“SHARING THE POOL”

Press, Volume LXXV, Issue 22662, 17 March 1939, Page 20

“SHARING THE POOL”

WAGES, TAXES, AND PROFITS REVIEW BY CHAMBERS OF COMMERCE

"Proof that the basis on which the value of total national production is aeing divided up between workers, jovernment, and capital is getting out 3f balance is to be found in an analysis of official figures which are now available from the Government Statistician,” says a statement by the Associated Chambers of Commerce of Mew Zealand. The value of total production in New Zealand in 1937-38 was £135,600,000, a

drop of £500,000, or .37 per cent., on .he previous year. This £135,600,000 was the sum available for division between the parties that produced it, and the Government. Although the value of total production had fallen by 37 per cent, in 1937-38 over the previous year, total wage and salary payments increased by 9.6 per cent. In other words, out of a national pool smaller by £500,000, wages and salaries took £12,700,000 more than they took the previous year, and left for other costs of national production a sum smaller by £ 13,200,000—a reduction of 26 per cent. —than was left the year before. . . , “Out of a smaller pool, the third party in the sharing out—the Governmenthad taken a larger apportionment, made still larger by an increase of 15 per cent, in the actual amount taken, representing a rise from 5s 6Jd m the £'of national production in 1936 : 37 to 6s 5d in the £, as compared with 2s 5d before-the war, and 3s 9£d in 192829—the peak year for value of production before 1936-37. “Coming now to the §hare of capital —the only share to suffer a reduction—what does it have to provide? First, new capital for expansion; second, the reward for enterprise to encourage it: third, the means to provide for denreciation of wasting assets and those becoming obsolete. How reacted to the reduction of £13,200,000 in its share? The year 1938-39 would provide a more up-to-date index, but as that year is still current, the figures for national production, wages, and taxation arc not available. "Set-back in Production”

“However, we know that national production values have received a serious set-back through a decline in primary production, both in quantity ana in value: exports tor the first 10 months of 1938-39 were valued at £44,000,000, which is a drop of £8,000,000, or 15 per cent,, over the corresponding period of 1937-38. Notwithstanding, the Government budgeted for still more taxation than in 1937-38, while wage rates as at December 31 last had been increased since the end of 1937-38 by 3.1 per cent, over all industrial grpups combined. "These factors point to a still greater share in the product of industry by wages and taxation for 1938-39, and a still greater state of unbalance in the division with capital, leaving as the residue for other production costs, and for the profits of industry, a sum diminished still further. One of the reasons why the Government introduced exchange control in December was the accelerated flight of capital from the country—capital which was afraid, and discouraged because it was receiving too small a share of the product of industry. “The lesson which emerges is that more than a pint cannot be got out of a pint pot. Wages cannot continue to take an increasing sum out of a variable total. The standard of living depends not on wage rates or on costs, but on how much wealth is produced. In the same way. the question of the extent of the share of the Government raises in an acute form the question of the taxable capacity of the country. As the rate of tax increases, so the incentive to produce decreases. The trquble is accentuated by the fact that so much expenditure by the Government is unproductive. “From the above analysis it will be seen that it is time more attention was given to a better division of the product of industry, and with less restriction on private enterprise—a division which would encourage and not discourage the maximum production essential to the maintenance and improvement of the national standard of living.”