Unternavigation

Unemployment

The modern understanding of unemployment emerged at the end of the 19th century when public and private measures were gradually taken to support those unable to find employment. This did not therefore concern the needy, but rather the ‘unemployed’ who needed something other than public welfare. However, not everyone without work was considered unemployed. Only those who were able and willing to work to work were included. The history of tackling unemployment and regulating the labor market are closely intertwined.

Against the backdrop of industrialisation and an economic crisis in the late 19th century, the term ‘unemployment’ was increasingly commonly used among social reformers as a shorthand for a specific type of risk. Unemployment was no longer considered exceptional but was instead seen as a risk inherent in capitalist economies. However, the category of the unemployed only included those regularly gainfully employed and who, for economic reasons, had temporarily lost their position. It was also important to distinguish unemployment from other risks. The unemployed had to be fit for work, which made illness, impairment, or advanced age into exclusion criteria. Joblessness should also be a temporary condition; various controls were meant to ensure that the unemployed were willing to work. Loss of a job did not automatically lead to social protection; the individual regarded as unemployed had to meet additional criteria. The risk of being unemployed was thus always linked to the norm of regular gainful employment.

The authorities, under pressure from the nascent workers’ movement, were anxious to both reduce the causes of social tension and guarantee stable work relations in industry. Consequently, they had to address the risk of unemployment. A number of municipalities became actively involved, but it was predominantly the newly formed trade unions that set up the first unemployment funds. Union leaders, particularly those who were reform oriented, saw unemployment insurance as a means to promote labor solidarity, recruit and retain members, and reduce the pressure on wages- Joining an unemployment fund thus necessitated membership in a trade union, and unemployment compensation was only disbursed after several months of paying into the fund. How long compensation was paid, and at what level, often even directly depended on how long one had paid into the unemployment fund or been a member of the union. It was primarily workers in the metal, watchmaking, construction, wood and textile industry who were insured against unemployment. Female workers, abound one-third of factory workers at the beginning of the 20th century, were about a quarter of the workers insured. Women were therefore not excluded from this insurance, but remained underrepresented. In addition, their claim to unemployment compensation was frequently called into question, as was their presence on the labor market. 

Unemployment Policy through Subsidies

When Parliament passed the first federal act on unemployment insurance on 17 October 1924, less than one-tenth of the working population were insured against unemployment, and of them, 94 percent by a union fund. The act suspended emergency federal subsidies to unemployment funds, which had been introduced at the end of the First World War due to the impoverishment of broad swathes of the population, major social tensions, and an economic crisis that exerted intense pressure on the unemployment funds’ finances. Back then, trade unions had increased their efforts to obtain governmental financing. A number of cantons and municipalities already provided subsidies following a system used in other countries, in particular the ‘Gent’ model used in Belgium. Middle-class parties and employer peak associations accepted government subsidies for trade union funds, though with reservations. Nevertheless, introducing unemployment insurance was in line with their policy of providing incentives that promoted regular or consistent work. This was necessary in order to retain qualified workers even during periods when production was falling. The employers were successful in making sure they were not obligated to financially contribute to existing union or public unemployment funds; the burden of financing was passed on to the insured and to the public sector. The system inaugurated in 1924 ultimately aimed to stimulate the development of public, voluntarily created funds set up by municipalities and cantons and jointly and equally funded by employers and employees. This came at a cost for trade union funds, which received reduced subsidies. 

Such jointly financed funds were frequently established, particularly in the textile industry, at the initiative of individual employers, in an effort to increase employee loyalty. Before 1924, only one percent of the workers had such unemployment insurance, but be the end of the 1920s, this grew to 20 percent – a level it remained at until the mid-1970s. Public unemployment funds also increased their share from five percent before 1924 to 30 percent during the economic crisis of the 1930s. By the mid-1960s, the number insured through public funds exceeded the number insured by trade union funds. In 1964, trade union funds accounted for 40 percent of the insured, considerably lower than the 94 percent in 1924.

