reference to the desirability of enacting compensation laws. These show that in great numbers of cases employers, even some of the largest and most prosperous of them, frequently neglected to make any payment whatever to the dependents of those who had been killed in their service. In many cases money was paid, but in sums so petty as to be little better than nothing, $50, $100, or perhaps a little more. Cases in which the payments ran in thousands were extremely rare. It may be a not unfair sweeping generalization to say that under the so-called liability laws payments at any amount were not made in more than a third of the cases of fatal injury to employees. And the average of the sums actually paid would be in the small hundreds. A careful study has shown that in Pennsylvania shortly before the passage of the compensation act the average amount paid on account of fatal injuries was $261, at a time when under the compensation laws of Connecticut and Ohio the corresponding figures were $2,269 and $3,098. The next year in Pennsylvania the average compensation award on account of fatal injuries was $2,383, while in 1918 it was $2,659, a little more than ten times as much as had been secured under the liability laws.

There can be no reasonable doubt that the compensation awards made for fatal injuries do mean a large increase from the petty and uncertain sums which dependents received under the liability laws. The differences appear so great in the loose comparisons which it is possible to make that, to a complete certainty, they could not disappear after the fullest collation of data. Indeed, the differences now apparent may quite as likely be below the reality as above it. And it must not be forgotten that such sums as now are received come promptly and without appreciable costs to the recipients. It is true that much the greater number of compensation awards for fatal injuries, as for other injuries, are paid in a continued series of small sums, not at once in a lump, and that, in so far, the awards must be discontinued for purposes of close comparison with the payments made in full at one time under the old order. But again the difference in amounts is so much in favor of the compensation awards that a full discounting of them could not bring them down to or near the level of the liability payments. It might, indeed, not be unreasonable to maintain that, on the whole, the series of continued small payments are the better arrangement for beneficiaries. That, at least, has been the judgment of those who made the compensation laws.

WHAT WORKMEN'S COMPENSATION INSURANCE MEANS TO THE MANUFACTURER 1

1

With compensation the burden is passed on to society in an orderly and moral manner by increased price increments to the

consumer.

In the old way, however, society has to bear the burden in the form of charity and upkeep of institutions necessary for the care of crippled workmen or the unprovided-for families they leave behind them when they are killed. What is the use of quibbling, therefore, as to whether the fault of the accident is that of the employer or employee?

Laws That Make the Employer Liable

Illustrating this argument in another way, we might consider the task of moving freight. Incidental to this movement there are a certain number of wrecked freight cars, the cost of which, of course, is included in the charge of operating expense. This operating expense in turn is covered by freight rates; the shippers pay the freight charges and include them in the price of their goods to the consumer. Thus, wreckage of freight is automatically taken care of by charges to the ultimate con

sumer.

Why should not the cost of wreckage of human workmen incidental to the production of goods be passed on to the ultimate consumer in the same manner? Every industry, I believe, should take care of its own human wrecks incidental to production in that industry.

In some states compensation is refused where the man injured has been intoxicated or has exhibited gross carelessness. As usually expressed, the laws state that compensation is to go for injuries "arising out of and in course of employment not due to wilful intention to injure self or another or to intoxication." Some states also make an exception in case the employee fails to make reasonable use of safety appliances.

Such penalization, however, is not wholly rational, for, no matter how incurred, injury or accidental death cause suffering and deprivation and eventually the cost has to be passed on to society anyway. If such a procedure is to be justified, it can

1 From article by Albert W. Whitney, General Manager, National Workmen's Compensation Service Bureau. Factory. 26 1307-10. June 1, 1921.

be only on the ground of making the employee more careful. It should be considered, however, whether, if the employer knows that he is to be responsible for all accidents that occur in his plant, he will not put into effect rigid safety and disciplinary provisions that will largely eliminate the possibility of such neglect.

Workmen's compensation laws involve an obligation on employers to pay to injured workmen or to their families in case of death, irrespective of the fact as to whether the fault of the accident lay with the employer or employee, certain sums of money generally stated as a percentage of the man's annual earnings. Being thus held liable for accidents occurring in his plant, the natural effect on the employer is to do his best to prevent all such accidents from happening.

Therefore, though workmen's compensation is primarily a system whereby a workman or his family is compensated for injury or accidental death, practically it has the effect of increasing industrial efficiency through reduction of accidents and elimination of accident hazards.

