American Economic Association

Workmen's Compensation by Herman M. Somers; Anne R. SomersReview by: Eveline M. BurnsThe American Economic Review, Vol. 45, No. 3 (Jun., 1955), pp. 475-477Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/835 .

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BOOK REVIEWS 475

will not permit a detailed examination and two examples only will be discussed here.

First the Huntington theory of the relation of climate to energy is described (p. 29) uncritically without reference to the severe criticisms to which his methods have been subjected and to which he never made an effective reply. Recent studies in the relation of climate to man and animals are not touched on in the text or bibliography.

Second, it is stated (p. 139) that"... the net reproduction rate measures the vitality of the population in terms of the long range trend, rather than current changes." Also, "A net reproduction rate of 1.0 indicates a state of demographic equilibrium in the long run." These statements may seem plaus- ible, but I do not think I should be alone among population students in regard- ing them as dangerous and misleading. Not even a trend line calculated em- pirically to fit a series of annual net reproduction rates, nor even a moving average, let alone the rate for a single year, could claim such properties. No reference is given in the bibliography to the work of Hjanal, Karmel and others in recent years on the net reproduction rate.

In neither of these two examples do I wish to suggest that the authors were obligated to survey the particular points in question in exhaustive detail. But it does seem justifiable to suggest that they would have been better advised to have been more careful in selecting the theories which they described and to have avoided some of the categorical statements which they made. Their dis- cussion on the points in question should have contained either more or less than it did.

These, however, are only points of detail and the feeling with which one closes the work can only be one of admiration for the immense task which the authors have carried to a successful conclusion.

E. F. PENROSE Thze Johns HIopkins University

Workmen's Compensation. By HERMAN M. SOMERS and ANNE R. SOMERS. (New York: John Wiley & Sons. 1954. Pp. xv, 341. $6.00.)

Students of social security have long complained that workmen's compensa- tion, the oldest of our social insurance programs, is the one about which least is known. The standard studies of workmen's compensation administration were written between 1924 and 1940: the most recent comprehensive technical book, Larson's The Law of Workmen's Compensation, is, as its title suggests, written primarily for lawyers, and the only study which frankly aimed to appraise the achievements of the system by reference to its social objectives, namely Reede's Adequacy of Workmen's Compensation, was based on data as of 1940. In contrast to our extensive knowledge of the functioning of other social insurance programs, we have had to be content in the field of workmen's compensation with estimates of total expenditures and until very recently no one had even ventured to estimate the total number of beneficiaries.

It must be admitted that the effort to assess the present system demands great fortitude on the part of the investigator. The many different jurisdictions, the diversity and complexity of the laws, statutory and administrative, the variety

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476 THE AMERICAN ECONOMIC REVIEW

of types and standards of administration, the involvement of private insurance and the shocking paucity of officially released data, coupled with the wide- ranging impact of workmen's compensation legislation which requires the stu- dent to delve into the technical literature of law, insurance, medicine and in- dustrial relations probably explain why the field has been so long neglected.

Fortunately Professor and Mrs. Somers have not allowed these obstacles to deter them. They have produced a study which is remarkable not only for the completeness of its coverage and breadth of treatment, but also for the exhaus- tiveness of the sources and authorities consulted. At long last we are in a posi- tion to know what workmen's compensation is like.

The findings reported by the Somers (with a pungency of style that is re- freshing in so technical a work) confirm one's worst suspicions. The program has not only failed to keep pace with the changes that have occurred in the economic and social environment since it was inaugurated: it is not even meet- ing the test of its own original objectives. The annual cost of workmen's com- pensation is now about $1.3 billions, or about the same as unemployment com- pensation. Yet neither employers nor workers pay anything like the same attention to its achievements and administration, while the public interest is in effect zero. Of this large sum, only about half goes to workers in the form of benefits: the remainder is consumed by overhead costs, primarily those of in- surance but also legal fees and administration. Employers have not reaped the alleged advantages of financing through competitive private insurance carriers because uniform manual rates have been established with expense loadings that reflect the experience of the less efficient carriers (some 200 carriers, many small and inefficient, share in the business) while the more efficient make large profits. Nor do employers enjoy the economies of rates based on national ex- perience. Despite original hopes, the administration is almost incredibly liti- gious (claimants' legal costs consume between 3.5 and 16.6 per cent of tlle cash benefits in the different jurisdictions) and the authors maintain that such ad- vances as have been made over the years have come at the expense of ever- increasing complexity, ambiguity, litigiousness and costliness.