The Absence of a National Unemployment Policy during the Economic Crisis of the 1930s 

After the enactment of the federal act of 1924 and especially during the crisis of the 1930s (1932-1937), cantons also passed unemployment insurance laws, set up funds and introduced compulsory insurance for those with low incomes. This cantonal legislation was why membership in unemployment funds increased. Part of the social welfare costs previously fully borne by municipalities were transferred to the insurance schemes that were financed by workers’ contributions and the Confederation. During the economic crisis in the 1930s, the increased risk of becoming unemployed served to encourage membership in an unemployment fund: the proportion of the insured rose from 16 to 28 percent of the working population in just a few years. However, most workers, and particularly working women, continued to be excluded from insurance coverage. 

Women were particularly strongly affected by the loss of job in the watchmaking and textile industries, but were only partially compensated. They often saw their working hours reduced and had to accept wage cuts. These went uncompensated and were justified by the general devaluation of women’s work, as their income was considered a supplement to men’s pay. The 1930s also saw campaigns against qualified female workers, further weakening the position of wage-earning women. Male workers were primarily affected by the crisis in the watchmaking, metal and construction industries. 

During the 1930s, it was primarily the cantons and the municipalities which took emergency measures against unemployment. They opened canteens, shelters and construction sites for the unemployed, particularly those with families. The Confederation limited its support to partially subsidizing employment programs for the unemployed and crisis subsidies – a form of social welfare that the cantons paid to the unemployed who were no longer entitled to benefits. In contrast, the benefits disbursed by unemployment funds were limited to the levels stipulated by the act of 1924. Those with families received 60 per cent of their insured wages for 90 days; the remaining policyholders received 50 per cent for the same duration. Legal changes with respect to unemployment carried out by the Confederation in the 1930s nevertheless helped strengthen the principle of insurance. The unemployed continued to be urged to accept any form of work they could. 

A New Compromise for the Postwar Period

During the Second World War – a time when the official unemployment rate was very low due to the surge in war production and military mobilization – a new compromise was negotiated between the government, employers and trade unions regarding unemployment insurance. The 1942 revision of the Unemployment Insurance Act took into account the demands made by the trade unions by repealing the inequitable subsidization of trade union, joint-financed and state-controlled funds and creating an equalization fund at the federal level. It also satisfied the concerns of the federal authorities, who feared an increase in unemployment immediately after the war and sought to prevent social unrest of the kind seen after the First World War. Representatives of the workers and the federal government agreed to urge employers to rehire soldiers who had completed their service – by dismissing the women hired during the war. The 1942 legislation forbade married women from taking out unemployment insurance if their husband’s income was adequate to support a family. This made it possible to dismiss married women who were gainfully employed without compensating them. Under pressure from feminist movements, these discriminatory measures were abolished by the Federal Unemployment Act in 1951. The entitlement period for drawing benefits was left at 90 days, but the revised act gave the Federal Council the power to increase it to 120 or 150 days in response to the economic situation. Under union pressure, the maximum insurable wage was raised, benefiting the more highly qualified workers. Finally, the compensation percentage was increased to 65 for those with families, and 60 for others.

The unsettling predictions made by the authorities did not come to pass, and mass unemployment did not follow the end of the war. Indeed, from the 1950s onwards, the increase in production and productivity actually led to a shortage of workers. Employers recruited foreign workers who helped contribute to the increase in production (1950-1975). Some of the immigrants – particularly those with seasonal permits – were not entitled to take out unemployment insurance. Migrant workers were deliberately kept in an uncertain economic situation, allowing the authorities to pursue a flexible workforce policy. This migration policy would ultimately play a key role in coming to terms with the economic crisis of the mid-1970s. The mass reduction in the number of foreign workers, primarily by not renewing seasonal and annual residence permits, helped limit annual unemployment to less than one per cent throughout the whole crisis. Unemployment was thereby exported to neighboring countries, which then had to foot the costs. The scarcity of insurance coverage and the failure to consider reducing working hours – affecting working women in particular – likewise contributed to the low official unemployment rate. 

