THE PRESS WEDNESDAY, NOVEMBER 21, 1979. Wages, prices, and markets

Press, 21 November 1979, Page 18

THE PRESS WEDNESDAY, NOVEMBER 21, 1979. Wages, prices, and markets

The increase of 9.2 per cent in wage rates in the year ended September is the smallest annual increase in this series since March. 1978. it would be premature to conclude, however, that the rate of wage inflation has declined. The figure of 1212 (December, 1977, equals 1000 in the statistics) which the Government Statistician (Mr E. A. Harris) announced last week is provisional, subject to revision in the light of subsequent information. The series measures •■nominal” wage rates, and is calculated from awards, agreements and determinations by all the courts and tribunals and other wagedetermining authorities in both the State and private sectors. Retrospective agreements almost invariably lift the provisional figure: for example, the provisional figure of 1177 for the June quarter this year has been revised to 1208—an increase of 31 points, or 2.6 per cent The increase in nominal wages, as measured by this index, was described by the executive director of the Employers’ Federation (Mr J W. Rowe) as an understatement of “actual” wage movements. These movements are more accurately reflected in the sixmonthtv survev of wages taken by the Denartment of La hour, and based on returns from emnloyers. Unlike the nominal wage index, the survey of wages includes bonuses, allowances, snecial payments and overtime. Nevertheless. the two series tend to move at much the same rate: the nominal wage index has risen in the last 10 years to 3 52 times its 1969 level while the average earnings have risen to 3.66 times their 1969 level. Mr Rowe estimates that the actual movement in wages over the last 12 months (the survey is taken in April and October) was closer to 15 per cent. “Recent wage settlements have produced increases of at least 10 per cent, which, when coupled with the 4.5 per cent general wage increase, will boost nominal w’ages by at least 15 per cent.” This is very close to the 15.2 per cent increase in the consumer price index in the year to September.

New Zealand's wages and costs have been rising this year faster than those of most of the countries with which we trade and compete: and there is no indication that the productivity of labour tn New Zealand is gaining on productivity elsewhere. The combination of high wages, high costs and low productivity holds no promise of an early recovery from the set-back to New Zealand's prosperity caused by the O.P.E.C. price rises and the exclusion of, or threat to, so many traditional exports in the most profitable markets Successive Government policies have attempted to grapple with the problem over the last decade since the threats to markets and the thrust of inflation even in times of business recession became strong. These policies have swung from stern controls on wages and prices to relative freedom from Government intervention on either front. Free bargaining on wage rates is never complete: competitive pricing is far from universal, though in some areas of the economy it has been intense. Governments have therefore almost always resorted to intermediate measures, to limited controls on prices, to warnings of wage limits, and, most recently, to holding the Commerce Act sword over sellers who seem likely to step out of line with price increases. This mixed bag of measures is undoubtedly one result of a mixed economy, given neither to complete economic freedom nor to complete central management. The public, of course, wants neither of these extremes. If this is the public preference, the final word on wages and prices must be left to the judgment of unions, employers, shopkeepers, producers and consumers. Marginal or occasional intervention by the Government is what they expect, and is what they will generally get. The rest is up to negotiation and the marketplace. Unfortunately for New Zealanders, a great part of their marketplace is far away, beyond effective negotiation. This cannot safely be forgotten when making decisions on wages and prices on the home front.