BASIC WAGE INQUIRY

Dominion, Volume 30, Issue 24, 23 October 1936, Page 11

BASIC WAGE INQUIRY

Low-scale Fixation

Suggested

FREEDOM SOUGHT TO REWARD MERIT

Age of Application Again

Discussed

Evidence for the employers at the basic wage inquiry in the Arbitration Court in Wellington yesterday included a suggestion that the wage should be a fair one for the most incompetent, least industrious and least willing worker, and that it should not apply till the age of 24 for clericnl workers.

The Court adjourned till Tuesday to enable both sides to prepare for the final evidence and argument in the case.

Mr. Justice Page presided, and with him were Messrs. W. Cecil Prime and A. L. Monteith. The case for the employers is being conducted by Mr. T. 0. Bishop, and the case for the work ers by Mr. J. Robinson, Dunedin, and Mr. J. Roberts, Wellington. Basis of Calculation. Mr. W. Machin, general manager of the New Zealand Farmers' Co-opera-tive Association, Ltd., Christchurch, and chairman of the economics committee of the Canterbury Chamber of Commerce, gave evidence that real wages, in terms of purchasing power, were higher in 1936 than in 191-1 or 1926, and suggested that any basic wage must be sufficiently in balance with the level of export prices so as not to put up farm costs to a point where production became unprofitable. A high wage for social reasons only was economically unsound. Mr. Machin examined’ production costs. The Government statistician gave the approximate increase for farmers on 1914 as 15 per cent., but- he thought it was nearer 25 per cent. Since 1914 the index percentage of increase in export prices was 15.4 per cent., in all groups of retail prices 35.4 per cent., in wholesale prices 33.8 per cent. Wages in August, 1936, would buy 13.8 per cent, more than in 1914 of the goods included in the official statistical index and 18 per cent, more than in 1926. Of primary produce at export prices the wages of August, 1936, would buy 33 per cent, more than in 1914 and 21.6 per cent, more than in 1926.

Real Wages Higher.

"The economic position of wageearners receiving these wage-rates in August, 1936, is a great deal better than that of similar wage-earners in 1914 and 1926,” be said. “In otherwords, real wages, that is wages in terms of purchasing power, are higher to-day than they were in 1914 or 1926, and the increase to the present time in comparison with the rates ruling in 1914 and 1926 is greater than the increase in returns of income either gross or net to any other class in the Dominion.

“Conversely, however, other members of the community are not doing so well—thus the prices received by the primary producers in August, 1936, will purchase only 85.5 per cent, of the retail prices group of what they purchased in 1914, and 97.3 per cent, of the amount they purchased in 1926. “Further, as interest rates have fallen by from 20 per cent. to. 25 per cent, since 1926 and the prices of goods, etc., in the ‘all groups’ index by 14 per cent., it follows that the purchasing power of interest lias fallen in terms of goods. It has also fallen considerably in terms of services as represented by wages.’’ Costs and Prices. Wool was £2O a bale on the average from 1914 to 1930, and £l3/6/8 in 1935-36 while butter was 183/- a cwt, in 1929 and 100/- in 1936. The costs of the primary producer had increased, and his purchasing power had decreased The income of lenders of capital from their savings had decreased and consequently their purchasing power had decreased. The wage rates of wage earners had increased and their purchasing power had increased. This indicated disequilibrium, less marked now than it was during the years 1930-1933, but still sufficient to account for the large residue of the unemployed who continued to present a grave problem. There was. also an important consideration in the large subsidies which, primary production had required during the past few years through voluntary remissions of interest charges and forgiveness of farmers’ debts, arid through the relief Acts compulsorily relieving some farmers of large portions of their costs. This was heavily subsidised production which could not continue indefinitely. Moreover, it consisted of subsidies from other individuals in the community who were correspondingly injured financially. Basic Wage Requirements. The reflection of these facts upon a suggested basic wage, he suggested, must be:—

“1. Any basic wage must be sufficiently in balance with the level of export prices as not to put up farm costs to a point where production becomes unprofitable; otherwise the export income will suffer, and the economic position of the Dominion will be weakened, and the repercussions on al) classes, and especially upon wage earners, will be unpleasant and severe in proportion. “2. Any basic wage must be at a level proportionate to the efforts of the least enterprising section of wage earners, otherwise the returns from production will be insufficient to bear the addition to the basic wage of the amount actually earned by the most enterprising of wage earners, and efficiency will suffer, with consequent detriment to the general economic position of the Dominion in its competition with other nations in the world’s markets.

“3. Any basic wage level must, therefore, be dictated by the actual conditions resulting from overseas market prices. No internal guaranteed prices by subsidy at a higher than market price level can continue to maintain a correspondingly higher basic wage level, as such subsidies must necessarily increase costs, which will in turn react unfavourably on production and industry generally, and will ultimately fall back injuriously on wage earners.

