F.O.L. Outlines Its Case In General Wage Claim

Press, Volume CVI, Issue 31145, 23 August 1966, Page 3

F.O.L. Outlines Its Case In General Wage Claim

(Xew Zealand Press Association)

WELLINGTON, August 22.

The present situation was very different from that which existed when the Economic Stabilisation Act became law in 1948, the president of the Federation of Labour, Mr T. E. Skinner, told the Arbitration Court today.

Opening the federation’s case for a 9.5 per cent general wage order —7 per cent to take account of higher retail prices and 2.5 per cent for greater productivity—Mr Skinner said controls imposed under the act had largely been dismantled.

He said the Government had declared itself in favour of removal of controls where ever it was considered possible; rent control had disappeared as far as new rentals were concerned; the control of prices of goods and services remained only in a restricted field—mainly for subsidised goods; and the control of costs and incomes, other than wages and salaries, had been removed almost completely.

In spite of this, applications to the Court for general wage increases were still subject to restriction on the ground of possible effects on the economic stability of the country, said Mr Skinner.

“A general increase in wage rates must, of course, have an effect on costs in industry, but this alone is no reason for denying justice to wage and salary-earners, whose incomes have fallen out of line with those of others in the community because they have been eroded by higher retail prices and other costs,” said Mr Skinner. When similar restraint was applied to the affairs of the community in general, workers could expect a close scrutiny of their demands and a restriction on the increase granted, but they could also expect protection from unjustified and unreasonable increases in their cost of living. “Today they have no such effective protection, but are being asked to carry the whole burden of the cost of economic stability. Other groups in the community are able to raise their charges at will, and lose no opportunity to do so. Prices of commodities and services have risen substantially since the last general wage increase took effect and, with very few exceptions, these increases have not been subject to any inquiry or investigation. Changed Policy “Consequently, the planned policy of stabilisation of all the main factors influencing the economic balance of the country has disappeared. In its place has appeared an unplanned confusion in which lip-service is paid to economic stability, but the only concerted action taken is a periodical condemnation of wage levels by practically all groups in the community except the wage and salaryearners.

“Generally, most groups in the community are free to raise charges at will, but wage and salary-earners can raise their minimum wage rates only by agreement with their employers or, if agreement is withheld, must accept the increase granted by the Arbitration Court. “We are told, by people with little knowledge of the subject or by people who wish to discredit the trade union movement, that workers would be better off with a reduction in prices instead of an increase in wages, and for this reason they are urged to refrain from making applications for general wage increases,” said Mr Skinner. “The Federation of Labour has said frequently that stability in retail prices is preferable to increases in retail prices and consequential increases in wage rates, and that, given the choice, we would gladly accept a reduction in prices instead of a wage increase.

“A choice between the two has never been offered, and the workers’ only option has been either to put up with a reduction in the value of wages when prices go up, or else to ask for compensation by way of a general wage increase. Price Increases “The present application deals with an increase in retail prices since the Court last considered the level of the price index, of no less than 7 per cent. “There appears to be suspicion in some quarters that this application may have some political significance since this is election year. We consider that the facts put before the Court speak for themselves, and would point out that the price index had risen by over 3 per cent at the end of 1964 and by close on 5 per cent in September, 1965.

“It does not seem reasonable, when this is taken into account, to suggest that the present application is hasty, ill-considered or has been

lodged with an eye on political circumstances. The facts indicate that the workers’ organisations have acted with responsibility and restraint for which it seems that they can expect little credit. Dealing with what he termed “the weakness of the consumers’ price index in relation to awards,” Mr Skinner said: “Costs of food, clothing and shelter have a much greater impact on the incomes of workers on minimum wage rates than on workers receiving the average income to which the price index applies. Consequently, increases in the prices of these items of the index would mean a greater loss in the value of wages to the worker on minimum rates than it would mean to a man with an average or higher income. “In other words, these commodities would have a greater weighting in the budget of a minimum wage-earner than they have in the consumers’ price index, which is related to a higher income level. Food And Housing “It does not seem proper, when this is realised, that we should continue to take notice of an effective wage rates index which is constructed by comparing the movement of minimum wage rates with the movement of the general level of prices at a different income level and, in spite of this, is accepted as being accurate to one-tenth of 1 per cent. “According to official index numbers, minimum wage rates have done little more in recent years than keep up with increases in retail prices, although they are supposed also to have taken into account increases in wage

rates on account of increased productivity. “It seems probable that a more realistic effective wage rates index would show a reversal of the situation, and indicate that rising costs of food and housing have been reducing the real value of minimum wage rates in spite of the increases in these rates. “This seems likely because of the greater impact of costs of food and housing, and the fact that they have been rising more rapidly and consistently than prices of goods and services included in other groups in the index. Because they are the first inescapable charge on income, and because they represent a larger proportion of smaller incomes than they do of larger incomes, changes in these costs have the most serious effect on the smaller incomes. Family Budget “Using the results of a household budget survey carried out by the F.O.L. in 1960-61 and adapting it to meet price changes, it seemed reasonable to expect that a family with two children would, on the average, spend £7 10s a week on food,” said Mr Skinner. “This is averaged over a considerable range of income, and the actual food purchased is reasonable in type and quantity, appearing to conform with the design of the consumers’ price index. “If this expenditure is related to the consumers’ price index, as 30.09 per cent of total expenditure, it would indicate that the average family spent a total amount of £24 18s 6d a week. “If this income was used as a basis for calculation, the family’s spending, if it conformed to the index pattern, would be:

Food £7 10s. Housing, £4 9s Bd. Household operation, £2 15s lOd. Apparel, £3 5s sd. Transport, £2 7s Id. Miscellaneous, £4 10s 6d. Depreciated £ “Where another family of this size and composition had £3O a week to spend, and did spend that amount, it would not follow the same pattern. If, as we have assumed, spending of food is adequate, the extra money would be distributed over other fields of spending and the proportion spent on food would be reduced. By spending £7 10s out of a total of £3O, this family would only be spending 25 per cent of the total amount on food. “Taking the other end of the scale, a worker receiving £l3 14s 2d a week, as provided in a recent key award, the picture is considerably changed. If this family, with a total amount of £l3 14s 2d available for spending, spends £7 10s to maintain a desirable standard of nutrition, it will have spent 54.7 per cent of the total money available. It will then have £4 4s 2d left to spend over the rest of the index regimen, a range of spending which has been calculated on the assumption that a sum of £l7 8s 6d is available for this other expenditure,” said Mr Skinner. Mr Skinner said the price index had increased by 5.3 per cent since the last general order was made. In terms of money and incomes this increase was the equivalent of nearly Is Id in the £. The increase has the effect of reducing the purchasing power of the £ to 19s. State Of Economy Mr Skinner said a good deal of uncertainty appeared to exist in New Zealand at present concerning the actual state of the economy. “There is no doubt that financial difficulties can lie ahead unless decisive and effective action is taken to meet the situation emerging from the heavy deficits in overseas receipts and payments over the past years. But it is undeniable that the state of our overseas trade is healthy, that our export income is at a very satisfactory level by comparison with the past, and that industry in New Zealand itself is extremely prosperous.”