A great nation has furnished a brilliant example for our study and guidance. Under the inspiration of that example the world seems to be moving toward the solution of one of its greatest and most difficult problems.

VII

INCIDENCE

UNDER a system of compulsory insurance for workmen such as prevails in Germany and some other countries, upon whom does the burden fall? Upon whom ought it to fall as a matter of justice? The German law provides that it shall be distributed; in sickness insurance one third must be paid by the employer and two thirds by the workman; in accident insurance the whole must be paid by the employer; and in invalidity insurance a subsidy is paid by the state and the balance in equal shares by the employers and the workmen. Perhaps it would not be claimed that this distribution of the burden was strictly scientific; there was the necessity for compromise between diverse views; in accident insurance it was doubtless felt that the employer was in a position to charge the cost to the industry and recover it in a higher price to consumers, although this reasoning might be almost equally applicable to other kinds of insurance, even if not quite so obviously sound.

In the discussion of the question of the incidence of burdens there is often much con

fusion of thought. Who pays taxes, direct and indirect? It is usually assumed that the question is very simple: that the landlord pays the tax and not the tenant; the employer and not the employee; in a word, the one who mechanically turns the fund over to the public treasury. Nothing could be simpler in the way of a solution. For example, in a recent public document issued for the purpose of furnishing valuable information one may find it carefully computed that the proper tax of a family of eight in a certain city would be $645.44 per annum, while the head of the family pays only a poll-tax of two dollars. The writer naïvely asks, "How, on the supposed income of $600, can enough be charged against him to pay a tax of $645.44?" He adds that such a person" is, in reality, a pensioner and a recipient of benefits paid for by persons who are taxed." This would seem to be the echo of an old political economist: "The poor do not, never have, and never can pay any tax whatever. A man that has nothing can pay nothing." The farm laborer sometimes in the dull season works for a nominal wage, say five dollars per month and board. It might be argued that as his board is worth at least fifteen dollars a month he is a pensioner, as

17.

1 F. F. Fauquier, quoted in Seligman, Incidence of Taxation, p.

he cannot pay the value of his board out of his wages.

As a matter of fact, it is immaterial who manually pays a tax. We can imagine a community where it would be the custom for the tenant to pay it rather than the landlord; the workman rather than the employer. Taxes are not paid, as a gratuity, out of some mysterious fund. They must trace their ultimate source to the product of labor. The question would be simplified if we look upon wages, when equitably adjusted, as a residue, after the payment of rent, taxes, interest, and similar charges have been deducted.

Some such general considerations should be borne in mind when we discuss the incidence of charges for workmen's insurance. The burden does not necessarily by any means fall upon the one who actually makes the pay

ment.

There are three parties upon whom the cost of such insurance may be levied: the state, the employer, and the workman. It is sometimes loosely argued that upon whichever of these parties the assessment falls it virtually comes to the same thing a tax upon the consumer. This view is superficial and fallacious, as will be shown.

At first sight it might seem appropriate that the state should take upon itself the whole

burden, granting compensation in case of accidents, sickness, and invalidity alike. It would be a natural transition from the support of the so-called worthy poor as now administered to the payment of specific amounts to the unfortunate soldiers of industry. The tax would be levied upon society as it is to-day. The objections are economic as well as moral and sentimental: there would be the same tendency to pauperize men as there is under the present poor-law; the state would be held out as a great benefactor of inexhaustible resources; there would be the greatest inducement to simulation of sickness and incapacity; it would bring in the evils of the soup-kitchen on a large scale. For these reasons the cost would be excessive and the evils would be cumulative.

By this method, too, the nature and the amount of the burden would be effectively disguised; the real cost of an industry could not be identified or made known; the party reaping the profit of the industry might escape its losses; the state would say to conscienceless promoters of industry, if there are such, Be as reckless as you may with the human material committed to your charge, maim with your dangerous machinery, poison with noxious gases and unsanitary surroundings, incapacitate as you may, even assail the future of the race by pitiless disregard of maternity and