone directly involved in a lockout
or other dispute, and anyone whose terms of employment can
reasonably be assumed to be affected by the outcome. Switzerland disqualifies all those unemployed as a result of a dispute
in their undertaking, and also those unemployed by reason of
a dispute in another undertaking if payment of benefit to them
would clearly serve to prolong or extend the dispute. In the
Union of South Africa all who are unemployed because of a
trade dispute are disqualified, whether the dispute is in the
industry in which they were employed or another industry,
unless neither they nor fellow employees in similar occupations
in the same place of employment are a party to the dispute
at any time or have a direct interest in it.
The United Kingdom disqualifies all persons working at

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the place where the dispute occurs who are participating in,
financing, or directly interested in the dispute or belong to a
grade or class of workers of whom this is true for any member.
The majority of the state schemes in the United States disqualify workers employed in the establishment where the dispute
occurs if they or any other worker of the same grade or class
are participating in, financing, or directly interested in the
dispute ; a considerable minority of these schemes, however,
disregard the factor of financing.
As regards the voluntary insurance schemes, Denmark disqualifies all workers taking part in a strike or lockout, anyone
who was employed by an undertaking affected by a dispute
for more than three weeks during the preceding eight weeks,
and all members of an occupation if 65 per cent, of its members
are taking part in a dispute. Finland withholds benefit from
all whose unemployment is a direct result of a dispute, and
also those whose unemployment is an indirect result of it if
the object of the dispute includes obtaining changes in their
terms of employment. Sweden disqualifies all workers directly
involved in a dispute as well as any person whose terms of
employment can reasonably be deemed to be influenced thereby.
In the case of non-insurance schemes Australia denies
allowances to any worker whose unemployment is due to his
being a direct participant in a strike. New Zealand disqualifies
those who are directly interested in a dispute or who belong
to a trade union that has involved its members therein. In
France no allowance is granted to persons unemployed by
reason of a collective dispute that involves the establishment
where they were previously employed.
Both the Unemployment Provision Convention, 1934, and
the Social Security (Minimum Standards) Convention, 1952,
permit disqualification for an appropriate period of claimants
who have lost their employment as a direct result of a stoppage
of work due to a trade dispute.
Period of Disqualification
The length of disqualification in the case of a labour
dispute involves considerations somewhat different from those
that apply where unemployment is due to voluntary leaving
or misconduct. If a disqualification is warranted initially
it may presumably continue for the duration of the work

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131

stoppage, whether this be a brief or long period. The reason
for withholding benefit in the first place would appear to
remain valid so long as the stoppage continues. An exception
to this general rule is desirable, however, for workers who
find another bona fide job during the dispute and then once
again become unemployed. Cases also occur where an employer
succeeds in resuming partial or full operation although the
strike or dispute itself continues ; this necessitates an interpretation of when a work stoppage or dispute may be considered
to be terminated.
A number of countries, including Austria, Canada, Denmark, Finland, the Federal Republic of Germany, Greece,
Ireland, Sweden, the Union of South Africa and the United
Kingdom, expressly limit the disqualification to the period of
the work stoppage. Such a limit may also be implicit in the
language of some of the other schemes. About three-fourths
of the state schemes in the United States limit disqualification
to the period of work stoppage, while most of the others limit
it to the period during which the dispute is in " active progress " ;
New York State and Rhode Island, in contrast, provide specific
maximum limits of seven weeks and eight weeks, respectively.
In certain other countries, however, it would appear possible
for the disqualification to apply even after a dispute ends, so
long as the dispute was the original cause of unemployment.
Switzerland, for example, requires the disqualification to continue for 12 working days after the end of the dispute.
REFUSAL OF SUITABLE J O B OFFER

Effects of Refusal
It is implicit in the theory of unemployment insurance
that unemployment is an involuntary state only so long as no
opportunity to work presents itself. If an unemployed worker
has a chance to secure a new job but refuses to take it, his
unemployment thereafter—subject to certain reservations noted
below—would seem due no longer to external factors but to
his own will. For this reason it is normally desirable to disqualify a worker for benefit if he fails to accept a job offered
to him. If this is not done every unemployed worker after
once qualifying for benefit could remain on the benefit roll
for the full period allowed by law if he so wished.

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SCHEMES

Denial of benefit for refusal to accept an offer of employment is closely linked with other benefit conditions such as
availability for work, seeking work, and registration at an
exchange. The offer of a new job to an unemployed worker
is the only real way of testing his availability for work and
whether he is actually seeking work. The reason for requiring him to register at an exchange is to find him another job.
If he fails to accept such a job when it is found the whole
purpose of the procedure is defeated. In a sense, therefore,
the disqualification discussed here is the basic sanction necessary to give meaning to the whole placement process in relation to unemployment insurance.
Non-Disqualifying

Refusals

What is said above must be somewhat modified since
there are some refusals of job offers that ought not to be regarded
as a sufficient basis for disqualification.
In the first place, if it can be established that a worker
has a justifiable reason for his refusal, the latter should not be
held against him. What constitutes a justifiable reason is
another matter for administrative and judicial interpretation. It must depend on the facts of each case, and may be
connected with features of the job offered or the worker's
personal circumstances.
Secondly, a refusal should not result in disqualification
if the employment offered is unsuitable for the worker. This
raises the extremely complex problem of defining suitable
employment, which is discussed at some length below.
Thirdly, the worker must have received adequate notice
of the vacancy. This may be limited to formal notification
by an employment exchange or possibly by other public authorities, or may also include offers made directly to a worker by
an employer. In any case the offer must be genuine and
unambiguous and not merely a vague and tentative inquiry.
The act of refusal may itself take various forms, each of
which may be a possible basis for disqualification. It may
normally be assumed to include, for example, failure to apply
for a vacancy when appropriately notified, failure to accept
a vacancy when offered, action to nullify the effect of an acceptance, and failure to follow out the instructions of an exchange
that might help in the finding of a new job.

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Definition of Suitable Employment
It would clearly be unjust to disqualify a worker irrespective of the type of job offered to him. Otherwise, his benefit
rights might be destroyed simply by his refusal to accept a
markedly inferior job totally unsuited to his qualifications.
The general principle should therefore be that disqualification
is imposed only if the job offered is suitable in relation to the
unemployed worker concerned. Because of its importance and
numerous ramifications, a carefully drawn definition of suitable employment is absolutely necessary.
A number of factors must be dealt with in such a definition. Rates of pay are among the most important. Consideration must also be given to the location of the new employment
in relation to the worker's home. The new job should bear a
reasonable relationship to the worker's previous occupation
and to his physical capabilities, training and experience.
Account must be taken of any risks to safety, health and morals
that the job may involve. Finally, the vacancy should not
be a result of a labour dispute.
Wage Rates.
A job should be considered as suitable for an unemployed
worker only if the wages and other terms of employment
attain a certain level. The problem is to find a bench-mark
for determining this level in individual cases. The most
favourable standard for some workers would be their previous
rate of earnings and other conditions of employment. But, if
every worker may refuse' any job involving a decrease in previous earnings, workers may in some cases be able to hold out
for wages considerably above those normally paid in the district to fellow workers of the same grade and class. A more
practicable policy is to use as the basic standard the wage rates
and terms of employment prevailing generally in the district
for the occupation concerned. These may be determined by
reference to prevailing rates and terms, provisions of collective
agreements, rates and terms fixed by public authorities, or
those provided by the better employers.
Most laws now include standards for determining the suitability of wages, although a few, such as those of Australia,
Belgium, New Zealand and to some extent the Union of South
Africa, leave it to administrative discretion. The standard

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SCHEMES

laid down is sometimes very general. Thus Austria requires
adequate remuneration, the Federal Republic of Germany
refers to the standard or customary local wage, and Switzerland
requires jobs to conform to occupational or local custom,
with wages not to be below the benefit payable.
The concept of the standard rate is more clearly expressed
in certain other countries. Italy requires remuneration to be
not less than that normally paid for the occupation in the
district, while Japan provides that it shall not be unreasonably below the prevailing wage for other workers of the same
kind and skill. Norway requires wages to conform to the
prescribed scale or local custom or, if fixed by public authority,
to be not less than 25 per cent, higher than the benefit. The
Greek law and the federal law in the United States provide
that wages, hours and other conditions of employment shall
not be substantially less favourable than those prevailing for
similar work in the locality.
The United Kingdom law contains a more detailed standard. Remuneration for a job in the worker's usual occupation in the district of last employment must not be lower
than that which he might reasonably have expected to obtain,
having regard to that which he habitually obtained or would
have obtained had he continued to be employed. If the job
is in another district its remuneration may not be less than
that generally provided for in employer-employee agreements
or, failing such agreements, than that generally paid by good
employers. Somewhat similar provisions also apply in Canada
and Ireland.
As regards the voluntary schemes the standard applied
in Denmark is the rate payable for corresponding work under
employer-employee agreements. Finland and Sweden in contrast refer to customary remuneration for the occupation in the
locality concerned. The French non-contributory scheme
requires the wages of a suitable job to be at the rate fixed for
the occupation and region.
Location.
The location of a new job is another factor affecting its
suitability. If it is a long way from the worker's home its
acceptance may cause undue hardship for him and his family.
This may take the form of excessive travel time, costly outlays

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for transportation, prolonged separation of the worker from
his family, difficulties of finding transportation to work, etc.
Quantitative criteria for judging the suitability of the location of a job may be expressed in terms of the maximum distance
between a worker's home and his place of employment, cost of
transportation in relation to earnings, hours of absence from
home, availability of transport facilities, and similar considerations. A job requiring a worker to change his residence need
not necessarily be unsuitable, provided that suitable lodging is
available in the new district and that the cost of removal is
adequately covered by a special grant or by prospective earnings
from the new job.
Not all laws contain standards regarding suitability of
location. A few examples may be cited, however, from those
that do. Austria requires that the worker's care of his family
should not be endangered, and that adequate lodging should
be available if a daily return home is not possible. Belgium
provides that the worker shall not be obliged to be absent
from home for more than 14 hours per day, that married men
shall be able to spend a full day at home each week, or that
suitable accommodation shall be available in the new district.
Japan holds a job unsuitable if the change of domicile required
is difficult. Switzerland provides that workers must be able
to return home each day, or that appropriate lodging must be
available and the worker must not be substantially prevented
from carrying out his family obligations. Most state laws in
the United States include distance of the job from the worker's
home as one criterion of suitability. Finland requires lumpsum travelling allowances to be paid if jobs are more than
20 kilometres from the place of residence.
Previous Occupation and

Training.

Another factor involved in the question of suitability of
employment is the relation of the job offered to a worker's
previous occupation, training and experience and to his physical
capabilities. His career may suffer if he is obliged to accept
a job that does not correspond to the skills and experience he
has acquired in a particular occupation. He may even be
unable to carry out the duties of the new job. There may
also be a social loss in such disuse of his skills.
On the other hand an undue restraint would be placed

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on labour mobility if unemployed workers were never required
to accept jobs in a new occupation. Moreover, such a policy
might considerably increase the cost of unemployment insurance. It is necessary, therefore, to evolve standards that steer
a middle course between doing violence to a worker's occupational development and general economic considerations.
Most existing laws do not require that a suitable job shall
always be in a worker's previous occupation, but they nevertheless lay down certain restrictions as to the types of such
other jobs which may be considered suitable. Austria requires,
for example, that the job offered shall not materially prejudice
a worker's chances of future employment in his calling and
shall be appropriate to his physical capacities ; but the former
provision does not apply after eight weeks of unemployment.
In Belgium a worker need not accept a job in a new occupation
during the first three months of unemployment ; thereafter, a
job in another occupation must be such that he can easily
carry it on without prejudice to himself. Work is considered
unsuitable in the Federal Republic of Germany if it cannot be
expected of a worker in view of his training, previous employment, physical condition, or subsequent career. Italy requires
a job to be such that it will not prevent a worker from resuming
employment in his own occupation in the future and that it
is compatible with his physical condition.
In the Netherlands recipients of waiting benefits need
only accept a job in the industry in which they previously
worked, while recipients of general unemployment benefits must
accept any suitable work. A suitable job in Japan, Finland,
Sweden, and Yugoslavia must be consistent with the ability
and training of the beneficiary. In Switzerland it must correspond to the worker's capabilities and health ; it also must
not appreciably compromise the future exercise of his previous
occupation, unless he has no prospect of finding a job therein
in the near future. The Union of South Africa considers any
work suitable for the three lowest wage classes if the worker
is physically capable of performing it, if it does not cause
undue hardship, and if its wages are not lower than the benefit
payable. For other wage classes work offered during the first
13 weeks of unemployment must be of a similar wage class
and group ; thereafter, the claims officer decides whether or
not it is suitable.

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The United Kingdom regards jobs in another occupation
as suitable only after the lapse of a reasonable interval. The
law in Greece and the state laws in the United States require
weight to be given to prior training and experience, physical
fitness, and prospects of securing local work in the usual occupation. Denmark permits a job in another occupation to be
considered suitable only if a need for additional manpower
exists therein, the worker's chances of returning to his previous
occupation are not considerably reduced, and he has the ability
and strength required for the new trade. France and Luxembourg provide that employment in another occupation must
be consistent with a worker's previous training and skills.
Safety and Health.
Some jobs involve an above-average risk to the health,
safety or morals of workers. When such risk in relation to a
particular worker exceeds a certain level the job concerned
should not be considered suitable. A finding on this score
must, of course, depend on the circumstances of each case.
Among schemes that must by law take account of the risks
mentioned in determining suitability of employment are those
of Austria, the Federal Republic of Germany, Greece, Italy,
Switzerland and the United States.
Labour Disputes.
If a worker were to be disqualified for refusing to accept
a job that is vacant as a result of a stoppage of work due to
a labour dispute, he would naturally be under heavy pressure
to take it. But this would represent, in a sense, an intervention
of the social security scheme in such disputes, because of the
aid that it would give to the employer. Since, therefore, it is
desirable that social security should play a neutral role in
labour disputes, jobs that are vacant as a result of strikes,
lockouts or other labour disputes should be classified as unsuitable for the purposes here under discussion.
The majority of countries expressly designate as unsuitable
vacancies arising out of work stoppages due to labour disputes.
This is true, for example, of Austria, Canada, Finland, the
Federal Republic of Germany, Italy, Ireland, Japan, Switzerland, the Union of South Africa, and the United Kingdom. In
the United States the federal law requires all state laws to

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contain such a provision as a condition for their approval.
Norway and Sweden also have a similar provision but add
certain qualifications : in Norway the dispute must be approved
by the central employee organisation involved and not have
been declared illegal, while Sweden excludes disputes that are
contrary to provisions of a collective agreement or law.
In conclusion the provisions of I.L.O. Conventions regarding suitability of employment may finally be noted. The
Social Security (Minimum Standards) Convention, 1952, permits
benefits to be paid only in the case of inability to obtain " suitable employment ", but does not define such employment. The
Unemployment Provision Convention, 1934, states that—

(a)
(b)

(c)
(d)

Employment shall not be deemed to be suitable—
if acceptance of it would involve residence in a district in
which suitable accommodation is not available ;
if the rate of wages offered is lower, or the other conditions of
employment are less favourable—
(i) where the employment offered is employment in the
claimant's usual occupation and in the district where he
was last ordinarily employed, than those which he might
reasonably have expected to obtain, having regard to
those which he habitually obtained in his usual occupation in that district or would have obtained if he had
continued to be so employed ;
(ii) in all other cases, than the standard generally observed
at the time in the occupation and district in which the
employment is offered ;
if the situation offered is vacant in consequence of a stoppage
of work due to a trade dispute ;
if for any other reason, having regard to all the considerations
involved including the personal circumstances of the claimant,
its refusal by the claimant is not unreasonable.
Existing Practice

All the schemes now in force expressly disqualify unemployed workers who refuse or fail to accept a new job offered
to them. The disqualification is usually in terms simply of
" refusal " or " failure to accept ". A few countries, such as
Canada and the United Kingdom, also refer to other acts such
as " neglecting to avail himself of an opportunity of employment " and " failrue to carry out written recommendations of
the exchange given him to assist him in finding employment ".
The majority of laws do not specify from whom the offer

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must have come. But Austria, France, Japan, and the United
States refer to notification of a vacancy by an employment
office or exchange. Denmark refers to an employment office
or the public authorities, and the United Kingdom to an
employment exchange, other recognised agency, or an employer.
Canada and the Union of South Africa mention vacancies
notified to the worker " or of which he may become
aware ".
All countries require the new employment to be " suitable ".
About half of them do not appear to provide specifically for
exemption of refusals made for good cause, but the remainder
do. Thus Australia, Belgium, Canada, Denmark, Finland,
France, the Federal Republic of Germany, Luxembourg, New
Zealand, the United Kingdom and the United States use phrases
such as " good or sufficient reason " or " justifiable refusal ".
Austria exempts " cases deserving special consideration ".
Canada specifically includes as being refusals with good cause
all cases where acceptance of an offer would cause loss of the
right to become a member, to continue to be a member, or to
refrain from becoming a member, of a workers' organisation.
The United States has somewhat similar provisions. The law
in the Federal Republic of Germany requires that a warning
be given of the legal consequences of a refusal.
The Unemployment Provision Convention, 1934, permits
disqualification for an appropriate period of claimants who
refuse an offer of suitable employment.
Length of Disqualification
The duration of the disqualification to be imposed in case
of refusal of an offer of employment raises difficult questions.
If the job offered is genuinely suitable and the beneficiary has
no good reason for declining it, it might be argued that all
further unemployment is voluntary so long as it lasts, and that
no further benefits should be paid. This seems, however, a
rather extreme solution for a contributory insurance scheme.
There may be intangible factors in the refusal that do not fall
under the standard definition of " good cause ". Moreover, if
the labour market is functioning normally, the worker should
be able to find another job within a certain period of time
after his first refusal. If he fails to do this his unemployment
at some later point may justifiably be considered a consequence

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primarily of the state of the labour market rather than of his
refusal of the previous offer.
For these reasons, and having regard to the human suffering that results from permanent denial of benefit, it would
seem desirable to limit the disqualification to a specified maximum number of weeks, perhaps somewhere from four to six
weeks.
There is considerable divergence among the policies of existing schemes on this point. A fixed four-week disqualification
is provided by Austria, the Federal Republic of Germany, and
Sweden, while Japan provides for one month. Canada, Ireland
and the United Kingdom prescribe a period of up to six weeks.
In the United States about half of the states provide for a
variable period, five weeks being the most common limit.
About a quarter provide a fixed period, which is generally from
three to six weeks, while the remaining quarter disqualify
claimants for the duration of the unemployment or even longer.
About a third of the states also count the period of disqualification in determining the maximum duration of benefit, which
has the effect of reducing benefit rights.
Belgium provides for four to 13 weeks of disqualification

for a first refusal, 13 to 26 weeks for a second, and 27 to 52 weeks
for any subsequent refusal. Switzerland provides for from one
to 48 days according to the seriousness of the fault. The laws
of Australia, France, the Netherlands, and New Zealand permit
either temporary postponement or permanent cancellation of
benefits. Those of other countries do not specify a particular
period, and would appear in some cases to permit disqualification to continue as long as unemployment lasts.
RECEIPT OF OTHER TYPES OF INCOME

There are various circumstances in which unemployed
workers continue to receive al least a partial income even after
stopping work. This income serves to replace a part of the
income lost through unemployment, and to that extent lessens
the presumed need for unemployment benefit. The receipt of
certain forms of other income would therefore appear to provide
a sufficient basis for disqualification, so long as its receipt
continues, or for reducing the benefit to take account of such
income.

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141

Adjustment of benefits for certain types of income is not
to be regarded, however, as adoption of the principle that
account should be taken of all forms of income that an unemployed worker may receive. Such a broad course, linking
benefit eligibility to the individual circumstances of each
claimant, would be contrary to the basic philosophy of a contributory insurance scheme ; and only certain special types of
income are in question here, e.g. that derivmg from previous
employment, that received from other branches of social
security, and that derived from current employment.
Dismissal Payments
Not infrequently a worker who loses his job may continue
to receive some form of payment from his employer by way
of compensation for his discharge or in place of notice of discharge. Such separation or severance allowances serve somewhat the same purpose as unemployment benefits. If their
payment is a consequence of the contract of employment it
would seem appropriate to reduce the unemployment benefit
proportionately. On the other hand a payment made by an
employer as a voluntary gratuity or one provided by statute
need not, perhaps, be taken into account.
A number of schemes expressly provide for suspension of
unemployment benefits so long as a dismissal allowance is being
received by the worker. This is true, for example, in Austria,
Belgium, France, Italy, the Netherlands, Switzerland, the
Union of South Africa, the United Kingdom, the United
States and Yugoslavia. In some cases, as in Canada and some
states of the United States, a worker is not in fact regarded as
being unemployed so long as he is receiving compensation for
the loss of his job that is substantially equivalent to his previous
remuneration. The Netherlands withholds benefit only if the
employer is bound to pay wages in full. It is usually provided
that the disqualification shall apply only if the dismissal payment is made by virtue of the contract of service.
Other Social Security Benefits
It is inherent in the concept of social insurance that an
individual should not ordinarily receive more than one social
security benefit at the same time. Social insurance is not a
10

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UNEMPLOYMENT INSURANCE SCHEMES

system of individual saving under which there is always an
absolute right to benefit wherever a contingency occurs but a
scheme for compensating presumed loss of income in defined
circumstances.
If a worker qualifies for benefit under one branch of social
security by reason of a presumed loss of income, he cannot
expect at the same time to be compensated for the occurrence
of another contingency under another branch, when the same
absence of income forms the basis of the claim for benefit in
both cases. Moreover, the benefit amount under each branch
of social security is usually fixed by reference to some basic
concept of adequacy. A worker receiving two separate benefits
at the same time would thus be likely to receive a total sum
greatly exceeding the standard of adequacy adopted.
It follows from the above that an unemployed worker
should, in principle, be disqualified for unemployment benefit
if he is already receiving another social security benefit. In
practice, if the unemployment benefit is larger than the other,
he should receive the former or the difference between the two
should be made good. The circumstances in which a worker
can qualify for unemployment benefit while already in receipt
of another benefit will naturally differ according to the individual
structure of each social security scheme. But among important
benefits that may be payable, or may become payable, while
a worker is unemployed are maternity benefit, cash sickness
benefit, maintenance in a curative institution, invalidity pension,
old-age pension, workmen's compensation pension, or even public
assistance.
Virtually all countries provide for disqualification in respect
of one or more types of social security benefits. Some, like
Australia, Belgium, Greece, Ireland, New Zealand, Sweden, the
United Kingdom and the United States, have a restriction
covering duplicate social security benefits in general. Others
specify particular types of benefit the receipt of which may
lead to disqualification for unemployment benefit. Only a few
examples need be given. Austria and the Federal Republic of
Germany mention sickness, invalidity and maternity benefits.
Italy mentions periods of treatment in a curative institution.
Norway lists old-age or superannuation pensions and institutional maintenance. In Denmark and France no unemployment
benefit is payable to a recipient of an invalidity or old-age

DISQUALIFICATION FOR BENEFIT

pension, public assistance, or institutional care.
bourg disqualifies recipients of pensions.

143
And Luxem-

Earnings from Employment
A worker may sometimes be able to find a certain amount
of outside work while he is unemployed, which will provide
him with a small income pending his full-time re-employment.
This raises the question of what effect such employment should
have on his right to unemployment benefit. It seems clear
that at some point such outside work must be regarded as
constituting a new job, the carrying on of which should nullify
the right to benefit. But it would also seem unduly restrictive
to disqualify workers in respect of only insignificant amounts
of outside earnings.
Some of the existing laws expressly disqualify workers for
benefit if they engage in gainful work. This is the case for
example in Belgium, Denmark, Greece, the Netherlands and
Switzerland. Disqualification in case of self-employment is
specifically mentioned by Austria, Greece and Switzerland ;
Austria also imposes a disqualification if the worker takes an
active part in a family undertaking. Canada and the United
Kingdom, in contrast, permit work to be disregarded if it could
ordinarily be followed outside working hours and if the earnings
from it do not exceed a specified daily sum—from $2 to $13
per week in Canada and 3s. 4d. per day in the United Kingdom.
Japan similarly provides for exemption of a small basic amount
of earnings.
About half of the countries have provisions for reducing
or adjusting benefits in respect of earnings from part-time
employment, though these provisions are more formal in some
cases than in others. Among countries providing for such
reduction of benefit or " partial benefits " may be mentioned
Austria, Belgium, Canada, Denmark, Finland, France, the
Federal Republic of Germany, Japan, Luxembourg, the Netherlands, Norway, Switzerland, the Union of South Africa and the
United States.
Other Income
Claimants for unemployment benefit sometimes have other
private sources of income that are unaffected by unemployment.

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SCHEMES

These may even be sufficient by themselves to support the
claimant and his family. It could be argued that such claimants
have no real need for an unemployment benefit, and that they
should therefore be disqualified because of their other income.
This would result in applying what is commonly known as a
means test.
Quite apart, however, from the special procedures that
would be required for investigating the individual circumstances
of each claimant, use of a means test would be foreign to the
basic notion of unemployment insurance proper. Under contributory unemployment insurance, as under other forms of
social insurance, benefits should be regarded as a right to
which unemployed workers are entitled by reason of their very
status under insurance and the contributions paid on their
behalf. Accordingly, benefits should be paid on the basis of
the presumed need of insured workers as a class when faced
with the loss of their job and not on the basis of the actual
verified need of each worker at the time of his unemployment.
In short, disregard of most private income in determining
eligibility to benefit is implicit in the initial decision to adopt
unemployment insurance ; it is not a question of technical detail
in connection with benefit conditions.
The situation is entirely different when benefits are provided other than through social insurance, and especially when
they are provided exclusively at public expense. Whether or
not to apply a means test in this case is a broad question of
public policy. If it is thought desirable to do so the administrative machinery necessary for applying it can be established. There are indeed rather strong arguments for having
a means test when benefits are financed wholly from public
funds. It keeps down the burden on the general taxpayer,
and it is somewhat inappropriate to use public moneys to pay
benefits to persons who can support themselves without working.
The compulsory and voluntary unemployment insurance
schemes now in force do not generally take account of other
private income in awarding benefits to otherwise eligible unemployed workers. Austria and Yugoslavia are exceptions, however, to this rule. Austria requires benefits to be reduced if
and in so far as the income of claimants equals or exceeds
1,200 schillings per month. In Yugoslavia benefits are withheld from persons living in households of which the total income

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145

from all sources amounts to more than 2,000 dinars a month
per head.
An income test is also imposed under all four of the noninsurance schemes in Australia, France, Luxembourg and New
Zealand. In Australia benefits are reduced by the amount by
which other income exceeds £1 per week, or 5s. to 15s. for
unmarried persons aged 16 to 20. France pays no allowance
if the allowance plus other income of the claimant's household
would total more than the maximum fixed in a prescribed scale.
In Luxembourg other income in excess of one-fourth of the
allowance must be deducted from the allowance. New Zealand
authorises its administrative agency to reduce unemployment
benefits at its discretion in respect of other income or property
of a claimant and his wife.
OTHER DISQUALIFICATIONS

There are still other possible grounds for disqualifying
workers for unemployment benefit. Whether or not these are
necessary in the case of any particular scheme depends to some
extent on whether the matter involved is already dealt with
in other legal provisions.
Refusal to Undergo Retraining
It has been found desirable in many countries to provide
vocational training courses at which unemployed workers can
receive instruction to maintain or improve their existing skills
or to teach them new skills. The subject of such training is
in general outside the scope of this study. It relates to the
matter under discussion, however, in that the undergoing of
such training, if considered desirable for particular claimants,
may be made a condition for their receipt of benefit. If such
courses are run in a particular country, and if the employment
service considers that some claimants would derive advantage
from attending them, it would not appear inappropriate to
withhold benefit from a claimant who fails without good
reason to attend a course to which he has been formally directed
by an employment office. Provision of such training and the
enforcement of attendance thereat by the sanction of a potential
benefit disqualification may be considered sound elements of
an over-all employment policy.

