WANTED-FACTS

Evening Post, Volume LXXXVII, Issue 70, 24 March 1914, Page 8

WANTED-FACTS

ON COST OF LIVING IMPORTANCE OF STATISTICS

WHAT NEW ZEALAND IS DOING. Ask the ordinary householder what is the minimum amount on which a family can be supported, in moderate comfort. The replies will be interesting ; but a comparison will prove beyond doubt that they cannot all be reliable. They will vary from 30s per week (probably given by a man who has never tried to live on less than £10) to — well, to anything (the opinion of a man whose present income, no matter how largo, cannot keep him from debt, though, as he will tell you himself, he is never extravagant). If you search for further evidence of popular knowledge, ask whether the cost of living has increased in the past ten years, and, if so, to what extent. ' Most people will agree that there has been an increase, but the percentages of increase will vary. These matters, the minimum living wage and the variations therein from year to year, are not merely academic questions. Wherever there is humanitarian interest they should be questions of importance. Where Arbitration Courts or Wages Boards exist to fix the minimum wages in industries they are, one- might say, indispensable if the arbitrating bodies are to speak with authority and finality. In Australia this has been recognised, and on sth December, 1912. Mr. G. 11. Knibbs, Commonwealth Statistician, issued the first report of the Labour and Industrial branch, of the Commonwealth Bureau of Census and. Statistics. The report dealt with prices, price indexes, and the cost of Irving. The secdnd report of the branch, issued in April, 1913, embraced trade unionism, unemployment, wages, prices, and cost of living in Australia, 1891 to 1912. The first of these reports inaugurated a system of index numbers which experts ha.ye pronounced to reveal a high degree of ac curacy. So reliable are these tables deemed that Mr. Justice Hey<<on ba-sed on them his calculations for" the living wage of £2 8s per week, which he declared in, the New South Wales Industrial Court in February last. AUSTRALIA'S EXAMPLE. Commenting on this decision the Evening Post stated : " The judgment is a glorification of statistics. Never before has the statistician come into such prominence. /Mr. Justice Heydoii holds that the living wage should lise or fall according to the general table of the Commonwealth Statistician as to the variation in the purchasing power of the sovereign. . . To ba&e the ( living wage, on the cost of living is scientific enough, if the thing can be done. It is possible only by the aid of statistics, and the unknown factor is the completeness and accuracy of the statistical method and its results. Clearly, this science, so vital to modern conditions, is assuming an ever increasing elaborateness, and New Zealand must pay it far more attention than it has received here in the past. If 'the present trend of events continues, the statistician will become more and more the national nhysician, with his finger on the economic pulse, and with the power of life and death over industry. The logical outcome of Mr. Justice lieydon's judgment is that the whole community must look to the statistician, not as the arbiter of industrial conditions, but as the mathematical interpreter of them." In the regular compilation of authoritative index numbers Australia is ahead of New Zealand. Dr. M'llwraith, of Christchurch, has compiled a series of price^indexes, and various other enquiries have been conducted by the Labour Department and independent persons, but there has been no regular official attention to the question. The Cost of Living Commission in 1912 directed attention to the inadequacy of our statistical methods with the pointed sentence : "The first essential in the stud^y of any social problem is correct diagnosis of the case." The Commission itself had realised the futility of endeavouring by commissions at intervals to obtain, reliable data. There had to be improvement in bhe method of constant collection of figures. DOMINION'S PREPARATIONS. New Zealand, however, has lately been preparing for a change. Quietly, so quietly that few people have any idea of the importance of the task, the present Government Statistician (Mr. Malcolm Fraser) has been working at the collection of such data as will enable him to issue tables of prices which will be both complete and accurate. The New Zealand system is based on that instituted by Mr. Knibbs in Australia. This is important, as it will, up to a certain point, permit of comparisons being made. In view of this fact, it may be interesting to explain Very briefly the principal points of the Australian system. The subject of pricemovements has been investigated at various times and in most countries ; with a wide variety of results in the form of alleged causes and suggested remedies. But, as Mr. Knibbs states in his report, "Before any adequate discussion of the situation is feasible, it is necessary that price-fluctuations should be accurately measured." Mr. Knibbs found that it was necessary to follow separately the fluctuations of : (1) Retail prices ; (2) wholesale prices, and (3) import and export prices. Each serves its own purpose, but, since most people make their purchases retail, the first enquiry is the only one which, for the general public, can be said to fairly indicate changes in the general purchasing power of money. The exchange value or purchasing efficiency of money is measured by the amount of any commodity which a unit of money will purchase. Thus, if the price of tea doubled during any period the money would purchase only half as much tea as before, and the exchange value of money in relation to tea would be halved. But man does does live by tea alone ; so, to determine tho exchange value of any unit of money, say, a sovereign, the variations in the prices of very many commodities must be considered ; also all commodities aro not equally important, a variation in the price of pepper has to be great before it will affect a man's bank account, but tho same is not the cabe with bread. Therefore each commodity must be given its appropriate measure of importance. On the method mostly adopted formerly, the price ratio had first to be discovered. This, stated very simply, is the ratio of the price in one year to the price in the year with which a comparison is desired (known as the base year). Then Ib^at price-ratio had to be multiplied by its appropriate "weight," representing its importance in tho scale of living. This was termed "weighting." The sum of the products obtained by this means was then divided by the sum of the weights and the result gave a weighted price-index. AN AGGREGATE EXPENDITURE. This method, though generally used, was, however, found to possess certain defects, so Mr. Knibbs, with similar basic principles in view, used what is known as the aggregate expenditure method. Under this scheme, the retail puce of any commodity having been determined, it is multiplied by the total approximate quantity ot the commodity consumed. For instance, the price of