In fact, apart from some growth in medical benefits, the advances are diffi- cult to discern. The fixed dollar maximums and the limits to duration have resulted in payments that today cover little more than one-third of wage loss, while for the permanently injured and survivors of deceased workers the per- centage is around 20. Although expenditures on medical care have increased, the medical program has grave deficiencies and is subject to little supervision or qualitative control. Rehabilitation, which might have been expected to be an area in which workmen's compensation would excel, has been disappointing, with the notable exception of the programs of one or two insurance companies. Indeed, the chapter on rehabilitation is perhaps the most dismal of all for it is a record of missed opportunity. The state administrations have in general been starved of appropriations, and salaries are disgracefully low in view of the highly technical nature of the work. Officials have been relatively helpless in the face of the powerful insurance and medical groups whom in theory they should supervise and control. Even in regard to prevention, the much-adver- tized achievements of workmen's compensation are, the Somers suggest, largely

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BOOK REVIEWS 477

in the past: other influences today far surpass those exerted by the workmen's compensation system.

What then is the future of this once important social security program? It is here, perhaps, that the authors are least satisfactory. They appear to place their faith in the further development of the already substantial number of supplementary security systems, some public, some private, which in total somewhat mitigate the deficiencies of workmen's compensation. But as they admit, this complex series of measures involves much overlapping and consider- able duplication of payments while offering no assurance that all cases of need for income or medical care will be provided for. Moreover, this duplicating series of programs is costly, and while it may be true, as some European ob- servers hold, that America is rich enough to afford a wasteful social security system, it is difficult not to think that sooner or later both employers and work- ers will begin to ask whether they could not get better value for the many premiums and social security taxes they pay. The Somers recognize that the future of workmen's compensation will be greatly affected by what action the nation takes in regard to temporary and permanent disability insurance and the socialization of the costs of medical care through social insurance or other- wise. But one would have welcomed a more specific indication of the precise role of workmen's compensation on the basis of alternative hypotheses as to the trend of social security legislation in general. For the question that is left in the reader's mind is whether workmen's compensation is worth salvaging.

But although the authors refrain from indicating the long-run solutions they would prefer, their study will rank as one of the most important books that has appeared in the field of social security for many years. It fills in an admirable way a major gap in our knowledge of social security institutions that had too long existed. And now that the inadequacies and inefficiencies of workmen's compensation have been so fully documented, the book will surely act as a powerful stimulus to a reconsideration of the role of this program, and, so long as it continues in existence, to legislative and administrative reforms.

EVELINE M. BURNS New York School of Social Work, Columbia University

Our Needy Aged: A California Study of a National Problem. By FLOYD A. BOND, RAY E. BABER, JOHN H. VIEG, Louis B. PERRY, ALVIN H. SCAFF, and LUTHER J. LEE, JR. (New York: Henry Holt. 1954. Pp. xxx, 401. $4.50.)

Old Age Assistance (OAA) receives heavy financial support from the federal government. It is administered by state and local governments and conse- quently the magnitude, benefits and eligibility requirements vary widely among the states. California's program is in many ways distinctive: it is the most ambitious, the most publicized, and the most controversial.

This first full-scale study of the California program by a team of Pomona College social scientists will command wide attention because of its unhesitat- ing recommendations with respect to all of the controversial features of the program.

The study is comprehensive. Its ten chapters concern: the socio-economic

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