Committee on Economic Security (CES)
Volume I. Unemployment
Compensation
Other Staff Reports
Foreign Experience
UNEMPLOYMENT INSURANCE IN SWITZERLAND
{1}
THE FEDERAL LAW
By
Wilbur J. Cohen
October 2, 1934
The Federal Unemployment Insurance Act of October 17, 1924, extended and
placed on a permanent basis the war time system of federal subsidies
to unemployment insurance funds set up by public authorities, workers’
associations, or jointly by employers and workers. The Confederation agreed
to pay from to thirty to forty percent of the cost of any fund recognized
as complying with the prescribed conditions. Within these limits, the
cantons could also adopt regulations for their territory and even establish
compulsory insurance.
The federal act did not establish uniform regulations concerning the employer’s
share of the cost, but it required a contribution from the insured
person and declared that the unemployed had a definite right to benefit.
The law did not impose the burden of a central administration and by avoiding
the compulsory principle it allowed for the differing stages in the evolution
of unemployment insurance throughout the country. The Confederation reserved
the right of supervision over the funds to withhold subsidies from funds
that violated its regulations. {2}
{1} A summary of T. G. Spates and S. Rabinovitch, Unemployment Insurance
in Switzerland, Industrial Relations Counselors, 1931.
{2} For detailed analysis of the law, Ibid. Chapters IX and X.
| Table 1:* MAIN PROVISIONS OF THE FEDERAL UNEMPLOYMENT INSURANCE ACT, OCTOBER 17, 1924 | |||||
| Nature of System | Conditions for Recognition of Funds | Scope | Financial Organization. | Conditions for Benefits | Benefits Granted |
| Optional, based on subsidies to public and private funds. | Not run for gain or any purpose other than insurance. Based on contributions by insured person. Keep separate accounts and and accept supervision by competent federal authorities. | Federal subsidy applies to insured persons: 1) over 16 years of age; 2) capable of working; 3) regularly working; 4) domiciled in Switzerland; 5) in principle irrespective of nationality. | 1) Contribution of federal authorities: to trade union funds paid; to public and joint funds 40 per cent of these benefits. 2) Contribution of insured person: varies in each fund, but may not be less than 30 per cent of benefits paid. 3)Contribution of Employers: according to the act, compulsory only in joint funds. | 1) Absence of fault. 2) Desire to work and registration with public employment exchange. 3) Lack of suitable employment for reason other than collective dispute. 4) Ability to work. 5) Qualifying to period of 180 days. 6) Waiting period of 3 days. 7) Equality of treatment for national and foreign workers. | 1) Amount: 50 or 60 percent of the loss of normal earnings,according to absence of legal obligation for maintenance of others. 2) Duration: 90 days in period of 360 days. |
THE CONSTITUTIONAL PROBLEM
Switzerland has a democratic form of government with a federal constitution
limiting central authority to delegated powers. The twenty five cantons
of the Confederation are entirely sovereign in so far as they have not
specifically given up any of their powers by virtue of the federal constitution. No
article of the constitution authorizes the federal authorities to introduce
employment insurance legislation or to make it compulsory for the cantons
and the council has no right to adopt an insurance act, even an optional
one, which could apply to the whole country. Such a step would require
an amendment to the constitution by vote of a majority of the
Swiss electors and of the cantons. It was this factor which made for difficulty
in determining how unemployment insurance could be established in
Switzerland.
As early as 1893, the Federal Chancellor received a request to include
the principle of the right to work in the federal constitution with a
section to be included insuring the workers effectively against
the consequences of lack of employment, either by public insurance or
by the establishment of private funds, to be subsidized by the public
authorities. This request was rejected by a large majority by popular
vote in 1895.
Because of the constitutional difficulties a permanent system of federal
subsidies to public and private funds was advocated in 1917 rather than
the creation of a federal compulsory unemployment insurance fund. The
Act of 1924 is the result of this decision.
In addition to the sovereignty of the cantons, the established traditions,
and the varied industrial structure of the country, necessitated legislation
that would be flexible and at the same time broad in its application,
in order to guarantee protection to as great a proportion of the population
as possible. The results of the legislation have been observed by
the authors of Unemployment Insurance in Switzerland. They have
included in their work a number of points for consideration in the discussion
of legislation in America which Switzerland's brief period under national
legislation suggests.
EXPERIENCE AND CONCLUSION {3}
(1) This federal country restricted national action to subsidizing funds
set up by cantonal and municipal governments and private funds. This procedure,
dictated mainly by constitutional limitations on the central authority,
has resulted in a variety of systems and degrees of protection, ranging
from compulsory insurance on through subsidized voluntary schemes to no
legislative provision.