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SCHEMES

Among countries that permit disqualification in the circumstances described above may be mentioned Australia,
Austria, Belgium, Canada, France, the Federal Republic of
Germany, Greece, Italy, Japan, the Netherlands, Norway,
Switzerland, the Union of South Africa and the United Kingdom.
Age
Various reasons may motivate a denial of benefits to
unemployed workers who have reached the age at which retirement benefits are payable. Many of these workers may be
able to qualify for a retirement pension, which is specifically
designed for aged persons. Moreover, the re-employability of
aged workers is probably, on the average, considerably lower
than that of younger workers. But, in general, it would seem
socially undesirable to disqualify aged workers who have satisfied other qualifying conditions solely on the basis of their
age, unless they actually qualify for an old-age or other pension
at what may be called the full rate. As regards existing
schemes, France normally disqualifies workers who have attained
the age of 65 ; the United Kingdom, men of 70 and over and
women of 65 and over ; Australia and Belgium, men of 65
and over and women of 60 and over ; and Ireland, persons who
have reached the age of 70.
A possible argument for disqualifying youths below a
certain age is that they do not usually have the same family
responsibilities as adults and generally belong to households
of which they are not the principal breadwinners. The frequency of claims by children under unemployment insurance
schemes is, of course, markedly affected by the scope of the
child labour laws in force. But it scarcely seems compatible
with the principle of contributory and compulsory unemployment insurance to disqualify young persons, so long as they
have actually been working and contributions have been paid
on their account.
It may be noted that Australia, Luxembourg, New Zealand
and Sweden forbid the payment of benefits to workers under
the age of 16, which is the age-limit for the payment of family
allowances. France does not usually permit the payment of
unemployment allowances to persons under the age of 21.
Some countries, in contrast, provide special reduced contribu-

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147

tion and benefit rates for young workers. This is the case,
for example, for youths under 18 in the United Kingdom.
Residence Abroad
A worker who leaves a country after becoming unemployed
obviously cannot be " exposed " to possible new employment in
the ordinary manner, that is by regular reporting at an employment exchange in the country where he was insured, and
an automatic disqualification by reason of his absence from
the country would therefore seem justifiable. A disqualification
of this sort is expressly provided for under most existing schemes,
and it is likely that under the others a worker residing outside
the country would be regarded as not available for work. It
should be noted, however, that some of the reciprocity treaties
referred to in the latter part of Chapter III contain provisions
enabling unemployed workers to receive benefit under certain
circumstances in a country other than that in which they
originally acquired their benefit rights.
Miscellaneous
The practice is sometimes followed of punishing fraudulent
misrepresentation to obtain benefits by imposing a specific disqualification, instead of or in addition to a fine or imprisonment. Such disqualifications are applied in Belgium (up to
26 weeks), Canada (up to six weeks), France, Greece, Italy (up
to 120 days), Japan, Luxembourg, Norway, Switzerland and
the United States, among other countries.
Another type of disqualification is that imposed by some
countries on unemployed workers serving a prison sentence or
otherwise detained in legal custody. It is obviously impossible
in such cases for the individual concerned to be " exposed " to
work, and he would be unable to accept a new job if suitable
employment were found for him. Moreover, his cost of maintenance is already being met from public funds. Among countries imposing this type of disqualification are Australia, Austria,
Canada, Denmark, Greece, Ireland, the Netherlands, New
Zealand and the United Kingdom.
Several other forms of disqualification found in certain
countries may finally be noted. Belgium withholds benefit
from unemployed persons whose conduct is notoriously bad
and from those who have been found begging, while France

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UNEMPLOYMENT INSURANCE SCHEMES

prohibits the payment of allowances to habitual drunkards.
Austria and the United States do not normally regard as eligible for benefits unemployed workers who are undergoing
ordinary schooling. France and Luxembourg disqualify married women whose husbands work regularly and receive normal
wages, while New Zealand disqualifies married women whose
husbands are able to maintain them.

CHAPTER VI
RATE AND DURATION OF BENEFITS
The circumstances in which unemployment benefits should
be granted are dealt with in the two preceding chapters. It
is now necessary to consider the benefits to be paid to insured
workers who satisfy all the prescribed conditions. This subject
involves two main questions : at what rates and during what
period of time should benefits be payable ? The present
chapter first deals with the subject of benefit rates, and then
considers the time aspect under two headings—waiting period
and duration of benefits.
BENEFIT RATES

Unemployment benefits should ordinarily be paid in cash
in keeping with the fact that the earnings they replace are
also paid in cash. Some countries, it is true, formerly provided
various types of unemployment relief in the form of payments
in kind. To pay unemployment insurance benefits proper in
a form other than cash, however, would hardly seem consistent
with the notion of a contributory benefit payable automatically
as a right to an insured person whenever he meets defined
conditions of eligibility. This section deals therefore only
with cash benefits.
Certain other services should, however, be furnished to
unemployed workers, in addition to cash income-maintenance
benefits, and these should ordinarily be in kind. Among such
services may be mentioned the search for a new job by the employment service, provision of vocational training and retraining, the supply of tools or special clothing required on a
new job, and transport of the worker and perhaps his household goods to a new job in another locality. These non-cash
services can considerably facilitate the return of the unemployed
to work. In one sense they are even more important than

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UNEMPLOYMENT INSURANCE SCHEMES

cash benefits, for it is better for both the worker and the community that the former should be working and earning rather
than idle and drawing benefits.
Some of the services mentioned have sometimes been provided as a benefit by unemployment insurance schemes themselves. This is still done to a limited extent, particularly in
Scandinavian countries. As a rule, however, it would seem
preferable to furnish such services as a part of the general
employment programme at public expense, rather than through
unemployment insurance proper at the expense of its contributors. Experience suggests that this is both a more logical
and usually a more effective method of providing the services
concerned. The unemployment insurance scheme is then left
responsible only for the narrower function of granting cash
income-maintenance benefits. As already stated, however, if
both services and benefits are to achieve their aims their administration must be closely linked.
Benefit Formulas
The type of formula used to determine the amount of
benefit due to individual claimants under unemployment
insurance should be chosen, as in the case of other social security
branches, having regard to the basic objectives of the scheme
and to the special circumstances of each country. Two somewhat different concepts exist regarding the general principles
that should govern unemployment benefit rates. These in
turn lead to two rather dissimilar types of benefit formula.
Graduated or Flat Benefits.
The objective of insurance may be to preserve the previous
standard of living of each individual claimant in so far as this
is practicable. To achieve this aim, benefit amounts must
be varied in accordance with previously existing differences
in such standards. The standards of living of most workers
may be assumed to vary more or less directly with their cash
earnings, and these standards can therefore be maintained by
graduating benefits of individual beneficiaries in relation to
their previous earnings. Alternatively, the objective may be
to guarantee every unemployed worker a certain fixed minimum
of subsistence while he is unemployed. This second approach,
which disregards previous differences in living standards,

RATE AND DURATION OF BENEFITS

151

leads to flat benefits that are the same in amount for all insured
persons.
The disparity between benefits produced by graduated
and flat benefit formulas will differ from one country to another,
depending upon the extent of the variation in wages in each.
In a country without substantial differences among the wages
of its workers, the two formulas may produce much the same
result so far as the great majority of workers are concerned.
This in itself may be a sufficient reason for adopting a flat
benefit formula in such countries, as such a formula is ordinarily
simpler both to administer and to understand.
In a country where the spread of wages is appreciable,
however, the two formulas would tend to produce considerably
different results. In such a case considerable difficulty would
be met in trying to select an appropriate level at which to fix
a flat benefit. If set by reference to the middle of the wage
range, it may equal or exceed the wages of lower-paid workers and weaken their incentive to return to employment.
On the other hand, if the benefit is set at a low level in
some appropriate relationship to the earnings of lower-paid
workers, there is a risk that it will be grossly inadequate for
workers with medium and high earnings.
A flat benefit formula automatically results in what may
be described as a progressive relationship between wages and
benefits, since the lower the wages of a worker the higher is
the percentage of them represented by the benefit. When
benefits are graduated with wages, the ratio between the two
may either be kept constant or be made progressive, if desired,
provided a system of wage classes is used. The degree of
progression achieved in the latter case, however, is not usually
as great as that resulting from the use of a flat benefit formula.
The social equity of paying larger benefits to better-paid
workers and smaller benefits to lower-paid workers, as occurs
under a graduated benefit formula, might well be challenged
if the amount of contribution paid for each worker covered
were the same. It is usually desirable, therefore, to vary
contribution amounts with wages whenever there is a similar
graduation of benefits. In contrast, it is usually appropriate
to employ a system of flat contributions when a flat-rate benefit
formula is used.
No single generalisation can be made concerning the

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SCHEMES

inherent superiority of either the graduated or flat benefit
approaches. The choice between them must necessarily be
determined by the wage distribution and other conditions
peculiar to each country. This is confirmed by the fact that
neither approach predominates under existing schemes. Among
countries that apply a system of flat benefits—that is, under
which benefits do not vary in relation to previous earnings—
may be mentioned Australia, Belgium, France, Ireland, Italy,
New Zealand, and the United Kingdom. In contrast, the
following countries cause benefits to vary directly or indirectly
with previous wages: Austria, Canada, the Federal Republic
of Germany, Greece, Japan, Luxembourg, the Netherlands,
Norway, Switzerland, the Union of South Africa, the United
States, and Yugoslavia. Under the voluntary schemes of
Denmark, Finland and Sweden, individual funds decide upon
their own rates of benefit within limits prescribed by law ; a
number of the Swedish funds vary benefits to their members
in relation to earnings, age, length of service, etc.
Methods of Graduation.
Two principal methods may be used for graduating benefits
in relation to the prior earnings of claimants. These may be
designated as the percentage and wage-class methods.
When a percentage method is used, benefits are expressed
as a uniform fixed percentage of the average wages of each
beneficiary prior to his unemployment. This relationship is
simple to understand and contributes to the objective of maintaining previous living standards. Several additional provisions
must, however, usually be added. The period over which mean
wages are computed must be clearly laid down, as well as
methods of computing this mean, including treatment of periods
of partial employment. A ceiling may have to be imposed
on wages to be taken into account in computing the average,
and the setting of this ceiling itself involves important policy
problems. Alternatively, or in addition, a maximum benefit
amount may have to be prescribed, on the theory that workers
earning more than a certain amount do not need the full normal
proportion of their earnings to tide them over a spell of unemployment.
Among countries using a percentage method are Luxembourg, the Netherlands, Switzerland, Yugoslavia, and the major-

RATE AND DURATION OF B E N E F I T S

153

ity of states in the United States. Wages above a certain level
are ignored in most of these countries through the imposition
of a wage ceiling. Switzerland also provides for gradual reduction of the percentage applied for wages above a specified level.
The wage-class method involves the designation of a
certain number of wage classes, with upper and lower limits,
together spanning the whole range of wages to be covered.
The lowest and highest classes may have to be defined in such
a way as to cover all workers earning less than and more than
certain amounts, respectively. Each worker is assigned to
a particular class on the basis of his average or normal rate of
earnings during a specified period prior to his unemployment.
An assumed wage, presumably the mid-point, may be fixed
as representative of each class. A single specified amount is
then prescribed as the benefit for each class and is payable
to all workers grouped in the class. Benefit amounts for the
various classes may be fixed uniformly at a constant percentage
of the assumed wage for each class. Alternatively, a progressive scale can be introduced into the benefit structure by fixing
benefit amounts at a larger percentage of assumed wages for
the lower wage classes than for the higher ones.
The number of classes to be established is a somewhat
arbitrary matter and depends on the desired degree of differentiation in benefit amounts. The number may theoretically
be as few as two, whereas the Federal Republic of Germany
uses nearly 60 classes. When this method is followed, however,
about seven classes are generally used.
One advantage of the wage-class method lies in the possibility it affords of securing a progressive relationship between
benefits and wages ; otherwise its chief advantages are probably
those concerning administration. Usually wage classes used
for benefits are also used in connection with contributions.
It is simpler, in some respects, to work with a small number
of wage classes than with the almost infinite number of variations that result when benefits as well as contributions are
scaled according to the actual wages of each individual worker.
The following countries use some form of wage-class principle
for determining unemployment benefit amounts ; Austria,
Canada, the Federal Republic of Germany, Greece, Japan,
Norway, the Union of South Africa, and some states in the
United States.

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UNEMPLOYMENT INSURANCE SCHEMES

Variation in Flat Rates.
Benefits that are not graduated with past wages may
nevertheless be varied in relation to certain other factors.
That is to say different benefit amounts may be paid to different
classes of beneficiaries even though the latter are not differentiated on the basis of earnings.
One possible basis of variation is the size of the community
where the worker resides. As certain items in a subsistence
budget are often more costly in larger cities than in smaller
places, it may sometimes be found desirable to provide larger
benefits in some regions than in others. Differentials of this
sort are applied, for example, in Belgium and France. It may
also be desirable to pay smaller benefits to young workers who
live in households in which they are not the chief breadwinners.
Such reduced benefits are paid in Australia, Belgium, France,
Ireland, New Zealand and the United Kingdom. Still further
differentiation may be made between primary earners and
married women whose husbands are the principal breadwinners.
This is done, for example, in France, Ireland and the United
Kingdom. The subject of variation between primary earners
with and without dependants is discussed in the following
subsection.
Flat benefits do not automatically adjust themselves to
changes in wage levels and living costs in the same way as
benefits that are directly linked with current wages under the
percentage or wage-class methods. As a consequence, consideration may be given to providing that flat benefits shall vary
automatically with changes in an official wage or cost-of-living
index. Denmark has such a provision for its maximum benefit
amounts. If this is not done the legislative or administrative
authority responsible for fixing benefit amounts should take
prompt action to modify flat benefit rates when significant
changes occur in such an index. Otherwise amounts that were
reasonably adequate when first adopted may gradually become
quite inadequate in periods of rising prices and wages.
It may be noted finally that, if flat benefits are provided
on a basis other than insurance, it may also be necessary to
vary the amount of the benefit with differences in claimants'
resources. This practice is followed in connection with flatrate benefits in Australia, France and New Zealand.

RATE AND DURATION OF B E N E F I T S

Dependants'

155

Supplements.

The cost of maintaining a given level of living during
unemployment is nearly always greater for a worker supporting dependants than for one who is not. This fact should be
recognised in unemployment benefit formulas for social reasons,
even though amounts contributed in respect of the two types
of workers are identical. Accordingly, whether graduated or
flat benefits are paid, the benefit formula should ordinarily
operate in such a way as to provide larger benefits for beneficiaries with dependants than for others. Technically this
may be done either by having different basic rates for workers
with different family responsibilities, or by providing supplements to the basic rate applicable to single workers.
The presence of at least one dependant may involve much
the same cost to the worker in the short run whether it is an
adult or child. He is obliged in either case to maintain a
household for someone other than himself. To the extent
that this is true the formula should provide a certain supplement
in respect of the first dependant irrespective of age. A somewhat
smaller supplement may then be provided in respect of additional dependants. Contrariwise it may be considered preferable to provide a larger supplement for a wife (or, if none, for
one other adult dependant such as a disabled husband or a
housekeeper), and a smaller supplement in respect of each child.
It is usually desirable to impose an over-all limit so that
the combined total of basic benefit plus supplements will not
exceed, or even approach too closely, the previous wages of
the claimant. In countries where family allowances are paid
separately to all parents, or to those with more than a certain
number of children, unemployment benefit supplements for
children must of course be integrated carefully with such
general family allowance provisions.
Most existing schemes pay larger benefits to workers with
dependants than to others. All the schemes applying a flatrate benefit provide either larger fixed amounts or flat-rate
supplements for married workers. Some of the schemes that
graduate benefits in accordance with past wages also graduate
dependants' supplements in the same way, by providing higher
percentage rates for workers with dependants. This is done
in Canada, the Federal Republic of Germany, Greece, the

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SCHEMES

Netherlands, and Switzerland. Other schemes of this type
provide supplements of a fixed amount even though the basic
benefit is graduated. This is the method followed in Austria,
Norway, and most of the dozen or so states of the United
States that provide such a supplement. Switzerland pays
flat supplements in addition to providing a higher percentage
benefit for workers with dependants. Larger benefits are also
payable to workers with dependants under the Danish, Finnish
and Swedish schemes.
Over three-quarters of the countries with unemployment
benefit schemes also have a general family allowance scheme.
This is true of all countries except Denmark, Greece, Japan,
the Union of South Africa, and the United States. It may
also be noted that special rent supplements or allowances
are payable to unemployment beneficiaries in Austria, Denmark,
Finland, and Sweden. Denmark also provides for payment
of a fuel allowance during the winter months, and Finland
for a clothing allowance.
Benefit Levels
The specific level of benefits provided under unemployment insurance should be determined in the light of its purpose
and with regard for considerations of adequacy in relation to
the presumed needs of different classes of beneficiaries. This
contrasts with private insurance, under which payments vary
strictly with contributions, and with public assistance where
payments depend on the individually measured needs and
resources of each recipient.
General Principles.
The central purpose of unemployment insurance is to
protect workers against the insecurity inherent in the risk of
losing their jobs. It does this by standing ready to furnish a
substitute source of income whenever earnings from employment are cut off. The specific question involved here is the
extent to which lost income must be replaced in order to make
the worker secure. Should it be replaced in its entirety or in
some lower proportion?
It would seem that benefits should, in principle, be large
enough to tide workers over a period of what is presumed to
be a temporary rather than a permanent loss of earnings. This

RATE AND DURATION OF BENEFITS

157

means that benefits should be large enough to enable workers
to meet all non-deferrable expenses for necessities—such as
rent, food and fuel—involved in maintaining either their
previous or a minimum subsistence level of living. Workers
in general should be able to do this without having to resort
to borrowing, any substantial drawing on long-term savings,
relief, support by relatives, charity from friends or others, or
a change of domicile.
It is neither necessary nor desirable, on the other hand,
for benefits to replace lost earnings in their entirety. It is
unnecessary since workers may generally be assumed to be
able to postpone some expenditures until they are re-employed.
They may also be expected to reduce temporarily certain other
expenditures for semi-luxuries as opposed to basic necessities.
Some flexibility of this sort is probably present in the budgets
of many workers, and supplemental assistance grants should
be available for the cases in which it is not.
Benefits equal to previous earnings would be undesirable,
for one thing, because they would risk impairing the incentive
and the will of unemployed persons to return to work. If
workers could receive the same or nearly the same income
whether they worked or not, the prospect of idleness—even
though demoralising for them and uneconomic for society—
might often prove a great attraction. If unemployed workers
thus lacked any material incentive to return to work, it might
be very difficult for the administration of the scheme to induce
them to do so against their will. For this reason benefits should
be fixed at a level far enough below full wages for the unreplaced
income involved to provide jobless persons with a real and continuing incentive to return to employment.
Unemployment insurance, moreover, should not usually
be regarded as a primary means of raising or bolstering wage
rates nor as a method of establishing a minimum wage. An
increase in, or the stabilisation of, wage rates and the establishment of minimum wages are quite sound social objectives
in themselves. Social action in this field, however, should be
taken through wage policy and other economic measures
designed to deal directly with the problems concerned. Unemployment insurance, like other forms of social security, is
designed for a specific purpose, that of protecting workers
against a particular contingency, and it should not be substann

158

UNEMPLOYMENT INSURANCE

SCHEMES

tially modified in order to accomplish objectives belonging to
other fields of social policy.
Finally, a scheme which sought to replace lost earnings
in full would tend to be exceedingly costly and would necessitate
very high rates of contribution. Besides placing a heavy
burden on contributors, it would also thus risk reducing the
sums available for other social security measures and other
socially desirable programmes.
Graduated Benefit Levels.
When benefits are varied with previous earnings, the
problem of benefit level involves finding the relationship between benefits and wages that will enable the mass of beneficiaries to maintain roughly their previous standard of living
except for postponable expenditures. The relationship selected
may take the form of a constant or uniform percentage of
wages for all beneficiaries, or of a weighted progressive scale
of percentages that increase as wages decrease. The virtue of
the latter lies in the way in which it takes account of the fact
that lower-paid workers ordinarily need to spend a greater
proportion of their pay for basic necessities than other workers.
As noted above, a weighted scale of percentages can readily
be applied when wage classes are used, but is more difficult
with a percentage formula.
Precise conclusions regarding the specific percentage or
percentages of wages required to conform to the principles
discussed above can only be derived from detailed analysis of
actual wage levels, family budgets, and cost-of-living data.
This can be done only with reference to a particular country
and a particular time.
It is only possible here, therefore, to present a few generalisations, based principally on experience under existing schemes.
If the same percentage of wages is used for all claimants, it
would hardly seem desirable for benefits for a short-term risk
like unemployment to be fixed at a rate lower than, say, 40
per cent. Any rate below this would scarcely appear adequate
to carry the majority of workers through a period of unemployment. On the other hand, having regard to the incentive
to work and to costs, it is doubtful whether any rate that is
much above 66 2 / 3 per cent, of wages should be provided for
all claimants. These two percentages may be taken as fixing

RATE AND DURATION OF B E N E F I T S

159

the approximate limits between which the percentage used in
a constant-percentage formula should ordinarily fall. A well
established scheme might seek to work towards the higher
percentage. Perhaps the simplest procedure in the case of new
schemes would be to fix the benefit rate at an even one-half of
wages.
If a weighted scale of percentages is used the limits mentioned above may be further extended. Under certain circumstances it would appear desirable to permit the lowest paid
workers admitted to insurance to qualify for a benefit rate
of as high as 75 per cent, or, at the most, perhaps 80 per cent.
of wages. On the other hand the opposite limit of the scale
might be extended to as low as perhaps 3 3 1 / 3 or 35 per cent.
of wages for the highest-paid workers.
If differential rates are provided according to whether
or not the beneficiary has dependants, the problem is somewhat
more complex. In addition to deciding on the general or
average level of rates, it is also neccessary to decide on the
size of the differential to be applied. If this differential is
wide the basic rate for a single person will have to be considerably lower than if the differential is narrow. A number of
factors have to be considered in deciding upon the amplitude of
the differential, including questions of general family policy,
equity among single and married workers, nature of general
family allowance scheme, incidence of unemployment among
the different categories, etc.
The ranges already mentioned, however, may reasonably
well be applied to cases where dependants' supplements are
provided. In other words, if a constant-percentage formula
is used, it would hardly seem justifiable to fix the normal
benefit rate for a single worker at much below 40 per cent, of
wages. The maximum rate for married workers with children
should not, on the other hand, usually rise much above 66 2 / 3
or 70 per cent. Again, if a weighted scale is used, the over-all
limits of 80 per cent, and 3 3 1 / 3 per cent, may well be applied.
The higher percentage should apply, however, only to low-paid
workers who are married and have children, while the lower
one should apply only to single workers who are fairly high
up in the earnings scale.
It may be seen from an examination of table VI below,
which summarises benefit rates under existing schemes, that

160

UNEMPLOYMENT INSURANCE SCHEMES

rates under schemes that graduate benefits with wages tend
in general to fall within the limits mentioned above. Thus
Greece pays either 40 or 50 per cent, to single workers and up
to 70 per cent, to workers with dependants ; Japan and Luxembourg have a rate of 60 per cent. ; the majority of states in the
United States pay a fixed rate of between 50 per cent, and
65 per cent, of below-ceiling wages, though the average ratio
of weekly benefits to actual total wages is now only about 35 per
cent. ; and Yugoslavia pays 50 per cent. The Netherlands
has somewhat higher rates: 70 per cent, for single adults and
80 per cent, for workers with dependants.
The maximum rates that voluntary funds may pay to
single persons in Denmark, Finland, and Sweden are 66 2 / s ,
50 and 60 per cent, respectively. The corresponding rates
for breadwinners are 80 per cent, in Denmark and Sweden
and 66 2 / 3 per cent, in Finland.
As regards schemes using a weighted formula, the following
approximate upper limits (applying usually only to lower-paid
workers with dependants) may be observed : Austria 80 per
cent., Canada 70 per cent., Federal Republic of Germany
80 per cent., Norway 90 per cent., Union of South Africa 75

per cent., and a certain number of states in the United States
75 per cent. The lower limits under these same schemes are
somewhat less precise, either because the top wage class often
has no upper limit, or because some beneficiaries earn wages
above the ceiling specified. The approximate rate for single
workers with average wages in the top wage class, or at or near
the ceiling, however, is 35 per cent, in Austria, Canada, the
Federal Republic of Germany, Norway, the Union of South
Africa, and some of the states of the United States.
The basic minimum standard laid down in the Social
Security (Minimum Standards) Convention, 1952, regarding
unemployment benefit rates is that the rate for an unemployed
insured worker with a wife and two children shall be at least
45 per cent, of wages. To satisfy the Convention this rate must
apply in a country at least to all workers whose previous wages
were equal to or lower than those of either a skilled manual
male employee or an ordinary adult male labourer. Precise
definitions and rules are set forth for ascertaining what the
wages of the two specified types of workers have been in a
particular country.

