Unemployment Insurance

On May 4, 1911, David Lloyd George, the Chancellor of the Exchequer, introduced the National Insurance Bill to the British Parliament.1 Part II of the bill created the first national compulsory unemployment insurance system in the world, covering workers in industries prone to cyclical layoffs, including building, construction, mechanical engineering, and shipbuilding.2

Lloyd George had visited Germany in 1908 to study Otto von Bismarck's health insurance system, which had operated since 1884. In his 1909 budget speech, he declared that Britain should not emulate Germany only in armaments.1

The scheme required contributions from three parties. Workers paid two and a half pence per week, employers paid two and a half pence, and the government contributed three pence from general taxation.2 After one week of unemployment, an insured worker could claim seven shillings per week for up to fifteen weeks in a year.

The system assumed an unemployment rate of 4.6 percent. At the time the act passed, unemployment was at three percent, and the fund was expected to build a surplus quickly.1

The bill faced opposition from multiple directions. The Conservative Party initially praised the proposal, then split, with most members abstaining on the final vote.1 Lord Northcliffe, who controlled forty percent of Britain's morning newspaper circulation, launched a propaganda campaign against the act, culminating in a rally at the Albert Hall on November 29, 1911.3

The bill became law on December 16, 1911, and went into effect on July 1, 1912. By 1913, 2.3 million workers were insured for unemployment benefit and nearly fifteen million for sickness benefit.1

The act was extended in 1920 to cover additional industries. Its architecture, mandatory contributions from workers, employers, and the state funding time-limited benefits during involuntary unemployment, became the template for unemployment insurance systems built across the industrialized world in the decades that followed.4