The Third Pillar: How Markets and the State Leave the Community Behind

by Raghuram G. Rajan

Instead, Germany passed three sets of laws in the 1880s, essentially making membership in insurance pools compulsory for specified worker groups, and adding employer taxes to the pool. The three risks insured were sickness, industrial accidents, and disability and old-age pensions for those who survived beyond seventy.39 The British Liberal government between 1906 and 1911 took the next big leap in state involvement with the passage of a number of important bills including old-age pensions (1908), the Labour Exchanges Act (1909), the Trade Boards Act (1909), which set minimum wages in a number of industries, and the Development and Road Improvement Funds Act (1909), which opened the way for public road works in times of mass unemployment. These efforts culminated with the enactment of unemployment and health insurance in 1911. The German and British reforms were indeed major steps in the creation of reliable nationwide safety nets that would buffer workers against market volatility, but they did diminish the role of the community once again.

German & brit reforms