History of Unemployment Insurance - Developments between the Wars
The first unemployment insurance program was organized by a trade union in Basel, Switzerland, in 1789. However, the first successful programs were compulsory ones organized by local and regional governments in Switzerland, France and Belgium at the end of the 19th century. The first national compulsory program was introduced in the United Kingdom in 1911. By 1920, it had been expanded to cover most workers and became a model for other countries.
Despite these trends, by the 1920s, Canadian policy still reflected the belief that obtaining and retaining employment and providing the basic essentials of life were largely an individual matter. It also reflected the general assumption that the British North America Act (BNA Act) gave only provincial governments the authority to create social programs.
Several Canadian studies had been done on the issue of unemployment insurance. The Royal Commission on Industrial Relations in 1919 proposed a state program of social insurance for those unemployed through no fault of their own, a principle endorsed by a parliamentary committee in 1929. However, unemployment insurance took second place on the social policy agenda to the resettlement of veterans of World War I, assistance to dependants of those who had died in the war and old age pensions.
The Great Depression of the 1930s forced a change in the attitudes of Canadians and their governments towards unemployed people. It was no longer possible to categorize them as lazy and of bad character, or to suggest there was something ennobling about poverty. The combination of these rapid changes in social attitudes and the example of government responses to the crises in Britain, Europe, the United States and elsewhere created demands for Canadian governments to act. Tied to that was the realization that, even if they had the potential authority to act, most provinces had little capacity to finance such programs.
In response, the Government of Prime Minister R.B. Bennett developed a social program package including the Employment and Social Insurance Act, which passed in June 1935. Modelled on the program in place in Great Britain, it was to be a compulsory unemployment insurance system involving contributions from employees, employers and the state. The Canadian program, however, was to provide earnings-related benefits as opposed to the flat-rate benefits available under the British legislation.
In an effort to pre-empt the question of constitutional jurisdiction, the preamble to the Act stated it was essential for the peace, order and good government of Canada to establish a National Employment Service (NES), insurance against unemployment and other forms of social insurance (e.g., health insurance), as well as to maintain interprovincial and international trade on equitable terms. The government used this wording to establish the argument that the magnitude of the economic crisis permitted it to act under federal authorities contained in the BNA Act.
The Liberal Party opposition, led by William Lyon Mackenzie King, supported the principle of unemployment insurance and a National Employment Service but opposed the legislation largely on constitutional grounds. Commonwealth Co-operative Federation Members of Parliament suggested that the Act was too limited in its application, inadequate in terms of benefits and too rigid in its restrictions. Difficulties in implementing UI across Canada were envisaged because of different labour market patterns, seasonal employment fluctuations, potentially long distances between workers and public offices and the lack of agreements with the provinces.
Later that year, King was elected prime minister with a platform that included constitutional change to permit federal unemployment insurance in the long run and co-operation with the provinces and municipalities on job creation and relief for the unemployed on a more immediate basis. King referred his predecessor’s statute to the Supreme Court of Canada for an opinion regarding its constitutionality. In 1936, the Court decided the Act was beyond the authority of the federal government. It also referred the case to the Judicial Committee of the Privy Council in England, at that time the final court of appeal for Canadian law. In 1937, the Judicial Committee agreed with the Canadian court, and the Bennett proposal went no further.
That same year, the government appointed the Royal Commission on Dominion-Provincial Relations (the Rowell-Sirois Commission) to examine the division of powers between the federal and provincial governments. The Commission’s report recommended the adoption of a federal social insurance program to deal with unemployment. The government then sought agreement from the provinces for an amendment to the BNA Act to provide exclusive authority for legislation by the federal government.
