CHAPTER V.

THE ECONOMIC BASIS OF COMPULSORY INDUSTRIAL INSURANCE AND COMPENSATION LAWS FOR INJURED WORKMEN.

econo

§ 33. Statement of problem from the mic standpoint. It is proposed in this chapter to present the economic basis for the substitution of a new remedy, namely, compulsory industrial insurance for workingmen, or workmen's compensation acts, in lieu of the common and statutory liability law remedies, as a means for compensating workmen who are injured in course of their employment.

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It will be shown not only that the common (and liability) law remedy in its present form does not furnish compensation of any kind in to exceed 12% of the cases of injuries to employés, and even in those cases in which compensation is paid, the compensation paid does not on the average exceed one-fifth of what is regarded as adequate compensation, but also that no modification of the common law remedy can be made whereby these results will be materially improved. Hence that the old common law remedy must be abandoned and a new remedy substituted therefor.

§ 34. Statistical studies exhibiting effects of old and new systems of compensation.-In the evolution of economic and sociological problems of a nation, already largely industrialized, gross inequalities in the material condition of the different classes of its citizens arise, and when the public mind becomes conscious of the hardships flowing from these inequalities, the legislative and judicial arms of the state are called upon to regulate, to equalize, and to adjudicate equitably such economic abuses and hardships.

The first steps to be taken in adjusting and relieving society of the said abuses are to inquire into and determine what the exact causal facts are, from which flow these abuses, before the legislative and judicial arms of the State can formulate and apply a just and equitable remedy. It is the determination of the causal facts of these economic abuses and the magnitude of their evil effects that constitute the most difficult step to accomplish, and upon the clear determination of which the legislatures and the courts of last resort insist first upon knowing, before they will enact and sustain the putting into operation of an adequate remedy for the injurious economic abuses involved in this problem.

Therefore, the discussion of "what provisions can be made for workingmen and their dependents, to avoid the economic insecurity which accompanies the modern wage system," resolves itself into the following plan:

(A) The location and determination of the causal facts and their fundamental characteristics which produce the economic insecurity of workingmen, and characteristics which accompany the modern wage system, shall first be analyzed.

(B) The remedy to cure these economic inequalities and in what way the legislative and judicial authorities of the States can put the proposed remedy into operation and perpetuate the same.

§ 35. Statistical experience under compulsory State insurance in Germany.-In 1887 there were insured against sickness and accidents in Germany 3,861,560 workingmen among 319,453 establishments,1 and the number of notices of accidents was 106,001. A special analysis of the different elements of the causes of these accidents will be found in the following section.

Persons

In 1907, these were insured in Germany against accidents:2 Insured Industrial, building, and marine trade associations

(associations, 66; establishments, 637,118) ------ 9,018,367 Agriculture and forestry trade associations (associa

tions, 48; establishments, 4,710,401)State executive boards (boards, 535).

11,189,071

964,589

21,172,027

In 1897 there were insured in Germany against accidents in the same associations and 409 State executive boards, in round numbers____.

18,500,000

§ 36. The question of fault and prevention of accidents-Compensation-German statistics.-The follow

1 Fourth Special Report of the Commissioner of Labor, 1893, p. 82. 2 Frankel and Dawson, Workingman's Insurance in Europe, 1910, p. 101.

ing table shows the accident statistics of industries for the three years, 1887,3 18973 and 1907, under the German law:

This table, covering a period of 20 years of experience, shows not only the elements of fault which enter into the problem, but also supplies a valuable basis for further improvement of preventive measures, since from 55 to 57 per cent. of all accidents are due either to the fault of the employer, employé, or their combined negligence.

It is of interest in this connection that the tables of the Minnesota and Wisconsin labor departments ascribe from 40 to 50 per cent. of all industrial accidents, on the average, as due solely to the inevitable risks of the business. The Austrian tables show 70 per cent. are attributed to this cause.5

It is first to be noted that this table represents the experience of the operation of the compulsory German State Insurance Law, for a period of 25 years, under the operation of which, from 4,000,000 to 21,000,000 workingmen and their dependents engaged in all possible in

3 Dr. George Zacher, Introduction to Workmen's Insurance in Germany, p. 14.

4 Bulletin of Bureau of Labor, 1908, p. 120 and § 47. 5 Report of the New York Commission, p. 25.

dustrial, governmental, and agricultural occupations of a great nation, with respect to the determination of the element of fault entering into the causes of accidents to workmen. We shall define the natural hazard of any occupation by the equation:

Inevitable risk + combined negligence of both employer and employé natural hazard.

During the period 1887-1897 there were put under the operation of the German law the workingmen employed in the occupations of agriculture, forestry, building trades, to the number of 12,250,000, who heretofore were not insured." This large class of workingmen were the most ignorant and poorest trained of all the workingmen insured under the law. It will be seen that the per cent. of the causes of accidents attributable to the negligence of the employé increased from 26.56 per cent. in 1887 to 29.74 per cent. in 1897, an increase of almost 3 per cent. During the next decade, 1897-1907, this element of fault fell from 29.74 per cent. to 28.89 per cent. while the number of such workingmen remained practically at the 12,000,000 mark. This is due to a gradual improvement of the ways and means of preventing accidents so carefully studied in Germany.

The superior intelligence of the employers made a more marked improvement in the reduction of the element of fault due to the employer's negligence.

Thus the causes of accidents attributable to the em

• Frankel and Dawson, Workingmen's Insurance in Europe, p. 101.