The Press FRIDAY, SEPTEMBER 18. 1942. War and the Money Incentive

Press, Volume LXXVIII, Issue 23746, 18 September 1942, Page 4

The Press FRIDAY, SEPTEMBER 18. 1942. War and the Money Incentive

For at least a year the widening disparity between service pay and wage rates in civilian occupations has been a thorny issue in British politics; and the recent 20 per cent, increase sanctioned by the Government, far from stilling the agitation, has stimulated it. The general feeling among the Government’s critics seems to be that it has in effect admitted that servicemen and their dependants are unjustly treated but has not gone far towards removing the injustice. In the meantime, 38 unions representing 2,000,000 workers in the engineering and shipbuilding trades are claiming wage increases aggregating £ 100,000,000 a year compared with the £43,000,000 it will cost to increase service pay. These two present developments raise in an acute form a problem which so far no democratic government has been willing to tackle. It has always been one of the anomalies of modern warfare that men who risk their lives in the fighting services are normally paid very much less than those who remain at home. In New Zealand, for instance, tradesmen employed on defence work are paid as much as £9 a week for a 54-hour week, although sometimes they work alongside equally skilled tradesmen who are paid 7s a day because they happen to be in khaki. The soldier’s actions, it is assumed, are governed by patriotism and a sense of duty, so that his pay is a subsistence allowance and in no sense a reward. For the civilian worker, on the other hand, the incentive to produce is primarily a money incentive: therefore his wages must vary with the nature and the amount of his work. In Britain, money wages still vary widely from one industry to another according to the bargaining power of the unions concerned and the capacity of the industry to pay; and the Trades Union Congress has firmly rejected all proposals for a national wages policy. Moreover, overtime rates and piecework are still sanctioned as means of encouraging the individual worker to produce more. But now that Britain’s economic resources have reached the stage of full mobilisation, the money incentive has become a deception like the carrot dangled in front of the donkey’s nose to make him go faster. Because the amount of goods available for consumption is decreasing, the Government risks inflation if it allows increased wages to become spending power. Accordingly, it seeks by means of rationing, high taxation, and compulsory saving to prevent the workers from spending all they earn. Curbs on spending are now so efficient that it can only be a matter of time before the money incentive loses its potency. Moreover, it has never been true in this war that the highest-paid workers are the best workers. In Britain, the greatest spurts of production took place after Dunkirk and after the decision to send war equipment to Russia. It has also been found in many industries that women, although paid less than men, produce substantially more, the reason being that the women have gone into factories from a desire to aid the war effort rather than from a desire to earn money. The same phenomenon has been observed in the linen flax industry in New Zealand, where women, paid a third less than men for the same work, have a better output. “There “may be some truth,” said the “ Economist ” recently, “ in the para“dox that the best way to increase “ incentive at this stage is to abolish “it completely.” If it is true that the money incentive is losing its validity, then part of the justification for the wide difference between service pay and the wages of civilian workers disappears. It is not to be expected that this fact will bring drastic and revolutionary changes in the economic system. But it is at least certain that in all countries which are fully mobilised for war, industrially as well as militarily, the trend must be towards uniformity of wage rates over the whole field of industry and towards a narrowing of the gap between service pay and civilian wages. The economic consequence of attempting to make the money incentive more effective must be inflation. And the effect on national morale must be serious, for money still has enough hold on men’s minds to make wide differences of money wages a cause of unrest, even though the differences are not as great when translated into spending power. In Britain there are some signs that this trend is seen and accepted by the trade unions, for although the Trades Union Congress still rejects the idea of a national wages policy, it has recently withdrawn its long-standing opposition to the system of family allowances. And it seems safe to predict that family allowances, which after all are a step towards uniformity in wages, will be introduced in Britain before another year passes.