Abstract: Since the end of the 19th century, unemployment had become one of dominant phenomena in German society. However, the unemployment insurance was shelved by the imperial government due to many disputes. During the World War I, in order to get the support from the working class, the imperial government changed its position and started the reform of the poor relief system. It was not until 1927 that the unemployment insurance system was finally established in Weimar Germany. Nevertheless, a fuse that caused directly the decline of Weimar democracy had been buried in this insurance system since it was at best a product of complicated social relations, postwar political transmission and economic fluctuations. Weimar government regarded it as a way to control and solve social crises and it failed to foresee financial capacity and possible development in the future.