(2) After a quarter century of experiment with voluntary forms of unemployment
insurance, well over one half of the insured population is now covered
by compulsory plans.
(3) In general, the federal subsidies to public and private unemployment
insurance funds have greatly accelerated the extension of coverage in
the more highly industrialized cantons but have been less effective in
cantons where industry is not so important.
(4) As a general rule, in funds of all types contributions have been assessed
and benefits paid according to wages earned, a departure from the flat
sum method of the British system that has also been followed in the legislation
of Germany.
(5) The pooling of he contributions of all industries in one fund according
the British procedure has been avoided.
{3} -Ibid., pp 161-164.
The principle of insurance by industry embodied in most of the trade union
funds that preceded the federal law, and also largely recognized in the
post war relief legislation, has been accepted in the national and cantonal
measures. Public funds open to all insurable workers regardless of industry
have necessarily been established by cantons and municipalities that have
made insurance compulsory in order to afford protection for persons attached
to industries in which trade union or joint funds have not been established
or who prefer not to join such funds. The experience in cantons and municipalities
that have adopted the compulsory principle indicates that with some freedom
of choice as between types of funds established within their population
are members of funds established within their industries.
(6) The principle of allocation of income to the different employment
risks has been recognized to some extent in that the federal act provides
for a special subsidy of 10 per cent of the benefit expenditure to meet
extraordinary unemployment, a step adopted by many of the cantons in their
subsidy procedure. Recent experience has
justified such provision. In the depression year, 1930, the benefit expenditure
per insured person for all groups of funds was more than twice that for
1929.
(7) For a few years preceding the depression of 1930, the benefit cost
per insured person in the group of public funds was usually more than
double that of trade union funds and from four to eight times that of
the joint funds. The experience seems to have confirmed the view
that the membership of public funds will include a larger proportion of
the poorest risks than that of the industrial funds, an hypotheses on
the higher federal subsidy to public funds than to trade union fund was
based.
(8) Retardation of labor mobility, a charge often brought against insurance
by industry, is guarded against by the provision that public insurance
funds receiving federal subsidy shall accept persons from other recognized
funds who have been released voluntarily, or through no fault of their
own, into the same insurance rights as their own members after they have
paid four weeks’ contributions. Transfers of insured workers into
union funds are conditioned on their being accepted as members of the
union and into joint funds on their being engaged by an employer contributing
to the fund. Most of the union and joint funds have rules providing
that once these initial conditions are satisfied benefit rights shall
be granted on easy terms to bona fide cases of transfer.
(9) The whole Procedure which involves no administration by government,
except in the case of municipal and cantonal funds, tends to avoid bureaucratic
methods and to minimize the danger of political interference with regulations
established by experience. As the initiative in legislation rests with
the cantons, unless they choose to pass it on to the municipalities, each
cantonal government is enabled to adopt within the federal limits the
type of legislation demanded by its own public and that seems best suited
to its stage of industrial development. Employers and workers are
left free to establish and administer their own systems within the prescribed
subsidy provisions and so to secure flexibility and adaptation to the
conditions of their industries.
(10) A nation wide system of public employment offices developed with
the financial aid of the federal government before the enactment of national
unemployment insurance legislation has facilitated administration of the
insurance funds and guarded against malingering.
Unemployment insurance, however, has achieved protection for less than
half of the whole body of insurable workers and only about one fifth of
all wage earners. The majority are still dependent upon their own resources
or poor relief. It is noteworthy that in the six years of
experience under the federal legislation the proportion of the population
insured has been growing steadily as more cantons and municipalities have
made membership in an insurance fund compulsory and the number of private
funds has increased.
SIGNIFICANT STATISTACAL DATA
1. Total Resident Population (1930) {a}
…….4,667,000
2. Percentage of insurable population insured:
1927……………………..32.3 {b}
1928……………………..34.3
1929……………………..37.9
1930……………………..41.1
{a} Percentages: on following tabulations, however,
were based on 1920 population figures.
{b} Cf. Ibid., 133-35.
3. Percentage of insured persons to total
gainfully occupied:
1927…………………………….13.2
1928…………………………….14.0
1929…………………………….15.5
1930…………………………….16.8
4. Percentage of insured persons to total
number of wage earners:
1927…………………………….17.6
1928…………………………….18.7
1929…………………………….20.7
1930…………………………….22.5
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