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The Pamphlet Collection of Sir Robert Stout: Volume 72

German Empire

German Empire

Practically, every workman is insured against sickness and against death, or disablement resulting from injuries sustained in the course of his employment. It is believed that about thirteen millions of Germans are thus secured. In accomplishing this great work, the German Government has not assumed the functions of an insurance society, nor has it granted any subvention to the associations which it has called into existence. It has done the work by imposing a legal obligation on employers, and by assisting in the formation of societies by which the object can be secured.

But in dealing with old age, it made a new departure; it recognised the necessity of a State subvention, and, as a consequence, a large extension of the area of State intervention in the business of insurance. The law of June 22, 1889, made insurance against disablement and old age compulsory upon the working classes.

The notion that the State may properly enforce the insurance of workmen against sickness and accident is not due, as is frequently stated, to Prince Bismarck. It goes much farther back. So long ago as 1854 the principle of State interference was established in Prussia; and not only in Prussia, but in Saxony and Bavaria, local authorities were empowered to introduce compulsory insurance within their jurisdiction. Although, however, the principle was sanctioned, little was done to give it practical effect until Bismarck took the matter in hand. Prince Bismarck conceived a large and comprehensive scheme to secure the working classes not only against sickness, but against accidents, disablement, and old age. The provisions for sickness were only part of a wide and complete scheme to give security to workers against the casualities of life. In the early part of 1881 he submitted a Bill to the German Parliament, and the first subject he selected for legislation was accidents. It is unnecessary to refer to the provisions of the Bill, as, in the order of events, compulsory insurance against sickness took precedence of accidents. The Act, which now provides for compulsory insurance against sickness for the whole German Empire, was passed May 31, 1883, and came into operation on December 1, 1884; and the complementary measure, providing for accidents was passed on July 6, 1884, and came into operation on October 1, 1885. These measures covered the whole ground of illness, from whatever cause arising.

The scope of the German compulsory law made the sickness insurance law apply to women as well as men. The earliest Act was compulsory on the following classes only:—(1) All persons engaged page 12 for hire or wages in mines, pits, quarries, factories, railways, steamers, docks or buildings. (2) In handicrafts or trades. (3) In works where steam or any power, such as wind, water, gas, or hot air, is employed as a motive power.

This feature of the German law is of great importance. It practically limits the accidents insurance to the two cases of permanent disablement and death, and relieves that fund of an enormous number of small and worrying claims:—
(1.)In the case of permanent disablement, the workman receive an annuity for life equal to two-thirds of the average wage actually earned by him during the year preceding the injury.
(2.)If the workman is killed, the compensation is measured with; reference to the average weekly wage earned by him during the year. preceding his death. The widow receives 20 per cent of this average weekly wage for life or until she re-marries; each child receives 15 per cent of the same until it attains the age of 15; but in the aggregate the sum paid to the widow and children must not exceed 60 per cent of the wages. Let us suppose that a man who has been killed, earned 20s. a week. His wife would be entitled to 4s. a week pension for life or until re-marriage, and for each child she would receive 3s. a week. If she had two children, she would get 10s. a week, but as the total sum must not exceed 60 per cent of the wages, she cannot receive more than 12s., however many children she may have. This restriction is most necessary, for otherwise her husband might be worth more to her when dead than when alive. Thus, if she had ten children under 15, she would, according to the scale, receive 30s. for them and 4s. for herself, or 14s. a week more than the wages earned by her husband.

In order to carry out the law, an Imperial Insurance Board was formed, consisting of eleven members, of whom three are named by the Emperor, four by the Federal Council, and four are elected for 4 years, two by the presidents of the insurance societies, and two by the workmen's committees. This body is an ultimate court of appeal in all disputes arising under the law, and it exercises control over the establishment and management of the insurance societies. These societies, are in fact, mutual associations of the employers, although the workmen have a voice in disputes. There were created up to May 1886, no fewer than sixty-two of these societies. The chief idea was to associate persons in the same trade, so that the risk should be the same. There is an association for the whole of the chemical industry throughout Germany; another for gas and water companies, and so on. The iron and steel trades have eight societies, each covering a geographical area. The Imperial Board is bound to see that a sufficient number of associations are formed to provide for the whole field of industry, and it exercises a control over the amount of premiums, page 13 and requires an annual statement of accounts. The premium is fixed for each trade according to the risk, and the several employers pay according to their wages bill. To secure the financial soundness of tie societies a reserve fund is created. In the first year the employers pay four times the normal premium; in the second year twice; in the third year 150 per cent; in the fourth year 100 per cent; in the fifth year 80 per cent; in the sixth year 60 per cent; and in each of the five succeeding years 10 per cent, in addition to the normal premium. By this time it is expected that the financial soundness of the societies will be incontestable; but behind these societies the workman has the guarantee of the State.

A very important and interesting feature of the Gorman system is that it discards the element of age on fixing the insurance for sickness. No voluntary society can do this. Our friendly societies generally refuse to admit members over the age of 45, and they quote much lower rates to those who join at an early period of life. In a voluntary system this is right and unavoidable, but it has its disadvantages. The conflict of interests between the young and the old members of a friendly society is not an infrequent cause of collapse, and sometimes the older members find themselves left without protection at the very period of life when it is most required. But when insurance is made compulsory, there is no difficulty in averaging the rale of sickness and requiring the same contributions from the young as the old. If the young pay a little too much, the burden falls upon them when they are strong, and they get the benefit of their sacrifice when they themselves advance in years.

The only State interference that forms a permanent element in German legislation is the imposition of An Obligation to Insure. This is not Socialism; it is the enforcement of a duty which every man owes both to his neighbours and to himself. Whether that duty should be left to the care of the individual conscience or be strengthened by the sanction of law, is an interesting subject of study; but in any case it is the duty of the individual that is established, not a duty of the State towards the individual. The German system is, in fact, the consummation of individualism, not the thin end of the wedge of Socialism. In one case only—the provision for disablement and old age—does the State even contribute to help the individual to perform his duty, but that help is limited in both its character and its duration.

A law that simply said to the workman, "Thou shalt insure against sickness, disablement, and old age," even if accompanied by penalties for disobedience, would be barren and unpractical. The cost of enforcing obedience would alone prohibit such a measure. Bismarck accordingly avoided the error of applying compulsion to the workman; he looked to the master. This latter method is as easy and simple as the former is complex and difficult. The principle upon page 14 which he proceeded was to compel the employer to insure the workman, and to pay for the insurance, leaving him to deduct from the work, man's wages the amount that in the eyes of the Legislature the workman might fairly be called upon to contribute. The employer is bound to pay the whole of the premiums of insurance against accident, and one-third of those for sickness; and to this extent Bismarck's legislation rests upon generally accepted notions of justice. But the half-share of the premiums for disablement and old age must be defended, if defended at all, not upon any abstract principle of justice, but upon grounds solely of expediency. He was able to satisfy the German Parliament that sufficient ground existed for a charge, the equitable nature of which is not self-evident.