RATE AND DURATION OF BENEFITS

161

In addition to specifying a benefit rate it is customary
under graduated benefit schemes to prescribe a maximum
monetary benefit or a ceiling on wages included in the benefit
computation, or both. These provisions mainly affect highly
paid workers. If their earnings exceed the limits prescribed
their resulting benefit will be a smaller proportion of their
total earnings than the basic percentage applicable to other
workers. It is important in fixing the maximum benefit
amount and wage ceiling, therefore, to make sure that they
are set at such a point that they affect adversely only workers
who are really in the upper part, e.g. the top decile or the
two highest deciles, of the earnings scale. They should not
operate in practice to reduce the effective benefit percentage
for workers who are in reality not much above the middle of
the earnings scale. It is also desirable that such limits be
promptly adjusted whenever there is a substantial increase
in wages. Otherwise, they will operate to reduce the benefit
rates of workers of lower and lower earnings.
Flat Benefit Levels.
The problem of benefit level in the case of flat benefits
is not the choice of a percentage rate but of a specific monetary
amount to be paid to all beneficiaries with the same family
responsibilities. As already stated, this amount should be
fixed by reference to its ability to provide workers with a certain
minimum of subsistence during their period of unemployment.
In other words the average worker and his family should be
able to subsist during this period on the benefit alone, if necessary, without supplementation from any other source.
There are of course varying degrees of subsistence, ranging upward from bare physical survival. A contributory
unemployment insurance benefit should presumably be fixed
above such a minimum. An appropriate additional standard
to lay down, therefore, is that a flat benefit should be sufficient
to enable an unemployed worker and his dependants, if any,
to subsist in health and decency. The latter phrase should
cover the food, shelter, fuel and perhaps clothing which
workers should be able to purchase with their benefit.
If wages earned by the mass of workers in a particular
country do not differ greatly, it may be assumed that the cost
of a minimum subsistence budget there is much the same for

162

UNEMPLOYMENT INSURANCE SCHEMES

all unemployed beneficiaries having the same family responsibilities. The exact amounts to be paid in such a case should
therefore be based on a study of consumption requirements
of unemployed workers, living costs, and earnings levels in
the country concerned. Account will also have to be taken
of the economic development of the country and its general
level of wealth. In view of the customary relationship between
wage levels and workers' living costs, however, it would ordinarily seem appropriate in countries with considerable homogeneity of wages to fix flat benefits at somewhere between twofifths and three-fifths of the going rate of wages for ordinary
workers. The exact amounts would vary according to the
degree of differentiation that it was desired to establish between workers with and without dependants.
In countries where there is an appreciable spread in wages,
however, the problem is more complicated. Differences in
workers' wages inevitably lead to differences in their consumption habits and modes of living. Thus a minimum budget
sufficient to maintain a beneficiary and his family in health
and decency cannot but be somewhat higher for workers
earning more in the past than for those who have been earning
less. This raises the question whether a flat benefit in such
circumstances should be related to the cost of a subsistence
budget for lower-paid, medium-paid or higher-paid workers.
If, as is usually the case, the mass of workers fall into
what may be called a medium-paid group between the extremes,
there is some basis for arguing that a flat benefit should be
related to the subsistence needs of this modal group. Otherwise it may prove inadequate for too many workers. It is
true that flat benefits equal to two-fifths or three-fifths of
median or modal wages may prove to be quite high in relation
to the wages of low-paid workers. This, however, may be a
necessary consequence of using flat benefits in a country that
has a considerable dispersion of wages. The difficulty can be
mitigated to some extent by including a proviso that the benefit
shall never exceed a specified percentage of wages ; something
of this sort is done, for example, in Belgium and France.
Existing Benefit Provisions
Provisions regarding benefit rates under existing unemployment benefit schemes are summarised in table VI.

RATE AND DURATION OF BENEFITS

TABLE VI.

163

PROVISIONS CONCERNING UNEMPLOYMENT
BENEFIT RATES, 1955

Australia (Act of 25 September 1952) :
Basic benefit : £2 10s. per week (£2 for youths aged 18 to 20 and
£1 10s. for those aged 16 to 17).
Dependants' supplements : £2 for dependent spouse or housekeeper, and 5s. for first child.
Means test : other income in excess of £1 per week deducted from
benefit.
Austria (Act of 30 J u n e 1955) :
Basic benefit : 82 sch. per week for weekly wages below 145 sch.
(wage class I) up to 142.50 sch. for weekly wages above 500 sch.
(wage class X I I ) .
Dependants' supplements : 30 sch. for first dependant and 11 sch.
for each additional dependant.
Maximum rate : 80 per cent, of wages.
Percentage range : 80 per cent, to approximately 35 per cent, of
wages.
Belgium (Decree of 28 July 1952) :
Single worker living alone : 79.86, 72.60, or 65.34 francs per day,
depending on size of commune (lower amounts for single
workers under the age of 21).
Married worker with non-employed spouse : 88, 80, or 72 francs
per day, depending on size of commune.
Dependants' supplements : amounts increase according to number
of children, with slight differentiation between skilled and
unskilled workers.
Maximum rate : 6 6 2 / 3 per cent, of reference wage plus family allowances, or 75 per cent, if four or more children.
Canada (Act of 11 July 1955) :
Benefit for single worker : $6.00 per week (wage class I) up to
$23.00 per week (wage class IX) for weekly wages of $57.00
or more.
Benefit for worker with dependant : $8.00 per week (wage class I)
up to $30.00 per week (wage class IX) for weekly wages of
$57.00 or more.
Approximate percentage range : 50 to 35 per cent, for single workers,
70 to 50 per cent, for workers with dependants.
Denmark (As of April 1955) :
(Voluntary funds fix actual rates, subject to statutory limits.)
Maximum daily benefit amount : 9.00 kroner for single persons and
12.20 kroner for persons with dependants, varied with changes
in cost-of-living index.
Dependants' supplements : may be paid at rate of 1.30 kroner a
day per child.
Rent allowance : not to exceed 54 to 81 kroner per month, varied
with cost-of-living index and size of commune.
Fuel allowance : m a y be made for minimum of 40 days from
1 October to 31 March ; 61 kroner for single persons and
95 kroner for breadwinners.
Maximum rates : 80 per cent, of going wages in occupation for
workers with children, 66 2 / 3 per cent, of such wages for other
workers.

164

UNEMPLOYMENT INSURANCE SCHEMES
TABLE VI.

PROVISIONS CONCERNING
B E N E F I T RATES

UNEMPLOYMENT

(cOflt.)

Finland (Act of 14 June 1951) :
(Voluntary funds fix actual rates, subject to statutory limits.)
Maximum benefits : 66 2/3 per cent, of going wages in occupation
or 360 marks per day whichever is less, for worker supporting child or parent incapable of work ; three-quarters of preceding maximum for other workers.
France (Decree of 18 February 1954) :
Basic beneflt : 300, 290, 260, or 225 francs per day, according to
size of commune.
Dependants' supplements: 130, 125, 115, or 100 francs per day,
according to size of commune, for non-employed spouse or
dependent parent.
Maximum rate : 66 2 / 3 per cent, of wages of household.
Means test : beneflt plus other income of household may not
exceed prescribed maximum.
Federal Republic of Germany (Act of 24 August 1953) :
Basic beneflt : rises by numerous small wage classes up to 42.60
marks per week for weekly wages of 116 marks or more.
Dependants' supplements : approximately 20 per cent, of basic
beneflt for first dependant and 10 per cent, for each additional dependant.
Maximum rate : 80 per cent, of wages up to 48 marks weekly, and
70 per cent, of wages for higher earnings.
Approximate percentage range : 80 per cent to 35 per cent, for
single worker, and 80 per cent, to 50 per cent, for worker
with three dependants.
Greece (Legislative decree of 25 August 1954) :
Basic beneflt : 40 per cent, of assumed daily wage or 50 per cent, of
assumed monthly wage for beneficiary's wage class.
Dependants' supplements : 10 per cent, of wages for each dependant.
Maximum rate : 70 per cent, of wages.
Ireland (Act of 14 June 1952) :
Basic beneflt : 24s. per week (18s. for married woman living with
husband and for youths without dependants).
Dependants' supplements : 12s. for adult dependant and 7s. each
for up to two children.
Italy (As of December 1954) :
Basic beneflt : 227 lire per day for wage earners and 232 lire per
day for salaried workers.
Dependants' supplements : 80 lire per day for dependent spouse,
each child and dependent parents.
Japan (Act of 20 May 1949) :
Beneflt rate : 60 per cent, of assumed wage of beneficiary's wage
class.
Maximum daily beneflt : 460 yen.
Luxembourg (Decree of 17 December 1952) :
Beneflt rate : 60 per cent, of wages under wage ceiling.
Means test : other income in excess of 25 per cent, of beneflt deducted
from latter.

RATE AND DURATION OF B E N E F I T S

TABLE VI.

PROVISIONS CONCERNING
B E N E F I T RATES

165

UNEMPLOYMENT

(cOllt.)

Netherlands (Act of 9 September 1949) :
Benefit rates :
Worker with dependant : 80 per cent, of wages.
Adults without dependant and not living at home : 70 per
cent, of wages.
Other workers : 60 per cent, of wages.
(Wages defined as going wages in worker's ordinary occupation, excluding those over 16 gulden per day.)
Waiting benefits : not less than above rates.
New Zealand (Act of 1 October 1954) :
Basic benefit : £3 7s. 6d. per week (£2 5s. for youths aged 16 to 19).
Dependants' supplement : £3 7s. 6d. for wife or housekeeper.
Means test : benefit reducible at administrative discretion in
respect of other income or property.
Norway (Act of 17 July 1953) :
Basic benefit : 3 kroner per day for annual wages of 1,000 to 2,000
kroner (first wage class) up to 10 kroner for annual wages of
8,000 kroner and over (fifth wage class).
Dependants' supplements : 2 kroner per day for first dependant
and 1 kroner for each additional dependant.
Maximum rate : 90 per cent, of wages.
Approximate percentage range : 90 per cent, to 35 per cent.
Sweden (Act of 8 May 1953) :
(Voluntary funds fix actual rates, subject to statutory limits.)
Maximum basic benefit : 20 kroner per day (actual benefits in
1953 ranged from 5 to 17 kroner).
Dependants' supplements : 2 kroner for adult dependant or housekeeper and 1.50 kroner for each child, per day.
Maximum rates : 60 per cent, of going wages in occupation for
non-breadwinners and 80 per cent, of such wages for breadwinners.
Switzerland (Act of 22 June 1951) :
Basic benefits : 60 per cent, of wages for worker without dependants and 65 per cent, of wages for worker with dependants,
reduced by 1 per cent, for each franc by which daily wages
exceed 10 francs and subject to wage ceiling of 24 francs per
day.
Dependants' supplements : 1.50 francs per day for first dependant
and 0.60 francs for each additional dependant.
Maximum rate : 85 per cent, of wages.
Union of South Africa (Act of 30 March 1954) :
Benefit amounts : 21s. per week for annual wages of £78 or less
(wage class I) up to 105s. per week for annual wages of £443 to
£750 (wage class IX).
Maximum rate : 75 per cent, of wages.
Percentage range : 75 per cent, to approximately 35 per cent.
United Kingdom (Act of 22 December 1954) :
Basic benefit : 40s. per week (30s. for married women living with
husband and 23s. for youths without dependants).
Dependants' supplements: 25s. for adult dependant, lis. 6d.
for first child, and 3s. 6d. for each additional child.

166

UNEMPLOYMENT INSURANCE

TABLE VI.

PROVISIONS CONCERNING
B E N E F I T RATES

SCHEMES

UNEMPLOYMENT

(conci.)

United States (Legislation as of 1955) :
Basic benefits :
About half the states pay weekly benefit equal to fixed fraction of from 1/26 to 1/20 of quarterly taxable wages,
amounting to between 50 per cent, and 65 per cent, of
wages below the wage ceiling.
About half the states pay weekly benefit equal to weighted
percentage of weekly, quarterly or annual wages, resulting in a range of approximately 75 per cent, to 50 per
cent, of wages below the wage ceiling.
Dependants' supplements : about one-quarter of the states provide
fixed supplement, generally from $1 to $3 per week, in respect
of dependants ; usually payable for maximum of two or three
dependants and most commonly only for children.
Maximum benefit : virtually all states prescribe maximum weekly
basic benefit amount, varying from $22 to $36 ; wage ceiling
of $3,000 per year.
Yugoslavia (Decree No. 16 of 29 March 1952) :
Benefit rate : 50 per cent, of wages.
WAITING

PERIOD

The earnings of a worker usually cease as soon as he stops
working. At first glance it would appear reasonable that,
if he is insured against unemployment, his right to benefit
should become payable at the same time as his wage loss begins.
Experience has shown, however, that there are significant
reasons for delaying the payment of benefits for a brief
period after the termination of employment. It is this intervening period of non-compensated unemployment that is
commonly referred to as a waiting period.
Purpose

of Waiting

Period

The concrete results of not paying benefit for the first few
days of unemployment are the complete exclusion from compensation of many short spells of unemployment, as well as the
exclusion of the first few days of longer spells. The first
effect is usually the most significant feature of a waiting period,
in terms both of the numbers of workers affected and of its
underlying rationale. Many workers who undergo even a
fairly ordinary shift of employment are without work for from
one to several days. If there is no waiting period an unem-

RATE AND DURATION OF BENEFITS

167

ployment insurance scheme is obliged to compensate every
single small case of wage loss, even though attendant upon
merely normal and smooth adjustments between demand
and supply in a particular labour market.
There is no major theoretical objection to compensating
such very short-term unemployment. It may be argued,
however, that few unemployed workers lack sufficient funds
to tide themselves over only a few days between jobs, and
that social insurance protection against such a relatively small
risk is therefore unnecessary. Moreover, there are real and
practical reasons, inherent in the nature of unemployment
insurance, for not compensating every short spell of unemployment. These are reviewed briefly below.
A requirement that the worker should himself support
the entire cost of the first few days of unemployment invokes
to some extent the insurance technique of " co-insurance ".
This in turn aids the administrative agency to control possible
abuses in the form of simulated unemployment, the purpose of
which may be to enjoy a short vacation at the expense of the
unemployment fund. Such cases, in which placement services
may be unable to verify the genuineness of unemployment
within only a few days, are effectively discouraged by a waiting
period.
Another administrative consequence of requiring a waiting
period is a considerable reduction in the total number of claims
to be handled. The handling of a claim—including its receipt,
assembling of evidence, deciding on its disposition, and making
of payment—is never a completely simple process. Experience has shown that if all spells of unemployment are classified
according to their length, those lasting for only a few days or
a week represent a considerable proportion of the total. A
waiting period therefore substantially lightens the administrative load of a scheme. This in turn means that less staff,
premises, equipment and administrative appropriations are
required, and also that a correspondingly greater efficiency
can be achieved in handling the remaining claims. Finally,
it may be noted that an administrative agency always needs
a certain amount of time to determine whether or not claimants
are eligible. A waiting period allows time for this operation
to be performed as well as for the determination to be contested.
Of equal significance is the effect of a waiting period on

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UNEMPLOYMENT INSURANCE SCHEMES

the cost of benefits. Exclusion of the large number of spells
of unemployment that last for only a few days results in a
considerable decrease in the total amount of benefits paid.
This in turn reduces the contributions that must be collected
from the different parties who finance the scheme.
The conclusion to be drawn from the above is that a waiting period of reasonable length is not unduly prejudicial to
the interests of the workers affected, is not in conflict with
the theory of unemployment insurance, and is of immense
advantage from the standpoints of administration and finance.
This conclusion is supported by practice under existing schemes.
All countries require some kind of waiting period, although
in some cases it is for only one day or need not be served for
each spell of unemployment. The same conclusion is also
reinforced by the widespread use of waiting periods under
sickness insurance, which has various problems in common
with unemployment insurance. Finally, it may be noted
that both the Unemployment Provision Convention, 1934,
and the Social Security (Minimum Standards) Convention,
1952, permit a waiting period to be required.
Length of Waiting Period
If the general principle of a waiting period is accepted,
other questions still remain to be considered regarding its
form. These concern the actual number of days to be included
in the waiting period, the period during which these waiting
days must be served, and whether or not the entire period
must be served again in the case of each fresh spell of unemployment.
If a waiting period is too long, it will impose undue hardship on the many workers who do not have sufficient savings
to cover their expenses for more than a few days after their ordinary income stops. On the other hand a very short period may
prove too brief to achieve the basic advantages noted above.
The exact length of the period must therefore be fixed somewhere between the opposing limits implicit in these two rather
vague principles. There is of course no single inherently correct
length and the final decision on this point in the case of a new
scheme must necessarily be somewhat arbitrary. If statistical
data are available which make it possible to compare differences
in the cost of waiting periods of varying length, the decision can

RATE AND DURATION OF BENEFITS

169

take account of these data as well as the probable impact of
different periods on claimants themselves and upon administration. It should be noted that, in keeping with the conditions
for eligibility, the waiting period should ordinarily start to
run only from the date on which the claimant first registers
for employment and files a claim.
It is questionable whether the waiting period should normally exceed one week unless special circumstances exist.
This is the maximum period permitted by the Social Security
(Minimum Standards) Convention, 1952 ; the Unemployment
Provision Convention, 1934, does not refer to any specific
number of days. On the other hand much of the purpose
of a waiting period may be lost if it is shorter than three days.
This suggests that the waiting period should ordinarily be
fixed at somewhere between three and seven days in length.
It may be pointed out, however, that if a new scheme is
established in a country with little or no previous experience
in social insurance administration, where data for estimating
probable costs are limited, and where the employment service
is fairly new, a factor of caution may be introduced by providing for a somewhat longer waiting period. To do this may in
fact be considered an indispensable feature of some new schemes,
despite the hardships for workers that would result. In such
a case the waiting period can be gradually but steadily shortened
as administrative and placement experience is acquired and
as actual operations provide a clearer picture of claims rates
and benefit costs to be expected in the future.
The waiting period may be required to be served in the
period immediately preceding award of the benefit, that is,
it may be expressed as x days of unemployment in the same
x days immediately preceding award of the benefit. In this
case the full waiting period must be served for each spell of
unemployment. Alternatively it may be required to be served
during a somewhat longer period prior to the award, e.g. during the preceding two, four, or six weeks. This permits odd
days of unemployment to be added together, so that the final
number of waiting days immediately prior to a longer spell
of unemployment need be very few. As a still broader application of the latter procedure, it may be required that the waiting period need be served only once in an entire benefit year—•
either as a consecutive unit or in isolated days that may be

170

UNEMPLOYMENT INSURANCE SCHEMES

cumulated. Certain variants or combinations of these different
types of reference periods are also possible.
The choice among these different procedures depends on
a number of factors that can only be briefly mentioned here.
These include the actual number of waiting days required,
patterns of employment prevailing in the country, the nature
of the benefit formula and qualifying conditions used, the
administrative procedures followed, and other features peculiar
to each scheme. Naturally, the longer the reference period
during which a given waiting period may be served, the less
the significance of the waiting period requirement for the scheme.
Existing Waiting Periods
Considerable variation exists among the waiting period
provisions now applied in different countries. The shortest
periods are those of Switzerland and Belgium ; the former
normally requires only one waiting day in a calendar year,
while Belgium simply prohibits the granting of benefit for
only one day of unemployment in a week and then not if it is the
first or last day of a spell of total unemployment lasting three
days or more and spread over two weeks.
A two-day waiting period is imposed by Luxembourg.
A basic three-day period is provided for by France, the Federal
Republic of Germany (seven days for workers without dependants), Ireland and the United Kingdom. Ireland requires
this period to be served for each spell of unemployment, but
the United Kingdom waives it if a worker has had 12 or more
days of unemployment or incapacity during the preceding
13 weeks.
Australia, Greece and Norway have a six-day waiting
period. Denmark, Finland and Sweden also require their
voluntary funds to impose a waiting period of at least six days
but permit them to fix a longer period if they wish, subject
to certain specified maxima. In Denmark the waiting period
need be served only once a year, in Finland in the last 10 days,
and in Sweden in the last 21 days. A normal waiting period
of seven days or one week must be served in Austria (during
the preceding six weeks), Canada, Italy, Japan (during one year),
New Zealand, the Union of South Africa (during the preceding
nine weeks) and the great majority of states in the United
States (during one year). Industrial associations that admi-

RATE AND DURATION OF B E N E F I T S

171

nister waiting benefits in the Netherlands are permitted to
fix the waiting period for such benefits.
Note should be taken of certain special types of waiting
period provisions that may be adopted. Provision may be
made, for example, for retroactive payment of benefits for
unemployment during the waiting period if unemployment
continues beyond a certain length. This is permitted in certain
circumstances in Luxembourg and the Union of South Africa.
Special and somewhat longer waiting periods may be laid down
for certain classes of workers for whom the genuineness of
unemployment is sometimes difficult to test in the normal
period. Belgium does this for homeworkers, Denmark and
Sweden for seasonal workers, and Switzerland for seasonal
and construction workers.
Provision may also be made for reducing or waiving the
normal period in particular circumstances. This might be
done if there has been a certain amount of partial unemployment or of incapacity during a given period immediately prior
to the filing of a claim for total unemployment ; or if unemployment has been briefly interrupted by a short period of
temporary employment. Provisions of this general sort exist in
Austria, Canada, Denmark, Finland, France, the Federal Republic of Germany, Norway, Sweden and the United Kingdom,
among others. New Zealand permits its administrative agency at
its discretion to reduce or waive the waiting period in individual
cases. The Social Security (Minimum Standards) Convention,
1952, requires " days of unemployment before and after temporary employment lasting not more than a prescribed period "
to be counted as part of the same case of suspension of earnings,
for the purpose of the waiting period.
DURATION OF BENEFITS

The maximum length of time during which an unemployed
person should be allowed to draw benefits is one of the most
important questions of unemployment insurance. This is
true because the question has substantial cost implications,
it involves major issues of social welfare policy, it is potentially
of great significance for the welfare of individual workers, and
it does not readily lend itself to any single obvious answer.
Experience with unemployment insurance over a period of

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UNEMPLOYMENT INSURANCE SCHEMES

several decades, however, has provided various lessons that
have served to clarify the thinking regarding this problem to
some extent.
Need for a Time Limit
It might be argued with some force that jobless workers
should be able to receive benefit so long as the contingency
they are insured against—involuntary unemployment—continues. Certainly their need for a substitute source of income
is in no way diminished by the circumstance that they are
without work for a long time. But in conflict with this humanitarian consideration there are other important factors, the
combined import of which tends to be that some kind of a
time limit is usually desirable.
Periods of High Employment.
In periods when the total volume of unemployment is
relatively small (e.g. below perhaps 3 to 5 per cent.), and when
unemployment is caused mainly by maladjustments between
the demand for labour in particular jobs and the number of
workers qualified and available for these jobs, most workers

losing their jobs can find new ones within a reasonable period
of time. This process is much facilitated by an efficient employment service and by provision of retraining facilities where
appropriate. In such periods, therefore, it is possible for the
majority of unemployed workers to be placed in new jobs and
removed from the benefit roll within a few weeks. Each
additional week may see the placement of still more workers,
until after a certain period of time only a quite small proportion
of the original group of claimants will remain. Thereafter,
however, the number of workers who leave the roll each week
may be quite small.
The asymmetric distribution of the duration of unemployment described above is a common pattern that has appeared
under numerous schemes. Its significance for the problem of
the duration of benefits is that, in the absence of mass unemployment, a time limit can be imposed that will allow most beneficiaries to receive benefits throughout their unemployment.
Such a limit will unfavourably affect only a relatively few
unemployed who have had, and may continue to have, considerable difficulty in finding a new job.

RATE AND DURATION OF B E N E F I T S

173

The question therefore arises whether unemployment
insurance should be required to support these hard cases for
an indefinite period. Their long continuing unemployment,
while their fellow beneficiaries succeed in finding new jobs,
may indicate that many of them are essentially unemployable
for physical, moral or other reasons. In so far as this is true,
it is desirable that such persons be separated from the unemployment insurance scheme at a certain stage and be transferred to another social insurance or welfare programme more
directly concerned with the type of disability from which
they suffer.
Another factor is that of cost and the manner in which it
is spread among different groups of the population. Indefinitely continued support of the long-term unemployed out of
the restricted resources of an unemployment insurance scheme
is only possible if benefits for other workers are kept at a lower
level, or higher contribution rates are levied, than would otherwise be necessary. Either alternative directly or indirectly
tends to work to the disadvantage of other insured persons.
To secure a reasonable balance, therefore, among the drains
which various participants may make on the scheme, some
time limit would appear to be required. In other words the
financial burden of caring for the long-term unemployed may
well be shifted from unemployment insurance funds to public
funds and thus be made a charge on general revenues as for
other non-self-supporting groups. This shift may also entail
the need to make an inquiry into the needs and resources of
each long-term beneficiary, to determine whether in fact he
is unable to support himself.
Periods of Mass

Unemployment.

The above analysis must be somewhat modified in respect
of periods of mass unemployment, often of a cyclical character,
during which a persistent deficiency in aggregate demand may
cause the demand for labour in virtually all occupations to
fall far short of the supply. In this case beneficiaries leaving
the rolls after a few weeks of benefit may be very few in number.
The majority may continue to be without work after many
weeks, even though fully employable by ordinary standards.
But in this case also there are some compelling reasons for
limiting the period of insurance benefit.
12

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UNEMPLOYMENT INSURANCE SCHEMES

For one thing, the normal procedures for verifying the
reality of unemployment by the offer of work can no longer
be followed for many claimants. This leads to difficulties in
applying the ordinary conditions for eligibility. In addition,
the continuing idleness of beneficiaries cannot but harm their
morale, despite the cash benefits they are receiving. Moreover,
the cost of paying benefits indefinitely to a continuously growing roll of beneficiaries will eventually exhaust existing funds.
This cost can continue to be financed through social insurance
means only if there are very heavy and perhaps uneconomic
increases in contribution rates.
Substantial financial aid from public revenues, whether
derived from taxation or borrowing, may thus become imperative
at some point to assist in the problem of caring for the long-term
unemployed. This aid may consist of large direct subsidies
to the unemployment insurance scheme itself. Or, it can take
the form of setting up publicly financed schemes of a noninsurance type to provide for those who have been unemployed
for longer than a certain period. The latter alternative seems
both in principle and in the light of experience to be preferable.
Such other schemes may take the form of work relief, unemployment or general assistance, or some similar measure that
should ordinarily provide aid only to persons satisfying a means
test. (Needless to say—though the point is outside the scope
of this study—the public authorities should continue at all
times to take such positive and remedial steps as are within
their power to maintain or restore a high level of employment.)
The obvious conclusion is that it is usually desirable, as
a basic principle, to confine the risk covered by unemployment
insurance to short-term unemployment only. For various
reasons of general social and economic policy, as well as technical social insurance policy, it would appear that the problem
of caring for workers who remain unemployed for more than a
certain period can best be handled through publicly financed
programmes other than unemployment insurance. This means
that some kind of time limit should ordinarily be placed on
the duration of benefits under unemployment insurance proper.
It should be stressed before leaving the point, however, that
whenever such a limit is imposed, there should if possible always
be an unemployment assistance, general assistance, work
relief or similar programme that will care for beneficiaries

RATE AND DURATION OF BENEFITS

175

who exceed the limit and are found to be in need. In the words
of Paragraph 1 of the Unemployment Provision Recommendation, 1934—
In countries in which compulsory or voluntary unemployment
insurance is in operation, a complementary assistance scheme should
be maintained to cover persons who have exhausted their right to
benefit and in certain cases those who have not yet acquired the
right to benefit ; this scheme should be on a different basis from
the ordinary arrangements for the relief of destitution.
Form of Time Limit
There are various ways in which limits on the duration of
benefits may be expressed. The maximum period for drawing
benefits may, on the one hand, be made uniform for all bénéficiaires. This means that once a worker has qualified for benefit,
he is entitled to the same potential period of benefit as any
other beneficiary. The contrary approach consists, in essence,
ir varying the maximum duration for beneficiaries in accordance
with the number, length, or volume of their previous contributions, employment or earnings. Under this ratio or slidingscale method, a worker who has contributed less to, or been
employed for a briefer period under, unemployment insurance
is not able to receive benefits for as long a period as another
worker who has contributed or been employed longer.
Uniform or Variable Limits.
Comparison of the relative effects of uniform and variable
limits on the duration of benefits is difficult without detailed
consideration of the actual figures involved in each case. One
ratio formula may in practice prove very restrictive and produce
relatively short periods of benefit for most claimants, while
another may in fact prove more liberal than most uniform
limits. The ratio method would appear usually to be more
complicated to understand and administer. In addition, it
would hardly seem possible to justify its use by the argument
that persons whose employment experience has been irregular
in the past do not need as long a period of protection as
other workers ; all other things being equal, the likelihood of
their being unemployed longer would in fact seem to be greater.
There seems to be no inherent reason why duration provisions
should favour steadily employed persons at the expense of
others.

