Adam Smith (1723–1790), in his Nature and Causes of the Wealth of Nations (p. 106), wrote as follows: "When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it with at least the ordinary profits. "A man educated at the expense of much labor and time to any of those employments which require extraordinary dexterity and skill may be compared to one of these expensive machines. "The work which he learns to perform, it must be expected, over and above the usual wages of common labor, will replace to him the whole expense of his education with at least the ordinary profits of an equally valuable capital. It must do this, too, in a reasonable time, regard being had to the uncertain duration of human life, in the same manner as to the more certain duration of the machine." In 1870 Dr. William Farr, of London, who was well qualified to speak, on account of his long experience in the registrar general's office, made another attempt to estimate the economic value of man. He says (vital statistics, pp. 59–64, 531–537): The characteristics of life property in wages and in income from professions, commerce, trades, and manufactures is that it is inherent in man and is the value of his services-of the direct product of his skill and industry. In slaves it is vendible and transferable; in freemen it is inalienable; but is not the less on that account property which in the early states of society is assessed and taxed in the form of personal services. It is combined with stock in all proportion, and the proportion of the elements varies in every kind of product. The labor of the parents and the expenses of attendance, nurture, clothing, lodging, education, apprenticeship, practice, are investments of capital, at risk extending over many years; and the return appears in the form of the wages, salaries, or income of the survivors, commencing at various ages, 12, 15, 21, 24, 30, 33, 36, 39, and ages still greater; for the incomes in the higher professions increase probably up to the age of 50 or 55. The outgo increases from infancy up to a certain age; the earnings then commence, and ere long equal the outgo; they are subsequently in excess throughout manhood, and at advanced age decrease, until they are extinguished amidst the feebleness and infirmities of old age. The present value of the person's probable future earnings, minus the necessary outgo in realizing these earnings, is the present value of that person's service. Like capital invested in the soil, in the vintage, or in a commercial adventure, the capital invested in the life of man returns, in happy natures, profit of a hundredfold; in other case, fifty, twenty, ten fold; in other it is barely returned; in some it is entirely lost, either by death, sickness, vice, idleness, or misfortune. Ernest Engel in his work, Der Werth des Menschen (1883), elaborates the same idea and arrives at much the same conclusion. There are thus two theories as to the manner of estimating the economic value of man. The first (that of Sir William Petty) is that the income of an individual is the measure of his economic value. The second (that of Adam Smith, Dr. Farr, and Ernest Engel) is that the present worth of a person's probable future earnings, minus the expense of maintenance, education, etc., is the present value of that person's services. For the purpose of a workmen's compensation act I consider that of Sir William Petty accurate enough, viz, that the income of an individual is the measure of his economic value. I have here a list of papers which I will present to the commission. There are several copies. First is a table which I have called "Schedule of economic values." It is based on the economic value of a man earning $1 per day, or $300 per year, as deduced from the discount table. The value of a man aged 20 years earning $1 per day would be $6,342; for one 21 years of age, it would be $6,303; for one 40 years of age, it would be $5,235; for one 50 years of age, it would be $4,359; 60 years of age, $3,309; and 70 years, $2,244. These data do not originate with me. They are deduced from the " Present value of an annuity of $1," given in the seventeenth edition of the Handy Guide to Premium Rates, etc. Of course the chances of a man's dying are taken into account in computing this table, and I simply introduce it to show what the person's economic value is at a given period of life. Of course if he is earning $1 a day, he is worth that; if he is earning 50 cents a day, he is worth half; if he is earning $2 a day, he would be worth double. It is very easy to deduce from this table what the economic value is at a given age. (The table is as follows:) Schedule of economic values-Economic value of a man earning $1 per day or $300 per year, as deducted from the discount table. Dr. BURR. The various countries of the world have approached this subject apparently long before the United States has, and I have had prepared here from the Twenty-fourth Annual Report of the Commissioner of Labor for 1909 a schedule showing what the various countries of the world which have passed legislation on this subject have done with regard to death; total and permanent disability; partial and permanent disability, and in this left-hand column. under the name of the country, is a date which gives the latest legislation on the subject. For instance, under the head of "Alberta, 1908," the compensation given for death is a sum equal to three years' wages and not exceeding $1,800. For total and permanent disability a pension of 50 per cent of the weekly wage, but not exceeding $10 per week; for partial and permanent disability a weekly pension of 50 per cent of the weekly wage, but not exceeding $10 per week. There are various countries here-24 in all-exclusive of the United States. I have not given the United States, although we have some legislation relating to compensation. The CHAIRMAN. Doctor, may I ask you a question? In Alberta is there any limitation upon the aggregate amount to be paid for total and permanent disability or partial and permanent disability? Dr. BURR. I think not; but you will find that in other countries there is. The CHAIRMAN. There is no limit there? Dr. BURR. I think not. If my figures are wrong, they can easily be compared with this report. There are two or three systems that run through this schedule. For instance, here is the Cape of Good Hope, 1905; for death a sum equal to three years' wages, but not to exceed £400; for total and permanent disability a sum equal to three years' wages, but not exceeding £600; for partial and permanent disability a sum proportionate to disability, but not exceeding £300. Most of the English colonies appear to have followed the lead of the British Parliament in giving a lump sum. For instance, here is the law of Great Britain, 1906: For death, a sum equal to three years' wages, but not exceeding £300; permanent disability, 50 per cent of weekly wage, but not exceeding £1 per week; for partial disability, a weekly pension of 50 per cent of weekly wage, but not exceeding £1 per week. Then take the continental countries. Here is France, 1906; a pension of 20 to 60 per cent of yearly wage of deceased is given for death; for total and permanent disability a pension of 67 per cent of yearly wage. Mr. MOON. Doctor, will you explain to me what is the cause of that variation from 20 to 60 per cent? What does that depend upon? Dr. BURR. For instance, if there is a widow with no children, she would receive 20 per cent. Mr. MOON. I understand. Dr. BURR. But if there are children, each child receives, I think, per cent up to the total of 60 per cent for the whole family; that is the limit. Now I introduce this schedule to show what is considered in other countries a fair compensation for total and permanent disability. There is only one instance in this schedule where full compensation is given or attempted to be given, and that is under the head of Germany, where they give a pension of 67 per cent of the yearly wage; increased to 100 per cent if regular aid and attendance of another person is required. Of course there are plenty of cases of injury in which a person is perfectly helpless, requiring the aid of another person to attend him. He may have to have another person help him to put on his clothing, to get him about, and it seems to me a very humane and wise provision to make a qualification that if a person requires the constant aid and attendance of another person that he should receive more than a person who is able to care for himself. With that exception, the average compensation given for total and permanent disability is from 50 per cent to 67 per cent. So that 60 per cent seems a fair pension. The CHAIRMAN. Do you mean 60 or 50 per cent? Dr. BURR. Sixty per cent. It is given here 50 per cent in various of these figures and some at 66. It seems to be a fair compensation. The CHAIRMAN. You mean by that that 60 per cent would be about the average? Dr. BURR. I haven't figured it out. You have these figures here, but it seems that 60 per cent is a fair compensation according to the figures of different countries. They may give over 50, but very few give under 50. The CHAIRMAN. Where the amount paid is more than 50 per cent, is not usually the increased amount over the 50 per cent in some way compensated for by some other circumstances. For example, take the case of Germany, where the man has 67 per cent. As I understand it, the period during which the injured employee can recover nothing is 13 weeks, during which time he is taken care of out of the sickness fund, to which the employees themselves contribute about two-thirds. Now, in other countries where the provision is for 50 per cent, there is no such compensating circumstance as that. The time during which the man can not recover anything is comparatively small, from a week to two weeks. Dr. BURR. In going over these bills The CHAIRMAN. In other words, what I was coming to was this: You say 60 per cent would be an average. If we should fix 50 per cent, and provide that that should go to all men who are disabled for a period of more than two weeks, and that the whole amount should be paid by the employer and that the employee should not be required to contribute anything to it, what I want to find out is whether or not, in your judgment, that would be the equivalent, say, of the 67 per cent under the German system, where the period of exclusion is 13 weeks, and where, during that time, the burden falls, not upon the employer, but partly upon the employer and the employee? Whether or not, in the case where the 50 per cent is paid by the employer entirely, that would not be the equivalent in the aggregate of 67 per cent, where the employee for 13 weeks, for the class of accidents involving disability for 13 weeks, is paid partly by the employees. Do you get my meaning? Dr. BURR. Yes; I should think so. This schedule is also introduced to show the chaotic system, or lack of system, under which ratings are awarded for partial and permanent disability. This, of course, is where the real difficulty of this problem lies. It is easy enough to decide what shall be a death benefit and what shall be given for total and permanent disability. It is self-evident that a person who loses his life loses his whole income, and a value can be put upon that. In the same way, if he is permanently disabled, his life is not lost, but his earning power is lost, and from this schedule of economic values of man at different ages you can certainly get an approximate idea of what that life was worth at any age. But the question is entirely dif ferent when we come to put a value upon the loss, for instance, of members of the body-of a hand, of a foot, or of internal injuries. That is where these factors which I have been telling you about come in, and here it is necessary to use these factors. If it can be settled what is a fair compensation for death or permanent disability; if, for the sake of my argument, we say 60 per cent, the same reasoning should fix upon 60 per cent of the economic loss to be a fair compensation for partial and permanent disability. Therefore, if a man loses his hand or his foot, if we can determine what his economic loss is for the lost hand or foot, then we can take the agreed-upon percentage of that loss, say 60 per cent, to determine what shall be given for the lost hand or foot. (The table is as follows:) Alberta (1908)... Austria (1887)... Belgium (1903).. British Columbia Schedule of compensation. [Twenty-fourth Annual Report of the Commissioner of Labor, 1909.] Denmark (1898).... Finland (1895).... France (1906).... Death. A sum equal to 3 years' A pension of 20 to 50 per A sum equal to the value of a life pension at 30 per A sum equal to 3 years' A sum equal to 3 years' A pension of 20 to 40 per A pension of 20 to 60 per Germany (1900)..... A pension of 67 per cent of A pension of 50 per cent of A sum equal to 3 years' wages, but not exceed- A pension of 60 per cent of A pension of 67 per cent of A pension of 67 per cent of A weekly pension of 50 per A pension of 60 per cent of A sum equal to 6 years' A pension of 67 per cent of A pension of 70 per cent of A sum equal to present difference between wage before and after accident. A pension of 50 per cent of A pension proportionate to A pension proportionate to A weekly pension of 50 per cent of weekly wage, but not exceeding £1 ($4.87) per week. A pension proportionate to A sum equal to six times A pension proportionate to Half the difference between weekly wage before and after accident, but not exceeding £500 ($2,433.25); specified disabilities to receive specified rates. Proportionate pension, but none unless earning power is diminished at least 5 per cent. |