“4. The suggestion that a high basic wage, fixed for social reasons and without regard to the uncontrolled prices obtainable for 65 per cent, of

the production of the Dominion ‘would not impoverish, but would enrich New Zealand because it would increase the purchasing power of those who receive it,’ is economically unsound, as it assumes erroneously that the turnover resulting from the spending of wages is sufficient to compensate the vendor for his extra expenses in paying these wages: in other words that the part (wages) is as great as the whole (turnover), instead of being but a proportion only of turnover. Wages must bear a proper relationship to costs and prices, otherwise, if they are disproportionately high they increase costs, and where prices cannot be raised (externally) consequently reduce the earnings of the producer, or where they raise prices (internally) the result is to reduce the purchasing power of those consumers whose incomes have not yet been increased.”

Relation of Exports and Imports. Mr. Roberts cross-examined Mr. Machin for two hours. Mr. Machin said his firm was not a large manufacturing concern, confining its manufacturing activities mainly to bedding and furniture. He considered that the price and volume of exports were the most important factors in the standard of living in New Zealand. Increased returns from produce sold overseas almost invariably resulted in an increase in the volume of imports, raising the standard of living in New Zealand. Mr. Roberts: You will agree that exports are paid for by imports. Mr. Machin: Certainly not. On the contrary, exports pay for imports. You can’t buy anything till you have sold something to pay for it. Mr. Roberts said all economists agreed that exports paid for imports. Mr. Machin: Well, you bad better question the economists about what they say. I am only a business man, but I know that I cannot buy till I have sold something to get the money to buy it with. Mr. Roberts asked several more questions about imports and exports, especially butter, till Mr. Machin said that if only Mr. Roberts were in business he would know how trade was conducted.

Mr. Roberts said he did not need to be in the business, as he was in it before Mr. Machin. He worked in Tooley Street 35 years ago and knew what went on.

Mr. Machin: You live in another world.

Mr. Roberts: I know what lam talking about. Mr. Machin: The terms you use do not apply. The world you speak of does not exist.

Mr. Roberts: I know the terms don’t apply because you commercial people don’t want them to.

Mr. Machin said he agreed that about 44 per cent, of primary production was exported. Mr. Roberts: You agree with Professor Tocker in that I suppose you have never, discussed this subject with him? Mr. Machin: Oh, he and I have discussed economic subjects together for many years. Mr. Roberts: He is your instructor, as .you might say, to your chamber of commerce? Mr. Machin: Over the years he has given in the chamber very interesting and very valuable information on economic subjects. Mr. Roberts: And when he says something you generally agree with him?

Mr. Machin: Well, we don’t always agree, but on questions of fact we generally reach a measure of agreement.’ I don’t think he would always agree with me. Comparison of Wages. Mr. Machin said wages were higher in New Zealand than in Great Britain, and had been for many years. When Mr. Roberts quoted figures for watersiders in London, showing that the wages there were 32/- for nine hours, compared with 18/- for eight hours in Lyttelton, Mr. Machin said these rates seemed extraordinarily out of proportion with the other wage rates in Great Britain. Mr. Roberts suggested that Mr. Machin had included boys and girls in computing the average earnings in Great Britain. Mr. Machin replied that his figures were average figures for adults taken from official sources such as the 1.L.0. returns and from other reliable sources and trade associations in Great Britain. Mr. Roberts said the figure quoted by Mr. Machin, showing New Zealand rates to be 40 per cent, above those in Great Britain, was incorrect and Mr. Machin undertook to have the returns provided for the court. Mr. Machin said he agreed that it was better for interest to be cut than wages, and it had been. It was unfair to lenders of money to say that they were unwilling to accept cuts, in interest at the time of the depression. Many did so willingly. When Mr. Roberts quoted shearing costs Mr. Machin asserted that he was trying to mislead the court by not giving the full figures. Mr. Roberts said he was not trying to do anything of the kind.

Referring to Mr. Machin’s comparison of 1926 and 1935 wage rates, Mr. Roberts said wages tax, sales tax and exchange costs were not chargeable in 1926.

Mr. Machin agreed that this was so, but said that in his opinion everybody had benefited from the exchange rate, which he thought had “saved the ship."

Basic Wage Foundation.

Mr. Roberts: You are asking for lower wages?—“Oh, no, I am not.”

You want the basic wage fixed on export prices?—“l do not. I would fix the basic wage, if I had anything to do with it, on the level of the most incompetent, least industrious and least willing worker, so that I might be able to build on that to reward the most competent, industrious and willing on the scale he is entitled to." Mr. Machin said he did not agree that it was inevitable that employers should endeavour to secure their labour at the cheapest possible price. Mr. Roberts: Well, why did the wage rates fall when the Arbitration Court was abolished by not only 10 per cent., but in some cases as high as 50 per cent? Mr. Machin: The main reason why wages fell was that the industries could not pay more, but the fall in wages was often not as severe as the fall in returns from business. Mr. Machin, to other questions, said he knew employers who did not pay the minimum of wages. Even if there were not awards he did not think employers would force wages down to the lowest possible level. Mr. Machin was also cross-examined by Mr. P. E. Warner, who gave evidence for the employees earlier. Mr. Warner asserted that Mr. Machin had “dodged the issue” with questions. His Honour said this was a most improper suggestion. Witness had given a clear and plain answer.