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UNEMPLOYMENT INSURANCE SCHEMES

The ratio method appears to contain a certain notion of
adjusting the duration of benefits to contributions in accordance
with savings or private insurance concepts. It may be argued
that a system of uniform duration is more in harmony with
the commonly accepted objectives and characteristics of unemployment insurance, although admittedly the nature of other
technical benefit provisions may make such a system inappropriate for some schemes.
Present Practice.
The majority of schemes now in force apply a uniform
limit, but some adhere at least in part to the ratio method. A few
examples of the latter may be given. Canada limits weeks of
benefit in a benefit year to one-half of the weeks of contribution in the preceding two years. The Union of South Africa
restricts the number of weeks of benefit to one-fourth of the
number of weeks of contribution. More than two-thirds of
the state schemes in the United States limit aggregate benefits
payable to a beneficiary in a benefit year to a certain fraction
of his insured earnings during the previous base year ; the
fraction most frequently specified is one-third.

Norway limits

benefits to a period not exceeding one-third of the number of
contribution weeks in the preceding four years, minus the
number of benefit weeks in the same period.
A modified ratio system is applied in the Federal Republic
of Germany through the use of a system of classes : 13 weeks'
duration after 26 weeks of employment, 20 weeks after 39
weeks, and 26 weeks after 52 weeks. Similarly, Austria has
a minimum 12-week limit but allows 20 weeks for workers
insured for 52 weeks in the last two years, and 30 weeks for
those insured for 156 weeks in the last five years. The United
Kingdom, although its normal maximum duration of 180 days is
uniform for all, allows persons insured for five years to receive
three additional days of benefit beyond this limit for each five
weeks of contribution in the preceding ten years, less one day
of extended benefit for each ten days of benefit received during
the last four years.
Other Considerations.
The maximum duration imposed may be applied separately
to each individual spell of unemployment. Alternatively, it

RATE AND DURATION OF B E N E F I T S

177

may be applied to the cumulative total of days of benefit during
the course of a specified period. If the latter procedure is
used, the period of observation or reference period during
which the limit is applicable is most appropriately fixed at
one year. This may be a benefit year differing for each claimant
or a uniform calendar or fiscal year, depending upon the internal structure of the scheme and its benefit provisions. An
example of the imposition of a dual reference period is found
in Switzerland, which limits benefits to 90 days in one calendar
year and to 315 days in four consecutive years. Whenever a
reference period is used, special provisions are necessary to
deal with spells of unemployment that begin in the latter part
of one reference year and overlap into the next.
Some countries have found it desirable to permit administrative modification of their statutory duration provisions.
Thus, Switzerland authorises extension of its ordinary duration
by one-third in case of severe and prolonged unemployment
throughout the country or in certain regions or industrial
branches, and by two-thirds if the situation worsens further.
The Union of South Africa permits its normal duration to be
extended in special cases, but also authorises claims officers
to reduce or suspend benefits if they think the number of occasions or periods during which a claimant has been unemployed
is excessive in comparison with other contributors performing
work of a similar nature.
Length of Duration
Attention may now be given to the question of the specific
period which constitutes a reasonable limit on the maximum
duration of unemployment benefits. A number of factors
must be weighed in deciding this question for a particular
scheme, of which some may be of conflicting tenor. Hence
the final decision must be somewhat pragmatic and, to some
degree, arbitrary. Fortunately, initial decisions on maximum
duration can be more readily changed by amendment than
certain other benefit provisions.
Factors Involved.
Mention may be made of some of the criteria to be considered in deciding upon the length of the benefit period. One
guiding rule is to try to fix the period in such a way that in

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UNEMPLOYMENT INSURANCE SCHEMES

normal times, e.g. when less than, say, 3 to 5 per cent, of the
labour force is unemployed, the great majority of beneficiaries
will receive benefits throughout their whole period of unemployment. Ideally, no more than a minor fraction of the beneficiaries, perhaps only 10 per cent., should be affected adversely
by the limit selected. For reasons previously discussed, this
objective cannot be sought in respect of periods of mass unemployment, during which resort should be had as a matter of
policy to other programmes for the care of the long-term unemployed. Thus, a second factor to consider in fixing the benefit
period is the availability of such other programmes and the way
in which they are co-ordinated with unemployment insurance.
A third factor to consider is that of cost. It is of course
self-evident that the longer the potential benefit period, the
greater will be the cost. The total cost of a scheme should
never be raised to such an extent as to require excessively high
and uneconomic contribution rates for its financing. In normal
times, however, the greater part of the cost is concentrated
in the first few weeks of benefit as most beneficiaries do not
remain on the benefit roll for a long period of time. Hence,
after a certain point (for example, six to eight weeks) each
week added to the maximum duration tends to result in only
a relatively small addition to the total cost as compared with
the first few weeks.
On the other hand, if unemployment is widespread the
majority of beneficiaries may remain on the roll for the full
period allowed. The period should therefore not be so long
that the scheme cannot remain reasonably solvent in the face
of a drain on its resources produced in this way. Stated
in other terms, the limit selected should make allowance,
among other things, for the proportion of total unemployment
costs that it is considered desirable and feasible to finance by
means of unemployment insurance during periods of mass
unemployment.
Still another factor that ought to be taken into account
is the degree to which the administrative procedures followed
will in fact constantly keep beneficiaries in contact with the
demand for labour throughout the entire period of benefit
adopted. Finally, the special types and patterns of unemployment peculiar to the particular country concerned must
be studied for their bearing on the maximum benefit period.

RATE AND DURATION OF BENEFITS

179

Desirable Limits.
The combined significance of the above factors, as manifested in a number of countries, would appear to be that the
maximum period of duration ought rarely to be less than three
months nor longer than, say, six or seven months. The latter
period, if it can be achieved, is probably close to the ideal objective for schemes that have had a chance to mature and to accumulate a reasonable contingency fund. Experience suggests that
if the normal maximum duration is fixed at much longer than
six months, a scheme may be unduly vulnerable to mass unemployment and may also risk accumulating a considerable number
of unemployable persons on its rolls. On the other hand,
if the duration is fixed at much less than this figure it may
prematurely cut off from benefit many workers who, if given
more time, can be restored to employment ; certain basic
readjustments in their occupation, skills or place of residence,
however, may sometimes be necessary.
The relevant provisions in the Unemployment Provision
Convention, 1934, call for a minimum duration of at least 78
working days a year and a normal duration of at least 156
days. The Social Security (Minimum Standards) Convention,
1952, permits unemployment schemes limited to employees
to fix the maximum duration at 13 weeks within a period of
12 months, and those limited to residents of limited means,
a corresponding maximum of 26 weeks. The latter Convention
also requires schemes that vary the maximum duration in
accordance with previous contributions to provide an " average "
duration of benefit of at least 13 weeks in 12 months.
A caution must again be recorded concerning the maximum
duration to be provided under new unemployment insurance
schemes. If, as is often the case, few statistics on employment
and unemployment are available at the start of the scheme,
and if placement facilities are still fairly new, a somewhat
conservative duration period should be adopted at the start.
This can be lengthened later after experience with the scheme
has thrown some light on the actual volume of claims and
enabled the efficiency of administrative and placement operations to be increased. Such a conservative duration period
may be tentatively defined for present purposes as one falling
somewhere between two to three months.

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UNEMPLOYMENT INSURANCE

SCHEMES

Existing Duration Provisions
The maximum periods during which benefits may be
drawn under existing unemployment benefit schemes are
summarised in table VII. It will be seen from this table that
the maximum duration provided for under these schemes
differs considerably. The majority of them provide for over
20 weeks, however, and there is some tendency for most of
the limits to fall at approximately six months.
The provisions referred to in table VII may be summarised
in ascending order of length as follows. A limit-of 12 weeks
is imposed by Austria and one of 15 weeks by Norway. Austria
raises its limit to a maximum of 30 weeks after a longer employment record, however, and also provides needy beneficiaries
who are Austrian citizens with an additional 26 weeks of emergency assistance after exhaustion of insurance benefit. A
limit of 90 days is normally applied in Switzerland, but the
Government can extend this to as many as 150 days in periods of
extensive unemployment ; a total of 315 days is permitted in any
four consecutive years. Sweden requires its funds to pay
benefits for at least 90 days but prohibits them from paying
for more than 156 days in 12 consecutive months. In practice,
the majority of Swedish funds have a maximum duration of
138 to 156 days ; unemployment relief may also be provided
after exhaustion of insurance rights.
Greece authorises a maximum of 100 days for beneficiaries
with 310 days of employment in the last two years, and one
of 130 days for beneficiaries with 900 days of employment in
the last five years ; it also places an over-all limit of 300 days
on total benefits payable during any four-year period. Finland
has a limit of 120 days in 12 consecutive months and of 240
days in 24 consecutive months ; thereafter employment on
work relief projects may be provided. The Netherlands waiting benefits must be payable by industrial associations for
at least 48 days, and its unemployment benefits are paid for
an additional 78 days or for 126 days in a benefit year if no
waiting benefit is payable ; assistance is also available to
some beneficiaries thereafter.
Ireland has a limit of 156 working days for each spell of
unemployment, and also maintains a supplementary unemployment assistance scheme ; however, workers over 65 who

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RATE AND DURATION OF B E N E F I T S

TABLE V I I .

MAXIMUM DURATION OF UNEMPLOYMENT B E N E F I T S ,

Country

Normal maximum
benefit period

1955

Exceptions or additional
limits

Australia

Unlimited

—

Austria

12 weeks

Extended by 8 weeks if 52 weeks
of employment in last 2 years,
or by 18 weeks if 156 weeks of
employment in last 5 years;
maximum duration : 30 weeks

Belgium

Unlimited

Administrative termination authorised in specified circumstances ; special limits for married women

Canada

36 weeks

May not exceed one-half of weeks
of contribution in last 2 years

Denmark

250 days in year for
most funds

Statutory minimum : 90 days

Finland

120 days in 12 months

240 days in 24 months

France

Unlimited

Administrative termination authorised in specified circumstances ; allowance decreased
10 per cent, for each year of
unemployment

Federal Republic
of Germany

13 weeks

Extended by 7 weeks if 39 weeks
of insurable employment or by
13 weeks if 52 weeks of insurable employment ; maximum
duration : 26 weeks

Greece

100 days

Extended by 30 days if 900 days
of employment in last 5 years ;
4-year maximum : 300 days

Ireland

156 days for each unemployment

No limit for workers aged 65 to
70, if 156 w e e k s of p a i d c o n t r i butions

182

TABLE VII.

UNEMPLOYMENT INSURANCE SCHEMES

MAXIMUM DURATION OF UNEMPLOYMENT BENEFITS

Country

Normal maximum
benefit period

(conci.)

Exceptions or additional
limits

Italy

180 days

—

Japan

180 days in 1 year

—

Luxembourg

26 weeks in 12 months

—

Netherlands

126 days in 1 year

New Zealand

Unlimited

Norway

15 weeks in 12 months

May not exceed one-third of
contribution weeks minus
benefit weeks in last 4 years

Sweden

138 to 156 days in 12
months for most funds

Statutory minimum and maximum : 90 and 156 days

Switzerland

90 days in calendar year

Government may extend by 30
or 60 days if severe unemployment; 4-year maximum: 315
days plus extension

Union of
South Africa

26 weeks in 52 weeks

May not exceed one-fourth of
weeks of contribution ;
administrative extension
authorised in special cases

United Kingdom

180 days for each unemployment

Extended 3 days for each 5 weeks
of contribution in last 10 years,
minus 1 day for each 10 days of
benefit in last 4 years, for employees with 5 years of insurance ; maximum duration :
492 days

United Stales

About half of states :
26 weeks in year
Most other states : 20 to
25 weeks in year

Total benefits in year commonly
limited to about one-third of
wages in previous year

Yugoslavia

Unlimited

Statutory minimum for " waiting benefits " : 48 days
—

—

RATE AND DURATION OF B E N E F I T S

183

have 156 weeks of paid contributions since entering insurance
may draw benefits without limit of duration up to the age of
70. About half of the United States schemes fix the maximum
benefit period at 26 weeks and most of the remainder at 20
to 25 weeks ; the separate states also maintain general assistance schemes. The Federal Republic of Germany, Luxembourg and the Union of South Africa also provide a 26-week
limit. The first-named country provides this, however, only
after a year of insured employment ; it also has an unemployment relief scheme for needy recipients, with no time limit on
duration. A normal 180-day limit is provided for by Italy,
Japan and the United Kingdom. Italy, in addition, provides
extraordinary allowances to workers who have exhausted
their right to benefit. The United Kingdom extends its normal
limit up to a potential maximum duration of 492 days (i.e.
19 months) after ten years of insurance, and also has a general
assistance scheme covering persons exhausting their right to
benefit.
Denmark requires its funds to provide a basic minimum
duration of at least 90 days. Nearly all of the Danish funds,
however, have also established special " continuation funds "
from which benefits are granted for an additional period equal
to the minimum statutory period plus 70 days ; thus most
funds provide a total potential duration of 250 days per year.
Canada has a normal limit of 36 weeks but also provides that
the duration may in no case exceed one-half of the number
of weeks of contribution in the two years preceding the
claim.
Five countries do not normally limit the duration of
benefits. These are Belgium, Yugoslavia and three countries
whose benefits are subject to an income test—Australia, France
and New Zealand. Belgium places certain restrictions on the
duration of benefits for married women who are not breadwinners, however, and also permits administrative termination after long or frequent receipt of benefits by beneficiaries
not effectively seeking employment, those with a supplementary occupation, and those living with an independent worker.
France provides for a reduction of 10 per cent, in the benefit
rate for each year of unemployment, and also permits a limit to
be imposed on duration in districts where employment offices
are currently receiving numerous offers of employment ; it

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UNEMPLOYMENT INSURANCE SCHEMES

also fixes the maximum duration for domestic servants at
15 days.
A worker who exhausts his benefit rights cannot requalify
for benefit under most schemes until he has again fulfilled the
basic qualifying period. A few schemes have, however, adopted
special requalifying provisions that are more liberal than
the initial provisions. Ireland and the United Kingdom, for
example, permit requalification for the ordinary period of
duration after payment of 13 weekly contributions ; and
Norway permits the same after 15 weeks of insured employment during a period of two years preceding the filing of a
new claim.

CHAPTER VII
METHODS OF FINANCING
The benefits discussed in preceding chapters are a form of
social expenditure for which covering revenues must be found.
It is implicit in the use of social insurance as the means of
providing unemployment benefits that the financial burden is
met through a system of pooling. In other words, a central
fund is created from revenues derived from various sources.
Benefits are then paid from this fund to insured individuals
who suffer the contingency insured against.
The scope of the pooling applied under unemployment insurance can from a technical standpoint be either local, regional,
or national. It can also be applied on an industrial basis. That
is to say, the unemployment benefits paid in each separate
locality, region or industry might be financed exclusively from
revenues raised in the particular geographical or industrial
unit concerned. It is characteristic of most countries, however,
that the forces that determine levels of market activity, prices,
production, employment and other phenomena are tending to
operate more and more on a nation-wide basis. Each region
and industry is basically subject to national trends. The
result is a high degree of economic interdependence among
the various regions and industrial branches of the country.
For this reason, it would seem that in most countries the most
appropriate unit over which to spread the risk of unemployment would be the nation as a whole.
Most existing unemployment insurance schemes operate
with what is, in effect, a single nation-wide pool. It is true
that a number of countries, including Denmark, Finland, the
Netherlands, Norway, Sweden and Switzerland, maintain
separate provincial, local, industrial or occupational funds. In
each case, however, a system of reinsurance is in effect provided
on a national basis by means of equalisation funds or through
substantial state subsidies. In contrast, the 48 separate state

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UNEMPLOYMENT INSURANCE SCHEMES

schemes in the United States are completely independent financially. The only exception to this is that under certain circumstances they may obtain repayable advances from a national
fund.
SOURCES OF REVENUE

It is essential to the successful functioning of an unemployment benefit scheme that it should possess an effective means
of securing the revenue required to cover its disbursements.
The revenue measures must be capable, on the one hand, of
providing the scheme with a sufficiently large and reasonably
stable flow of income. They should also be of such a nature
as to distribute the cost of unemployment benefits among the
population in an equitable manner and in a way that produces
the minimum of disturbance from an economic point of view.
The first general question to be examined is : what groups
of the population should the revenues be drawn from ? Many
of the issues involved in this question arise under any form
of social insurance and are already extensively treated in general
social insurance literature. 1 Hence, only a somewhat summary
and categorical discussion of the problem is presented here.
The principal parties who may be called upon to participate
in the financing of unemployment benefits are the workers
protected by the scheme, their employers, and general taxpayers. Some considerations involved in securing revenues
from each of these three groups are outlined briefly below.
Contribution by Employees
Various reasons may be advanced for obtaining part of
the moneys required for an unemployment benefit scheme
from insured workers themselves, though it would be neither
practical nor desirable to raise all revenues in this way. A
payment by insured workers puts into force the contributory
principle, a feature of other types of social security schemes
with which workers may already be familiar. This form of
contribution means that each worker, by regular prepayment
of a small sum, participates directly in building up his protection against unemployment. It also gives the programme
1
See, in particular, The Financing of Social Security, Report III,
International Labour Organisation, European Regional Conference,
1955 (Geneva, I.L.O., 1954). (roneoed document).

METHODS OF FINANCING

187

the character of a co-operative or group undertaking. There
are real psychological advantages in this, for workers are
given a greater interest and stake in the successful operation
of the scheme, and a greater sense of responsibility in the matter
of claiming unduly liberal benefits.
The fact that workers share in the cost of their benefits
also influences the conditions under which these can be paid.
It provides grounds for paying benefits automatically as a
right in case of unemployment, without regard to the means
of each claimant at the time. This in turn permits an unemployed worker to claim benefits as a business transaction,
without connotations of indigence or charity such as may
accompany payments subjected to a means test. If the contribution is graduated with wages, it also provides a justification
for paying graduated benefits, which enable workers to conserve
their previous living standards.
Finally, a concomitant of special contributions paid by
employees is that these contributions can be set apart in a
special unemployment fund. This tends to ensure a considerable degree of stability in unemployment insurance finances
and, in turn, in benefit rates. Such stability may not be possible
if benefits are financed exclusively from general public revenues
and are thus vulnerable to financial crises in the general budget.
The advantages of providing for employees' contributions
to unemployment insurance, though partly intangible, are nevertheless real. Experience with numerous programmes confirms
this and likewise indicates that many employees prefer to
contribute.
A disadvantage of contribution by employees lies in the
fact that, judged purely as a form of tax, it is at best proportional in its incidence and may under certain conditions be
regressive. This is one reason why employees' contributions
should never be used as the sole source of revenue. It also
suggests that the proportion of revenue to be obtained in this
way should be limited to 50 per cent, at the most. Otherwise
there is reason to believe that, for many schemes, the advantages
mentioned earlier will outweigh this disadvantage.
For practical reasons the decision regarding contribution
by employees to unemployment insurance should be co-ordinated
with similar decisions regarding other social security programmes. The larger the contribution paid by employees

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under other social insurance programmes, the smaller should
be that imposed for unemployment insurance and vice versa.
Contribution by Employers
Several arguments may also be advanced in favour of
deriving at least part of the resources of an unemployment
benefit scheme from the employers of the workers protected.
Thus, it may be argued that the labour costs entering into
the total cost of production should include, not only wages
paid to employees while working, but an additional premium
for insurance that will maintain them if they are laid off. In
other words the item of labour costs should include the cost
of maintaining the working force both while working and while
standing by. Since much of the employers' contribution is
undoubtedly shifted forward into prices, this means in effect
that part of the cost of maintaining unemployed workers will
be supported by members of the community in their capacity
as consumers rather than as taxpayers. This is an acceptable
result, once it is granted that unemployment protection is a
proper element in the cost of production.
A somewhat different approach is represented by the
argument that employers are in a sense " responsible " for
unemployment, since it is they who actually terminate the
employment contract. Contribution by employers is regarded
in this view as a kind of penalty, or put otherwise, as a method
of charging the cost of the risk to the party who precipitates
its occurrence. This line of reasoning is to some extent analogous to the concept of the responsibility of employers evolved
in connection with employment injuries. The notion is perhaps
carried farthest in the United States where the whole cost of
unemployment insurance is placed on employers. Moreover,
« the contribution rate of each employer in that country is varied
separately according to the amount of unemployment benefits
drawn by his ex-employees. Even when the concept of responsibility is not extended so far as to apply to individual employers,
however, it still provides at least theoretical justification for
allocating a part of benefit costs to employers as a class.
Several other considerations may also be noted. Contributions paid by employers are often regarded, by workers among
others, as an essential counterpart of the contributions paid
by employees. The employer is regarded as " matching " the

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amounts contributed by his workers. This clearly has a psychological effect on the attitude of the workers towards the
payment of their own contributions. Also, a worker enjoying the security that results from the fact that he is protected
against unemployment tends to be a more contented and
therefore a more efficient worker. His employer as a result
receives a definite material benefit from the scheme.
Employers' contributions are usually easy to collect from
an administrative standpoint and are therefore a fairly productive levy in relation to the cost of collection. Finally, requiring
employers to contribute makes it possible to achieve some of the
advantages already mentioned in connection with employees'
contributions : payment of benefits without means test, graduation of benefits, and a segregated independent fund.
A basic argument sometimes raised against contribution
by employers is that it really constitutes a tax on employment
that takes no account of the profits of undertakings. As such,
it is argued, it may actually have the effect of curtailing employment. But this may be said equally well of other socially
desirable burdens imposed on employers by law for the protection of workers. It is necessary in any case to balance the
broader tangible and intangible consequences of adopting,
or not adopting, the system under which employers contribute
with its characteristics judged purely in tax terms. The latter
characteristics 'are certainly not the only ones to consider, nor
are they necessarily the most important.
Contribution by the State
The third party from which unemployment insurance
revenues may be derived is the State itself, or the State and
other public authorities, such as provinces and communes.
The moneys provided by the State will ordinarily be raised
through its general tax system. Hence, it is general taxpayers
as a group who are the real source of this contribution. In
periods of economic stress, however, the state contribution
may in fact be derived from loans.
The final incidence of state contribution as among different
classes of taxpayers will be determined by the structure of
each country's tax system. That is, it will depend upon whether
the State relies mainly on direct or indirect taxes and whether
these taxes are generally progressive or regressive. If a new
13

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UNEMPLOYMENT INSURANCE

SCHEMES

tax must be levied to finance the state contribution, however,
the incidence will depend upon the character of this most
recently added levy.
A justification for financing part of the cost of unemployment insurance by means of state contribution lies, for one
thing, in the well recognised responsibility that society has
for the welfare of its dependent members, including those
who are unemployed and their families. State contribution
to a systematic scheme for caring for the unemployed thus
represents a convenient method by which society can discharge at least a part of this responsibility. Moreover, in the
absence of such a scheme the State, and in turn general taxpayers, might be obliged to spend substantial sums in providing direct assistance or relief to many of the unemployed. The
cost of the contribution by the State to unemployment insurance is thus at least partly offset by savings realised on such
other costs.
Still another reason for providing for state contribution
is that it permits part of unemployment revenues to be obtained
from progressive taxes that fall with greater weight on those
with higher incomes. This advantage is of course realised
only if progressive taxation is actually used ; it is not an
automatic consequence of any form of state contribution.
Finally, it is sometimes not possible or practicable to derive
sufficient revenues from contributions paid by employees and
employers alone. In this case, it is necessary to have recourse
to the general taxing power of the State if the total resources
of the scheme are to be brought up to the required level.
The above advantages of state contribution can be realised
even if it provides only a part of the total revenues of a scheme.
In the light of these advantages, contribution of this type
may ordinarily be considered a desirable element in the finances
of unemployment insurance, whether it is used in combination
with contribution by employees or by employers, or both.
But when a scheme is financed exclusively by the State, a different situation arises. The nature of the scheme then tends to
assume a form that differs from ordinary unemployment insurance not only in degree but in kind. The disadvantages of
contribution by employees and employers mentioned above
are avoided, but their positive advantages are also lost, and
new problems arise.

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Some of the consequences of financing unemployment
benefits exclusively through state grants may be mentioned.
The concept that every unemployed worker is automatically
entitled to benefit as a matter of right can hardly be applied
any longer, because there are no prior contributions on which
to base such rights. For reasons of cost and possibly because
of restrictions on the use of public funds, it may be necessary
to confine payments to unemployed workers who are actually
in need. This will require an inquiry into the means of each
applicant. Moreover, graduation of payments in relation to
past wage differences would clearly be inappropriate.
Financing of unemployment payments exclusively from
general revenues may also involve a heavy charge on the general
budget. This may lead to fiscal difficulties and perhaps to
regressive tax measures, especially in less wealthy countries.
The practice of building up a reserve in good times to be drawn
upon in bad times can hardly be applied. This in turn may
make benefits—which, to provide real security, ought to be
something stable upon which workers can definitely count—
vulnerable to changes in the general fiscal position of the government. It may even open up the possibility of their having to be
reduced at the very time when unemployment is most severe.
The above represent tendencies rather than the inevitable characteristics of schemes financed exclusively by the
State. Nevertheless, they are always latent possibilities.
They may be of little significance in times of high employment
but can become serious if employment slumps. At that point,
however, it is too late to change to another type of financing.
It may also be noted that the State should bear at least a
substantial part of the cost of administering unemployment insurance. The State together with its subdivisions also has to bear
the whole cost of any assistance payments made to unemployed
persons.
Joint Contributions
The preceding discussion deals with the merits of different
sources of revenue taken by themselves. It is difficult to
make any generally valid decision on which of these sources,
considered separately, is in the final analysis the best. Indeed,
it would seem appropriate under most unemployment benefit

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schemes to make use of at least two of the three sources mentioned. A bipartite system would thus consist of contributions
from one of the three following pairs : employees and employers,
employees and the State, and employers and the State. There
is much to be said, however, for making use of all three sources by
having a tripartite system of contribution. Such a course makes
it possible to obtain some of the advantages of each source,
while at the same time minimising the disadvantages of
each.
When use is made of two or more sources the question
arises of the relative proportions of cost to be covered by different types of revenue. When contributions from employees
and employers alone are used it is ordinarily perhaps simplest,
both in principle and in practice, to divide the burden between
the two parties on a fifty-fifty basis, unless special circumstances make this undesirable. Otherwise, if an unequal distribution is desired, it would normally appear appropriate for the
employer's share to be larger than that of workers, rather than
vice versa. There is less basis for generalisation when a state
contribution is linked with contribution by employees or
employers alone.