brrad, being 3d per 21b loaf in 1901 and in 1911. and the quantity consumed 470 million loaves, 3d and 4d are multiplied by 47 (an equal number of ciphers being omitted with each commodity). The results, 141 and 188 respectively, show the variation in the price in its proper clegiee of importance; so that, a list of fifty representative commodities being subjected to tho same treatment, the sum of the respective results gives an index mimber which indicates the variation in the purchasing power of money over the whole range of commodities dealt with. If in 1901. for example, the total obtained by this method were 1000 and in 1911 1365. it would mean that for the goods which the housewife purchased with a sovereign in 1901 she would, in 1911, have to pay a Slim greater than a sovereign as 1365 is greater than 1000. By an inverse calculation would be shown the purchasing power of- a sovereign in 1911 as compared with 1901. THE HOUSEWIFE'S BASKET. The system, as will be seen, is complex. Only the briefest sketch of it has been given ; and because of its brevity the sketch possesses certain inaccuracies. The whole idea at the bottom of the compilation of index numbers of retail prices is to obtain some satisfactory information as to the cost of the articles which are included in a housewife's basket ; each article having the same influence on the total result a« it would have on the average housewife's purse. To give an indication of the variations in the cost of living the investigations must deal with rent, according to its importance in the cost ,of living), food, clothing, fuel and light, and other items. In each department of tlie enquiry there are numerous pitfalls for the unwary. One of the greatest difficulties to be overcome when a representative list of commodities has been fixed is that entailed by the absence of any standard and the great variations of quality. Tea, for instance, costs anything from Is to several shillings. Which grade is the statistician to deal with? Clothing is especially varied in price according to quality. The method giving the _ most satisfactory results in this connection is the use of the "predominant"' price- — the price of the grade or quality most frequently sold. AN ENORMOUS TASK. Let the layman now imagine the task | which Mr. Malcolm Fraser had before him when he first set about the compilation of index numbers for New Zealand." He had to obtain the predominant prices, not only for the present artd the future, but also for the past (if .the, record were to be immediately available for comparison), of 70 articles for. the retail or cost of living scale, and 120 for the wholesale. The Commonwealth Statistician's list is not so complete, but Mr. Eraser has thought it advisable to aim high at the commencement. Market and general newspaper reports not being always for predominant prices, the information had to be obtained from deal' ers in various centres. For some time past Mr. J. Fraser, of the Labour Department, has been working under the Statistician's direction arranging in the four centres for the supply of information, and collecting such data as are a.vailable in regard to past years. When this information has been collected, arranged and put into form according to the method described, the first set of index numbers may be issued. On the degree of euccesj attending the search after prices of the past will de2>end the period covered by the comparison. Mr. Knibbs's figures dealt with 1901 for the metropolitan towns, and Mr. Fraser will do well if he ia able to go ba-ck so far. Afterwards the information will be collected regularly and published at regular intervals. Probably the Statistician's first results, however carefully prepared, will be much criticised, especially by people who consider their own memories' more reliable than, any statis« tics. Later it is hoped to extend the scope of enquiries to household budgets and so on, as it has been extended in Australia ; but for the present there is work enough in hand for one small office.