SCHEME DEFENDED

Dominion, Volume 27, Issue 108, 31 January 1934, Page 10

SCHEME DEFENDED

Stimulus to Building Industry PAYMENT OF SUBSIDY Minister Reviews Position The advantages of the Unemployment Board’s building subsidy scheme, not only to the unemployed, but to the community generally, were stressed by the Minister of Employment, Hon. Adam Hamilton, in a statement issued yesterday. After referring to the reduction in registrations during the operation of the subsidy. Mr. Hamilton said the board was convinced that no other expenditure of the board’s funds had been so productive of benefit to the employment situation as the expenditure under this scheme. It had rendered liquid much capital that was, for lack of confidence, frozen and useless from a community point of View. “There appears at the present time to be a fairly general demand for fuller and more detailed information in regard to the operations of the Unemployment Board’s No. 16 building subsidy scheme,” said Mr. Hamilton. “Already very full details have been supplied’ to the public as to the total value of works approved, of the anticipated cost to the board by way of subsidies, and of the value to the industry from an employment point of view as the work proceeds. The hoard cannot, nor has if any desire, to object to criticism being levelled against the practice of paying subsidies to the building industry. It is an unusual procedure, and any thoughtful examination is helpful. Not Clever Criticism.

“It is not very clever criticism, however, to make the bare statement, as though it were a fact, that all buildings being subsidised could have gone on whether they had been subsubsidised or not while to suggest that money expended in this direction would have been available for increased relief payments indicates very loose thinking. It is useful just now, in view of recent criticism levelled against scheme 10, to look back and observe the unemployment position as it was at the early part of last year when the scheme was reintroduced. “The building industry—the largest of our secondary industries from 1 the point of view of employment—was practically at a standstill. In selecting the building industry for special consideration, the Unemployment Board realised that practically no other industry offered the same need or facilities for stimulations by way of a subsidy. The percentage of the total money spent in wages both direct and indirect is greater in the building industry than in any other major industry in New Zealand. •> Permits in Larger Towns. “The total value of permits in the larger towns where statistics are collected for the month of April reached the zero figure of £76,000. This was the lowest monthly value of permits since the collection of building statistics was commenced in 1922, and is in sharp to the monthly average value of permits issued between 1926 and 1929, which stood at £750,000, while on two occasions during that period the monthly totals exceeded a million pounds. “Helped no doubt by the collapse of the building Industry the unemployed registration figures were increasing at an abnormal rate. It was freely and confidently anticipated by many of those now criticising the board for subsidising buildings that the unemployment figures would reach 100,000 before the winter came on.” Mr. Hamilton said the Unemployment Board bad the position to face, and decided to reintroduce the No. 10 subsidy scheme. By making the scheme wider in its application than was the case when it was attempted the previous year, and by providing for a shorter working week on subsidised work, the board set out to stimulate the building industry and, if at all possible, to counteract the abnormal increase in unemployment figures. “It is a significant fact,” he said, “that when the scheme had operated for one month only, the steady and abnormal rise which was taking place in unemployment figures was arrested.” Analysis of Registrations. The following analysis of registration figures, the Minister continued, would enable a proper appreciation of the effects of this scheme on the unemployment position:— The registration figures . for the month of May, 1933, or the month preceding the operation of Scheme 10, increased by 1336 over the previous month, against a corresponding increase for the same period in 1932 of 799. During the month of June, 1933, the first month of operation for Scheme 10. the Increase of registration figures was 356 only, corresponding with an increase of 1495 in June, 1932. Tn July, with the scheme scarcely under way. the effects of the scheme were beginning to he felt. Whereas in 1932 during the month of July the registrations nt the labour buraeux increased by 495. in 1933 they decreased by 419. Taking another month for comparison, when the scheme might be said to be properly under way—the month of October—the registrations decreased by 4599. as against a decrease of 1764 for the corresponding month of 1932: and. at the encl of December, 1933. the figures of registered unemployed remaining on the books at the employment, bureaux were less than at December 31. 1932. by 4159. and despite the fact that the 1933 year commenced with the registrations at 7000 above those of January, 1932. Unfulfilled Prophecies. “It is strange.” added Mr. Hamilton, “■that prominent among the critics of the building subsidy scheme we find many who were so confident that the registrations during the winter of 1933 would exceed 100.000. Wo might have expected them to give some credit to the No. 10 scheme, if for no other purpose than to excuse the non-fulfilment of their own prophecies.” The Minister said that to allege that the using of funds for subsidies under the No. 10 scheme had resulted in a necesssity for cutting allocations under Scheme No. 5 was not correct. It would appear more likely that had it not been for the operation of the No. 10 scheme it may nave been necessary to further reduce present allocations or to inerease taxation. To give one illustration typical of others showing how scheme 10 operated should suffice to dispose of the idea that subsidies on buildings had reduced the money available for scheme 5. Take a city building, subsidised under the scheme which gave employment to . -10 men, all of whom were previously l on relief under scheme 5. The cost of

subsidy—approximate figures only—for these men was £5O per week, the wages -bill for the same men was round about £l5O per week.. The overall expenditure on this buildin„, including the wages paid, averaged £450. Of this latter amount it was reliably estimated that, in addition to the direct wages paid, £2OO per week was -paid in indirect wages. It was important to note here in this illustration, being an actual case, , that the subsidy amounted to slightly less than would have been required to pay relief rates under scheme 5 to the same mqfi. By expending the money in this way the 40 men, instead of tenet rates of pay, were in receipt of standard rates. In addition, they created employment for other workers at standard rates and, more Important stilt all the men were employed m their normal undertakings. That illustration indicated olearly the advantages of the No. 10 scheme. Productive of Advantages. "The Unemployment Board is convinced," said the Minister, “that no other expenditure of the board s funds has -been so productive of advantages to the employment position as the expenditure under No. 10 scheme. It is not to be measured only by the reduction that has taken place in registrations. but some account must be taken, of the possible increase in registrations if the scheme had not been introduced. It is always very difficult, when proposals have been given effect to, to get It measure of what the position would have been if those proposals had not been put into operation. “The total value of applications approved is £5,494,000: the maximum subsidy on these works, assuming they are all gone on with and that, all estimates as to cost prove reliable, would involve £500.000 iu subsidies from the fund and direct and indirect employment involving over £4,000.000 in wages. The tax from these wages - will amount to approximately £200,000. In Keeping With Act"Such an arrangement as this; if at variance with usual economic practice, is well in keeping with the responsibility imposed on the board in section 17 of the Act, which sets out as a function of the board: ‘To take such, steps as in accordance with this Act it considers necessary to promote the growth of primary and secondary industries in New Zealand, so that an increasing number of workers will be required for the efficient carrying on of such industries.’ “Further, it should not be assumed that the whole of this increased building activity applied to large commercial undertakings. The subsidy was made particularly attractive in reference to private dwellings of less than £650 total value. The effect of this is evidenced by the fact that the November returns show 264 permits granted for private dwellings of a total value of £178,646. For each of the four months ending November the permits for this class of building exceeded 200, and is in pleasing contrast to the position in June last when the number issued was only 47. _ “It may be argued that people with money should build without subsidy. I could agree. The simple fact is that they were not doing so. This schema has rendered liquid much capital that was, for lack of confidence, frozen and useless from a community point o£ view.” .