The making of Beveridge's Unemployment (1909): three concepts blended

Abstract

The aim of this paper is to re-examine William Henry Beveridge's (1879 – 1963) early ideas on unemployment. After developing through three phases (‘from the unemployable to the unemployed’, ‘from the unemployed to unemployment’, and ‘perfection of the labour market’), Beveridge finally accomplished a coherent package of remedies for unemployment: labour exchanges with National Insurance on the basis of the living wage principle (previously unexplored but evident through his work). These three concepts, perfectly blended, formed his original and unique standpoint. By analysing this development of ideas, we can position Beveridge's doctrine of unemployment more appropriately in the history of economic thought.

Keywords:

• Beveridge
• labour exchanges
• insurance against unemployment
• the National Minimum
• 1903 – 1909

Notes

*I wish to thank two anonymous referees for their valuable comments; and Dr Alan Booth (University of Exeter) for discussions on this theme. This research was supported by JSPS. KAKENHI (15530132).

Harris' works (1972, 1977, 1996, 1997) are comprehensive studies of Beveridge's life, especially on social policy. Our study, which deals with an inner story of economic thought, should be regarded as a complement to Harris', not a substitution.

Himmelfarb (1992/1991: 5 – 6) points out that the late-Victorian reformers intended to be practical, scientific, and social policy thinkers, by admitting an expansion of the role of the state.

See Briggs and Macartney (1984: 61), ‘it was not as a “philanthropist” but a scientist that he [Beveridge] turned to the East End’ .

The Beveridge Papers in the Archive Section, British Library of Political Science, London School of Economics and Political Science (hereafter as BP), Part 2, Series 2: Part 1. Reel 1, Item 5 (microfilm). Early Activities: Central (Unemployed) Body for London, conference reports, summaries of working colony schemes and related papers, 1905 – 8.

Beveridge himself referred to his scientific method, saying ‘I wish to see economics […] established as an inductive science of observation, nearer to biology than to mathematics or philosophy’ (Beveridge 1955: 247).

Beveridge (1904c: 27), emphasis in original.

A few years later, Beveridge changed his opinion, and looked unfavourably on the Salvation Army and the Unemployed Workmen Act (1905). For instance, see Beveridge (1908a: 387) and Beveridge (1909: 160, 190 – 1).

Beveridge (1904d: 44) and also the ‘ provision of relief work is better than cash payments’ (p. 44).

Victorian values are thrift, prudence, diligence, self-discipline, self-dependence and so on. See Himmelfarb (1992/1991: 7).

Of course, this term was first used precisely in the Webbs (1897). The National Minimum means ‘ the prohibition of all such conditions of employment as are inconsistent with the maintenance of the workers in a state of efficiency as producers and citizens’ (Webbs 1898/1897: 771). By 1905, Beveridge definitely read the Webbs (1897), see Appendix.

Although Beveridge declared ‘ the consideration … of a comprehensive remedy’ (Beveridge and Maynard 1904: 629), he had no concrete plans.

Booth's intention was rather conservative, although his analysis much influenced Beveridge. Booth's survey (Life and Labour of the People in London, 1889 – 1903) highlighted casual labour ( = Class B, the casually under-employed). He advocated the labour colony as a remedy for ‘decasualization’ (see Phillips and Whiteside 1985: 44 – 5). However, the solution to the problem of poverty was to get class B out of the labour market, because Booth attributed unemployment to a surfeit of people (Garraty 1978: 112 – 13). Moreover, he was a moralist, which was axiomatic among most Victorians (Himmelfarb 1992/1991: 120) and preferred Individualism. Beveridge overcame such aspects of Booth's view.

Rowntree's survey (Poverty: A Study of Town Life, 1901) was more scientific than Booth's. The ‘poverty line’ was based on income and nutrition (see Himmelfarb 1992/1991: 169, 178). However, Rowntree concentrated on irregularity of work rather than unemployment (Garraty 1978: 128).

Barnett, Booth's friend, founded Toynbee Hall in east London in 1884. Based on Christian philanthropy, Barnett ran the Settlement house and appealed for social reforms.

This article is unsigned. Nonetheless, according to Harris' study and taking the terminology into account, we identify this paper with Beveridge's. See Harris (1997: 145, Note 25).

See Chapter 5 and 6 of Alden (1905). Alden spared 21 pages for the first class and 28 for the second.

BP, Reel 2, Section 3, Item 12, ‘ Plan for The Unemployed: An Economic Question’ (1905).

BP, IXb 3 (1905). On 30 March 1905, Beveridge pointed out the ‘need for a new local authority’ and considered the ‘relation of public relief schemes to the general industrial system’, ‘the right of the individual to labour’ and ‘the responsibility of the State’. These three lectures were on ‘Social and Industrial Questions’ at Toynbee Hall in Period 1; on 19 October, 23 November, and 7 December 1904. BP, IXb 2 (1904).

These three lectures were on ‘Social and Industrial Questions’ at Toynbee Hall in Period 1; on 19 October, 23 November, and 7 December 1904. BP, IXb 2 (1904).

This lecture was undated in 1905 for a meeting at Toynbee Hall. BP, IXb 3 (1905).

There were three lectures at Toynbee Hall on 24 January, 7 February, and 14 March 1905. BP, IXb 3 (1905).

Beveridge (1905b) and (1905c).