If the state contribution covers substantially

more than half of the cost, there is some danger that the contributory character of the scheme may be overshadowed. On
the other hand, it is rarely desirable for more than 50 per cent.
of the total cost to be borne by employees.
Finally, in the case of tripartite financing the most obvious
principle to follow in dividing up the burden is to allocate onethird of the cost to each party. So long, however, as the parity
between employees' and employers' contributions noted in
the preceding paragraph is observed, the proportion represented
by the state contribution may be allowed to vary widely depending upon the particular variable of which it is made a function,
as discussed below.
It should again be noted that the final decision concerning
the combination of sources of revenue used for unemployment
insurance in a particular country must take account of patterns
already being followed there in schemes dealing with other
social risks. Similarly, if unemployment benefits are part of
a unified scheme, decisions regarding methods of financing
must consider the scheme as a whole with its broad range of
benefits, rather than unemployment benefits exclusively.

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Existing Schemes
It is of interest in the light of the above discussion to see
what sources are used for financing unemployment insurance
under existing schemes. The method used in the largest number
of countries is a tripartite system, under which revenues are
provided jointly by insured workers, employers, and the State
or other public authorities. Nations financing unemployment
benefits separately and using tripartite financing include
Belgium, Canada, Japan, the Netherlands, Norway and the
Union of South Africa. Contribution rates for employees and
employers in each of these countries are equal except for special
rates sometimes applicable to the lowest-paid workers. Tripartite financing is also used by Ireland and the United Kingdom to finance their co-ordinated social insurance schemes,
of which unemployment benefits are a part. The New Zealand
social security fund, from which unemployment as well as other
benefits are paid, is financed by a uniform percentage levy on
the gross income of individuals and the net income of companies
and by grants from the State.
A bipartite system of financing is used in most other
countries. There are considerable differences, however, in the
two parties that are required to contribute. Contributions
from employers and employees are used to finance unemployment insurance benefits in Austria and the Federal Republic
of Germany with a fifty-fifty sharing of cost in both countries.
Greece provides for the same two types of contributions but
with employers paying two-thirds and employees one-third. A
combination of net income taxes on individuals and contributions from employers is used to finance Australia's national
welfare fund, from which all its social security benefits are paid.
A combination of contributions from employees and subsidies
by the public authorities is ordinarily used in Denmark, Finland,
Sweden, and Switzerland. In Denmark, however, employers
make a small flat-rate contribution to the central unemployment
fund, while employer contributions are required in Switzerland
in the case of " joint " funds.
Contributions from employers constitute the sole source
for financing unemployment insurance in Italy and Yugoslavia,
and under all but two state schemes in the United States. The
states of Alabama and New Jersey require employees to pay a

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small contribution in addition to that payable by employers.
Finally, the public authorities bear the whole cost of unemployment allowances in France and Luxembourg.
The above description of current practice relates to the
financing of unemployment benefits only and not to that of
administrative expenses. A number of countries not providing
for a state contribution to the cost of benefits pay part or all
of the cost of administration out of public funds. It may
also be noted that the unemployment assistance or general
assistance schemes maintained in some countries are financed
entirely from public funds. Thus, while the public authorities
in some of these—including Austria, the Federal Republic of
Germany and the United States—do not contribute to unemployment insurance itself, they nevertheless pay out substantial
sums for the support of assistance schemes.
The two Conventions already cited do not deal in detail
with the subject of financing, but lay down certain general
standards that may be noted here. The Unemployment
Provision Convention, 1934, requires unemployment benefits
related to contributions, or unemployment allowances, to be
provided under a compulsory or voluntary insurance scheme
or a combination thereof. The Social Security (Minimum
Standards) Convention, 1952, requires the cost of benefits and
their administration to be borne collectively by way of insurance contributions or taxation, or both. It also provides
that the total of insurance contributions borne by employees
should not exceed 50 per cent, of the total of the financial
resources allocated to the protection of employees and their
wives and children. Finally, it requires a ratifying State to
accept general responsibility for the due provision of benefits
provided in compliance with the Convention and to take all
measures required for this purpose.
FORM OF CONTRIBUTIONS

The contributions paid by workers, employers and the
State may take various different forms. That is to say, the
liability to contribute of the parties sharing in the financing
may be expressed in different ways. These are examined
below.

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195

Flat Contributions
One procedure is to fix the contribution payable by workers
and employers as a flat monetary amount that is uniform for
all workers with the same characteristics. This amount will
be payable for each elapsed unit of time, such as a week or day.
The contribution amount under this method does not vary with
the wages of different workers but may, if considered necessary,
be varied according to sex, age and perhaps region. Flat
contributions are usually linked with a system of flat benefits ;
thus, the implications of both must be considered together so
that a decision valid for both may be reached.
A system of flat contributions is simple for workers to
understand. It may also under some circumstances simplify
administration. Reports have to be secured and records maintained only with regard to the number of contributions that
have been paid. Another important consideration is that the
stamp method of collecting contributions can be most easily
applied when flat contributions are used.
With the flat contribution procedure, however, rather complex regulations may have to be issued concerning the definition
of contribution units, a problem that does not arise under some
other procedures. Moreover, the percentage of wages represented by a flat contribution becomes larger the lower the wages
of the worker paying it, and flat contribution therefore has a
somewhat regressive incidence. This fact may have relatively
little significance in countries where the dispersion of wages is
narrow, but its importance will increase the wider the spread
of wages in a country. The effect of the regressive tendency
may be moderated somewhat in practice by providing for a
special reduced contribution amount in case of the lowest paid
workers. This will need to be compensated by a special increased
contribution from employers in respect of such workers.
A system of flat-rate contributions is used by the United
Kingdom in financing its national insurance scheme, of which
unemployment benefits form a part. Ireland levies flat rates
on employees and employers under its co-ordinated social
insurance system. Flat contributions are also collected by
certain of the unemployment insurance funds operating in
Switzerland and by some of the voluntary funds set up in
Denmark, Finland and Sweden.

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Percentage Contributions
Procedure.
A more common method is to express the unemployment
insurance contribution due from employees and employers as
a percentage of wages. The worker's contribution in this case
is equal to the specified percentage of his own wage, while the
employer pays an amount equal to the prescribed percentage
of his total payroll, exclusive of any exempted amounts. The
absolute contribution amounts paid by and in respect of employees thus vary directly with their wages. This method of
determining contribution liability is usually linked with the
graduation of benefit amounts in accordance with wages. The
fact that larger contributions are paid in respect of higher-paid
workers under this method provides the justification for corresponding differentials in benefits.
Wages and salaries are usually taken into account for
benefit purposes only up to a certain level ; very high wages
would otherwise mean very large benefits, and above a certain
level the incentive to find employment again would be small.
It is therefore customary to fix an upper limit on the wages
and salaries in respect of which contributions are payable, the
same ceiling usually applying to both contributions and benefits.
Such a ceiling should not be fixed so low, however, as to have
the effect of excluding any significant part of the earnings of
the mass of workers.
From some points of view the percentage method is a more
equitable method of contribution than the flat-contribution
method. It permits the contributions of employees to vary
to some extent with their ability to pay. Such ability may
differ relatively little in countries where wage differences are
small, but in others it may vary widely. The percentage
method may also involve less work for larger employers. In
their periodic contribution reports they need only list their
employees and their aggregate earnings (below the prescribed
wage ceiling) during the contribution period, and then calculate
the specified percentage of contribution on the total of such
earnings. The percentage method in contrast is less well
adapted to the use of stamps in collecting contributions, so
that advantages potentially inherent in the latter must be
sacrificed. This may create difficulties in some countries where

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there are many small employers who do not keep books and
of whom many may be illiterate.
National Practice.
Under a number of existing unemployment insurance
schemes the contributions payable by employers and employees
are expressed as a percentage of wages, exclusive of the excess
of wages above a prescribed wage ceiling. Countries where
this is the case include Austria, Belgium, the Federal Republic
of Germany, Italy, the Netherlands, the United States and
Yugoslavia, and Switzerland in case of part of its funds. New
Zealand and Australia also levy percentage social security
contributions but the basis for the calculation of their contributions is not exclusively wages as in other countries. In New
Zealand, the basis of calculation for individuals is gross income
from all sources with no ceiling, while that for incorporated
companies is their net income. In Australia, the basis of
calculation for individuals is their income over and above a
personal exemption, while that for employers is their payroll
in excess of an exempted amount per week. The New Zealand
levies and that on employers in Australia are on a fixed percentage basis, but the levy on individuals in Australia takes
the form of percentages that rise with the net taxable income.
Differential Rates.
Contributions under all state schemes in the United States
are expressed as a percentage of wages below a prescribed
ceiling, but employers do not pay a uniform rate. Instead,
the percentage contribution of each employer is varied from
year to year in accordance with his individual " experience "
with the risk of unemployment. A principal purpose of this
arrangement is to provide a financial incentive to employers
to stabilise their employment, by holding out the possibility
of lower contribution rates if they do so. A related purpose
is to allocate the cost of unemployment insurance among firms
and industries in some proportion to the amount of unemployment for which they are responsible. The success of similar
provisions under workmen's compensation in reducing the
number of work accidents was the precedent originally followed
in adopting the procedure described.

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In accordance with the notion that individual employers
are " responsible " for the unemployment of and benefits paid
to their ex-employees, benefits paid in the United States are
in effect charged to the account of one employer or another.
The problem of determining which employer is responsible is
simple if an unemployed worker has had only one employer
during the base period. It becomes much more complex in
the case of workers who have had two or more employers during
this period. The formulas used for adjusting contribution rates
to the experience of individual employers are often elaborate
and also differ widely among the 48 states. The most common
consists of scaling contribution rates inversely with the ratio
between the annual surplus of an employer's contributions over
benefits and his annual payroll. Other formulas cause contribution rates to vary with the ratio between the benefits charged to
an employer during a year and his annual payroll ; the ratio
between the wages giving rise to benefits and the annual payroll ;
or changes in the employer's aggregate annual payroll.
This method of fixing employers' contributions in the
United States began in only a few states but spread eventually
to all 48. But the principle has never been copied in other
countries. It necessarily leads to complex provisions and
procedures for determining contribution rates ; it also results
in a diversity of contribution rates among employers and
industries, with the highest rates tending to apply to those
whose markets, production operations, and employment are
inherently unstable. It would seem that use of differential
rates can assist in reducing unemployment only to the extent
that the latter is in actual fact within the control of individual
employers.
Wage Class Contribution
The contributions payable by employees and employers
may also be fixed on the basis of wage classes. In this case,
the range of wages in a country is divided up into a certain
number of classes each with an upper and lower limit. A
fixed amount of contribution per week or other period is then
specified for each wage class, both for the worker and the
employer. Workers are assigned to wage classes on the basis
of their earnings during a specified period and are liable for
the contribution amount corresponding to their class. The

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employer in turn pays in respect of each of his employees
the employer contribution designated for the latter's class.
The wage class method is in some respects a hybrid of the
flat and percentage contribution methods. As in the latter,
the contribution amounts due per worker become larger
the higher his wages ; however, some progressivity can be
introduced into contribution rates, if desired, by making the
contribution a somewhat larger percentage of wages in the
upper wage classes than in the lower. The resemblance of
the wage class system to the flat contribution method lies in
the fact that it need involve only a relatively few contribution
amounts—what might be called a few flat contributions for
different wage levels. A relatively small number of stamps of
different denominations can be used for these several contribution amounts, and thus the advantages of a stamp procedure
of collection can be realised.
The wage class method of contribution may under certain
circumstances prove simpler to administer than the percentage
method. This is particularly true if the wages of most workers
are reasonably stable from one contribution period to the next,
i.e. if most workers tend to remain in the same wage class week
after week. When workers continually change from one wage
class to another, however, and especially for larger employers
who have numerous employees for whom this is the case, the
wage class method may possibly prove more complicated than
a simple percentage method.
One or another form of the wage class method is currently
in use for unemployment insurance in Canada, Greece, Japan,
Norway, and the Union of South Africa. Some Swiss and
Swedish funds also use this method, and Italy makes minor
use of it. There are considerable differences, however, in the
earnings periods utilised in assigning workers to wage classes.
Greece uses daily earnings for this purpose ; Canada, weekly earnings, and Norway and the Union of South Africa, annual earnings.
The consequences of using different forms of contribution,
the relative adaptability of these forms to different wage patterns,
and the divergence of practice under existing schemes clearly
indicate that the choice among flat contributions, percentage
contributions, or wage class contributions in a particular country
must be based on a careful survey of conditions prevailing in
that country alone.

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Government Contribution
If it is decided that part of the financial resources of a
scheme are to come from a public subsidy, there are a number of
different ways of determining the amount of this contribution.
It may be related like other contributions to wages ; it may be
related to such other contributions themselves ; it may be related
to benefits actually paid ; it may be related to the excess, if any,
of benefits over contributions ; or it may conceivably take
the form of a selected annual lump sum. The public contribution may be furnished wholly by the national government,
or it may be provided in part by local units of government.
Government Contribution Based on Wages.
The amount of the government contribution may, if desired,
be fixed as a specified percentage of the wages of insured workers,
in the same way as the contributions of employees and employers.
In this case the contribution does not depend in principle upon
disbursements for benefits but continues at the level selected
regardless of fluctuations in such disbursements. Unless the
percentage rate of the government contribution is frequently
altered, therefore, it will tend to be added to the reserve in
periods of high employment and may prove insufficient in
periods of low employment.
The practice of expressing the government contribution
as a percentage of earnings is followed in Belgium and the
Netherlands. In Belgium, the State provides a subsidy equal
to at least 2 per cent, of the wages of all workers insured during
the second-to-last preceding year, subject to a fixed maximum
amount. In the Netherlands, one-half of the total percentage
contribution payable to the general unemployment fund by
employers, employees and the State together is to be paid by
the State. In addition, this central fund may grant subsidies
to waiting-allowance funds of industrial associations in periods
when they are subject to heavy unemployment risks and must
pay out large sums in connection therewith.
Government Contribution Based on Other Contributions.
If the government contribution is related to other contributions, it may be fixed at a stated percentage of aggregate

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contributions paid by employees and employers. Or, in the case
of flat contributions, a specified flat contribution may be paid
by the State in respect of each flat contribution paid by an
employee. Thus, Canada provides a state subsidy equal to
20 per cent, of contributions paid by employers and employees.
The Union of South Africa contributes an amount equal to
25 per cent, of such contributions.
Norwegian communes
contribute to the extent of one-fourth of contributions paid
by employers and employees, but the state contribution is
related to deficits only. In Denmark the State and communes
share, in a proportion of two to one, in the payment to voluntary
funds of a subsidy related to the contributions of insured persons.
The exact rate of this subsidy varies inversely with the earnings
of workers in each industry or occupation. In contrast the
state contribution to the national insurance scheme of the
United Kingdom is in the form of a flat weekly contribution
per contributor ; this is supplemented by lump-sum grants.
Government Contribution Based on Benefits.
A third possible procedure is to relate the government
subsidy to actual expenditure on benefit payments. In this
case, in contrast to those under which it is related to insured
wages or contributions, the amount of the subsidy rises and
falls directly with the volume of compensable unemployment,
instead of rising during periods of high employment and falling
during periods of declining employment. The subsidy under
this method may be expressed either as a flat supplement to
each benefit paid, or as a percentage of each benefit or of the
aggregate of benefits paid. Both procedures are used under
existing schemes.
Thus, Japan requires its national treasury to bear onethird of the costs incurred for benefits. In Finland the State
pays two-thirds of the cost of benefits paid to breadwinners and
one-half of those paid to single persons. Federal and cantonal
subsidies in Switzerland are calculated as a percentage of the
expenditures of the different funds. The percentage of expenditure covered by the federal subsidy varies according to the
proportion of a fund's members who have received benefit, but
may not exceed 40 per cent. The cantonal subsidies are at
least equal to the federal subsidy and depend upon the number
of insured persons residing in the canton ; part of the

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SCHEMES

cantonal subsidy in some cantons is provided by municipal
governments.
In Sweden, in contrast, the State pays voluntary funds a
basic subsidy of up to 5 kronor per day in respect of each day
of unemployment for which they pay benefit, plus a subsidiary
grant varying with each fund's incidence of unemployment.
A grant is also made in respect of each dependant's supplement paid. These subsidies averaged about three-eighths of
benefit costs for all funds in 1952. Denmark reimburses its
funds in respect of part or all of the cost of rental, fuel, and
children's allowances paid, in addition to its subsidy related
to employees' contributions.
As already noted, in France and Luxembourg the full
cost of unemployment allowances is borne by the public authorities. The central Government supports the major part of
the cost in both countries, but communes are required to bear
a share of the allowances paid.
Government Contribution Based on Deficit.
Another procedure that may be followed is to provide a
government contribution only in case a scheme incurs a deficit,
that is, when its outpayments during a period exceed its
income. Under this system the State in a sense underwrites the
solvency of the scheme. The extent of this obligation will
differ, however, depending upon whether or not other contribution rates are raised when a deficit threatens. In Norway the
State bears three-fifths of any deficit of a local unemployment
fund and takes over all of its obligations if its resources are
exhausted. Under the Irish and New Zealand social security
schemes the State meets the difference between the yield from
other contributions and benefit expenditure. In Denmark the
State assumes certain contingent responsibilities in connection
with the solvency of voluntary funds and of the central reserve
fund. In some countries, also, a potential contribution by
the State to cover possible deficits is paid into an equalisation
fund, upon which other unemployment funds can draw.
It may again be noted that under a number of schemes
the State pays the whole or a specified part of the cost of administering unemployment insurance in addition to any contribution it may make in respect of unemployment benefits.

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RESERVE FUND

Nature of Reserve
The policy of financing unemployment insurance through
special contributions secured from insured workers and their
employers, rather than exclusively from the general budget,
should be accompanied by a policy of maintaining a specially
earmarked fund for unemployment insurance finances. This
fund should be carefully segregated from other public accounts,
and all contributions received by the scheme should be paid
into it. It should be drawn upon, in turn, only for payment
of unemployment benefits and, unless they are borne wholly
by the State, for administrative expenses of unemployment
insurance.
In case a country provides social insurance against other
risks in addition to unemployment, it may collect a single
contribution in respects of all the risks covered and pool all
moneys collected in a single reserve fund. In this case there
will be no segregation of moneys held against unemployment
benefit liabilities exclusively. The advantages and disadvantages of such a procedure are outside the scope of this study.
In such a case, however, the contribution rates must be fixed
and a policy regarding the size of the reserve fund adopted
bearing in mind the fact that the risk dealt with is a multiple
one and that the various parts of this multiple risk are likely
to exhibit a different pattern of behaviour at different periods.
Surplus moneys in an unemployment fund that are unlikely to be needed for meeting claims against the fund in the
near future should be invested. This enables the fund to earn
additional revenue for the scheme, which will decrease to that
extent the revenue required from other sources. While the
rate of the yield derived from the investments is thus a factor
to be considered, it is of still greater importance that the investments should be safe so that none of the principal is lost. Above
all, however, they should be liquid. They must be able to be
converted into cash quickly in case a sudden rise in unemployment leads to a drastic increase in claims for benefit.
Size of Reserve
Unemployment is essentially a short-term or current risk.
Rights to benefit are ordinarily built up within a period of a

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UNEMPLOYMENT INSURANCE SCHEMES

year or two, while the benefit period for an individual recipient
rarely lasts for longer than six months. This is in contrast
to the long-term building up of rights under pension insurance,
where benefits may also be payable for many years. As
a result of its short-term character, there is no question of
accumulating a large amount of capital under unemployment
insurance against a prolonged secular rise in costs. It is a
matter rather of proceeding on what may be called a modified
assessment basis, under which an attempt is made to keep the
inflow of contributions roughly equal over a relatively brief
period to the outgo in the form of benefits.
It is implicit in the very nature of unemployment insurance,
however, that of all forms of social insurance it is the most
sensitive to economic fluctuations. As the level of production
and employment rises and falls, the revenues of a scheme
likewise rise and fall. This results both from changes in the
number of contributors and also (except under flat contribution schemes) from changes in the average amount contributed
per contributor. At the same time the expenditures of the
scheme fluctuate in exactly the opposite direction. As employment falls and the revenues of the scheme shrink, its outgo
may rise precipitately. Then as employment rises and revenues
increase, outgo falls and may indeed reach a very low point in
periods of high employment.
It would clearly be economically undesirable to reduce
contribution rates in good times and raise them in bad times.
Still more important, the concept of security requires that
unemployment benefit rates should be something upon which
the worker can count. They should not be reduced in bad
times and raised in good times. This need for stability in
both contribution and benefit rates suggests that the period
over which a balance is sought between income and outgo
under unemployment insurance should ordinarily be longer
than a single year. Theoretically, to the extent that there is
a cyclical pattern in economic activity, this period should approach the length of a typical cycle. Otherwise, regard should be
had for the probable position of the reserve fund for several
years ahead and not only for a single year.
It follows that contribution rates should, in principle,
be fixed at such a level at the start of a scheme that they permit
the gradual building up of a contingency reserve during the

METHODS OF FINANCING

205

first few years, in addition to covering current disbursements.
This reserve should be large enough to permit benefits to be
paid during a recession without the need to raise contribution
rates immediately. The size of the reserve required to accomplish this cannot be exactly specified, however, as it depends on
detailed features of each particular scheme including the length
of its qualifying period, the maximum duration of benefits,
benefit rates, etc. When the employment situation finally
improves again, with a consequent increase in contributions
and a decline in outgo, the reserve, depleted by the preceding
excess of benefits over contributions, should be replenished by
allowing contributions to exceed benefits for a considerable
period.
The above discussion obviously oversimplifies the rhythmic character of variations in unemployment, particularly in
the light of employment trends- during the last decade and a
half. This has been done deliberately, however, in order to
illustrate the purpose of an unemployment insurance reserve
fund and the manner in which it should function.
Economic Effects
The primary raison d'être of unemployment insurance is
to lighten the burden placed by unemployment on workers
and their families, and not to reduce unemployment itself.
Yet, to the extent that it functions as described above, unemployment insurance can play a part in achieving the latter
objective. By automatically paying out more benefits than
it receives in contributions during periods of declining employment, it should assist in supporting purchasing power and thus
in maintaining aggregate demand. In so doing it may help to
arrest a slump in employment and to initiate an upward trend
once again. Similarly, in periods when demand tends to outrun
the supply of available goods with inflationary consequences,
an excess of contributions over benefits under unemployment
insurance may play a part in restoring the desired equilibrium.
RATES OF CONTRIBUTION

Preceding sections of this chapter indicate the sources of
revenue and forms of contribution which may be utilised in
financing unemployment insurance. It is now useful to consider
14

206

UNEMPLOYMENT INSURANCE SCHEMES

some of the factors that influence the level at which such contributions need to be set. In general, they must be so fixed as
to secure a reasonable balance over a period of time between
income and outgo, having regard for maintenance of the contingency reserve referred to above. The question of contribution
rates involves in effect the subject of "cost", since the cost to
employers and employees of a contributory social insurance
scheme is reflected in the rates of contribution they are required
to pay.
Importance of the Question
The contribution rates required for financing unemployment insurance are naturally one of the chief factors governing
a decision on whether or not its introduction is feasible in a
particular country. It is true that the loss of income accompanying unemployment is a cost that already exists and that someone
in the country must bear, regardless of whether there is a scheme
of insurance. If there is no scheme, the entire burden falls
in effect on the individual worker and his family in the form of
reduced consumption of food, inadequate shelter, and generally
lowered living standards ; or, alternatively, upon relatives,
neighbours or friends. Unemployment insurance serves to
transfer part of this cost to contributors as a group and to all
members of society on whom the incidence of contributions
rests. But there are usually practical limits to the size of the
burden that can be transferred in this way. Unemployment
insurance is only one of a number of social programmes that
employees, employers and general taxpayers are asked to
support, either directly or indirectly.
While no specific limits can be set, it may be assumed that
unemployment insurance can be successfully applied in any
given country only if its cost over a period of time remains
within manageable bounds. A scheme under which outlays
stay continuously at such a level as to necessitate excessively
high contribution rates will sooner or later break down: If
the latter appears as a definite possibility when a scheme is being
planned it may prove the wisest social policy in the end to
delay the introduction of unemployment insurance until unemployment has been somewhat reduced through direct measures
of a remedial character.
No attempt is made in the present study to give detailed

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207

information on unemployment insurance costs. In any case,
the problems involved in calculating the probable cost of a
new scheme differ widely from one country to another, and
even from one year to the next in the same country. What
is presented here, rather, is simply a brief comment on some
of the variables that may influence costs under different schemes.
These comments in turn may suggest what a study of cost
elements in particular countries should cover, especially in
those that have not yet had any experience with unemployment
insurance.
In analysing the probable cost of unemployment insurance
in a given country, attention must be paid to a number of
different factors. These are inter-related and react to some
extent upon each other, and it is therefore somewhat artificial
to deal with each in isolation and abstractly. This is done
below, however, in order to indicate more clearly some of the
forces involved.
General Unemployment Rate
The general rate of unemployment and fluctuations in this
rate are naturally one of the principal determinants of unemployment benefit costs. This rate is usually measured by expressing the number of unemployed workers as a percentage of the
total labour force. It has come to be recognised that, even
under conditions of so-called full employment, up to from 3
to 5 per cent, of the labour force may be unemployed at any
given time because of frictional factors. As the percentage
of unemployed rises above this level, the outlays of an insurance
scheme in the form of benefits will tend to mount rapidly.
If all members of the labour force who are unemployed
at a given time were eligible for full benefits, the cost of unemployment insurance could be roughly determined from the
general rate of unemployment and the benefit rate. Let us
assume, for example, that one-tenth of the labour force is
unemployed and that each unemployed worker is paid a benefit
equal to half of his usual wage. In this case the total contribution rate required to finance these benefits might correspond
roughly to the quotient of 5 per cent. (10 per cent, x %) divided
by 90 per cent, (the employed workers in respect of whom
contributions are levied), or about 5 % P e r cent, of wages.
Similarly, if one-fifth of the labour force were unemployed

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UNEMPLOYMENT INSURANCE

SCHEMES

and received benefits equal uniformly to two-thirds of wages,
the resulting total contribution rate might be the quotient of
13 1 / 3 per cent. (20 per cent, x 2 / 3 ) divided by 80 per cent.
(employed workers), or about 16 2 / 3 per cent, of wages. These
basic equations, though highly artificial and ignoring numerous
complicating factors, nevertheless give some idea of the magnitudes of the contribution percentages that may be involved
under various circumstances.
The aggregate volume of unemployment in a country and
its fluctuations in time are a consequence of the structure and
functioning of the economy as a whole. Hence, the probable
cost of a new unemployment insurance scheme over a period
of years in the future is closely linked to probable future trends
in the behaviour of the general economy. If conditions are
such that there is a prospect of a rather high general rate of
unemployment for some years to come, the fact must be faced
that unemployment insurance costs will also be very
heavy unless excessively rigid qualifying conditions are
prescribed.
Qualifying

