h order hearing F.O.L. Seeks Increase Of 11.5 Per Cent

Press, Volume CX, Issue 32385, 26 August 1970, Page 26

h order hearing F.O.L. Seeks Increase Of 11.5 Per Cent

(New Zealand Press Association) WELLINGTON, August 25. A married man with two children would need a weekly income of $103.13 to satisfy the “average” citizen’s cost of living, as indicated by the latest consumers’ price index figures issued by the Department of Statistics, the Court of Arbitration was told today by the president of the Federation of Labour (Mr T. E. Skinner).

Mr Skinner said in his submission supporting an application for a general wage order that an increase of 11.5 per cent was sought.

In the minds of many people this figure would seem to-fall short of the increase needed to restore the position of the wage and salary earner in the community, he said.

“At the present time it appears to the federation that the most important function with which the Court is charged is the promotion of harmonious relations in industry,” he said. “In making a general order due weight should be given to this consideration.

The figure of 11.5 per cent was arrived at by setting the estimated increase in wages since the last general order in 1968—6.9 per cent—against the estimated increase in prices and productivity—lB.4 per cent—to the end of this year.

The workers’ case was that the cost of living at June 30 had already risen by 10.7 per cent since the last order, and it appeared certain that the increase would continue at the same rate, or greater, to the end of the year. When the application for a general wage order was filed on May 8 this year, no amount was stated.

Mr Skinner said the reason for not giving a figure was that he wanted to first consider the latest quarterly price index figures of the Department of Statistics.

Value Determined

Dealing with these in his submissions today, he said a main ingredient in the standard of living was the cost of living. This determined the real value of income. As prices rose the value of income fell, with a consequent reduction in living standards. To maintain and promote living standards it was necessary to consider changes in price levels, to assess the actual value of remuneration in the light of living cost, and to adjust the remuneration accordingly. An accurate assessment of any rise or fall in retail prices —a criteria required to be taken into account—was complicated by defects in the price and wage indices, and also by unusual circumstances, especially in the changing relation between minimum and ruling wage rates. The consumers’ price index, regarded in the past as the official measure of changes in the cost of living, was. until the passing of the General Wage Orders Act, specifically named as an indication of price changes which had to be taken into account.

The federation had previously raised objections to its use as a cost-of-living index of wage and salary earners and had sought a household budget survey instead so that actual living costs of particular groups could be established.

Various publications had made the point that the consumers’ price index was a measure of a general movement only, applied to a nonexistent “average” citizen.

It did not fit the circumstances of the individual because, everyone did not buy all the commodities or services listed in the index, nor did any one buy them in the same proportions as laid down by the index.

Warning Given

Discussing the index, which was compiled on the advice of a committee set up by the Government in 1948, Mr Skinner noted that in publishing an explanation of the composition of the index in October. 1949, a warning was given against indiscriminate use of its averages. This was re-

peated when the index was revised in 1955. If application was to be limited to any given economic group or specified type of community then a family budgetary inquiry was necessary, the 1948 committee had reported. The then Government Statistician had said it would take at least 12 to 18 months to organise and carry out a properly designed family budget inquiry, the results of which would shed considerable light on social and economic problems. The level of spending indicated by the consumers’ price index showed that the base expenditure needed to maintain this pattern was $770.84 (with a base of 1000 units). But by June, 1970, the index had risen to 1251, requiring an expendtiure of $964.32.

$103.13 needed This total represented spending by an average member of an average household. This average person could be man, woman, or child. There was no distinction in the index.

“Thus the average family household of busband, wife, and two children would need four times the total of $964.32 to meet the expenditure laid down in the index, that is, they would need $3857.28 to spend,” Mr Skinner said. He went on to discuss other points made by the committee which established the index—noting that the committee had said the index “could not embrace expenditures not capable of being priced, that is, cannot be related directly to value received” — before listing under 19 headings items covered by the 10 per cent of spending not covered by the index. Taking this into account, the actual amount needed would be s42Bs.s7—equivalent to $82.42 a week. “Part of this would be supplied by family benefit, but earnings would need to be considerably higher to provide this amount tax-free,” he said.