It is well thus to put the responsibility for accidents on the shoulders of the employer, for the employer is an efficient person, otherwise he would not be an employer, and when he realizes that full costs for injuries must be borne by him he will organize his business in such a way as to take care of those costs. Furthermore, in order to reduce those costs, he will endeavor to reduce the number of accidents by the installation of safety devices and the inauguration of a continual educational campaign. He will see, then, that the best way to provide for payment of workmen's compensation is to make provisions in his plant so that he will not have to make payment. In that way, instead of endeavoring to avoid the effects of misfortune, he bends every effort to prevent misfortune from occurring through accident in his plant.

In most cases the employer passes the actual responsibility for compensation payments on to insurance carriers. In some states, in fact, this is required by law, while in other states the employer can carry his own insurance on proof of his financial ability to do so or by provision of suitable bond.

When the employer passes this responsibility on to an insurance company he goes a step further in the direction of accident prevention, for these companies, being specialists in this

work, are better equipped to solve the various problems that arise in this field and to give expert advice and assistance to the employer in inaugurating his accident-prevention campaign.

The insurance company also can, by combining a great number of risks together, install the machinery for handling them more efficiently and effectively than the individual is able to do. This does not apply, however, to certain very large concerns which are so big that they are able to install what virtually amounts to the complete machinery of a separate and distinct insurance organization of their own. Some states, however, notably Massachusetts, require everybody to insure.

The insurance company, by specializing as it does, is able to maintain a corps of trained inspectors who are usually better fitted for their work through wider and more varied experience than those that the individual employer can put on his force.

By distributing the work of its inspectors over a great many plants, moreover, the insurance company is able to utilize a higher grade of inspector than the individual employer can afford.

Why Competition Has No Place in Compensation Insurance

Certain states have provided funds for the payment of compensation insurance; in some of these states the fund is monopolistic and in others competitive. The best operated of these state funds, is that of Nevada for the monopolistic and that of California for the competitive. Most of the workmen's compensation insurance is carried through the stock companies (about 75 per cent), although the mutual companies and competitive state funds are making signal advances.

The need of a regulatory body to govern the conduct of workmen's compensation insurance was recognized soon after the first workmen's compensation law was passed, and so in December, 1910, various companies that had previously been caring for liability of employers under common law formed the National Workmen's Compensation Service Bureau. The necessity for this cooperative effort by the companies in the establishment of rates, commissions and guiding principles has not been questioned, because insurance departments and industrial commissions realize that it is needed in the interests of the public and they stand behind the movement with their influence.

One of the chief duties of this central bureau is to fix rates,

for startling as it may seem, competition in rates or prices has no place in insurance. Unregulated competition, it has been proved, leads frequently to insolvency of the insurance companies and consequently to the destruction of the coverage for the injured employee and his dependents. It also leads to gross discrimination in matter of rates between employers whose hazards are the same. Under competition, furthermore, that employer who is best able to do so can bring pressure to secure a lower rate: thus there is liability of a vicious discrimination in favor of the strong.

While the formation of the National Workmen's Compensation Service Bureau for the purpose of regulating rates was brought about by private initiative, the various states soon found it necessary also to regulate rates, and in this regulation they have followed the procedure already developed by the insurance carriers. In fact, some six states have utilized the machinery put together by the National Workmen's Compensation Service Bureau for the regulation of their rates and selected the branch offices of the bureau as official rating offices of the states. Other states such as New York and Pennsylvania have formed independent bureaus.

In the further adjustment of rates up to recently there was the informal cooperation of the various insurance carriers, insurance officials and such organizations as the National Workmen's Compensation Service Bureau and National Association of Mutual Casualty Insurance Companies. About a year ago, however, an advisory organization known as the National Council on Workmen's Compensation was formed to handle the making of rates in an organized way. The members of the National Council include nearly all insurance carriers, the National Workmen's Compensation Service Bureau, the National Association of Mutual Casualty Insurance Companies and independent rating bureaus in such states as New York and Massachusetts. In this way practically all the insurance carriers of the United States have become affiliated with the National Council. Although purely an advisory body, the National Council is well provided with data and facilities for rate making and its recommendations accordingly, therefore, are almost universally followed. State officials having jurisdiction over workmen's compensation rates cooperate with the National Council on Workmen's Compensation. These officials are chairmen of all the National Council's standing committees.