Employment

The analysis may now be carried a step further. Contrary
to the very broad assumption made above, by no means all
workers unemployed at any given time are ever eligible for
benefit under an unemployment insurance scheme. The disqualifying circumstances, some of which are mentioned below,
must be taken into account in any cost analysis.
As discussed in earlier chapters, unemployment insurance
schemes always lay down specific provisions governing eligibility for benefits. Many unemployed workers will be unable
to satisfy these, and hence their unemployment will not, so
to speak, represent a cost to the scheme.
In the first place, a scheme's cost is of course only affected
by the unemployment of " insured " or " covered " workers.
It has no liabilities in connection with workers engaged in
employment that is not covered by the scheme. Hence, the
observations above relative to the general rate of unemployment
concern in fact only the general level of unemployment among
" the insured population " rather than among all workers in
a country. If the probable future trend of unemployment
for this special population group differs considerably from that

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209

for the labour force as a whole, a special forecast or projection
must be made for the former.
Apart from the general coverage of an unemployment
insurance scheme, the most important requirement for the present discussion is that of the qualifying period. Many unemployed workers will have had some insured employment but not
enough of it to have fulfilled the qualifying period prior to losing
their job. They will therefore receive no benefit. The proportion
of workers for whom this unfortunate circumstance is true
will depend upon the nature of the period specified in the law
and the structure of employment in the country concerned.
If a fairly brief qualifying period is prescribed, and particularly if the law permits this to be served during a rather
long reference period, relatively few claimants may fail to
satisfy the requirement. If in contrast a longer period must
be served, and within a period of such recency that it is almost
equivalent to full-time employment throughout the specified
period prior to unemployment, a considerable number of job
terminations may not actually eventuate in the payment of
benefits.
The quantitative significance of the above will depend to
a great extent on the patterns of employment actually prevailing
in a given country. If there is a fairly high turnover of labour—
that is if many persons work in insured employment for a few
months, leave it and are replaced by previously non-insured
workers who in turn work for only a relatively short period—
a substantial proportion of unemployed persons may be unable
to establish their eligibility to benefit and will thus not occasion
any benefit outlay on the part of the scheme. If, however,
turnover in general is small and most workers tend to remain
in insured employment at least long enough to qualify for
benefit, little reduction in cost may result from this factor.
It may also be noted that if benefit amounts or the maximum
duration of benefit are scaled in relation to the cumulative
total of past employment, earnings or contributions, the factor
of turnover may affect costs in other ways as well. In any
case, a study of costs must take into account the probable
interaction of a scheme's benefit provisions and the probable
rate of turnover among the insured population.
Some, but probably not a very substantial proportion,
of otherwise qualified claimants may also fail to receive benefit

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UNEMPLOYMENT INSURANCE SCHEMES

by reason of their inability to comply with other provisions
dealing with eligibility for or disqualification from benefit.
Duration of Compensable Unemployment
An analysis of any group of unemployed workers, from the
standpoint of how long they have been unemployed, reveals
that at any given time there are wide differences in such duration. Some will have just lost their jobs ; some will have
been unemployed one week, two weeks or three weeks, etc. ;
and some will have been without work for a number of months.
The explanation of the particular distribution prevailing
at any given time is usually a manifold one. It will reflect
in part the personal characteristics of individual workers, and
in part the conditions existing in the occupations and industries
with which they have previously been connected. It will
also be influenced by the general rate of unemployment and
the state of the economy as a whole. If an economy is depressed
and the total volume of unemployment is large, workers have
less chance of finding a new job and will tend to remain
unemployed longer, on the average, than if the economy is
operating at a high level.
The frequency distribution of unemployed insured workers
according to duration of unemployment is an important variable
for unemployment insurance costs. The reason for this is
that workers who are unemployed for longer than a certain
period will exhaust their rights to benefit since, as has been
seen, a maximum time limit on receipt of benefits is nearly
always fixed under unemployment insurance laws and, when
this period is completed, the worker is no longer eligible for
benefit. Accordingly, at any given time a certain proportion
of unemployed workers who were previously receiving benefits
are no longer eligible to do so.
The quantitative importance of this factor in a particular
country will depend upon the maximum benefit duration its
law permits and upon the pattern of unemployment that exists
there. A maximum statutory duration of ten weeks, for instance, will make a larger proportion of the days of unemployment suffered by insured workers non-compensable than a
maximum of 20 weeks ; a limit of 20 weeks will do the same
in relation to one of 30 weeks ; etc. However, especially during
periods of relatively stable employment, as all unemployed

METHODS OF FINANCING

211

workers must first pass through the shorter-period brackets,
there tends normally to be a greater concentration of workers in
the one to four week brackets, for example, than in, say, the 21
to 24 week brackets. This means among other things that the
added cost of extending maximum duration in the shorterperiod brackets, e.g. from eight to 12 weeks, will be much greater
than that of extending it in the longer-period brackets, say
from 20 to 24 weeks.
Account must also be taken of the pattern of unemployment in the country concerned. Thus, two countries may
have the same maximum duration provisions and the same
general percentage of unemployment among their insured population. In one, however, the typical duration of unemployment may be relatively short, with the great majority of unemployed workers remaining without jobs for a briefer time than
the maximum duration. In this case a very high percentage
of all days of unemployment will be compensable. In the
other country, while the period of unemployment of some
workers may be very brief, that of many others may persist
beyond the maximum benefit duration. In this latter case,
therefore, a substantial part of the total days of unemployment
will not be compensable, and costs as a result may be much lower.
The purpose of these rather abstract illustrations is to
emphasise the need to take account of probable unemployment
patterns as well as maximum duration provisions in studying
potential unemployment insurance costs. As already mentioned, the distribution of unemployment by duration in one and
the same country will also change with time if there is any
substantial change in the general rate of unemployment accompanying basic shifts in the level of economic activity. It should
also be emphasised that the average length of the period during
which claimants receive benefit depends to no small extent
on the effectiveness of the employment service. If the latter
is inefficient or lax in finding jobs for claimants, many workers
will remain on the benefit roll for an unnecessarily long time.
Moreover, the average duration can also be much affected by
the interest that individual beneficiaries themselves take in
obtaining á new job. If many workers in a country are content
to remain idle as long as they can receive benefit, the average
duration of compensable unemployment will be abnormally
lengthened and benefit costs will be much higher as a result.

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UNEMPLOYMENT INSURANCE SCHEMES

It should be pointed out finally that days of unemployment
during the waiting period are not usually compensable. Cost
data must therefore be adjusted for this factor as well. The
number of days that are non-compensable for this reason will
be considerably larger if the law requires the waiting period
to be served for each separate spell of unemployment rather
than only once a year.
Benefit Rate
Apart from the factors determining the probable number
of man-days of unemployment that must be compensated,
there are others pertaining to the average rate of compensation.
Thus, the higher the proportion of lost wages restored in the
form of benefits, the higher will be the cost. Quantitative
analysis of the probable average benefit rate is often complicated,
however, by the existence of wage ceilings and of maximum
and minimum benefits. The effect of these is to produce ratios
between benefits and wages that are in many individual cases
considerably different from the normal ratio set forth in the
basic benefit formula.
It is also quite possible that the incidence of unemployment
in a particular country does not fall evenly on all wage groups.
It may happen, for example that lower-paid workers prove
more vulnerable to the risk of unemployment than other workers.
If such uneven incidence exists, the average actual benefit
rate will be considerably different from that which is suggested
by the average earnings of the insured population as a whole.
If benefits are varied in relation to the marital status of
recipients or the number of their dependants, some account
must also be taken of this in the cost analysis. Here again,
it is the family composition of workers most exposed to the
risk of unemployment rather than that of the insured population as a whole which is ultimately of most importance.
Underemployment
Special mention must be made of the significance of the
phenomenon of underemployment for unemployment insurance
costs, because of its prevalence in some of the countries that do
not yet have unemployment insurance laws. The extent to
which underemployed, as distinguished from non-employed,
workers become eligible for benefits under any scheme will

METHODS OF FINANCING

213

depend upon various detailed provisions. These include
provisions dealing with liability to contribution, qualifying
period, seasonal workers, disqualifying outside earnings, payment
of benefits at partial rates, etc.
If the provisions of a scheme are such as to permit parttime workers to qualify for benefits in considerable numbers,
the problem of analysing potential costs will be greatly complicated. It will be very difficult, for example, to determine the
extent to which such workers will just be able to cross the
border line of eligibility and the increase in benefit rolls that
will result. Because of the nature of their past employment
the majority of underemployed workers will perhaps tend to
draw benefit for the full duration permitted by law once they
have qualified. Application of the ordinary test, i.e. the offer
of work, would meet with considerable difficulty in their
case.
There are grounds for concluding, therefore, that adoption
of provisions enabling underemployed workers to qualify for
benefit in countries where underemployment is prevalent
would lead to more than usual uncertainty in the probable
costs of a scheme. Moreover, such action might cause costs
to rise to a very high level.
Sources of Data
A number of the existing compulsory unemployment
insurance schemes, as has been seen in Chapter I, were preceded
by trade union or other voluntary plans in the countries concerned. This was the case, for example in Belgium, the Netherlands, Norway, and the United Kingdom. A considerable
amount of experience was accumulated under these voluntary
plans in respect of the relative frequency of benefit claims,
operation of eligibility provisions, duration of compensable
unemployment, etc. This experience was often heavily drawn
upon in preparing the initial cost estimates for compulsory
schemes. Once operations under the latter had begun, however,
these estimates had to be revised on the basis of actual
experience.
Few of the nations that may give consideration to the
introduction of new unemployment insurance schemes in the
future will have any such experience with voluntary insurance
to draw upon. In studying the problem of cost, therefore,

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UNEMPLOYMENT INSURANCE SCHEMES

they will have to rely either on data derived from the experience
of other countries or on statistics obtained in their own countries.
A considerable amount of statistical data have become
available from operations under existing schemes. These show
in some detail the number of claims received in relation to the
total population at risk, the frequency distribution of beneficiaries according to duration of unemployment, the differences
in the incidence of unemployment among various population
groups, etc. Analysis of these data may suggest an approach
to the study of unemployment insurance costs in another
country. It is very doubtful, however, whether much direct
use can be made of them in such a study. Apart from the
intimate relation between specific types of benefit provisions
and cost data, patterns of employment and unemployment
differ so widely from country to country that the experience
of one can throw relatively little light on probable developments
in another.
The above difficulty results in considerable part from the
fact that unemployment is essentially an economic rather
than a physical risk. The incidence of the latter type of risks
(e.g. sickness, old age, death) may exhibit considerable similarity from one country to another, particularly in countries
with generally comparable climatic or economic characteristics.
The risk of unemployment in contrast is a resultant of complex
economic, industrial, financial, social and political forces that
cannot be assumed to be the same in different countries. Hence
its incidence may differ widely from country to country.
It follows that, apart from obtaining suggestions as to
technique or approach, a country wishing to study the cost
of introducing a new unemployment insurance scheme must
rely largely on statistics pertaining to its own economy. Among
the sources of data that may be useful in this connection are
censuses of population, industry and employment ; regular
statistical reports from employers on employment and payrolls ;
manpower surveys ; employment service operations, including
numbers of applicants for work, requests for workers, submissions
to vacancies, etc. ; and operations of other social insurance
schemes in the country, if such exist, particularly as regards the
probable number and earnings of insured workers. If fairly
extensive data from such sources are available in a country,
they may provide a sufficient basis for studying probable costs

METHODS OF FINANCING

215

of unemployment insurance. If only limited data of this type
are available, it may be virtually impossible to foresee within
any reasonable margin of error what the probable cost of an
unemployment insurance scheme will be.
In the absence of sufficient data to permit even a rough
approximation of the general limits within which unemployment insurance costs may fall, it becomes very hazardous to
set up such a scheme. This is particularly true for an industrially underdeveloped country, where necessary data for studying costs are likely to be scanty at best. A country with a
somewhat unstable economy, a generally low level of income,
a job market that is not highly organised, and much underemployment, is certain to face rather high costs if it adopts
unemployment insurance. If, in addition, the data needed to
forecast the probable magnitude of such costs are inadequate,
the financial risk of adopting such a measure is intensified.
At best, a start may be made in such a case only by use of quite
cautious provisions regarding scope, eligibility for benefit,
waiting period, maximum duration of benefits, benefit rates, etc.
Existing Contribution Rates
Rates of contribution under existing unemployment insurance schemes are summarised in table VIII. The percentages
shown are in some cases approximate only, representing ranges
or effective averages when wage classes or differential rates
are applied. They also take no account of wage ceilings and
various other special provisions. Nevertheless, the table gives
some indication of the current cost of unemployment insurance
to the parties contributing in different countries. It should be
borne in mind, in interpreting these rates, that a fairly high
level of employment has prevailed in most of the countries
concerned during the past few years.
A summary of aggregate contributions received and costs
incurred under existing unemployment benefit schemes is
presented in table IX. The data in this table have been mainly
derived from a special I.L.O. study of the cost of all forms
of social security. The figures relate to the calendar year
1951 or to the national financial year that ended in 1951. As
a result, they are not necessarily comparable with the contribution rates shown in table VIII, nor with other information
concerning the provisions of existing schemes presented through-

216

UNEMPLOYMENT INSURANCE

TABLE V I I I .

CONTRIBUTION

SCHEMES

RATES FOR

UNEMPLOYMENT

INSURANCE, 1955
(percentages of insured wages, unless otherwise indicated)
Country

Employer

Employee

Public
authorities

Australia
1.5
1.5
Austria
2.0
(minimum)
1.0
1.0
Belgium
0.4 to 0.5
1.3
8
1.0 to 1.3 1.0 to
Canada
2.7
0.2
2.0 4
50 to 67% of benefits
Denmark s
Whole cost
Finland
1.5
1.5
France
1.0
2.0
i
Federal Republic of Germany.
Deficit
2.0
Greece
0.8
0.8
0.8
Ireland
cost
Whole
Italy
1.1 to 5.6 1.1 to 5.6
1.2
i
i
Japan
0.5 to 1.3 0.5 to 1.3 0.3 to 0.6, plus deficit
Luxembourg
40 to 75% of benefits
4
Netherlands 5
4
Percentage of benefits
New Zealand
0.6 to 1.5 0.6 to 1.0 0.3 to 0.6
i
Norway 2
0.0 to 4.0«
Sweden
. i
Switzerland
Union
of South Africa *. . .
1
SingleKingdom
joint contribution for several social security branches. a Wage classes used ; figures shown
United
represent
approximate range. ' Averages for all funds ; rates for employees vary among funds from
0.2United
to 4.0 per
cent. * Vary by industry. ' Vary by industry ; average is 2.6 per cent, each
States
for employers and employees. • Varies among individual employers ; national average 1.2 per
Yugoslavia
cent,
in 1954.
out this study, which relates mainly to 1955. Thus, for example
table I X takes no account of the new schemes which came into
force in t h e Netherlands and Yugoslavia in 1952.
The table shows contribution receipts under the unemploym e n t benefit schemes now in force, classified according to their
derivation from employers, employees, and public authorities.
I t also shows the total of cash benefits paid out in each country.
To provide a basis for detailed analysis, the cost figures shown
need of course to be correlated with population, labour force,
earnings, and similar data for each country. They also have
to be interpreted in the light of the particular coverage, contribution, and benefit provisions applying under each scheme. They
are nevertheless presented here to convey a general impression
of t h e magnitude of the sums involved in unemployment insur-

217

METHODS OF FINANCING

ance in different countries, and also as a source of data for
further studies.
TABLE I X .

CONTRIBUTIONS AND

U N D E R UNEMPLOYMENT INSURANCE

(in millions

of units of national

Country and currency unit

BENEFITS

(FISCAL YEAR

1951)

currency)

Contribu- Contributions from tions from Public
employers employees subsidies •

Benefits

Australia (£)
0.06
255
256
108
Austria (Schilling)
492
721
721
3,194
Belgium (Franc)
4,365
64
64
37
Canada ($)
90
11
80
125
Denmark (Krone)
178
21
6
Finland (Markka)
4
3,185
France (Franc)
3,185
•507
578
514
Federal Republic of Germany
26,486
31,612
(Mark)
0.8
0.5
0.8
0.8
Greece (Drachma)
3,595
19,541
14,676
Ireland (£)
13,378
8,580
4,556
8,580
Italy (Lira)
1.2
1.3
a
J a p a n (Yen)
3
.
s
a
Luxembourg (Franc)
. . . .
0.005
Netherlands ( G u i l d e r ) . . . .
20
20
15
10
31
14
8
New Zealand (£)
21
2
13
6
Norway (Krone)
2
0.6
2
2
Sweden (Krona)
2
2
15
_ 2
Switzerland (Franc)
1,585
14
873
Union of South Africa (£). .
8
United Kingdom ( £ ) . . . .
United States ($)
Yugoslavia
(Dinar)Social Security Association, The Cost of Social Security, 1949-51.
Source
: International

International inquiry prepared by the International Labour Office (Geneva, 1955).
1
Represent state subsidies except for following subsidies by other public authorities :
Denmark, 19 million ; France, 231 million ; Luxembourg, 0.3 million ; Norway, 10 million ;
and Switzerland 3 million. • Not available separately for unemployment insurance
alone. ' New scheme not yet in force in 1951.

CHAPTER VIII
ADMINISTRATIVE ORGANISATION AND PROCESSES
The effectiveness of an unemployment insurance scheme
depends not only on the soundness of its statutory provisions,
but on the efficiency with which these are applied. A number
of processes are involved in the administration of unemployment insurance. If a scheme is a new one, machinery for
performing these processes must be carefully planned and
organised in advance of the time when the benefit provisions
come into force. A trained staff is also needed to man this
machinery properly.
The present chapter is in no sense intended as a manual
on administration of unemployment insurance. Such a document among other things would require far more space than is
available. Instead, it attempts to describe in fairly general
terms the principal functions involved in unemployment insurance administration. While procedures differing from those
outlined may sometimes prove just as effective, those set forth
below will at least provide suggestions for the formulation of
more detailed plans. Considerable experience has been acquired
in the administration of existing plans, and there is much
similarity in the way in which they are administered. The
discussion that follows draws heavily on this experience.
Brief attention is first given to several general questions
connected with the nature of the agency made responsible
for administration and various individual processes involved in
administration are then discussed.
ADMINISTRATIVE AGENCY

The administration of unemployment insurance is a specialised task that differs considerably from other forms of public
administration. For this reason the type of agency to which
such administration is entrusted is an important matter.
Various choices may be made in this connection.

ADMINISTRATIVE ORGANISATION AND PROCESSES

219

State or Autonomous Agency
A first major choice is whether or not administration
should be retained wholly in the hands of the State by lodging
it with an exclusively state agency. The alternative is to
delegate it to a semi-autonomous body, such as an association of the workers insured or of employers, or a joint association. No definitive universally applicable answer can be
given to this question. The situation will vary in different
countries depending upon their past customs, political and
social structure, whether a State or other body potentially
capable of administering a scheme like unemployment insurance already exists, and other circumstances.
Guiding Considerations.
Among considerations which may lead some countries to
entrust administration entirely or mainly to a state agency are
a belief that provision of protection against unemployment is
essentially a governmental function ; a feeling that the State
itself is in any case finally responsible for success of the scheme ;
a belief that a state agency can administer the scheme better
than any other type of agency ; and precedents in the country
concerned for state administration of other social security
measures or related social programmes.
Contrasting considerations that have led other countries
to assign a principal role to some kind of at least partially
self-governing institution include a belief that if participants
in a scheme (insured persons, employers or both) share in its
management, their interests will be better protected, the
scheme will be nearer to them, they will co-operate with it
more willingly, and efficiency will be greater than with state
administration. Moreover, in at least some countries there
has been a long tradition of administration of social programmes
by non-state bodies and there may even have been facilities
(membership records, premises, contribution-collecting and
benefit-paying machinery, etc.) already in existence which
could be utilised for unemployment insurance as well.
Present Practice.
A summary of agencies administering unemployment insurance under existing schemes is presented in table X. An
examination of this table reveals much variation in the nature

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UNEMPLOYMENT INSURANCE

SCHEMES

of the central administrative authority of each scheme and
in the relation of this authority to the State. This variation
tends to confirm that different arrangements are appropriate
in different countries.
TABLE X . AGENCIES ADMINISTERING

UNEMPLOYMENT

INSURANCE, 1955
Australia :
Commonwealth Department of Social Services : national authority, also administering other social security branches.
State headquarters and regional ornees of Department : decide
and pay claims.
District employment ornees and local agents : receive claims.
Austria :
Federal Ministry of Social Affairs : national authority.
Provincial employment offices : supervise unemployment insurance and employment services in provinces, under managing
board with worker and employer representatives.
Local employment offices : administer unemployment insurance
and employment services in locality, under managing committees with worker and employer representatives.
Communes : perform same functions at request of provincial office.
Sickness insurance funds : collect unemployment contributions
with sickness insurance contributions.
Belgium :
National Placement and Unemployment Office : national authority, under Ministry of Labour and Social Welfare and managed
by tripartite board.
Regional offices of National Office : supervise paying bodies, decide
claims, and operate employment exchanges.
Official paying bodies : receive and pay claims.
Employee organisations : may act as paying bodies for members
after approval.
National Social Security Office : public body in Ministry of Labour
and Social Welfare, managed by tripartite board ; collects unemployment contributions with other social security contributions.
Canada :
Unemployment Insurance Commission : national authority, also
administering employment service ; tripartite membership.
Regional offices : supervise local offices and decide claims ; advised
by tripartite committees.
Local employment offices : receive and verify claims, pay benefits,
and operate employment exchanges; advised by tripartite
committees.
Denmark :
Trade union unemployment funds : administer unemployment
insurance for individual occupations, after approval by and
under supervision of Ministry of Labour and Social Affairs.
Local branches of funds : receive and pay claims under supervision of employment exchanges.

ADMINISTRATIVE ORGANISATION AND PROCESSES
TABLE X .

AGENCIES ADMINISTERING
INSURANCE

221

UNEMPLOYMENT

(coni.)

Finland :
Trade union unemployment funds : administer unemployment
insurance for individual occupations, after approval by and
under supervision of Ministry of Social Affairs.
Local branches of funds : receive and pay claims.
France :
Ministry of Labour and Social Security : national authority.
Departmental employment offices : supervise employment exchanges
and decide claims.
Employment exchanges : receive and investigate claims.
Communes : pay allowances, and receive claims in localities having no employment exchange.
Federal Republic of Germany :
Federal Placement and Unemployment Insurance Institution :
national authority, also administering employment service ;
managed by tripartite governing body and executive board,
under supervision of Ministry of Labour.
Regional employment offices : supervise local offices, managed by
tripartite committees.
Local employment offices : administer unemployment insurance
and employment services in locality under tripartite managing
committees.
Greece :
Placement and Unemployment Insurance Institution : national
authority, also administering employment service ; directed
by tripartite governing body.
Local employment exchanges : receive and pay claims.
Ireland :
Department of Social Welfare : national authority, also administering other social security branches and employment service.
Local employment exchanges : receive and pay claims.
Italy :
National Social Insurance Institute : national authority, also administering pension insurance ; managed by tripartite governing body and executive committee, under supervision of
Ministry of Labour and Social Welfare.
Provincial offices of Institute : receive and pay some claims, decide
claims, maintain records, and supervise communal operations.
Placement offices : receive claims, verify unemployment, and pay
benefits in communes where no office of Institute exists.
Japan :
Ministry of Labour : national authority ; advised by representative committee.
Prefectural labour or economics departments : supervise local offices.
Local employment security offices : receive and pay claims and
operate employment exchanges.
15

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UNEMPLOYMENT INSURANCE
TABLE X .

AGENCIES ADMINISTERING
INSURANCE

SCHEMES
UNEMPLOYMENT

(coni.)

Luxembourg :
National Labour Office : national authority.
Local employment offices : receive and pay claims and operate
employment exchanges.
Netherlands :
General Unemployment Fund : national authority with tripartite
governing body supervising industrial associations under direction of Ministry of Social Affairs.
Industrial associations : approved joint employer-employee bodies
with compulsory industry membership administering unemployment insurance, sickness insurance and family allowances
in 26 different industries ; bipartite governing bodies.
District and local offices of industrial associations : receive and pay
claims.
New Zealand :
Social Security Department : national authority administering all
monetary social security benefits.
Social security registrars and district agents : receive, investigate,
decide and pay claims for unemployment and various other
social security benefits.
Norway :
Directorate of Labour : national authority, also administering
employment service, under supervision of Ministry of Labour
and Local Government, with tripartite governing body.
County employment committees : supervise communal committees ;
tripartite membership.
Communal employment committees : tripartite bodies deciding
claims and supervising communal funds.
Communal insurance funds : collect contributions, process claims,
and pay benefits ; also administer sickness insurance.
Sweden :
Trade union unemployment funds : administer unemployment
insurance for individual occupations, after approval by and
under supervision of Royal Employment Board.
Local branches of funds : receive and pay claims.
Switzerland :
Federal Office of Industry, Arts and Crafts, and Labour : approves
and supervises unemployment funds, in collaboration with
cantons.
Cantonal and communal unemployment funds : public funds
administering unemployment insurance in canton or commune.
Trade union unemployment funds : private funds established by
trade unions administering unemployment insurance for
occupations.
Joint funds : private funds established jointly by employers and
employees administering unemployment insurance for industries.

ADMINISTRATIVE ORGANISATION AND PROCESSES
TABLE X .

AGENCIES ADMINISTERING
INSURANCE

223

UNEMPLOYMENT

(conci.)

