give some protection to workers
1
who have lost their livelihood. Some countries passed laws introducing systems of relief whereby the destitute could obtain assistance, provided they gave up their civic rights. Under such a degrading condition, no one applied unless absolutely forced to. While their social efficacy was thus limited, these measures ha d the merit that they recognised a public responsibility for the relief of the destitute and led to special funds being set aside for this purpose. They applied a fairly wide range of workers and a number of their key principles are still, a century later, the basis of contemporary social security.
4. A number of other methods were also adopted to protect wage earners from poverty, for example savings banks, the system of the individual employer's liability in the event of employment injury, and various forms of individual insurance through private insurance companies and mutual benefit societies. Nevertheless none of these arrangements was capable of giving adequate protection to the working class as a whole. For example, although commercial insurance developed on a large scale in various countries, the premiums placed it virtually beyond the reach of the lower income group which included the great majority of wage earners. Voluntary social insurance expanded considerably in the form of mutual benefit societies. This system which often enjoyed the moral and material (or financial) support of the public authorities did have some major achievement, and in fact, even now, some countries rely on this system for social security protection; for example, such is the case in Denmark and Sweden for their unemployment insurance schemes and in some Swiss cantons for their health insurance schemes. But in
many countries the voluntary insurance system could not provide a completely satisfactory answer to the problems of insecurity among working people, particularly those who had not organised themselves into trade unions. The need for compulsory social insurance was inescapable.2
Social insurance
5. Compulsory insurance was first introduced in Germany in 1883 and has since steadily enlarged to give the workers increasingly comprehensive protection against such contingencies as are indicated earlier. In the early days, the chief function of social insurance was to pay out cash benefits as partial compensation for the loss suffered through the loss or permanent reduction of earning capacity. Nevertheless efforts were also made to cure the injured, sick or disabled person and to restore his earning capacity, with the result that curative medical care came to occupy an increasingly important place in social insurance. On the principle that prevention is better than cure, the scope of social insurance was further expanded to cover the prevention of sickness, employment injury and unemployment, So as reduce the cost of benefits and raise living standards of the working class, both materially and morally. Thus, compulsory social insurance had three main functions, namely income security, cure and prevention.
to
6. Under social insurance legislation entitlement to benefit is directly or indirectly related to the financial participation by Or in respect of persons protected. It en sures through the pooled financial resources, benefits for the persons protected in the contingency concerned and often relieves covered employers of direct responsibility prescribed by the existing employers' liability scheme dealing with the same contingency. For administrative purposes, such legislation sets up a public channel through a government department or government-supervised institution and establishes procedures for the processing of all claims and the award and payment of benefit. One of the major characteristics of social insurance schemes is that they are financed entirely or in large part from special social insurance "contributions" paid by employers or employees, or both, rather than from general revenue of the government. These contributions are set aside in a special fund kept separate from other government accounts, and all benefits are paid in turn from this fund.
1 It is, of course, possible to trace the origin of employers' liability principles back to the days of the Phoenicians or that of unemployment assistance to a Roman law of 132 B.C.
2 For the discussion of effectiveness and shortcomings of various social security measures, reference is made to the working paper prepared by K. Thompson for the seminar, ASS/11/3/1974.
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