The Origins of Unemployment Insurance in Edwardian Britain

By Part II of the National Insurance Act of 1911, Britain became the first country in world history to introduce national compulsory unemployment insurance, albeit at the first stage it was limited to just three trades: engineering, shipbuilding, and building and construction. According to international comparison on social policy, among the four main elements of social insurance (industrial accident, sickness, pension, and unemployment), unemployment insurance was the highest hurdle to overcome because of its peculiar characteristics that care for able-bodied workers.¹ Therefore, it is very natural to ask why the Liberal government adopted such a drastic measure despite there being no public demand to do so. Implementing such a policy could forestall even Germany, the original forerunner on creating a national social insurance system. In other words, what motivated policymakers’ decision to introduce such an epoch-making unemployment insurance policy? This question has not yet been completely answered. This article attempts to elucidate this question from the original perspective, which focuses on the organizational characteristics of the Board of Trade that introduced unemployment insurance. In so doing, this article shows that Britain’s unique free trade policy in contrast with other major industrial countries’ protectionism had strong influence upon that policymaking.

So far, the studies of Bentley Gilbert and Jose Harris have remained the authoritative source on the origin and formation of the British unemployment insurance scheme. There is a nuanced difference between Gilbert, who regards the humanitarian concern of Winston Churchill, president of the Board of Trade, as the most important factor, and Harris, who suggests that the role of dominant bureaucrats such as Hubert Llewellyn Smith or William Beveridge should also be emphasized and that their positive views on social policy arose from a conservative motive to maintain the existing social order as well as a humanitarian concern. However, Gilbert and Harris basically come to the consensus that the greatest driving force behind unemployment policy was the social radicalism of those dominant personalities.² This consensus is also backed up by J. A. M. Caldwell, who analyzes the reason why neither the Local Government Board nor the Home Office, but instead the Board of Trade, took the initiative on labor policy.³ Rodney Lowe also corroborates this consensus.⁴ Besides these studies, there is an interesting study of Timothy Hellwig that adopts a cross-class alliance approach of comparative political economy. He argues that employers and workers in capital-intensive trades formed an alliance in support of unemployment insurance, whereas their counterparts in relatively labor-intensive trades were unable to strike a similar bargain. However, his study does not aim to elucidate the policymaking process through primary documents.⁵

On the other hand, Roger Davidson is the only scholar who has thoroughly researched the entire labor policy of the Board of Trade. Originally, in his Ph.D. thesis, which dealt with the labor policy of Hubert Llewellyn Smith, he emphasized the progressive character of Llewellyn Smith and regarded his labor policy, including unemployment insurance, as basically a pro-labor one.⁶ However, thereafter, Davidson withdrew the argument that the civil servants of the Board of Trade were pro-labor social reformers, and instead put forward a new interpretation that the labor policy by the Board of Trade tended to support the employers’ side in cases of industrial disputes and embodied a conservative vision of social control to constrain the labor movement.⁷ However, Davidson has not analyzed unemployment insurance through his new perspective.

Thus, there is an overlooked contradiction between the dominant thesis on the origins of unemployment insurance and the consequence of verification of the Board of Trade’s policy structure. If, as Davidson has demonstrated, the Board of Trade’s labor policy was biased against the labor movement, how can their eagerness for unemployment insurance be explained?

Furthermore, Gordon Phillips and Noel Whiteside verify that Board of Trade officials eagerly grappled with the casual labor problem and used labor exchanges as a means to dismantle the underemployment system of the dock industry.⁸ Therefore, it is possible to say that those civil servants seriously addressed each problem...