Union of South Africa :
Department of Labour : national authority ; tripartite unemployment insurance board performs advisory and appeals functions.
Local claims offices : receive, investigate, and decide claims ; tripartite local unemployment benefit committees perform
advisory and appeals functions.
United Kingdom :
Ministry of Labour and National Service : administers unemployment benefits and also employment service.
Ministry of Pensions and National Insurance : collects contributions and maintains records for unemployment insurance and
other social security branches.
Regional offices : supervise local offices.
Local employment exchanges : receive, decide and pay claims ;
tripartite local advisory committees.
United States :
Secretary of Labor : approves state unemployment insurance laws.
State employment security agencies : commissions or departments
of state governments administering state unemployment insurance schemes and also employment service ; commissions
commonly tripartite, and states have tripartite advisory
councils.
Local offices of state agencies : receive and pay claims and operate employment exchanges.
Yugoslavia :
Federal Government Board for Public Health and Social Policy :
national authority, also directing employment service.
Employment offices of Federated Republics : supervise local
offices, directed by managing committees with government and
trade union representation.
Local employment offices : receive, decide and pay claims and
operate employment exchanges ; directed by managing committees with trade union and peoples' committee's representatives.
It will be noted from table X that in some countries the
State itself, or some other governmental unit, administers
unemployment insurance directly and exclusively, though tripartite advisory or appellate bodies may also be used. Such
exclusively governmental administration is found in Canada,
Ireland, Japan, the Union of South Africa, the United Kingdom
and the United States ; and also in four countries with noninsurance schemes—Australia, France, Luxembourg, and New

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UNEMPLOYMENT INSURANCE

SCHEMES

Zealand. In a second group of countries administration is
also to a considerable extent under the control of the State but
wide authority is nevertheless delegated to tripartite or bipartite governing boards which contain representatives of insured
persons, employers, or both. This appears to be the case in
Austria, Belgium, the Federal Republic of Germany, Greece,
Italy, Norway, and Yugoslavia. A third group of countries
consists of those in which administration is largely in the hands
of self-governing institutions, albeit subject to substantial supervision by the State. This group includes the Netherlands,
Switzerland, and the three countries applying subsidised voluntary insurance—Denmark, Finland and Sweden.
While universally valid conclusions concerning the relative superiority of administration by a state or a semi-autonomous agency are clearly impossible, certain tentative observations may be made. If unemployment insurance is introduced
in a country where no relevant autonomous organisation yet
exists and where there is little tradition of such organisations,
its administration should probably be entrusted to a state
agency rather than to a new autonomous organisation created
more or less specially for the purpose. Secondly, there is
some basis for believing that unemployment insurance is on
the whole less well adapted to administration by semi-autonomous agencies than certain other forms of social security.
Thirdly, if administration is delegated to a self-governing
agency, the State should nevertheless retain authority to supervise administration in considerable detail. Finally, if a scheme
is wholly state administered, provision should always be made
for setting up advisory bodies that include representatives of
insured persons and employers, and for giving much weight
to the views of such bodies.
Joint Agency
The administration of unemployment insurance has much
in common with the administration of at least two other types
of programme. For this reason, it is often desirable to provide
for its joint administration by an agency that also administers
one or other of these programmes. The two types of programmes concerned are other social security schemes and the
employment service.

ADMINISTRATIVE ORGANISATION AND PROCESSES

Other Branches

of Social

225

Insurance.

Some of the activities involved in the administration of
unemployment insurance are the same as, or very similar to,
those required for administering other forms of social insurance. 1 This is especially true of the processes of registration,
collection of contributions, and record keeping. There are
also some common features in the handling of claims, particularly in the case of other schemes t h a t deal with current
" short-term " risks, e.g. sickness insurance.
The added administrative burden of applying unemployment insurance m a y therefore be lightened somewhat if responsibility for its administration is placed in the hands of an
agency already administering another form of social insurance.
Such joint administration permits a single contribution to be
collected and a single record maintained for each worker, even
though two or more programmes may be involved. One local
office m a y also be able to handle claims for both programmes.
A certain number of existing schemes, as m a y be seen from
table X, are administered jointly with other branches of social
insurance. Thus Austria, Ireland, and New Zealand have
amalgamated the administration of unemployment benefits
with t h a t of all other types of social security benefit. Italy
has merged it with the administration of old-age, invalidity,
survivors' and tuberculosis insurance. The Netherlands has
merged it with the administration of sickness insurance and
family allowances, and Norway and three states in the United
States (California, Rhode Island, and New Jersey) with t h a t
of sickness insurance. Austria, Belgium, the United Kingdom
and Yugoslavia provide for joint collection of unemployment
and other social insurance contributions, b u t have n o t unified
administration of benefits in the same way.
Employment

Service.

There is also an intimate functional relationship between
finding an unemployed worker a new job and paying him an
unemployment benefit. Because of this and of the need for
verifying the involuntary unemployment of a worker each
time t h a t he is paid benefit there are also strong reasons for
entrusting the administration of unemployment insurance to
1

See I.L.O. : Administrative Practice of Social Insurance, Studies
and Reports, New Series, No. 40 (Geneva, 1955).

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UNEMPLOYMENT INSURANCE SCHEMES

the same agency that operates the employment service. Such
joint administration makes it possible to carry out placement,
claims-taking, and benefit-paying activities for a given worker
in a single place ; integrate to the fullest the procedures involved
in performing these functions ; apply unemployment insurance provisions concerning availability for work, inability to
find work, seeking work, etc., in the most effective way ; and
offer a genuine stimulus to workers to use the employment
exchange in looking for a new job.
A close working relationship should, in any case, always be
maintained between the unemployment insurance and placement agencies. This is most effectively accomplished when
both programmes are actually administered by the same
agency.
A number of countries have merged the administration
of unemployment benefits with that of the employment service, as may be seen from table X. This is particularly true
at the local level where claims are often received and paid by
employment exchanges. Among countries where this is the
case are Austria, Canada, France, the Federal Republic of
Germany, Greece, Ireland, Japan, Luxembourg, the United
Kingdom, the United States and Yugoslavia. In most other
countries unemployment beneficiaries are required to register
with an employment exchange, but administration of claims
and benefits is usually handled by a different office.
In some cases it may be necessary to choose between the
advantages of linking the administration of unemployment
insurance with that of other social insurance branches, and
those of linking it with administration of the employment
service. A final decision on this point may sometimes be
difficult and will have to be based on careful weighing of all
factors involved in the particular country concerned.
Decentralisation
Another choice to be made regarding the nature of the
administering agency concerns the extent to which it is to be
centralised or decentralised. Experience suggests, however,
that there is less room for discretion in this matter under
unemployment insurance than under numerous other programmes. The necessity of having unemployed workers report
in person to file their claims, to register, and perhaps to receive

ADMINISTRATIVE ORGANISATION AND PROCESSES

227

their benefits, makes it virtually essential for a substantial
part of the administration to be performed in local offices.
There must also be enough of these for an office to be within
relatively easy reach of the great majority of workers. A
considerable degree of decentralisation is thus almost unavoidable.
It is clearly desirable, on the other hand, that the general
policies and routine operations should be uniform throughout
a country. To achieve such uniformity and provide general
over-all supervision a central office of some size is also required.
There is more leeway in the choice of the role to be assigned
to intermediate regional offices in the administrative structure.
Such offices may or may not be called upon to share with local
offices various responsibilities in connection with the processing and adjudication of claims. Similarly, they can be made
to play a principal role in the maintenance of contribution
and other records ; if not, these records may have to be handled
mainly by the central office.
It is apparent from table X that nearly all existing unemployment insurance agencies are substantially decentralised.
As in the case of other questions, past practice in a country
as well as its special circumstances must be considered before
a final decision is taken on the degree of decentralisation.
There may be cases, however, where an extensive network of
regional and local offices will have to be set up for a new unemployment insurance scheme in a country where the traditional
organisation of other public services takes quite a different
form.
The basic operations that an administrative agency must
ordinarily perform in administering unemployment insurance
are usefully classified under five main headings. These are
collection of contributions, record keeping, receiving of claims,
adjudication of claims, and payment of benefits. Each of
these is discussed below.
COLLECTION OF CONTRIBUTIONS

Unemployment insurance is usually financed in part at
least, as discussed in Chapter VII, by special insurance contributions paid for the purpose by employers or employees or
both. These contributions are preferably payable in rela-

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UNEMPLOYMENT INSURANCE SCHEMES

tively small amounts at frequent intervals, rather t h a n in large
amounts a t quite infrequent intervals. As a result, collecting
them is one of the principal tasks of unemployment insurance
administration.
Procedures for collecting unemployment insurance contributions, however, differ little from those used in other forms
of social insurance. Since there is already a considerable body
of general social security literature dealing with these procedures, they are treated only briefly here. 1
Registration
An essential first step in collecting unemployment contributions is the registration of both employers and employees.
The registration of employers involves the systematic
enrolment of all undertakings t h a t have a s t a t u t o r y obligation
to pay unemployment contributions in respect of their employees. Once arrangements for registration have been made
and the d u t y to register has been publicly announced, most
employers will probably register a t the designated local office in
their district on their own initiative. An inspection programme
and systematic checking of available lists of business firms in
each industry should also be carried out, however, to discover
undertakings t h a t fail to register. Such failure should be made
subject, after a certain delay, to monetary penalties.
The forms filled out by employers while registering should
elicit pertinent information concerning the undertaking, which
will be useful later, such as : address, industry, legal form of
undertaking, number of employees, and where its payroll
records are kept. Each employer should be assigned an individual registration number for future use on all unemployment
insurance documents and records pertaining to him.
Employees in turn should also be registered a t the time
of their first entry into employment covered by unemployment
insurance. To enforce this, employers should be forbidden to
hire any worker in insurable employment unless he produces
1
For recent studies dealing with collection of social security
contributions, see Administrative Practice of Social Insurance, op. cit.,
Chs. I to III ; International Social Security Association : Proceedings,
Reports and National Monographs, Resolutions and Conclusions, Ninth
General Meeting of the I.S.S.A. (Geneva, General Secretariat, I.L.O.,
1950), pp. 319-436; and Inter-American Conference on Social Security:
Métodos de percepción de las cotizaciones del seguro social en las Americas
(Geneva, 1952).

ADMINISTRATIVE ORGANISATION AND PROCESSES

229

evidence that he has registered. Such evidence may consist
of an insurance card or stamp book issued to each employee
upon registration. Workers should be permitted to register
either by going personally to the local insurance office, or
through their first employer, who will provide them with
registration forms and then return them to the local office
after they have been filled in. If, however, a scheme is being
administered by voluntary self-governing funds without a
contribution from employers, employees will register by the
act of joining the fund or perhaps the trade union that has
established the fund.
Certain basic data should be secured from each employee
at the time of his registration, and these should be made a
part of his permanent file. They will include his full name,
address, sex, date of birth, occupation, marital status, dependants, etc. Each employee should also be assigned an insurance number when he registers, for the purpose of future
identification and for use on all unemployment insurance
documents and files applying to him. These numbers may be
coded in such a way that each worker's number conveys
significant information concerning, for example, his age, date
of entry into insurance, occupation, residence, etc.
Payment of Contributions
The basic law or administrative regulations will presumably fix the rates of unemployment contributions, the exact
base to which these rates are to be applied, and the frequency
of payment. Contributions from employees should ordinarily be collected through the employer, the latter in effect serving as intermediary for the administrative agency for this
purpose. Such contributions should actually be paid by
requiring employers to withhold from each wage payment an
amount equal to the contribution liability of the employee in
respect of the pay-period concerned. If the employer fails to
make the appropriate deduction in any pay-period, he himself
should then become legally liable for payment of the contribution. The legal status of employees' contributions withheld
prior to their transmission to the administrative agency should
be that of moneys held in trust for the employee.
At periodical intervals fixed by law or regulation, the
employer should be required to add his own unemployment

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UNEMPLOYMENT INSURANCE SCHEMES

insurance contributions for all his insured employees to those
he has withheld from his employees' wages, and to transmit
the total to the collecting authority. Such transmission may
be accomplished through one of two main methods, commonly
referred to as the payroll-reporting system and the stamp
system.
Payroll-Reporting

System.

Under the payroll-reporting system the employer mails
to a designated collection office a cheque or other means of
payment covering the total contributions due from himself
and his employees for the period concerned. This need not
ordinarily be done more frequently than once a month. It is
unwise to allow the unpaid liability of employers to accumulate for more than about three months, however, except in
specially exempted cases where a longer period appears practical.
To accompany the contributions thus transmitted, the
employer should also be required to submit a list of the names
and insurance numbers of all employees covered by the return.
Depending upon whether the qualifying period of the scheme is

expressed in terms of contributions, employment, or wages,
the report should also indicate for each listed employee the
unemployment contributions paid in respect of him, the number of days he has worked, or the wages paid to him during the
period covered. The information thus submitted with the
contribution payment provides some of the data needed later
to determine whether or not workers are eligible for unemployment benefit.
Stamp System.
If a stamp system is used, the employer transmits the
employees' contributions he has withheld and his own contribution to the collecting agency by indirect means only. This
is done by purchasing and paying for special insurance stamps
that correspond in denomination to the combined contributions
of the employer and the employee due in respect of each worker.
Arrangements may be made for selling such stamps at either
post offices or local insurance offices. Employers should be
required to affix the stamps so purchased in specified places in
the stamp book of each employee (such books being in the

ADMINISTRATIVE ORGANISATION AND PROCESSES

231

custody of the employer for the duration of a worker's employment) within a very brief time after payment of the wages to
which the stamps relate. They may also be required to cancel
the stamps they affix, if this is considered necessary to avoid
abuse.
Stamp books should contain spaces covering a period of
not longer than six months to one year. When this period has
elapsed, employers should be asked to return all stamp books
in their custody to the administrative agency, which will
issue new books to replace them. The stamp books returned
in this way, like the payroll reports mentioned above, furnish
part of the information needed by the administrative agency
to determine whether individual workers are qualified for
unemployment benefit.
The above discussion of the payroll-reporting and stamp
systems indicates only their broad outlines and omits numerous
details of their application. A description of such details is
available in other studies, as are analyses of the relative advantages of the two approaches. 1 It need only be observed here
that the payroll-reporting system is somewhat more readily
applied when contributions are expressed as a percentage of
wages ; and the stamp system when contributions are either
uniform or fixed for only a few simple wage classes. Both
systems are being used for unemployment insurance in different
countries at the present time. For example Canada, Ireland,
the United Kingdom, and to some extent Italy, use the
stamp system, while Austria, Belgium, Greece, the Federal
Republic of Germany, Italy, Japan, the Netherlands, Norway,
the Union of South Africa, and the United States each use
some form of payroll reporting.
Other Steps.
Regardless of which system is used, the administrative
agency must set up inspection and auditing services to ensure
that all employers subject to the law are paying unemployment
contributions, that these contributions are being paid in respect
of all insured employees, and that the correct amounts are
being paid. If employees are periodically supplied with receipts
for or statements of their contributions, or if they are occasionally allowed to inspect the stamp books held for them by
1

See footnote p. 228.

232

UNEMPLOYMENT INSURANCE SCHEMES

their employer, an element of automatic inspection can be
introduced into the collection process. It should also be noted
that the collection procedures outlined above may either be
performed for unemployment insurance alone, or they may be
performed jointly for one or more other forms of social insurance at the same time.
Under schemes where insurance is administered through
voluntary organisations, the worker himself will normally pay
his contribution directly to the fund of which he is a member.
If it is so desired, however, collective agreements might include
a provision that employers should withhold their employees'
contributions and transmit them to the fund concerned.
RECORD KEEPING

Another essential element in the administration of unemployment insurance is the maintenance of a substantial volume
of records. Since thousands or even millions of persons may
be covered by the scheme, the keeping of these records is inevitably a major operation.
The record-keeping system must therefore be carefully
planned, efficient procedures must be developed, and the latter
must be so organised as to lend themselves to routine application by a relatively unskilled staff. The time factor is also of
importance, for the records must be kept continuously up to
date despite a more or less steady inflow of new data to be
entered. Moreover, it must be possible to secure information
from the records very quickly, in order not to delay or hinder
the performance of other administrative operations.
Records of Employers
Several types of data derived from various administrative
processes must be systematically tabulated for future reference.
The first type that may be mentioned is the information provided
by employers when they register for unemployment insurance.
A complete set of records should be established covering all
employers subject to the law. These should include a file or
card for each individual employing unit. On this file should
first be summarised the data supplied by the employer when
he registers.

ADMINISTRATIVE ORGANISATION AND PROCESSES

233

These files should be set up immediately for all employers
who register at the outset of a new scheme. To them must be
added more or less continuously thereafter a similar file for
each newly established business firm. Procedures must also
be adopted for adjusting the files when employers go out of
business or change the name or status of their firm.
Another type of data regarding employers is that drawn
from their periodic contribution returns, whether the latter
are in the form of payroll reports or stamp books. These
returns will at least contain information on total contributions paid in by the employer, including his own contributions
and those he has withheld from his employees' wages, and the
number of his employees covered by insurance. This information should be systematically entered on an individual record
for each employer, either by transferring the data to a new
form or by filing the original contribution return. This record
of the contributions and employment of each employer should
be integrated if possible with the file established from the
original registration data.
The records of employers with their contribution entries
provide a basis for maintaining a continuous control on whether
or not employers are complying with the contribution provisions
of the law. If there is no entry for a particular employer for
a certain contribution period, it may be caused either by noncompliance with the law or by the fact that the undertaking
did not actually employ any insurable workers during the
period. In any case, some kind of check by mail or through
the visit of an inspector may be required. Similarly, if there
is a sudden and unexplained sharp drop in the number of employees for whom an employer submits a payroll report or
stamp books, it may call for further investigation.
Records of Employees
It is also nearly always essential for an unemployment
insurance scheme to maintain an individual record for every
worker who comes under the scheme. The rights of workers
to benefit when unemployed usually depend in part on their
past coverage, contributions, employment or benefits. The
purpose of the individual files of employees is to record this
experience as it.occurs, so that when a claim for benefit is made,

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UNEMPLOYMENT INSURANCE SCHEMES

up-to-date information can be easily and quickly obtained by
consulting the appropriate file. The importance of the role
played by employee records in the administration of unemployment insurance is thus self-evident.
Needless to say, the number of workers covered by an
unemployment insurance scheme always greatly exceeds the
number of employers subject to the law. Accordingly, the
volume of employee records to be maintained is very much
greater than that of the employer records referred to above.
Registration Data.
The record for each insured person should normally be
opened at the time of his registration for insurance. The
information about him obtained when he registers should
immediately be entered on the form to be used as his permanent
record, along with the insurance number assigned to him.
This information, though perhaps of no immediate use, is likely
to be needed at some future time when a claim is filed. The
completed form should be included in the register of insured
employees.
Contribution Data.
The next type of information that will normally be added
to the record for each employee is that contained in the contribution documents (payroll report or stamp book) submitted
periodically by his employer. The particular nature of the
information thus added will depend on the nature of the
statutory provisions regarding the qualifying period. As seen
in Chapter IV, these provisions may be expressed in terms
of weeks or days of insurable employment, number of contributions, aggregate earnings in insured employment, or
length of insurance membership. This information may also
be needed later under some schemes not only to determine
if a worker is eligible for benefit, but also to compute the rate
and duration of his benefit. Whatever type of provision exists,
it will be necessary to post to each employee's record the
appropriate information concerning his employment, contributions, or wages during the period concerned, as indicated by
the payroll report or his stamp book.
The posting referred to has to be performed for every
employee covered by the scheme during a contribution period.

ADMINISTRATIVE ORGANISATION AND PROCESSES

235

It also has to be repeated for each successive period for which
employers are required to turn in payroll reports or stamp books.
It is clearly a burdensome administrative task, but one that
is virtually essential if certain of the important benefit provisions
discussed in Chapters IV and VI are to be applied. Reliance
might conceivably be placed instead on special " separation
reports " secured from employers only when a worker actually
becomes unemployed and which summarise the past contribution, wage or employment record of the worker concerned. If
such a procedure worked smoothly, it might make the maintenance of continuous contribution records largely unnecessary.
It is bound to lead to some difficulties, however, including the
possibility that an employer's record for several years back
may be incomplete, inaccurate or lost.
The forms or ledger sheets to which the data from contribution documents are posted obviously must be planned with
extreme care. They must contain all the spaces necessary
to record the insurance history of the worker during each contribution period. They must also lend themselves to mass handling by means of routine operations. Similarly, the procedures
devised for handling the periodic postings must be simple,
reliable and such as will permit the work to be done in the
shortest possible time. They should also be designed so as to
facilitate auditing and supervisory control.
Benefit Data.
A third type of information to be entered in individual
employee files is the unemployment benefit record of each
worker. The file for each employee should indicate all benefits
paid to him in recent years, including the type, amounts, and
beginning and termination dates. This information, depending on specific provisions of the law, may be needed to determine
the basic right to benefit, the waiting period to be served, the
maximum potential duration of benefits, etc. While benefit
entries will neither be so voluminous nor so frequent as contribution entries, the same care must be taken in the procedures
adopted for their posting. If administration of unemployment
insurance is linked with that of other social insurance benefits,
the record of employees—although containing only a single
series of contribution entries—will have to deal with all types
of benefit covered by the joint administrative arrangements.

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Degree of Centralisation.
An important question to be decided in setting up the
records of employees is whether there should be a single centralised register for the whole scheme, or whether the records
should be subdivided into regional or even local registers.
A centralised register avoids problems caused by the
movement of workers from one region to another. It also
permits maximum use to be made of routine mass operations
and of specialised mechanical equipment. It may in some
instances, however, lead to unwieldy over-centralisation. It
may also lengthen the time involved in supplying a distant
local office with the information it needs to determine the rights
of unemployed claimants to benefit. Even a few days' delay
in the payment of benefits to unemployed workers, if caused
by the fact that a central register cannot make information
available as quickly as a regional or local register, may be a
serious matter.
In the final analysis, the relative advantages and disadvantages of a central register are dependent on the special
circumstances of each country. These include the size of the
scheme, area of the country, population distribution, urbanisation, communications, other social security benefits provided,
and the length of the waiting period provided by law.
Other Features.
The sequence in which employee records are filed is a
question of some importance, since many thousands or even
millions of records are involved. The principal choice lies
between a numerical register, in which the records are organised
by insurance numbers, and an alphabetical register. There
are problems in either case, but experience tends to suggest
that a numerical register may be the most efficient for
unemployment insurance. It avoids difficulties with the spelling
of names and readily lends itself to mechanised operations. If
a numerical register is used, however, it is usually necessary in
addition to maintain an alphabetical index of the names of all
insured workers together with their insurance numbers. This
enables documents concerning a worker to be located even if
the insurance number is not available.
The adoption of procedures and the design of forms for
maintaining records of employees should also take into account

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237

the possibilities of deriving statistics on a sample basis or otherwise. Such statistics are very useful for administrative planning, legislative planning, and actuarial studies connected with
the scheme itself, and are an invaluable source of material for
general economic studies concerned with employment and unemployment, wages, turnover, etc.
R E C E I V I N G OF CLAIMS

The administrative processes leading up to the final purpose
of unemployment insurance—the payment of benefits to unemployed workers—are set in motion by the filing of claims by
such workers. Because of the special characteristics of the risk
of unemployment, the acceptance of a claim for unemployment
benefit must be surrounded b y somewhat different formalities
and safeguards t h a n are usually required in the case of other
social security benefits. Basically this is due to the somewhat
intangible nature of the risk (as contrasted with t h a t of sickness,
maternity, old age, death, etc.), which creates a need for special
measures. A typical sequence of procedures for the filing and
receiving of unemployment claims is described below.
Preliminary

Steps

When a worker employed in an occupation covered by
insurance loses his job and does not find another or take up
self-employment, he should be instructed to get in touch immediately with the nearest local offices of the employment service
and the unemployment insurance agency, or their joint office if
there is one. The importance of doing this should be brought
to the attention of all insured workers through information
programmes of the administrative agency, and b y employers,
trade unions, welfare agencies, etc. If a stamp book system
is used, the worker should collect his book from the employer
before leaving his place of employment. In some countries
he m u s t also obtain a certificate of unemployment duly filled
in by his last employer.
Claims should ordinarily be accepted only when presented
by the unemployed worker himself at a local office. In practice,
several exceptions to this rule m a y be permitted. Arrangements
m a y be made for itinerant officials of the local office to
visit smaller communities periodically, where they will receive

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claims during a few specified hours. Designated agents, such
as post offices or municipal officials, may be empowered to
receive claims in specified circumstances. Filing of claims by
mail may be permitted for workers living in isolated areas, but
only subject to special safeguards ; if at all possible, every
worker who submits his claim by mail should be required to
report in person at least once to a local office. In no case
should a third party be allowed to file a claim on behalf of an
unemployed worker.
Placement Activities
An unemployed worker should normally first be put in
contact with the employment service, rather than with the
unemployment insurance administration. If these services
are housed in different premises, the worker should be instructed
to go first to the employment exchange. If the two are housed
and administered together, the worker should first be directed
by the reception clerk to the wicket or desk of an official
concerned with placement. The reasons for this are that if
a new job is available for the worker immediately, there is no
reason for him to claim benefit ; and no claim should be accepted
and acted upon in any case unless the claimant has already
registered for employment.
The appearance of a worker at the office, wicket or desk
of the employment service should set in motion the procedures
of that service for finding him a new job. Since employment
services constitute a complete field of administration in themselves, on which there already exists a considerable body of
literature 1 , this study does not deal in detail with the operations
involved in their administration. Nevertheless, a very brief
summary is presented below of some of the procedural steps
often followed in employment exchanges, particularly those
steps which are closely linked with unemployment insurance.
Registration.
The first basic step should be to " register " the worker
for employment by having him fill in a form which constitutes
an application for work. This form should call for information
1
See, for example, I.L.O.: National Employment Services : Canada
(Geneva, 1950) ; and idem. : National Employment Services : Great
Britain (Geneva, 1952).

