the rational, common sense system of collecting each year under a compulsory tax only that which is necessary to meet the requirements of the year with which to pay the incomes that must be paid that year on account of the accidents that happened that year or previous thereto. Started in just that way, we would collect just enough the first year to pay the incomes required to be paid on account of the accidents of that year. The German system started, gentlemen, at about 20 per cent of its ultimate cost. According to the estimates of actuaries, it will take in the natural process of events, if there were no change at all in the danger of the industries ie., if they did not become more dangerous or less dangerousit would take 50 years before it reached its absolutely full figure, and when it reached that absolutely full figure it would be the same average which the insurance company would want to charge from the beginning, with the sole exception that you would not have taken into account the powerful influence in favor of prevention which I am about to describe.

The CHAIRMAN. Do you mean by that that the full cost would be increased year by year for 50 years?

Mr. DAWSON. I do; but practically it really reaches half its maximum in 10 to 15 years, and almost its maximum in 25 years; and if the industry has learned its lesson and reduced the hazard, it may reach its maximum in 10 or 15 years and after that actually decline. Thus in Germany steam railways paid the first year, 1886, thirty-nine one-hundredths of 1 per cent on the pay roll, the next year seventynine one-hundredths of 1 per cent, the third 1.25, the fourth 1.38, rising to 1.80 the eighth; then prevention began to affect it markedly and it declined in a few years, notwithstanding the burden because of accidents in previous years, to as low as 1.26, and shows no signs after 24 years of rising beyond about 1.80 per cent, which it reached in eight years.

The CHAIRMAN. You say, Mr. Dawson, that we do not need a multitude of statistics in order to provide for the details of this plan which you suggest. How could we deal now with the question; what amount of tax should be levied upon the railroads of the company?

Mr. DAWSON. If you will pardon me, I did not mean to say that. I mean to say that you do not need all these actuarial facts. Of course you do need some rough knowledge at the outset of what the hazards of the industries are. That information is not difficult to obtain; a good deal of it is in existence now. A large mass of it is in existence in other countries that we can use by analogy, and much also in our own country. The information which is difficult or almost impossible to obtain so that you can absolutely rely upon it is that needed in order to set up this complex and technical reserve system that is called for by voluntary insurance, and that is not required by compulsory insurance, and would be wasteful if applied under compulsory insurance.

I want to give you another illustration in Germany. Here is one business where apparently, and I think that is probably true, the hazards of the industry have pretty steadily grown. They now have on hand people who may have been injured clear back in the first year and who are still in receipt of its benefits. The German system took effect in 1886. Agricultural machinery works only needed

to pay that first year thirty-two one-hundredths of 1 per cent as their premium.

The CHAIRMAN. What do you mean by that?

Mr. DAWSON. That is their rate upon the pay roll. In 1908 it had arisen to 2.11 per cent, seven times as much, and it probably has not quite reached its maximum yet, because apparently the hazards of that occupation have been increasing as well as the natural burden increasing because of the large number of years' accidents now represented in a year's disbursements. There has been a change in that business from simple hand methods to high-pressure machinery.

Take another occupation-beer bottling and shipping. This was already a tremendous business in Germany when this law went into effect, whereas the other was a small affair then. In beer bottling the first year was 1.73. The next year it was 1.83, and the next year was 2.81. About this time the brewers of Germany forming the mutual association that was furnishing this insurance, to use a slang term, "took a tumble." They had learned a few things concerning the conduct of their business. What was the result? A marked decrease, and now, after 24 years' operation, in 1908, the rate was only 1.89; scarcely larger than the first year.

The CHAIRMAN. Now, let me ask you, Mr. Dawson, how do you account for the fact, if it be a fact, that the rate would keep on increasing for a period of 50 years? Long before that time would not the lapsing liabilities begin to keep pace with the accruing liabilities?

Mr. DAWSON. The argument is this, and it is a fact which can not be escaped: Suppose you instituted such a system, for instance, for Government employees to-morrow, and that all benefits were to be paid in weekly or monthly installments during the continuance of the disability, widowhood, orphanage, etc. Obviously the first year you would only pay on account of people who are injured that year, and on the average not over six months. The next year you would have people that you were paying who were injured the first year, together with those injured the second year. The third year you would have those injured in both of the previous years with those injured in the third year; that is, I mean those of them who were not recovered, if they were injured, or the widows of those killed, etc. Now, that accumulation would continue until you reached a point where virtually there were no persons on your list who had been injured in the first year the system went into operation. From that time on you would have the very last of those on the list because of accidents happening the first year disappearing the next year, and from that time on you would have an equilibrium. The CHAIRMAN. Is it possible it would last for 50 years?