The Introduction of Compulsory Unemployment Insurance during the 1970s Economic Crises

When the economic crisis began in the mid-1970s, only one-fifth of the gainfully employed was insured against unemployment. A comprehensive revision of unemployment insurance thus became imperative. A constitutional amendment and an urgent federal decree were passed in 1976. Compulsory participation in unemployment insurance was introduced in 1977. The legislative process concluded with passage of the Federal Act on Compulsory Unemployment Insurance and Insolvency Compensation (AVIG) in June 1982, which entered into force in 1983. In international comparison, Switzerland had introduced such compulsory unemployment insurance relatively late. Those still excluded from this coverage included the self-employed and those who earned less than 500 francs per month. The matching contribution model applied to most who were gainfully employed, with 50 percent coming from the employee, 50 percent from the employer. A right to be compensated, however, was not guaranteed if the individual who had paid in became unemployed. As was true of earlier legislation, a minimum number of monthly contributions – 6, according to the AVIG – were needed to begin to receive insurance benefits. Since the fourth revision of the AVIG in 2012, this has been increased to 12. The AVIG also stipulated measures for re-integration into the labor market. It thus represented the beginning of an activation policy that has been successful, particularly since the 1990s. Consequently, it was no longer a matter of financing jobs or public works as a way to provide individual jobless persons with work, but they instead had to accept temporary positions and participate in courses and internships. Those affected were to be ‘activated’, thereby allowing them, in theory at least, to be subsequently more readily and easily re-integrated into the labor market. 

The level of compensation, following the AVIG, was likewise based on how high the insured earnings were: 80 percent for those with families or low incomes, and 70 percent for the rest. The principle of loss of income for the unemployed – who, in contrast to employers, pay the price associated with dismissal and unemployment themselves – was thus not called into question. The 1982 AVIG provided for a gradual reduction of benefits depending on the duration of unemployment. This penalized the long-term unemployed and was only repealed in the first revision of 1990; however, it re-entered discussion in the fourth revision in 2010. Although Parliament rejected reintroducing the gradual reduction in benefits, the length of benefit provision was tied to the number of monthly contributions: entitlement to 400 daily allowances required at least 18 months of contributions, whereas 12 months of contributions brought the entitlement down to 260 daily allowances. Furthermore, the fourth revision reduced the unemployment benefits for those who had just finished their education and extended their waiting period. . However, these individuals have been exempted from compulsory contributions since 1982, meaning they can receive benefits without providing evidence of previous employment. Likewise, the unemployed under 25 only receive 200 rather than 400 daily allowances. Western industrialized countries differ little in the benefits they provide for short-term unemployment. With increasing length, unemployment benefits decrease at differing rates. In Switzerland, as in Sweden, France, and Germany, relatively high levels of benefits are granted for longer periods. In the UK, the corresponding benefits are quite low. The pronounced activation policy (LINK SYNGTHESE 1995) in Switzerland is unique.

The fourth revision came about against the backdrop of an economic crisis which began in 2008 and which led to increasing unemployment in the next two years. Since the economic crisis of the 1990s, the unemployment rate has fluctuated in accordance with the economic cycle, but also due to the AVIC revisions that have changed the criteria of who is considered as unemployed. The unemployment rate has since fluctuated from 3.5-4 percent – with the exception of 1999–2002 when the rate fell to 2.5 per cent. 

Unemployment insurance continues to only provide coverage for wage work, and continues to exclude the self-employed and women who do housework. The child-care period introduced in the 1995 revision was an exception; it exempted those who devoted themselves to caring for their children from compulsory contributions. However, this only lasted until the 2002 revision when the regulation of ‘time spent providing care’ was modified. From then on, parents who cared for their children were no longer exempted from compulsory contributions. Since then, it is once again only employment that constitutes grounds for entitlement to compensation.

> Unemployment insurance: data and figures

Literatur / Bibliographie / Bibliografia / References: Tabin Jean-Pierre, Togni Carola (2013), L’assurance chômage en Suisse. Une socio-histoire (1924-1982), Lausanne; Togni Carola (2013), Le genre du chômage. Assurance chômage et division sexuée du travail en Suisse, Thèse de doctorat, Université de Berne.

(06/2019)