Unemployment was the last of the risks confronting the worker in modern industrial societies to be protected by a compulsory social insurance system. Benefits for the aged and the ill were, on the whole, less controversial, whereas deeply embedded in poor relief policies was the notion that the “able-bodied poor” were responsible for their own idleness and therefore must be harshly treated. In England, toward the end of the nineteenth century, this meant that, in general, they were to be denied “outdoor relief” and were to be sent to the workhouse. Policies in some of the continental European countries were less harsh, but were nevertheless punitive (see, e.g., de Schweinitz, 1943, and Heclo, 1974).

Moreover, prevailing economic thought weighed against intervention on behalf of the unemployed. Say's “law of markets,” first proclaimed by the French economist in 1803, held in its simplified version that supply creates its own demand and that therefore the economy will adjust to its potential without need of government intervention. It was not until the latter part of the nineteenth century that economists like Knut Wicksell in Sweden undertook studies of business cycles and confirmed the existence of recurring involuntary unemployment. Even then, adjustments at the micro level, such as wage reductions, were the preferred response. It was not until after the publication of Keynes's General Theory (1936) that the principle that governments should be responsible for maintaining full employment began to take hold. Keynesian policies were dominant in the first few decades after World War II, but in the 1970s some economists began to question the notion that most unemployment was involuntary.