Mr. DAWSON. Yes; the reason for this you can readily see when you remember that the average age of those widows might not be more than 34 or 35 years.. Some of them might not be that old, and they might live for 50 years.

Senator CHAMBERLAIN. What is the average length of human life? Mr. DAWSON. It differs in different countries so greatly that I could hardly say.

Senator CHAMBERLAIN. Insurance companies have some information on the subject, have they not?

Mr. DAWSON. In insurance companies we take it according to different ages. In Germany the average length of the lives of males is, I think, 46 years.

The CHAIRMAN. If the theory be correct that a scheme of this kind would tend to reduce the number of accidents, would not that circumstance figure in the matter so as to bring it to a maximum before the 50-year period?

Mr. DAWSON. Precisely. You notice in the beer-bottling occupation, which I have just mentioned, prevention virtually stopped its growth; also in railways, which I quoted first.

Take carpentry in Germany. They started at 0.49-about one-half of 1 per cent. It leaped the next year to 1.10; the next year to 1.39. They began to learn what was happening in carpentry after the law had been in force 10 years, and in 1895 it had reached 3.07. From that time on, I think, in the natural course of events, if the risk had remained stable, the cost would have steadily increased; but the cost has pretty steadily diminished, and, in point of fact, in 1908 it was only 2.32. In other words, the influence of prevention of accidents in carpentry has made it an enormously less perilous thing, evidently, than it was 20 years ago and has, as you see, brought about the condition that they do not have the normal increase.

Mr. HOLDER. Did that include mill-work carpentry or merely constructive carpentry?

Mr. DAWSON. This is general contract work.

In other lines, of course, where they have been introducing more intensive methods, with more complicated machinery, in spite of the most enormous efforts to reduce hazards, the same thing has taken place that has taken place in agricultural machinery rates, namely, that the hazard has increased. They have done everything they could to diminish that hazard, but still it has increased.

The CHAIRMAN. Notwithstanding the fact that the tax is imposed on these employers as a class, it has induced each employer to make efforts to cut down the number of accidents.

Mr. DAWSON. That is one of the things I will reach later in my discussion; but I will stop here to say that I believe this commission will do well to ascertain for itself and take nobody's word. If you are sufficiently impressed with the arguments which I have advanced and with the arguments which may be advanced by others to wish to know what system has worked best and is working best in this matter of prevention and otherwise, why not go over and look at it at first hand yourselves? It will pay you, and, better still, the Nation. There is no question in the world-there is not a question in any sane man's mind that has looked into it-that prevention is enormously better in Germany than anywhere else in the world. They have all sorts of designs for preventing accidents; all sorts of rules and regulations for preventing accidents; and they have flowed right out of this system and are intimately connected with it at every point. You can see readily why that may be so, Senator. Here day by day and year by year is the cost, just what it takes to pay for the employees who are disabled. Is there any way they may reduce that cost! First, they may reduce the hazard; second, they may introduce better means of taking care of the injured and restoring them to good health.

The CHAIRMAN. I am very much interested in this. Is it your opinion that the employer would be more careful to avoid these accidents where he contributed with a number of others to a common fund than he would be if the responsibility of the accidents in his plant was visited upon him alone?

Mr. DAWSON. There is not the slightest doubt of it. That is an established fact, so far as regards most employers.

The CHAIRMAN. I asked you that because the contrary would seem to be true.

