We actually do not know his history. Was his Father also unemployed? The family background he inherited from. But why is he getting benefits? He doesn't have any health problems.. Maybe he knew how to beat the system................ LOL
You could never imagine Compo doing an office job or something that would require wearing a suit, something outdoors, perhaps a stablehand at a racing stable would have suited him. He was perhaps too big to be a Flat racing jockey, but small enough to be a jump jockey, so as he liked racing perhaps he missed his calling.
As for beating the system, I don't think we ever saw any of them signing on at a DSS or Unemployment Benefit Office although in the earlier series the "social" is mentioned quite often, especially in relation to Compo. Given the changes in the benefit system since the 1980's it's unlikely that any of them would have been able to just continue signing on and doing nothing without going on some course, or work/training experience as time passed. However, back in the mid to late 70's and early 80's anyone over 50 made redundant or unemployed might have had a resigned acceptance that they wouldn't be employed again as unemployment got towards 3 million. Compo was perhaps good at hiding in the numbers, although back then the big concern was youth unemployment, so the DSS probably turned a blind eye to the older unemployed.
Clegg, Blamire and Foggy were also unemployed if one assumes they were in their mid 50's or so back then, so it was a little unfair on Compo that he copped all the flack for not working, although his history of not working had been long standing, something of which he held a certain pride in. Clegg often referred to himself as a redundant lino salesman from the Co-op, although I think later this became retired lino salesman. Blamire and Foggy often came up with a business idea which they would try to encourage a reluctant Compo and Clegg to join, but other than that they must have been all unemployed together.