THE PRESS FRIDAY, JANUARY 27, 1978. Wages and unemployment

Press, 27 January 1978, Page 8

THE PRESS FRIDAY, JANUARY 27, 1978. Wages and unemployment

The Prime Minister has said that a substantial general wage order will increase unemployment. Mr Muldoon’s warning will be seen in some quarters as a threat to applicants for a wage order simply because he does not want to have to deal with the inflationary results of a large increase in wage rates. Until recent times, wage increases in New Zealand have not been fallowed by an increase in unemployment.

Employers have passed on to their customers the increases in the cost of production, including wage increases. They have done so with the endorsement of all the authorities that have been devised to supervise and restrict price increases. Unemployment has not been a conspicuous result of either wage increases or price increases. The consumer has paid.

At the same time the cost of Government services has been increased because of the increases in wages and in the costs of materials for which the Government has had to pay. Neither

public nor private employment were diminished noticeably and higher incomes have yielded a higher tax revenue to pay the Government’s bills. While the growth of State services has been curtailed in almost every sphere except that of social welfare, the country has almost paid its way. Why. then, should anyone fear more unemplovment as a result of further rises in wages?

Sir Thomas Skinner, president of the Federation of Labour, has said that the lack of purchasing power in the hands of consumers, not wage rates, would lead to unemployment. He is right Given sufficient money, consumers will create enough demand to match wage increases and the consequent price increases.

In the process New Zealand would succumb to another cruel attack of inflation. At the same time the ability

of New Zealanders to export competitively would be diminished. Sir Thomas has said that he can see no reason why a wage order of 11 per cent should not be approved. “Business people are having price increases approved automatically now,” he has said. If he were to add that he no longer cared about price increases, or that he saw no dangers or injustices in more and more inflation, his argument might begin to

seem reasonable. But even if it became logical it would not become acceptable. Tax cuts would be an alternative to wage increases; both the F.O.L. and the executive director of the Employers’ Federation agree on that. But neither appear to be prepared to nominate which parts of the State services should be reduced. The Public Service Association has put up an argument for a sub-

stantial general wage order. It has not, however, suggested a cut in public services and all that this would imply to P.S.A. members if State services were to be reduced.

What held true about wage increases, price increases, and employment a few years ago does not hold true today. The country does not pay its way in respect of either imports or public services. Consumers’ purchasing power must be restored to a balance with what the country is producing and is capable of selling abroad. Increasing incomes unduly must mean that prices will rise

unduly and that more people will be thrown out of work. Largely because of w'hat has happened in the rest of the world, the old rules about wages and prices no longer apply. On this occasion the Prime Minister’s warning holds a painful truth The just answer lies in having all sectors of the community shoulder the burden of adjustment. It

does not lie in enabling some to score an advantage that entails others being deprived of jobs.