Mr. DAWSON. The fact is as I have stated; because, except when the employer is a very large one, thereby having an average among his own employees, he does not seem to see the relationship between the occasional high cost to him, because of what in his mind, as well as everybody else's, is an accident, and the failure to do this or that. Let me give you an illustration in our own country: When I was a boy I was a partner with my father in a fire insurance agency in Wisconsin. Although I am in that business no longer, I have kept up an interest in it ever since, although the actuary's connection is with personal insurance chiefly. In those days a woolen or a cotton mill did well indeed if it got a rate ranging from 2 to 5 per cent per annum on its fire insurance. That was moderate. The large mill owners and the small mill owners of the East organized a mutual association to take care of their fire insurance. The result has been that the rate for a number of years has been one-tenth of 1 per cent. Now, previously, at the high rates that were in force, Senator, they could not obtain full insurance; they could not afford to pay for it, also, if they could have obtained it. To-day they are almost invariably insured for 100 per cent. They lose nothing, or next to nothing, as individuals by the burning of their own particular factories. But the association has shown and enforced upon them the necessity of prevention; and it is the most interesting and the most extraordinary instance in our whole country. You can not obtain upon the bestconstructed private residence in the city of Washington as low a rate as a cotton mill can get to-day in fire insurance.

Senator CHAMBERLAIN. That is because of their cooperation in reducing the hazard?

Mr. DAWSON. That is because of their cooperation in reducing the hazard. Do not make the mistake that the employers do not know this the National Association of Manufacturers is not uninformed about it-the employers of the United States are not uninformed about it. It is the one way in which we really can accomplish prevention in the United States without attempting a thing which the Federal Government can not do, and that is to pass, under a meddlesome interpretation of the police power, an act that we would have to amend the Constitution of the United States to obtain, that would actually meddle at long range in everybody's business, which would be insufferable. These associations will bring about that situation, the employers acting of their own initiative.

The CHAIRMAN. Let us apply what you say to the railroads. Is it your idea, assuming that we are dealing with the railroads alone, now for the sake of the question?

Mr. DAWSON. Yes.

The CHAIRMAN. Is it your idea that if we should pass a law imposing a tax, say, of 3 per cent upon the pay rolls of all the railroads of

the country, that such would result in a greater decrease in the accidents by reason of making railroads more careful, than if we were to say to each railroad: "Whenever a man is injured you shall pay a given sum"?

Mr. DAWSON. Well, now, I will have to answer that question a little differently from the way I would if you had not made it a question of the railroads a particular industry. In the first place, the railroad companies are large enough for the most part to get an average within their own forces; and therefore the same principles that would apply in connection with other employments will not to the same degree apply to railroads. In the second place, your question was that if we would apply a tax of 3 per cent.

The CHAIRMAN. That is simply my illustration.

Mr. DAWSON. I must take that as you gave it, a fixed tax, not necessarily 3 per cent, but a fixed tax, and not merely enough to meet the year's disbursements. My proposition is that the railroad companies be taxed year by year just what is necessary to pay the claims, as in Germany, with perhaps a sufficient amount added to produce a moderate fluctuation reserve to take care of peculiar situations, like panics and things of that sort, where you might have a diminution in the pay rolls, and therefore a too heavy burden in one year.

The CHAIRMAN. I intended a tax merely sufficient to cover the cost. Mr. DAWSON. The answer, then, is "Yes." It will produce better prevention than to throw it on the individual railroads. In the first place, there is nothing in this plan that would prevent an individual railroad that ran its railroad in a dangerous manner from being taxed according to its own hazard. In the second place, even if that were not done, would not the railroad companies paying part of its cost be interested in doing what they could to improve its methods of operation? Would they not be bringing to the attention of that careless management the result of this or that or the other improvement which they had introduced? And do not you think that is effectual? Well, they found it in Germany perfectly tremendously effectual, keeping the rate from increasing for 15 years past, for a long time actually reducing it, notwithstanding the increasing burden because of previous years' accidents.

The CHAIRMAN. That is, you think there will be cooperation among the railroads to cut down these hazards?

Mr. DAWSON. It does produce that effect. Don't you see that the railroad company that is run the most dangerously has before it the example of a railroad company in its own association which is run the most safely? The reasons and methods and manner by which it has produced that safe condition are constantly impressed upon the minds of the management of the other. And it need not be impressed necessarily by precept only, because there is nothing in this proposition that will prevent the Federal Government from fixing the tax upon railroads that are run recklessly, in proportion to the hazard which they themselves create. In other words, you do not want to make the same rate for all sawmills or for all railroads; you may take into account the exceptional hazard it is itself causing in this manner. That is taken into account in Germany.

There is a good deal in the first part of this brief concerning this being for the public welfare that I regard important, and I sin