Harris (1977) at first judged that Beveridge for the Toynbee and the Morning Post period ‘read few works of economic theory’ (p. 115). However, Harris (1997) changed her view, stating that ‘he studied a number of classic nineteenth-century writings on political economy’ (p. 144) in both times, and that he read ‘marginalist economists, particularly the writings of W. S. Jevons and Alfred Marshall’ (p. 486) in his time on the Morning Post.

BP, IXb 3 (1905), see Appendix.

The four articles are again unsigned. However, we can observe the same terminology in many places, especially ‘act as a clearing-house’ in the Toynbee Record and the Morning Post at the same time. There was no one except Beveridge who wrote for both publications. Moreover, the last article, Beveridge (1906a), was identified by himself in his autobiography, Beveridge (1955: 55).

The two quotations are from Beveridge (1905e).

All the quotations are from Beveridge (1906b).

Some studies do point out the importance of the 1906 Conference at the LSE, where both Beveridge and Hobson participated. See Harris (1972: 22 – 3) and Phillips and Whiteside (1985: 79). However, there is no reference to Hobson regarding a theoretical relationship with Beveridge, even in Harris (1997: 143, 167).

Although Section 2 of the book had not been changed since the first version (1896: 127), it is quite natural that Beveridge would have referred to the second. This inference is possible because Beveridge began to use this word ‘clearing-house’ from December 1905, while Hobson had used it in his publication of November 1904. What is more, Beveridge (1909) referred to the third (and not revised from the second) edition (58, Note 2).

The proceedings from the Conference in 1906 were published a year later.

Beveridge's contemporaries thought of unemployment as a ‘social’ problem, arising out of the normal workings of the economic system (see Winch 1969: 47).

Beveridge (1907b: 329). As to second causes, Beveridge also pointed out the other (less effective) measures: national business to counter the fluctuations of privately controlled industry; the out-of-work pay (a grant).

Beveridge (1907b: 329). Hutchison (1953) referred to Beveridge (1909) concerning an explanation in terms of chronic over-capitalisation (p. 387, Note 2). We should note that the explanation dates back to 1906.

At the same time, Beveridge sharply distinguished the unemployable from the ‘efficient’ or dependent people (ordinary workers). The unemployable should be ‘removed from free industry and maintained adequately in public institutions’ with ‘the complete and permanent loss of all citizen rights’ (Beveridge 1907b: 327). His attitude towards the unemployable was severe at this stage.

Beveridge (1906e) and (1907a). We should note that Beveridge's fame at last took him to the top of the academic journal. This fact itself undermines the idea that he was not an economist.

Beveridge (1907a: 71); the equation above is our formation.

Beveridge (1907a: 68). These specialities took place against the background of industrial causes, whose content is the same as Beveridge (1907b: 325 – 6). However, the words are slightly changed: transformation of conditions; periodic fluctuations; chronic under-employment (Beveridge 1907a: 68).

All the quotations in this paragraph are from Beveridge (1907c). The first is from the subtitle of the twentieth article, the others from the twenty-third. Beveridge probably had not yet thought of unemployment insurance thoroughly around 1906. The exception is an article of 16 February 1906 in the Morning Post (Beveridge 1906a), though the author's position is obscure. He was worrying about the funds, however ‘this exclusion of contributory insurance was accepted’ (Beveridge 1955: 55 – 6). Another article in the Toynbee Record, in May 1906, has an interesting title ‘Insurance Against Unemployment’. However, we cannot identify the author and there were no original ideas in it (Beveridge? 1906c).

Beveridge (1907d) and (1907e), signed articles from Berlin.

Around 1903, Beveridge advocated the similar test for the labour colony, ‘making the relief work less attractive than ordinary work’ (Beveridge 1906d: 75).

The first three examples are from BP, IXb-5 (1907).

‘The Organization of the Labour Market’, BP, IXb-6 (1908: 9), emphasis added. See also Beveridge (1909: 207).

Recent theories developed this point: a process of matching workers with jobs. Each worker and job is diverse, thus employers and job-searchers are inevitably ‘involved in a process of search and exchange of information with respect to jobs and potential employees’ (Adema 1993: 9).

As early as 1886, Foxwell published a book whose title was attractive: Irregularity of Employment and Fluctuations of Prices. Although he recognized that ‘uncertainty of employment is the root-evil of the present industrial regime’ (p. 7) and ‘public control […] is certainly required’ (p. 73), his analysis was not striking. He devoted over 75 percent of the book only to price fluctuations, which derived from Jevons (p. 24).

See also Laidler (1999: 157); ‘Pigou (1913) thus paid more attention to wage stickiness as a cause of unemployment than did Beveridge’ .

Unpublished writings of J. M. Keynes, copyright The Provost and Scholars of King's College Cambridge 2004. Keynes to Beveridge, 25 March 1914, BP, II-13.

On the other hand, Backhouse (1985: 247) noticed Beveridge's Unemployment ‘went beyond their works [Booth and earlier investigators] in looking at employment in a wider range of industries’.

Harris (1997: 482) correctly claimed that ‘the structure of Beveridge's thought […] can be pieced together in a coherent way’ (emphasis in original). Nonetheless, the way was not the same as our emphasis. Ours focuses on the National Minimum and the economic theory on unemployment.

*Beveridge's original writings, (a) Unpublished papers: The Beveridge Papers in the Archive Section, British Library of Political Science, London School of Economics and Political Science (BP). Some of them are microfilmed

§(b) Published papers

†(2) Other primary writings

‡(3) Secondary writings