To Mr. Monteith, Mr. Machin said his company made substantial advances to farmers, but he denied that he was interested in keeping wages down so that he would be sure to get the interest on his advances. He had always advocated that interest and

wages should be equated, and he had said six years ago that both interest and wages would have to come down. He thought it would be a mistake to fix a high basic wage, because employers would not then have the opportunity of rewarding merit by paying more to the industrious and efficient workmen than to the less efficient and industrious. Mr. Monteith: That would be at the discretion of the employer solely. Mr. Machin: Not solely, for sometimes competition and other factors force you to pay high wages. We are at present paying more than award rates in some cases.

AGE OF APPLICATION Insurance Company Views The question of the age of application of the basic wage was again raised. Mr. Leslie C. Gibbons, for the executive council of the New Zealand Fire and Accident Underwriters’ Association, said the association had considered the position of clerical workers. Members of the council were agreed that should a basic wage for a man, his wife and three children become payable at the age of 21 it would unduly increase the costs of all employers of clerical workers and would also operate against the best interests of the workers. With such a provision insurance officers would be compelled, when engaging juniors, to give preference in all cases to boys of not more than 16 years of age. Boys of 18 and upward leaving secondary school would be prejudiced seriously in obtaining employment because, in the short space of two and a half to three years, they would be unable to qualify themselves to earn the basic wage. The council of the association strongly felt that the basic wage should apply at an age of not less than 24.

Mr. Roberts cross-examined Mr. Gibbons, who said the terms of his evidence were decided upon at a meeting of seven members of the council of the association. He did not know if the 1931 rates of pay had been restored to insurance company workers, nor could he say anything about profits of insurance companies. The council had nothing to do with the domestic affairs of the companies.

Mr. Roberts: Seven of you met and decided on the terms of a resolution, with no information about salaries or profits, and expect the court to treat it as a serious resolution. ... If I had a meeting of seven employees in an industry and came forward with a resolution about the basic wage without any other evidence, would you expect the court to accept it?—“That would be for the court to say.”

Mr. Roberts asked questions about the rates of pay to junior typists and clerks in insurance offices. Mr. Gibbons said he would be surprised to hear that in some of the depression years typists were paid only 10/- a week. He thought juniors would be paid from £5O or £65 a j-ear, but had no idea what it would cost a boy to board at 16 or IS. To Mr. Monteith he said insurance wages were on a scale. A first-year employee without previous experience would get £5O to £65. The scale, he thought, started at from £5O to £65 aud rose by £2O to £25 increments. At 20, he thought from experience, a clerk would receive £145. He was not sure, however, as he was not attached to an insurance company and did not have the salary, scale before him. The salary scale was a minimum, and it was for the companies to decide whether thev should or could pay more. Mr. Monteith: Why would, as you say, the companies be compelled to engage boys at young age—to get juniors cheaper?—“No. to get the service.” _

Mr. Monteith: Yes, to get the service cheaper. Now these men meet for the public good and not for the companies’ good?—“No, to consider staff matters.” Mr. Monteith: To consider staff matters on the standpoint of cheapness. . . . You know what I think of this statement? It is nothing less than an attempt to get cheap labour. PROFESSOR’S EVIDENCE Professor A. H. Tocker, professor of economics at Canterbury University College, was cross-examined again yesterday morning. Examined by Mr. Bishop, Professor Tocker said that he was present as a witness at the invitation of Mr. Bishop, who, in his letter asking him to give evidence, had particularly stressed that he was to come as an impartial witness who was to give his own opinions as to what factors should be considered by the court in fixing the basic wage. Mr. Bishop: There was no discussion between us as to what you were to say in your evidence or what I was to say in my statement? —No. none on any material points. To Mr. Monteith, he said the increase in unemployment from 1931 to 1932 was due to a number of factors beside wage cuts. It was impossible to

compare New Zealand with Australian States as to effects of wage cuts because the circumstances were so different. The predominating factor in prosperity was export prices. He did not agree that wage cuts caused the depression or intensified it. Mr. Monteith asked whether it was not a fact that the reason for the fall in export prices was that production outstripped consumption. Professor Tocker said it was due to a fall in consumption rather than an increase in production. Mr. Monteith asked whether it was not a fact that the wage movement increased largely in England from 1850 to 1900 and prices declined. Professor 'Tocker agreed, but said that the wages were able to increase because the productivity was increasing.

Isn’t that so in this country?—“The volume of exports from New Zealand has gone up considerably but as far as I can judge from the Government Statistician’s figures the volume of production per head remains very much the same.”