Is Unemployment Insurable? Employers and the Development of Unemployment Insurance

In order to shed light on the recent debates that are reinterpreting the role played by organized employers in the development of modern social policy, this paper examines the origin of the system of contributory social insurance during the Weimar period. Contrary to ‘laborist’ accounts of the origin of the modern welfare state that view the working class as the most important protagonist behind the transition from ‘assistance’ to ‘insurance’ policies, this paper argues that employers' dissatisfaction with the means-tested system of unemployment assistance and employers' endorsement of an insurance solution to the risk of unemployment remained the decisive factor leading to the introduction of the insurance system during the Weimar period. Drawing on employers' deliberations and archival material, the paper reconstructs the process of preference formation of German employers. The significance of a sectoral conflict between employers of large and small firms about the organization of the ‘risk pool’ within the system of unemployment insurance is also highlighted. While the existing literature fails to characterize employers' preferences towards social policies and to explain the variation in the degree of employers' support for particular social policies, this paper does so. Firms' preferences towards social policies can be analyzed along three dimensions: ability of social policies to redistribute risks, locus of control within alternative policy arenas and the costs imposed by different social policies.