When both family benefit and income tax were taken into account, the weekly income would need to be $103.13.

$103.13m Needed

Expenditure to maintain this average would be $82.42 a week. Family benefit of $3 would be available, but income tax as an M2 would require $23.71, giving a weekly income requirement of $103.13. Noting that during a past hearing for a general wage order,’ a number of questions had been put to the then Government Statistician (Mr J. V. T. Baker), Mr Skinner then assessed the weekly spending

For June, 1970, this would have been:— Food .. • • $22.29 Housing • • Household operation .. $7.77 Clothes • • • • ss'22 Transport - - • • $6.99 Miscellaneous .. $14.00 All groups • • $74.17 Non-index expenditure $8.25 Total .. •• $82.42 “If average expenditure on food is in accordance with this index calculation, the average wage and salary earner—earning $47.85 a week according to the latest Labour Department survey—would have little left for spending after paying out $22.29 on food, which in June, 1970, represented 30.04 per cent in index expenditure,” Mr Skinner said. Apart from anything else, this meant the index did not represent an accurate picture of spending by any particular economic and social group.

Unresolved Questions “Even so,” he said, “we are left with some unresolved questions. “We do not know just how the award wage earner spends the relatively small income available to him. He is a long way short of the $103.13 needed to cover index expenditure. “He obviously cannot spend $22.09 a week on food and provide for the other needs of his family as well. There is no standard provided by official figures to show what is, in fact, a living wage which will provide a reasonable standard of comfort for a family." Up to 1966 the annual increase in the index amounted to a little over 2 per cent a year, with the exception of 1964. Removal of food subsidies and other economic measures imposed by the Government raised the index by 6.6 per cent in 1966, and it had failed since then to go back

to the customary rate of increase. One obvious cause for the higher rate of increase was devaluation, coupled with rises in impart prices for other reasons. But it was disturbing to see that the increase in the first six months of this year continued at a rate of 7.4 per cent a year, higher than had been known for 20 years. “There is no satisfactory explanation for it, nor any reason to believe that it will ease in future,” Mr Skinner said.

Payroll Tax “In fact, the payroll tax imposed in the last Budget will give it further impetus. The tax is nominally 2 per cent of wage payments, but is not tax deductible and is estimated for this reason to have the effect of a 4 per cent tax. "Strangely naive statements have come from Government spokesmen, suggesting that this extra cost would not be added to prices, but these statements cannot be taken seriously. “Spokesmen for industry and commerce have stated definitely that the tax will be passed on by them.”

Mr Skinner said the most striking, “even staggering,” feature of analysis of subgroups increases in the index was the 23.6 per cent increase in the price of meat in two years to June, 1970. Local meat prices were governed by prices obtained overseas. He said the export position of New Zealand was sound, with export receipts rising to record levels. The unexpectedly strong position of overseas reserve funds which appeared in 1969 had been maintained, providing a satisfactory cushion against temporary adverse trading conditions.

“For the last 10 years the wage and salary earners have been told, when they asked for general wage increases, that our economy was endangered by the threat of the E.E.C. and that they should moderate their demands for this reason,” he said. “It is probable that we will hear it again this time, and will be told to consider the position of primary producers. In fact we appreciate their difficulties, just as in the past we appreciated the effects of the boom in wool prices, or the extraordinary prices of dairy produce and meat after drought conditions overseas. “We are unable to see that we should forego compensation for loss of value in wages in order to subsidise the incomes of others.

No Refund

“A wage earner has to live in the short term, from one weekly pay day to another. If he now takes less to assist primary producers he can be certain that it will never be refunded, whatever the future may bring.”

Mr Skinner said the usual hints of future disaster had appeared in both the Economic Review and the Budget. “But this is standard practice, since the Government’s advisers are always afraid that if they tell the people that prospects are too good, the people may think there should be something in it for them,” he said.