UNEMPLOYMENT AND THE COST OF PRODUCTION.

Press, Volume LXV, Issue 19691, 7 August 1929, Page 17

UNEMPLOYMENT AND THE COST OF PRODUCTION.

TO THE EDITOB Of THK PEESB Sir,—With so many theories being propounded to explain the prevailing disorder in industry the general reader is apt to be completely confused and despair of a remedy. It is true, for instance, that industry is becoming mechanised to a large extent. But mechanisation is a logical development and justifies itself ultimately. The course of events in its train is—rapid production, reduced costs, lower prices, larger sales, more labour, higher earnings. Any labour displaced in the initial stage is pretty sure to be re-absorbed speedily. The re-adoption of the gold standard in the face of a reduced production of the precious metal was a serious matter for producers, both primary and secondary. The natural effect would have been a lowering of the average price level. This, however, has been offset to some extent by economies in the use of gold and still more by the remarkable extension of credit under deferred-payment systems, the latter a very doubtful expedient. The settlement of war debts, involving a re-dis-tribution of gold, has also complicated the situation seriously. The general effect is a sense of instability among producers and traders. The growth of combinations, trusts, and mergers is an indication and also a natural result of a lack of confidence among producers, manufacturers, and traders. They must combine for their own salvation. But the consequent aggregations of capita] and resources have made it possible to apply scientific research to industry on a vast scale and with highly advantageous results. No doubt something can be done in this direction in New Zealand. There are too many little factories working under disadvantageous conditions. The aggregate of overhead charges is too high. Readjustments in the direction of specialised production and combined marketing are highly desirable. The breweries trust and selling pools are eases in point. But big combinations of capital and scientific resources such as have been effected in Europe and America are out of the question here. New Zealand is practically a self-con-tained community, with an unusual endowment of wealth in climate and natural resources. The major troubles of the Old World affect us only indirectly. We should be a busy, contented, well fed people. But notwithstanding our isolation and the favourable conditions of life, we find ourselves in serious trouble. Thousands of men, able and willing to work, are denied the opportunity and we are developing a system of pauperism, degrading both to the man immediately affected and their dependents—as the Mayor has pointed out—and to the people at large. Why is it? Clearly, it is not due, entirely or even chiefly, to world wide influences. It is due to some defect in our self-imposed industrial system. We are trying to fix an artificial value on labour without consideration of the value produced thereby or of the possible market for such production. Labour is the main element in the cost of production. At eac-b stage it represents approximately one-third of the total cost But that statement, standing by itself, is misleading. To arrive at the total labour cost of a given product, a series of processes must be taken into account. For instance, the cost of timber standing in the native forest is nil. Access has to be provided, trees have to be felled, conveyed to the breaking-down mill, the product transported to the towns, sawn, planed, converted into building material doors, sashes, furniture, etc , and finallv houses built and furnished. At each stage after the first, antecedent labour cost is added to and passed on to the next stage, and the accumulated labour cost of the finished product is probably 75 per cent, or more of the total cost. Thus one penny per hour added in the initial stage is doubled or trebled in the final stage. And if one penny is added at each stage throughout a series of four stages, the added cost to the purchaser of the house and furniture is over eight-fold. It is interesting to note that Mr H. E. Holland (Labour Leader) disapproves of the proposed addition of 1 per cent, primage tax on imports. Ho says it will cost the consumer 2 per cent, or more. He is quite right, and his anxiety for the consumer is to be commended But, on the other hand, his Party proposes to increase the cost to the consumer of every kind of material it handles and every service »t renders. Mr Holland objecte to imposing an additional burden of, say, £4OO 000 per year on consumers of imported goods, but Mr Sullivan, his lieutenant, proposes that every working man shall have two weeks holiday on full pay, which, on Mr Ho'land's scale of calculation, wil' cost the consumer of locallv-prodwed goods and services £2.000,000 per year at leapt, and probably twice that amount or more. One penny per hour added to wages seems a small thing, but it runs into big figures in the aggregate. It means about £1,000,000 more per year to be paid to the 100,000 Unionists registered hi the Dominion But the cumulative effect of successive stages of production and marketing certainly doubles that amount and probably much more. And that does not take account of non Unionists, whose wages have to be brought into line more or less. All this has to be provided by the ultimate purchasers, and so the cost ot living goes up. Then follows a demand for further increases to catch up with the cost of living, and so the game goes on. But it must be obvious that it <-annot go on indefinitely. A continuous piling up of costs will ruin industry in the long run. and will consign many more thousands of wageearners to the "degradation" class. TTiis is where the shoe pinches, and indicates where a remedy should be sought. Last year's Industrial Conference was abortive, and there is no reason to hope that a second conference of the kind would be anv more successful I venture to suggest that a Royal Commission should be appointed to make a thorough survey of the industrial situation. It should consist of a Judge, or «x-Judge, of the Supreme Court (familiar with our Labour laws), a trained industrial specialist from Kngland or America (a man of the Hoover type), a competent New Zealand business man (not necessarily an active industrialist), a competent I«abour man (not a Trade Unionist official or a politician), and one or two Economists of standing The cost should not be excessive, as all the necessary statistical information is available in the official departments, and a comparatively small number of witnesses representing all interests would be sufficient to cover the ground. —Tours, etc., AUDAX. August 6th, 1929.