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239

concerning both the personal characteristics of the worker
and his qualifications and experience, including full details on
his previous employment. The registration officer should
assist the worker in filling in the form though the latter himself
should sign it. The officer will then register the worker for
the occupation or occupations for which he appears to be
best qualified.
Selection.
After the application for employment has been checked,
coded and numbered, the worker should be referred to a placing
or selection officer. This officer should have at hand the " live "
file of vacant jobs for which employers have submitted requests
for workers. This file should be arranged on the basis of a
systematic occupational classification. The selection officer
will interview the applicant for employment to amplify the
information provided on the registration form and to determine
whether his skills conform to any existing or prospective job
vacancies. If an appropriate vacancy already exists in the
live file for which the worker appears qualified, the officer should
refer him to the employer concerned by giving him a card
instructing him to call upon the employer for interview at a
prearranged time. If the worker is engaged as a result of this
interview, there is of course no question of unemployment
benefit.
Live File.
If the placement officer finds no appropriate vacancy in
the file of current requests from employers he should refer the
worker to the unemployment insurance office or wicket. At
the same time he should issue a document to him certifying
that the employment service has no suitable job for him at
the moment. If, however, the worker has refused submission
to a vacancy that the officer thinks might have been suitable
for him the officer should make a note to that effect on the
document. The officer should then enter his own comments,
based on the interview, on the registration form and send it
to the live file of applications for employment, for filing in the
relevant occupational group.
As additional requests for workers are subsequently received
from employers, a selection officer will examine the live file

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SCHEMES

for workers in the occupation concerned and select the most
suitable name from the file on the basis of qualifications and any
other prescribed criteria. The person selected is then interviewed again by an officer of the employment service, and if
the vacancy is found suitable for him, he will be referred to
the employer for interview.
Initial Claim
Only workers whom the employment service has not been
able to refer immediately to a new job should normally present
themselves to the unemployment insurance office. This office
may first require the worker to produce certain documents,
depending on other administrative features of the scheme.
These may be his insurance registration card, which shows his
insurance number ; his membership card, if he belongs to a
voluntary fund ; or his stamp book, which he has obtained
from his employer. Under some schemes, he may also be asked
to produce the certificate issued by the employer at the time of
discharge. There will also be the document of the employment
service certifying that no suitable work is at present available
for the applicant.
Contents of Claim Form.
The worker should next be requested to fill in an initial
claim for unemployment benefit. This is an important form,
since it constitutes one of the principal elements for adjudication of the claim. It must therefore be designed so as to elicit
all the information required. Among the items of information
that may be pertinent are the claimant's full name, address,
telephone number, age, sex, family status, dependants, detailed
employment record for the period specified by the law, wages,
occupation, reason for loss of last job, subsidiary employment,
and benefits previously received. Still other information may
be needed depending on detailed provisions of the law concerned.
The claim form should also contain space for the claimant
to certify that he satisfies the different positive qualifying
conditions for benefit, e.g. that he is involuntarily unemployed,
able to work, available for work, and unable to obtain work.
It may also require him to make a declaration in respect of
such possible grounds for disqualification as receipt of other
benefits or refusal of suitable work. While the interviewing

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241

officer should assist the worker in filling in the claim form, the
latter himself should sign it with the officer serving as witness.
The signature of the claimant may be verified by comparing
it with that on the insurance documents he submits.
Instructions to Claimants.
After he has filled in his initial claim form, the claimant
should be given instructions about his further calls at the local
office. This may be done by handing him a card on which
the interviewing officer has marked the times when he is to
report in the future. On these subsequent calls, he will both
attest to the continuance of his unemployment and receive
his benefit. The card may be designed so that it can be mailed
back to the local office if the worker finds a new job himself
or if for any other reason he no longer wishes to claim benefit.
If a stamp book is used, a receipt for it should be issued to the
worker, since it will remain in the custody of the office as long
as benefit is being paid. If dependants' benefits are payable,
the claimant should also be given a form to fill in and mail
back to the local office, providing evidence of the existence and
age of the dependants referred to in the claim form.
The claimant has now completed his initial contact with
the placement and unemployment insurance offices. He will
not need to return until the first date indicated on the instruction card handed to him, except in one main circumstance, i.e.
if a notice of a vacancy for which he is suited comes into the
placement office and if he is selected from among all other
applicants as the worker to be submitted. In this case, the
office may inform him of the vacancy by mail or telephone.
Completion of Claim Form.
The unemployment insurance scheme is now in receipt of
a claim for benefit and must proceed to act upon it. The interviewing officer who received the claim should first get it ready
for transfer to the claims division of the agency, which will
decide whether a benefit is payable. He should enter the
claimant's insurance number on the claim form, as well as a
note to the effect that the employment service has certified
that no suitable employment was available for the claimant
when the initial claim was filed. If on the contrary it appears
that the claimant may have declined an offer of suitable work,
16

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UNEMPLOYMENT INSURANCE SCHEMES

he should note this. A similar entry should be made if it
appears that the claimant may be unemployed as a result of a
labour dispute.
The interviewing officer or assisting clerks should now
prepare a special file to contain all documents to be prepared
in connection with the claim. These should include various
control and index cards to facilitate the internal routing and
prompt location of the file at different stages in its handling.
An unemployment register should also be prepared, with spaces
for entering the times at which the claimant is asked to report,
the times at which he actually reports, days of unemployment
and benefits paid, and also a place for the claimant's signature
each time that he reports. If the claimant's stamp book is
deposited with the exchange, it should also be kept in this file.
It should be noted that the initial claim does not relate
to days of unemployment that a claimant has already suffered.
It should ordinarily be filed, in fact, on the next day following
that on which he is separated from his job. It is still necessary
for the claimant to serve the waiting period prescribed by law.
What an initial claim does, in effect, is to inform the administrative agency that the claimant is out of work, that his eligibility for benefit should be determined, and that benefits will
become payable if his unemployment persists beyond the
waiting period.
ADJUDICATION OF CLAIMS

Once it has received a claim for unemployment benefit,
it is the task of the administrative agency to determine whether
or not benefit is legally payable. It must also determine the
rate of benefit due and the maximum potential period of payment. Procedures must be designed for discharging these
responsibilities in connection with many thousands of claims
each year. These procedures must ensure, on the one hand,
that the statutory provisions are fully and equitably applied
and, on the other hand, that claims are handled expeditiously.
Each claim carries with it, in effect, its own deadline : after
the waiting period has been served, only a few days elapse
before the benefit actually becomes payable. All work of
adjudicating claims must normally be completed within this
brief period. If the agency fails in this and falls behind, unem-

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243

ployed workers whose ordinary income has stopped may find
themselves without any money even to buy food.
The work involved in adjudicating claims should, except
in the smallest offices, be handled by a department or staff
other than that responsible for receiving claims and interviewing workers, since the activities performed in adjudication
are not readily combined with the work of receiving and interviewing claimants. It is also useful to divide up the former type
of work into two parts. The first involves verifying the information required for deciding claims and its supplementation
where necessary. The second consists in deciding the claim
on the basis of the verified information assembled.
Basic Tasks
As discussed in Chapters IV and V, benefit eligibility
conditions prescribed by law usually consist of three main
types. These are qualifying conditions, the qualifying period,
and disqualifications. The first two represent positive requirements, and positive information must be assembled in order
to ascertain that they are satisfied. The provisions regarding
disqualification are of a negative character and information
must be assembled establishing the absence of disqualifying
circumstances. The procedures and forms used in checking
claims must therefore be directed towards the assembly of the
two different kinds of information.
It has been seen that a certain amount of information
bearing on the eligibility of the claimant is received when the
initial claim is filed. This includes that supplied by the claimant
himself on the claim form ; possibly that in his stamp book
or contribution card ; the certification from the placement
office ; and possibly a certificate of discharge from the employer.
These various documents must first be reviewed for completeness and also for their consistency with each other as regards
data presented, signatures, etc. Arrangements must then be
made for investigating the accuracy of all relevant but unsupported information and for obtaining any missing information.
Verification of Qualifying Conditions
The information needed to check compliance with the
qualifying conditions may be largely obtained from the employ-

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ment service, on the basis of the claimant's registration with it
for employment. In normal cases such registration establishes a prima facie case that the claimant is able to work,
available for work, willing to work and seeking work.
However, difficult border-line cases will always arise in
any large group of claimants. For example, the physical or
mental condition of a claimant may raise a question regarding
his " ability to work ". Medical opinion will therefore have
to be obtained on this point in some instances. Similarly,
if a claimant tells the employment exchange that he will accept
employment only during certain unusual hours, of a very
special type, or within an extremely limited area, a question
may arise regarding his genuine " availability for work ". In
such cases, the mere act of registering for employment may not
in itself suffice as proof that the qualifying conditions are satisfied. When this occurs, additional information must be secured
by further investigation.
Verification of Qualifying Period
The serving of a qualifying period is nearly always a basic
statutory condition for entitlement to benefit. Hence, verification of whether or not this period has been served is an important
step in the handling of claims. The information needed concerning previous contributions, employment, or wages of the claimant
can be obtained from the individual record maintained for the
claimant, as discussed above, provided such records are kept.
Otherwise, it will have to be obtained from the last or other
previous employers.
If the records of employees are kept in the office where the
claim is being handled, they can be consulted on the spot. But
if they are kept in a central register in another city procedures
must be worked out for rapid consultation of such records by
mail. These will include sending a request for information
on the claimant to the central register ; extracting the information requested from the central register ; and transmitting
it back to the local office. This entire operation ought normally
to be completed within a maximum of three or four days, for
final action on the claim may otherwise be unduly delayed. In
the case of larger schemes, it is desirable to mechanise the
operation so far as possible. Thus, the local office may prepare
a special type of punched card bearing the employee's name

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245

and insurance number and mail it to the central registry. The
latter can then mechanically sort the many cards coming in
from local offices, route them to the appropriate records of
employees, re-sort them according to local office, and mail
them back to their place of origin.
A law may sometimes provide that part of the reference
period during which the qualifying period must be served must
overlap into the current contribution period for which payroll
reports or stamp books have not yet been received. In this
case the local office, in addition to consulting the central register,
will also have to obtain information in respect of the current
contribution period. This may be obtained from the current
stamp book if such a system is used. Otherwise, it will have
to be obtained by securing a special report from the last employer.
This information on the recent contribution, employment, or
wage record of the claimant will help to complete the data
needed to decide whether he has served the qualifying period.
Verification of Absence of Disqualifications
If the separation of a claimant from his last job was due,
in fact, to his voluntary leaving, his misconduct, or a labour
dispute, the law probably disqualifies him for benefit for a
certain period. He will already have been asked to report
the reason for the loss of his job on his initial claim form. In
order to verify his statement on this point, a questionnaire
should be sent to his last employer (and perhaps to other recent
employers) as one of the first steps in checking the claim. The
questionnaire should request the employer to give the reasons
for and circumstances of the termination of the claimant's
employment. It should also ask him to indicate the starting
and ending dates of the claimant's employment with him, the
rate of pay and occupation, and whether any kind of dismissal
benefit is or will be paid to the claimant. The employer should
be asked to complete and return this form within two or three
days.
As mentioned previously, if employers are not required
to give details of the contribution, employment or wage record
of each employee at the time when they pay contributions,
of course no central register is built up. In this case the special
questionnaire for employers or separation report referred to
above will constitute the sole source of information to verify

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the claimant's statement that he has served the qualifying
period prescribed by law.
When the local office receives the completed questionnaire
from the employer, it should check it against information
supplied in the initial claim form. This is to determine if there
are material discrepancies, as regards either the cause of the
separation or the claimant's recent employment history. If
none are found, the information supplied by the two parties
may usually be taken as valid. If there are discrepancies,
further investigation will be necessary. Conflicting statements
by the employer and his ex-employee should first be submitted
to both parties in writing for their comment. Some discrepancies will undoubtedly be eliminated in this way. Those
that remain will have to go to the deciding authority for evaluation, accompanied by the results of any supplementary investigation of the matter made by the local office. In some cases,
as for example when there is a large trade dispute, such investigations may have to be rather extensive.
If dependants' benefits are payable, the local office should
receive back the form given to the claimant for attestation
regarding such dependants. Regulations should be issued to
prescribe the type of evidence that will be accepted on such
forms as adequate legal confirmation of the existence of qualified
dependants.
Decision of Claims
At this stage all the relevant facts concerning the claim
will have been established or, as regards doubtful points, all
available information bearing on items of disagreement will
have been collected. On the basis of the verified information
thus assembled, it must now be decided whether or not the
claimant is entitled to benefit.
Deciding

Authority.

The administrative organisation responsible for deciding
claims may take different forms. The local office that receives
and verifies claims may also be made responsible for deciding
them. If this is done, its findings may or may not be made
subject to routine review by a regional authority. Alternatively, responsibility for the first decision on all claims may be
lodged with a regional authority or with the national authority

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247

in a small country. In such a case, the local office will pass
on the entire file to the regional office after assembling and
verifying all necessary data.
Another point to be settled is whether the administrative
unit that assembles and verifies the information on which the
decision is based should also make the decision, or whether this
should be done by a separate, specially designated officer or
authority. Under the first method the final step of deciding
the claim becomes simply another administrative action, the
culmination of the preceding preparatory work. Under the
second, the deciding of claims becomes a semi-judicial function
performed by a deciding officer who is administratively independent of the organisational unit that has handled the claim
up to, but not including, the decision taken on it.
Each of the alternative forms of organisation mentioned
entails advantages and disadvantages. The particular forms
adopted in a given country must naturally be those that are
best suited to conditions prevailing there and that will result
in both the greatest efficiency and the maximum accuracy in
decisions. It should be noted, however, that the questions of
review by a higher authority and of the independence of the
deciding authority are not related to the question of the right
of claimants to appeal, which is an entirely separate matter.
Act of Decision.
The act of deciding a claim when all the necessary information is at hand is essentially a legal one. It is a matter of applying the controlling provisions of the relevant legislation to a
verified set of facts. In the majority of cases the correct
decision on a claim is obvious : the facts are not in dispute,
the claimant is able to and available for work, he clearly has
or has not fulfilled the qualifying period, and there is no ambiguity in the reason for his separation. Cases of this sort can
generally be disposed of rapidly and without difficulty.
There will always be a certain proportion of cases, however,
where the decision is not obvious. The claimant's health may
make his ability to work questionable ; he may have circumscribed his availability for work ; he and the employer may
disagree sharply on the cause of his separation ; he may be
somewhat indirectly connected with a trade dispute ; or he
may have refused a job whose suitability is debatable. Each

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of these circumstances will present difficult cases for decision.
Officers responsible for deciding claims will be greatly assisted
if they have ready access to precedents embodied in the decisions
of appeals authorities and, perhaps, of the courts. The central
administrative authority should also distribute manuals for the
guidance of such officers. Finally, difficult questions that can
be traced to obscurities in the basic law may eventually have
to be resolved through amendment of the law itself.
Depending upon the specific provisions of the law, the
deciding of claims may involve more than a finding of whether
or not a claimant is entitled to benefit. If disqualification
appears necessary, the length of the period of suspension of
benefit must be decided, within limits fixed by law. If the
size of the benefit varies with past wages or contributions,
the exact benefit amount must be computed. This will usually
be quite a routine operation, but it may also be quite a burdensome one when performed for many thousands of claims. Here
again, efficient but simple procedures must be worked out, and
the greatest possible use should be made of machines in the
computation process.
In m a n y cases the maximum period during which a claimant

will be entitled to receive benefit must also be determined.
Under laws where maximum duration varies with past contributions, employment or wages, data for the computation will
be obtained, in part at least, from the central register of employees. In addition, the maximum duration may also be
affected by benefits already paid to the claimant during previous
spells of unemployment. In this case the relevant data must
be obtained from the records of benefits paid.
Notice of Decision.
If a worker's claim for benefit is allowed, the processes
described in the section below on payment of benefit will apply.
If the claim is not allowed, the claimant should be formally
notified in writing and should be given the precise reason for
the disallowance. This notice should also contain instructions
on the procedures for appealing against the finding. It should,
in addition, stress the desirability of the claimant's continuing
to report at the employment exchange until a new job is found
for him. Special procedures must of course be followed if a
temporary period of disqualification is imposed.

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Appeals
Every claimant who is denied unemployment benefit,
or who has been awarded a benefit of smaller amount or shorter
duration than that to which he thinks he is entitled, should
have the right by law to appeal against the original finding.
Need for Appeals

Facilities.

The initial finding, as has been seen, is in effect simply
one additional administrative step in the routine handling of
claims. To protect claimants against elements of discretion,
bias, arbitrary action, or errors that may creep into these
administrative decisions, facilities should be provided for appeal
to a body that is jurisdictionally independent of the administrative authority responsible for the original decision. A
mere right to request reconsideration of the finding is not
sufficient in itself as an appeal procedure.
The importance of appeal facilities is perhaps slightly
less if the original decision is made by a special semi-judicial
officer, as described above, rather than by the administrative
unit that assembles and verifies the information on which the
decision is based. Nevertheless, the facilities are still desirable in such a case. On the other hand, if as is sometimes the
case the original decisions on all claims are made by a special
tripartite tribunal, the need for appeal facilities is much
lessened.
Appeals Bodies.
The functions of an appeals authority are mainly judicial
rather than administrative. They usually consist of reasoned
and impartial examination of relatively few claims that raise
new and complex issues, in contrast to mass disposition of many
claims the appropriate decisions on which usually become clear
as soon as the facts alleged are verified. In general, therefore,
appeals bodies should be set up as special tribunals with no
other duties than those of hearing and deciding appeals.
As regards the composition of appeals bodies, there are
two principal choices : they may be composed entirely of
" public " members representing no special interest, or they
may have a tripartite structure. In the first case the members
should, as far as possible, have some kind of legal background

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SCHEMES

and be thoroughly familiar with unemployment insurance
legislation. They should be completely independent of the
administrative unit responsible for handling claims. Needless
to say, they should also be impartial.
In the case of tripartite appeals bodies the employees'
representatives, drawn from panels, will endeavour to see
that full consideration is given to the claimant's interests ;
the employers' representatives will try to ensure that the
interests of employers contributing to the scheme are not adversely affected by unjustifiable liberality in the award of benefits ; and the public representatives will serve as chairmen, hold
the casting votes, and provide the judicial and legal knowledge
that the other members will be less likely to have.
Procedure.
The procedure of appeals bodies should be such as to make
it as easy as possible for claimants to have their case heard.
The appeal should cost the claimant nothing and he should not
need to hire counsel. The proceedings of the tribunal should be
informal, and the body itself, and particularly its chairman,
should in effect assist the claimant in presenting his case. A
representative of the administrative agency should attend each
hearing. He may explain the reasoning by which the agency
came to the adverse decision, and also provide information to
the tribunal on technical points ; but he should in no way
attempt to influence the latter's decision, nor should he in any
sense act as if he were counsel for the defendant in the hearing.
Appeals tribunals should be set up on a regional or even
local basis, so that they are within relatively easy reach of
most claimants. Transportation costs of claimants should be
paid if they must travel far to take part in a hearing. In view
of the number of appellate bodies this will require, it will usually
be found desirable to set up a second appeals stage as well.
Claimants receiving an adverse decision on their first appeal
will then be permitted, under specified circumstances, to appeal
to a central appeals authority. The decision of this authority
may or may not be made final, depending on juridical practice
in the country concerned.
The central tribunal may be composed of one or more
experienced judges, or it may be tripartite in character. As
a greater proportion of cases reaching this second appeals

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251

body may involve difficult legal points, however, there are
fairly strong grounds for preferring the first of these alternatives.
Decisions of the central tribunal should be systematically recorded and circulated for the guidance of officers making the first
decision on claims as well as the regional appeals bodies.
PAYMENT OF BENEFITS

Once a claim for benefit has been approved, preparations
should immediately be made for paying the first benefit on the
day it falls due. The benefit payment, in whatever form it is
made, should be ready for the claimant when he makes his
first call at the local office following completion of the waiting
period.
First Benefit
After a form indicating a favourable decision on a claim
has been prepared, the contents of the decision should be posted
to the blank unemployment register in the claim file. The
information thus transferred to the register should include the
date on which benefit first becomes payable, the benefit amount,
the dependants' supplements if any, and the maximum number
of weeks of benefit authorised. This unemployment register
will now become the central document controlling the payment
of all benefits. Meanwhile, if he has requested it, the claimant
should be informed by mail of the approval of his claim, his
rate of benefit, and the maximum potential duration thereof.
When the waiting period required of the claimant is entirely
or nearly served and on the day preceding that on which he is
next to report in person, his unemployment register should be
obtained from the files. It should then be brought up to
date, so far as possible, and the necessary payment form should
be prepared. Benefits may be paid in cash or by cheque or
postal draft, depending on the method best adapted to the
needs of unemployed workers in the region concerned. If
they are paid in cash, the necessary form authorising the cashier
to pay the specified amount involved should be prepared the
day before payment is due. Alternatively, the appropriate
cheque or postal draft should be filled in.
When the claimant actually reports on the following day,
he should first be asked to bring the unemployment register

252

UNEMPLOYMENT INSURANCE SCHEMES

completely up to date by entering details of his unemployment
or employment experience since his last call. The register
should contain spaces for the applicant to indicate whether
he was employed, unemployed, sick, or otherwise available or
not available on each day of the week. After entering this
information, he should sign the register to attest to the accuracy
of the statements made. The interviewing officer can then
complete the payment form on the basis of information on the
register regarding compensable and non-compensable days
during the preceding week.
If payment is made in cash, the payment form is then
presented to the claimant who takes it to the cashier of the
local office and receives payment after signing a receipt. If
payment is made by cheque or postal draft, the appropriate
document is handed to him. If the claimant does not come
to the office on the appointed day, the cheque or draft may be
mailed to him ; it should, however, be accompanied by a
notice indicating that payment of future benefits is being
suspended pending a further call at the office and explanation
of his failure to report.
Continuing Claim
At this stage the unemployed worker's name has been
entered on the benefit roll, he has received his first benefit,
and he has been found eligible to continue to receive benefit
for a certain number of weeks. In order to retain this eligibility, however, he should be required to report regularly to the
local office. The purpose of this is to verify that he continues
to be both unemployed and available for work, and to ensure
that he can be offered any suitable job that may become
vacant.
He should therefore be given written instructions each
time he calls at the office regarding the exact date and hour of
his next call. The time of reporting should be varied somewhat
from week to week, to prevent him from secretly working while
continuing to receive benefit. Failure to report on a specified
day should be penalised by suspension of the benefit until he
does report. Unjustified tardiness in reporting may be penalised
by adding an additional reporting day during the same week.
As in the case of the initial claim, the first contact of the
beneficiary during each regular call at the local office should

ADMINISTRATIVE ORGANISATION AND PROCESSES

253

be with the employment service. The interviewing officer
there will each time check the live file of requests from employers
to see whether a suitable job is now available. In case there
is such a job, the beneficiary should be immediately referred
to the employer concerned. If at any time during the benefit
period the beneficiary declines to follow up such an offer,
or turns down an actual offer from an employer to whom he
has been referred, the employment service should immediately
notify the unemployment insurance office. If no suitable job
is available at the time of the call, however, the employment
officer should note this on the beneficiary's written instructions
to report and then refer him to the unemployment insurance
office.
When the beneficiary again appears at the office or counter
of the unemployment insurance service, his unemployment
register is withdrawn from the files. The actual time of his
call should be entered on it opposite the time he was instructed
to report. The beneficiary should once more enter the details
of his unemployment or employment experience during the
past week and a statement as to his availability on each day
thereof. He should then again sign the register to certify to
the correctness of the new statements made. This, in effect,
serves as the filing of what may be described as a continuing
claim, as distinguished from the initial claim.
This operation being completed, the interviewing officer can
fill out the payment form, on the basis of days shown to be
compensable by the new information on the register, and give
it to the beneficiary. He also informs the latter of the date
and hour of his next call and enters this on the unemployment
register. If payment is in cash, the beneficiary will once
again visit the cashier and obtain his unemployment benefit
for the week.
Termination of Benefit
Benefits will ordinarily continue to be paid in this way
until the beneficiary either finds a new job or draws benefit
for the maximum number of weeks authorised.
If a beneficiary is referred to an employer who has a vacancy
and the employer hires him, he should be requested to report
at the local office on the last day before entering on his new
job. At the time of this call he should be asked to sign the

254

UNEMPLOYMENT INSURANCE SCHEMES

unemployment register for the last time ; he will be issued
his last benefit payment, and if he has deposited his stamp
book it will be returned to him. The administrative operations
connected with this one spell of unemployment are now largely
completed. The number or amount of benefits paid should,
however, be recorded on the permanent record of the employee.
This information may be needed, for one thing, if the employee
should later have another spell of unemployment and the question of the maximum benefit period to be allowed again arises.
In fixing the maximum period of duration many laws provide
for cumulation of the number of days of benefit payable during
a given reference period.
If a beneficiary fails to find a new job and continues to
draw benefits, the time will eventually come when he has
received benefits for the full period allowed by law. The unemployment register should be designed to include a space for
keeping a running total of the number of days or weeks of
benefit paid. When this cumulative total nears the maximum
allowable total already noted on the register, the beneficiary
should be advised and should be asked to report at the local
office on the day following the end of this benefit period. When
he reports he will sign the unemployment register for the last
time and receive the balance of the benefit payments due to
him. Accordingly, the unemployment insurance benefit file
established for him is now closed. In countries having a
supplementary unemployment assistance scheme, however, at
least a part of his previous insurance file may now be transferred
to that scheme. The employment service, on the other hand,
should naturally continue to give active attention to his application for employment, irrespective of the termination of his
benefit rights.

Publications of the International Labour Office

Systems of Social Security r
United States
The second of a series of handbooks on national systems of social
security prepared by governments according to a plan drafted by
the International Labour Office, this manual was compiled by the
United States Department of Health, Education and Welfare. It
deals with the legal provisions and benefit specifications for particular
contingencies as well as organisation and financing. The first handbook in this series, published in 1949, relates to New Zealand.

CONTENTS
CHAPTER I

Legal Basis.
Legislation—Legislation relating to the Basic Social Security
Programme—Legislation relating to the Programme for Railroad Employees.

CHAPTER

II

Scope of Protection.
Range of Persons Protected—Contingencies Covered :
Maternity—Child Maintenance—Condition Requiring Medical
Care—Maintenance of Community Health—Incapacity for Work
—Unemployment—Old Age—Funeral (Lump-Sum Death Payment)—Death of Breadwinner—Other Contingencies.

CHAPTER

III Provision of Benefits.
(Sub-headings as in Chapter II.)

CHAPTER

IV

Organisation.
Administration—Supervision of
and Settlement of Disputes.

CHAPTER V

Administration—Sanctions

Financing of Social Security.
Participation of Protected
Persons—Participation
of
Employers—Participation of Public Bodies—Collection and
Handling of Contributions—Allocation of Contribution Income
and Receipts and Expenditures of Social Security.

APPENDIX

I

Statistical

APPENDIX

II

Summary of Principal Provisions of Social Security
of 1954 concerning Old-Age and Survivors' Insurance.

APPENDIX

III

Summary of Amendments of 31 August 1954 to the Railroad Unemployment Insurance Act, the Railroad Retirement Act and the
Railroad Retirement Tax Act.

106 pages

Tables.
Amendments

Price : 75 cents ; 4s. 6d.

Publications of the International Labour Office

Administrative Practice
of Social Insurance
Studies and Reports, New Series, No. 40
Since 1952, when the International Labour Conference adopted
the Social Security (Minimum Standards) Convention, the I.L.O. has
concentrated a major part of its activities in the field of social
security on administrative aspects, using not only the traditional
methods of research and documentation but also some more practical
approaches—technical assistance, close collaboration with the International Social Security Association and the Inter-American Social
Security Conference and discussions among experts in social security seminars. In line with this increased practical activity, the
International Labour Office has published the present study, which
gives a detailed description of the administrative technique of social
insurance as regards sickness, maternity, occupational injury, invalidity, old age and death.
CONTENTS

CHAPTER I

Identification

and Registration

of Insured

Persons.

First Registration of Insured Persons—Registration Numbers
—Identity Documents—Other Aspects of Registration—Insurance Registers.
CHAPTER I I

Registration

of

Employers.

Definition of " Employer "—First Registration—Registration Numbers—-General Registration or Re-registration—Supervision of Registration—Records relating to Employers.
C H A P T E R I I I Collection

of

Contributions.

Collection Systems in General—Collection by Means of
Periodical Rolls—The Stamp System.
CHAPTER

IV Individual Records of Insured Persons.
Types of Individual Record and Transfer Methods—Centralisation or Decentralisation of Individual Records.

CHAPTER

V

Checking Qualifications for Benefit.
Insurance against Short-Term
against Long-Term Contingencies.

CHAPTER VI

86 pages

Contingencies—Insurance

Statistics.
Statistics of Insured Persons—Statistics of Employers and of
Contributions Collected—Statistics of Benefits—Relationship
between Statistics and Accounting.
Price: $1 ; 6s.