RISING TRENDS.

Auckland Star, Volume LXVII, Issue 226, 23 September 1936, Page 11

RISING TRENDS.

COSTS AND PRICES. EFFECTS OF LEGISLATION. CASES FOR EXEMPTION. "There is no doubt that to practically every manufacturing establishment the new labour legislation means increased costs. It by no means foWows that the prices of commodities are likely to rise in the same proportion as wages."

In this way a fairly common acceptance is refuted by the September issue of the "Commerce Journal." In expanding this edict, the journal explains that wages in different businesses constitute a varying proportion of the total manufacturing costs, but never 109 per cent. Even though it may be true that a large proportion of . the non-wages costs of manufacture involve in the last analysis labour costs, the proportion is never 100 per cent, and in any case as regards such items as interest on capital equipment the labour cost involved is past and not affected by the recent rise.

Further, the article states that imported goods are not likely to rise at all, except as far as the handling costs after they reach New Zealand are raised. Exportable goods are not likely to rise because the prices are fixed in the world's markets. Indeed, to the extent that handling costs go up in Zealand,, the price received by the farmer at the farm for his exportable produce might be expected to be lower with higher labour costs, though this drop would he more or less offset by higher distributing costs when it comes to a consideration of the Xew Zealand retail price of such exportable produce. Competition of Imports. It is pointed out that in some cases the manufacturer will not be able to raise his price as much as the increased labour costs would justify. This is so. firstly, because of the competition of similar imported goods, and, secondly, because in the case of articles priced low per unit it may be difficult to raise the price, since any upward step means an enormous percentage of increase, which would he likely to provoke adverse reactions from the consumer. For instance, the prices of newspapers could be raised only by id at a time and the prices oF cigarette packets only by Id at a time. Elastic Demands. A further reason given is the fear, of the increased price reducing an elastic demand. In this connection it is stated that each commodity must be considered separately, since the sales of some commodities "fall off on a given percentage increase in price far more than the sales of others. If the con\modity concerned is one freely bought by workers when their wages are above the usual levels the increased wages now available might fully offset this consideration. Without added tariff protection, the article concludes, certain undertakings are likely to be forced out of business, with consequent increases in local unemployment. On the other hand, this may be wholly or partially offset by increased demand for certain commodities and services as a result of increased purchasing power in the hands of the workers.